<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 29, 1998
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
---------------------
CLUETT AMERICAN CORP.
(Exact Name of Registrant as Specified in Its Charter)
<TABLE>
<S> <C> <C>
DELAWARE 5136 22-2397044
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER) IDENTIFICATION NUMBER)
</TABLE>
------------------------------
48 West 38th Street
New York, New York 10018
(212) 984-8900
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE, OF
REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------------
Bryan P. Marsal
President and Chief Executive Officer
48 West 38th Street
New York, New York 10018
(212) 984-8900
(NAME, ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER, INCLUDING AREA CODE,
OF AGENT FOR SERVICE)
------------------------------
WITH A COPY TO:
<TABLE>
<S> <C>
Stephan J. Feder, Esq.
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
(212) 455-2000
</TABLE>
------------------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: AS SOON AS
PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box: / /
If 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(d)
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: / /
------------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED PER UNIT OFFERING PRICE(1) FEE
<S> <C> <C> <C> <C>
10 1/8% Series B Senior Subordinated
Notes Due 2008.................... $112,000,000 100% $112,000,000 $33,040
Guarantees of 10 1/8% Series B
Senior Subordinated Notes Due
2008(2)........................... $112,000,000 None(3) None(3) None(3)
12 1/2% Series B Senior Exchangeable
Preferred Stock Due 2010(4)....... $ 50,000,000 100% $ 50,000,000 $14,750
12 1/2% Subordinated Exchange
Debentures Due 2010............... $ 50,000,000 None(5) None(5) None(5)
Total............................... -- -- $162,000,000 $47,790
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
(2) See inside facing page for table of additional registrant guarantors.
(3) No separate consideration will be received for the guarantees of the 10 1/8%
Series B Senior Subordinated Notes Due 2008 by certain subsidiaries of
Cluett American Corp.
(4) Includes dividends paid in additional fully-paid and non-assessable shares
of the 12 1/2% Series B Senior Exchangeable Preferred Stock Due 2010.
(5) No separate consideration will be received for the 12 1/2% Subordinated
Exchange Debentures Due 2010 issuable upon exchange of the 12 1/2% Series B
Senior Exchangeable Preferred Stock Due 2010.
------------------------------
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, AS AMENDED, OR UNTIL THIS REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(a), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PROSPECTUS STRICTLY CONFIDENTIAL
<TABLE>
<S> <C> <C>
CLUETT AMERICAN CORP. [LOGO]
[LOGO]
</TABLE>
OFFER TO EXCHANGE UP TO $112,000,000 OF ITS 10 1/8% SERIES B SENIOR SUBORDINATED
NOTES DUE 2008, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, FOR ANY
AND ALL OF ITS OUTSTANDING 10 1/8% SENIOR SUBORDINATED NOTES
DUE 2008
OFFER TO EXCHANGE UP TO $50,000,000 OF ITS 12 1/2% SERIES B SENIOR EXCHANGEABLE
PREFERRED STOCK DUE 2010, WHICH HAS BEEN REGISTERED UNDER THE SECURITIES ACT,
FOR ANY AND ALL OF ITS OUTSTANDING 12 1/2% SENIOR EXCHANGEABLE
PREFERRED STOCK DUE 2010
---------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON , 1998, UNLESS EXTENDED.
---------------------
Cluett American Corp. (formerly known as Bidermann Industries Corp.), a
Delaware corporation (the "Company"), hereby offers, upon the terms and subject
to the conditions set forth in this Prospectus and the accompanying Note Letter
of Transmittal and Preferred Stock Letter of Transmittal (together, the "Letters
of Transmittal"), to exchange an aggregate of up to $112,000,000 principal
amount of 10 1/8% Series B Senior Subordinated Notes Due 2008 (the "Exchange
Notes") of the Company for an identical face amount of the issued and
outstanding 10 1/8% Senior Subordinated Notes Due 2008 (the "Old Notes" and,
together with the Exchange Notes, the "Notes") of the Company from the Holders
thereof (the "Note Exchange Offer") and to exchange an aggregate of up to
$50,000,000 principal amount of 12 1/2% Series B Senior Exchangeable Preferred
Stock Due 2010 (the "New Preferred Stock") of the Company for an identical face
amount of the issued and outstanding 12 1/2% Senior Exchangeable Preferred Stock
Due 2010 (the "Exchangeable Preferred Stock" and, together with the New
Preferred Stock, the "Preferred Stock") of the Company from the Holders thereof
(the "Preferred Stock Exchange Offer" and, together with the Note Exchange
Offer, the "Exchange Offer" or "Exchange Offerings"). The Exchange Notes and New
Preferred Stock are collectively referred to herein as the "Securities." As of
the date of this Prospectus, there is $112,000,000 aggregate principal amount of
the Old Notes outstanding and $50,000,000 aggregate principal amount of the
Exchangeable Preferred Stock outstanding. The terms of the Exchange Notes and
New Preferred Stock are identical in all material respects to the Old Notes and
Exchangeable Preferred Stock, respectively, except that the Exchange Notes and
New Preferred Stock have been registered under the Securities Act of 1933, as
amended (the "Securities Act"), and therefore will not bear legends restricting
their transfer and will not contain certain provisions providing for an increase
in the interest rate on the Old Notes or for Liquidated Damages on the
Exchangeable Preferred Stock under certain circumstances described in the Note
Registration Rights Agreement and the Preferred Stock Registration Rights
Agreement, respectively, which provisions will terminate as to all of the Notes
and Preferred Stock upon the consummation of the Exchange Offer.
The Exchange Notes mature on May 15, 2008, unless previously redeemed.
Interest on the Exchange Notes will be payable semiannually on May 15 and
November 15 of each year, commencing November 15, 1998. The Company will not be
required to make any mandatory redemption or sinking fund payment with respect
to the Exchange Notes prior to maturity. The Exchange Notes will be redeemable
at the option of the Company, in whole or in part, at any time on or after May
15, 2003 at the redemption prices set forth herein plus accrued and unpaid
interest thereon and Liquidated Damages (as defined), if any, to the date of
redemption. In addition, at the option of the Company, up to 35% of the original
aggregate principal amount of Exchange Notes may be redeemed prior to May 15,
2001 at the redemption price set forth herein, plus accrued and unpaid interest
thereon and Liquidated Damages, if any, to the date of redemption with the
proceeds of a Public Offering (as defined); PROVIDED, HOWEVER, that at least 65%
of the original aggregate principal amount of Exchange Notes remains outstanding
following such redemption. In the event of a Change of Control (as defined), (i)
the Company will have the option, prior to May 15, 2003 to redeem the Exchange
Notes, in whole, at a redemption price equal to 100% of the principal amount
thereof plus the Applicable Premium (as defined), together with accrued and
unpaid interest, if any, to the date of redemption, and (ii) if the Company has
not redeemed the Exchange Notes, the Company will be required to make an offer
to repurchase all outstanding Exchange Notes at 101% of the aggregate principal
amount thereof plus accrued and unpaid interest thereon and Liquidated Damages,
if any, to the date of repurchase.
The Exchange Notes will be general unsecured obligations of the Company,
will be subordinated in right of payment to all existing and future Senior
Indebtedness (as defined) of the Company, including indebtedness under the
Senior Credit Facility (as defined) and will rank on a parity with or senior in
right of payment to all existing and future Subordinated Indebtedness (as
defined) of the Company. The Company's payment of principal, premium, if any,
and interest on the Exchange Notes will be guaranteed (the "Subsidiary
Guarantees"), jointly and severally, on an unsecured senior subordinated basis
by all existing and future domestic Restricted Subsidiaries (as defined) of the
Company (the "Subsidiary Guarantors"). The Subsidiary Guarantees will be
subordinated in right of payment to all existing and future Senior Indebtedness
of the Subsidiary Guarantors, including all obligations of the Subsidiary
Guarantors under the Senior Credit Facility and will rank on a parity with or
senior in right of payment to all existing and future Senior Subordinated
Indebtedness (as defined) of the
(CONTINUED ON NEXT PAGE)
SEE "RISK FACTORS" BEGINNING ON PAGE 23 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY INVESTORS IN CONNECTION WITH THE EXCHANGE OFFER AND
AN INVESTMENT IN THE SECURITIES.
-----------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is , 1998.
<PAGE>
Subsidiary Guarantors. However, the Exchange Notes will be effectively
subordinated to all indebtedness and other liabilities and commitments
(including trade payables and capital lease obligations) of the Company's
foreign subsidiaries. Any right of the Company to receive assets of any of its
foreign subsidiaries upon the latter's liquidation or reorganization (and the
consequent
<PAGE>
right of the holders of the Notes to participate in those assets) will be
effectively subordinated to the claims of that subsidiary's creditors, except to
the extent that the Company is itself recognized as a creditor of such
subsidiary, in which case the claims of the Company would still be subordinate
to any security in the assets of such subsidiary and any indebtedness of such
subsidiary senior to that held by the Company. As of March 28, 1998, the
liabilities of the Company's foreign subsidiaries was $9.4 million. See
"Description of the Exchange Notes".
As of March 28, 1998, on a pro forma basis after giving effect to the
Transaction (as defined), the aggregate principal amount of Senior Indebtedness
(excluding trade payables and other accrued liabilities) of the Company and its
subsidiaries would have been approximately $122.4 million (excluding $11.2
million of letters of credit). The indenture pursuant to which the Exchange
Notes will be issued will limit the ability of the Company and its subsidiaries
to incur additional indebtedness.
The Company will also issue 500,000 shares of the New Preferred Stock. Each
share of New Preferred Stock will have a liquidation preference of $100 per
share. All dividends will be cumulative from the date of issuance of the New
Preferred Stock and will be payable semiannually in arrears on May 15 and
November 15 of each year commencing on November 15, 1998. On or before May 15,
2003, the Company may, at its option, pay dividends in cash or in additional
fully-paid and non-assessable shares of New Preferred Stock having an aggregate
liquidation preference equal to the amount of such dividends. Thereafter,
dividends may be paid in cash only. It is not expected that the Company will pay
any dividends in cash for the period ending on or prior to May 15, 2003. On any
scheduled dividend payment date, the Company may, at its option, but subject to
certain conditions, exchange all but not less than all of the shares of New
Preferred Stock for the Company's 12 1/2% Subordinated Exchange Debentures Due
2010 (the "Exchange Debentures").
The Company will be required, subject to certain conditions, to redeem all
of the New Preferred Stock or the Exchange Debentures, as the case may be, on
May 15, 2010. Except as described below, the Company may not redeem the New
Preferred Stock or the Exchange Debentures prior to May 15, 2003. On or after
such date, the Company may, at its option, redeem the New Preferred Stock or the
Exchange Debentures, in whole or in part, for cash, at the redemption prices set
forth herein together with, in the case of the New Preferred Stock, all
accumulated and unpaid dividends to the date of redemption, or in the case of
the Exchange Debentures, all accrued and unpaid interest to the date of
redemption. In addition, at any time and from time to time prior to May 15,
2001, the New Preferred Stock and the Exchange Debentures may be redeemed, in
whole or in part, for cash, with the proceeds of one or more Equity Offerings
(as defined) at the redemption prices set forth herein, together with
accumulated and unpaid dividends, if any, to the date of redemption. Upon the
occurrence of a Change of Control, (i) the Company will have the option, prior
to May 15, 2003 to redeem the New Preferred Stock or Exchangeable Debentures, in
whole, at a redemption price equal to a percentage of the liquidation preference
equal to the sum of 100% and the dividend rate in effect with respect to the New
Preferred Stock (or the interest rate in effect with respect to the Exchange
Debentures, as applicable), together with accrued and unpaid interest, if any,
to the date of redemption, and (ii) if the Company has not redeemed the New
Preferred Stock or Exchangeable Debentures, the Company will be required to make
an offer to purchase the New Preferred Stock or the Exchange Debentures, for
cash, at a price equal to 101% of the liquidation preference or aggregate
principal amount (as the case may be) thereof, together with, in the case of the
New Preferred Stock, all accumulated and unpaid dividends to the date of
purchase, or in the case of the Exchange Debentures, all accrued and unpaid
interest thereon. The Exchange Debentures will be general unsecured obligations
of the Company, will be subordinated in right of payment to all existing and
future Exchange Debenture Senior Indebtedness (as defined) of the Company,
including indebtedness under the Senior Credit Facility and the Notes. The
Exchange Debentures will be effectively subordinated to all liabilities of the
Company's subsidiaries. See "Description of the New Preferred Stock and Exchange
Debentures."
The Old Notes (the "Note Offering") and the Exchangeable Preferred Stock
(the "Preferred Stock Offering" and, together with the Note Offering,
the"Offerings") were issued and sold on May 18, 1998 in a transaction not
registered under the Securities Act in reliance upon an exemption from the
registration requirements thereof. In general, the Old Notes and Exchangeable
Preferred Stock may not be offered or sold unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to the Securities Act. The Exchange Notes and New Preferred Stock are
being offered hereby in order to satisfy certain obligations of the Company
contained in the Note Registration Rights Agreement and the Preferred Stock
Registration Rights Agreement, respectively. Based on interpretations by the
staff of the Securities and Exchange Commission (the "Commission" or "SEC") set
forth in no-action letters issued to third parties, the Company believes that
the Exchange Notes and New Preferred Stock issued pursuant to the Exchange Offer
in exchange for Old Notes and Exchangeable Preferred Stock, respectively, may be
offered for resale, resold or otherwise transferred by any holder thereof (other
than any such holder that is an "affiliate" of the Company within the meaning of
Rule 405 promulgated under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, PROVIDED
that such Exchange Notes and New Preferred Stock are acquired in the ordinary
course of such holder's business, such holder has no arrangement with any person
to participate in the distribution of such Exchange Notes or New Preferred Stock
and neither such holder nor any such other person is engaging in or intends to
engage in a distribution of such Exchange Notes or New Preferred Stock. However,
the Company has not sought, and does not intend to seek, its own no-action
letter, and there can be no assurance that the staff of the Commission would
make a similar determination with respect to the Exchange Offer. Notwithstanding
the foregoing, each broker-dealer that receives Exchange Notes or New Preferred
Stock for its own account pursuant to the Exchange Offer must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes or New Preferred Stock. The Letters of Transmittal state that by so
acknowledging and by delivering a prospectus, a broker-dealer will not be deemed
to admit that it is an "underwriter" within the meaning of the Securities Act.
This Prospectus, as it may be amended or supplemented from time to time, may be
used by a broker-dealer in connection with any resale of Exchange Notes or New
Preferred Stock received in exchange for such Old Notes or Exchangeable
Preferred Stock where such Old Notes or Exchangeable Preferred Stock were
acquired by such broker-dealer as a result of market-making activities or other
trading activities (other than Old Notes or Exchangeable Preferred Stock
acquired directly from the Company). A broker-dealer may not participate in the
Exchange Offer with respect to Old Notes or Exchangeable Preferred Stock
acquired other than as a result of market-making activities or other trading
activities. The Company has agreed that, for a period of 90 days after the date
of this Prospectus, it will make this Prospectus available to any broker-dealer
for use in connection with any such resale. See "Plan of Distribution."
The Old Notes and Exchangeable Preferred Stock are designated for trading in
the Private Offerings, Resales and Trading through Automated Linkages ("PORTAL")
market. There is no established trading market for the Exchange Notes or New
Preferred Stock. The Company currently does not intend to list the Exchange
Notes or New Preferred Stock on any securities exchange or to seek approval for
quotation of the Exchange Notes or New Preferred Stock through any automated
quotation system. Accordingly, there can be no assurance as to the development
or liquidity of any market for the Exchange Notes or New Preferred Stock.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Old Notes or Exchangeable Preferred Stock being tendered for exchange.
The date of acceptance and exchange of the Old Notes and Exchangeable Preferred
Stock (the "Exchange Date") will be the fourth business day following the
Expiration Date. Old Notes and Exchangeable Preferred Stock tendered pursuant to
the Exchange Offer may be withdrawn at any time prior to the Expiration Date.
The Company will not receive any proceeds from the Exchange Offer. The Company
will pay all of the expenses incident to the Exchange Offer. The Exchange Offer
will expire 5:00 p.m., New York City time, on , 1998 (the
"Expiration Date"). The Company does not currently intend to extend the
Expiration Date.
i
<PAGE>
DISCLOSURE REGARDING FORWARD-LOOKING STATEMENTS
THIS PROSPECTUS CONTAINS CERTAIN FORWARD-LOOKING STATEMENTS WITHIN THE
MEANING OF SECTION 27A OF THE SECURITIES ACT AND SECTION 27A OF THE SECURITIES
EXCHANGE ACT OF 1934, AS AMENDED (THE "EXCHANGE ACT"). SUCH FORWARD-LOOKING
STATEMENTS ARE BASED ON THE BELIEFS OF THE COMPANY'S MANAGEMENT, AS WELL AS ON
ASSUMPTIONS MADE BY AND INFORMATION CURRENTLY AVAILABLE TO THE COMPANY AT THE
TIME SUCH STATEMENTS WERE MADE. WHEN USED IN THIS PROSPECTUS, THE, WORDS
"ANTICIPATE," "BELIEVE," "ESTIMATE," "EXPECT," "INTEND" AND SIMILAR EXPRESSIONS,
AS THEY RELATE TO THE COMPANY, ARE INTENDED TO IDENTIFY SUCH FORWARD-LOOKING
STATEMENTS. ALTHOUGH THE COMPANY BELIEVES THESE STATEMENTS ARE REASONABLE,
PROSPECTIVE PURCHASERS OF THE SECURITIES SHOULD CONSIDER CAREFULLY THE FACTORS
UNDER THE CAPTION "RISK FACTORS," AS WELL AS THE OTHER INFORMATION AND DATA
INCLUDED IN THIS PROSPECTUS, IN EVALUATING AN INVESTMENT IN THE SECURITIES. THE
COMPANY CAUTIONS THE READER, HOWEVER, THAT SUCH LIST OF FACTORS UNDER THE
CAPTION "RISK FACTORS" MAY NOT BE EXHAUSTIVE AND THAT THOSE OR OTHER FACTORS,
MANY OF WHICH ARE OUTSIDE OF THE COMPANY'S CONTROL, COULD HAVE A MATERIAL
ADVERSE EFFECT ON THE COMPANY AND ITS ABILITY TO SERVICE ITS INDEBTEDNESS,
INCLUDING PRINCIPAL AND INTEREST PAYMENTS ON, AND LIQUIDATED DAMAGES, IF ANY,
WITH RESPECT TO THE SECURITIES. ALL FORWARD-LOOKING STATEMENTS ATTRIBUTABLE TO
THE COMPANY OR PERSONS ACTING ON ITS BEHALF ARE EXPRESSLY QUALIFIED IN THEIR
ENTIRETY BY THE CAUTIONARY STATEMENTS SET FORTH UNDER THE CAPTIONS "RISK
FACTORS" AND "MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS."
OTHER INFORMATION
TRADEMARKS OF THE COMPANY INCLUDED IN THIS PROSPECTUS APPEAR IN ITALICS. ALL
OTHER TRADEMARKS APPEARING IN THIS PROSPECTUS ARE THE PROPERTY OF THEIR
RESPECTIVE HOLDERS.
MARKET SHARE DATA HAS BEEN DERIVED FROM DATA PROVIDED BY THE NPD DATA, INC.
AND THE NATIONAL ASSOCIATION OF HOSIERY DEALERS. SUCH MARKET SHARE DATA FOR THE
SOCK GROUP ONLY ASSUMES A RETAIL MARGIN OF 55% ON ALL SALES. NPD DATA MARKET
SHARE DATA IS FOR UNITED STATES SALES ONLY.
THE COMPANY CHANGED ITS NAME TO CLUETT AMERICAN CORP. ON THE DATE OF CLOSING
OF THE TRANSACTION.
THE COMPANY'S ADDRESS IS 48 WEST 38TH STREET, NEW YORK, NEW YORK, 10018 AND
ITS TELEPHONE NUMBER IS (212) 984-8900.
ii
<PAGE>
AVAILABLE INFORMATION
The Company has filed with the Commission a Registration Statement on Form
S-4 (together with all amendments, exhibits, schedules and supplements thereto,
the "Registration Statement") under the Securities Act with respect to the
Securities being offered hereby. This Prospectus, which forms a part of the
Registration Statement, does not contain all of the information set forth in the
Registration Statement. For further information with respect to the Company and
the Securities, reference is made to the Registration Statement. Statements
contained in this Prospectus as to the contents of any contract or other
document are not necessarily complete, and, where such contract or other
document is an exhibit to the Registration Statement, each such statement is
qualified in all respects by the provisions in such exhibit, to which reference
is hereby made. The Company is not currently subject to the informational
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). Upon completion of the Exchange Offer, the Company will be subject to the
information requirements of the Exchange Act and, in accordance therewith, will
file periodic reports and other information with the Commission. The
Registration Statement, such reports and other information can be inspected and
copied at the Public Reference Section of the Commission located at Room 1024,
Judiciary Plaza, 450 Fifth Street, N.W., Washington D.C. 20549 and at regional
public reference facilities maintained by the Commission located at Citicorp
Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661 and Seven
World Trade Center, Suite 1300, New York, New York 10048. Copies of such
material, including copies of all or any portion of the Registration Statement,
can be obtained from the Public Reference Section of the Commission at
prescribed rates. Such material may also be accessed electronically by means of
the Commission's home page on the Internet (http://www.sec.gov). In addition,
pursuant to the Indenture covering Old Notes and the Exchange Notes and the
Certificate of Designations covering the Exchangeable Preferred Stock and the
New Preferred Stock, the Company has agreed to file with the Commission and
provide to the Holders the annual reports and the information, documents and
other reports otherwise required pursuant to Section 13 of the Exchange Act.
Such requirements may be satisfied through the filing and provision of such
documents and reports which would otherwise be required pursuant to Section 13
in respect of the Company.
UNTIL , 1998 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED SECURITIES, WHETHER OR NOT
PARTICIPATING IN THIS DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
TABLE OF ADDITIONAL REGISTRANT GUARANTORS
<TABLE>
<CAPTION>
STATE OR OTHER
JURISDICTION
OF I.R.S. ADDRESS INCLUDING ZIP CODE, AND
EXACT NAME OF REGISTRANT INCORPORATION EMPLOYER TELEPHONE NUMBER INCLUDING AREA
GUARANTOR AS SPECIFIED OR IDENTIFICATION CODE, OF REGISTRANT GUARANTOR'S
IN ITS CHARTER ORGANIZATION NUMBER PRINCIPAL EXECUTIVE OFFICES
- ----------------------------------------------- -------------- ------------- ---------------------------------
<S> <C> <C> <C>
Cluett Designer Group, Inc..................... Delaware 13-4008697 1330 Avenue of the Americas
New York, NY 10019
(212) 984-8500
Great American Knitting Mills, Inc............. Delaware 13-3550197 661 Plaid Street
Burlington, NC 27215
(336) 229-3700
Cluett, Peabody & Co., Inc..................... Delaware 22-3004734 4150 Boulder Ridge Rd., S.W.
Atlanta, GA 30336
(404) 346-5300
Consumer Direct Corporation.................... Delaware 22-3174425 48 West 38th Street
New York, NY 10018
(212) 883-4026
Arrow Factory Stores, Inc...................... Delaware 22-3125042 4150 Boulder Ridge Rd.
Atlanta, GA 30336
(404) 346-5300
</TABLE>
iii
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY, AND SHOULD BE READ IN
CONJUNCTION WITH, THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL
STATEMENTS, INCLUDING THE NOTES THERETO, INCLUDED ELSEWHERE IN THIS PROSPECTUS.
UNLESS OTHERWISE INDICATED OR THE CONTEXT CLEARLY IMPLIES OTHERWISE, ALL
REFERENCES IN THIS PROSPECTUS TO (I) THE "COMPANY" REFERS TO CLUETT AMERICAN
CORP. (FORMERLY KNOWN AS BIDERMANN INDUSTRIES CORP.), A WHOLLY-OWNED SUBSIDIARY
OF CLUETT AMERICAN GROUP, INC. AND ITS SUBSIDIARIES, (II) "CAG" REFERS TO CLUETT
AMERICAN GROUP, INC., A WHOLLY-OWNED SUBSIDIARY OF CLUETT AMERICAN INVESTMENT
CORP. AND ITS SUBSIDIARIES AND (III) "HOLDINGS" REFERS TO CLUETT AMERICAN
INVESTMENT CORP. (FORMERLY KNOWN AS BIDERMANN INDUSTRIES U.S.A., INC.) AND ITS
SUBSIDIARIES. THE COMPANY ALSO INCLUDES THE RETAIL BUSINESS OPERATED BY CONSUMER
DIRECT CORPORATION, AN AFFILIATE OF THE COMPANY WHICH WILL BE CONTRIBUTED TO THE
COMPANY ON THE DATE OF CLOSING OF THE OFFERINGS. FOR A DISCUSSION OF PRO FORMA
ADJUSTMENTS TO THE COMPANY'S HISTORICAL COMBINED FINANCIAL STATEMENTS SEE
"UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION." FOR THE DISCUSSION OF THE
ADJUSTMENTS MADE TO NET SALES AND EBITDA IN ORDER TO DERIVE ADJUSTED NET SALES
AND ADJUSTED EBITDA SEE "SELECTED HISTORICAL COMBINED FINANCIAL DATA." UNLESS
OTHERWISE INDICATED, THE INFORMATION IN THIS PROSPECTUS GIVES EFFECT TO THE PLAN
AND THE RECAPITALIZATION.
THE COMPANY
The Company is one of the leading designers, manufacturers and marketers of
men's socks and dress shirts in the United States and has a significant market
presence in women's and children's socks and a growing presence in men's and
women's sportswear. While the Company serves most channels of distribution, its
primary focus is on department and national chain store retailers. The Company
believes its core product offerings, GOLD TOE socks and ARROW dress shirts,
provide classic styles at price points which represent exceptional value and
appeal to a broad consumer base.
The Company markets its products utilizing widely recognized Company-owned
brands such as GOLD TOE, SILVER TOE and ARROW in the sock segment and ARROW and
its related trade names, including DOVER, KENT, ARROW "1851", and COLLARMAN in
the dress shirt segment. In 1997, the Company's GOLD TOE brand commanded a sock
market share of approximately 45% in the department store channel and
approximately 22% in the combined department store and national chain channels.
In 1997, the ARROW brand was the second leading branded dress shirt capturing a
market share of approximately 10% of the department store channel for men's
dress shirts. The Company primarily sells its products to department and
national chain stores to maintain its brand image and to achieve the relatively
higher selling prices and higher margins characterized by sales to these retail
stores. Approximately 58% of the Company's sales are derived from these core
offerings, the demand for which the Company believes is stable and resistant to
changing fashion trends.
The Company also has licensed the exclusive rights to manufacture and market
certain apparel products (generally socks and shirts) under such widely
recognized brand names as Perry Ellis, Nautica, Jockey, Stride Rite, Kenneth
Cole, Burberrys, and Yves Saint Laurent. This diverse portfolio of Company-owned
and licensed brand names enables the Company to offer different brands of unique
value-added products to different channels of distribution.
The Company conducts its business through three principal business units:
the Sock Group, the Shirt Group and the Designer Group. For the twelve months
ended March 28, 1998 (the "LTM Period"), the Company realized pro forma net
sales and EBITDA of $364.2 million and $42.8 million, respectively.
- THE SOCK GROUP (42.6% OF PRO FORMA NET SALES FOR THE LTM PERIOD). The
Sock Group is the market leader in department store sales of socks, capturing
approximately 59% of all such sales in the United States. The Sock Group's
leading brand, GOLD TOE, was established in 1934 and generates approximately 63%
of the Sock Group's net sales with the remaining sales generated through
complementary private labels and through licensed brands such as Perry Ellis,
Nautica, Jockey and Stride Rite. The Sock Group offers a comprehensive line of
products across multiple price points, ages, genders and styles, enabling it to
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provide its customers with a full range of their sock requirements. For the LTM
Period, the Sock Group realized net sales and EBITDA of $155.1 million and $28.8
million, respectively.
- THE SHIRT GROUP (49.2% OF PRO FORMA NET SALES FOR THE LTM PERIOD). The
Shirt Group designs, manufactures and markets dress shirts and sportswear,
focusing on men's cotton/polyester and all cotton dress shirts which are sold
under the ARROW brand and its related trade names, including DOVER, KENT,
COLLARMAN, and ARROW "1851". Sportswear products manufactured by the Company
consist primarily of men's and women's knitted and woven sport shirts which are
sold primarily under its TOURNAMENT and ARROW AUTHENTIC labels. Because of the
name recognition of its ARROW brand, which was established in 1851, the Company
is also able to license the ARROW trademarks for shirts internationally and
non-shirt products both domestically and internationally. For the LTM Period,
the Shirt Group realized net sales (including licensing fee revenue of $6.9
million) and EBITDA (including net licensing income of $4.2 million) of $179.2
million and $16.8 million, respectively.
- THE DESIGNER GROUP (10.6% OF PRO FORMA NET SALES FOR THE LTM PERIOD). The
Designer Group was established as a separate business unit in October 1995 and
sells (i) dress and sport shirts under licensed Yves Saint Laurent, Burberrys
and Kenneth Cole trademarks, (ii) dress socks under the licensed Kenneth Cole
and Yves Saint Laurent trademarks and (iii) tailored clothing and casual pants
under the Yves Saint Laurent trademark. The Designer Group's products,
distributed primarily to department and specialty stores, help complement the
Company's core product offerings. For the LTM Period, the Designer Group had net
sales and EBITDA of $38.7 and negative $1.0 million, respectively.
The net sales and EBITDA numbers in the prior three paragraphs do not
include intercompany sales and pro forma corporate overhead charges of $8.8
million and $1.8 million, respectively.
COMPETITIVE STRENGTHS
Each of the Company's principal business units has secured a strong
competitive position within its respective market segment. Currently, the
Company is one of the leading designers, manufacturers and marketers of men's
socks and dress shirts in the United States. The management team will use the
following competitive strengths to further enhance the Company's position in the
marketplace:
- INDUSTRY LEADING BRANDS. The Company has assembled a portfolio of widely
recognized brand names in the sock and shirt markets, led by its owned
GOLD TOE and ARROW brands. In addition, the Company has licensed the right
to manufacture, design and distribute certain items of apparel under the
Nautica, Perry Ellis, Jockey, Stride Rite, Kenneth Cole, Burberrys, and
Yves Saint Laurent brands. This diverse portfolio of brand names allows
the Company to differentiate itself from its competitors by providing
distinct brand names for different channels of distribution and at
different price points.
- COMPREHENSIVE PRODUCT LINES. The Company offers a comprehensive product
line of brand-name socks and men's dress shirts across all major price
points. In addition, the Company is able to provide key retailers such as
Sears, Roebuck & Co. ("Sears"), J.C. Penney Company ("J.C. Penney") and
The May Department Stores Company (including Lord & Taylor, Hecht's,
Foley's and Filene's) ("May Company") with high quality, complementary
private label products. The Company also collaborates with customers to
develop exclusive or specially designed merchandising programs and is
capable of satisfying its customers' needs for prompt product delivery
across all of its product offerings. The combination of its broad array of
quality brand names and its private label programs positions the Company
to be the category manager for its customers in its core offerings.
- STRONG DISTRIBUTION CHANNELS. The Company has long-standing established
relationships with many of the largest department store and national chain
store retailers including Belk Department Stores ("Belk's"), Dayton-Hudson
Corporation (including Marshall Field's) ("Dayton-Hudson"), Dillard's Inc.
("Dillard's"), J.C. Penney, May Company, Mercantile Stores Company, Inc.
("Mercantile"),
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Federated Department Stores, Inc. (including Macy's East and Macy's West,
Bloomingdale's, Rich's, Stern's and Burdines) ("Federated"), Proffitt's,
Inc. ("Proffitt's") and Sears. In addition, the Company has selectively
developed relationships with certain large mass merchants and specialty
retailers. Management believes that these strong relationships will
provide it a stable base from which the Company can pursue future business
and new product introductions while maintaining the integrity of its core
brand names.
- RESPONSIVE MANUFACTURING AND SERVICING CAPABILITIES. The Company's balance
of domestic and foreign manufacturing operations allows it to maintain low
inventory levels resulting in increased inventory turns and better working
capital management while permitting it to quickly respond to customer
orders. In addition, the Company's upgraded information systems provide
comprehensive order processing, production, accounting and management
information for the marketing, manufacturing, importing and distribution
functions of the Company's business. The Company has also enhanced its
customer servicing capabilities with the introduction of its vendor
managed inventory system in the Shirt Group. This system provides the
Company with real time information on the sales of its products through
participating retailers, thus enabling it to replenish a customer's
inventory without the need for a formal order. The Company anticipates
installation of its vendor managed inventory system with certain of the
Sock Group's largest customers during 1998.
THE BANKRUPTCY AND TURNAROUND
In 1990, the Company acquired Cluett Peabody & Co., Inc., which included the
Sock Group and the Shirt Group, from West Point-Pepperell, Inc. Prior to that
time, the Company had primarily been a licensed designer and marketer of premium
high fashion apparel under designer labels such as Ralph Lauren. The Company
applied the same high overhead designer business model to these less fashion-
oriented businesses. Rather than reduce costs, the Company attempted to
compensate for this inappropriate cost structure by broadening distribution and
expanding the Shirt Group's ARROW business into higher-priced, higher-fashion
dress shirts and sportswear. This effort was poorly executed and ignored both
the Company's core customer and operational capabilities, resulting in
significant excess inventory. The losses associated with this strategy, in
addition to an unsuccessful expansion into retail outlets, forced the Company to
seek protection under the Bankruptcy Code in July 1995.
In June 1995, Bryan Marsal (a managing director of Alvarez & Marsal, Inc.
("A&M")) was appointed President and Chief Executive Officer of the Company.
Since then Mr. Marsal and the rest of his management team have taken a number of
strategic and operational actions which have substantially improved the
Company's cash flow and restored profitability. Although Adjusted Net Sales
decreased from $388.9 million in 1995 to $364.2 million for the LTM Period,
Adjusted EBITDA has increased from negative $8.5 million to $43.3 million
(before pro forma adjustments). As a result, the Company was able to file the
Plan (as defined) in March 1998 pursuant to which, utilizing the proceeds of the
Offerings and certain other financing, the Company repaid in full substantially
all of its outstanding indebtedness, together with all accrued interest thereon
and provide a payment to existing shareholders. See "The Transaction." The
actions taken by Mr. Marsal and his team have included the following:
- EXPENSE MANAGEMENT. The Company significantly reduced its operating costs
and expenses by transferring administrative functions to its operating
subsidiaries and by eliminating unnecessary expenses. This
decentralization resulted in a significant reduction in corporate overhead
and expenditures being made on redundant corporate activity. It also
increased the efficiency with which administrative functions were handled.
For example, instead of the collections process being managed at the
corporate level, it is being managed by the same group responsible for the
sales, marketing and distribution of the order. This integration has
significantly lowered returns, chargebacks and retailer penalties for
execution breakdowns. Examples of operating expense reductions include the
closure of unprofitable retail stores; the relocation of offices and
showrooms
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to less expensive locations; the introduction of more cost effective
medical and worker's compensation benefit plans; the consolidation of
distribution centers and the elimination of related excess capacity; the
reduction of personnel; and the modification and reduction of advertising
and promotional spending from an ineffective national media campaign to
more effective regional cooperative and point of sale advertising.
- OPERATIONAL IMPROVEMENTS. In the fourth quarter of 1995, the Company began
the elimination of excess or unnecessary capacity with the closure of the
Shirt Group's production facilities in Cedartown, Georgia and Costa Rica
and the Sock Group's manufacturing plant in Halifax, North Carolina. Also,
the Shirt Group consolidated New York and Atlanta product sourcing into
one group in Atlanta and implemented strict international vendor
qualification and monitoring programs. In addition, the Company invested
in new manufacturing equipment for the Sock Group; in new information
systems for the Sock and Shirt Groups which provided the financial tools
needed to reduce inventory, improve collections and assist overall
planning; and in material handling equipment and scanning technology to
more cost effectively meet customers' shipping needs.
- PRODUCT REALIGNMENT. In 1995, the Company began the process of refocusing
the Shirt Group on its blended dress shirt product and repositioning the
all cotton dress shirt and sports shirt products as complementary products
to these core cotton/polyester dress shirt offerings. Given the lead times
associated with international sourcing of sport shirts, it was not until
fall of 1997 that the Shirt Group's product line fully reflected
management's intended product mix. This realignment has contributed to
lower returns, allowances, markdowns, and off-price sales, resulting in
improved gross margins.
BUSINESS STRATEGY
Management intends to maintain its competitive position in its current
product offerings while leveraging its competitive strengths to implement the
following business strategies:
- INCREASE PENETRATION WITH EXISTING CUSTOMERS. The Sock Group intends to
leverage its existing customer relationships, recognized brand names and
established reputation for customer service to continue expanding its
branded and private label women's and children's sock businesses. The
Company has recently acquired the license to distribute children's socks
under the Stride Rite brand and has been successfully marketing a line of
women's GOLD TOE socks. By incorporating these new products into the Sock
Group's existing offerings, the Company believes it will create
opportunities for added sales and further increase its significance as a
supplier to its existing customer base.
Management intends to increase the Shirt Group's dress shirt business
through the expansion of the DOVER brand to include additional fabrics
including broadcloth and pinpoint. The Company is also selectively
expanding its sportswear business into underserved niches of the
sportswear market, such as blended men's golf shirts and women's golf
sportswear. The Company believes these products have been well received
and will further add to the Company's profitability.
- BROADEN DISTRIBUTION. Management intends to expand the Sock Group's
distribution from its strength in department and national chain stores to
include specialty chains, discount department stores and sporting goods
stores. Management believes that these new channels will complement the
Company's presence in the department store and national chain store
channels while adding incremental profit without diminishing the integrity
of its brand names.
The Shirt Group has been limited in its ability to pursue new retailers
and channels of distribution due to its operational problems and the
financial uncertainty caused by the bankruptcy. With these
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problems solved, the Shirt Group intends to expand its presence with
existing customers while pursuing new opportunities with other department
stores, specialty stores and national chains.
Both the Sock Group and the Shirt Group intend to pursue mass merchants on
a selective basis, only participating in programs which are value-added
and differentiated in terms of styling, branding and execution, as opposed
to price.
- NEW LICENSES, SELECTIVE ACQUISITIONS AND LICENSING OPPORTUNITIES. As the
leading supplier of socks to the department store channel, the Sock Group
believes it has the infrastructure and access to distribution channels
most desirable to prospective designer licensors. As such, it continues to
proactively pursue new license opportunities which will complement its
core offerings. Similarly, because of its market leadership and
operational structure, management believes the Sock Group is strategically
positioned to acquire and integrate additional brands or complementary
businesses. In addition, the Company intends to increase its fee income by
licensing its GOLD TOE trademark internationally and has recently hired an
international sales manager to assist in that effort.
The Shirt Group believes that opportunities will arise to acquire
complementary dress shirt and sports shirt companies or licenses which
will leverage the use of its existing operating infrastructure
(distribution, sourcing, quality control and finance) and yet allow the
acquired brand to have an independent identity through use of separate
design, sales and merchandising personnel. In addition, management intends
to expand its licensing of the ARROW name to include other products and
accessories in order to create a broader apparel collection.
The Designer Group has recently acquired the dress shirt and sock licenses
for Kenneth Cole and plans to introduce these products in the fall of
1998. The Designer Group intends to continue to introduce new offerings
under its existing brands while exploring opportunities to acquire other
high-end designer labels.
THE RECAPITALIZATION
On March 31, 1998, the Company's and Holdings' Third Amended Plan of
Reorganization (the "Plan") was confirmed by the United States Bankruptcy Court
for the Southern District of New York (the "Bankruptcy Court"). In connection
with the Plan and pursuant to a subscription agreement dated as of March 30,
1998 (the "Subscription Agreement"), Vestar Capital Partners III, L.P. or a
designated affiliate ("Vestar"), A&M or a designated affiliate, certain other
purchasers and certain members of existing management (collectively, the "Equity
Investors") made a $68.0 million equity investment (the "Equity Investment") in
Holdings. Approximately $52.7 million of the Equity Investment was provided by
Vestar in the form of a $21.3 million common equity investment in Holdings (the
"Holdings Common Stock") and a $31.4 million investment in Class C Junior
Preferred Stock of Holdings (the "Holdings Class C Junior Preferred Stock").
Approximately $8.6 million of the Equity Investment was provided by certain
other purchasers (the "Co-Investors") in the form of a $3.5 million investment
in Holdings Common Stock and a $5.1 million investment in Holdings Class C
Preferred Stock. A&M and certain members of management (the "Management
Investors") provided the remaining Equity Investment in the form of a $4.9
million and $1.8 million investment in Holdings Common Stock, respectively. The
Subscription Agreement also provides that Vestar will purchase any Holdings
Common Stock allocated to A&M or the Management Investors which A&M and the
Management Investors do not elect to purchase, resulting in a maximum investment
in Holdings Common Stock by Vestar of $28.0 million (80% of the outstanding
Holdings Common Stock). The balance of the Holdings Common Stock will be held by
existing shareholders of Holdings.
The Company and Holdings used the proceeds from the Equity Investment in
conjunction with (i) borrowings under a new $160.0 million senior credit
facility (the "Senior Credit Facility"), (ii) the
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<PAGE>
proceeds from the Offerings, (iii) the issuance of $13.0 million in new senior
subordinated notes which rank on parity with the Exchange Notes (the "Parity
Notes") to existing holders of Holdings Common Stock and (iv) the issuance of
approximately $2.4 million in Holdings Class A Preferred Stock (the "Holdings
Class A Senior Preferred Stock") to a plan to be established for the benefit of
the certain employees of the Company (all of such transactions, the
"Recapitalization" and together with the Plan, the "Transaction") to effect a
recapitalization under which substantially all of Holdings and the Company's
existing obligations, including all borrowings under the Company's
debtor-in-possession facility (the "DIP Facility"), were paid in full. The
consummation of the Recapitalization was a condition to the consummation of the
Offerings. See "The Transaction." In connection with the Recapitalization, the
Company changed its name to Cluett American Corp. on the date of closing.
The following table sets forth the cash sources and uses of funds for
Holdings for the Recapitalization and the application of the proceeds therefrom.
<TABLE>
<CAPTION>
(DOLLARS IN
MILLIONS)
-------------------
<S> <C>
SOURCES OF FUNDS(1):
The Senior Credit Facility................................................................. $ 114.5
The Note Offering.......................................................................... 112.0
The Preferred Stock Offering............................................................... 50.0
Holdings Class C Junior Preferred Stock.................................................... 36.5
Holdings Common Stock(2)................................................................... 29.2
Available Cash............................................................................. 11.9
------
$ 354.1
------
------
USES OF FUNDS:
Payment of Allowed Claims.................................................................. $ 291.5
Payment of Estimated Post-Petition Interest................................................ 36.7
Refinancing of Existing Debt............................................................... 7.0
Estimated Fees and Expenses................................................................ 18.9
------
$ 354.1
------
------
</TABLE>
- ------------------------
(1) Does not include non-cash items, listed as clauses (iii) and (iv) above.
(2) Excludes $2.3 million of Holdings Common Stock purchased with the proceeds
of loans provided by Holdings.
Vestar, headquartered in New York with an office in Denver, Colorado,
manages over $1.0 billion in private equity capital. Founded in 1988, the firm
focuses on management buyouts, recapitalizations and growth capital investments.
Since 1988, the firm has completed 25 investments with an aggregate value
approaching $5.0 billion. Previous Vestar investments have included Aearo
Corporation, Anvil Knitwear, Inc., Celestial Seasonings, Inc., Clark-Schwebel,
Inc., Insight Communications Company, L.P., Prestone Products Corporation,
Pyramid Communications, Inc., Remington Products Company, Russell-Stanley Corp.,
Sun Apparel, Inc., and Westinghouse Air Brake Company.
A&M is a prominent turnaround management firm located in New York. The firm
has been involved in the successful turnaround of over 20 companies, including
Ornda Healthcorp., Phar-Mor Inc., Wherehouse Entertainment Inc., Charter Medical
Corporation, Anthony Manufacturing Company and Long Manufacturing Corp., among
others.
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THE NOTE EXCHANGE OFFER
<TABLE>
<S> <C>
The Note Exchange Offer........... The Company is offering to exchange pursuant to the Note
Exchange Offer up to $112,000,000 aggregate principal
amount of its Exchange Notes for a like aggregate
principal amount of its Old Notes. The terms of the
Exchange Notes are identical in all material respects
(including principal amount, interest rate and maturity)
to the terms of the Old Notes for which they may be
exchanged pursuant to the Note Exchange Offer, except
that the Exchange Notes are freely transferrable by
Holders thereof (other than as provided herein), and are
not subject to any covenant regarding registration under
the Securities Act. See "The Note Exchange Offer."
Minimum Condition................. The Note Exchange Offer is not conditioned upon any
minimum aggregate principal amount of Old Notes being
tendered for exchange.
Expiration Date; Withdrawal of
Tender.......................... The Note Exchange Offer will expire at 5:00 p.m., New
York City time, on , 1998, unless the Note
Exchange Offer is extended, in which case the term
"Expiration Date" means the latest date and time to
which the Note Exchange Offer is extended. The Company
does not currently intend to extend the Expiration Date.
Tenders may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date. See "The
Note Exchange Offer--Withdrawal Rights."
Exchange Date..................... The date of acceptance for exchange of the Old Notes
will be the fourth business day following the Expiration
Date.
Conditions to the Note Exchange
Offer........................... The Note Exchange Offer is subject to certain customary
conditions, which may be waived by the Company. The
Company currently expects that each of the conditions
will be satisfied and that no waivers will be necessary.
See "The Note Exchange Offer--Certain Conditions to the
Note Exchange Offer." The Company reserves the right to
terminate or amend the Note Exchange Offer at any time
prior to the Expiration Date upon the occurrence of any
such condition.
Procedures for Tendering
Old Notes....................... Each Holder wishing to accept the Note Exchange Offer
must complete, sign and date the Note Letter of
Transmittal, or a facsimile thereof, in accordance with
the instructions contained herein and therein, and mail
or otherwise deliver such Letter of Transmittal, or such
facsimile, together with the Old Notes and any other
required documentation to the Exchange Agent at the
address set forth therein. See "The Note Exchange
Offer-- Procedures for Tendering Old Notes" and "Plan of
Distribution."
Use of Proceeds................... There will be no proceeds to the Company from the
exchange of Notes pursuant to the Note Exchange Offer.
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
Federal Income Tax Consequences... The exchange of Notes pursuant to the Note Exchange
Offer will not be a taxable event for federal income tax
purposes. See "United States Federal Tax
Considerations."
Special Procedures for Beneficial
Owners.......................... Any beneficial owner whose Old Notes are registered in
the name of a broker, dealer, commercial bank, trust
company or other nominee and who wishes to tender should
contact such registered holder promptly and instruct
such registered holder to tender on such beneficial
owner's behalf. If such beneficial owner wishes to
tender on such beneficial owner's own behalf, such
beneficial owner must, prior to completing and executing
the Note Letter of Transmittal and delivering the Old
Notes, either make appropriate arrangements to register
ownership of the Old Notes in such beneficial owner's
name or obtain a properly completed bond power from the
registered holder. The transfer of registered ownership
may take considerable time. See "The Note Exchange
Offer--Procedures for Tendering Old Notes."
Guaranteed Delivery Procedures.... Holders of Old Notes who wish to tender their Old Notes
and whose Old Notes are not immediately available or who
cannot deliver their Old Notes, the Note Letter of
Transmittal or any other documents required by the Note
Letter of Transmittal to the Exchange Agent prior to the
Expiration Date must tender their Old Notes according to
the guaranteed delivery procedures set forth in "The
Note Exchange Offer--Procedures for Tendering Old
Notes."
Acceptance of Old Notes and
Delivery of Exchange Notes...... The Company will accept for exchange any and all Old
Notes which are properly tendered in the Note Exchange
Offer prior to 5:00 p.m., New York City time, on the
Expiration Date. The Exchange Notes issued pursuant to
the Note Exchange Offer will be delivered promptly
following the Expiration Date. See "The Note Exchange
Offer--Acceptance of Old Notes for Exchange; Delivery of
Exchange Notes."
Effect on Holders of Old Notes.... As a result of the making of, and upon acceptance for
exchange of all validly tendered Old Notes pursuant to
the terms of this Exchange Offer, the Company will have
fulfilled a covenant contained in the Registration
Rights Agreement (the "Note Registration Rights
Agreement") dated as of May 18, 1998 among the Company
and NationsBanc Montgomery Securities LLC and NatWest
Capital Markets Limited (the "Initial Purchasers") and,
accordingly, there will be no increase in the interest
rate on the Old Notes pursuant to the terms of the Note
Registration Rights Agreement, and the holders of the
Old Notes will have no further registration or other
rights under the Note Registration Rights Agreement.
Holders of the Old Notes who do not tender their Old
Notes in the Note Exchange Offer will continue to hold
such Old Notes and will be entitled to all the rights
and limitations applicable thereto under the Indenture
dated as of May 18, 1998 between the Company and The
Bank
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
of New York relating to the Old Notes and the Exchange
Notes (the "Indenture"), except for any such rights
under the Note Registration Rights Agreement that by
their terms terminate or cease to have further
effectiveness as a result of the making of, and the
acceptance for exchange of all validly tendered Old
Notes pursuant to, the Note Exchange Offer. All
untendered Old Notes will continue to be subject to the
restrictions on transfer provided for in the Old Notes
and in the Indenture. To the extent that Old Notes are
tendered and accepted in the Note Exchange Offer, the
trading market for untendered Old Notes could be
adversely affected.
Consequence of Failure to
Exchange........................ Holders of Old Notes who do not exchange their Old Notes
for Exchange Notes pursuant to the Note Exchange Offer
will continue to be subject to the restrictions on
transfer of such Old Notes as set forth in the legend
thereon. In general, the Old Notes may not be offered or
sold, unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state
securities laws. The Company does not currently
anticipate that it will register the Old Notes under the
Securities Act.
Exchange Agent.................... The Bank of New York is serving as exchange agent (the
"Note Exchange Agent") in connection with the Exchange
Offer. See "The Note Exchange Offer--Exchange Agent."
</TABLE>
THE PREFERRED STOCK EXCHANGE OFFER
<TABLE>
<S> <C>
The Preferred Stock Exchange
Offer........................... The Company is offering to exchange pursuant to the
Preferred Stock Exchange Offer up to $50,000,000
aggregate principal amount of its New Preferred Stock
for a like aggregate principal amount of its
Exchangeable Preferred Stock. The terms of the New
Preferred Stock are identical in all material respects
to the terms of the Exchangeable Preferred Stock for
which they may be exchanged pursuant to the Preferred
Stock Exchange Offer, except that the New Preferred
Stock are freely transferrable by Holders thereof (other
than as provided herein), and are not subject to any
covenant regarding registration under the Securities
Act. See "The Preferred Stock Exchange Offer."
Minimum Condition................. The Preferred Stock Exchange Offer is not conditioned
upon any minimum aggregate principal amount of
Exchangeable Preferred Stock being tendered for
exchange.
Expiration Date; Withdrawal of
Tender.......................... The Preferred Stock Exchange Offer will expire at 5:00
p.m., New York City time, on , 1998, unless
the Preferred Stock Exchange Offer is extended, in which
case the term "Expiration Date" means the latest date
and time to which the Preferred Stock Exchange Offer is
extended. The Company does not currently intend to
extend the Expiration Date. Tenders may be withdrawn at
any time prior to 5:00 p.m., New York City time,
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
on the Expiration Date. See "The Preferred Stock
Exchange Offer--Withdrawal Rights."
Exchange Date..................... The date of acceptance for exchange of the Exchangeable
Preferred Stock will be the fourth business day
following the Expiration Date.
Conditions to the Preferred Stock
Exchange Offer.................. The Preferred Stock Exchange Offer is subject to certain
customary conditions, which may be waived by the
Company. The Company currently expects that each of the
conditions will be satisfied and that no waivers will be
necessary. See "The Preferred Stock Exchange
Offer--Certain Conditions to the Preferred Stock
Exchange Offer." The Company reserves the right to
terminate or amend the Preferred Stock Exchange Offer at
any time prior to the Expiration Date upon the
occurrence of any such condition.
Procedures for Tendering
Exchangeable Preferred Stock.... Each Holder wishing to accept the Preferred Stock
Exchange Offer must complete, sign and date the
Preferred Stock Letter of Transmittal, or a facsimile
thereof, in accordance with the instructions contained
herein and therein, and mail or otherwise deliver such
Letter of Transmittal, or such facsimile, together with
the Exchangeable Preferred Stock and any other required
documentation to the Exchange Agent at the address set
forth therein. See "The Preferred Stock Exchange
Offer--Procedures for Tendering Exchangeable Preferred
Stock" and "Plan of Distribution."
Use of Proceeds................... There will be no proceeds to the Company from the
exchange of Preferred Stock pursuant to the Preferred
Stock Exchange Offer.
Federal Income Tax Consequences... The exchange of Preferred Stock pursuant to the
Preferred Stock Exchange Offer will not be a taxable
event for federal income tax purposes. See "United
States Federal Tax Considerations."
Special Procedures for Beneficial
Owners.......................... Any beneficial owner whose Exchangeable Preferred Stock
is registered in the name of a broker, dealer,
commercial bank, trust company or other nominee and who
wishes to tender should contact such registered holder
promptly and instruct such registered holder to tender
on such beneficial owner's behalf. If such beneficial
owner wishes to tender on such beneficial owner's own
behalf, such beneficial owner must, prior to completing
and executing the Preferred Stock Letter of Transmittal
and delivering the Exchangeable Preferred Stock, either
make appropriate arrangements to register ownership of
the Exchangeable Preferred Stock in such beneficial
owner's name or obtain a properly completed bond power
from the registered holder. The transfer of registered
ownership may take considerable time. See "The Preferred
Stock Exchange Offer-- Procedures for Tendering
Exchangeable Preferred Stock."
</TABLE>
10
<PAGE>
<TABLE>
<S> <C>
Guaranteed Delivery Procedures.... Holders of Exchangeable Preferred Stock who wish to
tender their Exchangeable Preferred Stock and whose
Exchangeable Preferred Stock is not immediately
available or who cannot deliver their Exchangeable
Preferred Stock, the Preferred Stock Letter of
Transmittal or any other documents required by the
Preferred Stock Letter of Transmittal to the Exchange
Agent prior to the Expiration Date must tender their
Exchangeable Preferred Stock according to the guaranteed
delivery procedures set forth in "The Preferred Stock
Exchange Offer--Procedures for Tendering Exchangeable
Preferred Stock."
Acceptance of Exchangeable
Preferred Stock and Delivery of
New Preferred Stock............. The Company will accept for exchange any and all
Exchangeable Preferred Stock which is properly tendered
in the Preferred Stock Exchange Offer prior to 5:00
p.m., New York City time, on the Expiration Date. The
New Preferred Stock issued pursuant to the Preferred
Stock Exchange Offer will be delivered promptly
following the Expiration Date. See "The Preferred Stock
Exchange Offer--Acceptance of Exchangeable Preferred
Stock for Exchange; Delivery of New Preferred Stock."
Effect on Holders of Exchangeable
Preferred Stock................. As a result of the making of, and upon acceptance for
exchange of all validly tendered Exchangeable Preferred
Stock pursuant to the terms of this Preferred Stock
Exchange Offer, the Company will have fulfilled a
covenant contained in the Registration Rights Agreement
(the "Preferred Stock Registration Rights Agreement")
dated as of May 18, 1998 among the Company and
NationsBanc Montgomery Securities LLC and NatWest
Capital Markets Limited (the "Initial Purchasers") and,
accordingly, there will be no Liquidated Damages on the
Exchangeable Preferred Stock pursuant to the terms of
the Preferred Stock Registration Rights Agreement, and
the holders of the Exchangeable Preferred Stock will
have no further registration or other rights under the
Preferred Stock Registration Rights Agreement. Holders
of the Exchangeable Preferred Stock who do not tender
their Exchangeable Preferred Stock in the Preferred
Stock Exchange Offer will continue to hold such
Exchangeable Preferred Stock and will be entitled to all
the rights and limitations applicable thereto under the
Certificate of Designations (the "Certificate of
Designations"), except for any such rights under the
Preferred Stock Registration Rights Agreement that by
their terms terminate or cease to have further
effectiveness as a result of the making of, and the
acceptance for exchange of all validly tendered
Exchangeable Preferred Stock pursuant to, the Preferred
Stock Exchange Offer. All untendered Exchangeable
Preferred Stock will continue to be subject to the
restrictions on transfer provided for in the
Exchangeable Preferred Stock and in the Certificate of
Designations. To the extent that Exchangeable Preferred
Stock is tendered and accepted in the Preferred Stock
Exchange Offer,
</TABLE>
11
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<TABLE>
<S> <C>
the trading market for untendered Exchangeable Preferred
Stock could be adversely affected.
Consequence of Failure to
Exchange........................ Holders of Exchangeable Preferred Stock who do not
exchange their Exchangeable Preferred Stock for New
Preferred Stock pursuant to the Preferred Stock Exchange
Offer will continue to be subject to the restrictions on
transfer of such Exchangeable Preferred Stock as set
forth in the legend thereon. In general, the
Exchangeable Preferred Stock may not be offered or sold,
unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not
subject to, the Securities Act and applicable state
securities laws. The Company does not currently
anticipate that it will register the Exchangeable
Preferred Stock under the Securities Act.
Exchange Agent.................... The Bank of New York is serving as exchange agent (the
"Preferred Stock Exchange Agent" and, together with the
Note Exchange Agent, the "Exchange Agent") in connection
with the Preferred Stock Exchange Offer. See "The
Preferred Stock Exchange Offer--Exchange Agent."
</TABLE>
TERMS OF THE SECURITIES
THE EXCHANGE NOTES
<TABLE>
<S> <C>
The Exchange Notes.................. $112.0 million in aggregate principal amount of
10 1/8% Series B Senior Subordinated Notes Due 2008.
Maturity............................ May 15, 2008.
Interest............................ The Exchange Notes will bear interest at the rate of
10 1/8% per annum and will be payable semiannually on
May 15 and November 15 of each year, commencing
November 15, 1998.
Optional Redemption................. The Exchange Notes may be redeemed at the option of
the Company, in whole or in part, on or after May 15,
2003, at the redemption prices set forth herein, plus
accrued and unpaid interest thereon and Liquidated
Damages, if any, to the redemption date.
On or before May 15, 2001, the Company may, at its
option, redeem up to 35% of the original aggregate
principal amount of Exchange Notes with the proceeds
of a Public Offering (as defined), at the redemption
price set forth herein, plus accrued and unpaid
interest thereon and Liquidated Damages, if any, to
the date of redemption; PROVIDED, HOWEVER, that at
least 65% of the original aggregate principal amount
of Exchange Notes remain outstanding following such
redemption; and PROVIDED, FURTHER, that such
redemption shall occur within 60 days of the date of
the closing of such Public Offering. See "Description
of the Notes--Optional Redemption."
Change of Control................... In the event of a Change of Control, (i) the Company
will have the option, prior to May 15, 2003 to redeem
the
</TABLE>
12
<PAGE>
<TABLE>
<S> <C>
Exchange Notes, in whole, at a redemption price equal
to 100% of the principal amount thereof plus the
Applicable Premium (as defined), together with
accrued and unpaid interest, if any, to the date of
redemption, and (ii) if the Company has not redeemed
the Exchange Notes, the Company will be required to
make an offer to repurchase all outstanding Exchange
Notes at a purchase price equal to 101% of the
principal amount thereof, plus accrued and unpaid
interest thereon and Liquidated Damages, if any, to
the date of repurchase. There can be no assurance
that the Company will have sufficient funds to
repurchase the Exchange Notes in the event of a
Change of Control. See "Risk Factors--Repurchase Upon
a Change of Control," "Description of the Exchange
Notes--Repurchase at the Option of Holders--Change of
Control."
Ranking............................. The Exchange Notes will be general unsecured
obligations of the Company, will be subordinated in
right of payment to all existing and future Senior
Indebtedness of the Company, including indebtedness
under the Senior Credit Facility and will rank on a
parity with or senior in right of payment to all
existing and future Subordinated Indebtedness of the
Company. As of March 28, 1998, on a pro forma basis
after giving effect to the Transaction, the aggregate
principal amount of Senior Indebtedness (excluding
trade payables and other accrued liabilities) of the
Company and its subsidiaries would have been
approximately $122.4 million (excluding $11.2 million
of letters of credit). However, the Exchange Notes
will be effectively subordinated to all indebtedness
and other liabilities and commitments (including
trade payables and capital lease obligations) of the
Company's foreign subsidiaries. Any right of the
Company to receive assets of any of its foreign
subsidiaries upon the latter's liquidation or
reorganization (and the consequent right of the
holders of the Exchange Notes to participate in those
assets) will be effectively subordinated to the
claims of that subsidiary's creditors, except to the
extent that the Company is itself recognized as a
creditor of such subsidiary, in which case the claims
of the Company would still be subordinate to any
security in the assets of such subsidiary and any
indebtedness of such subsidiary senior to that held
by the Company. As of March 28, 1998 the liabilities
of the Company's foreign subsidiaries was $9.4
million. See "Description of the Exchange Notes."
Subsidiary Guarantees............... The Company's obligations under the Exchange Notes
will be guaranteed under the Subsidiary Guarantees,
jointly and severally, on an unsecured senior
subordinated basis by the Subsidiary Guarantors. The
Subsidiary Guarantees will be subordinated in right
of payment to all existing and future Senior
Indebtedness of the Subsidiary Guarantors, including
all obligations of the Subsidiary Guarantors under
the Senior
</TABLE>
13
<PAGE>
<TABLE>
<S> <C>
Credit Facility and will rank on a parity with or
senior in right of payment to all existing and future
Senior Subordinated Indebtedness of the Subsidiary
Guarantors. The obligations of the Subsidiary
Guarantors under the Subsidiary Guarantees will be
limited so as not to constitute a fraudulent
conveyance under applicable law.
Certain Covenants................... The indenture pursuant to which the Exchange Notes
will be issued (the "Indenture") will contain certain
covenants that, among other things, limit the ability
of the Company and its Restricted Subsidiaries to
incur additional Indebtedness (as defined) and issue
preferred stock, pay dividends or make other
distributions, create certain liens, enter into
certain transactions with affiliates, sell assets of
the Company or its Restricted Subsidiaries, sell
Equity Interests (as defined) of the Company's
Restricted Subsidiaries or enter into certain mergers
and consolidations. In addition, under certain
circumstances, the Company will be required to offer
to purchase Exchange Notes at a price equal to 100%
of the principal amount thereof, plus accrued and
unpaid interest thereon and Liquidated Damages, if
any, to the date of purchase, with the proceeds of
certain Asset Sales (as defined). See "Description of
the Exchange Notes."
THE NEW PREFERRED STOCK
The New Preferred Stock............. 500,000 shares of 12 1/2% Series B Senior
Exchangeable Preferred Stock Due 2010. Each share of
Exchangeable Preferred Stock will have a liquidation
preference of $100 per share.
Dividend............................ All dividends will be cumulative from the date of
issuance of the New Preferred Stock and will be
payable semi-annually in arrears on May 15 and
November 15 of each year, commencing on November 15,
1998. On or before May 15, 2003, the Company may, at
its option, pay dividends in cash or in additional
fully paid and non-assessable shares of New Preferred
Stock having an aggregate liquidation preference
equal to the amount of such dividends. After May 15,
2003, dividends may be paid only in cash.
Mandatory Redemption................ The Company is required, subject to certain
conditions, to redeem all of the New Preferred Stock
outstanding on May 15, 2010 at a redemption price
equal to 100% of the liquidation preference thereof,
plus, without duplication, accumulated and unpaid
dividends to the date of redemption.
Optional Redemption................. Except as described below, the Company may not redeem
the New Preferred Stock prior to May 15, 2003. On or
after such date, the Company may, at its option
redeem the New Preferred Stock, in whole or in part,
at the redemption prices set forth herein together
with accumulated and unpaid dividends, if any, to the
date of redemption. In addition, at any time and from
time to time prior to May 15, 2001, the
</TABLE>
14
<PAGE>
<TABLE>
<S> <C>
Company, at its option, may redeem the New Preferred
Stock, in whole or in part, with the proceeds of one
or more Equity Offerings at the redemption prices set
forth herein, together with accumulated and unpaid
dividends, if any, to the date of redemption.
Change of Control................... Upon the occurrence of a Change of Control, (i) the
Company will have the option, prior to May 15, 2003
to redeem the New Preferred Stock, in whole, at a
redemption price equal to a percentage of the
liquidation preference equal to the sum of 100% and
the dividend rate in effect with respect to the New
Preferred Stock, together with accrued and unpaid
interest, if any, to the date of redemption, and (ii)
if the Company has not redeemed the New Preferred
Stock, the Company will be required to make an offer
to purchase the New Preferred Stock for cash at a
purchase price of 101% of the liquidation preference
thereof, together with all accumulated and unpaid
dividends to the date of purchase. There can be no
assurance that the Company will have sufficient funds
to repurchase the New Preferred Stock in the event of
a Change of Control. See "Risk Factors-- Repurchase
Upon Change in Control."
Ranking............................. The New Preferred Stock will rank (i) senior to all
other classes of Capital Stock (as defined) of the
Company established after the issue date of the New
Preferred Stock which do not expressly provide that
such classes rank on a parity with the New Preferred
Stock as to dividends and distributions upon the
liquidation, winding up and dissolution of the
Company and (ii) subject to certain conditions, on a
parity with any class of Capital Stock established
after the date of issuance of the New Preferred Stock
the terms of which expressly provide that such class
or series will rank on a parity with the New
Preferred Stock as to dividends and distributions
upon the liquidation, winding up and dissolution of
the Company. As of March 28, 1998, on a pro forma
basis after giving effect to the Transaction, the
aggregate principal amount of liabilities of the
Company and its subsidiaries ranking senior to the
New Preferred Stock would have been approximately
$292.3 million (excluding $11.2 million of letters of
credit). Creditors of the Company will have priority
over the New Preferred Stock with respect to claims
on the assets of the Company. See "Description of the
New Preferred Stock and Exchange Debentures--New
Preferred Stock--Rank."
Certain Covenants................... The Certificate of Designations for the issuance of
the New Preferred Stock will contain certain
covenants that, among other things, limit the ability
of the Company and its Restricted Subsidiaries to
incur additional Indebtedness (as defined) and issue
preferred stock, pay dividends or make other
distributions, create certain liens, enter into
certain
</TABLE>
15
<PAGE>
<TABLE>
<S> <C>
transactions with affiliates, sell assets of the
Company or its Restricted Subsidiaries, sell Equity
Interests (as defined) of the Company's Restricted
Subsidiaries or enter into certain mergers and
consolidations. See "Description of the New Preferred
Stock and Exchange Debentures--New Preferred
Stock--Certain Covenants."
Exchange Feature.................... On any scheduled dividend payment date, subject to
provisions of the Company's debt instruments,
including the Indenture, the Company may, at its
option, exchange all but not less than all of the
shares of the New Preferred Stock then outstanding
for the Company's Exchange Debentures. The Senior
Credit Facility and the Indenture contain substantial
restrictions on the ability of the Company to
exchange New Preferred Stock for Exchange Debentures.
See "Description of the New Preferred Stock and
Exchange Debentures--New Preferred Stock--Exchange."
THE EXCHANGE DEBENTURES
The Exchange Debentures............. 12 1/2% Subordinated Exchange Debentures Due 2010.
Maturity............................ May 15, 2010.
Interest............................ Interest on the Exchange Debentures will be payable
semi-annually in cash (or on or prior to May 15,
2003, in additional Exchange Debentures, at the
option of the Company) in arrears on May 15 and
November 15 of each year, commencing with the first
such date after the Exchange Date.
Optional Redemption................. Except as described below, the Company may not redeem
the Exchange Debentures prior to May 15, 2003. On or
after such date, the Company may, at its option,
redeem the Exchange Debentures, in whole or in part,
at the redemption prices set forth herein together
with accrued and unpaid interest, if any, to the date
of redemption. In addition, at any time and from time
to time on or prior to May 15, 2001, the Company may,
at its option, redeem the Exchange Debentures in
whole or in part, with the proceeds of one or more
Equity Offerings at the redemption prices set forth
herein, together with accrued and unpaid interest, if
any, to the date of redemption.
Change of Control................... Upon the occurrence of a Change of Control, (i) the
Company will have the option, prior to May 15, 2003
to redeem the Exchange Debentures, in whole, at a
redemption price equal to 100% of the principal
amount thereof plus the Applicable Premium (as
defined), together with accrued and unpaid interest,
if any, to the date of redemption, and (ii) if the
Company has not redeemed the Exchange Debentures,
subject to certain restrictions in the Company's debt
instruments, the Company will be required to make an
offer to repurchase the Exchange Debentures held by
such holder at price equal to 101% of the principal
amount thereof, together with accrued and unpaid
interest, if any, to the date
</TABLE>
16
<PAGE>
<TABLE>
<S> <C>
of repurchase. There can be no assurance that the
Company will have sufficient funds to repurchase the
Exchange Debentures in the event of a Change of
Control. See "Risk Factors--Repurchase Upon a Change
of Control," "Description of the Exchange
Notes--Repurchase at the Option of Holders--Change of
Control" and "Description of Other Indebtedness."
Ranking............................. The Exchange Debentures will be unsecured and will be
subordinated in right of payment to all existing and
future Exchange Debenture Senior Indebtedness (as
defined) of the Company, including the Senior Credit
Facility and the Exchange Notes, and will be
effectively subordinated to all obligations of the
subsidiaries of the Company. The Exchange Debentures
will rank senior to all other subordinated
indebtedness (as defined) of the Company. As of March
28, 1998, on a pro forma basis after giving effect to
the Transaction, the aggregate principal amount of
Exchange Debenture Senior Indebtedness (excluding
trade payables and other accrued liabilities) of the
Company and its subsidiaries would have been
approximately $247.4 million (excluding $11.2 million
of letters of credit). In addition, the Exchange
Debentures will be effectively subordinated to all
liabilities of the Company's subsidiaries. The
Exchange Debenture Indenture (as defined) permits the
Company to incur additional indebtedness, including
Exchange Debenture Senior Indebtedness, subject to
certain limitations. See "Risk Factors" and
"Description of the New Preferred Stock and Exchange
Debentures--Exchange Debentures-- Subordination and
Ranking."
Restrictive Covenants............... The indenture under which the Exchange Debentures
will be issued (the "Exchange Debenture Indenture")
will contain certain covenants that, among other
things, limit the ability of the Company and its
Restricted Subsidiaries to incur additional
Indebtedness (as defined) and issue preferred stock,
pay dividends or make other distributions, create
certain liens, enter into certain transactions with
affiliates, sell assets of the Company or its
Restricted Subsidiaries, sell Equity Interests (as
defined) of the Company's Restricted Subsidiaries or
enter into certain mergers and consolidations. In
addition, under certain circumstances, the Company
will be required to offer to purchase Exchange
Debentures at a price equal to 100% of the principal
amount thereof, plus accrued and unpaid interest
thereon and Liquidated Damages, if any, to the date
of purchase, with the proceeds of certain Asset Sales
(as defined). See "Description of the New Preferred
Stock and Exchange Debentures--Exchange
Debentures--Certain Covenants."
</TABLE>
17
<PAGE>
<TABLE>
<S> <C>
TRANSFER RESTRICTIONS
Absence of a Public Market.......... The Securities are new securities for which there
presently is no established market. Although the
Initial Purchasers have informed the Company that
they currently intend to make a market in the
Securities, the Initial Purchasers are not obligated
to do so and any such market making may be
discontinued at any time without notice. Accordingly,
there can be no assurance as to the development or
liquidity of any market for the Securities. The
Securities are expected to be eligible for trading by
qualified buyers in the PORTAL market. The Company
does not intend to apply for listing of the
Securities on any securities exchange or for the
quotation of the Securities through the National
Association of Securities Dealers Automated Quotation
System. See "Risk Factors--Absence of Public Market"
and "Plan of Distribution."
USE OF PROCEEDS
Use of Proceeds and Borrowings...... The Company and Holdings used the proceeds from the
Offerings, together with borrowings under the Senior
Credit Facility and the Equity Investment to finance
the Transaction. See "Use of Proceeds."
</TABLE>
RISK FACTORS
Potential investors should consider carefully certain factors relating to an
investment in the Securities. See "Risk Factors."
18
<PAGE>
SUMMARY PRO FORMA COMBINED FINANCIAL INFORMATION
The following pro forma combined financial data have been derived from the
Unaudited Pro Forma Combined Financial Information and the related notes thereto
included elsewhere in this Prospectus. The pro forma information gives effect to
the Transaction and the Divested Operations (as defined). The accompanying pro
forma statement of operations data and other related data for the year ended
December 31, 1997 and for the three months and the twelve months ended March 28,
1998 give effect to such transactions as if they had occurred on January 1,
1997. The pro forma balance sheet data as of March 28, 1998 give effect to such
transactions as if they had occurred on such date. The pro forma data do not
purport to be indicative of the Company's financial position or the results that
would have actually been obtained had such transactions been consummated as of
the assumed dates and for the periods presented, nor are they indicative of the
Company's results of operations or financial position for any future period or
date. The pro forma adjustments, as described in the notes to the Unaudited Pro
Forma Combined Financial Information, are based on available information and
upon certain assumptions which management believes are reasonable.
The Summary Pro Forma Combined Financial Information should be read in
conjunction with "Unaudited Pro Forma Combined Financial Information," "Selected
Historical Combined Financial Data," "Management's Discussion and Analysis of
Financial Condition and Results of Operations," and the combined financial
statements of Bidermann Industries Corp. and Affiliates (the "Financial
Statements") and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
PRO FORMA
-------------------------------------------------------------
TWELVE MONTHS
YEAR ENDED THREE MONTHS ENDED MARCH 28,
DECEMBER 31, 1997 ENDED MARCH 28, 1998 1998
----------------- --------------------- -------------------
(DOLLARS IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................................... $ 359.2 $ 91.7 $ 364.2
Cost of goods sold.............................. 251.5 63.5 253.3
------ ----- -------
Gross profit.................................... 107.7 28.2 110.9
Selling, general and administrative expenses.... 73.3 19.0 74.3
Facility closing and reengineering costs........ 4.0 1.0 4.8
------ ----- -------
Operating income................................ 30.4 8.2 31.8
Interest expense, net........................... 24.0 6.0 23.9
Other expense (income), net..................... 1.8 (0.1) 1.2
Bankruptcy reorganization costs (credits)....... (3.9) 1.5 (4.0)
------ ----- -------
Income before provision for income taxes........ 8.5 0.8 10.7
Provision for income taxes...................... 1.3 0.3 1.4
------ ----- -------
Net income...................................... $ 7.2 $ 0.5 $ 9.3
------ ----- -------
------ ----- -------
OTHER DATA:
Capital expenditures............................ $ 11.0 $ 2.6 $ 11.5
Depreciation and amortization................... 8.1 2.1 8.2
Cash flows from (used by):
Operating activities.......................... $ 2.9 $ (4.7) $ (3.3)
Investing activities.......................... (7.3) (1.5) (3.0)
Financing activities.......................... (1.4) 4.5 (1.3)
EBITDA (1)...................................... 40.5 10.8 42.8
Cash interest expense (2)....................... 22.5 5.6 22.5
EBITDA to cash interest expense................. 1.8x 1.9x 1.9x
BALANCE SHEET DATA (AS OF MARCH 28, 1998):
Working capital (3)............................. $ 89.1
Total assets.................................... 225.6
Long-term debt (less current portion)........... 239.2
Preferred Stock................................. 48.1
Stockholder's deficit........................... (114.8)
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
19
<PAGE>
(1) EBITDA represents operating income before depreciation and amortization,
non-cash pension income and facility closing and reengineering costs. EBITDA
should not be considered in isolation or as a substitute for net income,
cash flows from operating activities and other income or cash flow statement
data prepared in accordance with generally accepted accounting principles
("GAAP") or as a measure of profitability or liquidity. EBITDA is presented
because it is a widely accepted financial indicator of a company's ability
to service and/or incur indebtedness; however, it is not necessarily
comparable to other similarly titled captions of other companies due to
differences in methods of calculation.
The calculation of pro forma EBITDA is shown below:
<TABLE>
<CAPTION>
YEAR ENDED THREE MONTHS TWELVE MONTHS
DECEMBER 31, 1997 ENDED MARCH 28, 1998 ENDED MARCH 28, 1998
------------------- ----------------------- -----------------------
<S> <C> <C> <C>
(IN MILLIONS)
Operating income....................... $ 30.4 $ 8.2 $ 31.8
Depreciation and amortization.......... 8.1 2.1 8.2
Non-cash pension income(a)............. (2.0) (0.5) (2.0)
Facility closing and reengineering
costs................................ 4.0 1.0 4.8
----- ----- -----
EBITDA................................. $ 40.5 $ 10.8 $ 42.8
----- ----- -----
----- ----- -----
</TABLE>
- ------------------------
(a) Represents non-cash pension income arising from the Company's overfunded
pension plan.
(2) Cash interest expense excludes non-cash amortization of deferred financing
costs of $1.5 million for the year ended December 31, 1997, $0.4 million for
the three months ended March 28, 1998, and $1.5 million for the twelve
months ended March 28, 1998.
(3) Working capital is defined as current assets (less cash and cash
equivalents) minus current liabilities (less current maturities of long-term
debt).
20
<PAGE>
SUMMARY HISTORICAL COMBINED FINANCIAL INFORMATION
The following table sets forth summary historical financial data of the
Company for each of the five years ended December 31, 1997, the twelve months
ended March 28, 1998 and for the three month periods ended March 29, 1997 and
March 28, 1998. The following summary financial data with respect to the three
years ended December 31, 1997, are derived from the Financial Statements
included elsewhere in this Prospectus, which have been audited by Ernst & Young
LLP, independent auditors, as indicated in their report included elsewhere
herein. The following summary financial data should be read in conjunction with
"Selected Historical Combined Financial Data," "Management's Discussion and
Analysis of Financial Condition and Results of Operations" and the Financial
Statements and notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, ---------------
------------------------------------------------------------------------- MARCH 29,
1993 1994 1995 1996 1997 1997
------------- ------------- ------------- ------------- ------------- ---------------
(UNAUDITED) (UNAUDITED) (UNAUDITED)
(DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................... $ 531.6 $ 536.8 $ 486.7 $ 368.7 $ 362.9 $ 87.5
Cost of goods sold(1)........... 394.2 391.5 369.8 273.8 253.8 62.3
------ ------------- ------ ------ ------ -----
Gross profit.................... 137.4 145.3 116.9 94.9 109.1 25.2
Selling, general and
administrative expenses....... 132.9 145.4 137.9 85.9 74.8 18.8
Facility closing and
reengineering costs(2)........ -- -- 22.5 11.6 2.5 0.2
------ ------------- ------ ------ ------ -----
Operating income (loss)......... 4.5 (0.1) (43.5) (2.6) 31.8 6.2
Interest expense, net........... 23.0 24.6 22.7 16.9 15.2 3.6
Write-down of intangible
assets(3)..................... -- 74.7 -- -- -- --
Other expense (income),
net(4)........................ 1.1 (0.3) 0.5 3.3 2.0 0.5
Bankruptcy reorganization costs
(credits)(5).................. -- -- 20.9 6.1 (3.9) 1.6
------ ------------- ------ ------ ------ -----
Income (loss) before provision
for income taxes.............. (19.6) (99.1) (87.6) (28.9) 18.5 0.5
Provision for income taxes...... 1.0 1.8 1.5 1.3 1.3 0.2
------ ------------- ------ ------ ------ -----
Net income (loss)............... ($ 20.6) ($ 100.9) ($ 89.1) ($ 30.2) $ 17.2 $ 0.3
------ ------------- ------ ------ ------ -----
------ ------------- ------ ------ ------ -----
OTHER FINANCIAL DATA:
Capital expenditures............ $ 7.5 $ 13.8 $ 6.8 $ 8.2 $ 11.0 $ 2.1
Depreciation and
amortization(6)............... 14.7 15.3 13.3 10.9 8.1 2.0
Cash flows from (used by):
Operating activities.......... $ 22.8 $ (16.0) $ 2.1 $ 13.6 $ 12.9 $ 3.4
Investing activities.......... (4.5) (10.3) (6.4) (5.1) (7.3) (5.8)
Financing activities.......... (33.1) (22.7) 3.9 (13.3) (1.4) 4.4
EBITDA(7)....................... 16.0 13.9 (7.8) 17.5 40.4 7.9
Adjusted Net Sales(8)........... 399.5 406.0 388.9 361.5 359.2 86.7
Adjusted EBITDA(7)(8)........... 11.0 0.6 (8.5) 18.8 41.0 8.6
Adjusted EBITDA margin.......... 2.8% 0.1% (2.2)% 5.2% 11.4% 9.9%
Ratio of earnings to fixed
charges(11)................... -- -- -- -- 2.1x 1.1x
BALANCE SHEET DATA (AT END OF PERIOD):
Working capital(9).............. $ 130.2 $ 141.5 $ 116.9 $ 82.1 $ 82.3 $ 80.9
Total assets.................... 388.0 321.5 252.9 211.1 220.0 215.4
Total long-term debt, net of
current portion(10)........... 138.8 150.4 3.6 8.6 2.0 7.9
Preferred stock................. 15.5 16.4 17.4 18.7 20.0 19.3
Total stockholders' equity
(deficit)..................... 150.4 46.9 (44.3) (74.2) (56.8) (76.8)
<CAPTION>
TWELVE
MONTHS ENDED
MARCH 28, MARCH 28,
1998 1998
------------- -------------
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................... $ 92.3 $ 367.7
Cost of goods sold(1)........... 63.9 255.4
------ ------
Gross profit.................... 28.4 112.3
Selling, general and
administrative expenses....... 19.5 75.5
Facility closing and
reengineering costs(2)........ 1.0 3.3
------ ------
Operating income (loss)......... 7.9 33.5
Interest expense, net........... 3.8 15.4
Write-down of intangible
assets(3)..................... -- --
Other expense (income),
net(4)........................ -- 1.5
Bankruptcy reorganization costs
(credits)(5).................. 1.5 (4.0)
------ ------
Income (loss) before provision
for income taxes.............. 2.6 20.6
Provision for income taxes...... 0.3 1.4
------ ------
Net income (loss)............... $ 2.3 $ 19.2
------ ------
------ ------
OTHER FINANCIAL DATA:
Capital expenditures............ $ 2.6 $ 11.5
Depreciation and
amortization(6)............... 2.1 8.2
Cash flows from (used by):
Operating activities.......... $ (2.9) $ 6.6
Investing activities.......... (1.5) (3.0)
Financing activities.......... 4.5 (1.3)
EBITDA(7)....................... 10.5 43.0
Adjusted Net Sales(8)........... 91.7 364.2
Adjusted EBITDA(7)(8)........... 10.9 43.3
Adjusted EBITDA margin.......... 11.9% 11.9%
Ratio of earnings to fixed
charges(11)................... 1.6x 2.2x
BALANCE SHEET DATA (AT END OF PE
Working capital(9).............. $ 89.0 $ 89.0
Total assets.................... 223.3 223.3
Total long-term debt, net of
current portion(10)........... 1.7 1.7
Preferred stock................. 22.1 22.1
Total stockholders' equity
(deficit)..................... (55.8) (55.8)
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
21
<PAGE>
(1) In 1995, the Company recorded a charge of approximately $14.0 million for
the write-down of inventory, which is included in cost of goods sold.
(2) Over the three year period 1995-1997 facility closing and reengineering
costs, which totalled $36.6 million, included $8.3 million for plant
closings, $9.9 million for store closings, $2.4 million for Divested
Operations, $2.8 million for relocation and severance, and $13.2 million for
software, systems development and implementation and other consulting costs.
(3) Represents the write-off of the remaining excess of the purchase price over
the fair value of net assets acquired (goodwill) recorded in connection with
the acquisition of the Shirt Group and the Sock Group, in 1990.
(4) Other expense, net is primarily exchange losses. Additionally, in 1996 the
Company began liquidating its investments in its Mexican and Guatemalan
subsidiaries and wrote off $3.1 million previously recorded as a component
of equity for foreign currency translation.
(5) Bankruptcy reorganization costs (credits) consist of the following:
<TABLE>
<CAPTION>
THREE MONTHS ENDED TWELVE
YEAR ENDED DECEMBER 31, ------------------------ MONTHS ENDED
------------------------------- MARCH 29, MARCH 28, MARCH 28,
1995 1996 1997 1997 1998 1998
--------- --------- --------- ----------- ----------- ---------------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C>
Professional fees.......................... $ 2.8 $6.1 $ 6.1 $1.6 $1.5 $ 6.0
Adjustment to lease rejection and other
pre-petition liabilities.................. 9.8 -- (10.0) -- -- (10.0)
Write off of deferred financing costs...... 3.5 -- -- -- -- --
Fees related to obtaining the DIP
Facility.................................. 1.3 -- -- -- -- --
Claims and related litigation.............. 3.5 -- -- -- -- --
--------- --------- --------- ----------- ----------- -------
$20.9 $6.1 $ (3.9) $1.6 $1.5 $ (4.0)
--------- --------- --------- ----------- ----------- -------
--------- --------- --------- ----------- ----------- -------
</TABLE>
(6) Depreciation and amortization excludes amortization of deferred financing
costs of $3.6 million in 1993, $3.6 million in 1994 and $5.2 million in
1995, which is included in interest expense.
(7) EBITDA is defined as operating income before depreciation and amortization,
non-cash pension income and facility closing and reengineering costs.
Adjusted EBITDA represents EBITDA adjusted for Divested Operations. EBITDA
should not be considered in isolation or as a substitute for net income,
cash flows from operating activities and other income or cash flow statement
data prepared in accordance with GAAP or as a measure of profitability or
liquidity. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to service and/or incur indebtedness;
however, it is not necessarily comparable to other similarly titled captions
of other companies due to differences in methods of calculation. The
calculation of EBITDA and Adjusted EBIDTA is shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Operating income (loss).................................... $ 4.5 $ (0.1) $ (43.5) $ (2.6) $ 31.8
Depreciation and amortization.............................. 14.7 15.3 13.3 10.9 8.1
Non-cash pension income.................................... (3.2) (1.3) (0.1) (2.4) (2.0)
Facility closing and reengineering costs................... -- -- 22.5 11.6 2.5
--------- --------- --------- --------- ---------
EBITDA..................................................... 16.0 13.9 (7.8) 17.5 40.4
EBITDA from Divested Operations(8)......................... 5.0 13.3 0.7 (1.3) (0.6)
--------- --------- --------- --------- ---------
Adjusted EBITDA............................................ $ 11.0 $ 0.6 $ (8.5) $ 18.8 $ 41.0
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
THREE MONTHS ENDED TWELVE
---------------------------- MONTHS ENDED
MARCH 29, MARCH 28, MARCH 28,
1997 1998 1998
------------- ------------- -----------------
<S> <C> <C> <C>
Operating income (loss).................................... $ 6.2 $ 7.9 $ 33.5
Depreciation and amortization.............................. 2.0 2.1 8.2
Non-cash pension income.................................... (0.5) (0.5) (2.0)
Facility closing and reengineering costs................... 0.2 1.0 3.3
----- ----- -----
EBITDA..................................................... 7.9 10.5 43.0
EBITDA from Divested Operations(8)......................... (0.7) (0.4) (0.3)
----- ----- -----
Adjusted EBITDA............................................ $ 8.6 $ 10.9 $ 43.3
----- ----- -----
----- ----- -----
</TABLE>
(8) Adjusted Net Sales and Adjusted EBITDA represent historical net sales and
EBITDA adjusted for (i) the sale of the Ralph Lauren Womenswear license and
associated operating assets which was completed in October 1995, (ii) the
sales of the operations of Arrow de Mexico and Arrow Guatemala in 1997 and
(iii) the decision to close certain Canadian retail stores which was made in
December 1996 (collectively, the "Divested Operations"). For a further
discussion of these adjustments see "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
(9) Working capital is defined as current assets (less cash and cash
equivalents) minus current liabilities (less current maturities of long-term
debt).
(10) On July 17, 1995, $161.1 million of long-term debt was reclassified to
liabilities subject to compromise.
(11) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings before income taxes, plus fixed charges.
Fixed charges include interest expense on all indebtedness, amortization of
deferred financing charges, and one-third of rental expense, representing
that portion of rental expense deemed to be attributable to interest.
Earnings were insufficient to cover fixed charges by $19.6 million in 1993,
$99.1 million in 1994, $87.6 million in 1995 and $28.9 million in 1996.
22
<PAGE>
RISK FACTORS
PROSPECTIVE INVESTORS SHOULD CAREFULLY CONSIDER THE FOLLOWING FACTORS IN
ADDITION TO THE OTHER INFORMATION SET FORTH IN THIS PROSPECTUS BEFORE MAKING AN
INVESTMENT IN THE SECURITIES OFFERED HEREBY.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Note Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Notes as set forth in the legend thereon.
In general, Old Notes may not be offered or sold unless registered under the
Securities Act, except pursuant to an exemption from, or in a transaction not
subject to, the registration requirements of the Securities Act and applicable
state securities laws. The Company does not currently intend to register the Old
Notes under the Securities Act. Based on interpretations by the staff of the
Commission, the Company believes that Exchange Notes issued pursuant to the Note
Exchange Offer in exchange for Old Notes may be offered for resale, resold or
otherwise transferred by Holders thereof (other than any such Holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such Old Notes were acquired in the
ordinary course of such Holders' business and such Holders have no arrangement
with any person to participate in the distribution of such Exchange Notes. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution." To the extent that Old Notes are tendered and
accepted in the Note Exchange Offer, the trading market for untendered and
tendered but unaccepted Old Notes will be adversely affected.
Holders of Exchangeable Preferred Stock who do not exchange their
Exchangeable Preferred Stock for New Preferred Stock pursuant to the Preferred
Stock Exchange Offer will continue to be subject to the restrictions on transfer
of such Exchangeable Preferred Stock as set forth in the legend thereon. In
general, Exchangeable Preferred Stock may not be offered or sold unless
registered under the Securities Act, except pursuant to an exemption from, or in
a transaction not subject to, the registration requirements of the Securities
Act and applicable state securities laws. The Company does not currently intend
to register the Exchangeable Preferred Stock under the Securities Act. Based on
interpretations by the staff of the Commission, the Company believes that New
Preferred Stock issued pursuant to the Preferred Stock Exchange Offer in
exchange for Exchangeable Preferred Stock may be offered for resale, resold or
otherwise transferred by Holders thereof (other than any such Holder which is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery provisions
of the Securities Act, provided that such Exchangeable Preferred Stock was
acquired in the ordinary course of such Holders' business and such Holders have
no arrangement with any person to participate in the distribution of such New
Preferred Stock. Each broker-dealer that receives New Preferred Stock for its
own account in exchange for Exchangeable Preferred Stock, where such
Exchangeable Preferred Stock was acquired by such broker-dealer as a result of
market-making activities or other trading activities, must acknowledge that it
will deliver a prospectus in connection with any resale of such New Preferred
Stock. See "Plan of Distribution." To the extent that Exchangeable Preferred
Stock is tendered and accepted in the Preferred Stock Exchange Offer, the
trading market for untendered and tendered but unaccepted Exchangeable Preferred
Stock will be adversely affected.
SUBSTANTIAL LEVERAGE
The Company is, and will continue after the Exchange Offerings to be, highly
leveraged. As of March 28, 1998, after giving pro forma effect to the
Transaction, the Company would have had total consolidated indebtedness of
approximately $247.4 million (of which $112.0 million would have consisted
23
<PAGE>
of the Notes), excluding $11.2 million of letter of credit. Also, after giving
pro forma effect to such transactions, the Company's ratio of earnings to fixed
charges would have been 1.4 and earnings would have been insufficient to cover
combined fixed charges and preferred stock dividends by $0.3 million for the LTM
Period. In addition, the Preferred Stock would have been $50.0 million (which,
subject to certain conditions, may be exchanged for Exchange Debentures in an
aggregate principal amount equal to the aggregate liquidation preference plus
accumulated dividends). After May 15, 2003, the Company will be required to pay
cash dividends on the Preferred Stock at a rate of 12 1/2% per annum. The
Company and its subsidiaries will be permitted to incur additional indebtedness
in the future. See "Capitalization" and "Selected Historical Combined Financial
and Operating Data" and "Description of the Exchange Notes."
The Company's ability to make scheduled payments of principal, interest or
Liquidated Damages, if any, on the Exchange Notes, to pay dividends on the New
Preferred Stock, to refinance or satisfy its indebtedness (including the
Exchange Notes), or to fund planned capital expenditures will depend on its
future performance and revenue growth, which, to a certain extent, is subject to
general economic, financial, competitive, legislative, regulatory and other
factors that are beyond its control. Based upon the current level of operations
and revenue growth, management believes that cash flow from operations and
available cash, together with available borrowings under the Senior Credit
Facility, will be adequate to meet the Company's future liquidity needs for at
least the next several years. The Company may, however, need to refinance all or
a portion of the principal of the Exchange Notes on or prior to maturity and
there can be no assurance that the Company will be able to effect any such
refinancing on commercially reasonable terms or at all. In addition, there can
be no assurance that the Company's business will generate sufficient cash flow
from operations, that anticipated revenue growth and operating improvements will
be realized or that future borrowings will be available under the Senior Credit
Facility in an amount sufficient to (i) enable the Company to service its
indebtedness (including the Exchange Notes), (ii) make periodic payments of cash
dividends on the New Preferred Stock, (iii) redeem any of the New Preferred
Stock for cash or, if the Exchange Debentures have been issued, to make payments
of principal or cash interest on the Exchange Debentures or (iv) fund its other
liquidity needs. If the Company's cash flow, availability under the Senior
Credit Facility and other capital resources are insufficient to fund the
Company's debt service obligations, the Company may be forced to reduce or delay
capital expenditures, sell assets, restructure or refinance its indebtedness, or
seek additional equity contributions. There can be no assurance that any of such
measures could be implemented on satisfactory terms or, if implemented, would be
successful or would permit the Company to meet its debt service obligations. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations--Liquidity and Capital Resources."
The degree to which the Company will be leveraged following the Exchange
Offerings could have important consequences to holders of the Securities,
including, but not limited to: (i) making it more difficult for the Company to
satisfy its obligations with respect to the Securities, (ii) increasing the
Company's vulnerability to general adverse economic and industry conditions,
(iii) limiting the Company's ability to obtain additional financing to fund
future working capital, capital expenditures, acquisitions and other general
corporate requirements, (iv) requiring the dedication of a substantial portion
of the Company's cash flow from operations to the payment of principal of, and
interest on, its indebtedness, thereby reducing the availability of such cash
flow to fund working capital, capital expenditures, acquisitions or other
general corporate purposes, (v) limiting the Company's flexibility in planning
for, or reacting to, changes in its business and the industry and (vi) placing
the Company at a competitive disadvantage vis-a-vis less leveraged competitors.
In addition, the Indenture and the Senior Credit Facility will contain financial
and other restrictive covenants that will limit the ability of the Company to,
among other things, borrow additional funds. Failure by the Company to comply
with such covenants could result in an event of default which, if not cured or
waived, could have a material adverse effect on the Company. In addition, the
degree to which the Company is leveraged could prevent it from repurchasing all
of the Exchange Notes tendered to it upon the occurrence of a Change of Control.
See "Description of the Exchange Notes--Repurchase at Option of Holder--Change
of Control" and "Description of Other Indebtedness."
24
<PAGE>
SUBORDINATION OF EXCHANGE NOTES AND EXCHANGE DEBENTURES; EQUITY INTEREST
The Exchange Notes will be subordinated in right of payment to all Senior
Indebtedness of the Company, including all amounts owing under the Senior Credit
Facility, and indebtedness of all subsidiaries which are not Subsidiary
Guarantors. In addition, the Indenture will permit the Company to incur or have
outstanding certain other Senior Indebtedness, including indebtedness that is
secured by assets of the Company. Consequently, in the event of bankruptcy,
liquidation or reorganization of the Company, the assets of the Company will be
available to pay obligations on the Exchange Notes only after all Senior
Indebtedness (including the Senior Credit Facility) has been paid in full. There
can be no assurance that there will be sufficient assets remaining to pay
amounts due on any or all of the Exchange Notes. In addition, the subordination
provisions of the Indenture will provide that payments with respect to the
Exchange Notes will be blocked in the event of a payment default on Senior
Indebtedness and may be blocked for up to 179 days each year in the event of
certain non-payment defaults on Senior Indebtedness. In the event of a
bankruptcy, liquidation or reorganization of the Company, holders of the
Exchange Notes will participate ratably with all holders of subordinated
indebtedness of the Company that is deemed to be of the same class as the
Exchange Notes, and potentially with all other general creditors of the Company,
based upon the respective amounts owed to each holder or creditor, in the
remaining assets of the Company. In any of the foregoing events, there can be no
assurance that there would be sufficient assets to pay amounts due on the
Exchange Notes. As a result, holders of Exchange Notes may receive less,
ratably, than the holders of Senior Indebtedness. As of March 28, 1998 after
giving effect to the Transaction on a pro forma basis, the Company would have
had $122.4 million in aggregate principal amount of Senior Indebtedness
outstanding (excluding $11.2 million of letters of credit). However, the
Exchange Notes will be effectively subordinated to all indebtedness and other
liabilities and commitments (including trade payables and capital lease
obligations) of the Company's foreign subsidiaries. Any right of the Company to
receive assets of any of its foreign subsidiaries upon the latter's liquidation
or reorganization (and the consequent right of the holders of the Exchange Notes
to participate in those assets) will be effectively subordinated to the claims
of that subsidiary's creditors, except to the extent that the Company is itself
recognized as a creditor of such subsidiary, in which case the claims of the
Company would still be subordinate to any security in the assets of such
subsidiary and any indebtedness of such subsidiary senior to that held by the
Company. As of March 28, 1998, the liabilities of the Company's foreign
subsidiaries was $9.4 million. See "Description of the Exchange Notes".
The New Preferred Stock will rank junior to all Indebtedness and other
obligations of the Company (including the Exchange Notes). The Exchange
Debentures, if issued, will be unsecured obligations of the Company and will be
subordinated in right of payment to all existing and future Exchange Debenture
Senior Indebtedness, including the Exchange Notes. Consequently, in the event of
bankruptcy, liquidation or reorganization of the Company, payments may be made
with respect to the New Preferred Stock only after the assets of the Company
have been used to satisfy all its obligations to its creditors (including the
Exchange Notes), or if the Exchange Debentures have been issued, only after all
of the Exchange Debenture Senior Indebtedness (including the Exchange Notes) has
been paid in full. In addition, the subordination provisions of the Exchange
Debenture Indenture will provide that payments with respect to the Exchange
Debentures will be blocked in the event of a payment default on Exchange
Debenture Senior Indebtedness and may be blocked for up to 179 days each year in
the event of certain non-payment defaults on Exchange Debenture Senior
Indebtedness. In the event of a bankruptcy, liquidation or reorganization of the
Company, holders of the Exchange Debentures will participate ratably with all
holders of subordinated indebtedness of the Company that is deemed to be of the
same class as the Exchange Debentures, and potentially with all other general
creditors of the Company, based upon the respective amounts owed to each holder
or creditor, in the remaining assets of the Company. In any of the foregoing
events, there can be no assurance that there would be sufficient assets to pay
amounts due on the Exchange Debentures. As a result, holders of Exchange
Debentures may receive less, ratably, than the
25
<PAGE>
holders of Senior Indebtedness. See "--Substantial Leverage" above, and
"Description of Other Indebtedness," "Description of the Exchange Notes" and
"Description of the New Preferred Stock and Exchange Debentures."
As of March 28, 1998 after giving effect to the Transaction on a pro forma
basis, the Company would have had $292.3 million of liabilities which would have
ranked senior to the New Preferred Stock and the Company would have had $247.4
million in aggregate principal amount of Exchange Debenture Senior Indebtedness
which would have ranked senior in right of payment to the Exchange Debentures
(excluding $11.2 million letters of credit).
EMERGENCE FROM CHAPTER 11
The Company will emerge from Chapter 11 contemporaneously with the
consummation of the Offerings. The Company's experience in Chapter 11 may affect
its ability to negotiate favorable trade terms with manufacturers and other
vendors and to negotiate favorable lease terms with landlords. The failure to
obtain such favorable terms could have a material adverse effect on the Company
and its financial performance.
NET LOSSES
The Company has experienced net losses for four of the last five years. See
"The Transaction". If the Company continues to experience net losses, the
Company will be required to find additional sources of financing to fund its
operating deficits, working capital requirements, anticipated capital
expenditures and financing commitments. There can be no assurance that such
financing will be available on terms and conditions acceptable to the Company in
such circumstances or that, if debt financing is required, such financing would
be permitted under the terms of the Company's indebtedness. If the Company
experiences losses in the future, that fact, combined with the absence of
additional financing, could impair the Company's ability to pay principal and
interest on the Exchange Notes, to pay cash dividends on the New Preferred
Stock, to redeem the Securities or, if issued, to pay principal and interest on
the Exchange Debentures.
DIVIDEND RESTRICTIONS ON NEW PREFERRED STOCK AND EXCHANGE DEBENTURES
The Senior Credit Facility prohibits the payment of cash dividends on the
New Preferred Stock or the redemption, purchase or other acquisition of any New
Preferred Stock or Exchange Debentures by the Company for cash. In addition, the
Indenture restricts the ability of the Company to pay cash dividends on the New
Preferred Stock, or redeem, purchase or otherwise acquire, the New Preferred
Stock or Exchange Debentures for cash. Moreover, under Delaware law, a dividend
on the New Preferred Stock may only be paid out of the Company's surplus or net
profits for the fiscal year in which the dividend is declared and/or the
preceding year, provided the board of directors approves the payment of such
dividend. There can be no assurances that the Company will be able to generate a
surplus or net profits after making its payments under the Senior Credit
Facility or the Exchange Notes, to other creditors or for any other reason. As a
result, the Company does not expect to be able to pay cash dividends on the New
Preferred Stock or redeem, purchase or otherwise acquire any New Preferred Stock
or Exchange Debentures for cash in the foreseeable future.
HOLDING COMPANY STRUCTURE
Cluett American Corp. is a holding company and does not have any material
operations or assets other than ownership of capital stock of its subsidiaries.
Accordingly, the New Preferred Stock and the Exchange Debentures will be
effectively subordinated to all existing and future liabilities of Cluett
American Corp.'s subsidiaries, including trade payables. As of March 28, 1998,
on a pro forma basis after giving effect to the Transaction, the New Preferred
Stock and the Exchange Debentures would have been subordinated to $292.3 million
of liabilities of Cluett American Corp. and its subsidiaries. Cluett American
26
<PAGE>
Corp. and its subsidiaries may incur additional indebtedness in the future,
subject to certain limitations contained in the instruments governing their
indebtedness.
Any right of holders of the New Preferred Stock or the Exchange Debentures
to participate in any distribution of the assets of the subsidiaries of Cluett
American Corp. upon the liquidation, reorganization or insolvency of any such
subsidiary will be subject to the prior claims of the respective subsidiary's
creditors and holders of equity interests.
COMPETITION; INDUSTRY RISKS
The apparel industries are highly competitive. The Company competes with
numerous domestic and foreign designers, brands and manufacturers of apparel and
accessories, some of which may be significantly larger and more diversified and
have greater financial and other resources than the Company. Increased
competition from these and future competitors could reduce sales and prices,
adversely affecting the Company's results of operations. Because of the
Company's high leverage, it may be less able to respond effectively to such
competition than other participants.
The industries in which the Company operates are cyclical. Purchases of
apparel tend to decline during recessionary periods and also may decline at
other times. A recession in the general economy or uncertainties regarding
future economic prospects could affect consumer spending habits and have an
adverse effect on the Company's results of operations. Weak sales and resulting
markdown requests from customers could also have a material adverse effect on
the Company's business, results of operations and financial condition.
Although the Company believes that most of its products are fashion staples,
some of the Company's products, such as those distributed by the Designer Group,
are subject to changing fashion tastes and styles. The Company's success in
these product lines depends on its ability to anticipate and react to consumer
demands in a timely manner. If the Company misjudges these markets, it may be
faced with significant excess inventory which could have a material adverse
effect on the Company's financial condition and results of operations.
RELIANCE ON CERTAIN CUSTOMERS
The Shirt Group's ten largest customers accounted for approximately 51% of
its net sales in 1997 and the Sock Group's ten largest customers accounted for
approximately 72% of its net sales in 1997. No customer accounted for more than
10% of the Company's sales. Although the Company has long-standing relationships
with these customers, a substantial reduction in sales to these customers could
have a material adverse effect on the financial condition and results of
operations of the Company.
OWNERSHIP CHANGES IN THE RETAIL INDUSTRY
In recent years, the retail industry has experienced consolidation and other
ownership changes. In addition, some of the Company's customers have operated
under the protection of the federal bankruptcy laws. In the future, retailers in
the United States and in foreign markets may consolidate, undergo restructurings
or reorganizations, or realign their affiliations, any of which could decrease
the number of stores that carry the Company's products or increase the ownership
concentration within the retail industry. While such changes in the retail
industry to date have not had a material adverse effect on the Company's
business or financial condition, there can be no assurance as to the future
effect of any such changes.
TRADEMARKS
The Company believes that its trademarks and other proprietary rights are
important to its success and its competitive position. Accordingly, the Company
devotes substantial resources to the establishment and protection of its
trademarks on a worldwide basis. There can be no assurance that the actions
taken by
27
<PAGE>
the Company to establish and protect its trademarks and other proprietary rights
will be adequate to prevent imitation of its products by others or to prevent
others from seeking to block sales of the Company's products as violative of the
trademarks and proprietary rights of others. Moreover, no assurance can be given
that others will not assert rights in, or ownership of, trademarks and other
proprietary rights of the Company or that the Company will be able to
successfully resolve such conflicts. In addition, the laws of certain foreign
countries may not protect proprietary rights to the same extent as do the laws
of the United States. The loss of such trademarks and other proprietary rights,
or the loss of the exclusive use of its trademarks and other proprietary right
could have a material adverse effect on the financial condition and results of
operations of the Company. See "Business--Trademarks and License Agreements".
DEPENDENCE ON LICENSING PARTNERS
For the LTM Period approximately 9.8% of the Company's EBITDA is derived
from licensing revenue representing royalties received from its licensing
partners. Approximately 60.6% of such licensing revenue in 1997 was derived from
10 licensing partners. The risk factors associated with the Company's own
products apply to its licensed products as well, in addition to any number of
possible risks specific to a licensing partner's business, including, for
example, risks associated with a particular licensing partner's ability to
obtain capital and manage its labor relations and risks related to a particular
country's economy. Although certain of the Company's license agreements prohibit
licensing partners from entering into licensing arrangements with the Company's
competitors, generally the Company's licensing partners are not precluded from
offering, under other brands, the types of products covered by their license
agreements with the Company. While the Company has significant control over its
licensing partners' products and advertising, it relies on its licensing
partners for, among other things, operational and financial control over their
businesses. In addition, failure by the Company to maintain its existing
licensing alliances could adversely affect the Company's financial condition and
results of operations. Although the Company believes in most circumstances it
could replace existing licensing partners if necessary, its inability to do so
for any period of time could adversely affect the Company's revenues both
directly from reduced licensing revenue received and indirectly from reduced
sales of the Company's other products. See "Business-- Trademarks and License
Agreements".
In addition, a material portion of the Company's EBITDA is derived from
sales of products manufactured by the Company as licensee of certain trademarks.
The risk factors associated with the Company's own products apply to its
licensed products as well. The Company's license agreements contain provisions
that, under certain circumstances, could permit the licensor to terminate the
Company's rights to the license. Such provisions include, among others (i) a
default in the payment of certain amounts payable under the license that
continues beyond the specified grace period and (ii) the failure to comply with
the covenants contained in the license. The Company believes that it is
currently in compliance with all material provisions of such licenses and has no
reason to believe that any events are likely to occur that would permit any
licensor to terminate its license agreement.
In 1995, the licensor of Ralph Lauren purported to terminate the Company's
licensed Ralph Lauren trademark as a result of alleged breaches by the Company
under the licensing agreement. Although the Company believed that it had certain
defenses to such termination, had the licensor been successful in its
assertions, the termination of such license would have had a material adverse
effect on the Company. The Company subsequently settled its dispute with such
licensor and, in connection with such settlement, sold its rights under the
Ralph Lauren trademark and certain assets to the licensor for approximately
$41.9 million.
PERFORMANCE OF UNAFFILIATED MANUFACTURERS
During 1997, approximately 57% (by dollar value) of the Shirt Group's
products (representing substantially all of the sports shirts produced by the
Company) and 8% (by dollar volume) of the Sock
28
<PAGE>
Group's products were manufactured by foreign unaffiliated manufacturers and
approximately 14% (by dollar value) of the Sock Group's products were
manufactured in the United States by unaffiliated manufacturers. The inability
of a manufacturer to ship orders of the Company's products in a timely manner or
to meet the Company's quality standards could cause the Company to miss the
delivery date requirements of its customers for those items, which could result
in cancellation of orders, refusal to accept deliveries or a reduction in
purchase prices, any of which could have a material adverse effect on the
Company's financial condition and results of operations. Although the Company
enters into a number of purchase order commitments each season specifying a time
frame for delivery, method of payment, design and quality specifications and
other standard industry provisions, the Company does not have long-term
contracts with any manufacturer and competes with other companies for production
capacity. None of the manufacturers used by the Company produces the Company's
products exclusively. No manufacturer accounted for more than ten percent of
either Group's total production in fiscal 1997.
The Company requires its licensing partners and independent manufacturers to
operate in compliance with applicable laws and regulations. While the Company's
internal and vendor operating guidelines promote ethical business practices and
the Company's staff periodically visits and monitors the operations of its
independent manufacturers, the Company does not control such manufacturers or
their labor practices. The violation of labor or other laws by an independent
manufacturer of the Company or by one of the Company's licensing partners, or
the divergence of an independent manufacturer's or licensing partner's labor
practices from those generally accepted as ethical in the United States, could
have a material adverse effect on the Company's financial condition and results
of operations.
POSSIBLE ADVERSE IMPACT OF CHANGES IN IMPORT RESTRICTIONS
The Company's import operations are subject to constraints imposed by
bilateral textile agreements between the United States and a number of foreign
countries, including Taiwan, South Korea, and Hong Kong. These agreements, which
have been negotiated bilaterally either under the framework established by the
Arrangement Regarding International Trade in Textiles, known as the Multifiber
Agreement, and other applicable statutes, impose quotas on the amounts and types
of merchandise which may be imported into the United States from these
countries. These agreements also allow the United States to impose restraints at
any time on the importation of categories of merchandise that, under the terms
of the agreements, are not currently subject to specified limits. The Company's
imported products are also subject to United States customs duties which
comprise a material portion of the cost of the merchandise. A substantial
increase in customs duties could have an adverse effect on the Company's
operating results. The United States and the countries in which the Company's
products are produced or sold may, from time to time, impose new quotas, duties,
tariffs, or other restrictions, or adversely adjust prevailing quota, duty, or
tariff levels, any of which could have a material adverse effect on the Company.
In addition, the Company has historically benefitted from import
restrictions imposed on foreign competitors in the apparel industry. The extent
of import protection afforded to domestic manufacturers such as the Company,
however, has been, and is likely to remain, subject to considerable political
deliberation. The General Agreement on Tariffs and Trade ("GATT") will
eliminate, over a number of years, restrictions on imports of apparel. In
addition, on January 1, 1994, the North American Free Trade Agreement ("NAFTA")
became effective. Each of these agreements will reduce import constraints
previously imposed on some of the Company's competitors and will increase the
likelihood of competition on the basis of price.
GROWTH STRATEGY AND STRATEGIC ACQUISITIONS
The Company believes opportunities for growth exist in men's and women's
sportswear and has begun offering men's cotton/polyester sports shirts and a
line of women's golf shirts. There can be no assurance that these products will
be successful. In the early 1990s, the Company attempted to grow sales by
expanding the Shirt Group's product line through the introduction of higher
fashion sport shirts. This
29
<PAGE>
effort was poorly executed in terms of design, sales and sourcing. As a result,
the Company built up significant excess inventory. The Company believes that the
addition of new management, its improved organizational structure, consistent
focus on its core products and new management information systems will enable
the Company to better execute this growth strategy. Nevertheless, there can be
no assurance that the Company's sportwear products will be successful.
In addition, the Company plans to increase sales by increasing the number of
customers through which its products are sold. There can be no assurance that
this strategy will be successful or that net sales will increase as a result of
an increase in the Company's customer base.
The Company continues to proactively pursue opportunities to acquire
additional brands and licenses and complementary businesses. Acquisitions that
the Company may make, or joint ventures into which the Company may enter, will
involve risks, including the successful integration and management of acquired
technology, operations and personnel. The integration of acquired businesses may
also lead to the loss of key employees of the acquired companies and diversion
of management attention from ongoing business concerns. There can be no
assurance that any acquisition will be made, that the Company will be able to
obtain additional financing needed to finance such transactions and, if any
acquisitions are so made or formed, that they will be successful.
DEPENDENCE ON KEY PERSONNEL
The success of the Company depends in large part on the Company's Chief
Executive Officer, Bryan Marsal, and other senior management and its ability to
attract and retain other highly qualified management personnel. There can be no
assurance that the Company will be successful in hiring or retaining key
personnel. The Company has not entered into an employment agreement with Bryan
Marsal and does not, in general, enter into employment agreements with its
senior managers. See "Management."
LABOR STOPPAGE
A significant percentage of the Shirt Group's employees are represented by a
union. These union members have been working without a signed contract since
August 1996. Notwithstanding, such employees were given wage increases of 3% in
March 1997 and March 1998 and the Company believes that its relationship with
its employees is good. No assurance can be given, however, that a new union
contract will be executed, or that negotiations regarding a new contract will
not result in employee slowdowns, strikes or similar actions which could have a
material adverse effect on the Company's financial condition and results of
operations.
CONTROL BY CERTAIN STOCKHOLDERS
Vestar owns approximately 60.8% of the outstanding common stock of Holdings.
As a result, Vestar is able to effectively control the outcome of certain
matters requiring a stockholder vote, including the election of directors. Such
ownership of common stock may have the effect of delaying, deferring, or
preventing a change of control of the Company and may adversely affect the
voting and other rights of other stockholders.
LIMITATION ON USE OF NET OPERATING LOSSES AND BUILT-IN LOSSES
Under the Internal Revenue Code of 1986, as amended (the "Code"), the
utilization of net operating loss carryovers against future taxable income is
subject to limitation if a company undergoes an "ownership change" as defined in
the Code (the "Section 382 limitation"). As a result of the Recapitalization, an
ownership change with respect to the Company occurred on the effective date of
the Plan (the "Change Date"). Accordingly, the Company's ability to utilize all
of its net operating losses (and "recognized built-in losses," if any) in
taxable years beginning after the Change Date (and a portion of the taxable year
which includes the Change Date) became subject to the Section 382 limitation.
The Company intends to
30
<PAGE>
determine the Section 382 limitation under the provisions of Code section
382(l)(6), which deals with a loss corporation that exchanges stock for debt and
undergoes an ownership change in a proceeding under Chapter 11. Under that
provision, the amount of income that may be offset by net operating loss
carryovers that occur prior to the Change Date should generally be limited to an
amount (subject to a proration rule for the taxable year that includes the
Change Date) equal to the product of a rate set by the Treasury Department
(5.05% on the Change Date) and the lower of (i) the value of the Company's
assets immediately prior to the ownership change, determined without regard to
liabilities, or (ii) the aggregate new stock value immediately after the
ownership change. The limitation, as so determined, may also apply to the use of
"recognized built-in losses" to offset other income during the five-year period
after the Change Date. The built-in loss limitation will apply if the excess of
the Company's tax basis in its assets over the fair market value of such assets
as of Change Date exceeds the lesser of $10.0 million or 15% of the fair market
value of the assets before the ownership change. This limitation also limits the
Company's ability to take depreciation or amortization charges with respect to
its built-in loss assets. The annual limitation on the Company's ability to
utilize its net operating losses (and recognized built-in losses, if any) may be
significant.
RESTRICTIVE FINANCING COVENANTS
The Senior Credit Facility contains a number of significant covenants that
restrict the operations of the Company. The Company is required to comply with
specified financial ratios and tests, including minimum fixed charge coverage
and interest coverage ratios and maximum leverage ratios. There can be no
assurance that the Company will be able to comply with such covenants or
restrictions in the future. The Company's ability to comply with such covenants
and other restrictions may be affected by events beyond its control, including
prevailing economic, financial and industry conditions. The breach of any such
covenants or restrictions could result in a default under the Senior Credit
Facility that would permit the lenders to declare all amounts outstanding
thereunder to be immediately due and payable, together with accrued and unpaid
interest, and the commitments of the lenders to make further extensions of
credit thereunder could be terminated. See "Description of Other Indebtedness."
The Indenture, the Certificate of Designation for the New Preferred Stock and
the Exchange Debenture Indenture also contain covenants that will restrict the
operations of the Company. See "Description of the Exchange Notes" and
"Description of the New Preferred Stock and Exchange Debentures."
REPURCHASE UPON CHANGE OF CONTROL
The occurrence of certain of the events that would constitute a Change of
Control may result in a default, or otherwise require repayment of indebtedness,
under the Senior Credit Facility and the Exchange Notes, and redemption of the
New Preferred Stock or, in the case of the Exchange Debentures, the Exchange
Debentures. In addition, the Senior Credit Facility prohibits the repayment of
indebtedness of the Exchange Notes by the Company in such an event, unless and
until such time as the indebtedness under the Senior Credit Facility is repaid
in full. The Company's failure to make such repayments in such instances would
result in a default under the Senior Credit Facility. The inability to repay the
indebtedness under the Senior Credit Facility, if accelerated, would also
constitute an event of default under the Indenture, which could have materially
adverse consequences to the Company and to the holders of the Securities. Future
indebtedness of the Company may also contain restrictions or repayment
requirements with respect to certain events or transactions that could
constitute a Change of Control. In the event of a Change of Control, there can
be no assurance that the Company would have sufficient assets to satisfy all of
its obligations under the Senior Credit Facility or the Exchange Notes, or with
respect to the New Preferred Stock or the Exchange Debentures, as the case may
be. See "Description of the Senior Credit Facility" and "Description of the
Exchange Notes."
31
<PAGE>
CERTAIN TAX CONSIDERATIONS FOR HOLDERS OF NEW PREFERRED STOCK
Distributions on the New Preferred Stock made out of the Company's current
or accumulated earnings and profits, as determined under U.S. federal income tax
principles, will be taxable as ordinary income whether paid in cash or in
additional shares of New Preferred Stock. In addition, to the extent that there
is a difference between the redemption price and issue price of the New
Preferred Stock (the "redemption premium"), holders will be required to treat
the difference as constructive distributions that are includable in income on an
economic accrual basis. If shares of New Preferred Stock (including additional
shares of New Preferred Stock distributed by the Company in lieu of cash
dividend payments) bear redemption premium, such shares generally will have
different tax characteristics than other shares of preferred stock and might
trade separately, which might adversely affect the liquidity of such shares. See
"United States Federal Tax Considerations; New Preferred Stock; U.S. Holders --
Redemption Premium."
Holders should also note that if shares of New Preferred Stock are exchanged
for Exchange Debentures and the stated redemption price at maturity of such
Exchange Debentures exceeds their issue price by more than a DE MINIMIS amount,
the Exchange Debentures will be treated as having original issue discount equal
to the entire amount of such excess. Exchange Debentures issued on or before May
15, 2003, when the Company has the option to pay interest on the Exchange
Debentures in additional Exchange Debentures, will have original issue discount
and Exchange Debentures issued thereafter may have original issue discount. Each
holder of Exchange Debentures with original issue discount will be required to
include in gross income an amount equal to the sum of the daily portions of the
original issue discount for all days during the taxable year in which such
holder holds the Exchange Debentures, regardless of the holder's regular method
of accounting and regardless of whether interest is paid by the Company in cash
or in additional Exchange Debentures. See "United States Federal Tax
Considerations; New Preferred Stock; U.S. Holders--Original Issue Discount."
FRAUDULENT CONVEYANCE CONSIDERATIONS
The incurrence of indebtedness by the Company or any of the Guarantors,
respectively, may be subject to review under Federal bankruptcy law or relevant
state fraudulent conveyance laws if a bankruptcy case or lawsuit is commenced by
or on behalf of unpaid creditors of such entity. Under these laws, if, in a
bankruptcy or reorganization case or a lawsuit by or on behalf of unpaid
creditors of the such entity, a court were to find that, at the time such entity
incurred indebtedness, including (i) such entity incurred such indebtedness with
the intent of hindering, delaying or defrauding current or future creditors or
(ii) (a) such entity received less than reasonably equivalent value or fair
consideration for incurring such indebtedness and (b) such entity (1) was
insolvent or was rendered insolvent by reason of the Exchange Notes (in the case
of the Company) or the Guarantees (in the case of the Guarantors), (2) was
engaged, or about to engage, in a business or transaction for which its assets
constituted unreasonably small capital, (3) intended to incur, or believed that
it would incur, debts beyond its ability to pay as such debts matured (as all of
the foregoing terms are defined in or interpreted under the relevant fraudulent
transfer or conveyance statutes) or (4) was a defendant in an action for money
damages, or had a judgment for money damages docketed against it (if, in either
case, after final judgment is unsatisfied), then such court could avoid or
subordinate the amounts owing under the Exchange Notes (in the case of the
Company) or the Guarantees (in the case of the Guarantors), to presently
existing and future indebtedness of the Company or the Guarantors, respectively
and take other actions detrimental to the holders of the Exchange Notes or the
Exchange Debentures, or both, as the case may be.
The measure of insolvency for purposes of the foregoing considerations will
vary depending upon the law of the jurisdiction that is being applied in any
such proceeding. Generally, however, an entity would be considered insolvent if,
at the time it incurred the indebtedness, either (i) the sum of its debts
(including contingent liabilities) is greater than its assets, at a fair
valuation, or (ii) the present fair saleable value of its assets is less than
the amount required to pay the probable liability on its total existing debts
and liabilities (including contingent liabilities) as they become absolute and
matured. There can be no
32
<PAGE>
assurance as to what standards a court would use to determine whether the
Company or the Guarantors were solvent at the relevant time, or whether,
whatever standard was used, the Exchange Notes or the Guarantees would not be
avoided or further subordinated on another of the grounds set forth above. In
rendering their opinions in connection with the Offerings, no counsel for will
express any opinion as to the applicability of Federal or state fraudulent
transfer and conveyance laws.
The Company and the Guarantors believe that at the time they initially incur
the obligations constituting the Notes or the Guarantees, as the case may be,
the Company and the Guarantors (i) will be (a) neither insolvent nor rendered
insolvent thereby, (b) in possession of sufficient capital to run their
businesses effectively and (c) incurring debts within their ability to pay as
the same mature or become due and (ii) will have sufficient assets to satisfy
any probable money judgment against them in any pending action. In reaching the
foregoing conclusions, the Company and the Guarantors have relied upon its
analyses of internal cash flow projections and estimated values of assets and
liabilities of the Guarantors. There can be no assurance, however, that a court
passing on such questions would reach the same conclusions. The obligations of
the Subsidiary Guarantors under the Subsidiary Guarantees will be limited so as
not to constitute a fraudulent conveyance under applicable law.
ENVIRONMENTAL MATTERS
The Company is subject to a broad range of federal, state and local
environmental laws and regulations, including those governing discharges to the
air and water, the handling and disposal of solid and/or hazardous wastes and
the remediation of contamination associated with releases of hazardous
substances. The Company believes that its operations are in compliance with
environmental requirements, except as would not be expected to have a material
adverse effect on the Company or as otherwise stated herein. However, there can
be no assurances that environmental requirements will not change in the future
or that the Company will not incur significant costs in the future to comply
with such requirements.
ABSENCE OF PUBLIC MARKET
The Securities are new securities for which there presently is no market.
Although the Initial Purchasers have informed the Company that they currently
intend to make a market in the Exchange Notes and the New Preferred Stock, and
if issued, the Exchange Debentures, the Initial Purchasers are not obligated to
do so and any such market making may be discontinued at any time without notice.
Accordingly, there can be no assurance as to the development or liquidity of any
market for the Securities or, if issued, the Exchange Debentures. The Securities
are expected to be eligible for trading by qualified buyers in the PORTAL
market. The Company does not intend to apply for listing of the Exchange Notes
or the New Preferred Stock or, if issued, the Exchange Debentures, on any
securities exchange or for quotation of any such securities through the National
Association of Securities Dealers Automated Quotation System. See "Plan of
Distribution."
No assurance can be given as to the liquidity of the trading market for the
Exchange Notes or the New Preferred Stock, or, in the case of non-exchanging
holders of Notes or Exchangeable Preferred Stock, the trading market for the
Notes or Exchangeable Preferred Stock following the Note Exchange Offer and the
Preferred Stock Exchange Offer.
YEAR 2000 RISK
The Company believes that its systems are capable of functioning from and
after the year 2000 without any material additional costs. The ability of third
parties with whom the Company transacts business to adequately address their
year 2000 issues is outside of the Company's control. There can be no assurance
that the failure of the Company or such third parties to adequately address
their respective year 2000 issues will not have a material adverse effect on the
Company.
33
<PAGE>
THE TRANSACTION
THE BANKRUPTCY AND TURNAROUND
In 1990, the Company acquired Cluett Peabody & Co., Inc., which included the
Sock Group and the Shirt Group, from West Point-Pepperell, Inc. Prior to that
time, the Company had primarily been a licensed designer and marketer of premium
high fashion apparel under designer labels such as Ralph Lauren. The Company
applied the same high overhead designer business model to these less fashion-
oriented businesses. Rather than reduce costs, the Company attempted to
compensate for this inappropriate cost structure by broadening distribution and
expanding the Shirt Group's ARROW business into higher-priced, higher-fashion
dress shirts and sportswear. This effort was poorly executed and ignored both
the Company's core customer and operational capabilities, resulting in
significant excess inventory. The losses associated with this strategy, in
addition to an unsuccessful expansion into retail outlets, forced the Company to
seek protection under the Bankruptcy Code in July 1995.
In June 1995, Bryan Marsal (a managing director of A&M) was appointed
President and Chief Executive Officer of the Company. Since then Mr. Marsal and
the rest of his management team have taken a number of strategic and operational
actions which have substantially improved the Company's cash flow and restored
profitability. Although Adjusted Net Sales decreased from $388.9 million in 1995
to $364.2 million for the LTM Period, Adjusted EBITDA has increased from
negative $8.5 million to $43.3 million (before pro forma adjustments). As a
result, the Company was able to file the Plan (as defined) in March 1998
pursuant to which, utilizing the proceeds of the Offerings and certain other
financing, the Company repaid in full substantially all of its outstanding
indebtedness, together with all accrued interest thereon and provide a payment
to existing shareholders. The actions taken by Mr. Marsal and his team have
included the following:
- EXPENSE MANAGEMENT. The Company significantly reduced its operating costs
and expenses by transferring administrative functions to its operating
subsidiaries and by eliminating unnecessary expenses. This
decentralization resulted in a significant reduction in corporate overhead
and expenditures being made on redundant corporate activity. It also
increased the efficiency with which administrative functions were handled.
For example, instead of the collections process being managed at the
corporate level, it is being managed by the same group responsible for the
sales, marketing and distribution of the order. This integration has
significantly lowered returns, chargebacks and retailer penalties for
execution breakdowns. Examples of operating expense reductions include the
closure of unprofitable retail stores; the relocation of offices and
showrooms to less expensive locations; the introduction of more cost
effective medical and worker's compensation benefit plans; the
consolidation of distribution centers and the elimination of related
excess capacity; the reduction of personnel; and the modification and
reduction of advertising and promotional spending from an ineffective
national media campaign to more effective regional cooperative and point
of sale advertising.
- OPERATIONAL IMPROVEMENTS. In the fourth quarter of 1995, the Company began
the elimination of excess or unnecessary capacity with the closure of the
Shirt Group's production facilities in Cedartown, Georgia and Costa Rica
and the Sock Group's manufacturing plant in Halifax, North Carolina. Also,
the Shirt Group consolidated New York and Atlanta product sourcing into
one group in Atlanta and implemented strict international vendor
qualification and monitoring programs. In addition, the Company invested
in new manufacturing equipment for the Sock Group; in new information
systems for the Sock and Shirt Groups which provided the financial tools
needed to reduce inventory, improve collections and assist overall
planning; and in material handling equipment and scanning technology to
more cost effectively meet customers' shipping needs.
- PRODUCT REALIGNMENT. In 1995, the Company began the process of refocusing
the Shirt Group on its blended dress shirt product and repositioning the
all cotton dress shirt and sports shirt products as complementary products
to these core cotton/polyester dress shirt offerings. Given the lead times
34
<PAGE>
associated with international sourcing of sport shirts, it was not until
fall of 1997 that the Shirt Group's product line fully reflected
management's intended product mix. This realignment has contributed to
lower returns, allowances, markdowns, and off-price sales, resulting in
improved gross margins.
THE PLAN CONFIRMATION
Subject to Bankruptcy Court supervision and approval of all transactions
outside the ordinary course of business, Holdings was permitted to develop the
Plan to restructure its financial affairs, including assuming or rejecting
executory contracts and leases, and to continue to manage and operate its
business as debtor-in-possession. The Plan was confirmed by the Bankruptcy Court
on March 31, 1998. In order to be confirmed, the Plan was required to satisfy
certain requirements of the Bankruptcy Code, including that each claim in a
particular class receive the same treatment as each other claim in that class
and that Holdings be adequately capitalized so that confirmation of the Plan
will not be followed by a liquidation or the need for further reorganization.
Holdings was also required to demonstrate to the satisfaction of the Bankruptcy
Code that the Plan satisfied the "best interests of creditors test." This means
that holders of claims and interests in each impaired class must have either
unanimously accepted the Plan or that such holders would not receive more in a
liquidation of Holdings than through the implementation of the Plan.
THE RECAPITALIZATION
On March 31, 1998, the Plan was confirmed by the Bankruptcy Court. In
connection with the Plan and pursuant to the Subscription Agreement, the Equity
Investors made the Equity Investment in Holdings. Approximately $52.7 million of
the Equity Investment was provided by Vestar in the form of a $21.3 million
common equity investment in Holdings Common Stock and a $31.4 million investment
in Holdings Class C Junior Preferred Stock. Approximately $8.6 million of the
Equity Investment was provided by the Co-Investors in the form of a $3.5 million
investment in Holdings Common Stock and a $5.1 million investment in Holdings
Class C Preferred Stock. A&M and the Management Investors provided the remaining
Equity Investment in the form of a $4.9 million and $1.8 million investment in
Holdings Common Stock, respectively. The balance of the Holdings Common Stock
will be held by existing shareholders of Holdings.
The Company and Holdings used the proceeds from the Equity Investment in
conjunction with (i) borrowings under the Senior Credit Facility, (ii) the
proceeds from the Offerings, (iii) the issuance of $13.0 million in Parity Notes
to existing holders of Holdings Common Stock and (iv) the issuance of
approximately $2.4 million in Holdings Class A Senior Preferred Stock to a plan
to be established for the benefit of the certain employees of the Company to
effect the Recapitalization under which substantially all of Holdings and the
Company's existing obligations, including all borrowings under the DIP Facility,
were paid in full. The consummation of the Recapitalization was a condition to
the consummation of the Offerings. In connection with the Recapitalization, the
Company changed its name to Cluett American Corp. on the date of closing.
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<PAGE>
The following table sets forth cash sources and uses of funds for Holdings
for the Recapitalization and the application of the proceeds therefrom.
<TABLE>
<CAPTION>
(DOLLARS IN
MILLIONS)
-------------------
<S> <C>
SOURCES OF FUNDS(1):
The Senior Credit Facility................................................................. $ 114.5
The Note Offering.......................................................................... 112.0
The Preferred Stock Offering............................................................... 50.0
Holdings Class C Junior Preferred Stock.................................................... 36.5
Holdings Common Stock(2)................................................................... 29.2
Available Cash............................................................................. 11.9
------
$ 354.1
------
------
USES OF FUNDS:
Payment of Allowed Claims.................................................................. $ 291.5
Payment of Estimated Post-Petition Interest................................................ 36.7
Refinancing of Existing Debt............................................................... 7.0
Estimated Fees and Expenses................................................................ 18.9
------
$ 354.1
------
------
</TABLE>
- ------------------------
(1) Does not include non-cash items, listed as clauses (iii) and (iv) above.
(2) Excludes $2.3 million of Holdings Common Stock purchased with the proceeds
of loans provided by Holdings.
Vestar, headquartered in New York with an office in Denver, Colorado,
manages over $1.0 billion in private equity capital. Founded in 1988, the firm
focuses on management buyouts, recapitalizations and growth capital investments.
Since 1988, the firm has completed 25 investments with an aggregate value
approaching $5.0 billion. Previous Vestar investments have included Aearo
Corporation, Anvil Knitwear, Inc., Celestial Seasonings, Inc., Clark-Schwebel,
Inc., Insight Communications Company, L.P., Prestone Products Corporation,
Pyramid Communications, Inc., Remington Products Company, Russell-Stanley Corp.,
Sun Apparel, Inc., and Westinghouse Air Brake Company.
A&M is a prominent turnaround management firm located in New York. The firm
has been involved in the successful turnaround of over 20 companies, including
Ornda Healthcor., Phar-Mor Inc., Wherehouse Entertainment Inc., Charter Medical
Corporation, Anthony Manufacturing Company and Long Manufacturing Corp., among
others.
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<PAGE>
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange of Notes or
Preferred Stock pursuant to the Exchange Offer. The gross proceeds from the
Offerings were approximately $162.0 million. The Company used such proceeds
together with borrowings under the Senior Credit Facility and available cash to
(i) repay all borrowings outstanding under the debtor-in-possession financing
facility (the "DIP Credit Facility"), (ii) pay all indebtedness and other claims
against the Company due under the Plan and certain other indebtedness, (iii)
distribute $86.1 million to Holdings to be used by Holdings to pay certain
claims and interests under the Plan and (iv) pay certain fees and expenses.
CAPITALIZATION
The following table sets forth the actual and pro forma capitalization of
the Company as of March 28, 1998. The table should be read in conjunction with
the historical combined financial statements of the Company and the related
notes thereto included elsewhere in this Prospectus. See "The Transaction",
"Selected Historical Financial Data" and "Unaudited Pro Forma Financial
Information."
<TABLE>
<CAPTION>
MARCH 28, 1998
------------------------
<S> <C> <C>
ACTUAL PRO FORMA(1)
--------- -------------
<CAPTION>
(DOLLARS IN MILLIONS)
<S> <C> <C>
Cash and cash equivalents................................................................. $ 10.2 $ 0.9
--------- -------------
--------- -------------
Short-term debt and current maturities of long-term debt (2).............................. $ 13.9 $ 8.2
--------- -------------
--------- -------------
Long-term debt (excluding current maturities):
DIP Credit Facility..................................................................... $ -- $ --
Senior Credit Facility(3)............................................................... -- 112.5
Capital lease obligations............................................................... 1.7 1.7
Notes(4)................................................................................ -- 125.0
--------- -------------
Total long-term debt.................................................................. 1.7 239.2
Liabilities subject to compromise(5)...................................................... 169.3 --
Redeemable preferred stock................................................................ 22.1 --
Preferred Stock........................................................................... -- 48.1
Shareholders' deficit..................................................................... (55.8) (114.8)
--------- -------------
Total capitalization...................................................................... $ 137.3 $ 172.5
--------- -------------
--------- -------------
</TABLE>
- ------------------------
(1) The pro forma capitalization of the Company as of March 28, 1998 gives
effect to the Offerings, the Exchange Offerings, the Senior Credit Facility
and the effectiveness of the Plan.
(2) On a pro forma basis includes borrowings of $5.5 million under the $15.0
million revolving credit facility of the Company's Canadian Subsidiary, $0.7
million of capital leases and $2.0 million of current maturities under the
Senior Credit Facility.
(3) Excludes letters of credit of $11.2 million.
(4) Includes $13.0 million of Parity Notes.
(5) Liabilities subject to compromise are being satisfied pursuant to the Plan.
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<PAGE>
UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION
The unaudited pro forma financial data has been derived by the application
of pro forma adjustments to the Company's historical combined financial
statements.
The adjustments give effect to (i) consummation of the Offerings, (ii)
entering into the Senior Credit Facility, (iii) the issuance of $13.0 million of
Parity Notes to existing holders of Holdings' Common Stock, (iv) the issuance of
approximately $2.4 million of Holdings Class A Preferred Stock to a stock plan
to be established for the benefit of certain union employees, (v) the
distribution of $86.1 million from the Company to Holdings (the "Distribution"),
(vi) consummation of the Plan, (vii) the payment of estimated fees and expenses
and (viii) the elimination of the results of the Divested Operations in Canada,
Mexico and Guatemala. The Distribution, together with the issuance of $31.5
million of Holdings' Common Stock to Vestar, A&M, the Co-Investors and certain
members of the Company's management and the issuance by Holdings of $36.5
million of its Class C Junior Preferred Stock to Vestar, will be used by
Holdings to pay claims pursuant to the Plan.
The Unaudited Pro Forma Condensed Combined Balance Sheet has been prepared
as if such transactions were consummated on March 28, 1998 and each Unaudited
Pro Forma Condensed Combined Statement of Operations has been prepared as if
such transactions were consummated as of January 1, 1997. The Pro Forma Combined
Financial Information is unaudited and does not purport to be indicative of the
Company's financial position or the results that would have actually been
obtained had such transactions been consummated as of the assumed dates and for
the periods presented, nor are they indicative of the Company's results of
operations or financial position for any future period or date. The pro forma
adjustments, as described in the accompanying notes, are based on available
information and upon certain assumptions which management believes are
reasonable. The Unaudited Pro Forma Combined Financial Information should be
read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements and notes
thereto included elsewhere in this Prospectus.
38
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1997
<TABLE>
<CAPTION>
DIVESTED
HISTORICAL OPERATIONS(1) ADJUSTMENTS PRO FORMA
----------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT RATIOS)
Net sales.................................................... $ 362.9 $ (3.7) $ 359.2
Cost of goods sold........................................... 253.8 (2.3) 251.5
----------- ----- -----------
Gross profit................................................. 109.1 (1.4) 107.7
Selling, general and administrative expenses................. 74.8 (2.0) $ 0.5(2) 73.3
Facility closing and reengineering costs..................... 2.5 1.5 4.0
----------- ----- ----- -----------
Operating income............................................. 31.8 (0.9) (0.5) 30.4
Interest expense, net........................................ 15.2 8.8(3) 24.0
Other expense, net........................................... 2.0 (0.2) 1.8
Bankruptcy reorganization credits............................ (3.9) (3.9)
----------- ----- ----- -----------
Income before provision for income taxes..................... 18.5 (0.7) (9.3) 8.5
Provision for income taxes................................... 1.3 1.3
----------- ----- ----- -----------
Net income(4)................................................ $ 17.2 $ (0.7) $ (9.3) $ 7.2
----------- ----- ----- -----------
----------- ----- ----- -----------
OTHER DATA:
Capital expenditures......................................... $ 11.0 $ -- $ -- $ 11.0
Depreciation and amortization(5)............................. 8.1 -- -- 8.1
Cash flows from (used by):
Operating activities....................................... 12.9 (0.7) (9.3) 2.9
Investing activities....................................... (7.3) (7.3)
Financing activities....................................... (1.4) (1.4)
EBITDA(6).................................................... 40.4 0.6 (0.5) 40.5
Cash interest expense (3).................................... 15.2 -- 7.3 22.5
EBITDA to cash interest expense.............................. 1.8x
Earnings to fixed charges(7)................................. 1.3x
Earnings to combined fixed charges and preferred stock
dividends(7)............................................... --
</TABLE>
The accompanying notes are an integral part of these statements.
39
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 28, 1998
<TABLE>
<CAPTION>
DIVESTED
HISTORICAL OPERATIONS (1) ADJUSTMENTS PRO FORMA
----------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT RATIOS)
Net sales.................................................... $ 92.3 $ (0.6) $ 91.7
Cost of goods sold........................................... 63.9 (0.4) 63.5
----- ----- -----
Gross profit................................................. 28.4 (0.2) 28.2
Selling, general and administrative expenses................. 19.5 (0.6) $ 0.1(2) 19.0
Facility closing and reengineering costs..................... 1.0 1.0
----- ----- ----- -----
Operating income............................................. 7.9 0.4 (0.1) 8.2
Interest expense, net........................................ 3.8 2.2(3) 6.0
Other income, net............................................ -- (0.1) (0.1)
Bankruptcy reorganization costs.............................. 1.5 1.5
----- ----- ----- -----
Income before provision for income taxes..................... 2.6 0.5 (2.3) 0.8
Provision for income taxes................................... 0.3 0.3
----- ----- ----- -----
Net income(4)................................................ $ 2.3 $ 0.5 $ (2.3) $ 0.5
----- ----- ----- -----
----- ----- ----- -----
OTHER DATA:
Capital expenditures......................................... $ 2.6 $ -- $ -- $ 2.6
Depreciation and amortization(5)............................. 2.1 -- -- 2.1
Cash flows from (used by):
Operating activities....................................... (2.9) 0.5 (2.3) (4.7)
Investing activities....................................... (1.5) (1.5)
Financing activities....................................... 4.5 4.5
EBITDA(6).................................................... 10.5 0.4 (0.1) 10.8
Cash interest expense(3)..................................... 3.8 -- 1.8 5.6
EBITDA to cash interest expense.............................. 1.9x
Earnings to fixed charges(7)................................. 1.1x
Earnings to combined fixed charges and preferred stock
dividends(7)............................................... --
</TABLE>
The accompanying notes are an integral part of these statements.
40
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENT OF OPERATIONS
FOR THE TWELVE MONTHS ENDED MARCH 28, 1998
<TABLE>
<CAPTION>
DIVESTED
HISTORICAL OPERATIONS(1) ADJUSTMENTS PRO FORMA
----------- --------------- ------------- -----------
<S> <C> <C> <C> <C>
(DOLLARS IN MILLIONS, EXCEPT RATIOS)
Net sales.................................................... $ 367.7 $ (3.5) $ 364.2
Cost of goods sold........................................... 255.4 (2.1) 253.3
----------- ----- -----------
Gross profit................................................. 112.3 (1.4) 110.9
Selling, general and administrative expenses................. 75.5 (1.7) $ 0.5(2) 74.3
Facility closing and reengineering costs..................... 3.3 1.5 4.8
----------- ----- ------ -----------
Operating income............................................. 33.5 (1.2) (0.5) 31.8
Interest expense, net........................................ 15.4 8.5(3) 23.9
Other expense, net........................................... 1.5 (0.3) 1.2
Bankruptcy reorganization credits............................ (4.0) (4.0)
----------- ----- ------ -----------
Income before provision for income taxes..................... 20.6 (0.9) (9.0) 10.7
Provision for income taxes................................... 1.4 1.4
----------- ----- ------ -----------
Net income(4)................................................ $ 19.2 $ (0.9) $ (9.0) $ 9.3
----------- ----- ------ -----------
----------- ----- ------ -----------
OTHER DATA:
Capital expenditures......................................... $ 11.5 $ -- $ -- $ 11.5
Depreciation and amortization(5)............................. 8.2 -- -- 8.2
Cash flows from (used by):
Operating activities....................................... 6.6 (0.9) (9.0) (3.3)
Investing activities....................................... (3.0) (3.0)
Financing activities....................................... (1.3) (1.3)
EBITDA(6).................................................... 43.0 0.3 (0.5) 42.8
Cash interest expense(3)..................................... 15.4 -- 7.1 22.5
EBITDA to cash interest expense.............................. 1.9x
Earnings to fixed charges(7)................................. 1.4x
Earnings to combined fixed charges and preferred stock
dividends(7)............................................... --
</TABLE>
The accompanying notes are an integral part of these statements.
41
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED STATEMENTS OF OPERATIONS
(1) Represents the elimination of the results of operations of the Company's
Canadian retail operations, which the Company decided to exit in 1996, and
the Company's Mexican and Guatemalan manufacturing operations which were
sold in 1997. For further discussion see "Management's Discussion and
Analysis of Financial Condition and Results of Operations--Overview."
(2) Represents the $0.5 million annual management fee to be paid to Vestar. See
"Certain Transactions-- Other Relationships--Management Advisory Agreement."
(3) Represents the net adjustment to interest expense as a result of the
borrowings under the Notes, the Parity Notes and the Senior Credit Facility
calculated as follows:
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, 1997 MARCH 28, 1998 MARCH 28, 1998
----------------- ----------------- ---------------
<S> <C> <C> <C>
(IN MILLIONS)
Notes and Parity Notes(a)................................ $ 12.7 $ 3.2 $ 12.7
Senior Credit Facility:
Revolver(b)............................................ 0.4 0.1 0.4
Term Loan A(c)......................................... 3.9 1.0 3.9
Term Loan B(d)......................................... 4.9 1.2 4.9
Commitment and letter of credit fees(e)................ 0.1 -- 0.1
Other(f)................................................. 0.5 0.1 0.5
------ ----- ------
Cash interest expense.................................... 22.5 5.6 22.5
Amortization of deferred financing costs(g).............. 1.5 0.4 1.5
------ ----- ------
Pro forma interest expense............................... 24.0 6.0 24.0
Less historical net interest expense(h).................. (15.2) (3.8) (15.5)
------ ----- ------
Net adjustment........................................... $ 8.8 $ 2.2 $ 8.5
------ ----- ------
------ ----- ------
</TABLE>
----------------------------
(a) Represents interest on the $112.0 million Notes and $13.0 million Parity
Notes using an interest rate of 10.125%.
(b) Represents interest on $4.5 million of the Revolver (as defined) which
is expected to be drawn at closing using an assumed interest rate of
7.95%.
(c) Represents interest on the $50.0 million Term Loan A (as defined) using
an assumed interest rate of 7.95%.
(d) Represents interest on the $60.0 million Term Loan B (as defined) using
an assumed interest rate of 8.20%.
(e) Represents a 0.125% fee on $11.2 million of outstanding letters of
credit and a 0.5% commitment fee applied to the remaining $34.3 million
unused portion of the Revolver.
(f) Represents historical interest expense on capital lease obligations and
indebtedness under the Canadian Facility (as defined) which will remain
outstanding.
(g) Represents amortization of estimated deferred financing costs of $11.6
million which will be amortized over the term of the related debt (ten
years for the Notes and Parity Notes, six years for the Revolver and Term
Loan A, and seven years for Term Loan B).
(h) Represents the elimination of historical interest expense, net of
interest income.
42
<PAGE>
A change of 0.125% in the assumed interest rate would have the following
effect on pro forma interest expense:
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, 1997 MARCH 28, 1998 MARCH 28, 1998
--------------------- ----------------- -----------------
<S> <C> <C> <C>
(IN MILLIONS)
Senior Credit Facility................................... $ 0.1 -- $ 0.1
</TABLE>
(4) The Unaudited Pro Forma Condensed Combined Statements of Operations do not
reflect $12.4 million of non-recurring costs which the Company incurred as a
result of the Transaction, representing estimated post-petition interest on
pre-petition claims calculated in accordance with the Plan.
(5) Depreciation and amortization excludes pro forma amortization of deferred
financing costs of $1.5 million for the year ended December 31, 1997, $0.4
million for the three months ended March 28, 1998 and $1.5 million for the
twelve months ended March 28, 1998.
(6) EBITDA represents operating income before depreciation and amortization,
non-cash pension income and facility closing and reengineering costs. EBITDA
should not be considered in isolation or as a substitute for net income,
cash flows from operating activities and other income or cash flow statement
data prepared in accordance with GAAP or as a measure of profitability or
liquidity. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to service and/or incur indebtedness;
however, it is not necessarily comparable to other similarly titled captions
of other companies due to differences in methods of calculation.
The calculation of pro forma EBITDA is shown below:
<TABLE>
<CAPTION>
THREE MONTHS TWELVE MONTHS
YEAR ENDED ENDED ENDED
DECEMBER 31, 1997 MARCH 28, 1998 MARCH 28, 1998
------------------- ----------------- -----------------
<S> <C> <C> <C>
(IN MILLIONS)
Operating income......................................... $ 30.4 $ 8.2 $ 31.8
Depreciation and amortization............................ 8.1 2.1 8.2
Non-cash pension income(a)............................... (2.0) (0.5) (2.0)
Facility closing and reengineering costs................. 4.0 1.0 4.8
----- ----- -----
EBITDA................................................... $ 40.5 $ 10.8 $ 42.8
----- ----- -----
----- ----- -----
</TABLE>
- ------------------------
(a) Represents non-cash pension income arising from the Company's overfunded
pension plan.
(7) For purposes of determining the pro forma ratios of earnings to fixed
charges and earnings to combined fixed charges and preferred stock
dividends, earnings are defined as earnings before income taxes plus fixed
charges. Fixed charges include interest expense on all indebtedness,
amortization of deferred financing costs, and one-third of rental expense,
representing that portion deemed to be attributable to interest. Preferred
stock dividends are computed by dividing the dividend requirement on the
Preferred Stock (using a dividend rate of 12.5%) by one minus the tax rate
of 40%. On a pro forma basis, earnings were insufficient to cover combined
fixed charges and preferred stock dividends by $2.2 million for the year
ended December 31, 1997, $2.0 million for the three months ended March 28,
1998, and $0.3 million for the year ended March 28, 1998.
43
<PAGE>
UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
MARCH 28, 1998
<TABLE>
<CAPTION>
HISTORICAL ADJUSTMENTS PRO FORMA
----------- ------------- -----------
<S> <C> <C> <C>
(DOLLARS IN MILLIONS)
ASSETS
Current assets:
Cash and cash equivalents.................................................. $ 10.2 $ (9.3)(1) $ 0.9
Accounts receivable, net................................................... 52.7 52.7
Inventories................................................................ 77.7 77.7
Prepaid expenses and other current assets.................................. 3.1 3.1
----------- ------ -----------
Total current assets......................................................... 143.7 (9.3) 134.4
Property, plant and equipment, net........................................... 47.8 47.8
Deferred financing costs..................................................... -- 11.6(2) 11.6
Pension and other noncurrent assets.......................................... 31.8 31.8
----------- ------ -----------
Total assets................................................................. $ 223.3 $ 2.3 $ 225.6
----------- ------ -----------
----------- ------ -----------
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable and accrued expenses...................................... $ 42.7 $ --(3) $ 42.7
Short-term debt and current portion of long-term debt and capital lease
obligations.............................................................. 13.9 (5.7)(4) 8.2
Income taxes payable....................................................... 1.7 1.7
----------- ------ -----------
Total current liabilities.................................................... 58.3 (5.7) 52.6
Due to Parent................................................................ 27.2 (27.2)(5) --
Senior Credit Facility....................................................... -- 112.5(6) 112.5
Notes and Parity Notes....................................................... -- 125.0(7) 125.0
Capital lease obligations and other noncurrent liabilities................... 2.2 2.2
Liabilities subject to compromise............................................ 169.3 (169.3)(1) --
Redeemable preferred stock................................................... 22.1 (22.1)(8) --
Preferred Stock.............................................................. -- 48.1(9) 48.1
Common stockholder's deficit................................................. (55.8) (59.0)(10) (114.8)
----------- ------ -----------
Total liabilities and stockholder's deficit.................................. $ 223.3 $ 2.3 $ 225.6
----------- ------ -----------
----------- ------ -----------
</TABLE>
The accompanying notes are an integral part of these statements.
44
<PAGE>
NOTES TO THE UNAUDITED PRO FORMA CONDENSED COMBINED BALANCE SHEET
(1) Sources and uses of cash for the Transaction were as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
Sources:
Old Notes...................................................................... $ 112.0
Senior Credit Facility......................................................... 114.5
Exchangeable Preferred Stock................................................... 50.0
Increase in accounts payable and accrued expenses.............................. 3.9
------
Total........................................................................ 280.4
------
Uses:
Payment of allowed claims...................................................... 169.3
Payment of estimated post-petition interest.................................... 11.1
Payment of estimated bankruptcy administrative fees............................ 1.5
Repayment of existing debt..................................................... 7.7
Distribution to Holdings....................................................... 86.6
Estimated fees and expenses.................................................... 13.5
------
Total........................................................................ 289.7
------
Net adjustment................................................................... $ (9.3)
------
------
</TABLE>
(2) Represents the portion of estimated transaction fees and expenses
attributable to the Senior Credit Facility and the Old Notes, including the
discounts payable to the Initial Purchasers, which will be recorded as
deferred financing costs and amortized over the life of the related debt.
(3) Represents the issuance of $2.4 million of Class A Preferred Stock of
Holdings to an employee stock plan in satisfaction of accrued compensation
liabilities of the Company and payment of $1.5 million of estimated
bankruptcy administrative fees offset by $3.9 million of accrued transaction
fees paid after closing.
(4) Represents the net adjustment to the current portion of long-term debt
consisting of the repayment of $7.7 million of existing debt offset by the
$2.0 million current portion of the new Senior Credit Facility.
(5) Represents the elimination of intercompany indebtedness owed to Holdings
pursuant to the Plan.
(6) Represents the non-current portion of the Senior Credit Facility.
(7) Represents $112.0 million of Notes issued for cash plus $13.0 million of
Parity Notes issued to existing holders of Holdings' common stock pursuant
to the Plan.
(8) Represents the contribution by Holdings of existing redeemable preferred
stock to common equity of the Company.
(9) Represents the issuance of $50.0 million of Preferred Stock net of $1.9
million of estimated fees and expenses.
(10) Represents the net adjustment to the Company's common stockholder's deficit
calculated as follows:
<TABLE>
<CAPTION>
(IN MILLIONS)
-------------
<S> <C>
Distribution to Holdings(a)...................................................... $ (99.6)
Contribution of redeemable preferred stock....................................... 22.1
Elimination of intercompany indebtedness to Holdings............................. 27.2
Post-petition interest(b)........................................................ (11.1)
Contribution of Class A Preferred Stock of Holdings(c)........................... 2.4
------
Net adjustment................................................................. $ (59.0)
------
------
</TABLE>
--------------------------------------
(a) Represents the $86.6 million cash distribution plus $13.0
million of Parity Notes distributed to Holdings.
(b) Represents estimated post-petition interest on pre-petition
claims that will be expensed in connection with the Plan.
(c) Represents the contribution of Class A Preferred Stock of
Holdings to the capital of the Company pursuant to the Plan.
45
<PAGE>
SELECTED HISTORICAL COMBINED FINANCIAL DATA
The following selected historical combined financial data for 1995, 1996 and
1997 were derived from the Financial Statements as of December 31, 1996 and 1997
and for each of the three years in the period ended December 31, 1997 which have
been audited by Ernst & Young LLP, independent auditors, as indicated in their
report included elsewhere herein. The combined financial data at and for the
twelve months ended March 28, 1998 and for the three months ended March 29, 1997
and March 28, 1998 have been derived from unaudited combined financial
statements of the Company and, in the opinion of the Company's management, have
been prepared on a basis consistent with the audited financial statements and
include all adjustments (which consist of normal recurring accruals) that are
considered by management to be necessary for a fair presentation of such
financial information. Historical data and interim results are not necessarily
indicative of future results and interim data are not necessarily indicative of
results for a full year. The information set forth below should be read in
conjunction with the discussion under "Management's Discussion and Analysis of
Financial Condition and Results of Operations."
<TABLE>
<CAPTION>
THREE MONTHS
ENDED
YEAR ENDED DECEMBER 31, ---------------
------------------------------------------------------------------------- MARCH 29,
1993 1994 1995 1996 1997 1997
------------- ------------- ------------- ------------- ------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
(UNAUDITED) (UNAUDITED) (UNAUDITED)
<CAPTION>
(DOLLARS IN MILLIONS, EXCEPT RATIOS)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................... $ 531.6 $ 536.8 $ 486.7 $ 368.7 $ 362.9 $ 87.5
Cost of goods sold(1)........... 394.2 391.5 369.8 273.8 253.8 62.3
------ ------------- ------ ------ ------ -----
Gross profit.................... 137.4 145.3 116.9 94.9 109.1 25.2
Selling, general and
administrative expenses....... 132.9 145.4 137.9 85.9 74.8 18.8
Facility closing and
reengineering costs(2)........ -- -- 22.5 11.6 2.5 0.2
------ ------------- ------ ------ ------ -----
Operating income (loss)......... 4.5 (0.1) (43.5) (2.6) 31.8 6.2
Interest expense, net........... 23.0 24.6 22.7 16.9 15.2 3.6
Write-down of intangible
assets(3)..................... -- 74.7 -- -- -- --
Other expense (income),
net(4)........................ 1.1 (0.3) 0.5 3.3 2.0 0.5
Bankruptcy reorganization costs
(credits)(5).................. -- -- 20.9 6.1 (3.9) 1.6
------ ------------- ------ ------ ------ -----
Income (loss) before provision
for income taxes.............. (19.6) (99.1) (87.6) (28.9) 18.5 0.5
Provision for income taxes...... 1.0 1.8 1.5 1.3 1.3 0.2
------ ------------- ------ ------ ------ -----
Net income (loss)............... ($ 20.6) ($ 100.9) ($ 89.1) ($ 30.2) $ 17.2 $ 0.3
------ ------------- ------ ------ ------ -----
------ ------------- ------ ------ ------ -----
OTHER FINANCIAL DATA:
Capital expenditures............ $ 7.5 $ 13.8 $ 6.8 $ 8.2 $ 11.0 $ 2.1
Depreciation and
amortization(6)............... 14.7 15.3 13.3 10.9 8.1 2.0
Cash flows from (used by):
Operating activities.......... $ 22.8 $ (16.0) $ 2.1 $ 13.6 $ 12.9 $ 3.4
Investing activities.......... (4.5) (10.3) (6.4) (5.1) (7.3) (5.8)
Financing activities.......... (33.1) (22.7) 3.9 (13.3) (1.4) 4.4
EBITDA(7)....................... 16.0 13.9 (7.8) 17.5 40.4 7.9
Adjusted Net Sales(8)........... 399.5 406.0 388.9 361.5 359.2 86.7
Adjusted EBITDA(7)(8)........... 11.0 0.6 (8.5) 18.8 41.0 8.6
Adjusted EBITDA margin.......... 2.8% 0.1% (2.2)% 5.2% 11.4% 9.9%
Ratio of earnings to fixed
charges(9).................... -- -- -- -- 2.1 x 1.1 x
<CAPTION>
BALANCE SHEET DATA (AT END OF PERIOD):
<S> <C> <C> <C> <C> <C> <C>
Working capital(10)............. $ 130.2 $ 141.5 $ 116.9 $ 82.1 $ 82.3 $ 80.9
Total assets.................... 388.0 321.5 252.9 211.1 220.0 215.4
Total long-term debt, net of
current portion(11)........... 138.8 150.4 3.6 8.6 2.0 7.9
Preferred stock................. 15.5 16.4 17.4 18.7 20.0 19.3
Total stockholders' equity
(deficit)..................... 150.4 46.9 (44.3) (74.2) (56.8) (76.8)
<CAPTION>
TWELVE
MONTHS ENDED
MARCH 28, MARCH 28,
1998 1998
------------- -------------
<S> <C> <C>
(UNAUDITED) (UNAUDITED)
<S> <C> <C>
STATEMENT OF OPERATIONS DATA:
Net sales....................... $ 92.3 $ 367.7
Cost of goods sold(1)........... 63.9 255.4
------ ------
Gross profit.................... 28.4 112.3
Selling, general and
administrative expenses....... 19.5 75.5
Facility closing and
reengineering costs(2)........ 1.0 3.3
------ ------
Operating income (loss)......... 7.9 33.5
Interest expense, net........... 3.8 15.4
Write-down of intangible
assets(3)..................... -- --
Other expense (income),
net(4)........................ -- 1.5
Bankruptcy reorganization costs
(credits)(5).................. 1.5 (4.0)
------ ------
Income (loss) before provision
for income taxes.............. 2.6 20.6
Provision for income taxes...... 0.3 1.4
------ ------
Net income (loss)............... $ 2.3 $ 19.2
------ ------
------ ------
OTHER FINANCIAL DATA:
Capital expenditures............ $ 2.6 $ 11.5
Depreciation and
amortization(6)............... 2.1 8.2
Cash flows from (used by):
Operating activities.......... $ (2.9) $ 6.6
Investing activities.......... (1.5) (3.0)
Financing activities.......... 4.5 (1.3)
EBITDA(7)....................... 10.5 43.0
Adjusted Net Sales(8)........... 91.7 364.2
Adjusted EBITDA(7)(8)........... 10.9 43.3
Adjusted EBITDA margin.......... 11.9% 11.9%
Ratio of earnings to fixed
charges(9).................... 1.6 x 2.2 x
BALANCE SHEET DATA (AT END OF PE
<S> <C> <C>
Working capital(10)............. $ 89.0 $ 89.0
Total assets.................... 223.3 223.3
Total long-term debt, net of
current portion(11)........... 1.7 1.7
Preferred stock................. 22.1 22.1
Total stockholders' equity
(deficit)..................... (55.8) (55.8)
</TABLE>
(FOOTNOTES ON FOLLOWING PAGE)
46
<PAGE>
(FOOTNOTES FOR PRECEDING PAGE)
(1) In 1995, the Company recorded a charge of approximately $14.0 million for
the write-down of inventory, which is included in cost of goods sold.
(2) Over the three year period 1995-1997 facility closing and reengineering
costs, which totalled $36.6 million, included $8.3 million for plant
closings, $9.9 million for store closings, $2.4 million for Divested
Operations, $2.8 million for relocation and severance, and $13.2 million for
software, systems development and implementation and other consulting costs.
(3) Represents the write-off of the remaining excess of the purchase price over
the fair value of net assets acquired (goodwill) recorded in connection with
the acquisition of the Shirt Group and the Sock Group, in 1990.
(4) Other expense, net is primarily exchange losses. Additionally, in 1996 the
Company began liquidating its investments in its Mexican and Guatemalan
subsidiaries and wrote off $3.1 million previously recorded as a component
of equity for foreign currency translation.
(5) Bankruptcy reorganization costs (credits) consist of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, THREE MONTHS ENDED
--------------------------
------------------------------- MARCH 29, MARCH 28,
1995 1996 1997 1997 1998
--------- --------- --------- ------------- -----------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Professional fees.......................................... $ 2.8 $ 6.1 $ 6.1 $ 1.6 $ 1.5
Adjustment to lease rejection and other pre-petition
liabilities................................................ 9.8 -- (10.0) -- --
Write off of deferred financing costs...................... 3.5 -- -- -- --
Fees related to obtaining the DIP Facility................. 1.3 -- -- -- --
Claims and related litigation.............................. 3.5 -- -- -- --
--------- --------- --------- ----- -----------
$ 20.9 $ 6.1 ($ 3.9) $ 1.6 $ 1.5
--------- --------- --------- ----- -----------
--------- --------- --------- ----- -----------
<CAPTION>
TWELVE
MONTHS ENDED
MARCH 28,
1998
-----------------
<S> <C>
Professional fees.......................................... $ 6.0
Adjustment to lease rejection and other pre-petition
liabilities................................................ (10.0)
Write off of deferred financing costs...................... --
Fees related to obtaining the DIP Facility................. --
Claims and related litigation.............................. --
-----
($ 4.0)
-----
-----
</TABLE>
(6) Depreciation and amortization excludes amortization of deferred financing
costs of $3.6 million in 1993, $3.6 million in 1994 and $5.2 million in
1995, which is included in interest expense.
(7) EBITDA is defined as operating income before depreciation and amortization,
non-cash pension income and facility closing and reengineering costs.
Adjusted EBITDA represents EBITDA adjusted for Divested Operations. EBITDA
should not be considered in isolation or as a substitute for net income,
cash flows from operating activities and other income or cash flow statement
data prepared in accordance with GAAP or as a measure of profitability or
liquidity. EBITDA is presented because it is a widely accepted financial
indicator of a company's ability to service and/or incur indebtedness;
however, it is not necessarily comparable to other similarly titled captions
of other companies due to differences in methods of calculation. The
calculation of EBITDA and Adjusted EBIDTA is shown below:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------------
1993 1994 1995 1996 1997
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
(IN MILLIONS)
Operating income (loss).................................... $ 4.5 $ (0.1) $ (43.5) $ (2.6) $ 31.8
Depreciation and amortization.............................. 14.7 15.3 13.3 10.9 8.1
Non-cash pension income.................................... (3.2) (1.3) (0.1) (2.4) (2.0)
Facility closing and reengineering costs................... -- -- 22.5 11.6 2.5
--------- --------- --------- --------- ---------
EBITDA..................................................... 16.0 13.9 (7.8) 17.5 40.4
EBITDA from Divested Operations(8)......................... 5.0 13.3 0.7 (1.3) (0.6)
--------- --------- --------- --------- ---------
Adjusted EBITDA............................................ $ 11.0 $ 0.6 $ (8.5) $ 18.8 $ 41.0
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
<CAPTION>
THREE MONTHS ENDED TWELVE
-------------------------- MONTHS ENDED
MARCH 29, MARCH 28, MARCH 28,
1997 1998 1998
------------- ----------- -----------------
<S> <C> <C> <C>
Operating income (loss).................................... $ 6.2 $ 7.9 $ 33.5
Depreciation and amortization.............................. 2.0 2.1 8.2
Non-cash pension income.................................... (0.5) (0.5) (2.0)
Facility closing and reengineering costs................... 0.2 1.0 3.3
----- ----------- -----
EBITDA..................................................... 7.9 10.5 43.0
EBITDA from Divested Operations(8)......................... (0.7) (0.4) (0.3)
----- ----------- -----
Adjusted EBITDA............................................ $ 8.6 $ 10.9 $ 43.3
----- ----------- -----
----- ----------- -----
</TABLE>
(8) Adjusted Net Sales and Adjusted EBITDA represent historical net sales and
EBITDA adjusted for (i) the sale of the Ralph Lauren Womenswear license and
associated operating assets which was completed in October 1995, (ii) the
sales of the operations of Arrow de Mexico and Arrow Gautemala in 1997 and
(iii) the decision to close certain Canadian retail stores which was made in
December 1996. For a further discussion of these adjustments see
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
(9) For purposes of determining the ratio of earnings to fixed charges, earnings
are defined as earnings before income taxes, plus fixed charges. Fixed
charges include interest expense on all indebtedness, amortization of
deferred financing charges, and one-third of rental expense, representing
that portion of rental expense deemed to be attributable to interest.
Earnings were insufficient to cover fixed charges by $19.6 million in 1993,
$99.1 million in 1994, $87.6 million in 1995 and $28.9 million in 1996.
(10) Working capital is defined as current assets (less cash and cash
equivalents) minus current liabilities (less current maturities of long-term
debt).
(11) On July 17, 1995, $161.1 million of long-term debt was reclassified to
liabilities subject to compromise.
47
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following is a discussion of the financial condition and results of
operations of the Company for the years ended December 31, 1995, 1996 and 1997
and the quarters ended March 29, 1997 and March 28, 1998. This discussion should
be read in conjunction with the audited combined financial statements of the
Company and the related notes thereto included elsewhere in this Prospectus.
OVERVIEW
In 1990, Bidermann Industries USA, Inc. ("Bidermann"), a fashion oriented
design Company with the rights to market various men's or women's apparel under
such well-known brand names as Polo and Yves Saint Laurent, acquired Cluett
Peabody & Co., which included the Sock Group and the Shirt Group.
Bidermann management applied its fashion oriented business model and
overhead structure to the Sock Group and Shirt Group. Because both the GOLD TOE
and ARROW product lines represent more basic staple apparel products, they do
not generate designer apparel gross margins. As a result, profitability for
these businesses is more dependent on tighter control of operating expenses.
They are also less dependent upon national advertising to generate sales. As a
result, the application of the designer-type cost structure led to a decline in
profitability.
Rather than reduce costs, Bidermann management addressed this decline by
attempting to rapidly increase the sales of ARROW shirts by broadening
distribution (including the opening of new retail stores) and adding higher
priced all cotton dress shirts and higher fashion sportswear. In addition to
missing ARROW'S core value oriented customer base, this effort was not aligned
with the Shirt Group's operational capabilities in terms of design, sourcing and
distribution. As a result, the Shirt Group quickly developed significant excess
inventory, particularly in sportswear, due to inaccurate sales planning and
significant late deliveries and poor quality from international vendors.
During this period, Bidermann also established a captive retail distribution
network of 73 stores. These stores offered a separate collection of first
quality products which competed with the Shirt Group's existing wholesale
customers. The retail store operation also required a completely separate design
and distribution effort, further adding to the operating expense burden. The
combination of these unsuccessful initiatives and the large operating and
overhead expense burden forced the Company to file for protection under Chapter
11 of the Bankruptcy Code on July 17, 1995.
One month prior to the commencement of the bankruptcy, the Company retained
A&M to act as crisis managers and appointed Bryan Marsal its President and Chief
Executive Officer. Mr. Marsal continues in this capacity today. Subsequently,
the Company replaced certain members of management of the Shirt Group. The
Company's management team focused on the elimination of excess costs and
strengthening the Company's core businesses.
One of new management's first initiatives was to address the existing
dispute with Ralph Lauren Enterprises, L.P. ("Lauren Enterprises") over the
Company's license to manufacture and sell women's apparel under the Ralph Lauren
name, which it had held since 1981. Prior to the filing of the bankruptcy case,
Lauren Enterprises alleged defaults by the Company under a certain design
services contract and the Ralph Lauren license and purported to terminate the
trademark license. In the fall of 1995, the Company sold the Ralph Lauren
license and associated operating assets to Lauren Enterprises for approximately
$41.9 million the proceeds of which were distributed to certain of the Company's
creditors.
Between 1995 and 1997, the Company reduced selling, general and
administrative expenses and corporate overhead, exclusive of those associated
with divested operations, by $32.3 million. This reduction was accomplished in
part by eliminating unnecessary expenses and by transferring several
administrative functions to the operating subsidiaries. Prior to mid-1995 the
Company had an overhead structure that allocated expenses to the operating
subsidiaries for accounting purposes only. In connection with the
48
<PAGE>
Company's expense reduction program, these expenses were transferred to the
subsidiaries, or eliminated. For example, instead of the collections process
being managed at the corporate level, it is being managed by the same group
responsible for the sales, marketing and distribution of the order. This
integration has significantly lowered returns, chargebacks and retailer
penalties for execution breakdowns because sales, marketing and accounts
receivable collection are managed by the same business unit. In addition, this
reduction in operating costs was accomplished by the closure of 42 retail
stores; the relocation of offices and showrooms to less expensive real estate;
the introduction of more cost effective medical and workers' compensation
benefit plans; the closure of the Company's excess warehouse and administrative
offices in Secaucus, New Jersey; the elimination of excess manufacturing
capacity through the closure of the Sock Group manufacturing facility in
Halifax, North Carolina, the closure of the Shirt Group manufacturing facilities
in Cedartown, Georgia and Costa Rica; the reduction of certain administrative
personnel; and the modification and reduction of advertising and promotional
spending from a national media campaign to more effective regional cooperative
and point of sale advertising.
In late 1995, new management began the process of refocusing the Shirt Group
on its core blended dress shirt product and began repositioning the all cotton
dress shirt and sports shirt products as complementary products to these core
offerings. Given the lead times associated with international sourcing of
products and the significant backlog of sport shirt deliveries, it was not until
fall of 1997 that the Shirt Group product line fully reflected management's
intended product mix. This realignment has resulted in lower returns, allowances
and markdowns.
Throughout the Company's bankruptcy, the Sock Group has continued to perform
well. Net sales in this group grew from $134.6 million in 1995 to $155.1 million
for the LTM period. This performance results from continued strength in GOLD TOE
and new license brands and brand extensions.
From 1995 to 1997, net sales in the Shirt Group declined from $230.6 million
to $179.2 million; however, for the three months ended March 28, 1998 net sales
increased to $49.5 million from $46.3 million for the comparable period in 1997.
Despite declining sales, as a result of management's initiatives gross profit
margin increased from 19.0% in 1995 (which includes the effect of $11.0 million
of inventory write-downs) to 28.4% for the LTM period.
In addition to the direct sale of apparel products, the Company generates
fee income through the licensing of the ARROW and GOLD TOE brands. License fee
revenue fell $5.5 million in 1996 primarily as a result of the sale of Ralph
Lauren, and declined by $1.7 million in 1997 primarily as a result of problems
experienced by the Company's Asian licensees.
Having succeeded in eliminating unnecessary corporate and operating costs
and revitalizing the ARROW brand, the Company is positioned to focus on the
expansion of its revenues. The Company believes that it can leverage its
existing customer relationships, recognized brand names and established
reputation for customer service to continue expanding its lines of sock products
to include branded and private label women's and children's socks. The emergence
from bankruptcy will occur contemporaneously with the Offerings and should,
management believes, remove the uncertainty surrounding the ARROW brand and thus
provide the Company with opportunities for increased sales in its core
offerings.
The Company's fiscal year ends on December 31st of each calendar year.
DIVESTED OPERATIONS
In 1996, the Company made a strategic decision to stop its production of
shirts in Guatemala and Mexico, to exit its retail business in Canada and to
close all but three of its Canadian outlet stores. In 1996, the Company's Latin
America operations represented $2.9 million in net sales and had an operating
loss (before facility closing costs) of $0.4 million and the Canadian retail
stores represented $4.3 million in net sales and had an operating loss (before
facility closing costs) of $1.3 million. In addition, the Company has incurred a
number of one-time costs associated with the restructuring of its operations and
has incurred a
49
<PAGE>
number of bankruptcy reorganization costs associated with operating under
Chapter 11 (the financial results associated with the Ralph Lauren, Latin
American and Canadian operations, are referred to collectively as the "divested
operations").
RESULTS OF OPERATIONS
COMPARISON OF FIRST QUARTER 1998 TO FIRST QUARTER 1997
The following table sets forth, for the periods indicated, statement of
operations data as a percentage of net sales.
<TABLE>
<CAPTION>
1997 1998
--------------------------------------------------------- --------------------
RECURRING DIVESTED TOTAL RECURRING
OPERATIONS OPERATIONS OPERATIONS OPERATIONS
-------------------- ------------- -------------------- --------------------
(DOLLARS IN
(DOLLARS IN MILLIONS) MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C>
Net sales............................ $ 86.7 100.0% $ 0.8 $ 87.5 100.0% $ 91.7 100.0%
Cost of sales........................ 61.7 71.2 0.6 62.3 71.2 63.5 69.2
Gross profit......................... 25.0 28.8 0.2 25.2 28.8 28.2 30.8
Selling, general and administrative
expenses........................... 17.9 20.6 0.9 18.8 21.5 18.9 20.6
Facility closing and reengineering
costs.............................. 0.2 0.2 -- 0.2 0.2 1.0 1.1
Operating income (loss).............. 6.9 8.0 (0.7) 6.2 7.1 8.3 9.1
Interest expense..................... 3.6 4.2 -- 3.6 4.1 3.8 4.1
Net income (loss).................... 1.0 1.2 (0.7) 0.3 0.3 2.8 3.1
<CAPTION>
DIVESTED TOTAL
OPERATIONS OPERATIONS
------------- --------------------
<S> <C> <C> <C>
Net sales............................ $ 0.6 $ 92.3 100.0%
Cost of sales........................ 0.4 63.9 69.2
Gross profit......................... 0.2 28.4 30.8
Selling, general and administrative
expenses........................... 0.6 19.5 21.1
Facility closing and reengineering
costs.............................. -- 1.0 1.1
Operating income (loss).............. (0.4) 7.9 8.6
Interest expense..................... -- 3.8 4.1
Net income (loss).................... (0.5) 2.3 2.5
</TABLE>
NET SALES. Net sales were $92.3 million in the first quarter of 1998, an
increase of 5.5% from the net sales of $87.5 million recorded in the first
quarter of 1997. Exclusive of the divested operations, net sales were $91.7
million, an increase of 5.8% from net sales of $86.7 million. The increase was
due primarily to an increase in net sales in both the Sock Group (an increase of
10.0% from $32.9 million to $36.2 million) resulting from the continued growth
of women's GOLD TOE and men's Jockey and ARROW sock sales and the Shirt Group
(an increase of 6.9% from $46.3 million to $49.5 million) resulting from
increased sales associated with its core dress shirt line offset by a decrease
in sales associated with the Designer Group. Net sales includes license fee
income of $1.9 million in the first quarter of 1998 compared to $1.8 million in
the first quarter of 1997. This increase is primarily as a result of increased
sales by the Company's licensees.
GROSS PROFIT. Gross profit increased from $25.2 million (28.8% of net
sales) in the first quarter of 1997 to $28.4 million (30.8% of net sales) in the
first quarter of 1998. Exclusive of the divested operations, gross profit
increased from $25.0 million in the first quarter of 1997 (28.8% of net sales)
to $28.2 million (30.8% of net sales) in the first quarter of 1998. Gross profit
as a percentage of net sales in the Sock Group was 32.1% and 31.1% in the first
quarters of 1998 and 1997, respectively. The improvement was primarily the
result of a more favorable mix of higher margin GOLD TOE and other branded sock
products. The Shirt Group realized gross profit margins of 29.5% in the first
quarter of 1998 versus 26.1% in the first quarter of 1997. The increase in the
gross margin in the Shirt Group is primarily due to increased domestic
manufacturing efficiencies and full priced sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses increased to $19.5 million (21.1% of net sales) in the
first quarter of 1998 from $18.8 million (21.5% of net sales) for the same
period in 1997. Exclusive of divested operations, these expenses increased to
$18.9 million (20.6% of net sales) in the first quarter of 1998 from $17.9
million (20.6% of net sales) for the same period in 1997. This increase is
primarily due to additional costs associated with an increase in net sales.
FACILITY CLOSING AND REENGINEERING COSTS. Facility closing and
reengineering costs increased to $1.0 million in the first quarter of 1998 from
$0.2 million for the same period in 1997 primarily due to a sock plant closing
and moving costs related to a new distribution facility for the Sock Group.
50
<PAGE>
OPERATING INCOME. Operating income increased to $7.9 million (8.6% of net
sales) in the first quarter of 1998 from $6.2 million (7.1% of net sales) for
the same period in 1997 as a result of the foregoing. Exclusive of divested
operations and facility closing and reengineering costs, operating income
increased to $9.3 million (10.2% of net sales) in the first quarter of 1998 from
$7.1 million (8.2% of net sales) for the same period in 1997.
INTEREST EXPENSE. Interest expense increased marginally to $3.8 million in
the first quarter of 1998 from $3.6 million for the same period in 1997,
primarily due to payment of the DIP extension fee.
NET INCOME. Net income increased to $2.3 million in the first quarter of
1998 from $0.3 million for the same period in 1997 primarily due to increased
sales and gross margin efficiencies referred to above.
YEAR ENDED DECEMBER 31, 1997 COMPARED TO YEAR ENDED DECEMBER 31, 1996
The following table sets forth, for the periods indicated, the statement of
operations data as a percentage of net sales.
<TABLE>
<CAPTION>
1996 1997
----------------------------------------------------------- -------------------------------------
RECURRING DIVESTED TOTAL RECURRING DIVESTED
OPERATIONS OPERATIONS OPERATIONS OPERATIONS OPERATIONS
-------------------- --------------- -------------------- -------------------- ---------------
(DOLLARS IN MILLIONS) (DOLLARS IN MILLIONS)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales..................... $ 361.5 100.0% $ 7.2 $ 368.7 100.0% $ 359.2 100.0% $ 3.7
Cost of sales................. 269.0 74.4 4.8 273.8 74.3 251.5 70.0 2.3
Gross profit.................. 92.5 25.6 2.4 94.9 25.7 107.7 30.0 1.4
Selling, general and
administrative expenses..... 81.9 22.7 4.0 85.9 23.3 72.8 20.3 2.0
Facility closing and
reengineering costs......... 8.5 2.4 3.1 11.6 3.1 4.0 1.1 (1.5)
Operating income (loss)....... 2.1 0.6 (4.7) (2.6) (0.7) 30.9 8.6 0.9
Interest expense.............. 16.9 4.7 -- 16.9 4.6 15.2 4.2 --
Net income (loss)............. (22.2) (6.1) (8.0) (30.2) (8.2) 16.5 4.6 0.7
<CAPTION>
TOTAL
OPERATIONS
--------------------
<S> <C> <C>
Net sales..................... $ 362.9 100.0%
Cost of sales................. 253.8 69.9
Gross profit.................. 109.1 30.1
Selling, general and
administrative expenses..... 74.8 20.6
Facility closing and
reengineering costs......... 2.5 0.7
Operating income (loss)....... 31.8 8.8
Interest expense.............. 15.2 4.2
Net income (loss)............. 17.2 4.7
</TABLE>
NET SALES. Net sales were $362.9 million in 1997, a slight decrease of 1.6%
from net sales of $368.7 million recorded in 1996. Exclusive of the divested
operations, net sales were $359.2 million, a decrease of 0.6% from net sales of
$361.5 million. Exclusive of the divested operations, net sales in the Sock
Group increased 7.6% from $141.1 million to $151.8 million and net sales in the
Shirt Group decreased 9.5% from $194.4 million to $176.0 million. The increase
in net sales in the Sock Group was primarily due to women's sock sales and a
full year of sales for new licensed brands, such as Nautica. The reduction in
net sales for the Shirt Group was due to the elimination of certain product
lines and the elimination of inventory liquidations taken in 1996 which did not
occur in 1997. Net sales includes license fee income of $6.9 million in 1997
compared to $8.6 million in 1996. The reduction in license fee income was caused
by currency devaluation problems faced by the Company's Asian licensees which
represent approximately 47% of the Company's license fee income.
GROSS PROFIT. Gross profit increased from $94.9 million (25.7% of net
sales) in 1996 to $109.1 million (30.1% of net sales) in 1997. Exclusive of the
divested operations, gross profit was $107.7 million in 1997 (30.0% of net
sales) versus $92.5 million in 1996 (25.6% of net sales) and gross profit for
the Sock Group was $49.1 million (32.4% of net sales) in 1997 as compared to
$41.3 million (29.3% of net sales) in 1996. The increase in gross profit was
attributable to the overall increase in sales ($3.5 million) and the improved
product mix ($4.0 million). Gross profit for the Shirt Group was $48.5 million
(27.5% of net sales) in 1997 versus $46.0 million (23.7% of net sales) in 1996
as a result of the improvement in product mix, an overall improvement in returns
and allowances and lower labor costs which offset the decline in net sales.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased to $74.8 million (20.6% of net sales) in 1997
from $85.9 million (23.3% of net sales) in 1996. Exclusive of divested
operations, these expenses decreased to $72.8 million (20.3% of net sales) in
1997 from $81.9
51
<PAGE>
million (22.7% of net sales) in 1996. Selling, general and administrative
expenses were reduced primarily due to (i) cost savings of $3.1 million realized
in the Company's distribution centers resulting from new management's
reengineering efforts (ii) a reduction in national advertising expenditures of
$4.3 million, (iii) the reduction of approximately 60 administrative positions
resulting in approximately $2.0 million in savings, and (iv) further reductions
in corporate overhead of $0.6 million. These savings were offset by higher
selling expenses and royalty payments associated with the new product lines.
FACILITY CLOSING AND REENGINEERING COSTS. Facility closing and
reengineering costs of $2.5 million in 1997 and $11.6 million in 1996 were
primarily related to plant closings, information systems conversion costs and
retail store closings.
OPERATING INCOME (LOSS). Operating income increased to $31.8 million (8.8%
of net sales) in 1997 from an operating loss of $2.6 million in 1996. Exclusive
of divested operations and facility closing and reengineering costs, operating
income increased to $34.9 million (9.7% of net sales) in 1997 from $10.6 million
(3.0% of net sales) for the comparable period in 1996. The increase in operating
income as a percentage of net sales results from the foregoing factors.
INTEREST EXPENSE. Interest expense decreased to $15.2 million in 1997 from
$16.9 million in 1996, primarily due to reduced borrowings under the Company's
DIP Credit Facility.
NET INCOME (LOSS). Net income increased to $17.2 million in 1997 from a net
loss of $30.2 million in 1996. The increase was primarily due to the factors
discussed above and a credit of $10.0 million in 1997 representing the reversal
of excess accruals taken in anticipation of certain lease rejection and other
pre-petition claims.
YEAR ENDED DECEMBER 31, 1996 COMPARED TO YEAR ENDED DECEMBER 31, 1995
The following table sets forth, for the periods indicated, the statement of
operations data as a percentage of net sales.
<TABLE>
<CAPTION>
1995 1996
----------------------------------------------------------- -------------------------------------
RECURRING DIVESTED TOTAL RECURRING DIVESTED
OPERATIONS OPERATIONS OPERATIONS OPERATIONS OPERATIONS
-------------------- --------------- -------------------- -------------------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(DOLLARS IN MILLIONS) (DOLLARS IN MILLIONS)
Net sales.................. $ 388.9 100.0% $ 97.8 $ 486.7 100.0% $ 361.5 100.0% $ 7.2
Cost of sales.............. 305.0 78.4 64.8 369.8 76.0 269.0 74.4 4.8
Gross profit............... 83.9 21.6 33.0 116.9 24.0 92.5 25.6 2.4
Selling, general and
administrative
expenses................. 105.1 27.0 32.8 137.9 28.3 81.9 22.7 4.0
Facility closing and
reengineering costs...... 16.1 4.1 6.4 22.5 4.6 8.5 2.4 3.1
Operating income (loss).... (37.3) (9.6) (6.2) (43.5) (8.9) 2.1 0.6 (4.7)
Interest expense........... 22.7 5.8 -- 22.7 4.7 16.9 4.7 --
Net Income (loss).......... (82.0) (21.1) (7.1) (89.1) (18.3) (22.2) (6.1) (8.0)
<CAPTION>
TOTAL
OPERATIONS
--------------------
<S> <C> <C>
Net sales.................. $ 368.7 100.0%
Cost of sales.............. 273.8 74.3
Gross profit............... 94.9 25.7
Selling, general and
administrative
expenses................. 85.9 23.3
Facility closing and
reengineering costs...... 11.6 3.1
Operating income (loss).... (2.6) (0.7)
Interest expense........... 16.9 4.6
Net Income (loss).......... (30.2) (8.2)
</TABLE>
NET SALES. Net sales were $368.7 million in 1996, a decrease of 24.2% from
net sales of $486.7 million recorded in 1995. Exclusive of divested operations,
net sales were $361.5 million in 1996, a decrease of 7.0% from net sales of
$388.9 million in 1995. Net sales in the Sock Group increased 4.8% from $134.6
million to $141.1 million and net sales in the Shirt Group decreased 15.7% from
$230.6 million to $194.4 million. The increase in net sales in the Sock Group
was primarily due to the Company's expanded product offerings, including
Nautica, ARROW and Jockey socks. The reduction in net sales in the Shirt Group
was primarily the result of uncertainty regarding ownership of the ARROW brand
as a result of the Company's bankruptcy and the poor ARROW brand positioning
discussed above. Net sales includes license fee income of $8.6 million in 1996
compared to $14.1 million in 1995. The reduction in license fee income was
caused by the sale of the Ralph Lauren license.
52
<PAGE>
GROSS PROFIT. Gross profit decreased from $116.9 million (24.0% of net
sales) in 1995 to $94.9 million (25.7% of net sales) in 1996. Exclusive of the
divested operations, gross profit was $92.5 million (25.6% of sales) in 1996
versus $83.9 million (21.6% of net sales) in 1995. Gross profit for the Sock
Group was $41.3 million (29.3% of net sales) in 1996 compared to $31.0 million
(23.1% of net sales) the previous year. The improvement in the gross margin of
the Sock Group was primarily the result of lower returns and allowances ($1.6
million) and an $8.6 million gross profit improvement associated with (i)
overall product mix changes ($5.5 million), (ii) an improvement in manufacturing
costs ($1.9 million) and the elimination of costs associated with excess
inventory liquidated in the prior year ($1.2 million). Gross profit for the
Shirt Group increased from $43.8 million (19.0% of net sales) in 1995 to $46.0
million (23.7% of net sales) in 1996. Approximately $6.2 million of the
reduction is attributable to the overall lower sales associated with the
division's departure from several product lines. This reduction is offset by a
$6.8 million improvement in returns and allowances resulting from the changes
implemented by new management, an overall cost improvement of $4.5 million from
the closure of the Cedartown, Georgia facility and $2.1 million in cost savings
associated with better foreign product sourcing and offshore manufacturing. In
addition, gross profit for the Shirt Group in 1995 was lower than normal as a
result of a write-down in inventory of approximately $11.0 million consistent
with the Company's refocus on its core products.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses decreased to $85.9 million (23.3% of net sales) in 1996
from $137.9 million (28.3% of net sales) in 1995. Exclusive of divested
operations, these expenses decreased to $81.9 million (22.7% of net sales) in
1996 from $105.1 million (27.0% of net sales) in 1995. This reduction is
primarily a result of the cost cutting activities exercised by the Company
during its bankruptcy, as discussed in the Overview above.
FACILITY CLOSING AND REENGINEERING COSTS. Facility closing and
reengineering costs of $22.5 million in 1995 were primarily attributed to
distribution facility consolidation, sock plant closings and the elimination of
the corporate overhead structure. Facility closing and reengineering costs of
$11.6 million in 1996 were related primarily to plant closings, information
systems conversion costs and retail store closings.
OPERATING INCOME (LOSS). Operating loss decreased to $(2.6) million in 1996
from $(43.5) million in 1995. Exclusive of divested operations and facility
closing and reengineering costs, operating income increased to $10.6 million
(3.0% of net sales) in 1996 from $(21.2) million for the comparable period in
1995. The increase in operating income as a percentage of net sales results from
the foregoing factors.
INTEREST EXPENSE. Interest expense decreased to $16.9 million in 1996 from
$22.7 million in 1995, primarily due to reduced borrowing under the Company's
DIP working capital facility.
NET INCOME (LOSS). Net loss decreased 66.1% to $(30.2) million in 1996 from
$(89.1) million in 1995 primarily as a result of the factors described above as
well as due to recognition of lease rejection claims and other bankruptcy
related costs of $20.9 million in 1995 compared to $6.1 million of such costs in
1996.
LIQUIDITY AND CAPITAL RESOURCES
Other than upon a Change of Control or as a result of certain asset sales,
the Company will not be required to make any principal payments in respect of
the Exchange Notes until maturity. The Company will be required to make interest
payments with respect to both the Senior Credit Facility and the Exchange Notes
and dividend payments with respect to the New Preferred Stock (if permitted
under the Senior Credit Facility and the Indenture). The Company typically makes
capital expenditures related primarily to the maintenance and improvement of
manufacturing facilities. The Company spent $2.6 million for the three months
ended March 28, 1998 as compared to $2.1 million for the three months ended
March 29, 1997. In fiscal 1995, 1996 and 1997, capital expenditures were $6.8
million, $8.2 million and $11.0 million, respectively. The Company estimates
that capital expenditures will be approximately $9.0 million for the last nine
months of 1998 and approximately $8.0 million in 1999.
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The Company's principal sources of cash to fund these capital requirements
are net cash provided by operating activities as well as borrowings, if needed,
under its Senior Credit Facility. The Company's net cash provided (used) by
operating activities for the three months ended March 28, 1998 totaled $(2.9)
million as compared to $3.4 million for the three months ended March 29, 1997.
In fiscal 1995, 1996 and 1997, the Company's net cash provided by operations
totaled $2.1 million, $13.6 million, and $12.9 million, respectively.
Net cash used by investing activities for the three months ended March 28,
1998 was $(1.5) million as compared to $(5.8) million for the three months ended
March 29, 1997. In fiscal 1995, 1996 and 1997, net cash used by investing
activities was $(6.4) million, $(5.1) million and $(7.3) million, respectively.
Net cash provided by financing activities for the three months ended March 28,
1998 was $4.5 million as compared to $4.4 million for the three months ended
March 29, 1997. In fiscal 1995, 1996 and 1997, net cash provided (used) by
financing activities was $3.9 million, $(13.3) million and $(1.4) million,
respectively.
The Company has a substantial amount of indebtedness. The Company relies on
internally generated funds and, to the extent necessary, on borrowings under the
revolving credit facility available under the Senior Credit Facility, which
provides for borrowings up to $50.0 million, subject to certain customary
drawing conditions, to meet its liquidity needs. In addition, the Company may
make selective acquisitions and would rely on internally generated funds, and,
to the extent necessary, on borrowings under such revolving credit facility or
from other sources to finance such acquisitions. The Company's ability to borrow
is limited by the Senior Credit Facility and the limitations on the incurrence
of indebtedness under the Indenture. See "Description of Other Indebtedness" and
"Description of the Exchange Notes."
Borrowings under the Senior Credit Facility bear interest at a rate per
annum equal to a margin over, at the Company's option, LIBOR or a Base Rate. The
Senior Credit Facility is secured by substantially all the assets of the
Company's domestic subsidiaries, guaranteed by the Company's domestic
subsidiaries and contains customary covenants and events of default, including
substantial restrictions on the Company's ability to declare dividends or
distributions. The Senior Credit Facility is subject to mandatory prepayment
with the proceeds of certain asset sales, certain equity issuances and certain
funded debt issuances for borrowed money, and with a portion of the Company's
excess cash flow (as defined in the Senior Credit Facility). See "Description of
Other Indebtedness."
Based upon the current level of operations and revenue growth, management
believes that cash flow from operations and available cash, together with
available borrowings under the Senior Credit Facility, are adequate to meet the
Company's future liquidity needs for at least the next several years. The
Company may, however, need to refinance all or a portion of the principal of the
Exchange Notes on or prior to maturity and there can be no assurance that the
Company will be able to effect any such refinancing on commercially reasonable
terms or at all. In addition, there can be no assurance that the Company's
business will generate sufficient cash flow from operations, that anticipated
revenue growth and operating improvements will be realized or that future
borrowings will be available under the Senior Credit Facility in an amount
sufficient to (i) enable the Company to service its indebtedness (including the
Exchange Notes), (ii) make periodic payments of cash dividends on the New
Preferred Stock, (iii) redeem any of the New Preferred Stock for cash or, if the
Exchange Debentures have been issued, to make payments of principal or cash
interest on the Exchange Debentures or (iv) fund its other liquidity needs. If
the Company's cash flow, availability under the Senior Credit Facility and other
capital resources are insufficient to fund the Company's debt service
obligations, the Company may be forced to reduce or delay capital expenditures,
sell assets, restructure or refinance its indebtedness, or seek additional
equity contributions. There can be no assurance that any of such measures could
be implemented on satisfactory terms or, if implemented, would be successful or
would permit the Company to meet its debt service obligations.
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SEASONALITY
The Company's business is seasonal, with higher sales and income during its
third and fourth quarters, which coincide with the Company's two peak retail
selling seasons: the first running from the start of the back-to-school and fall
selling seasons beginning in August and continuing through September, and the
second being the Christmas selling season beginning with the weekend following
Thanksgiving and continuing through the week after Christmas.
Also contributing to the strength of the third quarter is the high volume of
fall shipments to wholesale customers which are generally more profitable than
spring shipments. The slower spring selling season at wholesale combines with
retail seasonality to make the first quarter particularly weak.
INCOME TAXES
As of December 31, 1997, the Company had net operating loss carryforwards
(NOLs) of approximately $180 million. The Company's Plan or significant changes
in ownership of the Company could substantially limit the use of NOLs. The
Company accounts for income taxes in accordance with Statement of Financial
Accounting Standards No. 109, "Accounting for Income Taxes." This standard
requires, among other things, recognition of future tax benefits, measured by
enacted tax rates, attributable to deductible temporary differences between
financial statement and income tax bases of assets and liabilities and to tax
NOLs to the extent that realization of such benefits is more likely than not.
Based on the Company's history of earnings and in consideration of the Company's
Chapter 11 filing, the Company's entire balance of deferred tax assets has been
reduced by a valuation allowance of $55.3 million, as realization of these
long-term tax benefits is dependent upon future earnings. Management cannot
predict sufficient operating income to utilize fully its deferred income tax
income.
NEW ACCOUNTING STANDARDS
In June 1997, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards No. 131, DISCLOSURES ABOUT SEGMENTS
OF AN ENTERPRISE AND RELATED INFORMATION ("Statement 131"), which is effective
for years beginning after December 15, 1997, Statement 131 establishes standards
for the way that public business enterprises report selected information about
operating segments in interim financial reports. It also establishes standards
for related disclosures about products and services, geographic areas, and major
customers. Statement 131 is effective for financial statements for fiscal years
beginning after December 15, 1997, and therefore the Company will adopt the new
requirements in 1998, which will require retroactive disclosures. Management has
not determined how Statement 131 will impact the Company's financial statements.
YEAR 2000 RISK
The Company believes that its systems are capable of functioning from and
after the year 2000 without any material additional costs. The ability of third
parties with whom the Company transacts business to adequately address their
year 2000 issues is outside of the Company's control. There can be no assurance
that the failure of the Company or such third parties to adequately address
their respective year 2000 issues will not have a material adverse effect on the
Company.
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<PAGE>
BUSINESS
OVERVIEW
The Company is one of the leading designers, manufacturers and marketers of
men's socks and dress shirts in the United States and has a significant market
presence in women's and children's socks and a growing presence in men's and
women's sportswear. While the Company serves most channels of distribution, its
primary focus is on department and national chain store retailers. The Company
believes its core product offerings, GOLD TOE socks and ARROW dress shirts,
provide classic styles at price points which represent exceptional value and
appeal to a broad consumer base.
The Company markets its products utilizing widely recognized Company-owned
brands such as GOLD TOE, SILVER TOE and ARROW in the sock segment and ARROW and
its related trade names, including DOVER, KENT, ARROW "1851", and COLLARMAN in
the dress shirt segment. In 1997, the Company's GOLD TOE brand commanded a sock
market share of approximately 45% in the department store channel and
approximately 22% in the combined department store and national chain channels.
In 1997, the ARROW brand was the second leading branded dress shirt capturing a
market share of approximately 10% of the department store channel for men's
dress shirts. The Company primarily sells its products to department and
national chain stores to maintain its brand image and to achieve the relatively
higher selling prices and higher margins characterized by sales to these retail
stores. Approximately 58% of the Company's sales are derived from these core
offerings, the demand for which the Company believes is stable and resistant to
changing fashion trends.
The Company also has licensed the exclusive rights to manufacture and market
certain apparel products (generally socks and shirts) under such widely
recognized brand names as Perry Ellis, Nautica, Jockey, Stride Rite, Kenneth
Cole, Burberrys, and Yves Saint Laurent. This diverse portfolio of Company-owned
and licensed brand names enables the Company to offer different brands of unique
value-added products to different channels of distribution.
The Company conducts its business through three principal business units:
the Sock Group, the Shirt Group and the Designer Group. For the LTM Period, the
Company realized pro forma net sales and EBITDA of $364.2 million and $42.8
million, respectively.
- THE SOCK GROUP (42.6% OF PRO FORMA NET SALES FOR THE LTM PERIOD). The
Sock Group is the market leader in department store sales of socks, capturing
approximately 59% of all such sales in the United States. The Sock Group's
leading brand, GOLD TOE, was established in 1934 and generates approximately 63%
of the Sock Group's net sales with the remaining sales generated through
complementary private labels and through licensed brands such as Perry Ellis,
Nautica, Jockey and Stride Rite. The Sock Group offers a comprehensive line of
products across multiple price points, ages, genders and styles, enabling it to
provide its customers with a full range of their sock requirements. For the LTM
Period, the Sock Group realized net sales and EBITDA of $155.1 million and $28.8
million, respectively.
- THE SHIRT GROUP (49.2% OF PRO FORMA NET SALES FOR THE LTM PERIOD). The
Shirt Group designs, manufactures and markets dress shirts and sportswear,
focusing on men's cotton/polyester and all cotton dress shirts which are sold
under the ARROW brand and its related trade names, including DOVER, KENT,
COLLARMAN, and ARROW "1851". Sportswear products manufactured by the Company
consist primarily of men's and women's knitted and woven sport shirts which are
sold primarily under its TOURNAMENT and ARROW AUTHENTIC labels. Because of the
name recognition of its ARROW brand, which was established in 1851, the Company
is also able to license the ARROW trademarks for shirts internationally and
non-shirt products both domestically and internationally. For the LTM Period,
the Shirt Group realized net sales (including licensing fee revenue of $6.9
million) and EBITDA (including net licensing income of $4.2 million) of $179.2
million and $16.8 million, respectively.
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- THE DESIGNER GROUP (10.6% OF PRO FORMA NET SALES FOR THE LTM PERIOD). The
Designer Group was established as a separate business unit in October 1995 and
sells (i) dress and sport shirts under licensed Yves Saint Laurent, Burberrys
and Kenneth Cole trademarks, (ii) dress socks under the licensed Kenneth Cole
and Yves Saint Laurent trademarks and (iii) tailored clothing and casual pants
under the Yves Saint Laurent trademark. The Designer Group's products,
distributed primarily to department and specialty stores, help complement the
Company's core product offerings. For the LTM Period, the Designer Group had net
sales and EBITDA of $38.7 and negative $1.0 million, respectively.
The net sales and EBITDA numbers in the prior three paragraphs do not
include intercompany sales and pro forma corporate overhead charges of $8.8
million and $1.8 million, respectively.
COMPETITIVE STRENGTHS
Each of the Company's principal business units has secured a strong
competitive position within its respective market segment. Currently, the
Company is one of the leading designers, manufacturers and marketers of men's
socks and dress shirts in the United States. The management team will use the
following competitive strengths to further enhance the Company's position in the
marketplace:
- INDUSTRY LEADING BRANDS. The Company has assembled a portfolio of widely
recognized brand names in the sock and shirt markets, led by its owned
GOLD TOE and ARROW brands. In addition, the Company has licensed the right
to manufacture, design and distribute certain items of apparel under the
Nautica, Perry Ellis, Jockey, Stride Rite, Kenneth Cole, Burberrys, and
Yves Saint Laurent brands. This diverse portfolio of brand names allows
the Company to differentiate itself from its competitors by providing
distinct brand names, for different channels of distribution and at
different price points.
- COMPREHENSIVE PRODUCT LINES. The Company offers a comprehensive product
line of brand-name socks and men's dress shirts across all major price
points. In addition, the Company is able to provide key retailers such as
Sears, J.C. Penney and May Company with high quality, complementary
private label products. The Company also collaborates with customers to
develop exclusive or specially designed merchandising programs and is
capable of satisfying its customers' needs for prompt product delivery
across all of its product offerings. The combination of its broad array of
quality brand names and its private label programs positions the Company
to be the category manager for its customers in its core offerings.
- STRONG DISTRIBUTION CHANNELS. The Company has long-standing established
relationships with many of the largest department store and national chain
store retailers including Belk's, Dayton-Hudson, Dillard's, J.C. Penney,
May Company, Mercantile, Proffitt's, Federated and Sears. In addition, the
Company has selectively developed relationships with certain large mass
merchant and specialty retailers. Management believes that these strong
relationships will provide it a stable base from which the Company can
pursue future business and new product introductions while maintaining the
integrity of its core brand names.
- RESPONSIVE MANUFACTURING AND SERVICING CAPABILITIES. The Company's balance
of domestic and foreign manufacturing operations allows it to maintain low
inventory levels resulting in increased inventory turns and better working
capital management while permitting it to quickly respond to customer
orders. In addition, the Company's upgraded information systems provide
comprehensive order processing, production, accounting and management
information for the marketing, manufacturing, importing and distribution
functions of the Company's business. The Company has also enhanced its
customer servicing capabilities with the introduction of its vendor
managed inventory system in the Shirt Group. This system provides the
Company with real time information on the sales of its products through
participating retailers, thus enabling it to replenish a customer's
inventory without the need for a formal order. The Company anticipates
installation of its vendor managed inventory system with certain of the
Sock Group's largest customers during 1998.
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BUSINESS STRATEGY
Management intends to maintain its competitive position in its current
product offerings while leveraging its competitive strengths to implement the
following business strategies:
- INCREASE PENETRATION WITH EXISTING CUSTOMERS. The Sock Group intends to
leverage its existing customer relationships, recognized brand names and
established reputation for customer service to continue expanding its
branded and private label women's and children's sock businesses. The
Company has recently acquired the license to distribute children's socks
under the Stride Rite brand and has been successfully marketing a line of
women's GOLD TOE socks. By incorporating these new products into the Sock
Group's existing offerings, the Company believes it will create
opportunities for added sales and further increase its significance as a
supplier to its existing customer base.
Management intends to increase the Shirt Group's dress shirt business
through the expansion of the DOVER brand to include additional fabrics
including broadcloth and pinpoint. The Company is also selectively
expanding its sportswear business into underserved niches of the
sportswear market, such as blended men's golf shirts and women's golf
sportswear. The Company believes these products have been well received
and will further add to the Company's profitability.
- BROADEN DISTRIBUTION. Management intends to expand the Sock Group's
distribution from its strength in department and national chain stores to
include specialty chains, discount department stores and sporting goods
stores. Management believes that these new channels will complement the
Company's presence in the department store and national chain store
channels while adding incremental profit without diminishing the integrity
of its brand names.
The Shirt Group has been limited in its ability to pursue new retailers
and channels of distribution due to its operational problems and the
financial uncertainty caused by the bankruptcy. With these problems
solved, the Shirt Group intends to expand its presence with existing
customers while pursuing new opportunities with other department stores,
specialty stores and national chains.
Both the Sock Group and the Shirt Group intend to pursue mass merchants on
a selective basis, only participating in programs which are value-added
and differentiated in terms of styling, branding and execution, as opposed
to price.
- NEW LICENSES, SELECTIVE ACQUISITIONS AND LICENSING OPPORTUNITIES. As the
leading supplier of socks to the department store channel, the Sock Group
believes it has the infrastructure and access to distribution channels
most desirable to prospective designer licensors. As such, it continues to
proactively pursue new license opportunities which will complement its
core offerings. Similarly, because of its market leadership and
operational structure, management believes the Sock Group is strategically
positioned to acquire and integrate additional brands or complementary
businesses. In addition, the Company intends to increase its fee income by
licensing its GOLD TOE trademark internationally and has recently hired an
international sales manager to assist in that effort.
The Shirt Group believes that opportunities will arise to acquire
complementary dress shirt and sports shirt companies or licenses which
will leverage the use of its existing operating infrastructure
(distribution, sourcing, quality control and finance) and yet allow the
acquired brand to have an independent identity through use of separate
design, sales and merchandising personnel. In addition, management intends
to expand its licensing of the ARROW name to include other products and
accessories in order to create a broader apparel collection.
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The Designer Group has recently acquired the dress shirt and sock licenses
for Kenneth Cole and plans to introduce these products in the fall of
1998. The Designer Group intends to continue to introduce new offerings
under its existing brands while exploring opportunities to acquire other
high-end designer labels.
PRODUCTS
THE SOCK GROUP
Founded in 1919, the Sock Group is one of the largest designers,
manufacturers and marketers of socks in the United States. The Sock Group
distributes its products to most channels of distribution, although it has a
concentration in the higher-margin department and national chain store segment,
where its products have a combined market share of approximately 30%.
The United States sock industry is a sub-segment of the overall United
States hosiery industry. The sock industry includes the manufacture of men's,
women's, children's and infant socks. Within the sock industry, the two largest
segments are casual/dress and sport/athletic. Demand is driven by the overall
level of retail sales and the general fashion trends prevalent in the market.
The sale of socks as a percentage of total hosiery sales has been increasing
steadily over the last several years. The increased demand has been driven by
the overall trend toward casual fashion. In addition, the volume of socks sold
at retail has increased as more manufacturers, including the Company, introduced
multi-pack offerings for products that were traditionally sold in single pair
offerings. In 1997, the total United States sock industry sold at retail 284.2
million dozen socks with a value of $4.6 billion. Both units and dollar volume
were up over 6% compared to 1996 levels. Since 1990, the retail dollar volume
for socks has increased 7.7% annually.
Men's socks make up the largest segment of the sock industry in both dollars
and units sold. In 1997, men's socks accounted for 43.2% of the total dollar
volume and 36.2% of the total socks sold. Women's socks represent the next
largest segment of the sock industry with 29.8% of the total dollar volume and
28.4% of the total units sold in 1997.
In response to these trends and in order to diversify its product offerings,
the Sock Group has expanded its product lines through new licensing agreements,
private label products and brand extensions. The Sock Group, through its premier
GOLD TOE brand, its licensed Jockey, Perry Ellis, Nautica, Arrow and Stride Rite
trademarks, and its private label products, is the most diversified sock company
in the United States and is able to offer its customers a majority of their sock
requirements.
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The following table shows the percentage of the Company's net sales of socks
represented by the listed category:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Gold Toe:
Men's.................................................... 49% 47% 46%
Women's.................................................. 13 12 15
Other.................................................... 2 2 2
--------- --------- ---------
Total Gold Toe......................................... 64% 61% 63%
Other Branded.............................................. 17 20 20
Private Label.............................................. 12 12 11
Other(1)................................................... 7 7 6
--------- --------- ---------
Total.................................................. 100% 100% 100%
--------- --------- ---------
--------- --------- ---------
Total net sales in millions................................ $ 134.6 $ 141.1 $ 151.8
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------------------------
(1) Includes transfers to outlet stores.
GOLD TOE socks have provided a strong foundation for the Company for most of
its 79 year history and now constitute approximately 45% of all department store
sock sales. The GOLD TOE trademark is used on socks for all lifestyles (dress,
casual and athletic) and all genders and ages (men, women and children). GOLD
TOE socks are marketed at wholesale at the upper moderate price range ($3.75 to
$12.00). Its primary competitors include Dockers by Royce Hosiery Mills, Inc.
("Royce") for men's socks and Hue by Kayser-Roth Corporation for women's socks.
The Sock Group also markets Perry Ellis and Nautica designer socks. The
Perry Ellis label was added in 1993 and the Nautica label was added in 1996.
Perry Ellis and Nautica are primarily a premium quality, men's and women's
designer market product for the department store class. These lines enabled the
Sock Group to enhance its position in the upper price tier of this trade class
and expand its product line. Perry Ellis and Nautica socks are marketed at
wholesale at the upper price range ($6.00 to $11.00). Their primary competitors
include Ralph Lauren by Hot Sox and Calvin Klein by America Essentials.
The Sock Group markets moderate price point socks ($3.00 to $7.50) under the
ARROW and Jockey trademarks. ARROW and Jockey socks are marketed to men and
women. Both products have the advantage of nationally recognized brand names.
Currently, Sears accounts for the majority of the ARROW sock volume. Jockey's
and ARROW'S competitors include Dockers by Royce for men and Hanes by Sara Lee
Corporation ("Sara Lee") for women.
The Sock Group also sells socks into the mass market and discount channel
under the SILVER TOE, COLORMATCH and Jaclyn Smith brands. These offerings enable
the Company to access the large mass merchant channel with a high quality and
differentiated product. The Sock Group's primary competitors in this channel of
distribution are Gitano by Renfro Corporation ("Renfro") and other private label
products.
The Sock Group supplies a number of its key customers with comprehensive
private label programs. Private label represents an opportunistic business which
leverages the Company's strong design and production capabilities. By offering
private label socks, the Sock Group is able to serve the full range of its
customer's product needs.
The Sock Group's product line also includes children's socks under the
Stride Rite trademark which was licensed to the Company in 1997. These
moderately priced socks ($3.00 to $6.00) have allowed the Sock Group to complete
its product offerings to all ages. Its primary competitors are TrimFit by
TrimFit, Inc. and Socks by the Gap, Inc.
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THE SHIRT GROUP
Founded in 1851, the Shirt Group places its primary focus on the dress shirt
segment of the market, representing 65% of its revenues in 1997. The Shirt Group
distributes its products to department stores, specialty stores, chain stores
and discount stores, although it has its highest concentration in the department
and national chain store segment. Similar to the Sock Group, the Shirt Group has
diversified its product offerings through brand extensions and private label
products. The breadth of the Shirt Group's product offerings allows it to offer
a comprehensive range of products to its customers.
DRESS SHIRTS. The total size of the men's dress shirt retail market for
1997 was $3.4 billion which was a 3.2% improvement from the $3.3 billion in
sales in 1996, this level of growth was slightly higher than the 3.0% growth in
total men's apparel for 1997. The primary channels of distribution for men's
dress shirts are department stores, major national chains, and discount stores,
accounting for 25.3%, 27.4% and 23.5%, respectively, of total retail sales in
1997.
The Company's ARROW dress shirts are currently marketed principally under
four labels: DOVER, KENT, ARROW "1851", and COLLARMAN. These labels have been
repositioned over the past year to represent a good, better and best strategy
for the ARROW product lines.
The following table shows the percentage of the Company's net sales of
shirts represented by the listed category:
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- ---------
<S> <C> <C> <C>
Arrow:
Dover/Kent............................................... 32% 26% 24%
Arrow "1851"............................................. 27 31 30
Collarman................................................ -- 2 4
--------- --------- ---------
Total Arrow............................................ 59% 59% 58%
Other Dress Shirts......................................... 3 3 7
--------- --------- ---------
Total Dress Shirts..................................... 62% 62% 65%
Sport Shirts:
Tournament............................................... 21 26 21
Arrow Authentic.......................................... 17 12 14
--------- --------- ---------
Total Sport Shirts..................................... 38% 38% 35%
--------- --------- ---------
Total.................................................... 100% 100% 100%
--------- --------- ---------
--------- --------- ---------
Total net sales in millions................................ $ 228.6 $ 194.4 $ 176.1
--------- --------- ---------
--------- --------- ---------
</TABLE>
Taken together the DOVER and KENT label have been the number one selling
branded mostly cotton oxford dress shirt in the department store arena for
several years. Traditional in styling, the DOVER and KENT brands are names the
consumer and retailer recognize as a good quality, moderately priced, dress
shirt that is a mainstay of the ARROW assortment. This product line has allowed
ARROW to dominate the blended oxford cloth classification and is carried in
almost every store where ARROW sells. Playing off the strength of the DOVER
label, a new marketing strategy was launched for 1998. DOVER was extended to
include blended broadcloth and blended pinpoint shirts. A major design and
merchandising effort was put into these two new product offerings to show a
broader fashion assortment, while maintaining the classic DOVER styling. In 1997
the DOVER and KENT labels represented 36% of the total ARROW dress shirt
business. This product line is targeted at an average retail price of
approximately $20 with the major competitors being Van Heusen by Phillips-Van
Heusen Corporation and private label products.
The ARROW "1851" label was launched in 1994 when ARROW was the first to
market wrinkle free shirts. As with DOVER and KENT, the ARROW "1851" wrinkle
free products are mostly cotton blends available in oxford, broadcloth, and
pinpoint. The wrinkle free oxford is the best selling wrinkle free shirt in the
department store channel. Combined with the number one selling DOVER and KENT
oxford, this reinforces
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ARROW'S dominant position in the blended oxford classification. Whereas DOVER
and KENT are more traditional in styling, the ARROW "1851" label is available in
more updated fashion styles and is available in all cotton. This product line
represents ARROW'S better quality, by offering the consumer fashion looks with
either the enhancement of the wrinkle free process or the better 100% cotton
fabric. The primary competition for the ARROW "1851" label is Geoffrey Beene by
Phillips-Van Heusen Corporation and private label products. The average retail
price is approximately $25.
COLLARMAN is a product line that was launched in 1996. Designed to be the
highest quality shirt in the ARROW product offering, these shirts are
manufactured with cotton pinpoint oxford and broadcloth fabrics. Although not a
large portion of ARROW sales, this product has been placed in the better stores
of such key customers as May Company and Profitts. The primary competition for
the COLLARMAN is Perry Ellis by Salant Corporation ("Salant"). The average
retail price for COLLARMAN is approximately $30.
The Shirt Group has also identified the private label shirt market as a
growth opportunity with existing customers as well as other channels of
distribution. A separate sales team has been established to pursue this business
opportunity. Using the Company's expertise in design, manufacturing and service,
the Shirt Group can offer a competitive advantage in helping stores manage their
private label business.
SPORT SHIRTS. The Company leverages the recognition of its well known ARROW
brand name in its sportswear product lines. With the growth of the casual
sportswear business and the higher priced designer collections, ARROW has
identified a niche for a branded, moderately priced product. Over the past year,
the Company has repositioned its sportswear labels with an emphasis on two
brands, TOURNAMENT and ARROW AUTHENTIC, marketed to provide a good and better
product line.
In 1997, the markets for men's woven and knit sport shirts were $5.2 billion
and $7.1 billion, respectively, representing increases from 1996 sales of $5.0
billion and $6.7 billion, respectively. The largest single channel for woven
sport shirts and knit sport shirts is discount stores, accounting for 28.3% and
30.4% of retail sales, respectively, in 1997. The department stores and national
chains represented 36.9% and 30.7% of woven and knit sport shirts, respectively
in 1997. Approximately 35% of the Shirt Group's business is done in sportswear.
The TOURNAMENT brand, like DOVER, is a moderately priced, mostly cotton
blended product from ARROW. Starting in 1997, the Company began marketing all
their moderate price sportswear, primarily knit and woven shirts, under the
TOURNAMENT brand. TOURNAMENT sportswear represents approximately 62% of the
ARROW sportswear business and is targeted to retail for $20 with its major
competitors being private label, Van Heusen by Phillips-Van Heusen Corporation
and Supreme by Supreme International Corp. ("Supreme") shirts.
The ARROW AUTHENTIC label represents a higher quality, 100% cotton
sportswear product. Traditional in styling, this product was marketed to give
the consumer a natural fiber sport shirt at a retail price of $25. This product
line is primarily focused for the better specialty stores and traditional
department stores such as Belk's and Proffitt's. The major competitors are
private label products, Natural Issue by Supreme and Chaps by Warnaco Inc.
("Warnaco").
THE DESIGNER GROUP
The Designer Group was established as a separate business unit, in October,
1996 and sells (i) dress and sport shirts under its licensed Yves Saint Laurent,
Burberrys and Kenneth Cole trademarks, (ii) dress socks under the licensed
Kenneth Cole trademark and (iii) tailored clothing and casual pants under the
Yves Saint Laurent trademark. The Designer Group's products help complete the
Company's one-stop shopping strategy by offering products at price points higher
than its other products.
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<PAGE>
MARKETING, SALES AND DISTRIBUTION
THE SOCK GROUP
The Sock Group is a significant supplier to many leading department store
and national chain retailers including Belk's, Dayton-Hudson, Dillard's,
Federated, J.C. Penney, May Company, Mercantile, Proffitt's and Sears. The Sock
Group segments its use of brand names by distribution channel to solidify the
perceived value of such brands and maintain their integrity. The Sock Group's
top ten customers accounted for 72.4% of total sales in 1997.
The Sock Group distributes its products through the following channels:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1997 SALES BY DISTRIBUTION CHANNEL
<S> <C>
Department Stores and National Chains 85%
Specialty Stores/Other 2%
Mass Merchants and Discounters 13%
</TABLE>
Consistent with industry practice, the Sock Group does not operate under
long-term written supply agreements with its customers.
In order to better serve its customers, the Sock Group is installing a
vendor managed inventory system. The vendor managed inventory system will
provide the Company with real time information on the sales of the Sock Group's
products by its customers. This system will allow the Company to ship product to
a customer immediately upon learning that such customer does not have adequate
inventory instead of waiting until a request comes directly from the customer.
The system will be installed with certain of the Sock Group's largest customers
during 1998.
In an effort to maximize the Sock Group's product exposure and increase
sales, the Sock Group works closely with its major customers to assist them in
managing their entire sock category and promoting the Sock Group's products to
the consumer. In addition to frequent personal consultation with the employees
of these customers, the Sock Group meets with its customers' senior management
periodically to jointly develop merchandise assortments and plan promotional
events specifically tailored to that customer. The Sock Group provides
merchandising assistance with store layouts, fixture designs, advertising and
point of sale displays and also provides customers with preprinted, customized
advertising materials designed to increase sales. The Sock Group does not
utilize national brand advertising because it has found the above described
advertising techniques to be more cost effective. In order to maintain the GOLD
TOE brand image, the Company only allows retailers to price promote GOLD TOE
twice a year.
As a supplement to its primary distribution channels, the Company operates
seven outlet stores for Sock Group products. These stores sell seconds. The
stores are located in factory outlet malls. The stores average approximately
1,200 square feet.
The Sock Group employs sales people by brand who generally have many years
of industry experience. Most sales people are compensated with a combination of
salary and discretionary bonus.
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<PAGE>
THE SHIRT GROUP
The Shirt Group is a significant supplier to many leading department store
chains including Belk's, Dayton-Hudson, Hecht's, Federated, May Company,
Proffitt's and Sears. The Shirt Group's top ten customers accounted for
approximately 51.0% of total sales for 1997.
The Company distributes its products through the following channels:
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
<TABLE>
<CAPTION>
1997 SHIRT GROUP SALES BY DISTRIBUTION
CHANNEL
<S> <C>
Department Stores and National Chains 78%
Specialty Stores/Other 10%
Mass Merchants and Discounters 12%
</TABLE>
Consistent with industry practice, the Shirt Group does not operate under
long-term written supply agreements with its customers.
In order to better serve its customers, the Shirt Group has installed a
vendor management system with most of its major customers. As a result of this
system, the Shirt Group is one of the few shirt companies that can manage a
customer's inventory. In addition, the Shirt Group utilizes a balance of
off-shore sewing and domestic manufacturing to provide its customers with timely
product replenishment. As a result of this manufacturing strategy, the Shirt
Group can deliver its core dress shirt offerings within 48 hours of an order.
This order fullfillment time compares favorably to those competitors which rely
on foreign manufacturing for a majority of their products where lead times can
be as long as five weeks. As a result, management believes certain competitors
must hold much higher inventory levels to effectively compete with the Company.
The Shirt Group works closely with its key accounts to assist them in
managing their entire dress shirt and sport shirt product category, to insure
increased sales and promote maximum product exposure of the Shirt Group's
product to the consumer. In addition to frequent personal consultation with the
buying teams of these key accounts, the Shirt Group meets with its customers'
senior management frequently to jointly develop merchandise assortments and plan
promotional events specifically tailored for that account. The Shirt Group
provides merchandising assistance with store presentations, fixture designs,
advertising and point of sale displays.
The Shirt Group employs sales people by brand who generally have several
years experience in the men's shirt business. With the turnover of buyers at
retail stores high, many retailers rely on the experience of their key vendors
to manage their business for them. The Shirt Group has developed a well
respected expertise in doing this for our key accounts. Most sales and sales
management personnel are compensated with a combination of salary and bonus,
based on established goals and objectives.
As a supplement to its primary distribution channels, the Shirt Group
operates 24 retail outlet stores in the United States and Canada which sell the
Shirt Group's products directly to customers. These stores generally sell
seconds, discontinued and off price goods. The retail stores offer a collection
of the Shirt Group's dress and sport shirts, GOLD TOE socks as well as other
products such as ties and belts supplied by Arrow licensees. The main purpose of
the retail stores is to help maintain the ARROW brand image through
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<PAGE>
the control of excess inventory. The retail stores also provide a test market
for new products. The average store size is 3,000 square feet.
THE DESIGNER GROUP
The Designer Group sells its licensed Yves Saint Laurent, Burberrys and
Kenneth Cole products to a variety of specialty stores and department stores
including Federated, Dillard's and Proffitt's. Similar to the Company's other
divisions, the Designer Group employs sales people who generally have many years
of industry experience. Most sales people are compensated with a combination of
salary and discretionary bonus.
TRADEMARKS AND LICENSE AGREEMENTS
THE SOCK GROUP
The Sock Group markets its products under its own proprietary trade marks,
trade names and customer-owned private labels, as well as certain licensed
trademarks and trade names. The Sock Group uses trademarks, trade names and
private labels as merchandising tools to assist its customers in coordinating
their product offerings and differentiating their products from those of their
competitors.
The Company owns various trademarks and trade names including GOLD TOE,
SILVER TOE and ARROW. These trademarks are recognized to represent value in
product quality and design. The Sock Group regards its trademarks and trade
names as valuable assets and rigorously protects them against infringement.
The Sock Group holds the exclusive sock licenses for the following
trademarks:
<TABLE>
<CAPTION>
TRADEMARK TERRITORY EXPIRATION
- --------------------------------- --------------------------------- ---------------------------------
<S> <C> <C>
Perry Ellis and Perry Ellis U.S., Canada and Mexico 12/31/99
America
Nautica U.S. and Canada 12/31/98(1)
Jockey/Jockey For Her U.S. and Mexico 12/31/97(2)
Stride Rite U.S., Canada, Mexico, Israel, 12/31/00(1)
Italy, France, Germany, England,
Portugal and Spain
Jaclyn Smith U.S. No termination date
</TABLE>
- ------------------------------
(1) Option to renew
(2) The Company is currently negotiating a new license agreement.
The Company is only partially dependent on these licensed product lines and
the loss of any license would not materially adversely affect the Company's
overall profitability.
The Sock Group has licensed the GOLD TOE trademark to two licensees in
Mexico and Colombia which provide for minimum royalty payments to be paid to the
Sock Group. The Company intends to more fully exploit the strength of the GOLD
TOE brand by adding new licensees. To this end, the Sock Group has recently
hired a new international sales executive to develop these opportunities.
THE SHIRT GROUP
The Shirt Group owns various trademarks, including ARROW. The ARROW brand
name is widely recognized in the industry and represents excellence and value in
product quality, fashion and design. The Shirt Group regards its trademarks and
tradenames as valuable assets and rigorously protects them against infringement.
The Shirt Group licenses the ARROW and related trademarks to 23 licensees
for use in territories outside the United States. Through licensing alliances,
the Shirt Group combines its consumer insight and design, marketing and imaging
skills with the specific product or geographic competencies of its licensing
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<PAGE>
partners to create and build new businesses. The Shirt Group's licensing
partners, who are often leaders in their respective markets, generally
contribute the majority of product development costs, provide the operational
infrastructure required to support the business and own the inventory. The Shirt
Group works in close collaboration with its licensing partners to ensure that
products are developed, marketed and distributed to address the intended market
opportunities and present the Company's products consistently. While product
licensing partners may employ their own designers, the Shirt Group oversees the
design of all its products. The Shirt Group also works closely with licensing
partners to coordinate marketing and distribution strategies. For the LTM
Period, the Company had licensing fee revenue of $6.9 million.
Most of the ARROW license agreements provide for a minimum royalty payment
and require the licensee to spend a percentage of net sales on advertising and
marketing of products. The licenses are for three- or five-year terms which, in
most cases, have provisions for renewal terms if the licensee has not breached
the agreement and has met certain sales goals. The Shirt Group also has the
right to supervise the quality of the licensed products.
The Shirt Group also licenses the ARROW trademark to four United States
licensees for use on leather accessories, men's fashion eyewear and neckwear.
THE DESIGNER GROUP
The Designer Group holds the exclusive United States license for men's
shirts, tailored clothing and socks under the Yves Saint Laurent trademark,
men's shirts under the Burberrys trademark and men's shirts and socks under the
Kenneth Cole trademark. Unless extended, these licenses expire in 2001, 1999 and
2002, respectively.
DESIGN
THE SOCK GROUP
The Sock Group's primary offerings are timeless and are not subject to
change. These core product lines provide the Group with a base of business which
is carried over from year to year, and is the result of the Group's quality of
design, material and brand awareness. The Sock Group does, however, employ
separate designers and merchandise product development groups as necessary,
creating a structure that focuses on a brand's special qualities and identity.
These designers and merchants consider consumer taste and fashion trends when
creating a product plan for their brand.
THE SHIRT GROUP
The Shirt Group's primary dress shirt offerings exhibit the same timeless
fashion characteristics as the Sock Group's products and are not generally
subject to change, while sport shirt styles change each season. Each Shirt Group
brand employs separate brand designers similar to the Sock Group. The design
teams begin creating new product lines up to twelve months in advance of a
season in order to insure that samples, packaging and marketing presentations
are ready for introduction, which is generally five months prior to shipping.
Lead times will vary depending on whether or not the fabric and make is domestic
or imported.
THE DESIGNER GROUP
The in-house design team at the Designer Group designs (i) dress shirts
under its licensed Yves Saint Laurent, Burberrys and Kenneth Cole trademarks,
(ii) dress socks under the licensed Kenneth Cole trademark and (iii) tailored
clothing and casual pants under the licensed Yves Saint Laurent trademark. The
Designer Group works with each of the licensors to develop a "fashion blueprint"
for each of the Designer Group's products. The image, colors and styles of the
products are intended to be consistent with the other products sold by the
respective licensors and other companies using the particular brand name.
Products are made in a wide range of fabrics that are given distinctive looks
through a variety of finishes, many of which are developed by the Designer
Group.
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<PAGE>
INFORMATION SYSTEMS
The Company has invested $6.1 million since 1995 in state-of-the-art
information systems which have dramatically improved operations and management's
access to information and are Year 2000 compliant. The Company's information
system provides, among other things, comprehensive order processing, production,
accounting and management information for the marketing, manufacturing,
importing and distribution functions of the Company's business. The Company's
distribution facilities and administrative offices are linked by the computer
system. The Company has implemented a software program that enables the Company
to track, among other things, orders, manufacturing schedules, inventory, sales
and mark-downs of its products. In addition, to support the Company's
replenishment program, the Company has an electronic data interchange ("EDI")
system, through which certain customers' orders are placed with the Company. The
Company also has a vendor managed inventory system with certain customers
through which customers' orders are automatically placed.
BACKLOG AND SEASONALITY
The amount of the Company's backlog orders at any particular time is
affected by a number of factors, including seasonality and scheduling of the
manufacturing and shipment of products. In general, the Company's EDI and vendor
managed inventory systems have resulted in shortened lead times between
submission of purchase orders and delivery and lowered the level of backlog
orders. Consequently, the Company believes that the amount of its backlog is not
an appropriate indicator of levels of future production.
RAW MATERIALS
THE SOCK GROUP
The Sock Group relies on outside suppliers to meet its raw material needs.
The division has developed key relationships with each of the largest yarn
suppliers in the industry. Due to its size, management believes the Sock Group
has developed solid supplier relationships and historically has been able to
obtain competitive pricing.
The Company minimizes the effects of seasonal variations in yarn prices by
securing long-term contracts for yarn based on its anticipated needs for each
year. The industry convention is for sock manufacturers to negotiate yarn
contracts in the third quarter of the year for the following year. Selling
prices with retailers are then negotiated in January and February based on those
yarn prices. Historically, this process has acted as a natural hedge against
rising yarn prices.
THE SHIRT GROUP
The Shirt Group also relies on outside suppliers to meet its raw material
needs, namely fabric. The division maintains close relationships with the
largest suppliers of this material.
The Shirt Group also utilizes forward commitments to purchase fabric. Under
these arrangements, the division commits to purchase a minimum amount of
materials for a fixed price.
MANUFACTURING
THE SOCK GROUP
The Sock Group produces its sock products through domestic manufacturing
facilities, imports and outsourcing. Approximately 78% of all production is done
at owned facilities, 14% is contracted in the United States with other suppliers
and 8% is imported. The Sock Group operates three manufacturing facilities
located in Newton and Burlington, North Carolina and Bally, Pennsylvania. The
Company's socks are primarily made from cotton, nylon or acrylic yarns. These
yarns are knit on a circular knitting machine in a tube-like manner with
additional courses placed in the construction to form a pocket for the wearer's
heel and toe. The sock is seamed to close the toe end of the tube, dyed to the
proper color and packaged
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<PAGE>
for retail store presentation. The Company has spent approximately $9.7 million
since 1995 upgrading the Group's primary facilities.
The Sock Group's quality control program is designed to assure that its
products meet predetermined quality standards. The Sock Group has devoted
significant resources to support its quality improvement efforts. Each
manufacturing facility is staffed with a quality control team that identifies
and resolves quality issues.
THE SHIRT GROUP
The Shirt Group produces its shirt products through domestic manufacturing
facilities and outsourcing. Approximately 43% of all dress shirt production is
done at domestically owned or leased facilities, and 57% is sourced outside the
United States. All sport shirts are sourced outside the United States. The Shirt
Group owns or leases four facilities located in Enterprise and Albertville,
Alabama, Austell, Georgia and Kitchener, Ontario.
For dress shirts manufactured at the Company's owned facilities, the
manufacturing process begins when rolls of fabric are received by the Shirt
Group's cutting facilities. The fabric is cut using automated technology. Piece
goods are then assembled in bundles and shipped to sewing plants in the United
States, the Caribbean or Central America. Shirts that are assembled in Caribbean
or Central America make use of Rule 807 of the U.S. Tariff Code which provides
that duties are only assessed on the value that is added to the garment in the
foreign country. At the sewing facilities collars, cuffs and sleeves are first
assembled, then sewn together with the body of the shirt and finally, the
garments are inspected, pressed and packaged.
Sport shirts are sourced in the Far East and Central America. The Company's
purchases from its suppliers are effected through individual purchase orders
specifying the price and quantity of the items to be produced. Generally, the
Company does not have any long-term, formal arrangements with any of the
suppliers which manufacture its products. The Company believes that it is the
largest customer of many of its manufacturing suppliers and that its
long-standing relationships with its suppliers provide the Company with a
competitive advantage over its competitors. No single supplier is critical to
the Company's production needs, and the Company believes that an ample number of
alternative suppliers exist should the Company need to secure additional or
replacement production capacity.
THE DESIGNER GROUP
Burberrys shirts are produced for the Designer Group by the Company. All
Yves Saint Laurent and Kenneth Cole products are imported. No single supplier is
critical to the Company's production needs, and the Company believes that an
ample number of alternative suppliers exist should the Company need to secure
additional or replacement production capacity.
COMPETITION
The apparel industry is highly competitive due to its fashion orientation,
its mix of large and small producers, the flow of domestic and imported
merchandise and the wide diversity of retailing methods. The Company's apparel
wholesale divisions experience competition in branded, designer and private
label products.
Approximately 93% of all socks sold in the United States are also made in
the United States. The Sock Group's primary sock competitors include: Sara Lee
("Hanes" and "Champion" brands); Renfro ("Gitano" and "Fruit-of-the-Loom"
brands); Royce ("Dockers" and "Levi" brands); Kayser-Roth ("Burlington," "Hue"
and "No Nonsense" brands); American Essentials ("Calvin Klein" and "American
Essentials" brands) and Hot Sox ("Polo," "Hot Sox," "Chaps" and "Ralph Lauren"
brands). The Company believes, however, that it manufactures a more extensive
line of socks for both genders and children and in a broader price range than
any of its competitors.
Some of the larger dress shirt competitors include: Phillips-Van Heusen
Corporation ("Van Heusen" and "Geoffrey Beene" brands); Salant ("Perry Ellis"
and "John Henry" brands); Smart Shirt (private label
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<PAGE>
shirt division of Kellwood Company); Capital Mercury (private label shirts); and
Oxford Industries Inc. (private label shirts). Some of the larger sportswear
competitors include: Warnaco ("Chaps" brand); Polo/ Ralph Lauren L.P. ("Polo"
brand); Phillips-Van Heusen Corporation ("Van Heusen" brand); Supreme (Supreme
brand).
The Designer Group's competitors include numerous high-end designer labels,
including Perry Ellis, DKNY, Tommy Hilfiger and Polo.
The Company has historically benefitted from import restrictions imposed on
foreign competitors in the apparel industry. The extent of import protection
afforded to domestic manufacturers such as the Company, however, has been, and
is likely to remain, subject to considerable political deliberation. GATT will
eliminate, over a number of years, restrictions on imports of apparel. In
addition, on January 1, 1994, NAFTA became effective. Each of these agreements
will reduce import constraints previously imposed on some of the Company's
competitors and will increase the likelihood of competition on the basis of
price.
ENVIRONMENTAL MATTERS
The Company is subject to various federal, state and local environmental
laws and regulations concerning, among other things, wastewater discharges,
storm water flows, air emissions, ozone depletion and solid waste disposal. The
Company's plants generate very small quantities of hazardous waste that are
either recycled or disposed of off-site. Most of its plants are required to
possess one or more discharge permits.
Environmental regulation applicable to the Company's operations is becoming
increasingly stringent. The Company continues to incur capital and other
expenditures each year in order to comply with current and future regulatory
standards. The Company does not expect, however, that the amount of such
expenditures in the future will have a material adverse effect on its financial
condition, results of operations or competitive position. There can be no
assurance, however, that future changes in federal, state or local regulations,
interpretations of existing regulations, or the discovery of currently unknown
problems or conditions will not require substantial additional expenditures.
Similarly, the extent of the Company's liability, if any, for past failures to
comply with laws, regulations and permits applicable to its operations cannot be
determined.
LITIGATION
From time to time, the Company is involved in various legal proceedings
arising from the ordinary course of its business operations, such as personal
injury claims, employment matters and contractual disputes. The Company believes
that its potential liability with respect to proceedings currently pending is
not material in the aggregate to the Company's consolidated financial position
or results of operations.
EMPLOYEES
As of March 31, 1998, the Company employed 3,011 people, including 1,452 at
the Sock Group, 1,522 at the Shirt Group and 37 at the Designer Group. The Shirt
Group has 722 employees who are represented by a union. Although union members
have been working without a contract since 1996; such employees were given wage
increases of 3% in March, 1997 and March, 1998. The Company believes that its
relationship with its employees is good.
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FACILITIES
The following table summarizes certain information concerning certain of the
Company's facilities:
<TABLE>
<CAPTION>
APPROX.
LOCATION USE SQUARE FEET OWNED/LEASED
- ----------------------------------------------------- ------------------------------ ----------- -------------
<S> <C> <C> <C>
Shirt Group:
Enterprise, AL..................................... Manufacturing 50,000 Owned
Kitchener, Ontario................................. Manufacturing 145,000 Owned
Kitchener, Ontario................................. Distribution 125,000 Leased
Albertville, AL.................................... Manufacturing 57,000 Leased
Austell, GA........................................ Manufacturing/Distribution 593,000 Leased
Toronto, Ontario................................... Showroom 8,100 Leased
New York NY........................................ Showroom 11,000 Leased
Sock Group:
Bally, PA.......................................... Manufacturing 155,000 Owned
Newton, NC......................................... Manufacturing 81,600 Owned
Burlington, NC..................................... Manufacturing 251,400 Owned
Newton, NC......................................... Warehouse 36,000 Leased
Mabene, NC......................................... Distribution 150,000 Leased
New York, NY....................................... Showrooms 11,000 Leased
Boyertown, PA...................................... Warehouse 35,000 Leased
Pottstown, PA...................................... Dye Facility 20,500 Leased
Burlington, NC..................................... Office Space 8,300 Leased
Designer Group:
New York, NY....................................... Showroom 8,200 Leased
</TABLE>
- ------------------------------
The Designer Group subcontracts the manufacture of its products to the Shirt
Group, the Sock Group and off-shore companies.
In addition, the Shirt Group operates 31 outlet stores on leased premises.
The Company believes that its existing facilities are well maintained and in
good operating condition, and are otherwise adequate for its present and
foreseeable level of operations for the next few years.
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MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
Set forth below are the names and positions of the directors and executive
officers of Holdings, CAG and the Company who will hold these positions upon
consummation of the Offerings. All directors hold office until the next annual
meeting of stockholders of Holdings, CAG and the Company, and until their
successors are duly elected and qualified. All officers serve at the pleasure of
the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITION(S)
- ----------------------------------------------------- --- -----------------------------------------------------
<S> <C> <C>
Bryan P. Marsal...................................... 47 Director and Chief Executive Officer of Holdings, CAG
and the Company
James A. Williams.................................... 55 Director of Holdings, CAG and the Company; President
and Chief Executive Officer of the Sock Group
Philip L. Molinari................................... 50 President of the Shirt Group
Jean M. Kolloff...................................... 47 President of the Designer Group
Robert J. Riesbeck................................... 34 Chief Financial Officer of Holdings, CAG and the
Company and Chief Operating Officer of the Shirt
Group
Kathy D. Wilson...................................... 38 Vice President and Chief Financial Officer of the
Sock Group
William S. Sheely.................................... 39 Executive Vice President--Operations of the Sock
Group
Steven J. Kaufman.................................... 51 Vice President and General Counsel of Holdings, CAG
and the Company
Norman W. Alpert..................................... 39 Director of Holdings, CAG and the Company
J. Christopher Henderson............................. 30 Director of Holdings, CAG and the Company
Sander M. Levy....................................... 36 Director of Holdings, CAG and the Company
Daniel S. O'Connell.................................. 44 Director of Holdings, CAG and the Company
</TABLE>
BRYAN P. MARSAL is a founding Managing Director of A&M, a firm that was
formed in 1983. Mr. Marsal has been Chief Executive Officer of the Company since
1995. Mr. Marsal is a director of Timex Corporation, Long Manufacturing Corp.
and Anthony Manufacturing Company. Mr. Marsal received both a B.B.A. and an
M.B.A. from the University of Michigan.
JAMES A. WILLIAMS is President of the Sock Group. Mr. Williams joined the
Sock Group in July 1986 as Senior Vice President--Sales and Marketing and was
promoted to his current position as President in August 1991. Mr. Williams is a
director of The Bibb Company and Ithaca Industries, Inc. and is the Chairman and
a director of Maidenform Worldwide Inc. Prior to joining the Company, he worked
for 15 years for Adams-Millis Corporation, where his last position was Senior
Vice President--Sales and Marketing. Mr. Williams earned a B.S. in chemistry
from the University of Southern Mississippi.
PHILIP L. MOLINARI is President of the Shirt Group. Mr. Molinari joined the
Company in May 1993 as president of the Shirt Group. Prior to joining the
Company, he was the Executive Vice President of Sales and Marketing for Bugle
Boy Industries where he worked for approximately five years. Prior to Bugle Boy,
Mr. Molinari was the Executive Vice President--Sales and Marketing of the Van
Heusen division of the Phillips-Van Heusen Corporation. Previously, he worked
for the Arrow division of Cluett, Peabody & Co. for 13 years, where his last
position was Regional Sales Manager.
JEAN M. KOLLOFF is the President of the Designer Group. Ms. Kolloff joined
the Company in July 1993 as President of Burberrys and Yves Saint Laurent Shirts
and became President of the Designer Group in
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September 1995. For the prior five years, Ms. Kolloff had been President of
Falke North America, a hosiery manufacturer which had the Hugo Boss license for
knitwear and hosiery. Prior to that, Ms. Kolloff had been with the Company as
President of its Bill Robinson Menswear subsidiary.
ROBERT J. RIESBECK is Chief Financial Officer of Holdings, CAG and the
Company and Chief Operating Officer of the Shirt Group. Mr. Riesbeck joined the
Company in July of 1995 as Vice President--Finance of the Shirt Group. He was
named Executive Vice President, Chief Financial and Operating Officer of the
Shirt Group in January 1997. Prior to joining the Company, Mr. Riesbeck worked
for six years as Vice President Controller of Crystal Brands, an apparel
manufacturer. Mr. Riesbeck received a B.S. in Business Administration-Accounting
from the University of Akron and an M.B.A. from the University of Connecticut
and is also a C.P.A.
KATHY D. WILSON is the Vice President and Chief Financial Officer of the
Sock Group. Ms. Wilson joined the Company in January 1994. During the three
years prior to joining the Company, Ms. Wilson had a consulting practice in
Singapore for the hotel industry. She also worked five years with various
accounting firms. Ms. Wilson earned a B.S. in Business Administration -
Accounting from the University of North Carolina and is also a C.P.A.
WILLIAM S. SHEELY is the Executive Vice President--Operations of the Sock
Group. Mr. Sheely joined the Company as Vice President of Finance and Controller
of the Sock Group in February 1993 and was promoted to his current position of
Executive Vice President -Operations in April 1994. Prior to his tenure with the
Company, Mr. Sheely was controller at Kayser-Roth's sock division where he was
employed for seven years, and with Springs Industries for five years in various
financial positions. Mr. Sheely is a graduate of the University of South
Carolina where he received a B.S. in Business Administration - Accounting and is
also a C.P.A.
STEVEN J. KAUFMAN is Vice President and General Counsel of the Company. Mr.
Kaufman joined the Company in April 1990 as Vice President and General Counsel.
Prior to joining the Company he was an Assistant General Counsel of The Times
Mirror Company for 10 years and a corporate associate for six years with Fried,
Frank, Harris, Shriver and Jacobson. Mr. Kaufman earned a J.D. from the Yale Law
School and a B.A. from Columbia College.
NORMAN W. ALPERT is a Managing Director of Vestar and was a founding partner
of Vestar at its inception in 1988. Mr. Alpert is Chairman of the Board of
Directors of Advanced Organics, Inc., International AirParts Corporation and
Aearo Corporation, and a director of Russell-Stanley Holdings, Inc.,
Clark-Schwebel, Inc. and Remington Products Company, all companies in which
Vestar or its affiliates have a significant equity interest. Mr. Alpert received
an A.B. degree from Brown University.
J. CHRISTOPHER HENDERSON is a Vice President of Vestar. Mr. Henderson joined
Vestar in July of 1993. Between July 1991 and July 1993, Mr. Henderson was an
analyst in The First Boston Corporation's mergers and acquisitions group. Mr.
Henderson received a B.A. in Political Science from the University of Colorado
at Boulder.
SANDER M. LEVY is a Managing Director of Vestar and was a founding partner
of Vestar at its inception in 1988. Mr. Levy is a director of Sun Apparel, Inc.
and Clark-Schwebel, Inc. Mr. Levy received a B.S. degree from The Wharton School
of the University of Pennsylvania and an M.B.A. degree from Columbia University.
DANIEL S. O'CONNELL is the Chief Executive Officer and founder of Vestar.
Mr. O'Connell is a director of Advanced Organics, Inc., Aearo Corporation,
Clark-Schwebel, Inc., Pinnacle Automation, Inc., Russell-Stanley Holdings, Inc.,
Sun Apparel, Inc., Reid Plastics Holdings, Inc. and Remington Products Company,
all companies in which Vestar or its affiliates have a significant equity
interest. Mr. O'Connell received an A.B. degree from Brown University and an
M.P.P.M. degree from Yale University School of Management.
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COMPENSATION OF EXECUTIVE OFFICERS
The following table sets forth the cash and noncash compensation earned by
the Chief Executive Officer and the four other most highly compensated executive
officers of Holdings, CAG and the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
AWARDS
ANNUAL COMPENSATION -------------------
SECURITIES
-------------------- UNDERLYING ALL OTHER
YEAR SALARY($) BONUS($) OPTIONS (#) COMPENSATION
--------- --------- --------- ------------------- ---------------
<S> <C> <C> <C> <C> <C>
Bryan P. Marsal(1)................................ 1997 700,000(2) 0 0 0
Chief Executive Officer of 1996 700,000 0 0 0
Holdings and the Company 1995 321,000 0 0 0
James A. Williams................................. 1997 400,000 410,000 0 0
President of the Sock Group 1996 400,000 0 0 0
1995 400,000 50,000 0 0
Philip L. Molinari................................ 1997 320,000 0 0 0
President of the Shirt Group 1996 400,000 0 0 0
1995 437,000 10,000 0 0
William S. Sheely................................. 1997 156,000 150,000 0 6,000
Executive Vice President 1996 150,000 0 0 6,000
--Operations of the Sock Group 1995 145,000 10,000 0 6,000
Kathy D. Wilson................................... 1997 136,000 140,000 0 0
Vice President and Chief Financial Officer of 1996 120,000 0 0 0
the Sock Group 1995 100,000 17,000 0 0
</TABLE>
- ------------------------
(1) Compensation paid to A&M. A&M also received, for services other than those
of Mr. Marsal, other compensation of $710,000, $815,000 and $738,000 for
each of 1995, 1996 and 1997, respectively.
(2) Commencing July 1995.
EMPLOYMENT AND SEVERANCE AGREEMENTS
Mr. Williams entered into an employment agreement with the Sock Group
effective as of March 7, 1997, pursuant to which he serves as President and
Chief Executive Officer of the Sock Group. Such employment agreement provides
for Mr. Williams to receive an annual base salary of $400,000. Mr. Williams is
also entitled to annual incentive bonuses under the Sock Group's executive
management incentive plan, with no guaranteed minimum bonus amount. The
employment agreement continues until terminated (a) by the Sock Group with or
without cause or (b) by Mr. Williams with cause or upon 90 days notice. In the
event that Mr. Williams' employment is terminated without cause by the Sock
Group or with cause by Mr. Williams, Mr. Williams will be entitled to severance
pay in an amount equal to two times the sum of $400,000 plus his average annual
bonus calculated from prior years, up to a maximum severance of $1,200,000.
Other executive officers, along with certain other employees (each an
"Employee"), of the Company, the Sock Group and the Shirt Group (each an
"Employer") have entered into severance agreements, pursuant to which they hold
their respective offices. Each Employee is entitled to severance pay equal to
his or her current base salary for a period of between six months to two years
(excluding bonus
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compensation) upon the occurrence of the termination of his or her employment
without cause. These severance payments cease upon the Employee becoming a
full-time employee or full-time consultant (including self-employment) of
another entity. Each of the severance agreements described above terminates one
year from the date of the consummation of the Plan.
INCENTIVE COMPENSATION PLANS
Executive officers along with certain other employees (the "Participants")
of each the Shirt Group and the Sock Group participate in incentive compensation
plans pursuant to which the Participants are eligible to receive bonus
compensation based upon annual minimum EBITDA targets and upon the weighing of
certain other performance criteria by Bryan P. Marsal. Yearly bonus awards under
the incentive plans are limited to 100% of the respective Participant's annual
salary.
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OUTSTANDING VOTING SECURITIES OF HOLDINGS
AND PRINCIPAL HOLDERS THEREOF
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
All of the issued and outstanding shares of common stock of the Company will
be held by CAG which is a wholly-owned subsidiary of Holdings. The following
table sets forth, after giving effect to the Recapitalization, certain
information regarding the beneficial ownership of the voting securities of
Holdings by each person who beneficially owns more than 5% of any class of
Holdings voting securities and by the directors and certain executive officers
of Holdings, individually, and by the directors and executive officers of
Holdings as a group.
<TABLE>
<CAPTION>
HOLDINGS COMMON STOCK
--------------------------
<S> <C> <C>
SHARES BENEFICIALLY OWNED
--------------------------
<CAPTION>
NUMBER OF PERCENT OF
SHARES COMMON
----------- -------------
<S> <C> <C>
5% STOCKHOLDERS:
Vestar Capital Partners, III, L.P................................................. 217,285 60.8%(1)
245 Park Avenue
New York, New York 10017
A&M............................................................................... 49,995 14.0%(1)
885 Third Avenue
Suite 1700
New York, New York 10022
Societe Anonyme D'Etudes et de Participation Industrielles %(1)
et Commerciales................................................................. 24,699 6.9
114 rue de Turenne
75003 Paris
Cerebus Partners, L.P............................................................. 20,622 5.8%(1)
450 Park Avenue
New York, New York 10022
OFFICERS AND DIRECTORS
Bryan P. Marsal(3)................................................................ 49,995 14.0%
James A. Williams(4)
Norman W. Alpert(5)............................................................... 217,285 60.8%
Sander M. Levy(5)................................................................. 217,285 60.8%
Daniel S. O'Connell(5)............................................................ 217,285 60.8%
J. Christopher Henderson(5)....................................................... 217,285 60.8%
Philip L. Molinari(4)
Jean M. Kolloff(4)
Robert J. Riesbeck(4)
Kathy D. Wilson(4)
William S. Sheely(4)
Steven J. Kaufman(4)
All executive officers and directors as a group (12 persons)(3)(5)................ 267,280 74.8%
</TABLE>
- ------------------------
(1) For a discussion of certain voting arrangements among these holders see
"Certain Transactions--Stock Ownership and Stockholders' Agreement." Each of
Vestar, A&M, Societe Anonyme D'Etudes et de Participation Industrielles et
Commerciales ("SAEPIC") and Cerebus Partners, L.P. disclaims the existence
of a group and disclaims beneficial ownership of Holdings Common Stock not
owned of record by them.
(2) Includes shares owned by A&M. Mr. Marsal disclaims the existence of a group
and disclaims beneficial ownership of the Holdings Common Stock not held by
him.
(3) Certain executive officers of the Company, which may include the officers
listed in this table, may become Management Investors.
(4) Includes shares owned by Vestar. Each of Mr. Alpert, Mr. O'Connell, Mr.
Levy, and Mr. Henderson disclaims the existence of a group and disclaims
beneficial ownership of the common stock not held by him.
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<PAGE>
CERTAIN TRANSACTIONS
MANAGEMENT EQUITY PARTICIPATION
In connection with the Recapitalization, Holdings (i) permitted the
Management Investors to subscribe in the aggregate for up to 5.1% of the
outstanding Holdings Common Stock (the "Purchased Stock") and (ii) adopted a
stock option plan (the "Option Plan") providing for options to purchase shares
of Holdings Common Stock ("Options") to be granted to the Management Investors
at the consummation of the Recapitalization and to certain other employees of
Holdings and its subsidiaries from time to time thereafter, in each case in
order to provide additional compensation and financial incentives to Management
Investors and such other employees. The Option Plan may be amended, suspended or
terminated by the Holdings' Board of Directors at any time.
PURCHASED STOCK. On the Recapitalization closing date, the Management
Investors became holders of an aggregate of $1.8 million of Purchased Stock,
representing 5.1% of the outstanding Holdings Common Stock on the
Recapitalization closing date. All Purchased Stock is subject to certain
forfeiture provisions referred to in the paragraph entitled "Puts and Calls"
below.
STOCK OPTIONS. On the Recapitalization closing date Holdings granted to the
Management Investors nonqualified Options to purchase 5% of Holdings Common
Stock (on a fully diluted basis). Such Options will (i) vest and become
exercisable in equal installments in each of the five years following the grant
date, (ii) expire ten years from the grant date, or earlier in certain instances
of termination of employment and upon certain change of control events, and
(iii) have an exercise price equal to the per share price at which Vestar, A&M,
the Co-Investors and the Management Investors acquire shares of Holdings Common
Stock in the Recapitalization. From time to time following the Recapitalization,
the Board of Directors of Holdings or a compensation committee thereof may grant
additional Options under the Option Plan to various employees of Holdings, the
Company and their subsidiaries on terms, including vesting schedule, term and
exercise price, determined by the Board of Directors or such committee.
PUTS AND CALLS. Purchased Stock, Options and Holdings Common Stock
purchased upon the exercise of Options will be subject to certain put and call
provisions relating to the death, disability, retirement and termination of
employment of the holder. Put and call prices will vary depending on the number
of years since grant or purchase, the reason the put or call became exercisable,
and the fair market value and initial purchase price of Holdings Common Stock
subject to the put or call. Under certain circumstances, Holdings is permitted
(i) to defer exercise of the put or call to the extent prohibited by financing
agreements or other instruments, and (ii) to pay the purchase price under the
put or call in prime-rate junior subordinated notes with maturities up to five
years.
STOCK OWNERSHIP AND STOCKHOLDERS' AGREEMENT
In the Recapitalization, (i) Vestar acquired 60.8%, (ii) A&M acquired 14% of
the outstanding Holdings Common Stock, (iii) the Management Investors acquired
in the aggregate 5.1% of the outstanding Holdings Common Stock, and (iv) the
Co-Investors acquired 10% of the outstanding Holdings Common Stock. Following
the Recapitalization, the current stockholders of Holdings (the "Original Equity
Holders") retained in the aggregate 10.1% of the outstanding Holdings Common
Stock. There can be no assurance as to how long any of Vestar, A&M, the
Management Investors, the Co-Investors or the Original Equity Holders will hold
their shares of Holdings Common Stock, although certain transfers by them may be
restricted as described below and in "Management Equity Participation".
Vestar, A&M, the Co-Investors and the Management Investors (including any
employees of Holdings and its subsidiaries who purchase Holdings Common Stock
from, or are granted options by, Holdings following the Recapitalization) (the
foregoing parties, collectively, the "Initial Investors") and SAEPIC have, and
other Original Equity Holders may (SAEPIC and such other Original Equity
Holders, the
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<PAGE>
"Participating Original Equity Holders"; together with the Initial Investors,
the "Participating Stockholders"), enter into a Stockholders' Agreement (the
"Stockholders' Agreement") which provides for, among other things, the matters
described below.
TRANSFERS OF HOLDINGS COMMON STOCK AND HOLDINGS PREFERRED STOCK. Subject to
certain limitations, transfers of Holdings securities by A&M, the Management
Investors, the Co-Investors and the Participating Original Equity Holders will
be restricted unless the transferee agrees to become a party to, and be bound
by, the Stockholders' Agreement. In addition, subject to certain limitations,
A&M, the Management Investors, the Co-Investors and the Participating Original
Equity Holders will agree that, unless a public offering of Holdings securities
(a "Holdings Public Offering") has occurred, they will not transfer any Holdings
securities for a period of five years other than as described below. Under
certain circumstances, the transfer of Holdings securities by Participating
Stockholders to their respective affiliates will be permitted.
ELECTION OF DIRECTORS. Subject to certain requirements and exceptions, each
Participating Stockholder will vote all of the Holdings Common Stock owned or
held of record by such Participating Stockholder so as to elect to the Board of
Directors of Holdings and each of its subsidiaries: (i) four designees of
Vestar, (ii) three additional designees of Vestar who are not affiliates of any
Participating Stockholder or employees of Holdings or any of its affiliates and
(iii) three designees of A&M and the Management Investors. The number of
designees to which Vestar and A&M and the Management Investors are entitled
decrease according to a formula based on the number of shares owned as compared
to the number acquired in the Recapitalization. Mr. Marsal shall be Chairman of
the Board of Directors and a designee of A&M and the Management Investors so
long as he remains Chief Executive Officer of Holdings.
OTHER VOTING MATTERS. So long as Vestar and its affiliates continue to own
at least one-half of the shares of Holdings Common Stock acquired by them in the
Recapitalization, each Participating Stockholder (excluding the Original Equity
Holders) will vote all of its Holdings Common Stock in favor of adopting and
approving any action adopted and approved by the Holdings Board of Directors.
TAG-ALONG RIGHTS. So long as no Holdings Public Offering shall have
occurred and Vestar and its affiliates continue to own at least one-third of the
shares of Holdings Common Stock acquired by them in the Recapitalization,
subject to certain exceptions, with respect to any proposed transfer of Holdings
Common Stock or Holdings Class C Junior Preferred Stock by Vestar, other than
transfers to affiliates, each other Participating Stockholder will have the
right to require that the proposed transferee purchase a corresponding
percentage of any shares of Holdings Common Stock or Holdings Class C Junior
Preferred Stock, as the case may be, owned by such Participating Stockholder at
the same price and upon the same terms and conditions.
DRAG-ALONG RIGHTS. So long as no Holdings Public Offering shall have
occurred and Vestar and its affiliates continue to own at least one-third of the
shares of Holdings Common Stock acquired by them in the Recapitalization,
subject to certain limitations, each Participating Stockholder will be
obligated, in connection with an offer by a third party to Vestar to purchase
(pursuant to a sale of stock, a merger or otherwise) all of the outstanding
shares of Holdings Common Stock or Holdings Class C Junior Preferred Stock held
by the Participating Stockholders (other than shares not purchased in order to
preserve availability of recapitalization accounting treatment), to transfer all
of its shares of Holdings Common Stock or Holdings Class C Junior Preferred
Stock to such third party on the terms of the offer accepted by Vestar.
PARTICIPATION RIGHTS. So long as no Holdings Public Offering shall have
occurred and Vestar and its affiliates continue to own at least one-third of the
shares of Holdings Common Stock acquired by them in the Recapitalization, under
certain circumstances, if Holdings or its subsidiaries propose to issue any
common stock to an Initial Investor or Participating Original Equity Holder or
to an affiliate thereof, each
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<PAGE>
other Initial Investor or Participating Original Equity Holder shall have the
opportunity to purchase such Holdings Common Stock on a pro rata basis.
RIGHT OF FIRST REFUSAL. After five years and prior to a Holdings Public
Offering, if A&M, a Management Investor, the Co-Investors or a Participating
Original Equity Holder or any of their transferees receives an offer to purchase
any Holdings securities held by it, other than from its affiliate, and such
Participating Stockholder or transferee wishes to accept such offer, then such
Participating Stockholder or transferee shall be required to offer such
securities first to Holdings (or its designee) on the same terms and conditions
(provided that Holdings may pay cash consideration equivalent to any non-cash
consideration offered) before accepting such third-party offer.
REGISTRATION RIGHTS. Subject to certain limitations, upon a written request
by Vestar, its affiliates or its transferees, Holdings will use its best efforts
to effect the registration of all or part of the Holdings Common Stock owned by
Vestar or such affiliate or transferee, provided that (i) Holdings will not be
required to effect more than one registration within any 360-day period and (ii)
no more than six such registrations may be requested, unless the requesting
party agrees to pay all costs and expenses thereof.
INCIDENTAL REGISTRATION. Under certain circumstances, if Holdings proposes
to register shares of Holdings Common Stock, it will, upon the written request
of any Participating Stockholder, use all reasonable efforts to effect the
registration of such Participating Stockholder's common stock.
TERMINATION. The Stockholders' Agreement will terminate (i) in full on the
earliest of (A) the Initial Investors and their affiliates owning less than 5%
of the outstanding Holdings Common Stock (on a fully diluted basis) or (B) the
Participating Stockholders, including their affiliates and transferees, owning
less than 50% of the outstanding Holdings Common Stock (on a fully diluted
basis) and (C) ten years after the Recapitalization and (ii) as to any Holdings
securities, on the date such securities are sold in a public offering or
pursuant to Rule 144.
OTHER RELATIONSHIPS
MANAGEMENT ADVISORY AGREEMENT. Holdings will pay a $500,000 annual
management fee to Vestar in consideration for certain advisory and consulting
services provided by Vestar (excluding investment banking or other financial
advisory services and full- or part-time employment by Holdings or any of its
subsidiaries of any employee or partner of any of Vestar and its affiliates, in
each case for which Vestar and its affiliates shall be entitled to receive
additional compensation). Holdings has agreed to reimburse Vestar for expenses
incurred in connection with, and to indemnify Vestar and its affiliates for any
liabilities arising from, such advisory and consulting services. Upon
consummation of the Offerings Vestar received a one-time transaction fee of
$3.25 million.
MANAGEMENT LOANS. At the closing of the Recapitalization, Holdings lent
$1.35 million to A&M, and $0.9 million to the Management Investors (or to A&M,
to the extent A&M purchases shares of Holdings Common Stock allocated to the
Management Investors), in order to provide A&M and such Management Investors
with funds to be applied to a portion of the purchase price of the Holdings
common stock to be issued to A&M and such Management Investors in connection
with the Recapitalization. Such loans (i) are secured by pledges of the Holdings
common stock purchased by the respective borrowers, (ii) have a term of seven
years, (iii) bear interest at an annual rate of 5.75%, and (iv) are subject to
mandatory prepayment (a) with the net proceeds of any sales of Holdings Common
Stock and (b) in full in certain other events including, in the case of the
Management Investors, if the employment by Holdings and its subsidiaries of such
Management Investor terminates other than as a result of death, disability or
retirement.
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<PAGE>
THE NOTE EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Note Letter of Transmittal
(which together constitute the Note Exchange Offer), to exchange up to $112
million aggregate principal amount of Exchange Notes for a like aggregate
principal amount of Old Notes properly tendered on or prior to the Expiration
Date and not withdrawn as permitted pursuant to the procedures described below.
The Note Exchange Offer is being made with respect to all of the Old Notes.
As of the date of this Prospectus, $112 million aggregate principal amount
of the Old Notes is outstanding. This Prospectus, together with the Note Letter
of Transmittal, is first being sent on or about , 1998, to all holders of
Old Notes known to the Company. The Company's obligation to accept Old Notes for
exchange pursuant to the Exchange Offer is subject to certain conditions set
forth under "Certain Conditions to the Note Exchange Offer" below. The Company
currently expects that each of the conditions will be satisfied and that no
waivers will be necessary.
PURPOSE OF THE NOTE EXCHANGE OFFER
The Old Notes were issued on May 18, 1998 in a transaction exempt from the
registration requirements of the Securities Act. Accordingly, the Old Notes may
not be reoffered, resold, or otherwise transferred unless so registered or
unless an applicable exemption from the registration and prospectus delivery
requirements of the Securities Act is available.
In connection with the issuance and sale of the Old Notes, the Company
entered into the Note Registration Rights Agreement, which requires the Company
to file with the Commission a registration statement relating to the Note
Exchange Offer not later than 45 days after the date of issuance of the Old
Notes, and to use its best efforts to cause the registration statement relating
to the Note Exchange Offer to become effective under the Securities Act not
later than 160 days after the date of issuance of the Old Notes and the Note
Exchange Offer to be consummated not later than 30 days after the date of the
effectiveness of the Registration Statement (or use its best efforts to cause to
become effective by the 190th calendar day after the Issuance Date a shelf
registration statement with respect to resales of the Old Notes). A copy of the
Note Registration Rights Agreement has been filed as an exhibit to the
Registration Statement.
The Note Exchange Offer is being made by the Company to satisfy its
obligations with respect to the Note Registration Rights Agreement. The term
"holder," with respect to the Note Exchange Offer, means any person in whose
name Old Notes are registered on the books of the Company or any other person
who has obtained a properly completed bond power from the registered holder, or
any person whose Old Notes are held of record by The Depository Trust Company.
Other than pursuant to the Note Registration Rights Agreement, the Company is
not required to file any registration statement to register any outstanding Old
Notes. Holders of Old Notes who do not tender their Old Notes or whose Old Notes
are tendered but not accepted would have to rely on exemptions to registration
requirements under the securities laws, including the Securities Act, if they
wish to sell their Old Notes.
The Company is making the Note Exchange Offer in reliance on the position of
the staff of the Commission as set forth in certain interpretive letters
addressed to third parties in other transactions. However, the Company has not
sought its own interpretive letter and there can be no assurance that the staff
would make a similar determination with respect to the Note Exchange Offer as it
has in such interpretive letters to third parties. Based on these
interpretations by the staff, the Company believes that the Exchange Notes
issued pursuant to the Note Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by a Holder (other than any
Holder who is a broker-
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<PAGE>
dealer or an "affiliate" of the Company within the meaning of Rule 405 of the
Securities Act) without further compliance with the registration and prospectus
delivery requirements of the Securities Act, provided that such Exchange Notes
are acquired in the ordinary course of such Holder's business and that such
Holder is not participating, and has no arrangement or understanding with any
person to participate, in a distribution (within the meaning of the Securities
Act) of such Exchange Notes. See "--Resale of Exchange Notes." Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. See "Plan of Distribution."
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, subject to the conditions set forth
herein and in the Note Letter of Transmittal accompanying this Prospectus,
$1,000 in principal amount of Exchange Notes for each $1,000 in principal amount
of the Old Notes. The terms of the Exchange Notes are identical in all material
respects to the terms of the Old Notes for which they may be exchanged pursuant
to this Note Exchange Offer, except that the Exchange Notes will generally be
freely transferable by holders thereof and will not be subject to any covenant
regarding registration. The Exchange Notes will evidence the same indebtedness
as the Old Notes and will be entitled to the benefits of the Indenture. See
"Description of Exchange Notes."
The Note Exchange Offer is not conditioned upon any minimum aggregate
principal amount of Old Notes being tendered for exchange.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the
Exchange Notes issued pursuant to the Note Exchange Offer in exchange for the
Old Notes may be offered for sale, resold or otherwise transferred by any holder
without compliance with the registration and prospectus delivery provisions of
the Securities Act. Instead, based on an interpretation by the staff of the
Commission set forth in a series of no-action letters issued to third parties,
the Company believes that Exchange Notes issued pursuant to the Note Exchange
Offer in exchange for Old Notes may be offered for sale, resold and otherwise
transferred by any holder of such Exchange Notes (other than any such holder
that is a broker-dealer or is an "affiliate" of the Company within the meaning
of Rule 405 under the Securities Act) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business and
such holder has no arrangement or understanding with any person to participate
in the distribution of such Exchange Notes and neither such holder nor any other
such person is engaging in or intends to engage in a distribution of such
Exchange Notes. Since the Commission has not considered the Note Exchange Offer
in the context of a no-action letter, there can be no assurance that the staff
of the Commission would make a similar determination with respect to the Note
Exchange Offer. Any holder who is an affiliate of the Company or who tenders in
the Note Exchange Offer for the purpose of participating in a distribution of
the Exchange Notes cannot rely on such interpretation by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each holder, other than a broker-dealer, must acknowledge that it is not engaged
in, and does not intend to engage in, a distribution of Exchange Notes. Each
broker-dealer that receives Exchange Notes for its own account in exchange for
Old Notes, where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. A broker-dealer may not participate in the Note Exchange Offer with
respect to Old Notes acquired other than as a result of market-making activities
or other trading activities. See "Plan of Distribution."
Interest on the Exchange Notes will accrue from the last Interest Payment
Date on which interest was paid on the Old Notes so surrendered or, if no
interest has been paid on such Notes, from May 18, 1998.
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<PAGE>
Tendering holders of the Old Notes shall not be required to pay brokerage
commissions or fees or, subject to the instructions in the Note Letter of
Transmittal, transfer taxes with respect to the exchange of the Old Notes
pursuant to the Note Exchange Offer.
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Note Exchange Offer will expire at 5:00 p.m., New York City time, on
, 1998, unless the Company, in its sole discretion, has extended the
period of time for which the Note Exchange Offer is open (such date, as it may
be extended, is referred to herein as the "Expiration Date") . The Expiration
Date will be at least 20 business days after the commencement of the Note
Exchange Offer in accordance with Rule 14e-1(a) under the Exchange Act. The
Company expressly reserves the right, at any time or from time to time, to
extend the period of time during which the Note Exchange Offer is open, and
thereby delay acceptance for exchange of any Old Notes, by giving oral or
written notice to the Exchange Agent and by timely public announcement no later
than 9:00 a.m. New York City time, on the next business day after the previously
scheduled Expiration Date. During any such extension, all Old Notes previously
tendered will remain subject to the Note Exchange Offer unless properly
withdrawn. The Company does not anticipate extending the Expiration Date.
The Company expressly reserves the right to (i) terminate or amend the Note
Exchange Offer and not to accept for exchange any Old Notes not theretofore
accepted for exchange upon the occurrence of any of the events specified below
under "Certain Conditions to the Note Exchange Offer" which have not been waived
by the Company and (ii) amend the terms of the Note Exchange Offer in any manner
which, in its good faith judgment, is advantageous to the holders of the Old
Notes, whether before or after any tender of the Notes. If any such termination
or amendment occurs, the Company will notify the Exchange Agent and will either
issue a press release or give oral or written notice to the holders of the Old
Notes as promptly as practicable.
For purposes of the Note Exchange Offer, a "business day" means any day
other than Saturday, Sunday or a date on which banking institutions are required
or authorized by New York State law to be closed, and consists of the time
period from 12:01 a.m. through 12:00 midnight, New York City time. Unless the
Company terminates the Note Exchange Offer prior to 5:00 p.m., New York City
time, on the Expiration Date, the Company will exchange the Exchange Notes for
the Old Notes on the Exchange Date.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Note Letter of Transmittal.
A holder of Old Notes may tender the same by (i) properly completing and
signing the Note Letter of Transmittal or a facsimile thereof (all references in
this Prospectus to the Note Letter of Transmittal shall be deemed to include a
facsimile thereof) and delivering the same, together with the certificate or
certificates representing the Old Notes being tendered and any required
signature guarantees and any other documents required by the Note Letter of
Transmittal, to the Exchange Agent at its address set forth below on or prior to
the Expiration Date (or complying with the procedure for book-entry transfer
described below) or (ii) complying with the guaranteed delivery procedures
described below.
THE METHOD OF DELIVERY OF OLD NOTES, NOTE LETTERS OF TRANSMITTAL AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDERS. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO INSURE TIMELY DELIVERY. NO OLD NOTES OR NOTE LETTERS OF TRANSMITTAL
SHOULD BE SENT TO THE COMPANY.
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If tendered Old Notes are registered in the name of the signer of the Note
Letter of Transmittal and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Old Notes are to be reissued) in the name
of the registered holder (which term, for the purposes described herein, shall
include any participant in The Depository Trust Company (also referred to as a
"book-entry transfer facility") whose name appears on a security listing as the
owner of Old Notes), the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed by
the registered holder, and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Exchange Act. If the
Exchange Notes and/or Old Notes not exchanged are to be delivered to an address
other than that of the registered holder appearing on the note register for the
Old Notes, the signature in the Note Letter of Transmittal must be guaranteed by
an Eligible Institution.
The Exchange Agent will make a request within two business days after the
date of receipt of this Prospectus to establish accounts with respect to the Old
Notes at the book-entry transfer facility for the purpose of facilitating the
Note Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the book-entry transfer facility's system
may make book-entry delivery of Old Notes by causing such book-entry transfer
facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the book-entry transfer facility's
procedures for such transfer. Although delivery of Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at the book-entry
transfer facility, an appropriate Note Letter of Transmittal with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent at its address
set forth below on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures.
If a holder desires to accept the Note Exchange Offer and time will not
permit a Note Letter of Transmittal or Old Notes to reach the Exchange Agent
before the Expiration Date or the procedure for book-entry transfer cannot be
completed on a timely basis, a tender may be effected if the Exchange Agent has
received at its address set forth below on or prior to the Expiration Date, a
letter, telegram or facsimile transmission (receipt confirmed by telephone and
an original delivered by guaranteed overnight courier) from an Eligible
Institution setting forth the name and address of the tendering holder, the
names in which the Old Notes are registered and, if possible, the certificate
numbers of the Old Notes to be tendered, and stating that the tender is being
made thereby and guaranteeing that within three business days after the
Expiration Date, the Old Notes in proper form for transfer (or a confirmation of
book-entry transfer of such Old Notes into the Exchange Agent's account at the
book-entry transfer facility), will be delivered by such Eligible Institution
together with a properly completed and duly executed Note Letter of Transmittal
(and any other required documents). Unless Old Notes being tendered by the
above-described method are deposited with the Exchange Agent within the time
period set forth above (accompanied or preceded by a properly completed Note
Letter of Transmittal and any other required documents), the Company may, at its
option, reject the tender. Copies of the notice of guaranteed delivery ("Note
Notice of Guaranteed Delivery") which may be used by Eligible Institutions for
the purposes described in this paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Note Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at the book-entry transfer facility)
is received by the Exchange Agent, or (ii) a Note Notice of Guaranteed Delivery
or letter, telegram or facsimile transmission to similar effect (as provided
above) from an Eligible Institution is received by the Exchange Agent. Issuances
of Exchange Notes in exchange for Old Notes tendered pursuant to a Note Notice
of Guaranteed Delivery or letter, telegram or facsimile transmission to similar
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effect (as provided above) by an Eligible Institution will be made only against
deposit of the Note Letter of Transmittal (and any other required documents) and
the tendered Old Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or not to accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to waive
any defects or irregularities or conditions of the Note Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Note Exchange Offer). The interpretation of the terms and conditions of the
Note Exchange Offer (including the Note Letter of Transmittal and the
instructions thereto) by the Company shall be final and binding on all parties.
Unless waived, any defects or irregularities in connection with tenders of Old
Notes for exchange must be cured within such reasonable period of time as the
Company shall determine. Neither the Company, the Exchange Agent nor any other
person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Old Notes for exchange, nor shall any
of them incur any liability for failure to give such notification.
If the Note Letter of Transmittal is signed by a person or persons other
than the registered holder or holders of Old Notes, such Old Notes must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names of the registered holder or holders appear on the
Old Notes.
If the Note Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the Exchange Notes acquired pursuant to the Note Exchange Offer are
being acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder, that neither the
holder nor any such other person has an arrangement or understanding with any
person to participate in the distribution of such Exchange Notes and that
neither the holder nor any such other person is an "affiliate," as defined under
Rule 405 of the Securities Act, of the Company, or if it is an affiliate it will
comply with the registration and prospectus requirements of the Securities Act
to the extent applicable.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Old Notes where such Old Notes were acquired by such broker-dealer
as a result of market-making activities or other trading activities must
acknowledge that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
TERMS AND CONDITIONS OF THE NOTE LETTER OF TRANSMITTAL
The Note Letter of Transmittal contains, among other things, the following
terms and conditions, which are part of the Note Exchange Offer.
The party tendering Notes for exchange (the "Transferor") exchanges, assigns
and transfers the Old Notes to the Company and irrevocably constitutes and
appoints the Exchange Agent as the Transferor's agent and attorney-in-fact to
cause the Old Notes to be assigned, transferred and exchanged. The Transferor
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Old Notes and to acquire Exchange Notes
issuable upon the exchange of such tendered Notes, and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Old Notes, free and clear of all liens, restrictions, charges and
encumbrances and not
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subject to any adverse claim. The Transferor also warrants that it will, upon
request, execute and deliver any additional documents deemed by the Exchange
Agent or the Company to be necessary or desirable to complete the exchange,
assignment and transfer of tendered Old Notes or transfer ownership of such Old
Notes on the account books maintained by a book-entry transfer facility. The
Transferor further agrees that acceptance of any tendered Old Notes by the
Company and the issuance of Exchange Notes in exchange therefor shall constitute
performance in full by the Company of certain of its obligations under the Note
Registration Rights Agreement. All authority conferred by the Transferor will
survive the death or incapacity of the Transferor and every obligation of the
Transferor shall be binding upon the heirs, legal representatives, successors,
assigns, executors and administrators of such Transferor.
The Transferor certifies that it is not an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act and that it is acquiring the
Exchange Notes offered hereby in the ordinary course of such Transferor's
business and that such Transferor has no arrangement with any person to
participate in the distribution of such Exchange Notes. Each holder, other than
a broker-dealer, must acknowledge that it is not engaged in, and does not intend
to engage in, a distribution of Exchange Notes. Each Transferor which is a
broker-dealer receiving Exchange Notes for its own account must acknowledge that
it will deliver a prospectus in connection with any resale of such Exchange
Notes. By so acknowledging and by delivering a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of Exchange
Notes received in exchange for Old Notes where such Old Notes were acquired by
such broker-dealer as a result of market-making activities or other trading
activities. The Company will, for a period of 90 days after the Expiration Date,
make copies of this Prospectus available to any broker-dealer for use in
connection with any such resale.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent at the address set forth herein prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having tendered the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) specify the principal
amount of Old Notes to be withdrawn, (iv) include a statement that such holder
is withdrawing his election to have such Old Notes exchanged, (v) be signed by
the holder in the same manner as the original signature on the Note Letter of
Transmittal by which such Old Notes were tendered or as otherwise described
above (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee under the Indenture
register the transfer of such Old Notes into the name of the person withdrawing
the tender and (vi) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. The Exchange Agent will
return the properly withdrawn Old Notes promptly following receipt of notice of
withdrawal. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer, any notice of withdrawal must specify the name and number
of the account at the book-entry transfer facility to be credited with the
withdrawn Old Notes or otherwise comply with the book-entry transfer facility
procedure. All questions as to the validity of notices of withdrawals, including
time of receipt, will be determined by the Company and such determination will
be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Note Exchange Offer. Any Old Notes which have
been tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account with such
book-entry transfer facility specified by the holder) as soon
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as practicable after withdrawal, rejection of tender or termination of the Note
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described under "Procedures for Tendering Old Notes" above at
any time on or prior to the Expiration Date.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Note Exchange
Offer, the Company will accept, promptly on the Exchange Date, all Old Notes
properly tendered and will issue the Exchange Notes promptly after such
acceptance. See "Certain Conditions to the Note Exchange Offer" below. For
purposes of the Note Exchange Offer, the Company shall be deemed to have
accepted properly tendered Old Notes for exchange when, as and if the Company
has given oral or written notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the holder of such Old Note will
receive an Exchange Note having a principal amount equal to that of the
surrendered Old Note.
In all cases, issuance of Exchange Notes for Old Notes that are accepted for
exchange pursuant to the Note Exchange Offer will be made only after timely
receipt by the Exchange Agent of certificates for such Old Notes or a timely
book-entry confirmation of such Old Notes into the Exchange Agent's account at
the book-entry transfer facility, a properly completed and duly executed Note
Letter of Transmittal and all other required documents. If any tendered Old
Notes are not accepted for any reason set forth in the terms and conditions of
the Note Exchange Offer or if Old Notes are submitted for a greater principal
amount than the holder desires to exchange, such unaccepted or non-exchanged Old
Notes will be returned without expense to the tendering holder thereof (or, in
the case of Old Notes tendered by book-entry transfer into the Exchange Agent's
account at the book-entry transfer facility pursuant to the book-entry transfer
procedures described above, such non-exchanged Old Notes will be credited to an
account maintained with such book-entry transfer facility) as promptly as
practicable after the expiration of the Note Exchange Offer.
CERTAIN CONDITIONS TO THE NOTE EXCHANGE OFFER
Notwithstanding any other provision of the Note Exchange Offer, or any
extension of the Note Exchange Offer, the Company shall not be required to
accept for exchange, or to issue Exchange Notes in exchange for, any Old Notes
and may terminate or amend the Note Exchange Offer (by oral or written notice to
the Exchange Agent or by a timely press release) if at any time before the
acceptance of such Old Notes for exchange or the exchange of the Exchange Notes
for such Old Notes, any of the following conditions exist:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency or regulatory authority or any
injunction, order or decree is issued with respect to the Note Exchange
Offer which, in the sole judgment of the Company, might materially impair
the ability of the Company to proceed with the Note Exchange Offer or have a
material adverse effect on the contemplated benefits of the Note Exchange
Offer to the Company; or
(b) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company that is or may be adverse to the Company, or the
Company shall have become aware of facts that have or may have adverse
significance with respect to the value of the Old Notes or the Exchange
Notes or that may materially impair the contemplated benefits of the Note
Exchange Offer to the Company; or
(c) any law, rule or regulation or applicable interpretations of the
staff of the Commission is issued or promulgated which, in the good faith
determination of the Company, do not permit the Company to effect the Note
Exchange Offer; or
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(d) any governmental approval has not been obtained, which approval the
Company, in its sole discretion, deems necessary for the consummation of the
Note Exchange Offer; or
(e) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation (or an amendment to any existing law statute, rule or
regulation) which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Note Exchange Offer or
have a material adverse effect on the contemplated benefits of the Note
Exchange Offer to the Company; or
(f) there shall occur a change in the current interpretation by the
staff of the Commission which permits the Exchange Notes issued pursuant to
the Note Exchange Offer in exchange for Old Notes to be offered for resale,
resold and otherwise transferred by holders thereof (other than any such
holder that is an "affiliate" of the Company within the meaning of Rule 405
under the Securities Act) without compliance with the registration and
prospectus delivery provisions of the Securities Act provided that such
Exchange Notes are acquired in the ordinary course of such holders' business
and such holders have no arrangement with any person to participate in the
distribution of such Exchange Notes; or
(g) there shall have occurred (i) any general suspension of, shortening
of hours for, or limitation on prices for, trading in securities on any
national securities exchange or in the over-the-counter market (whether or
not mandatory), (ii) any limitation by any govermental agency or authority
which may adversely affect the ability of the Company to complete the
transactions contemplated by the Note Exchange Offer, (iii) a declaration of
a banking moratorium or any suspension of payments in respect of banks by
Federal or state authorities in the United States (whether or not
mandatory), (iv) a commencement of a war, armed hostilities or other
international or national crisis directly or indirectly involving the United
States, (v) any limitation (whether or not mandatory) by any governmental
authority on, or other event having a reasonable likelihood of affecting,
the extension of credit by banks or other leading institutions in the United
States, or (vi) in the case of any of the foregoing existing at the time of
the commencement of the Note Exchange Offer, a material acceleration or
worsening thereof.
The Company expressly reserves the right to terminate the Note Exchange
Offer and not accept for exchange any Old Notes upon the occurrence of any of
the foregoing conditions (which represent all of the material conditions to the
acceptance by the Company of properly tendered Old Notes). In addition, the
Company may amend the Note Exchange Offer at any time prior to the Expiration
Date if any of the conditions set forth above occur. Moreover, regardless of
whether any of such conditions has occurred, the Company may amend the Note
Exchange Offer in any manner which, in its good faith judgment, is advantageous
to holders of the Old Notes.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time. If the Company waives or amends the foregoing
conditions, it will, if required by law, extend the Note Exchange Offer for a
minimum of five business days from the date that the Company first gives notice,
by public announcement or otherwise, of such waiver or amendment, if the Note
Exchange Offer would otherwise expire within such five business-day period. Any
determination by the Company concerning the events described above will be final
and binding upon all parties.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no Exchange Notes will be issued in exchange for any such Old
Notes, if at such time any stop order shall be threatened or in effect with
respect to the Registration Statement of which this Prospectus constitutes a
part or the qualification of the Indenture under the Trust Indenture Act of
1939, as amended. In any such event the
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Company is required to use every reasonable effort to obtain the withdrawal of
any stop order at the earliest possible time.
The Note Exchange Offer is not conditioned upon any minimum principal amount
of Old Notes being tendered for exchange.
EXCHANGE AGENT
The Bank of New York has been appointed as the Exchange Agent for the Note
Exchange Offer. All executed Letters of Transmittal should be directed to the
Exchange Agent at one of the addresses set forth below:
<TABLE>
<S> <C>
BY HAND/OVERNIGHT COURIER: BY MAIL:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
New York, New York 10005 New York, New York 10005
BY FACSIMILE:
(212) 815-6339
Attn.:
Telephone: (212)
</TABLE>
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Note Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the address and
telephone number set forth in the Note Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE NOTE LETTER OF
TRANSMITTAL, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER
OTHER THAN THE ONES SET FORTH ON THE NOTE LETTER OF TRANSMITTAL, WILL NOT
CONSTITUTE A VALID DELIVERY.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the Note
Exchange Offer and will not make any payments to brokers, dealers or others
soliciting acceptances of the Note Exchange Offer. The Company, however, will
pay the Exchange Agent reasonable and customary fees for its services and will
reimburse it for its reasonable out-of-pocket expenses in connection therewith.
The Company will also pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of this and other related documents to the beneficial owners of the Old
Notes and in handling or forwarding tenders for their customers.
The estimated cash expenses to be incurred in connection with the Note
Exchange Offer will be paid by the Company and are estimated in the aggregate to
be approximately $40,000, which includes fees and expenses of the Exchange
Agent, Trustee, registration fees, accounting, legal, printing and related fees
and expenses.
No person has been authorized to give any information or to make any
representations in connection with the Note Exchange Offer other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any exchange made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the respective dates as of which
information is given herein. The Note Exchange Offer is not being made to (nor
will tenders be accepted from or on behalf of) holders of Old Notes in any
jurisdiction in which the making of the Note Exchange Offer or the acceptance
thereof would not be in compliance with the laws of such jurisdiction. However,
the Company may, at its discretion, take such action as it may deem necessary to
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make the Note Exchange Offer in any such jurisdiction and extend the Note
Exchange Offer to holders of Old Notes in such jurisdiction. In any jurisdiction
in which the securities laws or blue sky laws of which require the Note Exchange
Offer to be made by a licensed broker or dealer, the Note Exchange Offer is
being made on behalf of the Company by one or more registered brokers or dealers
which are licensed under the laws of such jurisdication.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the exchange
of Old Notes pursuant to the Note Exchange Offer. If, however, certificates
representing Exchange Notes or Old Notes for principal amounts not tendered or
accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Old Notes tendered, or if
tendered Old Notes are registered in the name of any person other than the
person signing the Note Letter of Transmittal, or if a transfer tax is imposed
for any reason other than the exchange of Old Notes pursuant to the Note
Exchange Offer, then the amount of any such transfer taxes (whether imposed on
the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exemption therefrom
is not submitted with the Note Letter of Transmittal, the amount of such
transfer taxes will be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the carrying value of the Old Notes
as reflected in the Company's accounting records on the date of the exchange.
Accordingly, no gain or loss for accounting purposes will be recognized by the
Company upon the exchange of Exchange Notes for Old Notes. Expenses incurred in
connection with the issuance of the Exchange Notes will be amortized over the
term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Old Notes who do not exchange their Old Notes for Exchange Notes
pursuant to the Note Exchange Offer will continue to be subject to the
restrictions on transfer of such Old Notes as set forth in the legend thereon.
Old Notes not exchanged pursuant to the Note Exchange Offer will continue to
remain outstanding in accordance with their terms. In general, the Old Notes may
not be offered or sold unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act.
Participation in the Note Exchange Offer is voluntary, and holders of Old
Notes should carefully consider whether to participate. Holders of Old Notes are
urged to consult their financial and tax advisors in making their own decision
on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Old Notes pursuant to the terms of, this Note Exchange Offer,
the Company will have fulfilled a covenant contained in the Note Registration
Rights Agreement. Holders of Old Notes who do not tender their Old Notes in the
Note Exchange Offer will continue to hold such Old Notes and will be entitled to
all the rights and limitations applicable thereto under the Indenture, except
for any such rights under the Note Registration Rights Agreement that by their
terms terminate or cease to have further effectiveness as a result of the making
of this Note Exchange Offer. All untendered Old Notes will continue to be
subject to the restrictions on transfer set forth in the Indenture. To the
extent that Old Notes are tendered and accepted in the Note Exchange Offer, the
trading market for untendered Old Notes could be adversely affected.
The Company may in the future seek to acquire, subject to the terms of the
Indenture, untendered Old Notes in open market or privately negotiated
transactions, through subsequent exchange offers or
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otherwise. The Company has no present plan to acquire any Old Notes which are
not tendered in the Note Exchange Offer.
RESALE OF EXCHANGE NOTES
The Company is making the Note Exchange Offer in reliance on the position of
the staff of the Commission as set forth in certain interpretive letters
addressed to third parties in other transactions. However, the Company has not
sought its own interpretive letter and there can be no assurance that the staff
would make a similar determination with respect to the Note Exchange Offer as it
has in such interpretive letters to third parties. Based on these
interpretations by the staff, the Company believes that the Exchange Notes
issued pursuant to the Note Exchange Offer in exchange for Old Notes may be
offered for resale, resold and otherwise transferred by a Holder (other than any
Holder who is a broker-dealer or an "affiliate" of the Company within the
meaning of Rule 405 of the Securities Act) without further compliance with the
registration and prospectus delivery requirements of the Securities Act,
provided that such Exchange Notes are acquired in the ordinary course of such
Holder's business and that such Holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such Exchange Notes. However, any
holder who is an "affiliate" of the Company or who has an arrangement or
understanding with respect to the distribution of the Exchange Notes to be
acquired pursuant to the Note Exchange Offer, or any broker-dealer who purchased
Old Notes from the Company to resell pursuant to Rule 144A or any other
available exemption under the Securities Act (i) could not rely on the
applicable interpretations of the staff and (ii) must comply with the
registration and prospectus delivery requirements of the Securities Act. A
broker-dealer who holds Old Notes that were acquired for its own account as a
result of market-making or other trading activities may be deemed to be an
"underwriter" within the meaning of the Securities Act and must, therefore,
deliver a prospectus meeting the requirements of the Securities Act in
connection with any resale of Exchange Notes. Each such broker-dealer that
receives Exchange Notes for its own account in exchange for Old Notes, where
such Old Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities, must acknowledge in the Note Letter of
Transmittal that it will deliver a prospectus in connection with any resale of
such Exchange Notes. See "Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the Exchange Notes may not be offered or sold unless they have been
registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Note Registration Rights Agreement and subject to
certain specified limitations therein, to register or qualify the Exchange Notes
for offer or sale under the securities or blue sky laws of such jurisdictions as
any holder of the Exchange Notes reasonably requests. Such registration or
qualification may require the imposition of restrictions or conditions
(including suitability requirements for offerees or purchasers) in connection
with the offer or sale of any Exchange Notes.
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THE PREFERRED STOCK EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Preferred Stock Letter of
Transmittal (which together constitute the Preferred Stock Exchange Offer), to
exchange up to $50 million aggregate principal amount of New Preferred Stock for
a like aggregate principal amount of Exchangeable Preferred Stock properly
tendered on or prior to the Expiration Date and not withdrawn as permitted
pursuant to the procedures described below. The Preferred Stock Exchange Offer
is being made with respect to all of the Exchangeable Preferred Stock.
As of the date of this Prospectus, $50 million aggregate principal amount of
the Exchangeable Preferred Stock is outstanding. This Prospectus, together with
the Preferred Stock Letter of Transmittal, is first being sent on or about
, 1998, to all holders of Exchangeable Preferred Stock known to the
Company. The Company's obligation to accept Exchangeable Preferred Stock for
exchange pursuant to the Preferred Stock Exchange Offer is subject to certain
conditions set forth under "Certain Conditions to the Preferred Stock Exchange
Offer" below. The Company currently expects that each of the conditions will be
satisfied and that no waivers will be necessary.
PURPOSE OF THE PREFERRED STOCK EXCHANGE OFFER
The Exchangeable Preferred Stock was issued on May 18, 1998 in a transaction
exempt from the registration requirements of the Securities Act. Accordingly,
the Exchangeable Preferred Stock may not be reoffered, resold, or otherwise
transferred unless so registered or unless an applicable exemption from the
registration and prospectus delivery requirements of the Securities Act is
available.
In connection with the issuance and sale of the Exchangeable Preferred
Stock, the Company entered into the Preferred Stock Registration Rights
Agreement, which requires the Company to file with the Commission a registration
statement relating to the Preferred Stock Exchange Offer not later than 45 days
after the date of issuance of the Exchangeable Preferred Stock, and to use its
best efforts to cause the registration statement relating to the Preferred Stock
Exchange Offer to become effective under the Securities Act not later than 160
days after the date of issuance of the Exchangeable Preferred Stock and the
Preferred Stock Exchange Offer to be consummated not later than 30 days after
the date of the effectiveness of the Registration Statement (or use its best
efforts to cause to become effective by the 190th calendar day after the
Issuance Date a shelf registration statement with respect to resales of the
Exchangeable Preferred Stock). A copy of the Preferred Stock Registration Rights
Agreement has been filed as an exhibit to the Registration Statement.
The Preferred Stock Exchange Offer is being made by the Company to satisfy
its obligations with respect to the Preferred Stock Registration Rights
Agreement. The term "holder," with respect to the Preferred Stock Exchange
Offer, means any person in whose name Exchangeable Preferred Stock is registered
on the books of the Company or any other person who has obtained a properly
completed bond power from the registered holder, or any person whose
Exchangeable Preferred Stock is held of record by The Depository Trust Company.
Other than pursuant to the Preferred Stock Registration Rights Agreement, the
Company is not required to file any registration statement to register any
outstanding Exchangeable Preferred Stock. Holders of Exchangeable Preferred
Stock who do not tender their Exchangeable Preferred Stock or whose Exchangeable
Preferred Stock is tendered but not accepted would have to rely on exemptions to
registration requirements under the securities laws, including the Securities
Act, if they wish to sell their Exchangeable Preferred Stock.
The Company is making the Preferred Stock Exchange Offer in reliance on the
position of the staff of the Commission as set forth in certain interpretive
letters addressed to third parties in other transactions. However, the Company
has not sought its own interpretive letter and there can be no assurance that
the staff would make a similar determination with respect to the Preferred Stock
Exchange Offer as it has in
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such interpretive letters to third parties. Based on these interpretations by
the staff, the Company believes that the New Preferred Stock issued pursuant to
the Preferred Stock Exchange Offer in exchange for Exchangeable Preferred Stock
may be offered for resale, resold and otherwise transferred by a Holder (other
than any Holder who is a broker-dealer or an "affiliate" of the Company within
the meaning of Rule 405 of the Securities Act) without further compliance with
the registration and prospectus delivery requirements of the Securities Act,
provided that such New Preferred Stock is acquired in the ordinary course of
such Holder's business and that such Holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such New Preferred Stock. See
"--Resale of New Preferred Stock." Each broker-dealer that receives New
Preferred Stock for its own account in exchange for New Preferred Stock, where
such Exchangeable Preferred Stock was acquired by such broker-dealer as a result
of market-making activities or other trading activities, must acknowledge that
it will deliver a prospectus in connection with any resale of such New Preferred
Stock. See "Plan of Distribution."
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, subject to the conditions set forth
herein and in the Preferred Stock Letter of Transmittal accompanying this
Prospectus, $1,000 in principal amount of New Preferred Stock for each $1,000 in
principal amount of the Exchangeable Preferred Stock. The terms of the New
Preferred Stock are identical in all material respects to the terms of the
Exchangeable Preferred Stock for which they may be exchanged pursuant to this
Preferred Stock Exchange Offer, except that the New Preferred Stock will
generally be freely transferable by holders thereof and will not be subject to
any covenant regarding registration. The New Preferred Stock will evidence the
same indebtedness as the Exchangeable Preferred Stock and will be entitled to
the benefits of the Indenture. See "Description of New Preferred Stock."
The Preferred Stock Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Exchangeable Preferred Stock being tendered for
exchange.
The Company has not requested, and does not intend to request, an
interpretation by the staff of the Commission with respect to whether the New
Preferred Stock issued pursuant to the Preferred Stock Exchange Offer in
exchange for the Exchangeable Preferred Stock may be offered for sale, resold or
otherwise transferred by any holder without compliance with the registration and
prospectus delivery provisions of the Securities Act. Instead, based on an
interpretation by the staff of the Commission set forth in a series of no-action
letters issued to third parties, the Company believes that New Preferred Stock
issued pursuant to the Preferred Stock Exchange Offer in exchange for
Exchangeable Preferred Stock may be offered for sale, resold and otherwise
transferred by any holder of such New Preferred Stock (other than any such
holder that is a broker-dealer or is an "affiliate" of the Company within the
meaning of Rule 405 under the Securities Act) without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
that such New Preferred Stock is acquired in the ordinary course of such
holder's business and such holder has no arrangement or understanding with any
person to participate in the distribution of such New Preferred Stock and
neither such holder nor any other such person is engaging in or intends to
engage in a distribution of such New Preferred Stock. Since the Commission has
not considered the Preferred Stock Exchange Offer in the context of a no-action
letter, there can be no assurance that the staff of the Commission would make a
similar determination with respect to the Preferred Stock Exchange Offer. Any
holder who is an affiliate of the Company or who tenders in the Preferred Stock
Exchange Offer for the purpose of participating in a distribution of the New
Preferred Stock cannot rely on such interpretation by the staff of the
Commission and must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with any resale transaction.
Each holder, other than a broker-dealer, must acknowledge that it is not engaged
in, and does not intend to engage in, a distribution of New Preferred Stock.
Each broker-dealer that receives New
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Preferred Stock for its own account in exchange for Exchangeable Preferred
Stock, where such Exchangeable Preferred Stock was acquired by such
broker-dealer as a result of market-making activities or other trading
activities, must acknowledge that it will deliver a prospectus in connection
with any resale of such New Preferred Stock. A broker-dealer may not participate
in the Preferred Stock Exchange Offer with respect to Exchangeable Preferred
Stock acquired other than as a result of market-making activities or other
trading activities. See "Plan of Distribution."
Tendering holders of the Exchangeable Preferred Stock shall not be required
to pay brokerage commissions or fees or, subject to the instructions in the
Preferred Stock Letter of Transmittal, transfer taxes with respect to the
exchange of the Exchangeable Preferred Stock pursuant to the Preferred Stock
Exchange Offer.
EXPIRATION DATE; EXTENSION; TERMINATION; AMENDMENT
The Preferred Stock Exchange Offer will expire at 5:00 p.m., New York City
time, on , 1998, unless the Company, in its sole discretion, has extended
the period of time for which the Preferred Stock Exchange Offer is open (such
date, as it may be extended, is referred to herein as the "Expiration Date") .
The Expiration Date will be at least 20 business days after the commencement of
the Preferred Stock Exchange Offer in accordance with Rule 14e-1(a) under the
Exchange Act. The Company expressly reserves the right, at any time or from time
to time, to extend the period of time during which the Preferred Stock Exchange
Offer is open, and thereby delay acceptance for exchange of any Exchangeable
Preferred Stock, by giving oral or written notice to the Exchange Agent and by
timely public announcement no later than 9:00 a.m. New York City time, on the
next business day after the previously scheduled Expiration Date. During any
such extension, all Exchangeable Preferred Stock previously tendered will remain
subject to the Preferred Stock Exchange Offer unless properly withdrawn. The
Company does not anticipate extending the Expiration Date.
The Company expressly reserves the right to (i) terminate or amend the
Preferred Stock Exchange Offer and not to accept for exchange any Exchangeable
Preferred Stock not theretofore accepted for exchange upon the occurrence of any
of the events specified below under "Certain Conditions to the Preferred Stock
Exchange Offer" which have not been waived by the Company and (ii) amend the
terms of the Preferred Stock Exchange Offer in any manner which, in its good
faith judgment, is advantageous to the holders of the Exchangeable Preferred
Stock, whether before or after any tender of the Preferred Stock. If any such
termination or amendment occurs, the Company will notify the Exchange Agent and
will either issue a press release or give oral or written notice to the holders
of the Exchangeable Preferred Stock as promptly as practicable.
For purposes of the Preferred Stock Exchange Offer, a "business day" means
any day other than Saturday, Sunday or a date on which banking institutions are
required or authorized by New York State law to be closed, and consists of the
time period from 12:01 a.m. through 12:00 midnight, New York City time. Unless
the Company terminates the Preferred Stock Exchange Offer prior to 5:00 p.m.,
New York City time, on the Expiration Date, the Company will exchange the New
Preferred Stock for the Exchangeable Preferred Stock on the Exchange Date.
PROCEDURES FOR TENDERING EXCHANGEABLE PREFERRED STOCK
The tender to the Company of Exchangeable Preferred Stock by a holder
thereof as set forth below and the acceptance thereof by the Company will
constitute a binding agreement between the tendering holder and the Company upon
the terms and subject to the conditions set forth in this Prospectus and in the
accompanying Preferred Stock Letter of Transmittal.
A holder of Exchangeable Preferred Stock may tender the same by (i) properly
completing and signing the Preferred Stock Letter of Transmittal or a facsimile
thereof (all references in this Prospectus to the Preferred Stock Letter of
Transmittal shall be deemed to include a facsimile thereof) and delivering the
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same, together with the certificate or certificates representing the
Exchangeable Preferred Stock being tendered and any required signature
guarantees and any other documents required by the Preferred Stock Letter of
Transmittal, to the Exchange Agent at its address set forth below on or prior to
the Expiration Date (or complying with the procedure for book-entry transfer
described below) or (ii) complying with the guaranteed delivery procedures
described below.
THE METHOD OF DELIVERY OF EXCHANGEABLE PREFERRED STOCK, PREFERRED STOCK
LETTERS OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND
RISK OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT
REGISTERED MAIL PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL
CASES, SUFFICIENT TIME SHOULD BE ALLOWED TO INSURE TIMELY DELIVERY. NO
EXCHANGEABLE PREFERRED STOCK OR PREFERRED STOCK LETTERS OF TRANSMITTAL SHOULD BE
SENT TO THE COMPANY.
If tendered Exchangeable Preferred Stock are registered in the name of the
signer of the Preferred Stock Letter of Transmittal and the New Preferred Stock
to be issued in exchange therefor are to be issued (and any untendered
Exchangeable Preferred Stock are to be reissued) in the name of the registered
holder (which term, for the purposes described herein, shall include any
participant in The Depository Trust Company (also referred to as a "book-entry
transfer facility") whose name appears on a security listing as the owner of
Exchangeable Preferred Stock), the signature of such signer need not be
guaranteed. In any other case, the tendered Exchangeable Preferred Stock must be
endorsed or accompanied by written instruments of transfer in form satisfactory
to the Company and duly executed by the registered holder, and the signature on
the endorsement or instrument of transfer must be guaranteed by a bank, broker,
dealer, credit union, savings association, clearing agency or other institution
(each an "Eligible Institution") that is a member of a recognized signature
guarantee medallion program within the meaning of Rule 17Ad-15 under the
Exchange Act. If the New Preferred Stock and/or Exchangeable Preferred Stock not
exchanged are to be delivered to an address other than that of the registered
holder appearing on the note register for the Exchangeable Preferred Stock, the
signature in the Preferred Stock Letter of Transmittal must be guaranteed by an
Eligible Institution.
The Exchange Agent will make a request within two business days after the
date of receipt of this Prospectus to establish accounts with respect to the
Exchangeable Preferred Stock at the book-entry transfer facility for the purpose
of facilitating the Preferred Stock Exchange Offer, and subject to the
establishment thereof, any financial institution that is a participant in the
book-entry transfer facility's system may make book-entry delivery of
Exchangeable Preferred Stock by causing such book-entry transfer facility to
transfer such Exchangeable Preferred Stock into the Exchange Agent's account
with respect to the Exchangeable Preferred Stock in accordance with the
book-entry transfer facility's procedures for such transfer. Although delivery
of Exchangeable Preferred Stock may be effected through book-entry transfer into
the Exchange Agent's account at the book-entry transfer facility, an appropriate
Preferred Stock Letter of Transmittal with any required signature guarantee and
all other required documents must in each case be transmitted to and received or
confirmed by the Exchange Agent at its address set forth below on or prior to
the Expiration Date, or, if the guaranteed delivery procedures described below
are complied with, within the time period provided under such procedures.
If a holder desires to accept the Preferred Stock Exchange Offer and time
will not permit a Preferred Stock Letter of Transmittal or Exchangeable
Preferred Stock to reach the Exchange Agent before the Expiration Date or the
procedure for book-entry transfer cannot be completed on a timely basis, a
tender may be effected if the Exchange Agent has received at its address set
forth below on or prior to the Expiration Date, a letter, telegram or facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight courier) from an Eligible Institution setting forth the
name and address of the tendering holder, the names in which the Exchangeable
Preferred Stock is registered and, if possible, the certificate numbers of the
Exchangeable Preferred Stock to be tendered, and stating that the tender is
being made thereby and guaranteeing that within three business days after the
Expiration Date, the Exchangeable Preferred Stock in proper form for transfer
(or a confirmation of book-entry transfer of such Exchangeable Preferred Stock
into the Exchange Agent's account at the book-entry transfer facility),
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will be delivered by such Eligible Institution together with a properly
completed and duly executed Preferred Stock Letter of Transmittal (and any other
required documents). Unless Exchangeable Preferred Stock being tendered by the
above-described method is deposited with the Exchange Agent within the time
period set forth above (accompanied or preceded by a properly completed
Preferred Stock Letter of Transmittal and any other required documents), the
Company may, at its option, reject the tender. Copies of the notice of
guaranteed delivery ("Preferred Stock Notice of Guaranteed Delivery") which may
be used by Eligible Institutions for the purposes described in this paragraph
are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Preferred Stock Letter of
Transmittal accompanied by the Exchangeable Preferred Stock (or a confirmation
of book-entry transfer of such Exchangeable Preferred Stock into the Exchange
Agent's account at the book-entry transfer facility) is received by the Exchange
Agent, or (ii) a Preferred Stock Notice of Guaranteed Delivery or letter,
telegram or facsimile transmission to similar effect (as provided above) from an
Eligible Institution is received by the Exchange Agent. Issuances of New
Preferred Stock in exchange for Exchangeable Preferred Stock tendered pursuant
to a Preferred Stock Notice of Guaranteed Delivery or letter, telegram or
facsimile transmission to similar effect (as provided above) by an Eligible
Institution will be made only against deposit of the Preferred Stock Letter of
Transmittal (and any other required documents) and the tendered Exchangeable
Preferred Stock.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Exchangeable Preferred Stock tendered for exchange
will be determined by the Company in its sole discretion, which determination
shall be final and binding. The Company reserves the absolute right to reject
any and all tenders of any particular Exchangeable Preferred Stock not properly
tendered or not to accept any particular Exchangeable Preferred Stock which
acceptance might, in the judgment of the Company or its counsel, be unlawful.
The Company also reserves the absolute right to waive any defects or
irregularities or conditions of the Preferred Stock Exchange Offer as to any
particular Exchangeable Preferred Stock either before or after the Expiration
Date (including the right to waive the ineligibility of any holder who seeks to
tender Exchangeable Preferred Stock in the Preferred Stock Exchange Offer). The
interpretation of the terms and conditions of the Preferred Stock Exchange Offer
(including the Preferred Stock Letter of Transmittal and the instructions
thereto) by the Company shall be final and binding on all parties. Unless
waived, any defects or irregularities in connection with tenders of Exchangeable
Preferred Stock for exchange must be cured within such reasonable period of time
as the Company shall determine. Neither the Company, the Exchange Agent nor any
other person shall be under any duty to give notification of any defect or
irregularity with respect to any tender of Exchangeable Preferred Stock for
exchange, nor shall any of them incur any liability for failure to give such
notification.
If the Preferred Stock Letter of Transmittal is signed by a person or
persons other than the registered holder or holders of Exchangeable Preferred
Stock, such Exchangeable Preferred Stock must be endorsed or accompanied by
appropriate powers of attorney, in either case signed exactly as the name or
names of the registered holder or holders appear on the Exchangeable Preferred
Stock.
If the Preferred Stock Letter of Transmittal or any Exchangeable Preferred
Stock or powers of attorney are signed by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, such persons should so indicate when
signing, and, unless waived by the Company, proper evidence satisfactory to the
Company of their authority to so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, the New Preferred Stock acquired pursuant to the Preferred Stock
Exchange Offer are being acquired in the ordinary course of business of the
person receiving such New Preferred Stock, whether or not such person is the
holder, that neither the holder nor any such other person has an arrangement or
understanding with any person to participate in the distribution of such New
Preferred Stock and that neither the holder nor any such other
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person is an "affiliate," as defined under Rule 405 of the Securities Act, of
the Company, or if it is an affiliate it will comply with the registration and
prospectus requirements of the Securities Act to the extent applicable.
Each broker-dealer that receives New Preferred Stock for its own account in
exchange for Exchangeable Preferred Stock where such Exchangeable Preferred
Stock was acquired by such broker-dealer as a result of market-making activities
or other trading activities must acknowledge that it will deliver a prospectus
in connection with any resale of such New Preferred Stock. See "Plan of
Distribution."
TERMS AND CONDITIONS OF THE PREFERRED STOCK LETTER OF TRANSMITTAL
The Preferred Stock Letter of Transmittal contains, among other things, the
following terms and conditions, which are part of the Preferred Stock Exchange
Offer.
The party tendering Preferred Stock for exchange (the "Transferor")
exchanges, assigns and transfers the Exchangeable Preferred Stock to the Company
and irrevocably constitutes and appoints the Exchange Agent as the Transferor's
agent and attorney-in-fact to cause the Exchangeable Preferred Stock to be
assigned, transferred and exchanged. The Transferor represents and warrants that
it has full power and authority to tender, exchange, assign and transfer the
Exchangeable Preferred Stock and to acquire New Preferred Stock issuable upon
the exchange of such tendered Preferred Stock, and that, when the same are
accepted for exchange, the Company will acquire good and unencumbered title to
the tendered Exchangeable Preferred Stock, free and clear of all liens,
restrictions, charges and encumbrances and not subject to any adverse claim. The
Transferor also warrants that it will, upon request, execute and deliver any
additional documents deemed by the Exchange Agent or the Company to be necessary
or desirable to complete the exchange, assignment and transfer of tendered
Exchangeable Preferred Stock or transfer ownership of such Exchangeable
Preferred Stock on the account books maintained by a book-entry transfer
facility. The Transferor further agrees that acceptance of any tendered
Exchangeable Preferred Stock by the Company and the issuance of New Preferred
Stock in exchange therefor shall constitute performance in full by the Company
of certain of its obligations under the Preferred Stock Registration Rights
Agreement. All authority conferred by the Transferor will survive the death or
incapacity of the Transferor and every obligation of the Transferor shall be
binding upon the heirs, legal representatives, successors, assigns, executors
and administrators of such Transferor.
The Transferor certifies that it is not an "affiliate" of the Company within
the meaning of Rule 405 under the Securities Act and that it is acquiring the
New Preferred Stock offered hereby in the ordinary course of such Transferor's
business and that such Transferor has no arrangement with any person to
participate in the distribution of such New Preferred Stock. Each holder, other
than a broker-dealer, must acknowledge that it is not engaged in, and does not
intend to engage in, a distribution of New Preferred Stock. Each Transferor
which is a broker-dealer receiving New Preferred Stock for its own account must
acknowledge that it will deliver a prospectus in connection with any resale of
such New Preferred Stock. By so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of New Preferred Stock received in exchange for Exchangeable
Preferred Stock where such Exchangeable Preferred Stock was acquired by such
broker-dealer as a result of market-making activities or other trading
activities. The Company will, for a period of 90 days after the Expiration Date,
make copies of this Prospectus available to any broker-dealer for use in
connection with any such resale.
WITHDRAWAL RIGHTS
Tenders of Exchangeable Preferred Stock may be withdrawn at any time prior
to the Expiration Date.
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent at the address set
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forth herein prior to the Expiration Date. Any such notice of withdrawal must
(i) specify the name of the person having tendered the Exchangeable Preferred
Stock to be withdrawn (the "Depositor"), (ii) identify the Exchangeable
Preferred Stock to be withdrawn (including the certificate number or numbers and
principal amount of such Exchangeable Preferred Stock), (iii) specify the
principal amount of Exchangeable Preferred Stock to be withdrawn, (iv) include a
statement that such holder is withdrawing his election to have such Exchangeable
Preferred Stock exchanged, (v) be signed by the holder in the same manner as the
original signature on the Preferred Stock Letter of Transmittal by which such
Exchangeable Preferred Stock were tendered or as otherwise described above
(including any required signature guarantees) or be accompanied by documents of
transfer sufficient to have the Trustee under the Indenture register the
transfer of such Exchangeable Preferred Stock into the name of the person
withdrawing the tender and (vi) specify the name in which any such Exchangeable
Preferred Stock is to be registered, if different from that of the Depositor.
The Exchange Agent will return the properly withdrawn Exchangeable Preferred
Stock promptly following receipt of notice of withdrawal. If Exchangeable
Preferred Stock has been tendered pursuant to the procedure for book-entry
transfer, any notice of withdrawal must specify the name and number of the
account at the book-entry transfer facility to be credited with the withdrawn
Exchangeable Preferred Stock or otherwise comply with the book-entry transfer
facility procedure. All questions as to the validity of notices of withdrawals,
including time of receipt, will be determined by the Company and such
determination will be final and binding on all parties.
Any Exchangeable Preferred Stock so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Preferred Stock Exchange
Offer. Any Exchangeable Preferred Stock which have been tendered for exchange
but which are not exchanged for any reason will be returned to the holder
thereof without cost to such holder (or, in the case of Exchangeable Preferred
Stock tendered by book-entry transfer into the Exchange Agent's account at the
book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such Exchangeable Preferred Stock will be credited to an
account with such book-entry transfer facility specified by the holder) as soon
as practicable after withdrawal, rejection of tender or termination of the
Preferred Stock Exchange Offer. Properly withdrawn Exchangeable Preferred Stock
may be retendered by following one of the procedures described under "Procedures
for Tendering Exchangeable Preferred Stock" above at any time on or prior to the
Expiration Date.
ACCEPTANCE OF EXCHANGEABLE PREFERRED STOCK FOR EXCHANGE; DELIVERY OF NEW
PREFERRED STOCK
Upon satisfaction or waiver of all of the conditions to the Preferred Stock
Exchange Offer, the Company will accept, promptly on the Exchange Date, all
Exchangeable Preferred Stock properly tendered and will issue the New Preferred
Stock promptly after such acceptance. See "Certain Conditions to the Preferred
Stock Exchange Offer" below. For purposes of the Preferred Stock Exchange Offer,
the Company shall be deemed to have accepted properly tendered Exchangeable
Preferred Stock for exchange when, as and if the Company has given oral or
written notice thereof to the Exchange Agent.
For each share of Exchangeable Preferred Stock accepted for exchange, the
holder of such Exchangeable Preferred Stock will receive a share of New
Preferred Stock having a principal amount equal to that of the surrendered
Exchangeable Preferred Stock.
In all cases, issuance of New Preferred Stock for Exchangeable Preferred
Stock that are accepted for exchange pursuant to the Preferred Stock Exchange
Offer will be made only after timely receipt by the Exchange Agent of
certificates for such Exchangeable Preferred Stock or a timely book-entry
confirmation of such Exchangeable Preferred Stock into the Exchange Agent's
account at the book-entry transfer facility, a properly completed and duly
executed Preferred Stock Letter of Transmittal and all other required documents.
If any tendered Exchangeable Preferred Stock is not accepted for any reason set
forth in the terms and conditions of the Preferred Stock Exchange Offer or if
Exchangeable Preferred Stock is submitted for a greater principal amount than
the holder desires to exchange, such unaccepted or non-exchanged Exchangeable
Preferred Stock will be returned without expense to the tendering holder thereof
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(or, in the case of Exchangeable Preferred Stock tendered by book-entry transfer
into the Exchange Agent's account at the book-entry transfer facility pursuant
to the book-entry transfer procedures described above, such non-exchanged
Exchangeable Preferred Stock will be credited to an account maintained with such
book-entry transfer facility) as promptly as practicable after the expiration of
the Preferred Stock Exchange Offer.
CERTAIN CONDITIONS TO THE PREFERRED STOCK EXCHANGE OFFER
Notwithstanding any other provision of the Preferred Stock Exchange Offer,
or any extension of the Preferred Stock Exchange Offer, the Company shall not be
required to accept for exchange, or to issue New Preferred Stock in exchange
for, any Exchangeable Preferred Stock and may terminate or amend the Preferred
Stock Exchange Offer (by oral or written notice to the Exchange Agent or by a
timely press release) if at any time before the acceptance of such Exchangeable
Preferred Stock for exchange or the exchange of the New Preferred Stock for such
Exchangeable Preferred Stock, any of the following conditions exist:
(a) any action or proceeding is instituted or threatened in any court or
by or before any governmental agency or regulatory authority or any
injunction, order or decree is issued with respect to the Preferred Stock
Exchange Offer which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Preferred Stock
Exchange Offer or have a material adverse effect on the contemplated
benefits of the Preferred Stock Exchange Offer to the Company; or
(b) any change (or any development involving a prospective change) shall
have occurred or be threatened in the business, properties, assets,
liabilities, financial condition, operations, results of operations or
prospects of the Company that is or may be adverse to the Company, or the
Company shall have become aware of facts that have or may have adverse
significance with respect to the value of the Exchangeable Preferred Stock
or the New Preferred Stock or that may materially impair the contemplated
benefits of the Preferred Stock Exchange Offer to the Company; or
(c) any law, rule or regulation or applicable interpretations of the
staff of the Commission is issued or promulgated which, in the good faith
determination of the Company, do not permit the Company to effect the
Preferred Stock Exchange Offer; or
(d) any governmental approval has not been obtained, which approval the
Company, in its sole discretion, deems necessary for the consummation of the
Preferred Stock Exchange Offer; or
(e) there shall have been proposed, adopted or enacted any law, statute,
rule or regulation (or an amendment to any existing law statute, rule or
regulation) which, in the sole judgment of the Company, might materially
impair the ability of the Company to proceed with the Preferred Stock
Exchange Offer or have a material adverse effect on the contemplated
benefits of the Preferred Stock Exchange Offer to the Company; or
(f) there shall occur a change in the current interpretation by the
staff of the Commission which permits the New Preferred Stock issued
pursuant to the Preferred Stock Exchange Offer in exchange for Exchangeable
Preferred Stock to be offered for resale, resold and otherwise transferred
by holders thereof (other than any such holder that is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act) without
compliance with the registration and prospectus delivery provisions of the
Securities Act provided that such New Preferred Stock is acquired in the
ordinary course of such holders' business and such holders have no
arrangement with any person to participate in the distribution of such New
Preferred Stock; or
(g) there shall have occurred (i) any general suspension of, shortening
of hours for, or limitation on prices for, trading in securities on any
national securities exchange or in the over-the-counter market (whether or
not mandatory), (ii) any limitation by any govermental agency or authority
which
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may adversely affect the ability of the Company to complete the transactions
contemplated by the Preferred Stock Exchange Offer, (iii) a declaration of a
banking moratorium or any suspension of payments in respect of banks by
Federal or state authorities in the United States (whether or not
mandatory), (iv) a commencement of a war, armed hostilities or other
international or national crisis directly or indirectly involving the United
States, (v) any limitation (whether or not mandatory) by any governmental
authority on, or other event having a reasonable likelihood of affecting,
the extension of credit by banks or other leading institutions in the United
States, or (vi) in the case of any of the foregoing existing at the time of
the commencement of the Preferred Stock Exchange Offer, a material
acceleration or worsening thereof.
The Company expressly reserves the right to terminate the Preferred Stock
Exchange Offer and not accept for exchange any Exchangeable Preferred Stock upon
the occurrence of any of the foregoing conditions (which represent all of the
material conditions to the acceptance by the Company of properly tendered
Exchangeable Preferred Stock). In addition, the Company may amend the Preferred
Stock Exchange Offer at any time prior to the Expiration Date if any of the
conditions set forth above occur. Moreover, regardless of whether any of such
conditions has occurred, the Company may amend the Preferred Stock Exchange
Offer in any manner which, in its good faith judgment, is advantageous to
holders of the Exchangeable Preferred Stock.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its sole discretion. The failure by the Company at any time
to exercise any of the foregoing rights shall not be deemed a waiver of any such
right and each such right shall be deemed an ongoing right which may be asserted
at any time and from time to time. If the Company waives or amends the foregoing
conditions, it will, if required by law, extend the Preferred Stock Exchange
Offer for a minimum of five business days from the date that the Company first
gives notice, by public announcement or otherwise, of such waiver or amendment,
if the Preferred Stock Exchange Offer would otherwise expire within such five
business-day period. Any determination by the Company concerning the events
described above will be final and binding upon all parties.
In addition, the Company will not accept for exchange any Exchangeable
Preferred Stock tendered, and no New Preferred Stock will be issued in exchange
for any such Exchangeable Preferred Stock, if at such time any stop order shall
be threatened or in effect with respect to the Registration Statement of which
this Prospectus constitutes a part. In any such event the Company is required to
use every reasonable effort to obtain the withdrawal of any stop order at the
earliest possible time.
The Preferred Stock Exchange Offer is not conditioned upon any minimum
principal amount of Exchangeable Preferred Stock being tendered for exchange.
EXCHANGE AGENT
The Bank of New York has been appointed as the Exchange Agent for the
Preferred Stock Exchange Offer. All executed Letters of Transmittal should be
directed to the Exchange Agent at one of the addresses set forth below:
<TABLE>
<S> <C>
BY HAND/OVERNIGHT COURIER: BY MAIL:
The Bank of New York The Bank of New York
101 Barclay Street 101 Barclay Street
New York, New York 10005 New York, New York 10005
BY FACSIMILE:
(212) 815-6339
Attn.:
Telephone: (212)
</TABLE>
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Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the address and
telephone number set forth in the Preferred Stock Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ON THE PREFERRED STOCK LETTER
OF TRANSMITTAL, OR TRANSMISSIONS OF INSTRUCTIONS VIA A FACSIMILE OR TELEX NUMBER
OTHER THAN THE ONES SET FORTH ON THE PREFERRED STOCK LETTER OF TRANSMITTAL, WILL
NOT CONSTITUTE A VALID DELIVERY.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the
Preferred Stock Exchange Offer and will not make any payments to brokers,
dealers or others soliciting acceptances of the Preferred Stock Exchange Offer.
The Company, however, will pay the Exchange Agent reasonable and customary fees
for its services and will reimburse it for its reasonable out-of-pocket expenses
in connection therewith. The Company will also pay brokerage houses and other
custodians, nominees and fiduciaries the reasonable out-of-pocket expenses
incurred by them in forwarding copies of this and other related documents to the
beneficial owners of the Exchangeable Preferred Stock and in handling or
forwarding tenders for their customers.
The estimated cash expenses to be incurred in connection with the Preferred
Stock Exchange Offer will be paid by the Company and are estimated in the
aggregate to be approximately $40,000, which includes fees and expenses of the
Exchange Agent, Trustee, registration fees, accounting, legal, printing and
related fees and expenses.
No person has been authorized to give any information or to make any
representations in connection with the Preferred Stock Exchange Offer other than
those contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any exchange made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the respective dates as of which
information is given herein. The Preferred Stock Exchange Offer is not being
made to (nor will tenders be accepted from or on behalf of) holders of
Exchangeable Preferred Stock in any jurisdiction in which the making of the
Preferred Stock Exchange Offer or the acceptance thereof would not be in
compliance with the laws of such jurisdiction. However, the Company may, at its
discretion, take such action as it may deem necessary to make the Preferred
Stock Exchange Offer in any such jurisdiction and extend the Preferred Stock
Exchange Offer to holders of Exchangeable Preferred Stock in such jurisdiction.
In any jurisdiction in which the securities laws or blue sky laws of which
require the Preferred Stock Exchange Offer to be made by a licensed broker or
dealer, the Preferred Stock Exchange Offer is being made on behalf of the
Company by one or more registered brokers or dealers which are licensed under
the laws of such jurisdication.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the exchange
of Exchangeable Preferred Stock pursuant to the Preferred Stock Exchange Offer.
If, however, certificates representing New Preferred Stock or Exchangeable
Preferred Stock for principal amounts not tendered or accepted for exchange are
to be delivered to, or are to be issued in the name of, any person other than
the registered holder of the Exchangeable Preferred Stock tendered, or if
tendered Exchangeable Preferred Stock is registered in the name of any person
other than the person signing the Preferred Stock Letter of Transmittal, or if a
transfer tax is imposed for any reason other than the exchange of Exchangeable
Preferred Stock pursuant to the Preferred Stock Exchange Offer, then the amount
of any such transfer taxes (whether imposed on the registered holder or any
other persons) will be payable by the tendering holder. If satisfactory evidence
of payment of such taxes or exemption therefrom is not submitted with the
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Preferred Stock Letter of Transmittal, the amount of such transfer taxes will be
billed directly to such tendering holder.
ACCOUNTING TREATMENT
The New Preferred Stock will be recorded at the carrying value of the
Exchangeable Preferred Stock as reflected in the Company's accounting records on
the date of the exchange. Accordingly, no gain or loss for accounting purposes
will be recognized by the Company upon the exchange of New Preferred Stock for
Exchangeable Preferred Stock. Expenses incurred in connection with the issuance
of the New Preferred Stock will be amortized over the term of the New Preferred
Stock.
CONSEQUENCES OF FAILURE TO EXCHANGE
Holders of Exchangeable Preferred Stock who do not exchange their
Exchangeable Preferred Stock for New Preferred Stock pursuant to the Preferred
Stock Exchange Offer will continue to be subject to the restrictions on transfer
of such Exchangeable Preferred Stock as set forth in the legend thereon.
Exchangeable Preferred Stock not exchanged pursuant to the Preferred Stock
Exchange Offer will continue to remain outstanding in accordance with their
terms. In general, the Exchangeable Preferred Stock may not be offered or sold
unless registered under the Securities Act, except pursuant to an exemption
from, or in a transaction not subject to, the Securities Act and applicable
state securities laws. The Company does not currently anticipate that it will
register the Exchangeable Preferred Stock under the Securities Act.
Participation in the Preferred Stock Exchange Offer is voluntary, and
holders of Exchangeable Preferred Stock should carefully consider whether to
participate. Holders of Exchangeable Preferred Stock are urged to consult their
financial and tax advisors in making their own decision on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Exchangeable Preferred Stock pursuant to the terms of, this
Preferred Stock Exchange Offer, the Company will have fulfilled a covenant
contained in the Preferred Stock Registration Rights Agreement. Holders of
Exchangeable Preferred Stock who do not tender their Exchangeable Preferred
Stock in the Preferred Stock Exchange Offer will continue to hold such
Exchangeable Preferred Stock and will be entitled to all the rights and
limitations applicable thereto under the Certificate of Designations, except for
any such rights under the Preferred Stock Registration Rights Agreement that by
their terms terminate or cease to have further effectiveness as a result of the
making of this Preferred Stock Exchange Offer. All untendered Exchangeable
Preferred Stock will continue to be subject to the restrictions on transfer set
forth in the Indenture. To the extent that Exchangeable Preferred Stock are
tendered and accepted in the Preferred Stock Exchange Offer, the trading market
for untendered Exchangeable Preferred Stock could be adversely affected.
The Company may in the future seek to acquire, subject to the terms of the
Certificate of Designations, untendered Exchangeable Preferred Stock in open
market or privately negotiated transactions, through subsequent exchange offers
or otherwise. The Company has no present plan to acquire any Exchangeable
Preferred Stock which are not tendered in the Preferred Stock Exchange Offer.
RESALE OF NEW PREFERRED STOCK
The Company is making the Preferred Stock Exchange Offer in reliance on the
position of the staff of the Commission as set forth in certain interpretive
letters addressed to third parties in other transactions. However, the Company
has not sought its own interpretive letter and there can be no assurance that
the staff would make a similar determination with respect to the Preferred Stock
Exchange Offer as it has in such interpretive letters to third parties. Based on
these interpretations by the staff, the Company believes that the New Preferred
Stock issued pursuant to the Preferred Stock Exchange Offer in exchange for
Exchangeable Preferred Stock may be offered for resale, resold and otherwise
transferred by a Holder
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(other than any Holder who is a broker-dealer or an "affiliate" of the Company
within the meaning of Rule 405 of the Securities Act) without further compliance
with the registration and prospectus delivery requirements of the Securities
Act, provided that such New Preferred Stock is acquired in the ordinary course
of such Holder's business and that such Holder is not participating, and has no
arrangement or understanding with any person to participate, in a distribution
(within the meaning of the Securities Act) of such New Preferred Stock. However,
any holder who is an "affiliate" of the Company or who has an arrangement or
understanding with respect to the distribution of the New Preferred Stock to be
acquired pursuant to the Preferred Stock Exchange Offer, or any broker-dealer
who purchased Exchangeable Preferred Stock from the Company to resell pursuant
to Rule 144A or any other available exemption under the Securities Act (i) could
not rely on the applicable interpretations of the staff and (ii) must comply
with the registration and prospectus delivery requirements of the Securities
Act. A broker-dealer who holds Exchangeable Preferred Stock that was acquired
for its own account as a result of market-making or other trading activities may
be deemed to be an "underwriter" within the meaning of the Securities Act and
must, therefore, deliver a prospectus meeting the requirements of the Securities
Act in connection with any resale of New Preferred Stock. Each such
broker-dealer that receives New Preferred Stock for its own account in exchange
for Exchangeable Preferred Stock, where such Exchangeable Preferred Stock were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge in the Preferred Stock Letter of
Transmittal that it will deliver a prospectus in connection with any resale of
such New Preferred Stock. See "Plan of Distribution."
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New Preferred Stock may not be offered or sold unless they have
been registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Preferred Stock Registration Rights Agreement and
subject to certain specified limitations therein, to register or qualify the New
Preferred Stock for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of the New Preferred Stock reasonably requests. Such
registration or qualification may require the imposition of restrictions or
conditions (including suitability requirements for offerees or purchasers) in
connection with the offer or sale of any New Preferred Stock.
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DESCRIPTION OF THE EXCHANGE NOTES
GENERAL
The Exchange Notes will be issued pursuant to an Indenture (the "Indenture")
among the Company, the Subsidiary Guarantors and The Bank of New York, as
trustee (the "Trustee"). See "Notice to Investors." The terms of the Exchange
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939 (the "Trust Indenture Act"). The
Exchange Notes are subject to all such terms, and Holders of Exchange Notes are
referred to the Indenture and the Trust Indenture Act for a statement thereof.
The following summary of the material provisions of the Indenture does not
purport to be complete and is qualified in its entirety by reference to the
Indenture, including the definitions therein of certain terms used below. Copies
of the proposed form of Indenture and Note Registration Rights Agreement are
available as set forth below under the caption "--Additional Information." The
definitions of certain terms used in the following summary are set forth below
under the caption "--Certain Definitions." For purposes of this summary, the
term "Company" refers only to Cluett American Corp. and not to any of its
Subsidiaries.
The Exchange Notes will be general unsecured obligations of the Company and
will be subordinated in right of payment to all existing and future Senior
Indebtedness, and will rank PARI PASSU or senior in right of payment to all
existing and future subordinated indebtedness of the Company. As of March 28,
1998, on a pro forma basis after giving effect to the Transaction, the Company
would have had Senior Indebtedness of approximately $122.4 million (excluding
$11.2 million of letters of credit). The Indenture permits the incurrence of
additional Senior Indebtedness in the future. The Exchange Notes will be
effectively subordinated to all indebtedness and other liabilities and
commitments (including trade payables and capital lease obligations) of the
Company's foreign subsidiaries. Any right of the Company to receive assets of
any of its foreign subsidiaries upon the latter's liquidation or reorganization
(and the consequent right of the Holders of the Exchange Notes to participate in
those assets) will be effectively subordinated to the claims of that
subsidiary's creditors, except to the extent that the Company is itself
recognized as a creditor of such subsidiary, in which case the claims of the
Company would still be subordinated to any security in the assets of such
subsidiary and any indebtedness of such subsidiary senior to that held by the
Company. As of March 28, 1998, the aggregate amount of liabilities of the
Company's foreign subsidiaries was $9.4 million.
As of the date of the Indenture, all of the Company's Subsidiaries will be
Restricted Subsidiaries. Under certain circumstances, however, the Company will
be able to designate current or future Subsidiaries as Unrestricted
Subsidiaries. Unrestricted Subsidiaries will not be subject to many of the
restrictive covenants set forth in the Indenture.
PRINCIPAL, MATURITY AND INTEREST
The Exchange Notes will be limited in aggregate principal amount to $175.0
million and will mature on May 15, 2008. Interest on the Notes will accrue at
the rate of 10 1/8% per annum and will be payable semiannually in arrears on May
15 and November 15, commencing on November 15, 1998, to Holders of record on the
immediately preceding May 1 and November 1. Additional Exchange Notes (the
"Additional Exchange Notes") may be issued from time to time after the Exchange
Offering, subject to the provisions of the Indenture described below under the
caption "--Certain Covenants--Incurrence of Indebtedness and Issuance of
Preferred Stock." The Exchange Notes offered hereby, the Parity Notes and any
Additional Exchange Notes subsequently issued under the Indenture would be
treated as a single class for all purposes under the Indenture, including,
without limitation, waivers, amendments, redemptions and offers to purchase.
Interest on the Exchange Notes will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from the date of
original issuance. Interest will be computed on the basis of a 360-day year
comprised of twelve 30-day months. Principal, premium, if any, and interest and
Liquidated Damages on the Exchange Notes will be payable at the office or agency
of the Company
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maintained for such purpose within the City and State of New York or, at the
option of the Company, payment of interest may be made by check mailed to the
Holders of the Notes at their respective addresses set forth in the register of
Holders of Exchange Notes; PROVIDED that all payments of principal, premium and
interest with respect to Exchange Notes the Holders of which have given wire
transfer instructions to the Company will be required to be made by wire
transfer of immediately available funds to the accounts specified by the Holders
thereof. Until otherwise designated by the Company, the Company's office or
agency in New York will be the office of the Trustee maintained for such
purpose. The Exchange Notes will be issued in denominations of $1,000 and
integral multiples thereof.
SUBORDINATION
The payment of principal of, premium, if any, and interest on the Exchange
Notes will be subordinated in right of payment, as set forth in the Indenture,
to the prior payment in full of all Senior Indebtedness, whether outstanding on
the date of the Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Senior Indebtedness will be entitled to
receive payment in full of all Obligations due in respect of such Senior
Indebtedness (including interest after the commencement of any such proceeding
at the rate specified in the applicable Senior Indebtedness) before the Holders
of Exchange Notes will be entitled to receive any payment with respect to the
Exchange Notes, and until all Obligations with respect to Senior Indebtedness
are paid in full, any distribution to which the Holders of Exchange Notes would
be entitled shall be made to the holders of Senior Indebtedness (except that
Holders of Exchange Notes may receive and retain Permitted Junior Securities and
payments made from the trust described under the caption "--Legal Defeasance and
Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Exchange
Notes (except in Permitted Junior Securities or from the trust described under
the caption "--Legal Defeasance and Covenant Defeasance") if (i) a default in
the payment of the principal of, premium, if any, or interest on Designated
Senior Debt occurs and is continuing beyond any applicable period of grace or
(ii) any other default occurs and is continuing with respect to Designated
Senior Debt that permits holders of the Designated Senior Debt as to which such
default relates to accelerate its maturity and the Trustee receives a notice of
such default (a "Payment Blockage Notice") from the Company or the holders of
any Designated Senior Debt. Payments on the Exchange Notes may and shall be
resumed (a) in the case of a payment default, upon the date on which such
default is cured or waived and (b) in case of a nonpayment default, the earlier
of the date on which such nonpayment default is cured or waived or 179 days
after the date on which the applicable Payment Blockage Notice is received,
unless the maturity of any Designated Senior Debt has been accelerated. No new
period of payment blockage may be commenced unless and until (i) 360 days have
elapsed since the effectiveness of the immediately prior Payment Blockage Notice
and (ii) all scheduled payments of principal, premium, if any, and interest on
the Exchange Notes that have come due have been paid in full in cash. No
nonpayment default that existed or was continuing on the date of delivery of any
Payment Blockage Notice to the Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice.
The Indenture will further require that the Company promptly notify holders
of Senior Indebtedness if payment of the Exchange Notes is accelerated because
of an Event of Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Exchange Notes may recover less ratably
than creditors of the Company who are holders of Senior Indebtedness. On a pro
forma basis, after giving effect to the Transaction, the principal amount of
Senior Indebtedness outstanding at March 28, 1998 would have been approximately
$122.4 million (excluding $11.2 million of letters of credit). The Indenture
limits, subject to certain financial tests, the
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amount of additional Indebtedness, including Senior Indebtedness, that the
Company and its subsidiaries can incur. See "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock."
SUBSIDIARY GUARANTEES
The Company's payment obligations under the Exchange Notes will be jointly
and severally guaranteed (the "Subsidiary Guarantees") by the Guarantors. The
Subsidiary Guarantee of each Guarantor will be subordinated to the prior payment
in full of all Senior Indebtedness of such Guarantor, which would include
approximately $122.4 million (excluding $11.2 million of letters of credit) of
Senior Indebtedness outstanding as of March 28, 1998, and the amounts for which
the Guarantors will be liable under the guarantees issued from time to time with
respect to Senior Indebtedness. The obligations of each Guarantor under its
Subsidiary Guarantee will be limited so as not to constitute a fraudulent
conveyance under applicable law. See "Risk Factors--Fraudulent Conveyance
Matters."
The Indenture provides that no Guarantor may consolidate with or merge with
or into (whether or not such Guarantor is the surviving Person) another
corporation, Person or entity whether or not affiliated with such Guarantor
unless (i) subject to the provisions of the following paragraph, the Person
formed by or surviving any such consolidation or merger (if other than such
Guarantor) assumes all the obligations of such Guarantor pursuant to a
supplemental indenture in form and substance reasonably satisfactory to the
Trustee, under the Exchange Notes, the Indenture and the Note Registration
Rights Agreement and (ii) immediately after giving effect to such transaction,
no Default or Event of Default exists.
The Indenture provides that in the event of a sale or other disposition of
all of the assets of any Guarantor, by way of merger, consolidation or
otherwise, or a sale or other disposition of all of the capital stock of any
Guarantor, then such Guarantor (in the event of a sale or other disposition, by
way of such a merger, consolidation or otherwise, of all of the capital stock of
such Guarantor) or the corporation acquiring the property (in the event of a
sale or other disposition of all of the assets of such Guarantor) will be
released and relieved of any obligations under its Subsidiary Guarantee;
PROVIDED that the Net Proceeds of such sale or other disposition are applied in
accordance with the applicable provisions of the Indenture. See "Redemption or
Repurchase at Option of Holders--Asset Sales."
OPTIONAL REDEMPTION
The Exchange Notes will not be redeemable at the Company's option prior to
May 15, 2003. Thereafter, the Exchange Notes will be subject to redemption at
any time at the option of the Company, in whole or in part, upon not less than
30 nor more than 60 days' notice, at the redemption prices (expressed as
percentages of principal amount) set forth below plus accrued and unpaid
interest thereon to the applicable redemption date, if redeemed during the
twelve-month period beginning on May 15 of the years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- -------------------------------------------------------------------------------------- -----------
<S> <C>
2003.................................................................................. 105.0625%
2004.................................................................................. 103.3750%
2005.................................................................................. 101.6875%
2006 and thereafter................................................................... 100.0000%
</TABLE>
Notwithstanding the foregoing, during the first 36 months after the date of
this Prospectus, the Company may on any one or more occasions redeem up to 35%
of the aggregate principal amount of Exchange Notes originally issued under the
Indenture at a redemption price of 110.125% of the principal amount thereof,
plus accrued and unpaid interest thereon, if any, to the redemption date, with
the net cash proceeds of a Public Offering; PROVIDED that at least 65% of the
original aggregate principal amount of Exchange Notes remains outstanding
immediately after the occurrence of such redemption (excluding Exchange Notes
held by the Company and its Subsidiaries); and PROVIDED, further, that such
redemption shall occur within 45 days of the date of the closing of such Public
Offering.
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At any time prior to May 15, 2003, the Exchange Notes may also be redeemed,
as a whole but not in part, at the option of the Company upon the occurrence of
a Change of Control, upon not less than 30 nor more than 60 days prior notice
(but in no event may any such redemption occur more than 90 days after the
occurrence of such Change of Control) mailed by first-class mail to each
Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest to, the date of redemption (the "Redemption Date").
SELECTION AND NOTICE
If less than all of the Exchange Notes are to be redeemed at any time,
selection of Exchange Notes for redemption will be made by the Trustee in
compliance with the requirements of the principal national securities exchange,
if any, on which the Exchange Notes are listed, or, if the Exchange Notes are
not so listed, on a pro rata basis, by lot or by such method as the Trustee
shall deem fair and appropriate; PROVIDED that no Exchange Notes of $1,000 or
less shall be redeemed in part. Notices of redemption shall be mailed by first
class mail at least 30 but not more than 60 days before the redemption date to
each Holder of Exchange Notes to be redeemed at its registered address. Notices
of redemption may not be conditional. If any Exchange Note is to be redeemed in
part only, the notice of redemption that relates to such Exchange Note shall
state the portion of the principal amount thereof to be redeemed. A new Exchange
Note in principal amount equal to the unredeemed portion thereof will be issued
in the name of the Holder thereof upon cancellation of the original Exchange
Note. Exchange Notes called for redemption become due on the date fixed for
redemption. On and after the redemption date, interest ceases to accrue on
Exchange Notes or portions of them called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Exchange Notes.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Exchange Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Exchange Notes
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest to the date of purchase (the "Change of Control
Payment"). Within 30 days following any Change of Control, the Company will mail
a notice to each Holder describing the transaction or transactions that
constitute the Change of Control and offering to repurchase Exchange Notes on
the date specified in such notice, which date shall be no earlier than 30 days
and no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), pursuant to the procedures required by the Indenture and
described in such notice. The Company will comply with the requirements of Rule
14e-1 under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Exchange Notes as a result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (i) accept for payment all Exchange Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (ii) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all
Exchange Notes or portions thereof so tendered and (iii) deliver or cause to be
delivered to the Trustee the Exchange Notes so accepted together with an
Officers' Certificate stating the aggregate principal amount of Exchange Notes
or portions thereof being purchased by the Company. The Paying Agent will
promptly mail to each Holder of Exchange Notes so tendered the Change of Control
Payment for such
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Exchange Notes, and the Trustee will promptly authenticate and mail (or cause to
be transferred by book entry) to each Holder a new Exchange Note equal in
principal amount to any unpurchased portion of the Exchange Notes surrendered,
if any; PROVIDED that each such new Exchange Note will be in a principal amount
of $1,000 or an integral multiple thereof. The Indenture provides that, prior to
complying with the provisions of this covenant, but in any event within 90 days
following a Change of Control, the Company will either repay all outstanding
Senior Indebtedness or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Indebtedness to permit the repurchase of
Exchange Notes required by this covenant. The Company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Indenture are applicable. Except as described
above with respect to a Change of Control, the Indenture does not contain
provisions that permit the Holders of the Exchange Notes to require that the
Company repurchase or redeem the Exchange Notes in the event of a takeover,
recapitalization or similar transaction.
The Senior Credit Facility currently prohibits the Company from purchasing
any Exchange Notes and also provides that certain change of control events with
respect to the Company would constitute a default thereunder. Any future credit
agreements or other agreements relating to Senior Indebtedness to which the
Company becomes a party may contain similar restrictions and provisions. In the
event a Change of Control occurs at a time when the Company is prohibited from
purchasing Exchange Notes, the Company could seek the consent of its lenders to
the purchase of Exchange Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a consent or repay
such borrowings, the Company will remain prohibited from purchasing Exchange
Notes. In such case, the Company's failure to purchase tendered Exchange Notes
would constitute an Event of Default under the Indenture which would, in turn,
constitute a default under the Senior Credit Facility. In such circumstances,
the subordination provisions in the Indenture would likely restrict payments to
the Holders of Exchange Notes.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Indenture applicable to a Change of Control Offer made by the Company and
purchases all Exchange Notes validly tendered and not withdrawn under such
Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Notes to require the Company to
repurchase such Exchange Notes as a result of a sale, lease, transfer,
conveyance or other disposition of less than all of the assets of the Company
and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
ASSET SALES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, consummate an Asset Sale unless (i) the Company
(or the Restricted Subsidiary, as the case may be) receives consideration at the
time of such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of (A) cash
or Cash Equivalents or (B) Qualified Proceeds; provided that the aggregate fair
market value of Qualified Proceeds (other than cash or Cash Equivalents), which
may be received in consideration for asset sales
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pursuant to this clause (ii) (B) shall not exceed $5.0 million since the Issue
Date; PROVIDED that the amount of (x) any liabilities (as shown on the Company's
or such Restricted Subsidiary's most recent balance sheet) of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Exchange Notes or any guarantee thereof)
that are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or such Restricted Subsidiary from
further liability and (y) any securities, notes or other obligations received by
the Company or any such Restricted Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to permanently repay
Senior Indebtedness, (b) to acquire all or substantially all of the assets of,
or a majority of the Voting Stock of, another Permitted Business, (c) to make a
capital expenditure or (d) to acquire other long-term assets that are used or
useful in a Permitted Business. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce revolving credit borrowings or
otherwise invest such Net Proceeds in any manner that is not prohibited by the
Indenture. Any Net Proceeds from Asset Sales that are not applied or invested as
provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company will be required to make an offer to all Holders of
Exchange Notes and all holders of other Indebtedness that is PARI PASSU with the
Exchange Notes containing provisions similar to those set forth in the Indenture
with respect to offers to purchase or redeem with the proceeds of sales of
assets (an "Asset Sale Offer") to purchase the maximum principal amount of
Exchange Notes and such other PARI PASSU Indebtedness that may be purchased out
of the Excess Proceeds, at an offer price in cash in an amount equal to 100% of
the principal amount thereof plus accrued and unpaid interest and Liquidated
Damages thereon, if any, to the date of purchase, in accordance with the
procedures set forth in the Indenture and such other PARI PASSU Indebtedness. To
the extent that any Excess Proceeds remain after consummation of an Asset Sale
Offer, or in the event the holders of the Exchange Notes and such other
indebtedness decline such Asset Sale Offer, the Company may use such Excess
Proceeds for any purpose not otherwise prohibited by the Indenture. If the
aggregate principal amount of Exchange Notes and such other PARI PASSU
Indebtedness tendered into such Asset Sale Offer surrendered by Holders thereof
exceeds the amount of Excess Proceeds, the Trustee shall select the Exchange
Notes and such other PARI PASSU Indebtedness to be purchased on a pro rata
basis. Upon completion of such offer to purchase, the amount of Excess Proceeds
shall be reset at zero.
The Senior Credit Facility currently prohibits the Company from purchasing
any Exchange Notes and also provides that certain change of control events with
respect to the Company would constitute a default thereunder. Any future credit
agreements or other agreements relating to Senior Indebtedness to which the
Company becomes a party may contain similar restrictions and provisions. In the
event an Asset Sale occurs at a time when the Company is prohibited from
purchasing Exchange Notes, the Company could seek the consent of its lenders to
the purchase of Exchange Notes or could attempt to refinance the borrowings that
contain such prohibition. If the Company does not obtain such a consent or repay
such borrowings, the Company will remain prohibited from purchasing Exchange
Notes. In such case, the Company's failure to purchase tendered Exchange Notes
would constitute an Event of Default under the Indenture which would, in turn,
constitute a default under the Senior Credit Facility. In such circumstances,
the subordination provisions in the Indenture would likely restrict payments to
the Holders of Exchange Notes.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly: (i) declare or pay any
dividend or make any other payment or
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distribution on account of the Company's or any of its Restricted Subsidiaries'
Equity Interests (including, without limitation, any payment in connection with
any merger or consolidation involving the Company or any of its Restricted
Subsidiaries) or to the direct or indirect holders of the Company's or any of
its Restricted Subsidiaries' Equity Interests in their capacity as such (other
than dividends or distributions payable in Equity Interests (other than
Disqualified Stock) of the Company and other than dividends or distributions
payable to the Company or a Restricted Subsidiary of the Company); (ii)
purchase, redeem or otherwise acquire or retire for value (including, without
limitation, in connection with any merger or consolidation involving the
Company) any Equity Interests of the Company or any direct or indirect parent of
the Company or other Affiliate of the Company (other than any such Equity
Interests owned by the Company or any Restricted Subsidiary of the Company);
(iii) make any payment on or with respect to, or purchase, redeem, defease or
otherwise acquire or retire for value any Indebtedness that is subordinated to
the Notes (other than Notes), except a payment of interest or principal at
Stated Maturity or as a mandatory or sinking fund payment; or (iv) make any
Restricted Investment (all such payments and other actions set forth in clauses
(i) through (iv) above being collectively referred to as "Restricted Payments"),
unless, at the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed
Charge Coverage Ratio test set forth in the first paragraph of the covenant
described below under the caption "--Incurrence of Indebtedness and Issuance
of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Indenture (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (v), (vii) and (ix) of the next
succeeding paragraph), is less than the sum, without duplication, of (i) 50%
of the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter commencing
after the date of the Indenture to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), plus (ii) 100% of
the aggregate net cash proceeds received by the Company since the date of
the Indenture as a contribution to its common equity capital or from the
issue or sale of Equity Interests of the Company (other than Disqualified
Stock) or from the issue or sale of Disqualified Stock or debt securities of
the Company that have been converted into such Equity Interests (other than
Equity Interests (or Disqualified Stock or convertible debt securities) sold
to a Subsidiary of the Company), plus (iii) 100% of the fair market value of
any Person engaged in a Permitted Business or assets used by the Company or
a Restricted Subsidiary in a Permitted Business which such Person or assets
were acquired by the Company or any of its Restricted Subsidiaries since the
Issue Date, PROVIDED that the consideration for such Person or assets
consisted solely of Equity Interests of the Company (other than Disqualified
Stock), PLUS (iv) to the extent that any Restricted Investment that was made
after the date of the Indenture is sold for cash or otherwise liquidated or
repaid for cash or the receipt of properties used in a Permitted Business,
the lesser of (A) the net cash proceeds of such sale, liquidation or
repayment or the fair market value (as determined in good faith by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of property received in exchange therefor and (B)
the amount of such Restricted Investment.
The foregoing provisions do not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any PARI PASSU or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net
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cash proceeds of the substantially concurrent sale (other than to a Restricted
Subsidiary of the Company) of, other Equity Interests of the Company (other than
any Disqualified Stock); PROVIDED that the amount of any such net cash proceeds
that are utilized for any such redemption, repurchase, retirement, defeasance or
other acquisition shall be excluded from clause (c) (ii) of the preceding
paragraph; (iii) the defeasance, redemption or repurchase of any Disqualified
Stock of the Company or any Restricted Subsidiary in exchange for, or out of the
substantially concurrent sale (other than to the Company or a Subsidiary of the
Company) of Disqualified Stock of the Company or such Restricted Subsidiary,
respectively; PROVIDED that: (A) the aggregate liquidation preference of such
Disqualified Stock does not exceed the aggregate liquidation preference of the
Disqualified Stock so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith); (B) such Disqualified Stock has a final maturity date later than the
final maturity date of, and has a Weighted Average Life to Maturity equal to or
greater than the Weighted Average Life to Maturity of the Notes; and (C) such
Disqualified Stock is incurred either by the Company or by the Restricted
Subsidiary who is the obligor on the Disqualified Stock being extended,
refinanced, renewed, replaced, defeased or refunded; (iv) the defeasance,
redemption, repurchase or other acquisition of subordinated Indebtedness with
the net cash proceeds from an incurrence of Permitted Refinancing Indebtedness;
(v) the payment of any dividend by a Restricted Subsidiary of the Company to the
holders of its common Equity Interests on a pro rata basis; (vi) so long as no
Default or Event of Default is continuing or would be caused thereby, the direct
or indirect repurchase, redemption or other acquisition or retirement for value
of any Equity Interests of the Company or any direct or indirect parent
corporation of the Company held by any member of the Company's (or any of its
Restricted Subsidiaries') management pursuant to any management equity
subscription agreement or stock option agreement in effect as of the date of the
Indenture; PROVIDED that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed $1.0 million in
any twelve-month period; (vii) dividends or other payments to Holdings
sufficient to enable Holdings to pay accounting, legal, corporate or reporting
and administrative expenses of Holdings incurred in the ordinary course of
business in an amount not to exceed $500,000 in any twelve-month period; (viii)
the making of loans by the Company or any of its Restricted Subsidiaries to
officers or directors of the Company; PROVIDED that the aggregate outstanding
amount of such loans shall not exceed, at any time, $2.0 million plus any such
loans outstanding on the date of the Indenture; (ix) payments to Holdings by the
Company or any Restricted Subsidiary with respect to taxes (including estimated
taxes) that are paid by Holdings on a combined, consolidated, unitary or similar
basis, to the extent that such payments do not exceed the amount that the
Company or such Restricted Subsidiary would have paid to the relevant taxing
authority if the Company or such Restricted Subsidiary filed a separate tax
return for the period in question; (x) so long as no Default or Event of Default
is continuing or would be caused thereby, the defeasance, redemption or
repurchase of any preferred stock or Disqualified Stock issued in connection
with the acquisition of assets or a Permitted Business, PROVIDED, that the
aggregate amount of such defeasance, redemption or repurchase payments shall not
exceed at any time $10.0 million; (xi) so long as no Default of Event of Default
is continuing or would be caused thereby, payments under the Management
Agreement as in effect on the Issue Date; (xii) the direct or indirect
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Company or any direct or indirect parent corporation of
the Company held by any employee of the Company or a Restricted Subsidiary of
the Company upon the retirement of any such employee; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $400,000 less the amount of Restricted
Payments made pursuant to clause (xiv) below in any twelve-month period; (xiii)
the repurchase, redemption or other acquisition or retirement for value of the
Preferred Stock or Exchange Debentures with Excess Proceeds to the extent such
Excess Proceeds are permitted to be used for general corporate purposes under
the covenant "--Asset Sales"; and (xiv) the direct or indirect redemption,
repurchase or other acquisition or retirement for value of Class A Senior
Preferred Stock of Holdings from Holdings' qualified employee stock options
plans, which Class A Senior Preferred Stock will either be issued on the Issue
Date or issued as dividends thereon in accordance with the certificate of
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designations relating thereto as in effect on the Issue Date, provided that such
redemption, repurchase or other acquisition or retirement is required by
applicable law and such plans.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. In the
event of any such designation, all outstanding Investments owned by the Company
and its Restricted Subsidiaries in the Subsidiary so designated will be deemed
to be an Investment made as of the time of such designation and will reduce the
amount available for Restricted Payments under the first paragraph of this
covenant or Permitted Investments, as applicable. All such outstanding
Investments will be deemed to constitute Restricted Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary. The Board of Directors may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if such
redesignation would not cause a Default.
The amount of all Restricted Payments (other than cash) and Qualified
Proceeds (other than cash) shall be the fair market value on the date of the
Restricted Payment (or date of receipt of Qualified Proceeds) of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this covenant shall be determined by the Board of Directors whose resolution
with respect thereto shall be delivered to the Trustee, such determination to be
based upon an opinion or appraisal issued by an accounting, appraisal or
investment banking firm of national standing if such fair market value exceeds
$5.0 million. Not later than the date of making any Restricted Payment, the
Company shall deliver to the Trustee an Officers' Certificate stating that such
Restricted Payment is permitted and setting forth the basis upon which the
calculations required by the covenant "Restricted Payments" were computed,
together with a copy of any fairness opinion or appraisal required by the
Indenture. Accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms and the payment of dividends on Disqualified
Stock in the form of additional shares of the same class of Disqualified Stock
will not be deemed to be a Restricted Payment for purposes of this covenant;
PROVIDED, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company will not issue any
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; PROVIDED, HOWEVER, that the Company may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock and Guarantors may incur Indebtedness or issue preferred stock if the
Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least 2 to 1, determined
on a pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
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The provisions of the first paragraph of this covenant do not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company of Indebtedness under the Senior
Credit Facility in an aggregate principal amount not exceeding an amount
equal to $160.0 million less the aggregate amount of all Net Proceeds of
Asset Sales applied by the Company or any of its Restricted Subsidiaries to
permanently repay Indebtedness under the Senior Credit Facility pursuant to
the covenant described above under the caption "--Asset Sales";
(ii) the incurrence by Cluett Peabody Canada Inc. of Indebtedness under
the Canadian Credit Facility in an aggregate principal amount not exceeding
an amount equal to $15.0 million less the aggregate amount of all Net
Proceeds of Asset Sales applied by the Company or any of its Restricted
Subsidiaries to permanently repay revolving credit Indebtedness under the
Canadian Credit Facility pursuant to the covenant described above under the
caption "--Asset Sales";
(iii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness;
(iv) the incurrence by the Company of Indebtedness represented by the
Old Notes (other than any Additional Notes), the Exchange Notes and the
Parity Notes;
(v) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $10.0 million at any time outstanding;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Existing Indebtedness or
Indebtedness (other than intercompany Indebtedness) that was permitted by
the Indenture to be incurred under the first paragraph hereof or clauses
(iv), (v), (vi), (ix) or (xv) of this paragraph;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries; PROVIDED, HOWEVER, that (i) if the Company is the
obligor on such Indebtedness, such Indebtedness is expressly subordinated to
the prior payment in full in cash of all Obligations with respect to the
Notes and (ii)(A) any subsequent issuance or transfer of Equity Interests
that results in any such Indebtedness being held by a Person other than the
Company or a Restricted Subsidiary thereof and (B) any sale or other
transfer of any such Indebtedness to a Person that is not either the Company
or a Restricted Subsidiary thereof shall be deemed, in each case, to
constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be, that was not permitted by this
clause (vii);
(viii) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or
hedging interest rate risk with respect to any floating rate Indebtedness
that is permitted by the terms of the Indenture to be outstanding;
(ix) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness in connection with the acquisition of assets or a new
Subsidiary; PROVIDED that such Indebtedness was incurred by the prior owner
of such assets or such Subsidiary prior to such acquisition by the Company
or one of its Restricted Subsidiaries and was not incurred in connection
with, or in contemplation of, such acquisition by the Company or one of it
Restricted Subsidiaries; and PROVIDED FURTHER that the principal amount (or
accreted value, as applicable) of such Indebtedness, together with any other
outstanding Indebtedness incurred pursuant to this clause (ix) and any
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (ix), does not exceed $5.0
million;
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(x) the guarantee by the Company or any of the Guarantors of
Indebtedness of the Company or a Restricted Subsidiary of the Company that
was permitted to be incurred by another provision of this covenant;
(xi) indebtedness incurred in respect of workers' compensation claims,
self-insurance obligations, performance, surety and similar bonds and
completion guarantees provided by the Company or a Guarantor in the ordinary
course of business;
(xii) Indebtedness arising from guarantees of Indebtedness of the Company
or any Subsidiary or the agreements of the Company or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with
the disposition of any business, assets or Capital Stock of a Restricted
Subsidiary, or other guarantees of Indebtedness incurred by any person
acquiring all or any portion of such business, assets or Capital Stock of a
Restricted Subsidiary for the purpose of financing such acquisition,
provided that the maximum aggregate liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds actually received by
the Company and its Restricted Subsidiaries in connection with such
disposition;
(xiii) Indebtedness of a Receivables Subsidiary that is not recourse to
the Company or any other Restricted Subsidiary of the Company (other than
Standard Securitization Undertakings) incurred in connection with a
Qualified Receivables Transaction;
(xiv) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, PROVIDED, HOWEVER, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (xiv); and
(xv) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (xv), not to exceed $10.0
million.
The Indenture also provides that the Company will not incur any Indebtedness
(including Permitted Debt) that is contractually subordinated in right of
payment to any other Indebtedness of the Company unless such Indebtedness is
also contractually subordinated in right of payment to the Notes on
substantially identical terms; PROVIDED, HOWEVER, that no Indebtedness of the
Company shall be deemed to be contractually subordinated in right of payment to
any other Indebtedness of the Company solely by virtue of being unsecured.
For purposes of determining compliance with this covenant, in the event that
an item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xv) above as of
the date of incurrence thereof, or is entitled to be incurred pursuant to the
first paragraph of this covenant as of the date of incurrence thereof, the
Company shall, in its sole discretion, classify such item of Indebtedness on the
date of its incurrence in any manner that complies with this covenant. Accrual
of interest, accretion or amortization of original issue discount, the payment
of interest on any Indebtedness in the form of additional Indebtedness with the
same terms and the payment of dividends on Disqualified Stock in the form of
additional shares of the same class of Disqualified Stock will not be deemed to
be an incurrence of Indebtedness or an issuance of Disqualified Stock for
purposes of this covenant; PROVIDED, in each such case, that the amount thereof
is included in Fixed Charges of the Company as accrued. For purposes of
determining compliance with any U.S. dollar-denominated restriction on the
incurrence of indebtedness, the U.S. dollar-equivalent principal amount of
indebtedness denominated in a foreign currency shall be calculated based on the
relevant currency exchange rate in effect on the date such indebtedness was
incurred.
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LIENS
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create, incur, assume or
suffer to exist any Lien securing Indebtedness, on any asset now owned or
hereafter acquired, except Permitted Liens, unless all payments due under the
Indenture and the Notes are secured on an equal and ratable basis with the
Indebtedness so secured until such time as such is no longer secured by a Lien;
PROVIDED that if such Indebtedness is by its terms expressly subordinated to the
Notes or any Subsidiary Guarantee, the Lien securing such Indebtedness shall be
subordinate and junior to the Lien securing the Notes and the Subsidiary
Guarantees with the same relative priority as such subordinate or junior
Indebtedness shall have with respect to the Notes and the Subsidiary Guarantees.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, directly or indirectly, create or otherwise
cause or suffer to exist or become effective any encumbrance or restriction on
the ability of any Restricted Subsidiary to (i) (a) pay dividends or make any
other distributions to the Company or any of its Restricted Subsidiaries (1) on
its Capital Stock or (2) with respect to any other interest or participation in,
or measured by, its profits, or (b) pay any indebtedness owed to the Company or
any of its Restricted Subsidiaries, (ii) make loans or advances to the Company
or any of its Restricted Subsidiaries or (iii) transfer any of its properties or
assets to the Company or any of its Restricted Subsidiaries. However, the
foregoing restrictions will not apply to encumbrances or restrictions existing
under or by reason of (a) Existing Indebtedness as in effect on the date of the
Indenture, (b) the Senior Credit Facility as in effect as of the date of the
Indenture, and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, PROVIDED that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacement or refinancings are no more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in the Senior Credit Facility as in effect on the date of the
Indenture, (c) the Indenture and the Notes, (d) applicable law, (e) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired,
PROVIDED that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of the Indenture to be incurred, (f) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (g) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (h) any
agreement for the sale or other disposition of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending its sale or other
disposition, (i) Permitted Refinancing Indebtedness, PROVIDED that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those contained in
the agreements governing the Indebtedness being refinanced, (j) Liens securing
Indebtedness otherwise permitted to be incurred pursuant to the provisions of
the covenant described above under the caption "--Liens" that limit the right of
the Company or any of its Restricted Subsidiaries to dispose of the assets
subject to such Lien, (k) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business, (l) restrictions on
cash or other deposits or net worth imposed by customers under contracts entered
into in the ordinary course of business, (m) any other security agreement,
instrument or document relating to Senior Indebtedness hereafter in effect,
provided that such encumbrances or restrictions are customary in connection with
such documents and that the terms and conditions of such encumbrances or
restrictions are no more restrictive than those encumbrances or restrictions
imposed in connection with the Senior Credit Facility as in effect on the Issue
Date, (n) any agreement relating to a sale and leaseback transaction
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or capital lease, but only on the property subject to such transaction or lease
and only to the extent that such restrictions or encumbrances are customary with
respect to a sale and leaseback transaction or capital lease, (o) the Canadian
Credit Facility as in effect as of the date of the Indenture, and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, PROVIDED that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
the Canadian Credit Facility as in effect on the date of the Indenture or (p)
customary restrictions imposed on the payment of dividends by a Receivables
Subsidiary in connection with a Qualified Receivables Transaction.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Indenture provides that the Company may not, directly or indirectly,
consolidate or merge with or into (whether or not the Company is the surviving
corporation), or sell, assign, transfer, lease, convey or otherwise dispose of
all or substantially all of its properties or assets in one or more related
transactions, to another corporation, Person or entity unless (i) the Company is
the surviving corporation or the entity or the Person formed by or surviving any
such consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Note Registration Rights Agreement, the Notes and the
Indenture pursuant to a supplemental indenture in a form reasonably satisfactory
to the Trustee; (iii) immediately after such transaction no Default or Event of
Default exists; and (iv) except in the case of a merger of the Company with or
into a Wholly Owned Restricted Subsidiary of the Company, the Company or the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) will have Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) will, immediately after such transaction after giving pro forma effect
thereto and any related financing transactions as if the same had occurred at
the beginning of the applicable four-quarter period, be permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of the covenant described above
under the caption "--Incurrence of Indebtedness and Issuance of Preferred
Stock."
TRANSACTIONS WITH AFFILIATES
The Indenture provides that the Company will not, and will not permit any of
its Restricted Subsidiaries to, make any payment to, or sell, lease, transfer or
otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, any Affiliate (each of the foregoing, an "Affiliate Transaction"),
unless (i) such Affiliate Transaction is on terms that are no less favorable to
the Company or the relevant Restricted Subsidiary than those that would have
been obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Trustee
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered
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into by the Company or any of its Restricted Subsidiaries in the ordinary course
of business and consistent with the past practice of the Company or such
Restricted Subsidiary, (ii) transactions between or among the Company and/or its
Restricted Subsidiaries, (iii) payment of reasonable directors fees to Persons
who are not otherwise Affiliates of the Company, (iv) any sale or other issuance
of Equity Interests (other than Disqualified Stock) of the Company, (v) payments
made pursuant to the Management Agreement in effect as of the Issue Date and
(vi) Restricted Payments that are permitted by the provisions of the Indenture
described above under the caption "--Restricted Payments."
LIMITATIONS ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS
The Indenture provides that the Company will not permit any Restricted
Subsidiary which is not a Guarantor, directly or indirectly, to Guarantee or
pledge any assets to secure the payment of any other Indebtedness of the Company
unless such Restricted Subsidiary simultaneously executes and delivers a
supplemental indenture to the Indenture providing for the Guarantee of the
payment of the Notes by such Restricted Subsidiary, which Guarantee shall be
senior to or PARI PASSU with such Restricted Subsidiary's Guarantee of or pledge
to secure such other Indebtedness unless such other Indebtedness is Senior
Indebtedness, in which case the Guarantee of the Notes may be subordinated to
the Guarantee of such Senior Indebtedness to the same extent as the Notes are
subordinated to such Senior Indebtedness. Notwithstanding the foregoing, any
such Guarantee by a Restricted Subsidiary of the Notes shall provide by its
terms that it shall be automatically and unconditionally released and discharged
upon any sale, exchange or transfer, to any Person not an Affiliate of the
Company, of all of the Company's stock in, or all or substantially all the
assets of, such Restricted Subsidiary, which sale, exchange or transfer is made
in compliance with the applicable provisions of the Indenture. The form of such
Guarantee will be attached as an exhibit to the Indenture.
NO SENIOR SUBORDINATED DEBT
The Indenture provides that (i) the Company will not incur, create, issue,
assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Indebtedness of the Company and
senior in any respect in right of payment to the Notes, and (ii) no Guarantor
will incur, create, issue, assume, guarantee or otherwise become liable for any
Indebtedness that is subordinate or junior in right of payment to any
Indebtedness of such Guarantor and senior in any respect in right of payment to
the Subsidiary Guarantees of such Guarantor.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Subsidiaries taken as a whole.
REPORTS
The Indenture provides that, whether or not required by the rules and
regulations of the Commission, so long as any Notes are outstanding, the Company
will furnish to the Holders of Notes (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations," that describes the financial condition and results
of operations of the Company and its consolidated Subsidiaries (showing in
reasonable detail, either on the face of the financial statements or in the
footnotes thereto and in Management's Discussion and Analysis of Financial
Condition and Results of Operations, the financial condition and results of
operations of the Company and its Restricted Subsidiaries separate from the
financial condition and results of operations of the Unrestricted Subsidiaries
of the Company) and, with respect to the annual information only, a report
thereon by the Company's certified independent accountants and (ii) all current
reports that would be required to be filed with the Commission on Form
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8-K if the Company were required to file such reports, in each case within the
time periods specified in the Commission's rules and regulations. In addition,
following the consummation of the Exchange Offer, whether or not required by the
rules and regulations of the Commission, the Company will file a copy of all
such information and reports with the Commission for public availability within
the time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company and the Guarantors have agreed that, for so long as any Notes remain
outstanding, they will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
EVENTS OF DEFAULT AND REMEDIES
The Indenture provides that each of the following constitutes an Event of
Default: (i) default for 30 days in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not prohibited by the
subordination provisions of the Indenture); (ii) default in payment when due of
the principal of or premium, if any, on the Notes (whether or not prohibited by
the subordination provisions of the Indenture); (iii) failure by the Company or
any of its Restricted Subsidiaries to comply with the provisions described under
the caption "--Merger, Consolidation or Sale of Assets"; (iv) failure by the
Company or any of its Restricted Subsidiaries for 60 days after notice from the
Trustee or Holders of at least 25% in principal amount of outstanding Notes to
comply with any of its other agreements in the Indenture or the Notes; (v)
default under any mortgage, indenture or instrument under which there may be
issued or by which there may be secured or evidenced any Indebtedness for money
borrowed by the Company or any of its Restricted Subsidiaries (or the payment of
which is guaranteed by the Company or any of its Restricted Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created after the date
of the Indenture, which default (a) is caused by a failure to pay principal of
or premium, if any, or interest on such Indebtedness prior to the expiration of
the grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5.0 million or more; (vi) failure by the Company or
any of its Restricted Subsidiaries to pay final judgments aggregating in excess
of $5.0 million, which judgments are not paid, discharged or stayed for a period
of 60 days; (vii) except as permitted by the Indenture, any Subsidiary Guarantee
shall be held in any judicial proceeding to be unenforceable or invalid or shall
cease for any reason to be in full force and effect or any Guarantor, or any
Person acing on behalf of any Guarantor, shall deny or disaffirm its obligations
under its Subsidiary Guarantee and (viii) certain events of bankruptcy or
insolvency with respect to the Company or any of its Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, with respect to the Company, any Significant Subsidiary or any group
of Subsidiaries that, taken together, would constitute a Significant Subsidiary,
all outstanding Notes will become due and payable without further action or
notice. Holders of the Notes may not enforce the Indenture or the Notes except
as provided in the Indenture. Subject to certain limitations, Holders of a
majority in principal amount of the then outstanding Notes may direct the
Trustee in its exercise of any trust or power. The Trustee may withhold from
Holders of the Notes notice of any continuing Default or Event of Default
(except a Default or Event of Default relating to the payment of principal or
interest) if it determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Notes then
outstanding by notice to the Trustee may on behalf of the Holders of all of the
Notes waive any existing Default or Event of Default
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and its consequences under the Indenture except a continuing Default or Event of
Default in the payment of interest on, or the principal of, the Notes.
The Company is required to deliver to the Trustee annually a statement
regarding compliance with the Indenture, and the Company is required upon
becoming aware of any Default or Event of Default, to deliver to the Trustee a
statement specifying such Default or Event of Default.
NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Exchange Notes, the Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Exchange Notes by
accepting an Exchange Note waives and releases all such liability. The waiver
and release are part of the consideration for issuance of the Exchange Notes.
Such waiver may not be effective to waive liabilities under the federal
securities laws and it is the view of the Commission that such a waiver is
against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Notes ("Legal
Defeasance") except for (i) the rights of Holders of outstanding Notes to
receive payments in respect of the principal of, premium, if any, and interest
and Liquidated Damages on such Notes when such payments are due from the trust
referred to below, (ii) the Company's obligations with respect to the Notes
concerning issuing temporary Notes, registration of Notes, mutilated, destroyed,
lost or stolen Notes and the maintenance of an office or agency for payment and
money for security payments held in trust, (iii) the rights, powers, trusts,
duties and immunities of the Trustee, and the Company's obligations in
connection therewith and (iv) the Legal Defeasance provisions of the Indenture.
In addition, the Company may, at its option and at any time, elect to have the
obligations of the Company released with respect to certain covenants that are
described in the Indenture ("Covenant Defeasance") and thereafter any omission
to comply with such obligations shall not constitute a Default or Event of
Default with respect to the Notes. In the event Covenant Defeasance occurs,
certain events (not including non-payment, bankruptcy, receivership,
rehabilitation and insolvency events) described under "Events of Default" will
no longer constitute an Event of Default with respect to the Notes.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Trustee, in trust, for the benefit of
the Holders of the Notes, cash in U.S. dollars, non-callable Government
Securities, or a combination thereof, in such amounts as will be sufficient, in
the opinion of a nationally recognized firm of independent public accountants,
to pay the principal of, premium, if any, and interest and Liquidated Damages on
the outstanding Notes on the stated maturity or on the applicable redemption
date, as the case may be, and the Company must specify whether the Notes are
being defeased to maturity or to a particular redemption date; (ii) in the case
of Legal Defeasance, the Company shall have delivered to the Trustee an opinion
of counsel in the United States reasonably acceptable to the Trustee confirming
that (A) the Company has received from, or there has been published by, the
Internal Revenue Service a ruling or (B) since the date of the Indenture, there
has been a change in the applicable federal income tax law, in either case to
the effect that, and based thereon such opinion of counsel shall confirm that,
the Holders of the outstanding Notes will not recognize income, gain or loss for
federal income tax purposes as a result of such Legal Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Legal Defeasance had not
occurred; (iii) in the case of Covenant Defeasance, the Company shall have
delivered to the Trustee an opinion of counsel in the United States reasonably
acceptable to the Trustee confirming that the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Covenant Defeasance and will be subject to federal income tax on
the same amounts, in the same manner and at the same times as would have been
the case if such Covenant Defeasance had not occurred; (iv) no Default or Event
of Default shall have
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occurred and be continuing on the date of such deposit (other than a Default or
Event of Default resulting from the borrowing of funds to be applied to such
deposit) or insofar as Events of Default from bankruptcy or insolvency events
are concerned, at any time in the period ending on the 91st day after the date
of deposit; (v) such Legal Defeasance or Covenant Defeasance will not result in
a breach or violation of, or constitute a default under any material agreement
or instrument (other than the Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company must have delivered to the Trustee an opinion of counsel
to the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally; (vii) the
Company must deliver to the Trustee an Officers' Certificate stating that the
deposit was not made by the Company with the intent of preferring the Holders of
Notes over the other creditors of the Company with the intent of defeating,
hindering, delaying or defrauding creditors of the Company or others; and (viii)
the Company must deliver to the Trustee an Officers' Certificate and an opinion
of counsel, each stating that all conditions precedent provided for relating to
the Legal Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Notes in accordance with the Indenture.
The Registrar and the Trustee may require a Holder, among other things, to
furnish appropriate endorsements and transfer documents and the Company may
require a Holder to pay any taxes and fees required by law or permitted by the
Indenture. The Company is not required to transfer or exchange any Note selected
for redemption. Also, the Company is not required to transfer or exchange any
Note for a period of 15 days before a selection of Notes to be redeemed.
The registered Holder of a Note will be treated as the owner of it for all
purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Indenture or
the Notes may be amended or supplemented with the consent of the Holders of at
least a majority in principal amount of the Notes then outstanding (including,
without limitation, consents obtained in connection with a purchase of, or
tender offer or exchange offer for, Notes), and any existing default or
compliance with any provision of the Indenture or the Notes may be waived with
the consent of the Holders of a majority in principal amount of the then
outstanding Notes (including, without limitation, consents obtained in
connection with a purchase of, or tender offer or exchange offer for, Notes).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Notes held by a non-consenting Holder): (i) reduce the
principal amount of Notes whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the principal of or change the fixed maturity of any Note
or alter the provisions with respect to the redemption of the Notes (other than
provisions relating to the covenants described above under the caption
"--Repurchase at the Option of Holders"), (iii) reduce the rate of or change the
time for payment of interest on any Note, (iv) waive a Default or Event of
Default in the payment of principal of or premium, if any, or interest on the
Notes (except a rescission of acceleration of the Notes by the Holders of at
least a majority in aggregate principal amount of the Notes and a waiver of the
payment default that resulted from such acceleration), (v) make any Note payable
in money other than that stated in the Notes, (vi) make any change in the
provisions of the Indenture relating to waivers of past Defaults or the rights
of Holders of Notes to receive payments of principal of or premium, if any, or
interest on the Notes, (vii) waive a redemption payment with respect to any Note
(other than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders"), (viii) release any Guarantor
from its obligations under its Guarantee or the Indenture or (ix) make any
change in the foregoing amendment and waiver provisions. In addition, any
amendment to the provisions of Article 10 of the Note Indenture (which relate to
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subordination) will require the consent of the Holders of at least 66 2/3% in
aggregate principal amount of the Notes then outstanding if such amendment would
adversely affect the rights of Holders of Notes.
Notwithstanding the foregoing, without the consent of any Holder of Notes,
the Company and the Trustee may amend or supplement the Indenture or the Notes
to cure any ambiguity, defect or inconsistency, to provide for uncertificated
Notes in addition to or in place of certificated Notes, to provide for the
assumption of the Company's obligations to Holders of Notes in the case of a
merger or consolidation or sale of all or substantially all of the Company's
assets, to provide for Additional Notes, to make any change that would provide
any additional rights or benefits to the Holders of Notes or that does not
adversely affect the legal rights under the Indenture of any such Holder, or to
comply with requirements of the Commission in order to effect or maintain the
qualification of the Indenture under the Trust Indenture Act.
CONCERNING THE TRUSTEE
The Indenture contains certain limitations on the rights of the Trustee,
should it become a creditor of the Company, to obtain payment of claims in
certain cases, or to realize on certain property received in respect of any such
claim as security or otherwise. The Trustee will be permitted to engage in other
transactions; however, if it acquires any conflicting interest it must eliminate
such conflict within 90 days, apply to the Commission for permission to continue
or resign.
The Holders of a majority in principal amount of the then outstanding Notes
will have the right to direct the time, method and place of conducting any
proceeding for exercising any remedy available to the Trustee, subject to
certain exceptions. The Indenture provides that in case an Event of Default
shall occur (which shall not be cured), the Trustee will be required, in the
exercise of its power, to use the degree of care of a prudent man in the conduct
of his own affairs. Subject to such provisions, the Trustee will be under no
obligation to exercise any of its rights or powers under the Indenture at the
request of any Holder of Notes, unless such Holder shall have offered to the
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Offering Memorandum may obtain a copy of the
Indenture and Registration Rights Agreement without charge by writing to Cluett
American Corp., 48 West 38th Street, New York, New York 10018, Attention:
General Counsel.
BOOK-ENTRY, DELIVERY AND FORM
The certificates representing the Exchange Notes will be issued in fully
registered form. The Exchange Notes initially will be represented by a single,
permanent global Exchange Note, in definitive, fully registered form without
interest coupons (the "Global Exchange Note") and will be deposited with the
Trustee as custodian for The Depository Trust Company, New York, New York
("DTC") and registered in the name of a nominee of DTC.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants (the "Participants") and facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and certain other organizations. Indirect access to the DTC system is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("indirect participants").
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So long as DTC, or its nominee, is the registered owner or holder of the
Exchange Notes, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the Exchange Notes represented by such Global Exchange
Note for all purposes under the Indenture. No beneficial owner of an interest in
the Global Exchange Note will be able to transfer that interest except in
accordance with DTC's procedures, in addition to those provided for under the
Indenture with respect to the Exchange Notes.
Payments of the principal of, premium (if any), and interest on, the Global
Exchange Note will be made to DTC or its nominee, as the case may be, as the
registered owner thereof. None of the Company, the Trustee or any paying agent
will have any responsibility or liability for any aspect of the records,
relating to or payments made on account of beneficial ownership interests in the
Global Exchange Note or for maintaining, supervising or reviewing any records
relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal, premium, if any, and interest (including liquidated damages) on the
Global Exchange Note, will credit Participants' accounts with payments in
amounts proportionate to their respective beneficial interests in the principal
amount of the Global Exchange Note as shown on the records of DTC or its
nominee. The Company also expects that payments by participants to owners of
beneficial interests in the Global Exchange Note held through such Participants
will be governed by standing instructions and customary practice, as is now the
case with securities held for the accounts of customers registered in the names
of nominees for such customers. Such payments will be the responsibility of such
Participants.
Transfers between Participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell Exchange Notes to
persons in states which require physical delivery of the Exchange Notes, or to
pledge such securities, such holder must transfer its interest in the Global
Exchange Note, in accordance with the normal procedures of DTC and with the
procedures set forth in the Indenture.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes (including the presentation of Exchange
Notes for exchange as described below) only at the direction of one or more
Participants to whose account the DTC interests in the Global Exchange Note are
credited and only in respect of such portion of the aggregate principal amount
of Exchange Notes as to which such Participant or Participants has or have given
such direction. However, if there is an Event of Default under the Indenture,
DTC will exchange the Global Exchange Note for Certificated Securities, which it
will distribute to its Participants.
Upon the issuance of the Global Exchange Note, DTC or its custodian will
credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Exchange Note to the
accounts of persons who have accounts with such depositary. Ownership of
beneficial interests in the Global Exchange Note will be limited to Participants
or persons who hold interests through Participants. Ownership of beneficial
interests in the Global Exchange Note will be shown on, and the transfer of that
ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
Participants (with respect to interests of persons other than Participants).
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Exchange Note among Participants, it is
under no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its Participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Exchange Note and a successor depositary is not appointed by the
Company within 90 days, Certificated Securities will be issued in exchange for
the Global Exchange Note.
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CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Indenture. Reference
is made to the Indenture for a full disclosure of all such terms, as well as any
other capitalized terms used herein for which no definition is provided.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; PROVIDED that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"APPLICABLE PREMIUM" means, with respect to any Note on any Redemption Date,
the greater of (i) 1.0% of the principal amount of such Note or (ii) the excess
of (A) the present value at such Redemption Date of (1) the redemption price of
such Note at May 15, 2003 (such redemption price being set forth in the table
above) plus (2) all required interest payments due on such Note through May 15,
2003 (excluding accrued but unpaid interest), computed using a discount rate
equal to the Treasury Rate and such Redemption Rate plus 75 basis points over
(B) the principal amount of such Note, if greater.
"ASSET ACQUISITION" means (i) an Investment by the Company or any Restricted
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or any Subsidiary of the Company, or
shall be merged with or into the Company or any Restricted Subsidiary of the
Company or (ii) the acquisition by the Company or any Restricted Subsidiary of
the Company of the assets of any Person which constitute all or substantially
all of the assets of such Person, any division or line of business of such
Person or any other properties or assets of such Person other than in the
ordinary course of business.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (PROVIDED that the sale, lease (other than an
operating lease), conveyance or other disposition of all or substantially all of
the assets of the Company and its Restricted Subsidiaries taken as a whole will
be governed by the provisions of the Indenture described above under the caption
"--Change of Control" and/or the provisions described above under the caption
"--Merger, Consolidation or Sale of Assets" and not by the provisions of the
Asset Sale covenant), and (ii) the issue by any Restricted Subsidiaries of the
Company of any Equity Interests of such Restricted Subsidiary and the sale by
the Company or any of its Restricted Subsidiaries of Equity Interests of any of
the Company's Subsidiaries, in the case of either clause (i) or (ii), whether in
a single transaction or a series of related transactions (a) that have a fair
market value in excess of $1.0 million or (b) for net proceeds in excess of $1.0
million. Notwithstanding the foregoing, the following items shall not be deemed
to be Asset Sales: (i) a transfer of assets by the Company to a Wholly Owned
Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to the Company
or to another Wholly Owned Restricted Subsidiary, (ii) an issuance of Equity
Interests by a Wholly Owned Restricted Subsidiary to the Company or to another
Wholly Owned Restricted Subsidiary, (iii) a Restricted Payment that is permitted
by the covenant described above under the caption "--Restricted Payments," (iv)
a disposition of Cash Equivalents or obsolete equipment in the ordinary course
of business or inventory or goods held for sale in the ordinary
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course of business; and (v) sale of accounts receivable, or participation
therein, in connection with any Qualified Receivables Transaction.
"BOARD OF DIRECTORS" means the board of directors of the Company.
"CANADIAN CREDIT FACILITY" means the Loan Agreement, dated as of August 8,
1997, between Cluett Peabody Canada Inc. and Burgess Financial Corporation
(Canada).
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500 million and a Thompson Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (ii)
and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper having the
highest rating obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months after the date of
acquisition and (vi) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i)--(v) of this
definition.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than a Principal or a Related Party of a Principal (as
defined below), (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above), other than the Principals and their
Related Parties, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular "person," such "person" shall be deemed
to have beneficial ownership of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
50% of the Voting Stock of the Company (measured by voting power rather than
number of shares), (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors or (v) the
Company consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which any of the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where the Voting Stock of the Company
outstanding immediately prior to such transaction is converted into or exchanged
for Voting Stock (other than Disqualified Stock) of the surviving or transferee
Person constituting a majority of the outstanding shares of such Voting Stock of
such surviving or transferee Person (immediately after giving effect to such
issuance). For purposes of this
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definition, any transfer of an equity interest of an entity that was formed for
the purpose of acquiring Voting Stock of the Company will be deemed to be a
transfer of such portion of such Voting Stock as corresponds to the portion of
the equity of such entity that has been so transferred.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale, to the extent such losses were deducted in computing such
Consolidated Net Income, plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was deducted in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period (other than items that were accrued in
the ordinary course of business) plus (vi) Reorganization Charges of such Person
and its Restricted Subsidiaries for such period to the extent that such
Reorganization Charges were deducted in computing such Consolidated Net Income,
in each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation and amortization and other non-cash expenses of, a
Subsidiary of the Company shall be added to Consolidated Net Income to compute
Consolidated Cash Flow of the Company only to the extent that a corresponding
amount would be permitted at the date of determination to be dividended to the
Company by such Subsidiary without prior governmental approval (that has not
been obtained), and without direct or indirect restriction pursuant to the terms
of its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof; PROVIDED that if such Restricted Subsidiary is not a Guarantor, the
amount of such dividends or distributions includable in Consolidated Net Income
shall be limited to the Company's direct and indirect Equity Interests in such
Restricted Subsidiary, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded, and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
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"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of the Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the date of the Indenture or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"CREDIT FACILITIES" means, with respect to the Company, one or more debt
facilities (including, without limitation, the Senior Credit Facility) or
commercial paper facilities, in each case with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time. Indebtedness under
Credit Facilities and the Canadian Credit Facility outstanding on the date on
which Notes are first issued and authenticated under the Indenture shall be
deemed to have been incurred on such date in reliance on the exception provided
by clauses (i) and (ii), respectively, of the definition of Permitted Debt.
"DEFAULT" means any event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.
"DESIGNATED SENIOR DEBT" means (i) any Senior Indebtedness in respect of the
Senior Credit Facility (ii) any other Senior Indebtedness permitted under the
Indenture the principal amount of which is $25.0 million or more and that has
been designated by the Company as "Designated Senior Debt."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature; PROVIDED, HOWEVER, that any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the
right to require the Company to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with the covenant described above
under the caption "--Certain Covenants-- Restricted Payments."
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
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"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its Restricted
Subsidiaries (other than Indebtedness under the Senior Credit Facility) in
existence on the date of the Indenture, until such amounts are repaid.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest of such Person and its Restricted Subsidiaries that was capitalized
during such period, and (iii) any interest expense on Indebtedness of another
Person that is Guaranteed by such Person or one of its Restricted Subsidiaries
or secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the
product of (a) all dividend payments, whether or not in cash, on any series of
preferred stock of such Person or any of its Restricted Subsidiaries, other than
dividend payments on Equity Interests payable solely in Equity Interests of the
Company (other than Disqualified Stock) or to the Company or a Restricted
Subsidiary of the Company, times (b) a fraction, the numerator of which is one
and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
referent Person or any of its Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income (adjusting for, in the case of an Asset
Acquisition or merger or consolidation permitted under "Certain
Covenants--Merger, Consolidation or Sale of Assets," any operating expense or
cost reduction of such Person or the Person to be acquired which, in the good
faith estimate of management, will be eliminated or realized, as the case may
be, as a result of such Asset Acquisition, merger or consolidation) and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements
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by such other entity as have been approved by a significant segment of the
accounting profession, which are in effect from time to time.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"GUARANTORS" means (i) each domestic Subsidiary of the Company on the Issue
Date and (ii) any other subsidiary that executes a Subsidiary Guarantee in
accordance with the provisions of the Indenture, and their respective successors
and assigns.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate or currency swap agreements, interest rate
or currency cap agreements and interest rate or currency collar agreements and
(ii) other agreements or arrangements designed to protect such Person against
fluctuations in interest rates or currency.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above under the
caption "--Restricted Payments."
"ISSUE DATE" means the date of original issuance of the Old Notes.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
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"MANAGEMENT AGREEMENT" means that certain Management Agreement dated the
Issue Date among the Principals, the Company and Holdings, as in effect on the
Issue Date.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, (i) excluding, however, (x) any gain (but
not loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (y) any extraordinary gain (but not loss),
together with any related provision for taxes on such extraordinary gain (but
not loss) and (ii) less the aggregate amount of all Restricted Payments made by
such Person or any of its Restricted Subsidiaries for such period pursuant to
clause (vii) of the second paragraph of the covenant described above under the
caption "--Restricted Payments" times one minus the then combined federal, state
and local statutory tax rate of such plans.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Senior Indebtedness) secured by a Lien on the asset or assets that
were the subject of such Asset Sale and any reserve for adjustment in respect of
the sale price of such asset or assets established in accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender, and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Exchange Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its Restricted
Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFICERS' CERTIFICATE" means a certificate signed by (i) the Chairman of
the Board of Directors, the Chief Executive Officer, the President or a Vice
President of the Company and (ii) the Chief Financial Officer or the Secretary
of the Company, which certificate shall comply with the Indenture.
"PERMITTED BUSINESS" means the business of the Company and its Restricted
Subsidiaries conducted on the Issue Date and businesses reasonably related or
ancillary thereto.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company; (b) any Investment in Cash Equivalents;
(c) any Investment by the Company or any Restricted Subsidiary of the Company in
a Person, if as a result of such Investment (i) such Person becomes a Restricted
Subsidiary of the Company or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of the
Company; (d) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with the covenant described above under the caption "--Repurchase at the Option
of Holders--Asset Sales" or any
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transaction not constituting an Asset Sale by reason of the $1.0 million
threshold contained in the definition thereof; (e) any acquisition of assets
solely in exchange for the issuance of Equity Interests (other than Disqualified
Stock) of the Company; (f) Hedging Obligations entered into in the ordinary
course of the Company's or its Restricted Subsidiaries' businesses and otherwise
in compliance with the Indenture; (g) Investments in securities of trade
creditors or customers received in settlement of obligations or pursuant to any
plan of reorganization or similar arrangement upon the bankruptcy of insolvency
of such trade creditors of customers; (h) Investments by the Company or a
Restricted Subsidiary in a Receivables Subsidiary or any Investment by a
Receivables Subsidiary in any other Person, in each case, in connection with a
Qualified Receivables Transaction; and (i) other Investments in any Person
having an aggregate fair market value (measured on the date each such Investment
was made and without giving effect to subsequent changes in value), when taken
together with all other Investments made pursuant to this clause (i) that are at
the time outstanding, not to exceed the greater of (A) $10.0 million and (B) 5%
of Total Assets.
"PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company or debt
securities that are subordinated to all Senior Indebtedness (and any debt
securities issued in exchange for Senior Indebtedness) to substantially the same
extent as, or to a greater extent than, the Notes are subordinated to Senior
Indebtedness pursuant to Article 10 of the Indenture.
"PERMITTED LIENS" means (i) Liens on assets of the Company and the
Guarantors securing Senior Indebtedness of the Company and the Guarantors; (ii)
Liens in favor of the Company; (iii) Liens on property of a Person existing at
the time such Person is merged with or into or consolidated with the Company or
any Restricted Subsidiary of the Company; PROVIDED that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or consolidated
with the Company; (iv) Liens on property existing at the time of acquisition
thereof by the Company or any Restricted Subsidiary of the Company, PROVIDED
that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (v) Liens to secure Indebtedness
(including Capital Lease Obligations) permitted by clause (vi) of the second
paragraph of the covenant entitled "Incurrence of Indebtedness and Issuance of
Preferred Stock" covering only the assets acquired with such Indebtedness; (vii)
Liens existing on the date of the Indenture; (viii) Liens for taxes, assessments
or governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, PROVIDED that any reserve or other appropriate provision
as shall be required in conformity with GAAP shall have been made therefor; (ix)
Liens on assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of
Unrestricted Subsidiaries; (x) Liens of the Company or a Wholly Owned Restricted
Subsidiary on assets of any Restricted Subsidiary of the Company; (xi) Liens
securing Permitted Refinancing Indebtedness which is incurred to refinance any
Indebtedness which has been secured by a Lien permitted under the Indenture and
which has been incurred in accordance with the provisions of the Indenture,
PROVIDED, HOWEVER, that such Liens (A) are not materially less favorable to the
Holders and are not materially more favorable to the lienholders with respect to
such Liens than the Liens in respect of the Indebtedness being refinanced and
(B) do not extend to or cover any property or assets of the Company or any of
its Restricted Subsidiaries not securing the Indebtedness so refinanced; (xii)
Liens incurred or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security or similar obligations, including any lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money); (xiii) judgment Liens not
giving rise to an Event of Default so long as such Lien is adequately bonded and
any appropriate legal proceedings which may have been duly initiated for the
review of such judgment shall not have been finally terminated or the period
within which such proceedings may be initiated shall not have expired;
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(xiv) easements, rights-of-way, zoning restrictions and other similar charges or
encumbrances in respect of real property not interfering in any material respect
with the ordinary conduct of the business of the company or any of its
Restricted Subsidiaries; (xv) any interest or title of a lessor under any lease,
whether or not characterized as capital or operating; provided that such Liens
do not extend to any property or assets which is not leased property subject to
such lease; (xvi) Liens upon specific items of inventory or other goods and
proceeds of any Person Securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods; (xvii) Liens
securing reimbursement obligations with respect to letters of credit which
encumber documents and other property relating to such letters of credit and
products and proceeds thereof; (xviii) Liens encumbering deposits made to secure
obligations arising from statutory, regulatory, contractual, or warranty
requirements of the Company or any of its Restricted Subsidiaries, including
rights of offset and set-off; (xix) Liens securing Hedging Obligations which
Hedging Obligations relate to Indebtedness that is otherwise permitted under the
Indenture; (xx) leases or subleases granted to others not interfering in any
material respect with the business of the Company or its Restricted
Subsidiaries; (xxi) Liens arising out of consignment or similar arrangements for
the sale of goods entered into by the Company or any Restricted Subsidiary in
the ordinary course of business; (xxii) Liens or assets of a Receivables
Subsidiary arising on connection with a Qualified Receivables Transaction;
(xxiii) Liens incurred in the ordinary course of business of the Company or any
Restricted Subsidiary of the Company with respect to obligations that do not
exceed $5.0 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Restricted Subsidiary; and (xxiv) Liens securing Acquired Debt incurred in
accordance with clause (ix) of the covenant described under "--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock;"
PROVIDED, that (A) such Liens secured such Acquired Debt at the time of and
prior to the incurrence of such Acquired Debt by the Company or a Restricted
Subsidiary of the Company and were not granted in connection with, or in
anticipation of, the incurrence of such Acquired Debt by the Company or a
Restricted Subsidiary of the Company and (B) such Liens do not extend to or
cover any property or assets of the Company or any of its Restricted
Subsidiaries other than the property or assets that secured the Acquired Debt
prior to the time such Indebtedness became Acquired Debt of the Company or a
Restricted Subsidiary of the Company and are not more favorable to the
lienholders than those securing the Acquired Debt prior to the incurrence of
such Acquired Debt by the Company or a Restricted Subsidiary of the Company.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is subordinated in right of payment
to, the Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such Indebtedness
is incurred either by the Company or by the Restricted Subsidiary who is the
obligor on the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded.
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"PERSON" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"PRINCIPALS" means Vestar Capital Partners III, L.P.
"PUBLIC OFFERING" means one (and not more than one) offering of common stock
(other than Disqualified Stock) of the Company or any direct or indirect parent
corporation of the Company (a "Parent Corporation"), pursuant to an effective
registration statement filed with the Commission in accordance with the
Securities Act, other than an offering pursuant to Form S-8 (or any successor
thereto), provided, that in the case of an Initial Public Offering by a Parent
Corporation, such Parent Corporation contributes to the common equity of the
Company the portion of the net cash proceeds thereof necessary to pay the
aggregate redemption price of the Notes to be redeemed in connection therewith.
"PURCHASE MONEY NOTE" means a promissory note evidencing a line of credit,
or evidencing other Indebtedness owed to the Company or any Restricted
Subsidiary in connection with a Qualified Receivables Transaction, which note
shall be repaid from cash available to the maker of such note, other than
amounts required to be established as reserves pursuant to agreement, amounts
paid to investors in respect of interest, principal and other amounts owing to
such investors and amounts paid in connection with the purchase of newly
generated receivables.
"QUALIFIED PROCEEDS" means any of the following or any combination of the
following: (i) cash, (ii) Cash Equivalents, (iii) long-term assets that are used
or useful in a Permitted Business and (iv) the Capital Stock of any Person
engaged primarily in a Permitted Business if, in connection with the receipt by
the company or any Restricted Subsidiary of the Company of such Capital Stock,
(a) such Person becomes a Wholly-Owned Restricted Subsidiary and a Guarantor or
(b) such Person is merged, consolidated or amalgamated with or into, or
transfers or conveys substantially all of its assets to, or is liquidated into,
the Company or any Wholly-Owned Restricted Subsidiary of the Company that is a
Guarantor.
"QUALIFIED RECEIVABLES TRANSACTION" means any transaction or series of
transactions that may be entered into by the Company or any Restricted
Subsidiary pursuant to which the Company or any Restricted Subsidiary may sell,
convey or otherwise transfer to (a) a Receivables Subsidiary (in the case of a
transfer by the Company or any Restricted Subsidiary) and (b) any other Person
(in the case of a transfer by a Receivables Subsidiary), or may grant a security
interest in, any accounts receivable (whether now existing or arising in the
future) of the Company or any Restricted Subsidiary and any asset related
thereto including, without limitation, all collateral securing such accounts
receivable, all contracts and all guarantees or other obligations in respect of
such accounts receivable, proceeds of such accounts receivable and other assets
which are customarily transferred, or in respect of which security interests are
customarily granted, in connection with asset securitization transactions
involving accounts receivable.
"RECEIVABLES SUBSIDIARY" means a Wholly Owned Restricted Subsidiary (other
than a Guarantor) which engages in no activities other than in connection with
the financing of accounts receivables and which is designated by the Board of
Directors of the Company (as provided below) as a Receivables Subsidiary (a) no
portion of the Indebtedness or any other Obligations (contingent or otherwise)
of which (i) is guaranteed by the Company or any other Restricted Subsidiary
(excluding guarantees of obligations (other than the principal of, and interest
on, Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is
recourse to or obligates the Company or any other Restricted Subsidiary in any
way other than pursuant to Standard Securitization Undertakings or (iii)
subjects any property or asset of the Company or any other Restricted
Subsidiary, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard Securitization
Undertakings, (b) with which neither the Company nor any other Restricted
Subsidiary has any material contract, agreement, arrangement or understanding
(except in connection with a Purchase Money Note or Qualified Receivables
Transaction) other than on terms no less favorable to the Company or such other
Restricted Subsidiary than those that might be obtained at the time from persons
that are not Affiliates of the Company, other than fees payable in the ordinary
course of business in connection with servicing accounts receivable, and (c) to
which neither the Company nor any
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other Restricted Subsidiary has any obligation to maintain or preserve such
entity's financial condition or cause such entity to achieve certain levels of
operating results. Any such designation by the Board of Directors of the Company
shall be evidenced to the Trustee by filing with the Trustee a certified copy of
the resolution of the Board of Directors of the Company giving effect to such
designation and an Officers' Certificate certifying, to the best of such
officers' knowledge and belief after consulting with counsel, that such
designation complied with the foregoing conditions.
"RELATED PARTY" with respect to any Principal means (A) any controlling
stockholder, Subsidiary, or spouse or immediate family member (in the case of an
individual) of such Principal or (B) any trust, corporation, partnership or
other entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding a majority interest of which consist of such Principal
and/or such other Persons referred to in the immediately preceding clause (A).
"REORGANIZATION CHARGES" means (i) up to $3.3 million of facility closing
and re-engineering costs incurred by the Company and its Subsidiaries prior to
the Issue Date, (ii) up to $550,000 of losses incurred by the Company and its
Subsidiaries prior to the Issue Date associated with (x) the Canadian retail
operations of the Company and its Subsidiaries and (y) the Mexican and
Guatemalan operations of the Company and its Subsidiaries, (iii) up to $4.0
million of bankruptcy reorganization costs incurred by the Company and its
Restricted Subsidiaries prior to the Issue Date and (iv) the costs and expenses
of the Company and its Subsidiaries incurred in connection with the Transaction,
in each case calculated in accordance with GAAP on a consolidated basis.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary
"SENIOR CREDIT FACILITY" means the credit agreement to be entered into on or
prior to the Issue Date by and among the Company, NationsBanc Montgomery
Securities LLC, as arranger and syndication agent, certain lending parties
thereto and NationsBank, N.A., as agent, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, as such credit agreements and/or related documents may be
amended, restated, supplemented, renewed, replaced or otherwise modified from
time to time whether or not with the same agent, trustee, representative lenders
or holders, and, subject to the proviso to the next succeeding sentence,
irrespective of any changes in the terms and conditions thereof. Without
limiting the generality of the foregoing, the term "Senior Credit Facility"
shall include any amendment, amendment and restatement, renewal, extension,
restructuring, supplement or modification to any Senior Credit Facility and all
refundings, refinancings and replacements of any Senior Credit Facility
including any agreement (i) extending the maturity of any Indebtedness incurred
thereunder or contemplated thereby, (ii) adding or deleting borrowers or
guarantors thereunder, so long as the borrowers and issuers hereunder include
one or more of the Company and its Restricted Subsidiaries and their respective
successors and assigns, or (iii) increasing the amount of Indebtedness incurred
thereunder or available to be borrowed thereunder.
"SENIOR INDEBTEDNESS" means (i) all Indebtedness outstanding under Credit
Facilities and all Hedging Obligations with respect thereto, (ii) any other
Indebtedness permitted to be incurred by the Company or a Guarantor under the
terms of the Indenture, unless the instrument under which such Indebtedness is
incurred expressly provides that it is on a parity with or subordinated in right
of payment to the Notes and (iii) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
will not include (w) any liability for federal, state, local or other taxes owed
or owing by the Company, (x) any Indebtedness of the Company to any of its
Restricted Subsidiaries or other Affiliates, (y) any trade payables or (z) any
Indebtedness that is incurred in violation of the Indenture.
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"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"STANDARD SECURITIZATION UNDERTAKINGS" means representations, warranties,
covenants and indemnities entered into by the Company or any Restricted
Subsidiary which are reasonably customary in an accounts receivable transaction.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"TOTAL ASSETS" means, with respect to any Person, the total consolidated
assets of such Person and its Restricted Subsidiaries, as shown on the most
recent balance sheet of such Person.
"TREASURY RATE" means, as of any Redemption Date, the yield to maturity as
of such Redemption Date of United States Treasury securities with a constant
maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the Redemption Date to May 15, 2003; PROVIDED,
HOWEVER, that if the period from the Redemption Date to May 15, 2003 is less
than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not a party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; and (d) has not guaranteed
or otherwise directly or indirectly provided credit support for any Indebtedness
of the Company or any of its Restricted Subsidiaries. Any such designation by
the Board of Directors shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant
described above under the caption "--Certain Covenants--Restricted Payments."
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant
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described under the caption "--Certain Covenants--Incurrence of Indebtedness and
Issuance of Preferred Stock," the Company shall be in default of such covenant).
The Board of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
the covenant described under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis
as if such designation had occurred at the beginning of the four-quarter
reference period, and (ii) no Default or Event of Default would be in existence
following such designation
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
or Disqualified Stock at any date, the number of years obtained by dividing (i)
the sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments
of principal or liquidation preference, as applicable, including payment at
final maturity, in respect thereof, by (b) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment, by (ii) the then outstanding principal amount or liquidation
preference, as applicable, of such Indebtedness or Disqualified Stock.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
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DESCRIPTION OF THE NEW PREFERRED STOCK
AND EXCHANGE DEBENTURES
DESCRIPTION OF NEW PREFERRED STOCK
GENERAL
The terms of the New Preferred Stock are set forth in the Certificate of
Designations, Preferences and Relative, Participating, Optional and Other
Special Rights of Preferred Stock and Qualifications, Limitations and
Restrictions Thereof (the "Certificate of Designations"). The following summary
of the material terms of the Certificate of Designations does not purport to be
complete and is qualified in its entirety by reference to the Company's Amended
and Restated Certificate of Incorporation, which includes the Certificate of
Designations, including the definitions therein of certain terms used below. The
definitions of certain terms used in the following summary are set forth below
under the caption "--Certain Definitions." For purposes of this summary, the
term "Company" refers only to Cluett American Corp. and not to any of its
Subsidiaries.
Pursuant to the Certificate of Designations, 500,000 shares of New Preferred
Stock with a liquidation preference of $100 per share (the "Liquidation
Preference") will be authorized for issuance in the Preferred Stock Offering.
The New Preferred Stock will, when issued, be fully paid and nonassessable, and
Holders thereof will have no preemptive rights in connection therewith.
The Liquidation Preference of the New Preferred Stock is not necessarily
indicative of the price at which the New Preferred Stock will actually trade at
or after the time of their issuance, and the New Preferred Stock may trade at
prices below its Liquidation Preference. The market price of the New Preferred
Stock can be expected to fluctuate with changes in the financial markets and
economic conditions, the financial condition and prospects of the Company and
other factors that generally influence the market prices of securities. See
"Risk Factors."
The transfer agent for the New Preferred Stock will be The Bank of New York
unless and until a successor is selected by the Company (the "Transfer Agent").
The offices of the Transfer Agent are located in New York City at 101 Barclay
Street, New York, New York 10005.
As of the date of the Certificate of Designations, all of the Company's
Subsidiaries were Restricted Subsidiaries. Under certain circumstances, however,
the Company will be able to designate current or future Subsidiaries as
Unrestricted Subsidiaries. Unrestricted Subsidiaries will not be subject to many
of the restrictive covenants set forth in the Certificate of Designations.
RANKING
Except as otherwise described below and as to the Exchangeable Preferred
Stock, the New Preferred Stock will rank senior in right of payment to all
classes or series of capital stock of the Company as to dividends and upon
liquidation, dissolution or winding up of the Company. The Certificate of
Designations provides that the Company may not, after the Issue Date, without
the consent of the Holders of at least a majority of the then outstanding New
Preferred Stock, authorize, create (by way of reclassification or otherwise) or
issue any class or series of capital stock of the Company ranking on a parity
with the New Preferred Stock ("Parity Securities") or any obligation or security
convertible or exchangeable into or evidencing a right to purchase, stock of any
class or series of Parity Securities. The Certificate of Designations provides
that the Company may not, without the consent of the Holders of at least
two-thirds of the then outstanding New Preferred Stock, authorize, create (by
way of reclassification or otherwise) or issue any class or series of capital
stock of the Company ranking senior to the New Preferred Stock ("Senior
Securities") other than, in each case, Disqualified Stock incurred in accordance
with the Certificate of Designations or any obligation or security convertible
or exchangeable into or evidencing a
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right to purchase, stock of any class or series of Senior Securities other than
Disqualified Stock incurred in accordance with the Certificate of Designations.
DIVIDENDS
The Holders of the New Preferred Stock will be entitled to receive, when, as
and if dividends are declared by the Board of Directors out of funds of the
Company legally available therefor, cumulative preferential dividends from the
date of issuance of the New Preferred Stock accruing at the rate per share of
12 1/2% per annum, payable semiannually in arrears on May 15 and November 15 of
each year (each, a "Dividend Payment Date") commencing on November 15, 1998, to
the Holders of record as of the preceding May 1 and November 1 (each, a "Record
Date"). On or prior to May 15, 2003, the Company may, at its option, pay
dividends in cash or in additional fully-paid and non-assessable shares of New
Preferred Stock (including fractional stock) having an aggregate Liquidation
Preference equal to the amount of such dividends. Thereafter, dividends may be
paid in cash only. It is not expected that the Company will pay any dividends in
cash for the period ending on or prior to May 15, 2003. Dividends payable on the
New Preferred Stock will be computed on the basis of a 360-day year of twelve
30-day months and will be deemed to accrue on a daily basis. On any scheduled
Dividend Payment Date, the Company may, at its option, but subject to certain
conditions, exchange all but not less than all of the shares of New Preferred
Stock for the Company's 12 1/2% Subordinated Exchange Debentures due 2010 (the
"Exchange Debentures"). For a discussion of certain federal income tax
considerations relevant to the payment of dividends on the New Preferred Stock,
see "Certain Federal Income Tax Considerations-- Dividends on New Preferred
Stock."
Dividends on the New Preferred Stock accrue whether or not the Company has
earnings or profits, whether or not there are funds legally available for the
payment of such dividends and whether or not dividends are declared. Dividends
will accumulate to the extent they are not paid on the Dividend Payment Date for
the semiannual period to which they relate. Accumulated unpaid dividends will
accrue dividends at the rate of 12 1/2% per annum. The Certificate of
Designations provides that the Company will take all actions required or
permitted under Delaware law to permit the payment of dividends on the New
Preferred Stock.
No dividend whatsoever shall be declared or paid upon, or any sum set apart
for the payment of dividends upon, any outstanding New Preferred Stock with
respect to any dividend period unless all dividends for all preceding dividend
periods have been declared and paid upon, or declared and a sufficient sum set
apart for the payment of such dividend upon, all outstanding New Preferred
Stock. Unless full cumulative dividends on all outstanding New Preferred Stock
due for all past dividend periods shall have been declared and paid, or declared
and a sufficient sum for shares for the payment thereof set apart, then: (i) no
dividend (other than a dividend payable solely in stock of any class of stock
ranking junior to the New Preferred Stock as to the payment of dividends and as
to rights in liquidation, dissolution or winding up of the affairs of the
Company ("Junior Securities")) shall be declared or paid upon, or any sum set
apart for the payment of dividends upon, any stock of Junior Securities; (ii) no
other distribution shall be declared or made upon, or any sum set apart for the
payment of any distribution upon, any stock of Junior Securities; (iii) no stock
of Junior Securities shall be purchased, redeemed or otherwise acquired or
retired for value (excluding an exchange for stock of other Junior Securities)
by the Company or any of its Restricted Subsidiaries; (iv) no warrants, rights,
calls or options to purchase any Junior Securities shall be directly or
indirectly issued by the Company or any of its Restricted Subsidiaries; and (v)
no monies shall be paid into or set apart or made available for a sinking or
other like fund for the purchase, redemption or other acquisition or retirement
for value of any stock of Junior Securities by the Company or any of its
Restricted Subsidiaries. Holders of the New Preferred Stock will not be entitled
to any dividends, whether payable in cash, property or stock, in excess of the
full cumulative dividends as herein described.
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In addition, the Senior Credit Facility and the Indenture contain
restrictions on the ability of the Company to pay dividends on the New Preferred
Stock. Any future credit agreements or other agreements relating to Indebtedness
to which the Company becomes a party may contain similar restrictions and
provisions. See "Risk Factors--Dividend Restrictions on New Preferred Stock and
Exchange Debentures" and "--Holding Company Structure."
VOTING RIGHTS
Holders of record of the Preferred Stock have no voting rights, except as
required by law and as provided in the Certificate of Designations. The
Certificate of Designations provides that upon (i) the accumulation of accrued
and unpaid dividends on the outstanding Preferred Stock in an amount equal to
three or more consecutive full semiannual dividends; (ii) failure by the Company
or any of its Restricted Subsidiaries to comply with (x) the provisions
described under the caption "--Merger, Consolidation or Sale of Assets" or (y)
any mandatory redemption obligation with respect to the Preferred Stock; (iii)
failure by the Company or any of its Restricted Subsidiaries to comply with any
of the other covenants or agreements set forth in the Certificate of
Designations and the continuance of such failure for 60 consecutive days or
more; or (iv) certain events of bankruptcy or insolvency with respect to the
Company or any of its Restricted Subsidiaries (each of the events described in
clauses (i), (ii), (iii) and (iv) being referred to as a "Voting Rights
Triggering Event"), then the number of members of the Company's Board of
Directors will be immediately and automatically increased by two, and the
Holders of a majority of the outstanding Preferred Stock, voting as a separate
class, will be entitled to elect two members to the Board of Directors of the
Company. Voting rights arising as a result of a Voting Rights Triggering Event
will continue until such time as all dividends in arrears on the Preferred Stock
are paid in full and all other Voting Rights Triggering Events have been cured
or waived.
In addition, as provided above under "--Ranking," the Company may not
authorize, create (by way of reclassification or otherwise) or issue (i) any
Parity Securities, or any obligation or security convertible into or evidencing
the right to purchase any Parity Securities, without the affirmative vote or
consent of the Holders of a majority of the then outstanding Preferred Stock;
and (ii) any Senior Securities (other than Disqualified Stock), or any
obligation or security convertible into or evidencing the right to purchase
Senior Securities (other than Disqualified Stock), without the affirmative vote
or consent of the Holders of two-thirds of the then outstanding Preferred Stock,
in each case, voting as a separate class.
EXCHANGE
The Company may, at its option on any Dividend Payment Date, exchange all
but not less than all of the shares of then outstanding New Preferred Stock for
Exchange Debentures; PROVIDED that (i) on the date of such exchange there are no
accumulated and unpaid dividends on the New Preferred Stock (including the
dividend payable on such date) or other contractual impediments to such
exchange; (ii) there shall be legally available funds sufficient therefor; (iii)
such exchange would be permitted under the terms of the Indenture and,
immediately after giving effect to such exchange, no Default or Event of Default
(each as defined in the Exchange Indenture) would exist under the Exchange
Indenture, no default or event of default would exist under the Senior Credit
Facility or the Indenture and no default or event of default under any material
instrument governing Indebtedness outstanding at the time would be caused
thereby; (iv) the Exchange Indenture has been qualified under the Trust
Indenture Act, if such qualification is required at the time of exchange; and
(v) the Company shall have delivered a written opinion to the Exchange Trustee
(as defined herein) to the effect that all conditions to be satisfied prior to
such exchange have been satisfied. The Senior Credit Facility and the Indenture
currently restrict the exchange of the New Preferred Stock and may restrict the
Company's ability to exchange the New Preferred Stock in the future. See
"Description of Certain Indebtedness" and "Description of Exchange Notes."
Upon any exchange pursuant to the preceding paragraph, holders of
outstanding New Preferred Stock will be entitled to receive, subject to the
second succeeding sentence of this paragraph, $1.00 principal
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amount of Exchange Debentures for each $1.00 of the aggregate Liquidation
Preference, plus, without duplication, accrued and unpaid dividends. The
Exchange Debentures will be issued in registered form, without coupons. For a
description of the Exchange Debentures, see "--Description of the Exchange
Debentures." The Exchange Debentures will be issued in principal amounts of
$1,000 and integral multiples thereof to the extent possible, and will also be
issuable in principal amounts less than $1,000 so that each holder of Preferred
Stock will receive interests representing the entire amount of Exchange
Debentures to which such holder's share of Preferred Stock entitle such holder;
PROVIDED that the Company may pay cash in lieu of issuing an Exchange Debenture
having a principal amount less than $1,000. Notice of the intention to exchange
will be sent by or on behalf of the Company not more than 60 days nor less than
30 days prior to the Exchange Date, by first class mail, postage prepaid, to
each Holder of record of New Preferred Stock at its registered address. In
addition to any information required by law or by the applicable rules of any
exchange upon which New Preferred Stock may be listed or admitted to trading,
such notice will state: (i) the Exchange Date; (ii) the place or places where
certificates for such stock are to be surrendered for exchange, including any
procedures applicable to exchanges to be accomplished through book-entry
transfers; and (iii) that dividends on the New Preferred Stock to be exchanged
will cease to accrue on the Exchange Date. If notice of any exchange has been
properly given, and if on or before the Exchange Date the Exchange Debentures
have been duly executed and authenticated and an amount in cash or additional
New Preferred Stock (as applicable) equal to all accrued and unpaid dividends,
if any, thereon to the Exchange Date has been deposited with the Transfer Agent,
then on and after the close of business on the Exchange Date, the New Preferred
Stock to be exchanged will no longer be deemed to be outstanding and may
thereafter be issued in the same manner as the other authorized but unissued
preferred stock, but not as New Preferred Stock, and all rights of the Holders
thereof as stockholders of the Company will cease, except the right of the
Holders to receive upon surrender of their certificates the Exchange Debentures
and all accrued and unpaid dividends, if any, thereon to the Exchange Date.
REDEMPTION
MANDATORY REDEMPTION
On May 15, 2010 (the "Mandatory Redemption Date"), the Company will be
required to redeem (subject to the legal availability of funds therefor) all
outstanding New Preferred Stock at a price in cash equal to the Liquidation
Preference thereof, plus accrued and unpaid dividends, if any, to the date of
redemption. The Company will not be required to make sinking fund payments with
respect to the New Preferred Stock. The Certificate of Designations provides
that the Company will take all actions required or permitted under Delaware law
to permit such redemption.
The Senior Credit Facility and the Indenture currently restrict the
redemption of the New Preferred Stock and additional indebtedness may restrict
the Company's ability to redeem the New Preferred Stock in the future. See
"Description of Other Indebtedness" and "Description of the Exchange Notes."
OPTIONAL REDEMPTION
The New Preferred Stock may not be redeemed at the option of the Company on
or prior to May 15, 2003. The New Preferred Stock may be redeemed, in whole or
in part, at the option of the Company on or after May 15, 2003, at the
redemption prices specified below (expressed as percentages of the Liquidation
Preference thereof), in each case, together with accrued and unpaid dividends,
if any, to the date of
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redemption, upon not less than 30 nor more than 60 days' prior written notice,
if redeemed during the 12-month period commencing on May 15 of each of the years
set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION RATE
- ------------------------------------------------------------------ ----------------
<S> <C>
2003.............................................................. 106.250%
2004.............................................................. 105.000%
2005.............................................................. 103.750%
2006.............................................................. 102.500%
2007.............................................................. 101.250%
2008 and thereafter............................................... 100.000%
</TABLE>
Notwithstanding the foregoing, during the first 36 months after the Issue
Date, the Company may, on any one or more occasions, redeem the New Preferred
Stock, in whole or in part, at the redemption prices set forth below (expressed
as percentages of the Liquidated Preference thereof), in each case, together
with accrued and unpaid dividends, if any, to the redemption date, with the net
proceeds of one or more Equity Offerings if redeemed during the 12-month period
commencing on May 15 of each of the years set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION RATE
- ------------------------------------------------------------------ ----------------
<S> <C>
1998.............................................................. 108.000%
1999.............................................................. 110.000%
2000.............................................................. 112.000%
</TABLE>
In the event of a redemption pursuant to the above paragraph (except in the
case of a redemption of all the New Preferred Stock), at least $25.0 million in
aggregate Liquidation Preference of New Preferred Stock shall remain outstanding
immediately after the occurrence of each such redemption and any such redemption
occur within 45 days of the date of closing of such Equity Offering.
At any time prior to May 15, 2003, the New Preferred Stock may also be
redeemed, as a whole but not in part, at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days
prior notice (but in no event may any such redemption occur more than 90 days
after the occurrence of such Change of Control) mailed by first-class mail to
each Holder's registered address, at a redemption price equal to a percentage of
the Liquidation Preference equal to the sum of 100% and the dividend rate then
in effect with respect to the New Preferred Stock, and accrued and unpaid
dividends, if any, to, the date of redemption.
The Senior Credit Facility and the Indenture currently restrict the
redemption of the New Preferred Stock and additional indebtedness may restrict
the Company's ability to redeem the New Preferred Stock in the future. See
"Description of Certain Indebtedness" and "Description of Capital Stock--New
Preferred Stock."
LIQUIDATION RIGHTS
Upon any voluntary or involuntary liquidation, dissolution or winding up of
the affairs of the Company or reduction or decrease in its capital stock
resulting in a distribution of assets to the holders of any class or series of
the Company's capital stock (a "reduction or decrease in capital stock"), each
Holder of the New Preferred Stock will be entitled to payment out of the assets
of the Company available for distribution of an amount equal to the Liquidation
Preference per New Preferred Stock held by such Holder, plus accrued and unpaid
dividends, if any, to the date fixed for liquidation, dissolution, winding up or
reduction or decrease in capital stock, before any distribution is made on any
Junior Securities, including, without limitation, common stock of the Company.
After payment in full of the Liquidation Preference and all accrued dividends,
if any, to which Holders of New Preferred Stock are entitled, such Holders will
not be entitled to any further participation in any distribution of assets of
the Company.
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However, neither the voluntary sale, conveyance, exchange or transfer (for cash,
stock of stock, securities or other consideration) of all or substantially all
of the property or assets of the Company nor the consolidation or merger of the
Company with or into one or more corporations will be deemed to be a voluntary
or involuntary liquidation, dissolution or winding up of the Company or
reduction or decrease in capital stock, unless such sale, conveyance, exchange
or transfer shall be in connection with a liquidation, dissolution or winding up
of the business of the Company or reduction or decrease in capital stock.
The Certificate of Designations does not contain any provision requiring
funds to be set aside to protect the Liquidation Preference of the New Preferred
Stock, although such Liquidation Preference will be substantially in excess of
the par value of the New Preferred Stock.
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of New Preferred
Stock will have the right to require the Company to repurchase all or any part
of such Holder's New Preferred Stock pursuant to the offer described below (the
"Change of Control Offer") at an offer price in cash equal to 101% of the
aggregate Liquidation Preference thereof plus accrued and unpaid dividends, if
any, thereon to the date of purchase (the "Change of Control Payment"). Within
30 days following any Change of Control, the Company will mail a notice to each
Holder describing the transaction or transactions that constitute the Change of
Control and offering to repurchase all outstanding New Preferred Stock on the
date specified in such notice, which date shall be no earlier than 30 days and
no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), pursuant to the procedures required by the Certificate
of Designations and described in such notice. The Company will comply with the
requirements of Rule 14e-l under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the New Preferred Stock as a
result of a Change of Control.
On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all New Preferred Stock or portions thereof
properly tendered pursuant to the Change of Control Offer, (2) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of all
New Preferred Stock or portions thereof so tendered and (3) deliver or cause to
be delivered to the Transfer Agent the New Preferred Stock so accepted together
with an Officers' Certificate stating the aggregate Liquidation Preference of
the New Preferred Stock or portions thereof being purchased by the Company. The
Paying Agent will promptly mail to each Holder of New Preferred Stock so
tendered the Change of Control Payment for such New Preferred Stock, and the
Transfer Agent will promptly authenticate and mail (or cause to be transferred
by book entry) to each Holder a new certificate representing the New Preferred
Stock equal in Liquidation Preference amount to any unpurchased portion of the
New Preferred Stock surrendered, if any. The Certificate of Designations
provides that, prior to complying with the provisions of this covenant, but in
any event within 90 days following a Change of Control, the Company will either
repay all outstanding Senior Indebtedness or obtain the requisite consents, if
any, under all agreements governing outstanding Senior Indebtedness to permit
the repurchase of New Preferred Stock required by this covenant. If the Company
fails to make such repayment or obtain such consents within such time period, it
will result in a Voting Rights Triggering Event, but the obligation to commence
and consummate a Change of Control Offer will be suspended until such repayment
is made or such consents are obtained. The Company will publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
The Change of Control provisions described above are applicable whether or
not any other provisions of the Certificate of Designations are applicable.
Except as described above with respect to a Change of Control, the Certificate
of Designations does not contain provisions that permit the Holders of the New
Preferred Stock to require that the Company repurchase or redeem the New
Preferred Stock in the event of a takeover, recapitalization or similar
transaction.
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The Senior Credit Facility currently prohibits the Company from purchasing
any New Preferred Stock prior to its maturity, and will also provide that
certain change of control events with respect to the Company would constitute a
default thereunder. The Indenture also contains restrictions on the ability of
the Company to repurchase New Preferred Stock. Any future credit agreements or
other agreements relating to Senior Indebtedness to which the Company becomes a
party may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when the Company is prohibited from purchasing New
Preferred Stock, the Company could seek the consent of its lenders to the
purchase of New Preferred Stock or could attempt to refinance the borrowings
that contain such prohibition. If the Company does not obtain such a consent or
repay such borrowings, the Company will remain prohibited from purchasing New
Preferred Stock. In such case, the Holders of a majority of the outstanding New
Preferred Stock, voting as a separate class, may be entitled to elect two
members to the Board of Directors of the Company. Such members shall cease to
serve for such periods thereafter as the Company shall no longer be so
prohibited and shall have paid the amounts required hereunder.
The Company is not required to make a Change of Control Offer to the Holders
of New Preferred Stock upon a Change of Control if a third party makes the
Change of Control Offer described above in the manner, at the times and
otherwise in compliance with the requirements set forth in the Certificate of
Designations and purchases all New Preferred Stock validly tendered and not
withdrawn under such Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of New Preferred Stock to require the
Company to repurchase such New Preferred Stock as a result of a sale, lease,
transfer, conveyance or other disposition of less than all of the assets of the
Company and, its Subsidiaries taken as a whole to another Person or group may be
uncertain.
ASSET SALES
The Certificate of Designations provides that the Company will not, and will
not permit any of its Restricted Subsidiaries to, consummate an Asset Sale
unless (i) the Company (or the Restricted Subsidiary, as the case may be)
receives consideration at the time of such Asset Sale at least equal to the fair
market value (evidenced by a resolution of the Board of Directors set forth in
an Officers' Certificate delivered to the Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of (A) cash or Cash Equivalents or (B) Qualified Proceeds; provided
that the aggregate fair market value of Qualified Proceeds (other than cash or
Cash Equivalents), which may be received in consideration for asset sales
pursuant to this clause (ii) (B) shall not exceed $5.0 million since the Issue
Date; PROVIDED that the amount of (x) any liabilities (as shown on the Company's
or such Restricted Subsidiary's most recent balance sheet), of the Company or
any Restricted Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the New Preferred Stock or any guarantee
thereof) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or such Restricted
Subsidiary from further liability and (y) any securities, notes or other
obligations received by the Company or any such Restricted Subsidiary from such
transferee that are contemporaneously (subject to ordinary settlement periods)
converted by the Company or such Restricted Subsidiary into cash (to the extent
of the cash received), shall be deemed to be cash for purposes of this
provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to permanently repay
Indebtedness, or (b) to acquire all or substantially all of the assets of, or a
majority of the Voting Stock of, another Permitted Business, (c) to make a
capital expenditure or (d) to acquire other long-term assets that are used or
useful in a Permitted
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Business. Pending the final application of any such Net Proceeds, the Company
may temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by the Certificate of
Designations. Any Net Proceeds from Asset Sales that are not applied or invested
as provided in the first sentence of this paragraph will be deemed to constitute
"Excess Proceeds." When the aggregate amount of Excess Proceeds exceeds $10.0
million, the Company will be required to make an offer to all Holders of New
Preferred Stock (an "Asset Sale Offer") to redeem the maximum outstanding New
Preferred Stock that may be purchased out of the Excess Proceeds, at a price in
cash equal to the Liquidation Preference thereof, plus accrued and unpaid
dividends, if any, to the date of purchase, in accordance with the procedures
set forth in the Certificate of Designations. To the extent that any Excess
Proceeds remain after consummation of an Asset Sale Offer, the Company may use
such Excess Proceeds for general corporate purposes. If the aggregate
Liquidation Preference of New Preferred Stock surrendered by Holders thereof
exceeds the amount of Excess Proceeds the Trustee shall select the New Preferred
Stock to be purchased on a pro rata basis. Upon completion of such offer to
purchase, the amount of Excess Proceeds shall be reset at zero.
The Senior Credit Facility and the Indenture currently restrict the
Company's ability to purchase any New Preferred Stock. Any future credit
agreements or other agreements relating to Senior Indebtedness to which the
Company becomes a party may contain similar restrictions and provisions. In the
event an Asset Sale occurs at a time when the Company is prohibited from
purchasing New Preferred Stock, the Company could seek the consent of its
lenders to the purchase of New Preferred Stock or could attempt to refinance the
borrowings that contain such prohibition. If the Company does not obtain such a
consent or repay such borrowings, the Company will remain prohibited from
purchasing New Preferred Stock. In such case, the Holders of a majority of the
outstanding New Preferred Stock, voting as a separate class, may be entitled to
elect two members to the Board of Directors of the Company. Such members shall
cease to serve for such periods thereafter as the Company shall no longer be
prohibited and shall have sold the amounts required thereunder.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Certificate of Designations provides that the Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly: (i)
declare or pay any dividend or make any other payment or distribution on account
of the Company's or any of its Restricted Subsidiaries' Parity Securities or
Junior Securities (including, without limitation, any payment in connection with
any merger or consolidation involving the Company or any of its Restricted
Subsidiaries) or to the direct or indirect holders of the Company's or any of
its Restricted Subsidiaries' Parity Securities or Junior Securities in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company and other than
dividends or distributions payable to the Company or a Restricted Subsidiary of
the Company); (ii) make any payment on, purchase, redeem or otherwise acquire or
retire for value any Parity Securities or Junior Securities of the Company or
any direct or indirect parent of the Company or other Affiliate of the Company
(other than any such Parity Securities or Junior Securities owned by the Company
or any Restricted Subsidiary of the Company); or (iii) make any Restricted
Investment (all such payments and other actions set forth in clauses (i) through
(iii) above being collectively referred to as "Restricted Payments"), unless, at
the time of and after giving effect to such Restricted Payment:
(a) no Voting Rights Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof, and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Debt to
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Cash Flow Ratio test set forth in the first paragraph of the covenant
described below under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock;" and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted
by clauses (ii), (iii), (v) and (vii) of the next succeeding paragraph), is
less than the sum, without duplication, of (i) 50% of the Consolidated Net
Income of the Company for the period (taken as one accounting period) from
the beginning of the first fiscal quarter commencing after Issue Date to the
end of the Company's most recently ended fiscal quarter for which internal
financial statements are available at the time of such Restricted Payment
(or, if such Consolidated Net Income for such period is a deficit, less 100%
of such deficit), plus (ii) 100% of the aggregate net cash proceeds received
by the Company since the Issue Date as a contribution to its common equity
capital or from the issue or sale of Equity Interests of the Company (other
than Disqualified Stock) or from the issue or sale of Disqualified Stock or
debt securities of the Company that have been converted into such Equity
Interests (other than Equity Interests (or Disqualified Stock or convertible
debt securities) sold to a Subsidiary of the Company), plus (iii) 100% of
the fair market value of any Person engaged in a Permitted Business or
assets used by the Company or a Restricted Subsidiary in a Permitted
Business which such Person or assets were acquired by the Company or any of
its Restricted Subsidiaries since the Issue Date PROVIDED that the
consideration for such Person or assets consisted solely of Equity Interests
of the Company (other than Disqualified Stock), PLUS (iv) to the extent that
any Restricted Investment that was made after the Issue Date is sold for
cash or otherwise liquidated or repaid for cash or the receipt of properties
used in a Permitted Business, the lesser of (A) the net cash proceeds of
such sale, liquidation or repayment or the fair market value (as determined
in good faith by a resolution of the Board of Directors) of property
received in exchange therefor and (B) the amount of such Restricted
Investment.
The foregoing provisions do not prohibit: (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the
Certificate of Designations; (ii) the redemption, repurchase, retirement or
other acquisition of any Equity Interests of the Company in exchange for, or out
of the proceeds of, the substantially concurrent sale (other than to a
Restricted Subsidiary of the Company) of, other Equity Interests of the Company
(other than any Disqualified Stock); provided that the amount of any such net
cash proceeds that are utilized for any such redemption, repurchase, retirement
or other acquisition shall be excluded from clause (c)(ii) of the preceding
paragraph; (iii) the payment of any dividend by a Restricted Subsidiary of the
Company to the holders of its common Equity Interests on a pro rata basis; (iv)
so long as no Voting Rights Triggering Event has occurred and is continuing or
would be caused thereby, the direct or indirect repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company or
any direct or indirect parent corporation of the Company held by any member of
the Company's (or any of its Restricted Subsidiaries') management pursuant to
any management equity subscription agreement or stock option agreement in effect
as of Issue Date; PROVIDED that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$1.0 million in any twelve-month period; (v) dividends or other payments to
Holdings sufficient to enable Holdings to pay accounting, legal, corporate or
reporting and administrative expenses of Holdings incurred in the ordinary
course of business in an amount not to exceed $500,000 in any twelve-month
period; (vi) the making of loans by the Company or any of its Restricted
Subsidiaries to officers or directors of the Company; provided that the
aggregate outstanding amount of such loans shall not exceed, at any time, $2.0
million plus any such loans outstanding on the Issue Date; (vii) payments to
Holdings by the Company or any Restricted Subsidiary with respect to taxes
(including estimated taxes) that are paid by Holdings on a combined,
consolidated, unitary or similar basis, to the extent that such payments do not
exceed the amount that the Company or such Restricted Subsidiary would have paid
to the relevant taxing authority if the Company or such Restricted Subsidiary
filed a separate tax return for the period in question; (viii) so long as no
Voting Rights Triggering Event has occurred and is continuing or would be caused
thereby, the
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defeasance, redemption or repurchase of any preferred stock issued in connection
with the acquisition of assets or a Permitted Business, PROVIDED, that the
aggregate amount of such defeasance, redemption or repurchase payments shall not
exceed at any time $10.0 million; (ix) so long as no Voting Rights Triggering
Event is continuing or would be caused thereby, payments under the Management
Agreement as in effect on the Issue Date; (x) the direct or indirect repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Company or any direct or indirect parent corporation of the Company held
by any employee of the Company or a Restricted Subsidiary of the Company upon
the retirement of any such employee; provided that the aggregate price paid for
all such repurchased, redeemed, acquired or retired Equity Interests shall not
exceed $400,000 less the amount of Restricted Payments made pursuant to clause
(xi) below during such period in any twelve-month period; and (xi) the direct or
indirect redemption, repurchase or other acquisition or retirement for value of
Class A Senior Preferred Stock of Holdings from Holdings' qualified employee
stock options plans, which Class A Senior Preferred Stock will either be issued
on the Issue Date or issued as dividends thereon in accordance with the
certificate of designations relating thereto as in effect on the Issue Date,
provided that such redemption, repurchase or other acquisition or retirement is
required by applicable law and such plans.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. In the
event of any such designation, all outstanding Investments owned by the Company
and its Restricted Subsidiaries in the Subsidiary so designated will be deemed
to be an Investment made as of the time of such designation and will reduce the
amount available for Restricted Payments under the first paragraph of this
covenant or Permitted Investments, as applicable. All such outstanding
Investments will be deemed to constitute Restricted Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary. The Board of Directors may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if such
redesignation would not cause a Default.
The amount of all Restricted Payments (other than cash) and Qualified
Proceeds (other than cash) shall be the fair market value on the date of the
Restricted Payment (or the date of receipt of Qualified Proceeds) of the
asset(s) or securities proposed to be transferred or issued by the Company or
such Restricted Subsidiary, as the case may be, pursuant to the Restricted
Payment. The fair market value of any assets or securities that are required to
be valued by this covenant shall be determined by the Board of Directors (whose
resolutions with respect thereto shall be delivered to the Transfer Agent), such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $5.0 million. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Board of Directors and the Transfer
Agent an Officers' Certificate stating that such Restricted Payment is permitted
and setting forth the basis upon which the calculations required by the covenant
"Restricted Payments" were computed, together with a copy of any fairness
opinion or appraisal required by the Certificate of Designations.
Accrual of interest, accretion or amortization of original issue discount,
the payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms and the payment of dividends on Disqualified
Stock in the form of additional shares of the same class of Disqualified Stock
will not be deemed to be Restricted Payment for purposes of this covenant;
PROVIDED, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued.
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INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Certificate of Designations provides that the Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly,
create, incur, issue, assume, guarantee or otherwise become directly or
indirectly liable, contingently or otherwise, with respect to (collectively,
"incur") any Indebtedness (including Acquired Debt) and that the Company will
not issue any Disqualified Stock and will not permit any of its Restricted
Subsidiaries to issue any shares of preferred stock; PROVIDED, HOWEVER, that the
Company may incur Indebtedness (including Acquired Debt) or issue shares of
Disqualified Stock and Restricted Subsidiaries may incur Indebtedness and issue
preferred stock, if the Fixed Charge Coverage Ratio for the Company's most
recently ended four full fiscal quarters for which internal financial statements
are available immediately preceding the date on which such additional
Indebtedness is incurred or such Disqualified Stock is issued would have been at
least 2 to 1, determined on a pro forma basis (including a pro forma application
of the net proceeds therefrom), as if the additional Indebtedness had been
incurred, or the Disqualified Stock had been issued, as the case may be, at the
beginning of such four-quarter period.
The provisions of the first paragraph of this covenant do not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company of Indebtedness under the Senior
Credit Facility in an aggregate principal amount not exceeding an amount
equal to $160.0 million LESS the aggregate amount of all Net Proceeds of
Asset Sales applied by the Company or any of its Restricted Subsidiaries to
permanently repay Indebtedness under the Senior Credit Facility pursuant to
the covenant described above under the caption "--Asset Sales";
(ii) the incurrence by Cluett Peabody Canada Inc. of Indebtedness under
the Canadian Credit Facility in an aggregate principal amount not exceeding
an amount equal to $15.0 million LESS the aggregate amount of all Net
Proceeds of Asset Sales applied by the Company or any of its Restricted
Subsidiaries to permanently repay revolving credit Indebtedness under the
Canadian Credit Facility pursuant to the covenant described above under the
caption "--Asset Sales";
(iii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness, including the Notes and the Guarantees thereof;
(iv) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $10.0 million at any time outstanding;
(v) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Existing Indebtedness or
Indebtedness (other than intercompany Indebtedness) that was permitted by
the Certificate of Designations to be incurred under the first paragraph
hereof or clauses (iv), (v), (viii) or (xv) of this paragraph;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries; PROVIDED, HOWEVER, that (A) any subsequent issuance
or transfer of Equity Interests that results in any such Indebtedness being
held by a Person other than the Company or a Restricted Subsidiary thereof
and (B) any sale or other transfer of any such Indebtedness to a Person that
is not either the Company or a Restricted Subsidiary thereof shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by
the Company or such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (vi);
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(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of the Certificate of
Designations to be outstanding;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of assets or
a new Subsidiary; PROVIDED that such Indebtedness was incurred by the prior
owner of such assets or such Subsidiary prior to such acquisition by the
Company or one of its Restricted Subsidiaries and was not incurred in
connection with, or in contemplation of, such acquisition by the Company or
one of it Restricted Subsidiaries; and PROVIDED FURTHER that the principal
amount (or accreted value, as applicable) of such Indebtedness, together
with any other outstanding Indebtedness incurred pursuant to this clause
(viii) and any Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause
(viii), does not exceed $5.0 million;
(ix) the guarantee by the Company or any Restricted Subsidiary of the
Company of Indebtedness of the Company or any Restricted Subsidiary of the
Company that was permitted to be incurred by another provision of this
covenant;
(x) indebtedness incurred in respect of workers' compensation claims,
self-insurance obligations, performance, surety and similar bonds and
completion guarantees provided by the Company in the ordinary course of
business;
(xi) Indebtedness arising from guarantees of Indebtedness of the Company
or any Restricted Subsidiary or the agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of purchase
price or similar obligations, in each case, incurred or assumed in
connection with the disposition of any business, assets or Capital Stock of
a Restricted Subsidiary, or other guarantees of Indebtedness incurred by any
person acquiring all or any portion of such business, assets or Capital
Stock of a Restricted Subsidiary for the purpose of financing such
acquisition, provided that the maximum aggregate liability in respect of all
such Indebtedness shall at no time exceed the gross proceeds actually
received by the Company and its Restricted Subsidiaries in connection with
such disposition;
(xii) Indebtedness of a Receivables Subsidiary that is not recourse to
the Company or any other Restricted Subsidiary of the Company (other than
Standard Securitization Undertakings) incurred in connection with a
Qualified Receivables Transaction;
(xiii) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, PROVIDED, HOWEVER, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (xiii); and
(xiv) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount (or
accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (xiv), not to exceed $10.0
million.
For purposes of determining compliance with this covenant, in the event that
an item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xiv) above as of
the date of incurrence thereof, or is entitled to be incurred pursuant to the
first paragraph of this covenant as of the date of incurrence thereof, the
Company shall, in its sole discretion, classify such item of Indebtedness on the
date of its incurrence in any manner that complies with this covenant. Accrual
of interest, accretion or amortization of original issue discount, the payment
of interest on any Indebtedness in the form of additional Indebtedness with the
same terms and the payment of dividends on Disqualified Stock in the form of
additional shares of the same class of Disqualified Stock will not be deemed to
be an incurrence of Indebtedness or an issuance of Disqualified Stock for
purposes of this covenant; PROVIDED, in each such case, that the amount thereof
is included in Fixed Charges of the
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Company as accrued. For purposes of determining compliance with any U.S.
dollar-denominated restriction on the incurrence of indebtedness, the U.S.
dollar-equivalent principal amount of indebtedness denominated in a foreign
currency shall be calculated based on the relevant currency exchange rate in
effect on the date such indebtedness was incurred.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Certificate of Designations provides that the Company will not, and will
not permit any of its Restricted Subsidiaries to, directly or indirectly, create
or otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (i) (a) pay dividends
or make any other distributions to the Company or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest
or participation in, or measured by, its profits, or (b) pay any indebtedness
owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries or (iii) transfer
any of its properties or assets to the Company or any of its Restricted
Subsidiaries. However, the foregoing restrictions will not apply to encumbrances
or restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the Issue Date, (b) the Senior Credit Facility as in effect as of the
Issue Date, and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof,
PROVIDED that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings are no more restrictive,
taken as a whole, with respect to such dividend and other payment restrictions
than those contained in the Senior Credit Facility as in effect on the Issue
Date, (c) the Indenture and the Notes, (d) applicable law, (e) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, PROVIDED that,
in the case of Indebtedness, such Indebtedness was permitted by the terms of the
Indenture to be incurred, (f) customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (g) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in clause
(iii) above on the property so acquired, (h) any agreement for the sale or other
disposition of a Restricted Subsidiary that restricts distributions by that
Restricted Subsidiary pending its sale or other disposition, (i) Permitted
Refinancing Indebtedness, PROVIDED that the restrictions contained in the
agreements governing such Permitted Refinancing Indebtedness are no more
restrictive, taken as a whole, than those contained in the agreements governing
the Indebtedness being refinanced, (j) Liens securing Indebtedness otherwise
permitted to be incurred pursuant to the provisions of the covenant described
above under the caption "--Limitations on Incurrence of Indebtedness" that limit
the right of the Company or any of its Restricted Subsidiaries to dispose of the
assets subject to such Lien, (k) provisions with respect to the disposition or
distribution of assets or property in joint venture agreements and other similar
agreements entered into in the ordinary course of business, (l) restrictions on
cash or other deposits or net worth imposed by customers under contracts entered
into in the ordinary course of business, (m) any other security agreement,
instrument or document relating to Senior Indebtedness hereafter in effect,
provided that such encumbrances or restrictions are customary in connection with
such documents and that the terms and conditions of such encumbrances or
restrictions are no more restrictive than those encumbrances or restrictions
imposed in connection with the Senior Credit Facility as in effect on the Issue
Date, (n) any agreement relating to a sale and leaseback transaction or capital
lease, but only on the property subject to such transaction or lease and only to
the extent that such restrictions or encumbrances are customary with respect to
a sale and leaseback transaction or capital lease or (o) the Canadian Facility
as in effect as of the Issue Date, and any amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacements or
refinancings thereof, PROVIDED that such amendments, modifications,
restatements, renewals, increases, supplements, refundings, replacement or
refinancings are no more restrictive, taken as a whole, with respect to such
dividend and other payment restrictions than those
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contained in the Canadian Facility as in effect on the Issue Date or (p)
customary restrictions imposed on the payment of dividends by a Receivables
Subsidiary in connection with a Qualified Receivables Transaction.
MERGER, CONSOLIDATION OR SALE OF ASSETS
The Certificate of Designations provides that the Company may not, directly
or indirectly, consolidate or merge with or into (whether or not the Company is
the surviving corporation), or sell, assign, transfer, lease, convey or
otherwise dispose of all or substantially all of its properties or assets in one
or more related transactions, to another corporation, Person or entity unless
(i) the Company is the surviving corporation or the entity or the Person formed
by or surviving any such consolidation or merger (if other than the Company) or
to which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of the Company under the Preferred Stock, the Certificate of
Designations and the Preferred Stock Registration Rights Agreement; (iii)
immediately after such transaction no Voting Rights Triggering Event exists; and
(iv) except in the case of a merger of the Company with or into a Wholly Owned
Restricted Subsidiary of the Company, the Company or the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company), or
to which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, immediately after such
transaction after giving pro forma effect thereto and any related financing
transactions as if the same had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of the covenant described above under the caption "-- Incurrence
of Indebtedness and Issuance of Preferred Stock."
TRANSACTIONS WITH AFFILIATES
The Certificate of Designations provides that the Company will not, and will
not permit any of its Restricted Subsidiaries to, make any payment to, or sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to
the Holders (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $1.0
million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of the Company or such Restricted
Subsidiary, (ii) transactions between or among the Company and/or its Restricted
Subsidiaries, (iii) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company, (iv) any sale or other issuance of Equity
Interests (other than Disqualified Stock) of the Company, (v) payments made
pursuant to the Management Agreement in effect as of the Issue Date and (vi)
Restricted Payments that are
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permitted by the provisions of the Certificate of Designations described above
under the caption "--Restricted Payments."
BUSINESS ACTIVITIES
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Subsidiaries taken as a whole.
REPORTS
The Certificate of Designations provides that, whether or not required by
the rules and regulations of the Commission, so long as any Preferred Stock is
outstanding, the Company will furnish to the Holders of Preferred Stock (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations," that describes the
financial condition and results of operations of the Company and its
consolidated Subsidiaries (showing in reasonable detail, either on the face of
the financial statements or in the footnotes thereto and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
financial condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of operations of
the Unrestricted Subsidiaries of the Company) and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to file such reports, in
each case within the time periods specified in the Commission's rules and
regulations. In addition, following the consummation of the Exchange Offer,
whether or not required by the rules and regulations of the Commission, the
Company will file a copy of all such information and reports with the Commission
for public availability within the time periods specified in the Commission's
rules and regulations (unless the Commission will not accept such a filing) and
make such information available to securities analysts and prospective investors
upon request. In addition, the Company has agreed that, for so long as any
Preferred Stock remains outstanding, it will furnish to the Holders and to
securities analysts and prospective investors, upon their request, the
information required to be delivered pursuant to Rule 144A(d)(4) under the
Securities Act.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange New Preferred Stock in accordance with the
Certificate of Designations if the requirements of the Transfer Agent for such
transfer or exchange are met. The Transfer Agent may require a Holder, among
other things, to furnish appropriate endorsements and transfer documents and the
Company may require a Holder to pay any taxes and fees required by law or
permitted by the Certificate of Designations.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Certificate of
Designations or the Preferred Stock may be amended or supplemented with the
consent of the Holders of at least a majority in aggregate Liquidation
Preference of the Preferred Stock then outstanding (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Preferred Stock), and any existing default or compliance
with any provision of the Certificate of Designations or the Preferred Stock may
be waived with the consent of the Holders of a majority in aggregate Liquidation
Preference of the then outstanding Preferred Stock (including, without
limitation, consents obtained in connection with a purchase of, or tender offer
or exchange offer for, Preferred Stock).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Preferred Stock held by a non-consenting Holder): (i) alter
the voting rights with respect to the Preferred Stock or reduce the number of
shares of Preferred Stock whose Holders must consent to an amendment, supplement
or waiver, (ii) reduce the Liquidation Preference of or change the Mandatory
Redemption
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Date of any Preferred Stock or alter the provisions with respect to the
redemption of the Preferred Stock (other than provisions relating to the
covenant described above under the caption "--Change of Control"), (iii) reduce
the rate of or change the time for payment of dividends on any Preferred Stock,
(iv) waive a default in the payment of dividends on the Preferred Stock, (v)
make any Preferred Stock payable in any form other than that stated in the
Certificate of Designations, (vi) waive a redemption payment with respect to any
Preferred Stock (other than a payment required by the covenant described above
under the caption "--Change of Control") or (vii) make any change in the
foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of
Preferred Stock, the Company may (to the extent permitted by Delaware law) amend
or supplement the Certificate of Designations to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Preferred Stock in addition to or
in place of certificated Preferred Stock or to make any change that would
provide any additional rights or benefits to the Holders of Preferred Stock or
that does not adversely affect the legal rights under the Certificate of
Designations of any such Holder.
DESCRIPTION OF THE EXCHANGE DEBENTURES
GENERAL
The Exchange Debentures will, if and when issued, be issued pursuant to an
Indenture (the "Exchange Indenture") between the Company and The Bank of New
York, as trustee (the "Exchange Trustee"). The terms of the Exchange Debentures
include those stated in the Exchange Indenture and those made part of the
Indenture by reference to the Trust Indenture Act of 1939 (the "Trust Indenture
Act"). The Exchange Debentures are subject to all such terms, and Holders of
Exchange Debentures are referred to the Exchange Indenture and the Trust
Indenture Act for a statement thereof. The following summary of the material
provisions of the Exchange Indenture does not purport to be complete and is
qualified in its entirety by reference to the Exchange Indenture, including the
definitions therein of certain terms used below. Copies of the proposed form of
Exchange Indenture are available as set forth below under the caption
"--Additional Information." The definitions of certain terms used in the
following summary are set forth below under the caption "--Certain Definitions."
For purposes of this summary, the term "Company" refers only to Cluett American
Corp. and not to any of its Subsidiaries.
The Exchange Debentures will be general unsecured obligations of the Company
and will be subordinated in right of payment to all existing and future Senior
Indebtedness, and will rank PARI PASSU or senior in right of payment to all
existing and future subordinated indebtedness of the Company. As of March 28,
1998, on a pro forma basis after giving effect to the Transaction, the Company
would have had Exchange Debenture Senior Indebtedness of approximately $247.4
million (excluding $11.2 million of letters of credit). The Exchange Indenture
will permit the incurrence of additional Exchange Debenture Senior Indebtedness
in the future. The Exchange Debentures will be effectively subordinated to all
indebtedness and other liabilities and commitments (including trade payables and
capital lease obligations) of the Company's subsidiaries. Any right of the
Company to receive assets of any of its subsidiaries upon the latter's
liquidation or reorganization (and the consequent right of the Holders of the
Exchange Debentures to participate in those assets) will be effectively
subordinated to the claims of that subsidiary's creditors, except to the extent
that the Company is itself recognized as a creditor of such subsidiary, in which
case the claims of the Company would still be subordinated to any security in
the assets of such subsidiary and any indebtedness of such subsidiary senior to
that held by the Company. As of March 28, 1998, the aggregate amount of
liabilities of the Company and its subsidiaries was $292.3 million. See "Risk
Factors--Holding Company Structure."
As of the Issue Date, all of the Company's Subsidiaries were Restricted
Subsidiaries. Under certain circumstances, however, the Company will be able to
designate current or future Subsidiaries as Unrestricted Subsidiaries.
Unrestricted Subsidiaries will not be subject to many of the restrictive
covenants set forth in the Exchange Indenture.
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PRINCIPAL, MATURITY AND INTEREST
The Exchange Debentures will mature on May 15, 2010. Interest on the
Exchange Debentures will accrue at the rate of 12 1/2% per annum and will be
payable semiannually in arrears on May 15 and November 15 (each, an "Interest
Payment Date") to Holders of record on the immediately preceding May 1 and
November 1. Interest will be payable in cash, except that on each Interest
Payment Date occurring prior to May 15, 2003, interest may be paid, at the
Company's option, by the issuance of additional Exchange Debentures having an
aggregate principal amount equal to the amount of such interest. Interest on the
Exchange Debentures will accrue from the most recent date to which interest has
been paid or, if no interest has been paid, from the date of original issuance.
Interest will be computed on the basis of a 360-day year comprised of twelve
30-day months. Principal, premium, if any, and interest and Liquidated Damages
on the Exchange Debentures will be payable at the office or agency of the
Company maintained for such purpose within the City and State of New York or, at
the option of the Company, payment of interest and Liquidated Damages may be
made by check mailed to the Holders of the Exchange Debentures at their
respective addresses set forth in the register of Holders of Exchange
Debentures; PROVIDED that all payments of principal, premium, interest and
Liquidated Damages with respect to Exchange Debentures the Holders of which have
given wire transfer instructions to the Company will be required to be made by
wire transfer of immediately available funds to the accounts specified by the
Holders thereof. Until otherwise designated by the Company, the Company's office
or agency in New York will be the office of the Exchange Trustee maintained for
such purpose. The Exchange Debentures will be issued in denominations of $1,000
and integral multiples thereof.
SUBORDINATION
The payment of principal of, premium, if any, and interest and Liquidated
Damages, if any, on the Exchange Debentures will be subordinated in right of
payment, as set forth in the Exchange Indenture, to the prior payment in full of
all Exchange Debenture Senior Indebtedness, whether outstanding on the date of
the Exchange Indenture or thereafter incurred.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, an
assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities, the holders of Exchange Debenture Senior Indebtedness
will be entitled to receive payment in full of all Obligations due in respect of
such Exchange Debenture Senior Indebtedness (including interest after the
commencement of any such proceeding at the rate specified in the applicable
Exchange Debenture Senior Indebtedness) before the Holders of Exchange
Debentures will be entitled to receive any payment with respect to the Exchange
Debentures, and until all Obligations with respect to Exchange Debenture Senior
Indebtedness are paid in full, any distribution to which the Holders of Exchange
Debentures would be entitled shall be made to the holders of Exchange Debenture
Senior Indebtedness (except that Holders of Exchange Debentures may receive and
retain Permitted Junior Securities and payments made from the trust described
under the caption "--Legal Defeasance and Covenant Defeasance").
The Company also may not make any payment upon or in respect of the Exchange
Debentures (except in Permitted Junior Securities or from the trust described
under the caption "--Legal Defeasance and Covenant Defeasance") if (i) a default
in the payment of the principal of, premium, if any, or interest on Designated
Exchange Debenture Senior Debt occurs and is continuing beyond any applicable
period of grace or (ii) any other default occurs and is continuing with respect
to Designated Exchange Debenture Senior Debt that permits holders of the
Designated Exchange Debenture Senior Debt as to which such default relates to
accelerate its maturity and the Exchange Trustee receives a notice of such
default (a "Payment Blockage Notice") from the Company or the holders of any
Designated Exchange Debenture Senior Debt. Payments on the Exchange Debentures
may and shall be resumed (a) in the case of a payment default, upon the date on
which such default is cured or waived and (b) in case of a nonpayment default,
the earlier of the date on which such nonpayment default is cured or waived or
179 days after the
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date on which the applicable Payment Blockage Notice is received, unless the
maturity of any Designated Exchange Debenture Senior Debt has been accelerated.
No new period of payment blockage may be commenced unless and until (i) 360 days
have elapsed since the effectiveness of the immediately prior Payment Blockage
Notice and (ii) all scheduled payments of principal, premium, if any, and
interest on the Exchange Debentures that have come due have been paid in full in
cash. No nonpayment default that existed or was continuing on the date of
delivery of any Payment Blockage Notice to the Exchange Trustee shall be, or be
made, the basis for a subsequent Payment Blockage Notice.
The Exchange Indenture will further require that the Company promptly notify
holders of Exchange Debenture Senior Indebtedness if payment of the Exchange
Debentures is accelerated because of an Event of Default.
As a result of the subordination provisions described above, in the event of
a liquidation or insolvency, Holders of Exchange Debentures may recover less
ratably than creditors of the Company who are holders of Exchange Debenture
Senior Indebtedness. On a pro forma basis, after giving effect to the
Transaction, the principal amount of Exchange Debenture Senior Indebtedness
outstanding at March 28, 1998 would have been approximately $247.4 million
(excluding $11.2 million of letters of credit). The Exchange Indenture will
limit, subject to certain financial tests, the amount of additional
Indebtedness, including Senior Indebtedness, that the Company and its
subsidiaries can incur. See "--Certain Covenants-- Incurrence of Indebtedness
and Issuance of Preferred Stock."
OPTIONAL REDEMPTION
The Exchange Debentures will not be redeemable at the Company's option prior
to May 15, 2003. Thereafter, the Exchange Debentures will be subject to
redemption at any time at the option of the Company, in whole or in part, upon
not less than 30 nor more than 60 days' notice, at the redemption prices
(expressed as percentages of principal amount) set forth below plus accrued and
unpaid interest and Liquidated Damages thereon to the applicable redemption
date, if redeemed during the twelve-month period beginning on May 15 of the
years indicated below:
<TABLE>
<CAPTION>
YEAR PERCENTAGE
- ------------------------------------------------------------------------ -----------
<S> <C>
2003.................................................................... 106.250%
2004.................................................................... 105.000%
2005.................................................................... 103.750%
2006.................................................................... 102.500%
2007.................................................................... 101.250%
2008 and thereafter..................................................... 100.000%
</TABLE>
Notwithstanding the foregoing, during the first 36 months after the date of
this Prospectus, the Company may on any one or more occasions redeem the
Exchange Debentures originally issued under the Exchange Indenture, in whole or
in part, at the redemption prices set forth below (expressed as percentages of
principal amount), in each case, together with accrued and unpaid interest and
Liquidated Damages thereon, if any, to the redemption date, with the net cash
proceeds of one or more Equity Offerings if redeemed during the 12-month period
commencing on May 15 of each of the years set forth below:
<TABLE>
<CAPTION>
YEAR REDEMPTION RATE
- ------------------------------------------------------------------ ----------------
<S> <C>
1998.............................................................. 108.000%
1999.............................................................. 110.000%
2000.............................................................. 112.000%
</TABLE>
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In the event of a redemption pursuant to the above paragraph (except in the
case of a redemption of all the Exchange Debentures), at least $25.0 million in
aggregate principal amount of Exchange Debentures shall remain outstanding
immediately after the occurrence of such redemption (excluding Exchange
Debentures held by the Company and its Subsidiaries) and any such redemption
shall occur within 45 days of the date of the closing of such Equity Offering.
At any time prior to May 15, 2003, the Exchange Debentures may also be
redeemed, as a whole but not in part, at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days
prior notice (but in no event may any such redemption occur more than 90 days
after the occurrence of such Change of Control) mailed by first-class mail to
each Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof and the interest rate in effect with respect to the
Exchange Debentures as of, and accrued and unpaid interest and Liquidated
Damages, if any, to, the date of redemption.
SELECTION AND NOTICE
If less than all of the Exchange Debentures are to be redeemed at any time,
selection of Exchange Debentures for redemption will be made by the Exchange
Trustee in compliance with the requirements of the principal national securities
exchange, if any, on which the Exchange Debentures are listed, or, if the
Exchange Debentures are not so listed, on a pro rata basis, by lot or by such
method as the Exchange Trustee shall deem fair and appropriate; PROVIDED that no
Exchange Debentures of $1,000 or less shall be redeemed in part. Notices of
redemption shall be mailed by first class mail at least 30 but not more than 60
days before the redemption date to each Holder of Exchange Debentures to be
redeemed at its registered address. Notices of redemption may not be
conditional. If any Exchange Debenture is to be redeemed in part only, the
notice of redemption that relates to such Exchange Debenture shall state the
portion of the principal amount thereof to be redeemed. A new Exchange Debenture
in principal amount equal to the unredeemed portion thereof will be issued in
the name of the Holder thereof upon cancellation of the original Exchange
Debenture. Exchange Debentures called for redemption become due on the date
fixed for redemption. On and after the redemption date, interest ceases to
accrue on Exchange Debentures or portions of them called for redemption.
MANDATORY REDEMPTION
The Company is not required to make mandatory redemption or sinking fund
payments with respect to the Exchange Debentures.
REPURCHASE AT THE OPTION OF HOLDERS
CHANGE OF CONTROL
Upon the occurrence of a Change of Control, each Holder of Exchange
Debentures will have the right to require the Company to repurchase all or any
part (equal to $1,000 or an integral multiple thereof) of such Holder's Exchange
Debentures pursuant to the offer described below (the "Change of Control Offer")
at an offer price in cash equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase (the "Change of Control Payment"). Within 30 days
following any Change of Control, the Company will mail a notice to each Holder
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase Exchange Debentures on the date specified in such
notice, which date shall be no earlier than 30 days and no later than 60 days
from the date such notice is mailed (the "Change of Control Payment Date"),
pursuant to the procedures required by the Exchange Indenture and described in
such notice. The Company will comply with the requirements of Rule 14e-1 under
the Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Exchange Debentures as a result of a Change of Control.
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On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Exchange Debentures or portions thereof
properly tendered pursuant to the Change of Control Offer, (2) deposit with the
Paying Agent an amount equal to the Change of Control Payment in respect of all
Exchange Debentures or portions thereof so tendered and (3) deliver or cause to
be delivered to the Exchange Trustee the Exchange Debentures so accepted
together with an Officers' Certificate stating the aggregate principal amount of
Exchange Debentures or portions thereof being purchased by the Company. The
Paying Agent will promptly mail to each Holder of Exchange Debentures so
tendered the Change of Control Payment for such Exchange Debentures, and the
Exchange Trustee will promptly authenticate and mail (or cause to be transferred
by book entry) to each Holder a new Exchange Debenture equal in principal amount
to any unpurchased portion of the Exchange Debentures surrendered, if any;
PROVIDED that each such new Exchange Debenture will be in a principal amount of
$1,000 or an integral multiple thereof. The Exchange Indenture will provide
that, prior to complying with the provisions of this covenant, but in any event
within 90 days following a Change of Control, the Company will either repay all
outstanding Exchange Debenture Senior Indebtedness or obtain the requisite
consents, if any, under all agreements governing outstanding Exchange Debenture
Senior Indebtedness to permit the repurchase of Exchange Debentures required by
this covenant. The Company will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
The Change of Control provisions described above will be applicable whether
or not any other provisions of the Exchange Indenture are applicable. Except as
described above with respect to a Change of Control, the Exchange Indenture does
not contain provisions that permit the Holders of the Exchange Debentures to
require that the Company repurchase or redeem the Exchange Debentures in the
event of a takeover, recapitalization or similar transaction.
The Senior Credit Facility currently prohibits the Company from purchasing
any Exchange Debentures and also provides that certain change of control events
with respect to the Company would constitute a default thereunder. The Indenture
also contains restrictions on the ability of the Company to repurchase the
Exchange Debentures. Any future credit agreements or other agreements relating
to Exchange Debenture Senior Indebtedness to which the Company becomes a party
may contain similar restrictions and provisions. In the event a Change of
Control occurs at a time when the Company is prohibited from purchasing Exchange
Debentures, the Company could seek the consent of its lenders to the purchase of
Exchange Debentures or could attempt to refinance the borrowings that contain
such prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Exchange
Debentures. In such case, the Company's failure to purchase tendered Exchange
Debentures would constitute an Event of Default under the Exchange Indenture
which would, in turn, constitute a default under the Senior Credit Facility. In
such circumstances, the subordination provisions in the Exchange Indenture would
likely restrict payments to the Holders of Exchange Debentures.
The Company will not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in the Exchange Indenture applicable to a Change of Control Offer made by the
Company and purchases all Exchange Debentures validly tendered and not withdrawn
under such Change of Control Offer.
The definition of Change of Control includes a phrase relating to the sale,
lease, transfer, conveyance or other disposition of "all or substantially all"
of the assets of the Company and its Subsidiaries taken as a whole. Although
there is a developing body of case law interpreting the phrase "substantially
all," there is no precise established definition of the phrase under applicable
law. Accordingly, the ability of a Holder of Exchange Debentures to require the
Company to repurchase such Exchange Debentures as a result of a sale, lease,
transfer, conveyance or other disposition of less than all of the assets of the
Company and its Subsidiaries taken as a whole to another Person or group may be
uncertain.
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ASSET SALES
The Exchange Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, consummate an Asset Sale unless
(i) the Company (or the Restricted Subsidiary, as the case may be) receives
consideration at the time of such Asset Sale at least equal to the fair market
value (evidenced by a resolution of the Board of Directors set forth in an
Officers' Certificate delivered to the Exchange Trustee) of the assets or Equity
Interests issued or sold or otherwise disposed of and (ii) at least 75% of the
consideration therefor received by the Company or such Restricted Subsidiary is
in the form of (A) cash or Cash Equivalents or (B) Qualified Proceeds; provided
that the aggregate fair market value of Qualified Proceeds (other than cash or
Cash Equivalents), which may be received in consideration for asset sales
pursuant to this clause (ii) (B) shall not exceed $5.0 million since the Issue
Date; PROVIDED that the amount of (x) any liabilities (as shown on the Company's
or such Restricted Subsidiary's most recent balance sheet), of the Company or
any Restricted Subsidiary (other than contingent liabilities and liabilities
that are by their terms subordinated to the Exchange Debentures or any guarantee
thereof) that are assumed by the transferee of any such assets pursuant to a
customary novation agreement that releases the Company or such Restricted
Subsidiary from further liability and (y) any securities, Exchange Debentures or
other obligations received by the Company or any such Restricted Subsidiary from
such transferee that are contemporaneously (subject to ordinary settlement
periods) converted by the Company or such Restricted Subsidiary into cash (to
the extent of the cash received), shall be deemed to be cash for purposes of
this provision.
Within 360 days after the receipt of any Net Proceeds from an Asset Sale,
the Company may apply such Net Proceeds, at its option, (a) to permanently repay
Exchange Debenture Senior Indebtedness, or (b) to acquire all or substantially
all of the assets of, or a majority of the Voting Stock of, another Permitted
Business, (c) to make a capital expenditure or (d) to acquire other long-term
assets that are used or useful in a Permitted Business. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any manner
that is not prohibited by the Exchange Indenture. Any Net Proceeds from Asset
Sales that are not applied or invested as provided in the first sentence of this
paragraph will be deemed to constitute "Excess Proceeds." When the aggregate
amount of Excess Proceeds exceeds $10.0 million, the Company will be required to
make an offer to all Holders of Exchange Debentures and all holders of other
Indebtedness that is PARI PASSU with the Exchange Debentures containing
provisions similar to those set forth in the Exchange Indenture with respect to
offers to purchase or redeem with the proceeds of sales of assets (an "Asset
Sale Offer") to purchase the maximum principal amount of Exchange Debentures and
such other PARI PASSU Indebtedness that may be purchased out of the Excess
Proceeds, at an offer price in cash in an amount equal to 100% of the principal
amount thereof plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the date of purchase, in accordance with the procedures set forth in
the Exchange Indenture and such other PARI PASSU Indebtedness. To the extent
that any Excess Proceeds remain after consummation of an Asset Sale Offer, the
Company may use such Excess Proceeds for any purpose not otherwise prohibited by
the Exchange Indenture. If the aggregate principal amount of Exchange Debentures
and such other PARI PASSU Indebtedness tendered into such Asset Sale Offer
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Exchange Trustee shall select the Exchange Debentures and such other PARI PASSU
Indebtedness to be purchased on a pro rata basis. Upon completion of such offer
to purchase, the amount of Excess Proceeds shall be reset at zero.
The Senior Credit Facility currently prohibits the Company from purchasing
any Exchange Debentures and also provides that certain change of control events
with respect to the Company would constitute a default thereunder. The Indenture
also contains restrictions on the ability of the Company to repurchase the
Exchange Debentures. Any future credit agreements or other agreements relating
to Exchange Debenture Senior Indebtedness to which the Company becomes a party
may contain similar restrictions and provisions. In the event an Asset Sale
occurs at a time when the Company is prohibited from purchasing Exchange
Debentures, the Company could seek the consent of its lenders to the purchase of
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Exchange Debentures or could attempt to refinance the borrowings that contain
such prohibition. If the Company does not obtain such a consent or repay such
borrowings, the Company will remain prohibited from purchasing Exchange
Debentures. In such case, the Company's failure to purchase tendered Exchange
Debentures would constitute an Event of Default under the Exchange Indenture
which would, in turn, constitute a default under the Senior Credit Facility. In
such circumstances, the subordination provisions in the Exchange Indenture would
likely restrict payments to the Holders of Exchange Debentures.
CERTAIN COVENANTS
RESTRICTED PAYMENTS
The Exchange Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly: (i)
declare or pay any dividend or make any other payment or distribution on account
of the Company's or any of its Restricted Subsidiaries' Equity Interests
(including, without limitation, any payment in connection with any merger or
consolidation involving the Company or any of its Restricted Subsidiaries) or to
the direct or indirect holders of the Company's or any of its Restricted
Subsidiaries' Equity Interests in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Company and other than dividends or distributions payable to the Company or
a Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving the Company) any Equity Interests of the
Company or any direct or indirect parent of the Company or other Affiliate of
the Company (other than any such Equity Interests owned by the Company or any
Wholly Owned Restricted Subsidiary of the Company); (iii) make any payment on or
with respect to, or purchase, redeem, defease or otherwise acquire or retire for
value any Indebtedness that is subordinated to the Exchange Debentures (other
than Exchange Debentures), except a payment of interest or principal at Stated
Maturity or as a mandatory or sinking fund payment; or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i) through
(iv) above being collectively referred to as "Restricted Payments"), unless, at
the time of and after giving effect to such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made
at the beginning of the applicable four-quarter
period, have been permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in
the first paragraph of the covenant described below under the caption
"--Incurrence of Indebtedness and Issuance of Preferred Stock"; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Issue Date (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (v), (vii) and (ix) of the next
succeeding paragraph), is less than the sum, without duplication, of (i) 50%
of the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter commencing
after the date of the Issue Date to the end of the Company's most recently
ended fiscal quarter for which internal financial statements are available
at the time of such Restricted Payment (or, if such Consolidated Net Income
for such period is a deficit, less 100% of such deficit), plus (ii) 100% of
the aggregate net cash proceeds received by the Company since the Issue Date
as a contribution to its common equity capital or from the issue or sale of
Equity Interests of the Company (other than Disqualified Stock) or from the
issue or sale of Disqualified Stock or debt securities of the Company that
have been converted into such Equity Interests (other than Equity Interests
(or Disqualified Stock or convertible debt securities) sold to a Subsidiary
of the Company),
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plus (iii) 100% of the fair market value of any Person engaged in a
Permitted Business or assets used by the Company or a Restricted Subsidiary
in a Permitted Business which such Person or assets were acquired by the
Company or any of its Restricted Subsidiaries since the Issue Date, PROVIDED
that the consideration for such Person or assets consisted solely of Equity
Interests of the Company (other than Disqualified Stock), PLUS (iv) to the
extent that any Restricted Investment that was made after the Issue Date is
sold for cash or otherwise liquidated or repaid for cash or the receipt of
properties used in a Permitted Business, the lesser of (A) the net cash
proceeds of such sale, liquidation or repayment or the fair market value (as
determined in good faith by a resolution of the Board of Directors set forth
in an Officers' Certificate delivered to the Trustee) of property received
in exchange therefor and (B) the amount of such Restricted Investment.
The foregoing provisions will not prohibit (i) the payment of any dividend
within 60 days after the date of declaration thereof, if at said date of
declaration such payment would have complied with the provisions of the Exchange
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any PARI PASSU or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of, other Equity Interests of the Company (other than any Disqualified
Stock); PROVIDED that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (c) (ii) of the preceding paragraph; (iii) the
defeasance, redemption or repurchase of any Disqualified Stock of the Company or
any Restricted Subsidiary in exchange for, or out of the substantially
concurrent sale (other than to the Company or a Subsidiary of the Company) of
Disqualified Stock of the Company or such Restricted Subsidiary, respectively;
PROVIDED that: (A) the aggregate liquidation preference of such Disqualified
Stock does not exceed the aggregate liquidation preference of the Disqualified
Stock so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (B) such
Disqualified Stock has a final maturity date later than the final maturity date
of, and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Notes; and (C) such Disqualified Stock
is incurred either by the Company or by the Restricted Subsidiary who is the
obligor on the Disqualified Stock being extended, refinanced, renewed, replaced,
defeased or refunded; (iv) the redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (v) the payment of any dividend by a
Restricted Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; (vi) so long as no Default or Event of Default is
continuing or would be caused thereby, the direct or indirect repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Company or any direct or indirect parent corporation of the Company held
by any member of the Company's (or any of its Restricted Subsidiaries')
management pursuant to any management equity subscription agreement or stock
option agreement in effect as of the date of the Exchange Indenture; PROVIDED
that the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $1.0 million in any twelve-month
period, (vii) dividends or other payments to Holdings sufficient to enable
Holdings to pay accounting, legal, corporate or reporting and administrative
expenses of Holdings incurred in the ordinary course of business in an amount
not to exceed $500,000 in any twelve-month period, (viii) the making of loans by
the Company or any of its Restricted Subsidiaries to officers or directors of
the Company; provided that the aggregate outstanding amount of such loans shall
not exceed, at any time, $2.0 million plus any such loans outstanding on the
date of the Exchange Indenture; (ix) payments to Holdings by the Company or any
Restricted Subsidiary with respect to taxes (including estimated taxes) that are
paid by Holdings on a combined, consolidated, unitary or similar basis, to the
extent that such payments do not exceed the amount that the Company or such
Restricted Subsidiary would have paid to the relevant taxing authority if the
Company or such Restricted Subsidiary filed a separate tax return for the period
in question; (x) so long as no Default or Event of Default is continuing or
would be caused thereby, the defeasance, redemption or repurchase of any
preferred stock or Disqualified Stock issued in connection with the acquisition
of assets or a Permitted
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Business, PROVIDED, that the aggregate amount of such defeasance, redemption or
repurchase payments shall not exceed at any time $10.0 million; (xi) so long as
no Default of Event of Default is continuing or would be caused thereby,
payments under the Management Agreement as in effect on the Issue Date; (xii)
the direct or indirect repurchase, redemption or other acquisition or retirement
for value of any Equity Interests of the Company or any direct or indirect
parent corporation of the Company held by any employee of the Company or a
Restricted Subsidiary of the Company upon the retirement of any such employee;
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $400,000 less the amount
of Restricted Payments made pursuant to clause (xiii) below during such period
in any twelve-month period; and (xiii) the direct or indirect redemption,
repurchase or other acquisition or retirement for value of Class A Senior
Preferred Stock of Holdings from Holdings' qualified employee stock options
plans, which Class A Senior Preferred Stock will either be issued on the Issue
Date or issued as dividends thereon in accordance with the certificate of
designations relating thereto as in effect on the Issue Date, provided that such
redemption, repurchase or other acquisition or retirement is required by
applicable law and such plans.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. In the
event of any such designation, all outstanding Investments owned by the Company
and its Restricted Subsidiaries in the Subsidiary so designated will be deemed
to be an Investment made as of the time of such designation and will reduce the
amount available for Restricted Payments under the first paragraph of this
covenant or Permitted Investments, as applicable. All such outstanding
Investments will be deemed to constitute Restricted Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary. The Board of Directors may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if such
redesignation would not cause a Default.
The amount of all Restricted Payments (other than cash) and Qualified
Proceeds (other than cash) shall be the fair market value on the date of the
Restricted Payment (or date of receipt of Qualified Proceeds) of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this covenant shall be determined by the Board of Directors whose resolution
with respect thereto shall be delivered to the Exchange Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $5.0 million. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Exchange Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by the covenant "Restricted
Payments" were computed, together with a copy of any fairness opinion or
appraisal required by the Exchange Indenture. Accrual of interest, accretion or
amortization of original issue discount, the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms and the
payment of dividends on Disqualified Stock in the form of additional shares of
the same class of Disqualified Stock will not be deemed to be a Restricted
Payment for purposes of this covenant; PROVIDED,in each such case, that the
amount thereof is included in Fixed Charges of the Company as accrued.
INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK
The Exchange Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, issue, assume, guarantee or otherwise become directly or indirectly
liable, contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt) and that the Company will not issue any
Disqualified Stock and will not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; PROVIDED, HOWEVER, that the Company may
incur Indebtedness (including Acquired Debt) or issue shares of Disqualified
Stock
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and Restricted Subsidiaries may incur Indebtedness or issue preferred stock if
the Fixed Charge Coverage Ratio for the Company's most recently ended four full
fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock is issued would have been at least 2 to 1, determined
on a pro forma basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred, or the
Disqualified Stock had been issued, as the case may be, at the beginning of such
four-quarter period.
The provisions of the first paragraph of this covenant will not apply to the
incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company of Indebtedness under the Senior
Credit Facility in an aggregate principal amount not exceeding an amount
equal to $160.0 million LESS the aggregate amount of all Net Proceeds of
Asset Sales applied by the Company or any of its Restricted Subsidiaries to
permanently repay Indebtedness under the Senior Credit Facility pursuant to
the covenant described above under the caption "--Asset Sales";
(ii) the incurrence by Cluett Peabody Canada Inc. of Indebtedness under
the Canadian Credit Facility in an aggregate principal amount not exceeding
an amount equal to $15.0 million LESS the aggregate amount of all Net
Proceeds of Asset Sales applied by the Company or any of its Restricted
Subsidiaries to permanently repay revolving credit Indebtedness under the
Canadian Credit Facility pursuant to the covenant described above under the
caption "--Asset Sales";
(iii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness, including the Notes and the Guarantees thereof;
(iv) the incurrence by the Company of Indebtedness represented by the
Exchange Debentures;
(v) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the
purpose of financing all or any part of the purchase price or cost of
construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $10.0 million at any time outstanding;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds
of which are used to refund, refinance or replace Existing Indebtedness or
Indebtedness (other than intercompany Indebtedness) that was permitted by
the Exchange Indenture to be incurred under the first paragraph hereof or
clauses (iv), (v), (vi), (ix) or (xv) of this paragraph;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries; PROVIDED, HOWEVER, that (i) if the
Company is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Exchange Debentures and (ii)(A) any subsequent issuance or
transfer of Equity Interests that results in any such Indebtedness being
held by a Person other than the Company or a Restricted Subsidiary thereof
and (B) any sale or other transfer of any such Indebtedness to a Person that
is not either the Company or a Restricted Subsidiary thereof shall be
deemed, in each case, to constitute an incurrence of such Indebtedness by
the Company or such Restricted Subsidiary, as the case may be, that was not
permitted by this clause (vii);
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Exchange Indenture to be
outstanding;
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(ix) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness in connection with the acquisition of assets or a new
Subsidiary; PROVIDED that such Indebtedness was incurred by the prior owner
of such assets or such Subsidiary prior to such acquisition by the Company
or one of its Restricted Subsidiaries and was not incurred in connection
with, or in contemplation of, such acquisition by the Company or one of it
Restricted Subsidiaries; and PROVIDED FURTHER that the principal amount (or
accreted value, as applicable) of such Indebtedness, together with any other
outstanding Indebtedness incurred pursuant to this clause (ix) and any
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (ix), does not exceed $5.0
million;
(x) the guarantee by the Company or any Restricted Subsidiary of
Indebtedness of the Company or a Restricted Subsidiary of the Company that
was permitted to be incurred by another provision of this covenant;
(xi) indebtedness incurred in respect of workers' compensation claims,
self-insurance obligations, performance, surety and similar bonds and
completion guarantees provided by the Company or a Guarantor in the ordinary
course of business;
(xii) Indebtedness arising from guarantees of Indebtedness of the
Company or any Subsidiary or the agreements of the Company or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with
the disposition of any business, assets or Capital Stock of a Restricted
Subsidiary, or other guarantees of Indebtedness incurred by any person
acquiring all or any portion of such business, assets or Capital Stock of a
Restricted Subsidiary for the purpose of financing such acquisition,
provided that the maximum aggregate liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds actually received by
the Company and its Restricted Subsidiaries in connection with such
disposition;
(xiii) Indebtedness of a Receivables Subsidiary that is not recourse to
the Company or any other Restricted Subsidiary of the Company (other than
Standard Securitization Undertakings) incurred in connection with a
Qualified Receivables Transaction;
(xiv) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, PROVIDED, HOWEVER, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (xiv); and
(xv) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness in an aggregate principal amount (or accreted
value, as applicable) at any time outstanding, including all Permitted
Refinancing Indebtedness incurred to refund, refinance or replace any
Indebtedness incurred pursuant to this clause (xv), not to exceed $10.0
million.
For purposes of determining compliance with this covenant, in the event that
an item of proposed Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (xv) above as of
the date of incurrence thereof, or is entitled to be incurred pursuant to the
first paragraph of this covenant as of the date of incurrence thereof, the
Company shall, in its sole discretion, classify such item of Indebtedness on the
date of its incurrence in any manner that complies with this covenant. Accrual
of interest, accretion or amortization of original issue discount, the payment
of interest on any Indebtedness in the form of additional Indebtedness with the
same terms and the payment of dividends on Disqualified Stock in the form of
additional shares of the same class of Disqualified Stock will not be deemed to
be Disqualified Stock for purposes of this covenant; PROVIDED, in each such
case, that the amount thereof is included in Fixed Charges of the Company as
accrued. For purposes of determining compliance with any U.S. dollar-denominated
restriction on the incurrence of indebtedness, the U.S.
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dollar-equivalent principal amount of indebtedness denominated in a foreign
currency shall be calculated based on the relevant currency exchange rate in
effect on the date such indebtedness was incurred.
LIENS
The Exchange Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create,
incur, assume or suffer to exist any Lien of any kind securing Indebtedness, on
any asset now owned or hereafter acquired, except Permitted Liens, unless all
payments due under the Exchange Indenture and the Exchange Debentures are
secured on an equal and ratable basis with the Indebtedness so secured until
such time as such is no longer secured by a Lien; PROVIDED that if such
Indebtedness is by its terms expressly subordinated to the Exchange Debentures,
the Lien securing such Indebtedness shall be subordinate and junior to the Lien
securing the Exchange Debentures with the same relative priority as such
subordinate or junior Indebtedness shall have with respect to the Exchange
Debentures.
DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Exchange Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, directly or indirectly, create or
otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary to (i)(a) pay dividends
or make any other distributions to the Company or any of its Restricted
Subsidiaries (1) on its Capital Stock or (2) with respect to any other interest
or participation in, or measured by, its profits, or (b) pay any indebtedness
owed to the Company or any of its Restricted Subsidiaries, (ii) make loans or
advances to the Company or any of its Restricted Subsidiaries or (iii) transfer
any of its properties or assets to the Company or any of its Restricted
Subsidiaries. However, the foregoing restrictions will not apply to encumbrances
or restrictions existing under or by reason of (a) Existing Indebtedness as in
effect on the Issue Date, (b) the Senior Credit Facility as in effect as of the
Issue Date, and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof,
PROVIDED that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacement or refinancings are no more restrictive,
taken as a whole, with respect to such dividend and other payment restrictions
than those contained in the Senior Credit Facility as in effect on the Issue
Date, (c) the Exchange Indenture and the Exchange Debentures, (d) applicable
law, (e) any instrument governing Indebtedness or Capital Stock of a Person
acquired by the Company or any of its Restricted Subsidiaries as in effect at
the time of such acquisition (except to the extent such Indebtedness was
incurred in connection with or in contemplation of such acquisition), which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person, or the property or assets of the
Person, so acquired, PROVIDED that, in the case of Indebtedness, such
Indebtedness was permitted by the terms of the Exchange Indenture to be
incurred, (f) customary non-assignment provisions in leases entered into in the
ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (h) any agreement for the sale or other disposition of a
Restricted Subsidiary that restricts distributions by that Restricted Subsidiary
pending its sale or other disposition, (i) Permitted Refinancing Indebtedness,
PROVIDED that the restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are no more restrictive, taken as a whole,
than those contained in the agreements governing the Indebtedness being
refinanced, (j) Liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of the covenant described above under the caption
"--Liens" that limit the right of the Company or any of its Restricted
Subsidiaries to dispose of the assets subject to such Lien, (k) provisions with
respect to the disposition or distribution of assets or property in joint
venture agreements and other similar agreements entered into in the ordinary
course of business, (l) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business, (m) any other security agreement, instrument or document relating to
Senior Indebtedness hereafter in effect, provided
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that such encumbrances or restrictions are customary in connection with such
documents and that the terms and conditions of such encumbrances or restrictions
are no more restrictive than those encumbrances or restrictions imposed in
connection with the Senior Credit Facility as in effect on the Issue Date, (n)
any agreement relating to a sale and leaseback transaction or capital lease, but
only on the property subject to such transaction or lease and only to the extent
that such restrictions or encumbrances are customary with respect to a sale and
leaseback transaction or capital lease, (o) the Canadian Credit Facility as in
effect as of the date of the Exchange Indenture, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, PROVIDED that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
the Canadian Credit Facility as in effect on the Issue Date or (p) customary
restrictions imposed on the payment of dividends by a Receivables Subsidiary in
connection with a Qualified Receivables Transaction.
MERGER, CONSOLIDATION, OR SALE OF ASSETS
The Exchange Indenture will provide that the Company may not, directly or
indirectly, consolidate or merge with or into (whether or not the Company is the
surviving corporation), or sell, assign, transfer, lease, convey or otherwise
dispose of all or substantially all of its properties or assets in one or more
related transactions, to another corporation, Person or entity unless (i) the
Company is the surviving corporation or the entity or the Person formed by or
surviving any such consolidation or merger (if other than the Company) or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made is a corporation organized or existing under the laws of
the United States, any state thereof or the District of Columbia; (ii) the
entity or Person formed by or surviving any such consolidation or merger (if
other than the Company) or the entity or Person to which such sale, assignment,
transfer, lease, conveyance or other disposition shall have been made assumes
all the obligations of the Company under the Exchange Debentures and the
Exchange Indenture pursuant to a supplemental indenture in a form reasonably
satisfactory to the Exchange Trustee; (iii) immediately after such transaction
no Default or Event of Default exists; and (iv) except in the case of a merger
of the Company with or into a Wholly Owned Restricted Subsidiary of the Company,
the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, immediately after such transaction after
giving pro forma effect thereto and any related financing transactions as if the
same had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of the
covenant described above under the caption "--Incurrence of Indebtedness and
Issuance of Preferred Stock."
TRANSACTIONS WITH AFFILIATES
The Exchange Indenture will provide that the Company will not, and will not
permit any of its Restricted Subsidiaries to, make any payment to, or sell,
lease, transfer or otherwise dispose of any of its properties or assets to, or
purchase any property or assets from, or enter into or make or amend any
transaction, contract, agreement, understanding, loan, advance or guarantee
with, or for the benefit of, any Affiliate (each of the foregoing, an "Affiliate
Transaction"), unless (i) such Affiliate Transaction is on terms that are no
less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to
the Exchange Trustee (a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved
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by a majority of the disinterested members of the Board of Directors and (b)
with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $5.0 million, an
opinion as to the fairness to the Holders of such Affiliate Transaction from a
financial point of view issued by an accounting, appraisal or investment banking
firm of national standing. Notwithstanding the foregoing, the following items
shall not be deemed to be Affiliate Transactions: (i) any employment agreement
entered into by the Company or any of its Restricted Subsidiaries in the
ordinary course of business and consistent with the past practice of the Company
or such Restricted Subsidiary, (ii) transactions between or among the Company
and/or its Restricted Subsidiaries, (iii) payment of reasonable directors fees
to Persons who are not otherwise Affiliates of the Company, (iv) any sale or
other issuance of Equity Interests (other than Disqualified Stock) of the
Company, (v) payments made pursuant to the Management Agreement in effect as of
the Issue Date, and (vi) Restricted Payments that are permitted by the
provisions of the Exchange Indenture described above under the caption
"--Restricted Payments.
NO SENIOR SUBORDINATED DEBT
The Exchange Indenture will provide that the Company will not incur, create,
issue, assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to all Senior Indebtedness of the
Company and senior in any respect in right of payment to the Exchange
Debentures.
BUSINESS ACTIVITIES
The Company will not, and will not permit any Restricted Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Subsidiaries taken as a whole.
REPORTS
The Exchange Indenture will provide that, whether or not required by the
rules and regulations of the Commission, so long as any Exchange Debentures are
outstanding, the Company will furnish to the Holders of Exchange Debentures (i)
all quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations," that describes the
financial condition and results of operations of the Company and its
consolidated Subsidiaries (showing in reasonable detail, either on the face of
the financial statements or in the footnotes thereto and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
financial condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of operations of
the Unrestricted Subsidiaries of the Company) and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to file such reports, in
each case within the time periods specified in the Commission's rules and
regulations. In addition, following the consummation of the exchange offer
contemplated by the Registration Rights Agreement, whether or not required by
the rules and regulations of the Commission, the Company will file a copy of all
such information and reports with the Commission for public availability within
the time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. In addition, the
Company has agreed that, for so long as any Exchange Debentures remain
outstanding, they will furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
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EVENTS OF DEFAULT AND REMEDIES
The Exchange Indenture will provide that each of the following constitutes
an Event of Default: (i) default for 30 days in the payment when due of interest
on, or Liquidated Damages with respect to, the Exchange Debentures (whether or
not prohibited by the subordination provisions of the Exchange Indenture); (ii)
default in payment when due of the principal of or premium, if any, on the
Exchange Debentures (whether or not prohibited by the subordination provisions
of the Exchange Indenture); (iii) failure by the Company or any of its
Restricted Subsidiaries to comply with the provisions described under the
captions "--Merger, Consolidation or Sale of Assets"; (iv) failure by the
Company or any of its Restricted Subsidiaries for 60 days after notice from the
Trustee or Holders of at least 25% in principal amount of outstanding Exchange
Debentures to comply with any of its other agreements in the Exchange Indenture
or the Exchange Debentures; (v) default under any mortgage, Exchange Indenture
or instrument under which there may be issued or by which there may be secured
or evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date of the Exchange Indenture, which default
(a) is caused by a failure to pay principal of or premium, if any, or interest
on such Indebtedness prior to the expiration of the grace period provided in
such Indebtedness on the date of such default (a "Payment Default") or (b)
results in the acceleration of such Indebtedness prior to its express maturity
and, in each case, the principal amount of any such Indebtedness, together with
the principal amount of any other such Indebtedness under which there has been a
Payment Default or the maturity of which has been so accelerated, aggregates
$5.0 million or more; (vi) failure by the Company or any of its Restricted
Subsidiaries to pay final judgments aggregating in excess of $5.0 million, which
judgments are not paid, discharged or stayed for a period of 60 days; and (vii)
certain events of bankruptcy or insolvency with respect to the Company or any of
its Restricted Subsidiaries.
If any Event of Default occurs and is continuing, the Exchange Trustee or
the Holders of at least 25% in principal amount of the then outstanding Exchange
Debentures may declare all the Exchange Debentures to be due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency, with respect to the
Company, any Significant Subsidiary or any group of Subsidiaries that, taken
together, would constitute a Significant Subsidiary, all outstanding Exchange
Debentures will become due and payable without further action or notice. Holders
of the Exchange Debentures may not enforce the Exchange Indenture or the
Exchange Debentures except as provided in the Exchange Indenture. Subject to
certain limitations, Holders of a majority in principal amount of the then
outstanding Exchange Debentures may direct the Exchange Trustee in its exercise
of any trust or power. The Exchange Trustee may withhold from Holders of the
Exchange Debentures notice of any continuing Default or Event of Default (except
a Default or Event of Default relating to the payment of principal or interest)
if it determines that withholding notice is in their interest.
The Holders of a majority in aggregate principal amount of the Exchange
Debentures then outstanding by notice to the Exchange Trustee may on behalf of
the Holders of all of the Exchange Debentures waive any existing Default or
Event of Default and its consequences under the Exchange Indenture except a
continuing Default or Event of Default in the payment of interest on, or the
principal of, the Exchange Debentures.
The Company is required to deliver to the Exchange Trustee annually a
statement regarding compliance with the Exchange Indenture, and the Company is
required upon becoming aware of any Default or Event of Default, to deliver to
the Exchange Trustee a statement specifying such Default or Event of Default.
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NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND STOCKHOLDERS
No director, officer, employee, incorporator or stockholder of the Company,
as such, shall have any liability for any obligations of the Company under the
Exchange Debentures, the Exchange Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder of
Exchange Debentures by accepting a Note waives and releases all such liability.
The waiver and release are part of the consideration for issuance of the
Exchange Debentures. Such waiver may not be effective to waive liabilities under
the federal securities laws and it is the view of the Commission that such a
waiver is against public policy.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
The Company may, at its option and at any time, elect to have all of its
obligations discharged with respect to the outstanding Exchange Debentures
("Legal Defeasance") except for (i) the rights of Holders of outstanding
Exchange Debentures to receive payments in respect of the principal of, premium,
if any, and interest and Liquidated Damages on such Exchange Debentures when
such payments are due from the trust referred to below, (ii) the Company's
obligations with respect to the Exchange Debentures concerning issuing temporary
Exchange Debentures, registration of Exchange Debentures, mutilated, destroyed,
lost or stolen Exchange Debentures and the maintenance of an office or agency
for payment and money for security payments held in trust, (iii) the rights,
powers, trusts, duties and immunities of the Exchange Trustee, and the Company's
obligations in connection therewith and (iv) the Legal Defeasance provisions of
the Exchange Indenture. In addition, the Company may, at its option and at any
time, elect to have the obligations of the Company released with respect to
certain covenants that are described in the Exchange Indenture ("Covenant
Defeasance") and thereafter any omission to comply with such obligations shall
not constitute a Default or Event of Default with respect to the Exchange
Debentures. In the event Covenant Defeasance occurs, certain events (not
including non-payment, bankruptcy, receivership, rehabilitation and insolvency
events) described under "Events of Default" will no longer constitute an Event
of Default with respect to the Exchange Debentures.
In order to exercise either Legal Defeasance or Covenant Defeasance, (i) the
Company must irrevocably deposit with the Exchange Trustee, in trust, for the
benefit of the Holders of the Exchange Debentures, cash in U.S. dollars,
non-callable Government Securities, or a combination thereof, in such amounts as
will be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
interest and Liquidated Damages on the outstanding Exchange Debentures on the
stated maturity or on the applicable redemption date, as the case may be, and
the Company must specify whether the Exchange Debentures are being defeased to
maturity or to a particular redemption date; (ii) in the case of Legal
Defeasance, the Company shall have delivered to the Exchange Trustee an opinion
of counsel in the United States reasonably acceptable to the Exchange Trustee
confirming that (A) the Company has received from, or there has been published
by, the Internal Revenue Service a ruling or (B) since the date of the Exchange
Indenture, there has been a change in the applicable federal income tax law, in
either case to the effect that, and based thereon such opinion of counsel shall
confirm that, the Holders of the outstanding Exchange Debentures will not
recognize income, gain or loss for federal income tax purposes as a result of
such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred; (iii) in the case of Covenant
Defeasance, the Company shall have delivered to the Exchange Trustee an opinion
of counsel in the United States reasonably acceptable to the Exchange Trustee
confirming that the Holders of the outstanding Exchange Debentures will not
recognize income, gain or loss for federal income tax purposes as a result of
such Covenant Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Covenant Defeasance had not occurred; (iv) no Default or Event of Default
shall have occurred and be continuing on the date of such deposit (other than a
Default or Event of Default resulting from the borrowing of funds to be applied
to such deposit) or
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insofar as Events of Default from bankruptcy or insolvency events are concerned,
at any time in the period ending on the 91st day after the date of deposit; (v)
such Legal Defeasance or Covenant Defeasance will not result in a breach or
violation of, or constitute a default under any material agreement or instrument
(other than the Exchange Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound; (vi) the Company must have delivered to the Exchange Trustee an opinion
of counsel to the effect that after the 91st day following the deposit, the
trust funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally; (vii) the Company must deliver to the Exchange Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders of Exchange Debentures over the other creditors of the
Company with the intent of defeating, hindering, delaying or defrauding
creditors of the Company or others; and (viii) the Company must deliver to the
Exchange Trustee an Officers' Certificate and an opinion of counsel, each
stating that all conditions precedent provided for relating to the Legal
Defeasance or the Covenant Defeasance have been complied with.
TRANSFER AND EXCHANGE
A Holder may transfer or exchange Exchange Debentures in accordance with the
Exchange Indenture. The Registrar and the Exchange Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Exchange Indenture. The Company is not required to transfer
or exchange any Exchange Debenture selected for redemption. Also, the Company is
not required to transfer or exchange any Exchange Debenture for a period of 15
days before a selection of Exchange Debentures to be redeemed.
The registered Holder of an Exchange Debenture will be treated as the owner
of it for all purposes.
AMENDMENT, SUPPLEMENT AND WAIVER
Except as provided in the next two succeeding paragraphs, the Exchange
Indenture or the Exchange Debentures may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the
Exchange Debentures then outstanding (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Exchange Debentures), and any existing default or compliance with any
provision of the Exchange Indenture or the Exchange Debentures may be waived
with the consent of the Holders of a majority in principal amount of the then
outstanding Exchange Debentures (including, without limitation, consents
obtained in connection with a purchase of, or tender offer or exchange offer
for, Exchange Debentures).
Without the consent of each Holder affected, an amendment or waiver may not
(with respect to any Exchange Debentures held by a non-consenting Holder): (i)
reduce the principal amount of Exchange Debentures whose Holders must consent to
an amendment, supplement or waiver, (ii) reduce the principal of or change the
fixed maturity of any Note or alter the provisions with respect to the
redemption of the Exchange Debentures (other than provisions relating to the
covenants described above under the caption "--Repurchase at the Option of
Holders"), (iii) reduce the rate of or change the time for payment of interest
on any Note, (iv) waive a Default or Event of Default in the payment of
principal of or premium, if any, or interest on the Exchange Debentures (except
a rescission of acceleration of the Exchange Debentures by the Holders of at
least a majority in aggregate principal amount of the Exchange Debentures and a
waiver of the payment default that resulted from such acceleration), (v) make
any Note payable in money other than that stated in the Exchange Debentures,
(vi) make any change in the provisions of the Exchange Indenture relating to
waivers of past Defaults or the rights of Holders of Exchange Debentures to
receive payments of principal of or premium, if any, or interest on the Exchange
Debentures, (vii) waive a redemption payment with respect to any Note (other
than a payment required by one of the covenants described above under the
caption "--Repurchase at the Option of Holders"), or
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(viii) make any change in the foregoing amendment and waiver provisions. In
addition, any amendment to the provisions of Article 10 of the Note Exchange
Indenture (which relate to subordination) will require the consent of the
Holders of at least 66 2/3% in aggregate principal amount of the Exchange
Debentures then outstanding if such amendment would adversely affect the rights
of Holders of Exchange Debentures.
Notwithstanding the foregoing, without the consent of any Holder of Exchange
Debentures, the Company and the Exchange Trustee may amend or supplement the
Exchange Indenture or the Exchange Debentures to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Exchange Debentures in addition to
or in place of certificated Exchange Debentures, to provide for the assumption
of the Company's obligations to Holders of Exchange Debentures in the case of a
merger or consolidation or sale of all or substantially all of the Company's
assets to make any change that would provide any additional rights or benefits
to the Holders of Exchange Debentures or that does not adversely affect the
legal rights under the Exchange Indenture of any such Holder, or to comply with
requirements of the Commission in order to effect or maintain the qualification
of the Exchange Indenture under the Trust Exchange Indenture Act.
CONCERNING THE EXCHANGE TRUSTEE
The Exchange Indenture contains certain limitations on the rights of the
Exchange Trustee, should it become a creditor of the Company, to obtain payment
of claims in certain cases, or to realize on certain property received in
respect of any such claim as security or otherwise. The Exchange Trustee will be
permitted to engage in other transactions; however, if it acquires any
conflicting interest it must eliminate such conflict within 90 days, apply to
the Commission for permission to continue or resign.
The Holders of a majority in principal amount of the then outstanding
Exchange Debentures will have the right to direct the time, method and place of
conducting any proceeding for exercising any remedy available to the Exchange
Trustee, subject to certain exceptions. The Exchange Indenture provides that in
case an Event of Default shall occur (which shall not be cured), the Exchange
Trustee will be required, in the exercise of its power, to use the degree of
care of a prudent man in the conduct of his own affairs. Subject to such
provisions, the Exchange Trustee will be under no obligation to exercise any of
its rights or powers under the Exchange Indenture at the request of any Holder
of Exchange Debentures, unless such Holder shall have offered to the Exchange
Trustee security and indemnity satisfactory to it against any loss, liability or
expense.
ADDITIONAL INFORMATION
Anyone who receives this Prospectus may obtain a copy of the Exchange
Indenture without charge by writing to Cluett American Corp., 48 West 38th
Street, New York, New York 10018, Attention: Secretary.
CERTAIN DEFINITIONS
Set forth below are certain defined terms used in the Certificate of
Designations and the Exchange Indenture. Reference is made to the Certificate of
Designations and the Exchange Indenture for a full disclosure of all such terms,
as well as any other capitalized terms used herein for which no definition is
provided.
"ACQUIRED DEBT" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person, and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"AFFILIATE" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this
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definition, "control" (including, with correlative meanings, the terms
"controlling," "controlled by" and "under common control with"), as used with
respect to any Person, shall mean the possession, directly or indirectly, of the
power to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement or
otherwise; PROVIDED that beneficial ownership of 10% or more of the Voting Stock
of a Person shall be deemed to be control.
"ASSET ACQUISITION" means (i) an Investment by the Company or any Restricted
Subsidiary of the Company in any other Person pursuant to which such Person
shall become a Subsidiary of the Company or any Subsidiary of the Company, or
shall be merged with or into the Company or any Restricted Subsidiary of the
Company or (ii) the acquisition by the Company or any Restricted Subsidiary of
the Company of the assets of any Person which constitute all or substantially
all of the assets of such Person, any division or line of business of such
Person or any other properties or assets of such Person other than in the
ordinary course of business.
"ASSET SALE" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (PROVIDED that the sale, lease (other than an
operating lease), conveyance or other disposition of all or substantially all of
the assets of the Company and its Restricted Subsidiaries taken as a whole will
be governed by the provisions of the Exchange Indenture described above under
the caption "--Change of Control" and/or the provisions described above under
the caption "--Merger, Consolidation or Sale of Assets" and not by the
provisions of the Asset Sale covenant), and (ii) the issue by any Restricted
Subsidiaries of the Company of any Equity Interests of such Restricted
Subsidiary and the sale by the Company or any of its Restricted Subsidiaries of
Equity Interests of any of the Company's Subsidiaries, in the case of either
clause (i) or (ii), whether in a single transaction or a series of related
transactions (a) that have a fair market value in excess of $1.0 million or (b)
for net proceeds in excess of $1.0 million. Notwithstanding the foregoing, the
following items shall not be deemed to be Asset Sales: (i) a transfer of assets
by the Company to a Wholly Owned Restricted Subsidiary or by a Wholly Owned
Restricted Subsidiary to the Company or to another Wholly Owned Restricted
Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned Restricted
Subsidiary to the Company or to another Wholly Owned Restricted Subsidiary,
(iii) a Restricted Payment that is permitted by the covenant described above
under the caption "--Restricted Payments," (iv) a disposition of Cash
Equivalents or obsolete equipment in the ordinary course of business or
inventory or goods held for sale in the ordinary course of business, and (v)
sale of accounts receivable, or participation therein, in connection with any
Qualified Receivables Transaction.
"BOARD OF DIRECTORS" means the board of directors of the Company.
"CANADIAN CREDIT FACILITY" means the Loan Agreement, added as of August 8,
1997, between Cluett Peabody Canada Inc. and Congress Financial Corporation
(Canada).
"CAPITAL LEASE OBLIGATION" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"CAPITAL STOCK" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"CASH EQUIVALENTS" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
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more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500 million and a Thompson Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (ii)
and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper having the
highest rating obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months after the date of
acquisition and (vi) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i)--(v) of this
definition.
"CHANGE OF CONTROL" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than a Principal or a Related Party of a Principal (as
defined below), (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above), other than the Principals and their
Related Parties, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular "person," such "person" shall be deemed
to have beneficial ownership of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
50% of the Voting Stock of the Company (measured by voting power rather than
number of shares), (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors or (v) the
Company consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which any of the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where the Voting Stock of the Company
outstanding immediately prior to such transaction is converted into or exchanged
for Voting Stock (other than Disqualified Stock) of the surviving or transferee
Person constituting a majority of the outstanding shares of such Voting Stock of
such surviving or transferee Person (immediately after giving effect to such
issuance). For purposes of this definition, any transfer of an equity interest
of an entity that was formed for the purpose of acquiring Voting Stock of the
Company will be deemed to be a transfer of such portion of such Voting Stock as
corresponds to the portion of the equity of such entity that has been so
transferred.
"CONSOLIDATED CASH FLOW" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale, to the extent such losses were deducted in computing such
Consolidated Net Income, plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was deducted in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a
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prior period) of such Person and its Restricted Subsidiaries for such period to
the extent that such depreciation, amortization and other non-cash expenses were
deducted in computing such Consolidated Net Income, minus (v) non-cash items
increasing such Consolidated Net Income for such period (other than items that
were accrued in the ordinary course of business) plus (vi) Reorganization
Charges of such Person and its Restricted Subsidiaries for such period to the
extent that such Reorganization Charges were deducted in computing such
Consolidated Net Income, in each case, determined on a consolidated basis and
determined in accordance with GAAP. Notwithstanding the foregoing, the provision
for taxes on the income or profits of, and the depreciation and amortization and
other non-cash expenses of, a Subsidiary of the Company shall be added to
Consolidated Net Income to compute Consolidated Cash Flow of the Company only to
the extent that a corresponding amount would be permitted at the date of
determination to be dividended to the Company by such Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Subsidiary or its stockholders.
"CONSOLIDATED NET INCOME" means, with respect to any Person for any period,
the aggregate of the Net Income of such Person and its Restricted Subsidiaries
for such period, on a consolidated basis, determined in accordance with GAAP;
PROVIDED that (i) the Net Income (but not loss) of any Person that is not a
Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof; PROVIDED that the amount of such dividends or distributions includable
in Consolidated Net Income shall be limited to the Company's direct and indirect
Equity Interests in such Restricted Subsidiary, (ii) the Net Income of any
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, and (iv) the cumulative effect of a change in
accounting principles shall be excluded.
"CONSOLIDATED NET WORTH" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the Issue Date in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"CONTINUING DIRECTORS" means, as of any date of determination, any member of
the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Issue Date or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination or
election.
"CREDIT FACILITIES" means, with respect to the Company, one or more debt
facilities (including, without limitation, the Senior Credit Facility) or
commercial paper facilities, in each case with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including
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through the sale of receivables to such lenders or to special purpose entities
formed to borrow from such lenders against such receivables) or letters of
credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time. Indebtedness under
Credit Facilities and the Canadian Credit Facility outstanding on the Issue Date
shall be deemed to have been incurred on such date in reliance on the exception
provided by clauses (i) and (ii), respectively, of the definition of Permitted
Debt.
"DEFAULT" means any event that is, or with the passage of time or the giving
of notice or both would be, an Event of Default.
"DESIGNATED EXCHANGE DEBENTURE SENIOR DEBT" means (i) any Indebtedness
outstanding under the Senior Credit Facility, (ii) any Indebtedness outstanding
under the Indenture, and (iii) any other Exchange Debenture Senior Indebtedness
permitted under the Exchange Indenture the principal amount of which is $25.0
million or more and that has been designated by the Company as "Designated
Exchange Debenture Senior Debt."
"DISQUALIFIED STOCK" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Preferred Stock mature; PROVIDED, HOWEVER, that any Capital
Stock that would constitute Disqualified Stock solely because the holders
thereof have the right to require the Company to repurchase such Capital Stock
upon the occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with the covenant described above
under the caption "--Certain Covenants--Restricted Payments."
"EQUITY INTERESTS" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"EQUITY OFFERING" means an offering of common stock (other than Disqualified
Stock) of the Company or any direct or indirect parent corporation of the
Company (a "Parent Corporation"), other than an offering pursuant to Form S-8
(or any successor thereto) and other than common stock issued pursuant to
employee benefit plans or as compensation to employees, PROVIDED, THAT in the
case of an Equity Offering by a Parent Corporation, such Parent Corporation
contributes to the common equity of the Company the portion of the net cash
proceeds thereof necessary to pay the aggregate redemption price of the
Exchangeable Preferred Stock or Exchange Debentures, as the case may be, to be
redeemed in connection therewith.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"EXCHANGE DEBENTURE SENIOR INDEBTEDNESS" means (i) all Indebtedness
outstanding under Credit Facilities and all Hedging Obligations with respect
thereto, (ii) all Indebtedness outstanding under the Notes and the Parity Notes,
(iii) any other Indebtedness permitted to be incurred by the Company or a
Restricted Subsidiary under the terms of the Exchange Indenture, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to the Exchange
Debentures and (iv) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
will not include (w) any liability for federal, state, local or other taxes owed
or owing by the Company, (x) any Indebtedness of the Company to any of its
Restricted Subsidiaries or other Affiliates, (y) any trade payables or (z) any
Indebtedness that is incurred in violation of the Exchange Indenture.
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"EXISTING INDEBTEDNESS" means Indebtedness of the Company and its Restricted
Subsidiaries (other than Indebtedness under the Senior Credit Facility) in
existence on the Issue Date, until such amounts are repaid.
"FIXED CHARGES" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest of such Person and its Restricted Subsidiaries that was capitalized
during such period, and (iii) any interest expense on Indebtedness of another
Person that is Guaranteed by such Person or one of its Restricted Subsidiaries
or secured by a Lien on assets of such Person or one of its Restricted
Subsidiaries (whether or not such Guarantee or Lien is called upon) and (iv) the
product of (a) all dividend payments, whether or not in cash, on any series of
preferred stock of such Person or any of its Restricted Subsidiaries, other than
dividend payments on Equity Interests payable solely in Equity Interests of the
Company (other than Disqualified Stock) or to the Company or a Restricted
Subsidiary of the Company, times (b) a fraction, the numerator of which is one
and the denominator of which is one minus the then current combined federal,
state and local statutory tax rate of such Person, expressed as a decimal, in
each case, on a consolidated basis and in accordance with GAAP.
"FIXED CHARGE COVERAGE RATIO" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
referent Person or any of its Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income (adjusting for, in the case of an Asset
Acquisition or merger or consolidation permitted under "Certain
Covenants--Merger, Consolidation or Sale of Assets," any operating expense or
cost reduction of such Person or the Person to be acquired which, in the good
faith estimate of management, will be eliminated or realized, as the case may
be, as a result of such Asset Acquisition, merger or consolidation) and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Restricted Subsidiaries
following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements
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by such other entity as have been approved by a significant segment of the
accounting profession, which are in effect from time to time.
"GUARANTEE" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
"HEDGING OBLIGATIONS" means, with respect to any Person, the obligations of
such Person under (i) interest rate or currency swap agreements, interest rate
or currency cap agreements and interest rate or currency collar agreements and
(ii) other agreements or arrangements designed to protect such Person against
fluctuations in interest rates or currency.
"INDEBTEDNESS" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
"INVESTMENTS" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of the covenant described above under the
caption "--Restricted Payments."
"ISSUE DATE" means the date of original issuance of the Exchangeable
Preferred Stock.
"LIEN" means, with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset, whether
or not filed, recorded or otherwise perfected under applicable law (including
any conditional sale or other title retention agreement, any lease in the nature
thereof, any option or other agreement to sell or give a security interest in
and any filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"MANAGEMENT AGREEMENT" means that certain Management Agreement dated the
Issue Date among the Principals, the Company and Holdings, as in effect on the
Issue Date.
"NET INCOME" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, (i) excluding,
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however, (x) any gain (but not loss), together with any related provision for
taxes on such gain (but not loss), realized in connection with (a) any Asset
Sale (including, without limitation, dispositions pursuant to sale and leaseback
transactions) or (b) the disposition of any securities by such Person or any of
its Restricted Subsidiaries or the extinguishment of any Indebtedness of such
Person or any of its Restricted Subsidiaries and (y) any extraordinary gain (but
not loss), together with any related provision for taxes on such extraordinary
gain (but not loss) and (ii) less the aggregate amount of all Restricted
Payments made by such Person or any of its Restricted Subsidiaries for such
period pursuant to clause (vii) of the second paragraph of the covenant
described above under the caption "--Description of the Exchange
Debentures--Certain Covenants--Restricted Payments" times one minus the then
combined federal, state and local statutory tax rate of the Company.
"NET PROCEEDS" means the aggregate cash proceeds received by the Company or
any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements), amounts required to be applied to the repayment of Indebtedness
(other than Senior Indebtedness) secured by a Lien on the asset or assets that
were the subject of such Asset Sale and any reserve for adjustment in respect of
the sale price of such asset or assets established in accordance with GAAP.
"NON-RECOURSE DEBT" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender, and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Exchange Debentures being offered hereby) of the Company or any of its
Restricted Subsidiaries to declare a default on such other Indebtedness or cause
the payment thereof to be accelerated or payable prior to its stated maturity;
and (iii) as to which the lenders have been notified in writing that they will
not have any recourse to the stock or assets of the Company or any of its
Restricted Subsidiaries.
"OBLIGATIONS" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"OFFICERS' CERTIFICATE" means a certificate signed by (i) the Chairman of
the Board of Directors, the Chief Executive Officer, the President or a Vice
President of the Company and (ii) the Chief Financial Officer or the Secretary
of the Company, which certificate shall comply with the Indenture.
"PERMITTED BUSINESS" means the business of the Company and its Restricted
Subsidiaries conducted on the Issue Date and businesses reasonably related or
ancillary thereto.
"PERMITTED INVESTMENTS" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company; (b) any Investment in Cash Equivalents;
(c) any Investment by the Company or any Restricted Subsidiary of the Company in
a Person, if as a result of such Investment (i) such Person becomes a Restricted
Subsidiary of the Company or (ii) such Person is merged, consolidated or
amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or a Restricted Subsidiary of the
Company; (d) any Investment made as a result of the receipt of non-cash
consideration from an Asset Sale that was made pursuant to and in compliance
with the covenant described above under the caption "--Repurchase at the Option
of Holders--Asset Sales" or any transaction not constituting an Asset Sale by
reason of the $1.0 million threshold contained in the definition thereof; (e)
any acquisition of assets solely in exchange for the issuance of Equity
Interests (other than Disqualified Stock) of the Company; (f) Hedging
Obligations entered into in the ordinary course of the Company's or its
Restricted Subsidiaries' businesses and otherwise in compliance with the
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Indenture; (g) Investments in securities of trade creditors or customers
received in settlement of obligations or pursuant to any plan of reorganization
or similar arrangement upon the bankruptcy of insolvency of such trade creditors
of customers; (h) Investments by the Company or a Restricted Subsidiary in a
Receivables Subsidiary or any Investment by a Receivables Subsidiary in any
other Person, in each case, in connection with a Qualified Receivables
Transaction; and (i) other Investments in any Person having an aggregate fair
market value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (i) that are at the time
outstanding, not to exceed the greater of (A) $10.0 million and (B) 5% of Total
Assets.
"PERMITTED JUNIOR SECURITIES" means Equity Interests in the Company or debt
securities that are subordinated to all Exchange Debenture Senior Indebtedness
(and any debt securities issued in exchange for Exchange Debenture Senior
Indebtedness) to substantially the same extent as, or to a greater extent than,
the Exchange Debentures are subordinated to Exchange Debenture Senior
Indebtedness pursuant to Article 10 of the Exchange Indenture.
"PERMITTED LIENS" means (i) Liens on assets of the Company securing Exchange
Debenture Senior Indebtedness of the Company and Liens on assets of the
Company's Restricted Subsidiaries; (ii) Liens in favor of the Company; (iii)
Liens on property of a Person existing at the time such Person is merged with or
into or consolidated with the Company or any Restricted Subsidiary of the
Company; PROVIDED that such Liens were in existence prior to the contemplation
of such merger or consolidation and do not extend to any assets other than those
of the Person merged into or consolidated with the Company; (iv) Liens on
property existing at the time of acquisition thereof by the Company or any
Restricted Subsidiary of the Company, PROVIDED that such Liens were in existence
prior to the contemplation of such acquisition; (v) Liens to secure the
performance of statutory obligations, surety or appeal bonds, performance bonds
or other obligations of a like nature incurred in the ordinary course of
business; (vi) Liens to secure Indebtedness (including Capital Lease
Obligations) permitted by clause (vi) of the second paragraph of the covenant
entitled "Incurrence of Indebtedness and Issuance of Preferred Stock" covering
only the assets acquired with such Indebtedness; (vii) Liens existing on the
Issue Date; (viii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, PROVIDED
that any reserve or other appropriate provision as shall be required in
conformity with GAAP shall have been made therefor; (ix) Liens on assets of
Unrestricted Subsidiaries that secure Non-Recourse Debt of Unrestricted
Subsidiaries; (x) Liens of the Company or a Wholly Owned Restricted Subsidiary
on assets of any Restricted Subsidiary of the Company; (xi) Liens securing
Permitted Refinancing Indebtedness which is incurred to refinance any
Indebtedness which has been secured by a Lien permitted under the Indenture and
which has been incurred in accordance with the provisions of the Indenture,
PROVIDED, HOWEVER, that such Liens (A) are not materially less favorable to the
Holders and are not materially more favorable to the lienholders with respect to
such Liens than the Liens in respect of the Indebtedness being refinanced and
(B) do not extend to or cover any property or assets of the Company or any of
its Restricted Subsidiaries not securing the Indebtedness so refinanced; (xii)
Liens incurred or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security or similar obligations, including any lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money); (xiii) judgment Liens not
giving rise to an Event of Default so long as such Lien is adequately bonded and
any appropriate legal proceedings which may have been duly initiated for the
review of such judgment shall not have been finally terminated or the period
within which such proceedings may be initiated shall not have expired; (xiv)
easements, rights-of-way, zoning restrictions and other similar charges or
encumbrances in respect of real property not interfering in any material respect
with the ordinary conduct of the business of the company or any of its
Restricted Subsidiaries; (xv) any interest or
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title of a lessor under any lease, whether or not characterized as capital or
operating; provided that such Liens do not extend to any property or assets
which is not leased property subject to such lease; (xvi) Liens upon specific
items of inventory or other goods and proceeds of any Person Securing such
Person's obligations in respect of bankers' acceptances issued or created for
the account of such Person to facilitate the purchase, shipment or storage of
such inventory or other goods; (xvii) Liens securing reimbursement obligations
with respect to letters of credit which encumber documents and other property
relating to such letters of credit and products and proceeds thereof; (xviii)
Liens encumbering deposits made to secure obligations arising from statutory,
regulatory, contractual, or warranty requirements of the Company or any of its
Restricted Subsidiaries, including rights of offset and set-off; (xix) Liens
securing Hedging Obligations which Hedging Obligations relate to Indebtedness
that is otherwise permitted under the Indenture; (xx) leases or subleases
granted to others not interfering in any material respect with the business of
the Company or its Restricted Subsidiaries; (xxi) Liens arising out of
consignment or similar arrangements for the sale of goods entered into by the
Company or any Restricted Subsidiary in the ordinary course of business; (xxii)
Liens or assets of a Receivables Subsidiary arising on connection with a
Qualified Receivables Transaction; (xxiii) Liens incurred in the ordinary course
of business of the Company or any Restricted Subsidiary of the Company with
respect to obligations that do not exceed $5.0 million at any one time
outstanding and that (a) are not incurred in connection with the borrowing of
money or the obtaining of advances or credit (other than trade credit in the
ordinary course of business) and (b) do not in the aggregate materially detract
from the value of the property or materially impair the use thereof in the
operation of business by the Company or such Restricted Subsidiary; and (xxiv)
Liens securing Acquired Debt incurred in accordance with clause (ix) of the
covenant described under "--Description of the Exchange Debentures--Certain
Covenants--Incurrence of Indebtedness and Issuance of Preferred Stock;"
PROVIDED, that (A) such Liens secured such Acquired Debt at the time of and
prior to the incurrence of such Acquired Debt by the Company or a Restricted
Subsidiary of the Company and were not granted in connection with, or in
anticipation of, the incurrence of such Acquired Debt by the Company or a
Restricted Subsidiary of the Company and (B) such Liens do not extend to or
cover any property or assets of the Company or any of its Restricted
Subsidiaries other than the property or assets that secured the Acquired Debt
prior to the time such Indebtedness became Acquired Debt of the Company or a
Restricted Subsidiary of the Company and are not more favorable to the
lienholders than those securing the Acquired Debt prior to the incurrence of
such Acquired Debt by the Company or a Restricted Subsidiary of the Company.
"PERMITTED REFINANCING INDEBTEDNESS" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); PROVIDED that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Exchange Debentures, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the Exchange Debentures on terms at least as favorable to
the Holders of Exchange Debentures as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
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"PERSON" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"PRINCIPALS" means Vestar Capital Partners III, L.P.
"PURCHASE MONEY NOTE" means a promissory note evidencing a line of credit,
or evidencing other Indebtedness owed to the Company or any Restricted
Subsidiary in connection with a Qualified Receivables Transaction, which note
shall be repaid from cash available to the maker of such note, other than
amounts required to be established as reserves pursuant to agreement, amounts
paid to investors in respect of interest, principal and other amounts owing to
such investors and amounts paid in connection with the purchase of newly
generated receivables.
"QUALIFIED PROCEEDS" means any of the following or any combination of the
following: (i) cash, (ii) Cash Equivalents, (iii) long-term assets that are used
or useful in a Permitted Business and (iv) the Capital Stock of any Person
engaged primarily in a Permitted Business if, in connection with the receipt by
the company or any Restricted Subsidiary of the Company of such Capital Stock,
(a) such Person becomes a Wholly-Owned Restricted Subsidiary or (b) such Person
is merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, the Company or any
Wholly-Owned Restricted Subsidiary of the Company.
"QUALIFIED RECEIVABLES TRANSACTION" means any transaction or series of
transactions that may be entered into by the Company or any Restricted
Subsidiary pursuant to which the Company or any Restricted Subsidiary may sell,
convey or otherwise transfer to (a) a Receivables Subsidiary (in the case of a
transfer by the Company or any Restricted Subsidiary) and (b) any other Person
(in the case of a transfer by a Receivables Subsidiary), or may grant a security
interest in, any accounts receivable (whether now existing or arising in the
future) of the Company or any Restricted Subsidiary and any asset related
thereto including, without limitation, all collateral securing such accounts
receivable, all contracts and all guarantees or other obligations in respect of
such accounts receivable, proceeds of such accounts receivable and other assets
which are customarily transferred, or in respect of which security interests are
customarily granted, in connection with asset securitization transactions
involving accounts receivable.
"RECEIVABLES SUBSIDIARY" means a Wholly Owned Restricted Subsidiary (other
than a Guarantor) which engages in no activities other than in connection with
the financing of accounts receivables and which is designated by the Board of
Directors of the Company (as provided below) as a Receivables Subsidiary (a) no
portion of the Indebtedness or any other Obligations (contingent or otherwise)
of which (i) is guaranteed by the Company or any other Restricted Subsidiary
(excluding guarantees of obligations (other than the principal of, and interest
on, Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is
recourse to or obligates the Company or any other Restricted Subsidiary in any
way other than pursuant to Standard Securitization Undertakings or (iii)
subjects any property or asset of the Company or any other Restricted
Subsidiary, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard Securitization
Undertakings, (b) with which neither the Company nor any other Restricted
Subsidiary has any material contract, agreement, arrangement or understanding
(except in connection with a Purchase Money Note or Qualified Receivables
Transaction) other than on terms no less favorable to the Company or such other
Restricted Subsidiary than those that might be obtained at the time from persons
that are not Affiliates of the Company, other than fees payable in the ordinary
course of business in connection with servicing accounts receivable, and (c) to
which neither the Company nor any other Restricted Subsidiary has any obligation
to maintain or preserve such entity's financial condition or cause such entity
to achieve certain levels of operating results. Any such designation by the
Board of Directors of the Company shall be evidenced to the Trustee by filing
with the Trustee a certified copy of the resolution of the Board of Directors of
the Company giving effect to such designation and an Officers' Certificate
certifying, to the best of such officers' knowledge and belief after consulting
with counsel, that such designation complied with the foregoing conditions.
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"RELATED PARTY" with respect to any Principal means (A) any controlling
stockholder, Subsidiary, or spouse or immediate family member (in the case of an
individual) of such Principal or (B) any trust, corporation, partnership or
other entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding a majority interest of which consist of such Principal
and/or such other Persons referred to in the immediately preceding clause (A).
"REORGANIZATION CHARGES" means (i) up to $3.3 million of facility closing
and reengineering costs incurred by the Company and its Subsidiaries prior to
the Issue Date, (ii) up to $550,000 of losses incurred by the Company and its
Subsidiaries prior to the Issue Date associated with (x) the Canadian retail
operations of the Company and its Subsidiaries and (y) the Mexican and
Guatemalan operations of the Company and its Subsidiaries, in each case
calculated in accordance with GAAP on a consolidated basis, (iii) up to $4.0
million of bankruptcy reorganization costs incurred by the Company and its
Restricted Subsidiaries prior to the Issue Date, and (iv) the costs and expenses
of the Company and its Subsidiaries incurred in connection with the Transaction,
in each case calculated in accordance with GAAP on a consolidated basis.
"RESTRICTED INVESTMENT" means an Investment other than a Permitted
Investment.
"RESTRICTED SUBSIDIARY" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary
"SENIOR CREDIT FACILITY" means the credit agreement to be entered into on or
prior to the Issue Date by and among the Company, NationsBanc Montgomery
Securities LLC, as arranger and syndication agent, certain lending parties
thereto and NationsBank, N.A., as agent, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, as such credit agreements and/or related documents may be
amended, restated, supplemented, renewed, replaced or otherwise modified from
time to time whether or not with the same agent, trustee, representative lenders
or holders, and, subject to the proviso to the next succeeding sentence,
irrespective of any changes in the terms and conditions thereof. Without
limiting the generality of the foregoing, the term "Senior Credit Facility"
shall include any amendment, amendment and restatement, renewal, extension,
restructuring, supplement or modification to any Senior Credit Facility and all
refundings, refinancings and replacements of any Senior Credit Facility,
including any agreement (i) extending the maturity of any Indebtedness incurred
thereunder or contemplated thereby, (ii) adding or deleting borrowers or
guarantors thereunder, so long as the borrowers and issuers thereunder include
one or more of the Company and its Subsidiaries and their respective successors
and assigns, or (iii) increasing the amount of Indebtedness incurred thereunder
or available to be borrowed thereunder.
"SIGNIFICANT SUBSIDIARY" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"STANDARD SECURITIZATION UNDERTAKINGS" means representations, warranties,
covenants and indemnities entered into by the Company or any Restricted
Subsidiary which are reasonably customary in an accounts receivable transaction.
"STATED MATURITY" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"SUBSIDIARY" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or Exchange
Trustees thereof is at the time owned or controlled, directly or indirectly, by
such Person or one or more of the
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other Subsidiaries of that Person (or a combination thereof) and (ii) any
partnership (a) the sole general partner or the managing general partner of
which is such Person or a Subsidiary of such Person or (b) the only general
partners of which are such Person or of one or more Subsidiaries of such Person
(or any combination thereof).
"TOTAL ASSETS" means, with respect to any Person, the total consolidated
assets of such Person and its Restricted Subsidiaries, as shown on the most
recent balance sheet of such Person.
"UNRESTRICTED SUBSIDIARY" means (i) any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; and (d) has not guaranteed
or otherwise directly or indirectly provided credit support for any Indebtedness
of the Company or any of its Restricted Subsidiaries. Any such designation by
the Board of Directors shall be evidenced to the Exchange Trustee by filing with
the Exchange Trustee a certified copy of the Board Resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by the covenant
described above under the caption "Certain Covenants--Restricted Payments." If,
at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Exchange Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under the covenant described under the
caption "--Certain Covenants-- Incurrence of Indebtedness and Issuance of
Preferred Stock," the Company shall be in default of such covenant). The Board
of Directors of the Company may at any time designate any Unrestricted
Subsidiary to be a Restricted Subsidiary; PROVIDED that such designation shall
be deemed to be an incurrence of Indebtedness by a Restricted Subsidiary of the
Company of any outstanding Indebtedness of such Unrestricted Subsidiary and such
designation shall only be permitted if (i) such Indebtedness is permitted under
the covenant described under the caption "--Certain Covenants--Incurrence of
Indebtedness and Issuance of Preferred Stock," calculated on a pro forma basis
as if such designation had occurred at the beginning of the four-quarter
reference period, and (ii) no Default or Event of Default or Voting Rights
Triggering Event, as applicable, would be in existence following such
designation
"VOTING STOCK" of any Person as of any date means the Capital Stock of such
Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"WEIGHTED AVERAGE LIFE TO MATURITY" means, when applied to any Indebtedness
or Disqualified Stock at any date, the number of years obtained by dividing (i)
the sum of the products obtained by multiplying (a) the amount of each then
remaining installment, sinking fund, serial maturity or other required payments
of principal or liquidation preference, as applicable, including payment at
final maturity, in respect thereof, by (b) the number of years (calculated to
the nearest one-twelfth) that will elapse between such date and the making of
such payment, by (ii) the then outstanding principal amount or liquidation
preference, if applicable, of such Indebtedness or Disqualified Stock.
"WHOLLY OWNED RESTRICTED SUBSIDIARY" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
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BOOK-ENTRY, DELIVERY AND FORM
The certificates representing the New Preferred Stock will be issued in
fully registered form. The New Preferred Stock initially will be represented by
a single, permanent global certificate, in definitive, fully registered form
without interest coupons (the "Global Certificate") and will be deposited with
the Trustee as custodian for The Depository Trust Company, New York, New York
("DTC") and registered in the name of a nominee of DTC.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a "banking
organization" within the meaning of the New York Banking Law, a member of the
Federal Reserve System, a "clearing corporation" within the meaning of the
Uniform Commercial Code and a "Clearing Agency" registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants (the "Participants") and facilitate the
clearance and settlement of securities transactions between Participants through
electronic book-entry changes in accounts of its Participants, thereby
eliminating the need for physical movement of certificates. Participants include
securities brokers and dealers, banks, trust companies and clearing corporations
and certain other organizations. Indirect access to the DTC system is available
to others such as banks, brokers, dealers and trust companies that clear through
or maintain a custodial relationship with a Participant, either directly or
indirectly ("indirect participants").
So long as DTC, or its nominee, is the registered owner or holder of the New
Preferred Stock, DTC or such nominee, as the case may be, will be considered the
sole owner or holder of the New Preferred Stock represented by such Global
Certificate for all purposes under the Certificate of Designations. No
beneficial owner of an interest in the Global Certificate will be able to
transfer that interest except in accordance with DTC's procedures, in addition
to those provided for under the Certificate of Designations with respect to the
New Preferred Stock.
Payments on the Global Certificate will be made to DTC or its nominee, as
the case may be, as the registered owner thereof. None of the Company, the
Trustee or any paying agent will have any responsibility or liability for any
aspect of the records, relating to or payments made on account of beneficial
ownership interests in the Global Certificate or for maintaining, supervising or
reviewing any records relating to such beneficial ownership interest.
The Company expects that DTC or its nominee, upon receipt of any payment
(including liquidated damages) on the Global Certificate, will credit
Participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of the Global
Certificate as shown on the records of DTC or its nominee. The Company also
expects that payments by participants to owners of beneficial interests in the
Global Certificate held through such Participants will be governed by standing
instructions and customary practice, as is now the case with securities held for
the accounts of customers registered in the names of nominees for such
customers. Such payments will be the responsibility of such Participants.
Transfers between Participants in DTC will be effected in the ordinary way
through DTC's same-day funds system in accordance with DTC rules and will be
settled in same day funds. If a holder requires physical delivery of a
Certificated Security for any reason, including to sell New Preferred Stock to
persons in states which require physical delivery of the New Preferred Stock, or
to pledge such securities, such holder must transfer its interest in the Global
Certificate, in accordance with the normal procedures of DTC and with the
procedures set forth in the Certificate of Designations.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of New Preferred Stock (including the presentation of New
Preferred Stock for exchange as described below) only at the direction of one or
more Participants to whose account the DTC interests in the Global Certificate
are credited and only in respect of such portion of the aggregate principal
amount of New Preferred Stock as to which such Participant or Participants has
or have given such direction.
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Upon the issuance of the Global Certificate, DTC or its custodian will
credit, on its internal system, the respective principal amount of the
individual beneficial interests represented by such Global Certificate to the
accounts of persons who have accounts with such depositary. Ownership of
beneficial interests in the Global Certificate will be limited to Participants
or persons who hold interests through Participants. Ownership of beneficial
interests in the Global Certificate will be shown on, and the transfer of that
ownership will be effected only through, records maintained by DTC or its
nominee (with respect to interests of participants) and the records of
Participants (with respect to interests of persons other than Participants).
Although DTC has agreed to the foregoing procedures in order to facilitate
transfers of interests in the Global Certificate among Participants, it is under
no obligation to perform such procedures, and such procedures may be
discontinued at any time. Neither the Company nor the Trustee will have any
responsibility for the performance by DTC or its Participants or indirect
participants of their respective obligations under the rules and procedures
governing their operations.
If DTC is at any time unwilling or unable to continue as a depositary for
the Global Certificate and a successor depositary is not appointed by the
Company within 90 days, Certificated Securities will be issued in exchange for
the Global Certificate.
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DESCRIPTION OF CAPITAL STOCK
Upon the consummation of the Offerings, the Certificate of Incorporation of
the Company, as amended, provided that the Company has the authority to issue
5,000,000 shares of the Company's preferred stock. Upon the consummation of the
Offerings and the Recapitalization, the Company had 500,000 shares of preferred
stock consisting of the Exchangeable Preferred Stock.
The following summary of certain provisions of the common stock and such
preferred stock does not purport to be complete and is subject to, and qualified
in its entirety by, the provisions of the Certificate of Incorporation, as
amended, and by the provisions of applicable law.
Except as otherwise provided herein or as otherwise required by applicable
law, the holders of common stock shall be entitled to one vote per share on all
matters to be voted on by the Company's stockholders.
The Company's preferred stock shall have the voting powers, full or limited,
or no voting powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications, limitations
or restrictions thereof as shall be stated and expressed in the resolution or
resolutions providing for the issue of such series of preferred stock adopted by
the Board of Directors of the Company. The New Preferred Stock being offered in
the Exchange Offerings is a series of the preferred stock issued pursuant to a
Certificate of Designation. See "Description of the New Preferred Stock and
Exchange Debentures."
The Certificate of Incorporation, as amended, of the Company provides that
to the fullest extent permitted by the General Corporation Law of the State of
Delaware (including, without limitation, Section 102(b)(7), as amended from time
to time) no director shall be personally liable to the Company or its
stockholders for monetary damages for breach of fiduciary duty as a director.
DESCRIPTION OF OTHER INDEBTEDNESS
The description set forth below does not purport to be complete and is
qualified in its entirety by reference to certain agreements setting forth the
principal terms and conditions of the Company's Senior Credit Facility and the
Canadian Facility (as defined). Capitalized terms used but not otherwise defined
in this "Description of the Senior Credit Facility" shall have the meaning to be
ascribed to them in the Senior Credit Facility.
SENIOR CREDIT FACILITY
The Senior Credit Facility is provided by a syndicate of banks and other
financial institutions led by NationsBank, N.A. as administrative and collateral
agent and NationsBanc Montgomery Securities LLC as arranger and syndication
agent and Gleacher Natwest Inc. as document agent. The Senior Credit Facility
provides senior secured financing of up to $160.0 million, consisting of the
$50.0 million Term Loan A with a maturity of six years ("Term Loan A"), the
$60.0 million Term Loan B with a maturity of seven years ("Term Loan B") and a
revolving facility for $50.0 million (the "Revolver"). The Revolver commitment
terminates six years from the date of the closing of the Senior Credit Facility.
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The Term Loans will amortize in quarterly amounts commencing June 30, 1998
based upon the annual amounts shown below:
<TABLE>
<CAPTION>
TERM LOAN A TERM LOAN B
--------------------- ---------------
<S> <C> <C>
(DOLLARS IN MILLIONS)
Year 1......................................................... $ 2.0 $ 0.6
Year 2......................................................... 4.0 0.6
Year 3......................................................... 6.0 0.6
Year 4......................................................... 10.0 0.6
Year 5......................................................... 13.0 0.6
Year 6......................................................... 15.0 0.6
Year 7......................................................... -- 56.4
----- -----
Total.......................................................... $ 50.0 $ 60.0
----- -----
----- -----
</TABLE>
The obligations of the Company under the Senior Credit Facility are
unconditionally and irrevocably guaranteed by the Company's domestic
subsidiaries (the "Guarantors"). In addition, the Senior Credit Facility is
secured by first priority or equivalent security interests in substantially all
tangible and intangible assets of the Company and the Guarantors, including all
the capital stock of, or other equity interests in, each direct or indirect
domestic subsidiary of the Company and 65% of the capital stock of, or other
equity interests in, each direct foreign subsidiary of the Company or any
Guarantor (to the extent permitted by applicable contractual and legal
provisions).
The Term Loans (and in the case of (i) below, the Revolver) will be subject
to mandatory prepayment (i) with the proceeds of certain asset sales, (ii) on an
annual basis with 50% of the Company's excess cash flow (as defined in the
Senior Credit Facility), (iii) with the proceeds of certain equity offerings and
(iv) with the proceeds from the issuance of certain funded debt of borrowed
money.
The Term Loans and the Revolver will initially bear (subject to performance
based step downs) interest at a rate equal to LIBOR plus (i) in the case of Term
Loan A and the Revolver, 225 basis points or, at the Company's option, the
administrative agent's alternate base rate (as defined in the Senior Credit
Facility) plus 125 basis points or (ii) in the case of Term Loan B, 250 basis
points or, at the Company's option, such alternate base rate plus 150 basis
points.
The Senior Credit Facility contains a number of covenants that, among other
things, restrict the ability of the Company and its subsidiaries to dispose of
assets, incur additional indebtedness, incur guarantee obligations, repay other
indebtedness, pay dividends, create liens on assets, enter into leases, make
investments, loans or advances, make acquisitions, engage in mergers or
consolidations, make capital expenditures, enter into sale and leaseback
transactions, or engage in certain transactions with subsidiaries and affiliates
and otherwise restrict corporate activities. In addition, under the Senior
Credit Facility the Company is required to comply with specified financial
ratios and tests, including minimum fixed charge coverage and interest coverage
ratios and maximum leverage ratios.
CANADIAN FACILITY
Cluett Peabody Canada Inc. ("Cluett Canada") has entered into a Loan
Agreement dated August 8, 1997 (the "Canadian Facility") between Cluett Canada
and Congress Financial Corporation (Canada) ("Congress"), as lender. The
Canadian Facility provides for a revolving loan facility of up to $15,000,000,
which amount may be reduced based upon the value of accounts receivable
outstanding and inventory held by Cluett Canada, or upon the good faith
determination by Congress that the amount should be reduced to reflect, among
other things, loss contingencies or risks, letters of credit and events of
default of Cluett
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Canada. The Canadian Facility also provides for letters of credit up to
$8,000,000 outstanding at any one time, subject to certain minimum inventory
requirements. The Canadian Facility has an initial term of three years and
continues year to year thereafter.
Amounts borrowed under the Canadian Facility bear interest at the rate of
1 1/4% per annum over the designated reference rate, rising to 3 1/4% in the
event that the Canadian Facility is terminated or an event of default has
occurred and is continuing or, in the case of the Revolver only, where amounts
borrowed are in excess of amounts available. The Canadian Facility contains
customary covenants and restrictions on Cluett Canada's ability to engage in
certain activities including limitations on indebtedness, dividends and
distributions, as well as a minimum net worth requirement.
THE PARITY NOTES
The Parity Notes will be issued under the Indenture, will have the same
terms as the Notes and will be treated as a single class with the Notes for all
purposes under the Indenture, including without limitation, waivers, amendments,
offers to purchase and redemptions.
UNITED STATES FEDERAL TAX CONSIDERATIONS
The following describes certain United States federal income tax
consequences of the acquisition, ownership and disposition of the Notes, the
Preferred Stock and the Exchange Debentures and the exchange of Old Notes for
Exchange Notes and the exchange of Exchangeable Preferred Stock for New
Preferred Stock pursuant to the Exchange Offerings as of the date hereof. It
applies only to a beneficial owner of a Note who acquires the Note at the
initial offering and for the original offering price thereof and to a U.S.
Holder (as defined below) who acquires the Preferred Stock on original issuance
and for the original offering price.
This discussion does not address the tax consequences to holders of the
Preferred Stock or the Exchange Debentures who are not U.S. Holders, and is
limited to Notes, Preferred Stock, and Exchange Debentures that are held as
capital assets. This discussion is for general information only, and does not
address all of the tax consequences that may be relevant to particular acquirers
in light of their personal circumstances, to certain types of acquirers (such as
banks and other financial institutions, real estate investment trusts, regulated
investment companies, insurance companies, tax-exempt organizations, dealers in
securities, or persons whose functional currency is not the U.S. Dollar) or to
integrated transactions (such as certain hedging transactions, conversion
transactions or "straddle" transactions). In addition, this discussion does not
include any description of the tax laws of any state, local or non-U.S.
government that may be applicable to a particular acquirer.
As used herein, the term "U.S. Holder" means a holder of Notes, Preferred
Stock or Exchange Debentures that is, for U.S. federal income tax purposes, (a)
an individual who is a citizen or resident of the United States, (b) a
corporation or partnership created or organized in or under the laws of the
United States or any political subdivision thereof, (c) an estate whose income
is includible in gross income for U.S. federal income tax purposes regardless of
its source or (d) a trust if (i) a court within the United States is able to
exercise primary supervision over the administration of the trust and (ii) at
least one U.S. person has authority to control all substantial decisions of the
trust. A "Non-U.S. Holder" is a holder that is not a U.S. Holder.
PROSPECTIVE ACQUIRERS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS WITH
RESPECT TO THE PARTICULAR U.S. FEDERAL INCOME AND ESTATE TAX CONSEQUENCES TO
THEM OF THE ACQUISITION, OWNERSHIP AND DISPOSITION OF THE EXCHANGE NOTES, THE
NEW PREFERRED STOCK AND THE EXCHANGE DEBENTURES, AS WELL AS THE TAX CONSEQUENCES
UNDER STATE, LOCAL, NON-U.S. AND OTHER U.S. FEDERAL TAX LAWS AND THE POSSIBLE
EFFECTS OF CHANGES IN TAX LAWS.
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EXCHANGE OF NOTES AND EXCHANGEABLE PREFERRED STOCK
The exchange of Old Notes and Exchangeable Preferred Stock for Exchange
Notes and New Preferred Stock, respectively, pursuant to the Exchange Offerings
should not constitute a taxable event to holders. Consequently, no gain or loss
should be recognized by a holder upon receipt of such Exchange Note or New
Preferred Stock, the holding period of such Exchange Note or New Preferred Stock
should include the holding period of the Old Note or the Exchangeable Preferred
Stock exchanged therefor, and the basis of such Exchange Note or such New
Preferred Stock should be the same as the basis of the Old Note or Exchangeable
Preferred Stock immediately before the exchange
THE NOTES; TAXATION OF U.S. HOLDERS
PAYMENT OF INTEREST ON THE NOTES. Interest on an Note will generally be
taxable to a U.S. Holder as ordinary income from domestic sources at the time it
is paid or accrued in accordance with the U.S. Holder's method of accounting for
tax purposes.
SALE, EXCHANGE AND RETIREMENT OF EXCHANGE NOTES. A U.S. Holder's tax basis
in a Note will, in general, be the U.S. Holder's cost therefor. Upon the sale,
exchange, retirement or other disposition of a Note, a U.S. Holder will
recognize gain or loss equal to the difference between the amount realized upon
the sale, exchange, retirement or other disposition (less amounts attributable
to any accrued qualified stated interest, which will be taxable as such) and the
adjusted tax basis of the Note. Such gain or loss will be capital gain or loss.
Capital gains of individuals derived in respect of capital assets held for more
than one year are eligible for reduced rates of taxation which may vary
depending upon the holding period of such capital assets. The deductibility of
capital losses is subject to limitations.
THE NOTES; TAXATION OF NON-U.S. HOLDERS
Under present United States federal income and estate tax law, and subject
to the discussion below concerning backup withholding:
(a) no withholding of United States federal income tax will be required
with respect to the payment by the Company or any paying agent of principal
or interest on an Exchange Note owned by a Non-U.S. Holder, provided (i)
that the beneficial owner does not actually or constructively own 10% or
more of the total combined voting power of all classes of stock of the
Company entitled to vote within the meaning of section 871(h)(3) of the Code
and the regulations thereunder, (ii) the beneficial owner is not a
controlled foreign corporation that is related to the Company through stock
ownership, (iii) the beneficial owner is not a bank whose receipt of
interest on an Exchange Note is described in section 881(c)(3)(A) of the
Code and (iv) the beneficial owner satisfies the statement requirement
(described generally below) set forth in section 871(h) and section 881(c)
of the Code and the regulations thereunder;
(b) no withholding of United States federal income tax will be required
with respect to any gain or income realized by a Non-U.S. Holder upon the
sale, exchange, retirement or other disposition of a Note; and
(c) a Note beneficially owned by an individual who at the time of death
is a Non-U.S. Holder will not be subject to United States federal estate tax
as a result of such individual's death, provided that such individual does
not actually or constructively own 10% or more of the total combined voting
power of all classes of stock of the Company entitled to vote within the
meaning of section 871(h)(3) of the Code and provided that the interest
payments with respect to such Exchange Note would not have been, if received
at the time of such individual's death, effectively connected with the
conduct of a United States trade or business by such individual.
To satisfy the requirement referred to in (a)(iv) above, the beneficial
owner of such Note, or a financial institution holding the Note on behalf of
such owner, must provide, in accordance with specified
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procedures, a paying agent of the Company with a statement to the effect that
the beneficial owner is not a United States person. Currently, these
requirements will be met if (1) the beneficial owner provides his name and
address, and certifies, under penalties of perjury, that he is not a United
States person (which certification may be made on an Internal Revenue Service
Form ("IRS") W-8 (or successor form)) or (2) a financial institution holding the
Note on behalf of the beneficial owner certifies, under penalties of perjury,
that such statement has been received by it and furnishes a paying agent with a
copy thereof. Under recently finalized Treasury regulations (the "Final
Regulations"), the statement requirement referred to in (a)(iv) above may also
be satisfied with other documentary evidence for interest paid after December
31, 1999 with respect to an offshore account or through certain foreign
intermediaries.
If a non-U.S. Holder cannot satisfy the requirements of the "portfolio
interest" exception described in (a) above, payments of interest made to such
non-U.S. Holder will be subject to a 30% withholding tax unless the beneficial
owner of the Note provides the Company or its paying agent, as the case may be,
with a properly executed (1) IRS Form 1001 (or successor form) claiming an
exemption from (or reduction in) withholding under the benefit of an applicable
tax treaty or (2) IRS Form 4224 (or successor form) stating that interest paid
on the Note is not subject to withholding tax because it is effectively
connected with the beneficial owner's conduct of a trade or business in the
United States. Under the Final Regulations, Non-U.S. Holders will generally be
required to provide IRS Form W-8 in lieu of IRS Form 1001 and IRS Form 4224,
although alternative documentation may be applicable in certain situations.
If a non-U.S. Holder is engaged in a trade or business in the United States
and interest on the Note is effectively connected with the conduct of such trade
or business, the Non-U.S. Holder, although exempt from the withholding tax
discussed above (provided it satisfies the certification requirements described
above), will be subject to United States federal income tax on such interest on
a net income basis in the same manner as if it were a U.S. Holder. In addition,
if such holder is a foreign corporation, it may be subject to a branch profits
tax equal to 30% (or lower applicable treaty rate) of its effectively connected
earnings and profits for the taxable year, subject to adjustments. For this
purpose, interest on an Exchange Note will be included in such foreign
corporation's earnings and profits.
Any gain or income realized upon the sale, exchange, retirement or other
disposition of a Note generally will not be subject to United States federal
income tax unless (i) such gain or income is effectively connected with a trade
or business in the United States of the Non-U.S. Holder, or (ii) in the case of
a Non-U.S. Holder who is an individual, such individual is present in the United
States for 183 days or more in the taxable year of such sale, exchange,
retirement or other disposition, and certain other conditions are met.
Special rules apply to certain Non-U.S. Holders such as "controlled foreign
corporations," "passive foreign investment companies" and "foreign personal
holding companies" and to certain U.S. shareholders of such entities that are
subject to special treatment under the Code. Such entities should consult their
own tax advisors to determine the U.S. federal, state, local and other tax
consequences that may be relevant to them.
INFORMATION REPORTING AND BACKUP WITHHOLDING.
In general, information reporting requirements will apply to certain
payments of principal and interest paid on Notes and to the proceeds of sale of
a Note made to U.S. Holders other than certain exempt recipients (such as
corporations). A 31% backup withholding tax will apply to such payments if the
U.S. Holder fails to provide a taxpayer identification number or certification
of foreign or other exempt status or fails to report in full dividend and
interest income.
In general, no information reporting or backup withholding will be required
with respect to payments made by the Company or any paying agent to Non-U.S.
Holders if a statement described in (a)(iv) above has been received (and the
payor does not have actual knowledge that the beneficial owner is a United
States person).
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In addition, backup withholding and information reporting may apply to the
proceeds of the sale of a Note within the United States or conducted through
certain U.S. related financial intermediaries unless the statement described in
(a)(iv) above has been received (and the payor does not have actual knowledge
that the beneficial owner is a United States person) or the holder otherwise
establishes an exemption.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such holder's United States federal income tax
liability provided the required information is furnished to the IRS.
NEW PREFERRED STOCK; U.S. HOLDERS
CLASSIFICATION OF PREFERRED STOCK AND EXCHANGE DEBENTURES. The remainder of
this discussion assumes that the Preferred Stock will be classified as stock and
the Exchange Debentures will be classified as debt for United States federal
income tax purposes, but no opinion is either expressed or implied on these
issues. Any change in these assumptions would alter the tax consequences
described below.
DIVIDENDS. Distributions on the Preferred Stock will constitute dividends
to the extent paid from current or accumulated earnings and profits of the
Company (as determined under United States federal income tax principles).
Dividends "paid in kind" through the issuance of additional Preferred Stock will
be treated as distributions in an amount equal to the fair market value of such
additional Preferred Stock as of the date of distribution. Such amount will also
be the issue price and initial tax basis of the newly distributed Preferred
Stock for United States federal income tax purposes. The amount of the Company's
earnings and profits at any time will depend upon the future actions and
financial performance of the Company. The Company believes that it does not
presently have any current or accumulated earnings and profits. Consequently,
unless the Company generates earnings and profits in the future, distributions
with respect to the Preferred Stock may not qualify as dividends for federal
income tax purposes. To the extent that the amount of a distribution on the
Preferred Stock exceeds the Company's current and accumulated earnings and
profits, such distribution will be treated as a nontaxable return of capital and
will be applied against and reduce the adjusted tax basis of the Preferred Stock
in the hands of each U.S. Holder (but not below zero), thus increasing the
amount of any gain (or reducing the amount of any loss) that would otherwise be
realized by such U.S. Holder upon the sale or other taxable disposition of such
Preferred Stock. The amount of any such distribution that exceeds the adjusted
tax basis of the Preferred Stock in the hands of the U.S. Holder will be treated
as capital gain.
DIVIDENDS RECEIVED DEDUCTION. Under Section 243 of the Code, corporate U.S.
Holders may be able to deduct 70% of the amount of any distribution qualifying
as a dividend. There are, however, many exceptions and restrictions relating to
the availability of such dividends received deduction.
Section 246A of the Code reduces the dividends received deduction allowed to
a corporate U.S. Holder that has incurred indebtedness "directly attributable"
to its investment in portfolio stock. Section 246(c) of the Code requires that,
in order to be eligible for the dividends received deduction, a corporate U.S.
Holder must generally hold the shares of the Preferred Stock for a minimum of 46
days (91 days in the case of certain preferred stock) during the 90 day period
beginning on the date which is 45 days before the date on which such share
becomes ex-dividend with respect to such dividend (during the 180 day period
beginning 90 days before such date in the case of certain preferred stock). A
U.S. Holder's holding period for these purposes is suspended during any period
in which it has certain options or contractual obligations with respect to
substantially identical stock or holds one or more other positions with respect
to substantially identical stock that diminishes the risk of loss from holding
the Preferred Stock.
Under Section 1059 of the Code, a corporate U.S. Holder is required to
reduce its tax basis (but not below zero) in the Preferred Stock by the nontaxed
portion of any "extraordinary dividend" if such stock has not been held for more
than two years before the earliest of the date such dividend is declared,
announced, or agreed to. Generally, the nontaxed portion of an extraordinary
dividend is the amount excluded from income by operation of the dividends
received deduction provisions of Section 243 of the
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Code. An extraordinary dividend on the Preferred Stock generally would be a
dividend that (i) equals or exceeds 5% of the corporate U.S. Holder's adjusted
tax basis in the Preferred Stock, treating all dividends having ex-dividend
dates within an 85 day period as one dividend or (ii) exceeds 20% of the
corporate U.S. Holder's adjusted tax basis in the Preferred Stock, treating all
dividends having ex-dividend dates within a 365 day period as one dividend. In
determining whether a dividend paid on the Preferred Stock is an extraordinary
dividend, a corporate U.S. Holder may elect to substitute the fair market value
of the stock for such U.S. Holder's tax basis for purposes of applying these
tests, provided such fair market value is established to the satisfaction of the
Secretary of the Treasury as of the day before the ex-dividend date. An
extraordinary dividend also includes any amount treated as a dividend in the
case of a redemption that is either non-pro rata as to all stockholders or in
partial liquidation of the Company, regardless of the stockholder's holding
period and regardless of the size of the dividend. If any part of the nontaxed
portion of an extraordinary dividend is not applied to reduce the U.S. Holder's
tax basis as a result of the limitation on reducing such basis below zero, such
part will be treated as capital gain and will be recognized in the taxable year
in which the extraordinary dividend is received.
Special rules exist with respect to extraordinary dividends for "qualified
preferred dividends." A qualified preferred dividend is any fixed dividend
payable with respect to any share of stock which (i) provides for fixed
preferred dividends payable not less frequently than annually and (ii) is not in
arrears as to dividends at the time the U.S. Holder acquired such stock. A
qualified preferred dividend does not include any dividend payable with respect
to any share of stock if the actual rate of return of such stock exceeds 15%.
Section 1059 does not apply to qualified preferred dividends if the corporate
U.S. Holder holds such stock for more than five years. If the U.S. Holder
disposes of such stock before it has been held for more than five years, the
amount subject to extraordinary dividend treatment with respect to qualified
preferred dividends is limited to the excess of the actual rate of return over
the stated rate of return. Actual or stated rates of return are the actual or
stated dividends expressed as a percentage of the lesser of (1) the U.S.
Holder's tax basis in such stock or (2) the liquidation preference of such
stock. CORPORATE U.S. HOLDERS ARE URGED TO CONSULT THEIR TAX ADVISORS WITH
RESPECT TO THE POSSIBLE APPLICATION OF SECTION 1059 TO THEIR OWNERSHIP OR
DISPOSITION OF THE PREFERRED STOCK.
REDEMPTION PREMIUM. Under Section 305(c) of the Code and the applicable
regulations thereunder, if the redemption price of the Preferred Stock exceeds
its issue price by more than a de minimus amount, the difference ("redemption
premium") will be taxable as a constructive distribution of additional Preferred
Stock to the U.S. Holder under a constant interest rate method similar to that
described below for accruing original issue discount ("OID") (see "Exchange
Debentures--Original Issue Discount"). Because the Preferred Stock provides for
optional rights of redemption by the Company at prices in excess of the issue
price, stockholders could be required to recognize such redemption premium if,
based on all of the facts and circumstances, the optional redemptions are more
likely than not to occur. If stock may be redeemed at more than one time, the
time and price at which such redemption is most likely to occur must be
determined based on all of the facts and circumstances. Applicable regulations
provide a "safe harbor" under which a right to redeem will not be treated as
more likely than not to occur if (i) the issuer and the U.S. Holder are not
related within the meaning of the regulations; (ii) there are no plans,
arrangements, or agreements that effectively require or are intended to compel
the issuer to redeem the stock (disregarding, for this purpose, a separate
mandatory redemption), and (iii) exercise of the right to redeem would not
reduce the yield of the stock, as determined under the regulations. Regardless
of whether the optional redemptions are more than likely not to occur,
constructive dividend treatment will not result if the redemption premium does
not exceed a DE MINIMIS amount or is in the nature of a penalty for premature
redemption. The Company intends to take the position that the existence of the
Company's optional redemption rights does not result in a constructive
distribution to U.S. Holders. It is not entirely clear how the rules under
Section 305(c) apply to the Company's rights and obligations to redeem the
Preferred Stock in the event of a Change of Control, and it is possible that
such rights and obligations will give rise to constructive distributions.
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Any additional shares of Preferred Stock distributed by the Company in lieu
of cash dividend payments on the Preferred Stock and received by Holders of the
Preferred Stock may bear redemption premium, depending upon the issue price of
such shares (I.E., the fair market value of such shares on the date of
issuance), and this may give rise to constructive distributions as described
above. If such shares bear redemption premium, such shares generally will have
different tax characteristics than other shares of Preferred Stock. This
difference in tax characteristics could adversely affect the liquidity of the
shares.
DISPOSITION OF PREFERRED STOCK. A U.S. Holder's adjusted tax basis in the
Preferred Stock will, in general, be the U.S. Holder's initial tax basis of such
Preferred Stock increased by the redemption premium previously included in
income by the U.S. Holder. A corporate U.S. Holder's tax basis may be further
adjusted by the extraordinary dividend provision discussed above. Upon the sale
or other disposition of Preferred Stock (other than by redemption) a U.S. Holder
will generally recognize capital gain or loss equal to the difference between
the amount realized upon the disposition and the adjusted tax basis of the
Preferred Stock. Such gain or loss will be capital gain or loss and will be
long-term capital gain or loss if at the time of sale, exchange, redemption or
other disposition the Preferred Stock has been held for more than one year. Net
capital gain of individuals derived in respect of capital assets held for more
than one year are eligible for reduced rates of taxation which may vary
depending upon the holding period of such capital assets. The deductibility of
capital losses is subject to limitations.
A redemption of the Preferred Stock by the Company would be treated, under
Section 302 of the Code, either as a sale or exchange giving rise to capital
gain or loss or as a dividend. In the case of a redemption of Preferred Stock
for Exchange Debentures, the amount realized on the exchange would be equal to
the "issue price" of the Exchange Debentures plus any cash received on the
exchange. The issue price of an Exchange Debenture would be equal to (i) its
fair market value as of the exchange date if the Exchange Debentures are traded
on an established securities market at any time during a specified period or
(ii) the fair market value at the exchange date of the Preferred Stock if such
Preferred Stock is traded on an established securities market during a specified
period but the Exchange Debentures are not. If neither the Preferred Stock nor
the Exchange Debentures are so traded, the issue price of the Exchange
Debentures would be determined under Section 1274 of the Code, in which case the
issue price would be the stated principal amount of the Exchange Debentures
provided that the yield on the Exchange Debentures is equal to or greater than
the "applicable federal rate" in effect at the time the Exchange Debentures are
issued. If the yield on the Exchange Debentures is less than such applicable
federal rate, their issue price under section 1274 of the Code would be equal to
the present value as of the issue date of all payments to be made on the
Exchange Debentures, discounted at the applicable federal rate. It cannot be
determined at the present time whether the Preferred Stock or the Exchange
Debentures will be, at the relevant time, traded on an established securities
market within the meaning of the Treasury Regulations or whether the yield on
the Exchange Debentures will equal or exceed the applicable federal rate, as
discussed above.
If a redemption of shares of the Preferred Stock for cash or an exchange of
the Preferred Stock for Exchange Debentures is treated as a dividend with
respect to a particular exchanging U.S. Holder under Section 302 of the Code,
such U.S. Holder (i) will not recognize any loss on the exchange, (ii) will
recognize dividend income (rather than capital gain) in an amount equal to the
fair market value of the Exchange Debentures received without regard to the U.S.
Holder's basis in the shares of Preferred Stock surrendered in the exchange, to
the extent of its proportionate share of the Company's current or accumulated
earnings and profits and (iii) the holding period for the Exchange Debentures
will begin on the day after the day on which the Exchange Debentures are
acquired by the exchanging U.S. Holder. Pursuant to Section 302 of the Code, the
redemption or exchange will not be treated as a dividend, if after giving effect
to the constructive ownership rules of Section 318 of the Code, the redemption
or exchange (i) represents a "complete termination" of the exchanging U.S.
Holder's stock interest in the Company, (ii) is "substantially disproportionate"
with respect to the exchanging U.S. Holder or (iii) is "not essentially
equivalent to a dividend" with respect to the exchanging U.S. Holder, all within
the meaning of Section
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302(b) of the Code. An exchange will be "not essentially equivalent to a
dividend" as to a particular U.S. Holder if it results in a "meaningful
reduction" in such U.S. Holder's interest in the Company (after application of
the constructive ownership rules of Section 318 of the Code). In general, there
are no fixed rules for determining whether a "meaningful reduction" has
occurred. Each U.S. Holder should consult its own tax advisor as to its ability
in light of its own particular circumstances to satisfy any of the foregoing
tests. Additionally, corporate U.S. Holders should consult their own tax
advisors concerning the availability of the corporate dividends received
deduction and the possible application of the extraordinary dividend rules of
Section 1059 of the Code to an exchange by a corporate holder for whom the
distribution is taxable as a dividend.
Depending upon a U.S. Holder's particular circumstances, the tax
consequences of holding Exchange Debentures may be less advantageous than the
tax consequences of holding Preferred Stock because, for example, payments of
interest on the Exchange Debentures will not be eligible for any dividends
received deduction that may be available to corporate United States Holders.
EXCHANGE DEBENTURES
ORIGINAL ISSUE DISCOUNT. An Exchange Debenture will be issued with original
issue discount ("OID") to the extent that its "stated redemption price at
maturity" exceeds its "issue price by more than a DE MINIMUS amount." U.S.
Holders of Exchange Debentures may be subject to special tax accounting rules,
as described in greater detail below. U.S. Holders of Exchange Debentures should
be aware that they generally must include OID in gross income for United States
federal income tax purposes on an annual basis under a constant yield method. As
a result, such U.S. Holders will include OID in income in advance of the receipt
of cash attributable to that income. However, U.S. Holders of Exchange
Debentures generally will not be required to include separately in income cash
payments received on such Debentures, even if denominated as interest, to the
extent such payments do not constitute qualified stated interest (as defined
below). The Company will report to U.S. Holders of any Exchange Debentures with
OID on a timely basis the reportable amount of OID and interest income based on
its understanding of applicable law.
The "stated redemption price at maturity" of a debt instrument is the sum of
its principal amount plus all other payments required thereunder, other than
payments of "qualified stated interest." For this purpose "qualified stated
interest" means stated interest that is unconditionally payable in cash or in
property (other than the debt instruments of the issuer), at least annually at a
single fixed rate during the entire term of the debt instrument that
appropriately takes into account the length of the intervals between payments.
If the Exchange Debentures are issued at a time when the Company has the option
to pay interest on the Exchange Debentures by issuing additional Exchange
Debentures, none of the stated interest on such Exchange Debentures will be
treated as qualified stated interest so that all of such payments will be
included in the "stated redemption price at maturity" and the Exchange
Debentures will be issued with OID. The "issue price" of an Exchange Debenture
will be determined as described under "--Disposition of Preferred Stock."
The amount of OID includible in income by the initial U.S. Holder of an
Exchange Debenture is the sum of the "daily portions" of OID with respect to the
Exchange Debenture for each day during the taxable year or portion of the
taxable year in which such U.S. Holder held such Exchange Debenture ("accrued
OID"). The daily portion is determined by allocating to each day in any "accrual
period" a pro rata portion of the OID allocable to that accrual period. The
"accrual period" for an Exchange Debenture may be of any length and may vary in
length over the term of the Exchange Debenture, provided that each accrual
period is no longer than one year and each scheduled payment of principal or
interest occurs on the first day or the final day of an accrual period. The
amount of OID allocable to any accrual period is an amount equal to the excess,
if any, of (a) the product of the Exchange Debenture's adjusted issue price at
the beginning of such accrual period and its yield to maturity (determined on
the basis of compounding at the close of each accrual period and properly
adjusted for the length of the accrual period) over (b) the
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sum of any qualified stated interest allocable to the accrual period. OID
allocable to a final accrual period is the difference between the amount payable
at maturity (other than a payment of qualified stated interest) and the adjusted
issue price at the beginning of the final accrual period. Special rules will
apply for calculating OID for an initial short accrual period. The "adjusted
issue price" of an Exchange Debenture at the beginning of any accrual period is
equal to its issue price increased by the accrued OID for each prior accrual
period and reduced by any payments made on such Exchange Debenture (other than
qualified stated interest) on or before the first day of the accrual period.
Under these rules, a U.S. Holder will have to include in income increasingly
greater amounts of OID in successive accrual periods.
PROSPECTIVE INVESTORS ARE URGED TO CONSULT THEIR OWN TAX ADVISORS AS TO THE
CONSEQUENCES OF OWNING EXCHANGE DEBENTURES.
AMORTIZABLE BOND PREMIUM. If at the time the Preferred Stock is exchanged
for the Exchange Debentures, the U.S. Holder's tax basis in any such Exchange
Debenture exceeds its stated redemption price at maturity, the Exchange
Debenture will be considered to have been issued at a premium. A U.S. Holder
generally may elect to amortize the premium over the term of the Exchange
Debenture on a constant yield method as an offset to interest when includible in
income under the U.S. Holder's regular accounting method. The election to
amortize premium on a constant yield method once made applies to all debt
obligations held or subsequently acquired by the electing U.S. Holder on or
after the first day of the first taxable year to which the election applies and
may not be revoked without the consent of the IRS.
REDEMPTION, SALE OR EXCHANGE OF EXCHANGE DEBENTURES. The adjusted tax basis
of a U.S. Holder who receives Exchange Debentures in exchange for Preferred
Stock will, in general, be equal to the initial tax basis of such Exchange
Debentures, increased by OID previously included in income by the U.S. Holder
and reduced by any cash payments on the Exchange Debentures other than qualified
stated interest. Upon the redemption, sale, exchange or retirement of an
Exchange Debenture a U.S. Holder will recognize capital gain or loss equal to
the difference between the amount realized upon the redemption, sale, exchange
or retirement (less any amount attributable to accrued qualified stated
interest) and the adjusted tax basis of the Exchange Debenture. Net capital gain
of individuals derived in respect of capital assets held for more than one year
are eligible for reduced rates of taxation which may vary depending upon the
holding period of such capital assets. The deductibility of capital losses is
subject to limitations.
APPLICABLE HIGH YIELD DISCOUNT OBLIGATIONS. If the yield-to-maturity on
Exchange Debentures with OID equals or exceeds the sum of (x) the "applicable
federal rate" (as determined under Section 1274(d) of the Code) in effect for
the month in which such debentures are issued (the "AFR") and (y) 5%, and the
OID on such Exchange Debentures is "significant", the Exchange Debentures will
be considered "applicable high yield discount obligations" ("AHYDOs") under
Section 163(i) of the Code. Consequently, the Company would not be allowed to
take a deduction for interest (including OID) accrued on such Exchange
Debentures for U.S. federal income tax purposes until such time as the Company
actually pays such interest (including OID) in cash or in other property (other
than stock or debt of the Company or a person deemed to be related to the
Company under Section 453(f)(1) of the Code). Because the amount of OID, if any,
attributable to such Exchange Debentures will be determined at the time such
Exchange Debentures are issued, and the AFR at the time such Exchange Debentures
are issued in exchange for Preferred Stock is not predictable, it is impossible
to determine at the present time whether an Exchange Debenture will be treated
as an AHYDO.
Moreover, if the yield-to-maturity on such an Exchange Debenture exceeds the
sum of (x) the AFR and (y) 6% (such excess shall be referred to hereinafter as
the "Disqualified Yield"), the deduction for OID accrued on the Exchange
Debenture will be permanently disallowed (regardless of whether the Company
actually pays such interest or OID in cash or in other property) for U.S.
federal income tax purposes to the extent such interest or OID is attributable
to the Disqualified Yield on the Exchange Debenture ("Dividend-Equivalent
Interest"). For purposes of the dividends received deduction, such
Dividend-Equivalent Interest will be treated as a dividend to the extent it is
deemed to have been paid out
190
<PAGE>
of the Company's current or accumulated earnings and profits. Accordingly, a
corporate U.S. Holder of an Exchange Debenture may be entitled to take a
dividends-received deduction with respect to any Dividend-Equivalent Interest
received by such corporate U.S. Holder on such an Exchange Debenture.
INFORMATION REPORTING AND BACKUP WITHHOLDING.
In general, information reporting requirements will apply to dividends paid
in respect of Preferred Stock and to the proceeds received on the sale, exchange
or redemption of Preferred Stock to U.S. Holders other than certain exempt
recipients (such as corporations). A 31% backup withholding tax will apply to
such payments if the U.S. Holder fails to provide a taxpayer identification
number or certification of exempt status or fails to report in full dividend and
interest income. U.S. Holders should consult their tax advisors concerning the
application of information reporting and backup withholding to the Exchange
Debentures.
Any amounts withheld under the backup withholding rules will be allowed as a
refund or a credit against such U.S. Holder's United States federal income tax
liability provided the required information is furnished to the IRS.
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes or New Preferred Stock for
its own account pursuant to the Exchange Offer must acknowledge that it will
deliver a prospectus in connection with any resale of such Exchange Notes or New
Preferred Stock. This Prospectus, as it may be amended or supplemented from time
to time, may be used by a broker-dealer in connection with resales of Exchange
Notes or New Preferred Stock received in exchange for Old Notes or Exchangeable
Preferred Stock where such Old Notes or Exchangeable Preferred Stock were
acquired as a result of market-making activities or other trading activities. A
broker-dealer may not participate in the Exchange Offer with respect to Old
Notes or Exchangeable Preferred Stock acquired other than as a result of
market-making activities or other trading activities. To the extent any such
broker-dealer participates in the Exchange Offer and so notifies the Company, or
causes the Company to be so notified in writing, the Company has agreed for a
period of 90 days after the date of this Prospectus, it will make this
Prospectus, as amended or supplemented, available to such broker-dealer for use
in connection with any such resale, and will promptly send additional copies of
this Prospectus and any amendment or supplement to this Prospectus to any
broker-dealer that requests such documents in any Letter of Transmittal. In
addition, until , 1998 (90 days after the date of this Prospectus),
all dealers effecting transactions in the Exchange Notes or New Preferred Stock
may be required to deliver a prospectus.
The Company will not receive any proceeds from any sale of Exchange Notes or
New Preferred Stock by broker-dealers. Exchange Notes and New Preferred Stock
received by broker-dealers for their own account pursuant to the Exchange Offer
may be sold from time to time in one or more transactions in the
over-the-counter market, in negotiated transactions, through the writing of
options on the Exchange Notes or New Preferred Stock or a combination of such
methods of resale, at prevailing market prices at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the form of commissions or concessions from any
such broker-dealer or the purchasers or any such Exchange Notes or New Preferred
Stock. Any broker-dealer that resells Exchange Notes or New Preferred Stock that
were received by it for its own account pursuant to the Exchange Offer and any
broker or dealer that participates in a distribution of such Exchange Notes or
New Preferred Stock may be deemed to be an "underwriter" within the meaning of
the Securities Act, and any profit on any such resale of Exchange Notes or New
Preferred Stock and any commissions or concessions received by any such persons
may be deemed to be underwriting compensation under the Securities Act. The
Letters of Transmittal state that, by acknowledging that it will deliver and by
delivering a prospectus, a broker-dealer will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act.
191
<PAGE>
The Company has agreed to pay all expenses incident to the Exchange Offer
(other than commissions and concessions of any broker-dealers), subject to
certain prescribed limitations, and will indemnify the holders of the Old Notes
and Exchangeable Preferred Stock against certain liabilities, including certain
liabilities that may arise under the Securities Act.
By its acceptance of the Exchange Offer, any broker-dealer that receives
Exchange Notes or New Preferred Stock pursuant to the Exchange Offer hereby
agrees to notify the Company prior to using the Prospectus in connection with
the sale or transfer of Exchange Notes or New Preferred Stock, and acknowledges
and agrees that, upon receipt of notice from the Company of the happening of any
event which makes any statement in the Prospectus untrue in any material respect
or which requires the making of any changes in the Prospectus in order to make
the statements therein not misleading or which may impose upon the Company
disclosure obligations that may have a material adverse effect on the Company
(which notice the Company agrees to deliver promptly to such broker-dealer),
such broker-dealer will suspend use of the Prospectus until the Company has
notified such broker-dealer that delivery of the Prospectus may resume and has
furnished copies of any amendment or supplement to the Prospectus to such
broker-dealer.
LEGAL MATTERS
The validity of the Securities will be passed upon for the Company by
Simpson Thacher & Bartlett, New York, New York.
EXPERTS
The combined financial statements of the Company as of December 31, 1996 and
1997 and for each of the three years in the period ended December 31, 1997,
included in this Prospectus, have been audited by Ernst & Young LLP, independent
auditors, as set forth in their reports appearing herein and elsewhere in the
Registration Statement, and are included in reliance upon such report given upon
authority of such firm as experts in accounting and auditing.
192
<PAGE>
INDEX TO COMBINED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Auditors............................................................................. F-2
Combined Financial Statements:
Combined Balance Sheets as of December 31, 1996 and 1997............................................... F-3
Combined Statements of Operations for the years ended December 31, 1995, 1996 and 1997................. F-4
Combined Statements of Stockholders' Deficit for the years ended December 31, 1995, 1996 and 1997...... F-5
Combined Statements of Cash Flows for the years ended December 31, 1995, 1996 and 1997................. F-6
Notes to Combined Financial Statements................................................................. F-7
Interim Condensed Combined Financial Statements (Unaudited):
Condensed Combined Balance Sheets as of March 29, 1997 and March 28, 1998.............................. F-32
Condensed Combined Statements of Operations for the three months ended March 29, 1997 and March 28,
1998.................................................................................................. F-33
Condensed Combined Statements of Cash Flows for the three months ended March 29, 1997 and March 28,
1998.................................................................................................. F-34
Notes to Condensed Combined Financial Statements....................................................... F-35
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Bidermann Industries Corp. and Affiliates
We have audited the accompanying combined balance sheets as of December 31,
1996 and 1997, of Bidermann Industries Corp. and Consumer Direct Corporation
(collectively, the "Company"), wholly owned subsidiaries of Bidermann Industries
U.S.A., Inc., and the related combined statements of operations, stockholders'
deficit and cash flows for each of the three years in the period ended December
31, 1997. These financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the combined financial position of the Company at
December 31, 1996 and 1997 and the combined results of their operations and
their cash flows for each of three years in the period ended December 31, 1997,
in conformity with generally accepted accounting principles.
/s/ Ernst & Young LLP
Atlanta, Georgia
March 19, 1998, except for Note 20
as to which the date is April 10, 1998
F-2
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
COMBINED BALANCE SHEETS
<TABLE>
<CAPTION>
DECEMBER 31
------------------------
<S> <C> <C>
1996 1997
----------- -----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................. $ 5,784 $ 10,019
Accounts receivable, net.............................................................. 52,489 48,442
Inventories........................................................................... 71,828 78,236
Prepaid expenses and other current assets............................................. 4,443 4,234
----------- -----------
Total current assets.................................................................... 134,544 140,931
Property, plant and equipment, net...................................................... 46,940 47,698
Pension asset........................................................................... 28,191 30,227
Other noncurrent assets................................................................. 1,419 1,161
----------- -----------
Total assets............................................................................ $ 211,094 $ 220,017
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses................................................. $ 44,996 $ 46,486
Short-term debt and current portion of long-term debt................................. 1,171 9,172
Income taxes payable.................................................................. 1,636 2,153
----------- -----------
Total current liabilities............................................................... 47,803 57,811
Due to parent........................................................................... 27,647 27,613
Long-term debt and capital lease obligations............................................ 8,558 1,960
Other noncurrent liabilities............................................................ 933 500
Liabilities subject to compromise....................................................... 181,695 168,932
Preferred stock, $1 par value: authorized 50,000 shares, issued and outstanding 15,000
shares................................................................................ 18,674 20,009
Stockholders' deficit:
Common stock, $1 par value: authorized, issued and outstanding 2,000 shares (1,000
BIC, 1,000 CDC)..................................................................... 2 2
Additional paid-in capital............................................................ 174,927 173,592
Accumulated deficit................................................................... (245,295) (228,099)
Equity adjustment from foreign currency translation................................... (3,850) (2,303)
----------- -----------
Total stockholders' deficit............................................................. (74,216) (56,808)
----------- -----------
Total liabilities and stockholders' deficit............................................. $ 211,094 $ 220,017
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
F-3
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
COMBINED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
----------------------------------
<S> <C> <C> <C>
1995 1996 1997
---------- ---------- ----------
<CAPTION>
(In Thousands)
<S> <C> <C> <C>
Net sales.................................................................... $ 486,733 $ 368,696 $ 362,907
Cost of goods sold........................................................... 369,817 273,800 253,792
---------- ---------- ----------
Gross profit................................................................. 116,916 94,896 109,115
Selling, general and administrative expenses................................. 137,903 85,877 74,790
Facility closing and reengineering costs..................................... 22,481 11,603 2,469
---------- ---------- ----------
160,384 97,480 77,259
Operating income (loss)...................................................... (43,468) (2,584) 31,856
Interest expense, net (contractural interest expense $28,639 in 1995)........ 22,721 16,928 15,233
Other expense, net........................................................... 532 3,314 1,984
---------- ---------- ----------
Income (loss) before reorganization costs (credits) and income taxes......... (66,721) (22,826) 14,639
Bankruptcy reorganization costs (credits).................................... 20,871 6,128 (3,883)
---------- ---------- ----------
Income (loss) before provision for income taxes.............................. (87,592) (28,954) 18,522
Provision for income taxes................................................... 1,555 1,246 1,326
---------- ---------- ----------
Net income (loss)............................................................ $ (89,147) $ (30,200) $ 17,196
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
See accompanying notes.
F-4
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
COMBINED STATEMENTS OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS)
<TABLE>
<CAPTION>
EQUITY
ADJUSTMENT
FROM
COMMON STOCK ADDITIONAL FOREIGN
---------------------- PAID-IN ACCUMULATED CURRENCY
SHARES AMOUNT CAPITAL DEFICIT TRANSLATION TOTAL
----------- --------- ---------- ------------ ----------- ----------
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1994......................... 2,000 $ 2 $ 177,159 $ (125,948) $ (4,350) $ 46,863
Foreign currency translation adjustment............ -- -- -- -- (1,069) (1,069)
Accretion of dividend on redeemable preferred
stock............................................ -- -- (920) -- -- (920)
Net loss........................................... -- -- -- (89,147) -- (89,147)
----- --------- ---------- ------------ ----------- ----------
Balance at December 31, 1995......................... 2,000 2 176,239 (215,095) (5,419) (44,273)
Foreign currency translation adjustment............ -- -- -- -- 1,569 1,569
Accretion of dividend on redeemable preferred
stock............................................ -- -- (1,312) -- -- (1,312)
Net loss........................................... -- -- -- (30,200) -- (30,200)
----- --------- ---------- ------------ ----------- ----------
Balance at December 31, 1996......................... 2,000 2 174,927 (245,295) (3,850) (74,216)
Foreign currency translation adjustment............ -- -- -- -- 1,547 1,547
Accretion of dividend on redeemable preferred
stock............................................ -- -- (1,335) -- -- (1,335)
Net income......................................... -- -- -- 17,196 -- 17,196
----- --------- ---------- ------------ ----------- ----------
Balance at December 31, 1997......................... 2,000 $ 2 $ 173,592 $ (228,099) $ (2,303) $ (56,808)
----- --------- ---------- ------------ ----------- ----------
----- --------- ---------- ------------ ----------- ----------
</TABLE>
See accompanying notes.
F-5
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
COMBINED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
1995 1996 1997
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).............................................. $ (89,147) $ (30,200) $ 17,196
Adjustment to reconcile net income (loss) to net cash and cash
equivalents provided by operating activities:
Write-down of deferred financing activities.................. 5,237 -- --
Write-down of property, plant and equipment.................. 9,425 742 --
Depreciation................................................. 12,301 10,716 8,075
Amortization................................................. 980 219 30
Adjustments of liabilities subject to compromise............. 9,793 -- (10,000)
Early retirement window benefit.............................. 2,877 -- --
--------- --------- ---------
(48,534) (18,523) 15,301
Changes in operating assets and liabilities, excluding the
effect of dispositions:
Accounts receivable.......................................... 5,271 8,240 4,047
Inventories.................................................. 37,161 21,389 (6,408)
Prepaid expenses and other current assets.................... 3,924 3,797 209
Pension and other noncurrent assets.......................... (3,573) (1,499) (1,808)
Accounts payable and accrued expenses........................ 4,722 1,526 1,490
Income taxes payable......................................... 278 (78) 517
Other liabilities............................................ 2,896 (1,302) (467)
--------- --------- ---------
Net cash and cash equivalents provided by operating
activities................................................... 2,145 13,550 12,881
INVESTING ACTIVITIES
Purchase of fixed assets....................................... (6,776) (8,249) (10,979)
Proceeds on disposal of fixed assets........................... 1,407 1,566 1,786
Other, net..................................................... (1,069) 1,564 1,907
--------- --------- ---------
Net cash and cash equivalents used in investing activities..... (6,438) (5,119) (7,286)
FINANCING ACTIVITIES
Proceeds from DIP credit facility.............................. 11,000 53,300 16,398
Principal payments on DIP credit facility...................... (9,000) (55,300) (16,398)
Proceeds from issuance of long term debt....................... 2,579 4,971 2,246
Principal payments on long term debt........................... (663) (16,302) (3,606)
--------- --------- ---------
Net cash and cash equivalents provided by (used in) financing
activities................................................... 3,916 (13,331) (1,360)
--------- --------- ---------
Net change in cash and cash equivalents........................ (377) (4,900) 4,235
Cash and cash equivalents at beginning of year................. 11,061 10,684 5,784
--------- --------- ---------
Cash and cash equivalents at end of year....................... $ 10,684 $ 5,784 $ 10,019
--------- --------- ---------
--------- --------- ---------
SUPPLEMENTAL DISCLOSURES
Cash paid during the year:
Interest..................................................... $ 17,149 $ 8,773 $ 7,649
--------- --------- ---------
--------- --------- ---------
Income taxes................................................. $ 234 $ 674 $ 1,163
--------- --------- ---------
--------- --------- ---------
</TABLE>
See accompanying notes.
F-6
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS
DECEMBER 31, 1997
1. BACKGROUND
Bidermann Industries Corp. ("BIC") and its subsidiaries is a wholly-owned
subsidiary of Bidermann Industries, U.S.A., Inc. ("BIUSA") operating in the
textile and apparel industry primarily in the design, manufacture, and marketing
of apparel and the licensing of certain owned trademarks and processes relating
to the textile and apparel industry. Effective November 4, 1996, certain assets
of two BIC subsidiaries, Cluett Peabody & Co., Inc. and Bidermann Tailored
Clothing, Inc., were transferred to a newly formed company, Cluett Designer
Group, Inc. ("CDG"), a wholly-owned subsidiary of BIC. CDG has not filed
petitions for relief under Chapter 11 of the U.S. Bankruptcy Code. These assets
were purchased at net book value and paid for in cash and stock. The combined
financial statements presented herein also include financial data of Consumer
Direct Corporation ("CDC"), which is also wholly owned by BIUSA. CDC primarily
operates retail apparel stores in discount outlet malls. BIC and CDC
collectively are referred to herein as the "Company".
PETITION FOR RELIEF UNDER CHAPTER 11
On July 17, 1995, BIUSA and sixteen of its subsidiaries (the "Debtors")
filed voluntary petitions for relief under the provisions of Chapter 11 of the
Federal Bankruptcy Code ("Chapter 11") in the United States Bankruptcy Court for
the Southern District of New York (the "Court"). See Note 18 for condensed
financial information of the entities included in the combined financial
statements but not included in the bankruptcy proceedings and, as such, not
subject to the provisions of Chapter 11. The separate Chapter 11 cases of the
Debtors have been consolidated for procedural purposes and are being jointly
administered pursuant to an order of the Court. By order of the Court dated
February 1, 1996, the Court procedurally deconsolidated the case of Ralph Lauren
Womenswear, Inc., from the cases of the remaining Debtors. Under Chapter 11,
certain claims against the Debtors in existence prior to the filing for relief
under the federal bankruptcy laws are stayed while the BIUSA continues business
operations as a Debtor-in-Possession subject to the supervision of the Court.
The Company filed a proposed plan of reorganization with the Court which was
approved on March 31, 1998 (see Note 20).
In connection with the bankruptcy proceedings, the Company incurred
bankruptcy reorganization costs in 1995, 1996, and 1997 of $2,772,000,
$6,128,000, and $6,117,000 respectively, for professional fees. In 1995, the
Company also established a reserve of $9,793,000 related to estimated costs
associated with rejecting leases for certain office space, facilities, retail
stores and equipment and incurred costs of $4,825,000 related to fees in
obtaining Debtor-in-Possession financing and the write-off of capitalized
deferred finance costs on the pre-petition debt, and $3,481,000 related to
potential claims and related litigation matters. The 1997 results also include
approximately $10,000,000 of credits resulting from a change in estimate of
lease rejection liabilities and negotiated settlements of trade accounts and
expenses payable which were approved by the Court.
The principal categories of claims classified as liabilities subject to
compromise in the combined balance sheets at December 31, 1996 and 1997 are
identified below. All amounts may be subject to future
F-7
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
1. BACKGROUND (CONTINUED)
adjustments depending on Court actions and further developments with respect to
disputed claims or other events.
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
<S> <C> <C>
1996 1997
---------- ----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Liabilities subject to compromise:
Debt and accrued interest........................................... $ 146,001 $ 145,629
Trade accounts and expenses payable................................. 28,101 18,238
Lease rejection liabilities......................................... 7,593 5,065
---------- ----------
Total................................................................. $ 181,695 $ 168,932
---------- ----------
---------- ----------
</TABLE>
Additional pre-petition claims may arise resulting from the rejection of
additional executory contracts, including leases, or from the determination by
the Court (or agreed to by the parties in interest) of allowed claims.
2. SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF COMBINATION
The combined financial statements include all subsidiary companies of BIC
and CDC. Significant intercompany transactions have been eliminated in the
combination. In 1995 and 1996, the Company allocated external interest expense
to all of its divisions based on a percentage of total equity. In 1997, the
Company allocated external interest expense based on a percentage of sales. All
allocations of interest expense eliminate prior to combination.
CASH EQUIVALENTS
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
ACCOUNTS RECEIVABLE
The Company's principal customers are retail stores and chains located in
the United States and in the countries where its foreign subsidiaries are
domiciled, primarily Canada. Royalty and licensing income is earned from a
worldwide base of licensees engaged in the sale and manufacture of textiles and
apparel. The Company generally does not require collateral on accounts
receivable.
INVENTORY VALUATION
Inventories are stated at the lower of cost (first-in, first-out) or market.
During 1995, the Company incurred a charge for the liquidation of excess
inventory of approximately $14,000,000 which is included in cost of goods sold.
F-8
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment are stated at cost and are depreciated
(including depreciation of assets recorded under capital leases) principally by
the straight-line method over the estimated useful lives of the assets as
follows:
<TABLE>
<S> <C>
Buildings............................ 32-39 years
Site improvements.................... 15-39 years
Machinery, equipment and other....... 3-10 years
Leasehold improvements............... The lesser of the lease term or
estimated useful life
</TABLE>
INCOME TAXES
The Company accounts for income taxes under FAS 109, "Accounting for Income
Taxes". Under the provisions of FAS 109, deferred income taxes are provided at
the enacted marginal rates on the differences between the financial statement
and income tax bases of assets and liabilities. BIUSA and subsidiaries file a
consolidated federal income tax return and separate, combined or unitary state
and local income tax returns in accordance with the filing requirements and
options applicable in the jurisdiction in which income tax returns are required.
Income tax expense for the Company is presented in the accompanying financial
statements on a separate return basis.
USE OF ESTIMATES
Management uses estimates in preparing the combined financial statements in
conformity with generally accepted accounting principles. The Company regularly
assesses these estimates and, while it is reasonably possible that actual
results may differ from these estimates, management believes that material
changes will not occur in the near term.
REVENUE RECOGNITION
The Company recognizes revenue when the apparel is shipped. Fees from the
licensing of trademarks and processes relating to the textile and apparel
industry are recognized ratably over the period of time for fixed license fees
and based on estimated sales for variable royalty fees. Customer returns and
allowances have been provided based on estimated returns (see Note 5).
SOFTWARE
In March 1998, the American Institute of Certified Public Accountants issued
Statement of Position (SOP) 98-1, ACCOUNTING FOR THE COSTS OF COMPUTER SOFTWARE
DEVELOPED FOR OR OBTAINED FOR INTERNAL-USE. The SOP is effective for the Company
beginning on January 1, 1999. The SOP will require the capitalization of certain
costs incurred after the date of adoption in connection with developing or
obtaining software for internal-use. The Company currently expenses such costs
as incurred. The Company has not yet assessed what the impact of the SOP will be
on the Company's future earnings or financial position. The Company expensed
$386,000, $2,345,000 and $448,000 of such costs during 1995, 1996, and 1997,
respectively.
F-9
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
FOREIGN CURRENCY TRANSLATION
Translation adjustments arising from certain foreign operations of the
Company are reflected as a separate component of stockholders' deficit. Other
expense, net includes an aggregate exchange loss on transactions of
approximately $502,000, $88,000, and $816,000 in 1995, 1996, and 1997
respectively.
DERIVATIVE FINANCIAL INSTRUMENTS
The Company is exposed to financial risks from movements in foreign exchange
rates through its foreign operations. To manage these risks, the Company
selectively uses forward contracts as hedges of foreign currency commitments.
The Company had no forward contracts outstanding at December 31, 1997.
ADVERTISING COSTS
The Company expenses advertising costs as incurred. The Company charged
$12,662,000, $11,503,000, and $8,659,000 to advertising expense in 1995, 1996,
and 1997 respectively.
CONCENTRATIONS OF CREDIT RISK AND FINANCIAL INSTRUMENTS
Financial instruments which subject the Company to credit risk are primarily
trade accounts receivable. Concentration of credit risk with respect to accounts
receivable is limited due to the large number and diversity of customers
comprising the Company's customer base. Management believes the risk associated
with trade accounts receivable is adequately provided for in the allowance for
doubtful accounts (see Note 5).
3. PREFERRED STOCK
During 1993, the Board of Directors authorized (50,000 shares) and issued
15,000 shares of Series A Redeemable Preferred Stock (Preferred Stock) to BIUSA
for an aggregate purchase price of $15,000,000. Each preferred share has a par
value of $1 and is recorded at its stated value on the date of issuance. The
Preferred Stock is redeemable for cash by the holders or the Company for $1,000
per share, together with accrued and unpaid dividends, whether or not earned or
declared, to the redemption date. The Company is prohibited under its Credit
Agreement (see Note 8-Long-Term Obligations and Financing Agreements) from
redeeming any of its outstanding stock. Dividends on the preferred shares are
cumulative and payable semiannually on the first day of January and July,
respectively, when and as declared by the Company's Board of Directors, but only
out of funds legally available. Cumulative cash dividends have been calculated
at a rate per annum equal to 3% over the six months London Inter Bank Offering
Rate date at December 31, 1996 and 1997 (8.84% at December 31, 1997).
In the event of any voluntary liquidation, dissolution or winding up of the
affairs of the Company, the holders of the Preferred Stock shall be entitled,
before any distribution or payment is made to holders of any junior stock, to be
paid in full an amount equal to $1,000 per share together with accrued dividends
to such date whether or not earned or declared. In the event six consecutive
preferred stock dividend payments are in arrears, holders of the preferred stock
may vote separately as a class to elect two members to the Board of Directors of
the Company until all such dividends have been paid.
The carrying value of Redeemable Preferred Stock reflects accretion of
$5,009,000 cumulative, undeclared dividends through December 31, 1997.
F-10
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
4. FACILITY CLOSING AND REENGINEERING COSTS
In connection with developing a plan of reorganization during 1995, the
Company developed and implemented a program designed to reduce operating
expenses and improve overall productivity. During 1995, 1996, and 1997, the
Company incurred expenses of $22,481,000, $11,603,000 and $2,469,000,
respectively, in implementing this plan. The principal components of these
expenses are as follows:
FACILITY CLOSINGS -- During 1995, 1996, and 1997, the Company recorded
expenses of approximately $12,805,000, $5,647,000, and $635,000 respectively,
for costs incurred in connection with closing various retail and outlet stores,
manufacturing, distribution and office facilities.
OTHER OPERATING EXPENSES -- In addition to the above items, the Company
incurred other operating expenses of $6,919,000, $5,956,000, $1,834,000 in 1995,
1996, and 1997, respectively, primarily related to certain professional fees
incurred to restructure and operate the Company during Bankruptcy, system
conversions and general restructuring costs. The Company also recognized a loss
of $2,757,000 in 1995 on the sale of its Ralph Lauren Womenswear, Inc.
subsidiary.
5. ACCOUNTS RECEIVABLE
Allowances provided for accounts receivable are as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1997
--------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Doubtful accounts........................................................ $ 3,292 $ 1,802
Customer allowances...................................................... 12,122 8,171
--------- ---------
$ 15,414 $ 9,973
--------- ---------
--------- ---------
</TABLE>
F-11
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
6. INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
<S> <C> <C>
1996 1997
--------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Finished goods.......................................................... $ 56,269 $ 65,558
Work in process......................................................... 6,168 4,326
Raw materials and supplies.............................................. 9,391 8,352
--------- ---------
$ 71,828 $ 78,236
--------- ---------
--------- ---------
</TABLE>
7. PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment consist of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
----------------------
<S> <C> <C>
1996 1997
---------- ----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Land.................................................................. $ 2,661 $ 2,120
Buildings and site improvements....................................... 26,013 25,764
Machinery, equipment and other........................................ 73,723 78,034
Construction in progress.............................................. 1,363 2,804
---------- ----------
103,760 108,722
Less accumulated depreciation......................................... (56,820) (61,024)
---------- ----------
$ 46,940 $ 47,698
---------- ----------
---------- ----------
</TABLE>
Included in the amounts above is property held under capital leases
(principally a distribution facility) of $9,523,000 and $8,450,000, at December
31, 1996 and 1997, respectively.
8. LONG-TERM OBLIGATIONS AND FINANCING AGREEMENTS
In conjunction with the Chapter 11 filing, BIC arranged for a $75,000,000
Debtor-in-Possession credit facility (the "DIP facility"). Interest charged on
borrowings under the DIP facility is the reference rate (defined as the greater
of the federal funds rate plus 1/2% or the prime rate) plus 2% and an
availability fee of 1/2 of 1% of the unused portion of the credit facility. As a
result of the sale of certain assets to CDG, the DIP facility was reduced to
$65,000,000. CDG secured a $15,000,000 asset-based lending facility with
interest of prime plus 1% charged on borrowings. On April 10, 1997, the
Bankruptcy Court granted final approval for replacement of the $65,000,000 DIP
facility which closed on April 17, 1997. The new $55,000,000 DIP facility, which
was set to mature on April 17, 1998, has been extended to mature on October 17,
1998. Interest charged on borrowings under the new DIP facility is prime plus
3/4 of 1%. Any borrowing under the Company's 1990 credit facility (as amended,
the "pre-petition facility") ceased on or before July 17, 1995. To provide
protection for the lenders under the pre-petition facility, payments are being
made at a rate of 10% per annum on the pre-petition amount owed to the lenders
and is payable monthly in arrears. Half of this payment is being applied to the
principal and the other half is applied to accrued interest, which is subject to
reclassification pending final approval of the Plan of Reorganization (see Note
20).
F-12
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
8. LONG-TERM OBLIGATIONS AND FINANCING AGREEMENTS (CONTINUED)
The Company has accrued interest on the obligations outstanding under the
pre-petition facility at the pre-petition contractual rates through December 31,
1997. The new DIP facility requires the Company to maintain various financial
covenants including minimum earnings.
At the time of the Chapter 11 filing, the pre-petition facility consisted of
(i) a revolving credit facility which allowed for revolving loans, letters of
credit and bankers acceptances and (ii) a term loan facility. Availability under
the revolving facility was limited to the lesser of a cap or a borrowing base
amount calculated based on certain percentages of eligible accounts receivable
and eligible inventory. Interest on outstanding borrowings under the revolving
credit facility was charged at the reference rate plus 1- 1/2%. Interest on the
term loan facility was charged at the reference rate plus 2%. The Company is
currently in default of this agreement.
The lenders under the new DIP facility have a first priority lien on
substantially all of the assets of BIC and certain other subsidiaries included
in the Chapter 11 filings. The lenders under the pre-petition facility have a
subordinate lien to the DIP lenders on substantially all of the assets of BIC
and those subsidiaries of BIC included in the Chapter 11 filings. The holders of
BIUSA Bond and Equity Notes, to the extent determined to be valid debt
obligations, have a first priority lien on substantially all of the assets of
CDC and the assets of its wholly-owned subsidiary, Arrow Factory Stores. The
lender under the Canadian Operating loan has a first priority lien on
substantially all of the assets of Cluett Canada.
The classification of the Company's long-term obligations and financing
arrangements, including accrued interest, are as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, 1996 DECEMBER 31, 1997
---------------------------------------------- -----------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
SUBJECT TO LONG- SUBJECT TO LONG-
CURRENT COMPROMISE TERM TOTAL CURRENT COMPROMISE TERM
----------- ----------- --------- --------- ----------- ----------- ---------
CDG operating facility (U.S. Prime +
1.5%).................................. $ -- $ -- $ 4,971 $ 4,971 $ 6,256 $ -- $ --
D.I.P. operating facility................ -- -- -- -- -- -- --
Pre-petition facility:
Revolving credit facility.............. -- 55,391 -- 55,391 -- 52,638 --
Term debt.............................. -- 74,252 -- 74,252 -- 70,459 --
Accrued interest....................... -- 16,358 -- 16,358 -- 22,532 --
----------- ----------- --------- --------- ----------- ----------- ---------
-- 146,001 -- 146,001 -- 145,629 --
Canada operating loan
(Canadian prime + 1%).................. 402 -- -- 402 2,192 -- --
Capital lease obligations................ 769 -- 3,587 4,356 724 -- 1,960
----------- ----------- --------- --------- ----------- ----------- ---------
$ 1,171 $ 146,001 $ 8,558 $ 155,730 $ 9,172 $ 145,629 $ 1,960
----------- ----------- --------- --------- ----------- ----------- ---------
----------- ----------- --------- --------- ----------- ----------- ---------
<CAPTION>
<S> <C>
TOTAL
---------
CDG operating facility (U.S. Prime +
1.5%).................................. $ 6,256
D.I.P. operating facility................ --
Pre-petition facility:
Revolving credit facility.............. 52,638
Term debt.............................. 70,459
Accrued interest....................... 22,532
---------
145,629
Canada operating loan
(Canadian prime + 1%).................. 2,192
Capital lease obligations................ 2,684
---------
$ 156,761
---------
---------
</TABLE>
The Company has two notes payable to its parent (BIUSA) aggregating
$27,647,000; since filing for relief under the provision of the Bankruptcy Code
in 1995, the notes have been non-interest bearing.
9. INCOME TAXES
The Company files a consolidated Federal income tax return with BIUSA. At
December 31, 1997, the Company had net domestic operating loss carryforwards of
approximately $180 million. The operating loss carryforwards are scheduled to
expire from the year 2005 to 2011. As defined under the Internal Revenue Code
and Regulations, utilization of net operating loss carryforwards are subject to
limitation after an
F-13
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
ownership change. Under these regulations, the Company believes that shareholder
transactions of BIUSA in prior years did not result in an ownership change, as
defined.
However, management is unable to determine if any "ownership change"
occurred during 1996 and 1997 which would result in a limitation of the net
operating loss carryforwards. In addition, the utilization of the net operating
loss carryforwards may be limited in the future depending upon the outcome of
events discussed in Note 1.
Undistributed earnings of foreign subsidiaries deemed permanently invested
for which no deferred income taxes have been provided were approximately
$10,942,000 at December 31, 1995, $6,814,000 at December 31, 1996, and
$5,091,000 at December 31, 1997.
Deferred income taxes reflect the net tax effects of temporary differences
between the carrying amount of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. The significant
components of the Company's deferred tax assets and liabilities are as follows:
<TABLE>
<CAPTION>
DECEMBER 31
----------------------
<S> <C> <C>
1996 1997
---------- ----------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Cancellation of debt income......................................... $ 10,200 $ 10,200
Depreciation........................................................ 2,618 2,067
Pension income...................................................... 3,992 4,332
Other............................................................... 1,187 1,187
---------- ----------
Total deferred tax liabilities........................................ 17,997 17,786
Deferred tax assets:
Net operating loss carryforwards.................................... 65,411 61,374
AMT Credits......................................................... -- 265
Restructuring reserves.............................................. 2,844 2,528
Note receivable reserves............................................ 1,931 1,931
Interest to parent.................................................. 1,056 1,056
Allowance for bad debts............................................. 1,147 1,154
Inventory overhead cost adjustment, net............................. 828 632
Other............................................................... 4,377 4,120
---------- ----------
Total deferred tax assets............................................. 77,594 73,060
Valuation allowance for deferred tax assets........................... (59,597) (55,274)
---------- ----------
Net deferred taxes.................................................... $ -- $ --
---------- ----------
---------- ----------
</TABLE>
F-14
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
9. INCOME TAXES (CONTINUED)
The provision for income taxes consisted of the following:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
-------------------------------
<S> <C> <C> <C>
1995 1996 1997
--------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal........................................................ $ -- $ -- $ 4,606
State and local................................................ 850 350 485
Foreign(1)..................................................... 705 896 575
Benefit of net operating loss carry forward...................... -- -- (4,340)
--------- --------- ---------
$ 1,555 $ 1,246 $ 1,326
--------- --------- ---------
--------- --------- ---------
</TABLE>
(1) Includes approximately $510, $691, and $500 relating to foreign withholding
taxes for 1995, 1996, and 1997, respectively.
A reconciliation of the statutory Federal income tax provision (benefit) to
the Company's provision for income taxes is as follows:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31
--------------------------------
<S> <C> <C> <C>
1995 1996 1997
---------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Computed at statutory rate.................................... $ (31,404) $ (8,529) $ 4,139
Effect on federal income tax expense of:
State and local income taxes, net of federal income tax
benefit................................................... 561 232 320
Differential attributed to foreign operations............... 3,315 1,820 1,172
Changes in valuation allowance for deferred tax assets...... 29,151 7,563 (4,340)
Other, net.................................................... (68) 160 35
---------- --------- ---------
$ 1,555 $ 1,246 $ 1,326
---------- --------- ---------
---------- --------- ---------
</TABLE>
10. EMPLOYEE BENEFIT PLANS
The Company has a number of qualified and nonqualified noncontributory
defined benefit pension plans covering essentially all employees of the Company
in the United States. The benefits are based on years of service and average
compensation for the highest five consecutive years of earnings preceding
retirement date (or earlier termination of employment), subject to certain
limitations. The Company's practice is to fund amounts which are required by
statute and applicable regulations and which are tax deductible. Assets of the
plans are investments in cash equivalents, publicly traded fixed income and
equity securities, and real estate. Assets are valued using a method which
recognizes the difference between actual and expected market values over a
period of five years.
F-15
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
10. EMPLOYEE BENEFIT PLANS (CONTINUED)
At December 31, 1996 and 1997, the funded status of the Company's qualified
defined benefit pension plan was as follows:
<TABLE>
<CAPTION>
DECEMBER 31
--------------------
<S> <C> <C>
1996 1997
--------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Accumulated benefit obligation:
Vested benefits......................................................... $ 64,294 $ 65,321
Nonvested benefits...................................................... 552 666
--------- ---------
Accumulated benefit obligation.......................................... 64,846 65,987
--------- ---------
Effect of projected salary levels....................................... 6,275 8,086
Projected benefit obligation............................................ 71,121 74,073
Plan assets at fair value............................................... 99,586 109,129
--------- ---------
Plan assets in excess of projected benefit obligation................... 28,465 35,056
Unrecognized net loss................................................... (2,902) (8,421)
Unrecognized prior service cost......................................... 2,628 3,592
--------- ---------
Pension asset included in combined balance sheets....................... $ 28,191 $ 30,227
--------- ---------
--------- ---------
</TABLE>
The Company's two nonqualified benefit plans had benefit obligations which
exceeded plan assets at December 31, 1996 and 1997. As of December 31, 1996 and
1997, these plans had net liabilities of $1,018,000 which relate primarily to
vested benefits. These liabilities are included in liabilities subject to
compromise at December 31, 1996 and 1997. Net pension expense for these plans
was not material in 1995, 1996, or 1997.
Net pension benefit of the Company's qualified defined benefit plan for the
years ended December 31, 1995, 1996, and 1997 include the following components:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
(IN THOUSANDS)
Service cost.............................................. $ 1,249 $ 1,449 $ 1,675
Interest cost............................................. 4,982 4,779 5,345
Actual return on plan assets.............................. (17,643) (12,661) (16,498)
Amortization of unrecognized reversion value discount..... (900) (1,230) (1,230)
Loss deferred for later recognition....................... 9,069 4,483 8,030
---------- ---------- ----------
(3,243) (3,180) (2,678)
Other benefit charges:
Early retirement program / special termination benefits... 3,028 809 642
Settlement benefits....................................... 82 -- --
---------- ---------- ----------
Net pension benefit....................................... $ (133) $ (2,371) $ (2,036)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The assumptions used in determining the funded status of the Company's
defined benefit pension plans for the years ended December 31, 1995, 1996, and
1997 were discount rates of 9.0%, 8.0%, and 8.0%,
F-16
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
10. EMPLOYEE BENEFIT PLANS (CONTINUED)
respectively, and an average rate of increase in compensation levels ranging
from 3.25% to 18.5% depending on the participant's age at the valuation date. In
addition, the expected long-term rate of return on plan assets was 9.5% for all
periods.
During 1990, in connection with the acquisition of certain businesses, the
Company adjusted the actuarial valuation of certain estimated pension assets to
reflect their net realizable value based upon a planned reversion to the
Company. In August 1991, the Company decided not to revert the assets. As a
result of this change, the excess pension assets are being recognized over the
Average Future Working Lifetime of the plan participants, estimated to be a
period of 14 years. Amortization of this amount was $900,000 in 1995, $1,230,000
in 1996, and $1,230,000 in 1997 and is included in pension benefit for each
respective year. The Company periodically performs an actuarial valuation of
these pension assets and adjusts the amount of the pension assets and the annual
amortization based on the results of the valuation.
During 1995, the Company's qualified defined benefit plan was amended to
provide an Enhanced Retirement Program ("ERP"). The total charge for 1995, 1996,
and 1997 related to this program was $3,028,000, $809,000 and $642,000,
respectively.
As of January 1, 1997, the benefit retirement income plan was converted into
a cash balance pension plan. Provisions of the plan in effect prior to January
1, 1997 continue to apply to participants who terminated, retired, or became
disabled prior to January 1, 1997 and not reemployed after December 31, 1996. As
of January 1, 1997, active participants' account balances were established equal
to the present value of the lump sum accrued benefit payable as of January 1,
1997 under the previous plan provisions. Benefits are calculated using a formula
based on a participant's years of service, age, and actual compensation.
The Company also has defined contribution pension plans covering certain
employees. Contributions and costs are either a percent of each covered
employee's salary or basic contribution. The Company funds contributions to
these plans as they come due. Payments charged to expenses for these plans
amounted to approximately $795,000, $655,000, and $0 in 1995, 1996, and 1997,
respectively.
In addition, the Company participated in mutiemployer pension plans that
provided defined benefits to employees covered by collective bargaining
agreements. Payments charged to expense for the multiemployer plans amounted to
approximately $212,000, $435,000, and $0 in 1995, 1996, and 1997, respectively.
Participation in the multiemployer pension plans terminated January 1, 1997.
F-17
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
11. SHAREHOLDER'S DEFICIT
The separate stockholder's deficit of each of BIC and CDC is as follows:
<TABLE>
<CAPTION>
BIC CDC COMBINED
---------- --------- ----------
<S> <C> <C> <C>
Balance at December 31, 1995:
Common Stock and Additional Paid In Capital.................................... $ 161,240 $ 15,001 $ 176,241
Accumulated Deficit............................................................ (202,168) (12,927) (215,095)
Foreign Currency Translation Adjustment........................................ (5,419) -- (5,419)
---------- --------- ----------
$ (46,347) $ (2,074) $ (44,273)
---------- --------- ----------
---------- --------- ----------
Balance at December 31, 1996:
Common Stock and Additional Paid In Capital.................................... $ 159,928 $ 15,001 $ 174,929
Accumulated Deficit............................................................ (221,810) (23,485) (245,295)
Foreign Currency Translation Adjustment........................................ (3,850) -- (3,850)
---------- --------- ----------
$ (65,732) $ (8,484) $ (74,216)
---------- --------- ----------
---------- --------- ----------
Balance at December 31, 1997:
Common Stock and Additional Paid In Capital.................................... $ 158,593 $ 15,001 $ 173,594
Accumulated Deficit............................................................ (204,570) (23,529) (228,099)
Foreign Currency Translation Adjustment........................................ (2,303) -- (2,303)
---------- --------- ----------
$ (48,280) $ (8,528) $ (56,808)
---------- --------- ----------
---------- --------- ----------
</TABLE>
12. COMMITMENTS AND CONTINGENCIES
The Company and certain of its subsidiaries are party to litigation in
connection with the normal conduct of their businesses. Management believes,
based in part on the opinion of counsel, that pending litigation in the
aggregate will not have a material effect on the Company's financial position.
The Company leases certain land, buildings and equipment under both capital
and noncancelable operating leases that expire in various years through 2013.
Certain of the operating leases contain rent escalation clauses and require the
Company to pay maintenance costs, property taxes, and insurance obligations on
the leased property.
F-18
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
12. COMMITMENTS AND CONTINGENCIES (CONTINUED)
Excluding lease contracts which have been rejected by the Company, future
minimum lease payments under noncancelable operating leases and capital leases,
together with the present value of the net minimum lease payments as of December
31, 1997 are as follows:
<TABLE>
<CAPTION>
CAPITAL OPERATING
LEASES LEASES
--------- -----------
<S> <C> <C>
(IN THOUSANDS)
Year payable:
1998....................................................................................... $ 959 $ 2,993
1999....................................................................................... 776 2,472
2000....................................................................................... 771 1,759
2001....................................................................................... 405 1,058
2002....................................................................................... 40 987
Later...................................................................................... 360 1,666
--------- -----------
Total minimum lease payments................................................................. 3,311 $ 10,935
-----------
-----------
Amount representing interest................................................................. (627)
---------
---------
Present value of net minimum lease payments.................................................. 2,684
Current portion.............................................................................. 724
---------
---------
Long-term portion............................................................................ $ 1,960
---------
---------
</TABLE>
Rent expense amounted to approximately $8,128,000 in 1995, $5,153,000 in
1996, and $3,861,000 in 1997.
The Company has approximately $19,075,000 of open letters of credit
outstanding at December 31, 1997 for the purchase of finished goods inventory
from foreign vendors. In addition, approximately $4,811,000 of stand-by letters
of credit were also outstanding.
13. SUBSIDIARY OPERATIONS
In 1996, the Company began the process of liquidating its investment in its
Mexican and Guatemalan subsidiaries. Accordingly, a translation adjustment of
approximately $3,100,000 previously recorded as a component of equity was
expensed and is included in other expense, net.
On June 17, 1997, the Company entered into an agreement with a private
individual to sell 100% of the stock of the Guatemalan subsidiary for $100,000.
The proceeds are currently being held in escrow pending determination of
distribution by the Court.
On September 30, 1997, the Company entered into an agreement with a private
individual to sell substantially all of the assets of the Company's Mexican
subsidiary for approximately $1,441,000. Substantially all of the proceeds were
used to reduce intercompany obligations of the Mexican subsidiary.
During 1996, Canadian management assessed the Company's operations in the
Canadian retail stores and concluded that the Company should close these stores
other than retaining three of the Company's Canadian outlet stores to dispose of
certain discounted inventory items. The resulting charge of $2,559,000 in 1996
for closure costs has been included in the financial statements in Facility
closing and reengineering costs.
F-19
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
13. SUBSIDIARY OPERATIONS (CONTINUED)
On August 23, 1995, the Company entered into an agreement with Polo Ralph
Lauren Enterprises, L.P. (the "Buyer") to sell substantially all of the assets
of the Company's Ralph Lauren Womenswear, Inc. subsidiary ("RLW") to an
affiliate of the Buyer for approximately $41,934,000. These assets were sold as
of October 15, 1995. In 1995, the Buyer paid approximately $30,967,000 into an
escrow account for the assets which was used to reduce the pre-petition debt.
Approximately $873,000 of the purchase price was used to offset obligations due
to affiliates of the Buyer at closing. The remaining sale proceeds were received
in 1996 and were used to reduce secured debt and fund certain liabilities of
RLW.
14. LICENSING AGREEMENTS
Certain of the Company's subsidiaries (Licensees) have licensing agreements
which give them the exclusive rights to use certain trademarks, logos and
related trade names in connection with the manufacture and sale of certain men's
and women's apparel in specified territories. License fees are based on
percentages of net sales, as defined, for the various products sold, but not
less than specified minimum amounts. The licensing agreements have various
renewal dates. Certain of the license agreements contain automatic renewals and
are noncancelable. The renewal terms range to five years and expire in various
years through 2002.
Future minimum license and technical assistance fees payable in the five
years succeeding December 31, 1997 are as follows (in thousands):
<TABLE>
<S> <C>
Year payable:
1998.............................................................. $ 3,228
1999.............................................................. 3,362
2000.............................................................. 2,980
2001.............................................................. 2,120
2002.............................................................. 360
</TABLE>
15. RELATED PARTY TRANSACTIONS
The Company has an 8.74% outstanding loan receivable from an officer (and
principal indirect stockholder) in the amount of approximately $4,456,000. The
accumulated accrued interest on the loan is $1,352,000 at December 31, 1995,
1996, and 1997. Both principal and accrued interests are due and payable to the
Company on June 30, 1998. The Company has recorded a reserve of approximately
$5,808,000 against the full unpaid interest and principal balances outstanding
at December 31, 1997.
16. RISKS, UNCERTAINTIES AND SIGNIFICANT CONCENTRATIONS
The Company manufactures and sources a portion of its products and raw
materials from foreign subsidiaries or vendors. The Company attempts to limit
the concentration with any one manufacturer or vendor. The Company believes it
has alternative manufacturing and raw material sources available to meet its
current and future production requirements in the event the Company is required
to change current manufacturers or vendors are unavailable to fulfill the
Company's needs.
The Company's principal customer base, the retail industry, has experienced
significant changes and difficulties over the past several years, including
consolidation of ownership, increased centralization of
F-20
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
16. RISKS, UNCERTAINTIES AND SIGNIFICANT CONCENTRATIONS (CONTINUED)
buying decisions and restructurings. The Company cannot predict what effect, if
any, continued changes within this industry will have on the Company's
operations.
17. FAIR MARKET VALUE
It was not practicable to estimate the fair market value of the Company's
pre-petition debt obligations as the Company is currently in Chapter 11
proceedings. As more fully described in Note 1, the ultimate plan of
reorganization could significantly impact the estimated fair value of these
obligations (see Note 20).
18. CONDENSED FINANCIAL INFORMATION FOR ENTITIES NOT IN CHAPTER 11
In 1996 and 1997, Cluett Designer Group, Cluett Peabody Canada, Inc., Arrow
Mexico and Arrow Guatemala are included in the Combined Financial Statements but
have not filed petitions for relief under Chapter 11 of the U.S. Bankruptcy
Code. Condensed combined financial statements of these entities are as follows
as of December 31, 1996 and 1997 and for each of the three years in the year
ended December 31, 1997:
<TABLE>
<CAPTION>
CONDENSED BALANCE
SHEET
DECEMBER 31
--------------------
<S> <C> <C>
1996 1997
--------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Current assets.......................................................... $ 32,258 $ 34,735
Total assets............................................................ 37,079 38,628
Current liabilities..................................................... (8,653) (16,461)
Total liabilities....................................................... (15,058) (17,202)
</TABLE>
<TABLE>
<CAPTION>
CONDENSED INCOME STATEMENT
YEAR ENDED DECEMBER 31
-------------------------------
<S> <C> <C> <C>
1995 1996 1997
--------- --------- ---------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales.................................................... $ 78,930 $ 69,288 $ 75,526
Gross profit................................................. 17,642 14,586 19,164
Net loss..................................................... 15,807 15,845 5,942
</TABLE>
19. SEGMENT DATA
The Company operates in a single business segment. Foreign sales, primarily
Canada, were approximately 16.2%, 18.8% and 20.8% in 1995, 1996 and 1997,
respectively. There were no customers for which sales exceeded 10% during the
three year period presented. All revenues and expenses are allocated to
F-21
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
19. SEGMENT DATA (CONTINUED)
geographical areas in determining net income. Assets are specifically identified
to the geographical area to which they provide benefit.
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
(IN THOUSANDS)
Net Sales:
United States.......................................... $ 433,909 $ 323,104 $ 320,412
Foreign (includes export sales)........................ 52,824 45,592 42,495
Intracompany transfers................................. (386) 139 --
Eliminations........................................... 386 (139) --
---------- ---------- ----------
Total.................................................. 486,733 368,696 362,907
---------- ---------- ----------
---------- ---------- ----------
Operating income (loss):
United States.......................................... $ (40,347) $ (5,861) $ 25,493
Foreign................................................ 3,752 3,277 6,363
---------- ---------- ----------
Total.................................................. $ (36,595) $ (2,584) $ 31,856
---------- ---------- ----------
---------- ---------- ----------
Identifiable Assets:
United States.......................................... $ 221,979 $ 186,726 $ 196,282
Foreign................................................ 30,931 24,368 23,735
---------- ---------- ----------
Total.................................................. $ 252,910 $ 211,094 $ 220,017
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
20. SUBSEQUENT EVENT
On March 31, 1998, the Company's and BIUSA's Third Amended Plan of
Reorganization (the "Plan") was confirmed by the Court. When consummated, the
Plan will complete BIUSA's (and its subsidiaries) bankruptcy proceeding which
began on July 17, 1995. In connection with the Plan and pursuant to a
subscription agreement dated as of March 30, 1998 (the "Subscription
Agreement"), Vestar Capital Partners III, L.P. or a designated affiliate
("Vestar"), Alvarez & Marsal, Inc. or a designated affiliate ("A&M"), a
turnaround management firm assisting the Company, and certain members of
existing management will make a $68 million equity investment (the "Equity
Investment") in BIUSA. Approximately $61.3 million of the Equity Investment will
be provided by Vestar in the form of a $24.8 million common equity investment in
BIUSA (the "Holdings Common Stock") and a $36.5 million investment in Class C
Junior Preferred Stock (the "Class C Junior Preferred Stock"). A&M and certain
members of management will provide the remaining Equity Investment in the form
of a $4.9 million and $1.8 million investment in BIUSA Common Stock,
respectively. The Subscription Agreement also provides that Vestar will purchase
any BIUSA Common Stock allocated to A&M or management which A&M or management
does not elect to purchase, resulting in a maximum investment in BIUSA Common
Stock by Vestar of $31.5 million (89.9% of the outstanding BIUSA Common Stock).
The balance of the BIUSA Common Stock will be held by existing shareholders of
BIUSA.
The Company and BIUSA used the Equity Investment in conjunction with (i)
borrowings under a new $160.0 million senior credit facility, (ii) the proceeds
from the Company's issuance of Senior Subordinated Notes Due 2008 and Senior
Exchangeable Preferred Stock Due 2010 collectively the "Offerings," (iii) the
issuance of $13.0 million in new senior subordinated notes which will rank on
parity with the Notes to existing holders of BIUSA Common Stock and (iv) the
issuance of approximately $2.4 million in BIUSA
F-22
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
20. SUBSEQUENT EVENT (CONTINUED)
Class A Preferred Stock to a plan to be established for the benefit of the
certain employees of the Company to effect a recapitalization (the
"Recapitalization") under which substantially all of BIUSA and the Company's
existing pre-petition obligations and all borrowing under the Company's
debtor-in-possession facility, were paid in full. The consummation of the
Recapitalization was a condition to the consummation of the Offerings.
The following table sets forth the uses of funds for BIUSA and the Company
after giving effect to the Recapitalization and the application of the proceeds
therefrom:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
-----------------------------------
<S> <C> <C> <C>
THE COMPANY BIUSA TOTAL
------------- --------- ---------
USES OF FUNDS:
Payment of Allowed Claims..................................................... $ 169.3 $ 122.5 $ 291.8
Payment of Estimated Post-Petition Interest................................... 11.1 24.3 35.4
Payment of Estimated Bankruptcy Administrative Fees........................... 1.5 -- 1.5
Refinancing of Existing Debt.................................................. 7.7 -- 7.7
Estimated Fees and Expenses................................................... 12.0 5.0 17.0
------ --------- ---------
$ 201.6 $ 151.8 $ 353.4
------ --------- ---------
------ --------- ---------
</TABLE>
21. GUARANTOR SUBSIDIARIES
The Company's payment obligations under the Senior Subordinated Notes (the
"Notes") will be fully and unconditionally guaranteed on a joint and several
basis by its current domestic subsidiaries, principally: Cluett Peabody & Co.,
Inc., Great American Knitting Mills, Inc., Cluett Designer Group Inc., Consumer
Direct Corporation and Arrow Factory Stores Inc. (collectively the "Guarantor
Subsidiaries"). Each of the Guarantor Subsidiaries is or will be a direct or
indirect wholly-owned subsidiary of the Company. The Company's payment
obligations under the Notes are not guaranteed by the remaining subsidiaries:
Bidermann Womenswear Corp. (formerly Ralph Lauren Womenswear Inc.), Cluett,
Peabody Canada Inc., Arrow de Mexico S.A. de C.V., and Arrow Inter-America &
Co., Ltd. (collectively the "Non-Guarantor Subsidiaries"). The obligations of
each Guarantor Subsidiary under its Guarantee are subordinated to such
subsidiary's obligations under its guarantee of the new senior credit facility.
Presented below is condensed combining financial information for Bidermann
Industries Corp. ("Parent Company"), the Guarantor Subsidiaries and the
Non-Guarantor Subsidiaries. In the Company's opinion, separate financial
statements and other disclosures concerning each of the Guarantor Subsidiaries
would not provide additional information that is material to investors.
Therefore, the Guarantor Subsidiaries are combined in the presentation below.
Investments in subsidiaries are accounted for by the Parent Company on the
equity method of accounting. Earnings of subsidiaries are, therefore, reflected
in the Parent Company's investments in and advances to/from subsidiaries account
and earnings (losses). The elimination entries eliminate investments in
subsidiaries, the related stockholders' deficit and other intercompany balances
and transactions.
F-23
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
21. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEET
DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS COMBINED
---------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents..................... $ -- $ 5,578 $ 206 $ -- $ 5,784
Accounts receivable, net...................... -- 48,518 3,971 -- 52,489
Inventories................................... -- 59,765 12,063 -- 71,828
Prepaid expenses and other current assets..... -- 3,628 815 -- 4,443
---------- ----------- ------- ------------ ----------
Total current assets.......................... -- 117,489 17,055 -- 134,544
Investment in subsidiaries.................... (66,692) -- -- 66,692 --
Intercompany receivable (payable)............. 15,000 (15,000) -- -- --
Property, plant and equipment, net............ -- 42,310 4,630 -- 46,940
Pension asset................................. -- 28,191 -- -- 28,191
Other noncurrent assets....................... -- 1,374 45 -- 1,419
---------- ----------- ------- ------------ ----------
Total assets.................................. $ (51,692) $ 174,364 $ 21,730 $ 66,692 $ 211,094
---------- ----------- ------- ------------ ----------
---------- ----------- ------- ------------ ----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses......... $ -- $ 39,723 $ 5,273 $ -- $ 44,996
Short-term debt and current portion of
long-term debt.............................. -- 769 402 -- 1,171
Income taxes payable.......................... -- 1,281 355 -- 1,636
---------- ----------- ------- ------------ ----------
Total current liabilities..................... -- 41,773 6,030 -- 47,803
Due to BIUSA.................................. -- 27,612 35 -- 27,647
Long-term debt and capital lease
obligations................................. -- 7,328 1,230 -- 8,558
Other noncurrent liabilities.................. -- 141 792 -- 933
Liabilities subject to compromise............. -- 181,695 -- -- 181,695
Preferred stock, $1 par value: authorized
50,000 shares, issued and outstanding 15,000
shares...................................... 18,674 -- -- -- 18,674
Stockholders' deficit......................... (70,366) (84,185) 13,643 66,692 (74,216)
---------- ----------- ------- ------------ ----------
Total liabilities and stockholders' deficit... $ (51,692) $ 174,364 $ 21,730 $ 66,692 $ 211,094
---------- ----------- ------- ------------ ----------
---------- ----------- ------- ------------ ----------
</TABLE>
F-24
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
21. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEET
DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS COMBINED
---------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents................... $ -- $ 9,551 $ 468 $ -- $ 10,019
Accounts receivable, net.................... -- 45,494 2,948 -- 48,442
Inventories................................. -- 63,806 14,430 -- 78,236
Prepaid expenses and other current assets... -- 3,359 875 -- 4,234
---------- ----------- -------------- ------------ ----------
Total current assets.......................... -- 122,210 18,721 -- 140,931
Investment in subsidiaries.................... (49,496) -- -- 49,496 --
Intercompany receivable (payable) 15,000 (15,000) -- -- --
Property, plant and equipment, net............ -- 44,035 3,663 -- 47,698
Pension asset................................. -- 30,227 -- -- 30,227
Other noncurrent assets....................... -- 1,149 12 -- 1,161
---------- ----------- -------------- ------------ ----------
Total assets.................................. $ (34,496) $ 182,621 $ 22,396 $ 49,496 $ 220,017
---------- ----------- -------------- ------------ ----------
---------- ----------- -------------- ------------ ----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses....... $ -- $ 41,930 $ 4,556 $ -- $ 46,486
Short-term debt and current portion of
long-term debt............................ -- 6,980 2,192 -- 9,172
Income taxes payable........................ -- 1,799 354 -- 2,153
---------- ----------- -------------- ------------ ----------
Total current liabilities..................... -- 50,709 7,102 -- 57,811
Due to BIUSA.................................. -- 27,613 -- -- 27,613
Long-term debt and capital lease
obligations................................. -- 1,619 341 -- 1,960
Other noncurrent liabilities.................. -- 100 400 -- 500
Liabilities subject to compromise............. -- 168,932 -- -- 168,932
Preferred stock, $1 par value: authorized
50,000 shares, issued and outstanding 15,000
shares...................................... 20,009 -- -- -- 20,009
Stockholders' deficit......................... (54,505) (66,352) 14,553 49,496 (56,808)
---------- ----------- -------------- ------------ ----------
Total liabilities and stockholders' deficit... $ (34,496) $ 182,621 $ 22,396 $ 49,496 $ 220,017
---------- ----------- -------------- ------------ ----------
---------- ----------- -------------- ------------ ----------
</TABLE>
F-25
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
21. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS COMBINED
---------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Net sales..................................... $ -- $ 444,731 $ 42,002 $ -- $ 486,733
Cost of goods sold............................ -- 337,713 32,104 -- 369,817
---------- ----------- -------------- ------------ ----------
Gross profit.................................. -- 107,018 9,898 -- 116,916
Selling, general and administrative
expenses.................................... -- 126,066 11,837 -- 137,903
Facility closing and reengineering costs...... -- 18,808 3,673 -- 22,481
---------- ----------- -------------- ------------ ----------
144,874 15,510 -- 160,384
Operating loss................................ -- (37,856) (5,612) -- (43,468)
Loss on investments in subsidiaries........... (89,147) -- -- 89,147 --
Interest expense, net (contractural interest
expense $28,936)............................ -- 19,563 3,158 -- 22,721
Other expense, net............................ -- -- 532 -- 532
---------- ----------- -------------- ------------ ----------
Loss before reorganization costs and income
taxes....................................... (89,147) (57,419) (9,302) 89,147 (66,721)
Bankruptcy reorganization costs............... -- 20,871 -- -- 20,871
---------- ----------- -------------- ------------ ----------
Loss before provision for income taxes........ (89,147) (78,290) (9,302) 89,147 (87,592)
Provision for income taxes.................... -- 1,449 106 -- 1,555
---------- ----------- -------------- ------------ ----------
Net loss...................................... $ (89,147) $ (79,739) $ (9,408) $ 89,147 $ (89,147)
---------- ----------- -------------- ------------ ----------
---------- ----------- -------------- ------------ ----------
</TABLE>
F-26
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
21. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS COMBINED
---------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Net sales..................................... $ -- $ 331,720 $ 36,976 $ -- $ 368,696
Cost of goods sold............................ -- 246,081 27,719 -- 273,800
---------- ----------- -------------- ------------ ----------
Gross profit.................................. -- 85,639 9,257 -- 94,896
Selling, general and administrative
expenses.................................... -- 76,804 9,073 -- 85,877
Facility closing and reengineering costs...... -- 8,517 3,086 -- 11,603
---------- ----------- -------------- ------------ ----------
-- 85,321 12,159 -- 97,480
Operating income (loss)....................... -- 318 (2,902) -- (2,584)
Loss on investments in subsidiaries........... (30,200) -- -- 30,200 --
Interest expense, net......................... -- 13,686 3,242 -- 16,928
Other expense, net............................ -- (747) 4,061 -- 3,314
---------- ----------- -------------- ------------ ----------
Loss before reorganization costs and income
taxes....................................... (30,200) (12,621) (10,205) 30,200 (22,826)
Bankruptcy reorganization costs............... -- 6,128 -- -- 6,128
---------- ----------- -------------- ------------ ----------
Loss before provision for income taxes........ (30,200) (18,749) (10,205) 30,200 (28,954)
Provision for income taxes.................... -- 1,042 204 -- 1,246
---------- ----------- -------------- ------------ ----------
Net loss...................................... $ (30,200) $ (19,791) $ (10,409) $ 30,200 $ (30,200)
---------- ----------- -------------- ------------ ----------
---------- ----------- -------------- ------------ ----------
</TABLE>
F-27
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
21. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS COMBINED
----------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Net sales...................................... $ -- $ 327,335 $ 35,572 $ -- $ 362,907
Cost of goods sold............................. -- 227,281 26,511 -- 253,792
----------- ----------- ------- ------------ ----------
Gross profit................................... -- 100,054 9,061 -- 109,115
Selling, general and administrative expenses... -- 66,817 7,973 -- 74,790
Facility closing and reengineering costs....... -- 3,911 (1,442) -- 2,469
----------- ----------- ------- ------------ ----------
-- 70,728 6,531 -- 77,259
Operating income............................... -- 29,326 2,530 -- 31,856
Income on investments in subsidiaries.......... 17,196 (17,196)
Interest expense, net.......................... -- 12,275 2,958 -- 15,233
Other expense, net............................. -- 852 1,132 -- 1,984
----------- ----------- ------- ------------ ----------
Income (loss) before reorganization costs
(credits) and income taxes................... 17,196 16,199 (1,560) (17,196) 14,639
Bankruptcy reorganization credits.............. -- (3,883) -- -- (3,883)
----------- ----------- ------- ------------ ----------
Income (loss) before provision for income
taxes........................................ 17,196 20,082 (1,560) (17,196) 18,522
Provision for income taxes..................... -- 1,326 -- 1,326
----------- ----------- ------- ------------ ----------
Net income (loss).............................. $ 17,196 $ 18,756 $ (1,560) $ (17,196) $ 17,196
----------- ----------- ------- ------------ ----------
----------- ----------- ------- ------------ ----------
</TABLE>
F-28
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
21. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS
YEAR-END DECEMBER 31, 1995
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS COMBINED
---------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss $ (89,147) $ (79,739) $ (9,408) $ 89,147 $ (89,147)
Adjustment to reconcile net loss to net cash
and cash equivalents provided by (used in)
operating activities:
Loss on investments in subsidiaries 89,147 -- -- (89,147) --
Write-down of deferred financing activities -- 5,237 -- -- 5,237
Write-down of property, plant and equipment -- 9,425 -- -- 9,425
Depreciation 11,028 1,273 -- 12,301
Amortization -- 980 980
Adjustments of liabilities subject to
compromise -- 9,793 -- -- 9,793
Early retirement window benefit 2,877 2,877
Changes in operating assets and liabilities -- 45,403 5,276 50,679
---------- ----------- ------- ------------ ----------
Net cash and cash equivalents provided by
(used in) operating activities -- 5,004 (2,859) 2,145
INVESTING ACTIVITIES
Purchase of fixed assets -- (5,562) (1,214) -- (6,776)
Proceeds on disposal of fixed assets -- 1,407 -- -- 1,407
Other, net -- (1,069) -- -- (1,069)
---------- ----------- ------- ------------ ----------
Net cash and cash equivalents used in
investing activities -- (5,224) (1,214) -- (6,438)
FINANCING ACTIVITIES
Proceeds from DIP credit facility -- 11,000 -- -- 11,000
Principal payments on DIP credit facility -- (9,000) -- -- (9,000)
Proceeds from issuance of long term debt -- 893 1,686 -- 2,579
Principal payments on long term debt -- (663) -- -- (663)
---------- ----------- ------- ------------ ----------
Net cash and cash equivalents provided by
financing activities -- 2,230 1,686 -- 3,916
---------- ----------- ------- ------------ ----------
Net change in cash and cash equivalents -- 2,010 (2,387) -- (377)
Cash and cash equivalents at beginning of year -- 8,330 2,731 -- 11,061
---------- ----------- ------- ------------ ----------
Cash and cash equivalents at end of year $ -- $ 10,340 $ 344 $ -- $ 10,684
---------- ----------- ------- ------------ ----------
---------- ----------- ------- ------------ ----------
</TABLE>
F-29
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
21. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS
YEAR-END DECEMBER 31, 1996
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS COMBINED
---------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net loss...................................... $ (30,200) $ (19,791) $ (10,409) $ 30,200 $ (30,200)
Adjustment to reconcile net loss to net cash
and cash equivalents provided by (used in)
operating activities:
Loss on investments in subsidiaries....... 30,200 -- -- (30,200) --
Write-down of property, plant and
equipment............................... -- 742 -- -- 742
Depreciation.............................. -- 10,267 449 -- 10,716
Amortization.............................. -- 219 -- -- 219
Changes in operating assets and liabilities... -- 22,977 9,096 -- 32,073
---------- ----------- -------------- ------------ ----------
Net cash and cash equivalents provided by
(used in) operating activities.............. -- 14,414 (864) -- 13,550
INVESTING ACTIVITIES
Purchase of fixed assets...................... -- (7,965) (284) -- (8,249)
Proceeds on disposal of fixed assets.......... -- 927 639 -- 1,566
Other, net.................................... -- 1,564 -- -- 1,564
---------- ----------- -------------- ------------ ----------
Net cash and cash equivalents provided by
(used in) investing activities.............. -- (5,474) 355 -- (5,119)
FINANCING ACTIVITIES
Proceeds from DIP credit facility............. -- 53,300 -- -- 53,300
Principal payments on DIP credit facility..... -- (55,300) -- -- (55,300)
Proceeds from issuance of long term debt...... -- 5,800 (829) -- 4,971
Principal payments on long term debt.......... -- (17,502) 1,200 -- (16,302)
---------- ----------- -------------- ------------ ----------
Net cash and cash equivalents provided by
(used in) financing activities.............. -- (13,702) 371 -- (13,331)
---------- ----------- -------------- ------------ ----------
Net change in cash and cash equivalents....... -- (4,762) (138) -- (4,900)
Cash and cash equivalents at beginning of
year........................................ -- 10,340 344 -- 10,684
---------- ----------- -------------- ------------ ----------
Cash and cash equivalents at end of year...... $ -- $ 5,578 $ 206 $ -- $ 5,784
---------- ----------- -------------- ------------ ----------
---------- ----------- -------------- ------------ ----------
</TABLE>
F-30
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO COMBINED FINANCIAL STATEMENTS (CONTINUED)
21. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS
YEAR-END DECEMBER 31, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS COMBINED
----------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).............................. $ 17,196 $ 18,756 $ (1,560) $ (17,196) $ 17,196
Adjustment to reconcile net income (loss) to
net cash and cash equivalents provided by
(used in) operating activities:
(Income) loss on investments in
subsidiaries............................... (17,196) -- -- 17,196 --
Depreciation................................. -- 7,824 251 -- 8,075
Amortization................................. -- 30 -- -- 30
Adjustments of liabilities subject to
compromise................................. -- (10,000) -- -- (10,000)
Changes in operating assets and liabilities.... -- (3,080) 660 -- (2,420)
----------- ----------- ------- ------------ ----------
Net cash and cash equivalents provided by (used
in) operating activities...................... -- 13,530 (649) -- 12,881
INVESTING ACTIVITIES
Purchase of fixed assets....................... -- (10,851) (128) -- (10,979)
Proceeds on disposal of fixed assets........... -- 1,648 138 -- 1,786
Other, net..................................... -- 1,907 -- -- 1,907
----------- ----------- ------- ------------ ----------
Net cash and cash equivalents provided by (used
in) investing activities...................... -- (7,296) 10 -- (7,286)
FINANCING ACTIVITIES
Proceeds from DIP credit facility.............. -- 16,398 -- -- 16,398
Principal payments on DIP credit facility...... -- (16,398) -- -- (16,398)
Proceeds from issuance of long term debt....... -- 456 1,790 -- 2,246
Principal payments on long term debt........... -- (2,717) (889) -- (3,606)
----------- ----------- ------- ------------ ----------
Net cash and cash equivalents provided by (used
in) financing activities...................... -- (2,261) 901 -- (1,360)
----------- ----------- ------- ------------ ----------
Net change in cash and cash equivalents........ -- 3,973 262 -- 4,235
Cash and cash equivalents at beginning of
year.......................................... -- 5,578 206 -- 5,784
----------- ----------- ------- ------------ ----------
Cash and cash equivalents at end of year....... $ -- $ 9,551 $ 468 $ -- $ 10,019
----------- ----------- ------- ------------ ----------
----------- ----------- ------- ------------ ----------
</TABLE>
F-31
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
CONDENSED COMBINED BALANCE SHEETS (UNAUDITED)
<TABLE>
<CAPTION>
MARCH 29, MARCH 28,
1997 1998
----------- -----------
<S> <C> <C>
(IN THOUSANDS)
ASSETS
Current assets:
Cash and cash equivalents............................................................. $ 7,706 $ 10,210
Accounts receivable, net.............................................................. 53,621 52,711
Inventories........................................................................... 71,586 77,650
Prepaid expenses and other current assets............................................. 3,795 3,078
----------- -----------
Total current assets.................................................................... 136,708 143,649
Property, plant and equipment, net...................................................... 48,844 47,776
Pension asset........................................................................... 28,691 30,726
Other noncurrent assets................................................................. 1,158 1,157
----------- -----------
Total assets............................................................................ $ 215,401 $ 223,308
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses................................................. $ 46,947 $ 42,766
Short-term debt and current portion of long-term debt................................. 6,206 13,908
Income taxes payable.................................................................. 1,109 1,702
Total current liabilities............................................................... 54,262 58,376
----------- -----------
Due to parent........................................................................... 27,943 27,187
Long-term debt and capital lease obligations............................................ 7,896 1,735
Other noncurrent liabilities............................................................ 1,231 500
Liabilities subject to compromise....................................................... 181,502 169,251
Preferred stock, $1 par value: authorized 50,000 shares, issued and outstanding 15,000
shares................................................................................ 19,335 22,086
Stockholders' deficit:
Common stock, $1 par value: authorized, issued and outstanding 2,000 shares (1,000
BIC, 1,000 CDC)..................................................................... 2 2
Additional paid-in capital............................................................ 174,266 171,515
Accumulated deficit................................................................... (245,213) (225,759)
Equity adjustment from foreign currency translation................................... (5,823) (1,585)
----------- -----------
Total stockholders' deficit............................................................. (76,768) (55,827)
----------- -----------
Total liabilities and stockholders' deficit............................................. $ 215,401 $ 223,308
----------- -----------
----------- -----------
</TABLE>
See accompanying notes.
F-32
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
CONDENSED COMBINED STATEMENTS OF OPERATIONS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
------------------------------
<S> <C> <C>
MARCH 29, 1997 MARCH 28, 1998
-------------- --------------
<CAPTION>
(IN THOUSANDS)
<S> <C> <C>
Net sales........................................................................ $ 87,466 $ 92,355
Cost of goods sold............................................................... 62,256 63,906
------- -------
Gross profit..................................................................... 25,210 28,449
Selling, general and administrative expenses..................................... 18,746 19,540
Facility closing and reengineering costs......................................... 202 940
------- -------
18,948 20,480
Operating income................................................................. 6,262 7,969
Interest expense, net............................................................ 3,587 3,811
Other expense, net............................................................... 526 --
------- -------
Income before reorganization costs and income taxes.............................. 2,149 4,158
Bankruptcy reorganization costs.................................................. 1,606 1,535
------- -------
Income before provision for income taxes......................................... 543 2,623
Provision for income taxes....................................................... 203 282
------- -------
Net income....................................................................... $ 340 $ 2,341
------- -------
------- -------
</TABLE>
See accompanying notes.
F-33
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
CONDENSED COMBINED STATEMENTS OF CASH FLOWS (UNAUDITED)
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------
MARCH 29, MARCH 28,
1997 1998
------------- -------------
(IN THOUSANDS)
<S> <C> <C>
OPERATING ACTIVITIES
Net income....................................................... $ 340 $ 2,341
Adjustment to reconcile net income to net cash and cash
equivalents provided by (used in) operating activities:
Depreciation................................................... 1,957 2,065
Amortization................................................... 82 41
------------- -------------
2,379 4,447
Changes in operating assets and liabilities:
Accounts receivable............................................ (1,132) (4,269)
Inventories.................................................... 242 586
Prepaid expenses and other current assets...................... 648 1,156
Pension and other noncurrent assets............................ (321) (495)
Accounts payable and accrued expenses.......................... 1,438 (3,401)
Income taxes payable........................................... (407) (451)
Other liabilities.............................................. 536 (427)
------------- -------------
Net cash and cash equivalents provided by (used in) operating
activities..................................................... 3,383 (2,854)
INVESTING ACTIVITIES
Purchase of fixed assets......................................... (2,072) (2,649)
Proceeds on disposal of fixed assets............................. -- 465
Other, net....................................................... (3,762) 718
------------- -------------
Net cash and cash equivalents used in investing activities....... (5,834) (1,466)
FINANCING ACTIVITIES
Proceeds on revolving credit facility............................ 3,931 11,899
Principal payments on revolving credit facility.................. -- (7,100)
Proceeds from DIP credit facility................................ 2,500 --
Principal payments on DIP credit facility........................ (1,400) --
Proceeds from issuance of long term debt......................... 8,392 --
Principal payments on long term debt............................. (9,050) (288)
------------- -------------
Net cash and cash equivalents provided by financing activities... 4,373 4,511
------------- -------------
Net change in cash and cash equivalents.......................... 1,922 191
Cash and cash equivalents at beginning of year................... 5,784 10,019
------------- -------------
Cash and cash equivalents at end of year......................... $ 7,706 $ 10,210
------------- -------------
------------- -------------
</TABLE>
See accompanying notes.
F-34
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED)
1. BASIS OF PRESENTATION
The accompanying unaudited combined financial statements of Bidermann
Industries Corp. and Affiliates have been prepared in accordance with generally
accepted accounting principles for interim financial information and with the
instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do
not include all of the information and footnotes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of normal recurring accruals) considered
necessary for a fair presentation have been included. Operating results for the
three month period ending March 28, 1998, are not necessarily indicative of the
results that may be expected for the year ending December 31, 1998. For further
information, refer to the annual financial statements and footnotes thereto of
Bidermann Industries Corp. and Affiliates included herein.
2. SUBSEQUENT EVENT
On March 31, 1998, the Company's and BIUSA's Third Amended Plan of
Reorganization (the "Plan") was confirmed by the Court. When consummated, the
Plan will complete BIUSA's (and its subsidiaries) bankruptcy proceeding which
began on July 17, 1995. In connection with the Plan and pursuant to a
subscription agreement dated as of March 30, 1998 (the "Subscription
Agreement"), Vestar Capital Partners III, L.P. or a designated affiliate
("Vestar"), Alvarez & Marsal, Inc. or a designated affiliate ("A&M"), a
turnaround management firm assisting the Company, and certain members of
existing management will make a $68 million equity investment (the "Equity
Investment") in BIUSA. Approximately $61.3 million of the Equity Investment will
be provided by Vestar in the form of a $24.8 million common equity investment in
BIUSA (the "Holdings Common Stock") and a $36.5 million investment in Class C
Junior Preferred Stock (the "Class C Junior Preferred Stock"). A&M and certain
members of management will provide the remaining Equity Investment in the form
of a $4.9 million and $1.8 million investment in BIUSA Common Stock,
respectively. The Subscription Agreement also provides that Vestar will purchase
any BIUSA Common Stock allocated to management which A&M or management does not
elect to purchase, resulting in a maximum investment in BIUSA Common Stock by
Vestar of $31.5 million (89.9% of the outstanding BIUSA Common Stock). The
balance of the BIUSA Common Stock will be held by existing shareholders of
BIUSA.
The Company and BIUSA will use the Equity Investment in conjunction with (i)
borrowings under a new $160.0 million senior credit facility, (ii) the proceeds
from the Company's issuance of Senior Subordinated Notes Due 2008 and Senior
Exchangeable Preferred Stock Due 2010, collectively the "Offerings," (iii) the
issuance of $13.0 million in new senior subordinated notes which will rank on
parity with the Notes to existing holders of BIUSA Common Stock and (iv) the
issuance of approximately $2.4 million in BIUSA Class A Preferred Stock to a
plan to be established for the benefit of the certain employees of the Company
to effect a recapitalization (the "Recapitalization") under which substantially
all of BIUSA and the Company's existing pre-petition obligations and all
borrowing under the Company's debtor-in-possession facility, will be paid in
full. The consummation of the Recapitalization is a condition to the
consummation of the Offerings.
F-35
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
2. SUBSEQUENT EVENT (CONTINUED)
The following table sets forth the uses of funds for BIUSA and the Company
after giving effect to the Recapitalization and the application of the proceeds
therefrom:
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
-----------------------------------
THE COMPANY BIUSA TOTAL
------------- --------- ---------
<S> <C> <C> <C>
USES OF FUNDS:
Payment of Allowed Claims..................................................... $ 169.3 $ 122.5 $ 291.8
Payment of Estimated Post-Petition Interest................................... 11.1 24.3 35.4
Payment of Estimated Bankruptcy Administrative Fees........................... 1.5 1.5
Refinancing of Existing Debt.................................................. 7.7 -- 7.7
Estimated Fees and Expenses................................................... 12.0 5.0 17.0
------ --------- ---------
$ 201.6 $ 151.8 $ 353.4
------ --------- ---------
------ --------- ---------
</TABLE>
3. GUARANTOR SUBSIDIARIES
The Company's payment obligations under the Senior Subordinated Notes (the
"Notes") will be unconditionally guaranteed on a joint and several basis by its
current domestic subsidiaries, principally: Cluett Peabody & Co., Inc., Great
American Knitting Mills, Inc., Cluett Designer Group Inc., Consumer Direct
Corporation and Arrow Factory Stores Inc. (collectively the "Guarantor
Subsidiaries"). Each of the Guarantor Subsidiaries is or will be a direct or
indirect wholly-owned subsidiary of the Company. The Company's payment
obligations under the Notes are not guaranteed by the remaining subsidiaries:
Bidermann Womenswear Corp. (formerly Ralph Lauren Womenswear Inc.), Cluett,
Peabody Canada Inc., Arrow de Mexico S.A. de C.V., and Arrow Inter-America &
Co., Ltd. (collectively the "Non-Guarantor Subsidiaries"). The obligations of
each Guarantor Subsidiary under its Guarantee are subordinated to such
subsidiary's obligations under its guarantee of the new senior credit facility.
Presented below is condensed consolidating financial information for
Bidermann Industries Corp. ("Parent Company"), the Guarantor Subsidiaries and
the Non-Guarantor Subsidiaries. In the Company's opinion, separate financial
statements and other disclosures concerning each of the Guarantor Subsidiaries
would not provide additional information that is material to investors.
Therefore, the Guarantor Subsidiaries are combined in the presentation below.
Investments in subsidiaries are accounted for by the Parent Company on the
equity method of accounting. Earnings of subsidiaries are, therefore, reflected
in the Parent Company's investments in and advances to/from subsidiaries account
and earnings. The elimination entries eliminate investments in subsidiaries and
intercompany balances and transactions.
F-36
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENT (UNAUDITED) (CONTINUED)
3. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEET
MARCH 29, 1997
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS COMBINED
---------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ -- $ 7,458 $ 248 $ $ 7,706
Accounts receivable, net -- 45,004 8,617 -- 53,621
Inventories -- 59,282 12,304 -- 71,586
Prepaid expenses and other current assets -- 2,835 960 -- 3,795
---------- ----------- ------- ------------ ----------
Total current assets -- 114,579 22,129 -- 136,708
Investment in subsidiaries (66,610) -- -- 66,610 --
Intercompany receivables (payable) 15,000 (15,000) -- -- --
Property, plant and equipment, net -- 43,596 5,248 48,844
Pension asset -- 28,691 -- -- 28,691
Other noncurrent assets -- 1,128 30 -- 1,158
---------- ----------- ------- ------------ ----------
Total assets $ (51,610) $ 172,994 $ 27,407 $ 66,610 $ 215,401
---------- ----------- ------- ------------ ----------
---------- ----------- ------- ------------ ----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ -- $ 41,869 $ 5,078 $ -- $ 46,947
Short-term debt and current portion of
long-term debt -- 1,906 4,300 -- 6,206
Income taxes payable -- 1,041 68 -- 1,109
---------- ----------- ------- ------------ ----------
Total current liabilities -- 44,816 9,446 -- 54,262
Due to parent -- 27,943 -- -- 27,943
Long-term debt and capital lease obligations -- 7,573 323 -- 7,896
Other noncurrent liabilities -- 791 440 -- 1,231
Liabilities subject to compromise -- 181,502 -- -- 181,502
Preferred stock, $1 par value: authorized
50,000 shares, issued and outstanding 15,000
shares 19,335 -- -- -- 19,335
Stockholders' deficit (70,945) (89,631) 17,198 66,610 (76,768)
---------- ----------- ------- ------------ ----------
Total liabilities stockholders' deficit $ (51,610) $ 172,994 $ 27,407 $ 66,610 $ 215,401
---------- ----------- ------- ------------ ----------
---------- ----------- ------- ------------ ----------
</TABLE>
F-37
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENT (UNAUDITED) (CONTINUED)
3. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING BALANCE SHEET
MARCH 28, 1998
(IN THOUSANDS)
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS COMBINED
---------- ----------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
ASSETS
Current assets:
Cash and cash equivalents $ -- $ 9,867 $ 343 $ -- $ 10,210
Accounts receivable, net -- 46,438 6,273 -- 52,711
Inventories -- 63,149 14,501 -- 77,650
Prepaid expenses and other current assets -- 2,912 166 -- 3,078
---------- ----------- -------------- ------------ ----------
Total current assets -- 122,366 21,283 -- 143,649
Investment in subsidiaires (47,156) -- -- 47,156 --
Intercompany receivable (payable) 15,000 (15,000) -- -- --
Property, plant and equipment, net -- 44,315 3,461 -- 47,776
Pension asset -- 30,726 -- -- 30,726
Other noncurrent assets -- 1,150 7 -- 1,157
---------- ----------- -------------- ------------ ----------
Total assets $ (32,156) $ 183,557 $ 24,751 $ 47,156 $ 223,308
---------- ----------- -------------- ------------ ----------
---------- ----------- -------------- ------------ ----------
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ -- $ 39,742 $ 3,024 $ -- $ 42,766
Short-term debt and current portion of
long-term debt -- 8,404 5,504 -- 13,908
Income taxes payable -- 1,446 256 -- 1,702
---------- ----------- -------------- ------------ ----------
Total current liabilities -- 49,592 8,784 -- 58,376
Due to parent -- 27,187 -- -- 27,187
Long-term debt and capital lease obligations -- 1,473 262 -- 1,735
Other noncurrent liabilities -- 100 400 -- 500
Liabilities subject to compromise -- 169,251 -- -- 169,251
Preferred stock, $1 par value: authorized
50,000 shares, issued and outstanding 15,000
shares 22,086 -- -- -- 22,086
Stockholders deficit (54,242) (64,046) 15,305 47,156 (55,827)
---------- ----------- -------------- ------------ ----------
Total liabilities stockholders deficit $ (32,156) $ 183,557 $ 24,751 $ 47,156 $ 223,308
---------- ----------- -------------- ------------ ----------
---------- ----------- -------------- ------------ ----------
</TABLE>
See accompanying notes.
F-38
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 29, 1997
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS COMBINED
----------- ----------- -------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
Net sales...................................... $ -- $ 77,140 $ 10,326 $ -- $ 87,466
Cost of goods sold............................. -- 54,427 7,829 -- 62,256
----- ----------- ------- ----- -----------
Gross profit................................... -- 22,713 2,497 -- 25,210
Selling, general and administrative expenses... -- 16,444 2,302 -- 18,746
Facility closing and reengineering costs....... -- 202 -- -- 202
-- 16,646 2,302 -- 18,948
----- ----------- ------- ----- -----------
Operating income............................... 6,067 195 6,262
Income from investments in subsidiaries........ 341 -- -- (341) --
Interest expense, net.......................... -- 2,861 726 -- 3,587
Other expense, net............................. -- 505 21 -- 526
----- ----------- ------- ----- -----------
Income (loss) before reorganization costs and
income taxes................................. 341 2,701 (552) (341) 2,149
Bankruptcy reorganization costs................ -- 1,606 -- -- 1,606
----- ----------- ------- ----- -----------
Income (loss) before provision for income
taxes........................................ 341 1,095 (552) (341) 543
Provision for income taxes..................... -- 162 41 -- 203
----- ----------- ------- ----- -----------
Net income (loss).............................. $ 341 $ 933 $ (593) $ (341) $ 340
----- ----------- ------- ----- -----------
----- ----------- ------- ----- -----------
</TABLE>
See accompanying notes
F-39
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF OPERATIONS
THREE MONTHS ENDED MARCH 28, 1998
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS COMBINED
----------- ----------- -------------- ------------ -----------
<S> <C> <C> <C> <C> <C>
Net sales...................................... $ -- $ 82,242 $ 10,113 $ -- $ 92,355
Cost of goods sold............................. -- 56,715 7,191 -- 63,906
----------- ----------- ------- ------------ -----------
Gross profit................................... -- 25,527 2,922 -- 28,449
Selling, general and administrative expenses... -- 17,132 2,408 -- 19,540
Facility closing and reengineering cost........ -- 940 -- -- 940
----------- ----------- ------- ------------ -----------
-- 18,072 2,408 -- 20,480
Operating income............................... -- 7,455 514 -- 7,969
Income from investments in subsidiaries........ 2,341 -- -- (2,341) --
Interest expense, net.......................... -- 3,042 769 -- 3,811
Other expense, net............................. -- (153) 153 -- --
----------- ----------- ------- ------------ -----------
Income (loss) before reorganization costs
(credits) and income taxes................... 2,341 4,566 (408) (2,341) 4,158
Bankruptcy reorganization costs (credits)...... -- 1,535 -- -- 1,535
----------- ----------- ------- ------------ -----------
Income (loss) before provision for income
taxes........................................ 2,341 3,031 (408) (2,341) 2,623
Provision for income taxes..................... -- 248 34 -- 282
----------- ----------- ------- ------------ -----------
Net income (loss).............................. $ 2,341 $ 2,783 $ (442) $ (2,341) $ 2,341
----------- ----------- ------- ------------ -----------
----------- ----------- ------- ------------ -----------
</TABLE>
F-40
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENT (UNAUDITED) (CONTINUED)
3. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS
THREE MONTH PERIOD ENDED MARCH 29, 1997
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS COMBINED
----------- ----------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).............................. $ 340 $ 933 $ (593) $ (341) $ 346
Adjustment to reconcile net income (loss) to
net cash and cash equivalents provided by
(used in) operating activities:
Income on investments in subsidiaries........ (340) -- -- 340 --
Depreciation................................. -- 1,802 155 -- 1,957
Amortization................................. -- 82 -- -- 82
Changes in operating assets and liabilities.... -- 3,486 (2,482) -- 1,004
----- ----------- ------- ----- -----------
Net cash and cash equivalents provided by
operating activities......................... -- 6,303 (2,920) -- 3,383
INVESTING ACTIVITIES
Purchase of fixed assets....................... -- (2,072) (29) -- (2,072)
Other, net..................................... -- (3,762) -- -- (3,762)
----- ----------- ------- ----- -----------
Net cash and cash equivalents used in investing
activities................................... -- (5,834) (29) -- (5,834)
FINANCING ACTIVITIES
Proceeds on revolving credit facility.......... -- 3,931 -- -- 3,931
Proceeds from DIP credit facility.............. -- 2,500 -- -- 2,500
Principal payments on DIP credit facility...... -- (1,400) -- -- (1,400)
Proceeds from issuance of long term debt....... -- 5,401 2,991 -- 8,392
Principal payments on long term debt........... -- (9,050) -- -- (9,050)
----- ----------- ------- ----- -----------
Net cash and cash equivalents provided by (used
by) financing activities..................... -- 1,382 2,991 -- 4,373
----- ----------- ------- ----- -----------
Net change in cash and cash equivalents........ -- 1,880 42 -- 1,922
Cash and cash equivalents at beginning of
year......................................... -- 5,578 206 -- 5,784
----- ----------- ------- ----- -----------
Cash and cash equivalents at end of year....... $ -- $ 7,458 $ 248 $ -- $ 7,706
----- ----------- ------- ----- -----------
----- ----------- ------- ----- -----------
</TABLE>
F-41
<PAGE>
BIDERMANN INDUSTRIES CORP. AND AFFILIATES
NOTES TO CONDENSED COMBINED FINANCIAL STATEMENTS (UNAUDITED) (CONTINUED)
3. GUARANTOR SUBSIDIARIES (CONTINUED)
SUPPLEMENTAL CONDENSED COMBINING STATEMENT OF CASH FLOWS
THREE MONTH PERIOD ENDED MARCH 28, 1998
<TABLE>
<CAPTION>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS COMBINED
----------- ----------- --------------- ------------- -----------
<S> <C> <C> <C> <C> <C>
OPERATING ACTIVITIES
Net income (loss).............................. $ 2,341 $ 2,783 $ (442) $ (2,341) $ 2,341
Adjustment to reconcile net income (loss) to
net cash and cash equivalents provided by
(used in) operating activities:
Income on investments in subsidiaries........ (2,341) -- -- 2,341 --
Depreciation................................. -- 1,984 81 -- 2,065
Amortization................................. -- 41 -- -- 41
Changes in operating assets and liabilities.... -- (4,346) (2,955) -- (7,301)
----------- ----------- ------- ------------- -----------
Net cash and cash equivalents provided by (used
in) operating activities..................... -- 461 (3,315) -- (2,854)
INVESTING ACTIVITIES
Purchase of fixed assets....................... -- (2,606) (43) -- (2,649)
Proceeds on disposal of fixed assets........... -- 465 -- -- 465
Other, net..................................... -- 718 -- -- 718
----------- ----------- ------- ------------- -----------
Net cash and cash equivalents used in investing
activities................................... -- (1,423) (43) -- (1,466)
FINANCING ACTIVITIES
Proceeds on revolving credit facility.......... -- 8,587 3,312 -- 11,899
Principal payments on revolving credit
facility..................................... -- (7,021) (79) -- (7,100)
Principal payments on long term debt........... -- (288) -- -- (288)
----------- ----------- ------- ------------- -----------
Net cash and cash equivalents provided by
financing activities......................... -- 1,278 3,233 -- 4,511
Net change in cash and cash equivalents........ -- 316 (125) -- 191
----------- ----------- ------- ------------- -----------
Cash and cash equivalents at beginning of
year......................................... -- 9,551 468 -- 10,019
----------- ----------- ------- ------------- -----------
Cash and cash equivalents at end of year....... $ -- $ 9,867 $ 343 $ -- $ 10,210
----------- ----------- ------- ------------- -----------
----------- ----------- ------- ------------- -----------
</TABLE>
F-42
<PAGE>
- -----------------------------------------------
-----------------------------------------------
- -----------------------------------------------
-----------------------------------------------
NO DEALER, SALESPERSON, OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY
INFORMATION OR TO MAKE ANY REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS
PROSPECTUS IN CONNECTION WITH THE OFFERINGS CONTAINED HEREIN, AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR THE INITIAL PURCHASERS. THIS PROSPECTUS DOES NOT
CONSTITUTE AN OFFER TO SELL, OR A SOLICITATION OF AN OFFER TO BUY, THE
SECURITIES IN ANY JURISDICTION WHERE, OR TO ANY PERSON TO WHOM, IT IS UNLAWFUL
TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR
ANY SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE AN IMPLICATION
THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO
THE DATE HEREOF.
-----------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Summary............................................... 1
Summary Pro Forma Combined Financial Information...... 19
Summary Historical Combined Financial Information..... 21
Risk Factors.......................................... 23
The Transaction....................................... 34
Use of Proceeds....................................... 37
Capitalization........................................ 37
Unaudited Pro Forma Combined Financial Information.... 38
Selected Historical Combined Financial Data........... 46
Management's Discussion and Analysis of Financial
Condition and Results of
Operations.......................................... 48
Business.............................................. 56
Management............................................ 71
Outstanding Voting Securities of Holdings and
Principal Holders Thereof........................... 75
Certain Transactions.................................. 76
The Note Exchange Offer............................... 79
The Preferred Stock Exchange Offer.................... 90
Description of the Exchange Notes..................... 102
Description of the New Preferred Stock and Exchange
Debentures.......................................... 134
Description of Capital Stock.......................... 181
Description of Other Indebtedness..................... 181
United States Federal Tax Considerations.............. 183
Plan of Distribution.................................. 191
Legal Matters......................................... 192
Experts............................................... 192
Index to Combined Financial Statements................ F-1
</TABLE>
CLUETT AMERICAN CORP.
OFFER TO EXCHANGE UP TO $112,000,000 OF ITS 10 1/8% SERIES B SENIOR SUBORDINATED
NOTES DUE 2008, WHICH HAVE BEEN REGISTERED UNDER THE SECURITIES ACT, FOR ANY AND
ALL OF ITS OUTSTANDING 10 1/8% SENIOR SUBORDINATED NOTES DUE 2008
OFFER TO EXCHANGE UP TO $50,000,000 OF ITS 12 1/2% SERIES B SENIOR EXCHANGEABLE
PREFERRED STOCK DUE 2010, WHICH HAS ANY BEEN REGISTERED UNDER THE SECURITIES
ACT, FOR ANY AND ALL OF ITS OUTSTANDING 12 1/2% SENIOR EXCHANGEABLE PREFERRED
STOCK DUE 2010
------------------------
PROSPECTUS
--------------------------
NATIONSBANC MONTGOMERY
SECURITIES LLC
NATWEST CAPITAL MARKETS LIMITED
, 1998
- -----------------------------------------------
-----------------------------------------------
- -----------------------------------------------
-----------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the Delaware General Corporation Law (the "DGCL") provides
that a corporation may indemnify directors and officers as well as other
employees and individuals against expenses (including attorneys' fees),
judgments, fines, and amounts paid in settlement in connection with specified
actions, suits or proceedings, whether civil, criminal, administrative, or
investigative (other than action by or in the right of the corporation a
"derivative action"), if they acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceedings, had no
reasonable cause to believe their conduct was unlawful. A similar standard is
applicable in the case of derivative actions, except that indemnification only
extends to expenses (including attorneys' fees) incurred in connection with the
defense or settlement of such actions, and the statute requires court approval
before there can be any indemnification where the person seeking indemnification
has been found liable to the corporation. The statute provides that it is not
exclusive of other indemnification that may be granted by a corporation's
charter, bylaws, disinterested director vote, stockholder vote, agreement or
otherwise. Article V of the Registrant's By-laws requires indemnification to the
fullest extent permitted by Delaware law. The Registrant has also obtained
officers' and directors' liability insurance which insures against liabilities
that officers and directors of the Registrant, in such capacities, may incur.
Such 102(b)(7) of the DGCL permits a corporation to provide in its
certificate of incorporation that a director of the corporation shall not be
personally liable to the corporation or its stockholders for monetary damages
for breach of fiduciary duties as a director, except for liability (i) for any
transaction from which the director derives an improper personal benefit, (ii)
for acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law, (iii) for improper payment of dividends or
redemption of shares, or (iv) for any breach of a director's duty of loyalty to
the company or its stockholders. Article Tenth of the Registrants' Restated
Certificate of Incorporation includes such a provision.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(A) EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
*2.1 Third Amended Plan of Reorganization of Cluett American Corp. and Cluett American Investment Corp.
*2.2 Subscription Agreement dated as of March 30, 1998 among Bidermann Industries U.S.A., Inc., Vestar Capital
Partners III, L.P. and Alvarez & Marsal, Inc.
*3.1 Restated Certificate of Incorporation of Cluett American Corp.
*3.2 Bylaws of Cluett American Corp.
*4.1 Indenture between Cluett American Corp. and The Bank of New York, as Trustee
*4.2 Exchange Debenture Indenture between Cluett American Corp. and The Bank of New York, as Trustee
*4.3 Certificate of Designations of the 12 1/2% Senior Exchangeable Preferred Stock Due 2010
*4.4 Form of 10 1/8% Senior Subordinated Notes Due 2008
*4.5 Form of 10 1/8% Series B Senior Subordinated Notes Due 2008
*4.6 Form of 12 1/2% Senior Exchangeable Preferred Stock Due 2010
*4.7 Form of 12 1/2% Series B Senior Exchangeable Preferred Stock Due 2010
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------- ---------------------------------------------------------------------------------------------------------
<C> <S>
*4.8 Note Registration Rights Agreement dated May 18, 1998 among Cluett American Corp., NationsBanc Montgomery
Securities LLC and NatWest Capital Markets Limited
*4.9 Preferred Stock Registration Rights Agreement dated May 18, 1998 among Cluett American Corp., NationsBanc
Montgomery Securities LLC and NatWest Capital Markets Limited
**5 Opinion of Simpson Thacher & Bartlett
*10.1 $160,000,000 Credit Agreement dated as of May 18, 1998 among Cluett American Corp., as the Borrower,
NationsBank, N.A., as Administrative Agent and Collateral Agent, NationsBanc Montgomery Securities LLC,
as Arranger and Syndication Agent, and lenders
*10.2 First Amendment to the Credit Agreement and Assignment dated May 27, 1998 by an among Cluett American
Corp., Cluett American Investment Corp., Cluett American Group, Inc. and certain subsidiaries, the
Existing Lenders, New Lenders, and agents
*10.3 Security Agreement dated as of May 18, 1998 made by Cluett American Corp., Cluett American Investment
Corp., Cluett American Group, Inc. and certain Subsidiaries of Cluett American Investment Corp. in
favor of NationsBank, N.A. as agent
*10.4 Pledge Agreement dated as of May 18, 1998 made by Cluett American Corp., Cluett American Investment
Corp., Cluett American Group, Inc. and certain Subsidiaries of Cluett American Investment Corp. in
favor of NationsBank, N.A., as agent
**10.5 Joinder Agreement dated as of May 18, 1998 by and between Bidermann Tailored Clothing, Inc., and
NationsBank, N.A., in its capacity as Agent under that certain Credit Agreement dated as of May 18,
1998
*10.6 CDN $15,000,000 Loan Agreement dated as of August 8, 1997 between Cluett, Peabody Canada Inc., as the
Borrower, and Congress Financial Corporation (Canada), as Lender
*12 Computation of Ratio of Earnings to Fixed Charges
*21 List of Subsidiaries
**23.1 Consent of Simpson Thacher & Bartlett (included as part of its opinion filed as Exhibit 5 hereto)
*23.2 Consent of Ernst & Young LLP, independent certified public accountants
*24 Powers of Attorney (included on pages II-5--II-11)
*25.1 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of The Bank of
New York, as Trustee for the 10 1/8% Senior Subordinated Notes Due 2008
*25.2 Form T-1 Statement of Eligibility and Qualification under the Trust Indenture Act of 1939 of The Bank of
New York, as Trustee for the 12 1/2% Subordinated Exchange Debentures Due 2010
*27 Financial Data Schedule
*99.1 Form of Note Letter of Transmittal
*99.2 Form of Preferred Stock Letter of Transmittal
*99.3 Form of Note Notice of Guaranteed Delivery
*99.4 Form of Preferred Stock Notice of Guaranteed Delivery
</TABLE>
- ----------------------------------
* Filed herewith.
** To be filed by amendment.
(B) FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Report of Independent Auditors................................................................... II-12
Schedule II--Valuation and Qualifying Accounts--
Three years ended December 31, 1997 and period ended March 28, 1998............................ II-13
</TABLE>
II-2
<PAGE>
Schedules other than the above have omitted because they are either not
applicable or the required information has been disclosed in the financial
statements or notes thereto.
ITEM 22. UNDERTAKINGS.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 (the "Securities Act") may be permitted to directors, officers and
controlling persons of the Registrant pursuant to the DGCL, the Certificate of
Incorporation and By-laws, or otherwise, the Registrant has been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Securities Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by the Registrant of expenses incurred or
paid by a director, officer or 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 Securities Act and will be governed by the final
adjudication of such issue.
The Registrant hereby undertakes:
(1) that prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), the issuer undertakes that such reoffering
prospectus will contain the information called for by the applicable
registration form with respect to reofferings by persons who may be deemed
underwriters, in addition to the information called for by the other times
of the applicable form.
(2) that every prospectus: (i) that is filed pursuant to paragraph (1)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the act and is used in connection with an offering of
securities subject to Rule 415, will be filed as a part of an amendment to
the registration statement and will not be used until such amendment is
effective, and that, for purposes of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(3) To file, during any period in which offers or sales are being made,
a post-effective amendment to this registration statement:
(i) To include any prospectus required by Section 10(a)(3) of the
securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after
the effective date of the registration statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in
the registration statement. Notwithstanding the foregoing, any increase
or decrease in volume of securities offered (if the total dollar value of
securities offered would not exceed that which was registered) and any
deviation from the low or high of the estimated maximum offering range
may be reflected in the form of prospectus filed with the Commission
pursuant to Rule 424(b) if, in the aggregate, the changes in volume and
price represent no more than a 20 percent change in the maximum aggregate
offering price set forth in the "Calculation of Registration Fee" table
in the effective registration statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the registration statement or
any material change to such information in the registration statement.
II-3
<PAGE>
(4) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment shall be deemed
to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial BONA FIDE offering thereof.
(5) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(6) To respond to requests for information that is incorporated by
reference into the prospectus pursuant to Items 4, 10(b), 11 or 13 of this
form, within one business day of receipt of such request, and to send the
incorporated documents by first class mail or other equally prompt means.
This includes information contained in documents filed subsequent to the
effective date of the registration statement through the date of responding
to the request.
(7) To supply by means of a post-effective amendment all information
concerning a transaction, and the company being acquired involved therein,
that was not the subject of and included in the registration statement when
it became effective.
II-4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of New York, State of New
York, on the 29th day of June 1998.
<TABLE>
<S> <C> <C>
CLUETT AMERICAN CORP.
By: /s/ BRYAN P. MARSAL
-----------------------------------------
Name: Bryan P. Marsal
TITLE: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
</TABLE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Cluett American Corp., do
hereby constitute and appoint Bryan P. Marsal and Steven J. Kaufman, or either
of them, our true and lawful attorneys and agents, to do any and all acts and
things in our name and on our behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys and agents, or any of them, may deem
necessary or advisable to enable said Corporation to comply with the Securities
Act of 1933 and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us or any
of us in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed on the 29th day of June 1998 by the
following persons in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ BRYAN P. MARSAL
------------------------------------------- Director, President and Chief Executive Officer
Bryan P. Marsal
/s/ ROBERT J. RIESBECK
------------------------------------------- Chief Financial Officer
Robert J. Riesbeck
/s/ STEVEN J. KAUFMAN
------------------------------------------- General Counsel
Steven J. Kaufman
/s/ JAMES A. WILLIAMS
------------------------------------------- Director
James A. Williams
</TABLE>
II-5
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ NORMAN W. ALPERT
------------------------------------------- Director
Norman W. Alpert
/s/ J. CHRISTOPHER HENDERSON
------------------------------------------- Director
J. Christopher Henderson
/s/ SANDER M. LEVY
------------------------------------------- Director
Sander M. Levy
/s/ DANIEL S. O'CONNELL
------------------------------------------- Director
Daniel S. O'Connell
</TABLE>
II-6
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused the Registration Statement or amendments thereto to be signed on its
behalf by the undersigned, thereunto duly authorized, on June 29th, 1998.
<TABLE>
<S> <C> <C>
ARROW FACTORY STORES, INC.
By: /s/ BRYAN P. MARSAL
-----------------------------------------
Name: Bryan P. Marsal
Title: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
</TABLE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Arrow Factory Stores Inc., do
hereby constitute and appoint Bryan P. Marsal and Steven J. Kaufman, or either
of them, our true and lawful attorneys and agents, to do any and all acts and
things in our name and on our behalf in our capacities as directors and officers
and to execute any and all instruments for us and in our names in the capacities
indicated below, which said attorneys and agents, or any of them, may deem
necessary or advisable to enable said Corporation to comply with the Securities
Act of 1933 and any rules, regulations and requirements of the Securities and
Exchange Commission, in connection with this Registration Statement, including
specifically, but without limitation, power and authority to sign for us or any
of us in our names in the capacities indicated below, any and all amendments
(including post-effective amendments) hereto and we do hereby ratify and confirm
all that said attorneys and agents, or any of them, shall do or cause to be done
by virtue hereof.
Pursuant to the requirements of the Securities Act, the Registration
Statement has been signed on the 29th day of June, 1998 by the following persons
in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ BRYAN P. MARSAL
------------------------------------------- Director, Chairman and Chief Executive Officer
Bryan P. Marsal
/s/ ROBERT J. RIESBECK
------------------------------------------- Chief Financial Officer
Robert J. Riesbeck
/s/ STEVEN J. KAUFMAN
------------------------------------------- General Counsel
Steven J. Kaufman
</TABLE>
II-7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused the Registration Statement or amendments thereto to be signed on its
behalf by the undersigned, thereunto duly authorized, on June 29th, 1998.
<TABLE>
<S> <C> <C>
CLUETT DESIGNER GROUP, INC.
By: /s/ BRYAN P. MARSAL
-----------------------------------------
Name: Bryan P. Marsal
Title: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
</TABLE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Cluette Designer Group Inc.,
do hereby constitute and appoint Bryan P. Marsal and Steven J. Kaufman, or
either of them, our true and lawful attorneys and agents, to do any and all acts
and things in our name and on our behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or any of them, may
deem necessary or advisable to enable said Corporation to comply with the
Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto and we do hereby
ratify and confirm all that said attorneys and agents, or any of them, shall do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, the Registration
Statement has been signed on the 29th day of June, 1998 by the following persons
in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ BRYAN P. MARSAL
------------------------------------------- Director, Chairman and Chief Executive Officer
Bryan P. Marsal
/s/ ROBERT J. RIESBECK
------------------------------------------- Chief Financial Officer
Robert J. Riesbeck
/s/ STEVEN J. KAUFMAN
------------------------------------------- General Counsel
Steven J. Kaufman
</TABLE>
II-8
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused the Registration Statement or amendments thereto to be signed on its
behalf by the undersigned, thereunto duly authorized, on June 29th, 1998.
<TABLE>
<S> <C> <C>
CLUETT, PEABODY & CO., INC.
By: /s/ BRYAN P. MARSAL
-----------------------------------------
Name: Bryan P. Marsal
Title: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
</TABLE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Cluett, Peabody & Co., Inc.,
do hereby constitute and appoint Bryan P. Marsal and Steven J. Kaufman, or
either of them, our true and lawful attorneys and agents, to do any and all acts
and things in our name and on our behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or any of them, may
deem necessary or advisable to enable said Corporation to comply with the
Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto and we do hereby
ratify and confirm all that said attorneys and agents, or any of them, shall do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, the Registration
Statement has been signed on the 29th day of June, 1998 by the following persons
in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ BRYAN P. MARSAL
------------------------------------------- Director, Chairman and Chief Executive Officer
Bryan P. Marsal
/s/ ROBERT J. RIESBECK
------------------------------------------- Chief Financial Officer
Robert J. Riesbeck
/s/ STEVEN J. KAUFMAN
------------------------------------------- General Counsel
Steven J. Kaufman
</TABLE>
II-9
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused the Registration Statement or amendments thereto to be signed on its
behalf by the undersigned, thereunto duly authorized, on June 29th, 1998.
<TABLE>
<S> <C> <C>
CONSUMER DIRECT CORPORATION
By: /s/ BRYAN P. MARSAL
-----------------------------------------
Name: Bryan P. Marsal
Title: PRESIDENT AND CHIEF EXECUTIVE
OFFICER
</TABLE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Consumer Direct Corporation,
do hereby constitute and appoint Bryan P. Marsal and Steven J. Kaufman, or
either of them, our true and lawful attorneys and agents, to do any and all acts
and things in our name and on our behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or any of them, may
deem necessary or advisable to enable said Corporation to comply with the
Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto and we do hereby
ratify and confirm all that said attorneys and agents, or any of them, shall do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, the Registration
Statement has been signed on the 29th day of June, 1998 by the following persons
in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ BRYAN P. MARSAL
------------------------------------------- Director, President and Chief Executive Officer
Bryan P. Marsal
/s/ ROBERT J. RIESBECK
------------------------------------------- Chief Financial Officer
Robert J. Riesbeck
/s/ STEVEN J. KAUFMAN
------------------------------------------- General Counsel
Steven J. Kaufman
</TABLE>
II-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act, the Registrant has duly
caused the Registration Statement or amendments thereto to be signed on its
behalf by the undersigned, thereunto duly authorized, on June 29th, 1998.
<TABLE>
<S> <C> <C>
GREAT AMERICAN KNITTING MILLS, INC.
By: /s/ BRYAN P. MARSAL
-----------------------------------------
Name: Bryan P. Marsal
Title: CHAIRMAN AND CHIEF EXECUTIVE
OFFICER
</TABLE>
POWER OF ATTORNEY
We, the undersigned directors and officers of Great American Knitting Mills,
Inc., do hereby constitute and appoint Bryan P. Marsal and Steven J. Kaufman, or
either of them, our true and lawful attorneys and agents, to do any and all acts
and things in our name and on our behalf in our capacities as directors and
officers and to execute any and all instruments for us and in our names in the
capacities indicated below, which said attorneys and agents, or any of them, may
deem necessary or advisable to enable said Corporation to comply with the
Securities Act of 1933 and any rules, regulations and requirements of the
Securities and Exchange Commission, in connection with this Registration
Statement, including specifically, but without limitation, power and authority
to sign for us or any of us in our names in the capacities indicated below, any
and all amendments (including post-effective amendments) hereto and we do hereby
ratify and confirm all that said attorneys and agents, or any of them, shall do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act, the Registration
Statement has been signed on the 29th day of June, 1998 by the following persons
in the capacities indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- ------------------------------------------------------ ---------------------------------------------------------
<C> <S>
/s/ BRYAN P. MARSAL
------------------------------------------- Director, Chairman and Chief Executive Officer
Bryan P. Marsal
/s/ KATHY D. WILSON
------------------------------------------- Chief Financial Officer
Kathy D. Wilson
/s/ STEVEN J. KAUFMAN
------------------------------------------- General Counsel
Steven J. Kaufman
</TABLE>
II-11
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors
Cluett American Corp.
We have audited the combined financial statements of Cluett American Corp.
(formerly Bidermann Industries Corp. and Affiliates), as of December 31, 1996
and 1997, and for each of the three years in the period ended December 31, 1997,
and have issued our report thereon dated March 19, 1998, except for Note 20 as
to which the date is April 10, 1998 (included elsewhere in this Registration
Statement). Our audits also included the financial statement schedule listed in
Item 21(b). The schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion based on our audits.
In our opinion, the financial statement schedule referred to above, when
considered in relation to the basic financial statements taken as a whole,
presents fairly in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Atlanta, Georgia
March 19, 1998, except for Note 20
as to which the date is April 10, 1998
II-12
<PAGE>
SCHEDULE II
CLUETT AMERICAN CORP.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUM A COLUMN B COLUMN C COLUMN D COLUMN E
- --------------------------------------------- ----------- ------------------------ ----------- -----------
<S> <C> <C> <C> <C> <C>
ADDITIONS
------------------------
CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END
DESCRIPTION BALANCE EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
- --------------------------------------------- ----------- ----------- ----------- ----------- -----------
YEAR ENDED DECEMBER 31, 1995:
Deduction from asset account:
Allowance for Doubtful Accounts.......... 1,923 2,180 -- 325(1) 3,778
Allowance for Sales Discounts............ 75 (10) -- 38(1) 27
Customer Allowances...................... 9,259 10,733 -- 8,161(1) 11,831
Total................................ 11,257 12,903 -- 8,524(1) 15,636
YEAR ENDED DECEMBER 31, 1996:
Deduction from asset account:
Allowance for Doubtful Accounts.......... 3,778 591 -- 1,077(1) 3,292
Allowance for Sales Discounts............ 27 42 -- (59)(1) 128
Customer Allowances...................... 11,831 9,346 -- 9,183(1) 11,994
Total 15,636 9,979 -- 10,201(1) 15,414
YEAR ENDED DECEMBER 31, 1997:
Deduction from asset account:
Allowance for Doubtful Accounts.......... 3,292 (717) -- 773(1) 1,802
Allowance for Sales Discounts............ 128 22 -- 141(1) 9
Customer Allowances...................... 11,994 6,855 -- 10,687(1) 8,162
Total................................ 15,414 6,160 -- 11,601(1) 9,973
PERIOD ENDED MARCH 28, 1998:
Deduction from asset account:
Allowance for Doubtful Accounts.......... 1,802 222 -- 33(1) 1,991
Allowance for Sales Discounts............ 9 3 -- 211(1) (199)
Customer Allowances...................... 8,162 2,125 -- 3,533(1) 6,755
Total................................ 9,973 2,350 -- 3,777(1) 8,547
</TABLE>
II-13
<PAGE>
EXHIBIT 2.1
UNITED STATES BANKRUPTCY COURT
FOR THE SOUTHERN DISTRICT OF NEW YORK
- -----------------------------------x
:
In re : Chapter 11 Case Nos.
: 95 B 43098 through
BIDERMANN INDUSTRIES U.S.A., : 95 B 43099 (TLB) and
INC. f/k/a BLACKSTONE, INC., : 95 B 43101 through
et al., : 95 B 43114 (TLB)
Debtors. :
: (Jointly Administered)
- -----------------------------------x
THIRD AMENDED JOINT PLAN OF REORGANIZATION
O'MELVENY & MYERS LLP
Attorneys for Timothy R. Coleman,
as Plan Facilitator
Citicorp Center
153 East 53rd Street
New York, New York 10022-4611
(212) 326-2000
STEVENS & LEE, P.C.
Attorneys for the Debtors
One Glenhardie Corporate Center
1275 Drummer Lane
Wayne, Pennsylvania 19087
(610) 964-1480
TENZER GREENBLATT, LLP
Attorneys for the Debtors
405 Lexington Avenue
New York, New York 10174
(212) 885-5000
Dated: New York, New York
March 30, 1998
<PAGE>
TABLE OF CONTENTS
SECTION 1. DEFINITIONS AND INTERPRETATION. . . . . . . . . . . . . . . 1
A. Definitions. . . . . . . . . . . . . . . . . . . . . . . . . . . 1
B. Interpretation; Application of
Definitions and Rules of Construction . . . . . . . . . . . 15
C. Exhibits and Schedules.. . . . . . . . . . . . . . . . . . . . . 16
SECTION 2. PROVISIONS FOR PAYMENT OF
ADMINISTRATION EXPENSE CLAIMS;
PRIORITY TAX CLAIMS . . . . . . . . . . . . . . . . . . . . 16
2.1. Administration Expense Claims. . . . . . . . . . . . . . . . . . 16
(a) General . . . . . . . . . . . . . . . . . . . . . . . . . . 16
(b) Compensation and Reimbursement Claims . . . . . . . . . . . 17
(c) Employee Administrative Wage Claims . . . . . . . . . . . . 18
2.2. Priority Tax Claims. . . . . . . . . . . . . . . . . . . . . . . 18
SECTION 3. CLASSIFICATION OF CLAIMS
AND EQUITY INTERESTS. . . . . . . . . . . . . . . . . . . . 19
SECTION 4. PROVISIONS FOR TREATMENT OF CLAIMS
AND EQUITY INTERESTS UNDER THE PLAN . . . . . . . . . . . . 20
4.1. Priority Non-Tax Claims (Class 1). . . . . . . . . . . . . . . . 20
4.2. Senior Secured Claims (Class 2). . . . . . . . . . . . . . . . . 21
(a) Allowance of Senior Secured Claims. . . . . . . . . . . . . 21
(b) Treatment of Senior Secured Claims. . . . . . . . . . . . . 21
(c) Related Matters . . . . . . . . . . . . . . . . . . . . . . 22
4.3. BIUSA Secured Claims (Class 3) . . . . . . . . . . . . . . . . . 22
(a) BIUSA (Subclass 3A) . . . . . . . . . . . . . . . . . . . . 22
(b) CDC (Subclass 3B) . . . . . . . . . . . . . . . . . . . . . 22
(c) AFS (Subclass 3C) . . . . . . . . . . . . . . . . . . . . . 22
(d) Treatment of BIUSA Secured Claims . . . . . . . . . . . . . 22
4.4. Other Secured Claims (Class 4) . . . . . . . . . . . . . . . . . 23
4.5. General Unsecured Claims (Class 5) . . . . . . . . . . . . . . . 23
(a) BIUSA (Subclass 5A) . . . . . . . . . . . . . . . . . . . . 23
(b) BIC (Subclass 5B) . . . . . . . . . . . . . . . . . . . . . 24
(c) AFS (Subclass 5C) . . . . . . . . . . . . . . . . . . . . . 25
(d) AIA (Subclass 5D) . . . . . . . . . . . . . . . . . . . . . 25
(e) BIL (Subclass 5E) . . . . . . . . . . . . . . . . . . . . . 25
(f) BTC (Subclass 5F) . . . . . . . . . . . . . . . . . . . . . 25
(g) BTS (Subclass 5G) . . . . . . . . . . . . . . . . . . . . . 25
(h) CPHC (Subclass 5H). . . . . . . . . . . . . . . . . . . . . 25
(i) CP-R (Subclass 5I). . . . . . . . . . . . . . . . . . . . . 26
(j) CP&C (Subclass 5J). . . . . . . . . . . . . . . . . . . . . 26
(k) CDC (Subclass 5K) . . . . . . . . . . . . . . . . . . . . . 26
(l) GAKM-R (Subclass 5L). . . . . . . . . . . . . . . . . . . . 26
(m) GAKM (Subclass 5M). . . . . . . . . . . . . . . . . . . . . 26
(n) KLW (Subclass 5N) . . . . . . . . . . . . . . . . . . . . . 27
(o) MWW (Subclass 5O) . . . . . . . . . . . . . . . . . . . . . 27
(p) OMT (Subclass 5P) . . . . . . . . . . . . . . . . . . . . . 27
(q) Post-Petition Interest. . . . . . . . . . . . . . . . . . . 27
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4.6. Affiliate Claims (Class 6) . . . . . . . . . . . . . . . . . . . 27
4.7. Equity Interests (Class 7) . . . . . . . . . . . . . . . . . . . 28
(a) Old BIUSA Common Stock (Subclass 7A). . . . . . . . . . . . 28
(b) BIUSA Other Equity Interests (Subclass 7B). . . . . . . . . 28
(c) Subsidiary Equity Interests (Subclass 7C).. . . . . . . . . 29
SECTION 5. IDENTIFICATION OF CLASSES OF CLAIMS
AND INTERESTS IMPAIRED AND NOT
IMPAIRED UNDER THE PLAN; ACCEPTANCE
OR REJECTION OF THE PLAN. . . . . . . . . . . . . . . . . . 29
5.1. Holders of Claims and Equity Interests
Entitled to Vote . . . . . . . . . . . . . . . . . . . . . . . . 29
5.2. Subtraction and Addition of Classes and Subclasses . . . . . . . 30
(a) Deletion of Classes and Subclasses. . . . . . . . . . . . . 30
(b) Addition of Classes and Subclasses. . . . . . . . . . . . . 30
5.3. Nonconsensual Confirmation . . . . . . . . . . . . . . . . . . . 30
5.4. Revocation of Plan of Reorganization . . . . . . . . . . . . . . 31
SECTION 6. MEANS OF IMPLEMENTATION . . . . . . . . . . . . . . . . . . 31
6.1. Implementation . . . . . . . . . . . . . . . . . . . . . . . . . 31
6.2. Sources of Funds . . . . . . . . . . . . . . . . . . . . . . . . 31
(a) New Equity Investment . . . . . . . . . . . . . . . . . . . 31
(i) Vestar Transaction. . . . . . . . . . . . . . . . . . . 31
(ii) Institutional Holders' Conversion Transaction . . . . 32
6.3. Restructuring Transactions . . . . . . . . . . . . . . . . . . . 32
6.4. New BIUSA Common Stock . . . . . . . . . . . . . . . . . . . . . 32
(a) Authorization . . . . . . . . . . . . . . . . . . . . . . . 32
(b) Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . 32
6.5. Registration of Securities . . . . . . . . . . . . . . . . . . . 32
6.6. Boards of Directors of the Debtors . . . . . . . . . . . . . . . 33
6.7. Officers of the Debtors. . . . . . . . . . . . . . . . . . . . . 33
SECTION 7. PROVISIONS GOVERNING DISTRIBUTIONS. . . . . . . . . . . . . 33
7.1. Date of Distributions. . . . . . . . . . . . . . . . . . . . . . 33
7.2. Surrender and Cancellation of Instruments. . . . . . . . . . . . 34
7.3. Delivery of Distributions. . . . . . . . . . . . . . . . . . . . 34
7.4. Intentionally omitted. . . . . . . . . . . . . . . . . . . . . . 36
7.5. Manner of Payment Under Plan of Reorganization . . . . . . . . . 36
7.6. Initial and Subsequent Distributions.. . . . . . . . . . . . . . 36
(a) Schedule of Initial Distributions . . . . . . . . . . . . . 36
(b) Reserves for Disputed Claims and Equity Interests . . . . . 36
(i) Disputed Claims. . . . . . . . . . . . . . . . . . . . 36
(ii) Disputed Equity Interests. . . . . . . . . . . . . . . 37
(c) Distributions on Account of Claims and Equity Interests Allowed
After the Consummation Date. . . . . . . . . . . . . . . . . . . 38
(d) Final Distributions on Account of Subclass 7A (Old BIUSA Common
Stock) of Class 7 (Equity Interests) . . . . . . . . . . . . . . 38
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7.7. No Fractional Distributions. . . . . . . . . . . . . . . . . . . 38
7.8. Rights and Powers of Disbursing Agent. . . . . . . . . . . . . . 39
(a) Entities to Exercise Function of Disbursing Agent . . . . . 39
(b) Powers of the Disbursing Agent. . . . . . . . . . . . . . . 39
(c) Expenses Incurred On or After the Consummation Date.. . . . 39
SECTION 8. PROCEDURES FOR TREATING DISPUTED
CLAIMS AND EQUITY INTERESTS UNDER
THE PLAN OF REORGANIZATION. . . . . . . . . . . . . . . . . 40
8.1. No Distributions Pending Allowance . . . . . . . . . . . . . . . 40
8.2. Distributions After Allowance. . . . . . . . . . . . . . . . . . 40
SECTION 9. PROCEDURES FOR RESOLVING AND
TREATING DISPUTED CLAIMS AND
EQUITY INTERESTS UNDER THE PLAN . . . . . . . . . . . . . . 40
9.1. Prosecution of Objections. . . . . . . . . . . . . . . . . . . . 40
SECTION 10. PROVISIONS GOVERNING EXECUTORY CONTRACTS
AND UNEXPIRED LEASES UNDER THE PLAN . . . . . . . . . . 41
10.1. General Treatment . . . . . . . . . . . . . . . . . . . . . 41
10.2. Expired Contracts . . . . . . . . . . . . . . . . . . . . . 41
10.3. Scheduled Contracts and Leases. . . . . . . . . . . . . . . 41
10.4. Amendments to Schedules: Effect of Amendments.. . . . . . . 42
10.5. Bar to Rejection Damage Claims. . . . . . . . . . . . . . . 42
10.6. Claims Arising from Assumption or Rejection . . . . . . . . 42
10.7. Cure of Defaults Upon Assumption. . . . . . . . . . . . . . 42
SECTION 11. CONDITIONS PRECEDENT TO CONFIRMATION
DATE AND CONSUMMATION DATE . . . . . . . . . . . . 43
11.1. Conditions Precedent to Confirmation
of Plan of Reorganization.. . . . . . . . . . . . . . . . . 43
(a) Vestar Transaction. . . . . . . . . . . . . . . . . . . . . 43
(i) Commitment for New BIC Term Debt . . . . . . . . . . . 43
(ii) Commitment for New Subordinated Notes. . . . . . . . . 44
(iii) Subscription Agreements . . . . . . . . . . . . . 44
(iv) Vestar Transaction Deposit . . . . . . . . . . . . . . 44
(v) Fee Letter . . . . . . . . . . . . . . . . . . . . . . 44
(b) Institutional Holders' Conversion Transaction . . . . . . . 44
(i) Subscription Agreements. . . . . . . . . . . . . . . . 44
(ii) Fee Letter . . . . . . . . . . . . . . . . . . . . . . 44
(c) Vestar Transaction and Institutional
Holders' Conversion Transaction . . . . . . . . . . . . . . 44
(i) Confirmation Order . . . . . . . . . . . . . . . . . . 44
11.2. Conditions Precedent to Consummation
Date of Plan of Reorganization. . . . . . . . . . . . . . . 44
(a) Vestar Transaction. . . . . . . . . . . . . . . . . . . . . 45
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(i) Confirmation Date. . . . . . . . . . . . . . . . . . . 45
(ii) Payment of Purchase Price. . . . . . . . . . . . . . . 45
(iii) No Material Adverse Change. . . . . . . . . . . . 45
(iv) Absence of Proceeding. . . . . . . . . . . . . . . . . 45
(v) Force Majeure. . . . . . . . . . . . . . . . . . . . . 45
(vi) Stockholders' Agreements Rejected. . . . . . . . . . . 46
(b) Institutional Holders' Conversion Transaction . . . . . . . 46
(i) No Consummation of Vestar Transaction. . . . . . . . . 46
(ii) New Equity Investment. . . . . . . . . . . . . . . . . 46
(iii) Exit Financing. . . . . . . . . . . . . . . . . . 46
(iv) No Material Adverse Change . . . . . . . . . . . . . . 46
(v) Absence of Proceeding. . . . . . . . . . . . . . . . . 46
(vi) Force Majeure. . . . . . . . . . . . . . . . . . . . . 47
(c) Vestar Transaction and Institutional Holders' Conversion
Transaction . . . . . . . . . . . . . . . . . . . . . . . . 47
(i) Finality of the Confirmation Order . . . . . . . . . . 47
(ii) Cash for Closing . . . . . . . . . . . . . . . . . . . 47
(iii) Execution and Delivery of Documents . . . . . . . 47
(iv) HSR Compliance . . . . . . . . . . . . . . . . . . . . 47
(v) Consents, Etc. . . . . . . . . . . . . . . . . . . . . 47
11.3. Waiver of Conditions Precedent. . . . . . . . . . . . . . . 48
SECTION 12. EFFECT OF CONFIRMATION. . . . . . . . . . . . . . . . . . . 48
12.1. General Authority . . . . . . . . . . . . . . . . . . . . . 48
12.2. Discharge of Debtors. . . . . . . . . . . . . . . . . . . . 49
12.3. Injunction. . . . . . . . . . . . . . . . . . . . . . . . . 49
12.4. Term of Injunctions or Stays. . . . . . . . . . . . . . . . 49
SECTION 13. SETTLEMENTS,RELEASES AND WAIVER OF CLAIMS . . . . . . . . . 50
13.1. Settlement of Claims by Ralph
Lauren Womenswear, Inc. . . . . . . . . . . . . . . . . . . 50
13.2. Settlement of Claims By and
Against Maurice Bidermann . . . . . . . . . . . . . . . . . 50
13.3. General Release of Releasees. . . . . . . . . . . . . . . . 50
13.4. Release from Claims and Liabilities . . . . . . . . . . . . 51
13.5. Avoidance Actions . . . . . . . . . . . . . . . . . . . . . 52
13.6. Setoffs . . . . . . . . . . . . . . . . . . . . . . . . . . 52
SECTION 14. UNSECURED CREDITORS' COMMITTEE. . . . . . . . . . . . . . . 53
14.1. Dissolution of Unsecured Creditors' Committee . . . . . . . 53
14.2. Exculpation . . . . . . . . . . . . . . . . . . . . . . . . 53
SECTION 15. RETENTION OF JURISDICTION . . . . . . . . . . . . . . . . . 54
15.1. Retention of Jurisdiction . . . . . . . . . . . . . . . . . 54
15.2. Amendment of Plan of Reorganization . . . . . . . . . . . . 56
SECTION 16. MISCELLANEOUS PROVISIONS. . . . . . . . . . . . . . . . . . 56
16.1. Payment of Statutory Fees . . . . . . . . . . . . . . . . . 56
16.2. Retiree Benefits. . . . . . . . . . . . . . . . . . . . . . 57
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16.3. Compliance with Tax Requirements. . . . . . . . . . . . . . 57
16.4. Recognition of Guarantee Rights . . . . . . . . . . . . . . 57
16.5. Transactions on Business Days . . . . . . . . . . . . . . . 58
16.6. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . 58
16.8. Governing Law . . . . . . . . . . . . . . . . . . . . . . . 60
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LIST OF EXHIBITS AND SCHEDULES
Schedule 10.1A - Assumed Executory Contracts and Unexpired Leases
Schedule 10.1B - Rejected Executory Contracts and Unexpired Leases
Exhibit A - Letter Agreement, dated March 30, 1998, among Maurice
Bidermann, SAEPIC, Vestar, the Debtors and the Plan
Facilitator (among others)
Exhibit B - Restructuring Transactions
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THIRD AMENDED JOINT PLAN OF REORGANIZATION
The Debtors, at the direction of Timothy R. Coleman, in his capacity
as Plan Facilitator appointed pursuant to an order of the Bankruptcy Court (1)
dated February 7, 1997, propose the following Third Amended Joint Plan of
Reorganization:
SECTION 1. DEFINITIONS AND INTERPRETATION
A. Definitions.
The following terms used herein shall have the respective meanings
defined below:
1.1. "Adequate Protection Orders" means those certain orders entered
on August 3, 1995 and titled Order Further Extending, Authorizing and
Restricting Use of BIUSA Cash Collateral and Granting Adequate Protection for
Use of Cash Collateral, and Final Order (i) Authorizing Bidermann Industries
Corp, et al., to Use BIC Cash Collateral, and (ii) Authorizing and Approving
Grant of Adequate Protection to Certain Pre-Petition Lenders.
1.2. "Administration Expense Claim" means any right to payment
constituting a cost or expense of administration of any of the Reorganization
Cases allowed under sections 503(b) and 507(a)(1) of the Bankruptcy Code,
including, without limitation, any actual and necessary costs and expenses of
preserving the estates of the Debtors, any actual and necessary costs and
expenses of operating the businesses of the Debtors, any indebtedness or
obligations incurred or assumed by the Debtors in Possession in connection with
the conduct of their businesses, including, without limitation, for the
acquisition or lease of property or an interest in property or the rendition of
services, all Allowed Claims against the Debtors entitled to a priority
pursuant to section 546(c)(2)(A) of the Bankruptcy Code, any allowances of
compensation and reimbursement of expenses to the extent allowed by Final Order
under section 330 or 503 of the Bankruptcy Code, and any fees or charges
assessed against the estates of the Debtors under section 1930, chapter 123,
title 28, United States Code.
1.3. "Administrative Order" means that certain Order Establishing
Budget and Interim Compensation Procedures
(1) All capitalized terms used herein shall have the meanings assigned to them
in section 1.A of this Third Amended Joint Plan of Reorganization.
<PAGE>
for Certain Court Appointed Professionals dated August 21, 1995, as amended.
1.4. "Affiliate" means, with reference to any entity, any other
entity that, within the meaning of Rule 12b-2 promulgated under the Securities
Exchange Act of 1934, as amended, "controls," is "controlled by" or is under
"common control with" such entity.
1.5. "Affiliate Claims" means all Claims held by an Affiliate of a
Debtor, excluding (a) Claims asserted by Maurice Bidermann, and (b) General
Unsecured Claims and Administration Expense Claims asserted by RLWW against the
Debtors and settled in accordance with section 13.1 hereof.
1.6. "Allowed" means, with reference to any Claim or Equity Interest,
(a) any Claim or Equity Interest against any Debtor, proof of which was filed
within the applicable period of limitation fixed by the Bankruptcy Court in
accordance with Rule 3003(c)(3) of the Bankruptcy Rules (i) as to which no
objection to the allowance thereof has been interposed within the applicable
period of limitation fixed by this Plan of Reorganization, the Bankruptcy Code,
the Bankruptcy Rules or a Final Order, or (ii) as to which an objection has
been interposed, to the extent such Claim or Equity Interest has been allowed
in whole or in part by a Final Order, (b) if no proof of Claim or Equity
Interest was so filed, any Claim or Equity Interest against any Debtor which
has been listed by such Debtor in its Schedules, as such Schedules may be
amended from time to time in accordance with Rule 1009 of the Bankruptcy Rules,
as liquidated in amount and not disputed or contingent as to liability, (c) any
Claim arising from the recovery of property under section 550 or 553 of the
Bankruptcy Code and allowed in accordance with section 502(h) of the Bankruptcy
Code or (d) any Claim or Equity Interest allowed hereunder.
1.7. "Alvarez & Marsal" means Alvarez & Marsal, Inc., or its
designated Affiliate.
1.8. "Ballot" means the form or forms distributed to each holder of
an impaired Claim or Equity Interest on which is to be indicated acceptance or
rejection of this Plan of Reorganization and any election for treatment of such
impaired Claim or Equity Interest under this Plan of Reorganization.
1.9. "Ballot Date" means the date fixed by the Bankruptcy Court by
which all Ballots for acceptance or rejection of this Plan of Reorganization
must be received.
1.10. "Bankruptcy Code" means title 11, United States Code, as
applicable to the Reorganization Cases.
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1.11. "Bankruptcy Court" means the United States District Court
for the Southern District of New York having jurisdiction over the
Reorganization Cases and, to the extent of any reference under section 157,
title 28, United States Code, the unit of such District Court under section
151, title 28, United States Code.
1.12. "Bankruptcy Rules" means the Federal Rules of Bankruptcy
Procedure as promulgated by the United States Supreme Court under section 2075,
title 28, United States Code, and any Local Rules of the Bankruptcy Court, as
applicable to the Reorganization Cases.
1.13. "Bidermann Note" means that certain note payable, dated as
of July 1, 1990, made by Maurice Bidermann in favor of BIC, in the original
principal amount of $4,489,780.56, together with all interest which has accrued
or may hereafter accrue thereon.
1.14. "BIUSA" means Bidermann Industries U.S.A., Inc., a Delaware
corporation.
1.15. "BIUSA Noteholders" means, at any time of determination,
the holders of the BIUSA Notes at such time.
1.16. "BIUSA Notes" means, collectively, the obligations
evidenced by the following: (a) that certain Promissory Note dated as of March
15, 1990 made by Bidermann Industries U.S.A., Inc. in favor of Banque Paribas,
(b) that certain Promissory Note dated as of July 5, 1991 made by Bidermann
Industries U.S.A., Inc. in favor of Compagnie de Participations et
D'Investissements Holding S.A., (c) notes issued under the Pre-Petition BIUSA
Credit Agreement, and (d) notes issued under that certain Term Loan and
Preferred Stock Purchase Agreement dated as of July 17, 1993 among Bidermann
Industries U.S.A., Inc., Bidermann Industries Corp., Compagnie de
Participations et D'Investissements Holding S.A. and Banque Nationale de Paris,
together with any amendments, modifications or supplements thereto or
replacements thereof.
1.17. "BIUSA Secured Claims" means any Secured Claim governed by
the Pre-Petition BIUSA Credit Agreement and secured by, among other things, a
pledge of the issued and outstanding capital stock of CDC, 40.0% of the issued
and outstanding capital stock of each of CP-R and GAKM-R, and substantially all
of the assets of AFS.
1.18. "Business Day" means any day other than a Saturday, a
Sunday or any other day on which banking institutions in New York, New York are
required or authorized to close by law or executive order.
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1.19. "Cash" means legal tender of the United States of America.
1.20. "Causes of Action" means, without limitation, any and all
actions, causes of action, liabilities, obligations, rights, suits, debts, sums
of money, damages, judgments, claims and demands whatsoever, whether known or
unknown, in law, equity or otherwise.
1.21. "Claim" means (a) any right to payment from any of the
Debtors, whether or not such right is reduced to judgment, liquidated,
unliquidated, fixed, contingent, matured, unmatured, disputed, undisputed,
legal, equitable, secured, or unsecured, or (b) any right to an equitable
remedy for breach of performance if such breach gives rise to a right of
payment from any of the Debtors, whether or not such right to an equitable
remedy is reduced to judgment, fixed, contingent, matured, unmatured, disputed,
undisputed, secured, or unsecured.
1.22. "Collateral" means any property or interest in property of
the estate of any Debtor subject to a Lien to secure the payment or performance
of a Claim, which Lien is not subject to avoidance under the Bankruptcy Code.
1.23. "Confirmation Date" means the date on which the Clerk of
the Bankruptcy Court enters the Confirmation Order on its docket.
1.24. "Confirmation Hearing" means the hearing held by the
Bankruptcy Court on confirmation of this Plan of Reorganization, as such
hearing may be adjourned or continued from time to time.
1.25. "Confirmation Order" means the order of the Bankruptcy
Court confirming this Plan of Reorganization, in form and substance reasonably
acceptable to each of the Plan Facilitator, the Debtors, Vestar, the
Institutional Holders and SAEPIC.
1.26. "Consummation Date" means, as the context may require,
either the Vestar Transaction Consummation Date or the Institutional Holders'
Conversion Transaction Consummation Date.
1.27. "Debtor" means each of BIUSA, Bidermann Industries Corp.
("BIC"), Great American Knitting Mills, Inc. ("GAKM"), Arrow Factory Stores
Inc. ("AFS"), Arrow Inter-America, Inc. ("AIA"), Old Mission Textiles, Inc.
("OMT"), Cluett, Peabody & Co., Inc. ("CP&C"), GAKM Resources Corporation
("GAKM-R"), Consumer Direct Corporation ("CDC"), MW Warehouse, Inc. ("MWW"),
Bidertex Services Inc. ("BTS"), Bidermann Industries Licensing, Inc. ("BIL"),
Cluett Peabody Resources Corporation ("CP-R"), Bidermann Tailored Clothing,
Inc. ("BTC"), Karl Lagerfeld Womenswear, Inc. ("KLW"), and Cluett Peabody
Holding Corp. ("CPHC"), the debtors in Chapter 11 Case Nos. 95 B 43098 through
95 B 43099 (TLB) and 95 B 43101 through 95 B 43114 (TLB), respectively.
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1.28. "Debtor in Possession" means each Debtor in its capacity as
a debtor in possession under sections 1107(a) and 1108 of the Bankruptcy Code.
1.29. "Deficiency Claim" means, with reference to a Claim secured
by a Lien against Collateral, an amount equal to the difference of (a) the
aggregate amount of such Claim, minus (b) the amount of such Claim that is a
Secured Claim; provided that, in the event the class or subclass, as
applicable, of which such Claim is a part makes the election under section
1111(b)(2) of the Bankruptcy Code in accordance with Bankruptcy Rule 3014,
there shall be no Deficiency Claim relating to such Claim.
1.30. "Disbursing Agent" means any entity in its capacity as a
disbursing agent under section 7.8 hereof.
1.31. "Disputed Claim" means a Claim against a Debtor to the
extent that such Claim is not an Allowed Claim.
1.32. "Disputed Equity Interest" means an Equity Interest in a
Debtor to the extent such Equity Interest is not an Allowed Equity Interest.
1.33. "Distribution Date" means the Consummation Date and each
March 15, June 15, September 15 and December 15 thereafter until the Final
Distribution Date.
1.34. "Employee Administrative Wage Claims" means the Claims of
certain employees of CP&C resulting from the agreement of such employees to
reduce wages and other benefits during the Chapter 11 cases, as more fully set
forth in that certain Memorandum of Understanding between BIC and UNITE, dated
May 3, 1996, and approved by the Bankruptcy Court.
1.35. "Employee Stock Plan" means the employee stock plan, or
such other similar plan as may be agreed to by UNITE, to be adopted on the
Consummation Date by (a) Reorganized BIUSA or an Affiliate thereof acceptable
to Vestar and UNITE if the Vestar Transaction is consummated, or (b) New ARROW
if the Institutional Holders' Conversion Transaction is consummated, in either
case containing the provisions described in that certain Memorandum of
Understanding between BIC and UNITE, dated May 3, 1996, together with such
other provisions as may be agreed between the Debtors or Reorganized Debtors,
as applicable, and UNITE.
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1.36. "Equity Interest" means any share of common stock or other
instrument evidencing a present ownership interest in any of the Debtors, or
any option, warrant, or right, contractual or otherwise, to acquire any share
of common stock or other instrument evidencing an ownership interest in any of
the Debtors, whether or not transferable.
1.37. "Estimated Claims Schedule" has the meaning assigned to
such term in section 7.6(a) hereof.
1.38. "Existing BIUSA Stockholders' Agreements" means,
collectively, (i) that certain Stockholders' Agreement dated as of March 7,
1990 among BIUSA and the other signatories thereto, (ii) that certain Auxiliary
Agreement dated as of March 7, 1990 among BIUSA and the other signatories
thereto, and (iii) any other document or agreement related to any of the
foregoing, each as amended, supplemented or modified prior to the Consummation
Date.
1.39. "Fee Letter" means the letter to be executed by Vestar or
the Institutional Holders, as applicable, pursuant to which Vestar or the
Institutional Holders, as applicable, agrees to cause the Reorganized Debtors
to pay, on the Consummation Date, in Cash, $2,000,000 in the aggregate, of the
fees and expenses of the financial and legal advisors to Maurice Bidermann and
his Affiliates which are not Debtors.
1.40. "Final Distribution Date" means the Distribution Date on
which the last distribution is made to holders of Allowed Claims and Allowed
Equity Interests pursuant to this Plan of Reorganization.
1.41. "Final Order" means an order or judgment of a court entered
by the Clerk of such court on the docket, which has not been reversed, vacated,
modified, amended or stayed and as to which (a) the time to appeal, petition
for certiorari or move for a new trial, reargument or rehearing has expired and
as to which no appeal, petition for certiorari or other proceedings for a new
trial, reargument or rehearing shall then be pending, or (b) if an appeal, writ
of certiorari, new trial, reargument or rehearing thereof has been sought, such
order or judgment shall have been affirmed by the highest court to which such
order was appealed, or certiorari shall have been denied or a new trial,
reargument or rehearing shall have been denied or resulted in no modification
of such order, and the time to take any further appeal, petition for certiorari
or move for a new trial, reargument or rehearing shall have expired; provided,
that any such order shall constitute a Final Order for purposes of this Plan of
Reorganization notwithstanding the possibility that a motion under Rule 60 of
the Federal Rules of Civil Procedure, or
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any analogous rule under state law or the Bankruptcy Rules, may be filed.
1.42. "General Unsecured Claim" means any Unsecured Claim other
than an Affiliate Claim.
1.43. "Institutional Holders" means, collectively, the BIUSA
Noteholders and the holders of the Senior Secured Claims.
1.44. "Institutional Holders' Conversion Transaction" means, in
the event the Vestar Transaction is not consummated on the Consummation Date,
the transaction pursuant to which (a) the BIUSA Noteholders and the holders of
the Senior Secured Claims will receive distributions on account of their
Allowed Claims in the form of New Subordinated Notes and New BIUSA Common
Stock, and (b) certain of the Institutional Holders, as New Equity Investors,
will purchase 3,850,000 shares of New Preferred Stock, all as more fully
described in this Plan of Reorganization.
1.45. "Institutional Holders' Conversion Transaction Consummation
Date" means the first Business Day which is at least twenty (20) days after it
is determined by the Debtors (at the direction of the Plan Facilitator) that
the Vestar Transaction will not be consummated, and on which the conditions
precedent to the occurrence of the Consummation Date, as set forth in sections
11.2 (b) and (c) hereof, shall have been satisfied or waived in accordance with
section 11.3 of this Plan of Reorganization, provided however that if a stay of
the Confirmation Order is then in effect, the Institutional Holders' Conversion
Transaction Consummation Date shall be the first Business Day after such stay
is no longer in effect.
1.46. "Institutional Holders' Conversion Transaction
Restructuring Transactions" means the Restructuring Transactions to be effected
upon the consummation of the Institutional Holders' Conversion Transaction, as
set forth on Exhibit B to this Plan of Reorganization.
1.47. "Lien" means any charge against or interest in property to
secure payment of a debt or performance of an obligation.
1.48. "Management Investors" means executives of the Debtors (but
not Alvarez & Marsal), acceptable to Vestar, who execute Subscription
Agreements to purchase New BIUSA Common Stock in connection with the Vestar
Transaction.
1.49. "Merrill Lynch" means Merrill Lynch, Pierce, Fenner & Smith
Incorporated.
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1.50. "New ARROW" means the entity to be formed on the
Consummation Date in accordance with the Institutional Holders' Conversion
Transaction Restructuring Transactions to hold all of the operating assets of
CP&C (other than licenses, trademarks, tradenames, other general intangibles,
receivables and notes from Cluett Peabody Canada, Inc. and the stock of
subsidiaries).
1.51. "New BIC Term Debt" means the $160,000,000 senior debt
facility to be entered into by Reorganized BIC and each of its subsidiaries in
connection with the Vestar Transaction, which facility shall be guaranteed by,
and secured by a first priority security interest on, all of the assets of the
Reorganized Debtors.
1.52. "New BIUSA Common Stock" means the shares of common stock
of Reorganized BIUSA to be issued on the Consummation Date under the Vestar
Transaction or the Institutional Holders' Conversion Transaction, as
applicable.
1.53. "New Class A Senior Preferred Stock" means, with respect to
the Vestar Transaction, the Class A Senior Preferred Stock to be issued by
Reorganized BIUSA (or an Affiliate thereof mutually agreed by Vestar and UNITE)
to the Employee Stock Plan on the Consummation Date, which Preferred Stock
shall be convertible or exchangeable in the event of a public offering by
Reorganized BIUSA or an Affiliate thereof acceptable to UNITE into common stock
of Reorganized BIUSA or such Affiliate at the price per share at which shares
are offered to the public.
1.54. "New Class B Preferred Stock" means, with respect to the
Vestar Transaction, the Class B Preferred Stock to be issued to Vestar by
Reorganized BIUSA or Reorganized BIC to the extent that the gross proceeds of
the New Mezzanine Financing are less than $50,000,000, on such terms and
conditions acceptable to Vestar in its sole discretion, provided that such
preferred stock (i) if issued by Reorganized BIUSA, shall rank junior to the
New Class A Senior Preferred Stock (if issued) and senior to the New Class C
Junior Preferred Stock, and (ii) shall not have an annual dividend rate in
excess of the greater of (A) 12% or (B) the rate which is 2% higher than the
interest rate on the New Subordinated Notes.
1.55. "New Class C Junior Preferred Stock" means, with respect to
the Vestar Transaction, the Class C Junior Preferred Stock to be issued by
Reorganized BIUSA on the Consummation Date, having an annual dividend rate
equal to the greater of (i) 12 1/2% or (ii) the rate which is 2 1/2% higher
than the interest rate on the New Subordinated Notes, which dividends
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shall cumulate at the option of the Board of Directors of Reorganized BIUSA.
1.56. "New Equity Investment" means (a) in the case of the Vestar
Transaction, the equity investment to be made by the New Equity Investors,
pursuant to which the New Equity Investors shall purchase (i) the number of
shares of New BIUSA Common Stock necessary to result in the New Equity
Investors owning 89.9% of the issued and outstanding common stock of
Reorganized BIUSA for not less than $31,465,000, (ii) $36,500,000 in New Class
C Junior Preferred Stock, and (iii) if necessary, up to $50,000,000 of New
Class B Preferred Stock, and (b) in the case of the Institutional Holders'
Conversion Transaction, the equity investment to be made by certain of the
Institutional Holders, as New Equity Investors, in the aggregate amount of not
less than $38,500,000, in consideration for which such Institutional Holders
shall receive 3,850,000 shares of New Preferred Stock, in each case pursuant to
the terms of a Subscription Agreement between each such New Equity Investor and
BIUSA.
1.57. "New Equity Investment Guarantor" means (a) in connection
with the Vestar Transaction, Vestar, and (b) in connection with the
Institutional Holders' Conversion Transaction, Merrill Lynch. Pursuant to the
terms of its Subscription Agreement, the New Equity Investment Guarantor shall
be liable to purchase all or any portion of the New Equity Investment Shares
upon the occurrence of any event or circumstance which results in any New
Equity Investment Shares remaining unsubscribed or unsold on the Consummation
Date.
1.58. "New Equity Investment Shares" means (a) in connection with
the Vestar Transaction, (i) the number of shares of New BIUSA Common Stock
necessary to result in the New Equity Investors owning 89.9% of the issued and
outstanding common stock of Reorganized BIUSA, (ii) the New Class C Junior
Preferred Stock, and (iii) if necessary, the New Class B Preferred Stock to be
purchased by the New Equity Investors with the New Equity Investment, and (b)
in connection with the Institutional Holders' Conversion Transaction, the
3,850,000 shares of New Preferred Stock to be purchased by certain of the
Institutional Holders with the New Equity Investment.
1.59. "New Equity Investors" means (a) in connection with the
Vestar Transaction, Vestar, Alvarez & Marsal, the Management Investors and the
Participating BIUSA Noteholders who execute and deliver to the Debtors a
Subscription Agreement, and (b) in connection with the Institutional Holders'
Conversion Transaction, each Institutional Holder who executes and delivers to
the Debtors a Subscription Agreement and the requisite deposit
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thereunder evidencing its binding commitment to purchase the New Equity
Investment Shares set forth on Schedule I thereto.
1.60. "New Mezzanine Financing" means, in connection with the
Vestar Transaction, the preferred stock of Reorganized BIC or senior discount
notes of Reorganized BIUSA, having terms and conditions acceptable to Vestar in
its sole discretion, which is sold in an offering pursuant to Rule 144A of the
Securities Act.
1.61. "New Preferred Stock" means (a) with respect to the Vestar
Transaction, collectively (i) the New Class A Senior Preferred Stock, (ii) the
New Class B Preferred Stock, (iii) the New Class C Junior Preferred Stock, and
(iv) to the extent New Mezzanine Financing includes preferred stock, the New
Mezzanine Financing, and (b) with respect to the Institutional Holders'
Conversion Transaction, the shares of 14.0% Pay-In-Kind Preferred Stock of
Reorganized BIUSA having the terms contained in Exhibit I to the Institutional
Holders' Subscription Agreement.
1.62. "New Subordinated Note Indenture" means that certain Trust
Indenture to be executed by (a) Reorganized BIC in connection with the Vestar
Transaction, or (b) Reorganized BIUSA in connection with the Institutional
Holders' Conversion Transaction, and the Indenture Trustee named therein with
respect to the issuance of the New Subordinated Notes. The New Subordinated
Note Indenture shall be acceptable in form and substance to the Indenture
Trustee and (i) with respect to the Vestar Transaction, to Vestar and the
underwriter of the New Subordinated Notes, and (ii) with respect to the
Institutional Holders' Conversion Transaction, to the Institutional Holders.
1.63. "New Subordinated Notes" means those certain Subordinated
Notes to be issued by (a) Reorganized BIC in connection with the Vestar
Transaction, or (b) Reorganized BIUSA in connection with the Institutional
Holders' Conversion Transaction, under the New Subordinated Note Indenture in
the aggregate original principal amount of (i) approximately $125,000,000 with
respect to the Vestar Transaction, and (ii) approximately $164,500,000 with
respect to the Institutional Holders' Conversion Transaction.
1.64. "New Working Capital Facilities" means, in connection with
the Institutional Holders' Conversion Transaction, one or more debt facilities
to be entered into by the Reorganized Debtors with one or more financial
institutions, effective as of the Consummation Date, to fund the
post-Consummation Date working capital requirements of the Reorganized Debtors
and, if necessary, make a portion of the distributions to, and fund a portion
of the reserves for the benefit of, the
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holders of Claims and Equity Interests as provided by this Plan of
Reorganization.
1.65. "Old BIUSA Common Stock" means the Equity Interests in
BIUSA evidenced by the issued and outstanding shares of common stock of BIUSA
as of the date immediately preceding the Consummation Date.
1.66. "Other Secured Claims" means any Secured Claim not
constituting a Senior Secured Claim or a BIUSA Secured Claim.
1.67. "Participating BIUSA Noteholder" has the meaning assigned
to such term in section 4.5(a)(ii)(2)(i) hereof.
1.68. "Person" means any individual, corporation, general
partnership, limited partnership, association, joint stock company, joint
venture, estate, trust, unincorporated organization, government, or any
political subdivision thereof.
1.69. "Petition Date" means July 17, 1995, the date on which each
of the Debtors filed its voluntary petition for relief under the Bankruptcy
Code.
1.70. "Plan of Reorganization" means this Third Amended Joint
Plan of Reorganization, dated March 30, 1998, including, without limitation,
the Exhibits and Schedules hereto, as the same may be amended or modified from
time to time in accordance with the terms hereof.
1.71. "Post-Petition Credit Agreement" means that certain
$55,000,000 Debtor In Possession Financing and Security Agreement dated as of
April 14, 1997, as the same may have been amended, modified and/or extended
from time to time in accordance with the terms thereof, among BIC, CP&C and
GAKM, as Borrowers, Nationsbank, N.A. (South), as Agent, and the financial
institutions party thereto, as Lenders.
1.72. "Post-Petition Interest Rate" means six percent (6.0%) per
annum.
1.73. "Post-Petition Lenders" has the meaning assigned to such
term in section 2.1 hereof.
1.74. "Pre-Petition BIC Credit Agreement" means, collectively,
that certain Credit Agreement dated as of March 14, 1990, as amended and
restated as of March 18, 1992, and as the same may have been further amended
from time to time in accordance with the terms thereof, among BIC, the lenders
named therein, Bank of America NT&SA, as agent, and Banque Nationale de Paris
New York Branch and Credit Lyonnais New York Branch as co-agents, and the
"Security Documents" referred to therein, as the
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same may have been amended from time to time in accordance with the terms
thereof.
1.75. "Pre-Petition BIUSA Credit Agreement" means, collectively,
that certain Term Loan Agreement dated as of September 24, 1992 among BIUSA,
Compagnie de Participations et D'Investissements Holding S.A., Credit Lyonnais,
Banque Nationale de Paris, and the other lenders identified in Exhibit A
thereto, and the collateral agreements referred to therein, as the same may
have been amended from time to time in accordance with the terms thereof.
1.76. "Priority Non-Tax Claim" means any Claim of a kind
specified in section 507(a)(2), (3), (4), (5), (6), (7) or (9) of the
Bankruptcy Code.
1.77. "Priority Tax Claim" means any Claim of a governmental unit
of the kind specified in section 507(a)(8) of the Bankruptcy Code.
1.78. "Proportionate Share" means, with reference to any
distribution on account of any Allowed Claim or Allowed Equity Interest in any
class or subclass, a distribution equal in amount to the ratio (expressed as a
percentage) that the amount of such Allowed Claim or Allowed Equity Interest
bears to the aggregate amount of Allowed Claims and Disputed Claims (if any),
or Allowed Equity Interests and Disputed Equity Interests (if any) of the same
class or subclass.
1.79. "Reorganized BIUSA Common Stock" means collectively, in
connection with the Vestar Transaction and after giving effect to the Vestar
Transaction Restructuring Transactions, the Old BIUSA Common Stock (to the
extent not redeemed) and the New BIUSA Common Stock.
1.80. "Releasees" means (a) (i) the Unsecured Creditors'
Committee, each of the individual creditor members thereof, each BIUSA
Noteholder, each holder of a Senior Secured Claim, Elf Aquitaine, Consortium de
Realisation, Credit Lyonnais and Vestar (but, as regards Vestar, only upon
consummation of the Vestar Transaction), and (ii) their respective successors,
predecessors, assignors, assignees, parents and subsidiaries, (b) all present
and former officers, directors, trustees, partners, employees, attorneys,
accountants, financial advisors, investment bankers, appraisers, stockholders,
affiliates, heirs, receivers, conservators, beneficiaries, executors,
administrators, agents and advisors of or to any of the entities identified in
clause (a) above, and (c) any Affiliate of any entity specified in clause (a)
or (b) above.
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1.81. "Reorganization Cases" means the cases commenced under
chapter 11 of the Bankruptcy Code by the Debtors on the Petition Date.
1.82. "Reorganized" means, with reference to any Debtor, such
Debtor or any successor in interest thereto from and after the Consummation
Date and after giving effect to the Restructuring Transactions.
1.83. "Restated Certificate of Incorporation" has the meaning
assigned to such term in section 6.4(a) hereof.
1.84. "Restructuring Transactions" means, as applicable, either
the Vestar Transaction Restructuring Transactions or the Institutional Holders'
Conversion Transaction Restructuring Transactions.
1.85. "RLWW" means Ralph Lauren Womenswear, Inc., now named
Bidermann Womenswear Corp.
1.86. "RLWW Plan of Reorganization" means that certain First
Amended Chapter 11 Plan of Reorganization for Ralph Lauren Womenswear, Inc.,
Now Named Bidermann Womenswear Corp. dated as of April 8, 1996, as amended, and
as confirmed by order of the Bankruptcy Court dated September 5, 1996.
1.87. "SAEPIC" means Societe Anonyme d'Etudes et Participations
Industrielles et Commerciales.
1.88. "Schedules" means the schedules of assets and liabilities
and the statements of financial affairs filed by the Debtors under section 521
of the Bankruptcy Code and the Official Bankruptcy Forms of the Bankruptcy
Rules as such schedules and statements have been or may be supplemented or
amended.
1.89. "Secured Claim" means a Claim secured by a Lien on
Collateral to the extent of the value of such Collateral, as determined in
accordance with section 506(a) of the Bankruptcy Code or, in the event that
such Claim is subject to setoff under section 553 of the Bankruptcy Code, to
the extent of such setoff, provided however, that if a class or subclass of
Secured Claims timely elects application of Bankruptcy Code section 1111(b)(2),
each Claim in such class or subclass shall be treated as a Secured Claim in the
full amount thereof.
1.90. "Securities Act" means the Securities Act of 1933, as
amended, and the rules and regulations promulgated thereunder.
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1.91. "Senior Secured Claim" means any Secured Claim arising
under the Pre-Petition BIC Credit Agreement or evidenced by any of the
promissory notes issued thereunder.
1.92. "Shelf Registration Statement" means, in connection with
the Institutional Holders' Conversion Transaction, one or more "shelf"
registration statement(s) filed by Reorganized BIUSA covering one or more of
(a) the New Subordinated Notes, (b) the New Preferred Stock, and/or (c) the New
BIUSA Common Stock, to the extent directed or required pursuant to section 6.5
hereof, on any appropriate form pursuant to the Securities Act or any similar
rule that may be adopted by the Securities and Exchange Commission.
1.93. "Subscription Agreement" means (a) with respect to the
Vestar Transaction, one or more Subscription Agreements between or among, as
the case may be, the New Equity Investors and BIUSA, in form and substance
acceptable to the Debtors (as determined by the Plan Facilitator), pursuant to
which such New Equity Investors collectively agree to make the New Equity
Investment and Vestar agrees to make the Vestar Transaction Deposit, each as
required by the Vestar Transaction, and (b) with respect to the Institutional
Holders' Conversion Transaction, a Subscription Agreement between certain
Institutional Holders and BIUSA, in form and substance acceptable to the
Debtors (as determined by the Plan Facilitator), pursuant to which such
Institutional Holders agree to make the New Equity Investment required by the
Institutional Holders Conversion Transaction.
1.94. "Subsidiary Equity Interests" means the Equity Interests in
any of the Debtors held by any of the other Debtors.
1.95. "Supporting Letter of Credit" has the meaning assigned to
such term in section 2.1 hereof.
1.96. "Unsecured Claim" means any Claim against a Debtor that is
not an Administration Expense Claim, a Priority Non-Tax Claim, a Priority Tax
Claim, an Affiliate Claim or a Secured Claim.
1.97. "Unsecured Creditors' Committee" means, on and after the
date of its organization by the U.S. Trustee, the statutory unsecured
creditors' committee appointed in the Reorganization Cases under section 1102
of the Bankruptcy Code, as such Committee may have been reconstituted from time
to time.
1.98. "UNITE" means Union of Needletrades Industrial Textile
Employees.
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1.99. "U.S. Trustee" means the United States Trustee appointed
under section 581, title 28, United States Code to serve in the Southern
District of New York.
1.100. "Vestar" means Vestar Capital Partners III, L.P., or it
designated Affiliate.
1.101. "Vestar Letter Agreement" means that certain letter
agreement among Maurice Bidermann, SAEPIC, Vestar, the Debtors and the Plan
Facilitator (among others), dated March 30, 1998, a copy of which is annexed to
this Plan of Reorganization as Exhibit A.
1.102. "Vestar Transaction" means the transaction pursuant to
which Vestar, individually or as part of a group, will acquire a controlling
interest in the Reorganized Debtors, all as more fully set forth in the Vestar
Letter Agreement.
1.103. "Vestar Transaction Consummation Date" means May 20, 1998,
or such earlier date as may be agreed to by Vestar. Such date may be extended
(a) at the request of the Debtors (at the direction of the Plan Facilitator)
with the consent of Vestar, the Unsecured Creditors' Committee and the
Institutional Holders, which consent shall not be unreasonably withheld, or (b)
at the request of Vestar, with the consent of the Plan Facilitator, the
Unsecured Creditors' Committee and the Institutional Holders, which consent
shall not be unreasonably withheld. In no event shall the Vestar Transaction
Consummation Date be earlier than the first Business Day after the date on
which all conditions precedent to the occurrence of the Consummation Date, as
set forth in sections 11.2(a) and (c) hereof, shall have been satisfied or
waived in accordance with section 11.3 of this Plan of Reorganization.
1.104. "Vestar Transaction Deposit" means the $12,000,000 deposit
to be made by Vestar in accordance with the terms of, and subject to the
conditions set forth in, section 2.1(f) of the Subscription Agreement to which
Vestar is a party.
1.105. "Vestar Transaction Restructuring Transactions" means the
Restructuring Transactions to be effected upon the consummation of the Vestar
Transaction, as set forth on Exhibit B to this Plan of Reorganization.
B. Interpretation; Application of
Definitions and Rules of Construction.
Unless otherwise specified, all section, schedule or exhibit
references in this Plan of Reorganization are to the respective section in,
article of, or schedule or exhibit to, this Plan of Reorganization, as the same
may be amended, waived,
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or modified from time to time. The words "herein," "hereof," "hereto,"
"hereunder," and other words of similar import refer to this Plan of
Reorganization as a whole and not to any particular section, subsection or
clause contained in this Plan of Reorganization. A term used herein that is
not defined herein shall have the meaning assigned to that term in the
Bankruptcy Code. The rules of construction contained in section 102 of the
Bankruptcy Code shall apply to the construction of this Plan of Reorganization.
The headings in this Plan of Reorganization are for convenience of reference
only and shall not limit or otherwise affect the provisions hereof.
C. Exhibits and Schedules.
All Exhibits and Schedules to this Plan of Reorganization are
incorporated into and are a part of this Plan of Reorganization as if set forth
in full herein.
SECTION 2. PROVISIONS FOR PAYMENT OF
ADMINISTRATION EXPENSE CLAIMS;
PRIORITY TAX CLAIMS
2.1. Administration Expense Claims.
(a) General. Each holder of an Allowed Administration Expense Claim
shall be distributed on account of such Administration Expense Claim an amount,
in Cash, equal to the amount of such Administration Expense Claim, on the later
to occur of (i) the Consummation Date, and (ii) the date on which such
Administration Expense Claim becomes an Allowed Claim, except to the extent
that any entity entitled to payment of any Administration Expense Claim agrees
to a different treatment; provided, however, that (x) Administration Expense
Claims representing liabilities incurred in the ordinary course of business by
the Debtors in Possession or liabilities arising under loans or advances to or
other obligations incurred by the Debtors in Possession, whether or not
incurred in the ordinary course of business (other than loans or advances to
the Debtors under the Post-Petition Credit Agreement), shall be assumed and
paid by the Reorganized Debtors in accordance with the terms and subject to the
conditions of any agreements governing, instruments evidencing or other
documents relating to, such transactions, (y) fees required to be paid pursuant
to 28 U.S.C. Section 1930 shall be paid on or before the thirtieth (30th)
Business Day after the Debtors' receipt of an invoice therefor, and
(z) outstanding obligations incurred by the Debtors in Possession under the
Post-Petition Credit Agreement shall be treated as follows: (A) non-contingent
obligations shall be paid in full, in Cash, on the Consummation Date, and
(B) with respect to each contingent obligation evidenced by a letter of credit,
on the
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Consummation Date, the Reorganized Debtors shall deposit with Nationsbank,
N.A., for the ratable benefit of the lenders under the Post-Petition Credit
Agreement (the "Post-Petition Lenders"), either (1) a standby letter of credit
(a "Supporting Letter of Credit") in form and substance, and issued by a
financial institution, satisfactory to the Post-Petition Lenders, in an amount
equal to 105% of the greatest amount for which such letter of credit may be
drawn, under which Supporting Letter of Credit Nationsbank, N.A. shall be
entitled to draw amounts necessary to reimburse itself and the other
Post-Petition Lenders for payments made by Nationsbank, N.A. and the other
Post-Petition Lenders under such letter of credit or under any reimbursement or
guaranty agreement with respect thereto, or (2) deposit cash collateral in an
amount equal to 105% of the amount necessary to reimburse Nationsbank, N.A. and
the other Post-Petition Lenders for payments made by Nationsbank, N.A. and the
other Post-Petition Lenders under such letter of credit or under any
reimbursement or guaranty agreement with respect thereto. Such Supporting
Letter of Credit or cash collateral shall be held by Nationsbank, N.A. for the
benefit of itself and the other Post-Petition Lenders as security for, and to
provide for the payment of, the Reimbursement Obligations (as defined in the
Post-Petition Credit Agreement). Any cash collateral shall be deposited in the
cash collateral account, as defined in the Post-Petition Credit Agreement, and
shall be administered in accordance with the provisions of section 4.15 of the
Post-Petition Credit Agreement.
(b) Compensation and Reimbursement Claims. All entities seeking an
award by the Bankruptcy Court of compensation for services rendered or
reimbursement of expenses incurred through and including the Consummation Date
under sections 503(b)(2), 503(b)(3), 503(b)(4) or 503(b)(5) of the Bankruptcy
Code (i) shall file their respective final applications for allowance of
compensation for services rendered and reimbursement of expenses incurred by
the date that is forty-five (45) days after the Consummation Date (provided
however, that the Plan Facilitator, any professionals retained by the Plan
Facilitator, Alvarez & Marsal, and Stevens & Lee, P.C. shall have until
forty-five days after the entry of an order by the Court discharging the Plan
Facilitator from any further duties in these cases to file their respective
final applications for allowance of compensation for services rendered and
reimbursement for expenses incurred) and, if granted such an award by the
Bankruptcy Court, (ii) shall be paid in full in such amounts as are Allowed by
the Bankruptcy Court (x) on the date upon which such Administration Expense
Claim becomes an Allowed Claim, or (y) upon such other terms as may be mutually
agreed upon between such holder of an Allowed Administration Expense Claim and
the Debtors or, on and after the Consummation Date, the Reorganized Debtors,
provided further, that the Debtors or the Reorganized Debtors, as
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applicable, shall continue to pay all fees and expenses incurred through the
Consummation Date in accordance with the Administrative Order and as otherwise
set forth in this Plan of Reorganization.
(c) Employee Administrative Wage Claims.
(i) All Allowed Employee Administrative Wage Claims shall be
satisfied by the creation and initial funding of the Employee Stock Plan.
(ii) If the Employee Stock Plan shall not be consummated, each
holder of an Allowed Employee Administrative Wage Claim shall be distributed on
account of such Employee Administrative Wage Claim an amount, in Cash, equal to
the amount of such Allowed Employee Administrative Wage Claim, on the later to
occur of (x) the Consummation Date, and (y) the date on which such Employee
Administrative Wage Claim becomes an Allowed Claim.
(iii) In the event that the Debtors shall be legally prohibited from
funding the Employee Stock Plan in the full amount of the Allowed Employee
Administrative Wage Claims on the Consummation Date, then the Allowed Employee
Administrative Wage Claims shall be satisfied by (x) the creation and funding
of the Employee Stock Plan to the extent legally permitted, and (y) the
distribution to each holder of an Allowed Employee Administrative Wage Claim of
an amount, in Cash, equal to the amount of such Allowed Employee Administrative
Wage Claim remaining unsatisfied after taking into account all contributions
made to the Employee Stock Plan on account of such Allowed Claim on the
Consummation Date, on the later to occur of (A) the Consummation Date, and
(B) the date on which such Employee Administrative Wage Claim becomes an
Allowed Claim.
2.2. Priority Tax Claims.
Each holder of an Allowed Priority Tax Claim shall be distributed on
account of such Allowed Priority Tax Claim, at the option of the Debtors or, on
and after the Consummation Date, the Reorganized Debtors, either (a) a payment,
in Cash, equal to the amount of such Allowed Priority Tax Claim, together with
interest thereon from the Petition Date through the Consummation Date at the
Post-Petition Interest Rate, on the later to occur of (i) the Consummation
Date, and (ii) the date on which such Priority Tax Claim becomes an Allowed
Claim, or (b) annual Cash payments commencing on the later to occur of the
Consummation Date and the date on which such Priority Tax Claim becomes an
Allowed Claim, over a period not exceeding six (6) years after the date of
assessment of such Allowed Priority Tax Claim, together with interest (payable
quarterly in arrears) on the unpaid balance of such Allowed Priority Tax Claim
at the Post-Petition Interest
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Rate. Allowed Priority Tax Claims may be prepaid, at any time, without
penalty.
SECTION 3. CLASSIFICATION OF CLAIMS
AND EQUITY INTERESTS
Claims against and Equity Interests in the Debtors are divided into
the following classes:
Class 1 - Priority Non-Tax Claims
Class 2 - Senior Secured Claims
Class 3 - BIUSA Secured Claims
Subclass 3A - Bidermann Industries U.S.A., Inc.
Subclass 3B - Consumer Direct Corporation
Subclass 3C - Arrow Factory Stores, Inc.
Class 4 - Other Secured Claims
Subclass 4A - Bidermann Industries U.S.A., Inc.
Subclass 4B - Bidermann Industries Corp.
Subclass 4C - Arrow Factory Stores Inc.
Subclass 4D - Arrow Inter-America, Inc.
Subclass 4E - Bidermann Industries Licensing, Inc.
Subclass 4F - Bidermann Tailored Clothing, Inc.
Subclass 4G - Bidertex Services Inc.
Subclass 4H - Cluett Peabody Holding Corp.
Subclass 4I - Cluett Peabody Resources Corporation
Subclass 4J - Cluett, Peabody & Co., Inc.
Subclass 4K - Consumer Direct Corporation
Subclass 4L - GAKM Resources Corporation
Subclass 4M - Great American Knitting Mills, Inc.
Subclass 4N - Karl Lagerfeld Womenswear, Inc.
Subclass 4O - MW Warehouse, Inc.
Subclass 4P - Old Mission Textiles, Inc.
Class 5 - General Unsecured Claims
Subclass 5A - Bidermann Industries U.S.A., Inc.
Subclass 5A1 - BIUSA: Non-BIUSA Note Claims
Subclass 5A2 - BIUSA: BIUSA Note Claims
Subclass 5B - Bidermann Industries Corp.
Subclass 5C - Arrow Factory Stores Inc.
Subclass 5D - Arrow Inter-America, Inc.
Subclass 5E - Bidermann Industries Licensing, Inc.
Subclass 5F - Bidermann Tailored Clothing, Inc.
Subclass 5G - Bidertex Services Inc.
Subclass 5H - Cluett Peabody Holding Corp.
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Subclass 5I - Cluett Peabody Resources Corporation
Subclass 5J - Cluett, Peabody & Co. Inc.
Subclass 5K - Consumer Direct Corporation
Subclass 5L - GAKM Resources Corporation
Subclass 5M - Great American Knitting Mills, Inc.
Subclass 5N - Karl Lagerfeld Womenswear, Inc.
Subclass 5O - MW Warehouse, Inc.
Subclass 5P - Old Mission Textiles, Inc.
Class 6 - Affiliate Claims
Subclass 6A - Bidermann Industries U.S.A., Inc.
Subclass 6B - Bidermann Industries Corp.
Subclass 6C - Arrow Factory Stores Inc.
Subclass 6D - Arrow Inter-America, Inc.
Subclass 6E - Bidermann Industries Licensing, Inc.
Subclass 6F - Bidermann Tailored Clothing, Inc.
Subclass 6G - Bidertex Services Inc.
Subclass 6H - Cluett Peabody Holding Corp.
Subclass 6I - Cluett Peabody Resources Corporation
Subclass 6J - Cluett, Peabody & Co. Inc.
Subclass 6K - Consumer Direct Corporation
Subclass 6L - GAKM Resources Corporation
Subclass 6M - Great American Knitting Mills, Inc.
Subclass 6N - Karl Lagerfeld Womenswear, Inc.
Subclass 6O - MW Warehouse, Inc.
Subclass 6P - Old Mission Textiles, Inc.
Class 7 - Equity Interests
Subclass 7A - Old Bidermann Industries U.S.A., Inc.
Common Stock
Subclass 7B - Bidermann Industries U.S.A., Inc.
Other Equity Interests
Subclass 7C - Subsidiary Equity Interests
SECTION 4. PROVISIONS FOR TREATMENT OF CLAIMS
AND EQUITY INTERESTS UNDER THE PLAN
4.1. Priority Non-Tax Claims (Class 1).
Each holder of an Allowed Priority Non-Tax Claim shall be distributed
on account of such Allowed Priority Non-Tax Claim a payment, in Cash, equal to
the amount of its Allowed Priority Non-Tax Claim, on the later to occur of (a)
the Consummation Date, and (b) the date on which such Priority Non-Tax Claim
becomes an Allowed Claim, together with interest thereon from the Petition Date
through the Consummation Date at the Post-Petition Interest Rate.
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4.2. Senior Secured Claims (Class 2).
(a) Allowance of Senior Secured Claims. The Senior Secured Claims
are hereby allowed in the aggregate amount of $153,776,786.86 as of March 31,
1998, such amount to be subject to adjustment to give effect to (i) the
continuing accrual of interest thereon from April 1, 1998 to (but not
including) the Consummation Date at the floating annual rate provided in
section 2.09 of the Pre-Petition BIC Credit Agreement, (ii) the application of
adequate protection payments which may be made from and after April 1, 1998 and
prior to the Consummation Date under the Adequate Protection Orders, and (iii)
$1,000,000 to reimburse the Senior Secured Lenders for certain fees and
expenses incurred by them and not reimbursed by the Debtors pursuant to the
Adequate Protection Orders. No other fees or expenses of the Senior Secured
Lenders shall be paid by the Debtors or the Reorganized Debtors pursuant to
this Plan of Reorganization or otherwise including, without limitation,
pursuant to an application made under section 503(b) of the Bankruptcy Code.
(b) Treatment of Senior Secured Claims.
(i) Vestar Transaction. If the Vestar Transaction is
consummated, each holder of an Allowed Senior Secured Claim shall, in
accordance with the Restructuring Transactions, be distributed on account of
such Allowed Senior Secured Claim on the Consummation Date a payment, in Cash,
an amount equal to its Proportionate Share of such Allowed Claim, calculated in
accordance with section 4.2(a) of this Plan of Reorganization.
(ii) Institutional Holders' Conversion Transaction. If the
Vestar Transaction is not consummated and the Institutional Holders' Conversion
Transaction is consummated, on the Consummation Date, each holder of an Allowed
Senior Secured Claim shall, in accordance with the Restructuring Transactions,
be distributed on account of such Allowed Senior Secured Claim its
Proportionate Share of (i) $111,354,440 in aggregate original principal amount
of New Subordinated Notes and (ii) 4,164,556 shares of New BIUSA Common Stock.
In addition, on the Consummation Date, the Debtors shall distribute to the
holders of the Allowed Senior Secured Claims, in Cash, an amount equal to the
amount by which the Allowed Senior Secured Claim (calculated in accordance with
section 4.2(a) of this Plan of Reorganization) exceeds $153,000,000, including
the reasonable fees, expenses and other charges arising prior to the
Consummation Date and payable by the Debtors pursuant to the Pre-Petition BIC
Credit Agreement, to the extent such fees, expenses and other charges
constitute a portion of the Allowed Senior
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Secured Claims in accordance with section 506(b) of the Bankruptcy Code.
(c) Related Matters. On the Consummation Date, the Reorganized
Debtors shall, at their option, either (i) cause all letters of credit issued
and outstanding under the Pre-Petition BIC Credit Agreement to be surrendered
to the Senior Lender Agent, (ii) provide the Senior Lender Agent with cash
collateral equal to 105% of the face amount of any issued and outstanding
letter of credit not surrendered, together with the right to apply such cash
collateral to satisfy any reimbursement obligation of any Debtor upon the
occurrence of any draw under any such letter of credit, or (iii) cause the
issuance to the Senior Lender Agent of one or more back to back letters of
credit issued by financial institutions, and in form and substance, reasonably
acceptable to the Senior Lender Agent permitting a draw thereunder upon any
draw under any corresponding letter of credit issued by the Senior Lender
Agent.
4.3. BIUSA Secured Claims (Class 3).
(a) BIUSA (Subclass 3A). The BIUSA Secured Claims shall be Allowed
against BIUSA in the amount of $0, representing the value of the issued and
outstanding shares of common stock of CDC owned by BIUSA and subject to the
Lien of the holders of the Allowed Claims in Subclass 3A (BIUSA) of Class 3.
(b) CDC (Subclass 3B). The BIUSA Secured Claims shall be Allowed
against CDC in the amount of $2,000,000, representing the value of the issued
and outstanding shares of common stock of GAKM-R and CP-R owned by CDC and
subject to the Lien of the holders of the Allowed Claims in Subclass 3B (CDC)
of Class 3.
(c) AFS (Subclass 3C). The BIUSA Secured Claims shall be Allowed
against AFS in the amount of $3,000,000, representing the value of the assets
of AFS subject to the Lien of the holders of the Allowed Claims in Subclass 3C
(AFS) of Class 3.
(d) Treatment of BIUSA Secured Claims. The BIUSA Secured Claims
shall be treated as part of the BIUSA Note Claims in Subclass 5A2 of Class 5
(General Unsecured Claims) in accordance with section 4.5(a)(ii) of this Plan
of Reorganization.
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4.4. Other Secured Claims (Class 4).
Each Allowed Other Secured Claim in each subclass of Class 4 shall,
at the option of the applicable Debtor, either (a) be made unimpaired in
accordance with section 1124(2) of the Bankruptcy Code, (b) be distributed on
account of such Other Secured Claim a payment, in Cash, in an amount equal to
the amount of such Allowed Other Secured Claim, together with interest from the
Petition Date through the Consummation Date at the rate set forth in any
agreements governing, instruments evidencing or other documents relating to
such Other Secured Claim, or if no interest rate is set forth therein, at the
Post-Petition Interest Rate, up to the value of the Collateral securing such
Allowed Other Secured Claim, or (c) be distributed on account of such Allowed
Other Secured Claim the Collateral securing such Claim, such distributions to
be made in the case of (b) and (c), above, on the later to occur of (i) the
Consummation Date, and (ii) the date on which such Other Secured Claim becomes
an Allowed Claim.
4.5. General Unsecured Claims (Class 5).
(a) BIUSA (Subclass 5A).
(i) Non-BIUSA Note Claims (Subclass 5A1).
(1) Treatment. Each holder of an Allowed General Unsecured
Claim in Subclass 5A1 (BIUSA: Non-BIUSA Note Claims) of Class 5 shall, in
accordance with the Restructuring Transactions, be distributed on account of
such Allowed General Unsecured Claim a payment, in Cash, in an amount equal to
the amount of such Allowed Claim, on the later to occur of (x) the Consummation
Date, and (y) the date on which such General Unsecured Claim in Subclass 5A1
(BIUSA: Non-BIUSA Note Claims) of Class 5 becomes an Allowed Claim.
(ii) BIUSA Note Claims (Subclass 5A2).
(1) Allowance of BIUSA Note Claims. The BIUSA Note Claims are
hereby allowed in the aggregate amount of $145,772,833 as of March 31, 1998,
such amount to be subject to adjustment to give effect to the continuing
accrual of interest thereon from April 1, 1998 to (but not including) the
Consummation Date, calculated at the rates, and in the manner, set forth in the
BIUSA Notes, provided that in no event shall any default rate of interest be
used in such calculation, and provided further, that for purposes of the 1991
BIUSA Note, the rate of interest to be used in such calculation shall be the
floating rate of interest applicable to Revolving Credit Loans under section
2.08 of the Pre-Petition BIC Credit Agreement as in effect from time to time.
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(2) Treatment of BIUSA Note Claims.
i) Vestar Transaction. If the Vestar Transaction is
consummated, on the Consummation Date, each holder of an Allowed BIUSA Note
Claim in Subclass 5A2 (BIUSA: BIUSA Note Claims) of Class 5 shall, in
accordance with the Restructuring Transactions, be distributed on account of
such Allowed BIUSA Note Claim a payment, in Cash, in an amount equal to the
amount of such Allowed Claim, calculated in accordance with section
4.5(a)(ii)(1) of this Plan of Reorganization. Each holder of an Allowed BIUSA
Note Claim in Subclass 5A2 (BIUSA: BIUSA Note Claims) of Class 5 shall have the
right to subscribe for up to 20% of each of the New BIUSA Common Stock,
$36,500,000 in New Class C Junior Preferred Stock and, if issued, New Class B
Preferred Stock, which Vestar is obligated to purchase (such right to be
exercised for equal percentage interests in each such class of common or
preferred stock which Vestar purchases) (each such holder of a BIUSA Note Claim
who elects such a right, a "Participating BIUSA Noteholder"). Such right must
be exercised irrevocably by such holder of an Allowed BIUSA Note Claim no later
than April 15, 1998 by executing and delivering to the Debtors (with a copy to
Vestar) (A) a Subscription Agreement substantially in the form of the
Subscription Agreement executed by Vestar (and having annexed thereto the same
exhibits attached to the Subscription Agreement executed by Vestar) and
otherwise satisfactory to the Debtors and the Plan Facilitator, and (B) a
stockholders' agreement substantially in the form annexed to the Vestar
Subscription Agreement and in form and substance acceptable to Vestar. The
exercise of such right shall relieve Vestar of its rights and obligations
referred to in sections 6.2(a)(i) and 11.2(a)(ii) hereof to purchase such
portion of each such class of capital stock.
ii) Institutional Holders' Conversion Transaction. If the
Vestar Transaction is not consummated and the Institutional Holders' Conversion
Transaction is consummated, on the Consummation Date, each holder of an Allowed
General Unsecured Claim in Subclass 5A2 (BIUSA: BIUSA Note Claims) of Class 5
shall, in accordance with the Restructuring Transactions, be distributed on
account of such Allowed General Unsecured Claim, on the Consummation Date, its
Proportionate Share of (i) $38,645,560 in aggregate original principal amount
of New Subordinated Notes, and (ii) 10,485,444 shares of New BIUSA Common
Stock.
(b) BIC (Subclass 5B). Each holder of an Allowed General Unsecured
Claim in Subclass 5B (BIC) of Class 5 shall, in accordance with the
Restructuring Transactions, be distributed on account of such Allowed General
Unsecured Claim a payment, in Cash, in an amount equal to the amount of such
Allowed Claim, on the later to occur of (i) the Consummation Date and (ii) the
date
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on which such General Unsecured Claim in Subclass 5B (BIC) of Class 5 becomes
an Allowed Claim.
(c) AFS (Subclass 5C). Each holder of an Allowed General Unsecured
Claim in Subclass 5C (AFS) of Class 5 shall, in accordance with the
Restructuring Transactions, be distributed on account of such Allowed General
Unsecured Claim a payment, in Cash, in an amount equal to the amount of such
Allowed Claim, on the later to occur of (i) the Consummation Date and (ii) the
date on which such General Unsecured Claim in Subclass 5C (AFS) of Class 5
becomes an Allowed Claim.
(d) AIA (Subclass 5D). Each holder of an Allowed General Unsecured
Claim in Subclass 5D (AIA) of Class 5 shall, in accordance with the
Restructuring Transactions, be distributed on account of such Allowed General
Unsecured Claim a payment, in Cash, in an amount equal to the amount of such
Allowed Claim, on the later to occur of (i) the Consummation Date and (ii) the
date on which such General Unsecured Claim in Subclass 5D (AIA) of Class 5
becomes an Allowed Claim.
(e) BIL (Subclass 5E). Each holder of an Allowed General Unsecured
Claim in Subclass 5E (BIL) of Class 5 shall, in accordance with the
Restructuring Transactions, be distributed on account of such Allowed General
Unsecured Claim a payment, in Cash, in an amount equal to the amount of such
Allowed Claim, on the later to occur of (i) the Consummation Date, and (ii) the
date on which such General Unsecured Claim in Subclass 5E (BIL) of Class 5
becomes an Allowed Claim.
(f) BTC (Subclass 5F). Each holder of an Allowed General Unsecured
Claim in Subclass 5F (BTC) of Class 5 shall, in accordance with the
Restructuring Transactions, be distributed on account of such Allowed General
Unsecured Claim a payment, in Cash, in an amount equal to the amount of such
Allowed Claim, on the later to occur of (i) the Consummation Date, and (ii) the
date on which such General Unsecured Claim in Subclass 5F (BTC) of Class 5
becomes an Allowed Claim.
(g) BTS (Subclass 5G). Each holder of an Allowed General Unsecured
Claim in Subclass 5G (BTS) of Class 5 shall, in accordance with the
Restructuring Transactions, be distributed on account of such Allowed General
Unsecured Claim a payment, in Cash, in an amount equal to the amount of such
Allowed Claim, on the later to occur of (i) the Consummation Date, and (ii) the
date on which such General Unsecured Claim in Subclass 5G (BTC) of Class 5
becomes an Allowed Claim.
(h) CPHC (Subclass 5H). Each holder of an Allowed General Unsecured
Claim in Subclass 5H (CPHC) of Class 5 shall, in accordance with the
Restructuring Transactions, be distributed
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on account of such Allowed General Unsecured Claim a payment, in Cash, in an
amount equal to the amount of such Allowed Claim, on the later to occur of
(i) the Consummation Date, and (ii) the date on which such General Unsecured
Claim in Subclass 5H (CPHC) of Class 5 becomes an Allowed Claim.
(i) CP-R (Subclass 5I). Each holder of an Allowed General Unsecured
Claim in Subclass 5I (CP-R) of Class 5 shall, in accordance with the
Restructuring Transactions, be distributed on account of such Allowed General
Unsecured Claim a payment, in Cash, in an amount equal to the amount of such
Allowed Claim, on the later to occur of (i) the Consummation Date, and (ii) the
date on which such General Unsecured Claim in Subclass 5I (CP-R) of Class 5
becomes an Allowed Claim.
(j) CP&C (Subclass 5J). Each holder of an Allowed General Unsecured
Claim in Subclass 5J (CP&C) of Class 5 shall, in accordance with the
Restructuring Transactions, be distributed on account of such Allowed General
Unsecured Claim a payment, in Cash, in an amount equal to the amount of such
Allowed Claim, on the later to occur of (i) the Consummation Date, and (ii) the
date on which such General Unsecured Claim in Subclass 5J (CP&C) of Class 5
becomes an Allowed Claim.
(k) CDC (Subclass 5K). Subject to the provisions of section 13.2
hereof, each holder of an Allowed General Unsecured Claim in Subclass 5K (CDC)
of Class 5 shall, in accordance with the Restructuring Transactions, be
distributed on account of such Allowed General Unsecured Claim a payment, in
Cash, in an amount equal to the amount of such Allowed Claim, on the later to
occur of (i) the Consummation Date, and (ii) the date on which such General
Unsecured Claim in Subclass 5K (CDC) of Class 5 becomes an Allowed Claim.
(l) GAKM-R (Subclass 5L). Each holder of an Allowed General
Unsecured Claim in Subclass 5L (GAKM-R) of Class 5 shall, in accordance with
the Restructuring Transactions, be distributed on account of such Allowed
General Unsecured Claim a payment, in Cash, in an amount equal to the amount of
such Allowed Claim, on the later to occur of (i) the Consummation Date, and
(ii) the date on which such General Unsecured Claim in Subclass 5L (GAKM-R) of
Class 5 becomes an Allowed Claim.
(m) GAKM (Subclass 5M). Each holder of an Allowed General Unsecured
Claim in Subclass 5M (GAKM) of Class 5 shall, in accordance with the
Restructuring Transactions, be distributed on account of such Allowed General
Unsecured Claim a payment, in Cash, in an amount equal to the amount of such
Allowed Claim, on the later to occur of (i) the Consummation Date, and (ii) the
date on which such General Unsecured Claim in Subclass 5M (GAKM) of Class 5
becomes an Allowed Claim.
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(n) KLW (Subclass 5N). Each holder of an Allowed General Unsecured
Claim in Subclass 5N (KLW) of Class 5 shall, in accordance with the
Restructuring Transactions, be distributed on account of such Allowed General
Unsecured Claim a payment, in Cash, in an amount equal to the amount of such
Allowed Claim, on the later to occur of (i) the Consummation Date, and (ii) the
date on which such General Unsecured Claim in Subclass 5N (KLW) of Class 5
become an Allowed Claim.
(o) MWW (Subclass 5O). Each holder of an Allowed General Unsecured
Claim in Subclass 5O (MWW) of Class 5 shall, in accordance with the
Restructuring Transactions, be distributed on account of such Allowed General
Unsecured Claim a payment, in Cash, in an amount equal to the amount of such
Allowed Claim, on the later to occur of (i) the Consummation Date, and (ii) the
date on which such General Unsecured Claim in Subclass 5O (MWW) of Class 5
become an Allowed Claim.
(p) OMT (Subclass 5P). Each holder of an Allowed General Unsecured
Claim in Subclass 5P (OMT) of Class 5 shall, in accordance with the
Restructuring Transactions, be distributed on account of such Allowed General
Unsecured Claim a payment, in Cash, in an amount equal to the amount of such
Allowed Claim, on the later to occur of (i) the Consummation Date, and (ii) the
date on which such General Unsecured Claim in Subclass 5P (OMT) of Class 5
become an Allowed Claim.
(q) Post-Petition Interest. In addition to the distributions to be
made to holders of Allowed General Unsecured Claims as set forth in sections
4.5(a) through 4.5(p) of this Plan of Reorganization, each holder of an Allowed
General Unsecured Claim in any Subclass of Class 5 (General Unsecured Claims),
other than Subclass 5A2 (BIUSA: BIUSA Note Claims), shall be distributed, on
account of such Allowed Claim, interest on such Allowed Claim calculated at the
Post-Petition Interest Rate from the Petition Date through the Consummation
Date. If the Vestar Transaction is consummated, the holders of the Allowed
BIUSA Note Claims in Subclass 5A2 shall receive interest on such Claims
calculated in accordance with section 4.5(a)(ii)(1) of this Plan of
Reorganization. If the Vestar Transaction is not consummated and the
Institutional Holders' Conversion Transaction is consummated, the holders of
the Allowed BIUSA Note Claims shall receive interest on such Claims up to the
value of the distributions to be made to the holders of such claims, as set
forth in section 4.5(a)(ii)(2) of this Plan of Reorganization.
4.6. Affiliate Claims (Class 6).
On the Consummation Date, each Affiliate Claim shall, at the option
of the Debtors or the Reorganized Debtors, either (a) be extinguished by
contribution to capital, distribution
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on account of Equity Interests or otherwise as determined by the Debtors or
Reorganized Debtors in a manner that will not give rise to gain or income for
Federal or state income tax purposes, and the holders of such Claims shall not
receive or retain any property on account thereof, or (b) continue in full
force and effect beyond the Consummation Date. Each of the Debtors hereby
consents, on behalf of itself and its non-Debtor subsidiaries, if any, to such
treatment.
4.7. Equity Interests (Class 7).
(a) Old BIUSA Common Stock (Subclass 7A).
(i) Vestar Transaction. If the Vestar Transaction is
consummated, in accordance with the Restructuring Transactions on the later to
occur of (i) the Consummation Date, and (ii) the date on which such Equity
Interest in Subclass 7A (Old BIUSA Common Stock) of Class 7 becomes an Allowed
Equity Interest, and upon compliance with the provisions of section 7.2 hereof,
the Reorganized Debtors shall (A) redeem 89.9% of each holders' Old BIUSA
Common Stock for a Proportionate Share of $13,000,000 in aggregate original
principal amount of New Subordinated Notes, and (B) issue a new share
certificate to such holder evidencing retention of its remaining 10.1% of such
Equity Interest. After issuance of the New BIUSA Common Stock, the Old BIUSA
Common Stock shall represent 10.1% of the Reorganized BIUSA Common Stock.
(ii) Institutional Holders' Conversion Transaction. If the
Vestar Transaction is not consummated and the Institutional Holders' Conversion
Transaction is consummated, each holder of an Allowed Equity Interest in
Subclass 7A (Old BIUSA Common Stock) of Class 7 shall, in accordance with the
Restructuring Transactions, be distributed on the later to occur of (i) the
Consummation Date, and (ii) the date on which such Equity Interest in Subclass
7A (Old BIUSA Common Stock) of Class 7 becomes an Allowed Equity Interest, a
Proportionate Share of $14,500,000, either in Cash or, at the option of the
Plan Facilitator after consultation with the Institutional Holders, in
aggregate original principal amount of New Subordinated Notes, or some
combination thereof. All holders of Allowed Equity Interests in Subclass 7A
will receive the same percentage of Cash and New Senior Subordinated Notes.
(b) BIUSA Other Equity Interests (Subclass 7B). On the Consummation
Date, each Equity Interest in BIUSA not evidenced by Old BIUSA Common Stock
shall, in accordance with the Restructuring Transactions, be extinguished, and
the holders thereof shall not receive or retain any property on account
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(c) Subsidiary Equity Interests (Subclass 7C). On the Consummation
Date, each holder of an Allowed Subsidiary Equity Interest shall be treated in
accordance with the Restructuring Transactions. Each of the Debtors hereby
consents, on behalf of itself and its non-Debtor subsidiaries, if any, to such
treatment.
SECTION 5. IDENTIFICATION OF CLASSES OF CLAIMS
AND INTERESTS IMPAIRED AND NOT
IMPAIRED UNDER THE PLAN; ACCEPTANCE
OR REJECTION OF THE PLAN
5.1. Holders of Claims and Equity Interests
Entitled to Vote.
Each of Class 1 (Priority Non-Tax Claims), Class 2 (Senior Secured
Claims), Class 3 (BIUSA Secured Claims), Class 5 (General Unsecured Claims),
and Subclass 7A (Old BIUSA Common Stock) of Class 7 and, as applicable, any
subclass thereof, are impaired hereunder, and the holders of Claims or Equity
Interests in such classes and, as applicable, any subclass thereof, are
entitled to vote on this Plan of Reorganization.
Class 4 (Other Secured Claims) and Subclass 7C (Subsidiary Equity
Interests) of Class 7 are unimpaired hereunder, and the holders of Claims in
such Class 4 or Subclass 7C are conclusively presumed under section 1126(f) of
the Bankruptcy Code to have accepted this Plan of Reorganization and,
accordingly, are not required to vote on this Plan of Reorganization.
Holders of Allowed Claims in Class 6 (Affiliate Claims) and Allowed
Equity Interests in Subclass 7B (BIUSA Other Equity Interests) of Class 7 will
not receive or retain any property on account thereof, and are conclusively
presumed under section 1126(g) of the Bankruptcy Code to have rejected this
Plan of Reorganization.
If a controversy arises as to whether any Claims or Equity Interests,
or any class or subclass of Claims or class or subclass of Equity Interests, is
impaired or unimpaired under this Plan of Reorganization, such class or
subclass shall be treated as specified in this Plan of Reorganization unless
the Bankruptcy Court shall otherwise determine such controversy upon the motion
of the party challenging the characterization of a particular Claim or Equity
Interest under this Plan of Reorganization.
Each holder of an Allowed Claim or an Allowed Equity Interest in an
impaired class or subclass of Claims against or
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Equity Interests in any Debtor that is entitled to vote shall be entitled to
vote separately to accept or reject this Plan of Reorganization as provided in
the order entered by the Bankruptcy Court governing the voting and balloting
procedures applicable to this Plan of Reorganization. For purposes of
calculating the number of Allowed Claims that have voted to accept or reject
this Plan of Reorganization under section 1126(c) of the Bankruptcy Code, all
Allowed Claims in any class or subclass thereof held by any entity or any
Affiliate thereof shall be aggregated and treated as one Allowed Claim.
5.2. Subtraction and Addition of Classes and Subclasses.
(a) Deletion of Classes and Subclasses. Any class or subclass of
Claims that does not contain as an element thereof an Allowed Claim or a Claim
temporarily allowed under Bankruptcy Rule 3018 as of the date of the
commencement of the Confirmation Hearing shall be deemed deleted from this Plan
of Reorganization for purposes of voting to accept or reject this Plan of
Reorganization and for purposes of determining acceptance or rejection of this
Plan of Reorganization by such class or subclass under section 1129(a)(8) of
the Bankruptcy Code.
(b) Addition of Classes and Subclasses. In the event that any
subclass of Class 4 (Other Secured Claims) would contain as elements thereof
two or more Secured Claims collateralized by different properties or interests
in property or collateralized by Liens against the same property or interest in
property having different priority, such Claims shall be divided into separate
subclasses of such subclass of Class 4 (Other Secured Claims) for purposes of
voting to accept or reject this Plan of Reorganization and for purposes of
determining acceptance or rejection of this Plan of Reorganization by such
class or subclass under section 1129(a)(8) of the Bankruptcy Code.
5.3. Nonconsensual Confirmation.
Pursuant to section 1126(g) of the Bankruptcy Code, the holders of
Allowed Claims in Class 6 (Affiliate Claims) and Allowed Equity Interests in
Subclass 7B (BIUSA Other Equity Interests) of Class 7 are conclusively presumed
to have rejected this Plan of Reorganization. Accordingly, this Plan of
Reorganization shall constitute a motion by the Debtors to confirm this Plan of
Reorganization pursuant to section 1129(b) of the Bankruptcy Code.
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5.4. Revocation of Plan of Reorganization.
The Debtors, at the direction of the Plan Facilitator, reserve the
right to revoke and withdraw this Plan of Reorganization as to any or all
Debtors at any time prior to entry of the Confirmation Order. In the event
that this Plan of Reorganization is so revoked or withdrawn as to any or all
Debtors, then this Plan of Reorganization shall be deemed null and void as it
relates to each such Debtor.
SECTION 6. MEANS OF IMPLEMENTATION
6.1. Implementation.
The principal means for implementing this Plan of Reorganization
shall be the Vestar Transaction. In the event the conditions precedent to
confirmation set forth in section 11.1(a) of this Plan of Reorganization are
not met (which are the conditions precedent to the Vestar Transaction) or, if
such conditions precedent have been met but the conditions precedent to
consummation set forth in section 11.2(a) have not been satisfied or waived in
accordance with section 11.3 hereof, then (assuming the conditions precedent to
confirmation set forth in section 11.1(b) hereof have been met and the
conditions precedent to consummation set forth in section 11.2(b) have been
satisfied or waived in accordance with section 11.3) this Plan of
Reorganization shall be implemented pursuant to the Institutional Holders'
Conversion Transaction.
6.2. Sources of Funds.
(a) New Equity Investment.
(i) Vestar Transaction. If the Vestar Transaction is
consummated, on the Consummation Date, Reorganized BIUSA will sell to the New
Equity Investors pursuant to the Subscription Agreements (x) the number of
shares of New BIUSA Common Stock necessary to result in the New Equity
Investors owning 89.9% of the issued and outstanding common stock of
Reorganized BIUSA, and (y) the New Class C Junior Preferred Stock, for
aggregate Cash proceeds of not less than $67,965,000. In addition, on the
Consummation Date, the Reorganized Debtors shall receive the proceeds of (i)
the New Mezzanine Financing and/or the New Class B Preferred Stock, (ii) the
New BIC Term Debt, and (iii) the New Subordinated Notes (but exclusive of the
$13,000,000 of the New Subordinated Notes being issued to the holders of Equity
Interests in Subclass 7A (Old BIUSA Common Stock) of Class 7 in redemption of
89.9% of their Old BIUSA Common Stock), aggregating, together with the New
Equity
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Investment (exclusive of New Class B Preferred Stock), not less than
approximately $389,965,000.
(ii) Institutional Holders' Conversion Transaction. If the
Vestar Transaction is not consummated, on the Consummation Date, Reorganized
BIUSA shall sell to the New Equity Investors the New Equity Investment Shares
pursuant to the Subscription Agreements for aggregate Cash proceeds of
$38,500,000. In addition, to the extent necessary or desirable, the
Reorganized Debtors shall borrow under the New Working Capital Facilities such
amounts as may be necessary so that, when combined with the actual Cash
proceeds received as a result of the transactions described in section
6.2(a)(ii) of this Plan of Reorganization, all distributions to be made, and
reserves to be established, on the Consummation Date, can be made or
established.
6.3. Restructuring Transactions.
The Restructuring Transactions shall be effected in the order and
manner in which such Restructuring Transactions are scheduled to occur as
provided on Exhibit B hereto.
6.4. New BIUSA Common Stock; New Preferred Stock.
(a) Authorization. The Certificates of Incorporation of the
Reorganized Debtors (to the extent necessary) shall be amended and/or restated
to, among other things, authorize the issuance of (i) not more than 25,000,000
shares of New BIUSA Common Stock, and (ii) the New Preferred Stock, and to
comply with section 1123(a)(6) of the Bankruptcy Code (the "Restated
Certificate of Incorporation"). Except as provided herein, no additional
shares of New BIUSA Common Stock or New Preferred Stock may be issued other
than as directed by the Board of Directors of Reorganized BIUSA after the
Consummation Date.
(b) Rights. The Reorganized BIUSA Common Stock and the New
Preferred Stock shall have such rights with respect to dividends, liquidation,
voting, and other matters as are set forth in the Restated Certificate of
Incorporation of Reorganized BIUSA, as amended from time to time, and as
provided under applicable state law.
6.5. Registration of Securities.
(a) Vestar Transaction. If the Vestar Transaction is consummated,
none of the Debtors or the Reorganized Debtors shall be obligated to provide
registration rights to the holders of New Subordinated Notes, New Preferred
Stock or New BIUSA Common Stock except to the extent expressly provided
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in the Vestar Letter Agreement or pursuant to a separate agreement between
Reorganized BIUSA and such holder.
(b) Institutional Holders' Conversion Transaction. If the Vestar
Transaction is not consummated, then with respect to the Institutional Holders'
Conversion Transaction, as soon as reasonably practicable following receipt by
Reorganized BIUSA of written instructions from holders of a majority of (a) the
aggregate outstanding principal amount of the New Subordinated Notes, (b) the
issued and outstanding shares of New Preferred Stock, or (c) the issued and
outstanding shares of New BIUSA Common Stock, the Reorganized Debtors shall
file, at their expense, one or more Shelf Registration Statements for the New
Subordinated Notes, the New Preferred Stock and/or the New BIUSA Common Stock,
depending on the written instructions received. The Reorganized Debtors shall
use their best efforts to have any Shelf Registration Statement filed declared
effective as soon as practicable after such filing and to keep any such Shelf
Registration Statement continuously effective until the third anniversary of
the effective date thereof.
6.6. Boards of Directors of the Debtors.
The initial members of the Boards of Directors of the Reorganized
Debtors shall be identified in a filing to be made with the Bankruptcy Court
prior to the commencement of the Confirmation Hearing, or shall be disclosed to
the Bankruptcy Court at the commencement of the Confirmation Hearing.
6.7. Officers of the Debtors.
The initial officers of the Reorganized Debtors shall be identified
in a filing to be made with the Bankruptcy Court prior to the commencement of
the Confirmation Hearing, or shall be disclosed to the Bankruptcy Court at the
commencement of the Confirmation Hearing. The selection of officers of the
Reorganized Debtors after the Consummation Date shall be as provided in the
articles or certificates of incorporation and bylaws.
SECTION 7. PROVISIONS GOVERNING DISTRIBUTIONS
7.1. Date of Distributions.
Notwithstanding any provision of this Plan obligating the Reorganized
Debtors to make payments "on the Consummation Date", any distributions and
deliveries to be made hereunder to the holders of Claims or Equity Interests
which are Allowed as of the Consummation Date, including any distributions of
post-petition interest pursuant to section 4.5(q) of this Plan of
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Reorganization, shall be made on the Consummation Date or as soon as
practicable thereafter. Any distributions and deliveries to be made to any
holder of a Claim or Equity Interest whose Claim or Equity Interest is not
Allowed as of the Consummation Date, including any distributions of
post-petition interest pursuant to section 4.5(q) of this Plan of
Reorganization, shall be made on the date on which such Claim or Equity
Interest becomes an Allowed Claim or Allowed Equity Interest or as soon as
practicable thereafter, in accordance with section 7.6(c) of this Plan of
Reorganization.
7.2. Surrender and Cancellation of Instruments.
Each holder of a promissory note, other instrument or certificate
evidencing a Claim or Equity Interest shall surrender such promissory note,
instrument or certificate to the Disbursing Agent for cancellation, and in
exchange therefor, the Disbursing Agent shall distribute or shall cause to be
distributed to the holder thereof the appropriate distribution and/or new
certificates as provided hereunder. No distribution hereunder shall be made to
or on behalf of any holder of such a Claim or Equity Interest unless and until
such promissory note, instrument or certificate is received or the
unavailability of such note, instrument or certificate is reasonably
established to the satisfaction of the Disbursing Agent. In accordance with
section 1143 of the Bankruptcy Code, any such holder of such a Claim or Equity
Interest that fails to (a) surrender or cause to be surrendered such promissory
note, instrument or certificate or to execute and deliver an affidavit of loss
and indemnity reasonably satisfactory to the Disbursing Agent and (b) in the
event that the Disbursing Agent requests, furnish a bond in form and substance
(including, without limitation, amount) reasonably satisfactory to the
Disbursing Agent, within 5 years from and after the Consummation Date, shall be
deemed to have forfeited all rights and Claims and Equity Interests and shall
not participate in any distribution hereunder; provided however, that no such
forfeiture shall occur if the failure to surrender required hereunder is the
result of a bona fide dispute, written notice of which has been provided to the
Disbursing Agent prior to the expiration of the 5 year period.
7.3. Delivery of Distributions.
(a)All distributions to any holder of an Allowed Claim or Equity
Interest shall be made at the address of such holder as scheduled on the
Schedules filed with the Bankruptcy Court unless the Disbursing Agent has been
notified in writing of a change of address, including, without limitation, by
the filing of a proof of Claim or Equity Interest by such holder that relates
an address for such holder different from the address reflected on such
Schedules for such holder. In the event that any
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distribution to any holder is returned as undeliverable, the Disbursing Agent
shall use reasonable efforts to determine the current address of such holder,
but no distribution to such holder shall be made unless and until the
Disbursing Agent has determined the then current address of such holder, at
which time such distribution shall be made to such holder together with any
interest actually earned on any Cash distributable to such holder from and
after the Consummation Date (net of any applicable taxes which are or could be
payable by the Reorganized Debtors on such earnings, calculated without regard
to any other earnings, losses or other tax attributes of the Reorganized
Debtors); provided that such distributions shall be deemed unclaimed property
under section 347(b) of the Bankruptcy Code at the expiration of one year from
the Consummation Date. After such date, all unclaimed property which is Cash
shall, subject to the next succeeding sentence, revert to the Reorganized
Debtors and the claim of any holder to such property shall be discharged and
forever barred. Notwithstanding the preceding sentence, all unclaimed property
that would have been distributed on account of any Allowed Equity Interests in
Subclass 7A (Old BIUSA Common Stock) of Class 7 (Equity Interests) shall be
distributed on account of all other Allowed Equity Interests in such Subclass
of Class 7 (Equity Interests) entitled thereto in accordance with the operation
of section 7.6(d) hereof.
(b) Notwithstanding anything contained in section 7.3(a) of this Plan
or Reorganization, the Disbursing Agent shall make distributions which would
otherwise be made to the holder of an Allowed Claim or Allowed Equity Interest
to a third party only upon (i) the receipt of written notice from an authorized
officer of the holder of an Allowed Claim (other than an Allowed Claim in Class
2 or 3 or Subclass 5A2 of Class 5) or Allowed Equity Interest directing the
Disbursing Agent to make the distributions which would otherwise be made to
such holder to a third party, and providing in specific detail the name and
address of the third party to whom the distributions should be made, or (ii)
the entry of an order of a court of competent jurisdiction directing the
Disbursing Agent to make such distributions to a third party. The Disbursing
Agent shall be entitled to rely on the genuineness of any written notice
received pursuant to this section 7.3(b) and shall not be liable to any Person
for complying with such notice.
(c) Notwithstanding anything to the contrary in sections 7.3(a) or
7.3(b) of this Plan or Reorganization, if the Disbursing Agent shall receive
written notice that there is a bona fide dispute regarding the Person entitled
to receive a distribution under this Plan of Reorganization, the Disbursing
Agent shall (i) not make such distribution, (ii) promptly provide written
notice to the holder of the Allowed Claim or Allowed Equity Interest that a
bona fide dispute exists and provide a
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copy of the written notice so received, (iii) hold such distribution in a
segregated interest bearing account (together with all interest accrued or paid
thereon) or, alternatively deposit such distribution in the registry of the
Court, and (iv) promptly seek instructions from the Court with respect to the
disposition of such distribution.
7.4. Intentionally omitted.
7.5. Manner of Payment Under Plan of Reorganization.
Any Cash payment to be made hereunder may be made by a check or wire
transfer or as otherwise required or provided in any applicable agreement.
7.6. Initial and Subsequent Distributions.
(a) Schedule of Initial Distributions. At the commencement of the
Confirmation Hearing, the Debtors shall submit a schedule, as of such date (the
"Estimated Claims Schedule") reflecting (i) the aggregate amount, as of such
date, of Allowed Claims and Allowed Equity Interests in each class and subclass
of Claims and Equity Interests under this Plan of Reorganization, (ii) the
aggregate amount, as of such date, of Disputed Claims and Disputed Equity
Interests in each class and subclass of Claims and Equity Interests under this
Plan of Reorganization, and (iii) the initial distributions to be made on
account of Allowed Equity Interests in Subclass 7A (Old BIUSA Common Stock) of
Class 7 (Equity Interests). The Debtors shall amend the Estimated Claims
Schedule as of the Consummation Date, which amended Estimated Claims Schedule
shall be used to establish the reserves required pursuant to section 7.6(b) of
this Plan of Reorganization.
(b) Reserves for Disputed Claims and Equity Interests.
(i) Disputed Claims. If Disputed Claims exist in any class or
subclass receiving Cash under this Plan of Reorganization, the Reorganized
Debtors shall deliver to the Disbursing Agent on the Consummation Date, and the
Disbursing Agent shall hold for the benefit of each holder of a Disputed Claim,
Cash or other adequate security as determined by the Bankruptcy Court in an
amount equal to the payments or distributions which would have been made to the
holder of such Disputed Claim if it were an Allowed Claim on the Consummation
Date in an amount equal to the least of (x) the amount of the Claim filed with
the Bankruptcy Court, (y) the amount listed by the Debtors in the Schedules as
not disputed, contingent or unliquidated, and (z) the amount, if any, estimated
by the Bankruptcy Court pursuant to section 502(c) of the Bankruptcy
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Code or such other amount as may be directed by the Bankruptcy Court, in each
case plus interest at the Post-Petition Interest Rate from the Petition Date
through the Consummation Date. If a Disputed Claim in any class or subclass
receiving Cash under this Plan of Reorganization is later Allowed in an amount
greater than the amount reserved for such Disputed Claim, the excess amount to
which such holder is entitled (including as a result of the accrual of interest
from the Petition Date through the Consummation Date) shall be paid by the
Reorganized Debtors from general operating funds. Cash, if any, reserved by
the Debtors on account of Disputed Claims shall be set aside, segregated and,
to the extent practicable, held in interest bearing deposits or certificates of
deposit. All earnings on any such deposits or certificates of deposit shall be
reported as earnings by the Reorganized Debtors and such earnings shall be paid
by the Disbursing Agent to the Reorganized Debtors to the extent required to
satisfy any taxes which are or could be payable by the Reorganized Debtors on
such earnings, calculated without regard to any other earnings, losses or other
tax attributes of the Reorganized Debtors. If a Disputed Claim in Class 1,
Class 2, Class 3, Class 4 or Class 5 (General Unsecured Claims) is disallowed,
in whole or in part, by Final Order, the Cash reserved in respect of such Claim
(or portion thereof) that has been disallowed shall revert to the Reorganized
Debtors together with all interest actually earned thereon.
(ii) Disputed Equity Interests. If Disputed Equity Interests
exist in Subclass 7A (Old BIUSA Common Stock) of Class 7 (Equity Interests),
the Reorganized Debtors shall deliver to the Disbursing Agent on the
Consummation Date, and the Disbursing Agent shall hold for the benefit of each
holder of a Disputed Equity Interest, Cash and/or New Subordinated Notes (as
applicable) in an amount equal to the payments or distributions which would
have been made to the holder of such Disputed Equity Interest if it were an
Allowed Equity Interest on the Consummation Date in a number of shares equal to
the greater of (x) the number of shares of Old BIUSA Common Stock owned by such
holder of record as of the Consummation Date, as set forth on the stock
register maintained by BIUSA, and (y) the number of shares allegedly owned by
such holder, as set forth in any proof of Equity Interest timely filed by such
holder with the Bankruptcy Court. Cash, if any, reserved by the Debtors on
account of Disputed Equity Interests shall be set aside, segregated and, to the
extent practicable, held in interest bearing deposits or certificates of
deposit. All earnings on any such deposits or certificates of deposit shall be
reported as earnings by the Reorganized Debtors and such earnings shall be paid
by the Disbursing Agent to the Reorganized Debtors to the extent required to
satisfy any taxes which are or could be payable by the Reorganized Debtors on
such earnings, calculated without regard to any other earnings, losses or other
tax attributes of
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the Reorganized Debtors. If a Disputed Equity Interest is disallowed, in whole
or in part, by Final Order, the Cash and/or New Subordinated Notes (as
applicable) reserved in respect of such Equity Interest (or portion thereof)
that has been disallowed shall be distributed on account of all other Allowed
Equity Interests in such Subclass.
(c) Distributions on Account of Claims and Equity Interests Allowed
After the Consummation Date. If a Disputed Claim or Equity Interest in any
class or subclass becomes an Allowed Claim or Equity Interest after the
Consummation Date, the Disbursing Agent shall, on the date such Claim or Equity
Interest becomes an Allowed Claim or Equity Interest, or as soon as practicable
thereafter, distribute to the holder thereof the Cash and/or New Subordinated
Notes (as applicable) in an amount equal to the Cash and/or New Subordinated
Notes such holder would have received on account of such Claim or Equity
Interest if such Claim or Equity Interest had been Allowed in such amount as of
the Confirmation Date, plus any interest actually earned thereon from and after
the Consummation Date (net of any applicable taxes which are or could be
payable by the Reorganized Debtors on such earnings, calculated without regard
to any other earnings, losses or other tax attributes of the Reorganized
Debtors ).
(d) Final Distributions on Account of Subclass 7A (Old BIUSA Common
Stock) of Class 7 (Equity Interests). Upon the resolution of all Disputed
Equity Interests in Subclass 7A (Old BIUSA Common Stock) of Class 7 (Equity
Interests), and after distributions have been made on account of Disputed
Equity Interests in such Subclass that have become Allowed Equity Interests,
each holder of an Allowed Equity Interest in such Subclass shall be distributed
its Proportionate Share of the amount of Cash and/or New Subordinated Notes, if
any, remaining on reserve for distribution to holders of Allowed Equity
Interests in such Subclass, together with any interest actually earned thereon
from and after the Consummation Date (net of any applicable taxes which are or
could be payable by the Reorganized Debtors on such earnings, calculated
without regard to any other earnings, losses or other tax attributes of the
Reorganized Debtors ) (the "Adjusted Available Cash"). All distributions of
Adjusted Available Cash pursuant to this section 7.6(d) shall be made on the
next succeeding Distribution Date after all Disputed Equity Interests in such
Subclass have been resolved by Final Order.
7.7. No Fractional Distributions.
No fractional shares of New BIUSA Common Stock will be issued to the
beneficial owners of Allowed Claims against any of the Debtors. Fractional
shares of New BIUSA Common Stock will be rounded to the next greater or next
lower number, as follows:
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(a) fractions of 1/2 or greater will be rounded to the next higher whole
number, and (b) fractions of less than 1/2 will be rounded to the next lower
whole number. No fraction of 1/2 or less will be rounded to zero and,
accordingly, extinguish in its entirety the distribution of shares of New BIUSA
Common Stock to any entity.
7.8. Rights and Powers of Disbursing Agent.
(a) Entities to Exercise Function of Disbursing Agent. All
distributions under this Plan of Reorganization shall be made by Reorganized
BIUSA as Disbursing Agent or such other entity designated by Reorganized BIUSA
as a Disbursing Agent from the reserves established therefor or from the
general operating funds of the Reorganized Debtors in accordance with section
7.6 of this Plan of Reorganization. The Disbursing Agent shall not be required
to give any bond or surety or other security for the performance of its duties
unless otherwise ordered by the Bankruptcy Court; and, in the event that a
Disbursing Agent is otherwise so ordered, all costs and expenses of procuring
any such bond or surety shall be borne by the Reorganized Debtors.
(b) Powers of the Disbursing Agent. The Disbursing Agent shall be
empowered to (i) effect all actions and execute all agreements, instruments and
other documents necessary to implement this Plan of Reorganization, (ii) make
distributions contemplated hereby, (iii) liquidate property as required to make
the distributions contemplated hereby, (iv) comply herewith and the obligations
hereunder, (v) employ professionals to represent it with respect to its
responsibilities, and (vi) exercise such other powers as may be vested in the
Disbursing Agent by order of the Bankruptcy Court, in accordance with this Plan
of Reorganization or as deemed by the Disbursing Agent to be necessary and
proper to implement the provisions hereof.
(c) Expenses Incurred On or After the Consummation Date. Except as
otherwise ordered by the Bankruptcy Court, the amount of any fees and expenses
incurred by the Disbursing Agent on or after the Consummation Date and any
compensation and expense reimbursement claims (including, without limitation,
reasonable fees and expenses of counsel) made by the Disbursing Agent, shall be
paid in Cash by the Reorganized Debtors without the need for other or further
Bankruptcy Court approval.
(d) Exculpation. Each Disbursing Agent, from and after the
Consummation Date, is hereby exculpated by all entities, including, without
limitation, holders of Claims and Equity Interests and other parties in
interest, from any and all claims, Causes of Action and other assertions of
liability arising out of the discharge by such Disbursing Agent of the powers
and duties conferred upon it hereby or by any order of the
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Bankruptcy Court entered pursuant to or in furtherance hereof, or by applicable
law, except solely for actions or omissions arising out of the gross negligence
or willful misconduct of such Disbursing Agent or which constitute a breach of
fiduciary duty. No holder of a Claim or an Equity Interest or other party in
interest shall have or pursue any claim or cause of action against the
Disbursing Agent for making payments in accordance herewith or for implementing
the terms hereof.
SECTION 8. PROCEDURES FOR TREATING DISPUTED
CLAIMS AND EQUITY INTERESTS UNDER
THE PLAN OF REORGANIZATION
8.1. No Distributions Pending Allowance.
Notwithstanding any other provision hereof, if any portion of a Claim
or Equity Interest is Disputed, no payment or distribution provided hereunder
shall be made on account of any portion of such Claim or Equity Interest unless
and until such Disputed Claim or Equity Interest becomes an Allowed Claim or
Equity Interest.
8.2. Distributions After Allowance.
Payments and distributions to each holder of a Disputed Claim or
Equity Interest or any other Claim or Equity Interest that is not Allowed on
the Consummation Date, to the extent that such Claim or Equity Interest
ultimately becomes Allowed, shall be made in accordance with section 7.6 of
this Plan of Reorganization and the provisions hereof governing the class or
subclass of Claims or Equity Interests in which such Claim or Equity Interest
is classified.
SECTION 9. PROCEDURES FOR RESOLVING AND
TREATING DISPUTED CLAIMS AND
EQUITY INTERESTS UNDER THE PLAN
9.1. Prosecution of Objections.
Unless otherwise provided herein or ordered by the Bankruptcy Court,
all objections to Claims or Equity Interests shall be served and filed by the
Debtors by no later than the Consummation Date. On the Consummation Date, the
Reorganized Debtors shall be substituted as the moving party in connection with
any then pending objection to any Claim or Equity Interest. All objections
shall be litigated to Final Order, provided that the Reorganized Debtors may
compromise and settle any objections to Claims and Equity Interests. The
Bankruptcy Court may approve
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any compromises and settlements in accordance with Bankruptcy Rule 9019(a) of
the Bankruptcy Rules.
SECTION 10. PROVISIONS GOVERNING EXECUTORY CONTRACTS
AND UNEXPIRED LEASES UNDER THE PLAN
10.1. General Treatment.
(a) This Plan of Reorganization constitutes a motion by each Debtor
governed by this Plan of Reorganization to assume, as of the Consummation Date,
all executory contracts and unexpired leases to which such Debtor is a party
(including those executory contracts and unexpired leases identified in
Schedule 10.1A hereto), except for any executory contract or unexpired lease
that (i) has been assumed or rejected in accordance with a Final Order of the
Bankruptcy Court, (ii) is specifically scheduled to be rejected on Schedule
10.1B hereto, or (iii) is the subject of a separate motion to assume or assume
and assign or reject such executory contract or unexpired lease under section
365 of the Bankruptcy Code filed by the Debtors prior to the Consummation Date.
For purposes hereof, each executory contract and unexpired lease listed on
Schedules 10.1A and 10.1B hereto shall include (x) modifications, amendments,
supplements, restatements, or other agreements made directly or indirectly by
any agreement, instrument, or other document that in any manner affects such
executory contract or unexpired lease, without regard to whether such
agreement, instrument or other document is listed on Schedule 10.1A or 10.1B
hereto, and (y) executory contracts or unexpired leases appurtenant to the
premises listed on Schedule 10.1A or 10.1B hereto including all easements,
licenses, permits, rights, privileges, immunities, options, rights of first
refusal, powers, uses, usufructs, reciprocal easement agreements, vault, tunnel
or bridge agreements or franchises, and any other interests in real estate or
rights in rem relating to such premises to the extent any of the foregoing are
executory contracts or unexpired leases.
10.2. Expired Contracts.
Any contract or lease that expired pursuant to its terms prior to the
Consummation Date, and that has not been assumed or rejected by Final Order
prior to the Consummation Date, is hereby rejected.
10.3. Scheduled Contracts and Leases.
All contracts, leases and other obligations listed on Schedules 10.1A
and 10.1B to this Plan of Reorganization shall be deemed to be, and shall be
treated as though they are, executory contracts and unexpired leases, and shall
be assumed or rejected,
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as applicable, as of the Consummation Date pursuant to this Plan of
Reorganization and the Confirmation Order.
10.4. Amendments to Schedules: Effect of Amendments.
The Debtors may at any time on or before the tenth Business Day
before the date of the commencement of the Confirmation Hearing amend Schedules
10.1A and 10.1B hereto to delete or add any executory contract or unexpired
lease thereto, in which event such executory contract or unexpired lease shall
be deemed to be respectively, assumed and, if applicable, assigned as provided
therein, or rejected. The Debtors shall provide notice of any amendments to
Schedules 10.1A or 10.1B hereto to the parties to the executory contracts or
unexpired leases affected thereby and to parties on the primary service list or
master service list, as applicable. The fact that any contract or lease is
scheduled on Schedules 10.1A or 10.1B hereto shall not constitute or be
construed to constitute an admission by any Debtor that any Debtor or any
Reorganized Debtor has any liability thereunder.
10.5. Bar to Rejection Damage Claims.
In the event that the rejection of an executory contract or unexpired
lease by any of the Debtors results in damages to the other party or parties to
such contract or lease, a Claim for such damages, if not heretofore evidenced
by a timely filed proof of Claim, shall be forever barred and shall not be
enforceable against the Debtors or the Reorganized Debtors, or their respective
properties or interests in property as agents, successors, or assigns, unless a
proof of Claim is filed with the Bankruptcy Court and served upon the Debtors
on or before the earlier to occur of (a) thirty days after the date of service
of notice of the rejection and (b) the date set as the last date for
filing such Claims as established pursuant to an order of the Bankruptcy Court.
10.6. Claims Arising from Assumption or Rejection
All Allowed Claims arising from the assumption of an executory
contract or unexpired lease shall be treated as an Administration Expense Claim
pursuant to section 2.1 of this Plan of Reorganization. All Allowed Claims
arising from the rejection of an executory contract or unexpired lease shall be
treated as a General Unsecured Claim pursuant to section 4.5 of this Plan of
Reorganization.
10.7. Cure of Defaults Upon Assumption
Upon the assumption of any executory contract or unexpired lease
listed on Schedule 10.1A hereto, all defaults,
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including, without limitation, defaults specified in sections 365(b)(1) and (2)
of the Bankruptcy Code, shall be deemed cured by the payment by the Disbursing
Agent of the cure amount stated on Schedule 10.1A plus interest thereon at the
Post-Petition Interest Rate from the Petition Date through the date of such
payment. Any objection as to such cure amount or other matter pertaining to
the assumption of any executory contract or unexpired lease shall be filed with
the Bankruptcy Court no later than three (3) days prior to the commencement of
the Confirmation Hearing. Any objection not filed within such time frame shall
be forever barred from assertion against the Debtors, the Reorganized Debtors,
their estates or their property. All timely filed objections shall be resolved
by the Bankruptcy Court at the Confirmation Hearing. If any such objection is
sustained, the Debtors, at the direction of the Plan Facilitator (after
consultation with the Senior Lender Agent and the Unsecured Creditors'
Committee) may either (a) take such actions as may be necessary to cure all
defaults under the executory contact or unexpired lease including, without
limitation, the payment of additional amounts as may be required by the
Bankruptcy Court or agreed to by the objecting party, or (b) reject such
executory contract or unexpired lease.
SECTION 11. CONDITIONS PRECEDENT TO CONFIRMATION
DATE AND CONSUMMATION DATE
11.1. Conditions Precedent to Confirmation
of Plan of Reorganization.
Confirmation of this Plan of Reorganization is subject to the
satisfaction (x) in the case of the Vestar Transaction, of the conditions
precedent set forth in subsection (a) of this section 11.1 or (y) in the case
of the Institutional Holders' Conversion Transaction, the conditions precedent
set forth in subsection (b) of this section 11.1, and in either such case the
conditions precedent set forth in subsection (c) of this section 11.1:
(a) Vestar Transaction.
(i) Commitment for New BIC Term Debt. Vestar shall have
received a binding commitment from NationsBank, N.A. and NationsBanc
Montgomery Securities (or such other financial institution
satisfactory to the Debtors, as determined by the Plan Facilitator),
in form and substance reasonably acceptable to the Debtors (as
determined by the Plan Facilitator), pursuant to which NationsBank,
N.A. or such other financial institution has committed to provide the
New BIC Term Debt.
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(ii) Commitment for New Subordinated Notes. Vestar shall have
received a binding commitment from NationsBanc Montgomery Securities
(or such other financial institution satisfactory to the Debtors, as
determined by the Plan Facilitator), in form and substance reasonably
acceptable to the Debtors (as determined by the Plan Facilitator),
pursuant to which such financial institution has committed to
underwrite, or failing such underwriting, acquire for its own
account, the New Subordinated Notes (other than the New Subordinated
Notes to be issued to the holders of Allowed Equity Interests in
Subclass 7A (Old BIUSA Common Stock) of Class 7 (Equity Interests )).
(iii) Subscription Agreements. The Debtors shall have
entered into a Subscription Agreement for the New Equity Investment
with Vestar in its capacity as the New Equity Investment Guarantor.
(iv) Vestar Transaction Deposit. Vestar shall have made the
Vestar Transaction Deposit.
(v) Fee Letter. Vestar shall have executed and delivered a Fee
Letter.
(b) Institutional Holders' Conversion Transaction.
(i) Subscription Agreements. The Debtors shall have entered
into Subscription Agreements for the New Equity Investment with the
New Equity Investors and the New Equity Investment Guarantor.
(ii) Fee Letter. The Institutional Holders shall have executed
and delivered a Fee Letter.
(c) Vestar Transaction and Institutional
Holders' Conversion Transaction.
(i) Confirmation Order. The Confirmation Order shall have been
entered.
11.2. Conditions Precedent to Consummation
Date of Plan of Reorganization.
The occurrence of the Consummation Date of this Plan of
Reorganization is subject to satisfaction (x) in the case of the Vestar
Transaction, of the conditions precedent set forth in subsection (a) of this
section 11.2 or (y) in the case of the Institutional Holders' Conversion
Transaction, the conditions precedent set forth in subsection (b) of this
section 11.2, and
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in either such case the conditions precedent set forth in subsection (c) of
this section 11.2:
(a) Vestar Transaction.
(i) Confirmation Date. The Confirmation Date shall have
occurred on or prior to March 31, 1998, or such later date as may be
agreed by Vestar and the Debtors (at the direction of the Plan
Facilitator).
(ii) Payment of Purchase Price. Vestar shall have tendered
sufficient funds to assure that the aggregate proceeds received by
the Reorganized Debtors from all financing sources including the New
Equity Investment shall not be less than $354,165,000.
(iii) No Material Adverse Change. There shall not have
occurred since December 31, 1997 any event, occurrence, change in
facts, conditions or other change or effect that, individually or in
the aggregate with all other events, occurrences, changes, conditions
or effects, is materially adverse to the business, assets,
operations, results of operations or financial condition of BIUSA and
its subsidiaries, taken as a whole (a "Material Adverse Change"), it
being understood and agreed that the departure of management prior to
the Consummation Date shall not constitute a Material Adverse Change.
(iv) Absence of Proceeding. No action, suit, investigation or
proceeding pending in any court or before any arbitrator or
governmental authority could reasonably be expected to have a
material adverse effect on Reorganized BIUSA and its subsidiaries
taken as a whole or on any transaction contemplated by the Vestar
Transaction or on the ability of Reorganized BIUSA and its
subsidiaries to perform their obligations under the documents to be
executed in connection with the debt securities to be offered under
the Vestar Transaction.
(v) Force Majeure. No banking moratorium shall have been
declared by federal or New York State banking authorities; trading in
securities generally on the New York Stock Exchange shall not have
been suspended or minimum or maximum prices shall not have been
established on the New York Stock Exchange; and there shall not have
been (i) a material outbreak or escalation of hostilities involving
the United States, or (ii) a material outbreak or escalation of any
other insurrection or armed conflict involving the United
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States or any other national or international calamity or emergency.
(vi) Stockholders' Agreements Rejected. The Bankruptcy Court
shall have entered an order rejecting the Existing BIUSA
Stockholders' Agreements, and there shall be no material claims
against BIUSA arising from such rejection.
(b) Institutional Holders' Conversion Transaction.
(i) No Consummation of Vestar Transaction. The conditions
precedent to confirmation or consummation of the Vestar Transaction
shall not have been satisfied or waived on or prior to the Vestar
Transaction Consummation Date, or the Vestar Transaction shall
otherwise not have been consummated on or prior to the Consummation
Date, and Vestar shall have forfeited the Vestar Transaction Deposit.
(ii) New Equity Investment. All conditions precedent to the
sale of the New Equity Investment Shares to the New Equity Investors
and/or New Equity Investment Guarantors, as applicable, as set forth
in the Subscription Agreement (other than the occurrence of the
Consummation Date) shall have been satisfied or waived.
(iii) Exit Financing. All conditions precedent to the
closing under each of the New Working Capital Facilities (other than
the occurrence of the Consummation Date) shall have been satisfied or
waived.
(iv) No Material Adverse Change. There shall not have occurred
since December 31, 1997 any event, occurrence, change in facts,
conditions or other change or effect that, individually or in the
aggregate with all other events, occurrences, changes, conditions or
effects, is materially adverse to the business, assets, operations,
results of operations or financial condition of BIUSA and its
subsidiaries, taken as a whole (a "Material Adverse Change"), it
being understood and agreed that the departure of management prior to
the Consummation Date shall not constitute a Material Adverse Change.
(v) Absence of Proceeding. No action, suit, investigation or
proceeding pending in any court or before any arbitrator or
governmental authority could reasonably be expected to have a
material adverse effect on Reorganized BIUSA and its subsidiaries
taken
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as a whole or on any transaction contemplated by the Vestar
Transaction or on the ability of Reorganized BIUSA and its
subsidiaries to perform their obligations under the documents to be
executed in connection with the debt securities to be offered under
the Vestar Transaction.
(vi) Force Majeure. No banking moratorium shall have been
declared by federal or New York State banking authorities; trading in
securities generally on the New York Stock Exchange shall not have
been suspended or minimum or maximum prices shall not have been
established on the New York Stock Exchange; and there shall not have
been (i) a material outbreak or escalation of hostilities involving
the United States, or (ii) a material outbreak or escalation of any
other insurrection or armed conflict involving the United States or
any other national or international calamity or emergency.
(c) Vestar Transaction and Institutional Holders' Conversion
Transaction.
(i) Finality of the Confirmation Order. The Confirmation
Order shall have become a Final Order.
(ii) Cash for Closing. The Debtors shall have available Cash in
an amount sufficient to make all distributions, and, to the extent
necessary, fund all reserves, required to be made or funded pursuant to
this Plan of Reorganization on the Consummation Date.
(iii) Execution and Delivery of Documents. All other
actions and documents necessary to implement the terms and provisions
hereof shall have been effected or executed and delivered.
(iv) HSR Compliance. Any entity required to file a Premerger
Notification and Report Form under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended, shall have filed such Form, and any
waiting periods applicable under the Act to such entity shall have expired
or been terminated.
(v) Consents, Etc. All necessary consents, assignments or
approvals from foreign or domestic governmental authorities and other
third parties, if any, shall have been obtained.
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11.3. Waiver of Conditions Precedent
(a) Except for the conditions specified in subsections 11.1(c)(i)
and 11.2(c)(ii), which conditions may not be waived, the Debtors at the
direction of the Plan Facilitator may waive each of the conditions precedent
set forth in sections 11.1 and 11.2 hereof, in whole or in part, only as
follows:
(i) The consent of Vestar is required to waive conditions
precedent specified in subsections 11.2(a)(i), (iii), (iv), (v), and (vi),
and (with respect to the Vestar Transaction) 11.2(c)(i), (iii), (iv) and
(v) ;
(ii) The consent of SAEPIC is required to waive conditions
precedent specified in subsections 11.1(a)(v) and 11.1(b)(ii);
(iii) The consent of the Unsecured Creditors' Committee is
required to waive conditions precedent specified in subsections
11.1(b)(i), and 11.2(b)(ii) and (iii);
(iv) The consent of the Institutional Holders and the Unsecured
Creditors' Committee is required to waive conditions precedent specified
in subsections 11.1(a)(i), (ii), (iii) and (iv), and 11.2(a)(ii); and
(v) The consent of the Institutional Holders is required to
waive conditions precedent specified in subsections 11.2(b)(i), (iv), (v)
and (vi), and (with respect to the Institutional Holders' Conversion
Transaction) 11.2(c)(i), (iii), (iv) and (v).
(b) Any waiver of a condition precedent in section 11.1 or 11.2
hereof in accordance with section 11.3(a) hereof may be effected at any time,
without notice, without leave or order of the Bankruptcy Court and without any
formal action other than proceeding to consummate this Plan of Reorganization.
SECTION 12. EFFECT OF CONFIRMATION
12.1. General Authority.
Until the Consummation Date, the Bankruptcy Court shall retain
custody and jurisdiction of each of the Debtors, its properties and interests
in property and its operations. On the Consummation Date, each of the Debtors,
its properties and interests in property and its operations shall be released
from the custody and jurisdiction of the Bankruptcy Court, except as provided
in section 15.1 hereof, and all such properties,
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interests in property and operations (other than funds reserved for
distributions to the holders of Allowed Claims and Equity Interests pursuant to
section 7.6(b) hereof) shall vest in the Reorganized Debtors.
12.2. Discharge of Debtors.
The treatment of all Claims against or Equity Interests in each of
the Debtors hereunder shall be in exchange for and in complete satisfaction,
discharge and release of all Claims against or, except as specifically provided
herein, Equity Interests, in such Debtor of any nature whatsoever, known or
unknown, including, without limitation, any interest accrued or expenses
incurred thereon from and after the Petition Date, or against their estates or
properties or interests in property. Except as otherwise provided herein, upon
the Consummation Date, all Claims against and Equity Interests in each of the
Debtors will be satisfied, discharged and released in full exchange for the
consideration provided hereunder. All entities shall be precluded from
asserting against any Debtor or their respective properties or interests in
property, any other Claims based upon any act or omission, transaction or other
activity of any kind or nature that occurred prior to the Consummation Date.
12.3. Injunction.
Except as otherwise expressly provided in the Confirmation Order or
this Plan of Reorganization, all entities who have held, hold or may hold
Claims against or Equity Interests in any of the Debtors are permanently
enjoined, on and after the Consummation Date, from (directly or derivatively)
(a) commencing or continuing in any manner any action or other proceeding of
any kind relating to any such Claim or Equity Interest against any such Debtor,
(b) the enforcement, attachment, collection or recovery by any manner or means
of any judgment, award, decree or order against any such Debtor, (c) creating,
perfecting, or enforcing any encumbrance of any kind against any such Debtor or
against the property or interests in property of any such Debtor on account of
any such Claim, and (d) asserting any right of setoff, subrogation, or
recoupment of any kind against any obligation due any such Debtor or against
the property or interests in property of any such Debtor on account of any such
Claim, provided that nothing contained in this section 12.3 shall affect the
rights of holders of Old BIUSA Common Stock with respect to their retained
Equity Interests.
12.4. Term of Injunctions or Stays.
Unless otherwise provided, all injunctions or stays provided for in
the Reorganization Cases under sections 105 or 362 of the Bankruptcy Code, or
otherwise, and in existence on the
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Confirmation Date, shall remain in full force and effect until the Consummation
Date.
SECTION 13. SETTLEMENTS,RELEASES AND WAIVER OF CLAIMS
13.1. Settlement of Claims by Ralph
Lauren Womenswear, Inc.
In accordance with section 1123(b)(3)(A) of the Bankruptcy Code and
Rule 9019 of the Bankruptcy Rules, and in full compromise and settlement of any
Administration Expense Claim, Claim in Subclass 5C (BIC) of Class 5 (General
Unsecured Claims) and any other Claims that the estate of Ralph Lauren
Womenswear, Inc. (now named Bidermann Womenswear Corp.) may have against the
estates of the Debtors, the Reorganized Debtors shall pay to RLWW, on the later
to occur of (a) the Consummation Date, and (b) the date on which any
Administration Expense Claim or General Unsecured Claim becomes an Allowed
Claim, an amount not to exceed $3.337 million, sufficient to permit RLWW to
make subsequent distributions to the holders of allowed unsecured claims
against RLWW and bring their aggregate distributions up to 100%.
13.2. Settlement of Claims By and
Against Maurice Bidermann.
In accordance with section 1123(b)(3)(A) of the Bankruptcy Code and
Rule 9019 of the Bankruptcy Rules, and in full compromise and settlement of (a)
any Claims or Causes of Action which any of the Debtors have or may have
against Maurice Bidermann (including, without limitation, any Claims or Causes
of Action arising under or in connection with the Bidermann Note), and (b) any
Claims or Causes of action which Maurice Bidermann has or may have against any
of the Debtors, (i) all of the Debtors' Claims or Causes of Action against
Maurice Bidermann arising on or prior to the Consummation Date shall be
released, and (ii) all of Maurice Bidermann's Claims and Causes of Action
against the Debtors arising or prior to the Consummation Date (including,
without limitation, any claim for indemnity arising from that certain action
styled Zelnik v. Bidermann Indus. U.S.A., Inc., but excluding a prepetition
claim for travel and expense reimbursement not to exceed $25,000 aggregate
principal amount which will be treated as an Allowed Claim within Subclass 5B
(BIC) of Class 5 (General Unsecured Claims)) shall be released.
13.3. General Release of Releasees.
Effective as of the Consummation Date, each of the Debtors and
Debtors in Possession releases the Releasees from any
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and all costs, expenses, claims, Causes of Action or liability whatsoever,
known or unknown, liquidated or unliquidated, matured or not matured,
contingent or direct, and whether arising at common law, in equity, or under
any statute, which such Debtor has as of, or prior to, the Consummation Date
against the Releasees or any of them which in any way relate to such Debtor or
the Reorganization Cases.
13.4. Release from Claims and Liabilities.
(a) Except for those obligations arising hereunder and except as may
otherwise be provided elsewhere in this Plan of Reorganization, effective as of
the Consummation Date, each of the Debtors is hereby released and discharged
from any and all claims and liabilities arising from or in connection with, by
reason of, or related in any way to, such Debtor, the Reorganization Case of
such Debtor or this Plan of Reorganization.
(b) Except as provided in section (d) of this section 13.4,
effective as of the Consummation Date, the Releasees are released and
discharged from any and all claims, obligations, rights, Causes of Action and
liabilities which any holder of a Claim against or Equity Interest in any of
the Debtors may be entitled to assert, whether known or unknown, foreseen or
unforeseen, existing or hereafter arising, based in whole or in part upon any
act or omission or other event occurring on or at any time prior to the
Consummation Date in any way relating to the Debtors, the Reorganization Cases
or this Plan of Reorganization; provided however that nothing in this section
13.4 of this Plan of Reorganization shall effect a release in favor of any
Person other than the Debtors with respect to any debt owed to the United
States Government, any state, city or municipality for any liability of such
Person arising under (i) the Internal Revenue Code, or any state, city or
municipal tax code, (ii) the environmental laws of the United States, any
state, city or municipality or (iii) any criminal laws of the United States,
any state, city or municipality.
(c) Notwithstanding the foregoing, nothing contained in this section
13.4 shall affect the rights of any Releasees to assert and prosecute (i) any
direct claim, counterclaim, cross-claim, separate action, or similar claim
against any entity which maintains that it has a Cause of Action of the kind
described in this section 13.4 (other than a claim described in clause (ii)
immediately below) against any such Releasee that has not been released and
discharged hereunder, or (ii) any claim for indemnification, contribution or
otherwise, however denominated, against any entity relating to any cause of
action against such Releasee that has not been released and discharged
hereunder.
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(d) Notwithstanding the foregoing, nothing contained in this section
13.4 shall affect any rights of (i) Compagnie De Participations Et
D'Investissement Holding (or any successor thereto including SES; "CPIH") under
that certain Pledge Agreement with SAEPIC dated as of September 20, 1993, or
with respect to any related obligation of SAEPIC, or (ii) Credit Lyonnais (or
any successor thereto) and Consortium de Realisation (or any successor or
Affiliate thereof) under that certain Pledge Agreement dated as of September
20, 1993, or with respect to any related obligations of SAEPIC; nor shall it
affect any other rights, claims or Causes of Action which Elf Aquitaine (or any
successor or Affiliate thereof), Credit Lyonnais (or any successor thereof) or
Consortium de Realisation (or any successor or Affiliate thereof) has, had or
may now or in the future have against Maurice Bidermann (or any of his
Affiliates which are not Debtors). Further, notwithstanding the foregoing,
nothing contained in this section 13.4 shall affect any rights, claims or
Causes of Action which Maurice Bidermann has, had or may now or in the future
have against Elf Aquitaine (or any Affiliate thereof), Credit Lyonnais (or any
successor thereof) or Consortium de Realisation (or any successor or Affiliate
thereof).
(e) Each holder of a Claim or Equity Interest shall be deemed to
have agreed to the provision of this section 13.4, and shall be bound thereby,
by reason of, among other things, its acceptance of this Plan of Reorganization
and its receipt of any distributions hereunder.
13.5. Avoidance Actions.
Except as may otherwise be provided in this Plan of Reorganization,
effective as of the Consummation Date, the Debtors waive the right to prosecute
and release any avoidance or recovery actions under sections 544, 545, 547,
548, 549, 550, 551 and 553 of the Bankruptcy Code, that belong to the Debtors
or Debtors in Possession, other than any such actions that may be pending on
such date. The Reorganized Debtors shall retain and may prosecute any such
actions that may be pending on such date.
13.6. Setoffs
Except as otherwise expressly provided herein, each Debtor may, but
shall not be required to, set off against any Claim, any claims of any nature
whatsoever which such Debtor may have against the holder, but neither the
failure to do so nor the allowance of any Claim shall constitute a waiver or
release by such Debtor of any such right of setoff.
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SECTION 14. UNSECURED CREDITORS' COMMITTEE; EXCULPATION
14.1. Dissolution of Unsecured Creditors' Committee
The Unsecured Creditors' Committee, and each of its members and legal
and financial advisors, shall be relieved of all responsibilities relating to
the Debtors upon the Consummation Date, except for purposes of (a) taking
positions with respect to any appeals of orders of the Bankruptcy Court entered
prior to the Consummation Date, (b) reviewing and responding to (i)
applications for allowance and payment of fees and expenses filed pursuant to
sections 330 or 503 of the Bankruptcy Code and (ii) proposed settlements of
Disputed Claims and/or Equity Interests, (c) preparing final applications for
the allowance and payment of fees and reimbursement of expenses of the legal
and financial advisors to, and members of, the Unsecured Creditors' Committee,
(d) monitoring the distributions made pursuant to this Plan of Reorganization,
and (e) performing such other duties that may be necessary to effect the
purposes of this Plan of Reorganization. From and after the Consummation Date,
the reasonable fees and expenses of the professionals for the Unsecured
Creditors' Committee, to the extent not subject to a bona fide dispute, shall
be paid within thirty (30) days after the submission of a written detailed
invoice therefor.
14.2. Exculpation
(a) The Debtors, the Plan Facilitator, each holder of a Senior
Secured Claim, each of the BIUSA Noteholders, each member of the Unsecured
Creditors' Committee, Elf Aquitaine, Credit Lyonnais, Consortium de
Realisation, Vestar (but, as regards Vestar, only upon consummation of the
Vestar Transaction) and each of their respective officers, directors,
affiliates, successors, assigns, advisors, attorneys and accountants, effective
as of the Consummation Date, is hereby exculpated by all entities, including,
without limitation, holders of Claims against and Equity Interests in any of
the Debtors and other parties in interest, from any and all claims, Causes of
Action and other assertions of liability whether known or unknown, foreseen or
unforeseen, existing or arising hereafter, arising out of or related to the
Debtors, the Reorganization Cases or the exercise by such entities of their
functions as members of or advisors to or attorneys or accountants for any such
party in interest or otherwise under applicable law, including, without
limitation, in connection with or related to the formulation, negotiation,
preparation, dissemination, confirmation and consummation of this Plan of
Reorganization and any agreement, instrument or other document issued hereunder
or related hereto, except (a) in the case of Bryan P. Marsal, Carter Evans, and
other employees of Alvarez & Marsal, Inc., Stevens & Lee, P.C. and Marks &
Murase, in connection with the review of their fees
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and expenses as described in the Order Directing Appointment of Plan
Facilitator entered by the Bankruptcy Court on January 13, 1997, and (b) for
actions or omissions arising out of the gross negligence or willful misconduct
of such Person or entity, or which constitute a breach of fiduciary duty.
Notwithstanding the foregoing, nothing in this section 14.2 shall serve to
exculpate any Person other than the Debtors with respect to any debt owed to
the United States Government, any state, city or municipality for any liability
of such Person arising under (i) the Internal Revenue Code, or any state, city
or municipal tax code, (ii) the environmental laws of the United States, any
state,city or municipality or (iii) any criminal laws of the United States, any
state, city or municipality.
(b) Notwithstanding anything to the contrary in section 14.2(a),
nothing contained in section 14.2(a) shall serve to exculpate SAEPIC from any
liability or obligation which it has or may have to (i) CPIH (or any successor
of Affiliate thereof) under that certain Pledge Agreement dated as of September
20, 1993 or any related document, or (ii) Credit Lyonnais (or any successor
thereto) and Consortium de Realisation (or any successor or Affiliate thereof)
under that certain Pledge Agreement dated as of September 20, 1993 or any
related document; nor shall it serve to exculpate Maurice Bidermann from any
liability which Maurice Bidermann (or any of his Affiliates which are not
Debtors) has, had or may now or in the future have to Elf Aquitaine (or any
Affiliate thereof), Credit Lyonnais (or any successor thereof) or Consortium de
Realisation (or any successor or Affiliate thereof). Further, notwithstanding
the foregoing, nothing contained in this section 14.2 shall serve to exculpate
Elf Aquitaine (or any Affiliate thereof), Credit Lyonnais (or any successor
thereof) or Consortium de Realisation (or any successor or Affiliate thereof)
from any liability which Elf Aquitaine (or any Affiliate thereof), Credit
Lyonnais (or any successor thereof) or Consortium de Realisation (or any
successor or Affiliate thereof) has, had or may now or in the future have to
Maurice Bidermann.
SECTION 15. RETENTION OF JURISDICTION
15.1. Retention of Jurisdiction
The Bankruptcy Court may retain jurisdiction of and, if the
Bankruptcy Court exercises its retained jurisdiction, shall have exclusive
jurisdiction of all matters arising out of, and related to, the Reorganization
Cases and this Plan of Reorganization pursuant to, and for the purposes of,
sections 105(a) and 1142 of the Bankruptcy Code and for, among other things,
the following purposes:
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(a) To hear and determine pending applications, if any, for the
assumption or rejection of executory contracts or unexpired leases, and
the allowance of Claims resulting therefrom;
(b) To determine any and all adversary proceedings, applications and
contested matters including, without limitation, the wrongful termination
claim styled Connolly v. Bidermann Industries, U.S.A., Inc., et al., No.
95 Civ. 1791 (RPP) (S.D.N.Y.);
(c) To ensure that distributions to holders of Allowed Claims and
Equity Interests are accomplished as provided herein;
(d) To hear and determine any timely objections to Administration
Expense Claims or to proofs of Claim and Equity Interests filed both
before and after the Confirmation Date, including, without limitation, any
objections to the classification of any Claim or Equity Interest, and to
allow or disallow any Disputed Claim or Equity Interest, in whole or in
part;
(e) To enter and implement such orders as may be appropriate in the
event the Confirmation Order is for any reason stayed, revoked, modified,
or vacated;
(f) To issue such orders in aide of execution of this Plan of
Reorganization, to the extent authorized by section 1142 of the Bankruptcy
Code;
(g) To consider any amendments to or modifications of this Plan of
Reorganization, to cure any defect or omission, or reconcile any
inconsistency in any order of the Bankruptcy Court, including, without
limitation, the Confirmation Order;
(h) To hear and determine all applications for awards of
compensation for services rendered and reimbursement of expenses incurred
prior to the Consummation Date;
(i) To hear and determine disputes arising in connection with the
interpretation, implementation, or enforcement of this Plan of
Reorganization;
(j) To hear and determine matters concerning state, local and
federal taxes in accordance with sections 346, 505, and 1146 of the
Bankruptcy Code;
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(k) To hear any other matter not inconsistent with the Bankruptcy
Code;
(l) To issue injunctions and effect any other actions that may be
necessary or desirable to restrain interference by any entity with the
consummation or implementation of this Plan of Reorganization; and
(m) To enter a final decree closing the Reorganization Cases.
15.2. Amendment of Plan of Reorganization.
Amendments to this Plan of Reorganization may be proposed in writing
by the Debtors, at the direction of the Plan Facilitator, with the prior
written consent of Vestar (with respect to the Vestar Transaction) or the
Institutional Holders (with respect to the Institutional Holders' Conversion
Transaction) provided that this Plan of Reorganization, as amended, satisfies
the requirements of sections 1122 and 1123 of the Bankruptcy Code and the
Bankruptcy Court, after notice and a hearing, confirms this Plan of
Reorganization as amended under section 1129 of the Bankruptcy Code and the
circumstances warrant such amendments. To the extent that any amendment of
this Plan of Reorganization, whether with respect to the Vestar Transaction or
the Institutional Holders' Conversion Transaction, affects the terms or amount
of distribution to holders of General Unsecured Claims, the consent of the
Unsecured Creditors' Committee shall also be required to such amendment. A
holder of a Claim or Equity Interest that has accepted this Plan of
Reorganization shall be deemed to have accepted this Plan of Reorganization as
amended except (i) if the Bankruptcy Court enters an order directing the
resolicitation of such holder's vote and (ii) such holder votes to reject the
Plan of Reorganization as amended within the time proscribed by the Court.
SECTION 16. MISCELLANEOUS PROVISIONS
16.1. Payment of Statutory Fees.
All fees payable under section 1930 of title 28 of the United States
Code, as determined by the Bankruptcy Court at the Confirmation Hearing, shall
be paid in accordance with section 2.1 hereof. Any such fees accrued after the
Consummation Date will constitute an Allowed Administration Expense Claim and
be treated in accordance with section 2.1 hereof.
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16.2. Retiree Benefits.
On and after the Consummation Date, pursuant to section 1129(a)(13)
of the Bankruptcy Code, each Reorganized Debtor shall continue to pay all
retiree benefits (within the meaning of section 1114 of the Bankruptcy Code),
at the level established by such Debtor in accordance with subsection (e)(1)(B)
or (g) of section 1114 of the Bankruptcy Code, at any time prior to the
Confirmation Date, for the duration of the period such Debtor has obligated
itself to provide such benefits, subject to any and all rights of such Debtor
to amend, modify or terminate such benefits under applicable nonbankruptcy law.
In that regard, from and after the Consummation Date, each Reorganized Debtor
shall continue to fund and maintain all single employer defined benefit pension
plans, within the meaning of 29 U.S.C. Section 1301(a)(15), for which such
Debtor is a contributing sponsor of the pension plan within the meaning of 29
U.S.C. Section 1301(a)(13), or a member of a controlled group within the
meaning of 29 U.S.C. Section 1301(a)(14)(A), pursuant to the minimum
requirements of 29 U.S.C. Section 1802 and 26 U.S.C. Section 412, subject to
any and all rights of such Debtor to amend, modify or terminate such pension
plans under applicable nonbankruptcy law.
16.3. Compliance with Tax Requirements.
In connection with the consummation of this Plan of Reorganization,
the Debtors and the Reorganized Debtors, as applicable, shall comply with all
withholding and reporting requirements imposed by any taxing authority, and all
distributions hereunder shall be subject to such withholding and reporting
requirements. Holders of Claims and Equity Interests may be required to
provide certain tax information as a condition to the receipt of distributions
under this Plan of Reorganization.
16.4. Recognition of Guarantee Rights.
The classification of and manner of satisfying all Claims hereunder,
including, without limitation, the Restructuring Transactions, takes into
account (a) the existence of guarantees by certain Debtors of obligations of
other Debtors and (b) the fact that the Debtors may be joint obligors with each
other or other entities with respect to an obligation. All Claims against the
Debtors based upon any such guarantees or joint obligations shall be discharged
in the manner provided in this Plan of Reorganization; provided, that no
creditor shall be entitled to receive in the aggregate under this Plan of
Reorganization more than a single satisfaction of its Allowed Claims.
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16.5. Transactions on Business Days.
In the event that any payment or act under this Plan of
Reorganization is required to be made or performed on a date that is not a
Business Day, then the making of such payment or the performance of such act
may be completed on the next succeeding Business Day, but shall be deemed to
have been completed as of the required date.
16.6. Notices.
All notices, requests, and demands to be effective shall be in
writing (including, without limitation, by facsimile transmission) and, unless
otherwise expressly provided herein, shall be deemed to have been duly given or
made when actually delivered or, in the case of notice by facsimile
transmission, when received and telephonically confirmed, addressed as follows:
If to the Plan Facilitator, to:
Mr. Timothy R. Coleman
The Blackstone Group L.P.
345 Park Avenue
New York, New York 10022-4611
Telephone: (212) 754-7352
Facsimile: (212) 754-8707
with a copy to:
O'MELVENY & MYERS LLP
Citicorp Center
153 East 53rd Street
New York, New York 10022-4611
Attn: Adam C. Harris, Esq.
Telephone: (212) 326-2182
Facsimile: (212) 326-2061
If to the Debtors or the Reorganized Debtors, to:
Bidermann Industries U.S.A., Inc.
48 West 38th Street
New York, New York 10017
Attention: Chief Executive Officer
Telephone: (212) 984-8915
Facsimile: (212) 984-8925
with a copy to:
58
<PAGE>
STEVENS & LEE, P.C.
One Glenhardie Corporate Center
1275 Drummer Lane
Wayne, Pennsylvania 19087
Attn: Robert Lapowsky, Esq.
Telephone: (610) 293-4976
Facsimile: (610) 687-1384
TENZER GREENBLATT LLP
405 Lexington Avenue
New York, New York 10174
Attn: Michael Z. Brownstein, Esq.
Telephone: (212) 885-5000
Facsimile: (212) 885-5001
If to the Institutional Holders, to:
WEIL, GOTSHAL & MANGES LLP
767 Fifth Avenue
New York, New York 10153
Attn: Edward A. C. Sutherland, Esq.
Telephone: (212) 310-8000
Facsimile: (212) 310-8007
If to Vestar, to:
VESTAR CAPITAL PARTNERS III, L.P.
245 Park Avenue
New York, New York
Attn: Norman Alpert
Telephone: (212) 949-6500
Facsimile: (212) 808-4922
with a copy to:
SIMPSON, THATCHER & BARTLETT
425 Lexington Avenue
New York, New York 10017
Attn: Mark Thompson, Esq.
Telephone: (212) 455-7355
Facsimile: (212) 455-2502
In addition to the foregoing, all notices, requests and demands to or upon the
Debtors, the Reorganized Debtors, the Plan Facilitator, the Institutional
Holders or Vestar (as applicable), or delivered by or on behalf of the Debtors,
the Reorganized Debtors, the Plan Facilitator, the Institutional Holders or
Vestar (as applicable) (including, without limitation, any objections to Claims
or Equity Interests), shall simultaneously be served upon the following:
59
<PAGE>
OTTERBOURG, STEINDLER, HOUSTON
& ROSEN, P.C.
230 Park Avenue
New York, New York 10169
Attn: Scott L. Hazan, Esq.
Telephone: (212) 661-9100
Facsimile: (212) 682-6104
16.7. Severability of Plan Provisions
In the event that, prior to the Confirmation Date, any term or
provision of this Plan of Reorganization is held by the Bankruptcy Court to be
invalid, void or unenforceable, the Bankruptcy Court shall, with the consent of
the Debtors (as determined by the Plan Facilitator), have the power to alter
and interpret such term or provision to make it valid or enforceable to the
maximum extent practicable, consistent with the original purpose of the term or
provision held to be invalid, void or unenforceable, and such term or provision
shall then be applicable as altered or interpreted. Notwithstanding any such
holding, alteration or interpretation, the remainder of the terms and
provisions hereof shall remain in full force and effect and shall in no way be
affected, impaired or invalidated by such holding, alteration or
interpretation. The Confirmation Order shall constitute a judicial
determination and shall provide that each term and provision hereof, as it may
have been altered or interpreted in accordance with the foregoing, is valid and
enforceable pursuant to its terms.
16.8. Governing Law
Except to the extent that the Bankruptcy Code or other federal law is
applicable, or to the extent an Exhibit hereto provides otherwise, the rights,
duties and obligations arising under this Plan of Reorganization shall be
governed by, and construed and enforced in accordance with, the laws of the
State of New York, without giving effect to the principles of conflicts of law
thereof.
{remainder of page intentionally left blank}
60
<PAGE>
Dated: New York, New York
March 30, 1998
Respectfully submitted,
TIMOTHY R. COLEMAN, in his capacity as Plan
Facilitator vested with the powers, duties and
functions of the Debtors Boards of Directors
By: /s/ Timothy R. Coleman
-------------------------------
Timothy R. Coleman
O'MELVENY & MYERS LLP
Attorneys for Timothy R. Coleman,
as Plan Facilitator
Citicorp Center
153 East 53rd Street
New York, New York 10022-4611
By: /s/ Adam C. Harris
-------------------------------------
Adam C. Harris, Esq. (4641)
A Member of the Firm
STEVENS & LEE, P.C.
Attorneys for the Debtors
One Glenhardie Corporate Center
1275 Drummer Lane
Wayne, Pennsylvania 19087
By: /s/ Robert Lapowsky
-------------------------------------
Robert Lapowsky, Esq. (RL0782)
A Member of the Firm
TENZER GREENBLATT, LLP
Attorneys for the Debtors
405 Lexington Avenue
New York, New York 10174
By: /s/ Michael Z. Brownstein
-------------------------------------
Michael Z. Brownstein, Esq. (MB9379)
A Member of the Firm
S-1
<PAGE>
Schedule 10.1 A
A. Arrow Factory Stores Inc.
1. All currently existing Store Leases
2. All currently existing office equipment lease agreements and currently
existing maintenance agreements.
3. Letter Agreement dated August 3, 1992 between Superba, Inc., whose
address is 1735 S. Santa Fe, Los Angeles, CA 90021, and Arrow Factory
Stores Inc.
4. Letter Agreement dated October 5, 1992 between Nantucket Industries,
Inc., whose address is 105 Madison Avenue, New York, NY 10016, and
Arrow Factory Stores Inc.
5. Letter Agreement dated September 20, 1994 between Italian Design
Group, whose address is 1105 Satellite Boulevard, Suite 105, Suanee,
Georgia 30174, and Arrow Factory Stores Inc.
6. Agreement with Computerized Security Systems, whose address is 1015 N.
McKenzie Street, Foley, AL 36535, to provide alarm service at all
stores.
B. Bidertex Services Inc.
1. Acceptance of New Employment Agreement between Bidertex Services Inc.,
on the one hand, and Koichi Nakai whose address is 12-9 Tendo-cho,
Nishinomiya 663, Japan, and Noriko Okamoto (who left the employ of
debtor in 1991), on the other hand, dated February 22, 1991.
2. Deed of Lease Contract between Toyo Sangyo Kabushiki Kaisha, lessor
whose address is 4-14, Sakae-machi-dori, 2-chom, Chuo-ku, Kobe, Japan,
and Bidertex Services Inc., lessee, dated March 28, 1991
C. Cluett, Peabody & Co, Inc.
1. All agreements licensing the right to use the ARROW and SANFORIZED
trademarks where Cluett, Peabody & Co., Inc. is the licensor.
2. All currently existing office equipment lease agreements and currently
existing maintenance agreements.
3. Lease dated April 1, 1995 between Cluett, Peabody & Co., Inc. and The
Industrial Development Board of the City of Albertville, Alabama, as
landlord, for a sewing facility at 1104 Highway 431 South
Albertville, AL.
4. Lease dated November 23, 1970 between Cluett, Peabody & Co, Inc. (as
assignee) and Interstate & Chattachoochee, Ltd., as landlord, for a
distribution and cutting facility at 7301 Lee Industrial Boulevard,
Austell, Georgia.
5. Agreement for the Sale and Purchase of 8.52 Acres of Land dated June
14, 1993 between Cluett, Peabody & Co. Inc. and Salant Corporation,
whose address is 1114 Avenue of the Americas, New York, NY 10036.
<PAGE>
6. Professional Services Agreement dated October 6, 1993 between Cluett,
Peabody & Co, Inc. and RUST Environment & Infrastructure Inc., whose
address is 100 Corporate Parkway, Birmingham, AL 35242.
D. Great American Knitting Mills, Inc.
1. Lease dated August 16, 1991 between Great American Knitting Mills,
Inc. and Tri-County Business Campus Joint Venture, as landlord, for
dye house in Pottstown, Pennsylvania.
2. All currently existing office equipment lease agreements and currently
existing maintenance agreements.
3. Agreement with K-mart Corporation, whose address is 3100 West Big
Beaver Road, Troy, MI 48084, as licensor, to use the name and
trademark: JACLYN SMITH.
4. Agreement with Textile Industrial Design, whose address is 1 Norcal
Road, Nunawading, Victoria 3131, Australia, as licensor, to use the
trademark FALL PROOF.
5. Independent Sales Representations Agreement dated November 21, 1991
between Great American Knitting Mills, Inc. and Military Sales Service
Company, Inc., whose address is 5301 S. Westmoreland Road, Dallas,
Texas 75237, as amended from time to time.
6. Master Lease Agreement dated April 1, 1995 between Great American
Knitting Mills, Inc. and General Electric Capital Corporation, 6100
Fairview Road, Charlotte, North Carolina 28210 for the lease of 37
knitting machines.
<PAGE>
Schedule 10.1 B
None
<PAGE>
Exhibit A
BY HAND AND TELECOPIER March 30, 1998
- ----------------------
Re: Proposed Plan of Reorganization
Mr. Timothy Coleman
Senior Managing Director
The Blackstone Group L.P.
345 Park Avenue , 31st Floor
New York, New York 10154
Dear Mr. Coleman:
The undersigned, Maurice Bidermann and Societe Anonyme d'Etudes et de
Participation Industrielles et Commerciales (collectively, the "Equity
Representatives") and Vestar Capital Partners III, L.P. ("Vestar") hereby make
the following offer with respect to a plan of reorganization (the "Lead Plan")
for Bidermann Industries U.S.A., Inc. and its subsidiaries ("Debtors"). In the
case of Vestar, Vestar shall purchase, individually or as part of a group, under
such plan (x) new shares of the common stock of the reorganized Bidermann
Industries U.S.A., Inc. ("Reorganized Bidermann") equal to approximately 89.9%
of the common stock of Reorganized Bidermann outstanding after giving effect to
such purchase, and (y) up to $86,500,000 of new preferred stock of Reorganized
Bidermann or another Debtor, all such purchases to be on the terms and subject
to the conditions set forth hereinbelow.
<PAGE>
Mr. Timothy Coleman -2- March 30, 1998
Treatment of Claims and Interests
The principal terms of the Lead Plan shall be as follows (capitalized terms
used herein and not specifically defined herein shall have the meanings assigned
thereto in the Second Amended Joint Plan of Reorganization ("Pending Plan")):
1) Administration Expense Claims, Employee Administrative Wage Claims and
Priority Tax Claims. All Allowed Administration Expense Claims, Employee
Administrative Wage Claims and Allowed Priority Tax Claims shall be treated as
set forth in the Pending Plan. Bryan P. Marsal and the firm of Alvarez & Marsal,
Inc. shall, upon consummation of the Lead Plan, waive their right to apply for
any success fee for services rendered prior to the Consummation Date.
2) Priority Non-Tax Claims (Class 1). All Allowed Priority Non-Tax Claims
shall be treated as set forth in the Pending Plan.
3) Senior Secured Claims (Class 2). All amounts owing in respect of
principal, interest and bank fees under the Pre-petition BIC Credit Agreement,
which are agreed to be, as of March 31, 1998, $153,776,786.86, shall be paid in
full in immediately available funds by wire transfer ("Cash") on the
Consummation Date (as defined below). Interest shall accrue on the principal
amount owing under such agreement from March 31, 1998 until (but not including)
the Consummation Date at the post-default rate specified in Section 2.09 of the
Pre-petition BIC Credit Agreement and shall likewise be paid in Cash on the
Consummation Date. $1,000,000 in the aggregate of fees and expenses of outside
professionals or other parties retained by the Institutional Holders
<PAGE>
Mr. Timothy Coleman -3- March 30, 1998
shall be Allowed Claims and shall be paid in Cash on the Consummation Date;
no other professional fees incurred by the Institutional Holders shall be
payable by the Debtors or Reorganized Debtors. Any adequate protection
payments made in respect of Claims under the Pre-petition BIC Credit
Agreement on or after March 31, 1998 shall be deducted from the amounts
payable to the Institutional Holders on the Consummation Date.
4) Other Secured Claims (Class 4). All Allowed Other Secured Claims shall
be treated as provided in the Pending Plan.
5) General Unsecured Claims (Class 5A1 and 5B through 5P). All allowed
General Unsecured Claims, other than BIUSA Note Claims, shall be treated as set
forth in the Pending Plan.
6) BIUSA Secured Claims and BIUSA Note Claims (Classes 3 and 5A2). Holders
of BIUSA Secured Claims and BIUSA Note Claims shall receive cash on the
Consummation Date in the sum of (x) $145,772,833.00, in satisfaction of all
Claims for principal, interest (whether prepetition or postpetition),
professional fees or other amounts, plus (y) the amount of interest accruing
from March 31, 1998 until (but not including) the Consummation Date on the
principal amount of the BIUSA Notes at the non-default rates specified in the
respective notes. The Institutional Holders shall have the right to subscribe
for up to, in the aggregate, 20% of each of the approximately $24,765,000 of
common stock of Reorganized Bidermann, $36,500,000 in 12 1/2 Class C junior
Preferred Stock of Reorganized Bidermann and, as the case may be, Class B
<PAGE>
Mr. Timothy Coleman -4- March 30, 1998
Preferred Stock or Reorganized Bidermann or another Debtor which Vestar is
obligated to purchase (such right to be exercised for equal percentage interests
in each such class of common or preferred stock which Vestar purchases). The
allocation of such purchased stock among such exercising Holders may be
determined by them in their sole discretion. Such right must be exercised
irrevocably by the Institutional Holders no later than April 15, 1988 by
executing and delivering to you (with a copy to Vestar) a Subscription Agreement
substantially in the form of the Subscription Agreement executed by Vestar and
otherwise satisfactory to you; on or before the Consummation Date, the
Institutional Holders which shall have exercised such reinvestment right shall
execute the Stockholders' Agreement executed by Vestar. The exercise of such
right shall relieve Vestar of its rights and obligations referred to below to
purchase such portion of each such class of capital stock of Reorganized
Bidermann or another Debtor.
7) Affiliate Claims (Class 6). All Affiliate Claims shall be treated as
provided in the Pending Plan.
8) Equity Interests (Class 7). The holders of Old BIUSA Common Stock (Class
7A) shall receive $13,000,000 in new subordinated notes described hereinbelow in
redemption of approximately 89.9% of their existing equity interests and shall
retain common stock of Reorganized Bidermann which shall represent approximately
10.1% of their remaining equity interest. Except as provided in a separate
letter agreement between Vestar and the Equity Representatives, which shall be
disclosed at the confirmation hearing, no professional fees incurred by the
Holders of Class 7 equity
<PAGE>
Mr. Timothy Coleman -5- March 30, 1998
interests shall be payable by the Debtors or Reorganized Debtors under the Lead
Plan. All other Equity Interest (Classes 7B and 7C) shall be treated as provided
in the Pending Plan. On the Consummation Date, the Equity Representatives shall
enter into the Stockholders' Agreement executed by Vestar.
Means of Implementation
The Lead Plan shall be implemented by modifications to the Existing Plan as
follows:
A) Equity Interests. Subject to the conditions set forth herein below,
by means of subscription agreements in form and substance reasonably
satisfactory to you and Vestar, to be executed and delivered to you by March
30, 1998, Vestar (or its affiliated designee) shall subscribe on the
Consummation Date for approximately $24,765,000 of new shares of common stock
of Reorganized Bidermann and $36,500,000 in Class C junior Preferred Stock of
Reorganized Bidermann, the dividends on which shall accrue at the greater of
12 1/2 or that rate which is 2 1/2 percentage points above the interest rate
on the new subordinated notes provided for below and shall cumulate at the
option of the Board of Directors of Reorganized Bidermann. The proceeds of
both subscriptions shall be used to fund distributions under the Lead Plan
and its transaction costs.
B) New Senior Debt. Subject to the conditions set forth hereinbelow, and
pursuant to a commitment letter between Nationsbank, N.A., Nationsbanc
Montgomery Securities ("NMS") and Vestar, in form and substance reasonably
satisfactory to you,
<PAGE>
Mr. Timothy Coleman -6- March 30, 1998
NMS and Vestar (the "Senior Debt Commitment Letter"), to be delivered to you on
or before March 30, 1998, Vestar shall cause to be provided on the Consummation
Date up to $160,000,000 in senior bank financing of BIC and its subsidiaries,
guaranteed by, and secured by a first-priority security interest on all the
assets of, Reorganized Bidermann and its subsidiaries; approximately
$124,200,000 of such financing shall be used to fund distributions under the
Lead Plan and the balance shall be available credit to the Reorganized Debtors.
The Senior Debt Commitment Letter contains confidential, sensitive commercial
information and (other than the amount and existence of such commitment) may not
be disclosed to any other person except with the prior written consent of Vestar
and NMS.
C) New Subordinated Notes. Subject to conditions set forth hereinbelow, and
pursuant to a letter agreement between Vestar and NMS in form and substance
reasonably satisfactory to you, Vestar and NMS (the "High-Yield Commitment
Letter"), to be delivered to you by March 30, 1998, Vestar shall cause an amount
equal to the gross proceeds of a Rule 144A offering of new subordinated notes of
BIC in the aggregate principal amount of approximately $112,000,000 to be
provided to the Debtors on the Consummation Date; such amount shall be used to
fund distributions on the Consummation Date. The $13,000,000 in new subordinated
notes issued to Class 7A holders shall have the same terms (including future
registration rights) as this issue. Gleacher NatWest shall be designated a
co-lead underwriter of the new subordinated notes offering on terms reasonably
satisfactory to it, NMS and Vestar. The High-Yield
<PAGE>
Mr. Timothy Coleman -7- March 30, 1998
Commitment Letter contains confidential, sensitive commercial information and
(other than the amount and existence of such commitment) may not be disclosed to
any other person without the prior written consent of NMS and Vestar.
D) Class A Preferred. Subject to restrictions imposed by applicable law,
the Debtors shall implement an employee stock plan substantially similar to that
contemplated by that certain Memorandum of Understanding dated May 3, 1996
between UNITE and BIUSA or an alternative mutually agreed between Vestar and
UNITE, provided, however, that (a) the convertible preferred stock to be issued
pursuant to such plan shall be Class A Preferred Stock of Reorganized
Bidermann or an affiliate thereof mutually agreed by Vestar and Unite and shall
be convertible or exchangeable in the event of an initial public offering by
Reorganized Bidermann or an affiliate thereof mutually agreed by Vestar and
UNITE into common stock of Reorganized Bidermann or such affiliate at the price
per share at which shares are offered to the public; (b) in the event the
required initial contribution exceeds any limitation imposed by applicable law,
any such excess shall be allocated to the participants in such plan on a basis
reasonably satisfactory to Reorganized Bidermann and UNITE; and (c) if there
shall be substantial legal difficulties in implementing the employee stock plan,
Vestar shall have the option, as provided in Section 2.1(c) of the Pending Plan,
on the Consummation Date, to pay all Allowed Employee Administrative Wage Claims
in Cash in lieu of establishing such plan or alternative.
<PAGE>
Mr. Timothy Coleman -8- March 30, 1998
E) High-Yield Preferred or Senior Discount Notes. Subject to the conditions
set forth below, Vestar shall cause to be provided on the Consummation Date, the
gross proceeds of a Rule 144A offering of $50,000,000 in Preferred Stock of BIC
or $50,000,000 of senior discount notes of Reorganized Bidermann, each with
terms and conditions acceptable to Vestar in its sole discretion. To the extent
that neither such offering shall be consummated in full by the Consummation
Date, Vestar shall purchase sufficient Class B Preferred Stock of Reorganized
Bidermann or BIC to result, together with proceeds of such offerings, in
$50,000,000 in total proceeds. Such preferred stock shall rank junior to the
Class A Preferred (if the Class B Preferred Stock is issued by Reorganized
Bidermann) and shall have dividends which accrue and cumulate at the option of
the Board of Directors of the issuer thereof at a rate equal to the greater of
12% or that rate which is two percentage points higher than the interest rate on
the new subordinated notes.
F) Management Equity Subscription. By means of subscription agreements
in form and substance satisfactory to Vestar, (a) Alvarez & Marsal, Inc. or
an affiliate thereof shall subscribe for approximately $4,900,000 of new
shares of common stock of Reorganized Bidermann, and (b) executives of the
Debtors designated by Vestar shall subscribe for approximately $1,800,000 in
new common stock of Reorganized Bidermann, both at the same price per share
as paid by Vestar for its shares of common stock. Approximately $2,250,000 of
the stock purchases referred to in the preceding sentence shall be funded by
loans on the Consummation Date by Reorganized Bidermann
<PAGE>
Mr. Timothy Coleman -9- March 30, 1998
to such purchasers. In the event for any reason Alvarez & Marsal, Inc. (or an
affiliated designee) or such executives shall fail to purchase any such amount
of common stock, Vestar shall purchase it at the same price. On or before the
Consummation Date, Alvarez & Marsal, Inc. (or its affiliated designee) and any
executives subscribing for such common stock shall execute the Stockholders'
Agreement executed by Vestar.
G) Mutual Releases Between Reorganized Debtors and Maurice Bidermann. The
Reorganized Debtors and Maurice Bidermann shall exchange mutual releases of
claims against one another (other than Mr. Bidermann's scheduled, prepetition,
general unsecured claims in the approximate amount of $25,000) and all pending
litigation between them involving such claims, including the litigation to which
you are a party in the Bankruptcy Court, shall be dismissed with prejudice
promptly after the Consummation Date.
H) Structure of Organization. The corporate organization of Reorganized
Debtors shall be modified such that (1) CDC shall be contributed by BIUSA to BIC
and shall become a subsidiary of BIC and (2) BIUSA shall form a new subsidiary
("Newco") and shall contribute BIC to Newco, so that, after all such
transactions are completed, BIUSA shall own Newco, which shall own BIC, which
shall own CDC.
I) Relationship of Lead Plan to Pending Plan. The Pending Plan shall be
modified to provide that the Lead Plan shall be given the first opportunity
to close and shall have until May 20, 1998, the exclusive opportunity to
close. Such exclusive opportunity may be extended (a) at your request, with
the consents of Vestar, the Official
<PAGE>
Mr. Timothy Coleman -10- March 30, 1998
Committee of Unsecured Creditors and the Institutional Holders, which consent
shall not be unreasonably withheld, or (b) at the request of Vestar, with the
consents (which shall not be unreasonably withheld) of you, the Official
Committee of Unsecured Creditors and the Institutional Holders. The date which
is determined in accordance with the two preceding sentences to be the last date
on which the Lead Plan shall have the exclusive opportunity to close is
hereinafter referred to as the "Lead Plan Expiration Date".
The Pending Plan shall also be modified to provide that, in the event that
the Lead Plan shall not have closed by the Lead Plan Expiration Date, then the
Lead Plan shall be deemed null and void and the Pending Plan shall have the
exclusive opportunity to close; provided that, in such case, the treatment of
Class 7A (Holders of Old BIUSA Common Stock) shall be modified to provide that
they shall receive either $14,500,000 in Cash or a like principal amount of the
new subordinated notes to be issued under the Pending Plan, as determined by
you. Except as provided in a separate letter agreement between the Institutional
Holders and the Equity Representatives, which shall be disclosed at the
confirmation hearing, no professional fees incurred by the Holders of Class 7
equity interests shall be payable by the Debtors or the Reorganized Debtors
under the Pending Plan.
Conditions
The obligations of Vestar with respect to the funding described above are
subject to the following conditions precedent:
<PAGE>
Mr. Timothy Coleman -11- March 30, 1998
a) you shall have proposed and the Bankruptcy Court shall have confirmed by
March 31, 1998 (or such later date as the Plan Facilitator may, with the consent
of Vestar, determine) a modified plan of reorganization for the Debtors
embodying the terms and conditions set forth herein and otherwise in form and
substance reasonably satisfactory to Vestar in its good faith judgment (the
"Modified Plan");
b) there shall not have occurred since December 31, 1997 any event,
occurrence, change in facts, conditions or other change or effect that,
individually or in the aggregate with all such other events, occurrences,
changes, conditions or effects, is materially adverse to the business, assets,
operations, results of operations or financial condition of BIUSA and its
subsidiaries taken as a whole (a "Material Adverse Change"), it being understood
and agreed that departures of management prior to the Consummation Date shall
not constitute a Material Adverse Change;
c) the absence of any action, suit, investigation or proceeding pending in
any court or before any arbitrator or governmental authority which could
reasonably be expected to have a material adverse effect on Reorganized
Bidermann and its subsidiaries taken as a whole or any transaction contemplated
hereby or on the ability of Reorganized Bidermann and its subsidiaries to
perform their obligations under the documents to be executed in connection with
the debt securities to be offered under the Lead Plan;
d) no banking moratorium shall have been declared by federal or New York
State banking authorities; trading in securities generally on the New York Stock
Exchange shall not have been suspended or minimum or maximum prices shall not
have
<PAGE>
Mr. Timothy Coleman -12- March 30, 1998
been established on the New York Stock Exchange; and there shall not have been
(i) a material outbreak or escalation of hostilities involving the United States
or (ii) a material outbreak or escalation of any other insurrection or armed
conflict involving the United States or any other national or international
calamity or emergency;
e) all of the conditions specified in paragraphs (a), (e), (f) and (g) of
Section 11.2 of the Pending Plan, any conditions included in the Modified Plan
and any conditions included in any document entered into with your approval to
implement the Lead Plan shall have been satisfied as to the Lead Plan; and
f) the Bankruptcy Court shall have entered an order rejecting the existing
BIUSA stockholders' agreements, as amended, and any related documents, and there
shall be no material claims against BIUSA arising from such rejection.
Vestar hereby confirms to you that as of the date hereof it is not aware of
the existence of any matter which would cause the conditions in clauses "b)" and
"c)" to fail to be satisfied. Vestar shall provide prompt written notice to you
and the Debtors should it become aware of the existence of any matter which
would cause any of the conditions in clauses "b)", "c)" and "d)" to fail to be
satisfied.
Any obligations of BIUSA or you in respect of the Lead Plan are subject to
the entry by the Bankruptcy Court of an order confirming the Lead Plan.
Any disputes as to whether or not any condition has been satisfied shall be
resolved by the Bankruptcy Court.
<PAGE>
Mr. Timothy Coleman -13- March 30, 1998
The "Consummation Date" of the Plan shall be any business day on or prior
to the Lead Plan Expiration Date as you and Vestar may agree on which all of the
conditions set forth above shall have been fulfilled or waived.
Deposit, Liquidated Damages; Limitations of Other Liability
To secure its performance of its obligations in respect of the Lead
Plan, Vestar shall, prior to entry of the confirmation order, but in any
event no later than one business day after the date on which the Bankruptcy
Court shall conclude the confirmation hearing, provide a letter of credit
from Nationsbank in form and substance reasonably satisfactory to you, the
Institutional Holders and Vestar in the amount of $12,000,000, which shall be
drawn if Vestar fails to close by the Lead Plan Expiration Date for any
reason other than the failure of any condition mentioned in the "Conditions"
section of this letter agreement. The parties agree that the forfeiture of
such amount is not a penalty but the parties' best estimate of the damages
that the Debtors would incur as a result of Vestar's failure to close, that
such damages are not otherwise reasonably subject to calculation and,
accordingly, that forfeiture of such amount shall serve as liquidated damages
in the event of Vestar's failure to close. In no event shall Vestar or its
officers, directors, partners (limited or general), agents, employees,
advisors, or affiliates have any liability to any Person in respect of such
failure to close, other than as expressly provided herein above, including
without limitation for consequential damages, lost profits or revenues, and
regardless of whether such claim is based in contract, tort or any other
theory of law or equity.
<PAGE>
Mr. Timothy Coleman -14- March 30, 1998
Ancillary Matters
1) Transaction Costs. All transactions costs, including, without the need
for any Bankruptcy Court approval, Vestar's fees and expenses and the fees and
expenses of its financing sources, counsel, accountants and other advisors,
shall be paid at closing of the Lead Plan.
2) Exclusivity. Vestar and the Equity Representatives reciprocally covenant
and agree that until December 31, 1998, neither of them, nor any of their
respective shareholders, principals, partners, officers, agents, affiliates,
counsel or investment bankers will directly, or indirectly, engage in any
discussions, negotiations or agreements with any entities other than the Equity
Representatives (in the case of Vestar) or Vestar (in the case of the Equity
Representatives), the purpose of which is to negotiate or invest in any other
plan of reorganization; provided, that in the event of a material breach by
either party of its obligations hereunder or in respect of the Modified Plan,
the other party shall be relieved of its obligation under this paragraph 2.
3) Vestar agrees that if the Lead Plan is not consummated it will not, at
any time prior to November 20, 1999, solicit any Person who at the time of such
solicitation is an executive officer of the Reorganized Debtors to become an
employee of any of Vestar and its Affiliates, without the prior written consent
of the Board of Directors of such Reorganized Debtor.
<PAGE>
Mr. Timothy Coleman -15- March 30, 1998
This offer and letter agreement supersedes all prior offers, proposals and
letter agreements delivered to you by either or both of the undersigned.
Very truly yours,
W. FORSTER & CO. INC. as Agent
for the Equity Representatives
By: ________________________
By: ________________________
Maurice Bidermann
SOCIETE ANONYME D'ETUDES ET
DE PARTICIPATION
INDUSTRIELLES ET
COMMERCIALES
By: ________________________
Title
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VESTAR CAPITAL PARTNERS III, L.P.
By: VESTAR ASSOCIATES III, L.P.
Its: General Partner
By: VESTAR ASSOCIATES
CORPORATION III
Its: General Partner
By:___________________
Name:
Title:
AGREED:
___________________
Timothy R. Coleman, in his capacity
as Plan Facilitator in the
Debtors' Chapter 11 cases,
and not in his individual
capacity
BIDERMANN INDUSTRIES, U.S.A, INC.
By: _______________________
Chief Executive Officer
Alvarez & Marsal, Inc.
By: _______________________
Title:
<PAGE>
Exhibit B
Vestar Transaction Restructuring Transactions
Step 1) BIUSA will contribute CDC to BIC
Step 2) BIUSA will form Newco and contribute BIC to Newco.
Step 3) BIC will borrow approximately $124,200,000 of New BIC Term Debt under
a facility of approximately $160,000,000 and will issue $125,000,000
of New Subordinated Notes.
Step 4) Each holder of old BIUSA Common Stock will retain 10.1% of its Old
BIUSA Common Stock and 89.9% of its Old BIUSA Common Stock will be
redeemed for a pro rata share of $13,000,000 of the $125,000,000 of
New Subordinated Notes of BIC.
Step 5) Vestar and the other New Equity Investors will purchase New Class C
Junior Preferred Stock for $36,500,000 and will purchase 89.9% of
common stock of BIUSA (after giving effect to the aforementioned
transactions) for not less than $31,465,000.
Step 6) An additional $50 million will be raised from the issuance of the
New Mezzanine Financing and/or the New Class B Preferred Stock.
Step 7) Approximately $2.3 million of New Class A Senior Preferred Stock will
be contributed to the employee stock plan to the extent provided in
the Plan.
<PAGE>
Step 8) Sufficient funds will be made available to each of the Debtors to
satisfy its obligations under the Plan.
Step 9) BIC shall cause the refinancing of the indebtedness of CPC Canada.
2
<PAGE>
Institutional Holders' Conversion Transaction
Restructuring Transactions
Step 1) There will be a formal contribution/distribution of all intercompany
accounts, notes and receivables/payables except for outstanding
balances from CP Canada, the RLWW/BIC $30M subrogation obligation and
the notes created below.
Step 2) BIUSA will issue the New Senior Subordinated Notes to the holders of
Senior Secured Claims and the holders of General Unsecured Claims in
Subclass 5A2 (BIUSA: BIUSA Note Claims) of Class 5.
Step 3) CDC will merge into CPHC, a subsidiary of its sister company BIC, in
exchange for BIC stock. As a result, AFS will become a direct
subsidiary of CPHC and CPHC will directly own 40% of GAKM-R and 40%
CP-R.
Step 4) BIC will drop all of its assets, which includes 60% of the stock of
GAKM-R and 60% of CP-R and all of the stock of BTC, Bidermann Company
Limited (Hong Kong) and a pension asset valued at $18 million, into
CPHC in exchange for stock of CPHC. As a result, CPHC will own 100% of
GAKM-R, 100% of CP-R, and 100% of BTC. After
3
<PAGE>
this transfer, the only asset that BIC will hold will be the stock
of CPHC.
Step 5) GAKM-R will then merge into GAKM. In addition, CP-R will merge into
CP & C. As a result of the transfers in Steps 3 and 4, these companies
are brother-sister companies immediately before the mergers. The
license agreements among GAKM-R, CP-R, and AFS and the supply
agreements between GAKM and CP & C will be cancelled.
Step 6) CP & C. transfers its 60% interest in CDG to BTC solely in exchange
for voting stock of BTC. CP & C. then distributes the BTC stock to
CPHC.
Step 7) CPHC contributes the stock of Bidertex Services, Inc. and Bidermann
Company Limited (Hong Kong) to CP & C.
Step 8) CP & C. will contribute all of its operating assets (other than
licenses, receivables and notes from CP Canada and the stock of its
subsidiaries) to a Newco in exchange for Newco stock.
Step 9) Old Mission Textiles, Inc., 294671 Ontario, Ltd., The French
Collection, Inc., Karl Lagerfeld Womenswear, Inc., Bidermann
Industries Licensing, Inc., M W Warehouse, Inc., and Bidermann
Womanswear Corp. will be liquidated or merged prior to or
simultaneously with
4
<PAGE>
the internal restructuring. There is a liquidation or sale of assets
in process that will probably not be completed prior to the internal
restructuring with respect to Arrow de Mexico, Cluett Peabody AG
(Switzerland) and Arrow Inter-America, Inc.
Step 10) BIC will be merged into BIUSA.
5
<PAGE>
EXHIBIT 2.2
EXECUTION COPY
SUBSCRIPTION AGREEMENT
THIS SUBSCRIPTION AGREEMENT (the "Agreement") is dated as of March 30,
1998 and entered into among Bidermann Industries U.S.A., Inc., a Delaware
corporation (the "Company" or "BIUSA"), Vestar Capital Partners III, L.P., a
Delaware limited partnership ("Vestar"), and Alvarez & Marsal, Inc., a New York
corporation ("A&M"; Vestar (or its affiliated designee) and A&M (or its
affiliated designee), individually, a "Purchaser" and, collectively, the
"Purchasers").
WHEREAS, the Company and certain of its affiliates (the "Debtors") are
debtors in certain cases under chapter 11 of Title 11 of the United States Code
in the United States Bankruptcy Court for the Southern District of New York (the
"Bankruptcy Court") entitled IN RE BIDERMANN INDUSTRIES U.S.A., INC., ET AL.
(Jointly Administered Case Nos. 95 B 43098 through 43099, and 43101 through
43114 (TLB)); and
WHEREAS, the Debtors have filed that certain Third Amended Joint Plan
of Reorganization dated March 30, 1998 (the "Plan of Reorganization"; terms used
herein and not otherwise defined shall have the meanings set forth in the Plan
of Reorganization); and
WHEREAS, the Plan of Reorganization contemplates that on the
Consummation Date the Purchasers (in their capacities as Purchasers or as
Guarantors), BIUSA Noteholders which theretofore had irrevocably exercised their
collective right to subscribe for up to 20% of the shares of each of the New
BIUSA Common Stock, New BIUSA Class C Junior Preferred Stock and, as the case
may be, New Class B Preferred Stock (such right to be exercised for equal
percentage interests in each such class of New Equity Investment Shares) which
Vestar (as a Purchaser, the New BIUSA Common Stock Guarantor and the New Class B
Preferred Stock Guarantor) is obligated hereunder to purchase (the
"Participating BIUSA Noteholders"), and the Management Investors (which shall
not include any affiliate of A&M) (collectively, the "New Equity Investors")
will make the New Equity Investment and purchase the New Equity Investment
Shares, and that the proceeds thereof will be used to make certain distributions
required to be made to or for the benefit of the holders of certain Claims and
Equity Interests pursuant to the terms of the Plan of Reorganization; and
WHEREAS, it is a condition precedent to confirmation of the Plan of
Reorganization that the Debtors shall have entered into a Subscription Agreement
with Vestar for the New Equity Investment; and
WHEREAS, it is a condition precedent to the consummation of the Plan
of Reorganization that the Company shall
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2
have received from Vestar (as a Purchaser, the New Class B Preferred Stock
Guarantor and the New BIUSA Common Stock Guarantor) and/or A&M (as a Purchaser
and the Management Investor Guarantor) and/or the other New Equity Investors
aggregate Cash proceeds in an amount not less than $31,465,000 for New BIUSA
Common Stock, $36,500,000 for New BIUSA Class C Junior Preferred Stock and, to
the extent $50,000,000 of preferred stock of BIC or senior discount notes of
BIUSA are not sold prior to the Consummation Date in an offering pursuant to
Rule 144A under the Securities Act of 1933, as amended (the "Rule 144A
Offering"), $50,000,000 for New Class B Preferred Stock of the Company or BIC;
and
WHEREAS, each Purchaser has agreed to become a New Equity Investor and
to purchase the number and class of New Equity Investment Shares identified on
Schedule I hereto (as the same may be amended, modified or supplemented with the
written consent of Vestar and A&M; the "New Equity Investment Share
Allocation"); and
WHEREAS, the Management Investment Guarantor has agreed to purchase
all or any portion of the New BIUSA Common Stock to be purchased by the
Management Investors upon the occurrence of any event or circumstance which
results in any such New BIUSA Common Stock not being purchased by Management
Investors on the Consummation Date; and
WHEREAS, the New BIUSA Common Stock Guarantor has agreed to purchase
all or any portion of the New BIUSA Common Stock to be purchased by A&M (as a
Purchaser or as the Management Investor Guarantor) upon the occurrence of any
event or circumstance which results in any such New BIUSA Common Stock not being
purchased by A&M (as a Purchaser or as the Management Investor Guarantor) on the
Consummation Date; and
WHEREAS, the Company desires to sell to Purchasers, and the Purchasers
desire to purchase from the Company, the number of shares of New BIUSA Common
Stock and, in the case of Vestar, New BIUSA Class C Junior Preferred Stock set
forth in the New Equity Investment Share Allocation and, to the extent
$50,000,000 of preferred stock of BIC or senior discount notes of BIUSA are not
sold prior to the Consummation Date in the Rule 144A Offering, New Class B
Preferred Stock of BIUSA or BIC;
NOW, THEREFORE, in order to implement the foregoing and in
consideration of the mutual representations, warranties, covenants and
agreements contained herein, the parties hereto agree as follows:
<PAGE>
3
1. DEFINITIONS
1.1. Capitalized terms that are not otherwise defined herein shall
have the meanings ascribed to such terms in the Plan of Reorganization.
2. SUBSCRIPTION FOR PURCHASE OF NEW EQUITY INVESTMENT SHARES.
2.1. Purchase of New Equity Investment Shares. (a) Pursuant to the
terms and subject to the conditions set forth in this Agreement, each Purchaser
hereby subscribes for and agrees to purchase, and the Company hereby agrees to
issue and sell to such Purchaser, on the Consummation Date, the number of shares
of New BIUSA Common Stock and, in the case of Vestar, New BIUSA Class C Junior
Preferred Stock set forth next to such Purchaser's name in the New Equity
Investment Share Allocation at a price of $98.01 per share of New BIUSA Common
Stock and $100.00 per share of New BIUSA Class C Junior Preferred Stock.
(b) Pursuant to the terms and subject to the conditions set forth in
this Agreement, the Management Investor Guarantor hereby subscribes for and
agrees to purchase, and the Company hereby agrees to issue and sell to such
Purchaser, on the Consummation Date, any and all unsold shares of New BIUSA
Common Stock to be purchased by the Management Investors, each at a price of
$98.01 per share.
(c) Pursuant to the terms and subject to the conditions set forth in
this Agreement, the New BIUSA Common Stock Guarantor hereby subscribes for and
agrees to purchase, and the Company hereby agrees to issue and sell to such
Purchaser, on the Consummation Date, any and all unsold shares of New BIUSA
Common Stock to be purchased by A&M (as a Purchaser or as the Management
Investor Guarantor), each at a price of $98.01 per share.
(d) Pursuant to the terms and subject to the conditions set forth in
this Agreement, the New Class B Preferred Stock Guarantor hereby subscribes for
and agrees to purchase, and the Company hereby agrees to issue and sell to such
Purchaser, on the Consummation Date, a number of shares (less any shares thereof
subscribed for by the Participating Noteholders) of New Class B Preferred Stock
of BIC or BIUSA resulting in receipt by the Company of proceeds equal to
$50,000,000 less any gross proceeds received on or prior to the Consummation
Date from the sale of preferred stock of BIC or discount notes of BIUSA in the
Rule 144A Offering. The New Class B Preferred Stock shall rank junior to any
New BIUSA Class A Senior Preferred Stock which is issued and senior to the New
BIUSA Class C Junior Preferred Stock (in each case if the New Class B Preferred
Stock is issued by BIUSA) and otherwise shall have such terms and conditions as
may be acceptable to Vestar in its sole discretion, except that the
<PAGE>
4
dividend rate thereon shall not be in excess of the greater of (i) 12% or (ii)
that rate which is two percentage points (2%) higher than the interest rate on
the subordinated notes to be issued pursuant to the Plan of Reorganization, and
provided that the New Class B Preferred Stock shall not be convertible into the
common stock of BIUSA or any of its subsidiaries.
(e) For purposes of this Agreement the product of (i) the number of
New Equity Investment Shares to be purchased by any Purchaser (in its capacity
as a Purchaser or as a Guarantor), multiplied by (ii) the respective per share
purchase prices thereof, shall be referred to in the aggregate as the "Purchase
Price" with respect to such Purchaser.
(f) Prior to entry of the order confirming the Plan of
Reorganization, but in any event no later than one business day after the date
on which the Bankruptcy Court shall conclude the Confirmation Hearing, Vestar
shall provide an irrevocable letter of credit from a financial institution
acceptable to the Plan Facilitator and Vestar and in form and substance
satisfactory to the Plan Facilitator and Vestar in the amount of $12,000,000,
which shall be drawn if Vestar fails to close by the Vestar Transaction
Consummation Date for any reason other than the failure of any condition set
forth in Section 5 hereof or in the "Conditions" section of the letter agreement
dated March 27, 1998 among the Equity Representatives, Vestar, the Plan
Facilitator, the Company and A&M (the "Letter Agreement"). The parties agree
that the forfeiture of such amount is not a penalty but the parties' best
estimate of the damages that the Debtors would incur as a result of Vestar's
failure to close, that such damages are not otherwise reasonably subject to
calculation and, accordingly, that forfeiture of such amount shall serve as
liquidated damages in the event of such failure to close by Vestar. In no event
shall Vestar or its officers, directors, partners (limited or general), agents,
employees, advisors or affiliates have any liability to any Person, including
the parties hereto, in respect of such failure to close, other than as expressly
provided in this Section 2.1(f), including without limitation for consequential
damages, lost profits or revenues, and regardless of whether such claim is based
in contract, tort or any other theory of law or equity. Upon the Consummation
Date, such letter of credit shall be returned to Vestar promptly.
2.2. The Closing. (a) The closing (the "Closing") of the purchase of
the New Equity Investment Shares provided for herein shall take place at 10:00
a.m., New York time, on the Consummation Date in accordance with the Plan of
Reorganization at the offices of Simpson Thacher & Bartlett, 425 Lexington
Avenue, New York, New York 10017.
(b) At the Closing, each Purchaser (in its capacity as a Purchaser or
as a Guarantor) shall deliver the Purchase Price for such Purchaser to the
Company by wire transfer of immediately
<PAGE>
5
available funds to an account designated by the Company in writing and delivered
to counsel for such Purchaser not less than five (5) Business Days prior to the
Closing. Promptly upon confirmation of the receipt of such wire transfer, the
Company shall deliver to such Purchaser a certificate or certificates
representing the shares purchased by such Purchaser of New BIUSA Common Stock
and, in the case of Vestar, New BIUSA Class C Junior Preferred Stock and, as the
case may be, New Class B Preferred Stock.
2.3. TERMS OF THE NEW BIUSA COMMON STOCK. The New BIUSA Common Stock shall
have the rights provided in the Restated Certificate of Incorporation of BIUSA
attached as Exhibit A hereto.
2.4. TERMS OF THE NEW BIUSA CLASS C JUNIOR PREFERRED STOCK. The New BIUSA
Class C Junior Preferred Stock shall have the terms, rights and preferences
provided in the Certificate of Designations attached as Exhibit B hereto.
2.5. BYLAWS OF BIUSA. On and after the Consummation Date, the Bylaws of
BIUSA shall be in the form attached as Exhibit C hereto, as they may be amended
after the Consummation Date.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Each Purchaser severally
represents, warrants and agrees as to itself only as follows (references in this
Section 3 to "Purchaser" are to such Purchaser):
3.1. ORGANIZATION AND STANDING; RESIDENCE AND COMPETENCY; POWER;
ENFORCEABILITY.
(a) Purchaser is duly organized and validly existing under the laws
of its jurisdiction of formation with power and authority under such laws to
enter into and perform its obligations under this Agreement and the Stockholders
Agreement attached hereto as Exhibit D. This Agreement has been, and
simultaneously with the Closing the Stockholders Agreement will be, duly
authorized, executed and delivered by Purchaser.
(b) Assuming the due execution and delivery thereof by the other
parties thereto, this Agreement is, and simultaneously with the Closing the
Stockholders Agreement will be, enforceable against Purchaser in accordance with
its terms, except as such enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or other similar laws and equitable
principles relating to or limiting creditors' rights against Purchaser
generally.
(c) Neither the execution and delivery of this Agreement or the
Stockholders Agreement by Purchaser nor the consummation by Purchaser of the
transactions contemplated hereby or thereby will conflict with or violate (i)
the certificate of
<PAGE>
6
incorporation or bylaws or other organizational documents of Purchaser, or (ii)
any law, rule, regulation, ordinance, writ, injunction, judgment or decree
applicable to Purchaser or by which any of its assets may be bound or affected.
(d) Neither the execution and delivery of this Agreement or the
Stockholders Agreement by Purchaser nor the consummation by Purchaser of the
transactions contemplated hereby or thereby will result in any material breach
of any terms or conditions of, or constitute a material default under, any
material contract, agreement or instrument to which Purchaser is a party or by
which Purchaser is bound.
3.2. Investment Intention; No Resales. Purchaser is acquiring New Equity
Investment Shares for investment solely for its own account and not with a view
to, or for resale in connection with, the distribution or other disposition
thereof (other than, in the case of the New Class B Preferred Stock Guarantor,
the resale of any New Class B Preferred Stock acquired by it hereunder to
"qualified institutional buyers" as defined in and pursuant to Rule 144A under
the Securities Act (as defined below) or, alternatively, in private sales made
in compliance with (or pursuant to exemptions from) the Securities Act and the
rules and regulations thereunder). Purchaser agrees and acknowledges that it
will not, directly or indirectly, offer, transfer, sell, assign, pledge,
hypothecate or otherwise dispose of any New Equity Investment Shares, or solicit
any offers to purchase or otherwise acquire or take a pledge of any New Equity
Investment Shares, except in compliance (including an exemption therefrom) with
the Securities Act of 1933, as amended (the "Securities Act"), and the rules and
regulations thereunder.
3.3. Stock Unregistered. Purchaser acknowledges and represents that it has
been advised by the Company that (a) the sale of New Equity Investment Shares
has not been registered under the Securities Act or any state securities laws;
(b) New Equity Investment Shares must be held indefinitely and Purchaser must
continue to bear the economic risk of its investment in New Equity Investment
Shares unless such New Equity Investment Shares are redeemed or the sale of such
New Equity Investment Shares is subsequently registered under the Securities Act
and all applicable state securities laws or an exemption from such registration
is available; (c) there is no established market for New Equity Investment
Shares and it is not anticipated that there will be any public market for New
Equity Investment Shares in the foreseeable future; (d) Rule 144 promulgated
under the Securities Act may not be presently available with respect to the sale
of any securities of the Company, and the Company has made no covenant to make
such Rule available; (e) when and if New Equity Investment Shares may be
disposed of without registration under the Securities Act in reliance on
Rule 144, such disposition may be made only in limited amounts in accordance
with the terms and conditions of such Rule; (f) if the Rule 144 exemption is not
<PAGE>
7
available, public offer or sale without registration will require compliance
with Regulation A or the availability of an exemption under the Securities Act;
(g) a restrictive legend in the form set forth (x) in Section 3.4 of the
Stockholders Agreement or (y) in the case of New Class B Preferred Stock, in
Section 3.5 hereof, shall be placed on the certificates representing New Equity
Investment Shares; and (h) a notation shall be made in the appropriate records
of the Company indicating that New Equity Investment Shares are subject to
restrictions on transfer and, if the Company engages the services of a
securities transfer agent, appropriate stop-transfer instructions will be issued
to such transfer agent with respect to New Equity Investment Shares.
3.4. ADDITIONAL INVESTMENT REPRESENTATIONS. (a) Such Purchaser's financial
situation is such that it can afford to bear the economic risk of holding New
Equity Investment Shares for an indefinite period of time and can afford to
suffer complete loss of its investment in New Equity Investment Shares; (b) such
Purchaser's knowledge and experience in financial and business matters are such
that it is capable of evaluating the merits and risks of the investment in New
Equity Investment Shares, as contemplated by this Agreement, or has been advised
by a representative possessing such knowledge and experience; (c) such Purchaser
understands that New Equity Investment Shares are a speculative investment which
involves a high degree of risk of loss of its investment therein, there are
substantial restrictions on the transferability of New Equity Investment Shares,
and, on the Consummation Date and for an indefinite period following the
Consummation Date, there will be no public market available to the Purchasers
for New Equity Investment Shares; (d) such Purchaser understands and has taken
cognizance of all the risks related to the purchase of New Equity Investment
Shares, and, except as set forth herein, no representations or warranties have
been made to such Purchaser concerning New Equity Investment Shares, the Company
or their prospects or other matters; (e) in making its decision to purchase New
Equity Investment Shares hereby subscribed for, such Purchaser has relied upon
independent investigations made by it and, to the extent believed by such
Purchaser to be appropriate, its representatives, including its own
professional, financial, tax and other advisors; and (f) such Purchaser is fully
familiar with the business and operations of the Company, and it and its
representatives have examined all documents and have been given the opportunity
to ask questions of, and to receive answers from, the Company concerning the
terms and conditions of the purchase of New Equity Investment Shares and to
obtain any additional information which such Purchaser or its representatives
deem necessary.
3.5. LEGEND. Each certificate representing New BIUSA Common Stock and New
BIUSA Class C Junior Preferred Stock shall bear on the face thereof the legend
set forth in Section 3.4 of the Stockholders Agreement. Each certificate
representing New
<PAGE>
8
Class B Preferred Stock shall bear on the face thereof the following legend:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAW,
AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH
SECURITIES UNLESS THE ISSUER RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER
OF THESE SECURITIES REASONABLY SATISFACTORY TO THE ISSUER STATING THAT SUCH
SALE, TRANSFER, ASSIGNMENT OR HYPOTHECATION IS EXEMPT FROM THE REGISTRATION
AND PROSPECTUS DELIVERY REQUIREMENTS OF SUCH ACT AND OTHER STATE SECURITIES
LAWS."
4. REPRESENTATIONS AND WARRANTIES OF COMPANY. The Company represents,
warrants and agrees as follows:
4.1. Organization and Standing; Residence and Competency; Power;
Enforceability.
(a) The Company is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware. Subject to any
requisite approval of the Bankruptcy Court, the Company has all requisite
corporate power and authority to execute and deliver this Agreement and the
Stockholders Agreement and to perform its obligations hereunder and thereunder.
(b) The execution, delivery and performance by the Company of this
Agreement has been duly authorized by Timothy R. Coleman, in his capacity as
Plan Facilitator appointed in the Debtors' chapter 11 cases with full power to
exercise the authority of the Company's Board of Directors in respect of its
Plan of Reorganization, and no other corporate proceeding is necessary for the
execution, delivery and performance by the Company of this Agreement. This
Agreement has been duly executed and delivered by the Company and, assuming it
is duly executed and delivered by the Purchasers, the New Class B Preferred
Stock Guarantor, the New BIUSA Common Stock Guarantor and the Management
Investor Guarantor (individually, a "Guarantor" and, collectively, the
"Guarantors"), and subject to any requisite approval of the Bankruptcy Court,
constitutes a valid and binding obligation of the Company to each Purchaser and
Guarantor, enforceable against the Company by each Purchaser and Guarantor in
accordance with its terms. The execution and delivery by the Company of the
Stockholders Agreement simultaneously with the Closing is provided for in the
Plan of Reorganization, and, subject to any requisite approval of the Bankruptcy
Court, no other corporate proceeding is necessary for such execution and
delivery. Following such execution and delivery by the Company, and, assuming
it is duly executed and delivered by the Purchasers (in their capacities as such
or as Guarantors), and subject to
<PAGE>
9
any requisite approval of the Bankruptcy Court, the Stockholders Agreement will
constitute a valid and binding obligation of the Company to each Purchaser,
enforceable against the Company by each Purchaser in accordance with its terms.
(c) The execution and delivery of this Agreement does not and the
execution and delivery of the Stockholders Agreement will not, and the
performance by the Company of its obligations hereunder and under the
Stockholders Agreement and the consummation of the transactions contemplated
hereby and thereby will not, (i) violate the certificate of incorporation or
bylaws (or other organizational documents) of any of the Company and its
subsidiaries, as amended and otherwise then in effect, (ii) conflict with or
result in the breach of or constitute a default (or an event which, with the
lapse of time or giving of notice, or both, would become a default) under any
note, bond, mortgage, indenture, permit, license, franchise or agreement or
obligation to which the Company, or any of its subsidiaries, is a party or by
which the Company, or any of its subsidiaries, or any of their respective assets
may be bound or affected or result in the creation of any lien, claim or
encumbrance on any asset of the Company or of any of its subsidiaries, (iii)
conflict with or violate any law, rule, regulation, ordinance, order, writ,
injunction, judgment or decree applicable to the Company or any of its
subsidiaries or by which any asset of the Company or any of its subsidiaries may
be bound, or (iv) require any action by or in respect of, or filing with, any
governmental body, agency or official except for (A) any requisite approval of
the Bankruptcy Court, (B) the filing with the Secretary of State of the State of
Delaware, of the Restated Certificate of Incorporation attached as Exhibit A
hereto, the Certificate of Designations attached as Exhibit B hereto and the
Certificates of Designations for the New BIUSA Class A Senior Preferred Stock
and the New Class B Preferred Stock referred to in the Plan of Reorganization
(such Restated Certificate of Incorporation and all three of such Certificates
of Designations collectively referred to as the "Certificates") and (C) with
respect to clauses (ii) and (iii) above, such conflicts, violations, breaches or
defaults which will not, in the aggregate, result in a Material Adverse Change
(as defined in Section 5.2(e)) or affect the Purchasers' or the Guarantors'
rights under this Agreement.
4.2. CAPITALIZATION. After giving effect to the transactions contemplated
by this Agreement and the Plan of Reorganization, and immediately after the
Closing, the capital stock of the Company, as authorized by its Restated
Certificate of Incorporation attached as Exhibit A hereto, as amended by the
other Certificates, will consist solely of a number of shares of common stock,
New BIUSA Class A Senior Preferred Stock, New BIUSA Class C Junior Preferred
Stock and other preferred stock (including any New Class B Preferred Stock)
provided for in the Plan of Reorganization or approved in writing by Vestar, and
no
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10
shares of capital stock of BIUSA or security convertible into or exercisable or
exchangeable for such capital stock will be issued, outstanding, reserved for
issuance, held in the treasury of the Company or issuable by the Company, except
in each case as provided in the Plan of Reorganization and this Agreement or
approved in writing by Vestar.
4.3. VALIDITY OF ISSUANCE. The New Equity Investment Shares to be issued
to the Purchasers and, as the case may be, the Guarantors pursuant to this
Agreement, when issued in accordance with the terms hereof, will be duly
authorized, validly issued, fully paid and nonassessable, with no personal
liability attached to the ownership thereof and will not be issued in violation
of or subject to any preemptive rights under the Delaware General Corporation
Law.
4.4. LITIGATION. Other than as disclosed to each of Vestar and A&M in
writing prior to the date hereof, there is not pending or, to the knowledge of
the Company, threatened any action, suit, proceeding, inquiry or investigation,
governmental or otherwise, to which any of the Company and its subsidiaries is a
party, or to which any of their respective material assets is subject, before or
brought by any court, arbitrator or governmental authority which, if determined
adversely to any of the Company and its subsidiaries, would result in a Material
Adverse Change.
5. CONDITIONS TO OBLIGATIONS OF PARTIES.
5.1. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The obligations of the
Company to sell the New Equity Investment Shares to the Purchasers and, as the
case may be, the Guarantors are subject to the satisfaction or waiver prior to
the Closing of the following conditions:
(a) The representations and warranties of each Purchaser and
Guarantor contained in this Agreement shall be true and correct in all material
respects as of the Consummation Date as if made at and as of such time, and each
Purchaser and Guarantor shall have performed or complied in all material
respects with all agreements and covenants required by this Agreement to be
performed or complied with by it prior to or at and as of the Consummation Date;
and
(b) All of the conditions precedent to the Consummation Date set
forth in section 11.2 of the Plan of Reorganization shall have been satisfied or
waived in accordance with the terms and conditions of the Plan of
Reorganization.
5.2. CONDITIONS TO OBLIGATIONS OF THE PURCHASERS AND THE GUARANTORS. The
obligation of each Purchaser and Guarantor to purchase New Equity Investment
Shares is subject to the satisfaction or waiver prior to the Closing of the
following conditions:
<PAGE>
11
(a) The representations and warranties of the Company contained in
this Agreement shall be true and correct in all material respects as of the
Consummation Date as if made at and as of such time, and the Company shall have
performed or complied in all material respects with all agreements and covenants
required by this Agreement to be performed or complied with by it prior to or at
and as of the Consummation Date; provided that if Vestar exercises its approval
rights under Section 4.2 hereof in any material respect without the consent of
A&M (which consent shall not be unreasonably withheld), A&M shall not be
obligated to purchase New Equity Investment Shares (whether as a Purchaser or as
the Management Investment Guarantor), but Vestar shall remain obligated
hereunder as a Purchaser and Guarantor;
(b) All of the conditions precedent to the Consummation Date set
forth in section 11.2 of the Plan of Reorganization shall have been satisfied or
waived in accordance with the terms and conditions of the Plan of
Reorganization; provided that in no event shall A&M be obligated to purchase New
Equity Investment Shares (whether as a Purchaser or as the Management Investment
Guarantor) if Vestar does not purchase New Equity Investment Shares in
accordance with its obligations hereunder;
(c) The Certificates shall have been filed with the Secretary of
State of the State of Delaware and shall be in full force and effect and the
Company's Restated Certificate of Incorporation attached as Exhibit A hereto, as
amended by the other Certificates, shall be in full force and effect;
(d) There shall not have been any material modification, amendment,
termination, cancellation, rescission, supersession or waiver of any term of the
Plan of Reorganization without the prior written consent of Vestar;
(e) There shall not have occurred since December 31, 1997 any event,
occurrence, change in facts, conditions or other change or effect that,
individually or in the aggregate with all such other events, occurrences,
changes, conditions or effects, is materially adverse to the business, assets,
operations, results of operations or financial condition of the Company and its
subsidiaries taken as a whole (a "Material Adverse Change"), it being understood
and agreed that departures of management prior to the Consummation Date shall
not constitute a Material Adverse Change;
(f) No banking moratorium shall have been declared by federal or New
York State banking authorities; trading in securities generally on the New York
Stock Exchange shall not have been suspended or minimum or maximum prices shall
not have been established on the New York Stock Exchange; and there shall not
have been (A) a material outbreak or escalation of hostilities involving the
United States or (B) a material outbreak or escalation of any other insurrection
or armed
<PAGE>
12
conflict involving the United States or any other national or international
calamity or emergency;
(g) All Management Common Stock Subscription Agreements which (i)
have been approved by Vestar, (ii) are not inconsistent with this Agreement or
the Plan of Reorganization and (iii) have been duly executed and delivered by
Management Investors shall have been duly executed and delivered by the Company
and shall (subject to any requisite approval of the Bankruptcy Court) constitute
valid and binding obligations of the Company to each Management Investor party
thereto, enforceable against the Company by each such Management Investor in
accordance with its terms (it being understood that any failure of any
Management Investor party to a Management Common Stock Subscription Agreement to
fulfill his obligations thereunder shall not relieve Vestar of any of its
obligations hereunder as a Purchaser or as a Guarantor);
(h) The Company and all Participating BIUSA Noteholders shall have
executed and delivered the Stockholders Agreement;
(i) No preliminary or permanent injunction or other order issued by
any federal, state or foreign court of competent jurisdiction or by any
governmental authority nor any statute, rule, regulation or executive order
promulgated or enacted by any federal, state or foreign governmental authority
which restrains, enjoins or otherwise prohibits the consummation of any of the
transactions contemplated hereby or by the Plan of Reorganization (other than
the purchase of New BIUSA Common Stock by A&M or a Management Investor;
provided, however, that any such injunction in effect at the Consummation Date
shall release A&M or such Management Investor from its obligations hereunder,
but shall not release any Guarantor from its obligations hereunder) shall be in
effect;
(j) All consents, exemptions, authorizations, or other actions by, or
notices to, or filings with, governmental authorities and other persons
necessary in connection with the consummation of the transactions contemplated
hereby shall have been obtained, given or made;
(k) There shall not be any action, suit, investigation or proceeding
pending in any court or before any arbitrator or governmental authority which
could reasonably be expected to have a material adverse effect on the Company
and its subsidiaries taken as a whole or any transaction contemplated hereby or
on the ability of the Company and its subsidiaries to perform their obligations
under the documents to be executed in connection with the debt securities to be
offered under the Plan of Reorganization.
Any disputes as to whether or not any condition set forth in Section 5.1 or
5.2 has been satisfied shall be
<PAGE>
13
resolved by the Bankruptcy Court. The conditions set forth in Section 5.1 shall
be subject to waiver by Vestar (to the extent legally permissible) without any
action by any other Purchaser, Guarantor or other person, and any such waiver
shall be binding on all parties hereto.
6. TERMINATION
6.1. GENERAL. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned prior to the Closing:
(a) by the mutual written consent of the Plan Facilitator and Vestar;
(b) by either the Plan Facilitator or Vestar after the Vestar
Transaction Consummation Date; or
(c) by Vestar, if the Confirmation Order is not issued by the
Bankruptcy Court by March 31, 1998 (or such later date as the Plan Facilitator
may, with the written consent of Vestar, determine).
7. MISCELLANEOUS
7.1. State Securities Laws. The Company hereby agrees to use its best
efforts to comply with all state securities or "blue sky" laws which might be
applicable to the sale of New Equity Investment Shares to the Purchasers or, as
the case may be, the Guarantors.
7.2. BINDING EFFECT. The provisions of this Agreement shall be binding
upon and accrue to the benefit of the parties hereto and their respective heirs,
legal representatives, successors and permitted assigns.
7.3. AMENDMENT. This Agreement may be amended only by a written instrument
signed by the parties hereto.
7.4. APPLICABLE LAW. The laws of the State of New York shall govern the
interpretation, validity and performance of the terms of this Agreement,
regardless of the law that might be applied under principles of conflicts of
law.
7.5. NOTICES. All notices and other communications provided for herein
shall be in writing and shall be deemed to have been duly given if delivered by
telecopy, by hand (whether by overnight courier or otherwise) or sent by
registered or certified mail, return receipt requested, postage prepaid, to the
party to whom it is directed, as follows:
If to the Company, to it at the following address:
<PAGE>
14
Bidermann Industries USA, Inc.
48 West 38th Street
New York, New York 10017
Attention: Chief Executive Officer
Telephone: (212) 984-8915
Facsimile: (212) 984-8925
with copies to:
Bidermann Industries USA, Inc.
48 West 38th Street
New York, New York 10018
Attention: Steven Kaufman, Esq.
Telephone: (212) 883-4021
Facsimile: (212) 883-4020
and
Timothy R. Coleman
Senior Managing Director
The Blackstone Group, L.P.
345 Park Avenue
New York, New York 10154
Telephone: (212) 935-2626
Facsimile: (212) 754-8712
and
O'Melveney & Myers LLP
153 E. 53rd Street
New York, New York 10022
Attention: Adam Harris, Esq.
Telephone: (212) 326-2000
Facsimile: (212) 326-2061
and
Stevens & Lee
One Glenhardie Corporate Center
1275 Drummers Lane
Wayne, Pennsylvania 19087-0236
Attention: Robert Lapowsky, Esq.
Telephone: (610) 293-4976
Facsimile: (610) 687-1384
If to any Purchaser or Guarantor, at the address or telecopy number
set forth on the signature pages hereto, with a copy to:
<PAGE>
15
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Peter J. Gordon, Esq.
Telephone: (212) 455-2605
Facsimile: (212) 455-2502
or at such other address as either party shall have specified by notice in
writing to the other.
7.6. 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.
7.7. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which shall
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.
7.8. Assignment; No Third Party Beneficiary. The rights and obligations of
the parties hereto may not be assigned without the written consent of each of
the other parties hereto, provided that each of Vestar and A&M may assign its
respective rights and obligations to one of its affiliates. Any attempted
assignment in violation of this provision shall be null and void AB INITIO. The
provisions hereof are intended solely for the benefit of the parties hereto and
their permitted assigns, and may be enforced only by such parties; the parties
hereto do not intend to create any rights or benefits for any third party by
their agreements hereunder.
7.9. Bankruptcy Court Approval. The parties hereto acknowledge and agree
that the obligations of the Company under this Agreement are subject to the
prior approval of the Agreement by the Bankruptcy Court, which shall be deemed
obtained upon entry of the Confirmation Order referred to in Section 6.1(c).
7.10. Capitalization. The parties hereto acknowledge and agree that
(a) the number of shares of New BIUSA Common Stock and the per share price
therefor set forth in this Agreement are based upon the information contained in
Schedule II attached hereto, which was supplied by the Company, and (b) to the
extent such information is not accurate as of the Consummation Date, such
numbers and per share price shall be recalculated accordingly, PROVIDED that the
aggregate Purchase Price for all shares of New BIUSA Common Stock hereunder
shall not be less than $31,465,000.
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
BIDERMANN INDUSTRIES U.S.A., INC.
By: /s/ Steven J. Kaufman
--------------------------------
Name: Steven J. Kaufman
Its: Vice President
VESTAR CAPITAL PARTNERS III, L.P., as
Purchaser, New BIUSA Common Stock
Guarantor and New Class B Preferred
Stock Guarantor
By: VESTAR ASSOCIATES III, L.P.
Its: General Partner
By: VESTAR ASSOCIATES CORPORATION III
Its: General Partner
By: /s/ John R. Woodard
--------------------------------
Name: John R. Woodard
Its: Managing Director
245 Park Avenue
41st Floor
New York, New York 10167
Attention: Norman W. Alpert
Telephone: (212) 949-6500
Facsimile: (212) 808-4922
ALVAREZ & MARSAL, INC., as Purchaser and
Management Investor Guarantor
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
Title: President
885 Third Avenue Suite 1700
New York, New York 10022
Attention: Bryan P. Marsal
Telephone: (212) 230-3304
Facsimile: (212) 984-8957
S-1
<PAGE>
with a copy to:
Gordon Altman Butowsky Weitzen Shalov & Wein
114 West 47th Street
New York, New York 10036
Attention: Bonnie D. Podolsky
Telephone: (212) 626-0832
Facsimile: (212) 626-0799
S-2
<PAGE>
SCHEDULE I
NEW EQUITY INVESTMENT SHARE ALLOCATION
<TABLE>
<CAPTION>
Number of Shares
of New BIUSA
Number of Shares of Class C Junior
NAME OF PURCHASER New Biusa Common Stock(1) Preferred Stock
- ----------------- ------------------------ -----------------
<S> <C> <C>
Vestar Capital Partners 252,680, plus any shares 365,000(2)
III, L.P. or an affiliated allocated to A&M and the
designee thereof Management Investors
which are not purchased
on the Consummation Date
by such purchasers(2)
Alvarez & Marsal, Inc. 49,995, plus any shares 0
allocated to the
Management Investors
which are not purchased
on the Consummation Date
by the Management
Investors
Management Investors 18,366 0
- ----------------- ------------------------ -----------------
TOTAL 321,041 365,000
</TABLE>
- ---------------
(1) Subject to Section 7.10.
(2) Number of shares (including shares purchased by Vestar as Common Stock
Guarantor) to be reduced by up to 20% if and to the extent that
Participating BIUSA Noteholders exercise their right to purchase shares.
S-3
<PAGE>
SCHEDULE II
[ATTACH CAPITALIZATION/SHAREHOLDERS SCHEDULE]
S-4
<PAGE>
SCHEDULE II
6/1/97
OWNERSHIP OF BIDERMANN INDUSTRIES U.S.A., INC.
<TABLE>
<CAPTION>
NAME OF STOCKHOLDER NUMBER OF SHARES %
------------------- ---------------- -----
<S> <C> <C>
*SAEPIC 244,543 68.5
Banexi 19,182 5.4
SES 5,157 1.4
CDR Participations 16,236 4.5
GAN 7,143 2.0
Credit National 7,143 2.0
Eurim 7,143 2.0
AXA 5,880 1.65
Maybright 5,845 1.65
CCCM 4,286 1.2
BFCE 4,523 1.3
Sofinindex 1,429 0.4
AGF 1,429 0.4
Credit Agricole 1,428 0.4
Holbeton Limited 13,136 3.7
Banque Worms 457 .1
Credit du Nord 279 .1
Financiere de Reins 11,904 3.3
-------- -------
357,143 100.0
</TABLE>
*SAEPIC is wholly-owned subsidiary
of Bidermann International S.A.
<PAGE>
2
As of 6/1/97
Bidermann Industries U.S.A., Inc.
Equity Security Holders
<TABLE>
<CAPTION>
Name and Address # of Shares % Ownership
---------------- ----------- -----------
<S> <C> <C>
Assurances Generales de France Vie 1,429 0.4
87 rue de Richelieu
75002 Paris
Attn: Mrs. Dominique Cyrot
Agepargne 1,370 0.4
40 rue de Colysee
75008 Paris
Attn: Mrs. Pascale Sagnier
AXA Investments 1,094 0.3
40 rue de Colysee
75008 Paris
Attn: Mrs. Pascale Sagnier
AXA Valeurs 276 0.1
40 rue de Colysee
75008 Paris
Attn: Mrs. Pascale Sagnier
Drouot France 1,505 0.4
40 rue de Colysee
75008 Paris
Attn: Mrs. Pascale Sagnier
Drouot Investissement 1,635 0.5
40 rue de Colysee
75008 Paris
Attn: Mrs. Pascale Sagnier
Banque pour l'expansion 9,183 2.6
Industrielle S.A.
12 rue Chauchat
75009 Paris
Attn: Mr. Gilles Perony
Mediane F.C.P.R. 2,856 0.8
12 rue Chauchat
75009 Paris
Attn: Mr. Gilles Perony
Societe Financiere Auxiliare 7,143 2.0
12 rue Chauchat
75009 Paris
Attn: Mr. Gilles Perony
<PAGE>
3
As of 6/1/97
Bidermann Industries U.S.A., Inc.
Equity Security Holders
Caisee Centrale de Credit Mutuel 4,286 1.2
4 rue Leon Jost
75017 Paris
Attn: Mr. Gasquet
SES 5,157 1.4
4 rue Dumont d'Urville
75116 Paris
Attn: Mrs. Genevieve Gomez
Holbeton Limited 13,136 3.7
P.O. Box 468
Grenville Street
St. Helier, Jersey
Channel Islands
Attn: Mr. A.J. Staples
Consortium de Realisation 12,664 3.5
l rue des Italiens
75009 Paris
Attn: Mrs. Michele Muhlbach
Consortium de Realisation 3,572 1.0
1 rue des Italiens
75009 Paris
Attn: Mrs. Michele Muhibach
Union d'Etudes et d'Investissements 1,428 0.4
c/o Credit Agricole
90 boulevard Pasteur
75015 Paris
Attn: Mr. Olivier Mussault
EURIM 7,143 2.0
UIC SOFAL
8 rue Lammenais
75008 Paris
Attn: Mr. Paricaud
GAN Avenir 3,571 1.0
2 rue Pillet-Will
75009 Paris
Attn: Mrs. Laurence Timsit
GAN Participations 3,572 1.0
2 rue Pillet-Will
75009 Paris
Attn: Mrs. Laurence Timsit
<PAGE>
4
As of 6/1/97
Bidermann Industries U.S.A., Inc.
Equity Security Holders
Saint Dominique Participations 7,143 2.0
c/o Credit National
48bis rue Fabert
75007 Paris
Attn: Mr. Pascal Stefani
Societe Financiere de la BFCE 4,523 1.3
21 boulevard Hausmann
75009 Paris
Attn: Mr. Dominique Ferrero
Societe pour le Financement des 1,429 0.4
Industries Exportatrices
5 rue Scribe
75009 Paris
Attn: Bruno Denis
Maybright Co. Limited 5,845 1.6
114 rue de Turenne
75003 Paris
Attn: Mr. Maurice Bidermann
SAEPIC 244,543 68.5
114 rue de Turenne
75003 Paris
Attn: Mr. Dominique Bouchez
Banque Worms 457 0.1
1 place des Degres
Cedex 58
92059 Paris
Credit du Nord 279 0.1
6/8 boulevard Haussman
75009 Paris
Financiere de Reins 11,904 3.3
Saint Vincent de Reins
Villefranche Tarare
France
----------- -----------
TOTAL 357,143 100.0%
</TABLE>
<PAGE>
EXHIBIT A
RESTATED CERTIFICATE OF INCORPORATION
* * * * *
BIDERMANN INDUSTRIES U.S.A., INC., a corporation organized and
existing under and by virtue of the General Corporation Law of the State of
Delaware (hereinafter the "Corporation"), DOES HEREBY CERTIFY that:
1. The name of the Corporation is Bidermann Industries U.S.A., Inc.
2. The date of filing of its original Certificate of Incorporation
with the Secretary of State of the State of Delaware was September 29, 1977
under the name of Blackstone, Inc.
3. (a) Provision for the making of this Restated Certificate of
Incorporation is contained in an Order, dated _______ __, 1998 (the
"Confirmation Order"), of the United States Bankruptcy Court for the
Southern District of New York in Jointly Administered Case Nos. 95 B 43098
through 43099 and 43101 through 43114 (TLB) confirming the Third Amended
Joint Plan of Reorganization dated March 30, 1998 of the Corporation and
certain of its affiliates (the "Plan").
(b) The Confirmation Order authorizes and directs the
Corporation to execute such documents and take, or cause to be taken, any
and all actions required to enable the effective implementation of the Plan
and the Confirmation Order. Section 6.4(a) of the Plan contemplates the
filing of this Restated Certificate of Incorporation in order to effectuate
such Plan provisions.
(c) In accordance with Sections 242, 245 and 303 of the General
Corporation Law of the State of Delaware, this Restated Certificate of
Incorporation restates and integrates and further amends the provisions of
the Certificate of Incorporation of the Corporation.
4. The text of the Certificate of Incorporation is hereby amended
and restated to read in full as follows:
FIRST. The name of the Corporation is: Bidermann Industries
U.S.A., Inc.
SECOND. The registered office and registered agent of the
Corporation is The Corporation Trust Company, 1209 Orange Street,
Wilmington, New Castle County, Delaware 19801. The name of its
registered agent at such address is The Corporation Trust Company.
THIRD. The purpose of the Corporation is to engage in any
lawful act or activity for which corporations may be organized under
the Delaware General Corporation Law (the "GCL").
<PAGE>
2
FOURTH. (1) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is [ ],
consisting of (i) [ ] shares of preferred stock, par value $.01
per share ("Preferred Stock"), and (ii) [ ] shares of common
stock, par value $.01 per share ("Common Stock"). The number of
authorized shares of any of the Preferred Stock or the Common Stock
may be increased or decreased (but not below the number of shares
thereof then outstanding) by the affirmative vote of the holders of a
majority in voting power of the stock of the Corporation entitled to
vote thereon irrespective of the provisions of Section 242(b)(2) of
the GCL (or any successor provision thereto), and no vote of the
holders of any of the Preferred Stock or the Common Stock voting
separately as a class shall be required therefor.
(2) The Board of Directors is hereby expressly authorized, by
resolution or resolutions, to provide, out of the unissued shares of
Preferred Stock, for series of Preferred Stock and, with respect to
each such series, to fix the number of shares constituting such series
and the designation of such series, the voting powers (if any) of the
shares of such series, and the preferences and relative,
participating, optional or other special rights, if any, and any
qualifications, limitations or restrictions thereof, of the shares of
such series. The powers, preferences and relative, participating,
optional and other special rights of each series of Preferred Stock,
and the qualifications, limitations or restrictions thereof, if any,
may differ from those of any and all other series at any time
outstanding.
(3) (a) Each holder of Common Stock, as such, shall be entitled
to one vote for each share of Common Stock held of record by such
holder on all matters on which stockholders generally are entitled to
vote; provided, however, that, except as otherwise required by law,
holders of Common Stock, as such, shall not be entitled to vote on any
amendment to this Restated Certificate of Incorporation (including any
certificate of designations relating to any series of Preferred Stock)
that relates solely to the terms of one or more outstanding series of
Preferred Stock if the holders of such affected series are entitled,
either separately or together with the holders of one or more other
such series, to vote thereon pursuant to this Restated Certificate of
Incorporation (including any certificate of designations relating to
any series of Preferred Stock) or pursuant to the GCL.
(b) Except as otherwise required by law, holders of a
series of Preferred Stock, as such, shall be entitled only to such
voting rights, if any, as shall expressly be granted thereto by this
Restated Certificate of Incorporation (including any certificate of
designations relating to such series).
(c) Subject to applicable law and the rights, if any, of
the holders of any outstanding series of Preferred Stock or any class
or series of stock having a preference over or the right to
participate with the Common
<PAGE>
3
Stock with respect to the payment of dividends, dividends may be
declared and paid on the Common Stock at such times and in such
amounts as the Board of Directors in its discretion shall determine.
(d) Upon the dissolution, liquidation or winding up of the
Corporation, subject to the rights, if any, of the holders of any
outstanding series of Preferred Stock or any class or series of stock
having a preference over or the right to participate with the Common
Stock with respect to the distribution of assets of the Corporation
upon such dissolution, liquidation or winding up of the Corporation,
the holders of the Common Stock, as such, shall be entitled to receive
the assets of the Corporation available for distribution to its
stockholders ratably in proportion to the number of shares held by
them.
(e) To the extent prohibited under chapter 11 of Title 11
of the United States Code (the "Bankruptcy Code"), the Corporation
shall not issue non-voting equity securities; PROVIDED, HOWEVER, that
this subsection (e): (i) will have no further force and effect beyond
that required under the Bankruptcy Code, (ii) will have such force and
effect, if any, only for so long as the relevant prohibitions imposed
by the Bankruptcy Code are in effect and applicable to the Corporation
and (iii) may be amended or eliminated in accordance with applicable
law as from time to time in effect.
FIFTH. The Corporation is to have perpetual existence.
SIXTH. In furtherance and not in limitation of the powers
conferred by statute, the Board of Directors of the Corporation,
acting by majority vote, is expressly authorized to adopt, amend or
repeal the By-Laws of the Corporation.
SEVENTH. Elections of directors need not be by written ballot
unless the By-Laws of the Corporation shall so provide. Meetings of
stockholders may be held within or without the State of Delaware. The
books of the Corporation may be kept (subject to any provision
contained in the statutes) outside the State of Delaware at such place
or places as may be designated from time to time by the Board of
Directors or in the By-Laws of the Corporation.
EIGHTH. The Corporation reserves the right to amend, alter,
change or repeal any provision contained in this Certificate of
Incorporation, in the manner now or hereafter prescribed by statute,
and all rights conferred upon stockholders herein are granted subject
to this reservation.
NINTH. Except as otherwise provided by the GCL as the same
exists or may hereafter be amended, no director of the Corporation
shall be personally liable to the Corporation or its stockholders for
monetary damages
<PAGE>
4
for breach of fiduciary duty as a director. Any repeal or
modification of this Article NINTH by the stockholders of the
Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or
modification.
<PAGE>
5
IN WITNESS WHEREOF, BIDERMANN INDUSTRIES U.S.A., INC. has caused this
Certificate to be signed by Bryan Marsal, Chief Executive Officer, and attested
by [INSERT NAME], Secretary, this __th day of May 1998.
BIDERMANN INDUSTRIES U.S.A., INC.
By:
---------------------------------
Name: Bryan Marsal
Title: Chief Executive Officer
ATTEST:
-----------------------
[INSERT NAME]
Secretary
<PAGE>
EXHIBIT B
BIDERMANN INDUSTRIES U.S.A., INC.
CERTIFICATE OF DESIGNATIONS
OF
CLASS C JUNIOR PREFERRED STOCK
-----------------------
Pursuant to Sections 151, 242 and 303
of the General Corporation Law of the State of Delaware
-----------------------
Bidermann Industries U.S.A., Inc. (the "Company"), a corporation
organized and existing under the General Corporation Law of the State of
Delaware, does hereby certify as follows:
(a) Pursuant to the provisions of Sections 151, 242 and 303 of the
General Corporation Law of the State of Delaware, and by Order, dated ______ __,
1998 (the "Confirmation Order"), of the United States Bankruptcy Court for the
Southern District of New York in Jointly Administered Case Nos. 95 B 43098
through 43099 and 43101 through 43114 (TLB) confirming the Third Amended Joint
Plan of Reorganization dated March 30, 1998 of the Company and certain of its
affiliates (the "Plan"), the Corporation is authorized and directed to execute
such documents and take, or cause to be taken, any and all actions required to
enable the effective implementation of the Plan and the Confirmation Order;
(b) The Confirmation Order authorizes and Section 6.4(a) of the Plan
contemplates the filing of this Certificate of Designations of Class C Junior
Preferred Stock of the Company in order to effectuate such Plan provisions; and
(c) Accordingly, there is hereby authorized such series of preferred
stock on the terms and with the provisions herein set forth:
1. CERTAIN DEFINITIONS
As used herein, the following terms shall have the following meanings
(with terms defined in the singular having comparable meanings when used in the
plural and vice versa), unless the context otherwise requires:
"AFFILIATE" means, with respect to any Person, (i) any Person that
directly or indirectly controls, is controlled by or is under common control
with such Person, (ii) any director, officer, partner or employee of such Person
or any Person specified in clause (i) above, or (iii) any Immediate Family
Member of any Person specified in (i) or (ii) above.
<PAGE>
2
"ALVAREZ & MARSAL" means Alvarez & Marsal, Inc.
"BENEFICIAL OWNER" has the meaning set forth in Rule 13d-3 under the
Exchange Act.
"BOARD OF DIRECTORS" means the Board of Directors of the Company.
"BUSINESS DAY" means a day other than a Saturday, Sunday, national or
New York State holiday or other day on which commercial banks in New York City
are authorized or required by law to close.
"CAPITAL STOCK" means (i) with respect to any Person that is a
corporation, any and all shares, interests, participations or other equivalents
(however designated) of capital stock of such Person and (ii) with respect to
any Person that is not a corporation, any and all partnership or other equity
interests of such Person.
"CHANGE OF CONTROL" has the meaning specified in Section 6(c) hereof.
"CHANGE OF CONTROL DATE" has the meaning specified in Section 6(c)
hereof.
"CHANGE OF CONTROL PUT REDEMPTION" has the meaning specified in
Section 6(c) hereof.
"CLASS A SENIOR PREFERRED STOCK" means [the preferred stock of the
Company issued to the employee stock plan].
"CLASS B PREFERRED STOCK" means [any preferred stock of the Company
issued to Vestar or its affiliated designee as a result of the $50,000,000
offering of mezzanine financing not being completed].
"COMPANY" means Bidermann Industries U.S.A., Inc. or any successor
entity thereof.
"DISQUALIFIED CAPITAL STOCK" means any Capital Stock which, by its
terms (or by the terms of any security into which it is convertible or for which
it is exchangeable), or upon the happening of any event, matures (excluding any
maturity as the result of an optional redemption by the issuer thereof) or is
mandatorily redeemable, pursuant to a sinking fund obligation or otherwise, or
is redeemable at the sole option of the holder thereof, in whole or in part at
any time when any of the shares of Junior Preferred Stock are outstanding.
"DIVIDEND PAYMENT DATE" means each September 30, December 31, March 31
and June 30 of each year, commencing on September 30, 1998.
<PAGE>
3
"DIVIDEND PERIOD" means the Initial Dividend Period and, thereafter,
each Quarterly Dividend Period.
"DIVIDEND RECORD DATE" means, with respect to the dividend payable on
each Dividend Payment Date, the immediately preceding September 15, December 15,
March 15, and June 15, as the case may be, or such other record date as may be
designated by the Board of Directors with respect to the dividend payable on
such Dividend Payment Date; PROVIDED, HOWEVER, that such record date may not be
more than sixty (60) days or less than ten (10) days prior to such Dividend
Payment Date.
"EMPLOYEE SECURITIES" means shares of Capital Stock, warrants,
rights, calls, options or obligations of the Company or any of its Subsidiaries
(including any accrued interest or dividends thereon) owned by any employees of
the Company or any of its subsidiaries or any Independent Director which are
subject to repurchase upon the death, disability or other termination of
employment of any such employee or Independent Director.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
"HOLDER" means a registered holder of shares of Junior Preferred
Stock.
"IMMEDIATE FAMILY MEMBER" with respect to any Person means a spouse,
parent, child or sibling of such Person.
"INDEPENDENT DIRECTOR" means any director of the Company who is not an
Affiliate of any Stockholder (as defined in the Stockholders' Agreement) or an
employee of the Company or any of its Affiliates.
"INITIAL DIVIDEND PERIOD" means the dividend period commencing on the
Original Issue Date and ending on and including September 30, 1998.
"JUNIOR SECURITIES" has the meaning specified in Section 3(i) hereof.
"JUNIOR PREFERRED STOCK" means the Class C Junior Preferred Stock, par
value $.01 per share, of the Company authorized by these resolutions and the
Certificate of Designations filed pursuant hereto (as such Certificate of
Designations may be amended from time to time in accordance with the provisions
thereof).
"LIQUIDATION PREFERENCE" means $100 per share, plus an amount in cash
equal to all accrued and unpaid dividends (including an amount equal to the
dividends accruing from the last Dividend Payment Date to the date such
Liquidation Preference is being determined). The Liquidation Preference of a
share of Junior Preferred Stock will increase on a daily basis as
<PAGE>
4
dividends accrue on such share and will decrease only to the extent such
dividends are actually paid, all as provided in Section 4 hereof.
"OPTIONAL REDEMPTION" has the meaning specified in Section 6(a)
hereof.
"OPTIONAL REDEMPTION DATE" has the meaning specified in Section 6(e)
hereof.
"ORIGINAL ISSUE DATE" means the date upon which the Junior Preferred
Stock was originally issued by the Company.
"PARITY SECURITIES" has the meaning specified in Section 3(ii) hereof.
"PERSON" means any individual, partnership, corporation, business
trust, joint stock company, trust, unincorporated association, joint venture,
governmental authority or other entity of whatever nature.
"PUT REDEMPTION" means a Change of Control Put Redemption.
"PUT REDEMPTION DATE" has the meaning specified in Section 6(e)
hereof.
"QUARTERLY DIVIDEND PERIOD" means the quarterly period commencing on
and including the day after the immediately preceding Dividend Payment Date and
ending on and including the immediately subsequent Dividend Payment Date.
"REDEMPTION DATE" means the Optional Redemption Date or the Put
Redemption Date, as the case may be.
"REDEMPTION NOTICE" has the meaning specified in Section 6(b) hereof.
"REDEMPTION PRICE" means a price per share equal to the Liquidation
Preference as of the applicable Redemption Date.
"RIGHT OF REDEMPTION NOTICE" has the meaning specified in Section 6(d)
hereof.
"SENIOR BANK FACILITY" means [describe BIC senior bank agreement and
related documents].
"SENIOR DISCOUNT NOTES" means [describe BIUSA senior discount notes,
if any, at closing].
"SENIOR SECURITIES" has the meaning specified in Section 3(iii)
hereof.
<PAGE>
5
"STOCKHOLDERS' AGREEMENT" means that certain agreement dated as of the
Original Issue Date among the Company, Vestar, Alvarez & Marsal, [insert names
of Management Investors], [insert names of holders of Old Equity], [insert names
of any Participating Noteholders], as it may be amended from time to time.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association or other business entity of which fifty percent (50%)
or more of the total voting power of shares of Capital Stock entitled (without
regard to the occurrence of any contingency) to vote in the election of
directors, managers or trustees thereof, or fifty percent (50%) or more of the
equity interest therein, is at the time owned or controlled, directly or
indirectly, by any Person or one or more of the other Subsidiaries of such
Person or a combination thereof.
"VESTAR" means Vestar Capital Partners III, L.P., a Delaware limited
partnership.
2. DESIGNATION.
The series of preferred stock authorized hereunder shall be designated as
the "Class C Junior Preferred Stock." The number of shares constituting such
series shall be 365,000. The par value of the Junior Preferred Stock shall be
$.01 per share. All shares of Junior Preferred Stock shall be identical with
each other in all respects.
3. RANK.
The Junior Preferred Stock shall rank, with respect to dividend rights and
rights on liquidation, dissolution and winding-up of the affairs of the Company:
(i) senior to all classes or series of common stock of the
Company and to any other class or series of Capital Stock of
the Company that does not constitute Senior Securities or
Parity Securities (as defined below) (collectively referred
to as "Junior Securities");
(ii) on parity with each class or series of Capital Stock of the
Company that (x) expressly provides that it ranks on a parity
with the Junior Preferred Stock as to dividends or
distributions upon the liquidation, dissolution and
winding-up of the Company and (y) has been approved by the
Holders in accordance with Section 8(b) hereof (collectively
referred to as "Parity Securities");
<PAGE>
6
(iii) junior to the Class A Senior Preferred Stock and the Class B
Preferred Stock and each other class or series of Capital
Stock of the Company that (x) expressly provides that it
ranks senior to the Junior Preferred Stock as to dividends or
distributions upon the liquidation, dissolution and
winding-up of the Company and (y) has been approved by the
Holders in accordance with Section 8(b) hereof (collectively
referred to as "Senior Securities").
The Company shall not create, authorize or issue any Senior Securities or
Parity Securities or reclassify any class or series of its Capital Stock into
Senior Securities or Parity Securities, other than the Class A Senior Preferred
Stock and the Class B Preferred Stock issued on the Original Issue Date, without
the affirmative votes or consents required by Section 8 hereof.
4. DIVIDENDS, ETC.
(i) Beginning on the Original Issue Date, the Holders of
outstanding shares of Junior Preferred Stock shall be
entitled to receive, when, as and if declared by the Board of
Directors, out of funds legally available for the payment of
dividends, dividends at the quarterly rate per share of
$3.125(1) per quarter. All dividends shall be cumulative
and shall be payable in arrears on each Dividend Payment Date
commencing on September 30, 1998. Such quarterly dividends
shall accrue (whether or not earned or declared, whether or
not permitted under any agreement of the Company and whether
or not there are funds legally available therefor) on a daily
basis from the last Dividend Payment Date, except that with
respect to the first quarterly dividend, such dividend shall
accrue from the Original Issue Date.
(ii) All dividends and distributions paid with respect to shares
of Junior Preferred Stock pursuant to Section 4(i) hereof
shall be paid pro rata to the Holders entitled thereto. Any
dividend not paid pursuant to this Section shall be fully
cumulative and shall accrue (whether or not earned or
declared, whether or not permitted under any agreement of the
Company and whether or not there are funds legally available
therefor) at the rate
- ---------------
(1) Or 2-1/2% above subordinated notes issued in 144A offering, if
higher.
<PAGE>
7
of 12.5%(2) per annum compounded quarterly and shall be in
arrears until paid.
(iii) No full dividend and no distribution shall be declared by the
Board of Directors or paid or set apart for payment by the
Company on Parity Securities for any period unless fully
cumulative dividends have been or contemporaneously are
declared and a sum set apart sufficient for payment on the
Junior Preferred Stock for all full Quarterly Dividend
Periods (including the Initial Dividend Period) terminating
on or prior to the date of payment of such full dividends on
the Parity Securities. If any dividends are not paid in full
upon the shares of the Junior Preferred Stock and the Parity
Securities, all dividends declared for any period upon shares
of the Junior Preferred Stock and the Parity Securities shall
be declared pro rata so that the amount and form of dividends
declared per share of the Junior Preferred Stock and the
Parity Securities shall in all cases bear to each other the
same ratio that accrued dividends per share on the Junior
Preferred Stock and the Parity Securities bear to each other.
(iv) Unless (a) full cumulative dividends have been paid, or funds
have been set apart sufficient for such payment, on the
Junior Preferred Stock for all full Quarterly Dividend
Periods, including the Initial Dividend Period, if completed,
since the Original Issue Date and (b) the Company shall have
satisfied all of its redemption and repurchase obligations
under Section 6 hereof, if any, the Company shall not,
directly or indirectly, whether in cash, obligations, or
other property (other than in Junior Securities which are not
Disqualified Capital Stock) declare, pay or set apart for
payment any dividend on any Junior Security or make any
distribution in respect thereof.
(v) Each fractional share of Junior Preferred Stock outstanding
shall be entitled to a ratably proportionate amount of
dividends accruing with respect to each outstanding share of
Junior Preferred Stock pursuant to this Section 4, and all
such dividends with respect to such outstanding fractional
shares shall be fully cumulative and shall accrue on a daily
basis
- --------------
(2) Or 2-1/2% above subordinated notes issued in 144A offering, if higher.
<PAGE>
8
(whether or not declared), and shall be payable in the same
manner and at such times as provided for in this Section 4,
with respect to dividends on each outstanding share of Junior
Preferred Stock. The amount of dividends accrued on the
Junior Preferred Stock for any period less than a full
Quarterly Dividend Period (including the Initial Dividend
Period) shall be equal to a PRO RATA portion of the total
dividend payable for the Quarterly Dividend Period during
which such period occurs, based on the actual number of days
elapsed in such period for which payable and the total number
of days in the applicable Quarterly Dividend Period. If any
Dividend Payment Date occurs on a day that is not a Business
Day, any accrued dividends otherwise payable on such Dividend
Payment Date shall be paid on the next succeeding Business
Day. Dividends shall accrue on a daily basis during each
Dividend Period as provided above, and the Liquidation
Preference of each outstanding share of Junior Preferred
Stock shall be correspondingly increased on a daily basis.
Each such dividend shall be payable to Holders of record as
their names shall appear on the stock books of the Company on
the Dividend Record Date for such dividend, except that
dividends in arrears for any past Dividend Payment Date may
be declared and paid at any time without reference to such
regular Dividend Payment Date to Holders of record on such
date not more than sixty (60) days or less than ten (10) days
prior to the date of payment as shall be determined by the
Board of Directors.
(vi) Dividends shall cease to accrue in respect of any particular
share of Junior Preferred Stock on the Redemption Date with
respect thereto unless the Company defaults in the payment of
the Redemption Price.
(vii) The Company shall not enter into any agreement that
prohibits, conflicts with or would be breached by the
Company's performance of its obligations hereunder.
5. PAYMENT ON LIQUIDATION.
(i) Upon any involuntary liquidation, dissolution or winding-up
of the affairs of the Company, the Holders of Junior
Preferred Stock will be entitled to receive out of the assets
of the Company available for distribution to the holders of
its Capital Stock, whether such assets are capital or
surplus, an amount in cash per share equal to the
<PAGE>
9
Liquidation Preference determined as of the date of such
involuntary liquidation, dissolution or winding-up, after any
payment or other distribution is made on any Senior
Securities. Holders of Junior Preferred Stock shall not be
entitled to any other distribution in the event of
involuntary liquidation, dissolution or winding up of the
affairs of the Company. If upon any involuntary liquidation,
dissolution or winding-up of the affairs of the Company, the
assets of the Company are not sufficient to pay in full the
liquidation payments payable to the holders of outstanding
shares of Junior Preferred Stock and Parity Securities, then
the holders of all such shares of Junior Preferred Stock and
Parity Securities shall share equally and ratably in any
distribution of assets of the Company in proportion to the
full liquidation payments determined as of the date of such
involuntary liquidation, dissolution or winding-up, to which
each of them is entitled.
(ii) For purposes of this Section 5 only, neither the sale, lease,
conveyance, exchange or transfer (for cash, shares of stock,
securities or other consideration) of all or substantially
all of the property or assets of the Company nor the
consolidation or merger of the Company with or into one or
more corporations shall be deemed to be a liquidation,
dissolution or winding-up of the affairs of the Company.
6. REDEMPTION
(a) OPTIONAL REDEMPTION. At any time and from time to time after the
Original Issue Date, the Company may redeem at the option of the Company in its
sole discretion, in whole or in part, shares of Junior Preferred Stock (an
"Optional Redemption"), at the Redemption Price. With respect to any Optional
Redemption of fewer than all the outstanding shares of Junior Preferred Stock,
the number of shares to be redeemed shall be determined by the Board of
Directors and the shares to be redeemed shall be selected PRO RATA, except that
in any Optional Redemption of fewer than all the outstanding shares of Junior
Preferred Stock, the Company may first redeem all shares held by any Holder of a
number of shares not to exceed 100, as may be specified by the Company.
Notwithstanding anything contained herein to the contrary, the Company shall not
effect an Optional Redemption if and to the extent prohibited by the terms of
the Senior Bank Facility.
(b) NOTICE OF OPTIONAL REDEMPTION. Notice of any Optional Redemption of
shares of Junior Preferred Stock, specifying the time and place of redemption
and the Redemption Price (a
<PAGE>
10
"Redemption Notice"), shall be sent by courier to each Holder of Junior
Preferred Stock to be redeemed, at the address for such Holder shown on the
Company's records, not more than sixty (60) nor less than thirty (30) days prior
to the Redemption Date. If less than all the shares of Junior Preferred Stock
owned by such Holder are then to be redeemed, the Redemption Notice shall also
specify the number of shares which are to be redeemed. No failure to give such
Redemption Notice nor any defect therein shall affect the validity of the
procedure for the redemption of any shares of Junior Preferred Stock to be
redeemed except as to the Holder to whom the Company has failed to give said
Redemption Notice or except as to the Holder whose Redemption Notice was
defective. Each such Redemption Notice shall state:
(i) the Redemption Date;
(ii) the Redemption Price;
(iii) the number of shares of Junior Preferred Stock to be redeemed
and, if fewer than all the shares of Junior Preferred Stock
held by a Holder are to be redeemed, the number of shares
thereof to be redeemed from such Holder;
(iv) the manner and place or places at which payment for the
shares of Junior Preferred Stock offered for redemption will
be made, upon presentation and surrender to the Company of
the certificates evidencing the shares being redeemed;
(v) that dividends on the shares of Junior Preferred Stock being
redeemed shall cease to accrue on the Redemption Date unless
the Company defaults in the payment of the Redemption Price;
and
(vi) that the rights of Holders of Junior Preferred Stock as
stockholders of the Company with respect to shares being
redeemed shall terminate as of the Redemption Date unless the
Company defaults in the payment of the Redemption Price.
Upon mailing any such Redemption Notice, the Company shall become obligated to
redeem at the Redemption Price on the applicable Redemption Date all shares of
Junior Preferred Stock therein specified.
(c) CHANGE OF CONTROL PUT REDEMPTION. If at any time after the Original
Issue Date:
(i) all or substantially all of the assets of the Company are
sold as an entirety to any Person or group (within the
meaning of Section 13(d) and 14(d) of the Exchange Act);
<PAGE>
11
(ii) the stockholders of the Company approve a plan of liquidation
or dissolution;
(iii) any Person or group (within the meaning of Section 13(d) and
14(d) of the Exchange Act), other than any stockholders party
to the Stockholders' Agreement, becomes, directly or
indirectly, the Beneficial Owner (in a single transaction or
in a related series of transactions, by way of merger,
consolidation or other business combination or otherwise) of
a majority of the total voting power entitled to vote in the
election of directors, managers or trustees of the Company or
such other Person surviving the transaction (other than the
voting power to elect directors upon the failure of the
Company to pay dividends on any series of its preferred
stock);
(iv) a consolidation or merger of the Company with another
corporation; PROVIDED that the Beneficial Owners immediately
prior to the effective time of such consolidation or merger
of the combined voting power of the outstanding voting
securities of the Company are the Beneficial Owners
immediately after such effective time of less than a majority
of the combined voting power of the outstanding voting
securities of the surviving corporation; or
(v) directors nominated by any Person or group (within the
meaning of Sections 13(d) and 14(d) of the Exchange Act),
other than any stockholders party to the Stockholders'
Agreement, constitute a majority of the Board of Directors of
the Company,
(each a "Change of Control" and the time of such Change of Control being
referred to as the "Change of Control Date"), then the Company shall notify the
Holders of the Junior Preferred Stock of such occurrence in writing within 10
Business Days of such occurrence and the Holders of a majority of the Junior
Preferred Stock outstanding shall have the right to require the Company to
redeem all shares of Junior Preferred Stock, in the manner provided in Section
6(d) hereof, at the Redemption Price (a "Change of Control Put Redemption").
Notwithstanding anything contained herein to the contrary, the Company
shall not be obligated to, and shall not, effect a Put Redemption if and to the
extent prohibited by the Senior Bank Facility or the Senior Discount Notes;
PROVIDED, HOWEVER, that (i) such Put Redemption (including any partial
redemption on a PRO RATA basis) shall be effected as soon as such prohibitions
are no longer applicable and (ii) if and so long as such Put Redemption is
delayed, the Corporation shall not declare or pay any dividend or make any
distribution on, or, directly or
<PAGE>
12
indirectly, retire, purchase, acquire, redeem or satisfy any mandatory
redemption, sinking fund or other similar obligations in respect of Parity
Securities.
(d) NOTICE OF PUT REDEMPTION. The Company shall send written notice of a
right of redemption pursuant to a Change of Control (the "Right of Redemption
Notice") by courier, overnight delivery or first class mail within 10 Business
Days following the Change of Control Date to each Holder of record of Junior
Preferred Stock at such Holder's address as the same appears on the stock
register of the Company; PROVIDED, HOWEVER, that no failure to give such Right
of Redemption Notice to any Holder or Holders nor any deficiency therein shall
affect the validity of the procedure for the redemption of any shares of Junior
Preferred Stock to be redeemed except as to the Holder or Holders to whom the
Company has failed to give notice or has given deficient notice. The Right of
Redemption Notice shall state:
(i) that a Change of Control has occurred and that the Holders of
a majority of the shares of Junior Preferred Stock
outstanding have the right to require the Company to redeem
all of the Junior Preferred Stock at the Redemption Price;
(ii) the Redemption Date;
(iii) a description of the Change of Control;
(iv) the Redemption Price;
(v) the manner and place or places at which payment for the
shares of Junior Preferred Stock offered for redemption will
be made, upon presentation and surrender to the Company of
the certificates evidencing the shares being redeemed;
(vi) that, if the Holders of a majority of the outstanding shares
of Junior Preferred Stock elect the redemption of such Junior
Preferred Stock, dividends on the shares of Junior Preferred
Stock shall cease to accrue on the Redemption Date unless the
Company defaults in the payment of the Redemption Price; and
(vii) that, if the Holders of a majority of the outstanding shares
of Junior Preferred Stock elect the redemption of such Junior
Preferred Stock, the rights of Holders of Junior Preferred
Stock as stockholders of the Company with respect to shares
of Junior Preferred Stock shall terminate as of the
Redemption Date unless the Company defaults in the payment of
the Redemption Price.
<PAGE>
13
The right to redeem shares of Junior Preferred Stock pursuant to Section 6(c)
hereof shall remain exercisable from the time of mailing until the fifth (5th)
Business Day preceding the Redemption Date.
(e) The Company shall fix the date for a Put Redemption (the "Put
Redemption Date") or the date for an Optional Redemption (an "Optional
Redemption Date"), as the case may be, no earlier than thirty (30) but not more
than sixty (60) days after the Redemption Notice or the Right of Redemption
Notice, as the case may be, is sent as set forth in Section 6(b) or 6(d) hereof,
as the case may be.
(f) On any Redemption Date, the full Redemption Price shall become payable
in cash for the shares of Junior Preferred Stock being redeemed on such
Redemption Date. As a condition of payment of the Redemption Price, each Holder
of Junior Preferred Stock must surrender the certificate or certificates
representing the shares of Junior Preferred Stock being redeemed to the Company
in the manner and at the place designated in the Redemption Notice or the Right
of Redemption Notice, as the case may be. Each surrendered certificate shall be
canceled and retired. All redemption payments will be made to the Holders of
the shares being redeemed.
(g) On any Redemption Date, unless the Company defaults in the payment in
full of the Redemption Price, dividends on the Junior Preferred Stock called for
redemption shall cease to accumulate, and all rights of Holders of such redeemed
shares shall terminate, except for the right to receive the Redemption Price.
7. CERTAIN COVENANTS.
(a) Redemptions, Etc.
Except as provided otherwise in Section 8, no Junior Securities or Parity
Securities, nor any warrants, rights, calls or options exercisable for or
convertible into, or any obligations evidencing the right to purchase or
acquire, any Junior Securities or Parity Securities, may be repurchased,
redeemed or otherwise acquired or retired for value, either directly or
indirectly, nor may funds be set apart for payment with respect thereto, either
directly or indirectly, whether in cash, obligations or shares of the Company or
other property, so long as any shares of Junior Preferred Stock shall be
outstanding (other than repurchases or redemptions by the Company of Employee
Securities not in excess of $_________ [to be supplied by Vestar after
consultation with financing sources] in any one calendar year).
<PAGE>
14
(b) SUBSIDIARY PAYMENTS.
Except as provided otherwise in Section 8, the Company shall not permit any
Subsidiary of the Company to make any payments in respect of dividends or other
distributions on, or repurchase, redemption or other acquisition or retirement
for value of, either directly or indirectly, securities of the Company of any
kind for any reason unless the Company would be permitted by this Section 7 or
Section 4 hereof to make such payments.
8. VOTING RIGHTS.
(a) Holders of Junior Preferred Stock, except as otherwise required by law
or in this Section 8, shall not be entitled to vote on any matter required or
permitted to be voted upon by holders of the common stock of the Company.
(b) Without the approval of Holders of at least a majority of the shares
of Junior Preferred Stock then outstanding, voting or consenting, as the case
may be, as one class, given in person or by proxy, either in writing or by
resolution adopted at an annual or special meeting called for the purpose, the
Company will not:
(1) create, authorize or issue any Parity Securities or Senior
Securities, except for the Class A Senior Preferred Stock and
the Class B Preferred Stock issued on the Original Issue
Date, or any warrants, rights, calls or options exercisable
or exchangeable for or convertible into, or any obligations
evidencing the right to purchase or acquire, any Parity
Securities or Senior Securities, including in connection with
a merger, consolidation or other reorganization;
(2) reclassify any Junior Securities or Parity Securities or
other outstanding securities of the Company into any Parity
Securities or Senior Securities or any warrants, rights,
calls or options exercisable or exchangeable for or
convertible into, or any obligations evidencing the right to
purchase or acquire any, Parity Securities or Senior
Securities;
(3) amend, modify or repeal the Certificate of Incorporation or
By-Laws of the Company or this Certificate of Designations or
any other specified designations, rights, preferences or
powers of the Junior Preferred Stock in a manner so as to
affect adversely the specified designations, rights, powers
or preferences of Holders of Junior Preferred Stock in their
capacity as such; or
<PAGE>
15
(4) increase the number of shares of Junior Preferred Stock
issued or authorized for issuance.
(c) For purposes of exercising any vote, election or consent under this
Section 8 hereof or under applicable law, shares of Junior Preferred Stock held
by the Company or any of its Subsidiaries shall not be deemed to be outstanding
and shall not be counted in determining the outcome of any such vote, election
or consent solicitation.
9. MUTILATED OR MISSING STOCK CERTIFICATES.
If any of the Junior Preferred Stock certificates shall be mutilated, lost,
stolen or destroyed, the Company shall issue, in exchange and substitution for
and upon cancellation of the mutilated Junior Preferred Stock certificate, or in
lieu of and substitution for the Junior Preferred Stock certificate lost, stolen
or destroyed, a new Junior Preferred Stock certificate of like tenor and
representing an equivalent amount of shares of Junior Preferred Stock, but only
upon receipt of evidence of such loss, theft or destruction of such Junior
Preferred Stock certificate and indemnity, if requested.
10. REISSUANCE OF PREFERRED STOCK.
Shares of Junior Preferred Stock that have been issued and reacquired in
any manner, including shares purchased or redeemed or exchanged, shall (upon
compliance with any applicable provisions of the laws of the State of Delaware)
have the status of authorized and unissued shares of preferred stock
undesignated as to series and, subject to Section 8 hereof, may be redesignated
and reissued as part of any series of preferred stock other than the Junior
Preferred Stock.
11. BUSINESS DAY.
If any payment, redemption or exchange shall be required by the terms
hereof to be made on a day that is not a Business Day, such payment, redemption
or exchange shall be made on the immediately succeeding Business Day.
12. HEADINGS OF SUBDIVISIONS.
The headings of various subdivisions hereof are for convenience of
reference only and shall not affect the interpretation of any of the provisions
hereof.
13. SEVERABILITY OF PROVISIONS.
If any right, preference or limitations of the Junior Preferred Stock set
forth in these resolutions and the Certificate of Designations filed pursuant
hereto (as such Certificate of Designations may be amended from time to time) is
invalid, unlawful or incapable of being enforced by reason of any
<PAGE>
16
rule or law or public policy, all other rights, preferences and limitations set
forth in such Certificate of Designations, as amended, which can be given effect
without the invalid, unlawful or unenforceable right, preference or limitation
shall, nevertheless remain in full force and effect, and no right, preference or
limitation herein set forth shall be deemed dependent upon any other such right,
preference or limitation unless so expressed herein.
14. NOTICE TO THE COMPANY.
All notices and other communications required or permitted to be given to
the Company hereunder shall be made by courier, overnight delivery or first
class mail to the Company at its principal executive offices (currently located
on the date of the adoption of these resolutions at the following address:
Bidermann Industries U.S.A., Inc., 48 West 38th Street, New York, New York
10018; Attention: Chief Executive Officer. Minor imperfections in any such
notice shall not affect the validity thereof.
15. LIMITATIONS.
Except as may otherwise be required by law, the shares of Junior Preferred
Stock shall not have any powers, preferences or relative, participating,
optional or other special rights other than those specifically set forth in this
resolution (as such resolution may be amended from time to time) or otherwise in
the Restated Certificate of Incorporation of the Company.
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17
IN WITNESS WHEREOF, Bidermann Industries U.S.A., Inc. has caused this
certificate to be executed by _______________, as President, and attested by
________________, as Secretary, as of this ___ day of _________, 1998.
BIDERMANN INDUSTRIES U.S.A., INC.
By:
-----------------------------------
Name:
Title:
Attest:
- ---------------------
Secretary
<PAGE>
EXHIBIT C
BY-LAWS OF
BIDERMANN INDUSTRIES U.S.A., INC.
(A Delaware Corporation)
ARTICLE I
Offices
SECTION 1. REGISTERED OFFICE. The registered office of the
Corporation within the State of Delaware shall be in the City of Wilmington,
County of New Castle.
SECTION 2. OTHER OFFICES. The Corporation may also have an office or
offices other than said registered office at such place or places, either within
or without the State of Delaware, as the Board of Directors shall from time to
time determine or the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 1. PLACE OF MEETINGS. All meetings of the stockholders for
the election of directors or for any other purpose shall be held at any such
place, either within or without the State of Delaware, as shall be designated
from time to time by the Board of Directors and stated in the notice of meeting
or in a duly executed waiver thereof.
SECTION 2. ANNUAL MEETING. The annual meeting of stockholders,
commencing with the year 1991, shall be held at 10:00 A.M. on the second Tuesday
of March, if not a legal holiday, and if a legal holiday, then on the next
succeeding day not a legal holiday, at 10:00 A.M., or at such other date and
time as shall be designated from time to time by the Board of Directors and
stated in the notice of meeting or in a duly executed waiver thereof. At such
annual meeting, the stockholders shall elect, by a plurality vote, a Board of
Directors and transact such other business as may properly be brought before the
meeting.
SECTION 3. SPECIAL MEETINGS. Special meetings of stockholders,
unless otherwise prescribed by statute, may be called at any time by the Board
of Directors or Chairman of the Board or the President.
SECTION 4. NOTICE OF MEETINGS. Except as otherwise expressly
required by statute, written notice of each annual and
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2
special meeting of stockholders stating the date, place and hour of the meeting,
and, in the case of a special meeting, the purpose or purposes for which the
meeting is called, shall be given to each stockholder of record entitled to vote
thereat not less than ten nor more than sixty days before the date of the
meeting. Business transacted at any special meeting of stockholders shall be
limited to the purposes stated in the notice. Notice shall be given personally
or by mail and, if by mail, shall be sent in a postage prepaid envelope,
addressed to the stockholder at his address as it appears on the records of the
Corporation. Notice by mail shall be deemed given at the time when the same
shall be deposited in the United States mail, postage prepaid. Notice of any
meeting shall not be required to be given to any person who attends such
meeting, except when such person attends the meeting in person or by proxy for
the express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened, or who, either before or after the meeting, shall submit a signed
written waiver of notice, in person or by proxy. Neither the business to be
transacted at, nor the purpose of, an annual or special meeting of stockholders
need be specified in any written waiver of notice.
SECTION 5. LIST OF STOCKHOLDERS. The officer who has charge of the
stock ledger of the Corporation shall prepare and make, at least ten days before
each meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, showing the address of and
the number of shares registered in the name of each stockholder. Such list
shall be open to the examination of any stockholder, for any purpose germane to
the meeting, during ordinary business hours, for a period of at least ten days
prior to the meeting, either at a place within the city, town or village where
the meeting is to be held, which place shall be specified in the notice of
meeting, or, if not specified, at the place where the meeting is to be held.
The list shall be produced and kept at the time and place of the meeting during
the whole time thereof, and may be inspected by any stockholder who is present.
SECTION 6. QUORUM, ADJOURNMENTS. The holders of a majority of the
voting power of the issued and outstanding stock of the Corporation entitled to
vote thereat, present in person or represented by proxy, shall constitute a
quorum for the transaction of business at all meetings of stockholders, except
as otherwise provided by statute or by the Certificate of Incorporation. If,
however, such quorum shall not be present or represented by proxy at any meeting
of stockholders, the stockholders entitled to vote thereat, present in person or
represented by proxy, shall have the power to adjourn the meeting from time to
time, without notice other than announcement at the meeting, until a quorum
shall be present or represented by proxy. At such adjourned meeting at which a
quorum shall be present or represented by proxy, any business may be transacted
which might
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3
have been transacted at the meeting as originally called. If the adjournment is
for more than thirty days, or, if after adjournment a new record date is set, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting.
SECTION 7. ORGANIZATION. At each meeting of stockholders, the
Chairman of the Board or, in his absence, the President shall act as chairman of
the meeting. The Secretary or, in his absence or inability to act, the person
whom the chairman of the meeting shall appoint secretary of the meeting shall
act as secretary of the meeting and keep the minutes thereof.
SECTION 8. ORDER OF BUSINESS. The order of business at all meetings
of the stockholders shall be as determined by the chairman of the meeting.
SECTION 9. VOTING. Except as otherwise provided by statute or the
Certificate of Incorporation, each stockholder of the Corporation shall be
entitled at each meeting of stockholders to one vote for each share of common
stock of the Corporation standing in his name on the record of stockholders of
the Corporation:
(a) on the date fixed pursuant to the provisions of Section 7 of
Article V of these By-Laws as the record date for the determination of the
stockholders who shall be entitled to notice of and to vote at such
meeting; or
(b) if no such record date shall have been so fixed, then at the close
of business on the day next preceding the day on which notice thereof shall
be given, or, if notice is waived, at the close of business on the date
next preceding the day on which the meeting is held.
Each stockholder entitled to vote at any meeting of stockholders may authorize
another person or persons to act for him by a proxy signed by such stockholder
or his attorney-in-fact, but no proxy shall be voted after three years from its
date, unless the proxy provides for a longer period. Any such proxy shall be
delivered to the secretary of the meeting at or prior to the time designated in
the order of business for so delivering such proxies. When a quorum is present
at any meeting, the vote of the holders of a majority of the voting power of the
issued and outstanding stock of the Corporation entitled to vote thereon,
present in person or represented by proxy, shall decide any question brought
before such meeting, unless the question is one upon which by express provision
of statute or of the Certificate of Incorporation or of these By-Laws, a
different vote is required, in which case such express provision shall govern
and control the decision of such question. Unless required by statute, or
determined by the chairman of the meeting to be advisable, the vote on any
question need not be by ballot. On a
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4
vote by ballot, each ballot shall be signed by the stockholder voting, or by his
proxy, if there by such proxy, and shall state the number of shares voted.
SECTION 10. INSPECTORS. The Board of Directors in its sole
discretion may, in advance of any meeting of stockholders, appoint one or more
inspectors to act at such meeting or any adjournment thereof. If any of the
inspectors so appointed shall fail to appear or act, the chairman of the meeting
shall, or if inspections shall not have been appointed, the chairman of the
meeting in his sole discretion may, appoint one or more inspectors. Each
inspector, before entering upon the discharge of his duties, shall take and sign
an oath faithfully to execute the duties of inspector at such meeting with
strict impartiality and according to the best of his ability. The inspectors
shall determine the number of shares of capital stock of the Corporation
outstanding and the voting power of each, the number of shares represented at
the meeting, the existence of a quorum, the validity and effect of proxies, and
shall receive votes, ballots or consents, hear and determine all challenges and
questions arising in connection with the right to vote, count and tabulate all
votes, ballots or consents, determine the results, and do such acts as are
proper to conduct the election or vote with fairness to all stockholders. On
request of the chairman of the meeting, the inspectors shall make a report in
writing of any challenge, request or matter determined by them and shall execute
a certificate of any fact found by them. No director or candidate for the
office of director shall act as an inspector of an election of directors.
Inspectors need not be stockholders.
SECTION 11. ACTION BY CONSENT. Whenever the vote of stockholders at
a meeting thereof is required or permitted to be taken for or in connection with
any corporate action, by any provision of statute or of the Certificate of
Incorporation or of these By-Laws, the meeting and vote of stockholders may be
dispensed with, and the action taken without such meeting and vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares of
stock of the Corporation entitled to vote thereon were present and voted.
ARTICLE III
Board of Directors
SECTION 1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. The Board of Directors may exercise all such authority and powers of
the Corporation and do all such lawful acts and things as are not by statute or
the Certificate
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5
of Incorporation directed or required to be exercised or done by the
stockholders.
SECTION 2. NUMBER, QUALIFICATIONS, ELECTION AND TERM OF OFFICE. The
number of directors constituting the Board of Directors shall be not less than
two nor more than fifteen as may be fixed, from time to time, by the affirmative
vote of a majority of the entire Board of Directors or by action of the
stockholders of the Corporation. Any decrease in the number of directors shall
be effective at the time of the next succeeding annual meeting of stockholders
unless there shall be vacancies in the Board of Directors, in which case such
decrease may become effective at any time prior to the next succeeding annual
meeting to the extent of the number of such vacancies. Directors need not be
stockholders. Except as otherwise provided by statute or these By-Laws, the
directors shall be elected at the annual meeting of stockholders. Each director
shall hold office until his successor shall have been elected and qualified, or
until his death, or until he shall have resigned, or have been removed, as
hereinafter provided in these By-Laws.
SECTION 3. PLACE OF MEETINGS. Meetings of the Board of Directors
shall be held at such place or places, within or without the State of Delaware,
as the Board of Directors may from time to time determine or as shall be
specified in the notice of any such meeting.
SECTION 4. ANNUAL MEETING. The Board of Directors shall meet for the
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of stockholders, on
the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. In the event such annual meeting is
not so held, the annual meeting of the Board of Directors may be held at such
other time or place (within or without the State of Delaware) as shall be
specified in a notice thereof given as hereinafter provided in Section 7 of this
Article III.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such time and place as the Board of Directors may
fix. If any day fixed for a regular meeting shall be a legal holiday at the
place where the meeting is to be held, then the meeting which would otherwise be
held on that day shall be held at the same hour on the next succeeding business
day. Notice of regular meetings of the Board of Directors need not be given
except as otherwise required by statute or these By-Laws.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board or by two or more directors
of the Corporation or by the President.
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6
SECTION 7. NOTICE OF MEETINGS. Notice of each special meeting of the
Board of Directors (and of each regular meeting for which notice shall be
required) shall be given by the Secretary as hereinafter provided in this
Section 7, in which notice shall be stated the time and place of the meeting.
Except as otherwise required by these By-Laws, such notice need not state the
purposes of such meeting. Notice of each such meeting shall be mailed, postage
prepaid, to each director, addressed to him at his residence or usual place of
business, by first class mail, at least two days before the day on which such
meeting is to be held, or shall be sent addressed to him at such place by
telegraph, cable, telex, telecopier or other similar means, or be delivered to
him personally or be given to him by telephone or other similar means, at least
twenty-four hours before the time at which such meeting is to be held. Notice
of any such meeting need not be given to any director who shall, either before
or after the meeting, submit a signed waiver of notice or who shall attend such
meeting, except when he shall attend for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
SECTION 8. QUORUM AND MANNER OF ACTING. A majority of the entire
Board of Directors shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors, and, except as otherwise expressly
required by statute or the Certificate of Incorporation or these By-Laws, the
act of a majority of the directors present at any meeting at which a quorum is
present shall be the act of the Board of Directors. In the absence of a quorum
at any meeting of the Board of Directors, a majority of the directors present
thereat may adjourn such meeting to another time and place. Notice of the time
and place of any such adjourned meeting shall be given to all of the directors
unless such time and place were announced at the meeting at which the
adjournment was taken, in which case such notice shall only be given to the
directors who were not present thereat. At any adjourned meeting at which a
quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called. The directors shall act only as
a Board and the individual directors shall have no power as such.
SECTION 9. ORGANIZATION. At each meeting of the Board of Directors,
the Chairman of the Board or, in the absence of the Chairman of the Board, the
President (or, in his absence, another director chosen by a majority of the
directors present) shall act as chairman of the meeting and preside thereat.
The Secretary or, in his absence, any person appointed by the chairman shall act
as secretary of the meeting and keep the minutes thereof.
SECTION 10. RESIGNATIONS. Any director of the Corporation may resign
at any time by giving written notice of his resignation to the Corporation. Any
such resignation shall take effect at the time specified therein or, if the time
when it
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7
shall become effective shall not be specified therein, immediately upon its
receipt. Unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
SECTION 11. VACANCIES. Any vacancy in the Board of Directors,
whether arising from death, resignation, removal (with or without cause), an
increase in the number of directors or any other cause, may be filled by the
vote of a majority of the directors then in office, though less than a quorum,
or by the sole remaining director or by the stockholders at the next annual
meeting thereof or at a special meeting thereof. Each director so elected shall
hold office until his successor shall have been elected and qualified.
SECTION 12. REMOVAL OF DIRECTORS. Any director may be removed,
either with or without cause, at any time, by the holders of a majority of the
voting power of the issued and outstanding capital stock of the Corporation
entitled to vote at an election of directors.
SECTION 13. COMPENSATION. The Board of Directors shall have
authority to fix the compensation, including fees and reimbursement of expenses,
of directors for services to the Corporation in any capacity.
SECTION 14. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, including an executive committee, each committee to consist of one
or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
addition, in the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Except to the extent restricted by statute or the Certificate of Incorporation,
each such committee, to the extent provided in the resolution creating it, shall
have and may exercise all the powers and authority of the Board of Directors and
may authorize the seal of the Corporation to be affixed to all papers which
require it. Each such committee shall serve at the pleasure of the Board of
Directors and have such name as may be determined from time to time by
resolution adopted by the Board of Directors. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Directors.
SECTION 15. ACTION BY CONSENT. Unless restricted by the Certificate
of Incorporation, any action required or
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8
permitted to be taken by the Board of Directors or any committee thereof may be
taken without a meeting if all members of the Board of Directors or such
committee, as the case may be, consent thereto in writing, and the writing or
writings are filed with the minutes of the proceedings of the Board of Directors
or such committee, as the case may be.
SECTION 16. TELEPHONIC MEETING. Unless restricted by the Certificate
of Incorporation, any one or more members of the Board of Directors or any
committee thereof may participate in a meeting of the Board of Directors or such
committee by means of a conference telephone or similar communications equipment
by means of which all persons participating in the meeting can hear each other.
Participation by such means shall constitute presence in person at a meeting.
ARTICLE IV
Officers
SECTION 1. NUMBER AND QUALIFICATIONS. The officers of the
Corporation shall be elected by the Board of Directors and shall include the
Chairman of the Board, the President, one or more Vice-Presidents, the Secretary
and the Treasurer. If the Board of Directors wishes, it may also elect as an
officer of the Corporation a Vice Chairman of the Board and may elect other
officers (including one or more Assistant Treasurers and one or more Assistant
Secretaries) as may be necessary or desirable for the business of the
Corporation. Any two or more offices may be held by the same person, and no
officer except the Chairman of the Board need be a director. Each officer shall
hold office until his successor shall have been duly elected and shall have
qualified, or until his death, or until he shall have resigned or have been
removed, as hereinafter provided in these By-Laws.
SECTION 2. RESIGNATIONS. Any officer of the Corporation may resign
at any time by giving written notice of his resignation to the Corporation. Any
such resignation shall take effect at the time specified therein or, if the time
when it shall become effective shall not be specified therein, immediately upon
receipt. Unless otherwise specified therein, the acceptance of any such
resignation shall not be necessary to make it effective.
SECTION 3. REMOVAL. Any officer of the Corporation may be removed,
either with or without cause, at any time, by the Board of Directors at any
meeting thereof.
SECTION 4. CHAIRMAN OF THE BOARD. The Chairman of the Board shall be
a member of the Board and, if present, shall preside at each meeting of the
Board of Directors or the stockholders. He shall advise and counsel with the
President, and in his absence with other executives of the Corporation, and
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9
shall perform such other duties as may from time to time be assigned to him by
the Board of Directors.
SECTION 5. THE PRESIDENT. The President shall be the chief executive
officer of the Corporation. He shall, in the absence of the Chairman of the
Board or if a Chairman of the Board shall not have been elected, preside at each
meeting of the Board of Directors or the stockholders. He shall perform all
duties incident to the office of President and chief executive officer and such
other duties as may from time to time be assigned to him by the Board of
Directors.
SECTION 6. VICE-PRESIDENT. Each Vice-President shall perform all
such duties as from time to time may be assigned to him by the Board of
Directors or the President. At the request of the President or in his absence
or in the event of his inability or refusal to act, the Vice-President, or if
there shall be more than one, the Vice-Presidents in the order determined by the
Board of Directors (or if there be no such determination, then the
Vice-Presidents in the order of their election), shall perform the duties of the
President, and, when so acting, shall have the powers of and be subject to the
restrictions placed upon the President in respect of the performance of such
duties.
SECTION 7. TREASURER. The Treasurer shall
(a) have charge and custody of, and be responsible for, all the funds
and securities of the Corporation;
(b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;
(c) deposit all moneys and other valuables to the credit of the
Corporation in such depositaries as may be designated by the Board of
Directors or pursuant to its direction;
(d) receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investments of its funds, taking proper vouchers therefor;
(f) render to the Board of Directors, whenever the Board of Directors
may require, an account of the financial condition of the Corporation; and
(g) in general, perform all duties incident to the office of Treasurer
and such other duties as from time to time may be assigned to him by the
Board of Directors.
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SECTION 8. SECRETARY. The Secretary shall
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, the
committees of the Board of Directors and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all certificates for shares of the Corporation
(unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all
other documents to be executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all duties incident to the office of Secretary
and such other duties as from time to time may be assigned to him by the
Board of Directors.
SECTION 9. THE ASSISTANT TREASURER. The Assistant Treasurer, or if
there shall be more than one, the Assistant Treasurers in the order determined
by the Board of Directors (or if there be no such determination, then in the
order of their election), shall, in the absence of the Treasurer or in the event
of his inability or refusal to act, perform the duties and exercise the powers
of the Treasurer and shall perform such other duties as from time to time may be
assigned by the Board of Directors.
SECTION 10. THE ASSISTANT SECRETARY. The Assistant Secretary, or if
there be more than one, the Assistant Secretaries in the order determined by the
Board of Directors (or if there be no such determination, then in the order of
their election), shall, in the absence of the Secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of the
Secretary and shall perform such other duties as from time to time may be
assigned by the Board of Directors.
SECTION 11. OFFICERS' BONDS OR OTHER SECURITY. If required by the
Board of Directors, any officer of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety as the Board of Directors may require.
SECTION 12. COMPENSATION. The compensation of the officers of the
Corporation for their services as such officers
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11
shall be fixed from time to time by the Board of Directors. An officer of the
Corporation shall not be prevented from receiving compensation by reason of the
fact that he is also a director of the Corporation.
ARTICLE V
Stock Certificates and Their Transfer
SECTION 1. STOCK CERTIFICATES. Every holder of stock in the
Corporation shall be entitled to have a certificate, signed by, or in the name
of the Corporation by, the Chairman of the Board or the President or a
Vice-President and by the Treasurer or an Assistant Treasurer or the Secretary
or an Assistant Secretary of the Corporation, certifying the number of shares
owned by him in the Corporation. If the Corporation shall be authorized to
issue more than one class of stock or more than one series of any class, the
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restriction of such preferences and/or rights shall be set forth
in full or summarized on the face or back of the certificate which the
Corporation shall issue to represent such class or series of stock, provided
that, except as otherwise provided in Section 202 of the General Corporation Law
of the State of Delaware, in lieu of the foregoing requirements, there may be
set forth on the face or back of the certificate which the Corporation shall
issue to represent such class or series of stock, a statement that the
Corporation will furnish without charge to each stockholder who so requests the
designations, preferences and relative, participating, optional or other special
rights of each class of stock or series thereof and the qualifications,
limitations or restrictions of such preferences and/or rights.
SECTION 2. FACSIMILE SIGNATURES. Any or all of the signatures on a
certificate may be a facsimile. In case any officer, transfer agent or
registrar who has signed or whose facsimile signature has been placed upon a
certificate shall have ceased to be such officer, transfer agent or registrar
before such certificate is issued, it may be issued by the Corporation with the
same effect as if he were such officer, transfer agent or registrar at the date
of issue.
SECTION 3. LOST CERTIFICATES. The Board of Directors or any two
officers authorized to sign certificates pursuant to Section 1 above may direct
a new certificate or certificates to be issued in place of any certificate or
certificates theretofore issued by the Corporation alleged to have been lost,
stolen, or destroyed. When authorizing such issue of a new certificate or
certificates, the Board of Directors or such officers may, in its or their
discretion and as a condition precedent to the issuance thereof, require the
owner of such lost, stolen, or destroyed
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12
certificate or certificates, or his legal representative, to give the
Corporation a bond in such sum as it may direct sufficient to indemnify it
against any claim that may be made against the Corporation on account of the
alleged loss, theft or destruction of any such certificate or the issuance of
such new certificate.
SECTION 4. TRANSFERS OF STOCK. Upon surrender to the Corporation or
the transfer agent or registrar of the Corporation of a certificate for shares
duly endorsed or accompanied by proper evidence of succession, assignment or
authority to transfer, it shall be the duty of the Corporation, transfer agent
or registrar to issue a new certificate to the person entitled thereto, cancel
the old certificate and record the transaction upon its records; provided,
however, that the Corporation shall be entitled to recognize and enforce any
lawful restriction on transfer. Whenever any transfer of stock shall be made
for collateral security, and not absolutely, it shall be so expressed in the
entry of transfer if, when the certificates are presented to the Corporation, or
transfer agent or registrar for transfer, both the transferor and the transferee
request the Corporation to do so.
SECTION 5. TRANSFER AGENTS AND REGISTRARS. The Board of Directors
may appoint, or authorize any officer or officers to appoint, one or more
transfer agents and one or more registrars.
SECTION 6. REGULATIONS. The Board of Directors may make such
additional rules and regulations, not inconsistent with these By-Laws, as it may
deem expedient concerning the issue, transfer and registration of certificates
for shares of stock of the Corporation.
SECTION 7. FIXING THE RECORD DATE. In order that the Corporation may
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any adjournment thereof, or to express consent to corporate
action in writing without a meeting, or entitled to receive payment of any
dividend or other distribution or allotment of any rights, or entitled to
exercise any rights in respect of any change, conversion or exchange of stock or
for the purpose of any other lawful action, the Board of Directors may fix, in
advance, a record date, which shall not be more than sixty nor less than ten
days before the date of such meeting, nor more than sixty days prior to any
other action. A determination of stockholders of record entitled to notice of
or to vote at a meeting of stockholders shall apply to any adjournment of the
meeting; provided, however, that the Board of Directors may fix a new record
date for the adjourned meeting.
SECTION 8. REGISTERED STOCKHOLDERS. The Corporation shall be
entitled to recognize the exclusive right of a person registered on its records
as the owner of shares of stock to receive dividends and to vote as such owner,
shall be entitled to hold liable for calls and assessments a person registered
on its records as the owner of shares of stock, and shall not be bound
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13
to recognize any equitable or other claim to or interest in such share or shares
of stock on the part of any other person, whether or not it shall have express
or other notice thereof, except as otherwise provided by the laws of Delaware.
ARTICLE VI
Indemnification of Directors and Officers
SECTION 1. GENERAL. The Corporation shall indemnify any person who
was or is a party or is threatened to be made a party to any threatened, pending
or completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the Corporation) by
reason of the fact that he is or was a director, officer, employee or agent of
the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement actually and reasonably
incurred by him in connection with such action, suit or proceeding unless a
court of competent jurisdiction shall determine that he did not act in good
faith and in a manner he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, that he believed or had reasonable cause to believe his conduct was
unlawful. The termination of any action, suit or proceeding by judgment, order,
settlement, conviction, or upon a plea of NOLO CONTENDERE or its equivalent,
shall not, of itself, create a presumption that the person did not act in good
faith and in a manner which he reasonably believed to be in or not opposed to
the best interests of the Corporation, or, with respect to any criminal action
or proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 2. DERIVATIVE ACTIONS. The Corporation shall indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation, provided that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the
<PAGE>
14
court in which such action or suit was brought shall determine upon application
that, despite the adjudication of liability but in view of all the circumstances
of the case, such person is fairly and reasonably entitled to indemnity for such
expenses which the Court of Chancery or such other court shall deem proper.
SECTION 3. ADVANCES FOR EXPENSES. Expenses incurred in defending a
civil or criminal action, suit or proceeding shall be paid by the Corporation in
advance of the final disposition of such action, suit or proceeding upon receipt
of an undertaking by or on behalf of the director, officer, employee or agent to
repay such amount if it shall be ultimately determined that he is not entitled
to be indemnified by the Corporation as authorized in this Article VI.
SECTION 4. RIGHTS NOT-EXCLUSIVE. The indemnification and advancement
of expenses provided by, or granted pursuant to, the other subsections of this
Article VI shall not be deemed exclusive of any other rights to which those
seeking indemnification or advancement of expenses may be entitled under any
law, by-law, agreement, vote of stockholders or disinterested directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office.
SECTION 5. INSURANCE. The Corporation shall have power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under the provisions of this
Article VI.
SECTION 6. DEFINITION OF CORPORATION. For the purposes of this
Article VI, references to "the Corporation" include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation so that any person who is or was a director, officer, employee or
agent of such a constituent corporation or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise shall
stand in the same position under the provisions of this Article VI with respect
to the resulting or surviving corporation as he would if he had served the
resulting or surviving corporation in the same capacity.
SECTION 7. SURVIVAL OF RIGHTS. The indemnification and advancement
of expenses provided by, or granted pursuant to,
<PAGE>
15
this Article VI shall continue as to a person who has ceased to be a director,
officer, employee or agent and shall inure to the benefit of the heirs,
executors and administrators of such a person.
ARTICLE VII
General Provisions
SECTION 1. DIVIDENDS. Subject to the provisions of statute and the
Certificate of Incorporation, dividends upon the shares of capital stock of the
Corporation may be declared by the Board of Directors at any regular or special
meeting. Dividends may be paid in cash, in property or in shares of stock of
the Corporation, unless otherwise provided by statute or the Certificate of
Incorporation.
SECTION 2. RESERVES. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors may think
conducive to the interests of the Corporation. The Board of Directors may
modify or abolish any such reserves in the manner in which it was created.
SECTION 3. SEAL. The seal of the Corporation shall be in circular
form and contain the name of the Corporation, the year of its incorporation and
the words "CORPORATE SEAL DELAWARE."
SECTION 4. FISCAL YEAR. The fiscal year of the Corporation shall be
each calendar year ending December 31st unless changed by resolution of the
Board of Directors.
SECTION 5. CHECKS, NOTES, DRAFTS, ETC. All checks, notes, drafts or
other orders for the payment of money of the Corporation shall be signed,
endorsed or accepted in the name of the Corporation by such officer, officers,
person or persons as from time to time may be designated by the Board of
Directors or by an officer or officers authorized by the Board of Directors to
make such designation.
SECTION 6. EXECUTION OF CONTRACTS, DEEDS, ETC. The Board of
Directors may authorize any officer or officers, agent or agents, in the name
and on behalf of the Corporation to enter into or execute and deliver any and
all deeds, bonds, mortgages, contracts and other obligations or instruments, and
such authority may be general or confined to specific instances.
<PAGE>
16
SECTION 7. VOTING OF STOCK IN OTHER CORPORATIONS. Unless otherwise
provided by resolution of the Board of Directors, the Chairman of the Board or
the President or other officer authorized by the Board of Directors, from time
to time, may (or may appoint one or more attorneys or agents to) cast the votes
which the Corporation may be entitled to cast as a shareholder or otherwise in
any other corporation, any of whose shares or securities may be held by the
Corporation, at meetings of the holders of the shares or other securities of
such other corporation. In the event one or more attorneys or agents are
appointed, the Chairman of the Board or the President or such other officer may
instruct the person or persons so appointed as to the manner of casting such
votes or giving such consent. The Chairman of the Board or the President may,
or may instruct the attorneys or agents appointed to, execute or cause to be
executed in the name and on behalf of the Corporation and under its seal or
otherwise, such written proxies, consents, waivers or other instruments as may
be necessary or proper in the circumstances.
ARTICLE VIII
Amendments
These By-Laws may be amended or repealed or new by-laws adopted (a) by
action of the stockholders entitled to vote thereon at any annual or special
meeting of stockholders or (b) if the Certificate of Incorporation so provides,
by action of the Board of Directors at a regular or special meeting thereof.
Any by-law made by the Board of Directors may be amended or repealed by action
of the stockholders at any annual or special meeting of stockholders.
<PAGE>
EXHIBIT D
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
STOCKHOLDERS' AGREEMENT
dated as of May __, 1998
among
BIDERMANN INDUSTRIES U.S.A., INC.,
VESTAR CAPITAL PARTNERS III, L.P.,
ALVAREZ & MARSAL, INC.,
THE ORIGINAL EQUITY HOLDERS NAMED HEREIN,
THE MANAGEMENT INVESTORS NAMED HEREIN
and
THE INSTITUTIONS NAMED HEREIN
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
Page
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.1 Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 Other Definitional Provisions; Interpretation . . . . . . . . . 4
SECTION 2. VOTING AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . 5
2.1 Election of Directors . . . . . . . . . . . . . . . . . . . . . 5
2.2 Other Voting Matters. . . . . . . . . . . . . . . . . . . . . . 7
SECTION 3. TRANSFERS AND ISSUANCES . . . . . . . . . . . . . . . . . . . . 8
3.1 Limitations on Transfer . . . . . . . . . . . . . . . . . . . . 8
3.2 Transfers to Affiliates . . . . . . . . . . . . . . . . . . . . 8
3.3 Effect of Void Transfers. . . . . . . . . . . . . . . . . . . . 9
3.4 Legend on Securities. . . . . . . . . . . . . . . . . . . . . . 9
3.5 Tag-Along Rights. . . . . . . . . . . . . . . . . . . . . . . . 10
3.6 Public Offerings, etc. . . . . . . . . . . . . . . . . . . . . 13
3.7 Drag-Along Rights . . . . . . . . . . . . . . . . . . . . . . . 13
3.8 Participation Right . . . . . . . . . . . . . . . . . . . . . . 14
3.9 Rights of First Refusal . . . . . . . . . . . . . . . . . . . . 15
SECTION 4. REGISTRATION RIGHTS . . . . . . . . . . . . . . . . . . . . . . 16
4.1 Demand Registration . . . . . . . . . . . . . . . . . . . . . . 17
4.2 Incidental Registration . . . . . . . . . . . . . . . . . . . . 18
4.3 Registration Procedures . . . . . . . . . . . . . . . . . . . . 20
4.4 Underwritten Offerings. . . . . . . . . . . . . . . . . . . . . 24
4.5 Preparation; Reasonable Investigation . . . . . . . . . . . . . 25
4.6 Limitations, Conditions and Qualifications to Obligations
under Registration Covenants. . . . . . . . . . . . . . . . . . 25
4.7 Expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
4.8 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . 27
4.9 Participation in Underwritten Registrations . . . . . . . . . . 29
4.10 Rule 144. . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
4.11 Holdback Agreements . . . . . . . . . . . . . . . . . . . . . . 30
SECTION 5. MISCELLANEOUS . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.1 Additional Securities Subject to Agreement. . . . . . . . . . . 30
5.2 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . 30
5.3 Injunctive Relief . . . . . . . . . . . . . . . . . . . . . . . 31
5.4 Other Stockholders' Agreements. . . . . . . . . . . . . . . . . 31
5.5 Amendments. . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.6 Successors, Assigns and Transferees . . . . . . . . . . . . . . 31
5.7 Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31
5.8 Integration . . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.9 Severability. . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.10 Counterparts. . . . . . . . . . . . . . . . . . . . . . . . . . 33
5.11 Governing Law, Etc. . . . . . . . . . . . . . . . . . . . . . . 33
5.12 Additional Management Investors . . . . . . . . . . . . . . . . 34
-i-
<PAGE>
STOCKHOLDERS' AGREEMENT, dated as of May __, 1998, among Bidermann
Industries U.S.A., Inc. (the "COMPANY"), Vestar Capital Partners III, L.P. [or
its affiliated designee party to a Stock Subscription Agreement] ("VESTAR"),
Alvarez & Marsal, Inc. [or its affiliated designee party to a Stock Subscription
Agreement] ("ALVAREZ & MARSAL"), the parties identified on the signature pages
hereto as Original Equity Holders (the "ORIGINAL EQUITY HOLDERS"), the parties
identified on the signature pages hereto as the Institutions (the
"INSTITUTIONS") [only to the extent Institutions execute a Subscription
Agreement] and the parties identified on the signature pages hereto or to the
supplementary agreements referred to in Section 5.12 as Management Investors
(the "MANAGEMENT INVESTORS").
W I T N E S S E T H :
WHEREAS, as of the Closing Date Vestar, Alvarez & Marsal, the Original
Equity Holders, the Institutions and the Management Investors are the holders of
all of the outstanding shares of capital stock of the Company and other
outstanding securities exercisable or exchangeable for or convertible into
voting stock of the Company; and
WHEREAS, the parties hereto wish to enter into certain agreements with
respect to the holdings by Vestar, Alvarez & Marsal, the Original Equity
Holders, the Institutions and the Management Investors and their respective
permitted transferees of capital stock of the Company and securities exercisable
or exchangeable for or convertible into capital stock of the Company;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1 DEFINED TERMS. As used in this Agreement, terms defined in the
heading and the recitals shall have their respective assigned meanings, and the
following capitalized terms shall have the meanings ascribed to them below:
"AFFILIATE" shall mean, with respect to any Person, (i) any Person
that directly or indirectly controls, is controlled by or is under common
control with, such Person, or (ii) any director, officer, partner, member
or employee of such Person or any Person specified in clause (i) above, or
(iii) any Immediate Family Member of any Person specified in clause (i) or
(ii) above.
"AGREEMENT" shall mean this Stockholders' Agreement, as the same may
be amended, supplemented or otherwise modified from time to time.
<PAGE>
2
"BENEFICIAL OWNER" has the meaning set forth in Rule 13d-3 under the
Exchange Act.
"BOARD OF DIRECTORS" shall mean, unless otherwise specified hereunder,
the Board of Directors of the Company.
"BUSINESS DAY" means a day other than a Saturday, Sunday, federal or
New York State holiday or other day on which commercial banks in New York
City are authorized or required by law to close.
"BY-LAWS" shall mean the By-Laws of the Company as in effect on the
date hereof, as the same may be amended from time to time in accordance
with the terms thereof and hereof.
"CAUSE" shall mean (i) wilful malfeasance or wilful misconduct by a
director in connection with the performance of his duties as such, (ii) the
commission by a director of (a) any felony or (b) a misdemeanor involving
moral turpitude or (iii) a determination by a court of competent
jurisdiction in the United States that such director, as such or in any
other capacity (whether or not relating to the Company), breached a
fiduciary duty owed by him or her to another Person.
"CERTIFICATE OF INCORPORATION" shall mean the Restated Certificate of
Incorporation of the Company as in effect on the date hereof, as the same
may be amended from time to time in accordance with the terms thereof and
hereof.
"CLOSING DATE" shall mean the date of the sale of Common Stock and the
Junior Preferred Stock to the Initial Investors pursuant to their Stock
Subscription Agreements.
"COMMON STOCK" shall mean the common stock, par value $.01 per share,
of the Company.
"COMMON STOCK EQUIVALENTS" shall mean any warrants, rights, calls,
options or other securities exchangeable or exercisable for or convertible
into Common Stock.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, as the same
may be amended from time to time.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
<PAGE>
3
"IMMEDIATE FAMILY MEMBER" shall mean, with respect to any Person, a
spouse, parent, child or sibling of such Person.
"INDEPENDENT DIRECTOR" shall mean any director of the Company who is
not an Affiliate of any Stockholder or an employee of the Company or any of
its Affiliates.
"INITIAL INVESTORS" shall mean Vestar, Alvarez & Marsal, the
Institutions and the Management Investors.
"JUNIOR PREFERRED STOCK" shall mean the Class C Junior Preferred
Stock, par value $.01 per share, of the Company.
"PERMITTED TRANSFEREE" shall mean any Person to whom an Initial
Investor (or any direct or indirect Permitted Transferee thereof) transfers
Securities in accordance with the terms of this Agreement and the Stock
Subscription Agreement by which such transferor is bound (other than
pursuant to a Public Offering or pursuant to Rule 144 under the Securities
Act) and who becomes a party to, and is bound to the same extent as its
transferor by the terms of, this Agreement.
"PERSON" shall mean any individual, corporation, partnership, limited
liability company, trust, joint stock company, business trust,
unincorporated association, joint venture, Governmental Authority or other
entity of any nature whatsoever.
"PUBLIC OFFERING" shall mean the sale of Securities to the public
pursuant to an effective registration statement filed under the Securities
Act, which results in (or after which there continues to be) an active
trading market in such Securities (it being understood that such an active
trading market shall be deemed to exist if, without limitation, such
Securities are listed on a national securities exchange or on NASDAQ).
"REQUESTING STOCKHOLDER" shall have the meaning set forth in Section
4.1(c).
"SEC" shall mean the Securities and Exchange Commission.
"SECURITIES" shall mean shares of Junior Preferred Stock, Series A
Preferred Stock, Series B Preferred Stock or Common Stock or Common Stock
Equivalents, whether owned on the date hereof or hereafter acquired.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder, as the same may be
amended from time to time.
<PAGE>
4
"SELLING STOCKHOLDERS" shall have the meaning set forth in Section
4.3(c).
"SERIES A PREFERRED STOCK" shall mean the Series A Senior Preferred
Stock, par value $.01 per share, of the Company.
"SERIES B PREFERRED STOCK" shall mean the Series B Preferred Stock,
par value $.01 per share, of [the Company] [BIC].
"STOCKHOLDERS" shall mean Vestar, Alvarez & Marsal, the Original
Equity Holders, the Institutions and the Management Investors and their
respective Permitted Transferees.
"STOCK SUBSCRIPTION AGREEMENTS" shall mean, collectively, the
Subscription Agreement, dated as of March 30, 1998 among Vestar, Alvarez &
Marsal and the Company, the Management Stock Subscription Agreements
between the Company and the Management Investors and the Subscription
Agreements between the Company and the Institutions, respectively.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association or other business entity of which fifty percent
(50%) or more of the total voting power of shares of capital stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof, or fifty percent (50%)
or more of the equity interest therein, is at the time owned or controlled,
directly or indirectly, by any Person or one or more of the other
Subsidiaries of such Person or a combination thereof.
"THIRD PARTY" shall mean any Person other than the Stockholders and
their Affiliates.
"TRANSFER" shall mean any transfer, sale, assignment, exchange,
mortgage, pledge, hypothecation or other disposition of any Securities or
any interest therein.
1.2 OTHER DEFINITIONAL PROVISIONS; INTERPRETATION. (a) The words
"hereof", "herein", and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section, Subsection, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(b) The headings in this Agreement are included for convenience of
reference only and shall not limit or otherwise affect the meaning or
interpretation of this Agreement.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
<PAGE>
5
(d) For purposes of comparing the beneficial ownership of any
Person on the date of execution and delivery of this Agreement to the level of
such ownership at any later time, the level of ownership on such later date
shall be adjusted to eliminate the effect of any subdivision of the Common
Stock, any combination of the Common Stock, any issuance of Common Stock or
Common Stock Equivalents by reason of any reclassification (including, without
limitation, any reclassification in connection with a merger or consolidation),
or any dividend payable in Common Stock or Common Stock Equivalents.
SECTION 2. VOTING AGREEMENTS
2.1 ELECTION OF DIRECTORS. (a) Each Stockholder hereby agrees that
so long as this Agreement shall remain in effect, such Stockholder will vote all
of the voting Securities owned or held of record by such Stockholder so as to
elect and, during such period, to continue in office a Board of Directors of the
Company and each Subsidiary of the Company, each consisting solely of the
following:
(i) 4 designees of Vestar (so long as Vestar and its Affiliates,
but not any other Permitted Transferee of any thereof,
beneficially own on a fully diluted basis an aggregate number
of shares of Common Stock not less than one-half (1/2) of the
number of shares of Common Stock beneficially owned on a fully
diluted basis by Vestar on the date of execution and delivery
of this Agreement) or, if the foregoing condition is not
satisfied, 3 designees of Vestar (so long as Vestar and its
Affiliates, but not any other Permitted Transferee of any
thereof, beneficially own on a fully diluted basis an aggregate
number of shares of Common Stock not less than one-third (1/3)
of the total number of shares of Common Stock beneficially
owned on a fully diluted basis by Vestar on the date of its
execution and delivery of this Agreement) or, if the foregoing
condition is not satisfied, 2 designees of Vestar (so long as
Vestar and its Affiliates, but not any other Permitted
Transferee of any thereof, beneficially own on a fully diluted
basis an aggregate number of shares of Common Stock not less
than one-fifth (1/5) of the total number of shares of Common
Stock beneficially owned by Vestar on the date of its execution
and delivery of this Agreement) or, if the foregoing condition
is not satisfied, 1 designee of Vestar (so long as Vestar and
its Affiliates, but not any other Permitted Transferee of any
thereof, beneficially own on a fully diluted basis an aggregate
number of shares of Common Stock not less than one-tenth (1/10)
of the
<PAGE>
6
number of shares of Common Stock beneficially owned on a fully
diluted basis by Vestar on the date of its execution and
delivery of this Agreement);
(ii) 2 designees of the Management Investors and Alvarez & Marsal
(such designees to be selected by the holders of a majority of
the shares of Common Stock beneficially owned by such
Stockholders on a fully diluted basis) (so long as the
Management Investors and Alvarez & Marsal and their respective
Affiliates, but not any other Permitted Transferee of any
thereof, beneficially own on a fully diluted basis an aggregate
number of shares of Common Stock not less than one-half (1/2)
of the number of shares of Common Stock beneficially owned on a
fully diluted basis by the Management Investors and Alvarez &
Marsal on the date of their execution and delivery of this
Agreement) or, if the foregoing condition is not satisfied, 1
designee of the Management Investors and Alvarez & Marsal (such
designees to be selected by the holders of a majority of the
shares of Common Stock beneficially owned by such Stockholders
on a fully diluted basis) (so long as the Management Investors
and Alvarez & Marsal and their respective Affiliates, but not
any other Permitted Transferee of any thereof, beneficially own
on a fully diluted basis an aggregate number of shares of
Common Stock not less than one-fifth (1/5) of the number of
shares of Common Stock beneficially owned on a fully diluted
basis by the Management Investors and Alvarez & Marsal on the
date of their execution and delivery of this Agreement); and
(iii) 3 Independent Directors designated by Vestar.
(b) If at any time during the period specified in paragraph (a)
above, Vestar, or the Management Investors and Alvarez & Marsal (based on the
action of holders of a majority of the shares of Common Stock beneficially owned
by the Management Investors and Alvarez & Marsal on a fully diluted basis),
shall notify the other Stockholders of its or their desire to remove, with or
without Cause, any director of the Company or of any Subsidiary of the Company
previously designated by it or them, each Stockholder shall vote all of the
voting Securities owned or held of record by it so as to remove such director.
(c) If at any time during the period specified in paragraph (a)
above, any director previously designated by Vestar, or the Management Investors
and Alvarez & Marsal, ceases to serve on the Board of Directors of the Company
or any Subsidiary of the Company (whether by reason of death,
<PAGE>
7
resignation, removal or otherwise), the Stockholder who designated such director
shall be entitled to designate a successor director to fill the vacancy created
thereby. If at any time during the period specified in paragraph (a) above an
Independent Director ceases to serve on the Board of Directors of the Company or
any Subsidiary of the Company (whether by reason of death, resignation, removal
or otherwise), a successor director to fill the vacancy created thereby shall be
designated as provided in clause (iii) of paragraph (a) above. Each Stockholder
agrees that such Stockholder will vote all of the voting Securities owned or
held of record by such Stockholder so as to elect any such director.
(d) The parties hereto hereby agree that any individual designated
as a director of the Company or of any Subsidiary of the Company may be removed
for Cause pursuant to the Company's (or such Subsidiary's) by-laws and
applicable law with or without the consent of the Stockholder which designated
such individual. No such removal of an individual designated pursuant to this
Section 2.1 shall affect any of the Stockholders' rights to designate a
different individual pursuant to this Section 2.1.
(e) So long as he is the chief executive officer of the Company Mr.
Marsal will be the Chairman of the Board of Directors and a designee pursuant to
clause (ii) of paragraph (a) above. No fees shall be paid by the Company or any
of its Subsidiaries to any member of the Board of Directors in his capacity as
such other than Independent Directors designated pursuant to clause (iii) of
paragraph (a) above; PROVIDED that the foregoing shall not limit reimbursement
of expenses in accordance with the expense reimbursement policy of the Company
and its Subsidiaries.
2.2 OTHER VOTING MATTERS. Each Stockholder hereby agrees that, so
long as this Agreement shall remain in effect and Vestar and its Affiliates, but
not any other Permitted Transferee of any thereof, beneficially own on a fully
diluted basis an aggregate number of shares of Common Stock not less than half
(1/2) of the number of shares of Common Stock beneficially owned on a fully
diluted basis by Vestar on the date of its execution and delivery of this
Agreement, such Stockholder will vote all of the Securities owned or held of
record by such Stockholder to ratify, approve and adopt any and all actions
adopted or approved by the Board of Directors of the Company, except that such
Stockholder may vote such Stockholder's shares of Series A Preferred Stock,
Series B Preferred Stock or Junior Preferred Stock, if any, in such
Stockholder's sole discretion with respect to any matter on which holders of
such preferred stock are entitled to vote as a separate class pursuant to
applicable law, the Certificate of Incorporation of the Company or the
certificate of designations or any other specified designations, rights,
preferences, or powers of such preferred stock.
<PAGE>
8
SECTION 3. TRANSFERS AND ISSUANCES
3.1 LIMITATIONS ON TRANSFER. (a) Each of Alvarez & Marsal, the
Original Equity Holders, the Institutions and the Management Investors hereby
agrees that no Transfer shall occur at any time prior to the earlier to occur of
(x) the fifth anniversary of the Closing Date and (y) a Public Offering, except
for Transfers pursuant to Section 3.2, 3.5 or 3.7 or Transfers in connection
with a Public Offering.
(b) Each Stockholder hereby agrees that, except for Transfers
effected pursuant to an effective registration statement filed under the
Securities Act, no Transfer shall occur unless the Company has been furnished
with an opinion in form and substance reasonably satisfactory to the Company of
counsel reasonably satisfactory to the Company that such Transfer is exempt from
the provisions of Section 5 under the Securities Act.
(c) Each of Alvarez & Marsal, the Original Equity Holders, the
Institutions and the Management Investors hereby agrees that, except for
Transfers in connection with a Public Offering, Transfers pursuant to Section
3.7 and Transfers pursuant to Rule 144 under the Securities Act, no Transfer
shall occur unless the transferee shall agree to become a party to, and be bound
to the same extent as its transferor by the terms of, this Agreement pursuant to
the provisions of Section 5.6.
3.2 TRANSFERS TO AFFILIATES. Notwithstanding any other provision
of this Agreement to the contrary, each Stockholder and its Affiliates (but not
any other Permitted Transferee of any thereof) shall be entitled from time to
time, without compliance with Section 3.5, to Transfer any or all of the
Securities beneficially owned by it to any of its Affiliates who agree to become
a party to, and be bound to the same extent as its transferor by the terms of,
this Agreement pursuant to the provisions of Section 5.6. A Management Investor
shall be entitled, without compliance with Section 3.5, to Transfer Securities
beneficially owned by him on the terms and subject to the restrictions and
conditions set forth in any Stock Subscription Agreement to which he is a party.
[Note to draft: such agreement will address puts, calls and transfers to trusts
and estates.] Any Transfer by Vestar to its partners of any or all of the
Securities beneficially owned by it (including a distribution of such Securities
to Vestar's partners upon a liquidation of Vestar or otherwise) shall be deemed
to be a Transfer to Affiliates of Vestar for purposes of this Section 3.2. Any
Transfer by A&M to its stockholders or members of any or all of the Securities
beneficially owned by it (including a distribution of such Securities to such
stockholders or members upon a liquidation of A&M or otherwise) shall be deemed
to be a Transfer to Affiliates of A&M for purposes of this Section 3.2, PROVIDED
that Bryan Marsal and/or Tony Alvarez retains sole voting control over such
Securities (including following any subsequent Transfer otherwise permitted
hereunder by any such
<PAGE>
9
stockholder or member to any of its Affiliates), whether through a voting trust
or otherwise. An Institution may Transfer Securities to another Institution (or
an Affiliate thereof which agrees to become a party to, and be bound to the same
extent as the transferor by the terms of, this Agreement pursuant to the
provisions of Section 5.6).
3.3 EFFECT OF VOID TRANSFERS. In the event of any purported
Transfer of any Securities in violation of the provisions of this Agreement,
such purported Transfer shall be void and of no effect and the Company shall not
give effect to such Transfer.
3.4 LEGEND ON SECURITIES. Each certificate representing Securities
issued to any Stockholder shall bear the following legend on the face thereof:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAW AND ARE SUBJECT TO A STOCKHOLDERS' AGREEMENT AMONG
BIDERMANN INDUSTRIES U.S.A., INC., VESTAR CAPITAL PARTNERS III, L.P.,
ALVAREZ & MARSAL, INC., THE ORIGINAL EQUITY HOLDERS PARTIES THERETO,
[THE INSTITUTIONS PARTIES THERETO] AND THE MANAGEMENT INVESTORS
PARTIES THERETO [AND A MANAGEMENT STOCK SUBSCRIPTION
AGREEMENT/NON-QUALIFIED STOCK OPTION SUBSCRIPTION AGREEMENT BETWEEN
THE MANAGEMENT INVESTOR PARTY THERETO AND THE COMPANY], [A COPY]
[COPIES] OF WHICH [IS] [ARE] ON FILE WITH THE SECRETARY OF THE
COMPANY. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR
OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE
MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH
STOCKHOLDERS' AGREEMENT [AND MANAGEMENT STOCK SUBSCRIPTION
AGREEMENT/NON-QUALIFIED STOCK OPTION SUBSCRIPTION AGREEMENT] AND (A)
PURSUANT TO A REGISTRATION STATEMENT EFFECTIVE UNDER THE SECURITIES
ACT OF 1933, AS AMENDED, OR (B) IF THE COMPANY HAS BEEN FURNISHED WITH
AN OPINION REASONABLY SATISFACTORY IN FORM AND SUBSTANCE TO THE
COMPANY OF COUNSEL REASONABLY SATISFACTORY TO THE COMPANY THAT SUCH
TRANSFER, SALE, ASSIGNMENT, PLEDGE, HYPOTHECATION OR OTHER DISPOSITION
IS EXEMPT FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT OF
1933, AS AMENDED, AND THE RULES AND REGULATIONS THEREUNDER. THE
HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS CERTIFICATE, AGREES
TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH STOCKHOLDERS' AGREEMENT
[AND MANAGEMENT STOCK SUBSCRIPTION AGREEMENT/NON-QUALIFIED STOCK
OPTION SUBSCRIPTION AGREEMENT], INCLUDING RESTRICTIONS RELATING TO THE
EXERCISE OF ANY VOTING RIGHTS GRANTED BY THE SECURITIES."
<PAGE>
10
3.5 TAG-ALONG RIGHTS. (a) So long as this Agreement shall remain
in effect, unless (x) a Public Offering of Common Stock shall have occurred or
(y) Vestar and its Affiliates, but not any other Permitted Transferee of any
thereof, beneficially own on a fully diluted basis an aggregate number of shares
of Common Stock less than one-third (1/3) of the number of shares of Common
Stock beneficially owned on a fully diluted basis by Vestar on the date of its
execution and delivery of this Agreement, with respect to any proposed Transfer
by any of Vestar and its Affiliates (but not any other Permitted Transferee of
any thereof) (in such capacity, a "Transferring Stockholder") of Common Stock,
other than as provided in Sections 3.2 and 3.6, the Transferring Stockholder
shall have the obligation, and each other Stockholder and its Permitted
Transferees shall have the right, to require the proposed transferee to purchase
from each Stockholder and its Permitted Transferees having and exercising such
right (a "TAGGING STOCKHOLDER") a number of shares of Common Stock up to the
product (rounded up to the nearest whole number) of (i) the quotient determined
by dividing the aggregate number of shares of Common Stock beneficially owned on
a fully diluted basis by such Tagging Stockholder and sought by the Tagging
Stockholder to be included in the contemplated Transfer by the aggregate number
of shares of Common Stock beneficially owned on a fully diluted basis by the
Transferring Stockholder plus the aggregate number of shares of Common Stock
beneficially owned on a fully diluted basis by all Tagging Stockholders and
sought by all Tagging Stockholders to be included in the contemplated Transfer
and (ii) the total number of shares of Common Stock proposed to be directly or
indirectly Transferred to the Transferee in the contemplated Transfer, and at
the same price per share of Common Stock and upon the same terms and conditions
(including without limitation time of payment and form of consideration) as to
be paid and given to the Transferring Stockholder, PROVIDED that in order to be
entitled to exercise its right to sell shares of Common Stock to the proposed
transferee pursuant to this Section 3.5, a Tagging Stockholder must agree to
make to the Transferee the same representations, warranties, covenants,
indemnities and agreements as the Transferring Stockholder agrees to make in
connection with the proposed transfer of the shares of Common Stock of the
Transferring Stockholder (except that in the case of representations and
warranties pertaining specifically to the Transferring Stockholder, a Tagging
Stockholder shall make the comparable representations and warranties pertaining
specifically to itself, and except that in the case of covenants or agreements
capable of performance only by certain Stockholders, such covenants or
agreements shall be made only by such certain Stockholders) and PROVIDED FURTHER
that all representations, warranties, covenants, agreements and indemnities made
by the Transferring Stockholder and the Tagging Stockholders pertaining
specifically to themselves shall be made by each of them severally and not
jointly and PROVIDED FURTHER that each of the Transferring Stockholder and each
Tagging Stockholder shall be severally (but not jointly) liable for breaches of
<PAGE>
11
representations, warranties, covenants and agreements of or (in the case of
representations and warranties) pertaining to the Company and its Subsidiaries,
and for indemnification obligations arising out of or relating to any such
breach or otherwise pertaining to the Company and its Subsidiaries, on a pro
rata basis, such liability of each such Stockholder not to exceed such
Stockholder's pro rata portion of the gross proceeds of the sale. Any Tagging
Stockholder that is a holder of Common Stock Equivalents and wishes to
participate in a sale of Common Stock pursuant to this Section 3.5(a) shall
convert into or exercise or exchange such number of Common Stock Equivalents for
Common Stock as may be required therefor on or prior to the closing date of such
Transfer.
(b) So long as this Agreement shall remain in effect, unless (x) a
Public Offering of Common Stock shall have occurred or (y) Vestar and its
Affiliates, but not any other Permitted Transferee of any thereof, beneficially
own on a fully diluted basis an aggregate number of shares of Common Stock less
than one-third (1/3) of the number of shares of Common Stock beneficially owned
on a fully diluted basis by Vestar on the date of its execution and delivery of
this Agreement, with respect to any proposed Transfer by any of Vestar and its
Affiliates (but not any other Permitted Transferee of any thereof) (in such
capacity, a "Transferring Preferred Stockholder"), of Junior Preferred Stock,
other than as provided in Sections 3.2 and 3.6, the Transferring Preferred
Stockholder shall have the obligation, and each other Stockholder and its
Permitted Transferees which holds Junior Preferred Stock shall have the right,
to require the proposed transferee to purchase from each such Stockholder and
its Permitted Transferees having and exercising such right (a "Tagging Preferred
Stockholder") a number of shares of Junior Preferred Stock up to the product
(rounded up to the nearest whole number) of (i) the quotient determined by
dividing the aggregate liquidation preference of all shares of Junior Preferred
Stock owned by such Tagging Preferred Stockholder and sought by the Tagging
Preferred Stockholder to be included in the contemplated Transfer by the
aggregate liquidation preference of all shares of Junior Preferred Stock owned
by the Transferring Preferred Stockholder plus the aggregate number of shares of
Junior Preferred Stock beneficially owned on a fully diluted basis by all
Tagging Preferred Stockholders and sought by all Tagging Preferred Stockholders
to be included in the contemplated Transfer and (ii) the total number of shares
of Junior Preferred Stock proposed to be directly or indirectly Transferred to
the Transferee in the contemplated Transfer, and at the same price per share of
Junior Preferred Stock and upon the same terms and conditions (including without
limitation time of payment and form of consideration) to be given to the
Transferring Preferred Stockholder, PROVIDED that in order to be entitled to
exercise its right to sell shares of Junior Preferred Stock to the proposed
transferee pursuant to this Section 3.5, a Tagging Preferred Stockholder must
agree to make to the Transferee the same representations, warranties, covenants,
indemnities and
<PAGE>
12
agreements as the Transferring Preferred Stockholder agrees to make in
connection with the proposed transfer of Junior Preferred Stock of the
Transferring Stockholder (except that in the case of representations and
warranties pertaining specifically to the Transferring Preferred Stockholder, a
Tagging Preferred Stockholder shall make the comparable representations and
warranties pertaining specifically to itself, and except that in the case of
covenants or agreements capable of performance only by certain Stockholders,
such covenants or agreements shall be made only by such certain Stockholders)
and PROVIDED FURTHER that all representations, warranties, covenants, agreements
and indemnities made by the Transferring Preferred Stockholder and the Tagging
Preferred Stockholders pertaining specifically to themselves shall be made by
each of them severally and not jointly and PROVIDED FURTHER that each of the
Transferring Preferred Stockholder and each Tagging Preferred Stockholder shall
be severally (but not jointly) liable for breaches of representations,
warranties, covenants and agreements of or (in the case of representations and
warranties) pertaining to the Company and its Subsidiaries, and for
indemnification obligations arising out of or relating to any such breach or
otherwise pertaining to the Company and its Subsidiaries, on a pro rata basis,
such liability of each such Stockholder not to exceed such Stockholder's
pro rata portion of the gross proceeds of the sale.
(c) The Transferring Stockholder or Transferring Preferred
Stockholder, as the case may be, shall give notice to all relevant Stockholders
and their Permitted Transferees of each proposed Transfer giving rise to the
rights of the Tagging Stockholders or Tagging Preferred Stockholders set forth
in the first sentence of Section 3.5(a) or (b), as the case may be, at least 30
days prior to the proposed consummation of such Transfer, setting forth the name
of the Transferring Stockholder or Transferring Preferred Stockholder, the
number of shares of Common Stock and/or Junior Preferred Stock proposed to be so
Transferred, the name and address of the proposed transferee, the proposed
amount and form of consideration and other terms and conditions offered by the
proposed transferee, and a representation that the proposed transferee has been
informed of the tag-along rights provided for in this Section 3.5 and has agreed
to purchase shares of Common Stock and/or Junior Preferred Stock in accordance
with the terms hereof. The tag-along rights provided by this Section 3.5 must
be exercised by each Tagging Stockholder or Tagging Preferred Stockholder within
15 days following receipt of the notice required by the preceding sentence, by
delivery of a written notice to the Transferring Stockholder or Transferring
Preferred Stockholder, as the case may be, indicating such Tagging Stockholder's
or Tagging Preferred Stockholder's desire to exercise its rights and specifying
the number of shares of Common Stock and/or Junior Preferred Stock it desires to
sell. The Transferring Stockholder or Transferring Preferred Stockholder, as
the case may be, shall be entitled under this Section 3.5 to Transfer to the
proposed transferee the number of Securities equal to the difference
<PAGE>
13
between the number referred to in clause (ii) of paragraph (a) or (b) above and
the aggregate number of shares of Common Stock and/or Junior Preferred Stock set
forth in the written notices, if any, delivered by the Tagging Stockholders or
Tagging Preferred Stockholders pursuant to the preceding sentence (up to the
maximum number of shares of Common Stock and/or Junior Preferred Stock
beneficially owned by such Tagging Stockholder or Tagging Preferred Stockholder
required to be purchased by the proposed transferee pursuant to the first
sentence of Section 3.5(a) or (b)). If the proposed transferee fails to
purchase shares of Common Stock or, as the case may be, Junior Preferred Stock
from any Tagging Stockholder or Tagging Preferred Stockholder that has properly
exercised its tag-along rights, then the Transferring Stockholder or
Transferring Preferred Stockholder, as the case may be, shall not be permitted
to make the proposed Transfer, and any such attempted Transfer shall be void and
of no effect, as provided in Section 3.3 hereof.
(d) If any of the Tagging Stockholders and Tagging Preferred
Stockholders exercise their rights under Section 3.5(a) or (b), the closing of
the purchase of the Common Stock or, as the case may be, Junior Preferred Stock
with respect to which such rights have been exercised shall take place
concurrently with the closing of the sale of the Transferring Stockholder's or,
as the case may be, Transferring Preferred Stockholder's Common Stock and/or
Junior Preferred Stock. No Transfer shall occur pursuant to this Section 3.5
unless the transferee shall agree to become a party to, and be bound to the same
extent as its transferor by the terms of, this Agreement pursuant to the
provisions of Section 5.6.
3.6 PUBLIC OFFERINGS, ETC. The provisions of Sections 3.5 and 3.7
shall not be applicable to offers and sales of Securities in a Public Offering
or pursuant to Rule 144 under the Securities Act.
3.7 DRAG-ALONG RIGHTS. So long as this Agreement shall remain in
effect, unless (x) a Public Offering of Common Stock shall have occurred or (y)
Vestar and its Affiliates, but not any other Permitted Transferee of any
thereof, beneficially own on a fully diluted basis an aggregate number of shares
of Common Stock less than one-third (1/3) of the number of shares of Common
Stock beneficially owned on a fully diluted basis by Vestar on the date of its
execution and delivery of this Agreement, if any of Vestar and its Affiliates
receives an offer from a Third Party to purchase (whether pursuant to a sale of
stock, a merger or otherwise) all, but not less than all, outstanding shares of
Common Stock or Junior Preferred Stock, as the case may be, subject to this
Agreement (other than shares not being purchased in order to preserve the
availability of recapitalization accounting treatment) and such offer is
accepted by Vestar, then each Stockholder hereby agrees that it will Transfer
all shares of Common Stock or Junior Preferred Stock, as the case may be, owned
by it to such Third Party on the terms of
<PAGE>
14
the offer so accepted by Vestar, including making the same representations,
warranties, covenants, indemnities and agreements that Vestar agrees to make
(except that, in the case of representations and warranties pertaining
specifically to Vestar, each other Stockholder shall make the comparable
representations and warranties pertaining specifically to itself, and except
that, in the case of covenants or agreements capable of performance only by
certain Stockholders, such covenants or agreements shall be made only by such
certain Stockholders, and provided that all representations, warranties,
covenants, agreements and indemnities made by the Stockholders pertaining
specifically to themselves shall be made by each of them severally and not
jointly and provided further that each Stockholder shall be severally (but not
jointly) liable for breaches of representations, warranties, covenants and
agreements of or (in the case of representations and warranties) pertaining to
the Company and its Subsidiaries, and for indemnification obligations arising
out of or relating to any such breach or otherwise pertaining to the Company and
its Subsidiaries, on a pro rata basis, such liability of each such Stockholder
not to exceed such Stockholder's pro rata portion of the gross proceeds of the
sale).
3.8 PARTICIPATION RIGHT. (a) So long as this Agreement shall
remain in effect, unless (x) a Public Offering of Common Stock shall have
occurred or (y) Vestar and its Affiliates, but not any other Permitted
Transferee of any thereof, beneficially own on a fully diluted basis an
aggregate number of shares of Common Stock less than one-third (1/3) of the
number of shares of Common Stock beneficially owned on a fully diluted basis by
Vestar on the date of its execution and delivery of this Agreement, the Company
shall not issue nor permit any of its Subsidiaries to issue (an "ISSUANCE")
additional shares of Common Stock, Common Stock Equivalents or common stock or
common stock equivalents of such Subsidiary to any Initial Investor or Original
Equity Holder or any Affiliate of an Initial Investor or Original Equity Holder
(but excluding any other Permitted Transferee of any thereof) unless, prior to
such Issuance, the Company notifies each other Initial Investor or Original
Equity Holder in writing of the proposed Issuance and grants to such other
Initial Investor or Original Equity Holder or, at such other Initial Investor's
or Original Equity Holder's election, one of its Affiliates (but not any other
Permitted Transferee thereof) the right (the "RIGHT") to subscribe for and
purchase up to a portion of such additional shares of Common Stock or common
stock or such additional shares or units of Common Stock Equivalents or common
stock equivalents (collectively, "EQUITY INTERESTS") so issued at the same price
and upon the same terms and conditions (including, in the event such Equity
Interests are issued as a unit together with other securities, the purchase of
such other securities) as issued in the Issuance such that:
(i) in the case of an Issuance in which shares of Common Stock or
Common Stock Equivalents are to be issued,
<PAGE>
15
immediately after giving effect to the Issuance and full exercise of the
Right (including, for purposes of this calculation, the issuance of shares
of Common Stock upon conversion, exchange or exercise of any Common Stock
Equivalent issued in the Issuance or subject to the Right), the shares of
Common Stock beneficially owned by each such other Initial Investor or
Original Equity Holder and its Affiliates on a fully diluted basis (rounded
to the nearest whole share) shall represent the same percentage of the
aggregate number of shares of Common Stock outstanding on a fully diluted
basis as was beneficially owned by such Initial Investor or Original Equity
Holder and its Affiliates immediately prior to the Issuance; and
(ii) in the case of an Issuance in which shares of such common stock
or common stock equivalents of a Subsidiary are to be issued, each such
other Initial Investor or Original Equity Holder and its Affiliates shall
have the Right to acquire a percentage of such common stock or common stock
equivalents to be issued in the Issuance equal to the percentage of shares
of Common Stock on a fully diluted basis that was beneficially owned by
such Initial Investor or Original Equity Holder and its Affiliates
immediately prior to the Issuance.
(b) The Right may be exercised by each such other Initial Investor
or Original Equity Holder at any time by written notice to the Company received
by the Company within 10 Business Days after the date on which such Initial
Investor or Original Equity Holder receives notice from the Company of the
proposed Issuance, and the closing of the purchase and sale pursuant to the
exercise of the Right shall occur at least 10 Business Days (but not later than
180 days) after the Company receives notice of the exercise of the Right and
prior to or concurrently with the closing of the Issuance. Notwithstanding the
foregoing, the Right shall not apply to (1) any Issuance, PRO RATA, to all
holders of Common Stock, (2) any Issuance upon the conversion, exercise or
exchange of any Common Stock Equivalent outstanding on the Closing Date pursuant
to the terms thereof, (3) any Issuance to a Management Purchaser pursuant to a
stock option or other employee benefit plan of the Company or one of its
Subsidiaries or (4) any Issuance pursuant to a bona fide underwritten public
offering pursuant to an effective registration statement under the Securities
Act.
3.9 RIGHTS OF FIRST REFUSAL. If, at any time after the fifth
anniversary of the Closing Date and, in each case, prior to a Public Offering,
Alvarez & Marsal, an Original Equity Holder, an Institution or a Management
Purchaser or any of their respective Permitted Transferees (an "Offeree")
receives a bona fide offer to purchase any or all of its Securities (the
"Offer") from a third party (the "Offeror") which such Offeree wishes to accept
(other than a Transfer pursuant to Section 3.2), such Offeree shall cause the
Offer to be reduced to writing and shall
<PAGE>
16
notify the Company in writing of its wish to accept the Offer (the "Sale
Notice"). The Sale Notice shall contain an irrevocable offer to sell such
Securities to the Company (in the manner set forth below) at a purchase price
equal to the price contained in, and otherwise on the same terms and conditions
of, the Offer, and shall be accompanied by a true copy of the Offer (which shall
identify the Offeror). At any time within 30 Business Days after the date of
the receipt by the Company of the Sale Notice, the Company shall have the right
and option to commit to purchase, or to arrange for one or more third parties
designated by the Company to purchase, all of the Securities covered by the
Offer either (i) for the same consideration and on the same terms and conditions
as the Offer or (ii) if the Offer includes any consideration other than cash,
then, at the sole option of the Company, at the equivalent all cash price,
determined in good faith by a majority of the members of the Company's Board of
Directors which are not employees or Affiliates of any of the Company and its
Subsidiaries (other than by reason of being a director of any thereof), any
Original Equity Holder, any Institution, Vestar or Alvarez & Marsal, and
otherwise on the same terms and conditions as the Offer. If the option referred
to in the preceding sentence is exercised, on or prior to the 60th Business Day
after the date of receipt by the Company of the Sale Notice the Company (or its
designees) shall pay the relevant cash consideration by delivering a certified
bank check or checks in (or, if the Offeree so elects at least three Business
Days prior to the closing date in a writing specifying the Offeree's bank
account and other wire transfer instructions, by wire transferring) the
appropriate amount and shall deliver the relevant non-cash consideration to the
Offeree against delivery at the principal office of the Company of certificates
representing the Securities being purchased, appropriately endorsed by the
Offeree. If at the end of the aforementioned 30 Business Day period, the
Company (or its designees) has not exercised its option in the manner set forth
above, the Offeree may during the succeeding 30 Business Day period sell not
less than all of the Securities covered by the Offer to the Offeror at a price
and on terms no less favorable to the Offeree than those contained in the Offer.
Such Offeror shall agree in a writing in form and substance reasonably
satisfactory to the Company to become a party hereto and be bound to the same
extent as the Offeree by the provisions hereof other than this Section 3.9.
Promptly after such sale, the Offeree shall notify the Company of the
consummation thereof and shall furnish such evidence of the completion and time
of completion of such sale and of the terms thereof as may reasonably be
requested by the Company. If, at the end of 30 Business Days following the
expiration of the 30 Business Day period for the Company (or its designees) to
commit to purchase the aforementioned Securities, the Offeree has not completed
the sale of such Securities as aforesaid, all the restrictions on transfer
contained herein shall again be in effect with respect to such Securities.
SECTION 4. REGISTRATION RIGHTS
<PAGE>
17
4.1 DEMAND REGISTRATION.
(a) COMMON STOCK REQUEST. Upon the written request (a "COMMON
STOCK REQUEST") of any of Vestar and its Affiliates and, if Vestar and its
Affiliates shall cease to beneficially own any shares of Common Stock or if
Vestar shall give its prior written consent thereto, any Permitted Transferee of
any of Vestar and its Affiliates, at any time after the Closing Date (each of
such Persons a "REQUESTING COMMON STOCKHOLDER"), that the Company effect the
registration under the Securities Act of all or part of the shares of Common
Stock owned or to be acquired upon conversion, exercise or exchange of Common
Stock Equivalents by such Requesting Common Stockholder, the Company will use
its best efforts to effect the registration under the Securities Act of such
shares.
(b) REGISTRATION STATEMENT FORM. Registrations under this Section
4.1 shall be on such appropriate registration form of the SEC (i) as shall be
selected by the Company and (ii) as shall permit the disposition of the Common
Stock being registered in accordance with the intended method or methods of
disposition specified in the request for such registration. The Company agrees
to include in any such registration statement all information which, in the
opinion of counsel to the underwriters, the Requesting Common Stockholder and
the Company, is required to be included.
(c) EFFECTIVE REGISTRATION STATEMENT. A registration requested
pursuant to this Section 4.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective, or
(ii) if after it has become effective, such registration is interfered with by
any stop order, injunction or other order or requirement of the SEC or other
Governmental Authority for any reason not attributable to the Requesting Common
Stockholder or any of its Affiliates and has not thereafter become effective.
(d) LIMITATIONS ON REGISTRATION ON REQUEST. Notwithstanding
anything in this Section 4.1 to the contrary, in no event will (i) the Company
be required to effect more than one registration pursuant to Section 4.1(a)
within any 360 day period, or (ii) Vestar and its Affiliates and Permitted
Transferees be entitled to more than six registrations in the aggregate pursuant
to Section 4.1(a), unless (a) such Requesting Common Stockholder agrees to pay
all of the costs and expenses of each such additional registration or (b) in the
case of clause (ii) above, either (x) a registration so requested is not
effected for a reason not attributable to the Requesting Common Stockholder or
any of its Affiliates or (y) the number of shares of Common Stock sought to be
included by such Requesting Common Stockholder in such registration is reduced
by more than 25% pursuant to the provisions of Section 4.2(b).
<PAGE>
18
4.2 INCIDENTAL REGISTRATION.
(a) RIGHT TO INCLUDE COMMON STOCK AND COMMON STOCK EQUIVALENTS. If
the Company at any time proposes to register any shares of Common Stock (or
Common Stock Equivalents) under the Securities Act (except registrations on such
form(s) solely for registration of Common Stock or Common Stock Equivalents in
connection with any employee benefit plan or dividend reinvestment plan or a
business combination transaction, recapitalization or exchange offer), including
registrations pursuant to Section 4.1(a), whether or not for sale for its own
account, it will each such time as soon as practicable give written notice of
its intention to do so to all the Stockholders and their Permitted Transferees.
Upon the written request (which request shall specify the total number of shares
of Common Stock or Common Stock Equivalents intended to be disposed of by such
Stockholder or Permitted Transferee) of any Stockholder or Permitted Transferee
made within 30 days after the receipt of any such notice (15 days if the Company
gives telephonic notice with written confirmation to follow promptly thereafter,
stating that (i) such registration will be on Form S-3 and (ii) such shorter
period of time is required because of a planned filing date), the Company will
use all reasonable efforts to effect the registration under the Securities Act
of all Common Stock held or to be acquired upon conversion, exercise or exchange
of Common Stock Equivalents (or, if Common Stock Equivalents are proposed to be
registered by the Company, Common Stock Equivalents) by the Stockholders and
their Permitted Transferees which the Company has been so requested to register
for sale in the manner initially proposed by the Company; provided that the
Company shall not be obliged to register any Common Stock Equivalents which are
not of the same class, series and form as the Common Stock Equivalents proposed
to be registered by the Company. If the Company thereafter determines for any
reason not to register or to delay registration of the Common Stock or Common
Stock Equivalents (provided, however, that in the case of any registration
pursuant to Section 4.1(a), such determination shall not violate any of the
Company's obligations under Section 4.1 or any other provision of this
Agreement), the Company may, at its election, give written notice of such
determination to the Stockholders and their Permitted Transferees and (i) in the
case of a determination not to register, shall be relieved of the obligation to
register such Common Stock or Common Stock Equivalents in connection with such
registration, without prejudice, however, to any right the requesting
Stockholder may have to request that such registration be effected as a
registration under Section 4.1(a) and (ii) in the case of a determination to
delay registering, shall be permitted to delay registering any Common Stock or
Common Stock Equivalents of a Stockholder or Permitted Transferee for the same
period as the delay in registration of such other securities. No registration
effected under this Section 4.2(a) shall relieve the Company of any obligation
to effect a registration upon a Common Stock Request under Section 4.1(a).
<PAGE>
19
(b) PRIORITY IN INCIDENTAL REGISTRATION. In a registration
pursuant to this Section 4.2, if the managing underwriter of such underwritten
offering shall inform the Company and the relevant Stockholders and their
Permitted Transferees by letter of its belief that the number of shares of
Common Stock or Common Stock Equivalents, as the case may be, to be included in
such registration would adversely affect its ability to effect such offering,
then the Company will be required to include in such registration only that
number of shares of Common Stock or Common Stock Equivalents, as the case may
be, which it is so advised should be included in such offering. Shares of
Common Stock or Common Stock Equivalents proposed by the Company to be
registered for issuance by the Company shall have the first priority in a
registration pursuant to Section 4.2(a) and all other shares of Common Stock or
Common Stock Equivalents to be registered (whether requested to be registered
pursuant to Section 4.1(a) or 4.2(a) or otherwise) shall be given second
priority without preference among the relevant holders. If less than all of a
Stockholder's or Permitted Transferee's shares of Common Stock or Common Stock
Equivalents are to be registered, such Stockholder's or Permitted Transferee's
shares of Common Stock or Common Stock Equivalents shall be included in the
registration pro rata based on the total number of shares of Common Stock or
Common Stock Equivalents sought to be registered by each Stockholder and
Permitted Transferee (as opposed to the Company).
(c) CUSTODY AGREEMENT AND POWER OF ATTORNEY. Upon delivering a
request under this Section 4.2, a Stockholder (excluding Vestar and its
Affiliates, but including any other Permitted Transferee of any thereof) or
Permitted Transferee will, if requested by the Company, execute and deliver a
custody agreement and power of attorney in form and substance reasonably
satisfactory to the Company with respect to such Stockholder's or Permitted
Transferee's shares of Common Stock or Common Stock Equivalents to be registered
pursuant to this Section 4.2 (a "CUSTODY AGREEMENT AND POWER OF ATTORNEY"). The
Custody Agreement and Power of Attorney will provide, among other things, that
the Stockholder or Permitted Transferee will deliver to and deposit in custody
with the custodian and attorney-in-fact named therein a certificate or
certificates representing such shares of Common Stock or Common Stock
Equivalents (duly endorsed in blank by the registered owner or owners thereof or
accompanied by duly executed stock powers in blank) and irrevocably appoint said
custodian and attorney-in-fact as such Stockholder's or Permitted Transferee's
agent and attorney-in-fact with full power and authority to act under the
Custody Agreement and Power of Attorney on such Stockholder's or Permitted
Transferee's behalf with respect to the matters specified therein. Such
Stockholder or Permitted Transferee also agrees to execute such other agreements
as the Company may reasonably request to further evidence the provisions of this
Section 4.2.
<PAGE>
20
4.3 REGISTRATION PROCEDURES. In connection with the Company's
obligations pursuant to Sections 4.1 and 4.2 hereof, the Company will use all
reasonable efforts to effect such registration and the Company will promptly:
(a) prepare and file with the SEC as soon as practicable after
request for registration hereunder the requisite registration statement to
effect such registration and use all reasonable efforts to cause such
registration statement to become effective and to remain continuously effective
until the earlier to occur of (x) 180 days following the date on which such
registration statement is declared effective or (y) the termination of the
offering being made thereunder.
(b) 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 and to comply
with the provisions of the Securities Act with respect to the disposition of all
shares of Common Stock and Common Stock Equivalents, as the case may be, covered
by such registration statement until such Common Stock and Common Stock
Equivalents, as the case may be, has been sold or such lesser period of time as
the Company, any seller of such Common Stock and Common Stock Equivalents, as
the case may be, or any underwriter is required under the Securities Act to
deliver a prospectus in accordance with the intended methods of disposition by
the sellers of such Common Stock and Common Stock Equivalents, as the case may
be, set forth in such registration statement or supplement to such prospectus;
(c) furnish to each Stockholder and Permitted Transferee which owns
shares of Common Stock or Common Stock Equivalents, as the case may be, covered
by such registration statement (the "SELLING STOCKHOLDERS") and the managing
underwriter, if any, at least one executed original of the registration
statement and such number of conformed copies of such registration statement and
of each such amendment and supplement thereto (in each case including all
exhibits), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any summary
prospectus) and any other prospectus filed under Rule 424 under the Securities
Act as may reasonably be requested by such Selling Stockholder;
(d) use all reasonable efforts (i) to register or qualify all
shares of Common Stock or Common Stock Equivalents, as the case may be, covered
by such registration statement under the securities or "blue sky" laws of such
jurisdictions where an exemption is not available as the Selling Stockholders
shall reasonably request, (ii) to keep such registration or qualification in
effect for so long as such registration statement remains in effect and (iii) to
take any other action which may be reasonably necessary or advisable to enable
the Selling Stockholders to consummate the disposition in such
<PAGE>
21
jurisdictions of such Common Stock and Common Stock Equivalents, as the case may
be, PROVIDED that the Company will not be required to qualify generally to do
business in any jurisdiction where it is not then so qualified, subject itself
to taxation in any such jurisdiction or take any action which would subject it
to general service of process in any such jurisdiction;
(e) notify the Selling Stockholders and the managing underwriter,
if any, promptly, and confirm such advice in writing (i) when a prospectus or
any prospectus supplement or post-effective amendment has been filed, and, with
respect to a registration statement or any post-effective amendment, when the
same has become effective, (ii) of any request by the SEC for amendments or
supplements to a registration statement or related prospectus or for additional
information, (iii) of the issuance by the SEC of any stop order suspending the
effectiveness of a registration statement or the initiation of any proceedings
for that purpose, (iv) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any of the registered
securities for sale in any jurisdiction or the initiation or threatening of any
proceeding for such purpose, (v) of the happening of any event or information
becoming known which requires the making of any changes in a registration
statement or related prospectus so that such documents will not contain any
untrue statement of a material fact or omit to state any material fact required
to be stated therein or necessary to make the statements therein not misleading
and (vi) of the Company's reasonable determination that a post-effective
amendment to a registration statement would be appropriate;
(f) make every reasonable effort to obtain the withdrawal of any
order suspending the effectiveness of a registration statement, or the lifting
of any suspension of the qualification of any of the registered securities for
sale in any jurisdiction, at the earliest possible moment;
(g) upon the occurrence of any event contemplated by clause (e)(v)
above, prepare a supplement or post-effective amendment to the applicable
registration statement or related prospectus or any document incorporated
therein by reference or file any other required document so that, as thereafter
delivered to the purchasers of the securities being sold thereunder, such
prospectus will not contain any untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not misleading;
(h) use its best efforts to furnish to the Selling Stockholders a
signed counterpart, addressed to the Selling Stockholders and the underwriters,
if any, of (A) an opinion of counsel for the Company, and (B) a "comfort"
letter, signed by the independent public accountants who have certified the
Company's financial statements included or incorporated by reference in such
registration statement, covering substantially
<PAGE>
22
the same matters with respect to such registration statement (and the prospectus
included therein) and, in the case of the accountant's letter, with respect to
events subsequent to the date of such financial statements, as are customarily
covered in opinions of issuer's counsel and in accountants' letters delivered to
underwriters in underwritten public offerings of securities (and dated the dates
such opinions and comfort letters are customarily dated) and, in the case of the
accountant's letter, such other financial matters, and in the case of the legal
opinion, such other legal matters, as the Selling Stockholders or the
underwriters may reasonably request;
(i) otherwise use its best efforts to comply with all applicable
rules and regulations of the SEC, and make available to the Selling Stockholders
an earnings statement satisfying the provisions of Section 11(a) of the
Securities Act and Rule 158 promulgated thereunder no later than 90 days after
the end of any 12-month period beginning after the effective date of a
registration statement pursuant to which shares of Common Stock and Common Stock
Equivalents, as the case may be, are sold, which statement shall cover such
12-month period;
(j) cooperate with the Selling Stockholders and the managing
underwriters, if any, to facilitate the timely preparation and delivery of
certificates representing shares of Common Stock and Common Stock Equivalents,
as the case may be, to be sold; and enable such shares of Common Stock and
Common Stock Equivalents, as the case may be, to be in such denominations and
registered in such names as the Selling Stockholders or the managing
underwriters, if any, may request at least two Business Days prior to any sale
of shares of Common Stock or Common Stock Equivalents, as the case may be, to
the underwriters;
(k) use its best efforts to cause the shares of Common Stock and
Common Stock Equivalents, as the case may be, covered by the applicable
registration statement to be registered with or approved by such other
governmental agencies or authorities as may be necessary to enable the Selling
Stockholder(s) or the underwriters, if any, to consummate the disposition of
such shares of Common Stock and Common Stock Equivalents, as the case may be;
(l) cause all shares or units of Common Stock or Common Stock
Equivalents, as the case may be, covered by the registration statement to be
listed on each securities exchange, if any, on which securities of such class,
series and form issued by the Company, if any, are then listed if requested by
the managing underwriters, if any, or the holders of a majority of the shares or
units of Common Stock or Common Stock Equivalents, as the case may be, covered
by the registration statement and entitled hereunder to be so listed;
(m) cooperate and assist in any filings required to be made with
the National Association of Securities Dealers, Inc.
<PAGE>
23
(the "NASD") and in the performance of any due diligence investigation by any
underwriter (including any "qualified independent underwriter" that is required
to be retained in accordance with the rules and regulations of the NASD); and
(n) as soon as practicable prior to the filing of any document
which is to be incorporated by reference into the registration statement or the
prospectus (after initial filing of the registration statement) provide copies
of such document to counsel to the Selling Stockholders and to the managing
underwriters, if any, and make the Company's representatives available for
discussion of such document and consider in good faith making such changes in
such document prior to the filing thereof as counsel for such Selling
Stockholders or underwriters may reasonably request.
The Company may require each Selling Stockholder to furnish to the
Company such information regarding such Selling Stockholder and the distribution
of such securities by such Selling Stockholder as the Company may from time to
time reasonably request in writing in order to comply with the Securities Act.
The Selling Stockholders severally agree that, upon receipt of any
notice from the Company of the happening of any event of the kind described in
Section 4.3(e)(ii), (iii), (iv), (v) or (vi) hereof, they will forthwith
discontinue disposition pursuant to such registration statement of any shares of
Common Stock or Common Stock Equivalents, as the case may be, covered by such
registration statement or prospectus until their receipt of the copies of the
supplemented or amended prospectus relating to such registration statement or
prospectus or until they are advised in writing by the Company that the use of
the applicable prospectus may be resumed (and the period of such discontinuance
shall be excluded from the calculation of the period specified in clause (x) of
Section 4.3(a)) and, if so directed by the Company, will deliver to the Company
(at the Company's expense, except as otherwise provided in Section 4.1(c)) all
copies, other than permanent file copies then in their possession, of the
prospectus covering such securities in effect at the time of receipt of such
notice. The Selling Stockholders agree to furnish the Company a signed
counterpart, addressed to the Company and the underwriters, if any, of an
opinion of counsel for the Selling Stockholders covering substantially the same
matters with respect to such registration statement (and the prospectus included
therein) as are customarily covered in opinions of selling stockholder's counsel
delivered to the underwriters in underwritten public offerings of securities
(and dated the dates such opinions are customarily dated) and such other legal
matters as the Company or the underwriters may reasonably request.
<PAGE>
24
4.4 UNDERWRITTEN OFFERINGS.
(a) DEMAND UNDERWRITTEN OFFERINGS. In any underwritten offering
pursuant to a registration requested under Section 4.1, the Company will use its
best efforts to enter into an underwriting agreement for such offering with the
underwriters selected by the Requesting Common Stockholder, such agreement and
underwriters to be reasonably satisfactory in form and substance to the Company,
the Requesting Common Stockholder and the underwriters and to contain such
representations and warranties by the Company and such other terms as are
generally prevailing in agreements of that type. The Selling Stockholders who
hold shares of Common Stock to be distributed by such underwriters shall be
parties to such underwriting agreement and may, at their option, require that
any or all of the representations and warranties by, and the other agreements on
the part of, the Company to and for the benefit of such underwriters shall also
be made to and for the benefit of them and that any or all of the conditions
precedent to the obligations of such underwriters under such underwriting
agreement be conditions precedent to their obligations. The Company may, at its
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Selling Stockholders to and for the
benefit of such underwriters shall also be made to and for the benefit of the
Company with due regard to the amount of Securities being sold by such Selling
Stockholder and the nature of such representations, warranties and agreements
and the underwriting.
(b) INCIDENTAL UNDERWRITTEN OFFERINGS. If the Company at any time
proposes to register any shares of its Common Stock or Common Stock Equivalents,
as the case may be, under the Securities Act as contemplated by Section 4.2 and
such Securities are to be distributed by or through one or more underwriters,
the Company and the Selling Stockholders who hold shares of Common Stock or
Common Stock Equivalents, as the case may be, to be distributed by such
underwriters in accordance with Section 4.2 hereof shall be parties to the
underwriting agreement between the Company and such underwriters and may, at
their option, require that any or all of the representations and warranties by,
and the other agreements on the part of, the Company to and for the benefit of
such underwriters shall also be made to and for the benefit of them and that any
or all of the conditions precedent to the obligations of such underwriters under
such underwriting agreement be conditions precedent to their obligations. The
Company may, at its option, require that any or all of the representations and
warranties by, and the other agreements on the part of, the Selling Stockholders
to and for the benefit of such underwriters shall also be made to and for the
benefit of the Company with due regard to the amount of Securities being sold by
such Selling Stockholder and the nature of such representations, warranties and
agreements and the underwriting.
<PAGE>
25
4.5 PREPARATION; REASONABLE INVESTIGATION. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the Selling Stockholders, the
underwriters and their respective counsels and accountants a reasonable
opportunity (but such Persons shall not have the obligation) to participate in
the preparation of such registration statement, each prospectus included therein
or filed with the SEC, and, to the extent practicable, each amendment thereof or
supplement thereto, and, subject to the execution and delivery of a customary
confidentiality agreement, will give each of them such access to its books and
records and such opportunities to discuss the business of the Company with its
officers and the independent public accountants who have certified its financial
statements as shall be necessary to conduct a reasonable investigation within
the meaning of the Securities Act.
4.6 LIMITATIONS, CONDITIONS AND QUALIFICATIONS TO OBLIGATIONS UNDER
REGISTRATION COVENANTS. The obligations of the Company to use its reasonable
efforts to cause shares of Common Stock and Common Stock Equivalents, as the
case may be, to be registered under the Securities Act are subject to each of
the following limitations, conditions and qualifications:
(a) The Company shall be entitled to postpone for a reasonable
period of time the filing or effectiveness of, or suspend the rights of Selling
Stockholders to make sales pursuant to, any registration statement otherwise
required to be prepared, filed and made and kept effective by it hereunder (but
the duration of such postponement or suspension may not exceed the earlier to
occur of (w) 30 days after the cessation of the circumstances described in
clauses (i) and (ii) below or (x) 180 days after the date of the determination
of the Board of Directors referred to below, and the duration of such
postponement or suspension shall be excluded from the calculation of the period
specified in clause (x) of Section 4.3(a)) if the Board of Directors of the
Company determines in good faith that (i) there is a material undisclosed
development in the business or affairs of the Company (including any pending or
proposed financing, recapitalization, acquisition or disposition), the
disclosure of which at such time could be adverse to the Company's interests or
(ii) the Company has filed a registration statement with the SEC, such
registration statement has not yet been declared effective, the Company is using
its reasonable best efforts to have such registration statement declared
effective, and the underwriters with respect to such registration advise that
such registration would be adversely affected. If the Company shall so delay
the filing of a registration statement, it shall, as promptly as possible,
notify the Selling Stockholders of such determination, and the Selling
Stockholders shall have the right (y) in the case of a postponement of the
filing or effectiveness of a registration statement, to withdraw the request for
registration by giving written notice to the Company within 10 Business Days
after receipt of the Company's notice or
<PAGE>
26
(z) in the case of a suspension of the right to make sales, to receive an
extension of the registration period equal to the number of days of the
suspension.
(b) The Company shall not be required hereby to include shares of
Common Stock or Common Stock Equivalents, as the case may be, in a registration
statement if, in the written opinion of outside counsel to the Company of
recognized standing in securities law matters, the beneficial owners of such
Common Stock or Common Stock Equivalents, as the case may be, seeking
registration would be free to sell all of such shares of Common Stock or Common
Stock Equivalents, as the case may be, within the current calendar quarter
without registration under Rule 144 under the Securities Act.
(c) The Company's obligations shall be subject to the obligations
of the Selling Stockholders, which the Selling Stockholders acknowledge, to
furnish all information and materials and to take any and all actions as may be
required under applicable federal and state securities laws and regulations to
permit the Company to comply with all applicable requirements of the SEC and to
obtain any acceleration of the effective date of such registration statement.
(d) The Company shall not be obligated to cause any special audit
to be undertaken in connection with any registration pursuant hereto unless such
audit is requested by the underwriters with respect to such registration.
4.7 EXPENSES. Except as otherwise provided in Section 4.1(c), the
Company will pay all reasonable out-of-pocket costs and expenses incurred in
connection with each registration of Common Stock or Common Stock Equivalents,
as the case may be, pursuant to this Agreement, including, without limitation,
the reasonable fees and disbursements of a single firm of outside counsel
retained on behalf of all Selling Stockholders by Selling Stockholders which
beneficially own a majority of the total number of shares or units of Common
Stock or Common Stock Equivalents, as the case may be, being registered by
Selling Stockholders (the "MAJORITY SELLING STOCKHOLDERS"), and any and all
filing fees payable to the SEC, fees with respect to filings required to be made
with stock exchanges, the NASDAQ and the NASD, fees and expenses of compliance
with state securities or blue sky laws (including reasonable fees and
disbursements of a single firm of outside counsel for the underwriters or the
Selling Stockholders in connection with blue sky qualifications of the Common
Stock or Common Stock Equivalents, as the case may be, being registered and
determination of its eligibility for investment under the laws of such
jurisdictions as the Selling Stockholders may designate), printing expenses,
fees and disbursements of counsel and accountants of the Company, including
costs associated with comfort letters, and fees and expenses of other Persons
retained by the Company, but excluding underwriters' expenses (including
discounts, commissions or fees
<PAGE>
27
of underwriters and expenses included therein, selling brokers, dealer managers
or similar securities industry professionals relating to the distribution of the
securities being registered or legal expenses of any Person other than the
Company and the Selling Stockholders) but including the fees and expenses of any
qualified independent underwriter required to participate in such registration
pursuant to applicable law or the requirements of the NASD. The Company shall,
in any event in all cases, pay its internal expenses (including, without
limitation, all salaries and expenses of its officers and employees performing
legal or accounting duties), and the expense of securities law liability
insurance and rating agency fees, if any.
4.8 INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. In connection with any
registration pursuant hereto in which shares of Common Stock or Common Stock
Equivalents, as the case may be, are to be disposed of, the Company shall
indemnify and hold harmless, to the full extent permitted by law, each holder of
such Common Stock or Common Stock Equivalents, as the case may be, to be
disposed of and, when applicable, its officers, directors, agents and employees
and each Person who controls such holder (within the meaning of the Securities
Act or the Exchange Act) against all losses, claims, damages, liabilities and
expenses caused by any untrue or alleged untrue statement of a material fact
contained in any registration statement, prospectus or preliminary prospectus or
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,
including, without limitation, any loss, claim, damage, liability or expense
resulting from the failure to keep a prospectus current, except insofar as the
same (i) are caused by or contained in any information relating to such holder
furnished in writing to the Company by such holder expressly for use therein or
(ii) are caused by such holder's failure to deliver a copy of the current
prospectus simultaneously with or prior to such sale after the Company has
furnished such holder with a sufficient number of copies of such prospectus
correcting such material misstatement or omission or (iii) arise in respect of
any offers to sell or sales made during any period when a holder is required to
discontinue sales under Section 4.3(e) (and after such holder has received the
notice contemplated by Section 4.3(e)). The Company shall also indemnify
underwriters, selling brokers, dealer managers and similar securities industry
professionals participating in the distribution, their officers and directors
and each person who controls such Persons (within the meaning of the Securities
Act) to the same extent as provided above with respect to the indemnification of
the holders of such Common Stock or Common Stock Equivalents, as the case may
be, to be disposed of, and shall enter into an indemnification agreement with
such Persons containing such terms, if requested.
<PAGE>
28
(b) INDEMNIFICATION BY STOCKHOLDERS. In connection with each
registration statement effected pursuant hereto in which shares of Common Stock
or Common Stock Equivalents, as the case may be, are to be disposed of, each
Selling Stockholder shall, severally but not jointly, indemnify and hold
harmless, to the full extent permitted by law, the Company, each other Selling
Stockholder and their respective directors, officers, agents and employees and
each Person who controls the Company and each other Selling Stockholder (within
the meaning of the Securities Act or the Exchange Act) against any losses,
claims, damages, liabilities and expenses resulting from any untrue statement of
a material fact or any omission of a material fact required to be stated in such
registration statement or prospectus or preliminary prospectus or necessary to
make the statements therein not misleading, to the extent, but only to the
extent, that such untrue statement or omission relates to such Selling
Stockholder and is contained in any information furnished in writing by such
Selling Stockholder or any of its Affiliates to the Company expressly for
inclusion in such registration statement or prospectus. In no event shall the
liability of any Selling Stockholder hereunder be greater in amount than the
dollar amount of the proceeds actually received by such Selling Stockholder upon
the sale of the securities giving rise to such indemnification obligation.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. Any Person entitled to
indemnification hereunder shall give prompt notice to the indemnifying party of
any claim with respect to which it shall seek indemnification and shall permit
such indemnifying party to assume the defense of such claim with counsel
reasonably satisfactory to the indemnified party; PROVIDED, HOWEVER, that any
Person entitled to indemnification hereunder shall have the right to employ
separate counsel and to participate in the defense of such claim, but the fees
and expenses of such counsel shall be at the expense of such Person unless (i)
the indemnifying party shall have agreed to pay such fees or expenses, or (ii)
the indemnifying party shall have failed to assume the defense of such claim and
employ counsel reasonably satisfactory to such Person or (iii) in the opinion of
outside counsel to such Person there may be one or more legal defenses available
to such Person which are different from or in addition to those available to the
indemnifying party with respect to such claims (in which case, if the Person
notifies the indemnifying party in writing that such Person elects to employ
separate counsel at the expense of the indemnifying party, the indemnifying
party shall not have the right to assume the defense of such claim on behalf of
such Person). If such defense is not assumed by the indemnifying party, the
indemnifying party shall not be subject to any liability for any settlement made
without its consent (but such consent shall not be unreasonably withheld). No
indemnified party shall be required to consent to entry of any judgment or enter
into any settlement that does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a written
<PAGE>
29
release in form and substance reasonably satisfactory to such indemnified party
from all liability in respect of such claim or litigation. An indemnifying
party who is not entitled to, or elects not to, assume the defense of a claim
shall not be obligated to pay the fees and expenses of more than one firm of
counsel (and, if necessary, local counsel) for all parties indemnified by such
indemnifying party with respect to such claim, unless in the written opinion of
outside counsel to an indemnified party a conflict of interest as to the subject
matter exists between such indemnified party and another indemnified party with
respect to such claim, in which event the indemnifying party shall be obligated
to pay the fees and expenses of additional counsel for such indemnified party.
(d) CONTRIBUTION. If for any reason the indemnification provided
for herein is unavailable to an indemnified party or is insufficient to hold it
harmless as contemplated hereby, then the indemnifying party shall contribute to
the amount paid or payable by the indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party and the
indemnifying party, as well as any other relevant equitable considerations,
provided that in no event shall the liability of any Selling Stockholder for
such contribution and indemnification exceed, in the aggregate, the dollar
amount of the proceeds received by such Selling Stockholder upon the sale of
securities giving rise to such indemnification and contribution obligation.
4.9 PARTICIPATION IN UNDERWRITTEN REGISTRATIONS. No Stockholder or
Permitted Transferee may participate in any underwritten registration hereunder
unless such Stockholder or Permitted Transferee (a) agrees to sell its shares of
Common Stock or Common Stock Equivalents, as the case may be, on the basis
provided in and in compliance with any underwriting arrangements approved by the
persons entitled hereunder to approve such arrangements and to comply with Rules
10b-6 and 10b-7 under the Exchange Act, and (b) completes and executes all
questionnaires, appropriate and limited powers of attorney, escrow agreements,
indemnities, underwriting agreements and other documents reasonably required
under the terms of such underwriting arrangements; PROVIDED that all such
documents shall be consistent with the provisions hereof.
4.10 RULE 144. The Company hereby covenants that after it has filed
(and such registration statement has become effective) 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 in respect of
Common Stock, the Company will file in a timely manner all 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 the Company is not required to
file such
<PAGE>
30
reports, it will, upon the request of any Stockholder or Permitted Transferee,
make publicly available other information so long as necessary to permit sales
by such Stockholder or Permitted Transferee under Rule 144 under the Securities
Act) and will take such further action as any Stockholder or Permitted
Transferee may reasonably request to the extent required from time to time to
enable such Stockholder or Permitted Transferee to sell shares of Common Stock
under Rule 144 under the Securities Act.
4.11 HOLDBACK AGREEMENTS.
(a) Each Stockholder and Permitted Transferee agrees that, if any
of its shares of Common Stock or Common Stock Equivalents, as the case may be,
is included in a registration statement filed by the Company in connection with
an underwritten public offering it shall not effect any public sale or
distribution of shares of Common Stock or Common Stock Equivalents, as the case
may be, during the 10 days prior to or the 180 day period beginning on the
effective date of such registration statement (except as part of such
registration) if and to the extent reasonably requested in writing (with
reasonable prior notice) by the managing underwriter of the underwritten public
offering.
(b) The Company agrees not to effect any primary public sale or
distribution of any Common Stock or Common Stock Equivalents, as the case may
be, during the 10 days prior to and the 180 day period beginning on the
effective date of any registration statement in which any Stockholder or
Permitted Transferee is participating in connection with an underwritten public
offering of Common Stock or Common Stock Equivalents, as the case may be, if and
to the extent reasonably requested in writing (with reasonable prior notice) by
the managing underwriter of the underwritten public offering.
SECTION 5. MISCELLANEOUS
5.1 ADDITIONAL SECURITIES SUBJECT TO AGREEMENT. Each Stockholder
agrees that any other Securities which it shall hereafter acquire by means of a
stock split, stock dividend, distribution or otherwise (other than pursuant to a
Public Offering) shall be subject to the provisions of this Agreement to the
same extent as if held on the date hereof.
5.2 TERMINATION. This Agreement (other than the provisions of
Section 4) shall terminate, and thereby become null and void, (A) in full on the
earliest date on which (i) the Initial Investors and their Affiliates do not own
in the aggregate at least 5% of the Common Stock outstanding on a fully diluted
basis or (ii) the aggregate number of shares of Common Stock outstanding on a
fully diluted basis which are not subject to Section 2 of this Agreement
constitute at least 50% of the
<PAGE>
31
total number of shares of Common Stock outstanding on a fully diluted basis or
(iii) the tenth anniversary of the date hereof, and (B) as to any particular
Securities, on the date on which they are sold in a Public Offering or are sold
pursuant to Rule 144 under the Securities Act.
5.3 INJUNCTIVE RELIEF. The Stockholders, their Permitted
Transferees and the Company acknowledge and agree that a violation of any of the
terms of this Agreement will cause the Stockholders and Permitted Transferees
irreparable injury for which adequate remedy at law is not available.
Accordingly, it is agreed that each Stockholder and Permitted Transferee shall
be entitled to an injunction, restraining order or other equitable relief 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.
5.4 OTHER STOCKHOLDERS' AGREEMENTS. None of the Stockholders shall
enter into any stockholder agreement or other arrangement of any kind with any
Person with respect to Securities which is inconsistent with the provisions of
this Agreement or which may impair its ability to comply with this Agreement.
5.5 AMENDMENTS. This Agreement may be amended only by a written
instrument signed (a) by Vestar, so long as it (or its Affiliates) owns
Securities and by Alvarez & Marsal, so long as it (or its Affiliates) owns
Securities, and (b) by Stockholders (other than Vestar, Alvarez & Marsal and
their Affiliates) which own on a fully diluted basis Securities representing at
least a majority of the voting power represented by all Securities outstanding
on a fully diluted basis and owned by all Stockholders (other than Vestar,
Alvarez & Marsal and their Affiliates); provided, however, that any amendment
which adversely affects the Company or imposes an additional obligation thereon
must be approved in writing by the Company.
5.6 SUCCESSORS, ASSIGNS AND TRANSFEREES. The provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their Permitted Transferees and their respective successors, each of
which Permitted Transferees shall agree in a writing in form and substance
reasonably satisfactory to the Company to become a party hereto and be bound to
the same extent as its transferor hereby, PROVIDED that no Stockholder may
assign to any Permitted Transferee any of its rights hereunder other than in
connection with a Transfer to such Permitted Transferee of Securities in
accordance with the provisions of this Agreement.
5.7 NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly
<PAGE>
32
provided herein, shall be deemed to have been duly given or made when delivered
by hand, or three days after being delivered to a recognized courier (whose
stated terms of delivery are three days or less to the destination of such
notice), or five days after being deposited in the mail or, in the case of
telecopy notice, when received, addressed as follows to the parties hereto, or
to such other address as may be hereafter notified by the respective parties
hereto:
if to the Company, to:
c/o Bidermann Industries U.S.A., Inc.
48 West 38th Street
New York, New York 10018
Attention: Chief Executive Officer
Telecopy: (212) 984-8925
if to Vestar, to:
Vestar Capital Partners III, L.P.
245 Park Avenue
41st Floor
New York, New York 10167-4098
Attention: Norman W. Alpert
Telecopy: (212) 808-4922
with a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attention: Peter J. Gordon
Telecopy: (212) 455-2502
if to Alvarez & Marsal, to:
Alvarez & Marsal, Inc.
885 Third Avenue
Suite 1700
New York, New York 10022
Attention: Bryan Marsal
Telecopy: (212) 984-8957
with a copy to:
Stevens & Lee
One Glenhardie
Corporate Center
1275 Drummers Lane
P.O. Box. 236
Wayne, PA 19087-0236
Attention: Robert Lapowsky
Telecopy: (610) 687-1384
<PAGE>
33
if to the Institutions, to
them at the addresses or telecopy
numbers set forth in the books and records of the Company
with a copy to:
Weil, Gotshal & Manges
767 Fifth Avenue
New York, New York 10153
Attention: Edward A.C. Sutherland
Telecopy: (212) 310-8007
if to the Management Investors, to them at the addresses
or telecopy numbers set forth in the books and records of
the Company
if to the Original Equity Holders, to them at the addresses
or telecopy numbers set forth in the books and records of
the Company.
5.8 INTEGRATION. This Agreement and the documents referred to
herein or delivered pursuant hereto, including the Stock Subscription
Agreements, contain the entire understanding of the parties with respect to the
subject matter hereof and thereof. There are no agreements, representations,
warranties, covenants or undertakings with respect to the subject matter hereof
and thereof other than those expressly set forth herein and therein. This
Agreement supersedes all prior agreements and understandings between the parties
with respect to such subject matter.
5.9 SEVERABILITY. If one or more of the provisions, paragraphs,
words, clauses, phrases 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.
5.10 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 of which shall constitute one and the same
instrument.
5.11 GOVERNING LAW, ETC.. This Agreement shall be governed by and
construed and enforced in accordance with the laws of the State of New York
without regard to the conflicts of law principles thereof, except for matters
directly within the purview of the General Corporation Law of the State of
Delaware
<PAGE>
34
(the "DGCL"), which shall be governed by the DGCL. The parties executing this
Agreement hereby (i) agree to submit to the non-exclusive jurisdiction of the
federal and state courts located in State of New York in any action or
proceeding arising out of or relating to this Agreement, (ii) waive any
objection to the laying of venue of any actions or proceedings brought in any
such court and any claim that such actions or proceedings have been brought in
an inconvenient forum, and (iii) agree that service of any process, summons,
notice or document by U.S. registered mail to the address for such party
specified in Section 5.7 shall be effective service of process for any action or
proceeding in New York with respect to any matter specified above.
5.12 ADDITIONAL MANAGEMENT INVESTORS. Each person who becomes party
to a Management Stock Subscription Agreement or Non-Qualified Stock Option
Subscription Agreement after the date hereof shall become a party hereto and
shall be bound hereby. The Company shall not issue any securities to an
employee or Independent Director of the Company or any of its Subsidiaries
unless he or she enters into a supplementary agreement with the Company agreeing
to be bound by the terms hereof in the same manner as the other Management
Investors. Each such supplementary agreement shall become effective upon its
execution by the Company and the additional Management Investor, and it shall
not require the signature or consent of any other party hereto. Such
supplementary agreement may modify some of the terms hereof as they effect the
additional Management Investor, provided that the modified terms shall be no
more favorable to the other parties hereto than the terms set forth herein.
<PAGE>
35
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.
BIDERMANN INDUSTRIES U.S.A., INC.
By:
--------------------------------------
Title:
VESTAR CAPITAL PARTNERS III, L.P.
By: Vestar Associates III, L.P.,
its General Partner
By: Vestar Associates Corporation
III, its General Partner
By:
--------------------------------------
Name:
Title: Managing Director
ALVAREZ & MARSAL, INC.
By:
--------------------------------------
Name:
Title:
<PAGE>
36
INSTITUTIONS */
-
[NAME]
By:
--------------------------------------
Name:
Title:
[NAME]
By:
--------------------------------------
Name:
Title:
[NAME]
By:
--------------------------------------
Name:
Title:
[NAME]
By:
--------------------------------------
Name:
Title:
MANAGEMENT INVESTORS:
-----------------------------------------
Name:
-----------------------------------------
Name:
-----------------------------------------
Name:
----------------------------------------
Name:
- ------------------
*/ Only to the extent that any Institution exercises its right to purchase
- - capital stock of the Company at the Closing.
<PAGE>
37
ORIGINAL EQUITY HOLDERS:
[NAME]
By:
--------------------------------------
Name:
Title:
[NAME]
By:
--------------------------------------
Name:
Title:
[NAME]
By:
--------------------------------------
Name:
Title:
<PAGE>
Exhibit 3.1
RESTATED CERTIFICATE OF INCORPORATION
* * * * * *
BIDERMANN INDUSTRIES CORP., a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware
(hereinafter the "Corporation"), DOES HEREBY CERTIFY that:
The name of the Corporation is Bidermann Industries Corp.
The date of filing of its original Certificate of Incorporation with
the Secretary of State of Delaware was January 28, 1982 under the name of
Bidermann Industries Financial Services, Inc.
(a) Provision for the making of this Restated Certificate of
Incorporation is contained in an Order, dated March 31, 1998 (the "Confirmation
Order"), of the United States Bankruptcy Court for the Southern District of New
York in Jointly Administered Case Nos. 95 B 43098 through 43099 and 43101
through 43114 (TLB) confirming the Third Amended Joint Plan of Reorganization
dated March 30, 1998 of the Corporation and certain of its affiliates (the
"Plan").
(b) The Confirmation Order authorizes and directs the Corporation to
execute such documents and take, or cause to be taken, any and all actions
required to enable the effective implementation of the Plan and the Confirmation
Order.
(c) In accordance with Sections 242, 245 and 303 of the General
Corporation Law of the State of Delaware, this Restated Certificate of
Incorporation restates and integrates and further amends the provisions of the
Certificate of Incorporation of the Corporation.
4. The text of the Certificate of Incorporation is hereby amended
and restated to read in full as follows:
FIRST: The name of the Corporation is: Cluett American Corp.
SECOND: The registered office and registered agent of the
Corporation is The Prentice-Hall Corporation System, Inc., 1013 Centre Road,
Wilmington, New Castle County, Delaware 19805. The name of its registered agent
at such address is The Prentice-Hall Corporation Systems, Inc.
THIRD: The purpose of the Corporation is to engage in any lawful
act or activity for which corporations may be organized under the Delaware
General Corporation Law (the "GCL").
<PAGE>
2
FOURTH: (1) The total number of shares of all classes of stock
which the Corporation shall have authority to issue is 2,000,000 consisting of
(i) 1,999,000 shares of preferred stock, par value $0.01 per share (the
"Preferred Stock"), and (ii) 1,000 shares of common stock, par value $1.00 per
share ("Common Stock").
(2) The Board of Directors is hereby expressly authorized, by
resolution or resolutions, to provide, out of the unissued shares of Preferred
Stock, for series of Preferred Stock and, with respect to each such series, to
fix the number of shares constituting such series and the designation of such
series, the voting powers (if any) of the shares of such series, and the
preferences and relative, participating, optional or other special rights, if
any, and any qualifications, limitations or restrictions thereof, of the shares
of such series. The powers, preferences and relative, participating, optional
and other special rights of each series of Preferred Stock, and the
qualifications, limitations or restrictions thereof, if any, may differ from
those of any and all other series at any time outstanding.
(3) (a) Each holder of Common Stock, as such, shall be entitled to
one vote for each share of Common Stock held of record by such holder on all
matters on which stockholders generally are entitled to vote; provided, however,
that, except as otherwise required by law, holders of Common Stock, as such,
shall not be entitled to vote on any amendment to this Restated Certificate of
Incorporation (including any certificate of designations relating to any series
of Preferred Stock) that relates solely to the terms of one or more outstanding
series of Preferred Stock if the holders of such affected series are entitled,
either separately or together with the holders of one or more other such series,
to vote thereon pursuant to this Restated Certificate of Incorporation
(including any certificate of designations relating to any series of Preferred
Stock) or pursuant to the GCL.
(b) Except as otherwise required by law, holders of a series of
Preferred Stock, as such, shall be entitled only to such voting rights, if any,
as shall expressly be granted thereto by this Restated Certificate of
Incorporation (including any certificate of designations relating to such
series).
(c) Subject to applicable law and the rights, if any, of the holders
of any outstanding series of Preferred Stock or any class or series of stock
having a preference over or the right to participate with the Common Stock with
respect to the payment of dividends, dividends may be declared and paid on the
Common Stock at such times and in such amounts as the Board of Directors in its
discretion shall determine.
(d) Upon the dissolution, liquidation or winding up of the
Corporation, subject to the rights, if any, of the holders of
<PAGE>
3
any outstanding series of Preferred Stock or any class or series of stock having
a preference over or the right to participate with the Common Stock with respect
to the distribution of assets of the Corporation upon such dissolution,
liquidation or winding up of the Corporation, the holders of the Common Stock,
as such, shall be entitled to receive the assets of the Corporation available
for distribution to its stockholders ratably in proportion to the number of
shares held by them.
(e) To the extent prohibited under chapter 11 of Title 11 of the
United States Code (the "Bankruptcy Code"), the Corporation shall not issue
non-voting equity securities; provided, however, that this subsection (e): (i)
will have no further force and effect beyond that required under the Bankruptcy
Code, (ii) will have such force and effect, if any, only for so long as the
relevant prohibitions imposed by the Bankruptcy Code are in effect and
applicable to the Corporation and (iii) may be amended or eliminated in
accordance with applicable law as from time to time in effect.
FIFTH. Upon the consummation of the Third Amended Joint Plan of
Reorganization dated March 30, 1998 of the Corporation and certain of its
affiliates (the "Plan") that was confirmed by order dated March 31, 1998 by the
United States Bankruptcy Court for the Southern District of New York in Jointly
Administered Case Nos. 95 B 43098 through 43099 and 43101 through 43114 (TLB),
the initial directors of the Corporation shall be Bryan P. Marsal, James A.
Williams, Norman W. Alpert, J. Christopher Henderson, Sander M. Levy and Daniel
S. O'Connell.
SIXTH. The Corporation is to have perpetual existence.
SEVENTH. In furtherance and not in limitation of the powers conferred
by statute, the Board of Directors of the Corporation, acting by majority vote,
is expressly authorized to adopt, amend or repeal the By-Laws of the
Corporation.
EIGHTH. Elections of directors need not be by written ballot unless
the By-Laws of the Corporation shall so provide. Meetings of stockholders may
be held within or without the State of Delaware. The books of the Corporation
may be kept (subject to any provision contained in the statutes) outside the
State of Delaware at such place or places as may be designated from time to time
by the Board of Directors or in the By-Laws of the Corporation.
NINTH. The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Certificate of Incorporation, in the
manner now or hereafter prescribed by statute, and all rights conferred upon
stockholders herein are granted subject to this reservation.
TENTH. Except as otherwise provided by the GCL as the same exists
or may hereafter be amended, no director of the
<PAGE>
4
Corporation shall be personally liable to the Corporation or its stockholders
for monetary damages for breach of fiduciary duty as a director. Any repeal or
modification of this Article TENTH by the stockholders of the Corporation shall
not adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
<PAGE>
5
IN WITNESS WHEREOF, BIDERMANN INDUSTRIES CORP. has caused this
Certificate to be signed by Bryan P. Marsal, Chief Executive Officer, and
attended by Steven J. Kaufman, Secretary, this 15th day of May 1998.
BIDERMANN INDUSTRIES CORP.
By: /s/ Bryan P. Marsal
------------------------------------
Name: Bryan P. Marsal
Title: Chief Executive Officer
ATTEST:
/s/ Steven J. Kaufman
----------------------------------------
Steven J. Kaufman
Secretary
<PAGE>
Exhibit 3.2
BY-LAWS OF
CLUETT AMERICAN CORP.
(A Delaware Corporation)
ARTICLE I
Offices
SECTION 1. REGISTERED OFFICE. The registered office of the
Corporation within the State of Delaware shall be in the City of Wilmington,
County of New Castle.
SECTION 2. OTHER OFFICES. The Corporation may also have an office
or offices other than said registered office at such place or places, either
within or without the State of Delaware, as the Board of Directors shall from
time to time determine or the business of the Corporation may require.
ARTICLE II
Meetings of Stockholders
SECTION 1. PLACE OF MEETINGS. Meetings of the stockholders shall
be held at such place either within or without the State of Delaware as the
Board of Directors may determine.
SECTION 2. ANNUAL MEETING. The annual meeting of stockholders
shall be held upon not less than ten nor more than sixty days written notice of
the time, place and purposes of the meeting. The meeting shall be held at the
time and at the place determined by the Board of Directors. At the meeting, the
stockholders shall elect directors and transact any other business that properly
comes before the meeting.
SECTION 3. SPECIAL MEETINGS. A special meeting of stockholders
may be called for any purpose by the president or the Board of Directors. The
meeting shall be held at the time and at the place determined by the president
or the board. A special meeting shall be held upon not less than ten nor more
than sixty days written notice of the time, place, and purposes of the meeting.
SECTION 4. QUORUM. At any meeting of stockholders, the holders of
record, present in person or by proxy, of a majority of the Corporation's issued
and outstanding capital stock shall constitute a quorum for the transaction of
business, except as otherwise provided by law. In the absence of a quorum, any
officer entitled to preside at or to act as secretary of the
<PAGE>
2
meeting shall have power to adjourn the meeting from time to time until a quorum
is present.
SECTION 5. VOTING. Except as otherwise provided by law, all
matters submitted to a meeting of stockholders shall be decided by vote of the
holders of record, present in person or by proxy, of a majority of the
Corporation's issued and outstanding capital stock.
SECTION 6. ACTION BY CONSENT. Whenever the vote of stockholders
at a meeting thereof is required or permitted to be taken for or in connection
with any corporate action, by any provision of statute or of the Certificate of
Incorporation or of these By-Laws, the meeting and vote of stockholders may be
dispensed with, and the action taken without such meeting and vote, if a consent
in writing, setting forth the action so taken, shall be signed by the holders of
outstanding stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares of
stock of the Corporation entitled to vote thereon were present and voted.
ARTICLE III
Board of Directors
SECTION 1. GENERAL POWERS. The business and affairs of the
Corporation shall be managed by or under the direction of the Board of
Directors. The Board of Directors may exercise all such authority and powers of
the Corporation and do all such lawful acts and things as are not by statute or
the Certificate of Incorporation directed or required to be exercised or done by
the stockholders.
SECTION 2. NUMBER, QUALIFICATIONS, ELECTION AND TERM OF OFFICE.
The number of directors constituting the Board of Directors shall be not less
than two nor more than fifteen as may be fixed, from time to time, by the
affirmative vote of a majority of the entire Board of Directors or by action of
the stockholders of the Corporation. Any decrease in the number of directors
shall be effective at the time of the next succeeding annual meeting of
stockholders unless there shall be vacancies in the Board of Directors, in which
case such decrease may become effective at any time prior to the next succeeding
annual meeting to the extent of the number of such vacancies. Directors need
not be stockholders. Except as otherwise provided by statute or these By-Laws,
the directors shall be elected at the annual meeting of stockholders. Each
director shall hold office until his successor shall have been elected and
qualified, or until his death, or until he shall have resigned, or have been
removed, as hereinafter provided in these By-Laws.
<PAGE>
3
SECTION 3. PLACE OF MEETINGS. Meetings of the Board of Directors
shall be held at such place or places, within or without the State of Delaware,
as the Board of Directors may from time to time determine or as shall be
specified in the notice of any such meeting.
SECTION 4. ANNUAL MEETING. The Board of Directors shall meet for
the purpose of organization, the election of officers and the transaction of
other business, as soon as practicable after each annual meeting of
stockholders, on the same day and at the same place where such annual meeting
shall be held. Notice of such meeting need not be given. In the event such
annual meeting is not so held, the annual meeting of the Board of Directors may
be held at such other time or place (within or without the State of Delaware) as
shall be specified in a notice thereof given as hereinafter provided in Section
7 of this Article III.
SECTION 5. REGULAR MEETINGS. Regular meetings of the Board of
Directors shall be held at such time and place as the Board of Directors may
fix. If any day fixed for a regular meeting shall be a legal holiday at the
place where the meeting is to be held, then the meeting which would otherwise be
held on that day shall be held at the same hour on the next succeeding business
day. Notice of regular meetings of the Board of Directors need not be given
except as otherwise required by statute or these By-Laws.
SECTION 6. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by the Chairman of the Board or by two or more directors
of the Corporation or by the President.
SECTION 7. NOTICE OF MEETINGS. Notice of each special meeting of
the Board of Directors (and of each regular meeting for which notice shall be
required) shall be given by the Secretary as hereinafter provided in this
Section 7, in which notice shall be stated the time and place of the meeting.
Except as otherwise required by these By-Laws, such notice need not state the
purposes of such meeting. Notice of each such meeting shall be mailed, postage
prepaid, to each director, addressed to him at his residence or usual place of
business, by first class mail, at least two days before the day on which such
meeting is to be held, or shall be sent addressed to him at such place by
telegraph, cable, telex, telecopier or other similar means, or be delivered to
him personally or be given to him by telephone or other similar means, at least
twenty-four hours before the time at which such meeting is to be held. Notice
of any such meeting need not be given to any director who shall, either before
or after the meeting, submit a signed waiver of notice or who shall attend such
meeting, except when he shall attend for the express purpose of objecting, at
the beginning of the meeting, to the transaction of any business because the
meeting is not lawfully called or convened.
<PAGE>
4
SECTION 8. QUORUM AND MANNER OF ACTING. A majority of the entire
Board of Directors shall constitute a quorum for the transaction of business at
any meeting of the Board of Directors, and, except as otherwise expressly
required by statute or the Certificate of Incorporation or these By-Laws, the
act of a majority of the directors present at any meeting at which a quorum is
present shall be the act of the Board of Directors. In the absence of a quorum
at any meeting of the Board of Directors, a majority of the directors present
thereat may adjourn such meeting to another time and place. Notice of the time
and place of any such adjourned meeting shall be given to all of the directors
unless such time and place were announced at the meeting at which the
adjournment was taken, in which case such notice shall only be given to the
directors who were not present thereat. At any adjourned meeting at which a
quorum is present, any business may be transacted which might have been
transacted at the meeting as originally called. The directors shall act only as
a Board and the individual directors shall have no power as such.
SECTION 9. ORGANIZATION. At each meeting of the Board of
Directors, the Chairman of the Board or, in the absence of the Chairman of the
Board, the President (or, in his absence, another director chosen by a majority
of the directors present) shall act as chairman of the meeting and preside
thereat. The Secretary or, in his absence, any person appointed by the chairman
shall act as secretary of the meeting and keep the minutes thereof.
SECTION 10. RESIGNATIONS. Any director of the Corporation may
resign at any time by giving written notice of his resignation to the
Corporation. Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not be specified
therein, immediately upon its receipt. Unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 11. VACANCIES. Any vacancy in the Board of Directors,
whether arising from death, resignation, removal (with or without cause), an
increase in the number of directors or any other cause, may be filled by the
vote of a majority of the directors then in office, though less than a quorum,
or by the sole remaining director or by the stockholders at the next annual
meeting thereof or at a special meeting thereof. Each director so elected shall
hold office until his successor shall have been elected and qualified.
SECTION 12. REMOVAL OF DIRECTORS. Any director may be removed,
either with or without cause, at any time, by the holders of a majority of the
voting power of the issued and outstanding capital stock of the Corporation
entitled to vote at an election of directors.
<PAGE>
5
SECTION 13. COMPENSATION. The Board of Directors shall have
authority to fix the compensation, including fees and reimbursement of expenses,
of directors for services to the Corporation in any capacity.
SECTION 14. COMMITTEES. The Board of Directors may, by resolution
passed by a majority of the entire Board of Directors, designate one or more
committees, including an executive committee, each committee to consist of one
or more of the directors of the Corporation. The Board of Directors may
designate one or more directors as alternate members of any committee, who may
replace any absent or disqualified member at any meeting of the committee. In
addition, in the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
Except to the extent restricted by statute or the Certificate of Incorporation,
each such committee, to the extent provided in the resolution creating it, shall
have and may exercise all the powers and authority of the Board of Directors and
may authorize the seal of the Corporation to be affixed to all papers which
require it. Each such committee shall serve at the pleasure of the Board of
Directors and have such name as may be determined from time to time by
resolution adopted by the Board of Directors. Each committee shall keep regular
minutes of its meetings and report the same to the Board of Directors.
SECTION 15. ACTION BY CONSENT. Unless restricted by the
Certificate of Incorporation, any action required or permitted to be taken by
the Board of Directors or any committee thereof may be taken without a meeting
if all members of the Board of Directors or such committee, as the case may be,
consent thereto in writing, and the writing or writings are filed with the
minutes of the proceedings of the Board of Directors or such committee, as the
case may be.
SECTION 16. TELEPHONIC MEETING. Unless restricted by the
Certificate of Incorporation, any one or more members of the Board of Directors
or any committee thereof may participate in a meeting of the Board of Directors
or such committee by means of a conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other. Participation by such means shall constitute presence in person at
a meeting.
<PAGE>
6
ARTICLE IV
Officers
SECTION 1. NUMBER AND QUALIFICATIONS. The officers of the
Corporation shall be elected by the Board of Directors and shall include the
Chairman of the Board, the President, one or more Vice-Presidents, the Secretary
and the Treasurer. If the Board of Directors wishes, it may also elect as an
officer of the Corporation a Vice Chairman of the Board and may elect other
officers (including one or more Assistant Treasurers and one or more Assistant
Secretaries) as may be necessary or desirable for the business of the
Corporation. Any two or more offices may be held by the same person, and no
officer except the Chairman of the Board need be a director. Each officer shall
hold office until his successor shall have been duly elected and shall have
qualified, or until his death, or until he shall have resigned or have been
removed, as hereinafter provided in these By-Laws.
SECTION 2. RESIGNATIONS. Any officer of the Corporation may
resign at any time by giving written notice of his resignation to the
Corporation. Any such resignation shall take effect at the time specified
therein or, if the time when it shall become effective shall not be specified
therein, immediately upon receipt. Unless otherwise specified therein, the
acceptance of any such resignation shall not be necessary to make it effective.
SECTION 3. REMOVAL. Any officer of the Corporation may be
removed, either with or without cause, at any time, by the Board of Directors at
any meeting thereof.
SECTION 4. CHAIRMAN OF THE BOARD. The Chairman of the Board shall
be a member of the Board and, if present, shall preside at each meeting of the
Board of Directors or the stockholders. He shall advise and counsel with the
President, and in his absence with other executives of the Corporation, and
shall perform such other duties as may from time to time be assigned to him by
the Board of Directors.
SECTION 5. THE PRESIDENT. The President shall be the chief
executive officer of the Corporation. He shall, in the absence of the Chairman
of the Board or if a Chairman of the Board shall not have been elected, preside
at each meeting of the Board of Directors or the stockholders. He shall perform
all duties incident to the office of President and chief executive officer and
such other duties as may from time to time be assigned to him by the Board of
Directors.
SECTION 6. VICE-PRESIDENT. Each Vice-President shall perform all
such duties as from time to time may be assigned to him by the Board of
Directors or the President. At the request of the President or in his absence
or in the event of his inability or refusal to act, the Vice-President, or if
there
<PAGE>
7
shall be more than one, the Vice-Presidents in the order determined by the Board
of Directors (or if there be no such determination, then the Vice-Presidents in
the order of their election), shall perform the duties of the President, and,
when so acting, shall have the powers of and be subject to the restrictions
placed upon the President in respect of the performance of such duties.
SECTION 7. TREASURER. The Treasurer shall
(a) have charge and custody of, and be responsible for, all the funds
and securities of the Corporation;
(b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation;
(c) deposit all moneys and other valuables to the credit of the
Corporation in such depositaries as may be designated by the Board of
Directors or pursuant to its direction;
(d) receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the
investments of its funds, taking proper vouchers therefor;
(f) render to the Board of Directors, whenever the Board of Directors
may require, an account of the financial condition of the Corporation; and
(g) in general, perform all duties incident to the office of
Treasurer and such other duties as from time to time may be assigned to him
by the Board of Directors.
SECTION 8. SECRETARY. The Secretary shall
(a) keep or cause to be kept in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, the
committees of the Board of Directors and the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all certificates for shares of the Corporation
(unless the seal of the Corporation on such certificates shall be a
facsimile, as hereinafter provided) and affix and attest the seal to all
other documents to be executed on behalf of the Corporation under its seal;
<PAGE>
8
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly
kept and filed; and
(e) in general, perform all duties incident to the office of
Secretary and such other duties as from time to time may be assigned to him
by the Board of Directors.
SECTION 9. THE ASSISTANT TREASURER. The Assistant Treasurer, or
if there shall be more than one, the Assistant Treasurers in the order
determined by the Board of Directors (or if there be no such determination, then
in the order of their election), shall, in the absence of the Treasurer or in
the event of his inability or refusal to act, perform the duties and exercise
the powers of the Treasurer and shall perform such other duties as from time to
time may be assigned by the Board of Directors.
SECTION 10. THE ASSISTANT SECRETARY. The Assistant Secretary, or
if there be more than one, the Assistant Secretaries in the order determined by
the Board of Directors (or if there be no such determination, then in the order
of their election), shall, in the absence of the Secretary or in the event of
his inability or refusal to act, perform the duties and exercise the powers of
the Secretary and shall perform such other duties as from time to time may be
assigned by the Board of Directors.
SECTION 11. OFFICERS' BONDS OR OTHER SECURITY. If required by the
Board of Directors, any officer of the Corporation shall give a bond or other
security for the faithful performance of his duties, in such amount and with
such surety as the Board of Directors may require.
SECTION 12. COMPENSATION. The compensation of the officers of the
Corporation for their services as such officers shall be fixed from time to time
by the Board of Directors. An officer of the Corporation shall not be prevented
from receiving compensation by reason of the fact that he is also a director of
the Corporation.
ARTICLE V
Indemnification of Directors and Officers
SECTION 1. GENERAL. The Corporation shall indemnify any person
who was or is a party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Corporation) by reason of the fact that he is or was a director, officer,
employee or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer,
<PAGE>
9
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred by him in
connection with such action, suit or proceeding unless a court of competent
jurisdiction shall determine that he did not act in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, or, with respect to any criminal action or proceeding, that he
believed or had reasonable cause to believe his conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of NOLO CONTENDERE or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
SECTION 2. DERIVATIVE ACTIONS. The Corporation shall indemnify
any person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
Corporation to procure a judgment in its favor by reason of the fact that he is
or was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests of the Corporation, provided that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged to be liable to the Corporation
unless and only to the extent that the Court of Chancery of the State of
Delaware or the court in which such action or suit was brought shall determine
upon application that, despite the adjudication of liability but in view of all
the circumstances of the case, such person is fairly and reasonably entitled to
indemnity for such expenses which the Court of Chancery or such other court
shall deem proper.
SECTION 3. ADVANCES FOR EXPENSES. Expenses incurred in defending
a civil or criminal action, suit or proceeding shall be paid by the Corporation
in advance of the final disposition of such action, suit or proceeding upon
receipt of an undertaking by or on behalf of the director, officer, employee or
agent to repay such amount if it shall be ultimately determined that he is not
entitled to be indemnified by the Corporation as authorized in this Article V.
SECTION 4. RIGHTS NOT EXCLUSIVE. The indemnification and
advancement of expenses provided by, or granted pursuant to,
<PAGE>
10
the other subsections of this Article V shall not be deemed exclusive of any
other rights to which those seeking indemnification or advancement of expenses
may be entitled under any law, by-law, agreement, vote of stockholders or
disinterested directors or otherwise, both as to action in his official capacity
and as to action in another capacity while holding such office.
SECTION 5. INSURANCE. The Corporation shall have power to
purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise
against any liability asserted against him and incurred by him in any such
capacity, or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of this Article V.
SECTION 6. DEFINITION OF CORPORATION. For the purposes of this
Article V, references to "the Corporation" include all constituent corporations
absorbed in a consolidation or merger as well as the resulting or surviving
corporation so that any person who is or was a director, officer, employee or
agent of such a constituent corporation or is or was serving at the request of
such constituent corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise shall
stand in the same position under the provisions of this Article V with respect
to the resulting or surviving corporation as he would if he had served the
resulting or surviving corporation in the same capacity.
SECTION 7. SURVIVAL OF RIGHTS. The indemnification and
advancement of expenses provided by, or granted pursuant to, this Article V
shall continue as to a person who has ceased to be a director, officer, employee
or agent and shall inure to the benefit of the heirs, executors and
administrators of such a person.
ARTICLE VI
General Provisions
SECTION 1. DIVIDENDS. Subject to the provisions of statute and
the Certificate of Incorporation, dividends upon the shares of capital stock of
the Corporation may be declared by the Board of Directors at any regular or
special meeting. Dividends may be paid in cash, in property or in shares of
stock of the Corporation, unless otherwise provided by statute or the
Certificate of Incorporation.
<PAGE>
11
SECTION 2. RESERVES. Before payment of any dividend, there may be
set aside out of any funds of the Corporation available for dividends such sum
or sums as the Board of Directors may, from time to time, in its absolute
discretion, think proper as a reserve or reserves to meet contingencies, or for
equalizing dividends, or for repairing or maintaining any property of the
Corporation or for such other purpose as the Board of Directors may think
conducive to the interests of the Corporation. The Board of Directors may
modify or abolish any such reserves in the manner in which it was created.
SECTION 3. SEAL. The seal of the Corporation shall be in circular
form and contain the name of the Corporation, the year of its incorporation and
the words "CORPORATE SEAL DELAWARE."
SECTION 4. FISCAL YEAR. The fiscal year of the Corporation shall
be each calendar year ending December 31st unless changed by resolution of the
Board of Directors.
SECTION 5. CHECKS, NOTES, DRAFTS, ETC. All checks, notes, drafts
or other orders for the payment of money of the Corporation shall be signed,
endorsed or accepted in the name of the Corporation by such officer, officers,
person or persons as from time to time may be designated by the Board of
Directors or by an officer or officers authorized by the Board of Directors to
make such designation.
SECTION 6. EXECUTION OF CONTRACTS, DEEDS, ETC. The Board of
Directors may authorize any officer or officers, agent or agents, in the name
and on behalf of the Corporation to enter into or execute and deliver any and
all deeds, bonds, mortgages, contracts and other obligations or instruments, and
such authority may be general or confined to specific instances.
SECTION 7. VOTING OF STOCK IN OTHER CORPORATIONS. Unless
otherwise provided by resolution of the Board of Directors, the Chairman of the
Board or the President or other officer authorized by the Board of Directors,
from time to time, may (or may appoint one or more attorneys or agents to) cast
the votes which the Corporation may be entitled to cast as a shareholder or
otherwise in any other corporation, any of whose shares or securities may be
held by the Corporation, at meetings of the holders of the shares or other
securities of such other corporation. In the event one or more attorneys or
agents are appointed, the Chairman of the Board or the President or such other
officer may instruct the person or persons so appointed as to the manner of
casting such votes or giving such consent. The Chairman of the Board or the
President may, or may instruct the attorneys or agents appointed to, execute or
cause to be executed in the name and on behalf of the Corporation and under its
seal or otherwise, such written proxies, consents, waivers or other instruments
as may be necessary or proper in the circumstances.
<PAGE>
12
ARTICLE VII
Amendments
These By-Laws may be amended or repealed or new by-laws adopted (a) by
action of the stockholders entitled to vote thereon at any annual or special
meeting of stockholders or (b) if the Certificate of Incorporation so provides,
by action of the Board of Directors at a regular or special meeting thereof.
Any by-law made by the Board of Directors may be amended or repealed by action
of the stockholders at any annual or special meeting of stockholders.
<PAGE>
Exhibit 4.1
CLUETT AMERICAN CORP.
10 1/8% SENIOR SUBORDINATED NOTES DUE 2008
INDENTURE
DATED AS OF MAY 18, 1998
The Bank of New York
Trustee
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section
310(a)(1)..................................................................7.10
(a)(2) ....................................................................7.10
(a)(3).....................................................................N.A.
(a)(4).....................................................................N.A.
(a)(5).....................................................................7.10
(b)........................................................................7.10
(c)........................................................................N.A.
311(a).....................................................................7.11
(b)........................................................................7.11
(c)........................................................................N.A.
312 (a)....................................................................2.05
(b)........................................................................11.03
(c)........................................................................11.03
313(a).....................................................................7.06
(b)(1).....................................................................10.03
(b)(2).....................................................................7.07
(c)........................................................................7.06;
11.02
(d)........................................................................7.06
314(a).....................................................................4.03;
11.02
(b)........................................................................10.02
(c)(1).....................................................................11.04
(c)(2).....................................................................11.04
(c)(3).....................................................................N.A.
(e)........................................................................11.05
(f)........................................................................N.A.
315 (a)....................................................................7.01
(b)........................................................................7.05;
11.02
(c)........................................................................7.01
(d)........................................................................7.01
(e)........................................................................6.11
316 (a)(last sentence).....................................................2.09
(a)(1)(A)..................................................................6.05
(a)(1)(B)..................................................................6.04
(a)(2).....................................................................N.A.
(b)........................................................................6.07
(c)........................................................................2.12
317(a)(1)..................................................................6.08
(a)(2).....................................................................6.09
(b)........................................................................2.04
318(a).....................................................................11.01
(b)........................................................................N.A.
(c)........................................................................11.01
N.A. means not applicable.
<PAGE>
*This Cross-Reference Table is not part of the Indenture.
2
<PAGE>
TABLE OF CONTENTS
Page
----
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE........................1
Section 1.01. Definitions..................................................1
Section 1.02. Other Definitions...........................................20
Section 1.03. Trust Indenture Act Provisions..............................20
Section 1.04. Rules of Construction.......................................21
ARTICLE 2. THE NOTES........................................................21
Section 2.01. Form and Dating.............................................21
Section 2.02. Execution and Authentication................................22
Section 2.03. Registrar and Paying Agent..................................23
Section 2.04. Paying Agent to Hold Money in Trust.........................23
Section 2.05. Holder Lists................................................23
Section 2.06. Transfer and Exchange.......................................24
Section 2.07. Replacement Notes...........................................36
Section 2.08. Outstanding Notes...........................................36
Section 2.09. Treasury Notes..............................................37
Section 2.10. Temporary Notes.............................................37
Section 2.11. Cancellation................................................37
Section 2.12. Defaulted Interest..........................................37
Section 2.13. CUSIP Numbers...............................................38
ARTICLE 3. REDEMPTION AND PREPAYMENT........................................38
Section 3.01. Notices to Trustee..........................................38
i
<PAGE>
Section 3.02. Selection of Notes to Be Redeemed...........................38
Section 3.03. Notice of Redemption........................................38
Section 3.04. Effect of Notice of Redemption..............................39
Section 3.05. Deposit of Redemption Price.................................39
Section 3.06. Notes Redeemed in Part......................................40
Section 3.07. Optional Redemption.........................................40
Section 3.08. Mandatory Redemption........................................41
Section 3.09. Offer to Purchase by Application of Excess Proceeds.........41
ARTICLE 4. COVENANTS........................................................43
Section 4.01. Payment of Notes............................................43
Section 4.02. Maintenance of Office or Agency.............................43
Section 4.03. Reports.....................................................43
Section 4.04. Compliance Certificate......................................44
Section 4.05. Taxes.......................................................45
Section 4.06. Stay, Extension and Usury Laws..............................45
Section 4.07. Restricted Payments.........................................45
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries..............................................48
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock..50
Section 4.10. Asset Sales.................................................52
Section 4.11. Transactions with Affiliates................................53
Section 4.12. Liens.......................................................54
Section 4.13. Business Activities.........................................54
Section 4.14. Corporate Existence.........................................54
Section 4.15. Offer to Repurchase Upon Change of Control..................55
Section 4.16. No Senior Subordinated Debt.................................55
ii
<PAGE>
Section 4.17. Limitations on Issuances of Guarantees of Indebtedness......56
ARTICLE 5. SUCCESSORS.......................................................56
Section 5.01. Merger, Consolidation, or Sale of Assets....................56
Section 5.02. Successor Corporation Substituted...........................57
ARTICLE 6. DEFAULTS AND REMEDIES............................................57
Section 6.01. Events of Default...........................................57
Section 6.02. Acceleration................................................59
Section 6.03. Other Remedies..............................................59
Section 6.04. Waiver of Past Defaults.....................................59
Section 6.05. Control by Majority.........................................60
Section 6.06. Limitation on Suits.........................................60
Section 6.07. Rights of Holders of Notes to Receive Payment...............60
Section 6.08. Collection Suit by Trustee..................................60
Section 6.09. Trustee May File Proofs of Claim............................61
Section 6.10. Priorities..................................................61
Section 6.11. Undertaking for Costs.......................................61
ARTICLE 7. TRUSTEE..........................................................62
Section 7.01. Duties of Trustee...........................................62
Section 7.02. Rights of Trustee...........................................63
Section 7.03. Individual Rights of Trustee................................63
Section 7.04. Trustee's Disclaimer........................................63
Section 7.05. Notice of Defaults..........................................64
Section 7.06. Reports by Trustee to Holders of the Notes..................64
Section 7.07. Compensation and Indemnity..................................64
Section 7.08. Replacement of Trustee......................................65
iii
<PAGE>
Section 7.09. Successor Trustee by Merger, etc............................66
Section 7.10. Eligibility; Disqualification...............................66
Section 7.11. Preferential Collection of Claims Against Company...........66
Section 7.12. Trustee's Application for Instructions from the Company.....67
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.........................67
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance....67
Section 8.02. Legal Defeasance and Discharge..............................67
Section 8.03. Covenant Defeasance.........................................67
Section 8.04. Conditions to Legal or Covenant Defeasance..................68
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions.....................69
Section 8.06. Repayment to Company........................................70
Section 8.07. Reinstatement...............................................70
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER.................................70
Section 9.01. Without Consent of Holders of Notes.........................70
Section 9.02. With Consent of Holders of Notes............................71
Section 9.03. Compliance with Trust Indenture Act.........................73
Section 9.04. Revocation and Effect of Consents...........................73
Section 9.05. Notation on or Exchange of Notes............................73
Section 9.06. Trustee to Sign Amendments, etc.............................73
ARTICLE 10. SUBORDINATION...................................................74
Section 10.01. Agreement to Subordinate...................................74
Section 10.02. Liquidation; Dissolution; Bankruptcy.......................74
Section 10.03. Default on Designated Senior Debt..........................74
Section 10.04. Acceleration of Notes......................................75
iv
<PAGE>
Section 10.05. When Distribution Must Be Paid Over........................75
Section 10.06. Notice by Company..........................................76
Section 10.07. Subrogation................................................76
Section 10.08. Relative Rights............................................76
Section 10.09. Subordination May Not Be Impaired by Company...............76
Section 10.10. Distribution or Notice to Representative...................77
Section 10.11. Rights of Trustee and Paying Agent.........................77
Section 10.12. Authorization to Effect Subordination......................77
Section 10.13. Amendments.................................................78
Section 10.14. Certain Definitions........................................78
ARTICLE 11. SUBSIDIARY GUARANTEES..........................................78
Section 11.01. Guarantee..................................................78
Section 11.02. Subordination of Subsidiary Guarantee......................79
Section 11.03. Limitation on Guarantor Liability..........................79
Section 11.04. Execution and Delivery of Subsidiary Guarantee.............80
Section 11.05. Guarantors May Consolidate, etc., on Certain Terms.........80
Section 11.06. Releases Following Sale of Assets..........................81
ARTICLE 12. MISCELLANEOUS...................................................81
Section 12.01. Trust Indenture Act Controls...............................81
Section 12.02. Notices....................................................82
Section 12.03. Communication by Holders of Notes with Other Holders of
Notes....................................................83
Section 12.04. Certificate and Opinion as to Conditions Precedent.........83
Section 12.05. Statements Required in Certificate or Opinion..............83
Section 12.06. Rules by Trustee and Agents................................84
Section 12.07. No Personal Liability of Directors, Officers, Employees and
Stockholders.............................................84
v
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Section 12.08. Governing Law..............................................84
Section 12.09. No Adverse Interpretation of Other Agreements..............84
Section 12.10. Successors.................................................84
Section 12.11. Severability...............................................84
Section 12.12. Counterpart Originals......................................84
Section 12.13. Table of Contents, Headings, etc...........................85
EXHIBITS
Exhibit A: FORM OF NOTE
Exhibit B: FORM OF CERTIFICATE OF TRANSFER
Exhibit C: FORM OF CERTIFICATE OF EXCHANGE
Exhibit D: FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Exhibit E: FORM OF NOTE GUARANTEE
Exhibit F: FORM OF SUPPLEMENTAL INDENTURE
vi
<PAGE>
INDENTURE dated as of May 18, 1998 among Cluett American Corp., a
Delaware corporation (the "Company"), Cluett Peabody & Co., Inc., Great American
Knitting Mills, Inc., Cluett Designer Group Inc., Consumer Direct Corporation
and Arrow Factory Stores Inc., each a Delaware corporation (collectively, the
"Guarantors") and The Bank of New York, a New York banking corporation, as
trustee (the "Trustee").
The Company, the Guarantors and the Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 10 1/8% Series A Senior Subordinated Notes due 2008 (the "Series A Notes"),
the 10 1/8% Series B Senior Subordinated Notes due 2008 (the "Series B Notes")
and the 10 1/8% Series C Senior Subordinated Notes due 2008 (the "Series C
Notes" and, together with the Series A and Series B Notes, the "Notes"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Note" means a global note in the form of Exhibit A-1
hereto bearing the Global Note Legend and the Private Placement Legend and
deposited with or on behalf of, and registered in the name of, the Depositary or
its nominee that will be issued in a denomination equal to the outstanding
principal amount of the Notes sold in reliance on Rule 144A.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Additional Notes" means up to $63.0 million in aggregate principal
amount of Notes (other than the Series B Notes) issued under this Indenture in
accordance with Sections 2.02 and 4.09 hereof.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise; provided that
beneficial ownership of 10% or more of the Voting Stock of a Person shall be
deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Premium" means, with respect to any Note on any
Redemption Date, the greater of (i) 1.0% of the principal amount of such Note or
(ii) the excess of (A) the present value at such Redemption Date of (1) the
redemption price of such Note at May 15, 2003 (such redemption price being
<PAGE>
set forth in the table above) plus (2) all required interest payments due on
such Note through May 15, 2003 (excluding accrued but unpaid interest), computed
using a discount rate equal to the Treasury Rate and such Redemption Rate plus
75 basis points over (B) the principal amount of such Note, if greater.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Note, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Acquisition" means (i) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Subsidiary of the Company or any Subsidiary of the
Company, or shall be merged with or into the Company or any Restricted
Subsidiary of the Company or (ii) the acquisition by the Company or any
Restricted Subsidiary of the Company of the assets of any Person which
constitute all or substantially all of the assets of such Person, any division
or line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business consistent with past practices (provided that the sale, lease (other
than an operating lease), conveyance or other disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of Section 4.15 and 5.01
hereof and not by the provisions of Section 4.10 hereof) and (ii) the issue by
any Restricted Subsidiaries of the Company of any Equity Interests of such
Restricted Subsidiary and the sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a series
of related transactions (a) that have a fair market value in excess of $1.0
million or (b) for net proceeds in excess of $1.0 million. Notwithstanding the
foregoing, the following items shall not be deemed to be Asset Sales: (i) a
transfer of assets by the Company to a Wholly Owned Restricted Subsidiary or by
a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned
Restricted Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned
Restricted Subsidiary to the Company or to another Wholly Owned Restricted
Subsidiary, (iii) a Restricted Payment that is permitted by Section 4.07 hereof,
(iv) a disposition of Cash Equivalents or obsolete equipment in the ordinary
course of business or inventory or goods held for sale in the ordinary course of
business; and (v) sale of accounts receivable, or participation therein, in
connection with any Qualified Receivables Transaction.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day
in the City of New York on which banks are authorized or ordered to close.
"Canadian Credit Facility" means the Loan Agreement, dated as of
August 8, 1997, between Cluett Peabody Canada Inc. and Burgess Financial
Corporation (Canada). The term "Canadian Credit Facility" shall include any
amendment, amendment and restatement, renewal, extension, restructuring,
supplement or modification to the Canadian Credit Facility and all refundings,
refinancings
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and replacements of the Canadian Credit Facility, including any agreement (i)
extending the maturity of any Indebtedness incurred thereunder or contemplated
thereby, (ii) adding or deleting borrowers or guarantors thereunder, so long as
the borrowers and issuers thereunder include one or more of the Company and its
Subsidiaries and their respective successors and assigns, or (iii) increasing
the amount of Indebtedness incurred thereunder or available to be borrowed
thereunder.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities
issued or directly and fully guaranteed or insured by the United States
government or any agency or instrumentality thereof (provided that the full
faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any domestic commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within six months after the date of acquisition and (vi) money market
funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i)-(v) of this definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than a Principal or a Related Party of a
Principal (as defined below), (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company, (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above), other than the
Principals and their Related Parties, becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that
in calculating the beneficial ownership of any particular "person," such
"person" shall be deemed to have beneficial ownership of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of the
Company (measured by voting power rather than number of shares), (iv) the first
day on which a
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majority of the members of the Board of Directors of the Company are not
Continuing Directors or (v) the Company consolidates with, or merges with or
into, any Person, or any Person consolidates with, or merges with or into, the
Company, in any such event pursuant to a transaction in which any of the
outstanding Voting Stock of the Company is converted into or exchanged for cash,
securities or other property, other than any such transaction where the Voting
Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance). For purposes of this definition, any
transfer of an equity interest of an entity that was formed for the purpose of
acquiring Voting Stock of the Company will be deemed to be a transfer of such
portion of such Voting Stock as corresponds to the portion of the equity of such
entity that has been so transferred.
"Common Stock" means the Common Stock, $1.00 par value, of the
Company and any other class of common stock issued by the Company from time to
time.
"Company" means Cluett American Corp.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale, to the extent such losses were deducted in computing such
Consolidated Net Income, plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was deducted in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period (other than items that were accrued in
the ordinary course of business) plus (vi) Reorganization Charges of such Person
and its Restricted Subsidiaries for such period to the extent that such
Reorganization Charges were deducted in computing such Consolidated Net Income,
in each case, on a consolidated basis and determined in accordance with GAAP.
Notwithstanding the foregoing, the provision for taxes on the income or profits
of, and the depreciation and amortization and other non-cash expenses of, a
Subsidiary of the Company shall be added to Consolidated Net Income to compute
Consolidated Cash Flow of the Company only to the extent that a corresponding
amount would be permitted at the date of determination to be dividended to the
Company by such Subsidiary without prior governmental approval (that has not
been obtained), and without direct or indirect restriction pursuant to the terms
of its charter and all agreements, instruments, judgments, decrees, orders,
statutes, rules and governmental regulations applicable to that Subsidiary or
its
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stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof; provided that if such Restricted Subsidiary is not a Guarantor, the
amount of such dividends or distributions includable in Consolidated Net Income
shall be limited to the Company's direct and indirect Equity Interests in such
Restricted Subsidiary, (ii) the Net Income of any Restricted Subsidiary shall be
excluded to the extent that the declaration or payment of dividends or similar
distributions by that Subsidiary of that Net Income is not at the date of
determination permitted without any prior governmental approval (that has not
been obtained) or, directly or indirectly, by operation of the terms of its
charter or any agreement, instrument, judgment, decree, order, statute, rule or
governmental regulation applicable to that Subsidiary or its stockholders, (iii)
the Net Income of any Person acquired in a pooling of interests transaction for
any period prior to the date of such acquisition shall be excluded, and (iv) the
cumulative effect of a change in accounting principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the date of this Indenture in the book value of
any asset owned by such Person or a consolidated Subsidiary of such Person, (y)
all investments as of such date in unconsolidated Subsidiaries and in Persons
that are not Subsidiaries (except, in each case, Permitted Investments), and (z)
all unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the date of this Indenture or (ii) was nominated for
election or elected to such Board of Directors with the approval of a majority
of the Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Trustee" shall be at the address of
the Trustee specified in Section 12.02 hereof or such other address as to which
the Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company, one or more
debt facilities (including, without limitation, the Senior Credit Facility) or
commercial paper facilities, in each case with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended,
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restated, modified, renewed, refunded, replaced or refinanced in whole or in
part from time to time. Indebtedness under Credit Facilities and the Canadian
Credit Facility outstanding on the date on which Notes are first issued and
authenticated under this Indenture shall be deemed to have been incurred on such
date in reliance on the exception provided by clauses (i) and (ii),
respectively, of the definition of Permitted Debt.
"Custodian" means the Trustee, as custodian with respect to the
Notes in global form, or any successor entity thereto.
"Default" means any event that is, or with the passage of time or
the giving of notice or both would be, an Event of Default.
"Definitive Note" means a certificated Note registered in the name
of the Holder thereof and issued in accordance with Section 2.06 hereof, in the
form of Exhibit A-1 hereto except that such Note shall not bear the Global Note
Legend and shall not have the "Schedule of Exchanges of Interests in the Global
Note" attached thereto.
"Depositary" means, with respect to the Notes issuable or issued in
whole or in part in global form, the Person specified in Section 2.03 hereof as
the Depositary with respect to the Notes, and any and all successors thereto
appointed as depositary hereunder and having become such pursuant to the
applicable provision of this Indenture.
"Designated Senior Debt" has the meaning set forth in Section 10.14
hereof.
"Disqualified Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Notes mature; provided, however, that any Capital Stock that
would constitute Disqualified Stock solely because the holders thereof have the
right to require the Company to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with Section 4.07 hereof.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Euroclear" means Morgan Guaranty Trust Company of New York,
Brussels office, as operator of the Euroclear system.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Debentures" means the Company's 12 1/2% Subordinated
Exchange Debentures due 2010.
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"Exchange Notes" means the Notes issued in the Exchange Offer
pursuant to Section 2.06(f) hereof.
"Exchange Offer" has the meaning set forth in the Registration
Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set forth in
the Registration Rights Agreement.
"Exchangeable Preferred Stock" means the Company's 12 1/2% Senior
Exchangeable Preferred Stock due 2010.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the Senior Credit
Facility) in existence on the date of this Indenture, until such amounts are
repaid.
"Fixed Charges" means, with respect to any Person for any period,
the sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments associated
with Capital Lease Obligations, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest of such Person and its Restricted Subsidiaries that
was capitalized during such period, and (iii) any interest expense on
Indebtedness of another Person that is Guaranteed by such Person or one of its
Restricted Subsidiaries or secured by a Lien on assets of such Person or one of
its Restricted Subsidiaries (whether or not such Guarantee or Lien is called
upon) and (iv) the product of (a) all dividend payments, whether or not in cash,
on any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company (other than Disqualified Stock) or to the
Company or a Restricted Subsidiary of the Company, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in accordance
with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the referent Person or any of its Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the four-quarter
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reference period and Consolidated Cash Flow for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income (adjusting for, in the case of an Asset
Acquisition or merger or consolidation permitted under Section 5.01 hereof, any
operating expense or cost reduction of such Person or the Person to be acquired
which, in the good faith estimate of management, will be eliminated or realized,
as the case may be, as a result of such Asset Acquisition, merger or
consolidation), (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect from time to time.
"Global Notes" means, individually and collectively, each of the
Restricted Global Notes and the Unrestricted Global Notes, in the form of
Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Note Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Notes issued under
this Indenture.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America, and the payment for which the
United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, by way of a
pledge of assets or through letters of credit or reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"Guarantors" means (i) each domestic Subsidiary of the Company on
the Issue Date and (ii) any other subsidiary that executes a Subsidiary
Guarantee in accordance with the provisions of this Indenture, and their
respective successors and assigns.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate or currency swap agreements,
interest rate or currency cap agreements and interest rate or currency collar
agreements and (ii) other agreements or arrangements designed to protect such
Person against fluctuations in interest rates or currency.
"Holder" means a Person in whose name a Note is registered.
"Holdings" means Cluett American Investment Corp., a Delaware
corporation.
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"Indebtedness" means, with respect to any Person, any indebtedness
of such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
"Indenture" means this Indenture, as amended or supplemented from
time to time.
"Indirect Participant" means a Person who holds a beneficial
interest in a Global Note through a Participant.
"Initial Notes" means $112.0 million in aggregate principal amount
of Series A Notes issued under this Indenture on the date hereof.
"Institutional Accredited Investor" means an institution that is an
"accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who is not also a QIB.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of Section 4.07 hereof
"Issue Date" means the date of original issuance of the Notes.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Notes for use by such
Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any
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<PAGE>
filing of or agreement to give any financing statement under the Uniform
Commercial Code (or equivalent statutes) of any jurisdiction).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Registration Rights Agreement.
"Management Agreement" means that certain Management Agreement dated
the Issue Date among the Principals, the Company and Holdings, as in effect on
the Issue Date.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, (i) excluding, however, (x)
any gain (but not loss), together with any related provision for taxes on such
gain (but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (y) any extraordinary gain (but not loss),
together with any related provision for taxes on such extraordinary gain (but
not loss) and (ii) less the aggregate amount of all Restricted Payments made by
such Person or any of its Restricted Subsidiaries for such period pursuant to
clause (vii) of the second paragraph of Section 4.07 hereof times one minus the
then combined federal, state and local statutory tax rate of such plans.
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than Senior Indebtedness) secured by a Lien
on the asset or assets that were the subject of such Asset Sale and any reserve
for adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender, and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity, and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its Restricted
Subsidiaries.
"Non-U.S. Person" means a Person who is not a U.S. Person.
"Note Guarantee" means the Guarantee by each Guarantor of the
Company's payment obligations under this Indenture and the Notes, executed
pursuant to the provisions of this Indenture.
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"Notes" has the meaning assigned to it in the preamble to this
Indenture.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Offering" means the offering of the Notes by the Company.
"Officer" means, with respect to any Person, the Chairman of the
Board of Directors, the Chief Executive Officer, the President, the Chief
Operating Officer, the Chief Financial Officer, the Treasurer, any Assistant
Treasurer, the Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed by (i) the
Chairman of the Board of Directors, the Chief Executive Officer, the President
or a Vice President of the Company and (ii) the Chief Financial Officer or the
Secretary of the Company, which certificate shall comply with this Indenture.
"Opinion of Counsel" means an opinion from legal counsel that meets
the requirements of Section 12.05 hereof. The counsel may be an employee of or
counsel to the Company, any Subsidiary of the Company or the Trustee.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
"Participating Broker-Dealer" has the meaning set forth in the
Registration Rights Agreement.
"Permitted Business" means the business of the Company and its
Restricted Subsidiaries conducted on the Issue Date and businesses reasonably
related or ancillary thereto.
"Permitted Investments" means (a) any Investment in the Company or
in a Restricted Subsidiary of the Company; (b) any Investment in Cash
Equivalents; (c) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment (i) such Person
becomes a Restricted Subsidiary of the Company or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company; (d) any Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.10 hereof or any transaction not constituting an Asset
Sale by reason of the $1.0 million threshold contained in the definition
thereof; (e) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company; (f) Hedging
Obligations entered into in the ordinary course of the Company's or its
Restricted Subsidiaries' businesses and otherwise in compliance with this
Indenture; (g) Investments in securities of trade creditors or customers
received in settlement of obligations or pursuant to any plan of reorganization
or similar arrangement upon the bankruptcy of insolvency of such trade creditors
of customers; (h) Investments by the Company or a Restricted Subsidiary in a
Receivables Subsidiary or any Investment by a Receivables Subsidiary in any
other Person, in each case, in connection with a Qualified Receivables
Transaction; and (i) other
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Investments in any Person having an aggregate fair market value (measured on the
date each such Investment was made and without giving effect to subsequent
changes in value), when taken together with all other Investments made pursuant
to this clause (i) that are at the time outstanding, not to exceed the greater
of (A) $10.0 million and (B) 5% of Total Assets.
"Permitted Junior Securities" means Equity Interests in the Company
or debt securities that are subordinated to all Senior Indebtedness (and any
debt securities issued in exchange for Senior Indebtedness) to substantially the
same extent as, or to a greater extent than, the Notes are subordinated to
Senior Indebtedness pursuant to Article 10 of this Indenture.
"Permitted Liens" means (i) Liens on assets of the Company and the
Guarantors securing Senior Indebtedness of the Company and the Guarantors; (ii)
Liens in favor of the Company; (iii) Liens on property of a Person existing at
the time such Person is merged with or into or consolidated with the Company or
any Restricted Subsidiary of the Company; provided that such Liens were in
existence prior to the contemplation of such merger or consolidation and do not
extend to any assets other than those of the Person merged into or consolidated
with the Company; (iv) Liens on property existing at the time of acquisition
thereof by the Company or any Restricted Subsidiary of the Company, provided
that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vi) Liens to secure Indebtedness
(including Capital Lease Obligations) permitted by clause (v) of the second
paragraph of Section 4.09 hereof covering only the assets acquired with such
Indebtedness; (vii) Liens existing on the date of this Indenture; (viii) Liens
for taxes, assessments or governmental charges or claims that are not yet
delinquent or that are being contested in good faith by appropriate proceedings
promptly instituted and diligently concluded, provided that any reserve or other
appropriate provision as shall be required in conformity with GAAP shall have
been made therefor; (ix) Liens on assets of Unrestricted Subsidiaries that
secure Non-Recourse Debt of Unrestricted Subsidiaries; (x) Liens of the Company
or a Wholly Owned Restricted Subsidiary on assets of any Restricted Subsidiary
of the Company; (xi) Liens securing Permitted Refinancing Indebtedness which is
incurred to refinance any Indebtedness which has been secured by a Lien
permitted under this Indenture and which has been incurred in accordance with
the provisions of this Indenture, provided, however, that such Liens (A) are not
materially less favorable to the Holders and are not materially more favorable
to the lienholders with respect to such Liens than the Liens in respect of the
Indebtedness being refinanced and (B) do not extend to or cover any property or
assets of the Company or any of its Restricted Subsidiaries not securing the
Indebtedness so refinanced; (xii) Liens incurred or deposits made in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security or similar
obligations, including any lien securing letters of credit issued in the
ordinary course of business consistent with past practice in connection
therewith, or to secure the performance of tenders, statutory obligations,
surety and appeal bonds, bids, leases, government contracts, performance and
return-of-money bonds and other similar obligations (exclusive of obligations
for the payment of borrowed money); (xiii) judgment Liens not giving rise to an
Event of Default so long as such Lien is adequately bonded and any appropriate
legal proceedings which may have been duly initiated for the review of such
judgment shall not have been finally terminated or the period within which such
proceedings may be initiated shall not have expired; (xiv) easements,
rights-of-way, zoning restrictions and other similar charges or encumbrances in
respect of real property not interfering in any material respect with the
ordinary conduct of the business of the Company or any of its Restricted
Subsidiaries; (xv) any interest or title of a lessor under any lease,
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whether or not characterized as capital or operating; provided that such Liens
do not extend to any property or assets which is not leased property subject to
such lease; (xvi) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods; (xvii) Liens
securing reimbursement obligations with respect to letters of credit which
encumber documents and other property relating to such letters of credit and
products and proceeds thereof; (xviii) Liens encumbering deposits made to secure
obligations arising from statutory, regulatory, contractual, or warranty
requirements of the Company or any of its Restricted Subsidiaries, including
rights of offset and set-off; (xix) Liens securing Hedging Obligations which
Hedging Obligations relate to Indebtedness that is otherwise permitted under
this Indenture; (xx) leases or subleases granted to others not interfering in
any material respect with the business of the Company or its Restricted
Subsidiaries; (xxi) Liens arising out of consignment or similar arrangements for
the sale of goods entered into by the Company or any Restricted Subsidiary in
the ordinary course of business; (xxii) Liens or assets of a Receivables
Subsidiary arising in connection with a Qualified Receivables Transaction;
(xxiii) Liens incurred in the ordinary course of business of the Company or any
Restricted Subsidiary of the Company with respect to obligations that do not
exceed $5.0 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Restricted Subsidiary; and (xxiv) Liens securing Acquired Debt incurred in
accordance with clause (ix) of Section 4.09 hereof; provided, that (A) such
Liens secured such Acquired Debt at the time of and prior to the incurrence of
such Acquired Debt by the Company or a Restricted Subsidiary of the Company and
were not granted in connection with, or in anticipation of, the incurrence of
such Acquired Debt by the Company or a Restricted Subsidiary of the Company and
(B) such Liens do not extend to or cover any property or assets of the Company
or any of its Restricted Subsidiaries other than the property or assets that
secured the Acquired Debt prior to the time such Indebtedness became Acquired
Debt of the Company or a Restricted Subsidiary of the Company and are not more
favorable to the lienholders than those securing the Acquired Debt prior to the
incurrence of such Acquired Debt by the Company or a Restricted Subsidiary of
the Company.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Notes, such Permitted Refinancing Indebtedness has a final maturity date
later than the final maturity date of, and is subordinated in right of payment
to, the Notes on terms at least as favorable to the Holders of Notes as those
contained in the documentation governing the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; and (iv) such
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Indebtedness is incurred either by the Company or by the Restricted Subsidiary
who is the obligor on the Indebtedness being extended, refinanced, renewed,
replaced, defeased or refunded.
"Person" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Principals" means Vestar Capital Partners III, L.P.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Notes issued under this Indenture except where
otherwise permitted by the provisions of this Indenture.
"Public Offering" means one (and not more than one) offering of
common stock (other than Disqualified Stock) of the Company or any direct or
indirect parent corporation of the Company (a "Parent Corporation"), pursuant to
an effective registration statement filed with the Commission in accordance with
the Securities Act, other than an offering pursuant to Form S-8 (or any
successor thereto), provided, that in the case of an Initial Public Offering by
a Parent Corporation, such Parent Corporation contributes to the common equity
of the Company the portion of the net cash proceeds thereof necessary to pay the
aggregate redemption price of the Notes to be redeemed in connection therewith.
"Purchase Money Note" means a promissory note evidencing a line of
credit, or evidencing other Indebtedness owed to the Company or any Restricted
Subsidiary in connection with a Qualified Receivables Transaction, which note
shall be repaid from cash available to the maker of such note, other than
amounts required to be established as reserves pursuant to agreement, amounts
paid to investors in respect of interest, principal and other amounts owing to
such investors and amounts paid in connection with the purchase of newly
generated receivables.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Qualified Proceeds" means any of the following or any combination
of the following: (i) cash, (ii) Cash Equivalents, (iii) long-term assets that
are used or useful in a Permitted Business and (iv) the Capital Stock of any
Person engaged primarily in a Permitted Business if, in connection with the
receipt by the company or any Restricted Subsidiary of the Company of such
Capital Stock, (a) such Person becomes a Wholly-Owned Restricted Subsidiary and
a Guarantor or (b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or any Wholly-Owned Restricted Subsidiary of the
Company that is a Guarantor.
"Qualified Receivables Transaction" means any transaction or series
of transactions that may be entered into by the Company or any Restricted
Subsidiary pursuant to which the Company or any Restricted Subsidiary may sell,
convey or otherwise transfer to (a) a Receivables Subsidiary (in the case of a
transfer by the Company or any Restricted Subsidiary) and (b) any other Person
(in the case of a transfer by a Receivables Subsidiary), or may grant a security
interest in, any accounts receivable (whether now existing or arising in the
future) of the Company or any Restricted Subsidiary and any asset related
thereto including, without limitation, all collateral securing such accounts
receivable, all
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contracts and all guarantees or other obligations in respect of such accounts
receivable, proceeds of such accounts receivable and other assets which are
customarily transferred, or in respect of which security interests are
customarily granted, in connection with asset securitization transactions
involving accounts receivable.
"Receivables Subsidiary" means a Wholly Owned Restricted Subsidiary
(other than a Guarantor) which engages in no activities other than in connection
with the financing of accounts receivables and which is designated by the Board
of Directors of the Company (as provided below) as a Receivables Subsidiary (a)
no portion of the Indebtedness or any other Obligations (contingent or
otherwise) of which (i) is guaranteed by the Company or any other Restricted
Subsidiary (excluding guarantees of obligations (other than the principal of,
and interest on, Indebtedness) pursuant to Standard Securitization
Undertakings), (ii) is recourse to or obligates the Company or any other
Restricted Subsidiary in any way other than pursuant to Standard Securitization
Undertakings or (iii) subjects any property or asset of the Company or any other
Restricted Subsidiary, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard Securitization
Undertakings, (b) with which neither the Company nor any other Restricted
Subsidiary has any material contract, agreement, arrangement or understanding
(except in connection with a Purchase Money Note or Qualified Receivables
Transaction) other than on terms no less favorable to the Company or such other
Restricted Subsidiary than those that might be obtained at the time from persons
that are not Affiliates of the Company, other than fees payable in the ordinary
course of business in connection with servicing accounts receivable, and (c) to
which neither the Company nor any other Restricted Subsidiary has any obligation
to maintain or preserve such entity's financial condition or cause such entity
to achieve certain levels of operating results. Any such designation by the
Board of Directors of the Company shall be evidenced to the Trustee by filing
with the Trustee a certified copy of the resolution of the Board of Directors of
the Company giving effect to such designation and an Officers' Certificate
certifying, to the best of such officers' knowledge and belief after consulting
with counsel, that such designation complied with the foregoing conditions.
"Registration Rights Agreement" means the Registration Rights
Agreement, dated as of May 18, 1998, by and among the Company and the other
parties named on the signature pages thereof, as such agreement may be amended,
modified or supplemented from time to time and, with respect to any Additional
Notes, one or more registration rights agreements between the Company and the
other parties thereto, as such agreement(s) may be amended, modified or
supplemented from time to time, relating to rights given by the Company to the
purchasers of Additional Notes to register such Additional Notes under the
Securities Act.
"Regulation S" means Regulation S promulgated under the Securities
Act.
"Regulation S Global Note" means a Regulation S Temporary Global
Note or Regulation S Permanent Global Note, as appropriate.
"Regulation S Permanent Global Note" means a permanent global Note
in the form of Exhibit A-1 hereto bearing the Global Note Legend and the Private
Placement Legend and deposited with or on behalf of and registered in the name
of the Depositary or its nominee, issued in a denomination equal to the
outstanding principal amount of the Regulation S Temporary Global Note upon
expiration of the Restricted Period.
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"Regulation S Temporary Global Note" means a temporary global Note
in the form of Exhibit A-2 hereto bearing the Private Placement Legend and
deposited with or on behalf of and registered in the name of the Depositary or
its nominee, issued in a denomination equal to the outstanding principal amount
of the Notes initially sold in reliance on Rule 903 of Regulation S.
"Related Party" with respect to any Principal means (A) any
controlling stockholder, Subsidiary, or spouse or immediate family member (in
the case of an individual) of such Principal or (B) any trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding a majority interest of which consist of such
Principal and/or such other Persons referred to in the immediately preceding
clause (A).
"Reorganization Charges" means (i) up to $3.3 million of facility
closing and re-engineering costs incurred by the Company and its Subsidiaries
prior to the Issue Date, (ii) up to $550,000 of losses incurred by the Company
and its Subsidiaries prior to the Issue Date associated with (x) the Canadian
retail operations of the Company and its Subsidiaries and (y) the Mexican and
Guatemalan operations of the Company and its Subsidiaries, (iii) up to $4.0
million of bankruptcy reorganization costs incurred by the Company and its
Restricted Subsidiaries prior to the Issue Date and (iv) the costs and expenses
of the Company and its Subsidiaries incurred in connection with the Transaction,
in each case calculated in accordance with GAAP on a consolidated basis.
"Responsible Officer," when used with respect to the Trustee, means
any officer within the Corporate Trust Administration of the Trustee (or any
successor group of the Trustee) or any other officer of the Trustee customarily
performing functions similar to those performed by any of the above designated
officers and also means, with respect to a particular corporate trust matter,
any other officer to whom such matter is referred because of his knowledge of
and familiarity with the particular subject.
"Restricted Definitive Note" means a Definitive Note bearing the
Private Placement Legend.
"Restricted Global Note" means a Global Note bearing the Private
Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Period" means the 40-day restricted period as defined in
Regulation S.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"Rule 903" means Rule 903 promulgated under the Securities Act.
"Rule 904" means Rule 904 promulgated under the Securities Act.
"SEC" means the Securities and Exchange Commission.
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"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means the credit agreement to be entered
into on or prior to the Issue Date by and among the Company, NationsBanc
Montgomery Securities LLC, as arranger and syndication agent, certain lending
parties thereto and NationsBank, N.A., as agent, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, as such credit agreements and/or related documents may be
amended, restated, supplemented, renewed, replaced or otherwise modified from
time to time whether or not with the same agent, trustee, representative lenders
or holders, and, subject to the proviso to the next succeeding sentence,
irrespective of any changes in the terms and conditions thereof. Without
limiting the generality of the foregoing, the term "Senior Credit Facility"
shall include any amendment, amendment and restatement, renewal, extension,
restructuring, supplement or modification to any Senior Credit Facility and all
refundings, refinancings and replacements of any Senior Credit Facility
including any agreement (i) extending the maturity of any Indebtedness incurred
thereunder or contemplated thereby, (ii) adding or deleting borrowers or
guarantors thereunder, so long as the borrowers and issuers hereunder include
one or more of the Company and its Restricted Subsidiaries and their respective
successors and assigns, or (iii) increasing the amount of Indebtedness incurred
thereunder or available to be borrowed thereunder.
"Senior Indebtedness" has the meaning set forth in Section 10.14
hereof.
"Series C Notes" means $13.0 million of 10 1/8% Series C Senior
Subordinated Notes due 2008, issued to certain former equity holders of
Holdings.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Company or any
Restricted Subsidiary which are reasonably customary in an accounts receivable
transaction.
"Stated Maturity" means, with respect to any installment of interest
or principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the
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only general partners of which are such Person or of one or more Subsidiaries of
such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Indenture is qualified
under the TIA.
"Total Assets" means, with respect to any Person, the total
consolidated assets of such Person and its Restricted Subsidiaries, as shown on
the most recent balance sheet of such Person.
"Treasury Rate" means, as of any Redemption Date, the yield to
maturity as of such Redemption Date of United States Treasury securities with a
constant maturity (as compiled and published in the most recent Federal Reserve
Statistical Release H.15 (519) that has become publicly available at least two
Business Days prior to the Redemption Date (or, if such Statistical Release is
no longer published, any publicly available source of similar market data)) most
nearly equal to the period from the Redemption Date to May 15, 2003; provided,
however, that if the period from the Redemption Date to May 15, 2003 is less
than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
"Trustee" means the party named as such above until a successor
replaces it in accordance with the applicable provisions of this Indenture and
thereafter means the successor serving hereunder.
"Unrestricted Global Note" means a permanent global Note in the form
of Exhibit A-1 attached hereto that bears the Global Note Legend and that has
the "Schedule of Exchanges of Interests in the Global Note" attached thereto,
and that is deposited with or on behalf of and registered in the name of the
Depositary, representing a series of Notes that do not bear the Private
Placement Legend.
"Unrestricted Definitive Note" means one or more Definitive Notes
that do not bear and are not required to bear the Private Placement Legend.
"Unrestricted Subsidiary" means any Subsidiary of the Company that
is designated by the Board of Directors as an Unrestricted Subsidiary pursuant
to a Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not a party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; and (d) has not guaranteed
or otherwise directly or indirectly provided credit support for any Indebtedness
of the Company or any of its Restricted Subsidiaries. Any such designation by
the Board of Directors shall be evidenced to the Trustee by filing with the
Trustee a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by Section 4.07 hereof.
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company
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as of such date (and, if such Indebtedness is not permitted to be incurred as of
such date under Section 4.09 hereof, the Company shall be in default of such
covenant). The Board of Directors of the Company may at any time designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; provided that such
designation shall be deemed to be an incurrence of Indebtedness by a Restricted
Subsidiary of the Company of any outstanding Indebtedness of such Unrestricted
Subsidiary and such designation shall only be permitted if (i) such Indebtedness
is permitted under Section 4.09 hereof, calculated on a pro forma basis as if
such designation had occurred at the beginning of the four-quarter reference
period, and (ii) no Default or Event of Default would be in existence following
such designation
"U.S. Person" means a U.S. person as defined in Rule 902(o) under
the Securities Act.
"Voting Stock" of any Person as of any date means the Capital Stock
of such Person that is at the time entitled to vote in the election of the Board
of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Disqualified Stock at any date, the number of years obtained by
dividing (i) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other required
payments of principal or liquidation preference, as applicable, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (ii) the then outstanding principal amount or
liquidation preference, as applicable, of such Indebtedness or Disqualified
Stock.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction"..............................4.11
"Asset Sale".........................................4.10
"Asset Sale Offer"...................................3.09
"Authentication Order"...............................2.02
"Change of Control Offer"............................4.15
"Change of Control Payment"..........................4.15
"Change of Control Payment Date" ....................4.15
"Covenant Defeasance"................................8.03
"Event of Default"...................................6.01
"Excess Proceeds"....................................4.10
"incur"..............................................4.09
"Legal Defeasance" ..................................8.02
"Offer Amount".......................................3.09
"Offer Period".......................................3.09
"Paying Agent".......................................2.03
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"Permitted Debt".....................................4.09
"Purchase Date"......................................3.09
"Registrar"..........................................2.03
"Restricted Payments"................................4.07
SECTION 1.03. TRUST INDENTURE ACT PROVISIONS.
Whenever this Indenture refers to a provision of the TIA, the
provision is incorporated by reference in and made a part of this Indenture.
The following TIA terms used in this Indenture have the following
meanings:
"indenture securities" means the Notes;
"indenture security Holder" means a Holder of a Note;
"indenture to be qualified" means this Indenture;
"indenture trustee" or "institutional trustee" means the Trustee;
and
"obligor" on the Notes and the Guarantees means the Company and the
Guarantors, respectively, and any successor obligor upon the Notes and the Note
Guarantees, respectively.
All other terms used in this Indenture that are defined by the TIA,
defined by TIA reference to another statute or defined by SEC rule under the TIA
have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) references to sections of or rules under the Securities
Act shall be deemed to include substitute, replacement of successor
sections or rules adopted by the SEC from time to time.
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ARTICLE 2.
THE NOTES
SECTION 2.01. FORM AND DATING.
(a) General. The Notes and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit A hereto. The Notes
may have notations, legends or endorsements required by law, stock exchange rule
or usage. Each Note shall be dated the date of its authentication. The Notes
shall be in denominations of $1,000 and integral multiples thereof. The Series A
Notes shall initially be issued in global form. The Series C Notes shall
initially be issued in definitive form.
The terms and provisions contained in the Notes shall constitute,
and are hereby expressly made, a part of this Indenture and the Company, the
Guarantor and the Trustee, by their execution and delivery of this Indenture,
expressly agree to such terms and provisions and to be bound thereby. However,
to the extent any provision of any Note conflicts with the express provisions of
this Indenture, the provisions of this Indenture shall govern and be
controlling.
(b) Global Notes. Notes issued in global form shall be substantially
in the form of Exhibits A-1 or A-2 attached hereto (including the Global Note
Legend thereon and the "Schedule of Exchanges of Interests in the Global Note"
attached thereto). Notes issued in definitive form shall be substantially in the
form of Exhibit A-1 attached hereto (but without the Global Note Legend thereon
and without the "Schedule of Exchanges of Interests in the Global Note" attached
thereto). Each Global Note shall represent such of the outstanding Notes as
shall be specified therein and each shall provide that it shall represent the
aggregate principal amount of outstanding Notes from time to time endorsed
thereon and that the aggregate principal amount of outstanding Notes represented
thereby may from time to time be reduced or increased, as appropriate, to
reflect exchanges and redemptions. Any endorsement of a Global Note to reflect
the amount of any increase or decrease in the aggregate principal amount of
outstanding Notes represented thereby shall be made by the Trustee or the Note
Custodian, at the direction of the Trustee, in accordance with instructions
given by the Holder thereof as required by Section 2.06 hereof.
(c) Temporary Global Notes. Notes offered and sold in reliance on
Regulation S shall be issued initially in the form of the Regulation S Temporary
Global Note, which shall be deposited on behalf of the purchasers of the Notes
represented thereby with the Trustee, at its New York, New York office, as
custodian for the Depositary, and registered in the name of the Depositary or
the nominee of the Depositary for the accounts of designated agents holding on
behalf of Euroclear or Cedel Bank, duly executed by the Company and
authenticated by the Trustee as hereinafter provided. The Restricted Period
shall be terminated upon the receipt by the Trustee of (i) a written certificate
from the Depositary, together with copies of certificates from Euroclear and
Cedel Bank certifying that they have received certification of non-United States
beneficial ownership of 100% of the aggregate principal amount of the Regulation
S Temporary Global Note (except to the extent of any beneficial owners thereof
who acquired an interest therein during the Restricted Period pursuant to
another exemption from registration under the Securities Act and who will take
delivery of a beneficial ownership interest in a 144A Global Note or an IAI
Global Note bearing a Private Placement Legend, all as contemplated by Section
2.06(a)(ii) hereof), and (ii) an Officers' Certificate from the Company.
Following the termination of the Restricted Period, beneficial interests in the
Regulation S Temporary Global Note shall be exchanged for beneficial interests
in Regulation S Permanent Global Notes pursuant to the Applicable Procedures.
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Simultaneously with the authentication of Regulation S Permanent Global Notes,
the Trustee shall cancel the Regulation S Temporary Global Note. The aggregate
principal amount of the Regulation S Temporary Global Note and the Regulation S
Permanent Global Notes may from time to time be increased or decreased by
adjustments made on the records of the Trustee and the Depositary or its
nominee, as the case may be, in connection with transfers of interest as
hereinafter provided.
(d) Euroclear and Cedel Procedures Applicable. The provisions of the
"Operating Procedures of the Euroclear System" and "Terms and Conditions
Governing Use of Euroclear" and the "General Terms and Conditions of Cedel Bank"
and "Customer Handbook" of Cedel Bank shall be applicable to transfers of
beneficial interests in the Regulation S Temporary Global Note and the
Regulation S Permanent Global Notes that are held by Participants through
Euroclear or Cedel Bank.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Notes for the Company by manual or
facsimile signature. The Company's seal shall be reproduced on the Notes and may
be in facsimile form.
If an Officer whose signature is on a Note no longer holds that
office at the time a Note is authenticated, the Note shall nevertheless be
valid.
A Note shall not be valid until authenticated by the manual
signature of the Trustee. The signature shall be conclusive evidence that the
Note has been authenticated under this Indenture.
The Trustee shall, upon a written order of the Company signed by two
Officers (an "Authentication Order"), authenticate Notes for original issue up
to the aggregate principal amount stated in paragraph 4 of the Notes. The
aggregate principal amount of Notes outstanding at any time may not exceed such
amount except as provided in Section 2.07 hereof.
The Trustee may appoint an authenticating agent acceptable to the
Company to authenticate Notes. An authenticating agent may authenticate Notes
whenever the Trustee may do so. Each reference in this Indenture to
authentication by the Trustee includes authentication by such agent. An
authenticating agent has the same rights as an Agent to deal with Holders or an
Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Notes may be
presented for registration of transfer or for exchange ("Registrar") and an
office or agency where Notes may be presented for payment ("Paying Agent"). The
Registrar shall keep a register of the Notes and of their transfer and exchange.
The Company may appoint one or more co-registrars and one or more additional
paying agents. The term "Registrar" includes any co-registrar and the term
"Paying Agent" includes any additional paying agent. The Company may change any
Paying Agent or Registrar without notice to any Holder. The Company shall notify
the Trustee in writing of the name and address of any Agent not a party to this
Indenture. If the Company fails to appoint or maintain another entity as
Registrar or Paying Agent, the Trustee shall act as such. The Company or any of
its Subsidiaries may act as Paying Agent or Registrar.
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The Company initially appoints The Depository Trust Company ("DTC")
to act as Depositary with respect to the Global Notes.
The Company initially appoints the Trustee to act as the Registrar
and Paying Agent and to act as Note Custodian with respect to the Global Notes.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the Trustee
to agree in writing that the Paying Agent will hold in trust for the benefit of
Holders or the Trustee all money held by the Paying Agent for the payment of
principal, premium or Liquidated Damages, if any, or interest on the Notes, and
will notify the Trustee of any default by the Company in making any such
payment. While any such default continues, the Trustee may require a Paying
Agent to pay all money held by it to the Trustee. The Company at any time may
require a Paying Agent to pay all money held by it to the Trustee. Upon payment
over to the Trustee, the Paying Agent (if other than the Company or a
Subsidiary) shall have no further liability for the money. If the Company or a
Subsidiary acts as Paying Agent, it shall segregate and hold in a separate trust
fund for the benefit of the Holders all money held by it as Paying Agent. Upon
any bankruptcy or reorganization proceedings relating to the Company, the
Trustee shall serve as Paying Agent for the Notes.
SECTION 2.05. HOLDER LISTS.
The Trustee shall preserve in as current a form as is reasonably
practicable the most recent list available to it of the names and addresses of
all Holders and shall otherwise comply with TIA ss. 312(a). If the Trustee is
not the Registrar, the Company shall furnish to the Trustee at least seven
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of the Holders of
Notes and the Company shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Notes. A Global Note may not be
transferred as a whole except by the Depositary to a nominee of the Depositary,
by a nominee of the Depositary to the Depositary or to another nominee of the
Depositary, the Depositary or any such nominee to a successor Depositary or a
nominee of such successor Depositary. All Global Notes will be exchanged by the
Company for Definitive Notes if (i) the Company delivers to the Trustee notice
from the Depositary that it is unwilling or unable to continue to act as
Depositary or that it is no longer a clearing agency registered under the
Exchange Act and, in either case, a successor Depositary is not appointed by the
Company within 120 days after the date of such notice from the Depositary or
(ii) the Company in its sole discretion determines that the Global Notes (in
whole but not in part) should be exchanged for Definitive Notes and delivers a
written notice to such effect to the Trustee; provided that in no event shall
the Regulation S Temporary Global Note be exchanged by the Company for
Definitive Notes prior to (x) the expiration of the Restricted Period and (y)
the receipt by the Registrar of any certificates required pursuant to Rule
903(c)(3)(ii)(B) under the Securities Act. Upon the occurrence of either of the
preceding events in (i) or (ii) above, Definitive Notes shall be issued in such
names as the Depositary shall instruct the Trustee. Global Notes also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Note authenticated and delivered in exchange for, or in
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lieu of, a Global Note or any portion thereof, pursuant to this Section 2.06 or
Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the form
of, and shall be, a Global Note. A Global Note may not be exchanged for another
Note other than as provided in this Section 2.06(a), however, beneficial
interests in a Global Note may be transferred and exchanged as provided in
Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global
Notes. The transfer and exchange of beneficial interests in the Global Notes
shall be effected through the Depositary, in accordance with the provisions of
this Indenture and the Applicable Procedures. Beneficial interests in the
Restricted Global Notes shall be subject to restrictions on transfer comparable
to those set forth herein to the extent required by the Securities Act.
Transfers of beneficial interests in the Global Notes also shall require
compliance with either subparagraph (i) or (ii) below, as applicable, as well as
one or more of the other following subparagraphs, as applicable:
(i) Transfer of Beneficial Interests in the Same Global Note.
Beneficial interests in any Restricted Global Note may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in
the same Restricted Global Note in accordance with the transfer
restrictions set forth in the Private Placement Legend; provided, however,
that prior to the expiration of the Restricted Period, transfers of
beneficial interests in the Temporary Regulation S Global Note may not be
made to a U.S. Person or for the account or benefit of a U.S. Person
(other than an Initial Purchaser). Beneficial interests in any
Unrestricted Global Note may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note. No written orders or instructions shall be required to be delivered
to the Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in
Global Notes. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor
of such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial interest in
another Global Note in an amount equal to the beneficial interest to be
transferred or exchanged and (2) instructions given in accordance with the
Applicable Procedures containing information regarding the Participant
account to be credited with such increase or (B) (1) a written order from
a Participant or an Indirect Participant given to the Depositary in
accordance with the Applicable Procedures directing the Depositary to
cause to be issued a Definitive Note in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given by the
Depositary to the Registrar containing information regarding the Person in
whose name such Definitive Note shall be registered to effect the transfer
or exchange referred to in (1) above; provided that in no event shall
Definitive Notes be issued upon the transfer or exchange of beneficial
interests in the Regulation S Temporary Global Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar
of any certificates required pursuant to Rule 903 under the Securities
Act. Upon consummation of an Exchange Offer by the Company in accordance
with Section 2.06(f) hereof, the requirements of this Section 2.06(b)(ii)
shall be deemed to have been satisfied upon receipt by the Registrar of
the instructions contained in the Letter of Transmittal delivered by the
Holder of such beneficial interests in the Restricted Global Notes. Upon
satisfaction of all of the requirements for transfer or exchange of
beneficial interests in Global Notes contained in
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this Indenture and the Notes or otherwise applicable under the Securities
Act, the Trustee shall adjust the principal amount of the relevant Global
Note(s) pursuant to Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Note. A beneficial interest in any Restricted Global Note may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Note if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the
Registrar receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Note, then the transferor
must deliver a certificate in the form of Exhibit B hereto,
including the certifications in item (1) thereof;
(B) if the transferee will take delivery in the form of a
beneficial interest in the Regulation S Temporary Global Note or the
Regulation S Global Note, then the transferor must deliver a
certificate in the form of Exhibit B hereto, including the
certifications in item (2) thereof; and
(C) if the transferee will take delivery in the form of a
beneficial interest in the IAI Global Note, then the transferor must
deliver a certificate in the form of Exhibit B hereto, including the
certifications and certificates and Opinion of Counsel required by
item (3) thereof, if applicable.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted
Global Note for Beneficial Interests in the Unrestricted Global Note. A
beneficial interest in any Restricted Global Note may be exchanged by any
holder thereof for a beneficial interest in an Unrestricted Global Note or
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in an Unrestricted Global Note if the exchange or
transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of the beneficial interest to be transferred, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1)
a broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined
in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a beneficial
interest in an Unrestricted
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Global Note, a certificate from such holder in the form of Exhibit C
hereto, including the certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Note, a certificate from such holder in the form of
Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or (D)
above at a time when an Unrestricted Global Note has not yet been issued, the
Company shall issue and, upon receipt of an Authentication Order in accordance
with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Note cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Note.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Notes.
(i) Beneficial Interests in Restricted Global Notes to Restricted
Definitive Notes. If any holder of a beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Restricted
Definitive Note or to transfer such beneficial interest to a Person who
takes delivery thereof in the form of a Restricted Definitive Note, then,
upon receipt by the Registrar of the following documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a
Restricted Definitive Note, a certificate from such holder in the
form of Exhibit C hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being transferred to a
Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item (2) thereof;
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(D) if such beneficial interest is being transferred pursuant
to an exemption from the registration requirements of the Securities
Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(a) thereof;
(E) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (B) through (D) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(F) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such beneficial interest is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(c) thereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest in a Restricted Global Note pursuant to this
Section 2.06(c) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Trustee shall
deliver such Definitive Notes to the Persons in whose names such Notes are
so registered. Any Definitive Note issued in exchange for a beneficial
interest in a Restricted Global Note pursuant to this Section 2.06(c)(i)
shall bear the Private Placement Legend and shall be subject to all
restrictions on transfer contained therein.
(ii) Notwithstanding Sections 2.06(c)(i)(A) and (C) hereof, a
beneficial interest in the Regulation S Temporary Global Note may not be
exchanged for a Definitive Note or transferred to a Person who takes
delivery thereof in the form of a Definitive Note prior to (x) the
expiration of the Restricted Period and (y) the receipt by the Registrar
of any certificates required pursuant to Rule 903(c)(3)(ii)(B) under the
Securities Act, except in the case of a transfer pursuant to an exemption
from the registration requirements of the Securities Act other than Rule
903 or Rule 904.
(iii) Beneficial Interests in Restricted Global Notes to
Unrestricted Definitive Notes. A holder of a beneficial interest in a
Restricted Global Note may exchange such beneficial interest for an
Unrestricted Definitive Note or may transfer such beneficial interest to a
Person who takes delivery thereof in the form of an Unrestricted
Definitive Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the holder of such beneficial interest, in the case of an
exchange, or the transferee, in the case of a transfer,
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certifies in the applicable Letter of Transmittal that it is not (1)
a broker-dealer, (2) a Person participating in the distribution of
the Exchange Notes or (3) a Person who is an affiliate (as defined
in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Note proposes to exchange such beneficial interest for a Definitive
Note that does not bear the Private Placement Legend, a certificate from
such holder in the form of Exhibit C hereto, including the certifications
in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Note proposes to transfer such beneficial interest to a Person who
shall take delivery thereof in the form of a Definitive Note that does not
bear the Private Placement Legend, a certificate from such holder in the
form of Exhibit B hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel to the effect that such exchange or transfer is
in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
(iv) Beneficial Interests in Unrestricted Global Notes to
Unrestricted Definitive Notes. If any holder of a beneficial interest in
an Unrestricted Global Note proposes to exchange such beneficial interest
for a Definitive Note or to transfer such beneficial interest to a Person
who takes delivery thereof in the form of a Definitive Note, then, upon
satisfaction of the conditions set forth in Section 2.06(b)(ii) hereof,
the Trustee shall cause the aggregate principal amount of the applicable
Global Note to be reduced accordingly pursuant to Section 2.06(h) hereof,
and the Company shall execute and the Trustee shall authenticate and
deliver to the Person designated in the instructions a Definitive Note in
the appropriate principal amount. Any Definitive Note issued in exchange
for a beneficial interest pursuant to this Section 2.06(c)(iii) shall be
registered in such name or names and in such authorized denomination or
denominations as the holder of such beneficial interest shall instruct the
Registrar through instructions from the Depositary and the Participant or
Indirect Participant. The Trustee shall deliver such Definitive Notes to
the Persons in whose names such Notes are so registered. Any Definitive
Note issued in exchange for a beneficial interest pursuant to this Section
2.06(c)(iii) shall not bear the Private Placement Legend.
(d) Transfer and Exchange of Definitive Notes for Beneficial
Interests.
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(i) Restricted Definitive Notes to Beneficial Interests in
Restricted Global Notes. If any Holder of a Restricted Definitive Note
proposes to exchange such Note for a beneficial interest in a Restricted
Global Note or to transfer such Restricted Definitive Notes to a Person
who takes delivery thereof in the form of a beneficial interest in a
Restricted Global Note, then, upon receipt by the Registrar of the
following documentation:
(A) if the Holder of such Restricted Definitive Note proposes
to exchange such Note for a beneficial interest in a Restricted
Global Note, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Note is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (1) thereof;
(C) if such Restricted Definitive Note is being transferred to
a Non-U.S. Person in an offshore transaction in accordance with Rule
903 or Rule 904 under the Securities Act, a certificate to the
effect set forth in Exhibit B hereto, including the certifications
in item (2) thereof;
(D) if such Restricted Definitive Note is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act,
a certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(a) thereof;
(E) if such Restricted Definitive Note is being transferred to
an Institutional Accredited Investor in reliance on an exemption
from the registration requirements of the Securities Act other than
those listed in subparagraphs (B) through (D) above, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications, certificates and Opinion of Counsel required by item
(3) thereof, if applicable;
(F) if such Restricted Definitive Note is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect
set forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(G) if such Restricted Definitive Note is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
the Trustee shall cancel the Restricted Definitive Note, increase or
cause to be increased the aggregate principal amount of, in the case
of clause (A) above, the appropriate Restricted Global Note, in the
case of clause (B) above, the 144A Global Note, in the case of
clause (c) above, the Regulation S Global Note, and in all other
cases, the IAI Global Note.
(ii) Restricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of a Restricted Definitive Note may
exchange such Note for a beneficial interest in an
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Unrestricted Global Note or transfer such Restricted Definitive Note to a
Person who takes delivery thereof in the form of a beneficial interest in
an Unrestricted Global Note only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Notes proposes to
exchange such Notes for a beneficial interest in the Unrestricted Global
Note, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Notes proposes to
transfer such Notes to a Person who shall take delivery thereof in the
form of a beneficial interest in the Unrestricted Global Note, a
certificate from such Holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Trustee shall cancel the Definitive Notes and
increase or cause to be increased the aggregate principal amount of the
Unrestricted Global Note.
(iii) Unrestricted Definitive Notes to Beneficial Interests in
Unrestricted Global Notes. A Holder of an Unrestricted Definitive Note may
exchange such Note for a beneficial interest in an Unrestricted Global
Note or transfer such Definitive Notes to a Person who takes delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Note at any time. Upon receipt of a request for such an exchange or
transfer, the Trustee shall cancel the applicable Unrestricted Definitive
Note and increase or cause to be increased the aggregate principal amount
of one of the Unrestricted Global Notes.
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If any such exchange or transfer from a Definitive Note to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Note has not yet been issued,
the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Trustee shall authenticate one or more
Unrestricted Global Notes in an aggregate principal amount equal to the
principal amount of Definitive Notes so transferred.
(e) Transfer and Exchange of Definitive Notes for Definitive Notes. Upon
request by a Holder of Definitive Notes and such Holder's compliance with the
provisions of this Section 2.06(e), the Registrar shall register the transfer or
exchange of Definitive Notes. Prior to such registration of transfer or
exchange, the requesting Holder shall present or surrender to the Registrar the
Definitive Notes duly endorsed or accompanied by a written instruction of
transfer in form satisfactory to the Registrar duly executed by such Holder or
by his attorney, duly authorized in writing. In addition, the requesting Holder
shall provide any additional certifications, documents and information, as
applicable, required pursuant to the following provisions of this Section
2.06(e).
(i) Restricted Definitive Notes to Restricted Definitive Notes. Any
Restricted Definitive Note may be transferred to and registered in the
name of Persons who take delivery thereof in the form of a Restricted
Definitive Note if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under
the Securities Act, then the transferor must deliver a certificate
in the form of Exhibit B hereto, including the certifications in
item (1) thereof;
(B) if the transfer will be made pursuant to Rule 903 or Rule
904, then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications in item (2) thereof;
and
(C) if the transfer will be made pursuant to any other
exemption from the registration requirements of the Securities Act,
then the transferor must deliver a certificate in the form of
Exhibit B hereto, including the certifications, certificates and
Opinion of Counsel required by item (3) thereof, if applicable.
(ii) Restricted Definitive Notes to Unrestricted Definitive Notes.
Any Restricted Definitive Note may be exchanged by the Holder thereof for
an Unrestricted Definitive Note or transferred to a Person or Persons who
take delivery thereof in the form of an Unrestricted Definitive Note if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Registration Rights Agreement
and the Holder, in the case of an exchange, or the transferee, in
the case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Notes or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Registration Rights
Agreement;
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(C) any such transfer is effected by a Participating
Broker-Dealer pursuant to the Exchange Offer Registration Statement
in accordance with the Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Notes proposes
to exchange such Notes for an Unrestricted Definitive Note, a certificate
from such Holder in the form of Exhibit C hereto, including the
certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Notes proposes
to transfer such Notes to a Person who shall take delivery thereof in the
form of an Unrestricted Definitive Note, a certificate from such Holder in
the form of Exhibit B hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel that such exchange or
transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
(iii) Unrestricted Definitive Notes to Unrestricted Definitive
Notes. A Holder of Unrestricted Definitive Notes may transfer such Notes
to a Person who takes delivery thereof in the form of an Unrestricted
Definitive Note. Upon receipt of a request to register such a transfer,
the Registrar shall register the Unrestricted Definitive Notes pursuant to
the instructions from the Holder thereof.
(f) Exchange Offer. Upon the occurrence of the Exchange Offer in
accordance with the Registration Rights Agreement, the Company shall issue and,
upon receipt of an Authentication Order in accordance with Section 2.02, the
Trustee shall authenticate (i) one or more Unrestricted Global Notes in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Notes tendered for acceptance by Persons that
certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Notes and (z) they are not affiliates (as defined in Rule 144) of the Company,
and accepted for exchange in the Exchange Offer and (ii) Definitive Notes in an
aggregate principal amount equal to the principal amount of the Restricted
Definitive Notes accepted for exchange in the Exchange Offer. Concurrently with
the issuance of such Notes, the Trustee shall cause the aggregate principal
amount of the applicable Restricted Global Notes to be reduced accordingly, and
the Company shall execute and the Trustee shall authenticate and deliver to the
Persons designated by the Holders of Definitive Notes so accepted Definitive
Notes in the appropriate principal amount.
(g) Legends. The following legends shall appear on the face of all Global
Notes and Definitive Notes issued under this Indenture unless specifically
stated otherwise in the applicable provisions of this Indenture.
(i) Private Placement Legend.
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(A) Except as permitted by subparagraph (B) below, each Global
Note and each Definitive Note (and all Notes issued in exchange
therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THIS SECURITY AND THE GUARANTEES HEREOF HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"),
AND THIS SECURITY MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT OR IN
ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY
IS HEREBY NOTIFIED THAT THE SELLER MAY BE RELYING ON THE EXEMPTION
FROM THE PROVISIONS OF SECTION 5 OF THE SECURITIES ACT PROVIDED BY
RULE 144A THEREUNDER ("RULE 144A") OR ANOTHER EXEMPTION UNDER THE
SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY AGREES
FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS
DEFINED IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION
MEETING THE REQUIREMENTS OF RULE 144A (b) IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES ACT, (c) OUTSIDE
THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN
ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS
OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF THE
COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE
WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED
STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE HOLDER WILL,
AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER FROM
IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET
FORTH IN (A) ABOVE."
(B) Notwithstanding the foregoing, the Series B Notes and any
Global Note or Definitive Note issued pursuant to subparagraphs
(b)(iv), (c)(ii), (c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or
(f) to this Section 2.06 (and all Notes issued in exchange therefor
or substitution thereof) shall not bear the Private Placement
Legend.
(ii) Global Note Legend. Each Global Note shall bear a legend in
substantially the following form:
"THIS GLOBAL NOTE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS NOTE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO
ANY PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE
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MAY MAKE SUCH NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO
SECTION 2.07 OF THE INDENTURE, (II) THIS GLOBAL NOTE MAY BE
EXCHANGED IN WHOLE BUT NOT IN PART PURSUANT TO SECTION 2.06(a) OF
THE INDENTURE, (III) THIS GLOBAL NOTE MAY BE DELIVERED TO THE
TRUSTEE FOR CANCELLATION PURSUANT TO SECTION 2.11 OF THE INDENTURE
AND (IV) THIS GLOBAL NOTE MAY BE TRANSFERRED TO A SUCCESSOR
DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF THE COMPANY."
(iii) Regulation S Temporary Global Note Legend. The Regulation S
Temporary Global Note shall bear a legend in substantially the following
form:
"THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE,
AND THE CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR
CERTIFICATED NOTES, ARE AS SPECIFIED IN THE INDENTURE (AS DEFINED
HEREIN). NEITHER THE HOLDER NOR THE BENEFICIAL OWNERS OF THIS
REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED TO RECEIVE
PAYMENT OF INTEREST HEREON."
(h) Cancellation and/or Adjustment of Global Notes. At such time as all
beneficial interests in a particular Global Note have been exchanged for
Definitive Notes or a particular Global Note has been redeemed, repurchased or
canceled in whole and not in part, each such Global Note shall be returned to or
retained and canceled by the Trustee in accordance with Section 2.11 hereof. At
any time prior to such cancellation, if any beneficial interest in a Global Note
is exchanged for or transferred to a Person who will take delivery thereof in
the form of a beneficial interest in another Global Note or for Definitive
Notes, the principal amount of Notes represented by such Global Note shall be
reduced accordingly and an endorsement shall be made on such Global Note by the
Trustee or by the Depositary at the direction of the Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Note, such other Global Note shall be increased accordingly
and an endorsement shall be made on such Global Note by the Trustee or by the
Depositary at the direction of the Trustee to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company shall
execute and the Trustee shall authenticate Global Notes and Definitive Notes
upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial
interest in a Global Note or to a Holder of a Definitive Note for any
registration of transfer or exchange, but the Company may require payment
of a sum sufficient to cover any transfer tax or similar governmental
charge payable in connection therewith (other than any such transfer taxes
or similar governmental charge payable upon exchange or transfer pursuant
to Sections 2.10, 3.06, 3.09, 4.10, 4.15 and 9.05 hereof).
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(iii) The Registrar shall not be required to register the transfer
of or exchange any Note selected for redemption in whole or in part,
except the unredeemed portion of any Note being redeemed in part.
(iv) All Global Notes and Definitive Notes issued upon any
registration of transfer or exchange of Global Notes or Definitive Notes
shall be the valid obligations of the Company, evidencing the same debt,
and entitled to the same benefits under this Indenture, as the Global
Notes or Definitive Notes surrendered upon such registration of transfer
or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Notes during a period beginning at the
opening of business 15 days before the day of any selection of Notes for
redemption under Section 3.02 hereof and ending at the close of business
on the day of selection, (B) to register the transfer of or to exchange
any Note so selected for redemption in whole or in part, except the
unredeemed portion of any Note being redeemed in part or (C) to register
the transfer of or to exchange a Note between a record date and the next
succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of
any Note, the Trustee, any Agent and the Company may deem and treat the
Person in whose name any Note is registered as the absolute owner of such
Note for the purpose of receiving payment of principal of and interest on
such Notes and for all other purposes, and none of the Trustee, any Agent
or the Company shall be affected by notice to the contrary.
(vii) The Trustee shall authenticate Global Notes and Definitive
Notes in accordance with the provisions of Section 2.02 hereof.
(viii) All certifications, certificates and Opinions of Counsel
required to be submitted to the Registrar pursuant to this Section 2.06 to
effect a registration of transfer or exchange may be submitted by
facsimile.
SECTION 2.07. REPLACEMENT NOTES.
If any mutilated Note is surrendered to the Trustee or the Company
and the Trustee receives evidence to its satisfaction of the destruction, loss
or theft of any Note, the Company shall issue and the Trustee, upon receipt of
an Authentication Order, shall authenticate a replacement Note if the Trustee's
requirements are met. If required by the Trustee or the Company, an indemnity
bond must be supplied by the Holder that is sufficient in the judgment of the
Trustee and the Company to protect the Company, the Trustee, any Agent and any
authenticating agent from any loss that any of them may suffer if a Note is
replaced. The Company and the Trustee may charge for their respective expenses
in replacing a Note.
Every replacement Note is an additional obligation of the Company
and shall be entitled to all of the benefits of this Indenture equally and
proportionately with all other Notes duly issued hereunder.
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SECTION 2.08. OUTSTANDING NOTES.
The Notes outstanding at any time are all the Notes authenticated by
the Trustee except for those canceled by it, those delivered to it for
cancellation, those reductions in the interest in a Global Note effected by the
Trustee in accordance with the provisions hereof, and those described in this
Section as not outstanding. Except as set forth in Section 2.09 hereof, a Note
does not cease to be outstanding because the Company or an Affiliate of the
Company holds the Note; however, Notes held by the Company or a Subsidiary of
the Company shall not be deemed to be outstanding for purposes of Section
3.07(b) hereof.
If a Note is replaced pursuant to Section 2.07 hereof, it ceases to
be outstanding unless a Responsible Officer of the Trustee receives proof
satisfactory to it that the replaced Note is held by a bona fide purchaser.
If the principal amount of any Note is considered paid under Section
4.01 hereof, it ceases to be outstanding and interest on it ceases to accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Notes payable on that date, then on and after that date such
Notes shall be deemed to be no longer outstanding and shall cease to accrue
interest.
SECTION 2.09. TREASURY NOTES.
In determining whether the Holders of the required principal amount
of Notes have concurred in any direction, waiver or consent, Notes owned by the
Company, or by any Person directly or indirectly controlling or controlled by or
under direct or indirect common control with the Company, shall be considered as
though not outstanding, except that for the purposes of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Notes that a Responsible Officer of the Trustee actually knows are so owned
shall be so disregarded.
SECTION 2.10. TEMPORARY NOTES.
Until certificates representing Notes are ready for delivery, the
Company may prepare and the Trustee, upon receipt of an Authentication Order,
shall authenticate temporary Notes. Temporary Notes shall be substantially in
the form of certificated Notes but may have variations that the Company
considers appropriate for temporary Notes and as shall be reasonably acceptable
to the Trustee. Without unreasonable delay, the Company shall prepare and the
Trustee shall authenticate Definitive Notes in exchange for temporary Notes.
Holders of temporary Notes shall be entitled to all of the benefits
of this Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Notes to the Trustee for
cancellation. The Registrar and Paying Agent shall forward to the Trustee any
Notes surrendered to them for registration of transfer, exchange or payment. The
Trustee and no one else shall cancel all Notes surrendered for
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registration of transfer, exchange, payment, replacement or cancellation and
shall return such canceled Notes.
SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the Notes, it
shall pay the defaulted interest in any lawful manner plus, to the extent
lawful, interest payable on the defaulted interest, to the Persons who are
Holders on a subsequent special record date, in each case at the rate provided
in the Notes and in Section 4.01 hereof. The Company shall notify the Trustee in
writing of the amount of defaulted interest proposed to be paid on each Note and
the date of the proposed payment. The Company shall fix or cause to be fixed
each such special record date and payment date, provided that no such special
record date shall be less than 10 days prior to the related payment date for
such defaulted interest. At least 15 days before the special record date, the
Company (or, upon the written request of the Company, the Trustee in the name
and at the expense of the Company) shall mail or cause to be mailed to Holders a
notice that states the special record date, the related payment date and the
amount of such interest to be paid.
SECTION 2.13. CUSIP NUMBERS
The Company in issuing the Notes may use "CUSIP" numbers (if then
generally in use), and, if so, the Trustee shall use "CUSIP" numbers in notices
of redemption as a convenience to Holders; provided that any such notice may
state that no representation is made as to the correctness of such numbers
either as printed on the Notes or as contained in any notice of a redemption and
that reliance may be placed only on the other identification numbers printed on
the Notes, and any such redemption shall not be affected by any defect in or
omission of such numbers. The Company will promptly notify the Trustee of any
change in the "CUSIP" numbers.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO TRUSTEE.
If the Company elects to redeem Notes pursuant to the optional
redemption provisions of Section 3.07 hereof, it shall furnish to the Trustee,
at least 30 days but not more than 60 days before a redemption date, an
Officers' Certificate setting forth (i) the clause of this Indenture pursuant to
which the redemption shall occur, (ii) the redemption date, (iii) the principal
amount of Notes to be redeemed and (iv) the redemption price.
SECTION 3.02. SELECTION OF NOTES TO BE REDEEMED.
If less than all of the Notes are to be redeemed or purchased in an
offer to purchase at any time, the Trustee shall select the Notes to be redeemed
or purchased among the Holders of the Notes in compliance with the requirements
of the principal national securities exchange, if any, on which the Notes are
listed or, if the Notes are not so listed, on a pro rata basis, by lot or in
accordance with any other method the Trustee considers fair and appropriate. In
the event of partial redemption by lot, the particular Notes to be redeemed
shall be selected, unless otherwise provided herein, not less than 30 nor
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more than 60 days prior to the redemption date by the Trustee from the
outstanding Notes not previously called for redemption.
The Trustee shall promptly notify the Company in writing of the
Notes selected for redemption and, in the case of any Note selected for partial
redemption, the principal amount thereof to be redeemed. Notes and portions of
Notes selected shall be in amounts of $1,000 or whole multiples of $1,000;
except that if all of the Notes of a Holder are to be redeemed, the entire
outstanding amount of Notes held by such Holder, even if not a multiple of
$1,000, shall be redeemed. Except as provided in the preceding sentence,
provisions of this Indenture that apply to Notes called for redemption also
apply to portions of Notes called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days
but not more than 60 days before a redemption date, the Company shall mail or
cause to be mailed, by first class mail, a notice of redemption to each Holder
whose Notes are to be redeemed at its registered address.
The notice shall fully identify the Notes to be redeemed and shall
state:
(a) the redemption date;
(b) the redemption price;
(c) if any Note is being redeemed in part, the portion of the principal
amount of such Note to be redeemed and that, after the redemption date upon
surrender of such Note, a new Note or Notes in principal amount equal to the
unredeemed portion shall be issued upon cancellation of the original Note;
(d) the name and address of the Paying Agent;
(e) that Notes called for redemption must be surrendered to the Paying
Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption payment,
interest on Notes called for redemption ceases to accrue on and after the
redemption date;
(g) the paragraph of the Notes and/or Section of this Indenture pursuant
to which the Notes called for redemption are being redeemed;
(h) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the Notes; and
(i) the applicable CUSIP numbers.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at its expense; provided, however, that the
Company shall have delivered to the Trustee, at least 45 days prior to the
redemption date, an Officers' Certificate requesting that the Trustee
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give such notice and setting forth the information to be stated in such notice
as provided in the preceding paragraph.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section 3.03
hereof, Notes called for redemption become irrevocably due and payable on the
redemption date at the redemption price. A notice of redemption may not be
conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall
deposit with the Trustee or with the Paying Agent money sufficient to pay the
redemption price of and accrued interest on all Notes to be redeemed on that
date. The Trustee or the Paying Agent shall promptly return to the Company any
money deposited with the Trustee or the Paying Agent by the Company in excess of
the amounts necessary to pay the redemption price of, and accrued interest on,
all Notes to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Notes or the portions of Notes called for redemption. If a Note is redeemed
on or after an interest record date but on or prior to the related interest
payment date, then any accrued and unpaid interest shall be paid to the Person
in whose name such Note was registered at the close of business on such record
date. If any Note called for redemption shall not be so paid upon surrender for
redemption because of the failure of the Company to comply with the preceding
paragraph, interest shall be paid on the unpaid principal, from the redemption
date until such principal is paid, and to the extent lawful on any interest not
paid on such unpaid principal, in each case at the rate provided in the Notes
and in Section 4.01 hereof.
SECTION 3.06. NOTES REDEEMED IN PART.
Upon surrender of a Note that is redeemed in part, the Company shall
issue and, upon the Company's written request, the Trustee shall authenticate
for the Holder at the expense of the Company a new Note equal in principal
amount to the unredeemed portion of the Note surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Notes pursuant to this Section 3.07
prior to May 15, 2003. Thereafter, the Company shall have the option to redeem
the Notes, in whole or in part, upon not less than 30 nor more than 60 days'
notice, at the redemption prices (expressed as percentages of principal amount)
set forth below plus accrued and unpaid interest and Liquidated Damages thereon,
if any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on May 15 of the years indicated below:
Year Percentage
---- ----------
2003.............................................105.0625%
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2004.............................................103.3750%
2005.............................................101.6875%
2006 and thereafter..............................100.0000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.07, at
any time prior to May 15, 2001, the Company may on any one or more occasions
redeem up to 35% of the aggregate principal amount of Notes originally issued
under this Indenture at a redemption price of 110.125% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the redemption date, with the net cash proceeds of a Public Offering;
provided that at least 65% of the original aggregate principal amount of Notes
remains outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company or any of its Subsidiaries); and provided,
further, that such redemption shall occur within 45 days of the date of the
closing of such Public Offering.
At any time prior to May 15, 2003, the Notes may also be redeemed,
as a whole but not in part, at the option of the Company upon the occurrence of
a Change of Control, upon not less than 30 nor more than 60 days' prior notice
(but in no event may any such redemption occur more than 90 days after the
occurrence of such Change of Control) mailed by first-class mail to each
Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest and Liquidated Damages, if any, to, the date of redemption (the
"Redemption Date").
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant to
the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption
payments with respect to the Notes.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company
shall be required to commence an offer to all Holders to purchase Notes (an
"Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Notes required to be
purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less than
the Offer Amount has been tendered, all Notes tendered in response to the Asset
Sale Offer. Payment for any Notes so purchased shall be made in the same manner
as interest payments are made.
If the Purchase Date is on or after an interest record date and on
or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Note
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is registered at the close of business on such record date, and no additional
interest shall be payable to Holders who tender Notes pursuant to the Asset Sale
Offer.
Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to the Trustee and each of the Holders, with
a copy to the Trustee. The notice shall contain all instructions and materials
necessary to enable such Holders to tender Notes pursuant to the Asset Sale
Offer. The Asset Sale Offer shall be made to all Holders. The notice, which
shall govern the terms of the Asset Sale Offer, shall state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Note not tendered or accepted for payment shall continue to
accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any Note
accepted for payment pursuant to the Asset Sale Offer shall cease to accrete or
accrue interest after the Purchase Date;
(e) that Holders electing to have a Note purchased pursuant to an Asset
Sale Offer may only elect to have all of such Note purchased and may not elect
to have only a portion of such Note purchased;
(f) that Holders electing to have a Note purchased pursuant to any Asset
Sale Offer shall be required to surrender the Note, with the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Note completed, or
transfer by book-entry transfer, to the Company, a depositary, if appointed by
the Company, or a Paying Agent at the address specified in the notice at least
three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the Note
the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Note purchased;
(h) that, if the aggregate principal amount of Notes surrendered by
Holders exceeds the Offer Amount, the Company shall select the Notes to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Notes in denominations of $1,000, or
integral multiples thereof, shall be purchased); and
(i) that Holders whose Notes were purchased only in part shall be issued
new Notes equal in principal amount to the unpurchased portion of the Notes
surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for
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payment, on a pro rata basis to the extent necessary, the Offer Amount of Notes
or portions thereof tendered pursuant to the Asset Sale Offer, or if less than
the Offer Amount has been tendered, all Notes tendered, and shall deliver to the
Trustee an Officers' Certificate stating that such Notes or portions thereof
were accepted for payment by the Company in accordance with the terms of this
Section 3.09. The Company, the Depositary or the Paying Agent, as the case may
be, shall promptly (but in any case not later than five days after the Purchase
Date) mail or deliver to each tendering Holder an amount equal to the purchase
price of the Notes tendered by such Holder and accepted by the Company for
purchase, and the Company shall promptly issue a new Note, and the Trustee, upon
written request from the Company shall authenticate and mail or deliver such new
Note to such Holder, in a principal amount equal to any unpurchased portion of
the Note surrendered. Any Note not so accepted shall be promptly mailed or
delivered by the Company to the Holder thereof. The Company shall publicly
announce the results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF NOTES.
The Company shall pay or cause to be paid the principal of, premium,
if any, and interest on the Notes on the dates and in the manner provided in the
Notes. Principal, premium, if any, and interest shall be considered paid on the
date due if the Paying Agent, if other than the Company or a Subsidiary thereof,
holds as of 10:00 a.m. Eastern Time on the due date money deposited by the
Company in immediately available funds and designated for and sufficient to pay
all principal, premium, if any, and interest then due. The Company shall pay all
Liquidated Damages, if any, in the same manner on the dates and in the amounts
set forth in the Registration Rights Agreement.
The Company shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue principal at the rate equal
to 1% per annum in excess of the then applicable interest rate on the Notes to
the extent lawful; it shall pay interest (including post-petition interest in
any proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace period) at the same
rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City of
New York, an office or agency (which may be an office of the Trustee or an
affiliate of the Trustee, Registrar or co-registrar) where Notes may be
surrendered for registration of transfer or for exchange and where notices and
demands to or upon the Company in respect of the Notes and this Indenture may be
served. The Company shall give prompt written notice to the Trustee of the
location, and any change in the location, of such office or agency. If at any
time the Company shall fail to maintain any such required office or agency or
shall fail to furnish the Trustee with the address thereof, such presentations,
surrenders, notices and demands may be made or served at the Corporate Trust
Office of the Trustee.
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The Company may also from time to time designate one or more other
offices or agencies where the Notes may be presented or surrendered for any or
all such purposes and may from time to time rescind such designations; provided,
however, that no such designation or rescission shall in any manner relieve the
Company of its obligation to maintain an office or agency in the Borough of
Manhattan, the City of New York for such purposes. The Company shall give prompt
written notice to the Trustee of any such designation or rescission and of any
change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Trustee as one such office or agency of the Company in accordance with Section
2.03.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the
Commission, so long as any Notes are outstanding, the Company shall furnish to
the Holders of Notes and to the Trustee (i) all quarterly and annual financial
information that would be required to be contained in a filing with the
Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations," that describes the financial condition and results
of operations of the Company and its consolidated Subsidiaries (showing in
reasonable detail, either on the face of the financial statements or in the
footnotes thereto and in Management's Discussion and Analysis of Financial
Condition and Results of Operations, the financial condition and results of
operations of the Company and its Restricted Subsidiaries separate from the
financial condition and results of operations of the Unrestricted Subsidiaries
of the Company) and, with respect to the annual information only, a report
thereon by the Company's certified independent accountants and (ii) all current
reports that would be required to be filed with the Commission on Form 8-K if
the Company were required to file such reports, in each case within the time
periods specified in the Commission's rules and regulations. In addition,
following the consummation of the exchange offer contemplated by the
Registration Rights Agreement, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The Company shall at
all times comply with TIA ss. 314(a).
(b) For so long as any Notes remain outstanding, the Company and the
Guarantors shall furnish to the Holders and to securities analysts and
prospective investors, upon their request, the information required to be
delivered pursuant to Rule 144A(d)(4) under the Securities Act.
(c) Delivery of such reports, information and documents to the Trustee is
for information purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein, including
the Company's compliance with any of its covenants hereunder (as to which the
Trustee is entitled to rely exclusively on Officer's Certificates).
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company and each Guarantor (to the extent that such Guarantor is
so required under the TIA) shall deliver to the Trustee, within 90 days after
the end of each fiscal year, an Officers'
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Certificate stating that a review of the activities of the Company and its
Subsidiaries during the preceding fiscal year has been made under the
supervision of the signing Officers with a view to determining whether the
Company has kept, observed, performed and fulfilled its obligations under this
Indenture, and further stating, as to each such Officer signing such
certificate, that to the best of his or her knowledge the Company has kept,
observed, performed and fulfilled each and every covenant contained in this
Indenture and is not in default in the performance or observance of any of the
terms, provisions and conditions of this Indenture (or, if a Default or Event of
Default shall have occurred, describing all such Defaults or Events of Default
of which he or she may have knowledge and what action the Company is taking or
proposes to take with respect thereto) and that to the best of his or her
knowledge no event has occurred and remains in existence by reason of which
payments on account of the principal of or interest, if any, on the Notes is
prohibited or if such event has occurred, a description of the event and what
action the Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Trustee, forthwith upon any Officer becoming aware of any Default
or Event of Default, an Officers' Certificate specifying such Default or Event
of Default and what action the Company is taking or proposes to take with
respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Notes.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company and each of the Guarantors covenants (to the extent that
it may lawfully do so) that it shall not at any time insist upon, plead, or in
any manner whatsoever claim or take the benefit or advantage of, any stay,
extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Indenture; and the
Company and each of the Guarantors (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law has been enacted.
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SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company or
any of its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company and other than
dividends or distributions payable to the Company or a Restricted Subsidiary of
the Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company or other Affiliate of the Company (other than any
such Equity Interests owned by the Company or any Restricted Subsidiary of the
Company); (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Notes (other than Notes), except a payment of interest or
principal at Stated Maturity or as a mandatory or sinking fund payment; or (iv)
make any Restricted Investment (all such payments and other actions set forth in
clauses (i) through (iv) above being collectively referred to as "Restricted
Payments"), unless, at the time of and after giving effect to such Restricted
Payment:
(a) no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof;
(b) the Company would, at the time of such Restricted Payment and after
giving pro forma effect thereto as if such Restricted Payment had been made at
the beginning of the applicable four-quarter period, have been permitted to
incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in Section 4.09; and
(c) such Restricted Payment, together with the aggregate amount of all
other Restricted Payments made by the Company and its Restricted Subsidiaries
after the date of this Indenture (excluding Restricted Payments permitted by
clauses (ii), (iii), (iv), (v), (vii) and (ix) of the next succeeding
paragraph), is less than the sum, without duplication, of (i) 50% of the
Consolidated Net Income of the Company for the period (taken as one accounting
period) from the beginning of the first fiscal quarter commencing after the date
of this Indenture to the end of the Company's most recently ended fiscal quarter
for which internal financial statements are available at the time of such
Restricted Payment (or, if such Consolidated Net Income for such period is a
deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net cash
proceeds received by the Company since the date of this Indenture as a
contribution to its common equity capital or from the issue or sale of Equity
Interests of the Company (other than Disqualified Stock) or from the issue or
sale of Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of the
Company), plus (iii) 100% of the fair market value of any Person engaged in a
Permitted Business or assets used by the Company or a Restricted Subsidiary in a
Permitted Business which such Person or assets were acquired by the Company or
any of its Restricted Subsidiaries since the Issue Date; provided that the
consideration for such Person or assets consisted solely of Equity Interests of
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the Company (other than Disqualified Stock), plus (iv) to the extent that any
Restricted Investment that was made after the date of this Indenture is sold for
cash or otherwise liquidated or repaid for cash or the receipt of properties
used in a Permitted Business, the lesser of (A) the net cash proceeds of such
sale, liquidation or repayment or the fair market value (as determined in good
faith by a resolution of the Board of Directors set forth in an Officers'
Certificate delivered to the Trustee) of property received in exchange therefor
and (B) the amount of such Restricted Investment.
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Indenture; (ii) the redemption, repurchase, retirement, defeasance or other
acquisition of any pari passu or subordinated Indebtedness or Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of, other Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (c) (ii) of the preceding paragraph; (iii) the
defeasance, redemption or repurchase of any Disqualified Stock of the Company or
any Restricted Subsidiary in exchange for, or out of the substantially
concurrent sale (other than to the Company or a Subsidiary of the Company) of
Disqualified Stock of the Company or such Restricted Subsidiary, respectively;
provided that: (A) the aggregate liquidation preference of such Disqualified
Stock does not exceed the aggregate liquidation preference of the Disqualified
Stock so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (B) such
Disqualified Stock has a final maturity date later than the final maturity date
of, and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Notes; and (C) such Disqualified Stock
is incurred either by the Company or by the Restricted Subsidiary who is the
obligor on the Disqualified Stock being extended, refinanced, renewed, replaced,
defeased or refunded; (iv) the defeasance, redemption, repurchase or other
acquisition of subordinated Indebtedness with the net cash proceeds from an
incurrence of Permitted Refinancing Indebtedness; (v) the payment of any
dividend by a Restricted Subsidiary of the Company to the holders of its common
Equity Interests on a pro rata basis; (vi) so long as no Default or Event of
Default is continuing or would be caused thereby, the direct or indirect
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Company or any direct or indirect parent corporation of
the Company held by any member of the Company's (or any of its Restricted
Subsidiaries') management pursuant to any management equity subscription
agreement or stock option agreement in effect as of the date of this Indenture;
provided that the aggregate price paid for all such repurchased, redeemed,
acquired or retired Equity Interests shall not exceed $1.0 million in any
twelve-month period; (vii) dividends or other payments to Holdings sufficient to
enable Holdings to pay accounting, legal, corporate or reporting and
administrative expenses of Holdings incurred in the ordinary course of business
in an amount not to exceed $500,000 in any twelve-month period; (viii) the
making of loans by the Company or any of its Restricted Subsidiaries to officers
or directors of the Company; provided that the aggregate outstanding amount of
such loans shall not exceed, at any time, $2.0 million plus any such loans
outstanding on the date of this Indenture; (ix) payments to Holdings by the
Company or any Restricted Subsidiary with respect to taxes (including estimated
taxes) that are paid by Holdings on a combined, consolidated, unitary or similar
basis, to the extent that such payments do not exceed the amount that the
Company or such Restricted Subsidiary would have paid to the relevant taxing
authority if the Company or such Restricted Subsidiary filed a
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separate tax return for the period in question; (x) so long as no Default or
Event of Default is continuing or would be caused thereby, the defeasance,
redemption or repurchase of any preferred stock or Disqualified Stock issued in
connection with the acquisition of assets or a Permitted Business; provided that
the aggregate amount of such defeasance, redemption or repurchase payments shall
not exceed at any time $10.0 million; (xi) so long as no Default of Event of
Default is continuing or would be caused thereby, payments under the Management
Agreement as in effect on the Issue Date; (xii) the direct or indirect
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests of the Company or any direct or indirect parent corporation of
the Company held by any employee of the Company or a Restricted Subsidiary of
the Company upon the retirement of any such employee; provided that the
aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $400,000 less the amount of Restricted
Payments made pursuant to clause (xiv) below in any twelve-month period; (xiii)
the repurchase, redemption or other acquisition or retirement for value of the
Exchangeable Preferred Stock or Exchange Debentures with Excess Proceeds to the
extent such Excess Proceeds are permitted to be used for general corporate
purposes under Section 4.10 hereof; (xiv) the direct or indirect redemption,
repurchase or other acquisition or retirement for value of Class A Senior
Preferred Stock of Holdings from Holdings' qualified employee stock options
plans, which Class A Senior Preferred Stock will either be issued on the Issue
Date or issued as dividends thereon in accordance with the certificate of
designations relating thereto as in effect on the Issue Date, provided that such
redemption, repurchase or other acquisition or retirement is required by
applicable law and such plans; and (xv) the distribution of any Parity Note.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default. In the
event of any such designation, all outstanding Investments owned by the Company
and its Restricted Subsidiaries in the Subsidiary so designated will be deemed
to be an Investment made as of the time of such designation and will reduce the
amount available for Restricted Payments under the first paragraph of this
Section 4.07 or Permitted Investments, as applicable. All such outstanding
Investments will be deemed to constitute Restricted Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary. The Board of Directors may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if such
redesignation would not cause a Default.
The amount of all Restricted Payments (other than cash) and
Qualified Proceeds (other than cash) shall be the fair market value on the date
of the Restricted Payment (or date of receipt of Qualified Proceeds) of the
asset(s) or securities proposed to be transferred or issued by the Company or
such Restricted Subsidiary, as the case may be, pursuant to the Restricted
Payment. The fair market value of any assets or securities that are required to
be valued by this Section 4.07 shall be determined by the Board of Directors
whose resolution with respect thereto shall be delivered to the Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $5.0 million. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Trustee an Officers' Certificate
stating that such Restricted Payment is permitted and setting forth the basis
upon which the calculations required by this Section 4.07 were computed,
together with a copy of any fairness opinion or appraisal required by this
Indenture. Accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms and
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the payment of dividends on Disqualified Stock in the form of additional shares
of the same class of Disqualified Stock will not be deemed to be a Restricted
Payment for purposes of this Section 4.07; provided, in each such case, that the
amount thereof is included in Fixed Charges of the Company as accrued.
SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) (a) pay dividends or make any other distributions
to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries. However, the foregoing
restrictions will not apply to encumbrances or restrictions existing under or by
reason of (a) Existing Indebtedness as in effect on the date of this Indenture,
(b) the Senior Credit Facility as in effect as of the date of this Indenture,
and any amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings thereof, provided that
such amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings are no more restrictive, taken as a
whole, with respect to such dividend and other payment restrictions than those
contained in the Senior Credit Facility as in effect on the date of this
Indenture, (c) this Indenture and the Notes, (d) applicable law, (e) any
instrument governing Indebtedness or Capital Stock of a Person acquired by the
Company or any of its Restricted Subsidiaries as in effect at the time of such
acquisition (except to the extent such Indebtedness was incurred in connection
with or in contemplation of such acquisition), which encumbrance or restriction
is not applicable to any Person, or the properties or assets of any Person,
other than the Person, or the property or assets of the Person, so acquired;
provided that, in the case of Indebtedness, such Indebtedness was permitted by
the terms of this Indenture to be incurred, (f) customary non-assignment
provisions in leases entered into in the ordinary course of business and
consistent with past practices, (g) purchase money obligations for property
acquired in the ordinary course of business that impose restrictions of the
nature described in clause (iii) above on the property so acquired, (h) any
agreement for the sale or other disposition of a Restricted Subsidiary that
restricts distributions by that Restricted Subsidiary pending its sale or other
disposition, (i) Permitted Refinancing Indebtedness, provided that the
restrictions contained in the agreements governing such Permitted Refinancing
Indebtedness are no more restrictive, taken as a whole, than those contained in
the agreements governing the Indebtedness being refinanced, (j) Liens securing
Indebtedness otherwise permitted to be incurred pursuant to the provisions of
Section 4.12 hereof that limit the right of the Company or any of its Restricted
Subsidiaries to dispose of the assets subject to such Lien, (k) provisions with
respect to the disposition or distribution of assets or property in joint
venture agreements and other similar agreements entered into in the ordinary
course of business, (l) restrictions on cash or other deposits or net worth
imposed by customers under contracts entered into in the ordinary course of
business, (m) any other security agreement, instrument or document relating to
Senior Indebtedness hereafter in effect; provided that such encumbrances or
restrictions are customary in connection with such documents and that the terms
and conditions of such encumbrances or restrictions are no more restrictive than
those encumbrances or restrictions imposed in connection with the Senior Credit
Facility as in effect on the Issue Date, (n) any agreement relating to a sale
and leaseback transaction or capital lease, but only on the property subject to
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such transaction or lease and only to the extent that such restrictions or
encumbrances are customary with respect to a sale and leaseback transaction or
capital lease, (o) the Canadian Credit Facility as in effect as of the date of
this Indenture, and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof,
provided that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are no more restrictive,
taken as a whole, with respect to such dividend and other payment restrictions
than those contained in the Canadian Credit Facility as in effect on the date of
this Indenture or (p) customary restrictions imposed on the payment of dividends
by a Receivables Subsidiary in connection with a Qualified Receivables
Transaction.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company (i) shall not, and shall not permit any of its
Restricted Subsidiaries to, directly or indirectly, create, incur, issue,
assume, guarantee or otherwise become directly or indirectly liable,
contingently or otherwise, with respect to (collectively, "incur") any
Indebtedness (including Acquired Debt), (ii) shall not issue any Disqualified
Stock and shall not permit any of its Restricted Subsidiaries to issue any
shares of preferred stock; provided, however, that the Company may incur
Indebtedness (including Acquired Debt) or issue shares of Disqualified Stock and
the Guarantors may incur Indebtedness (including Guarantees) or issue preferred
stock if the Fixed Charge Coverage Ratio for the Company's most recently ended
four full fiscal quarters for which internal financial statements are available
immediately preceding the date on which such additional Indebtedness is incurred
or such Disqualified Stock or preferred stock is issued would have been at least
2.0 to 1.0, determined on a pro forma basis (including a pro forma application
of the net proceeds therefrom), as if the additional Indebtedness had been
incurred, or the Disqualified Stock or preferred stock had been issued, as the
case may be, at the beginning of such four-quarter period.
The foregoing provisions shall not apply to the incurrence of any of
the following items of Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Company of Indebtedness under the Senior Credit
Facility in an aggregate principal amount not exceeding an amount equal to
$160.0 million less the aggregate amount of all Net Proceeds of Asset Sales
applied by the Company or any of its Restricted Subsidiaries to permanently
repay Indebtedness under the Senior Credit Facility pursuant to Section 4.10
hereof;
(ii) the incurrence by Cluett Peabody Canada Inc. of Indebtedness under
the Canadian Credit Facility in an aggregate principal amount not exceeding an
amount equal to $15.0 million less the aggregate amount of all Net Proceeds of
Asset Sales applied by the Company or any of its Restricted Subsidiaries to
permanently repay revolving credit Indebtedness under the Canadian Credit
Facility pursuant to Section 4.10 hereof;
(iii) the incurrence by the Company and its Restricted Subsidiaries of the
Existing Indebtedness;
(iv) the incurrence by the Company of Indebtedness represented by the
Notes (other than any Additional Notes) the Exchange Notes and the Parity Notes;
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(v) the incurrence by the Company or any of its Restricted Subsidiaries of
Indebtedness represented by Capital Lease Obligations, mortgage financings or
purchase money obligations, in each case incurred for the purpose of financing
all or any part of the purchase price or cost of construction or improvement of
property, plant or equipment used in the business of the Company or such
Restricted Subsidiary, in an aggregate principal amount not to exceed $10.0
million at any time outstanding;
(vi) the incurrence by the Company or any of its Restricted Subsidiaries
of Permitted Refinancing Indebtedness in exchange for, or the net proceeds of
which are used to refund, refinance or replace Existing Indebtedness or
Indebtedness (other than intercompany Indebtedness) that was permitted by this
Indenture to be incurred under the first paragraph hereof or clauses (iv), (v),
(vi), (ix) or (xv) of this paragraph;
(vii) the incurrence by the Company or any of its Restricted Subsidiaries
of intercompany Indebtedness between or among the Company and any of its
Restricted Subsidiaries; provided, however, that (i) if the Company is the
obligor on such Indebtedness, such Indebtedness is expressly subordinated to the
prior payment in full in cash of all Obligations with respect to the Notes and
(ii)(A) any subsequent issuance or transfer of Equity Interests that results in
any such Indebtedness being held by a Person other than the Company or a
Restricted Subsidiary thereof and (B) any sale or other transfer of any such
Indebtedness to a Person that is not either the Company or a Restricted
Subsidiary thereof shall be deemed, in each case, to constitute an incurrence of
such Indebtedness by the Company or such Restricted Subsidiary, as the case may
be, that was not permitted by this clause (vii);
(viii) the incurrence by the Company or any of its Restricted Subsidiaries
of Hedging Obligations that are incurred for the purpose of fixing or hedging
interest rate risk with respect to any floating rate Indebtedness that is
permitted by the terms of this Indenture to be outstanding;
(ix) the incurrence by the Company or any of its Restricted Subsidiaries
of Indebtedness in connection with the acquisition of assets or a new
Subsidiary; provided that such Indebtedness was incurred by the prior owner of
such assets or such Subsidiary prior to such acquisition by the Company or one
of its Restricted Subsidiaries and was not incurred in connection with, or in
contemplation of, such acquisition by the Company or one of it Restricted
Subsidiaries; and provided, further, that the principal amount (or accreted
value, as applicable) of such Indebtedness, together with any other outstanding
Indebtedness incurred pursuant to this clause (ix) and any Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (ix), does not exceed $5.0 million;
(x) the guarantee by the Company or any of the Guarantors of Indebtedness
of the Company or a Restricted Subsidiary of the Company that was permitted to
be incurred by another provision of this Section 4.09;
(xi) indebtedness incurred in respect of workers' compensation claims,
self-insurance obligations, performance, surety and similar bonds and completion
guarantees provided by the Company or a Guarantor in the ordinary course of
business;
(xii) Indebtedness arising from guarantees of Indebtedness of the Company
or any Subsidiary or the agreements of the Company or a Restricted Subsidiary
providing for indemnification, adjustment of purchase price or similar
obligations, in each case, incurred or assumed in connection with the
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disposition of any business, assets or Capital Stock of a Restricted Subsidiary,
or other guarantees of Indebtedness incurred by any person acquiring all or any
portion of such business, assets or Capital Stock of a Restricted Subsidiary for
the purpose of financing such acquisition; provided that the maximum aggregate
liability in respect of all such Indebtedness shall at no time exceed the gross
proceeds actually received by the Company and its Restricted Subsidiaries in
connection with such disposition;
(xiii) Indebtedness of a Receivables Subsidiary that is not recourse to
the Company or any other Restricted Subsidiary of the Company (other than
Standard Securitization Undertakings) incurred in connection with a Qualified
Receivables Transaction;
(xiv) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases to be
Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be deemed to
constitute an incurrence of Indebtedness by a Restricted Subsidiary of the
Company that was not permitted by this clause (xiv); and
(xv) the incurrence by the Company or any of its Restricted Subsidiaries
of additional Indebtedness in an aggregate principal amount (or accreted value,
as applicable) at any time outstanding, including all Permitted Refinancing
Indebtedness incurred to refund, refinance or replace any Indebtedness incurred
pursuant to this clause (xv), not to exceed $10.0 million.
For purposes of determining compliance with this Section 4.09, in
the event that an item of Indebtedness meets the criteria of more than one of
the categories of Permitted Debt described in clauses (i) through (xv) above or
is entitled to be incurred pursuant to the first paragraph of this Section 4.09,
the Company shall, in its sole discretion, classify such item of Indebtedness on
the date of its incurrence in any manner that complies with this Section 4.09.
Accrual of interest, accretion or amortization of original issue discount, the
payment of interest on any Indebtedness in the form of additional Indebtedness
with the same terms, and the payment of dividends on Disqualified Stock in the
form of additional shares of the same class of Disqualified Stock shall not be
deemed to be an incurrence of Indebtedness or an issuance of Disqualified Stock
for purposes of this Section 4.09; provided, in each such case, that the amount
thereof is included in Fixed Charges of the Company as accrued. For purposes of
determining compliance with any U.S. dollar-denominated restriction on the
incurrence of indebtedness, the U.S. dollar-equivalent principal amount of
indebtedness denominated in a foreign currency shall be calculated based on the
relevant currency exchange rate in effect on the date such indebtedness was
incurred.
In addition, the Company shall not incur any Indebtedness (including
Permitted Debt) that is contractually subordinated in right of payment to any
other Indebtedness of the Company unless such Indebtedness is also contractually
subordinated in right of payment to the Notes on substantially identical terms;
provided, however, that no Indebtedness of the Company shall be deemed to be
contractually subordinated in right of payment to any other Indebtedness of the
Company solely by virtue of being unsecured.
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the
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assets or Equity Interests issued or sold or otherwise disposed of and (ii) at
least 75% of the consideration therefor received by the Company or such
Restricted Subsidiary is in the form of (A) cash or Cash Equivalents or (B)
Qualified Proceeds; provided that the aggregate fair market value of Qualified
Proceeds (other than cash or Cash Equivalents), which may be received in
consideration for asset sales pursuant to this clause (ii)(B) shall not exceed
$5.0 million since the Issue Date; provided that the amount of (x) any
liabilities (as shown on the Company's or such Restricted Subsidiary's most
recent balance sheet) of the Company or any Restricted Subsidiary (other than
contingent liabilities and liabilities that are by their terms subordinated to
the Notes or any guarantee thereof) that are assumed by the transferee of any
such assets pursuant to a customary novation agreement that releases the Company
or such Restricted Subsidiary from further liability and (y) any securities,
notes or other obligations received by the Company or any such Restricted
Subsidiary from such transferee that are contemporaneously (subject to ordinary
settlement periods) converted by the Company or such Restricted Subsidiary into
cash (to the extent of the cash received), shall be deemed to be cash for
purposes of this Section 4.10.
Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds, at its option, (a) to permanently
repay Senior Indebtedness, (b) to acquire all or substantially all of the assets
of, or a majority of the Voting Stock of, another Permitted Business, (c) to
make a capital expenditure or (d) to acquire other long-term assets that are
used or useful in a Permitted Business. Pending the final application of any
such Net Proceeds, the Company may temporarily reduce revolving credit
borrowings or otherwise invest such Net Proceeds in any manner that is not
prohibited by this Indenture. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $10.0 million, the Company will be required to make an offer to
all Holders of Notes and all holders of other Indebtedness that is pari passu
with the Notes containing provisions similar to those set forth in this
Indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount
of Notes and such other pari passu Indebtedness that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in this Indenture and such other pari passu Indebtedness. To the extent
that any Excess Proceeds remain after consummation of an Asset Sale Offer, or in
the event the holders of the Notes and such other indebtedness decline such
Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not
otherwise prohibited by this Indenture. If the aggregate principal amount of
Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes and such other pari passu Indebtedness to be
purchased on a pro rata basis. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no
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less favorable to the Company or the relevant Restricted Subsidiary than those
that would have been obtained in a comparable transaction by the Company or such
Restricted Subsidiary with an unrelated Person and (ii) the Company delivers to
the Trustee (a) with respect to any Affiliate Transaction or series of related
Affiliate Transactions involving aggregate consideration in excess of $1.0
million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of the Company or such Restricted
Subsidiary, (ii) transactions between or among the Company and/or its Restricted
Subsidiaries, (iii) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company, (iv) any sale or other issuance of Equity
Interests (other than Disqualified Stock) of the Company, (v) payments made
pursuant to the Management Agreement in effect as of the Issue Date and (vi)
Restricted Payments that are permitted by the provisions of Section 4.07 hereof.
SECTION 4.12. LIENS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien securing Indebtedness, on any asset now owned or hereafter
acquired, except Permitted Liens, unless all payments due under this Indenture
and the Notes are secured on an equal and ratable basis with the Indebtedness so
secured until such time as such is no longer secured by a Lien; provided that if
such Indebtedness is by its terms expressly subordinated to the Notes or any
Subsidiary Guarantee, the Lien securing such Indebtedness shall be subordinate
and junior to the Lien securing the Notes and the Subsidiary Guarantees with the
same relative priority as such subordinate or junior Indebtedness shall have
with respect to the Notes and the Subsidiary Guarantees.
SECTION 4.13. BUSINESS ACTIVITIES
The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any business other than Permitted Businesses, except to
such extent as would not be material to the Company and its Subsidiaries taken
as a whole.
SECTION 4.14. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of
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the business of the Company and its Subsidiaries, taken as a whole, and that the
loss thereof is not adverse in any material respect to the Holders of the Notes.
SECTION 4.15. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of Notes
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Notes pursuant to
the offer described in this Section 4.15 (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate principal amount thereof plus
accrued and unpaid interest and Liquidated Damages thereon, if any, to the date
of purchase (the "Change of Control Payment"). Within 30 days following any
Change of Control, the Company shall mail a notice to each Holder and the
Trustee describing the transaction or transactions that constitute the Change of
Control and offering to repurchase the Notes from Holders on the date specified
in such notice, which date shall be no earlier than 30 days and no later than 60
days from the date such notice is mailed (the "Change of Control Payment Date"),
pursuant to the procedures required by this Indenture and described in such
notice. The Company shall comply with the requirements of Rule 14e-1 under the
Exchange Act and any other securities laws and regulations thereunder to the
extent such laws and regulations are applicable in connection with the
repurchase of the Notes as a result of a Change of Control.
(b) On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Notes or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all Notes
or portions thereof so tendered and (3) deliver or cause to be delivered to the
Trustee the Notes so accepted together with an Officers' Certificate stating the
aggregate principal amount of Notes or portions thereof being purchased by the
Company. The Paying Agent shall promptly mail to each Holder of Notes so
tendered the Change of Control Payment for such Notes, and the Trustee shall
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a new Note equal in principal amount to any unpurchased portion of
the Notes surrendered, if any; provided that each such new Note shall be in a
principal amount of $1,000 or an integral multiple thereof. Prior to complying
with the provisions of this Section 4.15, but in any event within 90 days
following a Change of Control, the Company shall either repay all outstanding
Senior Indebtedness or obtain the requisite consents, if any, under all
agreements governing outstanding Senior Indebtedness to permit the repurchase of
Notes required by this Section 4.15. The Company shall publicly announce the
results of the Change of Control Offer on or as soon as practicable after the
Change of Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.15,
the Company shall not be required to make a Change of Control Offer upon a
Change of Control if a third party makes the Change of Control Offer in the
manner, at the times and otherwise in compliance with the requirements set forth
in this Section 4.15 and Section 3.09 hereof and purchases all Notes validly
tendered and not withdrawn under such Change of Control Offer.
SECTION 4.16. NO SENIOR SUBORDINATED DEBT.
The Company shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to any Indebtedness of the Company and senior in any respect in
right of payment to the Notes; and no Guarantor shall incur, create,
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issue, assume, guarantee or otherwise become liable for any Indebtedness that is
subordinate or junior in right of payment to any Indebtedness of such Guarantor
and senior in any respect in right of payment to the Subsidiary Guarantees of
such Guarantor.
SECTION 4.17. LIMITATIONS ON ISSUANCES OF GUARANTEES OF INDEBTEDNESS.
The Company shall not permit any Restricted Subsidiary which is not a
Guarantor, directly or indirectly, to Guarantee or pledge any assets to secure
the payment of any other Indebtedness of the Company unless such Restricted
Subsidiary simultaneously executes and delivers a supplemental indenture to this
Indenture providing for the Guarantee of the payment of the Notes by such
Restricted Subsidiary, which Guarantee shall be senior to or pari passu with
such Restricted Subsidiary's Guarantee of or pledge to secure such other
Indebtedness unless such other Indebtedness is Senior Indebtedness, in which
case the Guarantee of the Notes may be subordinated to the Guarantee of such
Senior Indebtedness to the same extent as the Notes are subordinated to such
Senior Indebtedness. Notwithstanding the foregoing, any such Guarantee by a
Restricted Subsidiary of the Notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged upon any sale,
exchange or transfer, to any Person not an Affiliate of the Company, of all of
the Company's stock in, or all or substantially all the assets of, such
Restricted Subsidiary, which sale, exchange or transfer is made in compliance
with the applicable provisions of this Indenture. The form of such Guarantee is
attached as Exhibit E hereto.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not, directly or indirectly, consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Registration Rights Agreement, the Notes and this Indenture
pursuant to a supplemental indenture in a form reasonably satisfactory to the
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; and (iv) except in the case of a merger of the Company with or into a
Wholly Owned Restricted Subsidiary of the Company, the Company or the entity or
Person formed by or surviving any such consolidation or merger (if other than
the Company), or to which such sale, assignment, transfer, lease, conveyance or
other disposition shall have been made (A) will have Consolidated Net Worth
immediately after the transaction equal to or greater than the Consolidated Net
Worth of the Company immediately preceding the transaction and (B) will,
immediately after such transaction after giving pro forma effect thereto and any
related financing transactions as if the same had occurred at the beginning
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of the applicable four-quarter period, be permitted to incur at least $1.00 of
additional Indebtedness pursuant to the Fixed Charge Coverage Ratio test set
forth in the first paragraph of Section 4.09.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Indenture referring to the "Company" shall refer instead to
the successor corporation and not to the Company), and may exercise every right
and power of the Company under this Indenture with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
principal of and interest on the Notes except in the case of a sale of all of
the Company's assets that meets the requirements of Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
Each of the following constitutes an Event of Default:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Notes (whether or not permitted by the
subordination provisions of this Indenture) and such default continues for a
period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Notes when the same becomes due and payable at maturity,
upon redemption (including in connection with an offer to purchase) or otherwise
(whether or not permitted by the subordination provisions of this Indenture);
(c) the Company or any of its Restricted Subsidiaries fails to comply with
any of the provisions of Section 5.01 hereof;
(d) the Company or any of its Restricted Subsidiaries fails to observe or
perform any other covenant, representation, warranty or other agreement in this
Indenture or the Notes for 60 days after notice to the Company by the Trustee or
the Holders of at least 25% in aggregate principal amount of the Notes then
outstanding voting as a single class;
(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date hereof, which default (a) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness prior to
the expiration of the
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grace period provided in such Indebtedness on the date of such default (a
"Payment Default") or (b) results in the acceleration of such Indebtedness prior
to its express maturity and, in each case, the principal amount of any such
Indebtedness, together with the principal amount of any other such Indebtedness
under which there has been a Payment Default or the maturity of which has been
so accelerated, aggregates $5.0 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any of its Restricted Subsidiaries and such judgment or judgments remain
undischarged for a period (during which execution shall not be effectively
stayed) of 60 days, provided that the aggregate of all such undischarged
judgments exceeds $5.0 million;
(g) the Company or any of its Restricted Subsidiaries pursuant to or
within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any of its Restricted
Subsidiaries in an involuntary case,
(ii) appoints a Custodian of the Company or any of its Restricted
Subsidiaries or for all or substantially all of the property of the
Company or any of its Restricted Subsidiaries or
(iii) orders the liquidation of the Company or any of its Restricted
Subsidiaries,
and the order or decree remains unstayed and in effect for 60 consecutive
days; or
(i) except as permitted by this Indenture, any Subsidiary Guarantee is
held in any judicial proceeding to be unenforceable or invalid or shall cease
for any reason to be in full force and effect or any Guarantor, or any Person
acting on behalf of any Guarantor, shall deny or disaffirm its obligations under
such Subsidiary Guarantee.
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to the Company, any
Significant
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Subsidiary or any group of Significant Subsidiaries that, taken as a whole,
would constitute a Significant Subsidiary) occurs and is continuing, the Trustee
or the Holders of at least 25% in principal amount of the then outstanding Notes
may declare all the Notes to be due and payable immediately. Upon any such
declaration, the Notes shall become due and payable immediately. Notwithstanding
the foregoing, if an Event of Default specified in clause (g) or (h) of Section
6.01 hereof occurs with respect to the Company, any of its Significant
Subsidiaries or any group of Subsidiaries that, taken as a whole, would
constitute a Significant Subsidiary, all outstanding Notes shall be due and
payable immediately without further action or notice. The Holders of a majority
in aggregate principal amount of the then outstanding Notes by written notice to
the Trustee may on behalf of all of the Holders rescind an acceleration and its
consequences if the rescission would not conflict with any judgment or decree
and if all existing Events of Default (except nonpayment of principal, interest
or premium that has become due solely because of the acceleration) have been
cured or waived.
The Company is required to deliver to the Trustee annually a
statement regarding compliance with this Indenture, and the Company is required
upon becoming aware of any Default or Event of Default, to deliver to the
Trustee a statement specifying such Default or Event of Default.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Trustee may
pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Notes or to enforce the performance of any provision of
the Notes or this Indenture.
The Trustee may maintain a proceeding even if it does not possess
any of the Notes or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Holder of a Note in exercising any right or
remedy accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. All remedies are
cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Notes by notice to the Trustee may on behalf of the Holders
of all of the Notes waive an existing Default or Event of Default and its
consequences hereunder, except a continuing Default or Event of Default in the
payment of the principal of, premium and Liquidated Damages, if any, or interest
on, the Notes (including in connection with an offer to purchase) (provided,
however, that the Holders of a majority in aggregate principal amount of the
then outstanding Notes may rescind an acceleration and its consequences,
including any related payment default that resulted from such acceleration).
Upon any such waiver, such Default shall cease to exist, and any Event of
Default arising therefrom shall be deemed to have been cured for every purpose
of this Indenture; but no such waiver shall extend to any subsequent or other
Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Notes may direct the time, method and place of conducting any proceeding for
exercising any remedy available to the Trustee or exercising any trust or power
conferred on it. However, the Trustee may refuse to follow any
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direction that conflicts with law or this Indenture that the Trustee determines
may be unduly prejudicial to the rights of other Holders of Notes or that may
involve the Trustee in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Note may pursue a remedy with respect to this
Indenture or the Notes only if:
(a) the Holder of a Note gives to the Trustee written notice of a
continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Notes make a written request to the Trustee to pursue
the remedy;
(c) such Holder of a Note or Holders of Notes offer and, if requested,
provide to the Trustee indemnity satisfactory to the Trustee against
any loss, liability or expense;
(d) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Notes do not give the Trustee a
direction inconsistent with the request.
A Holder of a Note may not use this Indenture to prejudice the
rights of another Holder of a Note or to obtain a preference or priority over
another Holder of a Note.
SECTION 6.07. RIGHTS OF HOLDERS OF NOTES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Indenture, the right of
any Holder of a Note to receive payment of principal, premium and Liquidated
Damages, if any, and interest on the Note, on or after the respective due dates
expressed in the Note (including in connection with an offer to purchase), or to
bring suit for the enforcement of any such payment on or after such respective
dates, shall not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs
and is continuing, the Trustee is authorized to recover judgment in its own name
and as trustee of an express trust against the Company for the whole amount of
principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Notes and interest on overdue principal and, to the extent lawful,
interest and such further amount as shall be sufficient to cover the costs and
expenses of collection, including the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM.
The Trustee is authorized to file such proofs of claim and other
papers or documents as may be necessary or advisable in order to have the claims
of the Trustee (including any claim for the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel)
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and the Holders of the Notes allowed in any judicial proceedings relative to the
Company (or any other obligor upon the Notes), its creditors or its property and
shall be entitled and empowered to collect, receive and distribute any money or
other property payable or deliverable on any such claims and any custodian in
any such judicial proceeding is hereby authorized by each Holder to make such
payments to the Trustee, and in the event that the Trustee shall consent to the
making of such payments directly to the Holders, to pay to the Trustee any
amount due to it for the reasonable compensation, expenses, disbursements and
advances of the Trustee, its agents and counsel, and any other amounts due the
Trustee under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel, and any other amounts due the Trustee under Section 7.07 hereof out
of the estate in any such proceeding, shall be denied for any reason, payment of
the same shall be secured by a Lien on, and shall be paid out of, any and all
distributions, dividends, money, securities and other properties that the
Holders may be entitled to receive in such proceeding whether in liquidation or
under any plan of reorganization or arrangement or otherwise. Nothing herein
contained shall be deemed to authorize the Trustee to authorize or consent to or
accept or adopt on behalf of any Holder any plan of reorganization, arrangement,
adjustment or composition affecting the Notes or the rights of any Holder, or to
authorize the Trustee to vote in respect of the claim of any Holder in any such
proceeding.
SECTION 6.10. PRIORITIES.
If the Trustee collects any money pursuant to this Article, it shall
pay out the money in the following order:
First: to the Trustee, its agents and attorneys for amounts due
under Section 7.07 hereof, including payment of all compensation, expense and
liabilities incurred, and all advances made, by the Trustee and the costs and
expenses of collection;
Second: to Holders of Notes for amounts due and unpaid on the Notes
for principal, premium and Liquidated Damages, if any, and interest, ratably,
without preference or priority of any kind, according to the amounts due and
payable on the Notes for principal, premium, and Liquidated Damages, if any and
interest, respectively; and
Third: to the Company.
The Trustee may fix a record date and payment date for any payment
to Holders of Notes pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Indenture or in any suit against the Trustee for any action taken or omitted by
it as a Trustee, a court in its discretion may require the filing by any party
litigant in the suit of an undertaking to pay the costs of the suit, and the
court in its discretion may assess reasonable costs, including reasonable
attorneys' fees and expenses, against any party litigant in the suit, having due
regard to the merits and good faith of the claims or defenses made by the party
litigant. This Section does not apply to a suit by the Trustee, a suit by a
Holder of a Note pursuant to Section 6.07 hereof, or a suit by Holders of more
than 10% in principal amount of the then outstanding Notes.
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ARTICLE 7.
TRUSTEE
SECTION 7.01. DUTIES OF TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the
Trustee shall exercise such of the rights and powers vested in it by this
Indenture, and use the same degree of care and skill in its exercise, as a
prudent man would exercise or use under the circumstances in the conduct of his
own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Trustee shall be determined solely by the
express provisions of this Indenture and the Trustee need perform only
those duties that are specifically set forth in this Indenture and no
others, and no implied covenants or obligations shall be read into this
Indenture against the Trustee; and
(ii) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness
of the opinions expressed therein, upon certificates or opinions furnished
to the Trustee and conforming to the requirements of this Indenture.
However, the Trustee shall examine the certificates and opinions to
determine whether or not they conform to the requirements of this
Indenture.
(c) The Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of
this Section;
(ii) the Trustee shall not be liable for any error of judgment made
in good faith by a Responsible Officer, unless it is proved that the
Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of
this Indenture that in any way relates to the Trustee is subject to paragraphs
(a), (b), and (c) of this Section.
(e) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or incur any liability. The Trustee shall be under
no obligation to exercise any of its rights and powers under this Indenture at
the request of any Holders, unless such Holder shall have offered to the Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
Money held in trust by the Trustee need not be segregated from other funds
except to the extent required by law.
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SECTION 7.02. RIGHTS OF TRUSTEE.
(a) The Trustee may conclusively rely upon any document believed by
it to be genuine and to have been signed or presented by the proper Person. The
Trustee need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel or both. The Trustee shall not
be liable for any action it takes or omits to take in good faith in reliance on
such Officers' Certificate or Opinion of Counsel. The Trustee may consult with
counsel of its selection and the advice of such counsel or any Opinion of
Counsel shall be full and complete authorization and protection from liability
in respect of any action taken, suffered or omitted by it hereunder in good
faith and in reliance thereon.
(c) The Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith that it believes to be authorized or within the rights or
powers conferred upon it by this Indenture.
(e) Unless otherwise specifically provided in this Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Trustee shall be under no obligation to exercise any of the
rights or powers vested in it by this Indenture at the request or direction of
any of the Holders unless such Holders shall have offered to the Trustee
security or indemnity satisfactory to it against the costs, expenses and
liabilities that might be incurred by it in compliance with such request or
direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE.
The Trustee in its individual or any other capacity may become the
owner or pledgee of Notes and may otherwise deal with the Company or any
Affiliate of the Company with the same rights it would have if it were not
Trustee. However, in the event that the Trustee acquires any conflicting
interest it must eliminate such conflict within 90 days, apply to the SEC for
permission to continue as trustee or resign. Any Agent may do the same with like
rights and duties. The Trustee is also subject to Sections 7.10 and 7.11 hereof.
SECTION 7.04. TRUSTEE'S DISCLAIMER.
The Trustee shall not be responsible for and makes no representation
as to the validity or adequacy of this Indenture or the Notes, it shall not be
accountable for the Company's use of the proceeds from the Notes or any money
paid to the Company or upon the Company's direction under any provision of this
Indenture, it shall not be responsible for the use or application of any money
received by any Paying Agent other than the Trustee, and it shall not be
responsible for any statement or recital herein or any statement in the Notes or
any other document in connection with the sale of the Notes or pursuant to this
Indenture other than its certificate of authentication.
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SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it
is known to the Trustee, the Trustee shall mail to Holders of Notes a notice of
the Default or Event of Default within 90 days after it occurs. Except in the
case of a Default or Event of Default in payment of principal of, premium, if
any, or interest on any Note, the Trustee may withhold the notice if and so long
as a committee of its Responsible Officers in good faith determines that
withholding the notice is in the interests of the Holders of the Notes.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS OF THE NOTES.
Within 60 days after each April 15 beginning with the April 15
following the date hereof, and for so long as Notes remain outstanding, the
Trustee shall mail to the Holders of the Notes a brief report dated as of such
reporting date that complies with TIA ss. 313(a) (but if no event described in
TIA ss. 313(a) has occurred within the twelve months preceding the reporting
date, no report need be transmitted). The Trustee also shall comply with TIA ss.
313(b)(2). The Trustee shall also transmit by mail all reports as required by
TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Notes shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Notes are listed in accordance with TIA ss. 313(d). The
Company shall promptly notify the Trustee when the Notes are listed on any stock
exchange on delisted therefrom.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Trustee from time to time such
compensation as agreed upon in writing from time to time between the Company and
the Trustee for its acceptance of this Indenture and services hereunder. The
Trustee's compensation shall not be limited by any law on compensation of a
trustee of an express trust. The Company shall reimburse the Trustee promptly
upon request for all disbursements, advances and expenses incurred or made by it
in addition to the compensation for its services. Such expenses shall include
the reasonable compensation, disbursements and expenses of the Trustee's agents
and counsel.
The Company shall indemnify each of the Trustee and any predecessor
Trustee against any and all losses, liabilities, claims, damages or expenses
(including taxes other than taxes based upon the income of the Trustee) incurred
by it arising out of or in connection with the acceptance or administration of
its duties under this Indenture, including the costs and expenses of enforcing
this Indenture against the Company (including this Section 7.07) and defending
itself against any claim (whether asserted by the Company or any Holder or any
other person) or liability in connection with the exercise or performance of any
of its powers or duties hereunder, except to the extent any such loss, liability
or expense may be attributable to its negligence or willful misconduct. The
Trustee shall notify the Company promptly of any claim for which it may seek
indemnity. Failure by the Trustee to so notify the Company shall not relieve the
Company of its obligations hereunder. The Company shall defend the claim and the
Trustee shall cooperate in the defense. The Trustee may have separate counsel
and the Company shall pay the reasonable fees and expenses of such counsel. The
Company need not pay for any settlement made without its consent, which consent
shall not be unreasonably withheld.
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The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Indenture.
To secure the Company's payment obligations in this Section, the
Trustee shall have a Lien prior to the Notes on all money or property held or
collected by the Trustee, except that held in trust to pay principal and
interest on particular Notes. Such Lien shall survive the satisfaction and
discharge of this Indenture.
When the Trustee incurs expenses or renders services after an Event
of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses and
the compensation for the services (including the fees and expenses of its agents
and counsel) are intended to constitute expenses of administration under any
Bankruptcy Law.
The Trustee shall comply with the provisions of TIA ss. 313(b)(2) to
the extent applicable.
SECTION 7.08. REPLACEMENT OF TRUSTEE.
A resignation or removal of the Trustee and appointment of a
successor Trustee shall become effective only upon the successor Trustee's
acceptance of appointment as provided in this Section.
The Trustee may resign in writing at any time and be discharged from
the trust hereby created by so notifying the Company. The Holders of Notes of a
majority in principal amount of the then outstanding Notes may remove the
Trustee by so notifying the Trustee and the Company in writing. The Company may
remove the Trustee if:
(a) the Trustee fails to comply with Section 7.10 hereof;
(b) the Trustee is adjudged a bankrupt or an insolvent or an order for
relief is entered with respect to the Trustee under any Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Trustee or its
property; or
(d) the Trustee becomes incapable of acting.
If the Trustee resigns or is removed or if a vacancy exists in the
office of Trustee for any reason, the Company shall promptly appoint a successor
Trustee. Within one year after the successor Trustee takes office, the Holders
of a majority in principal amount of the then outstanding Notes may appoint a
successor Trustee to replace the successor Trustee appointed by the Company.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee, the Company, or
the Holders of Notes of at least 10% in principal amount of the then outstanding
Notes may petition at the expense of the Company any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee, after written request by any Holder of a Note who
has been a Holder of a Note for at least six months, fails to comply with
Section 7.10, such Holder of a Note may petition any
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court of competent jurisdiction for the removal of the Trustee and the
appointment of a successor Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Holders of the Notes. The retiring Trustee shall promptly transfer
all property held by it as Trustee to the successor Trustee, provided all sums
owing to the Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Trustee pursuant
to this Section 7.08, the Company's obligations under Section 7.07 hereof shall
continue for the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER, ETC.
If the Trustee consolidates, merges or converts into, or transfers
all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be a Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $50 million as set forth in its most recent published annual report of
condition.
This Indenture shall always have a Trustee who satisfies the
requirements of TIA ss. 310(a)(1), (2) and (5). The Trustee is subject to TIA
ss. 310(b).
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Trustee is subject to TIA ss. 311(a), excluding any creditor
relationship listed in TIA ss. 311(b). A Trustee who has resigned or been
removed shall be subject to TIA ss. 311(a) to the extent indicated therein.
SECTION 7.12. TRUSTEE'S APPLICATION FOR INSTRUCTIONS FROM THE COMPANY
Any application by the Trustee for written instructions from the
Company may, at the option of the Trustee, set forth in writing any action
proposed to be taken or omitted by the Trustee under this Indenture and the date
on and/or after which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable for any action taken by, or omission
of, the Trustee in accordance with a proposal included in such application on or
after the date specified in such application (which date shall not be less than
three Business Days after the date any officer of the Company actually receives
such application, unless any such officer shall have consented in writing to any
earlier date) unless prior to taking any such action (or the effective date in
the case of an omission), the Trustee shall have received written instructions
in response to such application specifying the action to be taken or omitted.
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ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced
by a resolution set forth in an Officers' Certificate, at any time, elect to
have either Section 8.02 or 8.03 hereof be applied to all outstanding Notes upon
compliance with the conditions set forth below in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Notes on the
date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Notes, which shall thereafter be deemed to be "outstanding" only for
the purposes of Section 8.05 hereof and the other Sections of this Indenture
referred to in (a) and (b) below, and to have satisfied all its other
obligations under such Notes and this Indenture (and the Trustee, on demand of
and at the expense of the Company, shall execute proper instruments
acknowledging the same), except for the following provisions which shall survive
until otherwise terminated or discharged hereunder: (a) the rights of Holders of
outstanding Notes to receive payments in respect of the principal of, premium,
if any, and interest and Liquidated Damages on such Notes when such payments are
due from the trust referred to below, (b) the Company's obligations with respect
to the Notes concerning issuing temporary Notes, registration of Notes,
mutilated, destroyed, lost or stolen Notes and the maintenance of an office or
agency for payment and money for security payments held in trust, (c) the
rights, powers, trusts, duties and immunities of the Trustee, and the Company's
obligations in connection therewith and (d) this Article 8. Subject to
compliance with this Article 8, the Company may exercise its option under this
Section 8.02 notwithstanding the prior exercise of its option under Section 8.03
hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.13, 4.15, 4.16, 4.17, and 5.01 hereof with respect to the
outstanding Notes on and after the date the conditions set forth in Section 8.04
are satisfied (hereinafter, "Covenant Defeasance"), and the Notes shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Notes shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding Notes,
the Company may omit to comply with and shall have no liability in respect of
any term, condition or limitation set forth in any such covenant, whether
directly or indirectly, by reason of any reference elsewhere herein to any such
covenant or by reason of any reference in any such covenant to any other
provision herein or in any other document and such omission to comply shall not
constitute a Default or an Event of Default under Section 6.01 hereof, but,
except as specified above, the remainder of this Indenture and such Notes shall
be unaffected
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thereby. In addition, upon the Company's exercise under Section 8.01 hereof of
the option applicable to this Section 8.03 hereof, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, Sections 6.01(c) through
6.01(f) hereof shall not constitute Events of Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Notes:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Trustee, in trust, for
the benefit of the Holders, cash in United States dollars, non-callable
Government Securities, or a combination thereof, in such amounts as shall be
sufficient, in the opinion of a nationally recognized firm of independent public
accountants, to pay the principal of, premium and Liquidated Damages, if any,
and interest on the outstanding Notes on the stated date for payment thereof or
on the applicable redemption date, as the case may be, and the Company must
specify whether the Notes are being defeased to maturity or to a particular
redemption date;
(b) in the case of an election under Section 8.02 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that (A) the Company has
received from, or there has been published by, the Internal Revenue Service a
ruling or (B) since the date hereof, there has been a change in the applicable
federal income tax law, in either case to the effect that, and based thereon
such Opinion of Counsel shall confirm that, the Holders of the outstanding Notes
will not recognize income, gain or loss for federal income tax purposes as a
result of such Legal Defeasance and will be subject to federal income tax on the
same amounts, in the same manner and at the same times as would have been the
case if such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company
shall have delivered to the Trustee an Opinion of Counsel in the United States
reasonably acceptable to the Trustee confirming that the Holders of the
outstanding Notes will not recognize income, gain or loss for federal income tax
purposes as a result of such Covenant Defeasance and will be subject to federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such Covenant Defeasance had not occurred;
(d) no Default or Event of Default shall have occurred and be continuing
on the date of such deposit (other than a Default or Event of Default resulting
from the incurrence of Indebtedness all or a portion of the proceeds of which
will be used to defease the Notes pursuant to this Article 8 concurrently with
such incurrence) or insofar as Sections 6.01(g) or 6.01(h) hereof is concerned,
at any time in the period ending on the 91st day after the date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Indenture) to which the Company or any of its
Subsidiaries is a party or by which the Company or any of its Subsidiaries is
bound;
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(f) the Company shall have delivered to the Trustee an Opinion of Counsel
to the effect that after the 91st day following the deposit, the trust funds
will not be subject to the effect of any applicable bankruptcy, insolvency,
reorganization or similar laws affecting creditors' rights generally;
(g) the Company shall have delivered to the Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(h) the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable
Government Securities (including the proceeds thereof) deposited with the
Trustee (or other qualifying trustee, collectively for purposes of this Section
8.05, the "Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Notes shall be held in trust and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as
Paying Agent) as the Trustee may determine, to the Holders of such Notes of all
sums due and to become due thereon in respect of principal, premium, if any, and
interest, but such money need not be segregated from other funds except to the
extent required by law.
The Company shall pay and indemnify the Trustee against any tax, fee
or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding Notes.
Anything in this Article 8 to the contrary notwithstanding, the
Trustee shall deliver or pay to the Company from time to time upon the request
of the Company any money or non-callable Government Securities held by it as
provided in Section 8.04 hereof which, in the opinion of a nationally recognized
firm of independent public accountants expressed in a written certification
thereof delivered to the Trustee (which may be the opinion delivered under
Section 8.04(a) hereof), are in excess of the amount thereof that would then be
required to be deposited to effect an equivalent Legal Defeasance or Covenant
Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Trustee or any Paying Agent, or then
held by the Company, in trust for the payment of the principal of, premium, if
any, or interest on any Note and remaining unclaimed for two years after such
principal, and premium, if any, or interest has become due and payable shall be
paid to the Company on its request or (if then held by the Company) shall be
discharged from such trust; and the Holder of such Note shall thereafter, as a
secured creditor, look only to the Company for payment thereof, and all
liability of the Trustee or such Paying Agent with respect to
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such trust money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Trustee or such Paying Agent,
before being required to make any such repayment, may at the expense of the
Company cause to be published once, in the New York Times and The Wall Street
Journal (national edition), notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such notification or publication, any unclaimed balance of such money
then remaining shall be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Trustee or Paying Agent is unable to apply any United States
dollars or non-callable Government Securities in accordance with Section 8.02 or
8.03 hereof, as the case may be, by reason of any order or judgment of any court
or governmental authority enjoining, restraining or otherwise prohibiting such
application, then the Company's obligations under this Indenture and the Notes
shall be revived and reinstated as though no deposit had occurred pursuant to
Section 8.02 or 8.03 hereof until such time as the Trustee or Paying Agent is
permitted to apply all such money in accordance with Section 8.02 or 8.03
hereof, as the case may be; provided, however, that, if the Company makes any
payment of principal of, premium, if any, or interest on any Note following the
reinstatement of its obligations, the Company shall be subrogated to the rights
of the Holders of such Notes to receive such payment from the money held by the
Trustee or Paying Agent.
ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF NOTES.
Notwithstanding Section 9.02 of this Indenture, the Company, the
Guarantors and the Trustee may amend or supplement this Indenture, the
Guarantees or the Notes without the consent of any Holder of a Note:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Notes in addition to or in place of
certificated Notes or to alter the provisions of Article 2 hereof (including the
related definitions) in a manner that does not materially adversely affect any
Holder;
(c) to provide for the assumption of the Company's or a Guarantor's
obligations to the Holders of the Notes by a successor to the Company or a
Guarantor pursuant to Article 5 or Article 10 hereof;
(d) to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights hereunder of any Holder of the Note;
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Indenture under the TIA;
(f) to provide for the issuance of Additional Notes in accordance with the
limitations set forth in this Indenture as of the date hereof; or
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(g) to allow any Guarantor to execute a supplemental indenture and/or a
Note Guarantee with respect to the Notes.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Trustee of the documents described in Section
7.02 hereof, the Trustee shall join with the Company and the Guarantors in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Indenture and to make any further appropriate agreements and
stipulations that may be therein contained, but the Trustee shall not be
obligated to enter into such amended or supplemental Indenture that affects its
own rights, duties or immunities under this Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF NOTES.
Except as provided below in this Section 9.02, the Company and the
Trustee may amend or supplement this Indenture (including Sections 3.09, 4.10
and 4.15 hereof), the Notes may be amended or supplemented with the consent of
the Holders of at least a majority in principal amount of the Notes (including
Additional Notes, if any) then outstanding voting as a single class (including
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Notes), and, subject to Sections 6.04 and 6.07 hereof, any
existing Default or Event of Default (other than a Default or Event of Default
in the payment of the principal of, premium, if any, or interest on the Notes,
except a payment default resulting from an acceleration that has been rescinded)
or compliance with any provision of this Indenture, the Subsidiary Guarantees or
the Notes may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Notes (including Additional Notes, if
any) voting as a single class (including consents obtained in connection with a
tender offer or exchange offer for, or purchase of, the Notes). Section 2.08
hereof shall determine which Notes are considered to be "outstanding" for
purposes of this Section 9.02.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Trustee of evidence satisfactory to the
Trustee of the consent of the Holders of Notes as aforesaid, and upon receipt by
the Trustee of the documents described in Section 7.02 hereof, the Trustee shall
join with the Company in the execution of such amended or supplemental Indenture
unless such amended or supplemental Indenture directly affects the Trustee's own
rights, duties or immunities under this Indenture or otherwise, in which case
the Trustee may in its discretion, but shall not be obligated to, enter into
such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Notes
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Notes affected thereby a
notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Notes (including Additional Notes,
if any) then outstanding voting as a single class may waive compliance in a
particular instance by the Company with any provision of this Indenture or the
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Notes. However, without the consent of each Holder affected, an amendment or
waiver under this Section 9.02 may not (with respect to any Notes held by a
non-consenting Holder):
(a) reduce the principal amount of Notes whose Holders must consent to an
amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Note or
alter or waive any of the provisions with respect to the redemption of the
Notes, except as provided above with respect to Sections 3.09, 4.10 and 4.15
hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Note;
(d) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Notes (except a rescission of acceleration
of the Notes by the Holders of at least a majority in aggregate principal amount
of the then outstanding Notes and a waiver of the payment default that resulted
from such;
(e) make any Note payable in money other than that stated in the Notes;
(f) make any change in the provisions of this Indenture relating to
waivers of past Defaults or the rights of Holders of Notes to receive payments
of principal of, interest, or premium, if any, on the Notes;
(g) waive a redemption payment with respect to any Note (other than a
payment required by Section 3.09, 4.10 and 4.15 hereof);
(h) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions;
(i) release any Guarantor from any of its obligations under its Subsidiary
Guarantee or this Indenture, except in accordance with the terms of this
Indenture; or
(j) amend this Section 9.02.
Without the consent of at least 66 2/3% in aggregate principal
amount of the Notes then outstanding (including Additional Notes, if any)
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, such Notes), no waiver or amendment to this Indenture may
make any change in the provisions of Article 10 hereof if such amendment would
adversely affect the rights of any Holder of Notes.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Indenture or the Notes shall
be set forth in a amended or supplemental Indenture that complies with the TIA
as then in effect.
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SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Trustee receives written
notice of revocation before the date the waiver, supplement or amendment becomes
effective. An amendment, supplement or waiver becomes effective in accordance
with its terms and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF NOTES.
The Trustee may place an appropriate notation about an amendment,
supplement or waiver on any Note thereafter authenticated. The Company in
exchange for all Notes may issue and the Trustee shall, upon receipt of an
Authentication Order, authenticate new Notes that reflect the amendment,
supplement or waiver.
Failure to make the appropriate notation or issue a new Note shall
not affect the validity and effect of such amendment, supplement or waiver.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS, ETC.
The Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article 9 if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
The Company may not sign an amendment or supplemental Indenture until the Board
of Directors approves it. In executing any amended or supplemental indenture,
the Trustee shall be entitled to receive and (subject to Section 7.01 hereof)
shall be fully protected in relying upon, in addition to the documents required
by Section 11.04 hereof, an Officer's Certificate and an Opinion of Counsel
stating that the execution of such amended or supplemental indenture is
authorized or permitted by this Indenture.
ARTICLE 10.
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Note agrees, that
the Indebtedness evidenced by the Notes is subordinated in right of payment, to
the extent and in the manner provided in this Article 10, to the prior payment
in full of all Senior Indebtedness (whether outstanding on the date hereof or
hereafter created, incurred, assumed or guaranteed), and that the subordination
is for the benefit of the holders of Senior Indebtedness.
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a liquidation
or dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities:
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(1) holders of Senior Indebtedness shall be entitled to receive payment
in full of all Obligations due in respect of such Senior
Indebtedness (including interest after the commencement of any such
proceeding at the rate specified in the applicable Senior
Indebtedness) before Holders of the Notes shall be entitled to
receive any payment with respect to the Notes (except that Holders
may receive (i) Permitted Junior Securities and (ii) payments and
other distributions made from any defeasance trust created pursuant
to Section 8.01 hereof); and
(2) until all Obligations with respect to Senior Indebtedness (as
provided in subsection (1) above) are paid in full, any distribution
to which Holders would be entitled but for this Article 10 shall be
made to holders of Senior Indebtedness (except that Holders of Notes
may receive (i) Permitted Junior Securities and (ii) payments and
other distributions made from any defeasance trust created pursuant
to Section 8.01 hereof), as their interests may appear.
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR DEBT.
The Company may not make any payment or distribution to the Trustee
or any Holder in respect of Obligations with respect to the Notes and may not
acquire from the Trustee or any Holder any Notes for cash or property (other
than (i) Permitted Junior Securities and (ii) payments and other distributions
made from any defeasance trust created pursuant to Section 8.01 hereof) until
all principal and other Obligations with respect to the Senior Indebtedness have
been paid in full if:
(i) a default in the payment of any principal of, premium, if any,
or interest on Designated Senior Debt occurs and is continuing beyond any
applicable grace period in the agreement, indenture or other document
governing such Designated Senior Debt; or
(ii) a default, other than a payment default, on Designated Senior
Debt occurs and is continuing that then permits holders of the Designated
Senior Debt to accelerate its maturity and the Trustee receives a notice
of the default (a "Payment Blockage Notice") from the holders (or a
Representative of the holders) of the Designated Senior Debt. If the
Trustee receives any such Payment Blockage Notice, no subsequent Payment
Blockage Notice shall be effective for purposes of this Section unless and
until (i) at least 360 days shall have elapsed since the effectiveness of
the immediately prior Payment Blockage Notice and (ii) all scheduled
payments of principal, premium, if any, and interest on the Notes that
have come due have been paid in full in cash. No nonpayment default that
existed or was continuing on the date of delivery of any Payment Blockage
Notice to the Trustee shall be, or be made, the basis for a subsequent
Payment Blockage Notice.
The Company may and shall resume payments on and distributions in
respect of the Notes and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 10.03(ii) hereof,
179 days pass after notice is received if the maturity of such
Designated Senior Debt has not been accelerated, if this Article 10
otherwise permits the payment, distribution or acquisition at the
time of such payment or acquisition.
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SECTION 10.04. ACCELERATION OF NOTES.
If payment of the Notes is accelerated because of an Event of
Default, the Company shall promptly notify holders of Senior Indebtedness of the
acceleration.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Trustee or any Holder receives any payment of
any Obligations with respect to the Notes at a time when the Trustee or such
Holder, as applicable, has actual knowledge that such payment is prohibited by
Section 10.03 hereof, such payment shall be held by the Trustee or such Holder,
in trust for the benefit of, and shall be paid forthwith over and delivered,
upon written request, to, the holders of Senior Indebtedness as their interests
may appear or their Representative under the indenture or other agreement (if
any) pursuant to which Senior Indebtedness may have been issued, as their
respective interests may appear, for application to the payment of all
Obligations with respect to Senior Indebtedness remaining unpaid to the extent
necessary to pay such Obligations in full in accordance with their terms, after
giving effect to any concurrent payment or distribution to or for the holders of
Senior Indebtedness.
With respect to the holders of Senior Indebtedness, the Trustee
undertakes to perform only such obligations on the part of the Trustee as are
specifically set forth in this Article 10, and no implied covenants or
obligations with respect to the holders of Senior Indebtedness shall be read
into this Indenture against the Trustee. The Trustee shall not be deemed to owe
any fiduciary duty to the holders of Senior Indebtedness, and shall not be
liable to any such holders if the Trustee shall pay over or distribute to or on
behalf of Holders or the Company or any other Person money or assets to which
any holders of Senior Indebtedness shall be entitled by virtue of this Article
10, except if such payment is made as a result of the willful misconduct or
gross negligence of the Trustee.
SECTION 10.06. NOTICE BY COMPANY.
The Company shall promptly notify the Trustee and the Paying Agent
of any facts known to the Company that would cause a payment of any Obligations
with respect to the Notes to violate this Article 10, but failure to give such
notice shall not affect the subordination of the Notes to the Senior
Indebtedness as provided in this Article 10.
SECTION 10.07. SUBROGATION.
After all Senior Indebtedness is paid in full and until the Notes
are paid in full, Holders of Notes shall be subrogated (equally and ratably with
all other Indebtedness pari passu with the Notes) to the rights of holders of
Senior Indebtedness to receive distributions applicable to Senior Indebtedness
to the extent that distributions otherwise payable to the Holders of Notes have
been applied to the payment of Senior Indebtedness. A distribution made under
this Article 10 to holders of Senior Indebtedness that otherwise would have been
made to Holders of Notes is not, as between the Company and Holders, a payment
by the Company on the Notes.
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SECTION 10.08. RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of Notes and
holders of Senior Indebtedness. Nothing in this Indenture shall:
(1) impair, as between the Company and Holders of Notes, the obligation
of the Company, which is absolute and unconditional, to pay
principal of and interest on the Notes in accordance with their
terms;
(2) affect the relative rights of Holders of Notes and creditors of the
Company other than their rights in relation to holders of Senior
Indebtedness; or
(3) prevent the Trustee or any Holder of Notes from exercising its
available remedies upon a Default or Event of Default, subject to
the rights of holders and owners of Senior Indebtedness to receive
distributions and payments otherwise payable to Holders of Notes.
If the Company fails because of this Article 10 to pay principal of
or interest on a Note on the due date, the failure is still a Default or Event
of Default.
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Senior Indebtedness to enforce the
subordination of the Indebtedness evidenced by the Notes shall be impaired by
any act or failure to act by the Company or any Holder or by the failure of the
Company or any Holder to comply with this Indenture.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders
of Senior Indebtedness, the distribution may be made and the notice given to
their Representative.
Upon any payment or distribution of assets of the Company referred
to in this Article 10, the Trustee and the Holders of Notes shall be entitled to
rely upon any order or decree made by any court of competent jurisdiction or
upon any certificate of such Representative or of the liquidating trustee or
agent or other Person making any distribution to the Trustee or to the Holders
of Notes for the purpose of ascertaining the Persons entitled to participate in
such distribution, the holders of the Senior Indebtedness and other Indebtedness
of the Company, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto or to this
Article 10.
SECTION 10.11. RIGHTS OF TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Indenture, the Trustee shall not be charged with knowledge of
the existence of any facts that would prohibit the making of any payment or
distribution by the Trustee, and the Trustee and the Paying Agent may continue
to make payments on the Notes, unless the Trustee shall have received at its
Corporate Trust Office at least five Business Days prior to the date of such
payment written notice of facts that would cause the payment of any Obligations
with respect to the Notes to violate this Article 10. Only
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the Company or a Representative may give the notice. Nothing in this Article 10
shall impair the claims of, or payments to, the Trustee under or pursuant to
Section 7.07 hereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. Any
Agent may do the same with like rights.
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Notes, by the Holder's acceptance thereof, authorizes
and directs the Trustee on such Holder's behalf to take such action as may be
necessary or appropriate to effectuate the subordination as provided in this
Article 10, and appoints the Trustee to act as such Holder's attorney-in-fact
for any and all such purposes. If the Trustee does not file a proper proof of
claim or proof of debt in the form required in any proceeding referred to in
Section 6.09 hereof at least 30 days before the expiration of the time to file
such claim, the Representatives of the Designated Senior Debt are hereby
authorized to file an appropriate claim for and on behalf of the Holders of the
Notes.
SECTION 10.13. AMENDMENTS.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Senior Indebtedness.
SECTION 10.14. CERTAIN DEFINITIONS.
"Designated Senior Debt" means (i) any Senior Indebtedness in
respect of the Senior Credit Facility and (ii) any other Senior Indebtedness
permitted under this Indenture the principal amount of which is $25.0 million or
more and that has been designated by the Company as "Designated Senior Debt."
"Senior Indebtedness" means (i) all Indebtedness outstanding under
Credit Facilities and all Hedging Obligations with respect thereto, (ii) any
other Indebtedness permitted to be incurred by the Company or a Guarantor under
the terms of this Indenture, unless the instrument under which such Indebtedness
is incurred expressly provides that it is on a parity with or subordinated in
right of payment to the Notes and (iii) all Obligations with respect to the
foregoing. Notwithstanding anything to the contrary in the foregoing, Senior
Indebtedness will not include (w) any liability for federal, state, local or
other taxes owed or owing by the Company, (x) any Indebtedness of the Company to
any of its Restricted Subsidiaries or other Affiliates, (y) any trade payables
or (z) any Indebtedness that is incurred in violation of this Indenture.
ARTICLE 11.
SUBSIDIARY GUARANTEES
SECTION 11.01. GUARANTEE.
Subject to this Article 11, each of the Guarantors hereby, jointly
and severally, unconditionally guarantees to each Holder of a Note authenticated
and delivered by the Trustee and to the Trustee and its successors and assigns,
irrespective of the validity and enforceability of this Indenture, the Notes or
the obligations of the Company hereunder or thereunder, that: (a) the principal
of and interest on the Notes shall be promptly paid in full when due, whether at
maturity, by acceleration, redemption or otherwise, and interest on the overdue
principal of and interest on the Notes, if any, if
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lawful, and all other obligations of the Company to the Holders or the Trustee
hereunder or thereunder shall be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and (b) in case of any extension
of time of payment or renewal of any Notes or any of such other obligations,
that same shall be promptly paid in full when due or performed in accordance
with the terms of the extension or renewal, whether at stated maturity, by
acceleration or otherwise. Failing payment when due of any amount so guaranteed
or any performance so guaranteed for whatever reason, the Guarantors shall be
jointly and severally obligated to pay the same immediately. Each Guarantor
agrees that this is a guarantee of payment and not a guarantee of collection.
The Guarantors hereby agree that their obligations hereunder shall
be unconditional, irrespective of the validity, regularity or enforceability of
the Notes or this Indenture, the absence of any action to enforce the same, any
waiver or consent by any Holder of the Notes with respect to any provisions
hereof or thereof, the recovery of any judgment against the Company, any action
to enforce the same or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. Each Guarantor hereby
waives diligence, presentment, demand of payment, filing of claims with a court
in the event of insolvency or bankruptcy of the Company, any right to require a
proceeding first against the Company, protest, notice and all demands whatsoever
and covenant that this Note Guarantee shall not be discharged except by complete
performance of the obligations contained in the Notes and this Indenture.
If any Holder or the Trustee is required by any court or otherwise
to return to the Company, the Guarantors or any custodian, trustee, liquidator
or other similar official acting in relation to either the Company or the
Guarantors, any amount paid by either to the Trustee or such Holder, this Note
Guarantee, to the extent theretofore discharged, shall be reinstated in full
force and effect.
Each Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any obligations guaranteed
hereby until payment in full of all obligations guaranteed hereby. Each
Guarantor further agrees that, as between the Guarantors, on the one hand, and
the Holders and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided in Article 6 hereof
for the purposes of this Note Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of the obligations
guaranteed hereby, and (y) in the event of any declaration of acceleration of
such obligations as provided in Article 6 hereof, such obligations (whether or
not due and payable) shall forthwith become due and payable by the Guarantors
for the purpose of this Note Guarantee. The Guarantors shall have the right to
seek contribution from any non-paying Guarantor so long as the exercise of such
right does not impair the rights of the Holders under the Guarantee.
SECTION 11.02. SUBORDINATION OF SUBSIDIARY GUARANTEE.
The Obligations of each Guarantor under its Subsidiary Guarantee
pursuant to this Article 11 shall be junior and subordinated to the Senior
Indebtedness of such Guarantor on the same basis as the Notes are junior and
subordinated to Senior Indebtedness of the Company. For the purposes of the
foregoing sentence, the Trustee and the Holders shall have the right to receive
and/or retain payments by any of the Guarantors only at such times as they may
receive and/or retain payments in respect of the Notes pursuant to this
Indenture, including Article 11 hereof.
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SECTION 11.03. LIMITATION ON GUARANTOR LIABILITY.
Each Guarantor, and by its acceptance of Notes, each Holder, hereby
confirms that it is the intention of all such parties that the Subsidiary
Guarantee of such Guarantor not constitute a fraudulent transfer or conveyance
for purposes of Bankruptcy Law, the Uniform Fraudulent Conveyance Act, the
Uniform Fraudulent Transfer Act or any similar federal or state law to the
extent applicable to any Subsidiary Guarantee. To effectuate the foregoing
intention, the Trustee, the Holders and the Guarantors hereby irrevocably agree
that the obligations of such Guarantor under its Subsidiary Guarantee and this
Article 11 shall be limited to the maximum amount as will, after giving effect
to such maximum amount and all other contingent and fixed liabilities of such
Guarantor that are relevant under such laws, and after giving effect to any
collections from, rights to receive contribution from or payments made by or on
behalf of any other Guarantor in respect of the obligations of such other
Guarantor under this Article 11, result in the obligations of such Guarantor
under its Subsidiary Guarantee not constituting a fraudulent transfer or
conveyance.
SECTION 11.04. EXECUTION AND DELIVERY OF SUBSIDIARY GUARANTEE.
To evidence its Subsidiary Guarantee set forth in Section 11.01
hereof, each Guarantor hereby agrees that a notation of such Subsidiary
Guarantee substantially in the form included in Exhibit E shall be endorsed by
an Officer of such Guarantor on each Note authenticated and delivered by the
Trustee and that this Indenture shall be executed on behalf of such Guarantor by
its President or one of its Vice Presidents.
Each Guarantor hereby agrees that its Subsidiary Guarantee set forth
in Section 11.01 hereof shall remain in full force and effect notwithstanding
any failure to endorse on each Note a notation of such Subsidiary Guarantee.
If an Officer whose signature is on this Indenture or on the
Subsidiary Guarantee no longer holds that office at the time the Trustee
authenticates the Note on which a Subsidiary Guarantee is endorsed, the
Subsidiary Guarantee shall be valid nevertheless.
The delivery of any Note by the Trustee, after the authentication
thereof hereunder, shall constitute due delivery of the Subsidiary Guarantee set
forth in this Indenture on behalf of the Guarantors.
In the event that the Company creates or acquires any new
Subsidiaries subsequent to the date of this Indenture, if required by Section
4.17 hereof, the Company shall cause such Subsidiaries to execute supplemental
indentures to this Indenture and Subsidiary Guarantees in accordance with
Section 4.17 hereof and this Article 11, to the extent applicable.
SECTION 11.05. GUARANTORS MAY CONSOLIDATE, ETC., ON CERTAIN TERMS.
No Guarantor may consolidate with or merge with or into (whether or
not such Guarantor is the surviving Person) another corporation, Person or
entity whether or not affiliated with such Guarantor unless:
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(1) subject to Section 11.05 hereof, the Person formed by or surviving
any such consolidation or merger (if other than such Guarantor)
assumes all the obligations of such Guarantor, pursuant to a
supplemental indenture in form and substance reasonably satisfactory
to the Trustee, under the Notes, this Indenture and the Guarantee on
the terms set forth herein or therein; and
(2) immediately after giving effect to such transaction, no Default or
Event of Default exists.
In case of any such consolidation, merger, sale or conveyance and
upon the assumption by the successor Person, by supplemental indenture, executed
and delivered to the Trustee and satisfactory in form to the Trustee, of the
Subsidiary Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of this Indenture to be
performed by the Guarantor, such successor Person shall succeed to and be
substituted for the Guarantor with the same effect as if it had been named
herein as a Guarantor. Such successor Person thereupon may cause to be signed
any or all of the Subsidiary Guarantees to be endorsed upon all of the Notes
issuable hereunder which theretofore shall not have been signed by the Company
and delivered to the Trustee. All the Subsidiary Guarantees so issued shall in
all respects have the same legal rank and benefit under this Indenture as the
Subsidiary Guarantees theretofore and thereafter issued in accordance with the
terms of this Indenture as though all of such Subsidiary Guarantees had been
issued at the date of the execution hereof.
Except as set forth in Articles 4 and 5 hereof, and notwithstanding
clauses (a) and (b) above, nothing contained in this Indenture or in any of the
Notes shall prevent any consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or conveyance of the
property of a Guarantor as an entirety or substantially as an entirety to the
Company or another Guarantor.
SECTION 11.06. RELEASES FOLLOWING SALE OF ASSETS.
In the event of a sale or other disposition of all of the assets of
any Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all of the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition, by way of merger, consolidation or
otherwise, of all of the capital stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) shall be released and
relieved of any obligations under its Subsidiary Guarantee; provided that the
Net Proceeds of such sale or other disposition are applied in accordance with
the applicable provisions of this Indenture, including without limitation
Section 4.10 hereof. Upon delivery by the Company to the Trustee of an Officers'
Certificate and an Opinion of Counsel to the effect that such sale or other
disposition was made by the Company in accordance with the applicable provisions
of this Indenture, including without limitation Section 4.10 hereof, the Trustee
shall execute any documents reasonably required in order to evidence the release
of any Guarantor from its obligations under its Subsidiary Guarantee.
Upon the designation of a Guarantor as an Unrestricted Subsidiary in
accordance with the terms of this Indenture, such Guarantor shall be released
and relieved of its obligations under its Guarantee and this Indenture. Upon
delivery by the Company to the Trustee of an Officers' Certificate and an
Opinion of Counsel to the effect that such designation of such Guarantor as an
Unrestricted
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Subsidiary was made by the Company in accordance with the provisions of this
Indenture, also including without limitation Section 4.07 hereof, the Trustee
shall execute any documents reasonably required in order to evidence the release
of such Guarantor from its obligations under its Guarantee.
Any Guarantor not released from its obligations under its Subsidiary
Guarantee shall remain liable for the full amount of principal of and interest
on the Notes and for the other obligations of any Guarantor under this Indenture
as provided in this Article 11.
ARTICLE 12.
MISCELLANEOUS
SECTION 12.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Indenture limits, qualifies or conflicts
with the duties imposed by TIA ss. 318(c), the imposed duties shall control.
SECTION 12.02. NOTICES.
Any notice or communication by the Company, any Guarantor or the
Trustee to the others is duly given if in writing and delivered in Person or
mailed by first class, postage prepaid mail, telecopier or overnight air courier
guaranteeing next day delivery, to the others' address
If to the Company and/or any Guarantor:
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier No.: (212) 883-4021
Attention: Steven J. Kaufman, Secretary
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3909
Telecopier No.: (212) 455-2502
Attention: Stephen J. Feder, Esq.
If to the Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Telecopier No.: (212) 815-5915
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The Company, any Guarantor or the Trustee, by notice to the others
may designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first
class mail, certified or registered, return receipt requested, or by overnight
air courier guaranteeing next day delivery to its address shown on the register
kept by the Registrar. Any notice or communication shall also be so mailed to
any Person described in TIA ss. 313(c), to the extent required by the TIA.
Failure to mail a notice or communication to a Holder or any defect in it shall
not affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Trustee and each Agent at the same time.
SECTION 12.03. COMMUNICATION BY HOLDERS OF NOTES WITH OTHER HOLDERS OF NOTES.
Holders may communicate pursuant to TIA ss. 312(b) with other
Holders with respect to their rights under this Indenture or the Notes. The
Company, the Trustee, the Registrar and anyone else shall have the protection of
TIA ss. 312(c).
SECTION 12.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to
take any action under this Indenture, the Company shall furnish to the Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Trustee (which shall include the statements set forth in Section 12.05
hereof) stating that, in the opinion of the signers, all conditions precedent
and covenants, if any, provided for in this Indenture relating to the proposed
action have been satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Trustee (which shall include the statements set forth in Section 12.05
hereof) stating that, in the opinion of such counsel, all such conditions
precedent and covenants have been satisfied.
SECTION 12.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture (other than a certificate
provided pursuant to TIA ss. 314(a)(4)) shall comply with the provisions of TIA
ss. 314(e) and shall include:
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(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to express an
informed opinion as to whether or not such covenant or condition has been
satisfied; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
SECTION 12.06. RULES BY TRUSTEE AND AGENTS.
The Trustee may make reasonable rules for action by or at a meeting
of Holders. The Registrar or Paying Agent may make reasonable rules and set
reasonable requirements for its functions.
SECTION 12.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Notes, this Indenture or for any claim based on, in respect of, or by
reason of, such obligations or their creation. Each Holder of Notes by accepting
a Note waives and releases all such liability. The waiver and release are part
of the consideration for issuance of the Notes.
SECTION 12.08. GOVERNING LAW.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED
TO CONSTRUE THIS INDENTURE, THE NOTES AND THE SUBSIDIARY GUARANTEES WITHOUT
GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT
THE APPLICATION OF THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 12.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Indenture may not be used to interpret any other indenture,
loan or Indebtedness agreement of the Company or its Subsidiaries or of any
other Person. Any such indenture, loan or Indebtedness agreement may not be used
to interpret this Indenture.
SECTION 12.10. SUCCESSORS.
All agreements of the Company in this Indenture and the Notes shall
bind its successors. All agreements of the Trustee in this Indenture shall bind
its successors.
82
<PAGE>
SECTION 12.11. SEVERABILITY.
In case any provision in this Indenture or in the Notes shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby.
SECTION 12.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Indenture. Each
signed copy shall be an original, but all of them together represent the same
agreement.
SECTION 12.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Indenture have been inserted for convenience of
reference only, are not to be considered a part of this Indenture and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
83
<PAGE>
SIGNATURES
Dated as of May 18, 1998
CLUETT AMERICAN CORP.
BY: /s/ Bryan P. Marsal
---------------------------------
Name: Bryan P. Marsal
Title: Director, President and Chief
Executive Officer
CLUETT PEABODY & CO., INC.
BY: /s/ Bryan P. Marsal
---------------------------------
Name: Bryan P. Marsal
Title: Chairman and Chief Exective
Officer
GREAT AMERICAN KNITTING MILLS, INC.
BY: /s/ Bryan P. Marsal
---------------------------------
Name: Bryan P. Marsal
Title: Chairman and Chief Executive
Officer
CLUETT DESIGNER GROUP INC.
BY: /s/ Bryan P. Marsal
---------------------------------
Name: Bryan P. Marsal
Title: Chairman and Chief Executive
Officer
CONSUMER DIRECT CORPORATION
BY: /s/ Bryan P. Marsal
---------------------------------
Name: Bryan P. Marsal
Title: Director, President and Chief
Executive Officer
ARROW FACTORY STORES INC.
BY: /s/ Bryan P. Marsal
---------------------------------
Name: Bryan P. Marsal
Title: Chairman and Chief Executive
Officer
84
<PAGE>
THE BANK OF NEW YORK
BY: /s/ Mary La Gumina
---------------------------------
Name: Mary La Gumina
Title: Assistant Vice President
85
<PAGE>
EXHIBIT A-1
(Face of Global Note)
==============================================================================
CUSIP/CINS____________
10 1/8% [Series A] [Series B] [Series C] Senior Subordinated Notes due 2008
No. __ $_____________
CLUETT AMERICAN CORP.
promises to pay to _______________, or registered assigns, the principal sum of
_______________ Dollars on ___________, 2008.
Interest Payment Dates: May 15 and November 15
Record Dates: May 1 and November 1
DATED:
CLUETT AMERICAN CORP.
BY:___________________________________
Name:
Title:
Dated:______________________________
This is one of the Global Notes
referred to in the within-mentioned
Indenture:
The Bank of New York,
as Trustee
By:__________________________________
Name:
==============================================================================
A1-1
<PAGE>
(Back of Note)
10 1/8% [Series A] [Series B][Series C] Senior Subordinated Notes due 2008
[Insert the Global Note legend, if applicable, pursuant to the provisions of the
Indenture]
[Insert the Private Placement legend, if applicable, pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Cluett American Corp., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
10 1/8% per annum from May 15, 1998 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company shall pay interest and Liquidated Damages, if
any, semi-annually on May 15 and November 15 of each year (the "Interest Payment
Date"), or if any such day is not a Business Day, on the next succeeding
Business Day. Interest on the Notes will accrue from the most recent Interest
Payment Date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be November 15, 1998. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the May 1 or November 1
next preceding the Interest Payment Date, even if such Notes are cancelled after
such record date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest. The Notes
will be payable as to principal, premium and Liquidated Damages, if any, and
interest at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium and Liquidated
Damages, if any, on, all Global Notes and all other Notes the Holders of which
shall have provided wire transfer instructions to the Company or the Paying
Agent. Such payment shall be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts.
A1-1
<PAGE>
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of May 18, 1998 ("Indenture") among the Company, the Guarantors on the
signature pages thereto (the "Guarantors") and the Trustee. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. To the extent any
provision of this Note conflicts with the express provisions of the Indenture,
the provisions of the indenture shall govern and be controlling. The Notes are
general, unsecured obligations of the Company limited to (i) up to $175.0
million in aggregate principal amount of outstanding Series A Notes and Series B
Notes (including up to $63.0 million of Additional Notes issued in accordance
with the terms of the Indenture) and (ii) up to $13.0 million in aggregate
principal amount of outstanding Series C Notes.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this paragraph 5, the Company
shall not have the option to redeem the Notes pursuant to this paragraph 5 prior
to May 15, 2003. Thereafter, the Company shall have the option to redeem the
Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice,
at the redemption prices (expressed as percentages of principal amount) set
forth below plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on May 15 of the years indicated below:
Year Percentage
---- ----------
2003.............................................105.0625%
2004.............................................103.3750%
2005.............................................101.6875%
2006 and thereafter..............................100.0000%
(b) Notwithstanding the provisions of clause (a) of this paragraph 5, at
any time prior to May 15, 2001, the Company may on any one or more occasions
redeem up to 35% of the aggregate principal amount of Notes originally issued
under the Indenture at a redemption price of 110.125% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the redemption date, with the net cash proceeds of a Public Offering;
provided that at least 65% of the original aggregate principal amount of Notes
remain outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company or any of its Subsidiaries); and provided,
further, that such redemption shall occur within 45 days of the date of the
closing of such Public Offering.
A1-2
<PAGE>
At any time prior to May 15, 2003, the Notes may also be redeemed,
as a whole but not in part, at the option of the Company upon the occurrence of
a Change of Control, upon not less than 30 nor more than 60 days' prior notice
(but in no event may any such redemption occur more than 90 days after the
occurrence of such Change of Control) mailed by first-class mail to each
Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest and Liquidated Damages, if any, to, the date of redemption (the
"Redemption Date").
(c) Any redemption pursuant to this paragraph 5 shall be made pursuant to
the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below,
the Company shall not be required to make mandatory redemption payments with
respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described in Section 4.15 of the Indenture (the "Change of Control Offer")
at an offer price in cash equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase (the "Change of Control Payment"). Within 30 days
following any Change of Control, the Company shall mail a notice to each Holder
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase the Notes on the date specified in such notice, which
date shall be no earlier than 30 days and no later than 60 days from the date
such notice is mailed (the "Change of Control Payment Date"), pursuant to the
procedures required by the Indenture and described in such notice.
(b) Within 360 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to
permanently repay Senior Indebtedness, (b) to acquire all or substantially all
of the assets of, or a majority of the Voting Stock of, another Permitted
Business, (c) to make a capital expenditure or (d) to acquire other long-term
assets that are used or useful in a Permitted Business. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any manner
that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $10.0 million, the Company will be required to make an
offer to all Holders of Notes and all holders of other Indebtedness that is pari
passu with the Notes containing provisions similar to those set forth in the
Indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount
of Notes and such other pari passu Indebtedness that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in the Indenture and such other pari passu Indebtedness. To the extent
that any Excess Proceeds remain after consummation of an Asset Sale Offer,
A1-3
<PAGE>
or in the event the holders of the Notes and such other indebtedness decline
such Asset Sale Offer, the Company may use such Excess Proceeds for any purpose
not otherwise prohibited by the Indenture. If the aggregate principal amount of
Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes and such other pari passu Indebtedness to be
purchased on a pro rata basis. Holders of Notes that are the subject of an offer
to purchase may elect to have such Notes purchased by completing the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. SUBORDINATION. Each Holder by accepting a Note agrees that the
payment of principal of and premium, interest and Liquidated Damages, if any, on
each Note is subordinated in right of payment, to the extent and in the manner
provided in Article 10 of the Indenture, prior to the payment in full of all
Senior Indebtedness of the Issuers (whether outstanding on the date of the
Indenture or thereafter incurred assumed or guaranteed), and the subordination
is for the benefit of the holders of such Senior Indebtedness.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Guarantees or the Notes may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
then outstanding Notes and any existing default or compliance with any provision
of the Indenture, the Guarantees or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes.
Without the consent of any Holder of a Note, the Indenture, the Guarantees or
the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's or
Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change
A1-4
<PAGE>
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act, to provide for the Issuance of Additional Notes in accordance with the
limitations set forth in the Indenture, or to allow any Guarantor to execute a
supplemental indenture to the Indenture and/or a Guarantee with respect to the
Notes.
13. DEFAULTS AND REMEDIES. Each of the following constitutes an
Event of Default: (i) the Company defaults in the payment when due of interest
on, or Liquidated Damages with respect to, the Notes (whether or not permitted
by the subordination provisions of the Indenture) and such default continues for
a period of 30 days; (ii) the Company defaults in the payment when due of
principal of or premium, if any, on the Notes when the same becomes due and
payable at maturity, upon redemption (including in connection with an offer to
purchase) or otherwise (whether or not permitted by the subordination provisions
of the Indenture); (iii) the Company or any of its Restricted Subsidiaries fails
to comply with any of the provisions of Section 5.01 of the Indenture; (iv) the
Company or any of its Restricted Subsidiaries fails to observe or perform any
other covenant, representation, warranty or other agreement in the Indenture or
the Notes for 60 days after notice to the Company by the Trustee or the Holders
of at least 25% in aggregate principal amount of the Notes then outstanding
voting as a single class; (v) a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date hereof, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (vi) a final
judgment or final judgments for the payment of money are entered by a court or
courts of competent jurisdiction against the Company or any of its Restricted
Subsidiaries and such judgment or judgments remain undischarged for a period
(during which execution shall not be effectively stayed) of 60 days, provided
that the aggregate of all such undischarged judgments exceeds $5.0 million;
(vii) except as permitted by the Indenture, any Subsidiary Guarantee is held in
any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under such
Subsidiary Guarantee. If any Event of Default (other than certain events of
bankruptcy or insolvency) occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Upon any such declaration, the
Notes shall become due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes shall be due and payable immediately without
further action or notice. The Holders of a majority in aggregate principal
amount of the then outstanding Notes by written notice to the Trustee may on
behalf of all of the Holders rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium that has
become due solely because of the acceleration) have been cured or waived. The
Company is required to deliver to the
A1-5
<PAGE>
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required upon becoming aware of any Default or Event of Default to
deliver to the Trustee a statement specifying such Default or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of May 18, 1998, between the Company and the parties named on
the signature pages thereof (the "Registration Rights Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier no.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
A1-6
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature:_______________________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:________________________________________
Signature Guarantee.
A1-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
|_| Section 4.10 |_| Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $________
Date: Your Signature:_______________________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:________________________________________
Signature Guarantee.
A1-8
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(1)
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
Amount of Amount of Principal Signature of
decrease in increase in Amount authorized
Principal Principal of this Global signatory of
Amount Amount Note following Trustee or
Date of of this of this such decrease Note
Exchange Global Note Global Note (or increase) Custodian
-------- ----------- ----------- -------------- ---------
- ----------
(1) This should be included only if the Note is issued in global form.
A1-9
<PAGE>
EXHIBIT A-2
(Face of Regulation S Temporary Global Note)
================================================================================
CUSIP/CINS_____________
10 1/8% [Series A] [Series B] Senior Subordinated Notes due 2008
No.__ $________________
CLUETT AMERICAN CORP.
promises to pay to _______________, or registered assigns, the principal sum
of _________________ Dollars on May 15, 2008.
Interest Payment Dates: May 15 and November 15
Record Dates: May 1 and November 1
DATED:
CLUETT AMERICAN CORP.
BY:___________________________________
Name:
Title:
Dated:__________________________________
This is one of the Global Notes referred
to in the within-mentioned Indenture:
The Bank of New York,
as Trustee
By:_____________________________________
==============================================================================
A2-1
<PAGE>
(Back of Regulation S Temporary Global Note)
10 1/8% [Series A] [Series B] Senior Subordinated Notes due 2008
THE RIGHTS ATTACHING TO THIS REGULATION S TEMPORARY GLOBAL NOTE, AND THE
CONDITIONS AND PROCEDURES GOVERNING ITS EXCHANGE FOR CERTIFICATED NOTES, ARE AS
SPECIFIED IN THE INDENTURE (AS DEFINED HEREIN). NEITHER THE HOLDER NOR THE
BENEFICIAL OWNERS OF THIS REGULATION S TEMPORARY GLOBAL NOTE SHALL BE ENTITLED
TO RECEIVE PAYMENT OF INTEREST HEREON.
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR NOTES IN DEFINITIVE
FORM, THIS NOTE MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE DEPOSITARY TO A
NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR
ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE COMPANY OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS SECURITY AND THE GUARANTEES HEREOF HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS SECURITY MAY
NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH ANY
APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER
JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED
THAT THE SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5
OF THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER ("RULE 144A") OR ANOTHER
EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED HEREBY
AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE RESOLD,
PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE SELLER
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A
UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A
(b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER THE SECURITIES
ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON IN A TRANSACTION MEETING
THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES ACT OR (d) IN ACCORDANCE WITH
ANOTHER EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO
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REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS
OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B)
THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN
(A) ABOVE.
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Cluett American Corp., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
10 1/8% per annum from May 15, 1998 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company shall pay interest and Liquidated Damages, if
any, semi-annually on May 15 and November 15 of each year (the "Interest Payment
Date"), or if any such day is not a Business Day, on the next succeeding
Business Day. Interest on the Notes will accrue from the most recent Interest
Payment Date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be November 15, 1998. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the May 1 or November 1
next preceding the Interest Payment Date, even if such Notes are cancelled after
such record date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest. The Notes
will be payable as to principal, premium and Liquidated Damages, if any, and
interest at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium and Liquidated
Damages, if any, on, all Global Notes and all other Notes the Holders of which
shall have provided wire transfer instructions to the Company or the Paying
Agent. Such payment shall be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts.
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying
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Agent or Registrar without notice to any Holder. The Company or any of its
Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of May 18, 1998 ("Indenture") among the Company, the Guarantors on the
signature pages thereto (the "Guarantors") and the Trustee. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. To the extent any
provision of this Note conflicts with the express provisions of the Indenture,
the provisions of the indenture shall govern and be controlling. The Notes are
general, unsecured obligations of the Company limited to (i) up to $175.0
million in aggregate principal amount of outstanding Series A Notes and Series B
Notes (including up to $63.0 million of Additional Notes issued in accordance
with the terms of the Indenture) and (ii) up to $13.0 million in aggregate
principal amount of outstanding Series C Notes.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this paragraph 5, the Company
shall not have the option to redeem the Notes pursuant to this paragraph 5 prior
to May 15, 2003. Thereafter, the Company shall have the option to redeem the
Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice,
at the redemption prices (expressed as percentages of principal amount) set
forth below plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on May 15 of the years indicated below:
Year Percentage
---- ----------
2003.............................................105.0625%
2004.............................................103.3750%
2005.............................................101.6875%
2006 and thereafter..............................100.0000%
(b) Notwithstanding the provisions of clause (a) of this paragraph 5, at
any time prior to May 15, 2001, the Company may on any one or more occasions
redeem up to 35% of the aggregate principal amount of Notes originally issued
under this Indenture at a redemption price of 110.125% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the redemption date, with the net cash proceeds of a Public Offering;
provided that at least 65% of the original aggregate principal amount of Notes
remain outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company or any of its Subsidiaries); and provided,
further, that such redemption shall occur within 45 days of the date of the
closing of such Public Offering.
At any time prior to May 15, 2003, the Notes may also be redeemed,
as a whole but not in part, at the option of the Company upon the occurrence of
a Change of Control, upon not less than 30 nor more than 60 days' prior notice
(but in no event may any such redemption occur more than 90 days after the
occurrence of such Change of Control) mailed by first-class mail to each
Holder's registered
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address, at a redemption price equal to 100% of the principal amount thereof
plus the Applicable Premium as of, and accrued and unpaid interest and
Liquidated Damages, if any, to, the date of redemption (the "Redemption Date").
(c) Any redemption pursuant to this paragraph 5 shall be made pursuant to
the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below,
the Company shall not be required to make mandatory redemption payments with
respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described in Section 4.15 of the Indenture (the "Change of Control Offer")
at an offer price in cash equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase (the "Change of Control Payment"). Within 30 days
following any Change of Control, the Company shall mail a notice to each Holder
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase the Notes on the date specified in such notice, which
date shall be no earlier than 30 days and no later than 60 days from the date
such notice is mailed (the "Change of Control Payment Date"), pursuant to the
procedures required by the Indenture and described in such notice.
(b) Within 360 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to
permanently repay Senior Indebtedness, (b) to acquire all or substantially all
of the assets of, or a majority of the Voting Stock of, another Permitted
Business, (c) to make a capital expenditure or (d) to acquire other long-term
assets that are used or useful in a Permitted Business. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any manner
that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $10.0 million, the Company will be required to make an
offer to all Holders of Notes and all holders of other Indebtedness that is pari
passu with the Notes containing provisions similar to those set forth in the
Indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount
of Notes and such other pari passu Indebtedness that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in the Indenture and such other pari passu Indebtedness. To the extent
that any Excess Proceeds remain after consummation of an Asset Sale Offer, or in
the event the holders of the Notes and such other indebtedness decline such
Asset Sale Offer, the Company may use such Excess Proceeds for any purpose not
otherwise prohibited by the Indenture. If the aggregate principal amount of
Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes and such other pari passu Indebtedness to be
purchased on a pro rata basis. Holders of
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Notes that are the subject of an offer to purchase may elect to have such Notes
purchased by completing the form entitled "Option of Holder to Elect Purchase"
on the reverse of the Notes. Upon completion of such offer to purchase, the
amount of Excess Proceeds shall be reset at zero.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. SUBORDINATION. Each Holder by accepting a Note agrees that the
payment of principal of and premium, interest and Liquidated Damages, if any, on
each Note is subordinated in right of payment, to the extent and in the manner
provided in Article 10 of the Indenture, prior to the payment in full of all
Senior Indebtedness of the Issuers (whether outstanding on the date of the
Indenture or thereafter incurred assumed or guaranteed), and the subordination
is for the benefit of the holders of such Senior Indebtedness.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Guarantees or the Notes may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
then outstanding Notes and any existing default or compliance with any provision
of the Indenture, the Guarantees or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes.
Without the consent of any Holder of a Note, the Indenture, the Guarantees or
the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's or
Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change that would provide any additional rights or
benefits to the Holders of the Notes or that does not adversely affect the legal
rights under the Indenture of any such Holder, to comply with the requirements
of the Commission in order to effect or maintain the qualification of the
Indenture under the Trust Indenture Act, to provide for the Issuance of
Additional Notes in accordance with the limitations set forth in the Indenture,
or to allow any Guarantor to execute a supplemental indenture to the Indenture
and/or a Guarantee with respect to the Notes.
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<PAGE>
13. DEFAULTS AND REMEDIES. Each of the following constitutes an
Event of Default: (i) the Company defaults in the payment when due of interest
on, or Liquidated Damages with respect to, the Notes (whether or not permitted
by the subordination provisions of the Indenture) and such default continues for
a period of 30 days; (ii) the Company defaults in the payment when due of
principal of or premium, if any, on the Notes when the same becomes due and
payable at maturity, upon redemption (including in connection with an offer to
purchase) or otherwise (whether or not permitted by the subordination provisions
of the Indenture); (iii) the Company or any of its Restricted Subsidiaries fails
to comply with any of the provisions of Section 5.01 of the Indenture; (iv) the
Company or any of its Restricted Subsidiaries fails to observe or perform any
other covenant, representation, warranty or other agreement in the Indenture or
the Notes for 60 days after notice to the Company by the Trustee or the Holders
of at least 25% in aggregate principal amount of the Notes then outstanding
voting as a single class; (v) a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date hereof, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (vi) a final
judgment or final judgments for the payment of money are entered by a court or
courts of competent jurisdiction against the Company or any of its Restricted
Subsidiaries and such judgment or judgments remain undischarged for a period
(during which execution shall not be effectively stayed) of 60 days, provided
that the aggregate of all such undischarged judgments exceeds $5.0 million;
(vii) except as permitted by the Indenture, any Subsidiary Guarantee is held in
any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under such
Subsidiary Guarantee. If any Event of Default (other than certain events of
bankruptcy or insolvency) occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Upon any such declaration, the
Notes shall become due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes shall be due and payable immediately without
further action or notice. The Holders of a majority in aggregate principal
amount of the then outstanding Notes by written notice to the Trustee may on
behalf of all of the Holders rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium that has
become due solely because of the acceleration) have been cured or waived. The
Company is required to deliver to the Trustee annually a statement regarding
compliance with the Indenture, and the Company is required upon becoming aware
of any Default or Event of Default to deliver to the Trustee a statement
specifying such Default or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
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<PAGE>
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of May 18, 1998, between the Company and the parties named on
the signature pages thereof (the "Registration Rights Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier no.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
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ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature:_______________________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:________________________________________
Signature Guarantee.
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
|_| Section 4.10 |_| Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $________
Date: Your Signature:_______________________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:________________________________________
Signature Guarantee.
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<PAGE>
SCHEDULE OF EXCHANGES OF REGULATION S TEMPORARY GLOBAL NOTE
The following exchanges of a part of this Regulation S Temporary
Global Note for an interest in another Global Note, or of other Restricted
Global Notes for an interest in this Regulation S Temporary Global Note, have
been made:
Amount of Amount of Principal Signature of
decrease in increase in Amount authorized
Principal Principal of this Global signatory of
Amount Amount Note following Trustee or
Date of of this of this such decrease Note
Exchange Global Note Global Note (or increase) Custodian
-------- ----------- ----------- -------------- ---------
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<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier no.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Re: 10 1/8% Senior Subordinated Notes Due 2008
Reference is hereby made to the Indenture, dated as of May 18, 1998
(the "Indenture"), among Cluett American Corp. (the "Company"), as issuer,
Cluett Peabody & Co., Inc., Great American Knitting Mills, Inc., Cluett Designer
Group Inc., Consumer Direct Corporation and Arrow Factory Stores Inc. (the
"Guarantors"), as guarantors, and The Bank of New York, as trustee. Capitalized
terms used but not defined herein shall have the meanings given to them in the
Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Note[s] or interest in such Note[s] specified in Annex A hereto, in the
principal amount of $___________ in such Note[s] or interests (the "Transfer"),
to __________ (the "Transferee"), as further specified in Annex A hereto. In
connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. |_| Check if Transferee will take delivery of a beneficial interest in the
144A Global Note or a Definitive Note Pursuant to Rule 144A. The Transfer is
being effected pursuant to and in accordance with Rule 144A under the United
States Securities Act of 1933, as amended (the "Securities Act"), and,
accordingly, the Transferor hereby further certifies that the beneficial
interest or Definitive Note is being transferred to a Person that the Transferor
reasonably believed and believes is purchasing the beneficial interest or
Definitive Note for its own account, or for one or more accounts with respect to
which such Person exercises sole investment discretion, and such Person and each
such account is a "qualified institutional buyer" within the meaning of Rule
144A in a transaction meeting the requirements of Rule 144A and such Transfer is
in compliance with any applicable blue sky securities laws of any state of the
United States. Upon consummation of the proposed Transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or Definitive Note
will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the 144A Global Note and/or the Definitive Note and
in the Indenture and the Securities Act.
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<PAGE>
2. |_| Check if Transferee will take delivery of a beneficial interest in the
Temporary Regulation S Global Note, the Regulation S Global Note or a Definitive
Note pursuant to Regulation S. The Transfer is being effected pursuant to and in
accordance with Rule 903 or Rule 904 under the Securities Act and, accordingly,
the Transferor hereby further certifies that (i) the Transfer is not being made
to a person in the United States and (x) at the time the buy order was
originated, the Transferee was outside the United States or such Transferor and
any Person acting on its behalf reasonably believed and believes that the
Transferee was outside the United States or (y) the transaction was executed in,
on or through the facilities of a designated offshore securities market and
neither such Transferor nor any Person acting on its behalf knows that the
transaction was prearranged with a buyer in the United States, (ii) no directed
selling efforts have been made in contravention of the requirements of Rule
903(b) or Rule 904(b) of Regulation S under the Securities Act and (iii) the
transaction is not part of a plan or scheme to evade the registration
requirements of the Securities Act and (iv) if the proposed transfer is being
made prior to the expiration of the Restricted Period, the transfer is not being
made to a U.S. Person or for the account or benefit of a U.S. Person (other than
an Initial Purchaser). Upon consummation of the proposed transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will be subject to the restrictions on Transfer enumerated in
the Private Placement Legend printed on the Regulation S Global Note , the
Temporary Regulation S Global Note and/or the Definitive Note and in the
Indenture and the Securities Act.
3. |_| Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Note or a Definitive Note pursuant to any provision
of the Securities Act other than Rule 144A or Regulation S. The Transfer is
being effected in compliance with the transfer restrictions applicable to
beneficial interests in Restricted Global Notes and Restricted Definitive Notes
and pursuant to and in accordance with the Securities Act and any applicable
blue sky securities laws of any state of the United States, and accordingly the
Transferor hereby further certifies that (check one):
(a) such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
(b) such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) such Transfer is being effected pursuant to an effective
registration statement under the Securities Act and in compliance
with the prospectus delivery requirements of the Securities Act;
or
(d) such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or
Rule 904, and the Transferor hereby further certifies that it has
not engaged in any general solicitation within the meaning of
Regulation D under the Securities Act and the Transfer complies with
the transfer restrictions applicable to beneficial interests in a
Restricted Global Note or Restricted Definitive Notes and the
requirements of the exemption claimed, which certification is
supported by (1) a certificate executed by the Transferee in the
form of Exhibit D to the Indenture and (2) if such Transfer is in
respect of a principal amount of Notes at the time
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<PAGE>
of transfer of less than $250,000, an Opinion of Counsel provided by
the Transferor or the Transferee (a copy of which the Transferor has
attached to this certification), to the effect that such Transfer is
in compliance with the Securities Act. Upon consummation of the
proposed transfer in accordance with the terms of the Indenture, the
transferred beneficial interest or Definitive Note will be subject
to the restrictions on transfer enumerated in the Private Placement
Legend printed on the IAI Global Note and/or the Definitive Notes
and in the Indenture and the Securities Act.
4. Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Note or of an Unrestricted Definitive Note.
(a) |_| Check if Transfer is pursuant to Rule 144. (i) The Transfer
is being effected pursuant to and in accordance with Rule 144 under the
Securities Act and in compliance with the transfer restrictions contained in the
Indenture and any applicable blue sky securities laws of any state of the United
States and (ii) the restrictions on transfer contained in the Indenture and the
Private Placement Legend are not required in order to maintain compliance with
the Securities Act. Upon consummation of the proposed Transfer in accordance
with the terms of the Indenture, the transferred beneficial interest or
Definitive Note will no longer be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes, on Restricted Definitive Notes and in the Indenture.
(b) |_| Check if Transfer is Pursuant to Regulation S. (i) The
Transfer is being effected pursuant to and in accordance with Rule 903 or Rule
904 under the Securities Act and in compliance with the transfer restrictions
contained in the Indenture and any applicable blue sky securities laws of any
state of the United States and (ii) the restrictions on transfer contained in
the Indenture and the Private Placement Legend are not required in order to
maintain compliance with the Securities Act. Upon consummation of the proposed
Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Note will no longer be subject to the
restrictions on transfer enumerated in the Private Placement Legend printed on
the Restricted Global Notes, on Restricted Definitive Notes and in the
Indenture.
(c) |_| Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Note will not be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the Restricted Global
Notes or Restricted Definitive Notes and in the Indenture.
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
______________________________________
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<PAGE>
[Insert Name of Transferor]
BY:___________________________________
Name:
Title:
Dated: __________, ____
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<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP _____), or
(ii) |_| Regulation S Global Note (CUSIP ______), or
(iii) |_| IAI Global Note (CUSIP ______); or
(b) a Restricted Definitive Note.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) a beneficial interest in the:
(i) |_| 144A Global Note (CUSIP _____), or
(ii) |_| Regulation S Global Note (CUSIP ______), or
(iii) |_| IAI Global Note (CUSIP ______); or
(iv) |_| Unrestricted Global Note (CUSIP _______); or
(b) a Restricted Definitive Note; or
(c) an Unrestricted Definitive Note, in accordance with the terms of the
Indenture.
B-5
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier no.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Re: 10 1/8% Senior Subordinated Notes Due 2008
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of May 18, 1998
(the "Indenture"), among Cluett American Corp. (the "Company"), as issuer,
Cluett Peabody & Co., Inc., Great American Knitting Mills, Inc., Cluett Designer
Group Inc., Consumer Direct Corporation and Arrow Factory Stores Inc.
(collectively, the "Guarantors") as guarantors, and The Bank of New York, as
trustee. Capitalized terms used but not defined herein shall have the meanings
given to them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the
Note[s] or interest in such Note[s] specified herein, in the principal amount of
$____________ in such Note[s] or interests (the "Exchange"). In connection with
the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Notes or Beneficial Interests in a
Restricted Global Note for Unrestricted Definitive Notes or Beneficial Interests
in an Unrestricted Global Note
(a) |_| Check if Exchange is from beneficial interest in a Restricted Global
Note to beneficial interest in an Unrestricted Global Note. In connection with
the Exchange of the Owner's beneficial interest in a Restricted Global Note for
a beneficial interest in an Unrestricted Global Note in an equal principal
amount, the Owner hereby certifies (i) the beneficial interest is being acquired
for the Owner's own account without transfer, (ii) such Exchange has been
effected in compliance with the transfer restrictions applicable to the Global
Notes and pursuant to and in accordance with the United States Securities Act of
1933, as amended (the "Securities Act"), (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest in an Unrestricted Global Note is being acquired in compliance with any
applicable blue sky securities laws of any state of the United States.
(b) |_| Check if Exchange is from beneficial interest in a Restricted Global
Note to Unrestricted Definitive Note. In connection with the Exchange of the
Owner's beneficial interest in a
C-1
<PAGE>
Restricted Global Note for an Unrestricted Definitive Note, the Owner hereby
certifies (i) the Definitive Note is being acquired for the Owner's own account
without transfer, (ii) such Exchange has been effected in compliance with the
transfer restrictions applicable to the Restricted Global Notes and pursuant to
and in accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the Definitive
Note is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(c) |_| Check if Exchange is from Restricted Definitive Note to beneficial
interest in an Unrestricted Global Note. In connection with the Owner's Exchange
of a Restricted Definitive Note for a beneficial interest in an Unrestricted
Global Note, the Owner hereby certifies (i) the beneficial interest is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Definitive Notes and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the beneficial interest is being
acquired in compliance with any applicable blue sky securities laws of any state
of the United States.
(d) |_| Check if Exchange is from Restricted Definitive Note to Unrestricted
Definitive Note. In connection with the Owner's Exchange of a Restricted
Definitive Note for an Unrestricted Definitive Note, the Owner hereby certifies
(i) the Unrestricted Definitive Note is being acquired for the Owner's own
account without transfer, (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to Restricted Definitive Notes and
pursuant to and in accordance with the Securities Act, (iii) the restrictions on
transfer contained in the Indenture and the Private Placement Legend are not
required in order to maintain compliance with the Securities Act and (iv) the
Unrestricted Definitive Note is being acquired in compliance with any applicable
blue sky securities laws of any state of the United States. 2. Exchange of
Restricted Definitive Notes or Beneficial Interests in Restricted Global Notes
for Restricted Definitive Notes or Beneficial Interests in Restricted Global
Notes
(a) |_| Check if Exchange is from beneficial interest in a Restricted Global
Note to Restricted Definitive Note. In connection with the Exchange of the
Owner's beneficial interest in a Restricted Global Note for a Restricted
Definitive Note with an equal principal amount, the Owner hereby certifies that
the Restricted Definitive Note is being acquired for the Owner's own account
without transfer. Upon consummation of the proposed Exchange in accordance with
the terms of the Indenture, the Restricted Definitive Note issued will continue
to be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the Restricted Definitive Note and in the Indenture
and the Securities Act.
(b) |_| Check if Exchange is from Restricted Definitive Note to beneficial
interest in a Restricted Global Note. In connection with the Exchange of the
Owner's Restricted Definitive Note for a beneficial interest in the [CHECK ONE]
"144A Global Note", "Regulation S Global Note", "IAI Global Note" with an equal
principal amount, the Owner hereby certifies (i) the beneficial interest is
being acquired for the Owner's own account without transfer and (ii) such
Exchange has been effected in compliance with the transfer restrictions
applicable to the Restricted Global Notes and pursuant to and in accordance with
the Securities Act, and in compliance with any applicable blue sky securities
laws of any state of the United States. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the beneficial interest
issued will be subject to the restrictions on transfer enumerated in the Private
Placement Legend printed on the relevant Restricted Global Note and in the
C-2
<PAGE>
Indenture and the Securities Act.
C-3
<PAGE>
This certificate and the statements contained herein are made for
your benefit and the benefit of the Company.
______________________________________
[Insert Name of Transferor]
BY:___________________________________
Name:
Title:
Dated: __________, ____
C-4
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier no.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Re: 10 1/8% Senior Subordinated Notes Due 2008
Reference is hereby made to the Indenture, dated as of May 18, 1998 (the
"Indenture"), among Cluett American Corp. (the "Company"), as issuer, Signal
Investment & Management Co. (the "Guarantor"), as guarantor, and The Bank of New
York, as trustee. Capitalized terms used but not defined herein shall have the
meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) |_| a beneficial interest in a Global Note, or
(b) |_| a Definitive Note,
we confirm that:
1. We understand that any subsequent transfer of the Notes or any
interest therein is subject to certain restrictions and conditions
set forth in the Indenture and the undersigned agrees to be bound
by, and not to resell, pledge or otherwise transfer the Notes or any
interest therein except in compliance with, such restrictions and
conditions and the United States Securities Act of 1933, as amended
(the "Securities Act").
2. We understand that the offer and sale of the Notes have not been
registered under the Securities Act, and that the Notes and any
interest therein may not be offered or sold except as permitted in
the following sentence. We agree, on our own behalf and on behalf of
any accounts for which we are acting as hereinafter stated, that if
we should sell the Notes or any interest therein, we will do so only
(A) to the Company or any subsidiary thereof, (B) in accordance with
Rule 144A under the Securities Act to a "qualified institutional
buyer" (as defined therein), (c) to an
D-1
<PAGE>
institutional "accredited investor" (as defined below) that, prior
to such transfer, furnishes (or has furnished on its behalf by a
U.S. broker-dealer) to you and to the Company a signed letter
substantially in the form of this letter and, if such transfer is in
respect of a principal amount of Notes, at the time of transfer of
less than $250,000, an Opinion of Counsel in form reasonably
acceptable to the Company to the effect that such transfer is in
compliance with the Securities Act, (D) outside the United States in
accordance with Rule 904 of Regulation S under the Securities Act,
(E) pursuant to the provisions of Rule 144(k) under the Securities
Act or (F) pursuant to an effective registration statement under the
Securities Act, and we further agree to provide to any person
purchasing the Definitive Note or beneficial interest in a Global
Note from us in a transaction meeting the requirements of clauses
(A) through (E) of this paragraph a notice advising such purchaser
that resales thereof are restricted as stated herein.
3. We understand that, on any proposed resale of the Notes or
beneficial interest therein, we will be required to furnish to you
and the Company such certifications, legal opinions and other
information as you and the Company may reasonably require to confirm
that the proposed sale complies with the foregoing restrictions. We
further understand that the Notes purchased by us will bear a legend
to the foregoing effect. We further understand that any subsequent
transfer by us of the Notes or beneficial interest therein acquired
by us must be effected through one of the Placement Agents.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act)
and have such knowledge and experience in financial and business
matters as to be capable of evaluating the merits and risks of our
investment in the Notes, and we and any accounts for which we are
acting are each able to bear the economic risk of our or its
investment.
5. We are acquiring the Notes or beneficial interest therein purchased
by us for our own account or for one or more accounts (each of which
is an institutional "accredited investor") as to each of which we
exercise sole investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to
any interested party in any administrative or legal proceedings or
official inquiry with respect to the matters covered hereby.
______________________________________
[Insert Name of Transferor]
BY:___________________________________
Name:
Title:
Dated: __________, ____
D-2
<PAGE>
EXHIBIT E
FORM OF NOTATION OF GUARANTEE
For value received, each Guarantor (which term includes any
successor Person under the Indenture) has, jointly and severally,
unconditionally guaranteed, to the extent set forth in the Indenture and subject
to the provisions in the Indenture dated as of May 18, 1998 (the "Indenture")
among Cluett American Corp. (the "Company"), Cluett Peabody & Co., Inc., Great
American Knitting Mills, Inc., Cluett Designer Group Inc., Consumer Direct
Corporation and Arrow Factory Stores Inc. (collectively, the "Guarantors") and
The Bank of New York as trustee (the "Trustee"), (a) the due and punctual
payment of the principal of, premium, if any, and interest on the Notes (as
defined in the Indenture), whether at maturity, by acceleration, redemption or
otherwise, the due and punctual payment of interest on overdue principal and
premium, and, to the extent permitted by law, interest, and the due and punctual
performance of all other obligations of the Company to the Holders or the
Trustee all in accordance with the terms of the Indenture and (b) in case of any
extension of time of payment or renewal of any Notes or any of such other
obligations, that the same will be promptly paid in full when due or performed
in accordance with the terms of the extension or renewal, whether at stated
maturity, by acceleration or otherwise. The obligations of the Guarantors to the
Holders of Notes and to the Trustee pursuant to the Subsidiary Guarantee and the
Indenture are expressly set forth in Article 11 of the Indenture and reference
is hereby made to the Indenture for the precise terms of the Subsidiary
Guarantee. Each Holder of a Note, by accepting the same, (a) agrees to and shall
be bound by such provisions, (b) authorizes and directs the Trustee, on behalf
of such Holder, to take such action as may be necessary or appropriate to
effectuate the subordination as provided in the Indenture and (c) appoints the
Trustee attorney-in-fact of such Holder for such purpose; provided, however,
that the Indebtedness evidenced by this Subsidiary Guarantee shall cease to be
so subordinated and subject in right of payment upon any defeasance of this Note
in accordance with the provisions of the Indenture.
[Name of Guarantor(s)]
By:______________________________________
Name:
Title:
E-1
<PAGE>
EXHIBIT F
FORM OF SUPPLEMENTAL INDENTURE
TO BE DELIVERED BY SUBSEQUENT GUARANTORS
SUPPLEMENTAL INDENTURE (this "Supplemental Indenture"), dated as of
________________, among __________________ (the "Guarantor"), Cluett American
Corp., (the "Company"), the other Guarantors (as defined in the Indenture
referred to herein) and The Bank of New York, as trustee under the indenture
referred to below (the "Trustee").
W I T N E S S E T H
WHEREAS, the Company has heretofore executed and delivered to the
Trustee an indenture (the "Indenture"), dated as of May 18, 1998 providing for
the issuance of an aggregate principal amount of up to $188.0 million of 10 1/8%
Notes due 2008 (the "Notes");
WHEREAS, the Indenture provides that under certain circumstances the
Guarantor shall execute and deliver to the Trustee a supplemental indenture
pursuant to which the Guarantor shall unconditionally guarantee all of the
Company's Obligations under the Notes and the Indenture on the terms and
conditions set forth herein (the "Subsidiary Guarantee"); and
WHEREAS, pursuant to Section 9.01 of the Indenture, the Trustee is
authorized to execute and deliver this Supplemental Indenture.
NOW THEREFORE, in consideration of the foregoing and for other good
and valuable consideration, the receipt of which is hereby acknowledged, the
Guarantor and the Trustee mutually covenant and agree for the equal and ratable
benefit of the Holders of the Notes as follows:
1. Capitalized Terms. Capitalized terms used herein without definition
shall have the meanings assigned to them in the Indenture.
2. Agreement to Guarantee. The Guarantor hereby agrees as follows:
(a) Along with all Guarantors named in the Indenture, to jointly
and severally Guarantee to each Holder of a Note authenticated
and delivered by the Trustee and to the Trustee and its
successors and assigns, irrespective of the validity and
enforceability of the Indenture, the Notes or the obligations
of the Company hereunder or thereunder, that:
(i) the principal of and interest on the Notes will be
promptly paid in full when due, whether at
maturity, by acceleration, redemption or
otherwise, and interest on the overdue principal
of and interest on the Notes, if any, if lawful,
and all other obligations of the Company to the
Holders or the Trustee hereunder or thereunder
will be promptly paid in full or performed, all in
accordance with the terms hereof and thereof; and
F-1
<PAGE>
(ii) in case of any extension of time of payment or
renewal of any Notes or any of such other
obligations, that same will be promptly paid in
full when due or performed in accordance with the
terms of the extension or renewal, whether at
stated maturity, by acceleration or otherwise.
Failing payment when due of any amount so
guaranteed or any performance so guaranteed for
whatever reason, the Guarantors shall be jointly
and severally obligated to pay the same
immediately.
(b) The obligations hereunder shall be unconditional, irrespective
of the validity, regularity or enforceability of the Notes or
the Indenture, the absence of any action to enforce the same,
any waiver or consent by any Holder of the Notes with respect
to any provisions hereof or thereof, the recovery of any
judgment against the Company, any action to enforce the same
or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor.
(c) The following is hereby waived: diligence, presentment, demand
of payment, filing of claims with a court in the event of
insolvency or bankruptcy of the Company, any right to require
a proceeding first against the Company, protest, notice and
all demands whatsoever.
(d) This Subsidiary Guarantee shall not be discharged except by
complete performance of the obligations contained in the Notes
and the Indenture.
(e) If any Holder or the Trustee is required by any court or
otherwise to return to the Company, the Guarantors, or any
Custodian, Trustee, liquidator or other similar official
acting in relation to either the Company or the Guarantors,
any amount paid by either to the Trustee or such Holder, this
Subsidiary Guarantee, to the extent theretofore discharged,
shall be reinstated in full force and effect.
(f) The Guarantor shall not be entitled to any right of
subrogation in relation to the Holders in respect of any
obligations guaranteed hereby until payment in full of all
obligations guaranteed hereby.
(g) As between the Guarantors, on the one hand, and the Holders
and the Trustee, on the other hand, (x) the maturity of the
obligations guaranteed hereby may be accelerated as provided
in Article 6 of the Indenture for the purposes of this
Subsidiary Guarantee, notwithstanding any stay, injunction or
other prohibition preventing such acceleration in respect of
the obligations guaranteed hereby, and (y) in the event of any
declaration of acceleration of such obligations as provided in
Article 6 of the Indenture, such obligations (whether or not
due and payable) shall forthwith become due and payable by the
Guarantors for the purpose of this Subsidiary Guarantee.
(h) The Guarantors shall have the right to seek contribution from
any non-paying Guarantor so long as the exercise of such right
does not impair the rights of the Holders under the Guarantee.
F-2
<PAGE>
(i) Pursuant to Section 11.03 of the Indenture, after giving
effect to any maximum amount and any other contingent and
fixed liabilities that are relevant under any applicable
Bankruptcy or fraudulent conveyance laws, and after giving
effect to any collections from, rights to receive contribution
from or payments made by or on behalf of any other Guarantor
in respect of the obligations of such other Guarantor under
Article 11 of the Indenture shall result in the obligations of
such Guarantor under its Subsidiary Guarantee not constituting
a fraudulent transfer or conveyance.
3. EXECUTION AND DELIVERY. Each Guarantor agrees that the Subsidiary
Guarantees shall remain in full force and effect notwithstanding any
failure to endorse on each Note a notation of such Subsidiary
Guarantee.
4. GUARANTOR MAY CONSOLIDATE, ETC. ON CERTAIN TERMS.
(a) The Guarantor may not consolidate with or merge with or into
(whether or not such Guarantor is the surviving Person)
another corporation, Person or entity whether or not
affiliated with such Guarantor unless:
(i) subject to Section 11.05 of the Indenture, the Person
formed by or surviving any such consolidation or merger
(if other than a Guarantor or the Company)
unconditionally assumes all the obligations of such
Guarantor, pursuant to a supplemental indenture in form
and substance reasonably satisfactory to the Trustee,
under the Notes, the Indenture and the Subsidiary
Guarantee on the terms set forth herein or therein; and
(ii) immediately after giving effect to such transaction, no
Default or Event of Default exists.
(b) In case of any such consolidation, merger, sale or conveyance
and upon the assumption by the successor corporation, by
supplemental indenture, executed and delivered to the Trustee
and satisfactory in form to the Trustee, of the Subsidiary
Guarantee endorsed upon the Notes and the due and punctual
performance of all of the covenants and conditions of the
Indenture to be performed by the Guarantor, such successor
corporation shall succeed to and be substituted for the
Guarantor with the same effect as if it had been named herein
as a Guarantor. Such successor corporation thereupon may cause
to be signed any or all of the Subsidiary Guarantees to be
endorsed upon all of the Notes issuable hereunder which
theretofore shall not have been signed by the Company and
delivered to the Trustee. All the Subsidiary Guarantees so
issued shall in all respects have the same legal rank and
benefit under the Indenture as the Subsidiary Guarantees
theretofore and thereafter issued in accordance with the terms
of the Indenture as though all of such Subsidiary Guarantees
had been issued at the date of the execution hereof.
(c) Except as set forth in Articles 4 and 5 of the Indenture, and
notwithstanding clauses (a) and (b) above, nothing contained
in the Indenture or in any of the Notes shall prevent any
consolidation or merger of a Guarantor with or into the
Company or another Guarantor, or shall prevent any sale or
conveyance of the property of a Guarantor as an entirety or
substantially as an entirety to the Company or another
Guarantor.
F-3
<PAGE>
5. RELEASES.
(a) In the event of a sale or other disposition of all of the assets of any
Guarantor, by way of merger, consolidation or otherwise, or a sale or other
disposition of all to the capital stock of any Guarantor, then such Guarantor
(in the event of a sale or other disposition, by way of merger, consolidation or
otherwise, of all of the capital stock of such Guarantor) or the corporation
acquiring the property (in the event of a sale or other disposition of all or
substantially all of the assets of such Guarantor) will be released and relieved
of any obligations under its Subsidiary Guarantee; provided that the Net
Proceeds of such sale or other disposition are applied in accordance with the
applicable provisions of the Indenture, including without limitation Section
4.10 of the Indenture. Upon delivery by the Company to the Trustee of an
Officers' Certificate and an Opinion of Counsel to the effect that such sale or
other disposition was made by the Company in accordance with the provisions of
the Indenture, including without limitation Section 4.10 of the Indenture, the
Trustee shall execute any documents reasonably required in order to evidence the
release of any Guarantor from its obligations under its Subsidiary Guarantee.
(b) Any Guarantor not released from its obligations under its
Subsidiary Guarantee shall remain liable for the full amount
of principal of and interest on the Notes and for the other
obligations of any Guarantor under the Indenture as provided
in Article 10 of the Indenture.
6. NO RECOURSE AGAINST OTHERS. No past, present or future director,
officer, employee, incorporator, stockholder or agent of the
Guarantor, as such, shall have any liability for any obligations of
the Company or any Guarantor under the Notes, any Subsidiary
Guarantees, the Indenture or this Supplemental Indenture or for any
claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder of the Notes by accepting a Note waives
and releases all such liability. The waiver and release are part of
the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and
it is the view of the Commission that such a waiver is against
public policy.
7. NEW YORK LAW TO GOVERN. THE INTERNAL LAW OF THE STATE OF NEW YORK
SHALL GOVERN AND BE USED TO CONSTRUE THIS SUPPLEMENTAL INDENTURE BUT
WITHOUT GIVING EFFECT TO APPLICABLE PRINCIPLES OF CONFLICTS OF LAW
TO THE EXTENT THAT THE APPLICATION OF THE LAWS OF ANOTHER
JURISDICTION WOULD BE REQUIRED THEREBY.
8. COUNTERPARTS The parties may sign any number of copies of this
Supplemental Indenture. Each signed copy shall be an original, but
all of them together represent the same agreement.
9. EFFECT OF HEADINGS. The Section headings herein are for convenience
only and shall not affect the construction hereof.
10. THE TRUSTEE. The Trustee shall not be responsible in any manner
whatsoever for or in respect of the validity or sufficiency of this
Supplemental Indenture or for or in respect of the recitals
contained herein, all of which recitals are made solely by the
Guarantor and the Company.
F-4
<PAGE>
IN WITNESS WHEREOF, the parties hereto
have caused this Supplemental Indenture
to be duly executed and attested, all as
of the date first above written.
[GUARANTEEING SUBSIDIARY]
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
Title: Director, President and
Chief Executive Office
CLUETT AMERICAN CORP.
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
Title: Chairman and
Chief Executive Officer
CLUETT PEABODY & CO., INC.
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
Title: Chairman and
Chief Executive Officer
GREAT AMERICAN KNITTING MILLS, INC.
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
Title: Chairman and
Chief Executive Officer
CLUETT DESIGNER GROUP INC.
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
Title: Chairman and
Chief Executive Officer
CONSUMER DIRECT CORPORATION
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
Title: Director, President and
Chief Executive Officer
F-5
<PAGE>
ARROW FACTORY STORES INC.
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
Title: Chairman and
Chief Executive Officer
The Bank of New York
as Trustee
By: /s/ Mary La Gunna
-------------------------------------
Name: Mary La Gunna
Title: Assistant Vice President
F-6
<PAGE>
Exhibit 4.2
CLUETT AMERICAN CORP.
12 1/2% SUBORDINATED EXCHANGE DEBENTURES DUE 2010
EXCHANGE INDENTURE
DATED AS OF _____
The Bank of New York
Trustee
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section
310(a)(1)...............................................................7.10
(a)(2)..................................................................7.10
(a)(3)..................................................................N.A.
(a)(4)..................................................................N.A.
(a)(5)..................................................................7.10
(b).....................................................................7.10
(c).....................................................................N.A.
311(a)..................................................................7.11
(b).....................................................................7.11
(c).....................................................................N.A.
312 (a).................................................................2.05
(b).....................................................................11.03
(c).....................................................................11.03
313(a)..................................................................7.06
(b)(1)..................................................................10.03
(b)(2)..................................................................7.07
(c).....................................................................7.06;
11.02
(d).....................................................................7.06
314(a)..................................................................4.03;
11.02
(b).....................................................................10.02
(c)(1)..................................................................11.04
(c)(2)..................................................................11.04
(c)(3)..................................................................N.A.
(e).....................................................................11.05
(f).....................................................................N.A.
315 (a).................................................................7.01
(b).....................................................................7.05;
11.02
(c).....................................................................7.01
(d).....................................................................7.01
(e).....................................................................6.11
316 (a)(last sentence)..................................................2.09
(a)(1)(A)...............................................................6.05
(a)(1)(B)...............................................................6.04
(a)(2)..................................................................N.A.
(b).....................................................................6.07
(c).....................................................................2.12
317(a)(1)...............................................................6.08
(a)(2)..................................................................6.09
(b).....................................................................2.04
318(a)..................................................................11.01
(b).....................................................................N.A.
(c).....................................................................11.01
N.A. means not applicable.
<PAGE>
*This Cross-Reference Table is not part of the Indenture.
2
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE........................1
Section 1.01. Definitions..................................................1
Section 1.02. Other Definitions...........................................18
Section 1.03. Trust Indenture Act Provisions..............................18
Section 1.04. Rules of Construction.......................................19
ARTICLE 2. THE DEBENTURES...................................................19
Section 2.01. Form and Dating.............................................19
Section 2.02. Execution and Authentication................................20
Section 2.03. Registrar and Paying Agent..................................20
Section 2.04. Paying Agent to Hold Money in Trust.........................21
Section 2.05. Holder Lists................................................21
Section 2.06. Transfer and Exchange.......................................21
Section 2.07. Replacement Debentures......................................33
Section 2.08. Outstanding Debentures......................................33
Section 2.09. Treasury Debentures.........................................34
Section 2.10. Temporary Debentures........................................34
Section 2.11. Cancellation................................................34
Section 2.12. Defaulted Interest..........................................34
Section 2.13. CUSIP Numbers...............................................35
ARTICLE 3. REDEMPTION AND PREPAYMENT........................................35
Section 3.01. Notices to Exchange Trustee.................................35
Section 3.02. Selection of Debentures to Be Redeemed......................35
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Section 3.03. Notice of Redemption........................................35
Section 3.04. Effect of Notice of Redemption..............................36
Section 3.05. Deposit of Redemption Price.................................36
Section 3.06. Debentures Redeemed in Part.................................37
Section 3.07. Optional Redemption.........................................37
Section 3.08. Mandatory Redemption........................................38
Section 3.09. Offer to Purchase by Application of Excess Proceeds.........38
ARTICLE 4. COVENANTS........................................................40
Section 4.01. Payment of Debentures.......................................40
Section 4.02. Maintenance of Office or Agency.............................40
Section 4.03. Reports.....................................................41
Section 4.04. Compliance Certificate......................................41
Section 4.05. Taxes.......................................................42
Section 4.06. Stay, Extension and Usury Laws..............................42
Section 4.07. Restricted Payments.........................................42
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries..............................................................45
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock..46
Section 4.10. Asset Sales.................................................49
Section 4.11. Transactions with Affiliates................................50
Section 4.12. Liens.......................................................50
Section 4.13. Corporate Existence.........................................51
Section 4.14. Offer to Repurchase Upon Change of Control..................51
Section 4.15. No Senior Subordinated Debt.................................52
Section 4.16. Business Activities.........................................52
ARTICLE 5. SUCCESSORS.......................................................52
Section 5.01. Merger, Consolidation, or Sale of Assets....................52
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Section 5.02. Successor Corporation Substituted...........................53
ARTICLE 6. DEFAULTS AND REMEDIES............................................53
Section 6.01. Events of Default...........................................53
Section 6.02. Acceleration................................................55
Section 6.03. Other Remedies..............................................55
Section 6.04. Waiver of Past Defaults.....................................55
Section 6.05. Control by Majority.........................................56
Section 6.06. Limitation on Suits.........................................56
Section 6.07. Rights of Holders of Debentures to Receive Payment..........56
Section 6.08. Collection Suit by Exchange Trustee.........................56
Section 6.09. Exchange Trustee May File Proofs of Claim...................57
Section 6.10. Priorities..................................................57
Section 6.11. Undertaking for Costs.......................................58
ARTICLE 7. EXCHANGE TRUSTEE.................................................58
Section 7.01. Duties of Exchange Trustee..................................58
Section 7.02. Rights of Exchange Trustee..................................59
Section 7.03. Individual Rights of Exchange Trustee.......................60
Section 7.04. Exchange Trustee's Disclaimer...............................60
Section 7.05. Notice of Defaults..........................................60
Section 7.06. Reports by Exchange Trustee to Holders of the Debentures....60
Section 7.07. Compensation and Indemnity..................................60
Section 7.08. Replacement of Exchange Trustee.............................61
Section 7.09. Successor Exchange Trustee by Merger, etc...................62
Section 7.10. Eligibility; Disqualification...............................62
Section 7.11. Preferential Collection of Claims Against Company...........63
Section 7.12. Trustee's Application for Instructions from the Company.....63
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ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.........................63
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance....63
Section 8.02. Legal Defeasance and Discharge..............................63
Section 8.03. Covenant Defeasance.........................................64
Section 8.04. Conditions to Legal or Covenant Defeasance..................64
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions.....................................66
Section 8.06. Repayment to Company........................................66
Section 8.07. Reinstatement...............................................66
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER.................................67
Section 9.01. Without Consent of Holders of Debentures....................67
Section 9.02. With Consent of Holders of Debentures.......................67
Section 9.03. Compliance with Trust Indenture Act.........................69
Section 9.04. Revocation and Effect of Consents...........................69
Section 9.05. Notation on or Exchange of Debentures.......................69
Section 9.06. Exchange Trustee to Sign Amendments, etc....................70
ARTICLE 10. SUBORDINATION...................................................70
Section 10.01. Agreement to Subordinate...................................70
Section 10.02. Liquidation; Dissolution; Bankruptcy.......................70
Section 10.03. Default on Designated Senior Indebtedness..................71
Section 10.04. Acceleration of Securities.................................71
Section 10.05. When Distribution Must Be Paid Over........................71
Section 10.06. Notice by Company..........................................72
Section 10.07. Subrogation................................................72
Section 10.08. Relative Rights............................................72
Section 10.09. Subordination May Not Be Impaired by Company...............73
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Section 10.10. Distribution or Notice to Representative...................73
Section 10.11. Rights of Exchange Trustee and Paying Agent................73
Section 10.12. Authorization to Effect Subordination......................74
Section 10.13. Amendments.................................................74
Section 10.14. Certain Definitions........................................74
ARTICLE 11. MISCELLANEOUS...................................................75
Section 11.01. Trust Indenture Act Controls...............................75
Section 11.02. Notices....................................................75
Section 11.03. Communication by Holders of Debentures with Other Holders
of Debentures.............................................................76
Section 11.04. Certificate and Opinion as to Conditions Precedent.........76
Section 11.05. Statements Required in Certificate or Opinion..............76
Section 11.06. Rules by Exchange Trustee and Agents.......................77
Section 11.07. No Personal Liability of Directors, Officers, Employees
and Stockholders..........................................................77
Section 11.08. Governing Law..............................................77
Section 11.09. No Adverse Interpretation of Other Agreements..............77
Section 11.10. Successors.................................................77
Section 11.11. Severability...............................................77
Section 11.12. Counterpart Originals......................................78
Section 11.13. Table of Contents, Headings, etc...........................78
EXHIBITS
Exhibit A: FORM OF DEBENTURE
Exhibit B: FORM OF CERTIFICATE OF TRANSFER
Exhibit C: FORM OF CERTIFICATE OF EXCHANGE
Exhibit D: FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
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INDENTURE dated as of ____, ____ between Cluett American Corp., a
Delaware corporation (the "Company"), and The Bank of New York, a New York
banking corporation, as trustee (the "Exchange Trustee").
The Company and the Exchange Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 12 1/2% Series A Subordinated Exchange Debentures due 2010 (the "Series A
Debentures") and the 12 1/2% Series B Subordinated Exchange Debentures due 2010
(the "Series B Debentures" and, together with the Series A Debentures, the
"Debentures"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Debenture" means a global debenture in the form of
Exhibit A-1 hereto bearing the Global Debenture Legend and the Private Placement
Legend and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Exchange Debentures sold in reliance on Rule
144A.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the Voting Stock of a
Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Debenture, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Acquisition" means (i) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Subsidiary of the Company or any Subsidiary of the
Company, or shall be merged with or into the Company or any Restricted
Subsidiary of the Company or (ii) the acquisition by the Company or any
Restricted Subsidiary of the Company of the assets of any Person which
constitute all or substantially all of the assets of such
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Person, any division or line of business of such Person or any other properties
or assets of such Person other than in the ordinary course of business.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business consistent with past practices (provided that the sale, lease (other
than an operating lease), conveyance or other disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of Sections 4.15 and 5.01
hereof and not by the provisions of Section 4.10 hereof), and (ii) the issue by
any Restricted Subsidiaries of the Company of any Equity Interests of such
Restricted Subsidiary and the sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a series
of related transactions (a) that have a fair market value in excess of $1.0
million or (b) for net proceeds in excess of $1.0 million. Notwithstanding the
foregoing, the following items shall not be deemed to be Asset Sales: (i) a
transfer of assets by the Company to a Wholly Owned Restricted Subsidiary or by
a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned
Restricted Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned
Restricted Subsidiary to the Company or to another Wholly Owned Restricted
Subsidiary, (iii) a Restricted Payment that is permitted by Section 4.07 hereof;
(iv) a disposition of Cash Equivalents or obsolete equipment in the ordinary
course of business or inventory or goods held for sale in the ordinary course of
business, and (v) sale of accounts receivable, or participation therein, in
connection with any Qualified Receivables Transaction.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal
or state law for the relief of debtors.
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other
day in the City of New York on which banks are authorized or ordered to close.
"Canadian Credit Facility" means the Loan Agreement, added as of
August 8, 1997, between Cluett Peabody Canada Inc. and Congress Financial
Corporation (Canada). The term "Canadian Credit Facility" shall include any
amendment, amendment and restatement, renewal, extension, restructuring,
supplement or modification to the Canadian Credit Facility and all refundings,
refinancings and replacements of the Canadian Credit Facility, including any
agreement (i) extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (ii) adding or deleting borrowers or guarantors
thereunder, so long as the borrowers and issuers thereunder include one or more
of the Company and its Subsidiaries and their respective successors and assigns,
or (iii) increasing the amount of Indebtedness incurred thereunder or available
to be borrowed thereunder.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation
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that confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any domestic commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within six months after the date of acquisition and (vi) money market
funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i)-(v) of this definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than a Principal or a Related Party of a
Principal (as defined below), (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company, (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above), other than the
Principals and their Related Parties, becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that
in calculating the beneficial ownership of any particular "person," such
"person" shall be deemed to have beneficial ownership of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of the
Company (measured by voting power rather than number of shares), (iv) the first
day on which a majority of the members of the Board of Directors of the Company
are not Continuing Directors or (v) the Company consolidates with, or merges
with or into, any Person, or any Person consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction in which any of
the outstanding Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, other than any such transaction where the
Voting Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance). For purposes of this definition, any
transfer of an equity interest of an entity that was formed for the purpose of
acquiring Voting Stock of the Company will be deemed to be a transfer of such
portion of such Voting Stock as corresponds to the portion of the equity of such
entity that has been so transferred.
"Common Stock" means the Common Stock, $1.00 par value, of the
Company and any other class of common stock issued by the Company from time to
time.
"Company" means Cluett American Corp.
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"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale, to the extent such losses were deducted in computing such
Consolidated Net Income, plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was deducted in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period (other than items that were accrued in
the ordinary course of business) plus (vi) Reorganization Charges of such Person
and its Restricted Subsidiaries for such period to the extent that such
Reorganization Charges were deducted in computing such Consolidated Net Income,
in each case, determined on a consolidated basis and determined in accordance
with GAAP. Notwithstanding the foregoing, the provision for taxes on the income
or profits of, and the depreciation and amortization and other non-cash expenses
of, a Subsidiary of the Company shall be added to Consolidated Net Income to
compute Consolidated Cash Flow of the Company only to the extent that a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior governmental approval
(that has not been obtained), and without direct or indirect restriction
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof; provided that the amount of such dividends or distributions includable
in Consolidated Net Income shall be limited to the Company's direct and indirect
Equity Interests in such Restricted Subsidiary, (ii) the Net Income of any
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, and (iv) the cumulative effect of a change in
accounting principles shall be excluded.
4
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"Consolidated Net Worth" means, with respect to any Person as of
any date, the sum of (i) the consolidated equity of the common stockholders of
such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the Issue Date in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Issue Date or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Exchange Trustee" shall be at the
address of the Exchange Trustee specified in Section 11.02 hereof or such other
address as to which the Exchange Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company, one or
more debt facilities (including, without limitation, the Senior Credit Facility)
or commercial paper facilities, in each case with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time. Indebtedness under
Credit Facilities and the Canadian Credit Facility outstanding on the Issue Date
shall be deemed to have been incurred on such date in reliance on the exception
provided by clauses (i) and (ii), respectively, of the definition of Permitted
Debt.
"Custodian" means the Exchange Trustee, as custodian with respect
to the Debentures in global form, or any successor entity thereto.
"Debentures" shall mean the Series A Debentures and the Series B
Debentures and shall also include all Debentures issued as interest on
outstanding Debentures in accordance with the terms hereof and thereof.
"Default" means any event that is or with the passage of time or
the giving of notice or both would be an Event of Default.
"Definitive Debenture" means a certificated Debenture registered
in the name of the Holder thereof and issued in accordance with Section 2.06
hereof, in the form of Exhibit A-1 hereto except that such Debenture shall not
bear the Global Debenture Legend and shall not have the "Schedule of Exchanges
of Interests in the Global Debenture" attached thereto.
5
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"Depositary" means, with respect to the Debentures issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Debentures, and any and all
successors thereto appointed as depositary hereunder and having become such
pursuant to the applicable provision of this Exchange Indenture.
"Designated Exchange Debenture Senior Debt" has the meaning set
forth in Section 10.14 hereof.
"Disqualified Stock" means any Capital Stock that, by its terms
(or by the terms of any security into which it is convertible, or for which it
is exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Exchangeable Preferred Stock matures; provided, however, that
any Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company to repurchase such Capital
Stock upon the occurrence of a Change of Control or an Asset Sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that
the Company may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with Section 4.07
hereof.
"Equity Interests" means Capital Stock and all warrants, options
or other rights to acquire Capital Stock (but excluding any debt security that
is convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an offering of common stock (other than
Disqualified Stock) of the Company or any direct or indirect parent corporation
of the Company (a "Parent Corporation"), other than an offering pursuant to Form
S-8 (or any successor thereto) and other than common stock issued pursuant to
employee benefit plans or as compensation to employees; provided that in the
case of an Equity Offering by a Parent Corporation, such Parent Corporation
contributes to the common equity of the Company the portion of the net cash
proceeds thereof necessary to pay the aggregate redemption price of the
Exchangeable Preferred Stock or Exchange Debentures, as the case may be, to be
redeemed in connection therewith.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Debenture Senior Indebtedness" has the meaning set forth
in Section 10.14 hereof.
"Exchange Indenture" means this Exchange Indenture, dated May,
1998, between the Company and the Exchange Trustee, governing the Company's 12
1/2% Subordinated Exchange Debentures Due 2010.
"Exchange Offer" has the meaning set forth in the Preferred Stock
Registration Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set forth
in the Preferred Stock Registration Rights Agreement.
"Exchange Trustee" means the trustee under this Exchange
Indenture.
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"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the Senior Credit
Facility) in existence on the Issue Date, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period,
the sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments associated
with Capital Lease Obligations, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest of such Person and its Restricted Subsidiaries that
was capitalized during such period, and (iii) any interest expense on
Indebtedness of another Person that is Guaranteed by such Person or one of its
Restricted Subsidiaries or secured by a Lien on assets of such Person or one of
its Restricted Subsidiaries (whether or not such Guarantee or Lien is called
upon) and (iv) the product of (a) all dividend payments, whether or not in cash,
on any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company (other than Disqualified Stock) or to the
Company or a Restricted Subsidiary of the Company, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in accordance
with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the referent Person or any of its Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income (adjusting for, in the case of an Asset
Acquisition or merger or consolidation permitted under Section 5.01 hereof, any
operating expense or cost reduction of such Person or the Person to be acquired
which, in the good faith estimate of management, will be eliminated or realized,
as the case may be, as a result of such Asset Acquisition, merger or
consolidation) and (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
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"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect from time to time.
"Global Debentures" means, individually and collectively, each of
the Restricted Global Debentures and the Unrestricted Global Debentures, in the
form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Debenture Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Debentures issued
under this Exchange Indenture.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America, and the payment for
which the United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, by way of a
pledge of assets or through letters of credit or reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"Guarantor" means a guarantor of the Notes under the Indenture.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate or currency swap agreements,
interest rate or currency cap agreements and interest rate or currency collar
agreements and (ii) other agreements or arrangements designed to protect such
Person against fluctuations in interest rates or currency.
"Holder" means a Person in whose name a Debenture is registered.
"Indebtedness" means, with respect to any Person, any indebtedness
of such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount and (ii) the
principal amount thereof, together with any interest thereon that is more than
30 days past due, in the case of any other Indebtedness.
"Indenture" means the Indenture, dated May 18, 1998, by and among
the Company, the Guarantors and the Trustee, governing the Company's 101/8%
Senior Subordinated Notes due 2008.
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"Indirect Participant" means a Person who holds a beneficial
interest in a Global Debenture through a Participant.
"Institutional Accredited Investor" means an institution that is
an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all investments
by such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of Section 4.07 hereof.
"Issue Date" means the date of original issuance of the
Exchangeable Preferred Stock.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Debentures for use by
such Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Preferred Stock Registration Rights Agreement.
"Management Agreement" means that certain Management Agreement
dated the Issue Date among the Principals, the Company and Holdings, as in
effect on the Issue Date.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, (i) excluding, however, (x)
any gain (but not loss), together with any related provision for taxes on such
gain (but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (y) any extraordinary gain (but not loss),
together with any related provision for taxes on such extraordinary gain (but
not loss) and (ii) less the aggregate amount of all Restricted Payments made by
such Person or any of its Restricted Subsidiaries for such period pursuant to
clause (vii) of the second paragraph of Section 4.07 hereof times one minus the
then combined federal, state and local statutory tax rate of the Company.
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"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than Senior Indebtedness) secured by a Lien
on the asset or assets that were the subject of such Asset Sale and any reserve
for adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.
"New Exchange Debentures" means the Debentures issued in the
Exchange Offer pursuant to Section 2.06(f) hereof.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender, and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Exchange Debentures) of the Company or any of its Restricted Subsidiaries to
declare a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed by (i) the
Chairman of the Board of Directors, the Chief Executive Officer, the President
or a Vice President of the Company and (ii) the Chief Financial Officer or the
Secretary of the Company, which certificate shall comply with this Exchange
Indenture.
"Opinion of Counsel" means an opinion from legal counsel that
meets the requirements of Section 11.05 hereof. The counsel may be an employee
of or counsel to the Company, any Subsidiary of the Company or the Exchange
Trustee.
"Parity Notes" means $13.0 million in aggregate principal amount
of the Company's 101/8% Series A Senior Subordinated Notes due 2008, issued
under the Indenture.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
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"Participating Broker-Dealer" has the meaning set forth in the
Preferred Stock Registration Rights Agreement.
"Permitted Business" means the business of the Company and its
Restricted Subsidiaries conducted on the Issue Date and businesses reasonably
related or ancillary thereto.
"Permitted Investments" means (a) any Investment in the Company or
in a Restricted Subsidiary of the Company; (b) any Investment in Cash
Equivalents; (c) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment (i) such Person
becomes a Restricted Subsidiary of the Company or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company; (d) any Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with Section 3.09 and 4.10 hereof or any transaction not constituting
an Asset Sale by reason of the $1.0 million threshold contained in the
definition thereof; (e) any acquisition of assets solely in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of the Company; (f)
Hedging Obligations entered into in the ordinary course of the Company's or its
Restricted Subsidiaries' businesses and otherwise in compliance with this
Exchange Indenture; (g) Investments in securities of trade creditors or
customers received in settlement of obligations or pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy of insolvency of such
trade creditors of customers; (h) Investments by the Company or a Restricted
Subsidiary in a Receivables Subsidiary or any Investment by a Receivables
Subsidiary in any other Person, in each case, in connection with a Qualified
Receivables Transaction; and (i) other Investments in any Person having an
aggregate fair market value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (i) that are at the time
outstanding, not to exceed the greater of (A) $10.0 million and (B) 5% of Total
Assets.
"Permitted Junior Securities" means Equity Interests in the
Company or debt securities that are subordinated to all Exchange Debenture
Senior Indebtedness (and any debt securities issued in exchange for Exchange
Debenture Senior Indebtedness) to substantially the same extent as, or to a
greater extent than, the Exchange Debentures are subordinated to Exchange
Debenture Senior Indebtedness pursuant to Article 10 of this Exchange Indenture.
"Permitted Liens" means (i) Liens on assets of the Company
securing Exchange Debenture Senior Indebtedness of the Company and Liens on
assets of the Company's Restricted Subsidiaries; (ii) Liens in favor of the
Company; (iii) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company; (iv) Liens on property existing at the time of acquisition thereof by
the Company or any Restricted Subsidiary of the Company, provided that such
Liens were in existence prior to the contemplation of such acquisition; (v)
Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business; (vi) Liens to secure Indebtedness (including
Capital Lease Obligations) permitted by clause (v) of the second paragraph of
Section 4.09 hereof covering only the assets acquired with such Indebtedness;
(vii) Liens existing on the Issue Date; (viii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be
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required in conformity with GAAP shall have been made therefor; (ix) Liens on
assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of
Unrestricted Subsidiaries; (x) Liens of the Company or a Wholly Owned Restricted
Subsidiary on assets of any Restricted Subsidiary of the Company; (xi) Liens
securing Permitted Refinancing Indebtedness which is incurred to refinance any
Indebtedness which has been secured by a Lien permitted under this Indenture and
which has been incurred in accordance with the provisions of this Indenture,
provided, however, that such Liens (A) are not materially less favorable to the
Holders and are not materially more favorable to the lienholders with respect to
such Liens than the Liens in respect of the Indebtedness being refinanced and
(B) do not extend to or cover any property or assets of the Company or any of
its Restricted Subsidiaries not securing the Indebtedness so refinanced; (xii)
Liens incurred or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security or similar obligations, including any lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money); (xiii) judgment Liens not
giving rise to an Event of Default so long as such Lien is adequately bonded and
any appropriate legal proceedings which may have been duly initiated for the
review of such judgment shall not have been finally terminated or the period
within which such proceedings may be initiated shall not have expired; (xiv)
easements, rights-of-way, zoning restrictions and other similar charges or
encumbrances in respect of real property not interfering in any material respect
with the ordinary conduct of the business of the Company or any of its
Restricted Subsidiaries; (xv) any interest or title of a lessor under any lease,
whether or not characterized as capital or operating; provided that such Liens
do not extend to any property or assets which is not leased property subject to
such lease; (xvi) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods; (xvii) Liens
securing reimbursement obligations with respect to letters of credit which
encumber documents and other property relating to such letters of credit and
products and proceeds thereof; (xviii) Liens encumbering deposits made to secure
obligations arising from statutory, regulatory, contractual, or warranty
requirements of the Company or any of its Restricted Subsidiaries, including
rights of offset and set-off; (xix) Liens securing Hedging Obligations which
Hedging Obligations relate to Indebtedness that is otherwise permitted under
this Indenture; (xx) leases or subleases granted to others not interfering in
any material respect with the business of the Company or its Restricted
Subsidiaries; (xxi) Liens arising out of consignment or similar arrangements for
the sale of goods entered into by the Company or any Restricted Subsidiary in
the ordinary course of business; (xxii) Liens or assets of a Receivables
Subsidiary arising in connection with a Qualified Receivables Transaction;
(xxiii) Liens incurred in the ordinary course of business of the Company or any
Restricted Subsidiary of the Company with respect to obligations that do not
exceed $5.0 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Restricted Subsidiary; and (xxiv) Liens securing Acquired Debt incurred in
accordance with clause (ix) of Section 4.09 hereof; provided, that (A) such
Liens secured such Acquired Debt at the time of and prior to the incurrence of
such Acquired Debt by the Company or a Restricted Subsidiary of the Company and
were not granted in connection with, or in anticipation of, the incurrence of
such Acquired Debt by the Company or a Restricted Subsidiary of the Company and
(B) such Liens do not extend to or cover any property or assets of the Company
or any of its Restricted Subsidiaries other than the property or assets that
secured the Acquired Debt prior to the time such Indebtedness became Acquired
Debt of the Company or a Restricted Subsidiary
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of the Company and are not more favorable to the lienholders than those securing
the Acquired Debt prior to the incurrence of such Acquired Debt by the Company
or a Restricted Subsidiary of the Company.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Exchange Debentures, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the Exchange Debentures on terms at least as favorable to
the Holders of Exchange Debentures as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Preferred Stock Registration Rights Agreement" means the
Preferred Stock Registration Rights Agreement, dated as of May 18, 1998, between
the Company and the Initial Purchasers.
"Principals" means Vestar Capital Partners III, L.P.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Debentures issued under this Exchange Indenture
except where otherwise permitted by the provisions of this Exchange Indenture.
"Purchase Money Note" means a promissory note evidencing a line of
credit, or evidencing other Indebtedness owed to the Company or any Restricted
Subsidiary in connection with a Qualified Receivables Transaction, which note
shall be repaid from cash available to the maker of such note, other than
amounts required to be established as reserves pursuant to agreement, amounts
paid to investors in respect of interest, principal and other amounts owing to
such investors and amounts paid in connection with the purchase of newly
generated receivables.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Qualified Proceeds" means any of the following or any combination
of the following: (i) cash, (ii) Cash Equivalents, (iii) long-term assets that
are used or useful in a Permitted Business and (iv) the Capital Stock of any
Person engaged primarily in a Permitted Business if, in connection with the
receipt by the company or any Restricted Subsidiary of the Company of such
Capital Stock, (a) such Person becomes a Wholly-Owned Restricted Subsidiary or
(b) such Person is merged, consolidated or
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amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or any Wholly-Owned Restricted
Subsidiary of the Company.
"Receivables Subsidiary" means a Wholly Owned Restricted
Subsidiary (other than a Guarantor) which engages in no activities other than in
connection with the financing of accounts receivables and which is designated by
the Board of Directors of the Company (as provided below) as a Receivables
Subsidiary (a) no portion of the Indebtedness or any other Obligations
(contingent or otherwise) of which (i) is guaranteed by the Company or any other
Restricted Subsidiary (excluding guarantees of obligations (other than the
principal of, and interest on, Indebtedness) pursuant to Standard Securitization
Undertakings), (ii) is recourse to or obligates the Company or any other
Restricted Subsidiary in any way other than pursuant to Standard Securitization
Undertakings or (iii) subjects any property or asset of the Company or any other
Restricted Subsidiary, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard Securitization
Undertakings, (b) with which neither the Company nor any other Restricted
Subsidiary has any material contract, agreement, arrangement or understanding
(except in connection with a Purchase Money Note or Qualified Receivables
Transaction) other than on terms no less favorable to the Company or such other
Restricted Subsidiary than those that might be obtained at the time from persons
that are not Affiliates of the Company, other than fees payable in the ordinary
course of business in connection with servicing accounts receivable, and (c) to
which neither the Company nor any other Restricted Subsidiary has any obligation
to maintain or preserve such entity's financial condition or cause such entity
to achieve certain levels of operating results. Any such designation by the
Board of Directors of the Company shall be evidenced to the Exchange Trustee by
filing with the Exchange Trustee a certified copy of the resolution of the Board
of Directors of the Company giving effect to such designation and an Officers'
Certificate certifying, to the best of such officers' knowledge and belief after
consulting with counsel, that such designation complied with the foregoing
conditions.
"Related Party" with respect to any Principal means (A) any
controlling stockholder, Subsidiary, or spouse or immediate family member (in
the case of an individual) of such Principal or (B) any trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding a majority interest of which consist of such
Principal and/or such other Persons referred to in the immediately preceding
clause (A).
"Reorganization Charges" means (i) up to $3.3 million of facility
closing and reengineering costs incurred by the Company and its Subsidiaries
prior to the Issue Date, (ii) up to $550,000 of losses incurred by the Company
and its Subsidiaries prior to the Issue Date associated with (x) the Canadian
retail operations of the Company and its Subsidiaries and (y) the Mexican and
Guatemalan operations of the Company and its Subsidiaries, in each case
calculated in accordance with GAAP on a consolidated basis, (iii) up to $4.0
million of bankruptcy reorganization costs incurred by the Company and its
Restricted Subsidiaries prior to the Issue Date, and (iv) the costs and expenses
of the Company and its Subsidiaries incurred in connection with the Transaction,
in each case calculated in accordance with GAAP on a consolidated basis.
"Responsible Officer," when used with respect to the Exchange
Trustee, means any officer within the Corporate Trust Administration of the
Exchange Trustee (or any successor group of the Exchange Trustee) or any other
officer of the Exchange Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
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"Restricted Definitive Debenture" means a Definitive Debenture
bearing the Private Placement Legend.
"Restricted Global Debenture" means a Global Debenture bearing the
Private Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means the credit agreement to be entered
into on or prior to the Issue Date by and among the Company, NationsBanc
Montgomery Securities LLC, as arranger and syndication agent, certain lending
parties thereto and NationsBank, N.A., as agent, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, as such credit agreements and/or related documents may be
amended, restated, supplemented, renewed, replaced or otherwise modified from
time to time whether or not with the same agent, trustee, representative lenders
or holders, and, subject to the proviso to the next succeeding sentence,
irrespective of any changes in the terms and conditions thereof. Without
limiting the generality of the foregoing, the term "Senior Credit Facility"
shall include any amendment, amendment and restatement, renewal, extension,
restructuring, supplement or modification to any Senior Credit Facility and all
refundings, refinancings and replacements of any Senior Credit Facility,
including any agreement (i) extending the maturity of any Indebtedness incurred
thereunder or contemplated thereby, (ii) adding or deleting borrowers or
guarantors thereunder, so long as the borrowers and issuers thereunder include
one or more of the Company and its Subsidiaries and their respective successors
and assigns, or (iii) increasing the amount of Indebtedness incurred thereunder
or available to be borrowed thereunder.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Preferred Stock Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Company or any
Restricted Subsidiary which are reasonably customary in an accounts receivable
transaction.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
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obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
Exchange Trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole general
partner or the managing general partner of which is such Person or a Subsidiary
of such Person or (b) the only general partners of which are such Person or of
one or more Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Exchange Indenture is
qualified under the TIA.
"Total Assets" means, with respect to any Person, the total
consolidated assets of such Person and its Restricted Subsidiaries, as shown on
the most recent balance sheet of such Person.
"Transfer Agent" means the transfer agent for the Exchangeable
Preferred Stock, which shall be The Bank of New York unless and until a
successor is selected by the Company.
"Unrestricted Global Debenture" means a permanent global Debenture
in the form of Exhibit A-1 attached hereto that bears the Global Debenture
Legend and that has the "Schedule of Exchanges of Interests in the Global
Debenture" attached thereto, and that is deposited with or on behalf of and
registered in the name of the Depositary, representing a series of Debentures
that do not bear the Private Placement Legend.
"Unrestricted Definitive Debenture" means one or more Definitive
Debentures that do not bear and are not required to bear the Private Placement
Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
that is designated by the Board of Directors as an Unrestricted Subsidiary
pursuant to a Board Resolution; but only to the extent that such Subsidiary: (a)
has no Indebtedness other than Non-Recourse Debt; (b) is not party to any
agreement, contract, arrangement or understanding with the Company or any
Restricted Subsidiary of the Company unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the Company or
such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; (c) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation (x) to subscribe for additional Equity Interests or (y)
to maintain or preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results; and (d) has not
guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries. Any such
designation by the Board of Directors shall be evidenced to the Exchange Trustee
by filing with the Exchange Trustee a certified copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing conditions and was permitted by
Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to
meet the foregoing requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of the Exchange
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary of the Company as of such date (and, if such
Indebtedness
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is not permitted to be incurred as of such date under Section 4.09 hereof, the
Company shall be in default of such covenant). The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under Section 4.09 hereof,
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period and (ii) no Default or Event of
Default or Voting Rights Triggering Event, as applicable, would be in existence
following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under
the Securities Act.
"Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Disqualified Stock at any date, the number of years obtained by
dividing (i) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other required
payments of principal or liquidation preference, as applicable, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (ii) the then outstanding principal amount or
liquidation preference, if applicable, of such Indebtedness or Disqualified
Stock.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction"..............................4.11
"Asset Sale".........................................4.10
"Asset Sale Offer"...................................3.09
"Authentication Order"...............................2.02
"Change of Control Offer"............................4.14
"Change of Control Payment"..........................4.14
"Change of Control Payment Date" ....................4.14
"Covenant Defeasance"................................8.03
"Event of Default"...................................6.01
"Excess Proceeds"....................................4.10
"incur"..............................................4.09
"Legal Defeasance" ..................................8.02
"Offer Amount".......................................3.09
"Offer Period".......................................3.09
"Paying Agent".......................................2.03
"Permitted Debt".....................................4.09
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"Purchase Date"......................................3.09
"Registrar"..........................................2.03
"Restricted Payments"................................4.07
SECTION 1.03. TRUST INDENTURE ACT PROVISIONS.
Whenever this Exchange Indenture refers to a provision of the TIA,
the provision is incorporated by reference in and made a part of this Exchange
Indenture.
The following TIA terms used in this Exchange Indenture have the following
meanings:
"indenture securities" means the Debentures;
"indenture security Holder" means a Holder of a Debenture;
"indenture to be qualified" means this Exchange Indenture;
"indenture trustee" or "institutional trustee" means the Exchange
Trustee; and
"obligor" on the Debentures means the Company and any successor
obligor upon the Debentures.
All other terms used in this Exchange Indenture that are defined
by the TIA, defined by TIA reference to another statute or defined by SEC rule
under the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) references to sections of or rules under the Securities
Act shall be deemed to include substitute, replacement of
successor sections or rules adopted by the SEC from time to time.
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ARTICLE 2.
THE DEBENTURES
SECTION 2.01. FORM AND DATING.
(a) General. The Debentures and the Exchange Trustee's certificate
of authentication shall be substantially in the form of Exhibit A hereto. The
Debentures may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Debenture shall be dated the date of its
authentication.
The terms and provisions contained in the Debentures shall
constitute, and are hereby expressly made, a part of this Exchange Indenture and
the Company and the Exchange Trustee, by their execution and delivery of this
Exchange Indenture, expressly agree to such terms and provisions and to be bound
thereby. However, to the extent any provision of any Debenture conflicts with
the express provisions of this Exchange Indenture, the provisions of this
Exchange Indenture shall govern and be controlling.
(b) Global Debentures. Debentures issued in global form shall be
substantially in the form of Exhibit A-1 attached hereto (including the Global
Debenture Legend thereon and the "Schedule of Exchanges of Interests in the
Global Debenture" attached thereto). Debentures issued in definitive form shall
be substantially in the form of Exhibit A-1 attached hereto (but without the
Global Debenture Legend thereon and without the "Schedule of Exchanges of
Interests in the Global Debenture" attached thereto). Each Global Debenture
shall represent such of the outstanding Debentures as shall be specified therein
and each shall provide that it shall represent the aggregate principal amount of
outstanding Debentures from time to time endorsed thereon and that the aggregate
principal amount of outstanding Debentures represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Debenture to reflect the amount of any
increase or decrease in the aggregate principal amount of outstanding Debentures
represented thereby shall be made by the Exchange Trustee or the Debenture
Custodian, at the direction of the Exchange Trustee, in accordance with
instructions given by the Holder thereof as required by Section 2.06 hereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Debentures for the Company by manual
or facsimile signature. The Company's seal shall be reproduced on the Debentures
and may be in facsimile form.
If an Officer whose signature is on a Debenture no longer holds
that office at the time a Debenture is authenticated, the Debenture shall
nevertheless be valid.
A Debenture shall not be valid until authenticated by the manual
signature of the Exchange Trustee. The signature shall be conclusive evidence
that the Debenture has been authenticated under this Exchange Indenture.
The Exchange Trustee shall, upon a written order of the Company
signed by two Officers (an "Authentication Order"), authenticate Debentures for
original issue up to the aggregate principal amount stated in paragraph 4 of the
Debentures, plus Debentures issued to pay Liquidated Damages pursuant to
paragraph 2 of the Debentures. The aggregate principal amount of Debentures
outstanding at any time may not exceed such amount except as provided in Section
2.07 hereof.
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The Exchange Trustee may appoint an authenticating agent
acceptable to the Company to authenticate Debentures. An authenticating agent
may authenticate Debentures whenever the Exchange Trustee may do so. Each
reference in this Exchange Indenture to authentication by the Exchange Trustee
includes authentication by such agent. An authenticating agent has the same
rights as an Agent to deal with Holders or an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Debentures
may be presented for registration of transfer or for exchange ("Registrar") and
an office or agency where Debentures may be presented for payment ("Paying
Agent"). The Registrar shall keep a register of the Debentures and of their
transfer and exchange. The Company may appoint one or more co-registrars and one
or more additional paying agents. The term "Registrar" includes any co-registrar
and the term "Paying Agent" includes any additional paying agent. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company shall notify the Exchange Trustee in writing of the name and address of
any Agent not a party to this Exchange Indenture. If the Company fails to
appoint or maintain another entity as Registrar or Paying Agent, the Exchange
Trustee shall act as such. The Company or any of its Subsidiaries may act as
Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Debentures.
The Company initially appoints the Exchange Trustee to act as the
Registrar and Paying Agent and to act as Debenture Custodian with respect to the
Global Debentures.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Exchange Trustee to agree in writing that the Paying Agent will hold in trust
for the benefit of Holders or the Exchange Trustee all money held by the Paying
Agent for the payment of principal, premium or Liquidated Damages, if any, or
interest on the Debentures, and will notify the Exchange Trustee of any default
by the Company in making any such payment. While any such default continues, the
Exchange Trustee may require a Paying Agent to pay all money held by it to the
Exchange Trustee. The Company at any time may require a Paying Agent to pay all
money held by it to the Exchange Trustee. Upon payment over to the Exchange
Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have
no further liability for the money. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy
or reorganization proceedings relating to the Company, the Exchange Trustee
shall serve as Paying Agent for the Debentures.
SECTION 2.05. HOLDER LISTS.
The Exchange Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the
Exchange Trustee is not the Registrar, the Company shall furnish to the Exchange
Trustee at least seven Business Days before each interest payment date and at
such other times as the Exchange Trustee may request in writing, a list in such
form and as of such date as the Exchange Trustee
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may reasonably require of the names and addresses of the Holders of Debentures
and the Company shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Debentures. A Global Debenture
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary. All Global Debentures will
be exchanged by the Company for Definitive Debentures if (i) the Company
delivers to the Exchange Trustee notice from the Depositary that it is unwilling
or unable to continue to act as Depositary or that it is no longer a clearing
agency registered under the Exchange Act and, in either case, a successor
Depositary is not appointed by the Company within 120 days after the date of
such notice from the Depositary or (ii) the Company in its sole discretion
determines that the Global Debentures (in whole but not in part) should be
exchanged for Definitive Debentures and delivers a written notice to such effect
to the Exchange Trustee. Upon the occurrence of either of the preceding events
in (i) or (ii) above, Definitive Debentures shall be issued in such names as the
Depositary shall instruct the Exchange Trustee. Global Debentures also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Debenture authenticated and delivered in exchange for, or in
lieu of, a Global Debenture or any portion thereof, pursuant to this Section
2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the
form of, and shall be, a Global Debenture. A Global Debenture may not be
exchanged for another Debenture other than as provided in this Section 2.06(a),
however, beneficial interests in a Global Debenture may be transferred and
exchanged as provided in Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global
Debentures. The transfer and exchange of beneficial interests in the Global
Debentures shall be effected through the Depositary, in accordance with the
provisions of this Exchange Indenture and the Applicable Procedures. Beneficial
interests in the Restricted Global Debentures shall be subject to restrictions
on transfer comparable to those set forth herein to the extent required by the
Securities Act. Transfers of beneficial interests in the Global Debentures also
shall require compliance with either subparagraph (i) or (ii) below, as
applicable, as well as one or more of the other following subparagraphs, as
applicable:
(i) Transfer of Beneficial Interests in the Same Global Debenture.
Beneficial interests in any Restricted Global Debenture may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in the
same Restricted Global Debenture in accordance with the transfer restrictions
set forth in the Private Placement Legend. Beneficial interests in any
Unrestricted Global Debenture may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Debenture. No written orders or instructions shall be required to be
delivered to the Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global
Debentures. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor of
such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial
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interest in another Global Debenture in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given in
accordance with the Applicable Procedures containing information regarding
the Participant account to be credited with such increase or (B) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Debenture in an amount equal to
the beneficial interest to be transferred or exchanged and (2) instructions
given by the Depositary to the Registrar containing information regarding the
Person in whose name such Definitive Debenture shall be registered to effect
the transfer or exchange referred to in (1) above. Upon consummation of an
Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the
requirements of this Section 2.06(b)(ii) shall be deemed to have been
satisfied upon receipt by the Registrar of the instructions contained in the
Letter of Transmittal delivered by the Holder of such beneficial interests in
the Restricted Global Debentures. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in Global
Debentures contained in this Exchange Indenture and the Debentures or
otherwise applicable under the Securities Act, the Exchange Trustee shall
adjust the principal amount of the relevant Global Debenture(s) pursuant to
Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Debenture. A beneficial interest in any Restricted Global Debenture may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Debenture if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the Registrar
receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Debenture, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global
Debenture for Beneficial Interests in the Unrestricted Global Debenture. A
beneficial interest in any Restricted Global Debenture may be exchanged by
any holder thereof for a beneficial interest in an Unrestricted Global
Debenture or transferred to a Person who takes delivery thereof in the form
of a beneficial interest in an Unrestricted Global Debenture if the exchange
or transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Preferred Stock Registration
Rights Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Debentures or (3)
a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Preferred Stock
Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Preferred Stock Registration Rights Agreement; or
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(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Debenture proposes to exchange such beneficial interest for a
beneficial interest in an Unrestricted Global Debenture, a certificate
from such holder in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Debenture proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Debenture, a certificate from such holder in the form
of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or
(D) above at a time when an Unrestricted Global Debenture has not yet been
issued, the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Exchange Trustee shall authenticate one
or more Unrestricted Global Debentures in an aggregate principal amount equal to
the aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Debenture cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Debenture.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Debentures.
(i) Beneficial Interests in Restricted Global Debentures to Restricted
Definitive Debentures. If any holder of a beneficial interest in a Restricted
Global Debenture proposes to exchange such beneficial interest for a
Restricted Definitive Debenture or to transfer such beneficial interest to a
Person who takes delivery thereof in the form of a Restricted Definitive
Debenture, then, upon receipt by the Registrar of the following
documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Debenture proposes to exchange such beneficial interest for a
Restricted Definitive Debenture, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being transferred pursuant
to an exemption from the registration requirements of the Securities
Act in accordance with Rule 144
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under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(D) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (B) and (C) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(E) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(F) if such beneficial interest is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(c) thereof,
the Exchange Trustee shall cause the aggregate principal amount of the
applicable Global Debenture to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Exchange Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Debenture in the appropriate principal amount. Any Definitive
Debenture issued in exchange for a beneficial interest in a Restricted Global
Debenture pursuant to this Section 2.06(c) shall be registered in such name
or names and in such authorized denomination or denominations as the holder
of such beneficial interest shall instruct the Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The Exchange
Trustee shall deliver such Definitive Debentures to the Persons in whose
names such Debentures are so registered. Any Definitive Debenture issued in
exchange for a beneficial interest in a Restricted Global Debenture pursuant
to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall
be subject to all restrictions on transfer contained therein.
(iii) Beneficial Interests in Restricted Global Debentures to Unrestricted
Definitive Debentures. A holder of a beneficial interest in a Restricted
Global Debenture may exchange such beneficial interest for an Unrestricted
Definitive Debenture or may transfer such beneficial interest to a Person who
takes delivery thereof in the form of an Unrestricted Definitive Debenture
only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Preferred Stock Registration
Rights Agreement and the holder of such beneficial interest, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1)
a broker-dealer, (2) a Person participating in the distribution of
the Exchange Debentures or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Preferred Stock
Registration Rights Agreement;
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(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Preferred Stock Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Debenture proposes to exchange such beneficial interest for a
Definitive Debenture that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit C hereto, including
the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Debenture proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a Definitive Debenture that
does not bear the Private Placement Legend, a certificate from such holder
in the form of Exhibit B hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel to the effect that such exchange or transfer is
in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
(iv) Beneficial Interests in Unrestricted Global Debentures to
Unrestricted Definitive Debentures. If any holder of a beneficial interest in
an Unrestricted Global Debenture proposes to exchange such beneficial
interest for a Definitive Debenture or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Definitive Debenture,
then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii)
hereof, the Exchange Trustee shall cause the aggregate principal amount of
the applicable Global Debenture to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Exchange Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Debenture in the appropriate principal amount. Any Definitive
Debenture issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Exchange Trustee
shall deliver such Definitive Debentures to the Persons in whose names such
Debentures are so registered. Any Definitive Debenture issued in exchange for
a beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear
the Private Placement Legend.
(d) Transfer and Exchange of Definitive Debentures for Beneficial
Interests.
(i) Restricted Definitive Debentures to Beneficial Interests in Restricted
Global Debentures. If any Holder of a Restricted Definitive Debenture
proposes to exchange such Debenture for a beneficial interest in a Restricted
Global Debenture or to transfer such Restricted Definitive Debentures to a
Person who takes delivery thereof in the form of a beneficial interest in a
Restricted Global Debenture, then, upon receipt by the Registrar of the
following documentation:
(A) if the Holder of such Restricted Definitive Debenture proposes
to exchange such Debenture for a beneficial interest in a Restricted
Global Debenture,
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a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Debenture is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such Restricted Definitive Debenture is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(D) if such Restricted Definitive Debenture is being transferred to
an Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (B) and (C) above, a certificate to the effect
set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(E) if such Restricted Definitive Debenture is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(F) if such Restricted Definitive Debenture is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
the Exchange Trustee shall cancel the Restricted Definitive Debenture,
increase or cause to be increased the aggregate principal amount of, in
the case of clause (A) above, the appropriate Restricted Global Debenture,
and in the case of clause (B) above, the 144A Global Debenture.
(ii) Restricted Definitive Debentures to Beneficial Interests in
Unrestricted Global Debentures. A Holder of a Restricted Definitive Debenture
may exchange such Debenture for a beneficial interest in an Unrestricted
Global Debenture or transfer such Restricted Definitive Debenture to a Person
who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Debenture only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Preferred Stock Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Debentures or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Preferred Stock Registration Rights
Agreement;
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(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Preferred Stock Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Debentures proposes to
exchange such Debentures for a beneficial interest in the Unrestricted
Global Debenture, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Debentures proposes to
transfer such Debentures to a Person who shall take delivery thereof in
the form of a beneficial interest in the Unrestricted Global Debenture, a
certificate from such Holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Exchange Trustee shall cancel the Definitive
Debentures and increase or cause to be increased the aggregate principal
amount of the Unrestricted Global Debenture.
(iii) Unrestricted Definitive Debentures to Beneficial Interests in
Unrestricted Global Debentures. A Holder of an Unrestricted Definitive
Debenture may exchange such Debenture for a beneficial interest in an
Unrestricted Global Debenture or transfer such Definitive Debentures to a
Person who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Debenture at any time. Upon receipt of a request for such
an exchange or transfer, the Exchange Trustee shall cancel the applicable
Unrestricted Definitive Debenture and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global Debentures.
If any such exchange or transfer from a Definitive Debenture to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Debenture has not yet been
issued, the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Exchange Trustee shall authenticate one
or more Unrestricted Global Debentures in an aggregate principal amount equal to
the principal amount of Definitive Debentures so transferred.
(e) Transfer and Exchange of Definitive Debentures for Definitive
Debentures.
Upon request by a Holder of Definitive Debentures and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar shall
register the transfer or exchange of Definitive Debentures. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Debentures duly endorsed or
accompanied by a written
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instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing. In addition, the
requesting Holder shall provide any additional certifications, documents and
information, as applicable, required pursuant to the following provisions of
this Section 2.06(e).
(i) Restricted Definitive Debentures to Restricted Definitive Debentures.
Any Restricted Definitive Debenture may be transferred to and registered in
the name of Persons who take delivery thereof in the form of a Restricted
Definitive Debenture if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof; and
(B) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(ii) Restricted Definitive Debentures to Unrestricted Definitive
Debentures. Any Restricted Definitive Debenture may be exchanged by the
Holder thereof for an Unrestricted Definitive Debenture or transferred to a
Person or Persons who take delivery thereof in the form of an Unrestricted
Definitive Debenture if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Preferred Stock Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Debentures or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Preferred Stock Registration Rights
Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Preferred Stock Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Debentures
proposes to exchange such Debentures for an Unrestricted Definitive
Debenture, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Debentures
proposes to transfer such Debentures to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Debenture, a certificate
from such Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
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and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel to the effect that such
exchange or transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
(iii) Unrestricted Definitive Debentures to Unrestricted Definitive
Debentures. A Holder of Unrestricted Definitive Debentures may transfer such
Debentures to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Debenture. Upon receipt of a request to register such
a transfer, the Registrar shall register the Unrestricted Definitive
Debentures pursuant to the instructions from the Holder thereof.
(f) Exchange Offer.
Upon the occurrence of the Exchange Offer in accordance with the
Preferred Stock Registration Rights Agreement, the Company shall issue and, upon
receipt of an Authentication Order in accordance with Section 2.02, the Exchange
Trustee shall authenticate (i) one or more Unrestricted Global Debentures in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Debentures tendered for acceptance by Persons
that certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Debentures and (z) they are not affiliates (as defined in Rule 144) of the
Company, and accepted for exchange in the Exchange Offer and (ii) Definitive
Debentures in an aggregate principal amount equal to the principal amount of the
Restricted Definitive Debentures accepted for exchange in the Exchange Offer.
Concurrently with the issuance of such Debentures, the Exchange Trustee shall
cause the aggregate principal amount of the applicable Restricted Global
Debentures to be reduced accordingly, and the Company shall execute and the
Exchange Trustee shall authenticate and deliver to the Persons designated by the
Holders of Definitive Debentures so accepted Definitive Debentures in the
appropriate principal amount.
(g) Legends.
The following legends shall appear on the face of all Global
Debentures and Definitive Debentures issued under this Exchange Indenture unless
specifically stated otherwise in the applicable provisions of this Exchange
Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Debenture and each Definitive Debenture (and all Debentures issued in
exchange therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE
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RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER ("RULE 144A") OR ANOTHER
EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, OR (c) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
(B) Notwithstanding the foregoing, any Global Debenture or
Definitive Debenture issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section
2.06 (and all Debentures issued in exchange therefor or substitution
thereof) shall not bear the Private Placement Legend.
(ii) Global Debenture Legend. Each Global Debenture shall bear a legend in
substantially the following form:
"THIS GLOBAL DEBENTURE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS DEBENTURE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH
NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE
INDENTURE, (II) THIS GLOBAL DEBENTURE MAY BE EXCHANGED IN WHOLE BUT NOT IN
PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL
DEBENTURE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL DEBENTURE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY."
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A SECURITY IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY
THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE
OF SUCH SUCCESSOR DEPOSITARY. THE DEPOSITARY TRUST COMPANY SHALL ACT AS
THE DEPOSITARY UNTIL A SUCCESSOR SHALL BE APPOINTED BY THE COMPANY AND THE
TRANSFER AGENT. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
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REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY (55 WATER STREET, NEW YORK,
NEW YORK) ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.
(h) Cancellation and/or Adjustment of Global Debentures. At such time as
all beneficial interests in a particular Global Debenture have been exchanged
for Definitive Debentures or a particular Global Debenture has been redeemed,
repurchased or canceled in whole and not in part, each such Global Debenture
shall be returned to or retained and canceled by the Exchange Trustee in
accordance with Section 2.11 hereof. At any time prior to such cancellation, if
any beneficial interest in a Global Debenture is exchanged for or transferred to
a Person who will take delivery thereof in the form of a beneficial interest in
another Global Debenture or for Definitive Debentures, the principal amount of
Debentures represented by such Global Debenture shall be reduced accordingly and
an endorsement shall be made on such Global Debenture by the Exchange Trustee or
by the Depositary at the direction of the Exchange Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Debenture, such other Global Debenture shall be increased
accordingly and an endorsement shall be made on such Global Debenture by the
Exchange Trustee or by the Depositary at the direction of the Exchange Trustee
to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company shall
execute and the Exchange Trustee shall authenticate Global Debentures and
Definitive Debentures upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial interest
in a Global Debenture or to a Holder of a Definitive Debenture for any
registration of transfer or exchange, but the Company may require payment of
a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchange or transfer pursuant to
Sections 2.10, 3.06, 3.09, 4.10, 4.14 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of or
exchange any Debenture selected for redemption in whole or in part, except
the unredeemed portion of any Debenture being redeemed in part.
(iv) All Global Debentures and Definitive Debentures issued upon any
registration of transfer or exchange of Global Debentures or Definitive
Debentures shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Exchange
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Indenture, as the Global Debentures or Definitive Debentures surrendered upon
such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Debentures during a period beginning at the
opening of business 15 days before the day of any selection of Debentures for
redemption under Section 3.02 hereof and ending at the close of business on
the day of selection, (B) to register the transfer of or to exchange any
Debenture so selected for redemption in whole or in part, except the
unredeemed portion of any Debenture being redeemed in part or (C) to register
the transfer of or to exchange a Debenture between a record date and the next
succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Debenture, the Exchange Trustee, any Agent and the Company may deem and treat
the Person in whose name any Debenture is registered as the absolute owner of
such Debenture for the purpose of receiving payment of principal of and
interest on such Debentures and for all other purposes, and none of the
Exchange Trustee, any Agent or the Company shall be affected by notice to the
contrary.
(vii) The Exchange Trustee shall authenticate Global Debentures and
Definitive Debentures in accordance with the provisions of Section 2.02
hereof.
(viii) All certifications, certificates and Opinions of Counsel required
to be submitted to the Registrar pursuant to this Section 2.06 to effect a
registration of transfer or exchange may be submitted by facsimile.
SECTION 2.07. REPLACEMENT DEBENTURES.
If any mutilated Debenture is surrendered to the Exchange Trustee
or the Company and the Exchange Trustee receives evidence to its satisfaction of
the destruction, loss or theft of any Debenture, the Company shall issue and the
Exchange Trustee, upon receipt of an Authentication Order, shall authenticate a
replacement Debenture if the Exchange Trustee's requirements are met. If
required by the Exchange Trustee or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Exchange
Trustee and the Company to protect the Company, the Exchange Trustee, any Agent
and any authenticating agent from any loss that any of them may suffer if a
Debenture is replaced. The Company and the Exchange Trustee may charge for their
respective expenses in replacing a Debenture.
Every replacement Debenture is an additional obligation of the
Company and shall be entitled to all of the benefits of this Exchange Indenture
equally and proportionately with all other Debentures duly issued hereunder.
SECTION 2.08. OUTSTANDING DEBENTURES.
The Debentures outstanding at any time are all the Debentures
authenticated by the Exchange Trustee except for those canceled by it, those
delivered to it for cancellation, those reductions in the interest in a Global
Debenture effected by the Exchange Trustee in accordance with the provisions
hereof, and those described in this Section as not outstanding. Except as set
forth in Section 2.09 hereof, a Debenture does not cease to be outstanding
because the Company or an Affiliate of the Company holds
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the Debenture; however, Debentures held by the Company or a Subsidiary of the
Company shall not be deemed to be outstanding for purposes of Section 3.07(b)
hereof.
If a Debenture is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless a Responsible Officer of the Exchange Trustee
receives proof satisfactory to it that the replaced Debenture is held by a bona
fide purchaser.
If the principal amount of any Debenture is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Debentures payable on that date, then on and after that date
such Debentures shall be deemed to be no longer outstanding and shall cease to
accrue interest.
SECTION 2.09. TREASURY DEBENTURES.
In determining whether the Holders of the required principal
amount of Debentures have concurred in any direction, waiver or consent,
Debentures owned by the Company, or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company, shall be considered as though not outstanding, except that for the
purposes of determining whether the Exchange Trustee shall be protected in
relying on any such direction, waiver or consent, only Debentures that a
Responsible Officer of the Exchange Trustee actually knows are so owned shall be
so disregarded.
SECTION 2.10. TEMPORARY DEBENTURES.
Until certificates representing Debentures are ready for delivery,
the Company may prepare and the Exchange Trustee, upon receipt of an
Authentication Order, shall authenticate temporary Debentures. Temporary
Debentures shall be substantially in the form of certificated Debentures but may
have variations that the Company considers appropriate for temporary Debentures
and as shall be reasonably acceptable to the Exchange Trustee. Without
unreasonable delay, the Company shall prepare and the Exchange Trustee shall
authenticate definitive Debentures in exchange for temporary Debentures.
Holders of temporary Debentures shall be entitled to all of the
benefits of this Exchange Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Debentures to the Exchange
Trustee for cancellation. The Registrar and Paying Agent shall forward to the
Exchange Trustee any Debentures surrendered to them for registration of
transfer, exchange or payment. The Exchange Trustee and no one else shall cancel
all Debentures surrendered for registration of transfer, exchange, payment,
replacement or cancellation and shall return such canceled Debentures.
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SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the
Debentures, it shall pay the defaulted interest in any lawful manner plus, to
the extent lawful, interest payable on the defaulted interest, to the Persons
who are Holders on a subsequent special record date, in each case at the rate
provided in the Debentures and in Section 4.01 hereof. The Company shall notify
the Exchange Trustee in writing of the amount of defaulted interest proposed to
be paid on each Debenture and the date of the proposed payment. The Company
shall fix or cause to be fixed each such special record date and payment date,
provided that no such special record date shall be less than 10 days prior to
the related payment date for such defaulted interest. At least 15 days before
the special record date, the Company (or, upon the written request of the
Company, the Exchange Trustee in the name and at the expense of the Company)
shall mail or cause to be mailed to Holders a notice that states the special
record date, the related payment date and the amount of such interest to be
paid.
SECTION 2.13. CUSIP NUMBERS
The Company in issuing the Debentures may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Debentures or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Debentures, and any such redemption shall not be affected
by any defect in or omission of such numbers. The Company will promptly notify
the Trustee of any change in the "CUSIP" numbers.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO EXCHANGE TRUSTEE.
If the Company elects to redeem Debentures pursuant to the
optional redemption provisions of Section 3.07 hereof, it shall furnish to the
Exchange Trustee, at least 30 days but not more than 60 days before a redemption
date, an Officers' Certificate setting forth (i) the clause of this Exchange
Indenture pursuant to which the redemption shall occur, (ii) the redemption
date, (iii) the principal amount of Debentures to be redeemed and (iv) the
redemption price.
SECTION 3.02. SELECTION OF DEBENTURES TO BE REDEEMED.
If less than all of the Debentures are to be redeemed or purchased
in an offer to purchase at any time, the Exchange Trustee shall select the
Debentures to be redeemed or purchased among the Holders of the Debentures in
compliance with the requirements of the principal national securities exchange,
if any, on which the Debentures are listed or, if the Debentures are not so
listed, on a pro rata basis, by lot or in accordance with any other method the
Exchange Trustee considers fair and appropriate; provided that no Debentures of
$1,000 or less shall be redeemed in part. In the event of partial redemption by
lot, the particular Debentures to be redeemed shall be selected, unless
otherwise provided herein, not less than 30 nor more than 60 days prior to the
redemption date by the Exchange Trustee from the outstanding Debentures not
previously called for redemption.
The Exchange Trustee shall promptly notify the Company in writing
of the Debentures selected for redemption and, in the case of any Debenture
selected for partial redemption, the principal
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amount thereof to be redeemed. Debentures and portions of Debentures selected
shall be in amounts of $1,000 or whole multiples of $1,000; except that if all
of the Debentures of a Holder are to be redeemed, the entire outstanding amount
of Debentures held by such Holder, even if not a multiple of $1,000, shall be
redeemed. Except as provided in the preceding sentence, provisions of this
Exchange Indenture that apply to Debentures called for redemption also apply to
portions of Debentures called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days
but not more than 60 days before a redemption date, the Company shall mail or
cause to be mailed, by first class mail, a notice of redemption to each Holder
whose Debentures are to be redeemed at its registered address.
The notice shall fully identify the Debentures to be redeemed and
shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Debenture is being redeemed in part, the portion of the
principal amount of such Debenture to be redeemed and that, after the redemption
date upon surrender of such Debenture, a new Debenture or Debentures in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Debenture;
(d) the name and address of the Paying Agent;
(e) that Debentures called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Debentures called for redemption ceases to accrue on and
after the redemption date;
(g) the paragraph of the Debentures and/or Section of this Exchange
Indenture pursuant to which the Debentures called for redemption are
being redeemed;
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Debentures; and
(i) the applicable CUSIP numbers.
At the Company's request, the Exchange Trustee shall give the
notice of redemption in the Company's name and at its expense; provided,
however, that the Company shall have delivered to the Exchange Trustee, at least
45 days prior to the redemption date, an Officers' Certificate requesting that
the Exchange Trustee give such notice and setting forth the information to be
stated in such notice as provided in the preceding paragraph.
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SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Debentures called for redemption become irrevocably due and payable
on the redemption date at the redemption price. A notice of redemption may not
be conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall
deposit with the Exchange Trustee or with the Paying Agent money sufficient to
pay the redemption price of and accrued interest on all Debentures to be
redeemed on that date. The Exchange Trustee or the Paying Agent shall promptly
return to the Company any money deposited with the Exchange Trustee or the
Paying Agent by the Company in excess of the amounts necessary to pay the
redemption price of, and accrued interest on, all Debentures to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Debentures or the portions of Debentures called for redemption. If a
Debenture is redeemed on or after an interest record date but on or prior to the
related interest payment date, then any accrued and unpaid interest shall be
paid to the Person in whose name such Debenture was registered at the close of
business on such record date. If any Debenture called for redemption shall not
be so paid upon surrender for redemption because of the failure of the Company
to comply with the preceding paragraph, interest shall be paid on the unpaid
principal, from the redemption date until such principal is paid, and to the
extent lawful on any interest not paid on such unpaid principal, in each case at
the rate provided in the Debentures and in Section 4.01 hereof.
SECTION 3.06. DEBENTURES REDEEMED IN PART.
Upon surrender of a Debenture that is redeemed in part, the
Company shall issue and, upon the Company's written request, the Exchange
Trustee shall authenticate for the Holder at the expense of the Company a new
Debenture equal in principal amount to the unredeemed portion of the Debenture
surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Debentures pursuant to this Section 3.07
prior to May 15, 2003. Thereafter, the Company shall have the option to redeem
the Debentures, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on May 15 of the years indicated below:
Year Percentage
---- ----------
2003.............................................106.250%
2004.............................................105.000%
2005.............................................103.750%
2006.............................................102.500%
2007.............................................101.250%
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2008 and thereafter..............................100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.07,
at any time prior to May 13, 2001, the Company may on any one or more occasions
redeem the Debentures originally issued under this Exchange Indenture, in whole
or in part, at the redemption prices set forth below (expressed as percentages
of principal amount), in each case, together with accrued and unpaid interest
and Liquidated Damages thereon, if any, to the redemption date, with the net
cash proceeds of one or more Equity Offerings if redeemed during the 12-month
period commencing on May 15 of each of the years set forth below:.
1998.............................................108.000%
1999.............................................110.000%
2000.............................................112.000%
In the event of a redemption pursuant to Section 3.07(b) hereof
(except in the case of a redemption of all the Debentures), at least $25.0
million in aggregate principal amount of Debentures shall remain outstanding
immediately after the occurrence of such redemption (excluding Debentures held
by the Company and its Subsidiaries) and any such redemption shall occur within
45 days of the date of the closing of such Equity Offering.
At any time prior to May 15, 2003, the Debentures may also be redeemed,
as a whole but not in part, at the option of the Company upon the occurrence of
a Change of Control, upon not less than 30 nor more than 60 days' prior notice
(but in no event may any such redemption occur more than 90 days after the
occurrence of such Change of Control) mailed by first-class mail to each
Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof and the interest rate in effect with respect to the
Debentures as of, and accrued and unpaid interest and Liquidated Damages, if
any, to, the date of redemption.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption or
sinking fund payments with respect to the Debentures.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company
shall be required to commence an offer to all Holders to purchase Debentures (an
"Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Debentures required
to be purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less
than the Offer Amount has
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been tendered, all Debentures tendered in response to the Asset Sale Offer.
Payment for any Debentures so purchased shall be made in the same manner as
interest payments are made.
If the Purchase Date is on or after an interest record date and on
or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Debenture is registered at the close
of business on such record date, and no additional interest shall be payable to
Holders who tender Debentures pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to the Exchange Trustee and each of the
Holders, with a copy to the Exchange Trustee. The notice shall contain all
instructions and materials necessary to enable such Holders to tender Debentures
pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all
Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall
state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Debenture not tendered or accepted for payment shall
continue to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any
Debenture accepted for payment pursuant to the Asset Sale Offer shall cease to
accrete or accrue interest after the Purchase Date;
(e) that Holders electing to have a Debenture purchased pursuant to an
Asset Sale Offer may only elect to have all of such Debenture purchased and may
not elect to have only a portion of such Debenture purchased;
(f) that Holders electing to have a Debenture purchased pursuant to any
Asset Sale Offer shall be required to surrender the Debenture, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Debenture
completed, or transfer by book-entry transfer, to the Company, a depositary, if
appointed by the Company, or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Debenture the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Debenture purchased;
(h) that, if the aggregate principal amount of Debentures surrendered by
Holders exceeds the Offer Amount, the Company shall select the Debentures to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Debentures in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
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(i) that Holders whose Debentures were purchased only in part shall be
issued new Debentures equal in principal amount to the unpurchased portion of
the Debentures surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Debentures or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Debentures
tendered, and shall deliver to the Exchange Trustee an Officers' Certificate
stating that such Debentures or portions thereof were accepted for payment by
the Company in accordance with the terms of this Section 3.09. The Company, the
Depositary or the Paying Agent, as the case may be, shall promptly (but in any
case not later than five days after the Purchase Date) mail or deliver to each
tendering Holder an amount equal to the purchase price of the Debentures
tendered by such Holder and accepted by the Company for purchase, and the
Company shall promptly issue a new Debenture, and the Exchange Trustee, upon
written request from the Company shall authenticate and mail or deliver such new
Debenture to such Holder, in a principal amount equal to any unpurchased portion
of the Debenture surrendered. Any Debenture not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company shall
publicly announce the results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF DEBENTURES.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Debentures on the dates and in the manner
provided in the Debentures. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date
money deposited by the Company in immediately available funds and designated for
and sufficient to pay all principal, premium, if any, and interest then due. The
Company shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Preferred Stock Registration Rights
Agreement.
The Company shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue principal at the rate
equal to 1% per annum in excess of the then applicable interest rate on the
Debentures to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace period)
at the same rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City
of New York, an office or agency (which may be an office of the Exchange Trustee
or an affiliate of the Exchange Trustee, Registrar or co-registrar) where
Debentures may be surrendered for registration of transfer or for exchange and
where notices and demands to or upon the Company in respect of the Debentures
and this Exchange Indenture may be served. The Company shall give prompt written
notice to the Exchange
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Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Exchange Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Exchange Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Debentures may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Exchange Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Exchange Trustee as one such office or agency of the Company in accordance with
Section 2.03.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the
Commission, so long as any Debentures are outstanding, the Company will furnish
to the Holders of Debentures and to the Trustee (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations," that describes the financial condition and results
of operations of the Company and its consolidated Subsidiaries (showing in
reasonable detail, either on the face of the financial statements or in the
footnotes thereto and in Management's Discussion and Analysis of Financial
Condition and Results of Operations, the financial condition and results of
operations of the Company and its Restricted Subsidiaries separate from the
financial condition and results of operations of the Unrestricted Subsidiaries
of the Company) and, with respect to the annual information only, a report
thereon by the Company's certified independent accountants and (ii) all current
reports that would be required to be filed with the Commission on Form 8-K if
the Company were required to file such reports, in each case within the time
periods specified in the Commission's rules and regulations. In addition,
following the consummation of the exchange offer contemplated by the Preferred
Stock Registration Rights Agreement, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The Company shall at
all times comply with TIA ss. 314(a).
(b) For so long as any Debentures remain outstanding, the Company shall
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
(c) Delivery of such reports, information and documents to the Trustee is
for information purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein, including
the Company's compliance with any of its
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covenants hereunder (as to which the Trustee is entitled to rely exclusively on
Officer's Certificates).
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Exchange Trustee, within 90 days
after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Exchange Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Exchange Indenture and is
not in default in the performance or observance of any of the terms, provisions
and conditions of this Exchange Indenture (or, if a Default or Event of Default
shall have occurred, describing all such Defaults or Events of Default of which
he or she may have knowledge and what action the Company is taking or proposes
to take with respect thereto) and that to the best of his or her knowledge no
event has occurred and remains in existence by reason of which payments on
account of the principal of or interest, if any, on the Debentures is prohibited
or if such event has occurred, a description of the event and what action the
Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Debentures are outstanding,
deliver to the Exchange Trustee, forthwith upon any Officer becoming aware of
any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Debentures.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay,
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extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Exchange Indenture; and
the Company (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it shall not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Exchange Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company or
any of its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company and other than
dividends or distributions payable to the Company or a Restricted Subsidiary of
the Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company or other Affiliate of the Company (other than any
such Equity Interests owned by the Company or any Restricted Subsidiary of the
Company); (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Debentures (other than Debentures), except a payment of
interest or principal at Stated Maturity or as a mandatory or sinking fund
payment; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments"), unless, at the time of and after giving effect to
such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Issue Date (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (v), (vii) and (ix) of the next
succeeding paragraph), is less than the sum, without duplication, of (i) 50% of
the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter commencing
after the date of the Issue Date to the end of the Company's most recently ended
fiscal quarter for which internal financial statements are available at the time
of such Restricted Payment (or, if such Consolidated Net Income for such period
is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net
cash proceeds received by the Company since the Issue Date as a contribution to
its common equity capital or from the issue or sale of Equity Interests of the
Company (other than Disqualified Stock) or from the issue or sale of
Disqualified Stock or debt securities of the Company that have been converted
into such Equity Interests (other than Equity Interests (or Disqualified Stock
or convertible debt securities) sold to a Subsidiary of the Company), plus (iii)
100% of the fair market value of any Person engaged in a Permitted
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Business or assets used by the Company or a Restricted Subsidiary in a Permitted
Business which such Person or assets were acquired by the Company or any of its
Restricted Subsidiaries since the Issue Date, provided that the consideration
for such Person or assets consisted solely of Equity Interests of the Company
(other than Disqualified Stock), plus (iv) to the extent that any Restricted
Investment that was made after the Issue Date is sold for cash or otherwise
liquidated or repaid for cash or the receipt of properties used in a Permitted
Business, the lesser of (A) the net cash proceeds of such sale, liquidation or
repayment or the fair market value (as determined in good faith by a resolution
of the Board of Directors set forth in an Officers' Certificate delivered to the
Exchange Trustee) of property received in exchange therefor and (B) the amount
of such Restricted Investment.
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Exchange Indenture; (ii) the redemption, repurchase, retirement, defeasance or
other acquisition of any pari passu or subordinated Indebtedness or Equity
Interests of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of, other Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (c)(ii) of the preceding paragraph; (iii) the
defeasance, redemption or repurchase of any Disqualified Stock of the Company or
any Restricted Subsidiary in exchange for, or out of the substantially
concurrent sale (other than to the Company or a Subsidiary of the Company) of
Disqualified Stock of the Company or such Restricted Subsidiary, respectively;
provided that: (A) the aggregate liquidation preference of such Disqualified
Stock does not exceed the aggregate liquidation preference of the Disqualified
Stock so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (B) such
Disqualified Stock has a final maturity date later than the final maturity date
of, and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Notes; and (C) such Disqualified Stock
is incurred either by the Company or by the Restricted Subsidiary who is the
obligor on the Disqualified Stock being extended, refinanced, renewed, replaced,
defeased or refunded; (iv) the redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (v) the payment of any dividend by a
Restricted Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; (vi) so long as no Default or Event of Default is
continuing or would be caused thereby, the direct or indirect repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Company or any direct or indirect parent corporation of the Company held
by any member of the Company's (or any of its Restricted Subsidiaries')
management pursuant to any management equity subscription agreement or stock
option agreement in effect as of the date of this Exchange Indenture; provided
that the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $1.0 million in any twelve-month
period; (vii) dividends or other payments to Holdings sufficient to enable
Holdings to pay accounting, legal, corporate or reporting and administrative
expenses of Holdings incurred in the ordinary course of business in an amount
not to exceed $500,000 in any twelve-month period; (viii) the making of loans by
the Company or any of its Restricted Subsidiaries to officers or directors of
the Company; provided that the aggregate outstanding amount of such loans shall
not exceed, at any time, $2.0 million plus any such loans outstanding on the
date of this Exchange Indenture; (ix) payments to Holdings by the Company or any
Restricted Subsidiary with respect to taxes (including estimated taxes) that are
paid by Holdings on a combined, consolidated, unitary or similar basis, to the
extent that such payments do not exceed the amount that the Company or such
Restricted Subsidiary would have paid to the relevant taxing authority if the
Company or such Restricted Subsidiary filed a separate tax return for the period
in question; (x) so long as no Default or Event of Default is continuing or
would be
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caused thereby, the defeasance, redemption or repurchase of any preferred stock
or Disqualified Stock issued in connection with the acquisition of assets or a
Permitted Business, provided that the aggregate amount of such defeasance,
redemption or repurchase payments shall not exceed at any time $10.0 million;
(xi) so long as no Default of Event of Default is continuing or would be caused
thereby, payments under the Management Agreement as in effect on the Issue Date;
and (xii) the direct or indirect repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any direct or
indirect parent corporation of the Company held by any employee of the Company
or a Restricted Subsidiary of the Company upon the retirement of any such
employee; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed $400,000 less
the amount of Restricted Payments made pursuant to clause (xiii) below during
such period in any twelve-month period; (xiii) the direct or indirect
redemption, repurchase or other acquisition or retirement for value of Class A
Senior Preferred Stock of Holdings from Holdings' qualified employee stock
option plans, which Class A Senior Preferred Stock will either be issued on the
Issue Date or issued as dividends thereon in accordance with the certificate of
designations relating thereto, provided that such redemption, repurchase or
other acquisition or retirement is required by applicable law and such plans;
and (xiv) the distribution of any Parity Note.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. In the
event of any such designation, all outstanding Investments owned by the Company
and its Restricted Subsidiaries in the Subsidiary so designated will be deemed
to be an Investment made as of the time of such designation and will reduce the
amount available for Restricted Payments under the first paragraph of this
Section 4.07 or Permitted Investments, as applicable. All such outstanding
Investments will be deemed to constitute Restricted Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary. The Board of Directors may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if such
redesignation would not cause a Default.
The amount of all Restricted Payments (other than cash) and Qualified
Proceeds (other than cash) shall be the fair market value on the date of the
Restricted Payment (or date of receipt of Qualified Proceeds) of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this Section 4.07 shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Exchange Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $5.0 million. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Exchange Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.07 were
computed, together with a copy of any fairness opinion or appraisal required by
this Exchange Indenture. Accrual of interest, accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in the form
of additional Indebtedness with the same terms and payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be a Restricted Payment for purposes of
this Section 4.07; provided, in each such case, that the amount thereof is
included in Fixed Charges of the Company as accrued.
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SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries. However, the foregoing
restrictions will not apply to encumbrances or restrictions existing under or by
reason of (a) Existing Indebtedness as in effect on the Issue Date, (b) the
Senior Credit Facility as in effect as of the Issue Date, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
the Senior Credit Facility as in effect on the Issue Date, (c) this Exchange
Indenture and the Debentures, (d) applicable law, (e) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
Restricted Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred in connection with or in contemplation
of such acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this Exchange
Indenture to be incurred, (f) customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (g) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in clause
(iii) above on the property so acquired, (h) any agreement for the sale or other
disposition of a Restricted Subsidiary that restricts distributions by that
Restricted Subsidiary pending its sale or other disposition, (i) Permitted
Refinancing Indebtedness, provided that the restrictions contained in the
agreements governing such Permitted Refinancing Indebtedness are no more
restrictive, taken as a whole, than those contained in the agreements governing
the Indebtedness being refinanced, (j) Liens securing Indebtedness otherwise
permitted to be incurred pursuant to the provisions of Section 4.12 hereof that
limit the right of the Company or any of its Restricted Subsidiaries to dispose
of the assets subject to such Lien, (k) provisions with respect to the
disposition or distribution of assets or property in joint venture agreements
and other similar agreements entered into in the ordinary course of business,
(l) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business, (m) any other
security agreement, instrument or document relating to Senior Indebtedness
hereafter in effect, provided that such encumbrances or restrictions are
customary in connection with such documents and that the terms and conditions of
such encumbrances or restrictions are no more restrictive than those
encumbrances or restrictions imposed in connection with the Senior Credit
Facility as in effect on the Issue Date, (n) any agreement relating to a sale
and leaseback transaction or capital lease, but only on the property subject to
such transaction or lease and only to the extent that such restrictions or
encumbrances are customary with respect to a sale and leaseback transaction or
capital lease, or (o) the Canadian Credit Facility as in effect as of the date
of this Exchange Indenture, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof, provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings are no more
restrictive, taken as a whole, with respect to such dividend and other payment
restrictions than those contained in the Canadian Credit Facility as in effect
on the Issue Date or (p) customary restrictions
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imposed on the payment of dividends by a Receivables Subsidiary in connection
with a Qualified Receivables Transaction.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company (i) shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and (ii) shall not issue any Disqualified Stock and will not permit any of
its Restricted Subsidiaries to issue any shares of preferred stock; provided,
however, that the Company may incur Indebtedness (including Acquired Debt) or
issue shares of Disqualified Stock and Restricted Subsidiaries may incur
Indebtedness or issue preferred stock if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2 to 1, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period.
The foregoing provisions shall not apply to the incurrence of any of
the following items of Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Company of Indebtedness under the Senior
Credit Facility in an aggregate principal amount not exceeding an amount
equal to $160.0 million less the aggregate amount of all Net Proceeds of
Asset Sales applied by the Company or any of its Restricted Subsidiaries to
permanently repay Indebtedness under the Senior Credit Facility pursuant to
Section 4.10 hereof;
(ii) the incurrence by Cluett Peabody Canada Inc. of Indebtedness
under the Canadian Credit Facility in an aggregate principal amount not
exceeding an amount equal to $15.0 million less the aggregate amount of all
Net Proceeds of Asset Sales applied by the Company or any of its Restricted
Subsidiaries to permanently repay revolving credit Indebtedness under the
Canadian Credit Facility pursuant to Section 4.10 hereof;
(iii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness, including the Notes and the Guarantees thereof;
(iv) the incurrence by the Company of Indebtedness represented by the
Debentures;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $10.0 million at any time outstanding;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace, Existing
Indebtedness or Indebtedness (other than intercompany Indebtedness)
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that was permitted by this Exchange Indenture to be incurred under the
first paragraph hereof or clauses (iv), (v), (vi), (ix) or (xv) of this
paragraph;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries; provided, however, that (i) if the
Company is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Debentures and (ii)(A) any subsequent issuance or transfer
of Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary thereof and (B)
any sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Restricted Subsidiary thereof shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by the Company
or such Restricted Subsidiary, as the case may be, that was not permitted
by this clause (vii);
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Exchange Indenture to
be outstanding;
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of assets
or a new Subsidiary; provided that such Indebtedness was incurred by the
prior owner of such assets or such Subsidiary prior to such acquisition by
the Company or one of its Restricted Subsidiaries and was not incurred in
connection with, or in contemplation of, such acquisition by the Company or
one of it Restricted Subsidiaries; and provided further that the principal
amount (or accreted value, as applicable) of such Indebtedness, together
with any other outstanding Indebtedness incurred pursuant to this clause
(ix) and any Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause
(ix), does not exceed $5.0 million;
(x) the guarantee by the Company or any Restricted Subsidiary of
Indebtedness of the Company or a Restricted Subsidiary of the Company that
was permitted to be incurred by another provision of this Section 4.09;
(xi) Indebtedness incurred in respect of workers' compensation claims,
self-insurance obligations, performance, surety and similar bonds and
completion guarantees provided by the Company in the ordinary course of
business;
(xii) Indebtedness arising from guarantees of Indebtedness of the
Company or any Subsidiary or the agreements of the Company or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with
the disposition of any business, assets or Capital Stock of a Restricted
Subsidiary, or other guarantees of Indebtedness incurred by any person
acquiring all or any portion of such business, assets or Capital Stock of a
Restricted Subsidiary for the purpose of financing such acquisition,
provided that the maximum aggregate liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds actually received
by the Company and its Restricted Subsidiaries in connection with such
disposition;
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(xiii) Indebtedness of a Receivables Subsidiary that is not recourse
to the Company or any other Restricted Subsidiary of the Company (other
than Standard Securitization Undertakings) incurred in connection with a
Qualified Receivables Transaction;
(xiv) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (xiv); and
(xv) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (xv), not to exceed $10.0
million.
For purposes of determining compliance with this Section 4.09, in the
event that an item of proposed Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in clauses (i) through (xv) above
as of the date of incurrence thereof, or is entitled to be incurred pursuant to
the first paragraph of this Section 4.09 as of the date of incurrence thereof,
the Company shall, in its sole discretion, classify such item of Indebtedness on
the date of its incurrence in any manner that complies with this Section 4.09.
Accrual of interest, accretion or amortization of original issue discount, the
payment of interest on any Indebtedness in the form of additional Indebtedness
with the same terms and the payment of dividends on Disqualified Stock in the
form of additional shares of the same class of Disqualified Stock will not be
deemed to be Disqualified Stock for purposes of this Section 4.09; provided, in
each such case, that the amount thereof is included in Fixed Charges of the
Company as accrued. For purposes of determining compliance with any U.S.
dollar-denominated restriction on the incurrence of Indebtedness, the U.S.
dollar-equivalent principal amount of Indebtedness denominated in a foreign
currency shall be calculated based on the relevant currency exchange rate in
effect on the date such Indebtedness was incurred.
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Exchange Trustee) of the assets or Equity Interests issued or
sold or otherwise disposed of and (ii) at least 75% of the consideration
therefor received by the Company or such Restricted Subsidiary is in the form of
(A) cash or Cash Equivalents or (B) Qualified Proceeds; provided that the
aggregate fair market value of Qualified Proceeds (other than cash or Cash
Equivalents), which may be received in consideration for asset sales pursuant to
this clause (ii) (B) shall not exceed $5.0 million since the Issue Date;
provided that the amount of (x) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Debentures or any guarantee thereof) that
are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or such Restricted Subsidiary from
further liability and (y) any securities, Debentures or other obligations
received by the Company or any such Restricted Subsidiary from such transferee
that are contemporaneously (subject to ordinary settlement periods) converted by
the Company or such Restricted Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.
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Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds, at its option, (a) to permanently
repay Exchange Debenture Senior Indebtedness or Indebtedness of a Restricted
Subsidiary, (b) to acquire all or substantially all of the assets of, or a
majority of the Voting Stock of, another Permitted Business, (c) to make a
capital expenditure or (d) to acquire other long-term assets that are used or
useful in a Permitted Business. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce revolving credit borrowings or
otherwise invest such Net Proceeds in any manner that is not prohibited by this
Exchange Indenture. Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the first sentence of this paragraph will be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $10.0 million, the Company will be required to make an offer to all
Holders of Debentures and all holders of other Indebtedness that is pari passu
with the Debentures containing provisions similar to those set forth in this
Exchange Indenture with respect to offers to purchase or redeem with the
proceeds of sales of assets (an "Asset Sale Offer") to purchase the maximum
principal amount of Debentures and such other pari passu Indebtedness that may
be purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the procedures set forth in this Exchange Indenture and such other pari
passu Indebtedness. To the extent that any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by this Exchange Indenture. If the
aggregate principal amount of Debentures and such other pari passu Indebtedness
tendered into such Asset Sale Offer surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Exchange Trustee shall select the Debentures and
such other pari passu Indebtedness to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the
Exchange Trustee (a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of the Company or such Restricted
Subsidiary, (ii) transactions between or among the Company and/or its Restricted
Subsidiaries, (iii) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company, (iv) any sale or other issuance of Equity
Interests (other than Disqualified Stock) of the Company, (v) payments made
pursuant to the Management Agreement in effect as of the Issue Date, and (vi)
Restricted Payments that are permitted under Section 4.07 hereof.
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SECTION 4.12. LIENS.
The Company shall not, and shall permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind securing Indebtedness, on any asset now owned or
hereafter acquired, except Permitted Liens, unless all payments due under this
Exchange Indenture and the Debentures are secured on an equal and ratable basis
with the Indebtedness so secured until such time as such is no longer secured by
a Lien; provided that if such Indebtedness is by its terms expressly
subordinated to the Debentures, the Lien securing such Indebtedness shall be
subordinate and junior to the Lien securing the Debentures with the same
relative priority as such subordinate or junior Indebtedness shall have with
respect to the Debentures.
SECTION 4.13. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Debentures.
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of Debentures
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Debentures pursuant
to the offer described in this Section 4.14 at an offer price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase (the "Change of
Control Payment"). Within 30 days following any Change of Control, the Company
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Debentures on
the date specified in such notice, which date shall be no earlier than 30 days
and no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), pursuant to the procedures required by this Exchange
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Debentures as a result of a
Change of Control.
(b) On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Debentures or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all
Debentures or portions thereof so tendered and (3) deliver or cause to be
delivered to the Exchange Trustee the Debentures so accepted together with an
Officers' Certificate stating the aggregate principal amount of Debentures or
portions thereof being purchased by the Company. The Paying Agent will promptly
mail to each Holder of Debentures so tendered the
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Change of Control Payment for such Debentures, and the Exchange Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a New Exchange Debenture equal in principal amount to any
unpurchased portion of the Exchange Debentures surrendered, if any; provided
that each such New Debenture will be in a principal amount of $1,000 or an
integral multiple thereof. Prior to complying with the provisions of this
Section 4.14, but in any event within 90 days following a Change of Control, the
Company shall either repay all outstanding Exchange Debenture Senior
Indebtedness or obtain the requisite consents, if any, under all agreements
governing outstanding Exchange Debenture Senior Indebtedness to permit the
repurchase of Debentures required by this Section 4.14. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.14, the
Company shall not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this
Section 4.14 and Section 3.09 hereof and purchases all Debentures validly
tendered and not withdrawn under such Change of Control Offer.
SECTION 4.15. NO SENIOR SUBORDINATED DEBT.
The Company shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to all Senior Indebtedness of the Company and senior in any
respect in right of payment to the Debentures.
SECTION 4.16. BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any Restricted Subsidiary
to, engage in any business other than Permitted Businesses, except to such
extent as would not be material to the Company and its Subsidiaries taken as a
whole.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not, directly or indirectly, consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Debentures and this Exchange Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Exchange
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; and (iv) except in the case of a
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merger of the Company with or into a Wholly Owned Restricted Subsidiary of the
Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have a Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, immediately after such transaction after
giving pro forma effect thereto and any related financing transactions as if the
same had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of Section
4.09 hereof.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Exchange Indenture referring to the "Company" shall refer
instead to the successor corporation and not to the Company), and may exercise
every right and power of the Company under this Exchange Indenture with the same
effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Debentures except in the
case of a sale of all of the Company's assets that meets the requirements of
Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Debentures (whether or not permitted by
the subordination provisions of this Exchange Indenture) and such default
continues for a period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Debentures when the same becomes due and payable at
maturity, upon redemption (including in connection with an offer to purchase) or
otherwise (whether or not permitted by the subordination provisions of this
Exchange Indenture);
(c) the Company or any of its Restricted Subsidiaries fails to comply with
the provisions of Section 5.01 hereof;
(d) the Company or any of its Restricted Subsidiaries fails to observe or
perform any other covenant, representation, warranty or other agreement in this
Exchange Indenture or the Debentures for 60 days after notice to the Company by
the Exchange Trustee or the Holders of at least 25% in aggregate principal
amount of the Debentures then outstanding voting as a single class;
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(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date hereof, which default (a) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness prior to
the expiration of the grace period provided in such Indebtedness on the date of
such default (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any of its Restricted Subsidiaries and such judgment or judgments remain
undischarged for a period (during which execution shall not be effectively
stayed) of 60 days, provided that the aggregate of all such undischarged
judgments exceeds $5.0 million;
(g) the Company or any of its Restricted Subsidiaries pursuant to or within
the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any of its Restricted
Subsidiaries in an involuntary case,
(ii) appoints a Custodian of the Company or any of its Restricted
Subsidiaries or for all or substantially all of the property of the Company
or any of its Restricted Subsidiaries or
(iii) orders the liquidation of the Company or any of its Restricted
Subsidiaries;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Significant
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Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary)
occurs and is continuing, the Exchange Trustee or the Holders of at least 25% in
aggregate principal amount of the then outstanding Debentures may declare all
the Debentures to be due and payable immediately. Upon any such declaration, the
Debentures shall become due and payable immediately. Notwithstanding the
foregoing, if an Event of Default specified in clause (g) or (h) of Section 6.01
hereof occurs with respect to the Company, any of its Significant Subsidiary or
any group of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary, all outstanding Debentures shall be due and payable immediately
without further action or notice. The Holders of a majority in aggregate
principal amount of the then outstanding Debentures by written notice to the
Exchange Trustee may on behalf of all of the Holders rescind an acceleration and
its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default (except nonpayment of principal,
interest or premium that has become due solely because of the acceleration) have
been cured or waived.
The Company is required to deliver to the Exchange Trustee annually a
statement regarding compliance with this Exchange Indenture, and the Company is
required upon becoming aware of any Default or Event of Default, to deliver to
the Exchange Trustee a statement specifying such Default or Event of Default.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Exchange Trustee
may pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Debentures or to enforce the performance of any
provision of the Debentures or this Exchange Indenture.
The Exchange Trustee may maintain a proceeding even if it does not
possess any of the Debentures or does not produce any of them in the proceeding.
A delay or omission by the Exchange Trustee or any Holder of a Debenture in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Debentures by notice to the Exchange Trustee may on behalf
of the Holders of all of the Debentures waive an existing Default or Event of
Default and its consequences hereunder, except a continuing Default or Event of
Default in the payment of the principal, premium and Liquidated Damages, if any,
or interest on, the Debentures (including in connection with an offer to
purchase) (provided, however, that the Holders of a majority in aggregate
principal amount of the then outstanding Debentures may rescind an acceleration
and its consequences, including any related payment default that resulted from
such acceleration). Upon any such waiver, such Default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured for
every purpose of this Exchange Indenture; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Debentures may direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Exchange Trustee or exercising any
trust or power conferred on it. However, the Exchange Trustee may
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refuse to follow any direction that conflicts with law or this Exchange
Indenture that the Exchange Trustee determines may be unduly prejudicial to the
rights of other Holders of Debentures or that may involve the Exchange Trustee
in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Debenture may pursue a remedy with respect to this
Exchange Indenture or the Debentures only if:
(a) the Holder of a Debenture gives to the Exchange Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Debentures make a written request to the Exchange Trustee
to pursue the remedy;
(c) such Holder of a Debenture or Holders of Debentures offer and, if
requested, provide to the Exchange Trustee indemnity satisfactory to
the Exchange Trustee against any loss, liability or expense;
(d) the Exchange Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Debentures do not give the Exchange
Trustee a direction inconsistent with the request.
A Holder of a Debenture may not use this Exchange Indenture to
prejudice the rights of another Holder of a Debenture or to obtain a preference
or priority over another Holder of a Debenture.
SECTION 6.07. RIGHTS OF HOLDERS OF DEBENTURES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Exchange Indenture, the
right of any Holder of a Debenture to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Debenture, on or after the
respective due dates expressed in the Debenture (including in connection with an
offer to purchase), or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY EXCHANGE TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Exchange Trustee is authorized to recover judgment in its own
name and as trustee of an express trust against the Company for the whole amount
of principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Debentures and interest on overdue principal and, to the extent
lawful, interest and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Exchange Trustee, its agents and
counsel.
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SECTION 6.09. EXCHANGE TRUSTEE MAY FILE PROOFS OF CLAIM.
The Exchange Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Exchange Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Exchange Trustee, its
agents and counsel) and the Holders of the Debentures allowed in any judicial
proceedings relative to the Company (or any other obligor upon the Debentures),
its creditors or its property and shall be entitled and empowered to collect,
receive and distribute any money or other property payable or deliverable on any
such claims and any custodian in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Exchange Trustee, and in
the event that the Exchange Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Exchange Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and advances of the
Exchange Trustee, its agents and counsel, and any other amounts due the Exchange
Trustee under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Exchange Trustee, its
agents and counsel, and any other amounts due the Exchange Trustee under Section
7.07 hereof out of the estate in any such proceeding, shall be denied for any
reason, payment of the same shall be secured by a Lien on, and shall be paid out
of, any and all distributions, dividends, money, securities and other properties
that the Holders may be entitled to receive in such proceeding whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Exchange Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Debentures
or the rights of any Holder, or to authorize the Exchange Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Exchange Trustee collects any money pursuant to this Article,
it shall pay out the money in the following order:
First: to the Exchange Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Exchange Trustee and the
costs and expenses of collection;
Second: to Holders of Debentures for amounts due and unpaid on the
Debentures for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Debentures for principal, premium, and Liquidated
Damages, if any and interest, respectively; and
Third: to the Company.
The Exchange Trustee may fix a record date and payment date for any
payment to Holders of Debentures pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Exchange Indenture or in any suit against the Exchange Trustee for any action
taken or omitted by it as a trustee, a court in its discretion may require the
filing by any party litigant in the suit of an undertaking to pay the costs of
the
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suit, and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section does not apply to a suit by the Exchange
Trustee, a suit by a Holder of a Debenture pursuant to Section 6.07 hereof, or a
suit by Holders of more than 10% in principal amount of the then outstanding
Debentures.
ARTICLE 7.
EXCHANGE TRUSTEE
SECTION 7.01. DUTIES OF EXCHANGE TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Exchange
Trustee shall exercise such of the rights and powers vested in it by this
Exchange Indenture, and use the same degree of care and skill in its exercise,
as a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Exchange Trustee shall be determined solely by the
express provisions of this Exchange Indenture and the Exchange Trustee need
perform only those duties that are specifically set forth in this Exchange
Indenture and no others, and no implied covenants or obligations shall be read
into this Exchange Indenture against the Exchange Trustee; and
(ii) in the absence of bad faith on its part, the Exchange Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Exchange Trustee and conforming to the requirements of this Exchange
Indenture. However, the Exchange Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of this
Exchange Indenture.
(c) The Exchange Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Exchange Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that the
Exchange Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Exchange Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Exchange Indenture that in any way relates to the Exchange Trustee is subject to
paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Exchange Indenture shall require the Exchange
Trustee to expend or risk its own funds or incur any liability. The Exchange
Trustee shall be under no obligation to exercise any of its rights and powers
under this Exchange Indenture at the request
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of any Holders, unless such Holder shall have offered to the Exchange Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Exchange Trustee shall not be liable for interest on any money
received by it except as the Exchange Trustee may agree in writing with the
Company. Money held in trust by the Exchange Trustee need not be segregated from
other funds except to the extent required by law.
SECTION 7.02. RIGHTS OF EXCHANGE TRUSTEE.
(a) The Exchange Trustee may conclusively rely upon any document believed
by it to be genuine and to have been signed or presented by the proper Person.
The Exchange Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Exchange Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Exchange
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel. The
Exchange Trustee may consult with counsel of its selection and the advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection from liability in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(c) The Exchange Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Exchange Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Exchange Indenture.
(e) Unless otherwise specifically provided in this Exchange Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Exchange Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Exchange Indenture at the request or
direction of any of the Holders unless such Holders shall have offered to the
Exchange Trustee security or indemnity satisfactory to it against the costs,
expenses and liabilities that might be incurred by it in compliance with such
request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF EXCHANGE TRUSTEE.
The Exchange Trustee in its individual or any other capacity may
become the owner or pledgee of Debentures and may otherwise deal with the
Company or any Affiliate of the Company with the same rights it would have if it
were not Exchange Trustee. However, in the event that the Exchange Trustee
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue as trustee or resign. Any
Agent may do the same with like rights and duties. The Exchange Trustee is also
subject to Sections 7.10 and 7.11 hereof.
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SECTION 7.04. EXCHANGE TRUSTEE'S DISCLAIMER.
The Exchange Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Exchange Indenture or the
Debentures, it shall not be accountable for the Company's use of the proceeds
from the Debentures or any money paid to the Company or upon the Company's
direction under any provision of this Exchange Indenture, it shall not be
responsible for the use or application of any money received by any Paying Agent
other than the Exchange Trustee, and it shall not be responsible for any
statement or recital herein or any statement in the Debentures or any other
document in connection with the sale of the Debentures or pursuant to this
Exchange Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Exchange Trustee, the Exchange Trustee shall mail to Holders of
Debentures a notice of the Default or Event of Default within 90 days after it
occurs. Except in the case of a Default or Event of Default in payment of
principal of, premium, if any, or interest on any Debenture, the Exchange
Trustee may withhold the notice if and so long as a committee of its Responsible
Officers in good faith determines that withholding the notice is in the
interests of the Holders of the Debentures.
SECTION 7.06. REPORTS BY EXCHANGE TRUSTEE TO HOLDERS OF THE DEBENTURES.
Within 60 days after each April 15 beginning with the April 15
following the date hereof, and for so long as Debentures remain outstanding, the
Exchange Trustee shall mail to the Holders of the Debentures a brief report
dated as of such reporting date that complies with TIA ss. 313(a) (but if no
event described in TIA ss. 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Exchange
Trustee also shall comply with TIA ss. 313(b)(2). The Exchange Trustee shall
also transmit by mail all reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Debentures shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Debentures are listed in accordance with TIA ss. 313(d).
The Company shall promptly notify the Exchange Trustee when the Debentures are
listed on any stock exchange or delisted therefrom.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Exchange Trustee from time to time
compensation as agreed upon in writing from time to time between the Company and
the Trustee for its acceptance of this Exchange Indenture and services
hereunder. The Exchange Trustee's compensation shall not be limited by any law
on compensation of a trustee of an express trust. The Company shall reimburse
the Exchange Trustee promptly upon request for all disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Exchange Trustee's agents and counsel.
The Company shall indemnify each of the Exchange Trustee and any
predecessor Exchange Trustee against any and all losses, liabilities, claims,
damages or expenses (including taxes other than taxes based upon the income of
the Exchange Trustee) incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Exchange Indenture,
including
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the costs and expenses of enforcing this Exchange Indenture against the Company
(including this Section 7.07) and defending itself against any claim (whether
asserted by the Company or any Holder or any other person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its negligence or willful misconduct. The Exchange Trustee shall
notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Exchange Trustee to so notify the Company shall not relieve the
Company of its obligations hereunder. The Company shall defend the claim and the
Exchange Trustee shall cooperate in the defense. The Exchange Trustee may have
separate counsel and the Company shall pay the reasonable fees and expenses of
such counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Exchange Indenture.
To secure the Company's payment obligations in this Section, the
Exchange Trustee shall have a Lien prior to the Debentures on all money or
property held or collected by the Exchange Trustee, except that held in trust to
pay principal and interest on particular Debentures. Such Lien shall survive the
satisfaction and discharge of this Exchange Indenture.
When the Exchange Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Exchange Trustee shall comply with the provisions of TIA ss.
313(b)(2) to the extent applicable.
SECTION 7.08. REPLACEMENT OF EXCHANGE TRUSTEE.
A resignation or removal of the Exchange Trustee and appointment of a
successor Exchange Trustee shall become effective only upon the successor
Exchange Trustee's acceptance of appointment as provided in this Section.
The Exchange Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Debentures of a majority in principal amount of the then outstanding
Debentures may remove the Exchange Trustee by so notifying the Exchange Trustee
and the Company in writing. The Company may remove the Exchange Trustee if:
(a) the Exchange Trustee fails to comply with Section 7.10 hereof;
(b) the Exchange Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Exchange Trustee under any
Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Exchange Trustee or
its property; or
(d) the Exchange Trustee becomes incapable of acting.
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If the Exchange Trustee resigns or is removed or if a vacancy exists
in the office of Exchange Trustee for any reason, the Company shall promptly
appoint a successor Exchange Trustee. Within one year after the successor
Exchange Trustee takes office, the Holders of a majority in principal amount of
the then outstanding Debentures may appoint a successor Exchange Trustee to
replace the successor Exchange Trustee appointed by the Company.
If a successor Exchange Trustee does not take office within 60 days
after the retiring Exchange Trustee resigns or is removed, the retiring Exchange
Trustee, the Company, or the Holders of Debentures of at least 10% in principal
amount of the then outstanding Debentures may petition at the expense of the
Company any court of competent jurisdiction for the appointment of a successor
Exchange Trustee.
If the Exchange Trustee, after written request by any Holder of a
Debenture who has been a Holder of a Debenture for at least six months, fails to
comply with Section 7.10, such Holder of a Debenture may petition any court of
competent jurisdiction for the removal of the Exchange Trustee and the
appointment of a successor Exchange Trustee.
A successor Exchange Trustee shall deliver a written acceptance of its
appointment to the retiring Exchange Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Exchange Trustee shall become effective,
and the successor Exchange Trustee shall have all the rights, powers and duties
of the Exchange Trustee under this Exchange Indenture. The successor Exchange
Trustee shall mail a notice of its succession to Holders of the Debentures. The
retiring Exchange Trustee shall promptly transfer all property held by it as
Exchange Trustee to the successor Exchange Trustee, provided all sums owing to
the Exchange Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Exchange Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
hereof shall continue for the benefit of the retiring Exchange Trustee.
SECTION 7.09. SUCCESSOR EXCHANGE TRUSTEE BY MERGER, ETC.
If the Exchange Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Exchange Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be an Exchange Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $50 million as set forth in its most recent published annual report of
condition.
This Exchange Indenture shall always have an Exchange Trustee who
satisfies the requirements of TIA ss. 310(a)(1), (2) and (5). The Exchange
Trustee is subject to TIA ss. 310(b).
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SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Exchange Trustee is subject to TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). An Exchange Trustee who has
resigned or been removed shall be subject to TIA ss. 311(a) to the extent
indicated therein.
SECTION 7.12. TRUSTEE'S APPLICATION FOR INSTRUCTIONS FROM THE COMPANY
Any application by the Trustee for written instructions from the
Company may, at the option of the Trustee, set forth in writing any action
proposed to be taken or omitted by the Trustee under the Indenture and the date
on and/or after which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable for any action taken by, or omission
of, the Trustee in accordance with a proposal included in such application on or
after the date specified in such application (which date shall not be less than
three Business Days after the date any officer of the Company actually receives
such application, unless any such officer shall have consented in writing to any
earlier date) unless prior to taking any such action (or the effective date in
the case of an omission), the Trustee shall have received written instructions
in response to such application specifying the action to be taken or omitted.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Debentures upon
compliance with the conditions set forth below in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Debentures on
the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Debentures, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 hereof and the other Sections of this
Exchange Indenture referred to in (a) and (b) below, and to have satisfied all
its other obligations under such Debentures and this Exchange Indenture (and the
Exchange Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following provisions
which shall survive until otherwise terminated or discharged hereunder: (a) the
rights of Holders of outstanding Debentures to receive payments in respect of
the principal of, premium, if any, and interest and Liquidated Damages on such
Debentures when such payments are due from the trust referred to below, (b) the
Company's obligations with respect to the Debentures concerning issuing
temporary Debentures, registration of Debentures, mutilated, destroyed, lost or
stolen Debentures and the maintenance of an office or agency for payment and
money for security payments held in trust, (c) the rights, powers, trusts,
duties and immunities of the Exchange Trustee, and the Company's obligations in
connection therewith and (d) this Article 8. Subject to compliance with this
Article 8, the Company may
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exercise its option under this Section 8.02 notwithstanding the prior exercise
of its option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.14, 4.15, 4.16, and 5.01 hereof with respect to the outstanding
Debentures on and after the date the conditions set forth in Section 8.04 are
satisfied (hereinafter, "Covenant Defeasance"), and the Debentures shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Debentures shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding
Debentures, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 6.01 hereof,
but, except as specified above, the remainder of this Exchange Indenture and
such Debentures shall be unaffected thereby. In addition, upon the Company's
exercise under Section 8.01 hereof of the option applicable to this Section 8.03
hereof, subject to the satisfaction of the conditions set forth in Section 8.04
hereof, Sections 6.01(c) through 6.01(f) hereof shall not constitute Events of
Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Debentures:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Exchange Trustee, in
trust, for the benefit of the Holders, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such amounts as
shall be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
Liquidated Damages, if any, and interest on the outstanding Debentures on the
stated date for payment thereof or on the applicable redemption date, as the
case may be, and the Company must specify whether the Debentures are being
defeased to maturity or to a particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the Company shall
have delivered to the Exchange Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Exchange Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date hereof, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Debentures will not recognize income, gain or loss for federal
income tax purposes as a result of
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such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company shall
have delivered to the Exchange Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Exchange Trustee confirming that the Holders
of the outstanding Debentures will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred;
(d) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (other than a Default or Event of Default resulting
from the incurrence of Indebtedness all or a portion of the proceeds of which
will be used to defease the Debentures pursuant to this Article Eight
concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Exchange Indenture) to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound;
(f) the Company shall have delivered to the Exchange Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) the Company shall have delivered to the Exchange Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(h) the Company shall have delivered to the Exchange Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Exchange Trustee
(or other qualifying trustee, collectively for purposes of this Section 8.05,
the "Exchange Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Debentures shall be held in trust and applied by the Exchange
Trustee, in accordance with the provisions of such Debentures and this Exchange
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as Paying Agent) as the Exchange Trustee may
determine, to the Holders of such Debentures of all sums due and to become due
thereon in
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respect of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Exchange Trustee against any
tax, fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding
Debentures.
Anything in this Article Eight to the contrary notwithstanding, the
Exchange Trustee shall deliver or pay to the Company from time to time upon the
request of the Company any money or non-callable Government Securities held by
it as provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Exchange Trustee (which may be the
opinion delivered under Section 8.04(a) hereof), are in excess of the amount
thereof that would then be required to be deposited to effect an equivalent
Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Exchange Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
if any, or interest on any Debenture and remaining unclaimed for two years after
such principal, and premium, if any, or interest has become due and payable
shall be paid to the Company on its request or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Debenture shall
thereafter, as a secured creditor, look only to the Company for payment thereof,
and all liability of the Exchange Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Exchange Trustee or such Paying
Agent, before being required to make any such repayment, may at the expense of
the Company cause to be published once, in the New York Times and The Wall
Street Journal (national edition), notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such notification or publication, any unclaimed balance of such
money then remaining shall be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Exchange Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this Exchange
Indenture and the Debentures shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as
the Exchange Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 8.02 or 8.03 hereof, as the case may be; provided,
however, that, if the Company makes any payment of principal of, premium, if
any, or interest on any Debenture following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Debentures to receive such payment from the money held by the Exchange
Trustee or Paying Agent.
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ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF DEBENTURES.
Notwithstanding Section 9.02 of this Exchange Indenture, the Company
and the Exchange Trustee may amend or supplement this Exchange Indenture or the
Debentures without the consent of any Holder of a Debenture:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Debentures in addition to or in place of
certificated Debentures or to alter the provisions of Article 2 hereof
(including the related definitions) in a manner that does not materially
adversely affect any Holder;
(c) to provide for the assumption of the Company's obligations to the
Holders of the Debentures by a successor to the Company pursuant to Article 5
hereof;
(d) to make any change that would provide any additional rights or benefits
to the Holders of the Debentures or that does not adversely affect the legal
rights hereunder of any Holder of the Debenture; or
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Exchange Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Exchange Trustee of the documents described
in Section 7.02 hereof, the Exchange Trustee shall join with the Company in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Exchange Indenture and to make any further appropriate
agreements and stipulations that may be therein contained, but the Exchange
Trustee shall not be obligated to enter into such amended or supplemental
Indenture that affects its own rights, duties or immunities under this Exchange
Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF DEBENTURES.
Except as provided below in this Section 9.02, the Company and the
Exchange Trustee may amend or supplement this Exchange Indenture (including
Sections 3.09, 4.10 and 4.15 hereof) and the Debentures may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Debentures then outstanding voting as a single class (including
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Debentures), and, subject to Sections 6.04 and 6.07 hereof, any
existing Default or Event of Default (other than a Default or Event of Default
in the payment of the principal of, premium, if any, or interest on the
Debentures, except a payment default resulting from an acceleration that has
been rescinded) or compliance with any provision of this Exchange Indenture or
the Debentures may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Debentures voting as a single class
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, the Debentures). Section 2.08 hereof shall determine which
Debentures are considered to be "outstanding" for purposes of this Section 9.02.
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Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Exchange Trustee of evidence
satisfactory to the Exchange Trustee of the consent of the Holders of Debentures
as aforesaid, and upon receipt by the Exchange Trustee of the documents
described in Section 7.02 hereof, the Exchange Trustee shall join with the
Company in the execution of such amended or supplemental Indenture unless such
amended or supplemental Indenture directly affects the Exchange Trustee's own
rights, duties or immunities under this Exchange Indenture or otherwise, in
which case the Exchange Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Debentures
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Debentures affected thereby
a notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Debentures then outstanding voting
as a single class may waive compliance in a particular instance by the Company
with any provision of this Exchange Indenture or the Debentures. However,
without the consent of each Holder affected, an amendment or waiver under this
Section 9.02 may not (with respect to any Debentures held by a non-consenting
Holder):
(a) reduce the principal amount of Debentures whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Debenture
or alter or waive any of the provisions with respect to the redemption of the
Debentures, except as provided above with respect to Sections 3.09, 4.10 and
4.15 hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Debenture;
(d) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Debentures (except a rescission of
acceleration of the Debentures by the Holders of at least a majority in
aggregate principal amount of the then outstanding Debentures and a waiver of
the payment default that resulted from such acceleration);
(e) make any Debenture payable in money other than that stated in the
Debentures;
(f) make any change in the provisions of this Exchange Indenture relating
to waivers of past Defaults or the rights of Holders of Debentures to receive
payments of principal of, interest, or premium, if any, on the Debentures;
(g) waive a redemption payment with respect to any Debenture (other than a
payment required by Section 3.07 hereof);
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(h) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions; or
(i) amend this Section 9.02.
Without the consent of at least 662/3% in aggregate principal amount
of the Debentures then outstanding (including consents obtained in connection
with a tender offer or exchange offer for, or purchase of, such Debentures), no
waiver or amendment to this Exchange Indenture may make any change in the
provisions of Article 10 hereof that adversely affects the rights of any Holder
of Debentures.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Exchange Indenture or the
Debentures shall be set forth in an amended or supplemental Indenture that
complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Debenture is a continuing consent by the Holder of a
Debenture and every subsequent Holder of a Debenture or portion of a Debenture
that evidences the same debt as the consenting Holder's Debenture, even if
notation of the consent is not made on any Debenture. However, any such Holder
of a Debenture or subsequent Holder of a Debenture may revoke the consent as to
its Debenture if the Exchange Trustee receives written notice of revocation
before the date the waiver, supplement or amendment becomes effective. An
amendment, supplement or waiver becomes effective in accordance with its terms
and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF DEBENTURES.
The Exchange Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Debenture thereafter authenticated. The
Company in exchange for all Debentures may issue and the Exchange Trustee shall,
upon receipt of an Authentication Order, authenticate new Debentures that
reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Debenture
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. EXCHANGE TRUSTEE TO SIGN AMENDMENTS, ETC.
The Exchange Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Exchange
Trustee. The Company may not sign an amendment or supplemental Indenture until
the Board of Directors approves it. In executing any amended or supplemental
indenture, the Exchange Trustee shall be entitled to receive and (subject to
Section 7.01 hereof) shall be fully protected in relying upon, in addition to
the documents required by Section 11.04 hereof, an Officer's Certificate and an
Opinion of Counsel stating that the execution of such amended or supplemental
indenture is authorized or permitted by this Exchange Indenture.
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ARTICLE 10.
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Debenture agrees,
that the Indebtedness evidenced by the Debentures is subordinated in right of
payment, to the extent and in the manner provided in this Article 10, to the
prior payment in full of all Exchange Debenture Senior Indebtedness (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of the holders of
Exchange Debenture Senior Indebtedness.
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities:
(1) holders of Exchange Debenture Senior Indebtedness shall be entitled to
receive payment in full of all Obligations due in respect of such
Exchange Debenture Senior Indebtedness (including interest after the
commencement of any such proceeding at the rate specified in the
applicable Exchange Debenture Senior Indebtedness) before Holders of
the Debentures shall be entitled to receive any payment with respect
to the Debentures (except that Holders may receive (i) Permitted
Junior Securities and (ii) payments and other distributions made from
any defeasance trust created pursuant to Section 8.01 hereof); and
(2) until all Obligations with respect to Exchange Debenture Senior
Indebtedness (as provided in subsection (1) above) are paid in full,
any distribution to which Holders would be entitled but for this
Article 10 shall be made to holders of Exchange Debenture Senior
Indebtedness (except that Holders of Debentures may receive (i)
Permitted Junior Securities and (ii) payments and other distributions
made from any defeasance trust created pursuant to Section 8.01
hereof), as their interests may appear.
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS.
The Company may not make any payment or distribution to the Exchange
Trustee or any Holder in respect of Obligations with respect to the Debentures
and may not acquire from the Exchange Trustee or any Holder any Debentures for
cash or property (other than (i) Permitted Junior Securities and (ii) payments
and other distributions made from any defeasance trust created pursuant to
Section 8.01 hereof) until all principal and other Obligations with respect to
the Exchange Debenture Senior Indebtedness have been paid in full if:
(i) a default in the payment of any principal of, premium, if any, or
interest on Designated Exchange Debenture Senior Debt occurs and is continuing
beyond any applicable grace period in the agreement, indenture or other
document governing such Designated Exchange Debenture Senior Debt; or
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(ii) a default, other than a payment default, on Designated Exchange
Debenture Senior Debt occurs and is continuing that then permits holders of
the Designated Exchange Debenture Senior Debt to accelerate its maturity and
the Exchange Trustee receives a notice of such default (a "Payment Blockage
Notice") from the Company or the holders of any Designated Exchange Debenture
Senior Debt. If the Exchange Trustee receives any such Payment Blockage
Notice, no subsequent Payment Blockage Notice shall be effective for purposes
of this Section unless and until (i) at least 360 days shall have elapsed
since the effectiveness of the immediately prior Payment Blockage Notice and
(ii) all scheduled payments of principal, premium, if any, and interest on the
Debentures that have come due have been paid in full in cash. No nonpayment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Exchange Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions in
respect of the Debentures and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 10.03(ii) hereof, 179
days pass after notice is received if the maturity of such Designated
Exchange Debenture Senior Debt has not been accelerated, if this
Article 10 otherwise permits the payment, distribution or acquisition
at the time of such payment or acquisition.
SECTION 10.04. ACCELERATION OF SECURITIES.
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of Exchange Debenture Senior
Indebtedness of the acceleration.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Exchange Trustee or any Holder receives any
payment of any Obligations with respect to the Debentures at a time when the
Exchange Trustee or such Holder, as applicable, has actual knowledge that such
payment is prohibited by Section 10.03 hereof, such payment shall be held by the
Exchange Trustee or such Holder, in trust for the benefit of, and shall be paid
forthwith over and delivered, upon written request, to, the holders of Exchange
Debenture Senior Indebtedness as their interests may appear or their
Representative under the indenture or other agreement (if any) pursuant to which
Exchange Debenture Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to Exchange Debenture Senior Indebtedness remaining unpaid to the extent
necessary to pay such Obligations in full in accordance with their terms, after
giving effect to any concurrent payment or distribution to or for the holders of
Exchange Debenture Senior Indebtedness.
With respect to the holders of Exchange Debenture Senior Indebtedness,
the Exchange Trustee undertakes to perform only such obligations on the part of
the Exchange Trustee as are specifically set forth in this Article 10, and no
implied covenants or obligations with respect to the holders of Exchange
Debenture Senior Indebtedness shall be read into this Exchange Indenture against
the Exchange Trustee. The Exchange Trustee shall not be deemed to owe any
fiduciary duty to the holders of Exchange Debenture Senior Indebtedness, and
shall not be liable to any such holders if the Exchange Trustee shall pay over
or distribute to or on behalf of Holders or the Company or any other
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Person money or assets to which any holders of Exchange Debenture Senior
Indebtedness shall be entitled by virtue of this Article 10, except if such
payment is made as a result of the willful misconduct or gross negligence of the
Exchange Trustee.
SECTION 10.06. NOTICE BY COMPANY.
The Company shall promptly notify the Exchange Trustee and the Paying
Agent of any facts known to the Company that would cause a payment of any
Obligations with respect to the Debentures to violate this Article 10, but
failure to give such notice shall not affect the subordination of the Debentures
to the Exchange Debenture Senior Indebtedness as provided in this Article 10.
SECTION 10.07. SUBROGATION.
After all Exchange Debenture Senior Indebtedness is paid in full and
until the Debentures are paid in full, Holders of Debentures shall be subrogated
(equally and ratably with all other Indebtedness pari passu with the Debentures)
to the rights of holders of Exchange Debenture Senior Indebtedness to receive
distributions applicable to Exchange Debenture Senior Indebtedness to the extent
that distributions otherwise payable to the Holders of Debentures have been
applied to the payment of Exchange Debenture Senior Indebtedness. A distribution
made under this Article 10 to holders of Exchange Debenture Senior Indebtedness
that otherwise would have been made to Holders of Debentures is not, as between
the Company and Holders, a payment by the Company on the Debentures.
SECTION 10.08. RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of Debentures
and holders of Exchange Debenture Senior Indebtedness. Nothing in this Exchange
Indenture shall:
(1) impair, as between the Company and Holders of Debentures, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Debentures in accordance with their
terms;
(2) affect the relative rights of Holders of Debentures and creditors of
the Company other than their rights in relation to holders of Exchange
Debenture Senior Indebtedness; or
(3) prevent the Exchange Trustee or any Holder of Debentures from
exercising its available remedies upon a Default or Event of Default,
subject to the rights of holders and owners of Exchange Debenture
Senior Indebtedness to receive distributions and payments otherwise
payable to Holders of Debentures.
If the Company fails because of this Article 10 to pay principal of or
interest on a Debenture on the due date, the failure is still a Default or Event
of Default.
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Exchange Debenture Senior Indebtedness to
enforce the subordination of the Indebtedness evidenced by the Debentures shall
be impaired by any act or failure to act by the Company or any Holder or by the
failure of the Company or any Holder to comply with this Exchange Indenture.
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SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Exchange Debenture Senior Indebtedness, the distribution may be made and the
notice given to their Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Exchange Trustee and the Holders of Debentures shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the
Exchange Trustee or to the Holders of Debentures for the purpose of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Exchange Debenture Senior Indebtedness and other Indebtedness of the Company,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 10.
SECTION 10.11. RIGHTS OF EXCHANGE TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Exchange Indenture, the Exchange Trustee shall not be charged
with knowledge of the existence of any facts that would prohibit the making of
any payment or distribution by the Exchange Trustee, and the Exchange Trustee
and the Paying Agent may continue to make payments on the Debentures, unless the
Exchange Trustee shall have received at its Corporate Trust Office at least five
Business Days prior to the date of such payment written notice of facts that
would cause the payment of any Obligations with respect to the Debentures to
violate this Article 10. Only the Company or a Representative may give the
notice. Nothing in this Article 10 shall impair the claims of, or payments to,
the Exchange Trustee under or pursuant to Section 7.07 hereof.
The Exchange Trustee in its individual or any other capacity may hold
Exchange Debenture Senior Indebtedness with the same rights it would have if it
were not Exchange Trustee. Any Agent may do the same with like rights.
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Debentures, by the Holder's acceptance thereof,
authorizes and directs the Exchange Trustee on such Holder's behalf to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in this Article 10, and appoints the Exchange Trustee to act as such
Holder's attorney-in-fact for any and all such purposes. If the Exchange Trustee
does not file a proper proof of claim or proof of debt in the form required in
any proceeding referred to in Section 6.09 hereof at least 30 days before the
expiration of the time to file such claim, the Representatives of the Designated
Exchange Debenture Senior Debt are hereby authorized to file an appropriate
claim for and on behalf of the Holders of the Debentures.
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SECTION 10.13. AMENDMENTS.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Exchange Debenture Senior
Indebtedness. In addition, the provisions of Section 8.04(e) shall not be
amended without the consent of the holders (or a Representative of the holders)
of Designated Exchange Debenture Senior Indebtedness in a manner which would
permit the defeasance of the Debentures in violation of such Designated Exchange
Debenture Senior Indebtedness.
SECTION 10.14. CERTAIN DEFINITIONS
"Designated Exchange Debenture Senior Debt" means (i) any Indebtedness
outstanding under the Senior Credit Facility, (ii) any Indebtedness outstanding
under the Indenture, and (iii) any other Exchange Debenture Senior Indebtedness
permitted under this Exchange Indenture the principal amount of which is $25.0
million or more and that has been designated by the Company as "Designated
Exchange Debenture Senior Debt."
"Exchange Debenture Senior Indebtedness" means (i) all Indebtedness
outstanding under Credit Facilities and all Hedging Obligations with respect
thereto, (ii) all Indebtedness outstanding under the Notes and the Parity Notes,
(iii) any other Indebtedness permitted to be incurred by the Company or a
Restricted Subsidiary under the terms of the Exchange Indenture, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to the Exchange
Debentures and (iv) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
will not include (w) any liability for federal, state, local or other taxes owed
or owing by the Company, (x) any Indebtedness of the Company to any of its
Restricted Subsidiaries or other Affiliates, (y) any trade payables or (z) any
Indebtedness that is incurred in violation of the Exchange Indenture.
ARTICLE 11.
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Exchange Indenture limits, qualifies or
conflicts with the duties imposed by TIA ss. 318(c), the imposed duties shall
control.
SECTION 11.02. NOTICES.
Any notice or communication by the Company or the Exchange Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class, postage prepaid mail, telecopier or overnight air courier
guaranteeing next day delivery, to the others' address
If to the Company:
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier No.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
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With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3909
Telecopier No.: (212) 455-2502
Attention: Stephen J. Feder, Esq.
If to the Exchange Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Telecopier No.: (212) 815-5915
The Company or the Exchange Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA ss. 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Exchange Trustee and each Agent at the same time.
SECTION 11.03. COMMUNICATION BY HOLDERS OF DEBENTURES WITH OTHER HOLDERS OF
DEBENTURES.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Exchange Indenture or the Debentures.
The Company, the Exchange Trustee, the Registrar and anyone else shall have the
protection of TIA ss. 312(c).
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SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Exchange Trustee
to take any action under this Exchange Indenture, the Company shall furnish to
the Exchange Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Exchange Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of the signers,
all conditions precedent and covenants, if any, provided for in this
Exchange Indenture relating to the proposed action have been
satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Exchange Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of such counsel,
all such conditions precedent and covenants have been satisfied.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Exchange Indenture (other than a
certificate provided pursuant to TIA ss. 314(a)(4)) shall comply with the
provisions of TIA ss. 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
SECTION 11.06. RULES BY EXCHANGE TRUSTEE AND AGENTS.
The Exchange Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Debentures, this Exchange Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
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accepting a Debenture waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Debentures.
SECTION 11.08. GOVERNING LAW.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS EXCHANGE INDENTURE, THE DEBENTURES WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Exchange Indenture may not be used to interpret any other
indenture, loan or Indebtedness agreement of the Company or its Subsidiaries or
of any other Person. Any such indenture, loan or Indebtedness agreement may not
be used to interpret this Exchange Indenture.
SECTION 11.10. SUCCESSORS.
All agreements of the Company in this Exchange Indenture and the
Debentures shall bind its successors. All agreements of the Exchange Trustee in
this Exchange Indenture shall bind its successors.
SECTION 11.11. SEVERABILITY.
In case any provision in this Exchange Indenture or in the Debentures
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 11.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Exchange Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Exchange Indenture have been inserted for
convenience of reference only, are not to be considered a part of this Exchange
Indenture and shall in no way modify or restrict any of the terms or provisions
hereof.
[Signatures on following page]
76
<PAGE>
SIGNATURES
Dated as of _______, ____
CLUETT AMERICAN CORP.
BY:
--------------------------
Name:
Title:
THE BANK OF NEW YORK
BY:
--------------------------
Name:
Title:
77
<PAGE>
EXHIBIT A-1
(Face of Global Debenture)
==============================================================================
CUSIP/CINS___________________
12 1/2% Subordinated Exchange Debentures due 2010
No. __ $_____________
CLUETT AMERICAN CORP.
promises to pay to _______________, or registered assigns, the principal sum of
_____________________ Dollars on _______, 2010.
Interest Payment Dates: May 15 and November 15
Record Dates: May 1 and November 1
DATED:
CLUETT AMERICAN CORP.
BY: __________________________
Name:
Title:
Dated:_____________
This is one of the Global Debentures referred to in the within-mentioned
Indenture:
The Bank of New York,
as Trustee
By: _______________
Name:
==============================================================================
A1-1
<PAGE>
(Back of Debenture)
12 1/2% Subordinated Debentures due 2008
[Insert the Global Debenture legend, if applicable, pursuant to the provisions
of the Indenture]
[Insert the Private Placement legend, if applicable, pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Cluett American Corp., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Debenture
at 12 1/2% per annum from _______, ____ until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Preferred Stock
Registration Rights Agreement referred to below. The Company shall pay interest
and Liquidated Damages, if any, semi-annually on May 15 and November 15 of each
year, or if any such day is not a Business Day, on the next succeeding Business
Day (the "Interest Payment Date"). Interest will be paid in cash, except that on
each Interest Payment Date occurring prior to May 15, 2003, interest on the
Debentures may be paid, at the Company's option, by the issuance of additional
Debentures having an aggregate principal amount equal to the amount of such
interest. Interest on the Debentures will accrue from the most recent Interest
Payment Date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Debenture is authenticated between a record
date referred to on the face hereof and the next succeeding Interest Payment
Date, interest shall accrue from such next succeeding Interest Payment Date;
provided, further, that the first Interest Payment Date shall be _______, ____.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the rate
then in effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Debentures
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Debentures at the close of business on the May 1 or
November 1 next preceding the Interest Payment Date, even if such Debentures are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Debentures will be payable as to principal, premium and Liquidated
Damages, if any, and interest at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Liquidated Damages may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest, premium and
Liquidated Damages, if any, on, all Global Debentures and all other Debentures
the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts. However, Liquidated Damages, if any,
incurred prior to May 15, 2003, may be paid, at the Company's option, by the
issuance of additional Debentures having an aggregate principal amount equal to
the amount of such Liquidated Damages.
A1-1
<PAGE>
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Debentures under an Indenture
dated as of _______, ____ ("Exchange Indenture") between the Company and the
Trustee. The terms of the Debentures include those stated in the Exchange
Indenture and those made part of the Exchange Indenture by reference to the
Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The
Debentures are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of such terms. To the extent any
provision of this Debenture conflicts with the express provisions of the
Exchange Indenture, the provisions of the Exchange Indenture shall govern and be
controlling. The Debentures are general, unsecured obligations of the Company
limited to $92 million in aggregate principal amount, plus amounts, if any,
issued to pay Liquidated Damages on outstanding Debentures as set forth in
paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this paragraph 5, the Company
shall not have the option to redeem the Debentures pursuant to this paragraph 5
prior to May 15, 2003. Thereafter, the Company shall have the option to redeem
the Debentures, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on May 15 of the years indicated below:
Year Percentage
---- ----------
2003.............................................106.250%
2004.............................................105.000%
2005.............................................103.750%
2006.............................................102.500%
2007.............................................101.250%
2008 and thereafter..............................100.000%
(b) Notwithstanding the provisions of clause (a) of this paragraph 5, at
any time prior to May 13, 2001, the Company may on any one or more occasions
redeem the Debentures originally issued under this Exchange Indenture, in whole
or in part, at the redemption prices set forth below (expressed as percentages
of principal amount), in each case, together with accrued and unpaid interest
and Liquidated Damages thereon, if any, to the redemption date, with the net
cash proceeds of one or more Equity Offerings if redeemed during the 12-month
period commencing on May 15 of each of the years set forth below:.
1998.............................................108.000%
1999.............................................110.000%
2000.............................................112.000%
A1-2
<PAGE>
In the event of a redemption pursuant to Section 3.07(b) of the
Indenture and paragraph 5 hereof (except in the case of a redemption of all the
Debentures), at least $25.0 million in aggregate principal amount of Debentures
shall remain outstanding immediately after the occurrence of such redemption
(excluding Debentures held by the Company and its Subsidiaries) and any such
redemption shall occur within 45 days of the date of the closing of such Equity
Offering.
At any time prior to May 15, 2003, the Debentures may also be
redeemed, as a whole but not in part, at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days'
prior notice (but in no event may any such redemption occur more than 90 days
after the occurrence of such Change of Control) mailed by first-class mail to
each Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof and the interest rate in effect with respect to the
Debentures as of, and accrued and unpaid interest and Liquidated Damages, if
any, to, the date of redemption.
(c) Any redemption pursuant to this paragraph 5 shall be made
pursuant to the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the
Company shall not be required to make mandatory redemption payments with respect
to the Debentures.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of
Debentures will have the right to require the Company to repurchase all or any
part (equal to $100 or an integral multiple thereof) of such Holder's Debentures
pursuant to the offer described in Section 4.14 of the Indenture (the "Change of
Control Offer") at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase (the "Change of Control Payment").
Within 30 days following any Change of Control, the Company shall mail a notice
to each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase the Debentures on the date
specified in such notice, which date shall be no earlier than 30 days and no
later than 60 days from the date such notice is mailed (the "Change of Control
Payment Date"), pursuant to the procedures required by the Indenture and
described in such notice.
(b) Within 360 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to
permanently repay Exchange Debenture Senior Indebtedness or Indebtedness of a
Restricted Subsidiary, or (b) to acquire all or substantially all of the assets
of, or a majority of the Voting Stock of, another Permitted Business, (c) to
make a capital expenditure or (d) to acquire other long-term assets that are
used or useful in a Permitted Business. Pending the final application of any
such Net Proceeds, the Company may temporarily reduce revolving credit
borrowings or otherwise invest such Net Proceeds in any manner that is not
prohibited by the Exchange Indenture. Any Net Proceeds from Asset Sales that are
not applied or invested as provided in the first sentence of this paragraph will
be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $10.0 million, the Company will be required to make an offer to
all Holders of Debentures and all holders of other Indebtedness that is pari
passu with the Debentures containing provisions similar to those set forth in
the Exchange Indenture with respect to offers to purchase or redeem with the
proceeds of sales of assets (an "Asset Sale Offer") to purchase the maximum
principal amount of Debentures and such other pari passu Indebtedness that may
be purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated
A1-3
<PAGE>
Damages thereon, if any, to the date of purchase, in accordance with the
procedures set forth in the Exchange Indenture and such other pari passu
Indebtedness. Holders of Debentures that are the subject of an offer to purchase
may elect to have such Debentures purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Debentures. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Debentures are to be redeemed at its registered address. Debentures in
denominations larger than $1000 may be redeemed in part but only in whole
multiples of $1000, unless all of the Debentures held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on
Debentures or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Debentures are in
registered form without coupons. The transfer of Debentures may be registered
and Debentures may be exchanged as provided in the Indenture. The Registrar and
the Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Holder to pay
any taxes and fees required by law or permitted by the Indenture. The Company
need not exchange or register the transfer of any Debenture or portion of a
Debenture selected for redemption, except for the unredeemed portion of any
Debenture being redeemed in part. Also, the Company need not exchange or
register the transfer of any Debentures for a period of 15 days before a
selection of Debentures to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. SUBORDINATION. Each Holder by accepting a Debenture agrees that
the payment of principal of and premium, interest and Liquidated Damages, if
any, on each Debenture is subordinated in right of payment, to the extent and in
the manner provided in Article 10 of the Indenture, prior to the payment in full
of all Exchange Debenture Senior Indebtedness of the Company (whether
outstanding on the date of the Exchange Indenture or thereafter incurred assumed
or guaranteed), and the subordination is for the benefit of the holders of such
Exchange Debenture Senior Indebtedness.
11. PERSONS DEEMED OWNERS. The registered Holder of a Debenture may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Exchange Indenture or the Debentures may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Debentures and any existing default or compliance with any provision
of the Exchange Indenture or the Debentures may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding
Debentures. Without the consent of any Holder of a Debenture, the Exchange
Indenture or the Debentures may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Debentures in
addition to or in place of certificated Debentures, to provide for the
assumption of the Company's obligations to Holders of the Debentures in case of
a merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of the Debentures or that does not adversely
affect the legal rights under the Exchange Indenture of any such Holder, to
comply with the requirements of the Commission in order to effect or maintain
the qualification of the Exchange Indenture under the Trust Indenture Act, or to
provide for the Issuance of Additional Debentures in accordance with the
limitations set forth in the Exchange Indenture.
A1-4
<PAGE>
13. DEFAULTS AND REMEDIES. An Event of Default occurs if: (i) the
Company defaults in the payment when due of interest on, or Liquidated Damages
with respect to, the Debentures (whether or not permitted by the subordination
provisions of this Exchange Indenture) and such default continues for a period
of 30 days; (ii) the Company defaults in the payment when due of principal of or
premium, if any, on the Debentures when the same becomes due and payable at
maturity, upon redemption (including in connection with an offer to purchase) or
otherwise (whether or not permitted by the subordination provisions of this
Exchange Indenture); (iii) the Company or any of its Restricted Subsidiaries
fails to comply with the provisions of Section 5.01 of the Exchange Indenture;
(iv) the Company or any of its Restricted Subsidiaries fails to observe or
perform any other covenant, representation, warranty or other agreement in this
Exchange Indenture or the Exchange Debentures for 60 days after notice to the
Company by the Exchange Trustee or the Holders of at least 25% in aggregate
principal amount of the Exchange Debentures then outstanding voting as a single
class; (v) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date hereof, which default (a) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness prior to
the expiration of the grace period provided in such Indebtedness on the date of
such default (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $7.5 million or more; (vi) a final
judgment or final judgments for the payment of money are entered by a court or
courts of competent jurisdiction against the Company or any of its Restricted
Subsidiaries and such judgment or judgments remain undischarged for a period
(during which execution shall not be effectively stayed) of 60 days, provided
that the aggregate of all such undischarged judgments exceeds $5.0 million; and
(vii) certain events of bankruptcy or insolvency as described in the Exchange
Indenture.
If any Event of Default (other than certain events of bankruptcy or
insolvency) with respect to the Company, any Significant Subsidiary or any group
of Significant Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary, occurs and is continuing, the Exchange Trustee or the
Holders of at least 25% in aggregate principal amount of the then outstanding
Debentures may declare all the Debentures to be due and payable immediately.
Upon any such declaration, the Debentures shall become due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency with respect to the
Company, any of its Significant Subsidiary or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary, all outstanding
Debentures shall be due and payable immediately without further action or
notice. The Holders of a majority in aggregate principal amount of the then
outstanding Debentures by written notice to the Exchange Trustee may on behalf
of all of the Holders rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium that has
become due solely because of the acceleration) have been cured or waived. The
Company is required to deliver to the Trustee annually a statement regarding
compliance with the Exchange Indenture, and the Company is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
A1-5
<PAGE>
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Debentures or the
Exchange Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder by accepting a Debenture waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Debentures.
16. AUTHENTICATION. This Debenture shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL DEBENTURES AND
RESTRICTED DEFINITIVE DEBENTURES. In addition to the rights provided to Holders
of Debentures under the Exchange Indenture, Holders of Restricted Global
Debentures and Restricted Definitive Debentures shall have all the rights set
forth in the Preferred Stock Registration Rights Agreement dated as of May 18,
1998, between the Company and the parties named on the signature pages thereof
(the "Preferred Stock Registration Rights Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Debentures and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Debentures
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Preferred Stock Registration
Rights Agreement. Requests may be made to:
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier No.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
A1-6
<PAGE>
ASSIGNMENT FORM
To assign this Debenture, fill in the form below: (I) or (we) assign and
transfer this Debenture to (Insert assignee's soc. sec. or tax I.D. no.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Debenture on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature: ________________________________________
(Sign exactly as your name appears on the Debenture)
Tax Identification No: _________________________________
Signature Guarantee.
A1-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Debenture purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Debenture purchased by
the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $________
Date: Your Signature: ________________________________________
(Sign exactly as your name appears
on the Debenture)
Tax Identification No:__________________________________
Signature Guarantee.
A1-8
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL DEBENTURE(1)
The following exchanges of a part of this Global Debenture for an
interest in another Global Debenture or for a Definitive Debenture, or exchanges
of a part of another Global Debenture or Definitive Debenture for an interest in
this Global Debenture, have been made:
Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global authorized
Principal Principal Debenture signatory of
Amount Amount following Trustee or
Date of of this of this such decrease Debenture
Exchange Global Debenture Global Debenture (or increase) Custodian
- ----------
(1) This should be included only if the Note is issued in global form.
A1-9
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier No.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Telecopier No.: (212) 815-5915
Re: 12 1/2% Subordinated Exchange Debentures Due 2010
Reference is hereby made to the Indenture, dated as of _______, ____
(the "Indenture"), between Cluett American Corp. (the "Company"), as issuer, and
The Bank of New York, as trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Debenture[s] or interest in such Debenture[s] specified in Annex A hereto, in
the principal amount of $___________ in such Debenture[s] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex A
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] Check if Transferee will take delivery of a beneficial
interest in the 144A Global Debenture or a Definitive Debenture Pursuant to Rule
144A. The Transfer is being effected pursuant to and in accordance with Rule
144A under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further certifies that the
beneficial interest or Definitive Debenture is being transferred to a Person
that the Transferor reasonably believed and believes is purchasing the
beneficial interest or Definitive Debenture for its own account, or for one or
more accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified institutional
buyer" within the meaning of Rule 144A in a transaction meeting the requirements
of Rule 144A and such Transfer is in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Debenture will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the 144A
Global Debenture and/or the Definitive Debenture and in the Indenture and the
Securities Act.
<PAGE>
2. [ ] Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Debenture or a Definitive Debenture pursuant to any
provision of the Securities Act other than Rule 144A or Regulation S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Debentures and
Restricted Definitive Debentures and pursuant to and in accordance with the
Securities Act and any applicable blue sky securities laws of any state of the
United States, and accordingly the Transferor hereby further certifies that
(check one):
(a) such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
(b) such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) such Transfer is being effected pursuant to an effective registration
statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or
Rule 904, and the Transferor hereby further certifies that it has not
engaged in any general solicitation within the meaning of Regulation D
under the Securities Act and the Transfer complies with the transfer
restrictions applicable to beneficial interests in a Restricted Global
Debenture or Restricted Definitive Debentures and the requirements of
the exemption claimed, which certification is supported by (1) a
certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) if such Transfer is in respect of a principal amount
of Debentures at the time of transfer of less than $250,000, an
Opinion of Counsel provided by the Transferor or the Transferee (a
copy of which the Transferor has attached to this certification), to
the effect that such Transfer is in compliance with the Securities
Act. Upon consummation of the proposed transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or
Definitive Debenture will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the IAI Global
Debenture and/or the Definitive Debentures and in the Indenture and
the Securities Act.
3. [ ] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Debenture or of an Unrestricted Definitive Debenture.
(a) [ ] Check if Transfer is pursuant to Rule 144. (i)
The Transfer is being effected pursuant to and in accordance with Rule 144 under
the Securities Act and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any state of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Debenture will no longer be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the Restricted
Global Debentures, on Restricted Definitive Debentures and in the Indenture.
B-2
<PAGE>
(b) [ ] Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Debenture will not be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Global Debentures or Restricted Definitive Debentures and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
______________________________________
[Insert Name of Transferor]
BY:___________________________________
Name:
Title:
Dated:_________, ____
B-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Debenture (CUSIP____); or
(b) [ ] a Restricted Definitive Debenture.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Debenture (CUSIP____), or
(ii) [ ] Unrestricted Global Debenture (CUSIP____); or
(b) [ ] a Restricted Definitive Debenture; or
(c) [ ] an Unrestricted Definitive Debenture, in accordance with the terms
of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier No.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Telecopier No.: (212) 815-5915
Re: 12 1/2% Subordinated Exchange Debentures Due 2010
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of _______, ____
(the "Indenture"), between Cluett American Corp. (the "Company"), as issuer, and
The Bank of New York, as trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the
Debenture[s] or interest in such Debenture[s] specified herein, in the principal
amount of $____________ in such Debenture[s] or interests (the "Exchange"). In
connection with the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Debentures or Beneficial
Interests in a Restricted Global Debenture for Unrestricted Definitive
Debentures or Beneficial Interests in an Unrestricted Global Debenture
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Debenture to beneficial interest in an Unrestricted Global Debenture. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Debenture for a beneficial interest in an Unrestricted Global Debenture
in an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Global Debentures and pursuant to and in accordance with the
United States Securities Act of 1933, as amended (the "Securities Act"), (iii)
the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest in an Unrestricted Global
Debenture is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
<PAGE>
(b) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Debenture to Unrestricted Definitive Debenture. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Debenture for
an Unrestricted Definitive Debenture, the Owner hereby certifies (i) the
Definitive Debenture is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Debentures and pursuant to and
in accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the Definitive
Debenture is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
(c) [ ] Check if Exchange is from Restricted Definitive Debenture to
beneficial interest in an Unrestricted Global Debenture. In connection with the
Owner's Exchange of a Restricted Definitive Debenture for a beneficial interest
in an Unrestricted Global Debenture, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to Restricted Definitive Debentures and pursuant to and
in accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(d) [ ] Check if Exchange is from Restricted Definitive Debenture to
Unrestricted Definitive Debenture. In connection with the Owner's Exchange of a
Restricted Definitive Debenture for an Unrestricted Definitive Debenture, the
Owner hereby certifies (i) the Unrestricted Definitive Debenture is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Definitive Debentures and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Unrestricted Definitive
Debenture is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
2. Exchange of Restricted Definitive Debentures or Beneficial Interests in
Restricted Global Debentures for Restricted Definitive Debentures or Beneficial
Interests in Restricted Global Debentures
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Debenture to Restricted Definitive Debenture. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Debenture for
a Restricted Definitive Debenture with an equal principal amount, the Owner
hereby certifies that the Restricted Definitive Debenture is being acquired for
the Owner's own account without transfer. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the Restricted
Definitive Debenture issued will continue to be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Definitive Debenture and in the Indenture and the Securities Act.
(b) [ ] Check if Exchange is from Restricted Definitive Debenture to
beneficial interest in a Restricted Global Debenture. In connection with the
Exchange of the Owner's Restricted Definitive Debenture for a beneficial
interest in the "144A Global Debenture" with an equal principal amount, the
Owner hereby certifies (i) the beneficial interest is being acquired for the
Owner's own
C-2
<PAGE>
account without transfer and (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to the Restricted Global Debentures
and pursuant to and in accordance with the Securities Act, and in compliance
with any applicable blue sky securities laws of any state of the United States.
Upon consummation of the proposed Exchange in accordance with the terms of the
Indenture, the beneficial interest issued will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the relevant
Restricted Global Debenture and in the Indenture and the Securities Act
C-3
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
_____________________________________
[Insert Name of Owner]
BY:__________________________________
Name:
Title:
Dated:__________, ____
C-4
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier No.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Telecopier No.: (212) 815-5915
Re: 12 1/2% Subordinated Exchange Debentures Due 2010
Reference is hereby made to the Indenture, dated as of _______, ____ (the
"Indenture"), between Cluett American Corp. (the "Company"), as issuer, and The
Bank of New York, as trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) [ ] a beneficial interest in a Global Debenture, or
(b) [ ] a Definitive Debenture,
we confirm that:
1. We understand that any subsequent transfer of the Debentures or any
interest therein is subject to certain restrictions and conditions set
forth in the Indenture and the undersigned agrees to be bound by, and not
to resell, pledge or otherwise transfer the Debentures or any interest
therein except in compliance with, such restrictions and conditions and
the United States Securities Act of 1933, as amended (the "Securities
Act").
2. We understand that the offer and sale of the Debentures have not been
registered under the Securities Act, and that the Debentures and any
interest therein may not be offered or sold except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any
accounts for which we are acting as hereinafter stated, that if we should
sell the Debentures or any interest therein, we will do so only (A) to the
Company or any subsidiary thereof, (B) in accordance with Rule 144A under
the Securities Act to a "qualified institutional buyer" (as defined
therein), (C) to an institutional "accredited investor" (as defined below)
that, prior to such transfer, furnishes (or has furnished on its behalf by
a U.S. broker-dealer) to you and to the
D-1
<PAGE>
Company a signed letter substantially in the form of this letter and, if
such transfer is in respect of a principal amount of Debentures, at the
time of transfer of less than $250,000, an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such transfer is
in compliance with the Securities Act, (D) pursuant to the provisions of
Rule 144(k) under the Securities Act or (E) pursuant to an effective
registration statement under the Securities Act, and we further agree to
provide to any person purchasing the Definitive Debenture or beneficial
interest in a Global Debenture from us in a transaction meeting the
requirements of clauses (A) through (D) of this paragraph a notice
advising such purchaser that resales thereof are restricted as stated
herein.
3. We understand that, on any proposed resale of the Debentures or beneficial
interest therein, we will be required to furnish to you and the Company
such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies
with the foregoing restrictions. We further understand that the Debentures
purchased by us will bear a legend to the foregoing effect. We further
understand that any subsequent transfer by us of the Debentures or
beneficial interest therein acquired by us must be effected through one of
the Placement Agents.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Debentures, and we and any accounts for which we are acting are each able
to bear the economic risk of our or its investment.
5. We are acquiring the Debentures or beneficial interest therein purchased
by us for our own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby.
---------------------------------------
[Insert Name of Accredited Investor]
By:____________________________________
Name:
Title:
Dated: __________________, ____
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
Title: Director, President and
Chief Executive Officer
By: /s/ Mary La Gunna
-------------------------------------
Name: Mary La Gunna
Title: Assistant Vice President
D-2
<PAGE>
Exhibit 4.3
CLUETT AMERICAN CORP.
121/2% SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2010
CERTIFICATE OF DESIGNATIONS
-----------------------
Pursuant to Section 151
of the General Law of the State of Delaware
-----------------------
Cluett American Corp. (the "Company"), a corporation organized and
existing under the General Corporation Law of the State of Delaware, does hereby
certify that
(a) Pursuant to the provisions of Sections 151, 242 and 303 of the
General Corporation Law of the State of Delaware, and by Order, dated March 31,
1998 (the "Confirmation Order"), of the United States Bankruptcy Court for the
Southern District of New York in Jointly Administered Case Nos. 95 B 43098
through 43099 and 43101 through 43114 (TLB) confirming the Third Amended Joint
Plan of Reorganization dated March 30, 1998 of the Company and certain of its
affiliates (the "Plan"), the Company is authorized and directed to execute such
documents and take, or cause to be taken, any and all actions required to enable
the effective implementation of the Plan and the Confirmation Order;
(b) The Confirmation Order authorizes and Section 6.4(a) of the Plan
contemplates the filing of this Certificate of Designations of 12 1/2% Senior
Exchangeable Preferred Stock Due 2010 of the Company in order to effectuate such
Plan provisions; and
(c) Accordingly, there is hereby authorized (i) 500,000 shares of 12
1/2% Senior Exchangeable Preferred Stock Due 2010 (the "144A Exchangeable
Preferred Stock"), par value $0.01 per share, with a liquidation preference of
$100 per share on the terms and with the provisions set forth herein and (ii)
500,000 shares of 12 1/2% Senior Exchangeable Preferred Stock Due 2010 (the
"Public Exchangeable Preferred Stock" and, together with the 144A Exchangeable
Preferred Stock, the "Exchangeable Preferred Stock"), par value $0.01 per share,
with a liquidation preference of $100 per share to be issued upon the exchange
of the 144A Exchangeable Preferred Stock pursuant to the Preferred Stock
Registration Rights Agreement, on the terms and with the provisions set forth
herein.
1. Certain Definitions. Unless the context otherwise requires, the terms
defined in this Section 1 shall have, for all purposes of this resolution, the
meanings herein specified (with terms defined in the singular having comparable
meanings when used in the plural).
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or
<PAGE>
indirectly, of the power to direct or cause the direction of the management or
policies of such Person, whether through the ownership of voting securities, by
agreement or otherwise; provided that beneficial ownership of 10% or more of the
Voting Stock of a Person shall be deemed to be control.
"Asset Acquisition" means (i) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Subsidiary of the Company or any Subsidiary of the
Company, or shall be merged with or into the Company or any Restricted
Subsidiary of the Company or (ii) the acquisition by the Company or any
Restricted Subsidiary of the Company of the assets of any Person which
constitute all or substantially all of the assets of such Person, any division
or line of business of such Person or any other properties or assets of such
Person other than in the ordinary course of business.
"Asset Sale" means (i) the sale, lease, conveyance or other disposition of
any assets or rights (including, without limitation, by way of a sale and
leaseback) other than sales of inventory in the ordinary course of business
consistent with past practices (provided that the sale, lease (other than an
operating lease), conveyance or other disposition of all or substantially all of
the assets of the Company and its Restricted Subsidiaries taken as a whole will
be governed by Section 15 and not by the provisions of Section 10 of this
Certificate of Designations, and (ii) the issue by any Restricted Subsidiaries
of the Company of any Equity Interests of such Restricted Subsidiary and the
sale by the Company or any of its Restricted Subsidiaries of Equity Interests of
any of the Company's Subsidiaries, in the case of either clause (i) or (ii),
whether in a single transaction or a series of related transactions (a) that
have a fair market value in excess of $1.0 million or (b) for net proceeds in
excess of $1.0 million. Notwithstanding the foregoing, the following items shall
not be deemed to be Asset Sales: (i) a transfer of assets by the Company to a
Wholly Owned Restricted Subsidiary or by a Wholly Owned Restricted Subsidiary to
the Company or to another Wholly Owned Restricted Subsidiary, (ii) an issuance
of Equity Interests by a Wholly Owned Restricted Subsidiary to the Company or to
another Wholly Owned Restricted Subsidiary, (iii) a Restricted Payment that is
permitted by Section 12 hereof, (iv) a disposition of Cash Equivalents or
obsolete equipment in the ordinary course of business or inventory or goods held
for sale in the ordinary course of business, and (v) the sale of accounts
receivable, or participations therein, in connection with any Qualified
Receivables Transaction.
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other day in the
City of New York on which banks are authorized or ordered to close.
"Canadian Credit Facility" means the Loan Agreement, added as of August 8,
1997, between Cluett Peabody Canada Inc. and Congress Financial Corporation
(Canada). The term "Canadian Credit Facility" shall include any amendment,
amendment and restatement, renewal, extension, restructuring, supplement or
modification to any the Canadian Credit Facility and all refundings,
refinancings and replacements of the Canadian Credit Facility, including any
agreement (i) extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (ii) adding or deleting borrowers or guarantors
thereunder, so long as the borrowers and issuers thereunder include one or more
of the Company and its Subsidiaries and their respective successors and assigns,
or (iii) increasing the amount of Indebtedness incurred thereunder or available
to be borrowed thereunder.
2
<PAGE>
"Capital Lease Obligation" means, at the time any determination thereof is
to be made, the amount of the liability in respect of a capital lease that would
at such time be required to be capitalized on a balance sheet in accordance with
GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate stock,
(ii) in the case of an association or business entity, any and all shares,
interests, participations, rights or other equivalents (however designated) of
corporate stock, (iii) in the case of a partnership or limited liability
company, partnership or membership interests (whether general or limited) and
(iv) any other interest or participation that confers on a Person the right to
receive a share of the profits and losses of, or distributions of assets of, the
issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii) securities issued
or directly and fully guaranteed or insured by the United States government or
any agency or instrumentality thereof (provided that the full faith and credit
of the United States is pledged in support thereof) having maturities of not
more than six months from the date of acquisition, (iii) certificates of deposit
and eurodollar time deposits with maturities of six months or less from the date
of acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any domestic commercial bank
having capital and surplus in excess of $500 million and a Thompson Bank Watch
Rating of "B" or better, (iv) repurchase obligations with a term of not more
than seven days for underlying securities of the types described in clauses (ii)
and (iii) above entered into with any financial institution meeting the
qualifications specified in clause (iii) above, (v) commercial paper having the
highest rating obtainable from Moody's Investors Service, Inc. or Standard &
Poor's Corporation and in each case maturing within six months after the date of
acquisition and (vi) money market funds at least 95% of the assets of which
constitute Cash Equivalents of the kinds described in clauses (i)-(v) of this
definition.
"Change of Control" means the occurrence of any of the following: (i) the
sale, lease, transfer, conveyance or other disposition (other than by way of
merger or consolidation), in one or a series of related transactions, of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole to any "person" (as such term is used in Section 13(d)(3) of
the Exchange Act) other than a Principal or a Related Party of a Principal (as
defined below), (ii) the adoption of a plan relating to the liquidation or
dissolution of the Company, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" (as defined above), other than the Principals and their
Related Parties, becomes the "beneficial owner" (as such term is defined in Rule
13d-3 and Rule 13d-5 under the Exchange Act, except that in calculating the
beneficial ownership of any particular "person," such "person" shall be deemed
to have beneficial ownership of all securities that such person has the right to
acquire, whether such right is currently exercisable or is exercisable only upon
the occurrence of a subsequent condition), directly or indirectly, of more than
50% of the Voting Stock of the Company (measured by voting power rather than
number of shares), (iv) the first day on which a majority of the members of the
Board of Directors of the Company are not Continuing Directors or (v) the
Company consolidates with, or merges with or into, any Person, or any Person
consolidates with, or merges with or into, the Company, in any such event
pursuant to a transaction in which any of the outstanding Voting Stock of the
Company is converted into or exchanged for cash, securities or other property,
other than any such transaction where the Voting Stock of the Company
outstanding immediately prior to such transaction is converted into or exchanged
for Voting Stock (other than Disqualified Stock) of the surviving or transferee
Person constituting a majority of the outstanding shares of such Voting Stock of
such surviving or transferee Person (immediately after giving effect to such
issuance). For purposes of this definition, any transfer of an equity interest
of an entity that was formed for the purpose of acquiring Voting Stock of the
3
<PAGE>
Company will be deemed to be a transfer of such portion of such Voting Stock as
corresponds to the portion of the equity of such entity that has been so
transferred.
"Common Stock" means the Common Stock, $.01 par value, of the Company and
any other class of common stock issued by the Company from time to time.
"Company" means Cluett American Corp.
"Consolidated Cash Flow" means, with respect to any Person for any period,
the Consolidated Net Income of such Person for such period plus (i) an amount
equal to any extraordinary loss plus any net loss realized in connection with an
Asset Sale, to the extent such losses were deducted in computing such
Consolidated Net Income, plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was deducted in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period (other than items that were accrued in
the ordinary course of business) plus (vi) Reorganization Charges of such Person
and its Restricted Subsidiaries for such period to the extent that such
Reorganization Charges were deducted in computing such Consolidated Net Income,
in each case, determined on a consolidated basis and determined in accordance
with GAAP. Notwithstanding the foregoing, the provision for taxes on the income
or profits of, and the depreciation and amortization and other non-cash expenses
of, a Subsidiary of the Company shall be added to Consolidated Net Income to
compute Consolidated Cash Flow of the Company only to the extent that a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior governmental approval
(that has not been obtained), and without direct or indirect restriction
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof; provided that the amount of such dividends or distributions includable
in Consolidated Net Income shall be limited to the Company's direct and indirect
Equity Interests in such Restricted Subsidiary, (ii) the Net Income of any
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that Net
Income is not
4
<PAGE>
at the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Subsidiary or its
stockholders, (iii) the Net Income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition shall
be excluded, and (iv) the cumulative effect of a change in accounting principles
shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any date,
the sum of (i) the consolidated equity of the common stockholders of such Person
and its consolidated Subsidiaries as of such date plus (ii) the respective
amounts reported on such Person's balance sheet as of such date with respect to
any series of preferred stock (other than Disqualified Stock) that by its terms
is not entitled to the payment of dividends unless such dividends may be
declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the Issue Date in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any member
of the Board of Directors of the Company who (i) was a member of such Board of
Directors on the Issue Date or (ii) was nominated for election or elected to
such Board of Directors with the approval of a majority of the Continuing
Directors who were members of such Board at the time of such nomination or
election.
"Credit Facilities" means, with respect to the Company, one or more debt
facilities (including, without limitation, the Senior Credit Facility) or
commercial paper facilities, in each case with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time. Indebtedness under
Credit Facilities and the Canadian Credit Facility outstanding on the Issue Date
shall be deemed to have been incurred on such date in reliance on the exception
provided by clauses (i) and (ii), respectively, of the definition of Permitted
Debt.
"Designated Exchange Debenture Senior Debt" means (i) any Indebtedness
outstanding under the Senior Credit Facility, (ii) any Indebtedness outstanding
under the Indenture and (iii) any other Exchange Debenture Senior Indebtedness
permitted under the Exchange Indenture the principal amount of which is $25.0
million or more and that has been designated by the Company as "Designated
Exchange Debenture Senior Debt."
"Disqualified Stock" means any Capital Stock that, by its terms (or by the
terms of any security into which it is convertible, or for which it is
exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Exchangeable Preferred Stock matures; provided, however, that
any Capital Stock that would constitute Disqualified Stock solely because the
holders thereof
5
<PAGE>
have the right to require the Company to repurchase such Capital Stock upon the
occurrence of a Change of Control or an Asset Sale shall not constitute
Disqualified Stock if the terms of such Capital Stock provide that the Company
may not repurchase or redeem any such Capital Stock pursuant to such provisions
unless such repurchase or redemption complies with Section 12 hereof.
"Dividend Payment Date" means May 15 and November 15 of each year.
"Equity Interests" means Capital Stock and all warrants, options or other
rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an offering of common stock (other than
Disqualified Stock) of the Company or any direct or indirect parent corporation
of the Company (a "Parent Corporation"), other than an offering pursuant to Form
S-8 (or any successor thereto) and other than common stock issued pursuant to
employee benefit plans or as compensation to employees, provided, that in the
case of an Equity Offering by a Parent Corporation, such Parent Corporation
contributes to the common equity of the Company the portion of the net cash
proceeds thereof necessary to pay the aggregate redemption price of the
Exchangeable Preferred Stock or Exchange Debentures, as the case may be, to be
redeemed in connection therewith.
"Exchange Act" means the Securities Exchange Act of 1934, as amended, and
the rules and regulations promulgated thereunder.
"Exchange Date" means the date on which the shares of Preferred Stock are
exchanged for the Exchange Debentures by the Company.
"Exchange Debentures" means the Company's 121/2% Subordinated Exchange
Debentures Due 2010, for which the Exchangeable Preferred may be exchanged in
accordance with Section 6 hereof.
"Exchange Indenture" means the Exchange Indenture between the Company and
the Exchange Trustee, governing the Company's 121/2% Subordinated Exchange
Debentures Due 2010, in the form attached as Exhibit A.
"Exchange Trustee" means the trustee under the Exchange Indenture.
"Exchangeable Preferred Stock" shall mean the Senior Exchangeable
Preferred Stock, par value $.01 per share, of the Company.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the Senior Credit
Facility) in existence on the Issue Date, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period, the sum,
without duplication, of (i) the consolidated interest expense of such Person and
its Restricted Subsidiaries for such period, whether paid or accrued (including,
without limitation, amortization of debt issuance costs and original issue
discount, non-cash interest payments, the interest component of any deferred
payment obligations, the interest component of all payments associated with
Capital Lease Obligations, commissions, discounts and other fees and charges
incurred in respect of letter of credit or bankers' acceptance financings, and
net payments (if any) pursuant to Hedging Obligations) and (ii) the consolidated
interest of such Person and its
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Restricted Subsidiaries that was capitalized during such period, and (iii) any
interest expense on Indebtedness of another Person that is Guaranteed by such
Person or one of its Restricted Subsidiaries or secured by a Lien on assets of
such Person or one of its Restricted Subsidiaries (whether or not such Guarantee
or Lien is called upon) and (iv) the product of (a) all dividend payments,
whether or not in cash, on any series of preferred stock of such Person or any
of its Restricted Subsidiaries, other than dividend payments on Equity Interests
payable solely in Equity Interests of the Company (other than Disqualified
Stock) or to the Company or a Restricted Subsidiary of the Company, times (b) a
fraction, the numerator of which is one and the denominator of which is one
minus the then current combined federal, state and local statutory tax rate of
such Person, expressed as a decimal, in each case, on a consolidated basis and
in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for any
period, the ratio of the Consolidated Cash Flow of such Person for such period
to the Fixed Charges of such Person for such period. In the event that the
referent Person or any of its Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income (adjusting for, in the case of an Asset
Acquisition or merger or consolidation permitted by Section 15 hereof any
operating expense or cost reduction of such Person or the Person to be acquired
which, in the good faith estimate of management, will be eliminated or realized,
as the case may be, as a result of such Asset Acquisition, merger or
consolidation) and (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as have been approved by a significant segment of the accounting
profession, which are in effect from time to time.
"Guarantee" means a guarantee (other than by endorsement of negotiable
instruments for collection in the ordinary course of business), direct or
indirect, in any manner (including, without limitation, by way of a pledge of
assets or through letters of credit or reimbursement agreements in respect
thereof), of all or any part of any Indebtedness.
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"Hedging Obligations" means, with respect to any Person, the obligations
of such Person under (i) interest rate or currency swap agreements, interest
rate or currency cap agreements and interest rate or currency collar agreements
and (ii) other agreements or arrangements designed to protect such Person
against fluctuations in interest rates or currency.
"Holder" means a holder of shares of Preferred Stock.
"Indebtedness" means, with respect to any Person, any indebtedness of such
Person, whether or not contingent, in respect of borrowed money or evidenced by
bonds, notes, debentures or similar instruments or letters of credit (or
reimbursement agreements in respect thereof) or banker's acceptances or
representing Capital Lease Obligations or the balance deferred and unpaid of the
purchase price of any property or representing any Hedging Obligations, except
any such balance that constitutes an accrued expense or trade payable, if and to
the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount, and (ii)
the principal amount thereof, together with any interest thereon that is more
than 30 days past due, in the case of any other Indebtedness.
"Indenture" means the Indenture, dated May 18, 1998, by and among the
Company, the Guarantors and the Trustee, governing the Company's 101/8% Senior
Subordinated Notes due 2008.
"Investments" means, with respect to any Person, all investments by such
Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of Section 12 hereof
"Issue Date" means May 18, 1998.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
"Management Agreement" means that certain Management Agreement dated the
Issue Date among the Principals, the Company and Holdings, as in effect on the
Issue Date.
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"Mandatory Redemption Date" means May 15, 2010.
"Net Income" means, with respect to any Person, the net income (loss) of
such Person, determined in accordance with GAAP and before any reduction in
respect of preferred stock dividends, (i) excluding, however, (x) any gain (but
not loss), together with any related provision for taxes on such gain (but not
loss), realized in connection with (a) any Asset Sale (including, without
limitation, dispositions pursuant to sale and leaseback transactions) or (b) the
disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (y) any extraordinary gain (but not loss),
together with any related provision for taxes on such extraordinary gain (but
not loss) and (ii) less the aggregate amount of all Restricted Payments made by
such Person or any of its Restricted Subsidiaries for such period pursuant to
clause (vii) of the second paragraph of Section 12 hereof times one minus the
then combined federal, state and local statutory tax rate of the Company.
"Net Proceeds" means the aggregate cash proceeds received by the Company
or any of its Restricted Subsidiaries in respect of any Asset Sale (including,
without limitation, any cash received upon the sale or other disposition of any
non-cash consideration received in any Asset Sale), net of the direct costs
relating to such Asset Sale (including, without limitation, legal, accounting
and investment banking fees, and sales commissions) and any relocation expenses
incurred as a result thereof, taxes paid or payable as a result thereof (after
taking into account any available tax credits or deductions and any tax sharing
arrangements) and any reserve for adjustment in respect of the sale price of
such asset or assets established in accordance with GAAP.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the Company
nor any of its Restricted Subsidiaries (a) provides credit support of any kind
(including any undertaking, agreement or instrument that would constitute
Indebtedness), (b) is directly or indirectly liable (as a guarantor or
otherwise), or (c) constitutes the lender, and (ii) no default with respect to
which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Exchange Debentures) of the Company or any of its Restricted Subsidiaries to
declare a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity; and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officers' Certificate" means a certificate signed by (i) the Chairman of
the Board of Directors, the Chief Executive Officer, the President or a Vice
President of the Company and (ii) the Chief Financial Officer or the Secretary
of the Company, which certificate shall comply with the Indenture.
"Permitted Business" means the business of the Company and its Restricted
Subsidiaries conducted on the Issue Date and businesses reasonably related or
ancillary thereto.
"Permitted Investments" means (a) any Investment in the Company or in a
Restricted Subsidiary of the Company; (b) any Investment in Cash Equivalents;
(c) any Investment by the Company or any Restricted Subsidiary of the Company in
a Person, if as a result of such Investment (i) such Person becomes
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a Restricted Subsidiary of the Company or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company; (d) any Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with Section 12 hereof or any transaction not constituting an Asset
Sale by reason of the $1.0 million threshold contained in the definition
thereof; (e) any acquisition of assets solely in exchange for the issuance of
Equity Interests (other than Disqualified Stock) of the Company; (f) Hedging
Obligations entered into in the ordinary course of the Company's or its
Restricted Subsidiaries' businesses and otherwise in compliance with the
Indenture; (g) Investments in securities of trade creditors or customers
received in settlement of obligations or pursuant to any plan of reorganization
or similar arrangement upon the bankruptcy of insolvency of such trade creditors
of customers; (h) Investments by the Company or a Restricted Subsidiary in a
Receivables Subsidiary or any Investment by a Receivables Subsidiary in any
other Person, in each case, in connection with a Qualified Receivables
Transaction; and (i) other Investments in any Person having an aggregate fair
market value (measured on the date each such Investment was made and without
giving effect to subsequent changes in value), when taken together with all
other Investments made pursuant to this clause (i) that are at the time
outstanding, not to exceed the greater of (A) $10.0 million and (B) 5% of Total
Assets.
"Permitted Refinancing Indebtedness" means any Indebtedness of the Company
or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iii) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means an individual, partnership, corporation, limited liability
company, unincorporated organization, trust or joint venture, or a governmental
agency or political subdivision thereof.
"Preferred Stock Registration Rights Agreement" means the Preferred Stock
Registration Rights Agreement, dated as of May 18, 1998, between the Company and
the Initial Purchasers.
"Principals" means Vestar Capital Partners III, L.P.
"Purchase Money Note" means a promissory note evidencing a line of credit,
or evidencing other Indebtedness owed to the Company or any Restricted
Subsidiary in connection with a Qualified Receivables Transaction, which note
shall be repaid from cash available to the maker of such note, other than
amounts required to be established as reserves pursuant to agreement, amounts
paid to investors in respect of interest, principal and other amounts owing to
such investors and amounts paid in connection with the purchase of newly
generated receivables.
"Qualified Proceeds" means any of the following or any combination of the
following: (i) cash, (ii) Cash Equivalents, (iii) long-term assets that are used
or useful in a Permitted Business and (iv) the
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Capital Stock of any Person engaged primarily in a Permitted Business if, in
connection with the receipt by the company or any Restricted Subsidiary of the
Company of such Capital Stock, (a) such Person becomes a Wholly-Owned Restricted
Subsidiary or (b) such Person is merged, consolidated or amalgamated with or
into, or transfers or conveys substantially all of its assets to, or is
liquidated into, the Company or any Wholly-Owned Restricted Subsidiary of the
Company.
"Qualified Receivables Transaction" means any transaction or series of
transactions that may be entered into by the Company or any Restricted
Subsidiary pursuant to which the Company or any Restricted Subsidiary may sell,
convey or otherwise transfer to (a) a Receivables Subsidiary (in the case of a
transfer by the Company or any Restricted Subsidiary) and (b) any other Person
(in the case of a transfer by a Receivables Subsidiary), or may grant a security
interest in, any accounts receivable (whether now existing or arising in the
future) of the Company or any Restricted Subsidiary and any asset related
thereto including, without limitation, all collateral securing such accounts
receivable, all contracts and all guarantees or other obligations in respect of
such accounts receivable, proceeds of such accounts receivable and other assets
which are customarily transferred, or in respect of which security interests are
customarily granted, in connection with asset securitization transactions
involving accounts receivable.
"Receivables Subsidiary" means a Wholly Owned Restricted Subsidiary (other
than a Guarantor) which engages in no activities other than in connection with
the financing of accounts receivables and which is designated by the Board of
Directors of the Company (as provided below) as a Receivables Subsidiary (a) no
portion of the Indebtedness or any other Obligations (contingent or otherwise)
of which (i) is guaranteed by the Company or any other Restricted Subsidiary
(excluding guarantees of obligations (other than the principal of, and interest
on, Indebtedness) pursuant to Standard Securitization Undertakings), (ii) is
recourse to or obligates the Company or any other Restricted Subsidiary in any
way other than pursuant to Standard Securitization Undertakings or (iii)
subjects any property or asset of the Company or any other Restricted
Subsidiary, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard Securitization
Undertakings, (b) with which neither the Company nor any other Restricted
Subsidiary has any material contract, agreement, arrangement or understanding
(except in connection with a Purchase Money Note or Qualified Receivables
Transaction) other than on terms no less favorable to the Company or such other
Restricted Subsidiary than those that might be obtained at the time from Persons
that are not Affiliates of the Company, other than fees payable in the ordinary
course of business in connection with servicing accounts receivable, and (c) to
which neither the Company nor any other Restricted Subsidiary has any obligation
to maintain or preserve such entity's financial condition or cause such entity
to achieve certain levels of operating results. Any such designation by the
Board of Directors of the Company shall be evidenced to the Trustee by filing
with the Trustee a certified copy of the resolution of the Board of Directors of
the Company giving effect to such designation and an Officers' Certificate
certifying, to the best of such officers' knowledge and belief after consulting
with counsel, that such designation complied with the foregoing conditions.
"Redemption Notice" shall have the meaning ascribed to it in Section 5(c)
hereof.
"Related Party" with respect to any Principal means (A) any controlling
stockholder, Subsidiary, or spouse or immediate family member (in the case of an
individual) of such Principal or (B) any trust, corporation, partnership or
other entity, the beneficiaries, stockholders, partners, owners or Persons
beneficially holding a majority interest of which consist of such Principal
and/or such other Persons referred to in the immediately preceding clause (A).
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"Reorganization Charges" means (i) up to $3.3 million of facility closing
and re-engineering costs incurred by the Company and its Subsidiaries prior to
the Issue Date, (ii) up to $550,000 of losses incurred by the Company and its
Subsidiaries prior to the Issue Date associated with (x) the Canadian retail
operations of the Company and its Subsidiaries and (y) the Mexican and
Guatemalan operations of the Company and its Subsidiaries, in each case
calculated in accordance with GAAP on a consolidated basis, (iii) up to $4.0
million of bankruptcy reorganization costs incurred by the Company and its
Restricted Subsidiaries prior to the Issue Date, and (iv) the costs and expenses
of the Company and its Subsidiaries incurred in connection with the Transaction,
in each case calculated in accordance with GAAP on a consolidated basis.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the referent
Person that is not an Unrestricted Subsidiary.
"Senior Credit Facility" means the credit agreement to be entered into on
or prior to the Issue Date by and among the Company, NationsBanc Montgomery
Securities LLC, as arranger and syndication agent, certain lending parties
thereto and NationsBank, N.A., as agent, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, as such credit agreements and/or related documents may be
amended, restated, supplemented, renewed, replaced or otherwise modified from
time to time whether or not with the same agent, trustee, representative lenders
or holders, and, subject to the proviso to the next succeeding sentence,
irrespective of any changes in the terms and conditions thereof. Without
limiting the generality of the foregoing, the term "Senior Credit Facility"
shall include any amendment, amendment and restatement, renewal, extension,
restructuring, supplement or modification to any Senior Credit Facility and all
refundings, refinancings and replacements of any Senior Credit Facility,
including any agreement (i) extending the maturity of any Indebtedness incurred
thereunder or contemplated thereby, (ii) adding or deleting borrowers or
guarantors thereunder, so long as the borrowers and issuers thereunder include
one or more of the Company and its Subsidiaries and their respective successors
and assigns, or (iii) increasing the amount of Indebtedness incurred thereunder
or available to be borrowed thereunder.
"Significant Subsidiary" means any Subsidiary that would be a "significant
subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X, promulgated
pursuant to the Act, as such Regulation is in effect on the date hereof.
"Standard Securitization Undertakings" means representations, warranties,
covenants and indemnities entered into by the Company or any Restricted
Subsidiary which are reasonably customary in an accounts receivable transaction.
"Stated Maturity" means, with respect to any installment of interest or
principal on any series of Indebtedness, the date on which such payment of
interest or principal was scheduled to be paid in the original documentation
governing such Indebtedness, and shall not include any contingent obligations to
repay, redeem or repurchase any such interest or principal prior to the date
originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or Exchange
Trustees
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thereof is at the time owned or controlled, directly or indirectly, by such
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or of one or more
Subsidiaries of such Person (or any combination thereof).
"Total Assets" means, with respect to any Person, the total consolidated
assets of such Person and its Restricted Subsidiaries, as shown on the most
recent balance sheet of such Person.
"Transfer Agent" means the transfer agent for the Exchangeable Preferred
Stock, which shall be The Bank of New York unless and until a successor is
selected by the Company.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary than those that might be obtained at the time from Persons
who are not Affiliates of the Company; (c) is a Person with respect to which
neither the Company nor any of its Restricted Subsidiaries has any direct or
indirect obligation (x) to subscribe for additional Equity Interests or (y) to
maintain or preserve such Person's financial condition or to cause such Person
to achieve any specified levels of operating results; and (d) has not guaranteed
or otherwise directly or indirectly provided credit support for any Indebtedness
of the Company or any of its Restricted Subsidiaries. Any such designation by
the Board of Directors shall be evidenced to the Exchange Trustee by filing with
the Exchange Trustee a certified copy of the Board Resolution giving effect to
such designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by Section 12 hereof.
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of the Exchange Indenture and any
Indebtedness of such Subsidiary shall be deemed to be incurred by a Restricted
Subsidiary of the Company as of such date (and, if such Indebtedness is not
permitted to be incurred as of such date under Section 13 hereof, the Company
shall be in default of such covenant.). The Board of Directors of the Company
may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under the covenant described
under Section 13 hereof, calculated on a pro forma basis as if such designation
had occurred at the beginning of the four-quarter reference period and (ii) no
Default or Event of Default or Voting Rights Triggering Event, as applicable,
would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Capital Stock of
such Person that is at the time entitled to vote in the election of the Board of
Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Disqualified Stock at any date, the number of years obtained by
dividing (i) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other required
payments of principal or liquidation preference, as applicable, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between
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such date and the making of such payment, by (ii) the then outstanding principal
amount or liquidation preference, if applicable, of such Indebtedness or
Disqualified Stock.
"Wholly Owned Restricted Subsidiary" of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person and one or more Wholly Owned Restricted Subsidiaries
of such Person.
2. Ranking.
Except as otherwise permitted by this Section 2, the Exchangeable
Preferred Stock shall rank senior in right of payment to all classes or series
of capital stock of the Company as to dividends and upon liquidation,
dissolution or winding up of the Company. The Company shall not, after the Issue
Date, without the consent of the Holders of at least a majority of the then
outstanding Exchangeable Preferred Stock, authorize, create (by way of
reclassification or otherwise) or issue any class or series of capital stock of
the Company ranking on a parity with the Exchangeable Preferred Stock ("Parity
Securities") or any obligation or security convertible or exchangeable into or
evidencing a right to purchase stock of any class or series of Parity
Securities. The Company shall not, without the consent of the Holders of at
least two-thirds of the then outstanding Exchangeable Preferred Stock,
authorize, create (by way of reclassification or otherwise) or issue any class
or series of capital stock of the Company ranking senior to the Exchangeable
Preferred Stock ("Senior Securities") other than, in each case, Disqualified
Stock incurred in accordance with this Certificate of Designations or any
obligation or security convertible or exchangeable into or evidencing a right to
purchase stock of any class or series of Senior Securities other than
Disqualified Stock incurred in accordance with this Certificate of Designations.
3. Dividends.
(a) The Holders of the Exchangeable Preferred Stock shall be
entitled to receive, when, as and if dividends are declared by the Board of
Directors out of funds of the Company legally available therefor, cumulative
preferential dividends from the date of issuance of the Exchangeable Preferred
Stock accruing at the rate per share of 12 1/2% per annum, payable semiannually
in arrears on May 15 and November 15 of each year (each, a "Dividend Payment
Date"), or if any such date is not a Business Day, on the next succeeding
Business Day, commencing on November 15, 1998, to the Holders of record as of
the preceding May 1 and November 1 (each, a "Record Date"). On or prior to May
15, 2003, the Company may, at its option, pay dividends in cash or in additional
fully-paid and non-assessable shares of Exchangeable Preferred Stock (including
fractional shares) having an aggregate Liquidation Preference equal to the
amount of such dividends. Thereafter, dividends may be paid in cash only.
Dividends payable on the Exchangeable Preferred Stock will be computed on the
basis of a 360-day year of twelve 30-day months and will be deemed to accrue on
a daily basis. On any scheduled Dividend Payment Date, the Company may, at its
option, but subject to certain conditions, exchange all but not less than all of
the shares of Exchangeable Preferred Stock for the Exchange Debentures.
(b) Dividends on the Exchangeable Preferred Stock shall accrue
whether or not the Company has earnings or profits, whether or not there are
funds legally available for the payment of such dividends and whether or not
dividends are declared. Dividends shall accumulate to the extent they are not
paid on the Dividend Payment Date for the semiannual period to which they
relate. Accumulated unpaid dividends will accrue dividends at the rate of 121/2%
per annum. The Company shall take all actions required or permitted under
Delaware law to permit the payment of dividends on the Exchangeable
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Preferred Stock.
(c) No dividend whatsoever shall be declared or paid upon, or any
sum set apart for the payment of dividends upon, any outstanding Exchangeable
Preferred Stock with respect to any dividend period unless all dividends for all
preceding dividend periods have been declared and paid upon, or declared and a
sufficient sum set apart for the payment of such dividend upon, all outstanding
Exchangeable Preferred Stock. Unless full cumulative dividends on all
outstanding Exchangeable Preferred Stock due for all past dividend periods shall
have been declared and paid, or declared and a sufficient sum for shares for the
payment thereof set apart, then: (i) no dividend (other than a dividend payable
solely in stock of any class of stock ranking junior to the Exchangeable
Preferred Stock as to the payment of dividends and as to rights in liquidation,
dissolution or winding up of the affairs of the Company ("Junior Securities"))
shall be declared or paid upon, or any sum set apart for the payment of
dividends upon, any stock of Junior Securities; (ii) no other distribution shall
be declared or made upon, or any sum set apart for the payment of any
distribution upon, any stock of Junior Securities; (iii) no stock of Junior
Securities shall be purchased, redeemed or otherwise acquired or retired for
value (excluding an exchange for stock of other Junior Securities) by the
Company or any of its Restricted Subsidiaries; (iv) no warrants, rights, calls
or options to purchase any Junior Securities shall be directly or indirectly
issued by the Company or any of its Restricted Subsidiaries; and (v) no monies
shall be paid into or set apart or made available for a sinking or other like
fund for the purchase, redemption or other acquisition or retirement for value
of any stock of Junior Securities by the Company or any of its Restricted
Subsidiaries. Holders of the Exchangeable Preferred Stock shall not be entitled
to any dividends, whether payable in cash, property or stock, in excess of the
full cumulative dividends as herein described.
In the event that the Company is obligated to pay Liquidated Damages
(as defined in the Preferred Stock Registration Rights Agreement) to the holders
of Exchangeable Preferred Stock in accordance with Section 5 of the Preferred
Stock Registration Rights Agreement , the dividend rate otherwise applicable to
the Exchangeable Preferred Stock shall be increased for the period during which
the Company is obligated to pay Liquidated Damages by the rate of such
Liquidated Damages and all references herein to dividends shall include such
Liquidated Damages, if any.
4. Voting Rights.
Holders of record of the Exchangeable Preferred Stock will have no
voting rights, except as required by law and as provided herein. Upon (i) the
accumulation of accrued and unpaid dividends on the outstanding Exchangeable
Preferred Stock in an amount equal to three or more consecutive full semiannual
dividends; (ii) failure by the Company or any of its Restricted Subsidiaries to
comply with (x) the provisions of Section 15 hereof or (y) any mandatory
redemption obligation with respect to the Exchangeable Preferred Stock; (iii)
failure by the Company or any of its Restricted Subsidiaries to comply with any
of the other covenants or agreements set forth in this Certificate of
Designations and the continuance of such failure for 60 consecutive days or
more; or (iv) certain events of bankruptcy or insolvency with respect to the
Company or any of its Restricted Subsidiaries (each of the events described in
clauses (i), (ii), (iii) and (iv) being referred to as a "Voting Rights
Triggering Event"), then the number of members of the Company's Board of
Directors will be immediately and automatically increased by two, and the
Holders of a majority of the outstanding Exchangeable Preferred Stock, voting as
a separate class, will be entitled to elect two members to the Board of
Directors of the Company. Voting rights arising as a result of a Voting Rights
Triggering Event will continue until such time as all dividends in arrears on
the Exchangeable Preferred Stock are paid in full and all other Voting Rights
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Triggering Events have been cured or waived. A Voting Rights Triggering Event
shall consititute an event of default hereunder.
5. Amendment, Supplement and Waiver.
Except as provided in the next two succeeding paragraphs, this Certificate
of Designations or the Exchangeable Preferred Stock may be amended or
supplemented with the consent of the Holders of at least a majority in aggregate
Liquidation Preference of the Exchangeable Preferred Stock then outstanding
(including, without limitation, consents obtained in connection with a purchase
of, or tender offer or exchange offer for, Exchangeable Preferred Stock), and
any existing default or compliance with any provision of this Certificate of
Designations or the Exchangeable Preferred Stock may be waived with the consent
of the Holders of a majority in aggregate Liquidation Preference of the then
outstanding Exchangeable Preferred Stock (including, without limitation,
consents obtained in connection with a purchase of, or tender offer or exchange
offer for, Exchangeable Preferred Stock).
Without the consent of each Holder affected, an amendment or waiver may
not (with respect to any Exchangeable Preferred Stock held by a non-consenting
Holder): (i) alter the voting rights with respect to the Exchangeable Preferred
Stock or reduce the number of shares of Exchangeable Preferred Stock whose
Holders must consent to an amendment, supplement or waiver, (ii) reduce the
Liquidation Preference of or change the Mandatory Redemption Date of any
Exchangeable Preferred Stock or alter the provisions with respect to the
redemption of the Exchangeable Preferred Stock (other than the provisions of
Section 9 or 10 hereof), (iii) reduce the rate of or change the time for payment
of dividends on any Exchangeable Preferred Stock, (iv) waive a default in the
payment of dividends on the Exchangeable Preferred Stock, (v) make any
Exchangeable Preferred Stock payable in any form other than that stated in this
Certificate of Designations, (vi) waive a redemption payment with respect to any
Exchangeable Preferred Stock (other than a payment required by Section 9 hereof)
or (vii) make any change in the foregoing amendment and waiver provisions.
Notwithstanding the foregoing, without the consent of any Holder of
Exchangeable Preferred Stock, the Company may (to the extent permitted by
Delaware law) amend or supplement this Certificate of Designations to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Exchangeable
Preferred Stock in addition to or in place of certificated Exchangeable
Preferred Stock or to make any change that would provide any additional rights
or benefits to the Holders of Exchangeable Preferred Stock or that does not
adversely affect the legal rights under this Certificate of Designations of any
such Holder.
6. Exchange.
The Company may, at its option on any Dividend Payment Date, exchange all
but not less than all of the shares of then outstanding Exchangeable Preferred
Stock for Exchange Debentures; provided that (i) on the date of such exchange
there are no accumulated and unpaid dividends on the Exchangeable Preferred
Stock (including the dividend payable on such date) or other contractual
impediments to such exchange; (ii) there shall be legally available funds
sufficient therefor; (iii) such exchange would be permitted under the terms of
the Indenture and, immediately after giving effect to such exchange, no Default
or Event of Default (each as defined in the Exchange Indenture) would exist
under the Exchange Indenture, no default or event of default would exist under
the Senior Credit Facility or the Indenture and no default or event of default
under any material instrument governing Indebtedness outstanding at the time
would be caused thereby; (iv) the Exchange Indenture has been qualified under
the Trust Indenture Act, if such qualification is required at the time of
exchange; and (v) the Company shall have delivered a written
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opinion to the Exchange Trustee (as defined herein) to the effect that all
conditions to be satisfied prior to such exchange have been satisfied.
Upon any exchange pursuant to the preceding paragraph, holders of
outstanding Exchangeable Preferred Stock will be entitled to receive, subject to
the second succeeding sentence of this paragraph, $1.00 principal amount of
Exchange Debentures for each $1.00 of the aggregate Liquidation Preference,
plus, without duplication, accrued and unpaid dividends. The Exchange Debentures
will be issued in registered form, without coupons. The Exchange Debentures will
be issued in principal amounts of $1,000 and integral multiples thereof to the
extent possible, and will also be issuable in principal amounts less than $1,000
so that each holder of Exchangeable Preferred Stock will receive interests
representing the entire amount of Exchange Debentures to which such holder's
share of Preferred Stock entitle such holder; provided that the Company may pay
cash in lieu of issuing an Exchange Debenture having a principal amount less
than $1,000. Notice of the intention to exchange shall be sent by or on behalf
of the Company not more than 60 days nor less than 30 days prior to the Exchange
Date, by first class mail, postage prepaid, to each Holder of record of
Exchangeable Preferred Stock at its registered address. In addition to any
information required by law or by the applicable rules of any exchange upon
which Exchangeable Preferred Stock may be listed or admitted to trading, such
notice will state: (i) the Exchange Date; (ii) the place or places where
certificates for such stock are to be surrendered for exchange, including any
procedures applicable to exchanges to be accomplished through book-entry
transfers; and (iii) that dividends on the Exchangeable Preferred Stock to be
exchanged will cease to accrue on the Exchange Date. If notice of any exchange
has been properly given, and if on or before the Exchange Date the Exchange
Debentures have been duly executed and authenticated and an amount in cash or
additional Exchangeable Preferred Stock (as applicable) equal to all accrued and
unpaid dividends, if any, thereon to the Exchange Date has been deposited with
the Transfer Agent, then on and after the close of business on the Exchange
Date, the Exchangeable Preferred Stock to be exchanged will no longer be deemed
to be outstanding and may thereafter be issued in the same manner as the other
authorized but unissued preferred stock, but not as Exchangeable Preferred
Stock, and all rights of the Holders thereof as stockholders of the Company will
cease, except the right of the Holders to receive upon surrender of their
certificates the Exchange Debentures and all accrued and unpaid dividends, if
any, thereon to the Exchange Date.
A Holder may transfer or exchange Exchangeable Preferred Stock in
accordance with this Certificate of Designations if the requirements of the
Transfer Agent for such transfer or exchange are met. The Transfer Agent may
require a Holder, among other things, to furnish appropriate endorsements and
transfer documents and the Company may require a Holder to pay any taxes and
fees required by law or permitted by this Certificate of Designations.
7. Redemption.
Mandatory Redemption.
On May 15, 2010 (the "Mandatory Redemption Date"), the Company shall be
required to redeem (subject to the legal availability of funds therefor) all
outstanding Exchangeable Preferred Stock at a price in cash equal to the
Liquidation Preference thereof, plus accrued and unpaid dividends, if any, to
the date of redemption. The Company shall not be required to make sinking fund
payments with respect to the Exchangeable Preferred Stock. The Company shall
take all actions required or permitted under Delaware law to permit such
redemption.
Optional Redemption.
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The Exchangeable Preferred Stock may not be redeemed at the option of the
Company on or prior to May 15, 2003. The Exchangeable Preferred Stock may be
redeemed, in whole or in part, at the option of the Company on or after May 15,
2003, at the redemption prices specified below (expressed as percentages of the
Liquidation Preference thereof), in each case, together with accrued and unpaid
dividends, if any, to the date of redemption, upon not less than 30 nor more
than 60 days' prior written notice, if redeemed during the 12-month period
commencing on May 15 of each of the years set forth below:
Year Redemption Rate
---- ---------------
2003............................................. 106.250%
2004............................................. 105.000%
2005............................................. 103.750%
2006............................................. 102.500%
2007............................................. 101.250%
2008 and thereafter.............................. 100.000%
Notwithstanding the foregoing, during the first 36 months after the Issue
Date, the Company may, on any one or more occasions, redeem the Exchangeable
Preferred Stock, in whole or in part, at the redemption prices set forth below
(expressed as percentages of the Liquidation Preference thereof), in each case,
together with accrued and unpaid dividends, if any, to the redemption date, with
the net proceeds of one or more Equity Offerings; if redeemed during the
12-month period commencing on May 15 of each of the years set forth below:
Year Redemption Rate
---- ---------------
1998............................................. 108.000%
1999............................................. 110.000%
2000............................................. 112.000%
In the event of a redemption pursuant to the above paragraph (except in
the case of a redemption of all the Exchangeable Preferred Stock), at least
$25.0 million in aggregate Liquidation Preference of Exchangeable Preferred
Stock shall remain outstanding immediately after the occurrence of each such
redemption; and any such redemption shall occur within 45 days of the date of
closing of such Equity Offering.
At any time prior to May 15, 2003, the Exchangeable Preferred Stock may
also be redeemed, as a whole but not in part, at the option of the Company upon
the occurrence of a Change of Control, upon not less than 30 nor more than 60
days prior notice (but in no event may any such redemption occur more than 90
days after the occurrence of such Change of Control) mailed by first-class mail
to each Holder's registered address, at a redemption price equal to a percentage
of the Liquidation Preference equal to the sum of 100% and the dividend rate
then in effect with respect to the Exchangeable Preferred Stock, and accrued and
unpaid dividends, if any, to, the date of redemption.
General Redemption Provisions
Subject to the provisions of this Section 7 and Sections 9 and 10 hereof,
the following provisions shall apply to the redemption or repurchase of shares
of Exchangeable Preferred Stock.
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(a) Selection of Debentures to Be Redeemed.
If less than all of the shares of Exchangeable Preferred Stock are
to be redeemed or purchased in an offer to purchase at any time, the Company
shall select the shares of Exchangeable Preferred Stock to be redeemed or
purchased among the Holders of the shares of Exchangeable Preferred Stock in
compliance with the requirements of the principal national securities exchange,
if any, on which the shares of Exchangeable Preferred Stock are listed or, if
the shares of Exchangeable Preferred Stock are not so listed, on a pro rata
basis, by lot or in accordance with any other method the Company considers fair
and appropriate; provided that no shares shall be redeemed in part. In the event
of partial redemption by lot, the particular shares of Exchangeable Preferred
Stock to be redeemed shall be selected, unless otherwise provided herein, not
less than 30 nor more than 60 days prior to the redemption date by the Company
from the outstanding shares of Exchangeable Preferred Stock not previously
called for redemption.
Subject to the provisions of Section 10 hereof, at least 30 days but
not more than 60 days before a redemption date, the Company shall mail or cause
to be mailed, by first class mail, a notice of redemption to each Holder whose
shares of Exchangeable Preferred Stock are to be redeemed at its registered
address. The notice shall identify the shares of Exchangeable Preferred Stock to
be redeemed and shall state: (i) the redemption date; (ii) the redemption price;
(iii) the name and address of the Paying Agent; (iv) that shares of Exchangeable
Preferred Stock called for redemption must be surrendered to the Paying Agent to
collect the redemption price; (v) that, unless the Company defaults in making
such redemption payment, dividend payments on shares of Exchangeable Preferred
Stock called for redemption cease to accrue on and after the redemption date;
(vi) the section of this Certificate of Designations pursuant to which the
shares of Exchangeable Preferred Stock called for redemption are being redeemed;
and (vii) that no representation is made as to the correctness or accuracy of
the CUSIP number, if any, listed in such notice or printed on the shares of
Exchangeable Preferred Stock.
(a) Effect of Notice of Redemption.
Once notice of redemption is mailed in accordance with this Section
19, shares of Exchangeable Preferred Stock called for redemption become
irrevocably due and payable on the redemption date at the redemption price. A
notice of redemption may not be conditional.
(b) Deposit of Redemption Price.
On the redemption date, the Company shall deposit with the Paying
Agent money sufficient to pay the redemption price of and accumulated dividends
on all shares of Exchangeable Preferred Stock to be redeemed on that date. The
Paying Agent shall promptly return to the Company any money deposited with the
Paying Agent by the Company in excess of the amounts necessary to pay the
redemption price of, and accumulated dividend payments on, all shares of
Exchangeable Preferred Stock to be redeemed.
If the Company complies with the provisions of the preceding paragraph, on and
after the redemption date, dividend payments shall cease to accrue on the shares
of Exchangeable Preferred Stock. If a share of Exchangeable Preferred Stock is
redeemed on or after a payment Record Date but on or prior to the related
Dividend Payment Date, then any accumulated and unpaid dividends shall be paid
to the Person in whose name such share of Exchangeable Preferred Stock was
registered at the close of business on such Record Date. If any shares of
Exchangeable Preferred Stock called for redemption shall not be so paid upon
surrender for redemption because of the failure of the Company to comply with
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the preceding paragraph, dividends shall be paid on the Liquidation Preference
thereof, from the redemption date until such principal is paid, and to the
extent lawful on any dividends not paid on such unpaid principal, in each case
at the rate provided in this Certificate of Designations.
8. Liquidation Rights.
Upon any voluntary or involuntary liquidation, dissolution or
winding up of the affairs of the Company or reduction or decrease in its capital
stock resulting in a distribution of assets to the holders of any class or
series of the Company's capital stock (a "reduction or decrease in capital
stock"), each Holder of the Exchangeable Preferred Stock will be entitled to
payment out of the assets of the Company available for distribution of an amount
equal to the Liquidation Preference per Exchangeable Preferred Stock held by
such Holder, plus accrued and unpaid dividends, if any, to the date fixed for
liquidation, dissolution, winding up or reduction or decrease in capital stock,
before any distribution is made on any Junior Securities, including, without
limitation, common stock of the Company. After payment in full of the
Liquidation Preference and all accrued dividends, if any, to which Holders of
Exchangeable Preferred Stock are entitled, such Holders will not be entitled to
any further participation in any distribution of assets of the Company. However,
neither the voluntary sale, conveyance, exchange or transfer (for cash, stock of
stock, securities or other consideration) of all or substantially all of the
property or assets of the Company nor the consolidation or merger of the Company
with or into one or more corporations will be deemed to be a voluntary or
involuntary liquidation, dissolution or winding up of the Company or reduction
or decrease in capital stock, unless such sale, conveyance, exchange or transfer
shall be in connection with a liquidation, dissolution or winding up of the
business of the Company or reduction or decrease in capital stock.
9. Change of Control.
Upon the occurrence of a Change of Control, each Holder of
Exchangeable Preferred Stock will have the right to require the Company to
repurchase all or any part of such Holder's Exchangeable Preferred Stock
pursuant to the offer described below (the "Change of Control Offer") at an
offer price in cash equal to 101% of the aggregate Liquidation Preference
thereof plus accrued and unpaid dividends, if any, thereon to the date of
purchase (the "Change of Control Payment"). Within 30 days following any Change
of Control, the Company shall mail a notice to each Holder describing the
transaction or transactions that constitute the Change of Control and offering
to repurchase all outstanding Exchangeable Preferred Stock on the date specified
in such notice, which date shall be no earlier than 30 days and no later than 60
days from the date such notice is mailed (the "Change of Control Payment Date"),
pursuant to the procedures required by this Certificate of Designations and
described in such notice. The Company shall comply with the requirements of Rule
14e-l under the Exchange Act and any other securities laws and regulations
thereunder to the extent such laws and regulations are applicable in connection
with the repurchase of the Exchangeable Preferred Stock as a result of a Change
of Control.
On the Change of Control Payment Date, the Company shall, to the
extent lawful, (1) accept for payment all Exchangeable Preferred Stock or
portions thereof properly tendered pursuant to the Change of Control Offer, (2)
deposit with the Paying Agent an amount equal to the Change of Control Payment
in respect of all Exchangeable Preferred Stock or portions thereof so tendered
and (3) deliver or cause to be delivered to the Transfer Agent the Exchangeable
Preferred Stock so accepted together with an Officers' Certificate stating the
aggregate Liquidation Preference of the Exchangeable Preferred Stock or portions
thereof being purchased by the Company. The Paying Agent will promptly mail to
each Holder of Exchangeable Preferred Stock so tendered the Change of Control
Payment for such Exchangeable Preferred Stock, and the Transfer Agent will
promptly authenticate and mail (or cause to be transferred by book entry)
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to each Holder a new certificate representing the Exchangeable Preferred Stock
equal in Liquidation Preference amount to any unpurchased portion of the
Exchangeable Preferred Stock surrendered, if any. Prior to complying with the
provisions of this Section 9, but in any event within 90 days following a Change
of Control, the Company shall either repay all outstanding Indebtedness or
obtain the requisite consents, if any, under all agreements governing
outstanding Indebtedness to permit the repurchase of Exchangeable Preferred
Stock required by this covenant. If the Company fails to make such repayment or
obtain such consents within such time period, it will result in a Voting Rights
Triggering Event, but the obligation to commence and consummate a Change of
Control Offer will be suspended until such repayment is made or such consents
are obtained. The Company will publicly announce the results of the Change of
Control Offer on or as soon as practicable after the Change of Control Payment
Date.
The Change of Control provisions described above shall be applicable
whether or not any other provisions of this Certificate of Designations are
applicable.
If the Company shall be prohibited from purchasing Exchangeable
Preferred Stock, whether as a consequence of the terms of the Senior Credit
Facility or the Indenture or for any other reason, then the Holders of a
majority of the outstanding Exchangeable Preferred Stock, voting as a separate
class, shall be entitled to elect two members to the Board of Directors of the
Company. Such members shall cease to serve for such periods thereafter as the
Company shall no longer be so prohibited and shall have paid the amounts
required under this Section 9.
The Company shall not be required to make a Change of Control Offer
to the Holders of Exchangeable Preferred Stock upon a Change of Control if a
third party makes the Change of Control Offer described above in the manner, at
the times and otherwise in compliance with the requirements set forth in this
Certificate of Designations and purchases all Exchangeable Preferred Stock
validly tendered and not withdrawn under such Change of Control Offer.
10. Asset Sales.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Trustee) of the assets or Equity Interests issued or sold or
otherwise disposed of and (ii) at least 75% of the consideration therefor
received by the Company or such Restricted Subsidiary is in the form of (A) cash
or Cash Equivalents or (B) Qualified Proceeds; provided that the aggregate fair
market value of Qualified Proceeds (other than cash or Cash Equivalents), which
may be received in consideration for asset sales pursuant to this clause (ii)
(B) shall not exceed $5.0 million since the Issue Date; provided that the amount
of (x) any liabilities (as shown on the Company's or such Restricted
Subsidiary's most recent balance sheet), of the Company or any Restricted
Subsidiary (other than contingent liabilities and liabilities that are by their
terms subordinated to the Exchangeable Preferred Stock or any guarantee thereof)
that are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or such Restricted Subsidiary from
further liability and (y) any securities, notes or other obligations received by
the Company or any such Restricted Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by the
Company or such Restricted Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.
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Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds, at its option, (a) to permanently
repay Indebtedness, or (b) to acquire all or substantially all of the assets of,
or a majority of the Voting Stock of, another Permitted Business, (c) to make a
capital expenditure or (d) to acquire other long-term assets that are used or
useful in a Permitted Business. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce revolving credit borrowings or
otherwise invest such Net Proceeds in any manner that is not prohibited by this
Certificate of Designations. Any Net Proceeds from Asset Sales that are not
applied or invested as provided in the first sentence of this paragraph will be
deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $10.0 million, the Company will be required to make an offer to
all Holders of Exchangeable Preferred Stock (an "Asset Sale Offer") to redeem
the maximum outstanding Exchangeable Preferred Stock that may be purchased out
of the Excess Proceeds, at a price in cash equal to the Liquidation Preference
thereof, plus accrued and unpaid dividends, if any, to the date of purchase, in
accordance with the procedures set forth in this Certificate of Designations. To
the extent that any Excess Proceeds remain after consummation of an Asset Sale
Offer, the Company may use such Excess Proceeds for general corporate purposes.
If the aggregate Liquidation Preference of Exchangeable Preferred Stock
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Exchangeable Preferred Stock to be purchased on a pro
rata basis. Upon completion of such offer to purchase, the amount of Excess
Proceeds shall be reset at zero.
If the Company shall be prohibited from purchasing Exchangeable
Preferred Stock, whether as a consequence of the terms of the Senior Credit
Facility or the Indenture or for any other reason, then the Holders of a
majority of the outstanding Exchangeable Preferred Stock, voting as a separate
class, shall be entitled to elect two members to the Board of Directors of the
Company. Such members shall cease to serve for such periods thereafter as the
Company shall no longer be so prohibited and shall have sold the amounts
required thereunder.
In the event that the Company shall be required to commence an Asset
Sale Offer, it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the Liquidation Preference of Exchangeable
Preferred Stock required to be purchased pursuant to the Asset Sale Offer (the
"Offer Amount") or, if less than the Offer Amount has been tendered, all shares
of Exchangeable Preferred Stock tendered in response to the Asset Sale Offer.
Payment for any shares so purchased shall be made in the same manner as dividend
payments are made.
If the Purchase Date is on or after a Record Date and on or before
the related Dividend Payment Date, any accumulated and unpaid dividends shall be
paid to the Person in whose name a share of Exchangeable Preferred Stock is
registered at the close of business on such record date, and no additional
dividends shall be payable to Holders who tender shares of Exchangeable
Preferred Stock pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to each of the Holders. The notice shall
contain all instructions and materials necessary to enable such Holders to
tender shares of Exchangeable Preferred Stock pursuant to the Asset Sale Offer.
The Asset Sale Offer shall be made to all Holders. The notice, which shall
govern the terms of the Asset Sale
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Offer, shall state: (i) that the Asset Sale Offer is being made pursuant to this
Section 11 of this Certificate of Designations and the length of time the Asset
Sale Offer shall remain open; (ii) the Offer Amount, the purchase price and the
Purchase Date; (iii) that any shares of Exchangeable Preferred Stock not
tendered or accepted for payment shall continue to accumulate dividends; (iv)
that, unless the Company defaults in making such payment, any shares of
Exchangeable Preferred Stock accepted for payment pursuant to the Asset Sale
Offer shall cease to accumulate dividends after the Purchase Date; (v) that
Holders electing to have shares of Exchangeable Preferred Stock purchased
pursuant to an Asset Sale Offer may only elect to have all of such shares of
Exchangeable Preferred Stock purchased and may not elect to have only a portion
of such shares of Exchangeable Preferred Stock purchased; (vi) that Holders
electing to have shares of Exchangeable Preferred Stock purchased pursuant to
any Asset Sale Offer shall be required to surrender the shares of Exchangeable
Preferred Stock, with the form entitled "Option of Holder to Elect Purchase" on
the reverse of the shares of Exchangeable Preferred Stock completed, or transfer
by book-entry transfer, to the Company, a depositary, if appointed by the
Company, or a Paying Agent at the address specified in the notice at least three
days before the Purchase Date; (vii) that Holders shall be entitled to withdraw
their election if the Company, the depositary or the Paying Agent, as the case
may be, receives, not later than the expiration of the Offer Period, a telegram,
facsimile transmission or letter setting forth the name of the Holder, the
number of shares of Exchangeable Preferred Stock the Holder delivered for
purchase and a statement that such Holder is withdrawing his election to have
such shares of Exchangeable Preferred Stock purchased; and (viii) that, if the
aggregate Liquidation Preference of the shares of Exchangeable Preferred Stock
surrendered by Holders exceeds the Offer Amount, the Company shall select the
shares of Exchangeable Preferred Stock to be purchased on a pro rata basis (with
such adjustments as may be deemed appropriate by the Company so that only shares
of Exchangeable Preferred Stock in denominations of $100 of Liquidation
Preference, or integral multiples thereof, shall be purchased).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of shares of Exchangeable Preferred Stock or portions thereof
tendered pursuant to the Asset Sale Offer, or if less than the Offer Amount has
been tendered, all shares of Exchangeable Preferred Stock tendered. The Company,
the Depositary or the Paying Agent, as the case may be, shall promptly (but in
any case not later than five days after the Purchase Date) mail or deliver to
each tendering Holder an amount equal to the purchase price of the shares of
Exchangeable Preferred Stock tendered by such Holder and accepted by the Company
for purchase, and the Company shall promptly issue new shares of Exchangeable
Preferred Stock and the Company shall authenticate and mail or deliver such new
shares of Exchangeable Preferred Stock to such Holder, in a Liquidation
Preference equal to any unpurchased portion of the shares of Exchangeable
Preferred Stock surrendered. Any shares of Exchangeable Preferred Stock not so
accepted shall be promptly mailed or delivered by the Company to the Holder
thereof. The Company shall publicly announce the results of the Asset Sale Offer
on the Purchase Date.
11. Remedies for Breach of Covenants.
The sole remedy to Holders of Preferred Stock in the event of a
breach of any of the covenants herein, including Section 7 hereof, will be the
voting rights arising from Section 4 hereof and such breach by the Company will
not cause any action taken by the Company to be invalid or unauthorized under
its charter documents.
12. Restricted Payments.
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The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Parity Securities or Junior Securities (including,
without limitation, any payment in connection with any merger or consolidation
involving the Company or any of its Restricted Subsidiaries) or to the direct or
indirect holders of the Company's or any of its Restricted Subsidiaries' Parity
Securities or Junior Securities in their capacity as such (other than dividends
or distributions payable in Equity Interests (other than Disqualified Stock) of
the Company and other than dividends or distributions payable to the Company or
a Restricted Subsidiary of the Company); (ii) make payment on, purchase, redeem
or otherwise acquire or retire for value any Parity Securities or Junior
Securities of the Company or any direct or indirect parent of the Company or
other Affiliate of the Company (other than any such Parity Securities or Junior
Securities owned by the Company or any Restricted Subsidiary of the Company); or
(iii) make any Restricted Investment (all such payments and other actions set
forth in clauses (i) through (iii) above being collectively referred to as
"Restricted Payments"), unless, at the time of and after giving effect to such
Restricted Payment:
(a) no Voting Rights Triggering Event shall have occurred and be
continuing or would occur as a consequence thereof, and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had
been made at the beginning of the applicable four-quarter period, have
been permitted to incur at least $1.00 of additional Indebtedness pursuant
to the Fixed Charge Coverage Ratio test set forth in the first paragraph
of Section 13 hereof, and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the Issue Date (excluding Restricted Payments permitted
by clauses (ii), (iii), (v) and (vii) of the next succeeding paragraph),
is less than the sum, without duplication, of (i) 50% of the Consolidated
Net Income of the Company for the period (taken as one accounting period)
from the beginning of the first fiscal quarter commencing after Issue Date
to the end of the Company's most recently ended fiscal quarter for which
internal financial statements are available at the time of such Restricted
Payment (or, if such Consolidated Net Income for such period is a deficit,
less 100% of such deficit), plus (ii) 100% of the aggregate net cash
proceeds received by the Company since the Issue Date as a contribution to
its common equity capital or from the issue or sale of Equity Interests of
the Company (other than Disqualified Stock) or from the issue or sale of
Disqualified Stock or debt securities of the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Subsidiary of
the Company), plus (iii) 100% of the fair market value of any Person
engaged in a Permitted Business or assets used by the Company or a
Restricted Subsidiary in a Permitted Business which such Person or assets
were acquired by the Company or any of its Restricted Subsidiaries since
the Issue Date provided that the consideration for such Person or assets
consisted solely of Equity Interests of the Company (other than
Disqualified Stock), plus (iv) to the extent that any Restricted
Investment that was made after the Issue Date is sold for cash or
otherwise liquidated or repaid for cash or the receipt of properties used
in a Permitted Business, the lesser of (A) the net cash proceeds of such
sale, liquidation or repayment or the fair market value (as determined in
good faith by a resolution of the Board of Directors) of property received
in exchange therefor and (B) the amount of such Restricted Investment.
The foregoing provisions shall not prohibit: (i) the payment of any
dividend within 60 days after the
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date of declaration thereof, if at said date of declaration such payment would
have complied with the provisions of this Certificate of Designations; (ii) the
redemption, repurchase, retirement or other acquisition of any Equity Interests
of the Company in exchange for, or out of the proceeds of, the substantially
concurrent sale (other than to a Restricted Subsidiary of the Company) of, other
Equity Interests of the Company (other than any Disqualified Stock); provided
that the amount of any such net cash proceeds that are utilized for any such
redemption, repurchase, retirement or other acquisition shall be excluded from
clause (c)(ii) of the preceding paragraph; (iii) the payment of any dividend by
a Restricted Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; (iv) so long as no Voting Rights Triggering Event
has occurred and is continuing or would be caused thereby, the direct or
indirect repurchase, redemption or other acquisition or retirement for value of
any Equity Interests of the Company or any direct or indirect parent corporation
of the Company held by any member of the Company's (or any of its Restricted
Subsidiaries') management pursuant to any management equity subscription
agreement or stock option agreement in effect as of Issue Date; provided that
the aggregate price paid for all such repurchased, redeemed, acquired or retired
Equity Interests shall not exceed $1.0 million in any twelve-month period; (v)
dividends or other payments to Holdings sufficient to enable Holdings to pay
accounting, legal, corporate or reporting and administrative expenses of
Holdings incurred in the ordinary course of business in an amount not to exceed
$500,000 in any twelve-month period; (vi) the making of loans by the Company or
any of its Restricted Subsidiaries to officers or directors of the Company;
provided that the aggregate outstanding amount of such loans shall not exceed,
at any time, $2.0 million plus any such loans outstanding on the Issue Date;
(vii) payments to Holdings by the Company or any Restricted Subsidiary with
respect to taxes (including estimated taxes) that are paid by Holdings on a
combined, consolidated, unitary or similar basis, to the extent that such
payments do not exceed the amount that the Company or such Restricted Subsidiary
would have paid to the relevant taxing authority if the Company or such
Restricted Subsidiary filed a separate tax return for the period in question;
(viii) so long as no Voting Rights Triggering Event has occurred and is
continuing or would be caused thereby, the defeasance, redemption or repurchase
of any preferred stock issued in connection with the acquisition of assets or a
Permitted Business, provided that the aggregate amount of such defeasance,
redemption or repurchase payments shall not exceed at any time $10.0 million;
(ix) so long as no Voting Rights Triggering Event is continuing or would be
caused thereby, payments under the Management Agreement as in effect on the
Issue Date; (x) the direct or indirect repurchase, redemption or other
acquisition or retirement for value of any Equity Interests of the Company or
any direct or indirect parent corporation of the Company held by any employee of
the Company or a Restricted Subsidiary of the Company upon the retirement of any
such employee; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed $400,000 less
the amount of Restricted Payments made pursuant to clause (xi) below during such
period in any twelve-month period; (xi) the direct or indirect redemption,
repurchase or other acquisition or retirement for value of Class A Senior
Preferred Stock of Holdings from Holdings' qualified employee stock option
plans, which Class A Senior Preferred Stock will either be issued on the Issue
Date or issued as dividends thereon in accordance with the certificate of
designations relating thereto as in effect on the Issue Date, provided that such
redemption, repurchase or other acquisition or retirement is required by
applicable law and such plans; and (xii) the distribution of any Parity Note
(and interest thereon) or cash in lieu of fractional amounts thereof.
The Board of Directors may designate any Restricted Subsidiary to be
an Unrestricted Subsidiary if such designation would not cause a Default. In the
event of any such designation, all outstanding Investments owned by the Company
and its Restricted Subsidiaries in the Subsidiary so designated will be deemed
to be an Investment made as of the time of such designation and will reduce the
amount available for Restricted Payments under the first paragraph of this
covenant or Permitted Investments, as applicable. All such outstanding
Investments will be deemed to constitute Restricted Investments in an amount
equal to
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the fair market value of such Investments at the time of such designation. Such
designation will only be permitted if such Restricted Payment would be permitted
at such time and if such Restricted Subsidiary otherwise meets the definition of
an Unrestricted Subsidiary. The Board of Directors may redesignate any
Unrestricted Subsidiary to be a Restricted Subsidiary if such redesignation
would not cause a Default.
The amount of all Restricted Payments (other than cash) and
Qualified Proceeds (other than cash) shall be the fair market value on the date
of the Restricted Payment (or the date of receipt of Qualified Proceeds) of the
asset(s) or securities proposed to be transferred or issued by the Company or
such Restricted Subsidiary, as the case may be, pursuant to the Restricted
Payment. The fair market value of any assets or securities that are required to
be valued by this covenant shall be determined by the Board of Directors (whose
resolutions with respect thereto shall be delivered to the Transfer Agent), such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $5.0 million. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Board of Directors and the Transfer
Agent an Officers' Certificate stating that such Restricted Payment is permitted
and setting forth the basis upon which the calculations required by Section 12
hereof were computed, together with a copy of any fairness opinion or appraisal
required by this Certificate of Designations.
Accrual of interest, accretion or amortization of original issue
discount, the payment of interest on any Indebtedness in the form of additional
Indebtedness with the same terms and the payment of dividends on Disqualified
Stock in the form of additional shares of the same class of Disqualified Stock
will not be deemed to be a Restricted Payment for purposes of this Section 12;
provided, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued.
13. Incurrence of Indebtedness and Issuance of Preferred Stock.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and that the Company shall not issue any Disqualified Stock and will not
permit any of its Restricted Subsidiaries to issue any shares of preferred
stock; provided, however, that the Company may incur Indebtedness (including
Acquired Debt) or issue shares of Disqualified Stock and Restricted Subsidiaries
may incur Indebtedness and issue preferred stock, if the Fixed Charge Coverage
Ratio for the Company's most recently ended four full fiscal quarters for which
internal financial statements are available immediately preceding the date on
which such additional Indebtedness is incurred or such Disqualified Stock is
issued would have been at least 2.0 to 1.0, determined on a pro forma basis
(including a pro forma application of the net proceeds therefrom), as if the
additional Indebtedness had been incurred, or the Disqualified Stock had been
issued, as the case may be, at the beginning of such four-quarter period.
The provisions of the first paragraph of this covenant will not apply to
the incurrence of any of the following items of Indebtedness (collectively,
"Permitted Debt"):
(i) the incurrence by the Company of Indebtedness under the Senior
Credit Facility in an aggregate principal amount not exceeding an amount
equal to $160.0 million less the aggregate amount of all Net Proceeds of
Asset Sales applied by the Company or any of its Restricted Subsidiaries
to permanently repay Indebtedness under the Senior Credit Facility
pursuant to Section 10 hereof;
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(ii) the incurrence by Cluett Peabody Canada Inc. of Indebtedness
under the Canadian Credit Facility in an aggregate principal amount not
exceeding an amount equal to $15.0 million less the aggregate amount of
all Net Proceeds of Asset Sales applied by the Company or any of its
Restricted Subsidiaries to permanently repay Indebtedness under the
Canadian Credit Facility pursuant to Section 10 hereof;
(iii) the incurrence by the Company and its Restricted Subsidiaries
of the Existing Indebtedness, including the Notes and the Guarantees
thereof;
(iv) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $10.0 million at any time outstanding;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace Existing
Indebtedness or Indebtedness (other than intercompany Indebtedness) that
was permitted by this Certificate of Designations to be incurred under the
first paragraph hereof or clauses (iv), (v), (viii) or (xiv) of this
paragraph;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries; provided, however, that (A) any
subsequent issuance or transfer of Equity Interests that results in any
such Indebtedness being held by a Person other than the Company or a
Restricted Subsidiary thereof and (B) any sale or other transfer of any
such Indebtedness to a Person that is not either the Company or a
Restricted Subsidiary thereof shall be deemed, in each case, to constitute
an incurrence of such Indebtedness by the Company or such Restricted
Subsidiary, as the case may be, that was not permitted by this clause
(vi);
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Certificate of
Designations to be outstanding;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of assets
or a new Subsidiary; provided that such Indebtedness was incurred by the
prior owner of such assets or such Subsidiary prior to such acquisition by
the Company or one of its Restricted Subsidiaries and was not incurred in
connection with, or in contemplation of, such acquisition by the Company
or one of it Restricted Subsidiaries; and provided further that the
principal amount (or accreted value, as applicable) of such Indebtedness,
together with any other outstanding Indebtedness incurred pursuant to this
clause (viii) and any Permitted Refinancing Indebtedness incurred to
refund, refinance or replace any Indebtedness incurred pursuant to this
clause (viii), does not exceed $5.0 million;
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(ix) the guarantee by the Company or any Restricted Subsidiary of
the Company of Indebtedness of the Company or any Restricted Subsidiary of
the Company that was permitted to be incurred by another provision of this
Section 13;
(x) Indebtedness incurred in respect of workers' compensation
claims, self-insurance obligations, performance, surety and similar bonds
and completion guarantees provided by the Company in the ordinary course
of business;
(xi) Indebtedness arising from guarantees of Indebtedness of the
Company or any Restricted Subsidiary or the agreements of the Company or a
Restricted Subsidiary providing for indemnification, adjustment of
purchase price or similar obligations, in each case, incurred or assumed
in connection with the disposition of any business, assets or Capital
Stock of a Restricted Subsidiary, or other guarantees of Indebtedness
incurred by any person acquiring all or any portion of such business,
assets or Capital Stock of a Restricted Subsidiary for the purpose of
financing such acquisition, provided that the maximum aggregate liability
in respect of all such Indebtedness shall at no time exceed the gross
proceeds actually received by the Company and its Restricted Subsidiaries
in connection with such disposition;
(xii) Indebtedness of a Receivables Subsidiary that is not recourse
to the Company or any other Restricted Subsidiary of the Company (other
than Standard Securitization Undertakings) incurred in connection with a
Qualified Receivables Transaction;
(xiii) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (xiii);
and
(xiv) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or
replace any Indebtedness incurred pursuant to this clause (xiv), not to
exceed $10.0 million.
For purposes of determining compliance with this Section 13, in the
event that an item of proposed Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in clauses (i) through (xiv) above
as of the date of incurrence thereof, or is entitled to be incurred pursuant to
the first paragraph of this Section 13 as of the date of incurrence thereof, the
Company shall, in its sole discretion, classify such item of Indebtedness on the
date of its incurrence in any manner that complies with this covenant. Accrual
of interest, accretion or amortization of original issue discount, the payment
of interest on any Indebtedness in the form of additional Indebtedness with the
same terms and the payment of dividends on Disqualified Stock in the form of
additional shares of the same class of Disqualified Stock will not be deemed to
be an incurrence of Indebtedness or an issuance of Disqualified Stock for
purposes of this Section 13; provided, in each such case, that the amount
thereof is included in Fixed Charges of the Company as accrued. For purposes of
determining compliance with any U.S. dollar-denominated restriction on the
incurrence of Indebtedness, the U.S. dollar-equivalent principal amount of
Indebtedness denominated in a foreign currency shall be calculated based on the
relevant currency exchange rate in effect on the date such Indebtedness was
incurred.
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14. Dividend and Other Payment Restrictions Affecting Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) (a) pay dividends or make any other distributions
to the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries. However, the foregoing
restrictions will not apply to encumbrances or restrictions existing under or by
reason of (a) Existing Indebtedness as in effect on the Issue Date, (b) the
Senior Credit Facility as in effect on the Issue Date, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
the Senior Credit Facility as in effect on the Issue Date, (c) the Indenture and
the Notes, (d) applicable law, (e) any instrument governing Indebtedness or
Capital Stock of a Person acquired by the Company or any of its Restricted
Subsidiaries as in effect at the time of such acquisition (except to the extent
such Indebtedness was incurred in connection with or in contemplation of such
acquisition), which encumbrance or restriction is not applicable to any Person,
or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of the Indenture to
be incurred, (f) customary non-assignment provisions in leases entered into in
the ordinary course of business and consistent with past practices, (g) purchase
money obligations for property acquired in the ordinary course of business that
impose restrictions of the nature described in clause (iii) above on the
property so acquired, (h) any agreement for the sale or other disposition of a
Restricted Subsidiary that restricts distributions by that Restricted Subsidiary
pending its sale or other disposition, (i) Permitted Refinancing Indebtedness,
provided that the restrictions contained in the agreements governing such
Permitted Refinancing Indebtedness are no more restrictive, taken as a whole,
than those contained in the agreements governing the Indebtedness being
refinanced, (j) Liens securing Indebtedness otherwise permitted to be incurred
pursuant to the provisions of Section 13 hereof that limit the right of the
Company or any of its Restricted Subsidiaries to dispose of the assets subject
to such Lien, (k) provisions with respect to the disposition or distribution of
assets or property in joint venture agreements and other similar agreements
entered into in the ordinary course of business, (l) restrictions on cash or
other deposits or net worth imposed by customers under contracts entered into in
the ordinary course of business, (m) any other security agreement, instrument or
document relating to Indebtedness hereafter in effect, provided that such
encumbrances or restrictions are customary in connection with such documents and
that the terms and conditions of such encumbrances or restrictions are no more
restrictive than those encumbrances or restrictions imposed in connection with
the Senior Credit Facility as in effect on the Issue Date, (n) any agreement
relating to a sale and leaseback transaction or capital lease, but only on the
property subject to such transaction or lease and only to the extent that such
restrictions or encumbrances are customary with respect to a sale and leaseback
transaction or capital lease, (o) the Canadian Credit Facility as in effect on
the Issue Date and any amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings thereof,
provided that such amendments, modifications, restatements, renewals, increases,
supplements, refundings, replacements or refinancings are no more restrictive,
taken as a whole, with respect to such dividend and other payment restrictions
than those contained in the Canadian Credit Facility as in effect on the issue
date, or (p) customary restrictions imposed on the payment of dividends by a
Receivables Subsidiary in connection with a Qualified Receivables Transaction.
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15. Merger, Consolidation or Sale of Assets.
The Company shall not, directly or indirectly, consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Exchangeable Preferred Stock, this Certificate of Designations
and the Preferred Stock Registration Rights Agreement; (iii) immediately after
such transaction no Voting Rights Triggering Event exists; and (iv) except in
the case of a merger of the Company with or into a Wholly Owned Restricted
Subsidiary of the Company, the Company or the entity or Person formed by or
surviving any such consolidation or merger (if other than the Company), or to
which such sale, assignment, transfer, lease, conveyance or other disposition
shall have been made (A) will have Consolidated Net Worth immediately after the
transaction equal to or greater than the Consolidated Net Worth of the Company
immediately preceding the transaction and (B) will, immediately after such
transaction after giving pro forma effect thereto and any related financing
transactions as if the same had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 13 hereof.
16. Transactions with Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the Holders
(a) with respect to any Affiliate Transaction or series of related Affiliate
Transactions involving aggregate consideration in excess of $1.0 million, a
resolution of the Board of Directors set forth in an Officers' Certificate
certifying that such Affiliate Transaction complies with clause (i) above and
that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of the Company or such Restricted
Subsidiary, (ii) transactions between or among the Company and/or its Restricted
Subsidiaries, (iii) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company, (iv) any sale or other issuance of Equity
Interests (other than Disqualified Stock) of the Company, (v) payments made
pursuant to the Management Agreement in effect as of the Issue Date and (vi)
Restricted Payments that are permitted by Section 12 hereof.
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17. Business Activities.
The Company shall not, and shall not permit any Restricted
Subsidiary to, engage in any business other than Permitted Businesses, except to
such extent as would not be material to the Company and its Subsidiaries taken
as a whole.
18. Reports.
Whether or not required by the rules and regulations of the
Commission, so long as any Exchangeable Preferred Stock are outstanding, the
Company will furnish to the Holders of Exchangeable Preferred Stock (i) all
quarterly and annual financial information that would be required to be
contained in a filing with the Commission on Forms 10-Q and 10-K if the Company
were required to file such Forms, including a "Management's Discussion and
Analysis of Financial Condition and Results of Operations," that describes the
financial condition and results of operations of the Company and its
consolidated Subsidiaries (showing in reasonable detail, either on the face of
the financial statements or in the footnotes thereto and in Management's
Discussion and Analysis of Financial Condition and Results of Operations, the
financial condition and results of operations of the Company and its Restricted
Subsidiaries separate from the financial condition and results of operations of
the Unrestricted Subsidiaries of the Company) and, with respect to the annual
information only, a report thereon by the Company's certified independent
accountants and (ii) all current reports that would be required to be filed with
the Commission on Form 8-K if the Company were required to file such reports, in
each case within the time periods specified in the Commission's rules and
regulations. In addition, following the consummation of the exchange offer
contemplated by the Preferred Stock Registration Rights Agreement, whether or
not required by the rules and regulations of the Commission, the Company shall
file a copy of all such information and reports with the Commission for public
availability within the time periods specified in the Commission's rules and
regulations (unless the Commission will not accept such a filing) and make such
information available to securities analysts and prospective investors upon
request. In addition, the Company has agreed that, for so long as any
Exchangeable Preferred Stock remains outstanding, it shall furnish to the
Holders and to securities analysts and prospective investors, upon their
request, the information required to be delivered pursuant to Rule 144A(d)(4)
under the Securities Act.
19. Payment.
(a) All amounts payable in cash with respect to the Exchangeable
Preferred Stock shall be payable in United States dollars at the office or
agency of the Company maintained for such purpose within the City and State of
New York or, at the option of the Company, payment of dividends (if any) may be
made by check mailed to the Holders of the Exchangeable Preferred Stock at their
respective addresses set forth in the register of Holders of Exchangeable
Preferred Stock maintained by the Transfer Agent, provided that all cash
payments with respect to the Global Certificates (as defined below) and shares
of Exchangeable Preferred Stock the Holders of which have given wire transfer
instructions to the Company shall be required to be made by wire transfer of
immediately available funds to the accounts specified by the Holders thereof.
(b) Any payment on the Exchangeable Preferred Stock due on any day
that is not a Business Day need not be made on such day, but may be made on the
next succeeding Business Day with the same force and effect as if made on such
due date.
(c) The Company has initially appointed the Transfer Agent to act as
the paying agent (the
31
<PAGE>
"Paying Agent"). The Company may at any time terminate the appointment of any
Paying Agent and appoint additional or other Paying Agents; provided that until
the Exchangeable Preferred Stock has been delivered to the Company for
cancellation, or moneys sufficient to pay the Liquidation Preference and accrued
dividends on the Exchangeable Preferred Stock have been made available for
payment and either paid or returned to the Company as provided in this
Certificate of Designations, the Company shall maintain an office or agency in
the Borough of Manhattan, The City of New York for surrender of Exchangeable
Preferred Stock for payment and exchange.
(d) Dividends payable on the Exchangeable Preferred Stock on any
redemption date or repurchase date that is a Dividend Payment Date shall be paid
to the Holders of record as of the immediately preceding Record Date.
(e) All moneys and shares of Exchangeable Preferred Stock deposited
with any Paying Agent or then held by the Company in trust for the payment of
the Liquidation Preference and dividends on any shares of Exchangeable Preferred
Stock which remain unclaimed at the end of two years after such payment has
become due and payable shall be repaid to the Company, and the Holder of such
shares of Exchangeable Preferred Stock shall thereafter look only to the Company
for payment thereof.
20. Exclusion of Other Rights.
Except as may otherwise be required by law, the shares of
Exchangeable Preferred Stock shall not have any voting powers, preferences and
relative, participating, optional or other special rights, other than those
specifically set forth in this Certificate of Designations (as such Certificate
of Designations may be amended from time to time) and in the Certificate of
Incorporation. The shares of Exchangeable Preferred Stock shall have no
preemptive or subscription rights.
21. Headings of Subdivisions.
The headings of the various subdivisions hereof are for convenience
of reference only and shall not affect the interpretation of any of the
provisions hereof.
22. Reserved.
23. Form of Exchangeable Preferred Stock.
(a) The Exchangeable Preferred Stock shall initially be issued in
the form of one or more Global Certificates (the "Global Certificates"). The
Global Certificates shall be deposited on the Closing Date with, or on behalf
of, The Depository Trust Company (the "Depositary") and registered in the name
of Cede & Co., as nominee of the Depositary (such nominee being referred to as
the "Global Certificate Holder").
(b) The Exchangeable Preferred Stock offered and sold in reliance on
Rule 144A shall be issued initially in the form of a Rule 144A Global
Certificate (the "Global Certificate").
(c) So long as the Global Certificate Holder is the registered owner
of any Exchangeable Preferred Stock, the Global Certificate Holder will be
considered the sole Holder under this Certificate of Designation of the shares
of Exchangeable Preferred Stock evidenced by the Global Certificate. Beneficial
owners of shares of Exchangeable Preferred Stock evidenced by the Global
Certificate shall not be considered the owners or Holders thereof under this
Certificate of Designation for any purpose.
32
<PAGE>
(d) Payments in respect of the Liquidation Preference of and
accumulated and unpaid dividends, if any, on any Exchangeable Preferred Stock
registered in the name of the Global Certificate Holder on the applicable record
date shall be payable by the Company to or at the direction of the Global
Certificate Holder in its capacity as the registered Holder under this
Certificate of Designations. The Company may treat the persons in whose names
Exchangeable Preferred Stock, including, without limitation, the Global
Certificate, are registered as the owners thereof for the purpose of receiving
such payments.
(e) If (i) the Company notifies the Holders in writing that the
Depositary is no longer willing or able to act as a depositary and the Company
is unable to locate a qualified successor within 90 days or (ii) the Company, at
its option, notifies the Holders in writing that it elects to cause the issuance
of Exchangeable Preferred Stock in the form of registered definitive
certificates ("Certificated Securities") under this Certificate of Designations,
then, upon surrender by the Global Security Holder of its Global Certificate,
Exchangeable Preferred Stock in such form will be issued to each person that the
Global Certificate Holder and the Depositary identify as being the beneficial
owner of the related Exchangeable Preferred Stock. Upon any such issuance, the
Company shall register such Certificated Securities in the name of, and cause
the same to be delivered to, such person or persons (or the nominee of any
thereof). If the Company elects to pay dividends on the Exchangeable Preferred
Stock by issuing additional Exchangeable Preferred Stock, fractional shares, if
any, issued in connection with any such dividend payment may be issued to
holders of Exchangeable Preferred Stock as Certificated Securities.
(f) Each Global Certificate which has not been registered pursuant
to an effective registration (including a shelf statement) statement shall bear
a legend in substantially the following form:
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A SECURITY
IN DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A
NOMINEE OF THE DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF
THE DEPOSITARY OR BY THE DEPOSITARY OR ANY SUCH NOMINEE TO A
SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR DEPOSITARY. THE
DEPOSITARY TRUST COMPANY SHALL ACT AS THE DEPOSITARY UNTIL A
SUCCESSOR SHALL BE APPOINTED BY THE COMPANY AND THE TRANSFER AGENT.
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE
OF THE DEPOSITARY TRUST COMPANY (55 WATER STREET, NEW YORK, NEW
YORK) ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS
REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS
MADE TO CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL
INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST
HEREIN.
(g) All shares of Exchangeable Preferred Stock and the Debentures
issuable upon exchange thereof which have not been registered pursuant to an
effective registration (including a shelf statement)
33
<PAGE>
statement shall bear a legend to the following effect, unless the Company
determines otherwise in compliance with applicable law:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT
BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN
EFFECTIVE REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
AND IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER JURISDICTION. EACH PURCHASER OF
THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE SELLER MAY
BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER ("RULE 144A") OR
ANOTHER EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE
SECURITY EVIDENCED HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT
(A) SUCH SECURITY MAY BE RESOLD, PLEDGED OR OTHERWISE TRANSFERRED,
ONLY (1)(a) TO A PERSON WHO THE SELLER REASONABLY BELIEVES IS A
QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN RULE 144A UNDER THE
SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE
144A (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144 UNDER
THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN
PERSON IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER
THE SECURITIES ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON
AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND,
IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF
ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION
AND (B) THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO,
NOTIFY ANY PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE
RESALE RESTRICTIONS SET FORTH IN (A) ABOVE.
34
<PAGE>
IN WITNESS WHEREOF, Cluett American Corp. has caused this
Certificate to be executed by Bryan P. Marsal, as President of the Company,
and attested by Steven J. Kaufman, as Secretary of the Company, this 18th day
of May, 1998.
CLUETT AMERICAN CORP.
By: /s/ Bryan P. Marsal
----------------------------
Name: Bryan P. Marsal
Title: President
Attest:
/s/ Steven J. Kaufman
- -----------------------
Name: Steven J. Kaufman
Title: Secretary
35
<PAGE>
Exhibit A
Exchange Indenture
36
<PAGE>
CLUETT AMERICAN CORP.
12 1/2% SUBORDINATED EXCHANGE DEBENTURES DUE 2010
EXCHANGE INDENTURE
DATED AS OF _____
The Bank of New York
Trustee
<PAGE>
CROSS-REFERENCE TABLE*
Trust Indenture Act Section Indenture Section
310(a)(1)...............................................................7.10
(a)(2)..................................................................7.10
(a)(3)..................................................................N.A.
(a)(4)..................................................................N.A.
(a)(5)..................................................................7.10
(b).....................................................................7.10
(c).....................................................................N.A.
311(a)..................................................................7.11
(b).....................................................................7.11
(c).....................................................................N.A.
312 (a).................................................................2.05
(b).....................................................................11.03
(c).....................................................................11.03
313(a)..................................................................7.06
(b)(1)..................................................................10.03
(b)(2)..................................................................7.07
(c).....................................................................7.06;
11.02
(d).....................................................................7.06
314(a)..................................................................4.03;
11.02
(b).....................................................................10.02
(c)(1)..................................................................11.04
(c)(2)..................................................................11.04
(c)(3)..................................................................N.A.
(e).....................................................................11.05
(f).....................................................................N.A.
315 (a).................................................................7.01
(b).....................................................................7.05;
11.02
(c).....................................................................7.01
(d).....................................................................7.01
(e).....................................................................6.11
316 (a)(last sentence)..................................................2.09
(a)(1)(A)...............................................................6.05
(a)(1)(B)...............................................................6.04
(a)(2)..................................................................N.A.
(b).....................................................................6.07
(c).....................................................................2.12
317(a)(1)...............................................................6.08
(a)(2)..................................................................6.09
(b).....................................................................2.04
318(a)..................................................................11.01
(b).....................................................................N.A.
(c).....................................................................11.01
N.A. means not applicable.
<PAGE>
*This Cross-Reference Table is not part of the Indenture.
2
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1. DEFINITIONS AND INCORPORATION BY REFERENCE........................1
Section 1.01. Definitions..................................................1
Section 1.02. Other Definitions...........................................18
Section 1.03. Trust Indenture Act Provisions..............................18
Section 1.04. Rules of Construction.......................................19
ARTICLE 2. THE DEBENTURES...................................................19
Section 2.01. Form and Dating.............................................19
Section 2.02. Execution and Authentication................................20
Section 2.03. Registrar and Paying Agent..................................20
Section 2.04. Paying Agent to Hold Money in Trust.........................21
Section 2.05. Holder Lists................................................21
Section 2.06. Transfer and Exchange.......................................21
Section 2.07. Replacement Debentures......................................33
Section 2.08. Outstanding Debentures......................................33
Section 2.09. Treasury Debentures.........................................34
Section 2.10. Temporary Debentures........................................34
Section 2.11. Cancellation................................................34
Section 2.12. Defaulted Interest..........................................34
Section 2.13. CUSIP Numbers...............................................35
ARTICLE 3. REDEMPTION AND PREPAYMENT........................................35
Section 3.01. Notices to Exchange Trustee.................................35
Section 3.02. Selection of Debentures to Be Redeemed......................35
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<PAGE>
Section 3.03. Notice of Redemption........................................35
Section 3.04. Effect of Notice of Redemption..............................36
Section 3.05. Deposit of Redemption Price.................................36
Section 3.06. Debentures Redeemed in Part.................................37
Section 3.07. Optional Redemption.........................................37
Section 3.08. Mandatory Redemption........................................38
Section 3.09. Offer to Purchase by Application of Excess Proceeds.........38
ARTICLE 4. COVENANTS........................................................40
Section 4.01. Payment of Debentures.......................................40
Section 4.02. Maintenance of Office or Agency.............................40
Section 4.03. Reports.....................................................41
Section 4.04. Compliance Certificate......................................41
Section 4.05. Taxes.......................................................42
Section 4.06. Stay, Extension and Usury Laws..............................42
Section 4.07. Restricted Payments.........................................42
Section 4.08. Dividend and Other Payment Restrictions Affecting
Subsidiaries..............................................................45
Section 4.09. Incurrence of Indebtedness and Issuance of Preferred Stock..46
Section 4.10. Asset Sales.................................................49
Section 4.11. Transactions with Affiliates................................50
Section 4.12. Liens.......................................................50
Section 4.13. Corporate Existence.........................................51
Section 4.14. Offer to Repurchase Upon Change of Control..................51
Section 4.15. No Senior Subordinated Debt.................................52
Section 4.16. Business Activities.........................................52
ARTICLE 5. SUCCESSORS.......................................................52
Section 5.01. Merger, Consolidation, or Sale of Assets....................52
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Section 5.02. Successor Corporation Substituted...........................53
ARTICLE 6. DEFAULTS AND REMEDIES............................................53
Section 6.01. Events of Default...........................................53
Section 6.02. Acceleration................................................55
Section 6.03. Other Remedies..............................................55
Section 6.04. Waiver of Past Defaults.....................................55
Section 6.05. Control by Majority.........................................56
Section 6.06. Limitation on Suits.........................................56
Section 6.07. Rights of Holders of Debentures to Receive Payment..........56
Section 6.08. Collection Suit by Exchange Trustee.........................56
Section 6.09. Exchange Trustee May File Proofs of Claim...................57
Section 6.10. Priorities..................................................57
Section 6.11. Undertaking for Costs.......................................58
ARTICLE 7. EXCHANGE TRUSTEE.................................................58
Section 7.01. Duties of Exchange Trustee..................................58
Section 7.02. Rights of Exchange Trustee..................................59
Section 7.03. Individual Rights of Exchange Trustee.......................60
Section 7.04. Exchange Trustee's Disclaimer...............................60
Section 7.05. Notice of Defaults..........................................60
Section 7.06. Reports by Exchange Trustee to Holders of the Debentures....60
Section 7.07. Compensation and Indemnity..................................60
Section 7.08. Replacement of Exchange Trustee.............................61
Section 7.09. Successor Exchange Trustee by Merger, etc...................62
Section 7.10. Eligibility; Disqualification...............................62
Section 7.11. Preferential Collection of Claims Against Company...........63
Section 7.12. Trustee's Application for Instructions from the Company.....63
iii
<PAGE>
ARTICLE 8. LEGAL DEFEASANCE AND COVENANT DEFEASANCE.........................63
Section 8.01. Option to Effect Legal Defeasance or Covenant Defeasance....63
Section 8.02. Legal Defeasance and Discharge..............................63
Section 8.03. Covenant Defeasance.........................................64
Section 8.04. Conditions to Legal or Covenant Defeasance..................64
Section 8.05. Deposited Money and Government Securities to be Held in
Trust; Other Miscellaneous Provisions.....................................66
Section 8.06. Repayment to Company........................................66
Section 8.07. Reinstatement...............................................66
ARTICLE 9. AMENDMENT, SUPPLEMENT AND WAIVER.................................67
Section 9.01. Without Consent of Holders of Debentures....................67
Section 9.02. With Consent of Holders of Debentures.......................67
Section 9.03. Compliance with Trust Indenture Act.........................69
Section 9.04. Revocation and Effect of Consents...........................69
Section 9.05. Notation on or Exchange of Debentures.......................69
Section 9.06. Exchange Trustee to Sign Amendments, etc....................70
ARTICLE 10. SUBORDINATION...................................................70
Section 10.01. Agreement to Subordinate...................................70
Section 10.02. Liquidation; Dissolution; Bankruptcy.......................70
Section 10.03. Default on Designated Senior Indebtedness..................71
Section 10.04. Acceleration of Securities.................................71
Section 10.05. When Distribution Must Be Paid Over........................71
Section 10.06. Notice by Company..........................................72
Section 10.07. Subrogation................................................72
Section 10.08. Relative Rights............................................72
Section 10.09. Subordination May Not Be Impaired by Company...............73
iv
<PAGE>
Section 10.10. Distribution or Notice to Representative...................73
Section 10.11. Rights of Exchange Trustee and Paying Agent................73
Section 10.12. Authorization to Effect Subordination......................74
Section 10.13. Amendments.................................................74
Section 10.14. Certain Definitions........................................74
ARTICLE 11. MISCELLANEOUS...................................................75
Section 11.01. Trust Indenture Act Controls...............................75
Section 11.02. Notices....................................................75
Section 11.03. Communication by Holders of Debentures with Other Holders
of Debentures.............................................................76
Section 11.04. Certificate and Opinion as to Conditions Precedent.........76
Section 11.05. Statements Required in Certificate or Opinion..............76
Section 11.06. Rules by Exchange Trustee and Agents.......................77
Section 11.07. No Personal Liability of Directors, Officers, Employees
and Stockholders..........................................................77
Section 11.08. Governing Law..............................................77
Section 11.09. No Adverse Interpretation of Other Agreements..............77
Section 11.10. Successors.................................................77
Section 11.11. Severability...............................................77
Section 11.12. Counterpart Originals......................................78
Section 11.13. Table of Contents, Headings, etc...........................78
EXHIBITS
Exhibit A: FORM OF DEBENTURE
Exhibit B: FORM OF CERTIFICATE OF TRANSFER
Exhibit C: FORM OF CERTIFICATE OF EXCHANGE
Exhibit D: FORM OF CERTIFICATE OF ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
v
<PAGE>
INDENTURE dated as of ____, ____ between Cluett American Corp., a
Delaware corporation (the "Company"), and The Bank of New York, a New York
banking corporation, as trustee (the "Exchange Trustee").
The Company and the Exchange Trustee agree as follows for the
benefit of each other and for the equal and ratable benefit of the Holders of
the 12 1/2% Series A Subordinated Exchange Debentures due 2010 (the "Series A
Debentures") and the 12 1/2% Series B Subordinated Exchange Debentures due 2010
(the "Series B Debentures" and, together with the Series A Debentures, the
"Debentures"):
ARTICLE 1.
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 1.01. DEFINITIONS.
"144A Global Debenture" means a global debenture in the form of
Exhibit A-1 hereto bearing the Global Debenture Legend and the Private Placement
Legend and deposited with or on behalf of, and registered in the name of, the
Depositary or its nominee that will be issued in a denomination equal to the
outstanding principal amount of the Exchange Debentures sold in reliance on Rule
144A.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of any other Person existing at the time such other Person is
merged with or into or became a Subsidiary of such specified Person, including,
without limitation, Indebtedness incurred in connection with, or in
contemplation of, such other Person merging with or into or becoming a
Subsidiary of such specified Person and (ii) Indebtedness secured by a Lien
encumbering any asset acquired by such specified Person.
"Affiliate" of any specified Person means any other Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with such specified Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling,"
"controlled by" and "under common control with"), as used with respect to any
Person, shall mean the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such Person,
whether through the ownership of voting securities, by agreement or otherwise;
provided that beneficial ownership of 10% or more of the Voting Stock of a
Person shall be deemed to be control.
"Agent" means any Registrar, Paying Agent or co-registrar.
"Applicable Procedures" means, with respect to any transfer or
exchange of or for beneficial interests in any Global Debenture, the rules and
procedures of the Depositary, Euroclear and Cedel that apply to such transfer or
exchange.
"Asset Acquisition" means (i) an Investment by the Company or any
Restricted Subsidiary of the Company in any other Person pursuant to which such
Person shall become a Subsidiary of the Company or any Subsidiary of the
Company, or shall be merged with or into the Company or any Restricted
Subsidiary of the Company or (ii) the acquisition by the Company or any
Restricted Subsidiary of the Company of the assets of any Person which
constitute all or substantially all of the assets of such
<PAGE>
Person, any division or line of business of such Person or any other properties
or assets of such Person other than in the ordinary course of business.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business consistent with past practices (provided that the sale, lease (other
than an operating lease), conveyance or other disposition of all or
substantially all of the assets of the Company and its Restricted Subsidiaries
taken as a whole will be governed by the provisions of Sections 4.15 and 5.01
hereof and not by the provisions of Section 4.10 hereof), and (ii) the issue by
any Restricted Subsidiaries of the Company of any Equity Interests of such
Restricted Subsidiary and the sale by the Company or any of its Restricted
Subsidiaries of Equity Interests of any of the Company's Subsidiaries, in the
case of either clause (i) or (ii), whether in a single transaction or a series
of related transactions (a) that have a fair market value in excess of $1.0
million or (b) for net proceeds in excess of $1.0 million. Notwithstanding the
foregoing, the following items shall not be deemed to be Asset Sales: (i) a
transfer of assets by the Company to a Wholly Owned Restricted Subsidiary or by
a Wholly Owned Restricted Subsidiary to the Company or to another Wholly Owned
Restricted Subsidiary, (ii) an issuance of Equity Interests by a Wholly Owned
Restricted Subsidiary to the Company or to another Wholly Owned Restricted
Subsidiary, (iii) a Restricted Payment that is permitted by Section 4.07 hereof;
(iv) a disposition of Cash Equivalents or obsolete equipment in the ordinary
course of business or inventory or goods held for sale in the ordinary course of
business, and (v) sale of accounts receivable, or participation therein, in
connection with any Qualified Receivables Transaction.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal
or state law for the relief of debtors.
"Board of Directors" means the board of directors of the Company.
"Business Day" means any day except a Saturday, Sunday or other
day in the City of New York on which banks are authorized or ordered to close.
"Canadian Credit Facility" means the Loan Agreement, added as of
August 8, 1997, between Cluett Peabody Canada Inc. and Congress Financial
Corporation (Canada). The term "Canadian Credit Facility" shall include any
amendment, amendment and restatement, renewal, extension, restructuring,
supplement or modification to the Canadian Credit Facility and all refundings,
refinancings and replacements of the Canadian Credit Facility, including any
agreement (i) extending the maturity of any Indebtedness incurred thereunder or
contemplated thereby, (ii) adding or deleting borrowers or guarantors
thereunder, so long as the borrowers and issuers thereunder include one or more
of the Company and its Subsidiaries and their respective successors and assigns,
or (iii) increasing the amount of Indebtedness incurred thereunder or available
to be borrowed thereunder.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation
2
<PAGE>
that confers on a Person the right to receive a share of the profits and losses
of, or distributions of assets of, the issuing Person.
"Cash Equivalents" means (i) United States dollars, (ii)
securities issued or directly and fully guaranteed or insured by the United
States government or any agency or instrumentality thereof (provided that the
full faith and credit of the United States is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any domestic commercial bank having capital and surplus in excess of $500
million and a Thompson Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from Moody's
Investors Service, Inc. or Standard & Poor's Corporation and in each case
maturing within six months after the date of acquisition and (vi) money market
funds at least 95% of the assets of which constitute Cash Equivalents of the
kinds described in clauses (i)-(v) of this definition.
"Cedel" means Cedel Bank, SA.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) other than a Principal or a Related Party of a
Principal (as defined below), (ii) the adoption of a plan relating to the
liquidation or dissolution of the Company, (iii) the consummation of any
transaction (including, without limitation, any merger or consolidation) the
result of which is that any "person" (as defined above), other than the
Principals and their Related Parties, becomes the "beneficial owner" (as such
term is defined in Rule 13d-3 and Rule 13d-5 under the Exchange Act, except that
in calculating the beneficial ownership of any particular "person," such
"person" shall be deemed to have beneficial ownership of all securities that
such person has the right to acquire, whether such right is currently
exercisable or is exercisable only upon the occurrence of a subsequent
condition), directly or indirectly, of more than 50% of the Voting Stock of the
Company (measured by voting power rather than number of shares), (iv) the first
day on which a majority of the members of the Board of Directors of the Company
are not Continuing Directors or (v) the Company consolidates with, or merges
with or into, any Person, or any Person consolidates with, or merges with or
into, the Company, in any such event pursuant to a transaction in which any of
the outstanding Voting Stock of the Company is converted into or exchanged for
cash, securities or other property, other than any such transaction where the
Voting Stock of the Company outstanding immediately prior to such transaction is
converted into or exchanged for Voting Stock (other than Disqualified Stock) of
the surviving or transferee Person constituting a majority of the outstanding
shares of such Voting Stock of such surviving or transferee Person (immediately
after giving effect to such issuance). For purposes of this definition, any
transfer of an equity interest of an entity that was formed for the purpose of
acquiring Voting Stock of the Company will be deemed to be a transfer of such
portion of such Voting Stock as corresponds to the portion of the equity of such
entity that has been so transferred.
"Common Stock" means the Common Stock, $1.00 par value, of the
Company and any other class of common stock issued by the Company from time to
time.
"Company" means Cluett American Corp.
3
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"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person for such period plus (i) an
amount equal to any extraordinary loss plus any net loss realized in connection
with an Asset Sale, to the extent such losses were deducted in computing such
Consolidated Net Income, plus (ii) provision for taxes based on income or
profits of such Person and its Restricted Subsidiaries for such period, to the
extent that such provision for taxes was deducted in computing such Consolidated
Net Income, plus (iii) consolidated interest expense of such Person and its
Restricted Subsidiaries for such period, whether paid or accrued and whether or
not capitalized (including, without limitation, amortization of debt issuance
costs and original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations), to the extent that any such expense was deducted in computing such
Consolidated Net Income, plus (iv) depreciation, amortization (including
amortization of goodwill and other intangibles but excluding amortization of
prepaid cash expenses that were paid in a prior period) and other non-cash
expenses (excluding any such non-cash expense to the extent that it represents
an accrual of or reserve for cash expenses in any future period or amortization
of a prepaid cash expense that was paid in a prior period) of such Person and
its Restricted Subsidiaries for such period to the extent that such
depreciation, amortization and other non-cash expenses were deducted in
computing such Consolidated Net Income, minus (v) non-cash items increasing such
Consolidated Net Income for such period (other than items that were accrued in
the ordinary course of business) plus (vi) Reorganization Charges of such Person
and its Restricted Subsidiaries for such period to the extent that such
Reorganization Charges were deducted in computing such Consolidated Net Income,
in each case, determined on a consolidated basis and determined in accordance
with GAAP. Notwithstanding the foregoing, the provision for taxes on the income
or profits of, and the depreciation and amortization and other non-cash expenses
of, a Subsidiary of the Company shall be added to Consolidated Net Income to
compute Consolidated Cash Flow of the Company only to the extent that a
corresponding amount would be permitted at the date of determination to be
dividended to the Company by such Subsidiary without prior governmental approval
(that has not been obtained), and without direct or indirect restriction
pursuant to the terms of its charter and all agreements, instruments, judgments,
decrees, orders, statutes, rules and governmental regulations applicable to that
Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for
any period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Restricted Subsidiary
thereof; provided that the amount of such dividends or distributions includable
in Consolidated Net Income shall be limited to the Company's direct and indirect
Equity Interests in such Restricted Subsidiary, (ii) the Net Income of any
Restricted Subsidiary shall be excluded to the extent that the declaration or
payment of dividends or similar distributions by that Subsidiary of that Net
Income is not at the date of determination permitted without any prior
governmental approval (that has not been obtained) or, directly or indirectly,
by operation of the terms of its charter or any agreement, instrument, judgment,
decree, order, statute, rule or governmental regulation applicable to that
Subsidiary or its stockholders, (iii) the Net Income of any Person acquired in a
pooling of interests transaction for any period prior to the date of such
acquisition shall be excluded, and (iv) the cumulative effect of a change in
accounting principles shall be excluded.
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"Consolidated Net Worth" means, with respect to any Person as of
any date, the sum of (i) the consolidated equity of the common stockholders of
such Person and its consolidated Subsidiaries as of such date plus (ii) the
respective amounts reported on such Person's balance sheet as of such date with
respect to any series of preferred stock (other than Disqualified Stock) that by
its terms is not entitled to the payment of dividends unless such dividends may
be declared and paid only out of net earnings in respect of the year of such
declaration and payment, but only to the extent of any cash received by such
Person upon issuance of such preferred stock, less (x) all write-ups (other than
write-ups resulting from foreign currency translations and write-ups of tangible
assets of a going concern business made within 12 months after the acquisition
of such business) subsequent to the Issue Date in the book value of any asset
owned by such Person or a consolidated Subsidiary of such Person, (y) all
investments as of such date in unconsolidated Subsidiaries and in Persons that
are not Subsidiaries (except, in each case, Permitted Investments), and (z) all
unamortized debt discount and expense and unamortized deferred charges as of
such date, all of the foregoing determined in accordance with GAAP.
"Continuing Directors" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Issue Date or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Corporate Trust Office of the Exchange Trustee" shall be at the
address of the Exchange Trustee specified in Section 11.02 hereof or such other
address as to which the Exchange Trustee may give notice to the Company.
"Credit Facilities" means, with respect to the Company, one or
more debt facilities (including, without limitation, the Senior Credit Facility)
or commercial paper facilities, in each case with banks or other institutional
lenders providing for revolving credit loans, term loans, receivables financing
(including through the sale of receivables to such lenders or to special purpose
entities formed to borrow from such lenders against such receivables) or letters
of credit, in each case, as amended, restated, modified, renewed, refunded,
replaced or refinanced in whole or in part from time to time. Indebtedness under
Credit Facilities and the Canadian Credit Facility outstanding on the Issue Date
shall be deemed to have been incurred on such date in reliance on the exception
provided by clauses (i) and (ii), respectively, of the definition of Permitted
Debt.
"Custodian" means the Exchange Trustee, as custodian with respect
to the Debentures in global form, or any successor entity thereto.
"Debentures" shall mean the Series A Debentures and the Series B
Debentures and shall also include all Debentures issued as interest on
outstanding Debentures in accordance with the terms hereof and thereof.
"Default" means any event that is or with the passage of time or
the giving of notice or both would be an Event of Default.
"Definitive Debenture" means a certificated Debenture registered
in the name of the Holder thereof and issued in accordance with Section 2.06
hereof, in the form of Exhibit A-1 hereto except that such Debenture shall not
bear the Global Debenture Legend and shall not have the "Schedule of Exchanges
of Interests in the Global Debenture" attached thereto.
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"Depositary" means, with respect to the Debentures issuable or
issued in whole or in part in global form, the Person specified in Section 2.03
hereof as the Depositary with respect to the Debentures, and any and all
successors thereto appointed as depositary hereunder and having become such
pursuant to the applicable provision of this Exchange Indenture.
"Designated Exchange Debenture Senior Debt" has the meaning set
forth in Section 10.14 hereof.
"Disqualified Stock" means any Capital Stock that, by its terms
(or by the terms of any security into which it is convertible, or for which it
is exchangeable, in each case at the option of the holder thereof), or upon the
happening of any event, matures or is mandatorily redeemable, pursuant to a
sinking fund obligation or otherwise, or redeemable at the option of the Holder
thereof, in whole or in part, on or prior to the date that is 91 days after the
date on which the Exchangeable Preferred Stock matures; provided, however, that
any Capital Stock that would constitute Disqualified Stock solely because the
holders thereof have the right to require the Company to repurchase such Capital
Stock upon the occurrence of a Change of Control or an Asset Sale shall not
constitute Disqualified Stock if the terms of such Capital Stock provide that
the Company may not repurchase or redeem any such Capital Stock pursuant to such
provisions unless such repurchase or redemption complies with Section 4.07
hereof.
"Equity Interests" means Capital Stock and all warrants, options
or other rights to acquire Capital Stock (but excluding any debt security that
is convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an offering of common stock (other than
Disqualified Stock) of the Company or any direct or indirect parent corporation
of the Company (a "Parent Corporation"), other than an offering pursuant to Form
S-8 (or any successor thereto) and other than common stock issued pursuant to
employee benefit plans or as compensation to employees; provided that in the
case of an Equity Offering by a Parent Corporation, such Parent Corporation
contributes to the common equity of the Company the portion of the net cash
proceeds thereof necessary to pay the aggregate redemption price of the
Exchangeable Preferred Stock or Exchange Debentures, as the case may be, to be
redeemed in connection therewith.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Exchange Debenture Senior Indebtedness" has the meaning set forth
in Section 10.14 hereof.
"Exchange Indenture" means this Exchange Indenture, dated May,
1998, between the Company and the Exchange Trustee, governing the Company's 12
1/2% Subordinated Exchange Debentures Due 2010.
"Exchange Offer" has the meaning set forth in the Preferred Stock
Registration Rights Agreement.
"Exchange Offer Registration Statement" has the meaning set forth
in the Preferred Stock Registration Rights Agreement.
"Exchange Trustee" means the trustee under this Exchange
Indenture.
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"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries (other than Indebtedness under the Senior Credit
Facility) in existence on the Issue Date, until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period,
the sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted Subsidiaries for such period, whether paid or accrued
(including, without limitation, amortization of debt issuance costs and original
issue discount, non-cash interest payments, the interest component of any
deferred payment obligations, the interest component of all payments associated
with Capital Lease Obligations, commissions, discounts and other fees and
charges incurred in respect of letter of credit or bankers' acceptance
financings, and net payments (if any) pursuant to Hedging Obligations) and (ii)
the consolidated interest of such Person and its Restricted Subsidiaries that
was capitalized during such period, and (iii) any interest expense on
Indebtedness of another Person that is Guaranteed by such Person or one of its
Restricted Subsidiaries or secured by a Lien on assets of such Person or one of
its Restricted Subsidiaries (whether or not such Guarantee or Lien is called
upon) and (iv) the product of (a) all dividend payments, whether or not in cash,
on any series of preferred stock of such Person or any of its Restricted
Subsidiaries, other than dividend payments on Equity Interests payable solely in
Equity Interests of the Company (other than Disqualified Stock) or to the
Company or a Restricted Subsidiary of the Company, times (b) a fraction, the
numerator of which is one and the denominator of which is one minus the then
current combined federal, state and local statutory tax rate of such Person,
expressed as a decimal, in each case, on a consolidated basis and in accordance
with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the referent Person or any of its Subsidiaries incurs, assumes, Guarantees or
redeems any Indebtedness (other than revolving credit borrowings) or issues or
redeems preferred stock subsequent to the commencement of the period for which
the Fixed Charge Coverage Ratio is being calculated but prior to the date on
which the event for which the calculation of the Fixed Charge Coverage Ratio is
made (the "Calculation Date"), then the Fixed Charge Coverage Ratio shall be
calculated giving pro forma effect to such incurrence, assumption, Guarantee or
redemption of Indebtedness, or such issuance or redemption of preferred stock,
as if the same had occurred at the beginning of the applicable four-quarter
reference period. In addition, for purposes of making the computation referred
to above, (i) acquisitions that have been made by the Company or any of its
Restricted Subsidiaries, including through mergers or consolidations and
including any related financing transactions, during the four-quarter reference
period or subsequent to such reference period and on or prior to the Calculation
Date shall be deemed to have occurred on the first day of the four-quarter
reference period and Consolidated Cash Flow for such reference period shall be
calculated without giving effect to clause (iii) of the proviso set forth in the
definition of Consolidated Net Income (adjusting for, in the case of an Asset
Acquisition or merger or consolidation permitted under Section 5.01 hereof, any
operating expense or cost reduction of such Person or the Person to be acquired
which, in the good faith estimate of management, will be eliminated or realized,
as the case may be, as a result of such Asset Acquisition, merger or
consolidation) and (ii) the Consolidated Cash Flow attributable to discontinued
operations, as determined in accordance with GAAP, and operations or businesses
disposed of prior to the Calculation Date, shall be excluded, and (iii) the
Fixed Charges attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, but only to the extent that the obligations
giving rise to such Fixed Charges will not be obligations of the referent Person
or any of its Restricted Subsidiaries following the Calculation Date.
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<PAGE>
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect from time to time.
"Global Debentures" means, individually and collectively, each of
the Restricted Global Debentures and the Unrestricted Global Debentures, in the
form of Exhibit A hereto issued in accordance with Section 2.01, 2.06(b)(iv),
2.06(d)(ii) or 2.06(f) hereof.
"Global Debenture Legend" means the legend set forth in Section
2.06(g)(ii), which is required to be placed on all Global Debentures issued
under this Exchange Indenture.
"Government Securities" means direct obligations of, or
obligations guaranteed by, the United States of America, and the payment for
which the United States pledges its full faith and credit.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, by way of a
pledge of assets or through letters of credit or reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"Guarantor" means a guarantor of the Notes under the Indenture.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate or currency swap agreements,
interest rate or currency cap agreements and interest rate or currency collar
agreements and (ii) other agreements or arrangements designed to protect such
Person against fluctuations in interest rates or currency.
"Holder" means a Person in whose name a Debenture is registered.
"Indebtedness" means, with respect to any Person, any indebtedness
of such Person, whether or not contingent, in respect of borrowed money or
evidenced by bonds, notes, debentures or similar instruments or letters of
credit (or reimbursement agreements in respect thereof) or banker's acceptances
or representing Capital Lease Obligations or the balance deferred and unpaid of
the purchase price of any property or representing any Hedging Obligations,
except any such balance that constitutes an accrued expense or trade payable, if
and to the extent any of the foregoing (other than letters of credit and Hedging
Obligations) would appear as a liability upon a balance sheet of such Person
prepared in accordance with GAAP, as well as all Indebtedness of others secured
by a Lien on any asset of such Person (whether or not such Indebtedness is
assumed by such Person) and, to the extent not otherwise included, the Guarantee
by such Person of any indebtedness of any other Person. The amount of any
Indebtedness outstanding as of any date shall be (i) the accreted value thereof,
in the case of any Indebtedness issued with original issue discount and (ii) the
principal amount thereof, together with any interest thereon that is more than
30 days past due, in the case of any other Indebtedness.
"Indenture" means the Indenture, dated May 18, 1998, by and among
the Company, the Guarantors and the Trustee, governing the Company's 101/8%
Senior Subordinated Notes due 2008.
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"Indirect Participant" means a Person who holds a beneficial
interest in a Global Debenture through a Participant.
"Institutional Accredited Investor" means an institution that is
an "accredited investor" as defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act, who are not also QIBs.
"Investments" means, with respect to any Person, all investments
by such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Restricted Subsidiary
of the Company such that, after giving effect to any such sale or disposition,
such Person is no longer a Restricted Subsidiary of the Company, the Company
shall be deemed to have made an Investment on the date of any such sale or
disposition equal to the fair market value of the Equity Interests of such
Restricted Subsidiary not sold or disposed of in an amount determined as
provided in the final paragraph of Section 4.07 hereof.
"Issue Date" means the date of original issuance of the
Exchangeable Preferred Stock.
"Letter of Transmittal" means the letter of transmittal to be
prepared by the Company and sent to all Holders of the Debentures for use by
such Holders in connection with the Exchange Offer.
"Lien" means, with respect to any asset, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of such
asset, whether or not filed, recorded or otherwise perfected under applicable
law (including any conditional sale or other title retention agreement, any
lease in the nature thereof, any option or other agreement to sell or give a
security interest in and any filing of or agreement to give any financing
statement under the Uniform Commercial Code (or equivalent statutes) of any
jurisdiction).
"Liquidated Damages" means all liquidated damages then owing
pursuant to Section 5 of the Preferred Stock Registration Rights Agreement.
"Management Agreement" means that certain Management Agreement
dated the Issue Date among the Principals, the Company and Holdings, as in
effect on the Issue Date.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends, (i) excluding, however, (x)
any gain (but not loss), together with any related provision for taxes on such
gain (but not loss), realized in connection with (a) any Asset Sale (including,
without limitation, dispositions pursuant to sale and leaseback transactions) or
(b) the disposition of any securities by such Person or any of its Restricted
Subsidiaries or the extinguishment of any Indebtedness of such Person or any of
its Restricted Subsidiaries and (y) any extraordinary gain (but not loss),
together with any related provision for taxes on such extraordinary gain (but
not loss) and (ii) less the aggregate amount of all Restricted Payments made by
such Person or any of its Restricted Subsidiaries for such period pursuant to
clause (vii) of the second paragraph of Section 4.07 hereof times one minus the
then combined federal, state and local statutory tax rate of the Company.
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<PAGE>
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness (other than Senior Indebtedness) secured by a Lien
on the asset or assets that were the subject of such Asset Sale and any reserve
for adjustment in respect of the sale price of such asset or assets established
in accordance with GAAP.
"New Exchange Debentures" means the Debentures issued in the
Exchange Offer pursuant to Section 2.06(f) hereof.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender, and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Exchange Debentures) of the Company or any of its Restricted Subsidiaries to
declare a default on such other Indebtedness or cause the payment thereof to be
accelerated or payable prior to its stated maturity and (iii) as to which the
lenders have been notified in writing that they will not have any recourse to
the stock or assets of the Company or any of its Restricted Subsidiaries.
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed by (i) the
Chairman of the Board of Directors, the Chief Executive Officer, the President
or a Vice President of the Company and (ii) the Chief Financial Officer or the
Secretary of the Company, which certificate shall comply with this Exchange
Indenture.
"Opinion of Counsel" means an opinion from legal counsel that
meets the requirements of Section 11.05 hereof. The counsel may be an employee
of or counsel to the Company, any Subsidiary of the Company or the Exchange
Trustee.
"Parity Notes" means $13.0 million in aggregate principal amount
of the Company's 101/8% Series A Senior Subordinated Notes due 2008, issued
under the Indenture.
"Participant" means, with respect to the Depositary, Euroclear or
Cedel, a Person who has an account with the Depositary, Euroclear or Cedel,
respectively (and, with respect to The Depository Trust Company, shall include
Euroclear and Cedel).
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"Participating Broker-Dealer" has the meaning set forth in the
Preferred Stock Registration Rights Agreement.
"Permitted Business" means the business of the Company and its
Restricted Subsidiaries conducted on the Issue Date and businesses reasonably
related or ancillary thereto.
"Permitted Investments" means (a) any Investment in the Company or
in a Restricted Subsidiary of the Company; (b) any Investment in Cash
Equivalents; (c) any Investment by the Company or any Restricted Subsidiary of
the Company in a Person, if as a result of such Investment (i) such Person
becomes a Restricted Subsidiary of the Company or (ii) such Person is merged,
consolidated or amalgamated with or into, or transfers or conveys substantially
all of its assets to, or is liquidated into, the Company or a Restricted
Subsidiary of the Company; (d) any Investment made as a result of the receipt of
non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with Section 3.09 and 4.10 hereof or any transaction not constituting
an Asset Sale by reason of the $1.0 million threshold contained in the
definition thereof; (e) any acquisition of assets solely in exchange for the
issuance of Equity Interests (other than Disqualified Stock) of the Company; (f)
Hedging Obligations entered into in the ordinary course of the Company's or its
Restricted Subsidiaries' businesses and otherwise in compliance with this
Exchange Indenture; (g) Investments in securities of trade creditors or
customers received in settlement of obligations or pursuant to any plan of
reorganization or similar arrangement upon the bankruptcy of insolvency of such
trade creditors of customers; (h) Investments by the Company or a Restricted
Subsidiary in a Receivables Subsidiary or any Investment by a Receivables
Subsidiary in any other Person, in each case, in connection with a Qualified
Receivables Transaction; and (i) other Investments in any Person having an
aggregate fair market value (measured on the date each such Investment was made
and without giving effect to subsequent changes in value), when taken together
with all other Investments made pursuant to this clause (i) that are at the time
outstanding, not to exceed the greater of (A) $10.0 million and (B) 5% of Total
Assets.
"Permitted Junior Securities" means Equity Interests in the
Company or debt securities that are subordinated to all Exchange Debenture
Senior Indebtedness (and any debt securities issued in exchange for Exchange
Debenture Senior Indebtedness) to substantially the same extent as, or to a
greater extent than, the Exchange Debentures are subordinated to Exchange
Debenture Senior Indebtedness pursuant to Article 10 of this Exchange Indenture.
"Permitted Liens" means (i) Liens on assets of the Company
securing Exchange Debenture Senior Indebtedness of the Company and Liens on
assets of the Company's Restricted Subsidiaries; (ii) Liens in favor of the
Company; (iii) Liens on property of a Person existing at the time such Person is
merged with or into or consolidated with the Company or any Restricted
Subsidiary of the Company; provided that such Liens were in existence prior to
the contemplation of such merger or consolidation and do not extend to any
assets other than those of the Person merged into or consolidated with the
Company; (iv) Liens on property existing at the time of acquisition thereof by
the Company or any Restricted Subsidiary of the Company, provided that such
Liens were in existence prior to the contemplation of such acquisition; (v)
Liens to secure the performance of statutory obligations, surety or appeal
bonds, performance bonds or other obligations of a like nature incurred in the
ordinary course of business; (vi) Liens to secure Indebtedness (including
Capital Lease Obligations) permitted by clause (v) of the second paragraph of
Section 4.09 hereof covering only the assets acquired with such Indebtedness;
(vii) Liens existing on the Issue Date; (viii) Liens for taxes, assessments or
governmental charges or claims that are not yet delinquent or that are being
contested in good faith by appropriate proceedings promptly instituted and
diligently concluded, provided that any reserve or other appropriate provision
as shall be
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required in conformity with GAAP shall have been made therefor; (ix) Liens on
assets of Unrestricted Subsidiaries that secure Non-Recourse Debt of
Unrestricted Subsidiaries; (x) Liens of the Company or a Wholly Owned Restricted
Subsidiary on assets of any Restricted Subsidiary of the Company; (xi) Liens
securing Permitted Refinancing Indebtedness which is incurred to refinance any
Indebtedness which has been secured by a Lien permitted under this Indenture and
which has been incurred in accordance with the provisions of this Indenture,
provided, however, that such Liens (A) are not materially less favorable to the
Holders and are not materially more favorable to the lienholders with respect to
such Liens than the Liens in respect of the Indebtedness being refinanced and
(B) do not extend to or cover any property or assets of the Company or any of
its Restricted Subsidiaries not securing the Indebtedness so refinanced; (xii)
Liens incurred or deposits made in the ordinary course of business in connection
with workers' compensation, unemployment insurance and other types of social
security or similar obligations, including any lien securing letters of credit
issued in the ordinary course of business consistent with past practice in
connection therewith, or to secure the performance of tenders, statutory
obligations, surety and appeal bonds, bids, leases, government contracts,
performance and return-of-money bonds and other similar obligations (exclusive
of obligations for the payment of borrowed money); (xiii) judgment Liens not
giving rise to an Event of Default so long as such Lien is adequately bonded and
any appropriate legal proceedings which may have been duly initiated for the
review of such judgment shall not have been finally terminated or the period
within which such proceedings may be initiated shall not have expired; (xiv)
easements, rights-of-way, zoning restrictions and other similar charges or
encumbrances in respect of real property not interfering in any material respect
with the ordinary conduct of the business of the Company or any of its
Restricted Subsidiaries; (xv) any interest or title of a lessor under any lease,
whether or not characterized as capital or operating; provided that such Liens
do not extend to any property or assets which is not leased property subject to
such lease; (xvi) Liens upon specific items of inventory or other goods and
proceeds of any Person securing such Person's obligations in respect of bankers'
acceptances issued or created for the account of such Person to facilitate the
purchase, shipment or storage of such inventory or other goods; (xvii) Liens
securing reimbursement obligations with respect to letters of credit which
encumber documents and other property relating to such letters of credit and
products and proceeds thereof; (xviii) Liens encumbering deposits made to secure
obligations arising from statutory, regulatory, contractual, or warranty
requirements of the Company or any of its Restricted Subsidiaries, including
rights of offset and set-off; (xix) Liens securing Hedging Obligations which
Hedging Obligations relate to Indebtedness that is otherwise permitted under
this Indenture; (xx) leases or subleases granted to others not interfering in
any material respect with the business of the Company or its Restricted
Subsidiaries; (xxi) Liens arising out of consignment or similar arrangements for
the sale of goods entered into by the Company or any Restricted Subsidiary in
the ordinary course of business; (xxii) Liens or assets of a Receivables
Subsidiary arising in connection with a Qualified Receivables Transaction;
(xxiii) Liens incurred in the ordinary course of business of the Company or any
Restricted Subsidiary of the Company with respect to obligations that do not
exceed $5.0 million at any one time outstanding and that (a) are not incurred in
connection with the borrowing of money or the obtaining of advances or credit
(other than trade credit in the ordinary course of business) and (b) do not in
the aggregate materially detract from the value of the property or materially
impair the use thereof in the operation of business by the Company or such
Restricted Subsidiary; and (xxiv) Liens securing Acquired Debt incurred in
accordance with clause (ix) of Section 4.09 hereof; provided, that (A) such
Liens secured such Acquired Debt at the time of and prior to the incurrence of
such Acquired Debt by the Company or a Restricted Subsidiary of the Company and
were not granted in connection with, or in anticipation of, the incurrence of
such Acquired Debt by the Company or a Restricted Subsidiary of the Company and
(B) such Liens do not extend to or cover any property or assets of the Company
or any of its Restricted Subsidiaries other than the property or assets that
secured the Acquired Debt prior to the time such Indebtedness became Acquired
Debt of the Company or a Restricted Subsidiary
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of the Company and are not more favorable to the lienholders than those securing
the Acquired Debt prior to the incurrence of such Acquired Debt by the Company
or a Restricted Subsidiary of the Company.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any of its Restricted Subsidiaries
(other than intercompany Indebtedness); provided that: (i) the principal amount
(or accreted value, if applicable) of such Permitted Refinancing Indebtedness
does not exceed the principal amount of (or accreted value, if applicable), plus
accrued interest on, the Indebtedness so extended, refinanced, renewed,
replaced, defeased or refunded (plus the amount of reasonable expenses incurred
in connection therewith); (ii) such Permitted Refinancing Indebtedness has a
final maturity date later than the final maturity date of, and has a Weighted
Average Life to Maturity equal to or greater than the Weighted Average Life to
Maturity of, the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; (iii) if the Indebtedness being extended, refinanced,
renewed, replaced, defeased or refunded is subordinated in right of payment to
the Exchange Debentures, such Permitted Refinancing Indebtedness has a final
maturity date later than the final maturity date of, and is subordinated in
right of payment to, the Exchange Debentures on terms at least as favorable to
the Holders of Exchange Debentures as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (iv) such Indebtedness is incurred either by the
Company or by the Restricted Subsidiary who is the obligor on the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded.
"Person" means an individual, partnership, corporation, limited
liability company, unincorporated organization, trust or joint venture, or a
governmental agency or political subdivision thereof.
"Preferred Stock Registration Rights Agreement" means the
Preferred Stock Registration Rights Agreement, dated as of May 18, 1998, between
the Company and the Initial Purchasers.
"Principals" means Vestar Capital Partners III, L.P.
"Private Placement Legend" means the legend set forth in Section
2.06(g)(i) to be placed on all Debentures issued under this Exchange Indenture
except where otherwise permitted by the provisions of this Exchange Indenture.
"Purchase Money Note" means a promissory note evidencing a line of
credit, or evidencing other Indebtedness owed to the Company or any Restricted
Subsidiary in connection with a Qualified Receivables Transaction, which note
shall be repaid from cash available to the maker of such note, other than
amounts required to be established as reserves pursuant to agreement, amounts
paid to investors in respect of interest, principal and other amounts owing to
such investors and amounts paid in connection with the purchase of newly
generated receivables.
"QIB" means a "qualified institutional buyer" as defined in Rule
144A.
"Qualified Proceeds" means any of the following or any combination
of the following: (i) cash, (ii) Cash Equivalents, (iii) long-term assets that
are used or useful in a Permitted Business and (iv) the Capital Stock of any
Person engaged primarily in a Permitted Business if, in connection with the
receipt by the company or any Restricted Subsidiary of the Company of such
Capital Stock, (a) such Person becomes a Wholly-Owned Restricted Subsidiary or
(b) such Person is merged, consolidated or
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amalgamated with or into, or transfers or conveys substantially all of its
assets to, or is liquidated into, the Company or any Wholly-Owned Restricted
Subsidiary of the Company.
"Receivables Subsidiary" means a Wholly Owned Restricted
Subsidiary (other than a Guarantor) which engages in no activities other than in
connection with the financing of accounts receivables and which is designated by
the Board of Directors of the Company (as provided below) as a Receivables
Subsidiary (a) no portion of the Indebtedness or any other Obligations
(contingent or otherwise) of which (i) is guaranteed by the Company or any other
Restricted Subsidiary (excluding guarantees of obligations (other than the
principal of, and interest on, Indebtedness) pursuant to Standard Securitization
Undertakings), (ii) is recourse to or obligates the Company or any other
Restricted Subsidiary in any way other than pursuant to Standard Securitization
Undertakings or (iii) subjects any property or asset of the Company or any other
Restricted Subsidiary, directly or indirectly, contingently or otherwise, to the
satisfaction thereof, other than pursuant to Standard Securitization
Undertakings, (b) with which neither the Company nor any other Restricted
Subsidiary has any material contract, agreement, arrangement or understanding
(except in connection with a Purchase Money Note or Qualified Receivables
Transaction) other than on terms no less favorable to the Company or such other
Restricted Subsidiary than those that might be obtained at the time from persons
that are not Affiliates of the Company, other than fees payable in the ordinary
course of business in connection with servicing accounts receivable, and (c) to
which neither the Company nor any other Restricted Subsidiary has any obligation
to maintain or preserve such entity's financial condition or cause such entity
to achieve certain levels of operating results. Any such designation by the
Board of Directors of the Company shall be evidenced to the Exchange Trustee by
filing with the Exchange Trustee a certified copy of the resolution of the Board
of Directors of the Company giving effect to such designation and an Officers'
Certificate certifying, to the best of such officers' knowledge and belief after
consulting with counsel, that such designation complied with the foregoing
conditions.
"Related Party" with respect to any Principal means (A) any
controlling stockholder, Subsidiary, or spouse or immediate family member (in
the case of an individual) of such Principal or (B) any trust, corporation,
partnership or other entity, the beneficiaries, stockholders, partners, owners
or Persons beneficially holding a majority interest of which consist of such
Principal and/or such other Persons referred to in the immediately preceding
clause (A).
"Reorganization Charges" means (i) up to $3.3 million of facility
closing and reengineering costs incurred by the Company and its Subsidiaries
prior to the Issue Date, (ii) up to $550,000 of losses incurred by the Company
and its Subsidiaries prior to the Issue Date associated with (x) the Canadian
retail operations of the Company and its Subsidiaries and (y) the Mexican and
Guatemalan operations of the Company and its Subsidiaries, in each case
calculated in accordance with GAAP on a consolidated basis, (iii) up to $4.0
million of bankruptcy reorganization costs incurred by the Company and its
Restricted Subsidiaries prior to the Issue Date, and (iv) the costs and expenses
of the Company and its Subsidiaries incurred in connection with the Transaction,
in each case calculated in accordance with GAAP on a consolidated basis.
"Responsible Officer," when used with respect to the Exchange
Trustee, means any officer within the Corporate Trust Administration of the
Exchange Trustee (or any successor group of the Exchange Trustee) or any other
officer of the Exchange Trustee customarily performing functions similar to
those performed by any of the above designated officers and also means, with
respect to a particular corporate trust matter, any other officer to whom such
matter is referred because of his knowledge of and familiarity with the
particular subject.
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"Restricted Definitive Debenture" means a Definitive Debenture
bearing the Private Placement Legend.
"Restricted Global Debenture" means a Global Debenture bearing the
Private Placement Legend.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Rule 144" means Rule 144 promulgated under the Securities Act.
"Rule 144A" means Rule 144A promulgated under the Securities Act.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Senior Credit Facility" means the credit agreement to be entered
into on or prior to the Issue Date by and among the Company, NationsBanc
Montgomery Securities LLC, as arranger and syndication agent, certain lending
parties thereto and NationsBank, N.A., as agent, including any related notes,
guarantees, collateral documents, instruments and agreements executed in
connection therewith, as such credit agreements and/or related documents may be
amended, restated, supplemented, renewed, replaced or otherwise modified from
time to time whether or not with the same agent, trustee, representative lenders
or holders, and, subject to the proviso to the next succeeding sentence,
irrespective of any changes in the terms and conditions thereof. Without
limiting the generality of the foregoing, the term "Senior Credit Facility"
shall include any amendment, amendment and restatement, renewal, extension,
restructuring, supplement or modification to any Senior Credit Facility and all
refundings, refinancings and replacements of any Senior Credit Facility,
including any agreement (i) extending the maturity of any Indebtedness incurred
thereunder or contemplated thereby, (ii) adding or deleting borrowers or
guarantors thereunder, so long as the borrowers and issuers thereunder include
one or more of the Company and its Subsidiaries and their respective successors
and assigns, or (iii) increasing the amount of Indebtedness incurred thereunder
or available to be borrowed thereunder.
"Shelf Registration Statement" means the Shelf Registration
Statement as defined in the Preferred Stock Registration Rights Agreement.
"Significant Subsidiary" means any Subsidiary that would be a
"significant subsidiary" as defined in Article 1, Rule 1-02 of Regulation S-X,
promulgated pursuant to the Act, as such Regulation is in effect on the date
hereof.
"Standard Securitization Undertakings" means representations,
warranties, covenants and indemnities entered into by the Company or any
Restricted Subsidiary which are reasonably customary in an accounts receivable
transaction.
"Stated Maturity" means, with respect to any installment of
interest or principal on any series of Indebtedness, the date on which such
payment of interest or principal was scheduled to be paid in the original
documentation governing such Indebtedness, and shall not include any contingent
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obligations to repay, redeem or repurchase any such interest or principal prior
to the date originally scheduled for the payment thereof.
"Subsidiary" means, with respect to any Person, (i) any
corporation, association or other business entity of which more than 50% of the
total voting power of shares of Capital Stock entitled (without regard to the
occurrence of any contingency) to vote in the election of directors, managers or
Exchange Trustees thereof is at the time owned or controlled, directly or
indirectly, by such Person or one or more of the other Subsidiaries of that
Person (or a combination thereof) and (ii) any partnership (a) the sole general
partner or the managing general partner of which is such Person or a Subsidiary
of such Person or (b) the only general partners of which are such Person or of
one or more Subsidiaries of such Person (or any combination thereof).
"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. ss.ss.
77aaa-77bbbb) as in effect on the date on which this Exchange Indenture is
qualified under the TIA.
"Total Assets" means, with respect to any Person, the total
consolidated assets of such Person and its Restricted Subsidiaries, as shown on
the most recent balance sheet of such Person.
"Transfer Agent" means the transfer agent for the Exchangeable
Preferred Stock, which shall be The Bank of New York unless and until a
successor is selected by the Company.
"Unrestricted Global Debenture" means a permanent global Debenture
in the form of Exhibit A-1 attached hereto that bears the Global Debenture
Legend and that has the "Schedule of Exchanges of Interests in the Global
Debenture" attached thereto, and that is deposited with or on behalf of and
registered in the name of the Depositary, representing a series of Debentures
that do not bear the Private Placement Legend.
"Unrestricted Definitive Debenture" means one or more Definitive
Debentures that do not bear and are not required to bear the Private Placement
Legend.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company
that is designated by the Board of Directors as an Unrestricted Subsidiary
pursuant to a Board Resolution; but only to the extent that such Subsidiary: (a)
has no Indebtedness other than Non-Recourse Debt; (b) is not party to any
agreement, contract, arrangement or understanding with the Company or any
Restricted Subsidiary of the Company unless the terms of any such agreement,
contract, arrangement or understanding are no less favorable to the Company or
such Restricted Subsidiary than those that might be obtained at the time from
Persons who are not Affiliates of the Company; (c) is a Person with respect to
which neither the Company nor any of its Restricted Subsidiaries has any direct
or indirect obligation (x) to subscribe for additional Equity Interests or (y)
to maintain or preserve such Person's financial condition or to cause such
Person to achieve any specified levels of operating results; and (d) has not
guaranteed or otherwise directly or indirectly provided credit support for any
Indebtedness of the Company or any of its Restricted Subsidiaries. Any such
designation by the Board of Directors shall be evidenced to the Exchange Trustee
by filing with the Exchange Trustee a certified copy of the Board Resolution
giving effect to such designation and an Officers' Certificate certifying that
such designation complied with the foregoing conditions and was permitted by
Section 4.07 hereof. If, at any time, any Unrestricted Subsidiary would fail to
meet the foregoing requirements as an Unrestricted Subsidiary, it shall
thereafter cease to be an Unrestricted Subsidiary for purposes of the Exchange
Indenture and any Indebtedness of such Subsidiary shall be deemed to be incurred
by a Restricted Subsidiary of the Company as of such date (and, if such
Indebtedness
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is not permitted to be incurred as of such date under Section 4.09 hereof, the
Company shall be in default of such covenant). The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under Section 4.09 hereof,
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period and (ii) no Default or Event of
Default or Voting Rights Triggering Event, as applicable, would be in existence
following such designation.
"U.S. Person" means a U.S. person as defined in Rule 902(o) under
the Securities Act.
"Voting Stock" of any Person as of any date means the Capital
Stock of such Person that is at the time entitled to vote in the election of the
Board of Directors of such Person.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness or Disqualified Stock at any date, the number of years obtained by
dividing (i) the sum of the products obtained by multiplying (a) the amount of
each then remaining installment, sinking fund, serial maturity or other required
payments of principal or liquidation preference, as applicable, including
payment at final maturity, in respect thereof, by (b) the number of years
(calculated to the nearest one-twelfth) that will elapse between such date and
the making of such payment, by (ii) the then outstanding principal amount or
liquidation preference, if applicable, of such Indebtedness or Disqualified
Stock.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person and one or more Wholly Owned Restricted
Subsidiaries of such Person.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
"Affiliate Transaction"..............................4.11
"Asset Sale".........................................4.10
"Asset Sale Offer"...................................3.09
"Authentication Order"...............................2.02
"Change of Control Offer"............................4.14
"Change of Control Payment"..........................4.14
"Change of Control Payment Date" ....................4.14
"Covenant Defeasance"................................8.03
"Event of Default"...................................6.01
"Excess Proceeds"....................................4.10
"incur"..............................................4.09
"Legal Defeasance" ..................................8.02
"Offer Amount".......................................3.09
"Offer Period".......................................3.09
"Paying Agent".......................................2.03
"Permitted Debt".....................................4.09
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"Purchase Date"......................................3.09
"Registrar"..........................................2.03
"Restricted Payments"................................4.07
SECTION 1.03. TRUST INDENTURE ACT PROVISIONS.
Whenever this Exchange Indenture refers to a provision of the TIA,
the provision is incorporated by reference in and made a part of this Exchange
Indenture.
The following TIA terms used in this Exchange Indenture have the following
meanings:
"indenture securities" means the Debentures;
"indenture security Holder" means a Holder of a Debenture;
"indenture to be qualified" means this Exchange Indenture;
"indenture trustee" or "institutional trustee" means the Exchange
Trustee; and
"obligor" on the Debentures means the Company and any successor
obligor upon the Debentures.
All other terms used in this Exchange Indenture that are defined
by the TIA, defined by TIA reference to another statute or defined by SEC rule
under the TIA have the meanings so assigned to them.
SECTION 1.04. RULES OF CONSTRUCTION.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the
plural include the singular;
(5) provisions apply to successive events and transactions;
and
(6) references to sections of or rules under the Securities
Act shall be deemed to include substitute, replacement of
successor sections or rules adopted by the SEC from time to time.
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ARTICLE 2.
THE DEBENTURES
SECTION 2.01. FORM AND DATING.
(a) General. The Debentures and the Exchange Trustee's certificate
of authentication shall be substantially in the form of Exhibit A hereto. The
Debentures may have notations, legends or endorsements required by law, stock
exchange rule or usage. Each Debenture shall be dated the date of its
authentication.
The terms and provisions contained in the Debentures shall
constitute, and are hereby expressly made, a part of this Exchange Indenture and
the Company and the Exchange Trustee, by their execution and delivery of this
Exchange Indenture, expressly agree to such terms and provisions and to be bound
thereby. However, to the extent any provision of any Debenture conflicts with
the express provisions of this Exchange Indenture, the provisions of this
Exchange Indenture shall govern and be controlling.
(b) Global Debentures. Debentures issued in global form shall be
substantially in the form of Exhibit A-1 attached hereto (including the Global
Debenture Legend thereon and the "Schedule of Exchanges of Interests in the
Global Debenture" attached thereto). Debentures issued in definitive form shall
be substantially in the form of Exhibit A-1 attached hereto (but without the
Global Debenture Legend thereon and without the "Schedule of Exchanges of
Interests in the Global Debenture" attached thereto). Each Global Debenture
shall represent such of the outstanding Debentures as shall be specified therein
and each shall provide that it shall represent the aggregate principal amount of
outstanding Debentures from time to time endorsed thereon and that the aggregate
principal amount of outstanding Debentures represented thereby may from time to
time be reduced or increased, as appropriate, to reflect exchanges and
redemptions. Any endorsement of a Global Debenture to reflect the amount of any
increase or decrease in the aggregate principal amount of outstanding Debentures
represented thereby shall be made by the Exchange Trustee or the Debenture
Custodian, at the direction of the Exchange Trustee, in accordance with
instructions given by the Holder thereof as required by Section 2.06 hereof.
SECTION 2.02. EXECUTION AND AUTHENTICATION.
Two Officers shall sign the Debentures for the Company by manual
or facsimile signature. The Company's seal shall be reproduced on the Debentures
and may be in facsimile form.
If an Officer whose signature is on a Debenture no longer holds
that office at the time a Debenture is authenticated, the Debenture shall
nevertheless be valid.
A Debenture shall not be valid until authenticated by the manual
signature of the Exchange Trustee. The signature shall be conclusive evidence
that the Debenture has been authenticated under this Exchange Indenture.
The Exchange Trustee shall, upon a written order of the Company
signed by two Officers (an "Authentication Order"), authenticate Debentures for
original issue up to the aggregate principal amount stated in paragraph 4 of the
Debentures, plus Debentures issued to pay Liquidated Damages pursuant to
paragraph 2 of the Debentures. The aggregate principal amount of Debentures
outstanding at any time may not exceed such amount except as provided in Section
2.07 hereof.
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The Exchange Trustee may appoint an authenticating agent
acceptable to the Company to authenticate Debentures. An authenticating agent
may authenticate Debentures whenever the Exchange Trustee may do so. Each
reference in this Exchange Indenture to authentication by the Exchange Trustee
includes authentication by such agent. An authenticating agent has the same
rights as an Agent to deal with Holders or an Affiliate of the Company.
SECTION 2.03. REGISTRAR AND PAYING AGENT.
The Company shall maintain an office or agency where Debentures
may be presented for registration of transfer or for exchange ("Registrar") and
an office or agency where Debentures may be presented for payment ("Paying
Agent"). The Registrar shall keep a register of the Debentures and of their
transfer and exchange. The Company may appoint one or more co-registrars and one
or more additional paying agents. The term "Registrar" includes any co-registrar
and the term "Paying Agent" includes any additional paying agent. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company shall notify the Exchange Trustee in writing of the name and address of
any Agent not a party to this Exchange Indenture. If the Company fails to
appoint or maintain another entity as Registrar or Paying Agent, the Exchange
Trustee shall act as such. The Company or any of its Subsidiaries may act as
Paying Agent or Registrar.
The Company initially appoints The Depository Trust Company
("DTC") to act as Depositary with respect to the Global Debentures.
The Company initially appoints the Exchange Trustee to act as the
Registrar and Paying Agent and to act as Debenture Custodian with respect to the
Global Debentures.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST.
The Company shall require each Paying Agent other than the
Exchange Trustee to agree in writing that the Paying Agent will hold in trust
for the benefit of Holders or the Exchange Trustee all money held by the Paying
Agent for the payment of principal, premium or Liquidated Damages, if any, or
interest on the Debentures, and will notify the Exchange Trustee of any default
by the Company in making any such payment. While any such default continues, the
Exchange Trustee may require a Paying Agent to pay all money held by it to the
Exchange Trustee. The Company at any time may require a Paying Agent to pay all
money held by it to the Exchange Trustee. Upon payment over to the Exchange
Trustee, the Paying Agent (if other than the Company or a Subsidiary) shall have
no further liability for the money. If the Company or a Subsidiary acts as
Paying Agent, it shall segregate and hold in a separate trust fund for the
benefit of the Holders all money held by it as Paying Agent. Upon any bankruptcy
or reorganization proceedings relating to the Company, the Exchange Trustee
shall serve as Paying Agent for the Debentures.
SECTION 2.05. HOLDER LISTS.
The Exchange Trustee shall preserve in as current a form as is
reasonably practicable the most recent list available to it of the names and
addresses of all Holders and shall otherwise comply with TIA ss. 312(a). If the
Exchange Trustee is not the Registrar, the Company shall furnish to the Exchange
Trustee at least seven Business Days before each interest payment date and at
such other times as the Exchange Trustee may request in writing, a list in such
form and as of such date as the Exchange Trustee
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may reasonably require of the names and addresses of the Holders of Debentures
and the Company shall otherwise comply with TIA ss. 312(a).
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Global Debentures. A Global Debenture
may not be transferred as a whole except by the Depositary to a nominee of the
Depositary, by a nominee of the Depositary to the Depositary or to another
nominee of the Depositary, the Depositary or any such nominee to a successor
Depositary or a nominee of such successor Depositary. All Global Debentures will
be exchanged by the Company for Definitive Debentures if (i) the Company
delivers to the Exchange Trustee notice from the Depositary that it is unwilling
or unable to continue to act as Depositary or that it is no longer a clearing
agency registered under the Exchange Act and, in either case, a successor
Depositary is not appointed by the Company within 120 days after the date of
such notice from the Depositary or (ii) the Company in its sole discretion
determines that the Global Debentures (in whole but not in part) should be
exchanged for Definitive Debentures and delivers a written notice to such effect
to the Exchange Trustee. Upon the occurrence of either of the preceding events
in (i) or (ii) above, Definitive Debentures shall be issued in such names as the
Depositary shall instruct the Exchange Trustee. Global Debentures also may be
exchanged or replaced, in whole or in part, as provided in Sections 2.07 and
2.10 hereof. Every Debenture authenticated and delivered in exchange for, or in
lieu of, a Global Debenture or any portion thereof, pursuant to this Section
2.06 or Section 2.07 or 2.10 hereof, shall be authenticated and delivered in the
form of, and shall be, a Global Debenture. A Global Debenture may not be
exchanged for another Debenture other than as provided in this Section 2.06(a),
however, beneficial interests in a Global Debenture may be transferred and
exchanged as provided in Section 2.06(b), (c) or (f) hereof.
(b) Transfer and Exchange of Beneficial Interests in the Global
Debentures. The transfer and exchange of beneficial interests in the Global
Debentures shall be effected through the Depositary, in accordance with the
provisions of this Exchange Indenture and the Applicable Procedures. Beneficial
interests in the Restricted Global Debentures shall be subject to restrictions
on transfer comparable to those set forth herein to the extent required by the
Securities Act. Transfers of beneficial interests in the Global Debentures also
shall require compliance with either subparagraph (i) or (ii) below, as
applicable, as well as one or more of the other following subparagraphs, as
applicable:
(i) Transfer of Beneficial Interests in the Same Global Debenture.
Beneficial interests in any Restricted Global Debenture may be transferred to
Persons who take delivery thereof in the form of a beneficial interest in the
same Restricted Global Debenture in accordance with the transfer restrictions
set forth in the Private Placement Legend. Beneficial interests in any
Unrestricted Global Debenture may be transferred to Persons who take delivery
thereof in the form of a beneficial interest in an Unrestricted Global
Debenture. No written orders or instructions shall be required to be
delivered to the Registrar to effect the transfers described in this Section
2.06(b)(i).
(ii) All Other Transfers and Exchanges of Beneficial Interests in Global
Debentures. In connection with all transfers and exchanges of beneficial
interests that are not subject to Section 2.06(b)(i) above, the transferor of
such beneficial interest must deliver to the Registrar either (A) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to credit or cause to be credited a beneficial
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interest in another Global Debenture in an amount equal to the beneficial
interest to be transferred or exchanged and (2) instructions given in
accordance with the Applicable Procedures containing information regarding
the Participant account to be credited with such increase or (B) (1) a
written order from a Participant or an Indirect Participant given to the
Depositary in accordance with the Applicable Procedures directing the
Depositary to cause to be issued a Definitive Debenture in an amount equal to
the beneficial interest to be transferred or exchanged and (2) instructions
given by the Depositary to the Registrar containing information regarding the
Person in whose name such Definitive Debenture shall be registered to effect
the transfer or exchange referred to in (1) above. Upon consummation of an
Exchange Offer by the Company in accordance with Section 2.06(f) hereof, the
requirements of this Section 2.06(b)(ii) shall be deemed to have been
satisfied upon receipt by the Registrar of the instructions contained in the
Letter of Transmittal delivered by the Holder of such beneficial interests in
the Restricted Global Debentures. Upon satisfaction of all of the
requirements for transfer or exchange of beneficial interests in Global
Debentures contained in this Exchange Indenture and the Debentures or
otherwise applicable under the Securities Act, the Exchange Trustee shall
adjust the principal amount of the relevant Global Debenture(s) pursuant to
Section 2.06(h) hereof.
(iii) Transfer of Beneficial Interests to Another Restricted Global
Debenture. A beneficial interest in any Restricted Global Debenture may be
transferred to a Person who takes delivery thereof in the form of a
beneficial interest in another Restricted Global Debenture if the transfer
complies with the requirements of Section 2.06(b)(ii) above and the Registrar
receives the following:
(A) if the transferee will take delivery in the form of a
beneficial interest in the 144A Global Debenture, then the
transferor must deliver a certificate in the form of Exhibit B
hereto, including the certifications in item (1) thereof.
(iv) Transfer and Exchange of Beneficial Interests in a Restricted Global
Debenture for Beneficial Interests in the Unrestricted Global Debenture. A
beneficial interest in any Restricted Global Debenture may be exchanged by
any holder thereof for a beneficial interest in an Unrestricted Global
Debenture or transferred to a Person who takes delivery thereof in the form
of a beneficial interest in an Unrestricted Global Debenture if the exchange
or transfer complies with the requirements of Section 2.06(b)(ii) above and:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Preferred Stock Registration
Rights Agreement and the holder of the beneficial interest to be
transferred, in the case of an exchange, or the transferee, in the
case of a transfer, certifies in the applicable Letter of
Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Debentures or (3)
a Person who is an affiliate (as defined in Rule 144) of the
Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Preferred Stock
Registration Rights Agreement;
(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Preferred Stock Registration Rights Agreement; or
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(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Debenture proposes to exchange such beneficial interest for a
beneficial interest in an Unrestricted Global Debenture, a certificate
from such holder in the form of Exhibit C hereto, including the
certifications in item (1)(a) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Debenture proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a beneficial interest in an
Unrestricted Global Debenture, a certificate from such holder in the form
of Exhibit B hereto, including the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.
If any such transfer is effected pursuant to subparagraph (B) or
(D) above at a time when an Unrestricted Global Debenture has not yet been
issued, the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Exchange Trustee shall authenticate one
or more Unrestricted Global Debentures in an aggregate principal amount equal to
the aggregate principal amount of beneficial interests transferred pursuant to
subparagraph (B) or (D) above.
Beneficial interests in an Unrestricted Global Debenture cannot be
exchanged for, or transferred to Persons who take delivery thereof in the form
of, a beneficial interest in a Restricted Global Debenture.
(c) Transfer or Exchange of Beneficial Interests for Definitive
Debentures.
(i) Beneficial Interests in Restricted Global Debentures to Restricted
Definitive Debentures. If any holder of a beneficial interest in a Restricted
Global Debenture proposes to exchange such beneficial interest for a
Restricted Definitive Debenture or to transfer such beneficial interest to a
Person who takes delivery thereof in the form of a Restricted Definitive
Debenture, then, upon receipt by the Registrar of the following
documentation:
(A) if the holder of such beneficial interest in a Restricted
Global Debenture proposes to exchange such beneficial interest for a
Restricted Definitive Debenture, a certificate from such holder in
the form of Exhibit C hereto, including the certifications in item
(2)(a) thereof;
(B) if such beneficial interest is being transferred to a QIB
in accordance with Rule 144A under the Securities Act, a certificate
to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such beneficial interest is being transferred pursuant
to an exemption from the registration requirements of the Securities
Act in accordance with Rule 144
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under the Securities Act, a certificate to the effect set forth in
Exhibit B hereto, including the certifications in item (3)(a)
thereof;
(D) if such beneficial interest is being transferred to an
Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (B) and (C) above, a certificate to the
effect set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(E) if such beneficial interest is being transferred to the
Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item
(3)(b) thereof; or
(F) if such beneficial interest is being transferred pursuant
to an effective registration statement under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including
the certifications in item (3)(c) thereof,
the Exchange Trustee shall cause the aggregate principal amount of the
applicable Global Debenture to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Exchange Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Debenture in the appropriate principal amount. Any Definitive
Debenture issued in exchange for a beneficial interest in a Restricted Global
Debenture pursuant to this Section 2.06(c) shall be registered in such name
or names and in such authorized denomination or denominations as the holder
of such beneficial interest shall instruct the Registrar through instructions
from the Depositary and the Participant or Indirect Participant. The Exchange
Trustee shall deliver such Definitive Debentures to the Persons in whose
names such Debentures are so registered. Any Definitive Debenture issued in
exchange for a beneficial interest in a Restricted Global Debenture pursuant
to this Section 2.06(c)(i) shall bear the Private Placement Legend and shall
be subject to all restrictions on transfer contained therein.
(iii) Beneficial Interests in Restricted Global Debentures to Unrestricted
Definitive Debentures. A holder of a beneficial interest in a Restricted
Global Debenture may exchange such beneficial interest for an Unrestricted
Definitive Debenture or may transfer such beneficial interest to a Person who
takes delivery thereof in the form of an Unrestricted Definitive Debenture
only if:
(A) such exchange or transfer is effected pursuant to the
Exchange Offer in accordance with the Preferred Stock Registration
Rights Agreement and the holder of such beneficial interest, in the
case of an exchange, or the transferee, in the case of a transfer,
certifies in the applicable Letter of Transmittal that it is not (1)
a broker-dealer, (2) a Person participating in the distribution of
the Exchange Debentures or (3) a Person who is an affiliate (as
defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf
Registration Statement in accordance with the Preferred Stock
Registration Rights Agreement;
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(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Preferred Stock Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the holder of such beneficial interest in a Restricted
Global Debenture proposes to exchange such beneficial interest for a
Definitive Debenture that does not bear the Private Placement Legend, a
certificate from such holder in the form of Exhibit C hereto, including
the certifications in item (1)(b) thereof; or
(2) if the holder of such beneficial interest in a Restricted
Global Debenture proposes to transfer such beneficial interest to a Person
who shall take delivery thereof in the form of a Definitive Debenture that
does not bear the Private Placement Legend, a certificate from such holder
in the form of Exhibit B hereto, including the certifications in item (4)
thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel to the effect that such exchange or transfer is
in compliance with the Securities Act and that the restrictions on
transfer contained herein and in the Private Placement Legend are no
longer required in order to maintain compliance with the Securities
Act.
(iv) Beneficial Interests in Unrestricted Global Debentures to
Unrestricted Definitive Debentures. If any holder of a beneficial interest in
an Unrestricted Global Debenture proposes to exchange such beneficial
interest for a Definitive Debenture or to transfer such beneficial interest
to a Person who takes delivery thereof in the form of a Definitive Debenture,
then, upon satisfaction of the conditions set forth in Section 2.06(b)(ii)
hereof, the Exchange Trustee shall cause the aggregate principal amount of
the applicable Global Debenture to be reduced accordingly pursuant to Section
2.06(h) hereof, and the Company shall execute and the Exchange Trustee shall
authenticate and deliver to the Person designated in the instructions a
Definitive Debenture in the appropriate principal amount. Any Definitive
Debenture issued in exchange for a beneficial interest pursuant to this
Section 2.06(c)(iii) shall be registered in such name or names and in such
authorized denomination or denominations as the holder of such beneficial
interest shall instruct the Registrar through instructions from the
Depositary and the Participant or Indirect Participant. The Exchange Trustee
shall deliver such Definitive Debentures to the Persons in whose names such
Debentures are so registered. Any Definitive Debenture issued in exchange for
a beneficial interest pursuant to this Section 2.06(c)(iii) shall not bear
the Private Placement Legend.
(d) Transfer and Exchange of Definitive Debentures for Beneficial
Interests.
(i) Restricted Definitive Debentures to Beneficial Interests in Restricted
Global Debentures. If any Holder of a Restricted Definitive Debenture
proposes to exchange such Debenture for a beneficial interest in a Restricted
Global Debenture or to transfer such Restricted Definitive Debentures to a
Person who takes delivery thereof in the form of a beneficial interest in a
Restricted Global Debenture, then, upon receipt by the Registrar of the
following documentation:
(A) if the Holder of such Restricted Definitive Debenture proposes
to exchange such Debenture for a beneficial interest in a Restricted
Global Debenture,
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a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (2)(b) thereof;
(B) if such Restricted Definitive Debenture is being transferred to
a QIB in accordance with Rule 144A under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (1) thereof;
(C) if such Restricted Definitive Debenture is being transferred
pursuant to an exemption from the registration requirements of the
Securities Act in accordance with Rule 144 under the Securities Act, a
certificate to the effect set forth in Exhibit B hereto, including the
certifications in item (3)(a) thereof;
(D) if such Restricted Definitive Debenture is being transferred to
an Institutional Accredited Investor in reliance on an exemption from
the registration requirements of the Securities Act other than those
listed in subparagraphs (B) and (C) above, a certificate to the effect
set forth in Exhibit B hereto, including the certifications,
certificates and Opinion of Counsel required by item (3) thereof, if
applicable;
(E) if such Restricted Definitive Debenture is being transferred to
the Company or any of its Subsidiaries, a certificate to the effect set
forth in Exhibit B hereto, including the certifications in item (3)(b)
thereof; or
(F) if such Restricted Definitive Debenture is being transferred
pursuant to an effective registration statement under the Securities
Act, a certificate to the effect set forth in Exhibit B hereto,
including the certifications in item (3)(c) thereof,
the Exchange Trustee shall cancel the Restricted Definitive Debenture,
increase or cause to be increased the aggregate principal amount of, in
the case of clause (A) above, the appropriate Restricted Global Debenture,
and in the case of clause (B) above, the 144A Global Debenture.
(ii) Restricted Definitive Debentures to Beneficial Interests in
Unrestricted Global Debentures. A Holder of a Restricted Definitive Debenture
may exchange such Debenture for a beneficial interest in an Unrestricted
Global Debenture or transfer such Restricted Definitive Debenture to a Person
who takes delivery thereof in the form of a beneficial
interest in an Unrestricted Global Debenture only if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Preferred Stock Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Debentures or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Preferred Stock Registration Rights
Agreement;
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(C) such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Preferred Stock Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Definitive Debentures proposes to
exchange such Debentures for a beneficial interest in the Unrestricted
Global Debenture, a certificate from such Holder in the form of Exhibit C
hereto, including the certifications in item (1)(c) thereof; or
(2) if the Holder of such Definitive Debentures proposes to
transfer such Debentures to a Person who shall take delivery thereof in
the form of a beneficial interest in the Unrestricted Global Debenture, a
certificate from such Holder in the form of Exhibit B hereto, including
the certifications in item (4) thereof;
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests or if the Applicable Procedures so require, an
Opinion of Counsel to the effect that such exchange or transfer is in
compliance with the Securities Act and that the restrictions on transfer
contained herein and in the Private Placement Legend are no longer
required in order to maintain compliance with the Securities Act.
Upon satisfaction of the conditions of any of the subparagraphs in this
Section 2.06(d)(ii), the Exchange Trustee shall cancel the Definitive
Debentures and increase or cause to be increased the aggregate principal
amount of the Unrestricted Global Debenture.
(iii) Unrestricted Definitive Debentures to Beneficial Interests in
Unrestricted Global Debentures. A Holder of an Unrestricted Definitive
Debenture may exchange such Debenture for a beneficial interest in an
Unrestricted Global Debenture or transfer such Definitive Debentures to a
Person who takes delivery thereof in the form of a beneficial interest in an
Unrestricted Global Debenture at any time. Upon receipt of a request for such
an exchange or transfer, the Exchange Trustee shall cancel the applicable
Unrestricted Definitive Debenture and increase or cause to be increased the
aggregate principal amount of one of the Unrestricted Global Debentures.
If any such exchange or transfer from a Definitive Debenture to a
beneficial interest is effected pursuant to subparagraphs (ii)(B), (ii)(D) or
(iii) above at a time when an Unrestricted Global Debenture has not yet been
issued, the Company shall issue and, upon receipt of an Authentication Order in
accordance with Section 2.02 hereof, the Exchange Trustee shall authenticate one
or more Unrestricted Global Debentures in an aggregate principal amount equal to
the principal amount of Definitive Debentures so transferred.
(e) Transfer and Exchange of Definitive Debentures for Definitive
Debentures.
Upon request by a Holder of Definitive Debentures and such Holder's
compliance with the provisions of this Section 2.06(e), the Registrar shall
register the transfer or exchange of Definitive Debentures. Prior to such
registration of transfer or exchange, the requesting Holder shall present or
surrender to the Registrar the Definitive Debentures duly endorsed or
accompanied by a written
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<PAGE>
instruction of transfer in form satisfactory to the Registrar duly executed by
such Holder or by his attorney, duly authorized in writing. In addition, the
requesting Holder shall provide any additional certifications, documents and
information, as applicable, required pursuant to the following provisions of
this Section 2.06(e).
(i) Restricted Definitive Debentures to Restricted Definitive Debentures.
Any Restricted Definitive Debenture may be transferred to and registered in
the name of Persons who take delivery thereof in the form of a Restricted
Definitive Debenture if the Registrar receives the following:
(A) if the transfer will be made pursuant to Rule 144A under the
Securities Act, then the transferor must deliver a certificate in the
form of Exhibit B hereto, including the certifications in item (1)
thereof; and
(B) if the transfer will be made pursuant to any other exemption
from the registration requirements of the Securities Act, then the
transferor must deliver a certificate in the form of Exhibit B hereto,
including the certifications, certificates and Opinion of Counsel
required by item (3) thereof, if applicable.
(ii) Restricted Definitive Debentures to Unrestricted Definitive
Debentures. Any Restricted Definitive Debenture may be exchanged by the
Holder thereof for an Unrestricted Definitive Debenture or transferred to a
Person or Persons who take delivery thereof in the form of an Unrestricted
Definitive Debenture if:
(A) such exchange or transfer is effected pursuant to the Exchange
Offer in accordance with the Preferred Stock Registration Rights
Agreement and the Holder, in the case of an exchange, or the
transferee, in the case of a transfer, certifies in the applicable
Letter of Transmittal that it is not (1) a broker-dealer, (2) a Person
participating in the distribution of the Exchange Debentures or (3) a
Person who is an affiliate (as defined in Rule 144) of the Company;
(B) any such transfer is effected pursuant to the Shelf Registration
Statement in accordance with the Preferred Stock Registration Rights
Agreement;
(C) any such transfer is effected by a Participating Broker-Dealer
pursuant to the Exchange Offer Registration Statement in accordance
with the Preferred Stock Registration Rights Agreement; or
(D) the Registrar receives the following:
(1) if the Holder of such Restricted Definitive Debentures
proposes to exchange such Debentures for an Unrestricted Definitive
Debenture, a certificate from such Holder in the form of Exhibit C hereto,
including the certifications in item (1)(d) thereof; or
(2) if the Holder of such Restricted Definitive Debentures
proposes to transfer such Debentures to a Person who shall take delivery
thereof in the form of an Unrestricted Definitive Debenture, a certificate
from such Holder in the form of Exhibit B hereto, including the
certifications in item (4) thereof;
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<PAGE>
and, in each such case set forth in this subparagraph (D), if the
Registrar so requests, an Opinion of Counsel to the effect that such
exchange or transfer is in compliance with the Securities Act and that the
restrictions on transfer contained herein and in the Private Placement
Legend are no longer required in order to maintain compliance with the
Securities Act.
(iii) Unrestricted Definitive Debentures to Unrestricted Definitive
Debentures. A Holder of Unrestricted Definitive Debentures may transfer such
Debentures to a Person who takes delivery thereof in the form of an
Unrestricted Definitive Debenture. Upon receipt of a request to register such
a transfer, the Registrar shall register the Unrestricted Definitive
Debentures pursuant to the instructions from the Holder thereof.
(f) Exchange Offer.
Upon the occurrence of the Exchange Offer in accordance with the
Preferred Stock Registration Rights Agreement, the Company shall issue and, upon
receipt of an Authentication Order in accordance with Section 2.02, the Exchange
Trustee shall authenticate (i) one or more Unrestricted Global Debentures in an
aggregate principal amount equal to the principal amount of the beneficial
interests in the Restricted Global Debentures tendered for acceptance by Persons
that certify in the applicable Letters of Transmittal that (x) they are not
broker-dealers, (y) they are not participating in a distribution of the Exchange
Debentures and (z) they are not affiliates (as defined in Rule 144) of the
Company, and accepted for exchange in the Exchange Offer and (ii) Definitive
Debentures in an aggregate principal amount equal to the principal amount of the
Restricted Definitive Debentures accepted for exchange in the Exchange Offer.
Concurrently with the issuance of such Debentures, the Exchange Trustee shall
cause the aggregate principal amount of the applicable Restricted Global
Debentures to be reduced accordingly, and the Company shall execute and the
Exchange Trustee shall authenticate and deliver to the Persons designated by the
Holders of Definitive Debentures so accepted Definitive Debentures in the
appropriate principal amount.
(g) Legends.
The following legends shall appear on the face of all Global
Debentures and Definitive Debentures issued under this Exchange Indenture unless
specifically stated otherwise in the applicable provisions of this Exchange
Indenture.
(i) Private Placement Legend.
(A) Except as permitted by subparagraph (B) below, each Global
Debenture and each Definitive Debenture (and all Debentures issued in
exchange therefor or substitution thereof) shall bear the legend in
substantially the following form:
"THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933,
AS AMENDED (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM
THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH
ANY APPLICABLE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY
OTHER JURISDICTION. EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS
HEREBY NOTIFIED THAT THE SELLER MAY BE
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RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF THE
SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER ("RULE 144A") OR ANOTHER
EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED
IN RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF
RULE 144 UNDER THE SECURITIES ACT, OR (c) IN ACCORDANCE WITH ANOTHER
EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT (AND
BASED UPON AN OPINION OF COUNSEL IF THE COMPANY SO REQUESTS), (2) TO THE
COMPANY OR (3) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT AND, IN
EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE SECURITIES LAWS OF ANY STATE
OF THE UNITED STATES OR ANY OTHER APPLICABLE JURISDICTION AND (B) THE
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE
RESTRICTIONS SET FORTH IN (A) ABOVE."
(B) Notwithstanding the foregoing, any Global Debenture or
Definitive Debenture issued pursuant to subparagraphs (b)(iv), (c)(ii),
(c)(iii), (d)(ii), (d)(iii), (e)(ii), (e)(iii) or (f) to this Section
2.06 (and all Debentures issued in exchange therefor or substitution
thereof) shall not bear the Private Placement Legend.
(ii) Global Debenture Legend. Each Global Debenture shall bear a legend in
substantially the following form:
"THIS GLOBAL DEBENTURE IS HELD BY THE DEPOSITARY (AS DEFINED IN THE
INDENTURE GOVERNING THIS DEBENTURE) OR ITS NOMINEE IN CUSTODY FOR THE
BENEFIT OF THE BENEFICIAL OWNERS HEREOF, AND IS NOT TRANSFERABLE TO ANY
PERSON UNDER ANY CIRCUMSTANCES EXCEPT THAT (I) THE TRUSTEE MAY MAKE SUCH
NOTATIONS HEREON AS MAY BE REQUIRED PURSUANT TO SECTION 2.07 OF THE
INDENTURE, (II) THIS GLOBAL DEBENTURE MAY BE EXCHANGED IN WHOLE BUT NOT IN
PART PURSUANT TO SECTION 2.06(a) OF THE INDENTURE, (III) THIS GLOBAL
DEBENTURE MAY BE DELIVERED TO THE TRUSTEE FOR CANCELLATION PURSUANT TO
SECTION 2.11 OF THE INDENTURE AND (IV) THIS GLOBAL DEBENTURE MAY BE
TRANSFERRED TO A SUCCESSOR DEPOSITARY WITH THE PRIOR WRITTEN CONSENT OF
THE COMPANY."
"UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A SECURITY IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY
THE DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE
OF SUCH SUCCESSOR DEPOSITARY. THE DEPOSITARY TRUST COMPANY SHALL ACT AS
THE DEPOSITARY UNTIL A SUCCESSOR SHALL BE APPOINTED BY THE COMPANY AND THE
TRANSFER AGENT. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
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REPRESENTATIVE OF THE DEPOSITARY TRUST COMPANY (55 WATER STREET, NEW YORK,
NEW YORK) ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF
TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN
THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN
AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR
SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF
DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY
OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE
& CO., HAS AN INTEREST HEREIN.
(h) Cancellation and/or Adjustment of Global Debentures. At such time as
all beneficial interests in a particular Global Debenture have been exchanged
for Definitive Debentures or a particular Global Debenture has been redeemed,
repurchased or canceled in whole and not in part, each such Global Debenture
shall be returned to or retained and canceled by the Exchange Trustee in
accordance with Section 2.11 hereof. At any time prior to such cancellation, if
any beneficial interest in a Global Debenture is exchanged for or transferred to
a Person who will take delivery thereof in the form of a beneficial interest in
another Global Debenture or for Definitive Debentures, the principal amount of
Debentures represented by such Global Debenture shall be reduced accordingly and
an endorsement shall be made on such Global Debenture by the Exchange Trustee or
by the Depositary at the direction of the Exchange Trustee to reflect such
reduction; and if the beneficial interest is being exchanged for or transferred
to a Person who will take delivery thereof in the form of a beneficial interest
in another Global Debenture, such other Global Debenture shall be increased
accordingly and an endorsement shall be made on such Global Debenture by the
Exchange Trustee or by the Depositary at the direction of the Exchange Trustee
to reflect such increase.
(i) General Provisions Relating to Transfers and Exchanges.
(i) To permit registrations of transfers and exchanges, the Company shall
execute and the Exchange Trustee shall authenticate Global Debentures and
Definitive Debentures upon the Company's order or at the Registrar's request.
(ii) No service charge shall be made to a holder of a beneficial interest
in a Global Debenture or to a Holder of a Definitive Debenture for any
registration of transfer or exchange, but the Company may require payment of
a sum sufficient to cover any transfer tax or similar governmental charge
payable in connection therewith (other than any such transfer taxes or
similar governmental charge payable upon exchange or transfer pursuant to
Sections 2.10, 3.06, 3.09, 4.10, 4.14 and 9.05 hereof).
(iii) The Registrar shall not be required to register the transfer of or
exchange any Debenture selected for redemption in whole or in part, except
the unredeemed portion of any Debenture being redeemed in part.
(iv) All Global Debentures and Definitive Debentures issued upon any
registration of transfer or exchange of Global Debentures or Definitive
Debentures shall be the valid obligations of the Company, evidencing the same
debt, and entitled to the same benefits under this Exchange
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Indenture, as the Global Debentures or Definitive Debentures surrendered upon
such registration of transfer or exchange.
(v) The Company shall not be required (A) to issue, to register the
transfer of or to exchange any Debentures during a period beginning at the
opening of business 15 days before the day of any selection of Debentures for
redemption under Section 3.02 hereof and ending at the close of business on
the day of selection, (B) to register the transfer of or to exchange any
Debenture so selected for redemption in whole or in part, except the
unredeemed portion of any Debenture being redeemed in part or (C) to register
the transfer of or to exchange a Debenture between a record date and the next
succeeding Interest Payment Date.
(vi) Prior to due presentment for the registration of a transfer of any
Debenture, the Exchange Trustee, any Agent and the Company may deem and treat
the Person in whose name any Debenture is registered as the absolute owner of
such Debenture for the purpose of receiving payment of principal of and
interest on such Debentures and for all other purposes, and none of the
Exchange Trustee, any Agent or the Company shall be affected by notice to the
contrary.
(vii) The Exchange Trustee shall authenticate Global Debentures and
Definitive Debentures in accordance with the provisions of Section 2.02
hereof.
(viii) All certifications, certificates and Opinions of Counsel required
to be submitted to the Registrar pursuant to this Section 2.06 to effect a
registration of transfer or exchange may be submitted by facsimile.
SECTION 2.07. REPLACEMENT DEBENTURES.
If any mutilated Debenture is surrendered to the Exchange Trustee
or the Company and the Exchange Trustee receives evidence to its satisfaction of
the destruction, loss or theft of any Debenture, the Company shall issue and the
Exchange Trustee, upon receipt of an Authentication Order, shall authenticate a
replacement Debenture if the Exchange Trustee's requirements are met. If
required by the Exchange Trustee or the Company, an indemnity bond must be
supplied by the Holder that is sufficient in the judgment of the Exchange
Trustee and the Company to protect the Company, the Exchange Trustee, any Agent
and any authenticating agent from any loss that any of them may suffer if a
Debenture is replaced. The Company and the Exchange Trustee may charge for their
respective expenses in replacing a Debenture.
Every replacement Debenture is an additional obligation of the
Company and shall be entitled to all of the benefits of this Exchange Indenture
equally and proportionately with all other Debentures duly issued hereunder.
SECTION 2.08. OUTSTANDING DEBENTURES.
The Debentures outstanding at any time are all the Debentures
authenticated by the Exchange Trustee except for those canceled by it, those
delivered to it for cancellation, those reductions in the interest in a Global
Debenture effected by the Exchange Trustee in accordance with the provisions
hereof, and those described in this Section as not outstanding. Except as set
forth in Section 2.09 hereof, a Debenture does not cease to be outstanding
because the Company or an Affiliate of the Company holds
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the Debenture; however, Debentures held by the Company or a Subsidiary of the
Company shall not be deemed to be outstanding for purposes of Section 3.07(b)
hereof.
If a Debenture is replaced pursuant to Section 2.07 hereof, it
ceases to be outstanding unless a Responsible Officer of the Exchange Trustee
receives proof satisfactory to it that the replaced Debenture is held by a bona
fide purchaser.
If the principal amount of any Debenture is considered paid under
Section 4.01 hereof, it ceases to be outstanding and interest on it ceases to
accrue.
If the Paying Agent (other than the Company, a Subsidiary or an
Affiliate of any thereof) holds, on a redemption date or maturity date, money
sufficient to pay Debentures payable on that date, then on and after that date
such Debentures shall be deemed to be no longer outstanding and shall cease to
accrue interest.
SECTION 2.09. TREASURY DEBENTURES.
In determining whether the Holders of the required principal
amount of Debentures have concurred in any direction, waiver or consent,
Debentures owned by the Company, or by any Person directly or indirectly
controlling or controlled by or under direct or indirect common control with the
Company, shall be considered as though not outstanding, except that for the
purposes of determining whether the Exchange Trustee shall be protected in
relying on any such direction, waiver or consent, only Debentures that a
Responsible Officer of the Exchange Trustee actually knows are so owned shall be
so disregarded.
SECTION 2.10. TEMPORARY DEBENTURES.
Until certificates representing Debentures are ready for delivery,
the Company may prepare and the Exchange Trustee, upon receipt of an
Authentication Order, shall authenticate temporary Debentures. Temporary
Debentures shall be substantially in the form of certificated Debentures but may
have variations that the Company considers appropriate for temporary Debentures
and as shall be reasonably acceptable to the Exchange Trustee. Without
unreasonable delay, the Company shall prepare and the Exchange Trustee shall
authenticate definitive Debentures in exchange for temporary Debentures.
Holders of temporary Debentures shall be entitled to all of the
benefits of this Exchange Indenture.
SECTION 2.11. CANCELLATION.
The Company at any time may deliver Debentures to the Exchange
Trustee for cancellation. The Registrar and Paying Agent shall forward to the
Exchange Trustee any Debentures surrendered to them for registration of
transfer, exchange or payment. The Exchange Trustee and no one else shall cancel
all Debentures surrendered for registration of transfer, exchange, payment,
replacement or cancellation and shall return such canceled Debentures.
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SECTION 2.12. DEFAULTED INTEREST.
If the Company defaults in a payment of interest on the
Debentures, it shall pay the defaulted interest in any lawful manner plus, to
the extent lawful, interest payable on the defaulted interest, to the Persons
who are Holders on a subsequent special record date, in each case at the rate
provided in the Debentures and in Section 4.01 hereof. The Company shall notify
the Exchange Trustee in writing of the amount of defaulted interest proposed to
be paid on each Debenture and the date of the proposed payment. The Company
shall fix or cause to be fixed each such special record date and payment date,
provided that no such special record date shall be less than 10 days prior to
the related payment date for such defaulted interest. At least 15 days before
the special record date, the Company (or, upon the written request of the
Company, the Exchange Trustee in the name and at the expense of the Company)
shall mail or cause to be mailed to Holders a notice that states the special
record date, the related payment date and the amount of such interest to be
paid.
SECTION 2.13. CUSIP NUMBERS
The Company in issuing the Debentures may use "CUSIP" numbers (if
then generally in use), and, if so, the Trustee shall use "CUSIP" numbers in
notices of redemption as a convenience to Holders; provided that any such notice
may state that no representation is made as to the correctness of such numbers
either as printed on the Debentures or as contained in any notice of a
redemption and that reliance may be placed only on the other identification
numbers printed on the Debentures, and any such redemption shall not be affected
by any defect in or omission of such numbers. The Company will promptly notify
the Trustee of any change in the "CUSIP" numbers.
ARTICLE 3.
REDEMPTION AND PREPAYMENT
SECTION 3.01. NOTICES TO EXCHANGE TRUSTEE.
If the Company elects to redeem Debentures pursuant to the
optional redemption provisions of Section 3.07 hereof, it shall furnish to the
Exchange Trustee, at least 30 days but not more than 60 days before a redemption
date, an Officers' Certificate setting forth (i) the clause of this Exchange
Indenture pursuant to which the redemption shall occur, (ii) the redemption
date, (iii) the principal amount of Debentures to be redeemed and (iv) the
redemption price.
SECTION 3.02. SELECTION OF DEBENTURES TO BE REDEEMED.
If less than all of the Debentures are to be redeemed or purchased
in an offer to purchase at any time, the Exchange Trustee shall select the
Debentures to be redeemed or purchased among the Holders of the Debentures in
compliance with the requirements of the principal national securities exchange,
if any, on which the Debentures are listed or, if the Debentures are not so
listed, on a pro rata basis, by lot or in accordance with any other method the
Exchange Trustee considers fair and appropriate; provided that no Debentures of
$1,000 or less shall be redeemed in part. In the event of partial redemption by
lot, the particular Debentures to be redeemed shall be selected, unless
otherwise provided herein, not less than 30 nor more than 60 days prior to the
redemption date by the Exchange Trustee from the outstanding Debentures not
previously called for redemption.
The Exchange Trustee shall promptly notify the Company in writing
of the Debentures selected for redemption and, in the case of any Debenture
selected for partial redemption, the principal
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amount thereof to be redeemed. Debentures and portions of Debentures selected
shall be in amounts of $1,000 or whole multiples of $1,000; except that if all
of the Debentures of a Holder are to be redeemed, the entire outstanding amount
of Debentures held by such Holder, even if not a multiple of $1,000, shall be
redeemed. Except as provided in the preceding sentence, provisions of this
Exchange Indenture that apply to Debentures called for redemption also apply to
portions of Debentures called for redemption.
SECTION 3.03. NOTICE OF REDEMPTION.
Subject to the provisions of Section 3.09 hereof, at least 30 days
but not more than 60 days before a redemption date, the Company shall mail or
cause to be mailed, by first class mail, a notice of redemption to each Holder
whose Debentures are to be redeemed at its registered address.
The notice shall fully identify the Debentures to be redeemed and
shall state:
(a) the redemption date;
(b) the redemption price;
(c) if any Debenture is being redeemed in part, the portion of the
principal amount of such Debenture to be redeemed and that, after the redemption
date upon surrender of such Debenture, a new Debenture or Debentures in
principal amount equal to the unredeemed portion shall be issued upon
cancellation of the original Debenture;
(d) the name and address of the Paying Agent;
(e) that Debentures called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(f) that, unless the Company defaults in making such redemption
payment, interest on Debentures called for redemption ceases to accrue on and
after the redemption date;
(g) the paragraph of the Debentures and/or Section of this Exchange
Indenture pursuant to which the Debentures called for redemption are
being redeemed;
(h) that no representation is made as to the correctness or
accuracy of the CUSIP number, if any, listed in such notice or printed on the
Debentures; and
(i) the applicable CUSIP numbers.
At the Company's request, the Exchange Trustee shall give the
notice of redemption in the Company's name and at its expense; provided,
however, that the Company shall have delivered to the Exchange Trustee, at least
45 days prior to the redemption date, an Officers' Certificate requesting that
the Exchange Trustee give such notice and setting forth the information to be
stated in such notice as provided in the preceding paragraph.
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SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION.
Once notice of redemption is mailed in accordance with Section
3.03 hereof, Debentures called for redemption become irrevocably due and payable
on the redemption date at the redemption price. A notice of redemption may not
be conditional.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE.
One Business Day prior to the redemption date, the Company shall
deposit with the Exchange Trustee or with the Paying Agent money sufficient to
pay the redemption price of and accrued interest on all Debentures to be
redeemed on that date. The Exchange Trustee or the Paying Agent shall promptly
return to the Company any money deposited with the Exchange Trustee or the
Paying Agent by the Company in excess of the amounts necessary to pay the
redemption price of, and accrued interest on, all Debentures to be redeemed.
If the Company complies with the provisions of the preceding
paragraph, on and after the redemption date, interest shall cease to accrue on
the Debentures or the portions of Debentures called for redemption. If a
Debenture is redeemed on or after an interest record date but on or prior to the
related interest payment date, then any accrued and unpaid interest shall be
paid to the Person in whose name such Debenture was registered at the close of
business on such record date. If any Debenture called for redemption shall not
be so paid upon surrender for redemption because of the failure of the Company
to comply with the preceding paragraph, interest shall be paid on the unpaid
principal, from the redemption date until such principal is paid, and to the
extent lawful on any interest not paid on such unpaid principal, in each case at
the rate provided in the Debentures and in Section 4.01 hereof.
SECTION 3.06. DEBENTURES REDEEMED IN PART.
Upon surrender of a Debenture that is redeemed in part, the
Company shall issue and, upon the Company's written request, the Exchange
Trustee shall authenticate for the Holder at the expense of the Company a new
Debenture equal in principal amount to the unredeemed portion of the Debenture
surrendered.
SECTION 3.07. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this Section 3.07, the Company
shall not have the option to redeem the Debentures pursuant to this Section 3.07
prior to May 15, 2003. Thereafter, the Company shall have the option to redeem
the Debentures, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on May 15 of the years indicated below:
Year Percentage
---- ----------
2003.............................................106.250%
2004.............................................105.000%
2005.............................................103.750%
2006.............................................102.500%
2007.............................................101.250%
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2008 and thereafter..............................100.000%
(b) Notwithstanding the provisions of clause (a) of this Section 3.07,
at any time prior to May 13, 2001, the Company may on any one or more occasions
redeem the Debentures originally issued under this Exchange Indenture, in whole
or in part, at the redemption prices set forth below (expressed as percentages
of principal amount), in each case, together with accrued and unpaid interest
and Liquidated Damages thereon, if any, to the redemption date, with the net
cash proceeds of one or more Equity Offerings if redeemed during the 12-month
period commencing on May 15 of each of the years set forth below:.
1998.............................................108.000%
1999.............................................110.000%
2000.............................................112.000%
In the event of a redemption pursuant to Section 3.07(b) hereof
(except in the case of a redemption of all the Debentures), at least $25.0
million in aggregate principal amount of Debentures shall remain outstanding
immediately after the occurrence of such redemption (excluding Debentures held
by the Company and its Subsidiaries) and any such redemption shall occur within
45 days of the date of the closing of such Equity Offering.
At any time prior to May 15, 2003, the Debentures may also be redeemed,
as a whole but not in part, at the option of the Company upon the occurrence of
a Change of Control, upon not less than 30 nor more than 60 days' prior notice
(but in no event may any such redemption occur more than 90 days after the
occurrence of such Change of Control) mailed by first-class mail to each
Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof and the interest rate in effect with respect to the
Debentures as of, and accrued and unpaid interest and Liquidated Damages, if
any, to, the date of redemption.
(c) Any redemption pursuant to this Section 3.07 shall be made pursuant
to the provisions of Section 3.01 through 3.06 hereof.
SECTION 3.08. MANDATORY REDEMPTION.
The Company shall not be required to make mandatory redemption or
sinking fund payments with respect to the Debentures.
SECTION 3.09. OFFER TO PURCHASE BY APPLICATION OF EXCESS PROCEEDS.
In the event that, pursuant to Section 4.10 hereof, the Company
shall be required to commence an offer to all Holders to purchase Debentures (an
"Asset Sale Offer"), it shall follow the procedures specified below.
The Asset Sale Offer shall remain open for a period of 20 Business
Days following its commencement and no longer, except to the extent that a
longer period is required by applicable law (the "Offer Period"). No later than
five Business Days after the termination of the Offer Period (the "Purchase
Date"), the Company shall purchase the principal amount of Debentures required
to be purchased pursuant to Section 4.10 hereof (the "Offer Amount") or, if less
than the Offer Amount has
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been tendered, all Debentures tendered in response to the Asset Sale Offer.
Payment for any Debentures so purchased shall be made in the same manner as
interest payments are made.
If the Purchase Date is on or after an interest record date and on
or before the related interest payment date, any accrued and unpaid interest
shall be paid to the Person in whose name a Debenture is registered at the close
of business on such record date, and no additional interest shall be payable to
Holders who tender Debentures pursuant to the Asset Sale Offer.
Upon the commencement of an Asset Sale Offer, the Company shall
send, by first class mail, a notice to the Exchange Trustee and each of the
Holders, with a copy to the Exchange Trustee. The notice shall contain all
instructions and materials necessary to enable such Holders to tender Debentures
pursuant to the Asset Sale Offer. The Asset Sale Offer shall be made to all
Holders. The notice, which shall govern the terms of the Asset Sale Offer, shall
state:
(a) that the Asset Sale Offer is being made pursuant to this Section 3.09
and Section 4.10 hereof and the length of time the Asset Sale Offer shall remain
open;
(b) the Offer Amount, the purchase price and the Purchase Date;
(c) that any Debenture not tendered or accepted for payment shall
continue to accrete or accrue interest;
(d) that, unless the Company defaults in making such payment, any
Debenture accepted for payment pursuant to the Asset Sale Offer shall cease to
accrete or accrue interest after the Purchase Date;
(e) that Holders electing to have a Debenture purchased pursuant to an
Asset Sale Offer may only elect to have all of such Debenture purchased and may
not elect to have only a portion of such Debenture purchased;
(f) that Holders electing to have a Debenture purchased pursuant to any
Asset Sale Offer shall be required to surrender the Debenture, with the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Debenture
completed, or transfer by book-entry transfer, to the Company, a depositary, if
appointed by the Company, or a Paying Agent at the address specified in the
notice at least three days before the Purchase Date;
(g) that Holders shall be entitled to withdraw their election if the
Company, the depositary or the Paying Agent, as the case may be, receives, not
later than the expiration of the Offer Period, a facsimile transmission or
letter setting forth the name of the Holder, the principal amount of the
Debenture the Holder delivered for purchase and a statement that such Holder is
withdrawing his election to have such Debenture purchased;
(h) that, if the aggregate principal amount of Debentures surrendered by
Holders exceeds the Offer Amount, the Company shall select the Debentures to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Debentures in denominations of $1,000,
or integral multiples thereof, shall be purchased); and
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(i) that Holders whose Debentures were purchased only in part shall be
issued new Debentures equal in principal amount to the unpurchased portion of
the Debentures surrendered (or transferred by book-entry transfer).
On or before the Purchase Date, the Company shall, to the extent
lawful, accept for payment, on a pro rata basis to the extent necessary, the
Offer Amount of Debentures or portions thereof tendered pursuant to the Asset
Sale Offer, or if less than the Offer Amount has been tendered, all Debentures
tendered, and shall deliver to the Exchange Trustee an Officers' Certificate
stating that such Debentures or portions thereof were accepted for payment by
the Company in accordance with the terms of this Section 3.09. The Company, the
Depositary or the Paying Agent, as the case may be, shall promptly (but in any
case not later than five days after the Purchase Date) mail or deliver to each
tendering Holder an amount equal to the purchase price of the Debentures
tendered by such Holder and accepted by the Company for purchase, and the
Company shall promptly issue a new Debenture, and the Exchange Trustee, upon
written request from the Company shall authenticate and mail or deliver such new
Debenture to such Holder, in a principal amount equal to any unpurchased portion
of the Debenture surrendered. Any Debenture not so accepted shall be promptly
mailed or delivered by the Company to the Holder thereof. The Company shall
publicly announce the results of the Asset Sale Offer on the Purchase Date.
Other than as specifically provided in this Section 3.09, any
purchase pursuant to this Section 3.09 shall be made pursuant to the provisions
of Sections 3.01 through 3.06 hereof.
ARTICLE 4.
COVENANTS
SECTION 4.01. PAYMENT OF DEBENTURES.
The Company shall pay or cause to be paid the principal of,
premium, if any, and interest on the Debentures on the dates and in the manner
provided in the Debentures. Principal, premium, if any, and interest shall be
considered paid on the date due if the Paying Agent, if other than the Company
or a Subsidiary thereof, holds as of 10:00 a.m. Eastern Time on the due date
money deposited by the Company in immediately available funds and designated for
and sufficient to pay all principal, premium, if any, and interest then due. The
Company shall pay all Liquidated Damages, if any, in the same manner on the
dates and in the amounts set forth in the Preferred Stock Registration Rights
Agreement.
The Company shall pay interest (including post-petition interest
in any proceeding under any Bankruptcy Law) on overdue principal at the rate
equal to 1% per annum in excess of the then applicable interest rate on the
Debentures to the extent lawful; it shall pay interest (including post-petition
interest in any proceeding under any Bankruptcy Law) on overdue installments of
interest and Liquidated Damages (without regard to any applicable grace period)
at the same rate to the extent lawful.
SECTION 4.02. MAINTENANCE OF OFFICE OR AGENCY.
The Company shall maintain in the Borough of Manhattan, the City
of New York, an office or agency (which may be an office of the Exchange Trustee
or an affiliate of the Exchange Trustee, Registrar or co-registrar) where
Debentures may be surrendered for registration of transfer or for exchange and
where notices and demands to or upon the Company in respect of the Debentures
and this Exchange Indenture may be served. The Company shall give prompt written
notice to the Exchange
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Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Exchange Trustee with the address
thereof, such presentations, surrenders, notices and demands may be made or
served at the Corporate Trust Office of the Exchange Trustee.
The Company may also from time to time designate one or more other
offices or agencies where the Debentures may be presented or surrendered for any
or all such purposes and may from time to time rescind such designations;
provided, however, that no such designation or rescission shall in any manner
relieve the Company of its obligation to maintain an office or agency in the
Borough of Manhattan, the City of New York for such purposes. The Company shall
give prompt written notice to the Exchange Trustee of any such designation or
rescission and of any change in the location of any such other office or agency.
The Company hereby designates the Corporate Trust Office of the
Exchange Trustee as one such office or agency of the Company in accordance with
Section 2.03.
SECTION 4.03. REPORTS.
(a) Whether or not required by the rules and regulations of the
Commission, so long as any Debentures are outstanding, the Company will furnish
to the Holders of Debentures and to the Trustee (i) all quarterly and annual
financial information that would be required to be contained in a filing with
the Commission on Forms 10-Q and 10-K if the Company were required to file such
Forms, including a "Management's Discussion and Analysis of Financial Condition
and Results of Operations," that describes the financial condition and results
of operations of the Company and its consolidated Subsidiaries (showing in
reasonable detail, either on the face of the financial statements or in the
footnotes thereto and in Management's Discussion and Analysis of Financial
Condition and Results of Operations, the financial condition and results of
operations of the Company and its Restricted Subsidiaries separate from the
financial condition and results of operations of the Unrestricted Subsidiaries
of the Company) and, with respect to the annual information only, a report
thereon by the Company's certified independent accountants and (ii) all current
reports that would be required to be filed with the Commission on Form 8-K if
the Company were required to file such reports, in each case within the time
periods specified in the Commission's rules and regulations. In addition,
following the consummation of the exchange offer contemplated by the Preferred
Stock Registration Rights Agreement, whether or not required by the rules and
regulations of the Commission, the Company will file a copy of all such
information and reports with the Commission for public availability within the
time periods specified in the Commission's rules and regulations (unless the
Commission will not accept such a filing) and make such information available to
securities analysts and prospective investors upon request. The Company shall at
all times comply with TIA ss. 314(a).
(b) For so long as any Debentures remain outstanding, the Company shall
furnish to the Holders and to securities analysts and prospective investors,
upon their request, the information required to be delivered pursuant to Rule
144A(d)(4) under the Securities Act.
(c) Delivery of such reports, information and documents to the Trustee is
for information purposes only and the Trustee's receipt of such shall not
constitute constructive notice of any information contained therein, including
the Company's compliance with any of its
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covenants hereunder (as to which the Trustee is entitled to rely exclusively on
Officer's Certificates).
SECTION 4.04. COMPLIANCE CERTIFICATE.
(a) The Company shall deliver to the Exchange Trustee, within 90 days
after the end of each fiscal year, an Officers' Certificate stating that a
review of the activities of the Company and its Subsidiaries during the
preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Exchange Indenture, and
further stating, as to each such Officer signing such certificate, that to the
best of his or her knowledge the Company has kept, observed, performed and
fulfilled each and every covenant contained in this Exchange Indenture and is
not in default in the performance or observance of any of the terms, provisions
and conditions of this Exchange Indenture (or, if a Default or Event of Default
shall have occurred, describing all such Defaults or Events of Default of which
he or she may have knowledge and what action the Company is taking or proposes
to take with respect thereto) and that to the best of his or her knowledge no
event has occurred and remains in existence by reason of which payments on
account of the principal of or interest, if any, on the Debentures is prohibited
or if such event has occurred, a description of the event and what action the
Company is taking or proposes to take with respect thereto.
(b) So long as not contrary to the then current recommendations of the
American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article 4 or Article 5 hereof or, if any such violation has
occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Debentures are outstanding,
deliver to the Exchange Trustee, forthwith upon any Officer becoming aware of
any Default or Event of Default, an Officers' Certificate specifying such
Default or Event of Default and what action the Company is taking or proposes to
take with respect thereto.
SECTION 4.05. TAXES.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate proceedings
or where the failure to effect such payment is not adverse in any material
respect to the Holders of the Debentures.
SECTION 4.06. STAY, EXTENSION AND USURY LAWS.
The Company covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay,
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extension or usury law wherever enacted, now or at any time hereafter in force,
that may affect the covenants or the performance of this Exchange Indenture; and
the Company (to the extent that it may lawfully do so) hereby expressly waives
all benefit or advantage of any such law, and covenants that it shall not, by
resort to any such law, hinder, delay or impede the execution of any power
herein granted to the Exchange Trustee, but shall suffer and permit the
execution of every such power as though no such law has been enacted.
SECTION 4.07. RESTRICTED PAYMENTS.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company or
any of its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company and other than
dividends or distributions payable to the Company or a Restricted Subsidiary of
the Company); (ii) purchase, redeem or otherwise acquire or retire for value
(including, without limitation, in connection with any merger or consolidation
involving the Company) any Equity Interests of the Company or any direct or
indirect parent of the Company or other Affiliate of the Company (other than any
such Equity Interests owned by the Company or any Restricted Subsidiary of the
Company); (iii) make any payment on or with respect to, or purchase, redeem,
defease or otherwise acquire or retire for value any Indebtedness that is
subordinated to the Debentures (other than Debentures), except a payment of
interest or principal at Stated Maturity or as a mandatory or sinking fund
payment; or (iv) make any Restricted Investment (all such payments and other
actions set forth in clauses (i) through (iv) above being collectively referred
to as "Restricted Payments"), unless, at the time of and after giving effect to
such Restricted Payment:
(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof; and
(b) the Company would, at the time of such Restricted Payment and
after giving pro forma effect thereto as if such Restricted Payment had been
made at the beginning of the applicable four-quarter period, have been permitted
to incur at least $1.00 of additional Indebtedness pursuant to the Fixed Charge
Coverage Ratio test set forth in Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Company and its Restricted
Subsidiaries after the date of the Issue Date (excluding Restricted Payments
permitted by clauses (ii), (iii), (iv), (v), (vii) and (ix) of the next
succeeding paragraph), is less than the sum, without duplication, of (i) 50% of
the Consolidated Net Income of the Company for the period (taken as one
accounting period) from the beginning of the first fiscal quarter commencing
after the date of the Issue Date to the end of the Company's most recently ended
fiscal quarter for which internal financial statements are available at the time
of such Restricted Payment (or, if such Consolidated Net Income for such period
is a deficit, less 100% of such deficit), plus (ii) 100% of the aggregate net
cash proceeds received by the Company since the Issue Date as a contribution to
its common equity capital or from the issue or sale of Equity Interests of the
Company (other than Disqualified Stock) or from the issue or sale of
Disqualified Stock or debt securities of the Company that have been converted
into such Equity Interests (other than Equity Interests (or Disqualified Stock
or convertible debt securities) sold to a Subsidiary of the Company), plus (iii)
100% of the fair market value of any Person engaged in a Permitted
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Business or assets used by the Company or a Restricted Subsidiary in a Permitted
Business which such Person or assets were acquired by the Company or any of its
Restricted Subsidiaries since the Issue Date, provided that the consideration
for such Person or assets consisted solely of Equity Interests of the Company
(other than Disqualified Stock), plus (iv) to the extent that any Restricted
Investment that was made after the Issue Date is sold for cash or otherwise
liquidated or repaid for cash or the receipt of properties used in a Permitted
Business, the lesser of (A) the net cash proceeds of such sale, liquidation or
repayment or the fair market value (as determined in good faith by a resolution
of the Board of Directors set forth in an Officers' Certificate delivered to the
Exchange Trustee) of property received in exchange therefor and (B) the amount
of such Restricted Investment.
The foregoing provisions shall not prohibit (i) the payment of any
dividend within 60 days after the date of declaration thereof, if at said date
of declaration such payment would have complied with the provisions of this
Exchange Indenture; (ii) the redemption, repurchase, retirement, defeasance or
other acquisition of any pari passu or subordinated Indebtedness or Equity
Interests of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of, other Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (c)(ii) of the preceding paragraph; (iii) the
defeasance, redemption or repurchase of any Disqualified Stock of the Company or
any Restricted Subsidiary in exchange for, or out of the substantially
concurrent sale (other than to the Company or a Subsidiary of the Company) of
Disqualified Stock of the Company or such Restricted Subsidiary, respectively;
provided that: (A) the aggregate liquidation preference of such Disqualified
Stock does not exceed the aggregate liquidation preference of the Disqualified
Stock so extended, refinanced, renewed, replaced, defeased or refunded (plus the
amount of reasonable expenses incurred in connection therewith); (B) such
Disqualified Stock has a final maturity date later than the final maturity date
of, and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of the Notes; and (C) such Disqualified Stock
is incurred either by the Company or by the Restricted Subsidiary who is the
obligor on the Disqualified Stock being extended, refinanced, renewed, replaced,
defeased or refunded; (iv) the redemption, repurchase or other acquisition of
subordinated Indebtedness with the net cash proceeds from an incurrence of
Permitted Refinancing Indebtedness; (v) the payment of any dividend by a
Restricted Subsidiary of the Company to the holders of its common Equity
Interests on a pro rata basis; (vi) so long as no Default or Event of Default is
continuing or would be caused thereby, the direct or indirect repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Company or any direct or indirect parent corporation of the Company held
by any member of the Company's (or any of its Restricted Subsidiaries')
management pursuant to any management equity subscription agreement or stock
option agreement in effect as of the date of this Exchange Indenture; provided
that the aggregate price paid for all such repurchased, redeemed, acquired or
retired Equity Interests shall not exceed $1.0 million in any twelve-month
period; (vii) dividends or other payments to Holdings sufficient to enable
Holdings to pay accounting, legal, corporate or reporting and administrative
expenses of Holdings incurred in the ordinary course of business in an amount
not to exceed $500,000 in any twelve-month period; (viii) the making of loans by
the Company or any of its Restricted Subsidiaries to officers or directors of
the Company; provided that the aggregate outstanding amount of such loans shall
not exceed, at any time, $2.0 million plus any such loans outstanding on the
date of this Exchange Indenture; (ix) payments to Holdings by the Company or any
Restricted Subsidiary with respect to taxes (including estimated taxes) that are
paid by Holdings on a combined, consolidated, unitary or similar basis, to the
extent that such payments do not exceed the amount that the Company or such
Restricted Subsidiary would have paid to the relevant taxing authority if the
Company or such Restricted Subsidiary filed a separate tax return for the period
in question; (x) so long as no Default or Event of Default is continuing or
would be
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caused thereby, the defeasance, redemption or repurchase of any preferred stock
or Disqualified Stock issued in connection with the acquisition of assets or a
Permitted Business, provided that the aggregate amount of such defeasance,
redemption or repurchase payments shall not exceed at any time $10.0 million;
(xi) so long as no Default of Event of Default is continuing or would be caused
thereby, payments under the Management Agreement as in effect on the Issue Date;
and (xii) the direct or indirect repurchase, redemption or other acquisition or
retirement for value of any Equity Interests of the Company or any direct or
indirect parent corporation of the Company held by any employee of the Company
or a Restricted Subsidiary of the Company upon the retirement of any such
employee; provided that the aggregate price paid for all such repurchased,
redeemed, acquired or retired Equity Interests shall not exceed $400,000 less
the amount of Restricted Payments made pursuant to clause (xiii) below during
such period in any twelve-month period; (xiii) the direct or indirect
redemption, repurchase or other acquisition or retirement for value of Class A
Senior Preferred Stock of Holdings from Holdings' qualified employee stock
option plans, which Class A Senior Preferred Stock will either be issued on the
Issue Date or issued as dividends thereon in accordance with the certificate of
designations relating thereto, provided that such redemption, repurchase or
other acquisition or retirement is required by applicable law and such plans;
and (xiv) the distribution of any Parity Note.
The Board of Directors may designate any Restricted Subsidiary to be an
Unrestricted Subsidiary if such designation would not cause a Default. In the
event of any such designation, all outstanding Investments owned by the Company
and its Restricted Subsidiaries in the Subsidiary so designated will be deemed
to be an Investment made as of the time of such designation and will reduce the
amount available for Restricted Payments under the first paragraph of this
Section 4.07 or Permitted Investments, as applicable. All such outstanding
Investments will be deemed to constitute Restricted Investments in an amount
equal to the fair market value of such Investments at the time of such
designation. Such designation will only be permitted if such Restricted Payment
would be permitted at such time and if such Restricted Subsidiary otherwise
meets the definition of an Unrestricted Subsidiary. The Board of Directors may
redesignate any Unrestricted Subsidiary to be a Restricted Subsidiary if such
redesignation would not cause a Default.
The amount of all Restricted Payments (other than cash) and Qualified
Proceeds (other than cash) shall be the fair market value on the date of the
Restricted Payment (or date of receipt of Qualified Proceeds) of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any assets or securities that are required to be valued
by this Section 4.07 shall be determined by the Board of Directors whose
resolution with respect thereto shall be delivered to the Exchange Trustee, such
determination to be based upon an opinion or appraisal issued by an accounting,
appraisal or investment banking firm of national standing if such fair market
value exceeds $5.0 million. Not later than the date of making any Restricted
Payment, the Company shall deliver to the Exchange Trustee an Officers'
Certificate stating that such Restricted Payment is permitted and setting forth
the basis upon which the calculations required by this Section 4.07 were
computed, together with a copy of any fairness opinion or appraisal required by
this Exchange Indenture. Accrual of interest, accretion or amortization of
original issue discount, the payment of interest on any Indebtedness in the form
of additional Indebtedness with the same terms and payment of dividends on
Disqualified Stock in the form of additional shares of the same class of
Disqualified Stock will not be deemed to be a Restricted Payment for purposes of
this Section 4.07; provided, in each such case, that the amount thereof is
included in Fixed Charges of the Company as accrued.
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SECTION 4.08. DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries. However, the foregoing
restrictions will not apply to encumbrances or restrictions existing under or by
reason of (a) Existing Indebtedness as in effect on the Issue Date, (b) the
Senior Credit Facility as in effect as of the Issue Date, and any amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacements or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those contained in
the Senior Credit Facility as in effect on the Issue Date, (c) this Exchange
Indenture and the Debentures, (d) applicable law, (e) any instrument governing
Indebtedness or Capital Stock of a Person acquired by the Company or any of its
Restricted Subsidiaries as in effect at the time of such acquisition (except to
the extent such Indebtedness was incurred in connection with or in contemplation
of such acquisition), which encumbrance or restriction is not applicable to any
Person, or the properties or assets of any Person, other than the Person, or the
property or assets of the Person, so acquired, provided that, in the case of
Indebtedness, such Indebtedness was permitted by the terms of this Exchange
Indenture to be incurred, (f) customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (g) purchase money obligations for property acquired in the ordinary
course of business that impose restrictions of the nature described in clause
(iii) above on the property so acquired, (h) any agreement for the sale or other
disposition of a Restricted Subsidiary that restricts distributions by that
Restricted Subsidiary pending its sale or other disposition, (i) Permitted
Refinancing Indebtedness, provided that the restrictions contained in the
agreements governing such Permitted Refinancing Indebtedness are no more
restrictive, taken as a whole, than those contained in the agreements governing
the Indebtedness being refinanced, (j) Liens securing Indebtedness otherwise
permitted to be incurred pursuant to the provisions of Section 4.12 hereof that
limit the right of the Company or any of its Restricted Subsidiaries to dispose
of the assets subject to such Lien, (k) provisions with respect to the
disposition or distribution of assets or property in joint venture agreements
and other similar agreements entered into in the ordinary course of business,
(l) restrictions on cash or other deposits or net worth imposed by customers
under contracts entered into in the ordinary course of business, (m) any other
security agreement, instrument or document relating to Senior Indebtedness
hereafter in effect, provided that such encumbrances or restrictions are
customary in connection with such documents and that the terms and conditions of
such encumbrances or restrictions are no more restrictive than those
encumbrances or restrictions imposed in connection with the Senior Credit
Facility as in effect on the Issue Date, (n) any agreement relating to a sale
and leaseback transaction or capital lease, but only on the property subject to
such transaction or lease and only to the extent that such restrictions or
encumbrances are customary with respect to a sale and leaseback transaction or
capital lease, or (o) the Canadian Credit Facility as in effect as of the date
of this Exchange Indenture, and any amendments, modifications, restatements,
renewals, increases, supplements, refundings, replacements or refinancings
thereof, provided that such amendments, modifications, restatements, renewals,
increases, supplements, refundings, replacements or refinancings are no more
restrictive, taken as a whole, with respect to such dividend and other payment
restrictions than those contained in the Canadian Credit Facility as in effect
on the Issue Date or (p) customary restrictions
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imposed on the payment of dividends by a Receivables Subsidiary in connection
with a Qualified Receivables Transaction.
SECTION 4.09. INCURRENCE OF INDEBTEDNESS AND ISSUANCE OF PREFERRED STOCK.
The Company (i) shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and (ii) shall not issue any Disqualified Stock and will not permit any of
its Restricted Subsidiaries to issue any shares of preferred stock; provided,
however, that the Company may incur Indebtedness (including Acquired Debt) or
issue shares of Disqualified Stock and Restricted Subsidiaries may incur
Indebtedness or issue preferred stock if the Fixed Charge Coverage Ratio for the
Company's most recently ended four full fiscal quarters for which internal
financial statements are available immediately preceding the date on which such
additional Indebtedness is incurred or such Disqualified Stock is issued would
have been at least 2 to 1, determined on a pro forma basis (including a pro
forma application of the net proceeds therefrom), as if the additional
Indebtedness had been incurred, or the Disqualified Stock had been issued, as
the case may be, at the beginning of such four-quarter period.
The foregoing provisions shall not apply to the incurrence of any of
the following items of Indebtedness (collectively, "Permitted Debt"):
(i) the incurrence by the Company of Indebtedness under the Senior
Credit Facility in an aggregate principal amount not exceeding an amount
equal to $160.0 million less the aggregate amount of all Net Proceeds of
Asset Sales applied by the Company or any of its Restricted Subsidiaries to
permanently repay Indebtedness under the Senior Credit Facility pursuant to
Section 4.10 hereof;
(ii) the incurrence by Cluett Peabody Canada Inc. of Indebtedness
under the Canadian Credit Facility in an aggregate principal amount not
exceeding an amount equal to $15.0 million less the aggregate amount of all
Net Proceeds of Asset Sales applied by the Company or any of its Restricted
Subsidiaries to permanently repay revolving credit Indebtedness under the
Canadian Credit Facility pursuant to Section 4.10 hereof;
(iii) the incurrence by the Company and its Restricted Subsidiaries of
the Existing Indebtedness, including the Notes and the Guarantees thereof;
(iv) the incurrence by the Company of Indebtedness represented by the
Debentures;
(v) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness represented by Capital Lease Obligations,
mortgage financings or purchase money obligations, in each case incurred
for the purpose of financing all or any part of the purchase price or cost
of construction or improvement of property, plant or equipment used in the
business of the Company or such Restricted Subsidiary, in an aggregate
principal amount not to exceed $10.0 million at any time outstanding;
(vi) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the
net proceeds of which are used to refund, refinance or replace, Existing
Indebtedness or Indebtedness (other than intercompany Indebtedness)
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that was permitted by this Exchange Indenture to be incurred under the
first paragraph hereof or clauses (iv), (v), (vi), (ix) or (xv) of this
paragraph;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and
any of its Restricted Subsidiaries; provided, however, that (i) if the
Company is the obligor on such Indebtedness, such Indebtedness is expressly
subordinated to the prior payment in full in cash of all Obligations with
respect to the Debentures and (ii)(A) any subsequent issuance or transfer
of Equity Interests that results in any such Indebtedness being held by a
Person other than the Company or a Restricted Subsidiary thereof and (B)
any sale or other transfer of any such Indebtedness to a Person that is not
either the Company or a Restricted Subsidiary thereof shall be deemed, in
each case, to constitute an incurrence of such Indebtedness by the Company
or such Restricted Subsidiary, as the case may be, that was not permitted
by this clause (vii);
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of Hedging Obligations that are incurred for the purpose of
fixing or hedging interest rate risk with respect to any floating rate
Indebtedness that is permitted by the terms of this Exchange Indenture to
be outstanding;
(ix) the incurrence by the Company or any of its Restricted
Subsidiaries of Indebtedness in connection with the acquisition of assets
or a new Subsidiary; provided that such Indebtedness was incurred by the
prior owner of such assets or such Subsidiary prior to such acquisition by
the Company or one of its Restricted Subsidiaries and was not incurred in
connection with, or in contemplation of, such acquisition by the Company or
one of it Restricted Subsidiaries; and provided further that the principal
amount (or accreted value, as applicable) of such Indebtedness, together
with any other outstanding Indebtedness incurred pursuant to this clause
(ix) and any Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause
(ix), does not exceed $5.0 million;
(x) the guarantee by the Company or any Restricted Subsidiary of
Indebtedness of the Company or a Restricted Subsidiary of the Company that
was permitted to be incurred by another provision of this Section 4.09;
(xi) Indebtedness incurred in respect of workers' compensation claims,
self-insurance obligations, performance, surety and similar bonds and
completion guarantees provided by the Company in the ordinary course of
business;
(xii) Indebtedness arising from guarantees of Indebtedness of the
Company or any Subsidiary or the agreements of the Company or a Restricted
Subsidiary providing for indemnification, adjustment of purchase price or
similar obligations, in each case, incurred or assumed in connection with
the disposition of any business, assets or Capital Stock of a Restricted
Subsidiary, or other guarantees of Indebtedness incurred by any person
acquiring all or any portion of such business, assets or Capital Stock of a
Restricted Subsidiary for the purpose of financing such acquisition,
provided that the maximum aggregate liability in respect of all such
Indebtedness shall at no time exceed the gross proceeds actually received
by the Company and its Restricted Subsidiaries in connection with such
disposition;
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(xiii) Indebtedness of a Receivables Subsidiary that is not recourse
to the Company or any other Restricted Subsidiary of the Company (other
than Standard Securitization Undertakings) incurred in connection with a
Qualified Receivables Transaction;
(xiv) the incurrence by the Company's Unrestricted Subsidiaries of
Non-Recourse Debt, provided, however, that if any such Indebtedness ceases
to be Non-Recourse Debt of an Unrestricted Subsidiary, such event shall be
deemed to constitute an incurrence of Indebtedness by a Restricted
Subsidiary of the Company that was not permitted by this clause (xiv); and
(xv) the incurrence by the Company or any of its Restricted
Subsidiaries of additional Indebtedness in an aggregate principal amount
(or accreted value, as applicable) at any time outstanding, including all
Permitted Refinancing Indebtedness incurred to refund, refinance or replace
any Indebtedness incurred pursuant to this clause (xv), not to exceed $10.0
million.
For purposes of determining compliance with this Section 4.09, in the
event that an item of proposed Indebtedness meets the criteria of more than one
of the categories of Permitted Debt described in clauses (i) through (xv) above
as of the date of incurrence thereof, or is entitled to be incurred pursuant to
the first paragraph of this Section 4.09 as of the date of incurrence thereof,
the Company shall, in its sole discretion, classify such item of Indebtedness on
the date of its incurrence in any manner that complies with this Section 4.09.
Accrual of interest, accretion or amortization of original issue discount, the
payment of interest on any Indebtedness in the form of additional Indebtedness
with the same terms and the payment of dividends on Disqualified Stock in the
form of additional shares of the same class of Disqualified Stock will not be
deemed to be Disqualified Stock for purposes of this Section 4.09; provided, in
each such case, that the amount thereof is included in Fixed Charges of the
Company as accrued. For purposes of determining compliance with any U.S.
dollar-denominated restriction on the incurrence of Indebtedness, the U.S.
dollar-equivalent principal amount of Indebtedness denominated in a foreign
currency shall be calculated based on the relevant currency exchange rate in
effect on the date such Indebtedness was incurred.
SECTION 4.10. ASSET SALES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, consummate an Asset Sale unless (i) the Company (or the
Restricted Subsidiary, as the case may be) receives consideration at the time of
such Asset Sale at least equal to the fair market value (evidenced by a
resolution of the Board of Directors set forth in an Officers' Certificate
delivered to the Exchange Trustee) of the assets or Equity Interests issued or
sold or otherwise disposed of and (ii) at least 75% of the consideration
therefor received by the Company or such Restricted Subsidiary is in the form of
(A) cash or Cash Equivalents or (B) Qualified Proceeds; provided that the
aggregate fair market value of Qualified Proceeds (other than cash or Cash
Equivalents), which may be received in consideration for asset sales pursuant to
this clause (ii) (B) shall not exceed $5.0 million since the Issue Date;
provided that the amount of (x) any liabilities (as shown on the Company's or
such Restricted Subsidiary's most recent balance sheet), of the Company or any
Restricted Subsidiary (other than contingent liabilities and liabilities that
are by their terms subordinated to the Debentures or any guarantee thereof) that
are assumed by the transferee of any such assets pursuant to a customary
novation agreement that releases the Company or such Restricted Subsidiary from
further liability and (y) any securities, Debentures or other obligations
received by the Company or any such Restricted Subsidiary from such transferee
that are contemporaneously (subject to ordinary settlement periods) converted by
the Company or such Restricted Subsidiary into cash (to the extent of the cash
received), shall be deemed to be cash for purposes of this provision.
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Within 360 days after the receipt of any Net Proceeds from an Asset
Sale, the Company may apply such Net Proceeds, at its option, (a) to permanently
repay Exchange Debenture Senior Indebtedness or Indebtedness of a Restricted
Subsidiary, (b) to acquire all or substantially all of the assets of, or a
majority of the Voting Stock of, another Permitted Business, (c) to make a
capital expenditure or (d) to acquire other long-term assets that are used or
useful in a Permitted Business. Pending the final application of any such Net
Proceeds, the Company may temporarily reduce revolving credit borrowings or
otherwise invest such Net Proceeds in any manner that is not prohibited by this
Exchange Indenture. Any Net Proceeds from Asset Sales that are not applied or
invested as provided in the first sentence of this paragraph will be deemed to
constitute "Excess Proceeds." When the aggregate amount of Excess Proceeds
exceeds $10.0 million, the Company will be required to make an offer to all
Holders of Debentures and all holders of other Indebtedness that is pari passu
with the Debentures containing provisions similar to those set forth in this
Exchange Indenture with respect to offers to purchase or redeem with the
proceeds of sales of assets (an "Asset Sale Offer") to purchase the maximum
principal amount of Debentures and such other pari passu Indebtedness that may
be purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase, in accordance
with the procedures set forth in this Exchange Indenture and such other pari
passu Indebtedness. To the extent that any Excess Proceeds remain after
consummation of an Asset Sale Offer, the Company may use such Excess Proceeds
for any purpose not otherwise prohibited by this Exchange Indenture. If the
aggregate principal amount of Debentures and such other pari passu Indebtedness
tendered into such Asset Sale Offer surrendered by Holders thereof exceeds the
amount of Excess Proceeds, the Exchange Trustee shall select the Debentures and
such other pari passu Indebtedness to be purchased on a pro rata basis. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
SECTION 4.11. TRANSACTIONS WITH AFFILIATES.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than those that would have been
obtained in a comparable transaction by the Company or such Restricted
Subsidiary with an unrelated Person and (ii) the Company delivers to the
Exchange Trustee (a) with respect to any Affiliate Transaction or series of
related Affiliate Transactions involving aggregate consideration in excess of
$1.0 million, a resolution of the Board of Directors set forth in an Officers'
Certificate certifying that such Affiliate Transaction complies with clause (i)
above and that such Affiliate Transaction has been approved by a majority of the
disinterested members of the Board of Directors and (b) with respect to any
Affiliate Transaction or series of related Affiliate Transactions involving
aggregate consideration in excess of $5.0 million, an opinion as to the fairness
to the Holders of such Affiliate Transaction from a financial point of view
issued by an accounting, appraisal or investment banking firm of national
standing. Notwithstanding the foregoing, the following items shall not be deemed
to be Affiliate Transactions: (i) any employment agreement entered into by the
Company or any of its Restricted Subsidiaries in the ordinary course of business
and consistent with the past practice of the Company or such Restricted
Subsidiary, (ii) transactions between or among the Company and/or its Restricted
Subsidiaries, (iii) payment of reasonable directors fees to Persons who are not
otherwise Affiliates of the Company, (iv) any sale or other issuance of Equity
Interests (other than Disqualified Stock) of the Company, (v) payments made
pursuant to the Management Agreement in effect as of the Issue Date, and (vi)
Restricted Payments that are permitted under Section 4.07 hereof.
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SECTION 4.12. LIENS.
The Company shall not, and shall permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien of any kind securing Indebtedness, on any asset now owned or
hereafter acquired, except Permitted Liens, unless all payments due under this
Exchange Indenture and the Debentures are secured on an equal and ratable basis
with the Indebtedness so secured until such time as such is no longer secured by
a Lien; provided that if such Indebtedness is by its terms expressly
subordinated to the Debentures, the Lien securing such Indebtedness shall be
subordinate and junior to the Lien securing the Debentures with the same
relative priority as such subordinate or junior Indebtedness shall have with
respect to the Debentures.
SECTION 4.13. CORPORATE EXISTENCE.
Subject to Article 5 hereof, the Company shall do or cause to be done
all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Subsidiaries, in accordance with the respective organizational documents
(as the same may be amended from time to time) of the Company or any such
Subsidiary and (ii) the rights (charter and statutory), licenses and franchises
of the Company and its Subsidiaries; provided, however, that the Company shall
not be required to preserve any such right, license or franchise, or the
corporate, partnership or other existence of any of its Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Subsidiaries,
taken as a whole, and that the loss thereof is not adverse in any material
respect to the Holders of the Debentures.
SECTION 4.14. OFFER TO REPURCHASE UPON CHANGE OF CONTROL.
(a) Upon the occurrence of a Change of Control, each Holder of Debentures
will have the right to require the Company to repurchase all or any part (equal
to $1,000 or an integral multiple thereof) of such Holder's Debentures pursuant
to the offer described in this Section 4.14 at an offer price in cash equal to
101% of the aggregate principal amount thereof plus accrued and unpaid interest
and Liquidated Damages thereon, if any, to the date of purchase (the "Change of
Control Payment"). Within 30 days following any Change of Control, the Company
will mail a notice to each Holder describing the transaction or transactions
that constitute the Change of Control and offering to repurchase Debentures on
the date specified in such notice, which date shall be no earlier than 30 days
and no later than 60 days from the date such notice is mailed (the "Change of
Control Payment Date"), pursuant to the procedures required by this Exchange
Indenture and described in such notice. The Company will comply with the
requirements of Rule 14e-1 under the Exchange Act and any other securities laws
and regulations thereunder to the extent such laws and regulations are
applicable in connection with the repurchase of the Debentures as a result of a
Change of Control.
(b) On the Change of Control Payment Date, the Company will, to the extent
lawful, (1) accept for payment all Debentures or portions thereof properly
tendered pursuant to the Change of Control Offer, (2) deposit with the Paying
Agent an amount equal to the Change of Control Payment in respect of all
Debentures or portions thereof so tendered and (3) deliver or cause to be
delivered to the Exchange Trustee the Debentures so accepted together with an
Officers' Certificate stating the aggregate principal amount of Debentures or
portions thereof being purchased by the Company. The Paying Agent will promptly
mail to each Holder of Debentures so tendered the
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Change of Control Payment for such Debentures, and the Exchange Trustee will
promptly authenticate and mail (or cause to be transferred by book entry) to
each Holder a New Exchange Debenture equal in principal amount to any
unpurchased portion of the Exchange Debentures surrendered, if any; provided
that each such New Debenture will be in a principal amount of $1,000 or an
integral multiple thereof. Prior to complying with the provisions of this
Section 4.14, but in any event within 90 days following a Change of Control, the
Company shall either repay all outstanding Exchange Debenture Senior
Indebtedness or obtain the requisite consents, if any, under all agreements
governing outstanding Exchange Debenture Senior Indebtedness to permit the
repurchase of Debentures required by this Section 4.14. The Company will
publicly announce the results of the Change of Control Offer on or as soon as
practicable after the Change of Control Payment Date.
(c) Notwithstanding anything to the contrary in this Section 4.14, the
Company shall not be required to make a Change of Control Offer upon a Change of
Control if a third party makes the Change of Control Offer in the manner, at the
times and otherwise in compliance with the requirements set forth in this
Section 4.14 and Section 3.09 hereof and purchases all Debentures validly
tendered and not withdrawn under such Change of Control Offer.
SECTION 4.15. NO SENIOR SUBORDINATED DEBT.
The Company shall not incur, create, issue, assume, guarantee or
otherwise become liable for any Indebtedness that is subordinate or junior in
right of payment to all Senior Indebtedness of the Company and senior in any
respect in right of payment to the Debentures.
SECTION 4.16. BUSINESS ACTIVITIES.
The Company shall not, and shall not permit any Restricted Subsidiary
to, engage in any business other than Permitted Businesses, except to such
extent as would not be material to the Company and its Subsidiaries taken as a
whole.
ARTICLE 5.
SUCCESSORS
SECTION 5.01. MERGER, CONSOLIDATION, OR SALE OF ASSETS.
The Company shall not, directly or indirectly, consolidate or merge
with or into (whether or not the Company is the surviving corporation), or sell,
assign, transfer, lease, convey or otherwise dispose of all or substantially all
of its properties or assets in one or more related transactions, to another
corporation, Person or entity unless (i) the Company is the surviving
corporation or the entity or the Person formed by or surviving any such
consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the entity or Person formed
by or surviving any such consolidation or merger (if other than the Company) or
the entity or Person to which such sale, assignment, transfer, lease, conveyance
or other disposition shall have been made assumes all the obligations of the
Company under the Debentures and this Exchange Indenture pursuant to a
supplemental indenture in a form reasonably satisfactory to the Exchange
Trustee; (iii) immediately after such transaction no Default or Event of Default
exists; and (iv) except in the case of a
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merger of the Company with or into a Wholly Owned Restricted Subsidiary of the
Company, the Company or the entity or Person formed by or surviving any such
consolidation or merger (if other than the Company), or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made (A) will have a Consolidated Net Worth immediately after the transaction
equal to or greater than the Consolidated Net Worth of the Company immediately
preceding the transaction and (B) will, immediately after such transaction after
giving pro forma effect thereto and any related financing transactions as if the
same had occurred at the beginning of the applicable four-quarter period, be
permitted to incur at least $1.00 of additional Indebtedness pursuant to the
Fixed Charge Coverage Ratio test set forth in the first paragraph of Section
4.09 hereof.
SECTION 5.02. SUCCESSOR CORPORATION SUBSTITUTED.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor corporation
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
provisions of this Exchange Indenture referring to the "Company" shall refer
instead to the successor corporation and not to the Company), and may exercise
every right and power of the Company under this Exchange Indenture with the same
effect as if such successor Person had been named as the Company herein;
provided, however, that the predecessor Company shall not be relieved from the
obligation to pay the principal of and interest on the Debentures except in the
case of a sale of all of the Company's assets that meets the requirements of
Section 5.01 hereof.
ARTICLE 6.
DEFAULTS AND REMEDIES
SECTION 6.01. EVENTS OF DEFAULT.
An "Event of Default" occurs if:
(a) the Company defaults in the payment when due of interest on, or
Liquidated Damages with respect to, the Debentures (whether or not permitted by
the subordination provisions of this Exchange Indenture) and such default
continues for a period of 30 days;
(b) the Company defaults in the payment when due of principal of or
premium, if any, on the Debentures when the same becomes due and payable at
maturity, upon redemption (including in connection with an offer to purchase) or
otherwise (whether or not permitted by the subordination provisions of this
Exchange Indenture);
(c) the Company or any of its Restricted Subsidiaries fails to comply with
the provisions of Section 5.01 hereof;
(d) the Company or any of its Restricted Subsidiaries fails to observe or
perform any other covenant, representation, warranty or other agreement in this
Exchange Indenture or the Debentures for 60 days after notice to the Company by
the Exchange Trustee or the Holders of at least 25% in aggregate principal
amount of the Debentures then outstanding voting as a single class;
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(e) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date hereof, which default (a) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness prior to
the expiration of the grace period provided in such Indebtedness on the date of
such default (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more;
(f) a final judgment or final judgments for the payment of money are
entered by a court or courts of competent jurisdiction against the Company or
any of its Restricted Subsidiaries and such judgment or judgments remain
undischarged for a period (during which execution shall not be effectively
stayed) of 60 days, provided that the aggregate of all such undischarged
judgments exceeds $5.0 million;
(g) the Company or any of its Restricted Subsidiaries pursuant to or within
the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief against it in an
involuntary case,
(iii) consents to the appointment of a Custodian of it or for all or
substantially all of its property,
(iv) makes a general assignment for the benefit of its creditors, or
(v) generally is not paying its debts as they become due; or
(h) a court of competent jurisdiction enters an order or decree under any
Bankruptcy Law that:
(i) is for relief against the Company or any of its Restricted
Subsidiaries in an involuntary case,
(ii) appoints a Custodian of the Company or any of its Restricted
Subsidiaries or for all or substantially all of the property of the Company
or any of its Restricted Subsidiaries or
(iii) orders the liquidation of the Company or any of its Restricted
Subsidiaries;
and the order or decree remains unstayed and in effect for 60 consecutive
days.
SECTION 6.02. ACCELERATION.
If any Event of Default (other than an Event of Default specified in
clause (g) or (h) of Section 6.01 hereof with respect to the Company, any
Significant Subsidiary or any group of Significant
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Subsidiaries that, taken as a whole, would constitute a Significant Subsidiary)
occurs and is continuing, the Exchange Trustee or the Holders of at least 25% in
aggregate principal amount of the then outstanding Debentures may declare all
the Debentures to be due and payable immediately. Upon any such declaration, the
Debentures shall become due and payable immediately. Notwithstanding the
foregoing, if an Event of Default specified in clause (g) or (h) of Section 6.01
hereof occurs with respect to the Company, any of its Significant Subsidiary or
any group of Subsidiaries that, taken as a whole, would constitute a Significant
Subsidiary, all outstanding Debentures shall be due and payable immediately
without further action or notice. The Holders of a majority in aggregate
principal amount of the then outstanding Debentures by written notice to the
Exchange Trustee may on behalf of all of the Holders rescind an acceleration and
its consequences if the rescission would not conflict with any judgment or
decree and if all existing Events of Default (except nonpayment of principal,
interest or premium that has become due solely because of the acceleration) have
been cured or waived.
The Company is required to deliver to the Exchange Trustee annually a
statement regarding compliance with this Exchange Indenture, and the Company is
required upon becoming aware of any Default or Event of Default, to deliver to
the Exchange Trustee a statement specifying such Default or Event of Default.
SECTION 6.03. OTHER REMEDIES.
If an Event of Default occurs and is continuing, the Exchange Trustee
may pursue any available remedy to collect the payment of principal, premium, if
any, and interest on the Debentures or to enforce the performance of any
provision of the Debentures or this Exchange Indenture.
The Exchange Trustee may maintain a proceeding even if it does not
possess any of the Debentures or does not produce any of them in the proceeding.
A delay or omission by the Exchange Trustee or any Holder of a Debenture in
exercising any right or remedy accruing upon an Event of Default shall not
impair the right or remedy or constitute a waiver of or acquiescence in the
Event of Default. All remedies are cumulative to the extent permitted by law.
SECTION 6.04. WAIVER OF PAST DEFAULTS.
Holders of not less than a majority in aggregate principal amount of
the then outstanding Debentures by notice to the Exchange Trustee may on behalf
of the Holders of all of the Debentures waive an existing Default or Event of
Default and its consequences hereunder, except a continuing Default or Event of
Default in the payment of the principal, premium and Liquidated Damages, if any,
or interest on, the Debentures (including in connection with an offer to
purchase) (provided, however, that the Holders of a majority in aggregate
principal amount of the then outstanding Debentures may rescind an acceleration
and its consequences, including any related payment default that resulted from
such acceleration). Upon any such waiver, such Default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured for
every purpose of this Exchange Indenture; but no such waiver shall extend to any
subsequent or other Default or impair any right consequent thereon.
SECTION 6.05. CONTROL BY MAJORITY.
Holders of a majority in principal amount of the then outstanding
Debentures may direct the time, method and place of conducting any proceeding
for exercising any remedy available to the Exchange Trustee or exercising any
trust or power conferred on it. However, the Exchange Trustee may
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refuse to follow any direction that conflicts with law or this Exchange
Indenture that the Exchange Trustee determines may be unduly prejudicial to the
rights of other Holders of Debentures or that may involve the Exchange Trustee
in personal liability.
SECTION 6.06. LIMITATION ON SUITS.
A Holder of a Debenture may pursue a remedy with respect to this
Exchange Indenture or the Debentures only if:
(a) the Holder of a Debenture gives to the Exchange Trustee written notice
of a continuing Event of Default;
(b) the Holders of at least 25% in principal amount of the then
outstanding Debentures make a written request to the Exchange Trustee
to pursue the remedy;
(c) such Holder of a Debenture or Holders of Debentures offer and, if
requested, provide to the Exchange Trustee indemnity satisfactory to
the Exchange Trustee against any loss, liability or expense;
(d) the Exchange Trustee does not comply with the request within 60 days
after receipt of the request and the offer and, if requested, the
provision of indemnity; and
(e) during such 60-day period the Holders of a majority in principal
amount of the then outstanding Debentures do not give the Exchange
Trustee a direction inconsistent with the request.
A Holder of a Debenture may not use this Exchange Indenture to
prejudice the rights of another Holder of a Debenture or to obtain a preference
or priority over another Holder of a Debenture.
SECTION 6.07. RIGHTS OF HOLDERS OF DEBENTURES TO RECEIVE PAYMENT.
Notwithstanding any other provision of this Exchange Indenture, the
right of any Holder of a Debenture to receive payment of principal, premium and
Liquidated Damages, if any, and interest on the Debenture, on or after the
respective due dates expressed in the Debenture (including in connection with an
offer to purchase), or to bring suit for the enforcement of any such payment on
or after such respective dates, shall not be impaired or affected without the
consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY EXCHANGE TRUSTEE.
If an Event of Default specified in Section 6.01(a) or (b) occurs and
is continuing, the Exchange Trustee is authorized to recover judgment in its own
name and as trustee of an express trust against the Company for the whole amount
of principal of, premium and Liquidated Damages, if any, and interest remaining
unpaid on the Debentures and interest on overdue principal and, to the extent
lawful, interest and such further amount as shall be sufficient to cover the
costs and expenses of collection, including the reasonable compensation,
expenses, disbursements and advances of the Exchange Trustee, its agents and
counsel.
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SECTION 6.09. EXCHANGE TRUSTEE MAY FILE PROOFS OF CLAIM.
The Exchange Trustee is authorized to file such proofs of claim and
other papers or documents as may be necessary or advisable in order to have the
claims of the Exchange Trustee (including any claim for the reasonable
compensation, expenses, disbursements and advances of the Exchange Trustee, its
agents and counsel) and the Holders of the Debentures allowed in any judicial
proceedings relative to the Company (or any other obligor upon the Debentures),
its creditors or its property and shall be entitled and empowered to collect,
receive and distribute any money or other property payable or deliverable on any
such claims and any custodian in any such judicial proceeding is hereby
authorized by each Holder to make such payments to the Exchange Trustee, and in
the event that the Exchange Trustee shall consent to the making of such payments
directly to the Holders, to pay to the Exchange Trustee any amount due to it for
the reasonable compensation, expenses, disbursements and advances of the
Exchange Trustee, its agents and counsel, and any other amounts due the Exchange
Trustee under Section 7.07 hereof. To the extent that the payment of any such
compensation, expenses, disbursements and advances of the Exchange Trustee, its
agents and counsel, and any other amounts due the Exchange Trustee under Section
7.07 hereof out of the estate in any such proceeding, shall be denied for any
reason, payment of the same shall be secured by a Lien on, and shall be paid out
of, any and all distributions, dividends, money, securities and other properties
that the Holders may be entitled to receive in such proceeding whether in
liquidation or under any plan of reorganization or arrangement or otherwise.
Nothing herein contained shall be deemed to authorize the Exchange Trustee to
authorize or consent to or accept or adopt on behalf of any Holder any plan of
reorganization, arrangement, adjustment or composition affecting the Debentures
or the rights of any Holder, or to authorize the Exchange Trustee to vote in
respect of the claim of any Holder in any such proceeding.
SECTION 6.10. PRIORITIES.
If the Exchange Trustee collects any money pursuant to this Article,
it shall pay out the money in the following order:
First: to the Exchange Trustee, its agents and attorneys for amounts
due under Section 7.07 hereof, including payment of all compensation, expense
and liabilities incurred, and all advances made, by the Exchange Trustee and the
costs and expenses of collection;
Second: to Holders of Debentures for amounts due and unpaid on the
Debentures for principal, premium and Liquidated Damages, if any, and interest,
ratably, without preference or priority of any kind, according to the amounts
due and payable on the Debentures for principal, premium, and Liquidated
Damages, if any and interest, respectively; and
Third: to the Company.
The Exchange Trustee may fix a record date and payment date for any
payment to Holders of Debentures pursuant to this Section 6.10.
SECTION 6.11. UNDERTAKING FOR COSTS.
In any suit for the enforcement of any right or remedy under this
Exchange Indenture or in any suit against the Exchange Trustee for any action
taken or omitted by it as a trustee, a court in its discretion may require the
filing by any party litigant in the suit of an undertaking to pay the costs of
the
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suit, and the court in its discretion may assess reasonable costs, including
reasonable attorneys' fees and expenses, against any party litigant in the suit,
having due regard to the merits and good faith of the claims or defenses made by
the party litigant. This Section does not apply to a suit by the Exchange
Trustee, a suit by a Holder of a Debenture pursuant to Section 6.07 hereof, or a
suit by Holders of more than 10% in principal amount of the then outstanding
Debentures.
ARTICLE 7.
EXCHANGE TRUSTEE
SECTION 7.01. DUTIES OF EXCHANGE TRUSTEE.
(a) If an Event of Default has occurred and is continuing, the Exchange
Trustee shall exercise such of the rights and powers vested in it by this
Exchange Indenture, and use the same degree of care and skill in its exercise,
as a prudent man would exercise or use under the circumstances in the conduct of
his own affairs.
(b) Except during the continuance of an Event of Default:
(i) the duties of the Exchange Trustee shall be determined solely by the
express provisions of this Exchange Indenture and the Exchange Trustee need
perform only those duties that are specifically set forth in this Exchange
Indenture and no others, and no implied covenants or obligations shall be read
into this Exchange Indenture against the Exchange Trustee; and
(ii) in the absence of bad faith on its part, the Exchange Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Exchange Trustee and conforming to the requirements of this Exchange
Indenture. However, the Exchange Trustee shall examine the certificates and
opinions to determine whether or not they conform to the requirements of this
Exchange Indenture.
(c) The Exchange Trustee may not be relieved from liabilities for its own
negligent action, its own negligent failure to act, or its own willful
misconduct, except that:
(i) this paragraph does not limit the effect of paragraph (b) of this
Section;
(ii) the Exchange Trustee shall not be liable for any error of judgment
made in good faith by a Responsible Officer, unless it is proved that the
Exchange Trustee was negligent in ascertaining the pertinent facts; and
(iii) the Exchange Trustee shall not be liable with respect to any action
it takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05 hereof.
(d) Whether or not therein expressly so provided, every provision of this
Exchange Indenture that in any way relates to the Exchange Trustee is subject to
paragraphs (a), (b), and (c) of this Section.
(e) No provision of this Exchange Indenture shall require the Exchange
Trustee to expend or risk its own funds or incur any liability. The Exchange
Trustee shall be under no obligation to exercise any of its rights and powers
under this Exchange Indenture at the request
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of any Holders, unless such Holder shall have offered to the Exchange Trustee
security and indemnity satisfactory to it against any loss, liability or
expense.
(f) The Exchange Trustee shall not be liable for interest on any money
received by it except as the Exchange Trustee may agree in writing with the
Company. Money held in trust by the Exchange Trustee need not be segregated from
other funds except to the extent required by law.
SECTION 7.02. RIGHTS OF EXCHANGE TRUSTEE.
(a) The Exchange Trustee may conclusively rely upon any document believed
by it to be genuine and to have been signed or presented by the proper Person.
The Exchange Trustee need not investigate any fact or matter stated in the
document.
(b) Before the Exchange Trustee acts or refrains from acting, it may
require an Officers' Certificate or an Opinion of Counsel or both. The Exchange
Trustee shall not be liable for any action it takes or omits to take in good
faith in reliance on such Officers' Certificate or Opinion of Counsel. The
Exchange Trustee may consult with counsel of its selection and the advice of
such counsel or any Opinion of Counsel shall be full and complete authorization
and protection from liability in respect of any action taken, suffered or
omitted by it hereunder in good faith and in reliance thereon.
(c) The Exchange Trustee may act through its attorneys and agents and shall
not be responsible for the misconduct or negligence of any agent appointed with
due care.
(d) The Exchange Trustee shall not be liable for any action it takes or
omits to take in good faith that it believes to be authorized or within the
rights or powers conferred upon it by this Exchange Indenture.
(e) Unless otherwise specifically provided in this Exchange Indenture, any
demand, request, direction or notice from the Company shall be sufficient if
signed by an Officer of the Company.
(f) The Exchange Trustee shall be under no obligation to exercise any of
the rights or powers vested in it by this Exchange Indenture at the request or
direction of any of the Holders unless such Holders shall have offered to the
Exchange Trustee security or indemnity satisfactory to it against the costs,
expenses and liabilities that might be incurred by it in compliance with such
request or direction.
SECTION 7.03. INDIVIDUAL RIGHTS OF EXCHANGE TRUSTEE.
The Exchange Trustee in its individual or any other capacity may
become the owner or pledgee of Debentures and may otherwise deal with the
Company or any Affiliate of the Company with the same rights it would have if it
were not Exchange Trustee. However, in the event that the Exchange Trustee
acquires any conflicting interest it must eliminate such conflict within 90
days, apply to the SEC for permission to continue as trustee or resign. Any
Agent may do the same with like rights and duties. The Exchange Trustee is also
subject to Sections 7.10 and 7.11 hereof.
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SECTION 7.04. EXCHANGE TRUSTEE'S DISCLAIMER.
The Exchange Trustee shall not be responsible for and makes no
representation as to the validity or adequacy of this Exchange Indenture or the
Debentures, it shall not be accountable for the Company's use of the proceeds
from the Debentures or any money paid to the Company or upon the Company's
direction under any provision of this Exchange Indenture, it shall not be
responsible for the use or application of any money received by any Paying Agent
other than the Exchange Trustee, and it shall not be responsible for any
statement or recital herein or any statement in the Debentures or any other
document in connection with the sale of the Debentures or pursuant to this
Exchange Indenture other than its certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS.
If a Default or Event of Default occurs and is continuing and if it is
known to the Exchange Trustee, the Exchange Trustee shall mail to Holders of
Debentures a notice of the Default or Event of Default within 90 days after it
occurs. Except in the case of a Default or Event of Default in payment of
principal of, premium, if any, or interest on any Debenture, the Exchange
Trustee may withhold the notice if and so long as a committee of its Responsible
Officers in good faith determines that withholding the notice is in the
interests of the Holders of the Debentures.
SECTION 7.06. REPORTS BY EXCHANGE TRUSTEE TO HOLDERS OF THE DEBENTURES.
Within 60 days after each April 15 beginning with the April 15
following the date hereof, and for so long as Debentures remain outstanding, the
Exchange Trustee shall mail to the Holders of the Debentures a brief report
dated as of such reporting date that complies with TIA ss. 313(a) (but if no
event described in TIA ss. 313(a) has occurred within the twelve months
preceding the reporting date, no report need be transmitted). The Exchange
Trustee also shall comply with TIA ss. 313(b)(2). The Exchange Trustee shall
also transmit by mail all reports as required by TIA ss. 313(c).
A copy of each report at the time of its mailing to the Holders of
Debentures shall be mailed to the Company and filed with the SEC and each stock
exchange on which the Debentures are listed in accordance with TIA ss. 313(d).
The Company shall promptly notify the Exchange Trustee when the Debentures are
listed on any stock exchange or delisted therefrom.
SECTION 7.07. COMPENSATION AND INDEMNITY.
The Company shall pay to the Exchange Trustee from time to time
compensation as agreed upon in writing from time to time between the Company and
the Trustee for its acceptance of this Exchange Indenture and services
hereunder. The Exchange Trustee's compensation shall not be limited by any law
on compensation of a trustee of an express trust. The Company shall reimburse
the Exchange Trustee promptly upon request for all disbursements, advances and
expenses incurred or made by it in addition to the compensation for its
services. Such expenses shall include the reasonable compensation, disbursements
and expenses of the Exchange Trustee's agents and counsel.
The Company shall indemnify each of the Exchange Trustee and any
predecessor Exchange Trustee against any and all losses, liabilities, claims,
damages or expenses (including taxes other than taxes based upon the income of
the Exchange Trustee) incurred by it arising out of or in connection with the
acceptance or administration of its duties under this Exchange Indenture,
including
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the costs and expenses of enforcing this Exchange Indenture against the Company
(including this Section 7.07) and defending itself against any claim (whether
asserted by the Company or any Holder or any other person) or liability in
connection with the exercise or performance of any of its powers or duties
hereunder, except to the extent any such loss, liability or expense may be
attributable to its negligence or willful misconduct. The Exchange Trustee shall
notify the Company promptly of any claim for which it may seek indemnity.
Failure by the Exchange Trustee to so notify the Company shall not relieve the
Company of its obligations hereunder. The Company shall defend the claim and the
Exchange Trustee shall cooperate in the defense. The Exchange Trustee may have
separate counsel and the Company shall pay the reasonable fees and expenses of
such counsel. The Company need not pay for any settlement made without its
consent, which consent shall not be unreasonably withheld.
The obligations of the Company under this Section 7.07 shall survive
the satisfaction and discharge of this Exchange Indenture.
To secure the Company's payment obligations in this Section, the
Exchange Trustee shall have a Lien prior to the Debentures on all money or
property held or collected by the Exchange Trustee, except that held in trust to
pay principal and interest on particular Debentures. Such Lien shall survive the
satisfaction and discharge of this Exchange Indenture.
When the Exchange Trustee incurs expenses or renders services after an
Event of Default specified in Section 6.01(g) or (h) hereof occurs, the expenses
and the compensation for the services (including the fees and expenses of its
agents and counsel) are intended to constitute expenses of administration under
any Bankruptcy Law.
The Exchange Trustee shall comply with the provisions of TIA ss.
313(b)(2) to the extent applicable.
SECTION 7.08. REPLACEMENT OF EXCHANGE TRUSTEE.
A resignation or removal of the Exchange Trustee and appointment of a
successor Exchange Trustee shall become effective only upon the successor
Exchange Trustee's acceptance of appointment as provided in this Section.
The Exchange Trustee may resign in writing at any time and be
discharged from the trust hereby created by so notifying the Company. The
Holders of Debentures of a majority in principal amount of the then outstanding
Debentures may remove the Exchange Trustee by so notifying the Exchange Trustee
and the Company in writing. The Company may remove the Exchange Trustee if:
(a) the Exchange Trustee fails to comply with Section 7.10 hereof;
(b) the Exchange Trustee is adjudged a bankrupt or an insolvent or an
order for relief is entered with respect to the Exchange Trustee under any
Bankruptcy Law;
(c) a Custodian or public officer takes charge of the Exchange Trustee or
its property; or
(d) the Exchange Trustee becomes incapable of acting.
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If the Exchange Trustee resigns or is removed or if a vacancy exists
in the office of Exchange Trustee for any reason, the Company shall promptly
appoint a successor Exchange Trustee. Within one year after the successor
Exchange Trustee takes office, the Holders of a majority in principal amount of
the then outstanding Debentures may appoint a successor Exchange Trustee to
replace the successor Exchange Trustee appointed by the Company.
If a successor Exchange Trustee does not take office within 60 days
after the retiring Exchange Trustee resigns or is removed, the retiring Exchange
Trustee, the Company, or the Holders of Debentures of at least 10% in principal
amount of the then outstanding Debentures may petition at the expense of the
Company any court of competent jurisdiction for the appointment of a successor
Exchange Trustee.
If the Exchange Trustee, after written request by any Holder of a
Debenture who has been a Holder of a Debenture for at least six months, fails to
comply with Section 7.10, such Holder of a Debenture may petition any court of
competent jurisdiction for the removal of the Exchange Trustee and the
appointment of a successor Exchange Trustee.
A successor Exchange Trustee shall deliver a written acceptance of its
appointment to the retiring Exchange Trustee and to the Company. Thereupon, the
resignation or removal of the retiring Exchange Trustee shall become effective,
and the successor Exchange Trustee shall have all the rights, powers and duties
of the Exchange Trustee under this Exchange Indenture. The successor Exchange
Trustee shall mail a notice of its succession to Holders of the Debentures. The
retiring Exchange Trustee shall promptly transfer all property held by it as
Exchange Trustee to the successor Exchange Trustee, provided all sums owing to
the Exchange Trustee hereunder have been paid and subject to the Lien provided
for in Section 7.07 hereof. Notwithstanding replacement of the Exchange Trustee
pursuant to this Section 7.08, the Company's obligations under Section 7.07
hereof shall continue for the benefit of the retiring Exchange Trustee.
SECTION 7.09. SUCCESSOR EXCHANGE TRUSTEE BY MERGER, ETC.
If the Exchange Trustee consolidates, merges or converts into, or
transfers all or substantially all of its corporate trust business to, another
corporation, the successor corporation without any further act shall be the
successor Exchange Trustee.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION.
There shall at all times be an Exchange Trustee hereunder that is a
corporation organized and doing business under the laws of the United States of
America or of any state thereof that is authorized under such laws to exercise
corporate trustee power, that is subject to supervision or examination by
federal or state authorities and that has a combined capital and surplus of at
least $50 million as set forth in its most recent published annual report of
condition.
This Exchange Indenture shall always have an Exchange Trustee who
satisfies the requirements of TIA ss. 310(a)(1), (2) and (5). The Exchange
Trustee is subject to TIA ss. 310(b).
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SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY.
The Exchange Trustee is subject to TIA ss. 311(a), excluding any
creditor relationship listed in TIA ss. 311(b). An Exchange Trustee who has
resigned or been removed shall be subject to TIA ss. 311(a) to the extent
indicated therein.
SECTION 7.12. TRUSTEE'S APPLICATION FOR INSTRUCTIONS FROM THE COMPANY
Any application by the Trustee for written instructions from the
Company may, at the option of the Trustee, set forth in writing any action
proposed to be taken or omitted by the Trustee under the Indenture and the date
on and/or after which such action shall be taken or such omission shall be
effective. The Trustee shall not be liable for any action taken by, or omission
of, the Trustee in accordance with a proposal included in such application on or
after the date specified in such application (which date shall not be less than
three Business Days after the date any officer of the Company actually receives
such application, unless any such officer shall have consented in writing to any
earlier date) unless prior to taking any such action (or the effective date in
the case of an omission), the Trustee shall have received written instructions
in response to such application specifying the action to be taken or omitted.
ARTICLE 8.
LEGAL DEFEASANCE AND COVENANT DEFEASANCE
SECTION 8.01. OPTION TO EFFECT LEGAL DEFEASANCE OR COVENANT DEFEASANCE.
The Company may, at the option of its Board of Directors evidenced by
a resolution set forth in an Officers' Certificate, at any time, elect to have
either Section 8.02 or 8.03 hereof be applied to all outstanding Debentures upon
compliance with the conditions set forth below in this Article 8.
SECTION 8.02. LEGAL DEFEASANCE AND DISCHARGE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.02, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be deemed to have been
discharged from its obligations with respect to all outstanding Debentures on
the date the conditions set forth below are satisfied (hereinafter, "Legal
Defeasance"). For this purpose, Legal Defeasance means that the Company shall be
deemed to have paid and discharged the entire Indebtedness represented by the
outstanding Debentures, which shall thereafter be deemed to be "outstanding"
only for the purposes of Section 8.05 hereof and the other Sections of this
Exchange Indenture referred to in (a) and (b) below, and to have satisfied all
its other obligations under such Debentures and this Exchange Indenture (and the
Exchange Trustee, on demand of and at the expense of the Company, shall execute
proper instruments acknowledging the same), except for the following provisions
which shall survive until otherwise terminated or discharged hereunder: (a) the
rights of Holders of outstanding Debentures to receive payments in respect of
the principal of, premium, if any, and interest and Liquidated Damages on such
Debentures when such payments are due from the trust referred to below, (b) the
Company's obligations with respect to the Debentures concerning issuing
temporary Debentures, registration of Debentures, mutilated, destroyed, lost or
stolen Debentures and the maintenance of an office or agency for payment and
money for security payments held in trust, (c) the rights, powers, trusts,
duties and immunities of the Exchange Trustee, and the Company's obligations in
connection therewith and (d) this Article 8. Subject to compliance with this
Article 8, the Company may
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exercise its option under this Section 8.02 notwithstanding the prior exercise
of its option under Section 8.03 hereof.
SECTION 8.03. COVENANT DEFEASANCE.
Upon the Company's exercise under Section 8.01 hereof of the option
applicable to this Section 8.03, the Company shall, subject to the satisfaction
of the conditions set forth in Section 8.04 hereof, be released from its
obligations under the covenants contained in Sections 4.07, 4.08, 4.09, 4.10,
4.11, 4.12, 4.14, 4.15, 4.16, and 5.01 hereof with respect to the outstanding
Debentures on and after the date the conditions set forth in Section 8.04 are
satisfied (hereinafter, "Covenant Defeasance"), and the Debentures shall
thereafter be deemed not "outstanding" for the purposes of any direction,
waiver, consent or declaration or act of Holders (and the consequences of any
thereof) in connection with such covenants, but shall continue to be deemed
"outstanding" for all other purposes hereunder (it being understood that such
Debentures shall not be deemed outstanding for accounting purposes). For this
purpose, Covenant Defeasance means that, with respect to the outstanding
Debentures, the Company may omit to comply with and shall have no liability in
respect of any term, condition or limitation set forth in any such covenant,
whether directly or indirectly, by reason of any reference elsewhere herein to
any such covenant or by reason of any reference in any such covenant to any
other provision herein or in any other document and such omission to comply
shall not constitute a Default or an Event of Default under Section 6.01 hereof,
but, except as specified above, the remainder of this Exchange Indenture and
such Debentures shall be unaffected thereby. In addition, upon the Company's
exercise under Section 8.01 hereof of the option applicable to this Section 8.03
hereof, subject to the satisfaction of the conditions set forth in Section 8.04
hereof, Sections 6.01(c) through 6.01(f) hereof shall not constitute Events of
Default.
SECTION 8.04. CONDITIONS TO LEGAL OR COVENANT DEFEASANCE.
The following shall be the conditions to the application of either
Section 8.02 or 8.03 hereof to the outstanding Debentures:
In order to exercise either Legal Defeasance or Covenant Defeasance:
(a) the Company must irrevocably deposit with the Exchange Trustee, in
trust, for the benefit of the Holders, cash in United States dollars,
non-callable Government Securities, or a combination thereof, in such amounts as
shall be sufficient, in the opinion of a nationally recognized firm of
independent public accountants, to pay the principal of, premium, if any, and
Liquidated Damages, if any, and interest on the outstanding Debentures on the
stated date for payment thereof or on the applicable redemption date, as the
case may be, and the Company must specify whether the Debentures are being
defeased to maturity or to a particular redemption date;
(b) in the case of an election under Section 8.02 hereof, the Company shall
have delivered to the Exchange Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Exchange Trustee confirming that (A) the
Company has received from, or there has been published by, the Internal Revenue
Service a ruling or (B) since the date hereof, there has been a change in the
applicable federal income tax law, in either case to the effect that, and based
thereon such Opinion of Counsel shall confirm that, the Holders of the
outstanding Debentures will not recognize income, gain or loss for federal
income tax purposes as a result of
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such Legal Defeasance and will be subject to federal income tax on the same
amounts, in the same manner and at the same times as would have been the case if
such Legal Defeasance had not occurred;
(c) in the case of an election under Section 8.03 hereof, the Company shall
have delivered to the Exchange Trustee an Opinion of Counsel in the United
States reasonably acceptable to the Exchange Trustee confirming that the Holders
of the outstanding Debentures will not recognize income, gain or loss for
federal income tax purposes as a result of such Covenant Defeasance and will be
subject to federal income tax on the same amounts, in the same manner and at the
same times as would have been the case if such Covenant Defeasance had not
occurred;
(d) no Default or Event of Default shall have occurred and be continuing on
the date of such deposit (other than a Default or Event of Default resulting
from the incurrence of Indebtedness all or a portion of the proceeds of which
will be used to defease the Debentures pursuant to this Article Eight
concurrently with such incurrence) or insofar as Sections 6.01(g) or 6.01(h)
hereof is concerned, at any time in the period ending on the 91st day after the
date of deposit;
(e) such Legal Defeasance or Covenant Defeasance shall not result in a
breach or violation of, or constitute a default under, any material agreement or
instrument (other than this Exchange Indenture) to which the Company or any of
its Subsidiaries is a party or by which the Company or any of its Subsidiaries
is bound;
(f) the Company shall have delivered to the Exchange Trustee an Opinion of
Counsel to the effect that after the 91st day following the deposit, the trust
funds will not be subject to the effect of any applicable bankruptcy,
insolvency, reorganization or similar laws affecting creditors' rights
generally;
(g) the Company shall have delivered to the Exchange Trustee an Officers'
Certificate stating that the deposit was not made by the Company with the intent
of preferring the Holders over any other creditors of the Company or with the
intent of defeating, hindering, delaying or defrauding any other creditors of
the Company; and
(h) the Company shall have delivered to the Exchange Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent provided for or relating to the Legal Defeasance or the Covenant
Defeasance have been complied with.
SECTION 8.05. DEPOSITED MONEY AND GOVERNMENT SECURITIES TO BE HELD IN TRUST;
OTHER MISCELLANEOUS PROVISIONS.
Subject to Section 8.06 hereof, all money and non-callable Government
Securities (including the proceeds thereof) deposited with the Exchange Trustee
(or other qualifying trustee, collectively for purposes of this Section 8.05,
the "Exchange Trustee") pursuant to Section 8.04 hereof in respect of the
outstanding Debentures shall be held in trust and applied by the Exchange
Trustee, in accordance with the provisions of such Debentures and this Exchange
Indenture, to the payment, either directly or through any Paying Agent
(including the Company acting as Paying Agent) as the Exchange Trustee may
determine, to the Holders of such Debentures of all sums due and to become due
thereon in
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respect of principal, premium, if any, and interest, but such money need not be
segregated from other funds except to the extent required by law.
The Company shall pay and indemnify the Exchange Trustee against any
tax, fee or other charge imposed on or assessed against the cash or non-callable
Government Securities deposited pursuant to Section 8.04 hereof or the principal
and interest received in respect thereof other than any such tax, fee or other
charge which by law is for the account of the Holders of the outstanding
Debentures.
Anything in this Article Eight to the contrary notwithstanding, the
Exchange Trustee shall deliver or pay to the Company from time to time upon the
request of the Company any money or non-callable Government Securities held by
it as provided in Section 8.04 hereof which, in the opinion of a nationally
recognized firm of independent public accountants expressed in a written
certification thereof delivered to the Exchange Trustee (which may be the
opinion delivered under Section 8.04(a) hereof), are in excess of the amount
thereof that would then be required to be deposited to effect an equivalent
Legal Defeasance or Covenant Defeasance.
SECTION 8.06. REPAYMENT TO COMPANY.
Any money deposited with the Exchange Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of, premium,
if any, or interest on any Debenture and remaining unclaimed for two years after
such principal, and premium, if any, or interest has become due and payable
shall be paid to the Company on its request or (if then held by the Company)
shall be discharged from such trust; and the Holder of such Debenture shall
thereafter, as a secured creditor, look only to the Company for payment thereof,
and all liability of the Exchange Trustee or such Paying Agent with respect to
such trust money, and all liability of the Company as trustee thereof, shall
thereupon cease; provided, however, that the Exchange Trustee or such Paying
Agent, before being required to make any such repayment, may at the expense of
the Company cause to be published once, in the New York Times and The Wall
Street Journal (national edition), notice that such money remains unclaimed and
that, after a date specified therein, which shall not be less than 30 days from
the date of such notification or publication, any unclaimed balance of such
money then remaining shall be repaid to the Company.
SECTION 8.07. REINSTATEMENT.
If the Exchange Trustee or Paying Agent is unable to apply any United
States dollars or non-callable Government Securities in accordance with Section
8.02 or 8.03 hereof, as the case may be, by reason of any order or judgment of
any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this Exchange
Indenture and the Debentures shall be revived and reinstated as though no
deposit had occurred pursuant to Section 8.02 or 8.03 hereof until such time as
the Exchange Trustee or Paying Agent is permitted to apply all such money in
accordance with Section 8.02 or 8.03 hereof, as the case may be; provided,
however, that, if the Company makes any payment of principal of, premium, if
any, or interest on any Debenture following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Debentures to receive such payment from the money held by the Exchange
Trustee or Paying Agent.
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ARTICLE 9.
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01. WITHOUT CONSENT OF HOLDERS OF DEBENTURES.
Notwithstanding Section 9.02 of this Exchange Indenture, the Company
and the Exchange Trustee may amend or supplement this Exchange Indenture or the
Debentures without the consent of any Holder of a Debenture:
(a) to cure any ambiguity, defect or inconsistency;
(b) to provide for uncertificated Debentures in addition to or in place of
certificated Debentures or to alter the provisions of Article 2 hereof
(including the related definitions) in a manner that does not materially
adversely affect any Holder;
(c) to provide for the assumption of the Company's obligations to the
Holders of the Debentures by a successor to the Company pursuant to Article 5
hereof;
(d) to make any change that would provide any additional rights or benefits
to the Holders of the Debentures or that does not adversely affect the legal
rights hereunder of any Holder of the Debenture; or
(e) to comply with requirements of the SEC in order to effect or maintain
the qualification of this Exchange Indenture under the TIA.
Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon receipt by the Exchange Trustee of the documents described
in Section 7.02 hereof, the Exchange Trustee shall join with the Company in the
execution of any amended or supplemental Indenture authorized or permitted by
the terms of this Exchange Indenture and to make any further appropriate
agreements and stipulations that may be therein contained, but the Exchange
Trustee shall not be obligated to enter into such amended or supplemental
Indenture that affects its own rights, duties or immunities under this Exchange
Indenture or otherwise.
SECTION 9.02. WITH CONSENT OF HOLDERS OF DEBENTURES.
Except as provided below in this Section 9.02, the Company and the
Exchange Trustee may amend or supplement this Exchange Indenture (including
Sections 3.09, 4.10 and 4.15 hereof) and the Debentures may be amended or
supplemented with the consent of the Holders of at least a majority in principal
amount of the Debentures then outstanding voting as a single class (including
consents obtained in connection with a tender offer or exchange offer for, or
purchase of, the Debentures), and, subject to Sections 6.04 and 6.07 hereof, any
existing Default or Event of Default (other than a Default or Event of Default
in the payment of the principal of, premium, if any, or interest on the
Debentures, except a payment default resulting from an acceleration that has
been rescinded) or compliance with any provision of this Exchange Indenture or
the Debentures may be waived with the consent of the Holders of a majority in
principal amount of the then outstanding Debentures voting as a single class
(including consents obtained in connection with a tender offer or exchange offer
for, or purchase of, the Debentures). Section 2.08 hereof shall determine which
Debentures are considered to be "outstanding" for purposes of this Section 9.02.
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Upon the request of the Company accompanied by a resolution of its
Board of Directors authorizing the execution of any such amended or supplemental
Indenture, and upon the filing with the Exchange Trustee of evidence
satisfactory to the Exchange Trustee of the consent of the Holders of Debentures
as aforesaid, and upon receipt by the Exchange Trustee of the documents
described in Section 7.02 hereof, the Exchange Trustee shall join with the
Company in the execution of such amended or supplemental Indenture unless such
amended or supplemental Indenture directly affects the Exchange Trustee's own
rights, duties or immunities under this Exchange Indenture or otherwise, in
which case the Exchange Trustee may in its discretion, but shall not be
obligated to, enter into such amended or supplemental Indenture.
It shall not be necessary for the consent of the Holders of Debentures
under this Section 9.02 to approve the particular form of any proposed amendment
or waiver, but it shall be sufficient if such consent approves the substance
thereof.
After an amendment, supplement or waiver under this Section becomes
effective, the Company shall mail to the Holders of Debentures affected thereby
a notice briefly describing the amendment, supplement or waiver. Any failure of
the Company to mail such notice, or any defect therein, shall not, however, in
any way impair or affect the validity of any such amended or supplemental
Indenture or waiver. Subject to Sections 6.04 and 6.07 hereof, the Holders of a
majority in aggregate principal amount of the Debentures then outstanding voting
as a single class may waive compliance in a particular instance by the Company
with any provision of this Exchange Indenture or the Debentures. However,
without the consent of each Holder affected, an amendment or waiver under this
Section 9.02 may not (with respect to any Debentures held by a non-consenting
Holder):
(a) reduce the principal amount of Debentures whose Holders must consent to
an amendment, supplement or waiver;
(b) reduce the principal of or change the fixed maturity of any Debenture
or alter or waive any of the provisions with respect to the redemption of the
Debentures, except as provided above with respect to Sections 3.09, 4.10 and
4.15 hereof;
(c) reduce the rate of or change the time for payment of interest,
including default interest, on any Debenture;
(d) waive a Default or Event of Default in the payment of principal of or
premium, if any, or interest on the Debentures (except a rescission of
acceleration of the Debentures by the Holders of at least a majority in
aggregate principal amount of the then outstanding Debentures and a waiver of
the payment default that resulted from such acceleration);
(e) make any Debenture payable in money other than that stated in the
Debentures;
(f) make any change in the provisions of this Exchange Indenture relating
to waivers of past Defaults or the rights of Holders of Debentures to receive
payments of principal of, interest, or premium, if any, on the Debentures;
(g) waive a redemption payment with respect to any Debenture (other than a
payment required by Section 3.07 hereof);
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(h) make any change in Section 6.04 or 6.07 hereof or in the foregoing
amendment and waiver provisions; or
(i) amend this Section 9.02.
Without the consent of at least 662/3% in aggregate principal amount
of the Debentures then outstanding (including consents obtained in connection
with a tender offer or exchange offer for, or purchase of, such Debentures), no
waiver or amendment to this Exchange Indenture may make any change in the
provisions of Article 10 hereof that adversely affects the rights of any Holder
of Debentures.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT.
Every amendment or supplement to this Exchange Indenture or the
Debentures shall be set forth in an amended or supplemental Indenture that
complies with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENTS.
Until an amendment, supplement or waiver becomes effective, a consent
to it by a Holder of a Debenture is a continuing consent by the Holder of a
Debenture and every subsequent Holder of a Debenture or portion of a Debenture
that evidences the same debt as the consenting Holder's Debenture, even if
notation of the consent is not made on any Debenture. However, any such Holder
of a Debenture or subsequent Holder of a Debenture may revoke the consent as to
its Debenture if the Exchange Trustee receives written notice of revocation
before the date the waiver, supplement or amendment becomes effective. An
amendment, supplement or waiver becomes effective in accordance with its terms
and thereafter binds every Holder.
SECTION 9.05. NOTATION ON OR EXCHANGE OF DEBENTURES.
The Exchange Trustee may place an appropriate notation about an
amendment, supplement or waiver on any Debenture thereafter authenticated. The
Company in exchange for all Debentures may issue and the Exchange Trustee shall,
upon receipt of an Authentication Order, authenticate new Debentures that
reflect the amendment, supplement or waiver.
Failure to make the appropriate notation or issue a new Debenture
shall not affect the validity and effect of such amendment, supplement or
waiver.
SECTION 9.06. EXCHANGE TRUSTEE TO SIGN AMENDMENTS, ETC.
The Exchange Trustee shall sign any amended or supplemental Indenture
authorized pursuant to this Article Nine if the amendment or supplement does not
adversely affect the rights, duties, liabilities or immunities of the Exchange
Trustee. The Company may not sign an amendment or supplemental Indenture until
the Board of Directors approves it. In executing any amended or supplemental
indenture, the Exchange Trustee shall be entitled to receive and (subject to
Section 7.01 hereof) shall be fully protected in relying upon, in addition to
the documents required by Section 11.04 hereof, an Officer's Certificate and an
Opinion of Counsel stating that the execution of such amended or supplemental
indenture is authorized or permitted by this Exchange Indenture.
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ARTICLE 10.
SUBORDINATION
SECTION 10.01. AGREEMENT TO SUBORDINATE.
The Company agrees, and each Holder by accepting a Debenture agrees,
that the Indebtedness evidenced by the Debentures is subordinated in right of
payment, to the extent and in the manner provided in this Article 10, to the
prior payment in full of all Exchange Debenture Senior Indebtedness (whether
outstanding on the date hereof or hereafter created, incurred, assumed or
guaranteed), and that the subordination is for the benefit of the holders of
Exchange Debenture Senior Indebtedness.
SECTION 10.02. LIQUIDATION; DISSOLUTION; BANKRUPTCY.
Upon any distribution to creditors of the Company in a liquidation or
dissolution of the Company or in a bankruptcy, reorganization, insolvency,
receivership or similar proceeding relating to the Company or its property, in
an assignment for the benefit of creditors or any marshalling of the Company's
assets and liabilities:
(1) holders of Exchange Debenture Senior Indebtedness shall be entitled to
receive payment in full of all Obligations due in respect of such
Exchange Debenture Senior Indebtedness (including interest after the
commencement of any such proceeding at the rate specified in the
applicable Exchange Debenture Senior Indebtedness) before Holders of
the Debentures shall be entitled to receive any payment with respect
to the Debentures (except that Holders may receive (i) Permitted
Junior Securities and (ii) payments and other distributions made from
any defeasance trust created pursuant to Section 8.01 hereof); and
(2) until all Obligations with respect to Exchange Debenture Senior
Indebtedness (as provided in subsection (1) above) are paid in full,
any distribution to which Holders would be entitled but for this
Article 10 shall be made to holders of Exchange Debenture Senior
Indebtedness (except that Holders of Debentures may receive (i)
Permitted Junior Securities and (ii) payments and other distributions
made from any defeasance trust created pursuant to Section 8.01
hereof), as their interests may appear.
SECTION 10.03. DEFAULT ON DESIGNATED SENIOR INDEBTEDNESS.
The Company may not make any payment or distribution to the Exchange
Trustee or any Holder in respect of Obligations with respect to the Debentures
and may not acquire from the Exchange Trustee or any Holder any Debentures for
cash or property (other than (i) Permitted Junior Securities and (ii) payments
and other distributions made from any defeasance trust created pursuant to
Section 8.01 hereof) until all principal and other Obligations with respect to
the Exchange Debenture Senior Indebtedness have been paid in full if:
(i) a default in the payment of any principal of, premium, if any, or
interest on Designated Exchange Debenture Senior Debt occurs and is continuing
beyond any applicable grace period in the agreement, indenture or other
document governing such Designated Exchange Debenture Senior Debt; or
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(ii) a default, other than a payment default, on Designated Exchange
Debenture Senior Debt occurs and is continuing that then permits holders of
the Designated Exchange Debenture Senior Debt to accelerate its maturity and
the Exchange Trustee receives a notice of such default (a "Payment Blockage
Notice") from the Company or the holders of any Designated Exchange Debenture
Senior Debt. If the Exchange Trustee receives any such Payment Blockage
Notice, no subsequent Payment Blockage Notice shall be effective for purposes
of this Section unless and until (i) at least 360 days shall have elapsed
since the effectiveness of the immediately prior Payment Blockage Notice and
(ii) all scheduled payments of principal, premium, if any, and interest on the
Debentures that have come due have been paid in full in cash. No nonpayment
default that existed or was continuing on the date of delivery of any Payment
Blockage Notice to the Exchange Trustee shall be, or be made, the basis for a
subsequent Payment Blockage Notice.
The Company may and shall resume payments on and distributions in
respect of the Debentures and may acquire them upon the earlier of:
(1) the date upon which the default is cured or waived, or
(2) in the case of a default referred to in Section 10.03(ii) hereof, 179
days pass after notice is received if the maturity of such Designated
Exchange Debenture Senior Debt has not been accelerated, if this
Article 10 otherwise permits the payment, distribution or acquisition
at the time of such payment or acquisition.
SECTION 10.04. ACCELERATION OF SECURITIES.
If payment of the Securities is accelerated because of an Event of
Default, the Company shall promptly notify holders of Exchange Debenture Senior
Indebtedness of the acceleration.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER.
In the event that the Exchange Trustee or any Holder receives any
payment of any Obligations with respect to the Debentures at a time when the
Exchange Trustee or such Holder, as applicable, has actual knowledge that such
payment is prohibited by Section 10.03 hereof, such payment shall be held by the
Exchange Trustee or such Holder, in trust for the benefit of, and shall be paid
forthwith over and delivered, upon written request, to, the holders of Exchange
Debenture Senior Indebtedness as their interests may appear or their
Representative under the indenture or other agreement (if any) pursuant to which
Exchange Debenture Senior Indebtedness may have been issued, as their respective
interests may appear, for application to the payment of all Obligations with
respect to Exchange Debenture Senior Indebtedness remaining unpaid to the extent
necessary to pay such Obligations in full in accordance with their terms, after
giving effect to any concurrent payment or distribution to or for the holders of
Exchange Debenture Senior Indebtedness.
With respect to the holders of Exchange Debenture Senior Indebtedness,
the Exchange Trustee undertakes to perform only such obligations on the part of
the Exchange Trustee as are specifically set forth in this Article 10, and no
implied covenants or obligations with respect to the holders of Exchange
Debenture Senior Indebtedness shall be read into this Exchange Indenture against
the Exchange Trustee. The Exchange Trustee shall not be deemed to owe any
fiduciary duty to the holders of Exchange Debenture Senior Indebtedness, and
shall not be liable to any such holders if the Exchange Trustee shall pay over
or distribute to or on behalf of Holders or the Company or any other
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Person money or assets to which any holders of Exchange Debenture Senior
Indebtedness shall be entitled by virtue of this Article 10, except if such
payment is made as a result of the willful misconduct or gross negligence of the
Exchange Trustee.
SECTION 10.06. NOTICE BY COMPANY.
The Company shall promptly notify the Exchange Trustee and the Paying
Agent of any facts known to the Company that would cause a payment of any
Obligations with respect to the Debentures to violate this Article 10, but
failure to give such notice shall not affect the subordination of the Debentures
to the Exchange Debenture Senior Indebtedness as provided in this Article 10.
SECTION 10.07. SUBROGATION.
After all Exchange Debenture Senior Indebtedness is paid in full and
until the Debentures are paid in full, Holders of Debentures shall be subrogated
(equally and ratably with all other Indebtedness pari passu with the Debentures)
to the rights of holders of Exchange Debenture Senior Indebtedness to receive
distributions applicable to Exchange Debenture Senior Indebtedness to the extent
that distributions otherwise payable to the Holders of Debentures have been
applied to the payment of Exchange Debenture Senior Indebtedness. A distribution
made under this Article 10 to holders of Exchange Debenture Senior Indebtedness
that otherwise would have been made to Holders of Debentures is not, as between
the Company and Holders, a payment by the Company on the Debentures.
SECTION 10.08. RELATIVE RIGHTS.
This Article 10 defines the relative rights of Holders of Debentures
and holders of Exchange Debenture Senior Indebtedness. Nothing in this Exchange
Indenture shall:
(1) impair, as between the Company and Holders of Debentures, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Debentures in accordance with their
terms;
(2) affect the relative rights of Holders of Debentures and creditors of
the Company other than their rights in relation to holders of Exchange
Debenture Senior Indebtedness; or
(3) prevent the Exchange Trustee or any Holder of Debentures from
exercising its available remedies upon a Default or Event of Default,
subject to the rights of holders and owners of Exchange Debenture
Senior Indebtedness to receive distributions and payments otherwise
payable to Holders of Debentures.
If the Company fails because of this Article 10 to pay principal of or
interest on a Debenture on the due date, the failure is still a Default or Event
of Default.
SECTION 10.09. SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY.
No right of any holder of Exchange Debenture Senior Indebtedness to
enforce the subordination of the Indebtedness evidenced by the Debentures shall
be impaired by any act or failure to act by the Company or any Holder or by the
failure of the Company or any Holder to comply with this Exchange Indenture.
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SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE.
Whenever a distribution is to be made or a notice given to holders of
Exchange Debenture Senior Indebtedness, the distribution may be made and the
notice given to their Representative.
Upon any payment or distribution of assets of the Company referred to
in this Article 10, the Exchange Trustee and the Holders of Debentures shall be
entitled to rely upon any order or decree made by any court of competent
jurisdiction or upon any certificate of such Representative or of the
liquidating trustee or agent or other Person making any distribution to the
Exchange Trustee or to the Holders of Debentures for the purpose of ascertaining
the Persons entitled to participate in such distribution, the holders of the
Exchange Debenture Senior Indebtedness and other Indebtedness of the Company,
the amount thereof or payable thereon, the amount or amounts paid or distributed
thereon and all other facts pertinent thereto or to this Article 10.
SECTION 10.11. RIGHTS OF EXCHANGE TRUSTEE AND PAYING AGENT.
Notwithstanding the provisions of this Article 10 or any other
provision of this Exchange Indenture, the Exchange Trustee shall not be charged
with knowledge of the existence of any facts that would prohibit the making of
any payment or distribution by the Exchange Trustee, and the Exchange Trustee
and the Paying Agent may continue to make payments on the Debentures, unless the
Exchange Trustee shall have received at its Corporate Trust Office at least five
Business Days prior to the date of such payment written notice of facts that
would cause the payment of any Obligations with respect to the Debentures to
violate this Article 10. Only the Company or a Representative may give the
notice. Nothing in this Article 10 shall impair the claims of, or payments to,
the Exchange Trustee under or pursuant to Section 7.07 hereof.
The Exchange Trustee in its individual or any other capacity may hold
Exchange Debenture Senior Indebtedness with the same rights it would have if it
were not Exchange Trustee. Any Agent may do the same with like rights.
SECTION 10.12. AUTHORIZATION TO EFFECT SUBORDINATION.
Each Holder of Debentures, by the Holder's acceptance thereof,
authorizes and directs the Exchange Trustee on such Holder's behalf to take such
action as may be necessary or appropriate to effectuate the subordination as
provided in this Article 10, and appoints the Exchange Trustee to act as such
Holder's attorney-in-fact for any and all such purposes. If the Exchange Trustee
does not file a proper proof of claim or proof of debt in the form required in
any proceeding referred to in Section 6.09 hereof at least 30 days before the
expiration of the time to file such claim, the Representatives of the Designated
Exchange Debenture Senior Debt are hereby authorized to file an appropriate
claim for and on behalf of the Holders of the Debentures.
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SECTION 10.13. AMENDMENTS.
The provisions of this Article 10 shall not be amended or modified
without the written consent of the holders of all Exchange Debenture Senior
Indebtedness. In addition, the provisions of Section 8.04(e) shall not be
amended without the consent of the holders (or a Representative of the holders)
of Designated Exchange Debenture Senior Indebtedness in a manner which would
permit the defeasance of the Debentures in violation of such Designated Exchange
Debenture Senior Indebtedness.
SECTION 10.14. CERTAIN DEFINITIONS
"Designated Exchange Debenture Senior Debt" means (i) any Indebtedness
outstanding under the Senior Credit Facility, (ii) any Indebtedness outstanding
under the Indenture, and (iii) any other Exchange Debenture Senior Indebtedness
permitted under this Exchange Indenture the principal amount of which is $25.0
million or more and that has been designated by the Company as "Designated
Exchange Debenture Senior Debt."
"Exchange Debenture Senior Indebtedness" means (i) all Indebtedness
outstanding under Credit Facilities and all Hedging Obligations with respect
thereto, (ii) all Indebtedness outstanding under the Notes and the Parity Notes,
(iii) any other Indebtedness permitted to be incurred by the Company or a
Restricted Subsidiary under the terms of the Exchange Indenture, unless the
instrument under which such Indebtedness is incurred expressly provides that it
is on a parity with or subordinated in right of payment to the Exchange
Debentures and (iv) all Obligations with respect to the foregoing.
Notwithstanding anything to the contrary in the foregoing, Senior Indebtedness
will not include (w) any liability for federal, state, local or other taxes owed
or owing by the Company, (x) any Indebtedness of the Company to any of its
Restricted Subsidiaries or other Affiliates, (y) any trade payables or (z) any
Indebtedness that is incurred in violation of the Exchange Indenture.
ARTICLE 11.
MISCELLANEOUS
SECTION 11.01. TRUST INDENTURE ACT CONTROLS.
If any provision of this Exchange Indenture limits, qualifies or
conflicts with the duties imposed by TIA ss. 318(c), the imposed duties shall
control.
SECTION 11.02. NOTICES.
Any notice or communication by the Company or the Exchange Trustee to
the others is duly given if in writing and delivered in Person or mailed by
first class, postage prepaid mail, telecopier or overnight air courier
guaranteeing next day delivery, to the others' address
If to the Company:
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier No.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
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With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3909
Telecopier No.: (212) 455-2502
Attention: Stephen J. Feder, Esq.
If to the Exchange Trustee:
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Telecopier No.: (212) 815-5915
The Company or the Exchange Trustee, by notice to the others may
designate additional or different addresses for subsequent notices or
communications.
All notices and communications (other than those sent to Holders)
shall be deemed to have been duly given: at the time delivered by hand, if
personally delivered; five Business Days after being deposited in the mail,
postage prepaid, if mailed; when receipt acknowledged, if telecopied; and the
next Business Day after timely delivery to the courier, if sent by overnight air
courier guaranteeing next day delivery.
Any notice or communication to a Holder shall be mailed by first class
mail, certified or registered, return receipt requested, or by overnight air
courier guaranteeing next day delivery to its address shown on the register kept
by the Registrar. Any notice or communication shall also be so mailed to any
Person described in TIA ss. 313(c), to the extent required by the TIA. Failure
to mail a notice or communication to a Holder or any defect in it shall not
affect its sufficiency with respect to other Holders.
If a notice or communication is mailed in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Exchange Trustee and each Agent at the same time.
SECTION 11.03. COMMUNICATION BY HOLDERS OF DEBENTURES WITH OTHER HOLDERS OF
DEBENTURES.
Holders may communicate pursuant to TIA ss. 312(b) with other Holders
with respect to their rights under this Exchange Indenture or the Debentures.
The Company, the Exchange Trustee, the Registrar and anyone else shall have the
protection of TIA ss. 312(c).
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SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Exchange Trustee
to take any action under this Exchange Indenture, the Company shall furnish to
the Exchange Trustee:
(a) an Officers' Certificate in form and substance reasonably satisfactory
to the Exchange Trustee (which shall include the statements set forth
in Section 12.05 hereof) stating that, in the opinion of the signers,
all conditions precedent and covenants, if any, provided for in this
Exchange Indenture relating to the proposed action have been
satisfied; and
(b) an Opinion of Counsel in form and substance reasonably satisfactory to
the Exchange Trustee (which shall include the statements set forth in
Section 12.05 hereof) stating that, in the opinion of such counsel,
all such conditions precedent and covenants have been satisfied.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Exchange Indenture (other than a
certificate provided pursuant to TIA ss. 314(a)(4)) shall comply with the
provisions of TIA ss. 314(e) and shall include:
(a) a statement that the Person making such certificate or opinion has
read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination or
investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has made
such examination or investigation as is necessary to enable him to
express an informed opinion as to whether or not such covenant or
condition has been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person, such
condition or covenant has been satisfied.
SECTION 11.06. RULES BY EXCHANGE TRUSTEE AND AGENTS.
The Exchange Trustee may make reasonable rules for action by or at a
meeting of Holders. The Registrar or Paying Agent may make reasonable rules and
set reasonable requirements for its functions.
SECTION 11.07. NO PERSONAL LIABILITY OF DIRECTORS, OFFICERS, EMPLOYEES AND
STOCKHOLDERS.
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Debentures, this Exchange Indenture or for any claim based on, in
respect of, or by reason of, such obligations or their creation. Each Holder by
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accepting a Debenture waives and releases all such liability. The waiver and
release are part of the consideration for issuance of the Debentures.
SECTION 11.08. GOVERNING LAW.
THE INTERNAL LAWS OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED TO
CONSTRUE THIS EXCHANGE INDENTURE, THE DEBENTURES WITHOUT GIVING EFFECT TO
APPLICABLE PRINCIPLES OF CONFLICTS OF LAW TO THE EXTENT THAT THE APPLICATION OF
THE LAWS OF ANOTHER JURISDICTION WOULD BE REQUIRED THEREBY.
SECTION 11.09. NO ADVERSE INTERPRETATION OF OTHER AGREEMENTS.
This Exchange Indenture may not be used to interpret any other
indenture, loan or Indebtedness agreement of the Company or its Subsidiaries or
of any other Person. Any such indenture, loan or Indebtedness agreement may not
be used to interpret this Exchange Indenture.
SECTION 11.10. SUCCESSORS.
All agreements of the Company in this Exchange Indenture and the
Debentures shall bind its successors. All agreements of the Exchange Trustee in
this Exchange Indenture shall bind its successors.
SECTION 11.11. SEVERABILITY.
In case any provision in this Exchange Indenture or in the Debentures
shall be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions shall not in any way be affected or
impaired thereby.
SECTION 11.12. COUNTERPART ORIGINALS.
The parties may sign any number of copies of this Exchange Indenture.
Each signed copy shall be an original, but all of them together represent the
same agreement.
SECTION 11.13. TABLE OF CONTENTS, HEADINGS, ETC.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Exchange Indenture have been inserted for
convenience of reference only, are not to be considered a part of this Exchange
Indenture and shall in no way modify or restrict any of the terms or provisions
hereof.
[Signatures on following page]
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SIGNATURES
Dated as of _______, ____
CLUETT AMERICAN CORP.
BY:________________________
Name:
Title:
THE BANK OF NEW YORK
BY:_________________________
Name:
Title:
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EXHIBIT A-1
(Face of Global Debenture)
==============================================================================
CUSIP/CINS___________________
12 1/2% Subordinated Exchange Debentures due 2010
No. __ $_____________
CLUETT AMERICAN CORP.
promises to pay to _______________, or registered assigns, the principal sum of
_____________________ Dollars on _______, 2010.
Interest Payment Dates: May 15 and November 15
Record Dates: May 1 and November 1
DATED:
CLUETT AMERICAN CORP.
BY: __________________________
Name:
Title:
Dated:_____________
This is one of the Global Debentures referred to in the within-mentioned
Indenture:
The Bank of New York,
as Trustee
By: _______________
Name:
==============================================================================
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(Back of Debenture)
12 1/2% Subordinated Debentures due 2008
[Insert the Global Debenture legend, if applicable, pursuant to the provisions
of the Indenture]
[Insert the Private Placement legend, if applicable, pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to them
in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Cluett American Corp., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Debenture
at 12 1/2% per annum from _______, ____ until maturity and shall pay the
Liquidated Damages payable pursuant to Section 5 of the Preferred Stock
Registration Rights Agreement referred to below. The Company shall pay interest
and Liquidated Damages, if any, semi-annually on May 15 and November 15 of each
year, or if any such day is not a Business Day, on the next succeeding Business
Day (the "Interest Payment Date"). Interest will be paid in cash, except that on
each Interest Payment Date occurring prior to May 15, 2003, interest on the
Debentures may be paid, at the Company's option, by the issuance of additional
Debentures having an aggregate principal amount equal to the amount of such
interest. Interest on the Debentures will accrue from the most recent Interest
Payment Date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Debenture is authenticated between a record
date referred to on the face hereof and the next succeeding Interest Payment
Date, interest shall accrue from such next succeeding Interest Payment Date;
provided, further, that the first Interest Payment Date shall be _______, ____.
The Company shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue principal and premium, if any,
from time to time on demand at a rate that is 1% per annum in excess of the rate
then in effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Debentures
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Debentures at the close of business on the May 1 or
November 1 next preceding the Interest Payment Date, even if such Debentures are
cancelled after such record date and on or before such Interest Payment Date,
except as provided in Section 2.12 of the Indenture with respect to defaulted
interest. The Debentures will be payable as to principal, premium and Liquidated
Damages, if any, and interest at the office or agency of the Company maintained
for such purpose within or without the City and State of New York, or, at the
option of the Company, payment of interest and Liquidated Damages may be made by
check mailed to the Holders at their addresses set forth in the register of
Holders, and provided that payment by wire transfer of immediately available
funds will be required with respect to principal of and interest, premium and
Liquidated Damages, if any, on, all Global Debentures and all other Debentures
the Holders of which shall have provided wire transfer instructions to the
Company or the Paying Agent. Such payment shall be in such coin or currency of
the United States of America as at the time of payment is legal tender for
payment of public and private debts. However, Liquidated Damages, if any,
incurred prior to May 15, 2003, may be paid, at the Company's option, by the
issuance of additional Debentures having an aggregate principal amount equal to
the amount of such Liquidated Damages.
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3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Debentures under an Indenture
dated as of _______, ____ ("Exchange Indenture") between the Company and the
Trustee. The terms of the Debentures include those stated in the Exchange
Indenture and those made part of the Exchange Indenture by reference to the
Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss. 77aaa-77bbbb). The
Debentures are subject to all such terms, and Holders are referred to the
Indenture and such Act for a statement of such terms. To the extent any
provision of this Debenture conflicts with the express provisions of the
Exchange Indenture, the provisions of the Exchange Indenture shall govern and be
controlling. The Debentures are general, unsecured obligations of the Company
limited to $92 million in aggregate principal amount, plus amounts, if any,
issued to pay Liquidated Damages on outstanding Debentures as set forth in
paragraph 2 hereof.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this paragraph 5, the Company
shall not have the option to redeem the Debentures pursuant to this paragraph 5
prior to May 15, 2003. Thereafter, the Company shall have the option to redeem
the Debentures, in whole or in part, upon not less than 30 nor more than 60
days' notice, at the redemption prices (expressed as percentages of principal
amount) set forth below plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the applicable redemption date, if redeemed during the
twelve-month period beginning on May 15 of the years indicated below:
Year Percentage
---- ----------
2003.............................................106.250%
2004.............................................105.000%
2005.............................................103.750%
2006.............................................102.500%
2007.............................................101.250%
2008 and thereafter..............................100.000%
(b) Notwithstanding the provisions of clause (a) of this paragraph 5, at
any time prior to May 13, 2001, the Company may on any one or more occasions
redeem the Debentures originally issued under this Exchange Indenture, in whole
or in part, at the redemption prices set forth below (expressed as percentages
of principal amount), in each case, together with accrued and unpaid interest
and Liquidated Damages thereon, if any, to the redemption date, with the net
cash proceeds of one or more Equity Offerings if redeemed during the 12-month
period commencing on May 15 of each of the years set forth below:.
1998.............................................108.000%
1999.............................................110.000%
2000.............................................112.000%
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In the event of a redemption pursuant to Section 3.07(b) of the
Indenture and paragraph 5 hereof (except in the case of a redemption of all the
Debentures), at least $25.0 million in aggregate principal amount of Debentures
shall remain outstanding immediately after the occurrence of such redemption
(excluding Debentures held by the Company and its Subsidiaries) and any such
redemption shall occur within 45 days of the date of the closing of such Equity
Offering.
At any time prior to May 15, 2003, the Debentures may also be
redeemed, as a whole but not in part, at the option of the Company upon the
occurrence of a Change of Control, upon not less than 30 nor more than 60 days'
prior notice (but in no event may any such redemption occur more than 90 days
after the occurrence of such Change of Control) mailed by first-class mail to
each Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof and the interest rate in effect with respect to the
Debentures as of, and accrued and unpaid interest and Liquidated Damages, if
any, to, the date of redemption.
(c) Any redemption pursuant to this paragraph 5 shall be made
pursuant to the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below, the
Company shall not be required to make mandatory redemption payments with respect
to the Debentures.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of
Debentures will have the right to require the Company to repurchase all or any
part (equal to $100 or an integral multiple thereof) of such Holder's Debentures
pursuant to the offer described in Section 4.14 of the Indenture (the "Change of
Control Offer") at an offer price in cash equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase (the "Change of Control Payment").
Within 30 days following any Change of Control, the Company shall mail a notice
to each Holder describing the transaction or transactions that constitute the
Change of Control and offering to repurchase the Debentures on the date
specified in such notice, which date shall be no earlier than 30 days and no
later than 60 days from the date such notice is mailed (the "Change of Control
Payment Date"), pursuant to the procedures required by the Indenture and
described in such notice.
(b) Within 360 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to
permanently repay Exchange Debenture Senior Indebtedness or Indebtedness of a
Restricted Subsidiary, or (b) to acquire all or substantially all of the assets
of, or a majority of the Voting Stock of, another Permitted Business, (c) to
make a capital expenditure or (d) to acquire other long-term assets that are
used or useful in a Permitted Business. Pending the final application of any
such Net Proceeds, the Company may temporarily reduce revolving credit
borrowings or otherwise invest such Net Proceeds in any manner that is not
prohibited by the Exchange Indenture. Any Net Proceeds from Asset Sales that are
not applied or invested as provided in the first sentence of this paragraph will
be deemed to constitute "Excess Proceeds." When the aggregate amount of Excess
Proceeds exceeds $10.0 million, the Company will be required to make an offer to
all Holders of Debentures and all holders of other Indebtedness that is pari
passu with the Debentures containing provisions similar to those set forth in
the Exchange Indenture with respect to offers to purchase or redeem with the
proceeds of sales of assets (an "Asset Sale Offer") to purchase the maximum
principal amount of Debentures and such other pari passu Indebtedness that may
be purchased out of the Excess Proceeds, at an offer price in cash in an amount
equal to 100% of the principal amount thereof plus accrued and unpaid interest
and Liquidated
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Damages thereon, if any, to the date of purchase, in accordance with the
procedures set forth in the Exchange Indenture and such other pari passu
Indebtedness. Holders of Debentures that are the subject of an offer to purchase
may elect to have such Debentures purchased by completing the form entitled
"Option of Holder to Elect Purchase" on the reverse of the Debentures. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at least
30 days but not more than 60 days before the redemption date to each Holder
whose Debentures are to be redeemed at its registered address. Debentures in
denominations larger than $1000 may be redeemed in part but only in whole
multiples of $1000, unless all of the Debentures held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on
Debentures or portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Debentures are in
registered form without coupons. The transfer of Debentures may be registered
and Debentures may be exchanged as provided in the Indenture. The Registrar and
the Trustee may require a Holder, among other things, to furnish appropriate
endorsements and transfer documents and the Company may require a Holder to pay
any taxes and fees required by law or permitted by the Indenture. The Company
need not exchange or register the transfer of any Debenture or portion of a
Debenture selected for redemption, except for the unredeemed portion of any
Debenture being redeemed in part. Also, the Company need not exchange or
register the transfer of any Debentures for a period of 15 days before a
selection of Debentures to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. SUBORDINATION. Each Holder by accepting a Debenture agrees that
the payment of principal of and premium, interest and Liquidated Damages, if
any, on each Debenture is subordinated in right of payment, to the extent and in
the manner provided in Article 10 of the Indenture, prior to the payment in full
of all Exchange Debenture Senior Indebtedness of the Company (whether
outstanding on the date of the Exchange Indenture or thereafter incurred assumed
or guaranteed), and the subordination is for the benefit of the holders of such
Exchange Debenture Senior Indebtedness.
11. PERSONS DEEMED OWNERS. The registered Holder of a Debenture may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Exchange Indenture or the Debentures may be amended or supplemented with the
consent of the Holders of at least a majority in principal amount of the then
outstanding Debentures and any existing default or compliance with any provision
of the Exchange Indenture or the Debentures may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding
Debentures. Without the consent of any Holder of a Debenture, the Exchange
Indenture or the Debentures may be amended or supplemented to cure any
ambiguity, defect or inconsistency, to provide for uncertificated Debentures in
addition to or in place of certificated Debentures, to provide for the
assumption of the Company's obligations to Holders of the Debentures in case of
a merger or consolidation, to make any change that would provide any additional
rights or benefits to the Holders of the Debentures or that does not adversely
affect the legal rights under the Exchange Indenture of any such Holder, to
comply with the requirements of the Commission in order to effect or maintain
the qualification of the Exchange Indenture under the Trust Indenture Act, or to
provide for the Issuance of Additional Debentures in accordance with the
limitations set forth in the Exchange Indenture.
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13. DEFAULTS AND REMEDIES. An Event of Default occurs if: (i) the
Company defaults in the payment when due of interest on, or Liquidated Damages
with respect to, the Debentures (whether or not permitted by the subordination
provisions of this Exchange Indenture) and such default continues for a period
of 30 days; (ii) the Company defaults in the payment when due of principal of or
premium, if any, on the Debentures when the same becomes due and payable at
maturity, upon redemption (including in connection with an offer to purchase) or
otherwise (whether or not permitted by the subordination provisions of this
Exchange Indenture); (iii) the Company or any of its Restricted Subsidiaries
fails to comply with the provisions of Section 5.01 of the Exchange Indenture;
(iv) the Company or any of its Restricted Subsidiaries fails to observe or
perform any other covenant, representation, warranty or other agreement in this
Exchange Indenture or the Exchange Debentures for 60 days after notice to the
Company by the Exchange Trustee or the Holders of at least 25% in aggregate
principal amount of the Exchange Debentures then outstanding voting as a single
class; (v) a default occurs under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Restricted
Subsidiaries (or the payment of which is guaranteed by the Company or any of its
Restricted Subsidiaries) whether such Indebtedness or guarantee now exists, or
is created after the date hereof, which default (a) is caused by a failure to
pay principal of or premium, if any, or interest on such Indebtedness prior to
the expiration of the grace period provided in such Indebtedness on the date of
such default (a "Payment Default") or (b) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $7.5 million or more; (vi) a final
judgment or final judgments for the payment of money are entered by a court or
courts of competent jurisdiction against the Company or any of its Restricted
Subsidiaries and such judgment or judgments remain undischarged for a period
(during which execution shall not be effectively stayed) of 60 days, provided
that the aggregate of all such undischarged judgments exceeds $5.0 million; and
(vii) certain events of bankruptcy or insolvency as described in the Exchange
Indenture.
If any Event of Default (other than certain events of bankruptcy or
insolvency) with respect to the Company, any Significant Subsidiary or any group
of Significant Subsidiaries that, taken as a whole, would constitute a
Significant Subsidiary, occurs and is continuing, the Exchange Trustee or the
Holders of at least 25% in aggregate principal amount of the then outstanding
Debentures may declare all the Debentures to be due and payable immediately.
Upon any such declaration, the Debentures shall become due and payable
immediately. Notwithstanding the foregoing, in the case of an Event of Default
arising from certain events of bankruptcy or insolvency with respect to the
Company, any of its Significant Subsidiary or any group of Subsidiaries that,
taken as a whole, would constitute a Significant Subsidiary, all outstanding
Debentures shall be due and payable immediately without further action or
notice. The Holders of a majority in aggregate principal amount of the then
outstanding Debentures by written notice to the Exchange Trustee may on behalf
of all of the Holders rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium that has
become due solely because of the acceleration) have been cured or waived. The
Company is required to deliver to the Trustee annually a statement regarding
compliance with the Exchange Indenture, and the Company is required upon
becoming aware of any Default or Event of Default to deliver to the Trustee a
statement specifying such Default or Event of Default.
A1-5
<PAGE>
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Debentures or the
Exchange Indenture or for any claim based on, in respect of, or by reason of,
such obligations or their creation. Each Holder by accepting a Debenture waives
and releases all such liability. The waiver and release are part of the
consideration for the issuance of the Debentures.
16. AUTHENTICATION. This Debenture shall not be valid until
authenticated by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL DEBENTURES AND
RESTRICTED DEFINITIVE DEBENTURES. In addition to the rights provided to Holders
of Debentures under the Exchange Indenture, Holders of Restricted Global
Debentures and Restricted Definitive Debentures shall have all the rights set
forth in the Preferred Stock Registration Rights Agreement dated as of May 18,
1998, between the Company and the parties named on the signature pages thereof
(the "Preferred Stock Registration Rights Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Debentures and the Trustee may use CUSIP
numbers in notices of redemption as a convenience to Holders. No representation
is made as to the accuracy of such numbers either as printed on the Debentures
or as contained in any notice of redemption and reliance may be placed only on
the other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Preferred Stock Registration
Rights Agreement. Requests may be made to:
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier No.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
A1-6
<PAGE>
ASSIGNMENT FORM
To assign this Debenture, fill in the form below: (I) or (we) assign and
transfer this Debenture to (Insert assignee's soc. sec. or tax I.D. no.)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
and irrevocably appoint ________________________________________________________
to transfer this Debenture on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature: ________________________________________
(Sign exactly as your name appears on the Debenture)
Tax Identification No: _________________________________
Signature Guarantee.
A1-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Debenture purchased by the Company
pursuant to Section 4.10 or 4.14 of the Indenture, check the box below:
[ ] Section 4.10 [ ] Section 4.14
If you want to elect to have only part of the Debenture purchased by
the Company pursuant to Section 4.10 or Section 4.14 of the Indenture, state the
amount you elect to have purchased: $________
Date: Your Signature: ________________________________________
(Sign exactly as your name appears
on the Debenture)
Tax Identification No:__________________________________
Signature Guarantee.
A1-8
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL DEBENTURE(1)
The following exchanges of a part of this Global Debenture for an
interest in another Global Debenture or for a Definitive Debenture, or exchanges
of a part of another Global Debenture or Definitive Debenture for an interest in
this Global Debenture, have been made:
Amount of Amount of Principal Amount Signature of
decrease in increase in of this Global authorized
Principal Principal Debenture signatory of
Amount Amount following Trustee or
Date of of this of this such decrease Debenture
Exchange Global Debenture Global Debenture (or increase) Custodian
- ----------
(1) This should be included only if the Note is issued in global form.
A1-9
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF TRANSFER
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier No.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Telecopier No.: (212) 815-5915
Re: 12 1/2% Subordinated Exchange Debentures Due 2010
Reference is hereby made to the Indenture, dated as of _______, ____
(the "Indenture"), between Cluett American Corp. (the "Company"), as issuer, and
The Bank of New York, as trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
______________, (the "Transferor") owns and proposes to transfer the
Debenture[s] or interest in such Debenture[s] specified in Annex A hereto, in
the principal amount of $___________ in such Debenture[s] or interests (the
"Transfer"), to __________ (the "Transferee"), as further specified in Annex A
hereto. In connection with the Transfer, the Transferor hereby certifies that:
[CHECK ALL THAT APPLY]
1. [ ] Check if Transferee will take delivery of a beneficial
interest in the 144A Global Debenture or a Definitive Debenture Pursuant to Rule
144A. The Transfer is being effected pursuant to and in accordance with Rule
144A under the United States Securities Act of 1933, as amended (the "Securities
Act"), and, accordingly, the Transferor hereby further certifies that the
beneficial interest or Definitive Debenture is being transferred to a Person
that the Transferor reasonably believed and believes is purchasing the
beneficial interest or Definitive Debenture for its own account, or for one or
more accounts with respect to which such Person exercises sole investment
discretion, and such Person and each such account is a "qualified institutional
buyer" within the meaning of Rule 144A in a transaction meeting the requirements
of Rule 144A and such Transfer is in compliance with any applicable blue sky
securities laws of any state of the United States. Upon consummation of the
proposed Transfer in accordance with the terms of the Indenture, the transferred
beneficial interest or Definitive Debenture will be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the 144A
Global Debenture and/or the Definitive Debenture and in the Indenture and the
Securities Act.
<PAGE>
2. [ ] Check and complete if Transferee will take delivery of a beneficial
interest in the IAI Global Debenture or a Definitive Debenture pursuant to any
provision of the Securities Act other than Rule 144A or Regulation S. The
Transfer is being effected in compliance with the transfer restrictions
applicable to beneficial interests in Restricted Global Debentures and
Restricted Definitive Debentures and pursuant to and in accordance with the
Securities Act and any applicable blue sky securities laws of any state of the
United States, and accordingly the Transferor hereby further certifies that
(check one):
(a) such Transfer is being effected pursuant to and in accordance with
Rule 144 under the Securities Act;
or
(b) such Transfer is being effected to the Company or a subsidiary
thereof;
or
(c) such Transfer is being effected pursuant to an effective registration
statement under the Securities Act and in compliance with the
prospectus delivery requirements of the Securities Act;
or
(d) such Transfer is being effected to an Institutional Accredited
Investor and pursuant to an exemption from the registration
requirements of the Securities Act other than Rule 144A, Rule 144 or
Rule 904, and the Transferor hereby further certifies that it has not
engaged in any general solicitation within the meaning of Regulation D
under the Securities Act and the Transfer complies with the transfer
restrictions applicable to beneficial interests in a Restricted Global
Debenture or Restricted Definitive Debentures and the requirements of
the exemption claimed, which certification is supported by (1) a
certificate executed by the Transferee in the form of Exhibit D to the
Indenture and (2) if such Transfer is in respect of a principal amount
of Debentures at the time of transfer of less than $250,000, an
Opinion of Counsel provided by the Transferor or the Transferee (a
copy of which the Transferor has attached to this certification), to
the effect that such Transfer is in compliance with the Securities
Act. Upon consummation of the proposed transfer in accordance with the
terms of the Indenture, the transferred beneficial interest or
Definitive Debenture will be subject to the restrictions on transfer
enumerated in the Private Placement Legend printed on the IAI Global
Debenture and/or the Definitive Debentures and in the Indenture and
the Securities Act.
3. [ ] Check if Transferee will take delivery of a beneficial interest in an
Unrestricted Global Debenture or of an Unrestricted Definitive Debenture.
(a) [ ] Check if Transfer is pursuant to Rule 144. (i)
The Transfer is being effected pursuant to and in accordance with Rule 144 under
the Securities Act and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any state of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Debenture will no longer be subject to the restrictions
on transfer enumerated in the Private Placement Legend printed on the Restricted
Global Debentures, on Restricted Definitive Debentures and in the Indenture.
B-2
<PAGE>
(b) [ ] Check if Transfer is Pursuant to Other Exemption. (i) The
Transfer is being effected pursuant to and in compliance with an exemption from
the registration requirements of the Securities Act other than Rule 144, Rule
903 or Rule 904 and in compliance with the transfer restrictions contained in
the Indenture and any applicable blue sky securities laws of any State of the
United States and (ii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act. Upon consummation of the proposed Transfer
in accordance with the terms of the Indenture, the transferred beneficial
interest or Definitive Debenture will not be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Global Debentures or Restricted Definitive Debentures and in the Indenture.
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
______________________________________
[Insert Name of Transferor]
BY:___________________________________
Name:
Title:
Dated:_________, ____
B-3
<PAGE>
ANNEX A TO CERTIFICATE OF TRANSFER
1. The Transferor owns and proposes to transfer the following:
[CHECK ONE OF (a) OR (b)]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Debenture (CUSIP____); or
(b) [ ] a Restricted Definitive Debenture.
2. After the Transfer the Transferee will hold:
[CHECK ONE]
(a) [ ] a beneficial interest in the:
(i) [ ] 144A Global Debenture (CUSIP____), or
(ii) [ ] Unrestricted Global Debenture (CUSIP____); or
(b) [ ] a Restricted Definitive Debenture; or
(c) [ ] an Unrestricted Definitive Debenture, in accordance with the terms
of the Indenture.
B-4
<PAGE>
EXHIBIT C
FORM OF CERTIFICATE OF EXCHANGE
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier No.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Telecopier No.: (212) 815-5915
Re: 12 1/2% Subordinated Exchange Debentures Due 2010
(CUSIP______________)
Reference is hereby made to the Indenture, dated as of _______, ____
(the "Indenture"), between Cluett American Corp. (the "Company"), as issuer, and
The Bank of New York, as trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
____________, (the "Owner") owns and proposes to exchange the
Debenture[s] or interest in such Debenture[s] specified herein, in the principal
amount of $____________ in such Debenture[s] or interests (the "Exchange"). In
connection with the Exchange, the Owner hereby certifies that:
1. Exchange of Restricted Definitive Debentures or Beneficial
Interests in a Restricted Global Debenture for Unrestricted Definitive
Debentures or Beneficial Interests in an Unrestricted Global Debenture
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Debenture to beneficial interest in an Unrestricted Global Debenture. In
connection with the Exchange of the Owner's beneficial interest in a Restricted
Global Debenture for a beneficial interest in an Unrestricted Global Debenture
in an equal principal amount, the Owner hereby certifies (i) the beneficial
interest is being acquired for the Owner's own account without transfer, (ii)
such Exchange has been effected in compliance with the transfer restrictions
applicable to the Global Debentures and pursuant to and in accordance with the
United States Securities Act of 1933, as amended (the "Securities Act"), (iii)
the restrictions on transfer contained in the Indenture and the Private
Placement Legend are not required in order to maintain compliance with the
Securities Act and (iv) the beneficial interest in an Unrestricted Global
Debenture is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
<PAGE>
(b) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Debenture to Unrestricted Definitive Debenture. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Debenture for
an Unrestricted Definitive Debenture, the Owner hereby certifies (i) the
Definitive Debenture is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to the Restricted Global Debentures and pursuant to and
in accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the Definitive
Debenture is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
(c) [ ] Check if Exchange is from Restricted Definitive Debenture to
beneficial interest in an Unrestricted Global Debenture. In connection with the
Owner's Exchange of a Restricted Definitive Debenture for a beneficial interest
in an Unrestricted Global Debenture, the Owner hereby certifies (i) the
beneficial interest is being acquired for the Owner's own account without
transfer, (ii) such Exchange has been effected in compliance with the transfer
restrictions applicable to Restricted Definitive Debentures and pursuant to and
in accordance with the Securities Act, (iii) the restrictions on transfer
contained in the Indenture and the Private Placement Legend are not required in
order to maintain compliance with the Securities Act and (iv) the beneficial
interest is being acquired in compliance with any applicable blue sky securities
laws of any state of the United States.
(d) [ ] Check if Exchange is from Restricted Definitive Debenture to
Unrestricted Definitive Debenture. In connection with the Owner's Exchange of a
Restricted Definitive Debenture for an Unrestricted Definitive Debenture, the
Owner hereby certifies (i) the Unrestricted Definitive Debenture is being
acquired for the Owner's own account without transfer, (ii) such Exchange has
been effected in compliance with the transfer restrictions applicable to
Restricted Definitive Debentures and pursuant to and in accordance with the
Securities Act, (iii) the restrictions on transfer contained in the Indenture
and the Private Placement Legend are not required in order to maintain
compliance with the Securities Act and (iv) the Unrestricted Definitive
Debenture is being acquired in compliance with any applicable blue sky
securities laws of any state of the United States.
2. Exchange of Restricted Definitive Debentures or Beneficial Interests in
Restricted Global Debentures for Restricted Definitive Debentures or Beneficial
Interests in Restricted Global Debentures
(a) [ ] Check if Exchange is from beneficial interest in a Restricted
Global Debenture to Restricted Definitive Debenture. In connection with the
Exchange of the Owner's beneficial interest in a Restricted Global Debenture for
a Restricted Definitive Debenture with an equal principal amount, the Owner
hereby certifies that the Restricted Definitive Debenture is being acquired for
the Owner's own account without transfer. Upon consummation of the proposed
Exchange in accordance with the terms of the Indenture, the Restricted
Definitive Debenture issued will continue to be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the Restricted
Definitive Debenture and in the Indenture and the Securities Act.
(b) [ ] Check if Exchange is from Restricted Definitive Debenture to
beneficial interest in a Restricted Global Debenture. In connection with the
Exchange of the Owner's Restricted Definitive Debenture for a beneficial
interest in the "144A Global Debenture" with an equal principal amount, the
Owner hereby certifies (i) the beneficial interest is being acquired for the
Owner's own
C-2
<PAGE>
account without transfer and (ii) such Exchange has been effected in compliance
with the transfer restrictions applicable to the Restricted Global Debentures
and pursuant to and in accordance with the Securities Act, and in compliance
with any applicable blue sky securities laws of any state of the United States.
Upon consummation of the proposed Exchange in accordance with the terms of the
Indenture, the beneficial interest issued will be subject to the restrictions on
transfer enumerated in the Private Placement Legend printed on the relevant
Restricted Global Debenture and in the Indenture and the Securities Act
C-3
<PAGE>
This certificate and the statements contained herein are made for your
benefit and the benefit of the Company.
_____________________________________
[Insert Name of Owner]
BY:__________________________________
Name:
Title:
Dated:__________, ____
C-4
<PAGE>
EXHIBIT D
FORM OF CERTIFICATE FROM
ACQUIRING INSTITUTIONAL ACCREDITED INVESTOR
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier No.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
The Bank of New York
101 Barclay Street, Floor 21 West
New York, New York 10286
Telecopier No.: (212) 815-5915
Re: 12 1/2% Subordinated Exchange Debentures Due 2010
Reference is hereby made to the Indenture, dated as of _______, ____ (the
"Indenture"), between Cluett American Corp. (the "Company"), as issuer, and The
Bank of New York, as trustee. Capitalized terms used but not defined herein
shall have the meanings given to them in the Indenture.
In connection with our proposed purchase of $____________ aggregate
principal amount of:
(a) [ ] a beneficial interest in a Global Debenture, or
(b) [ ] a Definitive Debenture,
we confirm that:
1. We understand that any subsequent transfer of the Debentures or any
interest therein is subject to certain restrictions and conditions set
forth in the Indenture and the undersigned agrees to be bound by, and not
to resell, pledge or otherwise transfer the Debentures or any interest
therein except in compliance with, such restrictions and conditions and
the United States Securities Act of 1933, as amended (the "Securities
Act").
2. We understand that the offer and sale of the Debentures have not been
registered under the Securities Act, and that the Debentures and any
interest therein may not be offered or sold except as permitted in the
following sentence. We agree, on our own behalf and on behalf of any
accounts for which we are acting as hereinafter stated, that if we should
sell the Debentures or any interest therein, we will do so only (A) to the
Company or any subsidiary thereof, (B) in accordance with Rule 144A under
the Securities Act to a "qualified institutional buyer" (as defined
therein), (C) to an institutional "accredited investor" (as defined below)
that, prior to such transfer, furnishes (or has furnished on its behalf by
a U.S. broker-dealer) to you and to the
D-1
<PAGE>
Company a signed letter substantially in the form of this letter and, if
such transfer is in respect of a principal amount of Debentures, at the
time of transfer of less than $250,000, an Opinion of Counsel in form
reasonably acceptable to the Company to the effect that such transfer is
in compliance with the Securities Act, (D) pursuant to the provisions of
Rule 144(k) under the Securities Act or (E) pursuant to an effective
registration statement under the Securities Act, and we further agree to
provide to any person purchasing the Definitive Debenture or beneficial
interest in a Global Debenture from us in a transaction meeting the
requirements of clauses (A) through (D) of this paragraph a notice
advising such purchaser that resales thereof are restricted as stated
herein.
3. We understand that, on any proposed resale of the Debentures or beneficial
interest therein, we will be required to furnish to you and the Company
such certifications, legal opinions and other information as you and the
Company may reasonably require to confirm that the proposed sale complies
with the foregoing restrictions. We further understand that the Debentures
purchased by us will bear a legend to the foregoing effect. We further
understand that any subsequent transfer by us of the Debentures or
beneficial interest therein acquired by us must be effected through one of
the Placement Agents.
4. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) of Regulation D under the Securities Act) and
have such knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of our investment in the
Debentures, and we and any accounts for which we are acting are each able
to bear the economic risk of our or its investment.
5. We are acquiring the Debentures or beneficial interest therein purchased
by us for our own account or for one or more accounts (each of which is an
institutional "accredited investor") as to each of which we exercise sole
investment discretion.
You and the Company are entitled to rely upon this letter and are
irrevocably authorized to produce this letter or a copy hereof to any
interested party in any administrative or legal proceedings or official
inquiry with respect to the matters covered hereby.
---------------------------------------
[Insert Name of Accredited Investor]
By:____________________________________
Name:
Title:
Dated: __________________, ____
D-2
<PAGE>
Exhibit 4.4
(Face of Global Note)
==============================================================================
CUSIP/CINS____________
10 1/8% Senior Subordinated Notes due 2008
No. __ $_____________
CLUETT AMERICAN CORP.
promises to pay to _______________, or registered assigns, the principal sum of
_______________ Dollars on ___________, 2008.
Interest Payment Dates: May 15 and November 15
Record Dates: May 1 and November 1
DATED:
CLUETT AMERICAN CORP.
BY:___________________________________
Name:
Title:
Dated:______________________________
This is one of the Global Notes
referred to in the within-mentioned
Indenture:
The Bank of New York,
as Trustee
By:__________________________________
Name:
==============================================================================
A1-1
<PAGE>
(Back of Note)
10 1/8% Senior Subordinated Notes due 2008
[Insert the Global Note legend, if applicable, pursuant to the provisions of the
Indenture]
[Insert the Private Placement legend, if applicable, pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Cluett American Corp., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
10 1/8% per annum from May 15, 1998 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company shall pay interest and Liquidated Damages, if
any, semi-annually on May 15 and November 15 of each year (the "Interest Payment
Date"), or if any such day is not a Business Day, on the next succeeding
Business Day. Interest on the Notes will accrue from the most recent Interest
Payment Date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be November 15, 1998. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the May 1 or November 1
next preceding the Interest Payment Date, even if such Notes are cancelled after
such record date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest. The Notes
will be payable as to principal, premium and Liquidated Damages, if any, and
interest at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium and Liquidated
Damages, if any, on, all Global Notes and all other Notes the Holders of which
shall have provided wire transfer instructions to the Company or the Paying
Agent. Such payment shall be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts.
A1-1
<PAGE>
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of May 18, 1998 ("Indenture") among the Company, the Guarantors on the
signature pages thereto (the "Guarantors") and the Trustee. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. To the extent any
provision of this Note conflicts with the express provisions of the Indenture,
the provisions of the indenture shall govern and be controlling. The Notes are
general, unsecured obligations of the Company limited to (i) up to $175.0
million in aggregate principal amount of outstanding Series A Notes and Series B
Notes (including up to $63.0 million of Additional Notes issued in accordance
with the terms of the Indenture) and (ii) up to $13.0 million in aggregate
principal amount of outstanding Series C Notes.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this paragraph 5, the Company
shall not have the option to redeem the Notes pursuant to this paragraph 5 prior
to May 15, 2003. Thereafter, the Company shall have the option to redeem the
Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice,
at the redemption prices (expressed as percentages of principal amount) set
forth below plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on May 15 of the years indicated below:
Year Percentage
---- ----------
2003.............................................105.0625%
2004.............................................103.3750%
2005.............................................101.6875%
2006 and thereafter..............................100.0000%
(b) Notwithstanding the provisions of clause (a) of this paragraph 5, at
any time prior to May 15, 2001, the Company may on any one or more occasions
redeem up to 35% of the aggregate principal amount of Notes originally issued
under the Indenture at a redemption price of 110.125% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the redemption date, with the net cash proceeds of a Public Offering;
provided that at least 65% of the original aggregate principal amount of Notes
remain outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company or any of its Subsidiaries); and provided,
further, that such redemption shall occur within 45 days of the date of the
closing of such Public Offering.
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At any time prior to May 15, 2003, the Notes may also be redeemed,
as a whole but not in part, at the option of the Company upon the occurrence of
a Change of Control, upon not less than 30 nor more than 60 days' prior notice
(but in no event may any such redemption occur more than 90 days after the
occurrence of such Change of Control) mailed by first-class mail to each
Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest and Liquidated Damages, if any, to, the date of redemption (the
"Redemption Date").
(c) Any redemption pursuant to this paragraph 5 shall be made pursuant to
the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below,
the Company shall not be required to make mandatory redemption payments with
respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described in Section 4.15 of the Indenture (the "Change of Control Offer")
at an offer price in cash equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase (the "Change of Control Payment"). Within 30 days
following any Change of Control, the Company shall mail a notice to each Holder
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase the Notes on the date specified in such notice, which
date shall be no earlier than 30 days and no later than 60 days from the date
such notice is mailed (the "Change of Control Payment Date"), pursuant to the
procedures required by the Indenture and described in such notice.
(b) Within 360 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to
permanently repay Senior Indebtedness, (b) to acquire all or substantially all
of the assets of, or a majority of the Voting Stock of, another Permitted
Business, (c) to make a capital expenditure or (d) to acquire other long-term
assets that are used or useful in a Permitted Business. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any manner
that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $10.0 million, the Company will be required to make an
offer to all Holders of Notes and all holders of other Indebtedness that is pari
passu with the Notes containing provisions similar to those set forth in the
Indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount
of Notes and such other pari passu Indebtedness that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in the Indenture and such other pari passu Indebtedness. To the extent
that any Excess Proceeds remain after consummation of an Asset Sale Offer,
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or in the event the holders of the Notes and such other indebtedness decline
such Asset Sale Offer, the Company may use such Excess Proceeds for any purpose
not otherwise prohibited by the Indenture. If the aggregate principal amount of
Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes and such other pari passu Indebtedness to be
purchased on a pro rata basis. Holders of Notes that are the subject of an offer
to purchase may elect to have such Notes purchased by completing the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. SUBORDINATION. Each Holder by accepting a Note agrees that the
payment of principal of and premium, interest and Liquidated Damages, if any, on
each Note is subordinated in right of payment, to the extent and in the manner
provided in Article 10 of the Indenture, prior to the payment in full of all
Senior Indebtedness of the Issuers (whether outstanding on the date of the
Indenture or thereafter incurred assumed or guaranteed), and the subordination
is for the benefit of the holders of such Senior Indebtedness.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Guarantees or the Notes may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
then outstanding Notes and any existing default or compliance with any provision
of the Indenture, the Guarantees or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes.
Without the consent of any Holder of a Note, the Indenture, the Guarantees or
the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's or
Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change
A1-4
<PAGE>
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act, to provide for the Issuance of Additional Notes in accordance with the
limitations set forth in the Indenture, or to allow any Guarantor to execute a
supplemental indenture to the Indenture and/or a Guarantee with respect to the
Notes.
13. DEFAULTS AND REMEDIES. Each of the following constitutes an
Event of Default: (i) the Company defaults in the payment when due of interest
on, or Liquidated Damages with respect to, the Notes (whether or not permitted
by the subordination provisions of the Indenture) and such default continues for
a period of 30 days; (ii) the Company defaults in the payment when due of
principal of or premium, if any, on the Notes when the same becomes due and
payable at maturity, upon redemption (including in connection with an offer to
purchase) or otherwise (whether or not permitted by the subordination provisions
of the Indenture); (iii) the Company or any of its Restricted Subsidiaries fails
to comply with any of the provisions of Section 5.01 of the Indenture; (iv) the
Company or any of its Restricted Subsidiaries fails to observe or perform any
other covenant, representation, warranty or other agreement in the Indenture or
the Notes for 60 days after notice to the Company by the Trustee or the Holders
of at least 25% in aggregate principal amount of the Notes then outstanding
voting as a single class; (v) a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date hereof, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (vi) a final
judgment or final judgments for the payment of money are entered by a court or
courts of competent jurisdiction against the Company or any of its Restricted
Subsidiaries and such judgment or judgments remain undischarged for a period
(during which execution shall not be effectively stayed) of 60 days, provided
that the aggregate of all such undischarged judgments exceeds $5.0 million;
(vii) except as permitted by the Indenture, any Subsidiary Guarantee is held in
any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under such
Subsidiary Guarantee. If any Event of Default (other than certain events of
bankruptcy or insolvency) occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Upon any such declaration, the
Notes shall become due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes shall be due and payable immediately without
further action or notice. The Holders of a majority in aggregate principal
amount of the then outstanding Notes by written notice to the Trustee may on
behalf of all of the Holders rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium that has
become due solely because of the acceleration) have been cured or waived. The
Company is required to deliver to the
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<PAGE>
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required upon becoming aware of any Default or Event of Default to
deliver to the Trustee a statement specifying such Default or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of May 18, 1998, between the Company and the parties named on
the signature pages thereof (the "Registration Rights Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier no.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
A1-6
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature:_______________________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:________________________________________
Signature Guarantee.
A1-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
|_| Section 4.10 |_| Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $________
Date: Your Signature:_______________________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:________________________________________
Signature Guarantee.
A1-8
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(1)
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
Amount of Amount of Principal Signature of
decrease in increase in Amount authorized
Principal Principal of this Global signatory of
Amount Amount Note following Trustee or
Date of of this of this such decrease Note
Exchange Global Note Global Note (or increase) Custodian
-------- ----------- ----------- -------------- ---------
- ----------
(1) This should be included only if the Note is issued in global form.
A1-9
<PAGE>
Exhibit 4.5
(Face of Global Note)
==============================================================================
CUSIP/CINS____________
10 1/8% Series B Senior Subordinated Notes due 2008
No. __ $_____________
CLUETT AMERICAN CORP.
promises to pay to _______________, or registered assigns, the principal sum of
_______________ Dollars on ___________, 2008.
Interest Payment Dates: May 15 and November 15
Record Dates: May 1 and November 1
DATED:
CLUETT AMERICAN CORP.
BY:___________________________________
Name:
Title:
Dated:______________________________
This is one of the Global Notes
referred to in the within-mentioned
Indenture:
The Bank of New York,
as Trustee
By:__________________________________
Name:
==============================================================================
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<PAGE>
(Back of Note)
10 1/8% Series B Senior Subordinated Notes due 2008
[Insert the Global Note legend, if applicable, pursuant to the provisions of the
Indenture]
[Insert the Private Placement legend, if applicable, pursuant to the provisions
of the Indenture]
Capitalized terms used herein shall have the meanings assigned to
them in the Indenture referred to below unless otherwise indicated.
1. INTEREST. Cluett American Corp., a Delaware corporation (the
"Company"), promises to pay interest on the principal amount of this Note at
10 1/8% per annum from May 15, 1998 until maturity and shall pay the Liquidated
Damages payable pursuant to Section 5 of the Registration Rights Agreement
referred to below. The Company shall pay interest and Liquidated Damages, if
any, semi-annually on May 15 and November 15 of each year (the "Interest Payment
Date"), or if any such day is not a Business Day, on the next succeeding
Business Day. Interest on the Notes will accrue from the most recent Interest
Payment Date to which interest has been paid or, if no interest has been paid,
from the date of issuance; provided that if there is no existing Default in the
payment of interest, and if this Note is authenticated between a record date
referred to on the face hereof and the next succeeding Interest Payment Date,
interest shall accrue from such next succeeding Interest Payment Date; provided,
further, that the first Interest Payment Date shall be November 15, 1998. The
Company shall pay interest (including post-petition interest in any proceeding
under any Bankruptcy Law) on overdue principal and premium, if any, from time to
time on demand at a rate that is 1% per annum in excess of the rate then in
effect; it shall pay interest (including post-petition interest in any
proceeding under any Bankruptcy Law) on overdue installments of interest and
Liquidated Damages (without regard to any applicable grace periods) from time to
time on demand at the same rate to the extent lawful. Interest will be computed
on the basis of a 360-day year of twelve 30-day months.
2. METHOD OF PAYMENT. The Company will pay interest on the Notes
(except defaulted interest) and Liquidated Damages to the Persons who are
registered Holders of Notes at the close of business on the May 1 or November 1
next preceding the Interest Payment Date, even if such Notes are cancelled after
such record date and on or before such Interest Payment Date, except as provided
in Section 2.12 of the Indenture with respect to defaulted interest. The Notes
will be payable as to principal, premium and Liquidated Damages, if any, and
interest at the office or agency of the Company maintained for such purpose
within or without the City and State of New York, or, at the option of the
Company, payment of interest and Liquidated Damages may be made by check mailed
to the Holders at their addresses set forth in the register of Holders, and
provided that payment by wire transfer of immediately available funds will be
required with respect to principal of and interest, premium and Liquidated
Damages, if any, on, all Global Notes and all other Notes the Holders of which
shall have provided wire transfer instructions to the Company or the Paying
Agent. Such payment shall be in such coin or currency of the United States of
America as at the time of payment is legal tender for payment of public and
private debts.
A1-1
<PAGE>
3. PAYING AGENT AND REGISTRAR. Initially, The Bank of New York, the
Trustee under the Indenture, will act as Paying Agent and Registrar. The Company
may change any Paying Agent or Registrar without notice to any Holder. The
Company or any of its Subsidiaries may act in any such capacity.
4. INDENTURE. The Company issued the Notes under an Indenture dated
as of May 18, 1998 ("Indenture") among the Company, the Guarantors on the
signature pages thereto (the "Guarantors") and the Trustee. The terms of the
Notes include those stated in the Indenture and those made part of the Indenture
by reference to the Trust Indenture Act of 1939, as amended (15 U.S. Code ss.ss.
77aaa-77bbbb). The Notes are subject to all such terms, and Holders are referred
to the Indenture and such Act for a statement of such terms. To the extent any
provision of this Note conflicts with the express provisions of the Indenture,
the provisions of the indenture shall govern and be controlling. The Notes are
general, unsecured obligations of the Company limited to (i) up to $175.0
million in aggregate principal amount of outstanding Series A Notes and Series B
Notes (including up to $63.0 million of Additional Notes issued in accordance
with the terms of the Indenture) and (ii) up to $13.0 million in aggregate
principal amount of outstanding Series C Notes.
5. OPTIONAL REDEMPTION.
(a) Except as set forth in clause (b) of this paragraph 5, the Company
shall not have the option to redeem the Notes pursuant to this paragraph 5 prior
to May 15, 2003. Thereafter, the Company shall have the option to redeem the
Notes, in whole or in part, upon not less than 30 nor more than 60 days' notice,
at the redemption prices (expressed as percentages of principal amount) set
forth below plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the applicable redemption date, if redeemed during the twelve-month
period beginning on May 15 of the years indicated below:
Year Percentage
---- ----------
2003.............................................105.0625%
2004.............................................103.3750%
2005.............................................101.6875%
2006 and thereafter..............................100.0000%
(b) Notwithstanding the provisions of clause (a) of this paragraph 5, at
any time prior to May 15, 2001, the Company may on any one or more occasions
redeem up to 35% of the aggregate principal amount of Notes originally issued
under the Indenture at a redemption price of 110.125% of the principal amount
thereof, plus accrued and unpaid interest and Liquidated Damages thereon, if
any, to the redemption date, with the net cash proceeds of a Public Offering;
provided that at least 65% of the original aggregate principal amount of Notes
remain outstanding immediately after the occurrence of such redemption
(excluding Notes held by the Company or any of its Subsidiaries); and provided,
further, that such redemption shall occur within 45 days of the date of the
closing of such Public Offering.
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<PAGE>
At any time prior to May 15, 2003, the Notes may also be redeemed,
as a whole but not in part, at the option of the Company upon the occurrence of
a Change of Control, upon not less than 30 nor more than 60 days' prior notice
(but in no event may any such redemption occur more than 90 days after the
occurrence of such Change of Control) mailed by first-class mail to each
Holder's registered address, at a redemption price equal to 100% of the
principal amount thereof plus the Applicable Premium as of, and accrued and
unpaid interest and Liquidated Damages, if any, to, the date of redemption (the
"Redemption Date").
(c) Any redemption pursuant to this paragraph 5 shall be made pursuant to
the provisions of Section 3.01 through 3.06 of the Indenture.
6. MANDATORY REDEMPTION. Except as set forth in paragraph 7 below,
the Company shall not be required to make mandatory redemption payments with
respect to the Notes.
7. REPURCHASE AT OPTION OF HOLDER.
(a) Upon the occurrence of a Change of Control, each Holder of Notes will
have the right to require the Company to repurchase all or any part (equal to
$1,000 or an integral multiple thereof) of such Holder's Notes pursuant to the
offer described in Section 4.15 of the Indenture (the "Change of Control Offer")
at an offer price in cash equal to 101% of the aggregate principal amount
thereof plus accrued and unpaid interest and Liquidated Damages thereon, if any,
to the date of purchase (the "Change of Control Payment"). Within 30 days
following any Change of Control, the Company shall mail a notice to each Holder
describing the transaction or transactions that constitute the Change of Control
and offering to repurchase the Notes on the date specified in such notice, which
date shall be no earlier than 30 days and no later than 60 days from the date
such notice is mailed (the "Change of Control Payment Date"), pursuant to the
procedures required by the Indenture and described in such notice.
(b) Within 360 days after the receipt of any Net Proceeds from an
Asset Sale, the Company may apply such Net Proceeds, at its option, (a) to
permanently repay Senior Indebtedness, (b) to acquire all or substantially all
of the assets of, or a majority of the Voting Stock of, another Permitted
Business, (c) to make a capital expenditure or (d) to acquire other long-term
assets that are used or useful in a Permitted Business. Pending the final
application of any such Net Proceeds, the Company may temporarily reduce
revolving credit borrowings or otherwise invest such Net Proceeds in any manner
that is not prohibited by the Indenture. Any Net Proceeds from Asset Sales that
are not applied or invested as provided in the first sentence of this paragraph
will be deemed to constitute "Excess Proceeds." When the aggregate amount of
Excess Proceeds exceeds $10.0 million, the Company will be required to make an
offer to all Holders of Notes and all holders of other Indebtedness that is pari
passu with the Notes containing provisions similar to those set forth in the
Indenture with respect to offers to purchase or redeem with the proceeds of
sales of assets (an "Asset Sale Offer") to purchase the maximum principal amount
of Notes and such other pari passu Indebtedness that may be purchased out of the
Excess Proceeds, at an offer price in cash in an amount equal to 100% of the
principal amount thereof plus accrued and unpaid interest and Liquidated Damages
thereon, if any, to the date of purchase, in accordance with the procedures set
forth in the Indenture and such other pari passu Indebtedness. To the extent
that any Excess Proceeds remain after consummation of an Asset Sale Offer,
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<PAGE>
or in the event the holders of the Notes and such other indebtedness decline
such Asset Sale Offer, the Company may use such Excess Proceeds for any purpose
not otherwise prohibited by the Indenture. If the aggregate principal amount of
Notes and such other pari passu Indebtedness tendered into such Asset Sale Offer
surrendered by Holders thereof exceeds the amount of Excess Proceeds, the
Trustee shall select the Notes and such other pari passu Indebtedness to be
purchased on a pro rata basis. Holders of Notes that are the subject of an offer
to purchase may elect to have such Notes purchased by completing the form
entitled "Option of Holder to Elect Purchase" on the reverse of the Notes. Upon
completion of such offer to purchase, the amount of Excess Proceeds shall be
reset at zero.
8. NOTICE OF REDEMPTION. Notice of redemption will be mailed at
least 30 days but not more than 60 days before the redemption date to each
Holder whose Notes are to be redeemed at its registered address. Notes in
denominations larger than $1,000 may be redeemed in part but only in whole
multiples of $1,000, unless all of the Notes held by a Holder are to be
redeemed. On and after the redemption date interest ceases to accrue on Notes or
portions thereof called for redemption.
9. DENOMINATIONS, TRANSFER, EXCHANGE. The Notes are in registered
form without coupons in denominations of $1,000 and integral multiples of
$1,000. The transfer of Notes may be registered and Notes may be exchanged as
provided in the Indenture. The Registrar and the Trustee may require a Holder,
among other things, to furnish appropriate endorsements and transfer documents
and the Company may require a Holder to pay any taxes and fees required by law
or permitted by the Indenture. The Company need not exchange or register the
transfer of any Note or portion of a Note selected for redemption, except for
the unredeemed portion of any Note being redeemed in part. Also, the Company
need not exchange or register the transfer of any Notes for a period of 15 days
before a selection of Notes to be redeemed or during the period between a record
date and the corresponding Interest Payment Date.
10. SUBORDINATION. Each Holder by accepting a Note agrees that the
payment of principal of and premium, interest and Liquidated Damages, if any, on
each Note is subordinated in right of payment, to the extent and in the manner
provided in Article 10 of the Indenture, prior to the payment in full of all
Senior Indebtedness of the Issuers (whether outstanding on the date of the
Indenture or thereafter incurred assumed or guaranteed), and the subordination
is for the benefit of the holders of such Senior Indebtedness.
11. PERSONS DEEMED OWNERS. The registered Holder of a Note may be
treated as its owner for all purposes.
12. AMENDMENT, SUPPLEMENT AND WAIVER. Subject to certain exceptions,
the Indenture, the Guarantees or the Notes may be amended or supplemented with
the consent of the Holders of at least a majority in principal amount of the
then outstanding Notes and any existing default or compliance with any provision
of the Indenture, the Guarantees or the Notes may be waived with the consent of
the Holders of a majority in principal amount of the then outstanding Notes.
Without the consent of any Holder of a Note, the Indenture, the Guarantees or
the Notes may be amended or supplemented to cure any ambiguity, defect or
inconsistency, to provide for uncertificated Notes in addition to or in place of
certificated Notes, to provide for the assumption of the Company's or
Guarantor's obligations to Holders of the Notes in case of a merger or
consolidation, to make any change
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<PAGE>
that would provide any additional rights or benefits to the Holders of the Notes
or that does not adversely affect the legal rights under the Indenture of any
such Holder, to comply with the requirements of the Commission in order to
effect or maintain the qualification of the Indenture under the Trust Indenture
Act, to provide for the Issuance of Additional Notes in accordance with the
limitations set forth in the Indenture, or to allow any Guarantor to execute a
supplemental indenture to the Indenture and/or a Guarantee with respect to the
Notes.
13. DEFAULTS AND REMEDIES. Each of the following constitutes an
Event of Default: (i) the Company defaults in the payment when due of interest
on, or Liquidated Damages with respect to, the Notes (whether or not permitted
by the subordination provisions of the Indenture) and such default continues for
a period of 30 days; (ii) the Company defaults in the payment when due of
principal of or premium, if any, on the Notes when the same becomes due and
payable at maturity, upon redemption (including in connection with an offer to
purchase) or otherwise (whether or not permitted by the subordination provisions
of the Indenture); (iii) the Company or any of its Restricted Subsidiaries fails
to comply with any of the provisions of Section 5.01 of the Indenture; (iv) the
Company or any of its Restricted Subsidiaries fails to observe or perform any
other covenant, representation, warranty or other agreement in the Indenture or
the Notes for 60 days after notice to the Company by the Trustee or the Holders
of at least 25% in aggregate principal amount of the Notes then outstanding
voting as a single class; (v) a default occurs under any mortgage, indenture or
instrument under which there may be issued or by which there may be secured or
evidenced any Indebtedness for money borrowed by the Company or any of its
Restricted Subsidiaries (or the payment of which is guaranteed by the Company or
any of its Restricted Subsidiaries) whether such Indebtedness or guarantee now
exists, or is created after the date hereof, which default (a) is caused by a
failure to pay principal of or premium, if any, or interest on such Indebtedness
prior to the expiration of the grace period provided in such Indebtedness on the
date of such default (a "Payment Default") or (b) results in the acceleration of
such Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $5.0 million or more; (vi) a final
judgment or final judgments for the payment of money are entered by a court or
courts of competent jurisdiction against the Company or any of its Restricted
Subsidiaries and such judgment or judgments remain undischarged for a period
(during which execution shall not be effectively stayed) of 60 days, provided
that the aggregate of all such undischarged judgments exceeds $5.0 million;
(vii) except as permitted by the Indenture, any Subsidiary Guarantee is held in
any judicial proceeding to be unenforceable or invalid or shall cease for any
reason to be in full force and effect or any Guarantor, or any Person acting on
behalf of any Guarantor, shall deny or disaffirm its obligations under such
Subsidiary Guarantee. If any Event of Default (other than certain events of
bankruptcy or insolvency) occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the then outstanding Notes may declare
all the Notes to be due and payable immediately. Upon any such declaration, the
Notes shall become due and payable immediately. Notwithstanding the foregoing,
in the case of an Event of Default arising from certain events of bankruptcy or
insolvency, all outstanding Notes shall be due and payable immediately without
further action or notice. The Holders of a majority in aggregate principal
amount of the then outstanding Notes by written notice to the Trustee may on
behalf of all of the Holders rescind an acceleration and its consequences if the
rescission would not conflict with any judgment or decree and if all existing
Events of Default (except nonpayment of principal, interest or premium that has
become due solely because of the acceleration) have been cured or waived. The
Company is required to deliver to the
A1-5
<PAGE>
Trustee annually a statement regarding compliance with the Indenture, and the
Company is required upon becoming aware of any Default or Event of Default to
deliver to the Trustee a statement specifying such Default or Event of Default.
14. TRUSTEE DEALINGS WITH COMPANY. The Trustee, in its individual or
any other capacity, may make loans to, accept deposits from, and perform
services for the Company or its Affiliates, and may otherwise deal with the
Company or its Affiliates, as if it were not the Trustee.
15. NO RECOURSE AGAINST OTHERS. A director, officer, employee,
incorporator or stockholder, of the Company, as such, shall not have any
liability for any obligations of the Company under the Notes or the Indenture or
for any claim based on, in respect of, or by reason of, such obligations or
their creation. Each Holder by accepting a Note waives and releases all such
liability. The waiver and release are part of the consideration for the issuance
of the Notes.
16. AUTHENTICATION. This Note shall not be valid until authenticated
by the manual signature of the Trustee or an authenticating agent.
17. ABBREVIATIONS. Customary abbreviations may be used in the name
of a Holder or an assignee, such as: TEN COM (= tenants in common), TEN ENT (=
tenants by the entireties), JT TEN (= joint tenants with right of survivorship
and not as tenants in common), CUST (= Custodian), and U/G/M/A (= Uniform Gifts
to Minors Act).
18. ADDITIONAL RIGHTS OF HOLDERS OF RESTRICTED GLOBAL NOTES AND
RESTRICTED DEFINITIVE NOTES. In addition to the rights provided to Holders of
Notes under the Indenture, Holders of Restricted Global Notes and Restricted
Definitive Notes shall have all the rights set forth in the Registration Rights
Agreement dated as of May 18, 1998, between the Company and the parties named on
the signature pages thereof (the "Registration Rights Agreement").
19. CUSIP NUMBERS. Pursuant to a recommendation promulgated by the
Committee on Uniform Security Identification Procedures, the Company has caused
CUSIP numbers to be printed on the Notes and the Trustee may use CUSIP numbers
in notices of redemption as a convenience to Holders. No representation is made
as to the accuracy of such numbers either as printed on the Notes or as
contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
The Company will furnish to any Holder upon written request and
without charge a copy of the Indenture and/or the Registration Rights Agreement.
Requests may be made to:
Cluett American Corp.
48 West 38th Street
New York, New York 10036
Telecopier no.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
A1-6
<PAGE>
ASSIGNMENT FORM
To assign this Note, fill in the form below: (I) or (we) assign and transfer
this Note to
(Insert assignee's soc. sec. or tax I.D. no.)
________________________________________________________________________________
________________________________________________________________________________
(Print or type assignee's name, address and zip code)
and irrevocably appoint_________________________________________________________
to transfer this Note on the books of the Company. The agent may substitute
another to act for him.
Date: Your Signature:_______________________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:________________________________________
Signature Guarantee.
A1-7
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased by the Company
pursuant to Section 4.10 or 4.15 of the Indenture, check the box below:
|_| Section 4.10 |_| Section 4.15
If you want to elect to have only part of the Note purchased by the
Company pursuant to Section 4.10 or Section 4.15 of the Indenture, state the
amount you elect to have purchased: $________
Date: Your Signature:_______________________________________________
(Sign exactly as your name appears on the Note)
Tax Identification No:________________________________________
Signature Guarantee.
A1-8
<PAGE>
SCHEDULE OF EXCHANGES OF INTERESTS IN THE GLOBAL NOTE(1)
The following exchanges of a part of this Global Note for an
interest in another Global Note or for a Definitive Note, or exchanges of a part
of another Global Note or Definitive Note for an interest in this Global Note,
have been made:
Amount of Amount of Principal Signature of
decrease in increase in Amount authorized
Principal Principal of this Global signatory of
Amount Amount Note following Trustee or
Date of of this of this such decrease Note
Exchange Global Note Global Note (or increase) Custodian
-------- ----------- ----------- -------------- ---------
- ----------
(1) This should be included only if the Note is issued in global form.
A1-9
<PAGE>
Exhibit 4.6
Number 1 500,000 Shares
CLUETT AMERICAN CORP.
Total Authorized Issue
1,999,000 Shares Par Value $0.01 Each
12 1/2% SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2010
This Certifies that CEDE & CO. is the owner of FIVE HUNDRED THOUSAND Shares of
the
transferable only on the books of the Corporation by the holder
hereof in person or by duly authorized Attorney upon surrender of this
Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal of the
Corporation this 18th day of May A.D. 1998.
/s/Bryan P. Marsal /s/Steven J. Kaufman
- ------------------- ---------------------
President Secretary
<PAGE>
2
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A SECURITY IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE DEPOSITARY TO
THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE DEPOSITARY OR ANY
SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH SUCCESSOR
DEPOSITARY. THE DEPOSITORY TRUST COMPANY SHALL ACT AS THE DEPOSITARY UNTIL A
SUCCESSOR SHALL BE APPOINTED BY THE COMPANY AND THE TRANSFER AGENT. UNLESS THIS
CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST
COMPANY (55 WATER STREET, NEW YORK, NEW YORK) ("DTC"), TO THE ISSUER OR ITS
AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS MAY BE
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "SECURITIES ACT"), AND THIS SECURITY MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
OR IN ACCORDANCE WITH AN APPLICABLE EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT AND IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER JURISDICTION.
EACH PURCHASER OF THE SECURITY EVIDENCED HEREBY IS HEREBY NOTIFIED THAT THE
SELLER MAY BE RELYING ON THE EXEMPTION FROM THE PROVISIONS OF SECTION 5 OF
THE SECURITIES ACT PROVIDED BY RULE 144A THEREUNDER ("RULE 144A") OR ANOTHER
EXEMPTION UNDER THE SECURITIES ACT. THE HOLDER OF THE SECURITY EVIDENCED
HEREBY AGREES FOR THE BENEFIT OF THE COMPANY THAT (A) SUCH SECURITY MAY BE
RESOLD, PLEDGED OR OTHERWISE TRANSFERRED, ONLY (1)(a) TO A PERSON WHO THE
SELLER REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER (AS DEFINED IN
RULE 144A UNDER THE SECURITIES ACT) IN A TRANSACTION MEETING THE REQUIREMENTS
OF RULE 144A, (b) IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 144A
UNDER THE SECURITIES ACT, (c) OUTSIDE THE UNITED STATES TO A FOREIGN PERSON
IN A TRANSACTION MEETING THE REQUIREMENTS OF RULE 904 UNDER THE SECURITIES
ACT OR (d) IN ACCORDANCE WITH ANOTHER EXEMPTION FROM THE REGISTRATION
REQUIREMENTS OF THE SECURITIES ACT (AND BASED UPON AN OPINION OF COUNSEL IF
THE COMPANY SO REQUESTS), (2) TO THE COMPANY OR (3) PURSUANT TO AN EFFECTIVE
REGISTRATION STATEMENT AND, IN EACH CASE, IN ACCORDANCE WITH ANY APPLICABLE
SECURITIES LAWS OF ANY STATE OF THE UNITED STATES OR ANY OTHER APPLICABLE
JURISDICTION AND (B) THE
<PAGE>
3
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH IN
(A) ABOVE.
For Value Received, __________ hereby sell, assign and transfer unto
(Please Insert Social Security or other identifying number of assignee)
_______________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute and
appoint _____________________________________ Attorney to transfer the said
Shares on the books of the within named Corporation with full power of
substitution in the premises.
Dated __________________ 19__
In presence of ____________________________________________________________
__________________________________
<PAGE>
Exhibit 4.7
Number 1 500,000 Shares
CLUETT AMERICAN CORP.
Total Authorized Issue
1,999,000 Shares Par Value $0.01 Each
12 1/2% SERIES B SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2010
This Certifies that CEDE & CO. is the owner of FIVE HUNDRED THOUSAND Shares of
the
transferable only on the books of the Corporation by the holder
hereof in person or by duly authorized Attorney upon surrender of this
Certificate properly endorsed.
In Witness Whereof, the said Corporation has caused this Certificate to be
signed by its duly authorized officers and to be sealed with the Seal of the
Corporation this _____ day of _____________ A.D. 1998.
/s/Bryan P. Marsal /s/Steven J. Kaufman
- ------------------- ---------------------
President Secretary
<PAGE>
2
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR A SECURITY IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY
THE DEPOSITARY TO A NOMINEE OF THE DEPOSITARY OR BY A NOMINEE OF THE
DEPOSITARY TO THE DEPOSITARY OR ANOTHER NOMINEE OF THE DEPOSITARY OR BY THE
DEPOSITARY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITARY OR A NOMINEE OF SUCH
SUCCESSOR DEPOSITARY. THE DEPOSITARY TRUST COMPANY SHALL ACT AS THE
DEPOSITARY UNTIL A SUCCESSOR SHALL BE APPOINTED BY THE COMPANY AND THE
TRANSFER AGENT. UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY (55 WATER STREET, NEW YORK,
NEW YORK) ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF
CEDE & CO. OR SUCH OTHER NAME AS MAY BE REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO CEDE & CO. OR SUCH OTHER
ENTITY AS MAY BE REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY
TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY
PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEROF, CEDE & CO., HAS AN
INTEREST HEREIN.
<PAGE>
3
HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY PURCHASER
FROM IT OF THE SECURITY EVIDENCED HEREBY OF THE RESALE RESTRICTIONS SET FORTH
IN (A) ABOVE.
For Value Received, ____________ hereby sell, assign and transfer unto
(Please Insert Social Security or other identifying number of assignee)
____________________________________________________________________ Shares
represented by the within Certificate, and do hereby irrevocably constitute
and appoint _____________________________________ Attorney to transfer the
said Shares on the books of the within named Corporation with full power of
substitution in the premises.
Dated ______________ 19__
In presence of _________________________________________________________
______________________________
<PAGE>
Exhibit 4.8
EXECUTION COPY
================================================================================
$112,000,000 10 1/8% SENIOR SUBORDINATED NOTES DUE 2008
REGISTRATION RIGHTS AGREEMENT
Dated as of May 18, 1998
by and among
CLUETT AMERICAN CORP.
and
CLUETT PEABODY & CO., INC., GREAT AMERICAN KNITTING MILLS, INC.,
CLUETT DESIGNER GROUP INC., CONSUMER DIRECT CORPORATION AND
ARROW FACTORY STORES INC.
and
NATIONSBANC MONTGOMERY SECURITIES LLC
&
NATWEST CAPITAL MARKETS LIMITED
================================================================================
<PAGE>
This Registration Rights Agreement (this "Agreement") is made and entered
into as of May 18, 1998, by and among Cluett American Corp., a Delaware
corporation (the "Company"), Cluett Peabody & Co., Inc., Great American Knitting
Mills, Inc., Cluett Designer Group Inc., Consumer Direct Corporation and Arrow
Factory Stores Inc., each a Delaware corporation (the "Guarantors"), NationsBanc
Montgomery Securities LLC and NatWest Capital Markets Limited (each an "Initial
Purchaser" and, together, the "Initial Purchasers"), each of whom has agreed to
purchase the Company's 101/8% Senior Subordinated Notes due 2008 (the "Series A
Notes") pursuant to the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated May 18,
1998, (the "Purchase Agreement"), by and among the Company, the Guarantors and
the Initial Purchasers.
In order to induce the Initial Purchasers to purchase the Notes, the
Company has agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
obligations of the Initial Purchasers set forth in Section 3 of the Purchase
Agreement. Capitalized terms used herein and not otherwise defined shall have
the meaning assigned to them in the Indenture, dated May 18, 1998, between the
Company and The Bank of New York, as Trustee (the "Trustee"), relating to the
Series A Notes (the "Indenture").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
Act: The Securities Act of 1933.
Affiliate: As defined in Rule 144 of the Act.
Broker-Dealer: Any broker or dealer registered under the Exchange Act.
Business Day: Any day except a Saturday, Sunday or other day in the City
of New York on which banks are authorized or ordered to close.
Certificated Securities: As defined in the Indenture.
Closing Date: The date hereof.
Commission: The Securities and Exchange Commission.
Consummate: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the Series B
Notes to be issued in the Exchange Offer, (b) the maintenance of such Exchange
Offer Registration Statement continuously effective and the keeping of the
Exchange Offer open for a period not less than the period required pursuant to
Section 3(b) hereof and (c) the delivery by the Company to the Registrar under
the Indenture of Series B Notes in the same aggregate principal amount as the
aggregate principal amount of Series A Notes tendered by Holders thereof
pursuant to the Exchange Offer.
Consummation Deadline: As defined in Section 3(b) hereof.
<PAGE>
Effectiveness Deadline: As defined in Section 3(a) and 4(a) hereof.
Exchange Act: The Securities Exchange Act of 1934, as amended.
Exchange Offer: The exchange and issuance by the Company of a principal
amount of Series B Notes (which shall be registered pursuant to the Exchange
Offer Registration Statement) equal to the outstanding principal amount of
Series A Notes that are tendered by such Holders in connection with such
exchange and issuance.
Exchange Offer Registration Statement: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
Exempt Resales: The transactions in which the Initial Purchasers propose
to sell the Series A Notes to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act and pursuant to Regulation S under
the Act.
Filing Deadline: As defined in Sections 3(a) and 4(a) hereof.
Holders: As defined in Section 2 hereof.
Indemnified Holder: As defined in Section 8(a) hereof.
Indemnified Party: As defined in Section 8(c) hereof.
Indemnifying Party: As defined in Section 8(c) hereof.
Liquidated Damages: As defined in Section 5 hereof.
Prospectus: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
Recommencement Date: As defined in Section 6(d) hereof.
Registration Default: As defined in Section 5 hereof.
Registration Statement: Any registration statement of the Company and the
Guarantors relating to (a) an offering of Series B Notes pursuant to an Exchange
Offer or (b) the registration for resale of Transfer Restricted Securities
pursuant to the Shelf Registration Statement, in each case, (i) that is filed
pursuant to the provisions of this Agreement and (ii) including the Prospectus
included therein, all amendments and supplements thereto (including
post-effective amendments) and all exhibits and material incorporated by
reference therein.
Regulation S: Regulation S promulgated under the Act.
Rule 144: Rule 144 promulgated under the Act.
Series B Notes: The Company's 101/8% Series B Senior Subordinated Notes
due 2008 to be issued pursuant to the Indenture: (i) in the Exchange Offer or
(ii) as contemplated by Section 4 hereof.
2
<PAGE>
Shelf Registration Statement: As defined in Section 4 hereof.
Suspension Notice: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as
in effect on the date of the Indenture.
Transfer Restricted Securities: Each Series A Note, until the earliest to
occur of (a) the date on which such Series A Note is exchanged in the Exchange
Offer for a Series B Note which is entitled to be resold to the public by the
Holder thereof without complying with the prospectus delivery requirements of
the Act, (b) the date on which such Series A Note has been disposed of in
accordance with a Shelf Registration Statement (and the purchasers thereof have
been issued Series B Notes), or (c) the date on which such Series A Note is
distributed to the public pursuant to Rule 144 under the Act (and purchasers
thereof have been issued Series B Notes) and each Series B Note until the date
on which such Series B Note is disposed of by a Broker-Dealer pursuant to the
"Plan of Distribution" contemplated by the Exchange Offer Registration Statement
(including the delivery of the Prospectus contained therein).
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "Holder") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), then each of the Company and the Guarantors shall (i) cause the Exchange
Offer Registration Statement to be filed with the Commission as soon as
practicable after the Closing Date, but in no event later than 45 days after the
Closing Date (such 45th day being the "Filing Deadline"), (ii) use their
respective best efforts to cause such Exchange Offer Registration Statement to
become effective at the earliest possible time, but in no event later than 160
days after the Closing Date (such 160th day being the "Effectiveness Deadline"),
(iii) in connection with the foregoing, (A) file all pre-effective amendments to
such Exchange Offer Registration Statement as may be necessary in order to cause
it to become effective, (B) file, if applicable, a post-effective amendment to
such Exchange Offer Registration Statement pursuant to Rule 430A under the Act
and (C) cause all necessary filings, if any, in connection with the registration
and qualification of the Series B Notes to be made under the Blue Sky laws of
such jurisdictions as are necessary to permit Consummation of the Exchange
Offer, and (iv) upon the effectiveness of such Exchange Offer Registration
Statement, commence and Consummate the Exchange Offer. The Exchange Offer shall
be on the appropriate form permitting (i) registration of the Series B Notes to
be offered in exchange for the Series A Notes that are Transfer Restricted
Securities and (ii) resales of Series B Notes by Broker-Dealers that tendered
into the Exchange Offer Series A Notes that such Broker-Dealer acquired for its
own account as a result of market making activities or other trading activities
(other than Series A Notes acquired directly from the Company or any of its
Affiliates) as contemplated by Section 3(c) below.
(b) The Company and the Guarantors shall use their respective best efforts
to cause the Exchange Offer Registration Statement to be effective continuously,
and shall keep the Exchange Offer open for a period of not less than the minimum
period required under applicable federal and state securities laws to Consummate
the Exchange Offer; provided, however, that in no event shall such period be
less than 20 Business Days. The Company and the Guarantors shall cause the
Exchange Offer to comply with all applicable federal and state securities laws.
No securities other than the Series B Notes and the Guarantees
3
<PAGE>
thereof shall be included in the Exchange Offer Registration Statement. The
Company and the Guarantors shall use their respective best efforts to cause the
Exchange Offer to be Consummated on the earliest practicable date after the
Exchange Offer Registration Statement has become effective, but in no event
later than 30 business days thereafter (such 30th day being the "Consummation
Deadline").
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any Affiliate of the Company), may exchange such
Transfer Restricted Securities pursuant to the Exchange Offer. Such "Plan of
Distribution" section shall also contain all other information with respect to
such sales by such Broker-Dealers that the Commission may require in order to
permit such sales pursuant thereto, but such "Plan of Distribution" shall not
name any such Broker-Dealer or disclose the amount of Transfer Restricted
Securities held by any such Broker-Dealer, except to the extent required by the
Commission as a result of a change in policy, rules or regulations after the
date of this Agreement. See the Shearman & Sterling no-action letter (available
July 2, 1993).
Because such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Series B
Notes received by such Broker-Dealer in the Exchange Offer, the Company and
Guarantors shall permit the use of the Prospectus contained in the Exchange
Offer Registration Statement by such Broker-Dealer to satisfy such prospectus
delivery requirement. To the extent necessary to ensure that the prospectus
contained in the Exchange Offer Registration Statement is available for sales of
Series B Notes by Broker-Dealers, the Company and the Guarantors agree to use
their respective best efforts to keep the Exchange Offer Registration Statement
continuously effective, supplemented, amended and current as required by and
subject to the provisions of Section 6(a) and (c) hereof and in conformity with
the requirements of this Agreement, the Act and the policies, rules and
regulations of the Commission as announced from time to time, for a period of
one year from the Consummation Deadline or such shorter period as will terminate
when all Transfer Restricted Securities covered by such Registration Statement
have been sold pursuant thereto. The Company and the Guarantors shall provide
sufficient copies of the latest version of such Prospectus to such
Broker-Dealers, promptly upon request, and in no event later than one day after
such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) Shelf Registration. If (i) the Exchange Offer is not permitted by
applicable law (after the Company and the Guarantors have complied with the
procedures set forth in Section 6(a)(i) below) or (ii) if any Holder of Transfer
Restricted Securities shall notify the Company within 20 Business Days following
the Consummation Deadline that (A) such Holder was prohibited by law or
Commission policy from participating in the Exchange Offer or (B) such Holder
may not resell the Series B Notes acquired by it in the Exchange Offer to the
public without delivering a prospectus and the Prospectus contained in the
Exchange Offer Registration Statement is not appropriate or available for such
resales by such Holder or (C) such Holder is a Broker-Dealer and holds Series A
Notes acquired directly from the Company or any of its Affiliates, then the
Company and the Guarantors shall:
(x) cause to be filed, on or prior to 45 days after the earlier of (i) the
date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Company receives the notice specified in clause (a)(ii) above,
(such earlier date, the "Filing Deadline"), a shelf registration statement
pursuant to Rule 415 under the Act (which may
4
<PAGE>
be an amendment to the Exchange Offer Registration Statement (the "Shelf
Registration Statement")), relating to all Transfer Restricted Securities, and
(y) shall use their respective best efforts to cause such Shelf
Registration Statement to become effective on or prior to 160 days after the
Filing Deadline for the Shelf Registration Statement (such 160th day the
"Effectiveness Deadline").
If, after the Company and the Guarantors have filed an Exchange Offer
Registration Statement that satisfies the requirements of Section 3(a) above,
the Company is required to file and make effective a Shelf Registration
Statement solely because the Exchange Offer is not permitted under applicable
federal law (i.e., clause (a)(i) above), then the filing of the Exchange Offer
Registration Statement shall be deemed to satisfy the requirements of clause (x)
above; provided that, in such event, the Company and the Guarantors shall remain
obligated to meet the Effectiveness Deadline set forth in clause (y).
To the extent necessary to ensure that the Shelf Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section 6(b)(ii) hereof, the Company and
the Guarantors shall use their respective best efforts to keep any Shelf
Registration Statement required by this Section 4(a) continuously effective,
supplemented, amended and current as required by and subject to the provisions
of Sections 6(b) and (c) hereof and in conformity with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of at least two years (as extended
pursuant to Section 6(c)(i)) following the Closing Date, or such shorter period
as will terminate when all Transfer Restricted Securities covered by such Shelf
Registration Statement have been sold pursuant thereto.
(b) Provision by Holders of Certain Information in Connection with the
Shelf Registration Statement. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to Liquidated Damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not
been Consummated on or prior to the Consummation Deadline or (iv) any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded by a post-effective amendment to
such Registration Statement that cures such failure and that is itself declared
effective within 10 days of filing such post-effective amendment to such
Registration Statement (each such event referred to in clauses (i) through (iv),
a "Registration Default"), then the Company and the Guarantors hereby jointly
and severally agree to pay to each Holder of Transfer Restricted Securities
affected thereby liquidated damages ("Liquidated Damages") in an amount equal to
$.05 per week per $1,000 in principal amount of Transfer Restricted Securities
held by such Holder for each week or portion thereof that the Registration
Default continues for
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the first 90-day period immediately following the occurrence of such
Registration Default. The amount of the Liquidated Damages shall increase by an
additional $.05 per week per $1,000 in principal amount of Transfer Restricted
Securities with respect to each subsequent 90-day period until all Registration
Defaults have been cured, up to a maximum amount of liquidated damages of $.50
per week per $1,000 in principal amount of Transfer Restricted Securities;
provided that the Company and the Guarantors shall in no event be required to
pay liquidated damages for more than one Registration Default at any given time.
Notwithstanding anything to the contrary set forth herein, (1) upon filing of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (i) above, (2) upon the effectiveness of
the Exchange Offer Registration Statement (and/or, if applicable, the Shelf
Registration Statement), in the case of (ii) above, (3) upon Consummation of the
Exchange Offer, in the case of (iii) above, or (4) upon the filing of a
post-effective amendment to the Registration Statement or an additional
Registration Statement that causes the Exchange Offer Registration Statement
(and/or, if applicable, the Shelf Registration Statement) to again be declared
effective or made usable in the case of (iv) above, the Liquidated Damages
payable with respect to the Transfer Restricted Securities as a result of such
clause (i), (ii), (iii) or (iv), as applicable, shall cease.
All accrued Liquidated Damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Indenture, on
each Interest Payment Date, as more fully set forth in the Indenture and the
Notes. Notwithstanding the fact that any securities for which Liquidated Damages
are due cease to be Transfer Restricted Securities, all obligations of the
Company and the Guarantors to pay Liquidated Damages with respect to securities
shall survive until such time as such obligations with respect to such
securities shall have been satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the Exchange
Offer, the Company and the Guarantors shall (x) comply with all applicable
provisions of Section 6(c) below, (y) use their respective best efforts to
effect such exchange and to permit the resale of Series B Notes by
Broker-Dealers that tendered in the Exchange Offer Series A Notes that such
Broker-Dealer acquired for its own account as a result of its market making
activities or other trading activities (other than Series A Notes acquired
directly from the Company or any of its Affiliates) being sold in accordance
with the intended method or methods of distribution thereof, and (z) comply with
all of the following provisions:
(i) If, following the date hereof there has been announced a change
in Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company and the Guarantors hereby agree to
seek a no-action letter or other favorable decision from the Commission
allowing the Company and the Guarantors to Consummate an Exchange Offer
for such Transfer Restricted Securities. The Company and the Guarantors
hereby agree to pursue the issuance of such a decision to the Commission
staff level. In connection with the foregoing, the Company and the
Guarantors hereby agree to take all such other actions as may be requested
by the Commission or otherwise required in connection with the issuance of
such decision, including without limitation (A) participating in
telephonic conferences with the Commission, (B) delivering to the
Commission staff an analysis prepared by counsel to the Company setting
forth the legal bases, if any, upon which such counsel has concluded that
such an Exchange Offer should be permitted and (C) diligently pursuing a
resolution (which need not be favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker Dealer) shall
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furnish, upon the request of the Company, prior to the Consummation of the
Exchange Offer, a written representation to the Company and the Guarantors
(which may be contained in the letter of transmittal contemplated by the
Exchange Offer Registration Statement) to the effect that (A) it is not an
Affiliate of the Company, (B) it is not engaged in, and does not intend to
engage in, and has no arrangement or understanding with any person to
participate in, a distribution of the Series B Notes to be issued in the
Exchange Offer and (C) it is acquiring the Series B Notes in its ordinary
course of business. As a condition to its participation in the Exchange
Offer, each Holder using the Exchange Offer to participate in a
distribution of the Series B Notes shall acknowledge and agree that, if
the resales are of Series B Notes obtained by such Holder in exchange for
Series A Notes acquired directly from the Company or an Affiliate thereof,
it (1) could not, under Commission policy as in effect on the date of this
Agreement, rely on the position of the Commission enunciated in Morgan
Stanley and Co., Inc. (available June 5, 1991) and Exxon Capital Holdings
Corporation (available May 13, 1988), as interpreted in the Commission's
letter to Shearman & Sterling dated July 2, 1993, and similar no-action
letters (including, if applicable, any no-action letter obtained pursuant
to clause (i) above), and (2) must comply with the registration and
prospectus delivery requirements of the Act in connection with a secondary
resale transaction and that such a secondary resale transaction must be
covered by an effective registration statement containing the selling
security holder information required by Item 507 or 508, as applicable, of
Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company and the Guarantors shall provide a supplemental
letter to the Commission (A) stating that the Company and the Guarantors
are registering the Exchange Offer in reliance on the position of the
Commission enunciated in Exxon Capital Holdings Corporation (available May
13, 1988), Morgan Stanley and Co., Inc. (available June 5, 1991) as
interpreted in the Commission's letter to Shearman & Sterling dated July
2, 1993, and, if applicable, any no-action letter obtained pursuant to
clause (i) above, (B) including a representation that neither the Company
nor any Guarantor has entered into any arrangement or understanding with
any Person to distribute the Series B Notes to be received in the Exchange
Offer and that, to the best of the Company's and each Guarantor's
information and belief, each Holder participating in the Exchange Offer is
acquiring the Series B Notes in its ordinary course of business and has no
arrangement or understanding with any Person to participate in the
distribution of the Series B Notes received in the Exchange Offer and (C)
any other undertaking or representation required by the Commission as set
forth in any no-action letter obtained pursuant to clause (i) above, if
applicable.
(b) Shelf Registration Statement. In connection with the Shelf
Registration Statement, the Company and the Guarantors shall (i) comply with all
the provisions of Section 6(c) below and use their respective best efforts to
effect such registration to permit the sale of the Transfer Restricted
Securities being sold in accordance with the intended method or methods of
distribution thereof (as indicated in the information furnished to the Company
pursuant to Section 4(b) hereof), and pursuant thereto the Company and the
Guarantors will prepare and file with the Commission a Registration Statement
relating to the registration on any appropriate form under the Act, which form
shall be available for the sale of the Transfer Restricted Securities in
accordance with the intended method or methods of distribution thereof within
the time periods and otherwise in accordance with the provisions hereof, and
(ii) issue, upon the request of any Holder or purchaser of Series A
Notes covered by any Shelf Registration Statement contemplated by this
Agreement, Series B Notes having an aggregate principal amount equal to the
aggregate principal amount of Series A Notes sold pursuant to the Shelf
Registration Statement and surrendered to the Company for cancellation; the
Company shall register Series B Notes on
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the Shelf Registration Statement for this purpose and issue the Series B Notes
to the purchaser(s) of securities subject to the Shelf Registration Statement in
the names as such purchaser(s) shall designate.
(c) General Provisions. In connection with any Registration Statement and
any related Prospectus required by this Agreement, the Company and the
Guarantors shall:
(i) use their respective best efforts to keep such Registration
Statement continuously effective and provide all requisite financial
statements for the period specified in Section 3 or 4 of this Agreement,
as applicable. Upon the occurrence of any event that would cause any such
Registration Statement or the Prospectus contained therein (A) to contain
an untrue statement of material fact or omit to state any material fact
necessary to make the statements therein not misleading or (B) not to be
effective and usable for resale of Transfer Restricted Securities during
the period required by this Agreement, the Company and the Guarantors
shall file promptly an appropriate amendment to such Registration
Statement curing such defect, and, if Commission review is required, use
their respective best efforts to cause such amendment to be declared
effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as may
be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may be;
cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Act, and to comply fully with Rules 424, 430A and 462, as applicable,
under the Act in a timely manner; and comply with the provisions of the
Act with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set
forth in such Registration Statement or supplement to the Prospectus;
(iii) advise each Holder in connection with sales or market making
activities promptly and, if requested by such Holder, confirm such advice
in writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
applicable Registration Statement or any post-effective amendment thereto,
when the same has become effective, (B) of any request by the Commission
for amendments to the Registration Statement or amendments or supplements
to the Prospectus or for additional information relating thereto, (C) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction,
or the initiation of any proceeding for any of the preceding purposes, (D)
of the existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement in order to make
the statements therein not misleading, or that requires the making of any
additions to or changes in the Prospectus in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws,
the Company and the Guarantors shall use their respective best efforts to
obtain the withdrawal or lifting of such order at the earliest possible
time;
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(iv) subject to Section 6(c)(i), if any fact or event contemplated
by Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the Registration Statement or
related Prospectus or any document incorporated therein by reference or
file any other required document so that, as thereafter delivered to the
purchasers of Transfer Restricted Securities, the Prospectus will not
contain an untrue statement of a material fact or omit to state any
material fact necessary to make the statements therein, in the light of
the circumstances under which they were made, not misleading;
(v) furnish to each Holder in connection with such exchange or sale,
if any, before filing with the Commission, copies of any Registration
Statement or any Prospectus included therein or any amendments or
supplements to any such Registration Statement or Prospectus (including
all documents incorporated by reference after the initial filing of such
Registration Statement), which documents will be subject to the review and
comment of such Holders in connection with such sale, if any, for a period
of at least five Business Days, and the Company will not file any such
Registration Statement or Prospectus or any amendment or supplement to any
such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which such Holders shall reasonably object
within five Business Days after the receipt thereof. A Holder shall be
deemed to have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as proposed
to be filed, contains an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading or fails to comply with the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to each Holder in connection with such
exchange or sale, if any, make the Company's and the Guarantors'
representatives available for discussion of such document and other
customary due diligence matters, and include such information in such
document prior to the filing thereof as such Holders may reasonably
request;
(vii) make available, at reasonable times, for inspection by each
Holder and any attorney or accountant retained by such Holders, all
financial and other records, pertinent corporate documents of the Company
and the Guarantors and cause the Company's and the Guarantors' officers,
directors and employees to supply all information reasonably requested by
any such Holder, attorney or accountant in connection with such
Registration Statement or any post-effective amendment thereto subsequent
to the filing thereof and prior to its effectiveness;
(viii) if requested by any Holders in connection with such exchange
or sale, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such Holders may reasonably request to have included
therein, including, without limitation, information relating to the "Plan
of Distribution" of the Transfer Restricted Securities; and make all
required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after the Company is notified of the matters to be
included in such Prospectus supplement or post-effective amendment;
(ix) furnish to each Holder in connection with such exchange or
sale, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including
all documents incorporated by reference therein and all exhibits
(including exhibits incorporated therein by reference);
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(x) deliver to each Holder without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company and
the Guarantors hereby consent to the use (in accordance with law) of the
Prospectus and any amendment or supplement thereto by each selling Holder
in connection with the offering and the sale of the Transfer Restricted
Securities covered by the Prospectus or any amendment or supplement
thereto;
(xi) upon the request of any Holder, enter into such agreements
(including underwriting agreements) and make such representations and
warranties and take all such other actions in connection therewith in
order to expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any applicable Registration Statement contemplated
by this Agreement as may be reasonably requested by any Holder in
connection with any sale or resale pursuant to any applicable Registration
Statement. In such connection, the Company and the Guarantors shall:
(A) upon request of any Holder, furnish (or in the case of
paragraphs (2) and (3), use its best efforts to cause to be furnished)
to each Holder, upon Consummation of the Exchange Offer or upon the
effectiveness of the Shelf Registration Statement, as the case may be:
(1) a certificate, dated such date, signed on behalf of the
Company and each Guarantor by (x) the President or any Vice
President and (y) a principal financial or accounting officer of the
Company and such Guarantor, confirming, as of the date thereof, the
matters set forth in Sections 7(b), (c) and (d) of the Purchase
Agreement and such other similar matters as such Holders may
reasonably request;
(2) an opinion, dated the date of Consummation of the Exchange
Offer or the date of effectiveness of the Shelf Registration
Statement, as the case may be, of counsel for the Company and the
Guarantors covering matters similar to those set forth in paragraph
(g) of Section 7 of the Purchase Agreement and such other matter as
such Holder may reasonably request, and in any event including a
statement to the effect that such counsel has participated in
conferences with officers and other representatives of the Company
and the Guarantors, representatives of the independent public
accountants for the Company and the Guarantors and have considered
the matters required to be stated therein and the statements
contained therein, although such counsel has not independently
verified the accuracy, completeness or fairness of such statements;
and that such counsel advises that, on the basis of the foregoing
(relying as to materiality to the extent such counsel deems
appropriate upon the statements of officers and other
representatives of the Company and the Guarantors) and without
independent check or verification), no facts came to such counsel's
attention that caused such counsel to believe that the applicable
Registration Statement, at the time such Registration Statement or
any post-effective amendment thereto became effective and, in the
case of the Exchange Offer Registration Statement, as of the date of
Consummation of the Exchange Offer, contained an untrue statement of
a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that the Prospectus contained in such Registration
Statement as of its date and, in the case of the opinion dated the
date of Consummation of the Exchange Offer, as of the date of
Consummation, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances
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under which they were made, not misleading. Without limiting the
foregoing, such counsel may state further that such counsel assumes
no responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial statements,
notes and schedules and other financial data included in any
Registration Statement contemplated by this Agreement or the related
Prospectus; and
(3) a customary comfort letter, dated the date of Consummation of
the Exchange Offer, or as of the date of effectiveness of the Shelf
Registration Statement, as the case may be, from the Company's
independent accountants, in the customary form and covering matters
of the type customarily covered in comfort letters to underwriters
in connection with underwritten offerings, and affirming the matters
set forth in the comfort letters delivered pursuant to Section 7(o)
of the Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance with
the matters covered in clause (A) above and with any customary
conditions contained in the any agreement entered into by the Company
and the Guarantors pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted
Securities, cooperate with the selling Holders and their counsel in
connection with the registration and qualification of the Transfer
Restricted Securities under the securities or Blue Sky laws of such
jurisdictions as the selling Holders may request and do any and all other
acts or things necessary or advisable to enable the disposition in such
jurisdictions of the Transfer Restricted Securities covered by the
applicable Registration Statement; provided, however, that neither the
Company nor any Guarantor shall be required to register or qualify as a
foreign corporation where it is not now so qualified or to take any action
that would subject it to the service of process in suits or to taxation,
other than as to matters and transactions relating to the Registration
Statement, in any jurisdiction where it is not now so subject;
(xiii) issue, upon the request of any Holder of Series A Notes
covered by any Shelf Registration Statement contemplated by this Agreement
Series B Notes having an aggregate principal amount equal to the aggregate
principal amount of Series A Notes surrendered to the Company by such
Holder in exchange therefor or being sold by such Holder; such Series B
Notes to be registered in the name of such Holder or in the name of the
purchaser(s) of such Series A Notes; in return, the Series A Notes held by
such Holder shall be surrendered to the Company for cancellation;
(xiv) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the Holders to facilitate the timely
preparation and delivery of certificates representing Transfer Restricted
Securities to be sold and not bearing any restrictive legends; and to
register such Transfer Restricted Securities in such denominations and
such names as the selling Holders may request at least two Business Days
prior to such sale of Transfer Restricted Securities;
(xv) use their respective best efforts to cause the disposition of
the Transfer Restricted Securities covered by the 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
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consummate the disposition of such Transfer Restricted Securities, subject
to the proviso contained in clause (xii) above;
(xvi) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering
such Transfer Restricted Securities and provide the Trustee under the
Indenture with printed certificates for the Transfer Restricted Securities
which are in a form eligible for deposit with the Depository Trust
Company;
(xvii) otherwise use their respective best efforts to comply with
all applicable rules and regulations of the Commission, and make generally
available to its security holders with regard to any applicable
Registration Statement, as soon as practicable, a consolidated earnings
statement meeting the requirements of Rule 158 (which need not be audited)
covering a twelve-month period beginning after the effective date of the
Registration Statement (as such term is defined in paragraph (c) of Rule
158 under the Act);
(xviii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee
and the Holders to effect such changes to the Indenture as may be required
for such Indenture to be so qualified in accordance with the terms of the
TIA; and execute and use their respective best efforts to cause the
Trustee to execute, all documents that may be required to effect such
changes and all other forms and documents required to be filed with the
Commission to enable such Indenture to be so qualified in a timely manner;
and
(viii) provide promptly to each Holder, upon request, each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) Restrictions on Holders. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"Suspension Notice"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "Recommencement
Date"). Each Holder receiving a Suspension Notice hereby agrees that it will
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Company with more
recently dated Prospectuses or (ii) 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 Transfer Restricted Securities that
was current at the time of receipt of the Suspension Notice. The time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable, shall be extended by a number of days equal to the
number of days in the period from and including the date of delivery of the
Suspension Notice to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's and the Guarantors' performance
of or compliance with this Agreement will be borne by the Company, regardless of
whether a Registration Statement becomes effective, including without
limitation: (i) all registration and filing fees and expenses; (ii) all fees and
expenses of compliance with federal securities and state Blue Sky or securities
laws; (iii) all expenses
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of printing (including printing certificates for the Series B Notes to be issued
in the Exchange Offer and printing of Prospectuses), messenger and delivery
services and telephone; (iv) all fees and disbursements of counsel for the
Company, the Guarantors and the Holders of Transfer Restricted Securities; (v)
all application and filing fees in connection with listing the Series B Notes on
a national securities exchange or automated quotation system pursuant to the
requirements hereof; and (vi) all fees and disbursements of independent
certified public accountants of the Company and the Guarantors (including the
expenses of any special audit and comfort letters required by or incident to
such performance).
The Company will, in any event, bear its and the Guarantors' internal
expenses (including, without limitation, all salaries and expenses of its
officers and employees performing legal or accounting duties), the expenses of
any annual audit and the fees and expenses of any Person, including special
experts, retained by the Company or the Guarantors.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company and the Guarantors
will reimburse the Initial Purchasers and the Holders of Transfer Restricted
Securities who are tendering Series A Notes into in the Exchange Offer and/or
selling or reselling Series A Notes or Series B Notes pursuant to the "Plan of
Distribution" contained in the Exchange Offer Registration Statement or the
Shelf Registration Statement, as applicable, for the reasonable fees and
disbursements of not more than one counsel, who shall be Latham & Watkins,
unless another firm shall be chosen by the Holders of a majority in principal
amount of the Transfer Restricted Securities for whose benefit such Registration
Statement is being prepared.
SECTION 8. INDEMNIFICATION
(a) The Company and the Guarantors agree, jointly and severally, to
indemnify and hold harmless each Holder, its directors, officers and each
Person, if any, who controls such Holder (within the meaning of Section 15 of
the Act or Section 20 of the Exchange Act), from and against any and all losses,
claims, damages, liabilities, judgments, (including without limitation, any
legal or other expenses incurred in connection with investigating or defending
any matter, including any action that could give rise to any such losses,
claims, damages, liabilities or judgments) caused by any untrue statement or
alleged untrue statement of a material fact contained in any Registration
Statement, preliminary prospectus or Prospectus (or any amendment or supplement
thereto) provided by the Company to any Holder or any prospective purchaser of
Series B Notes or registered Series A Notes, or caused by 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, except insofar as
such losses, claims, damages, liabilities or judgments are caused by an untrue
statement or omission or alleged untrue statement or omission that is based upon
information relating to any of the Holders furnished in writing to the Company
by any of the Holders.
(b) Each Holder of Transfer Restricted agrees, severally and not jointly,
to indemnify and hold harmless the Company and the Guarantors, and their
respective directors and officers, and each person, if any, who controls (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act) the
Company or the Guarantors to the same extent as the foregoing indemnity from the
Company and the Guarantors set forth in section (a) above, but only with
reference to information relating to such Holder furnished in writing to the
Company by such Holder expressly for use in any Registration Statement. In no
event shall any Holder, its directors, officers or any Person who controls such
Holder be liable or responsible for any amount in excess of the amount by which
the total amount received by such Holder with respect to its sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages that
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such Holder, its directors, officers or any Person who controls such Holder has
otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"indemnified party"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "indemnifying person") in writing
and the indemnifying party shall assume the defense of such action, including
the employment of counsel reasonably satisfactory to the indemnified party and
the payment of all fees and expenses of such counsel, as incurred (except that
in the case of any action in respect of which indemnity may be sought pursuant
to both Sections 8(a) and 8(b), a Holder shall not be required to assume the
defense of such action pursuant to this Section 8(c), but may employ separate
counsel and participate in the defense thereof, but the fees and expenses of
such counsel, except as provided below, shall be at the expense of the Holder).
Any indemnified party shall have the right to employ separate counsel in any
such action and participate in the defense thereof, but the fees and expenses of
such counsel shall be at the expense of the indemnified party unless (i) the
employment of such counsel shall have been specifically authorized in writing by
the indemnifying party, (ii) the indemnifying party shall have failed to assume
the defense of such action or employ counsel reasonably satisfactory to the
indemnified party or (iii) the named parties to any such action (including any
impleaded parties) include both the indemnified party and the indemnifying
party, and the indemnified party shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the indemnifying party (in which case the
indemnifying party shall not have the right to assume the defense of such action
on behalf of the indemnified party). In any such case, the indemnifying party
shall not, in connection with any one action or separate but substantially
similar or related actions in the same jurisdiction arising out of the same
general allegations or circumstances, be liable for the fees and expenses of
more than one separate firm of attorneys (in addition to any local counsel) for
all indemnified parties and all such fees and expenses shall be reimbursed as
they are incurred. Such firm shall be designated in writing by a majority of the
Holders, in the case of the parties indemnified pursuant to Section 8(a), and by
the Company and Guarantors, in the case of parties indemnified pursuant to
Section 8(b). The indemnifying party shall indemnify and hold harmless the
indemnified party from and against any and all losses, claims, damages,
liabilities and judgments by reason of any settlement of any action (i) effected
with its written consent or (ii) effected without its written consent if the
settlement is entered into more than twenty business days after the indemnifying
party shall have received a request from the indemnified party for reimbursement
for the fees and expenses of counsel (in any case where such fees and expenses
are at the expense of the indemnifying party) and, prior to the date of such
settlement, the indemnifying party shall have failed to comply with such
reimbursement request. No indemnifying party shall, without the prior written
consent of the indemnified party, effect any settlement or compromise of, or
consent to the entry of judgment with respect to, any pending or threatened
action in respect of which the indemnified party is or could have been a party
and indemnity or contribution may be or could have been sought hereunder by the
indemnified party, unless such settlement, compromise or judgment (i) includes
an unconditional release of the indemnified party from all liability on claims
that are or could have been the subject matter of such action and (ii) does not
include a statement as to or an admission of fault, culpability or a failure to
act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company and the
Guarantors, on the one hand, and the Holders, on the other hand, from their sale
of Transfer
14
<PAGE>
Restricted Securities or (ii) if the allocation provided by clause 8(d)(i) is
not permitted by applicable law, in such proportion as is appropriate to reflect
not only the relative benefits referred to in clause 8(d)(i) above but also the
relative fault of the Company and the Guarantors, on the one hand, and of the
Holder, on the other hand, in connection with the statements or omissions which
resulted in such losses, claims, damages, liabilities or judgments, as well as
any other relevant equitable considerations. The relative fault of the Company
and the Guarantors, on the one hand, and of the Holder, on the other hand, shall
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 or such
Guarantor, on the one hand, or by the Holder, on the other hand, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such statement or omission. The amount paid or payable by a
party as a result of the losses, claims, damages, liabilities and judgments
referred to above shall be deemed to include, subject to the limitations set
forth in the second paragraph of Section 8(a), any legal or other fees or
expenses reasonably incurred by such party in connection with investigating or
defending any action or claim.
The Company, the Guarantors and each Holder agree that it would not be
just and equitable if contribution pursuant to this Section 8(d) were determined
by pro rata allocation (even if the Holders were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to in the immediately preceding paragraph. The
amount paid or payable by an indemnified party as a result of the losses,
claims, damages, liabilities or judgments referred to in the immediately
preceding paragraph shall be deemed to include, subject to the limitations set
forth above, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any matter, including any
action that could have given rise to such losses, claims, damages, liabilities
or judgments. Notwithstanding the provisions of this Section 8, no Holder, nor
its directors, its officers or any Person, if any, who controls such Holder
shall be required to contribute, in the aggregate, any amount in excess of the
amount by which the total received by such Holder with respect to the sale of
Transfer Restricted Securities pursuant to a Registration Statement exceeds (i)
the amount paid by such Holder for such Transfer Restricted Securities and (ii)
the amount of any damages which such Holder has otherwise been required to pay
by reason of such untrue or alleged untrue statement or omission or alleged
omission. 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. The Holders'
obligations to contribute pursuant to this Section 8(c) are several in
proportion to the respective principal amount of Transfer Restricted Securities
held by each Holder hereunder and not joint.
SECTION 9. RULE 144A AND RULE 144
The Company and each Guarantor agree with each Holder, for so long as any
Transfer Restricted Securities remain outstanding and during any period in which
the Company or such Guarantor (i) is not subject to Section 13 or 15(d) of the
Exchange Act, to make available, upon request of any Holder, to such Holder or
beneficial owner of Transfer Restricted Securities in connection with any sale
thereof and any prospective purchaser of such Transfer Restricted Securities
designated by such Holder or beneficial owner, the information required by Rule
144A(d)(4) under the Act in order to permit resales of such Transfer Restricted
Securities pursuant to Rule 144A, and (ii) is subject to Section 13 or 15 (d) of
the Exchange Act, to make all filings required thereby in a timely manner in
order to permit resales of such Transfer Restricted Securities pursuant to Rule
144.
SECTION 10. MISCELLANEOUS
15
<PAGE>
(a) Remedies. The Company and the Guarantors acknowledge and agree that
any failure by the Company and/or the Guarantors to comply with their respective
obligations under Sections 3 and 4 hereof may result in material irreparable
injury to the Initial Purchasers or the Holders for which there is no adequate
remedy at law, that it will not be possible to measure damages for such injuries
precisely and that, in the event of any such failure, the Initial Purchasers or
any Holder may obtain such relief as may be required to specifically enforce the
Company's and the Guarantors' obligations under Sections 3 and 4 hereof. The
Company and the Guarantors further agree to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) No Inconsistent Agreements. Neither the Company nor any Guarantor
will, on or after the date of this Agreement, enter into any agreement with
respect to its securities that is inconsistent with the rights granted to the
Holders in this Agreement or otherwise conflicts with the provisions hereof.
Neither the Company nor any Guarantor has previously entered into any agreement
granting any registration rights with respect to its securities to any Person.
The rights granted to the Holders hereunder do not in any way conflict with and
are not inconsistent with the rights granted to the holders of the Company's and
the Guarantors' securities under any agreement in effect on the date hereof.
(c) Amendments and Waivers. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) Third Party Beneficiary. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company and the
Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and
shall have the right to enforce such agreements directly to the extent they may
deem such enforcement necessary or advisable to protect its rights or the rights
of Holders hereunder.
(e) Notices. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company or the Guarantors:
Cluett American Corp.
48 West 38th Street
New York, NY 10036
Telecopier No.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
16
<PAGE>
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3909
Telecopier No.: (212) 455-2502
Attention: Stephen Feder
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when receipt
acknowledged, if telecopied; and on the next business day, if timely delivered
to an air courier guaranteeing overnight delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) Successors and Assigns. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders; provided, that nothing herein shall be deemed to permit any assignment,
transfer or other disposition of Transfer Restricted Securities in violation of
the terms hereof or of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(g) Counterparts. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) Governing Law. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) Severability. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) Entire Agreement. This Agreement is intended by the parties as a final
expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
17
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CLUETT AMERICAN CORP.
/s/Bryan P. Marsal
----------------------------------------
By:
Name: Bryan P. Marsal
Title: President
CLUETT PEABODY & CO., INC.
By: /s/Bryan P. Marsal
----------------------------------------
Name: Bryan P. Marsal
Title: Chairman
GREAT AMERICAN KNITTING MILLS, INC.
By: /s/Bryan P. Marsal
----------------------------------------
Name: Bryan P. Marsal
Title: Chairman
CLUETT DESIGNER GROUP INC.
By: /s/ Bryan P. Marsal
----------------------------------------
Name: Bryan P. Marsal
Title: Chairman
CONSUMER DIRECT CORPORATION
By: /s/Bryan P. Marsal
----------------------------------------
Name: Bryan P. Marsal
Title: Chairman
18
<PAGE>
ARROW FACTORY STORES INC.
By: /s/Bryan P. Marsal
----------------------------------------
Name: Bryan P. Marsal
Title: Chairman
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/Gary R. Wolfe
----------------------------------------
Name: Gary R. Wolfe
Title: Managing Director
NATWEST CAPITAL MARKETS LIMITED
By: /s/A. Irby
----------------------------------------
Name: A. Irby
Title: Director
19
<PAGE>
Exhibit 4.9
EXECUTION COPY
- --------------------------------------------------------------------------------
$50,000,000 12 1/2% SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2010
PREFERRED STOCK REGISTRATION RIGHTS AGREEMENT
Dated as of May 18, 1998
by and among
CLUETT AMERICAN CORP.
and
NATIONSBANC MONTGOMERY SECURITIES LLC
&
NATWEST CAPITAL MARKETS LIMITED
- --------------------------------------------------------------------------------
<PAGE>
This Registration Rights Agreement (this "AGREEMENT") is made and entered
into as of May 18, 1998, by and among Cluett American Corp., a Delaware
corporation (the "COMPANY"), and NationsBanc Montgomery Securities LLC and
NatWest Capital Markets Limited (each an "INITIAL PURCHASER" and, together, the
"INITIAL PURCHASERS"), each of whom has agreed to purchase the Company's 121/2%
Senior Exchangeable Preferred Stock due 2010 (the "PREFERRED STOCK") pursuant to
the Purchase Agreement (as defined below).
This Agreement is made pursuant to the Purchase Agreement, dated May 18,
1998, (the "PURCHASE AGREEMENT"), by and among the Company, Cluett Peabody &
Co., Inc., Great American Knitting Mills, Inc., Cluett Designer Group Inc.,
Consumer Direct Corporation and Arrow Factory Stores Inc., each a Delaware
corporation (the "GUARANTORS"), and the Initial Purchasers. Under the terms of
the Purchase Agreement, the Preferred Stock may under certain conditions be
exchanged for the Company's 121/2% Subordinated Exchange Debentures due 2010
(the "EXCHANGE DEBENTURES").
In order to induce the Initial Purchasers to purchase the Preferred Stock,
the Company has agreed to provide the registration rights set forth in this
Agreement. The execution and delivery of this Agreement is a condition to the
obligations of the Initial Purchasers set forth in Section 3 of the Purchase
Agreement. Capitalized terms used herein and not otherwise defined shall have
the meaning assigned to them in the Exchange Indenture, dated May 18, 1998,
between the Company and The Bank of New York, as Trustee (the "TRUSTEE"),
relating to the Exchange Debentures (the "EXCHANGE INDENTURE").
The parties hereby agree as follows:
SECTION 1. DEFINITIONS
As used in this Agreement, the following capitalized terms shall have the
following meanings:
ACT: The Securities Act of 1933.
AFFILIATE: As defined in Rule 144 of the Act.
BROKER-DEALER: Any broker or dealer registered under the Exchange Act.
BUSINESS DAY: Any day except a Saturday, Sunday or other day in the City
of New York on which banks are authorized or ordered to close.
CERTIFICATE OF DESIGNATIONS. The Certificate of Designations, Preferences
and Relative, Participating, Optional and Other Special Rights of Preferred
Stock and Qualifications, Limitations and Restrictions Thereof, of the Preferred
Stock, dated May 18, 1998.
CERTIFICATED SECURITIES: As defined in the Certificate of Designations and
the Indenture.
CLOSING DATE: The date hereof.
COMMISSION: The Securities and Exchange Commission.
CONSUMMATE: An Exchange Offer shall be deemed "Consummated" for purposes
of this Agreement upon the occurrence of (a) the filing and effectiveness under
the Act of the Exchange Offer Registration Statement relating to the New
Preferred Stock, or if the Preferred Stock has been exchanged for the Exchange
Debentures, the New Exchange Debentures to be issued in the Exchange Offer, (b)
the maintenance of such Exchange Offer Registration Statement continuously
effective and the keeping of
<PAGE>
the Exchange Offer open for a period not less than the period required pursuant
to Section 3(b) hereof and (c) the delivery by the Company to the Transfer Agent
of shares of New Preferred Stock in the same aggregate Liquidation Preference or
the aggregate Liquidation Preference of Preferred Stock tendered by Holders
thereof pursuant to the Exchange Offer, or if the Preferred Stock has been
exchanged for Exchange Debentures, the delivery by the Company to the Trustee of
New Exchange Debentures tendered by Holders thereof pursuant to the Exchange
Offer.
CONSUMMATION DEADLINE: As defined in Section 3(b) hereof.
DEBENTURES. The Exchange Debentures and the New Exchange Debentures.
EFFECTIVENESS DEADLINE: As defined in Section 3(a) and 4(a) hereof.
EXCHANGE ACT: The Securities Exchange Act of 1934, as amended.
EXCHANGE DEBENTURES: The Company's 121/2% Subordinated Exchange Debentures
Due 2010, including, without limitation, all such Debentures issued in lieu of
payment of cash interest.
EXCHANGE OFFER: The registration by the Company under the Act of the New
Preferred Stock or, if the Preferred Stock has been exchanged for Exchange
Debentures, the New Exchange Debentures, pursuant to the Exchange Offer
Registration Statement, in accordance with which the Company shall offer the
Holders of all Transfer Restricted Securities held by such Holders the
opportunity to exchange all such outstanding Transfer Restricted Securities for
New Preferred Stock with the same aggregate Liquidation Preference as the
Preferred Stock tendered in such Exchange Offer by such Holders, or New Exchange
Debentures in an aggregate principal amount equal to the aggregate principal
amount of the Exchange Debentures tendered in such exchange offer by such
Holder, as the case may be.
EXCHANGE OFFER REGISTRATION STATEMENT: The Registration Statement relating
to the Exchange Offer, including the related Prospectus.
EXCHANGEABLE PREFERRED STOCK: The Preferred Stock and the New Preferred
Stock.
EXEMPT RESALES: The transactions in which the Initial Purchasers propose
to sell the Preferred Stock to certain "qualified institutional buyers," as such
term is defined in Rule 144A under the Act, and pursuant to Regulation S under
the Act.
FILING DEADLINE: As defined in Sections 3(a) and 4(a) hereof.
HOLDERS: As defined in Section 2 hereof.
GLOBAL SECURITY HOLDER: As defined in the Certificate of Designations with
respect to the Preferred Stock and in the Exchange Indenture with respect to the
Debentures.
INDEMNIFIED HOLDER: As defined in Section 8(a) hereof.
INDEMNIFIED PARTY: As defined in Section 8(c) hereof.
INDEMNIFYING PARTY: As defined in Section 8(c) hereof.
LIQUIDATED DAMAGES: As defined in Section 5 hereof.
2
<PAGE>
LIQUIDATION PREFERENCE. As defined in the Certificate of Designations.
NEW EXCHANGE DEBENTURES: The Company's 121/2% Subordinated Exchange
Debentures due 2010 to be issued pursuant to the Exchange Indenture (i) in the
Exchange Offer or (ii) upon the request of any Holder of Exchange Debentures
covered by a Shelf Registration Statement, in exchange for such Exchange
Debentures, including, without limitation, all such Debentures issued in lieu of
payment of cash interest thereon.
NEW PREFERRED STOCK: The Company's 121/2% Senior Exchangeable Preferred
Stock due 2010 to be issued pursuant to the Certificate of Designations (i) in
the Exchange Offer or (ii) upon the request of any Holder of Preferred Stock
covered by a Shelf Registration Statement, in exchange for such Preferred Stock,
including, without limitation, all such Preferred Stock.
PROSPECTUS: The prospectus included in a Registration Statement at the
time such Registration Statement is declared effective, as amended or
supplemented by any prospectus supplement and by all other amendments thereto,
including post-effective amendments, and all material incorporated by reference
into such Prospectus.
PREFERRED STOCK: The Company's 121/2% Senior Exchangeable Preferred Stock
due 2010 sold pursuant to the Purchase Agreement.
RECOMMENCEMENT DATE: As defined in Section 6(d) hereof.
REGISTRATION DEFAULT: As defined in Section 5 hereof.
REGISTRATION STATEMENT: Any registration statement of the Company relating
to (a) an offering of New Preferred Stock pursuant to an Exchange Offer or (b)
the registration for resale of Transfer Restricted Securities pursuant to the
Shelf Registration Statement, in each case, (i) that is filed pursuant to the
provisions of this Agreement and (ii) including the Prospectus included therein,
all amendments and supplements thereto (including post-effective amendments) and
all exhibits and material incorporated by reference therein.
REGULATION S: Regulation S promulgated under the Act.
RULE 144: Rule 144 promulgated under the Act.
SHELF REGISTRATION STATEMENT: As defined in Section 4 hereof.
SUSPENSION NOTICE: As defined in Section 6(d) hereof.
TIA: The Trust Indenture Act of 1939 (15 U.S.C. Section 77aaa-77bbbb) as in
effect on the date of the Indenture.
TRANSFER RESTRICTED SECURITIES: Preferred Stock or Debentures, until the
earliest to occur of (a) the date on which such Preferred Stock or Exchange
Debenture is exchanged in the Exchange Offer in and entitled to be resold to the
public by the Holder thereof without complying with the prospectus delivery
requirements of the Act, (b) the date on which such Preferred Stock or Exchange
Debenture has been disposed of in accordance with a Shelf Registration Statement
(and the purchasers thereof have been issued New Preferred Stock or New Exchange
Debentures, as applicable), (c) the date on which such Preferred Stock or
Exchange Debenture is distributed to the public pursuant to the "Plan of
Distribution"
3
<PAGE>
contemplated by the Exchange Offer Registration Statement (including the
delivery of the Prospectus contained therein) or (d) the date on which such
Preferred Stock or Exchange Debenture is distributed to the public pursuant to
Rule 144 under the Act.
SECTION 2. HOLDERS
A Person is deemed to be a holder of Transfer Restricted Securities (each,
a "HOLDER") whenever such Person owns Transfer Restricted Securities.
SECTION 3. REGISTERED EXCHANGE OFFER
(a) Unless the Exchange Offer shall not be permitted by applicable federal
law (after the procedures set forth in Section 6(a)(i) below have been complied
with), the Company shall (i) cause the Exchange Offer Registration Statement to
be filed with the Commission as soon as practicable after the Closing Date, but
in no event later than 45 days after the Closing Date (such 45th day being the
"FILING DEADLINE"), (ii) use its best efforts to cause such Exchange Offer
Registration Statement to become effective at the earliest possible time, but in
no event later than 160 days after the Closing Date (such 160th day being the
"EFFECTIVENESS DEADLINE"), (iii) in connection with the foregoing, (A) file all
pre-effective amendments to such Exchange Offer Registration Statement as may be
necessary in order to cause it to become effective, (B) file, if applicable, a
post-effective amendment to such Exchange Offer Registration Statement pursuant
to Rule 430A under the Act and (C) cause all necessary filings, if any, in
connection with the registration and qualification of the New Preferred Stock or
the New Exchange Debentures, as the case may be, to be made under the Blue Sky
laws of such jurisdictions as are necessary to permit Consummation of the
Exchange Offer, and (iv) upon the effectiveness of such Exchange Offer
Registration Statement, commence and Consummate the Exchange Offer. The
Exchange Offer shall be on the appropriate form permitting (i) registration of
the New Preferred Stock or the New Exchange Debentures, as the case may be, to
be offered in exchange for Preferred Stock or Exchange Debentures, as the case
may be, that are Transfer Restricted Securities and (ii) resales of the
Preferred Stock or the Exchange Debentures, as the case may be, by
Broker-Dealers that tendered into the Exchange Offer Preferred Stock or Exchange
Debentures, as the case may be, that such Broker-Dealer acquired for its own
account as a result of market making activities or other trading activities
(other than the Preferred Stock or the Exchange Debentures, as the case may be,
acquired directly from the Company or any of its Affiliates) as contemplated by
Section 3(c) below.
(b) The Company shall use its best efforts to cause the Exchange Offer
Registration Statement to be effective continuously, and shall keep the Exchange
Offer open for a period of not less than the minimum period required under
applicable federal and state securities laws to Consummate the Exchange Offer;
PROVIDED, HOWEVER, that in no event shall such period be less than 20 Business
Days. The Company shall cause the Exchange Offer to comply with all applicable
federal and state securities laws. No securities other than the Preferred Stock
and the Exchange Debentures shall be included in the Exchange Offer Registration
Statement. The Company shall use its best efforts to cause the Exchange Offer
to be Consummated on the earliest practicable date after the Exchange Offer
Registration Statement has become effective, but in no event later than 30
business days thereafter (such 30th day being the "CONSUMMATION DEADLINE").
(c) The Company shall include a "Plan of Distribution" section in the
Prospectus contained in the Exchange Offer Registration Statement and indicate
therein that any Broker-Dealer who holds Transfer Restricted Securities that
were acquired for the account of such Broker-Dealer as a result of market-making
activities or other trading activities (other than Transfer Restricted
Securities acquired directly from the Company or any Affiliate of the Company),
may exchange such Transfer Restricted Securities pursuant to the Exchange Offer.
Such "Plan of Distribution" section shall also contain all other information
with respect to such sales by such Broker-Dealers that the Commission may
require in order to permit such sales
4
<PAGE>
pursuant thereto, but such "Plan of Distribution" shall not name any such
Broker-Dealer or disclose the amount of Transfer Restricted Securities held by
any such Broker-Dealer, except to the extent required by the Commission as a
result of a change in policy, rules or regulations after the date of this
Agreement. See the SHEARMAN & STERLING no-action letter (available July 2,
1993).
Because such Broker-Dealer may be deemed to be an "underwriter" within the
meaning of the Act and must, therefore, deliver a prospectus meeting the
requirements of the Act in connection with its initial sale of any Preferred
Stock or Exchange Debentures, as the case may be, received by such Broker-Dealer
in the Exchange Offer, the Company shall permit the use of the Prospectus
contained in the Exchange Offer Registration Statement by such Broker-Dealer to
satisfy such prospectus delivery requirement. To the extent necessary to ensure
that the prospectus contained in the Exchange Offer Registration Statement is
available for sales of New Preferred Stock or New Exchange Debentures, as the
case may be, by Broker-Dealers, the Company agrees to use its best efforts to
keep the Exchange Offer Registration Statement continuously effective,
supplemented, amended and current as required by and subject to the provisions
of Section 6(a) and (c) hereof and in conformity with the requirements of this
Agreement, the Act and the policies, rules and regulations of the Commission as
announced from time to time, for a period of one year from the Consummation
Deadline or such shorter period as will terminate when all Transfer Restricted
Securities covered by such Registration Statement have been sold pursuant
thereto. The Company shall provide sufficient copies of the latest version of
such Prospectus to such Broker-Dealers, promptly upon request, and in no event
later than one day after such request, at any time during such period.
SECTION 4. SHELF REGISTRATION
(a) SHELF REGISTRATION. If (i) the Exchange Offer is not permitted by
applicable law (after the Company has complied with the procedures set forth in
Section 6(a)(i) below) or (ii) if any Holder of Transfer Restricted Securities
shall notify the Company within 20 Business Days following the Consummation
Deadline that (A) such Holder was prohibited by law or Commission policy from
participating in the Exchange Offer or (B) such Holder may not resell the New
Preferred Stock or New Exchange Debentures, as the case may be, acquired by it
in the Exchange Offer to the public without delivering a prospectus and the
Prospectus contained in the Exchange Offer Registration Statement is not
appropriate or available for such resales by such Holder or (C) such Holder is a
Broker-Dealer and holds Preferred Stock or Exchange Debentures acquired directly
from the Company or any of its Affiliates, then the Company shall:
(x) cause to be filed, on or prior to 45 days after the earlier of (i) the
date on which the Company determines that the Exchange Offer Registration
Statement cannot be filed as a result of clause (a)(i) above and (ii) the date
on which the Company receives the notice specified in clause (a)(ii) above,
(such earlier date, the "FILING DEADLINE"), a shelf registration statement
pursuant to Rule 415 under the Act (which may be an amendment to the Exchange
Offer Registration Statement (the "SHELF REGISTRATION STATEMENT")), relating to
all Transfer Restricted Securities, and
(y) shall use its best efforts to cause such Shelf Registration Statement
to become effective on or prior to 160 days after the Filing Deadline for the
Shelf Registration Statement (such 160th day the "EFFECTIVENESS DEADLINE").
If, after the Company has filed an Exchange Offer Registration Statement
that satisfies the requirements of Section 3(a) above, the Company is required
to file and make effective a Shelf Registration Statement solely because the
Exchange Offer is not permitted under applicable federal law (i.e., clause
(a)(i) above), then the filing of the Exchange Offer Registration Statement
shall be deemed to satisfy the
<PAGE>
requirements of clause (x) above; PROVIDED that, in such event, the Company
shall remain obligated to meet the Effectiveness Deadline set forth in clause
(y).
To the extent necessary to ensure that the Shelf Registration Statement is
available for sales of Transfer Restricted Securities by the Holders thereof
entitled to the benefit of this Section 4(a) and the other securities required
to be registered therein pursuant to Section 6(b)(ii) hereof, the Company shall
use its best efforts to keep any Shelf Registration Statement required by this
Section 4(a) continuously effective, supplemented, amended and current as
required by and subject to the provisions of Sections 6(b) and (c) hereof and in
conformity with the requirements of this Agreement, the Act and the policies,
rules and regulations of the Commission as announced from time to time, for a
period of at least two years (as extended pursuant to Section 6(c)(i)) following
the Closing Date, or such shorter period as will terminate when all Transfer
Restricted Securities covered by such Shelf Registration Statement have been
sold pursuant thereto.
(b) PROVISION BY HOLDERS OF CERTAIN INFORMATION IN CONNECTION WITH THE
SHELF REGISTRATION STATEMENT. No Holder of Transfer Restricted Securities may
include any of its Transfer Restricted Securities in any Shelf Registration
Statement pursuant to this Agreement unless and until such Holder furnishes to
the Company in writing, within 20 days after receipt of a request therefor, the
information specified in Item 507 or 508 of Regulation S-K, as applicable, of
the Act for use in connection with any Shelf Registration Statement or
Prospectus or preliminary Prospectus included therein. No Holder of Transfer
Restricted Securities shall be entitled to Liquidated Damages pursuant to
Section 5 hereof unless and until such Holder shall have provided all such
information. Each selling Holder agrees to promptly furnish additional
information required to be disclosed in order to make the information previously
furnished to the Company by such Holder not materially misleading.
SECTION 5. LIQUIDATED DAMAGES
If (i) any Registration Statement required by this Agreement is not filed
with the Commission on or prior to the applicable Filing Deadline, (ii) any such
Registration Statement has not been declared effective by the Commission on or
prior to the applicable Effectiveness Deadline, (iii) the Exchange Offer has not
been Consummated on or prior to the Consummation Deadline or (iv) any
Registration Statement required by this Agreement is filed and declared
effective but shall thereafter cease to be effective or fail to be usable for
its intended purpose without being succeeded within 2 days by a post-effective
amendment to such Registration Statement that cures such failure and that is
itself declared effective within 5 days of filing such post-effective amendment
to such Registration Statement (each such event referred to in clauses (i)
through (iv), a "REGISTRATION DEFAULT"), then the Company hereby agrees to pay
to each Holder of Transfer Restricted Securities affected thereby liquidated
damages ("LIQUIDATED DAMAGES") in an amount equal to $.05 per week per $1,000 in
principal amount of Transfer Restricted Securities held by such Holder for each
week or portion thereof that the Registration Default continues for the first
90-day period immediately following the occurrence of such Registration Default.
The amount of the Liquidated Damages shall increase by an additional $.05 per
week per $1,000 in principal amount of Transfer Restricted Securities with
respect to each subsequent 90-day period until all Registration Defaults have
been cured, up to a maximum amount of Liquidated Damages of $.50 per week per
$1,000 in principal amount of Transfer Restricted Securities; PROVIDED that the
Company shall in no event be required to pay Liquidated Damages for more than
one Registration Default at any given time. Notwithstanding anything to the
contrary set forth herein, (1) upon filing of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (i) above, (2) upon the effectiveness of the Exchange Offer Registration
Statement (and/or, if applicable, the Shelf Registration Statement), in the case
of (ii) above, (3) upon Consummation of the Exchange Offer, in the case of (iii)
above, or (4) upon the filing of a post-
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<PAGE>
effective amendment to the Registration Statement or an additional Registration
Statement that causes the Exchange Offer Registration Statement (and/or, if
applicable, the Shelf Registration Statement) to again be declared effective or
made usable in the case of (iv) above, the Liquidated Damages payable with
respect to the Transfer Restricted Securities as a result of such clause (i),
(ii), (iii) or (iv), as applicable, shall cease.
All accrued Liquidated Damages shall be paid to the Holders entitled
thereto, in the manner provided for the payment of interest in the Exchange
Indenture, on each Interest Payment Date, as more fully set forth in the
Exchange Indenture and the Debentures. Liquidated Damages, if any, incurred
prior to May 15, 2003, may be paid, at the Company's option, by the issuance of
additional Debentures having an aggregate principal amount equal to the amount
of such Liquidated Damages.
Notwithstanding the fact that any securities for which Liquidated Damages are
due cease to be Transfer Restricted Securities, all obligations of the Company
to pay Liquidated Damages with respect to securities shall survive until such
time as such obligations with respect to such securities shall have been
satisfied in full.
SECTION 6. REGISTRATION PROCEDURES
(a) Exchange Offer Registration Statement. In connection with the
Exchange Offer, the Company shall (x) comply with all applicable provisions of
Section 6(c) below, (y) use its best efforts to effect such exchange and to
permit the resale of New Preferred Stock or New Exchange Debentures, as the case
may be, by Broker-Dealers that tendered in the Exchange Offer Preferred Stock or
Exchange Debentures, as the case may be, that such Broker-Dealer acquired for
its own account as a result of its market making activities or other trading
activities (other than Preferred Stock or Exchange Debentures acquired directly
from the Company or any of its Affiliates) being sold in accordance with the
intended method or methods of distribution thereof, and (z) comply with all of
the following provisions:
(i) If, following the date hereof there has been announced a change
in Commission policy with respect to exchange offers such as the Exchange
Offer, that in the reasonable opinion of counsel to the Company raises a
substantial question as to whether the Exchange Offer is permitted by
applicable federal law, the Company hereby agrees to seek a no-action
letter or other favorable decision from the Commission allowing the Company
to Consummate an Exchange Offer for such Transfer Restricted Securities.
The Company hereby agrees to pursue the issuance of such a decision to the
Commission staff level. In connection with the foregoing, the Company
hereby agrees to take all such other actions as may be requested by the
Commission or otherwise required in connection with the issuance of such
decision, including without limitation (A) participating in telephonic
conferences with the Commission, (B) delivering to the Commission staff an
analysis prepared by counsel to the Company setting forth the legal bases,
if any, upon which such counsel has concluded that such an Exchange Offer
should be permitted and (C) diligently pursuing a resolution (which need
not be favorable) by the Commission staff.
(ii) As a condition to its participation in the Exchange Offer, each
Holder of Transfer Restricted Securities (including, without limitation,
any Holder who is a Broker Dealer) shall furnish, upon the request of the
Company, prior to the Consummation of the Exchange Offer, a written
representation to the Company (which may be contained in the letter of
transmittal contemplated by the Exchange Offer Registration Statement) to
the effect that (A) it is not an Affiliate of the Company, (B) it is not
engaged in, and does not intend to engage in, and has no arrangement or
understanding with any person to participate in, a distribution of the New
Preferred Stock or New Exchange Debentures, as the case may be, to be
issued in the Exchange Offer and (C) it is acquiring the New Preferred
Stock or the New Exchange Debentures, as the case may be, in
<PAGE>
its ordinary course of business. As a condition to its participation in
the Exchange Offer, each Holder using the Exchange Offer to participate in
a distribution of the New Preferred Stock or New Exchange Debentures, as
the case may be, shall acknowledge and agree that, if the resales are of
New Preferred Stock or New Exchange Debentures, as the case may be,
obtained by such Holder in exchange for Preferred Stock or Exchange
Debentures, as the case may be, acquired directly from the Company or an
Affiliate thereof, it (1) could not, under Commission policy as in effect
on the date of this Agreement, rely on the position of the Commission
enunciated in MORGAN STANLEY AND CO., INC. (available June 5, 1991) and
EXXON CAPITAL HOLDINGS CORPORATION (available May 13, 1988), as interpreted
in the Commission's letter to SHEARMAN & STERLING dated July 2, 1993, and
similar no-action letters (including, if applicable, any no-action letter
obtained pursuant to clause (i) above), and (2) must comply with the
registration and prospectus delivery requirements of the Act in connection
with a secondary resale transaction and that such a secondary resale
transaction must be covered by an effective registration statement
containing the selling security holder information required by Item 507 or
508, as applicable, of Regulation S-K.
(iii) Prior to effectiveness of the Exchange Offer Registration
Statement, the Company shall provide a supplemental letter to the
Commission (A) stating that the Company is registering the Exchange Offer
in reliance on the position of the Commission enunciated in EXXON CAPITAL
HOLDINGS CORPORATION (available May 13, 1988), MORGAN STANLEY AND CO., INC.
(available June 5, 1991) as interpreted in the Commission's letter to
SHEARMAN & STERLING dated July 2, 1993, and, if applicable, any no-action
letter obtained pursuant to clause (i) above, (B) including a
representation that the Company has not entered into any arrangement or
understanding with any Person to distribute the New Preferred Stock or New
Exchange Debentures, as the case may be, to be received in the Exchange
Offer and that, to the best of the Company's information and belief, each
Holder participating in the Exchange Offer is acquiring the New Preferred
Stock or New Exchange Debentures, as the case may be, in its ordinary
course of business and has no arrangement or understanding with any Person
to participate in the distribution of the New Preferred Stock or New
Exchange Debentures, as the case may be, received in the Exchange Offer and
(C) any other undertaking or representation required by the Commission as
set forth in any no-action letter obtained pursuant to clause (i) above, if
applicable.
(b) SHELF REGISTRATION STATEMENT. In connection with the Shelf
Registration Statement, the Company shall (i) comply with all the provisions of
Section 6(c) below and use its best efforts to effect such registration to
permit the sale of the Transfer Restricted Securities being sold in accordance
with the intended method or methods of distribution thereof (as indicated in the
information furnished to the Company pursuant to Section 4(b) hereof), and
pursuant thereto the Company will prepare and file with the Commission a
Registration Statement relating to the registration on any appropriate form
under the Act, which form shall be available for the sale of the Transfer
Restricted Securities in accordance with the intended method or methods of
distribution thereof within the time periods and otherwise in accordance with
the provisions hereof, and
(ii) issue, upon the request of any Holder or purchaser of Preferred Stock
or Exchange Debentures, as the case may be, covered by any Shelf Registration
Statement contemplated by this Agreement, New Preferred Stock or New Exchange
Debentures, as the case may be, having an aggregate principal amount equal to
the aggregate principal amount of Preferred Stock or Exchange Debentures, as the
case may be, sold pursuant to the Shelf Registration Statement and surrendered
to the Company for cancellation; the Company shall register New Preferred Stock
or New Exchange Debentures, as the case may be, on the Shelf Registration
Statement for this purpose and issue the New Preferred Stock or New
8
<PAGE>
Exchange Debentures, as the case may be, to the purchaser(s) of securities
subject to the Shelf Registration Statement in the names as such purchaser(s)
shall designate.
(c) GENERAL PROVISIONS. In connection with any Registration Statement and
any related Prospectus required by this Agreement, the Company shall:
(i) use its best efforts to keep such Registration Statement
continuously effective and provide all requisite financial statements for
the period specified in Section 3 or 4 of this Agreement, as applicable.
Upon the occurrence of any event that would cause any such Registration
Statement or the Prospectus contained therein (A) to contain an untrue
statement of material fact or omit to state any material fact necessary to
make the statements therein not misleading or (B) not to be effective and
usable for resale of Transfer Restricted Securities during the period
required by this Agreement, the Company shall file promptly an appropriate
amendment to such Registration Statement curing such defect, and, if
Commission review is required, use its best efforts to cause such amendment
to be declared effective as soon as practicable.
(ii) prepare and file with the Commission such amendments and
post-effective amendments to the applicable Registration Statement as may
be necessary to keep such Registration Statement effective for the
applicable period set forth in Section 3 or 4 hereof, as the case may be;
cause the Prospectus to be supplemented by any required Prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424 under
the Act, and to comply fully with Rules 424, 430A and 462, as applicable,
under the Act in a timely manner; and comply with the provisions of the Act
with respect to the disposition of all securities covered by such
Registration Statement during the applicable period in accordance with the
intended method or methods of distribution by the sellers thereof set forth
in such Registration Statement or supplement to the Prospectus;
(iii) advise each Holder in connection with sales or market making
activities promptly and, if requested by such Holder, confirm such advice
in writing, (A) when the Prospectus or any Prospectus supplement or
post-effective amendment has been filed, and, with respect to any
applicable Registration Statement or any post-effective amendment thereto,
when the same has become effective, (B) of any request by the Commission
for amendments to the Registration Statement or amendments or supplements
to the Prospectus or for additional information relating thereto, (C) of
the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement under the Act or of the
suspension by any state securities commission of the qualification of the
Transfer Restricted Securities for offering or sale in any jurisdiction, or
the initiation of any proceeding for any of the preceding purposes, (D) of
the existence of any fact or the happening of any event that makes any
statement of a material fact made in the Registration Statement, the
Prospectus, any amendment or supplement thereto or any document
incorporated by reference therein untrue, or that requires the making of
any additions to or changes in the Registration Statement in order to make
the statements therein not misleading, or that requires the making of any
additions to or changes in the Prospectus in order to make the statements
therein, in the light of the circumstances under which they were made, not
misleading. If at any time the Commission shall issue any stop order
suspending the effectiveness of the Registration Statement, or any state
securities commission or other regulatory authority shall issue an order
suspending the qualification or exemption from qualification of the
Transfer Restricted Securities under state securities or Blue Sky laws, the
Company shall use its best efforts to obtain the withdrawal or lifting of
such order at the earliest possible time;
(iv) subject to Section 6(c)(i), if any fact or event contemplated by
Section 6(c)(iii)(D) above shall exist or have occurred, prepare a
supplement or post-effective amendment to the
9
<PAGE>
Registration Statement or related Prospectus or any document incorporated
therein by reference or file any other required document so that, as
thereafter delivered to the purchasers of Transfer Restricted Securities,
the Prospectus will not contain an untrue statement of a material fact or
omit to state any material fact necessary to make the statements therein,
in the light of the circumstances under which they were made, not
misleading;
(v) furnish to each Holder in connection with such exchange or
sale, if any, before filing with the Commission, copies of any Registration
Statement or any Prospectus included therein or any amendments or
supplements to any such Registration Statement or Prospectus (including all
documents incorporated by reference after the initial filing of such
Registration Statement), which documents will be subject to the review and
comment of such Holders in connection with such sale, if any, for a period
of at least five Business Days, and the Company will not file any such
Registration Statement or Prospectus or any amendment or supplement to any
such Registration Statement or Prospectus (including all such documents
incorporated by reference) to which such Holders shall reasonably object
within five Business Days after the receipt thereof. A Holder shall be
deemed to have reasonably objected to such filing if such Registration
Statement, amendment, Prospectus or supplement, as applicable, as proposed
to be filed, contains an untrue statement of a material fact or omit to
state any material fact necessary to make the statements therein not
misleading or fails to comply with the applicable requirements of the Act;
(vi) promptly prior to the filing of any document that is to be
incorporated by reference into a Registration Statement or Prospectus,
provide copies of such document to each Holder in connection with such
exchange or sale, if any, make the Company's representatives available for
discussion of such document and other customary due diligence matters, and
include such information in such document prior to the filing thereof as
such Holders may reasonably request;
(vii) make available, at reasonable times, for inspection by each
Holder and any attorney or accountant retained by such Holders, all
financial and other records, pertinent corporate documents of the Company
and cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Holder, attorney or accountant
in connection with such Registration Statement or any post-effective
amendment thereto subsequent to the filing thereof and prior to its
effectiveness;
(viii) if requested by any Holders in connection with such exchange or
sale, promptly include in any Registration Statement or Prospectus,
pursuant to a supplement or post-effective amendment if necessary, such
information as such Holders may reasonably request to have included
therein, including, without limitation, information relating to the "Plan
of Distribution" of the Transfer Restricted Securities; and make all
required filings of such Prospectus supplement or post-effective amendment
as soon as practicable after the Company is notified of the matters to be
included in such Prospectus supplement or post-effective amendment;
(ix) furnish to each Holder in connection with such exchange or
sale, without charge, at least one copy of the Registration Statement, as
first filed with the Commission, and of each amendment thereto, including
all documents incorporated by reference therein and all exhibits (including
exhibits incorporated therein by reference);
(x) deliver to each Holder without charge, as many copies of the
Prospectus (including each preliminary prospectus) and any amendment or
supplement thereto as such Persons reasonably may request; the Company
hereby consents to the use (in accordance with law) of the Prospectus and
any amendment or supplement thereto by each selling Holder in connection
with the offering
10
<PAGE>
and the sale of the Transfer Restricted Securities covered by the
Prospectus or any amendment or supplement thereto;
(xi) upon the request of any Holder, enter into such agreements
(including underwriting agreements) and make such representations and
warranties and take all such other actions in connection therewith in order
to expedite or facilitate the disposition of the Transfer Restricted
Securities pursuant to any applicable Registration Statement contemplated
by this Agreement as may be reasonably requested by any Holder in
connection with any sale or resale pursuant to any applicable Registration
Statement. In such connection, the Company shall:
(A) upon request of any Holder, furnish (or in the case of
paragraphs (2) and (3), use its best efforts to cause to be furnished)
to each Holder, upon Consummation of the Exchange Offer or upon the
effectiveness of the Shelf Registration Statement, as the case may be:
(1) a certificate, dated such date, signed on behalf of the
Company by (x) the President or any Vice President and (y) a
principal financial or accounting officer of the Company,
confirming, as of the date thereof, the matters set forth in
Sections 7(b), (c) and (d) of the Purchase Agreement and such
other similar matters as such Holders may reasonably request;
(2) an opinion, dated the date of Consummation of the
Exchange Offer or the date of effectiveness of the Shelf
Registration Statement, as the case may be, of counsel for the
Company covering matters similar to those set forth in paragraph
(g) of Section 7 of the Purchase Agreement and such other matter
as such Holder may reasonably request, and in any event including
a statement to the effect that such counsel has participated in
conferences with officers and other representatives of the
Company, representatives of the independent public accountants
for the Company and have considered the matters required to be
stated therein and the statements contained therein, although
such counsel has not independently verified the accuracy,
completeness or fairness of such statements; and that such
counsel advises that, on the basis of the foregoing (relying as
to materiality to the extent such counsel deems appropriate upon
the statements of officers and other representatives of the
Company) and without independent check or verification), no facts
came to such counsel's attention that caused such counsel to
believe that the applicable Registration Statement, at the time
such Registration Statement or any post-effective amendment
thereto became effective and, in the case of the Exchange Offer
Registration Statement, as of the date of Consummation of the
Exchange Offer, contained an untrue statement of a material fact
or omitted to state a material fact required to be stated therein
or necessary to make the statements therein not misleading, or
that the Prospectus contained in such Registration Statement as
of its date and, in the case of the opinion dated the date of
Consummation of the Exchange Offer, as of the date of
Consummation, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which
they were made, not misleading. Without limiting the foregoing,
such counsel may state further that such counsel assumes no
responsibility for, and has not independently verified, the
accuracy, completeness or fairness of the financial statements,
notes and schedules and other financial data included in any
11
<PAGE>
Registration Statement contemplated by this Agreement or the
related Prospectus; and
(3) a customary comfort letter, dated the date of
Consummation of the Exchange Offer, or as of the date of
effectiveness of the Shelf Registration Statement, as the case
may be, from the Company's independent accountants, in the
customary form and covering matters of the type customarily
covered in comfort letters to underwriters in connection with
underwritten offerings, and affirming the matters set forth in
the comfort letters delivered pursuant to Section 7(o) of the
Purchase Agreement; and
(B) deliver such other documents and certificates as may be
reasonably requested by the selling Holders to evidence compliance
with the matters covered in clause (A) above and with any customary
conditions contained in the any agreement entered into by the Company
pursuant to this clause (xi);
(xii) prior to any public offering of Transfer Restricted Securities,
cooperate with the selling Holders and their counsel in connection with the
registration and qualification of the Transfer Restricted Securities under
the securities or Blue Sky laws of such jurisdictions as the selling
Holders may request and do any and all other acts or things necessary or
advisable to enable the disposition in such jurisdictions of the Transfer
Restricted Securities covered by the applicable Registration Statement;
provided, however, that the Company shall not be required to register or
qualify as a foreign corporation where it is not now so qualified or to
take any action that would subject it to the service of process in suits or
to taxation, other than as to matters and transactions relating to the
Registration Statement, in any jurisdiction where it is not now so subject;
(xiii) issue, upon the request of any Holder of Preferred Stock or
Exchange Debentures covered by any Shelf Registration Statement
contemplated by this Agreement, New Preferred Stock or New Exchange
Debentures, as the case may be, having an aggregate liquidation preference
or an aggregate principal amount equal to the aggregate liquidation
preference of Preferred Stock or aggregate principal amount of Exchange
Debentures, as the case may be, surrendered to the Company by such Holder
in exchange therefor or being sold by such Holder; such New Preferred Stock
or New Exchange Debentures, as the case may be, to be registered in the
name of such Holder or in the name of the purchaser(s) of such Preferred
Stock or Exchange Debentures, as the case may be; in return, the Preferred
Stock or the Exchange Debentures, as the case may be, held by such Holder
shall be surrendered to the Company for cancellation;
(xiv) in connection with any sale of Transfer Restricted Securities
that will result in such securities no longer being Transfer Restricted
Securities, cooperate with the Holders to facilitate the timely preparation
and delivery of certificates representing Transfer Restricted Securities to
be sold and not bearing any restrictive legends; and to register such
Transfer Restricted Securities in such denominations and such names as the
selling Holders may request at least two Business Days prior to such sale
of Transfer Restricted Securities;
(xv) use its best efforts to cause the disposition of the Transfer
Restricted Securities covered by the 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 Transfer Restricted Securities, subject
to the proviso contained in clause (xii) above;
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(xvi) provide a CUSIP number for all Transfer Restricted Securities
not later than the effective date of a Registration Statement covering such
Transfer Restricted Securities and provide the Trustee under the Indenture
with printed certificates for the Transfer Restricted Securities which are
in a form eligible for deposit with the Depository Trust Company;
(xvii) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make generally available to
its security holders with regard to any applicable Registration Statement,
as soon as practicable, a consolidated earnings statement meeting the
requirements of Rule 158 (which need not be audited) covering a
twelve-month period beginning after the effective date of the Registration
Statement (as such term is defined in paragraph (c) of Rule 158 under the
Act);
(xviii) cause the Indenture to be qualified under the TIA not later
than the effective date of the first Registration Statement required by
this Agreement and, in connection therewith, cooperate with the Trustee and
the Holders to effect such changes to the Indenture as may be required for
such Indenture to be so qualified in accordance with the terms of the TIA;
and execute and use its best efforts to cause the Trustee to execute, all
documents that may be required to effect such changes and all other forms
and documents required to be filed with the Commission to enable such
Indenture to be so qualified in a timely manner; and
(xix) provide promptly to each Holder, upon request, each document
filed with the Commission pursuant to the requirements of Section 13 or
Section 15(d) of the Exchange Act.
(d) RESTRICTIONS ON HOLDERS. Each Holder agrees by acquisition of a
Transfer Restricted Security that, upon receipt of the notice referred to in
Section 6(c)(iii)(C) or any notice from the Company of the existence of any fact
of the kind described in Section 6(c)(iii)(D) hereof (in each case, a
"SUSPENSION NOTICE"), such Holder will forthwith discontinue disposition of
Transfer Restricted Securities pursuant to the applicable Registration Statement
until (i) such Holder has received copies of the supplemented or amended
Prospectus contemplated by Section 6(c)(iv) hereof, or (ii) such Holder is
advised in writing by the Company that the use of the Prospectus may be resumed,
and has received copies of any additional or supplemental filings that are
incorporated by reference in the Prospectus (in each case, the "RECOMMENCEMENT
DATE"). Each Holder receiving a Suspension Notice hereby agrees that it will
either (i) destroy any Prospectuses, other than permanent file copies, then in
such Holder's possession which have been replaced by the Company with more
recently dated Prospectuses or (ii) 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 Transfer Restricted Securities that
was current at the time of receipt of the Suspension Notice. The time period
regarding the effectiveness of such Registration Statement set forth in Section
3 or 4 hereof, as applicable, shall be extended by a number of days equal to the
number of days in the period from and including the date of delivery of the
Suspension Notice to the date of delivery of the Recommencement Date.
SECTION 7. REGISTRATION EXPENSES
(a) All expenses incident to the Company's performance of or compliance
with this Agreement will be borne by the Company, regardless of whether a
Registration Statement becomes effective, including without limitation: (i) all
registration and filing fees and expenses; (ii) all fees and expenses of
compliance with federal securities and state Blue Sky or securities laws; (iii)
all expenses of printing (including printing certificates for the New Preferred
Stock or the New Exchange Debentures, as the case may be, to be issued in the
Exchange Offer and printing of Prospectuses), messenger and delivery services
and telephone; (iv) all fees and disbursements of counsel for the Company and
the Holders of Transfer Restricted Securities; (v) all
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application and filing fees in connection with listing the New Preferred Stock
or the New Exchange Debentures, as the case may be, on a national securities
exchange or automated quotation system pursuant to the requirements hereof; and
(vi) all fees and disbursements of independent certified public accountants of
the Company (including the expenses of any special audit and comfort letters
required by or incident to such performance).
The Company will, in any event, bear its internal expenses (including,
without limitation, all salaries and expenses of its officers and employees
performing legal or accounting duties), the expenses of any annual audit and the
fees and expenses of any Person, including special experts, retained by the
Company.
(b) In connection with any Registration Statement required by this
Agreement (including, without limitation, the Exchange Offer Registration
Statement and the Shelf Registration Statement), the Company will reimburse the
Initial Purchasers and the Holders of Transfer Restricted Securities being
tendered into the Exchange Offer and/or selling such Transfer Restricted
Securities pursuant to the "Plan of Distribution" contained in the Exchange
Offer Registration Statement or the Shelf Registration Statement, as applicable,
for the reasonable fees and disbursements of not more than one counsel, who
shall be Latham & Watkins, unless another firm shall be chosen by the Holders of
a majority in principal amount of the Transfer Restricted Securities for whose
benefit such Registration Statement is being prepared.
SECTION 8 INDEMNIFICATION
(a) The Company agrees to indemnify and hold harmless each Holder, its
directors, officers and each Person, if any, who controls such Holder (within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act), from
and against any and all losses, claims, damages, liabilities, judgments,
(including without limitation, any legal or other expenses incurred in
connection with investigating or defending any matter, including any action that
could give rise to any such losses, claims, damages, liabilities or judgments)
caused by any untrue statement or alleged untrue statement of a material fact
contained in any Registration Statement, preliminary prospectus or Prospectus
(or any amendment or supplement thereto) provided by the Company to any Holder
or any prospective purchaser of Preferred Stock, New Preferred Stock, Exchange
Debentures or New Exchange Debentures, as the case may be, or caused by 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,
except insofar as such losses, claims, damages, liabilities or judgments are
caused by an untrue statement or omission or alleged untrue statement or
omission that is based upon information relating to any of the Holders furnished
in writing to the Company by any of the Holders.
(b) Each Holder of Transfer Restricted agrees, severally and not jointly,
to indemnify and hold harmless the Company and its directors and officers, and
each person, if any, who controls (within the meaning of Section 15 of the Act
or Section 20 of the Exchange Act) the Company to the same extent as the
foregoing indemnity from the Company set forth in section (a) above, but only
with reference to information relating to such Holder furnished in writing to
the Company by such Holder expressly for use in any Registration Statement. In
no event shall any Holder, its directors, officers or any Person who controls
such Holder be liable or responsible for any amount in excess of the amount by
which the total amount received by such Holder with respect to its sale of
Transfer Restricted Securities pursuant to a Registration Statement exceeds (i)
the amount paid by such Holder for such Transfer Restricted Securities and (ii)
the amount of any damages that such Holder, its directors, officers or any
Person who controls such Holder has otherwise been required to pay by reason of
such untrue or alleged untrue statement or omission or alleged omission.
(c) In case any action shall be commenced involving any person in respect
of which indemnity may be sought pursuant to Section 8(a) or 8(b) (the
"INDEMNIFIED PARTY"), the indemnified party shall promptly notify the person
against whom such indemnity may be sought (the "INDEMNIFYING PERSON") in
14
<PAGE>
writing and the indemnifying party shall assume the defense of such action,
including the employment of counsel reasonably satisfactory to the indemnified
party and the payment of all fees and expenses of such counsel, as incurred
(except that in the case of any action in respect of which indemnity may be
sought pursuant to both Sections 8(a) and 8(b), a Holder shall not be required
to assume the defense of such action pursuant to this Section 8(c), but may
employ separate counsel and participate in the defense thereof, but the fees and
expenses of such counsel, except as provided below, shall be at the expense of
the Holder). Any indemnified party shall have the right to employ separate
counsel in any such action and participate in the defense thereof, but the fees
and expenses of such counsel shall be at the expense of the indemnified party
unless (i) the employment of such counsel shall have been specifically
authorized in writing by the indemnifying party, (ii) the indemnifying party
shall have failed to assume the defense of such action or employ counsel
reasonably satisfactory to the indemnified party or (iii) the named parties to
any such action (including any impleaded parties) include both the indemnified
party and the indemnifying party, and the indemnified party shall have been
advised by such counsel that there may be one or more legal defenses available
to it which are different from or additional to those available to the
indemnifying party (in which case the indemnifying party shall not have the
right to assume the defense of such action on behalf of the indemnified party).
In any such case, the indemnifying party shall not, in connection with any one
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the fees and expenses of more than one separate firm of attorneys (in
addition to any local counsel) for all indemnified parties and all such fees and
expenses shall be reimbursed as they are incurred. Such firm shall be
designated in writing by a majority of the Holders, in the case of the parties
indemnified pursuant to Section 8(a), and by the Company, in the case of parties
indemnified pursuant to Section 8(b). The indemnifying party shall indemnify and
hold harmless the indemnified party from and against any and all losses, claims,
damages, liabilities and judgments by reason of any settlement of any action (i)
effected with its written consent or (ii) effected without its written consent
if the settlement is entered into more than twenty business days after the
indemnifying party shall have received a request from the indemnified party for
reimbursement for the fees and expenses of counsel (in any case where such fees
and expenses are at the expense of the indemnifying party) and, prior to the
date of such settlement, the indemnifying party shall have failed to comply with
such reimbursement request. No indemnifying party shall, without the prior
written consent of the indemnified party, effect any settlement or compromise
of, or consent to the entry of judgment with respect to, any pending or
threatened action in respect of which the indemnified party is or could have
been a party and indemnity or contribution may be or could have been sought
hereunder by the indemnified party, unless such settlement, compromise or
judgment (i) includes an unconditional release of the indemnified party from all
liability on claims that are or could have been the subject matter of such
action and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of the indemnified party.
(d) To the extent that the indemnification provided for in this Section 8
is unavailable to an indemnified party in respect of any losses, claims,
damages, liabilities or judgments referred to therein, then each indemnifying
party, in lieu of indemnifying such indemnified party, shall contribute to the
amount paid or payable by such indemnified party as a result of such losses,
claims, damages, liabilities or judgments (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company, on the one
hand, and the Holders, on the other hand, from their sale of Transfer Restricted
Securities or (ii) if the allocation provided by clause 8(d)(i) is not permitted
by applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause 8(d)(i) above but also the relative
fault of the Company, on the one hand, and of the Holder, on the other hand, in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative fault of the Company, on the one hand,
and of the Holder, on the other hand, shall 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
15
<PAGE>
supplied by the Company, on the one hand, or by the Holder, on the other hand,
and the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such statement or omission. The amount paid
or payable by a party as a result of the losses, claims, damages, liabilities
and judgments referred to above shall be deemed to include, subject to the
limitations set forth in the second paragraph of Section 8(a), any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim.
The Company and each Holder agree that it would not be just and equitable
if contribution pursuant to this Section 8(d) were determined by pro rata
allocation (even if the Holders were treated as one entity for such purpose) or
by any other method of allocation which does not take account of the equitable
considerations referred to in the immediately preceding paragraph. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or judgments referred to in the immediately preceding
paragraph shall be deemed to include, subject to the limitations set forth
above, any legal or other expenses reasonably incurred by such indemnified party
in connection with investigating or defending any matter, including any action
that could have given rise to such losses, claims, damages, liabilities or
judgments. Notwithstanding the provisions of this Section 8, no Holder, nor its
directors, its officers or any Person, if any, who controls such Holder shall be
required to contribute, in the aggregate, any amount in excess of the amount by
which the total received by such Holder with respect to the sale of Transfer
Restricted Securities pursuant to a Registration Statement exceeds (i) the
amount paid by such Holder for such Transfer Restricted Securities and (ii) the
amount of any damages which such Holder has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission or alleged
omission. 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. The Holders'
obligations to contribute pursuant to this Section 8(c) are several in
proportion to the respective principal amount of Transfer Restricted Securities
held by each Holder hereunder and not joint.
SECTION 9. RULE 144A and RULE 144
The Company agrees with each Holder, for so long as any Transfer Restricted
Securities remain outstanding and during any period in which the Company (i) is
not subject to Section 13 or 15(d) of the Exchange Act, to make available, upon
request of any Holder, to such Holder or beneficial owner of Transfer Restricted
Securities in connection with any sale thereof and any prospective purchaser of
such Transfer Restricted Securities designated by such Holder or beneficial
owner, the information required by Rule 144A(d)(4) under the Act in order to
permit resales of such Transfer Restricted Securities pursuant to Rule 144A, and
(ii) is subject to Section 13 or 15 (d) of the Exchange Act, to make all filings
required thereby in a timely manner in order to permit resales of such Transfer
Restricted Securities pursuant to Rule 144.
SECTION 10. MISCELLANEOUS
(a) REMEDIES. The Company acknowledges and agrees that any failure by the
Company to comply with its obligations under Sections 3 and 4 hereof may result
in material irreparable injury to the Initial Purchasers or the Holders for
which there is no adequate remedy at law, that it will not be possible to
measure damages for such injuries precisely and that, in the event of any such
failure, the Initial Purchasers or any Holder may obtain such relief as may be
required to specifically enforce the Company's obligations under Sections 3 and
4 hereof. The Company further agrees to waive the defense in any action for
specific performance that a remedy at law would be adequate.
(b) NO INCONSISTENT AGREEMENTS. The Company will not, on or after the
date of this Agreement, enter into any agreement with respect to its securities
that is inconsistent with the rights granted to the
16
<PAGE>
Holders in this Agreement or otherwise conflicts with the provisions hereof.
The Company has not previously entered into any agreement granting any
registration rights with respect to its securities to any Person. The rights
granted to the Holders hereunder do not in any way conflict with and are not
inconsistent with the rights granted to the holders of the Company's securities
under any agreement in effect on the date hereof.
(c) AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified or supplemented, and waivers or consents to or departures from
the provisions hereof may not be given unless (i) in the case of Section 5
hereof and this Section 10(c)(i), the Company has obtained the written consent
of Holders of all outstanding Transfer Restricted Securities and (ii) in the
case of all other provisions hereof, the Company has obtained the written
consent of Holders of a majority of the outstanding principal amount of Transfer
Restricted Securities (excluding Transfer Restricted Securities held by the
Company or its Affiliates). Notwithstanding the foregoing, a waiver or consent
to departure from the provisions hereof that relates exclusively to the rights
of Holders whose Transfer Restricted Securities are being tendered pursuant to
the Exchange Offer, and that does not affect directly or indirectly the rights
of other Holders whose Transfer Restricted Securities are not being tendered
pursuant to such Exchange Offer, may be given by the Holders of a majority of
the outstanding principal amount of Transfer Restricted Securities subject to
such Exchange Offer.
(d) THIRD PARTY BENEFICIARY. The Holders shall be third party
beneficiaries to the agreements made hereunder between the Company, on the one
hand, and the Initial Purchasers, on the other hand, and shall have the right to
enforce such agreements directly to the extent they may deem such enforcement
necessary or advisable to protect its rights or the rights of Holders hereunder.
(e) NOTICES. All notices and other communications provided for or
permitted hereunder shall be made in writing by hand-delivery, first-class mail
(registered or certified, return receipt requested), telex, telecopier, or air
courier guaranteeing overnight delivery:
(i) if to a Holder, at the address set forth on the records of the
Registrar under the Indenture, with a copy to the Registrar under the
Indenture; and
(ii) if to the Company:
Cluett American Corp.
48 West 38th Street
New York, NY 10036
Telecopier No.: (212) 883-4021
Attention: Steven J. Kaufman, General Counsel
With a copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3909
Telecopier No.: (212) 455-2502
Attention: Timothy M. Clark
All such notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage
17
<PAGE>
prepaid, if mailed; when receipt acknowledged, if telecopied; and on the next
business day, if timely delivered to an air courier guaranteeing overnight
delivery.
Copies of all such notices, demands or other communications shall be
concurrently delivered by the Person giving the same to the Trustee at the
address specified in the Indenture.
(f) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the benefit of
and be binding upon the successors and assigns of each of the parties, including
without limitation and without the need for an express assignment, subsequent
Holders; provided, that nothing herein shall be deemed to permit any assignment,
transfer or other disposition of Transfer Restricted Securities in violation of
the terms hereof or of the Purchase Agreement or the Indenture. If any
transferee of any Holder shall acquire Transfer Restricted Securities in any
manner, whether by operation of law or otherwise, such Transfer Restricted
Securities shall be held subject to all of the terms of this Agreement, and by
taking and holding such Transfer Restricted Securities such Person shall be
conclusively deemed to have agreed to be bound by and to perform all of the
terms and provisions of this Agreement, including the restrictions on resale set
forth in this Agreement and, if applicable, the Purchase Agreement, and such
Person shall be entitled to receive the benefits hereof.
(g) COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(h) HEADINGS. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
(i) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK, WITHOUT REGARD TO THE
CONFLICT OF LAW RULES THEREOF.
(j) SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable, the validity, legality and enforceability of
any such provision in every other respect and of the remaining provisions
contained herein shall not be affected or impaired thereby.
(k) ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect of
the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein
with respect to the registration rights granted with respect to the Transfer
Restricted Securities. This Agreement supersedes all prior agreements and
understandings between the parties with respect to such subject matter.
18
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
CLUETT AMERICAN CORP.
By: /s/Bryan P. Marsal
-----------------------------------
Name: Bryan P. Marsal
Title: President
NATIONSBANC MONTGOMERY SECURITIES LLC
By: /s/ Gary R. Wolfe
-----------------------------------
Name: Gary R. Wolfe
Title: Managing Director
NATWEST CAPITAL MARKETS LIMITED
By: /s/ A. Irby
-----------------------------------
Name: A. Irby
Title: Director
<PAGE>
Exhibit 10.1
[EXECUTION COPY]
CREDIT AGREEMENT
Dated as of May 18, 1998
among
CLUETT AMERICAN CORP.,
as Borrower,
CLUETT AMERICAN INVESTMENT CORP.,
CLUETT AMERICAN GROUP, INC.
AND
CERTAIN OTHER DIRECT AND INDIRECT SUBSIDIARIES OF THE PARENT
FROM TIME TO TIME PARTY HERETO,
as Guarantors,
THE SEVERAL LENDERS
FROM TIME TO TIME PARTY HERETO,
NATIONSBANK, N. A.,
as Agent,
and
GLEACHER NATWEST INC.,
as Documentation Agent
<PAGE>
TABLE OF CONTENTS
SECTION 1 DEFINITIONS.......................................................1
1.1 Definitions........................................................1
1.2 Computation of Time Periods.......................................31
1.3 Accounting Terms..................................................31
SECTION 2 CREDIT FACILITIES................................................32
2.1 Revolving Loans...................................................32
2.2 Letter of Credit Subfacility......................................34
2.3 Swingline Loan Subfacility........................................39
2.4 Tranche A Term Loan...............................................41
2.5 Tranche B Term Loan...............................................44
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES...................46
3.1 Default Rate......................................................46
3.2 Extension and Conversion..........................................46
3.3 Prepayments.......................................................47
3.4 Termination and Reduction of Commitments..........................49
3.5 Fees..............................................................49
3.6 Capital Adequacy..................................................51
3.7 Limitation on Eurodollar Loans....................................51
3.8 Illegality........................................................51
3.9 Requirements of Law...............................................52
3.10 Treatment of Affected Loans......................................53
3.11 Taxes............................................................53
3.12 Compensation.....................................................55
3.13 Pro Rata Treatment...............................................56
3.14 Sharing of Payments..............................................57
3.15 Payments, Computations, Etc......................................57
3.16 Evidence of Debt.................................................59
SECTION 4 GUARANTY.........................................................60
4.1 The Guaranty......................................................60
4.2 Obligations Unconditional.........................................60
4.3 Reinstatement.....................................................61
4.4 Certain Additional Waivers........................................61
4.5 Remedies..........................................................62
4.6 Rights of Contribution............................................62
4.7 Guarantee of Payment; Continuing Guarantee........................63
SECTION 5 CONDITIONS.......................................................63
5.1 Closing Conditions................................................63
5.2 Conditions to all Extensions of Credit............................69
SECTION 6 REPRESENTATIONS AND WARRANTIES...................................70
6.1 Financial Condition...............................................70
6.2 No Material Change................................................71
6.3 Organization and Good Standing....................................71
6.4 Power; Authorization; Enforceable Obligations.....................71
6.5 No Conflicts......................................................72
6.6 No Default........................................................72
i
<PAGE>
6.7 Ownership.........................................................73
6.8 Indebtedness......................................................73
6.9 Litigation........................................................73
6.10 Taxes............................................................73
6.11 Compliance with Law..............................................73
6.12 ERISA............................................................73
6.13 Subsidiaries.....................................................74
6.14 Governmental Regulations, Etc....................................75
6.15 Purpose of Loans and Letters of Credit...........................76
6.16 Environmental Matters............................................76
6.17 Intellectual Property............................................77
6.18 Solvency.........................................................77
6.19 Investments......................................................77
6.20 Location of Collateral...........................................77
6.21 Disclosure.......................................................78
6.22 Brokers' Fees....................................................78
6.23 Labor Matters....................................................78
6.24 Nature of Business...............................................78
6.25 Year 2000 Compliance.............................................78
SECTION 7 AFFIRMATIVE COVENANTS............................................79
7.1 Information Covenants.............................................79
7.2 Preservation of Existence and Franchises..........................82
7.3 Books and Records.................................................82
7.4 Compliance with Law...............................................82
7.5 Payment of Taxes and Other Indebtedness...........................82
7.6 Insurance.........................................................83
7.7 Maintenance of Property...........................................84
7.8 Performance of Obligations........................................84
7.9 Use of Proceeds...................................................84
7.10 Audits/Inspections...............................................84
7.11 Financial Covenants..............................................84
7.12 Additional Credit Parties........................................86
7.13 Pledged Assets...................................................86
7.14 Furtherance Assurances...........................................87
SECTION 8 NEGATIVE COVENANTS...............................................88
8.1 Indebtedness......................................................88
8.2 Liens.............................................................90
8.3 Nature of Business................................................90
8.4 Consolidation, Merger, Dissolution, etc...........................90
8.5 Asset Dispositions................................................91
8.6 Investments.......................................................91
8.7 Restricted Payments...............................................92
8.8 Prepayments of Indebtedness, etc..................................92
8.9 Transactions with Affiliates......................................93
8.10 Fiscal Year; Organizational Documents............................93
8.11 Limitation on Restricted Actions.................................93
ii
<PAGE>
8.12 Ownership of Subsidiaries; Limitations on Parent and Interco.....94
8.13 Sale Leasebacks..................................................95
8.14 No Further Negative Pledges......................................95
8.15 Designated Senior Indebtedness...................................95
SECTION 9 EVENTS OF DEFAULT................................................96
9.1 Events of Default.................................................96
9.2 Acceleration; Remedies............................................98
SECTION 10 AGENCY PROVISIONS...............................................99
10.1 Appointment, Powers and Immunities...............................99
10.2 Reliance by Agent................................................99
10.3 Defaults........................................................100
10.4 Rights as a Lender..............................................100
10.5 Indemnification.................................................100
10.6 Non-Reliance on Agent and Other Lenders.........................101
10.7 Successor Agent.................................................101
10.8 Documentation Agent.............................................101
SECTION 11 MISCELLANEOUS..................................................102
11.1 Notices.........................................................102
11.2 Right of Set-Off; Adjustments...................................103
11.3 Benefit of Agreement............................................103
11.4 No Waiver; Remedies Cumulative..................................105
11.5 Expenses; Indemnification.......................................106
11.6 Amendments, Waivers and Consents................................106
11.7 Counterparts....................................................108
11.8 Headings........................................................108
11.9 Survival........................................................108
11.10 Governing Law; Submission to Jurisdiction; Venue...............108
11.11 Severability...................................................109
11.12 Entirety.......................................................109
11.13 Binding Effect; Termination....................................109
11.14 Confidentiality................................................110
11.15 Conflict.......................................................110
iii
<PAGE>
SCHEDULES
Schedule 1.1A Scheduled Financial Information
Schedule 1.1B Existing Letters of Credit
Schedule 1.1C Investments
Schedule 1.1D Liens
Schedule 2.1(a) Lenders
Schedule 5.1(c)(i) Form of Opinion of Simpson Thacher & Bartlett
Schedule 5.1(c)(ii) Form of Local Counsel Legal Opinion
Schedule 5.1(c)(iii) Form of Opinion of Canadian Counsel
Schedule 6.4 Required Consents, Authorizations, Notices
and Filings
Schedule 6.9 Litigation
Schedule 6.12 ERISA
Schedule 6.13 Subsidiaries
Schedule 6.16 Environmental Disclosures
Schedule 6.17 Intellectual Property
Schedule 6.20(a) Mortgaged Properties
Schedule 6.20(b) Collateral Locations
Schedule 6.20(c) Chief Executive Offices/Principal Places
of Business
Schedule 6.23 Labor Matters
Schedule 7.6 Insurance
Schedule 8.1 Indebtedness
EXHIBITS
Exhibit 1.1A Form of Pledge Agreement
Exhibit 1.1B Form of Security Agreement
Exhibit 2.1(b)(i) Form of Notice of Borrowing
Exhibit 2.1(e) Form of Revolving Note
Exhibit 2.3(d) Form of Swingline Note
Exhibit 2.4(f) Form of Tranche A Term Note
Exhibit 2.5(f) Form of Tranche B Term Note
Exhibit 3.2 Form of Notice of Extension/Conversion
Exhibit 7.1(c) Form of Officer's Compliance Certificate
Exhibit 7.12 Form of Joinder Agreement
Exhibit 11.3(b) Form of Assignment and Acceptance
iv
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of May 18, 1998 (as amended, modified,
restated or supplemented from time to time, the "Credit Agreement"), is by and
among CLUETT AMERICAN CORP., a Delaware corporation (the "Borrower"), CLUETT
AMERICAN INVESTMENT CORP., a Delaware corporation (the "Parent"), CLUETT
AMERICAN GROUP, INC., a Delaware corporation ("Interco"), the Subsidiary
Guarantors (as defined herein), the Lenders (as defined herein), NATIONSBANK, N.
A., as agent for the Lenders (in such capacity, the "Agent"), and GLEACHER
NATWEST INC., as documentation agent for the Lenders (in such capacity, the
"Documentation Agent").
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Lenders provide a
$160,000,000 credit facility for the purposes hereinafter set forth; and
WHEREAS, the Lenders have agreed to make the requested credit facility
available to the Borrower on the terms and conditions hereinafter set forth;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 Definitions.
As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:
"Acquisition", by any Person, means the acquisition by such Person
of the majority of the Equity Interests, all or substantially all of the
Property or a line of business or division of another Person, whether or
not involving a merger or consolidation with such other Person.
"Additional Credit Party" means each Person that becomes a
Subsidiary Guarantor after the Closing Date by execution of a Joinder
Agreement.
"Adjusted Base Rate" means the Base Rate plus the Applicable
Percentage.
"Adjusted Eurodollar Rate" means the Eurodollar Rate plus the
Applicable Percentage.
1
<PAGE>
"Affiliate" means, with respect to any Person, any other Person
directly or indirectly controlling or controlled by or under direct or
indirect common control with such Person. For purposes of this definition,
"control" (including, with correlative meanings, the terms "controlling",
"controlled by" and "under common control with"), when used with respect
to any Person, means the possession, directly or indirectly, of the power
to direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by agreement
or otherwise; and the terms "controlling" and "controlled" have meanings
correlative to the foregoing; provided, that beneficial ownership of 10%
or more of the Voting Stock of a Person shall be deemed to be control.
"Agency Services Address" means NationsBank, N. A., NC1-001-15-04,
101 North Tryon Street, Charlotte, North Carolina 28255, Attn: Agency
Services, or such other address as may be identified by written notice
from the Agent to the Borrower.
"Agent" shall have the meaning assigned to such term in the heading
hereof, together with any successors or assigns.
"Agent's Fee Letter" means that certain letter agreement, dated as
of March 30, 1998, between the Agent and the Sponsor, as amended,
modified, restated or supplemented from time to time.
"Agent's Fees" shall have the meaning assigned to such term in
Section 3.5(d).
"Applicable Lending Office" means, for each Lender, the office of
such Lender (or of an Affiliate of such Lender) as such Lender may from
time to time specify to the Agent and the Borrower by written notice as
the office by which its Eurodollar Loans are made and maintained.
"Applicable Percentage" means, for purposes of calculating the
applicable interest rate for any day for any Revolving Loan, any Tranche A
Term Loan or any Tranche B Term Loan, the applicable rate of the Unused
Fee for any day for purposes of Section 3.5(b), the applicable rate of the
Standby Letter of Credit Fee for any day for purposes of Section 3.5(c)(i)
or the applicable rate of the Trade Letter of Credit Fee for any day for
purposes of Section 3.5(c)(ii), the appropriate applicable percentage
corresponding to the Senior Leverage Ratio in effect as of the most recent
Calculation Date:
2
<PAGE>
<TABLE>
<CAPTION>
=================================================================================================
Applicable
Percentage For
Revolving Loans Applicable
and Tranche A Term Percentage For
Loan Tranche B Term Loan
-------------------- -------------------
Applicable Applicable Applicable
Percentage Percentage Percentage
Senior For Base Base For Standby for Trade
Pricing Leverage Unused Eurodollar Rate Eurodollar Rate Letter of Letter of
Level Ratio Fee Loans Loans Loans Loans Credit Fee Credit Fee
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
I > 2.50 1/2% 2-1/4% 1-1/4% 2-1/2% 1-1/2% 2-1/4% 1-1/8%
to 1.00
- -------------------------------------------------------------------------------------------------
II less than 1/2% 2% 1% 2-1/4% 1-1/4% 2% 1%
or equal
to 2.50
to
1.00
but greater
than or
equal to
2.00
to 1.00
- -------------------------------------------------------------------------------------------------
III < 2.00 3/8% 1-3/4% 3/4% 2% 1% 1-3/4% 7/8%
to
1.00
but greater
than or
equal to
1.75
to 1.00
- -------------------------------------------------------------------------------------------------
IV < 1.75 3/8% 1-1/2% 1/2% 2% 1% 1-1/2% 3/4%
to 1.00
=================================================================================================
</TABLE>
The Applicable Percentages shall be determined and adjusted quarterly on
the date (each a "Calculation Date") five Business Days after the date by
which the Credit Parties are required to provide the officer's certificate
in accordance with the provisions of Section 7.1(c) for the most recently
ended fiscal quarter of the Consolidated Parties or, in the case of the
fourth fiscal quarter of any fiscal year, five Business Days after such
earlier date as the Credit Parties shall have delivered to the Agent and
the Lenders financial statements for such fiscal quarter meeting the
requirements of Section 7.1(b) together with a related officer's
certificate meeting the requirements of Section 7.1(c)); provided,
however, that (i) the initial Applicable Percentages shall be based on
Pricing Level I (as shown above) and shall remain at Pricing Level I until
the first Calculation Date occurring after the date that is 6 months
following the Closing Date and, at such Calculation Date and thereafter,
the Pricing Level shall be determined by the Senior Leverage Ratio as of
the last day of the most recently ended fiscal quarter of the Consolidated
Parties preceding the applicable Calculation Date, (ii) if the Credit
Parties fail to provide the officer's certificate to the Agency Services
Address as required by Section 7.1(c) for the last day of the most
recently ended fiscal quarter of the Consolidated Parties preceding the
applicable Calculation Date, the Applicable Percentage from such
Calculation Date shall be based on Pricing Level I until such time as an
appropriate officer's certificate is provided, whereupon the Pricing Level
shall be determined by the Senior Leverage Ratio as of the last day of the
most recently ended fiscal quarter of the Consolidated Parties preceding
such Calculation Date and (iii) if the Applicable Percentages determined
based on the audited financial statements
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(and accompanying officer's certificate) for any fiscal year shall be at a
different Pricing Level than the Pricing Level of the Applicable
Percentages determined based on unaudited financial statements (and
accompanying officer's certificate), if any, for the fourth fiscal quarter
of any fiscal year delivered by the Credit Parties pursuant to this
definition of "Applicable Percentage", then (x) the Pricing Level
determined based on the audited financial statements (and accompanying
officer's certificate) shall control and (y) the Borrower shall promptly
pay to the Agent for the account of each affected Lender the amount of
additional interest and Fees, if any, which would have accrued hereunder
for the period that the Applicable Percentages were based on such
unaudited financial statements (and accompanying officer's certificate)
had the Applicable Percentages been based on such audited financial
statements (and accompanying officer's certificate). Each Applicable
Percentage shall be effective from one Calculation Date until the next
Calculation Date. Any adjustment in the Applicable Percentages shall be
applicable to all existing Loans and Letters of Credit as well as any new
Loans and Letters of Credit made or issued.
"Application Period", in respect of any Asset Disposition, shall
have the meaning assigned to such term in Section 8.5.
"Asset Disposition" means the disposition of any or all of the
assets (including without limitation the Equity Interests of a Subsidiary)
of the Parent or any Consolidated Party whether by sale, lease, transfer
or otherwise (including pursuant to any casualty or condemnation event).
The term "Asset Disposition" (a) shall include any "Asset Sale" under the
documents evidencing or governing the Senior Subordinated Debt and (b)
shall not include (i) the sale of inventory in the ordinary course of
business, (ii) the sale or disposition of machinery and equipment no
longer used or useful in the conduct of such Person's business or (iii)
any Equity Issuance.
"Asset Disposition Prepayment Event" means, with respect to any
Asset Disposition other than an Excluded Asset Disposition, the failure of
the Credit Parties to apply (or cause to be applied) the Net Cash Proceeds
of such Asset Disposition to Eligible Reinvestments during the Application
Period for such Asset Disposition.
"Austell Property" means the Borrower's facility located in Austell,
Georgia.
"Austell Transaction" means a collective reference to (i) the
purchase by the Borrower of the Austell Property for an aggregate purchase
price not greater than $3,000,000, (ii) the subsequent sale by the
Borrower of the Austell Property to a non-Affiliate Person for an
aggregate sale price not less than $5,000,000 and (iii) the leasing back
of the Austell Property by the Borrower, as lessee, from such
non-Affiliate Person, as lessor, pursuant to a lease providing for rent
and other conditions taken as a whole which are no less favorable to the
Borrower in any material respect than the agreement in respect of the
Borrower's leasehold interest in the Austell Property as of the Closing
Date.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or replaced from time
to time.
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"Bankruptcy Court" means the United States Bankruptcy Court for the
Southern District of New York.
"Bankruptcy Event" means, with respect to any Person, the occurrence
of any of the following with respect to such Person: (i) a court or
governmental agency having jurisdiction in the premises shall enter a
decree or order for relief in respect of such Person in an involuntary
case under any applicable bankruptcy, insolvency or other similar law now
or hereafter in effect, or appointing a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of such Person or
for any substantial part of its Property or ordering the winding up or
liquidation of its affairs; or (ii) there shall be commenced against such
Person an involuntary case under any applicable bankruptcy, insolvency or
other similar law now or hereafter in effect, or any case, proceeding or
other action for the appointment of a receiver, liquidator, assignee,
custodian, trustee, sequestrator (or similar official) of such Person or
for any substantial part of its Property or for the winding up or
liquidation of its affairs, and such involuntary case or other case,
proceeding or other action shall remain undismissed, undischarged or
unbonded for a period of sixty (60) consecutive days; or (iii) such Person
shall commence a voluntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or consent to
the entry of an order for relief in an involuntary case under any such
law, or consent to the appointment or taking possession by a receiver,
liquidator, assignee, custodian, trustee, sequestrator (or similar
official) of such Person or for any substantial part of its Property or
make any general assignment for the benefit of creditors; or (iv) such
Person shall be unable to, or shall admit in writing its inability to, pay
its debts generally as they become due.
"Base Rate" means, for any day, the rate per annum equal to the
higher of (a) the Federal Funds Rate for such day plus one-half of one
percent (0.5%) and (b) the Prime Rate for such day. Any change in the Base
Rate due to a change in the Prime Rate or the Federal Funds Rate shall be
effective on the effective date of such change in the Prime Rate or
Federal Funds Rate.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Borrower" shall have the meaning assigned to such terms in the
heading hereof, together with any permitted successors or assigns.
"Business Day" means a day other than a Saturday, Sunday or other
day on which commercial banks in Charlotte, North Carolina or New York,
New York are authorized or required by law to close, except that, when
used in connection with a Eurodollar Loan, such day shall also be a day on
which dealings between banks are carried on in Dollar deposits in London,
England.
"Calculation Date" has the meaning set forth in the definition of
"Applicable Percentage" set forth in this Section 1.1.
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"Capital Lease" means, as applied to any Person, any lease of any
Property (whether real, personal or mixed) by that Person as lessee which,
in accordance with GAAP, is or should be accounted for as a capital lease
on the balance sheet of that Person.
"Cash Equivalents" means (a) securities issued or directly and fully
guaranteed or insured by the United States of America or any agency or
instrumentality thereof (provided that the full faith and credit of the
United States of America is pledged in support thereof) having maturities
of not more than twelve months from the date of acquisition, (b) U.S.
Dollar denominated time deposits and certificates of deposit of (i) any
Lender, (ii) any domestic commercial bank of recognized standing having
capital and surplus in excess of $500,000,000 or (iii) any bank whose
short-term commercial paper rating from S&P is at least A-1 or the
equivalent thereof or from Moody's is at least P-1 or the equivalent
thereof (any such bank being an "Approved Bank"), in each case with
maturities of not more than one year from the date of acquisition, (c)
commercial paper and variable or fixed rate notes issued by any Approved
Bank (or by the parent company thereof) or any variable rate notes issued
by, or guaranteed by, any domestic corporation rated A-1 (or the
equivalent thereof) or better by S&P or P-1 (or the equivalent thereof) or
better by Moody's and maturing within one year of the date of acquisition,
(d) repurchase agreements entered into by any Person with a bank or trust
company (including any of the Lenders) or recognized securities dealer
having capital and surplus in excess of $500,000,000 for direct
obligations issued by or fully guaranteed by the United States of America
in which such Person shall have a perfected first priority security
interest (subject to no other Liens) and having, on the date of purchase
thereof, a fair market value of at least 100% of the amount of the
repurchase obligations and (e) Investments, classified in accordance with
GAAP as current assets, in money market investment programs registered
under the Investment Company Act of 1940, as amended, which are
administered by reputable financial institutions having capital of at
least $500,000,000 and the portfolios of which are limited to Investments
of the character described in the foregoing subdivisions (a) through (d).
"Change of Control" means any of the following events: (a) the
failure of the Parent to own, directly or indirectly, all of the Voting
Stock of Interco and all of the Voting Stock of the Borrower, (b) prior to
a Qualifying IPO, (1) the failure of the Sponsor (A) to own beneficially,
directly or indirectly, at least 2/3 of the outstanding capital stock of
the Parent initially acquired by the Sponsor pursuant to the
Recapitalization or (B) to have the right, directly or indirectly, by
beneficial ownership, contract or otherwise, to elect at least a majority
in number of the members of the Parent's Board of Directors or (2) less
than a majority in number of the sitting members of the Parent's Board of
Directors shall have been elected by the Sponsor, (c) after a Qualifying
IPO, (1) the failure of the Sponsor to own beneficially, directly or
indirectly, at least 30% of the outstanding Voting Stock of the IPO Issuer
or (2) a person or any group, and any affiliate of any such person other
than the Sponsor shall beneficially own, directly or indirectly, an amount
of the outstanding Voting Stock of the IPO Issuer entitled to 20% or more
of the voting power of all the outstanding Voting Stock of the IPO Issuer,
(d) during any period of up to 24 consecutive months, commencing after the
Closing Date, individuals who at the beginning of such 24 month period
were directors of the Parent (or, after a Qualifying IPO, the IPO Issuer)
(together with any new director whose election by the Parent's (or the
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IPO Issuer's, as applicable) Board of Directors or whose nomination for
election by the Parent's (or the IPO Issuer's, as applicable) shareholders
was approved by a vote of at least two-thirds of the directors then still
in office who either were directors at the beginning of such period or
whose election or nomination for election was previously so approved)
cease for any reason to constitute a majority of the directors of the
Parent (or the IPO Issuer, as applicable) then in office or (e) the
occurrence of a "Change of Control" under any of the Recapitalization
Documents. As used herein, "beneficial ownership" shall have the meaning
provided in Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934.
"Closing Date" means the date hereof.
"Code" means the Internal Revenue Code of 1986, as amended, and any
successor statute thereto, as interpreted by the rules and regulations
issued thereunder, in each case as in effect from time to time. References
to sections of the Code shall be construed also to refer to any successor
sections.
"Collateral" means a collective reference to the collateral which is
identified in, and at any time will be covered by, the Collateral
Documents.
"Collateral Documents" means a collective reference to the Security
Agreement, the Pledge Agreement, the Mortgage Instruments and such other
documents executed and delivered in connection with the attachment and
perfection of the Agent's security interests and liens
arising thereunder.
"Commitment" means (i) with respect to each Lender, the Revolving
Commitment of such Lender, the Tranche A Term Loan Commitment of such
Lender and the Tranche B Term Loan Commitment of such Lender, (ii) with
respect to the Swingline Lender, the Swingline Commitment and (iii) with
respect to the Issuing Lender, the LOC Commitment.
"Confirmation Order" means the final order of the Bankruptcy Court
dated March 31, 1998 confirming the Reorganization Plan.
"Consolidated Capital Expenditures" means, for any period, all
capital expenditures of the Consolidated Parties on a consolidated basis
for such period other than (i) any capital expenditure financed with the
proceeds of any Asset Disposition or Equity Issuance and (ii) any capital
expenditure constituting an Acquisition (or any portion thereof), all as
determined in accordance with GAAP.
"Consolidated Cash Taxes" means, for any period, the aggregate of
all taxes of the Consolidated Parties on a consolidated basis for such
period, as determined in accordance with GAAP, to the extent the same are
paid in cash during such period; provided, however, that Consolidated Cash
Taxes for the fiscal quarters ending June 30, 1998, September 30, 1998 and
December 31, 1998 shall be equal to the sum of (i) the amount determined
pursuant to the first clause of this definition for the one-quarter
period, two-quarter period or three-quarter period, respectively, then
ended plus (ii) the amount indicated for Consolidated Cash Taxes for such
date on Schedule 1.1A.
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"Consolidated EBITDA" means, for any period, the sum of (i)
Consolidated Net Income for such period, plus (ii) an amount which, in the
determination of Consolidated Net Income for such period, has been
deducted for (A) Consolidated Interest Expense, (B) total federal, state,
local and foreign income, value added and similar taxes, (C) depreciation
and amortization expense, (D) letter of credit fees, (E) non-cash expenses
resulting from the grant of stock and stock options to employees of the
Parent, the Borrower or any of their respective Subsidiaries pursuant to a
written plan or agreement and (F) step-ups in inventory valuation as a
result of purchase accounting for Permitted Acquisitions, all as
determined in accordance with GAAP; provided, however, that Consolidated
EBITDA for the fiscal quarters ending June 30, 1998, September 30, 1998
and December 31, 1998 shall be equal to the sum of (i) the amount
determined pursuant to the first clause of this definition for the
one-quarter period, two-quarter period or three-quarter period,
respectively, then ended plus (ii) the aggregate Consolidated EBITDA
Adjustment for each fiscal quarter occurring during such period.
"Consolidated EBITDA Adjustment" means, (i) for the fiscal quarters
ending September 30, 1997, December 31, 1997 and March 28, 1998, the
amount indicated for Consolidated EBITDA for such fiscal quarters on
Schedule 1.1A and (ii) for any fiscal quarter thereafter, the amount, if
any, of reorganization charges taken during such fiscal quarter in respect
of (A) up to $3.3 million of facility closing and re-engineering costs
accrued by the Borrower and its Subsidiaries prior to the Closing Date,
(B) up to $550,000 of losses accrued by the Borrower and its Subsidiaries
prior to the Closing Date associated with (1) the Canadian retail
operations the Borrower and its Subsidiaries and (2) the Mexican and
Guatemalan operations of the Borrower and its Subsidiaries, (C) up to $4.0
million of bankruptcy reorganization costs incurred by the Borrower and
its Subsidiaries on or prior to the Closing Date and (D) the costs and
expenses of the Parent, the Borrower and its Subsidiaries incurred in
connection with the Recapitalization, in each case calculated in
accordance with GAAP.
"Consolidated Interest Expense" means, for any period, interest
expense (including the amortization of debt discount and premium, the
interest component under Capital Leases and the implied interest component
under Synthetic Leases, but excluding amortization of deferred financing
costs) of the Consolidated Parties on a consolidated basis for such
period, as determined in accordance with GAAP; provided, however, that
Consolidated Interest Expense for the fiscal quarters ending June 30,
1998, September 30, 1998 and December 31, 1998 shall be equal to the sum
of (i) the amount determined pursuant to the first clause of this
definition for the one-quarter period, two-quarter period or three-quarter
period, respectively, then ended plus (ii) the amount indicated for
Consolidated Interest Expense for such date on Schedule 1.1A.
"Consolidated Net Income" means, for any period, net income
(excluding extraordinary items) after taxes for such period of the
Consolidated Parties on a consolidated basis, as determined in accordance
with GAAP.
"Consolidated Parties" means a collective reference to the Borrower
and its Subsidiaries, and "Consolidated Party" means any one of them.
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"Consolidated Scheduled Funded Debt Payments" means, as of the end
of each fiscal quarter of the Consolidated Parties, for the Consolidated
Parties on a consolidated basis, the sum of all scheduled payments of
principal on Funded Indebtedness for the applicable period ending on such
date (including the principal component of payments due on Capital Leases
during the applicable period ending on such date); it being understood
that Scheduled Funded Debt Payments shall not include voluntary
prepayments or the mandatory prepayments required pursuant to Section 3.3;
provided, however, that Consolidated Scheduled Funded Debt Payments for
the fiscal quarters ending June 30, 1998, September 30, 1998 and December
31, 1998 shall be equal to the sum of (i) the amount determined pursuant
to the first clause of this definition for the one-quarter period,
two-quarter period or three-quarter period, respectively, then ended plus
(ii) the amount indicated for Consolidated Scheduled Funded Debt Payments
for such date on Schedule 1.1A.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 3.2 hereof of a Eurodollar Loan from one
Interest Period to the next Interest Period.
"Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 3.2 or Sections 3.7 through 3.12, inclusive, of a Base
Rate Loan into a Eurodollar Loan.
"Credit Documents" means a collective reference to this Credit
Agreement, the Notes, the LOC Documents, each Joinder Agreement, the
Agent's Fee Letter, the Collateral Documents and all other related
agreements and documents issued or delivered hereunder or thereunder or
pursuant hereto or thereto (in each case as the same may be amended,
modified, restated, supplemented, extended, renewed or replaced from time
to time), and "Credit Document" means any one of them.
"Credit Parties" means a collective reference to the Borrower and
the Guarantors, and "Credit Party" means any one of them.
"Credit Party Obligations" means, without duplication, (i) all of
the obligations of the Credit Parties to the Lenders (including the
Issuing Lender and the Swingline Lender) and the Agent, whenever arising,
under this Credit Agreement, the Notes, the Collateral Documents or any of
the other Credit Documents (including, but not limited to, any interest
accruing after the occurrence of a Bankruptcy Event with respect to any
Credit Party, regardless of whether such interest is an allowed claim
under the Bankruptcy Code) and (ii) all liabilities and obligations,
whenever arising, owing from any Credit Party to any Lender, or any
Affiliate of a Lender, arising under any Hedging Agreement.
"Debt Issuance" means the issuance of any Indebtedness for borrowed
money by the Parent or any Consolidated Party other than Indebtedness
permitted under Section 8.1.
"Default" means any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of Default.
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"Defaulting Lender" means, at any time, any Lender that (a) has
failed to make a Loan or purchase a Participation Interest required
pursuant to the term of this Credit Agreement within one Business Day of
when due, (b) other than as set forth in (a) above, has failed to pay to
the Agent or any Lender an amount owed by such Lender pursuant to the
terms of this Credit Agreement within one Business Day of when due, unless
such amount is subject to a good faith dispute or (c) has been deemed
insolvent or has become subject to a bankruptcy or insolvency proceeding
or with respect to which (or with respect to any of assets of which) a
receiver, trustee or similar official has been appointed.
"Dollars" and "$" means dollars in lawful currency of the United
States of America.
"Domestic Subsidiary" means any Subsidiary of the Parent which is
incorporated or organized under the laws of any State of the United States
or the District of Columbia.
"Eligible Assets" means another business or any substantial part of
another business or any other long-term assets, in each case, in, or used
or useful in, the same or a similar line of business as the Parent or the
Consolidated Parties were engaged in on the Closing Date or any reasonable
extensions or expansions thereof.
"Eligible Assignee" means (i) a Lender; (ii) an Affiliate of a
Lender; and (iii) any other Person approved by the Agent and the Borrower
(such approval not to be unreasonably withheld or delayed by the Borrower
and such approval to be deemed given by the Borrower if no objection is
received by the assigning Lender and the Agent from the Borrower within
three Business Days after notice of such proposed assignment has been
provided by the assigning Lender to the Borrower); provided, however, that
neither the Parent nor any of the Consolidated Parties shall qualify as an
Eligible Assignee.
"Eligible Reinvestment" means (i) an acquisition (whether or not
constituting a capital expenditure, but not constituting an Acquisition)
of Eligible Assets and (ii) a Permitted Acquisition. The term "Eligible
Reinvestment" shall not include any item which is not a permitted
application of proceeds of an "Asset Sale" under Section 1.01 of the
Indenture for the Senior Subordinated Debt.
"Employee Preferred Stock" shall have the meaning assigned to such
term in Section 5.1(h).
"Environmental Laws" means any and all lawful and applicable
Federal, state, local and foreign statutes, laws, regulations, ordinances,
rules, judgments, orders, decrees, permits, concessions, grants,
franchises, licenses, agreements or other governmental restrictions
relating to the environment or to emissions, discharges, releases or
threatened releases of pollutants, contaminants, chemicals, or industrial,
toxic or hazardous substances or wastes into the environment including,
without limitation, ambient air, surface water, ground water, or land, or
otherwise relating to the manufacture, processing, distribution, use,
treatment, storage, disposal, transport, or handling of pollutants,
contaminants, chemicals, or industrial, toxic or hazardous substances or
wastes.
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"Equity Interest" means (i) in the case of a corporation, capital
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of capital stock, (iii) in the case of a partnership,
partnership interests (whether general or limited) and (iv) in the case of
a limited liability company, membership interests.
"Equity Issuance" means any issuance for cash by the Parent or any
Consolidated Party to any Person (other than the Sponsor or its Affiliates
or designated co-investors or any of the officers, directors or employees
of the Parent or a Consolidated Party) which is not a Credit Party of (a)
any of its Equity Interests, (b) any of its Equity Interests pursuant to
the exercise of options or warrants or (c) any of its Equity Interests
pursuant to the conversion of any debt securities to equity. The term
"Equity Issuance" shall not include any Asset Disposition.
"Equity Issuance Prepayment Event" means, with respect to any Equity
Issuance, the failure of the Credit Parties to apply (or cause to be
applied) the Net Cash Proceeds of such Equity Issuance to Eligible
Reinvestments within the period of 365 days following the consummation of
such Equity Issuance.
"ERISA" means the Employee Retirement Income Security Act of 1974,
as amended, and any successor statute thereto, as interpreted by the rules
and regulations thereunder, all as the same may be in effect from time to
time. References to sections of ERISA shall be construed also to refer to
any successor sections.
"ERISA Affiliate" means an entity which is under common control with
the Parent or any Consolidated Party within the meaning of Section
4001(a)(14) of ERISA, or is a member of a group which includes the Parent
or any Consolidated Party and which is treated as a single employer under
Sections 414(b) or (c) of the Code.
"ERISA Event" means (i) with respect to any Plan, the occurrence of
a Reportable Event or the substantial cessation of operations (within the
meaning of Section 4062(e) of ERISA); (ii) the withdrawal by the Parent,
any Consolidated Party or any ERISA Affiliate from a Multiple Employer
Plan during a plan year in which it was a substantial employer (as such
term is defined in Section 4001(a)(2) of ERISA), or the termination of a
Multiple Employer Plan; (iii) the distribution of a notice of intent to
terminate or the actual termination of a Plan pursuant to Section 4041 or
4041A of ERISA; (iv) the institution of proceedings to terminate or the
actual termination of a Plan by the PBGC under Section 4042 of ERISA; (v)
the complete or partial withdrawal of the Parent, any Consolidated Party
or any ERISA Affiliate from a Multiemployer Plan; or (vi) the adoption of
an amendment to any Plan requiring the provision of security to such Plan
pursuant to Section 307 of ERISA.
"Eurodollar Loan" means any Loan that bears interest at a rate based
upon the Eurodollar Rate.
"Eurodollar Rate" means, for any Eurodollar Loan for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/100 of 1%) determined
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by the Agent to be equal to the quotient obtained by dividing (a) the
Interbank Offered Rate for such Eurodollar Loan for such Interest Period
by (b) 1 minus the Eurodollar Reserve Requirement for such Eurodollar Loan
for such Interest Period.
"Eurodollar Reserve Requirement" means, at any time, the maximum
rate at which reserves (including, without limitation, any marginal,
special, supplemental, or emergency reserves) are required to be
maintained under regulations issued from time to time by the Board of
Governors of the Federal Reserve System (or any successor) by member banks
of the Federal Reserve System against "Eurocurrency liabilities" (as such
term is used in Regulation D of such Board). Without limiting the effect
of the foregoing, the Eurodollar Reserve Requirement shall reflect any
other reserves required to be maintained by such member banks with respect
to (i) any category of liabilities which includes deposits by reference to
which the Adjusted Eurodollar Rate is to be determined, or (ii) any
category of extensions of credit or other assets which include Eurodollar
Loans. The Adjusted Eurodollar Rate shall be adjusted automatically on and
as of the effective date of any change in the Eurodollar Reserve
Requirement.
"Event of Default" shall have the meaning as defined in Section 9.1.
"Excess Cash Flow" means, with respect to any fiscal year period of
the Consolidated Parties on a consolidated basis, an amount equal to (a)
Consolidated EBITDA for such period minus (b) Consolidated Capital
Expenditures for such period minus (c) Consolidated Interest Expense for
such period minus (d) Federal, state and other income taxes payable by the
Consolidated Parties on a consolidated basis in respect of such period
minus (e) Consolidated Scheduled Funded Debt Payments made during such
period minus (f) prepayments applied to the permanent reduction of Funded
Debt of any Consolidated Party; provided that in the case of any revolving
Funded Debt, such prepayment shall correspondingly permanently reduce
commitments with respect thereto, plus/minus (g) changes in non-cash
working capital for such period minus (h) without duplication of any item
included under clause (c) above, Restricted Payments made by the Parent
and the Consolidated Parties during such period to the extent permitted by
the terms of Section 8.7.
"Exchange Debentures" means subordinated exchange debentures of the
Borrower issued upon exchange of the Senior Preferred Stock.
"Excluded Asset Disposition" means (i) any Asset Disposition to any
Consolidated Party if (a) the Credit Parties shall cause to be executed
and delivered such documents, instruments and certificates as the Agent
may request so as to cause the Credit Parties to be in compliance with the
terms of Section 7.13 after giving effect to such Asset Disposition and
(b) after giving effect such Asset Disposition, no Default or Event of
Default exists, (ii) any casualty or condemnation event with respect to
which the net proceeds received by the Parent or the Consolidated Parties
are less than $1,000,000, (iii) the sale or other disposition of any
Property (other than inventory) in the ordinary course of business,
provided that the aggregate book of all Property so sold or disposed of in
any twelve consecutive months shall not exceed $2,000,000, (iv) the sale
or discount without recourse of accounts receivable only in connection
with the compromise thereof or the assignment or past-due
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accounts for collection, and (v) the sale or disposition by the Borrower
of Austell Property in connection with the Austell Transaction.
"Executive Officer" of any Person means any of the chief executive
officer, chief operating officer, president, vice president, chief
financial officer or treasurer of such Person.
"Existing Letters of Credit" means the letters of credit described
by date of issuance, letter of credit number, undrawn amount, name of
beneficiary and date of expiry on Schedule 1.1B.
"Fees" means all fees payable pursuant to Section 3.5.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/100 of 1%) equal to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers on such
day, as published by the Federal Reserve Bank of New York on the Business
Day next succeeding such day; provided that (a) if such day is not a
Business Day, the Federal Funds Rate for such day shall be such rate on
such transactions on the next preceding Business Day as so published on
the next succeeding Business Day, and (b) if no such rate is so published
on such next succeeding Business Day, the Federal Funds Rate for such day
shall be the average rate charged to the Agent (in its individual
capacity) on such day on such transactions as determined by the Agent.
"Fixed Charge Coverage Ratio" means, as of the last day of any
fiscal quarter of the Consolidated Parties for the twelve month period
ending on such date, the ratio of (a) the sum of (i) Consolidated EBITDA
for the applicable period minus (ii) Consolidated Capital Expenditures for
the applicable period minus (iii) Consolidated Cash Taxes for the
applicable period to (b) the sum of (i) Consolidated Interest Expense for
the applicable period plus (ii) Consolidated Scheduled Funded Debt
Payments for the applicable period.
"Foreign Subsidiary" means any direct or indirect Subsidiary of the
Parent which is not a Domestic Subsidiary.
"Fund" means Vestar Capital Partners III, L.P.
"Funded Indebtedness" means, with respect to any Person, without
duplication, (a) all Indebtedness of such Person other than Indebtedness
of the types referred to in clause (e), (f), (g), (i) and (m) of the
definition of "Indebtedness" set forth in this Section 1.1, (b) all
Indebtedness of another Person of the type referred to in clause (a) above
secured by (or for which the holder of such Funded Indebtedness has an
existing right, contingent or otherwise, to be secured by) any Lien on, or
payable out of the proceeds of production from, Property owned or acquired
by such Person, whether or not the obligations secured thereby have been
assumed, (c) all Guaranty Obligations of such Person with respect to
Indebtedness of the type referred to in clause (a) above of another Person
and (d) Indebtedness of the type referred to in clause (a) above of any
partnership or unincorporated
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joint venture in which such Person is a general partner or a joint
venturer to the extent such Person is liable therefor.
"GAAP" means generally accepted accounting principles in the United
States as in effect from time to time set forth in the opinions and
pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and the statements and
pronouncements of the Financial Accounting Standards Board and the rules
and regulations of the Securities and Exchange Commission which are
applicable as of the date of determination, and applied on a consistent
basis and subject to the terms of Section 1.3.
"Governmental Authority" means any Federal, state, local or foreign
court or governmental agency, authority, instrumentality or regulatory
body.
"Guarantors" means a collective reference to the Parent, Interco and
each of the Subsidiary Guarantors, together with their permitted
successors and assigns, and "Guarantor " means any one of them.
"Guaranty Obligations" means, with respect to any Person, without
duplication, any obligations of such Person (other than endorsements in
the ordinary course of business of negotiable instruments for deposit or
collection) guaranteeing or intended to guarantee any Indebtedness of any
other Person in any manner, whether direct or indirect, and including
without limitation any obligation, whether or not contingent, (i) to
purchase any such Indebtedness or any Property constituting security
therefor, (ii) to advance or provide funds or other support for the
payment or purchase of any such Indebtedness or to maintain working
capital, solvency or other balance sheet condition of such other Person
(including without limitation keep well agreements, maintenance
agreements, comfort letters or similar agreements or arrangements) for the
benefit of any holder of Indebtedness of such other Person, (iii) to lease
or purchase Property, securities or services primarily for the purpose of
assuring the holder of such Indebtedness, or (iv) to otherwise assure or
hold harmless the holder of such Indebtedness against loss in respect
thereof. The amount of any Guaranty Obligation hereunder shall (subject to
any limitations set forth therein) be deemed to be an amount equal to the
outstanding principal amount (or maximum principal amount, if larger) of
the Indebtedness in respect of which such Guaranty Obligation is made.
"Hedging Agreements" means any interest rate protection agreement or
foreign currency exchange agreement between the Parent or any Consolidated
Party and any Lender, or any Affiliate of a Lender.
"Indebtedness" means, with respect to any Person, without
duplication, (a) all obligations of such Person for borrowed money, (b)
all obligations of such Person evidenced by bonds, debentures, notes or
similar instruments, or upon which interest payments are customarily made,
(c) all obligations of such Person under conditional sale or other title
retention agreements relating to Property purchased by such Person (other
than customary reservations or retentions of title under agreements with
suppliers entered into in the ordinary course of business), (d) all
obligations of such Person issued or assumed as the deferred purchase
price of Property or services purchased by such Person (other than trade
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debt incurred in the ordinary course of business and due within six months
of the incurrence thereof) which would appear as liabilities on a balance
sheet of such Person, (e) all obligations of such Person under take-or-pay
or similar arrangements or under commodities agreements, (f) all
Indebtedness of others secured by (or for which the holder of such
Indebtedness has an existing right, contingent or otherwise, to be secured
by) any Lien on, or payable out of the proceeds of production from,
Property owned or acquired by such Person, whether or not the obligations
secured thereby have been assumed, (g) all Guaranty Obligations of such
Person, (h) the principal portion of all obligations of such Person under
Capital Leases, (i) all obligations of such Person under Hedging
Agreements, (j) the maximum amount of all standby letters of credit issued
or bankers' acceptances facilities created for the account of such Person
and, without duplication, all drafts drawn thereunder (to the extent
unreimbursed), (k) all preferred Equity Interests issued by such Person
and which by the terms thereof could be (at the request of the holders
thereof or otherwise) subject to mandatory sinking fund payments,
mandatory redemption or other acceleration (other than as a result of a
Change of Control or an Asset Disposition that does not in fact result in
a redemption of such preferred Equity Interests) prior to the Maturity
Date, (l) the principal portion of all obligations of such Person under
Synthetic Leases and (m) the Indebtedness of any partnership or
unincorporated joint venture in which such Person is a general partner or
a joint venturer to the extent such Person is liable therefor.
"Interbank Offered Rate" means, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Telerate Page 3750 (or
any successor page) as the London interbank offered rate for deposits in
Dollars at approximately 11:00 a.m. (London time) two Business Days prior
to the first day of such Interest Period for a term comparable to such
Interest Period. If for any reason such rate is not available, the term
"Interbank Offered Rate" shall mean, for any Eurodollar Loan for any
Interest Period therefor, the rate per annum (rounded upwards, if
necessary, to the nearest 1/100 of 1%) appearing on Reuters Screen LIBO
Page as the London interbank offered rate for deposits in Dollars at
approximately 11:00 a.m. (London time) two Business Days prior to the
first day of such Interest Period for a term comparable to such Interest
Period; provided, however, if more than one rate is specified on Reuters
Screen LIBO Page, the applicable rate shall be the arithmetic mean of all
such rates (rounded upwards, if necessary, to the nearest 1/100 of 1%).
"Interco" means the Person identified as such in the heading hereof,
together with any permitted successors and assigns.
"Interest Coverage Ratio" means, as of the last day of any fiscal
quarter of the Consolidated Parties for the twelve month period ending on
such date, the ratio of (a) Consolidated EBITDA for such period to (b)
Consolidated Interest Expense for such period.
"Interest Payment Date" means (a) as to Base Rate Loans and Quoted
Rate Swingline Loans, the last day of each fiscal quarter of the Borrower
and the Maturity Date and (b) as to Eurodollar Loans, the last day of each
applicable Interest Period and the Maturity Date, and in addition where
the applicable Interest Period for a Eurodollar Loan is greater than three
months, then also the date three months from the beginning of the Interest
Period and each three months thereafter.
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"Interest Period" means, (i) as to Eurodollar Loans, a period of
one, two, three, six or, subject to availability (as reasonably determined
by the Agent), nine or twelve months' duration, as the Borrower may elect,
commencing, in each case, on the date of the borrowing (including
continuations and conversions thereof) and (ii) as to any Swingline Loan,
a period commencing in each case on the date of the borrowing and ending
on the date agreed to by the Borrower and the Swingline Lender in
accordance with the provisions of Section 2.3(b)(i) (such ending date in
any event to be not more than thirty (30) Business Days from the date of
borrowing); provided, however, (a) if any Interest Period would end on a
day which is not a Business Day, such Interest Period shall be extended to
the next succeeding Business Day (except that where the next succeeding
Business Day falls in the next succeeding calendar month, then on the next
preceding Business Day), (b) no Interest Period shall extend beyond the
Maturity Date, (c) with regard to the Tranche A Term Loans, no Interest
Period shall extend beyond any Principal Amortization Payment Date unless
the portion of Tranche A Term Loans comprised of Base Rate Loans together
with the portion of Tranche A Term Loans comprised of Eurodollar Loans
with Interest Periods expiring prior to the date such Principal
Amortization Payment is due, is at least equal to the amount of such
Principal Amortization Payment due on such date, (d) with regard to the
Tranche B Term Loans, no Interest Period shall extend beyond any Principal
Amortization Payment Date unless the portion of Tranche B Term Loans
comprised of Base Rate Loans together with the portion of Tranche B Term
Loans comprised of Eurodollar Loans with Interest Periods expiring prior
to the date such Principal Amortization Payment is due, is at least equal
to the amount of such Principal Amortization Payment due on such date and
(e) where an Interest Period begins on a day for which there is no
numerically corresponding day in the calendar month in which the Interest
Period is to end, such Interest Period shall end on the last Business Day
of such calendar month.
"Investment" in any Person means (a) the acquisition (whether for
cash, property, services, assumption of Indebtedness, securities or
otherwise) of assets, Equity Interests, bonds, notes, debentures,
partnership, joint ventures or other ownership interests or other
securities of such other Person or (b) any deposit with, or advance, loan
or other extension of credit to, such Person (other than deposits made in
connection with the purchase of equipment or other assets in the ordinary
course of business) or (c) any other capital contribution to or investment
in such Person, including, without limitation, any Guaranty Obligations
(including any support for a letter of credit issued on behalf of such
Person) incurred for the benefit of such Person, but excluding any
Restricted Payment to such Person.
"IPO Issuer" means, in respect of a Qualifying IPO, the Person (as
among the Parent, Interco or the Borrower and subject to the definition of
the term "Change of Control" set forth in this Section 1.1) that is the
issuer of the common Equity Interests offered in such Qualifying IPO.
"Issuing Lender" means NationsBank.
"Issuing Lender Fees" shall have the meaning assigned to such term
in Section 3.5(c)(ii).
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"Joinder Agreement" means a Joinder Agreement substantially in the
form of Exhibit 7.12 hereto, executed and delivered by an Additional
Credit Party in accordance with the provisions of Section 7.12.
"Joint Venture" means an entity which meets the following criteria:
(a) it was organized pursuant to an express joint venture,
partnership or limited liability company agreement;
(b) it is a venture among two or more Persons and, except for
purposes of the definition of "Indebtedness" set forth in this
Section 1.1, at least one of such Persons is, and one of such
Persons is not, the Borrower or a Wholly-Owned Subsidiary of the
Borrower;
(c) it operates a business for profit in which there is a
joint proprietary interest in the subject matter;
(d) the venture involves a right of mutual control of the
subject of the enterprise;
(e) each of the venturers has contributed or will contribute
capital, materials, services or knowledge;
(f) each of the venturers has a right to share in the profits
of the venture;
(g) each of the venturers has a duty to share in the losses of
the venture;
(h) the Borrower, directly or indirectly, has at least a 25%
equity ownership interest; and
(i) the Borrower, directly or indirectly has Voting Control
over the disposition of cash flow of such entity.
For purposes of this definition of "Joint Venture", "Voting Control" of
any Person means the unilateral power, directly or indirectly, on the
basis of ownership of capital stock or other capital or equity interest,
profit interest or beneficial interest in such Person or by contract, to
cause by vote the approval or the disapproval by or with respect to such
Person of such matter at issue.
"Junior Preferred Stock" shall have the meaning assigned to such
term in Section 5.1(h).
"Lender" means any of the Persons identified as a "Lender" on the
signature pages hereto, and any Eligible Assignee which may become a
Lender by way of assignment in accordance with the terms hereof, together
with their permitted successors and assigns. The
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term Lender shall also mean a collective reference to any Revolving
Lender, Tranche A Term Lender or Tranche B Term Lender.
"Letter of Credit" means any (i) letter of credit issued by the
Issuing Lender for the account of the Borrower in accordance with the
terms of Section 2.2 and (ii) any Existing Letter of Credit.
"Licensing Subsidiary" means any direct or indirect Subsidiary of
the Borrower whose principal asset or assets consist of intellectual
property owned or located outside of the United States.
"Lien" means, with respect to any Property, any mortgage, lien,
pledge, charge, security interest or encumbrance of any kind in respect of
such Property, whether or not filed, recorded or otherwise perfected under
applicable law (including any conditional sale or other title retention
agreement, any lease in the nature thereof, any option or other agreement
to sell or give a security interest in and any filing of or agreement to
give any financing statement under the Uniform Commercial Code (or
equivalent statutes) of any jurisdiction.
"Loan" or "Loans" means the Revolving Loans, the Tranche A Term
Loans, the Tranche B Term Loans (or a portion of any Revolving Loan, any
Tranche A Term Loan or Tranche B Term Loan bearing interest at the
Adjusted Base Rate or the Adjusted Eurodollar Rate) and/or the Swingline
Loans (or any Swingline Loan bearing interest at the Adjusted Base Rate or
the Quoted Rate and referred to as a Base Rate Loan or a Quoted Rate
Swingline Loan), individually or collectively, as appropriate.
"LOC Commitment" means the commitment of the Issuing Lender to issue
Letters of Credit for the account of the Borrower in an aggregate face
amount at any time outstanding (together with the amounts of any
unreimbursed drawings thereon) of up to the LOC Committed Amount.
"LOC Committed Amount" shall have the meaning assigned to such term
in Section 2.2.
"LOC Documents" means, with respect to any Letter of Credit, any
application therefor, and any agreements, instruments, guarantees or other
documents (whether general in application or applicable only to such
Letter of Credit) governing or providing for (i) the rights and
obligations of the parties concerned or at risk or (ii) any collateral
security for such obligations.
"LOC Obligations" means, at any time, the sum of (i) the maximum
amount which is, or at any time thereafter may become, available to be
drawn under Letters of Credit then outstanding, assuming compliance with
all requirements for drawings referred to in such Letters of Credit plus
(ii) the aggregate amount of all drawings under Letters of Credit honored
by the Issuing Lender but not theretofore reimbursed by the Borrower.
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"Material Adverse Effect" means a material adverse effect on (i) the
business, assets, operations, results of operations or financial condition
of the Parent and its Subsidiaries taken as a whole, (ii) the ability of
the Credit Parties taken as a whole to perform any material obligation
under the Credit Documents or (iii) the material rights and remedies of
the Lenders under the Credit Documents.
"Material Domestic Subsidiary" means, at any time, any direct or
indirect Subsidiary of any Credit Party which (i) is not in the process of
liquidation in accordance with the terms of this Credit Agreement and (ii)
has total assets (as determined in accordance with GAAP) of at least
$500,000 at such time and revenues (as determined in accordance with GAAP)
of at least $500,000 for the most recently ended twelve-month period;
provided, however, that at no time shall (x) the aggregate total assets
(as determined in accordance with GAAP) of all Subsidiaries of the Credit
Parties which are not Material Domestic Subsidiaries exceed $5,000,000 or
(y) the aggregate revenues (as determined in accordance with GAAP) of all
Subsidiaries of the Credit Parties which are not Material Domestic
Subsidiaries for the most recently ended twelve-month period exceed
$5,000,000.
"Material Foreign Subsidiary" means, at any time, any Foreign
Subsidiary which (i) is not in the process of liquidation and (ii) has
total assets (as determined in accordance with GAAP) of at least $500,000
at such time and revenues (as determined in accordance with GAAP) of at
least $500,000 for the most recently ended twelve-month period.
"Materials of Environmental Concern" means any gasoline or petroleum
(including crude oil or any fraction thereof) or petroleum products or any
hazardous or toxic substances, materials or wastes, defined or regulated
as such in or under any Environmental Laws, including, without limitation,
asbestos, polychlorinated biphenyls and urea-formaldehyde insulation.
"Maturity Date" means (i) as to the Revolving Loans, Letters of
Credit (and the related LOC Obligations), Swingline Loans and Tranche A
Term Loan, May 18, 2004 and (ii) as to the Tranche B Term Loan, May 18,
2005.
"Moody's" means Moody's Investors Service, Inc., or any successor or
assignee of the business of such company in the business of rating
securities.
"Mortgage Instruments" shall have the meaning assigned such term in
Section 5.1(e).
"Mortgage Policies" shall have the meaning assigned such term in
Section 5.1(e).
"Mortgaged Properties" shall have the meaning assigned such term in
Section 5.1(e).
"Multiemployer Plan" means a Plan which is a multiemployer plan as
defined in Sections 3(37) or 4001(a)(3) of ERISA.
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"Multiple Employer Plan" means a Plan which the Parent, any
Consolidated Party or any ERISA Affiliate and at least one employer other
than the Parent, any Consolidated Parties or any ERISA Affiliate are
contributing sponsors.
"NationsBank" means NationsBank, N. A. and its successors.
"Net Cash Proceeds" means the aggregate cash proceeds received by
the Parent or the Consolidated Parties in respect of any Asset Disposition
(other than an Excluded Asset Disposition), Equity Issuance or Debt
Issuance, net of (a) direct costs (including, without limitation, legal,
accounting and investment banking fees, and sales commissions) and (b)
taxes paid or payable as a result thereof; it being understood that "Net
Cash Proceeds" shall include, without limitation, any cash received upon
the sale or other disposition of any non-cash consideration received by
the Parent or the Consolidated Parties in any Asset Disposition, Equity
Issuance or Debt Issuance. In addition, the "Net Cash Proceeds" of any
Asset Disposition shall include any other amounts defined as "Net Cash
Proceeds" of such transaction under the documents evidencing or governing
the Senior Subordinated Debt.
"Note" or "Notes" means the Revolving Notes, the Tranche A Term
Notes, the Tranche B Term Notes and/or the Swingline Note, individually
or collectively, as appropriate.
"Notice of Borrowing" means a written notice of borrowing in
substantially the form of Exhibit 2.1(b)(i), as required by Section
2.1(b)(i), Section 2.4(b) or Section 2.5(b).
"Notice of Extension/Conversion" means the written notice of
extension or conversion in substantially the form of Exhibit 3.2, as
required by Section 3.2.
"Operating Lease" means, as applied to any Person, any lease
(including, without limitation, leases which may be terminated by the
lessee at any time) of any Property (whether real, personal or mixed)
which is not a Capital Lease other than any such lease in which that
Person is the lessor.
"Other Taxes" shall have the meaning assigned to such term in
Section 3.11.
"Parent" means the Person identified as such in the heading hereof,
together with any permitted successors and assigns.
"Parity Notes" means the senior subordinated notes in an aggregate
principal amount of approximately $13 million issued by the Borrower to
existing holders of the common stock of the Parent.
"Participation Interest" means a purchase by a Lender of a
participation (i) in Letters of Credit or LOC Obligations as provided in
Section 2.2, (ii) in Swingline Loans as provided in Section 2.3(b)(iii) or
(iii) in any Loans as provided in Section 3.14.
"PBGC" means the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA and any successor thereof.
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"Permitted Acquisition" means an Acquisition by the Parent or any
Consolidated Party for consideration no greater than the fair market value
of the Equity Interests or Property acquired (as reasonably determined by
the Credit Parties), provided that (i) the Equity Interests or Property
acquired in such Acquisition constitute Eligible Assets, (ii) the Agent
shall have received all items in respect of the Equity Interests or
Property acquired in such Acquisition (and/or the seller thereof) required
to be delivered by the terms of Section 7.12 and/or Section 7.13, (iii) in
the case of an Acquisition of the Equity Interests of another Person, the
board of directors (or other comparable governing body) of such other
Person shall have duly approved such Acquisition, (iv) the Credit Parties
shall have delivered to the Agent (A) a Pro Forma Compliance Certificate
demonstrating that, upon giving effect to such Acquisition on a Pro Forma
Basis, the Credit Parties shall be in compliance with the financial
covenants set forth in Section 7.11(b), (c) and (d) and (B) a certificate
of an Executive Officer of the Borrower demonstrating that upon giving
effect to such Acquisition, at least 80% of Consolidated EBITDA for four
fiscal-quarter period ending as of the most recent fiscal quarter end
preceding the date of such transaction with respect to which the Agent has
received the Required Financial Information) shall have been audited in
accordance with GAAP by independent certified public accountants of
recognized national standing reasonably acceptable to the Agent (whose
opinion shall not be limited as to the scope or qualified as to going
concern status), (v) the representations and warranties made by the Credit
Parties in any Credit Document shall be true and correct in all material
respects at and as if made as of the date of such Acquisition (after
giving effect thereto) except to the extent such representations and
warranties expressly relate to an earlier date, (vi) if such transaction
involves the purchase of an interest in a partnership between the Parent
or a Consolidated Party as a general partner and entities unaffiliated
with the Parent or such Consolidated Party as the other partners, such
transaction shall be effected by having such equity interest acquired by a
corporate holding company directly or indirectly wholly-owned by the
Parent newly formed for the sole purpose of effecting such transaction,
(vii) after giving effect to such Acquisition, the Revolving Committed
Amount shall be at least $10 million greater than the sum of the Revolving
Loans outstanding plus LOC Obligations outstanding plus the Swingline
Loans outstanding, (viii) the aggregate consideration (including cash and
non-cash consideration and any assumption of liabilities (other than
current working capital liabilities not constituting Indebtedness), but
excluding consideration consisting of any Equity Interests of the Parent
or the proceeds of any Equity Issuance by the Parent) for any single
Acquisition shall not exceed $25 million and (ix) the aggregate
consideration (including cash and non-cash consideration and any
assumption of liabilities (other than current working capital liabilities
not constituting Indebtedness), but excluding consideration consisting of
any Equity Interests of the Parent or the proceeds of any Equity Issuance
by the Parent) for all such Acquisitions occurring after the Closing Date
shall not exceed $50 million.
"Permitted Investments" means Investments which are either (i) cash
and Cash Equivalents; (ii) accounts receivable created, acquired or made
by the Parent or any Consolidated Party in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms;
(iii) Investments consisting of Equity Interests, obligations, securities
or other property received by the Parent or any Consolidated Party in
settlement of accounts receivable (created in the ordinary course of
business) from bankrupt
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or insolvent obligors; (iv) existing Investments in Subsidiaries and other
Investments existing as of the Closing Date and set forth in Schedule
1.1B; (v) additional Investments in any Credit Party other than the Parent
or Interco; (vi) additional Investments in Foreign Subsidiaries not
exceeding $10,000,000 in the aggregate; (vii) Guaranty Obligations
permitted by Section 8.1; (viii) transactions permitted by Section 8.9;
(ix) advances or loans to directors, officers, employees, agents,
customers or suppliers that do not exceed $2,000,000 in the aggregate at
any time outstanding for the Parent and all of the Consolidated Parties
taken together; (x) advances or loans by the Parent to management of the
Parent and to Alvarez and Marsal in conjunction with the Recapitalization
in an aggregate principal of up to $2.5 million; (xi) Investments which
constitute capital expenditures (as determined in accordance with GAAP)
otherwise permitted under this Credit Agreement; (xii) Investments in
Joint Ventures not to exceed $15,000,000; (xiii) Permitted Acquisitions;
and (xiv) the purchase by the Borrower of the Austell Property pursuant to
the Austell Transaction.
"Permitted Liens" means:
(i) Liens in favor of the Agent to secure the Credit Party
Obligations;
(ii) Liens (other than Liens created or imposed under ERISA) for
taxes, assessments or governmental charges or levies not yet due or Liens
for taxes being contested in good faith by appropriate proceedings for
which adequate reserves determined in accordance with GAAP have been
established (and as to which the Property subject to any such Lien is not
yet subject to foreclosure, sale or loss on account thereof);
(iii) statutory Liens of landlords and Liens of carriers,
warehousemen, mechanics, materialmen and suppliers and other Liens imposed
by law or pursuant to customary reservations or retentions of title
arising in the ordinary course of business, provided that such Liens
secure only amounts not overdue by more than 30 days or, if more than 30
days overdue, are unfiled and no other action has been taken to enforce
the same or are being contested in good faith by appropriate proceedings
for which adequate reserves determined in accordance with GAAP have been
established (and as to which the Property subject to any such Lien is not
yet subject to foreclosure, sale or loss on account thereof);
(iv) Liens (other than Liens created or imposed under ERISA)
incurred or deposits made by the Parent or any Consolidated Party in the
ordinary course of business in connection with workers' compensation,
unemployment insurance and other types of social security and deposits
securing liability under insurance or self-insurance arrangements, or to
secure the performance of tenders, statutory obligations, bids, leases,
government contracts, performance and return-of-money bonds and other
similar obligations (exclusive of obligations for the payment of borrowed
money);
(v) Liens in connection with attachments or judgments (including
judgment or appeal bonds) provided that the judgments secured shall,
within 30 days after the entry thereof, have been discharged or execution
thereof stayed pending appeal, or shall have been discharged within 30
days after the expiration of any such stay;
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(vi) easements, rights-of-way, restrictions (including zoning
restrictions), minor defects or irregularities in title and other similar
charges or encumbrances not, in any material respect, impairing the use of
the encumbered Property for its intended purposes;
(vii) Liens on Property of any Person securing purchase money
Indebtedness (including Capital Leases and Synthetic Leases) of such
Person to the extent permitted under Section 8.1(c) or Section 8.1(h),
provided that any such Lien attaches to such Property concurrently with or
within 90 days after the acquisition thereof;
(viii) leases or subleases granted to others not interfering in any
material respect with the business of the Parent or any Consolidated
Party;
(ix) any interest of title of a lessor under, and Liens arising from
UCC financing statements (or equivalent filings, registrations or
agreements in foreign jurisdictions) relating to, leases permitted by this
Credit Agreement;
(x) Liens in favor of customs and revenue authorities arising as a
matter of law to secure payment of customs duties in connection with the
importation of goods;
(xi) Liens deemed to exist in connection with Investments in
repurchase agreements permitted under Section 8.6;
(xii) normal and customary rights of setoff upon deposits of cash in
favor of banks or other depository institutions;
(xiii) Liens existing as of the Closing Date and set forth on
Schedule 1.1C; provided that no such Lien shall at any time be extended to
or cover any Property other than the Property subject thereto on the
Closing Date;
(xiv) Liens on Property of any Foreign Subsidiary securing
Indebtedness of such Foreign Subsidiary to the extent permitted under
Section 8.1(g); and
(xv) Liens on Property of the Borrower or any other Domestic
Subsidiary not otherwise permitted hereunder securing Indebtedness of such
Person permitted under Section 8.1 not exceeding $7,500,000 in aggregate
at any time outstanding.
"Person" means any individual, partnership, joint venture, firm,
corporation, limited liability company, association, trust or other
enterprise (whether or not incorporated) or any Governmental Authority.
"Plan" means any employee benefit plan (as defined in Section 3(3)
of ERISA) which is covered by ERISA and with respect to which the Parent,
any Consolidated Party or any ERISA Affiliate is (or, if such plan were
terminated at such time, would under Section 4069 of ERISA be deemed to
be) an "employer" within the meaning of Section 3(5) of ERISA.
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"Pledge Agreement" means the pledge agreement dated as of the
Closing Date in the form of Exhibit 1.1A to be executed in favor of the
Agent by each of the Credit Parties, as amended, modified, restated or
supplemented from time to time.
"Prime Rate" means the per annum rate of interest established from
time to time by NationsBank as its prime rate, which rate may not be the
lowest rate of interest charged by NationsBank to its customers.
"Principal Amortization Payment" means a principal payment on the
Tranche A Term Loans as set forth in Section 2.4(d) or on the Tranche B
Term Loans as set forth in Section 2.5(d).
"Principal Amortization Payment Date" means the date a Principal
Amortization Payment is due.
"Pro Forma Basis" means, with respect to any transaction, that
such transaction shall be deemed to have occurred (for purposes of
calculating compliance in respect of such transaction with the financial
covenants set forth in Section 7.11(b), (c) and (d), as of the most recent
fiscal quarter end preceding the date of such transaction with respect to
which the Agent has received the Required Financial Information) as of the
first day of the four fiscal-quarter period ending as of such fiscal
quarter end. As used herein, "transaction" shall mean (i) any merger or
consolidation as referred to in Section 8.4, (ii) any Asset Disposition as
referred to in Section 8.5 or (iii) any Investment as referred to in
Section 8.6 and clause (xiii) of the definition of "Permitted Investment"
set forth in this Section 1.1. With respect to any transaction of the type
described in clause (i) above regarding Indebtedness which has a floating
or formula rate, the implied rate of interest for such Indebtedness for
the applicable period for purposes of this definition shall be determined
by utilizing the rate which is or would be in effect with respect to such
Indebtedness as at the relevant date of determination. With respect to any
transaction of the type described in clause (ii) or (iii) above, any
Indebtedness incurred by the Parent or any Consolidated Party in order to
consummate such transaction (A) shall be deemed to have been incurred on
the first day of the applicable four fiscal-quarter period and (B) if such
Indebtedness has a floating or formula rate, then the implied rate of
interest for such Indebtedness for the applicable period for purposes of
this definition shall be determined by utilizing the rate which is or
would be in effect with respect to such Indebtedness as at the relevant
date of determination. In connection with any calculation of the financial
covenants set forth in Section 7.11(b), (c) and (d) upon giving effect to
a transaction on a Pro Forma Basis for purposes of Section 8.4, Section
8.5 or Section 8.6 and clause (xiii) of the definition of "Permitted
Investment" set forth in this Section 1.1, as applicable:
(A) for purposes of any such calculation in respect of any
Asset Disposition as referred to in Section 8.5, (1) income
statement items (whether positive or negative) attributable to the
Property disposed of in such Asset Disposition shall be excluded and
(2) any Indebtedness which is retired in connection with such Asset
Disposition shall be excluded and deemed to have been retired as of
the first day of the applicable period;
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(B) for purposes of any such calculation in respect of any
merger or consolidation as referred to in Section 8.4 or any
Investment as referred to in Section 8.6 and clause (xiii) of the
definition of "Permitted Investment" set forth in this Section 1.1,
(1) any Indebtedness incurred by the Parent or any Consolidated
Party in connection with such transaction shall be deemed to have
been incurred as of the first day of the applicable period, (2)
income statement items (whether positive or negative) attributable
to the Property acquired in such transaction or to the Investment
comprising such transaction, as applicable, shall be included to the
extent relating to the relevant period and (3) pro forma adjustments
may be included to the extent that such adjustments give effect to
events that are (x) directly attributable to such transaction, (y)
expected to have a continuing impact on the Parent and the
Consolidated Parties and (z) factually supportable; and
(C) for purposes of any such calculation, the principles set
forth in the second paragraph of Section 1.3 shall be applicable.
"Pro Forma Compliance Certificate" means a certificate of an
Executive Officer of the Borrower delivered to the Agent in connection
with (i) any merger or consolidation as referred to in Section 8.4, (ii)
any Asset Disposition as referred to in Section 8.5 or (iii) any
Investment as referred to in Section 8.6 and clause (xiii) of the
definition of "Permitted Investment" set forth in this Section 1.1, as
applicable, and containing reasonably detailed calculations, upon giving
effect to the applicable transaction on a Pro Forma Basis, of the Interest
Coverage Ratio, the Senior Leverage Ratio and the Total Leverage Ratio as
of the most recent fiscal quarter end preceding the date of the applicable
transaction with respect to which the Agent shall have received the
Required Financial Information.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Qualifying IPO" means an underwritten primary public offering of
the common Equity Interests of the Parent (or, subject to the definition
of the term "Change of Control" set forth in Section 1.1, of the common
Equity Interests of Interco or the Borrower) (i) pursuant to an effective
registration statement filed with the Securities and Exchange Commission
in accordance with the Securities Act of 1933 (whether alone or in
connection with a secondary public offering) and (ii) resulting in gross
proceeds to the Parent (or Interco or the Borrower, as applicable) of at
least $30 million.
"Quoted Rate" means, with respect to any Quoted Rate Swingline Loan,
the fixed percentage rate per annum offered by the Swingline Lender and
accepted by the Borrower with respect to such Swingline Loan as provided
in accordance with the provisions of Section 2.3.
"Quoted Rate Swingline Loan" means a Swingline Loan bearing interest
at a Quoted Rate.
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"Recapitalization" means the recapitalization of the Parent and the
Borrower pursuant to the terms of the Reorganization Plan and the other
Recapitalization Documents.
"Recapitalization Documents" means a collective reference to the
Reorganization Plan, the Confirmation Order, the subscription agreement
dated as of March 30, 1998 among Parent (f/k/a Bidermann Industries
U.S.A., Inc.), the Fund and Alvarez & Marsal, Inc., the stockholders'
agreement dated as of May 18, 1998 among Parent, the Fund, A&M Investment
Associates #7, LLC and certain other individuals and entities party
thereto, the pledge agreement dated as of May 18, 1998 by and between
Parent and A&M Investment Associates #7, LLC, the secured promissory note
dated as of May 18, 1998 executed by A&M Investment Associates #7, LLC,
each of the management common stock subscription agreements dated as of
May 18, 1998 by and between Parent and the employee of Parent, Borrower or
any of their Subsidiaries party thereto, each of the pledge agreements
dated as of May 18, 1998 by and between Parent and the employee of Parent,
Borrower or any of their Subsidiaries party thereto, each of the secured
promissory notes dated as of May 18, 1998 executed by the employee of
Parent, Borrower or any of their Subsidiaries party thereto, the advisory
agreement dated as of May 18, 1998 among Parent, Borrower and Vestar
Capital Partners, the Certificate of Designations filed with the Secretary
of State of the State of Delaware on May 18, 1998 in respect of Borrower's
12-1/2% Senior Exchangeable Preferred Stock Due 2010, the indenture
executed in connection with the issuance, if any, of the Exchange
Debentures, the Certificate of Designations filed with the Secretary of
State of the State of Delaware on May 18, 1998 in respect of Parent's
Class A Senior Preferred Stock, the Certificate of Designations filed with
the Secretary of State of the State of Delaware on May 18, 1998 in respect
of Parent's Class C Junior Preferred Stock, and all other agreements,
instruments, certificates or documents executed or delivered in connection
with the transactions contemplated under the above listed documents,
together with any renewals, extensions, amendments or modifications.
"Register" shall have the meaning given such term in Section
11.3(c).
"Regulation T, U, or X" means Regulation T, U or X, respectively, of
the Board of Governors of the Federal Reserve System as from time to time
in effect and any successor to all or a portion thereof.
"Reorganization Plan" means the Third Amended Joint Plan of
Reorganization for the Parent, dated as of March 30, 1998, and as
confirmed by the Bankruptcy Court by order entered on March 31, 1998.
"Reportable Event" means any of the events set forth in Section
4043(c) of ERISA, other than those events as to which the notice
requirement has been waived by regulation.
"Required Financial Information" means, with respect to the
applicable Calculation Date, (i) the financial statements of the
Consolidated Parties required to be delivered pursuant to Section 7.1(a)
or (b) for the fiscal period or quarter ending as of such Calculation
Date, and (ii) the certificate of the chief financial officer of the
Borrower required by Section 7.1(c) to be delivered with the financial
statements described in clause (i) above.
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"Required Lenders" means, at any time, Lenders other than Defaulting
Lenders holding in the aggregate at least a majority of, without
duplication, (i) the Revolving Commitments, the outstanding Tranche A Term
Loans (and Participation Interests therein) and the outstanding Tranche B
Term Loans (and Participation Interests therein) or (ii) if the
Commitments have been terminated, the outstanding Loans and Participation
Interests (including the Participation Interests of the Issuing Lender in
any Letters of Credit and the Participation Interests of the Swingline
Lender in any Swingline Loans).
"Requirement of Law" means, as to any Person, the certificate of
incorporation and by-laws or other organizational or governing documents
of such Person, and any law, treaty, rule or regulation or determination
of an arbitrator or a court or other Governmental Authority, in each case
applicable to or binding upon such Person or any of its material property
is subject.
"Restricted Payment" means (i) subject to the terms of Section
8.12(a), any dividend or other payment or distribution, direct or
indirect, on account of any Equity Interests of the Parent or any
Consolidated Party, now or hereafter outstanding (including without
limitation any payment in connection with any merger or consolidation
involving the Parent or any Consolidated Party), or to the direct or
indirect holders of any Equity Interests of the Parent or any Consolidated
Party, now or hereafter outstanding, in their capacity as such (other than
dividends or distributions payable in the same class of Equity Interests
of the applicable Person or to any Credit Party (directly or indirectly
through Subsidiaries) or ratably to minority shareholders), (ii) any
redemption, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any Equity Interests of the
Parent or any Consolidated Party, now or hereafter outstanding, (iii) any
payment made to retire, or to obtain the surrender of, any outstanding
warrants, options or other rights to acquire any Equity Interests of the
Parent or any Consolidated Party, now or hereafter outstanding, (iv) any
payment or prepayment of principal of, premium, if any, or interest on,
redemption, purchase, retirement, defeasance, sinking fund or similar
payment with respect to, Subordinated Indebtedness, except as permitted by
Section 8.8, and (v) any loan or advance to the Parent or Interco.
"Revolving Commitment" means, with respect to each Revolving Lender,
the commitment of such Lender in an aggregate principal amount at any time
outstanding of up to such Lender's Revolving Commitment Percentage of the
Revolving Committed Amount, (i) to make Revolving Loans to the Borrower in
accordance with the provisions of Section 2.1(a), (ii) to purchase
Participation Interests in Letters of Credit in accordance with the
provisions of Section 2.2(c) and (iii) to purchase Participation Interests
in the Swingline Loans in accordance with the provisions of Section
2.3(b)(iii).
"Revolving Commitment Percentage" means, for any Revolving Lender,
the percentage identified as its Revolving Commitment Percentage on
Schedule 2.1(a), as such percentage may be modified in connection with any
assignment made in accordance with the provisions of Section 11.3.
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"Revolving Committed Amount" shall have the meaning assigned to such
term in Section 2.1(a).
"Revolving Lender" means any Lender holding a Revolving Commitment,
as identified on Schedule 2.1(a), together with their permitted successors
and assigns.
"Revolving Loans" shall have the meaning assigned to such term in
Section 2.1(a).
"Revolving Note" or "Revolving Notes" means the promissory notes of
the Borrower in favor of each of the Revolving Lenders evidencing the
Revolving Loans provided pursuant to Section 2.1(e), individually or
collectively, as appropriate, as such promissory notes may be amended,
modified, restated, supplemented, extended, renewed or replaced from time
to time.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw
Hill, Inc., or any successor or assignee of the business of such division
in the business of rating securities.
"Sale and Leaseback Transaction" means any direct or indirect
arrangement with any Person or to which any such Person is a party,
providing for the leasing to the Parent or any Consolidated Party of any
Property, whether owned by the Parent or such Consolidated Party as of the
Closing Date or later acquired, which has been or is to be sold or
transferred by the Parent or such Consolidated Party to such Person or to
any other Person from whom funds have been, or are to be, advanced by such
Person on the security of such Property.
"Security Agreement" means the security agreement dated as of the
Closing Date in the form of Exhibit 1.1B to be executed in favor of the
Agent by each of the Credit Parties, as amended, modified, restated or
supplemented from time to time.
"Senior Leverage Ratio" means, as of the last day of any fiscal
quarter of the Consolidated Parties for the twelve month period ending on
such date, the ratio of (a) all Funded Indebtedness other than
Subordinated Indebtedness (net of cash and Cash Equivalents) of the
Consolidated Parties on a consolidated basis on the last day of such
period to (b) Consolidated EBITDA for such period.
"Senior Preferred Stock" shall have the meaning assigned to such
term in Section 5.1(h).
"Senior Subordinated Debt" shall have the meaning assigned to such
term in Section 5.1(h).
"Single Employer Plan" means any Plan which is covered by Title IV
of ERISA, but which is not a Multiemployer Plan or a Multiple Employer
Plan.
"Solvent" or "Solvency" means, with respect to any Person as of a
particular date, that on such date (i) such Person is able to realize upon
its assets and pay its debts and other liabilities, contingent obligations
and other commitments as they mature in the normal
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course of business, (ii) such Person does not intend to, and does not
believe that it will, incur debts or liabilities beyond such Person's
ability to pay as such debts and liabilities mature in their ordinary
course, (iii) such Person is not engaged in a business or a transaction,
and is not about to engage in a business or a transaction, for which such
Person's Property would constitute unreasonably small capital after giving
due consideration to the prevailing practice in the industry in which such
Person is engaged or is to engage, (iv) the fair value of the Property of
such Person is greater than the total amount of liabilities, including,
without limitation, contingent liabilities, of such Person and (v) the
present fair salable value of the assets of such Person is not less than
the amount that will be required to pay the probable liability of such
Person on its debts as they become absolute and matured. In computing the
amount of contingent liabilities at any time, it is intended that such
liabilities will be computed at the amount which, in light of all the
facts and circumstances existing at such time, represents the amount that
can reasonably be expected to become an actual or matured liability.
"Sponsor" means Vestar Capital Partners III, L.P.
"Sponsor Common Stock" shall have the meaning assigned to such term
in Section 5.1(h).
"Standby Letter of Credit Fee" shall have the meaning assigned to
such term in Section 3.5(c)(i).
"Subordinated Indebtedness" means (i) Indebtedness of the Borrower
in respect of the Senior Subordinated Debt, together with Guaranty
Obligations, if any, of the Guarantors in respect thereof and (ii) other
Indebtedness of the Parent (a) incurred in connection with the repurchase
by the Parent of outstanding shares of Capital Stock in accordance with
the terms of Section 8.7(ii) and (b) which by its terms is subordinated to
the Credit Party Obligations in a manner and to an extent acceptable to
Agent.
"Subsidiary" means, as to any Person at any time, (a) any
corporation more than 50% of whose Equity Interests of any class or
classes having by the terms thereof ordinary voting power to elect a
majority of the directors of such corporation (irrespective of whether or
not at such time, any class or classes of such corporation shall have or
might have voting power by reason of the happening of any contingency) is
at such time owned by such Person directly or indirectly through
Subsidiaries, and (b) any partnership, association, joint venture or other
entity of which such Person directly or indirectly through Subsidiaries
owns at such time more than 50% of the Equity Interests.
"Subsidiary Guarantor" means each of the Persons identified as a
"Subsidiary Guarantor" on the signature pages hereto and each Additional
Credit Party which may hereafter execute a Joinder Agreement, together
with their permitted successors and assigns, and "Subsidiary Guarantor"
means any one of them.
"Swingline Commitment" means the commitment of the Swingline Lender
to make Swingline Loans to the Borrower in an aggregate principal amount
at any time outstanding of up to the Swingline Committed Amount.
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"Swingline Committed Amount" shall have the meaning assigned to such
term in Section 2.3(a).
"Swingline Lender" means NationsBank.
"Swingline Loan" shall have the meaning assigned to such term in
Section 2.3(a).
"Swingline Note" means the promissory note of the Borrower in favor
of the Swingline Lender evidencing the Swingline Loans provided pursuant
to Section 2.3(d), as such promissory note may be amended, modified,
restated, supplemented, extended, renewed or replaced from time to time.
"Synthetic Lease" means any synthetic lease, tax retention operating
lease, off-balance sheet loan or similar off-balance sheet financing
product where such transaction is considered borrowed money indebtedness
for tax purposes but is classified as an Operating Lease.
"Taxes" shall have the meaning assigned to such term in Section
3.11.
"Total Leverage Ratio" means, as of the last day of any fiscal
quarter of the Consolidated Parties for the twelve month period ending on
such date, the ratio of (a) all Funded Indebtedness (including
Subordinated Indebtedness, but net of cash and Cash Equivalents) of the
Consolidated Parties on a consolidated basis on the last day of such
period to (b) Consolidated EBITDA for such period.
"Trade Letter of Credit Fee" shall have the meaning assigned to such
term in Section 3.5(c)(ii).
"Tranche A Term Lender" means any Lender holding a Tranche A Term
Loan Commitment, as identified on Schedule 2.1(a), together with their
permitted successors and assigns.
"Tranche A Term Loan" shall have the meaning assigned to such term
in Section 2.4(a).
"Tranche A Term Loan Commitment" means, with respect to each Tranche
A Term Lender, the commitment of such Lender to make its portion of the
Tranche A Term Loan in a principal amount equal to such Lender's Tranche A
Term Loan Commitment Percentage of the Tranche A Term Loan Committed
Amount.
"Tranche A Term Loan Commitment Percentage" means, for any Tranche A
Term Lender, the percentage identified as its Tranche A Term Loan
Commitment Percentage on Schedule 2.1(a), as such percentage may be
modified in connection with any assignment made in accordance with the
provisions of Section 11.3.
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"Tranche A Term Loan Committed Amount" shall have the meaning
assigned to such term in Section 2.4(a).
"Tranche A Term Note" or "Tranche A Term Notes" means the promissory
notes of the Borrower in favor of each of the Tranche A Term Lenders
evidencing the Tranche A Term Loans provided pursuant to Section 2.4(f),
individually or collectively, as appropriate, as such promissory notes may
be amended, modified, restated, supplemented, extended, renewed or
replaced from time to time.
"Tranche B Term Lender" means any Lender holding a Tranche B Term
Loan Commitment, as identified on Schedule 2.1(a), together with their
permitted successors and assigns.
"Tranche B Term Loan" shall have the meaning assigned to such term
in Section 2.5(a).
"Tranche B Term Loan Commitment" means, with respect to each Tranche
B Term Lender, the commitment of such Lender to make its portion of the
Tranche B Term Loan in a principal amount equal to such Lender's Tranche B
Term Loan Commitment Percentage of the Tranche B Term Loan Committed
Amount.
"Tranche B Term Loan Commitment Percentage" means, for any Tranche B
Term Lender, the percentage identified as its Tranche B Term Loan
Commitment Percentage on Schedule 2.1(a), as such percentage may be
modified in connection with any assignment made in accordance with the
provisions of Section 11.3.
"Tranche B Term Loan Committed Amount" shall have the meaning
assigned to such term in Section 2.5(a).
"Tranche B Term Note" or "Tranche B Term Notes" means the promissory
notes of the Borrower in favor of each of the Tranche B Term Lenders
evidencing the Tranche B Term Loans provided pursuant to Section 2.5(f),
individually or collectively, as appropriate, as such promissory notes may
be amended, modified, restated, supplemented, extended, renewed or
replaced from time to time.
"Unused Fee" shall have the meaning assigned to such term in Section
3.5(b).
"Unused Revolving Committed Amount" means, for any period, the
amount by which (a) the then applicable Revolving Committed Amount exceeds
(b) the daily average sum for such period of (i) the outstanding aggregate
principal amount of all Revolving Loans (but not including any Swingline
Loans) plus (ii) the outstanding aggregate principal amount of all LOC
Obligations.
"Upfront Fee" shall have the meaning assigned to such term in
Section 3.5(a).
"Voting Stock" means, with respect to any Person, Equity Interests
issued by such Person the holders of which are ordinarily, in the absence
of contingencies, entitled to vote
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for the election of directors (or persons performing similar functions) of
such Person, even though the right so to vote has been suspended by the
happening of such a contingency.
"Wholly-Owned Subsidiary" of any Person means any Subsidiary 100% of
whose Voting Stock (other than director's qualifying shares) is at the
time owned by such Person directly or indirectly through other
Wholly-Owned Subsidiaries.
1.2 Computation of Time Periods.
For purposes of computation of periods of time hereunder, the word "from"
means "from and including" and the words "to" and "until" each mean "to but
excluding."
1.3 Accounting Terms.
Except as otherwise expressly provided herein, all accounting terms used
herein shall be interpreted, and all financial statements and certificates and
reports as to financial matters required to be delivered to the Lenders
hereunder shall be prepared, in accordance with GAAP applied on a consistent
basis. All calculations made for the purposes of determining compliance with
this Credit Agreement shall (except as otherwise expressly provided herein) be
made by application of GAAP applied on a basis consistent with the most recent
annual or quarterly financial statements delivered pursuant to Section 7.1 (or,
prior to the delivery of the first financial statements pursuant to Section 7.1,
consistent with the financial statements as at December 31, 1997); provided,
however, if (a) the Credit Parties shall object to determining such compliance
on such basis at the time of delivery of such financial statements due to any
change in GAAP or the rules promulgated with respect thereto or (b) the Agent or
the Required Lenders shall so object in writing within 60 days after delivery of
such financial statements, then such calculations shall be made on a basis
consistent with the most recent financial statements delivered by the Credit
Parties to the Lenders as to which no such objection shall have been made.
Notwithstanding the above or the terms of any definition set forth in Section
1.1, the parties hereto acknowledge and agree that, for purposes of all
calculations made under the financial covenants set forth in Section 7.11
(including without limitation for purposes of the definitions of "Applicable
Percentage" and "Pro Forma Basis" set forth in Section 1.1), (i)(A) income
statement items (whether positive or negative) attributable to the Property
disposed of in any Asset Disposition as contemplated by Section 8.5, as
applicable, shall be excluded to the extent relating to any period occurring
prior to the date of such transaction and (B) Indebtedness which is retired in
connection with any such Asset Disposition shall be excluded and deemed to have
been retired as of the first day of the applicable period, (ii) income statement
items (whether positive or negative) attributable to any Property acquired in
any Investment transaction contemplated by Section 8.6 and clause (xiii) of the
definition of "Permitted Investment" set forth in Section 1.1 shall, to the
extent not otherwise included in such income statements items for the
Consolidated Parties in accordance with GAAP or in accordance with any defined
terms set forth in Section 1.1, be included to the extent relating to any period
applicable in such calculations and (iii) the portion of Funded Indebtedness of
the Consolidated Parties as of any date consisting of Revolving Loans shall be
deemed to be the daily average amount of Revolving Loans outstanding for the
twelve-month period ended as of such date.
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SECTION 2
CREDIT FACILITIES
2.1 Revolving Loans.
(a) Revolving Commitment. Subject to the terms and conditions hereof
and in reliance upon the representations and warranties set forth herein,
each Revolving Lender severally agrees to make available to the Borrower
such Lender's Revolving Commitment Percentage of revolving credit loans
requested by the Borrower in Dollars ("Revolving Loans") from time to time
from the Closing Date until the Maturity Date, or such earlier date as the
Revolving Commitments shall have been terminated as provided herein;
provided, however, that the sum of the aggregate principal amount of
outstanding Revolving Loans shall not exceed FIFTY MILLION DOLLARS
($50,000,000) (as such aggregate maximum amount may be reduced from time
to time as provided in Section 3.4, the "Revolving Committed Amount");
provided, further, (A) with regard to each Revolving Lender individually,
such Lender's outstanding Revolving Loans shall not exceed such Lender's
Revolving Commitment Percentage of the Revolving Committed Amount, and (B)
the aggregate principal amount of outstanding Revolving Loans plus LOC
Obligations outstanding plus the aggregate principal amount of outstanding
Swingline Loans shall not exceed the Revolving Committed Amount. Revolving
Loans may consist of Base Rate Loans or Eurodollar Loans, or a combination
thereof, as the Borrower may request; provided, however, that no more than
10 Eurodollar Loans shall be outstanding hereunder at any time (it being
understood that, for purposes hereof, Eurodollar Loans with different
Interest Periods shall be considered as separate Eurodollar Loans, even if
they begin on the same date, although borrowings, extensions and
conversions may, in accordance with the provisions hereof, be combined at
the end of existing Interest Periods to constitute a new Eurodollar Loan
with a single Interest Period). Revolving Loans hereunder may be repaid
and reborrowed in accordance with the provisions hereof.
(b) Revolving Loan Borrowings.
(i) Notice of Borrowing. The Borrower shall request a
Revolving Loan borrowing by written notice (or telephonic notice
promptly confirmed in writing) to the Agent not later than 11:00
A.M. (Charlotte, North Carolina time) on the Business Day prior to
the date of the requested borrowing in the case of Base Rate Loans,
and on the third Business Day prior to the date of the requested
borrowing in the case of Eurodollar Loans. Each such request for
borrowing shall be irrevocable and shall specify (A) that a
Revolving Loan is requested, (B) the date of the requested borrowing
(which shall be a Business Day), (C) the aggregate principal amount
to be borrowed, and (D) whether the borrowing shall be comprised of
Base Rate Loans, Eurodollar Loans or a combination thereof, and if
Eurodollar Loans are requested, the Interest Period(s) therefor. If
the Borrower shall fail to specify in any such Notice of Borrowing
(I) an applicable Interest Period in the case of a Eurodollar Loan,
then such notice
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shall be deemed to be a request for an Interest Period of one month,
or (II) the type of Revolving Loan requested, then such notice shall
be deemed to be a request for a Base Rate Loan hereunder. The Agent
shall give notice to each Revolving Lender promptly upon receipt of
each Notice of Borrowing pursuant to this Section 2.1(b)(i), the
contents thereof and each such Lender's share of any borrowing to be
made pursuant thereto.
(ii) Minimum Amounts. Except as otherwise provided in Section
2.2(e), each Eurodollar Loan or Base Rate Loan that is a Revolving
Loan shall be in a minimum aggregate principal amount of $2,000,000
and integral multiples of $100,000 in excess thereof (or the
remaining amount of the Revolving Committed Amount, if less).
(iii) Advances. Each Revolving Lender will make its Revolving
Commitment Percentage of each Revolving Loan borrowing available to
the Agent for the account of the Borrower as specified in Section
3.15(a), or in such other manner as the Agent may specify in
writing, by 1:00 P.M. (Charlotte, North Carolina time) on the date
specified in the applicable Notice of Borrowing in Dollars and in
funds immediately available to the Agent. Such borrowing will then
be made available to the Borrower by the Agent by crediting the
account of the Borrower on the books of such office with the
aggregate of the amounts made available to the Agent by the
Revolving Lenders and in like funds as received by the Agent.
(c) Repayment. The principal amount of all Revolving Loans shall be
due and payable in full on the Maturity Date, unless accelerated sooner
pursuant to Section 9.2.
(d) Interest. Subject to the provisions of Section 3.1,
(i) Base Rate Loans. During such periods as Revolving Loans
shall be comprised in whole or in part of Base Rate Loans, such Base
Rate Loans shall bear interest at a per annum rate equal to the
Adjusted Base Rate.
(ii) Eurodollar Loans. During such periods as Revolving Loans
shall be comprised in whole or in part of Eurodollar Loans, such
Eurodollar Loans shall bear interest at a per annum rate equal to
the Adjusted Eurodollar Rate.
Interest on Revolving Loans shall be payable in arrears on each applicable
Interest Payment Date (or at such other times as may be specified herein).
(e) Revolving Notes. The Revolving Loans made by each Revolving
Lender shall be evidenced by a duly executed promissory note of the
Borrower to such Lender in an original principal amount equal to such
Lender's Revolving Commitment Percentage of the Revolving Committed Amount
and in substantially the form of Exhibit 2.1(e).
2.2 Letter of Credit Subfacility.
(a) Issuance. Subject to the terms and conditions hereof and of the
LOC Documents, if any, and any other terms and conditions which the
Issuing Lender may
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<PAGE>
reasonably require and in reliance upon the representations and warranties
set forth herein, the Issuing Lender agrees to issue, and each Revolving
Lender severally agrees to participate in the issuance by the Issuing
Lender of, standby and trade Letters of Credit in Dollars from time to
time from the Closing Date until the date five (5) prior to the Maturity
Date as the Borrower may request, in a form acceptable to the Issuing
Lender; provided, however, that (i) the LOC Obligations outstanding shall
not at any time exceed THIRTY MILLION DOLLARS ($30,000,000) (the "LOC
Committed Amount") and (ii) the sum of the aggregate principal amount of
outstanding Revolving Loans plus LOC Obligations outstanding plus the
aggregate principal amount of outstanding Swingline Loans shall not at any
time exceed the Revolving Committed Amount. No Letter of Credit shall (x)
have an original expiry date more than one year from the date of issuance
(provided that the foregoing shall not prohibit any Letter of Credit being
subject to automatic renewals for additional periods of up to 1 year) or
(y) as originally issued or as extended, have an expiry date extending
beyond the Maturity Date. Each Letter of Credit shall comply with the
related LOC Documents. The issuance and expiry dates of each Letter of
Credit shall be a Business Day.
(b) Notice and Reports. The request for the issuance of a Letter of
Credit shall be submitted by the Borrower to the Issuing Lender at least
three (3) Business Days prior to the requested date of issuance. The
Issuing Lender will, at least quarterly and more frequently upon request,
disseminate to each of the Revolving Lenders a detailed report specifying
the Letters of Credit which are then issued and outstanding and any
activity with respect thereto which may have occurred since the date of
the prior report, and including therein, among other things, the
beneficiary, the face amount and the expiry date, as well as any payment
or expirations which may have occurred.
(c) Participation. Each Revolving Lender, upon issuance of a Letter
of Credit (or, in the case of each Existing Letter of Credit, on the
Closing Date), shall be deemed to have purchased without recourse a
Participation Interest from the Issuing Lender in such Letter of Credit
and the obligations arising thereunder and any collateral relating
thereto, in each case in an amount equal to its pro rata share of the
obligations under such Letter of Credit (based on the respective Revolving
Commitment Percentages of the Revolving Lenders) and shall absolutely,
unconditionally and irrevocably assume and be obligated to pay to the
Issuing Lender and discharge when due, its pro rata share of the
obligations arising under such Letter of Credit. Without limiting the
scope and nature of each Revolving Lender's Participation Interest in any
Letter of Credit, to the extent that the Issuing Lender has not been
reimbursed as required hereunder or under any such Letter of Credit, each
such Revolving Lender shall pay to the Issuing Lender its pro rata share
of such unreimbursed drawing in same day funds on the day of notification
by the Issuing Lender of an unreimbursed drawing pursuant to the
provisions of subsection (d) below. The obligation of each Revolving
Lender to so reimburse the Issuing Lender shall be absolute and
unconditional and shall not be affected by the occurrence of a Default, an
Event of Default or any other occurrence or event. Any such reimbursement
shall not relieve or otherwise impair the obligation of the Borrower to
reimburse the Issuing Lender under any Letter of Credit, together with
interest as hereinafter provided.
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(d) Reimbursement. In the event of any drawing under any Letter of
Credit, the Issuing Lender will promptly notify the Borrower. Unless the
Borrower shall immediately notify the Issuing Lender that the Borrower
intends to otherwise reimburse the Issuing Lender for such drawing, the
Borrower shall be deemed to have requested that the Revolving Lenders make
a Revolving Loan in the amount of the drawing as provided in subsection
(e) below on the related Letter of Credit, the proceeds of which will be
used to satisfy the related reimbursement obligations. The Borrower
promises to reimburse the Issuing Lender on the day on which the Issuing
Lender notifies the Borrower of a drawing under any Letter of Credit
(either with the proceeds of a Revolving Loan obtained hereunder or
otherwise) in same day funds provided such notice is received by the
Borrower from the Issuing Lender on or before 2:00 P.M.(Charlotte, North
Carolina time) (otherwise such payment shall be made on or before 12:00
Noon (Charlotte, North Carolina time) on the Business Day next succeeding
the day such notice is received). The unreimbursed amount of any drawing
under a Letter of Credit shall bear interest at a per annum rate equal to
(i) for the first two (2) Business Days following the date of the related
drawing, the Adjusted Base Rate and (ii) thereafter, the Adjusted Base
Rate plus 2%. The Borrower's reimbursement obligations hereunder shall be
absolute and unconditional under all circumstances irrespective of any
rights of setoff, counterclaim or defense to payment the Borrower may
claim or have against the Issuing Lender, the Agent, the Revolving
Lenders, the beneficiary of the Letter of Credit drawn upon or any other
Person, including without limitation any defense based on any failure of
the Borrower or any other Credit Party to receive consideration or the
legality, validity, regularity or unenforceability of the Letter of
Credit. The Issuing Lender will promptly notify the other Revolving
Lenders of the amount of any unreimbursed drawing and each Revolving
Lender shall promptly pay to the Agent for the account of the Issuing
Lender in Dollars and in immediately available funds, the amount of such
Revolving Lender's pro rata share of such unreimbursed drawing. Such
payment shall be made on the day such notice is received by such Revolving
Lender from the Issuing Lender if such notice is received at or before
2:00 P.M. (Charlotte, North Carolina time) otherwise such payment shall be
made at or before 12:00 Noon (Charlotte, North Carolina time) on the
Business Day next succeeding the day such notice is received. If such
Revolving Lender does not pay such amount to the Issuing Lender in full
upon such request, such Revolving Lender shall, on demand, pay to the
Agent for the account of the Issuing Lender interest on the unpaid amount
during the period from the date of such drawing until such Revolving
Lender pays such amount to the Issuing Lender in full at a rate per annum
equal to, if paid within two (2) Business Days of the date that such
Revolving Lender is required to make payments of such amount pursuant to
the preceding sentence, the Federal Funds Rate and thereafter at a rate
equal to the Base Rate. Each Revolving Lender's obligation to make such
payment to the Issuing Lender, and the right of the Issuing Lender to
receive the same, shall be absolute and unconditional, shall not be
affected by any circumstance whatsoever and without regard to the
termination of this Credit Agreement or the Commitments hereunder, the
existence of a Default or Event of Default or the acceleration of the
obligations of the Borrower hereunder and shall be made without any
offset, abatement, withholding or reduction whatsoever. Simultaneously
with the making of each such payment by a Revolving Lender to the Issuing
Lender, such Revolving Lender shall, automatically and without any further
action on the part of the Issuing Lender or such Revolving Lender, acquire
a Participation Interest in an amount equal to such payment (excluding the
portion of such payment constituting interest owing to
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<PAGE>
the Issuing Lender) in the related unreimbursed drawing portion of the LOC
Obligation and in the interest thereon and in the related LOC Documents,
and shall have a claim against the Borrower with respect thereto.
(e) Repayment with Revolving Loans. On any day on which the Borrower
shall have requested, or been deemed to have requested, a Revolving Loan
advance to reimburse a drawing under a Letter of Credit, the Agent shall
give notice to the Revolving Lenders that a Revolving Loan has been
requested or deemed requested by the Borrower to be made in connection
with a drawing under a Letter of Credit, in which case a Revolving Loan
advance comprised of Base Rate Loans (or Eurodollar Loans to the extent
the Borrower has complied with the procedures of Section 2.1(b)(i) with
respect thereto) shall be immediately made to the Borrower by all
Revolving Lenders (notwithstanding any termination of the Commitments
pursuant to Section 9.2) pro rata based on the respective Revolving
Commitment Percentages of the Revolving Lenders (determined before giving
effect to any termination of the Commitments pursuant to Section 9.2) and
the proceeds thereof shall be paid directly to the Issuing Lender for
application to the respective LOC Obligations. Each such Revolving Lender
hereby irrevocably agrees to make its pro rata share of each such
Revolving Loan immediately upon any such request or deemed request in the
amount, in the manner and on the date specified in the preceding sentence
notwithstanding (i) the amount of such borrowing may not comply with the
minimum amount for advances of Revolving Loans otherwise required
hereunder, (ii) whether any conditions specified in Section 5.2 are then
satisfied, (iii) whether a Default or an Event of Default then exists,
(iv) failure for any such request or deemed request for Revolving Loan to
be made by the time otherwise required hereunder, (v) whether the date of
such borrowing is a date on which Revolving Loans are otherwise permitted
to be made hereunder or (vi) any termination of the Commitments
immediately prior to or contemporaneously with such borrowing. In the
event that any Revolving Loan cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result of
the commencement of a proceeding under the Bankruptcy Code with respect to
the Borrower or any other Credit Party), then each such Revolving Lender
hereby agrees that it shall forthwith purchase (as of the date such
borrowing would otherwise have occurred, but adjusted for any payments
received from the Borrower on or after such date and prior to such
purchase) from the Issuing Lender such Participation Interests in the
outstanding LOC Obligations as shall be necessary to cause each such
Revolving Lender to share in such LOC Obligations ratably (based upon the
respective Revolving Commitment Percentages of the Revolving Lenders
(determined before giving effect to any termination of the Commitments
pursuant to Section 9.2)), provided that at the time any purchase of
Participation Interests pursuant to this sentence is actually made, the
purchasing Revolving Lender shall be required to pay to the Issuing
Lender, to the extent not paid to the Issuer by the Borrower in accordance
with the terms of subsection (d) above, interest on the principal amount
of Participation Interests purchased for each day from and including the
day upon which such borrowing would otherwise have occurred to but
excluding the date of payment for such Participation Interests, at the
rate equal to, if paid within two (2) Business Days of the date of the
Revolving Loan advance, the Federal Funds Rate, and thereafter at a rate
equal to the Base Rate.
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(f) Designation of Consolidated Parties as Account Parties.
Notwithstanding anything to the contrary set forth in this Credit
Agreement, including without limitation Section 2.2(a), a Letter of Credit
issued hereunder may contain a statement to the effect that such Letter of
Credit is issued for the account of a Consolidated Party other than the
Borrower, provided that notwithstanding such statement, the Borrower shall
be the actual account party for all purposes of this Credit Agreement for
such Letter of Credit and such statement shall not affect the Borrower's
reimbursement obligations hereunder with respect to such Letter of Credit.
(g) Renewal, Extension. The renewal or extension of any Letter of
Credit shall, for purposes hereof, be treated in all respects the same as
the issuance of a new Letter of Credit hereunder.
(h) Uniform Customs and Practices. The Issuing Lender may have the
Letters of Credit be subject to The Uniform Customs and Practice for
Documentary Credits, as published as of the date of issue by the
International Chamber of Commerce (the "UCP"), in which case the UCP may
be incorporated therein and deemed in all respects to be a part thereof.
(i) Indemnification; Nature of Issuing Lender's Duties.
(i) In addition to its other obligations under this Section
2.2, the Borrower hereby agrees to pay, and protect, indemnify and
save the Issuing Lender harmless from and against, any and all
claims, demands, liabilities, damages, losses, costs, charges and
expenses (including reasonable attorneys' fees) that the Issuing
Lender may incur or be subject to as a consequence, direct or
indirect, of (A) the issuance of any Letter of Credit or (B) the
failure of the Issuing Lender to honor a drawing under a Letter of
Credit as a result of any act or omission, whether rightful or
wrongful, of any present or future de jure or de facto government or
Governmental Authority (all such acts or omissions, herein called
"Government Acts").
(ii) As between the Borrower and the Revolving Lenders
(including the Issuing Lender), the Borrower shall assume all risks
of the acts, omissions or misuse of any Letter of Credit by the
beneficiary thereof. No Revolving Lender (including the Issuing
Lender) shall be responsible: (A) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any document
submitted by any party in connection with the application for and
issuance of any Letter of Credit, even if it should in fact prove to
be in any or all respects invalid, insufficient, inaccurate,
fraudulent or forged; (B) for the validity or sufficiency of any
instrument transferring or assigning or purporting to transfer or
assign any Letter of Credit or the rights or benefits thereunder or
proceeds thereof, in whole or in part, that may prove to be invalid
or ineffective for any reason; (C) for errors, omissions,
interruptions or delays in transmission or delivery of any messages,
by mail, cable, telegraph, telex or otherwise, whether or not they
be in cipher; (D) for any loss or delay in the transmission or
otherwise of any document required in order to make a drawing under
a Letter of Credit or of the proceeds thereof; and (E) for any
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<PAGE>
consequences arising from causes beyond the control of such
Revolving Lender, including, without limitation, any Government
Acts. None of the above shall affect, impair, or prevent the vesting
of the Issuing Lender's rights or powers hereunder.
(iii) In furtherance and extension and not in limitation of
the specific provisions hereinabove set forth, any action taken or
omitted by any Revolving Lender (including the Issuing Lender),
under or in connection with any Letter of Credit or the related
certificates, if taken or omitted in good faith, shall not put such
Revolving Lender under any resulting liability to the Borrower or
any other Credit Party. It is the intention of the parties that this
Credit Agreement shall be construed and applied to protect and
indemnify each Revolving Lender (including the Issuing Lender)
against any and all risks involved in the issuance of the Letters of
Credit, all of which risks are hereby assumed by the Borrower (on
behalf of itself and each of the other Credit Parties), including,
without limitation, any and all Government Acts. No Revolving Lender
(including the Issuing Lender) shall, in any way, be liable for any
failure by such Revolving Lender or anyone else to pay any drawing
under any Letter of Credit as a result of any Government Acts or any
other cause beyond the control of such Revolving Lender.
(iv) Nothing in this subsection (i) is intended to limit the
reimbursement obligations of the Borrower contained in subsection
(d) above. The obligations of the Borrower under this subsection (i)
shall survive the termination of this Credit Agreement. No act or
omission of any current or prior beneficiary of a Letter of Credit
shall in any way affect or impair the rights of the Revolving
Lenders (including the Issuing Lender) to enforce any right, power
or benefit under this Credit Agreement.
(v) Notwithstanding anything to the contrary contained in this
subsection (i), the Borrower shall have no obligation to indemnify
any Revolving Lender (including the Issuing Lender) in respect of
any liability incurred by such Revolving Lender (A) arising out of
the gross negligence or willful misconduct of such Revolving Lender,
or (B) caused by the Issuing Lender's failure to pay under any
Letter of Credit after presentation to it of a request strictly
complying with the terms and conditions of such Letter of Credit,
unless such payment is prohibited by any Government Act.
(j) Responsibility of Issuing Lender. It is expressly understood and
agreed that the obligations of the Issuing Lender hereunder to the
Revolving Lenders are only those expressly set forth in this Credit
Agreement and that the Issuing Lender shall be entitled to assume that the
conditions precedent set forth in Section 5.2 have been satisfied unless
it shall have acquired actual knowledge that any such condition precedent
has not been satisfied; provided, however, that nothing set forth in this
Section 2.2 shall be deemed to prejudice the right of any Revolving Lender
to recover from the Issuing Lender any amounts made available by such
Revolving Lender to the Issuing Lender pursuant to this Section 2.2 in the
event that it is determined by a court of competent jurisdiction that the
payment with respect to a Letter of Credit constituted gross negligence or
willful misconduct on the part of the Issuing Lender.
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(k) Conflict with LOC Documents. In the event of any conflict
between this Credit Agreement and any LOC Document (including any letter
of credit application), this Credit Agreement shall control.
2.3 Swingline Loan Subfacility.
(a) Swingline Commitment. Subject to the terms and conditions hereof
and in reliance upon the representations and warranties set forth herein,
the Swingline Lender agrees to make certain revolving credit loans in
Dollars to the Borrower (the "Swingline Loans") as requested by the
Borrower from time to time from the Closing Date until the Maturity Date,
or such earlier date as the Swingline Commitment shall have been
terminated as provided herein; provided, however, (i) the aggregate
principal amount of Swingline Loans outstanding at any time shall not
exceed FIVE MILLION DOLLARS ($5,000,000) (the "Swingline Committed
Amount"), and (ii) the aggregate principal amount of outstanding Revolving
Loans plus LOC Obligations outstanding plus the aggregate principal amount
of outstanding Swingline Loans shall not exceed the Revolving Committed
Amount. Swingline Loans hereunder shall be made as Base Rate Loans or
Quoted Rate Swingline Loans as the Borrower may request in accordance with
the provisions of this Section 2.3, and may be repaid and reborrowed in
accordance with the provisions hereof.
(b) Swingline Loan Advances.
(i) Notices; Disbursement. Whenever the Borrower desires a
Swingline Loan advance hereunder it shall give written notice (or
telephonic notice promptly confirmed in writing) to the Swingline
Lender not later than 11:00 A.M. (Charlotte, North Carolina time) on
the Business Day of the requested Swingline Loan advance. Each such
notice shall be irrevocable and shall specify (A) that a Swingline
Loan advance is requested, (B) the date of the requested Swingline
Loan advance (which shall be a Business Day) and (C) the principal
amount of the Swingline Loan advance requested. Each Swingline Loan
shall be made as a Base Rate Loan or a Quoted Rate Swingline Loan
and shall have such maturity date as the Swingline Lender and the
Borrower shall agree upon receipt by the Swingline Lender of any
such notice from the Borrower. The Swingline Lender shall initiate
the transfer of funds representing the Swingline Loan advance to the
Borrower by 3:00 P.M. (Charlotte, North Carolina time) on the
Business Day of the requested borrowing.
(ii) Minimum Amounts. Each Swingline Loan advance shall be in
a minimum principal amount of $100,000 (or the remaining amount of
the Swingline Committed Amount, if less).
(iii) Repayment of Swingline Loans. The principal amount of
all Swingline Loans shall be due and payable on the earlier of (A)
the maturity date agreed to by the Swingline Lender and the Borrower
with respect to such Loan (which maturity date shall not be a date
more than thirty (30) Business Days from the date of advance
thereof) or (B) the Maturity Date. The Swingline Lender may,
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at any time, in its sole discretion, by written notice to the
Borrower and the Revolving Lenders, demand repayment of its
Swingline Loans by way of a Revolving Loan advance, in which case
the Borrower shall be deemed to have requested a Revolving Loan
advance comprised solely of Base Rate Loans in the amount of such
Swingline Loans; provided, however, that any such demand shall be
deemed to have been given one Business Day prior to the Maturity
Date and on the date of the occurrence of any Event of Default
described in Section 9.1 and upon acceleration of the indebtedness
hereunder and the exercise of remedies in accordance with the
provisions of Section 9.2. Each Revolving Lender hereby irrevocably
agrees to make its pro rata share of each such Revolving Loan in the
amount, in the manner and on the date specified in the preceding
sentence notwithstanding (I) the amount of such borrowing may not
comply with the minimum amount for advances of Revolving Loans
otherwise required hereunder, (II) whether any conditions specified
in Section 5.2 are then satisfied, (III) whether a Default or an
Event of Default then exists, (IV) failure of any such request or
deemed request for Revolving Loan to be made by the time otherwise
required hereunder, (V) whether the date of such borrowing is a date
on which Revolving Loans are otherwise permitted to be made
hereunder or (VI) any termination of the Commitments immediately
prior to or contemporaneously with such borrowing. In the event that
any Revolving Loan cannot for any reason be made on the date
otherwise required above (including, without limitation, as a result
of the commencement of a proceeding under the Bankruptcy Code with
respect to the Borrower or any other Credit Party), then each
Revolving Lender hereby agrees that it shall forthwith purchase (as
of the date such borrowing would otherwise have occurred, but
adjusted for any payments received from the Borrower on or after
such date and prior to such purchase) from the Swingline Lender such
Participation Interests in the outstanding Swingline Loans as shall
be necessary to cause each such Revolving Lender to share in such
Swingline Loans ratably based upon its Commitment Percentage of the
Revolving Committed Amount (determined before giving effect to any
termination of the Commitments pursuant to Section 3.4), provided
that (A) all interest payable on the Swingline Loans shall be for
the account of the Swingline Lender until the date as of which the
respective Participation Interest is purchased and (B) at the time
any purchase of Participation Interests pursuant to this sentence is
actually made, the purchasing Revolving Lender shall be required to
pay to the Swingline Lender, to the extent not paid to the Swingline
Lender by the Borrower in accordance with the terms of subsection
(c)(ii) below, interest on the principal amount of Participation
Interests purchased for each day from and including the day upon
which such borrowing would otherwise have occurred to but excluding
the date of payment for such Participation Interests, at the rate
equal to the Federal Funds Rate.
(c) Interest on Swingline Loans.
(i) Rates of Interest. Subject to the provisions of Section
3.1, each Swingline Loan shall bear interest as follows:
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(A) Base Rate Loans. If such Swingline Loan is a Base
Rate Loan, at a per annum rate (computed on the basis of the
actual number of days elapsed over a year of 365 days) equal
to the Adjusted Base Rate.
(B) Quoted Rate Swingline Loans. If such Swingline Loan
is a Quoted Rate Swingline Loan, at a per annum rate (computed
on the basis of the actual number of days elapsed over a year
of 360 days) equal to the Quoted Rate applicable thereto.
Notwithstanding any other provision to the contrary set forth in
this Credit Agreement, in the event that the principal amount of any
Quoted Rate Swingline Loan is not repaid on the last day of the
Interest Period for such Loan, then such Loan shall be automatically
converted into a Base Rate Loan at the end of such Interest Period.
(ii) Payment of Interest. Interest on Swingline Loans shall be
payable in arrears on each applicable Interest Payment Date (or at
such other times as may be specified herein), unless accelerated
sooner pursuant to Section 9.2.
(d) Swingline Note. The Swingline Loans shall be evidenced by a duly
executed promissory note of the Borrower to the Swingline Lender in an
original principal amount equal to the Swingline Committed Amount
substantially in the form of Exhibit 2.3(d).
2.4 Tranche A Term Loan.
(a) Tranche A Term Commitment. Subject to the terms and conditions
hereof and in reliance upon the representations and warranties set forth
herein each Tranche A Term Lender severally agrees to make available to
the Borrower on the Closing Date such Lender's Tranche A Term Loan
Commitment Percentage of a term loan in Dollars (the "Tranche A Term
Loan") in the aggregate principal amount of FIFTY MILLION DOLLARS
($50,000,000) (the "Tranche A Term Loan Committed Amount") for the
purposes hereinafter set forth. The Tranche A Term Loan may consist of
Base Rate Loans or Eurodollar Loans, or a combination thereof, as the
Borrower may request; provided, however, that no more than 10 Eurodollar
Loans shall be outstanding hereunder at any time (it being understood
that, for purposes hereof, Eurodollar Loans with different Interest
Periods shall be considered as separate Eurodollar Loans, even if they
begin on the same date, although borrowings, extensions and conversions
may, in accordance with the provisions hereof, be combined at the end of
existing Interest Periods to constitute a new Eurodollar Loan with a
single Interest Period). Amounts repaid on the Tranche A Term Loan may not
be reborrowed.
(b) Borrowing Procedures. The Borrower shall submit an appropriate
Notice of Borrowing to the Agent not later than 11:00 A.M. (Charlotte,
North Carolina time) on the Closing Date, with respect to the portion of
the Tranche A Term Loan initially consisting of a Base Rate Loan, or on
the third Business Day prior to the Closing Date, with respect to the
portion of the Tranche A Term Loan initially consisting of one or more
Eurodollar
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Loans, which Notice of Borrowing shall be irrevocable and shall specify
(i) that the funding of a Tranche A Term Loan is requested and (ii)
whether the funding of the Tranche A Term Loan shall be comprised of Base
Rate Loans, Eurodollar Loans or a combination thereof, and if Eurodollar
Loans are requested, the Interest Period(s) therefor. If the Borrower
shall fail to deliver such Notice of Borrowing to the Agent by 11:00 A.M.
(Charlotte, North Carolina time) on the third Business Day prior to the
Closing Date, then the full amount of the Tranche A Term Loan shall be
disbursed on the Closing Date as a Base Rate Loan. Each Tranche A Term
Lender shall make its Tranche A Term Loan Commitment Percentage of the
Tranche A Term Loan available to the Agent for the account of the Borrower
at the office of the Agent specified in Schedule 2.1(a), or at such other
office as the Agent may designate in writing, by 1:00 P.M. (Charlotte,
North Carolina time) on the Closing Date in Dollars and in funds
immediately available to the Agent.
(c) Minimum Amounts. Each Eurodollar Loan or Base Rate Loan that is
part of the Tranche A Term Loan shall be in an aggregate principal amount
that is not less than $2,000,000 and integral multiples of $100,000 (or
the then remaining principal balance of the Tranche A Term Loan, if less).
(d) Repayment of Tranche A Term Loan. The principal amount of the
Tranche A Term Loan shall be repaid in twenty-four (24) consecutive
quarterly installments as follows, unless accelerated sooner pursuant to
Section 9.2:
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=========================================
Tranche A Term
Principal Loan Principal
Amortization Amortization
Payment Dates Payment
-----------------------------------------
September 30, 1998, $500,000
December 31, 1998,
March 31, 1999
and
June 30, 1999
-----------------------------------------
September 30, 1999, $1,000,000
December 31, 1999,
March 31, 2000
and
June 30, 2000
-----------------------------------------
September 30, 2000, $1,500,000
December 31, 2000,
March 31, 2001
and
June 30, 2001
-----------------------------------------
September 30, 2001, $2,500,000
December 31, 2001,
March 31, 2002
and
June 30, 2002
-----------------------------------------
September 30, 2002, $3,250,000
December 31, 2002,
March 31, 2003
and
June 30, 2003
-----------------------------------------
September 30, 2003, $3,750,000
December 31, 2003,
March 31, 2004
and
the Maturity Date
=========================================
(e) Interest. Subject to the provisions of Section 3.1, the Tranche
A Term Loan shall bear interest at a per annum rate equal to:
(i) Base Rate Loans. During such periods as the Tranche A Term
Loan shall be comprised in whole or in part of Base Rate Loans, such
Base Rate Loans shall bear interest at a per annum rate equal to the
Adjusted Base Rate.
(ii) Eurodollar Loans. During such periods as the Tranche A
Term Loan shall be comprised in whole or in part of Eurodollar
Loans, such Eurodollar Loans shall bear interest at a per annum rate
equal to the Adjusted Eurodollar Rate.
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Interest on the Tranche A Term Loan shall be payable in arrears on each
applicable Interest Payment Date (or at such other times as may be
specified herein).
(f) Tranche A Term Notes. The portion of the Tranche A Term Loan
made by each Tranche A Term Lender shall be evidenced by a duly executed
promissory note of the Borrower to such Lender in an original principal
amount equal to such Lender's Tranche A Term Loan Commitment Percentage of
the Tranche A Term Loan and substantially in the form of Exhibit 2.4(f).
2.5 Tranche B Term Loan.
(a) Tranche B Term Commitment. Subject to the terms and conditions
hereof and in reliance upon the representations and warranties set forth
herein, each Tranche B Term Lender severally agrees to make available to
the Borrower on the Closing Date such Lender's Tranche B Term Loan
Commitment Percentage of a term loan in Dollars (the "Tranche B Term
Loan") in the aggregate principal amount of SIXTY MILLION DOLLARS
($60,000,000) (the "Tranche B Term Loan Committed Amount") for the
purposes hereinafter set forth. The Tranche B Term Loan may consist of
Base Rate Loans or Eurodollar Loans, or a combination thereof, as the
Borrower may request; provided, however, that no more than 10 Eurodollar
Loans shall be outstanding hereunder at any time (it being understood
that, for purposes hereof, Eurodollar Loans with different Interest
Periods shall be considered as separate Eurodollar Loans, even if they
begin on the same date, although borrowings, extensions and conversions
may, in accordance with the provisions hereof, be combined at the end of
existing Interest Periods to constitute a new Eurodollar Loan with a
single Interest Period). Amounts repaid on the Tranche B Term Loan may not
be reborrowed.
(b) Borrowing Procedures. The Borrower shall submit an appropriate
Notice of Borrowing to the Agent not later than 11:00 A.M. (Charlotte,
North Carolina time) on the Closing Date, with respect to the portion of
the Tranche B Term Loan initially consisting of a Base Rate Loan, or on
the third Business Day prior to the Closing Date, with respect to the
portion of the Tranche B Term Loan initially consisting of one or more
Eurodollar Loans, which Notice of Borrowing shall be irrevocable and shall
specify (i) that the funding of a Tranche B Term Loan is requested and
(ii) whether the funding of the Tranche B Term Loan shall be comprised of
Base Rate Loans, Eurodollar Loans or a combination thereof, and if
Eurodollar Loans are requested, the Interest Period(s) therefor. If the
Borrower shall fail to deliver such Notice of Borrowing to the Agent by
11:00 A.M. (Charlotte, North Carolina time) on the third Business Day
prior to the Closing Date, then the full amount of the Tranche B Term Loan
shall be disbursed on the Closing Date as a Base Rate Loan. Each Tranche B
Term Lender shall make its Tranche B Term Loan Commitment Percentage of
the Tranche B Term Loan available to the Agent for the account of the
Borrower at the office of the Agent specified in Schedule 2.1(a), or at
such other office as the Agent may designate in writing, by 1:00 P.M.
(Charlotte, North Carolina time) on the Closing Date in Dollars and in
funds immediately available to the Agent.
(c) Minimum Amounts. Each Eurodollar Loan or Base Rate Loan that is
part of the Tranche B Term Loan shall be in an aggregate principal amount
that is not less than
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$2,000,000 and integral multiples of $100,000 (or the then remaining
principal balance of the Tranche B Term Loan, if less).
(d) Repayment of Tranche B Term Loan. The principal amount of the
Tranche B Term Loan shall be repaid in twenty-eight (28) consecutive
quarterly installments as follows, unless accelerated sooner pursuant to
Section 9.2:
=========================================
Tranche B Term
Principal Loan Principal
Amortization Amortization
Payment Dates Payment
-----------------------------------------
September 30, 1998, $150,000
December 31, 1998,
March 31, 1999,
June 30, 1999,
September 30, 1999,
December 31, 1999,
March 31, 2000,
June 30, 2000,
September 30, 2000,
December 31, 2000,
March 31, 2001,
June 30, 2001,
September 30, 2001,
December 31, 2001,
March 31, 2002,
June 30, 2002,
September 30, 2002,
December 31, 2002,
March 31, 2003,
June 30, 2003,
September 30, 2003,
December 31, 2003,
March 31, 2004
and
June 30, 2004
-----------------------------------------
September 30, 2004 $14,100,000
December 31, 2004,
March 31, 2005
and
the Maturity Date
=========================================
(e) Interest. Subject to the provisions of Section 3.1, the Tranche
B Term Loan shall bear interest at a per annum rate equal to:
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(i) Base Rate Loans. During such periods as the Tranche B Term
Loan shall be comprised in whole or in part of Base Rate Loans, such
Base Rate Loans shall bear interest at a per annum rate equal to the
Adjusted Base Rate.
(ii) Eurodollar Loans. During such periods as the Tranche B
Term Loan shall be comprised in whole or in part of Eurodollar
Loans, such Eurodollar Loans shall bear interest at a per annum rate
equal to the Adjusted Eurodollar Rate.
Interest on the Tranche B Term Loan shall be payable in arrears on each
applicable Interest Payment Date (or at such other times as may be
specified herein).
(f) Tranche B Term Notes. The portion of the Tranche B Term Loan
made by each Tranche B Term Lender shall be evidenced by a duly executed
promissory note of the Borrower to such Lender in an original principal
amount equal to such Lender's Tranche B Term Loan Commitment Percentage of
the Tranche B Term Loan and substantially in the form of Exhibit 2.5(f).
SECTION 3
OTHER PROVISIONS RELATING TO CREDIT FACILITIES
3.1 Default Rate.
Upon the occurrence, and during the continuance, of default in the payment
of any amount hereunder, under the Notes or under any of the other Credit
Documents, such overdue amount shall bear interest, payable on demand, at a per
annum rate 2% greater than the rate which would otherwise be applicable (or if
no rate is applicable, whether in respect of interest, fees or other amounts,
then the Adjusted Base Rate plus 2%).
3.2 Extension and Conversion.
The Borrower shall have the option, on any Business Day, to extend
existing Loans into a subsequent permissible Interest Period or to convert Loans
into Loans of another interest rate type; provided, however, that (i) except as
provided in Section 3.8, Eurodollar Loans may be converted into Base Rate Loans
or extended as Eurodollar Loans for new Interest Periods only on the last day of
the Interest Period applicable thereto unless the Borrower makes payment of any
amounts payable pursuant to Section 3.12 in connection with such conversion or
extension, (ii) no Eurodollar Loan may be extended and no Base Rate Loan may be
converted into Eurodollar Loans when any Default or Event of Default is in
existence and the Agent or the Required Lenders have determined that such
conversion or extension is not appropriate, (iii) Loans extended as, or
converted into, Eurodollar Loans shall be subject to the terms of the definition
of "Interest Period" set forth in Section 1.1 and shall be in such minimum
amounts as provided in, with respect to Revolving Loans, Section 2.1(b)(ii),
with respect to the Tranche A Term Loan, Section 2.4(c), or, with respect to the
Tranche B Term Loan, Section 2.5(c), (iv) no more than 10 Eurodollar Loans shall
be outstanding hereunder at any time (it being understood that, for purposes
hereof, Eurodollar Loans with different Interest Periods shall be considered as
separate Eurodollar Loans, even if they
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begin on the same date, although borrowings, extensions and conversions may, in
accordance with the provisions hereof, be combined at the end of existing
Interest Periods to constitute a new Eurodollar Loan with a single Interest
Period), (v) any request for extension or conversion of a Eurodollar Loan which
shall fail to specify an Interest Period shall be deemed to be a request for an
Interest Period of one month and (vi) Swingline Loans may not be extended or
converted pursuant to this Section 3.2. Each such extension or conversion shall
be effected by the Borrower by giving a Notice of Extension/Conversion (or
telephonic notice promptly confirmed in writing) to the office of the Agent
specified in specified in Schedule 2.1(a), or at such other office as the Agent
may designate in writing, prior to 11:00 A.M. (Charlotte, North Carolina time)
on the Business Day of, in the case of the conversion of a Eurodollar Loan into
a Base Rate Loan, and on the third Business Day prior to, in the case of the
extension of a Eurodollar Loan as, or conversion of a Base Rate Loan into, a
Eurodollar Loan, the date of the proposed extension or conversion, specifying
the date of the proposed extension or conversion, the Loans to be so extended or
converted, the types of Loans into which such Loans are to be converted and, if
appropriate, the applicable Interest Periods with respect thereto. Each request
for extension or conversion shall be irrevocable. In the event the Borrower
fails to request extension or conversion of any Eurodollar Loan in accordance
with this Section, or any such conversion or extension is not permitted or
required by this Section, then such Eurodollar Loan shall be automatically
converted into a Base Rate Loan at the end of the Interest Period applicable
thereto. The Agent shall give each affected Lender notice as promptly as
practicable of any such proposed extension or conversion affecting any Loan.
3.3 Prepayments.
(a) Voluntary Prepayments. The Borrower shall have the right to
prepay Loans in whole or in part from time to time; provided, however,
that each partial prepayment of Loans shall be (i) in the case of
Revolving Loans, in a minimum principal amount of $2,000,000 and integral
multiples of $100,000 in excess thereof and (ii) in the case of Swingline
Loans, in a minimum principal amount of $100,000. Subject to the foregoing
terms, amounts prepaid under this Section 3.3(a) shall be applied as the
Borrower may elect. All prepayments under this Section 3.3(a) shall be
subject to Section 3.12, but otherwise without premium or penalty, and be
accompanied by interest on the principal amount prepaid through the date
of prepayment.
(b) Mandatory Prepayments.
(i) Revolving Committed Amount. If, at any time, the sum of
the aggregate principal amount of outstanding Revolving Loans plus
LOC Obligations outstanding plus outstanding Swingline Loans shall
exceed the Revolving Committed Amount, the Credit Parties
immediately shall cause the Borrower to prepay the Revolving Loans
and Swingline Loans and (after all Revolving Loans and Swingline
Loans have been repaid) cash collateralize the LOC Obligations in an
amount sufficient to eliminate such excess.
(ii) Excess Cash Flow. Within 90 days after the end of each
fiscal year (commencing with the fiscal year ending December 31,
1998), the Borrower shall prepay the Loans in an amount equal to (x)
50% of the Excess Cash Flow earned during such prior fiscal year
less (y) the amount of any voluntary prepayments of
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the Tranche A Term Loan, the Tranche B Term Loan or (to the extent
accompanied by a reduction in the Revolving Committed Amount) the
Revolving Loans during such prior fiscal year. Any payments of
Excess Cash Flow shall be applied as set forth in clause (vi) below.
(iii) Asset Dispositions. Immediately upon the occurrence of
any Asset Disposition Prepayment Event, the Borrower shall prepay
the Loans in an aggregate amount equal to 100% of the Net Cash
Proceeds of the related Asset Disposition not applied during the
related Application Period to make Eligible Reinvestments as
contemplated by the terms of Section 8.5(e) (such prepayment to be
applied as set forth in clause (vi) below).
(iv) Debt Issuances. Immediately upon receipt by the Parent or
any Consolidated Party of proceeds from any Debt Issuance, the
Borrower shall prepay the Loans in an aggregate amount equal to 100%
of the Net Cash Proceeds of such Debt Issuance to the Lenders (such
prepayment to be applied as set forth in clause (vi) below).
(v) Issuances of Equity. Immediately upon the occurrence of
any Equity Issuance Prepayment Event, the Borrower shall prepay the
Loans in an aggregate amount equal to 100% of the Net Cash Proceeds
of the related Equity Issuance not applied during the period of 365
days following the consummation of such Equity Issuance to make
Eligible Reinvestments (such prepayment to be applied as set forth
in clause (vi) below).
(vi) Application of Mandatory Prepayments. All amounts
required to be paid pursuant to this Section 3.3(b) shall be applied
as follows: (A) with respect to all amounts prepaid pursuant to
Section 3.3(b)(i), first to Swingline Loans and then to the
Revolving Loans and (after all Revolving Loans have been repaid) to
a cash collateral account in respect of LOC Obligations, (B) with
respect to all amounts prepaid pursuant to Section 3.3(b)(ii), (iv)
or (v), pro rata to the Tranche A Term Loan and the Tranche B Term
Loan (in each case ratably to the remaining Principal Amortization
Payments thereof) and (C) with respect to all amounts prepaid
pursuant to Section 3.3(b)(iii), pro rata to (1) the Swingline
Loans, (2) the Revolving Loans and (after all Revolving Loans have
been repaid) to a cash collateral account in respect of LOC
Obligations (with a corresponding reduction in the Revolving
Committed Amount in an amount equal to all amounts applied pursuant
to this clause (2)), (3) the Tranche A Term Loan (ratably to the
remaining Principal Amortization Payments thereof) and (4) the
Tranche B Term Loan (ratably to the remaining Principal Amortization
Payments thereof). One or more holders of the Tranche B Term Loans
may decline to accept a mandatory prepayment under Sections
3.3(b)(ii), (iii), (iv) or (v) to the extent there are sufficient
Tranche A Term Loans outstanding to be paid with such prepayment, in
which case such declined prepayments shall be allocated pro rata
among the Tranche A Term Loans and the Tranche B Term Loans held by
Lenders accepting such prepayments. Within the parameters of the
applications set forth above, prepayments of Revolving Loans, the
Tranche A Term Loan or the Tranche B Term
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Loan shall be applied first to Base Rate Loans and then to
Eurodollar Loans in direct order of Interest Period maturities. All
prepayments under this Section 3.3(b) shall be subject to Section
3.12 and be accompanied by interest on the principal amount prepaid
through the date of prepayment.
(c) Escrow Account.
If the Borrower is required to make a mandatory prepayment under
Section 3.3(b) that would result in a payment by the Borrower under
Section 3.12, the Borrower may, at its option, elect to deposit funds
constituting such prepayment with the Agent to be held by the Agent in a
cash collateral account and applied (including any income or gains earned
on amounts in the Escrow Account), upon the earliest to occur of (A) the
request of the Borrower, (B) the last day of any Interest Period, (C) the
occurrence of an Event of Default or (D) the Maturity Date, to the Credit
Party Obligations in accordance with the terms of Section 3.3(b)(vi).
3.4 Termination and Reduction of Commitments.
(a) Voluntary Reductions. The Borrower may from time to time
permanently reduce or terminate the Revolving Committed Amount in whole or
in part (in minimum aggregate amounts of $5,000,000 or in integral
multiples of $1,000,000 in excess thereof (or, if less, the full remaining
amount of the then applicable Revolving Committed Amount)) upon five
Business Days' prior written notice to the Agent; provided, however, no
such termination or reduction shall be made which would cause the
aggregate principal amount of outstanding Revolving Loans plus LOC
Obligations outstanding plus outstanding Swingline Loans to exceed the
Revolving Committed Amount unless, concurrently with such termination or
reduction, the Revolving Loans and Swingline Loans are repaid to the
extent necessary to eliminate such excess. The Agent shall promptly notify
each Revolving Lender of receipt by the Agent of any notice from the
Borrower pursuant to this Section 3.4(a).
(b) Mandatory Reductions. On any date that the Revolving Loans are
required to be prepaid pursuant to the terms of Section 3.3(b)(vi), the
Revolving Committed Amount automatically shall be permanently reduced by
the amount of such required prepayment and/or reduction.
(c) Maturity Date. The Revolving Commitments of the Revolving
Lenders, the LOC Commitment of the Issuing Lender and the Swingline
Commitment of the Swingline Lender shall automatically terminate on the
Maturity Date.
(d) General. The Borrower shall pay to the Agent for the account of
the Revolving Lenders in accordance with the terms of Section 3.5(b)(i),
on the date of each termination or reduction of the Revolving Committed
Amount, the Unused Fee accrued through the date of such termination or
reduction on the amount of the Revolving Committed Amount so terminated or
reduced.
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3.5 Fees.
(a) Upfront Fees. The Borrower agrees to pay to the Agent for the
benefit of the Lenders in immediately available funds on or before the
Closing Date an upfront fee (the "Upfront Fee") in the amount provided in
the Agent's Fee Letter.
(b) Unused Fee. In consideration of the Revolving Commitments of the
Revolving Lenders hereunder, the Borrower agrees to pay to the Agent for
the account of each Revolving Lender a fee (the "Unused Fee") on the
Unused Revolving Committed Amount computed at a per annum rate for each
day during the applicable Unused Fee Calculation Period (hereinafter
defined) at a rate equal to the Applicable Percentage in effect from time
to time. The Unused Fee shall commence to accrue on the Closing Date and
shall be due and payable in arrears on the last business day of each
March, June, September and December (and any date that the Revolving
Committed Amount is reduced as provided in Section 3.4(a) and the Maturity
Date) for the immediately preceding quarter (or portion thereof) (each
such quarter or portion thereof for which the Unused Fee is payable
hereunder being herein referred to as an "Unused Fee Calculation Period"),
beginning with the first of such dates to occur after the Closing Date.
(c) Letter of Credit Fees.
(i) Standby Letter of Credit Issuance Fee. In consideration of
the issuance of standby Letters of Credit hereunder, the Borrower
promises to pay to the Agent for the account of each Revolving
Lender a fee (the "Standby Letter of Credit Fee") on such Revolving
Lender's Revolving Commitment Percentage of the average daily
maximum amount available to be drawn under each such standby Letter
of Credit computed at a per annum rate for each day from the date of
issuance to the date of expiration equal to the Applicable
Percentage. The Standby Letter of Credit Fee will be payable
quarterly in arrears on the last Business Day of each March, June,
September and December for the immediately preceding quarter (or a
portion thereof).
(ii) Trade Letter of Credit Drawing Fee. In consideration of
the issuance of trade Letters of Credit hereunder, the Borrower
promises to pay to the Agent for the account of each Revolving
Lender a fee (the "Trade Letter of Credit Fee") on such Revolving
Lender's Revolving Commitment Percentage of the average daily
maximum amount available to be drawn under each such trade Letter of
Credit computed at a per annum rate for each day from the date of
issuance to the date of expiration equal to the Applicable
Percentage. The Trade Letter of Credit Fee will be payable quarterly
in arrears on the last Business Day of each March, June, September
and December for the immediately preceding quarter (or a portion
thereof).
(iii) Issuing Lender Fees. In addition to the Standby Letter
of Credit Fee payable pursuant to clause (i) above and the Trade
Letter of Credit Fee payable pursuant to clause (ii) above, the
Borrower promises to pay to the Issuing Lender for its own account
without sharing by the other Revolving Lenders the letter of credit
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fronting and negotiation fees agreed to by the Borrower and the
Issuing Lender from time to time and the customary charges from time
to time of the Issuing Lender with respect to the issuance,
amendment, transfer, administration, cancellation and conversion of,
and drawings under, such Letters of Credit (collectively, the
"Issuing Lender Fees").
(d) Administrative Fees. The Borrower agrees to pay to the Agent,
for its own account and NationsBanc Montgomery Securities LLC, as
applicable, the fees referred to in the Agent's Fee Letter (collectively,
the "Agent's Fees").
3.6 Capital Adequacy.
If any Lender has determined, after the date hereof, that the adoption or
the becoming effective of, or any change in, or any change by any Governmental
Authority, central bank or comparable agency charged with the interpretation or
administration thereof in the interpretation or administration of, any
applicable law, rule or regulation regarding capital adequacy, or compliance by
such Lender with any request or directive regarding capital adequacy (whether or
not having the force of law) of any such authority, central bank or comparable
agency, has the effect of reducing the rate of return on such Lender's capital
or assets as a consequence of its commitments or obligations hereunder to a
level below that which such Lender could have achieved but for such adoption,
effectiveness, change or compliance (taking into consideration such Lender's
policies with respect to capital adequacy) by an amount deemed by such Lender to
be material, then, upon notice from such Lender through the Agent to the
Borrower setting forth in reasonable detail the change and the calculation of
such reduced rate of return, the Borrower shall be obligated to pay to such
Lender such additional amount or amounts as will compensate such Lender for such
reduction. Each determination by any such Lender of amounts owing under this
Section shall, absent demonstrable error, be conclusive and binding on the
parties hereto.
3.7 Limitation on Eurodollar Loans.
If on or prior to the first day of any Interest Period for any Eurodollar
Loan:
(a) the Agent determines (which determination shall be conclusive)
that by reason of circumstances affecting the relevant market, adequate
and reasonable means do not exist for ascertaining the Eurodollar Rate for
such Interest Period; or
(b) the Required Lenders determine (which determination shall be
conclusive) and notify the Agent that the Eurodollar Rate will not
adequately and fairly reflect the cost to the Lenders of funding
Eurodollar Loans for such Interest Period;
then the Agent shall give the Borrower prompt notice thereof, and so long as
such condition remains in effect, the Lenders shall be under no obligation to
make additional Eurodollar Loans, Continue Eurodollar Loans, or to Convert Base
Rate Loans into Eurodollar Loans and the Borrower shall, on the last day(s) of
the then current Interest Period(s) for the outstanding Eurodollar Loans, either
prepay such Eurodollar Loans or Convert such Eurodollar Loans into Base Rate
Loans in accordance with the terms of this Credit Agreement. The Agent or the
Required Lenders, as the
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case may be, will promptly withdraw any determination pursuant to this Section
3.7 as soon as circumstances allow.
3.8 Illegality.
Notwithstanding any other provision of this Credit Agreement, in the event
that it becomes unlawful for any Lender or its Applicable Lending Office to
make, maintain or fund Eurodollar Loans hereunder, then such Lender shall
promptly notify the Borrower thereof and such Lender's obligation to make,
Convert into, Continue or maintain Eurodollar Loans shall be suspended until
such time as such Lender may again make, maintain, and fund Eurodollar Loans (in
which case the provisions of Section 3.10 shall be applicable).
3.9 Requirements of Law.
If, after the date hereof, the adoption of any applicable law, rule, or
regulation, or any change in any applicable law, rule, or regulation, or any
change in the interpretation or administration thereof by any Governmental
Authority, central bank, or comparable agency charged with the interpretation or
administration thereof, or compliance by any Lender (or its Applicable Lending
Office) with any request or directive (whether or not having the force of law)
of any such Governmental Authority, central bank, or comparable agency:
(i) shall subject such Lender (or its Applicable Lending Office) to
any tax, duty, or other charge with respect to any Loans, its Notes, or
its obligation to make Loans, or change the basis of taxation of any
amounts payable to such Lender (or its Applicable Lending Office) under
this Credit Agreement or its Notes in respect of any Loans (other than
Taxes defined in Section 3.11(a) and taxes imposed on the overall net
income of such Lender by the jurisdiction in which such Lender has its
principal office or such Applicable Lending Office);
(ii) shall impose, modify, or deem applicable any reserve, special
deposit, assessment, or similar requirement (other than the Eurodollar
Reserve Requirement utilized in the determination of the Adjusted
Eurodollar Rate) relating to any extensions of credit or other assets of,
or any deposits with or other liabilities or commitments of, such Lender
(or its Applicable Lending Office), including the Commitment of such
Lender hereunder; or
(iii) shall impose on such Lender (or its Applicable Lending Office)
or the London interbank market any other condition affecting this Credit
Agreement or its Notes or any of such extensions of credit or liabilities
or commitments;
and the result of any of the foregoing is to increase, by an amount deemed by
such Lender (or its Applicable Lending Office) to be material, the cost to such
Lender (or its Applicable Lending Office) of making, Converting into,
Continuing, or maintaining any Eurodollar Loans or to reduce any sum received or
receivable by such Lender (or its Applicable Lending Office) under this Credit
Agreement or its Notes, then the Borrower shall pay to such Lender on demand
such amount or amounts as will compensate such Lender for such increased cost or
reduction. If any Lender requests compensation by the Borrower under this
Section 3.9, the Borrower may, by notice to such Lender (with a copy to the
Agent), suspend the obligation of such Lender to make, Convert into,
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Continue or maintain the affected Loans, until the event or condition giving
rise to such request ceases to be in effect (in which case the provisions of
Section 3.10 shall be applicable); provided that such suspension shall not
affect the right of such Lender to receive the compensation so requested. Each
Lender shall promptly notify the Borrower and the Agent of any event of which it
has knowledge, occurring after the date hereof, which will entitle such Lender
to compensation pursuant to this Section 3.9 and will designate a different
Applicable Lending Office if such designation will avoid the need for, or reduce
the amount of, such compensation and will not, in the judgment of such Lender,
be otherwise disadvantageous to it. Any Lender claiming compensation under this
Section 3.9 shall furnish to the Borrower and the Agent a statement setting
forth in reasonable detail the calculation of the additional amount or amounts
to be paid to it hereunder which shall be conclusive in the absence of
demonstrable error. In determining such amount, such Lender may use any
reasonable averaging and attribution methods.
3.10 Treatment of Affected Loans.
If the obligation of any Lender to make, Convert into, Continue or
maintain Eurodollar Loans shall be suspended pursuant to Section 3.8 or 3.9
hereof, such Lender's Eurodollar Loans shall be automatically Converted into
Base Rate Loans on the last day(s) of the then current Interest Period(s) for
such Eurodollar Loans (or, in the case of a Conversion required by Section 3.8
hereof, on such earlier date required by law as such Lender may specify to the
Borrower with a copy to the Agent) and, unless and until such Lender gives
notice as provided below that the circumstances specified in Section 3.8 or 3.9
hereof that gave rise to such Conversion no longer exist:
(a) to the extent that such Lender's Eurodollar Loans have been so
Converted, all payments and prepayments of principal that would otherwise
be applied to such Lender's Eurodollar Loans shall be applied instead to
its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by such
Lender as Eurodollar Loans shall be made or Continued instead as Base Rate
Loans, and all Base Rate Loans of such Lender that would otherwise be
Converted into Eurodollar Loans shall remain as Base Rate Loans.
If such Lender gives notice to the Borrower (with a copy to the Agent) that the
circumstances specified in Section 3.8 or 3.9 hereof that gave rise to the
Conversion of such Lender's Eurodollar Loans pursuant to this Section 3.10 no
longer exist (which such Lender agrees to do promptly upon such circumstances
ceasing to exist) at a time when Eurodollar Loans made by other Lenders are
outstanding, such Lender's Base Rate Loans shall be automatically Converted, on
the first day(s) of the next succeeding Interest Period(s) for such outstanding
Eurodollar Loans, to the extent necessary so that, after giving effect thereto,
all Loans held by the Lenders holding Eurodollar Loans and by such Lender are
held pro rata (as to principal amounts, interest rate basis, and Interest
Periods) in accordance with their respective Commitments.
3.11 Taxes.
(a) Any and all payments by any Credit Party to or for the account
of any Lender or the Agent hereunder or under any other Credit Document
shall be made free and clear of and without deduction for any and all
present or future taxes, duties, levies,
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imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and the Agent,
taxes imposed on it as a result of a present or former connection between
the Agent or such Lender and the jurisdiction of the Governmental
Authority imposing such tax or any political subdivision or taxing
authority thereof or therein (other than any such connection arising
solely from the Agent or such Lender having executed, delivered or
performed its obligations or received a payment under, or enforced, this
Credit Agreement or any other Credit Document) (all such non-excluded
taxes, duties, levies, imposts, deductions, charges, withholdings, and
liabilities being hereinafter referred to as "Taxes"). If any Credit Party
shall be required by law to deduct any Taxes from or in respect of any sum
payable under this Credit Agreement or any other Credit Document to any
Lender or the Agent, (i) the sum payable shall be increased as necessary
so that after making all required deductions (including deductions for
Taxes applicable to additional sums payable under this Section 3.11) such
Lender or the Agent receives an amount equal to the sum it would have
received had no such deductions been made, (ii) such Credit Party shall
make such deductions, (iii) such Credit Party shall pay the full amount
deducted to the relevant taxation authority or other authority in
accordance with applicable law, and (iv) such Credit Party shall furnish
to the Agent, at its address referred to in Section 11.1, the original or
a certified copy of a receipt evidencing payment thereof. Notwithstanding
the foregoing, no additional sums shall be payable pursuant to Section
3.11(a)(i) or 3.11(c) with respect to Taxes (a) that are attributable to
such Lender's failure to comply with the requirements of Section 3.11(d),
(b) that are United States withholding taxes imposed on amounts payable to
such Lender at the time the Lender becomes a party to this Agreement or
(c) unless imposed as a result of a change in treaty, law or regulation.
(b) In addition, the Borrower agrees to pay any and all present or
future stamp or documentary taxes and any other excise or property taxes
or charges or similar levies which arise from any payment made under this
Credit Agreement or any other Credit Document or from the execution or
delivery of, or otherwise with respect to, this Credit Agreement or any
other Credit Document (hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify each Lender and the Agent for
the full amount of Taxes and Other Taxes (including, without limitation,
any Taxes or Other Taxes imposed or asserted by any jurisdiction on
amounts payable under this Section 3.11) paid by such Lender or the Agent
(as the case may be) and any liability for penalties, interest, and
expenses arising therefrom or with respect thereto.
(d) Each that is not a United States person under Section
7701(a)(30) of the Code, on or prior to the date of its execution and
delivery of this Credit Agreement in the case of each Lender listed on the
signature pages hereof and on or prior to the date on which it becomes a
Lender in the case of each other Lender, and from time to time thereafter
if requested in writing by the Borrower or the Agent (but only so long as
such Lender remains lawfully able to do so), shall provide the Borrower
and the Agent with (i) Internal Revenue Service Form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Lender is entitled to benefits under an
income tax treaty to which the United States is a party which reduces the
rate of withholding tax on payments of interest or certifying that the
income
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receivable pursuant to this Credit Agreement is effectively connected with
the conduct of a trade or business in the United States, (ii) Internal
Revenue Service Form W-8 or W-9, as appropriate, or any successor form
prescribed by the Internal Revenue Service, and (iii) any other form or
certificate required by any taxing authority (including any certificate
required by Sections 871(h) and 881(c) of the Internal Revenue Code),
certifying that such Lender is entitled to an exemption from or a reduced
rate of tax on payments pursuant to this Credit Agreement or any of the
other Credit Documents. In addition, each Lender shall deliver such forms
promptly upon the obsolescence or invalidity of any form previously
delivered by such Lender. Each Lender shall promptly notify the Borrower
at any time it determines that it is no longer in a position to provide
any previously delivered form to the Borrower (or any other form adopted
by the U.S. taxing authorities for such purpose). Notwithstanding any
other provision of this Section 3.11(d), a Lender shall not be required to
deliver any form pursuant to this Section 3.11(d) that such Lender is not
legally able to deliver.
(e) If any Credit Party is required to pay additional amounts to or
for the account of any Lender pursuant to this Section 3.11, then such
Lender will agree to use reasonable efforts to change the jurisdiction of
its Applicable Lending Office so as to eliminate or reduce any such
additional payment which may thereafter accrue if such change, in the
reasonable judgment of such Lender, is not otherwise materially
disadvantageous to such Lender.
(f) Within thirty (30) days after the date of any payment of Taxes,
the applicable Credit Party shall furnish to the Agent the original or a
certified copy of a receipt evidencing such payment.
(g) Without prejudice to the survival of any other agreement of the
Credit Parties hereunder, the agreements and obligations of the Credit
Parties contained in this Section 3.11 shall survive the repayment of the
Loans, LOC Obligations and other obligations under the Credit Documents
and the termination of the Commitments hereunder.
(h) If the Agent or any Lender receives a refund with respect to
Taxes paid by the Borrower, which in the good faith judgment of such
Lender is allocable to such payment, the Agent or Lender, respectively
shall promptly pay such refund, together with any other amounts paid by
the Borrower in connection with such refunded Taxes, to the Borrower, net
of all out-of-pocket expenses of such Lender incurred in obtaining such
refund, provided, however, that the Borrower agrees to promptly return
such refund to the Agent or the applicable Lender, as the case may be, if
it receives notice from the Agent or applicable Lender that such Agent or
Lender is required to repay such refund. Each of the Agent and each Lender
agrees that it will contest such Taxes or liabilities if the Agent or such
Lender determines, in its reasonable judgment, that it would not be
materially disadvantaged or prejudiced as a result of such contest.
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3.12 Compensation.
Upon the request of any Lender, the Borrower shall pay to such Lender such
amount or amounts as shall be sufficient (in the reasonable opinion of such
Lender) to compensate it for any loss, cost, or expense (excluding loss of
anticipated profits) incurred by it as a result of:
(a) any payment, prepayment, or Conversion of a Eurodollar Loan or
Quoted Rate Swingline Loan for any reason (including, without limitation,
the acceleration of the Loans pursuant to Section 9.2) on a date other
than the last day of the Interest Period for such Loan; or
(b) any failure by the Borrower for any reason (including, without
limitation, the failure of any condition precedent specified in Section 5
to be satisfied) to borrow, Convert, Continue, or prepay a Eurodollar Loan
or Quoted Rate Swingline Loan on the date for such borrowing, Conversion,
Continuation, or prepayment specified in the relevant notice of borrowing,
prepayment, Continuation, or Conversion under this Credit Agreement.
Such indemnification may include an amount equal to the excess, if any, of (a)
the amount of interest which would have accrued on the amount so prepaid, or not
so borrowed, converted or continued, for the period from the date of such
prepayment or of such failure to borrow, convert or continue to the last day of
the applicable Interest Period (or, in the case of a failure to borrow, convert
or continue, the Interest Period that would have commenced on the date of such
failure) in each case at the applicable rate of interest for such Eurodollar
Loans provided for herein (excluding, however, the Applicable Percentage
included therein, if any) over (b) the amount of interest (as reasonably
determined by such Lender) which would have accrued to such Lender on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank Eurodollar market. Any Lender claiming compensation under
this Section 3.12 shall furnish to the Borrower and the Agent a statement
setting forth in reasonable detail the calculation of the amounts to be paid to
it hereunder which shall be conclusive in the absence of demonstrable error. The
covenants of the Borrower set forth in this Section 3.12 shall survive the
repayment of the Loans, LOC Obligations and other obligations under the Credit
Documents and the termination of the Commitments hereunder.
3.13 Pro Rata Treatment.
Except to the extent otherwise provided herein:
(a) Loans. Each Loan, each payment or (subject to the terms of
Section 3.3) prepayment of principal of any Loan or reimbursement
obligations arising from drawings under Letters of Credit, each payment of
interest on the Loans or reimbursement obligations arising from drawings
under Letters of Credit, each payment of Unused Fees, each payment of the
Standby Letter of Credit Fee, each payment of the Trade Letter of Credit
Fee, each reduction of the Revolving Committed Amount and each conversion
or extension of any Loan, shall be allocated pro rata among the Lenders in
accordance with the respective principal amounts of their outstanding
Loans and Participation Interests.
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(b) Advances. No Lender shall be responsible for the failure or
delay by any other Lender in its obligation to make its ratable share of a
borrowing hereunder; provided, however, that the failure of any Lender to
fulfill its obligations hereunder shall not relieve any other Lender of
its obligations hereunder. Unless the Agent shall have been notified by
any Lender prior to the date of any requested borrowing that such Lender
does not intend to make available to the Agent its ratable share of such
borrowing to be made on such date, the Agent may assume that such Lender
has made such amount available to the Agent on the date of such borrowing,
and the Agent in reliance upon such assumption, may (in its sole
discretion but without any obligation to do so) make available to the
Borrower a corresponding amount. If such corresponding amount is not in
fact made available to the Agent, the Agent shall be able to recover such
corresponding amount from such Lender. If such Lender does not pay such
corresponding amount forthwith upon the Agent's demand therefor, the Agent
will promptly notify the Borrower, and the Borrower shall immediately pay
such corresponding amount to the Agent. The Agent shall also be entitled
to recover from the Lender or the Borrower, as the case may be, interest
on such corresponding amount in respect of each day from the date such
corresponding amount was made available by the Agent to the Borrower to
the date such corresponding amount is recovered by the Agent at a per
annum rate equal to (i) from the Borrower, at the applicable rate for the
applicable borrowing and (ii) from a Lender, at the Federal Funds Rate. A
certificate of the Agent submitted to any Lender with respect to any
amounts owing under this subsection (b) shall be conclusive in the absence
of manifest error.
3.14 Sharing of Payments.
The Lenders agree among themselves that, in the event that any Lender
shall obtain payment in respect of any Loan, LOC Obligation or any other
obligation owing to such Lender under this Credit Agreement through the exercise
of a right of setoff, banker's lien or counterclaim, or pursuant to a secured
claim under Section 506 of Title 11 of the United States Code or other security
or interest arising from, or in lieu of, such secured claim, received by such
Lender under any applicable bankruptcy, insolvency or other similar law or
otherwise, or by any other means, in excess of its pro rata share of such
payment as provided for in this Credit Agreement, such Lender shall promptly
purchase from the other Lenders a Participation Interest in such Loans, LOC
Obligations and other obligations in such amounts, and make such other
adjustments from time to time, as shall be equitable to the end that all Lenders
share such payment in accordance with their respective ratable shares as
provided for in this Credit Agreement. The Lenders further agree among
themselves that if payment to a Lender obtained by such Lender through the
exercise of a right of setoff, banker's lien, counterclaim or other event as
aforesaid shall be rescinded or must otherwise be restored, each Lender which
shall have shared the benefit of such payment shall, by repurchase of a
Participation Interest theretofore sold, return its share of that benefit
(together with its share of any accrued interest payable with respect thereto)
to each Lender whose payment shall have been rescinded or otherwise restored.
The Borrower agrees that any Lender so purchasing such a Participation Interest
may, to the fullest extent permitted by law, exercise all rights of payment,
including setoff, banker's lien or counterclaim, with respect to such
Participation Interest as fully as if such Lender were a holder of such Loan,
LOC Obligations or other obligation in the amount of such Participation
Interest. Except as otherwise expressly provided in this Credit Agreement, if
any Lender or the Agent shall fail to remit to the Agent or any other Lender an
amount payable by such Lender or the Agent to the Agent or such other Lender
pursuant to this
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Credit Agreement on the date when such amount is due, such payments shall be
made together with interest thereon for each date from the date such amount is
due until the date such amount is paid to the Agent or such other Lender at a
rate per annum equal to the Federal Funds Rate. If under any applicable
bankruptcy, insolvency or other similar law, any Lender receives a secured claim
in lieu of a setoff to which this Section 3.14 applies, such Lender shall, to
the extent practicable, exercise its rights in respect of such secured claim in
a manner consistent with the rights of the Lenders under this Section 3.14 to
share in the benefits of any recovery on such secured claim.
3.15 Payments, Computations, Etc.
(a) Place and Manner of Payments. Except as otherwise specifically
provided herein, all payments hereunder shall be made to the Agent in
immediately available funds, without setoff, deduction, counterclaim or
withholding of any kind, at the Agent's office specified in Schedule
2.1(a) not later than 2:00 P.M. (Charlotte, North Carolina time) on the
date when due. Any payment received after such time shall be deemed to
have been received on the next succeeding Business Day. The Agent may, but
shall not be obligated to, charge any ordinary deposit account of any
Credit Party at the Agent for the payment when due of all amounts payable
by the Borrower hereunder. Each Borrower shall, at the time it makes any
payment under this Credit Agreement, specify to the Agent the Credit Party
Obligations to which such payment is to be applied (and in the event that
it fails so to specify, or if such application would be inconsistent with
the terms hereof, the Agent shall distribute such payment to the Lenders
in such manner as the Agent may determine to be appropriate, subject to
the terms of Section 3.13(a)). The Agent shall promptly remit in same day
funds to each Lender such Lender's share, if any, of payments received by
the Agent for the account of such Lender. Whenever any payment hereunder
shall be stated to be due on a day which is not a Business Day, the due
date thereof shall be extended to the next succeeding Business Day
(subject to accrual of interest and Fees for the period of such
extension), except that in the case of Eurodollar Loans, if the extension
would cause the payment to be made in the next following calendar month,
then such payment shall instead be made on the next preceding Business
Day. Except as expressly provided otherwise herein, all computations of
interest and fees shall be made on the basis of actual number of days
elapsed over a year of 360 days, except with respect to computation of
interest on Base Rate Loans which (unless the Base Rate is determined by
reference to the Federal Funds Rate) shall be calculated based on a year
of 365 or 366 days, as appropriate. Interest shall accrue from and include
the date of borrowing, but exclude the date of payment.
(b) Allocation of Payments After Event of Default. Notwithstanding
any other provisions of this Credit Agreement, to the contrary, after the
occurrence and during the continuance of an Event of Default, all amounts
collected or received by the Agent or any Lender on account of the Credit
Party Obligations or any other amounts outstanding under any of the Credit
Documents or in respect of the Collateral shall be paid over or delivered
as follows:
FIRST, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation reasonable attorneys' fees) of the
Agent in connection with enforcing the rights of the Lenders under the
Credit Documents and any protective
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advances made by the Agent with respect to the Collateral under or
pursuant to the terms of the Collateral Documents;
SECOND, to payment of any fees payable to the Agent then due and
owing;
THIRD, to the payment of all reasonable out-of-pocket costs and
expenses (including without limitation, reasonable attorneys' fees) of
each of the Lenders in connection with enforcing its rights under the
Credit Documents or otherwise with respect to the Credit Party Obligations
owing to such Lender;
FOURTH, to the payment of all of the Credit Party Obligations
consisting of accrued fees and interest then due and owing;
FIFTH, to the payment of the outstanding principal amount of the
Credit Party Obligations (including the payment or cash collateralization
of the outstanding LOC Obligations) then due and owing;
SIXTH, to all other Credit Party Obligations and other obligations
which shall have become due and payable under the Credit Documents or
otherwise and not repaid pursuant to clauses "FIRST" through "FIFTH"
above; and
SEVENTH, to the payment of the surplus, if any, to whoever may be
lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in
the numerical order provided until exhausted prior to application to the
next succeeding category; (ii) each of the Lenders shall receive an amount
equal to its pro rata share (based on the proportion that the then
outstanding Loans and LOC Obligations held by such Lender bears to the
aggregate then outstanding Loans and LOC Obligations) of amounts available
to be applied pursuant to clauses "THIRD", "FOURTH", "FIFTH" and "SIXTH"
above; and (iii) to the extent that any amounts available for distribution
pursuant to clause "FIFTH" above are attributable to the issued but
undrawn amount of outstanding Letters of Credit, such amounts shall be
held by the Agent in a cash collateral account and applied (A) first, to
reimburse the Issuing Lender from time to time for any drawings under such
Letters of Credit and (B) then, following the expiration of all Letters of
Credit, to all other obligations of the types described in clauses "FIFTH"
and "SIXTH" above in the manner provided in this Section 3.15(b).
3.16 Evidence of Debt.
(a) Each Lender shall maintain an account or accounts evidencing
each Loan made by such Lender from time to time, including the amounts of
principal and interest payable and paid to such Lender from time to time
under this Credit Agreement. Each Lender will make reasonable efforts to
maintain the accuracy of its account or accounts and to promptly update
its account or accounts from time to time, as necessary.
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(b) The Agent shall maintain the Register pursuant to Section
11.3(c), and a subaccount for each Lender, in which Register and
subaccounts (taken together) shall be recorded (i) the amount, type and
Interest Period of each such Loan hereunder, (ii) the amount of any
principal or interest due and payable or to become due and payable to each
Lender hereunder and (iii) the amount of any sum received by the Agent
hereunder from or for the account of any Credit Party and each Lender's
share thereof. The Agent will make reasonable efforts to maintain the
accuracy of the subaccounts referred to in the preceding sentence and to
promptly update such subaccounts from time to time, as necessary.
(c) The entries made in the accounts, Register and subaccounts
maintained pursuant to subsection (b) of this Section 3.16 (and, if
consistent with the entries of the Agent, subsection (a)) shall be prima
facie evidence of the existence and amounts of the obligations of the
Credit Parties therein recorded; provided, however, that the failure of
any Lender or the Agent to maintain any such account, such Register or
such subaccount, as applicable, or any error therein, shall not in any
manner affect the obligation of the Credit Parties to pay the Credit Party
Obligations owing to such Lender.
SECTION 4
GUARANTY
4.1 The Guaranty.
Each of the Guarantors hereby jointly and severally guarantees to each
Lender, each Affiliate of a Lender that enters into a Hedging Agreement, and the
Agent as hereinafter provided, as primary obligor and not as surety, the prompt
payment of the Credit Party Obligations in full when due (whether at stated
maturity, as a mandatory prepayment, by acceleration, as a mandatory cash
collateralization or otherwise) strictly in accordance with the terms thereof.
The Guarantors hereby further agree that if any of the Credit Party Obligations
are not paid in full when due (whether at stated maturity, as a mandatory
prepayment, by acceleration, as a mandatory cash collateralization or
otherwise), the Guarantors will, jointly and severally, promptly pay the same,
without any demand or notice whatsoever, and that in the case of any extension
of time of payment or renewal of any of the Credit Party Obligations, the same
will be promptly paid in full when due (whether at extended maturity, as a
mandatory prepayment, by acceleration, as a mandatory cash collateralization or
otherwise) in accordance with the terms of such extension or renewal.
Notwithstanding any provision to the contrary contained herein or in any
other of the Credit Documents or Hedging Agreements, the obligations of each
Guarantor hereunder shall be limited to an aggregate amount equal to the largest
amount that would not render its obligations hereunder subject to avoidance
under Section 548 of the Bankruptcy Code or any comparable provisions of any
applicable state law.
4.2 Obligations Unconditional.
The obligations of the Guarantors under Section 4.1 are joint and several,
absolute and unconditional, irrespective of the value, genuineness, validity,
regularity or enforceability of any of
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the Credit Documents or Hedging Agreements, or any other agreement or instrument
referred to therein, or any substitution, release, impairment or exchange of any
other guarantee of or security for any of the Credit Party Obligations, and, to
the fullest extent permitted by applicable law, irrespective of any other
circumstance whatsoever which might otherwise constitute a legal or equitable
discharge or defense of a surety or guarantor, it being the intent of this
Section 4.2 that the obligations of the Guarantors hereunder shall be absolute
and unconditional under any and all circumstances. Each Guarantor agrees that
such Guarantor shall have no right of subrogation, indemnity, reimbursement or
contribution against the Borrower or any other Guarantor for amounts paid under
this Section 4 until such time as the Lenders (and any Affiliates of Lenders
entering into Hedging Agreements) have been paid in full, all Commitments under
this Credit Agreement have been terminated and no Person or Governmental
Authority shall have any right to request any return or reimbursement of funds
from the Lenders in connection with monies received under the Credit Documents
or Hedging Agreements. Without limiting the generality of the foregoing, it is
agreed that, to the fullest extent permitted by law, the occurrence of any one
or more of the following shall not alter or impair the liability of any
Guarantor hereunder which shall remain absolute and unconditional as described
above:
(a) at any time or from time to time, without notice to any
Guarantor, the time for any performance of or compliance with any of the
Credit Party Obligations shall be extended, or such performance or
compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of any of the
Credit Documents, any Hedging Agreement or any other agreement or
instrument referred to in the Credit Documents or Hedging Agreements shall
be done or omitted;
(c) the maturity of any of the Credit Party Obligations shall be
accelerated, or any of the Credit Party Obligations shall be modified,
supplemented or amended in any respect, or any right under any of the
Credit Documents, any Hedging Agreement or any other agreement or
instrument referred to in the Credit Documents or Hedging Agreements shall
be waived or any other guarantee of any of the Credit Party Obligations or
any security therefor shall be released, impaired or exchanged in whole or
in part or otherwise dealt with;
(d) any Lien granted to, or in favor of, the Agent or any Lender or
Lenders as security for any of the Credit Party Obligations shall fail to
attach or be perfected; or
(e) any of the Credit Party Obligations shall be determined to be
void or voidable (including, without limitation, for the benefit of any
creditor of any Guarantor) or shall be subordinated to the claims of any
Person (including, without limitation, any creditor of any Guarantor).
With respect to its obligations hereunder, each Guarantor hereby expressly
waives diligence, presentment, demand of payment, protest and all notices
whatsoever, and any requirement that the Agent or any Lender exhaust any right,
power or remedy or proceed against any Person under any of the Credit Documents,
any Hedging Agreement or any other agreement or instrument referred to in the
Credit Documents or Hedging Agreements, or against any other Person under any
other guarantee of, or security for, any of the Credit Party Obligations.
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4.3 Reinstatement.
The obligations of the Guarantors under this Section 4 shall be
automatically reinstated if and to the extent that for any reason any payment by
or on behalf of any Person in respect of the Credit Party Obligations is
rescinded or must be otherwise restored by any holder of any of the Credit Party
Obligations, whether as a result of any proceedings in bankruptcy or
reorganization or otherwise, and each Guarantor agrees that it will indemnify
the Agent and each Lender on demand for all reasonable costs and expenses
(including, without limitation, fees and expenses of counsel) incurred by the
Agent or such Lender in connection with such rescission or restoration,
including any such costs and expenses incurred in defending against any claim
alleging that such payment constituted a preference, fraudulent transfer or
similar payment under any bankruptcy, insolvency or similar law.
4.4 Certain Additional Waivers.
Without limiting the generality of the provisions of this Section 4, each
Guarantor hereby specifically waives the benefits of N.C. Gen. Stat. ss.ss. 26-7
through 26-9, inclusive, to the extent applicable. Each Guarantor further agrees
that such Guarantor shall have no right of recourse to security for the Credit
Party Obligations, except through the exercise of rights of subrogation pursuant
to Section 4.2 and through the exercise of rights of contribution pursuant to
Section 4.6.
4.5 Remedies.
The Guarantors agree that, to the fullest extent permitted by law, as
between the Guarantors, on the one hand, and the Agent and the Lenders, on the
other hand, the Credit Party Obligations may be declared to be forthwith due and
payable as provided in Section 9.2 (and shall be deemed to have become
automatically due and payable in the circumstances provided in said Section 9.2)
for purposes of Section 4.1 notwithstanding any stay, injunction or other
prohibition preventing such declaration (or preventing the Credit Party
Obligations from becoming automatically due and payable) as against any other
Person and that, in the event of such declaration (or the Credit Party
Obligations being deemed to have become automatically due and payable), the
Credit Party Obligations (whether or not due and payable by any other Person)
shall forthwith become due and payable by the Guarantors for purposes of Section
4.1. The Guarantors acknowledge and agree that their obligations hereunder are
secured in accordance with the terms of the Security Agreements and the other
Collateral Documents and that the Lenders may exercise their remedies thereunder
in accordance with the terms thereof.
4.6 Rights of Contribution.
The Guarantors hereby agree as among themselves that, if any Guarantor
shall make an Excess Payment (as defined below), such Guarantor shall have a
right of contribution from each other Guarantor in an amount equal to such other
Guarantor's Contribution Share (as defined below) of such Excess Payment. The
payment obligations of any Guarantor under this Section 4.6 shall be subordinate
and subject in right of payment to the prior payment in full to the Agent and
the Lenders of the Guaranteed Obligations, and none of the Guarantors shall
exercise any right or remedy under this Section 4.6 against any other Guarantor
until payment and satisfaction in full of
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all of such Guaranteed Obligations. For purposes of this Section 4.6, (a)
"Guaranteed Obligations" shall mean any obligations arising under the other
provisions of this Section 4; (b) "Excess Payment" shall mean the amount paid by
any Guarantor in excess of its Pro Rata Share of any Guaranteed Obligations; (c)
"Pro Rata Share" shall mean, for any Guarantor in respect of any payment of
Guaranteed Obligations, the ratio (expressed as a percentage) as of the date of
such payment of Guaranteed Obligations of (i) the amount by which the aggregate
present fair salable value of all of its assets and properties exceeds the
amount of all debts and liabilities of such Guarantor (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of such Guarantor hereunder) to (ii) the amount by which the
aggregate present fair salable value of all assets and other properties of all
of the Credit Parties exceeds the amount of all of the debts and liabilities
(including contingent, subordinated, unmatured, and unliquidated liabilities,
but excluding the obligations of the Credit Parties hereunder) of the Credit
Parties; provided, however, that, for purposes of calculating the Pro Rata
Shares of the Guarantors in respect of any payment of Guaranteed Obligations,
any Guarantor that became a Guarantor subsequent to the date of any such payment
shall be deemed to have been a Guarantor on the date of such payment and the
financial information for such Guarantor as of the date such Guarantor became a
Guarantor shall be utilized for such Guarantor in connection with such payment;
and (d) "Contribution Share" shall mean, for any Guarantor in respect of any
Excess Payment made by any other Guarantor, the ratio (expressed as a
percentage) as of the date of such Excess Payment of (i) the amount by which the
aggregate present fair salable value of all of its assets and properties exceeds
the amount of all debts and liabilities of such Guarantor (including contingent,
subordinated, unmatured, and unliquidated liabilities, but excluding the
obligations of such Guarantor hereunder) to (ii) the amount by which the
aggregate present fair salable value of all assets and other properties of the
Credit Parties other than the maker of such Excess Payment exceeds the amount of
all of the debts and liabilities (including contingent, subordinated, unmatured,
and unliquidated liabilities, but excluding the obligations of the Credit
Parties hereunder) of the Credit Parties other than the maker of such Excess
Payment; provided, however, that, for purposes of calculating the Contribution
Shares of the Guarantors in respect of any Excess Payment, any Guarantor that
became a Guarantor subsequent to the date of any such Excess Payment shall be
deemed to have been a Guarantor on the date of such Excess Payment and the
financial information for such Guarantor as of the date such Guarantor became a
Guarantor shall be utilized for such Guarantor in connection with such Excess
Payment. This Section 4.6 shall not be deemed to affect any right of
subrogation, indemnity, reimbursement or contribution that any Guarantor may
have under applicable law against the Borrower in respect of any payment of
Guaranteed Obligations. Notwithstanding the foregoing, all rights of
contribution against any Guarantor shall terminate from and after such time, if
ever, that such Guarantor shall be relieved of its obligations pursuant to
Section 8.4.
4.7 Guarantee of Payment; Continuing Guarantee.
The guarantee in this Section 4 is a guaranty of payment and not of
collection, is a continuing guarantee, and shall apply to all Credit Party
Obligations whenever arising.
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SECTION 5
CONDITIONS
5.1 Closing Conditions.
The obligation of the Lenders to enter into this Credit Agreement and to
make the initial Loans or the Issuing Lender to issue the initial Letter of
Credit(s), whichever shall occur first, shall be subject to satisfaction of the
following conditions (in form and substance acceptable to the Lenders):
(a) Executed Credit Documents. Receipt by the Agent of duly executed
copies of (i) this Credit Agreement, (ii) the Notes and (iii) the
Collateral Documents.
(b) Corporate Documents. Receipt by the Agent of the following:
(i) Charter Documents. Copies of the articles or certificates
of incorporation or other charter documents of each Credit Party
certified to be true and complete as of a recent date by the
appropriate Governmental Authority of the state or other
jurisdiction of its incorporation and certified by a secretary or
assistant secretary of such Credit Party to be true and correct as
of the Closing Date.
(ii) Bylaws. A copy of the bylaws of each Credit Party
certified by a secretary or assistant secretary of such Credit Party
to be true and correct as of the Closing Date.
(iii) Good Standing. Copies of (A) certificates of good
standing, existence or its equivalent with respect to each Credit
Party certified as of a recent date by the appropriate Governmental
Authorities of the state or other jurisdiction of incorporation and
each other jurisdiction in which the failure to so qualify and be in
good standing could reasonably be expected to have a Material
Adverse Effect and (B) to the extent available, a certificate
indicating payment of all corporate franchise taxes certified as of
a recent date by the appropriate governmental taxing authorities.
(iv) Incumbency. An incumbency certificate of each Credit
Party certified by a secretary or assistant secretary to be true and
correct as of the Closing Date.
(c) Opinions of Counsel. The Agent shall have received, in each case
dated as of the Closing Date:
(i) a legal opinion of Simpson Thacher & Bartlett, special
counsel for the Credit Parties, substantially in the form of
Schedule 5.1(c)(i);
(ii) a legal opinion of special local counsel for the Credit
Parties for the States of Alabama, North Carolina and Pennsylvania,
substantially in the form of Schedule 5.1(c)(ii); and
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(iii) a legal opinion of special Canadian counsel for the
Credit Parties, substantially in the form of Schedule 5.1(c)(iii);
(d) Personal Property Collateral. The Agent shall have received:
(i) searches of Uniform Commercial Code filings in the
jurisdiction of the chief executive office of each Credit Party and
each jurisdiction where any Collateral is located or where a filing
would need to be made in order to perfect the Agent's security
interest in the Collateral, copies of the financing statements on
file in such jurisdictions and evidence that no Liens exist other
than Permitted Liens;
(ii) duly executed UCC financing statements for each
appropriate jurisdiction as is necessary, in the Agent's sole
discretion, to perfect the Agent's security interest in the
Collateral;
(iii) searches of ownership of intellectual property in the
appropriate governmental offices and such patent/trademark/copyright
filings as requested by the Agent in order to perfect the Agent's
security interest in the Collateral;
(iv) all certificates evidencing the Equity Interests pledged
to the Agent pursuant to the Pledge Agreement, together with duly
executed in blank, undated stock powers attached thereto (unless,
with respect to the pledged Equity Interests of any Foreign
Subsidiary, such stock powers are deemed unnecessary by the Agent in
its reasonable discretion under the law of the jurisdiction of
incorporation of such Person);
(v) such patent/trademark/copyright filings as requested by
the Agent in order to perfect the Agent's security interest in the
Collateral;
(vi) all instruments and chattel paper in the possession of
any of the Credit Parties and having a value in excess of $250,000,
together with allonges or assignments as may be necessary or
appropriate to perfect the Agent's security interest in the
Collateral; and
(vii) in the case of any personal property Collateral located
at the premises leased by Great American Knitting Mills, Inc.
located in Pottstown, Pennsylvania and at the premises leased by
Cluett, Peabody & Co., Inc. located in Albertville, Alabama, such
estoppel letters, consents and waivers from the landlords on such
real property as shall be reasonably satisfactory to the Agent.
(e) Real Property Collateral. The Agent shall have received, in form
and substance reasonably satisfactory to the Agent:
(i) fully executed and notarized mortgages, deeds of trust or
deeds to secure debt (each, as the same may be amended, modified,
restated or
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supplemented from time to time, a "Mortgage Instrument" and
collectively the "Mortgage Instruments") encumbering the fee
interest and/or leasehold interest of any Credit Party in each real
property asset designated in Schedule 6.20(a) (each a "Mortgaged
Property" and collectively the "Mortgaged Properties");
(ii) a title report obtained by the Credit Parties in respect
of each of the Mortgaged Properties;
(iii) in the case of each real property leasehold interest of
any Credit Party constituting Mortgaged Property, (a) such estoppel
letters, consents and waivers from the landlords on such real
property as may be required by the Agent, which estoppel letters
shall be in the form and substance reasonably satisfactory to the
Agent and (b) evidence that the applicable lease, a memorandum of
lease with respect thereto, or other evidence of such lease in form
and substance reasonably satisfactory to the Agent, has been or will
be recorded in all places to the extent necessary or desirable, in
the reasonable judgment of the Agent, so as to enable the Mortgage
Instrument encumbering such leasehold interest to effectively create
a valid and enforceable first priority lien (subject to Permitted
Liens) on such leasehold interest in favor of the Agent (or such
other Person as may be required or desired under local law) for the
benefit of Lenders;
(iv) the Agent shall have received, and the title insurance
company issuing the policy referred to in Section 5.1(e)(v) (the
"Title Insurance Company") shall have received, maps or plats of an
as-built survey of the sites of the real property covered by the
Mortgage Instruments certified to the Agent and the Title Insurance
Company in a manner reasonably satisfactory to each of the Agent and
the Title Insurance Company, dated a date reasonably satisfactory to
each of the Agent and the Title Insurance Company by an independent
professional licensed land surveyor, which maps or plats and the
surveys on which they are based shall be made in accordance with
standards that enable the Title Insurance Company to issue the
policies referred to in Section 5.1(g)(v) below without exception
for "Survey matters", except for matters as are reasonably
acceptable to the Agent;
(v) ALTA mortgagee title insurance policies issued by Lawyers
Title Insurance Corporation (the "Mortgage Policies"), in amounts
not less than the respective amounts designated in Schedule 6.20(a)
with respect to any particular Mortgaged Property, assuring the
Agent that each of the Mortgage Instruments creates a valid and
enforceable first priority mortgage lien on the applicable Mortgaged
Property, free and clear of all defects and encumbrances except
Permitted Liens, which Mortgage Policies shall be in form and
substance reasonably satisfactory to the Agent and shall provide for
affirmative insurance and such reinsurance as the Agent may
reasonably request, all of the foregoing in form and substance
reasonably satisfactory to the Agent;
(vi) evidence, which may be in the form of a letter from an
insurance broker or a municipal engineer, as to whether (a) any
Mortgaged Property (a "Flood Hazard Property") is in an area
designated by the Federal Emergency
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Management Agency as having special flood or mud slide hazards and
(b) the community in which such Flood Hazard Property is located is
participating in the National Flood Insurance Program;
(vii) if there are any Flood Hazard Properties, a Credit
Party's written acknowledgment of receipt of written notification
from the Agent (a) as to the existence of each such Flood Hazard
Property and (b) as to whether the community in which each such
Flood Hazard Property is located is participating in the National
Flood Insurance Program;
(viii) maps or plats of an as-built survey of the sites of the
Mortgaged Properties certified to the Agent and the Title Insurance
Company in a manner reasonably satisfactory to them, dated a date
satisfactory to each of the Agent and the Title Insurance Company by
an independent professional licensed land surveyor reasonably
satisfactory to each of the Agent and the Title Insurance Company,
which maps or plats and the surveys on which they are based shall be
sufficient to delete any standard printed survey exception contained
in the applicable title policy and be made in accordance with the
Minimum Standard Detail Requirements for Land Title Surveys jointly
established and adopted by the American Land Title Association and
the American Congress on Surveying and Mapping in 1992, and, without
limiting the generality of the foregoing, there shall be surveyed
and shown on such maps, plats or surveys the following: (A) the
locations on such sites of all the buildings, structures and other
improvements and the established building setback lines; (B) the
lines of streets abutting the sites and width thereof; (C) all
access and other easements appurtenant to the sites necessary to use
the sites; (D) all roadways, paths, driveways, easements,
encroachments and overhanging projections and similar encumbrances
affecting the site, whether recorded, apparent from a physical
inspection of the sites or otherwise known to the surveyor; (E) any
encroachments on any adjoining property by the building structures
and improvements on the sites; and (F) if the site is described as
being on a filed map, a legend relating the survey to said map; and
(ix) evidence satisfactory to the Agent that each of the
Mortgaged Properties, and the uses of the Mortgaged Properties, are
in compliance in all material respects with all applicable laws,
regulations and ordinances including without limitation health and
environmental protection laws, erosion control ordinances, storm
drainage control laws, doing business and/or licensing laws, zoning
laws (the evidence submitted as to zoning should include the zoning
designation made for each of the Mortgaged Properties, the permitted
uses of each such Mortgaged Properties under such zoning designation
and zoning requirements as to parking, lot size, ingress, egress and
building setbacks) and laws regarding access and facilities for
disabled persons including, but not limited to, the federal
Architectural Barriers Act, the Fair Housing Amendments Act of 1988,
the Rehabilitation Act of 1973 and the Americans with Disabilities
Act of 1990.
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(f) Availability. After giving effect to the Recapitalization on the
Closing Date, there shall be at least $10 million of availability existing
under the Revolving Committed Amount.
(g) Evidence of Insurance. Receipt by the Agent of copies of
insurance policies or certificates of insurance of the Parent and the
Consolidated Parties evidencing liability and casualty insurance meeting
the requirements set forth in the Credit Documents, including, but not
limited to, naming the Agent as additional insured (in the case of
liability insurance) or sole loss payee (in the case of hazard insurance)
on behalf of the Lenders.
(h) Consummation of other External Financing Transactions. (i) The
Parent shall have received proceeds of a cash equity investment of at
least $31.5 million (at least $24.7 million of which shall be contributed
by the Sponsor, its Affiliates and other designated co-investors and up to
$2.5 million of which will be funded by loans from the Parent to
management of the Parent and to Alvarez and Marsal in conjunction with the
Recapitalization) (the "Sponsor Common Stock"), (ii) the Borrower shall
have received gross proceeds (including the value attributable to any
portion of such securities issued to existing shareholders of the Parent
to the extent required by the Reorganization Plan) of at least $125
million from the issuance by the Borrower of senior subordinated notes
(the "Senior Subordinated Debt"), (iii) the Parent shall have issued to an
employee stock ownership plan approximately $2.4 million (including the
value attributable to any portion of such securities issued to existing
shareholders of the Parent to the extent required by the Reorganization
Plan) of Class A senior preferred stock (the "Employee Preferred Stock"),
(iv) the Borrower shall have received net proceeds of at least $48.1
million from the issuance of the Borrower's Class B senior preferred stock
(the "Senior Preferred Stock") and (v) the Parent shall have received
gross proceeds of at least $36.5 million from the issuance to the Sponsor,
its Affiliates or other designated co-investors of the Parent's Class C
junior preferred stock (the "Junior Preferred Stock").
(i) Recapitalization Documents. The Agent shall have received a
copy, certified by an officer of the Borrower as true and complete, of
each of the Recapitalization Documents as originally executed and
delivered, and no amendment or modification thereof shall have been
entered into on or prior to the Closing Date which shall not have been
approved by the Agent.
(j) Government Consent. Receipt by the Agent of evidence that all
governmental, shareholder and material third party consents (including
Hart-Scott-Rodino clearance) and approvals necessary or, in the reasonable
opinion of the Agent, desirable in connection with the Recapitalization
and the related financings and other transactions contemplated hereby and
expiration of all applicable waiting periods without any action being
taken by any authority that could restrain, prevent or impose any material
adverse conditions on the Parent and its Subsidiaries taken as a whole or
such other transactions or that could seek or threaten any of the
foregoing, and no law or regulation shall be applicable which in the
judgment of the Agent could have such effect.
(k) Litigation. There shall not exist any action, suit,
investigation or proceeding pending in any court or before any arbitrator
or Governmental Authority that
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would have a material adverse effect on the Parent and its Subsidiaries
taken as a whole or on any transaction contemplated hereby or on the
ability of the Borrower and the Guarantors taken as whole to perform their
respective obligations under the Credit Documents.
(l) Reorganization Plan; Confirmation Order. The Reorganization Plan
and the Confirmation Order shall not be altered, amended or otherwise
changed or supplemented in any material respect or any material condition
therein waived, without the prior written consent of the Agent (which
consent shall not be unreasonably withheld). Each of the conditions
precedent to the consummation of the Reorganization Plan (as specified
therein) shall have been satisfied or, with the consent of the Agent (not
to be unreasonably withheld), waived, and the Parent, the Borrower and
their respective Subsidiaries shall be in compliance with the terms of the
Reorganization Plan and the Confirmation Order.
(m) Officer's Certificates. The Agent shall have received a
certificate or certificates executed by an Executive Officer of the
Borrower as of the Closing Date stating that (A) all governmental,
shareholder and third party consents and approvals, if any, with respect
to the Credit Documents and the transactions contemplated thereby have
been obtained, (B) no action, suit, investigation or proceeding is pending
in any court or before any arbitrator or Governmental Authority that would
have a Material Adverse Effect or a material adverse effect on any
transaction contemplated hereby or by the Reorganization Plan and the
other Recapitalization Documents, (C) the transactions contemplated by the
Reorganization Plan and the other Recapitalization Documents have been
consummated in accordance with the terms thereof and (D) immediately after
giving effect to the Recapitalization on the Closing Date, (1) each of the
Credit Parties is Solvent, (2) no Default or Event of Default exists and
(3) all representations and warranties contained herein and in the other
Credit Documents are true and correct in all material respects.
(n) Fees and Expenses. Payment by the Credit Parties of all fees and
expenses owed by them to the Lenders and the Agent, including, without
limitation, payment to the Agent of the fees set forth in the Fee Letter.
(o) Syndication Side Letter. Receipt by the Agent of a letter
agreement executed by the Borrower and satisfactory to the Agent regarding
amendment of this Credit Agreement in connection with the primary
syndication of the credit facilities hereunder.
(p) Return of Original Letter of Credit. Receipt by the Agent of the
original copy of NationsBank letter of credit no. 970700, dated March 30,
1998, issued by NationsBank in favor of Bidermann Industries USA, Inc.
(q) Other. Receipt by the Lenders of such other documents,
instruments, agreements or information as reasonably requested by the
Agent.
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5.2 Conditions to all Extensions of Credit.
The obligations of each Lender to make any Loan and of the Issuing Lender
to issue or extend any Letter of Credit (including the initial Loans and the
initial Letter of Credit) are subject to satisfaction of the following
conditions in addition to satisfaction on the Closing Date of the conditions set
forth in Section 5.1:
(a) The Borrower shall have delivered (i) in the case of any
Revolving Loan, any portion of the Tranche A Term Loan or any portion of
the Tranche B Term Loan, an appropriate Notice of Borrowing; (ii) in the
case of any Letter of Credit, the Issuing Lender shall have received an
appropriate request for issuance in accordance with the provisions of
Section 2.2(b); and (iii) in the case of any Swingline Loan, the Swingline
Lender shall have received an appropriate request for a Swingline Loan
advance in accordance with the provisions of Section 2.3(b);
(b) The representations and warranties set forth in Section 6 shall,
subject to the limitations set forth therein, be true and correct in all
material respects as of such date (except for those which expressly relate
to an earlier date);
(c) There shall not have been commenced against the Parent or any
Consolidated Party an involuntary case under any applicable bankruptcy,
insolvency or other similar law now or hereafter in effect, or any case,
proceeding or other action for the appointment of a receiver, liquidator,
assignee, custodian, trustee, sequestrator (or similar official) of such
Person or for any substantial part of its Property or for the winding up
or liquidation of its affairs, and such involuntary case or other case,
proceeding or other action shall remain undismissed, undischarged or
unbonded;
(d) No Default or Event of Default shall exist and be continuing
either prior to or after giving effect thereto; and
(e) Immediately after giving effect to the making of such Loan (and
the application of the proceeds thereof) or to the issuance of such Letter
of Credit, as the case may be, (i) the sum of the aggregate principal
amount of outstanding Revolving Loans plus LOC Obligations outstanding
plus the aggregate principal amount of outstanding Swingline Loans shall
not exceed the Revolving Committed Amount, (ii) the LOC Obligations shall
not exceed the LOC Committed Amount and (iii) the aggregate principal
amount of outstanding Swingline Loans shall not exceed the Swingline
Committed Amount.
The delivery of each Notice of Borrowing, each Notice of Extension/Conversion,
each request for a Letter of Credit pursuant to Section 2.2(b) and each request
for a Swingline Loan pursuant to Section 2.3(b) shall constitute a
representation and warranty by the Credit Parties of the correctness of the
matters specified in subsections (b), (c), (d) and (e) above.
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SECTION 6
REPRESENTATIONS AND WARRANTIES
The Credit Parties hereby represent to the Agent and each Lender that:
6.1 Financial Condition.
(a) The audited combined financial statements (including the notes
thereto) of the Consolidated Parties for the fiscal year ended December
31, 1997, copies of which previously have been delivered to the Agent, (i)
have been audited by Ernst & Young LLP, (ii) have been prepared in
accordance with GAAP consistently applied throughout the period covered
thereby and (iii) present fairly in all material respects (on the basis
disclosed in the footnotes to such financial statements) the combined
financial position, results of operations and cash flows of the
Consolidated Parties as of such date and for such period. The unaudited
interim balance sheet and statements of operations and of cash flows for
the fiscal quarter ended March 28, 1998, copies of which previously have
been delivered to the Agent, (i) have been prepared in accordance with
GAAP consistently applied throughout the periods covered thereby and (ii)
present fairly in all material respects (on the basis disclosed in the
footnotes to such financial statements) the combined financial position,
results of operations and cash flows of the Consolidated Parties as of
such date and for such periods. During the period from December 31, 1997
to and including the Closing Date, there has been no sale, transfer or
other disposition by any Consolidated Party of any material part of the
business or property of the Consolidated Parties, taken as a whole, and no
purchase or other acquisition by any of them of any business or property
(including any capital stock of any other person) material in relation to
the consolidated financial position of the Consolidated Parties, taken as
a whole, in each case, which, is not reflected in the foregoing financial
statements or in the notes thereto and has not otherwise been disclosed in
writing to the Lenders on or prior to the Closing Date.
(b) The pro forma consolidated balance sheet of the Consolidated
Parties as of March 28, 1998 giving effect to the Recapitalization, a copy
of which previously has been delivered to the Agent, is based upon
reasonable assumptions made known to the Lenders and upon information not
known to be incorrect or misleading in any material respect.
(c) Each of the financial statements delivered from time to time to
the Lenders pursuant to Section 7.1(a) and (b) (i) will be prepared in
accordance with GAAP (except as may otherwise be permitted under Section
7.1(a) and (b)) and (ii) will present fairly in all material respects (on
the basis disclosed in the footnotes to such financial statements) the
consolidated financial condition, results of operations and cash flows of
the Consolidated Parties as of such date and for such periods.
6.2 No Material Change.
Since December 31, 1997, (a) there has been no development or event
relating to or affecting the Parent or a Consolidated Party which has had or
could reasonably be expected to have a Material Adverse Effect and (b) except in
connection with Recapitalization as contemplated by
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the Recapitalization Documents and except as otherwise permitted under this
Credit Agreement, no dividends or other distributions have been declared, paid
or made upon the Equity Interests of the Parent or a Consolidated Party nor has
any of the Equity Interests of the Parent or a Consolidated Party been redeemed,
retired, purchased or otherwise acquired for value.
6.3 Organization and Good Standing.
Each of the Parent and the Consolidated Parties (a) is duly organized,
validly existing and is in good standing under the laws of the jurisdiction of
its incorporation or organization, (b) has the corporate or other necessary
power and authority, and the legal right, to own and operate its property, to
lease the property it operates as lessee and to conduct the business in which it
is currently engaged and (c) is duly qualified as a foreign entity and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct of its business requires such
qualification, other than in such jurisdictions where the failure to be so
qualified and in good standing could reasonably be expected to have a Material
Adverse Effect.
6.4 Power; Authorization; Enforceable Obligations.
Each of the Credit Parties has the corporate or other necessary power and
authority, and the legal right, to make, deliver and perform the Credit
Documents to which it is a party, and in the case of the Borrower, to obtain
extensions of credit hereunder, and has taken all necessary corporate action to
authorize the borrowings and other extensions of credit on the terms and
conditions of this Credit Agreement and to authorize the execution, delivery and
performance of the Credit Documents to which it is a party. No consent or
authorization of, filing with, notice to or other similar act by or in respect
of, any Governmental Authority or any other Person is required to be obtained or
made by or on behalf of any Credit Party in connection with the borrowings or
other extensions of credit hereunder or with the execution, delivery,
performance, validity or enforceability of the Credit Documents to which such
Credit Party is a party, except for (i) consents, authorizations, notices and
filings described in Schedule 6.4, all of which have been obtained or made or
have the status described in such Schedule 6.4, (ii) filings to perfect the
Liens created by the Collateral Documents and (iii) consents, authorizations,
filings, notices or other acts the failure to make or obtain could not
reasonably be expected to have a Material Adverse Effect.
This Credit Agreement has been, and each other Credit Document to which any
Credit Party is a party will be, duly executed and delivered on behalf of such
Credit Parties. This Credit Agreement constitutes, and each other Credit
Document to which any Credit Party is a party when executed and delivered will
constitute, a legal, valid and binding obligation of such Credit Party
enforceable against such party in accordance with its terms, except as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles (whether
enforcement is sought by proceedings in equity or at law).
6.5 No Conflicts.
Neither the execution and delivery of the Credit Documents, nor the
consummation of the transactions contemplated therein, nor performance of and
compliance with the terms and provisions thereof by such Credit Party will (a)
violate or conflict with any provision of its articles or certificate of
incorporation or bylaws or other organizational or governing documents, (b)
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violate, contravene or materially conflict with any material Requirement of Law
or any other material law, regulation (including, without limitation, Regulation
U or Regulation X), order, writ, judgment, injunction, decree or permit
applicable to it, (c) violate, contravene or conflict with contractual
provisions of, or cause an event of default under, any indenture, loan
agreement, mortgage, deed of trust, contract or other agreement or instrument to
which it is a party or by which it may be bound, the violation of which could
reasonably be expected to have a Material Adverse Effect, or (d) result in or
require the creation of any Lien (other than those contemplated in or created in
connection with the Credit Documents) upon or with respect to its properties.
6.6 No Default.
Neither the Parent nor any Consolidated Party is in default in any respect
under any contract, lease, loan agreement, indenture, mortgage, security
agreement or other agreement or obligation to which it is a party or by which
any of its properties is bound which default could reasonably be expected to
have a Material Adverse Effect. No Default or Event of Default has occurred or
exists except as previously disclosed in writing to the Lenders.
6.7 Ownership.
Each of the Parent and the Consolidated Parties is the owner of, and has
good and marketable title to, all of its respective assets necessary for the
conduct of its business and none of such assets is subject to any Lien other
than Permitted Liens.
6.8 Indebtedness.
Except as otherwise permitted under Section 8.1, the Parent and the
Consolidated Parties have no Indebtedness.
6.9 Litigation.
Except as disclosed in Schedule 6.9, there are no actions, suits or legal,
equitable, arbitration or administrative proceedings, pending or, to the
knowledge of any Credit Party, threatened against the Parent or any Consolidated
Party which, if adversely determined, could reasonably be expected to have a
Material Adverse Effect.
6.10 Taxes.
Each of the Parent and the Consolidated Parties has filed, or caused to be
filed, all material tax returns (federal, state, local and foreign) required to
be filed and paid (a) all amounts of taxes shown thereon to be due (including
interest and penalties) and (b) all other taxes, fees, assessments and other
governmental charges (including mortgage recording taxes, documentary stamp
taxes and intangibles taxes) owing by it, except for such taxes (i) which are
not yet delinquent or (ii) that are being contested in good faith and by proper
proceedings, and against which adequate reserves are being maintained in
accordance with GAAP. No Credit Party is aware as of the Closing Date of any
proposed tax assessments against the Parent or any Consolidated Party that could
reasonably be expected to have a Material Adverse Effect.
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6.11 Compliance with Law.
Each of the Parent and the Consolidated Parties is in compliance with all
Requirements of Law and all other laws, rules, regulations, orders and decrees
(including without limitation Environmental Laws) applicable to it, or to its
properties, unless such failure to comply could not reasonably be expected to
have a Material Adverse Effect. No Requirement of Law could cause a Material
Adverse Effect.
6.12 ERISA.
Except as disclosed and described in Schedule 6.12 attached hereto or
except as could not reasonably be expected to result in a Material Adverse
Effect:
(a) During the five-year period prior to the date on which this
representation is made or deemed made: (i) no ERISA Event has occurred,
and, to the best knowledge of the Credit Parties, no event or condition
has occurred or exists as a result of which any ERISA Event could
reasonably be expected to occur, with respect to any Plan; (ii) no
"accumulated funding deficiency," as such term is defined in Section 302
of ERISA and Section 412 of the Code, whether or not waived, has occurred
with respect to any Plan; (iii) each Plan has been maintained, operated,
and funded in compliance with its own terms and in material compliance
with the provisions of ERISA, the Code, and any other applicable federal
or state laws; and (iv) no lien in favor of the PBGC or a Plan has arisen
or is reasonably likely to arise on account of any Plan.
(b) The actuarial present value of all accumulated benefit
obligations, whether or not vested, under each Single Employer Plan, as of
the last annual valuation date prior to the date on which this
representation is made or deemed made (determined, in each case, in
accordance with Financial Accounting Standards Board Statement 87,
utilizing the actuarial assumptions used in such Plan's most recent
actuarial valuation report), did not exceed as of such valuation date the
fair market value of the assets of such Plan by an amount in excess of
$1,000,000.
(c) Neither the Parent, any Consolidated Party nor any ERISA
Affiliate has incurred, or, to the best knowledge of the Credit Parties,
could be reasonably expected to incur, any withdrawal liability under
ERISA to any Multiemployer Plan or Multiple Employer Plan. Neither the
Parent, any Consolidated Party nor any ERISA Affiliate has received any
notification that any Multiemployer Plan is in reorganization (within the
meaning of Section 4241 of ERISA), is insolvent (within the meaning of
Section 4245 of ERISA), or has been terminated (within the meaning of
Title IV of ERISA), and no Multiemployer Plan is, to the best knowledge of
the Credit Parties, reasonably expected to be in reorganization,
insolvent, or terminated.
(d) The Credit Parties shall not use the credit provided under this
Credit Agreement to loan or otherwise extend credit, directly or
indirectly, to any "employee benefit plan" (as defined in Section 3(3) of
ERISA).
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6.13 Subsidiaries.
Set forth on Schedule 6.13 is a complete and accurate list of all
Subsidiaries of each of the Parent and the Consolidated Parties as of the
Closing Date. Information on Schedule 6.13 includes jurisdiction of
incorporation, the amount and percentage of each class of Equity Interests
outstanding, the amount and percentage of outstanding Equity Interests of each
class owned (directly or indirectly) by such Person; and the number and effect,
if exercised, of all outstanding options, warrants, rights of conversion or
purchase and all other similar rights with respect thereto. The outstanding
Equity Interests of all such Subsidiaries is validly issued, fully paid and
non-assessable and is owned by each such Person, directly or indirectly, free
and clear of all Liens (other than those arising under or contemplated in
connection with the Credit Documents). Other than as set forth in Schedule 6.13,
neither the Parent nor any Consolidated Party has outstanding any securities
convertible into or exchangeable for its Equity Interests nor does any such
Person have outstanding any rights to subscribe for or to purchase or any
options for the purchase of, or any agreements providing for the issuance
(contingent or otherwise) of, or any calls, commitments or claims of any
character relating to its Equity Interests.
6.14 Governmental Regulations, Etc.
(a) No part of the Letters of Credit or proceeds of the Loans will
be used, directly or indirectly, for the purpose of purchasing or carrying
any "margin stock" in violation of Regulation U. If requested by any
Lender or the Agent, the Borrower will furnish to the Agent and each
Lender a statement to the foregoing effect in conformity with the
requirements of FR Form U-1 referred to in Regulation U. No indebtedness
being reduced or retired out of the proceeds of the Loans was or will be
incurred for the purpose of purchasing or carrying any margin stock within
the meaning of Regulation U or any "margin security" within the meaning of
Regulation T. "Margin stock" within the meaning of Regulation U does not
constitute more than 25% of the value of the combined assets of the Parent
and the Consolidated Parties. None of the transactions contemplated by
this Credit Agreement (including, without limitation, the direct or
indirect use of the proceeds of the Loans) will violate or result in a
violation of the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended, or regulations issued pursuant thereto,
or Regulation T, U or X.
(b) Neither the Parent nor any Consolidated Party is subject to
regulation under the Public Utility Holding Company Act of 1935, the
Federal Power Act or the Investment Company Act of 1940, each as amended.
In addition, neither the Parent nor any Consolidated Party is (i) an
"investment company" registered or required to be registered under the
Investment Company Act of 1940, as amended, and is not controlled by such
a company, or (ii) a "holding company", or a "subsidiary company" of a
"holding company", or an "affiliate" of a "holding company" or of a
"subsidiary" of a "holding company", within the meaning of the Public
Utility Holding Company Act of 1935, as amended.
(c) No director, executive officer or principal shareholder of the
Parent or any Consolidated Party is a director, executive officer or
principal shareholder of any Lender. For the purposes hereof the terms
"director", "executive officer" and "principal shareholder"
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(when used with reference to any Lender) have the respective meanings
assigned thereto in Regulation O issued by the Board of Governors of the
Federal Reserve System.
(d) Each of the Parent and the Consolidated Parties has obtained and
holds in full force and effect, all franchises, licenses, permits,
certificates, authorizations, qualifications, accreditations, easements,
rights of way and other rights, consents and approvals which are necessary
for the ownership of its respective Property and to the conduct of its
respective businesses as presently conducted except where the failure to
so obtain or hold could not reasonably be expected to have a Material
Adverse Effect.
(e) Neither the Parent nor any Consolidated Party is in violation of
any applicable statute, regulation or ordinance of the United States of
America, or of any state, city, town, municipality, county or any other
jurisdiction, or of any agency thereof (including without limitation,
environmental laws and regulations), which violation could reasonably be
expected to have a Material Adverse Effect.
(f) Each of the Parent and the Consolidated Parties is current with
all material reports and documents, if any, required to be filed with any
state or federal securities commission or similar agency and is in full
compliance in all material respects with all applicable rules and
regulations of such commissions.
6.15 Purpose of Loans and Letters of Credit.
The proceeds of the Loans hereunder shall be used solely by the Borrower
(i) to fund payments under the Reorganization Plan, (ii) to pay fees and
expenses incurred in connection with the Recapitalization and (iii) to provide
for the working capital and general corporate needs (including Acquisitions) of
the Borrower and its Subsidiaries. The Letters of Credit shall be used only for
or in connection with appeal bonds, reimbursement obligations arising in
connection with surety and reclamation bonds, reinsurance, disputed claims as
described in the Reorganization Plan, domestic or international trade
transactions and obligations not otherwise aforementioned relating to
transactions entered into by the applicable account party in compliance with
this Credit Agreement.
6.16 Environmental Matters.
Except as disclosed and described in Schedule 6.16 attached hereto or
except as could not reasonably be expected to result in a Material Adverse
Effect:
(a) Each of the facilities and properties owned, leased or operated
by the Parent or any of the Consolidated Parties (the "Real Properties")
and all operations at the Real Properties are in compliance with all
applicable Environmental Laws, and there is no violation of any
Environmental Law with respect to the Real Properties or the businesses
operated by the Parent and the Consolidated Parties (the "Businesses"),
and there are no conditions relating to the Businesses or Real Properties
that could give rise to liability under any applicable Environmental Laws.
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(b) None of the Real Properties contains, or has previously
contained, any Materials of Environmental Concern at, on or under the Real
Properties in amounts or concentrations that constitute or constituted a
violation of, or could give rise to liability under, Environmental Laws.
(c) Neither the Parent nor any Consolidated Party has received any
written or verbal notice of, or inquiry from any Governmental Authority
regarding, any violation, alleged violation, non-compliance, liability or
potential liability regarding environmental matters or compliance with
Environmental Laws with regard to any of the Real Properties or the
Businesses, nor does any Credit Party have knowledge or reason to believe
that any such notice will be received or is being threatened.
(d) Materials of Environmental Concern have not been transported or
disposed of from the Real Properties, or generated, treated, stored or
disposed of at, on or under any of the Real Properties or any other
location, in each case by or on behalf of the Parent or any Consolidated
Party in violation of, or in a manner that could give rise to liability
under, any applicable Environmental Law.
(e) No judicial proceeding or governmental or administrative action
is pending or, to the best knowledge of any Credit Party, threatened,
under any Environmental Law to which the Parent or any Consolidated Party
is or will be named as a party, nor are there any consent decrees or other
decrees, consent orders, administrative orders or other orders, or other
administrative or judicial requirements outstanding under any
Environmental Law with respect to the Parent and the Consolidated Parties,
the Real Properties or the Businesses.
(f) There has been no release, or threat of release, of Materials of
Environmental Concern at or from the Real Properties, or arising from or
related to the operations (including, without limitation, disposal) of the
Parent or any Consolidated Party in connection with the Real Properties or
otherwise in connection with the Businesses, in violation of or in amounts
or in a manner that could give rise to liability under Environmental Laws.
6.17 Intellectual Property.
Each of the Parent and the Consolidated Parties owns, or has the legal
right to use, all trademarks, tradenames, copyrights, technology, know-how and
processes (the "Intellectual Property") necessary for each of them to conduct
its business as currently conducted except for those the failure to own or have
such legal right to use could not reasonably be expected to have a Material
Adverse Effect. Set forth on Schedule 6.17 is a list of all material
Intellectual Property owned by the Parent or any Consolidated Party or that the
Parent or any Consolidated Party has the right to use, in each case as of the
Closing Date. Except as provided on Schedule 6.17, no claim has been asserted
and is pending by any Person challenging or questioning the use of any such
Intellectual Property or the validity or effectiveness of any such Intellectual
Property, nor does any Credit Party know of any such claim, and to the Credit
Parties' knowledge the use of such Intellectual Property by the Parent or any
Consolidated Party does not infringe on the rights of any
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Person, except for such claims and infringements that, in the aggregate, could
not have a Material Adverse Effect.
6.18 Solvency.
Each Credit Party is and, after consummation of the Recapitalization, will
be Solvent.
6.19 Investments.
All Investments of each of the Parent and the Consolidated Parties are
Permitted Investments.
6.20 Location of Collateral.
Set forth on Schedule 6.20(a) is a list of all Mortgaged Properties as of
the Closing Date with street address, county and state where located. Set forth
on Schedule 6.20(b) is a list of all locations where any tangible personal
property of a Credit Party is located as of the Closing Date, including county
and state where located. Set forth on Schedule 6.20(c) is the chief executive
office and principal place of business of each of the Credit Parties as of the
Closing Date.
6.21 Disclosure.
Neither this Credit Agreement nor any financial statements delivered to
the Lenders nor any other document, certificate or statement furnished to the
Lenders by or on behalf of the Parent or any Consolidated Party in connection
with the transactions contemplated hereby contains any untrue statement of a
material fact or omits to state a material fact necessary in order to make the
statements contained therein or herein not misleading.
6.22 Brokers' Fees.
Neither the Parent nor any Consolidated Party has any obligation to any
Person in respect of any finder's, broker's, investment banking or other similar
fee in connection with any of the transactions contemplated under the Credit
Documents.
6.23 Labor Matters.
Except as set forth on Schedule 6.23, there are no collective bargaining
agreements or Multiemployer Plans covering the employees of the Parent or a
Consolidated Party as of the Closing Date and neither the Parent nor any
Consolidated Party has suffered any material strikes, walkouts, work stoppages
or other material labor difficulty within the five years immediately preceding
the Closing Date.
6.24 Nature of Business.
As of the Closing Date, the Parent and the Consolidated Parties are
engaged in the business of designing, manufacturing and marketing socks, dress
shirts and sportswear.
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6.25 Year 2000 Compliance.
Each of the Credit Parties has conducted a review and assessment of its
computer applications with respect to the "year 2000 problem" (that is, the risk
that computer applications may not be able to properly perform date-sensitive
functions after December 31, 1999) and, based on that review and inquiry, the
Credit Parties believe that, except to the extent that non-Affiliate Persons
fail to address adequately their respective year 2000 problem, the year 2000
problem will not result in a material adverse change in the business, condition
(financial or otherwise), operations, business, assets or liabilities of the
Credit Parties taken as a whole, or on the ability of any Credit Party to
perform any material obligation under the Credit Documents to which it is a
party.
SECTION 7
AFFIRMATIVE COVENANTS
Each Credit Party hereby covenants and agrees that, so long as this Credit
Agreement is in effect or any amounts payable hereunder or under any other
Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
7.1 Information Covenants.
The Credit Parties will furnish, or cause to be furnished, to the Agent
and each of the Lenders:
(a) Annual Financial Statements. As soon as available, and in any
event within 90 days after the close of each fiscal year of the
Consolidated Parties, a consolidated balance sheet and income statement of
the Consolidated Parties, as of the end of such fiscal year, together with
related consolidated statements of operations and retained earnings and of
cash flows for such fiscal year, in each case setting forth in comparative
form consolidated figures for the preceding fiscal year and including
footnotes setting forth related consolidating information, all in
reasonable form and detail and, in the case of consolidated financial
information only, audited by independent certified public accountants of
recognized national standing reasonably acceptable to the Agent and whose
opinion shall be to the effect that such financial statements have been
prepared in accordance with GAAP (except for changes with which such
accountants concur) and shall not be limited as to the scope of the audit
or qualified as to the status of the Consolidated Parties as a going
concern.
(b) Quarterly Financial Statements. As soon as available, and in any
event within 45 days (or 60 days in the case of the fiscal quarter ending
June 30, 1998) after the close of each of the first three fiscal quarters
of each fiscal year of the Consolidated Parties a consolidated balance
sheet and income statement of the Consolidated Parties, as of the end of
such fiscal quarter, together with related consolidated statements of
operations and retained earnings and of cash flows for such fiscal
quarter, in each case setting forth in comparative form consolidated
figures for the corresponding period of the preceding fiscal
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year and including footnotes setting forth related consolidating
information, all in reasonable form and detail and reasonably acceptable
to the Agent, and accompanied by a certificate of the chief financial
officer of the Borrower to the effect that such quarterly financial
statements fairly present in all material respects the financial position
of the Consolidated Parties and have been prepared in accordance with
GAAP, subject to changes resulting from audit and normal year-end
adjustments.
(c) Officer's Certificate. At the time of delivery of the financial
statements provided for in Sections 7.1(a) and 7.1(b) above, a certificate
of the chief financial officer of the Borrower substantially in the form
of Exhibit 7.1(c), (i) demonstrating compliance with the financial
covenants contained in Section 7.11 by calculation thereof as of the end
of each such fiscal period and (ii) stating that no Default or Event of
Default exists, or if any Default or Event of Default does exist,
specifying the nature and extent thereof and what action the Credit
Parties propose to take with respect thereto.
(d) Annual Business Plan and Budgets. Prior to the end of each
fiscal year of the Credit Parties, beginning with the fiscal year ending
December 31, 1998, an annual business plan and budget of the Consolidated
Parties containing, among other things, pro forma financial statements for
the next fiscal year.
(e) Compliance With Certain Provisions of the Credit Agreement.
Within 90 days after the end of each fiscal year of the Credit Parties, a
certificate containing information regarding (i) the calculation of Excess
Cash Flow and (ii) the amount of all Asset Dispositions, Debt Issuances
and Equity Issuances that were made during the prior fiscal year.
(f) Accountant's Certificate. Within the period for delivery of the
annual financial statements provided in Section 7.1(a), a certificate of
the accountants conducting the annual audit stating that they have
reviewed this Credit Agreement and stating further whether, in the course
of their audit, they have become aware of any Default or Event of Default
and, if any such Default or Event of Default exists, specifying the nature
and extent thereof.
(g) Reports. Promptly upon transmission or receipt thereof, (i)
copies of any filings and registrations with, and reports to or from, the
Securities and Exchange Commission, or any successor agency, and copies of
all financial statements, proxy statements, notices and reports as the
Parent shall send to its shareholders generally or as the Parent or the
Borrower shall send to a holder of any Indebtedness owed by the Parent or
the Borrower, as applicable, in its capacity as such a holder and (ii)
upon the request of the Agent, all reports and written information to and
from the United States Environmental Protection Agency, or any state or
local agency responsible for environmental matters, the United States
Occupational Health and Safety Administration, or any state or local
agency responsible for health and safety matters, or any successor
agencies or authorities concerning environmental, health or safety
matters.
(h) Notices. Upon obtaining knowledge thereof, the Credit Parties
will give written notice to the Agent immediately of (i) the occurrence of
an event or condition
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consisting of a Default or Event of Default, specifying the nature and
existence thereof and what action the Credit Parties propose to take with
respect thereto, and (ii) the occurrence of any of the following with
respect to the Parent or any Consolidated Party (A) the pendency or
commencement of any litigation, arbitral or governmental proceeding
against such Person which if adversely determined is reasonably likely to
have a Material Adverse Effect, (B) the institution of any proceedings
against such Person with respect to, or the receipt of notice by such
Person of potential liability or responsibility for violation, or alleged
violation of any federal, state or local law, rule or regulation,
including but not limited to, Environmental Laws, the violation of which
could reasonably be expected to have a Material Adverse Effect, or (C) any
notice or determination concerning the imposition of any withdrawal
liability by a Multiemployer Plan against such Person or any ERISA
Affiliate, the determination that a Multiemployer Plan is, or is expected
to be, in reorganization within the meaning of Title IV of ERISA or the
termination of any Plan.
(i) ERISA. Upon obtaining knowledge thereof, the Credit Parties will
give written notice to the Agent promptly (and in any event within thirty
business days) of any of any of the following which could reasonably be
expected to result in a Material Adverse Effect: (i) of any event or
condition, including, but not limited to, any Reportable Event, that
constitutes, or might reasonably lead to, an ERISA Event; (ii) with
respect to any Multiemployer Plan, the receipt of notice as prescribed in
ERISA or otherwise of any withdrawal liability assessed against the Credit
Parties or any ERISA Affiliates, or of a determination that any
Multiemployer Plan is in reorganization or insolvent (both within the
meaning of Title IV of ERISA); (iii) the failure to make full payment on
or before the due date (including extensions) thereof of all amounts which
the Parent, any Consolidated Party or any ERISA Affiliate is required to
contribute to each Plan pursuant to its terms or as required to comply
with ERISA and the Code with respect thereto; or (iv) any change in the
funding status of any Plan as of the end of the applicable Plan Year that
could have a Material Adverse Effect, together with a description of any
such event or condition or a copy of any such notice and a statement by
the chief financial officer of the Borrower briefly setting forth the
details regarding such event, condition, or notice, and the action, if
any, which has been or is being taken or is proposed to be taken by the
Credit Parties with respect thereto. Promptly upon request, the Credit
Parties shall furnish the Agent and the Lenders with such additional
information concerning any Plan as may be reasonably requested, including,
but not limited to, copies of each annual report/return (Form 5500
series), as well as all schedules and attachments thereto required to be
filed with the Department of Labor and/or the Internal Revenue Service
pursuant to ERISA and the Code, respectively, for each "plan year" (within
the meaning of Section 3(39) of ERISA).
(j) Environmental.
(i) Upon the written request of the Agent following the
occurrence of any event or the discovery of any condition which the
Agent or the Required Lenders reasonably believe has caused (or
could cause) the representations and warranties set forth in Section
6.16 to be untrue in any material respect, the Credit Parties will
furnish or cause to be furnished to the Agent, at the Credit
Parties' expense, a report of an environmental assessment of
reasonable scope, form and depth, (including, where appropriate,
invasive soil or groundwater sampling) by a
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consultant reasonably acceptable to the Agent as to the nature and
extent of the presence of any Materials of Environmental Concern on
any Real Properties (as defined in Section 6.16) and as to the
compliance by the Parent and the Consolidated Parties with
Environmental Laws at such Real Properties. If the Credit Parties
fail to deliver such an environmental report within seventy-five
(75) days after receipt of such written request then the Agent may
arrange for same, and the Credit Parties hereby grant to the Agent
and their representatives access to the Real Properties to
reasonably undertake such an assessment (including, where
appropriate, invasive soil or groundwater sampling). The reasonable
cost of any assessment arranged for by the Agent pursuant to this
provision will be payable by the Credit Parties on demand and added
to the obligations secured by the Collateral Documents.
(ii) The Credit Parties will cause each of the Parent and the
Consolidated Parties to conduct and complete all investigations,
studies, sampling, and testing and all remedial, removal, and other
actions necessary to address all Materials of Environmental Concern
on , from or affecting any of the Real Properties to the extent
necessary to be in compliance with all Environmental Laws and with
the validly issued orders and directives of all Governmental
Authorities with jurisdiction over such Real Properties to the
extent any failure could reasonably be expected to have a Material
Adverse Effect.
(j) Additional Patents and Trademarks. At the time of delivery of
the financial statements and reports provided for in Section 7.1(a), a
report signed by the chief financial officer or treasurer of the Borrower
setting forth (i) a list of registration numbers for all patents,
trademarks, service marks, tradenames and copyrights awarded to the Parent
or any Consolidated Party since the last day of the immediately preceding
fiscal year and (ii) a list of all patent applications, trademark
applications, service mark applications, trade name applications and
copyright applications submitted by the Parent or any Consolidated Party
since the last day of the immediately preceding fiscal year and the status
of each such application, all in such form as shall be reasonably
satisfactory to the Agent.
(l) Other Information. With reasonable promptness upon any such
request, such other information regarding the business, properties or
financial condition of the Parent or any Consolidated Party as the Agent
or the Required Lenders may reasonably request.
7.2 Preservation of Existence and Franchises.
Except as a result of or in connection with a dissolution, merger or
disposition of a Subsidiary permitted under Section 8.4 or Section 8.5, each
Credit Party will, and will cause each of its Subsidiaries to, do all things
necessary to preserve and keep in full force and effect its existence, rights,
franchises and authority.
7.3 Books and Records.
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Each Credit Party will, and will cause each of its Subsidiaries to, keep
complete and accurate books and records of its transactions in accordance with
good accounting practices on the basis of GAAP (including the establishment and
maintenance of appropriate reserves).
7.4 Compliance with Law.
Each Credit Party will, and will cause each of its Subsidiaries to, comply
with all laws, rules, regulations and orders, and all applicable restrictions
imposed by all Governmental Authorities, applicable to it and its Property if
noncompliance with any such law, rule, regulation, order or restriction could
reasonably be expected to have a Material Adverse Effect.
7.5 Payment of Taxes and Other Indebtedness.
Each Credit Party will, and will cause each of its Subsidiaries to, pay
and discharge (a) all material taxes, assessments and governmental charges or
levies imposed upon it, or upon its income or profits, or upon any of its
properties, before they shall become delinquent, (b) all lawful claims
(including claims for labor, materials and supplies) which, if unpaid, might
give rise to a Lien upon any of its properties, and (c) except as prohibited
hereunder, all of its other material Indebtedness as it shall become due;
provided, however, that neither the Parent nor any Consolidated Party shall be
required to pay any such tax, assessment, charge, levy, claim or Indebtedness
which is being contested in good faith by appropriate proceedings and as to
which adequate reserves therefor have been established in accordance with GAAP,
unless the failure to make any such payment (i) could give rise to an immediate
right to foreclose on a Lien securing such amounts or (ii) could reasonably be
expected to have a Material Adverse Effect.
7.6 Insurance.
(a) Each Credit Party will, and will cause each of its Subsidiaries
to, at all times maintain in full force and effect insurance (including
worker's compensation insurance, liability insurance, casualty insurance
and business interruption insurance) in such amounts, covering such risks
and liabilities and with such deductibles or self-insurance retentions as
are in accordance with normal industry practice (or as otherwise required
by the Collateral Documents). The Agent shall be named as loss payee or
mortgagee, as its interest may appear, and/or additional insured with
respect to any such insurance providing coverage in respect of any
Collateral, and each provider of any such insurance shall agree, by
endorsement upon the policy or policies issued by it or by independent
instruments furnished to the Agent, that it will give the Agent thirty
(30) days prior written notice before any such policy or policies shall be
altered or canceled, and that no act or default of the Parent or any
Consolidated Party or any other Person shall affect the rights of the
Agent or the Lenders under such policy or policies. The present insurance
coverage of the Parent and the Consolidated Parties is outlined as to
carrier, policy number, expiration date, type and amount on Schedule 7.6.
(b) In case of any material loss, damage to or destruction of the
Collateral of any Credit Party or any part thereof, such Credit Party
shall promptly give written notice thereof to the Agent generally
describing the nature and extent of such damage or destruction. In case of
any loss, damage to or destruction of the Collateral of any Credit
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Party or any part thereof, such Credit Party, whether or not the insurance
proceeds, if any, received on account of such damage or destruction shall
be sufficient for that purpose, at such Credit Party's cost and expense,
will promptly repair or replace the Collateral of such Credit Party so
lost, damaged or destroyed; provided, however, that such Credit Party need
not repair or replace the Collateral of such Credit Party so lost, damaged
or destroyed to the extent the failure to make such repair or replacement
(i) is desirable to the proper conduct of the business of such Credit
Party and otherwise in the best interest of such Credit Party; and (ii)
would not materially impair the rights and benefits of the Agent or the
Lenders under the Collateral Documents, any other Credit Document or any
Hedging Agreement. Notwithstanding any provision to the contrary contained
in this Credit Agreement (including without limitation Section 3.3(b)(v)
and Section 8.5), none of the Credit Parties shall undertake replacement
or restoration of any lost, damaged or destroyed Collateral of such Credit
Party with insurance proceeds in respect thereof unless (A) the Agent has
received evidence reasonably satisfactory to it that the Collateral lost,
damaged or destroyed has been or will be replaced or restored to its
condition immediately prior to the loss, destruction or other event giving
rise to the payment of such insurance proceeds and (B) no violation of
Section 7.11(b), (c) or (d) would have occurred as of the most recent
fiscal quarter end preceding the date of determination with respect to
which the Agent has received the Required Financial Information upon
giving pro forma effect to any Indebtedness to be incurred in connection
with such replacement or restoration (assuming, for purposes hereof, that
such Indebtedness was incurred as of the first day of the four
fiscal-quarter period ending as of such fiscal quarter end).
7.7 Maintenance of Property.
Each Credit Party will, and will cause each of its Subsidiaries to,
maintain and preserve its properties and equipment material to the conduct of
its business in good repair, working order and condition, normal wear and tear
and casualty and condemnation excepted, and will make, or cause to be made, in
such properties and equipment from time to time all repairs, renewals,
replacements, extensions, additions, betterments and improvements thereto as may
be needed or proper, to the extent and in the manner customary for companies in
similar businesses.
7.8 Performance of Obligations.
Each Credit Party will, and will cause each of its Subsidiaries to,
perform in all material respects all of its obligations under the terms of all
material agreements, indentures, mortgages, security agreements or other debt
instruments to which it is a party or by which it is bound.
7.9 Use of Proceeds.
The Borrower will use the proceeds of the Loans and will use the Letters
of Credit solely for the purposes set forth in Section 6.15.
7.10 Audits/Inspections.
Upon reasonable notice and during normal business hours, each Credit Party
will, and will cause each of its Subsidiaries to, permit representatives
appointed by the Agent, including, without
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limitation, independent accountants, agents, attorneys, and appraisers to visit
and inspect its property, including its books and records, its accounts
receivable and inventory, its facilities and its other business assets, and to
make photocopies or photographs thereof and to write down and record any
information such representative obtains and shall permit the Agent or its
representatives to investigate and verify the accuracy of information provided
to the Lenders and to discuss all such matters with the officers, employees and
representatives of such Person.
7.11 Financial Covenants.
The Credit Parties shall cause:
(a) Fixed Charge Coverage Ratio. The Fixed Charge Coverage Ratio, as
of the last day of each fiscal quarter of the Consolidated Parties, to be
at least 1.00 to 1.00.
(b) Interest Coverage Ratio. The Interest Coverage Ratio, as of the
last day of each fiscal quarter of the Consolidated Parties, to be greater
than or equal to:
(i) for the period from the Closing Date to and including
December 30, 1999, 1.65 to 1.00;
(ii) for the period from December 31, 1999 to and including
December 30, 2000, 1.85 to 1.00;
(iii) for the period from December 31, 2000 to and including
December 30, 2001, 2.00 to 1.00;
(iv) for the period from December 31, 2001 to and including
December 30, 2002, 2.25 to 1.00; and
(v) for the period from December 31, 2002 and at all times
thereafter, 2.50 to 1.00.
(c) Senior Leverage Ratio. The Senior Leverage Ratio, as of the last
day of each fiscal quarter of the Consolidated Parties, to be less than or
equal to:
(i) for the period from the Closing Date to and including
December 30, 1998, 3.50 to 1.00;
(ii) for the period from December 31, 1998 to and including
December 30, 1999, 3.25 to 1.00;
(iii) for the period from December 31, 1999 to and including
December 30, 2000, 2.75 to 1.00;
(iv) for the period from December 31, 2000 to and including
December 30, 2001, 2.25 to 1.00; and
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(v) for the period from December 31, 2001 and at all times
thereafter, 2.00 to 1.00.
(d) Total Leverage Ratio. The Total Leverage Ratio, as of the last
day of each fiscal quarter of the Consolidated Parties, to be less than or
equal to:
(i) for the period from the Closing Date to and including
December 30, 1998, 6.50 to 1.00;
(ii) for the period from December 31, 1998 to and including
December 30, 1999, 6.25 to 1.00;
(iii) for the period from December 31, 1999 to and including
December 30, 2000, 5.50 to 1.00;
(iv) for the period from December 31, 2000 to and including
December 30, 2001, 4.75 to 1.00; and
(v) for the period from December 31, 2001 and at all times
thereafter, 4.00 to 1.00.
7.12 Additional Credit Parties.
As soon as practicable and in any event within 30 days after any Person
becomes a Material Domestic Subsidiary or a Material Foreign Subsidiary, the
Credit Parties shall provide the Agent with written notice thereof setting forth
information in reasonable detail describing all of the assets of such Person and
shall (a) if such Person is a Material Domestic Subsidiary, cause such Person to
execute a Joinder Agreement in substantially the same form as Exhibit 7.12, (b)
cause 100% (if such Person is a Material Domestic Subsidiary) or 65% (if such
Person is a Material Foreign Subsidiary directly owned by the Parent or any
Domestic Subsidiary) of the Equity Interests of such Person to be delivered to
the Agent (together with undated stock powers signed in blank (unless, with
respect to a Material Foreign Subsidiary, such stock powers are deemed
unnecessary by the Agent in its reasonable discretion under the law of the
jurisdiction of incorporation of such Person)) and pledged to the Agent pursuant
to an appropriate pledge agreement(s) in substantially the form of the Pledge
Agreement and otherwise in form acceptable to the Agent and (c) if such Person
is a Material Domestic Subsidiary which (i) owns any real property located in
the United States or (ii) leases any real property located in the United States
and deemed to be material by the Agent or the Required Lenders in its or their
sole reasonable discretion, cause such Person to (A) deliver to the Agent with
respect to such real property documents, instruments and other items of the
types required to be delivered pursuant to Section 5.1(g) all in form, content
and scope reasonably satisfactory to the Agent and (B) deliver such other
documentation as the Agent may reasonably request in connection with the
foregoing, including, without limitation, appropriate UCC-1 financing
statements, real estate title insurance policies, environmental reports,
landlord's waivers, certified resolutions and other organizational and
authorizing documents of such Person, favorable opinions of counsel to such
Person (which shall cover, among other things, the legality, validity, binding
effect and enforceability of the documentation referred to above and the
perfection of the Agent's liens thereunder) and other
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items of the types required to be delivered pursuant to Section 5.1(b), (d), (e)
and (f), all in form, content and scope reasonably satisfactory to the Agent.
7.13 Pledged Assets.
Each Credit Party will, and will cause each of the Material Domestic
Subsidiaries to, cause (i) all of its owned real and personal property located
in the United States and (ii) all of its leased real property located in the
United States and deemed to be material by the Agent or the Required Lenders in
its or their sole reasonable discretion to be subject at all times to first
priority, perfected and, in the case of real property (whether leased or owned),
title insured Liens in favor of the Agent to secure the Credit Party Obligations
pursuant to the terms and conditions of the Collateral Documents or, with
respect to any such property acquired subsequent to the Closing Date, such other
additional security documents as the Agent shall reasonably request, subject in
any case to Permitted Liens. With respect to any real property (whether leased
or owned) located in the United States acquired by the Parent, the Borrower or
any Material Domestic Subsidiary subsequent to the Closing Date, such Person
will cause to be delivered to the Agent with respect to such real property
documents, instruments and other items of the types required to be delivered
pursuant to Section 5.1(e) in form acceptable to the Agent. Without limiting the
generality of the above, the Credit Parties will cause 100% of the Equity
Interests of the Borrower and each of the other Material Domestic Subsidiaries
and 65% of the Equity Interests of each of the Material Foreign Subsidiaries
directly owned by the Parent or any Domestic Subsidiary to be subject at all
times to a first priority, perfected Lien in favor of the Agent pursuant to the
terms and conditions of the Collateral Documents or such other security
documents as the Agent shall reasonably request.
If, subsequent to the Closing Date, any Credit Party shall (a) acquire any
intellectual property, securities, instruments, chattel paper or other personal
property required to be pledged to the Agent as Collateral hereunder or under
any of the Collateral Documents or (b) acquire or lease any real property, the
Credit Parties shall promptly (and in any event within three (3) Business Days)
after any Executive Officer of a Credit Party acquires knowledge of same notify
the Agent of same. Each of the Credit Parties shall take such action (including
but not limited to the actions set forth in Sections 5.1(d) and (e)) at its own
expense as requested by the Agent to ensure that, subject in any case to
Permitted Liens, the Agent has a first priority perfected Lien to secure the
Credit Party Obligations in (i) all owned real property and personal property of
any Credit Party located in the United States and subject to a Permitted Lien
arising under documents prohibiting the creation or assumption of any other Lien
upon such property, (ii) to the extent deemed to be material by the Agent or the
Required Lenders in its or their sole reasonable discretion, all other owned
real and personal property of any Credit Party and (iii) all leased real
property located in the United States and deemed to be material by the Agent or
the Required Lenders in its or their sole reasonable discretion, subject in each
case only to Permitted Liens. Each Credit Party shall, and shall cause each of
its Subsidiaries to, adhere to the covenants regarding the location of personal
property as set forth in the Security Agreements.
7.14 Furtherance Assurances.
(a) The Credit Parties shall cause Cluett Peabody AG and Arrow
Mexico SA de CV to be dissolved within one year after the Closing Date.
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(b) The Borrower shall use its reasonable best efforts to deliver to
the Agent within 180 days after the Closing Date with respect to the
leasehold or other ownership interest of the Borrower in the Austell
Property at such time, such real property documents, instruments and other
items of the types required to be delivered pursuant to Section 5.1(e), in
each case in form and substance reasonably acceptable to the Agent.
(c) If the Borrower shall not have disposed of the real property of
the Borrower located in Cedartown, Georgia within 180 days after the
Closing Date, then the Borrower shall deliver to the Agent with respect to
such real property such documents, instruments and other items of the
types required to be delivered pursuant to Section 5.1(e), in each case in
form and substance reasonably acceptable to the Agent.
(d) If the Borrower shall not have disposed of the real property of
the Borrower located in Henderson, North Carolina within 180 days after
the Closing Date, then the Borrower shall deliver to the Agent with
respect to such real property such documents, instruments and other items
of the types required to be delivered pursuant to subsections (ii), (iv),
(v), (vi), (vii), (viii) and (ix) of Section 5.1(e), in each case in form
and substance reasonably acceptable to the Agent.
(e) Within 15 days after the Closing Date, the Borrower shall
deliver to the Agent, to the extent not previously delivered to the Agent
pursuant to Section 5.1(e), (i) maps or plats of an as-built survey of
each of the Mortgaged Property certified to the Agent and the Title
Insurance Company in a manner reasonably satisfactory to each of the Agent
and the Title Insurance Company, dated a date reasonably satisfactory to
the Agent and the Title Insurance Company by an independent professional
land surveyor licensed by the state in which the applicable Mortgaged
Property is located, which maps or plats and the surveys on which they are
based shall be made in accordance with standards that enable the Title
Insurance Company to issue an endorsement to the applicable Mortgage
Policies removing any exception for "survey matters", except for matters
as are reasonably acceptable to the Agent, (ii) such amendments or
modifications to the Mortgage Instruments delivered pursuant to Section
5.1(e) as shall be required by the Title Insurance Company in order for
the applicable Mortgage Policy to be endorsed by the Title Insurance
Company in order to insure the legal description of the related Mortgaged
Property determined from the survey of such Mortgaged Property described
in clause (i) above (together with corresponding amendments to any related
Uniform Commercial Code fixture filings) and (iii) such endorsements, if
any, to the Mortgage Policies as the Agent may reasonably request, all in
form and substance reasonably satisfactory to the Agent.
(f) Within 15 days after the Closing Date, the Credit Parties shall
deliver to the Agent in respect of any personal property Collateral
located at the premises leased by Great American Knitting Mills, Inc. in
Mebane, North Carolina, such estoppel letters, consents and waivers from
the landlord of such real property as shall be reasonably satisfactory to
the Agent.
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SECTION 8
NEGATIVE COVENANTS
Each Credit Party hereby covenants and agrees that, so long as this Credit
Agreement is in effect or any amounts payable hereunder or under any other
Credit Document shall remain outstanding, and until all of the Commitments
hereunder shall have terminated:
8.1 Indebtedness.
The Credit Parties will not permit the Parent or any Consolidated Party to
contract, create, incur, assume or permit to exist any Indebtedness, except:
(a) Indebtedness arising under this Credit Agreement and the other
Credit Documents;
(b) Indebtedness of the Parent and the Consolidated Parties set
forth in Schedule 8.1 (and renewals, refinancings and extensions thereof
on terms and conditions no less favorable to such Person than such
existing Indebtedness);
(c) purchase money Indebtedness (including Capital Leases or
Synthetic Leases) hereafter incurred by any of the Parent or the
Consolidated Parties to finance the purchase of fixed assets provided that
(i) the total of all such Indebtedness for all such Persons taken together
(including any such Indebtedness referred to in subsection (b) above, but
excluding the Indebtedness referred to in clause (h) below) shall not
exceed an aggregate principal amount of $5,000,000 at any one time
outstanding; (ii) unless such Indebtedness is non-recourse to the Parent
and the Consolidated Parties, such Indebtedness when incurred shall not
exceed the purchase price of the asset(s) financed; and (iii) no such
Indebtedness shall be refinanced for a principal amount in excess of the
principal balance outstanding thereon at the time of such refinancing;
(d) obligations of the Consolidated Parties in respect of Hedging
Agreements entered into in order to manage existing or anticipated
interest rate or exchange rate risks and not for speculative purposes;
(e) intercompany Indebtedness arising out of loans and advances
permitted under Section 8.6;
(f) Subordinated Indebtedness;
(g) Indebtedness of Foreign Subsidiaries not exceeding $10,000,000
in aggregate principal amount at any one time outstanding for all such
Persons taken together;
(h) Capital Lease obligations of the Borrower in respect of the
Austell Transaction;
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(i) Indebtedness representing deferred compensation to employees of
the Parent or any Consolidated Party not exceeding $2,000,000 in aggregate
principal amount at any one time outstanding for all such Persons taken
together;
(j) Guaranty Obligations of any Credit Party with respect to any
Indebtedness permitted under this Section 8.1;
(k) the Employee Preferred Stock; and
(l) in addition to the Indebtedness otherwise permitted by this
Section 8.1, other Indebtedness hereafter incurred by the Borrower not
exceeding $15,000,000 in aggregate principal amount at any one time
outstanding.
8.2 Liens.
The Credit Parties will not permit the Parent or any Consolidated Party to
contract, create, incur, assume or permit to exist any Lien with respect to any
of its Property, whether now owned or after acquired, except for Permitted
Liens.
8.3 Nature of Business.
The Credit Parties will not permit the Parent and the Consolidated Parties
taken as a whole to fail to be primarily in the business of manufacturing,
licensing and selling articles of clothing.
8.4 Consolidation, Merger, Dissolution, etc.
Except in connection with an Asset Disposition permitted by the terms of
Section 8.5, the Credit Parties will not permit the Parent or any Consolidated
Party to enter into any transaction of merger or consolidation or liquidate,
wind up or dissolve itself (or suffer any liquidation or dissolution); provided
that, notwithstanding the foregoing provisions of this Section 8.4, (a) the
Parent may merge or consolidate with Interco provided that the Credit Parties
shall cause to be executed and delivered such documents, instruments and
certificates as the Agent may request so as to cause the Credit Parties to be in
compliance with the terms of Section 7.13 after giving effect to such
transaction, (b) the Borrower may merge or consolidate with any of its
Subsidiaries provided that (i) the Borrower shall be the continuing or surviving
corporation, (ii) the Credit Parties shall cause to be executed and delivered
such documents, instruments and certificates as the Agent may request so as to
cause the Credit Parties to be in compliance with the terms of Section 7.13
after giving effect to such transaction and (iii) the Borrower shall have
delivered to the Agent a Pro Forma Compliance Certificate demonstrating that,
upon giving effect on a Pro Forma Basis to such transaction, no Default or Event
of Default would exist and be continuing, (c) any Credit Party other than the
Parent, Interco or the Borrower may merge or consolidate with any other Credit
Party other than the Parent, Interco or the Borrower provided that (i) the
Credit Parties shall cause to be executed and delivered such documents,
instruments and certificates as the Agent may request so as to cause the Credit
Parties to be in compliance with the terms of Section 7.13 after giving effect
to such transaction and (ii) the Borrower shall have delivered to the Agent a
Pro Forma Compliance Certificate demonstrating that, upon giving effect on a Pro
Forma Basis to such transaction, no Default or Event of Default would exist and
be continuing, (d) any Consolidated Party which is not
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a Credit Party may be merged or consolidated with or into any Credit Party other
than the Parent or Interco provided that (i) such Credit Party shall be the
continuing or surviving corporation, (ii) the Credit Parties shall cause to be
executed and delivered such documents, instruments and certificates as the Agent
may request so as to cause the Credit Parties to be in compliance with the terms
of Section 7.13 after giving effect to such transaction and (iii) the Borrower
shall have delivered to the Agent a Pro Forma Compliance Certificate
demonstrating that, upon giving effect on a Pro Forma Basis to such transaction,
no Default or Event of Default would exist and be continuing, (e) any
Consolidated Party which is not a Credit Party may be merged or consolidated
with or into any other Consolidated Party which is not a Credit Party provided
the Borrower shall have delivered to the Agent a Pro Forma Compliance
Certificate demonstrating that, upon giving effect on a Pro Forma Basis to such
transaction, no Default or Event of Default would exist and be continuing, (f)
the Borrower or any Subsidiary of the Borrower may merge with any Person other
than the Parent or a Consolidated Party in connection with a Permitted
Acquisition if (i) if such merger involves the Borrower, the Borrower shall be
the continuing or surviving corporation, (ii) the Credit Parties shall cause to
be executed and delivered such documents, instruments and certificates as the
Agent may request so as to cause the Credit Parties to be in compliance with the
terms of Section 7.13 after giving effect to such transaction and (iii) the
Borrower shall have delivered to the Agent a Pro Forma Compliance Certificate
demonstrating that, upon giving effect on a Pro Forma Basis to such transaction,
no Default or Event of Default would exist and be continuing and (g) any
Subsidiary of the Borrower may dissolve, liquidate or wind up its affairs at any
time.
8.5 Asset Dispositions.
The Credit Parties will not permit the Parent or any Consolidated Party to
make any Asset Disposition (including, without limitation, any Sale and
Leaseback Transaction) other than Excluded Asset Dispositions unless (a) the
consideration paid in connection therewith is at least 75% cash or Cash
Equivalents, (b) if such transaction is a Sale and Leaseback Transaction, such
transaction is permitted by the terms of Section 8.13, (c) the aggregate net
book value of all of the assets sold or otherwise disposed of in all such Asset
Dispositions after the Closing Date (other than pursuant to any casualty or
condemnation event) shall not exceed $5,000,000, (d) the Borrower shall have
delivered to the Agent a Pro Forma Compliance Certificate demonstrating that,
upon giving effect on a Pro Forma Basis to such transaction, no Default or Event
of Default would exist hereunder and (e) no later than 15 days prior to such
Asset Disposition, the Agent and the Lenders shall have received a certificate
of an officer of the Borrower specifying the anticipated or actual date of such
Asset Disposition, briefly describing the assets to be sold or otherwise
disposed of and setting forth the net book value of such assets, the aggregate
consideration and the Net Cash Proceeds to be received for such assets in
connection with such Asset Disposition, and thereafter the Credit Parties shall,
within the period of 365 days (or such earlier date as is provided for
reinvestment of such proceeds under the documents evidencing or governing the
Senior Subordinated Debt) following the consummation of such Asset Disposition
(with respect to any such Asset Disposition, the "Application Period"), apply
(or cause to be applied) an amount equal to the Net Cash Proceeds of such Asset
Disposition to (i) make Eligible Reinvestments or (ii) prepay the Loans (and
cash collateralize LOC Obligations) in accordance with the terms of Section
3.3(b)(iii). Pending final application of the Net Cash Proceeds of any Asset
Disposition, such Net Cash Proceeds may be applied to temporarily reduce the
Revolving Loans or to make Permitted Investments.
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Upon a sale of Property or the sale of Equity Interests of a Consolidated
Party permitted by this Section 8.5, the Agent shall (to the extent applicable
and provided that such Person is also released from any and all of its
obligations, if any, in respect of all other Indebtedness of the Credit Parties)
deliver to the Credit Parties, upon the Credit Parties' request and at the
Credit Parties' expense, such documentation as is reasonably necessary to
evidence the release of the Agent's security interest, if any, in such Property
or Equity Interests, including, without limitation, amendments or terminations
of UCC financing statements, if any, the return of stock certificates, if any,
and the release of such Consolidated Party from all of its obligations, if any,
under the Credit Documents.
8.6 Investments.
The Credit Parties will not permit the Parent or any Consolidated Party to
make Investments in or to any Person, except for Permitted Investments.
8.7 Restricted Payments.
The Credit Parties will not permit the Parent or any Consolidated Party
to, directly or indirectly, declare, order, make or set apart any sum for or pay
any Restricted Payment, except (i) payments and distributions to consummate the
Recapitalization pursuant to the Recapitalization Documents (a) on the Closing
Date or (b) to the extent consisting of the distribution of the Parity Notes
(and interest thereon) and cash in lieu of fractional amounts thereof, (ii) the
repurchase, redemption or other acquisition or retirement for value of any
Equity Interests in the Parent held by any member of the executive management of
the Parent and its Subsidiaries, provided that the aggregate price paid for all
such repurchased, redeemed, acquired or retired Capital Stock shall not exceed
$1,000,000 in any fiscal year, (iii) any payment by the Parent in connection
with the repurchase of outstanding shares of Employee Preferred Stock (or any
class of Equity Interests into which such shares of Employee Preferred Stock are
converted) following the death, termination, disability, retirement or
termination or other separation of employment of any employee that is the
beneficial holder thereof, (iv) payments by any Consolidated Parties to the
Parent pursuant to a tax sharing agreement under which each such Consolidated
Party is allocated its proportionate share of the tax liability of the
affiliated group of corporations that file consolidated federal income tax
returns (or that file state or local income tax returns on a consolidated basis)
and (v) provided that no Default or Event of Default exists either before or
after giving effect thereto, (A) loans, advances, dividends or distributions by
any Consolidated Party to the Parent not to exceed an amount necessary to permit
the Parent to pay its costs (including all professional fees and expenses)
incurred to comply with its reporting obligations under federal or state laws or
in connection with reporting or other obligations under this Credit Agreement
and the Credit Documents, (B) loans or advances by any Consolidated Party to the
Parent not to exceed an amount necessary to permit the Parent to pay its interim
expenses incurred in connection with any public offering of equity securities
the net proceeds of which are specifically intended to be received by or
contributed or loaned to the Borrower, which, unless such offering shall have
been terminated by the board of directors of the Parent, shall be repaid to the
Borrower promptly out of the proceeds of such offering and (C) loans, advances,
dividends or distributions by any Consolidated Party to the Parent to pay for
corporate, administrative and operating expenses in the ordinary course of
business.
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8.8 Prepayments of Indebtedness, etc.
The Credit Parties will not permit the Parent or any Consolidated Party to
(a) if any Default or Event of Default has occurred and is continuing or would
be directly or indirectly caused as a result thereof, (i) after the issuance
thereof, amend or modify (or permit the amendment or modification of) any of the
terms of any Indebtedness if such amendment or modification would add or change
any terms in a manner adverse to the issuer of such Indebtedness, or shorten the
final maturity or average life to maturity or require any payment to be made
sooner than originally scheduled or increase the interest rate applicable
thereto or change any subordination provision thereof or (ii) except for the
exchange of the notes evidencing the Senior Subordinated Debt for notes with
identical terms registered pursuant to the registration rights agreement set
forth in the indenture for the Senior Subordinated Debt, make (or give any
notice with respect thereto) any voluntary or optional payment or prepayment or
redemption or acquisition for value of (including without limitation, by way of
depositing money or securities with the trustee with respect thereto before due
for the purpose of paying when due), refund, refinance or exchange of any other
Indebtedness (including without limitation Subordinated Indebtedness), (b) make
interest payments in respect of Subordinated Indebtedness in violation of the
subordination provisions of the documents evidencing or governing such
Subordinated Indebtedness or (c) make (or give any notice with respect thereto)
any voluntary or optional payment or prepayment, redemption, acquisition for
value or defeasance of (including without limitation, by way of depositing money
or securities with the trustee with respect thereto before due for the purpose
of paying when due), refund, refinance or exchange of Subordinated Indebtedness
(including any payment of accrued interest and premium, if any, payable in
connection therewith).
8.9 Transactions with Affiliates.
The Credit Parties will not permit the Parent or any Consolidated Party to
enter into or permit to exist any transaction or series of transactions with any
officer, director, shareholder, Foreign Subsidiary or Affiliate of such Person
other than (a) advances of working capital to any Credit Party other than the
Parent or Interco, (b) transfers of cash and assets to any Credit Party other
than the Parent or Interco, (c) transactions permitted by Section 8.1, Section
8.4, Section 8.5, Section 8.6 or Section 8.7, (d) normal compensation and
reimbursement of expenses of employees, officers and directors, (e) provided
that no Default or Event of Default exists either before or after giving effect
thereto, payment on the Closing Date to the Sponsor of an investment banking fee
in an amount, together with transaction fees and out-of-pocket expenses of the
Sponsor, including those previously paid, not to exceed $4,500,000, (f) payments
to the Sponsor or its Affiliate designee of a annual management fee, together
with out-of-pocket expenses of all such Persons for the applicable year, not to
exceed $600,000 and (g) except as otherwise specifically limited in this Credit
Agreement, other transactions which are entered into in the ordinary course of
such Person's business on terms and conditions substantially as favorable to
such Person as would be obtainable by it in a comparable arms-length transaction
with a Person other than an officer, director, shareholder, Subsidiary or
Affiliate.
8.10 Fiscal Year; Organizational Documents.
The Credit Parties will not permit the Parent or any Consolidated Party to
change its fiscal year or amend, modify or change its articles of incorporation
in any manner adverse to the Lenders
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(or corporate charter or other similar organizational document) or bylaws (or
other similar document) without the prior written consent of the Required
Lenders.
8.11 Limitation on Restricted Actions.
The Credit Parties will not permit the Parent or any Consolidated Party
to, directly or indirectly, create or otherwise cause or suffer to exist or
become effective any encumbrance or restriction on the ability of any such
Person to (a) pay dividends or make any other distributions to any Credit Party
on its Equity Interests or with respect to any other interest or participation
in, or measured by, its profits, (b) pay any Indebtedness or other obligation
owed to any Credit Party, (c) make loans or advances to any Credit Party, (d)
sell, lease or transfer any of its properties or assets to any Credit Party or
(e) act as a Guarantor and pledge its assets pursuant to the Credit Documents or
any renewals, refinancings, exchanges, refundings or extension thereof, except
(in respect of any of the matters referred to in clauses (a)-(d) above) for such
encumbrances or restrictions existing under or by reason of (i) this Credit
Agreement and the other Credit Documents, (ii) the Recapitalization Documents,
in each case as in effect as of the Closing Date, (iii) applicable law, (iv) any
document or instrument governing Indebtedness permitted under Section 8.1,
provided that the encumbrances and restrictions relating to the Parent or any
Consolidated Party in such document or instrument are no more restrictive than
the corresponding encumbrances and restrictions contained in the Credit
Documents, (v) the agreement for any lease by a Consolidated Party permitted
hereunder, provided that any such restriction contained therein relates only to
the asset or assets subject to such lease, (vi) any agreement relating to a sale
of Property by the Parent or a Consolidated Party permitted under this Credit
Agreement, provided that any such restriction contained therein relates only to
the asset or assets subject to such agreement or (vii) any Permitted Lien or any
document or instrument governing any Permitted Lien, provided that any such
restriction contained therein relates only to the Property subject to such
Permitted Lien.
8.12 Ownership of Subsidiaries; Limitations on Parent and Interco.
Notwithstanding any other provisions of this Credit Agreement to the
contrary:
(a) The Credit Parties will not permit the Borrower to own, directly
or indirectly, less than 90% of the Voting Stock of any of Subsidiary of
the Borrower other than a Licensing Subsidiary, (ii) permit any Subsidiary
of the Borrower to issue Equity Interests (except to the Borrower or to a
Wholly-Owned Subsidiary of the Borrower), (iii) permit, create, incur,
assume or suffer to exist any Lien thereon, in each case except (A) to
qualify directors where required by applicable law or to satisfy other
requirements of applicable law with respect to the ownership of Equity
Interests of Foreign Subsidiaries, (B) as a result of or in connection
with a dissolution, merger or disposition of a Subsidiary permitted under
Section 8.4 or Section 8.5 or (C) for Permitted Liens and (iv)
notwithstanding anything to the contrary contained in clause (ii) above,
permit any Subsidiary of the Borrower to issue any preferred Equity
Interests.
(b) The Parent shall not (i) hold any assets other than the Equity
Interests of Interco and its other Subsidiaries, (ii) have any liabilities
other than (A) the liabilities under the Credit Documents, (B) tax
liabilities in the ordinary course of business, (C) loans and
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advances permitted under Section 8.9, (D) the liabilities referred to in
clause (iii)(C) below and (E) corporate, administrative and operating
expenses in the ordinary course of business and (iii) engage in any
business other than (A) owning the Equity Interests of Interco and its
other Subsidiaries and activities incidental or related thereto, (B)
acting as a Guarantor hereunder and pledging its assets to the Agent, for
the benefit of the Lenders, pursuant to the Collateral Documents to which
it is a party and (C) acting as a guarantor in respect of the Senior
Subordinated Debt.
(c) Interco shall not (i) hold any assets other than the Equity
Interests of the Borrower and its other Subsidiaries, (ii) have any
liabilities other than (A) the liabilities under the Credit Documents, (B)
tax liabilities in the ordinary course of business, (C) loans and advances
permitted under Section 8.9, (D) the liabilities referred to in clause
(iii)(C) below and (E) corporate, administrative and operating expenses in
the ordinary course of business and (iii) engage in any business other
than (A) owning the Equity Interests of the Borrower and its other
Subsidiaries and activities incidental or related thereto, (B) acting as a
Guarantor hereunder and pledging its assets to the Agent, for the benefit
of the Lenders, pursuant to the Collateral Documents to which it is a
party and (C) acting as a guarantor in respect of the Senior Subordinated
Debt.
8.13 Sale Leasebacks.
Except in connection with the Austell Transaction, the Credit Parties will
not permit the Parent or any Consolidated Party to, directly or indirectly,
become or remain liable as lessee or as guarantor or other surety with respect
to any lease, whether an Operating Lease or a Capital Lease, of any Property
(whether real, personal or mixed), whether now owned or hereafter acquired, (a)
which the Parent or such Consolidated Party has sold or transferred or is to
sell or transfer to a Person other than the Parent or a Consolidated Party or
(b) which the Parent or such Consolidated Party intends to use for substantially
the same purpose as any other Property which has been sold or is to be sold or
transferred by such Consolidated Party to another Person other than the Parent
or a Consolidated Party in connection with such lease.
8.14 No Further Negative Pledges.
The Credit Parties will not permit the Parent or any Consolidated Party to
enter into, assume or become subject to any agreement prohibiting or otherwise
restricting the creation or assumption of any Lien upon any of its Property,
whether now owned or hereafter acquired, or requiring the grant of any security
for such obligation if security is given for some other obligation, except (a)
pursuant to this Credit Agreement and the other Credit Documents, (b) pursuant
to the Recapitalization Documents, in each case as in effect as of the Closing
Date, (c) any document or instrument governing Indebtedness permitted under
Section 8.1, provided that the encumbrances and restrictions relating to the
Parent or any Consolidated Party in such document or instrument (i) permit the
Liens arising under the Collateral Documents and/or contemplated by the terms of
Section 7.12 and Section 7.13 and (ii) are no more restrictive than the
corresponding encumbrances and restrictions contained in the Credit Documents,
(d) the agreement for any lease by the Parent or a Consolidated Party permitted
hereunder, provided that any such restriction contained therein relates only to
the asset or assets subject to such lease, (e) any agreement relating to a sale
of Property by the Parent or a Consolidated Party permitted under this Credit
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Agreement, provided that any such restriction contained therein relates only to
the Property subject to such agreement or (f) any Permitted Lien or any document
or instrument governing any Permitted Lien, provided that any such restriction
contained therein relates only to the asset or assets subject to such Permitted
Lien.
8.15 Designated Senior Indebtedness.
Notwithstanding any other provision of this Credit Agreement to contrary
(including without limitation the terms of Section 8.1), the Credit Parties will
not permit the Parent or any Consolidated Party to contract, create, incur,
assume or permit to exist any Indebtedness which would constitute "Designated
Senior Indebtedness" under and as defined in the documents evidencing or
governing the Senior Subordinated Debt, except for the Indebtedness arising
under this Credit Agreement and the other Credit Documents.
SECTION 9
EVENTS OF DEFAULT
9.1 Events of Default.
An Event of Default shall exist upon the occurrence and continuation of
any of the following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall
(i) default in the payment when due of any principal of any of
the Loans or of any reimbursement obligations arising from drawings
under Letters of Credit, or
(ii) default, and such default shall continue for five (5) or
more Business Days, in the payment when due of any interest on the
Loans or on any reimbursement obligations arising from drawings
under Letters of Credit, or of any Fees or other amounts owing
hereunder, under any of the other Credit Documents or in connection
herewith or therewith; or
(b) Representations. Any representation, warranty or statement made
or deemed to be made by any Credit Party herein, in any of the other
Credit Documents, or in any statement or certificate delivered or required
to be delivered pursuant hereto or thereto shall prove untrue in any
material respect on the date as of which it was made or deemed to have
been made; or
(c) Covenants. Any Credit Party shall
(i) default in the due performance or observance of any term,
covenant or agreement contained in Sections 7.9, 7.11 or 8.1 through
8.15, inclusive; or
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(ii) default in the due performance or observance by it of any
term, covenant or agreement (other than those referred to in
subsections (a), (b) or (c)(i) of this Section 9.1) contained in
this Credit Agreement and such default shall continue unremedied for
a period of at least 30 days after the earlier of a responsible
officer of a Credit Party becoming aware of such default or notice
thereof by the Agent; or
(d) Other Credit Documents. (i) Any Credit Party shall default in
the due performance or observance of any term, covenant or agreement in
any of the other Credit Documents (subject to applicable grace or cure
periods, if any), or (ii) except as a result of or in connection with a
dissolution, merger or disposition of a Subsidiary permitted under Section
8.4 or Section 8.5, any Credit Document shall fail to be in full force and
effect or to give the Agent and/or the Lenders the Liens, rights, powers
and privileges purported to be created thereby, or any Credit Party shall
so state in writing; or
(e) Guaranties. Except as the result of or in connection with a
dissolution, merger or disposition of a Subsidiary permitted under Section
8.4 or Section 8.5, the guaranty given by any Guarantor hereunder
(including any Additional Credit Party) or any provision thereof shall
cease to be in full force and effect, or any Guarantor (including any
Additional Credit Party) hereunder or any Person acting by or on behalf of
such Guarantor shall deny or disaffirm such Guarantor's obligations under
such guaranty, or any Guarantor shall default in the due performance or
observance of any term, covenant or agreement on its part to be performed
or observed pursuant to any guaranty; or
(f) Bankruptcy, etc. Any Bankruptcy Event shall occur with respect
to the Parent or any Consolidated Party; or
(g) Revocation of Confirmation Order. The Confirmation Order shall
be revoked by the Bankruptcy Court or any other court of competent
jurisdiction; or
(h) Defaults under Other Agreements. With respect to any
Indebtedness (other than Indebtedness outstanding under this Credit
Agreement) in excess of $2,500,000 in the aggregate for the Parent and the
Consolidated Parties taken as a whole, (i) the Parent or any Consolidated
Party shall (A) default in any payment (beyond the applicable grace period
with respect thereto, if any) with respect to any such Indebtedness, or
(B) the occurrence and continuance of a default in the observance or
performance relating to such Indebtedness or contained in any instrument
or agreement evidencing, securing or relating thereto, or any other event
or condition shall occur or condition exist, the effect of which default
or other event or condition is to cause, or permit, the holder or holders
of such Indebtedness (or trustee or agent on behalf of such holders) to
cause (determined without regard to whether any notice or lapse of time is
required), any such Indebtedness to become due prior to its stated
maturity; or (ii) any such Indebtedness shall be declared due and payable,
or required to be prepaid other than by a regularly scheduled required
prepayment, prior to the stated maturity thereof; or
(i) Judgments. One or more judgments or decrees shall be entered
against one or more of the Parent and the Consolidated Parties involving a
liability of $2,500,000 or
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more in the aggregate (to the extent not paid or fully covered by
insurance provided by a carrier who has acknowledged coverage and has the
ability to perform) and any such judgments or decrees shall not have been
vacated, discharged or stayed or bonded pending appeal within 30 days from
the entry thereof; or
(j) ERISA. Any of the following events or conditions, if such event
or condition could reasonably be expected to result in liability that
would have a Material Adverse Effect: (i) an ERISA Event shall occur with
respect to a Single Employer Plan, which is, in the reasonable opinion of
the Agent, likely to result in the termination of such Plan for purposes
of Title IV of ERISA; (ii) an ERISA Event shall occur with respect to a
Multiemployer Plan or Multiple Employer Plan, which is, in the reasonable
opinion of the Agent, likely to result in (A) the termination of such Plan
for purposes of Title IV of ERISA, or (B) the Parent, any Consolidated
Party or any ERISA Affiliate incurring liability in connection with a
withdrawal from, reorganization of (within the meaning of Section 4241 of
ERISA), or insolvency or (within the meaning of Section 4245 of ERISA)
such Plan; or (iii) any prohibited transaction (within the meaning of
Section 406 of ERISA or Section 4975 of the Code) or breach of fiduciary
responsibility shall occur which may subject the Parent, any Consolidated
Party or any ERISA Affiliate to any liability under Sections 406, 409,
502(i), or 502(l) of ERISA or Section 4975 of the Code, or under any
agreement or other instrument pursuant to which the Parent, any
Consolidated Party or any ERISA Affiliate has agreed or is required to
indemnify any person against any such liability; or
(k) Recapitalization Documents. (i) There shall occur and be
continuing any Event of Default under and as defined in any of the
Recapitalization Documents or (ii) any of the Credit Party Obligations for
any reason shall cease to be "Designated Senior Indebtedness" under and as
defined in the documents evidencing or governing the Senior Subordinated
Debt; or
(l) Ownership. There shall occur a Change of Control.
9.2 Acceleration; Remedies.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the requisite Lenders
(pursuant to the voting requirements of Section 11.6) or cured to the
satisfaction of the requisite Lenders (pursuant to the voting procedures in
Section 11.6), the Agent shall, upon the request and direction of the Required
Lenders, by written notice to the Credit Parties take any of the following
actions:
(a) Termination of Commitments. Declare the Commitments terminated
whereupon the Commitments shall be immediately terminated.
(b) Acceleration. Declare the unpaid principal of and any accrued
interest in respect of all Loans, any reimbursement obligations arising
from drawings under Letters of Credit and any and all other indebtedness
or obligations of any and every kind owing by the Credit Parties to the
Agent and/or any of the Lenders hereunder to be due whereupon the
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same shall be immediately due and payable without presentment, demand,
protest or other notice of any kind, all of which are hereby waived by the
Credit Parties.
(c) Cash Collateral. Direct the Credit Parties to pay (and the
Credit Parties agree that upon receipt of such notice, or upon the
occurrence of an Event of Default under Section 9.1(f), they will
immediately pay) to the Agent additional cash, to be held by the Agent,
for the benefit of the Lenders, in a cash collateral account as additional
security for the LOC Obligations in respect of subsequent drawings under
all then outstanding Letters of Credit in an amount equal to the maximum
aggregate amount which may be drawn under all Letters of Credits then
outstanding.
(d) Enforcement of Rights. Enforce any and all rights and interests
created and existing under the Credit Documents including, without
limitation, all rights and remedies existing under the Collateral
Documents, all rights and remedies against a Guarantor and all rights of
set-off.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur with respect to the Borrower, then the Commitments shall
automatically terminate and all Loans, all reimbursement obligations arising
from drawings under Letters of Credit, all accrued interest in respect thereof,
all accrued and unpaid Fees and other indebtedness or obligations owing to the
Agent and/or any of the Lenders hereunder automatically shall immediately become
due and payable without the giving of any notice or other action by the Agent or
the Lenders.
SECTION 10
AGENCY PROVISIONS
10.1 Appointment, Powers and Immunities.
Each Lender hereby irrevocably appoints and authorizes the Agent to act as
its agent under this Credit Agreement and the other Credit Documents with such
powers and discretion as are specifically delegated to the Agent by the terms of
this Credit Agreement and the other Credit Documents, together with such other
powers as are reasonably incidental thereto. The Agent (which term as used in
this sentence and in Section 10.5 and the first sentence of Section 10.6 hereof
shall include its Affiliates and its own and its Affiliates' officers,
directors, employees, and agents): (a) shall not have any duties or
responsibilities except those expressly set forth in this Credit Agreement and
shall not be a trustee or fiduciary for any Lender; (b) shall not be responsible
to the Lenders for any recital, statement, representation, or warranty (whether
written or oral) made in or in connection with any Credit Document or any
certificate or other document referred to or provided for in, or received by any
of them under, any Credit Document, or for the value, validity, effectiveness,
genuineness, enforceability, or sufficiency of any Credit Document, or any other
document referred to or provided for therein or for any failure by any Credit
Party or any other Person to perform any of its obligations thereunder; (c)
shall not be responsible for or have any duty to ascertain, inquire into, or
verify the performance or observance of any covenants or agreements by any
Credit Party or the satisfaction of any condition or to inspect the property
(including the books and records) of any Credit Party or any
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of its Subsidiaries or Affiliates; (d) shall not be required to initiate or
conduct any litigation or collection proceedings under any Credit Document; and
(e) shall not be responsible for any action taken or omitted to be taken by it
under or in connection with any Credit Document, except for its own gross
negligence or willful misconduct. The Agent may employ agents and
attorneys-in-fact and shall not be responsible for the negligence or misconduct
of any such agents or attorneys-in-fact selected by it with reasonable care.
10.2 Reliance by Agent.
The Agent shall be entitled to rely upon any certification, notice,
instrument, writing, or other communication (including, without limitation, any
thereof by telephone or telecopy) believed by it to be genuine and correct and
to have been signed, sent or made by or on behalf of the proper Person or
Persons, and upon advice and statements of legal counsel (including counsel for
any Credit Party), independent accountants, and other experts selected by the
Agent. The Agent may deem and treat the payee of any Note as the holder thereof
for all purposes hereof unless and until the Agent receives and accepts an
Assignment and Acceptance executed in accordance with Section 11.3(b) hereof. As
to any matters not expressly provided for by this Credit Agreement, the Agent
shall not be required to exercise any discretion or take any action, but shall
be required to act or to refrain from acting (and shall be fully protected in so
acting or refraining from acting) upon the instructions of the Required Lenders,
and such instructions shall be binding on all of the Lenders; provided, however,
that the Agent shall not be required to take any action that exposes the Agent
to personal liability or that is contrary to any Credit Document or applicable
law or unless it shall first be indemnified to its satisfaction by the Lenders
against any and all liability and expense which may be incurred by it by reason
of taking any such action.
10.3 Defaults.
The Agent shall not be deemed to have knowledge or notice of the
occurrence of a Default or Event of Default unless the Agent has received
written notice from a Lender or a Credit Party specifying such Default or Event
of Default and stating that such notice is a "Notice of Default". In the event
that the Agent receives such a notice of the occurrence of a Default or Event of
Default, the Agent shall give prompt notice thereof to the Lenders. The Agent
shall (subject to Section 10.2 hereof) take such action with respect to such
Default or Event of Default as shall reasonably be directed by the Required
Lenders, provided that, unless and until the Agent shall have received such
directions, the Agent may (but shall not be obligated to) take such action, or
refrain from taking such action, with respect to such Default or Event of
Default as it shall deem advisable in the best interest of the Lenders.
10.4 Rights as a Lender.
With respect to its Commitment and the Loans made by it, NationsBank (and
any successor acting as Agent) in its capacity as a Lender hereunder shall have
the same rights and powers hereunder as any other Lender and may exercise the
same as though it were not acting as the Agent, and the terms "Lender",
"Lenders", "Lender" and "Lenders" shall, unless the context otherwise indicates,
include the Agent in its individual capacity. NationsBank (and any successor
acting as Agent) and its Affiliates may (without having to account therefor to
any
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Lender) accept deposits from, lend money to, make investments in, provide
services to, and generally engage in any kind of lending, trust, or other
business with any Credit Party or any of its Subsidiaries or Affiliates as if it
were not acting as Agent, and NationsBank (and any successor acting as Agent)
and its Affiliates may accept fees and other consideration from any Credit Party
or any of its Subsidiaries or Affiliates for services in connection with this
Credit Agreement or otherwise without having to account for the same to the
Lenders.
10.5 Indemnification.
The Lenders agree to indemnify the Agent (to the extent not reimbursed
under Section 11.5 hereof, but without limiting the obligations of the Credit
Parties under such Section) ratably in accordance with their respective
Commitments, for any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, costs, expenses (including attorneys'
fees), or disbursements of any kind and nature whatsoever that may be imposed
on, incurred by or asserted against the Agent (including by any Lender) in any
way relating to or arising out of any Credit Document or the transactions
contemplated thereby or any action taken or omitted by the Agent under any
Credit Document; provided that no Lender shall be liable for any of the
foregoing to the extent they arise from the gross negligence or willful
misconduct of the Person to be indemnified. Without limitation of the foregoing,
each Lender agrees to reimburse the Agent promptly upon demand for its ratable
share of any costs or expenses payable by the Credit Parties under Section 11.5,
to the extent that the Agent is not promptly reimbursed for such costs and
expenses by the Credit Parties. The agreements in this Section 10.5 shall
survive the repayment of the Loans, LOC Obligations and other obligations under
the Credit Documents and the termination of the Commitments hereunder.
10.6 Non-Reliance on Agent and Other Lenders.
Each Lender agrees that it has, independently and without reliance on the
Agent or any other Lender, and based on such documents and information as it has
deemed appropriate, made its own credit analysis of the Credit Parties and their
Subsidiaries and decision to enter into this Credit Agreement and that it will,
independently and without reliance upon the Agent or any other Lender, and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own analysis and decisions in taking or not taking action
under the Credit Documents. Except for notices, reports, and other documents and
information expressly required to be furnished to the Lenders by the Agent
hereunder, the Agent shall not have any duty or responsibility to provide any
Lender with any credit or other information concerning the affairs, financial
condition, or business of any Credit Party or any of its Subsidiaries or
Affiliates that may come into the possession of the Agent or any of its
Affiliates.
10.7 Successor Agent.
The Agent may resign at any time by giving 30 day's prior notice thereof
to the Lenders and the Credit Parties. Upon any such resignation, the Required
Lenders shall have the right with the consent of the Borrower (not be
unreasonably withheld) to appoint a successor Agent. If no successor Agent shall
have been so appointed by the Required Lenders and shall have accepted such
appointment within thirty (30) days after the retiring Agent's giving of notice
of resignation, then the retiring Agent may, on behalf of the Lenders, appoint a
successor Agent
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which shall be a commercial bank organized under the laws of the United States
having combined capital and surplus of at least $100,000,000. Upon the
acceptance of any appointment as Agent hereunder by a successor, such successor
shall thereupon succeed to and become vested with all the rights, powers,
discretion, privileges, and duties of the retiring Agent, and the retiring Agent
shall be discharged from its duties and obligations hereunder. After any
retiring Agent's resignation hereunder as Agent, the provisions of this Section
10 shall continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was acting as Agent.
10.8 Documentation Agent.
The Documentation Agent, in its capacity as such, shall have no rights,
powers, duties or obligations under this Credit Agreement or any of the other
Credit Documents.
SECTION 11
MISCELLANEOUS
11.1 Notices.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a) when
delivered, (b) when transmitted via telecopy (or other facsimile device) to the
number set out below, (c) the Business Day following the day on which the same
has been delivered prepaid to a reputable national overnight air courier
service, or (d) the third Business Day following the day on which the same is
sent by certified or registered mail, postage prepaid, in each case to the
respective parties at the address, in the case of the Credit Parties and the
Agent, set forth below, and, in the case of the Lenders, set forth on Schedule
2.1(a), or at such other address as such party may specify by written notice to
the other parties hereto:
if to any Credit Party:
Cluett American Corp.
48 W. 38th Street
New York, New York 10018
Attn: President
Telephone: (212) 984-8915
Telecopy: (212) 984-8925
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with a copy to:
Vestar Capital Partners III, L.P.
245 Park Avenue, 41st Floor
New York, New York 10167
Attn: Mr. Norm Alpert
Telephone: (212) 949-6504
Telecopy: (212) 808-4922
and
Peter J. Gordon
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017-3909
Telephone: (212) 455-2605
Telecopy: (212) 455-2502
if to the Agent:
NationsBank, N. A.
Independence Center, 15th Floor
NC1-001-15-04
101 North Tryon Street
Charlotte, North Carolina 28255
Attn: Agency Services
Telephone: (704) 388-2374
Telecopy: (704) 388-9607
with a copy to:
NationsBank, N.A.
NationsBank Corporate Center, 8th Floor
100 North Tryon Street
Charlotte, North Carolina 28255
Attn: E. Phifer Helms
Telephone: (704) 386-5358
Telecopy: (704) 386-1270
11.2 Right of Set-Off; Adjustments.
Upon the occurrence and during the continuance of any Event of Default
under Section 9.1(a), each Lender (and each of its Affiliates) is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender (or any of its Affiliates) to or for the credit or the
account of any Credit Party against any and all of the obligations of such
Person now or hereafter existing under this
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Credit Agreement, under the Notes, under any other Credit Document or otherwise,
irrespective of whether such Lender shall have made any demand under hereunder
or thereunder and although such obligations may be unmatured. Each Lender agrees
promptly to notify any affected Credit Party after any such set-off and
application made by such Lender; provided, however, that the failure to give
such notice shall not affect the validity of such set-off and application. The
rights of each Lender under this Section 11.2 are in addition to other rights
and remedies (including, without limitation, other rights of set-off) that such
Lender may have.
11.3 Benefit of Agreement.
(a) This Credit Agreement shall be binding upon and inure to the
benefit of and be enforceable by the respective successors and assigns of
the parties hereto; provided that none of the Credit Parties may assign or
transfer any of its interests and obligations without prior written
consent of the Lenders; provided further that the rights of each Lender to
transfer, assign or grant participations in its rights and/or obligations
hereunder shall be limited as set forth in this Section 11.3.
(b) Each Lender may assign to one or more Eligible Assignees all or
a portion of its rights and obligations under this Credit Agreement
(including, without limitation, all or a portion of its Loans, its Notes,
and its Commitment); provided, however, that
(i) each such assignment shall be to an Eligible Assignee;
(ii) except in the case of an assignment to another Lender or
an assignment of all of a Lender's rights and obligations under this
Credit Agreement, any such partial assignment shall be in an amount
at least equal to $5,000,000 (or, if less, the remaining amount of
the Commitment being assigned by such Lender) or an integral
multiple of $1,000,000 in excess thereof;
(iii) each such assignment by a Lender shall be of a constant,
and not varying, percentage of all of its rights and obligations
under this Credit Agreement and the Notes; and
(iv) the parties to such assignment shall execute and deliver
to the Agent for its acceptance an Assignment and Acceptance in the
form of Exhibit 11.3(b) hereto, together with any Note subject to
such assignment and a processing fee of $3,500.
Upon execution, delivery, and acceptance of such Assignment and
Acceptance, the assignee thereunder shall be a party hereto and, to the
extent of such assignment, have the obligations, rights, and benefits of a
Lender hereunder and the assigning Lender shall, to the extent of such
assignment, relinquish its rights and be released from its obligations
under this Credit Agreement. Upon the consummation of any assignment
pursuant to this Section 11.3(b), the assignor, the Agent and the Credit
Parties shall make appropriate arrangements so that, if required, new
Notes are issued to the assignor and the assignee. If the assignee is not
a United States person under Section 7701(a)(30) of the Code, it
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shall deliver to the Credit Parties and the Agent certification as to
exemption from deduction or withholding of Taxes in accordance with
Section 3.11.
(c) The Agent shall maintain at its address referred to in Section
11.1 a copy of each Assignment and Acceptance delivered to and accepted by
it and a register for the recordation of the names and addresses of the
Lenders and the Commitment of, and principal amount of the Loans owing to,
each Lender from time to time (the "Register"). The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and the Credit Parties, the Agent and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for
all purposes of this Credit Agreement. The Register shall be available for
inspection by the Credit Parties or any Lender at any reasonable time and
from time to time upon reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by the
parties thereto, together with any Note subject to such assignment and
payment of the processing fee, the Agent shall, if such Assignment and
Acceptance has been completed and is in substantially the form of Exhibit
11.3(b) hereto, (i) accept such Assignment and Acceptance, (ii) record the
information contained therein in the Register and (iii) give prompt notice
thereof to the parties thereto.
(e) Each Lender may sell participations to one or more Persons in
all or a portion of its rights, obligations or rights and obligations
under this Credit Agreement (including all or a portion of its Commitment
or its Loans); provided, however, that (i) such Lender's obligations under
this Credit Agreement shall remain unchanged, (ii) such Lender shall
remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) the participant shall be entitled to the
benefit of the yield protection provisions contained in Sections 3.7
through 3.12, inclusive (but only to the extent its selling Lender is so
entitled), and the right of set-off contained in Section 11.2 (provided
that, in the case of Section 3.11, such participant shall have complied
with the provisions of said Section (except that any forms required to be
delivered pursuant to Section 3.11 will be delivered to the Lender from
whom the participation was purchased) and, provided, further, that no
participant shall be entitled to receive any greater amount pursuant to
Sections 3.9, 3.11 or 3.12 than the Lender from whom the participation was
purchased would have been entitled to receive in respect of the amount of
the participation transferred by such Lender to such participant had no
such transfer occurred) and (iv) the Credit Parties shall continue to deal
solely and directly with such Lender in connection with such Lender's
rights and obligations under this Credit Agreement, and such Lender shall
retain the sole right to enforce the obligations of the Credit Parties
relating to the Credit Party Obligations owing to such Lender and to
approve any amendment, modification, or waiver of any provision of this
Credit Agreement (other than amendments, modifications, or waivers
decreasing the amount of principal of or the rate at which interest is
payable on such Loans or Notes, extending any scheduled principal payment
date or date fixed for the payment of interest on such Loans or Notes, or
extending its Commitment).
(f) Notwithstanding any other provision set forth in this Credit
Agreement, any Lender may at any time assign and pledge all or any portion
of its Loans and its
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Notes to any Federal Reserve Bank as collateral security pursuant to
Regulation A and any Operating Circular issued by such Federal Reserve
Bank. No such assignment shall release the assigning Lender from its
obligations hereunder.
(g) Any Lender may furnish any information concerning the Parent and
the Consolidated Parties in the possession of such Lender from time to
time to assignees and participants (including prospective assignees and
participants), subject, however, to the provisions of Section 11.14
hereof.
11.4 No Waiver; Remedies Cumulative.
No failure or delay on the part of the Agent or any Lender in exercising
any right, power or privilege hereunder or under any other Credit Document and
no course of dealing between the Agent or any Lender and any of the Credit
Parties shall operate as a waiver thereof; nor shall any single or partial
exercise of any right, power or privilege hereunder or under any other Credit
Document preclude any other or further exercise thereof or the exercise of any
other right, power or privilege hereunder or thereunder. The rights and remedies
provided herein are cumulative and not exclusive of any rights or remedies which
the Agent or any Lender would otherwise have. No notice to or demand on any
Credit Party in any case shall entitle the Credit Parties to any other or
further notice or demand in similar or other circumstances or constitute a
waiver of the rights of the Agent or the Lenders to any other or further action
in any circumstances without notice or demand.
11.5 Expenses; Indemnification.
(a) The Credit Parties jointly and severally agree to pay on demand all
costs and expenses of the Agent in connection with the syndication, preparation,
execution, delivery, administration, modification, and amendment of this Credit
Agreement, the other Credit Documents, and the other documents to be delivered
hereunder, including, without limitation, the reasonable fees and expenses of
counsel for the Agent (including the cost of internal counsel) with respect
thereto and with respect to advising the Agent as to its rights and
responsibilities under the Credit Documents. The Credit Parties further jointly
and severally agree to pay on demand all costs and expenses of the Agent and one
counsel to all of the Lenders, if any, in connection with the enforcement
(whether through negotiations, legal proceedings, or otherwise) of the Credit
Documents and the other documents to be delivered hereunder.
(b) The Credit Parties jointly and severally agree to indemnify and hold
harmless the Agent and each Lender and each of their Affiliates and their
respective officers, directors, employees, agents, and advisors (each, an
"Indemnified Party") from and against any and all claims, damages, losses,
liabilities, costs, and expenses (including, without limitation, reasonable
attorneys' fees and excluding taxes) that may be incurred by or asserted or
awarded against any Indemnified Party, in each case arising out of or in
connection with or by reason of (including, without limitation, in connection
with any investigation, litigation, or proceeding or preparation of defense in
connection therewith) the Credit Documents, any of the transactions contemplated
herein or the actual or proposed use of the proceeds of the Loans, except to the
extent such claim, damage, loss, liability, cost, or expense results from any
Indemnified Party's gross negligence or willful misconduct. In the case of an
investigation, litigation or other proceeding to which the indemnity in this
Section 11.5 applies, such indemnity shall be effective whether or not such
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investigation, litigation or proceeding is brought by any of the Credit Parties,
their respective directors, shareholders or creditors or an Indemnified Party or
any other Person or any Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated hereby are consummated. The Credit
Parties agree not to assert any claim against the Agent, any Lender, any of
their Affiliates, or any of their respective directors, officers, employees,
attorneys, agents, and advisers, on any theory of liability, for special,
indirect, consequential, or punitive damages arising out of or otherwise
relating to the Credit Documents, any of the transactions contemplated herein or
the actual or proposed use of the proceeds of the Loans.
(c) Without prejudice to the survival of any other agreement of the Credit
Parties hereunder, the agreements and obligations of the Credit Parties
contained in this Section 11.5 shall survive the repayment of the Loans, LOC
Obligations and other obligations under the Credit Documents and the termination
of the Commitments hereunder.
11.6 Amendments, Waivers and Consents.
Neither this Credit Agreement nor any other Credit Document nor any of the
terms hereof or thereof may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing entered into by, or approved in writing by, the Required Lenders and the
Borrower, provided, however, that:
(i) without the consent of each Lender affected thereby, neither
this Credit Agreement nor any other Credit Document may be amended to
(a) extend the final maturity of any Loan or of any
reimbursement obligation, or any portion thereof, arising from
drawings under Letters of Credit, or extend or waive any Principal
Amortization Payment of any Loan, or any portion thereof,
(b) reduce the rate or extend the time of payment of interest
(other than as a result of waiving the applicability of any
post-default increase in interest rates) thereon or Fees hereunder,
(c) reduce or waive the principal amount of any Loan or of any
reimbursement obligation, or any portion thereof, arising from
drawings under Letters of Credit,
(d) increase the Commitment of a Lender over the amount
thereof in effect (it being understood and agreed that a waiver of
any Default or Event of Default or mandatory reduction in the
Commitments shall not constitute a change in the terms of any
Commitment of any Lender),
(e) except as the result of or in connection with an Asset
Disposition permitted by Section 8.5, release all or substantially
all of the Collateral,
(f) except as the result of or in connection with a
dissolution, merger or disposition of a Consolidated Party permitted
under Section 8.4, release the
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Borrower or substantially all of the other Credit Parties from its
or their obligations under the Credit Documents,
(g) amend, modify or waive any provision of this Section 11.6
or Section 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13, 3.14, 3.15,
9.1(a), 11.2, 11.3, 11.5 or 11.9,
(h) reduce any percentage specified in, or otherwise modify,
the definition of Required Lenders, or
(i) consent to the assignment or transfer by the Borrower or
all or substantially all of the other Credit Parties of any of its
or their rights and obligations under (or in respect of) the Credit
Documents except as permitted thereby;
(ii) without the consent of Lenders holding in the aggregate more
than 50% of the outstanding Tranche A Term Loans and more than 50% of the
outstanding Tranche B Term Loans, extend the time for or the amount or the
manner of application of proceeds of any mandatory prepayment required by
Section 3.3(b)(ii), (iii), (iv) or (v) hereof;
(iii) without the consent of the Agent, no provision of Section 10
may be amended;
(iv) without the consent of the Issuing Lender, no provision of
Section 2.2 may be amended; and
(v) without the consent of the Swingline Lender, no provision of
Section 2.3 may be amended.
Notwithstanding the fact that the consent of all the Lenders is required
in certain circumstances as set forth above, (x) each Lender is entitled
to vote as such Lender sees fit on any bankruptcy reorganization plan that
affects the Loans, and each Lender acknowledges that the provisions of
Section 1126(c) of the Bankruptcy Code supersedes the unanimous consent
provisions set forth herein and (y) the Required Lenders may consent to
allow a Credit Party to use cash collateral in the context of a bankruptcy
or insolvency proceeding.
11.7 Counterparts.
This Credit Agreement may be executed in any number of counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument. It shall not be necessary in
making proof of this Credit Agreement to produce or account for more than one
such counterpart for each of the parties hereto. Delivery by facsimile by any of
the parties hereto of an executed counterpart of this Credit Agreement shall be
as effective as an original executed counterpart hereof and shall be deemed a
representation that an original executed counterpart hereof will be delivered.
109
<PAGE>
11.8 Headings.
The headings of the sections and subsections hereof are provided for
convenience only and shall not in any way affect the meaning or construction of
any provision of this Credit Agreement.
11.9 Survival.
All indemnities set forth herein, including, without limitation, in
Section 2.2(i), 3.11, 3.12, 10.5 or 11.5 shall survive the execution and
delivery of this Credit Agreement, the making of the Loans, the issuance of the
Letters of Credit, the repayment of the Loans, LOC Obligations and other
obligations under the Credit Documents and the termination of the Commitments
hereunder, and all representations and warranties made by the Credit Parties
herein shall survive delivery of the Notes and the making of the Loans
hereunder.
11.10 Governing Law; Submission to Jurisdiction; Venue.
(a) THIS CREDIT AGREEMENT AND, UNLESS OTHERWISE EXPRESSLY PROVIDED
THEREIN, THE OTHER CREDIT DOCUMENTS AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER AND THEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND
INTERPRETED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any
legal action or proceeding with respect to this Credit Agreement or any
other Credit Document may be brought in the courts of the State of New
York in New York County, or of the United States for the Southern District
of New York, and, by execution and delivery of this Credit Agreement, each
of the Credit Parties hereby irrevocably accepts for itself and in respect
of its property, generally and unconditionally, the nonexclusive
jurisdiction of such courts. Each of the Credit Parties further
irrevocably consents to the service of process out of any of the
aforementioned courts in any such action or proceeding by the mailing of
copies thereof by registered or certified mail, postage prepaid, to it at
the address set out for notices pursuant to Section 11.1, such service to
become effective three (3) days after such mailing. Nothing herein shall
affect the right of the Agent or any Lender to serve process in any other
manner permitted by law or to commence legal proceedings or to otherwise
proceed against any Credit Party in any other jurisdiction.
(b) Each of the Credit Parties hereby irrevocably waives any
objection which it may now or hereafter have to the laying of venue of any
of the aforesaid actions or proceedings arising out of or in connection
with this Credit Agreement or any other Credit Document brought in the
courts referred to in subsection (a) above and hereby further irrevocably
waives and agrees not to plead or claim in any such court that any such
action or proceeding brought in any such court has been brought in an
inconvenient forum.
(c) TO THE EXTENT PERMITTED BY LAW, EACH OF THE AGENT, THE LENDERS,
EACH OF THE CREDIT PARTIES HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING
TO THIS CREDIT AGREEMENT, ANY OF THE OTHER CREDIT DOCUMENTS OR THE
TRANSACTIONS CONTEMPLATED HEREBY.
110
<PAGE>
11.11 Severability.
If any provision of any of the Credit Documents is determined to be
illegal, invalid or unenforceable, such provision shall be fully severable and
the remaining provisions shall remain in full force and effect and shall be
construed without giving effect to the illegal, invalid or unenforceable
provisions.
11.12 Entirety.
This Credit Agreement together with the other Credit Documents represent
the entire agreement of the parties hereto and thereto, and supersede all prior
agreements and understandings, oral or written, if any, including any commitment
letters or correspondence relating to the Credit Documents or the transactions
contemplated herein and therein.
11.13 Binding Effect; Termination.
(a) This Credit Agreement shall become effective at such time on or
after the Closing Date when it shall have been executed by each Credit
Party and the Agent, and the Agent shall have received copies hereof
(telecopied or otherwise) which, when taken together, bear the signatures
of each Lender, and thereafter this Credit Agreement shall be binding upon
and inure to the benefit of each Credit Party, the Agent and each Lender
and their respective successors and assigns.
(b) The term of this Credit Agreement shall be until no Loans, LOC
Obligations or any other amounts then payable hereunder or under any of
the other Credit Documents shall remain outstanding, no Letters of Credit
shall be outstanding, all of the Credit Party Obligations then outstanding
have been irrevocably satisfied in full and all of the Commitments
hereunder shall have expired or been terminated.
11.14 Confidentiality.
The Agent and each Lender (each, a "Lending Party") agrees to keep
confidential any non-public information furnished or made available to it by the
Credit Parties pursuant to this Credit Agreement; provided that nothing herein
shall prevent any Lending Party from disclosing such information (a) to any
other Lending Party or any Affiliate of any Lending Party, or any officer,
director, employee, agent, or advisor of any Lending Party or Affiliate of any
Lending Party, (b) to any other Person if reasonably incidental to the
administration of the credit facility provided herein, (c) as required by any
law, rule, or regulation, (d) upon the order of any court or administrative
agency, (e) upon the request or demand of any regulatory agency or authority
having jurisdiction over such Lending Party, (f) that is or becomes available to
the public or that is or becomes available to any Lending Party other than as a
result of a disclosure by any Lending Party prohibited by this Credit Agreement,
(g) in connection with any litigation to which such Lending Party or any of its
Affiliates may be a party, (h) to the extent necessary in connection with the
exercise of any remedy under this Credit Agreement or any other Credit Document,
and (i) subject to provisions substantially similar to those contained in this
Section 11.14, to any actual or proposed participant or assignee.
111
<PAGE>
11.15 Conflict.
To the extent that there is a conflict or inconsistency between any
provision hereof, on the one hand, and any provision of any Credit Document, on
the other hand, this Credit Agreement shall control.
[Signature Pages to Follow]
112
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart of
this Credit Agreement to be duly executed and delivered as of the date first
above written.
BORROWER: CLUETT AMERICAN CORP.,
a Delaware corporation
By: /s/ Bryan P. Marsal
------------------------------
Name: Bryan P. Marsal
------------------------------
Title: Director, President and
------------------------------
Chief Executive Officer
------------------------------
PARENT: CLUETT AMERICAN INVESTMENT CORP.,
a Delaware corporation
By: /s/ Bryan P. Marsal
------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
------------------------------
INTERCO: CLUETT AMERICAN GROUP, INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
------------------------------
SUBSIDIARY
GUARANTORS: CONSUMER DIRECT CORPORATION,
a Delaware corporation
By: /s/ Bryan P. Marsal
------------------------------
Name: Bryan P. Marsal
------------------------------
Title: Director, President and
------------------------------
Chief Executive Officer
------------------------------
ARROW FACTORY STORES, INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
------------------------------
Name: Bryan P. Marsal
------------------------------
Title: Chairman and Chief
------------------------------
Executive Officer
------------------------------
(Signatures Continued)
<PAGE>
GAKM RESOURCES CORPORATION,
a Delaware corporation
By: /s/ Bryan P. Marsal
------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
------------------------------
CLUETT PEABODY RESOURCES CORPORATION,
a Delaware corporation
By: /s/ Bryan P. Marsal
------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
------------------------------
CLUETT PEABODY HOLDING CORP.,
a Delaware corporation
By: /s/ Bryan P. Marsal
------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
------------------------------
CLUETT, PEABODY & CO., INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
------------------------------
Name: Bryan P. Marsal
------------------------------
Title: Chairman and
------------------------------
Chief Executive Officer
------------------------------
BIDERTEX SERVICES INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
------------------------------
(Signatures Continued)
<PAGE>
GREAT AMERICAN KNITTING MILLS, INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
------------------------------
Name: Bryan P. Marsal
------------------------------
Title: Chairman and
------------------------------
Chief Executive Officer
------------------------------
CLUETT DESIGNER GROUP, INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
------------------------------
Name: Bryan P. Marsal
------------------------------
Title: Chairman and
------------------------------
Chief Executive Officer
------------------------------
(Signatures Continued)
<PAGE>
AGENT: NATIONSBANK, N. A.
By: /s/ Mark E. Stephanz
------------------------------
Name: Mark E. Stephanz
------------------------------
Title: Attorney-in-fact
------------------------------
DOCUMENTATION
AGENT: GLEACHER NATWEST INC.
By: /s/ Thomas J. Steiglehner
------------------------------
Name: Thomas J. Steiglehner
------------------------------
Title: Vice President
------------------------------
LENDERS: NATIONSBANK, N. A.
By: /s/ Elton Vogel
------------------------------
Name: Elton Vogel
------------------------------
Title: Managing Director
------------------------------
NATIONAL WESTMINSTER BANK PLC
By: /s/ Jacqueline L. Arambulo
------------------------------
Name: Jacqueline L. Arambulo
------------------------------
Title: Vice President
------------------------------
<PAGE>
SCHEDULE 1.1A
FINANCIAL INFORMATION
<TABLE>
<CAPTION>
For the Fiscal For the Fiscal For the Fiscal
Quarter Ended Quarter Ended Quarter Ended
September 30, 1997 December 31, 1997 March 28, 1998
<S> <C> <C> <C>
Consolidated
EBITDA $9.2 million $15.6 million $10.9 million
Consolidated
Interest Expense $5.9 million $5.9 million $5.9 million
Consolidated
Cash Taxes $0.0 million $0.0 million $0.0 million
Consolidated
Scheduled Funded
Debt Payment $0.65 million $0.65 million $0.65 million
</TABLE>
<PAGE>
Schedule 1.1B
EXISTING LETTERS OF CREDIT
<PAGE>
Schedule 1.1C
INVESTMENTS
<PAGE>
Schedule 1.1D
LIENS
<PAGE>
Schedule 2.1(a)
LENDER ADDRESSES AND COMMITMENTS
<PAGE>
Schedule 5.1(c)(i)
FORM OF OPINION OF SIMPSON THACHER & BARTLETT
<PAGE>
Schedule 5.1(c)(ii)
FORM OF LEGAL LOCAL COUNSEL OPINION
<PAGE>
Schedule 5.1(c)(iii)
FORM OF OPINION CANADIAN COUNSEL
<PAGE>
Schedule 6.4
REQUIRED CONSENTS, AUTHORIZATIONS, NOTICES AND FILINGS
<PAGE>
Schedule 6.9
LITIGATION
<PAGE>
Schedule 6.12
ERISA
<PAGE>
Schedule 6.13
SUBSIDIARIES
<PAGE>
Schedule 6.16
ENVIRONMENTAL DISCLOSURES
<PAGE>
Schedule 6.17
INTELLECTUAL PROPERTY
<PAGE>
Schedule 6.20(a)
MORTGAGED PROPERTIES
<PAGE>
Schedule 6.20(b)
COLLATERAL LOCATIONS
<PAGE>
Schedule 6.20(c)
CHIEF EXECUTIVE OFFICES/
PRINCIPAL PLACES OF BUSINESS
<PAGE>
Schedule 6.23
LABOR MATTERS
<PAGE>
Schedule 7.6
INSURANCE
<PAGE>
Schedule 8.1
INDEBTEDNESS
<PAGE>
Exhibit 1.1A
FORM OF PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "Pledge Agreement") is entered into as of May
18, 1998 among CLUETT AMERICAN CORP., a Delaware corporation (the "Borrower"),
CLUETT AMERICAN INVESTMENT CORP., a Delaware corporation (the "Parent"), CLUETT
AMERICAN GROUP, INC., a Delaware corporation ("Interco"), and certain other
direct and indirect Subsidiaries of the Parent (together with the Parent and
Interco, individually a "Guarantor", and collectively the "Guarantors"; together
with the Borrower, individually a "Pledgor", and collectively the "Pledgors")
and NATIONSBANK, N.A., in its capacity as agent (in such capacity, the "Agent")
for the Lenders from time to time party to the Credit Agreement described below
(the "Lenders").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement dated as of the date
hereof (as amended, modified, extended, renewed or replaced from time to time,
the "Credit Agreement") among the Borrower, the Guarantors, the Lenders, the
Agent and Gleacher Natwest Inc., in its capacity as documentation agent, the
Lenders have agreed to make Loans and issue or participate in Letters of Credit
upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue or participate in Letters of Credit under the Credit Agreement that the
Pledgors shall have executed and delivered this Pledge Agreement to the Agent
for the ratable benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Credit Agreement.
For purposes of this Pledge Agreement, the term "Lender" shall include any
Affiliate of any Lender which has entered into a Hedging Agreement with any
Credit Party.
2. Pledge and Grant of Security Interest. To secure the prompt payment and
performance in full when due, whether by lapse of time or otherwise, of the
Pledgor Obligations (as defined in Section 3 hereof), each Pledgor hereby
pledges and assigns to the Agent, for the benefit of the Lenders, and grants to
the Agent, for the benefit of the Lenders, a continuing security interest in any
and all right, title and interest of such Pledgor in and to the following,
whether now owned or existing or owned, acquired, or arising hereafter
(collectively, the "Pledged Collateral"):
<PAGE>
(a) Pledged Shares. (i) 100% (or, if less, the full amount owned by
such Pledgor) of the issued and outstanding Equity Interests owned by such
Pledgor of each Domestic Subsidiary set forth on Schedule 2(a) attached
hereto and (ii) 65% (or, if less, the full amount owned by such Pledgor)
of each class of the issued and outstanding Equity Interests entitled to
vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2)) ("Voting
Equity") and 100% (or, if less, the full amount owned by such Pledgor of
each class of the issued and outstanding Equity Interests not entitled to
vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2))
("Non-Voting Equity") owned by such Pledgor of each Material Foreign
Subsidiary set forth on Schedule 2(a) attached hereto, in each case
together with the certificates (or other agreements or instruments), if
any, representing such Equity Interests, and all options and other rights,
contractual or otherwise, with respect thereto (collectively, together
with the Equity Interests described in Section 2(b) and 2(c) below, the
"Pledged Shares"), including, but not limited to, the following:
(y) all shares or securities representing a dividend on any of
the Pledged Shares, or representing a distribution or return of
capital upon or in respect of the Pledged Shares, or resulting from
a stock split, revision, reclassification or other exchange
therefor, and any subscriptions, warrants, rights or options issued
to the holder of, or otherwise in respect of, the Pledged Shares;
and
(z) without affecting the obligations of the Pledgors under
any provision prohibiting such action hereunder or under the Credit
Agreement, in the event of any consolidation or merger involving the
issuer of any Pledged Shares and in which such issuer is not the
surviving corporation, all securities of each class of the Equity
Interests of the successor resulting from such consolidation or
merger payable to or received by such Pledgor as consideration for
such merger (subject to the 65% limitation on Voting Equity of
Material Foreign Subsidiaries).
(b) Additional Shares. 100% (or, if less, the full amount owned by
such Pledgor) of the issued and outstanding Equity Interests owned by such
Pledgor of any Person which hereafter becomes a Domestic Subsidiary and
65% (or, if less, the full amount owned by such Pledgor) of the Voting
Equity and 100% (or, if less, the full amount owned by such Pledgor) of
the Non-Voting Equity owned by such Pledgor of any Person which hereafter
becomes a Material Foreign Subsidiary, including, without limitation, the
certificates representing such Equity Interests.
(c) Proceeds. All proceeds and products of the foregoing, however
and whenever acquired and in whatever form.
Without limiting the generality of the foregoing, it is hereby
specifically understood and agreed that a Pledgor may from time to time
hereafter deliver additional Equity Interests to the Agent as collateral
security for the Pledgor Obligations. Upon delivery to the Agent, such
2
<PAGE>
additional Equity Interests shall be deemed to be part of the Pledged Collateral
of such Pledgor and shall be subject to the terms of this Pledge Agreement
whether or not Schedule 2(a) is amended to refer to such additional Equity
Interests.
3. Security for Pledgor Obligations. The security interest created hereby
in the Pledged Collateral of each Pledgor constitutes continuing
collateral security for all of the Credit Party Obligations, now existing
or hereafter arising pursuant to the Credit Documents, owing from the
Borrower or any other Credit Party to any Lender or the Agent, howsoever
evidenced, created, incurred or acquired, whether primary, secondary,
direct, contingent, or joint and several, including, without limitation,
all liabilities arising under Hedging Agreements and all obligations and
liabilities incurred in connection with collecting and enforcing the
foregoing (collectively, the "Pledgor Obligations").
4. Delivery of the Pledged Collateral. Each Pledgor hereby agrees that:
(a) Each Pledgor shall deliver to the Agent (i) simultaneously with
or prior to the execution and delivery of this Pledge Agreement, all
certificates representing the Pledged Shares of such Pledgor and (ii)
promptly upon the receipt thereof by or on behalf of a Pledgor, all other
certificates and instruments constituting Pledged Collateral of a Pledgor.
Prior to delivery to the Agent, all such certificates and instruments
constituting Pledged Collateral of a Pledgor shall be held in trust by
such Pledgor for the benefit of the Agent pursuant hereto. All such
certificates shall be delivered in suitable form for transfer by delivery
or shall be accompanied by duly executed instruments of transfer or
assignment in blank, substantially in the form provided in Exhibit 4(a)
attached hereto.
(b) Additional Securities. If such Pledgor shall receive by virtue
of its being or having been the owner of any Pledged Collateral, any (i)
stock certificate, including without limitation, any certificate
representing a stock dividend or distribution in connection with any
increase or reduction of capital, reclassification, merger, consolidation,
sale of assets, combination of equity interests, stock splits, spin-off or
split-off, promissory notes or other instrument; (ii) option or right,
whether as an addition to, substitution for, or an exchange for, any
Pledged Collateral or otherwise; (iii) dividends payable in securities; or
(iv) distributions of securities in connection with a partial or total
liquidation, dissolution or reduction of capital, capital surplus or
paid-in surplus, then such Pledgor shall receive such stock certificate,
instrument, option, right or distribution in trust for the benefit of the
Agent, shall segregate it from such Pledgor's other property and shall
deliver it forthwith to the Agent in the exact form received together with
any necessary endorsement and/or appropriate stock power duly executed in
blank, substantially in the form provided in Exhibit 4(a), to be held by
the Agent as Pledged Collateral and as further collateral security for the
Pledgor Obligations.
(c) Financing Statements. Each Pledgor shall execute and deliver to
the Agent such UCC or other applicable financing statements as may be
reasonably requested
3
<PAGE>
by the Agent in order to perfect and protect the security interest created
hereby in the Pledged Collateral of such Pledgor.
5. Representations and Warranties. Each Pledgor hereby represents and
warrants to the Agent, for the benefit of the Lenders, that so long as any of
the Pledgor Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding, and
until all of the Commitments shall have been terminated:
(a) Authorization of Pledged Shares. The Pledged Shares are duly
authorized and validly issued, are fully paid and nonassessable and are
not subject to the preemptive rights of any Person. All other equity
interests constituting Pledged Collateral will be duly authorized and
validly issued, fully paid and nonassessable and not subject to the
preemptive rights of any Person.
(b) Title. Each Pledgor has good and indefeasible title to the
Pledged Collateral of such Pledgor and will at all times be the legal and
beneficial owner of such Pledged Collateral free and clear of any Lien,
other than Permitted Liens. There exists no "adverse claim" within the
meaning of Section 8-302 of the Uniform Commercial Code as in effect in
the State of New York (the "UCC") with respect to the Pledged Shares of
such Pledgor.
(c) Pledgor's Authority. With respect to the Pledged Stock of
Domestic Subsidiaries and Cluett, Peabody Canada, Inc., no authorization,
approval or action by, and no notice or filing with any Governmental
Authority or with the issuer of such Pledged Stock (which has not already
been obtained) is required either (i) for the pledge made by a Pledgor or
for the granting of the security interest by a Pledgor pursuant to this
Pledge Agreement or (ii) for the exercise by the Agent or the Lenders of
their non-judicial foreclosure rights and remedies hereunder (except as
may be required by laws affecting the offering and sale of securities).
(d) Security Interest/Priority. This Pledge Agreement creates a
valid security interest in favor of the Agent for the benefit of the
Lenders, in the Pledged Collateral of each Domestic Subsidiary and Cluett,
Peabody Canada, Inc. The taking possession by the Agent of the
certificates representing the Pledged Shares of each Domestic Subsidiary
and Cluett, Peabody Canada, Inc. and all other certificates and
instruments constituting Pledged Collateral will perfect and establish the
first priority of the Agent's security interest in such Pledged Shares
and, when properly perfected by filing or registration, in all other
Pledged Collateral represented by such Pledged Shares and instruments
securing the Pledgor Obligations. Except as set forth in this Section
5(e), no action is necessary to perfect or otherwise protect such security
interest.
(e) No Other Shares. No Pledgor owns any Equity Interests required
to be pledged hereunder other than as set forth on Schedule 2(a) attached
hereto.
4
<PAGE>
6. Covenants. Each Pledgor hereby covenants, that so long as any of the
Pledgor Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding, and
until all of the Commitments shall have been terminated, such Pledgor shall:
(a) Books and Records. Mark its books and records (and shall cause
the issuer of the Pledged Shares of such Pledgor to mark its books and
records) to reflect the security interest granted to the Agent, for the
benefit of the Lenders, pursuant to this Pledge Agreement.
(b) Defense of Title. Warrant and defend title to and ownership of
the Pledged Collateral of such Pledgor at its own expense against the
claims and demands of all other parties claiming an interest therein, keep
the Pledged Collateral free from all Liens, except for Permitted Liens,
and not sell, exchange, transfer, assign, lease or otherwise dispose of
Pledged Collateral of such Pledgor or any interest therein, except as
permitted under the Credit Agreement and the other Credit Documents.
(c) Further Assurances. Promptly execute and deliver at its expense
all further instruments and documents and take all further action that may
be necessary and desirable or that the Agent may reasonably request in
order to (i) perfect and protect the security interest created hereby in
the Pledged Collateral of such Pledgor (including without limitation any
and all action reasonably necessary to satisfy the Agent that the Agent
has obtained a first priority perfected security interest in any capital
stock); (ii) enable the Agent to exercise and enforce its rights and
remedies hereunder in respect of the Pledged Collateral of such Pledgor;
and (iii) otherwise effect the purposes of this Pledge Agreement,
including, without limitation and if requested by the Agent, delivering to
the Agent irrevocable proxies in respect of the Pledged Collateral of such
Pledgor.
(d) Amendments. Not make or consent to any amendment or other
modification or waiver with respect to any of the Pledged Collateral of
such Pledgor or enter into any agreement or allow to exist any restriction
with respect to any of the Pledged Collateral of such Pledgor other than
pursuant hereto or as may be permitted under the Credit Agreement.
(e) Compliance with Securities Laws. File all reports and other
information now or hereafter required to be filed by such Pledgor with the
United States Securities and Exchange Commission and any other state,
federal or foreign agency in connection with the ownership of the Pledged
Collateral of such Pledgor.
7. Advances by Lenders. On failure of any Pledgor to perform any of the
covenants and agreements contained herein, the Agent may, at its sole option and
in its sole discretion, perform the same and in so doing may expend such sums as
the Agent may reasonably deem advisable in the performance thereof, including,
without limitation, the payment of any insurance premiums, the payment of any
taxes, a payment to obtain a release of a Lien or potential Lien,
5
<PAGE>
expenditures made in defending against any adverse claim and all other
expenditures which the Agent or the Lenders may make for the protection of the
security hereof or which may be compelled to make by operation of law. All such
sums and amounts so expended shall be repayable by the Pledgors on a joint and
several basis promptly upon timely notice thereof and demand therefor, shall
constitute additional Pledgor Obligations and shall bear interest from the date
said amounts are expended at the default rate specified in Section 3.1 of the
Credit Agreement for Revolving Loans that are Base Rate Loans. No such
performance of any covenant or agreement by the Agent or the Lenders on behalf
of any Pledgor, and no such advance or expenditure therefor, shall relieve the
Pledgors of any default under the terms of this Pledge Agreement, the other
Credit Documents or any Hedging Agreement. The Lenders may make any payment
hereby authorized in accordance with any bill, statement or estimate procured
from the appropriate public office or holder of the claim to be discharged
without inquiry into the accuracy of such bill, statement or estimate or into
the validity of any tax assessment, sale, forfeiture, tax lien, title or claim
except to the extent such payment is being contested in good faith by a Pledgor
in appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP.
8. Events of Default. The occurrence and continuance of an event which
under the Credit Agreement would constitute an Event of Default shall be an
Event of Default hereunder (an "Event of Default").
9. Remedies.
(a) General Remedies. Upon the occurrence of an Event of Default and
during the continuation thereof, the Agent and the Lenders shall have, in
respect of the Pledged Collateral of any Pledgor, in addition to the
rights and remedies provided herein, in the Credit Documents, in the
Hedging Agreements or by law, the rights and remedies of a secured party
under the UCC or any other applicable law.
(b) Sale of Pledged Collateral. Upon the occurrence of an Event of
Default and during the continuation thereof, without limiting the
generality of this Section and without notice, the Agent may, in its sole
discretion, sell or otherwise dispose of or realize upon the Pledged
Collateral, or any part thereof, in one or more parcels, at public or
private sale, at any exchange or broker's board or elsewhere, at such
price or prices and on such other terms as the Agent may deem commercially
reasonable, for cash, credit or for future delivery or otherwise in
accordance with applicable law. To the extent permitted by law, any Lender
may in such event, bid for the purchase of such securities. Each Pledgor
agrees that, to the extent notice of sale shall be required by law and has
not been waived by such Pledgor, any requirement of reasonable notice
shall be met if notice, specifying the place of any public sale or the
time after which any private sale is to be made, is personally served on
or mailed, postage prepaid, to such Pledgor, in accordance with the notice
provisions of Section 11.1 of the Credit Agreement at least 10 days before
the time of such sale (or such longer period as may be required under
applicable law). The Agent shall not be obligated to make any sale of
Pledged Collateral of such Pledgor regardless of notice of sale having
been given. The Agent may adjourn any public or
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<PAGE>
private sale from time to time by announcement at the time and place fixed
therefor, and such sale may, without further notice, be made at the time
and place to which it was so adjourned.
(c) Private Sale. Upon the occurrence of an Event of Default and
during the continuation thereof, the Pledgors recognize that the Agent may
deem it impracticable to effect a public sale of all or any part of the
Pledged Shares or any of the securities constituting Pledged Collateral
and that the Agent may, therefore, determine to make one or more private
sales of any such securities to a restricted group of purchasers who will
be obligated to agree, among other things, to acquire such securities for
their own account, for investment and not with a view to the distribution
or resale thereof. Each Pledgor acknowledges that any such private sale
may be at prices and on terms less favorable to the seller than the prices
and other terms which might have been obtained at a public sale and,
notwithstanding the foregoing, agrees that such private sale shall be
deemed to have been made in a commercially reasonable manner and that the
Agent shall have no obligation to delay sale of any such securities for
the period of time necessary to permit the issuer of such securities to
register such securities for public sale under the Securities Act of 1933.
Each Pledgor further acknowledges and agrees that any offer to sell such
securities which has been (i) publicly advertised on a bona fide basis in
a newspaper or other publication of general circulation in the financial
community of New York, New York (to the extent that such offer may be
advertised without prior registration under the Securities Act of 1933),
or (ii) made privately in the manner described above shall be deemed to
involve a "public sale" under the UCC, notwithstanding that such sale may
not constitute a "public offering" under the Securities Act of 1933, and
the Agent may, in such event, bid for the purchase of such securities.
(d) Retention of Pledged Collateral. In addition to the rights and
remedies hereunder, upon the occurrence of an Event of Default, the Agent
may, after providing the notices required by Section 9-505(2) of the UCC
or otherwise complying with the requirements of applicable law of the
relevant jurisdiction, retain all or any portion of the Pledged Collateral
in satisfaction of the Pledgor Obligations. Unless and until the Agent
shall have provided such notices, however, the Agent shall not be deemed
to have retained any Pledged Collateral in satisfaction of any Pledgor
Obligations for any reason.
(e) Deficiency. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which the
Agent or the Lenders are legally entitled, the Pledgors shall be jointly
and severally liable for the deficiency, together with interest thereon at
the default rate specified in Section 3.1 of the Credit Agreement for
Revolving Loans that are Base Rate Loans, together with the costs of
collection and the reasonable fees of any attorneys employed by the Agent
to collect such deficiency. Any surplus remaining after the full payment
and satisfaction of the Pledgor Obligations shall be returned to the
Pledgors or to whomsoever a court of competent jurisdiction shall
determine to be entitled thereto.
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10. Rights of the Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Pledgor hereby designates and appoints the Agent,
on behalf of the Lenders, and each of its designees or agents as
attorney-in-fact of such Pledgor, irrevocably and with power of
substitution, with authority to take any or all of the following actions
upon the occurrence and during the continuance of an Event of Default:
(i) to demand, collect, settle, compromise, adjust and give
discharges and releases concerning the Pledged Collateral of such
Pledgor, all as the Agent may reasonably determine;
(ii) to commence and prosecute any actions at any court for
the purposes of collecting any of the Pledged Collateral of such
Pledgor and enforcing any other right in respect thereof;
(iii) to defend, settle or compromise any action brought and,
in connection therewith, give such discharge or release as the Agent
may deem reasonably appropriate;
(iv) to pay or discharge taxes, liens, security interests,
or other encumbrances levied or placed on or threatened against the
Pledged Collateral of such Pledgor;
(v) to direct any parties liable for any payment under any
of the Pledged Collateral to make payment of any and all monies due
and to become due thereunder directly to the Agent or as the Agent
shall direct;
(vi) to receive payment of and receipt for any and all
monies, claims, and other amounts due and to become due at any time
in respect of or arising out of any Pledged Collateral of such
Pledgor;
(vii) to sign and endorse any drafts, assignments, proxies,
stock powers, verifications, notices and other documents relating to
the Pledged Collateral of such Pledgor;
(viii) to settle, compromise or adjust any suit, action or
proceeding described above and, in connection therewith, to give
such discharges or releases as the Agent may deem reasonably
appropriate;
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<PAGE>
(ix) execute and deliver all assignments, conveyances,
statements, financing statements, renewal financing statements,
pledge agreements, affidavits, notices and other agreements,
instruments and documents that the Agent may determine necessary in
order to perfect and maintain the security interests and liens
granted in this Pledge Agreement and in order to fully consummate
all of the transactions contemplated therein;
(x) to exchange any of the Pledged Collateral of such
Pledgor or other property upon any merger, consolidation,
reorganization, recapitalization or other readjustment of the issuer
thereof and, in connection therewith, deposit any of the Pledged
Collateral of such Pledgor with any committee, depository, transfer
agent, registrar or other designated agency upon such terms as the
Agent may determine;
(xi) to vote for a shareholder resolution, or to sign an
instrument in writing, sanctioning the transfer of any or all of the
Pledged Shares of such Pledgor into the name of the Agent or one or
more of the Lenders or into the name of any transferee to whom the
Pledged Shares of such Pledgor or any part thereof may be sold
pursuant to Section 10 hereof; and
(xii) to do and perform all such other acts and things as the
Agent may reasonably deem to be necessary, proper or convenient in
connection with the Pledged Collateral of such Pledgor.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Pledgor Obligations remain
outstanding, any Credit Document or any Hedging Agreement is in effect or
any Letter of Credit shall remain outstanding and (ii) until all of the
Commitments shall have been terminated. The Agent shall be under no duty
to exercise or withhold the exercise of any of the rights, powers,
privileges and options expressly or implicitly granted to the Agent in
this Pledge Agreement, and shall not be liable for any failure to do so or
any delay in doing so. The Agent shall not be liable for any act or
omission or for any error of judgment or any mistake of fact or law in its
individual capacity or its capacity as attorney-in-fact except acts or
omissions resulting from its gross negligence or willful misconduct. This
power of attorney is conferred on the Agent solely to protect, preserve
and realize upon its security interest in Pledged Collateral.
(b) Performance by the Agent of Pledgor's Obligations. If any
Pledgor fails to perform any agreement or obligation contained herein, the
Agent itself may perform, or cause performance of, such agreement or
obligation, and the expenses of the Agent incurred in connection therewith
shall be payable by the Pledgors on a joint and several basis pursuant to
Section 13 hereof.
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<PAGE>
(c) Assignment by the Agent. In connection with the succession of
the Agent pursuant to Section 10.7 of the Credit Agreement, the Agent may
from time to time assign the Pledgor Obligations and any portion thereof
and/or the Pledged Collateral and any portion thereof, and the assignee
shall be entitled to all of the rights and remedies of the Agent under
this Pledge Agreement in relation thereto.
(d) The Agent's Duty of Care. Other than the exercise of reasonable
care to assure the safe custody of the Pledged Collateral while being held
by the Agent hereunder, the Agent shall have no duty or liability to
preserve rights pertaining thereto, it being understood and agreed that
Pledgors shall be responsible for preservation of all rights in the
Pledged Collateral of such Pledgor, and the Agent shall be relieved of all
responsibility for Pledged Collateral upon surrendering it or tendering
the surrender of it to the Pledgors. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded
treatment substantially equal to that which the Agent accords its own
property, which shall be no less than the treatment employed by a
reasonable and prudent agent in the industry, it being understood that the
Agent shall not have responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or
other matters relating to any Pledged Collateral, whether or not the Agent
has or is deemed to have knowledge of such matters; or (ii) taking any
necessary steps to preserve rights against any parties with respect to any
Pledged Collateral.
(e) Voting Rights in Respect of the Pledged Collateral.
(i) So long as no Event of Default shall have occurred and
be continuing, to the extent permitted by law, each Pledgor may
exercise any and all voting and other consensual rights pertaining
to the Pledged Collateral of such Pledgor or any part thereof for
any purpose not inconsistent with the terms of this Pledge Agreement
or the Credit Agreement; and
(ii) Upon the occurrence and during the continuance of an
Event of Default, all rights of a Pledgor to exercise the voting and
other consensual rights which it would otherwise be entitled to
exercise pursuant to paragraph (i) of this Section upon written
notice to the Borrower shall cease and all such rights shall
thereupon become vested in the Agent which shall then have the sole
right to exercise such voting and other consensual rights.
(f) Dividend Rights in Respect of the Pledged Collateral.
(i) Each Pledgor may receive and retain any and all
dividends (other than stock dividends and other dividends
constituting Pledged Collateral which are addressed hereinabove) or
interest paid in respect of the Pledged Collateral to the extent
they are allowed under the Credit Agreement.
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<PAGE>
(ii) Upon the occurrence and during the continuance of an
Event of Default:
(A) all rights of a Pledgor to receive the dividends and
interest payments which it would otherwise be authorized to
receive and retain pursuant to paragraph (i) of this Section
upon written notice to the Borrower shall cease and all such
rights shall thereupon be vested in the Agent which shall then
have the sole right to receive and hold as Pledged Collateral
such dividends and interest payments; and
(B) all dividends and interest payments which are
received by a Pledgor contrary to the provisions of paragraph
(A) of this Section shall be received in trust for the benefit
of the Agent, shall be segregated from other property or funds
of such Pledgor, and shall be forthwith paid over to the Agent
as Pledged Collateral in the exact form received, to be held
by the Agent as Pledged Collateral and as further collateral
security for the Pledgor Obligations.
(g) Release of Pledged Collateral. The Agent may release any of the
Pledged Collateral from this Pledge Agreement or may substitute any of the
Pledged Collateral for other Pledged Collateral without altering, varying
or diminishing in any way the force, effect, lien, pledge or security
interest of this Pledge Agreement as to any Pledged Collateral not
expressly released or substituted, and this Pledge Agreement shall
continue as a first priority lien on all Pledged Collateral not expressly
released or substituted.
11. Rights of Required Lenders. All rights of the Agent hereunder, if not
exercised by the Agent, may be exercised by the Required Lenders.
12. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Pledgor
Obligations and any proceeds of any Pledged Collateral, when received by the
Agent or any of the Lenders in cash or its equivalent, will be applied in
reduction of the Pledgor Obligations in the order set forth in Section 3.15(b)
of the Credit Agreement, and each Pledgor irrevocably waives the right to direct
the application of such payments and proceeds and acknowledges and agrees that
the Agent shall have the continuing and exclusive right to apply and reapply any
and all such payments and proceeds in the Agent's sole discretion,
notwithstanding any entry to the contrary upon any of its books and records.
13. Costs of Counsel. At all times hereafter, the Pledgors agree to
promptly pay upon demand any and all reasonable costs and expenses (a) of the
Agent or the Lenders as required under Section 11.5 of the Credit Agreement and
(b) of the Agent as necessary to protect the Pledged Collateral or to exercise
any rights or remedies under this Pledge Agreement or with
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respect to any Pledged Collateral. All of the foregoing costs and expenses shall
constitute Pledgor Obligations hereunder.
14. Continuing Agreement.
(a) This Pledge Agreement shall be a continuing agreement in every
respect and shall remain in full force and effect so long as any of the
Pledgor Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding,
and until all of the Commitments thereunder shall have terminated (other
than any obligations with respect to the indemnities and the
representations and warranties set forth in the Credit Documents). Upon
such payment and termination, this Pledge Agreement shall be automatically
terminated and the Agent and the Lenders shall, upon the request and at
the expense of the Pledgors, forthwith release all of its liens and
security interests hereunder and shall executed and deliver all UCC
termination statements and/or other documents reasonably requested by the
Pledgors evidencing such termination. Notwithstanding the foregoing all
releases and indemnities provided hereunder shall survive termination of
this Pledge Agreement.
(b) This Pledge Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in
whole or in part, of any of the Pledgor Obligations is rescinded or must
otherwise be restored or returned by the Agent or any Lender as a
preference, fraudulent conveyance or otherwise under any bankruptcy,
insolvency or similar law, all as though such payment had not been made;
provided that in the event payment of all or any part of the Pledgor
Obligations is rescinded or must be restored or returned, all reasonable
costs and expenses (including without limitation any reasonable legal fees
and disbursements) incurred by the Agent or any Lender in defending and
enforcing such reinstatement shall be deemed to be included as a part of
the Pledgor Obligations.
15. Amendments; Waivers; Modifications. This Pledge Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 11.6 of the Credit Agreement.
16. Successors in Interest. This Pledge Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Pledgor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent
and the Lenders and their permitted successors and assigns; provided, however,
that none of the Pledgors may assign its rights or delegate its duties hereunder
without the prior written consent of each Lender or the Required Lenders, as
required by the Credit Agreement. To the fullest extent permitted by law, each
Pledgor hereby releases the Agent and each Lender, and its successors and
assigns, from any liability for any act or omission relating to this Pledge
Agreement or the Collateral, except for any liability arising from the gross
negligence or willful misconduct of the Agent, or such Lender, or its officers,
employees or agents.
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17. Notices. All notices required or permitted to be given under this
Pledge Agreement shall be in conformance with Section 11.1 of the Credit
Agreement.
18. Counterparts. This Pledge Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Pledge Agreement to produce or
account for more than one such counterpart.
19. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.
20. Governing Law; Submission to Jurisdiction; Venue.
(a) THIS PLEDGE AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any legal action or
proceeding with respect to this Security Agreement may be brought in the
courts of the State of New York, or of the United States for the Southern
District of New York, and, by execution and delivery of this Security
Agreement, each Pledgor hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction
of such courts. Each Pledgor further irrevocably consents to the service
of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to it at the address for notices pursuant to
Section 11.1 of the Credit Agreement, such service to become effective 30
days after such mailing. Nothing herein shall affect the right of the
Agent to serve process in any other manner permitted by law or to commence
legal proceedings or to otherwise proceed against any Pledgor in any other
jurisdiction.
(b) Each Pledgor hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Pledge
Agreement brought in the courts referred to in subsection (a) hereof and
hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court
has been brought in an inconvenient forum.
21. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH
OF THE PARTIES TO THIS PLEDGE AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS PLEDGE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
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22. Severability. If any provision of any of the Pledge Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
23. Entirety. This Pledge Agreement, the other Credit Documents and the
Hedging Agreements represent the entire agreement of the parties hereto and
thereto, and supersede all prior agreements and understandings, oral or written,
if any, including any commitment letters or correspondence relating to the
Credit Documents, the Hedging Agreements or the transactions contemplated herein
and therein.
24. Survival. All representations and warranties of the Pledgors hereunder
shall survive the execution and delivery of this Pledge Agreement, the other
Credit Documents and the Hedging Agreements, the delivery of the Notes and the
making of the Loans and the issuance of the Letters of Credit under the Credit
Agreement.
25. Other Security. To the extent that any of the Pledgor Obligations are
now or hereafter secured by property other than the Pledged Collateral
(including, without limitation, real and other personal property owned by a
Pledgor), or by a guarantee, endorsement or property of any other Person, then
the Agent and the Lenders shall have the right to proceed against such other
property, guarantee or endorsement upon the occurrence and continuance of any
Event of Default, and the Agent and the Lenders have the right, in their sole
discretion, to determine which rights, security, liens, security interests or
remedies the Agent and the Lenders shall at any time pursue, relinquish,
subordinate, modify or take with respect thereto, without in any way modifying
or affecting any of them or any of the Agent's and the Lenders' rights or the
Pledgor Obligations under this Pledge Agreement, under any other of the Credit
Documents or under any Hedging Agreement.
26. Joint and Several Obligations of Pledgors.
(a) Each of the Pledgors is accepting joint and several liability
hereunder in consideration of the financial accommodation to be provided
by the Lenders under the Credit Agreement, for the mutual benefit,
directly and indirectly, of each of the Pledgors and in consideration of
the undertakings of each of the Pledgors to accept joint and several
liability for the obligations of each of them.
(b) Each of the Pledgors jointly and severally hereby irrevocably
and unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with the other Pledgors with
respect to the payment and performance of all of the Pledgor Obligations
arising under this Pledge Agreement, the other Credit Documents and the
Hedging Agreements, it being the intention of the parties hereto that all
the Pledgor Obligations shall be the joint and several obligations of each
of the Pledgors without preferences or distinction among them.
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<PAGE>
(c) Notwithstanding any provision to the contrary contained herein
or in any other of the Credit Documents, to the extent the obligations of
a Pledgor shall be adjudicated to be invalid or unenforceable for any
reason (including, without limitation, because of any applicable state or
federal law relating to fraudulent conveyances or transfers) then the
obligations of such Pledgor hereunder shall be limited to the maximum
amount that is permissible under applicable law (whether federal or state
and including, without limitation, the Bankruptcy Code).
[remainder of page intentionally left blank]
15
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Each of the parties hereto has caused a counterpart of this Pledge
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: CLUETT AMERICAN CORP.,
a Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
GUARANTORS: CLUETT AMERICAN INVESTMENT CORP.,
a Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
CLUETT AMERICAN GROUP, INC.,
a Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
CONSUMER DIRECT CORPORATION,
a Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
(Signatures Continued)
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<PAGE>
ARROW FACTORY STORES, INC.,
a Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
GAKM RESOURCES CORPORATION,
a Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
CLUETT PEABODY RESOURCES CORPORATION,
a Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
CLUETT PEABODY HOLDING CORP.,
a Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
(Signatures Continued)
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<PAGE>
CLUETT, PEABODY & CO., INC.,
a Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
BIDERTEX SERVICES INC.,
a Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
GREAT AMERICAN KNITTING MILLS, INC.,
a Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
CLUETT DESIGNER GROUP, INC.,
a Delaware corporation
By:______________________________
Name:____________________________
Title:___________________________
Accepted and agreed to as of the date first above written.
NATIONSBANK, N.A., as Agent
By:______________________________
Name:____________________________
Title:___________________________
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<PAGE>
Schedule 2(a)
to
Pledge Agreement
dated as of May 18, 1998
in favor of NationsBank, N.A.
as Agent
PLEDGED STOCK
Pledgor: CLUETT AMERICAN CORP.
Number of Percentage
Name of Subsidiary Shares Certificate Number Ownership
- ------------------ ------ ------------------ ---------
Subsidiaries
Pledgor:
Number of Percentage
Name of Subsidiary Shares Certificate Number Ownership
- ------------------ ------ ------------------ ---------
Subsidiaries
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<PAGE>
Exhibit 4(a)
to
Pledge Agreement
dated as of May 18, 1998
in favor of NationsBank, N.A.
as Agent
Irrevocable Stock Power
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers
to
the following equity interests of _____________________, a ____________:
No. of Shares Certificate No.
------------- ---------------
and irrevocably appoints __________________________________ its agent and
attorney-in-fact to transfer all or any part of such capital stock and to take
all necessary and appropriate action to effect any such transfer. The agent and
attorney-in-fact may substitute and appoint one or more persons to act for him.
The effectiveness of a transfer pursuant to this stock power shall be subject to
any and all transfer restrictions referenced on the face of the certificates
evidencing such interest or in the certificate of incorporation or bylaws of the
subject corporation, to the extent they may from time to time exist.
________________________________
By:_____________________________
Name:___________________________
Title:__________________________
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<PAGE>
Exhibit 1.1B
FORM OF SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "Security Agreement") is entered into as of
May 18, 1998 among CLUETT AMERICAN CORP., a Delaware corporation (the
"Borrower"), CLUETT AMERICAN INVESTMENT CORP., a Delaware corporation (the
"Parent"), CLUETT AMERICAN GROUP, INC., a Delaware corporation ("Interco"), and
certain other direct and indirect Subsidiaries of the Parent (together with the
Parent and Interco, individually a "Guarantor", and collectively the
"Guarantors"; together with the Borrower, individually an "Obligor", and
collectively the "Obligors") and NATIONSBANK, N.A., in its capacity as agent (in
such capacity, the "Agent") for the Lenders from time to time party to the
Credit Agreement described below (the "Lenders").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement, dated as of the date
hereof (as amended, modified, extended, renewed or replaced from time to time,
the "Credit Agreement"), among the Borrower, the Guarantors, the Lenders, the
Agent and Gleacher Natwest Inc., in its capacity as documentation agent, the
Lenders have agreed to make Loans and issue or participate in Letters of Credit
upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue and participate in Letters of Credit under the Credit Agreement that
the Obligors shall have executed and delivered this Security Agreement to the
Agent for the ratable benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. Definitions.
(a) Unless otherwise defined herein, capitalized terms used herein
shall have the meanings ascribed to such terms in the Credit Agreement,
and the following terms which are defined in the Uniform Commercial Code
in effect in the State of New York on the date hereof are used herein as
so defined: Accounts, Chattel Paper, Deposit Accounts, Documents,
Equipment, Farm Products, Fixtures, General Intangibles, Instruments,
Inventory, Investment Property and Proceeds. For purposes of this Security
Agreement, the term "Lender" shall include any Affiliate of any Lender
which has entered into a Hedging Agreement with any Credit Party.
(b) In addition, the following terms shall have the following
meanings:
<PAGE>
"Copyright Licenses": any written agreement, naming any Obligor as
licensor, granting any right under any Copyright including, without
limitation, any thereof referred to in Schedule 1(b) hereto.
"Copyrights": (a) all registered United States copyrights in all
Works, now existing or hereafter created or acquired, all registrations
and recordings thereof, and all applications in connection therewith,
including, without limitation, registrations, recordings and applications
in the United States Copyright office including, without limitation, any
thereof referred to in Schedule 1(b) hereto, and (b) all renewals thereof
including, without limitation, any thereof referred to in Schedule 1(b)
hereto.
"Patent License": all agreements, whether written or oral, providing
for the grant by or to an Obligor of any right to manufacture, use or sell
any invention covered by a Patent, including, without limitation, any
thereof referred to in Schedule 1(b) hereto.
"Patents": (a) all letters patent of the United States or any other
country and all reissues and extensions thereof, including, without
limitation, any thereof referred to in Schedule 1(b) hereto, and (b) all
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any thereof referred to in Schedule 1(b)
hereto.
"Secured Obligations": the collective reference to all of the Credit
Party Obligations, now existing or hereafter arising pursuant to the
Credit Documents, owing from the Borrower or any other Credit Party to any
Lender or the Agent, howsoever evidenced, created, incurred or acquired,
whether primary, secondary, direct, contingent, or joint and several,
including, without limitation, all liabilities arising under Hedging
Agreements and all obligations and liabilities incurred in connection with
collecting and enforcing the foregoing.
"Trademark License": means any agreement, written or oral, providing
for the grant by or to an Obligor of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule 1(b)
hereto.
"Trademarks": (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications
in connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, or
otherwise, including, without limitation, any thereof referred to in
Schedule 1(b) hereto, and (b) all renewals thereof.
"Work": any work which is subject to copyright protection pursuant
to Title 17 of the United States Code.
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2. Grant of Security Interest in the Collateral. To secure the prompt
payment and performance in full when due, whether by lapse of time, acceleration
or otherwise, of the Secured Obligations, each Obligor hereby grants to the
Agent, for the benefit of the Lenders, a continuing security interest in, and a
right to set off against, any and all right, title and interest of such Obligor
in and to the following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the "Collateral"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Copyrights;
(d) all Copyright Licenses (provided the Agent shall not
have a Lien on any Copyright License that prohibits such
Obligor from granting a Lien or security interest in its
rights thereunder unless the consent of the licensor has been
obtained);
(e) all Deposit Accounts;
(f) all Documents;
(g) all Equipment (provided the Agent shall not have a
Lien on any Equipment subject to a Permitted Lien to the
extent such Permitted Lien prohibits such Obligor from
granting a Lien or security interest in its rights
thereunder);
(h) all Fixtures (provided the Agent shall not have a
Lien on any Fixture subject to a Permitted Lien to the extent
such Permitted Lien prohibits such Obligor from granting a
Lien or security interest in its rights thereunder);
(i) all General Intangibles (provided the Agent shall
not have a Lien on any General Intangible that prohibits such
Obligor from granting a Lien or security interest in its
rights thereunder to the extent prohibited by such General
Intangible);
(j) all Instruments;
(k) all Inventory;
(l) all Investment Property;
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(m) all Patents;
(n) all Patent Licenses (provided the Agent shall not
have a Lien on any Patent License that prohibits such Obligor
from granting a Lien or security interest in its rights
thereunder unless the consent of the licensor has been
obtained);
(o) all Trademarks;
(p) all Trademark Licenses (provided the Agent shall not
have a Lien on any Trademark License that prohibits such
Obligor from granting a Lien or security interest in its
rights thereunder unless the consent of the licensor has been
obtained);
(q) all books, records, ledger cards, files,
correspondence, computer programs, tapes, disks, and related
data processing software (owned by such Obligor or in which it
has an interest) that at any time evidence or contain
information relating to any Collateral or are otherwise
necessary or helpful in the collection thereof or realization
thereupon; and
(r) to the extent not otherwise included, all Proceeds
and products of any and all of the foregoing.
The Obligors and the Agent, on behalf of the Lenders, hereby acknowledge
and agree that the security interest created hereby in the Collateral (i)
constitutes continuing collateral security for all of the Secured Obligations,
whether now existing or hereafter arising and (ii) is not to be construed as an
assignment of any Copyrights, Copyright Licenses, Patents, Patent Licenses,
Trademarks or Trademark Licenses.
3. Provisions Relating to Accounts.
(a) Anything herein to the contrary notwithstanding, each of the
Obligors shall remain liable under each of the Accounts to observe and
perform all the conditions and obligations to be observed and performed by
it thereunder, all in accordance with the terms of any agreement giving
rise to each such Account. Neither the Agent nor any Lender shall have any
obligation or liability under any Account (or any agreement giving rise
thereto) by reason of or arising out of this Security Agreement or the
receipt by the Agent or any Lender of any payment relating to such Account
pursuant hereto, nor shall the Agent or any Lender be obligated in any
manner to perform any of the obligations of an Obligor under or pursuant
to any Account (or any agreement giving rise thereto), to make any
payment, to make any inquiry as to the nature or the sufficiency of any
payment received by it or as to the sufficiency of any performance by any
party under any Account (or any agreement giving rise thereto), to present
or file any claim, to take any action to enforce any
4
<PAGE>
performance or to collect the payment of any amounts which may have been
assigned to it or to which it may be entitled at any time or times.
(b) At any time after the occurrence and during the continuation of
an Event of Default, (i) the Agent shall have the right, but not the
obligation, to make test verifications of the Accounts in any manner and
through any medium that it reasonably considers advisable, and the
Obligors shall furnish all such assistance and information as the Agent
may reasonably require in connection with such test verifications, (ii)
upon the Agent's reasonable request and at the expense of the Obligors,
the Obligors shall cause independent public accountants or others
satisfactory to the Agent to furnish to the Agent reports showing
reconciliations, aging and test verifications of, and trial balances for,
the Accounts. and (iii) the Agent in its own name or in the name of others
may communicate with account debtors on the Accounts to verify with them
to the Agent's satisfaction the existence, amount and terms of any
Accounts.
4. Representations and Warranties. Each Obligor hereby represents and
warrants to the Agent, for the benefit of the Lenders, that so long as any of
the Secured Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding, and
until all of the Commitments shall have been terminated:
(a) Chief Executive Office; Books & Records. As of the date hereof,
each Obligor's chief executive office and chief place of business is (and
for the prior four months have been) located at the locations set forth on
Schedule 4(a) hereto, and each Obligor keeps its books and records at such
locations.
(b) Location of Collateral. As of the date hereof, the location of
all Collateral owned by each Obligor is as shown on Schedule 4(b) hereto.
(c) Ownership. Each Obligor is the legal and beneficial owner of its
Collateral and has the right to pledge, sell, assign or transfer the same.
Each Obligor's legal name is as shown in this Security Agreement and no
Obligor has in the past four months changed its name, been party to a
merger, consolidation or other change in structure or used any tradename
except as set forth in Schedule 4(c) attached hereto.
(d) Security Interest/Priority. This Security Agreement creates a
valid security interest in favor of the Agent, for the benefit of the
Lenders, in the Collateral of such Obligor and, when properly perfected by
filing, shall constitute a valid perfected security interest in such
Collateral, to the extent such security can be perfected by filing under
the UCC, free and clear of all Liens except for Permitted Liens.
(e) Farm Products. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
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<PAGE>
(f) Accounts. (i) Each Account of the Obligors and the papers and
documents relating thereto are genuine and in all material respects what
they purport to be and (ii) no Account in excess of $250,000 of an Obligor
is evidenced by any Instrument or Chattel Paper unless such Instrument or
Chattel Paper has been theretofore endorsed over and delivered to the
Agent.
(g) Copyrights, Patents and Trademarks.
(i) Schedule 1(b) hereto includes all Copyrights,
Copyright Licenses, Patents, Patent Licenses, Trademarks and
Trademark Licenses owned by the Obligors in their own names as of
the date hereof.
(ii) To the best of each Obligor's knowledge, each
material Copyright, Patent and Trademark of such Obligor is valid,
subsisting, unexpired, enforceable and has not been abandoned.
(iii) Except as set forth in Schedule 1(b) hereto, none
of such Copyrights, Patents and Trademarks is the subject of any
licensing or franchise agreement.
(iv) No holding, decision or judgment has been rendered
by any Governmental Authority which would limit, cancel or question
the validity of any material Copyright, Patent or Trademark.
(v) To the best of each Obligor's knowledge, no action
or proceeding is pending seeking to limit, cancel or question the
validity of any material Copyright, Patent or Trademark, or which,
if adversely determined, would have a material adverse effect on the
value of any such Copyright, Patent or Trademark.
(vi) All applications pertaining to the material
Copyrights, Patents and Trademarks of each Obligor have been duly
and properly filed, and all registrations or letters pertaining to
such Copyrights, Patents and Trademarks have been duly and properly
filed and issued, and all of such Copyrights, Patents and Trademarks
are valid and enforceable.
(vii) No Obligor has made any assignment or agreement in
conflict with the security interest in the Copyrights, Patents or
Trademarks of each Obligor hereunder.
5. Covenants. Each Obligor covenants that, so long as any of the Secured
Obligations remain outstanding or any Credit Document or Hedging Agreement is in
effect or any Letter of Credit shall remain outstanding, and until all of the
Commitments shall have been terminated, such Obligor shall:
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<PAGE>
(a) Other Liens. Defend the Collateral against the claims and
demands of all other parties claiming an interest therein, keep the
Collateral free from all Liens, except for Permitted Liens, and not sell,
exchange, transfer, assign, lease or otherwise dispose of the Collateral
or any interest therein, except as permitted under the Credit Agreement.
(b) Instruments/Chattel Paper. If any amount payable in excess of
$250,000 under or in connection with any of the Collateral shall be or
become evidenced by any Instrument or Chattel Paper, immediately deliver
such Instrument or Chattel Paper to the Agent, duly endorsed in a manner
satisfactory to the Agent, to be held as Collateral pursuant to this
Security Agreement.
(c) Change in Location. Not, without providing 30 days prior written
notice to the Agent and without filing such amendments to any previously
filed financing statements as the Agent may require, (a) change the
location of its chief executive office and chief place of business (as
well as its books and records) from the locations set forth on Schedule
4(a) hereto, (b) change the location of its Collateral from the locations
set forth for such Obligor on Schedule 4(b) hereto, or (c) change its
name, be party to a merger, consolidation or other change in structure or
use any tradename other than as set forth on Schedule 4(c) attached
hereto.
(d) Perfection of Security Interest. Execute and deliver to the
Agent such agreements, assignments or instruments (including affidavits,
notices, reaffirmations and amendments and restatements of existing
documents, as the Agent may reasonably request) and do all such other
things as the Agent may reasonably deem necessary or appropriate (i) to
assure to the Agent its security interests hereunder, including (A) such
financing statements (including renewal statements) or amendments thereof
or supplements thereto or other instruments as the Agent may from time to
time reasonably request in order to perfect and maintain the security
interests granted hereunder in accordance with the UCC, (B) with regard to
Copyrights, a Notice of Grant of Security Interest in Copyrights in the
form of Schedule 5(d)(i), (C) with regard to Patents, a Notice of Grant of
Security Interest in Patents for filing with the United States Patent and
Trademark Office in the form of Schedule 5(d)(ii) attached hereto and (D)
with regard to Trademarks, a Notice of Grant of Security Interest in
Trademarks for filing with the United States Patent and Trademark Office
in the form of Schedule 5(d)(iii) attached hereto, (ii) to consummate the
transactions contemplated hereby and (iii) to otherwise protect and assure
the Agent of its rights and interests hereunder. To that end, each Obligor
agrees that the Agent may file one or more financing statements disclosing
the Agent's security interest in any or all of the Collateral of such
Obligor without, to the extent permitted by law, such Obligor's signature
thereon, and further each Obligor also hereby irrevocably makes,
constitutes and appoints the Agent as such Obligor's attorney in fact with
full power and for the limited purpose to sign in the name of such Obligor
any such financing statements, or amendments and supplements to financing
statements, renewal financing statements, notices or any similar documents
which in the Agent's reasonable discretion would be necessary or
appropriate in order to perfect
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<PAGE>
and maintain perfection of the security interests granted hereunder, such
power, being coupled with an interest, being and remaining irrevocable so
long as the Credit Agreement is in effect or any amounts payable
thereunder or under any other Credit Document, any Letter of Credit or any
Hedging Agreement shall remain outstanding, and until all of the
Commitments thereunder shall have terminated. Each Obligor hereby agrees
that a carbon, photographic or other reproduction of this Security
Agreement or any such financing statement is sufficient for filing as a
financing statement by the Agent without notice thereof to such Obligor
wherever the Agent may in its sole discretion desire to file the same. In
the event for any reason the law of any jurisdiction other than New York
becomes or is applicable to the Collateral of any Obligor or any part
thereof, or to any of the Secured Obligations, such Obligor agrees to
execute and deliver all such instruments and to do all such other things
as the Agent in its sole discretion reasonably deems necessary or
appropriate to preserve, protect and enforce the security interests of the
Agent under the law of such other jurisdiction (and, if an Obligor shall
fail to do so promptly upon the request of the Agent, then the Agent may
execute any and all such requested documents on behalf of such Obligor
pursuant to the power of attorney granted hereinabove). If any Collateral
is in the possession or control of an Obligor's agents and the Agent so
requests, such Obligor agrees to notify such agents in writing of the
Agent's security interest therein and, upon the Agent's request, instruct
them to hold all such Collateral for the Lenders' account and subject to
the Agent's instructions. Each Obligor agrees to mark its books and
records to reflect the security interest of the Agent in the Collateral.
(e) Covenants Relating to Copyrights.
(i) Employ the Copyright for each Work with such notice
of copyright as may be required by law to secure copyright
protection.
(ii) Not do any act or knowingly omit to do any act
whereby any material Copyright would or would reasonably be expected
to become invalidated and (A) not do any act, or knowingly omit to
do any act, whereby any material Copyright would or would reasonably
be expected to become injected into the public domain; (B) notify
the Agent promptly after if it has knowledge that any material
Copyright may become injected into the public domain or of any
adverse determination or development (including, without limitation,
the institution of, or any such determination or development in, any
court or tribunal in the United States or any other country)
regarding an Obligor's ownership of any such Copyright or its
validity; (C) take all necessary steps as it shall reasonably deem
appropriate under the circumstances, to maintain and pursue each
application (and to obtain the relevant registration) and to
maintain each registration of each material Copyright owned by an
Obligor including, without limitation, filing of applications for
renewal where necessary; and (D) promptly notify the Agent of any
material infringement of any material Copyright of an Obligor of
which it becomes aware and take such actions as it shall reasonably
deem appropriate under the circumstances to protect such Copyright,
including, where appropriate, the bringing of suit for infringement,
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<PAGE>
seeking injunctive relief and seeking to recover any and all damages
for such infringement.
(iii) Not make any assignment or agreement in conflict
with the security interest in the Copyrights of each Obligor
hereunder.
(f) Covenants Relating to Patents and Trademarks.
(i) (A) Continue to use each Trademark on each and every
trademark class of goods applicable to its current line as reflected
in its current catalogs, brochures and price lists in order to
maintain such Trademark in full force free from any claim of
abandonment for non-use, (B) maintain as in the past the quality of
products and services offered under such Trademark, (C) employ such
Trademark with the appropriate notice of registration, (D) not adopt
or use any mark which is confusingly similar or a colorable
imitation of such Trademark unless the Agent, for the ratable
benefit of the Lenders, shall obtain a perfected security interest
in such mark pursuant to this Security Agreement, and (E) not (and
not knowingly permit any licensee or sublicensee thereof to) do any
act or knowingly omit to do any act whereby any Trademark would or
would reasonably be expected to become invalidated.
(ii) Not do any act, or knowingly omit to do any act,
whereby any Patent would or would reasonably be expected to become
abandoned or dedicated.
(iii) Notify the Agent and the Lenders promptly after it
has knowledge that any application or registration relating to any
material Patent or Trademark may become abandoned or dedicated, or
of any adverse determination or development (including, without
limitation, the institution of, or any such determination or
development in, any proceeding in the United States Patent and
Trademark Office or any court or tribunal in any country) regarding
an Obligor's ownership of any material Patent or Trademark or its
right to register the same or to keep and maintain the same.
(iv) Whenever an Obligor, either by itself or through an
agent, employee, licensee or designee, shall file an application for
the registration of any Patent or Trademark with the United States
Patent and Trademark Office or any similar office or agency in any
other country or any political subdivision thereof, an Obligor shall
report such filing to the Agent and the Lenders within five Business
Days after the last day of the fiscal quarter in which such filing
occurs. Upon request of the Agent, an Obligor shall execute and
deliver any and all agreements, instruments, documents and papers as
the Agent may request to evidence the Agent's and the Lenders'
security interest in any Patent or Trademark and the
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<PAGE>
goodwill and general intangibles of an Obligor relating thereto or
represented thereby.
(v) Take all reasonable and necessary steps, including,
without limitation, in any proceeding before the United States
Patent and Trademark Office, or any similar office or agency in any
other country or any political subdivision thereof, to maintain and
pursue each material application (and to obtain the relevant
registration) and to maintain each registration of the material
Patents and Trademarks, including, without limitation, filing of
applications for renewal, affidavits of use and affidavits of
incontestability.
(vi) Promptly notify the Agent and the Lenders after it
learns that any Patent or Trademark included in the Collateral is
infringed, misappropriated or diluted by a third party and promptly
sue for infringement, misappropriation or dilution, to seek
injunctive relief where appropriate and to recover any and all
damages for such infringement, misappropriation or dilution, or take
such other actions as it shall reasonably deem appropriate under the
circumstances to protect such Patent or Trademark.
(vii) Not make any assignment or agreement in conflict
with the security interest in the Patents or Trademarks of each
Obligor hereunder.
(g) New Patents, Copyrights and Trademarks. Promptly provide the
Agent with (i) a listing of all applications, if any, for new Copyrights,
Patents or Trademarks (together with a listing of the issuance of
registrations or letters on present applications), which new applications
and issued registrations or letters shall be subject to the terms and
conditions hereunder, and (ii) (A) with respect to Copyrights, a duly
executed Notice of Security Interest in Copyrights, (B) with respect to
Patents, a duly executed Notice of Security Interest in Patents, (C) with
respect to Trademarks, a duly executed Notice of Security Interest in
Trademarks or (D) such other duly executed documents as the Agent may
request in a form acceptable to counsel for the Agent and suitable for
recording to evidence the security interest in the Copyright, Patent or
Trademark which is the subject of such new application.
(h) Insurance. Insure, repair and replace the Collateral of such
Obligor as set forth in the Credit Agreement. All insurance proceeds shall
be subject to the security interest of the Agent hereunder.
6. Advances by Lenders. On failure of any Obligor to perform any of the
covenants and agreements contained herein, the Agent may, at its sole option and
in its sole discretion, perform the same and in so doing may expend such sums as
the Agent may reasonably deem advisable in the performance thereof, including,
without limitation, the payment of any insurance premiums, the payment of any
taxes, a payment to obtain a release of a Lien or potential Lien, expenditures
made in defending against any adverse claim and all other expenditures which the
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<PAGE>
Agent or the Lenders may make for the protection of the security hereof or which
may be compelled to make by operation of law. All such sums and amounts so
expended shall be repayable by the Obligors on a joint and several basis
promptly upon timely notice thereof and demand therefor, shall constitute
additional Secured Obligations and shall bear interest from the date said
amounts are expended at the default rate specified in Section 3.1 of the Credit
Agreement for Revolving Loans that are Base Rate Loans. No such performance of
any covenant or agreement by the Agent or the Lenders on behalf of any Obligor,
and no such advance or expenditure therefor, shall relieve the Obligors of any
default under the terms of this Security Agreement, the other Credit Documents
or any Hedging Agreement. The Lenders may make any payment hereby authorized in
accordance with any bill, statement or estimate procured from the appropriate
public office or holder of the claim to be discharged without inquiry into the
accuracy of such bill, statement or estimate or into the validity of any tax
assessment, sale, forfeiture, tax lien, title or claim except to the extent such
payment is being contested in good faith by an Obligor in appropriate
proceedings and against which adequate reserves are being maintained in
accordance with GAAP.
7. Events of Default.
The occurrence and continuance of an event which under the Credit
Agreement would constitute an Event of Default shall be an Event of Default
hereunder (an "Event of Default").
8. Remedies.
(a) General Remedies. Upon the occurrence of an Event of Default and
during continuation thereof, the Lenders shall have, in addition to the
rights and remedies provided herein, in the Credit Documents, in the
Hedging Agreements or by law (including, but not limited to, the rights
and remedies set forth in the Uniform Commercial Code of the jurisdiction
applicable to the affected Collateral), the rights and remedies of a
secured party under the UCC (regardless of whether the UCC is the law of
the jurisdiction where the rights and remedies are asserted and regardless
of whether the UCC applies to the affected Collateral), and further, the
Agent may, with or without judicial process or the aid and assistance of
others, (i) enter on any premises on which any of the Collateral may be
located and, without resistance or interference by the Obligors, take
possession of the Collateral, (ii) dispose of any Collateral on any such
premises, (iii) require the Obligors to assemble and make available to the
Agent at the expense of the Obligors any Collateral at any place and time
designated by the Agent which is reasonably convenient to both parties,
(iv) remove any Collateral from any such premises for the purpose of
effecting sale or other disposition thereof, and/or (v) without demand and
without advertisement, notice, hearing or process of law, all of which
each of the Obligors hereby waives to the fullest extent permitted by law,
at any place and time or times, sell and deliver any or all Collateral
held by or for it at public or private sale, by one or more contracts, in
one or more parcels, for cash, upon credit or otherwise, at such prices
and upon such terms as the Agent deems advisable, in its sole discretion
(subject to any and all mandatory legal requirements). In addition to all
other sums due the Agent and the Lenders with respect to the Secured
Obligations, the Obligors
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<PAGE>
shall pay the Agent and each of the Lenders all reasonable documented
costs and expenses incurred by the Agent or any such Lender, including,
but not limited to, reasonable attorneys' fees and court costs, in
obtaining or liquidating the Collateral, in enforcing payment of the
Secured Obligations, or in the prosecution or defense of any action or
proceeding by or against the Agent or the Lenders or the Obligors
concerning any matter arising out of or connected with this Security
Agreement, any Collateral or the Secured Obligations, including, without
limitation, any of the foregoing arising in, arising under or related to a
case under the Bankruptcy Code. To the extent the rights of notice cannot
be legally waived hereunder, each Obligor agrees that any requirement of
reasonable notice shall be met if such notice is personally served on or
mailed, postage prepaid, to the Credit Parties in accordance with the
notice provisions of Section 11.1 of the Credit Agreement at least 10 days
before the time of sale or other event giving rise to the requirement of
such notice. The Agent and the Lenders shall not be obligated to make any
sale or other disposition of the Collateral regardless of notice having
been given. To the extent permitted by law, any Lender may be a purchaser
at any such sale. To the extent permitted by applicable law, each of the
Obligors hereby waives all of its rights of redemption with respect to any
such sale. Subject to the provisions of applicable law, the Agent and the
Lenders may postpone or cause the postponement of the sale of all or any
portion of the Collateral by announcement at the time and place of such
sale, and such sale may, without further notice, to the extent permitted
by law, be made at the time and place to which the sale was postponed, or
the Agent and the Lenders may further postpone such sale by announcement
made at such time and place.
(b) Remedies Relating to Accounts. Upon the occurrence of an Event
of Default and during the continuation thereof, whether or not the Agent
has exercised any or all of its rights and remedies hereunder, each
Obligor will promptly upon request of the Agent instruct all account
debtors to remit all payments in respect of Accounts to a mailing location
selected by the Agent. In addition, the Agent or its designee may notify
any Obligor's customers and account debtors that the Accounts of such
Obligor have been assigned to the Agent or of the Agent's security
interest therein, and may (either in its own name or in the name of an
Obligor or both) demand, collect (including without limitation by way of a
lockbox arrangement), receive, take receipt for, sell, sue for, compound,
settle, compromise and give acquittance for any and all amounts due or to
become due on any Account, and, in the Agent's discretion, file any claim
or take any other action or proceeding to protect and realize upon the
security interest of the Lenders in the Accounts. Each Obligor
acknowledges and agrees that the Proceeds of its Accounts remitted to or
on behalf of the Agent in accordance with the provisions hereof shall be
solely for the Agent's own convenience and that such Obligor shall not
have any right, title or interest in such Accounts or in any such other
amounts except as expressly provided herein. The Agent and the Lenders
shall have no liability or responsibility to any Obligor for acceptance of
a check, draft or other order for payment of money bearing the legend
"payment in full" or words of similar import or any other restrictive
legend or endorsement or be responsible for determining the correctness of
any remittance. Each Obligor hereby agrees to indemnify the Agent and the
Lenders from and against all liabilities, damages, losses, actions,
claims,
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judgments, costs, expenses, charges and reasonable attorneys' fees
suffered or incurred by the Agent or the Lenders (each, an "Indemnified
Party") because of the maintenance of the foregoing arrangements except as
relating to or arising out of the gross negligence or willful misconduct
of an Indemnified Party or its officers, employees or agents. In the case
of any investigation, litigation or other proceeding, the foregoing
indemnity shall be effective whether or not such investigation, litigation
or proceeding is brought by an Obligor, its directors, shareholders or
creditors or an Indemnified Party or any other Person or any other
Indemnified Party is otherwise a party thereto.
(c) Access. In addition to the rights and remedies hereunder, upon
the occurrence of an Event of Default and during the continuance thereof,
the Agent shall have the right to enter and remain upon the various
premises of the Obligors without cost or charge to the Agent, and use the
same, together with materials, supplies, books and records of the Obligors
for the purpose of collecting and liquidating the Collateral, or for
preparing for sale and conducting the sale of the Collateral, whether by
foreclosure, auction or otherwise. In addition, the Agent may remove
Collateral, or any part thereof, from such premises and/or any records
with respect thereto, in order to effectively collect or liquidate such
Collateral.
(d) Nonexclusive Nature of Remedies. Failure by the Agent or the
Lenders to exercise any right, remedy or option under this Security
Agreement, any other Credit Document, any Hedging Agreement or as provided
by law, or any delay by the Agent or the Lenders in exercising the same,
shall not operate as a waiver of any such right, remedy or option. No
waiver hereunder shall be effective unless it is in writing, signed by the
party against whom such waiver is sought to be enforced and then only to
the extent specifically stated, which in the case of the Agent or the
Lenders shall only be granted as provided herein. To the extent permitted
by law, neither the Agent, the Lenders, nor any party acting as attorney
for the Agent or the Lenders, shall be liable hereunder for any acts or
omissions or for any error of judgment or mistake of fact or law other
than their gross negligence or willful misconduct hereunder. The rights
and remedies of the Agents and the Lenders under this Security Agreement
shall be cumulative and not exclusive of any other right or remedy which
the Agent or the Lenders may have.
(e) Retention of Collateral. The Agent may, after providing the
notices required by Section 9-505(2) of the UCC or otherwise complying
with the requirements of applicable law of the relevant jurisdiction, to
the extent the Agent is in possession of any of the Collateral, retain the
Collateral in satisfaction of the Secured Obligations. Unless and until
the Agent shall have provided such notices, however, the Agent shall not
be deemed to have retained any Collateral in satisfaction of any Secured
Obligations for any reason.
(f) Deficiency. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which the
Agent or the Lenders are legally entitled, the Obligors shall be jointly
and severally liable for the deficiency, together with interest thereon at
the default rate specified in Section 3.1 of the Credit Agreement for
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<PAGE>
Revolving Loans that are Base Rate Loans, together with the costs of
collection and the reasonable fees of any attorneys employed by the Agent
to collect such deficiency. Any surplus remaining after the full payment
and satisfaction of the Secured Obligations shall be returned to the
Obligors or to whomsoever a court of competent jurisdiction shall
determine to be entitled thereto.
9. Rights of the Agent.
(a) Power of Attorney. In addition to other powers of attorney
contained herein, each Obligor hereby designates and appoints the Agent,
on behalf of the Lenders, and each of its designees or agents, as
attorney-in-fact of such Obligor, irrevocably and with power of
substitution, with authority to take any or all of the following actions
upon the occurrence and during the continuance of an Event of Default:
(i) to demand, collect, settle, compromise, adjust, give
discharges and releases, all as the Agent may reasonably determine;
(ii) to commence and prosecute any actions at any court for
the purposes of collecting any Collateral and enforcing any other
right in respect thereof;
(iii) to defend, settle or compromise any action brought and,
in connection therewith, give such discharge or release as the Agent
may deem reasonably appropriate;
(iv) receive, open and dispose of mail addressed to an Obligor
and endorse checks, notes, drafts, acceptances, money orders, bills
of lading, warehouse receipts or other instruments or documents
evidencing payment, shipment or storage of the goods giving rise to
the Collateral of such Obligor on behalf of and in the name of such
Obligor, or securing, or relating to such Collateral;
(v) sell, assign, transfer, make any agreement in respect of,
or otherwise deal with or exercise rights in respect of, any
Collateral or the goods or services which have given rise thereto,
as fully and completely as though the Agent were the absolute owner
thereof for all purposes;
(vi) adjust and settle claims under any insurance policy
relating thereto;
(vii) execute and deliver all assignments, conveyances,
statements, financing statements, renewal financing statements,
security agreements, affidavits, notices and other agreements,
instruments and documents that the Agent may determine necessary in
order to perfect and
14
<PAGE>
maintain the security interests and liens granted in this Security
Agreement and in order to fully consummate all of the transactions
contemplated therein;
(viii) institute any foreclosure proceedings that the Agent
may deem appropriate; and
(ix) do and perform all such other acts and things as the
Agent may reasonably deem to be necessary, proper or convenient in
connection with the Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Secured Obligations remain
outstanding, any Credit Document or any Hedging Agreement is in effect or
any Letter of Credit shall remain outstanding and (ii) until all of the
Commitments shall have been terminated. The Agent shall be under no duty
to exercise or withhold the exercise of any of the rights, powers,
privileges and options expressly or implicitly granted to the Agent in
this Security Agreement, and shall not be liable for any failure to do so
or any delay in doing so. The Agent shall not be liable for any act or
omission or for any error of judgment or any mistake of fact or law in its
individual capacity or its capacity as attorney-in-fact except acts or
omissions resulting from its gross negligence or willful misconduct. This
power of attorney is conferred on the Agent solely to protect, preserve
and realize upon its security interest in the Collateral.
(b) Performance by the Agent of Obligations. If any Obligor fails to
perform any agreement or obligation contained herein, the Agent itself may
perform, or cause performance of, such agreement or obligation, and the
expenses of the Agent incurred in connection therewith shall be payable by
the Obligors on a joint and several basis pursuant to Section 11 hereof.
(c) Assignment by the Agent. In connection with the succession of
the Agent pursuant to Section 10.7 of the Credit Agreement, the Agent may
from time to time assign the Secured Obligations and any portion thereof
and/or the Collateral and any portion thereof, and the assignee shall be
entitled to all of the rights and remedies of the Agent under this
Security Agreement in relation thereto.
(d) The Agent's Duty of Care. Other than the exercise of reasonable
care to assure the safe custody of the Collateral while being held by the
Agent hereunder, the Agent shall have no duty or liability to preserve
rights pertaining thereto, it being understood and agreed that the
Obligors shall be responsible for preservation of all rights in the
Collateral, and the Agent shall be relieved of all responsibility for the
Collateral upon surrendering it or tendering the surrender of it to the
Obligors. The Agent shall be deemed to have exercised reasonable care in
the custody and preservation of the Collateral in its possession if the
Collateral is accorded treatment substantially equal to that which the
Agent accords its own property, which shall be no less than the treatment
employed by a reasonable and prudent
15
<PAGE>
agent in the industry, it being understood that the Agent shall not have
responsibility for taking any necessary steps to preserve rights against
any parties with respect to any of the Collateral.
10. Application of Proceeds. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the Agent or
any of the Lenders in cash or its equivalent, will be applied in reduction of
the Secured Obligations in the order set forth in Section 3.15(b) of the Credit
Agreement, and each Obligor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Agent shall have the continuing and exclusive right to apply and reapply any and
all such payments and proceeds in the Agent's sole discretion, notwithstanding
any entry to the contrary upon any of its books and records.
11. Costs of Counsel. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Agent employs counsel to prepare
or consider amendments, waivers or consents with respect to this Security
Agreement, or to take action or make a response in or with respect to any legal
or arbitral proceeding relating to this Security Agreement or relating to the
Collateral, or to protect the Collateral or exercise any rights or remedies
under this Security Agreement or with respect to the Collateral, then the
Obligors agree to promptly pay upon demand any and all such reasonable
documented costs and expenses of the Agent or the Lenders, all of which costs
and expenses shall constitute Secured Obligations hereunder.
12. Continuing Agreement.
(a) This Security Agreement shall be a continuing agreement in every
respect and shall remain in full force and effect so long as any of the
Secured Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding,
and until all of the Commitments thereunder shall have terminated (other
than any obligations with respect to the indemnities and the
representations and warranties set forth in the Credit Documents). Upon
such payment and termination, this Security Agreement shall be
automatically terminated and the Agent and the Lenders shall, upon the
request and at the expense of the Obligors, forthwith release all of its
liens and security interests hereunder and shall execute and deliver all
UCC termination statements and/or other documents reasonably requested by
the Obligors evidencing such termination. Notwithstanding the foregoing
all releases and indemnities provided hereunder shall survive termination
of this Security Agreement.
(b) This Security Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in
whole or in part, of any of the Secured Obligations is rescinded or must
otherwise be restored or returned by the Agent or any Lender as a
preference, fraudulent conveyance or otherwise under any bankruptcy,
insolvency or similar law, all as though such payment had not been made;
provided that in the event payment of all or any part of the Secured
Obligations is rescinded or must be restored or returned, all reasonable
costs and expenses (including without limitation any
16
<PAGE>
reasonable legal fees and disbursements) incurred by the Agent or any
Lender in defending and enforcing such reinstatement shall be deemed to be
included as a part of the Secured Obligations.
13. Amendments; Waivers; Modifications. This Security Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in Section 11.6 of the Credit Agreement.
14. Successors in Interest. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Obligor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent
and the Lenders and their permitted successors and assigns; provided, however,
that none of the Obligors may assign its rights or delegate its duties hereunder
without the prior written consent of each Lender or the Required Lenders, as
required by the Credit Agreement. To the fullest extent permitted by law, each
Obligor hereby releases the Agent and each Lender, and its successors and
assigns, from any liability for any act or omission relating to this Security
Agreement or the Collateral, except for any liability arising from the gross
negligence or willful misconduct of the Agent, or such Lender, or its officers,
employees or agents.
15. Notices. All notices required or permitted to be given under this
Security Agreement shall be in conformance with Section 11.1 of the Credit
Agreement.
16. Counterparts. This Security Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.
17. Headings. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
18. Governing Law; Submission to Jurisdiction; Venue.
(a) THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any legal action or
proceeding with respect to this Security Agreement may be brought in the
courts of the State of New York, or of the United States for the Southern
District of New York, and, by execution and delivery of this Security
Agreement, each Obligor hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction
of such courts. Each Obligor further irrevocably consents to the service
of process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to it
17
<PAGE>
at the address for notices pursuant to Section 11.1 of the Credit
Agreement, such service to become effective 30 days after such mailing.
Nothing herein shall affect the right of the Agent to serve process in any
other manner permitted by law or to commence legal proceedings or to
otherwise proceed against any Obligor in any other jurisdiction.
(b) Each Obligor hereby irrevocably waives any objection which it
may now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Security
Agreement brought in the courts referred to in subsection (a) hereof and
hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court
has been brought in an inconvenient forum.
19. Waiver of Jury Trial. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH
OF THE PARTIES TO THIS SECURITY AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS SECURITY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
20. Severability. If any provision of any of the Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
21. Entirety. This Security Agreement, the other Credit Documents and the
Hedging Agreements represent the entire agreement of the parties hereto and
thereto, and supersede all prior agreements and understandings, oral or written,
if any, including any commitment letters or correspondence relating to the
Credit Documents, the Hedging Agreements or the transactions contemplated herein
and therein.
22. Survival. All representations and warranties of the Obligors hereunder
shall survive the execution and delivery of this Security Agreement, the other
Credit Documents and the Hedging Agreements, the delivery of the Notes and the
making of the Loans and the issuance of the Letters of Credit under the Credit
Agreement.
23. Other Security. To the extent that any of the Secured Obligations are
now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by an Obligor), or by a
guarantee, endorsement or property of any other Person, then the Agent and the
Lenders shall have the right to proceed against such other property, guarantee
or endorsement upon the occurrence of any Event of Default, and the Agent and
the Lenders have the right, in their sole discretion, to determine which rights,
security, liens, security interests or remedies the Agent and the Lenders shall
at any time pursue, relinquish, subordinate, modify or take with respect
thereto, without in any way modifying or affecting any of them or any
18
<PAGE>
of the Agent's and the Lenders' rights or the Secured Obligations under this
Security Agreement, under any other of the Credit Documents or under any Hedging
Agreement.
24. Joint and Several Obligations of Obligors.
(a) Each of the Obligors is accepting joint and several liability
hereunder in consideration of the financial accommodation to be provided
by the Lenders under the Credit Agreement, for the mutual benefit,
directly and indirectly, of each of the Obligors and in consideration of
the undertakings of each of the Obligors to accept joint and several
liability for the obligations of each of them.
(b) Each of the Obligors jointly and severally hereby irrevocably
and unconditionally accepts, not merely as a surety but also as a
co-debtor, joint and several liability with the other Obligors with
respect to the payment and performance of all of the Secured Obligations
arising under this Security Agreement, the other Credit Documents and the
Hedging Agreements, it being the intention of the parties hereto that all
the Obligations shall be the joint and several obligations of each of the
Obligors without preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained herein
or in any other of the Credit Documents, to the extent the obligations of
an Obligor shall be adjudicated to be invalid or unenforceable for any
reason (including, without limitation, because of any applicable state or
federal law relating to fraudulent conveyances or transfers) then the
obligations of such Obligor hereunder shall be limited to the maximum
amount that is permissible under applicable law (whether federal or state
and including, without limitation, the Bankruptcy Code).
25. Rights of Required Lenders. All rights of the Agent hereunder, if not
exercised by the Agent, may be exercised by the Required Lenders.
[remainder of page intentionally left blank]
19
<PAGE>
Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: CLUETT AMERICAN CORP.,
a Delaware corporation
By:___________________________
Name:_________________________
Title:________________________
GUARANTORS: CLUETT AMERICAN INVESTMENT CORP.,
a Delaware corporation
By:___________________________
Name:_________________________
Title:________________________
CLUETT AMERICAN GROUP, INC.,
a Delaware corporation
By:___________________________
Name:_________________________
Title:________________________
CONSUMER DIRECT CORPORATION,
a Delaware corporation
By:___________________________
Name:_________________________
Title:________________________
(Signatures Continued)
20
<PAGE>
ARROW FACTORY STORES, INC.,
a Delaware corporation
By:___________________________
Name:_________________________
Title:________________________
GAKM RESOURCES CORPORATION,
a Delaware corporation
By:___________________________
Name:_________________________
Title:________________________
CLUETT PEABODY RESOURCES CORPORATION,
a Delaware corporation
By:___________________________
Name:_________________________
Title:________________________
CLUETT PEABODY HOLDING CORP.,
a Delaware corporation
By:___________________________
Name:_________________________
Title:________________________
(Signatures Continued)
21
<PAGE>
CLUETT, PEABODY & CO., INC.,
a Delaware corporation
By:___________________________
Name:_________________________
Title:________________________
BIDERTEX SERVICES INC.,
a Delaware corporation
By:___________________________
Name:_________________________
Title:________________________
GREAT AMERICAN KNITTING MILLS, INC.,
a Delaware corporation
By:___________________________
Name:_________________________
Title:________________________
CLUETT DESIGNER GROUP, INC.,
a Delaware corporation
By:___________________________
Name:_________________________
Title:________________________
Accepted and agreed to as of the date first above written.
NATIONSBANK, N.A., as Agent
By:___________________________
Name:_________________________
Title:________________________
22
<PAGE>
SCHEDULE 1(b)
INTELLECTUAL PROPERTY
1
<PAGE>
SCHEDULE 4(a)
CHIEF EXECUTIVE OFFICE
2
<PAGE>
SCHEDULE 4(b)
LOCATIONS OF COLLATERAL
3
<PAGE>
SCHEDULE 4(c)
MERGERS, CONSOLIDATIONS, CHANGE IN STRUCTURE OR USE OF TRADENAMES
4
<PAGE>
SCHEDULE 5(d)(i)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
COPYRIGHTS
United States Copyright Office
Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of May
18, 1998 (as the same may be amended, modified, extended or restated from time
to time, the "Security Agreement") by and among the Obligors party thereto (each
an "Obligor" and collectively, the "Obligors") and NationsBank, N.A., as Agent
(the "Agent") for the Lenders referenced therein (the "Lenders"), the
undersigned Obligor has granted a continuing security interest in and continuing
lien upon, the copyrights and copyright applications shown below to the Agent
for the ratable benefit of the Lenders:
COPYRIGHTS
Date of
Copyright No. Description of Copyright Copyright
------------- ------------------------ ---------
Copyright Applications
Copyright Description of Copyright Date of Copyright
Applications No. Applied For Applications
- ---------------- ----------- ------------
5
<PAGE>
The Obligors and the Agent, on behalf of the Lenders, hereby acknowledge
and agree that the security interest in the foregoing copyrights and copyright
applications (i) may only be terminated in accordance with the terms of the
Security Agreement and (ii) is not to be construed as an assignment of any
copyright or copyright application.
Very truly yours,
________________________________
[Obligor]
By:_____________________________
Name:___________________________
Title:__________________________
Acknowledged and Accepted:
NATIONSBANK, N.A., as Agent
By:_________________________
Name:_______________________
Title:______________________
6
<PAGE>
SCHEDULE 5(d)(ii)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
PATENTS
United States Patent and Trademark Office
Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of May
18, 1998 (the "Security Agreement") by and among the Obligors party thereto
(each an "Obligor" and collectively, the "Obligors") and NationsBank, N.A., as
Agent (the "Agent") for the Lenders referenced therein (the "Lenders"), the
undersigned Obligor has granted a continuing security interest in and continuing
lien upon, the patents and patent applications shown below to the Agent for the
ratable benefit of the Lenders:
PATENTS
Date of
Patent No. Description of Patent Patent
---------- --------------------- ------
Patent Applications
Patent Description of Patent Date of Patent
Applications No. Applied For Applications
- ---------------- ----------- ------------
7
<PAGE>
The Obligors and the Agent, on behalf of the Lenders, hereby acknowledge
and agree that the security interest in the foregoing patents and patent
applications (i) may only be terminated in accordance with the terms of the
Security Agreement and (ii) is not to be construed as an assignment of any
patent or patent application.
Very truly yours,
_____________________________
[Obligor]
By:__________________________
Name:________________________
Title:_______________________
Acknowledged and Accepted:
NATIONSBANK, N.A., as Agent
By:________________________
Name:______________________
Title:_____________________
8
<PAGE>
SCHEDULE 5(d)(iii)
NOTICE
OF
GRANT OF SECURITY INTEREST
IN
TRADEMARKS
United States Patent and Trademark Office
Gentlemen:
Please be advised that pursuant to the Security Agreement dated as of May
18, 1998 (the "Security Agreement") by and among the Obligors party thereto
(each an "Obligor" and collectively, the "Obligors") and NationsBank, N.A., as
Agent (the "Agent") for the Lenders referenced therein (the "Lenders"), the
undersigned Obligor has granted a continuing security interest in and continuing
lien upon, the trademarks and trademark applications shown below to the Agent
for the ratable benefit of the Lenders:
TRADEMARKS
Date of
Trademark No. Description of Trademark Trademark
------------- ------------------------ ---------
Trademark Applications
Trademark Description of Trademark Date of Trademark
Applications No. Applied For Applications
- ---------------- ----------- ------------
9
<PAGE>
The Obligors and the Agent, on behalf of the Lenders, hereby acknowledge
and agree that the security interest in the foregoing trademarks and trademark
applications (i) may only be terminated in accordance with the terms of the
Security Agreement and (ii) is not to be construed as an assignment of any
trademark or trademark application.
Very truly yours,
_____________________________
[Obligor]
By:__________________________
Name:________________________
Title:_______________________
Acknowledged and Accepted:
NATIONSBANK, N.A., as Agent
By:________________________
Name:______________________
Title:_____________________
10
<PAGE>
Exhibit 2.1(b)(i)
FORM OF NOTICE OF BORROWING
NationsBank, N. A.,
as Agent for the Lenders
101 North Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Ladies and Gentlemen:
The undersigned, Cluett American Corp. (the "Borrower"), refers to the
Credit Agreement dated as of May 18, 1998 (as amended, modified, restated or
supplemented from time to time, the "Credit Agreement"), among the Borrower, the
Guarantors, the Lenders, NationsBank, N. A., as Agent and Gleacher Natwest Inc.,
as Documentation Agent. Capitalized terms used herein and not otherwise defined
herein shall have the meanings assigned to such terms in the Credit Agreement.
[The Borrower hereby gives notice pursuant to Section 2.1 of the Credit
Agreement that it requests a Revolving Loan advance under the Credit Agreement,
and in connection therewith sets forth below the terms on which such Loan
advance is requested to be made:]* [The Borrower hereby gives notice pursuant to
Section 2.4 of the Credit Agreement that it requests the Tranche A Term Loan
under the Credit Agreement on the Closing Date, and in connection therewith sets
forth below the terms on which such Loan advance is requested to be made:]**
[The Borrower hereby gives notice pursuant to Section 2.5 of the Credit
Agreement that it requests the Tranche B Term Loan under the Credit Agreement on
the Closing Date, and in connection therewith sets forth below the terms on
which such Loan advance is requested to be made:]***
[(A) Date of Borrowing (which is a Business Day) _______________________]*
[(B) Principal Amount of Borrowing _______________________]*
(C) Interest rate basis _______________________
(D) Interest Period and the last day thereof _______________________
In accordance with the requirements of Section 5.2, the Borrower hereby
reaffirms the representations and warranties set forth in the Credit Agreement
as provided in subsection (b) of such Section, and confirms that the matters
referenced in subsections (c), (d) and (e) of such Section, are true and
correct.
11
<PAGE>
CLUETT AMERICAN CORP.
By:_________________________
Name:_______________________
Title:______________________
*For all Revolving Loans
**For the initial advance of the Tranche A Term Loan on the Closing Date
***For the initial advance of the Tranche B Term Loan on the Closing Date
12
<PAGE>
Exhibit 2.1(e)
FORM OF REVOLVING NOTE
$_________________ May 18, 1998
FOR VALUE RECEIVED, CLUETT AMERICAN CORP., a Delaware corporation (the
"Borrower"), hereby promises to pay to the order of __________________________,
its successors and assigns (the "Lender"), at the office of NationsBank, N. A.,
as Agent (the "Agent"), at 101 North Tryon Street, Independence Center,
NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places
as the holder hereof may designate), at the times set forth in the Credit
Agreement dated as of the date hereof among the Borrower, the Guarantors, the
Lenders, the Agent and Gleacher Natwest Inc. (as it may be as amended, modified,
restated or supplemented from time to time, the "Credit Agreement"; all
capitalized terms not otherwise defined herein shall have the meanings set forth
in the Credit Agreement), but in no event later than the Maturity Date, in
Dollars and in immediately available funds, the principal amount of
________________________ DOLLARS ($____________) or, if less than such principal
amount, the aggregate unpaid principal amount of all Revolving Loans made by the
Lender to the Borrower pursuant to the Credit Agreement, and to pay interest
from the date hereof on the unpaid principal amount hereof, in like money, at
said office, on the dates and at the rates selected in accordance with Section
2.1(d) of the Credit Agreement.
Upon the occurrence and during the continuance of an Event of Default, the
balance outstanding hereunder shall bear interest as provided in Section 3.1 of
the Credit Agreement. Further, in the event the payment of all sums due
hereunder is accelerated under the terms of the Credit Agreement, this Note
shall become immediately due and payable, without presentment, demand, protest
or notice of any kind, all of which are hereby waived by the Borrower.
In the event this Note is not paid when due at any stated or accelerated
maturity, the Borrower agrees to pay, in addition to the principal and interest,
all costs of collection, including reasonable attorneys' fees.
This Note and the Loans evidenced hereby may be transferred in whole or in
part only by registration of such transfer on the Register maintained by or on
behalf of the Borrower as provided in Section 11.3(c) of the Credit Agreement.
13
<PAGE>
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed
by its duly authorized officer as of the day and year first above written.
CLUETT AMERICAN CORP.
By:_________________________
Name:_______________________
Title:______________________
14
<PAGE>
Exhibit 2.3(d)
FORM OF SWINGLINE NOTE
$5,000,000 May 18, 1998
FOR VALUE RECEIVED, CLUETT AMERICAN CORP., a Delaware corporation
(the "Borrower"), hereby promises to pay to the order of NATIONSBANK, N.A., its
successors and assigns (the "Swingline Lender"), at the office of NationsBank,
N.A., as Agent (the "Agent"), at 101 North Tryon Street, Independence Center,
NC1-001-15-04, Charlotte, North Carolina 28255 (or at such other place or places
as the holder hereof may designate), at the times set forth in the Credit
Agreement dated as of the date hereof among the Borrower, the Guarantors, the
Lenders, the Agent and Gleacher Natwest Inc. (as it may be as amended, modified,
restated or supplemented from time to time, the "Credit Agreement"; all
capitalized terms not otherwise defined herein shall have the meanings set forth
in the Credit Agreement), but in no event later than the Maturity Date, in
Dollars and in immediately available funds, the principal amount of FIVE MILLION
DOLLARS ($5,000,000) or, if less than such principal amount, the aggregate
unpaid principal amount of all Swingline Loans made by the Swingline Lender to
the Borrower pursuant to the Credit Agreement, and to pay interest from the date
hereof on the unpaid principal amount hereof, in like money, at said office, on
the dates and at the rates selected in accordance with Section 2.3(c) of the
Credit Agreement.
Upon the occurrence and during the continuance of an Event of Default, the
balance outstanding hereunder shall bear interest as provided in Section 3.1 of
the Credit Agreement. Further, in the event the payment of all sums due
hereunder is accelerated under the terms of the Credit Agreement, this Note
shall become immediately due and payable, without presentment, demand, protest
or notice of any kind, all of which are hereby waived by the Borrower.
In the event this Note is not paid when due at any stated or accelerated
maturity, the Borrower agrees to pay, in addition to the principal and interest,
all costs of collection, including reasonable attorneys' fees.
This Note and the Loans evidenced hereby may be transferred in whole or in
part only by registration of such transfer on the Register maintained by or on
behalf of the Borrower as provided in Section 11.3(c) of the Credit Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed
by its duly authorized officer as of the day and year first above written.
CLUETT AMERICAN CORP.
By:_________________________
Name:_______________________
Title:______________________
<PAGE>
Exhibit 2.4(f)
FORM OF TRANCHE A TERM NOTE
$_________________ May 18, 1998
FOR VALUE RECEIVED, CLUETT AMERICAN CORP., a Delaware corporation
(the "Borrower"), hereby promises to pay to the order of
__________________________, its successors and assigns (the "Lender"), at the
office of NationsBank, N. A., as Agent (the "Agent"), at 101 North Tryon Street,
Independence Center, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such
other place or places as the holder hereof may designate), at the times set
forth in the Credit Agreement dated as of the date hereof among the Borrower,
the Guarantors, the Lenders, the Agent and Gleacher Natwest Inc. (as it may be
as amended, modified, restated or supplemented from time to time, the "Credit
Agreement"; all capitalized terms not otherwise defined herein shall have the
meanings set forth in the Credit Agreement), but in no event later than the
Maturity Date, in Dollars and in immediately available funds, the principal
amount of ________________________ DOLLARS ($____________), and to pay interest
from the date hereof on the unpaid principal amount hereof, in like money, at
said office, on the dates and at the rates selected in accordance with Section
2.4(e) of the Credit Agreement.
Upon the occurrence and during the continuance of an Event of Default, the
balance outstanding hereunder shall bear interest as provided in Section 3.1 of
the Credit Agreement. Further, in the event the payment of all sums due
hereunder is accelerated under the terms of the Credit Agreement, this Note
shall become immediately due and payable, without presentment, demand, protest
or notice of any kind, all of which are hereby waived by the Borrower.
In the event this Note is not paid when due at any stated or accelerated
maturity, the Borrower agrees to pay, in addition to the principal and interest,
all costs of collection, including reasonable attorneys' fees.
This Note and the Loans evidenced hereby may be transferred in whole or in
part only by registration of such transfer on the Register maintained by or on
behalf of the Borrower as provided in Section 11.3(c) of the Credit Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed
by its duly authorized officer as of the day and year first above written.
CLUETT AMERICAN CORP.
By:_________________________
Name:_______________________
Title:______________________
<PAGE>
Exhibit 2.5(f)
FORM OF TRANCHE B TERM NOTE
$_________________ May 18, 1998
FOR VALUE RECEIVED, CLUETT AMERICAN CORP., a Delaware corporation
(the "Borrower"), hereby promises to pay to the order of
__________________________, its successors and assigns (the "Lender"), at the
office of NationsBank, N. A., as Agent (the "Agent"), at 101 North Tryon Street,
Independence Center, NC1-001-15-04, Charlotte, North Carolina 28255 (or at such
other place or places as the holder hereof may designate), at the times set
forth in the Credit Agreement dated as of the date hereof among the Borrower,
the Guarantors, the Lenders, the Agent and Gleacher Natwest Inc. (as it may be
as amended, modified, restated or supplemented from time to time, the "Credit
Agreement"; all capitalized terms not otherwise defined herein shall have the
meanings set forth in the Credit Agreement), but in no event later than the
Maturity Date, in Dollars and in immediately available funds, the principal
amount of ________________________ DOLLARS ($____________), and to pay interest
from the date hereof on the unpaid principal amount hereof, in like money, at
said office, on the dates and at the rates selected in accordance with Section
2.5(e) of the Credit Agreement.
Upon the occurrence and during the continuance of an Event of Default, the
balance outstanding hereunder shall bear interest as provided in Section 3.1 of
the Credit Agreement. Further, in the event the payment of all sums due
hereunder is accelerated under the terms of the Credit Agreement, this Note, and
all other indebtedness of the Borrower to the Lender shall become immediately
due and payable, without presentment, demand, protest or notice of any kind, all
of which are hereby waived by the Borrower.
In the event this Note is not paid when due at any stated or accelerated
maturity, the Borrower agrees to pay, in addition to the principal and interest,
all costs of collection, including reasonable attorneys' fees.
This Note and the Loans evidenced hereby may be transferred in whole or in
part only by registration of such transfer on the Register maintained by or on
behalf of the Borrower as provided in Section 11.3(c) of the Credit Agreement.
IN WITNESS WHEREOF, the Borrower has caused this Note to be duly executed
by its duly authorized officer as of the day and year first above written.
CLUETT AMERICAN CORP.
By:_________________________
Name:_______________________
Title:______________________
<PAGE>
Exhibit 3.2
FORM OF NOTICE OF EXTENSION/CONVERSION
NationsBank, N. A.,
as Agent for the Lenders
101 North Tryon Street
Independence Center, 15th Floor
NC1-001-15-04
Charlotte, North Carolina 28255
Attention: Agency Services
Ladies and Gentlemen:
The undersigned, Cluett American Corp. (the "Borrower"), refers to the
Credit Agreement dated as of May 18, 1998 (as amended, modified, restated or
supplemented from time to time, the "Credit Agreement"), among the Borrower, the
Guarantors, the Lenders, NationsBank, N. A., as Agent, and Gleacher Natwest
Inc., as Documentation Agent. Capitalized terms used herein and not otherwise
defined herein shall have the meanings assigned to such terms in the Credit
Agreement. The Borrower hereby gives notice pursuant to Section 3.2 of the
Credit Agreement that it requests an extension or conversion of a [Revolving
Loan] [Tranche A Term Loan] [Tranche B Term Loan] outstanding under the Credit
Agreement, and in connection therewith sets forth below the terms on which such
extension or conversion is requested to be made:
(A) Loan Tranche __________________________
(B) Date of Extension or Conversion
(which is the last day of the the
applicable Interest Period) __________________________
(C) Principal Amount of Extension or
Conversion __________________________
(D) Interest rate basis __________________________
(E) Interest Period and the last day
thereof __________________________
CLUETT AMERICAN CORP.
By:_________________________
Name:_______________________
Title:______________________
<PAGE>
Exhibit 7.1(c)
FORM OF OFFICER'S COMPLIANCE CERTIFICATE
For the fiscal quarter ended _________________, 19___.
I, ______________________, [Title] of Cluett American Corp. (the
"Borrower") hereby certify that, to the best of my knowledge and belief, with
respect to that certain Credit Agreement dated as of May 18, 1998 (as amended,
modified, restated or supplemented from time to time, the "Credit Agreement";
all of the defined terms in the Credit Agreement are incorporated herein by
reference) among the Borrower, the Guarantors, the Lenders, NationsBank, N. A.,
as Agent, and Gleacher Natwest Inc., as Documentation Agent:
a. The company-prepared financial statements which accompany this
certificate are true and correct in all material respects and have
been prepared in accordance with GAAP applied on a consistent basis,
subject to changes resulting from normal year-end audit adjustments.
b. Since ___________ (the date of the last similar certification, or,
if none, the Closing Date) no Default or Event of Default has
occurred under the Credit Agreement, except as set forth on Schedule
1 attached hereto; and
Delivered herewith are calculations in reasonable detail demonstrating
compliance by the Consolidated Parties with the financial covenants contained in
Section 7.11 of the Credit Agreement as of the end of the fiscal period referred
to above.
This ______ day of ___________, 19__.
CLUETT AMERICAN CORP.
By:_________________________
Name:_______________________
Title:______________________
<PAGE>
Attachment to Officer's Certificate
Computation of Financial Covenants
<PAGE>
Exhibit 7.12
FORM OF JOINDER AGREEMENT
THIS JOINDER AGREEMENT (the "Agreement"), dated as of _____________, 19__,
is by and between _____________________, a ___________________ (the
"Subsidiary"), and NATIONSBANK, N. A., in its capacity as Agent under that
certain Credit Agreement (as it may be amended, modified, restated or
supplemented from time to time, the "Credit Agreement"), dated as of May 18,
1998, by and among Cluett American Corp., a Delaware corporation (the
"Borrower"), the Guarantors from time to time party thereto, the Lenders from
time to time party thereto, NationsBank, N. A., as Agent, and Gleacher Natwest
Inc., as Documentation Agent. All of the defined terms in the Credit Agreement
are incorporated herein by reference.
The Subsidiary is has become a Material Domestic Subsidiary and,
consequently, the Credit Parties are required by Section 7.12 of the Credit
Agreement to cause the Subsidiary to become a "Guarantor".
Accordingly, the Subsidiary hereby agrees as follows with the Agent, for
the benefit of the Lenders:
1. The Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Subsidiary will be deemed to be a party to the
Credit Agreement and a "Guarantor" for all purposes of the Credit Agreement, and
shall have all of the obligations of a Guarantor thereunder as if it had
executed the Credit Agreement. The Subsidiary hereby ratifies, as of the date
hereof, and agrees to be bound by, all of the terms, provisions and conditions
applicable to the Guarantors contained in the Credit Agreement. Without limiting
the generality of the foregoing terms of this paragraph 1, the Subsidiary hereby
(i) jointly and severally together with the other Guarantors, guarantees to each
Lender and the Agent, as provided in Section 4 of the Credit Agreement, the
prompt payment and performance of the Credit Party Obligations in full when due
(whether at stated maturity, as a mandatory prepayment, by acceleration or
otherwise) strictly in accordance with the terms thereof.
2. The Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Subsidiary will be deemed to be a party to the
Security Agreement, and shall have all the obligations of an "Obligor" (as such
term is defined in the Security Agreement) thereunder as if it had executed the
Security Agreement. The Subsidiary hereby ratifies, as of the date hereof, and
agrees to be bound by, all of the terms, provisions and conditions contained in
the Security Agreement. Without limiting generality of the foregoing terms of
this paragraph 2, the Subsidiary hereby grants to the Agent, for the benefit of
the Lenders, a continuing security interest in, and a right of set off against
any and all right, title and interest of the Subsidiary in and to the Collateral
(as such term is defined in Section 2 of the Security Agreement) of the
Subsidiary. The Subsidiary hereby represents and warrants to the Agent that:
(i) The Subsidiary's chief executive office and chief place of
business are (and for the prior four months have been) located at the
locations set forth on Schedule 1 attached hereto and the Subsidiary keeps
its books and records at such locations.
<PAGE>
(ii) The location of all Collateral owned by the Subsidiary is as
shown on Schedule 2 attached hereto.
(iii) The Subsidiary's legal name is as shown in this Agreement and
the Subsidiary has not in the past four months changed its name, been
party to a merger, consolidation or other change in structure or used any
tradename except as set forth in Schedule 3 attached hereto.
(iv) The patents and trademarks listed on Schedule 4 attached hereto
constitute all of the registrations and applications for the patents and
trademarks owned by the Subsidiary.
3. The Subsidiary hereby acknowledges, agrees and confirms that, by its
execution of this Agreement, the Subsidiary will be deemed to be a party to the
Pledge Agreement, and shall have all the obligations of a "Pledgor" thereunder
as if it had executed the Pledge Agreement. The Subsidiary hereby ratifies, as
of the date hereof, and agrees to be bound by, all the terms, provisions and
conditions contained in the Pledge Agreement. Without limiting the generality of
the foregoing terms of this paragraph 3, the Subsidiary hereby pledges and
assigns to the Agent, for the benefit of the Lenders, and grants to the Agent,
for the benefit of the Lenders, a continuing security interest in any and all
right, title and interest of the Subsidiary in and to Pledged Shares (as such
term is defined in Section 2 of the Pledge Agreement) listed on Schedule 5
attached hereto and the other Pledged Collateral (as such term is defined in
Section 2 of the Pledge Agreement).
4. The address of the Subsidiary for purposes of all notices and other
communications is ____________________, ____________________________, Attention
of ______________ (Facsimile No. ____________).
5. The Subsidiary hereby waives acceptance by the Agent and the Lenders of
the guaranty by the Subsidiary under Section 4 of the Credit Agreement upon the
execution of this Agreement by the Subsidiary.
6. This Agreement may be executed in two or more counterparts, each of
which shall constitute an original but all of which when taken together shall
constitute one contract.
7. This Agreement shall be governed by and construed and interpreted in
accordance with the laws of the State of New York.
<PAGE>
IN WITNESS WHEREOF, the Subsidiary has caused this Joinder Agreement to be
duly executed by its authorized officers, and the Agent, for the benefit of the
Lenders, has caused the same to be accepted by its authorized officer, as of the
day and year first above written.
[SUBSIDIARY]
By:________________________
Name:______________________
Title:_____________________
Acknowledged and accepted:
NATIONSBANK, N. A., as Agent
By:________________________
Name:______________________
Title:_____________________
<PAGE>
Schedule 1
TO FORM OF JOINDER AGREEMENT
[Chief Executive Office and
Chief Place of Business of Subsidiary]
<PAGE>
Schedule 2
TO FORM OF JOINDER AGREEMENT
[Locations of Collateral]
<PAGE>
Schedule 3
TO FORM OF JOINDER AGREEMENT
[Tradenames]
<PAGE>
Schedule 4
TO FORM OF JOINDER AGREEMENT
[Patents and Trademarks]
<PAGE>
Schedule 5
TO FORM OF JOINDER AGREEMENT
[Pledged Shares]
<PAGE>
Exhibit 11.3(b)
FORM OF ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement dated as of May 18, 1998, as
amended and modified from time to time thereafter (the "Credit Agreement") among
Cluett American Corp., the Guarantors from time to time party thereto, the
Lenders from time to time party thereto, NationsBank, N.A., as Agent, and
Gleacher Natwest Inc., as Documentation Agent. Terms defined in the Credit
Agreement are used herein with the same meanings.
The "Assignor" and the "Assignee" referred to on Schedule 1 agree as
follows:
1. The Assignor hereby sells and assigns to the Assignee, without recourse
and without representation or warranty except as expressly set forth herein, and
the Assignee hereby purchases and assumes from the Assignor, an interest in and
to the Assignor's rights and obligations under the Credit Agreement and the
other Credit Documents as of the date hereof equal to the percentage interest
specified on Schedule 1 of all outstanding rights and obligations under the
Credit Agreement and the other Credit Documents. After giving effect to such
sale and assignment, the Assignee's Commitment and the amount of the Loans owing
to the Assignee will be as set forth on Schedule 1.
2. The Assignor (i) represents and warrants that it is the legal and
beneficial owner of the interest being assigned by it hereunder and that such
interest is free and clear of any adverse claim; (ii) makes no representation or
warranty and assumes no responsibility with respect to any statements,
warranties or representations made in or in connection with the Credit Documents
or the execution, legality, validity, enforceability, genuineness, sufficiency
or value of the Credit Documents or any other instrument or document furnished
pursuant thereto; (iii) makes no representation or warranty and assumes no
responsibility with respect to the financial condition of any Credit Party or
the performance or observance by any Credit Party of any of its obligations
under the Credit Documents or any other instrument or document furnished
pursuant thereto; and (iv) attaches the Notes held by the Assignor and requests
that the Agent exchange such Notes for new Notes payable to the order of the
Assignee in an amount equal to the Commitment assumed by the Assignee pursuant
hereto and to the Assignor in an amount equal to the Commitment retained by the
Assignor, if any, as specified on Schedule 1.
<PAGE>
3. The Assignee (i) confirms that it has received a copy of the Credit
Agreement, together with copies of the financial statements referred to in
Section 7.1 thereof and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into this
Assignment and Acceptance; (ii) agrees that it will, independently and without
reliance upon the Agent, the Assignor or any other Lender and based on such
documents and information as it shall deem appropriate at the time, continue to
make its own credit decisions in taking or not taking action under the Credit
Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Credit Agreement as are delegated to the
Agent by the terms thereof, together with such powers and discretion as are
reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all of the obligations that by the terms of the Credit
Agreement are required to be performed by it as a Lender; and (vi) attaches any
U.S. Internal Revenue Service or other forms required under Section 3.11.
4. Following the execution of this Assignment and Acceptance, it will be
delivered to the Agent for acceptance and recording by the Agent. The effective
date for this Assignment and Acceptance (the "Effective Date") shall be the date
of acceptance hereof by the Agent, unless otherwise specified on Schedule 1.
5. Upon such acceptance and recording by the Agent, as of the Effective
Date, (i) the Assignee shall be a party to the Credit Agreement and, to the
extent provided in this Assignment and Acceptance, have the rights and
obligations of a Lender thereunder and (ii) the Assignor shall, to the extent
provided in this Assignment and Acceptance, relinquish its rights and be
released from its obligations under the Credit Agreement.
6. Upon such acceptance and recording by the Agent, from and after the
Effective Date, the Agent shall make all payments under the Credit Agreement and
the Notes in respect of the interest assigned hereby (including, without
limitation, all payments of principal, interest and commitment fees with respect
thereto) to the Assignee. The Assignor and Assignee shall make all appropriate
adjustments in payments under the Credit Agreement and the Notes for periods
prior to the Effective Date directly between themselves.
7. This Assignment and Acceptance shall be governed by, and construed in
accordance with, the laws of the State of New York.
8. This Assignment and Acceptance may be executed in any number of
counterparts and by different parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement. Delivery of an executed
counterpart of Schedule 1 to this Assignment and Acceptance by telecopier shall
be effective as delivery of a manually executed counterpart of this Assignment
and Acceptance.
<PAGE>
IN WITNESS WHEREOF, the Assignor and the Assignee have caused this
Assignment and Acceptance to be executed by their officers thereunto duly
authorized as of the date hereof.
____________________, as Assignor
By:______________________________
Name:____________________________
Title:___________________________
_____________________, as Assignee
By:______________________________
Name:____________________________
Title:___________________________
Notice address of Assignee:
[Assignee]
_________________________________
_________________________________
_________________________________
Attn: _____________________
Telephone:(___) ___________
Telecopy: (___) ___________
CONSENTED TO:
NATIONSBANK, N.A., *
as Agent
By:______________________________
Name:____________________________
Title:___________________________
CLUETT AMERICAN CORP.*
By:______________________________
Name:____________________________
Title:___________________________
- ----------
* Required if the Assignee is an Eligible Assignee solely by reason of
clause (iii) of the definition of "Eligible Assignee."
* Required if the Assignee is an Eligible Assignee solely by reason of
clause (iii) of the definition of "Eligible Assignee."
<PAGE>
SCHEDULE 1
to
ASSIGNMENT AND ACCEPTANCE
(a) Date of Assignment:
(b) Legal Name of Assignor:
(c) Legal Name of Assignee:
(d) Effective Date of Assignment*:
(e) Revolving Commitment Percentage Assigned
(expressed as a percentage set forth to at least
8 decimals) %
(f) Revolving Commitment Percentage of Assignee
after giving effect to this Assignment and
Acceptance as of the Effective Date (set forth
to at least 8 decimals) %
(g) Revolving Commitment Percentage of Assignor
after giving effect to this Assignment and
Acceptance as of the Effective Date (set forth
to at least 8 decimals) %
(h) Revolving Committed Amount as of Effective Date $_____________
(i) Amount of Assignor's Revolving Commitment
Percentage as of the Effective Date (the amount
set forth in (h) multiplied by the percentage
set forth in (g)) $_____________
(j) Amount of Assignee's Revolving Commitment
Percentage as of the Effective Date (the amount
set forth in (h) multiplied by the percentage
set forth in (f)) $_____________
(k) Tranche A Term Loan Commitment Percentage
Assigned (expressed as a percentage set forth to
at least 8 decimals) %
(l) Tranche A Term Loan Commitment Percentage of
Assignee after giving effect to this Assignment
and Acceptance on the Effective Date (set forth
to at least 8 decimals) %
(m) Tranche A Term Loan Commitment Percentage of
Assignor after giving effect to this Assignment
and Acceptance on the Effective Date (set forth
to at least 8 decimals) %
(n) Outstanding Balance of Tranche A Term Loan as of
Effective Date $_____________
(o) Principal Amount of Assignor's portion of the
Tranche A Term Loan after giving effect to this
Assignment and
- ----------
* This date should be no earlier than five Business Days after delivery of
this Assignment and Acceptance to the Agent.
<PAGE>
Acceptance on Effective Date (the amount set
forth in (n) multiplied by the percentage set
forth in (m)) $_____________
(p) Principal Amount of Assignee's portion of the
Tranche A Term Loan after giving effect to this
Assignment and Acceptance on Effective Date (the
amount set forth in (n) multiplied by the
percentage set forth in (l)) $_____________
(q) Tranche B Term Loan Commitment Percentage
Assigned (expressed as a percentage set forth to
at least 8 decimals) %
(r) Tranche B Term Loan Commitment Percentage of
Assignee after giving effect to this Assignment
and Acceptance on the Effective Date (set forth
to at least 8 decimals) %
(s) Tranche B Term Loan Commitment Percentage of
Assignor after giving effect to this Assignment
and Acceptance on the Effective Date (set forth
to at least 8 decimals) %
(t) Outstanding Balance of Tranche B Term Loan as of
Effective Date $_____________
(u) Principal Amount of Assignor's portion of the
Tranche B Term Loan after giving effect to this
Assignment and Acceptance on Effective Date (the
amount set forth in (t) multiplied by the
percentage set forth in (s)) $_____________
(v) Principal Amount of Assignee's portion of the
Tranche B Term Loan after giving effect to this
Assignment and Acceptance on Effective Date (the
amount set forth in (t) multiplied by the
percentage set forth in (q)) $_____________
<PAGE>
Exhibit 10.2
FIRST AMENDMENT TO CREDIT AGREEMENT
AND
ASSIGNMENT
THIS FIRST AMENDMENT TO CREDIT AGREEMENT AND ASSIGNMENT (this "AMENDMENT"),
dated as of May 27, 1998, is by and among Cluett American Corp. (the
"BORROWER"), Cluett American Investment Corp. (the "PARENT"), Cluett American
Group, Inc. ("INTERCO") and the certain subsidiaries of the Parent identified
on the signature pages hereto (together with the Parent and Interco, the
"GUARANTORS"), the lenders identified on the signature pages hereto as Existing
Lenders (the "EXISTING LENDERS"; such term shall include NationsBank, N.A. and
National Westminster Bank Plc, as each may be referred to hereunder as an
"ASSIGNING EXISTING LENDER"), the Persons identified as New Lenders on the
signature pages hereto (the "NEW LENDERS", and together with the Existing
Lenders, the "LENDERS"), NationsBank, N.A., as agent for the Lenders (in such
capacity, the "AGENT") and Gleacher NatWest Inc., as documentation agent (the
"DOCUMENTATION AGENT"). Capitalized terms used herein which are not defined
herein and which are defined in the Credit Agreement shall have the same
meanings as therein defined.
W I T N E S S E T H
WHEREAS, the Borrower, the Guarantors, the Existing Lenders, the Agent and
the Documentation Agent have entered into that certain Credit Agreement dated as
of May 18, 1998, as amended, (the "EXISTING CREDIT AGREEMENT");
WHEREAS, parties to the Existing Credit Agreement have agreed to amend the
Existing Credit Agreement as provided herein;
WHEREAS, the parties to the Existing Credit Agreement and the New Lenders
have agreed that the New Lenders shall become parties to the Existing Credit
Agreement (as amended hereby) by way of assignment by each Assigning Existing
Lender of certain percentages of its Commitments;
NOW, THEREFORE, in consideration of the agreements hereinafter set forth,
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, the parties hereto agree as follows:
PART 1
DEFINITIONS
SUBPART 1.1 CERTAIN DEFINITIONS. Unless otherwise defined herein or the
context otherwise requires, the following terms used in this Amendment,
including its preamble and recitals, have the following meanings:
"AMENDED CREDIT AGREEMENT" means the Existing Credit Agreement
as amended hereby.
1
<PAGE>
"AMENDMENT NO. 1 EFFECTIVE DATE" is defined in SUBPART 3.1.
SUBPART 1.2 OTHER DEFINITIONS. Unless otherwise defined herein or the
context otherwise requires, terms used in this Amendment, including its preamble
and recitals, have the meanings provided in the Amended Credit Agreement.
PART 2
AMENDMENTS TO EXISTING CREDIT AGREEMENT
Effective on (and subject to the occurrence of) the Amendment No. 1
Effective Date, the Existing Credit Agreement is hereby amended in accordance
with this PART 2. Except as so amended, the Existing Credit Agreement and all
other Credit Documents shall continue in full force and effect.
SUBPART 2.1 SECTION 1.1.
(a) Clause (e) appearing in the definition of "Change of
Control" appearing in Section 1.1 of the Existing Credit Agreement is
hereby amended to read as follows:
"CHANGE OF CONTROL" means
******
(e) the occurrence of a "Change of Control" under any of the
Recapitalization Documents or the indenture for the Senior
Subordinated Debt.
******
(b) The definition of "Eligible Assignee" appearing in Section
1.1 of the Existing Credit Agreement is hereby amended to read as follows:
"ELIGIBLE ASSIGNEE" means (i) a Lender; (ii) an Affiliate of a Lender or
any fund that invests in bank loans and is managed by an investment advisor
to a Lender; and (iii) any other Person approved by the Agent and the
Borrower (such approval not to be unreasonably withheld or delayed by the
Borrower and such approval to be deemed given by the Borrower if no
objection is received by the assigning Lender and the Agent from the
Borrower within three Business Days after notice of such proposed
assignment has been provided by the assigning Lender to the Borrower);
PROVIDED, HOWEVER, that neither the Parent nor any of the Consolidated
Parties shall qualify as an Eligible Assignee.
(c) The definition of "Equity Issuance Prepayment Event"
appearing in Section 1.1 of the Existing Credit Agreement is deleted.
2
<PAGE>
SUBPART 2.2 SECTION 3.3(B)(V). Section 3.3(b)(v) of the Existing Credit
Agreement is hereby amended and restated to read as follows:
(v) ISSUANCES OF EQUITY. Immediately upon the occurrence of any Equity
Issuance Prepayment Event, the Borrower shall prepay the Loans in an
aggregate amount equal to 100% of the Net Cash Proceeds of the
related Equity Issuance (such prepayment to be applied as set forth
in clause (vi) below.
SUBPART 2.3 SECTION 3.11(D). Section 3.11(d) of the Existing Credit
Agreement is hereby amended and restated to read as follows:
3.11 TAXES.
******
(d) Each Lender that is not a United States person under Section
7701(a)(30) of the Code, on or prior to the date of its execution and
delivery of this Credit Agreement in the case of each Lender listed on the
signature pages hereof and on or prior to the date on which it becomes a
Lender in the case of each other Lender, and from time to time thereafter
if requested in writing by the Borrower or the Agent (but only so long as
such Lender remains lawfully able to do so), shall provide the Borrower and
the Agent with (i) if such Lender is a "bank" within the meaning of Section
881(c)(3)(A) of the Code, Internal Revenue Service Form 1001 or 4224, as
appropriate, or any successor form prescribed by the Internal Revenue
Service, certifying that such Lender is entitled to benefits under an
income tax treaty to which the United States is a party which reduces the
rate of withholding tax on payments of interest or certifying that the
income receivable pursuant to this Credit Agreement is effectively
connected with the conduct of a trade or business in the United States and
a Form W-8, or successor applicable form, or (ii) if such Lender is not a
"bank" within the meaning of Section 881(c)(3)(A) of the Code and cannot
comply with clause (i) hereof, a Form W-8, or any subsequent versions
thereof or successors thereto certifying that such Lender is entitled to an
exemption from or a reduced rate of tax on payments pursuant to this Credit
Agreement or any of the other Credit Documents and, if such Lender delivers
a Form W-8, a certificate representing that such Lender is not a bank for
purposes of Section 881(c) of the Code, is not a 10% shareholder (within
the meaning of Section 871(h)(3)(B) of the Code) of the Borrower and is not
a controlled foreign corporation related to the Borrower (within the
meaning of Section 864(d)(4) of the Code). In addition, each Lender shall
deliver such forms promptly upon the obsolescence or invalidity of any form
previously delivered by such Lender. Each Lender shall promptly notify the
Borrower at any time it determines that it is no longer in a position to
provide any previously delivered form to the Borrower (or any other form
adopted by the U.S. taxing authorities for such purpose). Notwithstanding
any other provision of this Section 3.11(d), a Lender shall not be required
to deliver any form pursuant to this Section 3.11(d) that such Lender is
not legally able to deliver.
SUBPART 2.4 SECTION 11.3(B)(II), 11.3(C) AND 11.3(F). Sections
11.3(b)(ii), 11.3(c) and 11.3(f) of the Existing Credit Agreement are hereby
amended and restated to read as follows:
3
<PAGE>
11.3 BENEFIT OF AGREEMENT.
******
(b) Each Lender may assign to one or more Eligible Assignees all
or a portion of its rights and obligations under this Credit Agreement
(including, without limitation, all or a portion of its Loans, its Notes,
and its Commitment); PROVIDED, HOWEVER, that
******
(ii) except in the case of an assignment to another Lender,
an Affiliate of an existing Lender or any fund that invests in bank
loans and is advised or managed by an investment advisor to an
existing Lender, or an assignment of all of a Lender's rights and
obligations under this Credit Agreement, any such partial assignment
shall be in an amount at least equal to $5,000,000 (or, if less, the
remaining amount of the Commitment being assigned by such Lender) or
an integral multiple of $1,000,000 in excess thereof;
******
(c) The Agent, on behalf of the Borrower, shall maintain at its
address referred to in Section 11.1 a copy of each Assignment and
Acceptance delivered to and accepted by it and a register for the
recordation of the names and addresses of the Lenders and the Commitment
of, and principal amount of the Loans owing to, each Lender from time to
time (the "REGISTER"). The entries in the Register shall be conclusive and
binding for all purposes, absent manifest error, and the Credit Parties,
the Agent and the Lenders shall treat each Person whose name is recorded in
the Register as a Lender hereunder for all purposes of this Credit
Agreement. The Register shall be available for inspection by the Credit
Parties or any Lender at any reasonable time and from time to time upon
reasonable prior notice. Any assignment of any Loan or other Credit Party
Obligations shall be effective only upon an entry with respect thereto
being made in the Register.
******
(f) Notwithstanding any other provision set forth in this Credit
Agreement, any Lender may at any time assign and pledge all or any portion
of its Loans and its Notes (i) to any Federal Reserve Bank as collateral
security pursuant to Regulation A and any Operating Circular issued by such
Federal Reserve Bank or (ii) in the case of any Lender which has made
Tranche B Term Loans hereunder and is an investment fund, to the trustee
under the indenture to which such fund is a party in support of its
obligations to such trustee for the benefit of the applicable trust
beneficiaries. No such assignment shall release the assigning Lender from
its obligations hereunder.
SUBPART 2.5 SECTION 11.14. Section 11.14 of the Existing Credit Agreement
is hereby amended and restated to read as follows:
4
<PAGE>
11.14 CONFIDENTIALITY.
The Agent and each Lender (each, a "LENDING PARTY") agrees to keep
confidential any non-public information furnished or made available to it by the
Credit Parties pursuant to this Credit Agreement; PROVIDED that nothing herein
shall prevent any Lending Party from disclosing such information (a) to any
other Lending Party or any Affiliate of any Lending Party, or any officer,
director, employee, agent, or advisor of any Lending Party or Affiliate of any
Lending Party, (b) to any other Person if reasonably incidental to the
administration of the credit facility provided herein, (c) as required by any
law, rule, or regulation, (d) upon the order of any court or administrative
agency, (e) upon the request or demand of any regulatory agency or authority
having jurisdiction over such Lending Party, (f) that is or becomes available to
the public or that is or becomes available to any Lending Party other than as a
result of a disclosure by any Lending Party prohibited by this Credit Agreement,
(g) in connection with any litigation to which such Lending Party or any of its
Affiliates may be a party, (h) to the extent necessary in connection with the
exercise of any remedy under this Credit Agreement or any other Credit Document,
(i) to the National Association of Insurance Commissioners or any similar
organization or any nationally recognized rating agency that requires access to
information about a Lender's investment portfolio in connection with ratings
issued with respect to such Lender, (j) to any direct or indirect contractual
counterparty in swap agreements or such contractual counterparty's professional
advisor (so long as such contractual counterparty or professional advisor to
such contractual counterparty (i) has been approved in writing by the Borrower
and (ii) agrees in a writing enforceable by the Borrower to be bound by the
provisions of this Section 11.14) and (k) subject to provisions substantially
similar to those contained in this Section 11.14, to any actual or proposed
participant or assignee.
SUBPART 2.6 SCHEDULE 2.1(A). SCHEDULE 2.1(A) of the Existing Credit
Agreement is hereby deleted in its entirety and a new schedule in the form of
SCHEDULE 2.1(A) attached hereto is substituted therefor.
PART 3
CONDITIONS TO EFFECTIVENESS
SUBPART 3.1 AMENDMENT NO. 1 EFFECTIVE DATE. This Amendment shall be and
become effective as of the date hereof (the "AMENDMENT NO. 1 EFFECTIVE DATE")
when all of the conditions set forth in this PART 3 shall have been satisfied,
and thereafter this Amendment shall be known, and may be referred to, as
"AMENDMENT NO. 1."
SUBPART 3.2 EXECUTION OF COUNTERPARTS OF AMENDMENT. The Agent shall have
received counterparts (or other evidence of execution, including telephonic
message, satisfactory to the Agent) of this Amendment, which collectively shall
have been duly executed on behalf of each of the Borrower, the Guarantors and
the Lenders.
SUBPART 3.3 OTHER ITEMS. The Agent shall have received such other
documents, agreements or information which may be reasonably requested by the
Agent.
5
<PAGE>
PART 4
ASSIGNMENTS AND ASSUMPTIONS
Each Assigning Existing Lender hereby sells and assigns, without recourse,
to the New Lenders, and the New Lenders hereby purchase and assume, without
recourse, from such Assigning Existing Lender, effective as of the Amendment No.
1 Effective Date, such interests in such Assigning Existing Lender's rights and
obligations under the Existing Credit Agreement (including, without limitation,
the Commitments of such Assigning Existing Lender on the Amendment No. 1
Effective Date and the Revolving Loans and LOC Obligations, the portions of the
Tranche A Term Loan and the portions of the Tranche B Term Loan owing to such
Assigning Existing Lender which are outstanding on the Amendment No. 1 Effective
Date) as shall be necessary in order to give effect to the reallocations of the
Revolving Committed Amounts and Revolving Commitment Percentages, the Tranche A
Term Loan Committed Amounts and Tranche A Term Loan Commitment Percentages and
the Tranche B Term Loan Committed Amounts and Tranche B Term Loan Commitment
Percentages effected by the amendment to Schedule 2.1(a) to the Existing Credit
Agreement pursuant to SUBPART 2.6 hereof. From and after the Amendment No. 1
Effective Date (i) each of the New Lenders shall be a party to and be bound by
the provisions of the Existing Credit Agreement (as amended hereby) and, to the
extent of the interests assigned hereby, have the rights and obligations of a
Lender thereunder and under the other Credit Documents and (ii) each Assigning
Existing Lender shall, to the extent of the interests assigned hereby,
relinquish its rights and be released from its obligations under the Existing
Credit Agreement. Each Assigning Existing Lender (i) represents and warrants
that it is the legal and beneficial owner of the interest being assigned by it
hereunder and that such interest is free and clear of any adverse claim; (ii)
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
the Credit Documents or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of the Credit Documents or any other
instrument or document furnished pursuant thereto; and (iii) makes no
representation or warranty and assumes no responsibility with respect to the
financial condition of any Credit Party or the performance or observance by any
Credit Party of any of its obligations under the Credit Documents or any other
instrument or document furnished pursuant thereto. Each New Lender (i) confirms
that it has received a copy of the Existing Credit Agreement (as amended hereby)
together with copies of the financial statements referred to in Section 7.1
thereof and such other documents and information as it has deemed appropriate to
make its own credit analysis and decision to enter into this Amendment; (ii)
agrees that it will, independently and without reliance upon the Agent, the
Assigning Existing Lenders or any other Lender and based on such documents and
information as it shall deem appropriate at the time, continue to make its own
credit decisions in taking or not taking action under the Amended Credit
Agreement; (iii) confirms that it is an Eligible Assignee; (iv) appoints and
authorizes the Agent to take such action as agent on its behalf and to exercise
such powers and discretion under the Amended Credit Agreement as are delegated
to the Agent by the terms thereof, together with such powers and discretion as
are reasonably incidental thereto; (v) agrees that it will perform in accordance
with their terms all of the obligations that by the terms of the Amended Credit
Agreement are required to be performed by it as a Lender; and (vi) attaches any
U.S. Internal Revenue Service or other forms required under Section 3.11 of the
Amended Credit Agreement. Each New Lender specifically
6
<PAGE>
acknowledges and agrees that NationsBank, N.A. or one or more of its Affiliates
may hold from time to time shares of the Senior Preferred Stock.
PART 5
MISCELLANEOUS
SUBPART 5.1 REPRESENTATIONS AND WARRANTIES. Borrower hereby represents
and warrants to the Agent and the Lenders that, after giving effect to this
Amendment, (a) no Default or Event of Default exists under the Credit Agreement
or any of the other Credit Documents and (b) the representations and warranties
set forth in Section 6 of the Existing Credit Agreement are, subject to the
limitations set forth therein, true and correct in all material respects as of
the date hereof (except for those which expressly relate to an earlier date).
SUBPART 5.2 REAFFIRMATION OF CREDIT PARTY OBLIGATIONS. Each Credit Party
hereby ratifies the Credit Agreement and acknowledges and reaffirms (a) that it
is bound by all terms of the Credit Agreement applicable to it and (b) that it
is responsible for the observance and full performance of its respective Credit
Party Obligations.
SUBPART 5.3 CROSS-REFERENCES. References in this Amendment to any Part or
Subpart are, unless otherwise specified, to such Part or Subpart of this
Amendment.
SUBPART 5.4 INSTRUMENT PURSUANT TO EXISTING CREDIT AGREEMENT. This
Amendment is a Credit Document executed pursuant to the Existing Credit
Agreement and shall (unless otherwise expressly indicated therein) be construed,
administered and applied in accordance with the terms and provisions of the
Existing Credit Agreement.
SUBPART 5.5 REFERENCES IN OTHER CREDIT DOCUMENTS. At such time as this
Amendment No. 1 shall become effective pursuant to the terms of SUBPART 3.1, all
references in the Credit Documents to the "Credit Agreement" shall be deemed to
refer to the Credit Agreement as amended by this Amendment No. 1.
SUBPART 5.6 COUNTERPARTS/TELECOPY. This Amendment may be executed by the
parties hereto in several counterparts, each of which shall be deemed to be an
original and all of which shall constitute together but one and the same
agreement. Delivery of executed counterparts of the Amendment by telecopy shall
be effective as an original and shall constitute a representation that an
original shall be delivered.
SUBPART 5.7 GOVERNING LAW. THIS AMENDMENT SHALL BE DEEMED TO BE A
CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE NEW YORK.
SUBPART 5.8 SUCCESSORS AND ASSIGNS. This Amendment shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns.
[The remainder of this page has been left blank intentionally.]
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<PAGE>
IN WITNESS WHEREOF the Borrower, the Guarantors and the Existing Lenders
have caused this Amendment to be duly executed on the date first above written.
BORROWER: CLUETT AMERICAN CORP.
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
-----------------------------
GUARANTORS: CLUETT AMERICAN INVESTMENT CORP.,
a Delaware corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
-----------------------------
CLUETT AMERICAN GROUP, INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
-----------------------------
CONSUMER DIRECT CORPORATION,
a Delaware corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
-----------------------------
ARROW FACTORY STORES, INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: Chairman
-----------------------------
S-1
<PAGE>
GAKM RESOURCES CORPORATION,
a Delaware corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
-----------------------------
CLUETT PEABODY RESOURCES CORPORATION,
a Delaware corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
-----------------------------
CLUETT PEABODY HOLDING CORP.,
a Delaware corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
-----------------------------
CLUETT, PEABODY & CO., INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: Chairman
-----------------------------
BIDERTEX SERVICES INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
-----------------------------
S-2
<PAGE>
GREAT AMERICAN KNITTING MILLS, INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: Chairman
-----------------------------
CLUETT DESIGNER GROUP, INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: Chairman
-----------------------------
S-3
<PAGE>
EXISTING LENDERS: NATIONSBANK, N. A.,
individually in its capacity as a
Lender and in its capacity as Agent
By: /s/ Elton Vogel
-------------------------------------
Name: Elton Vogel
-----------------------------------
Title: Managing Director
----------------------------------
NATIONAL WESTMINSTER BANK PLC
By: /s/ Andrew S. Weinberg
-------------------------------------
Name: Andrew S. Weinberg
-----------------------------------
Title: Senior Vice President
----------------------------------
DOCUMENTATION AGENT: GLEACHER NATWEST INC.,
By: /s/ Thomas J. Steiglehner
-------------------------------------
Name: Thomas J. Steiglehner
-----------------------------------
Title: Vice President
----------------------------------
S-4
<PAGE>
IN WITNESS WHEREOF the New Lenders have become a party to the Amended
Credit Agreement on the date first above written.
NEW LENDERS: FLEET BANK, N.A.,
By: /s/ David R. Dubinsky
-------------------------------------
Name: David R. Dubinsky
-----------------------------------
Title: Senior Vice President
----------------------------------
S-5
<PAGE>
BANKBOSTON, N.A.,
By: /s/ Andrew Piculell
-------------------------------------
Name: Andrew Piculell
-----------------------------------
Title: Vice President
----------------------------------
S-6
<PAGE>
SANWA BUSINESS CREDIT CORPORATION
By: /s/ Peter L. Skavia
-------------------------------------
Name: Peter L. Skavia
-----------------------------------
Title: Vice President
----------------------------------
S-7
<PAGE>
CREDITANSTALT COROPRATE FINANCE, INC.,
By: /s/ Robert M. Biringer
-------------------------------------
Name: Robert M. Biringer
-----------------------------------
Title: Executive Vice President
----------------------------------
By: /s/ William E. McCollum, Jr.
-------------------------------------
Name: William E. McCollum, Jr.
-----------------------------------
Title: Senior Associate
----------------------------------
S-8
<PAGE>
FIRST SOURCE FINANCIAL LLP,
By First Source Financial Inc., its manager
By: /s/ Gary L. Francia
-------------------------------------
Name: Gary L. Francia
-----------------------------------
Title: Senior Vice President
----------------------------------
S-9
<PAGE>
THE LONG-TERM CREDIT BANK OF JAPAN,
LIMITED, NEW YORK BRANCH,
By: /s/ Shuichi Tajima
-------------------------------------
Name: Shuichi Tajima
-----------------------------------
Title: Deputy General Manager
----------------------------------
S-10
<PAGE>
SUMMIT BANK,
By: /s/ Fredrick H. Shuart, Jr.
-------------------------------------
Name: Fredrick H. Shuart, Jr.
-----------------------------------
Title: Vice President
----------------------------------
S-11
<PAGE>
MARINE MIDLAND BANK,
By: /s/ Susan L. LeFavre
-------------------------------------
Name: Susan L. LeFavre
-----------------------------------
Title: Authorized Signatory
----------------------------------
S-12
<PAGE>
AG CAPITAL FUNDING PARTNERS, L.P.,
By: Angelo Gordon & Co., L.P. as Investment Advisor
By: /s/ Jeffrey H. Aronson
-------------------------------------
Name: Jeffrey H. Aronson
-----------------------------------
Title: Managing Director
----------------------------------
S-13
<PAGE>
NEW YORK LIFE INSURANCE COMPANY,
By: /s/ David L. Banks
-------------------------------------
Name: David L. Banks
-----------------------------------
Title: Managing Director
----------------------------------
S-14
<PAGE>
SENIOR DEBT PORTFOLIO,
By: Boston Management and Research,
as Investment Advisor
By: /s/ Scott H. Page
-------------------------------------
Name: Scott H. Page
-----------------------------------
Title: Vice President
----------------------------------
S-15
<PAGE>
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S-16
<PAGE>
ML CLO XX PILGRIM AMERICA (CAYMAN) LTD.,
By: Pilgrim America Investments, Inc.,
as its Investment Manager
By: /s/ Michel Prince
-------------------------------------
Name: Michel Prince
-----------------------------------
Title: Vice President
----------------------------------
S-17
<PAGE>
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
S-18
<PAGE>
THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK.
S-19
<PAGE>
STRATA FUNDING LTD.,
By: /s/ John H. Cullinano
-------------------------------------
Name: John H. Cullinano
-----------------------------------
Title: Director
----------------------------------
S-20
<PAGE>
SCHEDULE 2.1(A)
LENDER ADDRESSES AND COMMITMENTS
S-21
<PAGE>
Exhibit 10.3
SECURITY AGREEMENT
THIS SECURITY AGREEMENT (this "SECURITY AGREEMENT") is entered into as of
May 18, 1998 among CLUETT AMERICAN CORP., a Delaware corporation (the
"BORROWER"), CLUETT AMERICAN INVESTMENT CORP., a Delaware corporation (the
"PARENT"), CLUETT AMERICAN GROUP, INC., a Delaware corporation ("INTERCO"), and
certain other direct and indirect Subsidiaries of the Parent (together with the
Parent and Interco, individually a "GUARANTOR", and collectively the
"GUARANTORS"; together with the Borrower, individually an "OBLIGOR", and
collectively the "OBLIGORS") and NATIONSBANK, N.A., in its capacity as agent (in
such capacity, the "AGENT") for the Lenders from time to time party to the
Credit Agreement described below (the "LENDERS").
RECITALS
WHEREAS, pursuant to that certain Credit Agreement, dated as of the date
hereof (as amended, modified, extended, renewed or replaced from time to time,
the "CREDIT AGREEMENT"), among the Borrower, the Guarantors, the Lenders, the
Agent and Gleacher Natwest Inc., in its capacity as documentation agent, the
Lenders have agreed to make Loans and issue or participate in Letters of Credit
upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue and participate in Letters of Credit under the Credit Agreement that
the Obligors shall have executed and delivered this Security Agreement to the
Agent for the ratable benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS.
(a) Unless otherwise defined herein, capitalized terms used herein
shall have the meanings ascribed to such terms in the Credit Agreement, and
the following terms which are defined in the Uniform Commercial Code in
effect in the State of New York on the date hereof are used herein as so
defined: Accounts, Chattel Paper, Deposit Accounts, Documents, Equipment,
Farm Products, Fixtures, General Intangibles, Instruments, Inventory,
Investment Property and Proceeds. For purposes of this Security Agreement,
the term "Lender" shall include any Affiliate of any Lender which has
entered into a Hedging Agreement with any Credit Party.
(b) In addition, the following terms shall have the following
meanings:
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<PAGE>
"COPYRIGHT LICENSES": any written agreement, naming any Obligor as
licensor, granting any right under any Copyright including, without
limitation, any thereof referred to in SCHEDULE 1(B) hereto.
"COPYRIGHTS": (a) all registered United States copyrights in all
Works, now existing or hereafter created or acquired, all registrations and
recordings thereof, and all applications in connection therewith,
including, without limitation, registrations, recordings and applications
in the United States Copyright office including, without limitation, any
thereof referred to in SCHEDULE 1(B) hereto, and (b) all renewals thereof
including, without limitation, any thereof referred to in SCHEDULE 1(B)
hereto.
"PATENT LICENSE": all agreements, whether written or oral, providing
for the grant by or to an Obligor of any right to manufacture, use or sell
any invention covered by a Patent, including, without limitation, any
thereof referred to in SCHEDULE 1(B) hereto.
"PATENTS": (a) all letters patent of the United States or any other
country and all reissues and extensions thereof, including, without
limitation, any thereof referred to in SCHEDULE 1(B) hereto, and (b) all
applications for letters patent of the United States or any other country
and all divisions, continuations and continuations-in-part thereof,
including, without limitation, any thereof referred to in SCHEDULE 1(B)
hereto.
"SECURED OBLIGATIONS": the collective reference to all of the Credit
Party Obligations, now existing or hereafter arising pursuant to the Credit
Documents, owing from the Borrower or any other Credit Party to any Lender
or the Agent, howsoever evidenced, created, incurred or acquired, whether
primary, secondary, direct, contingent, or joint and several, including,
without limitation, all liabilities arising under Hedging Agreements and
all obligations and liabilities incurred in connection with collecting and
enforcing the foregoing.
"TRADEMARK LICENSE": means any agreement, written or oral, providing
for the grant by or to an Obligor of any right to use any Trademark,
including, without limitation, any thereof referred to in SCHEDULE 1(B)
hereto.
"TRADEMARKS": (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source or business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any State
thereof or any other country or any political subdivision thereof, or
otherwise, including, without limitation, any thereof referred to in
SCHEDULE 1(B) hereto, and (b) all renewals thereof.
"WORK": any work which is subject to copyright protection pursuant to
Title 17 of the United States Code.
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<PAGE>
2. GRANT OF SECURITY INTEREST IN THE COLLATERAL. To secure the prompt
payment and performance in full when due, whether by lapse of time, acceleration
or otherwise, of the Secured Obligations, each Obligor hereby grants to the
Agent, for the benefit of the Lenders, a continuing security interest in, and a
right to set off against, any and all right, title and interest of such Obligor
in and to the following, whether now owned or existing or owned, acquired, or
arising hereafter (collectively, the "COLLATERAL"):
(a) all Accounts;
(b) all Chattel Paper;
(c) all Copyrights;
(d) all Copyright Licenses (provided the Agent shall not have a Lien
on any Copyright License that prohibits such Obligor from granting a Lien
or security interest in its rights thereunder unless the consent of the
licensor has been obtained);
(e) all Deposit Accounts;
(f) all Documents;
(g) all Equipment (provided the Agent shall not have a Lien on any
Equipment subject to a Permitted Lien to the extent such Permitted Lien
prohibits such Obligor from granting a Lien or security interest in its
rights thereunder);
(h) all Fixtures (provided the Agent shall not have a Lien on any
Fixture subject to a Permitted Lien to the extent such Permitted Lien
prohibits such Obligor from granting a Lien or security interest in its
rights thereunder);
(i) all General Intangibles (provided the Agent shall not have a Lien
on any General Intangible that prohibits such Obligor from granting a Lien
or security interest in its rights thereunder to the extent prohibited by
such General Intangible);
(j) all Instruments;
(k) all Inventory;
(l) all Investment Property;
(m) all Patents;
3
<PAGE>
(n) all Patent Licenses (provided the Agent shall not have a Lien on
any Patent License that prohibits such Obligor from granting a Lien or
security interest in its rights thereunder unless the consent of the
licensor has been obtained);
(o) all Trademarks;
(p) all Trademark Licenses (provided the Agent shall not have a Lien
on any Trademark License that prohibits such Obligor from granting a Lien
or security interest in its rights thereunder unless the consent of the
licensor has been obtained);
(q) all books, records, ledger cards, files, correspondence, computer
programs, tapes, disks, and related data processing software (owned by such
Obligor or in which it has an interest) that at any time evidence or
contain information relating to any Collateral or are otherwise necessary
or helpful in the collection thereof or realization thereupon; and
(r) to the extent not otherwise included, all Proceeds and products
of any and all of the foregoing.
The Obligors and the Agent, on behalf of the Lenders, hereby acknowledge
and agree that the security interest created hereby in the Collateral (i)
constitutes continuing collateral security for all of the Secured Obligations,
whether now existing or hereafter arising and (ii) is not to be construed as an
assignment of any Copyrights, Copyright Licenses, Patents, Patent Licenses,
Trademarks or Trademark Licenses.
3. PROVISIONS RELATING TO ACCOUNTS.
(a) Anything herein to the contrary notwithstanding, each of the
Obligors shall remain liable under each of the Accounts to observe and
perform all the conditions and obligations to be observed and performed by
it thereunder, all in accordance with the terms of any agreement giving
rise to each such Account. Neither the Agent nor any Lender shall have any
obligation or liability under any Account (or any agreement giving rise
thereto) by reason of or arising out of this Security Agreement or the
receipt by the Agent or any Lender of any payment relating to such Account
pursuant hereto, nor shall the Agent or any Lender be obligated in any
manner to perform any of the obligations of an Obligor under or pursuant to
any Account (or any agreement giving rise thereto), to make any payment, to
make any inquiry as to the nature or the sufficiency of any payment
received by it or as to the sufficiency of any performance by any party
under any Account (or any agreement giving rise thereto), to present or
file any claim, to take any action to enforce any performance or to collect
the payment of any amounts which may have been assigned to it or to which
it may be entitled at any time or times.
4
<PAGE>
(b) At any time after the occurrence and during the continuation of
an Event of Default, (i) the Agent shall have the right, but not the
obligation, to make test verifications of the Accounts in any manner and
through any medium that it reasonably considers advisable, and the Obligors
shall furnish all such assistance and information as the Agent may
reasonably require in connection with such test verifications, (ii) upon
the Agent's reasonable request and at the expense of the Obligors, the
Obligors shall cause independent public accountants or others satisfactory
to the Agent to furnish to the Agent reports showing reconciliations, aging
and test verifications of, and trial balances for, the Accounts. and (iii)
the Agent in its own name or in the name of others may communicate with
account debtors on the Accounts to verify with them to the Agent's
satisfaction the existence, amount and terms of any Accounts.
4. REPRESENTATIONS AND WARRANTIES. Each Obligor hereby represents and
warrants to the Agent, for the benefit of the Lenders, that so long as any of
the Secured Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding, and
until all of the Commitments shall have been terminated:
(a) CHIEF EXECUTIVE OFFICE; BOOKS & RECORDS. As of the date hereof,
each Obligor's chief executive office and chief place of business is (and
for the prior four months have been) located at the locations set forth on
SCHEDULE 4(A) hereto, and each Obligor keeps its books and records at such
locations.
(b) LOCATION OF COLLATERAL. As of the date hereof, the location of
all Collateral owned by each Obligor is as shown on SCHEDULE 4(B) hereto.
(c) OWNERSHIP. Each Obligor is the legal and beneficial owner of its
Collateral and has the right to pledge, sell, assign or transfer the same.
Each Obligor's legal name is as shown in this Security Agreement and no
Obligor has in the past four months changed its name, been party to a
merger, consolidation or other change in structure or used any tradename
except as set forth in SCHEDULE 4(C) attached hereto.
(d) SECURITY INTEREST/PRIORITY. This Security Agreement creates a
valid security interest in favor of the Agent, for the benefit of the
Lenders, in the Collateral of such Obligor and, when properly perfected by
filing, shall constitute a valid perfected security interest in such
Collateral, to the extent such security can be perfected by filing under
the UCC, free and clear of all Liens except for Permitted Liens.
(e) FARM PRODUCTS. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
(f) ACCOUNTS. (i) Each Account of the Obligors and the papers and
documents relating thereto are genuine and in all material respects what
they purport to be and (ii) no Account in excess of $250,000 of an Obligor
is evidenced by any Instrument or Chattel Paper unless such Instrument or
Chattel Paper has been theretofore endorsed over and delivered to the
Agent.
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(g) COPYRIGHTS, PATENTS AND TRADEMARKS.
(i) SCHEDULE 1(B) hereto includes all material Copyrights,
Copyright Licenses, Patents, Patent Licenses, Trademarks and Trademark
Licenses owned by the Obligors in their own names as of the date hereof.
(ii) To the best of each Obligor's knowledge, each material
Copyright, Patent and Trademark of such Obligor is valid, subsisting,
unexpired, enforceable and has not been abandoned.
(iii) Except as set forth in SCHEDULE 1(B) hereto, none of such
Copyrights, Patents and Trademarks is the subject of any licensing or
franchise agreement.
(iv) No holding, decision or judgment has been rendered by any
Governmental Authority which would limit, cancel or question the validity
of any material Copyright, Patent or Trademark.
(v) To the best of each Obligor's knowledge, no action or
proceeding is pending seeking to limit, cancel or question the validity of
any material Copyright, Patent or Trademark, or which, if adversely
determined, would have a material adverse effect on the value of any such
Copyright, Patent or Trademark.
(vi) All applications pertaining to the material Copyrights,
Patents and Trademarks of each Obligor have been duly and properly filed,
and all registrations or letters pertaining to such Copyrights, Patents and
Trademarks have been duly and properly filed and issued, and all of such
Copyrights, Patents and Trademarks are valid and enforceable.
(vii) No Obligor has made any assignment or agreement in
conflict with the security interest in the Copyrights, Patents or
Trademarks of each Obligor hereunder.
5. COVENANTS. Each Obligor covenants that, so long as any of the Secured
Obligations remain outstanding or any Credit Document or Hedging Agreement is in
effect or any Letter of Credit shall remain outstanding, and until all of the
Commitments shall have been terminated, such Obligor shall:
(a) OTHER LIENS. Defend the Collateral against the claims and
demands of all other parties claiming an interest therein, keep the
Collateral free from all Liens, except for Permitted Liens, and not sell,
exchange, transfer, assign, lease or otherwise dispose of the Collateral or
any interest therein, except as permitted under the Credit Agreement.
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(b) INSTRUMENTS/CHATTEL PAPER. If any amount payable in excess of
$250,000 under or in connection with any of the Collateral shall be or
become evidenced by any Instrument or Chattel Paper, immediately deliver
such Instrument or Chattel Paper to the Agent, duly endorsed in a manner
satisfactory to the Agent, to be held as Collateral pursuant to this
Security Agreement.
(c) CHANGE IN LOCATION. Not, without providing 30 days prior written
notice to the Agent and without filing such amendments to any previously
filed financing statements as the Agent may require, (a) change the
location of its chief executive office and chief place of business (as well
as its books and records) from the locations set forth on SCHEDULE 4(A)
hereto, (b) change the location of its Collateral from the locations set
forth for such Obligor on SCHEDULE 4(B) hereto, or (c) change its name, be
party to a merger, consolidation or other change in structure or use any
tradename other than as set forth on SCHEDULE 4(C) attached hereto.
(d) PERFECTION OF SECURITY INTEREST. Execute and deliver to the
Agent such agreements, assignments or instruments (including affidavits,
notices, reaffirmations and amendments and restatements of existing
documents, as the Agent may reasonably request) and do all such other
things as the Agent may reasonably deem necessary or appropriate (i) to
assure to the Agent its security interests hereunder, including (A) such
financing statements (including renewal statements) or amendments thereof
or supplements thereto or other instruments as the Agent may from time to
time reasonably request in order to perfect and maintain the security
interests granted hereunder in accordance with the UCC, (B) with regard to
Copyrights, a Notice of Grant of Security Interest in Copyrights in the
form of SCHEDULE 5(D)(I), (C) with regard to Patents, a Notice of Grant of
Security Interest in Patents for filing with the United States Patent and
Trademark Office in the form of SCHEDULE 5(D)(II) attached hereto and (D)
with regard to Trademarks, a Notice of Grant of Security Interest in
Trademarks for filing with the United States Patent and Trademark Office in
the form of SCHEDULE 5(D)(III) attached hereto, (ii) to consummate the
transactions contemplated hereby and (iii) to otherwise protect and assure
the Agent of its rights and interests hereunder. To that end, each Obligor
agrees that the Agent may file one or more financing statements disclosing
the Agent's security interest in any or all of the Collateral of such
Obligor without, to the extent permitted by law, such Obligor's signature
thereon, and further each Obligor also hereby irrevocably makes,
constitutes and appoints the Agent as such Obligor's attorney in fact with
full power and for the limited purpose to sign in the name of such Obligor
any such financing statements, or amendments and supplements to financing
statements, renewal financing statements, notices or any similar documents
which in the Agent's reasonable discretion would be necessary or
appropriate in order to perfect and maintain perfection of the security
interests granted hereunder, such power, being coupled with an interest,
being and remaining irrevocable so long as the Credit Agreement is in
effect or any amounts payable thereunder or under any other Credit
Document, any Letter of Credit or any Hedging Agreement shall remain
outstanding, and until all of the Commitments thereunder shall have
terminated. Each Obligor hereby agrees that a carbon, photographic or other
reproduction of this Security Agreement or any such financing statement is
sufficient for filing as a financing statement by the Agent without notice
thereof
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to such Obligor wherever the Agent may in its sole discretion desire to
file the same. In the event for any reason the law of any jurisdiction
other than New York becomes or is applicable to the Collateral of any
Obligor or any part thereof, or to any of the Secured Obligations, such
Obligor agrees to execute and deliver all such instruments and to do all
such other things as the Agent in its sole discretion reasonably deems
necessary or appropriate to preserve, protect and enforce the security
interests of the Agent under the law of such other jurisdiction (and, if an
Obligor shall fail to do so promptly upon the request of the Agent, then
the Agent may execute any and all such requested documents on behalf of
such Obligor pursuant to the power of attorney granted hereinabove). If
any Collateral is in the possession or control of an Obligor's agents and
the Agent so requests, such Obligor agrees to notify such agents in writing
of the Agent's security interest therein and, upon the Agent's request,
instruct them to hold all such Collateral for the Lenders' account and
subject to the Agent's instructions. Each Obligor agrees to mark its books
and records to reflect the security interest of the Agent in the
Collateral.
(e) COVENANTS RELATING TO COPYRIGHTS.
(i) Employ the Copyright for each Work with such notice of
copyright as may be required by law to secure copyright protection.
(ii) Not do any act or knowingly omit to do any act whereby
any material Copyright would or would reasonably be expected to become
invalidated and (A) not do any act, or knowingly omit to do any act,
whereby any material Copyright would or would reasonably be expected to
become injected into the public domain; (B) notify the Agent promptly after
if it has knowledge that any material Copyright may become injected into
the public domain or of any adverse determination or development
(including, without limitation, the institution of, or any such
determination or development in, any court or tribunal in the United States
or any other country) regarding an Obligor's ownership of any such
Copyright or its validity; (C) take all necessary steps as it shall
reasonably deem appropriate under the circumstances, to maintain and pursue
each application (and to obtain the relevant registration) and to maintain
each registration of each material Copyright owned by an Obligor including,
without limitation, filing of applications for renewal where necessary; and
(D) promptly notify the Agent of any material infringement of any material
Copyright of an Obligor of which it becomes aware and take such actions as
it shall reasonably deem appropriate under the circumstances to protect
such Copyright, including, where appropriate, the bringing of suit for
infringement, seeking injunctive relief and seeking to recover any and all
damages for such infringement.
(iii) Not make any assignment or agreement in conflict with the
security interest in the Copyrights of each Obligor hereunder.
(f) COVENANTS RELATING TO PATENTS AND TRADEMARKS.
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(i) (A) Continue to use each Trademark on each and every
trademark class of goods applicable to its current line as reflected in its
current catalogs, brochures and price lists in order to maintain such
Trademark in full force free from any claim of abandonment for non-use, (B)
maintain as in the past the quality of products and services offered under
such Trademark, (C) employ such Trademark with the appropriate notice of
registration, (D) not adopt or use any mark which is confusingly similar or
a colorable imitation of such Trademark unless the Agent, for the ratable
benefit of the Lenders, shall obtain a perfected security interest in such
mark pursuant to this Security Agreement, and (E) not (and not knowingly
permit any licensee or sublicensee thereof to) do any act or knowingly omit
to do any act whereby any Trademark would or would reasonably be expected
to become invalidated.
(ii) Not do any act, or knowingly omit to do any act, whereby
any Patent would or would reasonably be expected to become abandoned or
dedicated.
(iii) Notify the Agent and the Lenders promptly after it has
knowledge that any application or registration relating to any material
Patent or Trademark may become abandoned or dedicated, or of any adverse
determination or development (including, without limitation, the
institution of, or any such determination or development in, any proceeding
in the United States Patent and Trademark Office or any court or tribunal
in any country) regarding an Obligor's ownership of any material Patent or
Trademark or its right to register the same or to keep and maintain the
same.
(iv) Whenever an Obligor, either by itself or through an
agent, employee, licensee or designee, shall file an application for the
registration of any Patent or Trademark with the United States Patent and
Trademark Office or any similar office or agency in any other country or
any political subdivision thereof, an Obligor shall report such filing to
the Agent and the Lenders within five Business Days after the last day of
the fiscal quarter in which such filing occurs. Upon request of the Agent,
an Obligor shall execute and deliver any and all agreements, instruments,
documents and papers as the Agent may request to evidence the Agent's and
the Lenders' security interest in any Patent or Trademark and the goodwill
and general intangibles of an Obligor relating thereto or represented
thereby.
(v) Take all reasonable and necessary steps, including,
without limitation, in any proceeding before the United States Patent and
Trademark Office, or any similar office or agency in any other country or
any political subdivision thereof, to maintain and pursue each material
application (and to obtain the relevant registration) and to maintain each
registration of the material Patents and Trademarks, including, without
limitation, filing of applications for renewal, affidavits of use and
affidavits of incontestability.
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(vi) Promptly notify the Agent and the Lenders after it learns
that any Patent or Trademark included in the Collateral is infringed,
misappropriated or diluted by a third party and promptly sue for
infringement, misappropriation or dilution, to seek injunctive relief where
appropriate and to recover any and all damages for such infringement,
misappropriation or dilution, or take such other actions as it shall
reasonably deem appropriate under the circumstances to protect such Patent
or Trademark.
(vii) Not make any assignment or agreement in conflict with the
security interest in the Patents or Trademarks of each Obligor hereunder.
(g) NEW PATENTS, COPYRIGHTS AND TRADEMARKS. Promptly provide the
Agent with (i) a listing of all applications, if any, for new Copyrights,
Patents or Trademarks (together with a listing of the issuance of
registrations or letters on present applications), which new applications
and issued registrations or letters shall be subject to the terms and
conditions hereunder, and (ii) (A) with respect to Copyrights, a duly
executed Notice of Security Interest in Copyrights, (B) with respect to
Patents, a duly executed Notice of Security Interest in Patents, (C) with
respect to Trademarks, a duly executed Notice of Security Interest in
Trademarks or (D) such other duly executed documents as the Agent may
request in a form acceptable to counsel for the Agent and suitable for
recording to evidence the security interest in the Copyright, Patent or
Trademark which is the subject of such new application.
(h) INSURANCE. Insure, repair and replace the Collateral of such
Obligor as set forth in the Credit Agreement. All insurance proceeds shall
be subject to the security interest of the Agent hereunder.
6. ADVANCES BY LENDERS. On failure of any Obligor to perform any of the
covenants and agreements contained herein, the Agent may, at its sole option and
in its sole discretion, perform the same and in so doing may expend such sums as
the Agent may reasonably deem advisable in the performance thereof, including,
without limitation, the payment of any insurance premiums, the payment of any
taxes, a payment to obtain a release of a Lien or potential Lien, expenditures
made in defending against any adverse claim and all other expenditures which the
Agent or the Lenders may make for the protection of the security hereof or which
may be compelled to make by operation of law. All such sums and amounts so
expended shall be repayable by the Obligors on a joint and several basis
promptly upon timely notice thereof and demand therefor, shall constitute
additional Secured Obligations and shall bear interest from the date said
amounts are expended at the default rate specified in SECTION 3.1 of the Credit
Agreement for Revolving Loans that are Base Rate Loans. No such performance of
any covenant or agreement by the Agent or the Lenders on behalf of any Obligor,
and no such advance or expenditure therefor, shall relieve the Obligors of any
default under the terms of this Security Agreement, the other Credit Documents
or any Hedging Agreement. The Lenders may make any payment hereby authorized in
accordance with any bill, statement or estimate procured from the appropriate
public office or holder of the claim to be discharged without inquiry into the
accuracy of such bill,
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statement or estimate or into the validity of any tax assessment, sale,
forfeiture, tax lien, title or claim except to the extent such payment is being
contested in good faith by an Obligor in appropriate proceedings and against
which adequate reserves are being maintained in accordance with GAAP.
7. EVENTS OF DEFAULT.
The occurrence and continuance of an event which under the Credit Agreement
would constitute an Event of Default shall be an Event of Default hereunder (an
"EVENT OF DEFAULT").
8. REMEDIES.
(a) GENERAL REMEDIES. Upon the occurrence of an Event of Default and
during continuation thereof, the Lenders shall have, in addition to the
rights and remedies provided herein, in the Credit Documents, in the
Hedging Agreements or by law (including, but not limited to, the rights and
remedies set forth in the Uniform Commercial Code of the jurisdiction
applicable to the affected Collateral), the rights and remedies of a
secured party under the UCC (regardless of whether the UCC is the law of
the jurisdiction where the rights and remedies are asserted and regardless
of whether the UCC applies to the affected Collateral), and further, the
Agent may, with or without judicial process or the aid and assistance of
others, (i) enter on any premises on which any of the Collateral may be
located and, without resistance or interference by the Obligors, take
possession of the Collateral, (ii) dispose of any Collateral on any such
premises, (iii) require the Obligors to assemble and make available to the
Agent at the expense of the Obligors any Collateral at any place and time
designated by the Agent which is reasonably convenient to both parties,
(iv) remove any Collateral from any such premises for the purpose of
effecting sale or other disposition thereof, and/or (v) without demand and
without advertisement, notice, hearing or process of law, all of which each
of the Obligors hereby waives to the fullest extent permitted by law, at
any place and time or times, sell and deliver any or all Collateral held by
or for it at public or private sale, by one or more contracts, in one or
more parcels, for cash, upon credit or otherwise, at such prices and upon
such terms as the Agent deems advisable, in its sole discretion (subject to
any and all mandatory legal requirements). In addition to all other sums
due the Agent and the Lenders with respect to the Secured Obligations, the
Obligors shall pay the Agent and each of the Lenders all reasonable
documented costs and expenses incurred by the Agent or any such Lender,
including, but not limited to, reasonable attorneys' fees and court costs,
in obtaining or liquidating the Collateral, in enforcing payment of the
Secured Obligations, or in the prosecution or defense of any action or
proceeding by or against the Agent or the Lenders or the Obligors
concerning any matter arising out of or connected with this Security
Agreement, any Collateral or the Secured Obligations, including, without
limitation, any of the foregoing arising in, arising under or related to a
case under the Bankruptcy Code. To the extent the rights of notice cannot
be legally waived hereunder, each Obligor agrees that any requirement of
reasonable notice shall be met if such notice is personally served on or
mailed, postage prepaid, to the Credit Parties in accordance with the
notice provisions of SECTION 11.1 of the Credit Agreement at least 10 days
before the time of sale or other event giving rise to the requirement of
such
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notice. The Agent and the Lenders shall not be obligated to make any sale
or other disposition of the Collateral regardless of notice having been
given. To the extent permitted by law, any Lender may be a purchaser at
any such sale. To the extent permitted by applicable law, each of the
Obligors hereby waives all of its rights of redemption with respect to any
such sale. Subject to the provisions of applicable law, the Agent and the
Lenders may postpone or cause the postponement of the sale of all or any
portion of the Collateral by announcement at the time and place of such
sale, and such sale may, without further notice, to the extent permitted by
law, be made at the time and place to which the sale was postponed, or the
Agent and the Lenders may further postpone such sale by announcement made
at such time and place.
(b) REMEDIES RELATING TO ACCOUNTS. Upon the occurrence of an Event
of Default and during the continuation thereof, whether or not the Agent
has exercised any or all of its rights and remedies hereunder, each Obligor
will promptly upon request of the Agent instruct all account debtors to
remit all payments in respect of Accounts to a mailing location selected by
the Agent. In addition, the Agent or its designee may notify any Obligor's
customers and account debtors that the Accounts of such Obligor have been
assigned to the Agent or of the Agent's security interest therein, and may
(either in its own name or in the name of an Obligor or both) demand,
collect (including without limitation by way of a lockbox arrangement),
receive, take receipt for, sell, sue for, compound, settle, compromise and
give acquittance for any and all amounts due or to become due on any
Account, and, in the Agent's discretion, file any claim or take any other
action or proceeding to protect and realize upon the security interest of
the Lenders in the Accounts. Each Obligor acknowledges and agrees that the
Proceeds of its Accounts remitted to or on behalf of the Agent in
accordance with the provisions hereof shall be solely for the Agent's own
convenience and that such Obligor shall not have any right, title or
interest in such Accounts or in any such other amounts except as expressly
provided herein. The Agent and the Lenders shall have no liability or
responsibility to any Obligor for acceptance of a check, draft or other
order for payment of money bearing the legend "payment in full" or words of
similar import or any other restrictive legend or endorsement or be
responsible for determining the correctness of any remittance. Each
Obligor hereby agrees to indemnify the Agent and the Lenders from and
against all liabilities, damages, losses, actions, claims, judgments,
costs, expenses, charges and reasonable attorneys' fees suffered or
incurred by the Agent or the Lenders (each, an "INDEMNIFIED PARTY") because
of the maintenance of the foregoing arrangements except as relating to or
arising out of the gross negligence or willful misconduct of an Indemnified
Party or its officers, employees or agents. In the case of any
investigation, litigation or other proceeding, the foregoing indemnity
shall be effective whether or not such investigation, litigation or
proceeding is brought by an Obligor, its directors, shareholders or
creditors or an Indemnified Party or any other Person or any other
Indemnified Party is otherwise a party thereto.
(c) ACCESS. In addition to the rights and remedies hereunder, upon
the occurrence of an Event of Default and during the continuance thereof,
the Agent shall have the right to enter and remain upon the various
premises of the Obligors without cost or charge to the Agent, and use the
same, together with materials, supplies, books and records
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of the Obligors for the purpose of collecting and liquidating the
Collateral, or for preparing for sale and conducting the sale of the
Collateral, whether by foreclosure, auction or otherwise. In addition, the
Agent may remove Collateral, or any part thereof, from such premises and/or
any records with respect thereto, in order to effectively collect or
liquidate such Collateral.
(d) NONEXCLUSIVE NATURE OF REMEDIES. Failure by the Agent or the
Lenders to exercise any right, remedy or option under this Security
Agreement, any other Credit Document, any Hedging Agreement or as provided
by law, or any delay by the Agent or the Lenders in exercising the same,
shall not operate as a waiver of any such right, remedy or option. No
waiver hereunder shall be effective unless it is in writing, signed by the
party against whom such waiver is sought to be enforced and then only to
the extent specifically stated, which in the case of the Agent or the
Lenders shall only be granted as provided herein. To the extent permitted
by law, neither the Agent, the Lenders, nor any party acting as attorney
for the Agent or the Lenders, shall be liable hereunder for any acts or
omissions or for any error of judgment or mistake of fact or law other than
their gross negligence or willful misconduct hereunder. The rights and
remedies of the Agents and the Lenders under this Security Agreement shall
be cumulative and not exclusive of any other right or remedy which the
Agent or the Lenders may have.
(e) RETENTION OF COLLATERAL. The Agent may, after providing the
notices required by Section 9-505(2) of the UCC or otherwise complying with
the requirements of applicable law of the relevant jurisdiction, to the
extent the Agent is in possession of any of the Collateral, retain the
Collateral in satisfaction of the Secured Obligations. Unless and until
the Agent shall have provided such notices, however, the Agent shall not be
deemed to have retained any Collateral in satisfaction of any Secured
Obligations for any reason.
(f) DEFICIENCY. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which the
Agent or the Lenders are legally entitled, the Obligors shall be jointly
and severally liable for the deficiency, together with interest thereon at
the default rate specified in SECTION 3.1 of the Credit Agreement for
Revolving Loans that are Base Rate Loans, together with the costs of
collection and the reasonable fees of any attorneys employed by the Agent
to collect such deficiency. Any surplus remaining after the full payment
and satisfaction of the Secured Obligations shall be returned to the
Obligors or to whomsoever a court of competent jurisdiction shall determine
to be entitled thereto.
9. RIGHTS OF THE AGENT.
(a) POWER OF ATTORNEY. In addition to other powers of attorney
contained herein, each Obligor hereby designates and appoints the Agent, on
behalf of the Lenders, and each of its designees or agents, as
attorney-in-fact of such Obligor, irrevocably and with power of
substitution, with authority to take any or all of the following actions
upon the occurrence and during the continuance of an Event of Default:
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(i) to demand, collect, settle, compromise, adjust, give
discharges and releases, all as the Agent may reasonably determine;
(ii) to commence and prosecute any actions at any court
for the purposes of collecting any Collateral and enforcing any
other right in respect thereof;
(iii) to defend, settle or compromise any action brought
and, in connection therewith, give such discharge or release as
the Agent may deem reasonably appropriate;
(iv) receive, open and dispose of mail addressed to an
Obligor and endorse checks, notes, drafts, acceptances, money
orders, bills of lading, warehouse receipts or other instruments
or documents evidencing payment, shipment or storage of the goods
giving rise to the Collateral of such Obligor on behalf of and in
the name of such Obligor, or securing, or relating to such
Collateral;
(v) sell, assign, transfer, make any agreement in
respect of, or otherwise deal with or exercise rights in respect
of, any Collateral or the goods or services which have given rise
thereto, as fully and completely as though the Agent were the
absolute owner thereof for all purposes;
(vi) adjust and settle claims under any insurance policy
relating thereto;
(vii) execute and deliver all assignments, conveyances,
statements, financing statements, renewal financing statements,
security agreements, affidavits, notices and other agreements,
instruments and documents that the Agent may determine necessary
in order to perfect and maintain the security interests and liens
granted in this Security Agreement and in order to fully
consummate all of the transactions contemplated therein;
(viii) institute any foreclosure proceedings that the Agent
may deem appropriate; and
(ix) do and perform all such other acts and things as the
Agent may reasonably deem to be necessary, proper or convenient
in connection with the Collateral.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Secured Obligations remain
outstanding, any Credit Document or any Hedging Agreement is in effect or
any Letter of Credit shall remain outstanding and (ii) until all of the
Commitments shall have been terminated. The Agent shall be under no duty
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to exercise or withhold the exercise of any of the rights, powers,
privileges and options expressly or implicitly granted to the Agent in this
Security Agreement, and shall not be liable for any failure to do so or any
delay in doing so. The Agent shall not be liable for any act or omission
or for any error of judgment or any mistake of fact or law in its
individual capacity or its capacity as attorney-in-fact except acts or
omissions resulting from its gross negligence or willful misconduct. This
power of attorney is conferred on the Agent solely to protect, preserve and
realize upon its security interest in the Collateral.
(b) PERFORMANCE BY THE AGENT OF OBLIGATIONS. If any Obligor fails to
perform any agreement or obligation contained herein, the Agent itself may
perform, or cause performance of, such agreement or obligation, and the
expenses of the Agent incurred in connection therewith shall be payable by
the Obligors on a joint and several basis pursuant to Section 11 hereof.
(c) ASSIGNMENT BY THE AGENT. In connection with the succession of
the Agent pursuant to Section 10.7 of the Credit Agreement, the Agent may
from time to time assign the Secured Obligations and any portion thereof
and/or the Collateral and any portion thereof, and the assignee shall be
entitled to all of the rights and remedies of the Agent under this Security
Agreement in relation thereto.
(d) THE AGENT'S DUTY OF CARE. Other than the exercise of reasonable
care to assure the safe custody of the Collateral while being held by the
Agent hereunder, the Agent shall have no duty or liability to preserve
rights pertaining thereto, it being understood and agreed that the Obligors
shall be responsible for preservation of all rights in the Collateral, and
the Agent shall be relieved of all responsibility for the Collateral upon
surrendering it or tendering the surrender of it to the Obligors. The
Agent shall be deemed to have exercised reasonable care in the custody and
preservation of the Collateral in its possession if the Collateral is
accorded treatment substantially equal to that which the Agent accords its
own property, which shall be no less than the treatment employed by a
reasonable and prudent agent in the industry, it being understood that the
Agent shall not have responsibility for taking any necessary steps to
preserve rights against any parties with respect to any of the Collateral.
10. APPLICATION OF PROCEEDS. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Secured
Obligations and any proceeds of the Collateral, when received by the Agent or
any of the Lenders in cash or its equivalent, will be applied in reduction of
the Secured Obligations in the order set forth in SECTION 3.15(B) of the Credit
Agreement, and each Obligor irrevocably waives the right to direct the
application of such payments and proceeds and acknowledges and agrees that the
Agent shall have the continuing and exclusive right to apply and reapply any and
all such payments and proceeds in the Agent's sole discretion, notwithstanding
any entry to the contrary upon any of its books and records.
11. COSTS OF COUNSEL. If at any time hereafter, whether upon the
occurrence of an Event of Default or not, the Agent employs counsel to prepare
or consider amendments, waivers or consents with respect to this Security
Agreement, or to take action or make a response in or with
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respect to any legal or arbitral proceeding relating to this Security Agreement
or relating to the Collateral, or to protect the Collateral or exercise any
rights or remedies under this Security Agreement or with respect to the
Collateral, then the Obligors agree to promptly pay upon demand any and all such
reasonable documented costs and expenses of the Agent or the Lenders, all of
which costs and expenses shall constitute Secured Obligations hereunder.
12. CONTINUING AGREEMENT.
(a) This Security Agreement shall be a continuing agreement in every
respect and shall remain in full force and effect so long as any of the
Secured Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding,
and until all of the Commitments thereunder shall have terminated (other
than any obligations with respect to the indemnities and the
representations and warranties set forth in the Credit Documents). Upon
such payment and termination, this Security Agreement shall be
automatically terminated and the Agent and the Lenders shall, upon the
request and at the expense of the Obligors, forthwith release all of its
liens and security interests hereunder and shall execute and deliver all
UCC termination statements and/or other documents reasonably requested by
the Obligors evidencing such termination. Notwithstanding the foregoing
all releases and indemnities provided hereunder shall survive termination
of this Security Agreement.
(b) This Security Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in
whole or in part, of any of the Secured Obligations is rescinded or must
otherwise be restored or returned by the Agent or any Lender as a
preference, fraudulent conveyance or otherwise under any bankruptcy,
insolvency or similar law, all as though such payment had not been made;
provided that in the event payment of all or any part of the Secured
Obligations is rescinded or must be restored or returned, all reasonable
costs and expenses (including without limitation any reasonable legal fees
and disbursements) incurred by the Agent or any Lender in defending and
enforcing such reinstatement shall be deemed to be included as a part of
the Secured Obligations.
13. AMENDMENTS; WAIVERS; MODIFICATIONS. This Security Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in SECTION 11.6 of the Credit Agreement.
14. SUCCESSORS IN INTEREST. This Security Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Obligor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent
and the Lenders and their permitted successors and assigns; PROVIDED, HOWEVER,
that none of the Obligors may assign its rights or delegate its duties hereunder
without the prior written consent of each Lender or the Required Lenders, as
required by the Credit Agreement. To the fullest extent permitted by law, each
Obligor hereby releases the Agent and each Lender, and its successors and
assigns, from any liability for any act or omission relating to this Security
16
<PAGE>
Agreement or the Collateral, except for any liability arising from the gross
negligence or willful misconduct of the Agent, or such Lender, or its officers,
employees or agents.
15. NOTICES. All notices required or permitted to be given under this
Security Agreement shall be in conformance with SECTION 11.1 of the Credit
Agreement.
16. COUNTERPARTS. This Security Agreement may be executed in any number
of counterparts, each of which where so executed and delivered shall be an
original, but all of which shall constitute one and the same instrument. It
shall not be necessary in making proof of this Security Agreement to produce or
account for more than one such counterpart.
17. HEADINGS. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Security Agreement.
18. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS SECURITY AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any legal action or
proceeding with respect to this Security Agreement may be brought in the
courts of the State of New York, or of the United States for the Southern
District of New York, and, by execution and delivery of this Security
Agreement, each Obligor hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of
such courts. Each Obligor further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to it at the address for notices pursuant to SECTION
11.1 of the Credit Agreement, such service to become effective 30 days
after such mailing. Nothing herein shall affect the right of the Agent to
serve process in any other manner permitted by law or to commence legal
proceedings or to otherwise proceed against any Obligor in any other
jurisdiction.
(b) Each Obligor hereby irrevocably waives any objection which
it may now or hereafter have to the laying of venue of any of the
aforesaid actions or proceedings arising out of or in connection with
this Security Agreement brought in the courts referred to in
subsection (a) hereof and hereby further irrevocably waives and agrees
not to plead or claim in any such court that any such action or
proceeding brought in any such court has been brought in an
inconvenient forum.
17
<PAGE>
19. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH
OF THE PARTIES TO THIS SECURITY AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS SECURITY AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
20. SEVERABILITY. If any provision of any of the Security Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
21. ENTIRETY. This Security Agreement, the other Credit Documents and the
Hedging Agreements represent the entire agreement of the parties hereto and
thereto, and supersede all prior agreements and understandings, oral or written,
if any, including any commitment letters or correspondence relating to the
Credit Documents, the Hedging Agreements or the transactions contemplated herein
and therein.
22. SURVIVAL. All representations and warranties of the Obligors
hereunder shall survive the execution and delivery of this Security Agreement,
the other Credit Documents and the Hedging Agreements, the delivery of the Notes
and the making of the Loans and the issuance of the Letters of Credit under the
Credit Agreement.
23. OTHER SECURITY. To the extent that any of the Secured Obligations are
now or hereafter secured by property other than the Collateral (including,
without limitation, real property and securities owned by an Obligor), or by a
guarantee, endorsement or property of any other Person, then the Agent and the
Lenders shall have the right to proceed against such other property, guarantee
or endorsement upon the occurrence of any Event of Default, and the Agent and
the Lenders have the right, in their sole discretion, to determine which rights,
security, liens, security interests or remedies the Agent and the Lenders shall
at any time pursue, relinquish, subordinate, modify or take with respect
thereto, without in any way modifying or affecting any of them or any of the
Agent's and the Lenders' rights or the Secured Obligations under this Security
Agreement, under any other of the Credit Documents or under any Hedging
Agreement.
24. JOINT AND SEVERAL OBLIGATIONS OF OBLIGORS.
(a) Each of the Obligors is accepting joint and several liability
hereunder in consideration of the financial accommodation to be provided by
the Lenders under the Credit Agreement, for the mutual benefit, directly
and indirectly, of each of the Obligors and in consideration of the
undertakings of each of the Obligors to accept joint and several liability
for the obligations of each of them.
(b) Each of the Obligors jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor,
joint and several liability with the other Obligors with respect to the
payment and performance of all of the Secured Obligations arising under
this Security Agreement, the other Credit Documents and
18
<PAGE>
the Hedging Agreements, it being the intention of the parties hereto that
all the Obligations shall be the joint and several obligations of each of
the Obligors without preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained herein or
in any other of the Credit Documents, to the extent the obligations of an
Obligor shall be adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of any applicable state or federal
law relating to fraudulent conveyances or transfers) then the obligations
of such Obligor hereunder shall be limited to the maximum amount that is
permissible under applicable law (whether federal or state and including,
without limitation, the Bankruptcy Code).
25. RIGHTS OF REQUIRED LENDERS. All rights of the Agent hereunder, if not
exercised by the Agent, may be exercised by the Required Lenders.
[remainder of page intentionally left blank]
19
<PAGE>
Each of the parties hereto has caused a counterpart of this Security
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: CLUETT AMERICAN CORP.,
- -------- a Delaware corporation
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
-----------------------------------
Title: Director, President and Chief
----------------------------------
Executive Officer
----------------------------------
GUARANTORS: CLUETT AMERICAN INVESTMENT CORP.,
- ---------- a Delaware corporation
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
-----------------------------------
Title: President
----------------------------------
CLUETT AMERICAN GROUP, INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
-----------------------------------
Title: President
----------------------------------
CONSUMER DIRECT CORPORATION,
a Delaware corporation
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
-----------------------------------
Title: Director, President and Chief
----------------------------------
Executive Officer
----------------------------------
(Signatures Continued)
20
<PAGE>
ARROW FACTORY STORES, INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
-----------------------------------
Title: Chairman and Chief
----------------------------------
Executive Officer
----------------------------------
GAKM RESOURCES CORPORATION,
a Delaware corporation
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
-----------------------------------
Title: President
----------------------------------
CLUETT PEABODY RESOURCES CORPORATION,
a Delaware corporation
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
-----------------------------------
Title: President
----------------------------------
CLUETT PEABODY HOLDING CORP.,
a Delaware corporation
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
-----------------------------------
Title: President
----------------------------------
(Signatures Continued)
21
<PAGE>
CLUETT, PEABODY & CO., INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
-----------------------------------
Title: Chairman and Chief
----------------------------------
Executive Officer
----------------------------------
BIDERTEX SERVICES INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
-----------------------------------
Title: President
----------------------------------
GREAT AMERICAN KNITTING MILLS, INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
-----------------------------------
Title: Chairman and Chief
----------------------------------
Executive Officer
----------------------------------
CLUETT DESIGNER GROUP, INC.,
a Delaware corporation
By: /s/ Bryan P. Marsal
-------------------------------------
Name: Bryan P. Marsal
-----------------------------------
Title: Chairman and Chief
----------------------------------
Executive Officer
----------------------------------
Accepted and agreed to as of the date first above written.
NATIONSBANK, N.A., as Agent
By: /s/ Mark E. Stephanz
-------------------------------------
Name: Mark E. Stephanz
-----------------------------------
Title: Attorney-in-fact
----------------------------------
22
<PAGE>
Exhibit 10.4
PLEDGE AGREEMENT
THIS PLEDGE AGREEMENT (this "PLEDGE AGREEMENT") is entered into as of May
18, 1998 among CLUETT AMERICAN CORP., a Delaware corporation (the "BORROWER"),
CLUETT AMERICAN INVESTMENT CORP., a Delaware corporation (the "PARENT"), CLUETT
AMERICAN GROUP, INC., a Delaware corporation ("INTERCO"), and certain other
direct and indirect Subsidiaries of the Parent (together with the Parent and
Interco, individually a "GUARANTOR", and collectively the "GUARANTORS"; together
with the Borrower, individually a "PLEDGOR", and collectively the "PLEDGORS")
and NATIONSBANK, N.A., in its capacity as agent (in such capacity, the "AGENT")
for the Lenders from time to time party to the Credit Agreement described below
(the "LENDERS").
RECITALS
--------
WHEREAS, pursuant to that certain Credit Agreement dated as of the date
hereof (as amended, modified, extended, renewed or replaced from time to time,
the "CREDIT AGREEMENT") among the Borrower, the Guarantors, the Lenders, the
Agent and Gleacher Natwest Inc., in its capacity as documentation agent, the
Lenders have agreed to make Loans and issue or participate in Letters of Credit
upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the effectiveness of the Credit
Agreement and the obligations of the Lenders to make their respective Loans and
to issue or participate in Letters of Credit under the Credit Agreement that the
Pledgors shall have executed and delivered this Pledge Agreement to the Agent
for the ratable benefit of the Lenders.
NOW, THEREFORE, in consideration of these premises and other good and
valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the parties hereto agree as follows:
1. DEFINITIONS. Unless otherwise defined herein, capitalized terms used
herein shall have the meanings ascribed to such terms in the Credit Agreement.
For purposes of this Pledge Agreement, the term "Lender" shall include any
Affiliate of any Lender which has entered into a Hedging Agreement with any
Credit Party.
2. PLEDGE AND GRANT OF SECURITY INTEREST. To secure the prompt payment
and performance in full when due, whether by lapse of time or otherwise, of the
Pledgor Obligations (as defined in Section 3 hereof), each Pledgor hereby
pledges and assigns to the Agent, for the benefit of the Lenders, and grants to
the Agent, for the benefit of the Lenders, a continuing security interest in any
and all right, title and interest of such Pledgor in and to the following,
whether now owned or existing or owned, acquired, or arising hereafter
(collectively, the "PLEDGED COLLATERAL"):
<PAGE>
(a) PLEDGED SHARES. (i) 100% (or, if less, the full amount
owned by such Pledgor) of the issued and outstanding Equity Interests owned
by such Pledgor of each Domestic Subsidiary set forth on SCHEDULE 2(A)
attached hereto and (ii) 65% (or, if less, the full amount owned by such
Pledgor) of each class of the issued and outstanding Equity Interests
entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2))
("VOTING EQUITY") and 100% (or, if less, the full amount owned by such
Pledgor of each class of the issued and outstanding Equity Interests not
entitled to vote (within the meaning of Treas. Reg. Section 1.956-2(c)(2))
("NON-VOTING EQUITY") owned by such Pledgor of each Material Foreign
Subsidiary set forth on SCHEDULE 2(A) attached hereto, in each case
together with the certificates (or other agreements or instruments), if
any, representing such Equity Interests, and all options and other rights,
contractual or otherwise, with respect thereto (collectively, together with
the Equity Interests described in Section 2(b) and 2(c) below, the "PLEDGED
SHARES"), including, but not limited to, the following:
(y) all shares or securities representing a dividend on any of
the Pledged Shares, or representing a distribution or return of
capital upon or in respect of the Pledged Shares, or resulting from a
stock split, revision, reclassification or other exchange therefor,
and any subscriptions, warrants, rights or options issued to the
holder of, or otherwise in respect of, the Pledged Shares; and
(z) without affecting the obligations of the Pledgors under any
provision prohibiting such action hereunder or under the Credit
Agreement, in the event of any consolidation or merger involving the
issuer of any Pledged Shares and in which such issuer is not the
surviving corporation, all securities of each class of the Equity
Interests of the successor resulting from such consolidation or merger
payable to or received by such Pledgor as consideration for such
merger (subject to the 65% limitation on Voting Equity of Material
Foreign Subsidiaries).
(b) ADDITIONAL SHARES. 100% (or, if less, the full amount owned by
such Pledgor) of the issued and outstanding Equity Interests owned by such
Pledgor of any Person which hereafter becomes a Domestic Subsidiary and 65%
(or, if less, the full amount owned by such Pledgor) of the Voting Equity
and 100% (or, if less, the full amount owned by such Pledgor) of the
Non-Voting Equity owned by such Pledgor of any Person which hereafter
becomes a Material Foreign Subsidiary, including, without limitation, the
certificates representing such Equity Interests.
(c) OTHER EQUITY INTERESTS. Any and all other Equity Interests owned
by such Pledgor in any Domestic Subsidiary or any Material Foreign
Subsidiary.
(d) PROCEEDS. All proceeds and products of the foregoing, however
and whenever acquired and in whatever form.
<PAGE>
Without limiting the generality of the foregoing, it is hereby specifically
understood and agreed that a Pledgor may from time to time hereafter deliver
additional Equity Interests to the Agent as collateral security for the Pledgor
Obligations. Upon delivery to the Agent, such additional equity interests shall
be deemed to be part of the Pledged Collateral of such Pledgor and shall be
subject to the terms of this Pledge Agreement whether or not SCHEDULE 2(A) is
amended to refer to such additional equity interests.
3. SECURITY FOR PLEDGOR OBLIGATIONS. The security interest created
hereby in the Pledged Collateral of each Pledgor constitutes continuing
collateral security for all of the Credit Party Obligations, now existing
or hereafter arising pursuant to the Credit Documents, owing from the
Borrower or any other Credit Party to any Lender or the Agent, howsoever
evidenced, created, incurred or acquired, whether primary, secondary,
direct, contingent, or joint and several, including, without limitation,
all liabilities arising under Hedging Agreements and all obligations and
liabilities incurred in connection with collecting and enforcing the
foregoing (collectively, the "PLEDGOR OBLIGATIONS").
4. DELIVERY OF THE PLEDGED COLLATERAL. Each Pledgor hereby agrees that:
(a) Each Pledgor shall deliver to the Agent (i) simultaneously with
or prior to the execution and delivery of this Pledge Agreement, all
certificates representing the Pledged Shares of such Pledgor and (ii)
promptly upon the receipt thereof by or on behalf of a Pledgor, all other
certificates and instruments constituting Pledged Collateral of a Pledgor.
Prior to delivery to the Agent, all such certificates and instruments
constituting Pledged Collateral of a Pledgor shall be held in trust by such
Pledgor for the benefit of the Agent pursuant hereto. All such
certificates shall be delivered in suitable form for transfer by delivery
or shall be accompanied by duly executed instruments of transfer or
assignment in blank, substantially in the form provided in EXHIBIT 4(A)
attached hereto.
(b) ADDITIONAL SECURITIES. If such Pledgor shall receive by virtue
of its being or having been the owner of any Pledged Collateral, any (i)
stock certificate, including without limitation, any certificate
representing a stock dividend or distribution in connection with any
increase or reduction of capital, reclassification, merger, consolidation,
sale of assets, combination of equity interests, stock splits, spin-off or
split-off, promissory notes or other instrument; (ii) option or right,
whether as an addition to, substitution for, or an exchange for, any
Pledged Collateral or otherwise; (iii) dividends payable in securities; or
(iv) distributions of securities in connection with a partial or total
liquidation, dissolution or reduction of capital, capital surplus or
paid-in surplus, then such Pledgor shall receive such stock certificate,
instrument, option, right or distribution in trust for the benefit of the
Agent, shall segregate it from such Pledgor's other property and shall
deliver it forthwith to the Agent in the exact form received together with
any necessary endorsement and/or appropriate stock power duly executed in
blank, substantially in the form provided in EXHIBIT 4(A), to be held by
the Agent as Pledged Collateral and as further collateral security for the
Pledgor Obligations.
<PAGE>
(c) FINANCING STATEMENTS. Each Pledgor shall execute and deliver to
the Agent such UCC or other applicable financing statements as may be
reasonably requested by the Agent in order to perfect and protect the
security interest created hereby in the Pledged Collateral of such Pledgor.
5. REPRESENTATIONS AND WARRANTIES. Each Pledgor hereby represents and
warrants to the Agent, for the benefit of the Lenders, that so long as any of
the Pledgor Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding, and
until all of the Commitments shall have been terminated:
(a) AUTHORIZATION OF PLEDGED SHARES. The Pledged Shares are duly
authorized and validly issued, are fully paid and nonassessable and are not
subject to the preemptive rights of any Person. All other equity interests
constituting Pledged Collateral will be duly authorized and validly issued,
fully paid and nonassessable and not subject to the preemptive rights of
any Person.
(b) TITLE. Each Pledgor has good and indefeasible title to the
Pledged Collateral of such Pledgor and will at all times be the legal and
beneficial owner of such Pledged Collateral free and clear of any Lien,
other than Permitted Liens. There exists no "adverse claim" within the
meaning of Section 8-302 of the Uniform Commercial Code as in effect in the
State of New York (the "UCC") with respect to the Pledged Shares of such
Pledgor.
(c) PLEDGOR'S AUTHORITY. With respect to the Pledged Stock of
Domestic Subsidiaries and Cluett, Peabody Canada, Inc., no authorization,
approval or action by, and no notice or filing with any Governmental
Authority or with the issuer of such Pledged Stock (which has not already
been obtained) is required either (i) for the pledge made by a Pledgor or
for the granting of the security interest by a Pledgor pursuant to this
Pledge Agreement or (ii) for the exercise by the Agent or the Lenders of
their non-judicial foreclosure rights and remedies hereunder (except as may
be required by laws affecting the offering and sale of securities).
(d) SECURITY INTEREST/PRIORITY. This Pledge Agreement creates a
valid security interest in favor of the Agent for the benefit of the
Lenders, in the Pledged Collateral of each Domestic Subsidiary and Cluett,
Peabody Canada, Inc. The taking possession by the Agent of the
certificates representing the Pledged Shares of each Domestic Subsidiary
and Cluett, Peabody Canada, Inc. and all other certificates and instruments
constituting Pledged Collateral will perfect and establish the first
priority of the Agent's security interest in such Pledged Shares and, when
properly perfected by filing or registration, in all other Pledged
Collateral represented by such Pledged Shares and instruments securing the
Pledgor Obligations. Except as set forth in this Section 5(e), no action
is necessary to perfect or otherwise protect such security interest.
(e) NO OTHER SHARES. No Pledgor owns any Equity Interests required
to be pledged hereunder other than as set forth on SCHEDULE 2(A) attached
hereto.
<PAGE>
6. COVENANTS. Each Pledgor hereby covenants, that so long as any of the
Pledgor Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding, and
until all of the Commitments shall have been terminated, such Pledgor shall:
(a) BOOKS AND RECORDS. Mark its books and records (and shall cause
the issuer of the Pledged Shares of such Pledgor to mark its books and
records) to reflect the security interest granted to the Agent, for the
benefit of the Lenders, pursuant to this Pledge Agreement.
(b) DEFENSE OF TITLE. Warrant and defend title to and ownership of
the Pledged Collateral of such Pledgor at its own expense against the
claims and demands of all other parties claiming an interest therein, keep
the Pledged Collateral free from all Liens, except for Permitted Liens, and
not sell, exchange, transfer, assign, lease or otherwise dispose of Pledged
Collateral of such Pledgor or any interest therein, except as permitted
under the Credit Agreement and the other Credit Documents.
(c) FURTHER ASSURANCES. Promptly execute and deliver at its expense
all further instruments and documents and take all further action that may
be necessary and desirable or that the Agent may reasonably request in
order to (i) perfect and protect the security interest created hereby in
the Pledged Collateral of such Pledgor (including without limitation any
and all action reasonably necessary to satisfy the Agent that the Agent has
obtained a first priority perfected security interest in any capital
stock); (ii) enable the Agent to exercise and enforce its rights and
remedies hereunder in respect of the Pledged Collateral of such Pledgor;
and (iii) otherwise effect the purposes of this Pledge Agreement,
including, without limitation and if requested by the Agent, delivering to
the Agent irrevocable proxies in respect of the Pledged Collateral of such
Pledgor.
(d) AMENDMENTS. Not make or consent to any amendment or other
modification or waiver with respect to any of the Pledged Collateral of
such Pledgor or enter into any agreement or allow to exist any restriction
with respect to any of the Pledged Collateral of such Pledgor other than
pursuant hereto or as may be permitted under the Credit Agreement.
(e) COMPLIANCE WITH SECURITIES LAWS. File all reports and other
information now or hereafter required to be filed by such Pledgor with the
United States Securities and Exchange Commission and any other state,
federal or foreign agency in connection with the ownership of the Pledged
Collateral of such Pledgor.
7. ADVANCES BY LENDERS. On failure of any Pledgor to perform any of the
covenants and agreements contained herein, the Agent may, at its sole option and
in its sole discretion, perform the same and in so doing may expend such sums as
the Agent may reasonably deem advisable in the performance thereof, including,
without limitation, the payment of any insurance premiums, the payment of any
taxes, a payment to obtain a release of a Lien or potential Lien,
<PAGE>
expenditures made in defending against any adverse claim and all other
expenditures which the Agent or the Lenders may make for the protection of the
security hereof or which may be compelled to make by operation of law. All such
sums and amounts so expended shall be repayable by the Pledgors on a joint and
several basis promptly upon timely notice thereof and demand therefor, shall
constitute additional Pledgor Obligations and shall bear interest from the date
said amounts are expended at the default rate specified in SECTION 3.1 of the
Credit Agreement for Revolving Loans that are Base Rate Loans. No such
performance of any covenant or agreement by the Agent or the Lenders on behalf
of any Pledgor, and no such advance or expenditure therefor, shall relieve the
Pledgors of any default under the terms of this Pledge Agreement, the other
Credit Documents or any Hedging Agreement. The Lenders may make any payment
hereby authorized in accordance with any bill, statement or estimate procured
from the appropriate public office or holder of the claim to be discharged
without inquiry into the accuracy of such bill, statement or estimate or into
the validity of any tax assessment, sale, forfeiture, tax lien, title or claim
except to the extent such payment is being contested in good faith by a Pledgor
in appropriate proceedings and against which adequate reserves are being
maintained in accordance with GAAP.
8. EVENTS OF DEFAULT. The occurrence and continuance of an event which
under the Credit Agreement would constitute an Event of Default shall be an
Event of Default hereunder (an "EVENT OF DEFAULT").
9. REMEDIES.
(a) GENERAL REMEDIES. Upon the occurrence of an Event of Default and
during the continuation thereof, the Agent and the Lenders shall have, in
respect of the Pledged Collateral of any Pledgor, in addition to the rights
and remedies provided herein, in the Credit Documents, in the Hedging
Agreements or by law, the rights and remedies of a secured party under the
UCC or any other applicable law.
(b) SALE OF PLEDGED COLLATERAL. Upon the occurrence of an Event of
Default and during the continuation thereof, without limiting the
generality of this Section and without notice, the Agent may, in its sole
discretion, sell or otherwise dispose of or realize upon the Pledged
Collateral, or any part thereof, in one or more parcels, at public or
private sale, at any exchange or broker's board or elsewhere, at such price
or prices and on such other terms as the Agent may deem commercially
reasonable, for cash, credit or for future delivery or otherwise in
accordance with applicable law. To the extent permitted by law, any Lender
may in such event, bid for the purchase of such securities. Each Pledgor
agrees that, to the extent notice of sale shall be required by law and has
not been waived by such Pledgor, any requirement of reasonable notice shall
be met if notice, specifying the place of any public sale or the time after
which any private sale is to be made, is personally served on or mailed,
postage prepaid, to such Pledgor, in accordance with the notice provisions
of SECTION 11.1 of the Credit Agreement at least 10 days before the time of
such sale (or such longer period as may be required under applicable law).
The Agent shall not be obligated to make any sale of Pledged Collateral of
such Pledgor regardless of notice of sale having been given. The Agent may
adjourn any public or private sale from time to time by announcement at the
time and place fixed therefor, and
<PAGE>
such sale may, without further notice, be made at the time and place to
which it was so adjourned.
(c) PRIVATE SALE. Upon the occurrence of an Event of Default and
during the continuation thereof, the Pledgors recognize that the Agent may
deem it impracticable to effect a public sale of all or any part of the
Pledged Shares or any of the securities constituting Pledged Collateral and
that the Agent may, therefore, determine to make one or more private sales
of any such securities to a restricted group of purchasers who will be
obligated to agree, among other things, to acquire such securities for
their own account, for investment and not with a view to the distribution
or resale thereof. Each Pledgor acknowledges that any such private sale
may be at prices and on terms less favorable to the seller than the prices
and other terms which might have been obtained at a public sale and,
notwithstanding the foregoing, agrees that such private sale shall be
deemed to have been made in a commercially reasonable manner and that the
Agent shall have no obligation to delay sale of any such securities for the
period of time necessary to permit the issuer of such securities to
register such securities for public sale under the Securities Act of 1933.
Each Pledgor further acknowledges and agrees that any offer to sell such
securities which has been (i) publicly advertised on a bona fide basis in a
newspaper or other publication of general circulation in the financial
community of New York, New York (to the extent that such offer may be
advertised without prior registration under the Securities Act of 1933), or
(ii) made privately in the manner described above shall be deemed to
involve a "public sale" under the UCC, notwithstanding that such sale may
not constitute a "public offering" under the Securities Act of 1933, and
the Agent may, in such event, bid for the purchase of such securities.
(d) RETENTION OF PLEDGED COLLATERAL. In addition to the rights and
remedies hereunder, upon the occurrence of an Event of Default, the Agent
may, after providing the notices required by Section 9-505(2) of the UCC or
otherwise complying with the requirements of applicable law of the relevant
jurisdiction, retain all or any portion of the Pledged Collateral in
satisfaction of the Pledgor Obligations. Unless and until the Agent shall
have provided such notices, however, the Agent shall not be deemed to have
retained any Pledged Collateral in satisfaction of any Pledgor Obligations
for any reason.
(e) DEFICIENCY. In the event that the proceeds of any sale,
collection or realization are insufficient to pay all amounts to which the
Agent or the Lenders are legally entitled, the Pledgors shall be jointly
and severally liable for the deficiency, together with interest thereon at
the default rate specified in SECTION 3.1 of the Credit Agreement for
Revolving Loans that are Base Rate Loans, together with the costs of
collection and the reasonable fees of any attorneys employed by the Agent
to collect such deficiency. Any surplus remaining after the full payment
and satisfaction of the Pledgor Obligations shall be returned to the
Pledgors or to whomsoever a court of competent jurisdiction shall determine
to be entitled thereto.
<PAGE>
10. RIGHTS OF THE AGENT.
(a) POWER OF ATTORNEY. In addition to other powers of attorney
contained herein, each Pledgor hereby designates and appoints the Agent, on
behalf of the Lenders, and each of its designees or agents as
attorney-in-fact of such Pledgor, irrevocably and with power of
substitution, with authority to take any or all of the following actions
upon the occurrence and during the continuance of an Event of Default:
(i) to demand, collect, settle, compromise, adjust and give
discharges and releases concerning the Pledged Collateral of such
Pledgor, all as the Agent may reasonably determine;
(ii) to commence and prosecute any actions at any court for
the purposes of collecting any of the Pledged Collateral of such
Pledgor and enforcing any other right in respect thereof;
(iii) to defend, settle or compromise any action brought and,
in connection therewith, give such discharge or release as the Agent
may deem reasonably appropriate;
(iv) to pay or discharge taxes, liens, security interests,
or other encumbrances levied or placed on or threatened against the
Pledged Collateral of such Pledgor;
(v) to direct any parties liable for any payment under any
of the Pledged Collateral to make payment of any and all monies due
and to become due thereunder directly to the Agent or as the Agent
shall direct;
(vi) to receive payment of and receipt for any and all
monies, claims, and other amounts due and to become due at any time in
respect of or arising out of any Pledged Collateral of such Pledgor;
(vii) to sign and endorse any drafts, assignments, proxies,
stock powers, verifications, notices and other documents relating to
the Pledged Collateral of such Pledgor;
(viii) to settle, compromise or adjust any suit, action or
proceeding described above and, in connection therewith, to give such
discharges or releases as the Agent may deem reasonably appropriate;
<PAGE>
(ix) execute and deliver all assignments, conveyances,
statements, financing statements, renewal financing statements, pledge
agreements, affidavits, notices and other agreements, instruments and
documents that the Agent may determine necessary in order to perfect
and maintain the security interests and liens granted in this Pledge
Agreement and in order to fully consummate all of the transactions
contemplated therein;
(x) to exchange any of the Pledged Collateral of such
Pledgor or other property upon any merger, consolidation,
reorganization, recapitalization or other readjustment of the issuer
thereof and, in connection therewith, deposit any of the Pledged
Collateral of such Pledgor with any committee, depository, transfer
agent, registrar or other designated agency upon such terms as the
Agent may determine;
(xi) to vote for a shareholder resolution, or to sign an
instrument in writing, sanctioning the transfer of any or all of the
Pledged Shares of such Pledgor into the name of the Agent or one or
more of the Lenders or into the name of any transferee to whom the
Pledged Shares of such Pledgor or any part thereof may be sold
pursuant to Section 10 hereof; and
(xii) to do and perform all such other acts and things as the
Agent may reasonably deem to be necessary, proper or convenient in
connection with the Pledged Collateral of such Pledgor.
This power of attorney is a power coupled with an interest and shall be
irrevocable (i) for so long as any of the Pledgor Obligations remain
outstanding, any Credit Document or any Hedging Agreement is in effect or
any Letter of Credit shall remain outstanding and (ii) until all of the
Commitments shall have been terminated. The Agent shall be under no duty
to exercise or withhold the exercise of any of the rights, powers,
privileges and options expressly or implicitly granted to the Agent in this
Pledge Agreement, and shall not be liable for any failure to do so or any
delay in doing so. The Agent shall not be liable for any act or omission
or for any error of judgment or any mistake of fact or law in its
individual capacity or its capacity as attorney-in-fact except acts or
omissions resulting from its gross negligence or willful misconduct. This
power of attorney is conferred on the Agent solely to protect, preserve and
realize upon its security interest in Pledged Collateral.
(b) PERFORMANCE BY THE AGENT OF PLEDGOR'S OBLIGATIONS. If any
Pledgor fails to perform any agreement or obligation contained herein, the
Agent itself may perform, or cause performance of, such agreement or
obligation, and the expenses of the Agent incurred in connection therewith
shall be payable by the Pledgors on a joint and several basis pursuant to
Section 13 hereof.
(c) ASSIGNMENT BY THE AGENT. In connection with the succession of
the Agent pursuant to Section 10.7 of the Credit Agreement, the Agent may
from time to time
<PAGE>
assign the Pledgor Obligations and any portion thereof and/or the Pledged
Collateral and any portion thereof, and the assignee shall be entitled to
all of the rights and remedies of the Agent under this Pledge Agreement in
relation thereto.
(d) THE AGENT'S DUTY OF CARE. Other than the exercise of reasonable
care to assure the safe custody of the Pledged Collateral while being held
by the Agent hereunder, the Agent shall have no duty or liability to
preserve rights pertaining thereto, it being understood and agreed that
Pledgors shall be responsible for preservation of all rights in the Pledged
Collateral of such Pledgor, and the Agent shall be relieved of all
responsibility for Pledged Collateral upon surrendering it or tendering the
surrender of it to the Pledgors. The Agent shall be deemed to have
exercised reasonable care in the custody and preservation of the Pledged
Collateral in its possession if such Pledged Collateral is accorded
treatment substantially equal to that which the Agent accords its own
property, which shall be no less than the treatment employed by a
reasonable and prudent agent in the industry, it being understood that the
Agent shall not have responsibility for (i) ascertaining or taking action
with respect to calls, conversions, exchanges, maturities, tenders or other
matters relating to any Pledged Collateral, whether or not the Agent has or
is deemed to have knowledge of such matters; or (ii) taking any necessary
steps to preserve rights against any parties with respect to any Pledged
Collateral.
(e) VOTING RIGHTS IN RESPECT OF THE PLEDGED COLLATERAL.
(i) So long as no Event of Default shall have occurred and
be continuing, to the extent permitted by law, each Pledgor may
exercise any and all voting and other consensual rights pertaining to
the Pledged Collateral of such Pledgor or any part thereof for any
purpose not inconsistent with the terms of this Pledge Agreement or
the Credit Agreement; and
(ii) Upon the occurrence and during the continuance of an
Event of Default, all rights of a Pledgor to exercise the voting and
other consensual rights which it would otherwise be entitled to
exercise pursuant to paragraph (i) of this Section upon written notice
to the Borrower shall cease and all such rights shall thereupon become
vested in the Agent which shall then have the sole right to exercise
such voting and other consensual rights.
(f) DIVIDEND RIGHTS IN RESPECT OF THE PLEDGED COLLATERAL.
(i) Each Pledgor may receive and retain any and all
dividends (other than stock dividends and other dividends constituting
Pledged Collateral which are addressed hereinabove) or interest paid
in respect of the Pledged Collateral to the extent they are allowed
under the Credit Agreement.
(ii) Upon the occurrence and during the continuance of an
Event of Default:
<PAGE>
(A) all rights of a Pledgor to receive the dividends and
interest payments which it would otherwise be authorized to
receive and retain pursuant to paragraph (i) of this Section upon
written notice to the Borrower shall cease and all such rights
shall thereupon be vested in the Agent which shall then have the
sole right to receive and hold as Pledged Collateral such
dividends and interest payments; and
(B) all dividends and interest payments which are received
by a Pledgor contrary to the provisions of paragraph (A) of this
Section shall be received in trust for the benefit of the Agent,
shall be segregated from other property or funds of such Pledgor,
and shall be forthwith paid over to the Agent as Pledged
Collateral in the exact form received, to be held by the Agent as
Pledged Collateral and as further collateral security for the
Pledgor Obligations.
(g) RELEASE OF PLEDGED COLLATERAL. The Agent may release any of the
Pledged Collateral from this Pledge Agreement or may substitute any of the
Pledged Collateral for other Pledged Collateral without altering, varying
or diminishing in any way the force, effect, lien, pledge or security
interest of this Pledge Agreement as to any Pledged Collateral not
expressly released or substituted, and this Pledge Agreement shall continue
as a first priority lien on all Pledged Collateral not expressly released
or substituted.
11. RIGHTS OF REQUIRED LENDERS. All rights of the Agent hereunder, if not
exercised by the Agent, may be exercised by the Required Lenders.
12. APPLICATION OF PROCEEDS. Upon the occurrence and during the
continuance of an Event of Default, any payments in respect of the Pledgor
Obligations and any proceeds of any Pledged Collateral, when received by the
Agent or any of the Lenders in cash or its equivalent, will be applied in
reduction of the Pledgor Obligations in the order set forth in SECTION 3.15(B)
of the Credit Agreement, and each Pledgor irrevocably waives the right to direct
the application of such payments and proceeds and acknowledges and agrees that
the Agent shall have the continuing and exclusive right to apply and reapply any
and all such payments and proceeds in the Agent's sole discretion,
notwithstanding any entry to the contrary upon any of its books and records.
13. COSTS OF COUNSEL. At all times hereafter, the Pledgors agree to
promptly pay upon demand any and all reasonable costs and expenses (a) of the
Agent or the Lenders as required under SECTION 11.5 of the Credit Agreement and
(b) of the Agent as necessary to protect the Pledged Collateral or to exercise
any rights or remedies under this Pledge Agreement or with respect to any
Pledged Collateral. All of the foregoing costs and expenses shall constitute
Pledgor Obligations hereunder.
14. CONTINUING AGREEMENT.
<PAGE>
(a) This Pledge Agreement shall be a continuing agreement in every
respect and shall remain in full force and effect so long as any of the
Pledgor Obligations remain outstanding or any Credit Document or Hedging
Agreement is in effect or any Letter of Credit shall remain outstanding,
and until all of the Commitments thereunder shall have terminated (other
than any obligations with respect to the indemnities and the
representations and warranties set forth in the Credit Documents). Upon
such payment and termination, this Pledge Agreement shall be automatically
terminated and the Agent and the Lenders shall, upon the request and at the
expense of the Pledgors, forthwith release all of its liens and security
interests hereunder and shall executed and deliver all UCC termination
statements and/or other documents reasonably requested by the Pledgors
evidencing such termination. Notwithstanding the foregoing all releases
and indemnities provided hereunder shall survive termination of this Pledge
Agreement.
(b) This Pledge Agreement shall continue to be effective or be
automatically reinstated, as the case may be, if at any time payment, in
whole or in part, of any of the Pledgor Obligations is rescinded or must
otherwise be restored or returned by the Agent or any Lender as a
preference, fraudulent conveyance or otherwise under any bankruptcy,
insolvency or similar law, all as though such payment had not been made;
provided that in the event payment of all or any part of the Pledgor
Obligations is rescinded or must be restored or returned, all reasonable
costs and expenses (including without limitation any reasonable legal fees
and disbursements) incurred by the Agent or any Lender in defending and
enforcing such reinstatement shall be deemed to be included as a part of
the Pledgor Obligations.
15. AMENDMENTS; WAIVERS; MODIFICATIONS. This Pledge Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated except as set forth in SECTION 11.6 of the Credit Agreement.
16. SUCCESSORS IN INTEREST. This Pledge Agreement shall create a
continuing security interest in the Collateral and shall be binding upon each
Pledgor, its successors and assigns and shall inure, together with the rights
and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent
and the Lenders and their permitted successors and assigns; PROVIDED, HOWEVER,
that none of the Pledgors may assign its rights or delegate its duties hereunder
without the prior written consent of each Lender or the Required Lenders, as
required by the Credit Agreement. To the fullest extent permitted by law, each
Pledgor hereby releases the Agent and each Lender, and its successors and
assigns, from any liability for any act or omission relating to this Pledge
Agreement or the Collateral, except for any liability arising from the gross
negligence or willful misconduct of the Agent, or such Lender, or its officers,
employees or agents.
17. NOTICES. All notices required or permitted to be given under this
Pledge Agreement shall be in conformance with SECTION 11.1 of the Credit
Agreement.
18. COUNTERPARTS. This Pledge Agreement may be executed in any number of
counterparts, each of which where so executed and delivered shall be an
original, but all of which
<PAGE>
shall constitute one and the same instrument. It shall not be necessary in
making proof of this Pledge Agreement to produce or account for more than one
such counterpart.
19. HEADINGS. The headings of the sections and subsections hereof are
provided for convenience only and shall not in any way affect the meaning or
construction of any provision of this Pledge Agreement.
20. GOVERNING LAW; SUBMISSION TO JURISDICTION; VENUE.
(a) THIS PLEDGE AGREEMENT AND THE RIGHTS AND OBLIGATIONS OF THE
PARTIES HEREUNDER SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. Any legal action or
proceeding with respect to this Security Agreement may be brought in the
courts of the State of New York, or of the United States for the Southern
District of New York, and, by execution and delivery of this Security
Agreement, each Pledgor hereby irrevocably accepts for itself and in
respect of its property, generally and unconditionally, the jurisdiction of
such courts. Each Pledgor further irrevocably consents to the service of
process out of any of the aforementioned courts in any such action or
proceeding by the mailing of copies thereof by registered or certified
mail, postage prepaid, to it at the address for notices pursuant to SECTION
11.1 of the Credit Agreement, such service to become effective 30 days
after such mailing. Nothing herein shall affect the right of the Agent to
serve process in any other manner permitted by law or to commence legal
proceedings or to otherwise proceed against any Pledgor in any other
jurisdiction.
(b) Each Pledgor hereby irrevocably waives any objection which it may
now or hereafter have to the laying of venue of any of the aforesaid
actions or proceedings arising out of or in connection with this Pledge
Agreement brought in the courts referred to in subsection (a) hereof and
hereby further irrevocably waives and agrees not to plead or claim in any
such court that any such action or proceeding brought in any such court has
been brought in an inconvenient forum.
21. WAIVER OF JURY TRIAL. TO THE EXTENT PERMITTED BY APPLICABLE LAW, EACH
OF THE PARTIES TO THIS PLEDGE AGREEMENT HEREBY IRREVOCABLY WAIVES ALL RIGHT TO
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS PLEDGE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
22. SEVERABILITY. If any provision of any of the Pledge Agreement is
determined to be illegal, invalid or unenforceable, such provision shall be
fully severable and the remaining provisions shall remain in full force and
effect and shall be construed without giving effect to the illegal, invalid or
unenforceable provisions.
23. ENTIRETY. This Pledge Agreement, the other Credit Documents and the
Hedging Agreements represent the entire agreement of the parties hereto and
thereto, and supersede all
<PAGE>
prior agreements and understandings, oral or written, if any, including any
commitment letters or correspondence relating to the Credit Documents, the
Hedging Agreements or the transactions contemplated herein and therein.
24. SURVIVAL. All representations and warranties of the Pledgors
hereunder shall survive the execution and delivery of this Pledge Agreement, the
other Credit Documents and the Hedging Agreements, the delivery of the Notes and
the making of the Loans and the issuance of the Letters of Credit under the
Credit Agreement.
25. OTHER SECURITY. To the extent that any of the Pledgor Obligations are
now or hereafter secured by property other than the Pledged Collateral
(including, without limitation, real and other personal property owned by a
Pledgor), or by a guarantee, endorsement or property of any other Person, then
the Agent and the Lenders shall have the right to proceed against such other
property, guarantee or endorsement upon the occurrence and continuance of any
Event of Default, and the Agent and the Lenders have the right, in their sole
discretion, to determine which rights, security, liens, security interests or
remedies the Agent and the Lenders shall at any time pursue, relinquish,
subordinate, modify or take with respect thereto, without in any way modifying
or affecting any of them or any of the Agent's and the Lenders' rights or the
Pledgor Obligations under this Pledge Agreement, under any other of the Credit
Documents or under any Hedging Agreement.
26. JOINT AND SEVERAL OBLIGATIONS OF PLEDGORS.
(a) Each of the Pledgors is accepting joint and several liability
hereunder in consideration of the financial accommodation to be provided by
the Lenders under the Credit Agreement, for the mutual benefit, directly
and indirectly, of each of the Pledgors and in consideration of the
undertakings of each of the Pledgors to accept joint and several liability
for the obligations of each of them.
(b) Each of the Pledgors jointly and severally hereby irrevocably and
unconditionally accepts, not merely as a surety but also as a co-debtor,
joint and several liability with the other Pledgors with respect to the
payment and performance of all of the Pledgor Obligations arising under
this Pledge Agreement, the other Credit Documents and the Hedging
Agreements, it being the intention of the parties hereto that all the
Pledgor Obligations shall be the joint and several obligations of each of
the Pledgors without preferences or distinction among them.
(c) Notwithstanding any provision to the contrary contained herein or
in any other of the Credit Documents, to the extent the obligations of a
Pledgor shall be adjudicated to be invalid or unenforceable for any reason
(including, without limitation, because of any applicable state or federal
law relating to fraudulent conveyances or transfers) then the obligations
of such Pledgor hereunder shall be limited to the maximum amount that is
permissible under applicable law (whether federal or state and including,
without limitation, the Bankruptcy Code).
<PAGE>
[remainder of page intentionally left blank]
<PAGE>
Each of the parties hereto has caused a counterpart of this Pledge
Agreement to be duly executed and delivered as of the date first above written.
BORROWER: CLUETT AMERICAN CORP.,
- -------- a Delaware Corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: Director, President and
-----------------------------
Chief Executive Officer
-----------------------------
GUARANTORS: CLUETT AMERICAN INVESTMENT CORP.
- ---------- a Delaware Corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
-----------------------------
CLUETT AMERICAN GROUP, INC.,
a Delaware Corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
-----------------------------
CONSUMER DIRECT CORPORATION,
a Delaware Corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: Director, President and
-----------------------------
Chief Executive Officer
-----------------------------
ARROW FACTORY STORES, INC.,
a Delaware Corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: Chairman and
-----------------------------
Chief Executive Officer
-----------------------------
GAKM RESOURCES CORPORATION,
a Delaware Corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
-----------------------------
CLUETT PEABODY RESOURCES CORPORATION,
a Delaware Corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
-----------------------------
CLUETT PEABODY HOLDING CORP.,
a Delaware Corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
-----------------------------
CLUETT, PEABODY & CO., INC.,
a Delaware Corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: Chairman and
-----------------------------
Chief Executive Officer
-----------------------------
BIDERTEX SERVICES INC.,
a Delaware Corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: President
-----------------------------
GREAT AMERICAN KNITTING MILLS, INC.
a Delaware Corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: Chairman and
-----------------------------
Chief Executive Officer
-----------------------------
CLUETT DESIGNER GROUP, INC.
a Delaware Corporation
By: /s/ Bryan P. Marsal
--------------------------------
Name: Bryan P. Marsal
------------------------------
Title: Chairman and
-----------------------------
Chief Executive Officer
-----------------------------
Accepted and agreed to as of the date first above written.
NATIONSBANK, N.A., as Agent
By: /s/ Mark E. Stephanz
--------------------------------
Name: Mark E. Stephanz
------------------------------
Title: Attorney-in-fact
-----------------------------
<PAGE>
SCHEDULE 2(A)
to
Pledge Agreement
dated as of May 15, 1998
in favor of NationsBank, N.A.
as Agent
PLEDGED STOCK
-------------
PLEDGOR: CLUETT AMERICAN CORP.
Number Certificate Percentage
Name of Subsidiary Shares Number Ownership
- ------------------ ------ ----------- ----------
Subsidiaries
PLEDGOR:
Number Certificate Percentage
Name of Subsidiary Shares Number Ownership
- ------------------ ------ ----------- ----------
Subsidiaries
<PAGE>
EXHIBIT 4(A)
to
Pledge Agreement
dated as of May 15, 1998
in favor of NationsBank, N.A.
as Agent
IRREVOCABLE STOCK POWER
-----------------------
FOR VALUE RECEIVED, the undersigned hereby sells, assigns and transfers to
the following equity interests of _____________________, a ____________:
No. of Shares Certificate No.
------------- ---------------
and irrevocably appoints __________________________________ its agent and
attorney-in-fact to transfer all or any part of such capital stock and to take
all necessary and appropriate action to effect any such transfer. The agent and
attorney-in-fact may substitute and appoint one or more persons to act for him.
The effectiveness of a transfer pursuant to this stock power shall be subject to
any and all transfer restrictions referenced on the face of the certificates
evidencing such interest or in the certificate of incorporation or bylaws of the
subject corporation, to the extent they may from time to time exist.
_______________,
a ______________ corporation
By:
--------------------------------
Name:
------------------------------
Title:
-----------------------------
<PAGE>
Exhibit 10.6
08/8/97-7
LOAN AGREEMENT
BY AND BETWEEN
CONGRESS FINANCIAL CORPORATION (CANADA)
AS LENDER
AND
CLUETT, PEABODY CANADA INC.
AS BORROWER
DATED: AUGUST 8 , 1997
<PAGE>
TABLE OF CONTENTS
Page
----
SECTION 1. DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . .2
1.1 "Accounts". . . . . . . . . . . . . . . . . . . . . . . . . .2
1.2 "Adjusted Net Worth". . . . . . . . . . . . . . . . . . . . .3
1.3 "Availability Reserves" . . . . . . . . . . . . . . . . . . .3
1.4 "BIA" . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.5 "Blocked Accounts". . . . . . . . . . . . . . . . . . . . . .3
1.6 "CCAA". . . . . . . . . . . . . . . . . . . . . . . . . . . .3
1.7 "Canadian Dollar Amount". . . . . . . . . . . . . . . . . . .3
1.8 "CDOR Rate" . . . . . . . . . . . . . . . . . . . . . . . . .4
1.9 "Collateral". . . . . . . . . . . . . . . . . . . . . . . . .4
1.10 "Currency Exchange Convention". . . . . . . . . . . . . . . .4
1.11 "Eligible Accounts" . . . . . . . . . . . . . . . . . . . . .4
1.12 "Eligible Inventory". . . . . . . . . . . . . . . . . . . . .6
1.13 "Equipment" . . . . . . . . . . . . . . . . . . . . . . . . .6
1.14 "Event of Default". . . . . . . . . . . . . . . . . . . . . .7
1.15 "Financing Agreements". . . . . . . . . . . . . . . . . . . .7
1.16 "GAAP". . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.17 "Information Certificate" . . . . . . . . . . . . . . . . . .7
1.18 "Inventory" . . . . . . . . . . . . . . . . . . . . . . . . .7
1.19 "Letter of Credit Accommodations" . . . . . . . . . . . . . .7
1.20 "Loans" . . . . . . . . . . . . . . . . . . . . . . . . . . .7
1.21 "Maximum Credit". . . . . . . . . . . . . . . . . . . . . . .7
1.22 "Net Amount of Eligible Accounts" . . . . . . . . . . . . . .7
1.23 "Obligations" . . . . . . . . . . . . . . . . . . . . . . . .8
1.24 "Obligor" . . . . . . . . . . . . . . . . . . . . . . . . . .8
1.25 "Payment Account" . . . . . . . . . . . . . . . . . . . . . .8
1.26 "Person" or "person". . . . . . . . . . . . . . . . . . . . .8
1.27 "Records" . . . . . . . . . . . . . . . . . . . . . . . . . .8
1.28 "Reference Rate". . . . . . . . . . . . . . . . . . . . . . .8
1.29 "Revolving Loans" . . . . . . . . . . . . . . . . . . . . . .8
1.30 "Value" . . . . . . . . . . . . . . . . . . . . . . . . . . .8
SECTION 2. CREDIT FACILITIES . . . . . . . . . . . . . . . . . . . . . .9
2.1 Revolving Loans.. . . . . . . . . . . . . . . . . . . . . . .9
2.2 Letter of Credit Accommodations.. . . . . . . . . . . . . . .10
2.3 Availability Reserves.. . . . . . . . . . . . . . . . . . . .12
SECTION 3. INTEREST AND FEES . . . . . . . . . . . . . . . . . . . . . .12
3.1 Interest. . . . . . . . . . . . . . . . . . . . . . . . . . .12
3.2 Closing Fee.. . . . . . . . . . . . . . . . . . . . . . . . .13
3.3 Facility Fee. . . . . . . . . . . . . . . . . . . . . . . . .14
3.4 Servicing Fee.. . . . . . . . . . . . . . . . . . . . . . . .14
3.5 Unused Line Fee.. . . . . . . . . . . . . . . . . . . . . . .14
<PAGE>
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SECTION 4. CONDITIONS PRECEDENT. . . . . . . . . . . . . . . . . . . . .14
4.1 Conditions Precedent to Initial Loans and Letter of Credit
Accommodations. . . . . . . . . . . . . . . . . . . . . . . .14
4.2 Conditions Precedent to All Loans and Letter of Credit
Accommodations. . . . . . . . . . . . . . . . . . . . . . . .15
SECTION 5. GRANT OF SECURITY INTEREST. . . . . . . . . . . . . . . . . .16
SECTION 6. COLLECTION AND ADMINISTRATION . . . . . . . . . . . . . . . .16
6.1 Borrower's Loan Account.. . . . . . . . . . . . . . . . . . .16
6.2 Statements. . . . . . . . . . . . . . . . . . . . . . . . . .16
6.3 Collection of Accounts. . . . . . . . . . . . . . . . . . . .17
6.4 Payments. . . . . . . . . . . . . . . . . . . . . . . . . . .18
6.5 Authorization to Make Loans.. . . . . . . . . . . . . . . . .19
SECTION 7. COLLATERAL REPORTING AND COVENANTS. . . . . . . . . . . . . .19
7.1 Collateral Reporting. . . . . . . . . . . . . . . . . . . . .19
7.2 Accounts Covenants. . . . . . . . . . . . . . . . . . . . . .20
7.3 Inventory Covenants.. . . . . . . . . . . . . . . . . . . . .21
7.4 Equipment Covenants.. . . . . . . . . . . . . . . . . . . . .22
7.5 Power of Attorney.. . . . . . . . . . . . . . . . . . . . . .22
7.6 Right to Cure.. . . . . . . . . . . . . . . . . . . . . . . .23
7.7 Access to Premises. . . . . . . . . . . . . . . . . . . . . .23
SECTION 8. REPRESENTATIONS AND WARRANTIES. . . . . . . . . . . . . . . .23
8.1 Corporate Existence, Power and Authority. . . . . . . . . . .23
8.2 Financial Statements. . . . . . . . . . . . . . . . . . . . .24
8.3 Chief Executive Office. . . . . . . . . . . . . . . . . . . .24
8.4 Priority of Liens . . . . . . . . . . . . . . . . . . . . . .24
8.5 Tax Returns.. . . . . . . . . . . . . . . . . . . . . . . . .24
8.6 Litigation. . . . . . . . . . . . . . . . . . . . . . . . . .25
8.7 Compliance with Other Agreements and Applicable Laws. . . . .25
8.8 Bank Accounts.. . . . . . . . . . . . . . . . . . . . . . . .25
8.9 Accuracy and Completeness of Information. . . . . . . . . . .25
8.10 Survival of Warranties. . . . . . . . . . . . . . . . . . . .25
SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS. . . . . . . . . . . . . .26
9.1 Maintenance of Existence. . . . . . . . . . . . . . . . . . .26
9.2 New Collateral Locations. . . . . . . . . . . . . . . . . . .26
9.3 Compliance with Laws, Regulations, Etc. . . . . . . . . . . .26
9.4 Payment of Taxes and Claims.. . . . . . . . . . . . . . . . .26
9.5 Insurance.. . . . . . . . . . . . . . . . . . . . . . . . . .26
9.6 Financial Statements and Other Information. . . . . . . . . .27
9.7 Sale of Assets, Consolidation, Merger, Dissolution, Etc.. . .28
<PAGE>
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9.8 Encumbrances. . . . . . . . . . . . . . . . . . . . . . . . .28
9.9 Indebtedness. . . . . . . . . . . . . . . . . . . . . . . . .29
9.10 Loans, Investments, Guarantees, Distributions, Etc. . . . . .29
9.11 Dividends and Redemptions.. . . . . . . . . . . . . . . . . .30
9.12 Transactions with Affiliates. . . . . . . . . . . . . . . . .30
9.13 Additional Bank Accounts. . . . . . . . . . . . . . . . . . .30
9.14 Adjusted Net Worth. . . . . . . . . . . . . . . . . . . . . .31
9.15 Costs and Expenses. . . . . . . . . . . . . . . . . . . . . .31
9.16 Further Assurances. . . . . . . . . . . . . . . . . . . . . .31
SECTION 10. EVENTS OF DEFAULT AND REMEDIES. . . . . . . . . . . . . . . .32
10.1 Events of Default.. . . . . . . . . . . . . . . . . . . . . .32
10.2 Remedies. . . . . . . . . . . . . . . . . . . . . . . . . . .34
10.3 Rental Reservation. . . . . . . . . . . . . . . . . . . . . .35
SECTION 11. JURY TRIAL WAIVER . . . . . . . . . . . . . . . . . . . . . .35
11.1 Governing Law . . . . . . . . . . . . . . . . . . . . . . . .35
11.2 Waiver of Notices.. . . . . . . . . . . . . . . . . . . . . .36
11.3 Amendments and Waivers. . . . . . . . . . . . . . . . . . . .37
11.4 Waiver of Counterclaims.. . . . . . . . . . . . . . . . . . .37
11.5 Indemnification.. . . . . . . . . . . . . . . . . . . . . . .37
SECTION 12. TERM OF AGREEMENT . . . . . . . . . . . . . . . . . . . . . .38
12.1 Term. . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
12.2 Notices.. . . . . . . . . . . . . . . . . . . . . . . . . . .40
12.3 Partial Invalidity. . . . . . . . . . . . . . . . . . . . . .40
12.4 Successors. . . . . . . . . . . . . . . . . . . . . . . . . .40
12.5 Entire Agreement. . . . . . . . . . . . . . . . . . . . . . .40
<PAGE>
INDEX TO
EXHIBITS AND SCHEDULES
----------------------
Exhibit A Information Certificate
Schedule 1.12 Retail Sales Locations
Schedule 4.1(e) List of Certain Lessors and Warehousemen
Schedule 8.4 Existing Liens
Schedule 8.8 Bank Accounts
Schedule 9.9 Existing Indebtedness
Schedule 9.10 Existing Loans, Advances and Guarantees
<PAGE>
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LOAN AGREEMENT
--------------
This Loan Agreement dated August 8, 1997 is entered into by and between
Congress Financial Corporation (Canada), an Ontario corporation ("Lender") and
Cluett, Peabody Canada Inc., an Ontario corporation ("Borrower").
W I T N E S S E T H:
-------------------
WHEREAS, Borrower has requested that Lender enter into certain financing
arrangements with Borrower pursuant to which Lender may make loans and provide
other financial accommodations to Borrower; and
WHEREAS, Lender is willing to make such loans and provide such financial
accommodations on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the mutual conditions and agreements
set forth herein, and for other good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. DEFINITIONS
All terms used herein which are defined in the Personal Property Security
Act (Ontario) shall have the meanings given therein unless otherwise defined in
this Agreement. All references to the plural herein shall also mean the
singular and to the singular shall also mean the plural unless the context
otherwise requires. All references to Borrower and Lender pursuant to the
definitions set forth in the recitals hereto, or to any other person herein,
shall include their respective successors and assigns. The words "hereof",
"herein", "hereunder", "this Agreement" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not any particular
provision of this Agreement and as this Agreement now exists or may hereafter be
amended, modified, supplemented, extended, renewed, restated or replaced. The
word "including" when used in this Agreement shall mean "including, without
limitation". An Event of Default shall exist or continue or be continuing until
such Event of Default is waived in accordance with Section 11.3 or is cured in a
manner satisfactory to Lender, if such Event of Default is capable of being
cured as determined by Lender. Any accounting term used herein unless otherwise
defined in this Agreement shall have the meanings customarily given to such term
in accordance with GAAP. "Cdn $" and the sign "$" mean lawful money of Canada,
and "US $" and "US Dollars" mean lawful money of the United States. For purposes
of this Agreement, the following terms shall have the respective meanings given
to them below:
1.1 "Accounts"; shall mean all present and future rights of Borrower to
payment for goods sold or leased or for services rendered, which are not
evidenced by instruments or chattel paper, and whether or not earned by
performance.
<PAGE>
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1.2 "Adjusted Net Worth"; shall mean as to any Person, at any time, in
accordance with GAAP (except as otherwise specifically set forth below), on a
consolidated basis for such Person and its subsidiaries (if any), the amount
equal to: (a) the difference between: (i) the aggregate net book value of all
assets of such Person and its subsidiaries, calculating the book value of
inventory for this purpose on a first-in-first-out basis, after deducting from
such book values all appropriate reserves in accordance with GAAP (including all
reserves for doubtful receivables, obsolescence, depreciation and amortization)
and (ii) the aggregate amount of the indebtedness and other liabilities properly
included on a balance sheet, of such Person and its subsidiaries (including tax
and other proper accruals) PLUS (b) indebtedness of such Person and its
subsidiaries which is subordinated in right of payment to the full and final
payment of all of the Obligations (i) on the terms and conditions set forth in
the lien subordination and intercreditor agreement between the Lender, the
Borrower and Biderman Industries Corp., Cluett Peabody & Co., Inc., and Bank of
America National Trust and Savings Association (the "Intercreditor Agreement");
or (ii) on any other terms and conditions acceptable to the Lender.
1.3 "Availability Reserves"; shall mean, as of any date of
determination, such reasonable amounts as Lender may from time to time establish
and revise in good faith, acting reasonably, providing written notice to the
Borrower of the revision on a timely basis thereafter, reducing the amount of
Revolving Loans and Letter of Credit Accommodations which would otherwise be
available to Borrower under the lending formula(s) provided for herein: (a) to
reflect events, conditions, contingencies or risks which, as determined by
Lender, in good faith, would be reasonably likely to materially affect either
(i) the Collateral or any other property which is security for the Obligations
or its value, (ii) the assets, business or prospects of Borrower or any Obligor
or (iii) the security interests and other rights of Lender in the Collateral
(including the enforceability, perfection and priority thereof) or (b) to
reflect Lender's good faith belief that any collateral report or financial
information furnished by or on behalf of Borrower or any Obligor to Lender is or
may have been incomplete, inaccurate or misleading in any material respect or
(c) to reflect outstanding Letter of Credit Accommodations as provided in
Section 2.2 hereof or (d) in respect of any state of facts which Lender
determines in good faith constitutes an Event of Default or may, with notice or
passage of time or both, constitute an Event of Default.
1.4 " BIA "; shall mean the Bankruptcy and Insolvency Act (Canada).
1.5 "Blocked Accounts"; shall have the meaning set forth in Section 6.3
hereof.
1.6 "CCAA"; shall mean the Companies' Creditors Arrangement Act
(Canada).
1.7 "Canadian Dollar Amount"; shall mean, in respect of any amount, the
sum of:
(a) such portion, if any, of such amount denominated in Canadian
Dollars; and
(b) to the extent that a portion of such amount is denominated in US
Dollars, the amount in Canadian Dollars calculated by Lender using the Currency
Exchange Convention in effect on the day of determination.
<PAGE>
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1.8 "CDOR Rate"; shall mean, on any day, the annual rate of interest
which is the rate based on an average 30 day rate applicable to Canadian Dollar
bankers' acceptances appearing on the "Reuters Screen CDOR Page" (as defined in
the International Swap Dealer Association, Inc., definitions, as modified and
amended from time to time) as of 10:00 a.m. on such day; provided that if such
rate does not appear on the Reuters Screen CDOR Page as contemplated, then the
CDOR Rate on any day shall be the 30 day rate applicable in Canadian Dollar
bankers' acceptances quoted by any major Schedule I chartered bank selected by
Lender, selecting in good faith, as of 10:00 a.m. on such day.
1.9 "Collateral"; shall have the meaning set forth in the General
Security Agreement (as defined in Section 5.1 hereof).
1.10 "Currency Exchange Convention"; shall mean a procedure used by
Lender to value in Canadian Dollars the obligations or assets of Borrower or its
affiliates that are originally measured in US Dollars by using the spot price
for US Dollars provided to Lender by Bank of Montreal for the preceding business
day. In the event the Bank of Montreal no longer provides appropriate spot
prices for US Dollars to Lender, Lender shall obtain a US Dollar spot price from
another major Schedule I Canadian chartered bank selected in good faith by
Lender.
1.11 "Eligible Accounts"; shall mean Accounts created by Borrower which
are and continue to meet the criteria set forth below. In general, Accounts
shall be Eligible Accounts if:
(a) such Accounts arise from the actual and BONA FIDE sale and
delivery of goods by Borrower or rendition of services by Borrower in the
ordinary course of its business which transactions are completed in accordance
with the terms and provisions contained in any documents related thereto;
(b) such Accounts are not unpaid more than the earlier of 120
days after the date of the original invoice and 60 days after the original due
date for them;
(c) such Accounts comply with the terms and conditions contained
in Section 7.2(c) of this Agreement;
(d) such Accounts do not arise from sales on consignment,
guaranteed sale, sale and return, sale on approval, or other terms under which
payment by the account debtor may be conditional or contingent;
(e) the chief executive office of the account debtor with
respect to such Accounts is located in Canada or the United States, or, at
Lender's option, if either: (i) the account debtor has delivered to Borrower an
irrevocable letter of credit issued or confirmed by a bank satisfactory to
Lender and payable only in Canada and in Cdn. or U.S. dollars, sufficient to
cover such Account, in form and substance satisfactory to Lender and, if
required by Lender, the original of such letter of credit has been delivered to
Lender or Lender's agent and the issuer thereof notified of the assignment of
the proceeds of such letter of credit to Lender, or (ii) such Account is subject
to credit insurance payable to Lender issued by an insurer and on terms and in
an amount acceptable to Lender, or (iii) such Account is otherwise acceptable in
all respects to
<PAGE>
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Lender on the criteria in this section (subject to such lending formula with
respect thereto as Lender may determine);
(f) such Accounts do not consist of progress billings, bill and
hold invoices or retainage invoices, except as to bill and hold invoices, if
Lender shall have received an agreement in writing from the account debtor, in
form and substance satisfactory to Lender, confirming the unconditional
obligation of the account debtor to take the goods related thereto and pay such
invoice;
(g) the account debtor with respect to such Accounts has not
asserted a counterclaim, defense or dispute and does not have, and does not
engage in transactions which may give rise to, any right of setoff ( including
specifically any arising from providing letter of credit or other support for
the Borrower) against such Accounts (but the portion of the Accounts of such
account debtor in excess of the amount at any time and from time to time owed by
Borrower to such account debtor or claimed owed by such account debtor may be
deemed Eligible Accounts);
(h) there are no facts, events or occurrences which would impair
the validity, enforceability or collectability of such Accounts or reduce the
amount payable or delay payment thereunder;
(i) such Accounts are subject to the first priority, valid and
perfected security interest of Lender and any goods giving rise thereto are not,
and were not at the time of the sale thereof, subject to any liens except those
permitted in this Agreement;
(j) neither the account debtor nor any officer or employee of
the account debtor with respect to such Accounts is an officer, employee or
agent of or affiliated with Borrower directly or indirectly by virtue of family
membership, ownership, control, management or otherwise;
(k) the account debtors with respect to such Accounts are not
any foreign government, the federal government of Canada or the United States,
any province, political subdivision, department, agency or instrumentality
thereof, unless, if the account debtor is the federal government of Canada or of
the United States, or any province, political subdivision, department, agency or
instrumentality thereof, upon Lender's request, any applicable federal,
provincial or local law has been complied with in a manner satisfactory to
Lender;
(l) there are no proceedings or actions which are threatened or
pending against the account debtors with respect to such Accounts which would be
reasonable likely to result in any material adverse change in any such account
debtor's financial condition;
(m) such Accounts of a single account debtor or its affiliates
do not constitute more than twenty-five (25%) percent of all otherwise Eligible
Accounts (but the portion of the Accounts not in excess of such percentage may
be deemed Eligible Accounts), except with respect to Walmart Stores, Inc. with
regard to which all Accounts not in excess of thirty percent (30%) of all
otherwise Eligible Accounts will be deemed Eligible Accounts.
<PAGE>
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(n) such Accounts are not owed by an account debtor who has
Accounts unpaid more than the earlier of 120 days after the date of the original
invoice and 60 days after the original due date for them which constitute more
than fifty (50%) percent of the total Accounts of such account debtor;
(o) such Accounts are owed by account debtors whose total
indebtedness to Borrower does not exceed any credit limit with respect to such
account debtors as reasonably determined by Lender from time to time in good
faith, (but the portion of the Accounts not in excess of such credit limit may
be deemed Eligible Accounts);
(p) such Accounts are owed by account debtors deemed
creditworthy at all times by Lender, as reasonably determined by Lender in good
faith.
General criteria for Eligible Accounts may be established and revised from time
to time by Lender acting reasonably and in good faith. Any Accounts which are
not Eligible Accounts shall nevertheless be part of the Collateral.
1.12 "Eligible Inventory"; shall mean Inventory consisting of uncut
fabric raw materials and finished goods held for resale in the ordinary course
of the business of Borrower, which are acceptable to Lender based on the
criteria set forth below . In general, Eligible Inventory shall not include (a)
work-in-process; (b) components which are not part of finished goods; (c) spare
parts for equipment; (d) packaging and shipping materials; (e) supplies used or
consumed in Borrower's business; (f) Inventory at premises other than those
owned and controlled by Borrower, except if Lender shall have received an
agreement in writing from the person in possession of such Inventory and/or the
owner or operator of such premises in form and substance satisfactory to Lender
acknowledging Lender's first priority security interest in the Inventory,
waiving security interests and claims by such person against the Inventory and
permitting Lender access to, and the right to remain on, the premises so as to
exercise Lender's rights and remedies and otherwise deal with the Collateral, or
as to those retail sales locations listed in schedule 1.12 the Borrower has
provided evidence monthly, on the due date for rent for each such retail
location, that the rent is fully up to date, including any net or additional
rent and the landlord has no claims for past due payments of any nature relating
to such retail location, and except Inventory in transit in relation to which
the Lender has received satisfactory assurance of perfected security by delivery
of bills of lading or similar documents, as reasonably acceptable to the Lender;
(g) Inventory subject to a security interest or lien in favor of any person
other than Lender except those permitted in this Agreement; (i) unserviceable,
obsolete or slow moving Inventory; (j) Inventory which is not subject to the
first priority, valid and perfected security interest of Lender; (k) returned,
damaged and/or defective Inventory; (l) Inventory purchased or sold on
consignment; or (m) raw materials savefor uncut fabric. General criteria for
Eligible Inventory may be established and revised from time to time by Lender
acting reasonably and in good faith. Any Inventory which is not Eligible
Inventory shall nevertheless be part of the Collateral.
1.13 "Equipment"; shall mean all of Borrower's now owned and hereafter
acquired equipment, machinery, computers and computer hardware and software
(whether owned or
<PAGE>
-7-
licensed), vehicles, tools, furniture, fixtures, all attachments, accessions and
property now or hereafter affixed thereto or used in connection therewith, and
substitutions and replacements thereof, wherever located.
1.14 "Event of Default"; shall mean the occurrence or existence of any
event or condition described in Section 10.1 hereof.
1.15 "Financing Agreements"; shall mean, collectively, this Agreement and
all notes, guarantees, security agreements and other agreements, documents and
instruments now or at any time hereafter executed and/or delivered by Borrower
or any Obligor in connection with this Agreement, as the same now exist or may
hereafter be amended, modified, supplemented, extended, renewed, restated or
replaced.
1.16 "GAAP"; shall mean generally accepted accounting principles in
Canada as in effect from time to time as set forth in the Handbook of the
Canadian Institute of Chartered Accountants and the statements and
pronouncements of the Financial Accounting Standards Board which are applicable
to the circumstances as of the date of determination consistently applied,
except that, for purposes of Sections 9.14 and 9.15 hereof, GAAP shall be
determined on the basis of such principles in effect on the date hereof and
consistent with those used in the preparation of the audited financial
statements delivered to Lender prior to the date hereof.
1.17 "Information Certificate"; shall mean the Information Certificate of
Borrower constituting Exhibit A hereto containing material information with
respect to Borrower, its business and assets provided by or on behalf of
Borrower to Lender in connection with the preparation of this Agreement and the
other Financing Agreements and the financing arrangements provided for herein.
1.18 "Inventory"; shall mean all of Borrower's now owned and hereafter
existing or acquired raw materials, work in process, finished goods and all
other inventory of whatsoever kind or nature, wherever located.
1.19 "Letter of Credit Accommodations"; shall mean the letters of credit,
merchandise purchase or other guaranties which are from time to time either (a)
issued or opened by Lender for the account of Borrower or any Obligor or (b)
with respect to which Lender has agreed to indemnify the issuer or guaranteed to
the issuer the performance by Borrower, in writing, of its obligations to such
issuer.
1.20 "Loans"; shall mean the Revolving Loans and the Letter of Credit
Accommodations .
1.21 "Maximum Credit"; shall mean the amount of $15,000,000.
1.22 "Net Amount of Eligible Accounts"; shall mean the gross amount of
Eligible Accounts less (a) unpaid sales, excise or similar taxes included in the
amount thereof and (b) returns, discounts, claims, credits and allowances of any
nature at any time issued, owing, granted, outstanding, available or claimed
with respect thereto.
<PAGE>
-8-
1.23 "Obligations"; shall mean any and all Revolving Loans and Letter of
Credit Accommodations, and all other obligations, liabilities and indebtedness
of every kind, nature and description owing by Borrower to Lender, including
principal, interest, charges, fees, costs and expenses, however evidenced,
whether as principal, surety, endorser, guarantor or otherwise, arising under
this Agreement or the Financing Agreements, whether now existing or hereafter
arising, whether arising before, during or after the initial or any renewal term
of this Agreement or after the commencement of any case with respect to Borrower
under the BIA, CCAA, or any similar statute (including the payment of interest
and other amounts which would accrue and become due but for the commencement of
such case, whether or not such amounts are allowed or allowable in whole or in
part in such case), whether direct or indirect, absolute or contingent, joint or
several, due or not due, primary or secondary, liquidated or unliquidated,
secured or unsecured, and however acquired by Lender.
1.24 "Obligor"; shall mean any guarantor, endorser, acceptor, surety or
other person liable on or with respect to the Obligations or who is the owner of
any property which is security for the Obligations, other than Borrower.
1.25 "Payment Account"; shall have the meaning set forth in Section 6.3
hereof.
1.26 "Person" or "person"; shall mean any individual, sole
proprietorship, partnership, corporation, limited liability company, limited
liability partnership, business trust, unincorporated association, joint stock
corporation, trust, joint venture or other entity or any government or any
agency or instrumentality or political subdivision thereof.
1.27 "Records"; shall mean all of Borrower's present and future books of
account of every kind or nature, purchase and sale agreements, invoices, ledger
cards, bills of lading and other shipping evidence, statements, correspondence,
memoranda, credit files and other data relating to the Collateral or any account
debtor, together with the tapes, disks, diskettes and other data and software
storage media and devices, file cabinets or containers in or on which the
foregoing are stored (including any rights of Borrower with respect to the
foregoing maintained with or by any other person).
1.28 "Reference Rate"; shall mean, at any time, the greater of (i) the
rate from time to time publicly announced by Bank of Montreal as its prime rate
in effect for determining interest rates on Canadian Dollar denominated
commercial loans in Canada, or (ii) the annual rate of interest equal to the sum
of (A) the CDOR Rate at such time and (B) one (1%) percent per annum.
1.29 "Revolving Loans"; shall mean the loans now or hereafter made by
Lender to or for the benefit of Borrower on a revolving basis (involving
advances, repayments and readvances) as set forth in Section 2.1 hereof.
1.30 "Value"; shall mean, as determined by Lender in good faith, with
respect to Inventory, the lower of (a) cost computed on a first-in-first-out
basis in accordance with GAAP or (b) market value.
<PAGE>
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SECTION 2. CREDIT FACILITIES
2.1 REVOLVING LOANS.;
(a) Subject to and upon the terms and conditions contained
herein, Lender agrees to make Revolving Loans to Borrower from time to time in
amounts requested by Borrower up to the amount equal to the sum of:
(i) eighty-five (85%) percent of the Net Amount of Eligible
Accounts; PLUS
(ii) the lesser of: (A)the sum of fifty-five(55%) percent of the
Value of Eligible Inventory consisting of finished goods, to a
maximum of $10,000,000, plus fifty-five (55%) percent of the Value
of Eligible Inventory consisting of uncut fabric raw materials to a
maximum of $2,000,000 and (B) the amount of $10,000,000 ; LESS
(iii) any Availability Reserves.
(b) Lender may, in its reasonable discretion, from time to time,
upon not less than five (5) days prior notice to Borrower, (i) reduce the
lending formula with respect to Eligible Accounts to the extent that Lender
determines in good faith that: (A) the dilution with respect to the Accounts
for any period (based on the ratio of (1) the aggregate amount of reductions in
Accounts other than as a result of payments in cash to (2) the aggregate amount
of total sales) has increased in any material respect or may be reasonably
anticipated to increase in any material respect above historical levels, or (B)
the general creditworthiness of account debtors has declined from historical
levels or (ii) reduce the lending formula(s) with respect to Eligible Inventory
to the extent that Lender determines that: (A) the number of days of the
turnover of the Inventory for any period has changed in any material respect or
(B) the liquidation value of the Eligible Inventory, or any category thereof,
has materially decreased, or (C) the nature and quality of the Inventory has
deteriorated. In determining whether to reduce the lending formula(s), Lender
may consider events, conditions, contingencies or risks which are also
considered in determining Eligible Accounts, Eligible Inventory or in
establishing Availability Reserves.
(c) Except in Lender's discretion, the aggregate amount of the
Loans and the Letter of Credit Accommodations outstanding at any time shall not
exceed the amount of the Maximum Credit specified for Revolving Loans and Letter
of Credit Accommodations. In the event that the outstanding amount of any
component of the Loans, or the aggregate amount of the outstanding Loans and
Letter of Credit Accommodations, exceed the amounts available under the lending
formulas, the sublimits for Letter of Credit Accommodations set forth in Section
2.2(d) or the Maximum Credit, as applicable, such event shall not limit, waive
or otherwise affect any rights of Lender in that circumstance or on any future
occasions and Borrower shall, upon demand by Lender, which may be made at any
time or from time to time, immediately repay to Lender the entire amount of any
such excess(es) for which payment is demanded.
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(d) For purposes only of applying the sublimit on Revolving
Loans based on Eligible Inventory pursuant to Section 2.1(a)(ii)(B), Lender may
treat the then undrawn amounts of outstanding Letter of Credit Accommodations
for the purpose of purchasing Eligible Inventory as Revolving Loans to the
extent Lender is in effect basing the issuance of the Letter of Credit
Accommodations on the Value of the Eligible Inventory being purchased with such
Letter of Credit Accommodations.
2.2 LETTER OF CREDIT ACCOMMODATIONS.;
(a) Subject to and upon the terms and conditions contained
herein, at the request of Borrower, Lender agrees to provide or arrange for
Letter of Credit Accommodations for the account of Borrower containing terms and
conditions acceptable to Lender and the issuer thereof. Any payments made by
Lender to any issuer thereof and/or related parties in connection with the
Letter of Credit Accommodations shall constitute additional Revolving Loans to
Borrower pursuant to this Section 2.
(b) In addition to the customary and reasonable charges, fees or
expenses charged for opening, negotiation and similar fees and charges by the
bank or issuer in connection with the issuance of letters of credit under the
Letter of Credit Accommodations, Borrower shall pay to Lender a letter of credit
fee at a rate equal to one and one-quarter (1 1/4%) percent per annum on the
daily outstanding balance of the Letter of Credit Accommodations for the
immediately preceding month (or part thereof), payable in arrears as of the
first day of each succeeding month, which shall be the only charge or fee
payable to Congress, except that Borrower shall pay to Lender such letter of
credit fee, at Lender's option, without prior notice, but with notice promptly
thereafter, at a rate equal to three and one-quarter (3 1/4%) percent per annum
on such daily outstanding balance for: (i) the period from and after the date
of termination or non-renewal hereof until Lender has received full and final
payment of all Obligations (notwithstanding entry of a judgment against
Borrower) and (ii) the period from and after the date of the occurrence of an
Event of Default for so long as such Event of Default is continuing as
determined by Lender, acting in good faith, but not after the Borrower posted
cash collateral or letters of credit acceptable to the Lender for the
obligations under the Letter of Credit Accommodations. Such letter of credit
fee shall be calculated on the basis of a three hundred sixty-five (365) day
year and actual days elapsed and the obligation of Borrower to pay such fee
shall survive the termination or non-renewal of this Agreement.
(c) No Letter of Credit Accommodations shall be available unless
on the date of the proposed issuance of any Letter of Credit Accommodations, the
Revolving Loans available to Borrower (subject to the Maximum Credit and any
Availability Reserves) are equal to or greater than: (i) if the proposed Letter
of Credit Accommodation is for the purpose of purchasing Eligible Inventory, the
sum of (A) the percentage equal to one hundred (100%) percent minus the then
applicable percentage set forth in Section 2.1(a)(ii)(A) above of the Value of
such Eligible Inventory, plus (B) freight, taxes, duty and other amounts which
Lender estimates, acting in good faith, must be paid in connection with such
Inventory upon arrival and for delivery to one of Borrower's locations for
Eligible Inventory within Canada and (ii) if the proposed Letter of Credit
Accommodation is for any other purpose, an amount equal to one
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hundred (100%) percent of the face amount thereof and all other commitments and
obligations made or incurred by Lender with respect thereto. Effective on the
issuance of each Letter of Credit Accommodation, an Availability Reserve shall
be established in the applicable amount set forth in Section 2.2(c)(i) or
Section 2.2(c)(ii).
(d) Except in Lender's discretion, the amount of all outstanding
Letter of Credit Accommodations and all other commitments and obligations made
or incurred by Lender in connection therewith shall not at any time exceed
$8,000,000. At any time an Event of Default exists or has occurred and is
continuing, upon Lender's request, Borrower will either furnish cash collateral
or letters of credit acceptable to Lender to secure the reimbursement
obligations to the issuer in connection with any Letter of Credit Accommodations
or furnish cash collateral or letters of credit acceptable to the Lender to
Lender for the Letter of Credit Accommodations, and in either case, the
Revolving Loans otherwise available to Borrower shall not be reduced as provided
in Section 2.2(c) to the extent of such cash collateral.
(e) Borrower shall indemnify and hold Lender harmless from and
against any and all losses, claims, damages, liabilities, costs and expenses
which Lender may suffer or incur in connection with any Letter of Credit
Accommodations and any documents, drafts or acceptances relating thereto,
including any losses, claims, damages, liabilities, costs and expenses due to
any action taken by any issuer or correspondent with respect to any Letter of
Credit Accommodation, but excluding those resulting from the gross negligence or
willful misconduct of the Lender, or any issuer or correspondent selected by the
Lender. Borrower assumes all risks with respect to the acts or omissions of the
drawer under or beneficiary of any Letter of Credit Accommodation and for such
purposes the drawer or beneficiary shall be deemed Borrower's agent. Borrower
assumes all risks for, and agrees to pay, all foreign, Federal, provincial and
local taxes, duties and levies relating to any goods subject to any Letter of
Credit Accommodations or any documents, drafts or acceptances thereunder.
Borrower hereby releases and holds Lender harmless from and against any acts,
waivers, errors, delays or omissions, whether caused by Borrower, by any issuer
or correspondent or otherwise with respect to or relating to any Letter of
Credit Accommodation, but excluding those resulting from gross negligence or
willful misconduct of the Lender, or any issuer or corrsepondent selected by the
Lender. The provisions of this Section 2.2(e) shall survive the payment of
Obligations and the termination or non-renewal of this Agreement.
(f) Nothing contained herein shall be deemed or construed to
grant Borrower any right or authority to pledge the credit of Lender in any
manner. Lender shall have no liability, absent gross negligence or willful
misconduct, of any kind with respect to any Letter of Credit Accommodation
provided by an issuer other than Lender unless Lender has duly executed and
delivered to such issuer the application or a guarantee or indemnification in
writing with respect to such Letter of Credit Accommodation. Borrower shall be
bound by any interpretation made in good faith by Lender, or any other issuer or
correspondent under or in connection with any Letter of Credit Accommodation or
any documents, drafts or acceptances thereunder, notwithstanding that such
interpretation may be inconsistent with any instructions of Borrower. Lender
shall have the sole and exclusive right and authority to, and Borrower shall not
without the prior consent of the Lender at any time an Event of Default exists
or has occurred and is continuing: (A) approve or resolve any questions of
non-compliance of documents, (B) give any
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instructions as to acceptance or rejection of any documents or goods or (C)
execute any and all applications for steamship or airway guaranties, indemnities
or delivery orders. The Borrower may not at any time, to the extent the
following would adversely affect any right, obligation or liability of the
Lender, and in any event may not without notice to the Lender, or at any time
after an Event of Default exists or has occurred and is continuing: (A) grant
any extensions of the maturity of, time of payment for, or time of presentation
of, any drafts, acceptances, or documents, or (B) agree to any amendments,
renewals, extensions, modifications, changes or cancellations of any of the
terms or conditions of any of the applications, Letter of Credit Accommodations,
or documents, drafts or acceptances thereunder or any letters of credit included
in the Collateral. Lender may take such actions either in its own name or in
Borrower's name, and shall provide notice to the Borrower on a timely basis.
(g) Any rights, remedies, duties or obligations granted or
undertaken by Borrower to any issuer or correspondent in any application for any
Letter of Credit Accommodation, or any other agreement in favor of any issuer or
correspondent relating to any Letter of Credit Accommodation, shall be deemed to
have been granted or undertaken by Borrower to Lender. Provided that the
following shall apply solely to Letter of Credit Accommodations issued following
written application by the Borrower, and solely in relation to the standard
requirements of the bank or issuer in issuing the Letter of Credit
Accommodation, and subject to the limitation on fees set forth in Section 2.2(b)
hereof, any duties or obligations undertaken by Lender to any issuer or
correspondent in any application for any Letter of Credit Accommodation, or any
other agreement by Lender in favor of any issuer or correspondent relating to
any Letter of Credit Accommodation, shall be deemed to have been undertaken by
Borrower to Lender and to apply in all respects to Borrower, provided that such
duties, obligations and agreements are not materially inconsistent with the
terms of this Agreement, unless the Borrower has given its prior written consent
to such material inconsistency, and the Lender shall provide copies of the
letters of credit and related documents, on a timely basis.
2.3 AVAILABILITY RESERVES.; All Revolving Loans otherwise available to
Borrower pursuant to the lending formulas and subject to the Maximum Credit and
other applicable limits hereunder shall be subject to Lender's continuing right
to establish and revise Availability Reserves, in accordance with this
Agreement.
SECTION 3. INTEREST AND FEES
3.1 INTEREST.;
(a) Borrower shall pay to Lender interest on the outstanding
principal amount of the non-contingent Obligations at the rate of one and one
quarter (1 1/4%) percent per annum in excess of the Reference Rate, except that,
at Lender's option, without prior notice, but with notice promptly thereafter,
Borrower shall pay to Lender interest at the rate of three and one quarter (3
1/4%) percent per annum in excess of the Reference Rate: (i) on the
non-contingent Obligations for (A) the period from and after the date of
termination or non-renewal hereof until such time as Lender has received full
and final payment of all such Obligations (notwithstanding entry of any judgment
against Borrower), and (B) the period from and after the date of the
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occurrence of an Event of Default for so long as such Event of Default is
continuing as determined by Lender, acting in good faith and (ii) on the
Revolving Loans at any time outstanding in excess of the amounts available to
Borrower under Section 2 (whether or not such excess(es), arise or are made with
or without Lender's knowledge or consent and whether made before or after an
Event of Default).
(b) Interest shall be payable by Borrower to Lender monthly in
arrears not later than the first day of each calendar month and shall be
calculated on the basis of a three hundred sixty five (365) day year and actual
days elapsed. The interest rate shall increase or decrease by an amount equal
to each increase or decrease in the Reference Rate effective on the first day of
the month after any change in such Reference Rate is announced. The increase or
decrease shall be based on the Reference Rate in effect on the last day of the
month in which any such change occurs. All interest accruing hereunder on and
after an Event of Default or termination or non-renewal hereof shall be payable
on demand. In no event shall charges constituting interest payable by Borrower
to Lender exceed the maximum amount or the rate permitted under any applicable
law or regulation, and if any part or provision of this Agreement is in
contravention of any such law or regulation, such part or provision shall be
deemed amended to conform thereto.
(c) For purposes of disclosure under the INTEREST ACT (Canada),
where interest is calculated pursuant hereto at a rate based upon a 365 day year
(the "First Rate"), it is hereby agreed that the rate or percentage of interest
on a yearly basis is equivalent to such First Rate multiplied by the actual
number of days in the year divided by 365.
(d) Notwithstanding the provisions of this Section 3 or any
other provision of this Agreement, in no event shall the aggregate "interest"
(as that term is defined in Section 347 of the CRIMINAL CODE (Canada)) exceed
the effective annual rate of interest on the "credit advanced" (as defined
therein) lawfully permitted under Section 347 of the CRIMINAL CODE (Canada).
The effective annual rate of interest shall be determined in accordance with
generally accepted actuarial practices and principles over the term of the
applicable Loan, and in the event of a dispute, a certificate of a Fellow of the
Canadian Institute of Actuaries appointed by Lender will be conclusive for the
purposes of such determination.
(e) For greater certainty, whenever any amount is payable under
this Agreement or any Financing Agreement by Borrower as interest or as a fee
which requires the calculation of an amount using a percentage per annum, each
party to this Agreement acknowledges and agrees that such amount shall be
calculated as of the date payment is due without application of the "deemed
reinvestment principle" or the "effective yield method". As an example, when
interest is calculated and payable monthly, the rate of interest payable per
month is 1/12 of the stated rate of interest per annum.
3.2 CLOSING FEE.; Borrower shall pay to Lender as a closing fee the
amount of one (1%) percent of the Maximum Credit, which shall be fully earned as
of and payable on the date hereof.
<PAGE>
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3.3 FACILITY FEE.; Borrower shall pay to Lender annually a facility fee
in an amount of $15,000 per annum while this Agreement is in effect and for so
long thereafter as any of the Obligations are outstanding, which fee shall be
fully earned as of and payable in advance on each anniversary of the date
hereof.
3.4 SERVICING FEE.; Borrower shall pay to Lender, monthly, in advance,
a servicing fee in an amount equal to $1,000 in respect of Lender's services for
each month (or part thereof) while this Agreement remains in effect and for so
long thereafter as any of the Obligations are outstanding, which fee shall be
fully earned as of and payable in advance on the date hereof and on the first
day of each month hereafter.
3.5 UNUSED LINE FEE.; Borrower shall pay to Lender monthly an unused
line fee at a rate equal to one quarter of one (1/4%) percent per annum
calculated upon the amount by which $12,000,000 exceeds the average daily
principal balance of the outstanding Revolving Loans and Letter of Credit
Accommodations during the immediately preceding month (or part thereof), during
such periods as the Revolving Loans and Letter of Credit Accommodations remain
available to the Borrower, which fee shall be payable on the first day of each
month in arrears.
SECTION 4. CONDITIONS PRECEDENT
4.1 CONDITIONS PRECEDENT TO INITIAL LOANS AND LETTER OF CREDIT
ACCOMMODATIONS.; Each of the following is a condition precedent to Lender making
the initial Loans and providing the initial Letter of Credit Accommodations
hereunder:
(a) Lender shall have received evidence, in form and substance
satisfactory to Lender, that Lender has valid perfected and first priority
security interests in and liens upon the Collateral and any other property which
is intended to be security for the Obligations or the liability of any Obligor
in respect thereof, subject only to the security interests and liens permitted
herein or in the other Financing Agreements;
(b) all requisite corporate action and proceedings in connection
with this Agreement and the other Financing Agreements shall be satisfactory in
form and substance to Lender, and Lender shall have received all information and
copies of all documents, including records of requisite corporate action and
proceedings which Lender may have requested in connection therewith, such
documents where requested by Lender or its counsel to be certified by
appropriate corporate officers or governmental authorities;
(c) no material adverse change shall have occurred in the
assets, business or prospects of Borrower since the date of Lender's latest
field examination and no change or event shall have occurred which would impair
the ability of Borrower or any Obligor to perform its obligations hereunder or
under any of the other Financing Agreements to which it is a party or of Lender
to enforce the Obligations or realize upon the Collateral;
(d) Lender shall have completed a field review of the Records
and such other information with respect to the Collateral as Lender may require
to determine the amount of
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Revolving Loans available to Borrower, the results of which shall be
satisfactory to Lender, not more than three (3) business days prior to the date
hereof;
(e) Subject to the Borrower's compliance with the reporting
requirements imposed upon it with respect to retail sales locations pursuant to
Section 1.12 hereof, Lender shall have received, in form and substance
satisfactory to Lender, all consents, waivers, acknowledgments and other
agreements from third persons which Lender may deem necessary or desirable in
order to permit, protect and perfect its security interests in and liens upon
the Collateral or to effectuate the provisions or purposes of this Agreement and
the other Financing Agreements, including acknowledgements by the lessors, and
warehousemen identified on Schedule 4.1(e) hereto of Lender's security interests
in the Collateral, waivers by such persons of any security interests, liens or
other claims by such persons to the Collateral and agreements permitting Lender
access to, and the right to remain on, the premises to exercise its rights and
remedies and otherwise deal with the Collateral;
(f) Lender shall have received evidence of insurance and loss
payee endorsements required hereunder and under the other Financing Agreements,
in form and substance satisfactory to Lender, and certificates of insurance
policies and/or endorsements naming Lender as loss payee;
(g) Lender shall have received, in form and substance
satisfactory to Lender, such opinion letters of counsel to Borrower with respect
to the Financing Agreements and such other matters as Lender may request;
(h) the other Financing Agreements and all instruments and
documents hereunder and thereunder shall have been duly executed and delivered
to Lender, in form and substance satisfactory to Lender; and
(i) the Excess Availability as determined by Lender in
accordance with this Agreement, as of the date hereof, shall be not less than
$1,500,000 after giving effect to the initial Loans made or to be made and
Letter of Credit Accommodations issued or to be issued in connection with the
initial transactions hereunder and any distribution to any direct or indirect
parent or grandparent company, or any related company, which distributions shall
be limited to repayment of the inter-corporate obligations as reported to the
Lender prior to the date hereof.
"Excess Availability" shall mean the amount, as determined by Lender,
calculated at any time, equal to: (a) the lesser of (i) the amount of the
Revolving Loans available to Borrower, as determined by Lender, in accordance
with this Agreement, and subject to the sublimits and Availability Reserves from
time to time established by Lender hereunder and (ii) the Maximum Credit, MINUS
(b) the sum of: (i) the amount of all then outstanding and unpaid Obligations,
plus (ii) the aggregate amount of all trade payables of Borrower which are more
than sixty (60) days past due as of such time plus (iii) the amount of cheques
issued by Borrower to pay trade payables, but not yet sent and the book
overdraft of Borrower.
4.2 CONDITIONS PRECEDENT TO ALL LOANS AND LETTER OF CREDIT
ACCOMMODATIONS.; Each of the following is an additional condition precedent to
Lender making Loans and/or providing Letter
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of Credit Accommodations to Borrower, including the initial Loans and Letter of
Credit Accommodations and any future Loans and Letter of Credit Accommodations:
(a) all representations and warranties contained herein and in
the other Financing Agreements shall be true and correct in all material
respects with the same effect as though such representations and warranties had
been made on and as of the date of the making of each such Loan or providing
each such Letter of Credit Accommodation and after giving effect thereto; and
(b) no Event of Default and no event or condition which, with
notice or passage of time or both, would constitute an Event of Default, shall
exist or have occurred and be continuing on and as of the date of the making of
such Loan or providing each such Letter of Credit Accommodation and after giving
effect thereto.
SECTION 5. GRANT OF SECURITY INTEREST
5.1; To secure payment and performance of all Obligations, Borrower has
granted to the Lender security under a general security agreement between the
Borrower and the Lender dated even date herewith (the "General Security
Agreement"), which shall remain in full force and effect, duly perfected during
the period that any Obligation shall remain owing by the Borrower to the Lender.
5.2; As additional security, Borrower has granted to Lender a debenture
over the lands municipally known as 112 Benton Street, Kitchener, Ontario (the
"Debenture"). The Lender confirms that notwithstanding the nominal rate of
interest set forth in the Debenture in the amount of 25%, the applicable rate of
interest is the rate set forth in this Agreement and payment of interest at such
applicable rate for any period shall satisfy in full any requirement to pay
interest under the Debenture for the same period.
SECTION 6. COLLECTION AND ADMINISTRATION
6.1 BORROWER'S LOAN ACCOUNT.; Lender shall maintain one or more loan
account(s) on its books in which shall be recorded (a) all Revolving Loans,
Letter of Credit Accommodations and other Obligations and the Collateral, (b)
all payments made by or on behalf of Borrower and (c) all other appropriate
debits and credits as provided in this Agreement, including fees, charges,
costs, expenses and interest. All entries in the loan account(s) shall be made
in accordance with Lender's customary practices as in effect from time to time.
6.2 STATEMENTS. ; Lender shall render to Borrower each month a statement
setting forth the balance in the Borrower's loan account(s) maintained by Lender
for Borrower pursuant to the provisions of this Agreement, including principal,
interest, fees, costs and expenses. Each such statement shall be subject to
subsequent adjustment by Lender but shall, absent manifest errors or omissions,
be considered correct and deemed accepted by Borrower and conclusively binding
upon Borrower as an account stated except to the extent that Lender receives a
written notice
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from Borrower of any specific exceptions of Borrower thereto within thirty (30)
days after the date such statement has been mailed by Lender. Until such time
as Lender shall have rendered to Borrower a written statement as provided above,
the balance in Borrower's loan account(s) shall be presumptive evidence of the
amounts due and owing to Lender by Borrower.
6.3 COLLECTION OF ACCOUNTS. ;
(a) Borrower shall either establish and maintain, at its expense, an
arrangement for the deposit of all revenue and other receipts of any
nature and kind to a control account of the Lender, with such
arrangements for the operation of such account as shall be required
by the Lender ("Payment Accounts"), or, if required by the Lender,
shall, upon five (5) days notice, establish such blocked accounts
or lockboxes and related blocked accounts (in either case, "Blocked
Accounts"), as Lender may specify. In either case, the Lender may
establish and maintain bank accounts of Lender in each case with
such banks as are acceptable to Lender, into which Borrower shall,
in accordance with Lender's instructions, promptly deposit and
direct its account debtors that remit payments by electronic funds
transfers to directly remit, all payments on Accounts and all
payments constituting proceeds of Inventory or other Collateral in
the identical form in which such payments are made, whether by cash,
cheque or other manner. The banks at which any Blocked Accounts are
established shall enter into an agreement, in form and substance
satisfactory to Lender, providing that all items once received or
deposited in the Blocked Accounts are to be promptly applied to the
Obligations and therefore are the property of Lender, that the
depository bank has no lien upon, or right to setoff against the
Blocked Accounts, the items received for deposit therein, or the
funds from time to time on deposit therein and that the depository
bank will wire, or otherwise transfer, in immediately available
funds, on a daily basis, all funds received or deposited into the
Blocked Accounts to the Payment Accounts or such other bank account
of Lender as Lender may from time to time designate for such
purpose. Borrower agrees that all payments made to such Blocked
Accounts or Payment Accounts or other funds received and collected
by Lender, whether on the Accounts or as proceeds of Inventory or
other Collateral or otherwise shall be the property of Lender.
(b) For purposes of calculating interest on the Obligations, such
payments or other funds received will be applied (conditional upon
final collection) to the Obligations on the business day of receipt
of immediately available funds by Lender in the applicable Payment
Account, provided the same is received for same day credit and
otherwise on the next following business day. For purposes of
calculating the amount of the Revolving Loans available to Borrower
such payments will be applied (conditional upon final collection) to
the Obligations on the business day of receipt by Lender in the
applicable Payment Account, if such payments are received within
sufficient time (in accordance with Lender's usual and customary
practices as in effect from time to time) to credit Borrower's loan
account on such day, and if not, then on the next business day.
Provided that no Event of Default has occurred and is continuing, if
Lender receives funds in a
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Payment Account at any time at which no non-contingent Obligations
are outstanding or in excess of such outstanding Obligations, Lender
shall transfer such funds to Borrower at such account as Borrower
may direct, provided that Borrower shall, at Lender's request,
deposit such funds to an account maintained at the bank at which the
Payment Accounts are maintained and shall execute and deliver to
Lender a cash collateral agreement in form and substance
satisfactory to Lender providing to Lender a first priority security
interest over such account.
(c) Borrower and all of its affiliates, subsidiaries, shareholders,
directors, employees or agents shall, acting as trustee for Lender,
receive, as the property of Lender, any monies, cheques, notes,
drafts or any other payment relating to and/or proceeds of Accounts
or other Collateral which come into their possession or under their
control and immediately upon receipt thereof, shall deposit or cause
the same to be deposited in the Blocked Accounts or the Payment
Accounts, as applicable, or remit the same or cause the same to be
remitted, in kind, to Lender. In no event shall the same be
commingled with Borrower's own funds. Borrower agrees to reimburse
Lender on demand for any amounts owed or paid to any bank at which a
Blocked Account or Payment Account is established or any other bank
or person involved in the transfer of funds to or from the Blocked
Accounts or the Payment Accounts arising out of Lender's payments to
or indemnification of such bank or person. The obligation of
Borrower to reimburse Lender for such amounts pursuant to this
Section 6.3 shall survive the termination or non-renewal of this
Agreement.
6.4 PAYMENTS.; All Obligations shall be payable to the Payment Account
as provided in Section 6.3 or such other place as Lender may designate from time
to time. Provided that no Event of Default has occurred and is continuing,
Lender may apply payments received or collected from Borrower or for the account
of Borrower (including the monetary proceeds of collections or of realization
upon any Collateral) to such of the non-contingent Obligations, in such order
and manner as Lender determines. At Lender's option, all principal, interest,
fees, costs, expenses and other charges provided for in this Agreement or the
other Financing Agreements may be charged directly to the loan account(s) of
Borrower. Borrower shall make all payments to Lender on the Obligations free
and clear of, and without deduction or withholding for or on account of, any
setoff, counterclaim, defense, duties, taxes, levies, imposts, fees, deductions,
withholding, restrictions or conditions of any kind. If after receipt of any
payment of, or proceeds of Collateral applied to the payment of, any of the
Obligations, Lender is required to surrender or return such payment or proceeds
to any Person for any reason, then the Obligations intended to be satisfied by
such payment or proceeds shall be reinstated and continue and this Agreement
shall continue in full force and effect as if such payment or proceeds had not
been received by Lender. Borrower shall be liable to pay to Lender, and does
hereby indemnify and hold Lender harmless for the amount of any payments or
proceeds surrendered or returned. This Section 6.4 shall remain effective
notwithstanding any contrary action which may be taken by Lender in reliance
upon such payment or proceeds. This Section 6.4 shall survive the payment of
the Obligations and the termination or non-renewal of this Agreement.
<PAGE>
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To the extent Lender receives any payments or collections from or on
account of Borrower in US Dollars, Lender shall convert the amount of any such
payments received or collected (including, without limitation, the monetary
proceeds of collections or of realization upon any collateral) in US Dollars to
Canadian Dollars using the Currency Exchange Convention and such payments shall
constitute satisfaction of the Obligations only to the extent of the amounts so
converted.
6.5 AUTHORIZATION TO MAKE LOANS.; Lender is authorized to make the
Loans and provide the Letter of Credit Accommodations based upon telephonic or
other instructions received from those persons purporting to be the persons
designated, in writing, to the Lender for such purpose or, at the discretion of
Lender, if such Loans are necessary to satisfy any Obligations. All requests
for Loans or Letter of Credit Accommodations hereunder shall specify the date on
which the requested advance is to be made or Letter of Credit Accommodations
established (which day shall be a business day) and the amount of the requested
Loan. Requests received after 11:00 a.m. eastern standard time on any day
shall be deemed to have been made as of the opening of business on the
immediately following business day. All Loans and Letter of Credit
Accommodations under this Agreement shall be conclusively presumed to have been
made to, and at the request of and for the benefit of, Borrower when deposited
to the credit of Borrower or otherwise disbursed or established in accordance
with the instructions of Borrower or in accordance with the terms and conditions
of this Agreement.
6.6 USE OF PROCEEDS.; Borrower shall use the initial proceeds of the
Loans provided by Lender to Borrower hereunder only for: (a) payments to each
of the persons listed in the disbursement direction furnished by Borrower to
Lender on or about the date hereof and as otherwise permitted in Section 9.10
hereof and (b) costs, expenses and fees in connection with the preparation,
negotiation, execution and delivery of this Agreement and the other Financing
Agreements. All other Revolving Loans made or Letter of Credit Accommodations
provided by Lender to Borrower pursuant to the provisions hereof shall be used
by Borrower only for general operating, working capital and other proper
corporate purposes of Borrower not otherwise prohibited by the terms hereof.
SECTION 7. COLLATERAL REPORTING AND COVENANTS
7.1 COLLATERAL REPORTING.; Borrower shall provide Lender with the
following documents in a form satisfactory to Lender: (a) on a regular basis as
required by Lender, a schedule of Accounts, sales made, credits issued and cash
received; (b) on a monthly basis within 20 days after each month end, or more
frequently and within such time periods as Lender may request, (i) perpetual
inventory reports, (ii) inventory reports by category and (iii) agings of
accounts payable, (c) upon Lender's request, (i) copies of customer statements
and credit memos, remittance advices and reports, and copies of deposit slips
and bank statements, (ii) copies of shipping and delivery documents, and (iii)
copies of purchase orders, invoices and delivery documents for Inventory and
Equipment acquired by Borrower; (d) agings of accounts receivable on a monthly
basis within 20 days after each month end, or more frequently and within such
time periods as Lender may request; and (e) such other reports as to the
Collateral as Lender shall request from time to time. If any of Borrower's
records or reports of the Collateral are prepared
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or maintained by an accounting service, contractor, shipper or other agent,
Borrower hereby irrevocably authorizes such service, contractor, shipper or
agent to deliver such records, reports, and related documents to Lender and to
follow Lender's instructions with respect to further services at any time that
an Event of Default exists or has occurred and is continuing.
7.2 ACCOUNTS COVENANTS.;
(a) Borrower shall notify Lender promptly of: (i) any material
delay in Borrower's performance of any of its obligations to any account debtor
or the assertion of any claims, offsets, defenses or counterclaims by any
account debtor, or any disputes with account debtors, or any settlement,
adjustment or compromise thereof, (ii) all material adverse information in
Borrower's possession relating to the financial condition of any account debtor
and (iii) any event or circumstance which, to Borrower's knowledge would cause
Lender to consider any then existing Accounts as no longer constituting Eligible
Accounts. No credit, discount, allowance or extension or agreement for any of
the foregoing shall be granted to any account debtor without Lender's consent,
except in the ordinary course of Borrower's business in accordance with
practices and policies previously disclosed in writing to Lender. So long as no
Event of Default exists or has occurred and is continuing, Borrower shall
settle, adjust or compromise any claim, offset, counterclaim or dispute with any
account debtor. At any time that an Event of Default exists or has occurred and
is continuing, Lender shall, at its option, have the exclusive right to settle,
adjust or compromise any claim, offset, counterclaim or dispute with account
debtors or grant any credits, discounts or allowances.
(b) Without limiting the obligation of Borrower to deliver any
other information to Lender, Borrower shall promptly report to Lender any return
of Inventory by any one account debtor if the Inventory so returned in such case
has a value in excess of $100,000. At any time that Inventory is returned,
reclaimed or repossessed, the Account (or portion thereof) which arose from the
sale of such returned, reclaimed or repossessed Inventory shall not be deemed an
Eligible Account. In the event any account debtor returns Inventory when an
Event of Default exists or has occurred and is continuing, Borrower shall, upon
Lender's request, (i) hold the returned Inventory in trust for Lender, (ii)
segregate all returned Inventory from all of its other property, (iii) dispose
of the returned Inventory solely according to Lender's instructions, and (iv)
not issue any credits, discounts or allowances with respect thereto without
Lender's prior written consent.
(c) With respect to each Account: (i) the amounts shown on any
invoice delivered to Lender or schedule thereof delivered to Lender shall be
true and complete, in all material respects, (ii) no payments shall be made
thereon except payments promptly delivered to Lender pursuant to the terms of
this Agreement, (iii) no credit, discount, allowance or extension or agreement
for any of the foregoing shall be granted to any account debtor except as
reported to Lender in accordance with this Agreement and except for credits,
discounts, allowances or extensions made or given in the ordinary course of
Borrower's business in accordance with practices and policies previously
disclosed to Lender, (iv) there shall be no setoffs, deductions, contras,
defenses, counterclaims or disputes existing or asserted with respect thereto
except as reported to Lender in accordance with the terms of this Agreement, (v)
none of the transactions giving rise thereto will violate any applicable
provincial or Federal laws or regulations, all
<PAGE>
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documentation relating thereto will be legally sufficient under such laws and
regulations and all such documentation will be legally enforceable in accordance
with its terms.
(d) Lender shall have the right at any time or times, in
Lender's name or in the name of a nominee of Lender, to verify the validity,
amount or any other matter relating to any Account or other Collateral, by mail,
telephone, facsimile transmission or otherwise.
(e) Borrower shall deliver or cause to be delivered to Lender,
with appropriate endorsement and assignment, with full recourse to Borrower, all
chattel paper and instruments which Borrower now owns or may at any time acquire
immediately upon Borrower's receipt thereof, except as Lender may otherwise
agree.
(f) Lender may, at any time or times that an Event of Default
exists or has occurred and is continuing, (i) notify any or all account debtors
that the Accounts have been assigned to Lender and that Lender has a security
interest therein and Lender may direct any or all accounts debtors to make
payment of Accounts directly to Lender, (ii) extend the time of payment of,
compromise, settle or adjust for cash, credit, return of merchandise or
otherwise, and upon any terms or conditions, any and all Accounts or other
obligations included in the Collateral and thereby discharge or release the
account debtor or any other party or parties in any way liable for payment
thereof without affecting any of the Obligations, (iii) demand, collect or
enforce payment of any Accounts or such other obligations, but without any duty
to do so, and Lender shall not be liable, save for gross negligence or willful
misconduct, for its failure to collect or enforce the payment thereof nor for
the negligence of its agents or attorneys with respect thereto and (iv) take
whatever other action Lender may deem necessary or desirable for the protection
of its interests. At any time that an Event of Default exists or has occurred
and is continuing, at Lender's request, all invoices and statements sent to any
account debtor shall state that the Accounts and such other obligations have
been assigned to Lender and are payable directly and only to Lender and Borrower
shall deliver to Lender such originals of documents evidencing the sale and
delivery of goods or the performance of services giving rise to any Accounts as
Lender may require.
7.3 INVENTORY COVENANTS.; With respect to the Inventory: (a) Borrower
shall at all times maintain inventory records reasonably satisfactory to Lender,
keeping correct and accurate records itemizing and describing the kind, type,
quality and quantity of Inventory, Borrower's cost therefor and daily
withdrawals therefrom and additions thereto; (b) Borrower shall conduct a
physical count of the Inventory at least once each year, but at any time or
times as Lender may request on or after an Event of Default, but acting
reasonably and promptly following such physical inventory shall supply Lender
with a report in the form and with such specificity as may be reasonably
satisfactory to Lender concerning such physical count; (c) Borrower shall not
remove any Inventory from the locations set forth or permitted herein, without
the prior written consent of Lender, except for sales of Inventory in the
ordinary course of Borrower's business and except to move Inventory directly
from one location set forth or permitted herein to another such location; (d)
upon Lender's request, acting reasonably, Borrower shall, at its expense, no
more than once in any twelve (12) month period, but at any time or times as
Lender may request on or after an Event of Default, deliver or cause to be
delivered to Lender written reports or appraisals as to the Inventory in form,
scope and methodology acceptable to Lender and by an
<PAGE>
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appraiser acceptable to Lender, addressed to Lender or upon which Lender is
expressly permitted to rely; (e) Borrower shall produce, use, store and maintain
the Inventory with all reasonable care and caution and in accordance with
applicable standards of any insurance and in conformity with applicable laws ;
(f) Borrower assumes all responsibility and liability arising from or relating
to the production, use, sale or other disposition of the Inventory; (g) Borrower
shall not sell Inventory to any customer on approval, or any other basis which
entitles the customer to return or may obligate Borrower to repurchase such
Inventory; (h) Borrower shal keep the Inventory in good and marketable condition
; and (i) Borrower shall not, without prior written notice to Lender, acquire or
accept any Inventory on consignment or approval.
7.4 EQUIPMENT COVENANTS.; With respect to the Equipment: (a) upon
Lender's request, Borrower shall, at its expense, at any time or times as Lender
may request on or after an Event of Default, deliver or cause to be delivered to
Lender written reports or appraisals as to the Equipment in form, scope and
methodology acceptable to Lender and by an appraiser acceptable to Lender; (b)
Borrower shall keep the Equipment in good order, repair, running and marketable
condition (ordinary wear and tear excepted); (c) Borrower shall use the
Equipment with all reasonable care and caution and in accordance with applicable
standards of any insurance and in conformity with all applicable laws; (d) the
Equipment is and shall be used in Borrower's business and not for personal,
family, household or farming use; (e) Borrower shall not remove any Equipment
from the locations set forth or permitted herein, except to the extent necessary
to have any Equipment repaired or maintained in the ordinary course of the
business of Borrower or to move Equipment directly from one location set forth
or permitted herein to another such location and except for the movement of
motor vehicles used by or for the benefit of Borrower in the ordinary course of
business; (f) the Equipment is now and shall remain personal property and
Borrower shall not permit any of the Equipment to be or become a part of or
affixed to real property; and (g) Borrower assumes all responsibility and
liability arising from the use of the Equipment.
7.5 POWER OF ATTORNEY.; Borrower hereby irrevocably designates and
appoints Lender (and all persons designated by Lender) as Borrower's true and
lawful attorney-in-fact, and authorizes Lender, in Borrower's or Lender's name,
to: (a) at any time an Event of Default exists or has occurred and is continuing
(i) demand payment on Accounts or other proceeds of Inventory or other
Collateral, (ii) enforce payment of Accounts by legal proceedings or otherwise,
(iii) exercise all of Borrower's rights and remedies to collect any Account or
other Collateral, (iv) sell or assign any Account upon such reasonable terms,
for such amount and at such time or times as the Lender deems advisable, (v)
settle, adjust, compromise, extend or renew an Account, (vi) discharge and
release any Account, (vii) prepare, file and sign Borrower's name on any proof
of claim in bankruptcy or other similar document against an account debtor,
(viii) notify the post office authorities to change the address for delivery of
Borrower's mail to an address designated by Lender, and open and dispose of all
mail addressed to Borrower, and (ix) do all acts and things which are necessary,
in Lender's determination, acting reasonably, to fulfill Borrower's obligations
under this Agreement and the other Financing Agreements and (b) at any time to
(i) take control in any manner of any item of payment or proceeds thereof, (ii)
have access to any lockbox or postal box into which Borrower's mail is
deposited, (iii) endorse Borrower's name upon any items of payment or proceeds
thereof and deposit the same in the Payment Account for application to the
Obligations, (iv) endorse Borrower's name upon any
<PAGE>
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chattel paper, document, instrument, invoice, or similar document or agreement
relating to any Account or any goods pertaining thereto or any other Collateral,
(v) sign Borrower's name on any verification of Accounts and notices thereof to
account debtors and (vi) execute in Borrower's name and file any PPSA financing
statements or amendments thereto. Borrower hereby releases Lender and ts
officers, employees and designees from any liabilities arising from any act or
acts under this power of attorney and in furtherance thereof, whether of
omission or commission, except as a result of Lender's own gross negligence or
wilful misconduct as determined pursuant to a final non-appealable order of a
court of competent jurisdiction.
7.6 RIGHT TO CURE.; Lender may, at its option, (a) cure any default by
Borrower under any agreement with a third party or pay or bond on appeal any
judgment entered against Borrower, (b) discharge taxes, liens, security
interests or other encumbrances at any time levied on or existing with respect
to the Collateral and (c) pay any amount, incur any expense or perform any act
which, in Lender's reasonable judgment, is necessary or appropriate to preserve,
protect, insure or maintain the Collateral and the rights of Lender with respect
thereto. Lender may add any amounts so expended to the Obligations and charge
Borrower's account therefor, such amounts to be repayable by Borrower on demand.
Lender shall be under no obligation to effect such cure, payment or bonding and
shall not, by doing so, be deemed to have assumed any obligation or liability of
Borrower. Any payment made or other action taken by Lender under this Section
shall be without prejudice to any right to assert an Event of Default hereunder
and to proceed accordingly.
7.7 ACCESS TO PREMISES.; From time to time as requested by Lender, at
the cost and expense of Borrower, (a) Lender or its designee shall have complete
access to all of Borrower's premises during normal business hours and after
notice to Borrower, or at any time and without notice to Borrower if an Event of
Default exists or has occurred and is continuing, for the purposes of
inspecting, verifying and auditing the Collateral and all of Borrower's books
and records, including the Records, and (b) Borrower shall promptly furnish to
Lender such copies of such books and records or extracts therefrom as Lender may
request, and (c) Lender may use during normal business hours such of Borrower's
personnel, equipment, supplies and premises as may be reasonably necessary for
the foregoing and if an Event of Default exists or has occurred and is
continuing for the collection of Accounts and realization of other Collateral.
SECTION 8. REPRESENTATIONS AND WARRANTIES
Borrower hereby represents and warrants to Lender the following (which
shall survive the execution and delivery of this Agreement), the truth and
accuracy of which are a continuing condition of the making of Loans and
providing Letter of Credit Accommodations by Lender to Borrower:
8.1 CORPORATE EXISTENCE, POWER AND AUTHORITY; SUBSIDIARIES.; Borrower
is a corporation duly organized and in good standing under the laws of its
province of incorporation and is duly qualified as a foreign corporation and in
good standing in all states or other jurisdictions where the nature and extent
of the business transacted by it or the ownership of assets makes such
qualification necessary, except for those jurisdictions in which the failure to
so qualify would not have a material adverse effect on Borrower's financial
condition, results of
<PAGE>
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operation or business or the rights of Lender in or to any of the Collateral.
The execution, delivery and performance of this Agreement, the other Financing
Agreements and the transactions contemplated hereunder and thereunder are all
within Borrower's corporate powers, have been duly authorized and are not in
contravention of law or the terms of Borrower's certificate of incorporation,
by-laws, or other organizational documentation, or any indenture, agreement or
undertaking to which Borrower is a party or by which Borrower or its property
are bound. This Agreement and the other Financing Agreements constitute legal,
valid and binding obligations of Borrower enforceable in accordance with their
respective terms. Borrower does not have any subsidiaries except as set forth
on the Information Certificate.
8.2 FINANCIAL STATEMENTS; NO MATERIAL ADVERSE CHANGE.; All financial
statements, save for drafts thereof, relating to Borrower which have been or may
hereafter be delivered by Borrower to Lender have been prepared in accordance
with GAAP and fairly present the financial condition and the results of
operation of Borrower as at the dates and for the periods set forth therein.
Except as disclosed in any interim financial statements furnished by Borrower to
Lender prior to the date of this Agreement, there has been no material adverse
change in the assets, liabilities, properties and condition, financial or
otherwise, of Borrower, since the date of the most recent audited financial
statements furnished by Borrower to Lender prior to the date of this Agreement.
8.3 CHIEF EXECUTIVE OFFICE; COLLATERAL LOCATIONS.; The chief executive
office of Borrower and Borrower's Records concerning Accounts are located only
at the address set forth below and its only other places of business and the
only other locations of Collateral, if any, are the addresses set forth in the
Information Certificate, subject to the right of Borrower to establish new
locations in accordance with Section 9.2 below. The Information Certificate
correctly identifies any of such locations which are not owned by Borrower and
sets forth the owners and/or operators thereof and to the best of Borrower's
knowledge, the holders of any mortgages on such locations.
8.4 PRIORITY OF LIENS; TITLE TO PROPERTIES.; The security interests and
liens granted to Lender under this Agreement and the other Financing Agreements
constitute valid and perfected first priority liens and security interests in
and upon the Collateral subject only to the liens indicated on Schedule 8.4
hereto and the other liens permitted under Section 9.8 hereof. Borrower has
good and marketable title to all of its properties and assets subject to no
liens, mortgages, pledges, security interests, encumbrances or charges of any
kind, except those granted to Lender and such others as are specifically listed
on Schedule 8.4 hereto or permitted under Section 9.8 hereof.
8.5 TAX RETURNS.; Borrower has filed, or caused to be filed, in a
timely manner all tax returns, reports and declarations which are required to be
filed by it (without requests for extension except as previously disclosed in
writing to Lender). All information in such tax returns, reports and
declarations is complete and accurate in all material respects. Borrower has
paid or caused to be paid all taxes due and payable or claimed due and payable
in any assessment received by it, except taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Adequate provision has been made for the payment of
<PAGE>
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all accrued and unpaid Federal, provincial, county, local, foreign and other
taxes whether or not yet due and payable and whether or not disputed.
8.6 LITIGATION.; Except as set forth on the Information Certificate,
there is no present investigation by any governmental agency pending, or to the
best of Borrower's knowledge threatened, against or affecting Borrower, its
assets or business and there is no action, suit, proceeding or claim by any
Person pending, or to the best of Borrower's knowledge threatened, against
Borrower or its assets or goodwill, or against or affecting any transactions
contemplated by this Agreement, which if adversely determined against Borrower
would result in any material adverse change in the assets, business or prospects
of Borrower or would impair the ability of Borrower to perform its obligations
hereunder or under any of the other Financing Agreements to which it is a party
or of Lender to enforce any Obligations or realize upon any Collateral.
8.7 COMPLIANCE WITH OTHER AGREEMENTS AND APPLICABLE LAWS.; Borrower is
not in default in any material respect under, or in violation in any material
respect of any of the terms of, any material agreement, contract, instrument,
lease or other commitment to which it is a party or by which it or any of its
assets are bound and Borrower is in compliance in all material respects with all
applicable provisions of laws, rules, regulations, licenses, permits, approvals
and orders of any foreign, Federal, provincial or local governmental authority.
8.8 BANK ACCOUNTS.; All of the deposit accounts, investment accounts or
other accounts in the name of or used by Borrower maintained at any bank or
other financial institution are set forth on Schedule 8.8 hereto, subject to the
right of Borrower to establish new accounts in accordance with Section 9.13
below.
8.9 ACCURACY AND COMPLETENESS OF INFORMATION.; All information
furnished by or on behalf of Borrower in writing to Lender in connection with
this Agreement or any of the other Financing Agreements or any transaction
contemplated hereby or thereby, including all information on the Information
Certificate, as the same may be up-dated or supplemented, from time to time, is
true and correct in all material respects on the date as of which such
information is dated or certified and does not omit any material fact necessary
in order to make such information not misleading. No event or circumstance has
occurred which has had or could reasonably be expected to have a material
adverse affect on the business, assets or prospects of Borrower, which has not
been fully and accurately disclosed to Lender in writing.
8.10 SURVIVAL OF WARRANTIES; CUMULATIVE.; All representations and
warranties contained in this Agreement or any of the other Financing Agreements
shall survive the execution and delivery of this Agreement and shall be deemed
to have been made again to Lender on the date of each additional borrowing or
other credit accommodation hereunder and shall be conclusively presumed to have
been relied on by Lender regardless of any investigation made or information
possessed by Lender, but subject to any information disclosed to the Lender in
any schedule hereto. The representations and warranties set forth herein shall
be cumulative and in addition to any other representations or warranties which
Borrower shall now or hereafter give, or cause to be given, to Lender.
<PAGE>
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SECTION 9. AFFIRMATIVE AND NEGATIVE COVENANTS
9.1 MAINTENANCE OF EXISTENCE.; Borrower shall at all times preserve,
renew and keep in full, force and effect its corporate existence and rights and
franchises with respect thereto and maintain in full force and effect all
permits, licenses, trademarks, tradenames, approvals, authorizations, leases and
contracts necessary to carry on the business as presently or proposed to be
conducted. Borrower shall give Lender thirty (30) days prior written notice of
any proposed change in its corporate name, which notice shall set forth the new
name and Borrower shall deliver to Lender a copy of the amendment to the
Certificate of Incorporation of Borrower providing for the name change certified
by the appropriate authority of the jurisdiction of incorporation of Borrower as
soon as it is available.
9.2 NEW COLLATERAL LOCATIONS.; Borrower may open any new location
within Canada and the continental United States provided Borrower (a) gives
Lender thirty (30) days prior written notice of the intended opening of any such
new location and (b) executes and delivers, or causes to be executed and
delivered, to Lender such agreements, documents, and instruments as Lender may
deem reasonably necessary or desirable to protect its interests in the
Collateral at such location, including PPSA and UCC financing statements.
9.3 COMPLIANCE WITH LAWS, REGULATIONS, ETC. ; Borrower shall, at all
times, comply in all material respects with all laws, rules, regulations,
licenses, permits, approvals and orders of any Federal, Provincial or local
governmental authority applicable to it.
9.4 PAYMENT OF TAXES AND CLAIMS.; Borrower shall duly pay and discharge
all taxes, assessments, contributions and governmental charges upon or against
it or its properties or assets, except for taxes the validity of which are being
contested in good faith by appropriate proceedings diligently pursued and
available to Borrower and with respect to which adequate reserves have been set
aside on its books. Borrower shall be liable for any tax or penalties imposed
on Lender as a result of the financing arrangements provided for herein and
Borrower agrees to indemnify and hold Lender harmless with respect to the
foregoing, and to repay to Lender on demand the amount thereof, and until paid
by Borrower such amount shall be added and deemed part of the Loans, PROVIDED,
THAT, nothing contained herein shall be construed to require Borrower to pay any
income or franchise taxes attributable to the income of Lender from any amounts
charged or paid hereunder to Lender. The foregoing indemnity shall survive the
payment of the Obligations and the termination or non-renewal of this Agreement.
9.5 INSURANCE.; Borrower shall, at all times, maintain with financially
sound and reputable insurers insurance, on tangible property, with respect to
the Collateral against loss or damage and all other insurance of the kinds and
in the amounts customarily insured against or carried by corporations of
established reputation engaged in the same or similar businesses and similarly
situated. Said policies of insurance shall be satisfactory to Lender as to
form, amount and insurer. Borrower shall furnish certificates, policies or
endorsements to Lender as Lender shall require as proof of such insurance, and,
if Borrower fails to do so, Lender is authorized, but not required, to obtain
such insurance at the expense of Borrower. All policies shall provide for at
least thirty (30) days prior written notice to Lender of any cancellation or
reduction of coverage and that Lender may act as attorney for Borrower in
obtaining, and at any time an Event
<PAGE>
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of Default exists or has occurred and is continuing, adjusting, settling,
amending and canceling such insurance. Borrower shall cause Lender to be named
as a loss payee and an additional insured (but without any liability for any
premiums) under such insurance policies and Borrower shall obtain
non-contributory lender's loss payable endorsements to all insurance policies in
form and substance satisfactory to Lender. Such lender's loss payable
endorsements shall specify that the proceeds of such insurance shall be payable
to Lender as its interests may appear and further specify that Lender shall be
paid regardless of any act or omission by Borrower or any of its affiliates. At
its option, Lender may apply any insurance proceeds received by Lender at any
time to the cost of repairs or replacement of Collateral and/or to payment of
the Obligations, whether or not then due, in any order and in such manner as
Lender may determine or hold such proceeds as cash collateral for the
Obligations; provided, however, if (a) no Event of Default has occurred and is
continuing at the time of Lender' receipt of any such insurance proceeds and (b)
Lender elects to apply such insurance proceeds towards the reduction of the
Obligations, Lender will apply such proceeds towards non-contingent Obligations
only.
9.6 FINANCIAL STATEMENTS AND OTHER INFORMATION.;
(a) Borrower shall keep proper books and records in which true
and complete entries shall be made of all dealings or transactions of or in
relation to the Collateral and the business of Borrower and its subsidiaries (if
any) in accordance with GAAP and Borrower shall furnish or cause to be furnished
to Lender: (i) within fifteen (20) days after the end of each fiscal month,
monthly unaudited consolidated financial statements, and, if Borrower has any
subsidiaries, unaudited consolidating financial statements (including in each
case balance sheets, statements of income and loss, statements of cash flow, and
statements of shareholders' equity), all in reasonable detail, fairly presenting
the financial position and the results of the operations of Borrower and its
subsidiaries as of the end of and through such fiscal month, subject to normal
year end adjustments and (ii) within one hundred and twenty (120) days after the
end of each fiscal year, audited consolidated financial statements and, if
Borrower has any subsidiaries, audited consolidating financial statements of
Borrower and its subsidiaries (including in each case balance sheets, statements
of income and loss, statements of cash flow and statements of shareholders'
equity), and the accompanying notes thereto, all in reasonable detail, fairly
presenting the financial position and the results of the operations of Borrower
and its subsidiaries as of the end of and for such fiscal year, together with
the unqualified opinion of independent chartered accountants, which accountants
shall be an independent accounting firm selected by Borrower and reasonably
acceptable to Lender, that such financial statements have been prepared in
accordance with GAAP, and present fairly the results of operations and financial
condition of Borrower and its subsidiaries as of the end of and for the fiscal
year then ended.
(b) Borrower shall promptly notify Lender in writing of the
details of (i) any material loss, damage, investigation, action, suit,
proceeding or claim relating to the Collateral or any other property which is
security for the Obligations which would result in any material adverse change
in Borrower's business, properties, assets, goodwill or condition, financial or
otherwise and (ii) the occurrence of any Event of Default or event which, with
the passage of time or giving of notice or both, would constitute an Event of
Default.
<PAGE>
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(c) Borrower shall promptly after the sending or filing thereof
furnish or cause to be furnished to Lender copies of all reports which Borrower
sends to its stockholders generally and copies of all reports and registration
statements which Borrower files with any applicable Securities Commission, any
securities exchange or equivalent.
(d) Borrower shall furnish or cause to be furnished to Lender
such budgets, forecasts, projections and other information respecting the
Collateral and the business of Borrower, as Lender may, from time to time,
reasonably request. Lender is hereby authorized to deliver a copy of any
financial statement or any other information relating to the business of
Borrower to any court or other government agency or to any participant or
assignee or prospective participant or assignee. Borrower hereby irrevocably
authorizes and directs all accountants or auditors to deliver to Lender, at
Borrower's expense, copies of the final financial statements of Borrower and any
final reports or management letters prepared by such accountants or auditors on
behalf of Borrower and to disclose to Lender such information as they may have
regarding the business of Borrower, upon written request to the auditor copied
to the Borrower. Any documents, schedules, invoices or other papers delivered
to Lender may be destroyed or otherwise disposed of by Lender one (1) year after
the same are delivered to Lender, except as otherwise designated by Borrower to
Lender in writing.
9.7 SALE OF ASSETS, CONSOLIDATION, MERGER, DISSOLUTION, ETC.; Except as
may be expressly permitted pursuant to Section 9.8 hereof, Borrower shall not,
directly or indirectly, (a) merge into or with or consolidate with any other
Person or permit any other Person to merge into or with or consolidate with it,
or (b) sell, assign, lease, transfer, abandon or otherwise dispose of a material
amount of any stock or indebtedness to any other Person, or its assets to any
other Person (except for (i) sales of Inventory in the ordinary course of
business and (ii) the disposition of worn-out or obsolete Equipment or Equipment
no longer used in the business of Borrower so long as (A) if an Event of Default
exists or has occurred and is continuing, any proceeds are paid to Lender and
(B) such sales do not involve Equipment having an aggregate fair market value in
excess of $100,000 for all such Equipment disposed of in any fiscal year of
Borrower), or (c) form or acquire any subsidiaries, or (d) wind up, liquidate or
dissolve or (e) agree to do any of the foregoing.
9.8 ENCUMBRANCES.; Borrower shall not create, incur, assume or suffer
to exist any security interest, mortgage, pledge, lien, charge or other
encumbrance of any nature whatsoever on any of its assets or properties,
including the Collateral, EXCEPT: (a) liens and security interests of Lender;
(b) liens securing the payment of taxes, either not yet overdue or the validity
of which are being contested in good faith by appropriate proceedings diligently
pursued and available to Borrower and with respect to which adequate reserves
have been set aside on its books; (c) non-consensual statutory liens (other than
liens securing the payment of taxes) arising in the ordinary course of
Borrower's business to the extent: (i) such liens secure indebtedness which is
not overdue or (ii) such liens secure indebtedness relating to claims or
liabilities which are fully insured and being defended at the sole cost and
expense and at the sole risk of the insurer or being contested in good faith by
appropriate proceedings diligently pursued and available to Borrower, in each
case prior to the commencement of foreclosure or other similar proceedings and
with respect to which adequate reserves have been set aside on its books; (d)
zoning restrictions, easements, licenses, covenants and other restrictions
affecting the use of real property which do
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not interfere in any material respect with the use of such real property or
ordinary conduct of the business of Borrower as presently conducted thereon or
materially impair the value of the real property which may be subject thereto;
(e) purchase money security interests in Equipment (including capital leases)
and purchase money mortgages on real estate not to exceed $500,000 in the
aggregate at any time outstanding so long as such security interests and
mortgages do not apply to any property of Borrower other than the Equipment or
real estate so acquired, and the indebtedness secured thereby does not exceed
the cost of the Equipment or real estate so acquired, as the case may be but
provided that the Borrower may complete a sale and leaseback arrangement for the
building located in Kitchener, Ontario on reasonable commercial terms, with
prior written notice to the Lender; and (f) the security interests and liens set
forth on Schedule8.4 hereto.
9.9 INDEBTEDNESS.; Borrower shall not incur, create, assume, become or
be liable in any manner with respect to, or permit to exist, any obligations or
indebtedness, EXCEPT: (a) the Obligations; (b) trade obligations and normal
accruals in the ordinary course of business not yet due and payable, or with
respect to which the Borrower is contesting in good faith the amount or validity
thereof by appropriate proceedings diligently pursued and available to Borrower,
and with respect to which adequate reserves have been set aside on its books;
(c) purchase money indebtedness (including capital leases) to the extent not
incurred or secured by liens (including capital leases) in violation of any
other provision of this Agreement; (d) the indebtedness set forth on Schedule
9.9 hereto; and (e) indebtedness subordinated to the payments to and the
security held by the Lender (i) on the terms and conditions set forth in the
Intercreditor Agreement; or (ii) on any other terms and conditions satisfactory
to the Lender; PROVIDED, THAT, (i) Borrower may only make regularly scheduled
payments of principal and interest in respect of such indebtedness in accordance
with the terms of the agreement or instrument evidencing or giving rise to such
indebtedness as in effect on the date hereof, (ii) Borrower shall not, directly
or indirectly, (A) amend, modify, alter or change the terms of such indebtedness
or any agreement, document or instrument related thereto as in effect on the
date hereof as to the terms of payment, interest charge, terms of default or
other material term, or (B) redeem, retire, defease, purchase or otherwise
acquire such indebtedness, or set aside or otherwise deposit or invest any sums
for such purpose, and (iii) Borrower shall furnish to Lender all notices or
demands in connection with such indebtedness either received by Borrower or on
its behalf, promptly after the receipt thereof, or sent by Borrower or on its
behalf, concurrently with the sending thereof, as the case may be.
9.10 LOANS, INVESTMENTS, GUARANTEES, DISTRIBUTIONS, ETC.; Except as may
be permitted in Section 9.12 hereof, Borrower shall not, directly or indirectly,
make any loans or advance money or property to any person, or invest in (by
capital contribution, dividend or otherwise) or purchase or repurchase the stock
or indebtedness or all or a substantial part of the assets or property of any
person, or guarantee, assume, endorse, or otherwise become responsible for
(directly or indirectly) the indebtedness, performance, obligations or dividends
of any Person or agree to do any of the foregoing, and specifically shall not
authorize, undertake or pay any corporate distribution, which term is to be read
in its broadest meaning, to its parent, grandparent or any other related party
except, at the time of first advance of the Revolving Loan the Borrower may make
a distribution to its parent, grandparent or any other related person in the
amount permitted by the Lender, and after closing in an amount such that the
aggregate of any payment
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at closing and any thereafter does not exceed $4,000,000 US$ and the payment
would not reduce the Excess Availability, immediately on payment, and on the
basis of projections for the next 6 months, below $500,000, EXCEPT THE BORROWER
MAY PAY OR ISSUE THE FOLLOWING: (a) the endorsement of instruments for
collection or deposit in the ordinary course of business; (b) investments in:
(i) short-term direct obligations of the United States Government, or the
Government of Canada or any province thereof (ii) negotiable certificates of
deposit issued by any bank satisfactory to Lender, payable to the order of the
Borrower or to bearer and delivered to Lender, and (iii) commercial paper rated
A1 or P1; PROVIDED, THAT, as to any of the foregoing, unless waived in writing
by Lender, Borrower shall take such actions as are deemed necessary by Lender to
perfect the security interest of Lender in such investments and (c) the
investments, loans, advances and guarantees set forth on Schedule 9.10 hereto;
PROVIDED, THAT, as to such loans, advances and guarantees, (i) Borrower shall
not, directly or indirectly, (A) amend, modify, alter or change the terms of
such loans, advances or guarantees or any agreement, document or instrument
related thereto, or (B) as to such guarantees, redeem, retire, defease, purchase
or otherwise acquire the obligations arising pursuant to such guarantees, or set
aside or otherwise deposit or invest any sums for such purpose, and (ii)
Borrower shall furnish to Lender all notices or demands in connection with such
loans, advances or guarantees or other indebtedness subject to such guarantees
either received by Borrower or on its behalf, promptly after the receipt
thereof, or sent by Borrower or on its behalf, concurrently with the sending
thereof, as the case may be.
9.11 DIVIDENDS AND REDEMPTIONS.; Save as permitted under Section 9.10,
Borrower shall not, directly or indirectly, declare or pay any dividends on
account of any shares of class of capital stock of Borrower now or hereafter
outstanding, or set aside or otherwise deposit or invest any sums for such
purpose, or redeem, retire, defease, purchase or otherwise acquire any shares of
any class of capital stock (or set aside or otherwise deposit or invest any sums
for such purpose) for any consideration other than common stock or apply or set
apart any sum, or make any other distribution (by reduction of capital or
otherwise) in respect of any such shares or agree to do any of the foregoing.
9.12 TRANSACTIONS WITH AFFILIATES.; Except as may be permitted pursuant
to Section 9.10 hereof, Borrower shall not, directly or indirectly, (a)
purchase, acquire or lease any property from, or sell, transfer or lease any
property to, any officer, director, agent or other person affiliated with
Borrower, except in the ordinary course of and pursuant to the reasonable
requirements of Borrower's business and upon fair and reasonable terms no less
favorable to the Borrower than Borrower would obtain in a comparable arm's
length transaction with an unaffiliated person or (b) make any payments of
management, consulting or other fees for management or similar services, or of
any indebtedness owing to any officer, employee, shareholder, director or other
person affiliated with Borrower except reasonable compensation for services
rendered to Borrower in the ordinary course of business, and subject to
commercially reasonable terms, as if on an arm's length basis.
9.13 ADDITIONAL BANK ACCOUNTS.; Borrower shall not, directly or
indirectly, open, establish or maintain any deposit account, investment account
or any other account with any bank or other financial institution, other than
the Payments Accounts, Blocked Accounts and the accounts set forth in Schedule
8.8 hereto, except: (a) as to any new or additional Blocked
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Accounts and other such new or additional accounts which contain any Collateral
or proceeds thereof, with the prior written consent of Lender and subject to
such conditions thereto as Lender may establish and (b) as to any accounts used
by Borrower to make payments of payroll, taxes or other obligations to third
parties, after prior written notice to Lender.
9.14 ADJUSTED NET WORTH.; Borrower shall, at all times, maintain
Adjusted Net Worth of not less than $10,000,000.
9.15 COSTS AND EXPENSES.; Borrower shall pay to Lender on demand all
costs, expenses, filing fees and taxes paid or payable in connection with the
preparation, negotiation, execution, delivery, recording, administration,
collection, liquidation, enforcement and defense of the Obligations, Lender's
rights in the Collateral, this Agreement, the other Financing Agreements and all
other documents related hereto or thereto, including any amendments, supplements
or consents which may hereafter be contemplated (whether or not executed) or
entered into in respect hereof and thereof, including: (a) all costs and
expenses of filing or recording (including PPSA or UCC financing statement
filing taxes and fees, documentary taxes, intangibles taxes and mortgage
recording taxes and fees, if applicable); (b) all insurance premiums, appraisal
fees and search fees; (c) costs and expenses of remitting loan proceeds,
collecting cheques and other items of payment, and establishing and maintaining
the Blocked Accounts, together with Lender's customary charges and fees with
respect thereto; (d) subject to Section 2.2(b) hereof, charges, fees or expenses
charged by any bank or issuer in connection with the Letter of Credit
Accommodations; (e) costs and expenses of preserving and protecting the
Collateral; (f) costs and expenses paid or incurred in connection with obtaining
payment of the Obligations, enforcing the security interests and liens of
Lender, selling or otherwise realizing upon the Collateral, and otherwise
enforcing the provisions of this Agreement and the other Financing Agreements or
defending any claims made or threatened against Lender arising out of the
transactions contemplated hereby and thereby (including preparations for and
consultations concerning any such matters); (g) all out-of-pocket expenses and
costs heretofore and from time to time hereafter incurred by Lender during the
course of periodic field examinations of the Collateral and Borrower's
operations, plus a per diem charge at the rate of $650 Cdn funds per person per
day forLender's examiners in the field and office; and (h) the reasonable fees
and disbursements of counsel (including legal assistants) to Lender in
connection with any of the foregoing.
9.16 FURTHER ASSURANCES.; At the request of Lender at any time and from
time to time, Borrower shall, at its expense, duly execute and deliver, or cause
to be duly executed and delivered, such further agreements, documents and
instruments, and do or cause to be done such further acts as may be necessary or
proper to evidence, perfect, maintain and enforce the security interests and the
priority thereof in the Collateral and to otherwise effectuate the provisions or
purposes of this Agreement or any of the other Financing Agreements. Lender may
at any time and from time to time request a certificate from an officer of
Borrower representing that all conditions precedent to the making of Loans and
providing Letter of Credit Accommodations contained herein are satisfied. In
the event of such request by Lender, Lender may, at its option, cease to make
any further Loans or provide any further Letter of Credit Accommodations until
Lender has received such certificate and, in addition, Lender has determined
that such conditions are satisfied. Where permitted by law, Borrower hereby
authorizes Lender to execute and file one or more PPSA financing statements
signed only by Lender.
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SECTION 10. EVENTS OF DEFAULT AND REMEDIES
10.1 EVENTS OF DEFAULT.; The occurrence or existence of any one or more
of the following events are referred to herein individually as an "Event of
Default", and collectively as "Events of Default":
(a) Borrower fails to pay when due any of the Obligations or
fails to perform any of the terms, covenants, conditions or provisions, but
subject to the Lender providing notice of failure to perform and the Borrower
failing to rectify within 5 days of the notice, contained in this Agreement or
any of the other Financing Agreements;
(b) any representation, warranty or statement of fact made by
Borrower to Lender in this Agreement, the other Financing Agreements or any
other agreement, schedule, confirmatory assignment or other writing delivered
pursuant hereto shall when made or deemed made be false or misleading in any
material respect;
(c) any Obligor revokes, terminates or fails to perform any of
the terms, covenants, conditions or provisions of any guarantee, endorsement or
other agreement of such party in favor of Lender;
(d) any final judgment for the payment of money is rendered
against Borrower or any Obligor, to the extent it is not covered by prompt
payment of insurance proceeds, in excess of $25,000 in any one case or in excess
of $100,000 in the aggregate and shall remain undischarged or unvacated for a
period in excess of thirty (30) days or execution shall at any time not be
effectively stayed, or any judgment other than for the payment of money, or
injunction, attachment, garnishment or execution is rendered against Borrower or
any Obligor or any of their assets;
(e) any Obligor (being a natural person or a general partner of
an Obligor which is a partnership) dies or Borrower or any Obligor, which is a
partnership, limited liability company, limited liability partnership or a
corporation, dissolves or suspends or discontinues doing business;
(f) Borrower or any Obligor makes an assignment for the benefit
of creditors, makes or sends notice of a bulk transfer or calls a meeting of its
creditors or principal creditors;
(g) a petition, case or proceeding under the BIA or CCAA
("Bankruptcy Legislation") or similar laws, of any foreign jurisdiction now or
hereafter in effect or under any insolvency, arrangement, reorganization,
moratorium, receivership, readjustment of debt, dissolution or liquidation law
or statute of any jurisdiction now or hereafter in effect (whether at law or in
equity) is filed or commenced , against Borrower or all or any part of its
properties and such petition or application is not dismissed within sixty (60)
days after the date of its filing or Borrower shall file any answer admitting or
not contesting such petition or application or
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indicates its consent to, acquiescence in or approval of, any such action or
proceeding or the relief requested is granted sooner;
(h) a petition, case or proceeding under Bankruptcy Legislation,
or similar laws, of any foreign jurisdiction now or hereafter in effect or under
any insolvency, arrangement, reorganization, moratorium, receivership,
readjustment of debt, dissolution or liquidation law or statute of any
jurisdiction now or hereafter in effect (whether at a law or equity) is filed or
commenced by Borrower for all or any part of its property including, without
limitation, if Borrower shall:
(i) apply for or consent to the appointment of a receiver,
trustee or liquidator of it or of all or a substantial part
of its property and assets;
(ii) be unable, or admit in writing its inability, to pay its
debts as they mature, or commit any other act of bankruptcy;
(iii) make a general assignment for the benefit of creditors;
(iv) file a voluntary petition or assignment in bankruptcy or a
proposal seeking a reorganization, compromise, moratorium or
arrangement with its creditors;
(v) take advantage of any insolvency or other similar law
pertaining to arrangements, moratoriums, compromises or
reorganizations, or admit the material allegations of a
petition or application filed in respect of it in any
bankruptcy, reorganization or insolvency proceeding; or
(vi) take any corporate action for the purpose of effecting any
of the foregoing;
(i) any default by Borrower or any Obligor under any agreement,
document or instrument relating to any indebtedness for borrowed money owing to
any person other than Lender, or any capitalized lease obligations, contingent
indebtedness in connection with any guarantee, letter of credit, indemnity or
similar type of instrument in favor of any person other than Lender, in any case
in an amount in excess of $100,000, which default continues for more than the
applicable cure period, if any, with respect thereto, or any default by Borrower
or any Obligor under any material contract, lease, license or other obligation
to any person other than Lender, which default continues for more than the
applicable cure period, if any, with respect thereto;
(j) any change in the controlling ownership of Borrower save as
provided by the plan of re-organization under the bankruptcy proceedings of any
direct or indirect parent or grandparent corporation in the United States;
(k) the indictment of Borrower or any Obligor under any criminal
statute, or commencement of criminal proceedings against Borrower or any
Obligor, pursuant to which
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statute or proceedings the penalties or remedies sought or available include
forfeiture of any of the property of Borrower or such Obligor;
(l) there shall be a material adverse change in the business,
assets or prospects of Borrower or any Obligor after the date hereof; or
(m) there shall be an event of default, with the passage of any
grace or cure period under any of the other Financing Agreements.
10.2 REMEDIES.;
(a) At any time an Event of Default exists or has occurred and
is continuing, Lender shall have all rights and remedies provided in this
Agreement, the other Financing Agreements, the PPSA and other applicable law,
all of which rights and remedies may be exercised without notice to or consent
by Borrower or any Obligor, except as such notice or consent is expressly
provided for hereunder or required by applicable law. All rights, remedies and
powers granted to Lender hereunder, under any of the other Financing Agreements,
the PPSA or other applicable law, are cumulative, not exclusive and enforceable,
in Lender's discretion, alternatively, successively, or concurrently on any one
or more occasions, and shall include, without limitation, the right to apply to
a court of equity for an injunction to restrain a breach or threatened breach by
Borrower of this Agreement or any of the other Financing Agreements. Lender
may, at any time or times, proceed directly against Borrower or any Obligor to
collect the Obligations without prior recourse to the Collateral.
(b) Without limiting the foregoing, at any time an Event of
Default exists or has occurred and is continuing, Lender may, in its discretion
and without limitation, (i) accelerate the payment of all Obligations and demand
immediate payment thereof to Lender (PROVIDED, THAT, upon the occurrence of any
Event of Default described in Sections 10.1(g) and 10.1(h), all Obligations
shall automatically become immediately due and payable), (ii) with or without
judicial process or the aid or assistance of others, enter upon any premises on
or in which any of the Collateral may be located and take possession of the
Collateral or complete processing, manufacturing and repair of all or any
portion of the Collateral, (iii) require Borrower, at Borrower's expense, to
assemble and make available to Lender any part or all of the Collateral at any
place and time designated by Lender, (iv) collect, foreclose, receive,
appropriate, setoff and realize upon any and all Collateral, (v) remove any or
all of the Collateral from any premises on or in which the same may be located
for the purpose of effecting the sale, foreclosure or other disposition thereof
or for any other purpose, (vi) sell, lease, transfer, assign, deliver or
otherwise dispose of any and all Collateral (including entering into contracts
with respect thereto, public or private sales at any exchange, broker's board,
at any office of Lender or elsewhere) at such prices or terms as Lender may deem
reasonable, for cash, upon credit or for future delivery, with the Lender having
the right to purchase the whole or any part of the Collateral at any such public
sale, all of the foregoing being free from any right or equity of redemption of
Borrower, which right or equity of redemption is hereby expressly waived and
released by Borrower and/or (vii) terminate this Agreement. If any of the
Collateral is sold or leased by Lender upon credit terms or for future delivery,
the Obligations shall not be reduced as a result thereof until payment therefor
is finally collected by Lender. If notice of disposition of Collateral is
required by law,
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fifteen (15) days prior notice by Lender to Borrower designating the time and
place of any public sale or the time after which any private sale or other
intended disposition of Collateral is to be made, shall bedeemed to be
reasonable notice thereof and Borrower waives any other notice. In the event
Lender institutes an action to recover any Collateral or seeks recovery of any
Collateral by way of prejudgment remedy, Borrower waives the posting of any bond
which might otherwise be required.
(c) without limiting the foregoing, upon the occurrence and
during the continuation of an Event of Default, Lender may apply the cash
proceeds of Collateral actually received by Lender from any sale, lease,
foreclosure or other disposition of the Collateral to payment of the
Obligations, in whole or in part and in such order as Lender may elect, whether
or not then due. Borrower shall remain liable to Lender for the payment of any
deficiency with interest at the highest rate provided for herein and all costs
and expenses of collection or enforcement, including reasonable attorneys' fees
and legal expenses.
(d) Without limiting the foregoing, upon the occurrence and
during the continuation of an Event of Default, Lender may, at its option,
without notice, (i) cease making Loans or arranging for Letter of Credit
Accommodations or reduce the lending formulas or amounts of Revolving Loans and
Letter of Credit Accommodations available to Borrower and/or (ii) terminate any
provision of this Agreement providing for any future Loans or Letter of Credit
Accommodations to be made by Lender to Borrower.
10.3 RENTAL RESERVATION.;
In the event the Borrower has not provided the Lender with evidence,
within five (5) days of the due date for rent at any location in any month, that
the rent at any such location is fully up to date, including any net or
additional rent, and that the landlord has no claims for past due payments of
any nature relating to such location, the Lender shall be entitled, in addition
to any other remedies it may have, to add the amount of the rent due or past due
at such location(s) to its Availability Reserves, until such time as the
Borrower provides the Lender with evidence of the payment of all outstanding
amounts owing to the landlord(s).
SECTION 11. JURY TRIAL WAIVER; OTHER WAIVERS
AND CONSENTS; GOVERNING LAW
11.1 GOVERNING LAW; CHOICE OF FORUM; SERVICE OF PROCESS; JURY TRIAL
WAIVER.;
(a) The validity, interpretation and enforcement of this
Agreement and the other Financing Agreements and any dispute arising out of the
relationship between the parties hereto, whether in contract, tort, equity or
otherwise, shall be governed by the internal laws of the Province of Ontario
(without giving effect to principles of conflicts of law).
(b) Borrower and Lender irrevocably consent and submit to the
non-exclusive jurisdiction of the courts of the Province of Ontario and waive
any objection based on venue or
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FORUM NON CONVENIENS with respect to any action instituted therein arising under
this Agreement or any of the other Financing Agreements or in any way connected
with or related or incidental to the dealings of the parties hereto in respect
of this Agreement or any of the other Financing Agreements or the transactions
related hereto or thereto, in each case whether now existing or hereafter
arising, and whether in contract, tort, equity or otherwise, and agree that any
dispute with respect to any such matters shall be heard only in the courts
described above (except that Lender shall have the right to bring any action or
proceeding against Borrower or its property in the courts of any other
jurisdiction which Lender deems necessary or appropriate in order to realize on
the Collateral or to otherwise enforce its rights against Borrower or its
property).
(c) Borrower hereby waives personal service of any and all
process upon it and consents that all such service of process may be made by
certified mail (return receipt requested) directed to its address set forth on
the signature pages hereof and service so made shall be deemed to be completed
five (5) days after the same shall have been so deposited in the Canadian mails,
or, at Lender's option, by service upon Borrower in any other manner provided
under the rules of any such courts. Within thirty (30) days after such service,
Borrower shall appear in answer to such process, failing which Borrower shall be
deemed in default and judgment may be entered by Lender against Borrower for the
amount of the claim and other relief requested.
(d) BORROWER AND LENDER EACH HEREBY WAIVES ANY RIGHT TO TRIAL BY
JURY OF ANY CLAIM, DEMAND, ACTION OR CAUSE OF ACTION (i) ARISING UNDER THIS
AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR (ii) IN ANY WAY CONNECTED
WITH OR RELATED OR INCIDENTAL TO THE DEALINGS OF THE PARTIES HERETO IN RESPECT
OF THIS AGREEMENT OR ANY OF THE OTHER FINANCING AGREEMENTS OR THE TRANSACTIONS
RELATED HERETO OR THERETO IN EACH CASE WHETHER NOW EXISTING OR HEREAFTER
ARISING, AND WHETHER IN CONTRACT, TORT, EQUITY OR OTHERWISE. BORROWER AND
LENDER EACH HEREBY AGREES AND CONSENTS THAT ANY SUCH CLAIM, DEMAND, ACTION OR
CAUSE OF ACTION SHALL BE DECIDED BY COURT TRIAL WITHOUT A JURY AND THAT BORROWER
OR LENDER MAY FILE AN ORIGINAL COUNTERPART OF A COPY OF THIS AGREEMENT WITH ANY
COURT AS WRITTEN EVIDENCE OF THE CONSENT OF THE PARTIES HERETO TO THE WAIVER OF
THEIR RIGHT TO TRIAL BY JURY.
(e) Lender shall not have any liability to Borrower (whether in
tort, contract, equity or otherwise) for losses suffered by Borrower in
connection with, arising out of, or in any way related to the transactions or
relationships contemplated by this Agreement, or any act, omission or event
occurring in connection herewith, unless it is determined by a final and
non-appealable judgment or court order binding on Lender, that the losses were
the result of acts or omissions constituting gross negligence or willful
misconduct.
11.2 WAIVER OF NOTICES.; Borrower hereby expressly waives demand,
presentment, protest and notice of protest and notice of dishonor with respect
to any and all instruments and commercial paper, included in or evidencing any
of the Obligations or the Collateral, and any and all other demands and notices
of any kind or nature whatsoever with respect to the Obligations,
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the Collateral and this Agreement, except such as are expressly provided for
herein. No notice to or demand on Borrower which Lender may elect to give shall
entitle Borrower to any other or further notice or demand in the same, similar
or other circumstances.
11.3 AMENDMENTS AND WAIVERS.; Neither this Agreement nor any provision
hereof shall be amended, modified, waived or discharged orally or by course of
conduct, but only by a written agreement signed by an authorized officer of
Lender, and as to amendments, as also signed by an authorized officer of
Borrower. Lender shall not, by any act, delay, omission or otherwise be deemed
to have expressly or impliedly waived any of its rights, powers and/or remedies
unless such waiver shall be in writing and signed by an authorized officer of
Lender. Any such waiver shall be enforceable only to the extent specifically
set forth therein. A waiver by Lender of any right, power and/or remedy on any
one occasion shall not be construed as a bar to or waiver of any such right,
power and/or remedy which Lender would otherwise have on any future occasion,
whether similar in kind or otherwise. If the Lender exercises its rights,
options or judgment to amend terms, including the rate of interest chargeable or
the Availability Reserve, as provided by this Agreement, then the Lender shall
provide timely written notice of the change to the Borrower, and such change
shall be in effect from and after the exercise of the discretion, option or
judgment.
11.4 WAIVER OF COUNTERCLAIMS.; Borrower waives all rights to interpose
any claims, deductions, setoffs or counterclaims of any nature (other than
compulsory counterclaims or those raised in defence of a claim under this
Agreement) in any action or proceeding with respect to this Agreement, the
Obligations, the Collateral or any matter arising therefrom or relating hereto
or thereto.
11.5 INDEMNIFICATION.; Borrower shall indemnify and hold Lender, and its
directors, agents, employees and counsel (collectively, the "Indemnified
Persons"), harmless from and against any and all losses, claims, damages,
liabilities, costs or expenses imposed on, incurred by or asserted against any
of them in connection with any litigation, investigation, claim or proceeding
commenced or threatened related to the negotiation, preparation, execution,
delivery, enforcement, performance or administration of this Agreement, any
other Financing Agreements, or any undertaking or proceeding related to any of
the transactions contemplated hereby or any act, omission, event or transaction
related or attendant thereto, including amounts paid in settlement, court costs,
and the fees and expenses of counsel, but excluding any arising from the gross
negligence or willful misconduct of the Lender. To the extent that the
undertaking to indemnify, pay and hold harmless set forth in this Section may be
unenforceable because it violates any law or public policy, Borrower shall pay
the maximum portion which it is permitted to pay under applicable law to Lender
in satisfaction of indemnified matters under this Section. The foregoing
indemnity shall survive the payment of the Obligations and the termination or
non-renewal of this Agreement. If any action, proceeding or investigation is
commenced for which an Indemnified Person intends to demand indemnification
pursuant to this Section 11.5 or otherwise pursuant to this Agreement, such
Indemnified Person will notify the Borrower with reasonable promptness;
provided, however, that any failure by an Indemnified Person to notify the
Borrower will not relieve the Borrower from its indemnification obligations
hereunder, except and only to the extent that such failure has materially
prejudiced the defense of such action, proceeding or investigation. The Lender
shall have final authority to determine all matters in
<PAGE>
-38-
connection with any such action, proceeding or investigation; provided, however,
that the Borower shall have the right, at its own expense, to appoint single
counsel to advise the Lender in any contest of any such action, proceeding or
investigation. Notwithstanding the foregoing, the Borrower may, upon the giving
of written notice to the Lender within fifteen (15) days following its receipt
of any such notice of a claim of indemnity from any Indemnified Person, elect to
defend, at its own expense, any such action, proceeding or investigation, but
only if (a) the Borrower acknowledges, in writing to the Lender, its obligation
to fully indemnify the Lender, to the reasonable satisfaction of the Lender,
with respect to such action, proceeding or investigation, (b) the Borrower
demonstrates its ability to defend, and to pay the amount of any settlement or
judgment obtained in connection with, any such action, proceeding or
investigation and (c) the Borrower, in the reasonable judgment of the Lender,
diligently pursues the defence of any such action, proceeding or investigation,
in good faith, through appropriate proceedings and, in such event, the Borrower
shall be entitled to negotiate concerning settlement with any party asserting
any action, proceeding or investigation as to which an Indemnified Person shall
have provided notice of an intent to demand indemnification. In the event that
the Borrower (a) recommends a settlement of any such action, proceeding or
investigation that does not provide for any injunctive or other nonmonetary
relief affecting any Indemnified Person, (b) acknowledges its willingness to
fully fund such settlement and (c) demonstrates its ability to fully fund such
settlement, then, provided such settlement fully discharges the Indemnified
Person from all of the claims asserted in such action, proceeding or
investigation without the need for the Indemnified Person to admit wrongdoing,
the Indemnified Person shall accept such settlement. The Borrower shall not
consent to entry of any judgment against any Indemnified Person that does not
satisfy the requirements of the preceding setence without the prior written
consent of such Indemnified Person, which consent shall not be unreasonably
withheld.
SECTION 12. TERM OF AGREEMENT; MISCELLANEOUS
12.1 TERM.;
(a) This Agreement and the other Financing Agreements shall
become effective as of the date set forth on the first page hereof and shall
continue in full force and effect, unless terminated as provided in Section 12.1
(c), for a term ending on the date three (3) years from the date hereof (the
"Renewal Date"), and from year to year thereafter, unless sooner terminated
pursuant to the terms hereof; PROVIDED, THAT, Lender may, at its option, extend
the Renewal Date to the date four (4) years from the date hereof by giving
Borrower notice at least sixty (60) days prior to the third anniversary of this
Agreement. Lender (subject to Lender's right to extend the Renewal Date as
provided above) may terminate this Agreement and the other Financing Agreements
effective on the Renewal Date or on the anniversary of the Renewal Date in any
year by giving to the other party at least sixty (60) days prior written notice;
PROVIDED, THAT, this Agreement and all other Financing Agreements must be
terminated simultaneously. Notwithstanding the foregoing, Borrower, subject to
its payment of the applicable early termination fee described in Section 12.1(c)
hereof and payment of all Obligations, release of any Letters of Credit and
contingent obligations, or the posting of cash collateral or a letter of credit
acceptable to the Lender to Lender in such amounts as Lender determines are
reasonably necessary to secure Lender as set forth below, and the availability
of Loans in favour of the
<PAGE>
-39-
contingent obligations, and the availability of Loans in favour of the Lender,
on terms acceptable to the Lender, if any, may terminate this Agreement at any
time prior to the Renewal Date or at any time thereafter upon at least sixty
(60) days prior written notice to Lender. Upon the effective date of
termination or non-renewal of the Financing Agreements, Borrower shall pay to
Lender, in full, all outstanding and unpaid Obligations and shall furnish cash
collateral or a letter of credit acceptable to the Lender to Lender in such
amounts as Lender determines are reasonably necessary to secure Lender from
loss, cost, damage or expense, including attorneys' fees and legal expenses, in
connection with any contingent Obligations, including issued and outstanding
Letter of Credit Accommodations and cheques or other payments provisionally
credited to the Obligations and/or as to which Lender has not yet received final
and indefeasible payment. Such payments in respect of the Obligations and cash
collateral shall be remitted by wire transfer in Federal funds to such bank
account of Lender, as Lender may, in its discretion, designate in writing to
Borrower for such purpose. Interest shall be due until and including the next
business day, if the amounts so paid by Borrower to the bank account designated
by Lender are received in such bank account later than 12:00 noon, eastern
standard time.
(b) No termination of this Agreement or the other Financing
Agreements shall relieve or discharge Borrower of its respective duties,
obligations and covenants under this Agreement or the other Financing Agreements
until all Obligations have been fully and finally discharged and paid, and
Lender's continuing security interest in the Collateral and the rights and
remedies of Lender hereunder, under the other Financing Agreements and
applicable law, shall remain in effect until all such Obligations have been
fully and finally discharged and paid.
(c) If for any reason this Agreement is terminated prior to the
end of the then current term or renewal term of this Agreement, in view of the
impracticality and extreme difficulty of ascertaining actual damages and by
mutual agreement of the parties as to a reasonable calculation of Lender's lost
profits as a result thereof, Borrower agrees to pay to Lender, upon the
effective date of such termination, an early termination fee in the amount set
forth below if such termination is effective in the period indicated:
- --------------------------------------------------------------------------------
AMOUNT PERIOD
- --------------------------------------------------------------------------------
(i) 3% of Maximum Credit From the date hereof to and including
the first anniversary
- --------------------------------------------------------------------------------
(ii) 2% of Maximum Credit From the first anniversary to and
including the second anniversary
__________________________
- --------------------------------------------------------------------------------
(iii) 1% of Maximum Credit From the second anniversary to and
including the day immediately preceding
the third anniversary
__________________________
- --------------------------------------------------------------------------------
Such early termination fee shall be presumed to be the amount of damages
sustained by Lender as a result of such early termination and Borrower agrees
that it is reasonable under the circumstances currently existing. In addition,
Lender shall be entitled to such early termination fee upon the occurrence of
any Event of Default described in Sections 10.1(g) and 10.1(h) hereof,
<PAGE>
-40-
even if Lender does not exercise its right to terminate this Agreement, but
elects, at its option, to provide financing to Borrower or permit the use of
cash collateral under the Bankruptcy Laws. The early termination fee provided
for in this Section 12.1 shall be deemed included in the Obligations.
12.2 NOTICES.; All notices, requests and demands hereunder shall be in
writing and (a) made to Lender at its address set forth below and to Borrower at
its chief executive office set forth below, or to such other address as either
party may designate by written notice to the other in accordance with this
provision, and (b) deemed to have been given or made: if delivered in person,
immediately upon delivery; if by telex, telegram or facsimile transmission,
immediately upon sending and upon confirmation of receipt; if by nationally
recognized overnight courier service with instructions to deliver the next
business day, one (1) business day after sending; and if by certified mail,
return receipt requested, five (5) days after mailing.
12.3 PARTIAL INVALIDITY.; If any provision of this Agreement is held to
be invalid or unenforceable, such invalidity or unenforceability shall not
invalidate this Agreement as a whole, but this Agreement shall be construed as
though it did not contain the particular provision held to be invalid or
unenforceable and the rights and obligations of the parties shall be construed
and enforced only to such extent as shall be permitted by applicable law.
12.4 SUCCESSORS.; This Agreement, the other Financing Agreements and any
other document referred to herein or therein shall be binding upon and inure to
the benefit of and be enforceable by Lender, Borrower and their respective
successors and assigns, except that Borrower may not assign its rights under
this Agreement, the other Financing Agreements and any other document referred
to herein or therein without the prior written consent of Lender. Lender may,
after notice to Borrower, assign its rights and delegate its obligations under
this Agreement and the other Financing Agreements and further may assign, or
sell participations in, all or any part of the Loans, the Letter of Credit
Accommodations or any other interest herein to another financial institution or
other person, in which event, the assignee or participant shall have, to the
extent of such assignment or participation, the same rights and benefits as it
would have if it were the Lender hereunder, except as otherwise provided by the
terms of such assignment or participation.
12.5 ENTIRE AGREEMENT.; This Agreement, the other Financing Agreements,
any supplements hereto or thereto, and any instruments or documents delivered or
to be delivered in connection herewith or therewith represents the entire
agreement and understanding concerning the subject matter hereof and thereof
between the parties hereto, and supersede all other prior agreements,
understandings, negotiations and discussions, representations, warranties,
commitments, proposals, offers and contracts concerning the subject matter
hereof, whether oral or written. In the event of any inconsistency between the
terms of this Agreement and any schedule or exhibit hereto, the terms of this
Agreement shall govern.
IN WITNESS WHEREOF, Lender and Borrower have caused these presents to be
duly executed as of the day and year first above written.
<PAGE>
-41-
LENDER BORROWER
- ------ --------
CONGRESS FINANCIAL CLUETT, PEABODY CANADA INC.
CORPORATION (CANADA)
/s/ Wayne Ehgoetz /s/ Robert J. Riesbeck
- ------------------------------ ------------------------------
By : Wayne Ehgoetz By: Robert J. Riesbeck
Title: Senior Vice-President Title: Treasurer
ADDRESS: CHIEF EXECUTIVE OFFICE:
- ------- ----------------------
Suite 1508, 141 Adelaide Street West P.O. Box 518, Station C
Toronto, Ontario 112 Benton Street
M5H 3L9 Kitchener, Ontario
N2G 4A9
<PAGE>
Exhibit 12
Schedule of
Earnings to Fixed Charges
<TABLE>
<CAPTION>
<S> <C>
Twelve
Three Months Ended Months
Year Ended December 31, ------------------- Ended
------------------------------------------------- March 29, March 28, March 28,
1993 1994 1995 1996 1997 1997 1998 1998
---- ---- ---- ---- ---- ---- ---- ----
(Dollars in millions, except ratios) (Unaudited) (Unaudited) (Unaudited)
Earnings were calculated
as follows:
Income before provision
for income taxes $ (19.6) $ (99.1) $ (87.6) $ (28.9) $ 18.5 $ 0.5 $ 2.6 $ 20.6
Add: Fixed charges 26.7 28.2 30.6 18.6 16.5 3.9 4.1 16.7
------- ------- ------- ------- ----- ----- ----- ------
Earnings 7.1 (70.9) (57.0) (10.3) 35.0 4.4 6.7 37.3
------- ------- ------- ------- ----- ----- ----- ------
Fixed Charges were calculated
as follows:
Interest expense, net 23.0 24.6 22.7 16.9 15.2 3.6 3.8 15.4
Amortization of deferred
financing costs - - 5.2 - - - - -
Portion of rental
attributable to interest 3.7 3.6 2.7 1.7 1.3 0.3 0.3 1.3
------- ------- ------- ------- ----- ----- ----- ------
Fixed charges $ 26.7 $ 28.2 $ 30.6 $ 18.6 $ 16.5 $ 3.9 $ 4.1 $ 16.7
------- ------- ------- ------- ----- ----- ----- ------
Ratio of earnings to fixed
charges - - - - 2.1 1.1 1.6 2.2
Deficiency $ (19.6) $ (99.1) $ (87.6) $ (28.9)
</TABLE>
<PAGE>
Exhibit 21
Subsidiaries of Cluett American Corp.
-------------------------------------
<TABLE>
<CAPTION>
Subsidiary Jurisdiction of Incorporation
---------- -----------------------------
<S> <C>
Consumer Direct Corporation Delaware
Arrow Factory Stores, Inc. Delaware
GAKM Resources Corporation Delaware
Cluett Peabody Resources Corporation Delaware
Bidermann Company Limited Hong Kong
Karl Lagerfeld Womenswear, Inc. Delaware
Bidermann Industries Licensing, Inc. Delaware
M W Warehouse, Inc. Delaware
Bidermann Womenswear Corp. New York
Great American Knitting Mills, Inc. Delaware
Arrow Inter-America, Inc. Delaware
Cluett Peabody B.V. Netherlands
Cluett Peabody Holdings Corp. Delaware
Bidertex Services, Inc. Delaware
Bidermann Tailored Clothing, Inc. Delaware
Cluett Designer Group, Inc. Delaware
Old Mission Textiles, Inc. Georgia
Cluett, Peabody Canada Inc. Canada
Cluett Peabody A.G. Switzerland
Arrow de Mexico S.A. de C.V. Mexico
Cluett, Peabody & Co., Inc. Delaware
294671 Ontario, Ltd. Canada
</TABLE>
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Summary
Historical Combined Financial Information" and "Experts" in the Registration
Statements (Form S-4) and related prospectus of Cluett American Corp.,
formerly Bidermann Industries Corp., for the registration of 10 1/8%
$112,000,000 Senior Subordinated Notes Due 2008 and $50,000,000 12 1/2%
Senior Exchangeable Preferred Stock Due 2010 and to the inclusion of our
report dated March 19, 1998 (except for Note 20, as to which the date is
April 10, 1998) with respect to the combined financial statements of
Bidermann Industries Corp. and Affiliates for the year ended December 31,
1997.
/s/ Ernst & Young LLP
Atlanta, Georgia
June 25, 1998
<PAGE>
Exhibit 25.1
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
--------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
--------------------------
CLUETT AMERICAN CORP.
(Exact name of obligor as specified in its charter)
Delaware 22-2397044
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
48 West 38th Street
New York, New York 10018
(Address of principal executive offices) (Zip code)
--------------------------
10-1/8% Senior Subordinated Notes Due 2008
(Title of the indenture securities)
================================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 18th day of June, 1998.
THE BANK OF NEW YORK
By: /s/ VAN K. BROWN
-----------------------------
Name: VAN K. BROWN
Title: ASISTANT VICE PRESIDENT
-4-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 18th day of June, 1998.
THE BANK OF NEW YORK
By: /s/ Van K. Brown
-------------------------------
Name: Van K. Brown
Title: Assistant Vice President
-5-
<PAGE>
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ................. $ 5,742,986
Interest-bearing balances .......... 1,342,769
Securities:
Held-to-maturity securities ........ 1,099,736
Available-for-sale securities ...... 3,882,686
Federal funds sold and Securities pur-
chased under agreements to resell..... 2,568,530
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ................. 35,019,608
LESS: Allowance for loan and
lease losses .............. 627,350
LESS: Allocated transfer risk
reserve.................... 0
Loans and leases, net of unearned
income, allowance, and reserve 34,392,258
Assets held in trading accounts ...... 2,521,451
Premises and fixed assets (including
capitalized leases) ................ 659,209
Other real estate owned .............. 11,992
Investments in unconsolidated
subsidiaries and associated
companies .......................... 226,263
Customers' liability to this bank on
acceptances outstanding ............ 1,187,449
Intangible assets .................... 781,684
Other assets ......................... 1,736,574
-----------
Total assets ......................... $56,153,587
===========
LIABILITIES
Deposits:
In domestic offices ................ $27,031,362
Noninterest-bearing ...... 11,899,507
Interest-bearing ......... 15,131,855
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 13,794,449
Noninterest-bearing ......... 590,999
Interest-bearing ......... 13,203,450
Federal funds purchased and Securities
sold under agreements to repurchase. 2,338,881
Demand notes issued to the U.S.
Treasury ........................... 173,851
Trading liabilities .................. 1,695,216
Other borrowed money:
With remaining maturity of one year
or less .......................... 1,905,330
With remaining maturity of more than
one year through three years...... 0
With remaining maturity of more than
three years ...................... 25,664
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,195,923
Subordinated notes and debentures .... 1,012,940
Other liabilities .................... 2,018,960
-----------
Total liabilities .................... 51,192,576
-----------
EQUITY CAPITAL
Common stock ......................... 1,135,284
Surplus .............................. 731,319
Undivided profits and capital
reserves ........................... 3,093,726
Net unrealized holding gains
(losses) on available-for-sale
securities ......................... 36,866
Cumulative foreign currency transla-
tion adjustments ................... (36,184)
-----------
Total equity capital ................. 4,961,011
-----------
Total liabilities and equity
capital ............................ $56,153,587
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
)
Thomas A. Renyi )
Alan R. Griffith ) Directors
J. Carter Bacot )
)
<PAGE>
Exhibit 25.2
================================================================================
FORM T-1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
STATEMENT OF ELIGIBILITY
UNDER THE TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE
ELIGIBILITY OF A TRUSTEE PURSUANT TO
SECTION 305(b)(2) |__|
--------------------------
THE BANK OF NEW YORK
(Exact name of trustee as specified in its charter)
New York 13-5160382
(State of incorporation (I.R.S. employer
if not a U.S. national bank) identification no.)
48 Wall Street, New York, N.Y. 10286
(Address of principal executive offices) (Zip code)
--------------------------
CLUETT AMERICAN CORP.
(Exact name of obligor as specified in its charter)
Delaware 22-2397044
(State or other jurisdiction of (I.R.S. employer
incorporation or organization) identification no.)
48 West 38th Street
New York, New York 10018
(Address of principal executive offices) (Zip code)
--------------------------
12-1/2% Subordinated Exchange Debentures Due 2010
(Title of the indenture securities)
================================================================================
<PAGE>
1. GENERAL INFORMATION. FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(a) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISING AUTHORITY TO WHICH
IT IS SUBJECT.
- --------------------------------------------------------------------------------
Name Address
- --------------------------------------------------------------------------------
Superintendent of Banks of the State of 2 Rector Street, New York,
New York N.Y. 10006, and Albany, N.Y. 12203
Federal Reserve Bank of New York 33 Liberty Plaza, New York,
N.Y. 10045
Federal Deposit Insurance Corporation Washington, D.C. 20429
New York Clearing House Association New York, New York 10005
(b) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Yes.
2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
None.
16. LIST OF EXHIBITS.
EXHIBITS IDENTIFIED IN PARENTHESES BELOW, ON FILE WITH THE COMMISSION, ARE
INCORPORATED HEREIN BY REFERENCE AS AN EXHIBIT HERETO, PURSUANT TO RULE
7A-29 UNDER THE TRUST INDENTURE ACT OF 1939 (THE "ACT") AND 17 C.F.R.
229.10(d).
1. A copy of the Organization Certificate of The Bank of New York
(formerly Irving Trust Company) as now in effect, which contains the
authority to commence business and a grant of powers to exercise
corporate trust powers. (Exhibit 1 to Amendment No. 1 to Form T-1
filed with Registration Statement No. 33-6215, Exhibits 1a and 1b to
Form T-1 filed with Registration Statement No. 33-21672 and Exhibit 1
to Form T-1 filed with Registration Statement No. 33-29637.)
4. A copy of the existing By-laws of the Trustee. (Exhibit 4 to Form T-1
filed with Registration Statement No. 33-31019.)
-2-
<PAGE>
6. The consent of the Trustee required by Section 321(b) of the Act.
(Exhibit 6 to Form T-1 filed with Registration Statement No.
33-44051.)
7. A copy of the latest report of condition of the Trustee published
pursuant to law or to the requirements of its supervising or examining
authority.
-3-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 29th day of June, 1998.
THE BANK OF NEW YORK
By: /s/ LUCILLE FIRRINCIELI
-----------------------------
Name: LUCILLE FIRRINCIELI
Title: VICE PRESIDENT
-4-
<PAGE>
SIGNATURE
Pursuant to the requirements of the Act, the Trustee, The Bank of New York,
a corporation organized and existing under the laws of the State of New York,
has duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in The City of New York, and State
of New York, on the 29th day of June, 1998.
THE BANK OF NEW YORK
By: /s/ Lucille Firrincieli
-------------------------------
Name: Lucille Firrincieli
Title: Vice President
-5-
<PAGE>
Consolidated Report of Condition of
THE BANK OF NEW YORK
of 48 Wall Street, New York, N.Y. 10286
And Foreign and Domestic Subsidiaries,
a member of the Federal Reserve System, at the close of business December 31,
1997, published in accordance with a call made by the Federal Reserve Bank of
this District pursuant to the provisions of the Federal Reserve Act.
Dollar Amounts
ASSETS in Thousands
Cash and balances due from depos-
itory institutions:
Noninterest-bearing balances and
currency and coin ................. $ 5,742,986
Interest-bearing balances .......... 1,342,769
Securities:
Held-to-maturity securities ........ 1,099,736
Available-for-sale securities ...... 3,882,686
Federal funds sold and Securities pur-
chased under agreements to resell..... 2,568,530
Loans and lease financing
receivables:
Loans and leases, net of unearned
income ................. 35,019,608
LESS: Allowance for loan and
lease losses .............. 627,350
LESS: Allocated transfer risk
reserve.................... 0
Loans and leases, net of unearned
income, allowance, and reserve 34,392,258
Assets held in trading accounts ...... 2,521,451
Premises and fixed assets (including
capitalized leases) ................ 659,209
Other real estate owned .............. 11,992
Investments in unconsolidated
subsidiaries and associated
companies .......................... 226,263
Customers' liability to this bank on
acceptances outstanding ............ 1,187,449
Intangible assets .................... 781,684
Other assets ......................... 1,736,574
-----------
Total assets ......................... $56,153,587
===========
LIABILITIES
Deposits:
In domestic offices ................ $27,031,362
Noninterest-bearing ...... 11,899,507
Interest-bearing ......... 15,131,855
In foreign offices, Edge and
Agreement subsidiaries, and IBFs ... 13,794,449
Noninterest-bearing ......... 590,999
Interest-bearing ......... 13,203,450
Federal funds purchased and Securities
sold under agreements to repurchase. 2,338,881
Demand notes issued to the U.S.
Treasury ........................... 173,851
Trading liabilities .................. 1,695,216
Other borrowed money:
With remaining maturity of one year
or less .......................... 1,905,330
With remaining maturity of more than
one year through three years...... 0
With remaining maturity of more than
three years ...................... 25,664
Bank's liability on acceptances exe-
cuted and outstanding .............. 1,195,923
Subordinated notes and debentures .... 1,012,940
Other liabilities .................... 2,018,960
-----------
Total liabilities .................... 51,192,576
-----------
EQUITY CAPITAL
Common stock ......................... 1,135,284
Surplus .............................. 731,319
Undivided profits and capital
reserves ........................... 3,093,726
Net unrealized holding gains
(losses) on available-for-sale
securities ......................... 36,866
Cumulative foreign currency transla-
tion adjustments ................... (36,184)
-----------
Total equity capital ................. 4,961,011
-----------
Total liabilities and equity
capital ............................ $56,153,587
===========
I, Robert E. Keilman, Senior Vice President and Comptroller of the
above-named bank do hereby declare that this Report of Condition has been
prepared in conformance with the instructions issued by the Board of Governors
of the Federal Reserve System and is true to the best of my knowledge and
belief.
Robert E. Keilman
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
)
Thomas A. Renyi )
Alan R. Griffith ) Directors
J. Carter Bacot )
)
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<CIK> 0001064435
<NAME> CLUETT AMERICAN CORP.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<CASH> 10,019
<SECURITIES> 0
<RECEIVABLES> 50,244
<ALLOWANCES> 1,802
<INVENTORY> 78,236
<CURRENT-ASSETS> 140,931
<PP&E> 108,722
<DEPRECIATION> 61,024
<TOTAL-ASSETS> 220,017
<CURRENT-LIABILITIES> 57,811
<BONDS> 0
0
20,009
<COMMON> 2
<OTHER-SE> (56,810)
<TOTAL-LIABILITY-AND-EQUITY> 220,017
<SALES> 362,907
<TOTAL-REVENUES> 362,907
<CGS> 253,792
<TOTAL-COSTS> 74,790
<OTHER-EXPENSES> 1,984
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 15,233
<INCOME-PRETAX> 18,522
<INCOME-TAX> 1,326
<INCOME-CONTINUING> 17,196
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 17,196
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
FOR
10 1/8% SENIOR SUBORDINATED NOTES
DUE 2008
OF
CLUETT AMERICAN CORP.
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
,
1998 (THE "EXPIRATION DATE") UNLESS EXTENDED BY CLUETT AMERICAN CORP.
EXCHANGE AGENT:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
BY HAND: BY MAIL: BY OVERNIGHT EXPRESS:
The Bank of New York (INSURED OR REGISTERED The Bank of New York
101 Barclay Street RECOMMENDED) 101 Barclay Street
New York, New York 10005 The Bank of New York New York, New York 10005
101 Barclay Street
New York, New York 10005
</TABLE>
BY FACSIMILE:
(212) 815-6339
BY TELEPHONE:
(212)
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt for the Prospectus dated ,
1998 (the "Prospectus") of Cluett American Corp. (the "Company") and this Letter
of Transmittal (the "Letter of Transmittal"), which together describe the
Company's offer (the "Exchange Offer") to exchange $112,000,000 in principal
amount of its new 10 1/8% Series B Senior Subordinated Notes due 2008 (the
"Exchange Notes") for each $112,000,000 in principal amount of outstanding
10 1/8% Senior Subordinated Notes due 2008 (the "Old Notes"). The terms of the
Exchange Notes are identical in all material respects (including principal
amount, interest rate and maturity) to the terms of the Old Notes for which they
may be exchanged pursuant to the Exchange Offer, except that the Exchange Notes
are freely transferable by holders thereof (except as provided herein or in the
Prospectus) and are not subject to any covenant regarding registration under the
Securities Act of 1933, as amended (the "Securities Act").
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
<PAGE>
List below the Old Notes to which this Letter of Transmittal relates. If the
space provided below is inadequate, the Certificate Numbers and Principal
Amounts should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
DESCRIPTION OF OLD NOTES TENDERED HEREWITH
- -------------------------------------------------------------------------------------------
AGGREGATE
NAME(S) AND ADDRESS(ES) PRINCIPAL AMOUNT PRINCIPAL
OF REGISTERED HOLDER(S) CERTIFICATE REPRESENTED AMOUNT
(PLEASE FILL IN) NUMBER(S)* BY OLD NOTES* TENDERED**
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Total
- -------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Old Notes. See
instruction 2.
This Letter of Transmittal is to be used either if certificates representing
Old Notes are to be forwarded herewith or if delivery of Old Notes is to be made
by book-entry transfer to an account maintained by the Exchange Agent at The
Depository Trust Company, pursuant to the procedures set forth in "The Note
Exchange Offer--Procedures for Tendering Old Notes" in the Prospectus. Delivery
of documents to the book-entry transfer facility does not constitute delivery to
the Exchange Agent.
Holders whose Old Notes are not immediately available or who cannot deliver
their Old Notes and all other documents required hereby to the Exchange Agent on
or prior to the Expiration Date must tender their Old Notes according to the
guaranteed delivery procedure set forth in the Prospectus under the caption "The
Note Exchange Offer--Procedures for Tendering Old Notes."
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
/ / The Depository Trust Company
Account Number______________________________________________________________
Transaction Code Number_____________________________________________________
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE
OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) _______________________________________________
Name of Eligible Institution that Guaranteed Delivery ______________________
Date of Execution of Notice of Guaranteed Delivery _________________________
If Delivered by Book-Entry Transfer:
Account Number _____________________________________________________________
2
<PAGE>
/ / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO PERSON OTHER THAN
PERSON SIGNING THE LETTER OF TRANSMITTAL:
Name _______________________________________________________________________
(Please Print)
Address ____________________________________________________________________
(Including Zip Code)
/ / CHECK HERE IF EXCHANGE NOTES ARE TO BE DELIVERED TO ADDRESS DIFFERENT FROM
THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:
Address ____________________________________________________________________
(Including Zip Code)
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THIS PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Names ______________________________________________________________________
Address ____________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Old Notes that were acquired as result
of market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such Exchange Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act. A broker-dealer may not participate in the Exchange Offer
with respect to Old Notes acquired other than as a result of market-making
activities or other trading activities. Any holder who is an "affiliate" of the
Company or who has an arrangement or understanding with respect to the
distribution of the Exchange Notes to be acquired pursuant to the Exchange
Offer, or any broker-dealer who purchased Old Notes from the Company to resell
pursuant to Rule 144A under the Securities Act or any other available exemption
under the Securities Act must comply with the registration and prospectus
delivery requirements under the Securities Act.
3
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described principal amount
of the Old Notes indicated above. Subject to, and effective upon, the acceptance
for exchange of the Old Notes tendered herewith, the undersigned hereby
exchanges, assigns and transfers to, or upon the order of, the Company all
right, title and interest in and to such Old Notes. The undersigned hereby
irrevocably constitutes and appoints the Exchange Agent the true and lawful
agent and attorney-in-fact of the undersigned (with full knowledge that said
Exchange Agent acts as the agent of the Company, in connection with the Exchange
Offer) to cause the Old Notes to be assigned, transferred and exchanged. The
undersigned represents and warrants that it has full power and authority to
tender, exchange, assign and transfer the Old Notes and to acquire Exchange
Notes issuable upon the exchange of such tendered Old Notes, and that, when the
same are accepted for exchange, the Company will acquire good and unencumbered
title to the tendered Old Notes, free and clear of all liens, restrictions,
charges and encumbrances and not subject to any adverse claim. The undersigned
also warrants that it will, upon request, execute and deliver any additional
documents deemed by the Exchange Agent or the Company to be necessary or
desirable to complete the exchange, assignment and transfer of tendered Old
Notes or transfer ownership of such Old Notes on the account books maintained by
the book-entry transfer facility. The undersigned further agrees that acceptance
of any and all validly tendered Old Notes by the Company and the issuance of
Exchange Notes in exchange therefor shall constitute performance in full by the
Company of its obligations under the Note Registration Rights Agreement (as
defined in the Prospectus) and that the Company shall have no further
obligations or liabilities thereunder except as provided in the first paragraph
of Section 3 of said agreement.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Note Exchange Offer--Certain Conditions to the
Note Exchange Offer." The undersigned recognizes that as a result of these
conditions (which may be waived, in whole or in part, by the Company), as more
particularly set forth in the Prospectus, the Company may not be required to
exchange any of the Old Notes tendered hereby and, in such event, the Old Notes
not exchanged will be returned to the undersigned at the address shown above. In
addition, the Company may amend the Exchange Offer at any time prior to the
Expiration Date if any of the conditions set forth under "The Note Exchange
Offer-- Certain Conditions to the Note Exchange Offer" occur.
By tendering, each holder of Old Notes represents that the Exchange Notes
acquired in the exchange will be obtained in the ordinary course of such
holder's business, that such holder has no arrangement with any person to
participate in the distribution of such Exchange Notes, that such holder is not
an "affiliate" of the Company within the meaning of Rule 405 under the
Securities Act and that such holder is not engaged in, and does not intend to
engage in, a distribution of the Exchange Notes. Any holder of Old Notes using
the Exchange Offer to participate in a distribution of the Exchange Notes (i)
cannot rely on the position of the staff of the Securities and Exchange
Commission (the "Commission") enunciated in its interpretive letter with respect
to Exxon Capital Holdings Corporation (available April 13, 1989) or similar
letters and (ii) must comply with the registration and prospectus requirements
of the Securities Act in connection with a secondary resale transaction.
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of
Exchange Notes. If the undersigned is a broker-dealer that will receive Exchange
Notes for its own account in exchange for Old Notes that were acquired as a
result of market-making activities or other trading activities, it acknowledges
that it will deliver a prospectus in connection with any resale of such Exchange
Notes, however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. A broker-dealer may not participate in the
Exchange Offer with respect to Old Notes acquired other than as a result of
market-making activities or other trading activities.
4
<PAGE>
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Tendered Old Notes may be withdrawn at any time
prior to the Expiration Date in accordance with the terms of this Letter of
Transmittal. See Instruction 2.
Certificates for all Exchange Notes delivered in exchange for tendered Old
Notes and any Old Notes delivered herewith but not exchanged, and registered in
the name of the undersigned, shall be delivered to the undersigned at the
address shown below the signature of the undersigned.
TENDER HOLDER(S) SIGN HERE
(Complete accompanying substitute Form W-9)
________________________________________________________________________________
________________________________________________________________________________
Signature(s) of Holder(s)
Dated ________________________ Area Code and Telephone
Number_____________________
(MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON
CERTIFICATE(S) FOR OLD NOTES. IF SIGNATURE IS BY A TRUSTEE, EXECUTOR,
ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR OTHER
PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE SET FORTH THE
FULL TITLE OF SUCH PERSON.) SEE INSTRUCTION 3.
Name(s)_________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity (full title)___________________________________________________________
Address_________________________________________________________________________
(Including Zip Code)
Area Code and Telephone No._____________________________________________________
Taxpayer Identification No._____________________________________________________
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTION 3)
Authorized Signature____________________________________________________________
Name____________________________________________________________________________
Title___________________________________________________________________________
Address_________________________________________________________________________
Name of Firm____________________________________________________________________
Area Code and Telephone No._____________________________________________________
Dated___________________________________________________________________________
5
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
A holder of Old Notes may tender the same by (i) properly completing and
signing this Letter of Transmittal or a facsimile hereof (all references in the
Prospectus to the Letter of Transmittal shall be deemed to include a facsimile
thereof) and delivering the same, together with the certificate or certificates
representing the Old Notes being tendered and any required signature guarantees
and any other document required by this Letter of Transmittal, to the Exchange
Agent at its address set forth above on or prior to the Expiration Date (or
complying with the procedure for book-entry transfer described below) or (ii)
complying with the guaranteed delivery procedures described below.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE OLD NOTES AND ANY
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND EXCEPT
AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN ACTUALLY
RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS
SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED, PROPERLY INSURED,
BE USED. IN ALL CASES SUFFICIENT TIME SHOULD BE ALLOWED TO PERMIT TIMELY
DELIVERY. NO OLD NOTES OR LETTERS OF TRANSMITTAL SHOULD BE SENT TO THE COMPANY.
If tendered Old Notes are registered in the name of the signer of the Letter
of Transmittal and the Exchange Notes to be issued in exchange therefor are to
be issued (and any untendered Old Notes are to be reissued) in the name of the
registered holder (which term, for the purposes described herein, shall include
any participant in The Depository Trust Company (also referred to as a
"book-entry transfer facility") whose name appears on a security listing as the
owner of Old Notes), the signature of such signer need not be guaranteed. In any
other case, the tendered Old Notes must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed by
the registered holder, and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended. If the Exchange Notes and/or Old Notes not exchanged are to be
delivered to an address other than that of the registered holder appearing on
the note register for the Old Notes, the signature on the Letter of Transmittal
must be guaranteed by an Eligible Institution.
The Exchange Agent will make a request within two business days after the
date of receipt of this Prospectus to establish accounts with respect to the Old
Notes at the book-entry transfer facility for the purpose of facilitating the
Exchange Offer, and subject to the establishment thereof, any financial
institution that is a participant in the book-entry transfer facility's system
may make book-entry delivery of Old Notes by causing such book-entry transfer
facility to transfer such Old Notes into the Exchange Agent's account with
respect to the Old Notes in accordance with the book-entry transfer facility's
procedures for such transfer. Although delivery of Old Notes may be effected
through book-entry transfer into the Exchange Agent's account at the book-entry
transfer facility, an appropriate Letter of Transmittal with any required
signature guarantee and all other required documents must in each case be
transmitted to and received or confirmed by the Exchange Agent on or prior to
the Expiration Date, or, if the guaranteed delivery procedures described below
are complied with, within the time period provided under such procedures.
6
<PAGE>
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Old Notes to reach the Exchange Agent before the
Expiration Date or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received on
or prior to the Expiration Date, a letter, telegram or facsimile transmission
(receipt confirmed by telephone and an original delivered by guaranteed
overnight courier) from an Eligible Institution setting forth the name and
address of the tendering holder, the names in which the Old Notes are registered
and, if possible, the certificate numbers of the Old Notes to be tendered, and
stating that the tender is being made thereby and guaranteeing that within three
business days after the Expiration Date, the Old Notes in proper form for
transfer (or a confirmation of book-entry transfer of such Old Notes into the
Exchange Agent's account at the book-entry transfer facility), will be delivered
by such Eligible Institution together with a properly completed and duly
executed Letter of Transmittal (and any other required documents). Unless Old
Notes being tendered by the above-described method are deposited with the
Exchange Agent within the time period set forth above (accompanied or preceded
by a properly completed Letter of Transmittal and any other required documents),
the Company may, at its option, reject the tender. Copies of the notice of
guaranteed delivery ("Notice of Guaranteed Delivery") which may be used by
Eligible Institutions for the purposes described in this paragraph are available
from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Old Notes (or a confirmation of book-entry transfer of such
Old Notes into the Exchange Agent's account at the book-entry transfer facility)
is received by the Exchange Agent, or (ii) a Notice of Guaranteed Delivery or
letter, telegram or facsimile transmission to similar effect (as provided above)
from an Eligible Institution is received by the Exchange Agent. Issuances of
Exchange Notes in exchange for Old Notes tendered pursuant to a Notice of
Guaranteed Delivery or letter, telegram or facsimile transmission to similar
effect (as provided above) by an Eligible Institution will be made only against
deposit of the Letter of Transmittal (and any other required documents) and the
tendered Old Notes.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered holder or holders appear on the Old Notes.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Old Notes for exchange.
2. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of Old Notes evidenced by a
submitted certificate is tendered, the tendering holder should fill in the
principal amount tendered in the box entitled "Principal Amount Tendered." A
newly issued certificate for the principal amount of Old Notes submitted but not
tendered will be sent to such holder as soon as practicable after the Expiration
Date. All Old Notes delivered to the Exchange Agent will be deemed to have been
tendered unless otherwise clearly indicated.
7
<PAGE>
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent at the address set forth herein prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having tendered the Old Notes to be withdrawn (the "Depositor"), (ii)
identify the Old Notes to be withdrawn (including the certificate number or
numbers and principal amount of such Old Notes), (iii) specify the principal
amount of Old Notes to be withdrawn, (iv) include a statement that such holder
is withdrawing his election to have such Old Notes exchanged, (v) be signed by
the holder in the same manner as the original signature on the Letter of
Transmittal by which such Old Notes were tendered or as otherwise described
above (including any required signature guarantees) or be accompanied by
documents of transfer sufficient to have the Trustee under the Indenture
register the transfer of such Old Notes into the name of the person withdrawing
the tender and (vi) specify the name in which any such Old Notes are to be
registered, if different from that of the Depositor. The Exchange Agent will
return the properly withdrawn Old Notes promptly following receipt of notice of
withdrawal. If Old Notes have been tendered pursuant to the procedure for
book-entry transfer, any notice of withdrawal must specify the name and number
of the account at the book-entry transfer facility to be credited with the
withdrawn Old Notes or otherwise comply with the book-entry transfer facility
procedure. All questions as to the validity of notices of withdrawals, including
time of receipt, will be determined by the Company and such determination will
be final and binding on all parties.
Any Old Notes so withdrawn will be deemed not to have been validly tendered
for exchange for purposes of the Exchange Offer. Any Old Notes which have been
tendered for exchange but which are not exchanged for any reason will be
returned to the holder thereof without cost to such holder (or, in the case of
Old Notes tendered by book-entry transfer into the Exchange Agent's account at
the book-entry transfer facility pursuant to the book-entry transfer procedures
described above, such Old Notes will be credited to an account with such
book-entry transfer facility specified by the holder) as soon as practicable
after withdrawal, rejection of tender or termination of the Exchange Offer.
Properly withdrawn Old Notes may be retendered by following one of the
procedures described under the caption "Procedures for Tendering Old Notes" in
the Prospectus at any time on or prior to the Expiration Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS;
GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder(s) of the
Old Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the certificates without alteration, enlargement or any
change whatsoever.
If any of the Old Notes tendered hereby are owned of record by two or more
joint owners, all such owners must sign this Letter of Transmittal.
If a number of Old Notes registered in different names are tendered, it will
be necessary to complete, sign and submit as many separate copies of this Letter
of Transmittal as there are different registrations of Old Notes.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include the
book-entry transfer facility whose name appears on a security listing as the
owner of the Old Notes) of Old Notes listed and tendered hereby, no endorsements
of certificates or separate written instruments of transfer or exchange are
required.
If this Letter of Transmittal is signed by a person other than the
registered holder or holder of the Old Notes listed, such Old Notes must be
endorsed or accompanied by separate written instruments of transfer or exchange
in form satisfactory to the Company and duly executed by the registered holder,
in either case signed exactly as the name or names of the registered holder or
holders appear(s) on the Old Notes.
8
<PAGE>
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by an
Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Old Notes are tendered: (i) by a registered
holder of such Old Notes, for the holder of such Old Notes; or (ii) for the
account of an Eligible Institution.
4. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the transfer
and exchange of Old Notes to it or its order pursuant to the Exchange Offer. If,
however, certificates representing Exchange Notes or Old Notes for principal
amounts not tendered or accepted for exchange are to be delivered to, or are to
be issued in the name of, any person other than the registered holder of the Old
Notes tendered, or if tendered Old Notes are registered in the name of any
person other than the person signing the Letter of Transmittal, or if a transfer
tax is imposed for any reason other than the exchange of Old Notes pursuant to
the Exchange Offer, then the amount of any such transfer taxes (whether imposed
on the registered holder or any other persons) will be payable by the tendering
holder. If satisfactory evidence of payment of such taxes or exception therefrom
is not submitted herewith the amount of such transfer taxes will be billed
directly to such tendering holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes listed in this Letter of
Transmittal.
5. WAIVER OF CONDITIONS.
The Company reserves the right to waive in its reasonable judgment, in whole
or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES.
Any holder whose Old Notes have been mutilated, lost, stolen or destroyed,
should contact the Exchange Agent at the address indicated above for further
instructions.
7. SUBSTITUTE FORM W-9.
Each holder of Old Notes whose Old Notes are accepted for exchange (or other
payee) is required to provide a correct taxpayer identification number ("TIN"),
generally the holder's Social Security or federal employer identification
number, and with certain other information, on Substitute Form W-9, which is
provided under "Important Tax Information" below, and to certify that the holder
(or other payee) is not subject to backup withholding. Failure to provide the
information on the Substitute Form W-9 may subject the holder (or other payee)
to a $50 penalty imposed by the Internal Revenue Service and 31% federal income
tax backup withholding on payments made in connection with the Exchange Notes.
The box in Part 3 of the Substitute Form W-9 may be checked if the holder (or
other payee) has not been issued a TIN and has applied for a TIN or intends to
apply for a TIN in the near future. If the box in Part 3 is checked and a TIN is
not provided by the time any payment is made in connection with the Exchange
Notes, 31% of all such payments will be withheld until a TIN is provided.
9
<PAGE>
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to Cluett American Corp., 48 West 38th Street,
New York, New York 10018, attention: General Counsel (telephone: 212-984-8900).
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH
CERTIFICATES FOR OLD NOTES OR CONFIRMATION OF BOOK-ENTRY TRANSFER AND ALL OTHER
REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY MUST BE RECEIVED BY THE
EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
10
<PAGE>
IMPORTANT TAX INFORMATION
Under U.S. Federal income tax law, a holder of Old Notes whose Old Notes are
accepted for exchange may be subject to backup withholding unless the holder
provides The Bank of New York (as payor) (the "Paying Agent"), through the
Exchange Agent, with either (i) such holder's correct taxpayer identification
number ("TIN") on Substitute Form W-9 attached hereto, certifying that the TIN
provided on Substitute Form W-9 is correct (or that such holder of Old Notes is
awaiting a TIN) and that (A) the holder of Old Notes has not been notified by
the Internal Revenue Service that he or she is subject to backup withholding as
a result of a failure to report all interest or dividends or (B) the Internal
Revenue Service has notified the holder of Old Notes that he or she is no longer
subject to backup withholding; or (ii) an adequate basis for exemption from
backup withholding. If such holder of Old Notes is an individual, the TIN is
such holder's social security number. If the Paying Agent is not provided with
the correct taxpayer identification number, the holder of Old Notes may be
subject to certain penalties imposed by the Internal Revenue Service.
Certain holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. Exempt holders of Old Notes should indicate their exempt
status on Substitute Form W-9. In order for a foreign individual to qualify as
an exempt recipient, the holder must submit a Form W-8, signed under penalties
of perjury, attesting to that individual's exempt status. A Form W-8 can be
obtained from the Paying Agent. See the enclosed "Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9" for more instructions.
If backup withholding applies, the Paying Agent is required to withhold 31%
of any such payments made to the holder of Old Notes or other payee. Backup
withholding is not an additional tax. Rather, the tax liability of persons
subject to backup withholding will be reduced by the amount of tax withheld. If
withholding results in an overpayment of taxes, a refund may be obtained from
the Internal Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
surrendering holder of Old Notes has not been issued a TIN and has applied for a
TIN or intends to apply for a TIN in the near future. If the box in Part 3 is
checked, the holder of Old Notes or other payee must also complete the
Certificate of Awaiting Taxpayer Identification Number below in order to avoid
backup withholding . Notwithstanding that the box in Part 3 is checked and the
Certificate of Awaiting Taxpayer Identification Number is completed, the Paying
Agent will withhold 31% of all payments made prior to the time a properly
certified TIN is provided to the Paying Agent.
The holder of Old Notes is required to give the Paying Agent the TIN (e.g.,
social security number or employer identification number) of the record owner of
the Old Notes. If the Old Notes are in more than one name or are not in the name
of the actual owner, consult the enclosed "Guidelines for Certification of
Taxpayer Identification Number on Substitute Form W-9" for additional guidance
on which number to report.
11
<PAGE>
<TABLE>
<S> <C> <C>
PAYOR'S NAME: THE BANK OF NEW YORK, AS PAYING AGENT
PART I--PLEASE PROVIDE YOUR Social Security number(s) or
TIN IN THE BOX AT RIGHT AND Employer Identification
CERTIFY BY SIGNING AND DATING Number(s)
BELOW.
</TABLE>
<TABLE>
<S> <C>
SUBSTITUTE PART 2--CERTIFICATION--Under penalties of perjury, I
FORM W-9 certify that:
DEPARTMENT OF THE TREASURY (1) The number shown on this form is my correct taxpayer
INTERNAL REVENUE SERVICE identification number (or I am waiting for a number to
be issued for me), and
(2) I am not subject to backup withholding because: (a) I
am exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service (IRS) that I
am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the
IRS has notified me that I am no longer subject to
backup withholding.
PAYOR'S REQUEST FOR CERTIFICATION INSTRUCTIONS--You must cross out item (2)
TAXPAYER IDENTIFICATION above if you have been notified by the IRS that you are
NUMBER ("TIN") currently subject to backup withholding because of
underreporting interest or dividends on your tax return.
</TABLE>
<TABLE>
<S> <C> <C>
Signature
Date PART 3--Awaiting TIN / /
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 31% OF
ANY CASH PAYMENTS MADE TO YOU. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable cash payments made to me thereafter will be withheld until I
provide a taxpayer identification number.
______________________________________ ______________________________________
Signature Date
12
<PAGE>
EXHIBIT 99.2
LETTER OF TRANSMITTAL
FOR
12 1/2% SENIOR EXCHANGEABLE PREFERRED STOCK
DUE 2010
OF
CLUETT AMERICAN CORP.
----------------------------------------------------------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1998 (THE "EXPIRATION DATE") UNLESS EXTENDED BY CLUETT AMERICAN
CORP.
- --------------------------------------------------------------------------------
EXCHANGE AGENT:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
BY HAND: BY MAIL: BY OVERNIGHT EXPRESS:
The Bank of New York (INSURED OR REGISTERED The Bank of New York
101 Barclay Street RECOMMENDED) 101 Barclay Street
New York, New York 10005 The Bank of New York New York, New York 10005
101 Barclay Street
New York, New York 10005
BY FACSIMILE:
(212) 815-6339
BY TELEPHONE:
(212)
</TABLE>
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET FORTH
ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER THAN AS SET
FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
The undersigned acknowledges receipt for the Prospectus dated ,
1998 (the "Prospectus") of Cluett American Corp. (the "Company") and this Letter
of Transmittal (the "Letter of Transmittal"), which together describe the
Company's offer (the "Exchange Offer") to exchange $50,000,000 in principal
amount of its new 12 1/2% Series B Senior Exchangeable Preferred Stock due 2010
(the "New Preferred Stock") for each $50,000,000 in principal amount of
outstanding 12 1/2% Senior Exchangeable Preferred Stock due 2010 (the
"Exchangeable Preferred Stock"). The terms of the New Preferred Stock are
identical in all material respects (including principal amount, interest rate
and maturity) to the terms of the Exchangeable Preferred Stock for which they
may be exchanged pursuant to the Exchange Offer, except that the New Preferred
Stock is freely transferable by holders thereof (except as provided herein or in
the Prospectus) and is not subject to any covenant regarding registration under
the Securities Act of 1933, as amended (the "Securities Act").
The undersigned has checked the appropriate boxes below and signed this
Letter of Transmittal to indicate the action the undersigned desires to take
with respect to the Exchange Offer.
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS
CAREFULLY BEFORE CHECKING ANY BOX BELOW
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE INSTRUCTIONS
INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED. QUESTIONS AND
REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS AND THIS
LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
<PAGE>
List below the Exchangeable Preferred Stock to which this Letter of
Transmittal relates. If the space provided below is inadequate, the Certificate
Numbers and Principal Amounts should be listed on a separate signed schedule
affixed hereto.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------
DESCRIPTION OF EXCHANGEABLE PREFERRED STOCK TENDERED HEREWITH
- -------------------------------------------------------------------------------------------
AGGREGATE
PRINCIPAL AMOUNT
NAME(S) AND ADDRESS(ES) REPRESENTED PRINCIPAL
OF REGISTERED HOLDER(S) CERTIFICATE BY EXCHANGEABLE AMOUNT
(PLEASE FILL IN) NUMBER(S)* PREFERRED STOCK* TENDERED**
<S> <C> <C> <C>
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------
Total
- -------------------------------------------------------------------------------------------
</TABLE>
* Need not be completed by book-entry holders.
** Unless otherwise indicated, the holder will be deemed to have tendered the
full aggregate principal amount represented by such Exchangeable Preferred
Stock. See instruction 2.
This Letter of Transmittal is to be used either if certificates representing
Exchangeable Preferred Stock are to be forwarded herewith or if delivery of
Exchangeable Preferred Stock is to be made by book-entry transfer to an account
maintained by the Exchange Agent at The Depository Trust Company, pursuant to
the procedures set forth in "The Preferred Stock Exchange Offer--Procedures for
Tendering Exchangeable Preferred Stock" in the Prospectus. Delivery of documents
to the book-entry transfer facility does not constitute delivery to the Exchange
Agent.
Holders whose Exchangeable Preferred Stock is not immediately available or
who cannot deliver their Exchangeable Preferred Stock and all other documents
required hereby to the Exchange Agent on or prior to the Expiration Date must
tender their Exchangeable Preferred Stock according to the guaranteed delivery
procedure set forth in the Prospectus under the caption "The Preferred Stock
Exchange Offer-- Procedures for Tendering Exchangeable Preferred Stock."
/ / CHECK HERE IF TENDERED EXCHANGEABLE PREFERRED STOCK IS BEING DELIVERED BY
BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH
THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution ______________________________________________
/ / The Depository Trust Company
Account Number _____________________________________________________________
Transaction Code Number ____________________________________________________
2
<PAGE>
/ / CHECK HERE IF TENDERED EXCHANGEABLE PREFERRED STOCK IS BEING DELIVERED
PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND COMPLETE THE FOLLOWING:
Name of Registered Holder(s) _______________________________________________
Name of Eligible Institution that Guaranteed Delivery ______________________
Date of Execution of Notice of Guaranteed Delivery _________________________
If Delivered by Book-Entry Transfer:
Account Number _____________________________________________________________
/ / CHECK HERE IF NEW PREFERRED STOCK IS TO BE DELIVERED TO PERSON OTHER THAN
PERSON SIGNING THE LETTER OF TRANSMITTAL:
Name _______________________________________________________________________
(Please Print)
Address ____________________________________________________________________
(Including Zip Code)
/ / CHECK HERE IF NEW PREFERRED STOCK IS TO BE DELIVERED TO ADDRESS DIFFERENT
FROM THAT LISTED ELSEWHERE IN THIS LETTER OF TRANSMITTAL:
Address ____________________________________________________________________
(Including Zip Code)
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL
COPIES OF THIS PROSPECTUS AND 10 COPIES OF ANY AMENDMENTS OR SUPPLEMENTS
THERETO:
Names ______________________________________________________________________
Address ____________________________________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Preferred Stock. If the undersigned is a broker-dealer that will receive New
Preferred Stock for its own account in exchange for Exchangeable Preferred Stock
that was acquired as result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus in connection with
any resale of such New Preferred Stock; however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. A broker-dealer may
not participate in the Exchange Offer with respect to Exchangeable Preferred
Stock acquired other than as a result of market-making activities or other
trading activities. Any holder who is an "affiliate" of the Company or who has
an arrangement or understanding with respect to the distribution of the New
Preferred Stock to be acquired pursuant to the Exchange Offer, or any
broker-dealer who purchased Exchangeable Preferred Stock from the Company to
resell pursuant to Rule 144A under the Securities Act or any other available
exemption under the Securities Act must comply with the registration and
prospectus delivery requirements under the Securities Act.
3
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the above-described principal amount
of the Exchangeable Preferred Stock indicated above. Subject to, and effective
upon, the acceptance for exchange of the Exchangeable Preferred Stock tendered
herewith, the undersigned hereby exchanges, assigns and transfers to, or upon
the order of, the Company all right, title and interest in and to such
Exchangeable Preferred Stock. The undersigned hereby irrevocably constitutes and
appoints the Exchange Agent the true and lawful agent and attorney-in-fact of
the undersigned (with full knowledge that said Exchange Agent acts as the agent
of the Company, in connection with the Exchange Offer) to cause the Exchangeable
Preferred Stock to be assigned, transferred and exchanged. The undersigned
represents and warrants that it has full power and authority to tender,
exchange, assign and transfer the Exchangeable Preferred Stock and to acquire
New Preferred Stock issuable upon the exchange of such tendered Exchangeable
Preferred Stock, and that, when the same are accepted for exchange, the Company
will acquire good and unencumbered title to the tendered Exchangeable Preferred
Stock, free and clear of all liens, restrictions, charges and encumbrances and
not subject to any adverse claim. The undersigned also warrants that it will,
upon request, execute and deliver any additional documents deemed by the
Exchange Agent or the Company to be necessary or desirable to complete the
exchange, assignment and transfer of tendered Exchangeable Preferred Stock or
transfer ownership of such Exchangeable Preferred Stock on the account books
maintained by the book-entry transfer facility. The undersigned further agrees
that acceptance of any and all validly tendered Exchangeable Preferred Stock by
the Company and the issuance of New Preferred Stock in exchange therefor shall
constitute performance in full by the Company of its obligations under the
Preferred Stock Registration Rights Agreement (as defined in the Prospectus) and
that the Company shall have no further obligations or liabilities thereunder
except as provided in the first paragraph of Section 3 of said agreement.
The Exchange Offer is subject to certain conditions as set forth in the
Prospectus under the caption "The Preferred Stock Exchange Offer--Certain
Conditions to the Preferred Stock Exchange Offer." The undersigned recognizes
that as a result of these conditions (which may be waived, in whole or in part,
by the Company), as more particularly set forth in the Prospectus, the Company
may not be required to exchange any of the Exchangeable Preferred Stock tendered
hereby and, in such event, the Exchangeable Preferred Stock not exchanged will
be returned to the undersigned at the address shown above. In addition, the
Company may amend the Exchange Offer at any time prior to the Expiration Date if
any of the conditions set forth under "The Preferred Stock Exchange
Offer--Certain Conditions to the Preferred Stock Exchange Offer" occur.
By tendering, each holder of Exchangeable Preferred Stock represents that
the New Preferred Stock acquired in the exchange will be obtained in the
ordinary course of such holder's business, that such holder has no arrangement
with any person to participate in the distribution of such New Preferred Stock,
that such holder is not an "affiliate" of the Company within the meaning of Rule
405 under the Securities Act and that such holder is not engaged in, and does
not intend to engage in, a distribution of the New Preferred Stock. Any holder
of Exchangeable Preferred Stock using the Exchange Offer to participate in a
distribution of the New Preferred Stock (i) cannot rely on the position of the
staff of the Securities and Exchange Commission (the "Commission") enunciated in
its interpretive letter with respect to Exxon Capital Holdings Corporation
(available April 13, 1989) or similar letters and (ii) must comply with the
registration and prospectus requirements of the Securities Act in connection
with a secondary resale transaction.
4
<PAGE>
If the undersigned is not a broker-dealer, the undersigned represents that
it is not engaged in, and does not intend to engage in, a distribution of New
Preferred Stock. If the undersigned is a broker-dealer that will receive New
Preferred Stock for its own account in exchange for Exchangeable Preferred Stock
that was acquired as a result of market-making activities or other trading
activities, it acknowledges that it will deliver a prospectus in connection with
any resale of such New Preferred Stock, however, by so acknowledging and by
delivering a prospectus, the undersigned will not be deemed to admit that it is
an "underwriter" within the meaning of the Securities Act. A broker-dealer may
not participate in the Exchange Offer with respect to Exchangeable Preferred
Stock acquired other than as a result of market-making activities or other
trading activities.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned and every obligation of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned. Tendered Exchangeable Preferred Stock may be
withdrawn at any time prior to the Expiration Date in accordance with the terms
of this Letter of Transmittal. See Instruction 2.
Certificates for all New Preferred Stock delivered in exchange for tendered
Exchangeable Preferred Stock and any Exchangeable Preferred Stock delivered
herewith but not exchanged, and registered in the name of the undersigned, shall
be delivered to the undersigned at the address shown below the signature of the
undersigned.
5
<PAGE>
TENDER HOLDER(S) SIGN HERE
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9)
________________________________________________________________________________
________________________________________________________________________________
Signature(s) of Holder(s)
<TABLE>
<S> <C>
Dated Area Code and Telephone Number
</TABLE>
(MUST BE SIGNED BY REGISTERED HOLDER(S) EXACTLY AS NAME(S) APPEAR(S) ON
CERTIFICATE(S) FOR EXCHANGEABLE PREFERRED STOCK. IF SIGNATURE IS BY A TRUSTEE,
EXECUTOR, ADMINISTRATOR, GUARDIAN, ATTORNEY-IN-FACT, OFFICER OF A CORPORATION OR
OTHER PERSON ACTING IN A FIDUCIARY OR REPRESENTATIVE CAPACITY, PLEASE SET FORTH
THE FULL TITLE OF SUCH PERSON.) SEE INSTRUCTION 3.
NAME(S) ________________________________________________________________________
________________________________________________________________________________
(Please Print)
Capacity (full title) __________________________________________________________
Address ________________________________________________________________________
(Include Zip Code)
Area Code and Telephone No. ____________________________________________________
Taxpayer Identification No. ____________________________________________________
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTION 3)
Authorized Signature ___________________________________________________________
Name ___________________________________________________________________________
Title __________________________________________________________________________
Address ________________________________________________________________________
Name of Firm ___________________________________________________________________
Area Code and Telephone No. ____________________________________________________
Dated __________________________________________________________________________
6
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES.
A holder of Exchangeable Preferred Stock may tender the same by (i) properly
completing and signing this Letter of Transmittal or a facsimile hereof (all
references in the Prospectus to the Letter of Transmittal shall be deemed to
include a facsimile thereof) and delivering the same, together with the
certificate or certificates representing the Exchangeable Preferred Stock being
tendered and any required signature guarantees and any other document required
by this Letter of Transmittal, to the Exchange Agent at its address set forth
above on or prior to the Expiration Date (or complying with the procedure for
book-entry transfer described below) or (ii) complying with the guaranteed
delivery procedures described below.
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE EXCHANGEABLE
PREFERRED STOCK AND ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF
THE HOLDER, AND EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED
MADE ONLY WHEN ACTUALLY RECEIVED OR CONFIRMED BY THE EXCHANGE AGENT. IF SUCH
DELIVERY IS BY MAIL, IT IS SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT
REQUESTED, PROPERLY INSURED, BE USED. IN ALL CASES SUFFICIENT TIME SHOULD BE
ALLOWED TO PERMIT TIMELY DELIVERY. NO EXCHANGEABLE PREFERRED STOCK OR LETTERS OF
TRANSMITTAL SHOULD BE SENT TO THE COMPANY.
If tendered Exchangeable Preferred Stock is registered in the name of the
signer of the Letter of Transmittal and the New Preferred Stock to be issued in
exchange therefor is to be issued (and any untendered Exchangeable Preferred
Stock is to be reissued) in the name of the registered holder (which term, for
the purposes described herein, shall include any participant in The Depository
Trust Company (also referred to as a "book-entry transfer facility") whose name
appears on a security listing as the owner of Exchangeable Preferred Stock), the
signature of such signer need not be guaranteed. In any other case, the tendered
Exchangeable Preferred Stock must be endorsed or accompanied by written
instruments of transfer in form satisfactory to the Company and duly executed by
the registered holder, and the signature on the endorsement or instrument of
transfer must be guaranteed by a bank, broker, dealer, credit union, savings
association, clearing agency or other institution (each an "Eligible
Institution") that is a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended. If the New Preferred Stock and/or Exchangeable Preferred Stock
not exchanged are to be delivered to an address other than that of the
registered holder appearing on the register for the Exchangeable Preferred
Stock, the signature on the Letter of Transmittal must be guaranteed by an
Eligible Institution.
The Exchange Agent will make a request within two business days after the
date of receipt of this Prospectus to establish accounts with respect to the
Exchangeable Preferred Stock at the book-entry transfer facility for the purpose
of facilitating the Exchange Offer, and subject to the establishment thereof,
any financial institution that is a participant in the book-entry transfer
facility's system may make book-entry delivery of Exchangeable Preferred Stock
by causing such book-entry transfer facility to transfer such Exchangeable
Preferred Stock into the Exchange Agent's account with respect to the
Exchangeable Preferred Stock in accordance with the book-entry transfer
facility's procedures for such transfer. Although delivery of Exchangeable
Preferred Stock may be effected through book-entry transfer into the Exchange
Agent's account at the book-entry transfer facility, an appropriate Letter of
Transmittal with any required signature guarantee and all other required
documents must in each case be transmitted to and received or confirmed by the
Exchange Agent on or prior to the Expiration Date, or, if the guaranteed
delivery procedures described below are complied with, within the time period
provided under such procedures.
7
<PAGE>
If a holder desires to accept the Exchange Offer and time will not permit a
Letter of Transmittal or Exchangeable Preferred Stock to reach the Exchange
Agent before the Expiration Date or the procedure for book-entry transfer cannot
be completed on a timely basis, a tender may be effected if the Exchange Agent
has received on or prior to the Expiration Date, a letter, telegram or facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight courier) from an Eligible Institution setting forth the
name and address of the tendering holder, the names in which the Exchangeable
Preferred Stock is registered and, if possible, the certificate numbers of the
Exchangeable Preferred Stock to be tendered, and stating that the tender is
being made thereby and guaranteeing that within three business days after the
Expiration Date, the Exchangeable Preferred Stock in proper form for transfer
(or a confirmation of book-entry transfer of such Exchangeable Preferred Stock
into the Exchange Agent's account at the book-entry transfer facility), will be
delivered by such Eligible Institution together with a properly completed and
duly executed Letter of Transmittal (and any other required documents). Unless
the Exchangeable Preferred Stock being tendered by the above-described method is
deposited with the Exchange Agent within the time period set forth above
(accompanied or preceded by a properly completed Letter of Transmittal and any
other required documents), the Company may, at its option, reject the tender.
Copies of the notice of guaranteed delivery ("Notice of Guaranteed Delivery")
which may be used by Eligible Institutions for the purposes described in this
paragraph are available from the Exchange Agent.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly signed Letter of Transmittal
accompanied by the Exchangeable Preferred Stock (or a confirmation of book-entry
transfer of such Exchangeable Preferred Stock into the Exchange Agent's account
at the book-entry transfer facility) is received by the Exchange Agent, or (ii)
a Notice of Guaranteed Delivery or letter, telegram or facsimile transmission to
similar effect (as provided above) from an Eligible Institution is received by
the Exchange Agent. Issuances of New Preferred Stock in exchange for
Exchangeable Preferred Stock tendered pursuant to a Notice of Guaranteed
Delivery or letter, telegram or facsimile transmission to similar effect (as
provided above) by an Eligible Institution will be made only against deposit of
the Letter of Transmittal (and any other required documents) and the tendered
Exchangeable Preferred Stock.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Exchangeable Preferred Stock, such Exchangeable
Preferred Stock must be endorsed or accompanied by appropriate powers of
attorney, in either case signed exactly as the name or names of the registered
holder or holders appear on the Exchangeable Preferred Stock.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Exchangeable Preferred Stock for exchange.
2. PARTIAL TENDERS; WITHDRAWALS.
If less than the entire principal amount of Exchangeable Preferred Stock
evidenced by a submitted certificate is tendered, the tendering holder should
fill in the principal amount tendered in the box entitled "Principal Amount
Tendered." A newly issued certificate for the principal amount of Exchangeable
Preferred Stock submitted but not tendered will be sent to such holder as soon
as practicable after the Expiration Date. All Exchangeable Preferred Stock
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise clearly indicated.
8
<PAGE>
For a withdrawal to be effective, a written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone) or letter must
be received by the Exchange Agent at the address set forth herein prior to the
Expiration Date. Any such notice of withdrawal must (i) specify the name of the
person having tendered the Exchangeable Preferred Stock to be withdrawn (the
"Depositor"), (ii) identify the Exchangeable Preferred Stock to be withdrawn
(including the certificate number or numbers and principal amount of such
Exchangeable Preferred Stock), (iii) specify the principal amount of
Exchangeable Preferred Stock to be withdrawn, (iv) include a statement that such
holder is withdrawing his election to have such Exchangeable Preferred Stock
exchanged, (v) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Exchangeable Preferred
Stock was tendered or as otherwise described above (including any required
signature guarantees) or be accompanied by documents of transfer sufficient to
have the Trustee under the Indenture register the transfer of such Exchangeable
Preferred Stock into the name of the person withdrawing the tender and (vi)
specify the name in which any such Exchangeable Preferred Stock is to be
registered, if different from that of the Depositor. The Exchange Agent will
return the properly withdrawn Exchangeable Preferred Stock promptly following
receipt of notice of withdrawal. If Exchangeable Preferred Stock has been
tendered pursuant to the procedure for book-entry transfer, any notice of
withdrawal must specify the name and number of the account at the book-entry
transfer facility to be credited with the withdrawn Exchangeable Preferred Stock
or otherwise comply with the book-entry transfer facility procedure. All
questions as to the validity of notices of withdrawals, including time of
receipt, will be determined by the Company and such determination will be final
and binding on all parties.
Any Exchangeable Preferred Stock so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any
Exchangeable Preferred Stock which has been tendered for exchange but which is
not exchanged for any reason will be returned to the holder thereof without cost
to such holder (or, in the case of Exchangeable Preferred Stock tendered by
book-entry transfer into the Exchange Agent's account at the book-entry transfer
facility pursuant to the book-entry transfer procedures described above, such
Exchangeable Preferred Stock will be credited to an account with such book-entry
transfer facility specified by the holder) as soon as practicable after
withdrawal, rejection of tender or termination of the Exchange Offer. Properly
withdrawn Exchangeable Preferred Stock may be retendered by following one of the
procedures described under the caption "Procedures for Tendering Exchangeable
Preferred Stock" in the Prospectus at any time on or prior to the Expiration
Date.
3. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS;
GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered holder(s) of the
Exchangeable Preferred Stock tendered hereby, the signature must correspond with
the name(s) as written on the face of the certificates without alteration,
enlargement or any change whatsoever.
If any of the Exchangeable Preferred Stock tendered hereby is owned of
record by two or more joint owners, all such owners must sign this Letter of
Transmittal.
If a number of Exchangeable Preferred Stock registered in different names
are tendered, it will be necessary to complete, sign and submit as many separate
copies of this Letter of Transmittal as there are different registrations of
Exchangeable Preferred Stock.
When this Letter of Transmittal is signed by the registered holder or
holders (which term, for the purposes described herein, shall include the
book-entry transfer facility whose name appears on a security listing as the
owner of the Exchangeable Preferred Stock) of Exchangeable Preferred Stock
listed and tendered hereby, no endorsements of certificates or separate written
instruments of transfer or exchange are required.
9
<PAGE>
If this Letter of Transmittal is signed by a person other than the
registered holder or holder of the Exchangeable Preferred Stock listed, such
Exchangeable Preferred Stock must be endorsed or accompanied by separate written
instruments of transfer or exchange in form satisfactory to the Company and duly
executed by the registered holder, in either case signed exactly as the name or
names of the registered holder or holders appear(s) on the Exchangeable
Preferred Stock.
If this Letter of Transmittal, any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of corporations or others
acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 3 must be guaranteed by an
Eligible Institution.
Signatures on this Letter of Transmittal need not be guaranteed by an
Eligible Institution, provided the Exchangeable Preferred Stock is tendered: (i)
by a registered holder of such Exchangeable Preferred Stock, for the holder of
such Exchangeable Preferred Stock; or (ii) for the account of an Eligible
Institution.
4. TRANSFER TAXES.
The Company shall pay all transfer taxes, if any, applicable to the transfer
and exchange of Exchangeable Preferred Stock to it or its order pursuant to the
Exchange Offer. If, however, certificates representing New Preferred Stock or
Exchangeable Preferred Stock for principal amounts not tendered or accepted for
exchange are to be delivered to, or are to be issued in the name of, any person
other than the registered holder of the Exchangeable Preferred Stock tendered,
or if tendered Exchangeable Preferred Stock is registered in the name of any
person other than the person signing the Letter of Transmittal, or if a transfer
tax is imposed for any reason other than the exchange of Exchangeable Preferred
Stock pursuant to the Exchange Offer, then the amount of any such transfer taxes
(whether imposed on the registered holder or any other persons) will be payable
by the tendering holder. If satisfactory evidence of payment of such taxes or
exception therefrom is not submitted herewith the amount of such transfer taxes
will be billed directly to such tendering holder.
Except as provided in this Instruction 4, it will not be necessary for
transfer tax stamps to be affixed to the Exchangeable Preferred Stock listed in
this Letter of Transmittal.
5. WAIVER OF CONDITIONS.
The Company reserves the right to waive in its reasonable judgment, in whole
or in part, any of the conditions to the Exchange Offer set forth in the
Prospectus.
6. MUTILATED, LOST, STOLEN OR DESTROYED EXCHANGEABLE PREFERRED STOCK.
Any holder whose Exchangeable Preferred Stock has been mutilated, lost,
stolen or destroyed, should contact the Exchange Agent at the address indicated
above for further instructions.
10
<PAGE>
7. SUBSTITUTE FORM W-9.
Each holder of Exchangeable Preferred Stock whose Exchangeable Preferred
Stock is accepted for exchange (or other payee) is required to provide a correct
taxpayer identification number ("TIN"), generally the holder's Social Security
or federal employer identification number, and with certain other information,
on Substitute Form W-9, which is provided under "Important Tax Information"
below, and to certify that the holder (or other payee) is not subject to backup
withholding. Failure to provide the information on the Substitute Form W-9 may
subject the holder (or other payee) to a $50 penalty imposed by the Internal
Revenue Service and 31% federal income tax backup withholding on payments made
in connection with the New Preferred Stock. The box in Part 3 of the Substitute
Form W-9 may be checked if the holder (or other payee) has not been issued a TIN
and has applied for a TIN or intends to apply for a TIN in the near future. If
the box in Part 3 is checked and a TIN is not provided by the time any payment
is made in connection with the New Preferred Stock, 31% of all such payments
will be withheld until a TIN is provided.
8. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES.
Questions relating to the procedure for tendering, as well as requests for
additional copies of the Prospectus and this Letter of Transmittal, may be
directed to the Exchange Agent at the address and telephone number set forth
above. In addition, all questions relating to the Exchange Offer, as well as
requests for assistance or additional copies of the Prospectus and this Letter
of Transmittal, may be directed to Cluett American Corp., 48 West 38th Street,
New York, New York 10018, attention: General Counsel (telephone: 212-984-8900).
IMPORTANT: THIS LETTER OF TRANSMITTAL OR A FACSIMILE HEREOF (TOGETHER WITH
CERTIFICATES FOR EXCHANGEABLE PREFERRED STOCK OR CONFIRMATION OF BOOK-ENTRY
TRANSFER AND ALL OTHER REQUIRED DOCUMENTS) OR A NOTICE OF GUARANTEED DELIVERY
MUST BE RECEIVED BY THE EXCHANGE AGENT ON OR PRIOR TO THE EXPIRATION DATE.
11
<PAGE>
IMPORTANT TAX INFORMATION
Under U.S. Federal income tax law, a holder of Exchangeable Preferred Stock
whose Exchangeable Preferred Stock is accepted for exchange may be subject to
backup withholding unless the holder provides The Bank of New York (as payor)
(the "Paying Agent"), through the Exchange Agent, with either (i) such holder's
correct taxpayer identification number ("TIN") on Substitute Form W-9 attached
hereto, certifying that the TIN provided on Substitute Form W-9 is correct (or
that such holder of Exchangeable Preferred Stock is awaiting a TIN) and that (A)
the holder of Exchangeable Preferred Stock has not been notified by the Internal
Revenue Service that he or she is subject to backup withholding as a result of a
failure to report all interest or dividends or (B) the Internal Revenue Service
has notified the holder of Exchangeable Preferred Stock that he or she is no
longer subject to backup withholding; or (ii) an adequate basis for exemption
from backup withholding. If such holder of Exchangeable Preferred Stock is an
individual, the TIN is such holder's social security number. If the Paying Agent
is not provided with the correct taxpayer identification number, the holder of
Exchangeable Preferred Stock may be subject to certain penalties imposed by the
Internal Revenue Service.
Certain holders of Exchangeable Preferred Stock (including, among others,
all corporations and certain foreign individuals) are not subject to these
backup withholding and reporting requirements. Exempt holders of Exchangeable
Preferred Stock should indicate their exempt status on Substitute Form W-9. In
order for a foreign individual to qualify as an exempt recipient, the holder
must submit a Form W-8, signed under penalties of perjury, attesting to that
individual's exempt status. A Form W-8 can be obtained from the Paying Agent.
See the enclosed "Guidelines for Certification of Taxpayer Identification Number
on Substitute Form W-9" for more instructions.
If backup withholding applies, the Paying Agent is required to withhold 31%
of any such payments made to the holder of Exchangeable Preferred Stock or other
payee. Backup withholding is not an additional tax. Rather, the tax liability of
persons subject to backup withholding will be reduced by the amount of tax
withheld. If withholding results in an overpayment of taxes, a refund may be
obtained from the Internal Revenue Service.
The box in Part 3 of the Substitute Form W-9 may be checked if the
surrendering holder of Exchangeable Preferred Stock has not been issued a TIN
and has applied for a TIN or intends to apply for a TIN in the near future. If
the box in Part 3 is checked, the holder of Exchangeable Preferred Stock or
other payee must also complete the Certificate of Awaiting Taxpayer
Identification Number below in order to avoid backup withholding .
Notwithstanding that the box in Part 3 is checked and the Certificate of
Awaiting Taxpayer Identification Number is completed, the Paying Agent will
withhold 31% of all payments made prior to the time a properly certified TIN is
provided to the Paying Agent.
The holder of Exchangeable Preferred Stock is required to give the Paying
Agent the TIN (e.g., social security number or employer identification number)
of the record owner of the Exchangeable Preferred Stock. If the Exchangeable
Preferred Stock is in more than one name or are not in the name of the actual
owner, consult the enclosed "Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9" for additional guidance on which
number to report.
12
<PAGE>
<TABLE>
<S> <C> <C>
PAYOR'S NAME: THE BANK OF NEW YORK, AS PAYING AGENT
PART I--PLEASE PROVIDE YOUR Social Security number(s) or
TIN IN THE BOX AT RIGHT AND Employer Identification
CERTIFY BY SIGNING AND DATING Number(s)
BELOW.
</TABLE>
<TABLE>
<S> <C>
SUBSTITUTE PART 2--CERTIFICATION--Under penalties of perjury, I
FORM W-9 certify that:
DEPARTMENT OF THE TREASURY (1) The number shown on this form is my correct taxpayer
INTERNAL REVENUE SERVICE identification number (or I am waiting for a number to
be issued for me), and
(2) I am not subject to backup withholding because: (a) I
am exempt from backup withholding, or (b) I have not been
notified by the Internal Revenue Service (IRS) that I
am subject to backup withholding as a result of a
failure to report all interest or dividends, or (c) the
IRS has notified me that I am no longer subject to
backup withholding.
PAYOR'S REQUEST FOR CERTIFICATION INSTRUCTIONS--You must cross out item (2)
TAXPAYER IDENTIFICATION above if you have been notified by the IRS that you are
NUMBER ("TIN") currently subject to backup withholding because of
underreporting interest or dividends on your tax return.
</TABLE>
<TABLE>
<S> <C> <C>
Signature
Date PART 3--Awaiting TIN / /
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 31% OF
ANY CASH PAYMENTS MADE TO YOU. PLEASE REVIEW THE ENCLOSED GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9 FOR
ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF THE SUBSTITUTE FORM W-9.
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number
has not been issued to me, and either (1) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administration Office or (2)
I intend to mail or deliver an application in the near future. I understand that
if I do not provide a taxpayer identification number by the time of payment, 31%
of all reportable cash payments made to me thereafter will be withheld until I
provide a taxpayer identification number.
______________________________________ ______________________________________
Signature Date
13
<PAGE>
EXHIBIT 99.3
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
10 1/8% SENIOR SUBORDINATED NOTES
DUE 2008
IN EXCHANGE FOR NEW
10 1/8% SERIES B SENIOR SUBORDINATED NOTES DUE 2008
OF
CLUETT AMERICAN CORP.
Registered holders of outstanding 10 1/8% Senior Subordinated Notes due 2008
(the "Old Notes") who wish to tender their Old Notes in exchange for a like
principal amount of new 10 1/8% Series B Senior Subordinated Notes due 2008 (the
"Exchange Notes") and whose Old Notes are not immediately available or who
cannot deliver their Old Notes and Letter of Transmittal (and any other
documents required by the Letter of Transmittal) to The Bank of New York (the
"Exchange Agent") prior to the Expiration Date, may use this Notice of
Guaranteed Delivery or one substantially equivalent hereto. This Notice of
Guaranteed Delivery may be delivered by hand or sent by facsimile transmission
(receipt confirmed by telephone and an original delivered by guaranteed
overnight courier) or mail to the Exchange Agent. See "The Note Exchange
Offer--Procedure for Tendering Old Notes" in the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<S> <C>
BY HAND: BY MAIL:
The Bank of New York (INSURED OR REGISTERED RECOMMENDED)
101 Barclay Street The Bank of New York
New York, New York 10005 101 Barclay Street
New York, New York 10005
BY OVERNIGHT EXPRESS:
The Bank of New York
101 Barclay Street
New York, New York 10005
</TABLE>
BY FACSIMILE:
(212) 815-6339
(For Eligible Institutions Only)
BY TELEPHONE:
(212)
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Old Notes indicated
below, upon the terms and subject to the conditions contained in the Prospectus
dated , 1998 of Cluett American Corp. (the "Prospectus"), receipt of
which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
REGISTERED HOLDER AS
IT CERTIFICATE NUMBER(S)
NAME OF TENDERING APPEARS ON THE OLD OF PRINCIPAL AMOUNT OF
HOLDER NOTES (PLEASE PRINT) OLD NOTES TENDERED OLD NOTES TENDERED
<S> <C> <C> <C>
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
</TABLE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended, hereby guarantees to deliver to the Exchange Agent at one of
its addresses set forth above, the certificates representing the Old Notes (or a
confirmation of book-entry transfer of such Old Notes into the Exchange Agent's
account at the book-entry transfer facility), together with a properly completed
and duly executed Letter of Transmittal (or facsimile thereof), with any
required signature guarantees, and any other documents required by the Letter of
Transmittal within three business days after the Expiration Date (as defined in
the Prospectus and the Letter of Transmittal).
<TABLE>
<S> <C>
Name of Firm: (Authorized Signature)
Address: Title:
Name:
(Zip Code) (Please type or print)
Area Code and Telephone No.: Date:
</TABLE>
NOTE: DO NOT SEND OLD NOTES WITH THIS NOTICE OF GUARANTEED DELIVERY.
OLD NOTES SHOULD BE SENT WITH YOUR LETTER OF TRANSMITTAL.
<PAGE>
EXHIBIT 99.4
NOTICE OF GUARANTEED DELIVERY
FOR
TENDER OF ALL OUTSTANDING
12 1/2% SENIOR EXCHANGEABLE PREFERRED STOCK
DUE 2010
IN EXCHANGE FOR NEW
12 1/2% SERIES B SENIOR EXCHANGEABLE PREFERRED STOCK DUE 2010
OF
CLUETT AMERICAN CORP.
Registered holders of outstanding 12 1/2% Senior Exchangeable Preferred
Stock due 2010 (the "Exchangeable Preferred Stock") who wish to tender their
Exchangeable Preferred Stock in exchange for a like principal amount of new
12 1/2% Series B Senior Exchangeable Preferred Stock due 2010 (the "New
Preferred Stock") and whose Exchangeable Preferred Stock is not immediately
available or who cannot deliver their Exchangeable Preferred Stock and Letter of
Transmittal (and any other documents required by the Letter of Transmittal) to
The Bank of New York (the "Exchange Agent") prior to the Expiration Date, may
use this Notice of Guaranteed Delivery or one substantially equivalent hereto.
This Notice of Guaranteed Delivery may be delivered by hand or sent by facsimile
transmission (receipt confirmed by telephone and an original delivered by
guaranteed overnight courier) or mail to the Exchange Agent. See "The Preferred
Stock Exchange Offer--Procedure for Tendering Exchangeable Preferred Stock" in
the Prospectus.
THE EXCHANGE AGENT FOR THE EXCHANGE OFFER IS:
THE BANK OF NEW YORK
<TABLE>
<S> <C> <C>
BY HAND: BY MAIL:
The Bank of New York (INSURED OR REGISTERED
101 Barclay Street RECOMMENDED)
New York, New York 10005 The Bank of New York
101 Barclay Street
New York, New York 10005
BY OVERNIGHT EXPRESS:
The Bank of New York
101 Barclay Street
New York, New York 10005
BY FACSIMILE:
(212) 815-6339
(For Eligible Institutions
Only)
BY TELEPHONE:
(212)
</TABLE>
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE OR TRANSMISSION VIA A FACSIMILE TRANSMISSION TO A NUMBER OTHER
THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY.
This Notice of Guaranteed Delivery is not to be used to guarantee
signatures. If a signature on a Letter of Transmittal is required to be
guaranteed by an Eligible Institution (as defined in the Prospectus), such
signature guarantee must appear in the applicable space provided on the Letter
of Transmittal for Guarantee of Signatures.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders the principal amount of Exchangeable
Preferred Stock indicated below, upon the terms and subject to the conditions
contained in the Prospectus dated , 1998 of Cluett American Corp. (the
"Prospectus"), receipt of which is hereby acknowledged.
DESCRIPTION OF SECURITIES TENDERED
<TABLE>
<CAPTION>
NAME AND ADDRESS OF
REGISTERED HOLDER AS
IT
APPEARS ON THE CERTIFICATE NUMBER(S) PRINCIPAL AMOUNT OF
EXCHANGEABLE OF EXCHANGEABLE EXCHANGEABLE
NAME OF TENDERING PREFERRED PREFERRED STOCK PREFERRED
HOLDER STOCK (PLEASE PRINT) TENDERED STOCK TENDERED
<S> <C> <C> <C>
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
- --------------------- --------------------- --------------------- ---------------------
</TABLE>
THE FOLLOWING GUARANTEE MUST BE COMPLETED
GUARANTEE OF DELIVERY
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a member of a recognized signature guarantee medallion
program within the meaning of Rule 17Ad-15 under the Securities Exchange Act of
1934, as amended, hereby guarantees to deliver to the Exchange Agent at one of
its addresses set forth above, the certificates representing the Exchangeable
Preferred Stock (or a confirmation of book-entry transfer of such Exchangeable
Preferred Stock into the Exchange Agent's account at the book-entry transfer
facility), together with a properly completed and duly executed Letter of
Transmittal (or facsimile thereof), with any required signature guarantees, and
any other documents required by the Letter of Transmittal within three business
days after the Expiration Date (as defined in the Prospectus and the Letter of
Transmittal).
<TABLE>
<S> <C>
Name of Firm: (Authorized Signature)
Address: Title:
Name:
(Zip Code) (Please type or print)
Area Code and Telephone No.: Date:
</TABLE>
NOTE: DO NOT SEND EXCHANGEABLE PREFERRED STOCK WITH THIS NOTICE OF
GUARANTEED DELIVERY. EXCHANGEABLE PREFERRED STOCK SHOULD BE SENT WITH YOUR
LETTER OF TRANSMITTAL.
