UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 For the quarterly period ended October 2, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934 For the transition period from to
Commission File Number: 333-58059
Cluett American Corp.
(Exact Name of Registrant as Specified in Its Charter)
Delaware 22-2397044
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification No.)
48 West 38th Street New York, NY 10018
(Address of Principal Executive Offices) (Zip code)
Registrant's Telephone Number, Including Area Code 212-984-8900
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that registrant was
required to file such reports), and (2) has been subject to such filing
requirement for the past 90 days. Yes X No
APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEEDING FIVE YEARS:
Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15 (d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes X No
No stock is held by any non-affiliates of the registrant as of October 2, 1999
<PAGE>
Cluett American Corp. and Subsidiaries
TABLE OF CONTENTS
PART I - FINANCIAL INFORMATION
Page
Item 1. Financial Statements (Unaudited)
Condensed Consolidated Balance Sheets as of October 2, 1999
and December 31, 1998 F-1
Condensed Consolidated Statements of Operations for the
thirteen and thirty-nine
week periods ended October 2, 1999 and September 26, 1998 F-2
Condensed Consolidated Statements of Cash Flows for the
thirty-nine weeks ended October 2, 1999 and September 26, 1998 F-3
Notes to Condensed Consolidated Financial Statements - October 2, 1999 F-4
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations. 1
Item 3. Quantitative and Qualitative Disclosures About Market Risk. 7
PART II - OTHER INFORMATION
Item 1. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 8
Item 6. Exhibits and Reports on Form 8-K 8
SIGNATURES 12
<PAGE>
<TABLE>
Cluett American Corp. and Subsidiaries
Condensed Consolidated Balance Sheets
(Dollars In Thousands, except per share data)
October 2, December 31,
1999 1998
-----------------------------
(Unaudited) (Note 1)
<S> <C> <C>
Assets
Current assets:
Cash and cash equivalents.......................................... $ 7,062 $ 2,868
Accounts receivable, net........................................... 51,368 46,786
Inventories ....................................................... 89,197 74,599
Prepaid expenses and other current assets.......................... 3,734 3,972
----------------------------
Total current assets.................................................. 151,361 128,225
Property, plant and equipment, net.................................... 47,596 48,124
Pension assets........................................................
32,883 31,383
Deferred financing fees............................................... 10,559 11,198
Goodwill.............................................................. 4,692 -
Other noncurrent assets............................................... 2,006 1,845
============================
Total assets.......................................................... $249,097 $220,775
============================
Liabilities and stockholder's deficit Current liabilities:
Accounts payable and accrued expenses.............................. $ 35,430 $ 40,107
Accrued interest payable........................................... 6,321 2,332
Short-term debt and current portion of long-term debt.............. 18,359 10,248
Income taxes payable............................................... 1,827 1,475
----------------------------
Total current liabilities............................................. 61,937 54,162
Due to parent......................................................... 28,771 27,974
Long-term debt and capital lease obligations.......................... 266,457 235,681
Dividends payable..................................................... 2,403 605
Other non-current liabilities......................................... 130 111
Senior exchangeable preferred stock, cumulative, $.01 par value:
authorized 4,950,000, issued and outstanding 563,901 shares
(liquidation preference of $56,390)................................ 54,724 51,288
Stockholder's deficit:
Common stock, $1 par value: authorized, issued and outstanding 1,000
shares.......................................................... 1 1
Additional paid-in capital......................................... 111,683 116,919
Accumulated deficit................................................ (276,567) (264,933)
Other comprehensive loss........................................... (442) (1,033)
----------------------------
Total stockholder's deficit........................................... (165,325) (149,046)
============================
Total liabilities and stockholder's deficit........................... $ 249,097 $ 220,775
============================
See accompanying notes.
F-1
</TABLE>
<PAGE>
<TABLE>
Condensed Consolidated Statements of Operations (Unaudited)
(Dollars In Thousands)
Thirteen weeks ended Thirty-nine weeks ended
October 2, September 26, October 2, September 26,
1999 1998 1999 1998
---------------- ---------------- ------------- -----------------
<S> <C> <C> <C> <C>
Net sales.......................................... $87,438 $93,264 $247,756 $261,898
Cost of goods sold................................. 64,946 66,257 179,043 182,695
---------------- ---------------- ------------- -----------------
Gross profit....................................... 22,492 27,007 68,713 79,203
Selling, general and administrative expenses....... 18,979 21,129 57,845 59,958
Facility closing and reengineering costs........... 1,483 - 2,258 1,022
---------------- ---------------- ------------- -----------------
Operating income................................... 2,030 5,878 8,610 18,223
Interest expense, net.............................. 6,726 6,281 19,408 13,544
Other expense, net................................. 50 - 79 -
---------------- ---------------- ------------- -----------------
Income (loss) before reorganization costs and
income taxes.................................... (4,746) (403) (10,877) 4,679
Bankruptcy reorganization costs.................... - - - 13,179
---------------- ---------------- ------------- -----------------
Loss before provision for income taxes............. (4,746) (403) (10,877) (8,500)
Provision for income taxes......................... 193 312 751 899
---------------- ---------------- ------------- -----------------
Net loss .......................................... $(4,939) $(715) $(11,628) $(9,399)
================ ================ ============= =================
See accompanying notes.
F-2
</TABLE>
<PAGE>
<TABLE>
Condensed Consolidated Statements of Cash Flows (Unaudited)
(Dollars in Thousands)
Thirty-nine weeks ended
October 2, September 26,
1999 1998
------------------------------
<S> <C> <C>
Operating activities
Net loss........................................................... $(11,628) $(9,399)
Adjustment to reconcile net loss to net cash and cash equivalents
used in operating activities:
Depreciation.................................................... 7,225 6,295
Amortization.................................................... 1,235 585
Loss (Gain) on disposal of property, plant & equipment......... (57) -
Write-down of property, plant & equipment....................... 360 -
Changes of liabilities subject to compromise-reorganization..... - (22,442)
Changes in operating assets and liabilities, net of effects from purchase of
CAT:
Accounts receivable............................................. (4,229) (6,382)
Inventories..................................................... (13,932) (14,661)
Prepaid expenses and other current assets....................... 282 (12,099)
Pension and other noncurrent assets............................. (1,751) (561)
Accounts payable and accrued expenses........................... (1,762) 727
Income taxes payable............................................ 352 (557)
Other liabilities............................................... 744 3,797
Effect of changes in foreign currency........................... 763 -
----------------------------
Net cash and cash equivalents used in operating activities......... (22,398) (54,697)
Investing activities
Purchase of fixed assets........................................... (8,168) (7,640)
Purchase of CAT, net of cash acquired.............................. (4,954) -
Proceeds on disposal of fixed assets............................... 1,115 77
----------------------------
Net cash and cash equivalents used in investing activities......... (12,007) (7,563)
Financing activities
Issuance of preferred stock........................................ - 48,125
Distribution to parent............................................. - (87,522)
Principal payments on pre-petition credit facility................. - (146,490)
Proceeds from long term debt....................................... - 226,000
Principal payments on long term debt .............................. (2,634) (4,000)
Net borrowings under line-of-credit agreement ..................... 38,352 20,213
Net proceeds from long term note (CAT)............................. 2,881 -
Principal payments on capital leases............................... (11) (2,396)
----------------------------
Net cash and cash equivalents provided by financing activities..... 38,588 53,930
Effect of exchange rate changes on cash............................ 11 (36)
----------------------------
Net change in cash and cash equivalents............................ 4,194 (8,366)
Cash and cash equivalents at beginning of period................... 2,868 10,019
============================
Cash and cash equivalents at end of period......................... $ 7,062 $1,653
============================
See accompanying notes.
F-3
</TABLE>
<PAGE>
Notes to Condensed Consolidated Financial Statements (Unaudited)
October 2, 1999
1. Basis of Presentation
The accompanying unaudited condensed consolidated financial statements of Cluett
American Corp. and Subsidiaries, (the "Company") 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 thirteen and thirty-nine week periods ended
October 2, 1999 are not necessarily indicative of the operating results that may
be expected for the year ending December 31, 1999.
The Balance Sheet at December 31, 1998 has been derived from the audited
financial statements at that date but does not include all of the information
and footnotes required by generally accepted accounting principles for complete
financial statements.
For further information, refer to the annual consolidated financial statements
and footnotes of the Company, included in the Annual Report on Form 10-K, for
the year ended December 31, 1998, filed with the Securities and Exchange
Commission on March 29, 1999.
The consolidated financial statements include all subsidiary companies of the
Company. Significant intercompany transactions have been eliminated in
consolidation.
The Company uses a 5-4-4 week fiscal quarter whereby the fiscal quarter ends on
the Saturday nearest the end of the calendar quarter, which accordingly was
October 2, 1999 and September 26, 1998, respectively.
Certain amounts in the prior year financial statements and footnotes have been
reclassified to conform to the current year presentation.
2. Acquisition
On July 13, 1999, the Company acquired 100% of the outstanding common stock of
Central American Tailoring ("CAT"), incorporated under the laws of Honduras, for
$5.0 million including related acquisition costs. CAT had been a captive
contractor providing sewing services. The purchase price was comprised of cash
of $1.6 million, the issuance of a $2.9 million long-term note and other related
acquisition costs of $0.5 million. The cash payment was financed primarily under
the Company's revolving credit agreement. The acquisition was accounted for
using the purchase method of accounting. Accordingly, the assets and liabilities
of the acquired business are included in the consolidated balance sheet as of
October 2, 1999. The operating results of CAT have been included in the
consolidated statements of operations from the date of acquisition. The excess
purchase price over the fair market value of the underlying assets of $4.7
million was allocated to goodwill.
F-4
<PAGE>
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
3. Inventories
Inventories consist of the following at the specified date:
<TABLE>
December 31, October 2,
1999 1998
------------------ -----------------
(Dollars In Thousands)
<S> <C> <C>
Finished goods $66,702 $60,134
Work in process 9,610 4,189
Raw materials and supplies 12,885 10,276
================== =================
$89,197 $74,599
================== =================
</TABLE>
4. Comprehensive Income
For the periods ending October 2, 1999 and September 26, 1998, accumulated other
comprehensive loss as shown in the consolidated balance sheets was comprised of
foreign currency translation adjustments, which prior to the adoption was
reported separately in stockholder's deficit. The components of comprehensive
loss, for these periods were as follows:
<TABLE>
Thirteen weeks ended Thirty-nine weeks ended
October 2, September 26, October 2, September 26,
1999 1998 1999 1998
--------------- ---------------- ------------- -----------------
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Net loss........................................... $(4,939) $(715) $(11,628) $ (9,399)
Foreign currency translation adjustment............ 992 (352) 591 1,633
================ =============== ============= =================
Comprehensive loss................................. $(3,947) $(1,067) $(11,037) $(7,766)
================ =============== ============= =================
</TABLE>
F-5
<PAGE>
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Segment Data
The Company identifies its reportable segments based on the segment's product
offerings. For the quarter ended October 2, 1999, the Company conducted its
business through two principal segments: the Sock Group and the Shirt Group.
During the fiscal year ended December 31, 1998, management decided to exit the
Burberrys and the Yves Saint Laurent ("YSL") businesses. Consequently, the
Company terminated the Burberrys and YSL license agreements and ceased
distributing products under these brands as of June 30, 1999. Because of the
termination of these license agreements, the financial results of these brands
have been restated and reported under the All Other segment. For financial
reporting purposes, the dress shirt business under the Kenneth Cole trademark,
which was launched in Fall 1998 (previously reported under the Designer Group)
was consolidated into the Shirt Group financial results and the sock business
under the Kenneth Cole trademark was consolidated into the Sock Group financial
results. During the second quarter, the Company restated both the Sock Group and
Shirt Group prior year's financial results for the addition of the Kenneth Cole
brand.
<TABLE>
Thirteen weeks ended Thirty-nine weeks ended
October 2, September 26, October 2, September 26,
1999 1998 1999 1998
----------------- --- ------------ ------------ -- -------------
(Dollars in Thousands)
<S>
Net Sales <C> <C> <C> <C> <C>
Sock $42,776 $41,988 $115,685 $113,534
Shirt 46,204 46,346 131,397 132,095
All Other 803 7,689 6,409 22,195
Intersegment (2,345) (2,759) (5,735) (5,926)
------- ------- ------- -------
$87,438 $93,264 $247,756 $261,898
======= ======= ======== ========
Operating Income (loss) excluding
facility closing and reengineering
costs
Sock 7,964 7,198 19,401 16,571
Shirt (3,520) 2,895 (6,070) 8,338
All Other (931) (4,215) (2,463) (5,664)
----- ------- ------- -------
3,513 5,878 10,868 19,245
===== ===== ====== ======
Depreciation
Sock 1,511 1,335 4,531 4,005
Shirt 832 757 2,694 2,278
All Other --- 12 --- 12
--- -- ----- --
2,343 2,104 7,225 6,295
===== ===== ===== =====
Amortization
Sock --- --- --- ---
Shirt 49 22 59 22
All Other 395 563 1,176 563
--- --- ----- ---
444 585 1,235 585
=== === ===== ===
Identifiable Assets
Sock 88,561 86,456 88,561 86,456
Shirt 107,086 107,900 107,086 107,900
All Other 275 11,155 275 11,155
--- ------ --- ------
$195,922 $205,511 $195,922 $205,511
======== ======== ======== ========
EBITDA (a)
Sock 9,475 8,533 23,932 20,576
Shirt (2,688) 3,674 (3,366) 10,638
All Other (931) (4,203) (2,463) (5,652)
----- ------- ------- -------
5,856 8,004 18,103 25,562
===== ===== ====== ======
</TABLE>
F-6
<PAGE>
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
5. Segment Data (Continued)
(a) EBITDA does not include intangible amortization of $1,225 which accrue below
the line and asa thus is not included in the EBITA calculation.
Reconciliation of Reportable Segments Net Sales, Operating Income
and Identifiable Assets
<TABLE>
Thirteen weeks ended Thirty-nine weeks ended
October 2, September 26, October 2, September 26,
1999 1998 1999 1998
-------------- -- --------------- ------------- -- ----------------
(Dollars In Thousands)
<S> <C> <C> <C> <C>
Net Sales
Total net sales for reportable segments $88,980 $88,334 $247,082 $245,629
Other net sales 803 7,689 6,409 22,195
Elimination of intersegment net sales (2,345) (2,759) (5,735) (5,926)
------- ------- ------- -------
Total consolidated net sales 87,438 93,264 247,756 261,898
====== ====== ======= =======
Operating Profit (Loss)
Total operating profit or loss for
reportable segments 4,444 10,093 13,331 24,909
Other operating profit or loss (614) (3,461) (613) (4,886)
Unallocated amounts:
Corporate expense (817) (1,252) (3,353) (2,272)
Facility closing and reengineering costs (1,483) -- (2,258) (1,022)
Adjustment to pension expense in consolidation 500 498 1,503 1,494
--- --- ----- -----
Total operating profit 2,030 5,878 8,610 18,223
===== ===== ===== ======
Assets
Total assets for reportable segments 195,647 194,356 195,647 194,356
All other assets 275 11,155 275 11,155
Unallocated amounts:
Deferred finance costs 10,507 11,554 10,507 11,554
Pension assets 32,883 31,722 32,883 31,722
Other unallocated amounts 9,785 (4,732) 9,785 (4,732)
----- ------- ----- -------
Consolidated total $249,097 $244,055 $249,097 $244,055
======== ======== ======== ========
</TABLE>
F-7
<PAGE>
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Guarantor Subsidiaries
The Company's payment obligations under the Senior Credit Facility and the
Senior Subordinated Notes (the "Notes") are fully and unconditionally guaranteed
on a joint and several basis by its principal domestic subsidiaries: 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 a direct or
indirect wholly-owned subsidiary of the Company. The Company's payment
obligations under the Senior Credit Facility and the Notes are not guaranteed by
the foreign operating subsidiaries Cluett, Peabody Canada Inc. and Arrow de
Mexico S.A. de C.V. (collectively the "Non-Guarantor Subsidiaries"). The
obligation of each Guarantor Subsidiary under its Guarantee of the Notes is
subordinated to such subsidiary's obligation under its guarantee of the Senior
Credit Facility.
Presented below is condensed consolidating financial information for the
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 consolidated in the presentation below. Investments in subsidiaries are
accounted for by the Company using the equity method of accounting. Earnings
(losses) 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
stockholder's deficit and other intercompany balances and transactions.
F-8
<PAGE>
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Guarantor Subsidiaries (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
OCTOBER 2, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents...... $ -- $ 6,867 $ 195 $ -- $ 7,062
Accounts receivable, net....... -- 44,242 7,126 -- 51,368
Inventories (Note 2)........... -- 75,397 13,800 -- 89,197
Prepaid expenses and other
current assets.............. -- 3,225 509 -- 3,734
-- ----- --- -- -----
Total current assets.............. -- 129,731 21,630 -- 151,361
Investment in subsidiaries........ (97,958) -- -- 97,958 --
Intercompany receivable (payable) 15,000 (15,000) -- -- --
Property, plant and equipment, net -- 45,613 1,983 -- 47,596
Pension assets.................... -- 32,883 -- -- 32,883
Deferred financing fees........... -- 10,559 -- -- 10,559
Goodwill.......................... -- 4,692 -- -- 4,692
Other noncurrent assets........... -- 1,252 754 -- 2,006
-- ----- --- -- -----
Total assets...................... $ (82,958) $ 209,730 $ 24,367 $ 97,958 $ 249,097
======== ======= ====== ====== =======
Current liabilities:
Accounts payable and accrued
expenses.................... $ -- $ 32,956 $ 2,474 $ -- $ 35,430
Accrued interest payable..... -- 6,321 -- -- 6,321
Short-term debt and current
portion of long-term debt... -- 9,173 9,186 -- 18,359
Income taxes payable........... -- 1,620 207 -- 1,827
-- ----- --- -- -----
Total current liabilities......... -- 50,070 11,867 -- 61,937
Due to parent..................... -- 28,771 -- -- 28,771
Long-term debt and capital lease
obligations.................... -- 266,224 233 -- 266,457
Dividends payable................. 2,403 -- -- -- 2,403
Other non-current liabilities..... -- 130 -- -- 130
Senior exchangeable preferred
stock, cumulative, $.01 par
value: authorized 4,950,000,
issued and outstanding:
563,901 shares (liquidation 54,724 -- -- -- 54,724
preference of $56,390).........
Stockholder's deficit............. (140,085) (135,465) 12,267 97,958 (165,325)
--------- --------- ------ ------ ---------
Total liabilities and $ (82,958) $ 209,730 $ 24,367 $ 97,958 $ 249,097
stockholder's deficit............. ======== ======= ====== ====== =======
F-9
</TABLE>
<PAGE>
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Guarantor Subsidiaries (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Assets
Current assets:
Cash and cash equivalents...... $ -- $ 2,396 $ 472 $ -- $ 2,868
Accounts receivable, net....... -- 42,599 4,187 -- 46,786
Inventories (Note 2)........... -- 63,158 11,441 -- 74,599
Prepaid expenses and other
current assets.............. -- 3,168 804 -- 3,972
-- ----- --- -- -----
Total current assets.............. -- 111,321 16,904 -- 128,225
Investment in subsidiaries........ (86,330) -- -- 86,330 --
Intercompany receivable (payable) 15,000 (15,000) -- -- --
Property, plant and equipment, net -- 46,112 2,012 -- 48,124
Pension assets.................... -- 31,383 -- -- 31,383
Deferred financing fees........... -- 11,198 -- -- 11,198
Other noncurrent assets........... -- 1,012 833 -- 1,845
-- ----- --- -- -----
Total assets...................... $ (71,330) $ 186,026 $ 19,749 $ 86,330 $ 220,775
======== ======= ====== ====== =======
Liabilities and stockholder's deficit Current liabilities:
Accounts payable and accrued
expenses.................... $ -- $ 35,449 $ 4,658 $ -- $ 40,107
Accrued interest payable..... -- 2,332 -- -- 2,332
Short-term debt and current
portion of long-term debt... -- 6,600 3,648 -- 10,248
Income taxes payable........... -- 1,268 207 -- 1,475
-- ----- --- -- -----
Total current liabilities......... -- 45,649 8,513 -- 54,162
Due to parent..................... -- 27,974 -- -- 27,974
Long-term debt and capital lease
obligations.................... -- 235,450 231 -- 235,681
Dividends payable................. 605 -- -- -- 605
Other non-current liabilities..... -- 111 -- -- 111
Senior exchangeable preferred
stock, cumulative, $.01 par
value: authorized 4,950,000,
issued and outstanding:
530,730 shares (liquidation 51,288 -- -- -- 51,288
preference $53,073)
Stockholder's deficit............. (123,223) (123,158) 11,005 86,330 (149,046)
--------- --------- ------ ------ ---------
Total liabilities and $ (71,330) $ 186,026 $ 19,749 $ 86,330 $ 220,775
stockholder's deficit............. ======== ======= ====== ====== =======
</TABLE>
F-10
<PAGE>
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Guarantor Subsidiaries (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THIRTEEN WEEKS ENDED OCTOBER 2, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Net sales............................. $ -- $ 79,669 $ 7,769 $ -- $ 87,438
Cost of goods sold.................... -- 58,197 6,749 -- 64,946
-- ------ ----- -- ------
Gross profit.......................... -- 21,472 1,020 -- 22,492
Selling, general and administrative
expenses......................... -- 17,258 1,721 -- 18,979
--
Facility closing and reengineering
costs............................ -- 1,361 122 -- 1,483
-- ----- --- -- -----
Operating income...................... -- 2,853 (823) -- 2,030
Loss on investments in
subsidiaries .................... (4,939) -- -- 4,939 --
Interest expense, net................. -- 6,549 177 -- 6,726
Other expense, net.................... -- 49 1 -- 50
-- -- - -- --
Income before reorganization costs
and income taxes................... (4,939) (3,745) (1,001) 4,939 (4,746)
Bankruptcy reorganization costs....... -- -- -- -- --
-- -- -- -- --
Income (loss) before provision for
income taxes....................... (4,939) (3,745) (1,001) 4,939 (4,746)
Provision for income taxes............ -- 167 26 -- 193
-- --- -- -- ---
Net loss.............................. $ (4,939) $ (3,912) $ (1,027) $ 4,939 $ (4,939)
======= ======= ======= ===== =======
</TABLE>
F-11
<PAGE>
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Guarantor Subsidiaries (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THIRTEEN WEEKS ENDED SEPTEMBER 26, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Net sales............................. $ -- $ 86,002 $ 7,262 $ -- $ 93,264
Cost of goods sold.................... -- 59,509 6,748 -- 66,257
-- ------ ----- -- ------
Gross profit.......................... -- 26,493 514 -- 27,007
Selling, general and administrative
expenses......................... -- 18,775 2,354 -- 21,129
Facility closing and reengineering
costs............................ -- -- -- -- --
-- -- -- -- --
Operating income...................... -- 7,718 (1,840) -- 5,878
Income on investment in
subsidiaries..................... (715) -- -- 715 --
Interest expense, net................. -- 6,293 (12) -- 6,281
-- ----- ---- -- -----
Income before reorganization costs
and income taxes................... (715) 1,425 (1,828) 715 (403)
Bankruptcy reorganization costs....... -- -- -- -- --
-- -- -- -- --
Income (loss) before provision for
income taxes....................... (715) 1,425 (1,828) 715 (403)
Provision for income taxes............ -- 306 6 -- 312
-- --- - -- ---
Net income (loss)..................... $ (715) $ 1,119 $ (1,834) $ 715 $ (715)
===== ===== ======= === ===
F-12
</TABLE>
<PAGE>
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Guarantor Subsidiaries (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THIRTY-NINE WEEKS ENDED OCTOBER 2, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Net sales............................. $ -- $ 223,713 $ 24,043 $ -- $ 247,756
Cost of goods sold.................... -- 159,763 19,280 -- 179,043
-- ------- ------ -- -------
Gross profit.......................... -- 63,950 4,763 -- 68,713
Selling, general and administrative
expenses......................... -- 52,093 5,752 -- 57,845
Facility closing and reengineering
costs............................ -- 1,583 675 -- 2,258
-- ----- --- -- -----
Operating income...................... -- 10,274 (1,664) -- 8,610
Income on investment in
Subsidiaries..................... (11,628) -- -- 11,628 --
Interest expense, net................. -- 18,952 456 -- 19,408
Other (income) expense, net........... -- 78 1 -- 79
-- -- - -- --
Income before reorganization costs
and income taxes................... (11,628) (8,756) (2,121) 11,628 (10,877)
Bankruptcy reorganization costs....... -- -- -- -- --
-- -- -- -- --
Income (loss) before provision for
income taxes....................... (11,628) (8,756) (2,121) 11,628 (10,877)
Provision for income taxes............ -- 679 72 -- 751
-- --- -- -- ---
Net income (loss)..................... $ (11,628) $ (9,435) $ (2,193) $ (11,628) $ (11,628)
======== ======= ======= ======== ========
</TABLE>
F-13
<PAGE>
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Guarantor Subsidiaries (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
THIRTY-NINE WEEKS ENDED SEPTEMBER 26, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Net sales............................. $ -- $ 234,798 $ 27,100 $ -- $ 261,898
Cost of goods sold.................... -- 162,705 19,990 -- 182,695
-- ------- ------ -- -------
Gross profit.......................... -- 72,093 7,110 -- 79,203
Selling, general and administrative
expenses......................... -- 52,825 7,133 -- 59,958
Facility closing and reengineering
costs............................ -- 1,022 -- -- 1.022
-- ----- -- -- -----
Operating income/ (loss).............. -- 18,246 (23) -- 18,223
Income on investment in
subsidiaries..................... (9,399) -- -- 9,399 --
Interest expense, net................. -- 13,189 355 -- 13,544
-- ------ --- -- ------
Income before reorganization costs
and income taxes................... (9,399) 5,057 (378) 9,399 4,679
Bankruptcy reorganization costs....... -- 13,179 -- -- 13.179
-- ------ -- -- ------
Income (loss) before provision for
income taxes....................... (9,399) (8,122) (378) 9,399 (8,500)
Provision for income taxes............ -- 859 40 -- 899
-- --- -- -- ---
Net income (loss)..................... $ (9,399) $ (8,981) $ (418) $ 9,399 $ (9,399)
======= ======= ===== ===== =======
F-14
</TABLE>
<PAGE>
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Guarantor Subsidiaries (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THIRTY-NINE WEEKS ENDED OCTOBER 2, 1999
(DOLLARS IN THOUSANDS)
<TABLE>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Operating activities
Net income (loss)...................... $ (11,628) $ (9,435) $ (2,193) $ 11,628 $ (11,628)
Adjustment to reconcile net income
(loss) to net cash and cash
equivalents provided by (used in)
operating activities:
Loss on investments in subsidiaries.. 11,628 -- -- (11,628) --
Depreciation......................... -- 7,001 224 -- 7,225
Amortization......................... -- 1,235 -- -- 1,235
Gain on disposal of assets........... -- (57) -- -- (57)
Write-down of assets................. -- 360 -- -- 360
Changes in operating assets and -- (16,057) (3,476) -- (19,533)
-- -------- ------- -- --------
liabilities............................
Net cash and cash equivalents used in
operating activities................... -- (16,953) (5,445) -- (22,398)
Investing activities
Purchase of fixed assets............... -- (8,083) (85) -- (8,168)
Purchase of CAT, net of cash acquired.. (4,954) (4,954)
Proceeds on disposal of fixed assets... -- 1,114 1 -- 1,115
-- ----- - -- -----
Net cash and cash equivalents used in
investing activities................... -- (11,923) (84) -- (12,007)
Financing activities
Net borrowings under revolving credit
agreements............................. -- 33,100 5,252 -- 38,352
Principal payments on long term debt... -- (2,634) -- -- (2,634)
Net proceeds on long-term note......... -- 2,881 -- -- 2,881
Principal payments on capital leases... -- -- (11) -- (11)
-- -- ---- -- ----
Net cash and cash equivalents provided
by financing activities................ -- 33,347 5,241 -- 38,588
Effect of exchange rates changes on -- -- 11 -- 11
cash................................... -- -- -- -- --
Net change in cash and cash equivalents -- 4,471 (277) -- 4,194
Cash and cash equivalents at beginning -- 2,396 472 -- 2,868
of year................................ -- ----- --- -- -----
Cash and cash equivalents at end of $ -- $ 6,867 $ 195 $ - $ 7,062
period................................. == ===== === = =====
F-15
</TABLE>
<PAGE>
Notes to Condensed Consolidated Financial Statements (Unaudited) (continued)
6. Guarantor Subsidiaries (Continued)
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
THIRTY-NINE WEEKS ENDED SEPTEMBER 26, 1998
(DOLLARS IN THOUSANDS)
<TABLE>
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDIARIES ELIMINATIONS CONSOLIDATED
<S> <C> <C> <C> <C> <C>
Operating activities
Net income (loss)..................... $ (9,399) $ (9,229) $ (170) $ 9,399 $ (9,399)
Adjustment to reconcile net income
(loss) to net cash and cash equivalents
provided by (used in) operating activities:
Loss on investment in subsidiaries.. 9,399 -- -- (9,399) --
Depreciation........................ -- 6,056 239 -- 6,295
Amortization........................ -- 585 -- 585
Loss on disposal of assets.......... -- -- -- -- --
Changes of liabilities subject to
Compromise....................... -- (22,442) -- -- (22,442)
Changes in operating assets and -- (24,281) (5,455) -- (29,736)
liabilities...................... -- -------- ------- -- --------
Net cash and cash equivalents used in
operating activities.................. -- (49,311) (5,386) -- (54,697)
Investing activities
Purchase of fixed assets.............. -- (7,446) (194) -- (7,640)
Proceeds on disposal of fixed assets.. -- 77 -- -- 77
-- -- -- -- --
Net cash and cash equivalents used in
investing activities.................. -- (7,369) (194) -- (7,563)
Financing activities
Issuance of preferred stock........... -- 48,125 -- -- 48,125
Distribution to parent................ -- (87,522) -- -- (87,522)
Proceeds on long term debt............ -- 226,000 -- -- 226,000
Principle payments on long term debt.. -- (4,000) -- -- (4,000)
Net borrowings under line-of-credit... -- 14,771 5,442 -- 20,213
Principal payments on pre-petition
credit facility....................... -- (146,490) -- -- (146,490)
Principal payments on capital leases.. -- (2,373) (23) -- (2,396)
-- ------- ---- -- -------
Net cash and cash equivalents
provided by financing activities...... -- 48,511 5,419 -- 53,930
Effect of foreign currency translation -- -- (36) -- (36)
Net change in cash and cash -- (8,169) (197) -- (8,366)
equivalents...........................
Cash and cash equivalents at
beginning of year..................... -- 9,551 468 -- 10,019
-- ----- --- -- ------
Cash and cash equivalents at end of $ -- $ 1,382 $ 271 $ -- $ 1,653
period................................ == ===== === == =====
F-16
</TABLE>
<PAGE>
7. Long-Term Obligations and Financing Agreement
Effective September 30, 1999, the Company amended certain financial covenants
under its existing Senior Credit Facility. The amended covenants provide the
Company with greater operating flexibility through fiscal 2004. As a result of
the amendments, the rates for the Term A and Term B loans were amended,
effective September 30, 1999. The interest rate for the Term A loan was modified
to LIBOR plus 300 basis points or the alternative base rate plus 200 basis
points and interest on the Term B loan was modified to LIBOR plus 350 basis
points or the alternative base rate plus 250 basis points. The alternative
interest rates continue to be at the Company's option. In connection with the
amendments discussed above, the Company entered into an Investment and Deposit
agreement dated September 30, 1999 between Vestar Capital Partners III, L.P. and
Bank of America N.A. The Investment and Deposit agreement provides the Company
with the requirement of additional equity capital of up to $30 million in the
event the Company defaults on certain of the amended financial covenants.
In addition, the Company has entered into a $3.0 million revolving credit
facility with the Bank of America N.A. The facility expires on December 31,
2000; interest on any borrowings accrues at either, at the Company's option, the
Eurodollar rate plus 150 basis points or the Prime rate plus 50 basis points.
F-17
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations: Thirteen weeks ended October 2, 1999 vs.
September 26, 1998
The following table is derived from the Company's Consolidated Statements of
Operations and sets forth, for the period indicated, net sales, gross profit,
operating income, interest expense and net loss of the Company:
<TABLE>
Thirteen weeks ended
October 2, September 26,
1999 1998
------------------------------
(Dollars In Thousands)
<S> <C> <C>
Net sales................................................................. $87,438 $93,264
Gross profit.............................................................. 22,492 27,007
Operating income ......................................................... 2,030 5,878
Interest expense ......................................................... 6,726 6,281
Net loss.................................................................. $(4,939) $(715)
</TABLE>
Net Sales: For the third quarter 1999, net sales for reportable segments
(excludes YSL, Burberrys and the Canadian retail terminated businesses) were up
1% versus the prior year. The Sock Group recorded a 2% third quarter net sales
increase versus the same period last year, while the Shirt Group's third quarter
net sales were flat. The third quarter net sales growth from the Sock Group
relates to a rebound in Gold Toe sales from a sluggish first quarter combined
with solid growth in the Nautica, Kenneth Cole and Jockey sock offerings.
Net sales in the third quarter for the All Other segment were down $6.9 million
from the prior year reflecting the exit from the YSL, Burberrys and Canadian
retail store businesses.
Gross Profit: For the third quarter, 1999, gross profit decreased $4.5 million
from the third quarter of 1998 as a gross profit increase in the Sock Group was
more than offset by a gross profit decrease in the Shirt Group. The Sock Group
improved its third quarter gross margin from 32.6% to 33.1%. This improvement
relates to a combination of improved productivity, better overhead absorption
and material cost reductions. This pick up in gross margin occurred despite
costly returns and restocking activity during the quarter which has removed
certain slower moving items and improved the Sock Groups sales turn at retail.
The Shirt Group's gross margins were adversely impacted by a number of key items
including: a decline in staple dress shirt demand, the bankruptcy and
liquidation of Eaton's (Canada), improved dress shirt make without an offsetting
price increase, increased markdown and allowances relating primarily to
sportswear, and substantial new product launch expense (i.e., Kenneth Cole,
Urban Arrow, Khaki's by Arrow, and private label) which require special handling
or manufacturing approaches.
Operating Income: The Company's operating income, for the third quarter ending
October 2, 1999 declined to $2.0 million from $5.9 million for the same period
last year. Despite a $0.8 million or 11% increase in operating income from the
Sock Group, the Shirt Group's operating income declined $6.4 million. The key
source of the Shirt Group's decrease was a gross profit decline of $5.4 million
and a $1.0 million increase in overall selling, distribution, general and
administrative spending. The increased S,G&A expense relates primarily to new
product launches and revenue initiatives. Additionally, during the third
quarter, the Company incurred facility closing and reengineering costs of $1.5
million as a result of the consolidation of certain administrative functions and
the closure of a Shirt Group manufacturing facility. Operating losses in the All
Other segment decreased $3.3 million to $1.0 million for the third quarter 1999
from the same period last year. This improvement results from the exit of the
YSL, Burberrys and Candian Retail businesses during 1998.
Interest expense: Interest expense increased $0.4 million for the thirteen weeks
ended October 2, 1999 over the prior year as a result of higher debt levels
during the quarter.
1
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Net loss: Net loss for the thirteen weeks ended October 2, 1999 increased to
$4.9 million from a loss of $0.7 million for the same period in 1998. This
additional loss was related to the facility closing and reengineering costs
recorded in the third quarter, the decline in the Shirt Group's operating profit
and the Company's overall increased interest expense.
On July 13, 1999, the Company acquired 100% of the outstanding common stock of
Central American Tailoring (CAT), incorporated under the laws of Honduras, for
$5.0 million including related acquisition costs. CAT had been a captive
contractor providing sewing services. The purchase price was comprised of cash
of $1.6 million, the issuance of a $2.9 million long-term note and acquisition
related costs of $0.5 million. The cash payment was financed primarily under the
Company's revolving credit agreement. The acquisition was accounted for using
the purchase method of accounting. Accordingly, the assets and liabilities of
the acquired business are included in the consolidated balance sheet as of
October 2, 1999. The operating results of CAT have been included in the
consolidated statements of operations from the date of acquisition. The excess
purchase price over the fair market value of the underlying assets of $4.7
million was allocated to goodwill.
In order to reduce its domestic to imported goods manufacturing ratio and to
improve productivity and asset utilization, the Company announced, on August 2,
1999, plans to close its owned manufacturing facility located in Enterprise,
Alabama. The closure, which was completed on October 15, 1999, is expected to
yield annual pre-tax cost savings of approximately $3.2 million. The
restructuring plan, which is anticipated to cost approximately $1.8 million,
includes severance and benefits to terminate approximately 280 employees and
costs related to the physical closure of the facility. The Company recorded
facility closing and reengineering costs of $1.5 million during the third
quarter in accordance with the requirements of Emerging Issues Task Force
Pronouncement 94-3.
Results of Operations: Thirty-nine weeks ended October 2, 1999 vs.
September 26, 1998
The following table is derived from the Company's Consolidated Statements of
Operations and sets forth, for the period indicated, net sales, gross profit,
operating income, interest expense, bankruptcy reorganization costs and net
income (loss) of the Company:
<TABLE>
Thirty-nine weeks ended
October 2, September 26,
1999 1998
------------------------------
(Dollars In Thousands)
<S> <C> <C>
Net sales................................................................. $247,756 $261,898
Gross profit.............................................................. 68,713 79,203
Operating income ......................................................... 8,610 18,223
Interest expense ......................................................... 19,408 13,544
Bankruptcy reorganization costs........................................... -- 13,179
Net loss.................................................................. $(11,628) $(9,399)
</TABLE>
Net Sales: For the thirty-nine weeks ended October 2, 1999, net sales for
reportable segments (excludes the YSL, Burberrys and Canadian retail terminated
businesses) were up approximately 1% versus the prior year. The Sock Group
recorded a 2% net sales increase versus the same period last year, while the
Shirt Group had a 1% net sales decrease. Net sales in the All Other segment
(YSL, Burberrys and Canadian retail business) were down $17.2 million from the
prior year reflecting the decision to exit the businesses in 1998. $5.6 million
of All Other net sales in the first six months of 1999 represent the final
liquidation of the YSL and Burberrys inventory.
2
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations (Continued)
Gross Profit: For the thirty-nine weeks ended October 2, 1999, gross profit
decreased $10.5 million (with $3.6 million of the deterioration relating to the
All Other or terminated businesses) versus the same period in 1998. The Sock
Group improved its year-to-date gross margin from 32.2% to 34.3%. The Shirt
Group's gross margin decreased from 29.4% to 21.9%. The reasons for the
improvement, in the case of the Sock Group, and the decline, in the case of the
Shirt Group, are consistent with those as outlined for the third quarter of
1999.
Operating Income: The Company's operating income declined to $8.6 million for
the thirty-nine weeks ended October 2, 1999 from $18.2 million for the same
period in 1998, primarily due to the Shirt Group's gross margin deterioration
and increased SG&A expense levels associated with new product launches.
Interest expense: Interest expense increased $5.9 million for the thirty-nine
weeks ended October 2, 1999 as a result of higher debt levels existing after the
Recapitalization which was completed on May 18, 1998.
Bankruptcy Reorganization Costs: The Company's bankruptcy proceedings concluded
in May 1998. As a result, there were no bankruptcy reorganization costs for the
thirty-nine weeks ended October 2, 1999. For the thirty-nine weeks ended
September 26, 1998, bankruptcy reorganization costs represented the payment of
post-petition interest, default interest and fees to creditors in accordance
with the terms of the bankruptcy reorganization plan.
Net loss: Net loss for the thirty-nine weeks ended October 2, 1999 increased
$2.2 million to a loss of $11.6 million from a loss of $9.4 million for the same
period in 1998 for the reason stated above.
In a continuing effort to reduce operating costs and increase efficiencies, the
Company incurred net facility closing and reengineering costs of $2.3 million
for the thirty-nine weeks ended October 2, 1999, as a result of the closure of a
manufacturing facility and the consolidation of certain functions within the
Shirt Group. The consolidation and the closure are expected to yield combined
annual pretax cost savings of approximately $3.2 million beginning in 2000.
Liquidity and Capital Resources
The Company's primary cash requirements are to fund working capital (primarily
inventory and accounts receivable), the purchase of property and equipment and
the payment of debt service requirements related to the Company's financing
agreements. The Company has a Senior Credit Facility comprised of three loans,
including a revolving credit facility under which the Company may, at its
option, borrow and repay amounts within certain limits. The total amount
available to the Company under the revolving credit facility is $50.0 million,
subject to certain customary drawing conditions; the revolving credit facility
matures in 2004. Interest for borrowings under the revolving credit facility is
based on either, at the Company's option, LIBOR plus 300 basis points or the
Alternative Base rate plus 200 basis points. In addition, the Company has
obtained a $3.0 million revolving credit facility which bears interest, at the
Company's option, at eiterh the Eurodollar rate plus 150 basis points or the
Prime rate plus 50 basis points and expires on December 31, 2000.The Company
believes that its borrowing capacity under these facilities plus internally
generated funds are adequate to fund its capital expenditures and its working
capital and debt service requirements.
3
<PAGE>
The Senior Credit Facility (which was amended on December 18, 1998, March 19,
1999 and September 30, 1999) is secured by virtually all domestic assets of the
Company and its domestic subsidiaries and contains a number of covenants that,
among other things, restrict the ability of the Company and its subsidiaries,
other than pursuant to specified exceptions, 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, change the
nature of their business 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, including a senior leverage ratio
and a total leverage ratio, each of which is tested as of the last day of each
fiscal quarter of the Company. During the third quarter, the Company obtained an
amendment to the Senior Credit Facility which, in exchange for a commitment by
Vestar Capital Partners III, L.P. to infuse up to $30 million of new equity if
certain leverage ratios are not met, provides the Company with a new financial
covenant package. As a result of obtaining this amendment, the Company has
reclassified the obligations under the Senior Credit Facility as long-term.
The Company typically makes capital expenditures related primarily to the
maintenance and improvement of manufacturing facilities, equipment modernization
and acquisitions. Net capital spending for the first thirty-nine weeks of 1999
and 1998 was $12.0 million and $7.6 million, respectively. The increase in
capital expenditures relates to the 100% stock acquisition of CAT, previously
discussed. The Company anticipates overall capital spending (excluding
acquisitions) levels for 1999 to be approximately $9.3 million. 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.
Net cash used by operations for the thirty-nine weeks ended October 2, 1999 was
$22.4 million, as compared to $54.7 million for the same period in the prior
year. The significant improvement in cash used by operations was primarily due
to the settlement of certain prepetition liabilities, which were paid during the
second quarter of 1998. For 1999, the net cash used by operations results
primarily from an inventory increase at the Shirt Group. Inventory levels were
higher at the Shirt Group because of the growth in Kenneth Cole, the timing
differences of shipments and a build up in staple dress shirt inventory arising
out of sales softness during the period.
For the thirty-nine weeks ended October 2, 1999, net cash provided by financing
activities was $38.6 million compared with $53.9 million for the thirty-nine
weeks ended September 26, 1998.
4
<PAGE>
Year 2000 Risk
As is more fully described in the Company's Annual Report filed on Form 10-K for
the fiscal year ended December 31, 1998, the Company has undertaken various
initiatives intended to ensure that its computer equipment and software will
function properly with respect to dates in the year 2000 and thereafter. Based
upon its identification and assessment efforts, the Company replaced and or
modified certain of the computer equipment and software it uses. In addition, in
the ordinary course of replacing computer equipment and software, the Company
obtained replacements that it believes are Year 2000 compliant. As of October 2,
1999, the Company believes that the Year 2000 program is nearing completion.
Most of the project effort is focused on completing the Business Continuity
Plan. The Company believes that the Business Continuity Plan will be completed
by mid-December 1999.
<TABLE>
<S> <C> <C>
YEAR 2000 INITIATIVE TIME FRAME PERCENT COMPLETE
Initial IT Systems Assessment December 1998 100%
Remediation and Testing of Central/Distribution Systems November 1999 90%
Remediation and Testing of Store/Distribution Systems November 1999 90%
Upgrades to Telephone/PBX/Other Systems December 1999 75%
EDI Trading Partner Conversions November 1999 90%
Identification, Assessment, Remediation, & Testing
of Desktop Systems November 1999 90%
Identification, Assessment & Testing of Non-IT Systems December 1998 100%
</TABLE>
The Company has also mailed letters to its significant vendors, service
providers and customers to determine the extent to which interfaces with such
entities are vulnerable to Year 2000 issues and whether the products and
services purchased from or by such entities are Year 2000 compliant. As of
October 1999, the Company has received responses from approximately 90% of such
third parties, and 100% of the companies that have responded have provided
written assurances that they expect to address all their significant Year 2000
issues on a timely basis.
The Company believes that the cost of its Year 2000 identification, assessment,
remediation, and testing efforts, as well as currently anticipated costs to be
incurred by the Company with respect to Year 2000 issues of third parties, will
not exceed $600,000, which expenditures will be funded from operating cash
flows. Such amount represents less than 3% of the Company's total actual and
anticipated IT expenditures for fiscal 1997 through fiscal 1999. As of October
21, 1999, the Company had incurred costs of approximately $500,000 related to
its Year 2000 identification, assessment, remediation, and testing efforts. All
of the $500,000 relates to analysis, repair, or replacement of existing
software, upgrades to existing software, or evaluation of information received
from significant vendors, service providers or customers. Other non-Year 2000 IT
efforts have not been materially delayed or impacted by Year 2000 initiatives.
The Company presently believes that the Year 2000 issue will not pose
significant operational problems for the Company. However, if all Year 2000
issues are not properly identified, or assessment, remediation, and testing are
not effected timely with respect to Year 2000 problems that are identified,
there can be no assurance that the Year 2000 issue will not materially adversely
impact the Company's results of operations or adversely affect the Company's
relationships with customers, vendors or others. Additionally, there can be no
assurance that the Year 2000 issues of other entities will not have a material
adverse impact on the Company's systems or results of operations.
The Company has completed a comprehensive analysis of the operational problems
and costs (including loss of revenues) that would be reasonably likely to result
from the failure by the Company and certain third parties to complete efforts to
achieve Year 2000 compliance on a timely basis. Contingency plans are being
developed for dealing with the most reasonably likely worst case scenario.
The Company has engaged its independent auditor Ernst & Young to evaluate its
Year 2000 identification, assessment, remediation, and testing efforts. Results
of this initiative are forthcoming.
5
<PAGE>
The costs of the Company's Year 2000 identification, assessment, remediation,
and testing efforts and the dates on which the Company believes it has completed
such efforts are based upon management's best estimates, which were derived
using numerous assumptions regarding future events, including the continued
availability of certain resources, third-party remediation plans, and other
factors. There can be no assurance that these estimates will prove to be
accurate and actual results could differ materially from those currently
anticipated. Specific factors that could cause such material differences
include, but are not limited to, the availability and cost of personnel trained
in Year 2000 issues, the ability to identify, assess, remediate, and test all
relevant computer codes and imbedded technology, and similar uncertainties. In
addition, variability of definitions of "compliance with Year 2000" and the
myriad of different products and services, and combinations thereof, sold by the
Company may lead to claims whose impact on the Company is not currently
estimable. No assurance can be given that the aggregate cost of defending and
resolving such claims, if any, will not materially adversely affect the
Company's results of operations. Although some of the Company's agreements with
manufacturers and others from whom it purchases products for resale contain
provisions requiring such parties to indemnify the Company under some
circumstances, there can be no assurance that such indemnification arrangements
will cover all of the Company's liabilities and costs related to claims by third
parties related to the Year 2000 issue.
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 electronic data interchange
("EDI") system and vendor managed inventory systems have resulted in shortened
lead times between submission of purchase orders and delivery and has lowered
the level of backlog orders. Consequently, the Company believes that the amount
of its backlog is not an appropriate indicator of future production levels.
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 could 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.
The Company's business is seasonal, with higher sales and income during its
third and fourth quarters. The third and fourth quarters coincide with the
Company's two peak retail selling seasons: (i) the first season runs from the
start of the back-to-school and fall selling seasons, beginning in August and
continuing through September; and (ii) the second season runs from the start of
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 half of the year relatively weaker.
6
<PAGE>
Cautionary Statement Regarding Forward-Looking Statements
The Quarterly Report on Form 10-Q contains certain statements which describe the
Company's beliefs concerning future business conditions and the outlook for the
Company based on currently available information. The preceding Management's
Discussion and Analysis contains forward-looking statements regarding the
Company's performance, financial condition, liquidity and the adequacy of its
capital resources. These forward looking statements are subject to risks,
uncertainties and other factors which could cause the Company's actual results,
performance, condition or achievement to differ materially from those expressed
in, or implied by these statements.
As a result, the Company cautions that the forward-looking statements are
qualified by the financial strength of the retail industry, the risks of
increased competition from other manufacturers of men's dress shirts and socks,
shifting consumer demand, changing consumer credit markets and general economic
conditions, hiring and retaining effective team members, sourcing merchandise
from domestic and international vendors, preparing for the impact of year 2000
and other risks and uncertainties. Therefore, while management believes that
there is a reasonable basis for the forward-looking statements, undue reliance
should not be placed on those statements.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
The Company has exposure to fluctuations in interest rates and foreign currency
exchange rates. The Company operates under a senior credit facility at variable
interest rates. Interest expense is primarily affected by the general level of
U.S. interest rates, LIBOR and European base rates. The Company is subject to
risk from sales and loans to its foreign subsidiary as well as sales, purchases
from third party customers, suppliers and creditors, denominated in foreign
currencies. Currently, the Company does not engage in any material derivative
type instruments in order to hedge against interest rate and Canadian foreign
currency exchange rate fluctuations. However, the Company feels it is limited in
its exposure of foreign currency exchange rate changes as most inventory
purchase contracts are denominated in US Dollars.
The Company evaluated its market risks (floating interest rate, fixed interest
rate and currency risks) at the fiscal year ended December 31, 1998, which is
disclosed in the Company's annual report filed on Form 10-K. There has not been
any material change (adverse or favorable) in the risk factors identified since
the evaluation performed by the Company at December 31, 1998.
7
<PAGE>
Part II - OTHER INFORMATION
Item 1. Legal Proceedings
The Company and its subsidiaries are involved in various legal proceedings, both
as plaintiff and as defendant, which are normal to its business. It is the
opinion of management that the aforementioned actions and claims, if determined
adversely to the Company, will not have a material adverse effect on the
financial condition or operations of the Company taken as a whole.
Item 4. Submission of Matters to a Vote of Security Holders
There were no matters submitted to a vote of security holders during the quarter
ended October 2, 1999.
Item 6. Exhibits and Reports on Form 8-K
(a) (1) Financial Statements
Included in Part I, Item 1
(2) Financial Statement Schedules
Schedule II - Valuation and Qualifying
Accounts
All other schedules for which provision is made in the
applicable accounting regulation of the Securities and
Exchange Commission are not required under the related
instructions or are inapplicable and therefore have been
omitted.
(3) List of Exhibits
(b) The Company did not file any reports on Form 8-K during the thirteen weeks
ended October 2, 1999
(c) Exhibits: See (a)(3) above for a listing of the exhibits included as part of
this report.
(d) Financial Statement Schedules: See (a)(1) and (a)(2) above for a listing of
the financial statements and schedules submitted as part of this report.
EXHIBIT
NO. DESCRIPTION OF EXHIBIT
- --------------------------------------------------------------------------------
2.1 Third Amended plan of Reorganization of Cluett American Corp. and
Cluett American Investment Corp. (incorporated by reference to Exhibit
2.1 to the Company's Registration Statement on Form S-4 (Reg. No.
333-58059) filed on June 30, 1998).
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. (incorporated by reference to Exhibit 2.2 to the
Company's Registration Statement on Form S-4 (Reg. No. 333-58059)
filed on June 30, 1998).
2.3 Stockholders' Agreement dated as of May 18, 1998 among Cluett American
Investment Corp., Vestar Capital Partners III, L.P., A&M Investment
Associates #7, LLC, the Co-Investors named therein, the Original
Equity Holders named therein and the Management Investors named
therein (incorporated by reference to Exhibit 2.3 to the Company's
Registration Statement on Form S-4 (Reg. No. 333-58059) filed on June
30, 1998).
2.4 Joinder Agreement dated as of June 30, 1998 among Cluett American
Investment Corp., Vestar Capital Partners III, L.P. and each other
signatory thereto (an "Additional Stockholder") (incorporated by
reference to Exhibit 2.4 to the Company's Registration Statement on
Form S-4 (Reg. No. 333-58059) filed on June 30, 1998).
8
<PAGE>
3.1 Restated Certificate of Incorporation of Cluett American Corp.
(incorporated by reference to Exhibit 3.1 to the Company's
Registration Statement on Form S-4 (Reg. No. 333-58059) filed on June
30, 1998).
3.2 Bylaws of Cluett American Corp. (incorporated by reference to Exhibit
3.2 to the Company's Registration Statement on Form S-4 (Reg. No.
333-58059) filed on June 30, 1998).
4.1 Indenture between Cluett American Corp. and The Bank of New York, as
Trustee (incorporated by reference to Exhibit 4.1 to the Company's
Registration Statement on Form S-4 (Reg. No. 333-58059) filed on June
30, 1998).
4.2 Exchange Debenture Indenture between Cluett American Corp. and The
Bank of New York, as Trustee (incorporated by reference to Exhibit 4.2
to the Company's Registration Statement on Form S-4 (Reg. No.
333-58059) filed on June 30, 1998).
4.3 Certificate of Designations of the 12 1/2% Senior Exchangeable
Preferred Stock Due 2010 (incorporated by reference to Exhibit 4.3 to
the Company's Registration Statement on Form S-4 (Reg. No. 333-58059)
filed on June 30, 1998).
4.4 Form of 10 1/8% Senior Subordinated Notes Due 2008 (incorporated by
reference to Exhibit 4.4 to the Company's Registration Statement on
Form S-4 (Reg. No. 333-58059) filed on June 30, 1998).
4.5 Form of 10 1/8% Series B Senior Subordinated Notes Due 2008
(incorporated by reference to Exhibit 4.5 to the Company's
Registration Statement on Form S-4 (Reg. No. 333-58059) filed on June
30, 1998).
4.6 Form of 12 1/2% Senior Exchangeable Preferred Stock Due 2010
(incorporated by reference to Exhibit 4.6 to the Company's
Registration Statement on Form S-4 (Reg. No. 333-58059) filed on June
30, 1998).
4.7 Form of 12 1/2% Series B Senior Exchangeable Preferred Stock Due 2010
(incorporated by reference to Exhibit 4.7 to the Company's
Registration Statement on Form S-4 (Reg. No. 333-58059) filed on June
30, 1998).
4.8 Note Registration Rights Agreement dated May 18, 1998 among Cluett
American Corp., NationsBanc Montgomery Securities LLC and NatWest
Capital Markets Limited (incorporated by reference to Exhibit 4.8 to
the Company's Registration Statement on Form S-4 (Reg. No. 333-58059)
filed on June 30, 1998).
4.9 Preferred Stock Registration Rights Agreement dated May 18, 1998 among
Cluett American Corp., NationsBanc Montgomery Securities LLC and
NatWest Capital Markets Limited (incorporated by reference to Exhibit
4.9 to the Company's Registration Statement on Form S-4 (Reg. No.
333-58059) filed on June 30, 1998).
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 (incorporated by reference
to Exhibit 10.1 to the Company's Registration Statement on Form S-4
(Reg. No. 333-58059) filed on June 30, 1998).
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 (incorporated by reference
to Exhibit 10.2 to the Company's Registration Statement on Form S-4
(Reg. No. 333-58059) filed on June 30, 1998).
10.2.1 Second Amendment to the Credit Agreement and Assignment dated as
December 18, 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
(incorporated by reference to Exhibit 10.2.1 to the Company's Annual
Report on Form 10-K (Reg No. 333-58059) filed on March 29, 1999).
9
<PAGE>
10.2.2 Third Amendment to the Credit Agreement and Assignment dated as of
March 19, 1999 by an among Cluett American Corp., Cluett American
Investment Corp., Cluett American Group, Inc. and certain
subsidiaries, the Existing Lenders, New Lenders, and agents
(incorporated by reference to Exhibit 10.2.1 to the Company's Annual
Report on Form 10-K (Reg No. 333-58059) filed on March 29, 1999).
10.2.3 Waiver to the Credit Agreement and Assignment dated July 28, 1999 by
an among Cluett American Corp., Cluett American Investment Corp.,
Cluett American Group, Inc. and certain subsidiaries, the Existing
Lenders, New Lenders, and agents (incorporated by reference to Exhibit
10.2.1 to the Company's Annual Report on Form 10-K (Reg No. 333-58059)
filed on March 29, 1999).
*10.2.4 Fourth Amendment to the Credit Agreement and Assignment dated
September 30, 1999 by an among Cluett American Corp., Cluett American
Investment Corp., Cluett American Group, Inc. and certain
subsidiaries, the Existing Lender, New Lender, and agents
(incorporated by reference to Exhibit10.2.1 to the Company's Annual
Report on Form 10-K (Reg No. 333-58059) filed on March 29, 1999).
*10.2.5 Investment and Deposit Agreement between Vestar Capital Partners
and Bank of America dated September 30, 1999.
*10.2.6 $3.0 million Credit Agreement dated as of November 9, 1999 among
Cluett American Corp, as the borrower Bank of America, N.A. and Vestar
Capital Partners III, L.P. as guarantor.
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 (incorporated by reference to Exhibit
10.3 to the Company's Registration Statement on Form S-4 (Reg. No.
333-58059) filed on June 30, 1998).
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 (incorporated by reference to Exhibit
10.4 to the Company's Registration Statement on Form S-4 (Reg. No.
333-58059) filed on June 30, 1998).
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
(incorporated by reference to Exhibit 10.5 to the Company's
Registration Statement on Form S-4/A (Reg. No. 333-58059) filed on
September 3, 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 (incorporated by reference to Exhibit
10.6 to the Company's Registration Statement on Form S-4 (Reg. No.
333-58059) filed on June 30, 1998).
+10.7Employment Agreement dated March 7, 1997 by and between Great
American Knitting Mills, Inc. and James A. Williams (incorporated by
reference to Exhibit 10.7 to the Company's Registration Statement on
Form S-4/A (Reg. No. 333-58059) filed on September 3, 1998).
+10.8Severance Agreement dated as of August 8, 1997 by and between Cluett,
Peabody & Co., Inc. and Phil Molinari (incorporated by reference to
Exhibit 10.8 to the Company's Registration Statement on Form S-4/A
(Reg. No. 333-58059) filed on September 3, 1998).
+10.9Severance Agreement dated as of May 5, 1997 by and between Great
American Knitting Mills, Inc. and William Sheely (incorporated by
reference to Exhibit 10.9 to the Company's Registration Statement on
Form S-4/A (Reg. No. 333-58059) filed on September 3, 1998).
+10.10 Severance Agreement dated as of May 5, 1997 by and between Great
American Knitting Mills, Inc. and Kathy Wilson (incorporated by
reference to Exhibit 10.10 to the Company's Registration Statement on
Form S-4/A (Reg. No. 333-58059) filed on September 3, 1998).
10
<PAGE>
+10.11 Advisory Agreement dated May 18, 1998 among Cluett American
Investment Corp., Cluett American Corp. and Vestar Capital Partners
(incorporated by reference to Exhibit 10.11 to the Company's
Registration Statement on Form S-4/A (Reg. No. 333-58059) filed on
September 3, 1998).
10.12Secured Promissory Note dated May 18, 1998 made by A&M Investment
Associates #7, LLC in favor of Cluett American Investment Corp.
(incorporated by reference to Exhibit 10.12 to the Company's
Registration Statement on Form S-4/A (Reg. No. 333-58059) filed on
September 3, 1998).
10.13Form of Secured Promissory Note made by the Management Investors in
favor of Cluett American Investment Corp. (incorporated by reference
to Exhibit 10.13 to the Company's Registration Statement on Form S-4/A
(Reg. No. 333-58059) filed on September 3, 1998).
+10.14 Severance Agreement dated as of August 8, 1997 by and between
Cluett, Peabody & Co., Inc. and Robert Riesbeck (incorporated by
reference to Exhibit 10.14 to the Company's Registration Statement on
Form S-4/A (Reg. No. 333-58059) filed on October 15, 1998).
+10.15 Severance Agreement dated as of January 16, 1996 by and between
Bidermann Industries Corp. and Steven J. Kaufman (incorporated by
reference to Exhibit 10.15 to the Company's Registration Statement on
Form S-4/A (Reg. No. 333-58059) filed on October 15, 1998).
21 List of Subsidiaries (incorporated by reference to Exhibit 10.6 to the
Company's Registration Statement on Form S-4 (Reg. No. 333-58059)
filed on June 30, 1998).
24 Powers of Attorney (included on pages II-5--II-11) (incorporated by
reference to Exhibit 24 to the Company's Registration Statement on
Form S-4 (Reg. No. 333-58059) filed on June 30, 1998).
*27 Financial Data Schedule (filed herewith as Exhibit 27)
+ This is a management contract or compensatory plan or arrangement
* Filed herewith
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CLUETT AMERICAN CORP.
(Registrant)
November 11, 1999 /s/ Bryan P. Marsal
-------------------------------------------
Bryan P. Marsal
Director, President and Chief Executive Officer
November 11, 1999 /s/ W. Todd Walter
-------------------------------------------
W. Todd Walter
Vice President and Chief Financial
and Accounting Officer
12
<PAGE>
EXHIBIT INDEX
10.2.4 Fourth Amendment to the Credit Agreement and Assignment dated as of
September 30, 1999
10.2.5 Investment and Deposit Agreement between Vestar Capital Partners III, L.P
and Bank of America NA
10.2.6 Credit Agreement between Vestar Capital Partners III, L.P. and Bank of
America N.A.
27 Financial Data Schedule
13
<PAGE>
Item 6 (d). Financial Statement Schedules
SCHEDULE II
CLUETT AMERICAN CORP.
VALUATION AND QUALIFYING ACCOUNTS
(DOLLARS IN THOUSANDS)
<TABLE>
<S> <C> <C> <C> <C>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
ADDITIONS
BALANCE AT CHARGED TO CHARGED TO BALANCE
BEGINNING COSTS AND OTHER AT END
DESCRIPTION OF PERIOD EXPENSES ACCOUNTS DEDUCTIONS OF PERIOD
Period Ended October 2, 1999:
Deductions from
asset accounts:
Allowance for
Doubtful $1,568 $ 470 (a) $ -- (b) $ 211(c) $ 1,827
Accounts
Customer Allowances 6,894 7,070 -- 7,809(c) 6,155
Inventory reserves 5,149 2,165 (d) -- 4,171 3,143
----- --------- - -------- ---------- -----
Total $13,611 $9,705 $ -- $ 12,191 $11,125
======= ============ ======== ========== =======
<FN>
(a) Provision for doubtful accounts.
(b) Recoveries of doubtful accounts previously written off.
(c) Primarily uncollectible accounts charged against the allowance provided
therefor.
(d) Primarily related to the liquidation of excess inventory
</FN>
</TABLE>
14
Exhibit 10.2.4
FOURTH AMENDMENT TO CREDIT AGREEMENT
THIS FOURTH AMENDMENT TO CREDIT AGREEMENT (this "Amendment"), dated as
of September 30, 1999, 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 (the "Lenders"), Bank of
America, N.A. (formerly known as NationsBank, N.A.), as agent for the Lenders
(in such capacity, the "Agent") and Gleacher NatWest Inc., as documentation
agent (the "Documentation Agent").
W I T N E S S E T H
WHEREAS, the Borrower, the Guarantors, the Lenders, the Agent and the
Documentation Agent have entered into that certain Credit Agreement dated as of
May 18, 1998, as amended as of May 27, 1998, December 18, 1998 and March 19,
1999 (as so amended the "Existing Credit Agreement"); and
WHEREAS, the parties to the Existing Credit Agreement have agreed to
amend the Existing Credit Agreement as provided herein.
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.
"Amendment No. 4 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. 4
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 Amendments to Section 1.1.
(a) The pricing grid contained in the definition of "Applicable
Percentage" appearing in Section 1.1 of the Existing Credit Agreement
is hereby amended and restated as follows:
1
<PAGE>
<TABLE>
Applicable Percentage For
Revolving Loans and Tranche Applicable Percentage For
A Term Loan Tranche B Term Loan
-------------- ------------ -------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Applicable Applicable Applicable
Senior Percentage Percentage For Percentage for
Pricing Leverage For Unused Eurodollar Base Rate Eurodollar Base Rate Standby Letter of Trade Letter of
Level Ratio Fee Loans Loans Loans Loans Credit Fee Credit Fee
- ---------- ----------- ------------ ------------- -------------- -------------- ------------ ----------------- --------------
I > 2.50 to
1.00 1/2% 3% 2% 3-1/2% 2-1/2% 3% 1-1/2%
- ---------- ----------- ------------ ------------- -------------- -------------- ------------ ----------------- --------------
II < 2.50 to
1.00 but >
2.00 to 1/2% 2-3/4% 1-3/4% 3-1/4% 2-1/4% 2-3/4% 1-3/8%
1.00
- ---------- ----------- ------------ ------------- -------------- -------------- ------------ ----------------- --------------
III < 2.00 to
1.00 but >
1.75 to 3/8% 2-1/2% 1-1/2% 3% 2% 2-1/2% 1-1/4%
1.00
- ---------- ----------- ------------ ------------- -------------- -------------- ------------ ----------------- --------------
IV < 1.75 to
1.00 3/8% 2-1/4% 1-1/4% 3% 2% 2-1/4% 1-1/8%
- ---------- ----------- ------------ ------------- -------------- -------------- ------------ ----------------- --------------
</TABLE>
(b) The definition of "Consolidated EBITDA" appearing in Section 1.1 of
the Existing Credit Agreement is hereby amended and restated in its
entirety to read as follows:
"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, or the obligation to
grant, 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
any period shall be equal to the sum of (i) the amount determined
pursuant to the first clause of this definition for such period plus
(ii) the aggregate Consolidated EBITDA Adjustment for each fiscal
quarter occurring during such period.
(c) The definition of "Consolidated EBITDA Adjustment" appearing in
Section 1.1 of the Existing Credit Agreement is hereby amended and
restated in its entirety to read as follows:
"Consolidated EBITDA Adjustment" means (i) for the fiscal
quarter ending December 31, 1998, the lesser of $2.3 million and actual
losses of Cluett Designer Group, Inc. for such fiscal quarter
associated with the discontinuance of the Burberrys and Yves Saint
Laurent licensed product lines, (ii) for any fiscal quarter ending on
or after December 31, 1998, the sum of (A) the amount, if any, of
reorganization charges taken during such fiscal quarter in respect of
(1) up to $550,000 of losses accrued by the Borrower and its
Subsidiaries on or prior to December 31, 1998 associated with (x) the
Canadian retail operations of the Borrower and its Subsidiaries and (y)
the Mexican and Guatemalan operations of the Borrower and its
Subsidiaries, (2) the costs and expenses of the Parent, the Borrower
and its Subsidiaries incurred in connection with the Recapitalization
and (3) up to $700,000 for non-cash facility closing and re-engineering
costs accrued by the Borrower and its Subsidiaries on or prior to
December 31, 1998, plus (B) the amount, if any, of charges taken during
such fiscal quarter in respect of (1) the establishment on or prior to
December 31, 1998 of a litigation reserve of up to $1.6 million and (2)
failed deal costs of up to $500,000 incurred by the Borrower and its
Subsidiaries on or prior to December 31, 1998, and (iii) for any fiscal
quarter ending on or after September 30, 1999 and not later than
December 31, 2000, the sum of (A) the amount of charges taken during
such quarter in respect of reorganization and restructuring charges
2
<PAGE>
(including, without limitation, facility closing, severance, pension
expense and re-engineering costs) incurred by the Borrower or any of
its Subsidiaries during the period from and including June 30, 1999 to
and including December 31, 2000, provided that the aggregate amount of
all such charges for all such periods shall not exceed $6,000,000 and
(B) the amount of charges taken during such fiscal quarter in respect
of the establishment on or prior to June 30, 2000 of a litigation
reserve of up to $725,000, in each case calculated in accordance with
GAAP.
(d) The definition of "Equity Issuance" appearing in Section 1.1 of the
Existing Credit Agreement is hereby amended and restated in its
entirety to read as follows:
"Equity Issuance" means any issuance for cash by the Parent or
any Consolidated Party to any Person 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 include any Sponsor Equity Issuance,
but shall not include any Asset Disposition.
(e) The definition of "Funded Indebtedness" appearing in Section 1.1 of
the Existing Credit Agreement is hereby amended and restated in its
entirety to read as follows:
"Funded Indebtedness" means, with respect to any Person,
without duplication, the sum of (i) the amount equal to the sum of (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, plus (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, plus (c) all Guaranty Obligations of such Person
with respect to Indebtedness of the type referred to in clause (a)
above of another Person plus (d) Indebtedness of the type referred to
in clause (a) above 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, plus (ii) the portion not
applied to the prepayment of the Loans pursuant to Section 3.3(b)(v)(B)
of the aggregate Net Cash Proceeds of all Sponsor Equity Issuances
consummated on or after September 30, 1999 and at a time when the Total
Leverage Ratio as of the most recent fiscal quarter end with respect to
which the Agent has received the Required Financial Information is
greater than 6.5 to 1.0.
(f) The following new definitions are added to Section 1.1 of the Existing
Credit Agreement in appropriate alphabetical order:
"Investment and Deposit Agreement" means the investment and
deposit agreement dated as of September 30, 1999 between Vestar Capital
Partners III, L.P. and the Agent, as amended, modified, restated or
supplemented from time to time.
"Leverage Grace Period" means, with respect to any fiscal
quarter, the period beginning with the date that the Credit Parties are
required to deliver the Required Financial Information for such fiscal
quarter to the Lenders (or, if earlier, the date that such Required
Financial Information becomes available to the Borrower) and ending on
the later of (i) the date 15 Business Days thereafter or (ii) if a Sale
Moratorium (as hereinafter defined) is in effect as of the date
determined pursuant to clause (i) above, the last day of such Sale
Moratorium; provided, however, that (A) in no event shall the Leverage
Grace Period for any fiscal quarter extend beyond the date that is 180
days after the date that the Credit Parties are required to deliver the
Required Financial Information for such fiscal quarter to the Lenders
(or, if earlier, the date that such Required Financial Information
becomes available to the Borrower) and (B) the Credit Parties shall be
entitled to invoke a Sale Moratorium only one time. For purposes of
this definition, a "Sale Moratorium" shall be in effect for the period
beginning with the date that the Agent receives a written notice from
the Borrower requesting an extension of the Leverage Grace Period then
in effect, together with satisfactory evidence that the Credit Parties
3
<PAGE>
have engaged a financial advisor reasonably acceptable to the Agent to
arrange a sale of all or substantially all of either the Shirt Group or
the Sock Group, and ending on the earliest of (a) the date 180 days
after the date of engagement of such financial advisor, (b) the date
(as determined by the Agent in its sole reasonable discretion) on which
the Credit Parties discontinue their efforts to consummate the sale for
which such financial advisor was engaged and (c) the date on which a
sale of all or substantially all of either the Shirt Group or the Sock
Group is consummated in accordance with the terms of Section 8.5.
"Sale Moratorium" shall have the meaning assigned to such term
in the definition of "Leverage Grace Period" set forth in this Section
1.1.
"Shirt Group" means any of the Equity Interests and Property
comprising the businesses of the Borrower and its Subsidiaries that are
engaged, domestically or internationally, in the design, manufacture
and marketing of dress shirts and sportswear.
"Sock Group" means any of the Equity Interests and Property
comprising the businesses of the Borrower and its Subsidiaries that are
engaged, domestically or internationally, in the design, manufacture
and marketing of branded and private label men's, women's and
children's socks.
"Sponsor Equity Issuance" means any Equity Issuance to the
Sponsor or its Affiliates or designated co-investors or any of the
officers, directors or employees of the Parent or a Consolidated Party.
"Sponsor Equity Issuance Prepayment Event" means the
occurrence, prior to termination of the Investment and Deposit
Agreement in accordance with the terms of Section 9.13 thereof, of a
Sponsor Equity Issuance at a time that any Events of Default with
respect to which a Leverage Grace Period has become effective are
continuing (whether or not such Leverage Grace Period has expired),
other than an issuance of Equity Interests (a) pursuant to the exercise
of options or warrants or (b) the proceeds of which are used by the
Parent to repurchase Equity Interests of the Parent in accordance with
the terms of Section 8.7(v).
SUBPART 2.2 Amendments to Section 3.3(b). Subsections (v) and (vi) of
Section 3.3(b) of the Existing Credit Agreement are hereby amended and restated
in their entireties to read as follows:
3.3 Prepayments.
**********
(b) Mandatory Prepayments.
**********
(v) Issuances of Equity.
(A) Non-Sponsor Equity Issuance. Immediately
upon the occurrence of any Equity Issuance other than
a Sponsor Equity Issuance, the Borrower shall prepay
the Loans in an aggregate amount equal to 100% of the
Net Cash Proceeds of such Equity Issuance (such
prepayment to be applied as set forth in clause (vi)
below).
(B) Sponsor Equity Issuance. Immediately
upon the occurrence of a Sponsor Equity Issuance
Prepayment Event, the Borrower shall prepay the Loans
in an aggregate amount equal to the lesser of (x)
100% of the Net Cash Proceeds of the related Sponsor
Equity Issuance and (y) as applicable, (I) the
portion of the Net Cash Proceeds of the related
Sponsor Equity Issuance necessary to effect a cure,
in the manner contemplated by Section 7.11(f), of
Events of Default resulting from non-compliance by
the Credit Parties with Section 7.11(c) and/or
Section 7.11(d) as of the end of each fiscal quarter
with respect to which a Leverage Grace Period is then
4
<PAGE>
in effect or (II) the portion of the Net Cash
Proceeds of the related Sponsor Equity Issuance
necessary to effect compliance, in the manner
contemplated by Section 8.5(c)(ii)(B), with the
financial ratios set forth in Section 8.5(c)(ii)(A)
in connection with a sale of all or substantially all
of the Shirt Group at any time that a Sale Moratorium
is in effect (such prepayment, in any such case, 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), Section 3.3(b)(iv) or
Section 3.3(b)(v)(A), 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) or
Section 3.3(b)(v)(B), pro rata to (1) the Swingline Loans
(with a corresponding reduction in the Revolving Committed
Amount in an amount equal to all amounts applied pursuant to
this clause (1)), (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);
provided, however, that in connection with a Sponsor Equity
Issuance consummated at a time that the Total Leverage Ratio
as of the most recent fiscal quarter end with respect to which
the Agent has received the Required Financial Information is
equal to or less than 6.5 to 1.0, all amounts required to be
prepaid pursuant to Section 3.3(b)(v)(B) shall be applied by
the Borrower in the manner provided in Section 3.3(a). One or
more holders of the Tranche B Term Loans may decline to accept
a mandatory prepayment under Section 3.3(b)(ii), Section
3.3(b)(iii), Section 3.3(b)(iv) or Section 3.3(b)(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 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.
SUBPART 2.3 Amendments to Section 7.11. Section 7.11 of the Existing Credit
Agreement is hereby amended and restated in its entirety to read as follows:
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:
(i) for the period from September 30, 1999 to
and including September 29, 2000, 0.60 to
1.00;
(ii) for the period from September 30, 2000 to
and including December 30, 2000, 0.80 to
1.00;
5
<PAGE>
(iii) at all times thereafter, 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 September 30, 1999 to
and including March 30, 2000, 1.10 to 1.00;
(ii) for the period from March 31, 2000 to and
including June 29, 2000, 1.00 to 1.00;
(iii) for the period from June 30, 2000 to and
including September 29, 2000, 1.05 to 1.00;
(iv) for the period from September 30, 2000 to
and including December 30, 2000, 1.30 to
1.00;
(v) for the period from December 31, 2000 to
and including December 30, 2001, 1.50 to
1.00;
(vi) for the period from December 31, 2001 to and
including December 30, 2002, 1.85 to 1.0;
(vii) for the period from December 31, 2002 to and
including December 30, 2003, 2.00 to 1.0;
(viii) for the period from December 31, 2003 to and
including December 30, 2004, 2.25 to
1.0; and
(ix) 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 September 30, 1999 to
and including June 29, 2000, 5.75 to 1.00;
(ii) for the period from June 30, 2000 to and
including September 29, 2000, 5.50 to 1.00;
(iii) for the period from September 30, 2000 to
and including December 30, 2000, 4.50 to
1.00;
(iv) for the period from December 31, 2000 to and
including December 30, 2001, 3.25 to 1.00;
(v) for the period from December 31, 2001 to and
including December 30, 2002, 3.00 to 1.00;
(vi) for the period from December 31, 2002 to and
including December 30, 2003, 2.75 to
1.00; and
(vii) at all times thereafter, 2.50 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 September 30, 1999 to
6
<PAGE>
and including March 30, 2000, 10.00 to 1.00;
(ii) for the period from March 31, 2000 to and
including June 29, 2000, 10.50 to 1.00;
(iii) for the period from June 30, 2000 to and
including September 29, 2000, 10.00 to 1.00;
(iv) for the period from September 30, 2000 to
and including December 30, 2000, 8.00 to
1.00;
(v) for the period from December 31, 2000 to and
including December 30, 2001, 6.00 to 1.00;
(vi) for the period from December 31, 2001 to and
including December 30, 2002, 5.50 to 1.00;
(vii) for the period from December 31, 2002 to and
including December 30, 2003, 4.75 to
1.00; and
(viii) at all times thereafter, 4.00 to 1.00.
(e) Minimum Sock Group EBITDA. The portion of Consolidated EBITDA
attributable to the Sock Group, as of the last day of each fiscal
quarter of the Consolidated Parties for the twelve month period ending
on such date, to be greater than or equal to:
(i) for the period from September 30, 1999 to
and including December 31, 2000,
$32,000,000; and
(ii) at all times thereafter, $33,000,000.
(f) Certain Cure Rights. Notwithstanding any provision to the contrary
contained in this Credit Agreement (including, without limitation,
Section 9.1(c)(i)) or in any other Credit Document, until the date
that the Investment and Deposit Agreement is terminated in accordance
with the terms of Section 9.13 thereof, (i) the Borrower shall have
the right to cure any Event of Default resulting from non-compliance
by the Credit Parties with Section 7.11(c) or Section 7.11(d) as of
the end of any fiscal quarter by prepaying the Loans during the
Leverage Grace Period for such fiscal quarter in an amount (in an
integral multiple of $100,000) that would have been sufficient to
enable the Credit Parties to comply with Section 7.11(c) and Section
7.11(d) as of the last day of such fiscal quarter if such prepayment
had been made on such date, with either (A) the Net Cash Proceeds of a
Sponsor Equity Issuance in accordance with Section 3.3(b)(v)(B) or (B)
the Net Cash Proceeds of a sale of all or any portion of the Shirt
Group in accordance with Section 3.3(b)(iii) and (ii) upon
consummation of a sale of all or substantially all of the Shirt Group
while a Sale Moratorium is in effect and prepayment of the Loans in an
amount sufficient to enable the Credit Parties to be in compliance
with the financial ratios set forth in Section 8.5(c)(ii)(A) in the
manner contemplated by Section 8.5(c)(ii)(B), all Events of Defaults
with respect to which a Leverage Grace Period is then in effect
automatically shall be deemed to have been cured. Solely for purposes
of Section 7.11(c) and Section 7.11(d), (i) the amount of Funded
Indebtedness of the Consolidated Parties during any Leverage Grace
Period shall be calculated by giving pro forma effect to the
prepayment of the Loans that would be required to enable the Credit
Parties to comply with Section 7.11(c) and Section 7.11(d) as of the
related fiscal quarter-end (but only to the extent that such
prepayment actually has not been made) and (ii) the amount of the
prepayment required to effect a cure of any Event of Default occurring
as of the end of any fiscal quarter shall be determined without regard
to the Senior Leverage Ratio or the Total Leverage Ratio as of the end
of any subsequent fiscal quarter.
SUBPART 2.4 Amendments to Section 8.5. Section 8.5 of the Existing Credit
Agreement is hereby amended and restated in its entirety to read as follows:
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 Borrower shall have
delivered to the Agent a certificate of an Executive Officer of the
Borrower demonstrating (i) that upon giving effect to such transaction
and the application of the Net Cash Proceeds thereof no Default or
Event of Default would exist hereunder and (ii) if such Asset
7
<PAGE>
Disposition involves a sale of all or substantially all of the Shirt
Group while a Sale Moratorium is in effect, that upon giving effect on
a Pro Forma Basis to such transaction either (A) the Fixed Charge
Coverage Ratio would be at least 1.0 to 1.0, the Interest Coverage
Ratio would be at least 1.5 to 1.0, the Senior Leverage Ratio would not
exceed 3.25 to 1.0 and the Total Leverage Ratio would not exceed 5.5 to
1.0 or (B) concurrently with the consummation of such Asset
Disposition, the Borrower will be able to prepay the Loans in
accordance with Section 3.3(b)(iii) and/or Section 3.3(b)(v)(B) in an
amount sufficient to enable the Credit Parties to be in compliance with
the financial ratios set forth in the immediately preceding clause (A),
and (d) 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, immediately following the consummation of
such Asset Disposition apply (or cause to be applied) an amount equal
to the Net Cash Proceeds of such Asset Disposition to prepay the Loans
(and cash collateralize LOC Obligations) in accordance with the terms
of Section 3.3(b)(iii). Notwithstanding any provision of this Credit
Agreement to the contrary, no Asset Disposition involving any portion
of the Sock Group shall be permitted unless simultaneously all of the
Credit Party Obligations are repaid and this Credit Agreement is
terminated in accordance with the terms of Section 11.13(b).
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.
SUBPART 2.5 Amendments to Section 9.1. Subsection (l) of Section 9.1 of the
Existing Credit Agreement is hereby amended and restated in its entirety to read
as follows and the following new subsection (m) is added to Section 9.1
immediately succeeding such subsection (l):
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"):
**********
(l) Ownership. There shall occur a Change of Control; or
(m) Investment and Deposit Agreement. There shall occur
and be continuing any "Event of Default" under, and
as defined in, the Investment and Deposit Agreement.
SUBPART 2.6 Deletion of Schedules 1.1A and 1.1A-1. Schedules 1.1A and
1.1A-1 to the Existing Credit Agreement are hereby deleted in their entireties.
PART 3
CONDITIONS TO EFFECTIVENESS
SUBPART 3.1 Amendment No. 4 Effective Date. This Amendment shall be and
become effective as of the date hereof (the "Amendment No. 4 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. 4."
SUBPART 3.1.1 Execution of Counterparts of Amendment. The Agent shall have
received counterparts of this Amendment, which collectively shall have been duly
executed on behalf of each of the Borrower, the Guarantors and the Required
Lenders.
SUBPART 3.1.2 Vestar Documents, Legal Opinion, etc. The Investment and
Deposit Agreement shall have become effective in accordance with the provisions
8
<PAGE>
of Section 3.1 thereof and the Agent shall have received such other documents,
agreements or information as is reasonably requested by the Agent in connection
with the execution of the Investment and Deposit Agreement, including without
limitation, a legal opinion of Simpson Thacher & Bartlett in form and substance
reasonably satisfactory to the Agent.
SUBPART 3.1.3 Other Items. The Agent shall have received such other
documents, agreements or information which may be reasonably requested by the
Agent.
SUBPART 3.1.4 Payment of Amendment Fees. The Agent shall have received, for
the account of each Lender that has delivered an executed counterpart of this
Amendment to the Agent on or before 12 Noon (Charlotte, North Carolina time)
October 26, 1999, an amendment fee equal to 0.25% of the Commitment of each such
Lender under the Existing Credit Agreement.
PART 4
MISCELLANEOUS
SUBPART 4.1 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 4.2 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 4.3 Cross-References. References in this Amendment to any Part or
Subpart are, unless otherwise specified, to such Part or Subpart of this
Amendment.
SUBPART 4.4 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 4.5 References in Other Credit Documents. At such time as this
Amendment No. 4 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. 4.
SUBPART 4.6 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 this Amendment by telecopy shall
be effective as an original and shall constitute a representation that an
original shall be delivered.
SUBPART 4.7 Governing Law. THIS AMENDMENT SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
SUBPART 4.8 Successors and Assigns. This Amendment shall be binding upon
and inure to the benefit of the parties hereto and their respective successors
and assigns.
9
<PAGE>
IN WITNESS WHEREOF the Borrower, the Guarantors and the Required
Lenders have caused this Amendment to be duly executed on the date first above
written.
CREDIT PARTIES: CLUETT AMERICAN Corp.
- --------------
Cluett American Investment Corp.
Cluett American Group, Inc.
CONSUMER DIRECT CORPORATION
ARROW FACTORY STORES, INC.
GAKM RESOURCES CORPORATION
CLUETT PEABODY RESOURCES CORPORATION
CLUETT PEABODY HOLDING CORP.
CLUETT, PEABODY & CO., INC.
BIDERTEX SERVICES INC.
GREAT AMERICAN KNITTING MILLS, INC.
CLUETT DESIGNER GROUP, INC.
BIDERMANN TAILORED CLOTHING, INC.
By:
Name:
Title:
[Signatures Continued]
10
<PAGE>
LENDERS: BANK OF AMERICA, N.A.
(formerly known as NationsBank, N. A.)
By:
Name:
Title:
NATIONAL WESTMINSTER BANK PLC
By:
Name:
Title:
FLEET BANK, N.A.
By:
Name:
Title:
BANKBOSTON, N.A.
By:
Name:
Title:
FLEET BUSINESS CREDIT CORPORATION
(successor in interest to Sanwa Business Credit
Corporation)
By:
Name:
Title:
11
<PAGE>
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By:
Name:
Title:
By:
Name:
Title:
FIRST SOURCE FINANCIAL LLP,
By: First Source Financial Inc., its manager
By:
Name:
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION
By:
Name:
Title:
SUMMIT BANK
By:
Name:
Title:
HSBC BANK USA
By:
Name:
Title:
AG CAPITAL FUNDING PARTNERS, L.P.
By: Angelo Gordon & Co., L.P. as Investment
Advisor
By:
Name:
Title:
12
<PAGE>
NEW YORK LIFE INSURANCE COMPANY
By:
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By:
Name:
Title:
ML CLO XX PILGRIM AMERICA (CAYMAN) LTD.
By:
Name:
Title:
TORONTO DOMINION (TEXAS), INC.
By:
Name:
Title:
GREAT POINT CLO 1999-1 LTD.
By: Sankaty Advisors, Inc., as
Collateral Managers
By:
Name:
Title:
EATON VANCE SENIOR INCOME TRUST
By:
Name:
Title:
13
Exhibit 10.2.5 Investment and Deposit Agreement
INVESTMENT
AND
DEPOSIT AGREEMENT
Dated as of September 30, 1999
between
Vestar Capital Partners III, L.P.
and
BANK OF AMERICA, N. A.,
in its capacity as Agent for the Lenders herein defined
<PAGE>
TABLE OF CONTENTS
SECTION 1 DEFINITIONS..........................................................1
Section 1.1 Definitions..............................................1
Section 1.2 Terms Generally..........................................2
Section 1.3 Accounting Terms.........................................2
SECTION 2 MANDATORY INVESTMENTS................................................3
Section 2.1 Leverage Reduction in Connection with Covenant Defaults..3
Section 2.2 Leverage Reduction in Connection with Shirt Group Sale...3
Section 2.3 Leverage Reduction in Bankruptcy.........................3
Section 2.4 Limitation on Investment Obligations.....................4
SECTION 3 CONDITIONS...........................................................4
Section 3.1 Conditions to Effectiveness..............................4
SECTION 4 DEPOSIT OF CAPITAL CALL NOTICES WITH AGENT...........................5
Section 4.1 Deposit of Capital Call Notices..........................5
SECTION 5 REPRESENTATIONS AND WARRANTIES.......................................5
Section 5.1 Existence and Power......................................5
Section 5.2 Authorization............................................5
Section 5.3 No Conflicts.............................................6
Section 5.4 Consents.................................................6
Section 5.5 Enforceable Obligations..................................6
Section 5.6 Permitted Investment.....................................6
Section 5.7 Venture Capital Operating Company........................6
Section 5.8 Deposited Notices........................................6
Section 5.9 Limitations on Actions...................................6
SECTION 6 AFFIRMATIVE COVENANTS................................................7
Section 6.1 Outstanding Subscriptions................................7
Section 6.2 General Partner..........................................7
Section 6.3 Plan Assets, etc.........................................7
Section 6.4 Receipt of the Funds Pursuant to the Deposited Notices...7
Section 6.5 Partners and Pro Rata Shares.............................7
SECTION 7 NEGATIVE COVENANTS...................................................7
Section 7.1 Limitations on Actions...................................7
SECTION 8 EVENTS OF DEFAULT....................................................7
Section 8.1 Events of Default........................................7
Section 8.2 Remedies.................................................8
Section 8.3 Cash Collateral Account..................................8
Section 8.4 Nature of Payments after Event of Default................9
Section 8.5 Allocation of Payments after Event of Default............9
Section 8.6 Receipt of the Funds Pursuant to the Deposited Notices...9
SECTION 9 MISCELLANEOUS.......................................................10
Section 9.1 Notices.................................................10
Section 9.2 Payments................................................10
Section 9.3 Benefit of Agreement....................................10
Section 9.4 No Waiver; Remedies Cumulative..........................10
Section 9.5 Payment of Expenses, etc................................11
Section 9.6 Amendments, Waivers and Consents........................11
Section 9.7 Counterparts............................................11
Section 9.8 Headings................................................11
Section 9.9 Survival................................................11
Section 9.10 Governing Law; Submission to Jurisdiction; Venue.......11
Section 9.11 Severability...........................................12
Section 9.12 Entirety...............................................12
Section 9.13 Binding Effect; Termination............................12
Section 9.14 Limitation on Recourse.................................12
Section 9.15 Confidentiality........................................12
ANNEXES
Exhibit A Form of Capital Call Notice
Exhibit B Terms of Subordination
<PAGE>
INVESTMENT
AND
DEPOSIT AGREEMENT
THIS INVESTMENT AND DEPOSIT AGREEMENT, dated as of September 30, 1999 (the
"Agreement"), is executed and entered into by and between Vestar Capital
Partners III, L.P., a Delaware limited partnership (the "Fund"), and Bank of
America, N.A. (formerly known as NationsBank, N.A.), in its capacity as Agent
under the Credit Agreement hereinafter defined (in such capacity, the "Agent").
W I T N E S S E T H
WHEREAS, Cluett American Corp. (the "Borrower"), Cluett American Investment
Corp. (the "Parent"), Cluett American Group, Inc. ("Interco"), the Subsidiary
Guarantors parties thereto, the Lenders parties thereto and Gleacher NatWest
Inc., as Documentation Agent, have entered into that certain Credit Agreement
dated as of May 18, 1998 and amended as of May 27, 1998, December 18, 1998 and
March 19, 1999 (as so previously amended, the "Existing Credit Agreement"); and
WHEREAS, the parties to the Existing Credit Agreement have agreed to
further amend the Existing Credit Agreement by entering into that certain Fourth
Amendment, dated as of the date hereof (such amendment herein referred to as the
"Fourth Amendment" and, together with the Existing Credit Agreement and any
further amendments entered into subsequent to the date hereof, the "Credit
Agreement"); and
WHEREAS, as of the date hereof, the Fund is the indirect and beneficial
owner of a majority of the issued and outstanding shares of capital stock of the
Borrower; and
WHEREAS, as a condition to the effectiveness of the Fourth Amendment, the
Lenders have required that the Fund enter into this Agreement with the Agent for
the ratable benefit of the Lenders;
NOW, THEREFORE, for and in consideration of the mutual promises, covenants
and representations and warranties contained herein and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, and
intending to be legally bound, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
Section 1.1 Definitions.
All capitalized terms not defined in this Agreement shall have the meanings
ascribed to such terms in the Credit Agreement. As used in this Agreement, the
following terms shall have the meanings specified below unless the context
otherwise requires:
"Amendment No. 4 Effective Date" shall have the meaning assigned to
such term in the Fourth Amendment.
"Capital Call Notice" means a capital call notice satisfying the
requirements of Section 3.1 of the Partnership Agreement and substantially
in the form of Exhibit A attached hereto.
"Cash Collateral Account" shall have the meaning assigned to such term
in Section 9.2(b).
"Credit Agreement Event of Default" means any "Event of Default" as
defined in the Credit Agreement.
"Deposited Notices" means a collective reference to the Capital Call
Notices delivered by the Fund to the Agent pursuant to Section 3.1(b) and
maintained on deposit with the Agent as contemplated by Section 4.1.
"Event of Default" means such term as defined in Section 8.1.
"General Partner" means Vestar Associates III, L.P., a Delaware
limited partnership, as general partner of the Fund.
"Investment Commitment" means, at any time, (i) $30,000,000 minus (ii)
the aggregate amount of prepayments made by the Borrower prior to such time
pursuant to Section 3.3(b)(v)(B) of the Credit Agreement minus (iii) the
aggregate amount of payments made by the Fund to purchase participation
interests in the Credit Party Obligations outstanding under the Credit
Documents pursuant to Section 2.3(d).
1
<PAGE>
"Limited Partners" means the limited partners of the Fund.
"Mandatory Investment" means a capital contribution by the Fund to the
Parent in Dollars and in funds immediately available to the Parent made for
the purpose of enabling the Borrower to make a mandatory prepayment of the
Loans outstanding under the Credit Agreement pursuant to Section
3.3(b)(v)(B) thereof.
"Material Adverse Effect" means a material adverse effect on (i) the
condition (financial or otherwise), operations, business, assets,
liabilities or results of operations of the Fund, (ii) the ability of the
Fund to perform any material obligation under this Agreement or (iii) the
rights and remedies of the Agent under this Agreement.
"Obligations" means, with respect to the Fund, all Indebtedness, all
other obligations that would be reflected as liabilities on a balance sheet
of the Fund and the purchase price that the Fund (directly or indirectly,
including, but not limited to, through any Subsidiary of the Fund) or the
General Partner has agreed, pursuant to a binding contract, to pay for any
investment or acquisition that has not yet closed. The Obligations of the
Fund at any time shall include the obligations of the Fund to make
Mandatory Investments (and other payments to the Agent pursuant to Section
2.1, Section 2.2 or Section 2.3) in an amount up to the Investment
Commitment at such time and any and all other payment obligations of the
Fund to the Agent (on behalf of the Lenders) under this Agreement.
"Partners" means a collective reference to the General Partner and the
Limited Partners.
"Partnership Agreement" means that certain limited partnership
agreement, dated as of November 22, 1996, among the General Partner and the
individuals and entities party thereto, as limited partners.
"Plan Asset Regulations" means the plan asset regulations of the
Department of Labor, 29 CFR ss.2510.3-101 et seq., as amended, and the
advisory opinions and rulings issued thereunder.
"Pro Rata Share" means, with respect to any Partner, such Partner's
share, expressed as a percentage, of the aggregate obligations of all of
the Partners to make capital contributions to the Fund in accordance with
the terms of the Partnership Agreement. The Pro Rata Share of each Partner
shall be based on the proportion that such Partner's Total Capital
Commitment bears to the aggregate Total Capital Commitments of all of the
Partners. In determining the Pro Rata Shares of the Partners for purposes
of completing Deposited Notices as contemplated by Section 8.2, the Agent
shall (and shall be entitled to) rely on the information delivered to the
Agent pursuant to Section 3.1(f) unless the Fund shall have provided the
Agent with updated information regarding Pro Rata Shares pursuant to
Section 6.5, in which case the Agent shall (and shall be entitled to) rely
on such updated information.
"Subsidiary" means, at any time, (i) 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 the Fund,
directly or indirectly through Subsidiaries, and (ii) any partnership,
association, joint venture or other entity of which the Fund, directly or
indirectly through Subsidiaries, owns at such time more than 50% of the
Equity Interests.
"Termination Date" means the date 30 Business Days after the later of
(i) the date that the Credit Parties deliver to the Agent the Required
Financial Information for the fiscal quarter ended December 31, 2000 and
(ii) the last day of any Leverage Grace Period that is in effect as of the
date described in the preceding clause (i).
"Total Capital Commitment" means, with respect to any Limited Partner,
an amount equal to the total amount of capital contributions that such
Limited Partner is obligated to make to the Fund pursuant to the terms of
the Partnership Agreement.
Section 1.2 Terms Generally.
All references herein to Articles, Sections, Exhibits and Schedules
shall be deemed references to Articles and Sections of, and Exhibits and
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Schedules to, this Agreement unless the context shall otherwise require. 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."
Section 1.3 Accounting Terms.
Except as otherwise expressly provided herein, all accounting terms
used herein shall be interpreted in accordance with GAAP.
SECTION 2
MANDATORY INVESTMENTS
Section 2.1 Leverage Reduction in Connection with Covenant Defaults.
(a) Prior to the expiration of each Leverage Grace Period
under the Credit Agreement relating to Credit Agreement Events of
Default resulting from the failure of the Credit Parties to comply with
Section 7.11(c) and/or Section 7.11(d) of the Credit Agreement as of
the end of any fiscal quarter occurring on or before December 31, 2000,
the Fund shall, subject to Section 2.1(d), make a Mandatory Investment
in the amount necessary (after giving effect to any concurrent
prepayment pursuant to Section 3.3(b)(iii) of the Credit Agreement made
with the proceeds of an Asset Disposition) to enable the Credit Parties
to cure such Credit Agreement Events of Default in the manner
contemplated by Section 7.11(f) of the Credit Agreement.
(b) In the event that, prior to the expiration of the Leverage
Grace Period for any fiscal quarter, either (i) the Fund shall fail to
make the Mandatory Investment required pursuant to Section 2.1(a) for
such fiscal quarter or (ii) the proceeds of the Mandatory Investment
required pursuant to Section 2.1(a) for such fiscal quarter are not
used, for any reason, to prepay the Loans outstanding under the Credit
Agreement in accordance with the terms of Section 3.3(b)(v)(B) thereof,
the Fund, subject to Section 2.1(d), hereby promises to pay on demand
to the Agent (for the ratable benefit of the Lenders) an amount equal
to the amount of such required Mandatory Investment.
(c) All amounts paid by the Fund to the Agent pursuant to this
Section 2.1 shall be applied by the Agent on behalf of the Lenders to
the prepayment of the Loans outstanding under the Credit Agreement in
accordance with the terms of Section 3.3(b)(v)(B) thereof.
(d) Notwithstanding any provision to contrary set forth in
this Section 2.1, the obligations of the Fund under this Section 2.1
automatically shall be terminated upon the making of a Mandatory
Investment (or a payment to the Agent) pursuant to, and satisfying the
requirements of, Section 2.2 or Section 2.3.
Section 2.2 Leverage Reduction in Connection with Shirt Group Sale.
(a) Concurrently with the consummation prior to the
Termination Date of any Asset Disposition involving all or
substantially all of the Shirt Group while a Sale Moratorium is in
effect, the Fund shall, subject to Section 2.2(d), make a Mandatory
Investment in the amount, if any, necessary to enable the Borrower to
prepay the Loans pursuant to Section 3.3(b)(iii) and/or Section
3.3(b)(v)(B) of the Credit Agreement by an amount sufficient to enable
the Credit Parties to comply with the financial ratio requirements set
forth in Section 8.5(c)(ii)(A) of the Credit Agreement in the manner
contemplated by Section 8.5(c)(ii)(B) of the Credit Agreement.
(b) In the event that either (i) the Fund shall fail to make
any Mandatory Investment when due as required pursuant to Section
2.2(a) or (ii) the proceeds of the Mandatory Investment required
pursuant to this Section 2.2(a) for such fiscal quarter are not used,
for any reason, to prepay the Loans outstanding under the Credit
Agreement in accordance with the terms of Section 3.3(b)(v)(B) thereof,
the Fund, subject to Section 2.2(d), hereby promises to pay on demand
to the Agent (for the ratable benefit of the Lenders) an amount equal
to the amount necessary (after giving effect to any concurrent
prepayment pursuant to Section 3.3(b)(iii) of the Credit Agreement made
with the proceeds of any Asset Disposition involving all or
substantially all of the Shirt Group) to enable the Credit Parties to
comply with the financial ratio requirements set forth in Section
8.5(c)(ii)(A) of the Credit Agreement in the manner contemplated by
Section 8.5(c)(ii)(B) of the Credit Agreement.
(c) All amounts paid by the Fund to the Agent pursuant to this
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Section 2.2 shall be applied by the Agent on behalf of the Lenders to
the prepayment of the Loans outstanding under the Credit Agreement in
accordance with the terms of Section 3.3(b)(v)(B) thereof.
(d) Notwithstanding any provision to contrary set forth in
this Section 2.2, the obligations of the Fund under this Section 2.2
automatically shall be terminated upon the making of a Mandatory
Investment (or a payment to the Agent) pursuant to, and satisfying the
requirements of, Section 2.3.
Section 2.3 Leverage Reduction in Bankruptcy.
Notwithstanding any provision to contrary set forth in this Agreement:
(a) The obligations of the Fund under Section 2.1 and Section
2.2 shall not be satisfied by the making of a Mandatory Investment (or
any other capital contribution to or investment in the Parent or any of
the Consolidated Parties) at any time after the Business Day
immediately preceding the first day that a Bankruptcy Event with
respect to the Parent or the Borrower shall have occurred.
(b) If a Bankruptcy Event with respect to the Parent or the
Borrower shall have occurred and be continuing at a time when the Fund
is required to make a Mandatory Investment hereunder, the Fund, in lieu
of the obligations of the Fund under Section 2.1 and Section 2.2,
hereby promises to pay to the Agent (for the ratable benefit of the
Lenders), on the date that such Mandatory Investment otherwise would
have been required in accordance with the terms of Section 2.1 or
Section 2.2, as applicable, an amount equal to the amount of the
Mandatory Investment that otherwise would have been so required.
(c) In the event that, after the occurrence and during the
continuance of a Bankruptcy Event with respect to the Parent or the
Borrower, the Credit Parties shall fail to deliver the Required
Financial Information to the Agent for any fiscal quarter in compliance
with requirements of Section 7.1 of the Credit Agreement and such
default shall continue unremedied for a period of at least 45 days, the
Fund hereby promises to pay on demand to the Agent (for the ratable
benefit of the Lenders) an amount equal to the Investment Commitment at
such time.
(d) All amounts paid by the Fund to the Agent pursuant to this
Section 2.3 immediately shall be applied by the Agent (for the ratable
benefit of the Lenders) to pay for the purchase by the Fund of an
undivided, non-voting participation interest in the Credit Party
Obligations then outstanding under the Credit Documents on a basis
subordinated in right of payment to the Credit Party Obligations and
the Senior Subordinated Debt on substantially the terms and conditions
set forth on Exhibit B.
Section 2.4 Limitation on Investment Obligations.
Notwithstanding any provision to contrary set forth in this Agreement,
the Fund shall not be obligated at any time to make Mandatory Investments (or
any other payments to the Agent pursuant to Section 2.1, Section 2.2 or Section
2.3) in an amount in excess of the Investment Commitment at such time.
SECTION 3
CONDITIONS
Section 3.1 Conditions to Effectiveness.
This Agreement shall become effective on the Amendment No. 4 Effective
Date provided the following conditions are satisfied in form and substance
reasonably acceptable to the Agent:
(a) Execution of this Agreement. Receipt by the Agent of an
executed copy of this Agreement signed by a duly authorized officer of
the General Partner.
(b) Deposited Notices. Receipt by the Agent of an original
Capital Call Notice for each Limited Partner, in each case executed by
the General Partner and uncompleted in respect of the amount of the
total capital contribution to be made by all of the Limited Partners
pursuant to such Capital Call Notices and the applicable Limited
Partner's Pro Rata Share of such total capital contribution.
(c) Legal Opinion. Receipt of a legal opinion of Simpson
Thacher & Bartlett, counsel for the Fund, in form and substance
reasonably satisfactory to the Agent.
(d) Partnership Documents. Receipt by the Agent of all
documents reasonably requested by the Agent relating to the existence
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of the Fund, the enforceability of this Agreement and the Deposited
Notices and other matters relating thereto, in form and substance
satisfactory to the Agent, including, but not limited to:
(i) Certificates of Authorization. Certificates of
authorization of the General Partner as of the Amendment No. 4
Effective Date, approving and adopting this Agreement and the
delivery of the Deposited Notices and authorizing the
execution and delivery thereof by the General Partner on
behalf of the Fund.
(ii) Partnership Agreement. A copy, certified by an
officer of the general partner of the General Partner on
behalf of the Fund as true and complete, of the Partnership
Agreement, together with all amendments thereto, if any.
(iii) Incumbency Certificate. An incumbency
certificate of the President or any duly authorized officer
and Secretary of the general partner of the General Partner
who will be executing this Agreement, any Deposited Notice, or
any other document, instrument or certificate to be delivered
pursuant to the terms hereof (including the name, title and
signature of each such officer).
(e) Total Capital Commitments. Receipt by the Agent of a
certificate executed by an officer of the general partner of the
General Partner on behalf of the Fund, in form and substance
satisfactory to the Agent, stating that the aggregate Total Capital
Commitments of all Limited Partners as of the Amendment No. 4 Effective
Date equals or exceeds the sum of (i) the Investment Commitment plus
(ii) all other Obligations of the Fund.
(f) Partners and Pro Rata Shares. Receipt by the Agent of a
certificate executed by an officer of the general partner of the
General Partner on behalf of the Fund, in form and substance
satisfactory to the Agent, setting forth a list of Limited Partners and
their respective Pro Rata Shares as of the Amendment No. 4 Effective
Date. Except as otherwise permitted under Section 9.15, the information
contained in the certificate delivered to the Agent as contemplated by
this Section 3.1(f) shall not be disclosed by the Agent to any other
Person (including, without limitation, the Lenders) without the prior
written consent of the Fund.
SECTION 4
DEPOSIT OF CAPITAL CALL NOTICES WITH AGENT
Section 4.1 Deposit of Capital Call Notices.
The Fund hereby agrees that each of the Capital Call Notices delivered
by the Fund to the Agent pursuant to Section 3.1(b) shall be held by the Agent
on deposit and shall be delivered by the Agent to the Partners only under the
circumstances contemplated by, and otherwise in accordance with the terms of,
Section 8.2.
SECTION 5
REPRESENTATIONS AND WARRANTIES
The Fund hereby represents and warrants to the Agent (for the benefit
of the Lenders) that:
Section 5.1 Existence and Power.
(a) Each of the Fund and the General Partner is a limited
partnership duly organized, validly existing and in good standing under
the laws of the State of Delaware, and is in good standing as a foreign
limited partnership in each other jurisdiction where ownership of its
properties or the conduct of its business requires it to be so other
than in such jurisdictions where failure to be in good standing could
not reasonably be expected to have a Material Adverse Effect, and has
all power and authority under such laws and its partnership agreement
and all material governmental licenses, authorizations, consents and
approvals required to carry on its business as now conducted.
(b) The general partner of the General Partner (i) is duly
incorporated, validly existing and in good standing under the laws of
the state of its incorporation, (ii) has all corporate power pursuant
to proper authorization to enable it to act as the general partner of
the General Partner and to enter into this Agreement on the Fund's
behalf, and (iii) is duly qualified to do business and is in good
standing in each other jurisdiction where it is required to be
qualified in order to act as the general partner of the General
Partner, other than in such jurisdiction where the failure to be so
qualified and in good standing could not reasonably be expected to have
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a Material Adverse Effect.
Section 5.2 authorization.
The Fund has the partnership or other necessary power and authority,
and the legal right, to enter into this Agreement and to perform its obligations
hereunder and consummate the transactions contemplated hereby and has by proper
action duly authorized the execution and delivery of this Agreement and the
Deposited Notices. Without limiting the generality of the above, the Fund has by
proper action duly authorized (i) the execution and delivery of one or more
Capital Call Notices to each Partner in order to fund the obligations of the
Fund to make Mandatory Investments (and other payments to the Agent pursuant to
Section 2.1, Section 2.2 or Section 2.3) in accordance with the terms of this
Agreement, (ii) the depositing of such Capital Call Notices with the Agent in
the manner contemplated by Section 4.1 and (iii) the authorizing of the Agent to
complete and deliver such Capital Call Notices on behalf of the Fund in
accordance with the terms of Section 8.2.
Section 5.3 No Conflicts.
Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated herein, nor performance of and
compliance with the terms and provisions hereof will (i) violate or conflict
with any provision of the Partnership Agreement or other governance document,
(ii) violate any material law, regulation, order, writ, judgment, injunction,
decree or permit applicable to it, (iii) violate 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, (iv) result in or
require the creation of any lien, security interest or other charge or
encumbrance (other than those contemplated in or in connection with this
Agreement) upon or with respect to the Fund's properties.
Section 5.4 Consents.
No consent, approval, authorization or order of, or filing,
registration or qualification with, any court or Governmental Authority or other
Person is required in connection with the execution, delivery or performance of
this Agreement or with the execution and delivery of the Deposited Notices.
Section 5.5 Enforceable Obligations.
This Agreement has been duly executed and delivered by the Fund and
constitutes legal, valid and binding obligations of the Fund, enforceable in
accordance with its terms, subject to applicable bankruptcy, insolvency,
fraudulent conveyance, reorganization, moratorium or laws affecting creditors'
rights generally and subject to general principles of equity, regardless of
whether considered in proceedings in equity or at law and by an implied covenant
of good faith and fair dealing.
Section 5.6 Permitted Investment.
(a) The incurrence of the obligations of the Fund set forth in this
Agreement and the making by the Fund of any Mandatory Investment (and other
payments to the Agent pursuant to Section 2.1, Section 2.2 or Section 2.3) are
permitted by the Partnership Agreement, and (b) the Limited Partners shall be
obligated to make additional capital contributions (each in a pro rata amount in
proportion to such Limited Partner's Total Capital Commitment) for the purpose
of providing funds to or for the account of the Fund in an aggregate amount
sufficient to pay in full the amount required to satisfy the obligation of the
Fund to make Mandatory Investments (and other payments to the Agent pursuant to
Section 2.1, Section 2.2 or Section 2.3) in an aggregate amount of up to the
Investment Commitment, if so requested by the General Partner.
Section 5.7 Venture Capital Operating Company.
The Fund is a venture capital operating company within the meaning of
the Plan Asset Regulations, or, the Fund satisfies another exception under the
Plan Asset Regulations such that the assets of the Fund are not "plan assets"
within the meaning and as defined in the Plan Asset Regulations.
Section 5.8 Deposited Notices.
Each Deposited Notice, when completed by the Agent and delivered by the
Agent to the applicable Limited Partner in accordance with the terms of Section
8.2 and the definition of "Pro Rata Share" set forth in Section 1.1, will give
rise to a legal, valid and binding obligation on the part of such Limited
Partner to pay such Limited Partner's Pro Rata Share of each Mandatory
Investment (and each other payment to the Agent pursuant to Section 2.1, Section
2.2 or Section 2.3), enforceable against such Limited Partner in accordance with
the terms of such Deposited Notice and the Partnership Agreement.
Section 5.9 Limitations on Actions.
The Fund is not aware of any event or condition that could (i) have a
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material adverse effect on the ability of the Fund to perform its obligations
under this Agreement, (ii) render invalid or unenforceable any of the Deposited
Notices or (iii) otherwise modify the obligations of any of the Partners and/or
any Person becoming Partners subsequent to the date hereof which arise upon the
due delivery of, and as contemplated by, the Deposited Notices.
SECTION 6
AFFIRMATIVE COVENANTS
The Fund hereby covenants and agrees that so long as this Agreement is
in effect:
Section 6.1 Outstanding Subscriptions.
At all times prior to the termination of this Agreement in accordance
with the terms of Section 9.13, the Fund will cause the aggregate Total Capital
Commitments of all Limited Partners to equal or exceed the sum of (i) the
Investment Commitment plus (ii) all other Obligations of the Fund.
Section 6.2 General Partner.
The Fund will cause (i) Vestar Associates III, L.P. to be the sole
general partner of the Fund at all times and (ii) Vestar Associates Corporation
III to be the sole general partner of the General Partner at all times.
Section 6.3 Plan Assets, etc.
The Fund shall at all times either (i) be a venture capital operating
company within the meaning of the Plan Asset Regulations, or (ii) satisfy
another exception under the Plan Asset Regulations such that the assets of the
Fund are not "plan assets" within the meaning and as defined in the Plan Asset
Regulations.
Section 6.4 Receipt of the Funds Pursuant to the Deposited Notices.
Immediately upon receipt by the Fund or any of its Affiliates of
payment by any Limited Partner in respect of a Deposited Notice delivered by the
Agent pursuant to Section 8.2, the Fund shall (i) notify the Agent in writing
specifying the Limited Partner making such payment and the amount thereof and
(ii) forward, or cause to be forwarded, the funds representing such payment to
the Parent.
Section 6.5 Partners and Pro Rata Shares.
Upon the reasonable request of the Agent from time to time, the Fund
shall promptly deliver to the Agent an updated list of Limited Partners and
their respective Pro Rata Shares, certified by an officer of the general partner
of the General Partner on behalf of the Fund as true and complete.
SECTION 7
NEGATIVE COVENANTS
Section 7.1 Limitations on Actions.
So long as this Agreement is in effect, the Fund covenants and agrees
that it shall not take any action that could (i) render invalid or unenforceable
any of the Deposited Notices or (ii) otherwise modify the obligations of any of
the Partners and/or any Person becoming Partners subsequent to the date hereof
which arise upon the due delivery of, and as contemplated by, the Deposited
Notices.
SECTION 8
EVENTS OF DEFAULT
Section 8.1 Events of Default.
An Event of Default shall exist upon the occurrence of any of the
following specified events (each an "Event of Default"):
(a) Payment. The Fund shall default in the payment when due of any
amounts owing under Section 2.1, Section 2.2 or Section 2.3; or
(b) Representations. Any representation, warranty or statement made or
deemed to be made herein or in any statement or certificate delivered or
required to be delivered pursuant hereto shall prove untrue in any material
respect on the date as of which it was deemed to have been made; or
(c) Covenants.
(i) Default in the due performance or
observance of any term, covenant or
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agreement contained in Section 6 or
Section 7, or
(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 8.1) contained in this Agreement
and such default shall continue unremedied
for a period of at least 30 days after the
earlier of an officer of the Fund
becoming aware of such default or notice
thereof by the Agent; or
(d) Effectiveness of Documents. This Agreement or any of the Deposited
Notices shall fail to be in full force and effect or to give the Agent (for
the benefit of the Lenders) any material part of the rights, powers and
privileges purported to be created hereby; or
(e) Bankruptcy, etc. A Bankruptcy Event shall occur with respect to
the Fund; or
(f) Defaults under Other Agreements. With respect to any Indebtedness
(other than Indebtedness outstanding under this Agreement or the Credit
Agreement) in excess of $20 million in the aggregate for the Fund, (A)(1)
the Fund shall default in any payment (beyond the applicable grace period
with respect thereto, if any) with respect to any such Indebtedness, or (2)
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 (B) 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; provided, however, that
notwithstanding the foregoing, no Default or Event of Default shall exist
under this Section 8.1(f) with respect to a default which is being
contested in good faith by appropriate proceedings; or
(g) Judgments. The Fund shall fail within 30 days of the date due and
payable to pay, bond or otherwise discharge any judgment, settlement or
order for the payment of money (to the extent not paid or fully covered by
insurance provided by a carrier who has acknowledged coverage and has the
ability to perform) which judgment, settlement or order, when aggregated
with all other such judgments, settlements or orders due and unpaid at such
time, exceeds $20 million, and which is not stayed on appeal (or for which
no motion for stay is pending) or is not otherwise being executed.
(h) Non-Delivery of Financial Statements. The Credit Parties shall
fail to deliver the Required Financial Information to the Agent for any
fiscal quarter in compliance with the requirements of Section 7.1 of the
Credit Agreement and such failure shall continue unremedied for a period of
at least 45 days.
Section 8.2 Remedies.
Upon the occurrence and during the continuance of any Event of Default,
the Agent may, and shall be authorized to: (i) declare the unpaid amount of any
of the Fund's obligations arising under this Agreement (including, without
limitation, the Fund's obligations under Section 2.1, Section 2.2 and Section
2.3) to be due, whereupon the 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 Fund; (ii) complete appropriate Deposited Notices for the
Limited Partners based on each Limited Partner's Pro Rata Share of the then
current amount of the Investment Commitment; and (iii) after at least 2 Business
Days' prior written notice thereof by the Agent to the Fund, deliver such
Deposited Notices to the Limited Partners. The rights of the Agent under this
Section 8.2 are independent and in addition to such rights as the Agent may have
at law or in equity or otherwise based on the failure of the Fund to perform any
covenant, agreement or undertaking made by it in this Agreement, including the
right to seek specific performance of such covenant or agreement or seek any
other equitable relief.
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Section 8.3 Cash Collateral Account.
To the extent that payments made by the Fund (including capital
contributions made by the Partners) pursuant to the exercise of rights by the
Agent under Section 8.2 exceed the amounts necessary to enable the Credit
Parties from time to time to (A) cure Credit Agreement Events of Default in the
manner contemplated by Section 2.1 hereof and Section 7.11(f) of the Credit
Agreement, (B) comply with the financial ratio requirements set forth in Section
8.5(c)(ii)(A) of the Credit Agreement in the manner contemplated by Section 2.2
hereof and Section 8.5(c)(ii)(B) of the Credit Agreement or (C) satisfy the
obligations of the Fund to purchase a participation interest in the Credit Party
Obligations outstanding under the Credit Documents in accordance with the terms
of Section 2.3 hereof, such amounts shall be held by the Agent in a cash
collateral account subject to the sole dominion and control of the Agent (the
"Cash Collateral Account") until this Agreement is terminated in accordance with
the terms of Section 9.13. The Agent shall charge the Cash Collateral Account
from time to time for the payment when due of all amounts payable by the Fund
hereunder. Any balance remaining in the Cash Collateral Account at the time that
this Agreement is terminated in accordance with the terms of this Section 9.13
promptly shall be turned over by the Agent to the Fund in such manner as the
Fund at the time shall specify to the Agent. At the request of the Fund, amounts
on deposit in the Cash Collateral Account shall be invested by the Agent in Cash
Equivalents. Any income earned on such Cash Equivalents will be for the account
of the Fund and shall be distributed not less than quarterly by the Agent to the
Fund. To the extent that any loss is incurred in respect of such investments by
the Agent on behalf of the Fund, the Fund not less than quarterly will deliver
to the Agent, for deposit in the Cash Collateral Account, additional amounts
sufficient to offset such losses. Notwithstanding any provision to the contrary
set forth in this Section 8.3, to the extent that funds are on deposit in the
Cash Collateral Account solely as a result of the exercise of rights by the
Agent under Section 8.2 due to the occurrence of an Event of Default under
Section 8.1(h), such funds promptly shall be turned over by the Agent (less any
amounts then due and payable by the Fund under Section 2.1, Section 2.2 or
Section 2.3) to the Fund (in such manner as the Fund shall specify to the Agent)
if such Event of Default is thereafter cured.
Section 8.4 Nature of Payments after Event of Default.
All amounts collected or received by the Agent from the Fund or any
Partner pursuant to or in connection with this Agreement and the Deposited
Notices at a time that no Bankruptcy Event with respect to the Parent or the
Borrower shall have occurred and be continuing shall be deemed to constitute
proceeds of a Sponsor Equity Issuance. All amounts collected or received by the
Agent from the Fund or any Partner pursuant to or in connection with this
Agreement and the Deposited Notices at a time that a Bankruptcy Event with
respect to the Parent or the Borrower shall have occurred and be continuing
shall be deemed to constitute payment by the Fund of the purchase price for a
participation interest in the Credit Party Obligations outstanding under the
Credit Documents on the terms described in Section 2.3(d).
Section 8.5 Allocation of Payments after Event of Default.
Notwithstanding any other provisions of this Agreement to the contrary,
after the occurrence and during the continuance of an Event of Default, all
amounts collected or received by the Agent from the Fund or any Partner pursuant
to or in connection with this Agreement and the Deposited Notices shall be
applied by the Agent (i) with respect to amounts payable pursuant to Section 2.1
or Section 2.2, to the prepayment of the Loans outstanding under the Credit
Agreement in accordance with the terms of Section 3.3(b)(v)(B) thereof or (ii)
with respect to amounts payable pursuant to Section 2.3, to pay for the purchase
by the Fund of a participation interest in the Credit Party Obligations
outstanding under the Credit Documents (on the terms described in Section
2.3(d)); provided, however, that funds on deposit in the Cash Collateral Account
shall not be available to the Agent or the Lenders for prepayment of the Loans
pursuant to this Section 8.5 except to the extent that such funds are necessary
to enable the Credit Parties from time to time (i) to cure Credit Agreement
Events of Default in the manner contemplated by Section 2.1 hereof and Section
7.11(f) of the Credit Agreement, (ii) to comply with the financial ratio
requirements set forth in Section 8.5(c)(ii)(A) of the Credit Agreement in the
manner contemplated by Section 2.2 hereof and Section 8.5(c)(ii)(B) of the
Credit Agreement or (iii) to satisfy the obligations of the Fund to purchase a
participation interest in the Credit Party Obligations outstanding under the
Credit Documents in accordance with the terms of Section 2.3.
Section 8.6 Receipt of the Funds Pursuant to the Deposited Notices.
The Agent agrees that, promptly after receipt by the Agent of any
capital contribution by any Limited Partner pursuant to the exercise of the
Agent's rights under Section 8.2, the Agent shall notify the Fund of the amount
of such capital contribution and the identity of the Limited Partner making such
capital contribution.
9
<PAGE>
SECTION 9
MISCELLANEOUS
Section 9.1 Notices.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly received and shall be effective (i) when
delivered, (ii) when transmitted via telecopy (or other facsimile device) to the
number set out below, (iii) the day following the day on which the same has been
delivered prepaid to a reputable national overnight air courier service, or (iv)
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 set forth below or at such other address as such party may specify
by written notice to the other parties hereto:
if to the Fund:
Vestar Capital Partners III, L.P.
245 Park Avenue
41st Floor
New York, New York 10167
Attn: Norman W. Alpert
Telephone: (212) 351-1606
Telecopy: (212) 808-4922
with copies to:
Vestar Capital Partners III, L.P.
245 Park Avenue
41st Floor
New York, New York 10167
Attn: Brian P. Schwartz
Telephone: (212) 351-1651
Telecopy: (212) 808-4922
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Marissa Wesely
Telephone: (212) 455-7173
Telecopy: (212) 455-2502
if to the Agent:
Bank of America, N.A.
100 North Tryon Street
Bank of America Corporate Center, 13th Floor
NC1-007-13-06
Charlotte, North Carolina 28255
Attn: Leesa Sluder
Telephone: (704) 388-8330
Telecopy: (704) 386-1270
Section 9.2 Payments.
Except as otherwise specifically provided herein, all payments made
pursuant to any Deposited Notice shall be made to the Agent in Dollars in
immediately available funds, without offset, deduction, counterclaim or
withholding of any kind, not later than 2:00 P.M. (Charlotte, North Carolina
time). Payments received after such time shall be deemed to have been received
on the next succeeding Business Day.
Section 9.3 Benefit of Agreement.
This Agreement shall be binding upon and inure to the benefit of and be
enforceable by the respective successors and assigns of the Agent and the Fund;
provided that (i) the Fund may not assign or transfer any of its interests and
obligations hereunder without prior written consent of the Agent and (ii) the
Agent may not assign or transfer any of its interests and obligations hereunder
without prior written consent of the Fund except to any Person which becomes a
successor Agent pursuant to Section 10.7 of the Credit Agreement and except
during the continuance of an Event of Default.
Section 9.4 No Waiver; Remedies Cumulative.
No failure or delay on the part of the Agent or the Lenders in
10
<PAGE>
exercising any right, power or privilege hereunder and no course of dealing
between the Agent or any Lender and the Fund shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, power or privilege
hereunder 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 the Lenders would otherwise have. No notice to or demand on the
Fund in any case shall entitle the Fund to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the rights of the
Agent and the Lenders to any other or further action in any circumstances
without notice or demand.
Section 9.5 Payment of Expenses, etc.
The Fund shall cause the Borrower to (i) pay all reasonable
out-of-pocket costs and expenses (A) of the Agent in connection with the
negotiation, preparation, execution and delivery and administration of this
Agreement and the documents and instruments referred to herein (including,
without limitation, the reasonable fees and expenses of Moore & Van Allen, PLLC,
special counsel to the Agent) and any amendment, waiver or consent relating
hereto including, but not limited to, any such amendments, waivers or consents
resulting from or related to any work-out, renegotiation or restructure relating
to the performance by the Fund under this Agreement and (B) of the Agent in
connection with enforcement of this Agreement and the documents and instruments
referred to herein (including, without limitation, in connection with any such
enforcement, the reasonable fees and disbursements of counsel for the Agent);
and (ii) indemnify the Agent, its officers, directors, employees, and
representatives from and hold each of them harmless against any and all losses,
liabilities, claims, damages or expenses incurred by any of them as a result of,
or arising out of, or in any way related to, or by reason of any investigation,
litigation or other proceeding (whether or not the Agent is a party thereto)
related to the entering into and/or performance of this Agreement or the
consummation of any other transactions contemplated in this Agreement,
including, without limitation, the reasonable fees and disbursements of counsel
incurred in connection with any such investigation, litigation or other
proceeding (but excluding any such losses, liabilities, claims, damages or
expenses to the extent incurred by reason of gross negligence or willful
misconduct on the part of the Person to be indemnified).
Section 9.6 Amendments, Waivers and Consents.
Except pursuant to the terms of Section 9.13, this Agreement and the
provisions hereof may not be amended, waived, modified, changed, discharged or
terminated unless such amendment, waiver, modification, change, discharge or
termination is in writing entered into, or approved in writing, by the Agent and
the Fund.
Section 9.7 Counterparts.
This 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 Agreement to produce or account for more than one such
counterpart.
Section 9.8 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 Agreement.
Section 9.9 Survival.
All indemnities set forth herein, including, without limitation, in
Section 9.5, shall survive the execution and delivery of this Agreement and
other obligations under this Agreement.
Section 9.10 Governing Law; Submission to Jurisdiction; Venue.
(a) THIS 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 Agreement 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 Agreement, each of the Fund and the Agent hereby irrevocably
accepts for itself and in respect of its property, generally and
unconditionally, the nonexclusive jurisdiction of such courts. Each of
11
<PAGE>
the Fund and the Agent 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 9.1, such service to become effective three (3)
days after such mailing. Nothing herein shall affect the right of the
Agent, as the case may be, to serve process in any other manner
permitted by law or to commence legal proceedings or to otherwise
proceed against the Fund, as the case may be, in any other
jurisdiction.
(b) Each of the Fund and the Agent 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 Agreement brought in the courts referred to in
subsection (a) of this Section 9.10 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 AND THE
FUND HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY IN ANY
ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR RELATING TO THIS
AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY.
Section 9.11 Severability.
If any provision of this 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.
Section 9.12 Entirety.
This Agreement represents the entire agreement of the parties hereto,
and supersedes all prior agreements and understandings, oral or written, if any,
including any commitment letters or correspondence relating to this Agreement or
the transactions contemplated herein.
Section 9.13 Binding Effect; Termination.
This Agreement shall become effective at such date determined in
accordance with Section 3.1. The term of this Agreement shall be until the
earliest of (i) the date that the Credit Agreement is terminated in accordance
with the terms of Section 11.13(b) thereof, (ii) the date that the Fund has made
aggregate Mandatory Investments (and/or other payments to the Agent pursuant to
Section 2.1, Section 2.2 or Section 2.3) in an amount at least equal to
$30,000,000, (iii) the date that the Credit Parties consummate a sale of all or
substantially all of the Shirt Group while a Sale Moratorium is in effect in
accordance with the terms of Section 8.5 of the Credit Agreement (whether or not
such sale involves the making of a Mandatory Investment (or a payment to the
Agent) by the Fund pursuant to, and satisfying the requirements of, Section
2.2)) (iv) the date that the Fund makes a Mandatory Investment (or a payment to
the Agent) pursuant to, and satisfying the requirements of, Section 2.3, or (v)
the first day on or after the Termination Date that no Event of Default shall be
continuing hereunder.
Section 9.14 Limitation on Recourse.
The Agent agrees that its rights in respect of any claim or liability
under this Agreement asserted against the Fund by it shall be limited to
satisfaction out of, and enforcement against, the assets of the Fund.
Notwithstanding anything to the contrary contained herein or in any other
document, certificate or instrument executed by the Fund pursuant hereto, the
Agent acknowledges and agrees that no officer, employee, partner, servant,
controlling Person, manager, agent, authorized representative or Affiliate of
the Fund (collectively, the "Non-Recourse Persons") shall have any liability to
the Agent (such liability, including such as may arise by operation of law,
being hereby expressly waived) for the payment of any sums now or hereafter
owing by the Fund under this Agreement or for the performance of any of the
obligations of the Fund contained herein or shall otherwise be liable or
responsible with respect thereto. If any Event of Default shall occur or if any
claim of the Agent against the Fund or alleged liability to the Agent of the
Fund shall be asserted under this Agreement, the Agent agrees that it shall not
have the right to proceed directly or indirectly against the Non-Recourse
Persons or against their respective properties and assets for the satisfaction
of any such claim or liability or for any deficiency judgment in respect of any
such claim or liability. Notwithstanding any of the foregoing, it is expressly
understood and agreed, however, that nothing contained in this Section 9.14
shall in any manner or any way constitute or be deemed (i) to excuse any
obligations of any Partner to make additional capital contributions to the Fund
pursuant to the terms of the Partnership Agreement, (ii) to impair the
12
<PAGE>
enforceability of any of the rights arising from this Agreement or (iii) to
restrict the remedies available to the Agent to realize upon the assets of the
Fund. The foregoing acknowledgments, agreements and waivers shall survive the
termination of this Agreement and shall be enforceable by any Non-Recourse
Person.
Section 9.15 Confidentiality.
The Agent agrees to keep confidential any information furnished or made
available to it by or on behalf of the Fund pursuant to this Agreement that is
marked confidential, provided that nothing herein shall prevent the Agent from
disclosing such information (a) as required by any law, rule, or regulation, (b)
upon the order of any court or administrative agency, (c) upon the request or
demand of any regulatory agency or authority having jurisdiction over the Agent
or any Affiliate thereof, (d) that is or becomes available to the public or that
is or becomes available to the Agent or any Affiliate thereof other than as a
result of a disclosure by the Agent prohibited by this Agreement, (e) in
connection with any litigation to which the Agent or any of its Affiliates may
be a party, (f) to the extent necessary in connection with the exercise of any
remedy under this Agreement, and (g) to any Affiliate of the Agent.
[Signature Page to Follow]
13
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused a counterpart
of this Investment and Deposit Agreement to be duly executed and delivered as of
the date first above written.
Vestar Capital Partners III, L.P.,
a Delaware limited partnership
By: Vestar Associates III, L.P.,
its General Partner
By: Vestar Associates Corporation III,
its General Partner
By: ___________________________
Name:
Title:
Bank of America, N.A.
By: ________________________________
Name:
Title:
14
<PAGE>
Exhibit A
[Letterhead of Vestar Associates III, L.P.]
[Name and address of partner]
Re: [Vestar/Cluett-American Corp.]
Dear ___________:
Pursuant to Section 3.1(a) of the Agreement of Limited Partnership of
Vestar Capital Partners III, L.P., Vestar Associates III, L.P. (the "General
Partner") is calling for payment of the Capital Contribution to be made in
connection with Vestar/Cluett American Corp. Your pro rata share of the $
__________ Capital Contribution for your $ __________ commitment is $
__________. Kindly pay either by certified or cashier's check or by wire
transfer of immediately available funds to the account set forth below (or to
such other account as Bank of America, N.A. shall have notified you in writing)
no later than the tenth (10th) business day following the date of this letter.
Via Check: or Via Bank Wire:
Payable to: Bank of America, N.A. Payable to: Bank of America, N.A.
Send to: Bank of America, N.A.. Bank of America, N.A.
100 North Tryon Street Charlotte, North Carolina
Bank of America Corporate Center ABA Routing No.: 053-000-196
Charlotte, North Carolina 28255 Account No.: 1366212250600
Attn: Leesa Sluder For Credit to: Corporate Services
Telephone: (704) 388-8330 Reference: Vestar Capital
Account No. 1366212250600 Partners III, L.P.
For Credit to: Corporate Services Amount: $______________
Reference: Vestar Capital
Partners III, L.P.
Amount: $______________
If you have any questions, please feel free to call me at (212) 351-1651.
Very truly yours,
Vestar Associates III, L.P.,
General Partner of Vestar Capital Partners III, L.P.
By: Vestar Associates Corporation III,
its General Partner
By: __________________________________
Name: Brian P. Schwartz
Title: Chief Financial Officer
<PAGE>
Exhibit B
Terms of Subordination
o No payments or prepayments of principal or interest on the participation
interest of the Fund in the Credit Party Obligations (the "Fund
Participation Interest") may be made by the Credit Parties or received by
the Fund until the Credit Party Obligations and the Senior Subordinated
Debt (collectively, the "Senior Debt") have been paid in full in cash and
the Commitments under the Credit Agreement shall have been terminated.
o Until all Senior Debt has been paid in full in cash and the Commitments
under the Credit Agreement shall have been terminated, the Fund shall have
no right to direct the Agent to exercise remedies in respect of the Fund
Participation Interest.
o Until the date 91 days after all Senior Debt has been paid in full in cash
and the Commitments under the Credit Agreement shall have been terminated,
the Fund shall not take any action in its capacity as holder of the Fund
Participation Interest to initiate an involuntary bankruptcy proceeding in
respect of any Credit Party.
o The Lenders (excluding the Fund) and the holders of the Senior Subordinated
Debt (collectively, the "Senior Creditors") shall have the right, if not
exercised by the Fund, to file proofs of claim (and any notice of
assignment of the right to receive payments) in respect of Fund
Participation Interest to the extent not filed by the Fund in any
bankruptcy proceeding in respect of any Credit Party.
o In any bankruptcy proceeding in respect of any Credit Party, the Senior
Creditors shall be entitled to payment in full in cash before the Fund, in
its capacity as holder of the Fund Participation Interest, shall be
entitled to receive any payments, property or assets (other than (i) debt
securities that are subordinated at least to the extent provided in this
Exhibit B and (ii) equity securities that are not redeemable for cash, and
in respect of which no cash dividends are payable), until all Senior Debt
has been paid in full in cash and the Commitments under the Credit
Agreement shall have been terminated.
o Any payments received by the Fund, in its capacity as holder of the Fund
Participation Interest, in contravention of the foregoing subordination
provisions shall be held in trust for the benefit of, and immediately
turned over to, the Senior Creditors.
o In any reorganization proceeding in respect of any Credit Party, Senior
Creditors shall be entitled to approve (on behalf of the Fund, in its
capacity as holder of the Fund Participation Interest) the use of cash
collateral by such Credit Party.
o In any bankruptcy proceeding in respect of any Credit Party, the Fund, in
its capacity as holder of the Fund Participation Interest, shall not (i)
vote against any plan of reorganization or liquidation supported by the
Senior Creditors or (ii) vote for any plan of reorganization or liquidation
opposed by the Senior Creditors.
o In any bankruptcy proceeding in respect of any Credit Party, (i) the Fund,
in its capacity as holder of the Fund Participation Interest, shall not
file any motion, application or other pleading seeking affirmative relief,
including without limitation for the appointment of a trustee or examiner,
for the conversion of the case to a liquidation proceeding, for the
substantive consolidation of such Credit Party's bankruptcy case with the
case of any other entity, for the creation of a separate official committee
representing only the Fund or any other form of affirmative relief of any
other kind or nature and (ii) the Fund, in its capacity as holder of the
Fund Participation Interest, shall not file any objection or other
responsive pleading opposing any relief requested by the Senior Creditors.
o The Fund, in its capacity as holder of the Fund Participation Interest,
shall not exercise any right of subrogation in respect of any of the Credit
Party Obligations until all Senior Debt has been paid in full in cash and
the Commitments under the Credit Agreement shall have been terminated.
Exhibit 10.2.6 Credit Agreement
CREDIT AGREEMENT
Dated as of November 9, 1999
among
Cluett American Corp.,
Vestar Capital Partners III, L.P.,
and
BANK OF AMERICA, N. A.
<PAGE>
TABLE OF CONTENTS
SECTION 1 DEFINITIONS.........................................................1
1.1 Definitions......................................................1
1.2 Computation of Time Periods......................................6
SECTION 2 CREDIT FACILITIES....................................................7
2.1 Loans............................................................7
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES......................8
3.1 Default Rate.....................................................8
3.2 Extension and Conversion.........................................8
3.3 Prepayments......................................................8
3.4 Termination and Reduction of Commitment..........................8
3.5 Unused Fee.......................................................9
3.6 Capital Adequacy.................................................9
3.7 Limitation on Eurodollar Loans...................................9
3.8 Illegality.......................................................9
3.9 Requirements of Law.............................................10
3.10 Treatment of Affected Loans....................................10
3.11 Taxes..........................................................11
3.12 Compensation...................................................11
3.13 Payments, Computations, Etc....................................12
3.14 Evidence of Debt...............................................12
SECTION 4 GUARANTY...........................................................12
4.1 The Guaranty....................................................12
4.2 Obligations Unconditional.......................................13
4.3 Reinstatement...................................................13
4.4 Certain Additional Waivers......................................13
4.5 Remedies........................................................14
4.6 Guarantee of Payment; Continuing Guarantee......................14
4.7 Deposit of Capital Call Notices.................................14
SECTION 5 CONDITIONS.........................................................14
5.1 Closing Conditions..............................................14
5.2 Conditions to all Extensions of Credit..........................15
SECTION 6 REPRESENTATIONS AND WARRANTIES.....................................15
6.1 Existence and Power.............................................15
6.2 Authorization...................................................16
6.3 No Conflicts....................................................16
6.4 Consents........................................................16
6.5 Enforceable Obligations.........................................16
6.6 Permitted Investment............................................17
6.7 Venture Capital Operating Company...............................17
6.8 Deposited Notices...............................................17
6.9 Limitations on Actions..........................................17
SECTION 7 AFFIRMATIVE COVENANTS..............................................17
7.1 Outstanding Subscriptions.......................................17
7.2 General Partner.................................................17
7.3 Plan Assets, etc................................................17
7.4 Receipt of the Funds Pursuant to the Deposited Notices..........18
SECTION 8 NEGATIVE COVENANTS.................................................18
8.1 Limitations on Actions..........................................18
SECTION 9 EVENTS OF DEFAULT..................................................18
9.1 Events of Default...............................................18
9.2 Acceleration; Remedies..........................................19
9.3 Cash Collateral Account.........................................19
9.4 Allocation of Fund Payments.....................................20
9.5 Receipt of Funds Pursuant to the Deposited Notices..............20
<PAGE>
SECTION 10 MISCELLANEOUS.....................................................20
10.1 Notices........................................................20
10.2 Right of Set-Off; Adjustments..................................21
10.3 Benefit of Agreement...........................................21
10.4 No Waiver; Remedies Cumulative.................................21
10.5 Expenses; Indemnification......................................22
10.6 Amendments, Waivers and Consents...............................22
10.7 Counterparts...................................................22
10.8 Headings.......................................................22
10.9 Survival.......................................................22
10.10 Governing Law; Submission to Jurisdiction; Venue..............23
10.11 Severability..................................................23
10.12 Entirety......................................................23
10.13 Binding Effect; Termination...................................23
10.14 Limitation on Recourse to the Fund............................23
10.15 Confidentiality...............................................24
EXHIBITS
Exhibit A Form of Capital Call Notice
Exhibit 2.1(b)(i) Form of Notice of Borrowing
Exhibit 3.2 Form of Notice of Extension/Conversion
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of November 9, 1999 (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"), Vestar
Capital Partners III, L.P., a Delaware limited partnership (the "Fund"), and
BANK OF AMERICA, N. A. (the "Bank").
W I T N E S S E T H
WHEREAS, the Borrower has requested that the Bank provide a $3,000,000
revolving credit facility for the purposes hereinafter set forth; and
WHEREAS, the Bank has 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 10
DEFINITIONS
10.1 Definitions.
As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:
"Adjusted Base Rate" means the Base Rate plus 0.50%.
"Adjusted Eurodollar Rate" means the Eurodollar Rate plus 1.50%.
"Affiliate" means, with respect to any Person, any other Person
(i) directly or indirectly controlling or controlled by or
under direct or indirect common control with such Person or
(ii) directly or indirectly owning or holding ten percent
(10%) or more of the Voting Equity Interests in such Person.
For purposes of this definition, "control" when used with
respect to any Person means the power to direct the
management and policies of such Person, directly or
indirectly, whether through the ownership of voting
securities, by contract or otherwise; and the terms
"controlling" and "controlled" have meanings correlative to
the foregoing.
"Applicable Lending Office" means the office of the Bank (or of
an Affiliate of the Bank) as the Bank may from time to time
specify to the Borrower by written notice as the office by
which its Eurodollar Loans are made and maintained.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or
replaced from time to time.
"Bank" shall have the meaning assigned to such term in the
heading hereof, together with any successors or assigns.
"Bankruptcy Code" means the Bankruptcy Code in Title 11 of the
United States Code, as amended, modified, succeeded or
replaced from time to time.
"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
1
<PAGE>
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.
"BaseRate" 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.
"BaseRate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Borrower" shall have the meaning assigned to such term in the
heading hereof, together with any permitted successors or
assigns.
"Borrower Obligations" means, without duplication, all of the
obligations of the Borrower to the Bank, whenever arising,
under this Credit Agreement (including, but not limited to,
any interest accruing after the occurrence of a Bankruptcy
Event with respect to the Borrower, regardless of whether
such interest is an allowed claim under the Bankruptcy
Code).
"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.
"Capital Call Notice" means a capital call notice satisfying the
requirements of Section 3.1 of the Partnership Agreement and
substantially in the form of Exhibit A attached hereto.
"CashCollateral Account" shall have the meaning assigned to such
term in Section 9.3.
"CashEquivalents" shall have the meaning assigned to such term
in the Existing Credit Agreement.
"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.
"Commitment" means the commitment of the Bank in an aggregate
principal amount at any time outstanding of up to the
Committed Amount, to make Loans to the Borrower in
accordance with the provisions of Section 2.1(a).
"Committed Amount" shall have the meaning assigned to such term
in Section 2.1(a).
"Continue", "Continuation", and "Continued" shall refer to the
2
<PAGE>
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
3.10, inclusive, of a Base Rate Loan into a Eurodollar Loan.
"Default" means any event, act or condition which with notice or
lapse of time, or both, would constitute an Event of
Default.
"Deposited Notices" means a collective reference to the Capital
Call Notices delivered by the Fund to the Bank pursuant to
Section 5.1(b) and maintained on deposit with the Bank as
contemplated by Section 4.7.
"Dollars" and "$" means dollars in lawful currency of the United
States of America.
"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.
"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 by the
Bank 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 assigned to such term
in Section 9.1.
"Existing Credit Agreement" means the Credit Agreement, dated as
of May 18, 1998, among Cluett American Corp., as borrower,
the guarantors party thereto, the lenders party thereto and
Bank of America, N.A., as agent for such lenders, as
amended, modified, restated or supplemented from time to
time.
"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
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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 Bank (in its individual capacity) on such day on such
transactions as determined by the Bank.
"Fund" shall have the meaning assigned to such term in the
heading hereof.
"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.
"General Partner" means Vestar Associates III, L.P., a Delaware
limited partnership, as general partner of the Fund.
"Governmental Authority" means any Federal, state, local or
foreign court or governmental agency, authority,
instrumentality or regulatory body.
"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.
"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 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 any lease by that Person as lessee which,
in accordance with GAAP, should be accounted for as a
capital lease on the balance sheet of such Person, (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
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thereof or otherwise) subject to mandatory sinking fund
payments, mandatory redemption or other acceleration (other
than as a result of any event or condition 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 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 for accounting purposes 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%).
"Interest Payment Date" means (a) as to Base Rate Loans, the last
Business 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.
"Interest Period" means, as to Eurodollar Loans, a period of one,
two, three or six months' duration, as the Borrower may
elect, commencing, in each case, on the date of the
borrowing (including continuations and conversions thereof);
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 and (c) 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.
"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.
"Limited Partners" means the limited partners of the Fund.
"Loans" shall have the meaning assigned to such term in Section
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2.1(a). The term "Loan" shall also mean a portion of any
Loan bearing interest at the Adjusted Base Rate or the
Adjusted Eurodollar Rate and referred to as a Base Rate Loan
or a Eurodollar Loan.
"Material Adverse Effect" means a material adverse effect on (i)
the condition (financial or otherwise), operations,
business, assets, liabilities or results of operations of
the Fund, (ii) the ability of the Fund to perform any
material obligation under this Credit Agreement or (iii) the
rights and remedies of the Bank under this CreditAgreement.
"Maturity Date" means December 31, 2000.
"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).
"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.
"Obligations" means, with respect to the Fund, all Indebtedness,
all other obligations that would be reflected as liabilities
on a balance sheet of the Fund and the purchase price that
the Fund (directly or indirectly, including, but not limited
to, through any Subsidiary of the Fund) or the General
Partner has agreed, pursuant to a binding contract, to pay
for any investment or acquisition that has not yet closed.
The Obligations of the Fund at any time shall include the
payment obligations of the Fund under Section 4 of this
Credit Agreement.
"Other Taxes" shall have the meaning assigned to such term in
Section 3.11(b).
"Partners" means a collective reference to the General Partner
and the Limited Partners.
"Partnership Agreement" means that certain limited partnership
agreement, dated as of November 22, 1996, among the General
Partner and the individuals and entities party thereto, as
limited partners.
"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.
"PlanAsset Regulations" means the plan asset regulations of the
Department of Labor, 29 CFR ss. 2510.3-101 et seq., as
amended, and the advisory opinions and rulings issued
thereunder.
"Prime Rate" means the per annum rate of interest established
from time to time by the Bank as its prime rate, which rate
may not be the lowest rate of interest charged by the Bank
to its customers.
"Property" means any interest in any kind of property or asset,
whether real, personal or mixed, or tangible or intangible.
"Remaining Capital Commitment Balance" means, with respect to any
Limited Partner at any time, an amount equal to the total
remaining amount of capital contributions that such Limited
Partner is obligated at such time to make to the Fund
pursuant to the terms of the Partnership Agreement.
"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
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Person directly or indirectly through Subsidiaries owns at
such time more than 50% of the Equity Interests.
"Taxes" shall have the meaning assigned to such term in Section
3.11.
"Unused Fee" shall have the meaning assigned to such term in
Section 3.5.
"Unused Committed Amount" means, for any period, the amount by
which (a) the then applicable Committed Amount exceeds (b)
the daily average sum for such period of the outstanding
aggregate principal amount of all Loans.
"Unused Fee Calculation Period" shall have the meaning assigned
to such term in Section 3.5.
"Voting Equity Interests" 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 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.
10.2 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."
SECTION 2
CREDIT FACILITIES
2.1 Loans.
(a) Commitment. Subject to the terms and conditions hereof and in
reliance upon the representations and warranties set forth
herein, the Bank agrees to make available to the Borrower
revolving credit loans requested by the Borrower in Dollars
("Loans") from time to time from the Closing Date until the
Maturity Date, or such earlier date as the Commitment shall have
been terminated as provided herein; provided, however, that the
sum of the aggregate principal amount of outstanding Loans shall
not exceed THREE MILLION DOLLARS ($3,000,000) (as such aggregate
maximum amount may be reduced from time to time as provided in
Section 3.4, the "Committed Amount"). 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 5
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). Loans hereunder may be repaid and
reborrowed in accordance with the provisions hereof.
(b) Loan Borrowings.
(i) Notice of Borrowing. The Borrower shall request a Loan
borrowing by written notice (or telephonic notice promptly
confirmed in writing) to the Bank (a "Notice of Borrowing")
not later than 11:00 A.M. (Charlotte, North Carolina time)
on the Business Day 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 Notice of Borrowing shall be
irrevocable and shall specify (A) that a 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. Each Notice of Borrowing shall be
acknowledged in writing by the Fund. 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 shall be deemed to be a request for an
Interest Period of one month, or (II) the type of Loan
requested, then such notice shall be deemed to be a request
for a Base Rate Loan hereunder.
(ii) Minimum Amounts. Each Eurodollar Loan or Base Rate Loan that
is a Loan shall be in integral multiples of $100,000 (or the
remaining amount of the Committed Amount, if less).
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(iii)Advances. The Bank will make each Loan borrowing available
to the Borrower by crediting the account of the Borrower on
the books of the Bank 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 Borrower.
(c) Repayment. The Borrower hereby promises to pay to the order of
the Bank, on the Maturity Date (unless accelerated sooner
pursuant to Section 9.2), the principal amount of Three Million
Dollars ($3,000,000) or, if less than such principal amount, the
aggregate unpaid principal amount of all Loans then outstanding.
(d) Interest. Subject to the provisions of Section 3.1,
(i) Base Rate Loans. During such periods as 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 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.
The Borrower hereby promises to pay in arrears to the order of the Bank, on
each Interest Payment Date (or at such other times as may be specified herein),
accrued interest on the Loans.
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, 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 Bank has 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 Section
2.1(b)(ii), (iv) no more than 5 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), and (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. 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 Bank specified in specified in Section 10.1, or at such other
office as the Bank 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.
3.3 Prepayments.
(a) Voluntary Prepayments. The Borrower shall have the right to
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prepay Loans in whole or in part from time to time.
(b) Mandatory Prepayments.
(i) Committed Amount.If, at any time, the sum of the aggregate
principal amount of outstanding Loans shall exceed the
Committed Amount, the Borrower hereby promises to prepay the
Loans immediately in an amount sufficient to eliminate such
excess.
(ii) Other. Notwithstanding any provision of this Credit
Agreement to the contrary, the Borrower hereby promises to
prepay each Loan on or before the date 30 days after such
Loan is advanced by the Bank; provided that each of the
parties hereto agrees that the Fund may, in its sole
discretion, waive the obligation of the Borrower under this
Section 3.3(b)(ii) with respect to any Loan.
(c) Generally. 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.
3.4 Termination and Reduction of Commitment.
(a) Voluntary Reductions. The Borrower may from time to time
permanently reduce or terminate the Committed Amount in whole or
in part in integral multiples of $100,000 (or, if less, the full
remaining amount of the then applicable Committed Amount) upon
five Business Days' prior written notice to the Bank; provided,
however, no such termination or reduction shall be made which
would cause the aggregate principal amount of outstanding Loans
to exceed the Committed Amount unless, concurrently with such
termination or reduction, the Loans are repaid to the extent
necessary to eliminate such excess.
(b) Maturity Date. The Commitment of the Bank shall automatically
terminate on the Maturity Date.
(c) General. The Borrower shall pay to the Bank in accordance with
the terms of Section 3.5, on the date of each termination or
reduction of the Committed Amount, the Unused Fee accrued through
the date of such termination or reduction on the amount of the
Committed Amount so terminated or reduced.
3.5 Unused Fee.
In consideration of the Commitment of the Bank hereunder, the Borrower
hereby promises to pay to the Bank a fee (the "Unused Fee") on the Unused
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 50 basis
points. 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 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.
3.6 Capital Adequacy.
If the Bank 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
the Bank 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 the Bank's capital or
assets as a consequence of its commitments or obligations hereunder to a level
below that which the Bank could have achieved but for such adoption,
effectiveness, change or compliance (taking into consideration the Bank's
policies with respect to capital adequacy) by an amount deemed by the Bank to be
material, then, upon notice from the Bank 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 the Bank such additional amount or
amounts as will compensate the Bank for such reduction. Each determination by
the Bank 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:
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(a) the Bank 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 Bank determines (which determination shall be conclusive)
that the Eurodollar Rate will not adequately and fairly reflect
the cost to the Bank of funding Eurodollar Loans for such
Interest Period;
then the Bank shall give the Borrower prompt notice thereof, and so long as such
condition remains in effect, the Bank shall be under no obligation to make
additional Eurodollar Loans, Continue Eurodollar Loans, or 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 Bank 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 the Bank or its Applicable Lending Office to make,
maintain or fund Eurodollar Loans hereunder, then the Bank shall promptly notify
the Borrower thereof and the Bank's obligation to make, Convert into, Continue
or maintain Eurodollar Loans shall be suspended until such time as the Bank 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 the Bank (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 the Bank (or its Applicable Lending Office) to
any tax, duty, or other charge with respect to any Loans or
its obligation to make Loans, or change the basis of
taxation of any amounts payable to the Bank (or its
Applicable Lending Office) under this Credit Agreement in
respect of any Loans (other than Taxes defined in Section
3.11(a) and taxes imposed on the overall net income of the
Bank by the jurisdiction in which such Bank 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 Bank (or
its Applicable Lending Office), including the Commitment of
the Bank hereunder; or
(iii)shall impose on the Bank (or its Applicable Lending Office)
or the London interbank market any other condition affecting
this Credit Agreement 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
the Bank (or its Applicable Lending Office) to be material, the cost to the Bank
(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 Bank (or its Applicable Lending Office) under this Credit Agreement, then
the Borrower shall pay to the Bank on demand such amount or amounts as will
compensate the Bank for such increased cost or reduction. If the Bank requests
compensation by the Borrower under this Section 3.9, the Borrower may, by notice
to the Bank, suspend the obligation of the Bank to make, Convert into, 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 the Bank to receive the compensation so requested. The Bank shall promptly
notify the Borrower of any event of which it has knowledge, occurring after the
date hereof, which will entitle the Bank 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 the Bank, be otherwise disadvantageous to it.
If the Bank claims compensation under this Section 3.9, it shall furnish to the
Borrower a statement setting forth in reasonable detail the calculation of the
additional amount or amounts to be paid to it hereunder which shall be
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conclusive in the absence of demonstrable error. In determining such amount, the
Bank may use any reasonable averaging and attribution methods.
3.10 Treatment of Affected Loans.
If the obligation of the Bank to make, Convert into, Continue or maintain
Eurodollar Loans shall be suspended pursuant to Section 3.8 or 3.9 hereof, the
Bank'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 the Bank may specify to the Borrower) and, unless and
until the Bank 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 the Bank's Eurodollar Loans have been so
Converted, all payments and prepayments of principal that would
otherwise be applied to the Bank's Eurodollar Loans shall be
applied instead to its Base Rate Loans; and
(b) all Loans that would otherwise be made or Continued by the Bank
as Eurodollar Loans shall be made or Continued instead as Base
Rate Loans, and all Base Rate Loans of the Bank that would
otherwise be Converted into Eurodollar Loans shall remain as Base
Rate Loans.
3.11 Taxes.
(a) Any and all payments by the Borrower to or for the account of the
Bank hereunder shall be made free and clear of and without
deduction for any and all present or future taxes, duties,
levies, imposts, deductions, charges or withholdings, and all
liabilities with respect thereto, excluding taxes imposed on the
Bank as a result of a present or former connection between it 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
Bank having executed, delivered or performed its obligations or
received a payment under, or enforced, this Credit Agreement)
(all such non-excluded taxes, duties, levies, imposts,
deductions, charges, withholdings, and liabilities being
hereinafter referred to as "Taxes"). If the Borrower shall be
required by law to deduct any Taxes from or in respect of any sum
payable under this Credit Agreement to the Bank, (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) the Bank
receives an amount equal to the sum it would have received had no
such deductions been made, (ii) the Borrower shall make such
deductions, (iii) the Borrower shall pay the full amount deducted
to the relevant taxation authority or other authority in
accordance with applicable law, and (iv) the Borrower shall
furnish to the Bank, at its address referred to in Section 10.1,
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 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 from the execution or
delivery of, or otherwise with respect to, this Credit Agreement
(hereinafter referred to as "Other Taxes").
(c) The Borrower agrees to indemnify the Bank 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 the Bank and any
liability for penalties, interest, and expenses arising therefrom
or with respect thereto.
(d) If the Borrower is required to pay additional amounts to or for
the account of the Bank pursuant to this Section 3.11, then the
Bank 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 the Bank, is not
otherwise materially disadvantageous to the Bank.
(e) Within thirty (30) days after the date of any payment of Taxes,
the Borrower shall furnish to the Bank the original or a
certified copy of a receipt evidencing such payment.
(f) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the
Borrower contained in this Section 3.11 shall survive the
repayment of the Loans and other obligations under this Credit
Agreement and the termination of the Commitment hereunder.
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(g) If the Bank receives a refund with respect to Taxes paid by the
Borrower, which in the good faith judgment of the Bank is
allocable to such payment, the Bank 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 the Bank incurred in obtaining such
refund, provided, however, that the Borrower agrees to promptly
return such refund to the Bank if it receives notice from the
Bank that the Bank is required to repay such refund. The Bank
agrees that it will contest such Taxes or liabilities if the Bank
determines, in its reasonable judgment, that it would not be
materially disadvantaged or prejudiced as a result of such
contest.
3.12 Compensation.
Upon the request of the Bank, the Borrower shall pay to the Bank such
amount or amounts as shall be sufficient (in the reasonable opinion of the Bank)
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 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 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 Eurodollar Rate over (b) the amount of interest (as
reasonably determined by the Bank) which would have accrued to the Bank on such
amount by placing such amount on deposit for a comparable period with leading
banks in the interbank Eurodollar market. If the Bank claims compensation under
this Section 3.12, it shall furnish to the Borrower 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 and other obligations under this Credit Agreement and the termination of
the Commitment hereunder.
3.13 Payments, Computations, Etc.
Except as otherwise specifically provided herein, all payments hereunder
shall be made to the Bank in immediately available funds, without setoff,
deduction, counterclaim or withholding of any kind, at the Bank's office
specified in Section 10.1 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 Borrower shall,
at the time it makes any payment under this Credit Agreement, specify to the
Bank the Borrower 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 Bank shall apply such payment in such manner as the
Bank may determine to be appropriate). 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.
3.14 Evidence of Debt.
(a) The Bank shall maintain an account or accounts evidencing each
Loan made by the Bank from time to time, in which such accounts
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shall be recorded (i) the amount, type and Interest Period of
each such Loan hereunder, (ii) the amount of any principal or
interest payable and paid or to become due and payable to the
Bank hereunder and (iii) the amount of any sum received by the
Bank hereunder from or for the account of the Borrower. The Bank
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.
(b) The entries made in the accounts maintained pursuant to
subsection (a) of this Section 3.14 shall be prima facie evidence
of the existence and amounts of the obligations of the Borrower
therein recorded; provided, however, that the failure of the Bank
to maintain any such account, or any error therein, shall not in
any manner affect the obligation of the Borrower to pay the
Borrower Obligations owing to the Bank.
SECTION 4
GUARANTY
4.1 The Guaranty.
The Fund hereby guarantees to the Bank as hereinafter provided, as primary
obligor and not as surety, the prompt payment of the Borrower Obligations in
full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration or otherwise) strictly in accordance with the terms thereof. The
Fund hereby further agrees that if any of the Borrower Obligations are not paid
in full when due (whether at stated maturity, as a mandatory prepayment, by
acceleration or otherwise), the Fund will 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 Borrower Obligations, the same will be promptly
paid in full when due (whether at extended maturity, as a mandatory prepayment,
by acceleration or otherwise) in accordance with the terms of such extension or
renewal.
4.2 Obligations Unconditional.
The obligations of the Fund under Section 4.1 are absolute and
unconditional, irrespective of the value, genuineness, validity, regularity or
enforceability of any of this Credit Agreement, or any substitution, release,
impairment or exchange of any other guarantee of or security for any of the
Borrower 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 Fund
hereunder shall be absolute and unconditional under any and all circumstances.
The Fund agrees that it shall have no right of subrogation, indemnity,
reimbursement or contribution against the Borrower for amounts paid under this
Section 4 until such time as the Bank has been paid in full, the Commitment
under this Credit Agreement has been terminated and no Person or Governmental
Authority shall have any right to request any return or reimbursement of funds
from the Bank in connection with monies received under this Credit Agreement.
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 the Fund hereunder which
shall remain absolute and unconditional as described above:
(a) at any time or from time to time, without notice to the Fund, the
time for any performance of or compliance with any of the
Borrower Obligations shall be extended, or such performance or
compliance shall be waived;
(b) any of the acts mentioned in any of the provisions of this Credit
Agreement shall be done or omitted;
(c) the maturity of any of the Borrower Obligations shall be
accelerated, or any of the Borrower Obligations shall be
modified, supplemented or amended in any respect, or any right
under this Credit Agreement or any other agreement or instrument
referred to in this Credit Agreement shall be waived or any other
guarantee of any of the Borrower Obligations or any security
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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 Bank as security for any
of the Borrower Obligations shall fail to attach or be perfected;
or
(e) any of the Borrower Obligations shall be determined to be void or
voidable (including, without limitation, for the benefit of any
creditor of the Fund) or shall be subordinated to the claims of
any Person (including, without limitation, any creditor of the
Fund).
With respect to its obligations hereunder, the Fund hereby expressly waives
diligence, presentment, demand of payment, protest and all notices whatsoever,
and any requirement that the Bank exhaust any right, power or remedy or proceed
against any Person under this Credit Agreement or any other agreement or
instrument referred to in this Credit Agreement, or against any other Person
under any other guarantee of, or security for, any of the Borrower Obligations.
4.3 Reinstatement.
The obligations of the Fund 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 Borrower Obligations is rescinded or must be
otherwise restored by any holder of any of the Borrower Obligations, whether as
a result of any proceedings in bankruptcy or reorganization or otherwise, and
the Fund agrees that it will indemnify the Bank on demand for all reasonable
costs and expenses (including, without limitation, fees and expenses of counsel)
incurred by the Bank 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, the
Fund hereby specifically waives the benefits of N.C. Gen. Stat. ss.ss. 26-7
through 26-9, inclusive, to the extent applicable. The Fund further agrees that
it shall have no right of recourse to security for the Borrower Obligations,
except through the exercise of rights of subrogation pursuant to Section 4.2.
4.5 Remedies.
The Fund agrees that, to the fullest extent permitted by law, as between
the Fund, on the one hand, and the Bank, on the other hand, the Borrower
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 Borrower Obligations from becoming automatically
due and payable) as against any other Person and that, in the event of such
declaration (or the Borrower Obligations being deemed to have become
automatically due and payable), the Borrower Obligations (whether or not due and
payable by any other Person) shall forthwith become due and payable by the Fund
for purposes of Section 4.1.
4.6 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 Borrower
Obligations whenever arising.
4.7 Deposit of Capital Call Notices.
The Fund hereby agrees that each of the Capital Call Notices delivered by
the Fund to the Bank pursuant to Section 5.1(b) shall be held by the Bank on
deposit and shall be delivered by the Bank to the Partners only under the
circumstances contemplated by, and otherwise in accordance with the terms of,
Section 9.2.
SECTION 5
CONDITIONS
5.1 Closing Conditions.
The obligation of the Bank to enter into this Credit Agreement and to make
the initial Loans shall be subject to satisfaction of the following conditions
(in form and substance acceptable to the Bank):
(a) Executed Credit Agreement. Receipt by the Bank of duly executed
copies of this Credit Agreement.
(b) Deposited Notices. Receipt by the Bank of an original Capital
Call Notice for each Limited Partner, in each case executed by
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the General Partner and directing such Limited Partner to wire
transfer funds to the Bank in an amount equal to such Limited
Partner's pro rata share of the original Committed Amount
($3,000,000).
(c) Legal Opinion. Receipt of a legal opinion of Simpson Thacher &
Bartlett, counsel for the Fund, in form and substance reasonably
satisfactory to the Bank.
(d) Partnership Documents. Receipt by the Bank of all documents
reasonably requested by the Bank relating to the existence of the
Fund, the enforceability of this Credit Agreement and the
Deposited Notices and other matters relating thereto, in form and
substance satisfactory to the Bank, including, but not limited
to:
(i) Certificates of Authorization. Certificates of authorization
of the General Partner as of the Closing Date, approving and
adopting this Credit Agreement and the delivery of the
Deposited Notices and authorizing the execution and delivery
thereof by the General Partner on behalf of the Fund.
(ii) Partnership Agreement. A copy, certified by an officer of
the general partner of the General Partner on behalf of the
Fund as true and complete, of the Partnership Agreement,
together with all amendments thereto, if any.
(iii)Incumbency Certificate. An incumbency certificate of any
two duly authorized officers of the general partner of the
General Partner who will be executing this Credit Agreement,
any Deposited Notice or any other document, instrument or
certificate to be delivered pursuant to the terms hereof
(including the name, title and signature of each such
officer).
(e) Remaining Capital Commitments. Receipt by the Bank of a
certificate executed by an officer of the general partner of the
General Partner on behalf of the Fund, in form and substance
satisfactory to the Bank, stating that the aggregate Remaining
Capital Commitments of all Limited Partners as of the Closing
Date equals or exceeds the sum of (i) the Committed Amount plus
(ii) all other Obligations of the Fund.
5.2 Conditions to all Extensions of Credit.
The obligations of the Bank to make any Loan (including the initial Loans)
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 an appropriate Notice of
Borrowing;
(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 Borrower or the
Fund 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), the aggregate principal
amount of outstanding Loans shall not exceed the Committed
Amount.
The delivery of each Notice of Borrowing and each Notice of Extension/Conversion
shall constitute a representation and warranty by the Borrower (with respect to
itself only) and the Fund of the correctness of the matters specified in
subsections (b), (c), (d) and (e) above.
SECTION 6
REPRESENTATIONS AND WARRANTIES
6.1 Existence and Power.
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(a) The Fund hereby represents to the Bank that each of the Fund and
the General Partner is a limited partnership duly organized,
validly existing and in good standing under the laws of the State
of Delaware, and is in good standing as a foreign limited
partnership in each other jurisdiction where ownership of its
properties or the conduct of its business requires it to be so
other than in such jurisdictions where failure to be in good
standing could not reasonably be expected to have a Material
Adverse Effect, and has all power and authority under such laws
and its partnership agreement and all material governmental
licenses, authorizations, consents and approvals required to
carry on its business as now conducted.
(b) The Fund hereby represents to the Bank that the general partner
of the General Partner (i) is duly incorporated, validly existing
and in good standing under the laws of the state of its
incorporation, (ii) has all corporate power pursuant to proper
authorization to enable it to act as the general partner of the
General Partner and to enter into this Credit Agreement on the
Fund's behalf, and (iii) is duly qualified to do business and is
in good standing in each other jurisdiction where it is required
to be qualified in order to act as the general partner of the
General Partner, other than in such jurisdictions where the
failure to be so qualified and in good standing could not
reasonably be expected to have a Material Adverse Effect.
(c) The Borrower hereby represents to the Bank that the Borrower (i)
is duly incorporated, validly existing and in good standing under
the laws of the State of Delaware and (ii) has all corporate
power pursuant to proper authorization to enter into this Credit
Agreement.
6.2 Authorization.
(a) The Fund hereby represents to the Bank that the Fund has the
partnership or other necessary power and authority, and the legal
right, to enter into this Credit Agreement and to perform its
obligations hereunder and consummate the transactions
contemplated hereby and has by proper action duly authorized the
execution and delivery of this Credit Agreement and the Deposited
Notices. Without limiting the generality of the above, the Fund
has by proper action duly authorized (i) the execution and
delivery of one or more Capital Call Notices to each Partner in
order to fund the obligations of the Fund under Section 4, (ii)
the depositing of such Capital Call Notices with the Bank in the
manner contemplated by Section 4.7 and (iii) the authorizing of
the Bank to deliver such Capital Call Notices on behalf of the
Fund in accordance with the terms of Section 9.2(c).
(b) The Borrower hereby represents to the Bank that the Borrower has
the corporate power and authority, and the legal right, to enter
into this Credit Agreement and to perform its obligations
hereunder, to obtain extensions of credit hereunder and to
consummate the transactions contemplated hereby and has by proper
action duly authorized the execution and delivery of this Credit
Agreement.
6.3 No Conflicts.
(a) The Fund hereby represents to the Bank that neither the execution
and delivery by the Fund of this Credit Agreement nor the
consummation of the transactions contemplated herein, nor
performance by the Fund of and compliance with the terms and
provisions hereof will (i) violate or conflict with any provision
of the Partnership Agreement or other governance document, (ii)
violate any material law, regulation, order, writ, judgment,
injunction, decree or permit applicable to it, (iii) violate 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 (iv)
result in or require the creation of any Lien (other than those
contemplated in or in connection with this Credit Agreement) upon
or with respect to the Fund's Properties.
(b) The Borrower hereby represents to the Bank that neither the
execution and delivery by the Borrower of this Credit Agreement
nor the consummation of the transactions contemplated herein, nor
performance by the Borrower of and compliance with the terms and
provisions hereof will (i) violate or conflict with any provision
of its articles or certificate of incorporation or bylaws or
other organizational or governing documents, (ii) violate any
material law, regulation, order, writ, judgment, injunction,
16
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decree or permit applicable to it, (iii) violate 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 on the business,
assets, operations, results of operations or financial condition
of the Borrower and its Subsidiaries taken as a whole or (iv)
result in or require the creation of any Lien (other than those
contemplated in or in connection with this Credit Agreement) upon
or with respect to the Borrower's Properties.
6.4 Consents.
(a) The Fund hereby represents to the Bank that no consent, approval,
authorization or order of, or filing, registration or
qualification with, any court or Governmental Authority or other
Person is required in connection with the execution, delivery or
performance by the Fund of this Credit Agreement or with the
execution and delivery by the General Partner on the Fund's
behalf of the Deposited Notices.
(b) The Borrower hereby represents to the Bank that no consent,
approval, authorization or order of, or filing, registration or
qualification with, any court or Governmental Authority or other
Person is required in connection with the execution, delivery or
performance by the Borrower of this Credit Agreement.
6.5 Enforceable Obligations.
(a) The Fund hereby represents to the Bank that this Credit Agreement
has been duly executed and delivered by the Fund and constitutes
legal, valid and binding obligations of the Fund, enforceable
against the Fund in accordance with its terms, subject to
applicable bankruptcy, insolvency, fraudulent conveyance,
reorganization, moratorium or laws affecting creditors' rights
generally and subject to general principles of equity, regardless
of whether considered in proceedings in equity or at law and by
an implied covenant of good faith and fair dealing.
(b) The Borrower hereby represents to the Bank that this Credit
Agreement has been duly executed and delivered by the Borrower
and constitutes legal, valid and binding obligations of the
Borrower, enforceable against the Borrower in accordance with its
terms, subject to applicable bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium or laws affecting
creditors' rights generally and subject to general principles of
equity, regardless of whether considered in proceedings in equity
or at law and by an implied covenant of good faith and fair
dealing.
6.6 Permitted Investment.
The Fund hereby represents to the Bank that (a) the incurrence of the
obligations of the Fund set forth in this Credit Agreement are permitted by the
Partnership Agreement, and (b) the Limited Partners shall be obligated to make
additional capital contributions (each in a pro rata amount in proportion to
such Limited Partner's total capital commitment obligation to the Fund under the
Partnership Agreement) for the purpose of providing funds to or for the account
of the Fund in an aggregate amount at least equal to the Committed Amount for
the purpose of providing funds to the Fund sufficient to repay in full the
Borrower Obligations, if so requested by the General Partner.
6.7 Venture Capital Operating Company.
The Fund hereby represents to the Bank that the Fund is a venture capital
operating company within the meaning of the Plan Asset Regulations, or, the Fund
satisfies another exception under the Plan Asset Regulations such that the
assets of the Fund are not "plan assets" within the meaning and as defined in
the Plan Asset Regulations.
6.8 Deposited Notices.
The Fund hereby represents to the Bank that each Deposited Notice, when
delivered by the Bank to the applicable Limited Partner in accordance with the
terms of Section 9.2(c), will give rise to a legal, valid and binding obligation
on the part of such Limited Partner to pay to the Bank (for the account of the
Fund) such Limited Partner's pro rata share of the original Committed Amount
($3,000,000), enforceable against such Limited Partner in accordance with the
terms of such Deposited Notice and the Partnership Agreement.
6.9 Limitations on Actions.
The Fund hereby represents to the Bank that the Fund is not aware of any
event or condition that could (i) have a material adverse effect on the ability
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of the Fund to perform its obligations under this Credit Agreement, (ii) render
invalid or unenforceable any of the Deposited Notices or (iii) otherwise modify
the obligations of any of the Partners and/or any Person becoming Partners
subsequent to the Closing Date which arise upon the due delivery of, and as
contemplated by, the Deposited Notices.
SECTION 7
AFFIRMATIVE COVENANTS
The Fund hereby covenants and agrees that so long as this Credit Agreement
is in effect:
7.1 Outstanding Subscriptions.
The Fund will cause the aggregate Remaining Capital Commitments of all
Limited Partners to equal or exceed the sum of (i) the Committed Amount plus
(ii) all other Obligations of the Fund.
7.2 General Partner.
The Fund will cause (i) Vestar Associates III, L.P. to be the sole general
partner of the Fund at all times and (ii) Vestar Associates Corporation III to
be the sole general partner of the General Partner at all times.
7.3 Plan Assets, etc.
The Fund shall either (i) be a venture capital operating company within the
meaning of the Plan Asset Regulations, or (ii) satisfy another exception under
the Plan Asset Regulations such that the assets of the Fund are not "plan
assets" within the meaning and as defined in the Plan Asset Regulations.
7.4 Receipt of the Funds Pursuant to the Deposited Notices.
Immediately upon receipt by the Fund or any of its Affiliates of payment by
any Limited Partner in respect of a Deposited Notice delivered by the Bank
pursuant to Section 9.2(c), the Fund shall (i) notify the Bank in writing
specifying the Limited Partner making such payment and the amount thereof and
(ii) forward, or cause to be forwarded, the funds representing such payment to
the Parent.
SECTION 8
NEGATIVE COVENANTS
The Fund hereby covenants and agrees that so long as this Credit Agreement
is in effect:
8.1 Limitations on Actions.
The Fund shall not take any action that could (i) render invalid or
unenforceable any of the Deposited Notices or (ii) otherwise modify the
obligations of any of the Partners and/or any Person becoming Partners
subsequent to the Closing Date which arise upon the due delivery of, and as
contemplated by, the Deposited Notices.
SECTION 19
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. The Borrower shall
(i) default in the payment when due of any principal of any of
the Loans, 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 of any fees or other amounts owing
hereunder or in connection herewith; or
(b) Representations. Any representation, warranty or statement made
or deemed to be made by the Borrower or the Fund herein 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.
(i) The Fund shall default in the due performance or observance
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of any term, covenant or agreement contained in Section 7 or
Section 8; or
(ii) The Borrower or the Fund shall 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 the Borrower or the Fund becoming
aware of such default or notice thereof by the Bank; or
(d) Guaranties. The guaranty given by the Fund hereunder or any
provision thereof shall cease to be in full force and effect, or
the Fund or any Person acting by or on behalf of the Fund shall
deny or disaffirm the Fund's obligations under such guaranty, or
the Fund shall default in the due performance or observance of
any term, covenant or agreement on its part to be performed or
observed pursuant to Section 4; or
(e) Bankruptcy, etc. Any Bankruptcy Event shall occur with respect to
the Borrower or the Fund; or
(f) Defaults under Other Agreements. With respect to any Indebtedness
(other than Indebtedness outstanding under this Credit Agreement)
in excess of $20 million in the aggregate for the Fund, (A)(1)
the Fund shall default in any payment (beyond the applicable
grace period with respect thereto, if any) with respect to any
such Indebtedness, or (2) 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 (B)
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;
provided, however, that notwithstanding the foregoing, no Default
or Event of Default shall exist under this Section 9.1(f) with
respect to a default which is being contested in good faith by
appropriate proceedings; or
(g) Judgments. The Fund shall fail within 30 days of the date due and
payable to pay, bond or otherwise discharge any judgment,
settlement or order for the payment of money (to the extent not
paid or fully covered by insurance provided by a carrier who has
acknowledged coverage and has the ability to perform) which
judgment, settlement or order, when aggregated with all other
such judgments, settlements or orders due and unpaid at such
time, exceeds $20 million, and which is not stayed on appeal (or
for which no motion for stay is pending) or is not otherwise
being executed.
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 Bank or cured to
the satisfaction of the Bank, the Bank shall by written notice to the Borrower
and the Fund take any of the following actions:
(a) Termination of the Commitment. Declare the Commitment terminated
whereupon the Commitment shall be immediately terminated.
(b) Acceleration. Declare the unpaid principal of and any accrued
interest in respect of all Loans and any and all other
indebtedness or obligations of any and every kind owing by the
Borrower and the Fund to the Bank hereunder to be due whereupon
the 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 Borrower and the Fund.
(c) Delivery of Deposited Notices. After at least 2 Business Days'
prior written notice thereof by the Bank to the Fund, deliver the
Deposited Notices to the Limited Partners.
Notwithstanding the foregoing, if an Event of Default specified in Section
9.1(f) shall occur, then the Commitment shall automatically terminate and all
Loans, all accrued interest in respect thereof, all accrued and unpaid fees and
other indebtedness or obligations owing to the Bank hereunder automatically
shall immediately become due and payable without the giving of any notice or
other action by the Bank. In the event any of the Borrower Obligations are 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. The rights of the Bank under this Section 9.2 are
19
<PAGE>
independent and in addition to such rights as the Bank may have at law or in
equity or otherwise based on the failure of the Fund to perform any covenant,
agreement or undertaking made by it in this Credit Agreement.
9.3 Cash Collateral Account.
To the extent that payments made by the Fund (including capital
contributions made by the Partners) pursuant to the exercise of rights by the
Bank under Section 4 and Section 9.2(c) exceed the amounts necessary to satisfy
the obligations of the Fund to make payment in full of the Borrower Obligations,
such amounts shall be held by the Bank in a cash collateral account subject to
the sole dominion and control of the Bank (the "Cash Collateral Account") until
this Credit Agreement is terminated in accordance with the terms of Section
10.13(b). The Bank shall charge the Cash Collateral Account from time to time
for the payment when due of all amounts payable by the Fund hereunder. Any
balance remaining in the Cash Collateral Account at the time that this Credit
Agreement is terminated in accordance with the terms of Section 10.13(b)
promptly shall be turned over by the Bank to the Fund in such manner as the Fund
at the time shall specify to the Bank. At the request of the Fund, amounts on
deposit in the Cash Collateral Account shall be invested by the Bank in Cash
Equivalents. Any income earned on such Cash Equivalents will be for the account
of the Fund and shall be distributed not less than quarterly by the Bank to the
Fund. To the extent that any loss is incurred in respect of such investments by
the Bank on behalf of the Fund, the Fund not less than quarterly will deliver to
the Bank, for deposit in the Cash Collateral Account, additional amounts
sufficient to offset such losses.
9.4 Allocation of Fund Payments.
All amounts collected or received by the Bank from the Fund or any Partner
pursuant to or in connection with this Credit Agreement and the Deposited
Notices shall be applied by the Bank solely to the payment of the obligations of
the Fund under Section 4.1.
9.5 Receipt of Funds Pursuant to the Deposited Notices.
The Bank agrees that, promptly after receipt by the Bank of any capital
contribution by any Limited Partner pursuant to the exercise of the Bank's
rights under Section 4.1 and Section 9.2(c), the Bank shall notify the Fund of
the amount of such capital contribution and the identity of the Limited Partner
making such capital contribution.
SECTION 10
MISCELLANEOUS
10.1 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 set forth below, or at such other address as
such party may specify by written notice to the other parties hereto:
if to the Borrower:
Cluett American Corp.
48 W. 38th Street
New York, New York 10018
Attn: Chief Executive Officer
Telephone: (212) 984-8915
Telecopy: (212) 984-8925
with copies to:
Vestar Capital Partners III, L.P.
245 Park Avenue
41st Floor
New York, New York 10167
Attn: Norman W. Alpert
Telephone: (212) 351-1606
Telecopy: (212) 808-4922
and
Vestar Capital Partners III, L.P.
245 Park Avenue
41st Floor
New York, New York 10167
Attn: Brian P. Schwartz
Telephone: (212) 351-1651
Telecopy: (212) 808-4922
and
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<PAGE>
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Marissa Wesely
Telephone: (212) 455-7173
Telecopy: (212) 455-2502
if to the Fund:
Vestar Capital Partners III, L.P.
245 Park Avenue
41st Floor
New York, New York 10167
Attn: Norman W. Alpert
Telephone: (212) 351-1606
Telecopy: (212) 808-4922
with copies to:
Vestar Capital Partners III, L.P.
245 Park Avenue
41st Floor
New York, New York 10167
Attn: Brian P. Schwartz
Telephone: (212) 351-1651
Telecopy: (212) 808-4922
and
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, New York 10017
Attn: Marissa Wesely
Telephone: (212) 455-7173
Telecopy: (212) 455-2502
if to the Bank:
Bank of America, N. A.
Independence Center, 15th Floor
NC1-001-15-04
101 North Tryon Street
Charlotte, North Carolina 28255
Attn: Agency Services--Kathy Mumpower
Telephone: (704) 386-6837
Telecopy: (704) 409-0021
with a copy to:
Bank of America, N.A.
100 North Tryon Street
Bank of America Corporate Center, 13th Floor
NC1-007-13-06
Charlotte, North Carolina 28255
Attn: Bob Klawinski
Telephone: (704) 387-0467
Telecopy: (704) 386-9607
10.2 Right of Set-Off; Adjustments.
Upon the occurrence and during the continuance of any Event of Default
under Section 9.1(a), the Bank (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 the Bank (or any of its Affiliates) to or for the credit or the account of
the Borrower or the Fund against any and all of the obligations of such Person
now or hereafter existing under this Credit Agreement or otherwise, irrespective
of whether the Bank shall have made any demand under hereunder or thereunder and
although such obligations may be unmatured. The Bank agrees promptly to notify
the Borrower or the Fund, as applicable, after any such set-off and application
made by the Bank; provided, however, that the failure to give such notice shall
not affect the validity of such set-off and application. The rights of the Bank
under this Section 10.2 are in addition to other rights and remedies (including,
without limitation, other rights of set-off) that the Bank may have.
10.3 Benefit of Agreement.
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 (i) neither the Borrower nor the Fund may assign or transfer any
of its interests and obligations without prior written consent of the Bank and
(ii) the Bank may not assign or transfer any of its interests and obligations
21
<PAGE>
hereunder without prior written consent of the Borrower and the Fund except
during the continuance of an Event of Default.
10.4 No Waiver; Remedies Cumulative.
No failure or delay on the part of the Bank in exercising any right, power
or privilege hereunder and no course of dealing between the Bank and the
Borrower or the Fund shall operate as a waiver thereof; nor shall any single or
partial exercise of any right, power or privilege hereunder 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 Bank would
otherwise have. No notice to or demand on the Borrower or the Fund in any case
shall entitle the Borrower or the Fund to any other or further notice or demand
in similar or other circumstances or constitute a waiver of the rights of the
Bank to any other or further action in any circumstances without notice or
demand.
10.5 Expenses; Indemnification.
(a) The Borrower agrees to pay on demand all costs and expenses of
the Bank in connection with the preparation, execution, delivery,
administration, modification, and amendment of this Credit
Agreement and the other documents to be delivered hereunder,
including, without limitation, the reasonable fees and expenses
of counsel for the Bank (including the cost of internal counsel)
with respect thereto and with respect to advising the Bank as to
its rights and responsibilities under this Credit Agreement. The
Borrower further agrees to pay on demand all costs and expenses
of the Bank (including the reasonable fees and expenses of
counsel) in connection with the enforcement (whether through
negotiations, legal proceedings, or otherwise) of this Credit
Agreement and the other documents to be delivered hereunder.
(b) The Borrower agrees to indemnify and hold harmless the Bank and
each of its 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) this Credit Agreement, 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 10.5 applies, such indemnity
shall be effective whether or not such investigation, litigation
or proceeding is brought by the Borrower or the Fund, their
respective directors, shareholders or creditors or an Indemnified
Party or any other Person or any Indemnified Party is otherwise a
party thereto. The Borrower and the Fund each agrees not to
assert any claim against the Bank, any of its 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 this Credit Agreement, 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
Borrower or the Fund hereunder, the agreements and obligations of
the Borrower and the Fund contained in this Section 10.5 shall
survive the repayment of the Loans and other obligations under
this Credit Agreement and the termination of the Commitment
hereunder.
10.6 Amendments, Waivers and Consents.
Except as otherwise provided in Section 3.3(b)(ii), none of the provisions
of this Credit Agreement may be amended, changed, waived, discharged or
terminated unless such amendment, change, waiver, discharge or termination is in
writing and executed by the Bank, the Borrower and the Fund.
10.7 Counterparts.
This Credit Agreement may be executed in counterparts, each of which when
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<PAGE>
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.
10.8 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.
10.9 Survival.
All indemnities set forth herein, including, without limitation, in Section
3.11, 3.12 or 10.5 shall survive the execution and delivery of this Credit
Agreement, the making of the Loans, the repayment of the Loans and other
obligations under this Credit Agreement and the termination of the Commitment
hereunder, and all representations and warranties made by the Borrower or the
Fund herein shall survive delivery of this Credit Agreement and the making of
the Loans hereunder.
10.10 Governing Law; Submission to Jurisdiction; Venue.
(a) THIS CREDIT 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 Credit
Agreement 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 Borrower, the Fund and the Bank
hereby irrevocably accepts for itself and in respect of its
property, generally and unconditionally, the nonexclusive
jurisdiction of such courts. Each of the Borrower, the Fund and
the Bank 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 10.1, such service to become
effective three (3) days after such mailing. Nothing herein shall
affect the right of the Bank to serve process in any other manner
permitted by law or to commence legal proceedings or to otherwise
proceed against the Borrower or the Fund in any other
jurisdiction.
(b) Each of the Borrower, the Fund and the Bank 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
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 BANK, THE BORROWER
AND THE FUND HEREBY IRREVOCABLY WAIVES ALL RIGHT TO TRIAL BY JURY
IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS CREDIT AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
10.11 Severability.
If any provision of any of this Credit 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.
10.12 Entirety.
This Credit Agreement represents the entire agreement of the parties hereto
and thereto, and supersedes all prior agreements and understandings, oral or
written, if any, including any commitment letters or correspondence relating to
this Credit Agreement or the transactions contemplated herein.
10.13 Binding Effect; Termination.
(a) This Credit Agreement shall become effective at such time on or
23
<PAGE>
after the Closing Date when it shall have been executed by the
Borrower, the Fund and the Bank, and thereafter this Credit
Agreement shall be binding upon and inure to the benefit of the
Borrower, the Fund and the Bank and their respective successors
and assigns.
(b) The term of this Credit Agreement shall be until all of the
Borrower Obligations then outstanding have been irrevocably
satisfied in full and the Commitment hereunder shall have expired
or been terminated.
10.14 Limitation on Recourse to the Fund.
The Bank agrees that its rights in respect of any claim or liability under
this Credit Agreement asserted by it against the Fund shall be limited to
satisfaction out of, and enforcement against, the assets of the Fund.
Notwithstanding anything to the contrary contained herein or in any other
document, certificate or instrument executed by the Fund pursuant hereto, the
Bank acknowledges and agrees that no officer, employee, partner, servant,
controlling Person, manager, agent, authorized representative or Affiliate of
the Fund (collectively, the "Non-Recourse Persons") shall have any liability to
the Bank (such liability, including such as may arise by operation of law, being
hereby expressly waived) for the payment of any sums now or hereafter owing by
the Fund under this Credit Agreement or for the performance of any of the
obligations of the Fund contained herein or shall otherwise be liable or
responsible with respect thereto. If any Event of Default shall occur or if any
claim of the Bank against the Fund or alleged liability to the Bank of the Fund
shall be asserted under this Credit Agreement, the Bank agrees that it shall not
have the right to proceed directly or indirectly against the Non-Recourse
Persons or against their respective properties and assets for the satisfaction
of any such claim or liability or for any deficiency judgment in respect of any
such claim or liability. Notwithstanding any of the foregoing, it is expressly
understood and agreed, however, that nothing contained in this Section 10.14
shall in any manner or any way constitute or be deemed (i) to excuse any
obligations of any Partner to make additional capital contributions to the Fund
pursuant to the terms of the Partnership Agreement, (ii) to impair the
enforceability of any of the rights arising from this Credit Agreement or (iii)
to restrict the remedies available to the Bank to realize upon the assets of the
Fund. The foregoing acknowledgments, agreements and waivers shall survive the
termination of this Credit Agreement and shall be enforceable by any
Non-Recourse Person.
10.15 Confidentiality.
The Bank agrees to keep confidential any non-public information furnished
or made available to it by the Borrower or the Fund pursuant to this Credit
Agreement; provided that nothing herein shall prevent the Bank from disclosing
such information (a) to any of its Affiliate, (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 the Bank, (f) that is or
becomes available to the public or that is or becomes available to the Bank
other than as a result of a disclosure by the Bank prohibited by this Credit
Agreement, (g) in connection with any litigation to which the Bank 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 and (i) subject to provisions
substantially similar to those contained in this Section 10.15, to any actual or
proposed participant or assignee.
[Signature Pages to Follow]
24
<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:
Name:
Title:
GUARANTOR: Vestar Capital Partners III, L.P.,
a Delaware limited partnership
By: Vestar Associates III, L.P.,
its General Partner
By: Vestar Associates corporation III,
its General Partner
By:
Name:
Title:
BANK: BANK OF AMERICA, N. A.
By:
Name:
Title:
25
<PAGE>
Exhibit A
[Letterhead of Vestar Associates III, L.P.]
[Name and address of partner]
Re: Vestar Capital Partners III, L.P.--Cluett American Corp. $3 Million Line of
Credit
Dear ___________:
Pursuant to Section 3.1(a) of the Agreement of Limited Partnership of
Vestar Capital Partners III, L.P., Vestar Associates III, L.P. (the "General
Partner") is calling for payment of the Capital Contribution to be made in
connection with Vestar/Cluett American Corp. Your pro rata share of the
$__________ Capital Contribution for your $__________ commitment is $__________.
Kindly pay either by certified or cashier's check or by wire transfer of
immediately available funds to the account set forth below (or to such other
account as Bank of America, N.A. shall have notified you in writing) no later
than the tenth (10th) business day following the date of this letter.
Via Check: or Via Bank Wire:
Payable to: Bank of America, N.A. Payable to: Bank of America, N.A.
Send to: Bank of America, N.A.. Bank of America, N.A.
100 North Tryon Street Charlotte, North Carolina
Bank of America Corporate Center ABA Routing No.: 053-000-196
Charlotte, North Carolina 28255 Account No.: 1366212250600
Attn: Leesa Sluder For Credit to: Corporate Services
Telephone: (704) 388-8330 Reference: Vestar Capital
Account No. 1366212250600 Partners III, L.P.
For Credit to: Corporate Services Amount: $______________
Reference: Vestar Capital
Partners III, L.P.
Amount: $______________
If you have any questions, please feel free to call me at (212) 351-1651.
Very truly yours,
Vestar Associates III, L.P.,
General Partner of Vestar Capital Partners III, L.P.
By: Vestar Associates Corporation III,
its General Partner
By: __________________________________
Name: Brian P. Schwartz
Title: Chief Financial Officer
<PAGE>
Exhibit 2.1(b)(i)
FORM OF NOTICE OF BORROWING
[Date]
Bank of America, N.A.
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 November 9, 1999 (as amended, modified, restated or
supplemented from time to time, the "Credit Agreement"), among the Borrower,
Vestar Capital Partners III, L.P. (the "Fund") and Bank of America, N. A. (the
"Bank"). 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 Loan under the Credit Agreement, and in connection therewith sets
forth below the terms on which such Loan 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, (i) the Borrower (with
respect to itself only) and the Fund hereby reaffirm the representations and
warranties set forth in the Credit Agreement as provided in subsection (b) of
such Section and (ii) the Borrower (with respect to itself only) and the Fund
confirm that the matters referenced in subsections (c), (d) and (e) of such
Section are true and correct.
This Notice of Borrowing may be executed in counterparts, each of which
when so executed and delivered shall be an original, but all of which shall
constitute one and the same instrument.
Cluett American Corp.
By:
Name:
Title:
Acknowledged and consented to this __ day of ________, ____:
Vestar Capital Partners III, L.P.,
a Delaware limited partnership
By: Vestar Associates III, L.P.,
its General Partner
By: Vestar Associates corporation III,
its General Partner
By:
Name:
Title:
<PAGE>
Exhibit 3.2
FORM OF NOTICE OF EXTENSION/CONVERSION
[Date]
Bank of America, N.A.
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 November 9, 1999 (as amended, modified, restated or
supplemented from time to time, the "Credit Agreement"), among the Borrower,
Vestar Capital Partners III, L.P. (the "Fund") and Bank of America, N. A. (the
"Bank"). 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 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) 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 ____________________
In accordance with the requirements of Section 5.2, (i) the Borrower (with
respect to itself only) and the Fund hereby reaffirm the representations and
warranties set forth in the Credit Agreement as provided in subsection (b) of
such Section and (ii) the Borrower (with respect to itself only) and the Fund
confirm that the matters referenced in subsections (c), (d) and (e) of such
Section are true and correct.
This Notice of Extension/Conversion may be executed in counterparts, each
of which when so executed and delivered shall be an original, but all of which
shall constitute one and the same instrument.
Cluett American Corp.
By:
Name:
Title:
Acknowledged and consented to this __ day of ________, ____:
Vestar Capital Partners III, L.P.,
a Delaware limited partnership
By: Vestar Associates III, L.P.,
its General Partner
By: Vestar Associates corporation III,
its General Partner
By:
Name:
Title:
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<LEGEND>
(Replace this text with the legend)
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<NAME> Cluett American Corp
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0
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