21
UNITED STATES OF AMERICA
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934 For the fiscal year ended December 31, 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 (I.R.S. 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
Securities registered pursuant to Section 12(b) of the Act:
Title of Each class Name of each exchange on which registered
None None
- ----------------------- ----------------------------------------
Securities registered pursuant to Section 12(g) of the Act:
None
--------------------------------------
(Title of Class)
Indicate by check mark whether 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 the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K (section 229.405 of this chapter) is not contained herein,
and will not be contained, to the best of registrant's knowledge, in definitive
proxy or information statements incorporated by reference in Part III of this
form 10-K or any amendment to this Form 10-K. [ ]
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 December 31,
1999.
<PAGE>
TABLE OF CONTENTS
PART I
Item 1. Business
Item 2. Properties
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
Item 6. Selected Financial Data
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operation
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
Item 8. Financial Statements and Supplementary Data
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosures
PART III
Item 10. Directors and Executive Officers of the Registrant
Item 11. Executive Compensation
Item 12. Security Ownership of Certain Beneficial Owners and Management
Item 13. Certain Relationships and Related Transactions
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
SIGNATURES
EXHIBIT INDEX
<PAGE>
PART I
Item 1. Business
Cluett American Corp. and its subsidiaries (the "Company") is a wholly-owned
subsidiary of Cluett American Investment Corp. ("Holdings"). The Company was
organized in 1982 and primarily designs, manufactures and markets men's socks
and dress shirts in the United States and Canada. The Company filed voluntary
petitions for relief under the provisions of Chapter 11 of the Federal
Bankruptcy Code on July 17, 1995. The Company's recapitalization and refinancing
were consummated on May 18, 1998.
Description of Business
Based on net sales, the Company believes it is one of the leading designers,
manufacturers and marketers of men's socks and dress shirts in the United States
and has a significant market presence in women's and children's socks and a
growing presence in men's and women's sportswear. While the Company serves most
channels of distribution, its primary focus is on department and national chain
store retailers. The Company believes its core product offerings, GOLD TOE socks
and ARROW dress shirts, provide classic styles at price points which represent
exceptional value and appeal to a broad consumer base.
The Company markets its products using widely recognized Company-owned
brands such as GOLD TOE, SILVER TOE and ARROW in the sock segment and ARROW and
its related trade names, including DOVER, KENT, ARROW "1851", COLLARMAN and
KHAKI'S by ARROW in the shirt segment. The Company primarily sells its products
to department and national chain stores to maintain its brand image and to
achieve the relatively higher selling prices and higher margins characterized by
sales to these retail stores. Approximately 72% of the Company's net sales are
derived from these core offerings, the demand for which is believed to be stable
and resistant to changing fashion trends.
Within certain territories, the Company also has licensed the exclusive
rights to manufacture and market certain apparel products (generally socks and
shirts) under such widely recognized brand names as Kenneth Cole, Nautica,
Jockey, Jaclyn Smith and The North Face. This diverse portfolio of Company-owned
and licensed brand names enables the Company to offer different brands with
unique value propositions to different channels of distribution.
The Company identifies its reportable segments based on the segment's
product offerings. For the year ended December 31, 1999, the Company conducted
its business through two principal segments: the Sock Group and the Shirt Group.
The reportable segments are each managed separately as they manufacture and
distribute distinct products with different production processes. The Company
evaluates performance based on net sales, gross profit, operating profit and
EBITDA As Defined. EBITDA As Defined is defined as operating income before
depreciation and amortization, interest expense, taxes and restructuring and
impairment charges. See (5) of Item 6 - Selected Financial Data on pages 13
through 14 for a detailed discussion of EBITDA As Defined. For the year ended
December 31, 1999, the Company realized consolidated net sales and EBITDA As
Defined of $343.5 million and $22.0 million, respectively.
The Sock Group (47.9% of net sales for the year ended December 31, 1999).
The Sock Group is a market leader in department store sales of socks. The Sock
Group's leading brand, GOLD TOE, was established in 1934 and generates
approximately 62% of the Sock Group's net sales with the remaining sales
generated through complementary private labels and through licensed brands such
as Perry Ellis, Nautica, Jockey and Arrow. The Sock Group offers a comprehensive
line of products across multiple price points, ages, genders and styles,
enabling it to provide its customers with a full range of their sock
requirements. For the fiscal year ended December 31, 1999, the Sock Group
realized net sales and EBITDA As Defined of $168.4 million and $36.8 million,
respectively. Net sales include intercompany sales of $2.2 million.
<PAGE>
The Shirt Group (50.2% of net sales for the year ended December 31, 1999).
The Shirt Group designs, manufactures and markets dress shirts and sportswear,
focusing on men's cotton/polyester and all cotton dress shirts which are sold
under the ARROW brand and its related trade names, including DOVER, KENT,
COLLARMAN and ARROW "1851". Sportswear products manufactured by the Company
consist primarily of men's and women's knitted and woven sport shirts, which are
sold Primarily under the KHAKI'S by ARROW and ARROW AMERICA'S SPORT labels.
Because of the name recognition of its ARROW brand, which was established in
1851, the Company is also able to license the ARROW trademark for shirts
internationally and non-shirt products both domestically and internationally.
Effective January 1, 1999, the Dress Shirt business under the Kenneth Cole
trademark, which was launched in the Fall 1998 (previously reported under
Designer Group) was consolidated for financial reporting purposes only into the
Shirt Group. The Company has restated the 1998 Shirt Group's financial results
for the addition of the Kenneth Cole brand to conform with 1999 financial
reporting. For the fiscal year ended December 31, 1999, the Shirt Group realized
net sales (including licensing fee revenue of $6.4 million) and EBITDA As
Defined (including net licensing income of $4.8 million) of $176.5 million and
($11.8) million, respectively. Net sales include intercompany sales of $6.0
million.
For additional information about the Company's product categories and
reportable segments, see "Note 17 Segment Data" of the Notes to the Consolidated
Financial Statements on pages F-8 through F-37 of the Consolidated Financial
Statements.
Marketing, Sales & Distribution
The Sock Group
The Sock Group is a significant supplier to many leading department store
and national chain retailers. In addition, the Sock Group is a supplier to
specialty stores, mass merchants and discount retailers. The Sock Group segment
uses brand names by distribution channel to solidify the perceived value of such
brands and to maintain their integrity. Consistent with industry practice, the
Sock Group does not operate under long-term written supply agreements with its
customers. The Sock Group's top ten customers accounted for 78% of its total net
sales in the fiscal year ended December 31, 1999.
To better serve its customers, the Sock Group installed a vendor managed
inventory system ("VMI") in 1998. The VMI provides the Sock Group with real time
information on the sales of the Sock Group's products by its customers. This
system allows the Sock Group to ship product to a customer immediately upon
learning that such customer does not have adequate inventory. As a result, the
Sock Group no longer needs to wait until a request comes directly from that
customer.
In an effort to maximize the Sock Group's product exposure and increase
sales, the Sock Group works closely with its major customers to assist them in
managing their entire sock category and to promote the Sock Group's products to
the consumer. In addition to frequent personal consultation with the employees
of these customers, the Sock Group periodically meets with its customers' senior
management to jointly develop merchandise assortments and plan promotional
events specifically tailored to that customer. The Sock Group provides
merchandising assistance with store layouts, fixture designs, advertising and
point of sale displays. In addition, the Sock Group provides customers with
preprinted, customized advertising materials designed to increase sales. The
Sock Group does not use national brand advertising because it has found the
above described advertising techniques to be more cost effective.
As a supplement to the Sock Group's primary distribution channels, the Shirt
Group operates five outlet stores for Sock Group products. These stores sell
irregulars, and for financial reporting purposes, the financial results of these
stores are consolidated into the US Retail division, which is part of the Shirt
Group. The stores are located in factory outlet malls and average approximately
1,200 square feet per store. During the fiscal year ended December 31, 1999, no
GOLD TOE outlet stores were closed and no stores were opened.
The Sock Group employs sales people who generally have many years of
industry experience. Most sales people are compensated with a combination of
salary and discretionary bonus, based on established goals and objectives.
<PAGE>
The Shirt Group
The Shirt Group is a significant supplier to many leading department store
and national chain retailers. Additionally, the Shirt Group is a supplier to
specialty stores, mass merchants and discount retailers. Consistent with
industry practice, the Shirt Group does not operate under long-term written
supply agreements with its customers. The Shirt Group's top ten customers
accounted for approximately 51% of total net sales for the fiscal year ended
December 31, 1999.
In order to better serve its customers, the Shirt Group has installed a
vendor managed inventory system with most of its major customers. As a result of
this system, the Shirt Group is one of the few shirt companies that can manage a
customer's inventory. As an example, this system allows the Shirt Group to
monitor inventory levels at a customer and initiate replenishment orders without
having to wait for the customer's direct request. In addition, the Shirt Group
uses a balance of off-shore sewing and domestic manufacturing to provide its
customers with timely dress shirt replenishment. As a result of this
manufacturing strategy, the Shirt Group can deliver its core dress shirt
offerings within 48 hours of receiving an order. This order fulfillment time
compares favorably to those competitors who rely on foreign manufacturing for a
majority of their products where lead times can be as long as five weeks. As a
result, management believes certain competitors must hold much higher inventory
levels to effectively compete with the Shirt Group.
The Shirt Group works closely with its key accounts to assist them in
managing their entire dress shirt and sport shirt product categories. This close
relationship insures increased sales and promotes maximum product exposure of
the Shirt Group's products to the consumer. In addition to frequent personal
consultation with the buying teams of these key accounts, the Shirt Group
frequently meets with its customers' senior management to jointly develop
merchandise assortments and to plan promotional events specifically tailored for
that account. The Shirt Group provides merchandising assistance with in-store
presentations, fixture designs, advertising and point of sale displays.
The Shirt Group employs sales people who generally have several years of
experience in the men's shirt business. Because the turnover of buyers at retail
stores is high, many retailers rely on the experience of their key vendors to
manage their business for them. The Shirt Group has developed a well-respected
expertise in managing such businesses for its key accounts. Most sales and sales
management personnel are compensated with a combination of salary and
discretionary bonus, based on established goals and objectives.
As a supplement to its primary distribution channels, the Shirt Group
operates 23 retail outlet stores in the United States and Canada which sell the
Shirt Group's products directly to consumers. These stores generally sell
irregulars, discontinued and off price goods. The retail stores offer a
collection of the Shirt Group's dress and sport shirts, GOLD TOE socks and other
products such as ties and belts supplied by Arrow licensees. The main purpose of
the retail stores is to help maintain the ARROW brand image by controlling the
sale of excess inventory. During the fiscal year ended December 31, 1999, no new
retail outlet stores were opened and 1 was closed. The average size of each
store is approximately 3,000 square feet.
<PAGE>
Raw Materials
The Sock Group
The Sock Group relies on outside suppliers to meet its raw material needs.
The Sock Group has developed key relationships with each of the largest yarn
suppliers in the industry. Due to its size, management believes the Sock Group
has developed solid supplier relationships and historically has been able to
obtain competitive pricing.
The Sock Group minimizes the effects of seasonal variations in yarn prices
by securing long-term contracts for yarn based on its anticipated needs for each
year. Sock manufacturers in the industry typically negotiate yarn contracts in
the third quarter of the year for the following year. Selling prices with
retailers are then negotiated in January and February based on those yarn
prices. Historically, this process has acted as a natural hedge against rising
yarn prices.
The Shirt Group
The Shirt Group also relies on outside suppliers to meet its raw material
needs, namely fabric. The Shirt Group maintains close relationships with the
largest suppliers of this material. The Shirt Group is not heavily dependent on
any one particular supplier.
Manufacturing
The Sock Group
The Sock Group produces its sock products through domestic manufacturing
facilities, imports and subcontracting. Approximately 85% of all production is
done at Sock Group-owned facilities, 9% is contracted in the United States with
other suppliers and 6% is imported. The Sock Group operates three manufacturing
facilities located in Newton and Burlington, North Carolina and Bally,
Pennsylvania. The Sock Group's socks are primarily made from cotton, nylon or
acrylic yarns. These yarns are knit on a circular knitting machine in a
tube-like manner with additional courses placed in the construction to form a
pocket for the wearer's heel and toe. The sock is seamed to close the toe end of
the tube, dyed to the proper color and packaged for retail store presentation.
The Sock Group's quality control program is designed to assure that its
products meet predetermined quality standards. The Sock Group has devoted
significant resources to support its quality improvement efforts. Each
manufacturing facility is staffed with a quality control team that identifies
and resolves quality issues.
The Shirt Group
The Shirt Group produces its shirt products through owned manufacturing
facilities in North and Central America and subcontracting. Approximately 40% of
all dress shirt production is done at North American, Shirt Group-owned or
leased facilities, and 60% is sourced outside of North America. All sport shirts
are sourced outside of North America. The Shirt Group owns or leases, and
operates four facilities located in Albertville, Alabama; Austell, Georgia;
Kitchener, Ontario and San Pedro Sula, Honduras.
For dress shirts, the manufacturing process begins when rolls of fabric are
received by the Shirt Group's cutting facilities. The fabric is cut using
automated technology. Piece goods are then assembled in bundles and shipped to
sewing plants in the United States, Canada, the Caribbean or Central America.
Shirts that are assembled in the Caribbean or Central America comply with Rule
9802 of the U.S. Tariff Code. This Rule provides that duties are only assessed
on the value that is added to the garment in the foreign country. At the sewing
facilities, collars, cuffs and sleeves are first assembled, then sewn together
with the body of the shirt and, finally, the garments are inspected, pressed and
packaged. Sport shirts are sourced in the Far East and Central America.
The Shirt Group purchases product through individual purchase orders
specifying the price and quantity of the items to be produced. Generally, the
Shirt Group does not have any long-term, formal arrangements with any of the
suppliers which manufacture its products. The Shirt Group believes that it is
the largest customer of many of its manufacturing suppliers and that its
long-standing relationships with its suppliers provide the Shirt Group with a
competitive advantage over its competitors. No single supplier is critical to
the Shirt Group's production needs, and the Shirt Group believes that an ample
number of alternative suppliers exists should the Shirt Group need to secure
additional or replacement production capacity.
Trademarks and License Agreements
The Sock Group
The Sock Group markets its products under its own proprietary trademarks,
trade names and customer-owned private labels, as well as certain licensed
trademarks and trade names. The Sock Group uses trademarks, trade names and
private labels as merchandising tools to assist its customers in coordinating
their product offerings and differentiating their products from those of their
competitors.
The Sock Group owns various trademarks and trade names including GOLD TOE
and SILVER TOE. These trademarks and trade names represent value in product
quality and design. The Sock Group regards its trademarks and trade names as
valuable assets and rigorously protects them against infringement.
The Sock Group holds, with the exception of Kenneth Cole, the exclusive sock
licenses for the following trademarks (the Kenneth Cole sock license, as with
the Kenneth Cole shirt license, is held by the Cluett Designer Group; product
sales under the Kenneth Cole licenses are consolidated into the Sock Group and
the Shirt Group financial results, respectively, for financial reporting
purposes only):
TRADEMARK TERRITORY EXPIRATION
- --------------------------- -------------------------------- ----------
ARROW U.S., parts of Central & South 12/31/2000(1)
America
The North Face U.S., Canada, Europe and Asia 12/31/2004(1)
Kenneth Cole U.S. 12/31/2003(1)(3)
Nautica U.S. and Canada 12/31/2001
Jockey/Jockey For Her U.S. and Mexico 12/31/1999 (2)
Jaclyn Smith U.S. No termination date
(1) Option to renew.
(2) Renewal in negotiation.
(3) United States license held by Cluett Designer Group, Inc.
The Sock Group is only partially dependent on these licensed product lines
(for the year ended December 31, 1999, 20% of the Sock Group's net sales were
derived from licensed products), and the loss of any individual license would
not have a material adverse affect on the Sock Group's overall profitability.
The Sock Group has licensed the GOLD TOE trademark to two licensees in
Mexico and Colombia which provide for minimum royalty payments to be paid to the
Sock Group. The Sock Group intends to more fully exploit the strength of the
GOLD TOE brand by adding new licensees.
<PAGE>
The Shirt Group
The Shirt Group owns various trademarks and trade names, including ARROW.
The ARROW trademark is widely recognized in the industry and represents
excellence and value in product quality, fashion and design. The Shirt Group
regards its trademarks and trade names as valuable assets and rigorously
protects them against infringement.
The Shirt Group licenses the ARROW and related trademarks to 21 licensees
for use in territories within and outside the United States. Through licensing
alliances, the Shirt Group combines its consumer insight and design, marketing
and imaging skills with the specific product or geographic competencies of its
licensing partners to create and build new businesses. The Shirt Group's
licensing partners, who are often leaders in their respective markets, generally
contribute the majority of product development costs, provide the operational
infrastructure required to support the business and own the inventory. The Shirt
Group works in close collaboration with its licensing partners to ensure that
products are developed, marketed and distributed to address the intended market
opportunities and present the Shirt Group's products consistently. While product
licensing partners may employ their own designers, the Shirt Group oversees the
design of all their products. The Shirt Group also works closely with licensing
partners to coordinate marketing and distribution strategies. For the fiscal
year ended December 31, 1999, the Shirt Group had licensing fee revenue of $6.4
million.
Most of the ARROW license agreements provide for a minimum royalty payment
and require the licensee to spend a percentage of net sales on advertising and
marketing of products. The licenses are for three or five year terms which, in
most cases, have provisions for renewal terms if the licensee has not breached
the agreement and has met certain sales goals. The Shirt Group also has the
right to supervise the quality of the licensed products. The Shirt Group also
licenses the ARROW trademark to United States licensees for use on neckwear,
loungewear and men's fashion eyewear.
Cluett Designer Group, Inc. holds the exclusive United States license for
men's dress shirts under the Kenneth Cole trademark. The Kenneth Cole license
for men's dress shirts expires December 31, 2005.
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 Company's business is generally divided among four retail selling
seasons: Spring, Father's Day, Fall, and Holiday. Seasonal factors can cause
some variance in production and sales levels among fiscal quarters in any fiscal
year, but the Company does not regard its overall business as highly seasonal.
Working Capital
Working capital needs are affected primarily by inventory levels,
outstanding receivables and trade payables. The Company had available for its
use, revolving credit facilities with its primary lender aggregating $53.0
million at December 31, 1999. The commitment on these revolving credit
facilities was increased to $62.0 million, on March 29, 2000. These revolving
credit facilities are used by the Company to cover fluctuations in working
capital needs. The Company had $32.5 million outstanding under these revolving
credit facilities at December 31, 1999. Also, the Company had $10.1 million open
trade letters of credit reserved against these facilities at December 31, 1999.
In addition to the above, the Company has availability under a revolving loan
facility of up to $15.0 million Canadian dollars, which amount may be reduced
based upon the value of accounts receivable outstanding and inventory held by
Cluett Canada, or upon the good faith determination by Congress Financial Corp.
("Congress") that the amount should be reduced to reflect, among other things,
loss contingencies or risks, letters of credit and events of default of Cluett
Canada. At December 31, 1999, the Company had $11.3 million Canadian dollars and
$1.5 million Canadian dollars of letters of credit outstanding against the
revolving loan facility. The Company had cash of $7.2 million at December 31,
1999. Inventory levels are affected by anticipated sales. It is the general
practice of the Company to offer payment terms of net 30 days to the majority of
its customers from the date of shipment.
Reliance On Certain Customers
The Sock Group's ten largest customers accounted for approximately 78% of
its net sales in 1999 and the Shirt Group's ten largest customers accounted for
approximately 51% of its net sales for the fiscal year ended December 31, 1999.
The Company has no long-term contracts with these customers, and no customer
accounted for more than 10% of the Company's total net sales. Although the
Company has long-standing relationships with these customers, a substantial
reduction in sales to these customers could have a material adverse effect on
the financial condition and results of operations of the Company.
Employees
As of December 31, 1999, the Company employed approximately 2,772 persons
on a full-time basis and approximately 205 persons on a part-time basis,
including 1,411 persons in the Sock Group and 1,555 persons in the Shirt Group.
Of the total employees, 2,155 were engaged in manufacturing and distribution
operations, and the remainder were employed in executive, marketing and sales,
purchasing activities and in the operation of the Company's retail outlet
stores. Approximately 28% of the Company's 2,977 employees are represented by
collective bargaining agreements with one union, which expire between March 31,
2001 and December 31, 2002. The Company believes that its relations with its
employees are satisfactory.
Competition and Industry Risks
The apparel industry is highly competitive due to its fashion orientation,
its mix of large and small producers, the flow of domestic and imported
merchandise and the wide diversity of retailing methods. The Company competes
with numerous domestic and foreign designers, brands and manufacturers of
apparel and accessories, some of which may be significantly larger and more
diversified and have greater financial and other resources than the Company.
Increased competition from these and future competitors could reduce sales and
prices, adversely affecting the Company's results of operations.
Although the Company believes that most of its products are fashion
staples, some of the Company's products, such as those distributed by Kenneth
Cole, are subject to changing fashion tastes and styles. The Company's success
in these product lines depends on its ability to anticipate and react to
consumer demands in a timely manner. If the Company misjudges these markets, it
may be faced with significant excess inventory which could have a material
adverse effect on the Company's financial condition and results of operations.
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 Sock Group's primary sock competitors are: Sara Lee (`Hanes' and
`Champion' brands); Renfro (`Gitano' and `Fruit-of-the-Loom' brands); Royce
Hosiery Mills, Inc. (`Dockers' and `Levi' brands); Kayser-Roth (`Burlington,'
`Hue' and `No Nonsense' brands); American Essentials (`Calvin Klein' and
`American Essentials' brands) and Hot Sox (`Polo,' `Hot Sox,' `Chaps' and `Ralph
Lauren' brands). The Company believes, however, that it manufactures a more
extensive line of socks for both genders and children and in a broader price
range than any of its competitors.
The Shirt Group's primary dress shirt competitors are: Phillips-Van Heusen
Corporation (`DKNY,' `Van Heusen,' `Geoffrey Beene' and `John Henry' brands);
Salant (`Perry Ellis' brand); Smart Shirt (private label shirt division of
Kellwood Company); Capital Mercury (private label shirts); and Oxford Industries
Inc. (`Tommy Hilfiger' and `Polo' brands and private label shirts). The Shirt
Group's primary sports shirt competitors are: Warnaco (`Chaps' brand);
Phillips-Van Heusen Corporation (`Van Heusen' brand); and Perry Ellis
International, Inc. (formerly Supreme) (`Natural Issue' and `Munsingwear'
brands).
<PAGE>
The Company has historically benefited from import restrictions imposed on
foreign competitors in the apparel industry. The extent of import protection
afforded to domestic manufacturers such as the Company, however, has been, and
is likely to remain, subject to considerable political deliberation. General
Agreements on Trade and Tariffs ("GATT") will eliminate, over a number of years,
restrictions on imports of apparel. In addition, on January 1, 1994, the North
American Free Trade Agreement ("NAFTA") became effective. Each of these
agreements will reduce import constraints previously imposed on some of the
Company's competitors and will increase the likelihood of competition on the
basis of price.
Environmental Matters
The Company is subject to various federal, state and local environmental
laws and regulations concerning, among other things, wastewater discharges,
storm water flows, air emissions, ozone depletion and solid waste disposal. The
Company's plants generate very small quantities of hazardous waste that are
either recycled or disposed of off-site. Most of its plants are required to
possess one or more discharge permits.
Environmental regulation applicable to the Company's operations is becoming
increasingly more stringent. The Company continues to incur capital and other
expenditures each year in order to comply with current and future regulatory
standards. The Company does not expect, however, that the amount of such
expenditures in the future will have a material adverse effect on its financial
condition, results of operations or competitive position. There can be no
assurance, however, that future changes in federal, state or local regulations,
interpretations of existing regulations, or the discovery of currently unknown
problems or conditions will not require substantial additional expenditures.
Similarly, the extent of the Company's liability, if any, for past failures to
comply with laws, regulations and permits applicable to its operations cannot be
determined.
<PAGE>
Item 2. Properties
Facilities
The Company's principal executive offices are located at 48 West 38th
Street, New York, NY 10018. The following table summarizes certain information
concerning certain of the Company's facilities:
APPROX.
LOCATION USE SQUARE FEET OWNED/LEASED
- --------------------------- -------------- ----------- ------------
Shirt Group:
Enterprise, AL........... Manufacturing (1) 50,000 Owned
San Pedro Sula, Honduras. Manufacturing 55,000 Leased
Kitchener, Ontario....... Manufacturing 145,000 Owned
Kitchener, Ontario....... Distribution 125,000 Leased
Albertville, AL.......... Manufacturing 57,000 Leased
Austell, GA.............. Manufacturing/ 593,000 Owned
Distribution
Toronto, Ontario......... Showroom 8,100 Leased
New York NY.............. Showroom/ 30,000 Leased
Administrative
Smyrna, GA............... Administrative 28,486 Leased
Sock Group:
Bally, PA................ Manufacturing 155,000 Owned
Newton, NC............... Manufacturing 81,600 Owned
Burlington, NC........... Manufacturing 251,400 Owned
Newton, NC............... Warehouse 36,000 Leased
Mebane, NC............... Distribution 150,000 Leased
New York, NY............. Showrooms 11,000 Leased
Boyertown, PA............ Warehouse 35,000 Leased
Pottstown, PA............ Dye Facility 20,500 Leased
Burlington, NC........... Office Space 8,300 Leased
(1) Property held for sale as of December 31, 1999.
In addition, the Company operates 28 outlet stores on leased premises. The
Company believes that its existing facilities are adequately insured, well
maintained and in good operating condition and are otherwise adequate for its
current and foreseeable level of operations for the next few years.
<PAGE>
Item 3. Legal Proceedings
From time to time, the Company is involved in various legal proceedings
arising from the ordinary course of its business operations, such as personal
injury claims, employment matters and contractual disputes. The Company believes
that its potential liability with respect to proceedings currently pending is
not material in the aggregate to the Company's consolidated financial position
or results of operations.
In March 2000, the Company and a former employee reached an agreement in
principle to settle all matters relating to an action brought by the employee
for the sum of $1.75 million of which $1.6 million and $1.75 million was
reserved at December 31, 1998 and December 31, 1999, respectively.
In connection with the bankruptcy proceedings, the Company incurred
bankruptcy reorganization costs in 1997 and 1998 of $6.1 million and $2.5
million respectively, for professional fees. In 1999, the Company recognized
bankruptcy credits of $573,000. The Company does not anticipate any future
adjustments with respect to disputed claims or other events related to the
bankruptcy.
Item 4. Submission of Matters to a Vote of Security Holders
During the fourth quarter of 1999, no matter was submitted to a vote of
security holders of the Company by means of the solicitation of proxies or
otherwise.
PART II
Item 5. Market for Registrant's Common Equity and Related Stockholder Matters
All of the Company's outstanding common stock is held by Cluett American
Group ("CAG") and there is no established public trading market for such stock.
The Company has paid no dividends to common stockholders since inception and
does not have any present intention to commence payment of any cash dividends.
The Company's ability to pay such dividends is limited by the terms of its
Senior Credit Facility agreement and the Indenture relating to its 10 1/8%
Senior Subordinated Notes due 2008 and its 12 1/2% Senior Exchangeable Preferred
Stock due 2010. The Company intends to retain earnings to provide funds for
operation and expansion of the Company's businesses and to repay outstanding
indebtedness.
<PAGE>
Item 6. Selected Financial Data
The following table sets forth summary historical financial data of the
Company for each of the five years ended December 31, 1999. The following
summary financial data with respect to the three years ended December 31, 1999,
are derived from the Consolidated Financial Statements included elsewhere in
this document which have been audited by Ernst & Young LLP (1997 and 1998) and
Deloitte & Touche LLP (1999), independent auditors, as indicated in their
reports included elsewhere herein. The following summary financial data should
be read in conjunction with "Management's Discussion and Analysis of Financial
Condition and Results of Operations" and the Financial Statements and notes
thereto included elsewhere in this document.
1995 1996 1997 1998 1999
---- ---- ---- ---- ----
(DOLLARS IN MILLIONS)
STATEMENT OF OPERATIONS DATA:
Net sales $ 486.7 $ 369.0 $ 363.5 $ 373.1 $ 343.5
Cost of goods sold(1) 369.8 273.8 253.7 264.3 249.1
------------------------------------------
Gross profit 116.9 95.2 109.8 108.8 94.4
Selling, general and
administrative expense 137.9 86.3 76.3 82.4 81.8
Restructuring and impairment charges(2) 22.5 11.6 2.5 2.4 2.2
------------------------------------------
Operating income (loss) (43.5) (2.7) 31.0 24.0 10.4
Interest expense, net 22.7 16.9 15.2 20.4 26.5
Other expense (income), net(3) 0.5 3.2 1.2 2.1 0.5
Bankruptcy reorganization costs
(credits)(4) 20.9 6.1 (3.9) 37.5 (0.6)
Income (loss) before provision for
income taxes (87.6) (28.9) 18.5 (36.0) (16.0)
Provision for income taxes 1.5 1.3 1.3 0.8 1.1
------------------------------------------
Net income (loss) $ (89.1) $(30.2) $ 17.2 $ 36.8) $ (17.1)
==========================================
OTHER FINANCIAL DATA:
Capital expenditures $ 6.1 $ 9.8 $ 10.8 $ 11.8 $ 10.7
Depreciation 13.3 10.9 8.1 8.7 9.4
Cash flows provided by (used in):
Operating activities 0.4 16.7 13.0 (30.9) (7.9)
Investing activities 25.3 (8.3) (7.5) (11.7) (11.7)
Financing activities (26.1) 13.3 (1.3) 35.5 23.9
EBITDA As Defined(5) (7.8) 17.4 39.6 40.9 22.0
Net Sales 486.7 369.0 363.5 373.1 343.5
EBITDA As Defined margin -- 4.7% 10.9% 11.0% 6.4%
Ratio of earnings to fixed charges(6) -- -- 2.1x -- --
Working capital(7) $ 116.9 $ 82.1 $ 82.3 $ 81.4 $ 80.2
Total assets 252.9 211.1 220.0 220.8 231.5
Total long-term debt, net of current
portion(8) 3.6 8.6 2.0 235.7 258.9
Debt subject to compromise 161.1 146.0 145.6 -- --
Preferred stock 17.4 18.7 20.0 51.3 58.3
Total stockholder's deficit (44.3) (74.2) (56.8) (149.0) (147.2)
(1) In 1995, the Company recorded a charge of approximately $14.0 million for
the write-down of inventory, which is included in cost of goods sold.
(2) Over the five-year period 1995-1999, restructuring and impairments
charges, which totaled $42.0 million, included $20.1 million for facility
closings and related termination benefits, $10.5 million for store closings,
$2.4 million for Other Segment (as defined herein) and $8.9 million for
software, systems development and implementation and other consulting costs.
<PAGE>
(3) In 1996, the Company began liquidating its investments in its Mexican and
Guatemalan subsidiaries and wrote off $3.1 million previously recorded as a
component of equity for foreign currency translation. In 1998, other expenses
is comprised primarily of failed deal costs and litigation reserves.
(4) Bankruptcy reorganization costs (credits) consist of the following:
YEAR ENDED DECEMBER 31,
------------------------------------------
1995 1996 1997 1998 1999
------- ------- ------- ------- ------
(DOLLARS IN MILLIONS)
Professional fees $ 2.8 $ 6.1 $ 6.1 $ 2.5 $ --
Post petition interest paid in
accordance with the Plan -- -- -- 35.0 --
Adjustment to lease rejection and
other pre-petition liabilities 9.8 -- (10.0) -- (0.6)
Write off of deferred financing costs 3.5 -- -- -- --
Fees related to obtaining the Debtor-
In-Possession Facility 1.3 -- -- -- --
Claims and related litigation 3.5 -- -- -- --
-------- ------- ------- ------- -------
$ 20.9 $ 6.1 $ (3.9) $ 37.5 $ (0.6)
======== ======= ======= ======= =======
(5) For 1999, EBITDA As Defined is defined as operating income before
depreciation and amortization, interest expense, taxes and restructuring and
impairment charges. EBITDA As Defined for years 1995 through 1997 and 1998 is
based on a similiar definition as disclosed in the Company's S-4 and 1998 Form
10-K, respectively,(incorporated herein by reference).EBITDA As Defined should
not be considered in isolation or as a substitute for net income, certain cash
flows from operating activities and other income or cash flow statement
data prepared in accordance with generally accepted accounting principles
or as a measure of profitability or liquidity. EBITDA As Defined is not
necessarily comparable to other similarly titled captions of other
companies due to differences in methods of calculation.
(6) For purposes of determining the ratio of earnings to fixed charges,
earnings are defined as earnings before income taxes, plus fixed charges.
Fixed charges include interest expense on all indebtedness, amortization of
deferred financing charges, and one-third of rental expense, representing that
portion of rental expense deemed to be attributable to interest. Earnings were
insufficient to cover fixed charges by $87.6 million in 1995, $28.9 million in
1996, $14.2 million in 1998, and $11.9 million in 1999.
(7) Working capital is defined as current assets (less cash and cash
equivalents) minus current liabilities (less current maturities of long-term
debt).
(8) On July 17, 1995, $161.1 million of long-term debt was reclassified to
liabilities subject to compromise.
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The Consolidated Statement of Operations present Cluett American Corp.'s
operating performance over the last three years.
YEAR ENDED DECEMBER 31, 1999 COMPARED TO YEAR ENDED DECEMBER 31, 1998
The following table sets forth, for the periods indicated, statement of
operations data in dollars and as a percentage of net sales.
<TABLE>
1999 1998
--------------------- ----------------------
(DOLLARS
IN MILLIONS)
<S> <C> <C> <C> <C>
Net sales $ 343.5 100.0% $ 373.1 100.0%
Cost of sales 249.1 72.5 264.3 70.8
----- ---- ----- ------
Gross profit 94.4 27.5 108.8 29.2
Selling, general and administrative expense 81.8 23.6 82.4 22.1
Restructuring and impairment charges 2.2 0.6 2.4 0.6
--- --- ---- -----
Operating income 10.4 3.3 24.0 6.4
Interest expense 26.5 7.7 20.4 5.5
Other expense/(income) 0.5 0.1 2.1 0.6
Bankruptcy reorganization (0.6) (0.1) 37.5 10.5
Provision for income taxes 1.1 0.3 0.8 0.2
--- ----- --- -----
Net income (loss) $ (17.1) (5.0)% $ (36.8) (9.9)%
========== ====== ========== ========
</TABLE>
Net Sales. Net sales in 1999 decreased $29.6 million to $343.5 million
compared to $373.1 million in 1998. Net sales in the Sock Group increased $3.6
million to $168.4 million in 1999 from $164.8 million in 1998. This increase
resulted primarily from the Company's expanded branded product offerings. Net
sales in the Shirt Group decreased $8.9 million to $176.5 million in 1999 from
$185.4 in 1998. This decrease resulted primarily from an $18.0 million decrease
in Wholesale business due to a decline in staple dress shirt demand, offset by a
$10.2 million increase in Kenneth Cole product offerings. The Shirt Group net
sales also includes license fee income of $6.4 million in 1999 compared to $6.3
million in 1998. Net sales of all other products decreased $24.1 million to $6.8
million in 1999 compared to $30.9 million in 1998. This decrease resulted
primarily from the Company's exit from the YSL, Burberry's and Canadian retail
store businesses.
Gross Profit. Gross profit in 1999 decreased $14.4 million to $94.4 million
compared to $108.8 million in 1998. The Company's gross profit margin decreased
to 27.5% in 1999 compared to 29.2% in 1998. The Sock Group's gross profit
increased $6.2 million to $58.7 million in 1999 compared to $52.5 million in
1998. This increase is due to increased sales and improved efficiencies. Sock
Group gross margin increased to 34.9% in 1999 from 31.9% in 1998, primarily due
to productivity and overhead absorption improvements as well as material cost
reductions. The Shirt Group's gross profit decreased $17.2 million to $35.3
million in 1999 from $52.5 million in 1998, primarily due to decreased sales and
higher costs. Shirt Group gross margin decreased to 20.0% in 1999 compared to
28.3% in 1998, primarily due to margin deterioration at the US Wholesale
division where gross margin fell to 13.8% in 1999 from 25.1% in 1998. This
margin decrease was primarily due to a decline in staple dress shirt demand
(traditionally the Company's most profitable product), dress shirt cost
increases due to quality improvements without offsetting price increases,
general plant inefficiencies, transition costs for the new Khaki's sportswear
line, and new product launch costs. Gross profit of all other products decreased
$3.4 million to $382,000 in 1999 compared to $3.8 million in 1998, primarily due
to the Company's exit from the YSL, Burberry's and Canadian retail store
businesses.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for 1999 decreased $600,000 to $81.8 million in 1999
compared with $82.4 million in 1998. The decreased S,G&A expenses relate
primarily to cost savings from the Company's exit of the YSL, Burberry's and
Canadian retail store businesses.
<PAGE>
Restructuring and Impairment charges. Restructuring and impairment charges
decreased $200,000 to $2.2 million in 1999 compared to $2.4 million in 1998.
During 1999, the Company recorded net restructuring and impairment charges of
$2.2 million to reduce operating expenses and improve overall productivity. The
Company closed its owned manufacturing facility located in Enterprise, Alabama
and consolidated certain administrative functions within the Shirt Group. The
closure and administrative consolidation costs included severance costs of $1.6
million and an impairment charge of $383,000 to record the Enterprise facility
at its net realizable value. Both the facility closure and the administrative
consolidation are expected to yield annual pre-tax cost savings of approximately
$3.2 million beginning in 2000. In 1999, the Company's Sock Group approved
a restructuring plan to cease distribution operations at an owned facility
located in Bally, Pennsylvania and to close a leased dye-house facility in
Pottstown, Pennsylvania in 2000 and recorded termination benefits of $269,000
and other facility closure costs of $97,000. The restructuring is expected to
yield annual pre-tax savings of approximately $1.4 million beginning in 2001.
Operating Income. Operating income decreased $13.6 million to $10.4 million
in 1999 from $24.0 million in 1998, due to the factors discussed above.
Interest Expense. Interest expense increased $6.1 million to $26.5 million
in 1999, versus $20.4 million in 1998, due primarily to higher debt levels
existing in 1999.
Other Expense, net. Other expense, net decreased $1.6 million to $500,000
in 1999 compared to $2.1 million in 1998, due primarily to the Connolly
Litigation. In March 2000, the Company and a former employee reached an
agreement in principle to settle all matters relating to an action brought by
the employee for the sum of $1.75 million of which $1.6 million and $1.75
million was reserved at December 31, 1998 and December 31, 1999, respectively.
Bankruptcy Reorganization Costs. Bankruptcy reorganization costs decreased
$38.1 million to ($0.6) million in 1999 compared to $37.5 million in 1998.
During 1998, the Company incurred bankruptcy reorganization costs resulting from
the payment of post-petition interest, default interest, and fees to creditors
in accordance with the terms of the Plan, with no corresponding costs incurred
in 1999.
Provision for Income Taxes. Provision for income taxes increased $300,000
to $1.1 million in 1999 compared to $800,000 in 1998.
Net Loss. Net loss decreased $19.7 million to $17.1 million in 1999
compared to a net loss of $36.8 million in 1998. Due to the factors discussed
above.
<PAGE>
YEAR ENDED DECEMBER 31, 1998 COMPARED TO YEAR ENDED DECEMBER 31, 1997
The following table sets forth, for the periods indicated, statement of
operations data in dollars and as a percentage of net sales.
<TABLE>
1998 1997
--------------------- ------------------------
(DOLLARS IN
MILLIONS)
<S> <C> <C> <C> <C>
Net sales $ 373.1 100.0% $ 363.5 100.0%
Cost of sales 264.3 70.8 253.7 69.8
----- ----- ------ -----
Gross profit 108.8 29.2 109.8 30.2
Selling, general and administrative expense 82.4 22.1 76.3 21.0
Restructuring and impairment charges 2.4 0.6 2.5 0.7
------ ------ ------- -----
Operating income (loss) 24.0 6.4 31.0 8.5
Interest expense 20.4 5.5 15.2 4.2
Other expense/(income) 2.1 0.6 1.2 0.3
Bankruptcy reorganization 37.5 10.1 (3.9) (1.1)
Provision for income taxes 0.8 0.2 1.3 0.4
------ ----- ------ -----
Net income (loss) $ (36.8) (9.9)% $ 17.2 4.7%
========== ======== ========= =======
</TABLE>
Net Sales. Net sales in 1998 increased $9.6 million to $373.1 million
compared to $363.5 million in 1997. Net sales in the Sock Group increased $13.0
million to $164.8 million in 1998 from $151.8 million in 1997. This increase
resulted primarily from the Company's expanded GOLD TOE, Nautica and Jockey
product offerings. Net sales in the Shirt Group increased $8.6 million to $185.4
million in 1998 from $176.8 million in 1997. This increase resulted primarily
from an $8.6 million increase in the wholesale business. The Shirt Group net
sales also include license fee income of $6.3 million for 1998 compared to $6.7
million for 1997. The decrease in license fee income is a result of erosion in
royalties from ARROW's Asian licensees offset by a 15% improvement in ARROW
royalties in Europe, Africa, South America and the United States. Net sales of
all other products decreased $12.7 million to $30.9 million in 1998 compared to
$43.6 million in 1997, due to the Company's exit from the YSL and Burberry's
businesses.
Gross Profit. Gross profit in 1998 decreased $1.0 million to $108.8 million
compared to $109.8 million in 1997. The Company's gross profit margin decreased
slightly to 29.2% in 1998 compared to 30.2% in 1997. The Sock Group's gross
profit increased $3.4 million to $52.5 million in 1998 compared to $49.1 million
in 1997, primarily due to increased sales. Sock Group gross margin decreased to
31.7% in 1998 from 32.2% in 1997, primarily due to unfavorable mix changes and a
general 3% wage increase. The Shirt Group's gross profit increased $3.3 million
to $52.5 million in 1998 from $49.2 million in 1997, primarily due to increased
sales. Shirt Group gross margin increased to 28.3% in 1998 compared to 27.8% in
1997, primarily due to reduced off-price selling, lower excess inventories and
better execution of deliveries. Gross profit of all other products decreased
$7.7 million to $3.8 million in 1998 compared to $11.5 million in 1997. Gross
profit margin of all other products decreased to 12.4% in 1998 from 26.4% in
1997. These other product decreases are primarily due to the Company's decision
to exit the YSL and Burberry's businesses in 1998.
Selling, General and Administrative Expenses. Selling, general and
administrative expenses for 1998 increased $6.1 million to $82.4 million
compared with $76.3 million in 1997. This increase related to increased
advertising at Arrow, higher distribution expense from volume increases,
excessive overtime and Sock Group distribution center consolidation charges and
increased selling expense associated with new product-line and
distribution-channel initiatives.
Restructuring and Impairment Charges. Restructuring and impairment charges
decreased $100,000 to $2.4 million in 1998 compared to $2.5 million in 1997.
During 1998 and 1997, the Company closed 3 retail outlet stores each year and in
1998 consolidated certain distribution facilities and closed a sock knitting
facility at the Sock Group. The Company recorded restructuring costs of $2.2
million in 1997 and $2.3 million in 1998, respectively, related to the closures
and facility consolidation. Severance costs of $318,000 in 1998 and $338,000 in
1997 were recorded which related to the termination of 100 employees in 1998 and
25 employees in 1997. Additional closure costs primarily related to lease
terminations. In addition, the Company recorded impairment charges of $150,000
in 1998 and 1997 related to the write-off of retail outlet store property and
underperforming assets. The Company incurred other operating expenses during
1997 and 1998 to restructure and operate the Company during bankruptcy. In 1998,
the Company also consolidated certain distribution centers, closed a sock
knitting facility and disposed of certain under- performing assets. The
restructuring is expected to yield annual pre-tax savings of approximately
$847,000 beginning in 1999.
Operating Income (Loss). Operating income decreased $7.0 million to $24.0
million in 1998 from $31.0 million in 1997 due to the factors noted above.
Interest Expense. Interest expense increased $5.2 million in 1998 compared
to $15.2 million in 1997, due primarily to higher debt levels existing after the
bankruptcy reorganization completed on May 18, 1998.
Other Expense, net. Other expense, net increased $900,000 to $2.1 million
in 1998 compared to $1.2 million in 1997, due primarily to the Connally
Litigation previously discussed.
Bankruptcy Reorganization. Bankruptcy reorganization costs increased $41.4
million to $37.5 million in 1998 compared to bankruptcy reorganization credits
of $3.9 million in 1997, due primarily to post-petition interest, default
interest, and fees to creditors in accordance with the terms of the bankruptcy
reorganization plan.
Provision for Income Taxes. Provision for income taxes decreased $500,000
to $800,000 in 1998 compared to $1.3 million in 1997.
Net Income (Loss). Net loss increased $54.0 million to ($36.8) million in
1998 compared to net income of $17.2 million in 1997, due primarily to the
factors noted above.
Liquidity and Capital Resources
The Company broadly defines liquidity as its ability to generate sufficient
cash flow from operating activities to meet its obligations and commitments. In
addition, liquidity includes the ability to obtain appropriate debt and equity
financing and to convert into cash those assets that are no longer required to
meet existing strategic and financial objectives. Therefore, liquidity cannot be
considered separately from capital resources that consist of current or
potentially available funds for use in achieving long range business objectives
and meeting debt service commitments.
Cash Flows
Cash and cash equivalents increased $4.3 million to $7.2 million in 1999
from $2.9 million in 1998 primarily as a result of $7.9 million and $11.7
million in net cash used in operating and investing activities, respectively,
offset by $23.9 million in net cash provided by financing activities. Net cash
used in operating activities resulted primarily from the Company's $17.1 million
net loss offset by $10.9 million in non-cash depreciation and amortization
charges. Net cash used in investing activities resulted primarily from $10.7
million in capital expenditures. Net cash provided by financing activities
resulted primarily from $24.1 million in net borrowings under the Company's
revolving credit facilities.
Liquidity and Capital Resources
The Company's liquidity needs arise primarily from debt service on the
indebtedness incurred in connection with the Company's 1998 bankruptcy
reorganization and the funding of working capital and capital expenditures. As
of December 31, 1999, the Company had outstanding $273.1 million of debt
consisting of $125.0 million in senior subordinated notes (including the Parity
Notes), a Senior Credit Facility consisting of a $46.0 million term A loan, a
$59.1 million term B loan and $32.5 million in revolving credit facilities
borrowings, $7.8 million in Canadian revolving credit facility borrowings and a
$2.5 million CAT acquisition note payable. During 1999 the Company had a net
increase in revolving credit facilities borrowings of $27.9 million, and repaid
$4.0 million in term loans and notes payable.
In 1999, the Company obtained a $3.0 million revolving credit facility
("Additional Revolver") which is guaranteed by Vestar and bears interest, at the
Company's option, at either the Eurodollar rate plus 1.5% or the Prime rate plus
0.5%. This facility expires on December 31, 2000. At December 31, 1999, there
were no amounts outstanding under the Additional Revolver. On February 17, 2000,
the Additional Revolver was increased to $7.5 million.
On March 29, 2000, the Additional Revolver was increased to $12.0 million
and incorporated into the Senior Credit Facility as Tranche C. Borrowings under
Tranche C are due and payable on June 30, 2000 (unless certain events occur, in
which case the maturity can be extended to December 31, 2001) and are guaranteed
by Vestar.
Debt Service
Principal and interest payments under the Company's debt agreements
represent significant liquidity requirements for the Company. Aggregate
principal payments on the Company's indebtedness are $14.2 million, $9.5
million, $12.9 million, $14.6 million, $40.6 million, for each of the years 2000
through 2004, respectively, with $181.3 million thereafter through 2008.
The Company's senior subordinated notes mature in 2008 and require
semi-annual interest payments at 10 1/8%. The term A and B loans mature in 2004
and 2005, respectively, and require quarterly principal payments and quarterly
interest payments at floating rates based upon the interest rate option elected
by the Company. The revolving credit facilities expire at various dates through
2004, and require quarterly interest payments at floating rates based upon the
interest rate option elected by the Company. The Canadian revolving credit
facility expires in 2000, but can continue year to year thereafter, and requires
monthly interest payments at floating rates based upon the interest rate option
elected by the Company. The CAT note payable requires monthly payments through
2002 with interest imputed at 10%. Cash paid for interest in 1999 was $23.3
million. Interest expense for 2000 is expected to be $29.9 million, including
$1.7 million of non-cash amortization of deferred debt issuance costs.
Covenant Restrictions
The Senior Credit Facility 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, and a minimum Sock Group EBITDA test each of which
is tested as of the last day of each fiscal quarter of the Company and its
subsidiaries. The amendments in December 1998, March 1999, September 1999 and
March 2000 revised the original covenants. Additionally, the September 1999
amendment requires Vestar to infuse up to $30 million of new capital if certain
leverage ratios are not met.
At December 31, 1999, the Company was not in compliance with its financial
ratio covenants and received a waiver dated March 29, 2000. The March 2000
waiver and amendment, also revised on-going covenants and the Company expects to
meet these covenants in 2000.
On March 29, 2000, the Senior Credit Facility and the Investment and
Deposit agreement were amended. The March 2000 amendment requires (i) Vestar to
infuse up to $30 million of new capital into the Company and (ii) the Company to
make $20 million in additional principal payments on the Senior Credit
Facilities between June 30, 2000 (or in certain circumstances August 31, 2000)
and December 31, 2000 if certain financial ratios are not met by June 30, 2000.
Capital Expenditures
Capital spending during 1999 was $10.7 million and related primarily to
general improvements to the Company's manufacturing facilities. Total capital
spending for 2000 is expected to be $7.0 million and also relates primarily to
general improvements to the Company's manufacturing facilities.
Financing Sources and Cash Flows
At December 31, 1999 the Company had $7.2 million in cash and additional
availability of $5.7 million under the revolving credit facilities included in
the Senior Credit facility, after consideration of $10.1 million in open trade
letters of credit and $1.7 million of stand-by letters of credit. These credit
facilities were increased by $4.5 million on each of February 17, 2000, and
March 29, 2000. At December 31, 1999 the Company also had additional
availability of $2.2 million Canadian dollars under the Canadian revolving
credit facility, after consideration of $1.5 million Canadian dollars in open
trade letters of credit.
The Company has a substantial amount of indebtedness. The Company relies on
internally generated funds and, to the extent necessary, on borrowings under the
revolving credit facilities to meet its liquidity needs. The Company's ability
to incur additional indebtedness is limited under its existing borrowing
arrangements.
Based upon the current level of operations, management believes that cash
flow from operations and available cash, together with available borrowings
under the revolving credit facilities, are adequate to meet the Company's future
liquidity needs until at least the end of 2000. The Company may, however, need
to refinance all or a portion of the principal of the Senior Credit Facility on
or prior to maturity and there can be no assurance that the Company will be able
to effect any such refinancing. In addition, there can be no assurances that the
Company's business will generate sufficient cash flow from operations, that
anticipated revenue growth and operating improvements will be realized or that
future borrowings will be available under the Senior Credit Facility in an
amount sufficient to (i) enable the Company to service its indebtedness or (ii)
fund its other liquidity needs.
Income Taxes
See Note 10 "Income Taxes" of the Notes to the Consolidated Financial
Statements included on pages F-8 through F-37 of the Consolidated Financial
Statements.
New Accounting Pronouncements
See Note 3 "New Accounting Pronouncements" of the Notes to the Consolidated
Financial Statements included on pages F-8 through F-37 of the Consolidated
Financial Statements.
Year 2000 Risk
The Year 2000 ("Y2K") issue is the result of computer programs being
written using two digits rather than four to define the applicable year. The
Company's computer equipment, software and devices with embedded technology that
are time-sensitive may recognize a date using "00" as the year 1900 rather than
the Year 2000. This could result in system failures or miscalculations causing
disruptions of operations, including, among other things, a temporary inability
to process transactions, send invoices, or engage in similar normal business
activities. In addition, certain computer programs that are date sensitive may
not process the Y2K as a leap year. As of March 6, 2000, the Company has not
experienced any significant business interruption related to the Y2K issue or
leap year issues, nor is it aware of any business interruptions at any of its
primary suppliers or customers. There can be no assurance, however, that the
Company will not be affected in the future by any existing non-disclosed Y2K or
leap year non-compliance of material third parties. As a result, the Company
will continue to monitor its Y2K and leap year compliance and the related
compliance of its suppliers and customers. Total Y2K costs were not material to
the Company's results of operations and financial condition.
<PAGE>
Cautionary Statement Regarding Forward-Looking Statements
This Annual Report on Form 10-K contains certain statements that 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, 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 or
achievement to differ materially from those expressed in, or implied by these
statements. These risks, uncertainties and other factors include but are not
limited to, the following: (i) the financial strength of the retail industry and
the level of consumer spending for apparel, (ii) the Company's ability to
develop, market and sell its products, (iii) increased competition from other
manufacturers of men's dress shirts and socks, (iv) general economic conditions,
(v) hiring and retaining effective team members, (vi) sourcing merchandise from
domestic and international vendors, and (vii) any unanticipated problems or
delays in the completion by the Company to become Year 2000 ready or the failure
of the Company's vendors or customers to do so. 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 7A. Quantitative and Qualitative disclosures about Market Risk
Market Risk Factors
The Company has market risk exposure from changes 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 currently
engage in any 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.
Floating Interest Rate Risk
In order to assess the impact of changes in interest rate on future
earnings and cash flow, the Company assumed a 1% (100 basis points) unfavorable
shift in the underlying interest rate would result in additional interest
expense of $ 1.4 million.
Fixed Interest Rate Risk
The fair value of long-term fixed interest rate debt and fixed interest
rate preferred stock is also subject to interest rate risk. Generally, the fair
value of fixed interest rate debt and preferred stock will increase as interest
rates fall and decrease as interest rates rise. A hypothetical 100 basis point
increase in the prevailing interest rates at December 31, 1999 would result in a
decrease in fair value of total long-term debt and preferred stock, by
approximately $ 4.7 million.
Currency
The Company's Canadian operations represented approximately 4% of
consolidated fixed assets and 9% of consolidated net sales for 1999. Because of
the Company's international operations, the Company is exposed to translation
risk when the local currency statements of income are translated into U.S.
dollars. As currency exchange rates fluctuate, translation of the statements of
income of international businesses into U.S. dollars will affect the
comparability of revenues and expenses between years. None of the components of
the Company's consolidated statements of income was materially affected by
exchange rate fluctuations in 1997, 1998, or 1999.
The Company's revenues are denominated in each international subsidiary's local
currency; thus, the Company is not exposed to currency transaction risk on its
revenues. The Company is exposed to currency transaction risk on certain
purchases of raw materials and equipment by its international subsidiaries. At
December 31, 1999, a hypothetical 10% adverse movement in foreign exchange rates
applied to the underlying exposures described above would not have a material
effect on the Company's results of operations.
<PAGE>
Item 8. Consolidated Financial Statements and Supplementary Data
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
PAGE
- ---------
Report of Independent Auditors' as of and for the year ended December 31,
1999 F-2
Report of Independent Auditors' as of December 31, 1998 and for the
years ended December 31, 1997 and 1998 F-3
Consolidated Financial Statements:
Consolidated Balance Sheets as of December 31, 1998 and 1999 F-4
Consolidated Statements of Operations for the years ended
December 31, 1997, 1998 and 1999 F-5
Consolidated Statements of Stockholder's Deficit for the years ended
December 31, 1997, 1998 and 1999 F-6
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, 1998 and 1999 F-7
Notes to Consolidated Financial Statements F-8
Financial Statement Schedule:
Schedule II - Valuation and Qualifying Accounts for each of the
years in the three-year period ended December 31, 1999 II-6
All other schedules are omitted because they are not applicable or the required
information is provided in the Consolidated Financial Statements or related
notes thereto.
F-1
<PAGE>
REPORT OF DELOITTE & TOUCHE LLP, INDEPENDENT AUDITORS'
Board of Directors
Cluett American Corp. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Cluett American
Corp. and subsidiaries, a wholly-owned subsidiary of Cluett American Investment
Corp., as of December 31, 1999, and the related consolidated statements of
operations, stockholder's deficit and cash flows for the year then ended. Our
audit also included the financial statement schedule listed in the Index at Item
14(a) for the year ended December 31, 1999. These financial statements and
financial statement schedule are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, such consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Cluett American
Corp. and subsidiaries at December 31, 1999 and the results of their operations
and their cash flows for the year then ended in conformity with generally
accepted accounting principles. Also, in our opinion, such financial statement
schedule, when considered in relation to the basic consolidated financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
/s/ Deloitte & Touche LLP
Atlanta, Georgia
March 29, 2000
F-2
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS'
Board of Directors
Cluett American Corp. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Cluett American
Corp. and subsidiaries, a wholly owned subsidiary of Cluett American Investment
Corp. ("Holdings"), as of December 31, 1998, and the related consolidated
statements of operations, stockholder's deficit and cash flows for the two years
in the period ended December 31, 1998. Our audits also included the financial
statement schedule listed in the Index at Item 14(a) for the two years in the
period ended December 31, 1998. These financial statements and financial
statement schedule are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements and
financial statement schedule based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Cluett American
Corp. at December 31, 1998 and the consolidated results of their operations and
their cash flows for the two years in the period ended December 31, 1998, in
conformity with accounting principles generally accepted in the United States.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, present fairly
in all material respects the information set forth therein.
/s/ Ernst & Young LLP
Atlanta, Georgia
March 19, 1999
F-3
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
DECEMBER 31,
1998 1999
ASSETS
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 2,868 $ 7,239
Accounts receivable, net 46,786 45,519
Inventories, net 74,599 78,105
Prepaid expenses and other current assets 3,972 3,129
------------------ ----------------
Total current assets 128,225 133,992
Property, plant and equipment, net 48,124 47,794
Deferred financing costs 11,198 10,842
Pension assets 31,383 32,187
Goodwill, net -- 4,740
Other non-current assets 1,845 1,951
------------------ ----------------
Total assets $ 220,775 $ 231,506
================== ================
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ 40,107 $ 40,696
Accrued interest payable 2,332 3,861
Short-term debt and current portion of long-term debt 10,248 14,209
Income taxes payable 1,475 1,970
------------------ ----------------
Total current liabilities 54,162 60,736
Due to parent 27,974 --
Long-term debt and capital lease obligations 235,681 258,883
Other non-current liabilities 111 147
Redeemable preferred stock dividends payable 605 637
Commitments and Contingencies:
Senior Exchangeable Preferred Stock Due 2010, cumulative, $.01 par value:
authorized
4,950,000 shares, issued and outstanding 530,730 shares in 1998 and 599,145
shares in 1999 (liquidation preference of $53,073 in 1998 and $59,915 in 1999) 51,288 58,329
Stockholder's deficit:
Common stock, $1 par value: authorized, issued and outstanding 1,000 shares 1 1
Additional paid-in capital 116,919 135,100
Accumulated deficit (264,933) (282,046)
Accumulated other comprehensive loss (1,033) (281)
------------------ ----------------
Total stockholder's deficit (149,046) (147,226)
------------------ ----------------
Total liabilities and stockholder's deficit $ 220,775 $ 231,506
================== ================
</TABLE>
See accompanying notes.
F-4
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
YEAR ENDED DECEMBER 31,
1997 1998 1999
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net sales $ 363,528 $ 373,123 $ 343,520
Cost of goods sold 253,677 264,325 249,126
---------------- ------------- ----------------
Gross profit 109,851 108,798 94,394
Selling, general and administrative expenses 76,341 82,442 81,790
Restructuring and impairment charges 2,469 2,366 2,228
---------------- -------------- ---------------
Operating income 31,041 23,990 10,376
Interest expense, net 15,233 20,355 26,462
Other expense, net 1,169 2,131 457
---------------- -------------- ---------------
Income (loss) before bankruptcy reorganization costs (credits) and income taxes 14,639 1,504 (16,543)
Bankruptcy reorganization costs (credits) (3,883) 37,528 (573)
---------------- -------------- ---------------
Income (loss) before provision for income taxes 18,522 (36,024) (15,970)
Provision for income taxes 1,326 810 1,143
---------------- -------------- ---------------
Net income (loss) $ 17,196 $(36,834) $ (17,113)
================ ============== ===============
</TABLE>
See accompanying notes.
F-5
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDER'S DEFICIT
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL OTHER
COMMON STOCK PAID-IN ACCUMULATED COMPREHENSIVE
SHARES AMOUNT CAPITAL DEFICIT INCOME TOTAL
<S> <C> <C> <C> <C> <C> <C>
Balance at December 31, 1996 2,000 2 174,927 (245,295) (3,850) (74,216)
Net income -- -- -- 17,196 -- 17,196
Foreign currency translation
adjustment -- -- -- -- 1,547 1,547
----------
Comprehensive income 18,743
----------
Accretion of dividend on
redeemable preferred stock -- -- (1,335) -- -- (1,335)
------ ------ ---------- ---------- ---------- ----------
Balance at December 31, 1997 2,000 2 173,592 (228,099) (2,303) (56,808)
Net loss -- -- -- (36,834) -- (36,834)
Foreign currency translation
adjustment -- -- -- -- 1,270 1,270
---------- ----------
Comprehensive loss (35,564)
----------
Accretion of dividend on
redeemable preferred stock -- -- (2,078) -- -- (2,078)
Distribution to CAIC -- -- (87,522) -- -- (87,522)
Contribution of intercompany
debt due to CAIC -- -- 27,609 -- -- 27,609
Distribution to CAIC for
debt purchase -- -- (13,000) -- -- (13,000)
Contribution of preferred
stock from CAIC -- -- 22,086 -- -- 22,086
Contribution of CDC to CAC
from CAIC (1,000) (1) -- -- -- (1)
Accretion of dividend on
Senior exchangeable
preferred stock -- -- (3,678) -- -- (3,678)
Accretion of fees on Senior
exchangeable preferred
stock -- -- (90) -- -- (90)
------ ------ ---------- ---------- ---------- ----------
Balance at December 31, 1998 1,000 1 116,919 (264,933) (1,033) (149,046)
Net loss -- -- -- (17,113) -- (17,113)
Foreign currency translation
adjustment -- -- -- -- 752 752
---------- ----------
Comprehensive loss (16,361)
Capital contribution from Parent -- -- 25,255 -- -- 25,255
Accretion of dividend on
redeemable preferred stock -- -- (6,920) -- -- (6,920)
Accretion of fees on senior
exchangeable preferred stock -- -- (154) -- -- (154)
------ ------ ---------- ---------- ---------- ----------
Balance at December 31, 1999 1,000 $ 1 $ 135,100 $ (282,046) $ (281) $ (147,226)
====== ====== ========== ========== ========== ==========
</TABLE>
See accompanying notes.
F-6
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
-------- --------- ---------
1997 1998 1999
(DOLLARS IN THOUSANDS)
-------- --------- ---------
OPERATING ACTIVITIES
Net income (loss) $ 17,196 $ (36,834) $ (17,113)
Adjustments to reconcile net income
(loss) to net cash and cash equivalents
provided by (used in) operating activities:
Impairment of property, plant and equipment -- 1,094 360
Write-off of deferred acquisition cost -- 489 --
Depreciation 8,075 8,660 9,378
Deferred finance amortization -- 952 1,592
Goodwill and license fee amortization 30 40 228
Gain on sale of property, plant and equip (348) -- (57)
Adjustments in 1997 and payments in 1998
of liabilities subject to compromise-
reorganization (10,000) (22,442) --
Accrual of professional fees, potential
claims and related litigation matters-
reorgainzation 6,117 -- --
Changes in operating assets and liabilities,
excluding the effect of acquisition:
Accounts receivable 3,917 1,070 1,631
Inventories (6,980) 2,629 (2,718)
Prepaid expenses and other current assets 178 197 898
Pension and other non-current assets (1,808) (13,772) (1,683)
Accounts payable and accrued expenses (4,430) (3,871) 2,016
Income taxes payable 521 (678) 495
Other liabilities (448) 435 (234)
Due to parent -- 27,974 --
Effect of changes in foreign currency 930 3,190 (2,683)
--- ----- ------
Net cash and cash equivalents provided by
(used in) operating activities 12,950 (30,867) (7,890)
------ ------- ------
INVESTING ACTIVITIES
Purchase of property, plant and equipment (10,778) (11,841) (10,670)
Proceeds on disposal of property, plant and
equipment 3,327 152 1,275
Purchase of CAT, net of cash acquired -- -- (2,289)
------ ------ ------
Net cash and cash equivalents used in
investing activities (7,451) (11,689) (11,684)
------ ------- -------
FINANCING ACTIVITIES
Issuance of preferred stock -- 48,125 --
Distribution to Parent -- (87,522) --
Net borrowings under line-of-credit agreement -- 3,126 27,928
Proceeds from Debtor-in-Possession credit
facility 16,398 -- --
Principal payments on Debtor-in-Possession (16,795) -- --
Proceeds from issuance of long term debt 2,246 222,000 --
Principal payments on long term debt (3,113) (1,300) (3,600)
Principle Payment on long-term note CAT -- -- (374)
Payments on pre-petition liabilities -- (146,490) --
Principal payments on capital leases -- (2,406) (15)
----- ------ ---
Net cash and cash equivalents (used in)
provided by financing activities (1,264) 35,533 23,939
Effect of exchange rate changes on cash -- (128) 6
------- ------- -------
Net change in cash and cash equivalents 4,235 (7,151) 4,371
Cash and cash equivalents at beginning of
year 5,784 10,019 2,868
--------- --------- ---------
Cash and cash equivalents at end of year $ 10,019 $ 2,868 $ 7,239
========= ========= =========
SUPPLEMENTAL DISCLOSURES
Cash paid during the year:
Interest $ 7,649 $ 17,073 $ 23,341
Income taxes $ 1,163 $ 1,236 $ 648
SUMMARY OF CAT ACQUISITION:
Fair value of assets acquired $ 5,288
Long term notes issued (2,881)
Liabilities assumed (118)
----
Net cash paid for acquisitions $ 2,289
=========
See accompanying notes.
F-7
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Background
Cluett American Corp. and its subsidiaries (the "Company") are a wholly
owned subsidiary of Cluett American Investment Corp ("Holdings"). The Company
was organized in 1982 and primarily designs, manufactures and markets socks and
men's dress shirts in the United States and Canada. The Company also has a
growing presence in men's and women's sportswear. The Company also manufactures
dress shirts in Honduras.
The Company filed voluntary petitions for relief under the provisions of
Chapter 11 of the Federal Bankruptcy Code on July 17, 1995. The Company emerged
from bankruptcy on May 18, 1998. As part of the approved reorganization plan,
Vestar Capital Partners III, L.P. ("Vestar") and co-investors made a $61.3
million equity investment and Alvarez & Marsal, Inc. ("A&M") and certain members
of management made a $6.7 million equity investment in Holdings.
The Company and Holdings used the equity investments in conjunction with
borrowings under a new $160.0 million senior credit facility, $112.0 million in
proceeds from the Company's issuance of Senior Subordinated Notes Due 2008 and
$48.1 million in net proceeds from the issuance of Senior Exchangeable Preferred
Stock Due 2010, to complete its recapitalization (the "Recapitalization") under
which all of Holdings' and the Company's existing pre-petition obligations and
all borrowings under the Company's debtor-in-possession facility, were paid in
full. In addition, the Company issued $13.0 million in Senior Subordinated Notes
Due 2008 (the "Parity Notes") to Holdings shareholders that were shareholders
prior to the bankruptcy as part of the Recapitalization. These notes are
identical in, and rank in parity with, the $112.0 million Senior Subordinated
Notes Due 2008. During 1999, approximately $2.0 million of Parity Notes were
converted to Senior Subordinated Notes.
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.
CAT had been a captive contractor providing sewing services to the Company. The
total purchase price was $5.2 million and was comprised of $1.6 million in cash,
the issuance of $2.9 million in long-term notes and other related acquisition
costs of $0.7 million. The cash payment was financed primarily through the
Company's revolving credit facility. 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 December
31, 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 $4.9 million was
allocated to goodwill and is being amortized on a straight-line basis over 10
years.
F-8
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. Significant Accounting Policies
Principles of Consolidation
The consolidated financial statements include all subsidiary companies of
the Company. All significant intercompany balances and transactions have been
eliminated in consolidation.
Cash Equivalents
The Company considers all highly liquid investments with a maturity of three
months or less when purchased to be cash equivalents.
Accounts Receivable
The Company's principal customers are retail stores and chains primarily
located in the United States and Canada. Royalty and licensing income is earned
from a worldwide base of licensees engaged in the sale and manufacture of
textiles and apparel. The Company generally does not require collateral on
accounts receivable.
Inventory Valuation
Inventories are stated at the lower of cost (first-in, first-out) or market.
Inventories are stated net of an allowance for obsolete and slow moving
inventory.
Property, Plant and Equipment
Property, plant and equipment are stated at cost and are depreciated
(including depreciation of assets recorded under capital leases) principally by
the straight-line method over the estimated useful lives of the assets as
follows:
Buildings 32-39 years
Site improvements 15-39 years
Machinery, equipment and other 3-10 years
Leasehold improvements The lesser of the lease term
or estimated useful life
Impairment
The Company reviews long-lived assets and certain intangibles for
impairment when events or changes in circumstances indicate that the carrying
amount of these assets may not be recoverable. Any impairment losses are
reported in the period in which the recognition criteria are first applied based
on the fair value of the assets. Assets held for sale are carried at the lower
of carrying amount or fair value, less estimated costs to sell such assets. The
Company discontinues depreciating or amortizing assets held for sale at the time
the decision to sell the assets is made.
Goodwill
Goodwill represents the excess of costs of acquired businesses over the
fair value of the net identifiable assets acquired and is amortized on a
straight-line basis over 10 years, the estimated future economic benefit.
F-9
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. Significant Accounting Policies (Continued)
Deferred Financing Fees
In connection with the Recapitalization transactions discussed in Note 1,
the Company deferred financing fees of $13.4 million. These costs are being
amortized to interest expense over the lives of the related debt agreements.
Income Taxes
Deferred income taxes are provided at the enacted marginal rates on the
differences between the financial statement and income tax basis of assets and
liabilities. Valuation allowances are established when necessary to reduce
deferred tax assets to the amounts expected to be realized. The Company files a
consolidated federal income tax return with Holdings and separate, consolidated
or unitary state and local income tax returns in accordance with the filing
requirements and options applicable in the jurisdiction in which income tax
returns are required. Income tax expense for the Company is presented in the
accompanying financial statements calculated on a separate return basis.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities, and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could be different from those estimates.
Revenue Recognition
The Company recognizes revenue when the apparel is shipped. At this point,
persuasive evidence of a sale arrangement exists, delivery has occurred, the
Company's price to the buyer is fixed and collectibility of the associated
receivable is reasonably assured. Customer returns and allowances have been
provided based on estimated returns. Fees from the licensing of trademarks and
processes relating to the textile and apparel industry are recognized ratably
over the period of time for fixed license fees and based on estimated sales for
variable royalty fees. The Company recognized licensing fees of $6.9 million,
$6.3 million and $6.4 million in 1997, 1998 and 1999, respectively, which are
included in net sales in the accompanying statements of operations.
Interest Expense, net
The Company includes interest income from overnight investment in net
interest expense. The Company recorded interest income of $0, $178,000, $246,000
in 1997, 1998 and 1999 respectively.
F-10
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3. Significant Accounting Policies (Continued)
New Accounting Pronouncements
In June 1998, the Financial Accounting Standard Board issued Statement No.
133, "Accounting For Derivative Instruments And Hedging Activities" ("SFAS No.
133"). This statement (as amended by SFAS No. 137) is effective January 2001.
This statement establishes accounting and reporting standards for derivative
instruments including certain derivative instruments embedded in other
contracts, and for hedging activities. It requires that an entity recognize all
derivatives as either assets or liabilities in the balance sheet measured at
fair value. The Company will adopt SFAS No. 133 on January 1, 2001. Management
has not determined how SFAS No. 133 will impact the Company's results of
operations or financial position.
Foreign Currency Translation
The Company translates the financial statements of its foreign subsidiaries
from the local (functional) currencies to U.S. dollars in accordance with SFAS
No. 52 "Foreign Currency Translation". Substantially all assets and liabilities
of the Company's foreign subsidiaries are translated at year-end exchange rates,
while revenue, expenses and cash flow are translated at average exchange rates
prevailing during the year. Translation adjustments arising from certain foreign
operations of the Company are reflected as a separate component of stockholder's
deficit. Selling, general and administrative expense includes an aggregate
exchange loss on foreign currency transactions of approximately $816,000,
$41,000 and $16,000 in 1997, 1998 and 1999, respectively.
Advertising Costs
The Company expenses advertising costs as incurred. The Company charged a
total of $9.5 million, $9.3 million and $11.6 million to advertising expense in
1997, 1998 and 1999, respectively.
Concentrations of Credit Risk and Financial Instruments
Financial instruments which subject the Company to credit risk are primarily
trade accounts receivable. Concentration of credit risk with respect to accounts
receivable is limited due to the large number and diversity of customers
comprising the Company's customer base. No single customer accounted for more
than 10% of the Company's sales in 1997, 1998, and 1999. Additionally, there was
no single customer who accounted for more than 10% of consolidated accounts
receivable balances at December 31, 1998 or 1999. Management believes the risk
associated with trade accounts receivable is adequately provided for in the
allowance for doubtful accounts.
Reclassifications
Certain amounts in the 1997 and 1998 financial statements and footnotes
have been reclassified to conform to the 1999 presentation.
F-11
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
4. Redeemable Preferred Stock
In connection with the Recapitalization, the Company issued 500,000 shares
of 12 1/2% Senior Exchangeable Preferred Stock ("Preferred Stock") due 2010 and
received net proceeds of $48.1 million. Each preferred share has a liquidation
preference of $100. The holders of the Preferred Stock will be entitled to
receive, as and if dividends are declared by the Board of Directors out of funds
the Company has legally available, cumulative preferential dividends from the
date of issuance of the Preferred Stock accruing at the rate per share of 12 1/2
% per annum. Dividends are payable semiannually in arrears on May 15 and
November 15 of each year, commencing on November 15, 1998, to the holders of
record as of the preceding May 1 and November 1. On or prior to May 15, 2003,
the Company may, at its option, pay dividends in cash or in additionally fully
paid and non-assessable shares of Preferred Stock having an aggregate
liquidation preference equal to the amount of such dividends. The carrying value
of Senior Exchangeable Preferred Stock at December 31, 1998 and 1999, reflects
accretion of $90,000 and $244,000, respectively, in transaction fees. Through
December 31, 1999, the Company declared and paid stock dividends aggregating
99,145 shares on its Preferred Stock. As of December 31, 1999, the Company had
issued and outstanding 599,145 cumulative shares.
5. Restructuring and Impairment Charges
In 1995, the Company developed and implemented a program designed to reduce
operating expenses and improve overall productivity. During 1997, 1998 and 1999,
the Company incurred expenses of $2.5 million, $2.4 million and $2.2 million,
respectively, in implementing this plan.
During 1999, the Company closed its owned manufacturing facility located in
Enterprise, Alabama and consolidated certain administrative functions within its
Shirt Group. The closure and administrative consolidation costs included
severance costs of $1.6 million for 308 employees at Enterprise and in
administrative functions. In addition, special termination benefits of $1.7
million related to 280 employees of the Enterprise facility which were provided
through the Company's employee benefit plan. (See Note 11). All terminations
were completed by December 31, 1999. The Company also recorded an impairment
charge of $383,000 to record the Enterprise facility at its net realizable
value. This facility is held for sale at December 31, 1999 and the facility's
new basis of $257,000 is included in other assets on the Company's consolidated
balance sheet.
Also in 1999, the Company's Sock Group approved a restructuring plan to
cease distribution operations at an owned facility located in Bally,
Pennsylvania and to close a lease dye-house facility in Pottstown, Pennsylvania
in 2000. In 1999, the Company recorded termination benefits of $269,000 for 94
employees at the Bally, Pennsylvania facility and other facility closure costs
of $97,000. The terminations are expected to occur in the third quarter of 2000.
During 1998 and 1997, the Company closed 3 retail outlet stores each year
and in 1998 consolidated certain distribution facilities and closed a sock
knitting facility at the Sock Group. The Company recorded restructuring costs of
$2.2 million in 1998 and $2.3 million in 1997, related to the closures and
facility consolidation. Severance costs of $318,000 in 1998 and $338,000 in 1997
were recorded which related to the termination of 100 employees in 1998 and 25
employees in 1997. In 1998, additional closure costs primarily related to lease
termination costs. In addition, the Company recorded impairment charges of
$150,000 in 1998 and 1997 related to the write-off of outlet store property
and underperforming assets. The Company also incurred other operating expenses
during 1997 and 1998 to restructure and operate the Company during bankruptcy.
F-12
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5. Restructuring and Impairment Charges (Continued)
The provision and related ending accruals for these costs are summarized as
follows (in thousands):
<TABLE>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Restructuring:
Severance costs $ 338 $ 318 $ 1,890
Facility closure costs 1,400 1,816 84
Other 581 82 (129)
----------------- ----------------- -----------------
2,319 2,216 1,845
Impairment-property, plant and equipment 150 150 383
----------------- ----------------- -----------------
Total restructuring and impairment costs $ 2,469 $ 2,366 $ 2,228
================= ================= =================
</TABLE>
<TABLE>
<S> <C> <C> <C> <C>
Severance Costs Facility Closure Other Total
Balance, December 31, 1996 $ 0 $ 5,445 $ 144 $ 5,589
Restructuring expense 338 1,400 581 2,319
Payments (313) (6,118) (298) (6,729)
----------------- ----------------- ----------------- -----------------
Balance, December 31, 1997 25 727 427 1,179
Restructuring expense 318 1,816 82 2,216
Payments (68) (1,921) (446) (2,435)
----------------- ----------------- ----------------- -----------------
Balance, December 31, 1998 275 622 63 960
Restructuring expense,
net of $534 reversed 1,890 (129) 84 1,845
from prior accruals
Payments (1889) (348) (147) (2,384)
----------------- ----------------- ----------------- -----------------
Balance, December 31, 1999 $ 276 $ 145 $ -- $ 421
================= ================= ================= =================
</TABLE>
6. Accounts Receivable
Allowances provided for accounts receivable are as follows:
DECEMBER 31,
1998 1999
(DOLLARS IN THOUSANDS)
Doubtful accounts $ 1,610 $ 1,620
Customer allowances 6,852 8,554
------- -------
$ 8,462 $10,174
======= =======
F-13
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7. Inventories
Inventories consist of the following:
December 31,
1998 1999
(DOLLARS IN THOUSANDS)
Finished goods $ 65,283 $ 60,854
Work in process 4,189 8,260
Raw material and supplies 10,276 11,613
-------- --------
79,748 80,727
Less: Allowance for obsolete and slow
moving inventory (5,149) (2,622)
-------- --------
$ 74,599 $ 78,105
======== ========
8. Property, Plant and Equipment
Property, plant and equipment consist of the following:
December 31,
1998 1999
(DOLLARS IN THOUSANDS)
Land $ 2,091 $ 2,049
Buildings and site improvements 24,267 32,224
Machinery, equipment and other 81,200 82,403
Vehicles -- 37
Construction in progress 4,875 485
--------- ---------
112,433 117,198
Less accumulated depreciation (64,309) (69,404)
--------- ---------
$ 48,124 $ 47,794
========= =========
Included in the amounts above is property held under capital leases
(principally a distribution facility) of $0.8 million and $0.4 million, at
December 31, 1998 and 1999, respectively.
F-14
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. Long-Term Obligations and Financing Arrangements
The classification of the Company's long-term obligations and financing
arrangements, including accrued interest, is as follows:
<TABLE>
DECEMBER 31,
1998 1999
------------------ ------------------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Short-term debt and current portion of long-term debt:
Current portion of capital lease obligation $ 12 $ 16
Canadian Facility 3,636 7,788
CAT short-term portion -- 805
Senior Credit Facility:
Revolving Credit Facility 3,000 --
Term Loan A 3,000 5,000
Term Loan B 600 600
------------------ ------------------
Total short-term 10,248 14,209
Long-term debt:
Capital lease obligations 231 231
CAT long-term obligation -- 1,702
Senior Credit Facility:
Revolving Credit Facility 5,350 32,450
Term Loan A 46,000 41,000
Term Loan B 59,100 58,500
Senior subordinated notes (includes the Parity Notes) 125,000 125,000
------------------ ------------------
Total long-term 235,681 258,883
------------------ ------------------
Total debt $ 245,929 $ 273,092
================== ==================
</TABLE>
Senior Credit Facility
On May 18, 1998, the Company entered into a $160.0 million Senior Credit
Facility (the "Senior Credit Facility"). The Senior Credit Facility, which was
amended on December 18, 1998, March 19, 1999, September 30, 1999 and March 29,
2000, is comprised of three different loans: a $50.0 million revolving credit
facility (the "Revolver"), a $50.0 term loan ("Term A"), and a $60.0 million
term loan ("Term B"). As of December 31, 1999, approximately $32.5 million was
outstanding on the Revolver and the Company had approximately $10.1 million of
open trade letters of credit outstanding for the purchase of finished goods
inventory from foreign vendors. In addition, approximately $1.7 million of
stand-by letters of credit were outstanding. Net availability under the Revolver
was $5.7 million at December 31, 1999 in addition to cash and cash equivalents
of $7.2 million.
In 1999, the Company obtained a $3.0 million revolving credit facility
("Additional Revolver") which is guaranteed by Vestar and bears interest, at the
Company's option, at either the Eurodollar rate plus 1.5% or the Prime rate plus
0.5%. This facility expires on December 31, 2000. At December 31, 1999, there
were no amounts outstanding under the Additional Revolver. On February 17, 2000,
the Additional Revolver was increased to $7.5 million.
F-15
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. Long-Term Obligations and Financing Agreements (Continued)
On March 29, 2000, the Additional Revolver was increased to $12.0 million
and incorporated into the Senior Credit Facility as Tranche C. Borrowings under
Tranche C are due and payable on June 30, 2000 (unless certain events occur, in
which case the maturity can be extended to December 31, 2001) and are guaranteed
by Vestar.
The Revolver and the Term A loan mature in 2004 and the Term B loan matures
in 2005. Term Loan A requires quarterly principal payments of $500,000 through
June 1999, which increase annually by $500,000 through June 2002, then increase
by $750,000 through June 2003 and decrease by $250,000 through maturity. Term
Loan B requires quarterly principal payments of $150,000 through June 2004 and
four quarterly payments of $14,100,000 beginning in September 30, 2004.
Interest for borrowings under the Revolver and Term A loan is based on
either, at the Company's option, LIBOR plus 2.5% at December 31, 1998 and 3.0%
at December 31, 1999 or the Alternative Base Rate plus 1.5% at December 31, 1998
and 2.0% at December 31, 1999. The Alternative Base Rate is the greater of the
Bank of America prime rate or the Fed Funds rate plus 0.5%. Interest rates on
the Revolver and Term Loan A ranged between 7.56% to 9.13%, and 9.19% to 10.25%
at December 31, 1998 and 1999, respectively. Term Loan B interest rate is based
on either LIBOR plus 3.0% at December 31, 1998 and 3.5% at December 31, 1999 or,
at the Company's option, the Alternative Base Rate plus 2.0% at December 31,
1998 and 2.5% at December 31, 1999. Interest rates on Term Loan B were 7.79% and
9.69% at December 31, 1998 and 1999, respectively. At December 31, 1998 and
1999, the weighted average interest rate on short term borrowings was 9.0% and
9.41%, respectively.
The obligations of the Company under the Senior Credit Facility are
unconditionally and irrevocably guaranteed by the Company's domestic
subsidiaries (the "Guarantors"). See Note 18. In addition, the Senior Credit
Facility is secured by first priority or equivalent security interests in
substantially all tangible and intangible assets of the Company and the
Guarantors, including all the capital stock of, or other equity interests in,
each direct or indirect domestic subsidiary of the Company and 65% of the
capital stock of, or other equity interests in, each direct foreign subsidiary
of the Company or any Guarantor (to the extent permitted by applicable
contractual and legal provisions).
The Term A and Term B loans (and in the case of (i), the Revolver) are
subject to mandatory prepayment (i) with the proceeds of certain asset sales,
(ii) on an annual basis with 50% of the Company's excess cash flow (as defined
in the Senior Credit Facility), (iii) with the proceeds of certain equity
offerings and (iv) with the proceeds from debt issuance.
The Senior Credit Facility 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 and a minimum Sock Group EBITDA test, each of which
is tested as of the last day of each fiscal quarter of the Company and its
subsidiaries. The amendments in December 1998, March 1999, September 1999 and
March 2000 revised the original covenants.
F-16
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. Long-Term Obligations and Financing Agreements (Continued)
At December 31, 1999, the Company was not in compliance with its financial
ratio covenants and received a waiver dated March 29, 2000. The March 2000
amendment also revised on-going covenants and the Company expects to meet these
covenants throughout 2000.
In connection with the September 30, 1999 amendment of the Senior Credit
Facility, Vestar and Bank of America, N.A. entered into an Investment and
Deposit agreement for Vestar to infuse up to $30 million of new capital into the
Company if certain leverage ratios are not met.
On March 29, 2000, the Senior Credit Facility and the Investment and
Deposit agreement were amended. The March 2000 amendment requires (i) Vestar to
infuse up to $30 million of new capital and (ii) the Company to make $20 million
in additional principal payments on the Senior Credit Facilities between June
30, 2000 (or in certain circumstances August 31, 2000) and December 31, 2000 if
certain financial ratios are not met by June 30, 2000. The Company expects to
meet these covenants in 2000.
The Senior Credit Facility includes a cross-default provision which makes
it a default under the Senior Credit Facility if, with respect to other
indebtedness in excess of $2.5 million of Holdings and the Company and its
subsidiaries, any such party defaults in any payment with respect to such
indebtedness or defaults in a manner that permits such indebtedness to be
accelerated or such indebtedness is in fact accelerated.
The consequences of a default under the Senior Credit Facility are that the
lender may terminate the commitments, accelerate the Company's obligations under
the Senior Credit Facility, declaring them immediately due and payable, require
the credit parties to establish a cash collateral account as security for
outstanding letters of credit and enforce any and all other rights and interests
existing under the credit documents.
Senior Subordinated Notes
In connection with the Recapitalization, the Company issued $112.0 million
of 10 1/8% Senior Subordinated Notes due 2008 and $13.0 million in Parity Notes
(collectively, the "Notes"). The Parity Notes, which are convertible to senior
subordinated notes have the same terms as the Senior Subordinated Notes with the
exception that accumulated interest is paid to each Parity Note holder upon the
conversion to Senior Subordinated Notes. As of December 31, 1999, $2.0 million
of the initial $13.0 million Parity Notes have been converted to Senior
Subordinated Notes. No mandatory redeemable dates exist for the parties' notes
to be converted to Senior Subordination Note. Commencing November 15, 1998,
interest is paid semiannually on May 15 and November 15 of each year. The
Company is not required to make any mandatory redemption or sinking fund payment
with respect to the Notes prior to maturity. The Notes are redeemable at the
option of the Company, in whole or in part, at any time on or after May 15, 2003
at the redemption prices set forth in the agreement plus accrued and unpaid
interest. The Notes are subordinate in priority to the Senior Credit Facility,
are senior in right of payment to the Preferred Stock and are guaranteed by the
Company's domestic subsidiaries.
F-17
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
9. Long-Term Obligations and Financing Agreements (Continued
Canadian Facility
The Company's Canadian division (Cluett Peabody Canada Inc. ("Cluett
Canada")) entered into a loan agreement dated August 8, 1997 (the "Canadian
Facility") between Cluett Canada and Congress Financial Corporation
("Congress"). The Canadian Facility provides for a revolving loan facility of up
to $15,000,000 Canadian dollars, which amount may be reduced based upon the
value of accounts receivable outstanding and inventory held by Cluett Canada, or
upon the good faith determination by Congress that the amount should be reduced
to reflect, among other things, loss contingencies or risks, letters of credit
and event of default of Cluett Canada. The Canadian Facility has an initial term
of three years and continues year to year thereafter. Congress under the
Canadian Facility has a first priority lien on substantially all of the assets
of Cluett Canada. Interest rates on the Canadian Facility ranged between 8.0% to
9.0%, and 7.75% to 9.75% at December 31, 1998 and 1999, respectively.
As of December 31, 1999, $11.3 million Canadian dollars were outstanding
under the Canadian Facility plus $1.5 million Canadian dollars in open trade
letters of credit.
CAT Notes Payable
In connection with the CAT acquisition, the Company entered into long term
note agreements with an imputed value of $2.9 million which mature on November
1, 2002 and require monthly payments of $85,000 beginning August 1, 1999. The
Company imputed interest on the notes at 10.0%.
The aggregate maturities of long-term debt and capital lease obligations as of
December 31, 1999 are as follows:
2000 $14,209
2001 9,507
2002 12,930
2003 14,613
2004 40,563
Thereafter 181,270
--------
$273,092
========
F-18
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. Income Taxes
The provision for income taxes is summarized as follows:
<TABLE>
YEAR ENDED DECEMBER 31,
1997 1998 1999
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal $ 4,606 $ (146) $ --
State and local 485 550 600
Foreign(1) 575 406 543
Benefit of net operating loss carryforward (4,340) -- --
---------------- ---------------- -----------------
$ 1,326 $ 810 $ 1,143
================ ================ =================
</TABLE>
(1) Includes approximately $0.5 million, $0.4 million and $0.5 million relating
to foreign withholding taxes for 1997, 1998 and 1999, respectively.
A reconciliation of the statutory federal income tax provision (benefit) to
the Company's provision for income taxes is as follows:
<TABLE>
YEAR ENDED DECEMBER 31,
1997 1998 1999
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Computed at statutory rate $ 6,297 $ (12,248) $ (5,430)
Foreign subsidiaries loss (income) 1,482 (2,314) 2,751
State and local income taxes, net of federal
income tax benefit 320 363 396
Dedeuctions relating to foreign taxes 575 268 361
Changes in valuation allowance for deferred tax
assets (7,383) 14,812 2,953
Other, net 55 (71) 112
---------------- ---------------- ----------------
$ 1,326 $ 810 $ 1,143
================ ================ ================
</TABLE>
Deferred income taxes represent the net tax effects of temporary
differences between the carrying amount of assets and liabilities for financial
reporting purposes and the amounts used for income tax purposes.
F-19
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. Income Taxes (Continued)
The significant components of the Company's domestic deferred tax assets and
liabilities are as follows:
<TABLE>
DECEMBER 31,
1998 1999
------ ----
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Deferred tax liabilities:
Workers compensation $ 580 $ 893
Depreciation 4,268 4,180
Pension income 4,685 4,847
Other 578 354
----- -----
Total deferred tax liabilities 10,111 10,274
Deferred tax assets:
Net operating loss carryforwards 80,355 83,821
AMT credits 119 119
Restructuring reserves 864 861
Bankruptcy reorganization 1,181 1,094
Litigation reserve - -
Interest to parent - -
Allowance for bad debts 554 473
Inventory overhead cost adjustment, net 952 1,056
Reserves 1,613 1,128
Other 4,841 5,043
----- -----
Total deferred tax assets 90,479 93,595
Valuation allowance for deferred tax assets (80,368) (83,321)
-------- --------
Net deferred taxes $ -- $ --
========= =========
</TABLE>
As of December 31, 1999, the Company had federal net operating loss ("NOL")
carryforwards of approximately $246 million. These NOL carryforwards are
scheduled to expire from the year 2005 through 2019. The Internal Revenue Code
and Treasury Regulations prescribe a limitation on the use of NOL carryforwards
following an ownership change. The Company experienced such an ownership change
as a result of its Plan of Reorganization following the Company's exit from
Chapter 11 of the United States Bankruptcy Code on May 18, 1998. Therefore,
approximately $206 million of the Company's NOL carryforwards are subject to an
annual usage limitation of approximately $6.0 million plus an additional amounts
related to any realized built in gains.
Based on the Company's history of earnings and the limitation on the use of
its NOL carryforwards, the Company's entire balance of net domestic deferred
tax assets have been reduced by a valuation allowance of $80.4 million and $83.3
million at December 31, 1998 and 1999, respectively as it was not assured that
such assets would be realized in the future. The Company increased its valuation
allowance by $25.1 million to $80.4 million in 1998 and $3.0 million to $83.3
million in 1999.
Undistributed earnings of foreign subsidiaries deemed permanently invested
for which no deferred income taxes have been provided were approximately $5.1
million at December 31, 1997, and $0 at December 31, 1998 and $0 at December 31,
1999.
F-20
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. Employee Benefit Plans
The Company has a qualified defined benefit pension plan covering
essentially all employees of the Company in the United States. The pension plan
employs a cash balance form of benefit that provides for benefits based on
salary, age and service. The benefit available for certain union employees under
the plan is based on a flat dollar per year of service. The Company's practice
is to fund amounts that are required by statute and applicable regulations and
which are tax deductible. Assets of the plans are investments in cash
equivalents, publicly-traded fixed income and equity securities, and real
estate. Assets are valued using a method which recognizes the difference between
actual and expected market values over a period of five years.
At December 31, 1998 and 1999, the funded status of the Company's qualified
defined benefit pension plan was as follows:
DECEMBER 31,
1998 1999
(DOLLARS IN THOUSANDS)
Benefit Obligation Information
Benefit obligation at beginning of year $ 74,073 $ 77,582
Service cost 1,724 2,086
Interest cost 5,346 5,034
Actuarial loss/(gain) 3,794 (10,093)
Benefits paid (8,232) (11,703)
Amendments - 1,186
Special termination benefits 877 3,178
--------- ---------
Benefit obligation at end of year $ 77,582 $ 67,270
========= =========
Fair Value of Plan Assets
Fair value of plan assets at beginning of
year $109,129 $ 113,244
Actual return on plan assets 12,347 11,370
Benefits paid (8,232) (11,703)
--------- ---------
Fair value of plan assets at end of year $ 113,244 $ 112,911
========= =========
Reconciliation of Funded Status, Amounts
Not recognized, and Amounts Recognized
Funded status $ 35,662 $ 45,641
Unrecognized prior service cost 3,222 4,037
Unrecognized loss/(gain) 765 (10,455)
Unrecognized reversion value discount (8,266) (7,036)
--------- ---------
Prepaid benefit costs $ 31,383 $ 32,187
========= =========
F-21
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11. Employee Benefit Plans (Continued)
Net pension benefit of the Company's qualified defined benefit plan for the
years ended December 31, 1997, 1998 and 1999 include the following components:
<TABLE>
DECEMBER 31,
1997 1998 1999
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost $ 1,675 $ 1,724 $ 2,086
Interest cost 5,345 5,346 5,034
Actual return on plan assets (16,498) (12,347) (11,370)
Amortization of unrecognized reversion value discount (1,230) (1,230) (1,230)
Asset gain deferred for later recognition 8,030 4,474 1,496
-------- -------- --------
(2,678) (2,033) (3,984)
Other benefit charges:
Early retirement program / special retirement benefit 642 877 3,178
-------- -------- --------
Net pension benefit $ (2,036) $ (1,156) $ (806)
======== ======== ========
</TABLE>
The assumptions used in determining the funded status of the Company's
defined benefit pension plans for the years ended December 31, 1997, 1998 and
1999 were discount rates of 7.5%, 7.0% and 8.25% respectively, and an average
rate of increase in compensation levels ranging from 3.25% to 13.25% depending
on the participant's age at the valuation date. In addition, the expected
long-term rate of return on plan assets was 9.5% for all periods. The change in
assumptions between periods is reflected as an actuarial loss/(gain) and is
reflected as a component of benefit obligation.
During 1990, in connection with the acquisition of certain businesses, the
Company adjusted the actuarial valuation of certain estimated pension assets to
reflect their net realizable value based upon a planned reversion to the
Company. In August 1991, the Company decided not to revert the assets. As a
result of this change, the excess pension assets are being recognized over the
Average Future Working Lifetime of the plan participants, estimated to be a
period of 14 years. Amortization of this amount was $1,230,000 in 1997, 1998 and
1999, and is included in pension benefit for each respective year. The Company
periodically performs an actuarial valuation of these pension assets and adjusts
the amount of the pension assets and the annual amortization based on the
results of the valuation.
During 1995, the Company's qualified defined benefit plan was amended to
provide an Enhanced Retirement Program ("ERP"). The total charge in 1997 related
to this program was $642,000.
During 1998, the Company's qualified defined benefit plan was amended to
provide an Early Retirement Program ("CERP"). The total charge in 1998 and 1999
related to the program was $877,000 and $1,443,000.
During 1999, the Company's qualified defined benefit plan was amended to
provide special termination benefits to those employees severed as a result of
the Enterprise facility closing. The total charge in 1999 related to this
program was $1,735,000.
F-22
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
12. Commitments and Contingencies
The Company and certain of its subsidiaries are party to litigation in
connection with the normal conduct of their businesses. In March 2000, the
Company and a former employee reached an agreement in principle to settle all
matters relating to an action brought by the employee for the sum of $1.75
million of which $1.6 million and $1.75 million was reserved at December 31,
1998 and December 31, 1999, respectively. Management believes, based in part on
the opinion of counsel, that its potential liability with respect to other
proceedings currently pending is not material in the aggregate to the Company's
consolidated results of operations or financial position.
The Company leases certain land, buildings and equipment under both capital
and noncancelable operating leases that expire in various years through 2013.
Certain of the operating leases contain rent escalation clauses and require the
Company to pay maintenance costs, property taxes and insurance obligations on
the leased property. Future minimum lease payments under noncancelable operating
leases and capital leases, together with the present value of the net minimum
lease payments as of December 31, 1999 are as follows:
CAPITAL OPERATING
LEASES LEASES
(DOLLARS IN THOUSANDS)
Year payable:
2000 $ 41 $ 3,826
2001 38 2,708
2002 37 2,420
2003 31 1,940
2004 30 1,466
Thereafter 240 2,072
------- -------
Total minimum lease payments 417 $14,432
======= =======
Amount representing interest (170)
-------
Present value of net minimum lease payments 247
Current portion 16
-------
Long-term portion $ 231
=======
Rent expense totaled approximately $3.9 million in 1997, $4.3 million in
1998 and $3.4 million in 1999.
F-23
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13. Licensing Agreements
Certain of the Company's subsidiaries have licensing agreements which give
them the exclusive rights to use certain trademarks, logos and related trade
names in connection with the manufacture and sale of certain men's and women's
apparel in specified territories. License fees are based on percentages of net
sales, as defined, for the various products sold, but not less than specified
minimum amounts. The licensing agreements have various renewal dates. Certain of
the license agreements contain automatic renewals and are noncancelable. The
renewal terms range to five years and expire in various years through 2003.
Future minimum license fees payable in the five years succeeding December
31, 1999 are as follows (in thousands):
Year payable:
2000 $ 566
2001 695
2002 955
2003 763
14. Related Party Transactions
Subsequent to the emergence from bankruptcy, Holdings allocated interest
expense of $24.3 million related to post-petition interest on prepetition
obligations to the Company. This amount is included in bankruptcy reorganization
costs in 1998. This amount was contributed by Holdings to the Company in 1999
and is reflected as a component of Stockholder's Deficit. In addition, a $1.5
million and $2.1 million liability related to an employee stock plan was assumed
by the Company and the pension plan, respectively. The liability assumed by the
pension plan is reflected as a component of the benefit obligation (see Note
11).
Pursuant to a management advisory agreement (the "Management Agreement")
entered into in connection with the reorganization of the Company in 1998,
Vestar receives an annual advisory fee equal to $500,000. The Company expensed
$250,000 in 1998 and $500,000 in 1999 in consideration for certain advisory and
consulting services (excluding investment banking or other financial advisory
services and full- or part-time employment by Holdings or any of its
subsidiaries of any employee or partner of Vestar and its affiliates, in each
case for which Vestar and its affiliates shall be entitled to receive additional
compensation). Holdings has agreed to reimburse Vestar for expenses incurred in
connection with, and to indemnify Vestar and its affiliates for any liabilities
arising from, such advisory and consulting services. In connection with the
Recapitalization, Vestar received a one-time transaction fee of $3.25 million in
1998.
During 1995 Mr. Marsal (founding Managing Director of A&M) was appointed
Chief Executive Officer of the Company. In connection with this appointment, the
Company paid A&M $1.4 million, $957,000, and $963,000 for 1997, 1998, and 1999,
respectively for compensations and other related expenses.
F-24
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15. Risks, Uncertainties and Significant Concentrations
The Company manufactures and sources a portion of its products and raw
materials from foreign subsidiaries or vendors. The Company attempts to limit
the concentration with any one manufacturer or vendor. The Company believes it
has alternative manufacturing and raw material sources available to meet its
current and future production requirements in the event the Company is required
to change current manufacturers or vendors are unavailable to fulfill the
Company's needs.
The Company's principal customer base, the retail industry, has experienced
significant changes and difficulties over the past several years, including
consolidation of ownership, increased centralization of buying decisions and
restructurings. The Company cannot predict what effect, if any, continued
changes within this industry will have on the Company's operations.
Included in the Company's consolidated balance sheet at December 31, 1999
are the net assets of the Company's manufacturing facility located in Kitchener,
Ontario and San Pedro Sula, Honduras, which total $ 1.1 million. The Honduras
facility does not sell products to external customers. As of December 31, 1999,
28% of the Company's labor force is covered under collective bargaining
agreements with one union, which expire between March 31, 2001 and December 31,
2002.
16. Fair Value of Financial Instruments
The carrying amount of cash and cash equivalents, accounts receivable,
short-term borrowings, accounts payable and accrued liabilities approximate fair
value due to the short maturities of these instruments. The fair value of
long-term debt was approximately $222.5 million at December 31, 1998 and $225.1
million (book value of $257.0 million) at December 31, 1999 based on interest
rates that are believed to be available to the Company for debt with similar
provisions provided for in the existing debt agreements. The fair value of the
senior exchangeable Preferred Stock was approximately $45.7 million at December
31, 1998 and $20.0 million (book value of $58.3 million) at December 31, 1999
based on a market value analysis.
17. Segment Data
The Company is organized by product line in three business segments.
Foreign sales, primarily Canadian, were approximately 9.4%, 9.1% and 8.9%, in
1997, 1998 and 1999, respectively. There were no customers for which sales
exceeded 10% during the three-year period presented.
The Company incurred a number of one-time costs associated with the
restructuring of its operations and bankruptcy reorganization costs. The
financial results associated with the Burberrys, YSL, Latin America, Canadian
retail operations, Apparel On-line and unallocated corporate overhead charges,
are referred to collectively as "All other".
F-25
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. Segment Data (Continued)
<TABLE>
1997 1998 1999
(Dollars in Thousands)
<S> <C> <C> <C>
Net Sales
Sock $151,789 $164,760 $168,366
Shirt 176,753 185,353 176,500
All other 43,588 30,854 6,829
Intercompany (8,602) (7,844) (8,175)
----------------------- ------------------ -----------------
$363,528 $373,123 $343,520
======================= ================== =================
Gross Profit
Sock $ 49,144 $ 52,497 $ 58,735
Shirt 49,193 52,479 35,277
All other 11,514 3,821 382
----------------------- ------------------ -----------------
$109,851 $108,797 $ 94,394
======================= ================== =================
Selling, General and Administrative
Sock $ 25,874 $ 26,454 $ 27,750
Shirt 38,319 41,969 50,531
All other 12,148 14,019 2,946
----------------------- ------------------ -----------------
$ 76,341 $ 82,442 $ 81,227
======================= ================== =================
Operating Income
excluding restructuring and
impairment charges
Sock $ 23,270 $ 26,043 $ 30,985
Shirt 10,874 10,510 (15,245)
All other (634) (10,197) (3,136)
----------------------- ------------------ -----------------
$ 33,510 $ 26,356 $ 12,604
======================= ================== =================
Identifiable Assets
Sock $ 77,841 $ 80,766 $ 82,562
Shirt 92,412 90,239 104,356
All other 17,342 7,057 772
----------------------- ------------------ -----------------
$187,595 $178,062 $187,690
======================= ================== =================
Depreciation
Sock $ 4,640 $ 5,403 $ 5,815
Shirt 3,424 3,235 3,455
All other 11 22 108
----------------------- ------------------ -----------------
$ 8,075 $ 8,660 $ 9,378
======================= ================== =================
Capital expenditures
Sock $ 7,475 $ 7,987 $ 5,745
Shirt 3,075 3,816 4,277
All other 228 38 648
----------------------- ------------------ -----------------
$ 10,778 $ 11,841 $ 10,670
======================= ================== =================
</TABLE>
F-26
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. Segment Data (Continued)
Interest expense, interest income and income taxes are excluded from reportable
segment data as such amounts are not included in segment information reviewed by
the chief operating decision maker.
Reconciliation of Reportable Segments Net sales, Operating Income and
Identifiable Assets
<TABLE>
1997 1998 1999
---- ---- ----
<S> <C> <C> <C>
Net Sales
Total net sales for reportable segments $ 368,381 $ 350,113 $ 344,866
Other net sales 3,749 30,854 6,829
Eliminations of intersegment net sales (8,602) (7,844) (8,175)
------------------ ------------------ -------------------
Total consolidated net sales $ 363,528 $ 373,123 $ 343,520
================== ================== ===================
Operating Profit (Loss)
Total operating profit or loss for reportable segments $ 33,465 $ 36,553 $ 15,740
Other operating profit or loss (558) (7,764) (150)
Eliminations of intersegement operating profit (loss) - - -
Unallocated amounts:
Other corporate income (expense) 603 (2,433) (2,986)
Restructuring and impairment charges (2,469) (2,366) (2,228)
------------------ ------------------ -------------------
Total operating profit (loss) $ 31,041 $ 23,990 $ 10,376
================== ================== ===================
Assets
Total assets for reportable segments $ 186,485 $ 171,005 $ 186,918
Other assets 1,110 7,057 772
Unallocated amounts:
Deferred finance costs - 11,198 10,842
Pension assets 30,227 31,383 32,187
Other unallocated amounts 2,195 132 787
------------------ ------------------ -------------------
Consolidated total $ 220,017 $ 220,775 $ 231,506
================== ================== ===================
Capital Expenditures
Total capital expenditures for reportable segments $ 10,778 $ 11,803 $ 10,022
Adjustments - 38 648
------------------ ------------------ -------------------
Consolidated total $ 10,778 $ 11,841 $ 10,670
================== ================== ===================
</TABLE>
F-27
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17. Segment Data (Continued)
<TABLE>
1997 1998 1999
---- ---- ----
(Dollars in Thousands)
<S> <C> <C> <C>
Depreciation & Amortization
Total depreciation for reportable segments $ 8,075 $ 8,638 $ 9,270
Amortization 30 992 1,928
-------------------- ------------------- -------------------
Consolidated total $ 8,105 $ 9,630 $ 11,198
==================== =================== ===================
Geographic Information
Net Sales
United States $ 329,358 $ 339,276 $ 313,063
Foreign 34,170 33,847 30,457
-------------------- ------------------- -------------------
Total $ 363,528 $ 373,123 $ 343,520
==================== =================== ===================
Operating Income (Loss)
United States $ 29,327 $ 25,205 $ 13,829
Foreign 1,714 (1,215) (3,453)
-------------------- ------------------- -------------------
Total $ 31,041 $ 23,990 $ 10,376
==================== =================== ===================
Identifiable Assets
United States $ 197,621 $ 201,026 $ 209,594
Foreign 22,396 19,749 21,912
-------------------- ------------------- -------------------
Total $ 220,017 $ 220,775 $ 231,506
==================== =================== ===================
</TABLE>
18. 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 current domestic subsidiaries, principally:
Cluett Peabody & Co., Inc., Great American Knitting Mills, Inc., Cluett Designer
Group Inc., Consumer Direct Corporation and Arrow Factory Stores Inc.
(collectively the "Guarantor Subsidiaries"). Each of the Guarantor Subsidiaries
is a direct or indirect wholly-owned subsidiary of the Company. The Company's
payment obligations under the Notes are not guaranteed by the remaining
subsidiaries: Bidermann Womenswear Corp. (formerly Ralph Lauren Womenswear
Inc.), Cluett, Peabody Canada Inc., Arrow de Mexico S.A. de C.V., and Arrow
Inter-America & Co., Ltd. (collectively the "Non-Guarantor Subsidiaries"). The
obligations of each Guarantor Subsidiary under its guarantee of the Notes are
subordinated to such subsidiary's obligations under its guarantee of the Senior
Credit Facility.
Presented below is condensed consolidating financial information for Cluett
American Corp. ("Parent Company"), the Guarantor Subsidiaries and the
Non-Guarantor Subsidiaries. In the Company's opinion, separate financial
statements and other disclosures concerning each of the Guarantor Subsidiaries
would not provide additional information that is material to investors.
Therefore, the Guarantor Subsidiaries are consolidated in the presentation
below. Investments in subsidiaries are accounted for by Cluett American Corp.
using the equity method of accounting. Earnings of subsidiaries are, therefore,
reflected in the Parent Company's investments in and advances to/from
subsidiaries account and earnings (losses). The elimination entries eliminate
investments in subsidiaries, the related stockholder's deficit and other
intercompany balances and transactions.
In 1997, 1998 and 1999, the Company allocated external interest expense to
its subsidiaries, based on a percentage of net sales.
F-28
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. Guarantor Subsidiaries (Continued)
<TABLE>
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES 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 -- 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
Deferred finance costs -- 11,198 -- -- 11,198
Pension assets -- 31,383 -- -- 31,383
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 $ -- $ 37,781 $ 4,658 $ -- $ 42,439
Short-term debt and current portion of
long-term debt -- 6,600 3,648 -- 10,248
Income taxes payable -- 1,268 207 -- 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
Other noncurrent liabilities -- 111 -- -- 111
Dividends payable 605 -- -- -- 605
Senior exchangeable preferred stock,
cumulative, $.01 par value: authorized
4,950,000, issued and outstanding 530,730
shares (liquidation preference) 51,288 -- -- -- 51,288
Stockholder's deficit (123,223) (123,158) 11,005 86,330 (149,046)
---------- ----------- ------- ----------- ----------
Total liabilities and stockholder's deficit $ (71,330) $ 186,026 $ 19,749 $ 86,330 $ 220,775
======== ======= ====== ======= =======
</TABLE>
F-29
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. Guarantor Subsidiaries (Continued)
<TABLE>
SUPPLEMENTAL CONDENSED CONSOLIDATING BALANCE SHEET
DECEMBER 31,1999
(DOLLARS IN THOUSANDS)
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS CONSOLIDATED
<S> ---------- ------------ -------------- ------------ ----------
ASSETS
Current assets: <C> <C> <C> <C> <C>
Cash and cash equivalents $ -- $ 7,099 $ 140 $ -- $ 7,239
Accounts receivable, net -- 40,635 4,884 -- 45,519
Inventories -- 64,608 13,497 -- 78,105
Prepaid expenses and other current assets -- 2,422 707 -- 3,129
---------- ---------- ---------- ---------- ----------
Total current assets -- 114,764 19,228 -- 133,992
Investment in subsidiaries (103,443) -- -- 103,443 --
Intercompany receivable (payable) 15,000 (15,000) -- -- --
Property, plant and equipment, net -- 45,802 1,992 -- 47,794
Deferred finance costs -- 10,842 -- -- 10,842
Pension assets -- 32,187 -- -- 32,187
Goodwill, net -- 4,740 -- -- 4,740
Other noncurrent assets -- 1,259 692 -- 1,951
---------- ---------- ---------- ---------- ----------
Total assets $ (88,443) $ 194,594 $ 21,912 $ 103,443 $ 231,506
========== ========== ========== ========== ==========
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities:
Accounts payable and accrued expenses $ -- $ 38,239 $ 2,457 $ -- $ 40,696
Accrued interest expense -- 3,861 -- 3,861
Short-term debt and current portion of
long-term debt -- 6,405 7,804 -- 14,209
Income taxes payable -- 1,763 207 -- 1,970
---------- ---------- ---------- ---------- ----------
Total current liabilities -- 50,268 10,468 -- 60,736
Long-term debt and capital lease
obligations -- 258,652 231 -- 258,883
Other noncurrent liabilities -- 147 -- -- 147
Dividends payable 637 -- -- -- 637
Senior exchangeable preferred stock,
cumulative, $.01 par value: authorized
4,950,000, issued and outstanding 599,145
shares (liquidation preference of $ 59,915) 58,329 -- -- -- 58,329
Stockholder's deficit (147,409) (114,473) 11,213 103,443 (147,226)
---------- ---------- ---------- ---------- ----------
Total liabilities and stockholder's deficit $ (88,443) $ 194,594 $ 21,912 $ 103,443 $ 231,506
========== ========== ========== ========== ==========
</TABLE>
F-30
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. Guarantor Subsidiaries (Continued)
<TABLE>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS CONSOLIDATED
---------- --------- -------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Net sales $ -- $ 329,358 $ 34,170 $ -- $ 363,528
Cost of goods sold -- 229,303 24,374 -- 253,677
---------- ---------- ---------- ---------- ----------
Gross profit -- 100,055 9,796 -- 109,851
Selling, general and administrative expenses -- 66,817 9,524 -- 76,341
Restructuring and impairment charges -- 3,911 (1,442) -- 2,469
---------- ---------- ---------- ---------- ----------
Operating income (loss) -- 29,327 1,714 -- 31,041
Income (loss) on investments in subsidiaries 17,196 -- -- (17,196) --
Interest expense, net -- 12,275 2,958 -- 15,233
Other expense, net -- 853 316 -- 1,169
---------- ---------- ---------- ---------- ----------
Income (loss) before reorganization costs
(credits) and income taxes 17,196 16,199 (1,560) (17,196) 14,639
Bankruptcy reorganization credits -- (3,883) -- -- (3,883)
---------- ---------- ---------- ---------- ----------
Income (loss) before provision for income
taxes 17,196 20,082 (1,560) (17,196) 18,522
Provision for income taxes -- -- 1,326 -- 1,326
---------- ---------- ---------- ---------- ----------
Net income (loss) $ 17,196 $ 18,756 $ (1,560) $ (17,196) $ 17,196
========== ========== ========== ========== ==========
</TABLE>
F-31
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. Guarantor Subsidiaries (Continued)
<TABLE>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS CONSOLIDATED
---------- ----------- ------------- ------------ ----------
<S> <C> <C> <C> <C> <C>
Net sales ................................ $ -- $ 339,276 $ 33,847 $ -- $ 373,123
Cost of goods sold ....................... -- 239,479 24,846 -- 264,325
---------- ---------- ---------- ---------- ----------
Gross profit ............................. -- 99,797 9,001 -- 108,798
Selling, general and administrative
expenses ............................... -- 72,866 9,576 -- 82,442
Restructuring and impairment charges costs -- 1,726 640 -- 2,366
---------- ---------- ---------- ---------- ----------
Operating income (loss) .................. -- 25,205 (1,215) -- 23,990
Loss on investments in subsidiaries ...... (36,834) -- -- 36,834 --
Interest expense, net .................... -- 16,907 3,448 -- 20,355
Other expense, net ....................... -- 2,131 -- -- 2,131
---------- ---------- ---------- ---------- ----------
Income (loss) before reorganization costs
and income taxes ....................... (36,834) 6,167 (4,663) 36,834 1,504
Bankruptcy reorganization costs .......... -- 37,528 -- -- 37,528
---------- ---------- ---------- ---------- ----------
Loss before provision for income taxes ... (36,834) (31,361) (4,663) 36,834 (36,024)
Provision for income taxes ............... -- 851 (41) -- 810
---------- ---------- ---------- ---------- ----------
Net income (loss) ........................ $ (36,834) $ (32,212) $ (4,622) $ 36,834 $ (36,834)
========== ========== ========== ========== ==========
</TABLE>
F-32
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. Guarantor Subsidiaries (Continued)
<TABLE>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF OPERATIONS
YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS CONSOLIDATED
---------- ----------- ------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Net sales $ -- $ 311,989 $ 31,531 $ -- $ 343,520
Cost of goods sold -- 222,610 26,516 -- 249,126
---------- ---------- ---------- ---------- ----------
Gross profit -- 89,379 5,015 -- 94,394
Selling, general and administrative
expenses -- 74,000 7,790 -- 81,790
Restructuring and impairment charges costs -- 1,550 678 -- 2,228
---------- ---------- ---------- ---------- ----------
Operating income (loss) -- 13,829 (3,453) -- 10,376
Loss on investments in subsidiaries (17,113) -- -- 17,113 --
Interest expense, net -- 23,184 3,278 -- 26,462
Other expense, net -- 457 -- -- 457
---------- ---------- ---------- ---------- ----------
Income (loss) before reorganization costs
and income taxes (17,113) (9,812) (6,731) 17,113 (16,543)
Bankruptcy reorganization credits -- (573) -- -- (573)
---------- ---------- ---------- ---------- ----------
Loss before provision for income taxes (17,113) (9,239) (6,731) 17,113 (15,970)
Provision for income taxes -- 1,051 92 -- 1,143
---------- ---------- ---------- ---------- ----------
Net income (loss) $ (17,113) $ (10,290) $ (6,823) $ 17,113 $ (17,113)
========== ========== ========== ========== ==========
</TABLE>
F-33
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. Guarantor Subsidiaries (Continued)
<TABLE>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR-END DECEMBER 31, 1997
(DOLLARS IN THOUSANDS)
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS CONSOLIDATED
<S> ---------- ----------- -------------- ------------ ----------
OPERATING ACTIVITIES <C> <C> <C> <C> <C>
Net income (loss) $ 17,196 $ 18,756 $ (1,560) $(17,196) $ 17,196
Adjustment to reconcile net income (loss) to
net cash and cash equivalents provided by
(used in) operating activities:
(Income) on investments in
subsidiaries (17,196) -- -- 17,196 --
Depreciation and amortization -- 7,779 326 -- 8,105
Gain on sale of assets -- -- (348) -- (348)
Accrual of professional fees, potential
claims and related litigation matters-
reorganization -- 6,117 -- -- 6,117
Adjustments of liabilities subject to
compromise -- (10,000) -- -- (10,000)
Changes in operating assets and liabilities -- (7,746) (374) -- (8,120)
-------- -------- -------- -------- --------
Net cash and cash equivalents provided by (used
in) operating activities -- 14,906 (1,956) -- 12,950
INVESTING ACTIVITIES
Purchase of Property, Plant & Equipment -- (10,554) (224) -- (10,778)
Proceeds on disposal Property, Plant &
Equipment -- 1,786 1,541 -- 3,327
-------- -------- -------- -------- --------
Net cash and cash equivalents provided by
(used in) investing activities -- (8,768) 1,317 -- (7,451)
FINANCING ACTIVITIES
Proceeds from DIP credit facility -- 16,398 -- -- 16,398
Principal payments on DIP credit facility -- (16,398) (397) -- (16,795)
Proceeds from issuance of long term debt -- 456 1,790 -- 2,246
Principal payments on long term debt -- (2,621) (492) -- (3,113)
-------- -------- -------- -------- --------
Net cash and cash equivalents provided by (used
in) financing activities -- (2,165) 901 -- (1,264)
-------- -------- -------- -------- --------
Net change in cash and cash equivalents -- 3,973 262 -- 4,235
Cash and cash equivalents at beginning of
year -- 5,578 206 -- 5,784
-------- -------- -------- -------- --------
Cash and cash equivalents at end of year $ -- $ 9,551 $ 468 $ -- $ 10,019
======== ======== ======== ======== ========
</TABLE>
F-34
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. Guarantor Subsidiaries (Continued)
<TABLE>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
(DOLLARS IN THOUSANDS)
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS CONSOLIDATED
<S> ---------- ----------- -------------- ------------ ------------
OPERATING ACTIVITIES <C> <C> <C> <C> <C>
Net income (loss) $ (86,330) $ (32,212) $ (4,622) $ 86,330 $ (36,834)
Adjustment to reconcile net income
(loss) to net cash and cash equivalents
used in operating activities:
Loss on investments in subsidiaries 86,330 -- -- (86,330) --
Write-down of deferred acquisition activities -- 489 -- -- 489
Write-down of property, plant and equipment -- 1,094 -- -- 1,094
Depreciation 9,340 312 -- 9,652
Adjustments of liabilities subject to
compromise -- (22,442) -- -- (22,442)
Changes in operating assets and liabilities -- 13,640 3,534 -- 17,174
---------- ---------- ---------- ---------- ----------
Net cash and cash equivalents used in
operating activities -- (30,091) (776) -- (30,867)
INVESTING ACTIVITIES
Purchase of fixed assets -- (11,482) (359) -- (11,841)
Proceeds on disposal of fixed assets -- 152 -- -- 152
---------- ---------- ---------- ---------- ----------
Net cash and cash equivalents used in
investing activities -- (11,330) (359) -- (11,689)
FINANCING ACTIVITIES
Issuance of preferred stock -- 48,125 -- -- 48,125
Distribution to parent -- (87,522) -- -- (87,522)
Net proceeds from DIP credit facility -- 2,124 1,002 -- 3,126
Net proceeds from issuance of long term debt -- 222,000 -- -- 222,000
Principal payments on long term debt -- (1,300) -- -- (1,300)
Principle payments on pre-petition liabilities -- (146,490) -- -- (146,490)
Principle payments on capital lease -- (2,377) (29) -- (2,406)
---------- ---------- ---------- ---------- ----------
Net cash and cash equivalents provided by
financing activities -- 34,560 973 -- 35,533
Effect of foreign currency translations -- -- (128) -- (128)
---------- ---------- ---------- ---------- ----------
Net change in cash and cash equivalents -- (6,861) (290) -- (7,151)
Cash and cash equivalents at beginning of year -- 9,551 468 -- 10,019
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of year $ -- $ 2,690 $ 178 $ -- $ 2,868
========== ========== ========== ========== ==========
</TABLE>
F-35
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18. Guarantor Subsidiaries (Continued)
<TABLE>
SUPPLEMENTAL CONDENSED CONSOLIDATING STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1999
(DOLLARS IN THOUSANDS)
PARENT GUARANTOR NON-GUARANTOR
COMPANY SUBSIDIARIES SUBSIDARIES ELIMINATIONS CONSOLIDATED
<S> -------- ----------- -------------- ------------ ----------
OPERATING ACTIVITIES <C> <C> <C> <C> <C>
Net income (loss) $ (17,113) $ (10,290) $ (6,823) $ 17,113 $ (17,113)
Adjustment to reconcile Net income
(loss) to net cash and cash equivalents
used in operating activities:
Loss on investments in subsidiaries 17,113 -- -- (17,113) --
Write-down of property, plant & equipment -- 360 -- -- 360
Depreciation -- 9,094 284 -- 9,378
Deferred finance amortization -- 1,592 -- -- 1,592
Goodwill and License fee amortization -- 228 -- -- 228
Gain on sale of fixed assets -- (57) -- -- (57)
Adjustments of liabilities subject to
compromise -- -- -- -- --
Changes in operating assets and liabilities -- 7,989 (10,267) -- (2,278)
---------- ---------- ---------- ---------- ----------
Net cash and cash equivalents used in
operating activities -- 8,916 (16,806) -- (7,890)
INVESTING ACTIVITIES
Purchase of fixed assets -- (10,536) (134) -- (10,670)
Proceeds on disposal of fixed assets -- 1,274 1 -- 1,275
Purchase of CAT, net of cash acquired -- (2,289) -- -- (2,289)
---------- ---------- ---------- ---------- ----------
Net cash and cash equivalents used in
investing activities -- (11,551) (133) -- (11,684)
FINANCING ACTIVITIES
Issuance of preferred stock -- -- -- --
Distribution to parent -- (12,950) 12,950 -- --
Net borrowings under line-of-credit agreement . -- 24,101 3,828 -- 27,929
Net proceeds from issuance of long term debt .. -- -- -- -- --
Principal payments on long term debt -- (3,600) -- -- (3,600)
Principal payment on long-term notes (CAT) -- (374) -- -- (374)
Principle payments on capital lease -- -- (15) -- (15)
---------- ---------- ---------- ---------- ----------
Net cash and cash equivalents provided by
financing activities -- 7,177 16,763 -- 23,940
Effect of foreign currency translations -- -- 6 -- 6
---------- ---------- ---------- ---------- ----------
Net change in cash and cash equivalents -- 4,541 (170) -- 4,371
Cash and cash equivalents at beginning of year -- 2,690 178 -- 2,868
---------- ---------- ---------- ---------- ----------
Cash and cash equivalents at end of year $ -- $ 7,231 $ 8 $ -- $ 7,239
========== ========== ========== ========== ==========
</TABLE>
F-36
<PAGE>
CLUETT AMERICAN CORP. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
19. UNAUDITED QUARTERLY FINANCIAL INFORMATION
(Dollars in thousands)
Quarterly financial information for 1998 and 1999 is summarized as follows:
Year Ended Quarter
December 31, First Second Third Fourth
1998
Net Sales $ 92,355 $ 76,279 $ 93,264 $ 111,225
Gross Profit 28,449 23,747 27,007 29,595
Net Income (Loss) 2,341 (11,025) (715) (27,435)(1)
1999
Net Sales 81,099 79,219 87,438 95,764
Gross Profit 23,712 22,509 22,492 25,681
Net Loss $ (2,165) $ (4,524) $ (4,939) $ (5,485)
Notes:
(1) Includes $24.3 million in post-petition interest expense allocated to the
Company by Holdings
F-37
<PAGE>
Item 9. Changes in and disagreements with with Accountants on Accounting
and Financial Disclosures
None other than previously reported on Cluett American Corp.'s Form 8-K
dated January 3, 2000 and filed January 10, 2000.
PART III
Item 10. Directors and Executive Officers of the Registrant
Set forth below are the names and positions of the directors and executive
officers of the Parent and the Company. All directors hold office until the next
annual meeting of stockholders of the Parent and the Company, and until their
successors are duly elected and qualified. All officers serve at the pleasure of
the Board of Directors.
<TABLE>
<S> <C> <C>
NAME AGE POSTION(S)
- ----------------- ----- ---------------------------------------------------------------------
Bryan P. Marsal 49 Director and Chief Executive Officer of Holdings, CAG and the Company
James A. Williams 57 Director of Holdings, CAG and the Company; President
and Chief Executive Officer of the Sock Group
Joseph A. Rosato 41 President and Chief Operating Officer of the Shirt Group
William S. Sheely 41 Executive Vice President--Operations of the Sock Group
Kathy D. Wilson 40 Senior Vice President and Chief Financial Officer of the Sock Group
W. Todd Walter 34 Vice President and Chief Financial Officer of Holdings,
CAG, the Shirt Group and the Company
Scott R. Coleman 39 Acting General Counsel of Holdings, CAG and the Company
Norman W. Alpert 41 Director of Holdings, CAG and the Company
Sander M. Levy 38 Director of Holdings, CAG and the Company
Daniel S. O'Connell 46 Director of Holdings, CAG and the Company
Steven M. Silver 31 Director of Holdings, CAG and the Company
Neil P. DeFeo 53 Director of Holdings, CAG and the Company
</TABLE>
BRYAN P. MARSAL is a founding Managing Director of A&M, a firm that was
formed in 1983. Mr. Marsal has been Chief Executive Officer of the Company since
1995. Mr. Marsal is a director of Timex Corporation and Aearo Corporation. Mr.
Marsal received both a B.B.A. and an M.B.A. from the University of Michigan.
JAMES A. WILLIAMS is President of the Sock Group. Mr. Williams joined the
Sock Group in July 1986 as Senior Vice President--Sales and Marketing and was
promoted to his current position as President in August 1991. Mr. Williams is a
director of Ithaca Industries, Inc. and Esprit de Corp. and is the Chairman and
a director of Maidenform Worldwide Inc. Prior to joining the Company, he worked
for 15 years for Adams-Millis Corporation, where his last position was Senior
Vice President--Sales and Marketing. Mr. Williams earned a B.S. in chemistry
from the University of Southern Mississippi.
JOSEPH. A. ROSATO is the President and Chief Operating Officer of Cluett
Peabody & Co. Mr. Rosato joined the Company in September 1999. Mr. Rosato has 16
years of experience in the apparel industry. He has worked for Phillips-Van
Heusen Corporation, Tommy Hilfiger, Inc., and most recently Warnaco Group, Inc.,
and has held various positions in sourcing and production related areas. Mr.
Rosato earned a B.A. from New York University and an M.B.A. from Pace
University.
WILLIAM S. SHEELY is the Executive Vice President--Operations of the Sock
Group. Mr. Sheely joined the Company as Vice President of Finance and Controller
of the Sock Group in February 1993 and was promoted to his current position of
Executive Vice President--Operations in April 1994. Prior to his tenure with the
Company, Mr. Sheely was controller at Kayser-Roth's sock division where he was
employed for seven years, and with Springs Industries for five years in various
financial positions. Mr. Sheely is a graduate of the University of South
Carolina where he received a B.S. in Business Administration - Accounting and is
also a C.P.A.
KATHY D. WILSON is the Senior Vice President and Chief Financial Officer of
the Sock Group. Ms. Wilson joined the Company in January 1994 and became Vice
President of Finance in April 1994. During the three years prior to joining the
Company, Ms. Wilson had a consulting practice in Singapore for the hotel
industry. She also worked five years with various accounting firms. Ms. Wilson
earned a B.S. in Business Administration - Accounting from the University of
North Carolina and is also a C.P.A.
W. TODD WALTER is a Director of A&M and became the Chief Financial Officer
of the Parent and the Company effective March 1999. Mr. Walter joined A&M in May
1996 and has served in various financial and operating positions at client
companies. Between June 1992 and April 1996, Mr. Walter was a Vice President in
the Special Loan Group at Chemical Bank in New York. Mr. Walter earned a B.A
degree from Middlebury College and an M.B.A. degree from the Darden Graduate
School of Business Administration, University of Virginia.
SCOTT R. COLEMAN is Acting General Counsel and Secretary of the Parent and
the Company effective August 1999. Mr. Coleman joined the Company in July 1998
as Assistant General Counsel. Prior to joining the Company, Mr. Coleman worked
for four years as corporate associate at Paul, Weiss, Rifkind, Wharton &
Garrison, and five years as an attorney for the City of New York. Mr. Coleman
earned a J.D. from New York University School of Law and a B.A. from Columbia
College.
NORMAN W. ALPERT is a Managing Director of Vestar Capital Partners and was
a founding partner of Vestar at its inception in 1988. Mr. Alpert is Chairman of
the Board of Directors of Aearo Corporation and Advanced Organics, Inc., and
a director of Russell-Stanley Holdings, Inc., Siegelgale Holdings, Inc. and
Remington Products Company, L.L.C., all companies in which Vestar or its
affiliates have a significant equity interest. Mr. Alpert received an A.B.
degree from Brown University.
SANDER M. LEVY is a Managing Director of Vestar and was a founding partner
of Vestar at its inception in 1988. Mr. Levy is a director of Gleason
Corporation and St. John Knits, Inc., companies in which Vestar or its
affiliates have a significant equity interest. Mr. Levy received a B.S. degree
from The Wharton School of the University of Pennsylvania and an M.B.A. degree
from Columbia University.
DANIEL S. O'CONNELL is the founder and Chief Executive Officer of Vestar
Capital Partners. Mr. O'Connell is a director of Aearo Corporation, Insight
Communications Company, L.P., Remington Products Company, L.L.C., Russell-
Stanley Holdings, Inc., Sheridan Healthcare, Inc., Siegelgale Holdings, Inc. and
St. John Knits, Inc., all companies in which Vestar or its affiliates have a
significant equity interest. Mr. O'Connell received an A.B. degree from Brown
University and an M.P.P.M. degree from Yale University School of Management.
STEVEN M. SILVER is a Vice President of Vestar Capital Partners. Mr. Silver
joined Vestar in May of 1995. Between July 1990 and July 1993, Mr. Silver was an
analyst in Wasserstein Perella & Co.'s mergers and acquisitions groups in New
York and London. Mr. Silver holds a B.A. degree from Yale College and an M.B.A.
degree from Harvard University.
NEIL P. DEFEO has served as President, Chief Executive Officer and a
director of Remington Products Company, L.L.C. since January 1997. Mr. DeFeo is
a director of Driscoll Strawberry Associates, Inc. From 1993 to 1996, Mr. DeFeo
was Group Vice President, U.S. Operations for The Clorox Company. For 25 years
prior to 1993, Mr. DeFeo worked for Procter & Gamble in various executive
positions, including Vice President and Managing Director, Worldwide Strategic
Planning, Laundry and Cleaning Products. Mr. DeFeo holds a B.S.E.E. from
Manhattan College.
Compliance with Section 16(a) of the Exchange Act
Each new executive officers of the Company was required to file an Initial
Statement of Beneficial Ownership of Securities on Form 3 to report his or her
beneficial ownership of equity securities of the Company August 11, 1999 and
November 20, 1999, the effective date the individuals became a reporting person.
Through an oversight such forms were not filed until early in 2000. None of such
directors or officers reported beneficial ownership of any equity securities of
the Company.
Item 11. Executive Compensation
The following table sets forth the cash and noncash compensation earned by
the Chief Executive Officer and the four other most highly compensated executive
officers of the Parent and the Company.
SUMMARY COMPENSATION TABLE
<TABLE>
LONG-TERM
COMPENSATION
AWARDS
------------------
ANNUAL COMPENSATION
-------------------
SECURITIES
UNDERLYING ALL OTHER
YEAR SALARY ($) BONUS OPTIONS (#) COMPENSATION
------------ ---------- ----------------- --------------- ------------------
<S> <C> <C> <C> <C> <C> <C>
Bryan P. Marsal(1) 1999 $700,000 0 0 0
Chief Executive Officer of 1998 700,000 0 0 0
Holdings and the Company 1997 700,000 0 0 0
James A.Williams 1999 432,600 $412,000 0 0
President of the Sock Group 1998 412,000 400,000 0 0
1997 400,000 410,000 0 0
Philip L. Molinari 1999 0 0 0 $347,000 (2)
Former President of the Shirt 1998 330,000 150,000 0 52,000 (3)
Group 1997 320,000 0 0 0
Robert J. Riesbeck 1999 260,800 41,000 (4) 0 0
Former Executive Vice President 1998 235,000 124,000 0 0
and Chief Operating and 1997 181,000 0 0 0
Financial Officer of the
Shirt Group
William S. Sheely 1999 170,000 162,500 0 0
Executive Vice President 1998 162,000 156,000 0 0
--Operations of the Sock Group 1997 156,000 150,000 0 0
Kathy D. Wilson 1999 165,000 150,000 0 0
Senior Vice President and 1998 150,000 135,900 0 0
Chief Financial Officer of the Sock 1997 135,900 140,000 0 0
Group
</TABLE>
(1) A&M also received, for services other than those of Mr. Marsal, compensation
of $738,000, $257,000, and $263,000 for each of 1997, 1998, and 1999,
respectively.
(2) Severance paid as part of termination of employment that was effective
December 31, 1998.
(3) Accrued vacation pay and deferred compensation paid at time of termination
of employment.
(4) Effective October 31, 1999, Robert Riesbeck no longer acted in the capacity
of executive officer.
Employment and Severance Agreements
Mr. Williams entered into an employment agreement with the Sock Group
effective as of March 7, 1997, pursuant to which he serves as President and
Chief Executive Officer of the Sock Group. Such employment agreement provides
for Mr. Williams to receive an annual base salary of $400,000. Mr. Williams is
also entitled to annual incentive bonuses under the Sock Group's executive
management incentive plan, with no guaranteed minimum bonus amount. The
employment agreement continues until terminated (a) by the Sock Group with or
without cause or (b) by Mr. Williams with cause or upon 90 days notice. In the
event that Mr. Williams' employment is terminated without cause by the Sock
Group or with cause by Mr. Williams, Mr. Williams will be entitled to severance
pay in an amount equal to two times the sum of $400,000 plus his average annual
bonus calculated from prior years, up to a maximum severance of $1,200,000.
Each of Mr. Sheely, Ms. Wilson and Mr. Coleman (each an "Employee") have
entered into severance agreements. Each Employee is entitled to severance pay
equal to his or her current base salary for a period of one year (excluding
bonus compensation) with the exception of Mr. Coleman, upon the occurrence of
the termination of his or her employment without cause. Mr. Coleman's
entitlement covers a period of six months. These severance payments cease upon
the Employee becoming a full-time employee or full-time consultant (including
self-employment) of another entity. Each of the severance agreements described
in this paragraph terminates one year from the date of the consummation of the
Plan.
Mr. Molinari's employment with the Company terminated as of December 31,
1998. Mr. Molinari will receive severance payments equal to his base salary for
a period of up to one year. In addition, the Company exercised its call rights
and purchased the shares of Holdings Common Stock owned by Mr. Molinari at the
initial purchase price paid by Mr. Molinari in May 1998.
Mr. Kaufman's employment with the Company terminated as of September 30,
1999. The Company exercised its call rights and purchased the shares of Holdings
Common Stock owned by Mr. Kaufman at the initial purchase price paid by Mr.
Kaufman in May 1998.
Mr. Riesbeck stopped serving as executive officer effective October 31,
1999, but continued to receive salary continuation through on March 31,
2000. The Company exercised its call rights and purchased the shares of Holdings
Common Stock owned by Mr. Riesbeck at the initial purchase price paid by Mr.
Riesbeck in May 1998.
Bonus Plans
Executive officers along with certain other employees (the "Participants")
of each of the Shirt Group and the Sock Group participate in incentive
compensation plans pursuant to which the Participants are eligible to receive
bonus compensation based upon annual minimum EBITDA targets and upon the
weighing of certain other performance criteria by Bryan P. Marsal and the
Compensation Committee of the Board of Directors. Yearly bonus awards under the
incentive plans are limited to 100% of the respective Participant's annual
salary.
<PAGE>
Management Equity Participation
In connection with the Recapitalization, Holdings (i) permitted the
Management Investors to subscribe in the aggregate for up to 5.1% of the
outstanding Holdings Common Stock (the "Purchased Stock") and (ii) adopted a
stock option plan (the "Option Plan") providing for options to purchase shares
of Holdings Common Stock ("Options") to be granted to the Management Investors
at the consummation of the Recapitalization and to certain other employees of
Holdings and its subsidiaries from time to time thereafter, in each case in
order to provide additional compensation and financial incentives to Management
Investors and such other employees. The Option Plan may be amended, suspended or
terminated by the Holdings' Board of Directors at any time.
Purchased Stock. On May 18, 1998 (the "the Recapitalization closing date"),
the Management Investors became holders of an aggregate of $1.8 million of
Purchased Stock, representing 5.1% of the outstanding Holdings Common Stock on
the Recapitalization closing date. All Purchased Stock is subject to certain
forfeiture provisions referred to in the paragraph entitled "Puts and Calls"
below.
Stock Options. On the Recapitalization closing date, Holdings agreed to
grant nonqualified Options to purchase 5% of Holdings Common Stock (on a fully
diluted basis). Such Options will (i) vest and become exercisable in equal
installments in each of the five years following the grant date, (ii) expire ten
years from the grant date, or earlier in certain instances of termination of
employment and upon certain change of control events, and (iii) have an exercise
price equal to $98.01 (the per share price at which Vestar, A&M, the
Co-Investors and the Management Investors acquired shares of Holdings Common
Stock in the Recapitalization). From time to time following the
Recapitalization, the Board of Directors of Holdings, or a compensation
committee thereof, may grant these or additional Options under the Option Plan
to various employees of Holdings, the Company and their subsidiaries on terms,
including vesting schedule, term and exercise price, determined by the Board of
Directors or such committee in accordance with the Option Plan. No options have
been granted under the Option Plan through December 31, 1999.
Puts And Calls. Purchased Stock, Options and Holdings Common Stock purchased
upon the exercise of Options will be subject to certain put and call provisions
relating to the death, disability, retirement and termination of employment of
the holder. Put and call prices will vary depending on the number of years since
grant or purchase, the reason the put or call became exercisable, and the fair
market value and initial purchase price of Holdings Common Stock subject to the
put or call. Under certain circumstances, Holdings is permitted (i) to defer
exercise of the put or call to the extent prohibited by financing agreements or
other instruments, and (ii) to pay the purchase price under the put or call in
prime-rate junior subordinated notes with maturities up to five years.
Compensation of Directors
Directors of the Company who are neither employees of the Company nor
affiliated with Vestar receive annual compensation of $20,000 payable quarterly
for services in such capacity. Other directors do not receive any compensation
for services in such capacity.
Compensation Committee Interlocks and Insider Participation
Directors Alpert and Levy, each of whom is affiliated with Vestar, are the
members of the Compensation Committee which reviews the future compensation and
benefits of the Company's executive officers and key employees.
Since the Recapitalization, each of these individuals has had an interest
in transactions or business relationships involving the Company. See the
information contained in Item 13, "Certain Relationships and Related
Transactions", which is incorporated herein by reference.
Report on Executive Compensation
This report sets forth the compensation policies that guide decisions of
the Compensation committee with respect to the compensation of the Company's
executive officers. This report also reviews the rationale for pay decisions
that affected Mr. Marsal during the 1999 fiscal year, and, in that regard,
offers additional insight into the figures that appear in the compensation
tables which are an integral part of the overall disclosures of executive
compensation. Any consideration to pay-related actions that may become effective
in future fiscal years are not reported in this statement.
The central responsibility of the Compensation Committee is to oversee
compensation practices of the Company's executive offices. In this capacity, it
reviews salaries, benefits, and other compensation paid to the Company's
executive officers and recommends actions to the full Board of Directors with
respect to those matters.
The Compensation Committee is dedicated to ensuring that the Company's
financial resources are used effectively to support the achievement of its
short-term and long-term business objectives. In general, it is the policy of
the Company that executive compensation reflect relevant market standards for
individuals with superior capabilities and be driven substantially by the
Company's performance as measured by the achievement of internally generated
earnings targets. The members of the Compensation committee believes that the
Company's executive compensation program is well structured to achieve its
objectives.
<PAGE>
Item 12. Security Ownership of Certain Beneficial Owners and Management
All of the issued and outstanding shares of common stock of the Company are
held by Cluett American Group ("CAG"), which is a wholly-owned subsidiary of
Cluett American Investment Corp. ("Holdings"). The following table sets forth,
as of February 29, 2000, certain information regarding the beneficial ownership
of the voting securities of Holdings by each person who beneficially owns more
than 5% of any class of Holdings voting securities and by the directors and
certain executive officers of Holdings, individually, and by the directors and
executive officers of Holdings as a group. Except as indicated below, the
address for each of the persons listed below is c/o Cluett American Corp., 48 W
38th Street, New York, NY 10018.
HOLDINGS COMMON STOCK
-------------------------
SHARES BENEFICIALLY OWNED
-------------------------
NUMBER OF PERCENT OF
SHARES COMMON
5% STOCKHOLDERS:
Vestar Capital Partners III, L.P. ......... 217,285 60.8%(1)
245 Park Avenue
New York, New York 10017
A&M ........................................ 49,995 14.0%(1)
599 Lexington Avenue
Suite 2700
New York, New York 10022
Societe Anonyme D'Etudes et de Participation
Industrielles
et Commerciales .......................... 24,699 6.9%(1)
114 rue de Turenne
75003 Paris
Cerebus Partners, L.P ...................... 20,622 5.8%(1)
450 Park Avenue
New York, New York 10022
OFFICERS AND DIRECTORS:
Bryan P. Marsal(2) ......................... 49,995 14.0%
James A. Williams .......................... 4,388 1.2%
Norman W. Alpert(3) ........................ 217,285 60.8%
Sander M. Levy(3) .......................... 217,285 60.8%
Daniel S. O'Connell(3) ..................... 217,285 60.8%
Steven M. Silver(3) ........................ 217,285 60.8%
Kathy D. Wilson ............................ 2,041 (4)
William S. Sheely .......................... 1,633 (4)
All executive officers and directors as a
group (11 persons)(2)(3) .................. 275,342 77.1%
(1) For a discussion of certain voting arrangements among these holders see
Item 13. "Certain Relationship and Related Transactions--Stock Ownership
and Stockholder's Agreement". Each of Vestar, A&M, Societe Anonyme
D'Etudes et de Participation Industrielles et Commerciales ("SAEPIC") and
Cerebus Partners, L.P. disclaims the existence of a group and disclaims
beneficial ownership of Holdings Common Stock not owned of record by them.
(2) Includes shares owned by A&M. Mr. Marsal disclaims the existence of a group
and disclaims beneficial ownership of the Holdings Common Stock not held by
him.
(3) Includes shares owned by Vestar. Each of Mr. Alpert, Mr. O'Connell, Mr.
Levy, and Mr. Silver disclaims the existence of a group and disclaims
beneficial ownership of the Holdings Common Stock not held by him.
(4) Less than 1%.
Item 13. Certain Relationships and Related Transactions
Issuance Of Shares Pursuant To Recapitalization
In connection with the Plan and pursuant to the Subscription Agreement, the
Equity Investors made the Equity Investment in Holdings. Approximately $52.7
million of the Equity Investment was provided by Vestar in the form of a $21.3
million common equity investment in Holdings Common Stock and a $31.4 million
investment in Holdings Class C Junior Preferred Stock. Approximately $8.6
million of the Equity Investment was provided by the Co-Investors in the form of
a $3.5 million investment in Holdings Common Stock and a $5.1 million investment
in Holdings Class C Junior Preferred Stock. A&M and the Management Investors
provided the remaining Equity Investment in the form of a $4.9 million and $1.8
million investment in Holdings Common Stock, respectively. Each of these
issuances of securities were made in reliance on Section 4(2) of the Securities
Act of 1993, as amended (the "Securities Act"). The balance of the Holdings
Common Stock is held by former stockholders of Holdings.
Stock Ownership And Stockholders' Agreement
In the Recapitalization: (i) Vestar acquired 60.8% of the outstanding
Holdings Common Stock, (ii) A&M acquired 14% of the outstanding Holdings Common
Stock, (iii) the Management Investors acquired in the aggregate 5.1% of the
outstanding Holdings Common Stock, and (iv) the Co-Investors acquired 10% of the
outstanding Holdings Common Stock. Following the Recapitalization, the former
stockholders of Holdings (the "Original Equity Holders") retained in the
aggregate 10.1% of the outstanding Holdings Common Stock. There can be no
assurance as to how long any of Vestar, A&M, the Management Investors, the
Co-Investors or the Original Equity Holders will hold their shares of Holdings
Common Stock, although certain transfers by them may be restricted as described
below.
Vestar, A&M, the Co-Investors and the Management Investors (including any
employees of Holdings and its subsidiaries who purchase Holdings Common Stock
from, or are granted options by, Holdings following the Recapitalization) (the
foregoing parties, collectively, the "Initial Investors") and SAEPIC and certain
other Original Equity Holders (SAEPIC and such other Original Equity Holders,
the "Participating Original Equity Holders"; together with the Initial
Investors, the "Participating Stockholders"), have entered into a Stockholders'
Agreement (the "Stockholders' Agreement") which provides for, among other
things, the matters described below.
Transfers Of Holdings Common Stock And Holdings Preferred Stock. Subject to
certain limitations, transfers of Holdings securities by A&M, the Management
Investors, the Co-Investors and the Participating Original Equity Holders will
be restricted unless the transferee agrees to become a party to, and be bound
by, the Stockholders' Agreement. In addition, subject to certain limitations,
A&M, the Management Investors, the Co-Investors and the Participating Original
Equity Holders will agree that, unless a public offering of Holdings securities
(a "Holdings Public Offering") has occurred, they will not transfer any Holdings
securities for a period of five years other than as described below. Under
certain circumstances, the transfer of Holdings securities by Participating
Stockholders to their respective affiliates will be permitted.
Election Of Directors. Subject to certain requirements and exceptions, each
Participating Stockholder will vote all of the Holdings Common Stock owned or
held of record by such Participating Stockholder so as to elect to the Board of
Directors of Holdings and each of its subsidiaries: (i) four designees of
Vestar, (ii) three additional designees of Vestar who are not affiliates of any
Participating Stockholder or employees of Holdings or any of its affiliates and
(iii) three designees of A&M and the Management Investors. The number of
designees to which Vestar and A&M and the Management Investors are entitled
decrease according to a formula based on the number of shares owned as compared
to the number acquired in the Recapitalization. Mr. Marsal shall be Chairman of
the Board of Directors and a designee of A&M and the Management Investors so
long as he remains Chief Executive Officer of Holdings. See Item 10. "Directors
and Executive Officers of the Registrant" for a discussion of the present
officers and directors and their relationship to Vestar and A&M.
Other Voting Matters. So long as Vestar and its affiliates continue to own
at least one-half of the shares of Holdings Common Stock acquired by them in the
Recapitalization, each Participating Stockholder (excluding the Original Equity
Holders) will vote all of its Holdings Common Stock in favor of adopting and
approving any action adopted and approved by the Holdings Board of Directors.
Tag-Along Rights. So long as no Holdings Public Offering shall have
occurred and Vestar and its affiliates continue to own at least one-third of the
shares of Holdings Common Stock acquired by them in the Recapitalization,
subject to certain exceptions, with respect to any proposed transfer of Holdings
Common Stock or Holdings Class C Junior Preferred Stock by Vestar, other than
transfers to affiliates, each other Participating Stockholder will have the
right to require that the proposed transferee purchase a corresponding
percentage of any shares of Holdings Common Stock or Holdings Class C Junior
Preferred Stock, as the case may be, owned by such Participating Stockholder at
the same price and upon the same terms and conditions.
Drag-Along Rights. So long as no Holdings Public Offering shall have
occurred and Vestar and its affiliates continue to own at least one-third of the
shares of Holdings Common Stock acquired by them in the Recapitalization,
subject to certain limitations, each Participating Stockholder will be
obligated, in connection with an offer by a third party to Vestar to purchase
(pursuant to a sale of stock, a merger or otherwise) all of the outstanding
shares of Holdings Common Stock or Holdings Class C Junior Preferred Stock held
by the Participating Stockholders (other than shares not purchased in order to
reserve availability of recapitalization accounting treatment), to transfer all
of its shares of Holdings Common Stock or Holdings Class C Junior Preferred
Stock to such third party on the terms of the offer accepted by Vestar.
Participation Rights. So long as no Holdings Public Offering shall have
occurred and Vestar and its affiliates continue to own at least one-third of the
shares of Holdings Common Stock acquired by them in the Recapitalization, under
certain circumstances, if Holdings or its subsidiaries propose to issue any
common stock to an Initial Investor or Participating Original Equity Holder or
to an affiliate thereof, each other Initial Investor or Participating Original
Equity Holder shall have the opportunity to purchase such Holdings Common Stock
on a pro rata basis.
Right Of First Refusal. After five years and prior to a Holdings Public
Offering, if A&M, a Management Investor, the Co-Investors or a Participating
Original Equity Holder or any of their transferees receives an offer to purchase
any Holdings securities held by it, other than from its affiliate, and such
Participating Stockholder or transferee wishes to accept such offer, then such
Participating Stockholder or transferee shall be required to offer such
securities first to Holdings (or its designee) on the same terms and conditions
(provided that Holdings may pay cash consideration equivalent to any non-cash
consideration offered) before accepting such third-party offer.
Registration Rights. Subject to certain limitations, upon a written request
by Vestar, its affiliates or its transferees, Holdings will use its best efforts
to effect the registration of all or part of the Holdings Common Stock owned by
Vestar or such affiliate or transferee, provided that (i) Holdings will not be
required to effect more than one registration within any 360-day period and (ii)
no more than six such registrations may be requested, unless the requesting
party agrees to pay all costs and expenses thereof.
Incidental Registration. Under certain circumstances, if Holdings proposes
to register shares of Holdings Common Stock, it will, upon the written request
of any Participating Stockholder, use all reasonable efforts to effect the
registration of such Participating Stockholder's common stock.
Termination. The Stockholders' Agreement will terminate (i) in full on the
earliest of (A) the Initial Investors and their affiliates owning less than 5%of
the outstanding Holdings Common Stock (on a fully diluted basis) or (B) the
Participating Stockholders, including their affiliates and transferees, owning
less than 50% of the outstanding Holdings Common Stock (on a fully diluted
basis) and (C) ten years after the Recapitalization and (ii) as to any Holdings
securities, on the date such securities are sold in a public offering or
pursuant to Rule 144.
<PAGE>
Other Relationships
Management Advisory Agreement. Holdings will pay a $500,000 annual
management fee to Vestar in consideration for certain advisory and consulting
services provided by Vestar (excluding investment banking or other financial
advisory services and full- or part-time employment by Holdings or any of its
subsidiaries of any employee or partner of any of Vestar and its affiliates, in
each case for which Vestar and its affiliates shall be entitled to receive
additional compensation). Holdings has agreed to reimburse Vestar for expenses
incurred in connection with, and to indemnify Vestar and its affiliates for any
liabilities arising from, such advisory and consulting services.
Management Loans. At the closing of the Recapitalization, Holdings loaned
$1.35 million to A&M, and $0.9 million to the Management Investors, in order to
provide A&M and such Management Investors with funds to be applied to a portion
of the purchase price of the Holdings Common Stock to be issued to A&M and such
Management Investors in connection with the Recapitalization. Such recourse
loans (i) are secured by pledges of the Holdings common stock purchased by the
respective borrowers, (ii) have a term of seven years, (iii) bear interest at an
annual rate of 5.69%, and (iv) are subject to mandatory prepayment (a) with the
net proceeds of any sales of Holdings Common Stock and (b) in full in certain
other events including, in the case of the Management Investors, if the
employment by Holdings and its subsidiaries of such Management Investor
terminates other than as a result of death, disability or retirement. The terms
of these loans may be more favorable to Management Investors than terms
obtainable from an unrelated third-party.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K.
(a) (1) Financial Statements
Included in Part II, Item 8
Consolidated Balance Sheets as of December 31, 1998 and
December 31, 1999
Consolidated Statements of Operations for the years ended
December 31, 1997, December 31, 1998 and December 31, 1999
Consolidated Statements of Stockholder's Deficit for the
years ended December 31, 1997, December 31, 1998 and
December 31, 1999
Consolidated Statements of Cash Flows for the years ended
December 31, 1997, December 31, 1998 and December 31, 1999
Notes to Consolidated Financial Statements
(2) Financial Statement Schedule
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
<PAGE>
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).
2.3Stockholders' 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).
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 121/2% 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).
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
10.2.2 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 10.2.3 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 Exhibit 10.2.4
to the Company's Quarterly Report on Form 10-Q (Reg No. 333-58059) filed on
November 16, 1999).
10.2.5 Investment and Deposit Agreement between Vestar Capital Partners and Bank
of America dated September 30, 1999 (incorporated by reference to Exhibit
10.2.5 to the Company's Quarterly Report on Form 10-Q (Reg No. 333-58059)
filed on November 16, 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 (incorporated by reference to Exhibit
10.2.6 to the Company's Quarterly Report on Form 10-Q (Reg No. 333-58059)
filed on November 16, 1999).
*10.2.7 $7.5 million Amended and Restated Credit Agreement dated as of February
17, 2000, among Cluett American Corp, as the borrower, Bank of America,
N.A. and Vestar Capital Partners III, L.P., as guarantor (filed herewith as
Exhibit 10.2.7).
*10.2.8 Fifth Amendment to Credit Agreement and Waiver dated March 29, 2000 by
and among Cluett American Corp., Cluett American Investment Corp., Cluett
American Group, Inc. and certain subsidiaries, the Existing Lender, New
Lender, and agents (filed herewith as Exhibit 10.2.8).
*10.2.9 Amended and Restated Investment and Deposit Agreement between Vestar
Capital Partners III, L.P. and Bank of America dated March 29, 2000 (filed
herewith as Exhibit 10.2.9).
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).
+10.11 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).
16.1 Letter from Ernst & Young LLP, former Certifying Accountants (incorporated
by reference to Exhibit 16.1 to the Company's Current Report filed on Form
8-K (Reg. No. 333-58059) filed on January 10,2000).
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).
*23.1Consent of Ernst & Young LLP, independent certified public accountants
(filed herewith as Exhibit 23.1)
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)
99.1 Form of Note Letter of Transmittal (incorporated by reference to Exhibit
99.1 to the Company's Registration Statement on Form S-4 (Reg. No.
333-58059) filed on June 30, 1998).
99.2 Form of Preferred Stock Letter of Transmittal (incorporated by reference to
Exhibit 99.2 to the Company's Registration Statement on Form S-4 (Reg. No.
333-58059) filed on June 30, 1998).
99.3 Form of Note Notice of Guaranteed Delivery (incorporated by reference to
Exhibit 99.3 to the Company's Registration Statement on Form S-4 (Reg. No.
333-58059) filed on June 30, 1998).
99.4 Form of Preferred Stock Notice of Guaranteed Delivery (incorporated by
reference to Exhibit 99.4 to the Company's Registration Statement on Form
S-4 (Reg. No. 333-58059) filed on June 30, 1998).
+ This is a management contract or compensatory plan or arrangement
* Filed herewith
(b) No report was filed on Form 8-K during the three months ended December 31,
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.
<PAGE>
Signatures
Pursuant to the requirements of Section 13 or 15(d) 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)
By: /s/ Bryan P. Marsal
-----------------------------------------------------
Name: Bryan P. Marsal
Title: PRESIDENT AND CHIEF EXECUTIVE OFFICER
Date: March 29, 2000
--------------------------------------------------------------
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
/s/ Bryan P. Marsal
--------------------------------------------------------------
Name: Bryan P. Marsal
Title: Director and Chief Executive Officer
Date: March 29, 2000
--------------------------------------------------------------
/s/ W. Todd Walter
--------------------------------------------------------------
Name: W. Todd Walter
Title: Vice President and Chief Financial Officer
Date: March 29, 2000
--------------------------------------------------------------
/s/ James A. Williams
--------------------------------------------------------------
Name: James A. Williams
Title: Director
Date: March 29, 2000
--------------------------------------------------------------
/s/ Norman W. Alpert
--------------------------------------------------------------
Name: Norman W. Alpert
Title: Director
Date: March 29, 2000
--------------------------------------------------------------
/s/ Steven M. Silver
--------------------------------------------------------------
Name: Steven M. Silver
Title: Director
Date: March 29, 2000
--------------------------------------------------------------
/s/ Sander M. Levy
--------------------------------------------------------------
Name: Sander M. Levy
Title: Director
Date: March 29, 2000
--------------------------------------------------------------
/s/ Daniel S. O' Connell
--------------------------------------------------------------
Name: Daniel S. O'Connell
Title: Director
Date: March 29, 2000
--------------------------------------------------------------
<PAGE>
EXHIBIT INDEX
10.2.7 $7.5 million Amended and Restated Credit Agreement dated February 17,
2000.
10.2.8 Fifth Amendment to Credit Agreement and Waiver dated March 29, 2000.
10.2.9 Amended and Restated Investment and Deposit Agreement dated March 29,
2000
23.1 Consent of Ernst & Young, LLP Certified Public Accountant dated March 29,
2000
27 Financial Data Schedule
<PAGE>
Item 14 (d). Financial Statement Schedules
SCHEDULE II
CLUETT AMERICAN CORP.
VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<CAPTION>
COLUMN A COLUMN B COLUMN C COLUMN D COLUMN E
- -------- -------- -------------------- -------- --------
ADDITIONS
--------------------
CHARGED TO CHARGED BALANCE
BEGINNING COSTS AND TO OTHER AT END
DESCRIPTION BALANCE EXPENSES ACCOUNTS DEDUCTIONS OF YEAR
- ----------- ------- -------- -------- ---------- -------
<S> <C> <C> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997:
Deduction from asset account:
Allowance for Doubtful Accounts $ 3,292 $ (717) -- $ 773(1) $ 1,802
Customer Allowances 12,122 6,877 -- 10,828(1) 8,171
Inventory Reserves 4,550 2,937 -- 3,002(1) 4,485
----- ----- ----- ------- -----
Total $19,964 $ 9,097 -- $14,603(1) $14,458
======= ======= ===== ========= =======
YEAR ENDED DECEMBER 31, 1998 :
Deduction from asset account:
Allowance for Doubtful Accounts $ 1,802 $ 424 -- $ 616(1) $ 1,610
Customer Allowances 8,171 12,432 -- 13,751(1) 6,852
Inventory Reserves 4,485 14,470 -- 13,807(1) 5,149
----- ------ ------ -------- -----
Total $14,458 $27,326 -- $28,174(1) $13,611
======= ======= ====== ========= =======
YEAR ENDED DECEMBER 31, 1999:
Deduction from asset account:
Allowance for Doubtful Accounts $ 1,610 $ 327 -- $ 317(1) $ 1,620
Customer Allowances 6,852 12,403 -- 10,701(1) 8,554
Inventory Reserves 5,149 3,178 -- 5,705(1) 2,622
----- ----- ----- ------- -----
Total $13,611 $15,908 -- $16,723(1) $12,796
======= ======= ===== ========= =======
<FN>
(1) Writeoffs, net of recoveries
</FN>
</TABLE>
AMENDED AND RESTATED
CREDIT AGREEMENT
dated as of February 17, 2000
among
Cluett American Corp.,
Vestar Capital Partners III, L.P.
and
BANK OF AMERICA, N. A.
<PAGE>
i
TABLE OF CONTENTS
SECTION 1 DEFINITIONS 1
-----------
1.1 Definitions. 1
1.2 Computation of Time Periods. 7
SECTION 2 CREDIT FACILITIES 7
2.1 Loans 7
2.2 Letter of Credit Facility.
SECTION 3 OTHER PROVISIONS RELATING TO CREDIT FACILITIES 11
----------------------------------------------
3.1 Default Rate. 11
3.2 Extension and Conversion. 11
3.3 Prepayments. 11
3.4 Termination and Reduction of Commitment. 12
3.5 Fees. 12
3.6 Capital Adequacy. 13
3.7 Limitation on Eurodollar Loans. 13
3.8 Illegality. 14
3.9 Requirements of Law. 14
3.10 Treatment of Affected Loans. 15
3.11 Taxes. 15
3.12 Compensation. 16
3.13 Payments, Computations, Etc. 16
3.14 Evidence of Debt. 17
SECTION 4 GUARANTY 17
--------
4.1 The Guaranty. 17
4.2 Obligations Unconditional. 17
4.3 Reinstatement. 18
4.4 Certain Additional Waivers. 18
4.5 Remedies. 18
4.6 Guarantee of Payment; Continuing Guarantee. 19
4.7 Deposit of Capital Call Notices. 19
SECTION 5 CONDITIONS 19
----------
5.1 Closing Conditions. 19
5.2 Conditions to all Extensions of Credit.
SECTION 6 REPRESENTATIONS AND WARRANTIES 20
------------------------------
6.1 Existence and Power. 20
6.2 Authorization. 21
6.3 No Conflicts. 21
6.4 Consents. 22
6.5 Enforceable Obligations. 22
6.6 Permitted Investment. 22
6.7 Venture Capital Operating Company. 22
6.8 Deposited Notices. 22
6.9 Limitations on Actions. 23
SECTION 7 AFFIRMATIVE COVENANTS 23
---------------------
7.1 Outstanding Subscriptions. 23
7.2 General Partner. 23
7.3 Plan Assets, etc. 23
7.4 Receipt of the Funds Pursuant to the Deposited Notices23
SECTION 8 NEGATIVE COVENANTS 23
------------------
8.1 Limitations on Actions. 23
SECTION 9 EVENTS OF DEFAULT 24
-----------------
9.1 Events of Default. 24
9.2 Acceleration; Remedies. 25
9.3 Cash Collateral Account. 25
9.4 Allocation of Fund Payments. 26
9.5 Receipt of Funds Pursuant to the Deposited Notices. 26
SECTION 10 MISCELLANEOUS 26
-------------
10.1 Notices. 26
10.2 Right of Set-Off; Adjustments. 28
10.3 Benefit of Agreement. 29
10.4 No Waiver; Remedies Cumulative. 29
10.5 Expenses; Indemnification. 29
10.6 Amendments, Waivers and Consents. 30
10.7 Counterparts. 30
10.8 Headings. 30
10.9 Survival. 30
10.10 Governing Law; Submission to Jurisdiction; Venue. 30
10.11 Severability. 31
10.12 Entirety. 31
10.13 Binding Effect; Termination. 31
10.14 Limitation on Recourse to the Fund. 31
10.15 Confidentiality. 32
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
Exhibit 5.1(d) Form of Officer's Certificate
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
THIS AMENDED AND RESTATED CREDIT AGREEMENT, dated as of February 17, 2000 (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, the Fund and the Bank are parties to that
certain Credit Agreement dated as of November 9, 1999 (the "Existing Credit
Agreement"); and
WHEREAS, the Borrower, the Fund and the Bank have agreed to amend and
restate the Existing Credit Agreement as set forth herein;
NOW, THEREFORE, IN CONSIDERATION of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
SECTION 1
DEFINITIONS
1.1 Definitions.
As used in this Credit Agreement, the following terms shall have the
meanings specified below unless the context otherwise requires:
"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
of a receiver, liquidator, assignee, custodian, trustee, sequestrator
(or similar official) of such Person or for any substantial part of its
Property or for the winding up or liquidation of its affairs, and such
involuntary case or other case, proceeding or other action shall remain
undismissed, undischarged or unbonded for a period of sixty (60)
consecutive days; or (iii) such Person shall commence a voluntary case
under any applicable bankruptcy, insolvency or other similar law now or
hereafter in effect, or consent to the entry of an order for relief in
an involuntary case under any such law, or consent to the appointment
or taking possession by a receiver, liquidator, assignee, custodian,
trustee, sequestrator (or similar official) of such Person or for any
substantial part of its Property or make any general assignment for the
benefit of creditors; or (iv) such Person shall be unable to, or shall
admit in writing its inability to, pay its debts generally as they
become due.
"Base Rate" means, for any day, the rate per annum equal to
the higher of (a) the Federal Funds Rate for such day plus one-half of
one percent (0.5%) and (b) the Prime Rate for such day. Any change in
the Base Rate due to a change in the Prime Rate or the Federal Funds
Rate shall be effective on the effective date of such change in the
Prime Rate or Federal Funds Rate.
"Base Rate Loan" means any Loan bearing interest at a rate
determined by reference to the Base Rate.
"Borrower" shall have the meaning assigned to such 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.
"Cash Collateral Account" shall have the meaning assigned to
such term in Section 9.3.
"Cash Equivalents" 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) and issue Letters of Credit for the account of the
Borrower in accordance with the provisions of Section 2.2(a).
"Committed Amount" shall have the meaning assigned to such
term in Section 2.1(a).
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 3.2 hereof of a Eurodollar Loan from
one Interest Period to the next Interest Period.
"Convert", "Conversion", and "Converted" shall refer to a
conversion pursuant to Section 3.2 or Sections 3.7 through 3.10,
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 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 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.
"Letter of Credit" means any letter of credit issued by the
Bank for the account of the Borrower in accordance with the terms of
Section 2.2.
"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 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.
"LOC Committed Amount" shall have the meaning assigned to such
term in Section 2.2(a).
"LOC Documents" means, with respect to any Letter of Credit,
any application therefor, and any agreements, instruments, guarantees
or other documents (whether general in application or applicable only
to such Letter of Credit) governing or providing for (i) the rights and
obligations of the parties concerned or at risk or (ii) any collateral
security for such obligations.
"LOC Obligations" means, at any time, the sum of (i) the
maximum amount which is, or at any time thereafter may become,
available to be drawn under Letters of Credit then outstanding,
assuming compliance with all requirements for drawings referred to in
such Letters of Credit plus (ii) the aggregate amount of all drawings
under Letters of Credit honored by the Bank but not theretofore
reimbursed by the Borrower.
"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, 2001.
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"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.
"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.
"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 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 (i) the outstanding aggregate principal
amount of all Loans plus (ii) the outstanding aggregate principal
amount of all LOC Obligations.
"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.
1.2 Computation of Time Periods.
For purposes of computation of periods of time hereunder, the word
"from" means "from and including" and the words "to" and "until" each
mean "to but excluding."
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 SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($7,500,000) (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.
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(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).
(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
Seven Million Five Hundred Thousand Dollars ($7,500,000) 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.
2.2 Letter of Credit Facility.
(a) Issuance. Subject to the terms and conditions hereof and
of the LOC Documents, if any, and any other terms and conditions which
the Bank may reasonably require and in reliance upon the
representations and warranties set forth herein, the Bank agrees to
issue standby and trade Letters of Credit in Dollars from time to time
from the Closing Date until the date five (5) days prior to the
Maturity Date as the Borrower may request, in a form acceptable to the
Bank; provided, however, that (i) the LOC Obligations outstanding shall
not at any time exceed SEVEN MILLION FIVE HUNDRED THOUSAND DOLLARS
($7,500,000) (the "LOC Committed Amount") and (ii) the sum of the
aggregate principal amount of outstanding Loans plus LOC Obligations
outstanding shall not at any time exceed the Committed Amount. No
Letter of Credit shall (x) have an original expiry date more than one
year from the date of issuance or (y) as originally issued or as
extended, have an expiry date extending beyond the Maturity Date. Each
Letter of Credit shall comply with the related LOC Documents. The
issuance and expiry dates of each Letter of Credit shall be a Business
Day.
(b) Notice. The request for the issuance of a Letter of Credit
shall be submitted by the Borrower to the Bank at least three (3)
Business Days prior to the requested date of issuance.
(c) Reimbursement. In the event of any drawing under any
Letter of Credit, the Bank will promptly notify the Borrower. Unless
the Borrower shall immediately notify the Bank that the Borrower
intends to otherwise reimburse the Bank for such drawing, the Borrower
shall be deemed to have requested that the Bank make a Loan in the
amount of the drawing as provided in subsection (d) below on the
related Letter of Credit, the proceeds of which will be used to satisfy
the related reimbursement obligations. The Borrower promises to
reimburse the Bank on the day on which the Bank notifies the Borrower
of a drawing under any Letter of Credit (either with the proceeds of a
Loan obtained hereunder or otherwise) in same day funds provided such
notice is received by the Borrower from the Bank on or before 2:00
P.M.(Charlotte, North Carolina time) (otherwise such payment shall be
made on or before 12:00 Noon (Charlotte, North Carolina time) on the
Business Day next succeeding the day such notice is received). The
unreimbursed amount of any drawing under a Letter of Credit shall bear
interest at a per annum rate equal to (i) for the first two (2)
Business Days following the date of the related drawing, the Adjusted
Base Rate and (ii) thereafter, the Adjusted Base Rate plus 2%. The
Borrower's reimbursement obligations hereunder shall be absolute and
unconditional under all circumstances irrespective of any rights of
setoff, counterclaim or defense to payment the Borrower may claim or
have against the Bank, the beneficiary of the Letter of Credit drawn
upon or any other Person, including without limitation any defense
based on any failure of the Borrower to receive consideration or the
legality, validity, regularity or unenforceability of the Letter of
Credit.
(d) Repayment with Revolving Loans. On any day on which the
Borrower shall have requested, or been deemed to have requested, a Loan
advance to reimburse a drawing under a Letter of Credit, a Loan advance
comprised of Base Rate Loans (or Eurodollar Loans to the extent the
Borrower has complied with the procedures of Section 2.1(b)(i) with
respect thereto) shall be immediately made to the Borrower by the Bank.
(e) Designation of a Subsidiary as an Account Party.
Notwithstanding anything to the contrary set forth in this Credit
Agreement, including without limitation Section 2.2(a), a Letter of
Credit issued hereunder may contain a statement to the effect that such
Letter of Credit is issued for the account of a Subsidiary of the
Borrower, provided that notwithstanding such statement, the Borrower
shall be the actual account party for all purposes of this Credit
Agreement for such Letter of Credit and such statement shall not affect
the Borrower's reimbursement obligations hereunder with respect to such
Letter of Credit.
(f) Renewal, Extension. The renewal or extension of
any Letter of Credit shall, for purposes hereof, be treated in all
respects the same as the issuance of a new Letter of Credit hereunder.
(g) Uniform Customs and Practices. The Bank may have the
Letters of Credit be subject to The Uniform Customs and Practice for
Documentary Credits (the "UCP") or the International Standby Practices
1998 (the "ISP98"), in either case as published as of the date of issue
by the International Chamber of Commerce, in which case the UCP or the
ISP98, as applicable, may be incorporated therein and deemed in all
respects to be a part thereof.
(h) Indemnification; Nature of Bank's Duties.
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(i) In addition to its other obligations under this
Section 2.2, the Borrower hereby agrees to pay, and protect,
indemnify and save the Bank harmless from and against, any and
all claims, demands, liabilities, damages, losses, costs,
charges and expenses (including reasonable attorneys' fees)
that the Bank may incur or be subject to as a consequence,
direct or indirect, of (A) the issuance of any Letter of
Credit or (B) the failure of the Bank to honor a drawing under
a Letter of Credit as a result of any act or omission, whether
rightful or wrongful, of any present or future de jure or de
facto government or Governmental Authority (all such acts or
omissions, herein called "Government Acts").
(ii) As between the Borrower and the Bank, the
Borrower shall assume all risks of the acts, omissions or
misuse of any Letter of Credit by the beneficiary thereof. The
Bank shall not be responsible: (A) for the form, validity,
sufficiency, accuracy, genuineness or legal effect of any
document submitted by any party in connection with the
application for and issuance of any Letter of Credit, even if
it should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged; (B) for the
validity or sufficiency of any instrument transferring or
assigning or purporting to transfer or assign any Letter of
Credit or the rights or benefits thereunder or proceeds
thereof, in whole or in part, that may prove to be invalid or
ineffective for any reason; (C) for errors, omissions,
interruptions or delays in transmission or delivery of any
messages, by mail, cable, telegraph, telex or otherwise,
whether or not they be in cipher; (D) for any loss or delay in
the transmission or otherwise of any document required in
order to make a drawing under a Letter of Credit or of the
proceeds thereof; and (E) for any consequences arising from
causes beyond the control of the Bank, including, without
limitation, any Government Acts. None of the above shall
affect, impair, or prevent the vesting of the Bank's rights or
powers hereunder.
(iii) In furtherance and extension and not in
limitation of the specific provisions hereinabove set forth,
any action taken or omitted by the Bank, under or in
connection with any Letter of Credit or the related
certificates, if taken or omitted in good faith, shall not put
the Bank under any resulting liability to the Borrower or the
Fund. It is the intention of the parties that this Credit
Agreement shall be construed and applied to protect and
indemnify the Bank against any and all risks involved in the
issuance of the Letters of Credit, all of which risks are
hereby assumed by the Borrower, including, without limitation,
any and all Government Acts. The Bank shall not, in any way,
be liable for any failure by it or anyone else to pay any
drawing under any Letter of Credit as a result of any
Government Acts or any other cause beyond the control of the
Bank.
(iv) Nothing in this subsection (h) is intended to
limit the reimbursement obligations of the Borrower contained
in subsection (c) above. The obligations of the Borrower under
this subsection (h) shall survive the termination of this
Credit Agreement. No act or omission of any current or prior
beneficiary of a Letter of Credit shall in any way affect or
impair the rights of the Bank to enforce any right, power or
benefit under this Credit Agreement.
(v) Notwithstanding anything to the contrary
contained in this subsection (h), the Borrower shall have no
obligation to indemnify the Bank in respect of any liability
incurred by the Bank (A) arising out of the gross negligence
or willful misconduct of the Bank, or (B) caused by the Bank's
failure to pay under any Letter of Credit after presentation
to it of a request strictly complying with the terms and
conditions of such Letter of Credit, unless such payment is
prohibited by any Government Act.
(i) Conflict with LOC Documents. In the event of any conflict
between this Credit Agreement and any LOC Document (including any
letter of credit application), this Credit Agreement shall control.
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 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 plus LOC
Obligations outstanding shall exceed the Committed Amount, the
Borrower hereby promises to prepay the Loans immediately and
(after all Loans and have been repaid) cash collateralize the
LOC Obligations 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 plus LOC Obligations outstanding
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.
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(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 Fees.
(a) 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.
(b) Letter of Credit Fees.
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(i) Standby Letter of Credit Issuance Fee. In
consideration of the issuance of standby Letters of Credit
hereunder, the Borrower promises to pay to the Bank a fee of
3.0% per annum on the average daily maximum amount available
to be drawn under each such standby Letter of Credit computed
for each day from the date of issuance to the date of
expiration; such fee will be payable quarterly in arrears on
the last Business Day of each March, June, September and
December and the Maturity Date for the immediately preceding
quarter (or a portion thereof).
(ii) Trade Letter of Credit Drawing Fee. In
consideration of the issuance of trade Letters of Credit
hereunder, the Borrower promises to pay to the Bank a fee of
1.5% per annum on the average daily maximum amount available
to be drawn under each such trade Letter of Credit computed
for each day from the date of issuance to the date of
expiration; such fee will be payable quarterly in arrears on
the last Business Day of each March, June, September and
December and the Maturity Date for the immediately preceding
quarter (or a portion thereof).
(iii) Fronting Fees, etc. In addition to the fees
payable pursuant to clauses (i) and (ii) above, the Borrower
promises to pay to the Bank (i) a letter of credit fronting
fee of 0.125% per annum on the average daily maximum amount
available to be drawn under each Letter of Credit computed for
each day from the date of issuance to the date of expiration
(which fronting fee shall be payable quarterly in arrears on
the last Business Day of each March, June, September and
December and the Maturity Date for the immediately preceding
quarter (or a portion thereof)) and (ii) the customary charges
from time to time of the Bank with respect to the issuance,
amendment, transfer, administration, cancellation and
conversion of, and drawings under, such Letters of Credit.
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:
(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
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, LOC Obligations and other obligations under this Credit
Agreement and the termination of the Commitment hereunder.
(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, LOC Obligations 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
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 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 and the Commitment
under this Credit Agreement has been terminated. 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 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 and shall continue in effect until such time as (a) all principal of
and interest accrued to such date which constitute Borrower Obligations shall
have been paid in full in cash, (b) all fees, expenses and other amounts then
due and payable which constitute Borrower Obligations shall have been paid in
cash, (c) all outstanding Letters of Credit shall have been (i) terminated, (ii)
fully cash collateralized or (iii) secured by one or more letters of credit on
terms and conditions, and with one or more financial institutions, reasonably
satisfactory to the Bank and (d) the Commitment shall have been expired or
terminated in full.
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 or to issue the initial Letter(s) of Credit, whichever
shall occur first, 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 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 (i.e., $7,500,000).
(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) Officer's Certificates. Receipt by the Bank of a
certificate in the form of Exhibit 5.1(d) duly executed
by an Executive Officer of the general partner of the General Partner
as of the Closing Date
5.2 Conditions to all Extensions of Credit.
The obligations of the Bank to make any Loan or issue or extend any
Letter of Credit (including the initial Loans and the initial Letter(s) of
Credit) are subject to satisfaction of the following conditions in addition to
satisfaction on the Closing Date of the conditions set forth in Section 5.1:
(a) The Borrower shall have delivered (i) in the case of any
Loan, an appropriate Notice of Borrowing and (ii) in the case of any
Letter of Credit, the Bank shall have received an appropriate request
for issuance in accordance with the provisions of Section 2.2(b);
(b) The representations and warranties set forth in Section 6
shall, subject to the limitations set forth therein, be true and
correct in all material respects as of such date (except for those
which expressly relate to an earlier date);
(c) There shall not have been commenced against the 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) or to the issuance of
such Letter of Credit, as the case may be, (i) the aggregate principal
amount of outstanding Loans plus LOC Obligations outstanding shall not
exceed the Committed Amount and (ii) the LOC Obligations shall not
exceed the LOC Committed Amount.
The delivery of each Notice of Borrowing, each request for a Letter of Credit
pursuant to Section 2.2(b) 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.
(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, 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
($7,500,000), 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 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 9
EVENTS OF DEFAULT
9.1 Events of Default.
An Event of Default shall exist upon the occurrence and
continuation of any of the following specified events (each an "Event of
Default"):
(a) Payment. 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 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.
(d) Cash Collateral. Direct the Borrower or the Fund to pay
(and the Borrower and the Fund each agree that upon receipt of such
notice, or upon the occurrence of an Event of Default under Section
9.1(e), they will immediately pay) to the Bank additional cash, to be
held by the Bank in a cash collateral account as additional security
for the LOC Obligations in respect of subsequent drawings under all
then outstanding Letters of Credit in an amount equal to the maximum
aggregate amount which may be drawn under all Letters of Credits then
outstanding.
Notwithstanding the foregoing, if an Event of Default specified in
Section 9.1(e) 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 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 Sections 9.2(c) and (d) 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
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--Ret Taylor
Telephone: (704) 386-9368
Telecopy: (704) 409-0012
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 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, LOC Obligations 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 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 2.2(h), 3.11, 3.12 or 10.5 shall survive the execution and delivery of
this Credit Agreement, the making of the Loans, the issuance of the Letters of
Credit, the repayment of the Loans, LOC Obligations and other obligations under
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 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.
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:
FUND: Vestar Capital Partners III, L.P.,
- ----
a Delaware limited partnership
By: Vestar Associates III, L.P.,
its General Partner
By: Vestar Associates corp.III,
its General Partner
By:
Name:
Title:
BANK: BANK OF AMERICA, N. A.
- ----
By: /s/ Robert A. Klawinski
Name: Robert A. Klawinski
Title: Managing Director
<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. $7.5 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
$7,500,000 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: Robert A. Klawinski For Credit to:Corporate Services
Telephone: (704) 387-0467 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
Amended and Restated Credit Agreement dated as of February 17, 2000 (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
Amended and Restated Credit Agreement dated as of February 17, 2000 (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:
<PAGE>
34
Exhibit 5.1(d)
FORM OF OFFICER'S CERTIFICATE
<PAGE> [Attached.]
FIFTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT AND WAIVER (this
"Amendment"), dated as of March 29, 2000, 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, March 19, 1999
and September 30, 1999 (as so previously amended the "Existing Credit
Agreement"); and
WHEREAS, the parties to the Existing Credit Agreement have agreed to
amend the Existing Credit Agreement and waive certain provisions thereof 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. 5 Effective Date" is defined in Subpart 4.1.
------------------------------ -----------
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. 5
Effective Date, the Existing Credit Agreement is hereby amended in accordance
with this Part 2. Except as so amended and except as waived pursuant to the
terms of Part 3, 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 following definitions appearing in Section 1.1 of the Existing
Credit Agreement are amended and restated in their entireties to read as
follows:
"Asset Disposition Prepayment Event" means the receipt by the
Parent or any Consolidated Party of (i) the proceeds of any Asset
Disposition other than an Excluded Asset Disposition and (ii) any
dividend, distribution or other transfer from the Receivables Financing
Subsidiary pursuant to Section 7.14.
"Commitment" means (i) with respect to each Lender, the
Revolving Commitment of such Lender, the Tranche A Term Loan Commitment
of such Lender and the Tranche B Term Loan Commitment of such Lender,
(ii) with respect to the Tranche C Lender, the Tranche C Commitment of
such Lender, (iii) with respect to the Swingline Lender, the Swingline
Commitment and (iv) with respect to the Issuing Lender, the LOC
Commitment.
"Consolidated Cash Taxes" means, for any period, the aggregate
of all taxes of the Consolidated Parties on a consolidated basis for
such period, as determined in accordance with GAAP, to the extent the
same are paid in cash during such period.
"Consolidated Interest Expense" means, for any period, cash
interest expense of the Consolidated Parties on a consolidated basis
for such period, as determined in accordance with GAAP, but in any
event including the amortization of debt discount and premium, the
interest component under Capital Leases, the implied interest component
under Synthetic Leases and interest expense associated with the Tranche
C Obligations, but excluding amortization of deferred financing costs.
"Consolidated Parties" means a collective reference to the
Borrower and its Subsidiaries other than the Receivables Financing
Subsidiary, and "Consolidated Party" means any one of them.
"Consolidated Scheduled Funded Debt Payments" means, as of the
end of each fiscal quarter of the Consolidated Parties, for the
Consolidated Parties on a consolidated basis, the sum of all scheduled
payments of principal on Funded Indebtedness for the applicable period
ending on such date (including the principal component of payments due
on Capital Leases during the applicable period ending on such date); it
being understood that Consolidated Scheduled Funded Debt Payments shall
not include voluntary prepayments or the mandatory prepayments required
pursuant to Section 3.3.
"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;
provided, however, that, notwithstanding the above, the term "Equity
Issuance" shall also include any transaction involving a Sponsor
Support Payment. The term "Equity Issuance" shall not include any Asset
Disposition.
"Excluded Asset Disposition" means (i) any Asset Disposition
to any Consolidated Party if (a) the Credit Parties shall cause to be
executed and delivered such documents, instruments and certificates as
the Agent may request so as to cause the Credit Parties to be in
compliance with the terms of Section 7.13 after giving effect to such
Asset Disposition and (b) after giving effect to such Asset
Disposition, no Default or Event of Default exists, (ii) any casualty
or condemnation event (other than in respect of any Property comprising
the Shirt Group) with respect to which the net proceeds received by the
Parent or the Consolidated Parties are less than $1,000,000, (iii) the
sale or other disposition of any Property (other than inventory and
other than in respect of any Equity Interests or Property comprising
the Shirt Group) in the ordinary course of business, provided that the
aggregate book value of all Property so sold or disposed of in any
twelve consecutive months shall not exceed $2,000,000 and (iv) the sale
or discount without recourse of accounts receivable only in connection
with the compromise thereof or the assignment of past-due accounts for
collection.
"Funded Indebtedness" means, with respect to any Person,
without duplication, 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.
"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 and other than typical indemnity
and repurchase obligations in respect of receivables transferred to the
Receivables Financing Subsidiary in accordance with Sections 8.5)
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.
"Investment and Deposit Agreement" means the Amended and
Restated Investment and Deposit Agreement, dated as of March 29, 2000,
between the Sponsor and the Agent, as amended, modified, restated or
supplemented from time to time.
"Lender" means any of the Persons identified as a "Lender" on
the signature pages hereto, and any Eligible Assignee which may become
a Lender by way of assignment in accordance with the terms hereof,
together with their permitted successors and assigns. The term "Lender"
shall also mean any Revolving Lender, Tranche A Term Lender, Tranche B
Term Lender or the Tranche C Lender.
"Loan" or "Loans" means the Revolving Loans, the Tranche A
Term Loans, the Tranche B Term Loans, the Tranche C Loans (or a portion
of any Revolving Loan, Tranche A Term Loan, Tranche B Term Loan or
Tranche C Loan bearing interest at the Adjusted Base Rate or the
Adjusted Eurodollar Rate) and/or the Swingline Loans (or any Swingline
Loan bearing interest at the Adjusted Base Rate or the Quoted Rate and
referred to as a Base Rate Loan or a Quoted Rate Swingline Loan),
individually or collectively, as appropriate.
"LOC Documents" means, with respect to any Letter of Credit or
any Tranche C Letter of Credit, any application therefor, and any
agreements, instruments, guarantees or other documents (whether general
in application or applicable only to such Letter of Credit or Tranche C
Letter of Credit) governing or providing for (i) the rights and
obligations of the parties concerned or at risk or (ii) any collateral
security for such obligations.
"Material Domestic Subsidiary" means, at any time, any direct
or indirect Domestic Subsidiary (other than the Receivables Financing
Subsidiary) which (i) is not in the process of liquidation in
accordance with the terms of this Credit Agreement and (ii) has total
assets (as determined in accordance with GAAP) of at least $500,000 at
such time and revenues (as determined in accordance with GAAP) of at
least $500,000 for the most recently ended twelve-month period;
provided, however, that (w) at no time shall the aggregate total assets
(as determined in accordance with GAAP) of all Domestic Subsidiaries
(other than the Receivables Financing Subsidiary) which are not
Material Domestic Subsidiaries exceed $5,000,000 and (x) at no time
shall the aggregate revenues (as determined in accordance with GAAP) of
all Domestic Subsidiaries (other than the Receivables Financing
Subsidiary) which are not Material Domestic Subsidiaries for the most
recently ended twelve-month period exceed $5,000,000; provided further,
however, that, notwithstanding the above, any Domestic Subsidiary which
has any Guaranty Obligations with respect to any Funded Indebtedness of
any Credit Party (other than any of the Credit Party Obligations) shall
be deemed to be a Material Domestic Subsidiary.
"Maturity Date" means (i) as to the Revolving Loans, Letters
of Credit (and the related LOC Obligations), Swingline Loans and
Tranche A Term Loan, May 18, 2004, (ii) as to the Tranche B Term Loan,
May 18, 2005 and (iii) as to the Tranche C Loans and the Tranche C
Letters of Credit (and the related Tranche C LOC Obligations), either
(A) if the Leverage Reduction Requirements are not satisfied as of such
date, the last day of the Leverage Reduction Period or (B) in all other
cases, December 31, 2001.
"Net Cash Proceeds" means the aggregate cash proceeds received
by the Parent or the Consolidated Parties in respect of any Asset
Disposition (other than an Excluded Asset Disposition), Equity Issuance
or Debt Issuance, net of (a) direct costs (including, without
limitation, legal, accounting and investment banking fees, and sales
commissions), (b) taxes paid or payable as a result thereof, (c) in the
case of any Asset Disposition, the amount necessary to retire any
Indebtedness secured by a Permitted Lien on the related Property
ranking senior to any Lien of the Agent thereon, (d) in the case of any
Asset Disposition, the amount necessary to retire any Indebtedness
evidenced by that Loan Agreement dated as of August 8, 1997 between
Cluett, Peabody Canada, Inc. and Congress Financial Corporation
(Canada), (e) in the case of any Asset Disposition consisting of the
sale of receivables to the Receivables Financing Subsidiary, the amount
of the Investment made by the Consolidated Parties in the Receivables
Financing Subsidiary to the extent permitted under clause (xv) of the
definition of "Permitted Investments" set forth in this Section 1.1 and
(f) in the case of any Asset Disposition consisting of the sale of any
Equity Interests or Property comprising the Shirt Group, restructuring
costs such as severance payments, lease termination payments and, to
the extent that the amount thereof exceeds the amount of accounts
receivable associated with the related Equity Interests or Property,
accounts payable and accrued expenses associated with such Equity
Interests or Property; it being understood that "Net Cash Proceeds"
shall include, without limitation, any cash received upon the sale or
other disposition of any non-cash consideration received by the Parent
or the Consolidated Parties in any Asset Disposition, Equity Issuance
or Debt Issuance, but shall not include any licensing fees (including
guaranteed minimum payments) payable to the Consolidated Parties in
connection with the licensing of any of the intellectual property. In
addition, the "Net Cash Proceeds" of any Asset Disposition shall
include any other amounts defined as "Net Cash Proceeds" of such
transaction under the documents evidencing or governing the Senior
Subordinated Debt.
"Notice of Borrowing" means (i) with respect to the Revolving
Loans, the Tranche A Term Loan or the Tranche B Term Loan, a written
notice of borrowing in substantially the form of Exhibit 2.1(b)(i), as
required by, respectively, Section 2.1(b)(i), Section 2.4(b) or Section
2.5(b) and (ii) with respect to the Tranche C Loans, a written notice
satisfying the requirements of Section 2.6(b).
"Permitted Investments" means Investments which are either (i)
cash and Cash Equivalents; (ii) accounts receivable created, acquired
or made by the Parent or any Consolidated Party in the ordinary course
of business and payable or dischargeable in accordance with customary
trade terms; (iii) Investments consisting of Equity Interests,
obligations, securities or other property received by the Parent or any
Consolidated Party in settlement of accounts receivable (created in the
ordinary course of business) from bankrupt or insolvent obligors; (iv)
existing Investments in Subsidiaries and other Investments existing as
of the Closing Date and set forth in Schedule 1.1B; (v) additional
Investments in any Credit Party other than the Parent or Interco; (vi)
additional Investments in Foreign Subsidiaries not exceeding
$10,000,000 in the aggregate; (vii) Guaranty Obligations permitted by
Section 8.1; (viii) transactions permitted by Section 8.9; (ix)
advances or loans to directors, officers, employees, agents, customers
or suppliers that do not exceed $2,000,000 in the aggregate at any time
outstanding for the Parent and all of the Consolidated Parties taken
together; (x) advances or loans by the Parent to management of the
Parent and to Alvarez and Marsal in conjunction with the
Recapitalization in an aggregate principal of up to $2.5 million; (xi)
Investments which constitute capital expenditures (as determined in
accordance with GAAP) otherwise permitted under this Credit Agreement;
(xii) Investments in Joint Ventures not to exceed $15,000,000; (xiii)
Permitted Acquisitions; (xiv) the purchase by the Borrower of the
Austell Property pursuant to the Austell Transaction; (xv) an
Investment in the Receivables Financing Subsidiary in an aggregate
amount not to exceed $6,000,000; and (xvi) an Investment of up to
$250,000 in a Person organized under the laws of, or doing business
primarily in, the Peoples Republic of China.
"Senior Leverage Ratio" means, as of the last day of any
fiscal quarter of the Consolidated Parties for the twelve month period
ending on such date, the ratio of (a) all Funded Indebtedness (net of
cash and Cash Equivalents, including cash and Cash Equivalents on
deposit in the Cash Collateral Account) of the Consolidated Parties on
a consolidated basis on the last day of such period, excluding (i)
Subordinated Indebtedness, (ii) the Tranche C Obligations and (iii) any
Credit Party Obligations in which a participation interest has been
purchased by, or on behalf of, the Sponsor pursuant to Section 2.1(c)
or Section 2.2(c) of the Investment and Deposit Agreement, to (b)
Consolidated EBITDA for such period.
"Total Leverage Ratio" means, as of the last day of any fiscal
quarter of the Consolidated Parties for the twelve month period ending
on such date, the ratio of (a) all Funded Indebtedness (net of cash and
Cash Equivalents, including cash and Cash Equivalents on deposit in the
Cash Collateral Account) of the Consolidated Parties on a consolidated
basis on the last day of such period, including Subordinated
Indebtedness, but excluding (i) the Tranche C Loans Obligations and
(ii) any Credit Party Obligations in which a participation interest has
been purchased by, or on behalf of, the Sponsor pursuant to Section
2.1(c) or Section 2.2(c) of the Investment and Deposit Agreement, to
(b) Consolidated EBITDA for such period.
(b) Clauses (xiv) and (xv) of the definition of "Permitted Liens" set
forth in Section 1.1 of the Existing Credit Agreement are amended and
restated in their entireties to read as follows, and the following
new clauses (xvi) and (xvii) are added to such definition immediately
succeeding such amended and restated clauses (xiv) and (xv) thereof:
"Permitted Liens" means:
---------------
* * * * * * *
(xiv) Liens on Property of any Foreign Subsidiary securing
Indebtedness of such Foreign Subsidiary to the extent permitted under
Section 8.1(g);
(xv) Liens on Property of the Borrower or any other Domestic
Subsidiary not otherwise permitted hereunder securing Indebtedness of
such Person permitted under Section 8.1 not exceeding $7,500,000 in
aggregate at any time outstanding;
(xvi) Liens on cash and Cash Equivalents deposited by the
Borrower with the Tranche C Lender pursuant to and in accordance with
the terms of Section 2.6(i), Section 3.3(b)(vi)(D), Section
3.3(b)(vi)(E) or Section 3.15(b) to secure Tranche C LOC Obligations;
and
(xvii) any interest of title of a buyer in connection with,
and Liens arising from UCC financing statements relating to, the sale
of receivables by the Receivables Financing Subsidiary permitted under
this Credit Agreement.
(c) The definitions of "Application Period", "Equity Issuance
Prepayment Event", "Eligible Reinvestment", "Leverage Grace Period",
"Sale Moratorium" and "Sponsor Equity Issuance" set forth in Section
1.1 of the Existing Credit Agreement are deleted in their entireties.
(d) he following new definitions are added to Section 1.1 of the
Existing Credit Agreement in appropriate alphabetical order:
"Amendment No. 5 Effective Date" shall mean March 29, 2000.
------------------------------
"Cash Collateral Account" shall have the meaning assigned to
such term in the Investment and Deposit Agreement.
"General Partner" shall have the meaning assigned to such term
in the Investment and Deposit Agreement.
"Investment Commitment" shall have the meaning assigned to
such term in the Investment and Deposit Agreement.
"Leverage Reduction Period" means the period from and
including the Amendment No. 5 Effective Date through and including June
30, 2000; provided, however, that the Leverage Reduction Period
automatically shall be extended on June 30, 2000 to August 31, 2000 if
(A) either (1) the Shirt Group Restructuring shall not have been
consummated by June 30, 2000, but there shall exist one or more legally
binding and enforceable definitive purchase (or other appropriate)
agreements (as determined by the Agent in its sole reasonable
discretion, supported by such opinions of counsel for the applicable
Consolidated Party(ies) and/or the relevant purchaser(s) as the Agent
shall reasonably request) providing for the consummation of the Shirt
Group Restructuring by August 31, 2000 or (2) the Shirt Group
Restructuring shall have been consummated by June 30, 2000, but there
shall exist one or more legally binding and enforceable definitive
purchase (or other appropriate) agreements (as determined by the Agent
in its sole reasonable discretion, supported by such opinions of
counsel for the applicable Consolidated Party(ies) and/or the relevant
purchaser(s) as the Agent shall reasonably request) providing for Asset
Disposition(s) permitted by Section 8.5 not comprising the Shirt Group
Restructuring, but relating to Equity Interests or Property comprising
the Shirt Group for aggregate consideration of at least $2,000,000 (but
in any event including any transaction involving the sale or licensing
of the non-domestic intellectual property of the Shirt Group), after
June 30, 2000 but on before to August 31, 2000 and (B) cash and/or Cash
Equivalents in an aggregate amount at least equal to the Investment
Commitment as of June 30, 2000 shall be on deposit in the Cash
Collateral Account.
"Leverage Reduction Requirements" shall be deemed to have been
satisfied as of the last day of the Leverage Reduction Period if, as of
the most recent fiscal month end preceding the date of determination
with respect to which the Agent has received the Required Financial
Information, (i) the Fixed Charge Coverage Ratio is at least 1.0 to
1.0, (ii) the Interest Coverage Ratio is at least 1.5 to 1.0, (iii) the
Senior Leverage Ratio is no greater than 3.25 to 1.0 and (iv) the Total
Leverage Ratio is no greater than 5.5 to 1.0. For purposes of any
determination under this definition, (1) all calculations shall be made
on a pro forma basis using the principles set forth in clauses (2), (3)
and (4) below and Section 1.3, (2) any Asset Disposition consummated
after the Amendment No. 5 Effective Date and any prepayment made
pursuant to Section 3.3(b)(v)(B) of the Credit Agreement after the
Amendment No. 5 Effective Date shall be deemed to have occurred as of
the most recent fiscal month end preceding the date of determination
with respect to which the Agent has received the Required Financial
Information, (3) liabilities for restructuring costs (such as
liabilities for severance payments and lease termination payments and,
to the extent that the aggregate amount thereof exceeds the amount of
accounts receivable associated with the related Equity Interests or
Property, accounts payable and accrued expenses associated with such
Equity Interests or Property) resulting from all Asset Dispositions
relating to any Equity Interests or Property comprising the Shirt Group
consummated on or before the last day of the Leverage Reduction Period
shall be deemed to constitute Indebtedness of the Consolidated Parties
and (4) Funded Indebtedness of the Consolidated Parties on such date
shall be deemed to be increased by the amount as of such date, as
reasonably calculated by the Borrower, of the non-recurring benefit to
leverage associated with a sale of receivables to the Receivables
Financing Subsidiary and the corresponding prepayment of the Credit
Party Obligations, provided that, in no event shall such increase
exceed the Net Cash Proceeds from such sale of receivables. Solely for
purposes of this definition, Funded Indebtedness of the Consolidated
Parties shall be calculated without netting for cash and Cash
Equivalents on deposit in the Cash Collateral Account.
"Limited Partners" shall have the meaning assigned to such
term in the Investment and Deposit Agreement.
"Mandatory Investment" shall have the meaning assigned to such
term in the Investment and Deposit Agreement.
"Non-Sponsor Equity Issuance Prepayment Event" means the
receipt by the Parent or any Consolidated Party of the proceeds of any
Equity Issuance other than (i) a Sponsor Support Payment or (ii) 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 (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).
"Permitted Austell Property Sale" means (i) the sale of the
Austell Property contemplated by clause (ii) of the definition of
"Austell Transaction" set forth in this Section 1.1 and (ii) a sale of
the Austell Property otherwise in compliance with the terms of Section
8.5 and with respect to which the Agent shall have received an opinion
from an independent auditor or appraiser acceptable to the Agent as to
the fairness of such transaction to the Borrower.
"Pro Rata Share" shall have the meaning assigned to such term
in the Investment and Deposit Agreement.
"Receivables Financing Subsidiary" means a direct or indirect
Domestic Subsidiary created after the Amendment No. 5 Effective Date
and having no business other than, in a single transaction permitted by
Section 8.5, acquiring from the Consolidated Parties receivables,
related assets, proceeds and other assets customarily transferred in
connection with an asset-backed transaction and selling such
receivables, related assets, proceeds and other assets to a third
Person, and activities incidental or related thereto.
"Shirt Group Restructuring" means the consummation, in one or
more transactions or series of transactions permitted by Section 8.5,
of (i) the licensing of all or substantially all of the domestic
intellectual property of the Shirt Group and (ii) the sale of all or
substantially all of the inventory of the Shirt Group.
"Sponsor Support Payment" means any payment by, or on behalf
of, the Sponsor pursuant to Section 2.1 or Section 2.2 of the
Investment and Deposit Agreement.
"Tranche C Commitment" means the commitment of the Tranche C
Lender in an aggregate principal amount at any time outstanding of up
to the Tranche C Committed Amount, to make Tranche C Loans to the
Borrower in accordance with the provisions of Section 2.6(a) and issue
Tranche C Letters of Credit for the account of the Borrower in
accordance with the provisions of Section 2.7(a).
"Tranche C Committed Amount" shall have the meaning assigned
to such term in Section 2.6(a).
"Tranche C Default" means any event, act or condition which
with notice or lapse of time, or both, would constitute a Tranche C
Event of Default.
"Tranche C Event of Default" shall have the meaning assigned
to such term in Section 2.6(i).
"Tranche C Guaranty" means that certain Guaranty and
Investment Agreement dated as of March 29, 2000 between the Sponsor and
the Tranche C Lender.
"Tranche C Lender" means Bank of America, N.A.
"Tranche C Letter of Credit" means (i) any letter of credit
issued by the Tranche C Lender for the account of the Borrower in
accordance with the terms of Section 2.7 and (ii) and any of the
letters of credit described by date of issuance, letter of credit
number, undrawn amount, name of beneficiary and date of expiry on
Schedule 1.1E.
"Tranche C Loan" shall have the meaning assigned to such term
in Section 2.6(a).
"Tranche C LOC Obligations" means, at any time, the sum of (i)
the maximum amount which is, or at any time thereafter may become,
available to be drawn under Tranche C Letters of Credit then
outstanding, assuming compliance with all requirements for drawings
referred to in such Tranche C Letters of Credit plus (ii) the aggregate
amount of all drawings under Tranche C Letters of Credit honored by the
Tranche C Lender but not theretofore reimbursed by the Borrower.
"Tranche C Obligations" means, without duplication, all of the
obligations of the Borrower to the Tranche C Lender (in its capacity as
such), whenever arising, under this Credit Agreement or any Tranche C
Letter of Credit or related LOC Documents (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).
SUBPART 2.2 Amendments to Section 1.3. The second paragraph of Section
1.3 of the Existing Credit Agreement is amended and restated in its
entirety to read as follows:
1.3 Accounting Terms.
* * * * * * *
Notwithstanding the above or the terms of any definition set forth in
Section 1.1, the parties hereto acknowledge and agree that, for
purposes of all calculations made under the financial covenants set
forth in Section 7.11 or Section 8.5 (including without limitation for
purposes of the definitions of "Applicable Percentage" and "Pro Forma
Basis" set forth in Section 1.1), without duplication, (i)(A) subject
to the terms of clause (iv) below, income statement items (whether
positive or negative) attributable to the Property disposed of in any
Asset Disposition as contemplated by Section 8.5, as applicable, shall
be excluded to the extent relating to any period occurring prior to the
date of such transaction, (B) Indebtedness which is retired in
connection with any such Asset Disposition shall be excluded and deemed
to have been retired as of the first day of the applicable period and
(C) pro forma adjustments may be included to the extent that such
adjustments give effect to events that are directly attributable to
such transaction and are factually supportable, (ii) income statement
items (whether positive or negative) attributable to any Property
acquired in any Investment transaction contemplated by Section 8.6 and
clause (xiii) of the definition of "Permitted Investment" set forth in
Section 1.1 shall, to the extent not otherwise included in such income
statements items for the Consolidated Parties in accordance with GAAP
or in accordance with any defined terms set forth in Section 1.1, be
included to the extent relating to any period applicable in such
calculations, (iii) the portion of Funded Indebtedness of the
Consolidated Parties as of any date consisting of Revolving Loans shall
be deemed to be the monthly average amount of Revolving Loans
outstanding for the twelve-month period ended as of such date, (iv)
following the consummation of the licensing of any of the intellectual
property of the Shirt Group, Consolidated Net Income for any period (a
"Measurement Period") shall include the aggregate amount of all
scheduled "guaranteed minimum payments" payable by the licensee of such
intellectual property to the Consolidated Parties during the twelve
month period immediately succeeding such Measurement Period and (v)
one-time, non-recurring costs directly attributable to any Asset
Disposition relating to any Equity Interests or Property comprising the
Shirt Group may be excluded from the calculation of Consolidated Net
Income for any period occurring after the consummation of such Asset
Disposition.
SUBPART 2.3 New Section 2.6. The following new Section 2.6 is hereby
added to the Existing Credit Agreement immediately following existing
Section 2.5 thereof:
2.6 Tranche C Loans.
(a) Tranche C Commitment. Subject to the terms and conditions
of this Credit Agreement, the Tranche C Lender agrees to make available
to the Borrower revolving credit loans requested by the Borrower in
Dollars ("Tranche C Loans") from time to time from the Amendment No. 5
Effective Date until the Maturity Date, or such earlier date as the
Tranche C Commitment shall have been terminated as provided herein;
provided, however, that the sum of the aggregate principal amount of
outstanding Tranche C Loans shall not exceed TWELVE MILLION DOLLARS
($12,000,000) (as such aggregate maximum amount may be increased or
reduced from time to time as provided in Section 2.6(d), the "Tranche C
Committed Amount"). Tranche C 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 which
are Tranche C 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. Tranche
C Loans hereunder may be repaid and reborrowed in accordance with the
provisions hereof.
(b) Borrowing Procedures. The Borrower shall request a Tranche
C Loan borrowing by written notice (or telephonic notice promptly
confirmed in writing) to the Tranche C Lender 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 Tranche C Loan is requested, (B) the date of the requested
borrowing (which shall be a Business Day), (C) the aggregate principal
amount to be borrowed, and (D) whether the borrowing shall be comprised
of Base Rate Loans, Eurodollar Loans or a combination thereof, and if
Eurodollar Loans are requested, the Interest Period(s) therefor. If the
Borrower shall fail to specify in any such Notice of Borrowing (I) an
applicable Interest Period in the case of a Eurodollar Loan, then such
notice shall be deemed to be a request for an Interest Period of one
month, or (II) the type of Tranche C Loan requested, then such notice
shall be deemed to be a request for a Base Rate Loan hereunder. The
Tranche C Lender shall make the applicable Tranche C Loan available to
the Borrower by 1:00 P.M. (Charlotte, North Carolina time) on the date
specified in the applicable Notice of Borrowing in Dollars and in
immediately available funds by crediting the account of the Borrower on
the books of the Tranche C Lender at the office of the Tranche C Lender
designated from time to time to the Borrower.
(c) Minimum Amounts. Each Eurodollar Loan or Base Rate
Loan that is a Tranche C Loan shall be in integral multiples of
$100,000 (or the remaining amount of the Tranche C Committed Amount,
if less). (d) Repayment and Prepayments of Tranche C Loans; Reductions
and Increases of Tranche C Committed Amount.
(i) Maturity Date. The Borrower hereby promises to
pay to the order of the Bank, on the Maturity Date (unless
accelerated sooner pursuant to Section 2.6(i)), the aggregate
unpaid principal amount of all Tranche C Loans then
outstanding.
(ii) Termination of Tranche C Commitment. Unless
terminated sooner pursuant to Section 2.6(i), the Tranche C
Commitment shall automatically terminate on the Maturity Date.
(iii) Other. Subject to any contrary provisions set
forth in Section 3.3 or Section 3.15(b), the Borrower shall
prepay each Tranche C Loan on or before the date 30 days after
such Tranche C Loan is advanced by the Tranche C Lender;
provided that each of the parties hereto agrees that the
Sponsor may, in its sole discretion, waive the obligation of
the Borrower under this Section 2.6(d)(iii) with respect to
any Tranche C Loan.
(iv) Reductions of Tranche C Committed Amount.
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(A) Voluntary. The Borrower may from time to time
permanently reduce or terminate the Tranche C Committed
Amount in whole or in part in integral multiples of $100,000
(or, if less, the full remaining amount of the then
applicable Tranche C Committed Amount) upon three Business
Days' prior written notice to the Tranche C Lender;
provided, however, no such termination or reduction shall be
made which would cause the aggregate principal amount of
outstanding Tranche C Loans plus Tranche C LOC Obligations
outstanding to exceed the Tranche C Committed Amount unless,
concurrently with such termination or reduction, the Tranche
C Loans are repaid to the extent necessary to eliminate such
excess.
(B) Mandatory. On any date that the Tranche C
Loans are required to be prepaid pursuant to the terms of
Section 3.3(b), the Tranche C Committed Amount automatically
shall be permanently reduced by the amount of such required
prepayment and/or reduction.
(v) Increases in Tranche C Committed Amount. Upon the
occurrence of any permanent reductions (other than permanent
reductions effected with the proceeds of any "Asset Sale" as
such term is defined in the documents evidencing or governing
the Senior Subordinated Debt) in the outstanding principal
amount of the Loans (other than Tranche C Loans) on or after
the Amendment No. 5 Effective Date, the Tranche C Committed
Amount automatically shall be increased by a corresponding
amount, provided that at the time of such increase, the sum
of, without duplication, (1) the aggregate outstanding
principal amount of the Tranche C Obligations at such time
(assuming that the Tranche C Committed Amount as so increased
is fully drawn), (2) the aggregate amount of payments made by,
or on behalf of, the Sponsor after the Amendment No. 5
Effective Date through and including such date which
permanently reduce the Tranche C Obligations (including,
without limitation, payments made in order to cash
collateralize Tranche C LOC Obligations), (3) the aggregate
amount of capital contributions made by, or on behalf of, the
Sponsor to the Parent after the Amendment No. 5 Effective Date
through and including such date which are used by the Borrower
to make a mandatory prepayment of the Loans pursuant to
Section 3.3(b)(v)(B) and (4) the aggregate amount of payments
made by, or on behalf of, the Sponsor to purchase
participation interests in the Credit Party Obligations
outstanding under the Credit Documents pursuant to Section
2.1(c) or Section 2.2(c) of the Investment and Deposit
Agreement after the Amendment No. 5 Effective Date through and
including such time, shall not exceed $30,000,000.
(e) Interest. The Tranche C Loans shall bear interest at
a per annum rate equal to:
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(i) Base Rate Loans. During such periods as Tranche C
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 Base Rate plus 0.50%.
(ii) Eurodollar Loans. During such periods as Tranche
C 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 Eurodollar Rate plus 1.50%.
(iii) Default Interest. Upon the occurrence, and
during the continuance, of default in the payment of any
amount under this Section 2.6 or under Section 2.7, 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 Base Rate plus
2%).
The Borrower hereby promises to pay in arrears to
the order of the Tranche C Lender, on each Interest Payment
Date (or at such other times as may be specified herein),
accrued interest on the Tranche C Loans.
(f) Tranche C Fee. In consideration of the Tranche C
Commitment of the Tranche C Lender hereunder, the Borrower
hereby promises to pay to the Tranche C Lender a per annum
fee (the "Tranche C Fee") on the amount by which (i) the
then applicable Tranche C Committed Amount exceeds (ii) the
daily average sum for such period of (A) the outstanding
aggregate principal amount of all Tranche C Loans plus (B)
the outstanding aggregate principal amount of all Tranche C
LOC Obligations computed for each day during the applicable
Tranche C Fee Calculation Period (hereinafter defined) at a
rate equal to 50 basis points. The Tranche C Fee shall
commence to accrue on the Amendment No. 5 Effective 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 Tranche C Committed Amount is reduced or terminated
as provided in Section 2.6 and the Maturity Date) for the
immediately preceding quarter (or portion thereof) (each
such quarter or portion thereof for which the Tranche C Fee
is payable hereunder being herein referred to as a "Tranche
C Fee Calculation Period"), beginning with the first of such
dates to occur after the Amendment No. 5 Effective Date.
(g) Conditions to Tranche C Loans and Tranche C
Letters of Credit. The obligations of the Tranche C Lender
to make any Tranche C Loan and to issue or extend any
Tranche C Letter of Credit are subject to satisfaction of
the following conditions:
(i) The Borrower shall have delivered (i) in the case
of any Tranche C Loan, an appropriate Notice of Borrowing; and
(ii) in the case of any Tranche C Letter of Credit, the
Tranche C Lender shall have received an appropriate request
for issuance in accordance with the provisions of Section
2.7(b);
(ii) The representations and warranties set forth in
(A) with respect to the Borrower only, Sections 6.3, 6.4, 6.5
and 6.6 and (B) Section 11 of the Tranche C Guaranty, 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);
(iii) There shall not have been commenced against the
Sponsor 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;
(iv) No Tranche C Default or Tranche C Event of
Default shall exist and be continuing either prior to or after
giving effect to such extension of credit;
(v) Immediately after giving effect to the making of
such Tranche C Loan (and the application of the proceeds
thereof) or to the issuance of such Tranche C Letter of
Credit, as the case may be, the aggregate principal amount of
outstanding Tranche C Loans plus Tranche C LOC Obligations
outstanding shall not exceed the Tranche C Committed Amount;
and
The delivery of each Notice of Borrowing pursuant
to Section 2.6(b), each request for a Tranche C Letter of
Credit pursuant to Section 2.7(b) and each Notice of
Extension/Conversion with respect to any Tranche C Loan
shall constitute a representation and warranty by the
Borrower of the correctness of the matters specified in
subsections (ii), (iii), (iv) and (v) above.
(h) Tranche C Events of Default. A Tranche C Event
of Default shall exist upon the occurrence and continuation
of any of the following specified events (each a "Tranche C
Event of Default"):
(i) the Borrower shall default in the payment when
due of any Tranche C Obligations or other amounts owing under
Section 2.6, Section 2.7 or in connection with the Tranche C
Obligations; or
(ii) any representation, warranty or statement made
or deemed to be made by the Borrower pursuant to Section
2.6(g) shall prove untrue in any material respect on the date
as of which it was deemed to have been made; or
(iii) any "Event of Default" shall occur and be
continuing under and as defined in the Tranche C Guaranty.
(i) Remedies of Tranche C Lender. Upon the
occurrence of a Tranche C Event of Default, and at any time
thereafter unless and until such Tranche C Event of Default
has been waived by the Tranche C Lender or cured to the
satisfaction of the Tranche C Lender, the Tranche C Lender
may, by written notice to the Borrower and the Sponsor, take
any of the following actions (subject to the terms of
Section 3.15(b)):
(i) Termination of the Tranche C Commitment.
Declare the Tranche C Commitment terminated whereupon
-----------------------------------------
the Tranche C Commitment shall be immediately terminated.
(ii) Acceleration. Declare the unpaid principal of
and any accrued interest in respect of all Tranche C Loans and
any and all other indebtedness or obligations of any and every
kind owing by the Borrower to the Tranche C Lender (in its
capacity as such) 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.
(iii) Cash Collateral. Direct the Borrower to pay
(and the Borrower hereby promises to pay, upon receipt of such
notice) to the Tranche C Lender additional cash to be held by
the Tranche C Lender in a cash collateral account as
additional security for the Tranche C LOC Obligations in
respect of subsequent drawings under all then outstanding
Tranche C Letters of Credit in an amount equal to the maximum
aggregate amount which may be drawn under all Tranche C
Letters of Credits then outstanding. The Borrower hereby
grants a security interest to the Tranche C Lender in any
amounts so deposited with the Tranche C Lender.
(iv) Enforcement of Rights. Enforce (A) any and all
rights and interests of the Tranche C Lender (in its capacity
as such) created and existing under this Section 2.6, Section
2.7, the LOC Documents (to the extent relating to any Tranche
C Letters of Credit) or the Tranche C Guaranty and (B) all
rights of set-off.
Notwithstanding the foregoing, if a Tranche C
Event of Default occurs as the result of the occurrence of
an Event of Default specified in Section 9.1(f) with respect
to the Borrower, then the Tranche C Commitment shall
automatically terminate, all outstanding Tranche C
Obligations automatically shall immediately become due and
payable without the giving of any notice or other action by
the Tranche C Lender and the Borrower automatically shall be
obligated (and hereby promises) to pay to the Tranche C
Lender additional cash, to be held by the Tranche C Lender
in a cash collateral account as additional security for the
Tranche C LOC Obligations in respect of subsequent drawings
under all then outstanding Tranche C Letters of Credit in an
amount equal to the maximum aggregate amount which may be
drawn under all Tranche C Letters of Credits then
outstanding, and the Borrower hereby grants a security
interest to the Tranche C Lender in any amounts so deposited
with the Tranche C Lender.
SUBPART 2.4 New Section 2.7. The following new Section 2.7
is hereby added to the Existing Credit Agreement immediately following
Section 2.6 thereof:
2.7 Tranche C Letter of Credit Facility.
(a) Issuance. Subject to the terms and conditions of this
Credit Agreement, the Tranche C Lender agrees to issue standby and
trade Tranche C Letters of Credit in Dollars from time to time from the
Amendment No. 5 Effective Date until the date five (5) days prior to
the Maturity Date as the Borrower may request, in a form acceptable to
the Tranche C Lender; provided, however, that the sum of the aggregate
principal amount of outstanding Tranche C Loans plus Tranche C LOC
Obligations outstanding shall not at any time exceed the Tranche C
Committed Amount. No Tranche C Letter of Credit shall either (x) have
an original expiry date more than one year from the date of issuance or
(y) as originally issued or as extended, have an expiry date extending
beyond the Maturity Date. Each Tranche C Letter of Credit shall comply
with the related LOC Documents. The issuance and expiry dates of each
Tranche C Letter of Credit shall be a Business Day.
(b) Notice. The request for the issuance of a Tranche C Letter
of Credit shall be submitted by the Borrower to the Tranche C Lender at
least three (3) Business Days prior to the requested date of issuance.
(c) Reimbursement. In the event of any drawing under any
Tranche C Letter of Credit, the Tranche C Lender will promptly notify
the Borrower. Unless the Borrower shall immediately notify the Tranche
C Lender that the Borrower intends to otherwise reimburse the Tranche C
Lender for such drawing, the Borrower shall be deemed to have requested
that the Tranche C Lender make a Tranche C Loan in the amount of the
drawing as provided in subsection (d) below on the related Tranche C
Letter of Credit, the proceeds of which will be used to satisfy the
related reimbursement obligations. The Borrower promises to reimburse
the Tranche C Lender on the day on which the Tranche C Lender notifies
the Borrower of a drawing under any Tranche C Letter of Credit (either
with the proceeds of a Tranche C Loan obtained hereunder or otherwise)
in same day funds provided such notice is received by the Borrower from
the Tranche C Lender on or before 2:00 P.M.(Charlotte, North Carolina
time) (otherwise such payment shall be made on or before 12:00 Noon
(Charlotte, North Carolina time) on the Business Day next succeeding
the day such notice is received). The unreimbursed amount of any
drawing under a Tranche C Letter of Credit shall bear interest at a per
annum rate equal to (i) for the first two (2) Business Days following
the date of the related drawing, the Base Rate plus 0.50% and (ii)
thereafter, the Base Rate plus 2.50%. The Borrower's reimbursement
obligations hereunder shall be absolute and unconditional under all
circumstances irrespective of any rights of setoff, counterclaim or
defense to payment the Borrower may claim or have against the Tranche C
Lender, the beneficiary of the Tranche C Letter of Credit drawn upon or
any other Person, including without limitation any defense based on any
failure of the Borrower to receive consideration or the legality,
validity, regularity or unenforceability of the Tranche C Letter of
Credit.
(d) Repayment with Tranche C Loans. On any day on which the
Borrower shall have requested, or been deemed to have requested, a
Tranche C Loan advance to reimburse a drawing under a Tranche C Letter
of Credit, a Tranche C Loan advance comprised of Base Rate Loans (or
Eurodollar Loans to the extent the Borrower has complied with the
procedures of Section 2.6(b) with respect thereto) shall be immediately
made to the Borrower by the Tranche C Lender.
(e) Designation of a Subsidiary as an Account Party.
Notwithstanding anything to the contrary set forth in this Credit
Agreement, including without limitation Section 2.7(a), a Tranche C
Letter of Credit issued hereunder may contain a statement to the effect
that such Tranche C Letter of Credit is issued for the account of a
Subsidiary of the Borrower, provided that notwithstanding such
statement, the Borrower shall be the actual account party for all
purposes of this Credit Agreement for such Tranche C Letter of Credit
and such statement shall not affect the Borrower's reimbursement
obligations hereunder with respect to such Tranche C Letter of Credit.
(f) Renewal, Extension. The renewal or extension of any
Tranche C Letter of Credit shall, for purposes hereof,
-------------------
be treated in all respects the same as the issuance of a new Tranche C
Letter of Credit hereunder.
(g) Uniform Customs and Practices. The Tranche C Lender may
have the Tranche C Letters of Credit be subject to The Uniform Customs
and Practice for Documentary Credits (the "UCP") or the International
Standby Practices 1998 (the "ISP98"), in either case as published as of
the date of issue by the International Chamber of Commerce, in which
case the UCP or the ISP98, as applicable, may be incorporated therein
and deemed in all respects to be a part thereof.
(h) Incorporation by Reference. In issuing or administering
any Tranche C Letters of Credit, the Tranche C Lender shall be entitled
to all the rights, authority, privileges and immunities provided to the
Issuing Lender in Section 2.2(i) and Section 2.2(k), and the Borrower
shall be entitled to all of the rights, privileges and immunities
provided to the Borrower in Section 2.2(i), in each case as in effect
on the Amendment No. 5 Effective Date, all of which provisions are
incorporated by reference herein with the same force and effect as if
set forth in full in this Section 2.7.
(i) Tranche C Letter of Credit Fees. The Borrower hereby
promises to pay to the Tranche C Lender (i) a letter of credit issuance
fee of (A) 1.5% per annum on the average daily maximum amount available
to be drawn under each standby Tranche C Letter of Credit and (B) 0.75%
per annum on the average daily maximum amount available to be drawn
under each trade Tranche C Letter of Credit, in each case computed for
each day from the date of issuance to the date of expiration (which
fees shall be payable quarterly in arrears on the last Business Day of
each March, June, September and December and the Maturity Date for the
immediately preceding quarter (or a portion thereof)) and (ii) the
customary charges from time to time of the Tranche C Lender with
respect to the issuance, amendment, transfer, administration,
cancellation and conversion of, and drawings under, such Tranche C
Letters of Credit.
SUBPART 2.5 Amendments to Section 3.3. Section 3.3 of the
Existing Credit Agreement is amended and restated in its entirety to
read as follows:
3.3 Prepayments.
(a) Voluntary Prepayments. The Borrower shall have the right
to prepay Loans in whole or in part from time to time; provided,
however, that each partial prepayment of Loans shall be (i) in the case
of Revolving Loans, in a minimum principal amount of $2,000,000 and
integral multiples of $100,000 in excess thereof and (ii) in the case
of Swingline Loans, in a minimum principal amount of $100,000. Subject
to the foregoing terms, amounts prepaid under this Section 3.3(a) shall
be applied as the Borrower may elect; provided, however, that if the
Leverage Reduction Period shall have been extended to August 31, 2000
in accordance with the definition thereof set forth in Section 1.1,
that the Tranche C Loans and Tranche C LOC Obligations may not be
prepaid pursuant to this Section 3.3(a) at any time during the period
from and including June 30, 2000 through and including the date that
the Leverage Reductions Requirements shall have been satisfied unless
the Revolving Loans, the LOC Obligations, the Tranche A Term Loan and
the Tranche B Term Loan shall have been paid in full, no Letters of
Credit shall be outstanding and the Revolving Commitments shall have
expired or been terminated. All prepayments under this Section 3.3(a)
shall be subject to Section 3.12, but otherwise without premium or
penalty, and be accompanied by interest on the principal amount prepaid
through the date of prepayment.
(b) Mandatory Prepayments.
---------------------
(i)Revolving Committed Amount/Tranche C Committed Amount.
-----------------------------------------------------
(A) Revolving Committed Amount. If, at any
time, the sum of the aggregate principal amount of
outstanding Revolving Loans plus LOC Obligations
outstanding plus outstanding Swingline Loans shall
exceed the Revolving Committed Amount, the Borrower
hereby promises to prepay the Revolving Loans and
Swingline Loans and, after all Revolving Loans and
Swingline Loans have been repaid, cash collateralize
the LOC Obligations in an amount sufficient to
eliminate such excess (such prepayment to be applied
as set forth in clause (vi)(A) below).
(B) Tranche C Committed Amount. If, at any
time, the sum of the aggregate principal amount of
outstanding Tranche C Loans plus Tranche C LOC
Obligations outstanding shall exceed the Tranche C
Committed Amount, the Borrower hereby promises to
prepay the Tranche C Loans immediately and, after all
Tranche C Loans and have been repaid, cash
collateralize the Tranche C LOC Obligations in an
amount sufficient to eliminate such excess (such
prepayment to be applied as set forth in clause
(vi)(B) below).
(ii) Excess Cash Flow. Within 90 days
after the end of each fiscal year (commencing with
the fiscal year ending December 31, 1998), the
Borrower hereby promises to prepay the Loans in an
amount equal to (x) 50% of the Excess Cash Flow
earned during such prior fiscal year less (y) the
amount of any voluntary prepayments of the Tranche
A Term Loan, the Tranche B Term Loan or (to the
extent accompanied by a reduction in the Revolving
Committed Amount) the Revolving Loans during such
prior fiscal year (such prepayment to be applied
as set forth in clause (vi)(C) below).
(iii) Asset Dispositions.
------------------
(A) Shirt Group. Immediately upon the
occurrence of any Asset Disposition Prepayment Event
involving any Equity Interests or Property comprising
the Shirt Group (other than the Austell Property),
the Borrower hereby promises to prepay the Loans in
an aggregate amount equal to 100% of the Net Cash
Proceeds of the related Asset Disposition (such
prepayment to be applied as set forth in clause
(vi)(D) below).
(B) Other Asset Sales. Immediately upon the
occurrence of (1) any Asset Disposition Prepayment
Event not involving any Equity Interests or Property
comprising the Shirt Group or (2) any Asset
Disposition Prepayment Event involving the Austell
Property, the Borrower hereby promises to prepay the
Loans in an aggregate amount equal to 100% of the Net
Cash Proceeds of the related Asset Disposition (such
prepayment to be applied as set forth in clause
(vi)(C) below).
(iv) Debt Issuances. Immediately upon
receipt by the Parent or any Consolidated Party of
proceeds from any Debt Issuance, the Borrower
hereby promises to prepay the Loans in an
aggregate amount equal to 100% of the Net Cash
Proceeds of such Debt Issuance to the Lenders
(such prepayment to be applied as set forth in
clause (vi)(C) below).
(v) Issuances of Equity and Sponsor
Support Payments.
------------------------------------------------
(A) Non-Sponsor Equity Issuance. Immediately upon
the occurrence of a Non-Sponsor Equity Issuance
Prepayment Event, the Borrower hereby promises to
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)(C) below).
(B) Sponsor Support Payment. Immediately
upon the receipt by the Parent or the Borrower of the
proceeds of a Sponsor Support Payment, the Borrower
hereby promises to prepay the Loans in an aggregate
amount equal to 100% of the Net Cash Proceeds of the
related Sponsor Support Payment (such prepayment to
be applied as set forth in clause (vi)(C), (D) or (E)
below, as applicable).
(vi) Application of Mandatory
Prepayments. All amounts required to be paid
pursuant to Section 3.3(b) and Section 3.3(c)
shall be applied as follows: (A) Overadvances
under Revolving Committed Amount. With respect to
all amounts prepaid pursuant to Section
3.3(b)(i)(A), first, to Swingline Loans and
second, to the Revolving Loans and, after all
Revolving Loans have been repaid, to a cash
collateral account in respect of LOC Obligations
(in any such case, without any reduction in the
Revolving Committed Amount);
(B) Overadvances under Tranche C Committed
Amount. With respect to all amounts prepaid pursuant
to Section 3.3(b)(i)(B), first, to the Tranche C
Loans and, after all Tranche C Loans have been
repaid, to a cash collateral account in respect of
Tranche C LOC Obligations (in any such case, without
any reduction in the Tranche C Committed Amount);
(C) Excess Cash Flow, Sales of Assets (Other
than Shirt Group), Sale of Austell Property, Debt
Issuances, Non-Sponsor Equity Issuances and Section
3.3(c) Prepayments. With respect to all amounts
prepaid pursuant to Section 3.3(b)(ii), Section
3.3(b)(iii)(B), Section 3.3(b)(iv), Section
3.3(b)(v)(A) or Section 3.3(c), 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); provided, however,
that notwithstanding the foregoing terms of this
clause (C), 25% of the Net Cash Proceeds from the
sale of the Austell Property may, at the option of
the Borrower, be applied pro rata to (1) the
Swingline Loans (without any reduction in the
Revolving Committed Amount) and (2) the Revolving
Loans and, after all Revolving Loans have been
repaid, to a cash collateral account in respect of
LOC Obligations (without any reduction in the
Revolving Committed Amount);
(D) Sale of Shirt Group and Sponsor Support
Payments in Connection with Sale of Shirt Group. With
respect to all amounts prepaid pursuant to Section
3.3(b)(iii)(A) or amounts prepaid pursuant to Section
3.3(b)(v)(B) with the proceeds of a Sponsor Support
Payment made pursuant to Section 2.1(a)(i) of the
Investment and Deposit Agreement (or, in lieu
thereof, a Sponsor Support Payment made pursuant to
Section 2.1(c) of the Investment and Deposit
Agreement), first, 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) until the ratio (calculated on a
pro forma basis using the principles set forth in the
definition of "Leverage Reduction Requirements" set
forth in Section 1.1) of (1) all Funded Indebtedness
(net of cash and Cash Equivalents) of the
Consolidated Parties on a consolidated basis on the
date of determination (including Subordinated
Indebtedness, but excluding the Tranche C Obligations
and any Credit Party Obligations in which a
participation interest has been purchased by, or on
behalf of, the Sponsor pursuant to Section 2.1(c) or
Section 2.2(c) of the Investment and Deposit
Agreement) to (2) Consolidated EBITDA for the four
fiscal-quarter period ending as of the most recent
fiscal month end preceding the date of determination
with respect to which the Agent has received the
Required Financial Information, has been reduced to
6.5 to 1.0, second, pro rata to (1) the Swingline
Loans (without any reduction in the Revolving
Committed Amount), (2) the Revolving Loans and, after
all Revolving Loans have been repaid, to a cash
collateral account in respect of LOC Obligations
(without any reduction in the Revolving Committed
Amount), (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)
until the Leverage Reduction Requirements shall have
been satisfied, third, pro rata to the Tranche C
Loans and, after all Tranche C Loans have been
repaid, to a cash collateral account in respect of
Tranche C LOC Obligations, and fourth, pro rata to
(1) the Swingline Loans (without any reduction in the
Revolving Committed Amount), (2) the Revolving Loans
and, after all Revolving Loans have been repaid, to a
cash collateral account in respect of LOC Obligations
(without any reduction in the Revolving Committed
Amount), (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);
(E) Sponsor Support Payments in Connection
with Non-Sale of Shirt Group. With respect to all
amounts prepaid pursuant to Section 3.3(b)(v)(B) with
the proceeds of a Sponsor Support Payment made
pursuant to Section 2.1(a)(ii), Section 2.1(b) or
Section 2.2(c) of the Investment and Deposit
Agreement, of the Investment and Deposit Agreement,
pro rata to (1) the Swingline Loans (without any
reduction in the Revolving Committed Amount) and (2)
the Revolving Loans and, after all Revolving Loans
have been repaid, to a cash collateral account in
respect of LOC Obligations (without any reduction in
the Revolving Committed Amount).
Solely for purposes of determining the pro rata share of any
Tranche A Term Lender in connection with any prepayment
referred to in clause (C) above, subclause "first" of clause
(D) above or subsection (vii) below, the outstanding principal
amount of all Revolving Loans and LOC Obligations, and the
outstanding Participation Interests in Swingline Loans, of
such Tranche A Term Lender (in its capacity as a Revolving
Lender) shall be deemed to be additional Tranche A Term Loan
principal owing to such Lender. 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.
(vii) No Purchase of Participation Interests in
Revolving Loans, etc. Notwithstanding any provision to the
contrary contained herein or in the Investment and Deposit
Agreement, the proceeds of a Sponsor Support Payment shall not
be applied to pay for the purchase on behalf of the Sponsor of
a participation interest in any Swingline Loans, Revolving
Loans or LOC Obligations (or cash collateral therefor), and,
to the extent that any provision of this Credit Agreement or
the Investment and Deposit Agreement provides for the proceeds
of a Sponsor Support Payment to be so applied, such proceeds
instead shall be applied, at the Borrower's option, either (a)
to the pro rata prepayment of (1) the Swingline Loans (without
any reduction in the Revolving Committed Amount) and (2) the
Revolving Loans and, after all Revolving Loans have been
repaid, to a cash collateral account in respect of LOC
Obligations (without any reduction in the Revolving Committed
Amount), in which case such proceeds shall be deemed to
constitute a Mandatory Investment, or (b) to purchase an
undivided, non-voting participation interest in the Term Loans
then outstanding under the Credit Documents, such
participation interest to be subject to an intercreditor
agreement with the Agent on behalf of the Lenders containing
substantially the terms and conditions set forth on Exhibit C
to the Investment and Deposit Agreement and the purchase price
of such participation interest to be applied in the same
manner prescribed for the application of prepayment proceeds
under Section 3.3(b)(vi)(C) above.
(c) Additional Mandatory Prepayments of the Term Loans.
--------------------------------------------------
(i) In the event that the Shirt Group Restructuring
has not occurred by June 30, 2000 and the Leverage Reduction
Period shall not have been extended to August 31, 2000 in
accordance with the definition thereof set forth in Section
1.1, the Borrower hereby promises to prepay the Term Loans in
the amounts and on the dates set forth below:
Date Payment
June 30, 2000 $4,000,000
July 31, 2000 $3,000,000
September 30, 2000 $4,000,000
December 31, 2000 $9,000,000.
Such prepayments shall be applied as set forth in Section
3.3(b)(vi)(C) above; provided, however, the Borrower shall
have the right, in lieu of making the prepayment of the Term
Loans required by this Section 3.3(c)(i) on June 30, 2000, to
cause the Sponsor to purchase an undivided, non-voting
participation interest in the Term Loans then outstanding
under the Credit Documents for a purchase price equal to the
amount of the prepayment that otherwise would have been
required, such participation interest to be subject to an
intercreditor agreement with the Agent on behalf of the
Lenders containing substantially the terms and conditions set
forth on Exhibit C to the Investment and Deposit Agreement and
the purchase price of such participation interest shall be
applied in the same manner prescribed for the application of
prepayment proceeds under Section 3.3(b)(vi)(C) above.
(ii) In the event that the Leverage Reduction Period
shall have been extended to August 31, 2000 in accordance with
the definition thereof set forth in Section 1.1 and the Shirt
Group Restructuring has not occurred by August 31, 2000, the
Borrower hereby promises to prepay the Term Loans in the
amounts and on the dates set forth below:
Date Payment
August 31, 2000 $7,000,000
September 30, 2000 $4,000,000
December 31, 2000 $9,000,000.
Such prepayments shall be applied as set forth in Section
3.3(b)(vi)(C) above; provided, however, the Borrower shall
have the right, in lieu of making the prepayment of the Term
Loans required by this Section 3.3(c)(ii) on August 31, 2000,
to cause the Sponsor to purchase an undivided, non-voting
participation interest in the Term Loans then outstanding
under the Credit Documents for a purchase price equal to the
amount of the prepayment that otherwise would have been
required, such participation interest to be subject to an
intercreditor agreement with the Agent on behalf of the
Lenders containing substantially the terms and conditions set
forth on Exhibit C to the Investment and Deposit Agreement and
the purchase price of such participation interest shall be
applied in the same manner prescribed for the application of
prepayment proceeds under Section 3.3(b)(vi)(C) above.
(d) Escrow Account. If the Borrower is required to make a
mandatory prepayment under Section 3.3(b) that would result in a
payment by the Borrower under Section 3.12, the Borrower may, at its
option, elect to deposit funds constituting such prepayment with the
Agent to be held by the Agent in a cash collateral account and applied
(including any income or gains earned on amounts in the Escrow
Account), upon the earliest to occur of (A) the request of the
Borrower, (B) the last day of any Interest Period, (C) the occurrence
of an Event of Default or (D) the Maturity Date, to the Credit Party
Obligations in accordance with the terms of Section 3.3(b)(vi).
SUBPART 2.6 Amendments to Section 3.13(a). Section 3.13(a)
of the Existing Credit Agreement is amended and restated in its
entirety to read as follows:
3.13 Pro Rata Treatment.
Except to the extent otherwise provided herein:
(a) Loans. Each Loan, each payment or (subject to the terms of
Section 3.3) prepayment of principal of any Loan or reimbursement
obligations arising from drawings under Letters of Credit, each payment
of interest on the Loans or reimbursement obligations arising from
drawings under Letters of Credit, each payment of Unused Fees, each
payment of the Standby Letter of Credit Fee, each payment of the Trade
Letter of Credit Fee, each reduction of the Revolving Committed Amount
and each conversion or extension of any Loan, shall be allocated pro
rata among the Lenders in accordance with the respective principal
amounts of their outstanding Loans and Participation Interests.
Payments made to the Tranche C Lender in respect of the obligations of
the Sponsor arising under the Tranche C Guaranty shall not be subject
to the provisions of this Section 3.13 and shall be solely for the
account of the Tranche C Lender.
SUBPART 2.7 Amendments to Section 3.14. The following
sentence is added at the end of Section 3.14 of the Existing Credit
Agreement:
3.14 Sharing of Payments.
*******
Payments made to the Tranche C Lender in respect of the obligations of
the Sponsor arising under the Tranche C Guaranty shall not be subject
to the provisions of this Section 3.14 and shall be solely for the
account of the Tranche C Lender.
SUBPART 2.8 Amendments to Section 3.15(b). Section 3.15(b)
of the Existing Credit Agreement is amended and restated in its
entirety to read as follows:
3.15 Payments, Computations, Etc.
* * * * * * *
(b) Allocation of Payments After Event of Default.
Notwithstanding any other provisions of this Credit Agreement to the
contrary, after the occurrence and during the continuance of an Event
of Default, all amounts collected or received by the Agent or any
Lender on account of the Credit Party Obligations or any other amounts
outstanding under any of the Credit Documents or in respect of the
Collateral shall be paid over or delivered as follows:
FIRST, to the payment of all reasonable out-of-pocket
costs and expenses (including without limitation reasonable
attorneys' fees) of the Agent in connection with enforcing the
rights of the Lenders (excluding the Tranche C Lender in its
capacity as such) under the Credit Documents and any
protective advances made by the Agent with respect to the
Collateral under or pursuant to the terms of the Collateral
Documents;
SECOND, to payment of any fees payable to the Agent
then due and owing;
THIRD, to the payment of all reasonable out-of-pocket
costs and expenses (including without limitation, reasonable
attorneys' fees) of each of the Lenders (excluding the Tranche
C Lender in its capacity as such) in connection with enforcing
its rights under the Credit Documents or otherwise with
respect to the Credit Party Obligations owing to such Lender;
FOURTH, to the payment of all of the Credit Party
Obligations (excluding the Tranche C Obligations) consisting
of accrued fees and interest then due and owing;
FIFTH, to the payment of the outstanding principal
amount of the Credit Party Obligations (including the payment
or cash collateralization of the outstanding LOC Obligations,
but excluding the Tranche C Obligations) then due and owing;
SIXTH, to all other Credit Party Obligations (other
than the Tranche C Obligations) and other obligations which
shall have become due and payable under the Credit Documents
or otherwise and not repaid pursuant to clauses "FIRST"
through "FIFTH" above;
SEVENTH, to the payment of all reasonable
out-of-pocket costs and expenses (including without
limitation, reasonable attorneys' fees) of the Tranche C
Lender in connection with enforcing its rights under Section
2.6, Section 2.7, the LOC Documents related to Tranche C
Letters of Credit, the Tranche C Guaranty or otherwise with
respect to the Tranche C Obligations;
EIGHTH, to the payment of all of the Tranche C
Obligations consisting of accrued fees and interest then due
and owing;
NINTH, to the payment of the outstanding principal
amount of the Tranche C Obligations (including the payment or
cash collateralization of the outstanding Tranche C LOC
Obligations) then due and owing;
TENTH, to all other Tranche C Obligations and other
obligations which shall have become due and payable under the
Credit Documents or otherwise and not repaid pursuant to
clauses "FIRST" through "NINTH" above; and
ELEVENTH, to the payment of the surplus, if any, to
whoever may be lawfully entitled to receive such surplus.
In carrying out the foregoing, (i) amounts received shall be applied in
the numerical order provided until exhausted prior to application to
the next succeeding category; (ii) each of the Lenders shall receive an
amount equal to its pro rata share (based on the proportion that the
then outstanding Loans (other than Tranche C Loans) and LOC
Obligations, as applicable, held by such Lender bears to the aggregate
then outstanding Loans and LOC Obligations, as applicable) of amounts
available to be applied pursuant to clauses "THIRD", "FOURTH", "FIFTH",
"SIXTH", "SEVENTH", "EIGHTH", "NINTH" and "TENTH" above; (iii) to the
extent that any amounts available for distribution pursuant to clause
"FIFTH" above are attributable to the issued but undrawn amount of
outstanding Letters of Credit, such amounts shall be held by the Agent
in a cash collateral account and applied (A) first, to reimburse the
Issuing Lender from time to time for any drawings under such Letters of
Credit and (B) then, following the expiration of all Letters of Credit,
to all other obligations of the types described in clauses "FIFTH",
"SIXTH", "SEVENTH", "EIGHTH", "NINTH" and "TENTH" above in the manner
provided in this Section 3.15(b) and (iv) to the extent that any
amounts available for distribution pursuant to clause "NINTH" above are
attributable to the issued but undrawn amount of outstanding Tranche C
Letters of Credit, such amounts shall be held by the Tranche C Lender
in a cash collateral account, and the Borrower hereby grants a security
interest to the Tranche C Lender in any amounts so deposited with the
Tranche C Lender, and applied (A) first, to reimburse the Tranche C
Lender from time to time for any drawings under such Tranche C Letters
of Credit and (B) then, following the expiration of all Tranche C
Letters of Credit, to all other obligations of the types described in
clauses "NINTH" and "TENTH" above in the manner provided in this
Section 3.15(b).
Payments made to the Tranche C Lender in respect of the obligations of
the Sponsor arising under the Tranche C Guaranty shall not be subject
to the provisions of this Section 3.15(b) and shall be solely for the
account of the Tranche C Lender.
The provisions of this Section 3.15 are solely for the benefit of the
Lenders and their respective successors and assigns. Except as provided
in the preceding sentence, none of the Credit Parties or any other
Person other than the Lenders shall have any right, benefit, priority
or other interest under or because of the existence of this Section
3.15. This Section 3.15 shall solely define the relative rights of the
Lenders as amongst themselves and shall not define the rights of the
Lenders vis-a-vis any of the Credit Parties. For the avoidance of
doubt, each of the Credit Parties expressly agrees that the Credit
Party Obligations constitute unsubordinated indebtedness of such
Person.
SUBPART 2.9 Amendments to Section 5.2. Section 5.2 of the
Existing Credit Agreement is amended and restated in its entirety to
read as follows:
5.2 Conditions to Extensions of Credit (other than Tranche C Loans and
Tranche C Letters of Credit).
The obligations of each Lender to make any Loan (other than
any Tranche C Loan) and of the Issuing Lender to issue or extend any
Letter of Credit (including the initial Loans and the initial Letter
of Credit) are subject to satisfaction of the following conditions in
addition to satisfaction on the Closing Date of the conditions set
forth in Section 5.1:
(a) The Borrower shall have delivered (i) in the case of any
Revolving Loan, any portion of the Tranche A Term Loan or any portion
of the Tranche B Term Loan, an appropriate Notice of Borrowing; (ii) in
the case of any Letter of Credit, the Issuing Lender shall have
received an appropriate request for issuance in accordance with the
provisions of Section 2.2(b); and (iii) in the case of any Swingline
Loan, the Swingline Lender shall have received an appropriate request
for a Swingline Loan advance in accordance with the provisions of
Section 2.3(b);
(b) The representations and warranties set forth in Section 6
shall, subject to the limitations set forth therein, be true and
correct in all material respects as of such date (except for those
which expressly relate to an earlier date);
(c) There shall not have been commenced against the Parent or
any Consolidated Party an involuntary case under any applicable
bankruptcy, insolvency or other similar law now or hereafter in effect,
or any case, proceeding or other action for the appointment of a
receiver, liquidator, assignee, custodian, trustee, sequestrator (or
similar official) of such Person or for any substantial part of its
Property or for the winding up or liquidation of its affairs, and such
involuntary case or other case, proceeding or other action shall remain
undismissed, undischarged or unbonded;
(d) No Default or Event of Default shall exist and be
continuing either prior to or after giving effect thereto; and
(e) Immediately after giving effect to the making of such Loan
(and the application of the proceeds thereof) or to the issuance of
such Letter of Credit, as the case may be, (i) the sum of the aggregate
principal amount of outstanding Revolving Loans plus LOC Obligations
outstanding plus the aggregate principal amount of outstanding
Swingline Loans shall not exceed the Revolving Committed Amount, (ii)
the LOC Obligations shall not exceed the LOC Committed Amount and (iii)
the aggregate principal amount of outstanding Swingline Loans shall not
exceed the Swingline Committed Amount.
The delivery of each Notice of Borrowing (other than in respect of any
Tranche C Loan), each Notice of Extension/Conversion (other than in
respect of any Tranche C Loan), each request for a Letter of Credit
pursuant to Section 2.2(b) and each request for a Swingline Loan
pursuant to Section 2.3(b) shall constitute a representation and
warranty by the Credit Parties of the correctness of the matters
specified in subsections (b), (c), (d) and (e) above.
SUBPART 2.10 Amendments to Section 7.1. Subsections (a), (b)
and (c) of Section 7.1 of the Existing Credit Agreement are amended
and restated in their entireties to read as follows:
7.1 Information Covenants.
(a) Annual Financial Statements. As soon as available, and in
any event within 90 days after the close of each fiscal year of the
Consolidated Parties, a consolidated balance sheet and income statement
of the Consolidated Parties, as of the end of such fiscal year,
together with related consolidated statements of cash flows for such
fiscal year, in each case setting forth in comparative form
consolidated figures for the preceding fiscal year and including
footnotes setting forth related consolidating information, all in
reasonable form and detail and, in the case of consolidated financial
information only, audited by independent certified public accountants
of recognized national standing reasonably acceptable to the Agent and
whose opinion shall be to the effect that such financial statements
have been prepared in accordance with GAAP (except for changes with
which such accountants concur) and shall not be limited as to the scope
of the audit or qualified as to the status of the Consolidated Parties
as a going concern.
(b) Interim Financial Statements.
----------------------------
(i) Quarterly Financial Statements. As soon as
available, and in any event within 45 days after the close of
each of the first three fiscal quarters of each fiscal year of
the Consolidated Parties a consolidated balance sheet and
income statement of the Consolidated Parties, as of the end of
such fiscal quarter, together with related consolidated
statements of cash flows for such fiscal quarter, in each case
setting forth in comparative form consolidated figures for the
corresponding period of the preceding fiscal year and
including footnotes setting forth related consolidating
information, all in reasonable form and detail and reasonably
acceptable to the Agent, and accompanied by a certificate of
the chief financial officer of the Borrower to the effect that
such quarterly financial statements fairly present in all
material respects the financial position of the Consolidated
Parties and have been prepared in accordance with GAAP,
subject to changes resulting from audit and normal year-end
adjustments.
(ii) Monthly Financial Statements. As soon as
available, and in any event within 45 days after the close of
each fiscal month of the Consolidated Parties a consolidated
balance sheet and income statement of the Consolidated
Parties, as of the end of such fiscal month, together with
related consolidated statements of cash flows for such fiscal
month, in each case setting forth in comparative form
consolidated figures for the corresponding period of the
preceding fiscal year and including footnotes setting forth
related consolidating information, all in reasonable form and
detail and reasonably acceptable to the Agent, and accompanied
by a certificate of the chief financial officer of the
Borrower to the effect that such monthly financial statements
fairly present in all material respects the financial position
of the Consolidated Parties and have been prepared in
accordance with GAAP, subject to changes resulting from audit
and normal year-end adjustments.
(c) Officer's Certificate. At the time of delivery of the
financial statements provided for in Sections 7.1(a) and 7.1(b)(i)
above, a certificate of the chief financial officer of the Borrower
substantially in the form of Exhibit 7.1(c), (i) demonstrating
compliance with the financial covenants contained in Section 7.11 by
calculation thereof as of the end of each such fiscal period and (ii)
stating that no Default or Event of Default exists, or if any Default
or Event of Default does exist, specifying the nature and extent
thereof and what action the Credit Parties propose to take with respect
thereto.
SUBPART 2.11 Amendments to Section 7.11. Section 7.11 of the
Existing Credit Agreement is 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
1.00 to 1.00 for the period from December 31, 2000
and at all times thereafter.
(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:
<TABLE>
<S> <C>
(i) for the period from June 30, 2000 to and including September 29, 2000, 1.00 to 1.00;
(ii) for the period from September 30, 2000 to and including December 30, 2000, 1.30 to 1.00;
(iii) for the period from December 31, 2000 to and including December 30, 2001, 1.50 to 1.00;
(iv) for the period from December 31, 2001 to and including December 30, 2002, 1.85 to 1.0;
(v) for the period from December 31, 2002 to and including December 30, 2003, 2.00 to 1.0;
(vi) for the period from December 31, 2003 to and including December 30, 2004, 2.25 to 1.0; and
(vii) at all times thereafter, 2.50 to 1.00.
</TABLE>
(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:
<TABLE>
<S> <C>
(i) for the period from June 30, 2000 to and including September 29, 2000, 6.00 to 1.00;
(ii) for the period from September 30, 2000 to and including December 30, 2000, 4.50 to 1.00;
(iii) for the period from December 31, 2000 to and including December 30, 2001, 3.25 to 1.00;
(iv) for the period from December 31, 2001 to and including December 30, 2002, 3.00 to 1.00;
(v) for the period from December 31, 2002 to and including December 30, 2003, 2.75 to 1.00; and
(vi) at all times thereafter, 2.50 to 1.00.
</TABLE>
(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:
<TABLE>
<S> <C>
(i) for the period from June 30, 2000 to and including September 29, 2000, 11.00 to 1.00;
(ii) for the period from September 30, 2000 to and including December 30, 2000, 8.50 to 1.00;
(iii) for the period from December 31, 2000 to and including December 30, 2001, 6.00 to 1.00;
(iv) for the period from December 31, 2001 to and including December 30, 2002, 5.50 to 1.00;
(v) for the period from December 31, 2002 to and including December 30, 2003, 4.75 to 1.00; and
(vi) at all times thereafter, 4.00 to 1.00.
</TABLE>
(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.
SUBPART 2.12 Amendments to Section 7.14. Section 7.14 of the Existing
Credit Agreement is amended and restated in its entirety to read as follows:
7.14 Furtherance Assurances.
Following the consummation of any Asset Disposition of receivables to
the Receivables Financing Subsidiary, the Credit Parties will cause the
Receivables Financing Subsidiary to dividend, distribute or otherwise transfer
to the Credit Parties any Property of the Receivables Financing Subsidiary not
required to be pledged to the purchaser of receivables from the Receivables
Financing Subsidiary.
SUBPART 2.13 Amendments to Section 8.5. Section 8.5 of the Existing
Credit Agreement is 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 and a Permitted
Austell Property Sale, unless (a) except in connection with the licensing of any
of the intellectual property of the Shirt Group on terms providing for the
reversion to the applicable Consolidated Parties of all rights to such
intellectual property at the end of the license term and upon default in the
payment of licensing fees by the applicable licensee thereof, 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 and (c) 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 Credit Party Obligations in accordance with the terms
of Section 3.3(b)(iii). Notwithstanding any provision of this Credit Agreement
to the contrary, (i) 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) except pursuant to a transaction permitted
under clause (ii)(A) below and (ii) none of the Consolidated Parties may sell,
lease, transfer or otherwise dispose of accounts receivable except pursuant to
(A) a single Asset Disposition of receivables having an aggregate fair market
value of not greater than $24,000,000 by one or more Consolidated Parties to the
Receivables Financing Subsidiary in a transaction which (1) is non-recourse to
the Consolidated Parties (except for representations, warranties, covenants and
indemnities which are reasonably customary in an accounts receivable
transaction), (2) complies with the foregoing terms of this Section 8.5 and (3)
does not constitute an "Asset Sale" under and as defined in the documents
evidencing or governing the Senior Subordinated Debt and (B) a transaction
constituting an Excluded Asset Disposition.
Upon a sale of Property (including, without limitation, 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 2.14 Amendments to Section 8.9. Section 8.9 of the Existing
Credit Agreement is amended and restated in its entirety to read as follows:
8.9 Transactions with Affiliates.
The Credit Parties will not permit the Parent or any Consolidated Party
to enter into or permit to exist any transaction or series of transactions with
any officer, director, shareholder, Foreign Subsidiary or Affiliate of such
Person other than (a) advances of working capital to any Credit Party other than
the Parent or Interco, (b) transfers of cash and assets to any Credit Party
other than the Parent or Interco, (c) transactions permitted by Section 8.1,
Section 8.4, Section 8.5, Section 8.6, Section 8.7 or Section 8.13, (d) normal
compensation and reimbursement of expenses of employees, officers and directors,
(e) provided that no Default or Event of Default exists either before or after
giving effect thereto, payment on the Closing Date to the Sponsor of an
investment banking fee in an amount, together with transaction fees and
out-of-pocket expenses of the Sponsor, including those previously paid, not to
exceed $4,500,000, (f) payments to the Sponsor or its Affiliate designee of a
annual management fee, together with out-of-pocket expenses of all such Persons
for the applicable year, not to exceed $600,000, (g) except as otherwise
specifically limited in this Credit Agreement, other transactions which are
entered into in the ordinary course of such Person's business on terms and
conditions substantially as favorable to such Person as would be obtainable by
it in a comparable arms-length transaction with a Person other than an officer,
director, shareholder, Subsidiary or Affiliate and (h) the Consolidated Parties
may service receivables sold to the Receivables Financing Subsidiary and receive
a fee from the Receivables Financing Subsidiary for such services.
SUBPART 2.15 Amendments to Section 8.13. Section 8.13 of the Existing
Credit Agreement is amended and restated in its entirety to read as follows:
8.13 Sale Leasebacks.
Except in connection with the Austell Transaction, the Credit Parties
will not permit the Parent or any Consolidated Party to, directly or indirectly,
become or remain liable as lessee or as guarantor or other surety with respect
to any lease, whether an Operating Lease or a Capital Lease, of any Property
(whether real, personal or mixed), whether now owned or hereafter acquired, (a)
which the Parent or such Consolidated Party has sold or transferred or is to
sell or transfer to a Person other than the Parent or a Consolidated Party or
(b) which the Parent or such Consolidated Party intends to use for substantially
the same purpose as any other Property which has been sold or is to be sold or
transferred by such Consolidated Party to another Person other than the Parent
or a Consolidated Party in connection with such lease. Notwithstanding the
above, the Borrower may enter into a Sale and Leaseback Transaction with any
Affiliate with respect to the Austell Property in a transaction otherwise
permitted under Section 8.5.
SUBPART 2.16 Amendments to Section 9.1. Subsections (a), (b), (c)(ii),
(d), (h) and (m) of Section 9.1 of the Existing Credit Agreement are amended and
restated in their entireties to read as follows, and the following new
subsection (n) is added to Section 9.1 of the Existing Credit Agreement
immediately following subsection (m) thereof:
9.1 Events of Default.
An Event of Default shall exist upon the occurrence and continuation of
any of the following specified events (each an "Event of Default"):
(a) Payment. Any Credit Party shall
(i) default in the payment when due of any principal
of any of the Loans (other than the Tranche C Loans) or of any
reimbursement obligations arising from drawings under Letters
of Credit, or
(ii) default in the payment when due of any interest
on the Loans (other than the Tranche C Loans) or on any
reimbursement obligations arising from drawings under Letters
of Credit (other than Tranche C Letters of Credit), or of any
Fees or other amounts owing hereunder, under any of the other
Credit Documents or in connection herewith or therewith (other
than any such Fees or other amounts relating to the Tranche C
Loans); or
(b) Representations. Any representation, warranty or statement
made or deemed to be made by any Credit Party herein, in any of the
other Credit Documents, or in any statement or certificate delivered or
required to be delivered pursuant hereto or thereto (other than the
representations, warranties and statements made in Section 2.6 and
Section 2.7) shall prove untrue in any material respect on the date as
of which it was made or deemed to have been made;
(c) Covenants. Any Credit Party shall
* * * * * * *
(ii) default in the due performance or observance by
it of any term, covenant or agreement (other than those set
forth in Section 2.6, Section 2.7 or subsections (a), (b) or
(c)(i) of this Section 9.1) contained in this Credit Agreement
and such default shall continue unremedied for a period of at
least 30 days after the earlier of a responsible officer of a
Credit Party becoming aware of such default or notice thereof
by the Agent; or
(d) Other Credit Documents. (i) Any Credit Party shall default
in the due performance or observance of any term, covenant or agreement
in any of the other Credit Documents (other than the LOC Documents
relating to Tranche C Letters of Credit) (subject to applicable grace
or cure periods, if any), or (ii) except as a result of or in
connection with a dissolution, merger or disposition of a Subsidiary
permitted under Section 8.4 or Section 8.5, any Credit Document (other
than the LOC Documents relating to Tranche C Letters of Credit) shall
fail to be in full force and effect or to give the Agent and/or the
Lenders the Liens, rights, powers and privileges purported to be
created thereby, or any Credit Party shall so state in writing; or
* * * * * * *
(h) Defaults under Other Agreements. With respect to any
Indebtedness (including the Tranche C Loans, but excluding any other
than Indebtedness outstanding under this Credit Agreement) in excess of
$2,500,000 in the aggregate for the Parent and the Consolidated Parties
taken as a whole, (i) the Parent or any Consolidated Party shall (A)
default in any payment (beyond the applicable grace period with respect
thereto, if any) with respect to any such Indebtedness, or (B) the
occurrence and continuance of a default in the observance or
performance relating to such Indebtedness or contained in any
instrument or agreement evidencing, securing or relating thereto, or
any other event or condition shall occur or condition exist, the effect
of which default or other event or condition is to cause, or permit,
the holder or holders of such Indebtedness (or trustee or agent on
behalf of such holders) to cause (determined without regard to whether
any notice or lapse of time is required), any such Indebtedness to
become due prior to its stated maturity; or (ii) any such Indebtedness
shall be declared due and payable, or required to be prepaid other than
by a regularly scheduled required prepayment, prior to the stated
maturity thereof; or
* * * * * * *
(m) Investment and Deposit Agreement. There shall occur
and be continuing any "Event of Default" under, and as
---------------------------------
defined in, Section 8.1(a) of the Investment and Deposit Agreement; or
(n) Leverage Reduction Requirements. The Shirt Group
Restructuring shall have occurred and the Leverage
---------------------------------
Reduction Requirements shall not be satisfied as of the last day of the
Leverage Reduction Period.
SUBPART 2.17 Amendments to Section 9.2. Sections 9.2(a), (b)
and (d) of the Existing Credit Agreement are amended and restated in
their entireties to read as follows:
9.2 Acceleration; Remedies.
Upon the occurrence of an Event of Default, and at any time thereafter
unless and until such Event of Default has been waived by the
requisite Lenders (pursuant to the voting requirements of Section
11.6) or cured to the satisfaction of the requisite Lenders (pursuant
to the voting procedures in Section 11.6), the Agent shall, upon the
request and direction of the Required Lenders, by written notice to
the Credit Parties take any of the following actions:
(a) Termination of Commitments. Declare the Commitments
(other than the Tranche C Commitment) terminated
--------------------------
whereupon such Commitments shall be immediately terminated.
(b) Acceleration. Declare the unpaid principal of and any
accrued interest in respect of all Loans (other than the Tranche C
Loans), any reimbursement obligations arising from drawings under
Letters of Credit (but not Tranche C Letters of Credit) and any and all
other indebtedness or obligations of any and every kind owing by the
Credit Parties to the Agent and/or any of the Lenders (other than the
Tranche C Lender) 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 Credit
Parties.
* * * * * * *
(d) Enforcement of Rights. Enforce any and all rights and
interests created and existing under the Credit Documents including,
without limitation, all rights and remedies existing under the
Collateral Documents, all rights and remedies against a Guarantor and
all rights of set-off, but excluding, all rights and remedies of the
Tranche C Lender arising under Section 2.6, Section 2.7, the LOC
Documents relating to the Tranche C Letters of Credit or the Tranche C
Guaranty.
SUBPART 2.18 Amendments to Section 11.1. Section 11.1 of the
Existing Credit Agreement is amended and restated in its entirety to
read as follows:
11.1 Notices.
Except as otherwise expressly provided herein, all notices and other
communications shall have been duly given and shall be effective (a)
when delivered, (b) when transmitted via telecopy (or other facsimile
device) to the number set out below, (c) the Business Day following
the day on which the same has been delivered prepaid to a reputable
national overnight air courier service, or (d) the third Business Day
following the day on which the same is sent by certified or registered
mail, postage prepaid, in each case to the respective parties at the
address, in the case of the Credit Parties and the Agent, set forth
below, and, in the case of the Lenders, set forth on Schedule 2.1(a),
or at such other address as such party may specify by written notice
to the other parties hereto:
if to any Credit Party:
Cluett American Corp.
48 W. 38th Street
New York, New York 10018
Attn: President and 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: Jack Feder
Telephone: (212) 351-1630
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 Sponsor:
Vestar Capital Partners III, L.P.
245 Park Avenue
41st Floor
New York, New York 10167
Attn: Jack Feder
Telephone: (212) 351-1630
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.
Independence Center, 15th Floor
NC1-001-15-04
101 North Tryon Street
Charlotte, North Carolina 28255
Attn: Agency Services
Telephone: (704) 388-2374
Telecopy: (704) 388-9607
with a copy to:
Bank of America, N.A.
NY1-503-06-07
335 Madison Ave
New York, New York 10017
Attn: Fred Zagar
Telephone: (212) 503-8242
Telecopy: (212) 503-7080
SUBPART 2.19 Amendments to Section 11.3. The following new
subsection (h) is added to Section 11.3 of the Existing Credit
Agreement immediately following existing subsection (g) thereof:
11.3 Benefit of Agreement.
* * * * * * *
(h) The Tranche C Lender may not assign or transfer any of its
interests and obligations hereunder without prior written consent of
the Borrower except during the continuance of an Event of Default.
SUBPART 2.20 Amendments to Section 11.6. Section 11.6 of the
Existing Credit Agreement is amended and restated in its entirety to
read as follows:
11.6 Amendments, Waivers and Consents.
Neither this Credit Agreement nor any other Credit Document nor any of
the terms hereof or thereof may be amended, changed, waived,
discharged or terminated unless such amendment, change, waiver,
discharge or termination is in writing entered into by, or approved in
writing by, the Required Lenders and the Borrower, provided, however,
that:
(i) without the consent of each Lender affected thereby,
neither this Credit Agreement nor any other Credit Document
may be amended to
(a) extend the final maturity of any Loan or of any
reimbursement obligation, or any portion thereof, arising from
drawings under Letters of Credit, or extend or waive any
Principal Amortization Payment of any Loan, or any portion
thereof,
(b) reduce the rate or extend the time of payment of
interest (other than as a result of waiving the applicability
of any post-default increase in interest rates) thereon or
Fees hereunder,
(c) reduce or waive the principal amount of any
Loan or of any reimbursement obligation, or any portion
thereof, arising from drawings under Letters of Credit,
(d) increase the Commitment of a Lender over the amount
thereof in effect (it being understood and agreed that a
waiver of any Default or Event of Default or mandatory
reduction in the Commitments shall not constitute a change in
the terms of any Commitment of any Lender),
(e) except as the result of or in connection with
an Asset Disposition permitted by Section 8.5, release all
or substantially all of the Collateral,
(f) except as the result of or in connection with a
dissolution, merger or disposition of a Consolidated Party
permitted under Section 8.4, release the Borrower or
substantially all of the other Credit Parties from its or
their obligations under the Credit Documents,
(g) amend, modify or waive any provision of this Section
11.6 or Section 3.6, 3.7, 3.8, 3.9, 3.10, 3.11, 3.12, 3.13,
3.14, 3.15, 9.1(a), 11.2, 11.3, 11.5, 11.9 or 11.16,
(h) reduce any percentage specified in, or otherwise
modify, the definition of Required Lenders, or
(i) consent to the assignment or transfer by the
Borrower or all or substantially all of the other Credit
Parties of any of its or their rights and obligations under
(or in respect of) the Credit Documents except as permitted
thereby;
(ii) without the consent of Lenders holding in the aggregate
more than 50% of the outstanding Tranche A Term Loans and more than 50%
of the outstanding Tranche B Term Loans, extend the time for or the
amount or the manner of application of proceeds of (A) any mandatory
prepayment required by Section 3.3(b)(ii), (iii), (iv) or (v) hereof or
(B) any payment by, or on behalf of, the Sponsor to purchase a
participation interest in the Credit Party Obligations pursuant to
Section 2.1(c) or Section 2.2(c) of the Investment and Deposit
Agreement;
(iii) without the consent of the Agent, no provision of
Section 10 may be amended;
(iv) without the consent of the Issuing Lender, no provi-
sion of Section 2.2 may be amended;
(v) without the consent of the Swingline Lender, no provi-
sion of Section 2.3 may be amended;
(vi) the Tranche C Lender shall be the only Lender entitled to
effectuate, with the Borrower, any amendment, change, waiver, discharge
or termination of any of the following: (A) Section 2.6, Section 2.7 or
Section 3.3(b)(i)(B) or (B) any of the definitions of "Tranche C
Commitment", "Tranche C Committed Amount", "Tranche C Default",
"Tranche C Event of Default", "Tranche C Guaranty", "Tranche C LOC
Obligations", "Tranche C Obligations", "Tranche C Lender", "Tranche C
Letters of Credit", "Tranche C Lender" and "Tranche C Loan" set forth
in Section 1.1; and
(vii) without the consent of the Tranche C Lender, no
amendment, change, waiver, discharge or termination of any of the
following which would have an adverse effect on the Tranche C Lender
shall be effective: (A) any of the definitions of "Commitment",
"Lender", "Loan", "LOC Documents" and "Maturity Date" (clause (iii)
thereof only) set forth in Section 1.1 or (B) Section 3.3(b)(vi)(D).
Notwithstanding the fact that the consent of all the Lenders is
required in certain circumstances as set forth above, (x) each Lender
is entitled to vote as such Lender sees fit on any bankruptcy
reorganization plan that affects the Loans, and each Lender
acknowledges that the provisions of Section 1126(c) of the Bankruptcy
Code supersedes the unanimous consent provisions set forth herein and
(y) the Required Lenders may consent to allow a Credit Party to use
cash collateral in the context of a bankruptcy or insolvency
proceeding.
SUBPART 2.21 New Section 11.16. The following new Section
11.16 is added to the Existing Credit Agreement immediately following
existing Section 11.15 thereof:
11.16 General Provisions regarding Tranche C Obligations.
(a) Notwithstanding any provision to the contrary contained
herein or in any other of the Credit Documents, Tranche C Loans shall
not be included in the determination of the total number of outstanding
Eurodollar Loans for purposes of the limitations on the maximum number
of Eurodollar Loans set forth in Sections 2.1(a), 2.4(a), 2.5(a) and
3.2.
(b) The Lenders acknowledge and agree among themselves that,
notwithstanding any provision to the contrary contained herein or in
any other of the Credit Documents, the Tranche C Lender (in its
capacity as such) and the Tranche C Obligations shall not be entitled
to the benefit of (i) any Collateral subject to a Lien in favor of the
Agent pursuant to any of the Collateral Documents or (ii) the guarantee
of any Guarantor pursuant to Section 4. The agreement of the Lenders
set forth in this clause (b) shall not inure to the benefit of the
Borrower or any other Credit Party.
SUBPART 2.22 Additional Restrictions. Notwithstanding any
provision of the Amended Credit Agreement to the contrary (including,
without limitation, the definition of "Permitted Acquisitions",
"Permitted Investments" and "Permitted Liens" appearing in Section 1.1
of the Amended Credit Agreement and Sections 8.1 and 8.6 of the
Amended Credit Agreement), until the later of (i) the last day of the
Leverage Reduction Period and (ii) such time as the Leverage Reduction
Requirements shall have been satisfied, the Credit Parties will not
permit the Parent or any Consolidated Party to:
(i) consummate any Acquisition;
(ii) except as otherwise permitted under clause (xvi) of the
definition of "Permitted Investments" appearing in Section 1.1 of the
Amended Credit Agreement, make any additional Investments in Foreign
Subsidiaries;
(iii) make any additional advances or loans to directors,
officers, employees, agents, customers or suppliers;
(iv) except as otherwise permitted under clause (xvi) of the
definition of "Permitted Investments" appearing in Section 1.1 of the
Amended Credit Agreement, make any additional Investments in Joint
Ventures;
(v) grant or permit to exist any additional Liens pursuant
to clause (xv) of the definition of "Permitted
Liens" contained in Section 1.1 of the Amended Credit Agreement; or
(vi) incur or become liable with respect to any additional
Indebtedness of the types described in clauses (f), (g) or (l) of
Section 8.1 of the Amended Credit Agreement.
The Credit Parties hereby acknowledge and agree that, notwithstanding
any provision of the Amended Credit Agreement to the contrary, the
failure of the Credit Parties to comply with any of the terms of this
Subpart 2.22 shall constitute an Event of Default under the Credit
Agreement without the need for the giving of any notice or the lapse
of any period of time.
SUBPART 2.23 New Schedule 1.1E. A new schedule in the form
of Schedule 1.1E attached hereto is added to the Existing Credit
Agreement immediately following existing Schedule 1.1D thereof.
PART 3
WAIVER
Subject to the occurrence of the Amendment No. 5 Effective
Date, the Lenders hereby waive the requirements that the Credit
Parties comply with Sections 7.11(a) through (d) of the Credit
Agreement for the fiscal quarter ended December 31, 1999. This is a
one-time waiver and is granted only for the limited purposes set forth
herein and shall be effective only in the specific circumstances
provided for above and only for the purpose for which given. Except as
waived pursuant to the terms of this Part 3 or amended pursuant to
Part 2, the Existing Credit Agreement and all other Credit Documents
shall continue in full force and effect. The waiver pursuant to this
Part 3 shall be deemed to be effective as of December 30, 1999.
PART 4
CONDITIONS TO EFFECTIVENESS
SUBPART 4.1 Amendment No. 5 Effective Date. This Amendment
shall be and become effective as of the date hereof (the "Amendment
No. 5 Effective Date") when all of the conditions set forth in this
Part 4 shall have been satisfied, and thereafter this Amendment shall
be known, and may be referred to, as "Amendment No. 5."
SUBPART 4.1.1 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, the Tranche C Lender and the Required
Lenders.
SUBPART 4.1.2 Tranche C Guaranty. The Tranche C Lender shall
have received an original copy of the Tranche C Guaranty which shall
have been duly executed on behalf of the Sponsor.
SUBPART 4.1.3 Legal Opinions. The Agent shall have received a
legal opinion of legal counsel to the Credit Parties and the Sponsor in
form and substance reasonably satisfactory to it, and the Tranche C
Lender shall have received a legal opinion of legal counsel to the
Borrower and the Sponsor in form and substance reasonably satisfactory
to it.
SUBPART 4.1.4 Other Items. The Agent shall have received such
other documents, agreements or information which may be reasonably
requested by the Agent.
SUBPART 4.1.5 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 12:00 Noon
(Charlotte, North Carolina time) on the Amendment No. 5 Effective Date,
an amendment fee equal to 0.25% of the Commitment of each such Lender.
PART 5
MISCELLANEOUS
SUBPART 5.1 Representations and Warranties. Borrower hereby
represents and warrants to the Agent and the Lenders that, after
giving effect to this Amendment, (a) no Default or Event of Default
exists under the Credit Agreement or any of the other Credit Documents
and (b) the representations and warranties set forth in Section 6 of
the Existing Credit Agreement are, subject to the limitations set
forth therein, true and correct in all material respects as of the
date hereof (except for those which expressly relate to an earlier
date).
SUBPART 5.2 Reaffirmation of Credit Party Obligations. Each
Credit Party hereby ratifies the Credit Agreement and acknowledges and
reaffirms (a) that it is bound by all terms of the Credit Agreement
applicable to it and (b) that it is responsible for the observance and
full performance of its respective Credit Party Obligations.
SUBPART 5.3 Cross-References. References in this Amendment
to any Part or Subpart are, unless otherwise specified, to such Part
or Subpart of this Amendment.
SUBPART 5.4 Instrument Pursuant to Existing Credit
Agreement. This Amendment is a Credit Document executed pursuant to
the Existing Credit Agreement and shall (unless otherwise expressly
indicated therein) be construed, administered and applied in
accordance with the terms and provisions of the Existing Credit
Agreement.
SUBPART 5.5 References in Other Credit Documents. At such
time as this Amendment No. 5 shall become effective pursuant to the
terms of Subpart 4.1, 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. 5.
SUBPART 5.6 Counterparts/Telecopy. This Amendment may be
executed by the parties hereto in several counterparts, each of which
shall be deemed to be an original and all of which shall constitute
together but one and the same agreement. Delivery of executed
counterparts of this Amendment by telecopy shall be effective as an
original and shall constitute a representation that an original shall
be delivered.
SUBPART 5.7 Governing Law. THIS AMENDMENT SHALL BE DEEMED TO
BE A CONTRACT MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK.
SUBPART 5.8 Successors and Assigns. This Amendment shall be
binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
<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: /s/ Bryan P. Marsal
Name: Bryan P. Marsal
Title:Director and Chief Executive Officer
LENDERS: BANK OF AMERICA, N.A.
- -------
(formerly known as NationsBank, N. A.)
By:/s/ F.A.Zagar
Name: F.A. Zagar
Title: Managing Directory
NATIONAL WESTMINSTER BANK PLC
By:/s/ Andrew S. Weinberg
Name: Andrew S. Weinberg
Title: Senior Vice President
FLEET BANK, N.A.
By: /s/ Timothy A. Clarke
Name: Timothy A. Clarke
Title: Vice President
BANKBOSTON, N.A.
By: /s/ Richard D. Hill, Jr.
Name: Richard D. Hill, Jr.
Title: Managing Director
FLEET BUSINESS CREDIT CORPORATION
(successor in interest to Sanwa Business Credit
Corporation)
By: /s/ Roland J. Robinson
Name:Roland J. Robinson
Title: Senior Vice President
BANK AUSTRIA CREDITANSTALT
CORPORATE FINANCE, INC.
By: /s/ Richard W. Verella
Name: Richard W. Verella
Title: Senior Associate
By: /s/ William E. McCollum, Jr.
Name: William E. McCollum, Jr.
Title: Vice President
FIRST SOURCE FINANCIAL LLP,
By: First Source Financial Inc., its manager
By: /s/ John P. Thacker
Name: John P. Thacker
Title: Senior Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION
By: /s/ Thomas E. Johnstone
Name: Thomas E. Johnstone
Title: Duly Authorized Signatory
SUMMIT BANK
By: /s/ Segi Nakamura
Name: Segi Nakamura
Title: Vice President
HSBC BANK USA
By: /s/ J.B. Lyons
Name: J.B. Lyons
Title: Senior Vice President
AG CAPITAL FUNDING PARTNERS, L.P.
By: Angelo Gordon & Co., L.P. as Investment Advisor
By:
Name:
Title:
NORTHWOODS CAPITAL LIMITED
By: Angelo Gordon & Co., L.P. as Collateral Manager
By:
Name:
Title:
NEW YORK LIFE INSURANCE COMPANY
By:
Name:
Title:
SENIOR DEBT PORTFOLIO
By: Boston Management and Research,
as Investment Advisor
By: /s/ Payson F. Swaffield
Name: Payson F. Swaffield
Title: Vice President
ML CLO XX PILGRIM AMERICA (CAYMAN) LTD.
By:
Name:
Title:
TORONTO DOMINION (TEXAS), INC.
By: /s/ Lynn Chasin
Name: Lynn Chasin
Title: Vice President
GREAT POINT CLO 1999-1 LTD.
By: Sankaty Advisors, Inc., as
Collateral Managers
By: /s/ Diane J. Exter
Name: Diane J. Exter
Title:Executive Vice President, Portfolio Manager
EATON VANCE SENIOR INCOME TRUST
By:
Name:
Title:
Schedule 1.1E
Existing Tranche C Letters of Credit
None.
<PAGE>
AMENDED AND RESTATED
INVESTMENT
AND
DEPOSIT AGREEMENT
Dated as of March 29, 2000
between
Vestar Capital Partners III, L.P.
and
BANK OF AMERICA, N. A.,
in its capacity as Agent for the Lenders herein defined
<PAGE>
ii
TABLE OF CONTENTS
SECTION 1 DEFINITIONS 3
Section 1.1 Definitions. 3
Section 1.2 Terms Generally. 5
Section 1.3 Accounting Terms. 5
SECTION 2 MANDATORY INVESTMENTS 5
Section 2.1 Leverage Reduction relating to Shirt Group
Restructuring or Vestar Default. 5
Section 2.2 Leverage Reduction in Bankruptcy. 7
Section 2.3 Cash Collateral Account. 7
Section 2.4 Limitation on Investment Obligations. 7
SECTION 3 CONDITIONS 8
Section 3.1 Conditions to Effectiveness. 8
SECTION 4 DEPOSIT OF CAPITAL CALL NOTICES WITH AGENT 9
Section 4.1 Deposit of Capital Call Notices. 9
SECTION 5 REPRESENTATIONS AND WARRANTIES 9
Section 5.1 Existence and Power. 9
Section 5.2 Authorization. 9
Section 5.3 No Conflicts. 10
Section 5.4 Consents. 10
Section 5.5 Enforceable Obligations. 10
Section 5.6 Permitted Investment. 10
Section 5.7 Venture Capital Operating Company. 10
Section 5.8 Deposited Notices. 10
Section 5.9 Limitations on Actions. 11
SECTION 6 AFFIRMATIVE COVENANTS 11
Section 6.1 Outstanding Subscriptions. 11
Section 6.2 General Partner. 11
Section 6.3 Plan Assets, etc. 11
Section 6.4 Receipt of the Funds Pursuant to the
Deposited Notices. 11
Section 6.5 Partners and Pro Rata Shares. 11
SECTION 7 NEGATIVE COVENANTS 11
Section 7.1 Limitations on Actions. 12
SECTION 8 EVENTS OF DEFAULT 12
Section 8.1 Events of Default. 12
Section 8.2 Remedies. 13
Section 8.3 Receipt of the Funds Pursuant to the
Deposited Notices. 13
SECTION 9 MISCELLANEOUS 13
Section 9.1 Notices. 13
Section 9.2 Payments. 15
Section 9.3 Benefit of Agreement. 15
Section 9.4 No Waiver; Remedies Cumulative. 15
Section 9.5 Payment of Expenses, etc. 15
Section 9.6 Amendments, Waivers and Consents. 16
Section 9.7 Counterparts. 16
Section 9.8 Headings. 16
Section 9.9 Survival. 16
Section 9.10 Governing Law; Submission to Jurisdiction;
Venue. 16
Section 9.11 Severability. 17
Section 9.12 Entirety. 17
Section 9.13 Binding Effect; Termination. 17
Section 9.14 Limitation on Recourse. 17
Section 9.15 Confidentiality. 18
ANNEXES
Exhibit A Form of Capital Call Notice
Exhibit B Terms of Preferred Stock
Exhibit C Terms of Subordination
<PAGE>
AMENDED AND RESTATED
INVESTMENT
AND
DEPOSIT AGREEMENT
THIS AMENDED AND RESTATED INVESTMENT AND DEPOSIT AGREEMENT, dated as of
March 29, 2000 (the "Agreement"), amends and restates that certain Investment
and Deposit Agreement dated as of September 30, 1999 by and among the parties
hereto (the "Existing Investment and Deposit Agreement"), and is executed and
entered into by and between Vestar Capital Partners III, L.P., a Delaware
limited partnership (the "Sponsor"), 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, March 19, 1999 and September 30, 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 Fifth
Amendment, dated as of the date hereof (such amendment herein referred to as the
"Fifth 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 a condition to the effectiveness of the Fifth Amendment,
the Lenders have required that the Existing Investment and Deposit Agreement be
amended and restated in the manner set forth below;
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. 5 Effective Date" shall have the meaning
assigned to such term in the Fifth 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 2.3.
"Deposited Notices" means a collective reference to the
Capital Call Notices delivered by the Sponsor 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
----------------
Sponsor.
"Investment Commitment" means, on any date, $30,000,000 minus,
without duplication, the sum of (i) the aggregate outstanding principal
amount of the Tranche C Obligations on such date, (ii) the aggregate
amount of payments made by, or on behalf of, the Sponsor after the
Amendment No. 5 Effective Date through and including such date which
permanently reduce the Tranche C Commitment (including, without
limitation, pursuant to payments under the Tranche C Guaranty and
payments made in order to cash collateralize Tranche C LOC
Obligations), (iii) the aggregate amount of capital contributions made
by, or on behalf of, the Sponsor to the Parent after the Amendment No.
5 Effective Date through and including such date which are used by the
Borrower to make a mandatory prepayment of the Loans outstanding under
the Credit Agreement pursuant to Section 3.3(b)(v)(B) thereof and (iv)
the aggregate amount of Credit Party Obligations in which a
participation interest has been purchased by, or on behalf of, the
Sponsor pursuant to Section 2.1(c) or Section 2.2(c).
"Limited Partners" means the limited partners of the Sponsor.
"Mandatory Investment" means a capital contribution by, or on
behalf of, the Sponsor to the Parent in Dollars and in funds
immediately available to the Parent on the terms set forth in Exhibit B
attached hereto 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 Sponsor, (ii) the
ability of the Sponsor 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 Sponsor, all
Indebtedness, all other obligations that would be reflected as
liabilities on a balance sheet of the Sponsor and the purchase price
that the Sponsor (directly or indirectly, including, but not limited
to, through any Subsidiary of the Sponsor) 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 Sponsor on
any date shall include (i) the obligations of the Sponsor to make
Mandatory Investments (and other payments to the Agent pursuant to
Section 2.1 or Section 2.2) in an amount up to the Investment
Commitment on such date and any and all other payment obligations of
the Sponsor to the Agent (on behalf of the Lenders) under this
Agreement on such date and (ii) the obligations of the Sponsor under
the Tranche C Guaranty.
"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
Sponsor 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 Sponsor 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 Sponsor, directly or indirectly through Subsidiaries,
and (ii) any partnership, association, joint venture or other entity of
which the Sponsor, directly or indirectly through Subsidiaries, owns at
such time more than 50% of the Equity Interests.
"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 Sponsor 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 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 relating to Shirt Group Restructuring or Vestar
Default.
--------------------------------------------------------------------
(a) In the event that the Leverage Reduction Requirements
shall not have been satisfied by the last day of the Leverage Reduction
Period, the Sponsor shall make a Mandatory Investment on such day in an
amount equal to (i) if the Shirt Group Restructuring shall have been
consummated by such date, the amount necessary (after giving effect to
all prepayments made pursuant to Section 3.3(b)(iii)(A) of the Credit
Agreement after the Amendment No. 5 Effective Date through and
including such date) to enable satisfaction of the Leverage Reduction
Requirements or (ii) if the Shirt Group Restructuring shall not have
been consummated by such date, the then current Investment Commitment.
(b) Upon the occurrence of any Event of Default hereunder, the
Sponsor immediately shall, upon written demand by the Agent, make a
Mandatory Investment in an amount equal to the then current Investment
Commitment.
(c) The Sponsor may, at its option, in lieu of making a
Mandatory Investment required by Section 2.1(a)(i), pay directly to the
Agent and direct the Agent to purchase on behalf of the Sponsor, on or
before the time that such Mandatory Investment is required to be made,
an undivided, non-voting participation interest in the Credit Party
Obligations then outstanding under the Credit Documents for a purchase
price equal to the amount of the Mandatory Investment that otherwise
would have been required. The Sponsor may, at its option, in lieu of
making a portion of the Mandatory Investment required by Section
2.1(a)(ii) in an amount equal to the amount of the prepayment required
to be made on the last day of the Leverage Reduction Period pursuant to
Section 3.3(c) of the Credit Agreement, pay directly to the Agent and
direct the Agent to purchase on behalf of the Sponsor, on or before the
time that such Mandatory Investment is required to be made, an
undivided, non-voting participation interest in the Credit Party
Obligations then outstanding under the Credit Documents for a purchase
price equal to the amount of the prepayment required to be made on the
last day of the Leverage Reduction Period pursuant to Section 3.3(c) of
the Credit Agreement. Any participation interest in the Credit Party
Obligations acquired on behalf of the Sponsor in accordance with the
terms of this Section 2.1(c) shall be subject to an intercreditor
agreement with the Agent on behalf of the Lenders containing
substantially the terms and conditions set forth on Exhibit C.
(d) In the event that the Sponsor shall fail, at its option,
to either (A) make a Mandatory Investment when due as required pursuant
to Section 2.1(a) or Section 2.1(b) or (B) to the extent applicable,
make a payment to the Agent for the purchase on behalf of the Sponsor
of a participation interest in the Credit Party Obligations on or
before the time that such Mandatory Investment is required to be made
in accordance with the terms of Section 2.1(c), the Sponsor hereby
promises to pay on demand to the Agent (for the benefit of the Lenders)
an amount equal to the amount of the Mandatory Investment that
otherwise would have been required.
(e) All amounts paid by the Sponsor to the Agent pursuant to
Section 2.1(a) or Section 2.1(b) 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. Subject to the terms of Section 2.1(f), all
amounts paid by the Sponsor to the Agent pursuant to Section 2.1(c)
shall be applied by the Agent on behalf of the Lenders to pay for the
purchase by the Sponsor of an undivided, non-voting participation
interest in the Credit Party Obligations then outstanding under the
Credit Documents which shall be subject to an intercreditor agreement
with the Agent on behalf of the Lenders containing substantially the
terms and conditions set forth on Exhibit C and, in making the purchase
of such participation interest in the Credit Party Obligations, shall
be applied (i) in the case of any such payment pursuant to Section
2.1(c) made in lieu of a Mandatory Investment required by Section
2.1(a)(i), in the same manner prescribed for the application of
prepayment proceeds under Section 3.3(b)(vi)(D) of the Credit Agreement
and (ii) in the case of any such payment pursuant to Section 2.1(c)
made in lieu of a portion of a Mandatory Investment required by Section
2.1(a)(ii), in the same manner prescribed for the application of
prepayment proceeds under Section 3.3(b)(vi)(C) of the Credit
Agreement.
(f) Notwithstanding any provision to the contrary contained
herein or in the Credit Agreement, amounts paid by the Sponsor to the
Agent pursuant to Section 2.1(c) shall not be applied to pay for the
purchase on behalf of the Sponsor of a participation interest in any
Swingline Loans, Revolving Loans or LOC Obligations (or cash collateral
therefor), and, to the extent that any provision of this Agreement or
the Credit Agreement provides for such amounts to be so applied, such
amounts instead shall be applied, at the Sponsor's option, either (i)
to the pro rata prepayment of (A) the Swingline Loans (without any
reduction in the Revolving Committed Amount) and (B) the Revolving
Loans and, after all Revolving Loans have been repaid, to a cash
collateral account in respect of LOC Obligations (without any reduction
in the Revolving Committed Amount), in which case such proceeds shall
be deemed to constitute a Mandatory Investment, or (ii) to purchase an
undivided, non-voting participation interest in the Term Loans then
outstanding under the Credit Documents, such participation interest to
be subject to an intercreditor agreement with the Agent on behalf of
the Lenders containing substantially the terms and conditions set forth
on Exhibit C and the purchase price of such participation interest to
be applied in the same manner prescribed for the application of
prepayment proceeds under Section 3.3(b)(vi)(C) of the Credit
Agreement.
Section 2.2 Leverage Reduction in Bankruptcy.
Notwithstanding any provision to contrary set forth in this Agreement:
(a) The obligations of the Sponsor under Section 2.1 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 occur prior to the end of the Leverage Reduction Period,
the Sponsor hereby promises to pay immediately to the Agent (for the
benefit of the Lenders) an amount equal to the then current Investment
Commitment.
(c) All amounts paid by the Sponsor to the Agent pursuant to
this Section 2.2 immediately shall be applied by the Agent (for the
benefit of the Lenders) to pay for the purchase by the Sponsor of an
undivided, non-voting participation interest in the Credit Party
Obligations then outstanding under the Credit Documents shall be
subject to an intercreditor agreement with the Agent on behalf of the
Lenders containing substantially the terms and conditions set forth on
Exhibit C and, in making the purchase of such participation interest in
the Credit Party Obligations, shall be applied in the same manner
prescribed for the application of prepayment proceeds under Section
3.3(b)(vi)(E) of the Credit Agreement.
Section 2.3 Cash Collateral Account.
To the extent that the Sponsor shall have deposited with the
Agent on June 30, 2000 cash and/or Cash Equivalents in an aggregate
amount at least equal to the Investment Commitment as of such date,
the Leverage Reduction Period shall be extended until August 31, 2000
as provided in the definition of the term "Leverage Reduction Period"
set forth in Section 1.1 of the Credit Agreement. All cash and/or Cash
Equivalents so deposited with the Agent 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 Sponsor
hereby authorizes the Agent to apply amounts on deposit in the Cash
Collateral Account to the payment, on behalf of the Sponsor, when due
of all amounts payable under Section 2.1 or Section 2.2, as
applicable, and, in the case of amounts payable under Section 2.1(a)
or Section 2.1(c) (in lieu of a Mandatory Investment (or portion
thereof) required by Section 2.1(a)), if so directed by the Sponsor,
the amount so applied by the Agent shall be used by the Agent, on
behalf of the Sponsor, to purchase participation interests in the
Credit Party Obligations pursuant to Section 2.1(c), and any balance
remaining in the Cash Collateral Account promptly shall be turned over
by the Agent to the Sponsor in such manner as the Sponsor at the time
shall specify to the Agent. At the request of the Sponsor, 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 Sponsor and shall be distributed not less
than quarterly by the Agent to the Sponsor. To the extent that any
loss is incurred in respect of such investments by the Agent on behalf
of the Sponsor, the Sponsor not less than quarterly will deliver to
the Agent, for deposit in the Cash Collateral Account, additional
amounts sufficient to offset such losses.
Section 2.4 Limitation on Investment Obligations.
Notwithstanding any provision to contrary set forth in this
Agreement, the Sponsor shall not be obligated at any time to make
Mandatory Investments (or any other payments to the Agent pursuant to
Section 2.1 or Section 2.2) 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. 5
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
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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. Upon
satisfaction of the requirements of this clause (b), the Agent shall
promptly return to the Sponsor the original Capital Call Notices
delivered to the Agent pursuant to the Existing Investment and Deposit
Agreement.
(c) Legal Opinion. Receipt of a legal opinion of Simpson
Thacher & Bartlett, counsel for the Sponsor, in form
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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
of the Sponsor, 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. 5
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 Sponsor.
(ii) Partnership Agreement. A certificate of the
President or any duly authorized officer and Secretary of the
general partner of the General Partner providing that the copy
of the Partnership Agreement, together with all amendments
thereto, delivered to the Agent in connection with the
Existing Investment and Deposit Agreement is a true and
complete copy of the Partnership Agreement and that there have
been no amendments to the Partnership Agreement since the date
of the Existing Investment and Deposit Agreement.
(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 Sponsor, in form and substance
satisfactory to the Agent, stating that the aggregate Total Capital
Commitments of all Limited Partners as of the Amendment No. 5 Effective
Date equals or exceeds the sum of (i) the Investment Commitment plus
(ii) all other Obligations of the Sponsor.
(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 Sponsor, 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. 5 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 Sponsor.
SECTION 4
DEPOSIT OF CAPITAL CALL NOTICES WITH AGENT
Section 4.1 Deposit of Capital Call Notices.
The Sponsor hereby agrees that each of the Capital Call
Notices delivered by the Sponsor 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 Sponsor hereby represents and warrants to the Agent (for
the benefit of the Lenders) that:
Section 5.1 Existence and Power.
(a) Each of the Sponsor 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 Sponsor'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
a Material Adverse Effect.
Section 5.2 Authorization.
The Sponsor 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 Sponsor 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 Sponsor to make Mandatory Investments (and other
payments to the Agent pursuant to Section 2.1 or Section 2.2) 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 Sponsor 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 Sponsor'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
Sponsor and constitutes legal, valid and binding obligations of the
Sponsor, 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 Sponsor set
forth in this Agreement and the making by the Sponsor of any Mandatory
Investment (and other payments to the Agent pursuant to Section 2.1 or
Section 2.2) 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 Sponsor in an aggregate amount sufficient
to pay in full the amount required to satisfy the obligation of the
Sponsor to make Mandatory Investments (and other payments to the Agent
pursuant to Section 2.1 or Section 2.2) 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 Sponsor is a venture capital operating company within
the meaning of the Plan Asset Regulations, or, the Sponsor satisfies
another exception under the Plan Asset Regulations such that the
assets of the Sponsor 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 or Section 2.2),
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 Sponsor is not aware of any event or condition that
could (i) have a material adverse effect on the ability of the Sponsor
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 Sponsor 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 Sponsor 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 Sponsor.
Section 6.2 General Partner.
The Sponsor will cause (i) Vestar Associates III, L.P. to be
the sole general partner of the Sponsor 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 Sponsor 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 Sponsor 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.
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Immediately upon receipt by the Sponsor 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 Sponsor
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 Sponsor 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
Sponsor as true and complete.
SECTION 7
NEGATIVE COVENANTS
Section 7.1 Limitations on Actions.
So long as this Agreement is in effect, the Sponsor
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 Sponsor shall default in the payment
when due of any amounts owing under Section 2.1 or
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Section 2.2; 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.
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(i) Default in the due performance or observance
of any term, covenant or 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 Sponsor 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 Sponsor; or
---------------
(f) Defaults under Other Agreements. With respect to any
Indebtedness (other than Indebtedness outstanding under this Agreement
or the Credit Agreement (but including the Guaranty Obligations of the
Sponsor arising under the Tranche C Guaranty)) in excess of $20
million in the aggregate for the Sponsor, (A)(1) the Sponsor 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 Sponsor 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.
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 Sponsor's obligations arising under this
Agreement (including, without limitation, the Sponsor's obligations
under Section 2.1 and Section 2.2) 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
Sponsor; (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
Sponsor, 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 Sponsor 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.
Section 8.3 Receipt of the Funds Pursuant to the Deposited Notices.
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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 Sponsor of the amount of such capital contribution and the
identity of the Limited Partner making such capital contribution.
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 Sponsor:
Vestar Capital Partners III, L.P.
245 Park Avenue
41st Floor
New York, New York 10167
Attn: Jack Feder
Telephone: (212) 351-1630
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: Bob Klawinski
Telephone: (704) 387-0467
Telecopy: (704) 386-9607
with a copy to:
Bank of America, N.A.
NY1-503-06-07
335 Madison Ave
New York, New York 10017
Attn: Fred Zagar
Telephone: (212) 503-8242
Telecopy: (212) 503-7080
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
Sponsor; provided that (i) the Sponsor 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 Sponsor 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
exercising any right, power or privilege hereunder and no course of dealing
between the Agent or any Lender and the Sponsor 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 Sponsor in any case shall entitle the Sponsor 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 Sponsor 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 Sponsor 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 Sponsor.
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 Sponsor 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
the Sponsor 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 Sponsor, as the case may be, in any other
jurisdiction.
(b) Each of the Sponsor 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 the Existing Investment and Deposit Agreement.
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 Agent
receives the proceeds of a Mandatory Investment (and/or a payment to the Agent
in order to purchase a participation interest in the Credit Party Obligations)
in an aggregate amount that is equal to or exceeds the then current Investment
Commitment, (iii) the date that (A) the ratio (calculated on a pro forma basis
using the principles set forth in the definition of "Leverage Reduction
Requirements" set forth in Section 1.1 of the Credit Agreement) of (1) all
Funded Indebtedness (net of cash and Cash Equivalents, but without netting for
cash and Cash Equivalents on deposit in the Cash Collateral Account, and
excluding (x) Subordinated Indebtedness, (y) the Tranche C Obligations and (z)
any Credit Party Obligations in which a participation interest has been
purchased by, or on behalf of, the Sponsor pursuant to Section 2.1(c) or Section
2.2(c)) of the Consolidated Parties on a consolidated basis on the date of
determination, to (2) Consolidated EBITDA for the four fiscal-quarter period
ending as of the most recent fiscal month end preceding the date of
determination with respect to which the Agent has received the Required
Financial Information, is equal to or less than 3.25 to 1.0 and (B) the ratio
(calculated on a pro forma basis using the principles set forth in the
definition of "Leverage Reduction Requirements" set forth in Section 1.1) of (1)
all Funded Indebtedness (net of cash and Cash Equivalents, but without netting
for cash and Cash Equivalents on deposit in the Cash Collateral Account) of the
Consolidated Parties on a consolidated basis on the date of determination
(including Subordinated Indebtedness, but excluding the Tranche C Obligations
and any Credit Party Obligations in which a participation interest has been
purchased by, or on behalf of, the Sponsor pursuant to Section 2.1(c) or Section
2.2(c)) to (2) Consolidated EBITDA for the four fiscal-quarter period ending as
of the most recent fiscal month end preceding the date of determination with
respect to which the Agent has received the Required Financial Information is
equal to or less than 5.5 to 1.0 and (iv) the date that the sum of, without
duplication, (A) the aggregate amount of capital contributions made by, or on
behalf of, the Sponsor to the Parent after the Amendment No. 5 Effective Date
through and including such date which are used by the Borrower to make a
mandatory prepayment of the Loans pursuant to Section 3.3(b)(v)(B) of the Credit
Agreement and (B) the aggregate amount of payments made by, or on behalf of, the
Sponsor to purchase participation interests in the Credit Party Obligations
after the Amendment No. 5 Effective Date through and including such time, shall
equal or exceed the then current Investment Commitment.
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 Sponsor by it shall be limited to
satisfaction out of, and enforcement against, the assets of the Sponsor.
Notwithstanding anything to the contrary contained herein or in any other
document, certificate or instrument executed by the Sponsor pursuant hereto, the
Agent acknowledges and agrees that no officer, employee, partner, servant,
controlling Person, manager, agent, authorized representative or Affiliate of
the Sponsor (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 Sponsor under this Agreement or for the performance of any of the
obligations of the Sponsor 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 Sponsor or alleged liability to the Agent of the
Sponsor 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
Sponsor pursuant to the terms of the Partnership Agreement, (ii) to impair the
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
Sponsor. 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 Sponsor 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.
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:
<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
NC1-007-13-06 ABA Routing No.: 053-000-196
Bank of America Corporate Center Account No.: 1366212250600
Charlotte, North Carolina 28255 For Credit to: Corporate Services
Attn: Bob Klawinski Reference: Vestar Capital
Telephone: (704) 387-0467 Partners III, L.P.
Account No. 1366212250600 Amount: $______________
For Credit to: Corporate Services
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>
22
Exhibit B
Illustrative Terms of New Equity Securities
Issuer Cluett American Investment Corp. (the "Issuer").
------
- --------------------------------------------------
Security Junior Preferred Stock, par value $.01 per share (the
"Preferred Stock").
----------------
Offering Private offering of the Preferred Stock by the Issuer.
Liquidation Preference Per Share $100.00
per share, plus an amount in
cash equal to all accrued and
unpaid dividends.
Use of Proceeds All the net proceeds of the Preferred Stock will be
invested by the Issuer in its wholly-owned subsidiary
Cluett American Corp.
("Cluett").
------
Optional Redemption Unless prohibited
by the Credit Agreement, the
Issuer may redeem the
Preferred Stock in whole or
in part at any time and from
time to time, pro rata, at a
redemption price equal to the
liquidation preference
thereof, payable in cash.
Mandatory Redemption The Preferred Stock will not be subject to mandatory
redemption.
Dividend Rate Dividends on the Preferred
Stock will accrue at the rate
of 22?% per annum compounded
quarterly ("Dividend Rate").
-------------
Dividends Dividends on the Preferred
Stock will be payable only if
declared by the Issuer?s
Board of Directors. Upon any
such declaration, dividends
are payable in cash, at a per
annum rate equal to the
Dividend Rate of the
liquidation preference.
Dividends will be cumulative
and will accumulate from the
date of issuance.
Voting The Preferred Stock will be
non-voting, except as
otherwise required by law and
except in certain customary
circumstances, including
amendments to the rights of
the holders of the Preferred
Stock and the creation of
equivalent and senior
securities.
Ranking The Preferred Stock will
rank, with respect to the
dividend rights, redemption
and distributions upon
liquidation, winding-up and
dissolution of the Issuer,
senior to all classes of
common stock of the Issuer
and to the Class C Junior
Preferred Stock and junior to
the Class A Senior Preferred
Stock.
Covenants
The Issuer may not repurchase, redeem or otherwise acquire or retire securities
of equal or junior ranking, other than repurchases of employee stock
substantially on the same basis as provided for in the Issuer?s Class A Senior
Preferred Stock; the Issuer may not permit any subsidiary to make any payment or
distribution on securities of the Issuer that the Issuer would be prohibited
from making itself.
Remedies Until all Non-Sponsor Debt
(as defined in Exhibit C) has
been paid or purchased in
full in cash and the
Commitments under the Credit
Agreement shall have been
terminated, holders of the
Preferred Stock may not
exercise remedies other than
increasing pricing and
acceleration.
- ------------------------------------------------------------------------------
<PAGE>
Exhibit C
Illustrative Terms of Intercreditor Agreement
o All payments or prepayments of principal or interest on the participation
interests of the Sponsor, the Partners and/or their respective Affiliates
(collectively, the "Sponsor Lenders") in the Credit Party Obligations (the
"Sponsor Participation Interests") received by the Agent or the Sponsor
Lenders shall be used to purchase additional participation interests from
the Lenders other than the Sponsor Lenders (collectively, the "Non-Sponsor
Lenders") in the Credit Party Obligations held by the Non-Sponsor Lenders
(the "Non-Sponsor Debt") until the Non-Sponsor Debt has been paid or
purchased in full in cash, no Letters of Credit or Tranche C Letters of
Credit shall be outstanding and the Commitments under the Credit Agreement
shall have been terminated.
o Interest on the Sponsor Participation Interests shall be PIK only until all
Non-Sponsor Debt has been paid or purchased in full in cash, no Letters of
Credit or Tranche C Letters of Credit shall be outstanding and the
Commitments under the Credit Agreement shall have been terminated.
o Until all Non-Sponsor Debt has been paid or purchased in full in cash, no
Letters of Credit or Tranche C Letters of Credit shall be outstanding and
the Commitments under the Credit Agreement shall have been terminated, the
Sponsor Lenders shall have no voting rights in respect of the Sponsor
Participation Interests.
o Until the date 91 days after all Non-Sponsor Debt has been paid or
purchased in full in cash, no Letters of Credit or Tranche C Letters of
Credit shall be outstanding and the Commitments under the Credit Agreement
shall have been terminated, the Sponsor Lenders shall not take any action
in their capacity as holders of the Sponsor Participation Interests to
initiate an involuntary bankruptcy proceeding in respect of any Credit
Party.
o The Non-Sponsor Lenders shall have the right, if not exercised by the
Sponsor Lenders, to file proofs of claim (and any notice of assignment of
the right to receive payments) in respect of the Sponsor Participation
Interests in any bankruptcy proceeding in respect of any Credit Party.
o In any bankruptcy proceeding in respect of any Credit Party, the
Non-Sponsor Lenders shall be entitled to payment in full in cash before the
Sponsor Lenders, in their capacity as holders of the Sponsor Participation
Interests, shall be entitled to receive any payments, property or assets
(other than (i) debt securities having payment terms no more favorable to
the Sponsor Lenders vis-a-vis the Non-Sponsor Lenders than the terms
provided in this Exhibit C and (ii) equity securities that are not
redeemable for cash, and in respect of which no cash dividends are
payable), until all Non-Sponsor Debt has been paid in full in cash, no
Letters of Credit or Tranche C Letters of Credit shall be outstanding and
the Commitments under the Credit Agreement shall have been terminated.
o Any payments received by the Sponsor Lenders, in their capacity as holders
of the Sponsor Participation Interests, in contravention of the foregoing
provisions shall be held in trust for the benefit of the Non-Sponsor
Lenders, and immediately turned over to, the Agent for the benefit of the
Non-Sponsor Lenders.
o Until the Credit Party Obligations have been paid or purchased in full in
cash, no Letters of Credit or Tranche C Letters of Credit shall be
outstanding and the Commitments under the Credit Agreement have been
terminated, in any reorganization proceeding in respect of any Credit
Party, the Non-Sponsor Lenders shall be entitled to approve (on behalf of
the Sponsor Lenders, in their capacity as holders of the Sponsor
Participation Interests) the use of cash collateral by such Credit Party.
o Until the Credit Party Obligations have been paid or purchased in full in
cash, no Letters of Credit or Tranche C Letters of Credit shall be
outstanding and the Commitments under the Credit Agreement have been
terminated, in any bankruptcy proceeding in respect of any Credit Party,
the Sponsor Lenders, in their capacity as holders of the Sponsor
Participation Interests, shall not (i) vote against any plan of
reorganization or liquidation supported by the Non-Sponsor Lenders or (ii)
vote for any plan of reorganization or liquidation opposed by the
Non-Sponsor Lenders.
o Until the Credit Party Obligations have been paid or purchased in full in
cash, no Letters of Credit or Tranche C Letters of Credit shall be
outstanding and the Commitments under the Credit Agreement have been
terminated, in any bankruptcy proceeding in respect of any Credit Party,
(i) the Sponsor Lenders, in their capacity as holders of the Sponsor
Participation Interests, 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 Sponsor Lenders or
any other form of affirmative relief of any other kind or nature and (ii)
the Sponsor Lenders, in their capacity as holders of the Sponsor
Participation Interests, shall not file any objection or other responsive
pleading opposing any relief requested by the Non-Sponsor Lenders. o If a
Bankruptcy Event shall occur with respect to the Parent or the Borrower,
the Sponsor Lenders shall, subject to obtaining any necessary consents from
the holders of the Senior Subordinated Debt or as otherwise required by
law, take such action as the Agent shall reasonably request to cause the
Sponsor Participation Interests to rank pari passu with the Senior
Subordinated Debt.
<PAGE>
Cluett American Corp.
Consent of Independent Auditors
We consent to the use of our report dated March 19, 1999, with respect to the
consolidated financial statements and financial statement schedule of Cluett
American Corp. for the two years ended December 31, 1998, included in this
Annual Report (Form 10-K).
/s/ Ernst & Young LLP
Atlanta, GA
March 29, 2000
<PAGE>
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<ARTICLE> 5
<LEGEND>
(Replace this text with the legend)
</LEGEND>
<CIK> 0001064435
<NAME> Cluett American Corp
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> Dec-31-1999
<PERIOD-START> Jan-1-1999
<PERIOD-END> Dec-31-1999
<CASH> 7,239
<SECURITIES> 0
<RECEIVABLES> 55,693
<ALLOWANCES> (10,174)
<INVENTORY> 78,105
<CURRENT-ASSETS> 133,992
<PP&E> 117,198
<DEPRECIATION> (69,404)
<TOTAL-ASSETS> 231,506
<CURRENT-LIABILITIES> 60,736
<BONDS> 0
0
58,329
<COMMON> 1
<OTHER-SE> (147,226)
<TOTAL-LIABILITY-AND-EQUITY> 231,506
<SALES> 343,520
<TOTAL-REVENUES> 343,520
<CGS> 249,126
<TOTAL-COSTS> 81,790
<OTHER-EXPENSES> 2,228
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 26,462
<INCOME-PRETAX> (15,970)
<INCOME-TAX> 1,143
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (17,113)
<EPS-BASIC> 0
<EPS-DILUTED> 0
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