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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 18, 1998
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
------------------------
PHILLIPS-VAN HEUSEN CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
<TABLE>
<S> <C> <C>
DELAWARE 5136 13-1166910
(STATE OR OTHER JURISDICTION OF (PRIMARY STANDARD INDUSTRIAL (IRS EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION) CLASSIFICATION CODE NUMBER)
</TABLE>
1290 AVENUE OF THE AMERICAS
NEW YORK, NEW YORK 10104
(212) 541-5200
(ADDRESS AND TELEPHONE NUMBER OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
------------------------
<TABLE>
<S> <C>
BRUCE J. KLATSKY COPY TO:
CHAIRMAN AND CHIEF EXECUTIVE OFFICER EDWARD H. COHEN, ESQ.
PHILLIPS-VAN HEUSEN CORPORATION ROSENMAN & COLIN LLP
1290 AVENUE OF THE AMERICAS 575 MADISON AVENUE
NEW YORK, NEW YORK 10104 NEW YORK, NEW YORK 10022
(NAME, ADDRESS AND TELEPHONE NUMBER
OF AGENT FOR SERVICE)
</TABLE>
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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: From time
to time after the effective date of this Registration Statement.
If the securities being registered on this form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
If this form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If this form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /
------------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED
TITLE OF EACH CLASS MAXIMUM OFFERING PROPOSED
OF SECURITIES TO BE AMOUNT TO BE PRICE PER MAXIMUM AGGREGATE AMOUNT OF
REGISTERED REGISTERED SHARE(1) OFFERING PRICE(1) REGISTRATION FEE
<S> <C> <C> <C> <C>
9 1/2% Senior Subordinated
Notes
due 2008................ $150,000,000 100% $150,000,000 $44,250
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 under the Securities Act.
------------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR DATES
AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL FILE
A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION STATEMENT
SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF THE
SECURITIES ACT OF 1933 OR UNTIL THIS REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING
PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
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<PAGE>
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
SUBJECT TO COMPLETION DATED JUNE 18, 1998
PROSPECTUS
PHILLIPS-VAN HEUSEN CORPORATION
OFFER TO EXCHANGE UP TO
$150,000,000 OF ITS 9 1/2% SENIOR SUBORDINATED NOTES DUE 2008
FOR ANY AND ALL OF ITS OUTSTANDING
$150,000,000 9 1/2% SENIOR SUBORDINATED NOTES DUE 2008
----------------------
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON ______,
1998, UNLESS EXTENDED.
Phillips-Van Heusen Corporation is offering hereby, upon the terms and
subject to the conditions set forth in this Prospectus and accompanying Letter
of Transmittal, which together constitute the Exchange Offer, to exchange an
aggregate of up to $150 million principal amount of its 9 1/2% Senior
Subordinated Notes due 2008 (the 'Exchange Notes') for an identical face amount
of its issued and outstanding 9 1/2% Senior Subordinated Notes Due 2008 (the
'Initial Notes'; the Initial Notes and the Exchange Notes being referred to
collectively as the 'Notes'). See 'The Exchange Offer' for further information
concerning the above and for information with respect to resales of the Exchange
Notes by broker-dealers.
The Exchange Notes are substantially identical to the Initial Notes. See
'Description of Exchange Notes'.
The Exchange Notes are being offered hereby to satisfy certain obligations
of the Company contained in the Registration Rights Agreement. Based on
interpretations by the staff of the Securities and Exchange Commission set forth
in no-action letters issued to third parties, the Company believes that the
Exchange Notes issued pursuant to the Exchange Offer in exchange for Initial
Notes may be offered for resale, resold or otherwise transferred by any holder
thereof (other than any holder that is a broker-dealer or an 'affiliate' of the
Company within the meaning of Rule 405 under the Securities Act) without further
compliance with the registration and prospectus delivery requirements of the
Securities Act, provided that such Exchange Notes are acquired in the ordinary
course of such holder's business, such holder has no arrangement or
understanding with any person to participate in the distribution of such
Exchange Notes and neither such holder nor any such other person is engaging in
or intends to engage in a distribution of the Exchange Notes. However, the
Company has not sought, and does not intend to seek, its own no-action letter,
and there can be no assurance that the Commission would make a similar
determination with respect to the Exchange Offer. See 'Plan of Distribution'.
The Exchange Notes are designated for trading in the PORTAL Market. There
is no established trading market for the Exchange Notes. The Company does not
currently intend to list the Exchange Notes on any securities exchange or to
seek approval for quotation through any automated quotation system. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the Exchange Notes. The certificates representing the Exchange Notes will be
issued in fully registered form.
SEE 'RISK FACTORS' BEGINNING ON PAGE 14 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY HOLDERS OF THE INITIAL NOTES.
----------------------
THE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE COMMISSION NOR HAS THE COMMISSION
OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY
OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
The date of this Prospectus is June , 1998.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
The following documents filed by the Company with the Commission are hereby
incorporated into this Prospectus and shall be deemed to be a part hereof:
(i) the Company's Annual Report on Form 10-K for the fiscal year
ended February 1, 1998, as amended by its amendment on Form
10-K/A No. 1. (File No. 1-724); and
(ii) the Company's Quarterly Report on Form 10-Q for the fiscal
quarter ended May 3, 1998 (File No. 1-724).
All documents filed by the Company pursuant to Section 13(a), 13(c), 14 or
15(d) of the Securities Exchange Act of 1934 (the 'Exchange Act') subsequent to
the date of this Prospectus and prior to the consummation of the Exchange Offer
shall be deemed to be incorporated by reference herein and to be a part hereof
from the date of filing of such documents. Any statement contained in a document
incorporated or deemed to be incorporated by reference herein shall be deemed to
be modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein or in any other subsequently filed document which
also is or is deemed to be incorporated by reference herein modifies or
supersedes such statement. Any such statement so modified or superseded shall
not be deemed, except as so modified or superseded, to constitute a part of this
Prospectus.
Copies of all documents incorporated by reference into this Prospectus,
other than exhibits to such documents (unless such exhibits are specifically
incorporated by reference therein), will be provided without charge to each
person to whom this Prospectus is delivered, upon oral or written request by
such person to the Secretary of the Company, 1290 Avenue of the Americas, New
York, New York 10104, telephone number (212) 541-5200.
FORWARD-LOOKING STATEMENTS
Forward-looking statements in this Prospectus, including, without
limitation, statements relating to the plans, strategies, objectives,
expectations and intentions of Phillips-Van Heusen Corporation (the 'Company'),
are made pursuant to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. Investors are cautioned that such forward-looking
statements are inherently subject to risks and uncertainties, many of which
cannot be predicted with accuracy, and some of which might not be anticipated,
including, without limitation, the following: (i) the Company's plans,
strategies, objectives, expectations and intentions are subject to change at any
time at the discretion of the Company; (ii) the levels of sales of the Company's
apparel and footwear products, both to its wholesale customers and in its retail
stores, and the extent of discounts and promotional pricing in which the Company
is required to engage may vary from expected levels and amounts; (iii) the
Company's plans and results of operations will be affected by the Company's
ability to manage its growth and inventory; and (iv) other risks and
uncertainties indicated from time to time in the Company's filings with the
Securities and Exchange Commission (the 'Commission').
Future events and actual results, financial and otherwise, could differ
materially from those set forth in or contemplated by the forward-looking
statements herein. Important factors that could contribute to such differences,
in addition to those referred to above, are set forth herein under 'Risk
Factors'.
i
<PAGE>
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the detailed
information and consolidated financial statements appearing elsewhere in this
Prospectus. Unless the context otherwise requires, as used in this Prospectus,
the term 'Company' means Phillips-Van Heusen Corporation ('PVH') and its
subsidiaries ('Subsidiaries'). The Company's fiscal year is based on the 52-53
week period ending on the Sunday on or closest to January 31 and is designated
by the calendar year in which the fiscal year commences. The Company derives
market share data information used herein from various industry sources.
THE COMPANY
OVERVIEW
The Company is a leading marketer of men's, women's and children's apparel
and footwear, sold under five nationally recognized brand names -- Van Heusen,
Bass, Izod, Gant and Geoffrey Beene -- in the dress shirt, casual footwear, and
sportswear sectors. The Company is brand focused and manages the design,
sourcing and manufacturing of substantially all of its products on a brand by
brand basis. The Company's products include both dress and sport shirts and
casual shoes and, to a lesser extent, sweaters, neckwear, furnishings, bottoms,
outerwear and leather and canvas accessories. Approximately 23% of the Company's
net sales in fiscal 1997 were derived from sales of dress shirts, 33% from sales
of footwear and related products and 44% from sales of other apparel goods,
primarily branded sportswear. The Company markets its products at a wholesale
level through national and regional department store chains and also directly to
consumers through its own retail stores, generally located in factory outlet
retail malls. The Company believes that marketing through the wholesale channel
provides the opportunity to build brand equity and represents its core business,
and views its retail business as a complement to its strong branded positions in
the wholesale market. The Company's strategy is to exploit and expand its
branded position in the United States and, on a longer-term basis, in the
international arena, and the Company believes that its portfolio of well
recognized brands offers the Company the best opportunity for realizing sales
growth and enhancing profit margins.
The Company's net sales and EBITDA (exclusive of the non-recurring charges
to earnings recorded in fiscal 1997) were $1,350.0 million and $70.8 million,
respectively, in fiscal 1997 versus $1,359.6 million and $77.2 million,
respectively, in fiscal 1996. Fiscal 1997 was a year of transition, as the
Company continued to realign and strengthen its business and further reduce
costs. The Company continued its store closing program and closed its sweater
manufacturing operations, which resulted in a planned reduction of revenue, made
a major investment of $18.4 million in incremental advertising expenditures in
the second half of the year, and took non-recurring charges to earnings of
$132.7 million in connection with certain restructuring expenses. The Company
believes that it made significant progress in its apparel segment where sales
and profitability increased, but it was disappointed with the results of its
footwear and related products segment. The Company believes that the increased
advertising expenditures and brand repositionings executed in 1997 position it
well to compete in its markets and expects the actions which gave rise to the
1997 charges to result in aggregate cost savings of over $40 million in the
period 1998 to 2000, and to exceed $20 million annually by 2000.
The Company's Van Heusen, Bass, Izod, Gant and Geoffrey Beene brands
collectively account for approximately 93% of the Company's net sales, with
approximately 73% of net sales being derived from Van Heusen, Bass and Geoffrey
Beene alone. Izod and Gant were acquired by the Company in 1995 and subsequently
repositioned in their markets. The Company believes that Izod and Gant have
substantial brand equity and position the Company well to capitalize on the
increasing popularity of branded sportswear. The Company owns four of the five
brands, with sales of the fifth -- Geoffrey Beene -- being under licensing
agreements with that designer. In addition, the Company recently entered into a
license agreement to market DKNY brand men's dress shirts.
The Company's brands enjoy national recognition in their respective sectors
of the market and share a rich heritage with between 40 and 120 years of
operating history. They represent sales leaders
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in their respective market niches, from a dominant position in dress shirts, to
a leading position in casual footwear, to an increasingly important position in
men's sportswear. In the United States, Van Heusen is the best selling men's
dress shirt and woven sport shirt brand, and Geoffrey Beene is the best selling
men's designer dress shirt brand. The Company believes that its overall share of
the United States men's dress shirt market, including its branded, designer and
private label offerings, is the largest of any company and that it has a growing
market share, currently in excess of 32%, in the key department store channel.
In the United States, Izod products include the best selling men's sweater
brand, one of the best selling basic knit shirts and the number one ranked golf
apparel brand in pro shops and resorts. Gant represents the largest collection
brand in several countries in Europe, and is second only to 'Polo' in most of
the other European countries. Bass is the leading brand of men's, women's and
children's casual shoes at the moderate price range in the United States.
The Company markets its five premier brands to different segments of the
market, appealing to varied demographic sectors and a broad spectrum of
consumers. This diversity of the Company's brands is intended to minimize
competition among the brands. The Van Heusen brand, designed to target the
moderate price range, appeals to the relatively conservative 'middle American'
consumer. The typical Bass consumer is family oriented, views the Bass brand as
'Americana', associated with a casual, outdoor lifestyle, and pays moderate
prices for his or her product. The Company's Izod brand is 'active inspired',
designed to sell on the main floor of department stores largely in knitwear
categories in the moderate to upper moderate price range. The Gant brand is the
Company's entry into collection sportswear and focuses on a traditional consumer
with refined taste who is prepared to purchase apparel in the higher price range
of the market. Geoffrey Beene is targeted toward a more fashion-forward consumer
who is prepared to purchase apparel in the upper moderate price range. The
Company's products are designed to appeal to relatively stable demographic
sectors and generally are not reliant on rapidly changing fashion trends.
The Company believes that because of its strong brands it is
well-positioned to capitalize on several trends that have affected the apparel
and footwear sectors in recent years. These include the stabilization of the
department store sector with a smaller number of stronger players, among which
the Company ranks its most important customers; the continued importance of
branding as a measure of product differentiation; continued growth in the
branded sportswear sector; and the stabilization of the dress shirt sector after
several years of modest decline. In addition, the recent lack of momentum in the
athletic shoe sector provides the Company with the opportunity to capitalize on
its Bass casual footwear products.
Substantially all of the Company's sales are made in the United States.
However, the Company believes that global name awareness is a key to the
creation of lasting brand equity and that it must pursue selective opportunities
to expand the sales of its brands internationally. Currently, Gant is the
Company's brand that is most developed internationally, with its name
recognition and sales substantially stronger in Europe than in the United
States. Gant products are sold in 35 countries, including in over 50 Gant stores
owned or franchised by the Company's licensing partner, Pyramid Sportswear, in
which the Company owns a minority interest with an option to acquire 100%.
Although the Van Heusen, Bass and Izod product lines also are sold outside the
United States, both directly and through licensees, their international sales
are small relative to Gant. Based on its experience with Gant, the Company
believes that opportunities exist to expand the sales of its Van Heusen, Bass
and Izod brands internationally.
Consistent with its strategy of developing its brands, the Company has
focused on the wholesale sector -- primarily department stores -- as the key
source of distribution for its products. The Company believes that the wholesale
channel generally, and department stores specifically, provide the best means of
promoting a fully conceptualized image for each of its brands and of securing
broad awareness of its products and image. The Company's wholesale customers for
branded and designer apparel include May Co., Federated, JC Penney, Proffits and
Dillard's. The Company's customers for footwear include Federated, May Co.,
Dillard's, Belk's and Nordstrom. The Company's ten largest wholesale customers,
accounting for over 60% of the Company's fiscal 1997 sales to wholesale
customers, each have been the Company's customers for more than 25 years. The
Company believes
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that its customers rely on its ability to design, manufacture to exacting
quality standards and deliver on a timely basis commercially successful apparel
and footwear programs.
While focused on the wholesale sector, the Company also sells its products
directly to consumers in approximately 695 Company-owned stores located
primarily in factory outlet retail malls. The stores are operated in five
formats, matching each of the Company's premier brands -- Van Heusen, Bass,
Izod, Gant and Geoffrey Beene. Van Heusen and Bass, which have the broadest
national recognition, followed by Izod, are in the broadest range of malls.
Geoffrey Beene stores are located in malls where that brand has greater name
recognition. Gant stores are included in a limited number of the most successful
of the nation's malls. Historically, the Company participated in the significant
expansion of the factory outlet mall sector, capitalizing on mall expansion to
build a portfolio of approximately 1,000 stores and generate significant sales
and cash flow growth. However, this strategy left the Company reliant on mall
growth rather than on brand and market share development as the primary driver
of expansion, contributed to a deterioration in the quality and stability of
earnings and failed to strengthen the image and brand equity in its major
businesses. Since 1995, the Company has significantly reduced the number of its
retail locations and has closed its least attractive stores to optimize its
portfolio. The Company's retail presence remains an important complement to its
strong branded positions in the wholesale market, facilitating product
experimentation, the gathering of market intelligence, effective inventory
control and management of surplus product.
STRATEGY
The Company's strategy is to exploit and expand its branded position in the
United States and, on a longer-term basis, internationally. Elements of this
strategy include:
o CAPITALIZE ON SPORTSWEAR OPPORTUNITY. With a renewed strong focus by
retailers on the importance of men's sportswear and the customer impact
of brand differentiation within that sector, the Company has actively
sought to build a leading branded presence in this fragmented niche,
acquiring existing sportswear brands (Izod and Gant) and expanding their
presence in the wholesale sector. This renewed focus is in part
attributable to the on-going move of employers towards casual dress
policies, such as 'casual Fridays', and the increasing number of people
who work at home. In addition, outside of the workplace, people's social
activities generally focus on a more casual lifestyle. These trends
present greater opportunities for the Company in sportswear. Sportswear
now represents 66% of the Company's apparel segment sales, and it is
expected that sportswear will continue to increase as a percentage of
sales.
o EXTEND BRAND PRODUCT RANGE. The Company continues to broaden the
product range of its brands, capitalizing on the name recognition,
popular draw and discrete target customer segmentation of each of its
major labels. For example, dress shirts are now marketed under the Bass
name and sportswear under the Van Heusen name, and Izod recently has
expanded its offerings to include products for the fall and holiday
seasons, a step toward building a year-round brand. As part of the
introduction of the European Gant collection in the United States, the
Company expanded its sportswear offerings to include sport coats,
outerwear, rainwear, swimwear and accessories. Brand differentiation is
maintained with design, manufacturing and procurement functions managed
at the brand level.
o PROMOTE GLOBAL BRAND AND IMAGE. The Company believes that over the
long-term the most successful brands will be those with a consistent
imagery, market positioning and name recognition throughout the world's
major consumer markets. The Company's longer-term goal is to develop its
core brands into international consumer franchises. Currently, all four
of the Company's owned brands are distributed internationally, although
only Gant, which in its niche is the leading market player in several
European countries and is second only to 'Polo' in most of the other
European countries, has achieved widespread brand recognition. The Van
Heusen brand is licensed in 21 countries in North, Central and South
America. In 1992, Bass began marketing its footwear internationally and
is now selling limited amounts of footwear to retailers
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in Europe, Canada, South America, the Middle East, Africa and Asia. The
Company plans to build on these bases and to project a consistent global
image for each of its owned brands.
o BUILD UPON ENHANCED ADVERTISING PRESENCE. The Company launched
advertising campaigns for its brands in the second half of fiscal 1997,
which resulted in an increase in advertising expenditures by $18.4
million from fiscal 1996 to $37.8 million. Based upon dialogue with its
wholesale customers, the Company believes that the campaigns were well
received. The Company is committed to a continued advertising program to
support and further develop the national and international recognition
of its brands. The Company believes that ongoing communication with the
consumer is a core ingredient for branded marketing success.
o LEVERAGE CORE COMPETENCIES IN LOGISTICAL AND IT SUPPORT. With primary
focus on the more demanding wholesale customer nationwide and on
securing and maintaining a strong presence on the department store
floor, the Company has made significant investments to ensure the
adequacy of its inventory replenishment programs, its capacity to
monitor sales by SKU and margin and its ability to ensure its customers
of timely product availability in a cost-effective manner.
o INCREASE OPERATING EFFICIENCIES. The Company is committed to a cost
reduction program and constantly explores alternative methods to achieve
that objective. Given its size, purchasing power and ability to optimize
manufacturing and outsourcing alternatives, the Company is in a position
to achieve significant efficiencies in procurement and manufacturing.
This is essential if the Company is to provide high levels of service
and responsiveness to its wholesale customers, while maintaining control
over costs and working capital. The Company has developed significant
manufacturing flexibility by maintaining a range of Company-owned and
third party manufacturing capacity available to it, while optimizing
margins through recourse to low cost non-United States manufacturing.
The Company has announced a number of programs, including the
contraction of its United States manufacturing and logistical
infrastructure, to achieve significant cost savings.
o OPERATE COMPLEMENTARY RETAIL OPERATIONS. The Company's factory outlet
retail stores provide a valuable complement to its wholesale presence,
allowing for product experimentation, the gathering of market
information, increasing the efficiency of inventory and surplus product
management. The Company's stores sell a breadth of product not otherwise
found in the Company's wholesale offerings. With a significant program
of store closures in progress, the Company has been very focused on
improving the profitability of the retail portfolio as a whole and
maintaining its financial viability as a second channel of distribution.
The Company's remaining retail stores are profitable, and the average
sales per square foot and inventory turn at such stores have improved
significantly since 1995, thereby positioning the Company's retail
operations to generate increasing earnings and cash flows.
IMPLEMENTATION OF THE COMPANY'S STRATEGIES
Specific action steps taken beginning in 1995 and continuing into 1998 and
1999 with respect to the implementation of these strategies include: (i) the
acquisition of the Izod and Gant brands; (ii) the reorganization of the
Company's non-dress shirt operations along brand lines versus a wholesale/retail
organizational structure; (iii) the complete repositioning of Gant's domestic
brand image to match its highly successful European brand image; (iv) the
launching of new, focused Van Heusen, Izod and Gant advertising campaigns; (v)
the closure of approximately 400 of the Company's worst performing retail
locations in a program that by the end of fiscal 1998, after approximately 50
new store openings, will have reduced the retail portfolio from approximately
1,000 locations to approximately 650; (vi) the closure of domestic shirt
manufacturing plants and its United States mainland shoe manufacturing plant;
(vii) the consolidation of the Company's domestic warehousing and distribution
facilities; and (viii) the closure of the Company's sweater manufacturing
operations, which were unprofitable, capital intensive and did not match the
Company's branded strategy.
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These steps have had the effect of focusing the Company's attention and
resources on its core brands and have yielded strong and positive results, with
further benefits expected to continue over the next three years. The Company's
apparel operations (excluding sweater operations) saw net sales increase 4.9% in
fiscal 1997 to $882.0 million, representing 65% of total fiscal 1997 net sales,
gross margins improve from 31.3% to 32.9% and operating income increase over 50%
to $45.4 million in fiscal 1997 (after incremental advertising expenses of $15.0
million) as compared to fiscal 1996. The Company's net sales of wholesale
branded apparel products increased 24% in 1997 to $387.2 million. With $6.0
million of annual savings already realized from the closure of dress shirt
manufacturing facilities in 1995 and 1996, the further closures in manufacturing
facilities and consolidation of logistical infrastructure announced by the
Company in 1997 are expected to result in substantial future cash savings.
Within the dress shirt sector, as the benefits of brand development and
manufacturing reorientation have begun to be realized, estimated market share in
the department store channel in which the Company competes has increased to 31%
from 26%, with sales increasing by 20% in fiscal 1997 as compared to fiscal
1996, and operating margins and profitability more than doubling. Approximately
60 underperforming Geoffrey Beene sportswear retail outlets have been closed,
resulting in significant increases in productivity and sales per square foot in
the remaining stores, and eliminating the losses experienced by that business in
1996. Gant's 1997 repositioning in the United States was implemented as the
Company opened a new flagship store on Fifth Avenue in Manhattan and increased
by 34% the number of in-store shops in department stores carrying the Gant
collection, with a further increase of 30% planned by department stores in 1998.
Izod's wholesale sales doubled during 1997, with a 32% increase in the number of
stores carrying the line. While Van Heusen's retail sales experienced a small
decline as poorly performing stores were closed, operating profit increased 23%,
reflecting the benefits of the Company's programs.
The process of implementing the Company's strategic initiatives has not
been without disappointment. In the Bass business, fiscal 1997 net sales
declined 5% to $439.0 million, as a result of the Company's attempt to
reposition its Bass brand to higher price points, which proved overly
aggressive. While the higher price position was endorsed by the Company's
wholesale customers, the initiatives were not well executed and did not meet
with consumer support, resulting in an inventory build up at both the wholesale
level and in the Company's own factory outlet retail stores. To protect its
franchise and preserve its wholesale customer relationships, the Company took
substantial markdowns in its own retail stores and aggressively financed the
markdowns required by its wholesale customers to sell this inventory. Line
management responsible for the Bass business has been changed, a decision was
made to close the United States mainland manufacturing facilities and the brand
was returned to its historic positioning targeted in the moderate price range as
a family oriented, 'Americana'-associated casual lifestyle brand. The result of
these actions was a non-recurring charge to fiscal 1997 earnings of $54.2
million and a decline in footwear and related products operating income (before
such charge) of $17.5 million to $15.4 million. While the Company is
disappointed at the outcome of the Bass repositioning effort, the Company
believes that its current plans for Bass will allow it to return to its
historical levels of sales and profitability.
The implementation of these strategic initiatives has resulted in the
Company taking pre-tax charges of $27.0 million in fiscal 1995 and $132.7
million in fiscal 1997, inclusive of the $54.2 million of Bass related charges.
The Company believes that these initiatives have positioned it to achieve
significant improvements in sales, operating income and cash flow in its apparel
businesses and will position it further to compete cost effectively in the
future across all of its business sectors. Furthermore, the Company believes
that the initiatives favorably position the Company to accelerate its strategy
of building pre-eminent global apparel and footwear brands.
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COMPANY'S STRENGTHS
The key strengths of the Company are as follows:
o MARKET LEADERSHIP POSITION. The Company maintains a dominant position
in men's dress shirts, a leading position in casual footwear and an
increasingly important position in the fragmented men's sportswear
market. The Company's strong market shares provide it with significant
marketing strength relative to its competitors and attractive selling
floor space at its department store customers.
o HIGH BRAND AWARENESS. The Company's five premier brands -- Van Heusen,
Bass, Izod, Gant and Geoffrey Beene -- enjoy national recognition in
their respective sectors of the market. Brand recognition is critical in
the apparel and footwear industries, where strong brand names help
define consumer preferences and drive department store floor space
allocation.
o MARKET SEGMENTATION. The Company markets its five premier brands to
different segments of the market, appealing to varied demographic
sectors and a broad spectrum of consumers. Accordingly, the diversity of
the Company's brands is intended to minimize competition among the
brands.
o STRENGTH AND BREADTH OF CUSTOMERS. The Company markets its products to
a broad spectrum of customers, including department stores, as well as
directly to the consumer in its factory outlet retail stores. The
Company's retail business is intended to serve as a complement to its
strong branded positions in the wholesale market. The Company's ten
largest wholesale customers, accounting for over 60% of the Company's
fiscal 1997 sales to wholesale customers, each have been the Company's
customers for more than 25 years. No single customer accounted for more
than 6% of the Company's total sales in any of the last three years.
o STRONG LOGISTICS. Timely delivery and product quality are among the
most important criteria used by retailers to evaluate suppliers. Because
of the Company's relatively large size and vertical integration, it has
the capacity to contend successfully with the demands of large
retailers. The Company's investment in information technology, use of
the Company's electronic data interchange system ('EDI'), automated
warehousing and distribution operations and global sourcing network
facilitate quick response to sales trends and inventory demands,
maximizing its inventory flexibility and contributing to its strength in
dealing with its large retail customers.
o WORLDWIDE SOURCING ABILITY. The Company has the capability to source
effectively on a world-wide basis as a result of its structure and
history in the apparel and footwear industries. The Company employs
highly seasoned sourcing specialists for each brand. To support these
specialists, the Company maintains a world-wide sourcing network, with
offices in various countries, whose responsibilities include technical
support, quality control and human rights monitoring. These sourcing
specialists provide expertise in sourcing multiple classifications,
which results in highly efficient and cost-effective inventory movement.
As a result of the Company's sourcing network, the Company has developed
strong and stable global relationships over the years.
o STRONG MANAGEMENT. The Company's management is composed of a loyal team
of relatively young and experienced individuals. The average officer of
the Company is under 50 and has spent 25 years in the apparel industry,
13 of those years being with the Company. The Company believes that its
unique team has the experience and expertise to implement the objectives
of the Company.
The Company was incorporated in the State of Delaware in 1976 as the
successor to a business begun in 1881, and, with respect to Bass, a business
begun in 1876. The Company's principal executive offices are located at 1290
Avenue of the Americas, New York, New York 10104; its telephone number is (212)
541-5200.
6
<PAGE>
THE EXCHANGE OFFER
<TABLE>
<S> <C>
THE EXCHANGE OFFER.............................. The Company is offering, upon the terms and subject to the
conditions set forth in the accompanying Letter of Transmittal
(together, the 'Exchange Offer') to exchange up to $150 million
aggregate principal amount of its 9 1/2% Senior Subordinated
Notes due 2008 for a like aggregate principal amount of its
outstanding 9 1/2% Senior Subordinated Notes due 2008. The
terms of the Exchange Notes are identical in all material
respects (including principal amount, interest rate and
maturity) to the terms of the Initial Notes for which they may
be exchanged pursuant to the Exchange Offer, except that the
Exchange Notes are freely transferable by holders thereof
(other than as provided herein), and are not subject to any
covenant regarding registration under the Securities Act of
1933 (the 'Securities Act').
INTEREST PAYMENTS............................... Interest on the Exchange Notes shall accrue from the last
Interest Payment Date (May 1 or November 1) on which interest
was paid on the Initial Notes so surrendered or, if no interest
has been paid on such Initial Notes, from April 22, 1998.
NO MINIMUM CONDITION............................ The Exchange Offer is not conditioned upon any minimum
aggregate principal amount of Initial Notes being tendered for
exchange.
EXPIRATION DATE; WITHDRAWAL OF TENDER........... The Exchange Offer will expire at 5:00 p.m., New York City
time, on , 1998 (the 'Expiration Date'). The
Company currently does not intend to extend the Expiration
Date. Tenders may be withdrawn at any time prior to 5:00 p.m.,
New York City time, on the Expiration Date.
PROCEDURES FOR TENDERING INITIAL NOTES.......... Each holder of Initial Notes wishing to accept the Exchange
Offer must complete, sign and date the Letter of Transmittal,
or a facsimile thereof, in accordance with the instructions
contained herein and therein, and mail or otherwise deliver
such Letter of Transmittal, together with the Initial Notes and
any other required documentation, to the Exchange Agent at the
address set forth herein.
USE OF PROCEEDS................................. The Company will not receive any proceeds from the exchange of
Notes pursuant to the Exchange Offer.
SPECIAL PROCEDURES FOR BENEFICIAL OWNERS........ Any beneficial owner whose Initial Notes are registered in the
name of a broker, dealer, commercial bank, trust company or
other nominee who wishes to tender should contact such
registered holder promptly and instruct such registered holder
to tender on such beneficial owner's own behalf. If such
beneficial owner wishes to tender on such beneficial owner's
own behalf, such beneficial owner must, prior to completing and
executing the Letter of Transmittal and delivering the Initial
Notes, either make appropriate arrangements to register
ownership of the Initial Notes in such beneficial owner's name
or
</TABLE>
7
<PAGE>
<TABLE>
<S> <C>
obtain a properly completed bond power from the registered
holder. The transfer of registered ownership may take
considerable time.
GUARANTEED DELIVERY PROCEDURES.................. Holders of Initial Notes who wish to tender their Initial Notes
and whose Initial Notes are not entirely available or who
cannot deliver their Initial Notes, the Letter of Transmittal
or any other documents required by the Letter of Transmittal to
the Exchange Agent prior to the Expiration Date must tender
their Initial Notes according to the guaranteed delivery
procedures set forth herein.
ACCEPTANCE OF INITIAL NOTES AND DELIVERY OF THE The Company will accept for exchange any and all Initial Notes
EXCHANGE NOTES.................................. which are properly tendered in the Exchange Offer prior to 5:00
p.m., New York City time, on the Expiration Date. The Exchange
Notes issued pursuant to the Exchange Offer will be delivered
promptly following the Expiration Date.
EFFECT ON THE HOLDERS OF INITIAL NOTES.......... As a result of the making of, and upon acceptance for exchange
of all validly tendered Initial Notes pursuant to the terms of,
the Exchange Offer, the Company will have fulfilled the
covenant contained in the Exchange and Registration Rights
Agreement (the 'Registration Rights Agreement') dated April 22,
1998 among the Company and Goldman, Sachs & Co., Chase
Securities, Inc. and Citicorp Securities, Inc. (the 'Initial
Purchasers') Accordingly, there will be no increase in the
interest rate on the Initial Notes pursuant to the terms of the
Registration Rights Agreement, and the holders of the Initial
Notes will have no further registration or other rights under
the Registration Rights Agreement other than those which
survive the Exchange Offer. Holders of the Initial Notes who do
not tender their Initial Notes in the Exchange Offer will
continue to hold such Initial Notes and will be entitled to all
the rights and subject to all the limitations applicable
thereto under the Indenture dated April 22, 1998 between the
Company and Union Bank of California, N.A., as Trustee,
relating to the Initial Notes and the Exchange Notes (the
'Indenture'), except for any such rights under the Registration
Rights Agreement that by their terms terminate or cease to have
further effectiveness as a result of the making of, and the
acceptance for exchange of all validly tendered Initial Notes
pursuant to, the Exchange Offer. All untendered Initial Notes
will continue to be subject to the restrictions on transfer
provided for in the Initial Notes and the Indenture. To the
extent that the Initial Notes are tendered and accepted in the
Exchange Offer, the trading market for untendered Initial Notes
could be adversely affected.
CONSEQUENCE OF FAILURE TO EXCHANGE.............. Initial Notes that are not exchanged for Exchange Notes
pursuant to the Exchange Offer will continue to be subject to
the restrictions on transfer of such Initial Notes as set forth
in the legend thereon and in the Indenture.
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
The Company currently does not anticipate that it will register
any Initial Notes which are not exchanged pursuant to the
Exchange Offer under the Securities Act after the Expiration
Date.
FEDERAL INCOME TAX CONSEQUENCES................. The exchange pursuant to the Exchange Offer should not result
in gain or loss to the holders or the Company for federal
income tax purposes.
EXCHANGE AGENT.................................. Union Bank of California, N.A. (the 'Exchange Agent') is
serving as exchange agent in connection with the Exchange
Offer. Union Bank of California, N.A. also serves as the
Trustee under the Indenture.
</TABLE>
TERMS OF THE EXCHANGE NOTES
<TABLE>
<S> <C>
SECURITIES OFFERED.............................. $150 million aggregate principal amount of 9 1/2% Senior
Subordinated Notes due 2008.
MATURITY DATE................................... May 1, 2008.
INTEREST PAYMENT DATES.......................... May 1 and November 1, commencing November 1, 1998.
OPTIONAL REDEMPTION............................. The Exchange Notes will be redeemable at the option of the
Company, in whole or in part, at any time on or after May 1,
2003, at the redemption prices set forth herein plus accrued
and unpaid interest to the date of redemption. In addition, if
on or before May 1, 2001 one or more Public Equity Offerings
(as defined in the Indenture) are completed, the Company, at
its option, may redeem in the aggregate up to one-third of the
original principal amount of the Exchange Notes at a redemption
price equal to 109.50% of the aggregate principal amount so
redeemed plus accrued and unpaid interest to the redemption
date, with the net proceeds of such Public Equity Offerings,
provided that at least two-thirds of the original principal
amount of the Exchange Notes remains outstanding immediately
after the occurrence of any such redemption.
RANKING......................................... The Exchange Notes will be general unsecured obligations of
PVH, subordinated in right of payment to all existing and
future Senior Debt (as defined in the Indenture). The Notes
will also be effectively subordinated to all existing and
future liabilities of the Company's Subsidiaries. As of May 3,
1998, after giving effect to each of the Initial Notes Offering
and the senior credit facility (the 'Credit Facility') and the
use of proceeds therefrom, the Company has approximately $148
million principal amount of Senior Debt represented by
borrowings under its Credit Facility and the Initial Notes and
approximately $147 million of Senior Debt represented by
letters of credit. In addition, the Company has an additional
approximately $130 million of unused credit capacity available
under its Credit Facility. The indebtedness under the Credit
Facility is Senior Debt.
</TABLE>
9
<PAGE>
<TABLE>
<S> <C>
The existing Senior Debt is, and any future indebtedness under
the Credit Facility generally will be, secured by substantially
all of the Company's assets.
CHANGE OF CONTROL............................... In the event of a Change of Control (as defined in the
Indenture), the Company will be required to offer to repurchase
the Notes at a purchase price equal to 101% of the aggregate
principal amount thereof plus accrued and unpaid interest to
the date of purchase.
ASSET SALE PROCEEDS............................. The Company may not make any Asset Disposition (as defined in
the Indenture) in one or more related transactions, unless (i)
the Company receives fair market value, as determined by the
Board of Directors, (ii) 85% of the consideration consists of
cash, readily marketable cash equivalents or the assumption of
debt of the Company, and (iii) all Net Available Proceeds (as
defined in the Indenture), less any amounts invested or
committed to be invested within 365 days of such disposition in
assets related to the business of the Company or applied to
permanently repay Senior Debt, are applied to (a) the repayment
of Senior Debt then outstanding, (b) make an offer to purchase
any outstanding Notes at par, and (c) any other use not
otherwise prohibited by the Indenture.
CERTAIN COVENANTS............................... The Indenture contains covenants for the benefit of the holders
of Exchange Notes that, among other things, restrict the
ability of the Company to: (i) incur additional Debt (as
defined in the Indenture), (ii) pay dividends or make
distributions, (iii) incur liens, (iv) enter into transactions
with affiliates, or (v) merge or consolidate the Company.
</TABLE>
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of the Exchange
Notes in exchange for the Initial Notes.
RISK FACTORS
Holders of Initial Notes should consider carefully the matters set forth
under 'Risk Factors', as well as the other information and financial statements
and data included in this Prospectus.
10
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL INFORMATION
The following summary consolidated financial information for each of the
five years ended February 1, 1998 has been derived from the consolidated
financial statements of the Company which have been audited by Ernst & Young
LLP, independent auditors. The consolidated results of operations for 1994, 1995
and 1997 include non-recurring charges related principally to a series of
actions the Company has taken to accelerate the execution of its ongoing
strategy to build its brands. The adjusted statements of operations data and
segment data segregate the non-recurring charges from the Company's ongoing
operations. 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' included elsewhere herein discusses the Company's results
of operations before the non-recurring charges. The following summary
consolidated financial information for each of the thirteen weeks ended May 4,
1997 and May 3, 1998 have been derived from the unaudited condensed consolidated
financial statements of the Company and are subject to year-end adjustments;
however, in the opinion of management, all known adjustments (which consist only
of normal recurring accruals) have been made to present fairly the consolidated
operating results for the unaudited periods. The results of operations for the
interim periods are not necessarily indicative of those for a full fiscal year
due, in part, to seasonal factors.
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS 53 WEEKS 52 WEEKS 13 WEEKS
ENDED ENDED ENDED ENDED ENDED ENDED
JANUARY 30, JANUARY 29, JANUARY 28, FEBRUARY 2, FEBRUARY 1, MAY 4,
1994 1995 1996 1997 1998 1997
----------- ----------- ----------- ----------- ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sales............................. $1,152,394 $1,255,466 $1,464,128 $1,359,593 $1,350,007 $ 285,925
Cost of goods sold.................... 747,555 845,655 987,921 910,517 937,965 186,957
---------- ---------- ---------- ---------- ---------- ----------
Gross profit.......................... $ 404,839 $ 409,811 $ 476,207 $ 449,076 $ 412,042 $ 98,968
Selling, general and administrative
expenses............................ 324,528 353,109 428,634 401,338 412,495 100,654
Facility and store closing,
restructuring and other expenses.... -- 7,000 27,000 -- 86,700 --
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before Year 2000
computer conversion expenses,
interest and taxes.................. $ 80,311 $ 49,702 $ 20,573 $ 47,738 $ (87,153) $ (1,686)
Year 2000 computer conversion
expenses............................ -- -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before interest and
taxes............................... $ 80,311 $ 49,702 $ 20,573 $ 47,738 $ (87,153) $ (1,686)
Interest expense, net................. 16,679 12,793 23,199 23,164 20,672 4,932
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before taxes............ $ 63,632 $ 36,909 $ (2,626) $ 24,574 $ (107,825) $ (6,618)
Income tax expense (benefit).......... 20,380 6,894 (2,920) 6,044 (41,246) (2,078)
Extraordinary loss.................... 11,394 -- -- -- -- --
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss)..................... $ 31,858 $ 30,015 $ 294 $ 18,530 $ (66,579) $ (4,540)
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) per share:
Basic................................ $ 1.22 (1) $ 1.13 $ 0.01 $ 0.69 $ (2.46) $ (0.17)
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Diluted.............................. $ 1.18 (1) $ 1.11 $ 0.01 $ 0.68 $ (2.46) $ (0.17)
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
ADJUSTED STATEMENT OF OPERATIONS DATA
(BEFORE NON-RECURRING CHARGES)
Net sales............................. $1,152,394 $1,255,466 $1,464,128 $1,359,593 $1,350,007 $ 285,925
Cost of goods sold.................... 747,555 845,655 987,921 910,517 937,965 186,957
Non-recurring charges................. -- -- -- -- (46,000) --
---------- ---------- ---------- ---------- ----------- ----------
Gross profit before non-recurring
charges............................. $ 404,839 $ 409,811 $ 476,207 $ 449,076 $ 458,042 $ 98,968
SG&A expenses and non-recurring
charges............................. 324,528 360,109 455,634 401,338 499,195 100,654
Non-recurring charges................. -- (7,000 ) (27,000 ) -- (86,700) --
---------- ---------- ---------- ---------- ----------- ----------
SG&A expenses before non-recurring
charges............................. $ 324,528 $ 353,109 $ 428,634 $ 401,338 $ 412,495 $ 100,654
Income (loss) before Year 2000
computer conversion expenses,
interest, taxes and non-recurring
charges............................. 80,311 56,702 47,573 47,738 45,547 (1,686)
Year 2000 computer conversion
expenses............................ -- -- -- -- -- --
Income (loss) before interest, taxes
and non-recurring charges........... 80,311 56,702 47,573 47,738 45,547 (1,686)
Interest expense, net................. 16,679 12,793 23,199 23,164 20,672 4,932
---------- ---------- ---------- ---------- ---------- ----------
Income (loss) before taxes,
non-recurring charges and
extraordinary item.................. $ 63,632 $ 43,909 $ 24,374 $ 24,574 $ 24,875 $ (6,618)
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
<CAPTION>
13 WEEKS
ENDED
MAY 3,
1998
------------
(unaudited)
<S> <C>
STATEMENT OF OPERATIONS DATA
Net sales............................. $ 295,765
Cost of goods sold.................... 193,257
-----------
Gross profit.......................... $ 102,508
Selling, general and administrative
expenses............................ 101,954
Facility and store closing,
restructuring and other expenses.... --
-----------
Income (loss) before Year 2000
computer conversion expenses,
interest and taxes.................. 554
Year 2000 computer conversion
expenses............................ (2,000)
-----------
Income (loss) before interest and
taxes............................... $ (1,446)
Interest expense, net................. 5,466
-----------
Income (loss) before taxes............ $ (6,912)
Income tax expense (benefit).......... (2,427)
Extraordinary loss.................... 1,060
-----------
Net income (loss)..................... $ (5,545)
-----------
-----------
Net income (loss) per share:
Basic................................ $ (0.20)(2)
-----------
-----------
Diluted.............................. $ (0.20)(2)
-----------
-----------
ADJUSTED STATEMENT OF OPERATIONS DATA
(BEFORE NON-RECURRING CHARGES)
Net sales............................. $ 295,765
Cost of goods sold.................... 193,257
Non-recurring charges................. --
-----------
Gross profit before non-recurring
charges............................. $ 102,508
SG&A expenses and non-recurring
charges............................. 101,954
Non-recurring charges................. --
-----------
SG&A expenses before non-recurring
charges............................. $ 101,954
Income (loss) before Year 2000
computer conversion expenses,
interest, taxes and non-recurring
charges............................. 554
Year 2000 computer conversion
expenses............................ (2,000)
Income (loss) before interest, taxes
and non-recurring charges........... (1,446)
Interest expense, net................. 5,466
-----------
Income (loss) before taxes,
non-recurring charges and
extraordinary item.................. $ (6,912)
-----------
-----------
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS 53 WEEKS 52 WEEKS 13 WEEKS
ENDED ENDED ENDED ENDED ENDED ENDED
JANUARY 30, JANUARY 29, JANUARY 28, FEBRUARY 2, FEBRUARY 1, MAY 4,
1994 1995 1996 1997 1998 1997
----------- ----------- ----------- ----------- ----------- ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
SEGMENT DATA (BEFORE NON-RECURRING
CHARGES)
Net sales -- apparel................... $ 757,452 $ 812,993 $1,006,701 $ 897,370 $ 911,047 $ 193,298
Net sales -- footwear and related
products............................. 394,942 442,473 457,427 462,223 438,960 92,627
---------- ---------- ---------- ---------- ---------- ---------
Total net sales........................ $1,152,394 $1,255,466 $1,464,128 $1,359,593 $1,350,007 $ 285,925
---------- ---------- ---------- ---------- ---------- ---------
---------- ---------- ---------- ---------- ---------- ---------
Operating income (loss) -- apparel..... $ 53,645 $ 35,994 $ 37,432 $ 30,021 $ 45,416 $ (544)
Operating income -- footwear and
related products..................... 39,638 31,207 23,026 32,888 15,382 2,648
---------- ---------- ---------- ---------- ---------- ---------
Total operating income................. $ 93,283 $ 67,201 $ 60,458 $ 62,909 $ 60,798 $ 2,104
Corporate expenses..................... (12,972) (10,499) (12,885) (15,171) (15,251) (3,790)
---------- ---------- ---------- ---------- ---------- ---------
Income (loss) before Year 2000 computer
conversion expenses, interest, taxes,
non-recurring charges and
extraordinary item................... $ 80,311 $ 56,702 $ 47,573 $ 47,738 $ 45,547 $ (1,686)
---------- ---------- ---------- ---------- ---------- ---------
---------- ---------- ---------- ---------- ---------- ---------
OTHER DATA
EBITDA (before non-recurring
charges)(3).......................... $ 99,893 $ 81,467 $ 81,313 $ 77,176 $ 70,847 $ 5,296
Capital expenditures................... 47,866 53,140 39,773 22,578 17,923 3,354
Depreciation and amortization.......... 19,582 24,765 33,740 29,438 25,300 6,982
Cash dividends......................... 3,920 3,984 4,007 4,050 4,065 2,030
Ratio of EBITDA to interest
expense(4)........................... 6.0 x 5.8 x 2.3 x 3.3 x -- 1.1x
Ratio of adjusted EBITDA (before
non-recurring charges) to interest
expense.............................. 6.0 x 6.4 x 3.5 x 3.3 x 3.4 x (6) N/A
Ratio of earnings to fixed
charges(5)........................... 2.7 x 2.0 x -- 1.5 x -- --
Ratio of adjusted earnings (before
non-recurring charges) to fixed
charges.............................. 2.7 x 2.2 x 1.5 x 1.5 x 1.5 x (6) N/A
Ratio of total debt to adjusted EBITDA
(before non-recurring charges)....... 1.7 x 2.1 x 3.7 x 2.8 x 3.5 x 50.7x
Ratio of total debt to capital......... 40.8 % 38.2 % 52.3 % 43.1 % 53.0 % 48.6%
<CAPTION>
13 WEEKS
ENDED
MAY 3,
1998
------------
<S> <C>
SEGMENT DATA (BEFORE NON-RECURRING
CHARGES)
Net sales -- apparel................... $ 205,389
Net sales -- footwear and related
products............................. 90,376
----------
Total net sales........................ $ 295,765
----------
----------
Operating income (loss) -- apparel..... $ 3,226
Operating income -- footwear and
related products..................... 581
----------
Total operating income................. $ 3,807
Corporate expenses..................... (3,253)
----------
Income (loss) before Year 2000 computer
conversion expenses, interest, taxes,
non-recurring charges and
extraordinary item................... $ 554
----------
----------
OTHER DATA
EBITDA (before non-recurring
charges)(3).......................... $ 5,339
Capital expenditures................... 3,553
Depreciation and amortization.......... 6,785
Cash dividends......................... 2,038
Ratio of EBITDA to interest
expense(4)........................... 1.0x(7)
Ratio of adjusted EBITDA (before
non-recurring charges) to interest
expense.............................. N/A
Ratio of earnings to fixed
charges(5)........................... --(7)
Ratio of adjusted earnings (before
non-recurring charges) to fixed
charges.............................. N/A
Ratio of total debt to adjusted EBITDA
(before non-recurring charges)....... 55.7x
Ratio of total debt to capital......... 58.3%
</TABLE>
- ------------------
(1) Basic and diluted net income per share for the 52 weeks ended January 30,
1994 are net of $0.44 and $0.42, respectively, related to an extraordinary
loss on the early retirement of debt.
(2) Basic and diluted net loss per share for the 13 weeks ended May 3, 1998
include $(0.04) related to an extraordinary loss on the early retirement of
debt.
(3) EBITDA is defined as earnings before extraordinary item, interest expense,
taxes, depreciation and amortization. EBITDA is presented because the
Company believes it is a widely accepted financial indicator of an entity's
ability to incur and service debt. EBITDA should not be considered by an
investor as an alternative to net income or income from operations, as an
indicator of the operating performance of the Company or other consolidated
operations or cash flow data prepared in accordance with generally accepted
accounting principles, or as an alternative to cash flows as a measure of
liquidity.
(4) As a result of the non-recurring charges recorded in the 52 weeks ended
February 1, 1998, EBITDA was a loss and the ratio of EBITDA to interest
expense is not presented.
(5) The ratio of earnings to fixed charges is computed by dividing fixed charges
of the Company into earnings before extraordinary item and taxes, plus fixed
charges. Fixed charges represent interest expense, amortization of discounts
and costs associated with this offering and the portion of rental payments
associated with leases which is deemed to be representative of the interest
factor. As a result of the non-recurring charges recorded in each of the 52
weeks ended January 28, 1996 and February 1, 1998, earnings were inadequate
to cover fixed charges by $2,626 and $107,825, respectively. In each of the
13 weeks ended May 4, 1997 and May 3, 1998, earnings were inadequate to
cover fixed charges by $6,618 and $6,912, respectively.
(6) If the Initial Notes had been issued and the Credit Facility had been in
place as of February 3, 1997, the Company's unaudited pro forma ratio of
adjusted EBITDA (before non-recurring charges) to interest expense for the
52 weeks ended February 1, 1998 would have been 2.7x and the unaudited pro
forma ratio of adjusted earnings (before non-recurring charges) to fixed
charges would have been 1.4x (based on an interest rate of 9.5% on the Notes
and an assumed interest rate of 7.2% on the Credit Facility).
(7) If the Initial Notes had been issued and the Credit Facility had been in
place as of February 2, 1998, the Company's unaudited pro forma ratio of
EBITDA to interest expense for the 13 weeks ended May 3, 1998 would have
been 0.8x and the unaudited pro forma ratio of earnings to fixed charges
would have been 0.4x (based on an interest rate of 9.5% for the Notes and an
assumed interest rate of 6.4% on the Credit Facility).
12
<PAGE>
<TABLE>
<CAPTION>
JANUARY 30, JANUARY 29, JANUARY 28, FEBRUARY 2, FEBRUARY 1, MAY 4,
1994 1995 1996 1997 1998 1997
------------ ------------ ----------- ----------- ----------- -----------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital............... $309,546 $315,637 $ 261,538 $ 240,692 $ 251,683 $ 236,951
Total assets.................. 554,771 596,284 749,055 657,436 660,459 697,835
Current portion of long-term
debt........................ 245 260 10,137 10,157 -- 10,157
Long-term debt................ 169,934 169,679 229,548 189,398 241,004 189,399
Stockholders' equity.......... 246,799 275,460 275,292 290,158 220,305 283,693
<CAPTION>
MAY 3,
1998
-----------
(unaudited)
<S> <C>
BALANCE SHEET DATA
Working capital............... $ 248,491
Total assets.................. 690,245
Current portion of long-term
debt........................ --
Long-term debt................ 249,349
Stockholders' equity.......... 212,797
</TABLE>
NON-RECURRING RESTRUCTURING CHARGES. The Company recorded pre-tax
restructuring charges of $132.7 million ($85.5 million after tax) in 1997
related to a series of actions the Company has taken toward (i) exiting all
United States mainland footwear manufacturing with the closing of its Wilton,
Maine footwear manufacturing facility; (ii) exiting the sweater manufacturing
business with the sale and liquidation of its Puerto Rico sweater operations;
(iii) consolidating and closing manufacturing, warehouse and distribution
facilities, as well as restructuring other logistical and administrative areas,
in order to reduce product costs and operating expenses and improve
efficiencies; (iv) repositioning the Gant brand in the United States to be
consistent with its highly successful positioning in Europe; (v) closing 150
additional underperforming factory outlet retail stores; and (vi) modifying a
repositioning of Bass, including the liquidation of a resulting excess
inventory. Of these charges, approximately $91.9 million include cash outlays,
with the balance, $40.8 million, being non-cash. These restructuring initiatives
will enable the Company significantly to reduce future operating expenses and
product costs. It is expected that the cost savings initiatives will aggregate
in excess of $40 million in the period 1998 to 2000, and exceed $20 million
annually by 2000.
The restructuring initiatives related to the 1995 charge of $27.0 million
($17.0 million after tax) were the closing of three domestic shirt manufacturing
facilities, closing approximately 300 underperforming retail outlet stores and
the reorganization of the Company's management structure to enhance the
Company's focus on its brands.
The restructuring initiatives related to the 1994 charge of $7.0 million
($4.2 million after tax) were the restructuring of wholesale and retail
operations and the closing of the Company's private label retail stores.
13
<PAGE>
RISK FACTORS
In addition to the other information set forth or incorporated by reference
herein, holders of Initial Notes should consider carefully the following
information.
LEVERAGE AND ABILITY TO SERVICE DEBT
As of May 3, 1998 the Company had approximately $297 million of
indebtedness, which represents 58.3% of its total capitalization and had an
additional approximately $130 million of unused credit capacity available under
the Credit Facility. See 'Capitalization'. In addition, the Company's debt
instruments allow the Company to incur additional indebtedness under certain
circumstances. The ability of the Company to make payments with respect to the
Exchange Notes and to satisfy its other debt obligations will depend on the
Company's future operating performance, which will be affected by prevailing
economic conditions and financial, business and other factors, many of which are
beyond the Company's control.
As a result of the issuance of the Initial Notes, the Company's interest
expense has increased compared to prior years (although after giving effect to
each of the Initial Notes Offering and the Credit Facility and the use of
proceeds therefrom, the Company's total level of debt will be substantially
unchanged). The Company believes, based on current circumstances, that the
Company's cash flow, together with available credit capacity under the Credit
Facility, will be sufficient to permit the Company to meet its operating
expenses and capital expenditures and to service its debt requirements as they
become due for the foreseeable future. If the Company is unable to service its
indebtedness, it will be required to adopt alternative strategies, which may
include actions such as reducing or delaying capital expenditures, selling
assets, restructuring or refinancing its indebtedness or seeking additional
equity capital. There can be no assurance that any of these strategies could be
effected on satisfactory terms.
The degree to which the Company is leveraged could have important
consequences to holders of the Exchange Notes, including (i) the Company's
ability to obtain additional financing in the future for working capital,
capital expenditures, acquisitions or general corporate purposes may be
impaired; (ii) under this offering and the Credit Facility, a substantial
portion of the Company's cash flows from operations may be dedicated to the
payment of interest on its indebtedness, thereby reducing the funds available to
the Company for its operations; (iii) certain of the Company's indebtedness
contain financial and other restrictive covenants, including those restricting
the incurrence of additional indebtedness, the creation of liens, the payment of
dividends, sales of assets and minimum net worth requirements; (iv) the Credit
Facility will continue to be at variable rates of interest which exposes the
Company to the risk of interest rate volatility; (v) the Company may be more
leveraged than certain of its competitors, which may place the Company at a
relative competitive disadvantage; and (vi) the Company's high degree of
indebtedness could make it more vulnerable in the event of a downturn in its
business. As a result of the Company's level of indebtedness, its financial
capacity to respond to market conditions, extraordinary capital needs and other
factors may be limited.
SUBORDINATION
The payment of principal of and interest on, and any premium or other
amounts owing in respect of, the Exchange Notes will be subordinated to the
prior payment in full of all existing and future Senior Debt of the Company,
including all amounts owing under the Credit Facility. The Notes will be
effectively subordinated to all existing and future liabilities of the
Subsidiaries. As of May 3, 1998, the aggregate amount of Senior Debt of the
Company was approximately $148 million. The existing Senior Debt is, and any
future indebtedness under the Credit Facility generally will be, secured by the
Company's assets. Consequently, in the event of a bankruptcy, liquidation,
dissolution, reorganization or similar proceeding with respect to PVH, assets of
PVH will be available to pay obligations under the Exchange Notes only after all
Senior Debt has been paid in full, and there can be no assurance that there will
be sufficient assets to pay amounts due on the Exchange Notes. In addition,
under certain circumstances, PVH may be prohibited by the subordination
provisions of the Indenture from paying amounts due in respect of the Exchange
Notes, or from purchasing, redeeming or otherwise acquiring Exchange Notes,
14
<PAGE>
if a payment or non-payment default exists with respect to Senior Debt. See
'Description of Exchange Notes'.
RESTRICTIONS IMPOSED BY THE CREDIT FACILITY AND THE INDENTURE
The Credit Facility and the Indenture contain a number of significant
covenants that, among other things, limit or restrict the ability of the Company
to dispose of assets, incur additional indebtedness, repay other indebtedness,
pay dividends, enter into certain investments or acquisitions, repurchase or
redeem capital stock, engage in mergers or consolidations, or engage in certain
transactions with subsidiaries and affiliates and otherwise restrict corporate
activities. There can be no assurance that such limitations and restrictions
will not adversely affect the Company's ability to finance its future operations
or capital needs or engage in other business activities that may be in the
interest of the Company. In addition, the Credit Facility also requires the
Company to maintain compliance with certain financial ratios. The ability of the
Company to comply with such ratios may be affected by events beyond the
Company's control. A breach of any of these covenants or the inability of the
Company to comply with the required financial ratios could result in a default
under the Credit Facility. In the event of any such default, the lenders under
the Credit Facility could elect to declare all borrowings outstanding under the
Credit Facility, together with accrued interest and other fees, to be due and
payable, to require the Company to apply all of its available cash to repay such
borrowings or to prevent the Company from making debt service payments on the
Exchange Notes. If the Company were unable to repay any such borrowings when
due, the lenders could proceed against their collateral. If the indebtedness
under the Credit Facility or the Exchange Notes were to be accelerated, there
can be no assurance that the assets of the Company would be sufficient to repay
such indebtedness in full. See 'Description of Exchange Notes' and 'Description
of Senior Debt'.
POTENTIAL INABILITY TO REPURCHASE NOTES UPON A CHANGE OF CONTROL
Upon the occurrence of a Change of Control, PVH will be required to offer
to repurchase the Exchange Notes at 101% of the principal amount of the Notes,
together with accrued or unpaid interest, if any, to the date of purchase. In
such circumstances, the Company will be required to (i) repay all or a portion
of the outstanding principal of, and pay any accrued interest on, its Senior
Debt, including indebtedness under the Credit Facility or (ii) obtain any
requisite consent from its lenders to permit the purchase of the Exchange Notes.
If PVH is unable to repay all of such indebtedness or is unable to obtain the
necessary consents, PVH may be unable to offer to repurchase the Exchange Notes,
which would constitute an Event of Default under the Indenture. There can be no
assurance that PVH will have sufficient funds available at the time of any
Change of Control to make any debt payment (including repurchases of the
Exchange Notes) as described above or that PVH would be able to refinance its
outstanding indebtedness in order to permit it to repurchase the Exchange Notes
or, if such refinancing were to occur, that such financing would be on terms
favorable to the Company. See 'Description of Exchange Notes'.
The events that constitute a Change of Control under the Indenture may also
be events of default under the Credit Facility or other Senior Debt of the
Company. Such events may permit the holders under such debt instruments to
accelerate the debt and, if the debt is not paid, to enforce security interests
on, or commence litigation that could ultimately result in a sale of,
substantially all of the assets of the Company, thereby limiting the Company's
ability to raise cash to repurchase the Exchange Notes.
CONSEQUENCES OF A FAILURE TO EXCHANGE INITIAL NOTES
The Initial Notes have not been registered under the Securities Act or any
state securities laws and therefore may not be offered, sold or otherwise
transferred except in compliance with the registration requirements of the
Securities Act and any other applicable securities laws, or pursuant to an
exemption therefrom or in a transaction not subject thereto, and in each case in
compliance with certain other conditions and restrictions. Initial Notes that
remain outstanding after consummation of the Exchange Offer will continue to
bear a legend reflecting such restrictions on transfer. In addition, upon
consummation of the Exchange Offer, holders of Initial Notes that remain
outstanding will not be entitled
15
<PAGE>
to any rights under the Registration Rights Agreement that by their terms
terminate or cease to have further effectiveness as a result of the making of
this Exchange Offer, including an increase in the interest rates on the Initial
Notes. The Company does not currently anticipate that it will register the
Initial Notes under the Securities Act.
The Initial Notes were issued to, and the Company believes are currently
owned by, a small number of beneficial owners. Although the Initial Notes have
been designated for trading in the PORTAL Market, to the extent that Initial
Notes are tendered and accepted in connection with the Exchange Offer, any
trading market for Initial Notes that remain outstanding after the Exchange
Offer could be adversely affected.
ABSENCE OF PUBLIC MARKET FOR THE EXCHANGE NOTES
The Exchange Notes are being offered to the holders of the Initial Notes
and are designated for trading in the PORTAL market. The Company does not intend
to apply for a listing of the Exchange Notes on a securities exchange. There is
currently no established market for the Exchange Notes and there can be no
assurance as to the liquidity of markets that may develop for the Exchange
Notes, the ability of the holders of the Exchange Notes to sell their Exchange
Notes or the price at which such holders would be able to sell their Exchange
Notes. If such markets were to exist, the Exchange Notes could trade at prices
that may be lower than the initial market values thereof depending on many
factors, including prevailing interest rates and the markets for similar
securities.
The liquidity of, and trading market for, the Exchange Notes also may be
adversely affected by general declines in the market for similar securities.
CYCLICAL AND COMPETITIVE NATURE OF APPAREL AND FOOTWEAR INDUSTRIES
Competition is strong in the segments of the apparel and footwear
industries in which the Company operates. The Company competes with numerous
domestic and foreign designers, brands and manufacturers of apparel, accessories
and shoes, some of which may be significantly larger and more diversified and
have greater resources than the Company. The Company's business depends on its
ability to keep up with and respond to changing consumer tastes and demands by
producing attractive quality products, brands and marketing, as well as on its
ability to remain competitive in the area of fashion and price. The failure of
the Company to compete effectively or to keep pace with rapidly changing markets
could have a material adverse effect on the Company's business. See 'Business'.
Despite the use of its EDI, there can be no assurance that the Company will
continue to be successful in this regard. Weak sales and resulting markdown
requests from customers and markdowns at its retail stores could have a material
adverse effect on the Company's business, results of operations and financial
condition. In addition, if the Company misjudges the market for its products, it
may be faced with significant excess inventories for some products and missed
opportunities with others. For example, the Company's attempt to reposition the
Bass brand to a higher price point during 1997 proved over-aggressive, resulting
in an inventory buildup at both the wholesale and retail levels, requiring
substantial markdowns at its own retail stores and requiring the Company
aggressively to finance the markdowns required by its wholesale customers to
sell this inventory.
YEAR 2000
Until recently, computer programs were written using two digits rather than
four to define the applicable year. Thus, such programs were unable to properly
distinguish between the year 1900 and the year 2000. In October 1996, the
Company initiated a comprehensive Year 2000 Project to address this issue. The
Company determined that it will need to modify or replace significant portions
of its software so that its computer systems will function properly with respect
to dates in the year 2000 and beyond. The Company has also initiated discussions
with its significant suppliers and large customers to determine the status of
their compliance programs. The Company anticipates completing the Year 2000
Project by June 30, 1999. The Company presently believes that the year 2000
issue will not pose significant operational problems for its computer systems.
However, if such modifications and
16
<PAGE>
conversions are not made, or are not completed timely, or the systems of other
companies on which the Company's systems and operations rely are not converted
on a timely basis, the year 2000 issue could have a material adverse impact on
the Company's operations.
USE OF PROCEEDS
The Company will not receive any proceeds from the issuance of the Exchange
Notes in exchange for the Initial Notes.
17
<PAGE>
CAPITALIZATION
The following table sets forth the long-term debt and the capitalization of
the Company as of
May 3, 1998.
<TABLE>
<CAPTION>
MAY 3, 1998
------------------
(IN THOUSANDS,
EXCEPT SHARE DATA)
<S> <C>
Short-term debt--notes payable................................................................ $ 48,000
Long-term debt
7.75% Debentures due 2023................................................................... $ 99,450
9 1/2% Senior Subordinated Notes due 2008................................................... 149,229
Other debt.................................................................................. 670
--------
Total Long-Term Debt..................................................................... $249,349
Stockholders' Equity:
Preferred Stock, par value $100 per share; 150,000 shares authorized; none outstanding...... --
Common Stock, par value $1.00 per share, 100,000,000 shares authorized; 27,188,644 shares
issued................................................................................... $ 27,189
Additional capital.......................................................................... 117,019
Retained earnings........................................................................... 68,589
--------
Total Stockholders' Equity............................................................... $212,797
--------
Total Capitalization and Short-Term Debt.................................................... $510,146
--------
--------
</TABLE>
18
<PAGE>
SELECTED CONSOLIDATED FINANCIAL INFORMATION
The following selected consolidated financial information for each of the
five years ended February 1, 1998 has been derived from the consolidated
financial statements of the Company which have been audited by Ernst & Young
LLP, independent auditors. The consolidated results of operations for 1994, 1995
and 1997 include non-recurring charges related principally to a series of
actions the Company has taken to accelerate the execution of its ongoing
strategy to build its brands. The adjusted statements of operations data and
segment data segregate the non-recurring charges from the Company's ongoing
operations. 'Management's Discussion and Analysis of Financial Condition and
Results of Operations' included elsewhere herein discusses the Company's results
of operations before the non-recurring charges. The following selected
consolidated financial information for each of the thirteen weeks ended May 4,
1997 and May 3, 1998 have been derived from the unaudited condensed consolidated
financial statements of the Company and are subject to year-end adjustments;
however, in the opinion of management, all known adjustments (which consist only
of normal recurring accruals) have been made to present fairly the consolidated
operating results for the unaudited periods. The results of operations for the
interim periods are not necessarily indicative of those for a full fiscal year
due, in part, to seasonal factors.
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS 53 WEEKS 52 WEEKS 13 WEEKS
ENDED ENDED ENDED ENDED ENDED ENDED
JANUARY 30, JANUARY 29, JANUARY 28, FEBRUARY 2, FEBRUARY 1, MAY 4,
1994 1995 1996 1997 1998 1997
----------- ----------- ----------- ------------ ------------ --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA
Net sales........................ $ 1,152,394 $ 1,255,466 $ 1,464,128 $1,359,593 $1,350,007 $285,925
Cost of goods sold............... 747,555 845,655 987,921 910,517 937,965 186,957
----------- ----------- ----------- ------------ ------------ --------
Gross profit..................... $ 404,839 $ 409,811 $ 476,207 $ 449,076 $ 412,042 $ 98,968
Selling, general and
administrative expenses........ 324,528 353,109 428,634 401,338 412,495 100,654
Facility and store closing,
restructuring and other
expenses....................... -- 7,000 27,000 -- 86,700 --
----------- ----------- ----------- ------------ ------------ --------
Income (loss) before Year 2000
computer conversion expenses,
interest and taxes............. $ 80,311 $ 49,702 $ 20,573 $ 47,738 $ (87,153) $ (1,686)
Year 2000 computer conversion
expenses....................... -- -- -- -- -- --
Income (loss) before interest,
taxes and non-recurring
charges........................ $ 80,311 $ 49,702 $ 20,573 $ 47,738 $ (87,153) $ (1,686)
Interest expense, net............ 16,679 12,793 23,199 23,164 20,672 4,932
----------- ----------- ----------- ------------ ------------ --------
Income (loss) before taxes....... $ 63,632 $ 36,909 $ (2,626) $ 24,574 $ (107,825) $ (6,618)
Income tax expense (benefit)..... 20,380 6,894 (2,920) 6,044 (41,246) (2,078)
Extraordinary loss............... 11,394 -- -- -- -- --
----------- ----------- ----------- ------------ ------------ --------
Net income (loss)................ $ 31,858 $ 30,015 $ 294 $ 18,530 $ (66,579) $ (4,540)
----------- ----------- ----------- ------------ ------------ --------
----------- ----------- ----------- ------------ ------------ --------
Net income (loss) per share:
Basic.......................... $ 1.22(1) $ 1.13 $ 0.01 $ 0.69 $ (2.46) $ (0.17)
----------- ----------- ----------- ------------ ------------ --------
----------- ----------- ----------- ------------ ------------ --------
Diluted........................ $ 1.18(1) $ 1.11 $ 0.01 $ 0.68 $ (2.46) $ (0.17)
----------- ----------- ----------- ------------ ------------ --------
----------- ----------- ----------- ------------ ------------ --------
ADJUSTED STATEMENT OF OPERATIONS
DATA (BEFORE NON-RECURRING
CHARGES)
Net sales........................ $ 1,152,394 $ 1,255,466 $ 1,464,128 $1,359,593 $1,350,007 $285,925
Cost of goods sold............... 747,555 845,655 987,921 910,517 937,965 186,957
Non-recurring charges............ -- -- -- -- (46,000) --
----------- ----------- ----------- ------------ ------------ --------
Gross profit before non-recurring
charges........................ $ 404,839 $ 409,811 $ 476,207 $ 449,076 $ 458,042 $ 98,968
SG&A expenses and non-recurring
charges........................ 324,528 360,109 455,634 401,338 499,195 100,654
Non-recurring charges............ -- (7,000) (27,000) -- (86,700) --
----------- ----------- ----------- ------------ ------------ --------
SG&A expenses before non-
recurring charges.............. $ 324,528 $ 353,109 $ 428,634 $ 401,338 $ 412,495 $100,654
Income (loss) before Year 2000
computer conversion expenses,
interest, taxes and
non-recurring charges.......... 80,311 56,702 47,573 47,738 45,547 (1,686)
Year 2000 computer conversion
expenses....................... -- -- -- -- -- --
Income (loss) before interest,
taxes and non-recurring
charges........................ 80,311 56,702 47,573 47,738 45,547 (1,686)
Interest expense, net............ 16,679 12,793 23,199 23,164 20,672 4,932
----------- ----------- ----------- ------------ ------------ --------
Income (loss) before taxes, non-
recurring charges and
extraordinary item............. $ 63,632 $ 43,909 $ 24,374 $ 24,574 $ 24,875 $ (6,618)
----------- ----------- ----------- ------------ ------------ --------
----------- ----------- ----------- ------------ ------------ --------
<CAPTION>
13 WEEKS
ENDED
MAY 3,
1998
--------
(unaudited)
<S> <C>
STATEMENT OF OPERATIONS DATA
Net sales........................ $295,765
Cost of goods sold............... 193,257
--------
Gross profit..................... $102,508
Selling, general and
administrative expenses........ 101,954
Facility and store closing,
restructuring and other
expenses....................... --
--------
Income (loss) before Year 2000
computer conversion expenses,
interest and taxes............. $ 554
Year 2000 computer conversion
expenses....................... (2,000)
Income (loss) before interest,
taxes and non-recurring
charges........................ $ (1,446)
Interest expense, net............ 5,466
--------
Income (loss) before taxes....... $ (6,912)
Income tax expense (benefit)..... (2,427)
Extraordinary loss............... 1,060
--------
Net income (loss)................ $ (5,545)
--------
--------
Net income (loss) per share:
Basic.......................... $ (0.20)(2)
--------
--------
Diluted........................ $ (0.20)(2)
--------
--------
ADJUSTED STATEMENT OF OPERATIONS
DATA (BEFORE NON-RECURRING
CHARGES)
Net sales........................ $295,765
Cost of goods sold............... 193,257
Non-recurring charges............ --
--------
Gross profit before non-recurring
charges........................ $102,508
SG&A expenses and non-recurring
charges........................ 101,954
Non-recurring charges............ --
--------
SG&A expenses before non-
recurring charges.............. $101,954
Income (loss) before Year 2000
computer conversion expenses,
interest, taxes and
non-recurring charges.......... 554
Year 2000 computer conversion
expenses....................... (2,000)
Income (loss) before interest,
taxes and non-recurring
charges........................ (1,446)
Interest expense, net............ 5,466
--------
Income (loss) before taxes, non-
recurring charges and
extraordinary item............. $ (6,912)
--------
--------
</TABLE>
19
<PAGE>
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS 53 WEEKS 52 WEEKS 13 WEEKS
ENDED ENDED ENDED ENDED ENDED ENDED
JANUARY 30, JANUARY 29, JANUARY 28, FEBRUARY 2, FEBRUARY 1, MAY 4,
1994 1995 1996 1997 1998 1997
----------- ----------- ----------- ------------ ------------ --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) UNAUDITED
<S> <C> <C> <C> <C> <C> <C>
SEGMENT DATA (BEFORE NON-
RECURRING CHARGES)
Net sales -- apparel....... $ 757,452 $ 812,993 $ 1,006,701 $ 897,370 $ 911,047 $193,298
Net sales -- footwear and
related products......... 394,942 442,473 457,427 462,223 438,960 92,627
----------- ----------- ----------- ------------ ------------ --------
Total net sales............ $ 1,152,394 $ 1,255,466 $ 1,464,128 $1,359,593 $1,350,007 $285,925
----------- ----------- ----------- ------------ ------------ --------
----------- ----------- ----------- ------------ ------------ --------
Operating income (loss) --
apparel.................. $ 53,645 $ 35,994 $ 37,432 $ 30,021 $ 45,416 $ (544)
Operating
income -- footwear and
related products......... 39,638 31,207 23,026 32,888 15,382 2,648
----------- ----------- ----------- ------------ ------------ --------
Total operating income..... $ 93,283 $ 67,201 $ 60,458 $ 62,909 $ 60,798 $ 2,104
Corporate expenses......... (12,972) (10,499) (12,885) (15,171) (15,251) (3,790)
----------- ----------- ----------- ------------ ------------ --------
Income (loss) before Year
2000 computer conversion
expenses, interest,
taxes, non-recurring
charges and extraordinary
item..................... $ 80,311 $ 56,702 $ 47,573 $ 47,738 $ 45,547 $ (1,686)
----------- ----------- ----------- ------------ ------------ --------
----------- ----------- ----------- ------------ ------------ --------
OTHER DATA
EBITDA (before
non-recurring
charges)(3).............. $ 99,893 $ 81,467 $ 81,313 $ 77,176 $ 70,847 $ 5,296
Capital expenditures....... 47,866 53,140 39,773 22,578 17,923 3,354
Depreciation and
amortization............. 19,582 24,765 33,740 29,438 25,300 6,982
Cash dividends............. 3,920 3,984 4,007 4,050 4,065 2,030
Ratio of EBITDA to interest
expense(4)............... 6.0x 5.8x 2.3x 3.3x -- 1.1x
Ratio of adjusted EBITDA
(before non-recurring
charges) to interest
expense.................. 6.0x 6.4x 3.5x 3.3x 3.4x(6) N/A
Ratio of earnings to fixed
charges(5)............... 2.7x 2.0x -- 1.5x -- --
Ratio of adjusted earnings
(before non-recurring
charges) to fixed
charges.................. 2.7x 2.2x 1.5x 1.5x 1.5x(6) N/A
Ratio of total debt to
adjusted EBITDA (before
non-recurring charges)... 1.7x 2.1x 3.7x 2.8x 3.5x 50.7x
Ratio of total debt to
capital.................. 40.8% 38.2% 52.3% 43.1% 53.0% 48.6%
<CAPTION>
13 WEEKS
ENDED
MAY 3,
1998
--------
UNAUDITED
<S> <C>
SEGMENT DATA (BEFORE NON-
RECURRING CHARGES)
Net sales -- apparel....... $205,389
Net sales -- footwear and
related products......... 90,376
--------
Total net sales............ $295,765
--------
--------
Operating income (loss) --
apparel.................. $ 3,226
Operating
income -- footwear and
related products......... 581
--------
Total operating income..... $ 3,807
Corporate expenses......... (3,253)
--------
Income (loss) before Year
2000 computer conversion
expenses, interest,
taxes, non-recurring
charges and extraordinary
item..................... $ 554
--------
--------
OTHER DATA
EBITDA (before
non-recurring
charges)(3).............. $ 5,339
Capital expenditures....... 3,553
Depreciation and
amortization............. 6,785
Cash dividends............. 2,038
Ratio of EBITDA to interest
expense(4)............... 1.0x(7)
Ratio of adjusted EBITDA
(before non-recurring
charges) to interest
expense.................. N/A
Ratio of earnings to fixed
charges(5)............... --(7)
Ratio of adjusted earnings
(before non-recurring
charges) to fixed
charges.................. N/A
Ratio of total debt to
adjusted EBITDA (before
non-recurring charges)... 55.7x
Ratio of total debt to
capital.................. 58.3%
</TABLE>
- ------------------
(1) Basic and diluted net income per share for the 52 weeks ended January 30,
1994 are net of $0.44 and $0.42, respectively, related to an extraordinary
loss on the early retirement of debt.
(2) Basic and diluted net loss per share for the 13 weeks ended May 3, 1998
include $(0.04) related to an extraordinary loss on the early retirement of
debt.
(3) EBITDA is defined as earnings before extraordinary item, interest expense,
taxes, depreciation and amortization. EBITDA is presented because the
Company believes it is a widely accepted financial indicator of an entity's
ability to incur and service debt. EBITDA should not be considered by an
investor as an alternative to net income or income from operations, as an
indicator of the operating performance of the Company or other consolidated
operations or cash flow data prepared in accordance with generally accepted
accounting principles, or as an alternative to cash flows as a measure of
liquidity.
(4) As a result of the non-recurring charges recorded in the 52 weeks ended
February 1, 1998, EBITDA was a loss and the ratio of EBITDA to interest
expense is not presented.
(5) The ratio of earnings to fixed charges is computed by dividing fixed charges
of the Company into earnings before extraordinary item and taxes, plus fixed
charges. Fixed charges represent interest expense, amortization of discounts
and costs associated with this offering and the portion of rental payments
associated with leases which is deemed to be representative of the interest
factor. As a result of the non-recurring charges recorded in each of the 52
weeks ended January 28, 1996 and February 1, 1998, earnings were inadequate
to cover fixed charges by $2,626 and $107,825, respectively. In each of the
13 weeks ended May 4, 1997 and May 3, 1998, earnings were inadequate to
cover fixed charges by $6,618 and $6,912, respectively.
(6) If the Notes had been issued and the Credit Facility had been in place as of
February 3, 1997, the Company's unaudited pro forma ratio of adjusted EBITDA
(before non-recurring charges) to interest expense for the 52 weeks ended
February 1, 1998 would have been 2.7x and the unaudited pro forma ratio of
adjusted earnings (before non-recurring charges) to fixed charges would have
been 1.4x (based on an interest rate of 9.5% on the Notes and an assumed
interest rate of 7.2% on the Credit Facility).
(7) If the Initial Notes had been issued and the Credit Facility had been in
place as of February 2, 1998, the Company's unaudited pro forma ratio of
EBITDA to interest expense for the 13 weeks ended May 3, 1998 would have
been 0.8x and the unaudited pro forma ratio of earnings to fixed charges
would have been 0.4x (based on an interest rate of 9.5% for the Notes and an
assumed interest rate of 6.4% on the Credit Facility).
20
<PAGE>
<TABLE>
<CAPTION>
JANUARY 30, JANUARY 29, JANUARY 28, FEBRUARY 2, FEBRUARY 1, MAY 4, MAY 3,
1994 1995 1996 1997 1998 1997 1998
----------- ----------- ----------- ------------ ------------ -------- --------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) (UNAUDITED)
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA
Working capital......... $ 309,546 $ 315,637 $ 261,538 $240,692 $251,683 $236,951 $248,491
Total assets............ 554,771 596,284 749,055 657,436 660,459 697,835 690,245
Current portion of
long-term debt........ 245 260 10,137 10,157 -- 10,157 --
Long-term debt.......... 169,934 169,679 229,548 189,398 241,004 189,399 249,349
Stockholders' equity.... 246,799 275,460 275,292 290,158 220,305 283,693 212,797
</TABLE>
NON-RECURRING RESTRUCTURING CHARGES. The Company recorded pre-tax
restructuring charges of $132.7 million ($85.5 million after tax) in 1997
related to a series of actions the Company has taken toward (i) exiting all
United States mainland footwear manufacturing with the closing of its Wilton,
Maine footwear manufacturing facility; (ii) exiting the sweater manufacturing
business with the sale and liquidation of its Puerto Rico sweater operations;
(iii) consolidating and closing manufacturing, warehouse and distribution
facilities, as well as restructuring other logistical and administrative areas,
in order to reduce product costs and operating expenses and improve
efficiencies; (iv) repositioning the Gant brand in the United States to be
consistent with its highly successful positioning in Europe; (v) closing 150
additional underperforming factory outlet retail stores; and (vi) modifying a
repositioning of Bass, including the liquidation of a resulting excess
inventory. Of these charges, approximately $91.9 million include cash outlays,
with the balance, $40.8 million, being non-cash. These restructuring initiatives
will enable the Company significantly to reduce future operating expenses and
product costs. It is expected that the cost savings initiatives will aggregate
in excess of $40 million in the period 1998 to 2000, and exceed $20 million
annually by 2000.
The restructuring initiatives related to the 1995 charge of $27.0 million
($17.0 million after tax) were the closing of three domestic shirt manufacturing
facilities, closing approximately 300 underperforming retail outlet stores and
the reorganization of the Company's management structure to enhance the
Company's focus on its brands.
The restructuring initiatives related to the 1994 charge of $7.0 million
($4.2 million after tax) were the restructuring of wholesale and retail
operations and the closing of the Company's private label retail stores.
21
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Years Ended January 28, 1996, February 2, 1997 and February 1, 1998:
The Company manages and analyzes its operating results by two vertically
integrated business segments: (i) apparel and (ii) footwear and related
products. As described more fully in the 'Non-Recurring Charges' section of this
review, the results of operations for 1997 and 1995 include pre-tax
non-recurring charges of $132.7 million and $27 million, respectively.
The following adjusted statements of operations and segment data segregate
the non-recurring charges from the Company's ongoing operations, and the review
which follows discusses the Company's results of operations before the
non-recurring charges.
ADJUSTED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
52 WEEKS 53 WEEKS 52 WEEKS
ENDED ENDED ENDED
JANUARY 28, FEBRUARY 2, FEBRUARY 1,
1996 1997 1998
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net Sales........................................................... $ 1,464,128 $ 1,359,593 $ 1,350,007
Cost of goods sold.................................................. 987,921 910,517 937,965
Non-recurring charges............................................... (46,000)
----------- ----------- -----------
Gross profit before non-recurring charges........................... $ 476,207 $ 449,076 $ 458,042
----------- ----------- -----------
SG&A expenses and non-recurring charges............................. 455,634 401,338 499,195
Non-recurring charges............................................... (27,000) (86,700)
----------- ----------- -----------
SG&A expenses before non-recurring charges.......................... $ 428,634 $ 401,338 $ 412,495
----------- ----------- -----------
Income before interest, taxes and non-recurring charges............. 47,573 47,738 45,547
Interest expense, net............................................... 23,199 23,164 20,672
----------- ----------- -----------
Income before taxes and non-recurring charges....................... $ 24,374 $ 24,574 $ 24,875
Income tax expense.................................................. 7,064 6,044 5,954
----------- ----------- -----------
Income from ongoing operations before non-recurring charges......... $ 17,310 $ 18,530 $ 18,921
Non-recurring charges, net of tax benefit........................... (17,016) (85,500)
----------- ----------- -----------
Net income (loss)................................................... $ 294 $ 18,530 $ (66,579)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
ADJUSTED SEGMENT DATA
<TABLE>
<CAPTION>
52 WEEKS 53 WEEKS 52 WEEKS
ENDED ENDED ENDED
JANUARY 28, FEBRUARY 2, FEBRUARY 1,
1996 1997 1998
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Net sales -- Apparel................................................ $ 1,006,701 $ 897,370 $ 911,047
Net sales -- Footwear and Related Products.......................... 457,427 462,223 438,960
----------- ----------- -----------
Total net sales..................................................... $ 1,464,128 $ 1,359,593 $ 1,350,007
----------- ----------- -----------
----------- ----------- -----------
Operating income -- Apparel......................................... $ 37,432 $ 30,021 $ 45,416
Operating income -- Footwear and Related Products................... 23,026 32,888 15,382
----------- ----------- -----------
Total operating income.............................................. 60,458 62,909 60,798
Corporate expenses.................................................. (12,885) (15,171) (15,251)
----------- ----------- -----------
Income before interest, taxes and non-recurring charges............. $ 47,573 $ 47,738 $ 45,547
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
22
<PAGE>
APPAREL
Net sales of the Company's apparel segment were $911.0 million in 1997
compared with $897.4 million in 1996 and $1,006.7 million in 1995. In both 1997
and 1996, sales growth was limited by the planned closing of retail outlet
stores and the contraction of the private label business, including the closing
in 1997 of the Company's sweater manufacturing operations. The Company's sales
of wholesale branded products increased 24% and 3% in 1997 and 1996,
respectively, to $387.2 million in 1997 from $311.9 million in 1996 and $303.2
million in 1995. The major areas of growth in 1997 were Van Heusen and Geoffrey
Beene dress shirts, as well as Izod sportswear.
Gross margin increased to 32.9% in 1997 from 31.3% in 1996 and 31.4% in
1995. All divisions had gross margin improvements with the exception of Izod
Club, which experienced a particularly difficult competitive environment. Strong
inroads by high-visibility men's department store brands into the 'green grass'
channel of distribution serviced by Izod Club caused price pressures which, in
turn, led to price promotions and a reduced gross margin. The Company believes
that the consolidation during 1997 of Izod Club into the various functional
departments of Izod should result in significant cost reductions, as well as
provide major improvements in product and product distribution.
Two factors were key to the improvement in gross margin:
1. The closing of underperforming retail outlet stores and the contraction
of the less profitable private label business.
2. Improvement, across the board, in product and presentation in all of the
Company's brands.
The Company believes these factors should continue in 1998 as the Company's
brands continue to improve their positioning in department store accounts and as
the Company's marketing efforts continue to increase consumer awareness of the
considerable attributes that each of the Company's brands offers.
Selling, general and administrative expenses were 27.9% of net sales in
1997 and 1996 compared with 27.7% in 1995. While overall expense levels have
remained flat, there has been a significant shift in the mix of these
expenditures to marketing and advertising from more general logistical areas.
Included in 1997 were incremental advertising expenses of $15.0 million.
Operating income increased 51.3% in 1997 to $45.4 million compared with
$30.0 million in 1996 and $37.4 million in 1995. The Company believes that its
wholesale sales gains, gross margin improvement, operating efficiency and
marketing investment are all very positive indications of the impact of the
Company's strategic initiatives.
FOOTWEAR AND RELATED PRODUCTS
The process of implementing the Company's strategic initiatives has not
been without disappointment. In the footwear and related products segment,
fiscal 1997 net sales declined 5.0% to $439.0 million compared with $462.2
million in 1996 and $457.4 million in 1995. A closing of retail outlet stores
was a factor in the reduction of overall Bass sales in 1997. However, the larger
negative factor in 1997 was the disappointing results of the Company's attempt
to reposition its Bass brand to higher price points. While the higher price
position was endorsed by the Company's wholesale customers, the initiatives were
not well executed and did not meet with consumer support, resulting in an
inventory build up at both the wholesale level and in the Company's own factory
outlet retail stores. To protect its franchise and preserve its wholesale
customer relationships, the Company took substantial markdowns in its own retail
stores and aggressively financed the markdowns required by its wholesale
customers to sell this inventory. Line management responsible for the Bass
business has been changed, a decision was made to close the United States
mainland footwear manufacturing facilities, and the brand was returned to its
historic positioning targeted in the moderate price range as a family oriented,
'Americana'-associated, casual lifestyle brand. The result of these actions was
a non-recurring charge to fiscal 1997 earnings of $54.2 million and a decline in
footwear and related products operating income (before such charge) of $17.5
million to $15.4 million. Operating income in 1995 was $23.0 million.
23
<PAGE>
Gross margin in 1997 was 36.0% compared with 36.3% in 1996 and 34.9% in
1995. As in all of the Company's branded businesses, the footwear and related
products segment represents a combination of wholesale and retail businesses.
The sales problems described above caused gross margin reductions across the
board as markdown allowances to wholesale customers took place contemporaneously
with markdowns taken at the Company's retail outlet stores. However, the much
sharper declines in the Company's wholesale sector created a greater weighting
to the Company's higher margin retail sector, and this shift offset most of the
overall percentage decline. The Company believes that the repositioning of the
Bass brand should enable both the mix of business and their respective gross
margins to return to more normal levels.
Selling, general and administrative expenses were 32.5% of net sales in
1997 compared with 29.2% in 1996 and 29.9% in 1995. The increase in 1997 was
caused principally by increased national advertising as well as a ramping up of
design and selling costs to support the upgrading of product and product
presentation which was a part of the Bass repositioning.
The Bass misstep is by far the biggest disappointment that the Company has
had in executing its brand strategy. However as much as it negatively impacted
the Company's results of operations in 1997, and is expected to dampen 1998, the
Company believes its impact should be substantially behind the Company by the
fall 1998 season. In the process, the Company has strengthened the Bass
management team and has substantially redirected the sourcing of Bass product.
The Company believes it can lower its costs considerably and build on Bass'
historically strong record of profitability.
NON-RECURRING CHARGES
The Company recorded pre-tax non-recurring charges of $132.7 million ($85.5
million after tax) in 1997 related to a series of actions the Company has taken
towards:
o Exiting all United States mainland footwear manufacturing with the
closing of its Wilton, Maine footwear manufacturing facility;
o Exiting the sweater manufacturing business with the sale and liquidation
of its Puerto Rico sweater operations;
o Consolidating and contracting plant and warehouse and distribution
facilities as well as restructuring other logistical and administrative
areas in order to reduce product costs and operating expenses and improve
efficiencies;
o Repositioning the Gant brand in the United States to be consistent with
its highly successful positioning in Europe;
o Closing an additional 150 underperforming retail outlet stores; and
o Modifying a repositioning of Bass, including the liquidation of a
resulting excess inventory.
The Company believes that these initiatives will enable the Company to
significantly reduce future operating expenses and product costs. It is expected
that the actions which gave rise to the 1997 charge will result in aggregate
cost savings of over $40 million in the period 1998 to 2000, and will exceed $20
million annually by 2000.
The Company had recorded a pre-tax non-recurring charge of $27.0 million
($17.0 million after tax) in 1995 to provide for the closing of some 300 retail
outlet stores, the closing of three domestic shirt manufacturing facilities and
a reorganization of the Company's management structure.
CORPORATE EXPENSES
Corporate expenses were $15.3 million in 1997 compared with $15.2 million
in 1996 and $12.9 million in 1995. The increase in 1996 compared with 1995 was
attributable to an increase in spending relating to information technology.
24
<PAGE>
INTEREST EXPENSE
Interest expense was $20.7 million in 1997 compared with $23.2 million in
both 1996 and 1995. A strong cash flow in 1996 reduced overall debt levels early
in 1997 and was the principal reason for the reduction in interest expense in
1997. The 1997 restructuring activities, described above, will result in a cash
outflow that will likely increase interest expense in 1998. These activities
should become cash positive in 1999 with a resulting interest expense reduction.
INCOME TAXES
Excluding the non-recurring charges, the income tax expense rate was 23.9%
in 1997, 24.6% in 1996 and 29.0% in 1995. The Company's effective tax rate is
lower than statutory rates due to tax exempt income from operations in Puerto
Rico, as well as other permanent differences between book income and taxable
income.
13 Weeks Ended May 4, 1997 and May 3, 1998:
The following statements of operations and segment data show the Company's
results from ongoing operations for the 13 weeks ended May 4, 1997 and May 3,
1998:
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
-----------------------
MAY 4, MAY 3,
1997 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net sales.......................................................................... $285,925 $295,765
Cost of goods sold................................................................. 186,957 193,257
-------- --------
Gross profit....................................................................... $ 98,968 $102,508
Selling, general and administrative expenses....................................... 100,654 101,954
-------- --------
Income (loss) before Year 2000 computer conversion expenses, interest and taxes.... $ (1,686) $ 554
Year 2000 computer conversion expenses............................................. (2,000)
-------- --------
Loss before interest and taxes..................................................... $ (1,686) $ (1,446)
Interest expense, net.............................................................. 4,932 5,466
-------- --------
Loss before taxes.................................................................. $ (6,618) $ (6,912)
Income tax benefit................................................................. 2,078 2,427
-------- --------
Loss from ongoing operations....................................................... $ (4,540) $ (4,485)
-------- --------
-------- --------
SEGMENT DATA
<CAPTION>
THIRTEEN WEEKS ENDED
-----------------------
MAY 4, MAY 3,
1997 1998
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Net sales -- Apparel............................................................... $193,298 $205,389
Net sales -- Footwear and Related Products......................................... 92,627 90,376
-------- --------
Total net sales.................................................................... $285,925 $295,765
-------- --------
-------- --------
Operating income (loss) -- Apparel................................................. $ (544) $ 3,226
Operating income -- Footwear and Related Products.................................. 2,648 581
-------- --------
Total operating income............................................................. 2,104 3,807
Corporate expenses................................................................. (3,790) (3,253)
-------- --------
Income (loss) before Year 2000 computer conversion expenses, interest and taxes.... $ (1,686) $ 554
-------- --------
-------- --------
</TABLE>
Excluding Year 2000 computer conversion expenses (net of tax benefit),
basic and diluted net loss per share before extraordinary item for the thirteen
weeks ended May 3, 1998, would have been ($0.12).
25
<PAGE>
APPAREL
Net sales of the Company's apparel segment in the first quarter were $205.4
million in 1998 and $193.3 million last year, an increase of 6.3%. This increase
is due to a 19% increase in branded wholesale apparel sales, offset, in part, by
the impact of the planned reduction in the number of retail outlet stores
operated by the Company and the sale of the Company's private label sweater
manufacturing business in the fourth quarter of 1997.
Gross profit on apparel sales in the first quarter was 33.6% in 1998
compared with 33.0% in the prior year, the fourth consecutive quarter of
increased gross profit in this segment. This improvement is primarily a function
of the changing mix in the Company's apparel business as evidenced by strong
growth in branded wholesale sales and the planned reduction/divestment of
underperforming businesses.
Selling, general and administrative expenses as a percentage of apparel
sales in the first quarter decreased to 32.0% this year from 33.2% last year.
The improved expense level relates principally to the Company's program of
closing underperforming retail outlet stores.
FOOTWEAR AND RELATED PRODUCTS
Net sales of the Company's footwear and related products segment in the
first quarter were $90.4 million in 1998 and $92.6 million last year, a decrease
of 2.4%. This decrease was expected as Bass' sales and gross margins continued
to be impacted by the unsuccessful repositioning in 1997 of the Bass brand to
higher price points.
Gross profit on footwear and related products sales in the first quarter
was 36.8% in 1998 compared with 38.4% in the prior year. As noted above, this
decrease was expected. The Bass inventory position is now substantially
improved, and the Company believes that the impact of the unsuccessful
repositioning in 1997 should be behind it by the third quarter of 1998.
Selling, general and administrative expenses as a percentage of footwear
and related products sales in the first quarter were 36.1% this year compared
with 35.6% last year. While expense levels were essentially flat, the lower
volume of sales caused the percentage relationship to net sales to increase.
INTEREST EXPENSE
Interest expense in the first quarter was $5.5 million in 1998 compared
with $4.9 million last year. This increase resulted from increased debt levels
associated with funding the Company's 1997 restructuring initiatives. On April
22, 1998, the Company issued $150 million of 9.5% senior subordinated notes due
May 1, 2008, and used the net proceeds to retire its intermediate term 7.75%
senior notes and reduce its revolving credit debt. At the same time, the Company
re-syndicated and refinanced its revolving credit facility with a new $325
million senior secured credit facility with a group of 12 banks. While these
refinancings will increase the overall cost of the Company's borrowings, the
Company believes they should provide a secure financial base which will allow
the Company to focus its attention on the execution of its strategic business
plan.
CORPORATE EXPENSES
Corporate expenses in the first quarter were $3.3 million in 1998 compared
with $3.8 million last year.
INCOME TAXES
Income taxes were estimated at a rate of 35.1% for the current year
compared with last year's first quarter rate of 31.4%. The increase relates
principally to the divestment in the fourth quarter of 1997 of the Company's
sweater manufacturing operations in Puerto Rico, which had provided income that
was exempt from Federal income taxes.
26
<PAGE>
LIQUIDITY AND CAPITAL RESOURCES
Years Ended January 28, 1996, February 2, 1997 and February 1, 1998:
The following table shows key cash flow elements over the last three years:
<TABLE>
<CAPTION>
52 WEEKS 53 WEEKS 52 WEEKS
ENDED ENDED ENDED
JANUARY 28, FEBRUARY 2, FEBRUARY 1,
1996 1997 1998
----------- ----------- -----------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating activities
Income from operations before non-recurring charges adjusted
for non-cash items....................................... $ 67,328 $ 55,282 $ 42,021
Change in working capital................................... (35,344) 54,104 (16,275)
----------- ----------- -----------
Cash flow before non-recurring charges...................... $ 31,984 $ 109,386 $ 25,746
Non-recurring charges -- cash impact........................ (6,490) (7,510) (34,100)
Working capital acquired(1)................................. (56,282) -- --
----------- ----------- -----------
$ (30,788) $ 101,876 $ (8,354)
----------- ----------- -----------
Investment activities
Acquisition of Izod and Gant................................ $ (114,503) $ -- $ --
Investment in Pyramid Sportswear............................ (6,950) -- --
Capital spending............................................ (39,773) (22,578) (17,923)
Other, net.................................................. -- 143 360
----------- ----------- -----------
$ (161,226) $ (22,435) $ (17,563)
----------- ----------- -----------
Financing activities
Cash dividends.............................................. $ (4,007) $ (4,050) $ (4,065)
Exercise of stock options................................... 1,745 386 791
----------- ----------- -----------
$ (2,262) $ (3,664) $ (3,274)
----------- ----------- -----------
Increase (decrease) in cash before net change in debt....... $ (194,276) $ 75,777 $ (29,191)
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
- ------------------
(1) Represents working capital related to the acquisition of the Izod and Gant
businesses.
As noted in the table above, the Company's cash flow before non-recurring
charges was positive in each of the three fiscal years ended February 1, 1998.
The cash impact in 1997 of the initiatives covered by the Company's
restructuring charges totaled $34.1 million. The principal areas of outflow
related to the repositioning of Gant and costs associated with the inventory
correction at Bass.
Capital spending in 1997 was $17.9 million compared with $22.6 million in
1996 and $39.8 million in 1995. The reduced level of spending in the latest two
years reflects the completion in 1995 of several large capital spending
projects, including the Company's new distribution center in North Carolina. In
1998, upon the expiration of the lease at the Company's New York headquarters,
the Company anticipates consolidating all of its New York office space into one
location. Capital expenditures related to that move are anticipated to be
approximately $15 million. Capital expenditures, in total, for 1998 are planned
at approximately $40 million. Beyond that, the Company anticipates returning to
the lower level of capital expenditures of the past two years.
Total debt as a percentage of total capital was 53.0% at the end of fiscal
1997 compared with 43.1% at the end of fiscal 1996 and 52.3% at the end of
fiscal 1995.
In fiscal 1998, the Company anticipates additional cash outflows of
approximately $47 million to substantially complete the restructuring programs
provided for in 1997. Most of that amount should be funded by cash flow from
operations as well as certain of the cash flow benefits stemming from these
restructuring moves, particularly the closing of retail stores and the exiting
from the capital-intensive sweater manufacturing business. Beyond that, the
Company anticipates that the cash flow benefits from
27
<PAGE>
the balance of restructuring together with cash flow from operations should
allow it to begin to realize an overall positive cash flow in its individual
business units and in the Company as a whole.
Notwithstanding the Company's positive feelings about future cash flow,
including the cash impact of the non-recurring charges, the Company believed
that it made a great deal of sense to avail itself of the favorable fixed income
market to extend the maturities of its existing debt. Therefore, on April 22,
1998, the Company issued $150 million of Senior Subordinated Notes due 2008 and
used the proceeds to eliminate its intermediate term senior notes and reduce its
revolving credit debt. Accordingly, such debt as of February 1, 1998 has been
classified as long-term debt in the 1997 year end balance sheet.
At the same time, the Company re-syndicated and refinanced its revolving
credit facility, which was scheduled to mature in early 1999, with a new $325
million senior secured credit facility with a group of 12 banks.
The Company believes that these refinancings should provide a secure
financial base and allow the Company to fully focus its attention on the
execution of its strategic business plan.
13 Weeks Ended May 4, 1997 and May 3, 1998:
The seasonal nature of PVH's business typically requires the use of cash to
fund a build-up in the Company's inventory in the first half of each year.
During the third and fourth quarters, the Company's higher level of sales tends
to reduce its inventory and generate cash from operations.
Net cash used by operations in the first quarter totalled $37.9 million in
1998 and $39.1 million last year. The Company's seasonal inventory build-up was
less than in the prior year due principally to a lower Bass inventory build-up
than in the prior year. Partially offsetting the cash flow inventory improvement
was a larger increase in trade receivables, due to an increase in wholesale
sales, and a larger decrease in accrued expenses, due to spending associated
with the Company's 1997 restructuring initiatives.
Capital spending in the first quarter was $3.6 million in 1998 as compared
with $3.4 million last year. The Company anticipates a significant increase in
overall capital spending levels in 1998 due principally to the anticipated
consolidation of its New York City offices into one location.
On April 22, 1998, the Company issued $150 million of 9.5% senior
subordinated notes due May 1, 2008, and used the net proceeds to retire its
intermediate term 7.75% senior notes and reduce its revolving credit debt. At
the same time, the Company re-syndicated and refinanced its revolving credit
facility with a new $325 million senior secured credit facility with a group of
12 banks. While these refinancings will increase the overall cost of the
Company's borrowings, the Company believes they should provide a secure
financial base which will allow the Company to focus its attention on the
execution of its strategic business plan. The new revolving credit facility also
includes a letter of credit facility with a sub-limit of $250 million provided,
however, that the aggregate maximum amount outstanding under both the revolving
credit facility and the letter of credit facility is $325 million. The Company
believes that its borrowing capacity under these facilities is adequate for its
peak seasonal needs in the foreseeable future. In addition, the retirement of
the Company's intermediate term 7.75% senior notes eliminates all long-term debt
repayment requirements for the next 10 years.
YEAR 2000
Until recently, computer programs were written using two digits rather than
four to define the applicable year. Thus, such programs were unable to properly
distinguish between the year 1900 and the year 2000. In October 1996, the
Company initiated a comprehensive Year 2000 Project to address this issue. The
Company determined that it will need to modify or replace significant portions
of its software so that its computer systems will function properly with respect
to dates in the year 2000 and beyond. The Company has also initiated discussions
with its significant suppliers and large customers to determine the status of
their compliance programs.
The Company is utilizing both internal and external resources to remediate,
or replace, and test the software for year 2000 modifications. The Company
anticipates completing the Year 2000 Project by June 30, 1999. The Company
incurred $2.0 million of computer conversion expenses in the first quarter of
1998 in connection with making its computer systems Year 2000 compliant. The
Company expects to
28
<PAGE>
incur additional Year 2000 computer conversion expenses of approximately $6.5
million in the current year and $8.5 million in 1999.
The cost of the project and the date on which the Company believes it will
complete the year 2000 modifications are based on management's estimates, which
were derived utilizing numerous assumptions of future events, including the
continued availability of resources, third party modification plans and other
factors. The Company presently believes that the year 2000 issue will not pose
significant operational problems for its computer systems. However, if such
modifications and conversions are not made, or are not completed timely, or the
systems of other companies on which the Company's systems and operations rely
are not converted on a timely basis, the year 2000 issue could have a material
adverse impact on the Company's operations.
SEASONALITY
The Company's business is seasonal, with higher sales and income during its
third and fourth quarters, which coincide with the Company's two peak retail
selling seasons: the first running from the start of the back-to-school and fall
selling seasons beginning in August and continuing through September, and the
second being the Christmas selling season beginning with the weekend following
Thanksgiving and continuing through the week after Christmas.
Also contributing to the strength of the third quarter is the high volume
of fall shipments to wholesale customers which are generally more profitable
than spring shipments. The slower spring selling season at wholesale combines
with retail seasonality to make the first quarter particularly weak.
29
<PAGE>
THE EXCHANGE OFFER
GENERAL
The Company hereby offers, upon the terms and subject to the conditions set
forth in this Prospectus and in the accompanying Letter of Transmittal (which
together constitute the Exchange Offer), to exchange up to $150 million
aggregate principal amount of Exchange Notes for a like aggregate principal
amount of Initial Notes properly tendered on or prior to the Expiration Date and
not withdrawn as permitted pursuant to the procedures described below. The
Exchange Offer is being made with respect to all of the Initial Notes.
As of the date of this Prospectus, the aggregate principal amount of the
Initial Notes outstanding is $150 million. This Prospectus, together with the
Letter of Transmittal, is first being sent on or about , 1998, to all
holders of Initial Notes known to the Company.
PURPOSE OF THE EXCHANGE OFFER
The Initial Notes were issued on April 22, 1998 in a transaction exempt
from the registration requirements of the Securities Act. Accordingly, the
Initial Notes may not be reoffered, resold, or otherwise transferred unless
registered under the Securities Act or any applicable securities law or unless
an applicable exemption from the registration and prospectus delivery
requirements of the Securities Act is available.
In connection with the issuance and sale of the Initial Notes, the Company
entered into the Registration Rights Agreement, which requires the Company to
file with the Commission a registration statement relating to the Exchange Offer
(the 'Registration Statement') not later than 60 days after the date of original
issuance of the Initial Notes, and to use their best efforts to cause the
Registration Statement to become effective under the Securities Act as soon as
practicable thereafter and to commence the Exchange Offer promptly after such
Registration Statement has become effective, hold the Exchange Offer open for at
least 30 days and exchange the Exchange Notes for all Initial Notes that have
been validly tendered and not withdrawn on or prior to the expiration of the
Exchange Offer. A copy of the Registration Rights Agreement has been filed as an
exhibit to the Registration Statement.
The term 'holder' with respect to the Exchange Offer, means any person in
whose name Initial Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
holder, or any person whose Initial Notes are held of record by The Depository
Trust Company ('DTC'). Other than as pursuant to the Registration Rights
Agreement, the Company is not required to file any registration statement to
register any outstanding Initial Notes. Holders of Initial Notes who do not
tender their Initial Notes or whose Initial Notes are tendered but not accepted
would have to rely on exemptions from the registration requirements under the
securities laws, including the Securities Act, if they wish to sell their
Initial Notes.
TERMS OF THE EXCHANGE
The Company hereby offers to exchange, subject to the conditions set forth
herein and in the Letter of Transmittal accompanying this Prospectus, $1,000 in
principal amount of Exchange Notes for each $1,000 in principal amount of the
Initial Notes. The terms of the Exchange Notes are identical in all material
respects to the terms of the Initial Notes for which they may be exchanged
pursuant to this Exchange Offer, except that the Exchange Notes generally will
be freely transferable by holders thereof and will not be subject to any
covenant regarding registration. The Exchange Notes will evidence the same
indebtedness as the Initial Notes and will be entitled to the benefits of the
Indenture. See 'Description of Exchange Notes'.
The Exchange Offer is not conditioned upon any minimum aggregate principal
amount of Initial Notes being tendered for exchange.
The Company is making the Exchange Offer in reliance on the position of the
Commission as set forth in certain interpretive letters addressed to third
parties in other transactions. However, the Company has not sought its own
interpretive letters, and there can be no assurance that the Commission would
make a similar determination with respect to the Exchange Notes. Based on these
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interpretations by the staff of the Commission, the Company believes that
Exchange Notes issued pursuant to the Exchange Offer in exchange for Initial
Notes may be offered for sale, resold and otherwise transferred by any holder of
such Exchange Notes (other than any such holder that is a broker-dealer or an
'affiliate' of the Company within the meaning of Rule 405 under the Securities
Act) without compliance with the registration and prospectus delivery
requirements of the Securities Act, provided that such Exchange Notes are
acquired in the ordinary course of such holder's business and such holder has no
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes and neither such holder nor any other such person is
engaging in or intends to engage in a distribution of such Exchange Notes. Since
the Commission has not considered the Exchange Offer in the context of a
no-action letter, there can be no assurance that the staff of the Commission
would make a similar determination with respect to the Exchange Offer. See
'-- Resale of Exchange Notes' and 'Plan of Distribution'.
Interest on the Exchange Notes shall accrue from the last Interest Payment
Date on which interest was paid on the Initial Notes so surrendered or, if no
interest has been paid on such Notes, from April 22, 1998.
Tendering holders of the Initial Notes shall not be required to pay
brokerage commissions or fees or, subject to the instructions in the Letter of
Transmittal, transfer taxes with respect to the exchange of the Initial Notes
pursuant to the Exchange Offer.
EXPIRATION DATE; EXTENSION
The Exchange Offer will expire at 5:00 p.m., New York City time, on the
Expiration Date. The Company expressly reserves the right, at any time or from
time to time, to extend the period of time during which the Exchange Offer is
open, and thereby delay acceptance for exchange of any Initial Notes, by giving
oral or written notice to the Exchange Agent and by giving written notice of
such extension to the holders thereof or by timely public announcement no later
than 9:00 a.m., New York City time, on the next business day after the
previously scheduled Expiration Date. During any such extension, all Initial
Notes previously tendered will remain subject to the Exchange Offer unless
properly withdrawn. The Company does not anticipate extending the Expiration
Date.
For purposes of the Exchange Offer, a 'business day' means any day
excluding Saturday, Sunday or any other day which is a legal holiday under the
laws of New York, New York or is a day on which banking institutions therein
located are authorized or required by law or other governmental action to close.
PROCEDURES FOR TENDERING INITIAL NOTES
The tender to the Company of Initial Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Initial Notes for exchange pursuant to the Exchange Offer must transmit either
(i) a properly completed and duly executed Letter of Transmittal, including all
other documents required by such Letter of Transmittal, to the Exchange Agent,
at the address set forth below under '-- Exchange Agent' on or prior to the
Expiration Date, or (ii) if such Initial Notes are tendered pursuant to the
procedures for book-entry transfer set forth below under '-- Book-Entry
Transfer', a holder tendering Initial Notes may transmit an Agent's Message (as
defined herein) to the Exchange Agent in lieu of the Letter of Transmittal, in
either case on or prior to the Expiration Date. In addition, either (i)
certificates for such Initial Notes must be received by the Exchange Agent along
with the Letter of Transmittal, (ii) a timely confirmation of a book-entry
transfer (a 'Book-Entry Confirmation') of such Initial Notes, if such procedure
is available, into the Exchange Agent's account at the DTC (the 'Book-Entry
Transfer Facility') pursuant to the procedure for book-entry transfer described
below, along with the Letter of Transmittal or an Agent's Message, as the case
may be, must be received by the Exchange Agent prior to the Expiration Date, or
(iii) the holder must comply with the guaranteed delivery procedures described
below. The term 'Agent's Message' means a message, transmitted to the Book-Entry
Transfer Facility and received by the Exchange Agent and forming a part of the
Book-Entry Confirmation, which states that the Book-Entry Transfer Facility
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has received an express acknowledgement from the tendering holder that such
holder has received and agrees to be bound by the Letter of Transmittal and the
Company may enforce the Letter of Transmittal against such holder. THE METHOD OF
DELIVERY OF INITIAL NOTES, LETTERS OF TRANSMITTAL OR AGENT'S MESSAGES AND ALL
OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER. IF SUCH
DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED MAIL, PROPERLY INSURED,
WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES, SUFFICIENT TIME SHOULD BE
ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF TRANSMITTAL OR INITIAL NOTES
SHOULD BE SENT TO THE COMPANY.
If tendered, Initial Notes are registered in the name of the signer of the
Letter of Transmittal, and the Exchange Notes to be issued in exchange therefor
are to be issued (and any untendered Initial Notes are to be reissued) in the
name of the registered holder (which term, for the purposes described herein,
shall include any participant in the Book-Entry Transfer Facility's system whose
name appears on a security listing as the owner of Initial Notes), the signature
of such signer need not be guaranteed. In any other case, the tendered Initial
Notes must be endorsed or accompanied by written instruments of transfer in form
satisfactory to the Company and duly executed by the registered holder, and the
signature on the endorsement or instrument of transfer must be guaranteed by a
bank, broker, dealer, credit union, savings association, clearing agency or
other institution (each, an 'Eligible Institution') that is a member of a
recognized signature guarantee medallion program within the meaning of Rule
17Ad-15 under the Exchange Act. If the Exchange Notes and/or Initial Notes not
exchanged are to be delivered to an address other than that of the registered
holder appearing on the note register for the Initial Notes, the signature in
the Letter of Transmittal must be guaranteed by an Eligible Institution.
A tender will be deemed to have been received as of the date when (i) the
tendering holder's properly completed and duly executed Letter of Transmittal
accompanied by the Initial Notes is received by the Exchange Agent, or (ii) a
Notice of Guaranteed Delivery (as provided below) or letter, telegram or
facsimile transmission to similar effect from an Eligible Institution is
received by the Exchange Agent. Issuances of Exchange Notes in exchange for
Initial Notes tendered pursuant to a Notice of Guaranteed Delivery or letter,
telegram or facsimile transmission to similar effect (as provided below) by an
Eligible Institution will be made only against deposit of the Letter of
Transmittal (and any other required documents) and the tendered Initial Notes.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Letters of Transmittal or Initial Notes tendered for
exchange will be determined by the Company in its sole discretion, which
determination shall be final and binding. The Company reserves the absolute
right to reject any and all tenders of any particular Initial Notes not properly
tendered and not to accept any particular Initial Notes for exchange which
acceptance might, in the judgment of the Company or its counsel, be unlawful.
The Company also reserves the absolute right to waive any defects or
irregularities as to any particular Initial Notes or conditions of the Exchange
Offer either before or after the Expiration Date (including the right to waive
the ineligibility of any holder who seeks to tender Initial Notes in the
Exchange Offer). The interpretation of the terms and conditions of the Exchange
Offer (including the Letter of Transmittal and the instructions thereto) by the
Company shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Initial Notes for exchange must be
cured within each reasonable period of time as the Company shall determine. None
of the Company, the Exchange Agent nor any other person shall be under any duty
to give notification of any defect or irregularity with respect to any tender of
Initial Notes for exchange, nor shall any of them incur any liability for
failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than
the registered holder or holders of Initial Notes, such Initial Notes must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names of the registered holder or holders appear on the
Initial Notes.
If the Letter of Transmittal or any Initial Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived
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<PAGE>
by the Company, proper evidence satisfactory to the Company of their authority
to so act must be submitted.
By tendering, each holder will represent to the Company that, among other
things, (a) Exchange Notes acquired pursuant to the Exchange Offer are being
acquired in the ordinary course of business of the person receiving such
Exchange Notes, whether or not such person is the holder, (b) neither the holder
nor any such other person has an arrangement or understanding with any person to
participate in the distribution of such Exchange Notes and (c) neither the
holder nor any such other person is an 'affiliate' of the Company as defined
under Rule 405 of the Securities Act, or if it is an affiliate, it will comply
with the registration and prospectus delivery requirements of the Securities Act
to the extent applicable. Any holder of Initial Notes using the Exchange Offer
to participate in a distribution of the Exchange Notes (i) cannot rely on the
position of the staff of the Commission set forth in certain no-action and
interpretive letters and (ii) must comply with the registration and prospectus
delivery requirements of the Securities Act in connection with a secondary
resale transaction.
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Initial Notes where such Initial Notes were acquired by such
broker-dealer as a result of market-making activities or other trading
activities must acknowledge that it will deliver a prospectus in connection with
any resale of such Exchange Notes. See 'Plan of Distribution'.
BOOK-ENTRY TRANSFER
The Exchange Agent will make a request to establish an account with respect
to the Initial Notes at the Book-Entry Transfer Facility for purposes of the
Exchange Offer within two business days after the date of this Prospectus, and
any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Initial Notes by causing the
Book-Entry Transfer Facility to transfer such Initial Notes into the Exchange
Agent's account at the Book-Entry Transfer Facility in accordance with such
Book-Entry Transfer Facility's procedures for transfer. However, although
delivery of Initial Notes may be effected through book-entry transfer at the
Book-Entry Transfer Facility, the Letter of Transmittal or facsimile thereof,
with any required signature guarantees, or an Agent's Message in lieu of a
Letter of Transmittal, and any other required documents, must, in any case, be
transmitted to and received by the Exchange Agent at one of the addresses set
forth below under '-- Exchange Agent' on or prior to the Expiration Date or the
guaranteed delivery procedures described below must be complied with.
GUARANTEED DELIVERY PROCEDURE
If a holder desires to accept the Exchange Offer, and time will not permit
a Letter of Transmittal or Initial Notes to reach the Exchange Agent before the
Expiration Date, or the procedure for book-entry transfer cannot be completed on
a timely basis, a tender may be effected if the Exchange Agent has received at
its address set forth below, on or prior to the Expiration Date, a letter by
hand or mail, or sent by facsimile transmission (receipt confirmed by telephone
and an original delivered by guaranteed overnight courier) from an Eligible
Institution setting forth the name and address of the tendering holder, the
names in which the Initial Notes are registered and, if possible, the
certificate numbers of the Initial Notes to be tendered, and stating that the
tender is being made thereby and guaranteeing that within three business days
after the Expiration Date, the Initial Notes in proper form for transfer or a
Book-Entry Confirmation, will be delivered by such Eligible Institution together
with a properly completed and duly executed Letter of Transmittal (and any other
required documents). Unless Initial Notes being tendered by the above-described
method are deposited with the Exchange Agent within the time period set forth
above (accompanied or preceded by a properly completed Letter of Transmittal and
any other required documents), the Company may, at its option, reject the
tender. Copies of the notice of guaranteed delivery ('Notice of Guaranteed
Delivery') which may be used by Eligible Institutions for the purposes described
in this paragraph are available from the Exchange Agent.
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WITHDRAWAL RIGHTS
Tenders of Initial Notes may be withdrawn at any time prior to the
Expiration Date.
For a withdrawal to be effective, written notice of withdrawal sent by
telegram, facsimile transmission (receipt confirmed by telephone and an original
delivered by guaranteed overnight courier) or letter must be received by the
Exchange Agent at the address set forth herein prior to the Expiration Date. Any
such notice of withdrawal must (i) specify the name of the person having
tendered the Initial Notes to be withdrawn (the 'Depositor'), (ii) identify the
Initial Notes to be withdrawn (including the certificate number or numbers of
such Initial Notes and the principal amount of each such Initial Note), (iii)
specify the principal amount of Initial Notes to be withdrawn, (iv) include a
statement that such holder is withdrawing his election to have such Initial
Notes exchanged, (v) be signed by the holder in the same manner as the original
signature on the Letter of Transmittal by which such Initial Notes were tendered
or as otherwise described above (including any required signature guarantees) or
be accompanied by documents of transfer sufficient to have the Trustee under the
Indenture register the transfer of such Initial Notes into the name of the
person withdrawing the tender, and (vi) specify the name in which any such
Initial Notes are to be registered, if different from that of the Depositor. The
Exchange Agent will return the properly withdrawn Initial Notes promptly
following receipt of notice of withdrawal. If Initial Notes have been tendered
pursuant to the procedure for book-entry transfer, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Initial Notes or otherwise comply with the
Book-Entry Transfer Facility procedure. All questions as to the validity, form
and eligibility of notices of withdrawals, including time of receipt, will be
determined by the Company, and such determination will be final and binding on
all parties.
Any Initial Notes so withdrawn will be deemed not to have been validly
tendered for exchange for purposes of the Exchange Offer. Any Initial Notes
which have been tendered for exchange but which are not exchanged for any reason
will be returned to the holder thereof without cost to such holder (or, in the
case of Initial Notes tendered by Book-Entry Transfer into the Exchange Agent's
account at the Book-Entry Transfer Facility pursuant to the Book-Entry Transfer
procedures described above, such Initial Notes will be credited to an account
with such Book-Entry Transfer Facility specified by the holder) as soon as
practicable after withdrawal, rejection of tender or termination of the Exchange
Offer. Properly withdrawn Initial Notes may be retendered by following one of
the procedures described under '-- Procedures for Tendering Initial Notes' above
at any time on or prior to the Expiration Date.
ACCEPTANCE OF INITIAL NOTES FOR EXCHANGE DELIVERY OF EXCHANGE NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Initial Notes
properly tendered and will issue the Exchange Notes promptly after such
acceptance. For purposes of the Exchange Offer, the Company shall be deemed to
have accepted properly tendered Initial Notes for exchange when, as and if the
Company has given oral or written notice thereof to the Exchange Agent.
For each Initial Note accepted for exchange, the holder of such Initial
Note will receive an Exchange Note having a principal amount equal to the
principal amount (or portion thereof) of the Initial Note surrendered for
tender.
In all cases, issuance of Exchange Notes for Initial Notes that are
accepted for exchange pursuant to the Exchange Offer will be made only after
timely receipt by the Exchange Agent of certificates for such Initial Notes or a
timely Book-Entry Confirmation of such Initial Notes into the Exchange Agent's
account at the Book-Entry Transfer Facility, a properly completed and duly
executed Letter of Transmittal and all other required documents or, in the case
of a Book-Entry Confirmation, an Agent's Message in lieu thereof. If any
tendered Initial Notes are not accepted for any reason set forth in the terms
and conditions of the Exchange Offer, or if Initial Notes are submitted for a
greater principal amount than the holder desires to exchange, such unaccepted or
non-exchanged Initial Notes will be returned without expense to the tendering
holder thereof (or, in the case of Initial Notes tendered by book-entry transfer
into the Exchange Agent's account at the Book-Entry Transfer Facility pursuant
to the book-entry transfer procedures described above, such non-exchanged
Initial Notes will be credited
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to an account maintained with such Book-Entry Transfer Facility) as promptly as
practicable after the expiration of the Exchange Offer.
EXCHANGE AGENT
Union Bank of California, N.A. has been appointed as the Exchange Agent for
the Exchange Offer. All executed Letters of Transmittal should be directed to
the Exchange Agent at one of the addresses set forth below:
<TABLE>
<S> <C>
BY HAND/OVERNIGHT COURIER MAIL: BY FACSIMILE: (415) 296-6757
Union Bank of California, N.A. Attn: Ms. Gillian Wallace
475 Sansome Street--12th Floor Corporate Trust Division
San Francisco, California 94111 By Telephone: (415) 296-6750
Attn: Ms. Gillian Wallace
Corporate Trust Division
</TABLE>
Questions and requests for assistance, requests for additional copies of this
Prospectus or of the Letter of Transmittal and requests for Notices of
Guaranteed Delivery should be directed to the Exchange Agent at the address and
telephone number set forth in the Letter of Transmittal.
DELIVERY TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR TRANSMISSIONS OF
INSTRUCTIONS VIA A FACSIMILE TO A NUMBER OTHER THAN AS SET FORTH ABOVE, WILL NOT
CONSITITUTE A VALID DELIVERY.
SOLICITATION OF TENDERS; FEES AND EXPENSES
The Company has not retained any dealer-manager in connection with the
Exchange Offer and will not make any payments to brokers, dealers or others for
soliciting acceptances of the Exchange Offer. The Company, however, will pay the
Exchange Agent reasonable and customary fees for its services and will reimburse
it for its reasonable out-of-pocket expenses in connection therewith. The
Company also will pay brokerage houses and other custodians, nominees and
fiduciaries the reasonable out-of-pocket expenses incurred by them in forwarding
copies of this and other related documents to the beneficial owners of the
Initial Notes and in handling or forwarding tenders for their customers.
The estimated cash expenses to be incurred in connection with the Exchange
Offer will be paid by the Company and are estimated in the aggregate to be
approximately $200,000, which includes fees and expenses of the Exchange Agent,
Trustee, registration fees, accounting, legal printing and related fees and
expenses.
No person has been authorized to give any information or to make any
representations in connection with the Exchange Offer, other than those
contained in this Prospectus. If given or made, such information or
representations should not be relied upon as having been authorized by the
Company. Neither the delivery of this Prospectus nor any exchange made hereunder
shall, under any circumstances, create any implication that there has been no
change in the affairs of the Company since the respective dates as of which
information is given herein. The Exchange Offer is not being made to (not will
tenders be accepted from or on behalf of) holders of Initial Notes in any
jurisdiction in which the making of the Exchange Offer or the acceptance thereof
would not be in compliance with the laws of such jurisdiction. However, the
Company, at its discretion, may take such action as it may deem necessary to
make the Exchange Offer in any such jurisdiction and extend the Exchange Offer
to holders of Initial Notes in such jurisdiction. In any jurisdiction in which
the securities laws or blue sky laws of which require the Exchange Offer to be
made by a licensed broker or dealer, the Exchange Offer is being made on behalf
of the Company by one or more registered brokers or dealers which are licensed
under the laws of such jurisdiction.
TRANSFER TAXES
The Company will pay all transfer taxes, if any, applicable to the exchange
of Initial Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Initial Notes for principal amounts not tendered
or accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered holder of the Initial Notes tendered,
or if tendered
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<PAGE>
Initial Notes, are registered in the name of any person other than the person
signing the Letter of Transmittal, or if a transfer tax is imposed for any
reason other than the exchange of Initial Notes pursuant to the Exchange Offer,
then the amount of any such transfer taxes (whether imposed on the registered
holder or any other persons) will be payable by the tendering holder. If
satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering holder.
ACCOUNTING TREATMENT
The Exchange Notes will be recorded at the carrying value of the Initial
Notes as reflected in the Company's accounting records on the date of the
exchange. Accordingly, no gain or loss for accounting purposes will be
recognized by the Company upon the exchange of Exchange Notes for Initial Notes.
Expenses incurred in connection with the issuance of the Exchange Notes will be
amortized over the term of the Exchange Notes.
CONSEQUENCES OF FAILURE TO EXCHANGE
Initial Notes that are not exchanged for Exchange Notes pursuant to the
Exchange Offer will continue to be subject to the restrictions on transfer of
such Initial Notes as set forth in the legend thereon and in the Indenture.
Initial Notes not exchanged pursuant to the Exchange Offer will continue to
remain outstanding in accordance with their terms. In general, the Initial Notes
may not be offered or sold unless registered under the Securities Act, except
pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Initial Notes under the
Securities Act.
Participation in the Exchange Offer is voluntary, and holders of Initial
Notes should consider carefully whether to participate. Holders of the Initial
Notes are urged to consult their financial and tax advisors in making their own
decision on what action to take.
As a result of the making of, and upon acceptance for exchange of all
validly tendered Initial Notes pursuant to the terms of, this Exchange Offer,
the Company will have fulfilled a covenant contained in the Registration Rights
Agreement. Holders of Initial Notes who do not tender their Initial Notes in the
Exchange Offer will continue to hold such Initial Notes and will be entitled to
all the rights and subject to all the limitations applicable thereto under the
Indenture, except for any such rights under the Registration Rights Agreement
that by their terms terminate or cease to have further effectiveness as a result
of the making of this Exchange Offer. All untendered Initial Notes will continue
to be subject to the restrictions on transfer set forth in the Indenture. To the
extent that Initial Notes are tendered and accepted in the Exchange Offer, the
trading market for untendered Initial Notes could be adversely affected.
The Company may seek to acquire in the future, subject to the terms of the
Indenture, untendered Initial Notes in open market or privately negotiated
transactions, through subsequent exchange offers or otherwise. The Company has
no present plan to acquire any Initial Notes which are not tendered in the
Exchange Offer.
RESALE OF EXCHANGE NOTES
The Company is making the Exchange Offer in reliance on the position of the
Commission as set forth in certain interpretive letters addressed to third
parties in other transactions. However, the Company has not sought its own
interpretive letter, and there can be no assurance that the Commission would
make a similar determination with respect to the Exchange Offer as it has in
such interpretive letters to third parties. Based on these interpretations by
the staff of the Commission, the Company believes that the Exchange Notes issued
pursuant to the Exchange Offer in exchange for Initial Notes may be offered for
resale, resold and otherwise transferred by a holder (other than any Holder that
is a broker-dealer or an 'affiliate' of the Company within the meaning of Rule
405 of the Securities Act) without further compliance with the registration and
prospectus delivery requirements of the Securities Act, provided that such
Exchange Notes are acquired in the ordinary course of such holder's business,
such holder has no arrangement or understanding with any person to participate
in the distribution of such Exchange Notes and neither such holder nor any such
other person is engaging in or intends to
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<PAGE>
engage in a distribution of the Exchange Notes. However, any holder who is an
'affiliate' of the Company or who has an arrangement or understanding with
respect to the distribution of the Exchange Notes to be acquired pursuant to the
Exchange Offer, or any broker-dealer who purchased Initial Notes from the
Company to resell pursuant to Rule 144A or any other available exemption under
the Securities Act (i) could not rely on the applicable interpretations of the
staff of the Commission and (ii) must comply with the registration and
prospectus delivery requirements of the Securities Act. A broker-dealer who
holds Initial Notes that were acquired for its own account as a result of
market-making or other trading activities may be deemed to be an 'underwriter'
within the meaning of the Securities Act and must, therefore deliver a
prospectus meeting the requirements of the Securities Act in connection with any
resale of Exchange Notes. Each such broker-dealer that receives Exchange Notes
for its own account in exchange for Initial Notes, where such Initial Notes were
acquired by such broker-dealer as a result of market-making activities or other
trading activities, must acknowledge in the Letter of Transmittal that it will
deliver a prospectus in connection with any resale of such Exchange Notes. See
'Plan of Distribution'.
In addition, to comply with the securities laws of certain jurisdictions,
if applicable, the Exchange Notes may not be offered or sold unless they have
been registered or qualified for sale in such jurisdiction or an exemption from
registration or qualification is available and is complied with. The Company has
agreed, pursuant to the Registration Rights Agreement and subject to certain
specified limitations therein, to register or qualify the Exchange Notes for
offer or sale under the securities or blue sky laws of such jurisdictions as any
holder of the Exchange Notes reasonably requests. Such registration or
qualification may require the imposition of restrictions or conditions
(including suitability requirements for offerees or purchasers) in connection
with the offer or sale of any Exchange Notes.
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<PAGE>
BUSINESS
OVERVIEW
The Company is a leading marketer of men's, women's and children's apparel
and footwear, sold under five nationally recognized brand names -- Van Heusen,
Bass, Izod, Gant and Geoffrey Beene -- in the dress shirt, casual footwear, and
sportswear sectors. The Company is brand focused and manages the design,
sourcing and manufacturing of substantially all of its products on a brand by
brand basis. The Company's products include both dress and sport shirts and
casual shoes and, to a lesser extent, sweaters, neckwear, furnishings, bottoms,
outerwear and leather and canvas accessories. Approximately 23% of the Company's
net sales in fiscal 1997 were derived from sales of dress shirts, 33% from sales
of footwear and related products and 44% from sales of other apparel goods,
primarily branded sportswear. The Company markets its products at a wholesale
level through national and regional department store chains and also directly to
consumers through its own retail stores, generally located in factory outlet
retail malls. The Company believes that marketing through the wholesale channel
provides the opportunity to build brand equity and represents its core business,
and views its retail business as a complement to its strong branded positions in
the wholesale market. The Company's strategy is to exploit and expand its
branded position in the United States and, on a longer-term basis, in the
international arena, and the Company believes that its portfolio of well
recognized brands offers the Company the best opportunity for realizing sales
growth and enhancing profit margins.
The Company's net sales and EBITDA (exclusive of the non-recurring charges
to earnings recorded in fiscal 1997) were $1,350.0 million and $70.8 million,
respectively, in fiscal 1997 versus $1,359.6 million and $77.2 million,
respectively, in fiscal 1996. Fiscal 1997 was a year of transition, as the
Company continued to realign and strengthen its business and further reduce
costs. The Company continued its store closing program and closed its sweater
manufacturing operations, which resulted in a planned reduction of revenue, made
a major investment of $18.4 million in incremental advertising expenditures in
the second half of the year, and took non-recurring charges to earnings of
$132.7 million in connection with certain restructuring expenses. The Company
believes that it made significant progress in its apparel segment where sales
and profitability increased, but it was disappointed with the results of its
footwear and related products segment. The Company believes that the increased
advertising expenditures and brand repositionings executed in 1997 position it
well to compete in its markets and expects the actions which gave rise to the
1997 charges to result in aggregate cost savings of over $40 million in the
period 1998 to 2000, and to exceed $20 million annually by 2000.
The Company's Van Heusen, Bass, Izod, Gant and Geoffrey Beene brands
collectively account for approximately 93% of the Company's net sales, with
approximately 73% of net sales being derived from Van Heusen, Bass and Geoffrey
Beene alone. Izod and Gant were acquired by the Company in 1995 and subsequently
repositioned in their markets. The Company believes that Izod and Gant have
substantial brand equity and position the Company well to capitalize on the
increasing popularity of branded sportswear. The Company owns four of the five
brands, with sales of the fifth -- Geoffrey Beene -- being under licensing
agreements with that designer. In addition, the Company recently entered into a
license agreement to market DKNY brand men's dress shirts.
The Company's brands enjoy national recognition in their respective sectors
of the market and share a rich heritage with between 40 and 120 years of
operating history. They represent sales leaders in their respective market
niches, from a dominant position in dress shirts, to a leading position in
casual footwear, to an increasingly important position in men's sportswear. In
the United States, Van Heusen is the best selling men's dress shirt and woven
sport shirt brand, and Geoffrey Beene is the best selling men's designer dress
shirt brand. The Company believes that its overall share of the United States
men's dress shirt market, including its branded, designer and private label
offerings, is the largest of any company and that it has a growing market share,
currently in excess of 32%, in the key department store channel. In the United
States, Izod products include the best selling men's sweater brand, one of the
best selling basic knit shirts and the number one ranked golf apparel brand in
pro shops and resorts. Gant represents the largest collection brand in several
countries in Europe, and is second only to 'Polo' in most of the other European
countries. Bass is the leading brand of men's, women's and children's casual
shoes at the moderate price range in the United States.
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The Company markets its five premier brands to different segments of the
market, appealing to varied demographic sectors and a broad spectrum of
consumers. This diversity of the Company's brands is intended to minimize
competition among the brands. The Van Heusen brand, designed to target the
moderate price range, appeals to the relatively conservative 'middle American'
consumer. The typical Bass consumer is family oriented, views the Bass brand as
'Americana', associated with a casual, outdoor lifestyle, and pays moderate
prices for his or her product. The Company's Izod brand is 'active inspired',
designed to sell on the main floor of department stores largely in knitwear
categories in the moderate to upper moderate price range. The Gant brand is the
Company's entry into collection sportswear and focuses on a traditional consumer
with refined taste who is prepared to purchase apparel in the higher price range
of the market. Geoffrey Beene is targeted toward a more fashion-forward consumer
who is prepared to purchase apparel in the upper moderate price range. The
Company's products are designed to appeal to relatively stable demographic
sectors and generally are not reliant on rapidly changing fashion trends.
The Company believes that because of its strong brands it is
well-positioned to capitalize on several trends that have affected the apparel
and footwear sectors in recent years. These include the stabilization of the
department store sector with a smaller number of stronger players, among which
the Company ranks its most important customers; the continued importance of
branding as a measure of product differentiation; continued growth in the
branded sportswear sector; and the stabilization of the dress shirt sector after
several years of modest decline. In addition, the recent lack of momentum in the
athletic shoe sector provides the Company with the opportunity to capitalize on
its Bass casual footwear products.
Substantially all of the Company's sales are made in the United States.
However, the Company believes that global name awareness is a key to the
creation of lasting brand equity and that it must pursue selective opportunities
to expand the sales of its brands internationally. Currently, Gant is the
Company's brand that is most developed internationally, with its name
recognition and sales substantially stronger in Europe than in the United
States. Gant products are sold in 35 countries, including in over 50 Gant stores
owned or franchised by the Company's licensing partner, Pyramid Sportswear, in
which the Company owns a minority interest with an option to acquire 100%.
Although the Van Heusen, Bass and Izod product lines also are sold outside the
United States, both directly and through licensees, their international sales
are small relative to Gant. Based on its experience with Gant, the Company
believes that opportunities exist to expand the sales of its Van Heusen, Bass
and Izod brands internationally.
Consistent with its strategy of developing its brands, the Company has
focused on the wholesale sector -- primarily department stores -- as the key
source of distribution for its products. The Company believes that the wholesale
channel generally, and department stores specifically, provide the best means of
promoting a fully conceptualized image for each of its brands and of securing
broad awareness of its products and image. The Company's wholesale customers for
branded and designer apparel include May Co., Federated, JC Penney, Proffits and
Dillard's. The Company's customers for footwear include Federated, May Co.,
Dillard's, Belk's and Nordstrom. The Company's ten largest wholesale customers,
accounting for over 60% of the Company's fiscal 1997 sales to wholesale
customers, each have been the Company's customers for more than 25 years. The
Company believes that its customers rely on its ability to design, manufacture
to exacting quality standards and deliver on a timely basis commercially
successful apparel and footwear programs.
While focused on the wholesale sector, the Company also sells its products
directly to consumers in approximately 695 Company-owned stores located
primarily in factory outlet retail malls. The stores are operated in five
formats, matching each of the Company's premier brands -- Van Heusen, Bass,
Izod, Gant and Geoffrey Beene. Van Heusen and Bass, which have the broadest
national recognition, followed by Izod, are in the broadest range of malls.
Geoffrey Beene stores are located in malls where that brand has greater name
recognition. Gant stores are included in a limited number of the most successful
of the nation's malls. Historically, the Company participated in the significant
expansion of the factory outlet mall sector, capitalizing on mall expansion to
build a portfolio of approximately 1,000 stores and generate significant sales
and cash flow growth. However, this strategy left the Company reliant on mall
growth rather than on brand and market share development as the primary driver
of
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expansion, contributed to a deterioration in the quality and stability of
earnings and failed to strengthen the image and brand equity in its major
businesses. Since 1995, the Company has significantly reduced the number of its
retail locations and has closed its least attractive stores to optimize its
portfolio. The Company's retail presence remains an important complement to its
strong branded positions in the wholesale market, facilitating product
experimentation, the gathering of market intelligence, effective inventory
control and management of surplus product.
STRATEGY
The Company's strategy is to exploit and expand its branded position in the
United States and, on a longer-term basis, internationally. Elements of this
strategy include:
o CAPITALIZE ON SPORTSWEAR OPPORTUNITY. With a renewed strong focus by
retailers on the importance of men's sportswear and the customer impact
of brand differentiation within that sector, the Company actively has
sought to build a leading branded presence in this fragmented niche,
acquiring existing sportswear brands (Izod and Gant) and expanding their
presence in the wholesale sector. This renewed focus is in part
attributable to the on-going move of employers towards casual dress
policies, such as 'casual Fridays', and the increasing number of people
who work at home. In addition, outside of the workplace, people's social
activities generally focus on a more casual lifestyle. These trends
present greater opportunities for the Company in sportswear. Sportswear
now represents 66% of the Company's apparel segment sales, and it is
expected that sportswear will continue to increase as a percentage of
sales.
o EXTEND BRAND PRODUCT RANGE. The Company continues to broaden the
product range of its brands, capitalizing on the name recognition,
popular draw and discrete target customer segmentation of each of its
major labels. For example, dress shirts are now marketed under the Bass
name and sportswear under the Van Heusen name, and Izod recently has
expanded its offerings to include products for the fall and holiday
seasons, a step toward building a year-round brand. As part of the
introduction of the European Gant collection in the United States, the
Company expanded its sportswear offerings to include sport coats,
outerwear, rainwear, swimwear and accessories. Brand differentiation is
maintained with design, manufacturing and procurement functions managed
at the brand level.
o PROMOTE GLOBAL BRAND AND IMAGE. The Company believes that over the
long-term the most successful brands will be those with a consistent
imagery, market positioning and name recognition throughout the world's
major consumer markets. The Company's longer-term goal is to develop its
core brands into international consumer franchises. Currently, all four
of the Company's owned brands are distributed internationally, although
only Gant, which in its niche is the leading market player in several
European countries and is second only to 'Polo' in most of the other
European countries, has achieved widespread brand recognition. The Van
Heusen brand is licensed in 21 countries in North, Central and South
America. In 1992, Bass began marketing its footwear internationally and
is now selling limited amounts of footwear to retailers in Europe,
Canada, South America, the Middle East, Africa and Asia. The Company
plans to build on these bases and to project a consistent global image
for each of its owned brands.
o BUILD UPON ENHANCED ADVERTISING PRESENCE. The Company launched
advertising campaigns for its brands in the second half of fiscal 1997,
which resulted in an increase in advertising expenditures by $18.4
million from fiscal 1996 to $37.8 million. Based upon dialogue with its
wholesale customers, the Company believes that the campaigns were well
received. The Company is committed to a continued advertising program to
support and further develop the national and international recognition
of its brands. The Company believes that ongoing communication with the
consumer is a core ingredient for branded marketing success.
o LEVERAGE CORE COMPETENCIES IN LOGISTICAL AND IT SUPPORT. With primary
focus on the more demanding wholesale customer nationwide and on
securing and maintaining a strong presence on the department store
floor, the Company has made significant investments to ensure the
adequacy of its inventory replenishment programs, its capacity to
monitor sales by
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SKU and margin and its ability to ensure its customers of timely
product availability in a cost-effective manner.
o INCREASE OPERATING EFFICIENCIES. The Company is committed to a cost
reduction program and constantly explores alternative methods to achieve
that objective. Given its size, purchasing power and ability to optimize
manufacturing and outsourcing alternatives, the Company is in a position
to achieve significant efficiencies in procurement and manufacturing.
This is essential if the Company is to provide high levels of service
and responsiveness to its wholesale customers, while maintaining control
over costs and working capital. The Company has developed significant
manufacturing flexibility by maintaining a range of Company-owned and
third party manufacturing capacity available to it, while optimizing
margins through recourse to low cost non-United States manufacturing.
The Company has announced a number of programs, including the
contraction of its United States manufacturing and logistical
infrastructure, to achieve significant cost savings.
o OPERATE COMPLEMENTARY RETAIL OPERATIONS. The Company's factory outlet
retail stores provide a valuable complement to its wholesale presence,
allowing for product experimentation, the gathering of market
information, increasing the efficiency of inventory and surplus product
management. The Company's stores sell a breadth of product not otherwise
found in the Company's wholesale offerings. With a significant program
of store closures in progress, the Company has been very focused on
improving the profitability of the retail portfolio as a whole and
maintaining its financial viability as a second channel of distribution.
The Company's remaining retail stores are profitable, and the average
sales per square foot and inventory turn at such stores have improved
significantly since 1995, thereby positioning the Company's retail
operations to generate increasing earnings and cash flows.
IMPLEMENTATION OF THE COMPANY'S STRATEGIES
Specific action steps taken beginning in 1995 and continuing into 1998 and
1999 with respect to the implementation of these strategies include: (i) the
acquisition of the Izod and Gant brands; (ii) the reorganization of the
Company's non-dress shirt operations along brand lines versus a wholesale/retail
organizational structure; (iii) the complete repositioning of Gant's domestic
brand image to match its highly successful European brand image; (iv) the
launching of new, focused Van Heusen, Izod and Gant advertising campaigns; (v)
the closure of approximately 400 of the Company's worst performing retail
locations in a program that by the end of fiscal 1998, after approximately 50
new store openings, will have reduced the retail portfolio from approximately
1,000 locations to approximately 650; (vi) the closure of domestic shirt
manufacturing plants and its United States mainland shoe manufacturing plant;
(vii) the consolidation of the Company's domestic warehousing and distribution
facilities; and (viii) the closure of the Company's sweater manufacturing
operations, which were unprofitable, capital intensive and did not match the
Company's branded strategy.
These steps have had the effect of focusing the Company's attention and
resources on its core brands and have yielded strong and positive results, with
further benefits expected to continue over the next three years. The Company's
apparel operations (excluding sweater operations) saw net sales increase 4.9% in
fiscal 1997 to $882.0 million, representing 65% of total fiscal 1997 net sales,
gross margins improve from 31.3% to 32.9% and operating income increase over 50%
to $45.4 million in fiscal 1997 (after incremental advertising expenses of $15.0
million) as compared to fiscal 1996. The Company's net sales of wholesale
branded apparel products increased 24% in 1997 to $387.2 million. With $6.0
million of annual savings already realized from the closure of dress shirt
manufacturing facilities in 1995 and 1996, the further closures in manufacturing
facilities and consolidation of logistical infrastructure announced by the
Company in 1997 are expected to result in substantial future cash savings.
Within the dress shirt sector, as the benefits of brand development and
manufacturing reorientation have begun to be realized, estimated market share in
the department store channel in which the Company competes has increased to 31%
from 26%, with sales increasing by 20% in fiscal 1997 as compared to fiscal
1996, and operating margins and profitability more than doubling. Approximately
60 underperforming Geoffrey Beene sportswear retail outlets have been closed,
resulting in significant increases in productivity and sales per square foot in
the remaining stores, and eliminating the losses
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experienced by that business in 1996. Gant's 1997 repositioning in the United
States was implemented as the Company opened a new flagship store on Fifth
Avenue in Manhattan and increased by 34% the number of in-store shops in
department stores carrying the Gant collection, with a further increase of 30%
planned by department stores in 1998. Izod's wholesale sales doubled during
1997, with a 32% increase in the number of stores carrying the line. While Van
Heusen's retail sales experienced a small decline as poorly performing stores
were closed, operating profit increased 23%, reflecting the benefits of the
Company's programs.
The process of implementing the Company's strategic initiatives has not
been without disappointment. In the Bass business, fiscal 1997 net sales
declined 5.0% to $439.0 million, as a result of the Company's attempt to
reposition its Bass brand to higher price points, which proved overly
aggressive. While the higher price position was endorsed by the Company's
wholesale customers, the initiatives were not well executed and did not meet
with consumer support, resulting in an inventory build up at both the wholesale
level and in the Company's own factory outlet retail stores. To protect its
franchise and preserve its wholesale customer relationships, the Company took
substantial markdowns in its own retail stores and aggressively financed the
markdowns required by its wholesale customers to sell this inventory. Line
management responsible for the Bass business has been changed, a decision was
made to close the United States mainland manufacturing facilities and the brand
was returned to its historic positioning targeted in the moderate price range as
a family oriented, 'Americana'-associated casual lifestyle brand. The result of
these actions was a non-recurring charge to fiscal 1997 earnings of $54.2
million and a decline in footwear and related products operating income (before
such charge) of $17.5 million to $15.4 million. While the Company is
disappointed at the outcome of the Bass repositioning effort, the Company
believes that its current plans for Bass will allow it to return to its
historical levels of sales and profitability.
The implementation of these strategic initiatives has resulted in the
Company taking pre-tax charges of $27.0 million in fiscal 1995 and $132.7
million in fiscal 1997, inclusive of the $54.2 million of Bass related charges.
The Company believes that these initiatives have positioned it to achieve
significant improvements in sales, operating income and cash flow in its apparel
businesses and will position it further to compete cost effectively in the
future across all of its business sectors. Furthermore, the Company believes
that the initiatives favorably position the Company to accelerate its strategy
of building pre-eminent global apparel and footwear brands.
COMPANY'S STRENGTHS
The key strengths of the Company are as follows:
o MARKET LEADERSHIP POSITION. The Company maintains a dominant position
in men's dress shirts, a leading position in casual footwear and an
increasingly important position in the fragmented men's sportswear
market. The Company's strong market shares provide it with significant
marketing strength relative to its competitors and attractive selling
floor space at its department store customers.
o HIGH BRAND AWARENESS. The Company's five premier brands -- Van Heusen,
Bass, Izod, Gant and Geoffrey Beene -- enjoy national recognition in
their respective sectors of the market. Brand recognition is critical in
the apparel and footwear industries, where strong brand names help
define consumer preferences and drive department store floor space
allocation.
o MARKET SEGMENTATION. The Company markets its five premier brands to
different segments of the market, appealing to varied demographic
sectors and a broad spectrum of consumers. Accordingly, the diversity of
the Company's brands is intended to minimize competition among the
brands.
o STRENGTH AND BREADTH OF CUSTOMERS. The Company markets its products to
a broad spectrum of customers, including department stores, as well as
directly to the consumer in its factory outlet retail stores. The
Company's retail business is intended to serve as a complement to its
strong branded positions in the wholesale market. The Company's ten
largest wholesale customers, accounting for over 60% of the Company's
fiscal 1997 sales to wholesale customers, each have been the Company's
customers for more than 25 years. No single
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customer accounted for more than 6% of the Company's total sales in
any of the last three years.
o STRONG LOGISTICS. Timely delivery and product quality are among the
most important criteria used by retailers to evaluate suppliers. Because
of the Company's relatively large size and vertical integration, it has
the capacity to contend successfully with the demands of large
retailers. The Company's investment in information technology, use of
the Company's EDI system, automated warehousing and distribution
operations and global sourcing network facilitate quick response to
sales trends and inventory demands, maximizing its inventory flexibility
and contributing to its strength in dealing with its large retail
customers.
o WORLDWIDE SOURCING ABILITY. The Company has the capability to source
effectively on a world-wide basis as a result of its structure and
history in the apparel and footwear industries. The Company employs
highly seasoned sourcing specialists for each brand. To support these
specialists, the Company maintains a world-wide sourcing network, with
offices in various countries, whose responsibilities include technical
support, quality control and human rights monitoring. These sourcing
specialists provide expertise in sourcing multiple classifications,
which results in highly efficient and cost-effective inventory movement.
As a result of the Company's sourcing network, the Company has developed
strong and stable global relationships over the years.
o STRONG MANAGEMENT. The Company's management is composed of a loyal team
of relatively young and experienced individuals. The average officer of
the Company is under 50 and has spent 25 years in the apparel industry,
13 of those years being with the Company. The Company believes that its
unique team has the experience and expertise to implement the objectives
of the Company.
BUSINESS
DRESS SHIRTS
The Company's dress shirts currently are marketed principally under the Van
Heusen and Geoffrey Beene brands. These two brands are by far the leaders in
men's dress shirts in their respective markets, finishing calendar 1997 with a
combined market share in the key United States department store sector of 31%,
an increase of five percentage points over the prior year. In addition, the
Company markets its dress shirts under the Bass and Etienne Aigner brands, as
well as providing private label dress shirts. The Company recently entered into
a license agreement pursuant to which it will market men's dress shirts under
the DKNY brand beginning with the holiday season in 1998, thereby permitting the
Company further to leverage its competencies and resources.
While the dress shirt sector in the United States has undergone
considerable change and some contraction over the last several years, the
Company believes that the sector has started to demonstrate stability. Over the
last three years, the Company has increased both the level of its sales in
dollar terms and its overall market share and the Company believes that the core
strength of its brands provides it with a strong foundation for future market
development.
In the past year, the Company made considerable progress not only with
respect to the increase in estimated market share, which generated a substantial
increase in sales, but also with respect to cost and working capital. With the
benefits of the first of the Company's manufacturing and logistics
rationalization strategies beginning to be felt, profitability in this core area
of the Company's business benefited from approximately $6.0 million of achieved
cost savings, and gross margins increased 2.7 percentage points to 24.3% and
operating profit more than doubled to $19.6 million. In addition, the Company
improved its inventory turn significantly in this sector of its business,
reflecting a better logistics function and the strength of its underlying
product and appeal to the end consumer.
Van Heusen dress shirts have provided a strong foundation for the Company
for most of its 117-year history and now constitute the best-selling men's dress
shirt brand in the United States. The Van Heusen dress shirt is marketed at
wholesale in the moderate price range to major department stores and men's
specialty stores nationwide, including May Co., JC Penney, Mervyns and
Federated. Its primary competitors are 'Arrow' and private label shirts.
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The Company markets Geoffrey Beene men's dress shirts under a license
agreement with that designer, which is up for renewal in 2001. Geoffrey Beene
dress shirts are the best-selling men's designer dress shirts in the United
States. In fiscal 1997, Geoffrey Beene garnered the largest market
share of all dress shirt brands in the department store channel of distribution.
Geoffrey Beene dress shirts are sold in the upper moderate price range to major
department stores and men's specialty stores nationwide, including Federated,
May Co., Proffits and Mercantile. Geoffrey Beene dress shirts compete with those
of other designers, including 'Perry Ellis' and 'Ralph Lauren Polo'.
Bass dress shirts are marketed at wholesale to major department stores,
including Federated, Mercantile and Dayton-Hudson, and are sold in the upper
moderate price range. This is a small but successful example of expanding an
existing product line. DKNY dress shirts will be sold in the better price range
and targeted to younger and more contemporary customers.
Private label programs offer the retailer the ability to create its own
line of exclusive merchandise and give the retailer control over distribution of
the product. Private label represents an opportunistic business which leverages
the Company's strong design and sourcing expertise. The Company's customers work
with the Company's designers to develop shirts in the styles, sizes and cuts
which the customers desire to sell in their stores with their particular store
names or private labels. Private label programs offer the consumer quality
product and offer the retailer the opportunity to enjoy higher margins and
product exclusivity. Private label products, however, do not have the same level
of consumer recognition as branded products and private label manufacturers do
not generally provide retailers with the same breadth of services and in-store
sales and promotional support as branded manufacturers. The Company markets at
wholesale men's dress shirts under private labels to major national retail
chains and department stores, including JC Penney, Sears, May Co., Target and
Federated. The Company believes it is one of the largest marketers of private
label dress shirts in the United States.
SPORTSWEAR
Several trends have affected the domestic and global apparel business in
recent years, including the increase in casual dress in and away from the
workplace. The retail dollar volume for men's casual business attire grew 7.3%
annually between 1991 and 1997, and the retail dollar volume of women's casual
business attire increased 4.9% annually in the same period, in comparison to the
retail dollar volume for total tailored apparel, which grew 2.1% annually. In
1997, 65% of the retail dollars spent on casual and tailored apparel was
attributed to casual apparel. The Company has sought to capitalize on this trend
and sportswear sales now account for 66% of the Company's apparel segment sales.
The Company's sportswear products currently are marketed principally under the
Van Heusen, Izod, Izod Club, Gant and Geoffrey Beene brands.
Van Heusen is the best-selling woven sport shirt brand in the United
States. Van Heusen apparel also includes knit sport shirts, sweaters and golf
apparel. Like Van Heusen branded dress shirts, Van Heusen branded sport shirts
and sweaters are marketed at wholesale in the moderate price range to major
department stores and men's specialty stores nationwide, including JC Penney,
Mervyns, May Co. and Proffits. The Company believes that the main floor
classification business in department stores is becoming increasingly important
and that there are few important brands in that category. As a result, the
Company believes that the success of Van Heusen dress shirts in department
stores where it is part of the stores' classification offerings supports its
presence in the department stores' sportswear classification offerings and
presents a significant opportunity for further development.
During 1997, the Company's Van Heusen sport shirt product presentation was
improved through new packaging, and a modest program to reposition the brand was
implemented, all in an effort to improve its share of floor space in better
department stores. The Company ascribes the increased sales at wholesale to a
combination of retailers' increased focus on the classification sportswear
sector and to the success of these programs.
The product mix targeted for Van Heusen outlet stores is intended to
satisfy the key apparel needs of men from dress furnishings to sportswear and of
women for sportswear. Van Heusen stores' merchandising strategy is focused on
achieving a classic and/or updated traditional look in a range of primarily
moderate price points. Target customers represent the broadest spectrum of the
American
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consumer. The Company closed a number of the worst performing Van Heusen retail
outlets during fiscal 1997, resulting in a small reduction in sales, but a
significant increase in profit margin in its retail operations.
Izod occupies a major presence in department stores as a main floor
lifestyle classification sportswear brand. Izod branded apparel products consist
of active inspired men's and women's sportswear, including Izod sweaters (the
best-selling men's sweater brand in the United States), knitwear (one of the
best-selling basic knit shirts in the United States), slacks, fleecewear and
microfiber jackets. These products are marketed in the moderate to upper
moderate price range in major department store locations, including May Co.,
Federated, JC Penney, Mercantile and Belk's.
The Company continues to upgrade its growing product line from the core of
the pique knit shirt and has expanded its wholesale customer base significantly.
During fiscal 1997, Izod doubled its wholesale revenues from the previous fiscal
year. In spring of 1997, the Company sold its Izod products in more than 1,700
department store locations; by spring 1998, the Company expects to have an Izod
presence in approximately 2,300 department store locations. The Company has
expanded the Izod brand to include apparel appropriate for the fall and winter
seasons, including long-sleeve knit shirts, fleecewear and microfiber jackets.
The Company's Izod outlet stores market Izod branded men's and women's
active-inspired sportswear. Target customers are generally brand loyalists who
expect quality and fashion at reasonable prices.
Izod Club branded golf apparel is marketed to approximately 4,000 golf pro
shops and resorts across the United States in the better price range and is
ranked as the number one golf brand in that channel of distribution. Products
marketed in the Izod Club men's and women's collections include knit shirts,
sweaters, bottoms, outerwear, windshirts, headwear and hosiery. Izod Club
women's products have been sold at Nordstrom stores since 1997 and since 1998 at
Dayton Hudson department stores. Izod Club has developed a professional golf
tournament strategy, which was highlighted by its management of the
merchandising efforts at the 1997 U.S. Open, USGA Senior's Open, and USGA
Women's Open. In addition, four of the top 10 women golf professionals on the
LPGA tour wear Izod Club golf apparel, making the Izod Club brand highly visible
on the golf course and on televised LPGA events. In 1997, Izod Club was
reorganized into Izod and all of Izod Club's operational functions, other than
its sales function, were integrated with Izod's operational functions.
The Gant brand is the Company's only lifestyle collection of men's
sportswear that includes woven and knit tops, bottoms and outerwear. For the
past decade, Gant has been successfully marketed internationally as an upscale
brand (competing head-to-head with 'Polo') through a license to the Company's
affiliate, Pyramid Sportswear. Gant's international sales have experienced
significant growth annually for the last decade and the international business
has developed the critical mass to serve as a fully developed stable business.
It is now the largest collection brand in several countries in Europe, and is
second only to 'Polo' in most of the other European countries. Gant products are
sold in 35 countries throughout Europe, Canada, the Middle East and Asia,
including in over 50 Gant retail stores, with 13 additional stores scheduled to
be opened in Europe in 1998. The Company receives a royalty on the sales of Gant
products by Pyramid Sportswear, and also owns 25% of Pyramid Sportswear with an
option to purchase the balance beginning in 2000.
Commencing in 1997, as a part of the Company's ongoing strategy to build
its brands, the Company undertook a series of measures to reposition the Gant
brand in the United States as a pre-eminent global sportswear collection. The
repositioning of the Gant brand in the United States has encompassed new,
expanded and upgraded products and the consolidation of the worldwide design and
sourcing functions -- all focused on promoting consistency of product and
quality throughout the world. It is a major step forward in creating one image
for this global brand. Enhancing this image is the Gant flagship store on Fifth
Avenue in New York City which opened on November 20, 1997. Serving as a showcase
of Gant products for retail customers and building brand recognition among
consumers, the store carries a wide range of Gant brand products at higher
quality and better price points. Part of this repositioning has been an
increased effort to encourage wholesale customers to present the Gant collection
in separate in-store shops. The number of Gant in-store shops more than doubled
from 156
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in 1995 to 441 in 1997. In 1998, Gant will be offered as a collection
in selected Federated stores, including Macy's West.
The Company's limited number of Gant outlet stores offer fine quality knit
and woven shirts, sweaters, pants, shorts, outerwear and accessories for men.
The Gant line incorporates several sportswear 'lifestyles'. Included are
spectator-active and sportswear products, all of which maintain detailed
construction and high quality fabrics.
The Company's Geoffrey Beene stores offer dress and sport shirts, neckwear,
furnishings, outerwear, bottoms and sportswear. Through their product mix, the
Geoffrey Beene stores seek to meet the full needs of men's wardrobes (excluding
suits) from dress furnishings to sportswear. The merchandising strategy is
focused on an upscale, fashion forward consumer who is prepared to purchase
apparel in the upper moderate price range. Most Geoffrey Beene stores also offer
a full line of women's casual apparel bearing the Geoffrey Beene name, which
accounts for more than one-third of the Company's Geoffrey Beene outlet
business. The Company offers Geoffrey Beene products in its stores under license
agreements which expire in 1999. The Company is negotiating for a renewal of
these agreements.
Geoffrey Beene products are styled to be more fashion-forward than the
Company's Van Heusen brand, and the Geoffrey Beene brand name recognition is
more geographically focused, versus the broader based familiarity with the Van
Heusen, Bass or Izod labels. In recognition of this, the Company has closed a
significant number of its Geoffrey Beene retail outlets in parts of the country
where brand recognition was not strong, which has resulted in a substantial
improvement in store productivity and inventory turn and a significant increase
in profitability.
The Company's extensive resources in both product development and sourcing
have permitted it to market successfully private label sport shirts to major
retailers, including K-Mart, Wal-Mart, Target, Sears, JC Penney and Lord &
Taylor. Private label golf apparel is marketed to traditional department and
specialty stores, national retail chains and catalog merchants. The Company also
markets private label shirts to companies in service industries, including major
airlines and food chains. The Company believes it is one of the largest
marketers of private label sport shirts in the United States.
FOOTWEAR AND RELATED PRODUCTS
The Company manufactures, procures for sale and markets a broad line of
traditional men's, women's and children's casual shoes and related products
under the Bass brand in the moderate price range. The Bass brand has a very
strong heritage since its formation in 1876 and has been an icon to a wide
spectrum of consumers. A number of Bass' trademarks are highly recognized, the
most important ones being Weejun and Sunjun. Bass is the leading brand of men's,
women's and children's casual shoes at the moderate price range in the United
States. Based on the number of pairs sold, Bass branded footwear has a 3.4%
share of the upper moderate casual shoe market.
The Company launched an aggressive repositioning program at Bass during
fiscal 1997 intended to capitalize on its broad name recognition and reputation.
Based on extensive market research and encouragement from its wholesale
customers, the Company implemented significant price increases without, however,
the depth of prior marketing and brand image support that such a program
requires. The repositioning was not well-executed and did not meet with consumer
support. This misstep in execution resulted in a significant build up in
inventory at both the wholesale customer and Company-owned retail store levels,
as the end-consumer resisted the price changes. The Company elected to correct
this inventory build up as expeditiously as possible through inventory markdowns
and allowances to wholesale customers, and to restore Bass to its historical
price point and image. While the Company continues to believe that the Bass
brand is capable of sustaining higher end product pricing and a more upmarket
image, the experience in fiscal 1997 has resulted in the determination to
undertake any such repositioning in a very gradual and incremental fashion. The
Company does not believe that the underlying brand equity built up over 120
years has been weakened.
Bass' traditional wholesale customers are major department stores and
specialty shoe stores throughout the United States, including Federated, May
Co., Dillard's, Belk's and Nordstrom. In 1992, Bass began marketing its footwear
internationally and is now selling limited amounts of footwear to retailers in
Europe, Canada, South America, the Middle East, Africa and Asia.
46
<PAGE>
Bass' merchandising strategy is focused on achieving an American classic
look that emphasizes the Bass style -- the classic and traditional designs Bass
has marketed for more than a century -- representing the 'Bass Lifestyle'. All
footwear is designed in-house, regardless of source, to maintain tight control
of the styling and quality offered by the brand.
The Company's Bass factory outlet retail stores typically carry an
assortment of Bass shoes and accessories for men, women and children, in the
moderate price range, as well as complementary products not sold to wholesale
customers. Bass sportswear apparel for men, women and children is marketed in
approximately 70% of the Company's Bass stores.
COMPETITION
The apparel industry is highly competitive due to its fashion orientation,
its mix of large and small producers, the flow of domestic and imported
merchandise and the wide diversity of retailing methods. The Company's apparel
wholesale divisions experience competition in branded, designer and private
label products. Some of the larger dress shirt competitors include: Bidermann
Industries ('Arrow' brand); Salant Corporation ('Perry Ellis' and 'John Henry'
brands); Smart Shirt (private label shirt division of Kellwood); Capital Mercury
(private label shirts); and Oxford Industries (private label shirts). The
dominance of the Company's dress shirts has increased, in part attributable to
the decrease in sales of the 'Arrow' brand of Bidermann Industries. The Geoffrey
Beene brand has increased its lead in sales over other dress shirt brands,
augmenting its dominance in department stores. Some of the larger sportswear
competitors include: Warnaco ('Chaps' brand); Nautica Enterprises ('Nautica'
brand); Polo/Ralph Lauren L.P. ('Polo' brand); Ashworth and Tommy Hilfiger.
The shoe industry is characterized by fragmented competition. Consequently,
retailers and consumers have a wide variety of choices regarding brands, style
and price. However, over the years, Bass has maintained its important position
in the traditional casual footwear market, and few of its competitors have the
significant brand recognition of Bass. The Company's primary competitors include
Dexter, Rockport, Eastland, Sperry and Sebago. The Company believes, however,
that it manufactures a more extensive line of footwear for both genders and
children and in a broader price range than any of its competitors.
Based on the variety of the apparel and footwear marketed by the Company,
the various channels of distribution it has developed, its logistics and
sourcing expertise, and the strength of the Company's brands, the Company
believes it is particularly well-positioned to compete in the apparel and
footwear industries.
MERCHANDISE DESIGN AND PRODUCT PROCUREMENT
Each brand employs its own designers, product line builders and separate
merchandise product development groups, creating a structure that focuses on the
brand's special qualities and identity. These designers, product line builders
and merchants consider consumer taste, fashion trends and the economic
environment when creating a product plan for a particular season for their
brand. Each brand also employs sourcing specialists who focus on the
manufacturing and sourcing needs of the particular brand. In addition, the
Company operates a world-wide network providing technical support and quality
control to those sourcing specialists. The apparel and footwear merchandise
manufactured by the Company, as well as the vast majority of its sourced
products, are planned, designed and sourced through the efforts of its various
merchandise/product development and sourcing groups.
The process from initial design to finished product varies greatly, but
generally spans nine to 12 months prior to each selling season. Apparel and
footwear product lines are developed primarily for two major selling seasons,
spring and fall. However, certain of the Company's product lines require more
frequent introductions of new merchandise. Raw materials and production
commitments are generally made four to 12 months prior to production and
quantities are finalized at that time. In addition, sales are monitored
regularly at both the retail and wholesale levels and modifications in
production can be made both to increase or reduce availability. The Company's
substantial efforts in the area of quick response to sales trends (through the
expanded use of EDI) enhance its inventory flexibility and reduce production
overruns. EDI provides a computer link between the Company and its wholesale
customers that enables both the customer and the Company to track sales,
inventory and
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<PAGE>
shipments; currently, 65% of the Company's total invoices are handled using EDI.
Use of the system also reduces the amount of time it takes a customer to
determine its inventory needs and order replenishment merchandise and for the
Company to respond to the customer's order.
Dress shirts are manufactured in the Company's domestic apparel
manufacturing facilities in Alabama and Arkansas as well as in Costa Rica,
Guatemala and Honduras. However, most of the Company's dress shirts and
substantially all of its sportswear are sourced and manufactured to the
Company's specifications by independent manufacturers in the Far East, Middle
East and Caribbean areas who meet its quality and cost requirements. Footwear is
manufactured in the Company's factories located in Puerto Rico and the Dominican
Republic. However, approximately 80% of the Company's footwear is sourced to
independent manufacturers which meet its quality and cost requirements,
principally located in Brazil and the Far East.
The Company's foreign offices, located principally in Hong Kong, Taiwan,
the Philippines, Singapore and throughout Central America, enable the Company to
monitor the quality of the goods manufactured by, and the delivery performance
of, its suppliers. The Company continually seeks additional suppliers throughout
the world for its sourcing needs and places its orders in a manner designed to
limit the risk that a disruption of production at any one facility could cause a
serious inventory problem. The Company has not experienced significant
production delays or difficulties in importing goods. However, from time to time
the Company has incurred added costs by shipping goods by air freight in order
to meet certain delivery commitments to its customers. The Company's purchases
from its suppliers are effected through individual purchase orders specifying
the price and quantity of the items to be produced. Generally, the Company does
not have any long-term, formal arrangements with any of the suppliers which
manufacture its products. The Company believes that it is the largest customer
of many of its manufacturing suppliers and that its long-standing relationships
with its suppliers provide the Company with a competitive advantage over its
competitors. No single supplier is critical to the Company's production needs,
and the Company believes that an ample number of alternative suppliers exist
should the Company need to secure additional or replacement production capacity.
The Company purchases raw materials, including shirting fabric, buttons,
thread, labels, yarn, piece goods and leather, from domestic and foreign sources
based on quality, pricing and availability (including quotas and duties). The
Company believes it is one of the largest procurers of shirting fabric worldwide
and purchases the majority of its shirting fabric from overseas manufacturers,
due, principally, to decreased domestic production. The Company monitors factors
affecting textile production and imports and remains flexible in order to
exploit advantages in obtaining materials from different suppliers and different
geographic regions. Rawhide leather for Bass footwear is procured mainly from
domestic suppliers. Bass monitors the leather market and makes purchases on the
spot market or through blanket contracts with suppliers as price trends dictate.
No single supplier of raw materials is critical to the Company's production
needs and the Company believes that an ample number of alternative suppliers
exist should the Company need to secure additional or replacement raw materials.
ADVERTISING AND PROMOTION
The Company has used national advertising to communicate the Company's
marketing message since the 1920s. In recent years, the Company focused on
cooperative advertising, through which the Company and individual retailers
combine their efforts and share the cost of store radio, television and
newspaper advertisements and in-store advertising and promotional events
featuring the Company's branded products. While the Company believes that this
effort has helped create strong brand awareness and a high recognition factor
among American consumers, as well as contributed to the overall success of the
Company, in fiscal 1997 the Company increased its media marketing activities in
an aggressive fashion by also communicating its brand position directly to the
American consumer. The Company's advertising expenses increased by $18.4 million
to $37.8 million.
The Company advertises primarily in national print media, including
fashion, entertainment/human interest, business, men's, women's and sports
magazines. The Company continues its efforts in
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<PAGE>
cooperative advertising, as it
believes that brand awareness and in-store positioning is further supplemented
by the Company's continuation of such a program.
In the Company's retail sector, the Company relies upon local outlet mall
developers to promote traffic for their centers. Outlet center developers employ
multiple formats, including signage (highway billboards, off-highway directional
signs, on-site signage and on-site information centers), print advertising
(brochures, newspapers and travel magazines), direct marketing (to tour bus
companies and travel agents), radio and television, and special promotions.
TRADEMARKS
The Company has the exclusive right to use the Izod and Gant names in most
countries, the Van Heusen name in North, Central and South America as well as
the Philippines, and the exclusive worldwide right to use the Bass name for
footwear. The Company has registered or applied for registration of numerous
other trademarks for use on a variety of items of apparel and footwear and
related products and owns many foreign trademark registrations. It presently has
pending a number of applications for additional trademark registrations. The
Company regards its trademarks and other proprietary rights as valuable assets
and believes that they have significant value in the marketing of its products.
LICENSING
The Company has various agreements under which it licenses the use of its
brand names. The Company is licensing the Van Heusen name for apparel products
in Canada and in most of the South and Central American countries. In the United
States, the Company currently licenses the use of the Van Heusen name for
various products that it does not manufacture or source, including boy's
apparel, sleepwear, eyeglasses, neckwear and other accessories and is exploring
the possibility of licensing the name for use on other products. The Company
licenses the use of the Gant name for a complete range of sportswear and
footwear in Europe, Australia, New Zealand and the Far East. (During 1995, the
Company acquired 25% of the Gant licensee, Pyramid Sportswear, and has an option
to purchase the remaining 75% beginning in the year 2000.) The Company also
licenses the use of the Gant name for dress furnishings in the United States.
The Company licenses the use of the Izod name for infants, toddlers and
children's clothing, as well as 'big and tall' apparel, in the United States,
and for men's and women's sportswear in Canada.
The Company plans to continue expanding its worldwide marketing efforts,
utilizing licenses and other techniques for all its brands, especially under the
Izod and Gant trademarks. A substantial portion of sales by its domestic
licensing partners are made to the Company's largest customers. While the
Company has significant control over its licensing partners' products and
advertising, it relies on its licensing partners for, among other things,
operational and financial control over their businesses. In addition, failure by
the Company to maintain its existing licensing alliances could adversely affect
the Company's financial condition and results of operations. Although the
Company believes in most circumstances it could replace existing licensing
partners if necessary, its inability to do so for any period of time could
adversely affect the Company's revenues both directly from reduced licensing
revenue received and indirectly from reduced sales of the Company's other
products. To the extent the equity and awareness of each of the Company's brands
grows, the Company expects to gain even greater opportunities to build on its
licensing efforts.
TARIFFS AND IMPORT RESTRICTIONS
A substantial portion of the Company's products is manufactured by
contractors located outside the United States. These products are imported and
are subject to United States Customs laws, which impose tariffs as well as
import quota restrictions established by the United States government. However,
a significant portion of the Company's apparel products is imported from its
Caribbean Basin manufacturing facilities and is therefore eligible for certain
duty-advantaged programs commonly known as '807 Programs'. While importation of
goods from certain countries from which the Company obtains goods may be subject
to embargo by United States Customs authorities if shipments exceed quota
limits, the Company closely monitors import quotas and can, in most cases, shift
production to
49
<PAGE>
contractors located in countries with available quotas. The existence of import
quotas has, therefore, not had a material adverse effect on the Company's
business.
EMPLOYEES
As of February 1, 1998, the Company employed approximately 8,450 persons on
a full-time basis and approximately 3,400 persons on a part-time basis.
Approximately 5% of the Company's 11,850 employees are represented for the
purpose of collective bargaining by three different unions. Additional persons,
some represented by these three unions, are employed from time to time based
upon the Company's manufacturing schedules and retailing seasonal needs. The
Company believes that its relations with its employees are satisfactory. As a
result of the restructuring and reorganization of the Company's operations over
the past three years, the number of the Company's employees will have been
reduced by approximately 3,400 persons.
PROPERTIES
The Company maintains its principal executive offices at 1290 Avenue of the
Americas, New York, New York, occupying approximately 80,000 square feet under a
sub-lease which expires on December 30, 1998. The Company also maintains
administrative offices at 404 Fifth Avenue, New York, New York, where the
Company occupies approximately 38,000 square feet under a lease which expires on
December 31, 1998; in Bridgewater, New Jersey, where the Company occupies a
building of approximately 153,000 square feet under a lease which expires on
July 30, 2007; and in Portland, Maine, where the Company occupies a building of
approximately 95,000 square feet under a lease which expires on October 1, 2008.
The Company expects to move at the end of 1998 or early in 1999 in order to
consolidate its offices now located at 1290 Avenue of the Americas and 404 Fifth
Avenue, New York, New York and has entered into a lease for approximately
132,400 square feet at 200 Madison Avenue, New York, New York. That lease will
expire on May 31, 2014, subject to certain renewal options. The following tables
summarize the other manufacturing facilities, warehouses and distribution
centers, administrative offices and retail stores of the Company as of February
1, 1998:
Apparel
<TABLE>
<CAPTION>
SQUARE FEET OF
FLOOR SPACE (000'S)
------------------------
OWNED LEASED TOTAL
----- ------ -----
<S> <C> <C> <C>
Manufacturing Facilities.............................................................. 239 127 366
Warehouses and Distribution Centers................................................... 1,770 146 1,916
Administrative........................................................................ 16 311 327
Retail Stores......................................................................... 6 1,759 1,765
----- ------ -----
2,031 2,343 4,374
----- ------ -----
----- ------ -----
</TABLE>
Footwear and Related Products
<TABLE>
<CAPTION>
OWNED LEASED TOTAL
----- ------ -----
<S> <C> <C> <C>
Manufacturing Facilities.............................................................. 274 151 425
Warehouses and Distribution Centers................................................... 209 57 266
Administrative........................................................................ 20 115 135
Retail Stores......................................................................... 8 1,381 1,389
----- ------ -----
511 1,704 2,215
----- ------ -----
----- ------ -----
</TABLE>
For information with respect to minimum annual rental commitments under
leases in which the Company is a lessee, see the note entitled 'Leases' in the
Notes to Consolidated Financial Statements.
50
<PAGE>
MANAGEMENT
The following table sets forth information with respect to the officers of
the Company:
<TABLE>
<CAPTION>
NAME POSITION AGE
- ---- -------- ---
<S> <C> <C>
Bruce J. Klatsky............................. Chairman and Chief Executive Officer; Director 49
Mark Weber................................... President and Chief Operating Officer; Director 49
Irwin W. Winter.............................. Executive Vice President and Chief Financial 64
Officer; Director
Allen E. Sirkin.............................. Vice Chairman 55
Michael J. Blitzer........................... Vice Chairman 48
Mitchell Kates............................... Senior Vice President -- Marketing and Strategic 43
Development
Emanuel Chirico.............................. Vice President and Controller 40
Pamela N. Hootkin............................ Vice President, Treasurer and Secretary 50
Eugene O. Kessler............................ Vice President -- Human Resources 55
</TABLE>
Mr. Bruce J. Klatsky has been employed by the Company in various capacities
over the last 26 years, and was President of the Company from 1987 to March
1998. Mr. Klatsky was named Chief Executive Officer in June of 1993 and Chairman
of the Board of Directors in June of 1994.
Mr. Mark Weber has been employed by the Company in various capacities over
the last 26 years, had been a Vice President of the Company since 1988, was Vice
Chairman of the Company since 1995 and was named President and Chief Operating
Officer in 1998.
Mr. Irwin W. Winter joined the Company in 1987 as Vice President, Finance
and Chief Financial Officer and has over 30 years of experience in the apparel
industry.
Mr. Allen E. Sirkin has been employed by the Company since 1985. He served
as Chairman of the Company's Apparel Group since 1990 and was named Vice
Chairman of the Company in 1995.
Mr. Michael J. Blitzer has been employed by the Company since 1980. In
1998, Mr. Blitzer was named Vice Chairman and Chairman of G.H. Bass & Co. Prior
to that, Mr. Blitzer served as Senior Vice President of the Company since 1995
and President of the Company's Van Heusen retail operations since 1990.
Mr. Mitchell Kates joined the Company in 1998 as Senior Vice
President -- Marketing and Strategic Development. Prior to that, Mr. Kates
served as a consultant with Monitor Company, a management consulting firm.
Mr. Emanuel Chirico has been employed by the Company as Vice President and
Controller since 1993. Prior to that, Mr. Chirico was a partner with the
accounting firm of Ernst and Young LLP.
Ms. Pamela N. Hootkin has been employed by the Company as Vice President,
Treasurer and Secretary since 1988. Prior to that, Ms. Hootkin was the Chief
Financial Officer of Yves Saint Laurent Parfums, Inc.
Mr. Eugene O. Kessler has been employed by the Company in various
capacities since 1981. In 1988, Mr. Kessler was named Vice President -- Human
Resources.
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<PAGE>
The following table lists the non-employee directors of the Company:
<TABLE>
<CAPTION>
NAME PRINCIPAL OCCUPATION AGE
- ---- -------------------- ---
<S> <C> <C>
Edward H. Cohen.............................. Senior Partner of Rosenman & Colin LLP, a law firm 59
Joseph B. Fuller............................. Director of Monitor Company, a management 41
consulting firm
Joel H. Goldberg............................. President of Career Consultants, Inc., a 54
management consulting firm
Marc Grosman................................. Founder and Chief Executive Officer of Marc 46
Laurent SA, the owner of a chain of European
apparel stores which trade under the name CELIO
Dennis F. Hightower.......................... Professor of Management, Harvard University, 56
Graduate School of Business Administration
Maria Elena Lagomasino....................... Senior Vice President of The Chase Manhattan Bank 49
Harry N.S. Lee............................... Director of TAL Apparel Limited, an apparel 55
manufacturer and exporter based in Hong Kong
Bruce Maggin................................. Principal of The H.A.M. Media Group, LLC, a media 55
investment company
Sylvia M. Rhone.............................. Chairman and Chief Executive Officer of the 46
Elektra Entertainment Group of Time-Warner Inc.
Peter J. Solomon............................. Chairman of Peter J. Solomon Company, Ltd., an 59
investment banking firm
</TABLE>
52
<PAGE>
PRINCIPAL STOCKHOLDERS
The following table sets forth certain information as of May 3, 1998
(unless otherwise noted) with respect to each person who is known to the Company
to be the beneficial owner of more than five percent of the outstanding shares
of the Company's common stock, par value $1.00 per share (the 'Common Stock').
<TABLE>
<CAPTION>
AMOUNT
NAME AND ADDRESS OF BENEFICIALLY PERCENT OF
BENEFICIAL OWNER OWNED CLASS
- ------------------- ------------ ----------
<S> <C> <C>
The Crabbe Huson Group, Inc.(1) ....................................................... 4,844,300 17.9%
121 SW Morrison
Suite 1400
Portland, Oregon 97204
Vaneton International, Inc.(2) ........................................................ 2,860,001 10.5
P.O. Box 3340
Road Town
Tortola, British Virgin Islands
Mellon Bank Corporation(3) ............................................................ 1,796,453 6.6
One Mellon Bank Center
Pittsburgh, Pennsylvania 15258
Phillips-Van Heusen Corporation Investment Committee .................................. 1,398,044 5.1
1290 Avenue of the Americas
New York, New York 10104
</TABLE>
- ------------------
(1) The Crabbe Huson Group, Inc. ('CHG') is a registered investment advisor
which, as of February 2, 1998, shares voting and dispositive power with
approximately 60 investors for whom it serves as investment advisor with
respect to the 4,844,300 shares of Common Stock owned by such investors. CHG
disclaims beneficial ownership of all shares owned by such investors.
Information as to the shares of Common Stock owned by CHG is as set forth in
a Schedule 13G filed with the Commission.
(2) Dr. Richard Lee, 6/F TAL Building, 49 Austin Road, Kowloon, Hong Kong, may
be deemed to beneficially own the 2,860,001 shares of Common Stock owned of
record by Vaneton International, Inc. Dr. Richard Lee and Vaneton
International, Inc. have shared voting and dispositive power over such
shares. Information as to the shares of Common Stock beneficially owned by
Vaneton International, Inc. and Dr. Richard Lee is as of March 5, 1998 and
as set forth in information filed with the Company.
(3) Mellon Bank Corporation ('MBC') is the parent company of Boston Group
Holdings, Inc. ('BGH') which is the parent company of The Boston Company,
Inc. ('TBC'). Each of BGH and TBC may be deemed to be the beneficial owner
of 1,427,155 shares of Common Stock (5.3% of the class). Each of MBC, BGH
and TBC has disclaimed beneficial ownership of such shares. Information as
to the shares of Common Stock beneficially owned by MBC, BGH and TBC is as
of January 23, 1998 and as set forth in a Schedule 13G filed with the
Commission.
(4) Includes all shares held by Wachovia Bank, N.A. as trustee under the Master
Trust Agreement relating to the Company's Associates Investment Plan and its
Associates Investment Plan for Associates in Puerto Rico. Wachovia Bank,
N.A. does not have dispositive power as to the shares of Common Stock
beneficially owned by it.
53
<PAGE>
DESCRIPTION OF SENIOR DEBT
CREDIT FACILITY. The Company and The Chase Manhattan Bank ('Chase') and
Citicorp USA, Inc. ('Citicorp') and a syndicate of lenders have entered into a
senior secured revolving credit facility agreement, which provides for loans in
the aggregate principal amount of $325.0 million (the 'Credit Facility'). In
connection with such financing, Chase acts as administrative agent and
collateral agent and Citicorp acts as documentation agent.
Borrowings under the Credit Facility bear interest, at the Company's
option, (a) at a rate equal to Adjusted LIBOR plus 1.25% per annum or (b) the
Alternate Base Rate (as defined therein) plus 0.25% per annum. The spread over
Adjusted LIBOR or the Alternate Base Rate is subject to change depending on
certain performance measures.
The Credit Facility has a term of five years and is fully revolving until
final maturity. The Credit Facility is secured by all of the stock of certain of
the Company's present and future subsidiaries (which pledge, in the case of
foreign subsidiaries, is limited to 65% of the voting stock of each directly
owned foreign subsidiary to the extent the pledge of any greater percentage
would result in adverse tax consequences to the Company) and by substantially
all of the other present and future domestic property and assets of the Company
and its domestic subsidiaries.
The Credit Facility contains certain financial covenants, including, but
not limited to, covenants related to interest coverage, a leverage test and a
limitation on capital expenditures. In addition, the Credit Facility contains
other affirmative and negative covenants relating to (among other things) liens,
limitations on other debt, transactions with affiliates, mergers and
acquisitions, sales of assets, leases, restricted junior payments, capital
expenditures, guarantees and investments. The Credit Facility contains customary
events of default, including certain changes in control of the Company.
2023 DEBENTURES. The 2023 Debentures rank pari passu in right of payment
with the Credit Facility and rank senior in right of payment to the Notes. The
2023 Debentures will be secured pari passu with the Credit Facility by all of
the stock of certain of the Company's present and future subsidiaries (which
pledge, in the case of foreign subsidiaries, shall be limited to 65% of the
voting stock of each directly owned foreign subsidiary to the extent the pledge
of any greater percentage would result in adverse tax consequences to the
Company) and by substantially all of the other present and future domestic
property and assets of the Company and its domestic subsidiaries.
54
<PAGE>
DESCRIPTION OF EXCHANGE NOTES
The Initial Notes have been, and the Exchange Notes are to be, issued under
the Indenture, dated as of April 22, 1998 between the Company and Union Bank of
California, N.A., as trustee (the 'Trustee'). The statements under this caption
relating to the Notes and the Indenture are summaries and do not purport to be
complete, and are subject to, and are qualified in their entirety by reference
to, all the provisions of the Indenture, including the definitions of certain
terms therein. The Indenture is by its terms subject to and governed by the
Trust Indenture Act of 1939. Unless otherwise indicated, references under this
caption to sections, 'Section' or articles are references to the Indenture.
Where reference is made to particular provisions of the Indenture or to defined
terms not otherwise defined herein, such provisions or defined terms are
incorporated herein by reference. Copies of the Indenture and of the
Registration Rights Agreement referred to below (see '-- Registration
Covenant -- Exchange Offer' below) will be available at the corporate trust
office of the Trustee.
GENERAL
The Exchange Notes will be unsecured obligations of the Company, will be
limited to $150 million aggregate principal amount and will mature on May 1,
2008. The Exchange Notes will bear interest at the rate per annum shown on the
front cover of this Prospectus from April 22, 1998 or from the most recent
Interest Payment Date to which interest has been paid or provided for, payable
semi-annually on May 1 and November 1 of each year, commencing November 1, 1998,
to the Person in whose name the Exchange Note (or any predecessor Note) is
registered at the close of business on the preceding April 15 or October 15, as
the case may be. Settlement for the Exchange Notes will be made in immediately
available funds and payments by the Company in respect of the Exchange Notes
(including principal, premium, if any, and interest) will be made in immediately
available funds. Interest on the Exchange Notes will be computed on the basis of
a 360-day year comprised of twelve 30-day months. (SectionSection 301, 308 and
311)
Principal of, premium, if any, and interest on the Exchange Notes will be
payable, and the Exchange Notes may be exchanged or transferred, at the office
or agency of the Company in San Francisco, California (which initially shall be
the corporate trust office of the Trustee, at Union Bank of California, N.A.,
475 Sansome Street - 12th Floor, San Francisco California 94111; telephone (415)
296-6757, except that, at the option of the Company, payment of interest may be
made by check mailed to the address of the holders as such address appears in
the Exchange Note register).
The Exchange Notes will be issued only in fully registered form, without
coupons, in denominations of $1,000 and any integral multiple of $1,000. No
service charge shall be made for any registration of transfer or exchange of
Exchange Notes, but the Company may require payment of a sum sufficient to cover
any transfer tax or other similar governmental charge payable in connection
therewith.
FORM, DENOMINATION, TRANSFER, EXCHANGE AND BOOK-ENTRY PROCEDURES
The Exchange Notes will be issued only in fully registered form, without
interest coupons, in denominations of $1,000 and integral multiples thereof. The
Exchange Notes will not be issued in bearer form.
Global Exchange Notes. The Exchange Notes initially will be represented by
one or more Notes in registered global form without interest coupons
(collectively, the 'Global Exchange Note'). A Global Exchange Note will be
deposited upon issuance with the Trustee as custodian for The Depository Trust
Company ('DTC'), in New York, New York and registered in the name of DTC or its
nominee, in each case for credit to an account of a direct or indirect
participant in DTC as described below.
Transfers of beneficial interests in a Global Exchange Note will be subject
to the applicable rules and procedures of DTC and its direct or indirect
participants (including, if applicable, those of Euroclear and CEDEL), which may
change from time to time.
Except as set forth below, a Global Exchange Note may be transferred, in
whole and not in part, only to another nominee of DTC or to a successor of DTC
or its nominee. Beneficial interests in a
55
<PAGE>
Exchange Note may not be exchanged for Exchange Notes in certificated form
except in the limited circumstances described below under '-- Exchanges of
Book-Entry Notes for Certificated Notes'.
Holders whose Initial Notes were issued in registered certificated form
without interest coupons (the 'Certificated Initial Notes') are entitled to
receive Exchange Notes in registered certificated form without interest coupons
(the 'Certificated Exchange Notes') instead of a beneficial interest in a Global
Exchange Note. Holders tendering Certificated Initial Notes who wish to receive
an interest in the Global Exchange Note may elect to do so by so indicating in
the Letter of Transmittal.
EXCHANGES OF BOOK-ENTRY NOTES FOR CERTIFICATED NOTES. A beneficial
interest in a Global Exchange Note may not be exchanged for an Exchange Note in
certificated form unless (i) DTC (x) notifies the Company that it is unwilling
or unable to continue as Depositary for the Global Exchange Note or (y) has
ceased to be a clearing agency registered under the Exchange Act, and in either
case the Company thereupon fails to appoint a successor Depositary within 90
days, (ii) the Company, at its option, notifies the Trustee in writing that it
elects to cause the issuance of the Exchange Notes in certificated form or (iii)
there shall have occurred and be continuing an Event of Default or any Event
which after notice or lapse of time or both would be an Event of Default with
respect to the Exchange Notes. In all cases, certificated Exchange Notes
delivered in exchange for any Global Exchange Note or beneficial interests
therein will be registered in the names, and issued in any approved
denominations, requested by or on behalf of the Depositary (in accordance with
its customary procedures). Any such exchange will be effected through the DWAC
system, and an appropriate adjustment will be made in the records of the
Security Registrar to reflect a decrease in the principal amount of the relevant
Global Exchange Note.
CERTAIN BOOK-ENTRY PROCEDURES. The descriptions of the operations and
procedures of DTC, Euroclear and CEDEL that follow are provided solely as a
matter of convenience. These operations and procedures are solely within the
control of the respective settlement systems and are subject to changes by them
from time to time. The Company takes no responsibility for these operations and
procedures and urges investors to contact the system or their participants
directly to discuss these matters.
DTC has advised the Company as follows: DTC is a limited purpose trust
company organized under the laws of the State of New York, a member of the
Federal Reserve System, a 'clearing corporation' within the meaning of the
Uniform Commercial Code and a 'Clearing Agency' registered pursuant to the
provisions of Section 17A of the Exchange Act. DTC was created to hold
securities for its participants ('participants') and facilitate the clearance
and settlement of securities transactions between participants through
electronic book-entry changes in accounts of its participants, thereby
eliminating the need for physical transfer and delivery of certificates.
Participants include securities brokers and dealers, banks, trust companies and
clearing corporations and may include certain other organizations. Indirect
access to the DTC system is available to other entities such as banks, brokers,
dealers and trust companies that clear through or maintain a custodial
relationship with a participant, either directly or indirectly ('indirect
participants').
DTC has advised the Company that its current practice, upon the issuance of
a Global Exchange Note, is to credit, on its internal system, the respective
principal amount of the individual beneficial interests represented by such
Global Exchange Note to the accounts with DTC of the participants through which
such interests are to be held. Ownership of beneficial interests in a Global
Exchange Note will be shown on, and the transfer of that ownership will be
effected only through, records maintained by DTC or its nominees (with respect
to interests of participants) and the records of participants and indirect
participants (with respect to interests of persons other than participants).
AS LONG AS DTC, OR ITS NOMINEE, IS THE REGISTERED HOLDER OF A GLOBAL
EXCHANGE NOTE, DTC OR SUCH NOMINEE, AS THE CASE MAY BE, WILL BE CONSIDERED THE
SOLE OWNER AND HOLDER OF THE EXCHANGE NOTES REPRESENTED BY SUCH GLOBAL EXCHANGE
NOTE FOR ALL PURPOSES UNDER THE INDENTURE AND THE EXCHANGE NOTES. Except in the
limited circumstances described above under '-- Exchanges of Book-Entry Exchange
Notes for Certificated Notes', owners of beneficial interests in a Global
Exchange Note will not be entitled to have any portions of such Global Exchange
Note
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registered in their names, will not receive or be entitled to receive physical
delivery of Exchange Notes in definitive form and will not be considered the
owners or Holders of the Global Exchange Note (or any Exchange Note represented
thereby) under the Indenture or the Exchange Notes.
Investors may hold their interests in a Global Exchange Note directly
through DTC, if they are participants in such system, or indirectly through
organizations (including Euroclear and CEDEL) which are participants in such
system. Investors also may hold their interests in a Global Exchange Note
through organizations other than CEDEL and Euroclear that are participants in
the DTC system. CEDEL and Euroclear will hold interests in any Global Exchange
Note on behalf of their participants through customers' securities accounts in
their respective names on the books of their respective depositories. The
depositories, in turn, will hold such interests in such Global Exchange Notes in
customers' securities accounts in the depositories' names on the books of DTC.
All interest in a Global Exchange Note, including those held through Euroclear
or CEDEL, will be subject to the procedures and requirements of DTC. Those
interests held through Euroclear or CEDEL will also be subject to the procedures
and requirements of such system.
The laws of some states require that certain persons take physical delivery
in definitive form of securities that they own. Consequently, the ability to
transfer beneficial interests in a Global Exchange Note to such persons may be
limited to that extent. Because DTC can act only on behalf of its participants,
which in turn act on behalf of indirect participants and certain banks, the
ability of a person having beneficial interests in a Global Exchange Note to
pledge such interest to persons or entities that do not participate in the DTC
system, or otherwise take actions in respect of such interests, may be affected
by the lack of a physical certificate evidencing such interests.
Payments of the principal of, premium, if any, and interest on, Global
Exchange Notes will be made to DTC or its nominee as the registered owner
thereof. Neither the Company, the Trustee nor any of their respective agents
will have any responsibility or liability for any aspect of the records relating
to or payments made on account of beneficial ownership interests in the Global
Exchange Notes or for maintaining, supervising or reviewing any records relating
to such beneficial ownership interests.
The Company expects that DTC or its nominee, upon receipt of any payment of
principal or interest in respect of a Global Exchange Note representing any
Exchange Notes held by it or its nominee, will immediately credit participants'
accounts with payments in amounts proportionate to their respective beneficial
interests in the principal amount of such Global Exchange Note for such Exchange
Notes as shown on the records of DTC or its nominee. The Company also expects
that payments by participants to owners of beneficial interests in such Global
Exchange Note held through such participants will be governed by standing
instructions and customary practices, as is the case with securities held for
the accounts of customers registered in 'street name'. Such payment will be the
responsibility of such participants.
Except for trades involving only Euroclear and CEDEL participants,
interests in the Global Exchange Note will trade in DTC's settlement system and
secondary market trading activity in such interests will therefore settle in
immediately available funds, subject in all cases to the rules and procedures of
DTC and its participants. Transfers between participants in DTC will be effected
in accordance with DTC's procedures, and will be settled in same-day funds.
Transfers between participants in Euroclear and CEDEL will be effected in the
ordinary way in accordance with their respective rules and operating procedures.
Subject to compliance with the transfer and exchange applicable to the
Exchange Notes described elsewhere herein, cross-market transfers between DTC
participants, on the one hand, and Euroclear or CEDEL participants, on the other
hand, will be effected by DTC in accordance with DTC's rules on behalf of
Euroclear or CEDEL, as the case may be, by its respective depositary; however,
such cross-market transactions will require delivery of instructions to
Euroclear or CEDEL, as the case may be, by the counterparty in such system in
accordance with the rules and procedures and within the established deadlines
(Brussels time) of such system. Euroclear or CEDEL, as the case may be, will, if
the transaction meets its settlement requirements, deliver instructions to its
respective depository to take action to effect final settlement on its behalf by
delivering or receiving interests in the relevant Global
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Exchange Note in DTC, and making or receiving payment in accordance with normal
procedures for same-day funds settlement applicable to DTC. Euroclear
participants and CEDEL participants may not deliver instructions directly to the
depositories for Euroclear or CEDEL.
Because of time zone differences, the securities account of a Euroclear or
CEDEL participant purchasing an interest in a Global Exchange Note from a DTC
participant will be credited, and any such crediting will be reported to the
relevant Euroclear or CEDEL participant, during the securities settlement
processing day (which must be a business day for Euroclear and CEDEL)
immediately following the DTC settlement date. Cash received in Euroclear or
CEDEL as a result of sales of interests in a Global Exchange Note by or through
a Euroclear or CEDEL participant to a DTC participant will be received with
value on the DTC settlement date but will be available in the relevant Euroclear
or CEDEL cash account only as of the business day for Euroclear or CEDEL
following the DTC settlement date.
DTC has advised the Company that it will take any action permitted to be
taken by a holder of Exchange Notes (including the presentation of Exchange
Notes for exchange as described below and the conversion of Exchange Notes) only
at the direction of one or more participants to whose account the DTC interests
in the Global Exchange Notes are credited and only in respect of such portion of
the aggregate principal amount of the Exchange Notes as to which such
participant or participants has or have given such direction. However, if there
is an Event of Default (as defined below) under the Exchange Notes, the Global
Notes will be exchanged for Exchange Notes in certificated form, and distributed
to DTC's participants.
Although DTC, Euroclear and CEDEL have agreed to the foregoing procedures
in order to facilitate transfers of beneficial ownership interests in the Global
Exchange Notes among participants of DTC, Euroclear and CEDEL, they are under no
obligation to perform or continue to perform such procedures, and such
procedures may be discontinued at any time. None of the Company, the Trustee nor
any of their respective agents will have any responsibility for the performance
by DTC, Euroclear and CEDEL, their participants or indirect participants of
their respective obligations under the rules and procedures governing their
operations, including maintaining, supervising or reviewing the records relating
to, or payments made on account of, beneficial ownership interests in Global
Exchange Notes.
OPTIONAL REDEMPTION
The Exchange Notes will be subject to redemption, at the option of the
Company, in whole or in part, at any time on or after May 1, 2003 and prior to
maturity, upon not less than 30 nor more than 60 days' notice mailed to each
holder of Exchange Notes to be redeemed at such holder's address appearing in
the Note Register, in amounts of $1,000 or an integral multiple of $1,000, at
the following Redemption Prices (expressed as percentages of the principal
amount) plus accrued interest to but excluding the Redemption Date (subject to
the right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date), if redeemed during the 12-month period beginning May 1 of the years
indicated:
<TABLE>
<CAPTION>
REDEMPTION
YEAR PRICE
- ---- ----------
<S> <C>
2003........................................................ 104.750%
2004........................................................ 103.167%
2005........................................................ 101.583%
2006 and thereafter......................................... 100.000%
</TABLE>
(Sections 203, 1101, 1105 and 1107)
In addition, if on or before May 1, 2001 the Company receives net proceeds
from the sale of its Common Stock in one or more Public Equity Offerings, the
Company may, at its option, use an amount equal to all or a portion of any such
net proceeds to redeem Exchange Notes in an aggregate principal amount of up to
one-third of the original principal amount of the Exchange Notes, provided,
however, that Exchange Notes having a principal amount equal to at least
two-thirds of the original principal amount of the Exchange Notes remain
outstanding after such redemption. Such redemption must occur
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on a Redemption Date within 90 days of such sale and upon not less than 30 nor
more than 60 days' notice mailed to each holder of Exchange Notes to be redeemed
at such holder's address appearing in the Note Register, in amounts of $1,000 or
an integral multiple of $1,000, at a redemption price of 109.50% of the
principal amount of the Exchange Notes plus accrued interest to but excluding
the Redemption Date (subject to the right of holders of record on the relevant
Regular Record Date to receive interest due on an Interest Payment Date that is
on or prior to the Redemption Date).
If less than all the Exchange Notes are to be redeemed, the Trustee shall
select, in such manner as it shall deem fair and appropriate, the particular
Exchange Notes to be redeemed or any portion thereof that is an integral
multiple of $1,000. (Section 1101)
The Exchange Notes will not have the benefit of any sinking fund.
SUBORDINATION
The indebtedness evidenced by the Exchange Notes will, to the extent set
forth in the Indenture, be subordinate in right of payment to the prior payment
in full in cash of all Senior Debt. Upon any payment or distribution of assets
to creditors upon any liquidation, dissolution, winding-up, reorganization,
assignment for the benefit of creditors or marshaling of assets of the Company,
whether voluntary or involuntary, or any bankruptcy, insolvency, receivership or
similar proceedings of the Company, the holders of all Senior Debt will first be
entitled to receive payment in full in cash of such Senior Debt, or provision
made for such payment, before the holders of the Exchange Notes will be entitled
to receive any payment in respect of the principal of or premium, if any, or
interest on, or any obligation to repurchase, the Exchange Notes. In the event
that notwithstanding the foregoing, the Trustee or the holder of any Exchange
Note receives any payment or distribution of assets of the Company of any kind
or character (including any such payment or distribution which may be payable or
deliverable by reason of the payment of any other indebtedness of the Company
being subordinated to the payment of the Exchange Notes), before all the Senior
Debt is so paid in full, then such payment or distribution will be required to
be paid over or delivered forthwith to the trustee in bankruptcy or other person
making payment or distribution of assets of the Company for application to the
payment of all Senior Debt remaining unpaid, to the extent necessary to pay the
Senior Debt in full.
No payments on account of principal of, premium, if any, or interest on, or
in respect of the purchase, redemption or other acquisition of, the Exchange
Notes, and no defeasance of the Exchange Notes, may be made if there shall have
occurred and be continuing a Senior Payment Default. 'Senior Payment Default'
means any default in the payment of any principal of or premium, if any, or
interest on Designated Senior Debt when due, whether at the stated maturity of
any such payment or by declaration of acceleration, call for redemption or
otherwise.
Upon the occurrence of a Senior Nonmonetary Default and receipt of written
notice by the Company and the Trustee of the occurrence of such Senior
Nonmonetary Default from any holder of Designated Senior Debt (or any trustee,
agent or other representative for such holder) which is the subject of such
Senior Nonmonetary Default, no payments on account of principal of, premium, if
any, or interest on, or in respect of the purchase, redemption or other
acquisition of, the Exchange Notes, and no defeasance of the Exchange Notes, may
be made for a period (the 'Payment Blockage Period') commencing on the date of
the receipt of such notice and ending the earlier of (i) the date on which such
Senior Nonmonetary Default shall have been cured or waived or ceased to exist or
all Designated Senior Debt the subject of such Senior Nonmonetary Default shall
have been discharged and (ii) the 179th day after the date of the receipt of
such notice. In any event, no more than one Payment Blockage Period may be
commenced during any 360-day period, and there shall be a period of at least 181
days during each 360-day period when no Payment Blockage Period is in effect. In
addition, no Senior Nonmonetary Default that existed or was continuing on the
date of the commencement of a Payment Blockage Period may be made the basis of
the commencement of a subsequent Payment Blockage Period whether or not within a
period of 360 consecutive days, unless such Senior Nonmonetary Default shall
have been cured for a period of not less than 90 consecutive days. 'Senior
Nonmonetary Default' means the occurrence or existence and continuance of an
event of default with respect to Senior Debt, other than a Senior Payment
Default, permitting the holders of the Designated Senior Debt (or a trustee
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or other agent on behalf of the holders thereof) then to declare such Designated
Senior Debt due and payable prior to the date on which it would otherwise become
due and payable.
The failure to make any payment on the Exchange Notes by reason of the
provisions of the Indenture described under this caption 'Subordination' will
not be construed as preventing the occurrence of an Event of Default with
respect to the Exchange Notes arising from any such failure to make payment.
Upon termination of any period of payment blockage the Company shall resume
making any and all required payments in respect of the Exchange Notes, including
any missed payments.
'Senior Debt' means (i) the principal of (and premium, if any) and interest
(including interest accruing on or after the filing of any petition in
bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding) on, and
penalties and any obligation of the Company for reimbursement, indemnities, fees
and expenses relating to, the Credit Facility, (ii) every reimbursement
obligation of the Company with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of the Company, (iii)
the principal of (and premium, if any) and interest on Debt of the Company for
money borrowed, whether Incurred on or prior to the date of original issuance of
the Initial Notes or thereafter, and any amendments, renewals, extensions,
modifications, refinancings and refundings of any such Debt and (iv) Permitted
Interest Rate, Currency or Commodity Price Agreements entered into with respect
to Debt described in clauses (i), (ii) and (iii) above; provided, however, that
the following shall not constitute Senior Debt: (1) any Debt as to which the
terms of the instrument creating or evidencing the same provide that such Debt
is not superior in right of payment to the Exchange Notes, (2) any Debt which is
subordinated in right of payment in any respect to any other Debt of the
Company, (3) Debt evidenced by the Exchange Notes, (4) any Debt owed to a Person
when such Person is a Subsidiary of the Company, (5) any obligation of the
Company arising from Redeemable Stock of the Company, (6) that portion of any
Debt which is Incurred in violation of the Indenture and (7) Debt which, when
Incurred and without respect to any election under Section 1111(b) of Title 11,
United States Code, is without recourse to the Company. If any Senior Debt is
disallowed, avoided or subordinated pursuant to the provisions of Section 548 of
Title 11, United States Code, or any applicable state fraudulent conveyance law,
such Senior Debt nevertheless will constitute Senior Debt.
By reason of such subordination, in the event of insolvency, creditors of
the Company who are not holders of Senior Debt or of the Exchange Notes may
recover less, ratably, than holders of Senior Debt and more, ratably, than
holders of the Exchange Notes.
The subordination provisions described above will not be applicable to
payments in respect of the Exchange Notes from a defeasance trust established in
connection with any defeasance or covenant defeasance of the Exchange Notes as
described under '-- Defeasance'. (Article Thirteen)
COVENANTS
The Indenture contains, among others, the following covenants:
LIMITATION ON CONSOLIDATED DEBT
The Company may not, and may not permit any Restricted Subsidiary of the
Company to, Incur any Debt unless immediately after giving pro forma effect to
the Incurrence of such Debt and the receipt and application of the proceeds
thereof, the Consolidated Cash Flow Coverage Ratio of the Company would be
greater than 2.0 to 1, for any Incurrence of Debt prior to May 1, 2001, and 2.5
to 1 for any Incurrence of Debt thereafter.
Notwithstanding the foregoing limitation, the Company may, and may permit
any Restricted Subsidiary to, Incur the following Debt:
(i) Debt under the Credit Facility in an aggregate principal amount at
any one time not to exceed $325.0 million, less any amounts by which any
revolving credit facility commitments under the Credit Facility are
permanently reduced pursuant to the 'Limitation on Asset Dispositions'
covenant below (so long as and to the extent that any required payments in
connection therewith are actually made);
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(ii) the original issuance by the Company of the Debt evidenced by the
Notes (including any Exchange Notes);
(iii) Debt (other than Debt described in another clause of this
paragraph) outstanding or committed on the date of original issuance of the
Notes after giving effect to the application of the proceeds of the
Exchange Notes, as described in a schedule to the Indenture;
(iv) Debt owed by the Company to any Wholly Owned Restricted
Subsidiary of the Company or Debt owed by a Restricted Subsidiary of the
Company to the Company or a Wholly Owned Restricted Subsidiary of the
Company; provided, however, that upon either (A) the transfer or other
disposition by such Wholly Owned Restricted Subsidiary or the Company of
any Debt so permitted to a Person other than the Company or another Wholly
Owned Restricted Subsidiary of the Company or (B) the issuance (other than
directors' qualifying shares), sale, lease, transfer or other disposition
of shares of Capital Stock (including by consolidation or merger) of such
Wholly Owned Restricted Subsidiary to a Person other than the Company or
another such Wholly Owned Restricted Subsidiary, the provisions of this
clause (iv) shall no longer be applicable to such Debt and such Debt shall
be deemed to have been Incurred at the time of such transfer or other
disposition;
(v) Debt consisting of Permitted Interest Rate, Currency or Commodity
Price Agreements;
(vi) Debt which is exchanged for or the proceeds of which are used to
refinance or refund, or any extension or renewal of, outstanding Debt
Incurred pursuant to the first paragraph under this caption or clauses (ii)
or (iii) of this paragraph (each of the foregoing, a 'refinancing') in an
aggregate principal amount not to exceed the principal amount of the Debt
so refinanced plus the amount of any premium required to be paid in
connection with such refinancing pursuant to the terms of the Debt so
refinanced or the amount of any premium reasonably determined by the
Company as necessary to accomplish such refinancing by means of a tender
offer or privately negotiated repurchase, plus the expenses of the Company
or the Restricted Subsidiary, as the case may be, incurred in connection
with such refinancing; provided, however, that (A) Debt the proceeds of
which are used to refinance the Exchange Notes or Debt which is pari passu
with or subordinate in right of payment to the Exchange Notes shall only be
permitted if (x) in the case of any refinancing of the Exchange Notes or
Debt which is pari passu to the Exchange Notes, the refinancing Debt is
made pari passu to the Exchange Notes or subordinated to the Exchange
Notes, and (y) in the case of any refinancing of Debt which is subordinated
to the Exchange Notes, the refinancing Debt constitutes Subordinated Debt;
(B) the refinancing Debt by its terms, or by the terms of any agreement or
instrument pursuant to which such Debt is issued, (1) does not provide for
payments of principal of such Debt at the stated maturity thereof or by way
of a sinking fund applicable thereto or by way of any mandatory redemption,
defeasance, retirement or repurchase thereof (including any redemption,
defeasance, retirement or repurchase which is contingent upon events or
circumstances, but excluding any retirement required by virtue of
acceleration of such Debt upon any event of default thereunder), in each
case prior to the stated maturity of the Debt being refinanced and (2) does
not permit redemption or other retirement (including pursuant to an offer
to purchase) of such debt at the option of the holder thereof prior to the
final stated maturity of the Debt being refinanced), other than a
redemption or other retirement at the option of the holder of such Debt
(including pursuant to an offer to purchase) which is conditioned upon
provisions substantially similar to those described under '-- Change of
Control' and '-- Limitation on Asset Dispositions'; and (C) in the case of
any refinancing of Debt Incurred by the Company, the refinancing Debt may
be Incurred only by the Company, and in the case of any refinancing of Debt
Incurred by a Restricted Subsidiary, the refinancing Debt may be Incurred
only by such Restricted Subsidiary; provided, further, that Debt Incurred
pursuant to this clause (vi) may not be Incurred more than 45 days prior to
the application of the proceeds to repay the Debt to be refinanced; and
(vii) Debt not otherwise permitted to be Incurred pursuant to clauses
(i) through (vi) above, which, together with any other outstanding Debt
Incurred pursuant to this clause (vii), has an aggregate principal amount
not in excess of $50 million at any time outstanding. (Section 1008)
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LIMITATION ON SENIOR SUBORDINATED DEBT
The Company may not Incur any Debt which by its terms is both (i)
subordinated in right of payment to any Senior Debt and (ii) senior in right of
payment to the Exchange Notes. (Section 1009)
LIMITATION ON ISSUANCE OF GUARANTEES OF SUBORDINATED DEBT
The Company may not permit any Restricted Subsidiary, directly or
indirectly, to assume, guarantee or in any other manner become liable with
respect to any Debt of the Company that by its terms is pari passu or junior in
right of payment to the Exchange Notes. (Section 1010)
LIMITATION ON LIENS
The Company may not, and may not permit any Restricted Subsidiary to,
create, incur, assume or suffer to exist any Lien on or with respect to any
property or assets of the Company or any such Restricted Subsidiary now owned or
hereafter acquired to secure Debt which is pari passu with or subordinated in
right of payment to the Exchange Notes without making, or causing such
Restricted Subsidiary to make, effective provision for securing the Exchange
Notes (and, if the Company shall so determine, any other Debt of the Company
which is not subordinate to the Exchange Notes or of such Restricted Subsidiary)
(x) equally and ratably with such Debt as to such property or assets for so long
as such Debt shall be so secured or (y) in the event such Debt is Debt of the
Company which is subordinate in right of payment to the Exchange Notes, prior to
such Debt as to such property for so long as such Debt will be so secured. The
foregoing restrictions shall not apply to Liens in respect of Debt existing at
the date of the Indenture or to: (i) Liens securing only the Exchange Notes;
(ii) Liens in favor of the Company or a Wholly Owned Restricted Subsidiary; or
(iii) Liens to secure Debt incurred to extend, renew, refinance or refund (or
successive extensions, renewals, refinancings or refundings), in whole or in
part, any Debt secured by Liens referred to in the foregoing clause (i) so long
as such Lien does not extend to any other property and the principal amount of
Debt so secured is not increased except as otherwise permitted under Clause (vi)
of the 'Limitation on Consolidated Debt'. (Section 1011)
LIMITATION ON RESTRICTED PAYMENTS
The Company (i) may not, directly or indirectly, declare or pay any
dividend or make any distribution (including any payment in connection with any
merger or consolidation derived from assets of the Company or any Restricted
Subsidiary) in respect of its Capital Stock or to the holders thereof, excluding
any dividends or distributions by the Company payable solely in shares of its
Capital Stock (other than Redeemable Stock) or in options, warrants or other
rights to acquire its Capital Stock (other than Redeemable Stock), (ii) may not,
and may not permit any Restricted Subsidiary to, purchase, redeem, or otherwise
acquire or retire for value (a) any Capital Stock of the Company or any Related
Person of the Company or (b) any options, warrants or other rights to acquire
shares of Capital Stock of the Company or any Related Person of the Company or
any securities convertible or exchangeable into shares of Capital Stock of the
Company or any Related Person of the Company, (iii) may not make, or permit any
Restricted Subsidiary to make, any Investment other than a Permitted Investment,
and (iv) may not, and may not permit any Restricted Subsidiary to, redeem,
repurchase, defease or otherwise acquire or retire for value prior to any
scheduled maturity, repayment or sinking fund payment Debt of the Company which
is subordinate in right of payment to the Exchange Notes (each of clauses (i)
through (iv) being a 'Restricted Payment') unless, at the time of, and after
giving effect to such Restricted Payment, (1) no Event of Default, or event that
with the passing of time or the giving of notice, or both, would constitute an
Event of Default, shall have occurred and is continuing or would result from
such Restricted Payment, and (2) after giving pro forma effect to such
Restricted Payment as if such Restricted Payment had been made at the beginning
of the applicable four-fiscal-quarter period, the Company could Incur at least
$1.00 of additional Debt pursuant to the terms of the Indenture described in the
first paragraph of 'Limitation on Consolidated Debt' above; provided that in
connection with regular quarterly dividends on the Company's Common Stock (not
to exceed $7.5 million in the aggregate) declared or payable prior to January
31, 1999, the Company's pro forma capacity to Incur additional Debt shall be
computed on a basis that excludes the non-recurring charges recorded during
the 1997 fiscal year; and (3) upon giving effect to such Restricted Payment, the
aggregate of all
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Restricted Payments from the date of issuance of the Exchange Notes does not
exceed the sum of: (a) 50% of cumulative Consolidated Net Income (or, in the
case Consolidated Net Income shall be negative, less 100% of such deficit) of
the Company since the date of issuance of the Exchange Notes through the last
day of the last full fiscal quarter ending immediately preceding the date of
such Restricted Payment for which quarterly or annual financial statements are
available (taken as a single accounting period); plus (b) 100% of the aggregate
net proceeds received by the Company after the date of original issuance of the
Initial Notes, including the fair market value of property other than cash
(determined in good faith by the Board of Directors as evidenced by a resolution
of the Board of Directors filed with the Trustee), from the issuance and sale
(other than to a Restricted Subsidiary) of Capital Stock (other than Redeemable
Stock) of the Company, options, warrants or other rights to acquire Capital
Stock (other than Redeemable Stock) of the Company and Debt of the Company that
has been converted into or exchanged for Capital Stock (other than Redeemable
Stock and other than by or from a Restricted Subsidiary) of the Company after
the date of original issuance of the Initial Notes, provided that any such net
proceeds received by the Company from an employee stock ownership plan financed
by loans from the Company or a Restricted Subsidiary of the Company shall be
included only to the extent such loans have been repaid with cash on or prior to
the date of determination; plus (c) $40 million. Prior to the making of any
Restricted Payment, the Company shall deliver to the Trustee an Officers'
Certificate setting forth the computations by which the determinations required
by clauses (2) and (3) above were made and stating that no Event of Default, or
event that with the passing of time or the giving of notice, or both, would
constitute an Event of Default, has occurred and is continuing or will result
from such Restricted Payment.
Notwithstanding the foregoing, so long as no Event of Default, or event
that with the passing of time or the giving of notice, or both, would constitute
an Event of Default, shall have occurred and is continuing or would result
therefrom, (i) the Company may pay any dividend on Capital Stock of any class
within 60 days after the declaration thereof if, on the date when the dividend
was declared, the Company could have paid such dividend in accordance with the
foregoing provisions; (ii) the Company may refinance any Debt otherwise
permitted by clause (vi) of the second paragraph under 'Limitation on
Consolidated Debt' above or solely in exchange for or out of the net proceeds of
the substantially concurrent sale (other than from or to a Restricted Subsidiary
or from or to an employee stock ownership plan financed by loans from the
Company or a Restricted Subsidiary of the Company) of shares of Capital Stock
(other than Redeemable Stock) of the Company, provided that the amount of net
proceeds from such exchange or sale shall be excluded from the calculation of
the amount available for Restricted Payments pursuant to the preceding
paragraph; (iii) the Company may purchase, redeem, acquire or retire any shares
of Capital Stock of the Company solely in exchange for or out of the net
proceeds of the substantially concurrent sale (other than from or to a
Restricted Subsidiary or from or to an employee stock ownership plan financed by
loans from the Company or a Restricted Subsidiary of the Company) of shares of
Capital Stock (other than Redeemable Stock) of the Company; and (iv) the Company
or a Restricted Subsidiary may purchase or redeem any Debt from Net Available
Proceeds to the extent permitted under 'Limitation on Asset Dispositions'.
Any payment made pursuant to clause (i) or (iii) of this paragraph shall be
a Restricted Payment for purposes of calculating aggregate Restricted Payments
pursuant to the preceding paragraph. (Section 1012)
LIMITATION ON DIVIDEND AND OTHER PAYMENT RESTRICTIONS AFFECTING SUBSIDIARIES
The Company may not, and may not permit any Restricted Subsidiary to,
directly or indirectly, create or otherwise cause or suffer to exist or become
effective any encumbrance or restriction on the ability of any Restricted
Subsidiary of the Company (i) to pay dividends (in cash or otherwise) or make
any other distributions in respect of its Capital Stock or pay any Debt or other
obligation owed to the Company or any other Restricted Subsidiary; (ii) to make
loans or advances to the Company or any other Restricted Subsidiary; or (iii) to
transfer any of its property or assets to the Company or any other Restricted
Subsidiary. Notwithstanding the foregoing, the Company may, and may permit any
Restricted Subsidiary to, suffer to exist any such encumbrance or restriction
(a) pursuant to any agreement in effect on the date of original issuance of the
Initial Notes as described in a schedule to the Indenture; (b) pursuant to an
agreement relating to any Debt Incurred by a Person (other than a
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Restricted Subsidiary of the Company existing on the date of original issuance
of the Initial Notes or any Restricted Subsidiary carrying on any of the
businesses of any such Restricted Subsidiary) prior to the date on which such
Person became a Restricted Subsidiary of the Company and outstanding on such
date and not Incurred in anticipation of becoming a Restricted Subsidiary, which
encumbrance or restriction is not applicable to any Person, or the properties or
assets of any Person, other than the Person so acquired; (c) pursuant to an
agreement effecting a renewal, refunding or extension of Debt Incurred pursuant
to an agreement referred to in clause (a) or (b) above, provided, however, that
the provisions contained in such renewal, refunding or extension agreement
relating to such encumbrance or restriction are no more restrictive in any
material respect than the provisions contained in the agreement the subject
thereof, as determined in good faith by the Board of Directors and evidenced by
a resolution of the Board of Directors filed with the Trustee; (d) pursuant to
an agreement relating to Debt of a Restricted Subsidiary that is not materially
more restrictive than customary provisions in comparable financing arrangements
and which the Board of Directors determines (as evidenced by a resolution of the
Board of Directors filed with the Trustee) will not materially impair the
Company's ability to make payments under the Exchange Notes; (e) in the case of
clause (iii) above, restrictions contained in any security agreement (including
a capital lease) securing Debt of a Restricted Subsidiary otherwise permitted
under the Indenture, but only to the extent such restrictions restrict the
transfer of the property subject to such security agreement; (f) in the case of
clause (iii) above, customary nonassignment provisions entered into in the
ordinary course of business consistent with past practices in leases and other
contracts to the extent such provisions restrict the transfer or subletting of
any such lease or the assignment of rights under any such contract; (g) any
restriction with respect to a Restricted Subsidiary of the Company imposed
pursuant to an agreement which has been entered into for the sale or disposition
of all or substantially all of the Capital Stock or assets of such Restricted
Subsidiary, provided that consummation of such transaction would not result in
an Event of Default or an event that, with the passing of time or the giving of
notice or both, would constitute an Event of Default, that such restriction
terminates if such transaction is closed or abandoned and that the closing or
abandonment of such transaction occurs within one year of the date such
agreement was entered into; or (h) such encumbrance or restriction is the result
of applicable corporate law or regulation relating to the payment of dividends
or distributions. (Section 1013)
LIMITATION ON ASSET DISPOSITIONS
The Company may not, and may not permit any Restricted Subsidiary to, make
any Asset Disposition in one or more related transactions unless: (i) the
Company or the Restricted Subsidiary, as the case may be, receives consideration
for such disposition at least equal to the fair market value for the assets sold
or disposed of as determined by the Board of Directors in good faith and
evidenced by a resolution of the Board of Directors filed with the Trustee; (ii)
at least 85% of the consideration for such disposition consists of cash or
readily marketable cash equivalents or the assumption of Debt (other than Debt
that is subordinated to the Exchange Notes) relating to such assets and release
from all liability on the Debt assumed; and (iii) all Net Available Proceeds,
less any amounts invested or committed to be invested within 365 days of such
disposition in assets related to the business of the Company or applied to
permanently repay Senior Debt, are applied within 365 days of such disposition
(1) first, to the permanent repayment or reduction of Senior Debt then
outstanding under any agreements or instruments which would require such
application or prohibit payments pursuant to clause (2) following, (2) second,
to the extent of remaining Net Available Proceeds, to make an Offer to Purchase
outstanding Exchange Notes at 100% of their principal amount plus accrued
interest to the date of purchase and, to the extent required by the terms
thereof, any other Debt of the Company that is pari passu with the Exchange
Notes at a price no greater than 100% of the principal amount thereof plus
accrued interest to the date of purchase and (3) third, to the extent of any
remaining Net Available Proceeds, to any other use as determined by the Company
which is not otherwise prohibited by the Indenture. (Section 1014)
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TRANSACTIONS WITH AFFILIATES AND RELATED PERSONS
The Company may not, and may not permit any Restricted Subsidiary of the
Company to, enter into any transaction (or series of related transactions) with
an Affiliate or Related Person of the Company (other than the Company or a
Wholly-Owned Restricted Subsidiary of the Company), including any Investment,
either directly or indirectly, unless such transaction is on terms no less
favorable to the Company or such Restricted Subsidiary than those that could be
obtained in a comparable arm's-length transaction with an entity that is not an
Affiliate or Related Person. For any transaction that involves in excess of
$5,000,000, a majority of the disinterested members of the Board of Directors
shall determine that the transaction satisfies the above criteria and shall
evidence such a determination by a Board Resolution filed with the Trustee. For
any transaction that involves in excess of $10,000,000, the Company shall also
obtain an opinion from a nationally recognized expert with experience in
appraising the terms and conditions of the type of transaction (or series of
related transactions) for which the opinion is required stating that such
transaction (or series of related transactions) is on terms no less favorable to
the Company or such Restricted Subsidiary than those that could be obtained in a
comparable arm's-length transaction with an entity that is not an Affiliate or
Related Person of the Company, which opinion shall be filed with the Trustee.
(Section 1015)
Notwithstanding anything to the contrary contained in the Indenture, the
foregoing provisions shall not apply to (i) transactions with any employee,
officer or director of the Company or any of its Restricted Subsidiaries
pursuant to employee benefit plans or compensation arrangements or agreements
entered into in the ordinary course of business, (ii) purchases or sales of
goods or services in the ordinary course of business, or (iii) transactions with
any Affiliate or Related Person of the Company in which such Affiliate or
Related Person acquires or purchases the capital stock of the Company or any
Restricted Subsidiary at fair market value.
CHANGE OF CONTROL
Within 60 days of the occurrence of a Change of Control, the Company will
be required to make an Offer to Purchase all Outstanding Exchange Notes at a
purchase price equal to 101% of their principal amount plus accrued interest to
but excluding the date of purchase. A 'Change of Control' will be deemed to have
occurred at such time as either (a) any Person or any Persons acting together
that would constitute a 'group' (a 'Group') for purposes of Section 13(d) of the
Exchange Act, or any successor provision thereto, together with any Affiliates
or Related Persons thereof, shall beneficially own (within the meaning of Rule
13d-3 under the Exchange Act, or any successor provision thereto), directly or
indirectly, at least 50% of the aggregate voting power of all classes of Voting
Stock of the Company (for the purposes of this clause (a) a person shall be
deemed to beneficially own the Voting Stock of a corporation that is
beneficially owned (as defined above) by another corporation (a 'parent
corporation'), if such person beneficially owns (as defined above) at least 50%
of the aggregate voting power of all classes of Voting Stock of such parent
corporation); or (b) any Person or Group, together with any Affiliates or
Related Persons thereof, shall succeed in having a sufficient number of its
nominees elected to the Board of Directors of the Company such that such
nominees, when added to any existing director remaining on the Board of
Directors of the Company after such election who was a nominee of or is an
Affiliate or Related Person of such Person or Group, will constitute a majority
of the Board of Directors of the Company; or (c) the Company shall, directly or
indirectly, transfer, sell, lease or otherwise dispose of all or substantially
all of its assets; or (d) there shall be adopted a plan of liquidation or
dissolution of the Company; provided, however, that a transaction effected to
create a holding company of the Company, (i) pursuant to which the Company
becomes a wholly-owned Subsidiary of such holding company, and (ii) as a result
of which the holders of Capital Stock of such holding company are substantially
the same as the holders of Capital Stock of the Company immediately prior to
such transaction, shall not be deemed to involve a 'Change of Control'.
(Section 1016)
In the event that the Company makes an Offer to Purchase the Exchange
Notes, the Company intends to comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and Rule
14e-1 under, the Exchange Act.
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PROVISION OF FINANCIAL INFORMATION
For so long as any of the Exchange Notes are outstanding, the Company shall
file with the Commission the annual reports, quarterly reports and other
documents which the Company is required to file with the Commission pursuant to
Section 13(a) or 15(d) of the Exchange Act or any successor provisions thereto.
(Section 1017)
UNRESTRICTED SUBSIDIARIES
The Company may designate any Subsidiary of the Company to be an
'Unrestricted Subsidiary' as provided below in which event such Subsidiary and
each other Person that is then or thereafter becomes a Subsidiary of such
Subsidiary will be deemed to be an Unrestricted Subsidiary. 'Unrestricted
Subsidiary' means (1) any Subsidiary designated as such by the Board of
Directors as set forth below where (a) neither the Company nor any of its other
Subsidiaries (other than another Unrestricted Subsidiary) (i) provides credit
support for, or any Guarantee of, any Debt of such Subsidiary or any Subsidiary
of such Subsidiary (including any undertaking, agreement or instrument
evidencing such Debt) or (ii) is directly or indirectly liable for any Debt of
such Subsidiary or any Subsidiary of such Subsidiary, and (b) no default with
respect to any Debt of such Subsidiary or any Subsidiary of such Subsidiary
(including any right which the holders thereof may have to take enforcement
action against such Subsidiary) would permit (upon notice, lapse of time or
both) any holder of any other Debt of the Company and its Subsidiaries (other
than another Unrestricted Subsidiary) to declare a default on such other Debt or
cause the payment thereof to be accelerated or payable prior to its final
scheduled maturity and (2) any Subsidiary of an Unrestricted Subsidiary. The
Board of Directors may designate any Subsidiary to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, any other Subsidiary of the Company which is not a Subsidiary
of the Subsidiary to be so designated or otherwise an Unrestricted Subsidiary,
provided that either (x) the Subsidiary to be so designated has total assets of
$1,000 or less or (y) immediately after giving effect to such designation, the
Company could Incur at least $1.00 of additional Debt pursuant to the first
paragraph under '-- Limitation on Consolidated Debt' and provided, further, that
the Company could make a Restricted Payment in an amount equal to the greater of
the fair market value and book value of such Subsidiary pursuant to 'Limitation
on Restricted Payments' and such amount is thereafter treated as a Restricted
Payment for the purpose of calculating the aggregate amount available for
Restricted Payments thereunder. (Section 1018)
MERGERS, CONSOLIDATIONS AND CERTAIN SALES OF ASSETS
The Company may not, in a single transaction or a series of related
transactions, (i) consolidate with or merge into any other Person or permit any
other Person to consolidate with or merge into the Company or (ii) directly or
indirectly, transfer, sell, lease or otherwise dispose of all or substantially
all of its assets unless: (1) in a transaction in which the Company does not
survive or in which the Company transfers, sells, leases or otherwise disposes
of all or substantially all of its assets, the successor entity to the Company
is organized under the laws of the United States of America or any State thereof
or the District of Columbia and shall expressly assume, by a supplemental
indenture executed and delivered to the Trustee in form satisfactory to the
Trustee, all of the Company's obligations under the Indenture; (2) immediately
before and after giving effect to such transaction and treating any Debt which
becomes an obligation of the Company or a Restricted Subsidiary as a result of
such transaction as having been Incurred by the Company or such Restricted
Subsidiary at the time of the transaction, no Event of Default or event that
with the passing of time or the giving of notice, or both, would constitute an
Event of Default shall have occurred and be continuing; (3) immediately after
giving effect to such transaction, the Consolidated Net Worth of the Company (or
other successor entity to the Company) is equal to or greater than that of the
Company immediately prior to the transaction; (4) immediately after giving
effect to such transaction and treating any Debt which becomes an obligation of
the Company or a Restricted Subsidiary as a result of such transaction as having
been Incurred by the Company or such Restricted Subsidiary at the time of the
transaction, the Company (including any successor entity to the Company) could
Incur at least $1.00 of additional Debt pursuant to the provisions of the
Indenture described in the
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first paragraph under 'Limitation on Consolidated Debt' above; and (5) certain
other conditions are met. (Section 801)
CERTAIN DEFINITIONS
Set forth below is a summary of certain of the defined terms used in the
Indenture. Reference is made to the Indenture for the full definition of all
such terms, as well as any other terms used herein for which no definition is
provided. (Section 101)
'Affiliate' of any Person means any other Person directly or indirectly
controlling or controlled by or under direct or indirect common control with
such Person. For the 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.
'Asset Disposition' by any Person means any transfer, conveyance, sale,
lease or other disposition by such Person or any of its Restricted Subsidiaries
(including any issuance or sale by a Restricted Subsidiary of Capital Stock of
such Restricted Subsidiary, and including a consolidation or merger or other
sale of any such Restricted Subsidiary with, into or to another Person in a
transaction in which such Restricted Subsidiary ceases to be a Restricted
Subsidiary, but excluding a disposition by a Restricted Subsidiary of such
Person to such Person or a Wholly-Owned Restricted Subsidiary of such Person or
by such Person to a Wholly-Owned Restricted Subsidiary of such Person) of (i)
shares of Capital Stock (other than directors' qualifying shares) or other
ownership interests of a Restricted Subsidiary of such Person, (ii)
substantially all of the assets of such Person or any of its Restricted
Subsidiaries representing a division or line of business or (iii) other assets
or rights of such Person or any of its Restricted Subsidiaries outside of the
ordinary course of business, provided in each case that the aggregate
consideration to the Company or Restricted Subsidiary in any single transaction
or series of related transactions for such transfer, conveyance, sale, lease or
other disposition is equal to $20 million or more.
'Capital Lease Obligation' of any Person means the obligation to pay rent
or other payment amounts under a lease of (or other Debt arrangements conveying
the right to use) real or personal property of such Person which is required to
be classified and accounted for as a capital lease or a liability on the face of
a balance sheet of such Person in accordance with generally accepted accounting
principles. The stated maturity of such obligation shall be the date of the last
payment of rent or any other amount due under such lease prior to the first date
upon which such lease may be terminated by the lessee without payment of a
penalty. The principal amount of such obligation shall be the capitalized amount
thereof that would appear on the face of a balance sheet of such Person in
accordance with generally accepted accounting principles.
'Capital Stock' of any Person means any and all shares, interests,
participations or other equivalents (however designated) of corporate stock or
other equity participations, including partnership interests, whether general or
limited, of such Person.
'Cash Equivalents' means (i) direct obligations of the United States of
America or any agency thereof having maturities of not more than one year from
the date of acquisition, (ii) time deposits and certificates of deposit of any
domestic commercial bank or recognized standing having capital and surplus in
excess of $500 million, with maturities of not more than one year from the date
of acquisition, (iii) repurchase obligations issued by any bank described in
clause (ii) above with a term not to exceed 30 days; (iv) commercial paper rated
at least A-1 or the equivalent thereof by S&P or at least P-1 or the equivalent
thereof by Moody's, in each case maturing within one year after the date of
acquisition and (v) shares of any money market mutual fund, or similar fund, in
each case having assets in excess of $500 million, which invests predominantly
in investments of the types describes in clauses (i) through (iv) above.
'Common Stock' of any Person means Capital Stock of such Person that does
not rank prior, as to the payment of dividends or as to the distribution of
assets upon any voluntary or involuntary liquidation, dissolution or winding up
of such Person, to shares of Capital Stock of any other class of such Person.
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'Consolidated Cash Flow Available for Fixed Charges' for any period means
the Consolidated Net Income of the Company and its Restricted Subsidiaries for
such period increased by the sum of (i) Consolidated Interest Expense of the
Company and its Restricted Subsidiaries for such period, plus (ii) Consolidated
Income Tax Expense of the Company and its Restricted Subsidiaries for such
period, plus (iii) the consolidated depreciation and amortization expense
included in the income statement of the Company and its Restricted Subsidiaries
for such period, plus (iv) all other non-cash items reducing Consolidated Net
Income of the Company and its Restricted Subsidiaries, less all non-cash items
increasing Consolidated Net Income of the Company and its Restricted
Subsidiaries; provided, however, that there shall be excluded therefrom the
Consolidated Cash Flow Available for Fixed Charges (if positive) of any
Restricted Subsidiary of the Company (calculated separately for such Restricted
Subsidiary in the same manner as provided above for the Company) that is subject
to a restriction which prevents the payment of dividends or the making of
distributions to the Company or another Restricted Subsidiary of the Company to
the extent of such restriction.
'Consolidated Cash Flow Coverage Ratio' as of any date of determination
means the ratio of (i) Consolidated Cash Flow Available for Fixed Charges of the
Company and its Restricted Subsidiaries for the period of the most recently
completed four consecutive fiscal quarters for which quarterly or annual
financial statements are available to (ii) Consolidated Fixed Charges of the
Company and its Restricted Subsidiaries for such period; provided, however, that
Consolidated Fixed Charges shall be adjusted to give effect on a pro forma basis
to any Debt (other than short-term Debt Incurred for working capital purposes)
that has been Incurred by the Company or any Restricted Subsidiary since the
beginning of such period that remains outstanding and to any Debt (other than
short-term Debt Incurred for working capital purposes) that is proposed to be
Incurred by the Company or any Restricted Subsidiary as if in each case such
Debt had been Incurred on the first day of such period and as if any Debt (other
than short-term Debt Incurred for working capital purposes) that (i) is or will
no longer be outstanding as the result of the Incurrence of any such Debt or
(ii) had been repaid or retired during such period had not been outstanding as
of the first day of such period; provided further that in making such
computation, the Consolidated Interest Expense of the Company and its Restricted
Subsidiaries attributable to interest on any proposed Debt bearing a floating
interest rate shall be computed on a pro forma basis as if the rate in effect on
the date of computation had been the applicable rate for the entire period; and
provided further that, in the event the Company or any of its Restricted
Subsidiaries has made Asset Dispositions or acquisitions of assets not in the
ordinary course of business (including acquisitions of other Persons by merger,
consolidation or purchase of Capital Stock) during or after such period, such
computation shall be made on a pro forma basis as if the Asset Dispositions or
acquisitions had taken place on the first day of such period.
'Consolidated Fixed Charges' for any period means the sum of (i)
Consolidated Interest Expense and (ii) the consolidated amount of interest
capitalized by the Company and its Restricted Subsidiaries during such period
calculated in accordance with generally accepted accounting principles.
'Consolidated Income Tax Expense' for any period means the consolidated
provision for income taxes of the Company and its Restricted Subsidiaries for
such period calculated on a consolidated basis in accordance with generally
accepted accounting principles.
'Consolidated Interest Expense' means for any period the consolidated
interest expense included in a consolidated income statement (without deduction
of interest income) of the Company and its Restricted Subsidiaries for such
period calculated on a consolidated basis in accordance with generally accepted
accounting principles, including without limitation or duplication (or, to the
extent not so included, with the addition of), (i) the amortization of Debt
discounts; (ii) any payments or fees with respect to letters of credit, bankers'
acceptances or similar facilities; (iii) fees with respect to Interest Rate,
Currency or Commodity Price Agreements; (iv) Preferred Stock dividends of
Restricted Subsidiaries of the Company (other than with respect to Redeemable
Stock) declared and paid or payable to persons other than the Company or any
Restricted Subsidiary; (v) accrued Redeemable Stock dividends of the Company and
its Restricted Subsidiaries payable to persons other than the Company or any
Restricted Subsidiary, whether or not declared or paid; (vi) interest on Debt
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guaranteed by the Company and its Restricted Subsidiaries; and (vii) the portion
of any rental obligation with respect to capitalized leases allocable to
interest expense.
'Consolidated Net Income' for any period means the consolidated net income
(or loss) of the Company and its Restricted Subsidiaries for such period
determined on a consolidated basis in accordance with generally accepted
accounting principles; provided that there shall be excluded therefrom (a) the
net income (or loss) of any Person acquired by of the Company or a Restricted
Subsidiary of the Company in a pooling-of-interests transaction for any period
prior to the date of such transaction, (b) the net income (or loss) of any
Person that is not a Subsidiary of the Company except to the extent of the
amount of dividends or other distributions actually paid to the Company or a
Subsidiary of the Company by such Person during such period, (c) gains or losses
on Asset Dispositions by the Company or its Restricted Subsidiaries, (d) all
extraordinary gains and extraordinary losses, (e) the cumulative effect of
changes in accounting principles and (f) the tax effect, if any, of any of the
items described in clauses (a) through (e) above; provided, further, that for
purposes of any determination pursuant to the provisions described under
'Limitation on Restricted Payments', there shall further be excluded therefrom
the net income (but not net loss) of any Restricted Subsidiary of the Company
that is subject to a restriction which prevents the payment of dividends or the
making of distributions to the Company or another Restricted Subsidiary of the
Company to the extent of such restriction.
'Consolidated Net Worth' of any Person means the consolidated stockholders'
equity of such Person, determined on a consolidated basis in accordance with
generally accepted accounting principles, less amounts attributable to
Redeemable Stock of such Person; provided that, with respect to the Company,
adjustments following the date of the Indenture to the accounting books and
records of the Company in accordance with Accounting Principles Board Opinions
Nos. 16 and 17 (or successor opinions thereto) or otherwise resulting from the
acquisition of control of the Company by another Person shall not be given
effect to.
'Consolidated Tangible Assets' of any Person means, as of any date, the
amount which, in accordance with GAAP, would be set forth under the caption
'Total Assets' (or any like caption) on a consolidated balance sheet of such
Person and its Restricted Subsidiaries, less all intangible assets, including,
without limitation, goodwill, organization costs, patents, trademarks,
copyrights, franchises, and research and development costs.
'Debt' means (without duplication), with respect to any Person, whether
recourse is to all or a portion of the assets of such Person and whether or not
contingent, (i) every obligation of such Person for money borrowed, (ii) every
obligation of such Person evidenced by bonds, debentures, notes or other similar
instruments, including obligations Incurred in connection with the acquisition
of property, assets or businesses, (iii) every reimbursement obligation of such
Person with respect to letters of credit, bankers' acceptances or similar
facilities issued for the account of such Person, (iv) every obligation of such
Person issued or assumed as the deferred purchase price of property or services
(including securities repurchase agreements but excluding trade accounts payable
or accrued liabilities arising in the ordinary course of business which are not
overdue or which are being contested in good faith), (v) every Capital Lease
Obligation of such Person, (vi) all Receivables Sales of such Person, together
with any obligation of such Person to pay any discount, interest, fees,
indemnities, penalties, recourse, expenses or other amounts in connection
therewith, (vii) all Redeemable Stock issued by such Person, (viii) Preferred
Stock of Restricted Subsidiaries of such Person held by Persons other than such
Person or one of its Wholly-Owned Restricted Subsidiaries, (ix) every obligation
under Interest Rate, Currency or Commodity Price Agreements of such Person and
(x) every obligation of the type referred to in clauses (i) through (ix) of
another Person and all dividends of another Person the payment of which, in
either case, such Person has Guaranteed or is responsible or liable for,
directly or indirectly, as obligor, Guarantor or otherwise. The 'amount' or
'principal amount' of Debt at any time of determination as used herein
represented by (a) any Receivables Sale, shall be the amount of the unrecovered
capital or principal investment of the purchaser (other than the Company or a
Wholly-Owned Restricted Subsidiary of the Company) thereof, excluding amounts
representative of yield or interest earned on such investment and (b) any
Redeemable Stock, shall be the maximum fixed redemption or repurchase price in
respect thereof.
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'Designated Senior Debt' shall mean (i) so long as the Credit Facility is
in effect, the obligations of the Company under the Credit Facility and (ii) at
any time thereafter, the 2023 Debentures and any other Senior Debt of the
Company permitted under the Indenture, the principal amount of which at original
issuance is $25.0 million or more and that has been designated by the Company as
Designated Senior Debt.
'Guarantee' by any Person means any obligation, contingent or otherwise, of
such Person guaranteeing, or having the economic effect of guaranteeing, any
Debt of any other Person (the 'primary obligor') in any manner, whether directly
or indirectly, and including, without limitation, any obligation of such Person,
(i) to purchase or pay (or advance or supply funds for the purchase or payment
of) such Debt or to purchase (or to advance or supply funds for the purchase of)
any security for the payment of such Debt, (ii) to purchase property, securities
or services for the purpose of assuring the holder of such Debt of the payment
of such Debt, or (iii) to maintain working capital, equity capital or other
financial statement condition or liquidity of the primary obligor so as to
enable the primary obligor to pay such Debt (and 'Guaranteed', 'Guaranteeing'
and 'Guarantor' shall have meanings correlative to the foregoing); provided,
however, that the Guaranty by any Person shall not include endorsements by such
Person for collection or deposit, in either case, in the ordinary course of
business.
'Incur' means, with respect to any Debt or other obligation of any Person,
to create, issue, incur (by conversion, exchange or otherwise), assume,
Guarantee or otherwise become liable in respect of such Debt or other obligation
or the recording, as required pursuant to generally accepted accounting
principles or otherwise, of any such Debt or other obligation on the balance
sheet of such Person (and 'Incurrence', 'Incurred', 'Incurrable' and 'Incurring'
shall have meanings correlative to the foregoing); provided, however, that a
change in generally accepted accounting principles that results in an obligation
of such Person that exists at such time becoming Debt shall not be deemed an
Incurrence of such Debt.
'Interest Rate, Currency or Commodity Price Agreement' of any Person means
any forward contract, futures contract, swap, option or other financial
agreement or arrangement (including, without limitation, caps, floors, collars
and similar agreements) relating to, or the value of which is dependent upon,
interest rates, currency exchange rates or commodity prices or indices
(excluding contracts for the purchase or sale of goods in the ordinary course of
business).
'Investment' by any Person means any direct or indirect loan, advance or
other extension of credit or capital contribution (by means of transfers of cash
or other property to others or payments for property or services for the account
or use of others, or otherwise) to, or purchase or acquisition of Capital Stock,
bonds, notes, debentures or other securities or evidence of Debt issued by, any
other Person, including any payment on a Guarantee of any obligation of such
other Person.
'Lien' means, with respect to any property or assets, any mortgage or deed
of trust, pledge, hypothecation, assignment, Receivables Sale, deposit
arrangement, security interest, lien, charge, easement (other than any easement
not materially impairing usefulness or marketability), encumbrance, preference,
priority or other security agreement or preferential arrangement of any kind or
nature whatsoever on or with respect to such property or assets (including,
without limitation, any conditional sale or other title retention agreement
having substantially the same economic effect as any of the foregoing).
'Moody's' means Moody's Investors Services, Inc.
'Net Available Proceeds' from any Asset Disposition by any Person means
cash or readily marketable cash equivalents received (including by way of sale
or discounting of a note, instalment receivable or other receivable, but
excluding any other consideration received in the form of assumption by the
acquiree of Debt or other obligations relating to such properties or assets)
therefrom by such Person, net of (i) all legal, title and recording tax
expenses, commissions and other fees and expenses Incurred and all federal,
state, provincial, foreign and local taxes required to be accrued as a liability
as a consequence of such Asset Disposition, (ii) all payments made by such
Person or its Restricted Subsidiaries on any Debt which is secured by such
assets in accordance with the terms of any Lien upon or with respect to such
assets or which must by the terms of such Lien, or in order to obtain a
necessary consent to such Asset Disposition or by applicable law, be repaid out
of the proceeds from
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such Asset Disposition, (iii) all distributions and other payments made to
minority interest holders in Restricted Subsidiaries of such Person or joint
ventures as a result of such Asset Disposition and (iv) appropriate amounts to
be provided by such Person or any Restricted Subsidiary thereof, as the case may
be, as a reserve in accordance with generally accepted accounting principles
against any liabilities associated with such assets and retained by such Person
or any Restricted Subsidiary thereof, as the case may be, after such Asset
Disposition, including, without limitation, liabilities under any
indemnification obligations and severance and other employee termination costs
associated with such Asset Disposition, in each case as determined by the Board
of Directors, in its reasonable good faith judgment evidenced by a resolution of
the Board of Directors filed with the Trustee; provided, however, that any
reduction in such reserve following the consummation of such Asset Disposition
will be treated for all purposes of the Indenture and the Exchange Notes as a
new Asset Disposition at the time of such reduction with Net Available Proceeds
equal to the amount of such reduction.
'Credit Facility' means the senior secured revolving credit facility in the
aggregate principal amount of $325.0 million between the Company, The Chase
Manhattan Bank, as administrative and collateral agent, Citibank USA, Inc., as
documentation agent, and certain other lenders, as it may be amended or restated
from time to time, and any renewal, extension, refinancing, refunding or
replacement thereof, in whole or in part.
'Offer to Purchase' means a written offer (the 'Offer') sent by the Company
by first class mail, postage prepaid, to each holder at his address appearing in
the Note Register on the date of the Offer offering to purchase up to the
principal amount of Exchange Notes specified in such Offer at the purchase price
specified in such Offer (as determined pursuant to the Indenture). Unless
otherwise required by applicable law, the Offer shall specify an expiration date
(the 'Expiration Date') of the Offer to Purchase which shall be, subject to any
contrary requirements of applicable law, not less than 30 days or more than 60
days after the date of such Offer and a settlement date (the 'Purchase Date')
for purchase of Notes within five Business Days after the Expiration Date. The
Company shall notify the Trustee at least 15 Business Days (or such shorter
period as is acceptable to the Trustee) prior to the mailing of the Offer of the
Company's obligation to make an Offer to Purchase, and the Offer shall be mailed
by the Company or, at the Company's request, by the Trustee in the name and at
the expense of the Company. The Offer shall contain information concerning the
business of the Company and its Restricted Subsidiaries which the Company in
good faith believes will enable such holders to make an informed decision with
respect to the Offer to Purchase (which at a minimum will include (i) the most
recent annual and quarterly financial statements and 'Management's Discussion
and Analysis of Financial Condition and Results of Operations' contained in the
documents required to be filed with the Trustee pursuant to the Indenture (which
requirements may be satisfied by delivery of such documents together with the
Offer), (ii) a description of material developments in the Company's business
subsequent to the date of the latest of such financial statements referred to in
clause (i) (including a description of the events requiring the Company to make
the Offer to Purchase), (iii) if applicable, appropriate pro forma financial
information concerning the Offer to Purchase and the events requiring the
Company to make the Offer to Purchase and (iv) any other information required by
applicable law to be included therein. The Offer shall contain all instructions
and materials necessary to enable such holders to tender Exchange Notes pursuant
to the Offer to Purchase. The Offer shall also state:
(1) the Section of the Indenture pursuant to which the Offer to
Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding Exchange Notes
offered to be purchased by the Company pursuant to the Offer to Purchase
(including, if less than 100%, the manner by which such amount has been
determined pursuant to the Indenture provision requiring the Offer to
Purchase) (the 'Purchase Amount');
(4) the purchase price to be paid by the Company for each $1,000
aggregate principal amount of Exchange Notes accepted for payment (as
specified pursuant to the Indenture) (the 'Purchase Price');
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(5) that the holder may tender all or any portion of the Exchange
Notes registered in the name of such holder and that any portion of an
Exchange Note tendered must be tendered in an integral multiple of $1,000
principal amount;
(6) the place or places where Exchange Notes are to be surrendered for
tender pursuant to the Offer to Purchase;
(7) that interest on any Exchange Note not tendered or tendered but
not purchased by the Company pursuant to the Offer to Purchase will
continue to accrue;
(8) that on the Purchase Date the Purchase Price will become due and
payable upon each Exchange Note being accepted for payment pursuant to the
Offer to Purchase and that interest thereon shall cease to accrue on and
after the Purchase Date;
(9) that each holder electing to tender an Exchange Note pursuant to
the Offer to Purchase will be required to surrender such Exchange Note at
the place or places specified in the Offer prior to the close of business
on the Expiration Date (such Exchange Note being, if the Company or the
Trustee so requires, duly endorsed by, or accompanied by a written
instrument of transfer in form satisfactory to the Company and the Trustee
duly executed by, the holder thereof or his attorney duly authorized in
writing);
(10) that holders will be entitled to withdraw all or any portion of
Exchange Notes tendered if the Company (or their Paying Agent) receives,
not later than the close of business on the Expiration Date, a telegram,
telex, facsimile transmission or letter setting forth the name of the
holder, the principal amount of the Exchange Note the holder tendered, the
certificate number of the Exchange Note the holder tendered and a statement
that such holder is withdrawing all or a portion of his tender;
(11) that (a) if Exchange Notes in an aggregate principal amount less
than or equal to the Purchase Amount are duly tendered and not withdrawn
pursuant to the Offer to Purchase, the Company shall purchase all such
Exchange Notes and (b) if Exchange Notes in an aggregate principal amount
in excess of the Purchase Amount are tendered and not withdrawn pursuant to
the Offer to Purchase, the Company shall purchase Exchange Notes having an
aggregate principal amount equal to the Purchase Amount on a pro rata basis
(with such adjustments as may be deemed appropriate so that only Exchange
Notes in denominations of $1,000 or integral multiples thereof shall be
purchased); and
(12) that in the case of any holder whose Exchange Note is purchased
only in part, the Company shall execute, and the Trustee shall authenticate
and deliver to the holder of such Exchange Note without service charge, a
new Exchange Note or Exchange Notes, of any authorized denomination as
requested by such holder, in an aggregate principal amount equal to and in
exchange for the unpurchased portion of the Exchange Note so tendered.
Any Offer to Purchase shall be governed by and effected in accordance with the
Offer for such Offer to Purchase.
'Permitted Interest Rate, Currency or Commodity Price Agreement' of any
Person means any Interest Rate, Currency or Commodity Price Agreement entered
into with one or more financial institutions in the ordinary course of business
that is designed to protect such Person against fluctuations in interest rates
or currency exchange rates with respect to Debt Incurred and which shall have a
notional amount no greater than the payments due with respect to the Debt being
hedged thereby, or in the case of currency or commodity protection agreements,
against currency exchange rate or commodity price fluctuations in the ordinary
course of business relating to then existing financial obligations or then
existing or forecast production or for the purchase of product for resale and
not for purposes of speculation.
'Permitted Investments' means (i) an Investment in the Company or a
Wholly-Owned Restricted Subsidiary of the Company; (ii) an Investment in Pyramid
Sportswear; provided, however, that as a result thereof the Company owns not
less than a majority interest in Pyramid Sportswear; (iii) an Investment in a
Person, if such Person or a Subsidiary of such Person will, as a result of the
making of such Investment and all other contemporaneous related transactions,
become a Wholly-Owned
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Restricted Subsidiary of the Company or be merged or consolidated with or into
or transfer or convey all or substantially all its assets to the Company or a
Wholly-Owned Restricted Subsidiary of the Company; (iv) a Temporary Cash
Investment; (v) stock, obligations or securities received in settlement of debts
owing to the Company or a Restricted Subsidiary of the Company as a result of
bankruptcy or insolvency proceedings or upon the foreclosure, perfection,
enforcement or agreement in lieu of foreclosure of any Lien in favor of the
Company or a Restricted Subsidiary of the Company; (vi) Investments in the
Exchange Notes; (vii) Investments in Permitted Interest Rate, Currency or
Commodity Price Agreements; (viii) advances to employees of the Company made in
the ordinary course of business and (ix) entry into and Investments in joint
ventures, partnerships and other Persons engaged or proposing to engage in
businesses related to those conducted by the Company or any Restricted
Subsidiary of the Company, in an amount not to exceed $15 million.
'Preferred Stock' of any Person means Capital Stock of such Person of any
class or classes (however designated) that ranks prior, as to the payment of
dividends or as to the distribution of assets upon any voluntary or involuntary
liquidation, dissolution or winding up of such Person, to shares of Capital
Stock of any other class of such Person.
'Public Equity Offering' means an underwritten primary public offering of
Common Stock of the Company pursuant to an effective registration statement
under the Securities Act.
'Receivables' means receivables, chattel paper, instruments, documents or
intangibles evidencing or relating to the right to payment of money.
'Receivables Sale' of any Person means any sale of Receivables of such
Person (pursuant to a purchase facility or otherwise), other than in connection
with a disposition of the business operations of such Person relating thereto or
a disposition of defaulted Receivables for purpose of collection and not as a
financing arrangement.
'Redeemable Stock' of any Person means any Capital Stock of such Person
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable) or otherwise (including upon the occurrence of
an event) matures or is required to be redeemed (pursuant to any sinking fund
obligation or otherwise) or is convertible into or exchangeable for Debt or is
redeemable at the option of the holder thereof, in whole or in part, at any time
prior to the final Stated Maturity of the Exchange Notes; provided that
'Redeemable Stock' shall not include any Capital Stock that is payable at
maturity, or upon required redemption or redemption at the option of the holder
thereof, or that is automatically convertible or exchangeable, solely in or into
Common Stock of such Person.
'Related Person' of any Person means any other Person directly or
indirectly owning (a) 5% or more of the Outstanding Common Stock of such Person
(or, in the case of a Person that is not a corporation, 5% or more of the equity
interest in such Person) or (b) 5% or more of the combined voting power of the
Voting Stock of such Person.
'Restricted Subsidiary' means any Subsidiary, whether existing on or after
the date of the Indenture, unless such Subsidiary is an Unrestricted Subsidiary.
'S&P' means Standard & Poor's Ratings Group, a division of MacGraw-Hill,
Inc.
'Subordinated Debt' means Debt of the Company as to which the payment of
principal of (and premium, if any) and interest and other payment obligations in
respect of such Debt shall be subordinate to the prior payment in full of the
Exchange Notes to at least the following extent: (i) no payments of principal of
(or premium, if any) or interest on or otherwise due in respect of such Debt may
be permitted for so long as any default in the payment of principal (or premium,
if any) or interest on the Exchange Notes exists; (ii) in the event that any
other default that with the passing of time or the giving of notice, or both,
would constitute an event of default exists with respect to the Exchange Notes,
upon notice by 25% or more in principal amount of the Exchange Notes to the
Trustee, the Trustee shall have the right to give notice to the Company and the
holders of such Debt (or trustees or agents therefor) of a payment blockage, and
thereafter no payments of principal of (or premium, if any) or interest on or
otherwise due in respect of such Debt may be made for a period of 179 days from
the date of such notice; and (iii) such Debt may not (x) provide for payments of
principal of such Debt at the stated maturity thereof or by way of a sinking
fund applicable thereto or by way of any mandatory redemption,
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defeasance, retirement or repurchase thereof by the Company (including any
redemption, retirement or repurchase which is contingent upon events or
circumstances, but excluding any retirement required by virtue of acceleration
of such Debt upon an event of default thereunder), in each case prior to the
final Stated Maturity of the Exchange Notes or (y) permit redemption or other
retirement (including pursuant to an offer to purchase made by the Company) of
such other Debt at the option of the holder thereof prior to the final Stated
Maturity of the Exchange Notes, other than a redemption or other retirement at
the option of the holder of such Debt (including pursuant to an offer to
purchase made by the Company) which is conditioned upon a change of control of
the Company pursuant to provisions substantially similar to those described
under 'Change of Control' (and which shall provide that such Debt will not be
repurchased pursuant to such provisions prior to the Company's repurchase of the
Exchange Notes required to be repurchased by the Company pursuant to the
provisions described under 'Change of Control').
'Subsidiary' of any Person means (i) a corporation more than 50% of the
combined voting power of the outstanding Voting Stock of which is owned,
directly or indirectly, by such Person or by one or more other Subsidiaries of
such Person or by such Person and one or more Subsidiaries thereof or (ii) any
other Person (other than a corporation) in which such Person, or one or more
other Subsidiaries of such Person or such Person and one or more other
Subsidiaries thereof, directly or indirectly, has at least a majority ownership
and power to direct the policies, management and affairs thereof.
'Temporary Cash Investments' means any Investment in the following kinds of
instruments: (A) readily marketable obligations issued or unconditionally
guaranteed as to principal and interest by the United States of America or by
any agency or authority controlled or supervised by and acting as an
instrumentality of the United States of America if, on the date of purchase or
other acquisition of any such instrument by the Company or any Restricted
Subsidiary of the Company, the remaining term to maturity or interest rate
adjustment is not more than two years; (B) obligations (including, but not
limited to, demand or time deposits, bankers' acceptances and certificates of
deposit) issued or guaranteed by a depository institution or trust company
incorporated under the laws of the United States of America, any state thereof
or the District of Columbia, provided that (1) such instrument has a final
maturity nor more than one year from the date of purchase thereof by the Company
or any Restricted Subsidiary of the Company and (2) such depository institution
or trust company has at the time of the Company's or such Restricted
Subsidiary's Investment therein or contractual commitment providing for such
Investment, (x) capital, surplus and undivided profits (as of the date such
institution's most recently published financial statements) in excess of $100
million and (y) the long-term unsecured debt obligations (other than such
obligations rated on the basis of the credit of a Person other than such
institution) of such institution, at the time of the Company's or such
Restricted Subsidiary's Investment therein or contractual commitment providing
for such Investment, are rated in the highest rating category of both S&P and
Moody's; (C) commercial paper issued by any corporation, if such commercial
paper has, at the time of the Company's or any Restricted Subsidiary's
Investment therein or contractual commitment providing for such Investment
credit ratings of at least A-1 by S&P and P-1 by Moody's; (D) money market
mutual or similar funds having assets in excess of $100 million; (E) readily
marketable debt obligations issued by any corporation, if at the time of the
Company's or any Restricted Subsidiary's Investment therein or contractual
commitment providing for such Investment (1) the remaining term to maturity is
not more than two years and (2) such debt obligations are rated in one of the
two highest rating categories of both S&P and Moody's; (F) demand or time
deposit accounts used in the ordinary course of business with commercial banks
the balances in which are at all times fully insured as to principal and
interest by the Federal Deposit Insurance Corporation or any successor thereto;
and (G) to the extent not otherwise included herein, Cash Equivalents. In the
event that either S&P or Moody's ceases to publish ratings of the type provided
herein, a replacement rating agency shall be selected by the Company with the
consent of the Trustee, and in each case the rating of such replacement rating
agency most nearly equivalent to the corresponding S&P or Moody's rating, as the
case may be, shall be used for purposes hereof.
'Voting Stock' of any Person means Capital Stock of such Person which
ordinarily has voting power for the election of directors (or persons performing
similar functions) of such Person, whether at
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all times or only so long as no senior class of securities has such voting power
by reason of any contingency.
'Wholly Owned Restricted Subsidiary' of any Person means a Restricted
Subsidiary of such Person all of the outstanding Capital Stock or other
ownership interests of which (other than directors' qualifying shares) shall at
the time be owned by such Person or by one or more Wholly Owned Restricted
Subsidiaries of such Person or by such Person and one or more Wholly Owned
Restricted Subsidiaries of such Person.
EVENTS OF DEFAULT
The following will be Events of Default under the Indenture: (a) failure to
pay principal of (or premium, if any, on) any Exchange Note when due; (b)
failure to pay any interest on any Exchange Note when due, continued for 30
days; (c) default in the payment of principal and interest on Exchange Notes
required to be purchased pursuant to an Offer to Purchase as described under
'Change of Control' and 'Limitation on Certain Asset Dispositions' when due and
payable; (d) failure to perform or comply with the provisions described under
'Merger, Consolidation and Certain Sales of Assets'; (e) failure to perform any
other covenant or agreement of the Company under the Indenture or the Exchange
Notes continued for 60 days after written notice to the Company by the Trustee
or holders of at least 25% in aggregate principal amount of Outstanding Exchange
Notes; (f) default under the terms of any instrument evidencing or securing Debt
for money borrowed by the Company or any Restricted Subsidiary having an
outstanding principal amount of $5 million individually or in the aggregate
which default results in the acceleration of the payment of such indebtedness or
constitutes the failure to pay such indebtedness when due; (g) the rendering of
a final judgment or judgments (not subject to appeal) against the Company or any
Restricted Subsidiary in an amount in excess of $5 million which remains
undischarged or unstayed for a period of 60 days after the date on which the
right to appeal has expired; and (h) certain events of bankruptcy, insolvency or
reorganization affecting the Company or any Restricted Subsidiary. (Section 501)
Subject to the provisions of the Indenture relating to the duties of the Trustee
in case an Event of Default (as defined) shall occur and be continuing, the
Trustee will be under no obligation to exercise any of its rights or powers
under the Indenture at the request or direction of any of the holders, unless
such holders shall have offered to the Trustee reasonable indemnity. (Section
603) Subject to such provisions for the indemnification of the Trustee, the
holders of a majority in aggregate principal amount of the Outstanding Exchange
Notes will have the right to direct the time, method and place of conducting any
proceeding for any remedy available to the Trustee or exercising any trust or
power conferred on the Trustee. (Section 512)
If an Event of Default (other than an Event of Default described in Clause
(h) above) shall occur and be continuing, either the Trustee or the holders of
at least 25% in aggregate principal amount of the Outstanding Exchange Notes may
accelerate the maturity of all Exchange Notes; provided, however, that after
such acceleration, but before a judgment or decree based on acceleration, the
holders of a majority in aggregate principal amount of Outstanding Exchange
Notes may, under certain circumstances, rescind and annul such acceleration if
all Events of Default, other than the non-payment of accelerated principal, have
been cured or waived as provided in the Indenture. If an Event of Default
specified in Clause (h) above occurs, the Outstanding Exchange Notes will ipso
facto become immediately due and payable without any declaration or other act on
the part of the Trustee or any holder. (Section 502) For information as to
waiver of defaults, see 'Modification and Waiver'.
No holder of any Exchange Note will have any right to institute any
proceeding with respect to the Indenture or for any remedy thereunder, unless
such holder shall have previously given to the Trustee written notice of a
continuing Event of Default (as defined) and unless also the holders of at least
25% in aggregate principal amount of the Outstanding Exchange Notes shall have
made written request, and offered reasonable indemnity, to the Trustee to
institute such proceeding as trustee, and the Trustee shall not have received
from the holders of a majority in aggregate principal amount of the Outstanding
Exchange Notes a direction inconsistent with such request and shall have failed
to institute such proceeding within 60 days. (Section 507) However, such
limitations do not apply to a suit instituted by a holder of an Exchange Note
for enforcement of payment of the principal of or premium, if any, or interest
on such Exchange Note on or after the respective due dates expressed in such
Exchange Note. (Section 508)
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The Company will be required to furnish to the Trustee quarterly a
statement as to the performance by the Company of certain of its obligations
under the Indenture and as to any default in such performance. (Section 1019)
SATISFACTION AND DISCHARGE OF THE INDENTURE
The Indenture will cease to be of further effect as to all outstanding
Exchange Notes (except as to (i) rights of registration of transfer and exchange
and the Company's right of optional redemption, (ii) substitution of apparently
mutilated, defaced, destroyed, lost or stolen Exchange Notes, (iii) rights of
holders to receive payment of principal and interest on the Exchange Notes, (iv)
rights, obligations and immunities of the Trustee under the Indenture and (v)
rights of the holders of the Exchange Notes as beneficiaries of the Indenture
with respect to any property deposited with the Trustee payable to all or any of
them), if (x) the Company will have paid or caused to be paid the principal of
and interest on the Notes as and when the same will have become due and payable
or (y) all Outstanding Exchange Notes (except lost, stolen or destroyed Exchange
Notes which have been replaced or paid) have been delivered to the Trustee for
cancellation.
DEFEASANCE
The Indenture will provide that, at the option of the Company, (A) if
applicable, the Company will be discharged from any and all obligations in
respect of the Outstanding Exchange Notes or (B) if applicable, the Company may
omit to comply with certain restrictive covenants, and that such omission shall
not be deemed to be an Event of Default under the Indenture and the Exchange
Notes, in either case (A) or (B) upon irrevocable deposit with the Trustee, in
trust, of money and/or U.S. government obligations which will provide money in
an amount sufficient in the opinion of a nationally recognized firm of
independent certified public accountants to pay the principal of and premium, if
any, and each installment of interest, if any, on the Outstanding Exchange
Notes. With respect to clause (B), the obligations under the Indenture other
than with respect to such covenants and the Events of Default other than the
Events of Default relating to such covenants above shall remain in full force
and effect. Such trust may only be established if, among other things (i) with
respect to clause (A), the Company has received from, or there has been
published by, the Internal Revenue Service a ruling or there has been a change
in law, which in the Opinion of Counsel provides that holders of the Exchange
Notes will not recognize gain or loss for Federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject to Federal
income tax on the same amounts, in the same manner and at the same times as
would have been the case if such deposit, defeasance and discharge had not
occurred; or, with respect to clause (B), the Company has delivered to the
Trustee an Opinion of Counsel to the effect that the holders of the Exchange
Notes will not recognize gain or loss for Federal income tax purposes as a
result of such deposit and defeasance and will be subject to Federal income tax
on the same amounts, in the same manner and at the same times as would have been
the case if such deposit and defeasance had not occurred; (ii) no Event of
Default or event that with the passing of time or the giving of notice, or both,
shall constitute an Event of Default shall have occurred or be continuing; (iii)
the Company has delivered to the Trustee an Opinion of Counsel to the effect
that such deposit shall not cause the Trustee or the trust so created to be
subject to the Investment Company Act of 1940; and (iv) certain other customary
conditions precedent are satisfied. (Article Thirteen)
MODIFICATION AND WAIVER
Modifications and amendments of the Indenture may be made by the Company
and the Trustee with the consent of the holders of a majority in aggregate
principal amount of the Outstanding Exchange Notes; provided, however, that no
such modification or amendment may, without the consent of the Holder of each
Outstanding Exchange Note affected thereby, (a) change the Stated Maturity of
the principal of, or any installment of interest on, any Exchange Note, (b)
reduce the principal amount of (or the premium) or interest on any Exchange
Note, (c) change the place or currency of payment of principal of (or premium)
or interest on any Exchange Note, (d) impair the right to institute suit for the
enforcement of any payment on or with respect to any Exchange Note, (e) reduce
the above-stated percentage of Outstanding Exchange Notes necessary to modify or
amend the Indenture, (f) reduce the percentage of aggregate principal amount of
Outstanding Exchange Notes necessary for waiver of
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compliance with certain provisions of the Indenture or for waiver of certain
defaults, (g) modify any provisions of the Indenture relating to the
modification and amendment of the Indenture or the waiver of past defaults or
covenants, except as otherwise specified, or (h) following the mailing of any
Offer to Purchase, modify any Offer to Purchase for the Exchange Notes required
under the 'Limitation on Asset Dispositions' and the 'Change of Control'
covenants contained in the Indenture in a manner materially adverse to the
holders thereof. (Section 902)
The holders of a majority in aggregate principal amount of the Outstanding
Exchange Notes, on behalf of all holders of Exchange Notes, may waive compliance
by the Company with certain restrictive provisions of the Indenture. (Section
1020) Subject to certain rights of the Trustee, as provided in the Indenture,
the holders of a majority in aggregate principal amount of the Outstanding
Exchange Notes, on behalf of all holders of Exchange Notes, may waive any past
default under the Indenture, except a default in the payment of principal,
premium or interest or a default arising from failure to purchase any Exchange
Note tendered pursuant to an Offer to Purchase. (Section 513)
GOVERNING LAW
The Indenture and the Exchange Notes will be governed by the laws of the
State of New York.
THE TRUSTEE
The Indenture provides that, except during the continuance of an Event of
Default, the Trustee will perform only such duties as are specifically set forth
in the Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise as a prudent person would exercise
under the circumstances in the conduct of such person's own affairs.
(Sections 601-603)
The Indenture and provisions of the Trust Indenture Act incorporated by
reference therein contain limitations on the rights of the Trustee, should it
become a creditor of the Company, to obtain payment of claims in certain cases
or to realize on certain property received by it in respect of any such claim as
security or otherwise. The Trustee is permitted to engage in other transactions
with the Company or any Affiliate, provided, however, that if it acquires any
conflicting interest (as defined in the Indenture or in the Trust Indenture
Act), it must eliminate such conflict or resign. (Section 608)
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DESCRIPTION OF CERTAIN FEDERAL INCOME TAX
CONSEQUENCES OF AN INVESTMENT IN THE EXCHANGE NOTES
The following is a summary of certain United States federal income tax
consequences associated with the acquisition, ownership, and disposition of the
Exchange Notes. The following summary does not discuss all of the aspects of
federal income taxation that may be relevant to investors in light of his or her
particular circumstances, or to certain types of holders which are subject to
special treatment under the federal income tax laws (including dealers in
securities, insurance companies, tax-exempt organizations, financial
institutions, broker-dealers, S corporations, persons who hold the Exchange
Notes as part of a hedge, straddle, 'synthetic security' or other integrated
investment, and, except as discussed below, foreign corporations and persons who
are not citizens or residents of the United States). Such holders generally are
taxed in a similar manner to U.S. Holders (as defined below); however, certain
special rules apply. In addition, this discussion is limited to holders who hold
the Exchange Notes as capital assets within the meaning of Section 1221 of the
United States Internal Revenue Code of 1986 (the 'Code'). This summary also does
not describe any tax consequences under state, local, or foreign tax laws.
The discussion is based upon the Code, Treasury Regulations, Internal
Revenue Service ('IRS') rulings and pronouncements and judicial decisions all in
effect as of the date hereof, all of which are subject to change at any time by
legislative, judicial or administrative action. Any such changes may be applied
retroactively in a manner that could adversely affect a holder of the Exchange
Notes. The Company has not sought and will not seek any rulings or opinions from
the IRS or counsel with respect to the matters discussed below. There can be no
assurance that the IRS will not take positions concerning the tax consequences
of the purchase, ownership or disposition of the Exchange Notes which are
different from those discussed herein.
PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO
THE UNITED STATES FEDERAL INCOME TAX CONSEQUENCES THAT MAY APPLY TO THEM, AS
WELL AS THE APPLICATION OF STATE, LOCAL, FOREIGN AND OTHER TAX LAWS.
TAX CONSEQUENCES OF THE EXCHANGE OFFER
The exchange of Initial Notes for Exchange Notes pursuant to the Exchange
Offer will not be considered a taxable exchange for United States federal income
tax purposes because the Exchange Notes will not differ materially in kind or
extent from the Initial Notes and because the exchange will occur by operation
of the terms of the Notes. Accordingly, such exchange will have no United States
federal income tax consequences to holders of Initial Notes. A holder's adjusted
tax basis and holding period in an Exchange Note will be the same as such
holder's adjusted tax basis and holding period, respectively, in the Initial
Note exchanged therefor. All references to Notes under this heading 'Description
of Certain Federal Income Tax Consequences of an Investment in the Notes', apply
equally to Exchange Notes.
Holders considering the exchange of Initial Notes for Exchange Notes should
consult their own tax advisors concerning the United States federal income tax
consequences in light of their particular situations as well as any consequences
arising under state, local or foreign income tax or other tax law.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES TO U.S. HOLDERS
A U.S. Holder is any holder who or which is (i) a citizen or resident of
the United States; (ii) a corporation or partnership created or organized in or
under the laws of the United States or of any political subsidiaries thereof;
(iii) an estate other than a 'foreign estate' as defined in Section 7701 (a)
(31) of the Code; or (iv) a trust if a court within the United States is able to
exercise primary supervision over the administration of the trust, and one or
more United States persons have the authority to control all substantial
decisions of the trust.
78
<PAGE>
TAXATION OF STATED INTEREST. In general, U.S. Holders of the Exchange Notes
will be required to include interest received thereon in taxable income as
ordinary income at the time it accrues or is received, in accordance with the
holder's regular method of accounting for federal income tax purposes.
REGISTRATION DEFAULT. Because the Exchange Notes provide for an increase in
the interest rate during the time that a Registration Default is in effect, the
Exchange Notes are subject to Treasury regulations applicable to debt
instruments that provide for one or more contingent payments. Under such
Treasury regulations, if the possibility of an increased interest payments is,
as of the Issue Date, either a 'remote' or 'incidental' contingency, the payment
of such additional interest would not be considered a contingent interest
payment and the U.S. federal income tax treatment of such additional interest
generally would be the same as that described under 'Taxation of Stated
Interest' above. The Company intends to take the position that, solely for these
purposes, the payment of additional interest upon a Registration Default is a
remote or incidental contingency; such determination is binding on a U.S. Holder
unless such holder discloses to the Internal Revenue Service (the 'IRS') that it
is taking a contrary position.
If the Company becomes obligated to pay interest at an increased rate upon
a Registration Default, a U.S. Holder generally would be required to include the
initial payment of interest at such rate in income as ordinary income when
received or accrued, in accordance with such holder's method of accounting for
U.S. federal income tax purposes. In addition, the Exchange Notes would be
treated as having been reissued at such time for their 'adjusted issue price'
(i.e., generally, the stated principal amount of the Exchange Notes). If, at the
time of such deemed reissuance, the possibility that the Company would be
required to make additional payments of interest at such increased interest rate
were not a remote or incidental contingency, a U.S. Holder could be required to
accrue the projected payments of interest at such increased rate into income on
a constant yield basis, which could result in a holder recognizing income prior
to the receipt of the related cash payment. Prospective investors should consult
their tax advisors regarding the U.S. federal income tax consequences should the
interest rate be increased as a result of a Registration Default.
EFFECT OF OPTIONAL REDEMPTION AND REPURCHASE. Under certain circumstances
the Company may be entitled to redeem a portion of the Exchange Notes. In
addition, under certain circumstances, the Company will be required to offer to
repurchase all or any part of a holder's Exchange Notes. Treasury Regulations
contain special rules for determining the yield to maturity and maturity on a
debt instrument in the event the debt instrument provides for a contingency that
could result in the acceleration or deferral of one or more payments. The
Company does not believe that these rules should apply to either the Company's
right to redeem Exchange Notes or to the holders' rights to require the Company
to repurchase Exchange Notes. Therefore, the Company has no present intention of
treating such redemption and repurchase provisions of the Exchange Notes as
affecting the computation of the yield to maturity or maturity date of the
Exchange Notes.
SALE OR OTHER TAXABLE DISPOSITION OF THE NOTES. The sale, exchange,
redemption, retirement or other taxable disposition of an Exchange Note will
result in the recognition of gain or loss to a U.S. Holder in an amount equal to
the difference between (a) the amount of cash and fair market value of property
received in exchange therefor (except to the extent attributable to the payment
of accrued but unpaid stated interest) and (b) the holder's adjusted tax basis
in such an Exchange Note. A holder's initial tax basis in an Exchange Note
purchased by such holder will be equal to the price paid for the Exchange Note.
Any gain or loss on the sale or other taxable disposition of an Exchange Note
generally will be capital gain or loss, and generally will be long-term capital
gain or loss if the holding period for the Exchange Note exceeds one year at the
time of the disposition. Non-corporate taxpayers may be taxed at reduced rates
of federal income tax in respect of long-term capital gains realized on a
disposition of Exchange Notes in certain instances (e.g., generally, long-term
capital gain recognized by an individual U.S. Holder would be subject to a
maximum tax rate of 20% in respect of Exchange Notes held for more than eighteen
months, or to a maximum rate of 28% in respect of Exchange Notes held in excess
of one year but for eighteen months or less). Prospective investors should
consult their tax advisors regarding the tax consequences of realizing long-term
capital gains. Payments on such disposition for accrued interest not previously
included in income will be treated as ordinary interest income.
79
<PAGE>
The exchange of (i) beneficial interests in a Global Exchange Note for a
Certificated Exchange Note or (ii) the exchange of an Initial Note for an
Exchange Note, will not constitute a 'significant modification' of the Note for
U.S. federal income tax purposes and, accordingly, the beneficial interests,
Certificated Exchange Note or Exchange Note received in exchange for the
original beneficial interest or Note, as the case may be, would be treated as a
continuation of the original Note in the hands of such U.S. Holder. As a result,
there would be no U.S. federal income tax consequences to a U.S. Holder upon
such exchanges.
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES FOR NON-U.S. HOLDERS
For purposes hereof, a 'Non-U.S. Holder' is any person that is not a U.S.
Holder. This summary does not address the tax consequences to stockholders,
partners or beneficiaries in a Non-U.S. Holder.
PAYMENTS OF INTERESTS. Interest that is paid to a Non-U.S. Holder on an
Exchange Note will not be subject to U.S. withholding tax provided that (a) (i)
the Non-U.S. Holder does not own, actually or constructively, 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote; (ii) the Non-U.S. Holder is not a controlled foreign corporation that is
related to the Company actually or constructively through stock ownership for
United States federal income tax purposes; (iii) the Non-U.S. Holder is not a
bank receiving interest on a loan entered into in the ordinary course of
business; and (iv) either (x) the beneficial owner of the Exchange Note provides
the Company or its paying agent with a properly executed certification on IRS
Form W-8 (or a suitable substitute form) signed under penalties of perjury that
the beneficial owner is not a 'U.S. person' for United States federal income tax
purposes and that provides the beneficial owner's name and address, or (y) a
securities clearing organization, bank or other financial institution that holds
customers' securities in the ordinary course of its business holds the Exchange
Note and certifies to the Company or its agent under penalties of perjury that
the IRS Form W-8 (or a suitable substitute) has been received by it from the
beneficial owner of the Exchange Note or a qualifying intermediary and furnishes
the payor a copy thereof; (b) the interest received on the Exchange Note is
effectively connected with the conduct by the Non-U.S. Holder of a trade or
business in the United States, and the Non-U.S. Holder complies with certain
reporting requirements; or (c) a U.S. income tax treaty applies to reduce the
rate of withholding to zero and the Non-U.S. Holder provides a properly executed
Form 1001.
Recently issued Treasury regulations (the 'Withholding Regulations') that
will be effective with respect to payments made after December 31, 1999, will
provide alternative methods for satisfying the certification requirements
described in clause (a)(iv) above. The Withholding Regulations will also
require, in the case of Exchange Notes held by a foreign partnership, that (x)
the certification described in clause (a)(iv) above be provided by the partners
and (y) the partnership provide certain information, including its taxpayer
identification number. A look-through rule will apply in the case of tiered
partnerships.
Payments of interest to a Non-U.S. Holder that do not qualify for the
non-imposition of U.S. withholding tax discussed above, will be subject to U.S.
federal withholding tax at a rate of 30% (or such reduced rate of withholding as
provided for in an applicable treaty if such Non-U.S. Holder provides a properly
executed Form 1001).
SALE, EXCHANGE OR RETIREMENT OF EXCHANGE NOTES. Any gain realized by a
Non-U.S. Holder on the sale, exchange or retirement of the Exchange Notes, will
generally not be subject to United States federal income tax or withholding
unless (i) the Non-U.S. Holder is an individual who was present in the United
States for 183 days or more in the taxable year of the disposition and meets
certain other requirements; (ii) the Non-U.S. Holder is subject to tax pursuant
to certain provisions of the Code applicable to certain individuals who renounce
their United States citizenship or terminate long-term United States residency
or (iii) the gain is effectively connected with a U.S. trade or business
conducted by the Non-U.S. Holder. If a Non-U.S. Holder falls under clause (i)
above, the holder generally will be subject to United States federal income tax
at a rate of 30% on the gain derived from the sale (or reduced treaty rate) and
may be subject to withholding in certain circumstances. If a Non-U.S. Holder
falls under clause (ii) above, the holder will be taxed on the net gain derived
from the sale under the graduated United States federal income tax rates that
are applicable to United States citizens and resident aliens, and may be subject
to withholding under certain circumstances.
80
<PAGE>
EFFECTIVELY CONNECTED INCOME. To the extent that interest or other payments
received by a Non-U.S. Holder with respect to the Exchange Notes (or proceeds
from the disposition of the Exchange Notes) are treated as being effectively
connected with the conduct by the Non-U.S. Holder of a trade or business within
the United States (or the Non-U.S. Holder is otherwise subject to U.S. federal
income taxation on a net basis with respect to such Non-U.S. Holder's ownership
of the Notes), such Non-U.S. Holder will generally be subject to rules similar
to that described above under 'U.S. Taxation of U.S. Holders' (subject to any
modification provided under an applicable income tax treaty). Such Non-U.S.
Holder may also be subject to the U.S. 'branch profits tax' if such Non-U.S.
Holder is a corporation.
U.S. FEDERAL ESTATE TAXES. An Exchange Note beneficially owned by an
individual who is a Non-U.S. Holder at the time of his or her death generally
will not be subject to U.S. federal estate tax as a result of such death if (i)
the Non-U.S. Holder does not actually or constructively own 10% or more of the
total combined voting power of all classes of stock of the Company entitled to
vote and (ii) interest payments with respect to the Exchange Note would not have
been, if received at the time of such individual's death, effectively connected
with the conduct of a U.S. trade or business.
U.S. INFORMATION REPORTING AND BACKUP WITHHOLDING TAX
The backup withholding rules require a payor to deduct and withhold a tax
if (i) the payee fails to furnish a taxpayer identification number ('TIN') in
the prescribed manner, (ii) the IRS notifies the payor that the TIN furnished by
the payee is incorrect, (iii) the payee has failed to report properly the
receipt of 'reportable payments' and the IRS has notified the payor that
withholding is required, or (iv) the payee fails to certify under the penalty of
perjury that such payee is not subject to backup withholding. If any one of the
events discussed above occurs with respect to a holder of Exchange Notes, the
Company, its paying agent or other withholding agent will be required to
withhold a tax equal to 31% of any 'reportable payment' made in connection with
the Exchange Notes of such holder. A 'reportable payment' includes, among other
things, amounts paid in respect of interest on an Exchange Note. Certain holders
(including, among others, corporations and certain tax-exempt organizations) are
not subject to backup withholding.
Back-up withholding generally will not apply to an Exchange Note issued in
registered form that is beneficially owned by a Non-U.S. Holder if the
certification of Non-U.S. Holder status is provided to the Company or its agent
as described above in 'Certain Federal Income Tax Consequences to Non-U.S.
Holders -- Interest', provided that the payor does not have actual knowledge
that the holder is a U.S. person. The Company may be required to report annually
to the IRS and to each Non-U.S. Holder the amount of interest paid to, and the
tax withheld, if any, with respect to each Non-U.S. Holder.
If payments of principal and interest are made to the beneficial owner of
an Exchange Note by or through the foreign office of a custodian, nominee or
other agent of such beneficial owner, or if the proceeds of the sale of Exchange
Notes are paid to the beneficial owner of an Exchange Note through a foreign
office of a 'broker' (as defined in the pertinent Regulations), the proceeds
will not be subject to backup withholding (absent actual knowledge that the
payee is a U.S. person). Information reporting (but not backup withholding) will
apply, however, to a payment by a foreign office of a custodian, nominee, agent
or broker that is (i) a U.S. person, (ii) a controlled foreign corporation for
United States federal income tax purposes, or (iii) a foreign person that
derives 50% or more of its gross income from the conduct of a United States
trade or business for a specified three-year period or, effective after December
31, 1998, by a foreign office of certain other persons; unless the broker has in
its records documentary evidence that the holder is a Non-U.S. Holder and
certain conditions are met (including that the broker has no actual knowledge
that the holder is a U.S. Holder) or the holder otherwise establishes an
exemption. Payment through the United States office of a custodian, nominee,
agent or broker is subject to both backup withholding at a rate of 31% and
information reporting, unless the holder certifies that it is a Non-U.S. Holder
under penalties of perjury or otherwise establishes an exemption.
Any amount withheld under the backup withholding rules will be allowed as a
credit against, or refund of, such holder's United States federal income tax
liability, provided that the required information is provided by the holder to
the IRS.
81
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives Exchange Notes for its own account
pursuant to the Exchange Offer must acknowledge that it will deliver a
prospectus in connection with any resale of such Exchange Notes. This
Prospectus, as it may be amended or supplemented from time to time, may be used
by a broker-dealer in connection with resales of Exchange Notes received in
exchange for Initial Notes where such Initial Notes were acquired as a result of
market-making activities or other trading activities. The Company has agreed
that it will make this Prospectus, as amended or supplemented, available to such
broker-dealer for use in connection with any such resale.
The Company will not receive any proceeds from any sale of Exchange Notes
by broker-dealers. Exchange Notes received by broker-dealers for their own
account pursuant to the Exchange Offer may be sold from time to time in one or
more transactions in the over-the-counter market, in negotiated transactions,
through the writing of options on the Exchange Notes or a combination of such
methods of resale, at prevailing market prices at the time of resale, at prices
related to such prevailing market prices or at negotiated prices. Any such
resale may be made directly to purchasers or to or through brokers or dealers
who may receive compensation in the Notes. Any broker-dealer that resells
Exchange Notes that were received by it for its own account pursuant to the
Exchange Offer and any broker or dealer that participates in a distribution of
such Exchange Notes may be deemed to be an 'underwriter' within the meaning of
the Securities Act and any profit from any such resale of Exchange Notes and any
commissions or concessions received by any such persons may be deemed to be
underwriting compensation under the Securities Act. The Letter of Transmittal
states that by acknowledging that it will deliver and by delivering a
prospectus, a broker-dealer will not be deemed to admit that it is an
'underwriter' within the meaning of the Securities Act.
The Company promptly will send additional copies of this Prospectus and any
amendment or supplement to this Prospectus to any broker-dealer that requests
such documents in the Letter of Transmittal. The Company has agreed to pay all
expenses incident to the Exchange Offer (including the expenses of one counsel
for the holders of the Initial Notes) other than dealers' and brokers'
discounts, commissions and counsel fees and will indemnify the holders of the
Initial Notes (including any broker-dealers) against certain liabilities,
including liabilities under the Securities Act.
VALIDITY OF THE EXCHANGE NOTES
The validity of the Exchange Notes will be passed upon for the Company by
Rosenman & Colin LLP, 575 Madison Avenue, New York, New York 10022. Edward H.
Cohen, a member of Rosenman & Colin LLP, is a director of the Company and is the
beneficial owner of 14,963 shares of the Company's Common Stock.
EXPERTS
The consolidated financial statements (including the schedule incorporated
by reference) of the Company at February 1, 1998 and February 2, 1997, and for
each of the three years in the period ended February 1, 1998, appearing in this
Prospectus and Registration Statement have been audited by Ernst & Young LLP,
independent auditors, as set forth in their report thereon appearing elsewhere
herein, and are included in reliance upon such report given upon the authority
of such firm as experts in accounting and auditing.
With respect to the unaudited condensed consolidated interim financial
information for the thirteen weeks ended May 3, 1998 appearing in this
Prospectus and Registration Statement, Ernst & Young LLP has reported that they
have applied limited procedures in accordance with professional standards for a
review of such information. However, their separate report appearing elsewhere
herein states that they did not audit and they do not express an opinion on such
interim financial information. Accordingly, the degree of reliance on their
report on such information should be restricted considering the limited nature
of the review procedures applied. The independent auditors are not subject to
the liability provisions of Section 11 of the Securities Act for their report on
the unaudited interim financial
82
<PAGE>
information because that report is not a 'report' or a 'part' of the
Registration Statement prepared or certified by the auditors within the meaning
of Sections 7 and 11 of the Securities Act.
AVAILABLE INFORMATION
The Company is subject to the informational requirements of the Exchange
Act and, in accordance therewith, files reports and other information with the
Commission. Such reports and other information filed with the Commission may be
inspected and copied at the public reference facilities maintained by the
Commission at Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549
and at the Commission's regional offices at Seven World Trade Center, 13th
Floor, New York, New York 10007 and at Northwestern Atrium Center, 500 West
Madison Street, 14th Floor, Chicago, Illinois 60661-2551. Copies of such
material also can be obtained from the principal office of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates. Materials filed electronically with the Commission via EDGAR may also be
accessed through the Commission's home page at http://www.sec.gov.
This Prospectus constitutes a part of a Registration Statement of Form S-4
filed by the Company with the Commission under the Securities Act. As permitted
by the rules and regulations of the Commission, this Prospectus does not contain
all of the information contained in the Registration Statement and the exhibits
and schedules thereto, and reference is hereby made to the Registration
Statement and the exhibits and schedules thereto for further information with
respect to the Company and the Exchange Notes. Statements contained herein
concerning the provisions of any documents filed as an exhibit to the
Registration Statement or otherwise filed with the Commission are not
necessarily complete, and in each instance, reference is made to the copy of
such document so filed. Each such statement is qualified in its entirety by such
reference.
83
<PAGE>
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<S> <C>
Report of Independent Auditors............................................................................ F-2
Consolidated Balance Sheets as of February 2, 1997 and February 1, 1998................................... F-3
Consolidated Statements of Operations for the years ended January 28, 1996, February 2, 1997 and February
1, 1998................................................................................................. F-4
Consolidated Statements of Cash Flows for the years ended January 28, 1996, February 2, 1997 and February
1, 1998................................................................................................. F-5
Consolidated Statements of Changes in Stockholders' Equity for the years ended January 28, 1996, February
2, 1997 and February 1, 1998............................................................................ F-6
Notes to Consolidated Financial Statements................................................................ F-7
Independent Accountants Review Report..................................................................... F-18
Condensed Consolidated Balance Sheet as of May 3, 1998 (unaudited)........................................ F-19
Condensed Consolidated Statements of Operations for the thirteen weeks ended May 4, 1997 and May 3, 1998
(unaudited)............................................................................................. F-20
Condensed Consolidated Statements of Cash Flows for the thirteen weeks ended May 4, 1997 and May 3, 1998
(unaudited)............................................................................................. F-21
Notes to Condensed Consolidated Financial Statements (unaudited).......................................... F-22
</TABLE>
F-1
<PAGE>
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Stockholders and the Board of Directors
Phillips-Van Heusen Corporation
We have audited the accompanying consolidated balance sheets of
Phillips-Van Heusen Corporation and subsidiaries as of February 1, 1998 and
February 2, 1997, and the related consolidated statements of operations, changes
in stockholders' equity, and cash flows for each of the three years in the
period ended February 1, 1998. These financial statements are the responsibility
of the Company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Phillips-Van
Heusen Corporation and subsidiaries at February 1, 1998 and February 2, 1997,
and the consolidated results of their operations and their cash flows for each
of the three years in the period ended February 1, 1998 in conformity with
generally accepted accounting principles.
/s/ Ernst & Young LLP
New York, New York
March 10, 1998, except for the
Long-Term Debt note,
which is as of April 22, 1998
F-2
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
Feb. 2, 1997 FEB. 1, 1998
------------- -------------
<S> <C> <C>
ASSETS
Current assets:
Cash, including cash equivalents of $1,861 and $1,413............................. $ 11,590 $ 11,748
Trade receivables, less allowances of $3,401 and $2,911........................... 91,806 88,656
Inventories....................................................................... 237,422 249,534
Other, including deferred taxes of $4,300 and $19,031............................. 22,140 35,080
--------- ---------
Total Current Assets........................................................... 362,958 385,018
Property, Plant and Equipment....................................................... 137,060 94,582
Goodwill............................................................................ 120,324 116,467
Other Assets, including deferred taxes of $16,617 and $44,094....................... 37,094 64,392
--------- ---------
$ 657,436 $ 660,459
--------- ---------
--------- ---------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable..................................................................... $ 20,000 $ 7,900
Accounts payable.................................................................. 36,355 36,233
Accrued expenses.................................................................. 55,754 89,202
Current portion of long-term debt................................................. 10,157
--------- ---------
Total Current Liabilities...................................................... 122,266 133,335
Long-Term Debt, less current portion................................................ 189,398 241,004
Other Liabilities................................................................... 55,614 65,815
Stockholders' Equity:
Preferred stock, par value $100 per share; 150,000 shares authorized; no shares
outstanding
Common stock, par value $1 per share; 100,000,000 shares authorized; shares issued
27,045,705 and 27,179,244...................................................... 27,046 27,179
Additional capital................................................................ 116,296 116,954
Retained earnings................................................................. 146,816 76,172
--------- ---------
Total Stockholders' Equity..................................................... 290,158 220,305
--------- ---------
$ 657,436 $ 660,459
--------- ---------
--------- ---------
</TABLE>
See notes to consolidated financial statements.
F-3
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Net sales........................................................... $1,464,128 $1,359,593 $1,350,007
Cost of goods sold.................................................. 987,921 910,517 937,965
---------- ---------- ----------
Gross profit........................................................ 476,207 449,076 412,042
Selling, general and administrative expenses........................ 428,634 401,338 412,495
Facility and store closing, restructuring and other expenses........ 27,000 86,700
---------- ---------- ----------
Income (loss) before interest and taxes............................. 20,573 47,738 (87,153)
Interest expense, net............................................... 23,199 23,164 20,672
---------- ---------- ----------
Income (loss) before taxes.......................................... (2,626) 24,574 (107,825)
Income tax expense (benefit)........................................ (2,920) 6,044 (41,246)
---------- ---------- ----------
Net income (loss)................................................... $ 294 $ 18,530 $ (66,579)
---------- ---------- ----------
---------- ---------- ----------
Net income (loss) per share:
Basic............................................................. $ 0.01 $ 0.69 $ (2.46)
---------- ---------- ----------
---------- ---------- ----------
Diluted........................................................... $ 0.01 $ 0.68 $ (2.46)
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
In 1995 and 1997, PVH recorded pre-tax charges of $27,000 and $132,700,
respectively, related principally to a series of actions the Company has taken
to accelerate the execution of PVH's ongoing strategy to build its brands. Such
charges have been recorded in the consolidated statements of operations as
follows:
<TABLE>
<CAPTION>
1995 1997
-------- -------
<S> <C> <C>
Cost of goods sold................................................... $46,000
Facility and store closing, restructuring and other expenses......... $ 27,000 86,700
-------- -------
27,000 132,700
Income tax benefit................................................... (9,984) (47,200)
-------- -------
$ 17,016 $85,500
-------- -------
-------- -------
</TABLE>
See notes to consolidated financial statements.
F-4
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
1995 1996 1997
--------- --------- --------
<S> <C> <C> <C>
Operating activities:
Net income (loss)...................................................... $ 294 $ 18,530 $(66,579)
Adjustments to reconcile net income (loss) to net cash provided (used)
by operating activities:
Depreciation and amortization..................................... 33,740 29,438 25,300
Write-off of property, plant and equipment........................ 13,000 40,800
Deferred income taxes............................................. 3,363 8,214 (42,208)
Equity income in Pyramid Sportswear............................... (85) (900) (792)
Changes in operating assets and liabilities:
Receivables......................................................... (13,927) 18,060 3,150
Income tax refund receivable........................................ 16,987
Inventories......................................................... 16,315 39,351 (12,112)
Accounts payable and accrued expenses............................... (83,897) (17,782) 34,038
Deferred landlord contributions..................................... (399) (5,001) (5,949)
Other-net........................................................... 808 (5,021) 15,998
--------- --------- --------
Net cash provided (used) by operating activities.................... (30,788) 101,876 (8,354)
--------- --------- --------
Investing activities:
Acquisition of the Apparel Group of Crystal Brands, Inc................ (114,503)
Property, plant and equipment acquired................................. (39,773) (22,578) (17,923)
Investment in Pyramid Sportswear....................................... (6,950)
Other-net.............................................................. 143 360
--------- --------- --------
Net cash used by investing activities............................... (161,226) (22,435) (17,563)
--------- --------- --------
Financing activities:
Proceeds from revolving line of credit................................. 204,996 52,582 123,000
Payments on revolving line of credit and long-term borrowings.......... (73,660) (134,302) (93,651)
Exercise of stock options.............................................. 1,745 386 791
Cash dividends......................................................... (4,007) (4,050) (4,065)
--------- --------- --------
Net cash provided (used) by financing activities.................... 129,074 (85,384) 26,075
--------- --------- --------
Increase (decrease) in cash.............................................. (62,940) (5,943) 158
Cash at beginning of period.............................................. 80,473 17,533 11,590
--------- --------- --------
Cash at end of period.................................................... $ 17,533 $ 11,590 $ 11,748
--------- --------- --------
--------- --------- --------
</TABLE>
See notes to consolidated financial statements.
F-5
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
COMMON STOCK
---------------------
$1 PAR ADDITIONAL RETAINED STOCKHOLDERS'
SHARES VALUE CAPITAL EARNINGS EQUITY
---------- ------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
January 29, 1995........................... 26,610,310 $26,610 $ 112,801 $136,049 $ 275,460
Stock options exercised.................. 187,908 188 1,557 1,745
Net income............................... 294 294
Cash dividends........................... (4,007) (4,007)
Investment in Pyramid Sportswear......... 181,134 181 1,619 1,800
---------- ------- ---------- -------- -------------
January 28, 1996........................... 26,979,352 26,979 115,977 132,336 275,292
Stock options exercised.................. 66,353 67 319 386
Net income............................... 18,530 18,530
Cash dividends........................... (4,050) (4,050)
---------- ------- ---------- -------- -------------
FEBRUARY 2, 1997........................... 27,045,705 27,046 116,296 146,816 290,158
Stock options exercised.................. 133,539 133 658 791
Net loss................................. (66,579) (66,579)
Cash dividends........................... (4,065) (4,065)
---------- ------- ---------- -------- -------------
FEBRUARY 1, 1998........................... 27,179,244 $27,179 $ 116,954 $ 76,172 $ 220,305
---------- ------- ---------- -------- -------------
---------- ------- ---------- -------- -------------
</TABLE>
See notes to consolidated financial statements.
F-6
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(IN THOUSANDS, EXCEPT SHARE DATA)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation -- The consolidated financial statements
include the accounts of PVH and its subsidiaries. Significant intercompany
accounts and transactions have been eliminated in consolidation.
Use of Estimates -- The preparation of the financial statements in
conformity with generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from the
estimates.
Fiscal Year -- Fiscal years are designated in the financial statements and
notes by the calendar year in which the fiscal year commences. Accordingly,
results for fiscal years 1995 and 1997 represent the 52 weeks ended January 28,
1996 and February 1, 1998, respectively. Fiscal year 1996 represents the 53
weeks ended February 2, 1997.
Cash and Cash Equivalents -- PVH considers all highly liquid investments
with a maturity of three months or less when purchased to be cash equivalents.
Asset Impairments -- PVH records impairment losses on long-lived assets
(including goodwill) used in operations when events and circumstances indicate
that the assets might be impaired and the undiscounted cash flows estimated to
be generated by the related assets are less than the carrying amounts of those
assets.
Inventories -- Inventories are stated at the lower of cost or market. Cost
for apparel inventories of $90,151 (1996) and $90,999 (1997) is determined using
the last-in, first-out method (LIFO). Cost for footwear and certain sportswear
inventories is determined using the first-in, first-out method (FIFO).
Property, Plant and Equipment -- Depreciation is computed principally by
the straight line method over the estimated useful lives of the various classes
of property.
Goodwill -- Goodwill, net of accumulated amortization of $8,615 and $11,358
in 1996 and 1997, respectively, is being amortized principally by the straight
line method over 40 years.
Contributions from Landlords -- PVH receives contributions from landlords
for fixturing retail stores which the Company leases. Such amounts are amortized
as a reduction of rent expense over the life of the related lease. Unamortized
contributions are included in accrued expenses and other liabilities and
amounted to $18,747 and $12,798 in 1996 and 1997, respectively.
Fair Value of Financial Instruments -- Using discounted cash flow analyses,
PVH estimates that the fair value of all financial instruments approximates
their carrying value, except as noted in the footnote entitled 'Long-Term Debt'.
Stock-Based Compensation -- PVH accounts for its stock options under the
provisions of APB Opinion No. 25, 'Accounting for Stock Issued to Employees,'
and complies with the disclosure requirements of FASB Statement No. 123,
'Accounting for Stock-Based Compensation'.
Advertising -- Advertising costs are expensed as incurred and totaled
$21,136 (1995), $19,427 (1996) and $37,762 (1997).
EARNINGS PER SHARE
In 1997, PVH adopted FASB Statement No. 128, 'Earnings Per Share'. This
statement replaced the calculation of primary and fully diluted earnings per
share with basic and diluted earnings per share.
PVH computed its basic and diluted earnings per share by dividing net
income or loss by:
<TABLE>
<CAPTION>
1995 1996 1997
---------- ---------- ----------
<S> <C> <C> <C>
Weighted Average Common Shares Outstanding for Basic
Earnings Per Share...................................... 26,725,804 27,004,115 27,107,633
Impact of Dilutive Employee Stock Options................. 295,529 209,462
---------- ---------- ----------
Total Shares for Diluted Earnings Per Share............... 27,021,333 27,213,577 27,107,633
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-7
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
INCOME TAXES
Income taxes consist of:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Federal:
Current............................................................ $(8,219) $(4,620) $ 400
Deferred........................................................... 2,995 7,959 (42,985)
State, foreign and local:
Current............................................................ 1,936 2,450 562
Deferred........................................................... 368 255 777
------- ------- --------
$(2,920) $ 6,044 $(41,246)
------- ------- --------
------- ------- --------
</TABLE>
Taxes paid were $3,371 (1995), $1,262 (1996) and $1,155 (1997). In
addition, PVH received an income tax refund of $16,987 in 1996.
The approximate tax effect of items giving rise to the deferred income tax
asset recognized in the Company's balance sheets is as follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Depreciation................................................................... $(18,349) $(18,427)
Landlord contributions......................................................... 7,367 5,030
Facility and store closing, restructuring and other expenses................... 415 27,295
Employee compensation and benefits............................................. 9,243 10,302
Tax loss and credit carryforwards.............................................. 17,231 31,179
Other -- net................................................................... 5,010 7,746
-------- --------
$ 20,917 $ 63,125
-------- --------
-------- --------
</TABLE>
A reconciliation of the statutory Federal income tax to the income tax
expense (benefit) is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- --------
<S> <C> <C> <C>
Statutory 35% federal tax............................................ $ (919) $ 8,601 $(37,739)
State, foreign and local income taxes, net of Federal income tax
benefit............................................................ 1,454 1,463 805
Income of Puerto Rico Subsidiaries(1)................................ (3,298) (3,757) (3,258)
Other -- net......................................................... (157) (263) (1,054)
------- ------- --------
Income tax expense (benefit)......................................... $(2,920) $ 6,044 $(41,246)
------- ------- --------
------- ------- --------
</TABLE>
- ------------------
(1) Exemption from Puerto Rico income tax expires in 1998. PVH anticipates this
exemption will be extended through 2008.
INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Raw materials................................................................. $ 16,670 $ 15,964
Work in process............................................................... 13,208 15,216
Finished goods................................................................ 207,544 218,354
-------- --------
$237,422 $249,534
-------- --------
-------- --------
</TABLE>
Inventories would have been approximately $13,000 and $12,000 higher than
reported at February 2, 1997 and February 1, 1998, respectively, if the FIFO
method of inventory accounting had been used for all apparel.
F-8
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
PROPERTY, PLANT AND EQUIPMENT
Property, plant and equipment, at cost, are summarized as follows:
<TABLE>
<CAPTION>
ESTIMATED
USEFUL
LIVES 1996 1997
------------ -------- --------
<S> <C> <C> <C>
Land......................................................... $ 1,774 $ 1,646
Buildings and building improvements.......................... 15-40 years 37,778 24,932
Machinery and equipment, furniture and fixtures and leasehold
improvements............................................... 5-15 years 233,884 187,671
-------- --------
273,436 214,249
Less: Accumulated depreciation and amortization.............. 136,376 119,667
-------- --------
$137,060 $ 94,582
-------- --------
-------- --------
</TABLE>
LONG-TERM DEBT
Long-term debt, exclusive of current portion, is as follows:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Revolving Credit Facility..................................................... $ 40,000 $ 91,600
7.75% Debentures.............................................................. 99,442 99,448
7.75% Senior Notes............................................................ 49,286 49,286
Other debt.................................................................... 670 670
-------- --------
$189,398 $241,004
-------- --------
-------- --------
</TABLE>
PVH issued $100,000 of 7.75% Debentures due 2023 on November 15, 1993 with
a yield to maturity of 7.80%. Interest is payable semi-annually. Based on
current market conditions, PVH estimates that the fair value of these Debentures
on February 1, 1998, using discounted cash flow analyses, was approximately
$93,400.
On April 22, 1998, PVH completed a refinancing of its Revolving Credit
Facility and its 7.75% Senior Notes by entering into a new $325,000 Senior
Secured Credit Facility with a group of banks and by issuing $150,000 of 9.5%
Senior Subordinated Notes due May 1, 2008. The net proceeds from the Senior
Subordinated Notes were used to retire the 7.75% Senior Notes and to repay a
portion of the amount due under PVH's prior Revolving Credit Facility.
Accordingly, such amounts have been classified as long-term debt as of February
1, 1998.
The new $325,000 Credit Facility has a 5 year term and all borrowings
thereunder are due April 22, 2003. The Facility includes a revolving credit
facility which allows PVH, at its option, to borrow and repay amounts up to
$325,000. The Facility also includes a letter of credit facility with a
sub-limit of $250,000 provided, however, that the aggregate maximum amount
outstanding under both the revolving credit facility and the letter of credit
facility is $325,000. Interest is payable quarterly at a spread over LIBOR or
the prime rate, at the borrower's option, with the spread based on PVH's credit
rating and certain financial ratios. The Facility also provides for payment of a
fee on the unutilized portion of the Facility.
The 9.5% Senior Subordinated Notes have a yield to maturity of 9.58% and
interest payable semi-annually.
In connection with the 7.75% Debentures and the $325,000 Credit Facility,
substantially all of PVH's assets have been pledged as collateral.
In connection with the early retirement of the 7.75% Senior Notes, PVH paid
a yield maintenance premium of $1,446, which will be classified as an
extraordinary item in 1998.
The weighted average interest rate on outstanding borrowings under the
revolving credit facility at February 2, 1997 and February 1, 1998 was 6.2% and
6.4%, respectively.
Interest paid was $22,949 (1995), $24,039 (1996) and $20,784 (1997).
There are no scheduled maturities of long-term debt for the next five
years.
F-9
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
INVESTMENT IN PYRAMID SPORTSWEAR
During the fourth quarter of 1995, PVH acquired 25% of Pyramid Sportswear
('Pyramid') for $6,950 in cash and $1,800 in the Company's common stock. PVH
accounts for its investment in Pyramid under the equity method of accounting.
Pyramid, headquarted in Sweden, designs, develops and sources Gant sportswear
under a license from PVH and markets such sportswear in 35 countries around the
world. In connection with this investment, PVH also acquired an option to
purchase the remaining 75% of Pyramid beginning in 2000.
STOCKHOLDERS' EQUITY
Preferred Stock Rights -- On June 10, 1986, the Board of Directors declared
a distribution of one Right (the 'Rights') to purchase Series A Cumulative
Participating Preferred Stock, par value $100 per share, for each outstanding
share of common stock. As a result of subsequent stock splits, each outstanding
share of common stock now carries with it one-fifth of one Right.
Under certain circumstances, each Right will entitle the registered holder
to acquire from the Company one one-hundredth (1/100) of a share of said Series
A Preferred Stock at an exercise price of $100. The Rights will be exercisable,
except in certain circumstances, commencing ten days following a public
announcement that (i) a person or group has acquired or obtained the right to
acquire 20% or more of the common stock, in a transaction not approved by the
Board of Directors or (ii) a person or group has commenced or intends to
commence a tender offer for 30% or more of the common stock (the 'Distribution
Date').
If PVH is the surviving corporation in a merger or other business
combination then, under certain circumstances, each holder of a Right will have
the right to receive upon exercise the number of shares of common stock having a
market value equal to two times the exercise price of the Right.
In the event PVH is not the surviving corporation in a merger or other
business combination, or more than 50% of PVH's assets or earning power is sold
or transferred, each holder of a Right will have the right to receive upon
exercise the number of shares of common stock of the acquiring company having a
market value equal to two times the exercise price of the Right.
At any time prior to the close of business on the Distribution Date, PVH
may redeem the Rights in whole, but not in part, at a price of $.05 per Right.
During 1996, the rights were extended for a period of 10 years from the date of
initial expiration and will expire on June 16, 2006.
Stock Options -- Under PVH's stock option plans, non-qualified and
incentive stock options ('ISOs') may be granted. Options are granted at fair
market value at the date of grant. ISOs and non-qualified options granted have a
ten year duration. Generally, options are cumulatively exercisable in three
installments commencing three years after the date of grant.
Under APB Opinion No. 25, PVH does not recognize compensation expense
because the exercise price of the Company's stock options equals the market
price of the underlying stock on the date of grant. Under FASB Statement No.
123, proforma information regarding net income and earnings per share is
required as if the Company had accounted for its employee stock options under
the fair value method of that Statement.
For purposes of proforma disclosures, PVH estimated the fair value of stock
options granted since 1995 at the date of grant using the Black-Scholes option
pricing model. The estimated fair value of the options is amortized to expense
over the options' vesting period.
F-10
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
STOCKHOLDERS' EQUITY--(CONTINUED)
The following summarizes the assumptions used to estimate the fair value of
stock options granted in each year and certain proforma information:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Risk-free interest rate.......................................... 6.05% 6.61% 6.49%
Expected option life............................................. 7 Years 7 Years 7 YEARS
Expected volatility.............................................. 30.6% 30.6% 26.0%
Expected dividends per share..................................... $ 0.15 $ 0.15 $ 0.15
Weighted average estimated fair value per share of options
granted........................................................ $ 6.11 $ 5.29 $ 5.43
Proforma net income (loss)....................................... $ (127) $ 17,396 $(68,242)
Proforma basic and diluted net income (loss) per share........... $ (0.00) $ 0.65 $ (2.52)
</TABLE>
As any options granted in the future will also be subject to the fair value
proforma calculations, the proforma adjustments for 1995, 1996 and 1997 may not
be indicative of future years.
Other data with respect to stock options follows:
<TABLE>
<CAPTION>
OPTION PRICE WEIGHTED AVERAGE
SHARES PER SHARE PRICE PER SHARE
--------- --------------------- ----------------
<S> <C> <C> <C>
Outstanding at January 29, 1995.................. 1,554,249 $ 4.75 - $36.25 $16.99
Granted........................................ 568,390 10.75 - 17.50 15.02
Exercised...................................... 187,908 4.75 - 10.69 7.17
Cancelled...................................... 131,383 4.75 - 34.75 20.37
--------- --------------------- --------
Outstanding at January 28, 1996.................. 1,803,348 4.75 - 36.25 17.14
Granted........................................ 948,411 10.75 - 14.38 12.83
Exercised...................................... 66,353 4.75 - 8.75 5.81
Cancelled...................................... 727,866 6.88 - 36.25 26.07
--------- --------------------- --------
Outstanding at February 2, 1997.................. 1,957,540 4.75 - 31.63 12.12
Granted........................................ 817,250 12.81 - 15.68 14.23
Exercised...................................... 133,539 4.75 - 13.13 5.93
Cancelled...................................... 179,587 6.88 - 31.63 14.49
--------- --------------------- --------
Outstanding at February 1, 1998.................. 2,461,664 $ 5.94 - $31.63 $12.98
--------- --------------------- --------
--------- --------------------- --------
</TABLE>
Of the outstanding options at February 1, 1998, 434,466 shares have an
exercise price below $12.25, 2,023,558 shares have an exercise price from $12.25
to $16.50 and 3,640 shares have an exercise price above $16.50. The weighted
average remaining contractual life for all options outstanding at February 1,
1998 is 7.6 years.
Of the outstanding options at February 2, 1997 and February 1, 1998,
options covering 645,091 and 650,479 shares were exercisable at a weighted
average price of $9.35 and $10.56, respectively. Stock options available for
grant at February 2, 1997 and February 1, 1998 amounted to 311,496 and 1,704,250
shares, respectively.
LEASES
PVH leases retail stores, manufacturing facilities, office space and
equipment. The leases generally are renewable and provide for the payment of
real estate taxes and certain other occupancy expenses. Retail store leases
generally provide for the payment of percentage rentals based on store sales and
other costs associated with the leased property.
F-11
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
LEASES--(CONTINUED)
At February 1, 1998, minimum annual rental commitments under
non-cancellable operating leases, including leases for new retail stores which
had not begun operating at February 1, 1998, are as follows:
<TABLE>
<S> <C>
1998......................................................... $ 59,232
1999......................................................... 46,049
2000......................................................... 33,183
2001......................................................... 26,036
2002......................................................... 19,653
Thereafter................................................... 48,174
--------
Total minimum lease payments................................. $232,327
--------
--------
</TABLE>
Rent expense, principally for real estate, is as follows:
<TABLE>
<CAPTION>
1995 1996 1997
------- ------- -------
<S> <C> <C> <C>
Minimum............................................................. $69,988 $67,914 $65,177
Percentage and other................................................ 11,807 11,166 11,139
------- ------- -------
$81,795 $79,080 $76,316
------- ------- -------
------- ------- -------
</TABLE>
RETIREMENT AND BENEFIT PLANS
Defined Benefit Plans -- PVH has noncontributory, defined benefit pension
plans covering substantially all U.S. employees meeting certain age and service
requirements. For those vested (after five years of service), the plans provide
monthly benefits upon retirement based on career compensation and years of
credited service. It is PVH's policy to fund pension cost annually in an amount
consistent with Federal law and regulations. The assets of the plans are
principally invested in a mix of fixed income and equity investments. In
addition, PVH also participates in multi-employer plans, which provide defined
benefits to their union employees.
A summary of the components of net pension cost for the defined benefit
plans and the total contributions charged to pension expense for the
multi-employer plans follows:
<TABLE>
<CAPTION>
1995 1996 1997
-------- -------- --------
<S> <C> <C> <C>
Defined Benefit Plans:
Service cost -- benefits earned during the period............... $ 2,145 $ 2,528 $ 2,004
Interest cost on projected benefit obligation................... 7,107 7,425 7,935
Actual gain on plan assets...................................... (19,533) (13,688) (19,772)
Net amortization and deferral of actuarial gains................ 12,028 5,354 11,259
-------- -------- --------
Net pension cost of defined benefit plans......................... 1,747 1,619 1,426
Multi-employer plans.............................................. 219 253 213
-------- -------- --------
Total pension expense............................................. $ 1,966 $ 1,872 $ 1,639
-------- -------- --------
-------- -------- --------
</TABLE>
Significant rate assumptions used in determining pension obligations at the
end of each year, as well as pension cost in the following year, were as
follows:
<TABLE>
<CAPTION>
1995 1996 1997
---- ---- ----
<S> <C> <C> <C>
Discount rate used in determining projected benefit obligation................ 7.50% 8.00% 7.25%
Rate of increase in compensation levels....................................... 4.00% 4.50% 4.00%
Long-term rate of return on assets............................................ 8.75% 8.75% 8.75%
</TABLE>
F-12
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
RETIREMENT AND BENEFIT PLANS--(CONTINUED)
The following table sets forth the plans' funded status and amounts
recognized for defined benefit plans in the Company's balance sheets:
<TABLE>
<CAPTION>
1996 1997
--------- ---------
<S> <C> <C>
Actuarial present value of benefit obligations:
Vested benefit obligation................................................ $ 91,379 $ 108,656
--------- ---------
--------- ---------
Accumulated benefit obligation........................................... $ 93,373 $ 110,171
--------- ---------
--------- ---------
Plan assets at fair value.................................................. $ 110,830 $ 124,663
Less: projected benefit obligation for services rendered to date........... (101,065) (116,622)
--------- ---------
Plan assets in excess of projected benefit obligation...................... 9,765 8,041
Unrecognized prior service cost............................................ 3,099 2,536
Unrecognized net actuarial gain............................................ (3,665) (2,403)
Unrecognized net asset at adoption date of FASB Statement No. 87........... (305) (238)
--------- ---------
Net pension asset recognized in the balance sheets......................... $ 8,894 $ 7,936
--------- ---------
--------- ---------
</TABLE>
Plan assets in excess of projected benefit obligation at February 2, 1997
and February 1, 1998 are net of $3,729 and $4,264, respectively, for certain
underfunded plans.
PVH has an unfunded supplemental defined benefit plan covering 23 current
and retired executives under which the participants will receive a predetermined
amount during the 10 years following the attainment of age 65, provided that
prior to the termination of employment with PVH, the participant has been in the
plan for at least 10 years and has attained age 55. PVH does not intend to admit
new participants in the future. At February 2, 1997 and February 1, 1998, $7,450
and $8,309, respectively, are included in other liabilities as the accrued cost
of this plan.
Savings and Retirement Plans -- PVH has a savings and retirement plan (the
'Associates Investment Plan') and a supplemental savings plan for the benefit of
its eligible employees who elect to participate. Participants generally may
elect to contribute up to 15% of their annual compensation, as defined, to the
plans. PVH contributions to the plans are equal to 50% of the amounts
contributed by participating employees with respect to the first 6% of
compensation and were $2,668 (1995), $2,249 (1996) and $1,959 (1997). In
accordance with the terms of the Associates Investment Plan, PVH matching
contributions are invested in the Company's common stock.
Post-Retirement Benefits -- PVH and its domestic subsidiaries provide
certain health care and life insurance benefits to retired employees. Employees
become eligible for these benefits if they reach retirement age while working
for the Company. Retirees contribute to the cost of this plan, which is
unfunded.
Net post-retirement benefit cost includes the following components:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Service cost............................................................. $ 466 $ 687 $ 389
Interest cost............................................................ 2,128 2,166 2,403
Amortization of net loss................................................. 37 44 284
Amortization of transition obligation.................................... 273 273 273
------ ------ ------
$2,904 $3,170 $3,349
------ ------ ------
------ ------ ------
</TABLE>
F-13
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
RETIREMENT AND BENEFIT PLANS--(CONTINUED)
The following reconciles the plan's accumulated post-retirement benefit
with amounts recognized in the Company's balance sheets:
<TABLE>
<CAPTION>
1996 1997
-------- --------
<S> <C> <C>
Accumulated post-retirement benefit obligation:
Retirees receiving benefits................................................. $ 21,505 $ 27,389
Fully eligible active plan participants..................................... 2,132 2,547
Active plan participants not eligible for benefits.......................... 5,503 4,171
-------- --------
29,140 34,107
Unrecognized transition obligation............................................ (4,370) (4,097)
Unrecognized net loss......................................................... (4,729) (8,689)
-------- --------
Post-retirement liability recognized in the balance sheets.................... $ 20,041 $ 21,321
-------- --------
-------- --------
</TABLE>
The weighted average annual assumed rate of increase in the cost of covered
benefits (i.e., health care cost trend rate) is 7.0% for 1998 and is assumed to
decrease gradually to 5.5% by 2010 and remain at that level thereafter.
Increasing the assumed health care cost trend rate by one percentage point would
increase the accumulated post-retirement benefit obligation as of February 1,
1998 by $3,391, and the aggregate of the service and interest cost components of
net post-retirement benefit cost for 1997 by $303. The discount rate used in
determining the accumulated post-retirement benefit obligation at February 2,
1997 and February 1, 1998 was 8.0% and 7.25%, respectively.
SEGMENT DATA
PVH manages and analyzes its operating results by its two vertically
integrated business segments: (i) Apparel and (ii) Footwear and Related
Products. In prior years, the Apparel segment included sales, income and assets
related to apparel marketed by the Company's footwear division. In the fourth
quarter of 1997, PVH adopted FASB Statement No. 131, 'Disclosures about Segments
of an Enterprise and Related Information'. In identifying its reportable
segments under the provisions of Statement No. 131, PVH evaluated its operating
divisions and product offerings. Under the aggregation criteria of Statement No.
131, PVH aggregated the results of its apparel divisions into the Apparel
segment, which now excludes Bass apparel. The apparel segment derives revenues
from marketing dresswear, sportswear and accessories, principally under the
brand names Van Heusen, Izod, Izod Club, Gant and Geoffrey Beene. PVH's footwear
business has been identified as the Footwear and Related Products segment. This
segment derives revenues from marketing casual and weekend footwear, apparel and
accessories under the Bass brand name.
F-14
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
SEGMENT DATA--(CONTINUED)
Sales for both segments occur principally in the United States. There are
no inter-segment sales. The Bass apparel data for prior years has been
reclassified for consistent presentation with the current year.
<TABLE>
<CAPTION>
1995 1996 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net Sales
Apparel............................................. $ 1,006,701 $ 897,370 $ 911,047
Footwear and Related Products....................... 457,427 462,223 438,960
----------- ----------- -----------
Total Net Sales..................................... $ 1,464,128 $ 1,359,593 $ 1,350,007
----------- ----------- -----------
----------- ----------- -----------
Operating Income (Loss)
Apparel(1).......................................... $ 12,432 $ 30,021 $ (33,049)
Footwear and Related Products(2).................... 21,026 32,888 (38,853)
----------- ----------- -----------
Total Operating Income (Loss)....................... 33,458 62,909 (71,902)
Corporate Expenses.................................... (12,885) (15,171) (15,251)
Interest Expense, net................................. (23,199) (23,164) (20,672)
----------- ----------- -----------
Income (Loss) Before Taxes.......................... $ (2,626) $ 24,574 $ (107,825)
----------- ----------- -----------
----------- ----------- -----------
Identifiable Assets
Apparel............................................. $ 468,618 $ 381,274 $ 355,979
Footwear and Related Products....................... 165,390 143,631 152,518
Corporate........................................... 115,047 132,531 151,962
----------- ----------- -----------
$ 749,055 $ 657,436 $ 660,459
----------- ----------- -----------
----------- ----------- -----------
Depreciation and Amortization
Apparel............................................. $ 22,399 $ 16,105 $ 10,484
Footwear and Related Products....................... 7,074 5,780 6,561
Corporate........................................... 4,267 7,553 8,255
----------- ----------- -----------
$ 33,740 $ 29,438 $ 25,300
----------- ----------- -----------
----------- ----------- -----------
Identifiable Capital Expenditures
Apparel............................................. $ 20,555 $ 4,269 $ 8,103
Footwear and Related Products....................... 7,281 6,650 3,957
Corporate........................................... 11,937 11,659 5,863
----------- ----------- -----------
$ 39,773 $ 22,578 $ 17,923
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
- ------------------
(1) Operating income of the Apparel segment includes charges for facility and
store closing, restructuring and other expenses of $25,000 (1995) and
$78,465 (1997).
(2) Operating income of the Footwear and Related Products segment includes
charges for facility and store closing, restructuring and other expenses of
$2,000 (1995) and $54,235 (1997).
FACILITY AND STORE CLOSING, RESTRUCTURING AND OTHER EXPENSES
During 1995 and 1997, the Company recorded pre-tax charges of $27,000 and
$132,700, respectively, related principally to a series of actions the Company
has taken to accelerate the execution of its ongoing strategies to build its
brands. The initiatives related to the 1997 charges are as follows:
Exiting all U.S. mainland footwear manufacturing with the closing of the
Company's Wilton, Maine footwear manufacturing facility
Exiting sweater manufacturing with the sale and liquidation of the
Company's Puerto Rico sweater operations
Restructuring plant, warehouse and distribution and other administrative
areas to reduce product costs and operating expenses and improve efficiencies
Closing an additional 150 underperforming retail outlet stores
F-15
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
FACILITY AND STORE CLOSING, RESTRUCTURING AND OTHER EXPENSES--(CONTINUED)
Repositioning the Gant brand in the United States to be consistent with its
highly successful
positioning in Europe
Modifying a repositioning of the Bass brand, including the liquidation of a
resulting excess
inventory
The cost components of the 1997 charges are as follows:
<TABLE>
<S> <C>
Inventory markdowns included in cost of goods sold....................................... $ 46,000
Fixed asset write-offs................................................................... 40,800
Termination benefits for approximately 2,150 employees................................... 19,500
Lease and other obligations.............................................................. 19,100
Other.................................................................................... 7,300
--------
$132,700
--------
--------
</TABLE>
As of February 1, 1998, approximately $84,900 had been charged against this
reserve, of which approximately $26,600 related to inventory markdowns.
The initiatives related to the 1995 charges were the closing of three
domestic shirt manufacturing facilities, closing approximately 300
underperforming retail outlet stores and reorganizing the Company's management
structure to enhance the Company's focus on its brands. Approximately $13,000 of
the charges related to the write-off of fixed assets located in such factories
and retail outlet stores. The remaining $14,000 related to termination benefits,
including pension settlements and curtailments of $1,200, for approximately
1,250 employees. As of February 1, 1998, all of this reserve had been utilized.
OTHER COMMENTS
One of the Company's directors, Mr. Harry N.S. Lee, is a director of TAL
Apparel Limited, an apparel manufacturer and exporter based in Hong Kong. During
1995, 1996 and 1997, the Company purchased approximately $45,000, $35,000 and
$26,500, respectively, of products from TAL Apparel Limited and certain related
companies.
The Company is a party to certain litigation which, in management's
judgment based in part on the opinion of legal counsel, will not have a material
adverse effect on the Company's financial position.
During 1995, 1996 and 1997, the Company paid a $0.0375 per share cash
dividend each quarter on its common stock.
Certain items in 1995 and 1996 have been reclassified to present them on a
basis consistent with 1997.
F-16
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
(IN THOUSANDS, EXCEPT SHARE DATA)
RESERVE FOR DOUBTFUL ACCOUNTS
The following reflects PVH's allowance for bad debts:
<TABLE>
<CAPTION>
1995 1996 1997
------ ------ ------
<S> <C> <C> <C>
Allowance at Beginning of Year........................................... $1,617 $5,363 $3,401
Provision for Bad Debts.................................................. 4,244 2,165 694
Deductions Charged Against Allowance..................................... 498 4,127 1,184
------ ------ ------
Allowance at End of Year................................................. $5,363 $3,401 $2,911
------ ------ ------
------ ------ ------
</TABLE>
SELECTED QUARTERLY FINANCIAL DATA -- UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
------------------- ------------------- ------------------- -------------------
1996 1997 1996 1997(1) 1996 1997 1996(2) 1997(3)
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net sales.................... $273,660 $285,925 $313,807 $313,458 $391,245 $413,643 $380,881 $336,981
Gross profit................. 93,097 98,968 105,325 94,188 129,709 139,766 120,945 79,120
Net income (loss)............ (6,554) (4,540) 2,126 (33,285) 15,035 14,552 7,923 (43,306)
Net income (loss) per share:
Basic(4)................... (0.24) (0.17) 0.08 (1.23) 0.56 0.54 0.29 (1.59)
Diluted.................... (0.24) (0.17) 0.08 (1.23) 0.55 0.53 0.29 (1.59)
Price range of common stock
per share:
High....................... 13 3/8 14 5/8 14 1/2 15 3/4 11 3/4 15 7/8 15 1/8 14 1/2
Low........................ 9 5/8 11 1/2 11 12 3/8 10 3/8 13 1/2 10 3/4 11 1/2
</TABLE>
- ------------------
(1) Net loss for the second quarter of 1997 includes a pre-tax charge of $57,000
for facility and store closing, restructuring and other expenses.
(2) The fourth quarter of 1996 includes 14 weeks of operations.
(3) Net loss for the fourth quarter of 1997 includes a pre-tax charge of $75,700
for facility and store closing, restructuring and other expenses.
(4) Due to averaging the quarterly shares outstanding when computing basic
earnings per share, basic earnings per share totaled for the four quarters
of 1997 does not agree with the annual amount.
F-17
<PAGE>
INDEPENDENT ACCOUNTANTS REVIEW REPORT
Stockholders and Board of Directors
Phillips-Van Heusen Corporation
We have reviewed the accompanying condensed consolidated balance sheet of
Phillips-Van Heusen Corporation as of May 3, 1998, and the related condensed
consolidated statements of operations and cash flows for the thirteen week
periods ended May 3, 1998 and May 4, 1997. These financial statements are the
responsibility of the Company's management.
We conducted our reviews in accordance with standards established by the
American Institute of Certified Public Accountants. A review of interim
financial information consists principally of applying analytical procedures to
financial data, and making inquiries of persons responsible for financial and
accounting matters. It is substantially less in scope than an audit conducted in
accordance with generally accepted auditing standards, which will be performed
for the full year with the objective of expressing an opinion regarding the
financial statements taken as a whole. Accordingly, we do not express such an
opinion.
Based on our reviews, we are not aware of any material modifications that
should be made to the accompanying condensed consolidated financial statements
referred to above for them to be in conformity with generally accepted
accounting principles.
/s/ Ernst & Young LLP
New York, New York
May 20, 1998
F-18
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
MAY 3,
1998
-----------
(UNAUDITED)
<S> <C>
ASSETS
Current Assets:
Cash, including cash equivalents of $6,009........................................................ $ 12,694
Trade receivables, less allowances of $2,769...................................................... 101,901
Inventories....................................................................................... 261,739
Other, including deferred taxes of $19,031........................................................ 34,994
-----------
Total Current Assets........................................................................... 411,328
Property, Plant and Equipment....................................................................... 92,614
Goodwill............................................................................................ 115,683
Other Assets, including deferred taxes of $44,659................................................... 70,620
-----------
$ 690,245
-----------
-----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Notes payable..................................................................................... $ 48,000
Accounts payable.................................................................................. 32,214
Accrued expenses.................................................................................. 82,623
-----------
Total Current Liabilities...................................................................... 162,837
Long-Term Debt...................................................................................... 249,349
Other Liabilities................................................................................... 65,262
Stockholders' Equity:
Preferred Stock, par value $100 per share; 150,000 shares authorized; no shares outstanding
Common Stock, par value $1 per share; 100,000,000 shares authorized; shares issued 27,188,644..... 27,189
Additional Capital................................................................................ 117,019
Retained Earnings................................................................................. 68,589
-----------
Total Stockholders' Equity..................................................................... 212,797
-----------
$ 690,245
-----------
-----------
</TABLE>
See notes to condensed consolidated financial statements.
F-19
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
----------------------
MAY 4, MAY 3,
1997 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
Net sales............................................................................ $285,925 $295,765
Cost of goods sold................................................................... 186,957 193,257
-------- --------
Gross profit......................................................................... 98,968 102,508
Selling, general and administrative expenses......................................... 100,654 101,954
Year 2000 computer conversion expenses............................................... 2,000
-------- --------
Loss before interest, taxes and extraordinary item................................... (1,686) (1,446)
Interest expense, net................................................................ 4,932 5,466
-------- --------
Loss before taxes and extraordinary item............................................. (6,618) (6,912)
Income tax benefit................................................................... 2,078 2,427
-------- --------
Loss before extraordinary item....................................................... (4,540) (4,485)
Extraordinary loss on debt retirement................................................ (1,060)
-------- --------
Net loss............................................................................. $ (4,540) $ (5,545)
-------- --------
-------- --------
Basic and diluted net loss per share:
Loss before extraordinary item..................................................... $ (0.17) $ (0.16)
Extraordinary loss................................................................. (0.04)
-------- --------
Net loss per share................................................................. $ (0.17) $ (0.20)
-------- --------
-------- --------
</TABLE>
See notes to condensed consolidated financial statements.
F-20
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
THIRTEEN WEEKS ENDED
-------------------------------------------
MAY 4, 1997 MAY 3, 1998
-------------------- --------------------
(UNAUDITED)
<S> <C> <C>
Operating activities:
Net loss.................................................................. $ (4,540) $ (5,545)
Adjustments to reconcile net loss to net cash
used by operating activities:
Depreciation and amortization.......................................... 6,982 6,785
Equity income in Pyramid Sportswear.................................... (228) (260)
Deferred income taxes.................................................. (565)
Changes in operating assets and liabilities:
Receivables............................................................ (5,398) (13,245)
Inventories............................................................ (29,690) (12,205)
Accounts payable and accrued expenses.................................. (3,869) (10,428)
Deferred landlord contributions........................................ (1,382) (1,129)
Other-net.............................................................. (967) (1,264)
----------- -----------
Net cash used by operating activities............................. (39,092) (37,856)
Investing activities:
Property, plant and equipment acquired.................................... (3,354) (3,553)
Financing activities:
Net proceeds from issuance of 9.5% senior subordinated notes.............. 145,104
Repayment of 7.75% senior notes........................................... (49,286)
Proceeds from revolving lines of credit................................... 49,001 117,000
Payments on revolving lines of credit..................................... (168,500)
Exercise of stock options................................................. 105 75
Cash dividends............................................................ (2,030) (2,038)
----------- -----------
Net cash provided by financing activities......................... 47,076 42,355
----------- -----------
Increase in cash............................................................ 4,630 946
Cash at beginning of period................................................. 11,590 11,748
----------- -----------
Cash at end of period....................................................... $ 16,220 $ 12,694
----------- -----------
----------- -----------
</TABLE>
See notes to condensed consolidated financial statements.
F-21
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
UNAUDITED
(IN THOUSANDS)
GENERAL
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles for
interim financial information. Accordingly, they do not contain all disclosures
required by generally accepted accounting principles for complete financial
statements. Reference should be made to the annual financial statements,
including the notes thereto, for the year ended February 1, 1998 which are
included elsewhere herein.
The preparation of the financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from the estimates.
The results of operations for the thirteen weeks ended May 4, 1997 and May
3, 1998 are not necessarily indicative of those for a full fiscal year due, in
part, to seasonal factors. The data contained in these financial statements are
unaudited and are subject to year-end adjustments; however, in the opinion of
management, all known adjustments (which consist only of normal recurring
accruals) have been made to present fairly the consolidated operating results
for the unaudited periods.
Certain reclassifications have been made to the condensed consolidated
financial statements for the thirteen weeks ended May 4, 1997 to present them on
a basis consistent with the thirteen weeks ended May 3, 1998.
INVENTORIES
Inventories are summarized as follows:
<TABLE>
<CAPTION>
MAY 3,
1998
--------
<S> <C>
Raw materials.................................................................... $ 14,325
Work in process.................................................................. 14,509
Finished goods................................................................... 232,905
--------
Total.......................................................................... $261,739
--------
--------
</TABLE>
Inventories are stated at the lower of cost or market. Cost for apparel
inventories, excluding certain sportswear inventories, is determined using the
last-in, first-out method (LIFO). Cost for footwear and certain sportswear
inventories is determined using the first-in, first-out method (FIFO).
Inventories would have been approximately $12,200 higher than reported at May 3,
1998, if the FIFO method of inventory accounting had been used for all apparel.
The final determination of cost of sales and inventories under the LIFO
method can only be made at the end of each fiscal year based on inventory cost
and quantities on hand. Interim LIFO determinations are based on management's
estimates of expected year-end inventory levels and costs. Such estimates are
subject to revision at the end of each quarter. Since estimates of future
inventory levels and costs are subject to external factors, interim financial
results are subject to year-end LIFO inventory adjustments.
EXTRAORDINARY LOSS
On April 22, 1998, PVH issued $150 million of 9.5% senior subordinated
notes due May 1, 2008 and used the net proceeds to retire its intermediate term
7.75% senior notes and to repay a portion of the borrowings under its prior
revolving credit facility. On the same day, PVH refinanced its revolving credit
facility by entering into a new $325 million senior secured credit facility. In
connection therewith,
F-22
<PAGE>
PHILLIPS-VAN HEUSEN CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
UNAUDITED
(IN THOUSANDS)
EXTRAORDINARY LOSS--(CONTINUED)
the Company paid a yield maintenance premium of $1.4 million and wrote-off
certain debt issue costs of $0.2 million. These items have been classified as an
extraordinary loss, net of tax benefit of $0.5 million, in the first quarter of
1998.
SEGMENT DATA
PVH manages and analyzes its operating results by its two vertically
integrated business segments: (i) Apparel and (ii) Footwear and Related
Products. In identifying its reportable segments under the provisions of FASB
Statement No. 131, 'Disclosures about Segments of an Enterprise and Related
Information', PVH evaluated its operating divisions and product offerings. Under
the aggregation criteria of Statement No. 131, PVH aggregated the results of its
apparel divisions into the Apparel segment. This segment derives revenues from
marketing dresswear, sportswear and accessories, principally under the brand
names Van Heusen, Izod, Izod Club, Gant and Geoffrey Beene. PVH's footwear
business has been identified as the Footwear and Related Products segment. This
segment derives revenues from marketing casual and weekend footwear, apparel and
accessories under the Bass brand name.
Sales for both segments occur principally in the United States. There are
no inter-segment sales. See 'Management's Discussion and Analysis of Results of
Operations and Financial Condition' for additional segment data.
F-23
<PAGE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR
MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE SECURITIES TO
WHICH IT RELATES OR AN OFFER TO SELL OR THE SOLICITATION OF AN OFFER TO BUY SUCH
SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR SOLICITATION IS UNLAWFUL.
NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY SALE MADE HEREUNDER SHALL, UNDER
ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE
AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE INFORMATION CONTAINED
HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
------------------------
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary............................. 1
Risk Factors................................... 14
Use of Proceeds................................ 17
Capitalization................................. 18
Selected Consolidated Financial Information.... 19
Management's Discussion and Analysis of
Financial Condition and Results of
Operations................................... 22
The Exchange Offer............................. 30
Business....................................... 38
Management..................................... 51
Principal Stockholders......................... 53
Description of Senior Debt..................... 54
Description of Exchange Notes.................. 55
Description of Certain Federal Income Tax
Consequences of an Investment in the Exchange
Notes........................................ 78
Plan of Distribution........................... 82
Validity of the Exchange Notes................. 82
Experts........................................ 82
Available Information.......................... 83
Index to Financial Statements.................. F-1
</TABLE>
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PHILLIPS-VAN HEUSEN
CORPORATION
OFFER TO EXCHANGE UP TO
$150,000,000 OF ITS
9 1/2% SENIOR SUBORDINATED
NOTES DUE 2008
FOR
9 1/2% SENIOR SUBORDINATED NOTES
DUE 2008
------------------------------
PROSPECTUS
------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Section 145 of the General Corporation Law of Delaware, the law of the
state in which the Company is incorporated, empowers a corporation within
certain limitations to indemnify any person against expenses, including
attorney's fees, judgments, fines and amounts paid in settlement actually and
reasonably incurred by the person in connection with any suit or proceeding to
which such person is a party by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise, as
long as such person acted in good faith and in a manner which the person
reasonably believed to be in, or not opposed to, the best interests of the
corporation. With respect to any criminal proceeding, the person must have had
no reasonable cause to believe that the person's conduct was unlawful. Article
Eighth of the Company's Certificate of Incorporation provides for
indemnification of directors to the extent permitted by the General Corporation
Law of the State of Delaware.
Section 102(b)(7) of the General Corporation Law of the State of Delaware
provides that a certificate of incorporation may contain a provision eliminating
or limiting the personal liability of a director to the corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director,
provided that such provision shall not eliminate or limit the liability of a
director (i) for any breach of the director's duty of loyalty to the Company or
its stockholders, (ii) for acts or omissions not in good faith or which involve
intentional misconduct or a knowing violation of law, (iii) under Section 174
(relating to liability for unauthorized acquisitions or redemptions of, or
dividends on, capital stock) of the General Corporation Law of the State of
Delaware, or (iv) for any transaction from which the director derived an
improper personal benefit. Article Eighth of the Company's Certificate of
Incorporation contains such a provision.
The Company also has in effect directors' and officers' liability insurance
covering certain liabilities incurred by the directors and officers of the
Company in connection with the performance of their duties.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
See the Exhibit Index included immediately preceding the exhibits to this
Registration Statement.
ITEM 22. UNDERTAKINGS.
The undersigned Company hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to the Registration Statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act;
(ii) to reflect in the prospectus any facts or events arising after
the effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from low or high and of the estimated
maximum offering range may be reflected in the form of prospectus filed
with the Commission pursuant to Rule 424(b) if, in the aggregate, the
changes in volume and price represent no more than a 20 percent change
in the maximum aggregate offering price set forth in the 'Calculation of
Registration Fee' table in the effective registration statement;
II-1
<PAGE>
(iii) to include any material information with respect to the plan
of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration
Statement;
(2) That, for the purpose of determining any liability under the
Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and
the offering of such securities at that time shall be deemed to be the
initial bona fide offering thereof.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
The Company hereby undertakes that, for purposes of determining any
liability under the Securities Act, each filing of the Company's annual report
pursuant to Section 13(a) or Section 15(d) of the Exchange Act (and, where
applicable, each filing of an employee benefit plan's annual report pursuant to
Section 15(d) of the Exchange Act) that is incorporated by reference in this
Registration Statement shall be deemed to be a new registration statement
relating to the securities offered therein, and the offering of such securities
at that time shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities Act
may be permitted to directors, officers, and controlling persons of the Company
pursuant to the foregoing provisions, or otherwise, the Company has been advised
that in the opinion of the Commission such indemnification is against public
policy as expressed in the Securities Act and is, therefore, unenforceable. In
the event that a claim for indemnification against such liabilities (other than
the payment by the Company of expenses incurred or paid by a director, officer
or controlling person of the Company in the successful defense of any action,
suit or proceeding) is asserted by such director, officer or controlling person
in connection with the securities being registered, the Company will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit to a court of appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in the Act, and will
be governed by the final adjudication of such issue.
The undersigned Company hereby undertakes to respond to requests for
information that is incorporated by reference into the prospectus pursuant to
Items 4, 10(b), 11 or 13 of this form, within one business day of receipt of
such request, and to send the incorporated documents by first-class mail or
other equally prompt means. This includes information contained in documents
filed subsequent to the effective date of the Registration Statement through the
date of responding to the request.
II-2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Company has
duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the County of New York and State of
New York on June 17, 1998.
PHILLIPS VAN-HEUSEN CORPORATION
By: /s/
----------------------------------
Bruce J. Klatsky
Chairman and Chief Executive Officer
II-3
<PAGE>
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Bruce J. Klatsky his true and lawful
attorney-in-fact and agent, acting alone, with full power of substitution and
resubstitution, for him and in his name, place, and stead, in any and all
capacities, to sign any or all amendments (including post-effective amendments)
to this Registration Statement, and to file the same, with all the exhibits
thereto, and other documents in connection therewith, with the Commission,
granting unto said attorney-in-fact and agent, acting alone, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises as fully, to all intents and purposes, as
he might or could do in person, hereby ratifying and confirming all that said
attorney-in-fact and agent, acting alone, or his substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Chairman; Chief Executive Officer; June 17, 1998
- --------------------------------------- Director
Bruce J. Klatsky
/s/ President, Chief Operating Officer; June 17, 1998
- ---------------------------------------
Mark Weber
/s/ Executive Vice President; Chief Financial June 17, 1998
- --------------------------------------- Officer; Director
Irwin W. Winter
/s/ Vice President and Controller June 17, 1998
- ---------------------------------------
Emanuel Chirico
/s/ Director June 17, 1998
- ---------------------------------------
Edward H. Cohen
/s/ Director June 17, 1998
- ---------------------------------------
Joseph B. Fuller
/s/ Director June 17, 1998
- ---------------------------------------
Joel H. Goldberg
/s/ Director June 17, 1998
- ---------------------------------------
Marc Grossman
/s/ Director June 17, 1998
- ---------------------------------------
Dennis F. Hightower
/s/ Director June 17, 1998
- ---------------------------------------
Maria Elena Lagomasino
/s/ Director June 17, 1998
- ---------------------------------------
Harry N.S. Lee
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Director June 17, 1998
- ---------------------------------------
Bruce Maggin
/s/ Director June 17, 1998
- ---------------------------------------
Sylvia M. Rhone
/s/ Director June 17, 1998
- ---------------------------------------
Peter J. Solomon
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- ------ -----------
<S> <C>
4.1* -- Indenture, dated as of April 22, 1998, between the Company and Union
Bank of California, N.A., as Trustee.
4.2* -- Exchange and Registration Rights Agreement, dated as of April 22, 1998,
among the Company and Goldman, Sachs & Co., Chase Securities Inc. and
Citicorp Securities, Inc.
4.3* -- Form of Global 9 1/2% Senior Subordinated Note due 2008.
5* -- Form of Opinion of Rosenman & Colin LLP.
12* -- Statement re: Computation of Ratios.
13 -- Annual Report on Form 10-K for the fiscal year ended February 1, 1998,
as amended by its amendment on Form 10-K/A No. 1 (incorporated by
reference to the Company's Annual Report on Form 10-K and its amendment
on Form 10-K/A filed with the Commission on April 15, 1998 and April 24,
1998, respectively).
21 -- List of Subsidiaries (incorporated by reference to the Company's Annual
Report on Form 10-K for the fiscal year ended February 1, 1998).
23.1* -- Consent of Ernst & Young LLP.
23.2* -- Consent of Rosenman & Colin LLP (included in Exhibit 5).
24* -- Power of Attorney (included on page II-4).
25+ -- Form T-1 Statement of Eligibility under the Trust Indenture Act of 1939
of Union Bank of California, N.A., as Trustee.
99.1* -- Form of Letter of Transmittal for Initial Notes.
99.2* -- Form of Notice of Guaranteed Delivery for Initial Notes.
</TABLE>
- ------------------
* Filed herewith.
+ To be filed by amendment.
<PAGE>
Exhibit 4.1
- --------------------------------------------------------------------------------
PHILLIPS-VAN HEUSEN CORPORATION
As Issuer
TO
UNION BANK OF CALIFORNIA, N.A.
As Trustee
----------------
Indenture
Dated as of April 22, 1998
----------------
$150,000,000
9 1/2% Senior Subordinated Notes due May 1, 2008
- --------------------------------------------------------------------------------
<PAGE>
.....................................
Reconciliation and tie between Trust Indenture Act
of 1939 and Indenture, dated as of August 7, 1997
Trust Indenture Indenture
Act Section Section
----------- -------
ss. 310(a)(1) ............................... 609
(a)(2) ............................... 609
(a)(3) ............................... Not
Applicable
(a)(4) ............................... Not
Applicable
(b) ............................... 608
610
ss. 311(a) ............................... 613(a)
(b) ............................... 613(b)
(b)(2) ............................... 703(a)(2)
703(b)
ss. 312(a) ............................... 701
702(a)
(b) ............................... 702(b)
(c) ............................... 702(c)
ss. 313(a) ............................... 703(a)
(b) ............................... 703(b)
(c) ............................... 703(a)
703(b)
(d) ............................... 703(c)
ss. 314(a) ............................... 704
(b) ............................... Not
Applicable
(c)(1) ............................... 102
(c)(2) ............................... 102
(c)(3) ............................... Not
Applicable
(d) ............................... Not
Applicable
(e) ............................... 102
ss. 315(a) ............................... 601(a)
(b) ............................... 602
703(a)(6)
(c) ............................... 601(b)
(d) ............................... 601(c)
(d)(1) ............................... 601(a)(1)
(d)(2) ............................... 601(c)(2)
i
<PAGE>
Trust Indenture Indenture
Act Section Section
----------- ------
(d)(3) ............................... 601(c)(3)
(e) ............................... 514
ss. 316(a) ............................... 101
(a)(1)(A) ............................... 502
512
(a)(1)(B) ............................... 513
(a)(2) ............................... Not
Applicable
(b) ............................... 508
ss. 317(a)(1) ............................... 503
(a)(2) ............................... 504
(b) ............................... 1003
ss. 318(a) ............................... 107
- --------------
Note: This reconciliation and tie shall not, for any purpose, be deemed to be a
part of the Indenture.
ii
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
RECITALS OF THE COMPANY..................................................................................1
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions................................................................................1
Act.............................................................................................2
Affiliate.......................................................................................2
Agent Member....................................................................................3
Applicable Procedures...........................................................................3
Asset Disposition...............................................................................3
Board of Directors..............................................................................3
Board Resolution................................................................................3
Business Day....................................................................................4
Capital Lease Obligation........................................................................4
Capital Stock...................................................................................4
Cash Equivalents................................................................................4
Cedel...........................................................................................5
Closing Date....................................................................................5
Commission......................................................................................5
Common Stock....................................................................................5
Company.........................................................................................5
Company Request/Company Order...................................................................5
Consolidated Cash Flow Available for Fixed Charges..............................................5
Consolidated Cash Flow Coverage Ratio...........................................................6
Consolidated Fixed Charges......................................................................7
Consolidated Income Tax Expense.................................................................7
Consolidated Interest Expense...................................................................7
Consolidated Net Income.........................................................................7
Consolidated Net Worth..........................................................................8
Consolidated Tangible Assets....................................................................8
Corporate Trust Office..........................................................................8
corporation.....................................................................................9
Debt............................................................................................9
Depositary......................................................................................9
Designated Senior Debt.........................................................................10
DTC............................................................................................10
Euroclear......................................................................................10
Event of Default...............................................................................10
Exchange Act...................................................................................10
Exchange and Registration Rights Agreement.....................................................10
</TABLE>
-iii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Exchange Notes.................................................................................10
Exchange Offer.................................................................................10
Exchange Registration Statement................................................................10
Global Note....................................................................................11
Guarantee......................................................................................11
Holder.........................................................................................11
Incur..........................................................................................11
Indenture......................................................................................11
Initial Purchasers.............................................................................12
Interest Payment Date..........................................................................12
Interest Rate, Currency or Commodity Price
Agreement......................................................................................12
Investment.....................................................................................12
Lien...........................................................................................12
Maturity.......................................................................................12
Moody's........................................................................................13
Net Available Proceeds.........................................................................13
New Credit Facility............................................................................14
Note Purchase Agreement........................................................................14
Notes..........................................................................................14
Offer to Purchase..............................................................................14
Officers' Certificate..........................................................................17
Opinion of Counsel.............................................................................17
Original Notes.................................................................................17
Outstanding....................................................................................17
Paying Agent...................................................................................18
Permitted Interest Rate, Currency or Commodity
Price Agreement................................................................................18
Permitted Investments..........................................................................19
Person.........................................................................................19
Predecessor Note...............................................................................19
Preferred Stock................................................................................20
Public Equity Offering.........................................................................20
Receivables....................................................................................20
Receivables Sale...............................................................................20
Redeemable Stock...............................................................................20
Redemption Date................................................................................20
Redemption Price...............................................................................20
Registration Default...........................................................................21
Registration Default Period....................................................................21
Regulation S...................................................................................21
Regulation S Certificate.......................................................................21
Regulation S Global Note.......................................................................21
Regulation S Legend............................................................................21
Regulation S Notes.............................................................................21
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
Related Person.................................................................................22
Responsible Officer............................................................................22
Restricted Notes...............................................................................22
Restricted Notes Certificate...................................................................22
Restricted Notes Legend........................................................................22
Restricted Period..............................................................................22
Restricted Subsidiary..........................................................................22
Rule 144.......................................................................................22
Rule 144A......................................................................................23
Rule 144A Notes................................................................................23
S&P............................................................................................23
Securities Act.................................................................................23
Security Register/Security Registrar...........................................................23
Senior Debt....................................................................................23
Shelf Registration Statement...................................................................24
Special Interest...............................................................................24
Special Record Date............................................................................24
Stated Maturity................................................................................24
Subordinated Debt..............................................................................24
Subsidiary.....................................................................................25
Successor Note.................................................................................25
Temporary Cash Investments.....................................................................25
Trust Indenture Act............................................................................27
Trustee........................................................................................27
2023 Debentures................................................................................27
U.S. Person....................................................................................27
Vice President.................................................................................28
Voting Stock...................................................................................28
Wholly Owned Restricted Subsidiary.............................................................28
SECTION 102. Compliance Certificates and Opinions.......................................................28
SECTION 103. Form of Documents Delivered to Trustee.....................................................29
SECTION 104. Acts of Holders; Record Date...............................................................30
SECTION 105. Notices, Etc., to Trustee and Company......................................................31
SECTION 106. Notice to Holders; Waiver..................................................................32
SECTION 107. Conflict with Trust Indenture Act..........................................................33
SECTION 108. Effect of Headings and Table of Contents...................................................33
SECTION 109. Successors and Assigns.....................................................................33
SECTION 110. Separability Clause........................................................................33
SECTION 111. Benefits of Indenture......................................................................33
SECTION 112. Governing Law..............................................................................34
SECTION 113. Legal Holidays.............................................................................34
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE TWO
Note Forms
Page
----
<S> <C>
SECTION 201. Forms Generally; Initial Forms of Rule
144A and Regulation S Notes...........................................................34
SECTION 202. Form of Face of Note..................................................................36
SECTION 203. Form of Reverse of Note...............................................................40
SECTION 204. Form of Trustee's Certificate of
Authentication........................................................................45
ARTICLE THREE
The Notes
SECTION 301. Title and Terms.......................................................................46
SECTION 302. Denominations.........................................................................47
SECTION 303. Execution, Authentication, Delivery
and Dating............................................................................47
SECTION 304. Temporary Notes.......................................................................49
SECTION 305. Global Notes..........................................................................49
SECTION 306. Registration, Registration of Transfer
and Exchange Generally; Restrictions
on Transfer and Exchange; Securities
Act Legends...........................................................................51
SECTION 307. Mutilated, Destroyed, Lost and Stolen
Notes....................................................................56
SECTION 308. Payment of Interest; Interest Rights
Preserved.............................................................................57
SECTION 309. Persons Deemed Owners.................................................................59
SECTION 310. Cancellation..........................................................................60
SECTION 311. Computation of Interest...............................................................60
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture...............................................60
SECTION 402. Application of Trust Money............................................................62
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.....................................................................62
</TABLE>
-vi-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 502. Acceleration of Maturity; Rescission
and Annulment.........................................................................66
SECTION 503. Collection of Indebtedness and Suits
for Enforcement by Trustee............................................................67
SECTION 504. Trustee May File Proofs of Claim......................................................68
SECTION 505. Trustee May Enforce Claims Without
Possession of Notes...................................................................69
SECTION 506. Application of Money Collected........................................................69
SECTION 507. Limitation on Suits...................................................................70
SECTION 508. Unconditional Right of Holders to Receive
Principal, Premium and Interest.......................................................71
SECTION 509. Restoration of Rights and Remedies....................................................71
SECTION 510. Rights and Remedies Cumulative........................................................71
SECTION 511. Delay or Omission Not Waiver..........................................................72
SECTION 512. Control by Holders....................................................................72
SECTION 513. Waiver of Past Defaults...............................................................72
SECTION 514. Undertaking for Costs.................................................................73
SECTION 515. Waiver of Stay or Extension Laws......................................................73
ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities...................................................74
SECTION 602. Notice of Defaults....................................................................74
SECTION 603. Certain Rights of Trustee.............................................................74
SECTION 604. Not Responsible for Recitals or
Issuance of Notes.....................................................................76
SECTION 605. May Hold Notes........................................................................76
SECTION 606. Money Held in Trust...................................................................77
SECTION 607. Compensation and Reimbursement........................................................77
SECTION 608. Disqualification; Conflicting Interests...............................................78
SECTION 609. Corporate Trustee Required; Eligibility...............................................78
SECTION 610. Resignation and Removal; Appointment
of Successor..........................................................................78
SECTION 611. Acceptance of Appointment by Successor................................................80
SECTION 612. Merger, Conversion, Consolidation or
Succession to Business................................................................80
SECTION 613. Preferential Collection of Claims
Against Company.......................................................................81
</TABLE>
-vii-
<PAGE>
<TABLE>
<CAPTION>
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
Page
----
<S> <C>
SECTION 701. Company to Furnish Trustee Names and
Addresses of Holders..................................................................81
SECTION 702. Preservation of Information;
Communications to Holders.............................................................82
SECTION 703. Reports by Trustee....................................................................82
SECTION 704. Reports by Company....................................................................82
SECTION 705. Officers' Certificate with Respect to
Change in Interest Rates..............................................................83
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Mergers, Consolidations and Certain
Transfers, Leases and Acquisition of
Assets...................................................................83
SECTION 802. Successor Substituted.................................................................84
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without
Consent of Holders....................................................................85
SECTION 902. Supplemental Indentures with Consent
of Holders............................................................................86
SECTION 903. Execution of Supplemental Indentures..................................................87
SECTION 904. Effect of Supplemental Indentures.....................................................87
SECTION 905. Conformity with Trust Indenture Act...................................................88
SECTION 906. Reference in Notes to Supplemental
Indentures............................................................................88
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and
Interest..............................................................................88
SECTION 1002. Maintenance of Office or Agency.......................................................88
SECTION 1003. Money for Note Payments to Be Held
in Trust..............................................................................89
</TABLE>
-viii-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1004. Existence.............................................................................91
SECTION 1005. Maintenance of Properties.............................................................91
SECTION 1006. Payment of Taxes and Other Claims.....................................................91
SECTION 1007. Maintenance of Insurance..............................................................92
SECTION 1008. Limitation on Consolidated Debt.......................................................92
SECTION 1009. Limitation on Senior Subordinated Debt................................................95
SECTION 1010. Limitation on Issuance of Guarantees
of Subordinated Debt..................................................................95
SECTION 1011. Limitation on Liens...................................................................95
SECTION 1012. Limitation on Restricted Payments.....................................................96
SECTION 1013. Limitations on Dividend and Other Payment
Restrictions Affecting Subsidiaries...................................................98
SECTION 1014. Limitation on Asset Disposition......................................................100
SECTION 1015. Transactions with Affiliates and Related
Persons..............................................................................101
SECTION 1016. Change of Control....................................................................102
SECTION 1017. Provision of Financial Information...................................................103
SECTION 1018. Unrestricted Subsidiaries............................................................103
SECTION 1019. Statement by Officers as to Default;
Compliance Certificates..............................................................104
SECTION 1020. Waiver of Certain Covenants..........................................................105
ARTICLE ELEVEN
Redemption of Notes
SECTION 1101. Right of Redemption..................................................................105
SECTION 1102. Applicability of Article.............................................................106
SECTION 1103. Election to Redeem; Notice to Trustee................................................106
SECTION 1104. Selection by Trustee of Notes to Be
Redeemed................................................................106
SECTION 1105. Notice of Redemption.................................................................107
SECTION 1106. Deposit of Redemption Price..........................................................108
SECTION 1107. Notes Payable on Redemption Date.....................................................108
SECTION 1108. Notes Redeemed in Part...............................................................109
ARTICLE TWELVE
Subordination of Notes
SECTION 1201. Notes Subordinate to Senior Debt.....................................................109
SECTION 1202. Payment Over of Proceeds Upon
Dissolution, Etc.....................................................................109
SECTION 1203. No Payment When Senior Debt in Default...............................................111
SECTION 1204. Payment Permitted If No Default......................................................113
</TABLE>
-ix-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
SECTION 1205. Subrogation to Rights of Holders of
Senior Debt..........................................................................113
SECTION 1206. Provisions Solely to Define Relative
Rights...............................................................................113
SECTION 1207. Trustee to Effectuate Subordination..................................................114
SECTION 1208. No Waiver of Subordination Provisions................................................114
SECTION 1209. Notice to Trustee....................................................................115
SECTION 1210. Reliance on Judicial Order or Certificate
of Liquidating Agent.................................................................116
SECTION 1211. Trustee Not Fiduciary for Holders of
Senior Debt..........................................................................116
SECTION 1212. Rights of Trustee as Holder of Senior
Debt; Preservation of Trustee's Rights...............................................117
SECTION 1213. Article Applicable to Paying Agents..................................................117
SECTION 1214. Defeasance of this Article Twelve....................................................117
ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
SECTION 1301. Company's Option to Effect Defeasance or
Covenant Defeasance..................................................................118
SECTION 1302. Defeasance and Discharge.............................................................118
SECTION 1303. Covenant Defeasance..................................................................119
SECTION 1304. Conditions to Defeasance or Covenant
Defeasance...........................................................................119
SECTION 1305. Deposited Money and U.S. Government
Obligations to be Held in Trust;
Other Miscellaneous Provisions.......................................................122
SECTION 1306. Reinstatement........................................................................123
</TABLE>
-x-
<PAGE>
<TABLE>
<CAPTION>
Page
----
<S> <C>
ANNEX A -- Form of Regulation S Certificate..............................................................1
ANNEX B -- Form of Restricted Securities Certificate.....................................................1
ANNEX C -- Form of Unrestricted Securities Certificate...................................................1
ANNEX D -- Form of Certification to be Given by Holders of
Beneficial Interest in a Regulation S Temporary Global
Note..........................................................................................1
ANNEX E -- Form of Certification to be Given by the
Euroclear Operator or Cedel S.A...............................................................1
</TABLE>
-xi-
<PAGE>
INDENTURE, dated as of April 22, 1998, between Phillips-Van
Heusen Corporation, a corporation duly organized and existing under the laws of
the State of Delaware (herein called the "Company"), having its principal office
at 1290 Avenue of the Americas, New York, New York 10104 and Union Bank of
California, N.A., a national banking association duly organized and existing
under the laws of the United States of America, as Trustee (herein called the
"Trustee").
RECITALS OF THE COMPANY
The Company has duly authorized the creation of an issue of
its 9 1/2% Senior Subordinated Notes due May 1, 2008 (the "Notes") of
substantially the tenor and amount hereinafter set forth, and to provide
therefor the Company has duly authorized the execution and delivery of this
Indenture.
All things necessary (i) to make the Notes, when executed by
the Company and authenticated and delivered hereunder and duly issued by the
Company, the valid obligations of the Company and (ii) to make this Indenture a
valid agreement of the Company, all in accordance with their respective terms,
have been done.
NOW, THEREFORE, THIS INDENTURE WITNESSETH:
For and in consideration of the premises and the purchase of
the Notes by the Holders thereof, it is mutually covenanted and agreed, for the
equal and proportionate benefit of all Holders of the Notes, as follows:
ARTICLE ONE
Definitions and Other Provisions
of General Application
SECTION 101. Definitions.
For all purposes of this Indenture, except as otherwise
expressly provided or unless the context otherwise requires:
<PAGE>
(1) the terms defined in this Article have the meanings
assigned to them in this Article and include the plural as well as the
singular;
(2) all other terms used herein which are defined in the
Trust Indenture Act, either directly or by reference therein, have the
meanings assigned to them therein;
(3) all accounting terms not otherwise defined herein
have the meanings assigned to them in accordance with generally
accepted accounting principles (whether or not such is indicated
herein), and, except as otherwise herein expressly provided, the term
"generally accepted accounting principles" or GAAP with respect to any
computation required or permitted hereunder shall mean such accounting
principles as are generally accepted as consistently applied by the
Company at the date of such computation;
(4) unless otherwise specifically set forth herein, all
calculations or determinations of a Person shall be performed or made
on a consolidated basis in accordance with generally accepted
accounting principles; and
(5) the words "herein", "hereof" and "hereunder" and
other words of similar import refer to this Indenture as a whole and
not to any particular Article, Section or other subdivision.
Certain terms, used principally in Article Six, are defined in
that Article.
"Act", when used with respect to any Holder, has the meaning
specified in Section 104.
"Affiliate" of any Person means any other Person directly or
indirectly controlling or controlled by or under direct or indirect common
control with such Person. For the 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.
-2-
<PAGE>
"Agent Member" means any member of, or participant
in, the Depositary.
"Applicable Procedures" means, with respect to any transfer or
transaction involving a Global Note or beneficial interest therein, the rules
and procedures of the Depositary for such Note, Euroclear and Cedel, in each
case to the extent applicable to such transaction and as in effect at the time
of such transfer or transaction.
"Asset Disposition" by any Person means any transfer,
conveyance, sale, lease or other disposition by such Person or any of its
Restricted Subsidiaries (including any issuance or sale by a Restricted
Subsidiary of Capital Stock of such Restricted Subsidiary, and including a
consolidation or merger or other sale of any such Restricted Subsidiary with,
into or to another Person in a transaction in which such Restricted Subsidiary
ceases to be a Restricted Subsidiary, but excluding a disposition by a
Restricted Subsidiary of such Person to such Person or a Wholly Owned Restricted
Subsidiary of such Person or by such Person to a Wholly Owned Restricted
Subsidiary of such Person) of (i) shares of Capital Stock (other than directors'
qualifying shares) or other ownership interests of a Restricted Subsidiary of
such Person, (ii) substantially all of the assets of such Person or any of its
Restricted Subsidiaries representing a division or line of business or (iii)
other assets or rights of such Person or any of its Restricted Subsidiaries
outside of the ordinary course of business, provided in each case that the
aggregate consideration to the Company or Restricted Subsidiary in any single
transaction or series of related transactions for such transfer, conveyance,
sale, lease or other disposition is equal to $20.0 million or more.
"Board of Directors" means either the board of directors of
the Company or any duly authorized committee of that board. Except as otherwise
provided or unless context otherwise requires, each reference herein to the
"Board of Directors" shall mean the Board of Directors of the Company.
"Board Resolution" means a copy of a resolution certified by
the Secretary or an Assistant Secretary of the Company to have been duly adopted
by the Board of Directors and to be in full force and effect on the date of such
certification, and delivered to the Trustee. Except as otherwise expressly
provided or unless the context otherwise
-3-
<PAGE>
requires, each reference herein to a "Board Resolution" shall mean a Board
Resolution of the Company.
"Business Day" means each Monday, Tuesday, Wednesday, Thursday
and Friday which is not a day on which banking institutions in New York, New
York or in the city in which the Corporate Trust Office is located are
authorized or obligated by law or executive order to close.
"Capital Lease Obligation" of any Person means the obligation
to pay rent or other payment amounts under a lease of (or other Debt
arrangements conveying the right to use) real or personal property of such
Person which is required to be classified and accounted for as a capital lease
or a liability on the face of a balance sheet of such Person in accordance with
generally accepted accounting principles. The stated maturity of such obligation
shall be the date of the last payment of rent or any other amount due under such
lease prior to the first date upon which such lease may be terminated by the
lessee without payment of a penalty. The principal amount of such obligation
shall be the capitalized amount thereof that would appear on the face of a
balance sheet of such Person in accordance with generally accepted accounting
principles.
"Capital Stock" of any Person means any and all shares,
interests, participations or other equivalents (however designated) of corporate
stock or other equity participations, including partnership interests, whether
general or limited, of such Person.
"Cash Equivalents" means (i) direct obligations of the United
States of America or any agency thereof having maturities of not more than one
year from the date of acquisition, (ii) time deposits and certificates of
deposit of any domestic commercial bank of recognized standing having capital
and surplus in excess of $500 million, with maturities of not more than one year
from the date of acquisition, (iii) repurchase obligations issued by any bank
described in clause (ii) above with a term not to exceed 30 days; (iv)
commercial paper rated at least A-1 or the equivalent thereof by S&P or at least
P-1 or the equivalent thereof by Moody's, in each case maturing within one year
after the date of acquisition and (v) shares of any money market mutual fund, or
similar fund, in each case having assets in excess of $500 million, which
invests
-4-
<PAGE>
predominantly in investments of the types describes in clauses (i) through (iv)
above.
"Cedel" means Cedel, S.A. (or any successor securities
clearing agency).
"Closing Date" means April 22, 1998.
"Commission" means the Securities and Exchange Commission, as
from time to time constituted, created under the Exchange Act, or, if at any
time after the execution of this instrument such Commission is not existing and
performing the duties now assigned to it under the Trust Indenture Act, then the
body performing such duties at such time.
"Common Stock" of any Person means Capital Stock of such
Person that does not rank prior, as to the payment of dividends or as to the
distribution of assets upon any voluntary or involuntary liquidation,
dissolution or winding up of such Person, to shares of Capital Stock of any
other class of such Person.
"Company" means the Person named as the "Company" in the first
paragraph of this instrument until a successor Person shall have become such
pursuant to the applicable provisions of this Indenture and thereafter "Company"
shall mean such successor Person.
"Company Request" or "Company Order" means a written request
or order signed in the name of the Company by its Chairman of the Board, its
President or a Vice President, and by its Treasurer, an Assistant Treasurer, its
Secretary or an Assistant Secretary and delivered to the Trustee.
"Consolidated Cash Flow Available for Fixed Charges" means for
any period the Consolidated Net Income of the Company and its Restricted
Subsidiaries for such period increased by the sum of (i) Consolidated Interest
Expense of the Company and its Restricted Subsidiaries for such period, plus
(ii) Consolidated Income Tax Expense of the Company and its Restricted
Subsidiaries for such period, plus (iii) the consolidated depreciation and
amortization expense included in the income statement of the Company and its
Restricted Subsidiaries for such period, plus (iv) all other non-cash items
reducing Consolidated Net Income of the Company and
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its Restricted Subsidiaries, less all non-cash items increasing Consolidated Net
Income of the Company and its Restricted Subsidiaries; provided, however, that
there shall be excluded therefrom the Consolidated Cash Flow Available for Fixed
Charges (if positive) of any Restricted Subsidiary of the Company (calculated
separately for such Restricted Subsidiary in the same manner as provided above
for the Company) that is subject to a restriction which prevents the payment of
dividends or the making of distributions to the Company or another Restricted
Subsidiary of the Company to the extent of such restriction.
"Consolidated Cash Flow Coverage Ratio" as of any date of
determination means the ratio of (i) Consolidated Cash Flow Available for Fixed
Charges of the Company and its Restricted Subsidiaries for the period of the
most recently completed four consecutive fiscal quarters for which quarterly or
annual financial statements are available to (ii) Consolidated Fixed Charges of
the Company and its Restricted Subsidiaries for such period; provided, however,
that Consolidated Fixed Charges shall be adjusted to give effect on a pro forma
basis to any Debt (other than short-term Debt Incurred for working capital
purposes) that has been Incurred by the Company or any Restricted Subsidiary
since the beginning of such period that remains outstanding and to any Debt
(other than short-term Debt Incurred for working capital purposes) that is
proposed to be Incurred by the Company or any Restricted Subsidiary as if in
each case such Debt had been Incurred on the first day of such period and as if
any Debt (other than short-term Debt Incurred for working capital purposes) that
(i) is or will no longer be outstanding as the result of the Incurrence of any
such Debt or (ii) had been repaid or retired during such period had not been
outstanding as of the first day of such period; provided further that in making
such computation, the Consolidated Interest Expense of the Company and its
Restricted Subsidiaries attributable to interest on any proposed Debt bearing a
floating interest rate shall be computed on a pro forma basis as if the rate in
effect on the date of computation had been the applicable rate for the entire
period; and provided further that, in the event the Company or any of its
Restricted Subsidiaries has made Asset Dispositions or acquisitions of assets
not in the ordinary course of business (including acquisitions of other Persons
by merger, consolidation or purchase of Capital Stock) during or after such
period, such computation shall be made on a pro forma basis as if the Asset
Dispositions or
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acquisitions had taken place on the first day of such period.
"Consolidated Fixed Charges" for any period means the sum of
(i) Consolidated Interest Expense and (ii) the consolidated amount of interest
capitalized by the Company and its Restricted Subsidiaries during such period
calculated in accordance with generally accepted accounting principles.
"Consolidated Income Tax Expense" for any period means the
consolidated provision for income taxes of the Company and its Restricted
Subsidiaries for such period calculated on a consolidated basis in accordance
with generally accepted accounting principles.
"Consolidated Interest Expense" means for any period the
consolidated interest expense included in a consolidated income statement
(without deduction of interest income) of the Company and its Restricted
Subsidiaries for such period calculated on a consolidated basis in accordance
with generally accepted accounting principles, including without limitation or
duplication (or, to the extent not so included, with the addition of), (i) the
amortization of Debt discounts; (ii) any payments or fees with respect to
letters of credit, bankers' acceptances or similar facilities; (iii) fees with
respect to Interest Rate, Currency or Commodity Price Agreements; (iv) Preferred
Stock dividends of Restricted Subsidiaries of the Company (other than with
respect to Redeemable Stock) declared and paid or payable to persons other than
the Company or any Restricted Subsidiary; (v) accrued Redeemable Stock dividends
of the Company and its Restricted Subsidiaries payable to persons other than the
Company or any Restricted Subsidiary, whether or not declared or paid; (vi)
interest on Debt guaranteed by the Company and its Restricted Subsidiaries; and
(vii) the portion of any rental obligation with respect to capitalized leases
allocable to interest expense.
"Consolidated Net Income" for any period means the
consolidated net income (or loss) of the Company and its Restricted Subsidiaries
for such period determined on a consolidated basis in accordance with generally
accepted accounting principles; provided that there shall be excluded therefrom
(a) the net income (or loss) of any Person acquired by the Company or a
Restricted Subsidiary of the Company in a pooling-of-interests transaction for
any period
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prior to the date of such transaction, (b) the net income (or loss) of any
Person that is not a Subsidiary of the Company except to the extent of the
amount of dividends or other distributions actually paid to the Company or a
Subsidiary of the Company by such Person during such period, (c) gains or losses
on Asset Dispositions by the Company or its Restricted Subsidiaries, (d) all
extraordinary gains and extraordinary losses, (e) the cumulative effect of
changes in accounting principles and (f) the tax effect, if any, of any of the
items described in clauses (a) through (e) above; provided, further, that for
purposes of any determination pursuant to the provisions described under Section
1012 hereof, there shall further be excluded therefrom the net income (but not
net loss) of any Restricted Subsidiary of the Company that is subject to a
restriction which prevents the payment of dividends or the making of
distributions to the Company or another Restricted Subsidiary of the Company to
the extent of such restriction.
"Consolidated Net Worth" of any Person means the consolidated
stockholders' equity of such Person, determined on a consolidated basis in
accordance with generally accepted accounting principles, less amounts
attributable to Redeemable Stock of such Person; provided that, with respect to
the Company, adjustments following the date of this Indenture to the accounting
books and records of the Company in accordance with Accounting Principles Board
Opinions Nos. 16 and 17 (or successor opinions thereto) or otherwise resulting
from the acquisition of control of the Company by another Person shall not be
given effect to.
"Consolidated Tangible Assets" of any Person means, as of any
date, the amount which, in accordance with GAAP, would be set forth under the
caption "Total Assets" (or any like caption) on a consolidated balance sheet of
such Person and its Restricted Subsidiaries, less all intangible assets,
including, without limitation, goodwill, organization costs, patents,
trademarks, copyrights, franchises, and research and development costs.
"Corporate Trust Office" means the principal office of the
Trustee at which at any particular time its corporate trust business shall be
administered, which is, at the date as of which this Indenture is dated, located
at 475 Sansome Street, 12th Floor, San Francisco, California 94111.
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"corporation" means a corporation, association, company,
joint-stock company, partnership or business trust.
"Debt" means (without duplication), with respect to any
Person, whether recourse is to all or a portion of the assets of such Person and
whether or not contingent, (i) every obligation of such Person for money
borrowed, (ii) every obligation of such Person evidenced by bonds, debentures,
notes or other similar instruments, including obligations Incurred in connection
with the acquisition of property, assets or businesses, (iii) every
reimbursement obligation of such Person with respect to letters of credit,
bankers' acceptances or similar facilities issued for the account of such
Person, (iv) every obligation of such Person issued or assumed as the deferred
purchase price of property or services (including securities repurchase
agreements but excluding trade accounts payable or accrued liabilities arising
in the ordinary course of business which are not overdue or which are being
contested in good faith), (v) every Capital Lease Obligation of such Person,
(vi) all Receivables Sales of such Person, together with any obligation of such
Person to pay any discount, interest, fees, indemnities, penalties, recourse,
expenses or other amounts in connection therewith, (vii) all Redeemable Stock
issued by such Person, (viii) Preferred Stock of Restricted Subsidiaries of such
Person held by Persons other than such Person or one of its Wholly Owned
Restricted Subsidiaries, (ix) every obligation under Interest Rate, Currency or
Commodity Price Agreements of such Person and (x) every obligation of the type
referred to in clauses (i) through (ix) of another Person and all dividends of
another Person the payment of which, in either case, such Person has Guaranteed
or is responsible or liable for, directly or indirectly, as obligor, Guarantor
or otherwise. The "amount" or "principal amount" of Debt at any time of
determination as used herein represented by (a) any Receivables Sale, shall be
the amount of the unrecovered capital or principal investment of the purchaser
(other than the Company or a Wholly Owned Restricted Subsidiary of the Company)
thereof, excluding amounts representative of yield or interest earned on such
investment and (b) any Redeemable Stock, shall be the maximum fixed redemption
or repurchase price in respect thereof.
"Depositary" means, with respect to any Notes, a clearing
agency that is registered as such under the Exchange Act and is designated by
the Company to act as
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Depositary for such Notes (or any successor securities clearing agency so
registered).
"Designated Senior Debt" shall mean (i) so long as the New
Credit Facility is in effect, the obligations of the Company under the New
Credit Facility and (ii) at any time thereafter, the 2023 Debentures and any
other Senior Debt of the Company permitted under this Indenture, the principal
amount of which at original issuance is $25.0 million or more and that has been
designated by the Company as Designated Senior Debt.
"DTC" means The Depository Trust Company, a New York
corporation.
"Euroclear" means the Euroclear Clearance System (or any
successor securities clearing agency).
"Event of Default" has the meaning specified in Section 501.
"Exchange Act" means the Securities Exchange Act of 1934 as it
may be amended and any successor act thereto.
"Exchange and Registration Rights Agreement" means the
Exchange and Registration Rights Agreement, dated as of April 22, 1998, among
the Company, Goldman, Sachs & Co., Chase Securities Inc. and Citicorp
Securities, Inc., as representatives of the Initial Purchasers, and the Holders
from time to time as provided therein, as such agreement may be amended from
time to time.
"Exchange Notes" means the Notes issued pursuant to the
Exchange Offer and their Successor Notes.
"Exchange Offer" means an offer made by the Company pursuant
to the Exchange and Registration Rights Agreement under the effective
registration statement under the Securities Act to exchange securities
substantially identical to Outstanding Notes (except for the differences
provided for herein) for Outstanding Notes.
"Exchange Registration Statement" means a registration
statement of the Company under the Securities Act registering Exchange Notes for
distribution pursuant to the Exchange Offer.
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"Global Note" means a Note that is registered in the Security
Register in the name of a Depositary or a nominee thereof.
"Guarantee" by any Person means any obligation, contingent or
otherwise, of such Person guaranteeing, or having the economic effect of
guaranteeing, any Debt of any other Person (the "primary obligor") in any
manner, whether directly or indirectly, and including, without limitation, any
obligation of such Person, (i) to purchase or pay (or advance or supply funds
for the purchase or payment of) such Debt or to purchase (or to advance or
supply funds for the purchase of) any security for the payment of such Debt,
(ii) to purchase property, securities or services for the purpose of assuring
the holder of such Debt of the payment of such Debt, or (iii) to maintain
working capital, equity capital or other financial statement condition or
liquidity of the primary obligor so as to enable the primary obligor to pay such
Debt (and "Guaranteed", "Guaranteeing" and "Guarantor" shall have meanings
correlative to the foregoing); provided, however, that the Guarantee by any
Person shall not include endorsements by such Person for collection or deposit,
in either case, in the ordinary course of business.
"Holder" means a Person in whose name a Note is registered in
the Security Register.
"Incur" means, with respect to any Debt or other obligation of
any Person, to create, issue, incur (by conversion, exchange or otherwise),
assume, Guarantee or otherwise become liable in respect of such Debt or other
obligation or the recording, as required pursuant to generally accepted
accounting principles or otherwise, of any such Debt or other obligation on the
balance sheet of such Person (and "Incurrence", "Incurred", "Incurrable" and
"Incurring" shall have meanings correlative to the foregoing); provided,
however, that a change in generally accepted accounting principles that results
in an obligation of such Person that exists at such time becoming Debt shall not
be deemed an Incurrence of such Debt.
"Indenture" means this instrument as originally executed and
as it may from time to time be supplemented or amended by one or more indentures
supplemental hereto entered into pursuant to the applicable provisions hereof
including, for all purposes of this instrument and any such
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supplemental indenture, the provisions of the Trust Indenture Act that are
deemed to be a part of and govern this instrument and any such supplemental
indenture, respectively.
"Initial Purchasers" means Goldman, Sachs & Co., Chase
Securities Inc. and Citicorp Securities, Inc., as purchasers of the Notes from
the Company pursuant to the Note Purchase Agreement.
"Interest Payment Date" means the Stated Maturity of an
installment of interest on the Notes.
"Interest Rate, Currency or Commodity Price Agreement" of any
Person means any forward contract, futures contract, swap, option or other
financial agreement or arrangement (including, without limitation, caps, floors,
collars and similar agreements) relating to, or the value of which is dependent
upon, interest rates, currency exchange rates or commodity prices or indices
(excluding contracts for the purchase or sale of goods in the ordinary course of
business).
"Investment" by any Person means any direct or indirect loan,
advance or other extension of credit or capital contribution to (by means of
transfers of cash or other property to others or payments for property or
services for the account or use of others, or otherwise) to, or purchase or
acquisition of Capital Stock, bonds, notes, debentures or other securities or
evidence of Debt issued by any other Person, including any payment on a
Guarantee of any obligation of such other Person.
"Lien" means, with respect to any property or assets, any
mortgage or deed of trust, pledge, hypothecation, assignment, Receivables Sale,
deposit arrangement, security interest, lien, charge, easement (other than any
easement not materially impairing usefulness or marketability), encumbrance,
preference, priority or other security agreement or preferential arrangement of
any kind or nature whatsoever on or with respect to such property or assets
(including, without limitation, any conditional sale or other title retention
agreement having substantially the same economic effect as any of the
foregoing).
"Maturity", when used with respect to any Note, means the date
on which the principal of such Note becomes
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due and payable as therein or herein provided, whether at the Stated Maturity or
by declaration of acceleration, call for redemption or otherwise.
"Moody's" means Moody's Investors Service, Inc.
"Net Available Proceeds" from any Asset Disposition by any
Person means cash or readily marketable cash equivalents received (including by
way of sale or discounting of a note, installment receivable or other
receivable, but excluding any other consideration received in the form of
assumption by the acquiree of Debt or other obligations relating to such
properties or assets) therefrom by such Person, net of (i) all legal, title and
recording tax expenses, commissions and other fees and expenses Incurred and all
federal, state, provincial, foreign and local taxes required to be accrued as a
liability as a consequence of such Asset Disposition, (ii) all payments made by
such Person or its Restricted Subsidiaries on any Debt which is secured by such
assets in accordance with the terms of any Lien upon or with respect to such
assets or which must by the terms of such Lien, or in order to obtain a
necessary consent to such Asset Disposition or by applicable law, be repaid out
of the proceeds from such Asset Disposition, (iii) all distributions and other
payments made to minority interest holders in Restricted Subsidiaries of such
Person or joint ventures as a result of such Asset Disposition and (iv)
appropriate amounts to be provided by such Person or any Restricted Subsidiary
thereof, as the case may be, as a reserve in accordance with generally accepted
accounting principles against any liabilities associated with such assets and
retained by such Person or any Restricted Subsidiary thereof, as the case may
be, after such Asset Disposition, including, without limitation, liabilities
under any indemnification obligations and severance and other employee
termination costs associated with such Asset Disposition, in each case as
determined by the Board of Directors, in its reasonable good faith judgment
evidenced by a resolution of the Board of Directors filed with the Trustee;
provided, however, that any reduction in such reserve following the consummation
of such Asset Disposition will be treated for all purposes of the Indenture and
the Notes as a new Asset Disposition at the time of such reduction with Net
Available Proceeds equal to the amount of such reduction.
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"New Credit Facility" means the senior secured revolving
credit facility in the aggregate principal amount of $325.0 million between the
Company, The Chase Manhattan Bank, as administrative and collateral agent,
Citibank USA, Inc., as documentation agent, and certain other lenders, as it may
be amended or restated from time to time, and any renewal, extension,
refinancing, refunding or replacement thereof, in whole or in part.
"Note Purchase Agreement" means the Purchase Agreement, dated
as of April 22, 1998, between the Company and the Initial Purchasers, as such
agreement may be amended from time to time.
"Notes" means notes designated in the first paragraph of the
RECITALS OF THE COMPANY and includes the Exchange Notes.
"Offer to Purchase" means a written offer (the "Offer") sent
by the Company by first class mail, postage prepaid, to each Holder at his
address appearing in the Security Register on the date of the Offer offering to
purchase up to the principal amount of Notes specified in such Offer at the
purchase price specified in such Offer (as determined pursuant to this
Indenture). Unless otherwise required by applicable law, the Offer shall specify
an expiration date (the "Expiration Date") of the Offer to Purchase which shall
be, subject to any contrary requirements of applicable law, not less than 30
days or more than 60 days after the date of such Offer and a settlement date
(the "Purchase Date") for purchase of Notes within five Business Days after the
Expiration Date. The Company shall notify the Trustee at least 15 Business Days
(or such shorter period as is acceptable to the Trustee) prior to the mailing of
the Offer of the Company's obligation to make an Offer to Purchase, and the
Offer shall be mailed by the Company or, at the Company's request, by the
Trustee in the name and at the expense of the Company. The Offer shall contain
information concerning the business of the Company and its Restricted
Subsidiaries which the Company in good faith believes will enable such Holders
to make an informed decision with respect to the Offer to Purchase (which at a
minimum will include (i) the most recent annual and quarterly financial
statements and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" contained in the documents required to be filed with the
Trustee pursuant to
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Section 1017 (which requirements may be satisfied by delivery of such documents
together with the Offer), (ii) a description of material developments in the
Company's business subsequent to the date of the latest of such financial
statements referred to in clause (i) (including a description of the events
requiring the Company to make the Offer to Purchase), (iii) if applicable,
appropriate pro forma financial information concerning the Offer to Purchase and
the events requiring the Company to make the Offer to Purchase and (iv) any
other information required by applicable law to be included therein. The Offer
shall contain all instructions and materials necessary to enable such Holders to
tender Notes pursuant to the Offer to Purchase. The Offer shall also state:
(1) the Section of this Indenture pursuant to which the
Offer to Purchase is being made;
(2) the Expiration Date and the Purchase Date;
(3) the aggregate principal amount of the Outstanding
Notes offered to be purchased by the Company pursuant to the Offer to
Purchase (including, if less than 100%, the manner by which such has
been determined pursuant to the Section hereof requiring the Offer to
Purchase) (the "Purchase Amount");
(4) the purchase price to be paid by the Company for each
$1,000 aggregate principal amount of Notes accepted for payment (as
specified pursuant to this Indenture) (the "Purchase Price");
(5) that the Holder may tender all or any portion of the
Notes registered in the name of such Holder and that any portion of a
Note tendered must be tendered in an integral multiple of $1,000
principal amount;
(6) the place or places where Notes are to be surrendered
for tender pursuant to the Offer to Purchase;
(7) that interest on any Note not tendered or tendered
but not purchased by the Company
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pursuant to the Offer to Purchase will continue to accrue;
(8) that on the Purchase Date the Purchase Price will
become due and payable upon each Note accepted for payment pursuant to
the Offer to Purchase and that interest thereon shall cease to accrue
on and after the Purchase Date;
(9) that each Holder electing to tender a Note pursuant
to the Offer to Purchase will be required to surrender such Note at the
place or places specified in the Offer prior to the close of business
on the Expiration Date (such Note being, if the Company or the Trustee
so requires, duly endorsed by, or accompanied by a written instrument
of transfer in form satisfactory to the Company and the Trustee duly
executed by, the Holder thereof or his attorney duly authorized in
writing);
(10) that Holders will be entitled to withdraw all or any
portion of Notes tendered if the Company (or their Paying Agent)
receives, not later than the close of business on the Expiration Date,
a telegram, telex, facsimile transmission or letter setting forth the
name of the Holder, the principal amount of the Note the Holder
tendered, the certificate number of the Note the Holder tendered and a
statement that such Holder is withdrawing all or a portion of his
tender;
(11) that (a) if Notes in an aggregate principal amount
less than or equal to the Purchase Amount are duly tendered and not
withdrawn pursuant to the Offer to Purchase, the Company shall purchase
all such Notes and (b) if Notes in an aggregate principal amount in
excess of the Purchase Amount are tendered and not withdrawn pursuant
to the Offer to Purchase, the Company shall purchase Notes having an
aggregate principal amount equal to the Purchase Amount on a pro rata
basis (with such adjustments as may be deemed appropriate so that only
Notes in denominations of $1,000 or integral multiples thereof shall be
purchased); and
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(12) that in the case of any Holder whose Note is
purchased only in part, the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Note without
service charge, a new Note or Notes, of any authorized denomination as
requested by such Holder, in an aggregate principal amount equal to and
in exchange for the unpurchased portion of the Note so tendered.
Any Offer to Purchase shall be governed by and effected in accordance with the
Offer for such Offer to Purchase.
"Officers' Certificate" means a certificate signed by the
Chairman of the Board, the President or a Vice President, and by the Treasurer,
an Assistant Treasurer, the Secretary or an Assistant Secretary, of the Company,
and delivered to the Trustee. Unless the context otherwise requires, each
reference herein to an "Officers' Certificate" shall mean an Officers'
Certificate of the Company.
"Opinion of Counsel" means a written opinion of counsel, who
may be counsel for the Company, and who shall be reasonably acceptable to the
Trustee.
"Original Notes" means all Notes other than Exchange Notes.
"Outstanding", when used with respect to Notes, means, as of
the date of determination, all Notes theretofore authenticated and delivered
under this Indenture, except:
(i) Notes theretofore canceled by the Trustee or delivered to
the Trustee for cancellation;
(ii) Notes for whose payment or redemption money in the
necessary amount has been theretofore deposited with the Trustee or any
Paying Agent (other than the Company) in trust or set aside and
segregated in trust by the Company (if the Company shall act as its own
Paying Agent) for the Holders of such Notes; provided that, if such
Notes are to be redeemed, notice of such redemption has been duly given
pursuant to this Indenture or provision
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therefor satisfactory to the Trustee has been made; and
(iii) Notes which have been transferred pursuant to Section 306 or
in exchange for or in lieu of which other Notes have been authenticated
and delivered pursuant to this Indenture, other than any such Notes in
respect of which there shall have been presented to the Trustee proof
satisfactory to it that such Notes are held by a bona fide purchaser in
whose hands such Notes are valid obligations of the Company;
provided, however, that in determining whether the Holders of the requisite
principal amount of the Outstanding Notes have given any request, demand,
authorization, direction, notice, consent or waiver hereunder, Notes owned by
the Company or any Affiliate of the Company shall be disregarded and deemed not
to be Outstanding, except that, in determining whether the Trustee shall be
protected in relying upon any such request, demand, authorization, direction,
notice, consent or waiver, only Notes which the Trustee knows to be so owned
shall be so disregarded. Notes so owned which have been pledged in good faith
may be regarded as Outstanding if the pledgee establishes to the satisfaction of
the Trustee the pledgee's right so to act with respect to such Notes and that
the pledgee is not the Company or any other obligor upon the Notes or any
Affiliate of the Company or of such other obligor.
"Paying Agent" means any Person authorized by the Company to
pay the principal of (and premium, if any) or interest on any Notes on behalf of
the Company.
"Permitted Interest Rate, Currency or Commodity Price
Agreement" of any Person means any Interest Rate, Currency or Commodity Price
Agreement entered into with one or more financial institutions in the ordinary
course of business that is designed to protect such Person against fluctuations
in interest rates or currency exchange rates with respect to Debt Incurred and
which shall have a notional amount no greater than the payments due with respect
to the Debt being hedged thereby, or in the case of currency or commodity
protection agreements, against currency exchange rate or commodity price
fluctuations in the ordinary course of business relating to then existing
financial obligations or then existing or forecast produc-
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tion or for purchase of products for resale and not for purposes of speculation.
"Permitted Investments" means (i) an Investment in the Company
or a Wholly-Owned Restricted Subsidiary of the Company; (ii) an Investment in
Pyramid Sportswear; provided, however, that as a result thereof the Company owns
not less than a majority interest in Pyramid Sportswear; (iii) an Investment in
a Person, if such Person or a Subsidiary of such Person will, as a result of the
making of such Investment and all other contemporaneous related transactions,
become a Wholly-Owned Restricted Subsidiary of the Company or be merged or
consolidated with or into or transfer or convey all or substantially all its
assets to the Company or a Wholly-Owned Restricted Subsidiary of the Company;
(iv) a Temporary Cash Investment; (v) stock, obligations or securities received
in settlement of debts owing to the Company or a Restricted Subsidiary of the
Company as a result of bankruptcy or insolvency proceedings or upon the
foreclosure, perfection, enforcement or agreement in lieu of foreclosure of
any Lien in favor of the Company or a Restricted Subsidiary of the Company; (vi)
Investments in the Notes; (vii) Investments in Permitted Interest Rate, Currency
or Commodity Price Agreements; (viii) advances to employees of the Company made
in the ordinary course of business and (ix) entry into and Investments in joint
ventures, partnerships and other Persons engaged or proposing to engage in
businesses related to those conducted by the Company or any Restricted
Subsidiary of the Company, in an amount not to exceed $15 million.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization or
government or any agency or political subdivision thereof.
"Predecessor Note" of any particular Note means every previous
Note evidencing all or a portion of the same debt as that evidenced by such
particular Note; and, for the purposes of this definition, any Note
authenticated and delivered under Section 307 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Note shall be deemed to evidence the same
debt as the mutilated, destroyed, lost or stolen Note.
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"Preferred Stock", of any Person, means Capital Stock of such
Person of any class or classes (however designated) that ranks prior, as to the
payment of dividends or as to the distribution of assets upon any voluntary or
involuntary liquidation, dissolution or winding up of such Person, to shares of
Capital Stock of any other class of such Person.
"Public Equity Offering" means an underwritten primary public
offering of Common Stock of the Company pursuant to an effective registration
statement under the Securities Act of 1933, as amended.
"Receivables" means receivables, chattel paper, instruments,
documents or intangibles evidencing or relating to the right to payment of
money.
"Receivables Sale" of any Person means any sale of Receivables
of such Person (pursuant to a purchase facility or otherwise), other than in
connection with a disposition of the business operations of such Person relating
thereto or a disposition of defaulted Receivables for purposes of collection and
not as a financing arrangement.
"Redeemable Stock" of any Person means any Capital Stock of
such Person that by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable) or otherwise (including upon the
occurrence of an event) matures or is required to be redeemed (pursuant to any
sinking fund obligation or otherwise) or is convertible into or exchangeable for
Debt or is redeemable at the option of the holder thereof, in whole or in part,
at any time prior to the final Stated Maturity of the Notes; provided that
"Redeemable Stock" shall not include any Capital Stock that is payable at
maturity, or upon required redemption or redemption at the option of the holder
thereof, or that is automatically convertible or exchangeable, solely in or into
Common Stock of such Person.
"Redemption Date", when used with respect to any Note to be
redeemed, means the date fixed for such redemption by or pursuant to this
Indenture.
"Redemption Price", when used with respect to any Note to be
redeemed, means the price at which it is to be redeemed pursuant to this
Indenture.
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"Registration Default" means the occurrence of any of the
following events: (i) the Company has not filed the Exchange Registration
Statement or Shelf Registration Statement on or before the date on which such
registration statement is required to be filed pursuant to the Exchange and
Registration Rights Agreement, (ii) the Exchange Registration Statement or Shelf
Registration Statement has not become effective or been declared effective by
the Commission on or before the date on which such registration statement is
required to become or be declared effective under the requirements of the
Exchange and Registration Rights Agreement, (iii) the Exchange Offer has not
been completed within 30 Business Days after the initial effective date of the
Exchange Registration Statement relating to the Exchange Offer (if the Exchange
Offer is then required to be made under the Exchange and Registration Rights
Agreement) or (iv) any Exchange Registration Statement or Shelf Registration
Statement required to be filed pursuant the Exchange and Registration Rights
Agreement is filed and declared effective but shall thereafter either be
withdrawn by the Company or shall become subject to an effective stop order
issued pursuant to Section 8(d) of the Securities Act suspending the
effectiveness of such registration statement (except as specifically permitted
herein) without being succeeded immediately by an additional registration
statement filed and declared effective.
"Registration Default Period" means any period during which a
Registration Default has occurred and is continuing.
"Regulation S" means Regulation S under the Securities Act.
"Regulation S Certificate" means a certificate substantially
in the form set forth in Annex A.
"Regulation S Global Note" has the meaning specified in
Section 201.
"Regulation S Legend" means a legend substantially in the form
of the legend required in the form of Note set forth in Section 202 to be placed
upon Regulation S Notes.
"Regulation S Notes" means all Notes required pursuant to
Section 306(c) to bear a Regulation S Legend.
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"Related Person" of any Person means any other Person directly
or indirectly owning (a) 5% or more of the Outstanding Common Stock of such
Person (or in the case of a Person that is not a corporation, 5% or more of the
equity interest in such Person) or (b) 5% or more of the combined voting power
of the Voting Stock of such Person.
"Responsible Officer", when used with respect to the Trustee,
means the chairman or any vice-chairman of the board of directors, the chairman
or any vice-chairman of the executive committee of the board of directors, the
chairman of the trust committee, the president, any vice president, the
secretary, any assistant secretary, the treasurer, any assistant treasurer, the
cashier, any assistant cashier, any trust officer or assistant trust officer,
the controller or any assistant controller or any other officer of the Trustee
customarily performing functions similar to those performed by any of the above
designated officers and also means, with respect to a particular corporate trust
matter, any other officer to whom such matter is referred because of his
knowledge of and familiarity with the particular subject.
"Restricted Notes" means all Notes required pursuant to
Section 306(c) to bear a Restricted Notes Legend. Such term includes the
Restricted Global Notes.
"Restricted Notes Certificate" means a certificate
substantially in for form set forth in Annex B.
"Restricted Notes Legend" means a legend substantially in the
form of the legend required in the form of Note set forth in Section 202 to be
placed upon a Restricted Note.
"Restricted Period" means the period of 40 consecutive days
beginning on the later of (i) the day on which Notes are first offered to
persons other than distributors (as defined in Regulation S) in reliance on
Regulation S and (ii) the Closing Date.
"Restricted Subsidiary" means any Subsidiary, whether existing
on or after the date of this Indenture, unless such Subsidiary is an
Unrestricted Subsidiary.
"Rule 144" means Rule 144 under the Securities Act.
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"Rule 144A" means Rule 144A under the Securities Act.
"Rule 144A Notes" means the Notes purchased by the Initial
Purchasers from the Company pursuant to the Note Purchase Agreement, other than
the Regulation S Notes.
"S&P" means Standard & Poor's Ratings Group, a division of
McGraw-Hill, Inc.
"Securities Act" means the Securities Act of 1933, as it may
be amended and any successor act thereto.
"Security Register" and "Security Registrar" have the
respective meanings specified in Section 306(a).
"Senior Debt" means (i) the principal of (and premium, if any)
and interest (including interest accruing on or after the filing of any petition
in bankruptcy or for reorganization relating to the Company whether or not such
claim for post-petition interest is allowed in such proceeding) on, and
penalties and any obligation of the Company for reimbursement, indemnities, fees
and expenses relating to, the New Credit Facility and (ii) every reimbursement
obligation of the Company with respect to letters of credit, bankers'
acceptances or similar facilities issued for the account of the Company and
(iii) the principal of (and premium, if any) and interest on Debt of the Company
for money borrowed, whether Incurred on or prior to the date of original
issuance of the Notes or thereafter, and any amendments, renewals, extensions,
modifications, refinancings and refundings of any such Debt and (iv) Permitted
Interest Rate, Currency or Commodity Price Agreements entered into with respect
to Debt described in clauses (i), (ii) and (iii) above; provided, however, that
the following shall not constitute Senior Debt: (1) any Debt as to which the
terms of the instrument creating or evidencing the same provide that such Debt
is not superior in right of payment to the Notes, (2) any Debt which is
subordinated in right of payment in any respect to any other Debt of the
Company, (3) Debt evidenced by the Notes, (4) any Debt owed to a Person when
such Person is a Subsidiary of the Company, (5) any obligation of the Company
arising from Redeemable Stock of the Company, (6) that portion of any Debt which
is Incurred in violation of the Indenture and (7) Debt which, when Incurred and
without respect to any election under Section 1111(b) of Title 11, United States
Code, is without
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recourse to the Company. If any Senior Debt is disallowed, avoided or
subordinated pursuant to the provisions of Section 548 of Title 11, United
States Code, or any applicable state fraudulent conveyance law, such Senior Debt
nevertheless will constitute Senior Debt.
"Shelf Registration Statement" means a shelf registration
statement under the Securities Act filed by the Company, if required by, and
meeting the requirements of, the Exchange and Registration Rights Agreement,
registering Original Notes for resale.
"Special Interest" has the meaning specified in the form of
Notes set forth in Section 202.
"Special Record Date" for the payment of any Defaulted
Interest means a date fixed by Trustee pursuant to Section 308.
"Stated Maturity", when used with respect to any Note or any
installment of interest thereon, means the date specified in such Note as the
fixed date on which the principal of such Note or such installment of interest
is due and payable.
"Subordinated Debt" means Debt of the Company as to which the
payment of principal of (and premium, if any) and interest and other payment
obligations in respect of such Debt shall be subordinate to the prior payment in
full of the Notes to at least the following extent: (i) no payments of principal
of (or premium, if any) or interest on or otherwise due in respect of such Debt
may be permitted for so long as any default in the payment of principal (or
premium, if any) or interest on the Notes exists; (ii) in the event that any
other default that with the passing of time or the giving of notice, or both,
would constitute an event of default exists with respect to the Notes, upon
notice by 25% or more in principal amount of the Notes to the Trustee, the
Trustee shall have the right to give notice to the Company and the holders of
such Debt (or trustees or agents therefor) of a payment blockage, and thereafter
no payments of principal of (or premium, if any) or interest on or otherwise due
in respect of such Debt may be made for a period of 179 days from the date of
such notice; and (iii) such Debt may not (x) provide for payments of principal
of such Debt at the stated maturity thereof or by way of a sinking fund
applicable thereto or by way of any
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mandatory redemption, defeasance, retirement or repurchase thereof by the
Company (including any redemption, retirement or repurchase which is contingent
upon events or circumstances, but excluding any retirement required by virtue of
acceleration of such Debt upon an event of default thereunder), in each case
prior to the final Stated Maturity of the Notes or (y) permit redemption or
other retirement (including pursuant to an offer to purchase made by the
Company) of such other Debt at the option of the holder thereof prior to the
final Stated Maturity of the Notes, other than a redemption or other retirement
at the option of the holder of such Debt (including pursuant to an offer to
purchase made by the Company) which is conditioned upon a change of control of
the Company pursuant to provisions substantially similar to those contained in
Section 1016 hereof (and which shall provide that such Debt will not be
repurchased pursuant to such provisions prior to the Company's repurchase of the
Notes required to be repurchased by the Company pursuant to the provisions
described under Section 1016).
"Subsidiary" of any Person means (i) a corporation more than
50% of the combined voting power of the outstanding Voting Stock of which is
owned, directly or indirectly, by such Person or by one or more other
Subsidiaries of such Person or by such Person and one or more Subsidiaries
thereof or (ii) any other Person (other than a corporation) in which such
Person, or one or more other Subsidiaries of such Person or such Person and one
or more other Subsidiaries thereof, directly or indirectly, has at least a
majority ownership and power to direct the policies, management and affairs
thereof.
"Successor Note" of any particular Note means every Note
issued after, and evidencing all or a portion of the same debt as that evidenced
by, such particular Note; and, for the purpose of this definition, any Note
authenticated and delivered under Section 307 in exchange for or in lieu of a
mutilated, destroyed, lost or stolen Security shall be deemed to evidence the
same debt as the mutilated, destroyed, lost or stolen Note.
"Temporary Cash Investments" means any Investment in the
following kinds of instruments: (A) readily marketable obligations issued or
unconditionally guaranteed as to principal and interest by the United States of
America or by any agency or authority controlled or supervised by
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and acting as an instrumentality of the United States of America if, on the date
of purchase or other acquisition of any such instrument by the Company or any
Restricted Subsidiary of the Company, the remaining term to maturity or interest
rate adjustment is not more than two years; (B) obligations (including, but not
limited to, demand or time deposits, bankers' acceptances and certificates of
deposit) issued or guaranteed by a depository institution or trust company
incorporated under the laws of the United States of America, any state thereof
or the District of Columbia, provided that (1) such instrument has a final
maturity not more than one year from the date of purchase thereof by the Company
or any Restricted Subsidiary of the Company and (2) such depository institution
or trust company has at the time of the Company's or such Restricted
Subsidiary's Investment therein or contractual commitment providing for such
Investment, (x) capital, surplus and undivided profits (as of the date such
institution's most recently published financial statements) in excess of $100
million and (y) the long-term unsecured debt obligations (other than such
obligations rated on the basis of the credit of a Person other than such
institution) of such institution, at the time of the Company's or such
Restricted Subsidiary's Investment therein or contractual commitment providing
for such Investment, are rated in the highest rating category of both S&P and
Moody's; (C) commercial paper issued by any corporation, if such commercial
paper has, at the time of the Company's or any Restricted Subsidiary's
Investment therein or contractual commitment providing for such Investment
credit ratings of at least A-1 by S&P and P-1 by Moody's; (D) money market
mutual or similar funds having assets in excess of $100 million; (E) readily
marketable debt obligations issued by any corporation, if at the time of the
Company's or Restricted Subsidiary's Investment therein or contractual
commitment providing for such Investment (1) the remaining term to maturity is
not more than two years and (2) such debt obligations are rated in one of the
two highest rating categories of both S&P and Moody's; (F) demand or time
deposit accounts used in the ordinary course of business with commercial banks
the balances in which are at all times fully insured as to principal and
interest by the Federal Deposit Insurance Corporation or any successor thereto;
and (G) to the extent not otherwise included herein, Cash Equivalents. In the
event that either S&P or Moody's ceases to publish ratings of the type provided
herein, a replacement rating agency shall be selected by the Company
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with the consent of the Trustee, and in each case the rating of such replacement
rating agency most nearly equivalent to the corresponding S&P or Moody's rating,
as the case may be, shall be used for purposes hereof.
"Trust Indenture Act" means the Trust Indenture Act of 1939 as
in force at the date as of which this instrument was executed, except as
provided in Section 905; provided, however, that in the event the Trust
Indenture Act of 1939 is amended after such date, "Trust Indenture Act" means,
to the extent required by any such amendment, the Trust Indenture Act of 1939 as
so amended.
"Trustee" means the Person named as the "Trustee" in the first
paragraph of this instrument until a successor Trustee shall have become such
pursuant to the applicable provisions of this Indenture, and thereafter
"Trustee" shall mean such successor Trustee.
"2023 Debentures" means the Company's 7.75% Debentures
due 2023.
"U.S. Person" means (i) any individual resident in the United
States, (ii) any partnership or corporation organized or incorporated under the
laws of the United States, (iii) any estate of which an executor or
administrator is a U.S. Person (other than an estate governed by foreign law and
of which at least one executor or administrator is a non-U.S. Person who has
sole or shared investment discretion with respect to its assets), (iv) any trust
of which any trustee is a U.S. Person (other than a trust of which at least one
trustee is a non-U.S. Person who has sole or shared investment discretion with
respect to its assets and no beneficiary of the trust (and no settlor if the
Trust is revocable) is a U.S. Person), (v) any agency or branch of a foreign
entity located in the United States, (vi) any non-discretionary or similar
account (other than an estate or trust) held by a dealer or other fiduciary for
the benefit or account of a U.S. Person, (vii) any discretionary or similar
account (other than an estate or trust) held by a dealer or other fiduciary
organized, incorporated or (if an individual) resident in the United States
(other than such an account held for the benefit or account of a non-U.S.
Person), (viii) any partnership or corporation organized or incorporated under
the laws of a foreign jurisdiction and formed by a U.S. Person principally for
the purpose of investing in securities not registered under the Securities
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Act (unless it is organized or incorporated, and owned, by accredited investors
within the meaning of Rule 501(a) under the Securities Act who are not natural
persons, estates or trusts); provided, however, that the term "U.S. Person" does
not include (A) a branch or agency of a U.S. Person that is located and
operating outside the United States for valid business purposes as a locally
regulated branch or agency engaged in the banking or insurance business, (B) any
employee benefit plan established and administered in accordance with the law,
customary practices and documentation of a foreign country and (C) the
international organizations set forth in Section 902(o)(7) of Regulation S under
the Securities Act and any other similar international organizations, and their
agencies, affiliates and pension plans.
"Vice President", when used with respect to the Company or the
Trustee, means any vice president, whether or not designated by a number or a
word or words added before or after the title "vice president".
"Voting Stock" of any Person means Capital Stock of such
Person which ordinarily has voting power for the election of directors (or
persons performing similar functions) of such Person, whether at all times or
only so long as no senior class of securities has such voting power by reason of
any contingency.
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock or
other ownership interests of which (other than directors' qualifying shares)
shall at the time be owned by such Person or by one or more Wholly Owned
Restricted Subsidiaries of such Person or by such Person and one or more Wholly
Owned Restricted Subsidiaries of such Person.
SECTION 102. Compliance Certificates and Opinions.
Upon any application or request by the Company to the Trustee
to take any action under any provision of this Indenture, the Company shall
furnish to the Trustee such certificates and opinions as may be required under
the Trust Indenture Act. Each such certificate or opinion shall be given in the
form of an Officers' Certificate, if to be given by an officer of the Company,
or an Opinion of
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Counsel, if to be given by counsel, and shall comply with the requirements of
the Trust Indenture Act and any other requirement set forth in this Indenture.
Every certificate or opinion with respect to compliance with a
condition or covenant provided for in this Indenture shall include:
(1) a statement that each individual signing such certificate
or opinion has read such covenant or condition and the definitions
herein relating thereto;
(2) a brief statement as to the nature and scope of the
examination or investigation upon which the statements or opinions
contained in such certificate or opinion are based;
(3) a statement that, in the opinion of each such individual,
he has made such examination or investigation as is necessary to enable
him to express an informed opinion as to whether or not such covenant
or condition has been complied with; and
(4) a statement as to whether, in the opinion of each such
individual, such condition or covenant has been complied with.
SECTION 103. Form of Documents Delivered to Trustee.
In any case where several matters are required to be certified
by, or covered by an opinion of, any specified Person, it is not necessary that
all such matters be certified by, or covered by the opinion of, only one such
Person, or that they be so certified or covered by only one document, but one
such Person may certify or give an opinion with respect to some matters and one
or more other such Persons as to other matters, and any such Person may certify
or give an opinion as to such matters in one or several documents.
Any certificate or opinion of an officer of the Company may be
based, insofar as it relates to legal matters, upon a certificate or opinion of,
or representations by, counsel, unless such officer knows, or in the
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exercise of reasonable care should know, that the certificate or opinion or
representations with respect to the matters upon which his certificate or
opinion is based are erroneous. Any such certificate or opinion of counsel may
be based, insofar as it relates to factual matters, upon a certificate or
opinion of, or representations by, an officer or officers of the Company stating
that the information with respect to such factual matters is in the possession
of the Company, unless such counsel knows, or in the exercise of reasonable care
should know, that the certificate or opinion or representations with respect to
such matters are erroneous.
Where any Person is required to make, give or execute two or
more applications, requests, consents, certificates, statements, opinions or
other instruments under this Indenture, they may, but need not, be consolidated
and form one instrument.
SECTION 104. Acts of Holders; Record Date.
(a) Any request, demand, authorization, direction, notice,
consent, waiver or other action provided by this Indenture to be given or taken
by Holders may be embodied in and evidenced by one or more instruments of
substantially similar tenor signed by such Holders in person or by agent duly
appointed in writing; and, except as herein otherwise expressly provided, such
action shall become effective when such instrument or instruments are delivered
to the Trustee and, where it is hereby expressly required, to the Company. Such
instrument or instruments (and the action embodied therein and evidenced
thereby) are herein sometimes referred to as the "Act" of the Holders signing
such instrument or instruments. Proof of execution of any such instrument or of
a writing appointing any such agent shall be sufficient for any purpose of this
Indenture and (subject to Section 601) conclusive in favor of the Trustee and
the Company, if made in the manner provided in this Section.
(b) The fact and date of the execution by any Person of any
such instrument or writing may be proved by the affidavit of a witness of such
execution or by a certificate of a notary public or other officer authorized by
law to take acknowledgments of deeds, certifying that the individual signing
such instrument or writing acknowledged
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to him the execution thereof. Where such execution is by a signer acting in a
capacity other than his individual capacity, such certificate or affidavit shall
also constitute sufficient proof of his authority. The fact and date of the
execution of any such instrument or writing, or the authority of the Person
executing the same, may also be proved in any other manner which the Trustee
deems sufficient.
(c) The Company may, in the circumstances permitted by the
Trust Indenture Act, fix any day as the record date for the purpose of
determining the Holders entitled to give or take any request, demand,
authorization, direction, notice, consent, waiver or other action, or to vote on
any action, authorized or permitted to be given or taken by Holders. If not set
by the Company prior to the first solicitation of a Holder made by any Person in
respect of any such action, or, in the case of any such vote, prior to such
vote, the record date for any such action or vote shall be the 30th day (or, if
later, the date of the most recent list of Holders required to be provided
pursuant to Section 701) prior to such first solicitation or vote, as the case
may be. With regard to any record date, only the Holders on such date (or their
duly designated proxies) shall be entitled to give or take, or vote on, the
relevant action.
(d) The ownership of Notes shall be proved by the Security
Register.
(e) Any request, demand, authorization, direction, notice,
consent, waiver or other Act of the Holder of any Note shall bind every future
Holder of the same Note and the Holder of every Note issued upon the
registration of transfer thereof or in exchange therefor or in lieu thereof in
respect of anything done, omitted or suffered to be done by the Trustee or the
Company in reliance thereon, whether or not notation of such action is made upon
such Note.
SECTION 105. Notices, Etc., to Trustee and Company.
Any request, demand, authorization, direction, notice,
consent, waiver or Act of Holders or other document provided or permitted by
this Indenture to be made upon, given or furnished to, or filed with,
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(1) the Trustee by any Holder or by the Company shall be
sufficient for every purpose hereunder if made, given, furnished or
filed in writing and mailed, first-class postage prepaid, or sent by
facsimile to or with the Trustee at its Corporate Trust Office,
Attention: Corporate Trust, or
(2) the Company by the Trustee or by any Holder shall be
sufficient for every purpose hereunder (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage
prepaid, or sent by facsimile to the Company addressed to it at the
address of its principal office specified in the first paragraph of
this instrument or at any other address previously furnished in writing
to the Trustee by the Company.
SECTION 106. Notice to Holders; Waiver.
Where this Indenture provides for notice to Holders of any
event, such notice shall be sufficiently given (unless otherwise herein
expressly provided) if in writing and mailed, first-class postage prepaid, to
each Holder affected by such event, at his address as it appears in the Security
Register, not later than the latest date (if any), and not earlier than the
earliest date (if any), prescribed for the giving of such notice. In any case
where notice to Holders is given by mail, neither the failure to mail such
notice, nor any defect in any notice so mailed, to any particular Holder shall
affect the sufficiency of such notice with respect to other Holders. Where this
Indenture provides for notice in any manner, such notice may be waived in
writing by the Person entitled to receive such notice, either before or after
the event, and such waiver shall be the equivalent of such notice. Waivers of
notice by Holders shall be filed with the Trustee, but such filing shall not be
a condition precedent to the validity of any action taken in reliance upon such
waiver.
In case by reason of the suspension of regular mail service or
by reason of any other cause it shall be impracticable to give such notice by
mail, then such notification as shall be made with the approval of the
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Trustee shall constitute a sufficient notification for every purpose hereunder.
SECTION 107. Conflict with Trust Indenture Act.
If any provision hereof limits, qualifies or conflicts with a
provision of the Trust Indenture Act, that is required under such Act to be part
of and govern this Indenture, the latter provision shall control. If any
provision of this Indenture modifies or excludes any provision of the Trust
Indenture Act that may be so modified or excluded, the latter provision shall be
deemed to apply to this Indenture as so modified or to be excluded, as the case
may be. Until such time as this Indenture shall be qualified under the Trust
Indenture Act, this Indenture, the Company and the Trustee shall be deemed for
all purposes hereof to be subject to and governed by the Trust Indenture Act to
the same extent as would be the case if this Indenture were so qualified on the
date hereof.
SECTION 108. Effect of Headings and Table of Contents.
The Article and Section headings herein and the Table of
Contents are for convenience only and shall not affect the construction hereof.
SECTION 109. Successors and Assigns.
All covenants and agreements in this Indenture by the Company
shall bind its successors and assigns, whether so expressed or not.
SECTION 110. Separability Clause.
In case any provision in this Indenture or in the Notes shall
be invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
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SECTION 111. Benefits of Indenture.
Nothing in this Indenture or in the Notes, express or implied,
shall give to any Person, other than the parties hereto and their successors
hereunder, the holders of Senior Debt and the Holders of Notes, any benefit or
any legal or equitable right, remedy or claim under this Indenture.
SECTION 112. Governing Law.
This Indenture and the Notes shall be governed by and
construed in accordance with the laws of the State of New York; provided,
however, that the standard of performance by the Trustee of its duties hereunder
shall be governed by the laws of the State of California.
SECTION 113. Legal Holidays.
In any case where any Interest Payment Date, Redemption Date,
Purchase Date or Stated Maturity of any Note shall not be a Business Day, then
(notwithstanding any other provision of this Indenture or of the Notes) payment
of interest or principal (and premium, if any) need not be made on such date,
but may be made on the next succeeding Business Day with the same force and
effect as if made on the Interest Payment Date, Redemption Date or Purchase
Date, or at the Stated Maturity, as the case may be, provided that no interest
shall accrue for the period from and after such Interest Payment Date,
Redemption Date or Purchase Date or Stated Maturity, as the case may be.
ARTICLE TWO
Note Forms
SECTION 201. Forms Generally; Initial Forms of Rule 144A and Regulation
S Notes.
The Notes and the Trustee's certificates of authentication
shall be in substantially the forms set forth in this Article, with such
appropriate insertions, omissions, substitutions and other variations as are
required or permitted by this Indenture, and may have such
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letters, numbers or other marks of identification and such legends or
endorsements placed thereon as may be required to comply with the rules of any
securities exchange or as may, consistently herewith, be determined by the
officers executing such Notes, as evidenced by their execution of the Notes.
The definitive Notes to be endorsed thereon shall be printed,
lithographed or engraved or produced by any combination of these methods on
steel engraved borders or may be produced in any other manner permitted by the
rules of any securities exchange on which the Notes may be listed, all as
determined by the officers executing such Notes, as evidenced by their execution
thereof.
Upon their original issuance, Rule 144A Notes shall be issued
in the form of one or more Global Notes without interest coupons registered in
the name of DTC, as Depositary, or its nominee and deposited with the Trustee,
as custodian for DTC, in New York, New York, for credit by DTC to the respective
accounts of beneficial owners of the Notes represented thereby (or such other
accounts as they may direct). Such Global Notes, together with their Successor
Notes which are Global Notes other than the Restricted Global Note are
collectively herein called the "Regulation S Global Note".
Upon their original issuance, Regulation S Notes (herein
called the "Regulation S Temporary Global Note") shall be issued in the form of
a single temporary Global Note without coupons registered in the name of DTC, as
Depositary, or its nominee and deposited with the Trustee at its Corporate Trust
Office, as custodian for DTC, for credit to Morgan Guaranty Trust Company of New
York, Brussels Office, as operator of the Euroclear, and Cedel to the respective
accounts of beneficial owners of the Notes represented thereby (or such other
accounts as they may direct) in accordance with the rules thereof.
Beneficial interests in the Regulation S Temporary Global Note
may only be held through Euroclear and Cedel until such interests are exchanged
for corresponding interests in an unrestricted Global Note as provided in the
next sentence. A holder of a beneficial interest in the Regulation S Temporary
Global Note must provide written certification to Euroclear or CEDEL, as the
case may be, that the beneficial owner of the interest in such Global
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Note is not a U.S. Person (an "Owner Securities Certification"), and Euroclear
or CEDEL, as the case may be, must provide to the Trustee a similar certificate
in the form set form in Annex C (a "Depositary Securities Certification"), prior
to (i) the payment of interest with respect to such holder's beneficial interest
in the Regulation S Temporary Global Note and (ii) any exchange of such
beneficial interest for a beneficial interest in the Regulation S Global Note.
SECTION 202. Form of Face of Note.
[If the Note is a Restricted Note, then insert -- THE NOTES
EVIDENCED HEREBY HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S.
SECURITIES ACT OF 1933 (THE "SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED EXCEPT (1) TO A PERSON WHOM THE TRANSFEROR
REASONABLY BELIEVES IS A QUALIFIED INSTITUTIONAL BUYER WITHIN THE MEANING OF
RULE 144A UNDER THE SECURITIES ACT ACQUIRING FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER IN A TRANSACTION MEETING THE
REQUIREMENTS OF RULE 144A, (2) IN AN OFFSHORE TRANSACTION MEETING THE
REQUIREMENTS OF RULE 903 OR RULE 904 OF REGULATION S UNDER THE SECURITIES ACT,
(3) PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE SECURITIES ACT PROVIDED
BY RULE 144 THEREUNDER (IF AVAILABLE), (4) TO INSTITUTIONAL ACCREDITED INVESTORS
IN A TRANSACTION EXEMPT FROM THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT
OR (5) PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT UNDER THE SECURITIES ACT,
IN EACH CASE IN ACCORDANCE WITH ALL OTHER APPLICABLE SECURITIES LAWS.
THE HOLDER OF THIS NOTE AGREES FOR THE BENEFIT OF THE ISSUER
THAT THE HOLDER WILL, AND EACH SUBSEQUENT HOLDER IS REQUIRED TO, NOTIFY ANY
PURCHASER OF THIS NOTE FROM IT OF THE RESALE RESTRICTIONS REFERRED TO IN (A)
ABOVE.
THIS NOTE WILL NOT BE ACCEPTED FOR REGISTRATION OF TRANSFER
UNLESS THE REGISTRAR OR TRANSFER AGENT IS SATISFIED THAT THE RESTRICTIONS ON
TRANSFER SET FORTH ABOVE HAVE BEEN COMPLIED WITH, ALL AS PROVIDED IN THE
INDENTURE.]
[If the Note is a Global Note, then insert -- THIS NOTE IS A
GLOBAL NOTE WITHIN THE MEANING OF THE INDENTURE HEREINAFTER REFERRED TO AND IS
REGISTERED IN THE NAME OF A DEPOSITARY OR A NOMINEE THEREOF. THIS NOTE MAY NOT
BE
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<PAGE>
EXCHANGED IN WHOLE OR IN PART FOR A NOTE REGISTERED, AND NO TRANSFER OF THIS
NOTE IN WHOLE OR IN PART MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN
SUCH DEPOSITARY OR A NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES
DESCRIBED IN THE INDENTURE.]
[If the Note is a Global Note and The Depository Trust Company
is to be the Depositary therefor, then insert -- UNLESS THIS NOTE IS PRESENTED
BY AN AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK
CORPORATION ("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER,
EXCHANGE OR PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO.
OR IN SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC
(AND ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED
BY AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE
HEREOF FOR VALUE OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE
REGISTERED OWNER HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.]
[If the Note is a Regulation S Note, then insert -- THIS NOTE
HAS NOT BEEN REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933 , AS AMENDED (THE
"SECURITIES ACT"), AND MAY NOT BE OFFERED, SOLD OR DELIVERED IN THE UNITED
STATES OR TO, OR FOR THE ACCOUNT OF BENEFIT OF, ANY U.S. PERSON, UNLESS THIS
NOTE IS REGISTERED UNDER THE SECURITIES ACT OR AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS THEREOF IS AVAILABLE.]
[If the Note is a Regulation S Temporary Global Note, then
insert -- THIS NOTE IS A REGULATION S TEMPORARY GLOBAL NOTE WITHIN THE MEANING
OF THE INDENTURE REFERRED TO HEREINAFTER. INTERESTS IN THIS REGULATION S
TEMPORARY GLOBAL NOTE MAY NOT BE OFFERED OR SOLD TO A U.S. PERSON PRIOR TO THE
EXPIRATION OF THE RESTRICTED PERIOD (AS DEFINED IN THE INDENTURE) EXCEPT IN
CERTAIN LIMITED CIRCUMSTANCES IN ACCORDANCE WITH THE TERMS OF THE INDENTURE.]
PHILLIPS-VAN HEUSEN CORPORATION
9 1/2% SENIOR SUBORDINATED NOTES DUE 2008
[If Restricted Global Note - CUSIP No. ____________]
[If Regulation S Temporary Global Note - CUSIP No.
[_____________]]
[If Regulation S Global Note - ISIN No. [____________]]
No. __________ $___________
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<PAGE>
Phillips-Van Heusen Corporation, a corporation duly organized
and existing under the laws of Delaware (herein called the "Company", which term
includes any successor Person under the Indenture hereinafter referred to), for
value received, hereby promises to pay to ________________, or registered
assigns, the principal sum of ______________ Dollars (such amount the "principal
amount" of this Note) [if the Note is a Global Note, then insert -- , or such
other principal amount (which, when taken together with the principal amounts of
all other Outstanding Notes, shall not exceed $150,000,000 in the aggregate at
any time) as may be set forth in the records of the Trustee hereinafter referred
to in accordance with the Indenture,] on May 1, 2008 and to pay interest thereon
from April 22, 1998, or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, semi-annually on May 1 and November
1 in each year, commencing November 1, 1998, at the rate of 9 1/2% per annum,
until the principal hereof is paid or made available for payment; provided that,
if any Registration Default occurs under the Exchange and Registration Rights
Agreement, then the per annum interest rate on the applicable principal amount
will increase for the period from and including the date of the occurrence of
the Registration Default to but excluding such date as no Registration Default
is in effect (at which time the interest rate will be reduced to its initial
rate) at a per annum rate of 0.5% for the first 90-day period following the
occurrence of such Registration Default, and by an additional 0.5% thereafter
(up to a maximum of 1.0%) (such additional interest being hereafter referred to
as "Special Interest"), and provided, further,] that any amount of interest on
this Note which is overdue shall bear interest (to the extent that payment
thereof shall be legally enforceable) at the rate per annum then borne by this
Note from the date such amount is due to the day it is paid or made available
for payment, and such overdue interest shall be payable on demand.
The interest so payable, and punctually paid or duly provided
for, on any Interest Payment Date will, as provided in such Indenture, be paid
to the Person in whose name this Note (or one or more Predecessor Notes) is
registered at the close of business on the Regular Record Date for such
interest, which shall be the April 15 or October 15 (whether or not a Business
Day), as the case may be, next preceding such Interest Payment Date [if the Note
is an Original Note, then insert --, provided that any
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<PAGE>
accrued and unpaid interest (including Special Interest) on this Note upon the
issuance of an Exchange Note in exchange for this Note shall cease to be payable
to the Holder hereof and shall be payable on the next Interest Payment Date for
such Exchange Note to the Holder thereof on the related Regular Record Date].
Any such interest not so punctually paid or duly provided for will forthwith
cease to be payable to the Holder on the relevant Regular Record Date and may
either be paid to the Person in whose name this Note (or one or more Predecessor
Notes) is registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest to be fixed by the Trustee, notice whereof
shall be given to Holders of Notes not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not inconsistent
with the requirements of any securities exchange on which the Notes may be
listed, and upon such notice as may be required by such exchange, all as more
fully provided in said Indenture. Interest on this Note shall be computed on the
basis set forth in the Indenture.
Payment of the principal of (and premium, if any) and any such
interest on this Note will be made at the office or agency of the Company in the
Borough of Manhattan, The City of New York, New York, maintained for such
purpose and at any other office or agency maintained by the Company for such
purpose, in such coin or currency of the United States of America as at the time
of payment is legal tender for payment of public and private debts; provided,
however, that at the option of the Company payment of interest may be made by
check mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register; provided further that all payments of the
principal (and premium, if any) and interest on Notes, the Holders of which have
given wire transfer instructions to the Company or its agent at least 10
Business Days prior to the applicable payment date will be required to be made
by wire transfer of immediately available funds to the accounts specified by
such Holders in such instructions. Notwithstanding the foregoing, the final
payment of principal shall be payable only upon surrender of this Note to the
Trustee.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further provisions shall for all
purposes have the same effect as if set forth at this place.
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<PAGE>
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument to
be duly executed under its corporate seal.
Dated:
PHILLIPS-VAN HEUSEN CORPORATION
[SEAL]
By___________________________________
Attest:
________________________________
SECTION 203. Form of Reverse of Note.
This Note is one of a duly authorized issue of Notes of the
Company designated as its 9 1/2% Senior Subordinated Notes due May 1, 2008
(herein called the "Notes"), limited in aggregate principal amount to
$150,000,000, issued and to be issued under an Indenture, dated as of April 22,
1998 (herein called the "Indenture", which term shall have the meaning assigned
to it in such instrument), between the Company and Union Bank of California,
N.A., as Trustee (herein called the "Trustee", which term includes any successor
trustee under the Indenture), to which Indenture and all indentures supplemental
thereto reference is hereby made for a statement of the respective rights,
limitations of rights, duties and immunities thereunder of the Company, the
Trustee and the Holders of the Notes and of the terms upon which the Notes are,
and are to be, authenticated and delivered.
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<PAGE>
The Notes will be subject to redemption, at the option of the
Company, in whole or in part, at any time on or after May 1, 2003 and prior to
maturity, upon not less than 30 nor more than 60 days' notice mailed to each
Holder of Notes to be redeemed at such Holder's address appearing in the
Security Register, in amounts of $1,000 or an integral multiple of $1,000, at
the following Redemption Prices (expressed as percentages of the principal
amount) plus accrued interest to but excluding the Redemption Date (subject to
the right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date), if redeemed during the 12-month period beginning May 1 of the years
indicated:
Redemption
Year Price
---- ----------
2003................................................ 104.750%
2004................................................ 103.167%
2005................................................ 101.583%
2006 and thereafter................................. 100.000%
In addition, if on or before May 1, 2001 the Company receives
net proceeds from the sale of its Common Stock in one or more Public Equity
Offerings, the Company may, at its option use an amount equal to all or a
portion of any such net proceeds to redeem Notes in an aggregate principal
amount of up to 33 1/3% of the original aggregate principal amount of the Notes,
provided, however, that Notes having a principal amount equal to at least
66 2/3% of the original aggregate principal amount of the Notes remain
outstanding after such redemption. Such redemption must occur on a Redemption
Date within 90 days of such sale and upon not less than 30 nor more than 60
days' notice mailed to each Holder of Notes to be redeemed at such Holder's
address appearing in the Security Register, in amounts of $1,000 or an integral
multiple of $1,000, at a redemption price of 109.50% of the principal amount of
the Notes plus accrued interest to but excluding the Redemption Date (subject to
the right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date).
If less than all the Notes are to be redeemed, the Trustee
shall select, in such manner as it shall deem fair
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<PAGE>
and appropriate, the particular Notes to be redeemed or any portion thereof that
is an integral multiple of $1,000.
The Notes do not have the benefit of any sinking fund
obligations.
The Indenture provides that, subject to certain conditions, if
(i) certain Net Available Proceeds are available to the Company as a result of
Asset Dispositions or (ii) a Change of Control occurs, the Company shall be
required to make an Offer to Purchase for all or a specified portion of the
Notes.
In the event of redemption or purchase pursuant to an Offer to
Purchase of this Note in part only, a new Note or Notes of like tenor for the
unredeemed or unpurchased portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the
principal of all the Notes may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time
of (i) the entire indebtedness of this Note having been paid or discharged or
(ii) certain restrictive covenants and Events of Default with respect to this
Note having occurred, in each case upon compliance with certain conditions set
forth therein.
The Notes shall be subordinated in right of payment to Senior
Debt of the Company as provided in the Indenture.
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Notes under the
Indenture at any time by the Company and the Trustee with the consent of the
Holders of a majority in aggregate principal amount of the Notes at the time
Outstanding. The Indenture also contains provisions permitting the Holders of a
majority in aggregate principal amount of the Notes at the time Outstanding, on
behalf of the Holders of all the Notes, to waive compliance by the Company with
certain provisions of the Indenture and certain past defaults under the
Indenture and their
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<PAGE>
consequences. Any such consent or waiver by the Holder of this Note shall be
conclusive and binding upon such Holder and upon all future Holders of this Note
and of any Note issued upon the registration of transfer hereof or in exchange
herefor or in lieu hereof, whether or not notation of such consent or waiver is
made upon this Note.
As provided in and subject to the provisions of the Indenture,
the Holder of this Note shall not have the right to institute any proceeding
with respect to the Indenture or for the appointment of a receiver or trustee or
for any other remedy thereunder, unless such Holder shall have previously given
to the Trustee written notice of a continuing Event of Default with respect to
the Notes, the Holders of not less than 25% in aggregate principal amount of the
Notes at the time Outstanding shall have made written request to the Trustee to
institute proceedings in respect of such Event of Default as Trustee and offered
the Trustee reasonable indemnity and the Trustee shall not have received from
the Holders of a majority in aggregate principal amount of Notes at the time
Outstanding a direction inconsistent with such request and shall have failed to
institute any such proceeding for 60 days after receipt of such notice, request
and offer of indemnity. The foregoing shall not apply to certain suits described
in the Indenture, including any suit instituted by the Holder of this Note for
the enforcement of any payment of principal hereof or any premium (if any) or
interest hereon on or after the respective due dates expressed herein (or, in
the case of redemption, on or after the Redemption Date or, in the case of any
purchase of this Note required to be made pursuant to an Offer to Purchase, on
the Purchase Date).
No reference herein to the Indenture and no provision of this
Note or of the Indenture shall alter or impair the obligation of the Company,
which is absolute and unconditional, to pay the principal of (and premium, if
any) and interest on this Note at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registrable in the
Security Register, upon surrender of this Note for registration of transfer at
the office or agency of the Company in the Borough of Manhattan, The City of New
York, duly endorsed by, or accompanied by a written instrument of transfer in
form satisfactory to the Company
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<PAGE>
and the Note Registrar duly executed by, the Holder hereof or his attorney duly
authorized in writing, and thereupon one or more new Notes, of authorized
denominations and for the same aggregate principal amount, will be issued to the
designated transferee or transferees.
The Notes are issuable only in registered form without coupons
in denominations of $1,000 principal amount and any integral multiple thereof.
As provided in the Indenture and subject to certain limitations therein set
forth, Notes are exchangeable for a like aggregate principal amount of Notes of
a different authorized denomination, as requested by the Holder surrendering the
same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient to
cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Note is registered as the owner hereof
for all purposes (subject to the provisions hereof with respect to determination
of the Person to whom interest is payable), whether or not this Note be overdue,
and neither the Company, the Trustee nor any such agent shall be affected by
notice to the contrary.
Interest on this Note shall be computed on the basis of a
360-day year of twelve 30-month days.
All terms used in this Note which are defined in the Indenture
shall have the meanings assigned to them in the Indenture.
The Indenture and this Note shall be governed by and construed
in accordance with the laws of the State of New York; provided, however, that
the standard of performance by the Trustee of its duties hereunder shall be
governed by the laws of the State of California.
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<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased in its
entirety by the Company pursuant to Section 1014 or 1016 of the Indenture, check
the box:
|_|
If you want to elect to have only a part of this Note
purchased by the Company pursuant to Section 1014 or 1016 of the Indenture,
state the principal amount of this Note you want to elect to have so purchased
by the Company: $____________
Dated:______________ Your Signature:____________________
(Sign exactly as
name appears on the
other side of this
Note)
Signature Guarantee:_________________________________________________
Notice: Signature(s) must be guaranteed by an
"eligible guarantor institution" meeting the
requirements of the Trustee, which requirements
will include membership or participation in STAMP
or such other "signature guarantee program" as
may be determined by the Trustee in addition to,
or in substitution for STAMP, all in accordance
with the Securities Exchange Act of 1934, as
amended.
SECTION 204. Form of Trustee's Certificate of Authentication.
This is one of the Notes referred to in the within-mentioned
Indenture.
------------------------
as Trustee
By
---------------------
Authorized Officer
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<PAGE>
ARTICLE THREE
The Notes
SECTION 301. Title and Terms.
The aggregate principal amount of Notes which may be
authenticated and delivered under this Indenture is limited to $150,000,000
except for Notes authenticated and delivered upon registration of transfer of,
or in exchange for, or in lieu of, other Notes pursuant to Section 304, 305,
306, 906 or 1108 or in connection with an Offer to Purchase pursuant to Sections
1014 and 1016.
The Notes shall be known and designated as the "9 1/2% Senior
Subordinated Notes due May 1, 2008" of the Company. Their Stated Maturity shall
be May 1, 2008 and they shall bear interest at the rate of 9 1/2% per annum,
from April 22, 1998 or from the most recent Interest Payment Date to which
interest has been paid or duly provided for, as the case may be, payable
semi-annually on May 1 and November 1, commencing November 1, 1998, until the
principal thereof is paid or made available for payment provided, if any
Registration Default occurs under the Exchange and Registration Rights
Agreement, then the per annum interest rate on the applicable principal amount
will increase for the period from and including the date of occurrence of the
Registration Default to but excluding such date as no Registration Default is in
effect (at which time the interest rate will be reduced to its initial rate) by
a per annum rate of 0.5% for the first 90-day period following the occurrence of
such Registration Default, and by an additional 0.5% thereafter (up to a maximum
of 1.0%).
The principal of (and premium, if any) and interest on the
Notes shall be payable at the office or agency of the Company in the Borough of
Manhattan, The City of New York maintained for such purpose and at any other
office or agency maintained by the Company for such purpose; provided, however,
that at the option of the Company payment of interest may be made by check
mailed to the address of the Person entitled thereto as such address shall
appear in the Security Register.
The Notes shall be subject to repurchase by the Company
pursuant to an Offer to Purchase as provided in Sections 1014 and 1016.
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<PAGE>
The Notes shall be redeemable as provided in Article Eleven.
The Notes shall be subordinated in right of payment to Senior
Debt of the Company as provided in Article Twelve.
The Notes shall be subject to defeasance at the option of the
Company as provided in Article Thirteen.
Unless the context otherwise requires, the Original Notes and
the Exchange Notes shall constitute one series for all purposes under the
Indenture, including with respect to any amendment, waiver, acceleration or
other Act of Holders, redemption or Offer to Purchase.
SECTION 302. Denominations.
The Notes shall be issuable only in registered form without
coupons and only in denominations of $1000 and integral multiples thereof.
SECTION 303. Execution, Authentication, Delivery and Dating.
The Notes shall be executed on behalf of the Company by its
Chairman of the Board, its President or one of its Vice Presidents, under its
corporate seal reproduced thereon attested by its Secretary or one of its
Assistant Secretaries. The signature of any of these officers on the Notes may
be manual or facsimile.
Notes bearing the manual or facsimile signatures of
individuals who were at any time the proper officers of the Company shall bind
the Company, notwithstanding that such individuals or any of them have ceased to
hold such offices prior to the authentication and delivery of such Notes or did
not hold such offices at the date of such Notes.
At any time and from time to time after the execution and
delivery of this Indenture, the Company may deliver Notes executed by the
Company to the Trustee for authentication, together with a Company Order for the
authentication and delivery of such Notes; and the Trustee
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<PAGE>
in accordance with such Company Order shall authenticate and deliver such Notes
as in this Indenture provided and not otherwise.
At any time and from time to time after the execution and
delivery of this Indenture and after the effectiveness of a registration
statement under the Securities Act with respect thereto, the Company may deliver
Exchange Notes executed by the Company to the Trustee for authentication,
together with a Company Order for the authentication and delivery of such
Exchange Notes and a like principal amount of Original Notes for cancellation in
accordance with this Article Three of this Indenture, and the Trustee in
accordance with the Company Order shall authenticate and deliver such Notes.
Prior to authenticating such Exchange Notes, and accepting any additional
responsibilities under this Indenture in relation to such Notes, the Trustee
shall be entitled to receive, if requested, and (subject to Section 601) shall
be fully protected in relying upon, an Opinion of Counsel stating in substance:
(a) that all conditions hereunder precedent to the
authentication and delivery of such Exchange Notes have been complied
with and that such Exchange Notes, when such Notes have been duly
authenticated and delivered by the Trustee (and subject to any other
conditions specified in such Opinion of Counsel), have been duly issued
and delivered and will constitute valid and legally binding obligations
of the Company, enforceable in accordance with their terms, subject to
bankruptcy, insolvency, fraudulent transfer, reorganization, moratorium
and similar laws of general applicability relating to or affecting
creditors' rights and to general equity principles; and
(b) that the issuance of the Exchange Notes in exchange for
Original Notes has been effected in compliance with the Securities Act.
Each Note shall be dated the date of its authentication.
No Note shall be entitled to any benefit under this Indenture
or be valid or obligatory for any purpose unless there appears on such Note a
certificate of authentication substantially in the form provided for herein
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<PAGE>
executed by the Trustee by manual signature, and such certificate upon any Note
shall be conclusive evidence, and the only evidence, that such Note has been
duly authenticated and delivered hereunder.
SECTION 304. Temporary Notes.
Pending the preparation of definitive Notes, the Company may
execute, and upon Company Order the Trustee shall authenticate and deliver,
temporary Notes, which Notes are printed, lithographed, typewritten,
mimeographed or otherwise produced, in any authorized denomination,
substantially of the tenor of the definitive Notes in lieu of which they are
issued and with such appropriate insertions, omissions, substitutions and other
variations as the officers executing such Notes may determine, as evidenced by
their execution thereof.
If temporary Notes are issued, the Company will cause
definitive Notes to be prepared without unreasonable delay. After the
preparation of definitive Notes, the temporary Notes shall be exchangeable for
definitive Notes, upon surrender of the temporary Notes at any office or agency
of the Company designated pursuant to Section 1002, without charge to the
Holder. Upon surrender for cancellation of any one or more temporary Notes the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a like principal amount of definitive Notes of authorized
denominations. Until so exchanged the temporary Notes shall in all respects be
entitled to the same benefits under this Indenture as definitive Notes.
SECTION 305. Global Notes.
(a) Each Global Note authenticated under this Indenture shall
be registered in the name of the Depositary designated by the Company for such
Global Note or a nominee thereof and delivered to such Depositary or a nominee
thereof or custodian therefor, and each such Global Note shall constitute a
single Note for all purposes of this Indenture.
(b) Notwithstanding any other provision in this Indenture, no
Global Note may be exchanged in whole or in part for Notes registered, and no
transfer of a Global Note in whole or in part may be registered, in the name of
any Person other than the Depositary for such Global Note or a
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<PAGE>
nominee thereof unless (i) such Depositary (A) has notified the Company that it
is unwilling or unable to continue as Depositary for such Global Note or (B) has
ceased to be a clearing agency registered as such under the Exchange Act, and in
either case the Company fails to appoint a successor Depositary within 90 days,
(ii) the Company executes and delivers to the Trustee a Company Order stating
that it elects to cause the issuance of the Notes in certificated form and that
all Global Notes shall be exchanged in whole for Securities that are not Global
Notes (in which case such exchange shall be effected by the Trustee) or (iii)
there shall have occurred and be continuing an Event of Default or any Event
which after notice or lapse of time or both would be an Event of Default with
respect to the Notes.
(c) If any Global Note is to be exchanged for other Notes or
canceled in whole, it shall be surrendered by or on behalf of the Depositary or
its nominee to the Trustee, as Security Registrar, for exchange or cancellation
as provided in this Article Three. If any Global Note is to be exchanged for
other Notes or canceled in part, or if another Note is to be exchanged in whole
or in part for a beneficial interest in any Global Note, then either (i) such
Global Note shall be so surrendered for exchange or cancellation as provided in
this Article Three or (ii) the principal amount thereof shall be reduced or
increased by an amount equal to the portion thereof to be so exchanged or
canceled, or equal to the principal amount of such other Note to be so exchanged
for a beneficial interest therein, as the case may be, by means of an
appropriate adjustment made on the records of the Trustee, as Security
Registrar, whereupon the Trustee, in accordance with the Applicable Procedures,
shall instruct the Depositary or its authorized representative to make a
corresponding adjustment to its records. Upon any such surrender or adjustment
of a Global Note, the Trustee shall, subject to Section 306(c) and as otherwise
provided in this Article Three, authenticate and deliver any Notes issuable in
exchange for such Global Note (or any portion thereof) to or upon the order of,
and registered in such names as may be directed by, the Depositary or its
authorized representative. Upon the request of the Trustee in connection with
the occurrence of any of the events specified in the preceding paragraph, the
Company shall promptly make available to the Trustee a reasonable supply of
Notes that are not in the form of Global Notes. The Trustee shall be entitled to
rely upon any order, direction or request of the Depositary or its
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<PAGE>
authorized representative which is given or made pursuant to this Article Three
if such order, direction or request is given or made in accordance with the
Applicable Procedures.
(d) Every Note authenticated and delivered upon registration
of transfer of, or in exchange for or in lieu of, a Global Note or any portion
thereof, whether pursuant to this Article Three or otherwise, shall be
authenticated and delivered in the form of, and shall be, a Global Note, unless
such Note is registered in the name of a Person other than the Depositary for
such Global Note or a nominee thereof.
(e) The Depositary or its nominee, as registered owner of a
Global Note, shall be the Holder of such Global Note for all purposes under the
Indenture and the Notes, and owners of beneficial interests in a Global Note
shall hold such interests pursuant to the Applicable Procedures. Accordingly,
any such owner's beneficial interest in a Global Note will be shown only on, and
the transfer of such interest shall be effected only through, records maintained
by the Depositary or its nominee or its Agent Members.
SECTION 306. Registration, Registration of Transfer and Exchange Generally;
Restrictions on Transfer and Exchange; Securities Act Legends.
(a) Registration, Registration of Transfer and Exchange
Generally. The Company shall cause to be kept at the Corporate Trust Office of
the Trustee a register (the register maintained in such office and in any other
office or agency of the Company designated pursuant to Section 1002 being herein
sometimes collectively referred to as the "Security Register") in which, subject
to such reasonable regulations as it may prescribe, the Company shall provide
for the registration of Notes and of transfers and exchanges of Notes. The
Trustee is hereby appointed "Security Registrar" for the purpose of registering
Notes and transfers and exchanges of Notes as herein provided. Such Security
Register shall distinguish between Original Notes and Exchange Notes.
Upon surrender for registration of transfer of any Note at an
office or agency of the Company designated pursuant to Section 1002 for such
purpose, and provided that the other requirements of this Section 306 have been
satisfied, the Company shall execute, and the Trustee shall
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authenticate and deliver, in the name of the designated transferee or
transferees, one or more new Notes of any authorized denominations, of a like
aggregate principal amount and bearing such restrictive legends as may be
required by this Indenture.
At the option of the Holder, and subject to the other
provisions of this Section 306, Notes may be exchanged for other Notes of any
authorized denominations, of a like aggregate principal amount and bearing such
restrictive legends as may be required by this Indenture upon surrender of the
Notes to be exchanged at any such office or agency. Whenever any Notes are so
surrendered for exchange, the Company shall execute, and the Trustee shall
authenticate and deliver, the Notes which the Holder making the exchange is
entitled to receive.
All Notes issued upon any registration of transfer or exchange
of Notes shall be the valid obligations of the Company, evidencing the same
debt, and (except for the differences between Original Notes and Exchange Notes
provided for herein) entitled to the same benefits under this Indenture, as the
Notes surrendered upon such registration of transfer or exchange.
Every Note presented or surrendered for registration of
transfer or for exchange shall (if so required by the Company or the Security
Registrar) be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company and the Note Registrar duly
executed, by the Holder thereof or his attorney duly authorized in writing.
No service charge shall be made for any registration of
transfer or exchange of Notes, but the Company may require payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
connection with any registration of transfer or exchange of Notes, other than
exchanges pursuant to Sections 303, 304, 305, 306, 906, 1016, 1017 or 1109 not
involving any transfer.
The Company shall not be required (i) to issue, register the
transfer of, or exchange any Note during a period beginning at the opening of
business 15 days before the day of the mailing of a notice of redemption of
Notes selected for redemption under Section 1105 and ending at the close of
business on the day of such mailing, or (ii) to
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register the transfer of or exchange any Note so selected for redemption, in
whole or in part, except the unredeemed portion of any Note being redeemed in
part.
(b) Certain Transfers and Exchanges. Notwithstanding any other
provision of this Indenture or the Notes, transfers and exchanges of Notes and
beneficial interests in a Global Note of the kinds specified in this Section
306(b) shall be made only in accordance with this Section 306(b).
(i) Restricted Global Note to Regulation S Temporary Global
Note or Regulation S Global Note. If the owner of a beneficial interest
in the Restricted Global Note wishes at any time to transfer such
interest to a Person who wishes to acquire the same in the form of a
beneficial interest in the Regulation S Temporary Global Note (if
before the expiration of the Restricted Period) or in the Regulation S
Global Note (if thereafter), such transfer may be effected only in
accordance with the provisions of this Clause (b)(i) subject to the
Applicable Procedures. Upon receipt by the Trustee, as Security
Registrar, of (A) an order given by the Depositary or its authorized
representative directing that a beneficial interest in the Regulation S
Temporary Global Note or Regulation S Temporary Global Note or
Regulation S Global Note (as applicable) in a specified principal
amount be credited to a specified Agent Member's account and that a
beneficial interest in the Restricted Global Note in an equal principal
amount be debited from another specified Agent Member's account and (B)
a Regulation S Certificate, satisfactory to the Trustee and duly
executed by the owner of such beneficial interest in the Restricted
Global Note or his attorney duly authorized in writing, then the
Trustee, as Security Registrar but subject to Clause (b)(iv) below,
shall reduce the principal amount of the Restricted Global Note and
increase the principal amount of the Regulation S Temporary Global Note
or Regulation S Global Note (as applicable) by such specified principal
amount as provided in Section 305(c).
(ii) Regulation S Temporary Global Note to Restricted Global
Note. If the owner of a beneficial interest in the Regulation S
Temporary Global Note wishes at any time to transfer such interest to a
Person who wishes to acquire the same in the form of a
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beneficial interest in the Restricted Global Note, such transfer may be
effected only in accordance with this Clause (b)(ii) and subject to the
Applicable Procedures. Upon receipt by the Trustee, as Security
Registrar, of (A) an order given by the Depositary or its authorized
representative directing that a beneficial interest in the Restricted
Global Note in a specified principal amount be credited to a specified
Agent Member's account and that a beneficial interest in the Regulation
S Temporary Global Note in an equal principal amount be debited from
another specified Agent Member's account and (B) a Restricted Notes
Certificate, satisfactory to the Trustee and duly executed by the owner
of such beneficial interest in the Regulation S Temporary Global Note
or his attorney duly authorized in writing, then the Trustee, as
Security Registrar, shall reduce the principal amount of the Regulation
S Temporary Global Note and increase the principal amount of the
Restricted Global Note by such specified principal amount as provided
in Section 305(c).
(iii) Exchanges between Global Note and Non-Global Note. A
beneficial interest in a Global Note may be exchanged for a Note that
is not a Global Note as provided in Section 305, provided that, if such
interest is a beneficial interest in the Restricted Global Note, or if
such interest is a beneficial interest in the Regulation S Temporary
Global Note, then such interest shall be exchanged for a Restricted
Note (subject in each case to Section 306(c)).
(iv) Regulation S Temporary Global Note to be Held Through
Euroclear or Cedel during Restricted Period. The Company shall use its
best efforts to cause the Depositary to ensure that beneficial
interests in the Regulation S Temporary Global Note may be held only in
or through accounts maintained at the Depositary by Euroclear or Cedel
(or by Agent Members acting for the account thereof), and no person
shall be entitled to effect any transfer or exchange that would result
in any such interest being held otherwise than in or through such an
account; provided that this Clause (b)(iv) shall not prohibit any
transfer or exchange of such an interest in accordance with Clause
(b)(ii) above.
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(c) Securities Act Legends. Rule 144A Notes and their
respective Successor Notes shall bear a Restricted Notes Legend, and Regulation
S Notes and their Successor Notes shall bear a Regulation S Legend, subject to
the following:
(i) subject to the following Clauses of this Section 306(c), a
Note or any portion thereof which is exchanged, upon transfer or
otherwise, for a Global Note or any portion thereof shall bear the
Securities Act Legend borne by such Global Note while represented
thereby;
(ii) subject to the following Clauses of this Section 306(c),
a new Note which is not a Global Note and is issued in exchange for
another Note (including a Global Note) or any portion thereof, upon
transfer or otherwise, shall bear the Securities Act Legend borne by
such other Note, provided that, if such new Note is required pursuant
to Section 306(b)(iii) to be issued in the form of a Restricted Note,
it shall bear a Restricted Notes Legend and, if such new Note is so
required to be issued in the form of a Regulation S Note, it shall bear
a Regulation S Legend;
(iii) Exchange Notes shall not bear a Securities Act Legend;
(iv) at any time after the Notes may be freely transferred
without registration under the Securities Act or without being subject
to transfer restrictions pursuant to the Securities Act, a new Note
which does not bear a Securities Act Legend may be issued in exchange
for or in lieu of a Note (other than a Global Note) or any portion
thereof which bears such a legend if the Trustee has received an
Unrestricted Notes Certificate, satisfactory to the Trustee and duly
executed by the Holder of such legended Note or his attorney duly
authorized in writing, and after such date and receipt of such
certificate, the Trustee shall authenticate and deliver such a new Note
in exchange for or in lieu of such other Note as provided in this
Article Three;
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(v) a new Note which does not bear a Securities Act Legend may
be issued in exchange for or in lieu of a Note (other than a Global
Note) or any portion thereof which bears such a legend if, in the
Company's judgment, placing such a legend upon such new Note is not
necessary to ensure compliance with the registration requirements of
the Securities Act, and the Trustee, at the direction of the Company,
shall authenticate and deliver such a new Note as provided in this
Article Three; and
(vi) notwithstanding the foregoing provisions of this Section
306(c), a Successor Note of a Note that does not bear a particular form
of Securities Act Legend shall not bear such form of legend unless the
Company has reasonable cause to believe that such Successor Note is a
"restricted security" within the meaning of Rule 144, in which case the
Trustee, at the direction of the Company, shall authenticate and
deliver a new Note bearing a Restricted Notes Legend in exchange for
such Successor Note as provided in this Article Three.
SECTION 307. Mutilated, Destroyed, Lost and Stolen Notes.
If any mutilated Note is surrendered to the Trustee, the
Company shall execute and the Trustee shall authenticate and deliver in exchange
therefor a new Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
If there shall be delivered to the Company and the Trustee (i)
evidence to their satisfaction of the destruction, loss or theft of any Note and
(ii) such security or indemnity as may be required by either of them to save
each of them and any agent of either of them harmless, then, in the absence of
notice to the Company or the Trustee that such Note has been acquired by a bona
fide purchaser, the Company shall execute and upon its request the Trustee shall
authenticate and deliver, in lieu of any such destroyed, lost or stolen Note, a
new Note of like tenor and principal amount and bearing a number not
contemporaneously outstanding.
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In case any such mutilated, destroyed, lost or stolen Note has
become or is about to become due and payable, the Company in its discretion may,
instead of issuing a new Note, pay such Note.
Upon the issuance of any new Note under this Section, the
Company may require the payment of a sum sufficient to cover any tax or other
governmental charge that may be imposed in relation thereto and any other
expenses (including the fees and expenses of the Trustee) connected therewith.
Every new Note issued pursuant to this Section in lieu of any
destroyed, lost or stolen Note shall constitute an original additional
contractual obligation of the Company, whether or not the destroyed, lost or
stolen Note shall be at any time enforceable by anyone, and shall be entitled to
all the benefits of this Indenture equally and proportionately with any and all
other Notes duly issued hereunder.
The provisions of this Section are exclusive and shall
preclude (to the extent lawful) all other rights and remedies with respect to
the replacement or payment of mutilated, destroyed, lost or stolen Notes.
SECTION 308. Payment of Interest; Interest Rights Preserved.
Interest on any Note which is payable, and is punctually paid
or duly provided for, on any Interest Payment Date shall be paid to the Person
in whose name that Note (or one or more Predecessor Notes) is registered at the
close of business on the Regular Record Date for such interest.
Any interest on any Note which is payable, but is not
punctually paid or duly provided for, on any Interest Payment Date (herein
called "Defaulted Interest") shall forthwith cease to be payable to the Holder
on the relevant Regular Record Date by virtue of having been such Holder, and
such Defaulted Interest may be paid by the Company, at its election in each
case, as provided in Clause (1) or (2) below:
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(1) The Company may elect to make payment of any Defaulted
Interest to the Persons in whose names the Notes (or their respective
Predecessor Notes) are registered at the close of business on a Special
Record Date for the payment of such Defaulted Interest, which shall be
fixed in the following manner. The Company shall notify the Trustee in
writing of the amount of Defaulted Interest proposed to be paid on each
Note and the date of the proposed payment, and at the same time the
Company shall deposit with the Trustee an amount of money equal to the
aggregate amount proposed to be paid in respect of such Defaulted
Interest or shall make arrangements satisfactory to the Trustee for
such deposit prior to the date of the proposed payment, such money when
deposited to be held in trust for the benefit of the Persons entitled
to such Defaulted Interest as in this Clause provided. Thereupon the
Trustee shall fix a Special Record Date for the payment of such
Defaulted Interest which shall be not more than 15 days and not less
than 10 days prior to the date of the proposed payment and not less
than 10 days after the receipt by the Trustee of the notice of the
proposed payment. The Trustee shall promptly notify the Company of such
Special Record Date and, in the name and at the expense of the Company,
shall cause notice of the proposed payment of such Defaulted Interest
and the Special Record Date therefor to be mailed, first-class postage
prepaid, to each Holder at his address as it appears in the Security
Register, not less than 10 days prior to such Special Record Date.
Notice of the proposed payment of such Defaulted Interest and the
Special Record Date therefor having been so mailed, such Defaulted
Interest shall be paid to the Persons in whose names the Notes (or
their respective Predecessor Notes) are registered at the close of
business on such Special Record Date and shall no longer be payable
pursuant to the following Clause (2).
(2) The Company may make payment of any Defaulted Interest in
any other lawful manner not inconsistent with the requirements of any
securities exchange on which the Notes may be listed, and upon such
notice as may be required by
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such exchange, if, after notice given by the Company to the Trustee of
the proposed payment pursuant to this Clause, such manner of payment
shall be deemed practicable by the Trustee.
Subject to the foregoing provisions of this Section, each Note
delivered under this Indenture upon registration of transfer of or in exchange
for or in lieu of any other Note shall carry the rights to interest accrued and
unpaid, and to accrue, which were carried by such other Note.
SECTION 309. Persons Deemed Owners.
Prior to due presentment of a Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name such Note is registered as the owner of such
Note for the purpose of receiving payment of principal of (and premium, if any)
and (subject to Section 308) interest on such Note and for all other purposes
whatsoever, whether or not such Note be overdue, and none of the Company, the
Trustee or any agent of the Company or the Trustee shall be affected by notice
to the contrary.
None of the Company, the Trustee or any agent of the Company
or the Trustee shall have any responsibility or liability for any aspect of the
records relating to or payments made on account of beneficial ownership
interests of a Note in global form, or for maintaining, supervising or reviewing
any records relating to such beneficial ownership interests. Notwithstanding the
foregoing, with respect to any Note in global form, nothing herein shall prevent
the Company or the Trustee, or any agent of the Company or the Trustee, from
giving effect to any written certification, proxy or other authorization
furnished by any Depositary (or its nominee), as a Holder, with respect to such
Note in global form or impair, as between such Depositary and owners of
beneficial interests in such Note in global form, the operation of customary
practices governing the exercise of the rights of such Depositary (or its
nominee) as Holder of such Note in global form.
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SECTION 310. Cancellation.
All Notes surrendered for payment, redemption, registration of
transfer or exchange or any Offer to Purchase pursuant to Section 1014 or 1016
shall, if surrendered to any Person other than the Trustee, be delivered to the
Trustee and shall be promptly canceled by it. The Company may at any time
deliver to the Trustee for cancellation any Notes previously authenticated and
delivered hereunder which the Company may have acquired in any manner
whatsoever, and all Notes so delivered shall be promptly canceled by the
Trustee. No Notes shall be authenticated in lieu of or in exchange for any Notes
canceled as provided in this Section, except as expressly permitted by this
Indenture. All canceled Notes held by the Trustee shall be disposed of as
directed by a Company Order.
SECTION 311. Computation of Interest.
Interest on the Notes shall be computed on the basis of a 360
day year of twelve 30-day months.
ARTICLE FOUR
Satisfaction and Discharge
SECTION 401. Satisfaction and Discharge of Indenture.
This Indenture shall cease to be of further effect (except as
to (i) rights of registration of transfer and exchange and the Company's right
of optional redemption, (ii) substitution of apparently mutilated, defaced,
destroyed, lost or stolen Notes, (iii) rights of Holders to receive payment of
principal and interest on the Notes, (iv) rights, obligations and immunities of
the Trustee under the Indenture, (v) rights of the Holders of the Notes as
beneficiaries of the Indenture with respect to any property deposited with the
Trustee payable to all or any of them and (vi) obligations of the Company under
Section 610(e)), and the Trustee, on demand of and at the expense of the
Company, shall execute proper instruments acknowledging satisfaction and
discharge of this Indenture, when
(1) either
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(A) all Notes theretofore authenticated and delivered
(other than (i) Notes which have been destroyed, lost or
stolen and which have been replaced or paid as provided in
Section 307 and (ii) Notes for whose payment money has
theretofore been deposited in trust or segregated and held in
trust by the Company and thereafter repaid to the Company or
discharged from such trust, as provided in Section 1003) have
been delivered to the Trustee for cancellation; or
(B) all such Notes not theretofore delivered to the
Trustee for cancellation
(i) have become due and payable, or
(ii) will become due and payable at their Stated
Maturity within one year, or
(iii) are to be called for redemption within one
year under arrangements satisfactory to the Trustee
for the giving of notice of redemption by the Trustee
in the name, and at the expense, of the Company,
and the Company, in the case of (i), (ii) or (iii) above, has
deposited or caused to be deposited with the Trustee as trust
funds in trust for the purpose an amount sufficient to pay and
discharge the entire indebtedness on such Notes not
theretofore delivered to the Trustee for cancellation, for
principal (and premium, if any) and interest to the date of
such deposit (in the case of Notes which have become due and
payable) or to the Stated Maturity or Redemption Date, as the
case may be;
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(2) the Company has paid or caused to be paid all other sums
payable hereunder by the Company; and
(3) the Company has delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that all conditions
precedent herein provided for relating to the satisfaction and
discharge of this Indenture have been complied with.
Notwithstanding the satisfaction and discharge of this Indenture pursuant to
this Article Four, the obligations of the Company to the Trustee under Section
607 and, if money shall have been deposited with the Trustee pursuant to
subclause (B) of Clause (1) of this Section, the obligations of the Trustee
under Section 402 and the last paragraph of Section 1003 shall survive.
SECTION 402. Application of Trust Money.
Subject to the provisions of the last paragraph of Section
1003, all money deposited with the Trustee pursuant to Section 401 shall be held
in trust uninvested and applied by it, in accordance with the provisions of the
Notes and this Indenture, to the payment, either directly or through any Paying
Agent (including the Company acting as its own Paying Agent) as the Trustee may
determine, to the Persons entitled thereto, of the principal (and premium, if
any) and interest for whose payment such money has been deposited with the
Trustee but such money need not be separated from other funds except to the
extent required by law.
ARTICLE FIVE
Remedies
SECTION 501. Events of Default.
"Event of Default", wherever used herein, means any one of the
following events (whatever the reason for such Event of Default and whether it
shall be occasioned by the provisions of Article Twelve or be voluntary or
involuntary or be effected by operation of law or pursuant to any judgment,
decree or order of any court or any order,
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rule or regulation of any administrative or governmental body):
(1) failure to pay the principal of (or premium, if any,
on) any Note at its Maturity; or
(2) failure to pay any interest upon any Note when it
becomes due and payable, and continuance of such
default for a period of 30 days; or
(3) default in the payment of principal and interest on
Notes required to be purchased by the Company
pursuant to an Offer to Purchase as described in
Section 1014 herein and Section 1016 herein when due
and payable; or
(4) failure to perform or comply with the provisions of
Section 801; or
(5) failure to perform any other covenant or agreement of
the Company in this Indenture or Notes (other than a
covenant or warranty a default in whose performance
or whose breach is elsewhere in this Section
specifically dealt with), and continuance of such
default or breach for a period of 60 days after there
has been given, by registered or certified mail, to
the Company by the Trustee or to the Company and the
Trustee by the Holders of at least 25% in principal
amount of the Outstanding Notes a written notice
specifying such default or breach and requiring it to
be remedied and stating that such notice is a "Notice
of Default" hereunder; or
(6) default under the terms of any instrument evidencing
or securing Debt for money borrowed by the Company or
any Restricted Subsidiary having an outstanding
principal amount of $5.0 million individually or in
the aggregate which default results in the
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acceleration of the payment of such indebtedness or
constitutes the failure to pay such indebtedness when
due; or
(7) a final judgment or judgments (not subject to appeal)
for the payment of money are entered against the
Company or any Restricted Subsidiary of the Company
in an amount in excess of $5.0 million by a court or
courts of competent jurisdiction, which judgments
remain undischarged or unstayed for a period of 60
days after the date on which the right to appeal all
such judgments has expired; or
(8) the entry by a court having jurisdiction in the
premises of (A) a decree or order for relief in
respect of the Company or any Restricted Subsidiary
of the Company in an involuntary case or proceeding
under any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or
(B) a decree or order adjudging the Company or any
such Restricted Subsidiary a bankrupt or insolvent,
or approving as properly filed a petition seeking
reorganization, arrangement, adjustment or
composition of or in respect of the Company or any
such Restricted Subsidiary under any applicable
Federal or State law, or appointing a custodian,
receiver, liquidator, assignee, trustee, sequestrator
or other similar official of the Company or any such
Restricted Subsidiary of any substantial part of the
property of the Company or any such Restricted
Subsidiary, or ordering the winding up or liquidation
of the affairs of the Company or any such Subsidiary,
and the continuance of any such decree or order for
relief or any such other decree or order unstayed and
in effect for a period of 60 consecutive days; or
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(9) the commencement by the Company or any Restricted
Subsidiary of the Company of a voluntary case or
proceeding under any applicable Federal or State
bankruptcy, insolvency, reorganization or other
similar law or of any other case or proceeding to be
adjudicated a bankrupt or insolvent, or the consent
by the Company or any such Restricted Subsidiary to
the entry of a decree or order for relief in respect
of the Company or any Restricted Subsidiary of the
Company in an involuntary case or proceeding under
any applicable Federal or State bankruptcy,
insolvency, reorganization or other similar law or to
the commencement of any bankruptcy or insolvency case
or proceeding against the Company or any Restricted
Subsidiary of the Company, or the filing by the
Company or any such Restricted Subsidiary of a
petition or answer or consent seeking reorganization
or relief under any applicable Federal or State law,
or the consent by the Company or any such Restricted
Subsidiary to the filing of such petition or to the
appointment of or taking possession by a custodian,
receiver, liquidator, assignee, trustee, sequestrator
or similar official of the Company or any Restricted
Subsidiary of the Company of any substantial part of
the property of the Company or any Restricted
Subsidiary of the Company, or the making by the
Company or any Restricted Subsidiary of the Company
of an assignment for the benefit of creditors, or the
admission by the Company or any such Restricted
Subsidiary in writing of its inability to pay its
debts generally as they become due, or the taking of
corporate action by the Company or any such
Restricted Subsidiary in furtherance of any such
action.
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SECTION 502. Acceleration of Maturity; Rescission and Annulment.
If an Event of Default (other than an Event of Default
specified in Section 501(8) or (9)) occurs and is continuing, then and in every
such case the Trustee or the Holders of not less than 25% in aggregate principal
amount of the Outstanding Notes may declare all of the Notes to be due and
payable immediately, by a notice in writing to the Company (and to the Trustee
if given by Holders), and upon any such declaration such principal and any
accrued interest, if any, shall become immediately due and payable. If an Event
of Default specified in Section 501(8) or (9) occurs, the principal and any
accrued interest on the Notes then Outstanding shall ipso facto become
immediately due and payable without any declaration or other Act on the part of
the Trustee or any Holder.
At any time after such a declaration of acceleration has been
made and before a judgment or decree for payment of the money due has been
obtained by the Trustee as hereinafter in this Article provided, the Holders of
a majority in aggregate principal amount of the Outstanding Notes, by written
notice to the Company and the Trustee, may rescind and annul such declaration
and its consequences if
(1) the Company has paid or deposited with the Trustee a sum
sufficient to pay
(A) all overdue interest on all Notes,
(B) the principal of (and premium, if any, on) any Notes
which have become due otherwise than by such declaration of
acceleration (including any Notes required to have been
purchased on the Purchase Date pursuant to an Offer to
Purchase made by the Company) and, to the extent that payment
of such interest is lawful, interest thereon at the rate
provided by the Notes,
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(C) to the extent that payment of such interest is
lawful, interest upon overdue interest at the rate provided by
the Notes, and
(D) all sums paid or advanced by the Trustee
hereunder and the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and
counsel;
and
(2) all Events of Default, other than the non-payment of the
principal of Notes which have become due solely by such declaration of
acceleration, have been cured or waived as provided in Section 513.
No such rescission shall affect any subsequent default or impair any right
consequent thereon.
SECTION 503. Collection of Indebtedness and Suits for Enforcement by Trustee.
The Company covenants that if
(1) default is made in the payment of any interest on any Note
when such interest becomes due and payable and such default continues
for a period of 30 days, or
(2) default is made in the payment of the principal of (or
premium, if any, on) any Note at the Maturity thereof or, with respect
to any Note required to have been purchased pursuant to an Offer to
Purchase made by the Company, at the Purchase Date thereof,
the Company will, upon demand of the Trustee, pay to it, for the benefit of the
Holders of such Notes, the whole amount then due and payable on such Notes for
principal (and premium, if any) and interest, and, to the extent that payment of
such interest shall be legally enforceable, interest on any overdue principal
(and premium, if any) and on any overdue interest, at the rate provided by the
Notes,
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if any, and, in addition thereto, such further amount as shall be sufficient to
cover the costs and expenses of collection, including the reasonable
compensation, expenses, disbursements and advances of the Trustee, its agents
and counsel.
If the Company fails to pay such amounts forthwith upon such
demand, the Trustee, in its own name and as trustee of an express trust, may
institute a judicial proceeding for the collection of the sums so due and
unpaid, may prosecute such proceeding to judgment or final decree and may
enforce the same against the Company or any other obligor upon the Notes and
collect the moneys adjudged or decreed to be payable in the manner provided by
law out of the property of the Company or any other obligor upon the Notes,
wherever situated.
If an Event of Default occurs and is continuing, the Trustee
may in its discretion proceed to protect and enforce its rights and the rights
of the Holders by such appropriate judicial proceedings as the Trustee shall
deem most effectual to protect and enforce any such rights, whether for the
specific enforcement of any covenant or agreement in this Indenture or in aid of
the exercise of any power granted herein, or to enforce any other proper remedy.
SECTION 504. Trustee May File Proofs of Claim.
In case of any judicial proceeding relative to the Company or
any other obligor upon the Notes, or upon the property of the Company or its
creditors, the Trustee shall be entitled and empowered, by intervention in such
proceeding or otherwise, to take any and all actions authorized under the Trust
Indenture Act in order to have claims of the Holders and the Trustee allowed in
any such proceeding. In particular, the Trustee shall be authorized to collect
and receive any moneys or other property payable or deliverable on any such
claims and to distribute the same; and any custodian, receiver, assignee,
trustee, liquidator, sequestrator or other similar official in any such judicial
proceeding is hereby authorized by each Holder to make such payments to the
Trustee and, in the event that the Trustee shall consent to the making of such
payments directly to the Holders, to pay to the Trustee any amount due it for
the reasonable compensation, expenses, disbursements and advances of the
Trustee, its agents and
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counsel, and any other amounts due the Trustee under Section 607.
No provision of this Indenture shall be deemed to authorize
the Trustee to authorize or consent to or accept or adopt on behalf of any
Holder any plan of reorganization, arrangement, adjustment or composition
affecting the Notes or the rights of any Holder thereof or to authorize the
Trustee to vote in respect of the claim of any Holder in any such proceeding.
SECTION 505. Trustee May Enforce Claims Without Possession of Notes.
All rights of action and claims under this Indenture or the
Notes may be prosecuted and enforced by the Trustee without the possession of
any of the Notes or the production thereof in any proceeding relating thereto,
and any such proceeding instituted by the Trustee shall be brought in its own
name as trustee of an express trust, and any recovery of judgment shall, after
provision for the payment of the reasonable compensation, expenses,
disbursements and advances of the Trustee, its agents and counsel, be for the
ratable benefit of the Holders of the Notes in respect of which such judgment
has been recovered.
SECTION 506. Application of Money Collected.
Any money collected by the Trustee pursuant to this Article
shall be applied in the following order, at the date or dates fixed by the
Trustee and, in case of the distribution of such money on account of principal
(or premium, if any) or interest, upon presentation of the Notes and the
notation thereon of the payment if only partially paid and upon surrender
thereof if fully paid:
FIRST: To the payment of all amounts due the Trustee
under Section 607; and
SECOND: To the extent provided in Article Twelve, to
the holders of Senior Debt in accordance with Article Twelve;
and
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THIRD: To the payment of the amounts then due and
unpaid for principal of (and premium, if any) and interest on
the Notes in respect of which or for the benefit of which such
money has been collected, ratably, without preference or
priority of any kind, according to the amounts due and payable
on such Notes for principal (and premium, if any) and
interest, respectively.
SECTION 507. Limitation on Suits.
No Holder of any Note shall have any right to institute any
proceeding, judicial or otherwise, with respect to this Indenture, or for the
appointment of a receiver or trustee, or for any other remedy hereunder, unless
(1) such Holder has previously given written notice to the
Trustee of a continuing Event of Default;
(2) the Holders of not less than 25% in aggregate principal
amount of the Outstanding Notes shall have made written request to the
Trustee to institute proceedings in respect of such Event of Default in
its own name as Trustee hereunder;
(3) such Holder or Holders have offered to the Trustee
reasonable indemnity against the costs, expenses and liabilities to be
incurred in compliance with such request;
(4) the Trustee for 60 days after its receipt of such notice,
request and offer of indemnity has failed to institute any such
proceeding; and
(5) no direction inconsistent with such written request has
been given to the Trustee during such 60-day period by the Holders of a
majority in aggregate principal amount of the Outstanding Notes;
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it being understood and intended that no one or more Holders shall have any
right in any manner whatever by virtue of, or by availing of, any provision of
this Indenture to affect, disturb or prejudice the rights of any other Holders,
or to obtain or to seek to obtain priority or preference over any other Holders
or to enforce any right under this Indenture, except in the manner herein
provided and for the equal and ratable benefit of all the Holders.
SECTION 508. Unconditional Right of Holders to Receive Principal, Premium and
Interest.
Notwithstanding any other provision in this Indenture, the
Holder of any Note shall have the right, which is absolute and unconditional, to
receive payment of the principal of (and premium, if any) and (subject to
Section 306) interest on such Note on the respective Stated Maturities expressed
in such Note (or, in the case of redemption, on the Redemption Date or in the
case of an Offer to Purchase made by the Company and required to be accepted as
to such Note, on the Purchase Date) and to institute suit for the enforcement of
any such payment, and such rights shall not be impaired without the consent of
such Holder.
SECTION 509. Restoration of Rights and Remedies.
If the Trustee or any Holder has instituted any proceeding to
enforce any right or remedy under this Indenture and such proceeding has been
discontinued or abandoned for any reason, or has been determined adversely to
the Trustee or to such Holder, then and in every such case, subject to any
determination in such proceeding, the Company, the Trustee and the Holders shall
be restored severally and respectively to their former positions hereunder and
thereafter all rights and remedies of the Trustee and the Holders shall continue
as though no such proceeding had been instituted.
SECTION 510. Rights and Remedies Cumulative.
Except as otherwise provided with respect to the replacement
or payment of mutilated, destroyed, lost or stolen Notes in the last paragraph
of Section 307, no right
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or remedy herein conferred upon or reserved to the Trustee or to the Holders is
intended to be exclusive of any other right or remedy, and every right and
remedy shall, to the extent permitted by law, be cumulative and in addition to
every other right and remedy given hereunder or now or hereafter existing at law
or in equity or otherwise. The assertion or employment of any right or remedy
hereunder, or otherwise, shall not prevent the concurrent assertion or
employment of any other appropriate right or remedy.
SECTION 511. Delay or Omission Not Waiver.
No delay or omission of the Trustee or of any Holder of any
Note to exercise any right or remedy accruing upon any Event of Default shall
impair any such right or remedy or constitute a waiver of any such Event of
Default or an acquiescence therein. Every right and remedy given by this Article
or by law to the Trustee or to the Holders may be exercised from time to time,
and as often as may be deemed expedient, by the Trustee or by the Holders, as
the case may be.
SECTION 512. Control by Holders.
The Holders of a majority in aggregate principal amount of the
Outstanding Notes shall have the right to direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or exercising
any trust or power conferred on the Trustee, provided that
(1) such direction shall not be in conflict with any rule of
law or with this Indenture, and
(2) the Trustee may take any other action deemed proper by the
Trustee which is not inconsistent with such direction.
SECTION 513. Waiver of Past Defaults.
The Holders of not less than a majority in aggregate principal
amount of the Outstanding Notes may on behalf of the Holders of all the Notes
waive any past default hereunder and its consequences, except a default
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(1) in the payment of the principal of (or premium, if any) or
interest on any Note (including any Note which is required to have been
purchased pursuant to an Offer to Purchase which has been made by the
Company), or
(2) in respect of a covenant or provision hereof which under
Article Ten cannot be modified or amended without the consent of the
Holder of each Outstanding Note affected.
Upon any such waiver, such default shall cease to exist, and
any Event of Default arising therefrom shall be deemed to have been cured, for
every purpose of this Indenture; but no such waiver shall extend to any
subsequent or other default or impair any right consequent thereon.
SECTION 514. Undertaking for Costs.
In any suit for the enforcement of any right or remedy under
this Indenture, or in any suit against the Trustee for any action taken,
suffered or omitted by it as Trustee, a court may require any party litigant in
such suit to file an undertaking to pay the costs of such suit, and may assess
costs against any such party litigant, in the manner and to the extent provided
in the Trust Indenture Act; provided, that neither this Section nor the Trust
Indenture Act shall be deemed to authorize any court to require such an
undertaking or to make such an assessment in any suit instituted by the Company.
SECTION 515. Waiver of Stay or Extension Laws.
The Company covenants (to the extent that it may lawfully do
so) that it will not at any time insist upon, or plead, or in any manner
whatsoever claim or take the benefit or advantage of, any stay or extension law
wherever enacted, now or at any time hereafter in force, which may affect the
covenants or the performance of this Indenture; and the Company (to the extent
that it may lawfully do so) hereby expressly waives all benefit or advantage of
any such law and covenants that it will not hinder, delay or impede the
execution of any power herein granted to the Trustee, but will suffer and permit
the execution of every such power as though no such law had been enacted.
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ARTICLE SIX
The Trustee
SECTION 601. Certain Duties and Responsibilities.
Except during the continuance of an Event of Default, the
duties and responsibilities of the Trustee shall be as provided by the
Indenture. During the existence of an Event of Default, the Trustee will
exercise such rights and powers vested in it under the Indenture and use the
same degree of care and skill in its exercise as a prudent person would exercise
under the circumstances in the conduct of such person's own affairs.
Notwithstanding the foregoing, no provision of this Indenture shall require the
Trustee to expend or risk its own funds or otherwise incur any financial
liability in the performance of any of its duties hereunder, or in the exercise
of any of its rights or powers, if it shall have reasonable grounds for
believing that repayment of such funds or adequate indemnity against such risk
or liability is not reasonably assured to it. Whether or not therein expressly
so provided, every provision of this Indenture relating to the conduct or
affecting the liability of or affording protection to the Trustee shall be
subject to the provisions of this Section.
SECTION 602. Notice of Defaults.
The Trustee shall give the Holders notice of any default
hereunder as and to the extent provided by the Trust Indenture Act; provided,
however, that in the case of any default of the character specified in Section
501(4), no such notice to Holders shall be given until at least 30 days after
the occurrence thereof. For the purpose of this Section, the term "default"
means any event which is, or after notice or lapse of time or both would become,
an Event of Default.
SECTION 603. Certain Rights of Trustee.
Subject to the provisions of Section 601:
(a) the Trustee may rely and shall be protected in acting or
refraining from acting upon
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any resolution, certificate, statement, instrument, opinion, report,
notice, request, direction, consent, order, bond, debenture, note,
other evidence of indebtedness or other paper or document believed by
it to be genuine and to have been signed or presented by the proper
party or parties;
(b) any request or direction of the Company mentioned herein
shall be sufficiently evidenced by a Company Request or Company Order
and any resolution of the Board of Directors may be sufficiently
evidenced by a Board Resolution;
(c) whenever in the administration of this Indenture the
Trustee shall deem it desirable that a matter be proved or established
prior to taking, suffering or omitting any action hereunder, the
Trustee (unless other evidence be herein specifically prescribed) may,
in the absence of bad faith on its part, rely upon an Officers'
Certificate;
(d) the Trustee may consult with counsel and the written
advice of such counsel or any Opinion of Counsel shall be full and
complete authorization and protection in respect of any action taken,
suffered or omitted by it hereunder in good faith and in reliance
thereon;
(e) the Trustee shall be under no obligation to exercise any
of the rights or powers vested in it by this Indenture at the request
or direction of any of the Holders pursuant to this Indenture, unless
such Holders shall have offered to the Trustee reasonable security or
indemnity against the costs, expenses and liabilities which might be
incurred by it in compliance with such request or direction;
(f) the Trustee shall not be bound to make any investigation
into the facts or matters stated in any resolution, certificate,
statement, instrument, opinion, report, notice, request, direction,
consent, order, bond, debenture, note, other evidence of indebtedness
or other paper or document, but the Trustee, in its discretion, may
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make such further inquiry or investigation into such facts or matters
as it may see fit, and, if the Trustee shall determine to make such
further inquiry or investigation, it shall be entitled to examine the
books, records and premises of the Company, personally or by agent or
attorney;
(g) the Trustee may execute any of the trusts or powers
hereunder or perform any duties hereunder either directly or by or
through agents or attorneys and the Trustee shall not be responsible
for any misconduct or negligence on the part of any agent or attorney
appointed with due care by it hereunder; and
(h) the Trustee shall not be deemed to have notice of a
"default" as defined in Section 602, or an Event of Default as defined
in Section 501 hereof, unless and until it has actual knowledge thereof
at its Corporate Trust Office.
SECTION 604. Not Responsible for Recitals or Issuance of Notes.
The recitals contained herein and in the Notes, except the
Trustee's certificates of authentication, shall be taken as the statements of
the Company, and the Trustee assumes no responsibility for their correctness.
The Trustee makes no representations as to the validity or sufficiency of this
Indenture or of the Notes. The Trustee shall not be accountable for the use or
application by the Company of Notes or the proceeds thereof.
SECTION 605. May Hold Notes.
The Trustee, any Paying Agent, any Note Registrar or any other
agent of the Company, in its individual or any other capacity, may become the
owner or pledgee of Notes and, subject to Sections 608 and 613, may otherwise
deal with the Company with the same rights it would have if it were not Trustee,
Paying Agent, Note Registrar or such other agent.
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SECTION 606. Money Held in Trust.
Money held by the Trustee in trust hereunder need not be
segregated from other funds except to the extent required by law. The Trustee
shall be under no liability for interest on any money received by it hereunder
except as otherwise agreed with the Company.
SECTION 607. Compensation and Reimbursement.
The Company agrees
(1) to pay to the Trustee from time to time such compensation
as shall be agreed to in writing by the Company and the Trustee for all
services rendered by it hereunder (which compensation shall not be
limited by any provision of law in regard to the compensation of a
trustee of an express trust);
(2) except as otherwise expressly provided herein, to
reimburse the Trustee upon its request for all reasonable expenses,
disbursements and advances incurred or made by the Trustee in
accordance with any provision of this Indenture (including the
reasonable compensation and the expenses and disbursements of its
agents and counsel), except any such expense, disbursement or advance
as may be attributable to its negligence or bad faith; and
(3) to indemnify the Trustee for, and to hold it harmless
against, any loss, liability or expense (other than taxes based on the
income of the Trustee) incurred without negligence or bad faith on its
part, arising out of or in connection with the acceptance or
administration of this trust, including the costs and expenses of
defending itself against any claim or liability in connection with the
exercise or performance of any of its powers or duties hereunder.
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SECTION 608. Disqualification; Conflicting Interests.
If the Trustee has or shall acquire a conflicting interest
within the meaning of the Trust Indenture Act, the Trustee shall either
eliminate such conflict or resign, to the extent and in the manner provided by,
and subject to the provisions of, the Trust Indenture Act and this Indenture.
SECTION 609. Corporate Trustee Required; Eligibility.
There shall at all times be a Trustee hereunder which shall be
a Person that is eligible pursuant to the Trust Indenture Act to act as such and
has a combined capital and surplus of at least $50,000,000 and its Corporate
Trust Office in the Borough of Manhattan, The City of New York. If such Person
publishes reports of condition at least annually, pursuant to law or to the
requirements of said supervising or examining authority, then for the purposes
of this Section, the combined capital and surplus of such Person shall be deemed
to be its combined capital and surplus as set forth in its most recent report of
condition so published. If at any time the Trustee shall cease to be eligible in
accordance with the provisions of this Section, it shall resign immediately in
the manner and with the effect hereinafter specified in this Article.
SECTION 610. Resignation and Removal; Appointment of Successor.
(a) No resignation or removal of the Trustee and no
appointment of a successor Trustee pursuant to this Article shall become
effective until the acceptance of appointment by the successor Trustee under
Section 611.
(b) The Trustee may resign at any time by giving written
notice thereof to the Company. If an instrument of acceptance by a successor
Trustee shall not have been delivered to the Trustee within 30 days after the
giving of such notice of resignation, the resigning Trustee may petition any
court of competent jurisdiction for the appointment of a successor Trustee.
(c) The Trustee may be removed at any time by Act of the
Holders of a majority in aggregate principal amount
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of the Outstanding Notes, delivered to the Trustee and to the Company.
(d) If at any time:
(1) the Trustee shall fail to comply with Section 608 after
written request therefor by the Company or by any Holder who has been a
bona fide Holder of a Note for at least six months, or
(2) the Trustee shall cease to be eligible under Section 609
and shall fail to resign after written request therefor by the Company
or by any such Holder, or
(3) the Trustee shall become incapable of acting or shall be
adjudged a bankrupt or insolvent or a receiver of the Trustee or of its
property shall be appointed or any public officer shall take charge or
control of the Trustee or of its property or affairs for the purpose of
rehabilitation, conservation or liquidation,
then, in any such case, (i) the Company by a Board Resolution may remove the
Trustee, or (ii) subject to Section 514, any Holder who has been a bona fide
Holder of a Note for at least six months may, on behalf of himself and all
others similarly situated, petition any court of competent jurisdiction for the
removal of the Trustee and the appointment of a successor Trustee.
(e) If the Trustee shall resign, be removed or become
incapable of acting, or if a vacancy shall occur in the office of Trustee for
any cause, the Company, by a Board Resolution, shall promptly appoint a
successor Trustee. If, within one year after such resignation, removal or
incapability, or the occurrence of such vacancy, a successor Trustee shall be
appointed by Act of the Holders of a majority in aggregate principal amount of
the Outstanding Notes delivered to the Company and the retiring Trustee, the
successor Trustee so appointed shall, forthwith upon its acceptance of such
appointment, become the successor Trustee and supersede the successor Trustee
appointed by the Company. If no successor Trustee shall have been so appointed
by the Company or the Holders and accepted appointment in the manner hereinafter
provided, any Holder who has been a bona fide Holder of a Note for at least six
months may, on
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behalf of himself and all others similarly situated, petition any court of
competent jurisdiction for the appointment of a successor Trustee.
(f) The Company shall give notice of each resignation and each
removal of the Trustee and each appointment of a successor Trustee to all
Holders in the manner provided in Section 106. Each notice shall include the
name of the successor Trustee and the address of its Corporate Trust Office.
SECTION 611. Acceptance of Appointment by Successor.
Every successor Trustee appointed hereunder shall execute,
acknowledge and deliver to the Company and to the retiring Trustee an instrument
accepting such appointment, and thereupon the resignation or removal of the
retiring Trustee shall become effective and such successor Trustee, without any
further act, deed or conveyance, shall become vested with all the rights,
powers, trusts and duties of the retiring Trustee; but, on request of the
Company or the successor Trustee, such retiring Trustee shall, upon payment of
its charges, execute and deliver an instrument transferring to such successor
Trustee all the rights, powers and trusts of the retiring Trustee and shall duly
assign, transfer and deliver to such successor Trustee all property and money
held by such retiring Trustee hereunder. Upon request of any such successor
Trustee, the Company shall execute any and all instruments for more fully and
certainly vesting in and confirming to such successor Trustee all such rights,
powers and trusts.
No successor Trustee shall accept its appointment unless at
the time of such acceptance such successor Trustee shall be qualified and
eligible under this Article.
SECTION 612. Merger, Conversion, Consolidation or Succession to Business.
Any corporation into which the Trustee may be merged or
converted or with which it may be consolidated, or any corporation resulting
from any merger, conversion or consolidation to which the Trustee shall be a
party, or any corporation succeeding to all or substantially all the corporate
trust business of the Trustee, shall be the successor
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of the Trustee hereunder, provided such corporation shall be otherwise qualified
and eligible under this Article, without the execution or filing of any paper or
any further act on the part of any of the parties hereto. In case any Notes
shall have been authenticated, but not delivered, by the Trustee then in office,
any successor by merger, conversion or consolidation to such authenticating
Trustee may adopt such authentication and deliver the Notes so authenticated
with the same effect as if such successor Trustee had itself authenticated such
Notes.
SECTION 613. Preferential Collection of Claims Against Company.
If and when the Trustee shall be or become a creditor of the
Company (or any other obligor upon the Notes), the Trustee shall be subject to
the provisions of the Trust Indenture Act regarding the collection of claims
against the Company (or any such other obligor).
ARTICLE SEVEN
Holders' Lists and Reports by Trustee and Company
SECTION 701. Company to Furnish Trustee Names and Addresses of Holders.
The Company will furnish or cause to be furnished to the
Trustee
(a) semi-annually, not more than 15 days after each Regular
Record Date, a list, in such form as the Trustee may reasonably
require, of the names and addresses of the Holders as of such Regular
Record Date, and
(b) at such other times as the Trustee may request in writing,
within 30 days after the receipt by the Company of any such request, a
list of similar form and content as of a date not more than 15 days
prior to the time such list is furnished;
excluding from any such list names and addresses received by the Trustee in its
capacity as Note Registrar.
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SECTION 702. Preservation of Information; Communications to Holders.
(a) The Trustee shall preserve, in as current a form as is
reasonably practicable, the names and addresses of Holders contained in the most
recent list furnished to the Trustee as provided in Section 701 and the names
and addresses of Holders received by the Trustee in its capacity as Note
Registrar. The Trustee may destroy any list furnished to it as provided in
Section 701 upon receipt of a new list so furnished.
(b) The rights of Holders to communicate with other Holders
with respect to their rights under this Indenture or under the Notes and the
corresponding rights and duties of the Trustee, shall be provided by the Trust
Indenture Act.
(c) Every Holder of Notes, by receiving and holding the same,
agrees with the Company and the Trustee that neither the Company nor the Trustee
nor any agent of either of them shall be held accountable by reason of any
disclosure of information as to the names and addresses of Holders made pursuant
to the Trust Indenture Act.
SECTION 703. Reports by Trustee.
(a) The Trustee shall transmit to Holders such reports
concerning the Trustee and its actions under this Indenture as may be required
pursuant to the Trust Indenture Act at the times and in the manner provided
pursuant thereto.
(b) A copy of each such report shall, at the time of such
transmission to Holders, be filed by the Trustee with each stock exchange upon
which the Notes are listed, with the Commission and with the Company. The
Company will notify the Trustee when the Notes are listed on any stock exchange.
SECTION 704. Reports by Company.
The Company shall file with the Trustee and the Commission,
and transmit to Holders, such information, docu-
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ments and other reports, and such summaries thereof, as may be required pursuant
to the Trust Indenture Act at the times and in the manner provided pursuant to
such Act; provided that any such information, documents or reports required to
be filed with Commission pursuant to Section 13 or 15(d) of the Exchange Act
shall be filed with the Trustee within 30 days after the same is so required to
be filed with the Commission.
SECTION 705. Officers' Certificate with Respect to Change in Interest Rates.
Within five days after the day on which any Special Interest
begins accruing, and within five days after any Special Interest ceases to
accrue, the Company shall deliver an Officers' Certificate to the Trustee
stating the interest rate thereupon in effect for the applicable Notes (if any
are Outstanding) and the date on which such rate became effective.
ARTICLE EIGHT
Consolidation, Merger, Conveyance, Transfer or Lease
SECTION 801. Mergers, Consolidations and Certain Transfers, Leases and
Acquisition of Assets.
The Company shall not, in a single transaction or a series of
related transactions, (i) consolidate with or merge into any other Person or
permit any other Person to consolidate with or merge into the Company or (ii)
directly or indirectly, transfer, sell, lease or otherwise dispose of all or
substantially all of its assets unless: (1) in a transaction in which the
Company does not survive or in which the Company sells, leases or otherwise
disposes of all or substantially all of its assets, the successor entity to the
Company is organized under the laws of the United States of America or any State
thereof or the District of Columbia and shall expressly assume, by a
supplemental indenture executed and delivered to the Trustee in form
satisfactory to the Trustee, all of the Company's obligations under the
Indenture; (2) immediately before and after giving effect to
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such transaction and treating any Debt which becomes an obligation of the
Company or a Restricted Subsidiary as a result of such transaction as having
been Incurred by the Company or such Restricted Subsidiary at the time of the
transaction, no Event of Default or event that with the passing of time or the
giving of notice, or both, would constitute an Event of Default shall have
occurred and be continuing; (3) immediately after giving effect to such
transaction, the Consolidated Net Worth of the Company (or other successor
entity to the Company) is equal to or greater than that of the Company
immediately prior to the transaction; (4) immediately after giving effect to
such transaction and treating any Debt which becomes an obligation of the
Company or a Restricted Subsidiary as a result of such transaction as having
been Incurred by the Company or such Restricted Subsidiary at the time of the
transaction, the Company (including any successor entity to the Company) could
Incur at least $1.00 of additional Debt pursuant to the provisions of the
Indenture described in the first paragraph under Section 1008 hereof; and (5)
the Company has delivered to the Trustee an Officer's Certificate and an Opinion
of Counsel (which Opinion of Counsel may rely, as to factual matters, on such
Officer's Certificate), each stating that such consolidation, merger,
conveyance, transfer, lease or acquisition and, if a supplemental indenture is
required in connection with such transaction, such supplemental indenture,
complies with this Article and that all conditions precedent herein provided for
relating to such transaction have been complied with, and, with respect to such
Officer's Certificate, setting forth the manner of determination of the
Consolidated Net Worth and the ability to Incur Debt in accordance with Clause
(4) of Section 801, of the Company or, if applicable, of the Successor Company
as required pursuant to the foregoing.
SECTION 802. Successor Substituted.
Upon any consolidation of the Company with, or merger of the
Company into, any other Person or any transfer, conveyance, sale, lease or other
disposition of all or substantially all of the properties and assets of the
Company as an entirety in accordance with Section 801, the Successor Company
shall succeed to, and be substituted for, and may exercise every right and power
of, the Company under this Indenture with the same effect as if such successor
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Person had been named as the Company herein, and thereafter, except in the case
of a lease, the predecessor Person shall be relieved of all obligations and
covenants under this Indenture and the Notes.
ARTICLE NINE
Supplemental Indentures
SECTION 901. Supplemental Indentures Without Consent of Holders.
Without the consent of any Holders, the Company, when
authorized by a Board Resolution of the Company, and the Trustee, at any time
and from time to time, may enter into one or more indentures supplemental
hereto, in form satisfactory to the Trustee, for any of the following purposes:
(1) to evidence the succession of another Person to the
Company and the assumption by any such successor of the covenants of
the Company herein and in the Notes; or
(2) to add to the covenants of the Company for the benefit of
the Holders, or to surrender any right or power herein conferred upon
the Company; or
(3) to secure the Notes pursuant to the requirements of
Section 1011 or otherwise; or
(4) to comply with any requirements of the Commission in order
to effect and maintain the qualification of this Indenture under the
Trust Indenture Act; or
(5) to cure any ambiguity, to correct or supplement any
provision herein which may be inconsistent with any other provision
herein, or to make any other provisions with respect to matters or
questions arising under this Indenture which shall not be inconsistent
with the provi sions of this Indenture, provided such action pursuant
to this Clause (5) shall not adversely
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affect the interests of the Holders in any material respect.
SECTION 902. Supplemental Indentures with Consent of Holders.
With the consent of the Holders of not less than a majority in
principal amount of the Outstanding Notes, by Act of said Holders delivered to
the Company and the Trustee, the Company, when authorized by a Board Resolution
of the Company, and the Trustee may enter into an indenture or indentures
supplemental hereto for the purpose of adding any provisions to or changing in
any manner or eliminating any of the provisions of this Indenture or of
modifying in any manner the rights of the Holders under this Indenture;
provided, however, that no such supplemental indenture shall, without the
consent of the Holder of each Outstanding Note affected thereby,
(1) change the Stated Maturity of the principal of, or any
instalment of interest on, any Note, or reduce the principal amount
thereof or the rate of interest thereon or any premium payable thereon,
or change the place of payment where, or the coin or currency in which,
any Note or any premium or the interest thereon is payable, or impair
the right to institute suit for the enforcement of any such payment on
or after the Stated Maturity thereof (or, in the case of redemption, on
or after the Redemption Date or, in the case of an Offer to Purchase
which has been made, on or after the applicable Purchase Date), or
(2) reduce the percentage in principal amount of the
Outstanding Notes, the consent of whose Holders is required for any
such supplemental indenture, or the consent of whose Holders is
required for any waiver (of compliance with certain provisions of this
Indenture or certain defaults hereunder and their consequences)
provided for in this Indenture, or
(3) modify any of the provisions of this Section, Section 513
or Section 1020, except to increase any such percentage or to provide
that certain other provisions of this Indenture cannot
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be modified or waived without the consent of the Holder of each
Outstanding Note affected thereby, or
(4) modify any of the provisions of this Indenture relating to
the subordination of the Notes in a manner adverse to the Holders, or
(5) following the mailing of an Offer with respect to an Offer
to Purchase pursuant to Sections 1014 and 1016, modify the provisions
of this Indenture with respect to such Offer to Purchase in a manner
materially adverse to such Holder.
It shall not be necessary for any Act of Holders under this
Section to approve the particular form of any proposed supplemental indenture,
but it shall be sufficient if such Act shall approve the substance thereof.
SECTION 903. Execution of Supplemental Indentures.
Upon the request of the Company, accotmpanied by a Board
Resolution authorizing the execution of any supplemental indenture, the Trustee
shall join the Company in the execution of any supplemental indenture authorized
or permitted by this Indenture and shall make any further appropriate agreements
and stipulations as may be contained therein. In executing, or accepting the
additional trusts created by, any supplemental indenture permitted by this
Article or the modifications thereby of the trusts created by this Indenture,
the Trustee shall be entitled to receive, and (subject to Section 601) shall be
fully protected in relying upon, an Opinion of Counsel stating that the
execution of such supplemental indenture is authorized or permitted by this
Indenture. The Trustee may, but shall not be obligated to, enter into any such
supplemental indenture which affects the Trustee's own rights, duties or
immunities under this Indenture or otherwise.
SECTION 904. Effect of Supplemental Indentures.
Upon the execution of any supplemental indenture under this
Article, this Indenture shall be modified in accordance therewith, and such
supplemental indenture shall
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form a part of this Indenture for all purposes; and every Holder of Notes
theretofore or thereafter authenticated and delivered hereunder shall be bound
thereby.
SECTION 905. Conformity with Trust Indenture Act.
Every supplemental indenture executed pursuant to this Article
shall conform to the requirements of the Trust Indenture Act.
SECTION 906. Reference in Notes to Supplemental Indentures.
Notes authenticated and delivered after the execution of any
supplemental indenture pursuant to this Article may, and shall if required by
the Trustee, bear a notation in form approved by the Trustee as to any matter
provided for in such supplemental indenture. If the Company shall so determine,
new Notes so modified as to conform, in the opinion of the Trustee and the
Company, to any such supplemental indenture may be prepared and executed by the
Company and authenticated and delivered by the Trustee in exchange for
Outstanding Notes.
ARTICLE TEN
Covenants
SECTION 1001. Payment of Principal, Premium and Interest.
The Company will duly and punctually pay the principal of (and
premium, if any) and interest on the Notes in accordance with the terms of the
Notes and this Indenture.
SECTION 1002. Maintenance of Office or Agency.
The Company will maintain in the Borough of Manhattan, The
City of New York, an office or agency where Notes may be presented or
surrendered for payment, where Notes may be surrendered for registration of
transfer or exchange and where notices and demands to or upon the Company in
respect of the Notes and this Indenture may be served. The Company will give
prompt written notice to the
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Trustee of the location, and any change in the location, of such office or
agency. If at any time the Company shall fail to maintain any such required
office or agency or shall fail to furnish the Trustee with the address thereof,
such presentations, surrenders, notices and demands may be made or served at the
Corporate Trust Office of the Trustee, and the Company hereby appoints the
Trustee as its agent to receive all such presentations, surrenders, notices and
demands.
The Company may also from time to time designate one or more
other offices or agencies (in or outside the Borough of Manhattan, The City of
New York) where the Notes may be presented or surrendered for any or all such
purposes and may from time to time rescind such designations; provided, however,
that no such designation or rescission shall in any manner relieve the Company
of its obligation to maintain an office or agency in the Borough of Manhattan,
The City of New York, for such purposes. The Company will give prompt written
notice to the Trustee of any such designation or rescission and of any change in
the location of any such other office or agency.
SECTION 1003. Money for Note Payments to Be Held in Trust.
If the Company shall at any time act as its own Paying Agent,
it will, on or before each due date of the principal of or interest on any of
the Notes, segregate and hold in trust for the benefit of the Persons entitled
thereto a sum sufficient to pay the principal (and premium, if any) or interest
so becoming due until such sums shall be paid to such Persons or otherwise
disposed of as herein provided and will promptly notify the Trustee of its
action or failure so to act.
Whenever the Company shall have one or more Paying Agents, it
will, prior to each due date of the principal of (and premium, if any) or
interest on any Notes, deposit with a Paying Agent a sum sufficient to pay the
principal (and premium, if any) or interest so becoming due, such sum to be held
in trust for the benefit of the Persons entitled to such principal, premium or
interest, and (unless such Paying Agent is the Trustee) the Company will
promptly notify the Trustee of its action or failure so to act.
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The Company will cause each Paying Agent other than the
Trustee to execute and deliver to the Trustee an instrument in which such Paying
Agent shall agree with the Trustee, subject to the provisions of this Section,
that such Paying Agent will:
(1) hold all sums held by it for the payment of the
principal of (and premium, if any) or interest on Notes in trust for
the benefit of the Persons entitled thereto until such sums shall be
paid to such Persons or otherwise disposed of as herein provided;
(2) give the Trustee notice of any default by the Company
(or any other obligor upon the Notes) in the making of any payment of
principal (and premium, if any) or interest; and
(3) at any time during the continuance of any such
default, upon the written request of the Trustee, forthwith pay to the
Trustee all sums so held in trust by such Paying Agent.
The Company may at any time, for the purpose of obtaining the
satisfaction and discharge of this Indenture or for any other purpose, pay, or
by Company Order direct any Paying Agent to pay, to the Trustee all sums held in
trust by the Company or such Paying Agent, such sums to be held by the Trustee
upon the same trusts as those upon which such sums were held by the Company or
such Paying Agent; and, upon such payment by any Paying Agent to the Trustee,
such Paying Agent shall be released from all further liability with respect to
such money.
Any money deposited with the Trustee or any Paying Agent, or
then held by the Company, in trust for the payment of the principal of (and
premium, if any) or interest on any Note and remaining unclaimed for two years
after such principal (and premium, if any) or interest has become due and
payable shall be paid to the Company on Company Request, or (if then held by the
Company) shall be discharged from such trust; and the Holder of such Note shall
thereafter, as an unsecured general creditor, look only to the Company for
payment thereof, and all liability of the Trustee or such Paying Agent with
respect to such trust money, and all liability of the Company as trustee
thereof, shall thereupon cease; provided, however, that the Trustee or such
Paying
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Agent, before being required to make any such repayment, may at the expense of
the Company cause to be published once, in a newspaper published in the English
language, customarily published on each Business Day and of general circulation
in The City of New York, notice that such money remains unclaimed and that,
after a date specified therein, which shall not be less than 30 days from the
date of such publication, any unclaimed balance of such money then remaining
will be repaid to the Company.
SECTION 1004. Existence.
Subject to Article Eight, the Company will do or cause to be
done all things necessary to preserve and keep in full force and effect its
existence, rights (charter and statutory) and franchises; provided, however,
that the Company shall not be required to preserve any such right or franchise
if the Board of Directors in good faith shall determine that the preservation
thereof is no longer desirable in the conduct of the business of the Company and
that the loss thereof is not disadvantageous in any material respect to the
Holders.
SECTION 1005. Maintenance of Properties.
The Company will cause all properties used or useful in the
conduct of its business or the business of any Subsidiary of the Company to be
maintained and kept in good condition, repair and working order and supplied
with all necessary equipment and will cause to be made all necessary repairs,
renewals, replacements, betterments and improvements thereof, all as in the
judgment of the Company may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at all times;
provided, however, that nothing in this Section shall prevent the Company from
discontinuing the operation or maintenance of any of such properties if such
discontinuance is, as determined by the Board of Directors in good faith,
desirable in the conduct of its business or the business of any Subsidiary and
not disadvantageous in any material respect to the Holders.
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SECTION 1006. Payment of Taxes and Other Claims.
The Company will pay or discharge or cause to be paid or
discharged, before the same shall become delinquent, (1) all taxes, assessments
and governmental charges levied or imposed upon the Company or any of its
Subsidiaries or upon the income, profits or property of the Company or any of
its Subsidiaries, and (2) all lawful claims for labor, materials and supplies
which, if unpaid, might by law become a lien upon the property of the Company or
any of its Subsidiaries; provided, however, that the Company shall not be
required to pay or discharge or cause to be paid or discharged any such tax,
assessment, charge or claim whose amount, applicability or validity is being
contested in good faith by appropriate proceedings.
SECTION 1007. Maintenance of Insurance.
The Company shall, and shall cause its Subsidiaries to, keep
at all times all of their properties which are of an insurable nature insured
against loss or damage with insurers believed by the Company to be responsible
to the extent that property of similar character is usually so insured by
corporations similarly situated and owning like properties in accordance with
good business practice. The Company shall, and shall cause its Subsidiaries to,
use an amount equal to not less than the proceeds from any such insurance policy
to repair, replace or otherwise restore the property to which such proceeds
relate.
SECTION 1008. Limitation on Consolidated Debt.
The Company shall not, and shall not permit any Restricted
Subsidiary of the Company to, Incur any Debt unless immediately after giving pro
forma effect to the Incurrence of such Debt and the receipt and application of
the proceeds thereof, the Consolidated Cash Flow Coverage Ratio of the Company
would be greater than 2.0 to 1 for any Incurrence of Debt prior to May 1, 2001,
and 2.5 to 1 for any Incurrence of Debt thereafter.
Notwithstanding the foregoing paragraph, the Company may, and
may permit any Restricted Subsidiary, to Incur the following Debt:
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(i) Debt under the New Credit Facility in an aggregate principal
amount at any one time not to exceed $325.0 million, less any amounts
by which any revolving credit facility commitments under the New Credit
Facility are permanently reduced pursuant to Section 1014 (so long as
and to the extent that any required payments in connection therewith
are actually made);
(ii) the original issuance by the Company of the Debt evidenced by
the Notes (including any Exchange Notes);
(iii) Debt (other than Debt described in another clause of this
paragraph) outstanding on the date of original issuance of the Notes
after giving effect to the application of the proceeds of the Notes, as
described in Schedule I hereto;
(iv) Debt owed by the Company to any Wholly Owned Restricted
Subsidiary of the Company or Debt owed by a Restricted Subsidiary of
the Company to the Company or a Wholly Owned Restricted Subsidiary of
the Company; provided, however, that upon either (A) the transfer or
other disposition by such Wholly Owned Restricted Subsidiary or the
Company of any Debt so permitted to a Person other than the Company or
another Wholly Owned Restricted Subsidiary of the Company or (B) the
issuance (other than directors' qualifying shares), sale, lease,
transfer or other disposition of shares of Capital Stock (including by
consolidation or merger) of such Wholly Owned Restricted Subsidiary to
a Person other than the Company or another such Wholly Owned Restricted
Subsidiary, the provisions of this Clause (iv) shall no longer be
applicable to such Debt and such Debt shall be deemed to have been
Incurred at the time of such transfer or other disposition;
(v) Debt consisting of Permitted Interest Rate, Currency or
Commodity Price Agreements;
(vi) Debt which is exchanged for or the proceeds of which are
used to refinance or refund, or any extension or renewal of,
outstanding Debt Incurred pursuant to the preceding paragraph or
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clauses (ii) or (iii) of this paragraph (each of the foregoing, a
"refinancing") in an aggregate principal amount not to exceed the
principal amount of the Debt so refinanced plus the amount of any
premium required to be paid in connection with such refinancing
pursuant to the terms of the Debt so refinanced or the amount of any
premium reasonably determined by the Company as necessary to accomplish
such refinancing by means of a tender offer or privately negotiated
repurchase, plus the expenses of the Company or the Restricted
Subsidiary, as the case may be, incurred in connection with such
refinancing; provided, however, that (A) Debt the proceeds of which are
used to refinance the Notes or Debt which is pari passu with or
subordinate in right of payment to the Notes shall only be permitted if
(x) in the case of any refinancing of the Notes or Debt which is pari
passu to the Notes, the refinancing Debt is made pari passu to the
Notes or subordinated to the Notes, and (y) in the case of any
refinancing of Debt which is subordinated to the Notes, the refinancing
Debt constitutes Subordinated Debt; (B) the refinancing Debt by its
terms, or by the terms of any agreement or instrument pursuant to which
such Debt is issued, (1) does not provide for payments of principal of
such Debt at the stated maturity thereof or by way of a sinking fund
applicable thereto or by way of any mandatory redemption, defeasance,
retirement or repurchase thereof (including any redemption, defeasance,
retirement or repurchase which is contingent upon events or
circumstances, but excluding any retirement required by virtue of
acceleration of such Debt upon any event of default thereunder), in
each case prior to the stated maturity of the Debt being refinanced and
(2) does not permit redemption or other retirement (including pursuant
to an offer to purchase) of such debt at the option of the holder
thereof prior to the final stated maturity of the Debt being
refinanced), other than a redemption or other retirement at the option
of the holder of such Debt (including pursuant to an offer to purchase)
which is conditioned upon provisions substantially similar to those
described under Sections 1014 and 1016; and (C) in the case of any
refinancing of Debt
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Incurred by the Company, the refinancing Debt may be Incurred only by
the Company, and in the case of any refinancing of Debt Incurred by a
Restricted Subsidiary, the refinancing Debt may be Incurred only by
such Restricted Subsidiary; provided, further, that Debt Incurred
pursuant to this clause (vi) may not be Incurred more than 45 days
prior to the application of the proceeds to repay the Debt to be
refinanced; and
(vii) Debt not otherwise permitted to be Incurred pursuant to
Clauses (i) through (vi) above, which, together with any other
outstanding Debt Incurred pursuant to this Clause (vii), has an
aggregate principal amount not in excess of $50.0 million at any time
outstanding.
SECTION 1009. Limitation on Senior Subordinated Debt.
The Company shall not Incur any Debt which by its terms is
both (i) subordinated in right of payment to any Senior Debt and (ii) senior in
right of payment to the Notes.
SECTION 1010. Limitation on Issuance of Guarantees of Subordinated Debt.
The Company shall not permit any Restricted Subsidiary,
directly or indirectly, to assume, guarantee or in any other manner become
liable with respect to any Debt of the Company that by its terms is pari passu
or junior in right of payment to the Notes.
SECTION 1011. Limitation on Liens.
The Company shall not, and shall not permit any Subsidiary to,
create, incur, assume or suffer to exist any Lien on or with respect to any
property or assets of the Company or any such Restricted Subsidiary now owned or
hereafter acquired to secure Debt which is pari passu with or subordinated in
right of payment to the Notes without making, or causing such Restricted
Subsidiary to make, effective provision for securing the Notes (and, if the
Company shall so determine, any other Debt of the Company
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which is not subordinate to the Notes or of such Restricted Subsidiary) (x)
equally and ratably with such Debt as to such property or assets for so long as
such Debt shall be so secured or (y) in the event such Debt is Debt of the
Company which is subordinate in right of payment to the Notes, prior to such
Debt as to such property for so long as such Debt will be so secured. The
foregoing restrictions shall not apply to Liens in respect of Debt existing at
the date of this Indenture or to: (i) Liens securing only the Notes; (ii) Liens
in favor of the Company or a Wholly Owned Restricted Subsidiary; or (iii) Liens
to secure Debt incurred to extend, renew, refinance or refund (or successive
extensions, renewals, refinancings or refundings), in whole or in part, any Debt
secured by Liens referred to in the foregoing clause (i) so long as such Lien
does not extend to any other property and the principal amount of Debt so
secured is not increased except as otherwise permitted under Clause (vi) of
Section 1008.
SECTION 1012. Limitation on Restricted Payments.
The Company (i) shall not, directly or indirectly, declare or
pay any dividend or make any distribution (including any payment in connection
with any merger or consolidation derived from assets of the Company or any
Restricted Subsidiary) in respect of its Capital Stock or to the holders
thereof, excluding any dividends or distributions by the Company payable solely
in shares of its Capital Stock (other than Redeemable Stock) or in options,
warrants or other rights to acquire its Capital Stock (other than Redeemable
Stock), (ii) shall not, and shall not permit any Restricted Subsidiary to,
purchase, redeem, or otherwise acquire or retire for value (a) any Capital Stock
of the Company or any Related Person of the Company or (b) any options, warrants
or other rights to acquire shares of Capital Stock of the Company or any Related
Person of the Company or any securities convertible or exchangeable into shares
of Capital Stock of the Company or any Related Person of the Company, (iii)
shall not make, or permit any Restricted Subsidiary to make, any Investment
other than a Permitted Investment, and (iv) shall not, and shall not permit any
Restricted Subsidiary to, redeem, repurchase, defease or otherwise acquire or
retire for value prior to any scheduled maturity, repayment or sinking fund
payment Debt of the Company which is subordinate in right of payment to the
Notes (each of clauses (i) through (iv) being a
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"Restricted Payment") if: (1) an Event of Default, or an event that with the
passing of time or the giving of notice, or both, would constitute an Event of
Default, shall have occurred and is continuing or would result from such
Restricted Payment, or (2) after giving pro forma effect to such Restricted
Payment as if such Restricted Payment had been made at the beginning of the
applicable four-fiscal-quarter period, the Company could not Incur at least
$1.00 of additional Debt pursuant to the terms of the Indenture described in the
first paragraph of Section 1008 hereof; provided that in connection with regular
quarterly dividends on the Company's Common Stock (not to exceed $7.5 million in
the aggregate) declared or payable prior to January 31, 1999, the Company's pro
forma capacity to Incur additional Debt shall be computed on a basis that
excludes the non-recurring charges recorded during the Company's 1997 fiscal
year, or (3) upon giving effect to such Restricted Payment, the aggregate of all
Restricted Payments from the date of issuance of the Notes exceeds the sum of:
(a) 50% of cumulative Consolidated Net Income (or, in the case Consolidated Net
Income shall be negative, less 100% of such deficit) of the Company since the
date of issuance of the Notes through the last day of the last full fiscal
quarter ending immediately preceding the date of such Restricted Payment for
which quarterly or annual financial statements are available (taken as a single
accounting period); plus (b) 100% of the aggregate net proceeds received by the
Company after the date of original issuance of the Notes, including the fair
market value of property other than cash (determined in good faith by the Board
of Directors as evidenced by a resolution of the Board of Directors filed with
the Trustee), from the issuance and sale (other than to a Restricted Subsidiary)
of Capital Stock (other than Redeemable Stock) of the Company, options, warrants
or other rights to acquire Capital Stock (other than Redeemable Stock) of the
Company and Debt of the Company that has been converted into or exchanged for
Capital Stock (other than Redeemable Stock and other than by or from a
Restricted Subsidiary) of the Company after the date of original issuance of the
Notes, provided that any such net proceeds received by the Company from an
employee stock ownership plan financed by loans from the Company or a Restricted
Subsidiary of the Company shall be included only to the extent such loans have
been repaid with cash on or prior to the date of determination; plus (c) $40.0
million. Prior to the making of any Restricted Payment, the Company shall
deliver to the Trustee an Officers' Certificate setting
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forth the computations by which the determinations required by clauses (2) and
(3) above were made and stating that no Event of Default, or event that with the
passing of time or the giving of notice, or both, would constitute an Event of
Default, has occurred and is continuing or will result from such Restricted
Payment.
Notwithstanding the foregoing, so long as no Event of Default,
or event that with the passing of time or the giving of notice, or both, would
constitute an Event of Default, shall have occurred and is continuing or would
result therefrom, (i) the Company may pay any dividend on Capital Stock of any
class within 60 days after the declaration thereof if, on the date when the
dividend was declared, the Company could have paid such dividend in accordance
with the foregoing provisions; (ii) the Company may refinance any Debt otherwise
permitted by clause (vi) of the second paragraph under Section 1008 above or
solely in exchange for or out of the net proceeds of the substantially
concurrent sale (other than from or to a Restricted Subsidiary or from or to an
employee stock ownership plan financed by loans from the Company or a Restricted
Subsidiary of the Company) of shares of Capital Stock (other than Redeemable
Stock) of the Company, provided that the amount of net proceeds from such
exchange or sale shall be excluded from the calculation of the amount available
for Restricted Payments pursuant to the preceding paragraph; (iii) the Company
may purchase, redeem, acquire or retire any shares of Capital Stock of the
Company solely in exchange for or out of the net proceeds of the substantially
concurrent sale (other than from or to a Restricted Subsidiary or from or to an
employee stock ownership plan financed by loans from the Company or a Restricted
Subsidiary of the Company) of shares of Capital Stock (other than Redeemable
Stock) of the Company; and (iv) the Company or a Restricted Subsidiary may
purchase or redeem any Debt from Net Available Proceeds to the extent permitted
under Section 1014. Any payment made pursuant to clause (i) or (iii) of this
paragraph shall be a Restricted Payment for purposes of calculating aggregate
Restricted Payments pursuant to the preceding paragraph.
SECTION 1013. Limitations on Dividend and Other Payment Restrictions Affecting
Subsidiaries.
The Company shall not, and shall not permit any Restricted
Subsidiary to, directly or indirectly, create or
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otherwise cause or suffer to exist or become effective any encumbrance or
restriction on the ability of any Restricted Subsidiary of the Company (i) to
pay dividends (in cash or otherwise) or make any other distributions in respect
of its Capital Stock or pay any Debt or other obligation owed to the Company or
any other Restricted Subsidiary; (ii) to make loans or advances to the Company
or any other Restricted Subsidiary; or (iii) to transfer any of its property or
assets to the Company or any other Restricted Subsidiary. Notwithstanding the
foregoing, the Company may, and may permit any Restricted Subsidiary to, suffer
to exist any such encumbrance or restriction (a) pursuant to any agreement in
effect on the date of original issuance of the Notes; (b) pursuant to an
agreement relating to any Debt Incurred by a Person (other than a Restricted
Subsidiary of the Company existing on the date of original issuance of the Notes
or any Restricted Subsidiary carrying on any of the businesses of any such
Restricted Subsidiary) prior to the date on which such Person became a
Restricted Subsidiary of the Company and outstanding on such date and not
Incurred in anticipation of becoming a Restricted Subsidiary, which encumbrance
or restriction is not applicable to any Person, or the properties or assets of
any Person, other than the Person so acquired; (c) pursuant to an agreement
effecting a renewal, refunding or extension of Debt Incurred pursuant to an
agreement referred to in clause (a) or (b) above, provided, however, that the
provisions contained in such renewal, refunding or extension agreement relating
to such encumbrance or restriction are no more restrictive in any material
respect than the provisions contained in the agreement the subject thereof, as
determined in good faith by the Board of Directors and evidenced by a resolution
of the Board of Directors filed with the Trustee; (d) pursuant to an agreement
relating to Debt of a Restricted Subsidiary that is not materially more
restrictive than customary provisions in comparable financing arrangements and
which the Board of Directors determines (as evidenced by a resolution of the
Board of Directors filed with the Trustee) will not materially impair the
Company's ability to make payments under the Notes; (e) in the case of clause
(iii) above, restrictions contained in any security agreement (including a
capital lease) securing Debt of a Restricted Subsidiary otherwise permitted
under this Indenture, but only to the extent such restrictions restrict the
transfer of the property subject to such security agreement; (f) in the case of
clause (iii) above, customary nonassignment provisions entered into in the
ordinary course of business
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consistent with past practices in leases and other contracts to the extent such
provisions restrict the transfer or subletting of any such lease or the
assignment of rights under any such contract; (g) any restriction with respect
to a Restricted Subsidiary of the Company imposed pursuant to an agreement which
has been entered into for the sale or disposition of all or substantially all of
the Capital Stock or assets of such Restricted Subsidiary, provided that
consummation of such transaction would not result in an Event of Default or an
event that, with the passing of time or the giving of notice or both, would
constitute an Event of Default, that such restriction terminates if such
transaction is closed or abandoned and that the closing or abandonment of such
transaction occurs within one year of the date such agreement was entered into;
or (h) such encumbrance or restriction is the result of applicable corporate law
or regulation relating to the payment of dividends or distributions.
SECTION 1014. Limitation on Asset Disposition.
The Company shall not, and shall not permit any Restricted
Subsidiary to, make any Asset Disposition in one or more related transactions
unless: (i) the Company or the Restricted Subsidiary, as the case may be,
receives consideration for such disposition at least equal to the fair market
value for the assets sold or disposed of as determined by the Board of Directors
in good faith and evidenced by a resolution of the Board of Directors filed with
the Trustee; (ii) at least 85% of the consideration for such disposition
consists of cash or readily marketable cash equivalents or the assumption of
Debt (other than Debt that is subordinated to the Notes) relating to such assets
and release from all liability on the Debt assumed; and (iii) all Net Available
Proceeds, less any amounts invested or committed to be invested within 365 days
of such disposition in assets related to the business of the Company or applied
to permanently repay Senior Debt, are applied within 365 days of such
disposition (1) first, to the permanent repayment or reduction of Senior Debt
then outstanding under any agreements or instruments which would require such
application or prohibit payments pursuant to clause (2) following, (2) second,
to the extent of remaining Net Available Proceeds, to make an Offer to Purchase
Outstanding Notes at 100% of their principal amount plus accrued interest to the
date of purchase and, to the extent
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required by the terms thereof, any other Debt of the Company that is pari passu
with the Notes at a price no greater than 100% of the principal amount thereof
plus accrued interest to the date of purchase, and (3) third, to the extent of
any remaining Net Available Proceeds, to any other use as determined by the
Company which is not otherwise prohibited by this Indenture.
SECTION 1015. Transactions with Affiliates and Related Persons.
The Company shall not, and shall not permit any Restricted
Subsidiary of the Company to, enter into any transaction (or series of related
transactions) with an Affiliate or Related Person of the Company (other than the
Company or a Wholly Owned Restricted Subsidiary of the Company), including any
Investment, either directly or indirectly, unless such transaction is on terms
no less favorable to the Company or such Restricted Subsidiary than those that
could be obtained in a comparable arm's-length transaction with an entity that
is not an Affiliate or Related Person. For any transaction that involves in
excess of $5,000,000, a majority of the disinterested members of the Board of
Directors shall determine that the transaction satisfies the above criteria and
shall evidence such a determination by a Board Resolution filed with the
Trustee. For any transaction that involves in excess of $10,000,000, the Company
shall also obtain an opinion from a nationally recognized expert with experience
in appraising the terms and conditions of the type of transaction (or series of
related transactions) for which the opinion is required stating that such
transaction (or series of related transactions) is on terms no less favorable to
the Company or such Restricted Subsidiary than those that could be obtained in a
comparable arm's-length transaction with an entity that is not an Affiliate or
Related Person of the Company, which opinion shall be filed with the Trustee.
Notwithstanding anything to the contrary contained in this
Indenture, the foregoing provisions shall not apply to (i) transactions with any
employee, officer or director of the Company or any of its Restricted
Subsidiaries pursuant to employee benefit plans or compensation arrangements or
agreements entered into in the ordinary course of business, (ii) purchases or
sales of goods or services in the ordinary course of business, or (iii)
transactions with any
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Affiliate or Related Person of the Company in which such Affiliate or Related
Person acquires or purchases the capital stock of the Company or any Restricted
Subsidiary at fair market value.
SECTION 1016. Change of Control.
Within 60 days of the occurrence of a Change of Control, the
Company will be required to make an Offer to Purchase all Outstanding Notes at a
purchase price equal to 101% of their principal amount plus accrued interest to
but excluding the date of purchase. A "Change of Control" will be deemed to have
occurred at such time as either (a) any Person (other than a Permitted Holder)
or any Persons acting together that would constitute a "group" (a "Group") for
purposes of Section 13(d) of the Exchange Act, or any successor provision
thereto (other than Permitted Holders), together with any Affiliates or Related
Persons thereof, shall beneficially own (within the meaning of Rule 13d-3 under
the Exchange Act, or any successor provision thereto), directly or indirectly,
at least 50% of the aggregate voting power of all classes of Voting Stock of the
Company (for the purposes of this clause (a) a person shall be deemed to
beneficially own the Voting Stock of a corporation that is beneficially owned
(as defined above) by another corporation (a "parent corporation"), if such
person beneficially owns (as defined above) at least 50% of the aggregate voting
power of all classes of Voting Stock of such parent corporation); or (b) any
Person or Group (other than Permitted Holders), together with any Affiliates or
Related Persons thereof, shall succeed in having a sufficient number of its
nominees elected to the Board of Directors of the Company such that such
nominees, when added to any existing director remaining on the Board of
Directors of the Company after such election who was a nominee of or is an
Affiliate or Related Person of such Person or Group, will constitute a majority
of the Board of Directors of the Company; or (c) the Company shall, directly or
indirectly, transfer, sell, lease or otherwise dispose of all or substantially
all of its assets; or (d) there shall be adopted a plan of liquidation or
dissolution of the Company; provided, however, that a transaction effected to
create a holding company of the Company, (i) pursuant to which the Company
becomes a wholly-owned Subsidiary of such holding company, and (ii) as a result
of which the holders of Capital Stock of such holding company are substantially
the same as the
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holders of Capital Stock of the Company immediately prior to such transaction,
shall not be deemed to involve a "Change of Control".
In the event that the Company makes an Offer to Purchase the
Notes, the Company intends to comply with any applicable securities laws and
regulations, including any applicable requirements of Section 14(e) of, and Rule
14e-1 under, the Exchange Act.
SECTION 1017. Provision of Financial Information.
For so long as any of the Notes are outstanding, the Company
shall file with the Commission the annual reports, quarterly reports and other
documents which the Company is required to file with the Commission pursuant to
Section 13(a) or 15(d) of the Exchange Act or any successor provisions thereto.
SECTION 1018. Unrestricted Subsidiaries.
The Company may designate any Subsidiary of the Company to be
an "Unrestricted Subsidiary" as provided below in which event such Subsidiary
and each other Person that is then or thereafter becomes a Subsidiary of such
Subsidiary will be deemed to be an Unrestricted Subsidiary. "Unrestricted
Subsidiary" means (1) any Subsidiary designated as such by the Board of
Directors as set forth below where (a) neither the Company nor any of its other
Subsidiaries (other than another Unrestricted Subsidiary) (i) provides credit
support for, or any Guarantee of, any Debt of such Subsidiary or any Subsidiary
of such Subsidiary (including any undertaking, agreement or instrument
evidencing such Debt) or (ii) is directly or indirectly liable for any Debt of
such Subsidiary or any Subsidiary of such Subsidiary, and (b) no default with
respect to any Debt of such Subsidiary or any Subsidiary of such Subsidiary
(including any right which the holders thereof may have to take enforcement
action against such Subsidiary) would permit (upon notice, lapse of time or
both) any holder of any other Debt of the Company and its Subsidiaries (other
than another Unrestricted Subsidiary) to declare a default on such other Debt or
cause the payment thereof to be accelerated or payable prior to its final
scheduled maturity and (2) any Subsidiary of an Unrestricted Subsidiary. The
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Board of Directors may designate any Subsidiary to be an Unrestricted Subsidiary
unless such Subsidiary owns any Capital Stock of, or owns or holds any Lien on
any property of, any other Subsidiary of the Company which is not a Subsidiary
of the Subsidiary to be so designated or otherwise an Unrestricted Subsidiary,
provided that either (x) the Subsidiary to be so designated has total assets of
$1,000 or less or (y) immediately after giving effect to such designation, the
Company could Incur at least $1.00 of additional Debt pursuant to the first
paragraph under Section 1008 hereof and provided, further, that the Company
could make a Restricted Payment in an amount equal to the greater of the fair
market value and book value of such Subsidiary pursuant to Section 1012 hereof
and such amount is thereafter treated as a Restricted Payment for the purpose of
calculating the aggregate amount available for Restricted Payments thereunder.
SECTION 1019. Statement by Officers as to Default; Compliance Certificates.
(a) The Company will deliver to the Trustee, within
90 days after the end of each fiscal quarter of the Company ending after the
date hereof an Officers' Certificate, stating whether or not to the best
knowledge of the signers thereof the Company is in default in the performance
and observance of any of the terms, provisions and conditions of Section 801 or
Sections 1004 to 1018, inclusive, and if the Company shall be in default,
specifying all such defaults and the nature and status thereof of which they may
have knowledge.
(b) The Company shall deliver to the Trustee, as
soon as possible and in any event within 10 days after the Company becomes aware
or should reasonably become aware of the occurrence of an Event of Default or an
event which, with notice or the lapse of time or both, would constitute an Event
of Default, an Officers' Certificate setting forth the details of such Event of
Default or default, and the action which the Company proposes to take with
respect thereto.
(c) The Company shall deliver to the Trustee
within 90 days after the end of each fiscal year a written statement by the
Company's independent public accountants stating (A) that their audit
examination was conducted in
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accordance with generally accepted accounting standards, and (B) whether, in
connection with their audit examination, any event which, with notice or the
lapse of time or both, would constitute an Event of Default has come to their
attention insofar as it relates to accounting matters and, if such a default has
come to their attention, specifying the nature and period of the existence
thereof.
SECTION 1020. Waiver of Certain Covenants.
The Company may omit in any particular instance to comply with
any covenant or condition set forth in Section 801 and Sections 1004 to 1018, if
before the time for such compliance the Holders of at least a majority in
principal amount of the Outstanding Notes shall, by Act of such Holders, either
waive such compliance in such instance or generally waive compliance with such
covenant or condition, but no such waiver shall extend to or affect such
covenant or condition except to the extent so expressly waived, and, until such
waiver shall become effective, the obligations of the Company and the duties of
the Trustee in respect of any such covenant or condition shall remain in full
force and effect; provided, however, with respect to an Offer to Purchase as to
which an Offer has been mailed, no such waiver may be made or shall be effective
against any Holder tendering Notes pursuant to such Offer, and the Company may
not omit to comply with the terms of such Offer as to such Holder.
ARTICLE ELEVEN
Redemption of Notes
SECTION 1101. Right of Redemption.
The Notes may be redeemed at the option of the Company, in
whole or in part, at any time on or after May 1, 2003, and prior to maturity, at
the Redemption Prices specified in the form of Note hereinbefore set forth
together with accrued interest to, but excluding, the Redemption Date.
In addition, if on or before May 1, 2001 the Company receives
net proceeds from the sale of its Common Stock in one or more Public Equity
Offerings, the Company
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may, at its option, use an amount equal to all or a portion of any such net
proceeds to redeem Notes in an aggregate principal amount of up to 33 1/3% of
the original aggregate principal amount of the Notes, provided, however, that
Notes having a principal amount equal to at least 66 2/3% of the original
aggregate principal amount of the Notes remain outstanding after such
redemption. Such redemption must occur on a Redemption Date within 90 days of
such sale and upon not less than 30 nor more than 60 days' notice mailed to each
Holder of Notes to be redeemed at such Holder's address appearing in the
Security Register, in amounts of $1,000 or an integral multiple of $1,000, at a
redemption price of 109.50% of the principal amount of the Notes plus accrued
interest to but excluding the Redemption Date (subject to the right of Holders
of record on the relevant Regular Record Date to receive interest due on an
Interest Payment Date that is on or prior to the Redemption Date).
If less than all the Notes are to be redeemed, the Trustee
shall select, in such manner as it shall deem fair and appropriate, the
particular Notes to be redeemed or any portion thereof that is an integral
multiple of $1,000.
The Notes will not have the benefit of any sinking fund.
SECTION 1102. Applicability of Article.
Redemption of Notes at the election of the Company, as
permitted by any provision of this Indenture, shall be made in accordance with
such provision and this Article.
SECTION 1103. Election to Redeem; Notice to Trustee.
The election of the Company to redeem any Notes
pursuant to Section 1101 shall be evidenced by a Board Resolution. In case of
any redemption at the election of the Company of less than all the Notes, the
Company shall, at least 60 days prior to the Redemption Date fixed by the
Company (unless a shorter notice shall be satisfactory to the Trustee), notify
the Trustee of such Redemption Date and of the principal amount of Notes to be
redeemed.
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SECTION 1104. Selection by Trustee of Notes to Be Redeemed.
If less than all the Notes are to be redeemed, the particular
Notes to be redeemed shall be selected not more than 60 days prior to the
Redemption Date by the Trustee, from the Outstanding Notes not previously called
for redemption, by such method as the Trustee shall deem fair and appropriate
and which may provide for the selection for redemption of portions (equal to
$1,000 or any integral multiple thereof) of the principal amount of Notes of a
denomination larger than $1,000.
The Trustee shall promptly notify the Company and each Note
Registrar in writing of the Notes selected for redemption and, in the case of
any Notes selected for partial redemption, the principal amount thereof to be
redeemed.
For all purposes of this Indenture, unless the context
otherwise requires, all provisions relating to the redemption of Notes shall
relate, in the case of any Notes redeemed or to be redeemed only in part, to the
portion of the principal amount of such Notes which has been or is to be
redeemed.
SECTION 1105. Notice of Redemption.
Notice of redemption shall be given by first-class mail,
postage prepaid, mailed not less than 30 nor more than 60 days prior to the
Redemption Date, to each Holder of Notes to be redeemed, at his address
appearing in the Security Register.
All notices of redemption shall state:
(1) the Redemption Date,
(2) the Redemption Price,
(3) if less than all the Outstanding Notes are to be redeemed,
the identification (and, in the case of partial redemption, the
principal amounts) of the particular Notes to be redeemed,
(4) that on the Redemption Date the Redemption Price will
become due and payable upon
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each such Note to be redeemed and that interest thereon will cease to
accrue on and after said date, and
(5) the place or places where such Notes are to be surrendered
for payment of the Redemption Price.
Notice of redemption of Notes to be redeemed at the election
of the Company shall be given by the Company or, at the Company's request, by
the Trustee in the name and at the expense of the Company.
SECTION 1106. Deposit of Redemption Price.
Prior to any Redemption Date, the Company shall deposit with
the Trustee or with a Paying Agent (or, if the Company is acting as its own
Paying Agent, segregate and hold in trust as provided in Section 1003) an amount
of money sufficient to pay the Redemption Price of, and (except if the
Redemption Date shall be an Interest Payment Date) accrued interest on, all the
Notes which are to be redeemed on that date.
SECTION 1107. Notes Payable on Redemption Date.
Notice of redemption having been given as aforesaid, the Notes
so to be redeemed shall, on the Redemption Date, become due and payable at the
Redemption Price therein specified, and from and after such date (unless the
Company shall default in the payment of the Redemption Price plus accrued
interest) such Notes shall cease to bear interest. Upon surrender of any such
Note for redemption in accordance with said notice, such Note shall be paid by
the Company at the Redemption Price together with accrued interest to the
Redemption Date; provided, however, that instalments of interest whose Stated
Maturity is on or prior to the Redemption Date shall be payable to the Holders
of such Notes, or one or more Predecessor Notes, registered as such at the close
of business on the relevant Record Dates according to their terms and the
provisions of Section 307.
If any Note called for redemption shall not be so paid upon
surrender thereof for redemption, the principal
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(and premium, if any) shall, until paid, bear interest from the Redemption Date
at the rate provided by the Note.
SECTION 1108. Notes Redeemed in Part.
Any Note which is to be redeemed only in part shall be
surrendered at an office or agency of the Company designated for that purpose
pursuant to Section 1002 (with, if the Company or the Trustee so requires, due
endorsement by, or a written instrument of transfer in form satisfactory to the
Company and the Trustee duly executed by, the Holder thereof or his attorney
duly authorized in writing), and the Company shall execute, and the Trustee
shall authenticate and deliver to the Holder of such Note without service
charge, a new Note or Notes, of any authorized denomination as requested by such
Holder, in aggregate principal amount equal to and in exchange for the
unredeemed portion of the principal of the Note so surrendered.
ARTICLE TWELVE
Subordination of Notes
SECTION 1201. Notes Subordinate to Senior Debt.
The Company covenants and agrees, and each Holder of a Note,
by his acceptance thereof, likewise covenants and agrees, that, to the extent
and in the manner hereinafter set forth in this Article (subject to the
provisions of Article Four and Article Thirteen), the payment of the principal
of (and premium, if any) and interest on each and all of the Notes (and any
liquidated damages under the Exchange and Registration Rights Agreement
("Additional Amounts")) are hereby expressly made subordinate and subject in
right of payment to the prior payment in full in cash of all Senior Debt of the
Company.
SECTION 1202. Payment Over of Proceeds Upon Dissolution, Etc.
In the event of (a) any insolvency or bankruptcy case or
proceeding, or any receivership, liquidation, reorganization or other similar
case or proceeding in connection therewith, relative to the Company or to its
creditors, as
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such, or to its assets, or (b) any liquidation, dissolution or other winding up
of the Company, whether voluntary or involuntary and whether or not involving
insolvency or bankruptcy, or (c) any assignment for the benefit of creditors or
any other marshaling of assets and liabilities of the Company, then and in any
such event specified in (a), (b) or (c) above (each such event, if any, herein
sometimes referred to as a "Proceeding") the holders of Senior Debt shall be
entitled to receive or retain payment in full in cash or cash equivalents of all
amounts due or to become due on or in respect of all Senior Debt, or provision
shall be made for such payment in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of Senior Debt, before the Holders of the
Notes are entitled to receive any payment or distribution of any kind or
character, whether in cash, property or securities, on account of principal of
(or premium, if any) or interest on (or Additional Amounts) or other obligations
in respect of the Notes or on account of any purchase, redemption or other
acquisition of Notes by the Company or any Subsidiary of the Company (all such
payments, distributions, purchases and acquisitions herein referred to,
individually and collectively, as a "Notes Payment"), and to that end the
holders of Senior Debt shall be entitled to receive, for application to the
payment thereof, any Notes Payment which may be payable or deliverable in
respect of the Notes in any such Proceeding.
In the event that, notwithstanding the foregoing provisions of
this Section, the Trustee or the Holder of any Note shall have received any
Notes Payment before all Senior Debt of the Company is paid in full in cash or
cash equivalents or payment thereof provided for in cash or cash equivalents or
otherwise in a manner satisfactory to the holders of such Debt, then and in such
event such Notes Payment shall be paid over or delivered forthwith to the
trustee in bankruptcy or other person making payment or distribution of assets
of the Company for the application to the payment of all Senior Debt remaining
unpaid, to the extent necessary to pay the Senior Debt in full.
For purposes of this Article only, the words "any payment or
distribution of any kind or character, whether in cash, property or securities"
shall not be deemed to include a payment or distribution of stock or securities
of the Company provided for by a plan of reorganization or readjustment
authorized by an order or decree of a court of
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competent jurisdiction in a reorganization proceeding under any applicable
bankruptcy law or of any other corporation provided for by such plan of
reorganization or readjustment which stock or securities are subordinated in
right of payment to all then outstanding Senior Debt to substantially the same
extent as the Notes are so subordinated as provided in this Article. The
consolidation of the Company with, or the merger of the Company into, another
Person or the liquidation or dissolution of the Company following the conveyance
or transfer of all or substantially all of its properties and assets as an
entirety to another Person upon the terms and conditions set forth in Article
Eight shall not be deemed a Proceeding for the purposes of this Section if the
Person formed by such consolidation or into which the Company is merged or the
Person which acquires by conveyance or transfer such properties and assets as an
entirety, as the case may be, shall, as a part of such consolidation, merger,
conveyance or transfer, comply with the conditions set forth in Article Eight.
SECTION 1203. No Payment When Senior Debt in Default.
In the event that any Company Senior Payment Default (as
defined below) shall have occurred and be continuing, then no Notes Payment
shall be made, and no defeasance of the Notes may be made, unless and until such
Company Senior Payment Default shall have been cured or waived or shall have
ceased to exist or all amounts then due and payable in respect of Senior Debt
shall have been paid in full in cash or cash equivalents, or provision shall
have been made for such payment in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of Senior Debt. "Company Senior Payment
Default" means any default in the payment of principal of (or premium, if any)
or interest on Designated Senior Debt when due, whether at the Stated Maturity
of any such payment or by declaration of acceleration, call for redemption or
otherwise.
Upon the occurrence of a Senior Nonmonetary Default and
receipt of written notice by the Company and the Trustee of the occurrence of
such Senior Nonmonetary Default from any holder of Designated Senior Debt (or
any trustee, agent or other representative for such holder) which is the subject
of such Senior Nonmonetary Default, no Notes Payment may be made, and no
defeasance of the Notes, may be made for a period (the "Payment Blockage
Period") commencing on the
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date of the receipt of such notice and ending the earlier of (i) the date on
which such Senior Nonmonetary Default shall have been cured or waived or ceased
to exist or all Senior Debt the subject of such Senior Nonmonetary Default shall
have been discharged and (ii) the 179th day after the date of the receipt of
such notice. In any event, no more than one Payment Blockage Period may be
commenced during any 360-day period and there shall be a period of at least 181
days during each 360-day period when no Payment Blockage Period is in effect. In
addition, no Senior Nonmonetary Default that existed or was continuing on the
date of the commencement of a Payment Blockage Period may be made the basis of
the commencement of a subsequent Payment Blockage Period whether or not within a
period of 360 consecutive days, unless such Senior Nonmonetary Default shall
have been cured for a period of not less than 90 consecutive days. "Senior
Nonmonetary Default" means the occurrence or existence and continuance of an
event of default with respect to Company Senior Debt, other than a Senior
Payment Default, permitting the holders of the Designated Senior Debt (or a
trustee or other agent on behalf of the holders thereof) then to declare such
Designated Senior Debt due and payable prior to the date on which it would
otherwise become due and payable.
The failure to make any payment on the Notes by reason of the
provisions of the Indenture described under this Article Twelve will not be
construed as preventing the occurrence of an Event of Default with respect to
the Notes arising from any such failure to make payment. Upon termination of any
period of payment blockage the Company shall resume making any and all required
payments in respect of the Notes, including any missed payments.
In the event that, notwithstanding the foregoing, the Company
shall make any Company Notes Payment to the Trustee or any Holder prohibited by
the foregoing of this Section, and if such fact shall, at or prior to the time
of such Notes Payment, have been made known to the Trustee or, as the case may
be, such Holder, then and in such event such Notes Payment shall be paid over
and delivered forthwith to the holders of the Senior Debt of the Company.
The subordination provisions described above will not be
applicable to payments in respect of the Notes from a defeasance trust
established in connection with any defeasance or covenant defeasance of the
Notes as described under Article Thirteen.
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The provisions of this Section shall not apply to any Notes
Payment with respect to which Section 1202 would be applicable.
SECTION 1204. Payment Permitted If No Default.
Nothing contained in this Article or elsewhere in this
Indenture or in any of the Notes shall prevent (a) the Company, at any time
except during the pendency of any Proceeding referred to in Section 1202 or
under the conditions described in Section 1203, from making Notes Payments, or
(b) the application by the Trustee of any money deposited with it hereunder to
Notes Payments or the retention of such Notes Payment by the Holders, if, at the
time of such application by the Trustee, it did not have knowledge that such
Notes Payment would have been prohibited by the provisions of this Article.
SECTION 1205. Subrogation to Rights of Holders of Senior Debt.
Subject to the payment in full in cash or cash equivalents of
all amounts due or to become due on or in respect of Senior Debt of the Company
or the provision for such payment in cash or cash equivalents or otherwise in a
manner satisfactory to the holders of Senior Debt, the Holders of the Notes
shall be subrogated to the rights of the holders of such Debt to receive
payments and distributions of cash, property and securities applicable to such
Debt until the principal of (and premium, if any) and interest on the Notes
shall be paid in full. For purposes of such subrogation, no payments or
distributions to the holders of the Senior Debt of the Company of any cash,
property or securities to which the Holders of the Notes or the Trustee would be
entitled except for the provisions of this Article, and no payments over
pursuant to the provisions of this Article to the holders of Senior Debt by
Holders of the Notes or the Trustee, shall, as among the Company, its creditors
other than holders of Senior Debt and the Holders of the Notes, be deemed to be
a payment or distribution by the Company to or on account of the Senior Debt of
the Company.
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SECTION 1206. Provisions Solely to Define Relative Rights.
The provisions of this Article are and are intended solely for
the purpose of defining the relative rights of the Holders on the one hand and
the holders of Senior Debt on the other hand. Nothing contained in this Article
or elsewhere in this Indenture or in the Notes is intended to or shall (a)
impair, as among the Company, its creditors other than holders of Senior Debt
and the Holders of the Notes, the obligation of the Company, which is absolute
and unconditional (and which, subject to the rights under this Article of the
holders of Senior Debt, is intended to rank equally with all other general
obligations of the Company), to pay to the Holders of the Notes the principal of
(and premium, if any) and interest on the Notes as and when the same shall
become due and payable in accordance with their terms; or (b) affect the
relative rights against the Company of the Holders of the Notes and creditors of
the Company, other than the holders of Senior Debt; or (c) prevent the Trustee
or the Holder of any Note from exercising all remedies otherwise permitted by
applicable law upon default under this Indenture, subject to the rights, if any,
under this Article of the holders of Senior Debt to receive cash, property and
securities otherwise payable or deliverable to the Trustee or such Holder.
SECTION 1207. Trustee to Effectuate Subordination.
Each Holder of a Note by his acceptance thereof authorizes and
directs the Trustee on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Article and
appoints the Trustee his attorney-in-fact for any and all such purposes.
SECTION 1208. No Waiver of Subordination Provisions.
No right of any present or future holder of any Senior Debt to
enforce subordination as herein provided shall at any time in any way be
prejudiced or impaired by any act or failure to act on the part of the Company
or by any act or failure to act by any such holder, or by any noncompliance by
the Company with the terms, provisions and covenants of this Indenture,
regardless of any knowledge thereof any such holder may have or be otherwise
charged with.
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Without in any way limiting the generality of the foregoing
paragraph, the holders of Senior Debt may, at any time and from time to time,
without the consent of or notice to the Trustee or the Holders of the Notes,
without incurring responsibility to the Holders of the Notes and without
impairing or releasing the subordination provided in this Article or the
obligations hereunder of the Holders of the Notes to the holders of Senior Debt,
do any one or more of the following: (i) change the manner, place or terms of
payment or extend the time of payment of, or renew or alter, Senior Debt, or
otherwise amend or supplement in any manner Senior Debt or any instrument
evidencing the same or any agreement under which Senior Debt is outstanding;
(ii) sell, exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing Senior Debt; (iii) release any Person liable in
any manner for the collection of Senior Debt; and (iv) exercise or refrain from
exercising any rights against the Company and any other Person.
SECTION 1209. Notice to Trustee.
The Company shall give prompt written notice to the Trustee of
any fact known to the Company which would prohibit the making of any payment to
or by the Trustee in respect of the Notes, provided that failure to notify will
not affect the subordination provisions set forth herein. Notwithstanding the
provisions of this Article or any other provision of this Indenture, the Trustee
shall not be charged with knowledge of the existence of any facts which would
prohibit the making of any payment to or by the Trustee in respect of the Notes,
unless and until the Trustee shall have received written notice thereof from the
Company or a holder of Senior Debt or from any trustee therefor at its Corporate
Trust Office; and, prior to the receipt of any such written notice, the Trustee,
subject to the provisions of Section 601, shall be entitled in all respects to
assume that no such facts exist.
Subject to the provisions of Section 601, the Trustee shall be
entitled to rely on the delivery to it of a written notice by a Person
representing himself to be a holder of Senior Debt (or a trustee therefor) to
establish that such notice has been given by a holder of Senior Debt (or a
trustee therefor). In the event that the Trustee determines in good faith that
further evidence is required
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with respect to the right of any Person as a holder of Senior Debt to
participate in any payment or distribution pursuant to this Article, the Trustee
may request such Person to furnish evidence to the reasonable satisfaction of
the Trustee as to the amount of Senior Debt held by such Person, the extent to
which such Person is entitled to participate in such payment or distribution and
any other facts pertinent to the rights of such Person under this Article, and
if such evidence is not furnished, the Trustee may defer any payment to such
Person pending judicial determination as to the right of such Person to receive
such payment.
SECTION 1210. Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets or securities of
the Company referred to in this Article, the Trustee, subject to the provisions
of Section 601, and the Holders of the Notes shall be entitled to rely upon any
order or decree entered by any court of competent jurisdiction in which such
Proceeding is pending, or a certificate of the trustee in bankruptcy, receiver,
liquidating trustee, custodian, assignee for the benefit of creditors, agent or
other Person making such payment or distribution, delivered to the Trustee or to
the Holders of Notes, for the purpose of ascertaining the Persons entitled to
participate in such payment or distribution, the holders of the Senior Debt and
other indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article.
SECTION 1211. Trustee Not Fiduciary for Holders of Senior Debt.
The Trustee shall not be deemed to owe any fiduciary duty to
the holders of Senior Debt and shall not be liable to any such holders if it
shall in good faith mistakenly pay over or distribute to Holders of Notes or to
the Company or to any other Person cash, property or securities to which any
holders of Senior Debt shall be entitled by virtue of this Article or otherwise.
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SECTION 1212. Rights of Trustee as Holder of Senior Debt; Preservation of
Trustee's Rights.
The Trustee in its individual capacity shall be entitled to
all the rights set forth in this Article with respect to any Senior Debt which
may at any time be held by it, to the same extent as any other holder of Senior
Debt, and nothing in this Indenture shall deprive the Trustee of any of its
rights as such holder.
Nothing in this Article shall apply to claims of, or payments
to, the Trustee under or pursuant to Section 607.
SECTION 1213. Article Applicable to Paying Agents.
In case at any time any Paying Agent other than the Trustee
shall have been appointed by the Company and be then acting hereunder, the term
"Trustee" as used in this Article shall in such case (unless the context
otherwise requires) be construed as extending to and including such Paying Agent
within its meaning as fully for all intents and purposes as if such Paying Agent
were named in this Article in addition to or in place of the Trustee; provided,
however, that Section 1212 shall not apply to the Company or any Affiliate of
the Company if it or such Affiliate acts as Paying Agent.
SECTION 1214. Defeasance of this Article Twelve.
The subordination of the Notes provided by this Article Twelve
is expressly made subject to the provisions for defeasance or covenant
defeasance in Article Thirteen hereof and, anything herein to the contrary
notwithstanding, upon the effectiveness of any such defeasance or covenant
defeasance effected in compliance with this Indenture, the Notes then
outstanding shall thereupon cease to be subordinated pursuant to this Article
Twelve.
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ARTICLE THIRTEEN
Defeasance and Covenant Defeasance
SECTION 1301. Company's Option to Effect Defeasance or Covenant Defeasance.
The Company may at its option by Board Resolution, at any
time, in accordance with the Exchange and Registration Rights Agreement, elect
to have either Section 1302 or Section 1303 applied to the Outstanding Notes
upon compliance with the conditions set forth below in this Article Thirteen.
SECTION 1302. Defeasance and Discharge.
Upon the Company's exercise of the option provided in Section
1301 applicable to this Section, the Company shall be deemed to have been
discharged from its obligations with respect to the Outstanding Notes, and the
provisions of Article Twelve hereof shall cease to be effective, on the date the
conditions set forth below are satisfied (hereinafter, "defeasance"). For this
purpose, such defeasance means that the Company shall be deemed to have paid and
discharged the entire indebtedness represented by the Outstanding Notes and to
have satisfied all its other obligations under such Notes and this Indenture
insofar as such Notes are concerned (and the Trustee, at the expense of the
Company, shall execute proper instruments acknowledging the same), except for
the following which shall survive until otherwise terminated or discharged
hereunder: (A) the rights of Holders of such Notes to receive, solely from the
trust fund described in Section 1304 and as more fully set forth in such
Section, payments in respect of the principal of (and premium, if any) and
interest on such Notes when such payments are due, (B) the Company's obligations
with respect to such Notes under Sections 304, 305, 306, 1002 and 1003, (C) the
rights, powers, trusts, duties and immunities of the Trustee hereunder and (D)
this Article Thirteen. Subject to compliance with this Article Thirteen, the
Company may exercise its option under this Section 1302 notwithstanding the
prior exercise of its option under Section 1303.
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<PAGE>
SECTION 1303. Covenant Defeasance.
Upon the Company's exercise of the option provided in Section
1301 applicable to this Section, (i) the Company shall be released from its
obligations under Sections 1005 through 1018, inclusive, and Clauses (3), (4)
and (5) of Section 801, (ii) the occurrence of an event specified in Sections
501(3), 501(4) (with respect to Clauses (1), (3), (4) or (5) of Section 801),
501(5) (with respect to any of Sections 1005 through 1018, inclusive), 501(6)
and 501(7) shall not be deemed to be an Event of Default and (iii) the
provisions of Article Twelve hereof shall cease to be effective on and after the
date the conditions set forth below are satisfied (hereinafter, "covenant
defeasance"). For this purpose, such covenant defeasance means that the Company
may omit to comply with and shall have no liability in respect of any term,
condition or limitation set forth in any such Section, Clause or Article,
whether directly or indirectly by reason of any reference elsewhere herein to
any such Section, Clause or Article or by reason of any reference in any such
Section, Clause or Article to any other provision herein or in any other
document, but the remainder of this Indenture and such Notes shall be unaffected
thereby.
SECTION 1304. Conditions to Defeasance or Covenant Defeasance.
The following shall be the conditions to application of either
Section 1302 or Section 1303 to the then Outstanding Notes:
(1) The Company shall irrevocably have deposited or
caused to be deposited with the Trustee (or another trustee satisfying
the requirements of Section 609 who shall agree to comply with the
provisions of this Article Thirteen applicable to it) as trust funds in
trust for the purpose of making the following payments, specifically
pledged as security for, and dedicated solely to, the benefit of the
Holders of such Notes, (A) money in an amount, or (B) U.S. Government
Obligations which through the scheduled payment of principal and
interest in respect thereof in accordance with their terms will
provide, not later than one day before the due
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<PAGE>
date of any payment, money in an amount, or (C) a combination thereof,
sufficient, in the opinion of a nationally recognized firm of
independent public accountants expressed in a written certification
thereof delivered to the Trustee, to pay and discharge, and which shall
be applied by the Trustee (or other qualifying trustee) to pay and
discharge, the principal of (, premium, if any,) and each instalment of
interest on the Notes on the Stated Maturity of such principal or
instalment of interest in accordance with the terms of this Indenture
and of such Notes. For this purpose, "U.S. Government Obligations"
means securities that are (x) direct obligations of the United States
of America for the payment of which its full faith and credit is
pledged or (y) obligations of a Person controlled or supervised by and
acting as an agency or instrumentality of the United States of America
the payment of which is unconditionally guaranteed as a full faith and
credit obligation by the United States of America, which, in either
case, are not callable or redeemable at the option of the issuer
thereof, and shall also include a depository receipt issued by a bank
(as defined in Section 3(a)(2) of the Securities Act of 1933, as
amended) as custodian with respect to any such U.S. Government
Obligation or a specific payment of principal of or interest on any
such U.S. Government Obligation held by such custodian for the account
of the holder of such depository receipt, provided that (except as
required by law) such custodian is not authorized to make any deduction
from the amount payable to the holder of such depository receipt from
any amount received by the custodian in respect of the U.S. Government
Obligation or the specific payment of principal of or interest on the
U.S. Government Obligation evidenced by such depository receipt.
(2) In the case of an election under Section 1302, the
Company shall have delivered to the Trustee an Opinion of Counsel
stating that (x) the Company has received from, or there has been
published by, the Internal Revenue Service a ruling, or (y) since the
date of this Indenture there has been a change in the applicable
Federal
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<PAGE>
income tax law, in either case to the effect that, and based thereon
such opinion shall confirm that, the Holders of the Outstanding Notes
will not recognize gain or loss for Federal income tax purposes as a
result of such deposit, defeasance and discharge and will be subject to
Federal income tax on the same amount, in the same manner and at the
same times as would have been the case if such deposit, defeasance and
discharge had not occurred.
(3) In the case of an election under Section 1303, the
Company shall have delivered to the Trustee an Opinion of Counsel to
the effect that the Holders of the Outstanding Notes will not recognize
gain or loss for Federal income tax purposes as a result of such
deposit and covenant defeasance and will be subject to Federal income
tax on the same amount, in the same manner and at the same times as
would have been the case if such deposit and covenant defeasance had
not occurred.
(4) The Company shall have delivered to the Trustee an
Officer's Certificate to the effect that the Notes, if then listed on
any securities exchange, will not be delisted as a result of such
deposit.
(5) Such defeasance or covenant defeasance shall not
cause the Trustee to have a conflicting interest as defined in Section
608 and for purposes of the Trust Indenture Act with respect to any
securities of the Company.
(6) At the time of such deposit: (A) no default in the
payment of all or a portion of principal of (or premium, if any) or
interest on or other obligations in respect of any Senior Debt shall
have occurred and be continuing, and no event of default with respect
to any Senior Debt shall have occurred and be continuing and shall have
resulted in such Senior Debt becoming or being declared due and payable
prior to the date on which it would otherwise have become due and
payable and (B) no other event of default with respect to any Senior
Debt shall have occurred and be continuing permitting (after notice or
the
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<PAGE>
lapse of time, or both) the holders of such Senior Debt (or a trustee
on behalf of the holders thereof) to declare such Senior Debt due and
payable prior to the date on which it would otherwise have become due
and payable, or, in the case of either Clause (A) or Clause (B) above,
each such default or event of default shall have been cured or waived
or shall have ceased to exist.
(7) No Event of Default or event which with notice or
lapse of time or both would become an Event of Default shall have
occurred and be continuing.
(8) Such defeasance or covenant defeasance shall not
result in a breach or violation of, or constitute a default under, any
other agreement or instrument to which the Company is a party or by
which it is bound.
(9) The Company shall have delivered to the Trustee an
Officer's Certificate and an Opinion of Counsel (which Opinion of
Counsel may rely, as to factual matters, on such Officer's
Certificate), each stating that all conditions precedent provided for
relating to either the defeasance under Section 1302 or the covenant
defeasance under Section 1303 (as the case may be) have been complied
with.
(10) Such defeasance or covenant defeasance shall not
result in the trust arising from such deposit constituting an
investment company as defined in the Investment Company Act of 1940, as
amended, or such trust shall be qualified under such act or exempt from
regulation thereunder.
SECTION 1305. Deposited Money and U.S. Government Obligations to be Held in
Trust; Other Miscellaneous Provisions.
Subject to the provisions of the last paragraph of Section
1003, all money and U.S. Government Obligations (including the proceeds thereof)
deposited with the Trustee (or other qualifying trustee--collectively, for
purposes of
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<PAGE>
this Section 1305, the "Trustee") pursuant to Section 1304 in respect of the
Notes shall be held in trust uninvested and applied by the Trustee, in
accordance with the provisions of such Notes and this Indenture, to the payment,
either directly or through any Paying Agent (including the Company acting as its
own Paying Agent) as the Trustee may determine, to the Holders of such Notes, of
all sums due and to become due thereon in respect of principal (and premium, if
any) and interest, but such money need not be segregated from other funds except
to the extent required by law. Money so held in trust shall not be subject to
the provisions of Article Twelve.
The Company shall pay and indemnify the Trustee against any
tax, fee or other charge imposed on or assessed against the U.S. Government
Obligations deposited pursuant to Section 1304 or the principal and interest
received in respect thereof other than any such tax, fee or other charge which
by law is for the account of the Holders of the Outstanding Notes.
Anything in this Article Thirteen to the contrary
notwithstanding, the Trustee shall deliver or pay to the Company from time to
time upon Company Request any money or U.S. Government Obligations held by it as
provided in Section 1304 which, in the opinion of a nationally recognized firm
of independent public accountants expressed in a written certification thereof
delivered to the Trustee, are in excess of the amount thereof which would then
be required to be deposited to effect an equivalent defeasance or covenant
defeasance.
SECTION 1306. Reinstatement.
If the Trustee or the Paying Agent is unable to apply any
money in accordance with Section 1302 or 1303 by reason of any order or judgment
of any court or governmental authority enjoining, restraining or otherwise
prohibiting such application, then the Company's obligations under this
Indenture and the Notes shall be revived and reinstated as though no deposit had
occurred pursuant to this Article Thirteen until such time as the Trustee or
Paying Agent is
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<PAGE>
permitted to apply all such money in accordance with Section 1302 or 1303;
provided, however, that if the Company makes any payment of principal of (and
premium, if any) or interest on any Note following the reinstatement of its
obligations, the Company shall be subrogated to the rights of the Holders of
such Note to receive such payment from the money held by the Trustee or the
Paying Agent.
--------------------
This instrument may be executed in any number of counterparts,
each of which so executed shall be deemed to be an original, but all such
counterparts shall together constitute but one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Indenture to be duly executed, and their respective corporate seals to be
hereunto affixed and attested, all as of the day and year first above written.
PHILLIPS-VAN HEUSEN CORPORATION
By /s/
----------------------------
Name: Irwin W. Winter
Title: Executive Vice President and
Chief Financial Officer
Attest:
/s/ Pamela N. Hootkin
- --------------------------
UNION BANK OF CALIFORNIA, N.A.
By /s/
----------------------------
Name: Gillian Wallace
Title: Assistant Vice President
<PAGE>
STATE OF _________ ) ss.:
COUNTY OF _________)
On the _____ day of __________, 19__, before me personally
came ___________________________, to me known, who, being by me duly sworn, did
depose and say that [he -- she] is
___________________________________________________ of
___________________________, one of the corporations described in and which
executed the foregoing instrument; that [he -- she] knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation; and that [he -- she] signed [his -- her] name thereto by like
authority.
------------------------------
STATE OF __________) ss.:
COUNTY OF _________)
On the _____ day of __________, 19__, before me personally
came ___________________________, to me known, who, being by me duly sworn, did
depose and say that [he -- she] is
___________________________________________________ of
___________________________, one of the corporations described in and which
executed the foregoing instrument; that [he -- she] knows the seal of said
corporation; that the seal affixed to said instrument is such corporate seal;
that it was so affixed by authority of the Board of Directors of said
corporation; and that [he -- she] signed [his -- her] name thereto by like
authority.
------------------------------
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<PAGE>
SCHEDULE I
7.75% Debentures due 2023
Capital Lease re: Industrial Development Board of Ozark, AL
(Interest rate: 6.50% - 7.75%; Maturity date: 09/01/99;
Amount outstanding as of 03/31/98: $670,000)
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<PAGE>
ANNEX A -- Form of
Regulation S Certificate
REGULATION S CERTIFICATE
(For transfers pursuant to ss. 306(b)(i) of the Indenture)
[ ]
[ ]
[ ]
[ ]
Re: % Senior Subordinated Notes due , 2008 of
Granite Broadcasting Corporation (the "Securities")
Reference is made to the Indenture, dated as of May , 1998
(the "Indenture"), from Granite Broadcasting Corporation (the "Company") to The
Bank of New York, as Trustee. Terms used herein and defined in the Indenture or
in Regulation S or Rule 144 under the U.S. Securities Act of 1933 (the
"Securities Act") are used herein as so defined.
This certificate relates to U.S. $_______________ principal
amount of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
The Specified Securities are represented by a Global Security and are held
through the Depositary or an Agent Member in the name of the Undersigned, as or
on behalf of the Owner.
A-1
<PAGE>
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the form of
a Regulation S Security. In connection with such transfer, the Owner hereby
certifies that, unless such transfer is being effected pursuant to an effective
registration statement under the Securities Act, it is being effected in
accordance with Rule 904 or Rule 144 under the Securities Act and with all
applicable securities laws of the states of the United States and other
jurisdictions. Accordingly, the Owner hereby further certifies as follows:
(1) Rule 904 Transfers. If the transfer is being effected in
accordance with Rule 904:
(A) the Owner is not a distributor of the Securities,
an affiliate of the Company or any such distributor or a
person acting on behalf of any of the foregoing;
(B) the offer of the Specified Securities was not
made to a person in the United States;
(C) either:
(i) at the time the buy order was
originated, the Transferee was outside the United
States or the Owner and any person acting on its
behalf reasonably believed that the Transferee was
outside the United States, or
(ii) the transaction is being executed in,
on or through the facilities of the Eurobond market,
as regulated by the Association of International Bond
Dealers, or another designated offshore securities
market and neither the Owner nor any person acting on
its behalf knows that the transaction has been
prearranged with a buyer in the United States;
(D) no directed selling efforts have been made in the
United States by or on behalf of the Owner or any affiliate
thereof;
A-2
<PAGE>
(E) if the Owner is a dealer in securities or has
received a selling concession, fee or other renumeration in
respect of the Specified Securities, and the transfer is to
occur during the Restricted Period, then the requirements of
Rule 904(c)(1) have been satisfied; and
(F) the transaction is not part of a plan or scheme
to evade the registration requirements of the Securities Act.
(2) Rule 144 Transfers. If the transfer is being effected
pursuant to Rule 144:
(A) the transfer is occurring after a holding period
of at least one year (computed in accordance with paragraph
(d) of Rule 144) has elapsed since the Specified Securities
were last acquired from the Company or from an affiliate of
the Company, whichever is later, and is being effected in
accordance with the applicable amount, manner of sale and
notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period
of at least two years has elapsed since the Specified
Securities were last acquired from the Company or from an
affiliate of the Company, whichever is later, and the Owner is
not, and during the preceding three months has not been, an
affiliate of the Company.
A-3
<PAGE>
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and the Initial Purchasers.
Dated: --------------------------------------
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
By:
----------------------------------
Name:
Title:
(If the Undersigned is a corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
A-4
<PAGE>
ANNEX B -- Form of Restricted
Securities Certificate
RESTRICTED SECURITIES CERTIFICATE
(For transfers pursuant to ss. 306(b)(ii) of the Indenture)
[ ]
[ ]
[ ]
[ ]
Re: % Senior Subordinated Notes due , 2008 of
Granite Broadcasting Corporation (the "Securities")
Reference is made to the Indenture, dated as of May , 1998
(the "Indenture"), from Granite Broadcasting Corporation (the "Company") to The
Bank of New York, as Trustee. Terms used herein and defined in the Indenture or
in Rule 144A or Rule 144 under the U.S. Securities Act of 1933 (the "Securities
Act") are used herein as so defined.
This certificate relates to U.S.$_____________ principal
amount of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s). ___________________________
ISIN No(s) If any. ____________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
The Specified Securities are represented by a Global Security and are held
through the Depositary or an Agent Member in the name of the Undersigned, as or
on behalf of the Owner.
The Owner has requested that the Specified Securities be
transferred to a person (the "Transferee") who will take delivery in the form of
a Restricted Security. In
B-1
<PAGE>
connection with such transfer, the Owner hereby certifies that, unless such
transfer is being effected pursuant to an effective registration statement under
the Securities Act, it is being effected in accordance with Rule 144A or Rule
144 under the Securities Act and all applicable securities laws of the states of
the United States and other jurisdictions. Accordingly, the Owner hereby further
certifies as:
(1) Rule 144A Transfers. If the transfer is being
effected in accordance with Rule 144A:
(A) the Specified Securities are being transferred to
a person that the Owner and any person acting on its behalf
reasonably believe is a "qualified institutional buyer" within
the meaning of Rule 144A, acquiring for its own account or for
the account of a qualified institutional buyer; and
(B) the Owner and any person acting on its behalf
have taken reasonable steps to ensure that the Transferee is
aware that the Owner may be relying on Rule 144A in connection
with the transfer; and
(2) Rule 144 Transfers. If the transfer is being
effected pursuant to Rule 144:
(A) the transfer is occurring after a holding period
of at least one year (computed in accordance with paragraph
(d) of Rule 144) has elapsed since the Specified Securities
were last acquired from the Company or from an affiliate of
the Company, whichever is later, and is being effected in
accordance with the applicable amount, manner of sale and
notice requirements of Rule 144; or
(B) the transfer is occurring after a holding period
of at least two years has elapsed since the Specified
Securities were last acquired from the Company or from an
affiliate of the Company, whichever is later, and the Owner is
not, and during the preceding three months has not been, an
affiliate of the Company.
B-2
<PAGE>
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and the Initial Purchasers.
Dated: _______________________________________
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
By:____________________________________
Name:
Title:
(If the Undersigned is a corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
B-3
<PAGE>
ANNEX C -- Form of Unrestricted
Securities Certificate
UNRESTRICTED SECURITIES CERTIFICATE
(For removal of Securities Act Legends pursuant to ss. 306(c))
[ ]
[ ]
[ ]
[ ]
Re: % Senior Subordinated Notes due , 2008 of
Granite Broadcasting Corporation (the "Securities")
Reference is made to the Indenture, dated as of May , 1998
(the "Indenture"), from Granite Broadcasting Corporation (the "Company") to The
Bank of New York, as Trustee. Terms used herein and defined in the Indenture or
in Regulation S or Rule 144 under the U.S. Securities Act of 1933 (the
"Securities Act") are used herein as so defined.
This certificate relates to U.S. $_____________ principal
amount of Securities, which are evidenced by the following certificate(s) (the
"Specified Securities"):
CUSIP No(s). ___________________________
CERTIFICATE No(s). _____________________
The person in whose name this certificate is executed below (the "Undersigned")
hereby certifies that either (i) it is the sole beneficial owner of the
Specified Securities or (ii) it is acting on behalf of all the beneficial owners
of the Specified Securities and is duly authorized by them to do so. Such
beneficial owner or owners are referred to herein collectively as the "Owner".
If the Specified Securities are represented by a Global Security, they are held
through the Depositary or an Agent Member in the name of the Undersigned, as or
on behalf of the Owner. If the Specified Securities are not represented by a
Global Security, they are registered in the name of the Undersigned, as or on
behalf of the Owner.
C-1
<PAGE>
The Owner has requested that the Specified Securities be
exchanged for Securities bearing no Securities Act Legend pursuant to Section
306(c) of the Indenture. In connection with such exchange, the Owner hereby
certifies that the exchange is occurring after a holding period of at least
three years (computed in accordance with paragraph (d) of Rule 144) has elapsed
since the Specified Securities were last acquired from the Company or from an
affiliate of the Company, whichever is later, and the Owner is not, and during
the preceding three months has not been, an affiliate of the Company. The Owner
also acknowledges that any future transfers of the Specified Securities must
comply with all applicable securities laws of the states of the United States
and other jurisdictions.
This certificate and the statements contained herein are made
for your benefit and the benefit of the Company and the Initial Purchasers.
Dated: ______________________________________
(Print the name of the Undersigned, as
such term is defined in the second
paragraph of this certificate.)
By:___________________________________
Name:
Title:
(If the Undersigned is a corporation,
partnership or fiduciary, the title of
the person signing on behalf of the
Undersigned must be stated.)
C-2
<PAGE>
ANNEX D -- Form of Certification to
be Given by Holders of Beneficial
Interest in a Regulation S Temporary
Global Note
OWNER SECURITIES CERTIFICATION
GRANITE BROADCASTING CORPORATION
% Senior Subordinated Notes due , 2008
This is to certify that, as of the date hereof, $________ of
the above-captioned Notes are beneficially owned by non-U.S. person(s). As used
in this paragraph, the term "U.S. person" has the meaning given to it by
Regulation S under the Securities Act of 1933, as amended.
We undertake to advise you promptly by tested telex on or
prior to the date on which you intend to submit your certification relating to
the Notes held by you for our account in accordance with your operating
procedures if any applicable statement herein is not correct on such date, and
in the absence of any such notification it may be assumed that this
certification applies as of such date.
We understand that this certificate is required in connection
with certain securities laws of the United States. In connection therewith, if
administrative or legal proceedings are commenced or threatened in connection
with which this certificate is or would be relevant, we irrevocably authorize
you to produce this certificate to any interested party in such proceedings.
Dated:______________, ____
By:____________________________________________
As, or as agent for, the beneficial owner(s) of
the Notes to which this certificate relates.
D-1
<PAGE>
ANNEX E -- Form of Certification to
be Given by the Euroclear Operator
or Cedel S.A.
DEPOSITARY SECURITIES CERTIFICATION
GRANITE BROADCASTING CORPORATION
% Senior Subordinated Notes due , 2008
This is to certify that, with respect to U.S. $___________
principal amount of the above-captioned Notes, except as set forth below, we
have received in writing, by tested telex or by electronic transmission, from
member organizations appearing in our records as persons being entitled to a
portion of the principal amount of Notes set forth above (our "Member
Organizations"), certifications with respect to such portion, substantially to
the effect set forth in the Indenture.
We further certify (i) that we are not making available
herewith for exchange (or, if relevant, exercise of any rights or collection of
any interest) any portion of the Regulation S Temporary Global Note (as defined
in the Indenture) excepted in such certifications and (ii) that as of the date
hereof we have not received any notification from any of our Member
Organizations to the effect that the statements made by such Member
Organizations with respect to any portion of the part submitted herewith for
exchange (or, if relevant, exercise of any rights or collection of any interest)
are no longer true and cannot be relied upon as of the date hereof.
We understand that this certification is required in
connection with certain securities laws of the United States. In connection
therewith, if administrative or legal proceedings are commenced or threatened in
connection with
E-1
<PAGE>
which this certification is or would be relevant, we irrevocably authorize you
to produce this certification to any interested party in such proceedings.
Dated: _____________, _______
Yours faithfully,
[MORGAN GUARANTY TRUST COMPANY OF NEW YORK, Brussels office,
as operator of the Euroclear System]
or
[CEDEL S.A.]
By____________________________
E-2
<PAGE>
Exhibit 4.2
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT, dated as of April 22, 1998, by
and among Phillips-Van Heusen Corporation (the "Company") and Goldman, Sachs &
Co., Chase Securities Inc. and Citicorp Securities, Inc. (collectively, the
"Purchasers") as the purchasers of the 9 1/2% Senior Subordinated Notes due 2008
of the Company.
1. Certain Definitions.
For purposes of this Agreement, the following terms shall have the
following respective meanings:
(a) "Closing Date" shall mean the date on which the Securities are
initially issued.
(b) "Commission" shall mean the Securities and Exchange Commission, or
any other federal agency at the time administering the Exchange Act or the
Securities Act, whichever is the relevant statute for the particular purpose.
(c) "Effective Time", in the case of an Exchange Offer, shall mean the
date on which the Commission declares the Exchange Offer registration statement
effective or on which such registration statement otherwise becomes effective
and, in the case of a Shelf Registration, shall mean the date on which the
Commission declares the Shelf Registration effective or on which the Shelf
Registration otherwise becomes effective.
(d) "Exchange Act" shall mean the Securities Exchange Act of 1934.
(e) "Exchange Offer" shall have the meaning assigned thereto in
Section 2.
(f) "Exchange Securities" shall have the meaning assigned thereto in
Section 2.
(g) The term "holder" shall mean the Purchasers for so long as they own
any Registrable Securities and any person who is a holder or beneficial owner of
any Registrable Securities, for so long as such person owns any Registrable
Securities.
(h) "Indenture" shall mean the Indenture, dated as of April 22, 1998,
between the Company and Union Bank of California, N.A., as Trustee.
(i) The term "person" shall mean a corporation, limited liability
company, association, partnership, organization, business, individual, trust,
government or political subdivision thereof or governmental agency.
(j) "Registrable Securities" shall mean the Securities; provided,
however, that such Securities shall cease to be Registrable Securities when (i)
in the circumstances contemplated by Section 2(a), such Securities have been
exchanged for Exchange Securities in an Exchange Offer as contemplated in
Section 2(a) provided, however, that any such Securities that, pursuant to the
last two sentences of Section 2(a), are included in a prospectus for use in
connection with resales by broker-dealers shall be deemed to be Registrable
Securities with respect to Sections 5, 6 and 9 until resale of such
<PAGE>
Exchange Securities has been effected within the 180-day period referred to in
Section 2(a); (ii) in the circumstances contemplated by Section 2(b), a
registration statement registering such Securities under the Securities Act has
been declared or becomes effective, and such Securities have been sold or
otherwise transferred by the holder thereof pursuant to such effective
registration statement; (iii) such Securities are sold pursuant to Rule 144
under circumstances in which any legend borne by such Securities relating to
restrictions on transferability thereof, under the Securities Act or otherwise,
is removed by the Company or pursuant to the Indenture, or such Securities are
eligible to be sold pursuant to paragraph (k) of Rule 144; or (iv) such
Securities shall cease to be outstanding.
(k) "Registration Expenses" shall have the meaning assigned
thereto in Section 4 hereof.
(l) "Restricted Holder" shall mean (i) a holder that is an
affiliate of the Company within the meaning of Rule 405 under the
Securities Act, (ii) a holder who acquires Exchange Securities outside the
ordinary course of such holder's business or (iii) a holder who has
arrangements or understandings with any person to participate in the
Exchange Offer for the purpose of distributing Exchange Securities.
(m) "Rule 144", "Rule 405" and "Rule 415" shall mean, in each
case, such rule promulgated under the Securities Act.
(n) "Securities" shall mean, collectively, the 9 1/2% Senior
Subordinated Notes due 2008 of the Company to be issued and sold to the
Purchasers and any securities issued in exchange therefor or in lieu
thereof pursuant to the Indenture.
(o) "Securities Act" shall mean the Securities Act of 1933.
(p) "Shelf Registration" shall have the meaning assigned thereto
in Section 2 hereof.
(q) "Trust Indenture Act" shall mean the Trust Indenture Act of
1939, or any successor thereto, and the rules, regulations and forms
promulgated thereunder, all as the same shall be amended from time to time.
Unless the context otherwise requires, any reference herein to a
"Section" or "clause" refers to a Section or clause, as the case may be, of this
Agreement, and the words "herein", "hereof" and "hereunder" and other words of
similar import refer to this Agreement as a whole and not to any particular
Section or other subdivision. Unless the context otherwise requires, any
reference to a statute, rule or regulation refers to the same (including any
successor statute, rule or regulation thereto) as it may be amended from time to
time.
2. Registration Under the Securities Act.
(a) Except as set forth in Section 2(b) below, the Company agrees to
use its best efforts to file under the Securities Act, as soon as practicable,
but no later than 60 days after the Closing Date, a registration statement
relating to an offer to exchange (the "Exchange Offer") any and all of the
Securities for a like aggregate principal amount of debt securities of the
Company which are substantially identical to the Securities (and which are
entitled to the benefits of a trust indenture which is substantially identical
to the Indenture or is the Indenture and which has been qualified
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under the Trust Indenture Act) except that they have been registered pursuant to
an effective registration statement under the Securities Act and will not
contain provisions for the additional interest contemplated by Section 2(c)
hereof or provisions restricting transfer (such new debt securities hereinafter
called "Exchange Securities"). The Company agrees to use its best efforts to
cause such registration statement to become effective under the Securities Act
as soon as practicable thereafter. The Exchange Offer will be registered under
the Securities Act on the appropriate form and will comply with all applicable
tender offer rules and regulations under the Exchange Act. The Company further
agrees to use its best efforts to commence the Exchange Offer promptly after
such registration statement has become effective, hold the Exchange Offer open
for at least 30 days and exchange the Exchange Securities for all Registrable
Securities that have been validly tendered and not withdrawn on or prior to the
expiration of the Exchange Offer. The Exchange Offer will be deemed to have been
completed only if the Exchange Securities received by holders other than
Restricted Holders in the Exchange Offer for Registrable Securities are, upon
receipt, transferable by each such holder without restriction under the
Securities Act and without material restrictions under the Blue Sky or
securities laws of a substantial majority of the States of the United States of
America, it being understood that broker-dealers receiving Exchange Securities
will be subject to certain prospectus delivery requirements with respect to
resale of the Exchange Securities. The Exchange Offer shall be deemed to have
been completed upon the earlier to occur of (i) the Company having exchanged the
Exchange Securities for all outstanding Registrable Securities that have been
validly tendered pursuant to the Exchange Offer and (ii) the Company having
exchanged, pursuant to the Exchange Offer, Exchange Securities for all
Registrable Securities that have been properly tendered and not withdrawn before
the expiration of the Exchange Offer, which shall be on a date that is at least
30 days following the commencement of the Exchange Offer. The Company agrees (i)
to include in the registration statement a prospectus for use in any resales by
any holder of Securities that is a broker-dealer and (ii) to keep such
registration statement effective for a period ending on the earlier of the 180th
day after the Exchange Offer has been completed or such time as such
broker-dealers no longer own any Registrable Securities. With respect to such
registration statement, such holders shall have the benefit of the rights of
indemnification and contribution set forth in Section 6 hereof.
(b) In the event that (i) on or prior to the consummation of the
Exchange Offer existing Commission interpretations are changed such that the
Exchange Securities received by holders other than Restricted Holders in the
Exchange Offer for Registrable Securities are not or would not be, upon receipt,
transferable by each such holder without restriction under the Securities Act,
(ii) the Exchange Offer has not been consummated on or before the 210th day
after the Closing Date or (iii) the Exchange Offer is not available to any
holder of Registrable Securities, the Company shall, in lieu of (or, in the case
of clause (iii), in addition to) conducting the Exchange Offer contemplated by
Section 2(a), file under the Securities Act as soon as practicable a "shelf"
registration statement providing for the registration of, and the sale on a
continuous or delayed basis by the holders of, all of the Registrable
Securities, pursuant to Rule 415 under the Securities Act and/or any similar
rule that may be adopted by the Commission (the "Shelf Registration"). The
Company agrees to use its best efforts to cause the Shelf Registration to become
or be declared effective as soon as practicable after the Closing Date and to
keep such Shelf Registration continuously effective for a period ending on the
earlier of the second anniversary of the Closing Date or such time as there are
no longer any Registrable Securities outstanding. The Company further agrees to
supplement or make amendments to the Shelf Registration, as and when required by
the rules, regulations or instructions applicable to the registration form used
by the Company for such Shelf Registration or by the Securities Act
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or rules and regulations thereunder for shelf registration, and the Company
agrees to furnish to the holders of the Registrable Securities copies of any
such supplement or amendment prior to its being used and/or filed with the
Commission.
(c) In the event that (i) the Company has not filed the registration
statement relating to the Exchange Offer (or, if applicable, the Shelf
Registration) on or before the 60th day after the Closing Date, or (ii) such
registration statement (or, if applicable, the Shelf Registration) has not
become effective or been declared effective by the Commission on or before the
180th day after the Closing Date, or (iii) the Exchange Offer has not been
completed within 30 business days after the initial effective date of the
registration statement (if the Exchange Offer is then required to be made) or
(iv) any registration statement required by Section 2(a) or 2(b) is filed and
declared effective but shall thereafter cease to be effective (except as
specifically permitted herein) without being succeeded immediately by an
additional registration statement filed and declared effective (each such event
referred to in clauses (i) through (iv), a "Registration Default"), then the per
annum interest rate of the Securities as set forth in the Securities shall
increase by 0.5% during the first 90-day period following the occurrence of the
Registration Default, and the per annum interest rate on the Securities will
increase by an additional 0.5% for each subsequent 90-day period during which
any Registration Default remains in effect up to a maximum additional interest
rate of 1%, for the period from and including the date of occurrence of the
Registration Default to but excluding such date as no Registration Default is in
effect (at which time the interest rate will be restored to its initial rate).
In the event that the interest rate of the Securities is so increased, the
Company shall promptly notify the Trustee of such increase, including any
subsequent increase, and the beginning and ending dates therefor.
3. Registration Procedures.
If the Company files a registration statement pursuant to Section 2(a)
or Section 2(b), the following provisions shall apply:
(a) At or before the Effective Time of the Exchange Offer or the Shelf
Registration, as the case may be, the Company shall qualify the Indenture
under the Trust Indenture Act of 1939.
(b) In the event that such qualification would require the appointment
of a new trustee under the Indenture, the Company shall appoint a new
trustee thereunder pursuant to the applicable provisions of the Indenture.
(c) In connection with the Company's obligations with respect to the
Shelf Registration, if applicable, the Company shall use its best efforts to
effect or cause the Shelf Registration to permit the sale of the Registrable
Securities by the holders thereof in accordance with the intended method or
methods of distribution thereof described in the Shelf Registration. In
connection therewith, the Company shall:
(i) as soon as reasonably possible, prepare and file with the
Commission a registration statement with respect to the Shelf
Registration on any form which may be utilized by the Company and which
shall permit the disposition of the Registrable Securities in
accordance with the intended method or methods thereof, as specified in
writing by the
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<PAGE>
holders of the Registrable Securities, and use its best efforts to
cause such registration statement to become effective as soon as
reasonably possible thereafter;
(ii) as soon as reasonably possible, prepare and file with the
Commission such amendments and supplements to such registration
statement and the prospectus included therein as may be necessary to
effect and maintain the effectiveness of such registration statement
for the period specified in Section 2(b) hereof and as may be required
by the applicable rules and regulations of the Commission and the
instructions applicable to the form of such registration statement, and
furnish to the holders of the Registrable Securities copies of any such
supplement or amendment prior to its being used and/or filed with the
Commission;
(iii) as soon as reasonably possible, comply with the provisions
of the Securities Act with respect to the disposition of all of the
Registrable Securities covered by such registration statement in
accordance with the intended methods of disposition by the holders
thereof set forth in such registration statement;
(iv) provide (A) the holders of the Registrable Securities to be
included in such registration statement, (B) the underwriters (which
term, for purposes of this Agreement, shall include a person deemed to
be an underwriter within the meaning of Section 2(11) of the Securities
Act) if any, thereof, (C) the sales or placement agent, if any,
therefor, (D) counsel for such underwriters or agent, and (E) not more
than one counsel for all the holders of such Registrable Securities the
opportunity to participate in the preparation of such registration
statement, each prospectus included therein or filed with the
Commission, and each amendment or supplement thereto;
(v) for a reasonable period prior to the filing of such
registration statement, and throughout the period specified in Section
2(b), make available at reasonable times at the Company's principal
place of business or such other reasonable place for inspection by the
parties referred to in Section 3(c)(iv) who shall certify to the
Company that they have a current intention to sell the Registrable
Securities pursuant to the Shelf Registration such financial and other
information and books and records of the Company, and cause the
officers, employees, counsel and independent certified public
accountants of the Company to respond to such inquiries, as shall be
reasonably necessary, in the reasonable judgment of the respective
counsel referred to in such Section, to conduct a reasonable
investigation within the meaning of Section 11 of the Securities Act;
provided, however, that each such party shall be required to maintain
in confidence and not to disclose to any other person any information
or records designated by the Company in writing as being confidential,
until such time as (A) such information becomes a matter of public
record (whether by virtue of its inclusion in such registration
statement or otherwise), or (B) such person shall be required, or shall
deem it advisable, so to disclose such information pursuant to the
subpoena or order of any court or other governmental agency or body
having jurisdiction over the matter (subject to the requirements of
such order, and only after such person shall have given the Company
prompt prior written notice thereof), or (C) such information is
required to be set forth in such registration statement or the
prospectus included therein or in an amendment to such registration
statement or an amendment or supplement to such prospectus in order
that such registration statement, prospectus, amendment or supplement,
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<PAGE>
as the case may be, does not contain an untrue statement of a material
fact or omit to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading in
light of the circumstances then existing;
(vi) promptly notify the selling holders of Registrable
Securities, the sales or placement agent, if any, therefor and the
managing underwriter or underwriters, if any, thereof and confirm such
advice in writing, (A) when such registration statement or the
prospectus included therein or any prospectus amendment or supplement
or post-effective amendment has been filed, and, with respect to such
registration statement or any post-effective amendment, when the same
has become effective, (B) of any comments by the Commission, the Blue
Sky or securities commissioner or regulator of any state with respect
thereto or any request by the Commission for amendments or supplements
to such registration statement or prospectus or for additional
information, (C) of the issuance by the Commission of any stop order
suspending the effectiveness of such registration statement or the
initiation or threatening of any proceedings for that purpose, (D) if
at any time the representations and warranties of the Company
contemplated by Section 3(c)(xv) or Section 5 cease to be true and
correct in all material respects, (E) of the receipt by the Company of
any notification with respect to the suspension of the qualification of
the Registrable Securities for sale in any jurisdiction or the
initiation or threatening of any proceeding for such purpose, or (F) at
any time when a prospectus is required to be delivered under the
Securities Act, if such registration statement, prospectus, prospectus
amendment or supplement or post-effective amendment, or any document
incorporated by reference in any of the foregoing, contains an untrue
statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing;
(vii) use its best efforts to obtain the withdrawal of any order
suspending the effectiveness of such registration statement or any
post-effective amendment thereto at the earliest practicable date;
(viii) if requested by any managing underwriter or underwriters,
any placement or sales agent or any holder of Registrable Securities,
promptly incorporate in a prospectus supplement or post-effective
amendment such information as is required by the applicable rules and
regulations of the Commission and as such managing underwriter or
underwriters, such agent or such holder specifies should be included
therein relating to the terms of the sale of such Registrable
Securities, including, without limitation, information with respect to
the principal amount of Registrable Securities being sold by such
holder or agent or to any underwriters, the name and description of
such holder, agent or underwriter, the offering price of such
Registrable Securities and any discount, commission or other
compensation payable in respect thereof, the purchase price being paid
therefor by such underwriters and with respect to any other terms of
the offering of the Registrable Securities to be sold by such holder or
agent or to such underwriters; and make all required filings of such
prospectus supplement or post-effective amendment promptly after
notification of the matters to be incorporated in such prospectus
supplement or post-effective amendment;
(ix) furnish to each holder of Registrable Securities, each
placement or sales agent, if any, therefor, each underwriter, if any,
thereof and the respective counsel referred to in
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<PAGE>
Section 3(c)(iv) an executed copy of such registration statement, each
such amendment and supplement thereto (in each case including all
exhibits thereto and documents incorporated by reference therein) and
such number of copies of such registration statement (excluding
exhibits thereto and documents incorporated by reference therein unless
specifically so requested by such holder, agent or underwriter, as the
case may be) and of the prospectus included in such registration
statement (including each preliminary prospectus and any summary
prospectus), in conformity with the requirements of the Securities Act,
and such other documents, as such holder, agent, if any, and
underwriter, if any, may reasonably request in order to facilitate the
offering and disposition of the Registrable Securities owned by such
holder, offered or sold by such agent or underwritten by such
underwriter and to permit such holder, agent and underwriter to satisfy
the prospectus delivery requirements of the Securities Act; and the
Company hereby consents to the use of such prospectus (including such
preliminary and summary prospectus) and any amendment or supplement
thereto by each such holder and by any such agent and underwriter, in
each case in the form most recently provided to such party by the
Company, in connection with the offering and sale of the Registrable
Securities covered by the prospectus (including such preliminary and
summary prospectus) or any supplement or amendment thereto;
(x) use its best efforts to (A) register or qualify the
Registrable Securities to be included in such registration statement
under such securities laws or Blue Sky laws of such jurisdictions as
any holder of such Registrable Securities and each placement or sales
agent, if any, therefor and underwriter, if any, thereof shall
reasonably request, (B) keep such registrations or qualifications in
effect and comply with such laws so as to permit the continuance of
offers, sales and dealings therein in such jurisdictions during the
period the Shelf Registration is required to remain effective under
Section 2(b) above and for so long as may be necessary to enable any
such holder, agent or underwriter to complete its distribution of
Securities pursuant to such registration statement and (C) take any and
all other actions as may be reasonably necessary or advisable to enable
each such holder, agent, if any, and underwriter, if any, to consummate
the disposition in such jurisdictions of such Registrable Securities;
provided, however, that the Company shall not be required for any such
purpose to (1) qualify as a foreign corporation in any jurisdiction
wherein it would not otherwise be required to qualify but for the
requirements of this Section 3(c)(x), (2) consent to general service of
process or taxation in any such jurisdiction or (3) make any changes to
its articles of incorporation or by-laws or any agreement between it
and its stockholders;
(xi) use its best efforts to obtain the consent or approval of
each governmental agency or authority, whether federal, state,
provincial or local, which may be required to effect the Shelf
Registration or the offering or sale in connection therewith or to
enable the selling holder or holders to offer, or to consummate the
disposition of, their Registrable Securities;
(xii) cooperate with the holders of the Registrable Securities
and the managing underwriters, if any, to facilitate the timely
preparation and delivery of certificates representing Registrable
Securities to be sold, which certificates shall not bear any
restrictive legends; and, in the case of an underwritten offering,
enable such Registrable Securities to be in such denominations and
registered in such names as the managing underwriters may request at
least two business days prior to any sale of the Registrable
Securities;
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<PAGE>
(xiii) provide a CUSIP number for all Registrable Securities,
not later than the effective date of the Shelf Registration;
(xiv) enter into one or more underwriting agreements, engagement
letters, agency agreements, "best efforts" underwriting agreements or
similar agreements, as appropriate, including (without limitation)
customary provisions relating to indemnification and contribution, and
take such other actions in connection therewith as any holders of
Registrable Securities aggregating at least 25% in aggregate principal
amount of the Registrable Securities at the time outstanding shall
request in order to expedite or facilitate the disposition of such
Registrable Securities; provided, that the Company shall not be
required to enter into any such agreement more than twice with respect
to all of the Registrable Securities and may delay entering into such
agreement until the consummation of any underwritten public offering
which the Company shall have then engaged;
(xv) whether or not an agreement of the type referred to in
Section (3)(c)(xiv) hereof is entered into and whether or not any
portion of the offering contemplated by such registration statement is
an underwritten offering or is made through a placement or sales agent
or any other entity, (A) make such representations and warranties to
the holders of such Registrable Securities and the placement or sales
agent, if any, therefor and the underwriters, if any, thereof
substantially the same as those set forth in Section 1 of the Purchase
Agreement dated the date hereof and such other representations and
warranties in form, substance and scope as are customarily made in
connection with an offering of debt securities pursuant to any
appropriate agreement and/or to a registration statement filed on the
form applicable to the Shelf Registration; (B) obtain an opinion or
opinions of counsel to the Company in customary form and covering such
other matters of the type customarily covered by such an opinion, as
the managing underwriters, if any, and as any holders of at least 25%
in aggregate principal amount of the Registrable Securities at the time
outstanding may reasonably request, addressed to such holder or holders
and the placement or sales agent, if any, therefor and the
underwriters, if any, thereof and dated the effective date of such
registration statement (and if such registration statement contemplates
an underwritten offering of a part or all of the Registrable
Securities, dated the date of the closing under the underwriting
agreement relating thereto) (it being agreed that the matters to be
covered by such opinion shall include, without limitation, the due
incorporation and good standing of the Company and its subsidiaries;
the due authorization, execution and delivery of the relevant agreement
of the type referred to in Section (3)(c)(xiv) hereof; the due
authorization, execution, authentication and issuance, and the validity
and enforceability, of the Securities; the absence of material legal or
governmental proceedings involving the Company; the absence of a breach
by the Company or any of its subsidiaries of, or a default under,
material agreements binding upon the Company or any subsidiary of the
Company; the absence of governmental approvals required to be obtained
in connection with the Shelf Registration, the offering and sale of the
Registrable Securities, this Agreement or any agreement of the type
referred to in Section (3)(c)(xiv) hereof, except such approvals as may
be required under state securities or Blue Sky laws; the compliance as
to form of such registration statement and any documents incorporated
by reference therein and of the Indenture with the requirements of the
Securities Act and the Trust Indenture Act, respectively; and, as of
the date of the opinion and of the registration statement or most
recent post-effective amendment thereto, as the case may be, the
absence from such
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registration statement and the prospectus included therein, as then
amended or supplemented, and from the documents incorporated by
reference therein (in each case other than the financial statements and
other financial information contained therein) of an untrue statement
of a material fact or the omission to state therein a material fact
necessary to make the statements therein not misleading (in the case of
such documents, in the light of the circumstances existing at the time
that such documents were filed with the Commission under the Exchange
Act)); (C) obtain a "cold comfort" letter or letters from the
independent certified public accountants of the Company addressed to
the selling holders of Registrable Securities and the placement or
sales agent, if any, therefor and the underwriters, if any, thereof,
dated (i) the effective date of such registration statement and (ii)
the date of any prospectus supplement to the prospectus included in
such registration statement or the effective date of any post-effective
amendment to such registration statement which includes unaudited or
audited financial statements as of a date or for a period subsequent to
that of the latest such statements included in such prospectus (and, if
such registration statement contemplates an underwritten offering
pursuant to any prospectus supplement to the prospectus included in
such registration statement or post-effective amendment to such
registration statement which includes unaudited or audited financial
statements as of a date or for a period subsequent to that of the
latest such statements included in such prospectus, dated the date of
the closing under the underwriting agreement relating thereto), such
letter or letters to be in customary form and covering such matters of
the type customarily covered by letters of such type; (D) deliver such
documents and certificates, including officers' certificates, as may be
reasonably requested by any holders of at least 25% in aggregate
principal amount of the Registrable Securities at the time outstanding
and the placement or sales agent, if any, therefor and the managing
underwriters, if any, thereof to evidence the accuracy of the
representations and warranties made pursuant to clause (A) above or
those contained in Section 5(a) hereof and the compliance with or
satisfaction of any agreements or conditions contained in the
underwriting agreement or other agreement entered into by the Company;
and (E) undertake such obligations relating to expense reimbursement,
indemnification and contribution as are provided in Section 6 hereof;
(xvi) notify in writing each holder of Registrable Securities of
any proposal by the Company to amend or waive any provision of this
Agreement pursuant to Section 9(h) hereof and of any amendment or
waiver effected pursuant thereto, each of which notices shall contain
the text of the amendment or waiver proposed or effected, as the case
may be;
(xvii) in the event that any broker-dealer registered under the
Exchange Act shall underwrite any Registrable Securities or participate
as a member of an underwriting syndicate or selling group or "assist in
the distribution" (within the meaning of the Rules of Conduct (the
"Rules of Conduct") of the National Association of Securities Dealers,
Inc. ("NASD")) thereof, whether as a holder of such Registrable
Securities or as an underwriter, a placement or sales agent or a broker
or dealer in respect thereof, or otherwise, reasonably assist such
broker-dealer in complying with the requirements of such Rules of
Conduct, including, without limitation, by (A) if such Rules of Conduct
shall so require, engaging a "qualified independent underwriter" (as
defined in such Rules of Conduct) to participate in the preparation of
the registration statement relating to such Registrable Securities, to
exercise usual standards of due diligence in respect thereto and, if
any portion of the offering contemplated by such registration statement
is an underwritten offering or is made
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<PAGE>
through a placement or sales agent, to recommend the yield of such
Registrable Securities, (B) indemnifying any such qualified independent
underwriter to the extent of the indemnification of underwriters
provided in Section 6 hereof, and (C) providing such information to
such broker-dealer as may be required in order for such broker-dealer
to comply with the requirements of the Rules of Conduct; and
(xviii) comply with all applicable rules and regulations of the
Commission, and make generally available to its security holders as
soon as practicable but in any event not later than 18 months after the
effective date of such registration statement, an earning statement of
the Company and its consolidated subsidiaries complying with Section
11(a) of the Securities Act (including, at the option of the Company,
Rule 158 thereunder).
(d) In the event that the Company would be required, pursuant to
Section 3(c)(vi)(F) above, to notify the selling holders of Registrable
Securities, the placement or sales agent, if any, therefor and the managing
underwriters, if any, thereof, the Company shall without delay prepare and
furnish to each such holder, to each placement or sales agent, if any, and
to each underwriter, if any, a reasonable number of copies of a prospectus
supplemented or amended so that, as thereafter delivered to purchasers of
Registrable Securities, such prospectus shall not contain an untrue
statement of a material fact or omit to state a material fact required to be
stated therein or necessary to make the statements therein not misleading in
light of the circumstances then existing. Each holder of Registrable
Securities agrees that upon receipt of any notice from the Company pursuant
to Section 3(c)(vi)(F) hereof, such holder shall forthwith discontinue the
disposition of Registrable Securities pursuant to the registration statement
applicable to such Registrable Securities until such holder shall have
received copies of such amended or supplemented prospectus, and if so
directed by the Company, such holder shall deliver to the Company (at the
Company's expense) all copies, other than permanent file copies, then in
such holder's possession of the prospectus covering such Registrable
Securities at the time of receipt of such notice.
(e) The Company may require each holder of Registrable Securities as to
which any registration is being effected to furnish to the Company such
information regarding such holder and such holder's intended method of
distribution of such Registrable Securities as the Company may from time to
time request in writing, but only to the extent that such information is
required in order to comply with the Securities Act. Each such holder agrees
to notify the Company as promptly as practicable of any inaccuracy or change
in information previously furnished by such holder to the Company or of the
occurrence of any event in either case as a result of which any prospectus
relating to such registration contains or would contain an untrue statement
of a material fact regarding such holder or such holder's intended method of
distribution of such Registrable Securities or omits to state any material
fact regarding such holder or such holder's intended method of distribution
of such Registrable Securities required to be stated therein or necessary to
make the statements therein not misleading in light of the circumstances
then existing, and promptly to furnish to the Company any additional
information required to correct and update any previously furnished
information or required so that such prospectus shall not contain, with
respect to such holder or the distribution of such Registrable Securities,
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading in light of the circumstances then existing.
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4. Registration Expenses.
The Company agrees to bear and to pay or cause to be paid all expenses
incident to the Company's performance of or compliance with this Agreement,
including, without limitation, (a) all Commission and any NASD registration and
filing fees and expenses, (b) all fees and expenses in connection with the
qualification of the Securities or Exchange Securities for offering and sale
under the State securities and Blue Sky laws referred to in Section 3(c)(x)
hereof, including reasonable fees and disbursements of counsel for the placement
or sales agent or underwriters in connection with such qualifications, (c) all
expenses relating to the preparation, printing, distribution and reproduction of
each registration statement required to be filed hereunder, each prospectus
included therein or prepared for distribution pursuant hereto, each amendment or
supplement to the foregoing, the certificates representing the Securities and
Exchange Securities and all other documents relating hereto, (d) messenger and
delivery expenses, (e) fees and expenses of the Trustee under the Indenture and
of any escrow agent or custodian, (f) internal expenses (including, without
limitation, all salaries and expenses of the Company's officers and employees
performing legal or accounting duties), (g) fees, disbursements and expenses of
counsel and independent certified public accountants of the Company (including
the expenses of any opinions or "cold comfort" letters required by or incident
to such performance and compliance), (h) fees, disbursements and expenses of any
"qualified independent underwriter" engaged pursuant to Section 3(c)(xvii)
hereof, (i) fees, disbursements and expenses of one counsel for the holders of
Registrable Securities retained in connection with a Shelf Registration, as
selected by the holders of at least a majority in aggregate principal amount of
the Registrable Securities being registered, and fees, expenses and
disbursements of any other persons, including special experts, retained by the
Company in connection with such registration (collectively, the "Registration
Expenses"). To the extent that any Registration Expenses are incurred, assumed
or paid by any holder of Registrable Securities or any placement or sales agent
therefor or underwriter thereof, the Company shall reimburse such person for the
full amount of the Registration Expenses so incurred, assumed or paid promptly
after receipt of a request therefor. Notwithstanding the foregoing, the holders
of the Registrable Securities being registered shall pay all agency fees,
brokerage fees and commissions and underwriting discounts and commissions and
transfer taxes, if any, attributable to the sale of such Registered Securities
and the fees and disbursements of any counsel or other advisors or experts
retained by such holders (severally or jointly), and any other out-of-pocket
expenses of such holders, other than the counsel and experts specifically
referred to above.
5. Representations and Warranties.
The Company represents and warrants to, and agrees with, the Purchasers
and each of the holders from time to time of Registrable Securities that:
(a) Each registration statement covering Registrable Securities and
each prospectus (including any preliminary or summary prospectus) contained
therein or furnished pursuant to Section 3(c)(ix) hereof and any further
amendments or supplements to any such registration statement or prospectus,
when it becomes effective or is filed with the Commission, as the case may
be, and, in the case of an underwritten offering of Registrable Securities,
at the time of the closing under the underwriting agreement relating
thereto, will conform in all material respects to the requirements of the
Securities Act and the Trust Indenture Act and any such registration
statement and any amendment thereto will not contain an untrue statement of
a material fact or
-11-
<PAGE>
omit to state a material fact required to be stated therein or necessary to
make the statements therein not misleading and any such prospectus or any
amendment or supplement thereto will not contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein not misleading in light
of the circumstances then existing; and at all times subsequent to the
Effective Time when a prospectus would be required to be delivered under
the Securities Act, other than from (i) such time as a notice has been
given to holders of Registrable Securities pursuant to Section 3(c)(vi)(F)
hereof until (ii) such time as the Company furnishes an amended or
supplemented prospectus pursuant to Section 3(d) hereof, each such
registration statement, and each prospectus (including any summary
prospectus) contained therein or furnished pursuant to Section 3(c)(ix)
hereof, as then amended or supplemented, will conform in all material
respects to the requirements of the Securities Act and the Trust Indenture
Act and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading in the light of the circumstances
then existing; provided, however, that this representation and warranty
shall not apply to any statements or omissions made in reliance upon and in
conformity with information furnished in writing to the Company by a holder
of Registrable Securities expressly for use therein.
(b) Any documents incorporated by reference in any prospectus referred
to in Section 5(a) hereof, when they become or became effective or are or
were filed with the Commission, as the case may be, will conform or
conformed in all material respects to the requirements of the Securities Act
or the Exchange Act, as applicable, and none of such documents will contain
or contained an untrue statement of a material fact or will omit or omitted
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading; provided, however, that this
representation and warranty shall not apply to any statements or omissions
made in reliance upon and in conformity with information furnished in
writing to the Company by a holder of Registrable Securities expressly for
use therein.
(c) The compliance by the Company with all of the provisions of this
Agreement and the consummation of the transactions herein contemplated will
not conflict with or result in a breach of any of the terms or provisions
of, or constitute a default under, any indenture, mortgage, deed of trust,
loan agreement or other agreement or instrument to which the Company or any
subsidiary of the Company is a party or by which the Company or any
subsidiary of the Company is bound or to which any of the property or assets
of the Company or any subsidiary of the Company is subject, nor will such
action result in any violation of the provisions of the articles of
incorporation or by-laws of the Company or any statute or any order, rule or
regulation of any court or governmental agency or body having jurisdiction
over the Company or any subsidiary of the Company or any of their
properties; and no consent, approval, authorization, order, registration or
qualification of or with any such court or governmental agency or body is
required for the consummation by the Company of the transactions
contemplated by this Agreement, except the registration under the Securities
Act of the Registrable Securities, qualification of the Indenture under the
Trust Indenture Act and such consents, approvals, authorizations,
registrations or qualifications as may be required under State securities or
Blue Sky laws in connection with the offering and distribution of the
Registrable Securities.
(d) This Agreement has been duly authorized, executed and delivered by
the Company.
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<PAGE>
6. Indemnification.
(a) Indemnification by the Company. Upon the registration of the
Registrable Securities pursuant to Section 2 hereof, and in consideration of
the agreements of the Purchasers contained herein, and as an inducement to
the Purchasers to purchase the Securities, the Company shall, and it hereby
agrees to, indemnify and hold harmless each of the holders of Registrable
Securities to be included in such registration, and each person who
participates as a placement or sales agent or as an underwriter in any
offering or sale of such Registrable Securities against any losses, claims,
damages or liabilities, joint or several, to which such holder, agent or
underwriter may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in
respect thereof) arise out of or are based upon an untrue statement or
alleged untrue statement of a material fact contained in any registration
statement under which such Registrable Securities were registered under the
Securities Act, or any preliminary, final or summary prospectus contained
therein or furnished by the Company to any such holder, agent or
underwriter, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and the Company shall reimburse such holder, such agent and
such underwriter for any legal or other expenses reasonably incurred by them
in connection with investigating or defending any such action or claim as
such expenses are incurred; provided, however, that the Company shall not be
liable to any such person in any such case to the extent that any such loss,
claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made
in such registration statement, or preliminary, final or summary prospectus,
or amendment or supplement thereto, in reliance upon and in conformity with
written information furnished to the Company by holders of Registrable
Securities expressly for use therein; and provided further, that the Company
shall not be liable to any person under this subsection (a) for any such
loss, claim, damage or liability arising from any preliminary prospectus to
the extent that such loss, claim, damage or liability of such person results
from the fact that such person sold Securities to a person to whom there was
not sent or given, at or prior to the written confirmation of such sale, a
copy of the final prospectus or the final prospectus as then amended or
supplemented, excluding documents incorporated by reference, in any case
where (i) such delivery of the final prospectus or the final prospectus as
then amended or supplemented, as the case may be, is required by the
Securities Act, (ii) the Company has previously furnished sufficient copies
thereof to such person at such time as is sufficient to permit such delivery
prior to such confirmation and (iii) the loss, claim, damage or liability of
such person results from an untrue statement or omission of a material fact
contained in the preliminary prospectus which was corrected in the final
prospectus or the final prospectus as amended or supplemented, as the case
may be, excluding documents incorporated therein by reference.
(b) Indemnification by the Holders and any Agents and Underwriters. The
Company may require, as a condition to including any Registrable Securities
in any registration statement filed pursuant to Section 2 hereof and to
entering into any underwriting agreement with respect thereto, that the
Company shall have received an undertaking reasonably satisfactory to it
from each holder of such Registrable Securities and from each underwriter
named in any such underwriting agreement, severally and not jointly, to
indemnify and hold harmless the Company and all other holders of Registrable
Securities, against any losses, claims, damages or liabilities to which the
Company or such other holders of Registrable Securities may become subject,
under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise
-13-
<PAGE>
out of or are based upon an untrue statement or alleged untrue statement of
a material fact contained in such registration statement, or any
preliminary, final or summary prospectus contained therein or furnished by
the Company to any such holder, agent or underwriter, or any amendment or
supplement thereto, or arise out of or are based upon the omission or
alleged omission to state therein a material fact required to be stated
therein or necessary to make the statements therein not misleading, in each
case to the extent, but only to the extent, that such untrue statement or
alleged untrue statement or omission or alleged omission was made in
reliance upon and in conformity with written information furnished to the
Company by such holder or underwriter expressly for use therein, provided,
however, that no such holder shall be required to undertake liability to any
person under this Section 6(b) for any amounts in excess of the dollar
amount of the proceeds to be received by such holder from the sale of such
holder's Registrable Securities pursuant to such registration.
(c) Notices of Claims, Etc. Promptly after receipt by an indemnified
party under subsection (a) or (b) above of written notice of the
commencement of any action, such indemnified party shall, if a claim in
respect thereof is to be made against an indemnifying party pursuant to the
indemnification provisions of or contemplated by this Section 6, notify such
indemnifying party in writing of the commencement of such action; but the
omission so to notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party, other than under the
indemnification provisions of or contemplated by Section 6(a) or 6(b)
hereof. In case any such action shall be brought against any indemnified
party and it shall notify an indemnifying party of the commencement thereof,
such indemnifying party shall be entitled to participate therein and, to the
extent that it shall wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel reasonably
satisfactory to such indemnified party (who shall not, except with the
consent of the indemnified party, be counsel to the indemnifying party),
and, after notice from the indemnifying party to such indemnified party of
its election so to assume the defense thereof, such indemnifying party shall
not be liable to such indemnified party for any legal expenses of other
counsel or any other expenses, in each case subsequently incurred by such
indemnified party, in connection with the defense thereof other than
reasonable costs of investigation. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification or
contribution may be sought hereunder (whether or not the indemnified party
is an actual or potential party to such action or claim) unless such
settlement, compromise or judgment (i) includes an unconditional release of
the indemnified party from all liability arising out of such action or claim
and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act by or on behalf of any indemnified party. No
indemnifying party shall be liable for the cost of any settlement effected
by an indemnified party without the written consent of such indemnifying
party, which consent shall not be unreasonably withheld.
(d) Contribution. Each party hereto agrees that, if for any reason the
indemnification provisions contemplated by Section 6(a) or Section 6(b) are
unavailable to or insufficient to hold harmless an indemnified party in
respect of any losses, claims damages or liabilities (or actions in respect
thereof) referred to therein, then each indemnifying party shall contribute
to the amount paid or payable by such indemnified party as a result of such
losses, claims, damages or liabilities (or actions in respect thereof) in
such proportion as is appropriate to reflect the relative fault of the
indemnifying party and the indemnified party in connection with the
statements or omissions which resulted in such losses, claims, damages or
liabilities (or actions in respect thereof), as well as any other relevant
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<PAGE>
equitable considerations. The relative fault of such indemnifying party and
indemnified party shall be determined by reference to, among other things,
whether the untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by such indemnifying party or by such indemnified party, and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The parties hereto agree
that it would not be just and equitable if contributions pursuant to this
Section 6(d) were determined by pro rata allocation (even if the holders or
any agents or underwriters or all of them were treated as one entity for
such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to in this Section 6(d).
The amount paid or payable by an indemnified party as a result of the
losses, claims, damages, or liabilities (or actions in respect thereof)
referred to above shall be deemed to include any legal or other fees or
expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim. Notwithstanding the
provisions of this Section 6(d), no holder shall be required to contribute
any amount in excess of the amount by which the dollar amount of the
proceeds received by such holder from the sale of any Registrable Securities
(after deducting any fees, discounts and commissions applicable thereto)
exceeds the amount of any damages which such holder has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission or alleged omission, and no underwriter shall be required to
contribute any amount in excess of the amount by which the total price at
which the Registrable Securities underwritten by it and distributed to the
public were offered to the public exceeds the amount of any damages which
such underwriter has otherwise been required to pay by reason of such untrue
or alleged untrue statement or omission or alleged omission. No person
guilty of fraudulent misrepresentation (within the meaning of Section 11(f)
of the Securities Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. The holders' and any
underwriters' obligations in this Section 6(d) to contribute shall be
several in proportion to the principal amount of Registrable Securities
registered or underwritten, as the case may be, by them and not joint.
(e) The obligations of the Company under this Section 6 shall be in
addition to any liability which the Company may otherwise have and shall
extend, upon the same terms and conditions, to each officer, director and
partner of each holder, agent and underwriter and each person, if any, who
controls any holder, agent or underwriter within the meaning of the
Securities Act; and the obligations of the holders and any underwriters
contemplated by this Section 6 shall be in addition to any liability which
the respective holder or underwriter may otherwise have and shall extend,
upon the same terms and conditions, to each officer and director of the
Company (including any person who, with his consent, is named in any
registration statement as about to become a director of the Company) and to
each person, if any, who controls the Company within the meaning of the
Securities Act.
7. Underwritten Offerings.
(a) Selection of Underwriters. If any of the Registrable Securities
covered by the Shelf Registration are to be sold pursuant to an underwritten
offering, the managing underwriter or underwriters thereof shall be
designated by the holders of at least a majority in aggregate principal
amount of the Registrable Securities to be included in such offering,
provided that such designated managing underwriter or underwriters is or are
reasonably acceptable to the Company.
-15-
<PAGE>
(b) Participation by Holders. Each holder of Registrable Securities
hereby agrees with each other such holder that no such holder may
participate in any underwritten offering hereunder unless such holder (1)
agrees to sell such holder's Registrable Securities on the basis provided in
any underwriting arrangements approved by the persons entitled hereunder to
approve such arrangements and (ii) completes and executes all
questionnaires, powers of attorney, indemnities, underwriting agreements and
other documents reasonably required under the terms of such underwriting
arrangements.
8. Rule 144.
The Company covenants to the holders of Registrable Securities that to
the extent it shall be required to do so under the Exchange Act, it shall
timely file the reports required to be filed by it under the Exchange Act or
the Securities Act (including, but not limited to, the reports under Section
13 and 15(d) of the Exchange Act referred to in subparagraph (c)(1) of Rule
144) and the rules and regulations adopted by the Commission thereunder, and
shall take such further action as any holder of Registrable Securities who
is unable to sell Registrable Securities pursuant to an effective
registration statement may reasonably request, all to the extent required
from time to time to enable such holder to sell Registrable Securities
without registration under the Securities Act within the limitations of the
exemption provided by Rule 144 or any similar rule or regulation hereafter
adopted by the Commission. Upon the request of any holder of Registrable
Securities in connection with that holder's sale pursuant to Rule 144, the
Company shall deliver to such holder a written statement as to whether it
has complied with such requirements.
9. Miscellaneous.
(a) No Inconsistent Agreements. The Company represents, warrants,
covenants and agrees that it has not granted, and shall not grant,
registration rights with respect to Registrable Securities or any other
securities which would be inconsistent with the terms contained in this
Agreement.
(b) Specific Performance. The parties hereto acknowledge that there
would be no adequate remedy at law if any party fails to perform any of its
obligations hereunder and that each party may be irreparably harmed by any
such failure, and accordingly agree that each party, in addition to any
other remedy to which it may be entitled at law or in equity, shall be
entitled to compel specific performance of the obligations of any other
party under this Agreement in accordance with the terms and conditions of
this Agreement, in any court of the United States or any State thereof
having jurisdiction.
(c) Notices. All notices, requests, claims, demands, waivers and other
communications hereunder shall be in writing and shall be deemed to have
been duly given when delivered by hand, if delivered personally or by
courier, or three days after being deposited in the mail (registered or
certified mail, postage prepaid, return receipt requested) as follows: If to
the Company, to it at 1290 Avenue of the Americas, New York, New York 10104,
Attention: Chief Financial Officer and if to a holder, to the address of
such holder set forth in the security register or other records of the
Company, or to such other address as any party may have furnished to the
others in writing in accordance herewith, except that notices of change of
address shall be effective only upon receipt.
(d) Parties in Interest. All the terms and provisions of this Agreement
shall be binding upon, shall inure to the benefit of and shall be
enforceable by the respective successors and assigns
-16-
<PAGE>
of the parties hereto. In the event that any transferee of any holder of
Registrable Securities shall validly acquire Registrable Securities, in any
manner, whether by gift, bequest, purchase, operation of law or otherwise,
such transferee shall, without any further writing or action of any kind, be
deemed a party hereto for all purposes and such Registrable Securities shall
be held subject to all of the terms of this Agreement, and by validly taking
and holding such Registrable Securities such transferee shall be entitled to
receive the benefits of and be conclusively deemed to have agreed to be
bound by and to perform all of the terms and provisions of this Agreement.
(e) Survival. The respective indemnities, agreements, representations,
warranties and each other provision set forth in this Agreement or made
pursuant hereto shall remain in full force and effect regardless of any
investigation (or statement as to the results thereof) made by or on behalf
of any holder of Registrable Securities, any director, officer or partner of
such holder, any agent or underwriter or any director, officer or partner
thereof, or any controlling person of any of the foregoing, and shall
survive delivery of and payment for the Registrable Securities pursuant to
the Purchase Agreement and the transfer and registration of Registrable
Securities by such holder and the consummation of an Exchange Offer.
(f) LAW GOVERNING. THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
(g) Headings. The descriptive headings of the several Sections and
paragraphs of this Agreement are inserted for convenience only, do not
constitute a part of this Agreement and shall not affect in any way the
meaning or interpretation of this Agreement.
(h) Entire Agreement; Amendments. This Agreement and the other writings
referred to herein (including the Indenture and the form of Securities) or
delivered pursuant hereto which form a part hereof contain the entire
understanding of the parties with respect to its subject matter. This
Agreement supersedes all prior agreements and understandings between the
parties with respect to its subject matter. This Agreement may be amended
and the observance of any term of this Agreement may be waived (either
generally or in a particular instance and either retroactively or
prospectively) only by a written instrument duly executed by the Company and
the holders of at least 66-2/3 percent in aggregate principal amount of the
Registrable Securities at the time outstanding. Each holder of any
Registrable Securities at the time or thereafter outstanding shall be bound
by any amendment or waiver effected pursuant to this Section 9(h), whether
or not any notice, writing or marking indicating such amendment or waiver
appears on such Registrable Securities or is delivered to such holder.
(i) Inspection. For so long as this Agreement shall be in effect, this
Agreement and a complete list of the names and addresses of all the holders
of Registrable Securities shall be made available upon reasonable notice to
the Company for inspection and copying on any business day by any holder of
Registrable Securities at the offices of the Company at the address thereof
set forth in Section 9(c) above and at the office of the Trustee under the
Indenture.
(j) Counterparts. This agreement may be executed by the parties in
counterparts, each of which shall be deemed to be an original, but all such
respective counterparts shall together constitute one and the same
instrument.
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<PAGE>
Agreed to and accepted as of the date referred to above.
PHILLIPS-VAN HEUSEN CORPORATION
By: /s/
----------------------------
Name: Emanuel Chirico
Title: Vice President and
Controller
GOLDMAN, SACHS & CO.
CHASE SECURITIES INC.
CITICORP SECURITIES, INC.
By: GOLDMAN, SACHS & CO.
/s/
----------------------------
(Goldman, Sachs & Co.)
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<PAGE>
THIS NOTE IS A GLOBAL NOTE WITHIN THE MEANING OF THE
INDENTURE HEREINAFTER REFERRED TO AND IS REGISTERED IN THE NAME OF A
DEPOSITARY OR A NOMINEE THEREOF. THIS NOTE MAY NOT BE EXCHANGED IN WHOLE OR IN
PART FOR A NOTE REGISTERED, AND NO TRANSFER OF THIS NOTE IN WHOLE OR IN PART
MAY BE REGISTERED, IN THE NAME OF ANY PERSON OTHER THAN SUCH DEPOSITARY OR A
NOMINEE THEREOF, EXCEPT IN THE LIMITED CIRCUMSTANCES DESCRIBED IN THE
INDENTURE.
UNLESS THIS NOTE IS PRESENTED BY AN AUTHORIZED
REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION
("DTC"), TO THE ISSUER OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR
PAYMENT, AND ANY NOTE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN
SUCH OTHER NAME AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND
ANY PAYMENT IS MADE TO CEDE & CO. OR TO SUCH OTHER ENTITY AS IS REQUESTED BY
AN AUTHORIZED REPRESENTATIVE OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF
FOR VALUE
<PAGE>
OR OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
PHILLIPS-VAN HEUSEN CORPORATION
9-1/2% SENIOR SUBORDINATED NOTES DUE 2008
CUSIP No.
No. $___________
Phillips-Van Heusen Corporation, a corporation duly
organized and existing under the laws of Delaware (herein called the "Company",
which term includes any successor Person under the Indenture hereinafter
referred to), for value received, hereby promises to pay to the Depository Trust
Company, or registered assigns, the principal sum of __________________________
___________________________________________ (such amount the "principal amount"
of this Note), or such other principal amount (which, when taken together with
the principal amounts of all other Outstanding Notes, shall not exceed
$150,000,000 in the aggregate at any time) as may be set forth in the records of
the Trustee hereinafter referred to in accordance with the Indenture, on May 1,
2008 and to pay interest thereon from April 22, 1998, or from the most recent
Interest Payment Date to which interest has been paid or duly provided for,
semi-annually on May 1 and November 1 in each year, commencing November 1, 1998,
at the rate of 9-1/2% per annum, until the principal hereof is paid or made
available for payment; provided that, if any Registration Default occurs under
the Exchange and Registration Rights Agreement, then the per annum interest rate
on the applicable principal amount will increase for the period from and
including the date of the occurrence of the Registration Default to but
excluding such date as no Registration Default is in effect (at which time the
interest rate will be reduced to its initial rate) at a per annum rate of 0.5%
for the first 90-day period following the occurrence of such Registration
Default, and by an additional 0.5% thereafter (up to a maximum of 1.0%) (such
additional interest being hereafter referred to as "Special Interest"), and
provided, further, that any amount of interest on this Note which is overdue
shall bear interest (to the extent that payment thereof shall be legally
enforceable) at the rate per annum then borne by this Note from the date such
amount is due to the day it is paid or made available for payment, and such
overdue interest shall be payable on demand.
The interest so payable, and punctually paid or duly
provided for, on any Interest Payment Date will, as provided in such
Indenture, be paid to the Person in whose
<PAGE>
name this Note (or one or more Predecessor Notes) is registered at the close
of business on the Regular Record Date for such interest, which shall be the
April 15 or October 15 (whether or not a Business Day), as the case may be,
next preceding such Interest Payment Date, provided that any accrued and
unpaid interest (including Special Interest) on this Note upon the issuance of
an Exchange Note in exchange for this Note shall cease to be payable to the
Holder hereof and shall be payable on the next Interest Payment Date for such
Exchange Note to the Holder thereof on the related Regular Record Date. Any
such interest not so punctually paid or duly provided for will forthwith cease
to be payable to the Holder on the relevant Regular Record Date and may either
be paid to the Person in whose name this Note (or one or more Predecessor
Notes) is registered at the close of business on a Special Record Date for the
payment of such Defaulted Interest to be fixed by the Trustee, notice whereof
shall be given to Holders of Notes not less than 10 days prior to such Special
Record Date, or be paid at any time in any other lawful manner not
inconsistent with the requirements of any securities exchange on which the
Notes may be listed, and upon such notice as may be required by such exchange,
all as more fully provided in said Indenture. Interest on this Note shall be
computed on the basis set forth in the Indenture.
Payment of the principal of (and premium, if any) and any
such interest on this Note will be made at the office or agency of the Company
in the Borough of Manhattan, The City of New York, New York, maintained for
such purpose and at any other office or agency maintained by the Company for
such purpose, in such coin or currency of the United States of America as at
the time of payment is legal tender for payment of public and private debts;
provided, however, that at the option of the Company payment of interest may
be made by check mailed to the address of the Person entitled thereto as such
address shall appear in the Security Register; provided further that all
payments of the principal (and premium, if any) and interest on Notes, the
Holders of which have given wire transfer instructions to the Company or its
agent at least 10 Business Days prior to the applicable payment date will be
required to be made by wire transfer of immediately available funds to the
accounts specified by such Holders in such instructions. Notwithstanding the
foregoing, the final payment of principal shall be payable only upon surrender
of this Note to the Trustee.
Reference is hereby made to the further provisions of this
Note set forth on the reverse hereof, which further
<PAGE>
provisions shall for all purposes have the same effect as if set forth at this
place.
Unless the certificate of authentication hereon has been
executed by the Trustee referred to on the reverse hereof by manual signature,
this Note shall not be entitled to any benefit under the Indenture or be valid
or obligatory for any purpose.
IN WITNESS WHEREOF, the Company has caused this instrument
to be duly executed under its corporate seal.
Dated:
PHILLIPS-VAN HEUSEN CORPORATION
[SEAL]
By___________________________________
Attest:
- ------------------------------
Trustee's Certificate of Authentication
---------------------------------------
This is one of the Notes referred to in the within-mentioned
Indenture.
-------------------
as Trustee
By ____________________
Authorized Officer
<PAGE>
This Note is one of a duly authorized issue of Notes of the
Company designated as its 9-1/2% Senior Subordinated Notes due May 1, 2008
(herein called the "Notes"), limited in aggregate principal amount to
$150,000,000, issued and to be issued under an Indenture, dated as of April
22, 1998 (herein called the "Indenture", which term shall have the meaning
assigned to it in such instrument), between the Company and Union Bank of
California, N.A., as Trustee (herein called the "Trustee", which term includes
any successor trustee under the Indenture), to which Indenture and all
indentures supplemental thereto reference is hereby made for a statement of
the respective rights, limitations of rights, duties and immunities thereunder
of the Company, the Trustee and the Holders of the Notes and of the terms upon
which the Notes are, and are to be, authenticated and delivered.
The Notes will be subject to redemption, at the option of
the Company, in whole or in part, at any time on or after May 1, 2003 and
prior to maturity, upon not less than 30 nor more than 60 days' notice mailed
to each Holder of Notes to be redeemed at such Holder's address appearing in
the Security Register, in amounts of $1,000 or an integral multiple of $1,000,
at the following Redemption Prices (expressed as percentages of the principal
amount) plus accrued interest to but excluding the Redemption Date (subject to
the right of Holders of record on the relevant Regular Record Date to receive
interest due on an Interest Payment Date that is on or prior to the Redemption
Date), if redeemed during the 12-month period beginning May 1 of the years
indicated:
Redemption
Year Price
---- ----------
2003.................................... 104.750%
2004.................................... 103.167%
2005.................................... 101.583%
2006 and thereafter..................... 100.000%
In addition, if on or before May 1, 2001 the Company
receives net proceeds from the sale of its Common Stock in one or more Public
Equity Offerings, the Company may, at its option use an amount equal to all or
a portion of any such net proceeds to redeem Notes in an aggregate principal
amount of up to 33a% of the original aggregate principal amount of the Notes,
provided, however, that Notes having a principal amount equal to at least 66b%
of the original aggregate principal amount of the Notes remain
<PAGE>
outstanding after such redemption. Such redemption must occur on a Redemption
Date within 90 days of such sale and upon not less than 30 nor more than 60
days= notice mailed to each Holder of Notes to be redeemed at such Holder=s
address appearing in the Security Register, in amounts of $1,000 or an
integral multiple of $1,000, at a redemption price of 109.50% of the principal
amount of the Notes plus accrued interest to but excluding the Redemption Date
(subject to the right of Holders of record on the relevant Regular Record Date
to receive interest due on an Interest Payment Date that is on or prior to the
Redemption Date).
If less than all the Notes are to be redeemed, the Trustee
shall select, in such manner as it shall deem fair and appropriate, the
particular Notes to be redeemed or any portion thereof that is an integral
multiple of $1,000.
The Notes do not have the benefit of any sinking fund
obligations.
The Indenture provides that, subject to certain conditions,
if (i) certain Net Available Proceeds are available to the Company as a result
of Asset Dispositions or (ii) a Change of Control occurs, the Company shall be
required to make an Offer to Purchase for all or a specified portion of the
Notes.
In the event of redemption or purchase pursuant to an Offer
to Purchase of this Note in part only, a new Note or Notes of like tenor for
the unredeemed or unpurchased portion hereof will be issued in the name of the
Holder hereof upon the cancellation hereof.
If an Event of Default shall occur and be continuing, the
principal of all the Notes may be declared due and payable in the manner and
with the effect provided in the Indenture.
The Indenture contains provisions for defeasance at any time
of (i) the entire indebtedness of this Note having been paid or discharged or
(ii) certain restrictive covenants and Events of Default with respect to this
Note having occurred, in each case upon compliance with certain conditions set
forth therein.
The Notes shall be subordinated in right of payment to
Senior Debt of the Company as provided in the Indenture.
<PAGE>
The Indenture permits, with certain exceptions as therein
provided, the amendment thereof and the modification of the rights and
obligations of the Company and the rights of the Holders of the Notes under
the Indenture at any time by the Company and the Trustee with the consent of
the Holders of a majority in aggregate principal amount of the Notes at the
time Outstanding. The Indenture also contains provisions permitting the
Holders of a majority in aggregate principal amount of the Notes at the time
Outstanding, on behalf of the Holders of all the Notes, to waive compliance by
the Company with certain provisions of the Indenture and certain past defaults
under the Indenture and their consequences. Any such consent or waiver by the
Holder of this Note shall be conclusive and binding upon such Holder and upon
all future Holders of this Note and of any Note issued upon the registration
of transfer hereof or in exchange herefor or in lieu hereof, whether or not
notation of such consent or waiver is made upon this Note.
As provided in and subject to the provisions of the
Indenture, the Holder of this Note shall not have the right to institute any
proceeding with respect to the Indenture or for the appointment of a receiver
or trustee or for any other remedy thereunder, unless such Holder shall have
previously given to the Trustee written notice of a continuing Event of
Default with respect to the Notes, the Holders of not less than 25% in
aggregate principal amount of the Notes at the time Outstanding shall have
made written request to the Trustee to institute proceedings in respect of
such Event of Default as Trustee and offered the Trustee reasonable indemnity
and the Trustee shall not have received from the Holders of a majority in
aggregate principal amount of Notes at the time Outstanding a direction
inconsistent with such request and shall have failed to institute any such
proceeding for 60 days after receipt of such notice, request and offer of
indemnity. The foregoing shall not apply to certain suits described in the
Indenture, including any suit instituted by the Holder of this Note for the
enforcement of any payment of principal hereof or any premium (if any) or
interest hereon on or after the respective due dates expressed herein (or, in
the case of redemption, on or after the Redemption Date or, in the case of any
purchase of this Note required to be made pursuant to an Offer to Purchase, on
the Purchase Date).
No reference herein to the Indenture and no provision of
this Note or of the Indenture shall alter or impair the obligation of the
Company, which is absolute and unconditional, to pay the principal of (and
premium, if any)
<PAGE>
and interest on this Note at the times, place and rate, and in the coin or
currency, herein prescribed.
As provided in the Indenture and subject to certain
limitations therein set forth, the transfer of this Note is registrable in the
Security Register, upon surrender of this Note for registration of transfer at
the office or agency of the Company in the Borough of Manhattan, The City of
New York, duly endorsed by, or accompanied by a written instrument of transfer
in form satisfactory to the Company and the Note Registrar duly executed by,
the Holder hereof or his attorney duly authorized in writing, and thereupon
one or more new Notes, of authorized denominations and for the same aggregate
principal amount, will be issued to the designated transferee or transferees.
The Notes are issuable only in registered form without
coupons in denominations of $1,000 principal amount and any integral multiple
thereof. As provided in the Indenture and subject to certain limitations
therein set forth, Notes are exchangeable for a like aggregate principal
amount of Notes of a different authorized denomination, as requested by the
Holder surrendering the same.
No service charge shall be made for any such registration of
transfer or exchange, but the Company may require payment of a sum sufficient
to cover any tax or other governmental charge payable in connection therewith.
Prior to due presentment of this Note for registration of
transfer, the Company, the Trustee and any agent of the Company or the Trustee
may treat the Person in whose name this Note is registered as the owner hereof
for all purposes (subject to the provisions hereof with respect to
determination of the Person to whom interest is payable), whether or not this
Note be overdue, and neither the Company, the Trustee nor any such agent shall
be affected by notice to the contrary.
Interest on this Note shall be computed on the basis of a
360-day year of twelve 30-month days.
All terms used in this Note which are defined in the
Indenture shall have the meanings assigned to them in the Indenture.
The Indenture and this Note shall be governed by and
construed in accordance with the laws of the State of New York; provided,
however, that the standard of
<PAGE>
performance by the Trustee of its duties hereunder shall be governed by the
laws of the State of California.
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Note purchased in its
entirety by the Company pursuant to Section 1014 or 1016 of the Indenture,
check the box:
/ /
If you want to elect to have only a part of this Note
purchased by the Company pursuant to Section 1014 or 1016 of the Indenture,
state the principal amount of this Note you want to elect to have so purchased
by the Company: $___________
Dated:______________ Your Signature:____________________
(Sign exactly as name
appears on the other
side of this Note)
Signature Guarantee:________________________________________
Notice: Signature(s) must be guaranteed by
an "eligible guarantor institution"
meeting the requirements of the Trustee,
which requirements will include membership
or participation in STAMP or such other
"signature guarantee program" as may be
determined by the Trustee in addition to,
or in substitution for STAMP, all in
accordance with the Securities Exchange
Act of 1934, as amended.
<PAGE>
June __, 1998
Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, NW E-MAIL ADDRESS
Washington, DC 20549 [email protected]
Ladies and Gentlemen:
We have acted as counsel to Phillips-Van Heusen Corporation (the "Company"), a
Delaware corporation, in connection with the registration statement (the
"Registration Statement") on Form S-4 filed with the Securities and Exchange
Commission on June __, 1998 in connection with the registration of
$150,000,000 aggregate principal amount of 9 1/2% Senior Subordinated Notes
due 2008 (the "Notes") of the Company.
In rendering this opinion, we have examined (i) the Indenture between the
Company and Union Bank of California, N.A., dated as of April 22, 1998,
pursuant to which the Notes will be issued; (ii) the Notes; (iii) the
Registration Statement; (iv) the Restated Certificate of Incorporation of the
Company; (v) the Amended and Restated By-laws of the Company; (vi) resolutions
of the Board of Directors of the Company, dated April __, 1998, and (vii) such
other documents, and made such inquiries as to questions of law, as we have
deemed necessary.
Based upon the foregoing, it is our opinion that when (i) the Notes have been
(a) duly authenticated in accordance with the Indenture and (b) issued,
exchanged and delivered in the manner and for the consideration stated in the
Indenture, the Prospectus and the Letter of Transmittal, which have been, or
forms of which have been, filed as part of, or as exhibits to, the
Registration Statement; (ii) the Registration Statement has become effective
under the Securities Act of 1933, and (iii) the Notes have been qualified as
required under the laws of those jurisdictions in which they are to be issued
and exchanged, the Notes will be legally issued, fully paid and non-assessable
and valid and binding obligations of the Company, enforceable against the
Company in accordance with their terms, except as enforcement thereof may be
limited by bankruptcy, insolvency, reorganization or other similar laws, now
or hereafter in effect, and equitable considerations of any court before which
enforcement may be sought.
We hereby consent to the use of this opinion as an exhibit to the Registration
Statement and further consent to the use of our name in the Registration
Statement, including the Prospectus
<PAGE>
Securities and Exchange Commission
June __, 1998
Page 2
constituting a part thereof, and any amendments or supplements thereto, under
the caption "Validity of the Exchange Notes."
Very truly yours,
ROSENMAN & COLIN LLP
By:___________________________________
A Partner
<PAGE>
EXHIBIT 12
PHILLIPS-VAN HEUSEN CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
52 WEEKS 52 WEEKS 52 WEEKS 53 WEEKS
ENDED ENDED ENDED ENDED
JANUARY 30, JANUARY 29, JANUARY 28, FEBRUARY 2,
1994 1995 1996 1997
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Earnings:
Net income (loss)............................................. $ 31,858 $30,015 $ 294 $18,530
Add:
Provision for income taxes.................................... 20,380 6,894 (2,920) 6,044
Extraordinary loss............................................ 11,394
Fixed charges................................................. 37,020 36,543 51,122 50,217
----------- ----------- ----------- -----------
Earnings...................................................... $ 100,652 $73,452 $48,496 $74,791
Fixed Charges:
Interest expense.............................................. $ 17,518 $14,368 $23,857 $23,857
Interest factor of rents...................................... 19,502 22,175 27,265 26,360
----------- ----------- ----------- -----------
Fixed charges................................................. $ 37,020 $36,543 $51,122 $50,217
Ratio of earnings to fixed charges............................ 2.7x 2.0x Note 1 1.5x
<CAPTION>
52 WEEKS 13 WEEKS 13 WEEKS
ENDED ENDED ENDED
FEBRUARY 1, 1998 MAY 4, 1997 MAY 3, 1998
---------------- ----------- -----------
(UNAUDITED) (UNAUDITED)
<S> <C> <C> <C>
Earnings:
Net income (loss)............................................. $ (66,579) $(4,540) $(5,545)
Add:
Provision for income taxes.................................... (41,246) (2,078) (2,427)
Extraordinary loss............................................ 1,060
Fixed charges................................................. 46,561 11,343 11,643
----------- ----------- -----------
Earnings...................................................... $ (61,264) $ 4,725 $ 4,731
Fixed Charges:
Interest expense.............................................. $ 21,122 $ 5,001 $ 5,540
Interest factor of rents...................................... 25,439 6,342 6,103
----------- ----------- -----------
Fixed charges................................................. $ 46,561 $11,343 $11,643
Ratio of earnings to fixed charges............................ Note 1 Note 1 Note 1
</TABLE>
- ------------------
(1) Earnings were inadequate to cover fixed charges by $2,626, $107,825, $6,618
and $6,912 for the 52 weeks ended January 28, 1996 and February 1, 1998 and
the 13 weeks ended May 4, 1997 and May 3, 1998, respectively.
<PAGE>
CONSENT OF INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions 'Experts',
'Summary Consolidated Financial Information' and 'Selected Consolidated
Financial Information' and the use of our report dated March 10, 1998, except
for the Long-Term Debt note, as to which the date is April 22, 1998, in the
Registration Statement on Form S-4 and the related Prospectus of Phillips-Van
Heusen Corporation for the registration of $150,000,000 of its 9 1/2% Senior
Subordinated Notes due 2008.
We also consent to the incorporation by reference therein of our report
dated April 14, 1998 with respect to the financial statement schedule of
Phillips-Van Heusen Corporation for the years ended February 1, 1998, February
2, 1997 and January 28, 1996 included in the Annual Report (Form 10-K) for 1998
filed with the Securities and Exchange Commission.
/s/ Ernst & Young LLP
New York, New York
June 17, 1998
<PAGE>
To the Stockholders and the Board of Directors
Phillips-Van Heusen Corporation
We are aware of the use of our report dated May 20, 1998 relating to the
unaudited condensed consolidated interim financial statements of Phillips-Van
Heusen Corporation which are included in its Form 10-Q for the 13 weeks ended
May 3, 1998 and in the Registration Statement on Form S-4 and the related
Prospectus of Phillips-Van Heusen Corporation for the registration of
$150,000,000 of its 9 1/2% Senior Subordinated Notes due 2008.
/s/ Ernst & Young LLP
New York, New York
June 17, 1998
<PAGE>
EXHIBIT 99.1
LETTER OF TRANSMITTAL
OFFER TO EXCHANGE
9 1/2% SENIOR SUBORDINATED NOTES DUE 2008
FOR ANY AND ALL OUTSTANDING
9 1/2% SENIOR SUBORDINATED NOTES DUE 2008
OF
PHILLIPS-VAN HEUSEN CORPORATION
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME,
ON JULY , 1998, UNLESS EXTENDED BY
PHILLIPS-VAN HEUSEN CORPORATION (THE 'EXPIRATION DATE').
------------------------
The Exchange Agent for the Exchange Offer is:
Union Bank of California, N.A.
BY HAND, OVERNIGHT COURIER OR MAIL:
Union Bank of California, N.A.
475 Sansome Street
12th Floor
San Francisco, California 94111
Attention: Gillian Wallace, Corporate Trust Division
or
BY FACSIMILE:
Union Bank of California, N.A.
Attention: Gillian Wallace, Corporate Trust Division
Facsimile Number: (415) 296-6757
DELIVERY OF THIS LETTER OF TRANSMITTAL TO AN ADDRESS OTHER THAN AS SET
FORTH ABOVE OR TRANSMISSION OF INSTRUCTIONS VIA A FACSIMILE TRANSMISSION TO A
NUMBER OTHER THAN AS SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. THE
INSTRUCTIONS CONTAINED HEREIN SHOULD BE READ CAREFULLY BEFORE THIS LETTER OF
TRANSMITTAL IS COMPLETED.
This Letter of Transmittal is to be used either if certificates of Initial
Notes are to be forwarded herewith to the Exchange Agent or if delivery of
Initial Notes is to be made by book-entry transfer to an account maintained by
the Exchange Agent at The Depository Trust Company ('DTC'), pursuant to the
procedures set forth in the section of the Prospectus entitled 'The Exchange
Offer--Book-Entry Transfer'. Delivery of documents to the Book-Entry Transfer
Facility does not constitute delivery to the Exchange Agent.
The term 'Holder' with respect to the Exchange Offer means any person in
whose name Initial Notes are registered on the books of the Company or any other
person who has obtained a properly completed bond power from the registered
Holder or any person whose Initial Notes are held of record by DTC.
Holders whose Initial Notes are not immediately available or who cannot
deliver their Initial Notes and all other documents required hereby to the
Exchange Agent on or prior to the Expiration Date may tender their Initial Notes
according to the guaranteed delivery procedure set forth in the Prospectus under
the caption 'The Exchange Offer--Guaranteed Delivery Procedure'.
The undersigned must check the appropriate boxes at page 6 below and sign
this Letter of Transmittal to indicate the action the undersigned desires to
take with respect to the Exchange Offer.
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
The undersigned acknowledges receipt of the Prospectus dated June , 1998
(the 'Prospectus') of Phillips-Van Heusen Corporation (the 'Company'), and this
Letter of Transmittal (the 'Letter of Transmittal'), which together describe the
Company's offer (the 'Exchange Offer') to exchange $1,000 in principal amount of
9 1/2% Senior Subordinated Notes due 2008 (the 'Exchange Notes') for each $1,000
in principal amount of the Company's outstanding 9 1/2% Senior Subordinated
Notes due 2008 (the 'Initial Notes'). The terms of the Exchange Notes are
substantially identical in all respects (including principal amount, interest
rate and maturity) to the terms of the Initial Notes for which they may be
exchanged pursuant to the Exchange Offer, except that the Exchange Notes are
freely transferable by Holders thereof (except as provided herein or in the
Prospectus) and are issued without any right to registration under the
Securities Act of 1933 (the 'Securities Act'). Capitalized terms used herein but
not defined herein have the meanings ascribed to them in the Prospectus.
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the principal amount of the Initial
Notes indicated in Box 1 below. The undersigned is the registered owner of all
the Initial Notes, and the undersigned represents that it has received from each
beneficial owner of tendered Initial Notes ('Beneficial Owner(s)') a duly
completed and executed form of 'Instructions to Registered Holder from
Beneficial Owner' accompanying this Letter of Transmittal, instructing the
undersigned to take the action described in this Letter of Transmittal.
Subject to, and effective upon, the acceptance for exchange of the Initial
Notes tendered herewith, the undersigned hereby irrevocably exchanges, assigns
and transfers to, or upon the order of, the Company all right, title and
interest in and to such Initial Notes. The undersigned hereby irrevocably
constitutes and appoints the Exchange Agent the true and lawful agent and
attorney-in-fact of the undersigned (with full knowledge that said Exchange
Agent acts as the agent of the Company in connection with the Exchange Offer) to
cause the Initial Notes to be assigned, transferred and exchanged. The
undersigned agrees that acceptance of any and all validly tendered Initial Notes
by the Company and the issuance of Exchange Notes in exchange therefor shall
constitute performance in full by the Company of its obligations under the
Registration Rights Agreement and that the Company shall have no further
obligations or liabilities thereunder.
The undersigned hereby represents and warrants that the undersigned accepts
the terms and conditions of the Exchange Offer and has full power and authority
to tender, exchange, assign and transfer the Initial Notes tendered hereby and
to acquire Exchange Notes issuable upon the exchange of such tendered Initial
Notes, and that, when such tendered Initial Notes are accepted for exchange, the
Company will acquire good and unencumbered title thereto, free and clear of all
liens, restrictions, charges and encumbrances and not subject to any adverse
claim. The undersigned and each Beneficial Owner will, upon request, execute and
deliver any additional documents deemed by the Exchange Agent or the Company to
be necessary or desirable to complete and give effect to the transactions
contemplated hereof.
The undersigned represents that it and each Beneficial Owner acknowledge
that the Exchange Offer is being made in reliance on an interpretation by the
staff of the Commission, not issued in connection with the Company or the
Exchange Offer, to the effect that the Exchange Notes issued pursuant to the
Exchange Offer in exchange for the Initial Notes may be offered for resale,
resold and otherwise transferred by a Holder thereof (other than any such Holder
which is an 'affiliate' of the Company within the meaning of Rule 405 under the
Securities Act) without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such Exchange Notes are acquired
in the ordinary course of such Holder's business and such Holder has no
arrangement or understanding with any person to participate in the distribution
of such Exchange Notes, and as to broker-dealer prospectus delivery
requirements, subject to the provisions of the paragraph below. See 'Shearman &
Sterling', SEC No-Action Letter (available July 2, 1993). Any Holder who tenders
in the Exchange Offer for the purpose of participating in a distribution of the
Exchange Notes
2
<PAGE>
cannot rely on such interpretation by the staff of the SEC and must comply with
the registration and prospectus delivery requirements of the Securities Act in
connection with a secondary resale transaction. See 'Morgan Stanley & Co.,
Inc.', SEC No-Action Letter (available June 5, 1991), and 'Exxon Capital
Holdings Corporation', SEC No-Action Letter (available May 13, 1988).
The undersigned hereby represents and warrants that (i) the Exchange Notes
or interests therein received by the undersigned and any Beneficial Owner(s)
pursuant to the Exchange Offer are being acquired by the undersigned and any
Beneficial Owner(s) in the ordinary course of business of the undersigned and
any Beneficial Owner(s) receiving such Exchange Notes, (ii) neither the
undersigned nor any Beneficial Owner(s) is participating, intends to participate
or has an arrangement or understanding with any person to participate in the
distribution of such Exchange Notes, (iii) the undersigned and any Beneficial
Owner(s) acknowledge that any person who is a broker-dealer under the Exchange
Act or is participating in the Exchange Offer for the purpose of distributing
the Exchange Notes must comply with the registration and prospectus delivery
requirements of the Securities Act in connection with a secondary resale of the
Exchange Notes and any interest therein acquired by such person and cannot rely
on the position of the staff of the Commission set forth in the no-action
letters that are discussed above, (iv) the undersigned and each Beneficial Owner
understand that a secondary resale transaction described in the preceding clause
(iii) and any resale of the Exchange Notes and any interest therein obtained by
the undersigned and in exchange for the Initial Notes originally acquired by the
undersigned directly from the Company should be covered by an effective
registration statement containing the selling security holder information
required by Item 507 and 508, as applicable, of Regulation S-K of the
Commission, and (v) neither the undersigned nor any Beneficial Owner(s) is an
'affiliate', as defined in Rule 405 under the Securities Act, of the Company, or
if either the undersigned or any Beneficial Owner(s) is an affiliate, that the
undersigned and any such Beneficial Owner(s) will comply with the prospectus
delivery requirements of the Securities Act in connection with the disposition
of any Exchange Notes to the extent applicable. If the undersigned or any
Beneficial Owner(s) is a broker-dealer, the undersigned further represents that
(x) it and any such Beneficial Owner(s) acquired Initial Notes for the
undersigned's and any such Beneficial Owner's own account as a result of market-
making activities or other trading activities, (y) neither the undersigned nor
any Beneficial Owner(s) has entered into any arrangement or understanding with
the Company or any 'affiliate' of the Company (within the meaning of Rule 405
under the Securities Act) to distribute the Exchange Notes to be received in the
Exchange Offer and (z) the undersigned and any Beneficial Owner(s) acknowledge
that the undersigned and any Beneficial Owner(s) will deliver a copy of a
prospectus meeting the requirements of the Securities Act in connection with any
resale of Exchange Notes. By so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an 'underwriter' within the
meaning of the Securities Act. The Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with the resales of Exchange Notes received in exchange for Initial Notes where
Initial Notes were acquired by such broker-dealer as a result of market-making
activities or other trading activities. The Company intends to make the
Prospectus (as it may be amended or supplemented) available to any broker-dealer
for use in connection with any such resale for a period of 180 days after the
expiration date of the Exchange Offer.
The Exchange Offer is not being made to, nor will tenders be accepted from
or on behalf of, Holders of the Initial Notes in any jurisdiction in which the
making of the Exchange Offer or acceptance thereof would not be in compliance
with the laws of such jurisdiction or would otherwise not be in compliance with
any provision of any applicable security law. For purposes of compliance with
state blue sky laws, the undersigned represents and warrants to the Company that
the state in which each Beneficial Owner's principal business office is located
or the state of each Beneficial Owner's principal residence is one of the states
which is listed on Schedule A attached hereto. The undersigned hereby represents
and warrants that the information set forth in Box 2 is true and correct.
The undersigned acknowledges that prior to the Exchange Offer, there has
been no public market for the Initial Notes or the Exchange Notes. The Company
does not intend to list the Exchange Notes on a national securities exchange.
There can be no assurance that an active market for the Exchange Notes will
develop. The undersigned understands and acknowledges that the Company reserves
the
3
<PAGE>
right in its sole discretion to purchase or make offers for any Initial Notes
that remain outstanding subsequent to the Expiration Date and, to the extent
permitted by applicable law, purchase Initial Notes in the open market, in
privately negotiated transactions or otherwise.
The undersigned understands that tenders of the Initial Notes pursuant to
any one of the procedures described in the Prospectus under the caption
'Exchange Offer' and in the instructions hereto will constitute a binding
agreement between the undersigned and the Company in accordance with the terms
and subject to the conditions of the Exchange Offer.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Letters of Transmittal or Initial Notes tendered for
exchange, and of withdrawal of the tendered Initial Notes, will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Initial Notes not properly tendered or if, in the sole
judgment of the Company, (i) the Exchange Offer would violate any law, statute,
rule or regulation or an interpretation thereof of the staff of the Commission
or (ii) any governmental approval has not been obtained, which approval the
Company deems necessary for the consummation of the Exchange Offer. The Company
also reserves the absolute right to waive any defects of irregularities as to
any particular Initial Notes or conditions of the Exchange Offer either before
or after the Expiration Date (including the right to waive the ineligibility of
any Holder who seeks to tender Initial Notes in the Exchange Offer). The
interpretation of the terms and conditions of the Exchange Offer by the Company
shall be final and binding on all parties. Unless waived, any defects or
irregularities in connection with tenders of Initial Notes to exchange must be
cured within such reasonable period of time as the Company shall determine. None
of the Company, the Exchange Agent nor any other person shall be under any duty
to give notification of any defect or irregularity with respect to any tender of
Initial Notes for exchange, nor shall any of them incur any liability for
failure to give such notification. Tenders of Initial Notes will not be deemed
to have been made until such irregularities have been cured or waived. Any
Initial Notes received by the Exchange Agent that are not properly tendered and
as to which the defects or irregularities have not been cured or waived will be
returned without cost to such Holder by the Exchange Agent to the tendering
Holders of Initial Notes, as soon as practicable following the Expiration Date.
All authority herein conferred or agreed to be conferred shall not be
affected by, and shall survive, the death or incapacity of the undersigned and
any Beneficial Owner(s), and every obligation of the undersigned or any
Beneficial Owner(s) shall be binding upon the heirs, personal representatives,
successors and assigns of the undersigned and any Beneficial Owner(s). The
undersigned also agrees that except as provided in the Prospectus and set forth
in Instruction 3 below, the Initial Notes tendered hereby cannot be withdrawn.
Certificates for all Exchange Notes delivered in exchange for tendered
Initial Notes and any Initial Notes delivered herewith but not exchanged, and
registered in the name of the undersigned, shall be delivered to the undersigned
at the address shown below the signature of the undersigned, unless otherwise
indicated on page 6.
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED 'DESCRIPTION OF INITIAL
NOTES TENDERED HEREWITH' BELOW AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE
TENDERED THE INITIAL NOTES AND MADE THE REPRESENTATIONS DESCRIBED HEREIN AND IN
THE PROSPECTUS.
4
<PAGE>
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
- ------------------------------------------------------------------------------
(SIGNATURE(S) OF
HOLDER(S))
Date: ___, 1998
(Must be signed by registered Holder(s) exactly as name(s) appear(s) on
certificate(s) of Initial Notes. If signature is by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, please set forth the
full title of such person.) See Instruction 4.
Name(s):
----------------------------------------------------------------------
(PLEASE PRINT)
Capacity (full title):
--------------------------------------------------------
Address:
----------------------------------------------------------------------
----------------------------------------------------------------------
(INCLUDING ZIP CODE)
Area Code and Telephone No.:
-------------------------------------------------
Taxpayer Identification No.:
-------------------------------------------------
GUARANTEE OF SIGNATURE(S)
(IF REQUIRED--SEE INSTRUCTION 4)
Authorized Signature:
---------------------------------------------------------
Name:
-------------------------------------------------------------------------
Title:
------------------------------------------------------------------------
Address:
----------------------------------------------------------------------
----------------------------------------------------------------------
Name of Firm:
-----------------------------------------------------------------
Area Code and Telephone No.:
--------------------------------------------------
Date:__, 1998
5
<PAGE>
PLEASE READ THE ENTIRE LETTER OF TRANSMITTAL AND THE PROSPECTUS CAREFULLY BEFORE
CHECKING ANY BOX BELOW
YOUR BANK OR BROKER CAN ASSIST YOU IN COMPLETING THIS FORM. THE
INSTRUCTIONS INCLUDED WITH THIS LETTER OF TRANSMITTAL MUST BE FOLLOWED.
QUESTIONS AND REQUESTS FOR ASSISTANCE OR FOR ADDITIONAL COPIES OF THE PROSPECTUS
AND THIS LETTER OF TRANSMITTAL MAY BE DIRECTED TO THE EXCHANGE AGENT.
A Holder that is a participant in The Depository Trust Company's system may
utilize The Depository Trust Company's Automated Tender Offer Program to tender
Initial Notes.
<TABLE>
<S> <C>
/ / CHECK HERE IF YOU ARE TENDERING INITIAL NOTES IN CERTIFICATED FORM AND WISH TO RECEIVE AN INTEREST IN THE
GLOBAL EXCHANGE NOTE AND COMPLETE THE FOLLOWING:
Account Number:
-----------------------------------------------------------------------------------------
Transaction Code Number:
--------------------------------------------------------------------------------
/ / CHECK HERE IF YOU ARE TENDERING INITIAL NOTES IN CERTIFICATED FORM AND WISH TO RECEIVE EXCHANGE NOTES IN
CERTIFICATED FORM.
/ / CHECK HERE IF TENDERED INITIAL NOTES ARE ENCLOSED HEREWITH.
/ / CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER MADE TO AN ACCOUNT
MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution: / / The Depository Trust Company
--------------------------
Account Number:
-----------------------------------------------------------------------------------------
Transaction Code Number:
--------------------------------------------------------------------------------
/ / CHECK HERE IF TENDERED INITIAL NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF GUARANTEED DELIVERY AND
COMPLETE THE FOLLOWING:
Name of Registered Holder(s):
---------------------------------------------------------------------------
Name of Eligible Institution that Guaranteed Delivery:
--------------------------------------------------
If Delivered by Book-Entry Transfer:
--------------------------------------------------------------------
Account Number:
----------------------------------------------------------------------------------------
/ / CHECK HERE ONLY IF EXCHANGE NOTES OR UNEXCHANGED INITIAL NOTES DELIVERED HEREWITH ARE TO BE SENT TO SOMEONE
OTHER THAN THE UNDERSIGNED, OR TO THE UNDERSIGNED AT AN ADDRESS OTHER THAN THAT SHOWN ABOVE.
Mail Exchange Notes to:
Name:
--------------------------------------------------------------------------------------------------------
(PLEASE PRINT)
Address:
------------------------------------------------------------------------------------------------
Tax Identification Number:
------------------------------------------------------------------------------
Social Security No.:
------------------------------------------------------------------------------------
/ / CHECK HERE IF YOU ARE A BROKER-DEALER AND WISH TO RECEIVE 10 ADDITIONAL COPIES OF THE PROSPECTUS AND 10
COPIES OF ANY AMENDMENTS OR SUPPLEMENTS THERETO.
Name:
---------------------------------------------------------------------------------------------------
Address:
------------------------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
List in Box 1 the Initial Notes to which this Letter of Transmittal
relates. If the space provided below is inadequate, information should be listed
on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
BOX 1
DESCRIPTION OF INITIAL NOTES TENDERED HEREWITH
- -------------------------------------------------------------------------------------------------------------------
AGGREGATE
NAME(S) AND ADDRESSES PRINCIPAL
OF REGISTERED HOLDER(S) AMOUNT REPRESENTED PRINCIPAL AMOUNT
(PLEASE FILL IN) CERTIFICATE NUMBER(S)* BY INITIAL NOTES* TENDERED*
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ------------------------------------------------ ------------------------- --------------------- ------------------
- ------------------------------------------------ ------------------------- --------------------- ------------------
- ------------------------------------------------ ------------------------- --------------------- ------------------
- ------------------------------------------------ ------------------------- --------------------- ------------------
- ------------------------------------------------ ------------------------- --------------------- ------------------
TOTAL
- ------------------------------------------------ ------------------------- --------------------- ------------------
* Need not be completed by book-entry Holders.
** Unless otherwise indicated, the Holder will be deemed to have tendered the
full aggregate principal amount represented by such Initial Notes. See
Instruction 3.
<CAPTION>
- -------------------------------------------------------------------------------------------------------------------
BOX 2
BENEFICIAL OWNER(S)
- -------------------------------------------------------------------------------------------------------------------
STATE OF PRINCIPAL RESIDENCE OR PRINCIPAL PLACE
OF BUSINESS OF EACH BENEFICIAL OWNER PRINCIPAL AMOUNT OF TENDERED INITIAL NOTES HELD
OF TENDERED INITIAL NOTES FOR ACCOUNT OF BENEFICIAL OWNER
<S> <C> <C> <C>
- ---------------------------- ---------------------------- ---------------------------- ----------------------------
- ---------------------------- ---------------------------- ---------------------------- ----------------------------
- ---------------------------- ---------------------------- ---------------------------- ----------------------------
- ---------------------------- ---------------------------- ---------------------------- ----------------------------
- ---------------------------- ---------------------------- ---------------------------- ----------------------------
- ---------------------------- ---------------------------- ---------------------------- ----------------------------
- ---------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>
7
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS
OF THE EXCHANGE OFFER
1. DELIVERY OF THIS LETTER OF TRANSMITTAL AND CERTIFICATES; GUARANTEED DELIVERY
PROCEDURES.
Certificates for all physically delivered Initial Notes or confirmation of
any book-entry transfer to the Exchange Agent's account at the Book-Entry
Transfer Facility of Initial Notes tendered by book-entry transfer, as well as a
properly completed and duty executed copy of this Letter of Transmittal or
facsimile thereof, and any other documents required by this Letter of
Transmittal, must be received by the Exchange Agent at any of its addresses set
forth on the front page of this Letter of Transmittal prior to 5:00 p.m., New
York City time, on the Expiration Date (as defined in the Prospectus).
THE METHOD OF DELIVERY OF THIS LETTER OF TRANSMITTAL, THE INITIAL NOTES AND
ANY OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK OF THE HOLDER, AND
EXCEPT AS OTHERWISE PROVIDED BELOW, THE DELIVERY WILL BE DEEMED MADE ONLY WHEN
ACTUALLY RECEIVED BY THE EXCHANGE AGENT. IF SUCH DELIVERY IS BY MAIL, IT IS
SUGGESTED THAT REGISTERED MAIL WITH RETURN RECEIPT REQUESTED BE USED, PROPER
INSURANCE BE OBTAINED AND THE MAILING BE MADE SUFFICIENTLY IN ADVANCE OF THE
EXPIRATION DATE TO PERMIT DELIVERY TO THE EXCHANGE AGENT ON OR BEFORE THE
EXPIRATION DATE.
Holders who wish to tender their Initial Notes but whose Initial Notes are
not immediately available or who cannot deliver their Initial Notes and all
other required documents to the Exchange Agent prior to 5:00 p.m., New York City
time, on the Expiration Date or comply with book-entry transfer procedures on a
timely basis may tender their Initial Notes pursuant to the guaranteed delivery
procedure set forth in the Prospectus under 'The Exchange Offer--Guaranteed
Delivery Procedure'. Such Holders' tender may be effected if:
(a) such tender is made by or through an Eligible Institution (as defined
below);
(b) on or prior to the Expiration Date, the Exchange Agent has received
from such Eligible Institution (a) either a properly completed and duly executed
Letter of Transmittal (or a facsimile thereof) or a properly transmitted Agent's
Message and (b) a Notice of Guaranteed Delivery, substantially in the form
provided by the Company, by hand or mail, or facsimile transmission (receipt
confirmed by telephone and an original delivered by guaranteed overnight
courier) setting forth the name and address of such Holder of Initial Notes and
the amount of Initial Notes tendered, stating that the tender is being made
thereby and guaranteeing that within three business days (as defined in the
Prospectus) after the Expiration Date, that the Initial Notes in proper form for
transfer or a Book-Entry Confirmation and all other documents required by this
Letter of Transmittal will be deposited by the Eligible Institution with the
Exchange Agent; and
(c) a Book-Entry Confirmation or the certificates relating to the Initial
Notes in registered form and all other documents required by this Letter of
Transmittal, are received by the Exchange Agent within three business days (as
defined in the Prospectus) after the Expiration Date.
No alternative, conditional, irregular or contingent tenders will be
accepted. All tendering Holders, by execution of this Letter of Transmittal (or
facsimile thereof), shall waive any right to receive notice of the acceptance of
the Initial Notes for exchange.
2. BENEFICIAL OWNER INSTRUCTIONS TO REGISTERED HOLDERS.
Only a Holder in whose name tendered Initial Notes are registered on the
books of the registrar (or the legal representative or attorney-in-fact of such
registered Holder) may execute and deliver this Letter of Transmittal. Any
Beneficial Owner of tendered Initial Notes who is not the registered Holder must
arrange promptly with the registered Holder to execute and deliver this Letter
of Transmittal on his or her behalf through the execution and delivery to the
registered Holder of the 'Instructions to Registered Holder from Beneficial
Owner' form accompanying this Letter of Transmittal.
3. PARTIAL TENDER; WITHDRAWALS.
If less than the entire principal amount of Initial Notes evidenced by a
submitted certificate is tendered, the tendering Holder should fill in the
principal amount tendered in the box entitled 'Principal Amount Tendered'. A
newly issued certificate for the principal amount of Initial Notes submitted but
not tendered will be sent to such
8
<PAGE>
Holder as soon as practicable after the Expiration Date. All Initial Notes
delivered to the Exchange Agent will be deemed to have been tendered unless
otherwise indicated.
Initial Notes tendered pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date. For a withdrawal to be effective, a
written notice of withdrawal sent by telegram, facsimile transmission (receipt
confirmed by telephone and an original delivered by guaranteed overnight
courier) or letter must be received by the Exchange Agent at the address set
forth herein prior to the Expiration Date. Any such notice of withdrawal must
(i) specify the name of the person having tendered the Initial Notes to be
withdrawn (the 'Depositor'), (ii) identify the Initial Notes to be withdrawn
(including the certificate number or numbers of such Initial Notes and the
principal amount of each such Initial Note), (iii) specify the principal amount
of Initial Notes to be withdrawn, (iv) include a statement that such Holder is
withdrawing his election to have such Initial Notes exchanged, (v) be signed by
the Holder in the same manner as the original signature on the Letter of
Transmittal by which such Initial Notes were tendered or as otherwise described
in the Prospectus (including any required signature guarantees) or be
accompanied by documents of transfer sufficient to have the Trustee under the
Indenture register the transfer of such Initial Notes into the name of the
person withdrawing the tender and (vi) specify the name in which any such
Initial Notes are to be registered, if different from that of the Depositor. The
Exchange Agent will return the properly withdrawn Initial Notes promptly
following receipt of notice of withdrawal. If Initial Notes have been tendered
pursuant to the procedure for book-entry transfer, any notice of withdrawal must
specify the name and number of the account at the Book-Entry Transfer Facility
to be credited with the withdrawn Initial Notes or otherwise comply with the
Book-Entry Transfer Facility procedure. All questions as to the validity, form
and eligibility of such notices of withdrawals, including time of receipt, will
be determined by the Company and such determination will be final and binding,
on all parties.
4. SIGNATURE ON THIS LETTER OF TRANSMITTAL; WRITTEN INSTRUMENTS AND
ENDORSEMENTS; GUARANTEE OF SIGNATURES.
If this Letter of Transmittal is signed by the registered Holder(s) of the
Initial Notes tendered hereby, the signature must correspond with the name(s) as
written on the face of the certificates without alteration or any change
whatsoever.
If any of the Initial Notes tendered hereby are owned of record by two or
more joint owners, all such owners must sign this Letter of Transmittal.
If any of the Initial Notes tendered hereby are registered in several
names, it will be necessary to complete, sign and submit as many separate copies
of this Letter of Transmittal as there are different registrations of Initial
Notes.
When this Letter of Transmittal is signed by the registered Holder or
Holders (which term, for the purposes described herein, shall include the
Book-Entry Transfer Facility whose name appears on a security listing as the
owner of the Initial Notes) of Initial Notes listed and tendered hereby, no
endorsements of certificates or separate written instruments of transfer or
exchange are required.
If this Letter of Transmittal is signed by a person other than the
registered Holder or Holders of the Initial Notes listed, such Initial Notes
must be endorsed or accompanied by separate written instruments of transfer or
exchange in form satisfactory to the Company and duly executed by the registered
Holder, in either case signed exactly as the name or names of the registered
Holder or Holders appear(s) on the Initial Notes.
If this Letter of Transmittal or any certificates or separate written
instruments of transfer or exchange are signed by trustees, executors,
administrators, guardians, attorneys-in-fact, officers of a corporation or
others acting in a fiduciary or representative capacity, such persons should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
Endorsements on certificates or signatures on separate written instruments
of transfer or exchange required by this Instruction 4 must be guaranteed by an
Eligible Institution.
Signatures on this Letter of Transmittal or notice of withdrawal need not
be guaranteed by an Eligible Institution, provided the Initial Notes are
tendered: (i) by a registered Holder of such Initial Notes or (ii) for the
account of an Eligible Institution.
For purposes of this Letter of Transmittal, an 'Eligible Institution' shall
mean any bank, broker, dealer, credit union, savings association, clearing
agency or other institution that is a member of a recognized signature guarantee
medallion program within the meaning of Rule 17Ad-15 under the Securities
Exchange Act of 1934.
9
<PAGE>
5. TRANSFER TAXES.
The Company will pay all transfer taxes, if any, applicable to the exchange
of Initial Notes pursuant to the Exchange Offer. If, however, certificates
representing Exchange Notes or Initial Notes for principal amounts not tendered
or accepted for exchange are to be delivered to, or are to be issued in the name
of, any person other than the registered Holder of the Initial Notes tendered,
or if tendered Initial Notes are registered in the name of any person other than
the person signing the Letter of Transmittal, or if a transfer tax is imposed
for any reason other than the exchange of Initial Notes pursuant to the Exchange
Offer, then the amount of any such transfer taxes (whether imposed on the
registered Holder or any other persons) will be payable by the tendering Holder.
If satisfactory evidence of payment of such taxes or exemption therefrom is not
submitted with the Letter of Transmittal, the amount of such transfer taxes will
be billed directly to such tendering Holder.
Except as provided in this Instruction 5, it will not be necessary for
transfer tax stamps to be affixed to the Initial Notes listed in this Letter of
Transmittal.
6. MUTILATED, LOST, STOLEN OR DESTROYED INITIAL NOTES.
Any Holder whose Initial Notes have been mutilated, lost, stolen or
destroyed should contact the Exchange Agent at the address indicated above for
further instructions.
7. ACCEPTANCE OF TENDERED INITIAL NOTES AND ISSUANCE OF EXCHANGE NOTES; RETURN
OF INITIAL NOTES.
Subject to the terms and conditions of the Exchange Offer, the Company will
accept for exchange all validly tendered Initial Notes promptly after the
Expiration Date and will issue Exchange Notes therefor promptly after acceptance
of the Initial Notes. For purposes of the Exchange Offer, the Company shall be
deemed to have accepted tendered Initial Notes when, as and if the Company has
given written or oral notice thereof to the Exchange Agent. If any tendered
Initial Notes are not exchanged pursuant to the Exchange Offer for any reason,
such unexchanged Initial Notes will be returned, without expense, to the
undersigned at the address indicated above.
8. SUBSTITUTE FORM W-9.
Each Holder of Initial Notes whose Initial Notes are accepted for exchange
(or any other such payee) is required to provide the Exchange Agent with a
correct taxpayer identification number ('TIN'), generally the Holder's social
security or federal employer identification number, and certain other
information, on a Substitute Form W-9, a form of which is included in this
Letter of Transmittal, and to certify that the Holder (or other payee) is not
subject to backup withholding. Failure to provide the information on the
Substitute Form W-9 may subject the Holder (or other payee) to a penalty imposed
by the Internal Revenue Service and 31% federal income tax backup withholding on
payments made in connection with the Exchange Notes. The box in Part 3 of the
Substitute Form W-9 may be checked if the surrendering Holder of Initial Notes
(or other payee) has not been issued a TIN and has applied for a TIN or intends
to apply for a TIN in the near future. If the box in part 3 is checked, the
Holder of Initial Notes (or other payee) must also complete the Certificate of
Awaiting Taxpayer Identification Number accompanying this Letter of Transmittal
in order to avoid backup withholding. Notwithstanding that the box in part 3 is
checked and the Certificate of Awaiting Taxpayer Identification Number is
completed, the Exchange Agent will withhold 31 % of all payments made prior to
the time a properly certified TIN is provided to the Exchange Agent.
The Holder of Initial Notes is required to give the Exchange Agent the TIN
(e.g., social security number or employer identification number) of the record
owner of the Initial Notes. If the Initial Notes are in more than one name or
are not in the name of the beneficial owner, consult the 'Guidelines for
Certification of Taxpayer Identification Number on Substitute Form W-9' included
herein for additional guidance on which number to report.
Certain Holders of Initial Notes (or other payees) (including, among
others, all corporations and certain foreign individuals) are not subject to
these backup withholding and reporting requirements. However, exempt Holders of
Initial Notes (or other payees) should indicate their exempt status on
Substitute Form W-9. For example, a corporation must complete the Substitute
Form W-9, providing its TIN and indicating that it is exempt from backup
withholding. In order for a foreign individual to qualify as an exempt
recipient, the Holder (or other payee) must submit a Form W-8, signed under
penalties of perjury, attesting to that individual's exempt status. A Form W-8
can be obtained from the Exchange Agent. See the 'Guidelines for Certification
of Taxpayer Identification Number on Substitute Form W-9' included herein for
more instructions.
10
<PAGE>
SCHEDULE A
Florida
Georgia
Illinois
Massachusetts
Missouri
New Jersey
New York
North Carolina
Ohio
Pennsylvania
Tennessee
Texas
Wisconsin
<PAGE>
INSTRUCTIONS TO REGISTERED HOLDER
FROM BENEFICIAL OWNER
WITH RESPECT TO
PHILLIPS-VAN HEUSEN CORPORATION
9 1/2% SENIOR SUBORDINATED NOTES DUE 2008
The undersigned hereby acknowledges receipt of the Prospectus dated June
, 1998 (the 'Prospectus') of Phillips-Van Heusen Corporation (the 'Company'),
and the accompanying Letter of Transmittal (the 'Letter of Transmittal'), that
together constitute the Company's offer (the 'Exchange Offer') to exchange
$1,000 in principal amount of its 9 1/2% Senior Subordinated Notes due 2008 (the
'Exchange Notes') for each $1,000 in principal amount of its outstanding 9 1/2%
Senior Subordinated Notes due 2008 (the 'Initial Notes'). Capitalized terms used
herein but not defined herein have the meanings ascribed to them in the
Prospectus.
This will instruct you, the registered holder, as to the action to be taken
by you relating to the Exchange Offer with respect to the Initial Notes held by
you for the account of the undersigned.
The aggregate face amount of the Initial Notes held by you for the account
of the undersigned is (fill in amount):
$ of the 9 1/2% Senior Subordinated Notes due 2008.
With respect to the Exchange Offer, the undersigned hereby instructs you (check
appropriate box):
/ / To TENDER the following Initial Notes held by you for the account
of the undersigned (insert principal amount of initial notes to be
tendered, * if any):
$ of the 9 1/2% Senior Subordinated Notes due 2008.
* The minimum permitted tender is $1,000 in principal amount of
Initial Notes. All other tenders must be integral multiples of
$1,000 of principal amount.
/ / NOT to TENDER any Initial Notes held by you for the account of the
undersigned.
If the undersigned instructs you to tender the Initial Notes held by you
for the account of the undersigned, it is understood that you are authorized (a)
to make, on behalf of the undersigned (and the undersigned, by its signature
below, hereby makes to you), the representations and warranties contained in the
Letter of Transmittal that are to be made with respect to the undersigned as a
Beneficial Owner (as defined in the Letter of Transmittal), including, but not
limited to, representations to the effect that (i) the undersigned's principal
residence or principal business office is in the state of (fill in state) which
is listed on Schedule A attached to the Letter of Transmittal, (ii) the
undersigned is acquiring the Exchange Notes or interests therein in the ordinary
course of business of the undersigned, (iii) the undersigned is not
participating, does not intend to participate, and has no arrangement or
understanding with any person to participate, in the distribution of the
Exchange Notes, (iv) the undersigned acknowledges that any person who is a
broker-dealer registered under the Exchange Act or is participating in the
Exchange Offer for the purpose of distributing the Exchange Notes must comply
with the registration and prospectus delivery requirements of the Securities Act
in connection with a secondary resale of the Exchange Notes or any interest
therein acquired by such person and cannot rely on the position of the staff of
the Commission set forth in the no-action letters that are discussed in the
section of the Prospectus entitled 'Exchange Offer' and the Letter of
Transmittal, (v) the undersigned understands that a secondary resale transaction
described in clause (iv) above and any resale of the Exchange Notes and any
interest therein obtained by the undersigned in exchange for the Initial Notes
originally acquired by the undersigned directly from the Company should be
covered by an effective registration statement containing the selling security
holder information required by Items 507 and 508, as applicable, of Regulation
S-K of the Commission, and (vi) except as otherwise disclosed in writing
herewith, the undersigned is not an 'affiliate', as defined in Rule 405 under
the Securities Act of the Company; (b) to agree, on behalf of the undersigned,
as set forth in the Letter of Transmittal and (c) to take such other action as
may be necessary under the Prospectus or the Letter of Transmittal to effect the
valid tender of such Initial Notes. If the undersigned is a broker-dealer, the
undersigned further (x) represents that it acquired Initial Notes for the
undersigned's own account as a result of market-making activities or other
trading activities, (y) represents that it has not entered into any arrangement
or understanding with the Company or any 'affiliate' of the Company (within the
meaning of Rule 405 under the Securities Act) to distribute the Exchange Notes
to be received in the Exchange Offer and (z) acknowledges that it will deliver a
copy of a Prospectus meeting the requirements of the Securities Act in
connection with any resale of Exchange Notes.
<PAGE>
SIGN HERE
Name of Beneficial Owner(s): _________________________________________________
Signature(s): __________________________________________________________
Name(s): _______________________________________________________________
(PLEASE PRINT)
Address: _____________________________________________________________________
______________________________________________________________________________
Telephone Number: ____________________________________________________________
Taxpayer Identification or Social Security Number:____________________________
Date:_________________________________________________________________________
2
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------
PAYOR'S NAME: UNION BANK OF CALIFORNIA, N.A., AS EXCHANGE AGENT
- --------------------------------------------------------------------------------------------------------------
<S> <C> <C>
PART 1--Please provide your TIN in the box at right
and
SUBSTITUTE certify by signing and dating below. ------------------------
FORM W-9 Social Security
DEPARTMENT OF THE TREASURY Number(s)
INTERNAL REVENUE SERVICE or
------------------------
Employer Identification
Number
PAYOR'S REQUEST FOR -------------------------------------------------------------------------------
TAXPAYER IDENTIFICATION PART 2--CERTIFICATION: Under penalties of perjury, I certify that:
NUMBER ('TIN')
(1) The number shown on this form is my correct taxpayer identification
number (or I am waiting for a number to be issued for me), and
(2) I am not subject to backup withholding because: (a) I am exempt from
backup withholding, or (b) I have not been notified by the Internal Revenue
Service (IRS) that I am subject to a backup withholding as a result of a
failure to report all interest or dividends, or (c) the IRS has notified
me that I am no longer subject to backup withholding.
---------------------------------------------------------------------------------
CERTIFICATION INSTRUCTIONS: You must cross out
item (2) above if you have been notified by the IRS PART 3--
that you are currently subject to backup
withholding because of underreporting interest or Awaiting TIN / /
dividends on your tax return.
Signature
---------------------------------------
Date
--------------------------------------
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
NOTE: FAILURE TO COMPLETE AND RETURN THIS FORM MAY RESULT IN A $50 PENALTY
IMPOSED BY THE INTERNAL REVENUE SERVICE AND BACKUP WITHHOLDING OF 31% OF
ANY CASH PAYMENTS MADE TO YOU. PLEASE REVIEW THE 'GUIDELINES FOR
CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE FORM W-9'
INCLUDED HEREIN FOR ADDITIONAL DETAILS.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART
3 OF THE SUBSTITUTE FORM W-9.
- -------------------------------------------------------------------------------
CERTIFICATE OF AWAITING TAXPAYER IDENTIFICATION NUMBER
I certify under penalties of perjury that a taxpayer identification number has
not been issued to me, and either (i) I have mailed or delivered an application
to receive a taxpayer identification number to the appropriate Internal Revenue
Service Center or Social Security Administration Office or (ii) I intend to mail
or deliver an application in the near future. I understand that if I do not
provide a taxpayer identification number by the time of payment, 31% of all
reportable cash payments made to me thereafter will be withheld until I provide
a taxpayer identification number.
Signature Date
------------------------------ ---------------------------
- -------------------------------------------------------------------------------
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GUIDE THE
PAYER.--Social Security numbers have nine digits separated by two hyphens: i.e.
000-00-0000. Employer identification numbers have nine digits separated by only
one hyphen: i.e. 00-0000000. The table below will help determine the number to
give the payer.
- ------------------------------------------------------------------------------
GIVE THE
SOCIAL SECURITY
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------------------------------------------------------
1. An individual's account The individual
2. Two or more individuals The actual owner of the account or,
(joint account) if combined funds, any one of the
individuals(1)
3. Custodian account of a minor The minor(2)
4. a. The usual revocable savings trust The grantor-trustee(1)
account (grantor is also a
trustee)
b. So-called trust account that is The actual owner(1)
not a legal or valid trust under
State law
5. Sole proprietorship account The owner(3)
- ------------------------------------------------------------------------------
- ------------------------------------------------------------------------------
GIVE THE EMPLOYER IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
- ------------------------------------------------------------------------------
6. A valid trust, estate, or pension The legal entity (Do not furnish the
trust identifying number of the personal
representative or trustee unless the
legal entity itself is not
designated in the account title)(4)
7. Corporate account The corporation
8. Religious, charitable, or educational The organization
organization account
9. Partnership The partnership
10. Association, club, or other The organization
tax-exempt organization
11. A broker or registered nominee The broker or nominee
12. Account with the Department of The public entity
Agriculture in the name of a public
entity (such as a State or local
government, school district or
prison) that receives agricultural
program payments
- -----------------------------------------------------------------------------
(1) List first and circle the name of the person whose number you furnish.
(2) Circle the minor's name and furnish the minor's Social Security Number.
(3) Show the name of the owner. You may also enter your business name. You may
use your Social Security Number or Employer Indentification Number.
(4) List first and circle the name of the legal trust, estate, or pension trust.
NOTE: If no name is circled when there is more than one name, the number
will be considered to be that of the first name listed.
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
OBTAINING A NUMBER
If you don't have a Taxpayer Identification Number or you don't know your
number, obtain Form SS-5, Application for a Social Security Number Card, or Form
SS-4, Application for Employer Identification Number, at the local office of the
Social Security Administration or the Internal Revenue Service and apply for a
number.
PAYEES EXEMPT FROM BACKUP WITHHOLDING
Payees specifically exempted from backup withholding on broker transactions
include the following:
(i) A corporation.
(ii) A financial institution.
(iii) An organization exempt from tax under section 501(a), or
an individual retirement plan.
(iv) The United States or any agency or instrumentality
thereof.
(v) A State, the District of Columbia, a possession of the
United States, or any subdivision or instrumentality
thereof.
(vi) A foreign government, a political subdivision of a
foreign government, or any agency, or instrumentality
thereof.
(vii) An international organization or any agency or
instrumentality thereof.
(viii) A registered dealer in securities or commodities
registered in the United States or a possession of the
United States.
(ix) A real estate investment trust.
(x) A common trust fund operated by a bank under section
584(a).
(xi) An entity registered at all times under the Investment
Company Act of 1940.
(xii) A foreign central bank issue.
(xiii) A person registered under the Investment Advisors Act of
1940 who regularly acts as a broker.
Payment of interest not generally subject to backup withholding include the
following:
(i) Payments to nonresident aliens subject to withholding
under Section 1441.
(ii) Payments to partnerships not engaged in a trade or
business in the United States and which have at least one
nonresident partner.
(iii) Payments made by certain foreign organizations.
Exempt payees described above should file Form W-9 to avoid possible erroneous
backup withholding. FILE THIS FORM WITH THE PAYER, FURNISH YOUR TAXPAYER
IDENTIFICATION NUMBER, WRITE 'EXEMPT' ON THE FORM, SIGN AND DATE THE FORM AND
RETURN IT TO THE PAYER.
PRIVACY ACT NOTICE.--Section 6019 requires most recipients of dividend,
interest, or other payments to give Taxpayer Identification Numbers to payers
who must report the payments to the IRS. The IRS uses the numbers for
identification purposes. Payers must be given the numbers whether or not
recipients are required to file tax returns. Payers must generally withhold 31%
of taxable interest, dividend, and certain other payments to a payee who does
not furnish a taxpayer identification number to a payer. Certain penalties may
also apply.
PENALTIES
(1) PENALTY FOR FAILURE TO FURNISH TAXPAYER IDENTIFICATION NUMBER.--If you fail
to furnish your Taxpayer Identification Number to a payer, you are subject to a
penalty of $50 for each such failure unless your failure is due to reasonable
cause and not to willful neglect.
(2) CIVIL PENALTY FOR FALSE INFORMATION WITH RESPECT TO WITHHOLDING.--If you
make a false statement with no reasonable basis which results in no imposition
of backup withholding, you are subject to a penalty of $500.
(3) CRIMINAL PENALTY FOR FALSIFYING INFORMATION.-- Falsifying certifications or
affirmations may subject you to criminal penalties including fines and/or
imprisonment.
FOR ADDITIONAL INFORMATION CONTACT YOUR TAX CONSULTANT OR THE IRS.
<PAGE>
EXHIBIT 99.2
NOTICE OF GUARANTEED DELIVERY
WITH RESPECT TO
PHILLIPS-VAN HEUSEN CORPORATION
9 1/2% SENIOR SUBORDINATED NOTES DUE 2008
This form must be used by a holder of the 9 1/2% Senior Subordinated Notes
due 2008 (the 'Initial Notes' of Phillips-Van Heusen Corporation (the
'Company'), who wishes to tender Initial Notes to the Exchange Agent pursuant to
the guaranteed delivery procedures described in 'The Exchange Offer-- Guaranteed
Delivery Procedure' of the Prospectus dated June , 1998 (the 'Prospectus') and
in Instruction 1 of the Letter of Transmittal. Any holder who wishes to tender
Initial Notes pursuant to such guaranteed delivery procedures must ensure that
the Exchange Agent receives this Notice of Guaranteed Delivery prior to the
Expiration Date of the Exchange Offer. Capitalized terms not defined herein have
the meanings ascribed to them in the Prospectus or the Letter of Transmittal.
TO: UNION BANK OF CALIFORNIA, N.A.--EXCHANGE AGENT
BY HAND, OVERNIGHT COURIER OR MAIL:
Union Bank of California, N.A.
475 Sansome Street
12th Floor
San Francisco, California 94111
Attention: Gillian Wallace, Corporate Trust Division
or
BY FACSIMILE:
Union Bank of California, N.A.
Facsimile Number: (415) 296-6757
Attention: Gillian Wallace, Corporate Trust Division
DELIVERY OF THIS NOTICE OF GUARANTEED DELIVERY TO AN ADDRESS OTHER THAN AS
SET FORTH ABOVE WILL NOT CONSTITUTE A VALID DELIVERY. PLEASE READ THE
ACCOMPANYING INSTRUCTIONS CAREFULLY.
<PAGE>
Ladies and Gentlemen:
The undersigned hereby tenders to the Company, upon the terms and subject
to the conditions set forth in the Prospectus and the related Letter of
Transmittal, receipt of which is hereby acknowledged, the principal amount of
Initial Notes specified below pursuant to the guaranteed delivery procedures set
forth in the Prospectus and in Instruction 1 of the Letter of Transmittal. The
undersigned hereby tenders the Initial Notes listed below:
- --------------------------------------- ---------------------------------------
CERTIFICATE NUMBER(S) (IF KNOWN) OF AGGREGATE PRINCIPAL
INITIAL NOTES AMOUNT TENDERED
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
- --------------------------------------- ---------------------------------------
Name of Tendering Holder:___________________________
Signature(s):___________________________________
Name(s): _______________________________________
(PLEASE PRINT)
Address:____________________________________________
____________________________________________________
Telephone Number:___________________________________
Date:____________________, 1998
GUARANTEE
(NOT TO BE USED FOR SIGNATURE GUARANTEE)
The undersigned, a bank, broker, dealer, credit union, savings association,
clearing agency or other institution that is a member of a recognized signature
guarantee medallion program or is otherwise an 'eligible guarantor institution'
within the meaning of Rule 17Ad-15 under the Securities Exchange Act of 1934, as
amended, guarantees deposit with the Exchange Agent of the Letter of
Transmittal, together with the Initial Notes tendered hereby, in proper form for
transfer and any other required documents, all by 5:00 p.m., New York City time,
before the third business day (as defined in the Prospectus) following the
Expiration Date.
SIGN HERE
Name of firm: ____________________________________________
(PLEASE PRINT)
Authorized Signature:_____________________________________
Name: ____________________________________________________
(PLEASE PRINT)
Address:__________________________________________________
__________________________________________________________
__________________________________________________________
Telephone Number:_________________________________________
Date:_____________________________________________________
DO NOT SEND TENDERED INITIAL NOTES WITH THIS FORM. ACTUAL DELIVERY OF
TENDERED INITIAL NOTES MUST BE MADE IN ACCORDANCE WITH, AND BE ACCOMPANIED BY,
AN EXECUTED LETTER OF TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS.
<PAGE>
INSTRUCTIONS FOR NOTICE OF GUARANTEED DELIVERY
1. Delivery of this Notice of Guaranteed Delivery. A properly completed
and duly executed copy of this Notice of Guaranteed Delivery and any other
documents required by this Notice of Guaranteed Delivery must be received by the
Exchange Agent at its address set forth herein prior to the Expiration Date. The
method of delivery of this Notice of Guaranteed Delivery and any other required
documents to the Exchange Agent is at the election and risk of the holder, and
the delivery will be deemed made only when actually received by the Exchange
Agent. If delivery is by mail, registered mail with return receipt requested,
properly insured, is recommended. Instead of delivery by mail, it is recommended
that the holder use an overnight or hand delivery service. Facsimile
transmission is permissible, provided, however, that receipt is confirmed by
telephone and an original is delivered by guaranteed overnight courier. In all
cases, sufficient time should be allowed to assure timely delivery. For a
description of the guaranteed delivery procedure, see the section set forth in
the Prospectus entitled 'The Exchange Offer--Guaranteed Delivery Procedure' and
Instruction 1 of the Letter of Transmittal.
2. Signatures on this Notice of Guaranteed Delivery. If this Notice of
Guaranteed Delivery is signed by the registered holder(s) of the tendered
Initial Notes referred to herein, the signature must correspond with the name(s)
written on the face of the tendered Initial Notes without alteration or any
change whatsoever.
If this Notice of Guaranteed Delivery is signed by a person other than the
registered holder(s) of any tendered Initial Notes listed, this Notice of
Guaranteed Delivery must be accompanied by appropriate bond powers, signed as
the name of the registered holder(s) appears on the tendered Initial Notes.
If this Notice of Guaranteed Delivery is signed by a trustee, executor,
administrator, guardian, attorney-in-fact, officer of a corporation, or other
person acting in a fiduciary or representative capacity, such person should so
indicate when signing, and, unless waived by the Company, proper evidence
satisfactory to the Company of their authority so to act must be submitted.
3. Requests for Assistance or Additional Copies. Questions and requests
for assistance and requests for additional copies of the Prospectus may be
directed to the Exchange Agent at the address specified in the Prospectus.
Holders also may contact their broker, dealer, commercial bank, trust company,
or other nominee for assistance concerning the Exchange Offer.
