<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON FEBRUARY 21, 1997
REGISTRATION NO. 333-
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
-------------------
THE WILLIAM CARTER COMPANY
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C> <C>
MASSACHUSETTS 2300 13-3912935
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
incorporation or organization) Classification Code Number) Identification No.)
</TABLE>
-------------------
1590 ADAMSON PARKWAY, SUITE 400
MORROW, GEORGIA 30260
(770) 961-8722
(Address, including zip code, and telephone number,
including area code, of registrant's and co-registrant's principal executive
offices)
------------------------
JAY A. BERMAN
SENIOR VICE PRESIDENT
AND CHIEF FINANCIAL OFFICER
THE WILLIAM CARTER COMPANY
1590 ADAMSON PARKWAY, SUITE 400
MORROW, GEORGIA 30260
(770) 961-8722
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
------------------------
WITH A COPY TO:
CHARLES K. MARQUIS, ESQ.
GIBSON, DUNN & CRUTCHER LLP
200 PARK AVENUE
NEW YORK, NEW YORK 10166
-------------------
APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this Registration Statement becomes effective.
If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /
-------------------
CALCULATION OF REGISTRATION FEE
<TABLE>
<CAPTION>
PROPOSED MAXIMUM PROPOSED MAXIMUM
TITLE OF EACH CLASS AMOUNT TO OFFERING PRICE AGGREGATE OFFERING AMOUNT OF
OF SECURITIES TO BE REGISTERED BE REGISTERED PER UNIT (1) PRICE (1) REGISTRATION FEE
<S> <C> <C> <C> <C>
10 3/8% Series A Senior Subordinated
Notes due 2006 $100,000,000 100% $100,000,000 $30,303
</TABLE>
(1) Estimated pursuant to Rule 457(f) solely for the purposes of calculating the
registration fee.
-------------------
THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, AS AMENDED, OR UNTIL THE REGISTRATION STATEMENT
SHALL BECOME EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID
SECTION 8(A), MAY DETERMINE.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
SUBJECT TO COMPLETION, DATED FEBRUARY 21, 1997
INFORMATION 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.
<PAGE>
PROSPECTUS
OFFER FOR ALL OUTSTANDING 10 3/8% SENIOR SUBORDINATED NOTES DUE 2006
IN EXCHANGE FOR
10 3/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2006 OF
THE WILLIAM CARTER COMPANY
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M.,
NEW YORK CITY TIME ON , 1997, UNLESS EXTENDED
-------------------
The William Carter Company, a Massachusetts corporation (the "Company"),
hereby offers to exchange an aggregate principal amount of up to $100,000,000 of
its 10 3/8% Series A Senior Subordinated Notes due 2006 (the "New Notes") for a
like principal amount of its 10 3/8% Senior Subordinated Notes due 2006 (the
"Old Notes") outstanding on the date hereof 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"). The New Notes and
the Old Notes are collectively hereinafter referred to as the "Notes." The terms
of the New Notes are identical in all material respects to those of the Old
Notes, except for certain transfer restrictions and registration rights relating
to the Old Notes. The New Notes will be issued pursuant to, and entitled to the
benefits of, the Indenture (as defined) governing the Old Notes.
The New Notes will be unsecured, will be subordinated to all existing and
future Senior Indebtedness (as defined) of the Company and will be effectively
subordinated to all obligations of any subsidiaries of the Company as may exist
from time to time. The New Notes will rank PARI PASSU with all future Senior
Subordinated Indebtedness (as defined) of the Company and will rank senior to
all other subordinated indebtedness of the Company. The Indenture permits the
Company to incur additional indebtedness, including Senior Indebtedness under
its $100.0 million Senior Credit Facility (as defined), subject to certain
limitations. See "Description of Notes." As of December 28, 1996, the aggregate
amount of the Company's Senior Indebtedness was $45.0 million (exclusive of
unused commitments), and the Company had no Senior Subordinated Indebtedness
outstanding other than the Notes.
The New Notes will bear interest from and including the date of consummation
of the Exchange Offer. Interest on the New Notes will be payable semi-annually
on June 1 and December 1 of each year, commencing June 1, 1997. Additionally,
interest on the New Notes will accrue from the last interest payment date on
which interest was paid on the Old Notes surrendered in exchange therefor or, if
no interest has been paid on the Old Notes, from the date of original issue of
the Old Notes.
The New Notes are being offered hereunder in order to satisfy certain
obligations of the Company contained in the Exchange and Registration Rights
Agreement dated November 25, 1996 (the "Registration Rights Agreement"), between
the Company and the Initial Purchasers (as defined), with respect to the initial
sale of the Old Notes.
The Company will not receive any proceeds from the Exchange Offer. The
Company will pay all the expenses incident to the Exchange Offer. Tenders of Old
Notes pursuant to the Exchange Offer may be withdrawn at any time prior to the
Expiration Date (as defined) for the Exchange Offer. In the event the Company
terminates the Exchange Offer and does not accept for exchange any Old Notes
with respect to the Exchange Offer, the Company will promptly return such Old
Notes to the holders thereof. See "The Exchange Offer."
Each broker-dealer that receives New 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 New Notes. The Letter of Transmittal states
that by so acknowledging and by delivery of a prospectus, a broker-dealer will
not be deemed to admit that it is an "underwriter" within the meaning of the
Securities Act of 1933, as amended (the "Securities Act"). This Prospectus, as
it may be amended or supplemented from time to time, may be used by a
broker-dealer in connection with resales of New Notes received in exchange for
Old Notes where such Old Notes were acquired by such broker-dealer as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 90 days after the Expiration Date, it will make this
Prospectus available to any broker-dealer for use in connection with any such
resale. See "Plan of Distribution."
---------------------
Prior to the Exchange Offer, there has been no public market for the Old
Notes. If a market for the New Notes should develop, such New Notes could trade
at a discount from their principal amount. The Company currently does not intend
to list the New Notes on any securities exchange or to seek approval for
quotation through any automated quotation system and no active public market for
the New Notes is currently anticipated. There can be no assurance that an active
public market for the New Notes will develop.
The Exchange Offer is not conditioned upon any minimum principal amount of
Old Notes being tendered for exchange pursuant to the Exchange Offer.
SEE "RISK FACTORS" COMMENCING ON PAGE 12 FOR A DISCUSSION OF CERTAIN FACTORS
THAT HOLDERS OF OLD NOTES SHOULD CONSIDER IN CONNECTION WITH THE EXCHANGE OFFER.
-----------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE 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 , 1997.
<PAGE>
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROSPECTUS AND, IF GIVEN OR MADE, SUCH
INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED
BY THE COMPANY. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL, OR A
SOLICITATION OF AN OFFER TO BUY, ANY OF THE NEW NOTES OR OLD NOTES BY ANY PERSON
IN ANY JURISDICTION IN WHICH IT IS UNLAWFUL FOR SUCH PERSON TO MAKE SUCH AN
OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR THE EXCHANGE
PROPOSED TO BE MADE HEREUNDER SHALL UNDER ANY CIRCUMSTANCES IMPLY THAT THE
INFORMATION HEREIN IS CORRECT AS OF ANY DATE SUBSEQUENT TO THE DATE HEREOF.
UNTIL , 1997, ALL DEALERS EFFECTING TRANSACTIONS IN THE REGISTERED
SECURITIES, WHETHER OR NOT PARTICIPATING IN THE DISTRIBUTION, MAY BE REQUIRED TO
DELIVER A PROSPECTUS.
AVAILABLE INFORMATION
The Company is not currently subject to the periodic reporting and other
informational requirements of the Securities Exchange Act of 1934, as amended
(the "Exchange Act"). Pursuant to the Indenture, the Company has agreed to file
with the Securities and Exchange Commission (the "Commission") and provide to
the holders of the Notes annual reports and the information, documents and other
reports that are specified in Sections 13 and 15(d) of the Exchange Act.
The Company has filed with the Commission a Registration Statement (which
term includes any amendments thereto) on Form S-4 under the Securities Act with
respect to the New Notes offered by this Prospectus. This Prospectus does not
contain all information set forth in the Registration Statement and the exhibits
thereto, to which reference is hereby made. Statements made in this Prospectus
as to the contents of any contract, agreement, or other document are not
necessarily complete. With respect to each such contract, agreement, or other
document filed as an exhibit to the Registration Statement, reference is made to
such exhibit for a more complete description of the matter involved.
2
<PAGE>
SUMMARY
THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED
INFORMATION AND FINANCIAL STATEMENTS AND NOTES THERETO APPEARING ELSEWHERE IN
THIS PROSPECTUS. FOR PURPOSES OF THIS PROSPECTUS, THE "COMPANY" AND "CARTER'S"
SHALL REFER TO THE WILLIAM CARTER COMPANY AND ALL OF ITS CONSOLIDATED
SUBSIDIARIES, UNLESS THE CONTEXT OTHERWISE REQUIRES. THE FISCAL YEAR OF THE
COMPANY ENDS ON THE SATURDAY IN DECEMBER OR JANUARY NEAREST THE LAST DAY OF
DECEMBER. ALL REFERENCES TO DEMOGRAPHIC DATA IN THIS PROSPECTUS ARE BASED UPON
INDUSTRY PUBLICATIONS, CENSUS INFORMATION AND COMPANY DATA AND, UNLESS
INDICATED, ALL REFERENCES TO NUMBER OF STORES ARE AS OF DECEMBER 28, 1996. AS
USED HEREIN, REFERENCES TO "BABY AND TODDLER" MEAN NEWBORNS THROUGH TODDLERS
APPROXIMATELY AGE THREE (UP TO SIZE 4T) AND REFERENCES TO "YOUNG CHILDREN" MEAN
CHILDREN FROM APPROXIMATELY AGE THREE UP TO APPROXIMATELY AGE SIX (BOYS' SIZES
4-7 AND GIRLS' SIZES 4-6X). MARKET SHARE DATA IN THIS PROSPECTUS ARE IN UNITS AS
REPORTED IN AN AUGUST 1996 NATIONAL PANEL DIARY SURVEY AND REFER ONLY TO THE
COMPANY'S TARGET DISTRIBUTION CHANNELS, WHICH INCLUDE ALL DOMESTIC DEPARTMENT
AND SPECIALTY STORES AND EXCLUDE OFF-PRICE, DISCOUNT AND OUTLET OPERATORS.
THE COMPANY
The William Carter Company is the largest marketer of baby and toddler
apparel and a leading marketer of young children's apparel. Over the Company's
more than 130 years of operation, CARTER'S has become one of the most highly
recognized brand names in the children's apparel industry. The Company is a
vertically-integrated manufacturer that sells its products under the CARTER'S,
CARTER'S CLASSICS and BABY DIOR brand names to more than 300 department and
specialty store accounts (with an estimated 4,600 store fronts) and through its
135 retail outlet stores. Carter's is the leading provider of layette (a
complete range of apparel and related products for newborns) in its target
distribution channels, with a market share of approximately 16%, more than four
times that of its nearest branded competitor. Carter's is also the leading
provider of baby and toddler sleepwear in its target distribution channels, with
a market share of approximately 28%, more than three times that of its nearest
branded competitor. The Company also has a significant presence in the much
larger and highly fragmented baby and toddler playwear market.
Carter's generates approximately 87% of its sales in the baby and toddler
apparel market, a $5.6 billion market which grew at a 6.1% compound annual rate
from 1991 through 1995. Management believes that the baby and toddler market is
well-insulated from changes in fashion trends and less sensitive to general
economic conditions, while offering strong prospects for continued growth. The
growth in this market is being driven by a number of factors, including: (i)
women having children later, resulting in more disposable income available for
expenditures on children; (ii) more women returning to the workplace after
having children, resulting in more disposable income and increased day care
apparel needs; (iii) the increasing number of grandparents, a demographic
segment with high per capita discretionary income and an important consumer base
for children's apparel; and (iv) an increasing social emphasis on attractive
children's apparel.
Carter's senior management has significantly increased earnings and market
share since joining the Company in 1992. Management's fundamental strategy has
been to promote the Company's brand image as the absolute leader in baby apparel
products and to consistently provide high quality, attractive products at a
strong perceived value to consumers. To this end, management employs a
comprehensive four-step marketing strategy which incorporates: (i) extensive
consumer preference testing; (ii) superior brand and product presentation at the
consumer point-of-purchase; (iii) dominant marketing communications; and (iv)
consistent, premium service to fulfill customer and consumer needs. In addition,
the Company continues to realize significant operating efficiencies by reducing
SKUs and product complexity, enhancing core product offerings, increasing
off-shore production and implementing the wider use of advanced information
systems. As a result of these efforts, the Company has increased its EBITDA (as
defined) from $12.4 million in fiscal 1992 to $31.2 million in fiscal 1996.
3
<PAGE>
COMPANY STRENGTHS
The Company attributes its market leadership and its significant
opportunities for continued growth and increased profitability to the following
competitive strengths:
SUPERIOR BRAND AWARENESS. Carter's has achieved a high level of positive
brand awareness with both consumers and retailers as a result of more than a
century of providing quality baby, toddler and young children's apparel. In a
1993 survey, 92% of mothers and grandmothers surveyed were familiar with the
CARTER'S brand name, and 80% reported that they had purchased CARTER'S brand
products. The Company has maintained this positive brand awareness despite a
relatively low marketing budget with little national advertising. Management
believes that the consolidation of the apparel industry and changes in the
retail environment will continue to favor strong branded companies such as
Carter's, as many department and specialty stores have focused on promoting
leading brands while reducing their number of suppliers.
LEADING AND GROWING MARKET POSITIONS. Carter's is the largest provider of
baby and toddler apparel, with leading market shares in the layette and
sleepwear product categories in its target distribution channels. Since 1992,
the Company has increased its share of the layette market from 9% to 16% and its
share of the baby and toddler sleepwear market from 22% to 28%. In addition, the
Company is the second largest provider of young children's sleepwear and has a
significant presence in the much larger and highly fragmented baby and toddler
playwear market.
STRONG MANAGEMENT TEAM. Since joining Carter's in 1992, the Company's
management team, led by Frederick J. Rowan, II, has been responsible for sales
and EBITDA increasing at compound annual rates of 8.7% and 25.8%, respectively.
Four of the Company's top executives, including Mr. Rowan, joined the Company
following successful careers running the Bassett-Walker and Lee Jeans divisions
of the VF Corporation. The Company's five top executives average more than 20
years of experience in the textile and apparel industries. Management believes
that they have significant experience in developing brand names, have a strong
reputation with customers, the trade and the financial community, and possess a
diverse skill base which incorporates brand marketing, multiple sourcing,
off-shore production, vertical manufacturing and management information systems
("MIS") integration.
VERTICALLY-INTEGRATED MANUFACTURING CAPABILITIES. Carter's is a
vertically-integrated manufacturer that knits, dyes, finishes, prints, cuts,
sews and embroiders approximately 80% of the products it sells. The Company
believes that its vertical integration allows it to maintain a competitive cost
structure, accelerate speed to market and provide consistent, premium quality.
Since 1992, the Company has made significant investments in equipment,
facilities and systems to improve quality, reduce costs, minimize shrinkage,
decrease inventories and shorten cycle times. In 1991, the Company commenced
off-shore sewing operations to decrease costs of sewing, typically the most
labor-intensive portion of the manufacturing process. At year-end 1996,
approximately 40% of the Company's sewing production was conducted off-shore
which reduced annual manufacturing costs by approximately $10 million. In
addition, in 1993, management initiated a substantial upgrade of its MIS
capabilities with a fully-integrated operating system designed to support the
growth of the business and to further improve manufacturing efficiencies. These
system upgrades are 65% complete and are expected to be completed in 1998.
STRONG CUSTOMER RELATIONSHIPS. Due to focused and consistent management
efforts to create retail partnerships, the Company enjoys strong relationships
with its wholesale customers, as evidenced by the nine supplier awards the
Company has received since 1992. Management meets frequently with the Company's
major accounts to review product offerings, establish and monitor sales plans
and design joint advertising and promotional campaigns. In addition, the Company
has introduced to several of its major wholesale customers, including Macy's,
Bloomingdale's, Burdine's, Rich's and JCPenney, its "store-in-store" concept in
which the Company creates a CARTER'S-brand shop within its wholesale customers'
children's apparel departments. Such store-in-store shops provide the Company
with dedicated selling space, superior and consistent brand presentation and
greater control of product mix, resulting in higher profitability and
productivity for both the Company and its wholesale customers.
4
<PAGE>
OPERATING STRATEGY
The Company intends to strengthen its market leadership positions and
further increase sales and EBITDA by continuing to implement an operating
strategy which has the following primary components:
INCREASE INVESTMENTS IN BRAND EQUITY. Management believes Carter's enjoys
among the highest brand awareness of any children's apparel company, despite
having spent an estimated 0.3% of sales on advertising, including only $1.1
million on national advertising, in fiscal 1996. In order to capitalize further
on the potential of the CARTER'S name, the Company intends to increase its joint
promotional activities with its key wholesale accounts, accelerate the roll out
of its branded "store-in-store" shops and selectively increase its national
print advertising, with heightened visibility of its tag line "If they could
just stay little 'til their CARTER'S wear out."-TM- Management believes that
selective investments in its brand will result in high returns and will help
support continued growth.
INCREASE OPERATING EFFICIENCIES. The Company's management team has
successfully increased EBITDA margins from 5.5% of sales in 1992 to 9.8% of
sales in fiscal 1996. The Company has achieved these results by reducing SKUs,
decreasing product complexity, upgrading information systems and moving certain
labor-intensive portions of its production process off-shore. Management
believes additional opportunities exist to continue to reduce manufacturing
costs and accelerate speed to market by shortening cycle times, more efficiently
managing inventories and further expanding off-shore production. Management
expects to increase the Company's percentage of off-shore sewing production to
approximately 60% by the end of 1998 and approximately 80% by the end of 2001,
which is expected to yield incremental cost savings in line with the Company's
historical experience.
ENHANCE RETAIL OUTLET STORE PRODUCTIVITY. During the past year, the Company
has emphasized improving the value, quality and convenience of the retail
shopping experience. Management has recently increased the percentage of
sleepwear and baby products in the Company's retail product mix, which represent
the Company's historical product strengths and also carry higher margins. The
Company is also reducing the complexity and assortment of retail products
offered to simplify the consumer's shopping experience. In addition, the Company
has created new consumer-friendly store layouts, with clearly identified
departments, designated clearance areas and higher impact store fronts. Since
November 1995, the Company has implemented these new store layouts in 24 of its
135 retail outlet stores, and expects to have this new store layout implemented
in approximately 100 of its stores by the end of 1997.
CAPITALIZE ON ADDITIONAL GROWTH OPPORTUNITIES. The Company intends to
aggressively pursue selected growth opportunities in its primary markets,
including:
- Leveraging its leading positions in layette and sleepwear to increase its
share of the larger and more highly fragmented playwear market, which is
more than five times the size of the sleepwear market. Management has
recently increased the marketing focus on its playwear lines and
introduced new playwear product designs. The success of these efforts is
reflected in the 33% increase in wholesale playwear shipments from fiscal
1995 to fiscal 1996.
- Continuing to implement the Company's "store-in-store" concept. The
Company first introduced these shops in fiscal 1995, had 250 such shops at
the end of fiscal year 1996 and expects to have approximately 400 such
shops by the end of fiscal 1997. Management believes that there are
significant opportunities to expand the "store-in-store" concept
throughout its wholesale customer base.
- Leveraging the CARTER'S brand through other growth opportunities. Carter's
has recently initiated product extensions through a gift-giving program
and a renewed focus on selectively increasing licensing relationships. In
addition, Carter's is investigating opportunities for international and
direct marketing sales, alternative retail formats and brand extensions to
serve the discount channel, a market in which the Company currently does
not compete.
5
<PAGE>
THE ACQUISITION
On October 30, 1996 (the "Acquisition Closing Date"), Carter Holdings, Inc.
("Holdings"), a company organized on behalf of affiliates of INVESTCORP S.A.
("Investcorp"), management and certain other investors, acquired 100% of the
outstanding common and preferred stock of the Company (the "Acquisition") from
MBL Life Assurance Corporation ("MBL"), CHC Charitable Irrevocable Trust (the
"Trust") and certain management stockholders (collectively, the "Sellers") for
$208.0 million, which includes the issuance of shares of non-voting stock of
Holdings valued at $9.1 million to certain members of management, plus certain
other payments, costs and expenses of approximately $18.1 million. Financing for
the Acquisition was provided by (i) $56.1 million of borrowings under a $100.0
million senior credit facility among the Company, certain lenders and The Chase
Manhattan Bank, as administrative agent (the "Senior Credit Facility"), (ii)
$90.0 million of borrowings under a subordinated loan facility among the
Company, certain lenders and Bankers Trust Company, as administrative agent (the
"Subordinated Loan Facility") and (iii) $70.9 million of capital invested by
affiliates of Investcorp and certain other investors in Holdings. See "The
Acquisition."
The Company and Holdings are Massachusetts corporations. The principal
executive offices of the Company and Holdings are located at 1590 Adamson
Parkway, Suite 400, Morrow, Georgia 30260, and their telephone number is (770)
961-8722.
RISK FACTORS
Holders of Old Notes should carefully consider all of the information set
forth under "Risk Factors" in connection with the Exchange Offer.
THE EXCHANGE OFFER
<TABLE>
<S> <C>
Securities Offered.............. Up to $100,000,000 aggregate principal amount of 10 3/8%
Series A Senior Subordinated Notes due 2006 (the "New
Notes"). The terms of the New Notes and Old Notes are
identical in all material respects, except for certain
transfer restrictions and registration rights relating to
the Old Notes.
The Exchange Offer.............. The New Notes are being offered in exchange for a like
principal amount of Old Notes. Old Notes may be exchanged
only in integral multiples of $1,000. The issuance of the
New Notes is intended to satisfy obligations of the Company
contained in the Registration Rights Agreement.
Expiration Date; Withdrawal of
Tender.......................... The Exchange Offer will expire at 5:00 p.m. New York City
time, on , 1997, or such later date and time to
which it is extended by the Company. The tender of Old
Notes pursuant to the Exchange Offer may be withdrawn at
any time prior to the Expiration Date. Any Old Notes not
accepted for exchange for any reason will be returned
without expense to the tendering holder thereof as promptly
as practicable after the expiration or termination of the
Exchange Offer.
Certain Conditions to the
Exchange Offer.................. The Company's obligation to accept for exchange, or to
issue New Notes in exchange for, any Old Notes is subject
to certain customary
</TABLE>
6
<PAGE>
<TABLE>
<S> <C>
conditions relating to compliance with any applicable law,
order of any governmental agency or any applicable
interpretation by any staff of the Commission, which may be
waived by the Company in its reasonable discretion. The
Company currently expects that each of the conditions will
be satisfied and that no waivers will be necessary. See
"The Exchange Offer--Certain Conditions to the Exchange
Offer."
Procedures for Tendering Old
Notes........................... Each holder of Old 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, or such
facsimile, together with such Old Notes and any other
required documentation, to the Exchange Agent (as defined)
at the address set forth herein. See "The Exchange
Offer--Procedures for Tendering Old Notes."
Use of Proceeds................. There will be no proceeds to the Company from the exchange
of Notes pursuant to the Exchange Offer.
Exchange Agent.................. State Street Bank and Trust Company is serving as the
Exchange Agent in connection with the Exchange Offer.
Federal Income Tax
Consequences.................... The exchange of Notes pursuant to the Exchange Offer will
not be a taxable event for federal income tax purposes. See
"Certain Federal Income Tax Considerations."
</TABLE>
CONSEQUENCES OF EXCHANGING OLD NOTES PURSUANT
TO THE EXCHANGE OFFER
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, holders of Old Notes (other than any
holder who is an "affiliate" of the Company within the meaning of Rule 405 under
the Securities Act) who exchange their Old Notes for New Notes pursuant to the
Exchange Offer generally may offer such New Notes for resale, resell such New
Notes, and otherwise transfer such New Notes without compliance with the
registration and prospectus delivery provisions of the Securities Act, provided
such New Notes are acquired in the ordinary course of the holder's business and
such holders have no arrangement with any person to participate in a
distribution of such New Notes. Each broker-dealer that receives New Notes for
its own account in exchange for Old Notes must acknowledge that it will deliver
a prospectus in connection with any resale of such New Notes. See "Plan of
Distribution." In addition, to comply with the securities laws of certain
jurisdictions, if applicable, the New 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 New
Notes for offer or sale under the securities or blue sky laws of such
jurisdictions as any holder of the Notes reasonably requests in writing. If a
holder of Old Notes does not exchange such Old Notes for New Notes pursuant to
the Exchange Offer, such Old Notes will continue to be subject to the
restrictions on transfer contained in the legend thereon. In general, the Old
Notes may not be offered or sold, unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. See "The Exchange
Offer--Consequences of Failure to Exchange; Resales of New Notes."
7
<PAGE>
The Old Notes are currently eligible for trading in the Private Offerings,
Resales and Trading through Automated Linkages ("PORTAL") market. Following
commencement of the Exchange Offer but prior to its consummation, the Old Notes
may continue to be traded in the PORTAL market. Following consummation of the
Exchange Offer, the New Notes will not be eligible for PORTAL trading.
THE NEW NOTES
THE TERMS OF THE NEW NOTES ARE IDENTICAL IN ALL MATERIAL RESPECTS TO THE OLD
NOTES, EXCEPT FOR CERTAIN TRANSFER RESTRICTIONS AND REGISTRATION RIGHTS RELATING
TO THE OLD NOTES. FOR PURPOSES OF THIS PROSPECTUS, THE TERM "NOTES" SHALL REFER
COLLECTIVELY TO THE NEW NOTES AND THE OLD NOTES.
<TABLE>
<S> <C>
Issuer.......................... The William Carter Company.
Securities Offered.............. $100,000,000 principal amount of 10 3/8% Series A Senior
Subordinated Notes due 2006 (the "New Notes").
Maturity Date................... December 1, 2006.
Interest Payment Dates.......... June 1 and December 1 of each year, commencing on June 1,
1997.
Optional Redemption............. Except as described below, the Company may not redeem the
Notes prior to December 1, 2001. On or after such date, the
Company may redeem the Notes, in whole or in part, at the
redemption prices set forth herein, together with accrued
and unpaid interest, if any, to the date of redemption. In
addition, at any time on or prior to December 1, 1999, the
Company may redeem up to 35% of the original aggregate
principal amount of the Notes with the net cash proceeds of
one or more Public Equity Offerings (as defined) by the
Company or Holdings at a redemption price equal to 110.375%
of the principal amount to be redeemed, together with
accrued and unpaid interest, if any, to the date of
redemption, provided that at least 65% of the original
aggregate principal amount of Notes remains outstanding
immediately after any such redemption. See "Description of
Notes--Optional Redemption."
Change of Control............... Upon the occurrence of a Change of Control (i) the Company
will have the option, at any time on or prior to December
1, 2001, to redeem the New Notes in whole but not in part
at a redemption price equal to 100% of the principal amount
thereof plus the Applicable Premium (as defined) as of, and
accrued and unpaid interest, if any, to, the date of
redemption, and (ii) if the Company does not so redeem the
New Notes or if such Change of Control occurs after
December 1, 2001, the Company will be required to make an
offer to repurchase the New Notes at a price equal to 101%
of the principal amount thereof, together with accrued and
unpaid interest, if any, to the date of purchase. See
"Description of Notes-- Change of Control."
Ranking......................... The New Notes will be general unsecured obligations of the
Company and will be subordinated in right of payment to all
existing and future Senior Indebtedness (as defined) of the
Company. The New Notes will rank PARI PASSU with all
present and future
</TABLE>
8
<PAGE>
<TABLE>
<S> <C>
Indebtedness of the Company other than Senior Indebtedness
and will rank senior to any Subordinated Obligations (as
defined) of the Company. At December 28, 1996, the
aggregate amount of the Company's outstanding Senior
Indebtedness was $45.0 million (exclusive of unused
commitments). See "Description of Notes-- Ranking."
Certain Covenants............... The indenture under which the New Notes will be issued (the
"Indenture") limits, among other things, (i) the incurrence
of additional indebtedness by the Company and its
subsidiaries, (ii) the payment of dividends on, and
redemption of, capital stock of the Company and its
subsidiaries and the redemption of certain subordinated
obligations of the Company and its subsidiaries, (iii)
investments, (iv) sales of assets and subsidiary stock, (v)
transactions with affiliates, (vi) the creation of liens
and (vii) consolidations, mergers and transfers of all or
substantially all of the Company's assets. The Indenture
also prohibits certain restrictions on distributions from
subsidiaries. However, all of these limitations and
prohibitions are subject to a number of important
qualifications and exceptions. See "Description of
Notes--Certain Covenants."
Absence of a Public Market for
the New Notes................... The New Notes are new securities and there is currently no
established market for the New Notes. Accordingly, there
can be no assurance as to the development or liquidity of
any market for the New Notes. The Company does not intend
to apply for listing of the New Notes on a securities
exchange.
</TABLE>
9
<PAGE>
SUMMARY HISTORICAL AND PRO FORMA FINANCIAL INFORMATION
The following table sets forth summary historical financial and other data
of the Company for the five fiscal years ended December 28, 1996 and certain pro
forma financial and other data for the fiscal year ended December 28, 1996. The
pro forma operating data and other data assume that the Acquisition and the
issuance of the Old Notes and the application of the net proceeds therefrom
(collectively, the "Transactions") occurred on December 31, 1995 (the first day
of fiscal 1996). The adjusted pro forma operating and other data assume that the
Transactions and the issuance of the New Notes occurred on December 31, 1995.
The pro forma financial and other data do not purport to represent what the
Company's financial position or results of operations would actually have been
had the Transactions in fact occurred on the assumed dates or to project the
Company's financial position or results of operations for any future date or
period. For additional information, see the Consolidated Financial Statements
and related notes thereto included elsewhere in this Prospectus. The following
table should also be read in conjunction with "Selected Historical and Pro Forma
Financial Data," "Unaudited Pro Forma Condensed Consolidated Financial
Statements" and "Management's Discussion and Analysis of Financial Condition and
Results of Operations."
<TABLE>
<CAPTION>
(DOLLARS IN MILLIONS)
FISCAL YEAR
-------------------------------------------------------------------------------------
PREDECESSOR SUCCESSOR
DEC. 31, 1995 OCT. 30, 1996
THROUGH THROUGH PRO FORMA
1992 1993 1994 1995 OCT. 29, 1996 DEC. 28, 1996 1996
--------- --------- --------- --------- ------------- ------------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Net sales................................. $ 228.1 $ 237.0 $ 271.5 $ 295.4 $ 266.7 $ 51.5 $ 318.2
Gross profit.............................. 63.7 80.5 96.3 104.3 96.7 19.8 116.2
Selling, general and administrative....... 58.0 67.7 77.5 83.2 79.3 16.7 99.6
Operating income (loss) (a)............... (2.4) 12.8 18.8 21.1 8.6 3.1 16.6
Interest expense.......................... 7.4 6.0 6.4 7.8 7.1 2.6 16.9
Income (loss) before income taxes and
extraordinary item...................... (9.8) 6.8 12.4 13.3 1.5 0.5 (0.3)
Extraordinary item, net of tax (b)........ -- -- -- -- -- 2.4 --
--------- --------- --------- --------- ------ ------ -----------
Net income (loss)......................... $ (10.1) $ 3.8 $ 8.4 $ 8.1 $ (0.4) $ (2.1) $ (0.5)
--------- --------- --------- --------- ------ ------ -----------
--------- --------- --------- --------- ------ ------ -----------
Net income (loss) available to common
stockholders............................ $ (10.1) $ 3.8 $ 6.7 $ 6.5 $ (1.5) $ (2.5) $ (3.2)
--------- --------- --------- --------- ------ ------ -----------
--------- --------- --------- --------- ------ ------ -----------
OTHER DATA:
EBITDA (c)................................ $ 12.4 $ 20.6 $ 27.1 $ 30.6 $ 25.6 $ 5.5 $ 31.5
EBITDA margin............................. 5.5% 8.7% 10.0% 10.3% 9.6% 10.7% 9.9%
Gross margin.............................. 27.9% 34.0% 35.5% 35.3% 36.3% 38.4% 36.5%
Depreciation and amortization............. $ 6.7 $ 6.4 $ 6.5 $ 7.3 $ 6.6 $ 2.4 $ 13.3
Capital expenditures...................... 5.0 7.9 11.0 13.7 4.0 3.7 7.8
Cash interest expense (d)................. 7.0 5.6 6.0 7.4 6.7 2.5 15.7
Ratio of earnings to fixed charges (e).... -- 1.8x 2.3x 2.1x 1.1x 1.1x --
Ratio of EBITDA to cash interest
expense................................. 1.8x 3.7x 4.5x 4.1x 3.8x 2.2x 2.0x
<CAPTION>
AT DECEMBER
28,
1996
-------------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Working capital(f)(g)................................................................................ $ 69.7
Total assets......................................................................................... 318.7
Total debt, including current maturities............................................................. 145.0
Redeemable preferred stock(h)........................................................................ 18.2
Common stockholder's equity.......................................................................... 57.5
<CAPTION>
ADJUSTED
PRO FORMA
1996
-----------
<S> <C>
OPERATING DATA:
Net sales................................. $ 318.2
Gross profit.............................. 116.2
Selling, general and administrative....... 99.6
Operating income (loss) (a)............... 16.6
Interest expense.......................... 17.0
Income (loss) before income taxes and
extraordinary item...................... (0.4)
Extraordinary item, net of tax (b)........ --
-----------
Net income (loss)......................... $ (0.6)
-----------
-----------
Net income (loss) available to common
stockholders............................ $ (3.2)
-----------
-----------
OTHER DATA:
EBITDA (c)................................ $ 31.5
EBITDA margin............................. 9.9%
Gross margin.............................. 36.5%
Depreciation and amortization............. $ 13.3
Capital expenditures...................... 7.8
Cash interest expense (d)................. 15.7
Ratio of earnings to fixed charges (e).... --
Ratio of EBITDA to cash interest
expense................................. 2.0x
<S> <C>
BALANCE SHEET DATA:
Working capital(f)(g).....................
Total assets..............................
Total debt, including current maturities..
Redeemable preferred stock(h).............
Common stockholder's equity...............
</TABLE>
10
<PAGE>
- ------------
(a) Operating income (loss) for the period December 31, 1995 through October 29,
1996 includes: (1) compensation-related charges of $5.3 million for amounts
paid to management in connection with the Acquisition; and (2) other expense
charges of $3.5 million for costs and fees the Company incurred in
connection with the Acquisition. Both of these items are excluded from pro
forma and adjusted pro forma fiscal 1996 results.
(b) The extraordinary item for the period October 30, 1996 through December 28,
1996 reflects the write-off of $3.4 million and $0.2 million of deferred
debt issuance costs related to the Subordinated Loan Facility and the
portion of the Senior Credit Facility repaid with the proceeds of the Old
Notes in November 1996, net of income tax effects. These items are excluded
from pro forma and adjusted pro forma fiscal 1996 results.
(c) EBITDA represents earnings before interest expense and income tax expense
(i.e., operating income (loss)) excluding the following charges:
(i) depreciation and amortization expense including prepaid management fee
amortization of $0.23 million for the period October 30, 1996 through
December 28, 1996 and $1.35 million for pro forma and adjusted pro forma
fiscal 1996 in connection with the Acquisition;
(ii) in fiscal 1992, $8.2 million of restructuring charges related to new
management establishing a strategy to rationalize SKUs within its product
lines, decrease product complexity and improve manufacturing operations,
a reduction in the carrying value of a facility held for sale, and costs
associated with certain plant closings;
(iii) recurring costs associated with certain benefit plans which were
terminated as a result of the Acquisition and not replaced, as follows:
(1) Long-Term Incentive Plan expenses of $0.8 million, $1.2 million, $1.1
million and $1.0 million for fiscal 1993, 1994, 1995 and the period
December 31, 1995 through October 29, 1996, respectively, and $1.0
million for pro forma and adjusted pro forma fiscal 1996; (2) Management
Equity Participation Plan expenses of $0.6 million, $0.6 million, $0.6
million and $0.6 million for fiscal 1993, 1994, 1995 and the period
December 31, 1995 through October 29, 1996, respectively, and $0.6
million for pro forma and adjusted pro forma fiscal 1996; and (3) Stock
Compensation Plan expense of $0.4 million in fiscal 1995; and
(iv) in fiscal 1996, nonrecurrring charges of $8.3 million related to the
Acquisition.
The Company has included information concerning EBITDA as it is relevant for
covenant analysis under the Indenture, which defines EBITDA as set forth
above for the periods shown. See "Description of Notes--Certain
Definitions." In addition, management believes that EBITDA is generally
accepted as providing useful information regarding a company's ability to
service and/or incur debt. EBITDA should not be considered in isolation or
as a substitute for net income, cash flows or other consolidated income or
cash flow data prepared in accordance with generally accepted accounting
principles or as a measure of a company's profitability or liquidity.
(d) Cash interest expense is defined as interest expense less amortization of
debt issuance costs.
(e) For the purpose of determining the ratio of earnings to fixed charges,
earnings consist of income before income taxes and fixed charges. Fixed
charges consist of interest expense, which includes the amortization of
deferred debt issuance costs and the interest portion of the Company's rent
expense (assumed to be one-third of total rent expense). Earnings were
insufficient to cover fixed charges for fiscal 1992 by $9.8 million, for pro
forma fiscal 1996 by $0.3 million and for adjusted pro forma fiscal 1996 by
$0.4 million.
(f) Represents total current assets (excluding cash and cash equivalents) less
total current liabilities, excluding current portion of long-term debt.
(g) On an adjusted pro forma basis, working capital would be $68.7 million, due
to the use of cash for $1.0 million of estimated debt issuance costs
incurred for the New Notes.
(h) The Company issued redeemable preferred stock at the closing of the
Acquisition to Holdings for $20.0 million (its estimated fair value, which
equals its redemption value), net of $2.2 million of fees associated with
its issuance.
11
<PAGE>
RISK FACTORS
IN EVALUATING AN INVESTMENT IN THE NEW NOTES, PROSPECTIVE INVESTORS SHOULD
CAREFULLY CONSIDER THE FOLLOWING RISK FACTORS AS WELL AS THE OTHER INFORMATION
SET FORTH ELSEWHERE IN THIS PROSPECTUS.
SUBSTANTIAL LEVERAGE AND DEBT SERVICE OBLIGATIONS
The Company incurred substantial indebtedness in connection with the
Acquisition and the offering of the Old Notes (the "Offering"), the effect of
which was to increase the Company's indebtedness by approximately $83.0 million.
At December 28, 1996, the Company's total indebtedness was $145.0 million
(exclusive of $50.0 million of available borrowings and outstanding letters of
credit under the Senior Credit Facility), and the Company had redeemable
preferred stock of $20.0 million ($18.2 million net of fees associated with its
issuance and accretion) and common stockholder's equity of $57.5 million. The
degree to which the Company is leveraged could have important consequences to
holders of the Notes, including the following: (i) the Company's ability to
obtain additional financing for working capital, capital expenditures,
acquisitions or general corporate purposes may be impaired; (ii) a substantial
portion of the Company's cash flow from operations must be dedicated to the
payment of interest on the Notes and its other existing indebtedness, thereby
reducing the funds available to the Company for other purposes; (iii) the
agreements governing the Company's long-term indebtedness contain certain
restrictive financial and operating covenants; (iv) certain indebtedness under
the Senior Credit Facility is at variable rates of interest, which causes the
Company to be vulnerable to increases in interest rates; (v) all of the
indebtedness outstanding under the Senior Credit Facility is secured by
substantially all the assets of the Company and becomes due prior to the time
the principal on the Notes will become due; (vi) the Company is substantially
more leveraged than certain of its competitors, which might place the Company at
a competitive disadvantage; (vii) the Company may be hindered in its ability to
adjust rapidly to changing market conditions; and (viii) the Company's
substantial degree of leverage could make it more vulnerable in the event of a
downturn in general economic conditions or in its business.
The Company may be required to refinance all or a portion of the Senior
Credit Facility at or prior to its maturity, which is prior to the maturity of
the Notes. Potential measures to raise cash may include the sale of assets or
equity. However, the Company's ability to raise funds by selling assets is
restricted by the Senior Credit Facility, and its ability to effect equity
financings is dependent on results of operations and market conditions. In the
event that the Company is unable to refinance the Senior Credit Facility or
raise funds through asset sales, sales of equity or otherwise, its ability to
pay principal of and interest on the Notes would be adversely affected.
SUBORDINATION OF NOTES; ASSET ENCUMBRANCE
At December 28, 1996, the Company had $45.0 million of Senior Indebtedness
outstanding (exclusive of $50.0 million of available borrowings and outstanding
letters of credit under the Senior Credit Facility). The Indenture permits the
Company to incur additional Senior Indebtedness subject to certain conditions.
The Notes will be subordinated in right of payment to all existing and future
Senior Indebtedness, including the principal, premium (if any) and interest with
respect to the Senior Indebtedness under the Senior Credit Facility.
The Company may not pay principal of, premium on (if any), or interest on,
the Notes, make any deposit pursuant to defeasance provisions or repurchase or
redeem or otherwise retire any Notes (i) if any Senior Indebtedness is not paid
when due or (ii) if any other default on Senior Indebtedness occurs and the
maturity of such Senior Indebtedness is accelerated in accordance with its
terms, unless, in either case, the default has been cured or waived, any such
acceleration has been rescinded or such Senior Indebtedness has been paid in
full, except that the Company may pay the Notes upon the approval of the
Representative of the relevant Designated Senior Indebtedness (as defined in the
Indenture). In addition, if any other default exists with respect to the
Designated Senior Indebtedness and certain other conditions
12
<PAGE>
are satisfied, the Company may not make any payments on the Notes for up to 179
days. Upon any payment or distribution of the assets of the Company in
connection with a total or partial liquidation or dissolution or reorganization
of or similar proceeding relating to the Company, the holders of Senior
Indebtedness will be entitled to receive payment in full before the holders of
the Notes are entitled to receive any payment. See "Description of
Notes--Ranking."
The Notes are also unsecured and thus, in effect, will rank junior to any
secured indebtedness of the Company. Furthermore, they will effectively be
subordinated to any indebtedness and other liabilities of the Company's
subsidiaries. The indebtedness outstanding under the Senior Credit Facility will
be secured by liens on substantially all of the personal property and certain
real property of the Company. The Senior Credit Facility includes certain
covenants that, among other things, restrict: (i) the making of investments,
loans and advances and the paying of dividends and other restricted payments;
(ii) the incurrence of additional indebtedness; (iii) the granting of liens,
other than liens created pursuant to the Senior Credit Facility and certain
permitted liens; (iv) mergers, consolidations, and sales of all or a substantial
part of the Company's business or property; (v) the sale of assets; and (vi) the
making of capital expenditures. The Senior Credit Facility also requires the
Company to maintain certain financial ratios, including interest coverage and
leverage ratios, and to maintain a minimum level of consolidated EBITDA (as
defined in the Senior Credit Facility). The ability of the Company to comply
with these and other provisions of the Senior Credit Facility may be affected by
events beyond the Company's control. The breach of any of these covenants could
result in a default under the Senior Credit Facility, in which case, depending
on the actions taken by the lenders thereunder or their successors or assignees,
such lenders could elect to declare all amounts borrowed under the Senior Credit
Facility, together with accrued interest, to be due and payable, and the Company
could be prohibited from making payments of interest and principal on the Notes
until the default is cured or all Senior Indebtedness is paid or satisfied in
full. If the Company were unable to repay such borrowings, such lenders could
proceed against their collateral. If the indebtedness under the Senior Credit
Facility were to be accelerated, there can be no assurance that the assets of
the Company would be sufficient to repay in full such indebtedness and the other
indebtedness of the Company, including the Notes. See "Capital Structure--Senior
Credit Facility" and "Description of Notes--Ranking."
CONTROL BY INVESTCORP
Investcorp and its affiliates, through their ownership of the voting stock
of Holdings or through other contractual arrangements, indirectly control the
power to vote all of the outstanding capital stock of the Company. Accordingly,
Investcorp and its affiliates are entitled to elect all directors of the
Company, approve all amendments to the Company's Articles of Organization and
effect fundamental corporate transactions such as mergers and asset sales. See
"Ownership of Voting Securities."
CHANGE OF CONTROL
A Change of Control (as defined) could require the Company to refinance
substantial amounts of indebtedness. Upon the occurrence of a Change of Control,
the holders of the Notes would be entitled to require the Company to purchase
the Notes at a purchase price equal to 101% of the principal amount of such
Notes, plus accrued and unpaid interest, if any, to the date of purchase.
However, the Senior Credit Facility prohibits the purchase of the Notes by the
Company in the event of a Change of Control, unless and until such time as the
indebtedness under the Senior Credit Facility is repaid in full. The Company's
failure to purchase the Notes would result in a default under the Indenture and
the Senior Credit Facility. The inability to repay the indebtedness under the
Senior Credit Facility, if accelerated, would also constitute an event of
default under the Indenture, which could have adverse consequences to the
Company and the holders of the Notes. In the event of a Change of Control, there
can be no assurance that the Company would have sufficient assets to satisfy all
of its obligations under the Senior Credit
13
<PAGE>
Facility and the Notes. See "Capital Structure--Senior Credit Facility" and
"Description of Notes-- Change of Control."
FRAUDULENT CONVEYANCE
If the court in a lawsuit brought by an unpaid creditor or representative of
creditors, such as a trustee in bankruptcy or the Company as a
debtor-in-possession, were to find under relevant federal and state fraudulent
conveyance statutes that the Company did not receive fair consideration or
reasonably equivalent value for incurring certain of the indebtedness, including
the Notes, incurred by the Company in connection with the Acquisition, and that,
at the time of such incurrence, the Company (i) was insolvent, (ii) was rendered
insolvent by reason of such incurrence or grant, (iii) was engaged in a business
or transaction for which the assets remaining with the Company constituted
unreasonably small capital or (iv) intended to incur, or believed that it would
incur, debts beyond its ability to pay such debts as they matured, such court,
subject to applicable statutes of limitation, could void the Company's
obligations under the Notes, subordinate the Notes to obligations of the Company
that do not otherwise constitute Senior Indebtedness or take other action
detrimental to the holders of the Notes.
The measure of insolvency for these purposes will vary depending upon the
law of the jurisdiction being applied. Generally, however, a company will be
considered insolvent for these purposes if the sum of that company's debts is
greater than all that company's property at a fair valuation, or if the present
fair salable value of that company's assets is less than the amount that will be
required to pay its probable liability on its existing debts as they become
absolute and matured. Moreover, regardless of solvency, a court could void an
incurrence of indebtedness, including the Notes, if it determined that such
transaction was made with intent to hinder, delay or defraud creditors, or a
court could subordinate the indebtedness, including the Notes, to the claims of
all existing and future creditors on similar grounds.
There can be no assurance as to what standard a court would apply in order
to determine whether the Company was "insolvent" upon consummation of the
Acquisition or the sale of the Notes or that, regardless of the method of
valuation, a court would not determine that the Company was insolvent upon
consummation of the Acquisition or sale of the Notes.
Additionally, under federal bankruptcy or applicable state insolvency law,
if a bankruptcy or insolvency were initiated by or against the Company within 90
days after any payment by the Company with respect to the Notes, or if the
Company anticipated becoming insolvent at the time of such payment, all or a
portion of the payment could be avoided as a preferential transfer and the
recipient of such payment could be required to return such payment.
COMPARABLE STORE SALES
Comparable store sales for the Company's retail outlet stores declined 1.4%,
2.8%, 7.1% and 8.8% in fiscal years 1993, 1994, 1995 and 1996, respectively. The
Company believes that these comparable store sales declines were a result of
several factors, including poor product mix, weak retail operating disciplines,
the removal of certain product lines and overall weaker performance in the
outlet industry. In an effort to slow comparable store sales declines,
management recently introduced new merchandise, changed its product mix and
strengthened certain operating disciplines. Despite these improvements,
comparable store sales remain low, and there can be no assurance that recent
performance can be maintained or further improved in the future. See
"Management's Discussion and Analysis of Financial Condition and Results of
Operations."
FOREIGN SOURCING
The Company currently sources approximately 40% of its sewing production
through its off-shore facilities, and intends to increase this percentage to up
to 80% over the next five years. As a result, the Company may be adversely
affected by political instability resulting in the disruption of trade from
foreign
14
<PAGE>
countries in which the Company's manufacturing facilities are located, the
imposition of additional regulations relating to imports, duties, taxes and
other charges on imports, any significant decreases in the value of the dollar
against foreign currencies and restrictions on the transfer of funds. These and
other factors could result in the interruption of production in off-shore
facilities or a delay in the receipt of the products by the Company in the
United States. The Company's future performance may be subject to such factors,
which are beyond the Company's control, and there can be no assurance that such
factors would not have a material adverse effect on the Company's financial
condition and results of operations.
DEPENDENCE ON KEY PERSONNEL
The Company believes that its success is largely dependent upon the
abilities and experience of its senior management team. The loss of the services
of one or more of these senior executives could adversely affect the Company's
results of operations. The Company has entered into employment agreements with
each of its senior executives. See "Management--Employment Arrangements."
DEPENDENCE ON MAJOR SUPPLIERS
The Company purchases the majority of the various raw materials used to
manufacture its products from a few vendors of each material. For example, in
1996, 100% of the thread purchased by the Company was supplied by three vendors,
96% of the yarn purchased by the Company was supplied by five vendors and 77% of
the fabric purchased by the Company was supplied by five vendors. The Company
expects that these vendors will provide a comparable portion of the Company's
raw materials in 1997. Although the Company believes that alternative sources
for these materials are available, there can be no assurance that the loss of
one or more of these vendors as a supplier would not result in an interruption
of supply, which could have an adverse effect on the Company's results of
operations.
COMPETITION
The baby and toddler and young children's apparel markets are highly
competitive. Competition generally is based upon product quality, brand name
recognition, price, selection, service and convenience. Both branded and private
label manufacturers compete in the baby and toddler and children's apparel
markets. The Company's primary branded competitors include Health-Tex and
Oshkosh B'Gosh together with Disney licensed products in playwear, and numerous
smaller branded companies, as well as Disney licensed products, in sleepwear.
Although management believes that the Company does not compete as directly with
most private label manufacturers in playwear, certain retailers, including
several which are customers of the Company, have significant private label
product offerings. The Company does not believe that it has any significant
branded competitors in its layette market in which most of the alternative
products are offered by private label manufacturers. Because of the highly
fragmented nature of the industry, the Company also competes with many small,
local manufacturers and retailers. Certain of the Company's competitors have
greater financial resources than the Company, have larger customer bases and are
less financially leveraged.
LICENSING ARRANGEMENT
The Company is the exclusive sub-licensee of the BABY DIOR brand name for
baby clothes through 1998. The BABY DIOR line is currently positioned as the
most luxurious brand marketed by the Company, accounting for $17.7 million, or
5.6%, of the Company's sales in fiscal 1996. The Company's licensing arrangement
with Dior expires in 1998 at which time Dior may, but is not obligated to, renew
the license. There can be no assurance that Dior will renew the Company's
license beyond 1998.
15
<PAGE>
DEPENDENCE ON WHOLESALE CUSTOMERS
Approximately 57.2% and 57.5% of the Company's total wholesale sales for
fiscal 1995 and fiscal 1996, respectively, were derived from sales to its top
six customers, with no one customer accounting for more than 11.6% of such sales
(or more than 6.6% of the Company's total sales) in either period. The Company
expects that these wholesale customers will continue to represent a significant
portion of the Company's wholesale sales in the future. There can be no
assurance that the loss of, or a significant decrease in business from, one or
more of these customers would not result in a material adverse effect on the
Company's financial condition and results of operations.
LACK OF PUBLIC MARKET; RESTRICTIONS ON TRANSFERABILITY
The New Notes are new securities for which there currently is no market.
Although the Initial Purchasers have been making a market in the Old Notes and
have informed the Company that they currently intend to make a market in the New
Notes, they are not obligated to do so and any such market making may be
discontinued at any time without notice. In addition, such market making
activity may be limited during the pendency of the Exchange Offer. Accordingly,
there can be no assurance as to the development or liquidity of any market for
the New Notes. The Old Notes are currently eligible for trading by qualified
buyers in the PORTAL market. The Company does not intend to apply for listing of
the New Notes on any securities exchange or for quotation through The Nasdaq
National Market.
The liquidity of, and trading market for, the New Notes also may be
adversely affected by general declines in the market for similar securities.
Such a decline may adversely affect such liquidity and trading markets
independent of the financial performance of, and prospects for, the Company.
ENVIRONMENTAL MATTERS
The Company is subject to federal, state and local laws, regulations and
ordinances that (i) govern activities or operations that may have adverse
environmental effects, such as discharges to air and water, as well as handling
and disposal practices for solid and hazardous wastes, and (ii) impose liability
for response costs and certain damages resulting from past and current spills,
disposals or other releases of hazardous materials (together, "Environmental
Laws"). The Company believes that it currently conducts its operations, and in
the past has operated its business, in substantial compliance with applicable
Environmental Laws. From time to time, operations of the Company have resulted
or may result in noncompliance with or liability for cleanup pursuant to
Environmental Laws. In July and August 1996, the Company had Phase I
Environmental Site Assessment and Regulatory Compliance Reviews (the "Reports")
conducted by an environmental consultant for 13 facilities. Based on available
information, including the Reports, the Company has identified certain
non-compliance with Environmental Laws, including waste water discharge at its
textile manufacturing facility in Barnesville, Georgia. The Company has also
identified certain actions that may be required in the future at this facility.
The Company is currently remediating its non-compliance, which it believes will
be completed in fiscal 1997, at an estimated cost of $1.0 million. However, the
Company believes that any such noncompliance or liability under current
Environmental Laws would not have a material adverse effect on its results of
operations and financial condition. Environmental Laws have changed rapidly in
recent years, and the Company may be subject to more stringent Environmental
Laws in the future. There can be no assurance that more stringent Environmental
Laws could not have a material adverse effect on the Company's results of
operations. See "Business-- Environmental Matters."
USE OF PROCEEDS
There will be no proceeds to the Company from the exchange of Notes pursuant
to the Exchange Offer.
16
<PAGE>
THE ACQUISITION
On the Acquisition Closing Date, Holdings, a company organized on behalf of
affiliates of Investcorp, management and certain other investors, acquired 100%
of the outstanding preferred and common stock of the Company from the Sellers
for total consideration of $208.0 million, which amount includes the base
purchase price of $194.7 million (including refinancing of indebtedness and
certain payments to management but excluding fees and expenses), the issuance of
shares of non-voting stock of Holdings valued at $9.1 million to certain members
of management and a payment of $4.2 million to the Sellers representing the
estimated future tax benefit to the Company resulting from certain payments. The
Company also incurred additional financing and transaction fees and expenses of
$18.1 million related to the Acquisition. Financing for the Acquisition was
provided by (i) $56.1 million of borrowings under the Senior Credit Facility,
(ii) $90.0 million of borrowings under the Subordinated Loan Facility, (iii)
$50.9 million of equity investments in Holdings by affiliates of Investcorp and
certain other investors (which excludes the exchange of management stock
described below) and (iv) the issuance by Holdings of $20.0 million of senior
subordinated notes to affiliates of Investcorp and certain other investors which
Holdings used to purchase $20.0 million of the Company's redeemable preferred
stock (the "Preferred Stock"). Holdings has no assets or investments other than
the shares of capital stock of the Company.
Upon the Acquisition, the Company paid a total of approximately $11.3
million to members of management (the "Management Payments"), including payments
under a Management Equity Participation Plan and a Long-Term Incentive Plan. In
addition, upon the closing of the Acquisition, certain members of management
exchanged capital stock of the Company with an aggregate value of $9.1 million
for non-voting stock of Holdings. See "Certain Transactions."
17
<PAGE>
CAPITALIZATION
The following table sets forth the consolidated capitalization of the
Company at December 28, 1996. There is no adjustment to give effect to the
Exchange Offer. This table should be read in conjunction with the "Selected
Historical and Pro Forma Financial Data," "Unaudited Pro Forma Condensed
Consolidated Financial Statements," "Management's Discussion and Analysis of
Financial Condition and Results of Operations" and the Consolidated Financial
Statements and related notes thereto included elsewhere in this Prospectus.
<TABLE>
<CAPTION>
DECEMBER 28, 1996
--------------------
<S> <C>
(DOLLARS IN
THOUSANDS)
Debt:
Term loans (a)............................................................................ $ 45,000
Revolving credit facility (a)............................................................. --
10 3/8% Senior Subordinated Notes due 2006................................................ 100,000
--------
Total debt.............................................................................. 145,000
--------
Redeemable preferred stock (b).............................................................. 18,234
--------
Common stockholder's equity:
Common Stock, $.01 par value, 1,000 shares authorized; 1,000 shares outstanding........... --
Capital in excess of par value............................................................ 59,566
Accumulated deficit....................................................................... (2,078)
--------
Total common stockholder's equity....................................................... 57,488
--------
Total capitalization.................................................................... $ 220,722
--------
--------
</TABLE>
- ---------
(a) The term loan portion of the Senior Credit Facility will mature in the year
2003 and requires semi-annual principal payments totaling $0 in 1996, $0.9
million in each of 1997, 1998, 1999 and 2000 and $5.4 million, $13.5 million
and $22.5 million in 2001, 2002 and 2003, respectively. See "Capital
Structure--Senior Credit Facility" for a description of the revolving credit
facility and term loans under the Senior Credit Facility. In November 1996,
the term loan was reduced by $5.0 million with proceeds from the issuance of
the Old Notes. The future scheduled payments under the Senior Credit
Facility have been reduced ratably for this payment.
(b) The Company issued the redeemable Preferred Stock at the closing of the
Acquisition to Holdings for $20.0 million (its estimated fair value, which
equals its redemption value), net of $2.2 million of fees associated with
its issuance. The carrying value reflects accretion of issuance costs and
cumulative dividends. See "Capital Structure--Preferred Stock" for a
description of the Preferred Stock.
18
<PAGE>
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
The following unaudited pro forma condensed consolidated financial
statements are based on the consolidated financial statements included elsewhere
in this Prospectus, adjusted to give effect to the Transactions.
The unaudited pro forma statement of operations data are derived from the
Consolidated Statements of Operations for the periods December 31, 1995 through
October 29, 1996 (predecessor) and October 30, 1996 through December 28, 1996
(successor), included elsewhere in this Prospectus, and assume that the
Transactions were consummated as of December 31, 1995. Unaudited pro forma
condensed consolidated balance sheet data is not presented, as the Acquisition
and issuance of the Old Notes are reflected in the historical December 28, 1996
consolidated balance sheet presented elsewhere in this Prospectus. On a pro
forma basis adjusted for the Exchange Offer, all balance sheet amounts would be
unaffected, except for a decrease in cash and an increase in other assets to
reflect $1.0 million of debt issuance costs incurred for the New Notes. The
unaudited pro forma condensed consolidated financial statements should be read
in conjunction with the Consolidated Financial Statements of the Company,
included elsewhere in this Prospectus.
The unaudited pro forma condensed consolidated financial statements do not
purport to be indicative of the results that would actually have been obtained
if the Transactions had occurred on the dates indicated or of the results that
may be obtained in the future. The unaudited pro forma condensed consolidated
financial statements are presented for comparative purposes only. The pro forma
adjustments, as described in the accompanying data, are based on available
information and certain assumptions that management believes are reasonable.
The unaudited pro forma information is based on the historical financial
statements of the business acquired, adjusted to reflect the Transactions. The
Acquisition was accounted for under the purchase method of accounting. The
purchase price for the Acquisition, including the related fees and expenses, has
been allocated to the tangible and identifiable intangible assets and
liabilities of the acquired business based upon the Company's preliminary
estimates of their fair value with the remainder allocated to goodwill. The
allocation of purchase price for the Acquisition is subject to revision when
additional information concerning asset and liability valuation becomes
available. The pro forma adjustments directly attributable to the Transactions
primarily include adjustments to interest expense related to the financing,
changes in depreciation of property, plant and equipment and amortization of
intangible assets relating to the allocation of the purchase price, management
fees, and the related tax effects.
19
<PAGE>
THE WILLIAM CARTER COMPANY
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE FISCAL YEAR ENDED DECEMBER 28, 1996
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
COMBINED ACQUISITION EXCHANGE OFFER ADJUSTED
HISTORICAL(A) ADJUSTMENTS PRO FORMA ADJUSTMENTS PRO FORMA
------------ ----------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C>
Net sales.......................... $ 318,235 $ -- $ 318,235 $ -- $ 318,235
Cost of goods sold................. 201,735 282(b) 202,017 -- 202,017
------------ ----------- ----------- ----- ------------
Gross profit....................... 116,500 (282) 116,218 -- 116,218
Selling, general and administrative
expenses.......................... 95,968 3,668(c) 99,636 -- 99,636
Nonrecurring charge................ 8,834 (8,834)(d) -- -- --
------------ ----------- ----------- ----- ------------
Operating income................... 11,698 4,884 16,582 -- 16,582
Interest expense................... 9,706 7,172(e) 16,878 100(h) 16,978
------------ ----------- ----------- ----- ------------
Income (loss) before income taxes
and extraordinary item............ 1,992 (2,288) (296) (100) (396)
Provision (benefit) for income
taxes............................. 2,097 (1,848)(f) 249 (37)(i) 212
------------ ----------- ----------- ----- ------------
Loss before extraordinary
item (g).......................... $ (105) $ (440) $ (545) $ (63) $ (608)
------------ ----------- ----------- ----- ------------
------------ ----------- ----------- ----- ------------
OTHER DATA:
EBITDA............................. $ 31,158 $ 31,502
Cash interest expense.............. 15,661
Ratio of EBITDA to cash interest
expense........................... 2.01x
Loss attributable to common
stockholder....................... $ (3,228)
</TABLE>
See Notes to Unaudited Pro Forma Condensed Consolidated Statement of Operations.
20
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
The Unaudited Pro Forma Condensed Consolidated Statement of Operations for
the fiscal year ended December 28, 1996 reflects the Transactions as if they had
occurred on December 31, 1995 and excludes nonrecurring items directly
attributable to the Transactions.
<TABLE>
<S> <C>
(a) The Combined Historical amounts represent the mathematical addition of the
historical amounts for the predecessor period (December 31, 1995 through
October 29, 1996) and the successor period (October 30, 1996 through
December 28, 1996) and are not indicative of results that would have been
obtained had the Acquisition occurred on December 31, 1995.
(b) Reflects increase in depreciation expense on property, plant and
equipment..................................................................... $ 282
-----------
-----------
(c) Reflects the following:
Increase in amortization expense of:
Goodwill............................................................ $ 793
Tradename........................................................... 2,083
Decrease to periodic expense for postretirement benefits as a result of
recognition of accrued benefit obligation in purchase accounting........ (333)
Amortization of management agreement fees which were prepaid to Investcorp
International Inc. at Acquisition Closing Date.......................... 1,125
-----------
Net adjustments..................................................... $ 3,668
-----------
-----------
(d) Reflects elimination of nonrecurring items, as follows:
Compensation charges for amounts paid to management in connection with the
Acquisition................................................................ $ (5,334)
Other expense charges for expenses of the Company in connection with the
Acquisition................................................................ (3,500)
-----------
Total............................................................... $ (8,834)
-----------
-----------
</TABLE>
21
<PAGE>
<TABLE>
<S> <C>
(e) Reflects net increases in interest expense resulting from the Acquisition
and issuance of the Old Notes, as follows:
Elimination of historical interest expense net of previously outstanding
revolver amounts adjusted for rate differential......................... $ (6,431)
Elimination of amortization of debt issuance costs on the retired debt.... (398)
Interest resulting from $45,000 of term loan borrowings under the Senior
Credit Facility, at an assumed interest rate of 8.50%................... 3,188
Interest resulting from $6,100 of borrowings on revolving credit facility
under the Senior Credit Facility, at an assumed interest rate of
8.0%.................................................................... 407
Interest resulting from $100,000 of borrowings under Senior Subordinated
Notes due 2006 (the Old Notes), at an interest rate of 10.375%.......... 9,363
Amortization of $8,787 debt issuance costs on the Senior Credit Facility
and the Old Notes....................................................... 1,043
-----------
Net adjustments..................................................... $ 7,172
-----------
-----------
(f) Reflects tax effects of above items, except for goodwill amortization and
Company Acquisition expenses, at an assumed tax rate of 37%................. $ (1,848)
-----------
-----------
(g) Excludes extraordinary items related to:
The write-off of $3,377 of debt issuance costs on the Subordinated Loan
Facility and $244 of debt issuance costs on the portion of the Senior
Credit Facility repaid with the proceeds of the Old Notes, net of related
income tax benefits of $1,270.
(h) Amortization of $1,000 in debt issuance costs on the New Notes issued in the
Exchange Offer.............................................................. $ 100
-----------
-----------
(i) Reflects tax effects of the Exchange Offer adjustment (h) above............. $ (37)
-----------
-----------
</TABLE>
22
<PAGE>
SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
The following table sets forth selected historical financial and other data
of the Company as of and for the five fiscal years ended December 28, 1996 and
certain unaudited pro forma financial data as of and for the fiscal year ended
December 28, 1996. As a result of certain adjustments made in connection with
the Acquisition, the results of operations for the period October 30, 1996
through December 28, 1996 are not comparable to prior periods. The unaudited pro
forma operating data and other data assume that the Transactions occurred on
December 31, 1995. The unaudited adjusted pro forma operating and other data
assume that the Transactions and the issuance of the New Notes occurred on
December 31, 1995. The unaudited adjusted pro forma balance sheet data reflect
the historical December 28, 1996 balance sheet data as adjusted for the Exchange
Offer. The selected historical financial data for the five fiscal years ended
December 28, 1996 were derived from the Company's audited Consolidated Financial
Statements. The pro forma financial data were derived from the Unaudited Pro
Forma Condensed Consolidated Financial Statements included elsewhere in this
Prospectus. The pro forma adjustments are based upon available information and
certain assumptions that management believes are reasonable. The pro forma
financial information does not purport to represent what the Company's financial
position or results of operations would actually have been had the Transactions
in fact occurred on such dates or to project the Company's financial position or
results of operations for any future date or period. The pro forma adjustments
are based on the purchase method of accounting and a preliminary allocation of
the purchase costs incurred in connection with the Acquisition.
The following table should be read in conjunction with "Capitalization,"
"Unaudited Pro Forma Condensed Consolidated Financial Statements" and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations." For reports by the Company's independent accountants with respect
to historical financial information, see "Index to Consolidated Financial
Statements."
23
<PAGE>
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR
DEC. 31, SUCCESSOR
1995 OCT. 30, 1996
FISCAL YEAR THROUGH THROUGH PRO ADJUSTED
------------------------------------------ OCT. 29, DEC. 28, FORMA PRO FORMA
1992 1993 1994 1995 1996 1996(A) 1996 1996
--------- --------- --------- --------- ----------- --------------- --------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
OPERATING DATA:
Wholesale sales.......... $ 142,694 $ 127,457 $ 150,175 $ 166,884 $ 160,485 $ 28,506 $ 188,991 $ 188,991
Retail sales............. 85,417 109,554 121,374 128,547 106,254 22,990 129,244 129,244
--------- --------- --------- --------- ----------- --------------- --------- -----------
Net sales................ 228,111 237,011 271,549 295,431 266,739 51,496 318,235 318,235
Cost of goods sold....... 164,366 156,525 175,244 191,105 170,027 31,708 202,017 202,017
--------- --------- --------- --------- ----------- --------------- --------- -----------
Gross profit............. 63,745 80,486 96,305 104,326 96,712 19,788 116,218 116,218
Selling, general and
administrative......... 57,975 67,699 77,472 83,223 79,296 16,672 99,636 99,636
Nonrecurring
charges(b)(d).......... 8,194 -- -- -- 8,834 -- -- --
--------- --------- --------- --------- ----------- --------------- --------- -----------
Operating income
(loss)................. (2,424) 12,787 18,833 21,103 8,582 3,116 16,582 16,582
Interest expense......... 7,368 5,957 6,445 7,849 7,075 2,631 16,878 16,978
--------- --------- --------- --------- ----------- --------------- --------- -----------
Income (loss) before
income taxes and
extraordinary item..... (9,792) 6,830 12,388 13,254 1,507 485 (296) (396)
Provision for income
taxes.................. 270 3,000 4,000 5,179 1,885 212 249 212
--------- --------- --------- --------- ----------- --------------- --------- -----------
Income (loss) before
extraordinary item..... (10,062) 3,830 8,388 8,075 (378) 273 (545) (608)
Extraordinary item, net
of tax (c)............. -- -- -- -- -- 2,351 -- --
--------- --------- --------- --------- ----------- --------------- --------- -----------
Net income (loss)........ $ (10,062) $ 3,830 $ 8,388 $ 8,075 $ (378) $ (2,078) $ (545) $ (608)
--------- --------- --------- --------- ----------- --------------- --------- -----------
--------- --------- --------- --------- ----------- --------------- --------- -----------
Net income (loss)
available to common
stockholders........... $ (10,062) $ 3,830 $ 6,710 $ 6,460 $ (1,510) $ (2,512) $ (3,165) $ (3,228)
--------- --------- --------- --------- ----------- --------------- --------- -----------
--------- --------- --------- --------- ----------- --------------- --------- -----------
OTHER DATA:
EBITDA (d)............... $ 12,437 $ 20,647 $ 27,098 $ 30,562 $ 25,628 $ 5,530 $ 31,502 $ 31,502
EBITDA margin............ 5.5% 8.7% 10.0% 10.3% 9.6% 10.7% 9.9% 9.9%
Gross margin............. 27.9% 34.0% 35.5% 35.3% 36.3% 38.4% 36.5% 36.5%
Depreciation and
amortization........... $ 6,667 $ 6,431 $ 6,515 $ 7,337 $ 6,612 $ 2,414 $ 13,320 $ 13,320
Capital expenditures..... 4,991 7,941 10,996 13,715 4,007 3,749 7,756 7,756
Ratio of earnings to
fixed charges (e)...... -- 1.8x 2.3x 2.1x 1.1x 1.1x -- --
BALANCE SHEET DATA
(END OF PERIOD):
Working capital (f)(g)... $ 60,405 $ 62,659 $ 63,947 $ 86,871 $ 69,731
Total assets............. 127,506 123,938 135,471 167,216 318,709
Total debt, including
current
maturities............. 81,332 73,406 71,660 87,495 145,000
Redeemable Preferred
Stock (h).............. -- -- -- -- 18,234
Preferred stock.......... 50,000 50,000 50,000 50,000 --
Common stockholders'
equity................. (23,569) (19,739) (11,351) (4,678) 57,488
</TABLE>
See Notes to Selected Historical and Pro Forma Financial Data.
24
<PAGE>
NOTES TO SELECTED HISTORICAL AND PRO FORMA FINANCIAL DATA
(a) As a result of the Acquisition, the Company's assets and liabilities were
adjusted to their estimated fair values as of October 30, 1996. In
addition, the Company entered into new financing arrangements and changed
its capital structure. Accordingly, the results of operations for the
period October 30, 1996 through December 28, 1996 are not comparable to
prior periods. The period October 30, 1996 to December 28, 1996 reflects
increased depreciation, amortization, management fee and interest expenses.
(b) The nonrecurring charge for the period December 31, 1995 through October 29,
1996 includes: (1) compensation-related charges of $5.3 million for amounts
paid to management in connection with the Acquisition; and (2) other expense
charges of $3.5 million for costs and fees the Company incurred in
connection with the Acquisition. Both of these items are excluded from pro
forma and adjusted pro forma fiscal 1996 results.
(c) The extraordinary item for the period October 30, 1996 through December 28,
1996 reflects the write-off of $3.4 million and $0.2 million of deferred
debt issuance costs related to the Subordinated Loan Facility and the
portion of the Senior Credit Facility repaid with the proceeds of the Old
Notes in November 1996, net of income tax effects. These items are excluded
from pro forma and adjusted pro forma fiscal 1996 results.
(d) EBITDA represents earnings before interest expense and income tax expense
(i.e., operating income (loss)) excluding the following charges:
(i) depreciation and amortization expense including prepaid management fee
amortization of $0.23 million for the period October 30, 1996 through
December 28, 1996 and $1.35 million for pro forma and adjusted pro forma
fiscal 1996 in connection with the Acquisition;
(ii) in fiscal 1992, $8.2 million of restructuring charges related to new
management establishing a strategy to rationalize SKUs within its product
lines, decrease product complexity and improve manufacturing operations;
a reduction in the carrying value of a facility held for sale; and costs
associated with certain plant closings;
(iii) recurring costs associated with certain benefit plans that were
terminated as a result of the Acquisition and not replaced, as follows:
(1) Long-Term Incentive Plan expenses of $0.8 million, $1.2 million, $1.1
million and $1.0 million for fiscal 1993, 1994, 1995 and the period
December 31, 1995 through October 29, 1996, respectively, and $1.0
million for pro forma and adjusted pro forma fiscal 1996; (2) Management
Equity Participation Plan expenses of $0.6 million, $0.6 million, $0.6
million and $0.6 million for fiscal 1993, 1994, 1995 and the period
December 31, 1995 through October 29, 1996, respectively, and $0.6
million for pro forma and adjusted pro forma fiscal 1996; and (3) Stock
Compensation Plan expense of $0.4 million in fiscal 1995; and
(iv) in fiscal 1996, the nonrecurring charge of $8.3 million related to the
Acquisition.
The Company has included information concerning EBITDA as it is relevant for
covenant analysis under the Indenture, which defines EBITDA as set forth
above for the periods shown. See "Description of Notes--Certain
Definitions." In addition, management believes that EBITDA is generally
accepted as providing useful information regarding a company's ability to
service and/or incur debt. EBITDA should not be considered in isolation or
as a substitute for net income, cash flows or other consolidated income or
cash flow data prepared in accordance with generally accepted accounting
principles or as a measure of a company's profitability or liquidity.
(e) For the purpose of determining the ratio of earnings to fixed charges,
earnings consist of income before income taxes and fixed charges. Fixed
charges consist of interest expense, which includes the amortization of
deferred debt issuance costs and the interest portion of the Company's rent
expense (assumed to be one-third of total rent expense). Earnings were
insufficient to cover fixed charges for fiscal 1992 by $9.8 million, for pro
forma fiscal 1996 by $0.3 million and for adjusted pro forma fiscal 1996 by
$0.4 million.
(f) Represents total current assets (excluding cash and cash equivalents) less
total current liabilities, excluding current portion of long-term debt.
(g) On an adjusted pro forma basis, working capital would be $68.7 million, due
to the use of cash for $1.0 million of estimated debt issuance costs for the
New Notes.
(h) The Company issued redeemable preferred stock at the closing of the
Acquisition to Holdings for $20.0 million (its estimated fair value, which
equals its redemption value), net of $2.2 million of fees associated with
its issuance.
25
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THE FOLLOWING DISCUSSION SHOULD BE READ IN CONJUNCTION WITH THE "SELECTED
HISTORICAL AND PRO FORMA FINANCIAL DATA" AND THE CONSOLIDATED FINANCIAL
STATEMENTS OF THE COMPANY AND THE NOTES THERETO INCLUDED ELSEWHERE IN THIS
PROSPECTUS. THIS PROSPECTUS CONTAINS, IN ADDITION TO HISTORICAL INFORMATION,
FORWARD-LOOKING STATEMENTS THAT INCLUDE RISKS AND OTHER UNCERTAINTIES. THE
COMPANY'S ACTUAL RESULTS MAY DIFFER MATERIALLY FROM THOSE ANTICIPATED IN THESE
FORWARD-LOOKING STATEMENTS. FACTORS THAT MIGHT CAUSE SUCH A DIFFERENCE INCLUDE
THOSE DISCUSSED BELOW, AS WELL AS GENERAL ECONOMIC AND BUSINESS CONDITIONS,
COMPETITION AND OTHER FACTORS DISCUSSED ELSEWHERE IN THIS PROSPECTUS. THE
COMPANY UNDERTAKES NO OBLIGATION TO RELEASE PUBLICLY ANY REVISIONS TO THESE
FORWARD-LOOKING STATEMENTS THAT MAY BE MADE TO REFLECT EVENTS OR CIRCUMSTANCES
AFTER THE DATE HEREOF OR TO REFLECT THE OCCURRENCE OF ANTICIPATED OR
UNANTICIPATED EVENTS.
GENERAL
The Company is a leading marketer and manufacturer of baby, toddler and
young children's apparel. The Company sells its products to more than 300
department and specialty store customers (59.4% of fiscal 1996 sales) and
through its 135 retail outlet stores (40.6% of fiscal 1996 sales). The Company
was acquired in a leveraged buyout in 1988. At the time of that closing, the
Company had $155.0 million of funded indebtedness and approximately $13.1
million of prior fiscal year EBITDA. Despite the continuing strength of the
CARTER'S brand name, the Company's results of operations from 1988 to 1991 were
adversely affected by a high degree of financial leverage and a lack of
liquidity and, among other things, poor customer relationships, an unfocused
product offering and an inefficient cost structure. As a result of these
factors, the Company was forced to restructure certain of its debt obligations
in December 1991, and sought new management.
Carter's senior management has significantly increased earnings and market
share since joining the Company in 1992. Management believes these improvements
resulted primarily from efforts to strengthen customer relationships, improve
product offerings and further enhance the CARTER'S brand image. In addition, the
Company has realized significant operating efficiencies by reducing the scope of
its product offerings while enhancing core product offerings, increasing
off-shore production, and implementing the wider use of advanced operating and
financial information systems. Management believes that these actions have been
instrumental in enabling the Company to increase sales and EBITDA from $228.1
million and $12.4 million, respectively, in fiscal 1992 to $318.2 million and
$31.2 million, respectively, in fiscal 1996, representing compound annual rates
of 8.7% and 25.8%, respectively. In addition, during this period, the Company's
gross margins increased from 27.9% to 36.6% and EBITDA margins increased from
5.5% to 9.8%.
The Company's sales growth since fiscal 1992 resulted from a $46.3 million
increase in wholesale sales and a $43.8 million increase in retail sales. The
increase in wholesale sales resulted primarily from new product introductions
and the opening of new wholesale accounts, including Sears and JCPenney,
partially offset by the removal of certain product lines, such as outerwear,
boys' and girls' underwear and certain BABY DIOR seasonal lines. The increase in
retail sales resulted primarily from new store openings, partially offset by
comparable store sales declines since the beginning of fiscal 1993. Management
believes the comparable store sales declines were due to a soft retailing
environment and to certain operational and merchandising problems, which have
recently been addressed. See "--Liquidity and Capital Resources" and
"Business--Distribution and Sales--Retail Operations." Since fiscal 1992, the
Company has invested an aggregate of $45.4 million in capital expenditures which
were primarily related to the purchase of new equipment, information systems and
off-shore production facilities.
Notwithstanding the substantial improvements in operating results achieved
over the past four years, the Company's financial results in 1996 were adversely
affected by the performance of its retail outlet stores. Comparable store sales
in 1996 decreased 8.8%. As a result of retail outlet store sales performance and
increased administrative and store level expenses associated with new retail
outlet store openings in
26
<PAGE>
1995 and 1996, the growth in consolidated EBITDA slowed to an increase of $0.6
million or 2% from 1995 to 1996.
RESULTS OF OPERATIONS
The following table sets forth certain components of the Company's
Consolidated Statement of Operations data expressed as a percentage of net
sales:
<TABLE>
<CAPTION>
FISCAL YEAR
-------------------------------
1994 1995 1996
--------- --------- ---------
<S> <C> <C> <C>
STATEMENT OF OPERATIONS:
Wholesale sales..................................................................... 55.3% 56.5% 59.4%
Retail sales........................................................................ 44.7 43.5 40.6
--------- --------- ---------
Net sales......................................................................... 100.0 100.0 100.0
Cost of goods sold.................................................................. 64.5 64.7 63.4
--------- --------- ---------
Gross profit........................................................................ 35.5 35.3 36.6
Selling, general and administrative expenses........................................ 28.5 28.2 30.2
Nonrecurring charge................................................................. -- -- 2.8
--------- --------- ---------
Operating income.................................................................... 6.9 7.1 3.6
Interest expense.................................................................... 2.4 2.7 3.0
--------- --------- ---------
Income before income taxes and extraordinary item................................... 4.6 4.5 0.6
Provision for income taxes.......................................................... 1.5 1.8 0.7
Extraordinary item, net............................................................. -- -- 0.7
--------- --------- ---------
Net income (loss)................................................................... 3.1% 2.7% (0.8)%
--------- --------- ---------
--------- --------- ---------
</TABLE>
FISCAL YEAR ENDED DECEMBER 28, 1996 COMPARED WITH FISCAL YEAR ENDED DECEMBER 30,
1995
The 1996 results discussed below represent the mathematical addition of the
historical results for the period from December 31, 1995 through October 29,
1996 (the "Predecessor" period) and the period from October 30, 1996 through
December 28, 1996 (the "Successor" period) for purposes of the discussion below
only and are not indicative of results that would actually have been obtained if
the Acquisition had occurred on December 31, 1995 (the first day of fiscal
1996).
As a result of the Acquisition, the Company's assets and liabilities were
adjusted to their estimated fair values as of October 30, 1996. In addition, the
Company entered into new financing arrangements and had a change in its capital
structure. Certain nonrecurring charges and an extraordinary loss were recorded
in connection with the Acquisition and financing. Accordingly, the results of
operations for 1996 are not comparable to prior periods. The period prior to the
Acquisition reflects nonrecurring charges, principally the Company's and
Sellers' expenses, such as accelerated compensation plan payments to management
and professional fees. The period subsequent to the Acquisition reflects
increased cost of sales due to higher depreciation expense for assets revalued
at the Acquisition, increased interest expense, the amortization of goodwill and
tradename and certain prepaid expenses, and an extraordinary loss resulting from
the early extinguishment of debt.
NET SALES. Net sales for fiscal 1996 increased 7.7% to $318.2 million from
$295.4 million in fiscal 1995. This increase was due to a 13.2% increase in
wholesale sales and a 0.5% increase in retail sales. Wholesale sales for fiscal
1996 increased to $189.0 million from $166.9 million in fiscal 1995. This
increase was due primarily to continued strong sales to wholesale customers and
improved average pricing, as well as to increased clearance and off-price
merchandise sales resulting from the Company's efforts to reduce the high
inventory levels experienced at the end of fiscal 1995. In addition, the Company
continued to rationalize its product lines by scaling back certain products and
by continuing to reduce the overall
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number of SKUs. Retail sales for fiscal 1996 increased to $129.2 million from
$128.5 million in fiscal 1995. This increase was a result of the incremental
volume provided by 36 new stores opened since the beginning of fiscal 1995,
partially offset by comparable store sales declines of 8.8%. Management believes
that the comparable store sales declines were due primarily to certain
operational and merchandising problems, as well as to a soft retailing
environment. These declines were also affected by the removal of certain product
categories that were sold in the Company's retail outlet stores in fiscal 1995.
Management currently is addressing the comparable store sales declines by
improving product mix; emphasizing core layette and sleepwear products;
improving store layouts; assessing locations, demographics and store sizes; and
upgrading management and retailing skills at the corporate, regional and store
levels.
GROSS PROFIT. Gross profit for fiscal 1996 increased 11.7% to $116.5
million from $104.3 million in fiscal 1995. Gross profit as a percentage of net
sales in fiscal 1996 increased to 36.6% from 35.3% in fiscal 1995. This increase
resulted primarily from pricing improvements in the Company's wholesale and
retail businesses, the maturing effect of the Company's three off-shore sewing
plants, one of which was opened in 1995, and the change in the retail store
product mix toward higher margin sleepwear and layette products, partially
offset by an increase in depreciation expense and lower margins in the first
quarter of 1996 as a result of actions taken to decrease inventories that had
built up at the end of fiscal 1995.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for fiscal 1996 increased 15.3% to $96.0 million from
$83.2 million in fiscal 1995. Selling, general and administrative expenses as a
percentage of net sales increased to 30.2% in fiscal 1996 from 28.2% in fiscal
1995. This increase in selling, general and administrative expenses as a
percentage of net sales resulted from the comparable store sales declines
experienced by the Company's retail outlet stores and higher retail store
expenses associated with the 36 new stores opened since the beginning of fiscal
1995.
NONRECURRING CHARGE. In connection with the Acquisition, the Company
recorded an $8.8 million nonrecurring charge. This charge includes $3.5 million
of Company and Sellers' expenses and $5.3 million of expenses related to
management payments, including the unaccrued costs associated with accelerated
compensation plan payments. Total payments to management were approximately
$11.3 million.
OPERATING INCOME. Operating income for fiscal 1996 decreased 44.6% to $11.7
million from $21.1 million in fiscal 1995 as a result of the changes in selling,
general and administrative expenses, gross profit and the nonrecurring charges
described above. Operating income as a percentage of net sales decreased to 3.6%
in fiscal 1996 from 7.1% in fiscal 1995.
INTEREST EXPENSE. Interest expense for fiscal 1996 increased 23.7% to $9.7
million from $7.8 million in fiscal 1995. This increase reflects higher interest
expense on additional indebtedness resulting from the Acquisition, and higher
average borrowings under the Company's revolving credit facility in place prior
to the Acquisition. At December 28, 1996, outstanding debt aggregated $145.0
million, of which a $45.0 million term loan bore interest at a variable rate, so
that an increase of 1% in the applicable rate would increase the Company's
annual interest cost by $450,000. At December 28, 1996, there were no borrowings
under the Company's $50.0 million revolving credit facility, except for $4.2
million of outstanding letters of credit. Any borrowings under the revolving
credit facility would bear interest at a variable rate.
EXTRAORDINARY LOSS. In November 1996, the Company used the proceeds from
the issuance of the Old Notes to prepay $90.0 million of Acquisition-related
borrowings under the Subordinated Loan Facility and $5.0 million of the term
loan portion of the Senior Credit Facility. As a result, the Company recorded an
after-tax loss of $2.4 million, which has been reflected in the Company's
Consolidated Statement of Operations as an extraordinary item.
NET LOSS. As a result of the factors described above, the Company reported
a net loss of $2.5 million in fiscal 1996 compared with net income of $8.1
million in fiscal 1995.
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FISCAL YEAR ENDED DECEMBER 30, 1995 COMPARED WITH FISCAL YEAR ENDED DECEMBER 31,
1994
NET SALES. Net sales for fiscal 1995 increased 8.8% to $295.4 million from
$271.5 million in fiscal 1994. This increase was due to an 11.1% increase in
wholesale sales and a 5.9% increase in retail sales. Wholesale sales for fiscal
1995 increased to $166.9 million from $150.2 million in fiscal 1994. This
increase was due to the continued success of the Company's business strategy,
which included increased wholesale volume in its core layette and sleepwear
product categories, as well as the full year impact of sales to Sears, a new
wholesale customer for the Company in 1994. The Company also continued to scale
back its total product offerings and continued to reduce the overall number of
SKUs. Retail sales for fiscal 1995 increased to $128.5 million from $121.4
million. This increase was primarily due to the incremental volume provided by
20 new stores opened in 1995, partially offset by comparable store sales
declines of 7.1%. The comparable store sales declines were due to certain
operational and merchandising problems which management believes have recently
been addressed, as well as to a soft retailing environment.
GROSS PROFIT. Gross profit for fiscal 1995 increased 8.3% to $104.3 million
from $96.3 million in fiscal 1994. Gross profit as a percentage of net sales
decreased slightly to 35.3% in fiscal 1995 from 35.5% in fiscal 1994. This
moderate decline reflects $0.5 million of start-up costs in 1995 associated with
the opening of a new off-shore sewing plant in the Dominican Republic and a $1.8
million increase in retail markdowns, partially offset by improved overhead
absorption, lower yarn cost and the initial benefits of the second off-shore
plant in Costa Rica.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. Selling, general and
administrative expenses for fiscal 1995 increased 7.4% to $83.2 million from
$77.5 million in fiscal 1994. Selling, general and administrative expenses as a
percentage of net sales declined to 28.2% in fiscal 1995 from 28.5% in fiscal
1994 primarily due to a reduction in retail sales administration costs as a
percentage of net sales.
OPERATING INCOME. As a result of the changes in selling, general and
administrative expenses and gross profit discussed above, operating income for
fiscal 1995 increased 12.1% to $21.1 million from $18.8 million in fiscal 1994.
Operating income as a percentage of net sales increased to 7.1% in fiscal 1995
from 6.9% in fiscal 1994.
INTEREST EXPENSE. Interest expense for fiscal 1995 increased 21.8% to $7.8
million from $6.4 million in fiscal 1994 due to higher average borrowings under
the Company's revolving credit facility.
NET INCOME. As a result of the factors discussed above, net income for
fiscal 1995 decreased 3.7% to $8.1 million from $8.4 million in fiscal 1994.
LIQUIDITY AND CAPITAL RESOURCES
The Company's primary cash needs are working capital, capital expenditures
and debt service. The Company has financed its working capital, capital
expenditures and debt service requirements primarily through internally
generated cash flow, in addition to funds borrowed under the Company's credit
facilities.
Net cash provided by operating activities in fiscal 1996 was $31.5 million
as compared with net cash used in operating activities of $5.5 million in the
prior year. This increase reflects the reduction in inventory balances resulting
from management's efforts in this regard described below. Operating cash flow
for fiscal 1996 also reflects a significant increase in accounts payable and
other liabilities, such increases resulting primarily from expenses incurred in
connection with the Acquisition. Net cash provided by (used in) operating
activities in fiscal 1995 decreased to $(5.5) million from $14.6 million in
fiscal 1994. This decrease resulted primarily from the increase in the Company's
inventory levels during fiscal 1995.
At the end of fiscal 1995, the Company's inventory levels exceeded its prior
year-end inventories by $28.1 million and its budget by approximately $13.0
million. Management attributes the inventory build-up during fiscal 1995 to a
number of items which include: (i) aggressive production plans reflecting
stronger
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anticipated demand; (ii) historically inadequate production planning and
monitoring systems; (iii) high levels of "open market goods" purchased for the
retail outlet stores; (iv) extra basics fabric manufactured late in 1995 to
reduce the Company's reliance on expensive contracting in 1996; (v) excessive
seasonal fabric due to a mid-year shift in merchandise mix; and (vi) excessive
seconds inventory. Management maintained adequate reserves to adjust inventory
balances to lower of cost or market at December 30, 1995.
The Company believes that each of these items has been successfully
addressed in fiscal 1996. First, the Company moderated production plans in the
first quarter of fiscal 1996, mitigating additional build-up and allowing much
of the excess inventory to be sold. Second, excess basics fabric was quickly
worked through the system and most of the Company's excess seasonal fabric was
sold to third parties at a loss. Third, the Company significantly increased its
capacity in embroidery in 1996 in order to reduce the requirements for
contracting, thus reducing its work-in-process inventory. Finally, most of the
excessive seconds inventories created from the new off-shore sewing facilities
were eliminated through an aggressive sell-off of goods to off-price customers
and temporary retail clearance stores set up by the Company.
Management believes that improvements in production planning and reporting
have been made possible with new information systems installed in the first
quarter of fiscal 1996, as well as with the implementation of an automatic
replenishment system which was fully functioning at its retail stores as of
August 1996. In addition, the Company is continuing to aggressively reduce the
scope of its product offerings (since 1992, wholesale and retail style-colors
have been reduced by approximately 60% and 30%, respectively) and reduce the
amount of open-market purchases, which management believes will help mitigate
the Company's exposure to excess finished goods and will allow the Company to
continue moderating inventory levels going forward. As a result of these
factors, the Company's inventory levels at fiscal year-end 1996 were lower than
those at fiscal year-end 1995 despite higher sales.
The Company invested $11.0 million, $13.7 million and $7.8 million in
capital expenditures during fiscal years 1994, 1995 and 1996, respectively. The
Company's budgeted capital expenditures for fiscal 1997 are approximately $14.0
million.
The Company incurred significant indebtedness in connection with the
Acquisition. At December 28, 1996, the Company had approximately $145.0 million
of indebtedness outstanding, consisting of $100.0 million of Notes and $45.0
million in term loan borrowings under the Senior Credit Facility, with no other
debt or capital lease obligations. In addition, the Company has approximately
$50.0 million in availability under the revolving credit portion of the Senior
Credit Facility (exclusive of approximately $4.2 million of outstanding letters
of credit). The term loan portion of the Senior Credit Facility will mature on
October 31, 2003 and requires semi-annual principal payments totaling $0.0 in
1996, $0.9 million in each of 1997, 1998, 1999 and 2000, and $5.4 million, $13.5
million and $22.5 million in 2001, 2002 and 2003, respectively. In November
1996, the term loan was reduced by $5.0 million with proceeds from the issuance
of the Old Notes. The future scheduled payments under the Senior Credit Facility
have been reduced ratably for this payment. The revolving credit portion of the
Senior Credit Facility will mature on October 31, 2001 and has no scheduled
interim amortization. For a description of the Senior Credit Facility, see
"Capital Structure--Senior Credit Facility." No principal payments are required
on the Notes prior to their scheduled maturity.
The Company believes that cash generated from operations, together with
amounts available under the revolving portion of the Senior Credit Facility,
will be adequate to meet its debt service requirements, capital expenditures and
working capital needs for the foreseeable future, although no assurance can be
given in this regard.
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EFFECTS OF INFLATION
The Company is affected by inflation primarily through the purchase of raw
material, increased operating costs and expenses, and higher interest rates. The
effects of inflation on the Company's operations have not been material in
recent years.
SEASONALITY
The Company experiences seasonal fluctuations in its sales and
profitability, with generally lower sales and gross profit in the first and
second quarters of its fiscal year. The Company believes that seasonality of
sales and profitability is a factor that affects the baby and children's apparel
industry generally and is primarily due to retailers' emphasis in the first
quarter on price reductions, and promotional retailers' and manufacturers'
emphasis on closeouts of the prior year's product lines.
ACCOUNTING PRONOUNCEMENT
In October 1995, the Financial Accounting Standards Board issued SFAS No.
123, Accounting for Stock-Based Compensation, which the Company has been
required to adopt in 1996. SFAS No. 123 establishes optional alternative
accounting methods for stock-based compensation as well as new required
disclosures. The Company will account for stock-based compensation under
previously existing accounting guidance. As such, SFAS No. 123 has been adopted
for disclosure purposes only and will not impact the Company's financial
position, annual operating results or cash flows.
CHANGE IN ACCOUNTANTS
In connection with the Acquisition, the Company dismissed Price Waterhouse
LLP ("Price Waterhouse") as its principal independent accountant and engaged
Coopers & Lybrand L.L.P. as its principal independent accountant. The decision
to change accountants was approved by the Company's Board of Directors. In
connection with the audits of the Company's financial statements for the two
most recent completed fiscal years prior to the Acquisition and during the
interim period up until the date of the change in accountants, there were no
disagreements with Price Waterhouse on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure. Price
Waterhouse's report on the financial statements for such years did not contain
an adverse opinion or disclaimer of opinion, nor was it modified as to
uncertainty, audit scope or accounting principles.
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THE EXCHANGE OFFER
TERMS OF THE EXCHANGE OFFER; PERIOD FOR TENDERING OLD NOTES
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), the Company will accept for exchange Old Notes which are
properly tendered on or prior to the Expiration Date and not withdrawn as
permitted below. As used herein, the term "Expiration Date" means 5:00 p.m., New
York City time, on , 1997; PROVIDED, HOWEVER, that if the Company has
extended the period of time for which the Exchange Offer is open, the term
"Expiration Date" means the latest time and date to which the Exchange Offer is
extended.
As of the date of this Prospectus, $100.0 million aggregate principal amount
of the Old Notes was outstanding. This Prospectus, together with the Letter of
Transmittal, is first being sent on or about , 1997, to all holders of
Old Notes known to the Company. The Company's obligation to accept Old Notes for
exchange pursuant to the Exchange Offer is subject to certain conditions as set
forth under "-- Certain Conditions to the Exchange Offer" below.
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 Old Notes, by giving notice of such
extension to the holders thereof. During any such extension, all Old Notes
previously tendered will remain subject to the Exchange Offer and may be
accepted for exchange by the Company. Any Old Notes not accepted for exchange
for any reason will be returned without expense to the tendering holder thereof
as promptly as practicable after the expiration or termination of the Exchange
Offer.
The Company expressly reserves the right to amend or terminate the Exchange
Offer, and not to accept for exchange any Old Notes not theretofore accepted for
exchange, upon the occurrence of any of the conditions of the Exchange Offer
specified below under "--Certain Conditions to the Exchange Offer." The Company
will give notice of any extension, amendment, non-acceptance or termination to
the holders of the Old Notes as promptly as practicable, such notice in the case
of any extension to be issued no later than 9:00 a.m., New York City time, on
the next business day after the previously scheduled Expiration Date.
Holders of Old Notes do not have any appraisal or dissenters' rights under
the Massachusetts Business Corporation Law in connection with the Exchange
Offer.
PROCEDURES FOR TENDERING OLD NOTES
The tender to the Company of Old Notes by a holder thereof as set forth
below and the acceptance thereof by the Company will constitute a binding
agreement between the tendering holder and the Company upon the terms and
subject to the conditions set forth in this Prospectus and in the accompanying
Letter of Transmittal. Except as set forth below, a holder who wishes to tender
Old Notes for exchange pursuant to the Exchange Offer must transmit a properly
completed and duly executed Letter of Transmittal, including all other documents
required by such Letter of Transmittal, to State Street Bank and Trust Company
(the "Exchange Agent") at one of the addresses set forth below under "Exchange
Agent" on or prior to the Expiration Date. In addition, either (i) certificates
for such Old Notes must be received by the Exchange Agent along with the Letter
of Transmittal, or (ii) a timely confirmation of a book-entry transfer (a
"Book-Entry Confirmation") of such Old Notes, if such procedure is available,
into the Exchange Agent's account at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedure for book-entry
transfer described below, 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 METHOD OF DELIVERY OF OLD NOTES, LETTERS OF
TRANSMITTAL AND ALL OTHER REQUIRED DOCUMENTS IS AT THE ELECTION AND RISK
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OF THE HOLDERS. IF SUCH DELIVERY IS BY MAIL, IT IS RECOMMENDED THAT REGISTERED
MAIL, PROPERLY INSURED, WITH RETURN RECEIPT REQUESTED, BE USED. IN ALL CASES,
SUFFICIENT TIME SHOULD BE ALLOWED TO ASSURE TIMELY DELIVERY. NO LETTERS OF
TRANSMITTAL OR OLD NOTES SHOULD BE SENT TO THE COMPANY. THE COMPANY IS NOT
ASKING NOTEHOLDERS FOR A PROXY AND NOTEHOLDERS ARE REQUESTED NOT TO SEND THE
COMPANY A PROXY.
Signatures on a Letter of Transmittal or a notice of withdrawal, as the case
may be, must be guaranteed unless the Old Notes surrendered for exchange
pursuant thereto are tendered (i) by a registered holder of the Old Notes who
has not completed the box entitled "Special Issuance Instruction" or "Special
Delivery Instructions" on the Letter of Transmittal or (ii) for the account of
an Eligible Institution (as defined below). In the event that signatures on a
Letter of Transmittal or a notice of withdrawal, as the case may be, are
required to be guaranteed, such guarantees must be by a firm which is a member
of a registered national securities exchange or a member of the National
Association of Securities Dealers, Inc. or by a commercial bank or trust company
having an office or correspondent in the United States (collectively, "Eligible
Institutions"). If Old Notes are registered in the name of a person other than a
signer of the Letter of Transmittal, the Old Notes surrendered for exchange must
be endorsed by, or be accompanied by a written instrument or instruments of
transfer or exchange, in satisfactory form as determined by the Company in its
sole discretion, duly executed by the registered holder with the signature
thereon guaranteed by an Eligible Institution.
All questions as to the validity, form, eligibility (including time of
receipt) and acceptance of Old Notes tendered for exchange will be determined by
the Company in its sole discretion, which determination shall be final and
binding. The Company reserves the absolute right to reject any and all tenders
of any particular Old Notes not properly tendered or to not accept any
particular Old Notes which acceptance might, in the judgment of the Company or
its counsel, be unlawful. The Company also reserves the absolute right to waive
any defects or irregularities or conditions of the Exchange Offer as to any
particular Old Notes either before or after the Expiration Date (including the
right to waive the ineligibility of any holder who seeks to tender Old Notes in
the Exchange Offer). The interpretation of the terms and conditions of the
Exchange Offer as to any particular Old Notes either before or after the
Expiration Date (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 Old Notes
for exchange must be cured within such reasonable period of time as the Company
shall determine. Neither the Company, the Exchange Agent nor any other person
shall be under any duty to give notification of any defect or irregularity with
respect to any tender of Old Notes for exchange, nor shall any of them incur any
liability for failure to give such notification.
If the Letter of Transmittal is signed by a person or persons other than the
registered holder or holders of Old Notes, such Old Notes must be endorsed or
accompanied by appropriate powers of attorney, in either case signed exactly as
the name or names of the registered holder or holders that appear on the Old
Notes.
If the Letter of Transmittal or any Old Notes or powers of attorney are
signed by trustees, executors, administrators, guardians, attorneys-in-fact,
officers of corporations or others acting in a fiduciary or representative
capacity, such persons should so indicate when signing, and, unless waived by
the Company, proper evidence satisfactory to the Company of their authority to
so act must be submitted.
By tendering, each broker-dealer holder will represent to the Company that,
among other things, the New Notes acquired pursuant to the Exchange Offer are
being obtained in the ordinary course of business of the holder and any
beneficial holder, that neither the holder nor any such beneficial holder has an
arrangement or understanding with any person to participate in the distribution
of such New Notes and that neither the holder nor any such other person is an
"affiliate," as defined under Rule 405 of the
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Securities Act, of the Company. If the holder is not a broker-dealer, the holder
must represent that it is not engaged in nor does it intend to engage in a
distribution of the New Notes.
ACCEPTANCE OF OLD NOTES FOR EXCHANGE; DELIVERY OF NEW NOTES
Upon satisfaction or waiver of all of the conditions to the Exchange Offer,
the Company will accept, promptly after the Expiration Date, all Old Notes
properly tendered and will issue the New Notes promptly after acceptance of the
Old Notes. See "--Certain Conditions to the Exchange Offer" below. For purposes
of the Exchange Offer, the Company shall be deemed to have accepted properly
tendered Old Notes for exchange when, as and if the Company has given oral and
written notice thereof to the Exchange Agent.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount equal to that of the surrendered
Old Note.
In all cases, issuance of New Notes for Old 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 Old Notes or a timely Book-Entry
Confirmation of such Old Notes into the Exchange Agent's account at the Book-
Entry Transfer Facility, a properly completed and duly executed Letter of
Transmittal and all other required documents. If any tendered Old Notes are not
accepted for any reason set forth in the terms and conditions of the Exchange
Offer or if Old Notes are submitted for a greater principal amount than the
holder desires to exchange, such unaccepted or non-exchanged Old Notes will be
returned without expense to the tendering holder thereof (or, in the case of Old
Notes tendered by book-entry transfer into the Exchange Agent's account at the
Book-Entry Transfer Facility pursuant to the book-entry transfer procedures
described below, such non-exchanged Old Notes will be credited to an account
maintained with such Book-Entry Transfer Facility) as promptly as practicable
after the expiration of the Exchange Offer.
BOOK-ENTRY TRANSFER
Any financial institution that is a participant in the Book-Entry Transfer
Facility's systems may make book-entry delivery of Old Notes by causing the
Book- Entry Transfer Facility to transfer such Old 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 Old 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 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 PROCEDURES
If a registered holder of the Old Notes desires to tender such Old Notes and
the Old Notes are not immediately available, or time will not permit such
holder's Old Notes or other required documents 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 (i) the tender is made
through an Eligible Institution, (ii) prior to the Expiration Date, the Exchange
Agent received from such Eligible Institution a properly completed and duly
executed Letter of Transmittal (or a facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by telegram, telex,
facsimile transmission, mail or hand delivery), setting forth the name and
address of the holder of Old Notes and the amount of Old Notes tendered, stating
that the tender is being made thereby and guaranteeing that within five New York
Stock Exchange ("NYSE") trading days after the date of execution of the Notice
of Guaranteed Delivery, the certificates for all physically tendered Old Notes,
in proper form for transfer, or a Book-Entry Confirmation, as the case may be,
and any other documents required by the Letter of
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<PAGE>
Transmittal will be deposited by the Eligible Institution with the Exchange
Agent and (iii) the certificates for all physically tendered Old Notes, in
proper form for transfer, or a Book- Entry Confirmation, as the case may be, and
all other documents required by the Letter of Transmittal are received by the
Exchange Agent within five NYSE trading days after the date of execution of the
Notice of Guaranteed Delivery.
WITHDRAWAL RIGHTS
Tenders of Old Notes may be withdrawn at any time prior to the Expiration
Date. For a withdrawal to be effective, a written notice of withdrawal must be
received by the Exchange Agent at one of the addresses set forth below under
"Exchange Agent." Any such notice of withdrawal must specify the name of the
person having tendered the Old Notes to be withdrawn, identify the Old Notes to
be withdrawn (including the principal amount of such Old Notes), and (where
certificates for Old Notes have been transmitted) specify the name in which such
Old Notes are registered, if different from that of the withdrawing holder. If
certificates for Old Notes have been delivered or otherwise identified to the
Exchange Agent, then, prior to the release of such certificates the withdrawing
holder must also submit the serial numbers of the particular certificates to be
withdrawn and a signed notice of withdrawal with signatures guaranteed by an
Eligible Institution unless such holder is an Eligible Institution. If Old Notes
have been tendered pursuant to the procedure for book-entry transfer described
above, any notice of withdrawal must specify the name and number of the account
at the Book-Entry Transfer Facility to be credited with the withdrawn Old Notes
and otherwise comply with the procedures of such facility. All questions as to
the validity, form and eligibility (including time of receipt) of such notices
will be determined by the Company, whose determination shall be final and
binding on all parties. Any Old Notes so withdrawn will be deemed not to have
been validly tendered for exchange for purposes of the Exchange Offer. Any Old
Notes that have been tendered for exchange but that are not exchanged for any
reason will be returned to the holder thereof without cost to such holder (or,
in the case of Old Notes tendered by book-entry transfer into the Exchange
Agent's account at the Book-Entry Transfer Facility pursuant to the book-entry
transfer procedures described above, such Old Notes will be credited to an
account maintained with such Book-Entry Transfer Facility for the Old Notes) as
soon as practicable after withdrawal, rejection of tender or termination of the
Exchange Offer. Properly withdrawn Old Notes may be retendered by following one
of the procedures described under "--Procedures for Tendering Old Notes" above
at any time on or prior to the Expiration Date.
CERTAIN CONDITIONS TO THE EXCHANGE OFFER
Notwithstanding any other provision of the Exchange Offer, the Company shall
not be required to accept for exchange, or to issue New Notes in exchange for,
any Old Notes and may terminate or amend the Exchange Offer if at any time
before the acceptance of such Old Notes for exchange or the exchange of the New
Notes for such Old Notes, the Company determines that the Exchange Offer
violates applicable law, any applicable interpretation of the staff of the
Commission or any order of any governmental agency or court of competent
jurisdiction.
The foregoing conditions are for the sole benefit of the Company and may be
asserted by the Company regardless of the circumstances giving rise to any such
condition or may be waived by the Company in whole or in part at any time and
from time to time in its reasonable discretion. The failure by the Company at
any time to exercise any of the foregoing rights shall not be deemed a waiver of
any such right and each such right shall be deemed an ongoing right which may be
asserted at any time and from time to time.
In addition, the Company will not accept for exchange any Old Notes
tendered, and no New Notes will be issued in exchange for any such Old Notes, if
at such time any stop order shall be threatened or in effect with respect to the
Registration Statement of which this Prospectus constitutes a part or the
qualification of the Indenture under the Trust Indenture Act of 1939 (the
"TIA"). In any such event, the
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<PAGE>
Company is required to use every reasonable effort to obtain the withdrawal of
any stop order at the earliest possible time.
EXCHANGE AGENT
State Street Bank and Trust Company 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. 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 addressed as follows:
BY HAND/OVERNIGHT EXPRESS/MAIL/OVERNIGHT DELIVERY:
(insured if registered recommended)
<TABLE>
<S> <C> <C>
State Street Bank and Trust Company, or State Street Bank and Trust
N.A. Company
Corporate Trust Window Corporate Trust Dept.
Concourse Level 2 International Place - 4th Floor
61 Broadway Boston, MA 02110
New York, NY 10006 Attn: William Norkus
</TABLE>
VIA FACSIMILE:
(617) 664-5371
FOR INFORMATION CALL:
Lisa Guymont
(617) 664-5618
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE DOES
NOT CONSTITUTE A VALID DELIVERY.
FEES AND EXPENSES
The Company will not make any payments to brokers, dealers or others
soliciting acceptances of the Exchange Offer. The principal solicitation is
being made by mail; however, additional solicitations may be made in person or
by telephone by officers and employees of the Company.
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 $ , which includes fees and expenses of the Trustee,
accounting, legal, printing and related fees and expenses.
ACCOUNTING TREATMENT
The New Notes will be recorded at the same carrying value as the Old Notes,
which is the principal amount 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. The expenses of the Exchange Offer will be
capitalized for accounting purposes.
TRANSFER TAXES
Holders who tender their Old Notes for exchange will not be obligated to pay
any transfer taxes in connection therewith, except that holders who instruct the
Company to register New Notes in the name of, or request that Old Notes not
tendered or not accepted in the Exchange Offer be returned to, a person other
than the registered tendering holder will be responsible for the payment of any
applicable transfer tax thereon.
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CONSEQUENCES OF FAILURE TO EXCHANGE; RESALES OF NEW NOTES
Holders of Old Notes who do not exchange their Old Notes for New Notes
pursuant to the Exchange Offer will continue to be subject to the restrictions
on transfer of such Old Notes as set forth in the legend thereon as a
consequence of the issuance of the Old Notes pursuant to the exemptions from, or
in transactions not subject to, the registration requirements of the Securities
Act and applicable state securities law. Old Notes not exchanged pursuant to the
Exchange Offer will continue to accrue interest at 10 3/8% per annum and will
otherwise remain outstanding in accordance with their terms. Holders of Old
Notes do not have any appraisal or dissenters' rights under the Massachusetts
Business Corporation Law in connection with the Exchange Offer. In general, the
Old Notes may not be offered or sold unless registered under the Securities Act,
except pursuant to an exemption from, or in a transaction not subject to, the
Securities Act and applicable state securities laws. The Company does not
currently anticipate that it will register the Old Notes under the Securities
Act. However, (i) if any Initial Purchaser so requests with respect to Old Notes
not eligible to be exchanged for New Notes in the Exchange Offer and held by it
following consummation of the Exchange Offer or (ii) if any holder of Old Notes
is not eligible to participate in the Exchange Offer or, in the case of any
holder of Old Notes that participates in the Exchange Offer, does not receive
freely tradable New Notes in exchange for Old Notes, the Company is obligated to
file a registration statement on the appropriate form under the Securities Act
relating to the Old Notes held by such persons.
Based on certain interpretive letters issued by the staff of the Commission
to third parties in unrelated transactions, New Notes issued pursuant to the
Exchange Offer may be offered for resale, resold or otherwise transferred by
holders thereof (other than (i) any such holder which is an "affiliate" of the
Company within the meaning of Rule 405 under the Securities Act or (ii) any
broker-dealer that purchases Notes from the Company to resell pursuant to Rule
144A or any other available exemption) without compliance with the registration
and prospectus delivery provisions of the Securities Act, provided that such New
Notes are acquired in the ordinary course of such holders' business and such
holders have no arrangement or understanding with any person to participate in
the distribution of such New Notes. If any holder has any arrangement or
understanding with respect to the distribution of the New Notes to be acquired
pursuant to the Exchange Offer, such holder (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 in
connection with a secondary resale transaction. A broker-dealer who holds Old
Notes that were acquired for its own account as a result of market-making or
other trading activities may be deemed to be an "underwriter" within the meaning
of the Securities Act and must, therefore, deliver a prospectus meeting the
requirements of the Securities Act in connection with any resale of New Notes.
Each such broker-dealer who receives New Notes for its own account in exchange
for Old Notes, where such Old Notes were acquired by such broker-dealer as a
result of market-making activities or other trading activities, must acknowledge
in the Letter of Transmittal that it will deliver a prospectus in connection
with any resale of such New Notes. See "Plan of Distribution." While the Company
has an obligation under the Registration Rights Agreement to update this
Prospectus by amendment or supplement for a period of 90 days following
consummation of the Exchange Offer, the Company has no obligation thereafter to
update the Prospectus and, therefore, holders required to deliver a prospectus
may not thereafter be able to resell because they may be unable to comply with
the prospectus delivery requirements described above.
In addition, to comply with the securities laws of certain jurisdictions, if
applicable, the New 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 New Notes for offer or
sale under the securities or blue sky laws of such jurisdictions as any holder
of the Notes reasonably requests in writing.
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BUSINESS
GENERAL
The Company is the largest marketer of baby and toddler apparel and a
leading marketer of young children's apparel. Over the Company's more than 130
years of operation, CARTER'S has become one of the most highly recognized brand
names in the children's apparel industry. The Company is a vertically-integrated
manufacturer which sells its products under the CARTER'S, CARTER'S CLASSICS and
BABY DIOR brand names to more than 300 department and specialty store accounts
(with an estimated 4,600 store fronts) and through its 135 retail outlet stores.
Carter's is the leading provider of layette (a complete range of apparel and
related products for newborns) in its target distribution channels, with a
market share of approximately 16%, more than four times that of its nearest
branded competitor. Carter's is also the leading provider of baby and toddler
sleepwear in its target distribution channels, with a market share of
approximately 28%, more than three times that of its nearest branded competitor.
The Company also has a significant presence in the much larger and highly
fragmented baby and toddler playwear market.
Carter's generates approximately 87% of its sales in the baby and toddler
apparel market, a $5.6 billion market which has grown at a 6.1% compound annual
rate from 1991 through 1995. Management believes that the baby and toddler
market is well-insulated from changes in fashion trends and less sensitive to
general economic conditions, while offering strong prospects for continued
growth. The growth in this market is being driven by a number of factors,
including: (i) women having children later, resulting in more disposable income
available for expenditures on children; (ii) more women returning to the
workplace after having children, resulting in more disposable income and
increased day care apparel needs; (iii) the increasing number of grandparents, a
demographic segment with high per capita discretionary income and an important
consumer base for children's apparel; and (iv) an increasing social emphasis on
attractive children's apparel.
Carter's senior management has significantly increased earnings and market
share since joining the Company in 1992. Management's fundamental strategy has
been to promote the Company's brand image as the absolute leader in baby apparel
products and to consistently provide high quality, attractive products at a
strong perceived value to consumers. To this end, management employs a
comprehensive four-step marketing strategy which incorporates: (i) extensive
consumer preference testing; (ii) superior brand and product presentation at the
consumer point-of-purchase; (iii) dominant marketing communications; and (iv)
consistent, premium service to fulfill customer and consumer needs. In addition,
the Company continues to realize significant operating efficiencies by reducing
SKUs and product complexity, enhancing core product offerings, increasing
off-shore production and implementing the wider use of advanced information
systems. As a result of these efforts, the Company has increased its EBITDA from
$12.4 million in fiscal 1992 to $31.2 million in fiscal 1996.
COMPANY STRENGTHS
The Company attributes its market leadership and its significant
opportunities for continued growth and increased profitability to the following
competitive strengths:
SUPERIOR BRAND AWARENESS
Carter's has achieved a high level of positive brand awareness with both
consumers and retailers as a result of more than a century of providing quality
baby, toddler and young children's apparel. In a 1993 survey, 92% of mothers and
grandmothers surveyed were familiar with the CARTER'S brand name, and 80%
reported that they had purchased CARTER'S brand products. The Company has
maintained this positive brand awareness despite a relatively low marketing
budget with little national advertising. Management believes that the
consolidation of the apparel industry and changes in the retail environment will
continue to favor strong branded companies such as Carter's, as many department
and specialty stores have focused on promoting leading brands while reducing
their number of suppliers.
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LEADING AND GROWING MARKET POSITIONS
Carter's is the largest marketer of baby and toddler apparel, with leading
market shares in the layette and sleepwear product categories in its target
distribution channels. Since 1992, the Company has increased its share of the
layette market from 9% to 16% and its share of the baby and toddler sleepwear
market from 22% to 28%. In addition, the Company is the second largest marketer
of young children's sleepwear and has a significant presence in the much larger
and highly fragmented baby and toddler playwear market.
STRONG MANAGEMENT TEAM
Since joining Carter's in 1992, the Company's management team, led by
Frederick J. Rowan, II, has been responsible for sales and EBITDA increasing at
compound annual rates of 8.7% and 25.8%, respectively. Four of the Company's top
executives, including Mr. Rowan, joined the Company following successful careers
running the Bassett-Walker and Lee Jeans divisions of the VF Corporation. The
Company's five top executives average more than 20 years of experience in the
textile and apparel industries. Management believes that they have significant
experience in developing brand names, have a strong reputation with customers,
the trade and the financial community, and possess a diverse skill base which
incorporates brand marketing, multiple sourcing, off-shore production, vertical
manufacturing and MIS integration.
VERTICALLY-INTEGRATED MANUFACTURING CAPABILITIES
Carter's is a vertically-integrated manufacturer that knits, dyes, finishes,
prints, cuts, sews and embroiders approximately 80% of the products it sells.
The Company believes that its vertical integration allows it to maintain a
competitive cost structure, accelerate speed to market and provide consistent,
premium quality. Since 1992, the Company has made significant investments in
equipment, facilities and systems to improve quality, reduce costs, minimize
shrinkage, decrease inventories and shorten cycle times. In 1991, the Company
commenced off-shore sewing operations to decrease costs of sewing, typically the
most labor-intensive portion of the manufacturing process. At year-end 1996,
approximately 40% of the Company's sewing production was conducted off-shore
which reduced annual manufacturing costs by approximately $10 million. In
addition, in 1993, management initiated a substantial upgrade of its MIS
capabilities with a fully-integrated operating system designed to support the
growth of the business and to further improve manufacturing efficiencies. These
system upgrades are 65% complete and are expected to be completed in 1998.
STRONG CUSTOMER RELATIONSHIPS
Due to focused and consistent management efforts to create retail
partnerships, the Company enjoys strong relationships with its wholesale
customers, as evidenced by the nine supplier awards the Company has received
since 1992. Management meets frequently with the Company's major accounts to
review product offerings, establish and monitor sales plans and design joint
advertising and promotional campaigns. In addition, the Company has introduced
to several of its major wholesale customers, including Macy's, Bloomingdale's,
Burdine's, Rich's and JCPenney, its "store-in-store" concept in which the
Company creates a CARTER'S-brand shop within its wholesale customers' children's
apparel departments. Such store-in-store shops provide the Company with
dedicated selling space, superior and consistent brand presentation and greater
control of product mix, resulting in higher profitability and productivity for
both the Company and its wholesale customers.
OPERATING STRATEGY
The Company intends to strengthen its market leadership positions and
further increase sales and EBITDA by continuing to implement an operating
strategy that has the following primary components:
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INCREASE INVESTMENTS IN BRAND EQUITY
Management believes Carter's enjoys among the highest brand awareness of any
children's apparel company, despite having spent only $1.1 million on national
advertising in fiscal 1996. In order to capitalize further on the potential of
the CARTER'S name, the Company intends to increase its joint promotional
activities with its key wholesale accounts, accelerate the roll out of its
branded "store-in-store" shops and selectively increase its national print
advertising with heightened visibility of its tag line "If they could just stay
little 'til their CARTER'S wear out."-TM- Management believes that selective
investments in its brand will result in high returns and will help support
continued growth.
INCREASE OPERATING EFFICIENCIES
The Company's management team has successfully increased EBITDA margins from
5.5% of sales in 1992 to 9.8% of sales in fiscal 1996. The Company has achieved
these results by reducing SKUs, decreasing product complexity, upgrading
information systems and moving certain labor-intensive portions of its
production process off-shore. Management believes additional opportunities exist
to continue to reduce manufacturing costs and accelerate speed to market by
shortening cycle times, more efficiently managing inventories and further
expanding off-shore production. Management expects to increase the Company's
percentage of off-shore sewing to approximately 60% by the end of 1998 and
approximately 80% by the end of 2001, which is expected to yield incremental
cost savings in line with the Company's historical experience.
ENHANCE RETAIL OUTLET STORE PRODUCTIVITY
During the past year, the Company has emphasized improving the value,
quality and convenience of the retail shopping experience. Management has
recently increased the percentage of sleepwear and baby products in the
Company's retail product mix, which represent the Company's historical product
strengths and also carry higher margins. The Company is also reducing the
complexity and assortment of retail products offered to simplify the consumer's
shopping experience. In addition, the Company has created new consumer-friendly
store layouts, with clearly identified departments, designated clearance areas
and higher impact store fronts. Since November 1995, the Company has implemented
these new store layouts in 24 of its 135 retail outlet stores, and expects to
have this new store layout implemented in approximately 100 of its stores by the
end of 1997.
CAPITALIZE ON ADDITIONAL GROWTH OPPORTUNITIES
The Company intends to aggressively pursue selected growth opportunities in
its primary markets, including:
- Leveraging its leading positions in layette and sleepwear to increase its
share of the larger and more highly fragmented playwear market, which is
more than five times the size of the sleepwear market. Management has
recently increased the marketing focus on its playwear lines and
introduced new playwear product designs. The success of these efforts is
reflected in the 33% increase in wholesale playwear shipments from fiscal
1995 to fiscal 1996.
- Continuing to implement the Company's "store-in-store" concept. The
Company first introduced these shops in fiscal 1995, had 250 such shops at
the end of fiscal 1996 and expects to have approximately 400 such shops at
the end of fiscal 1997. Management believes that there are significant
opportunities to expand the "store-in-store" concept throughout its
wholesale customer base.
- Leveraging the CARTER'S brand through other growth opportunities. Carter's
has recently initiated product extensions through a gift-giving program
and a renewed focus on selectively increasing licensing relationships. In
addition, Carter's is investigating opportunities for international and
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direct marketing sales, alternative retail formats and brand extensions to
serve the discount channel, a market in which the Company currently does
not compete.
PRODUCTS AND MARKETS
The Company markets and manufactures a broad array of baby, toddler and
young children's apparel under the CARTER'S, CARTER'S CLASSICS and BABY DIOR
brand names. The Company's product offerings can be broadly grouped into two
primary categories: (i) "baby and toddler," which includes newborns through
toddlers approximately age three (up to size 4T); and (ii) "young children,"
which includes children approximately age three through approximately age six
(boys' sizes 4-7 and girls' sizes 4-6x). The Company's product offerings in
these categories include layette, sleepwear and playwear for the baby and
toddler market, and sleepwear and playwear for the young children's market. In
addition, the Company sells products such as diaper bags, lamps, socks,
strollers, hair accessories, outerwear, underwear and shoes, including products
for which the Company licenses the CARTER'S name.
BABY AND TODDLER
From 1991 through 1995, total industry sales of baby and toddler apparel
increased from $4.4 billion to $5.6 billion, a compound annual rate of 6.1%,
making it one of the fastest growing sectors of the apparel industry. Carter's
target distribution channels, which include department and specialty stores,
account for approximately half of this market. Carter's is currently the leading
supplier of baby and toddler apparel in the United States, with a 7.1% market
share in its target distribution channels, nearly twice that of its nearest
branded competitor. In fiscal 1996, the Company generated $253.1 million of
sales, or 87.0% of its total regular-priced sales, in the baby and toddler
apparel market.
LAYETTE. Layette includes a complete range of products primarily made of
cotton for newborns, including bodysuits, undershirts, towels, washcloths,
receiving blankets, layette gowns, bibs, caps and booties. In fiscal 1996, the
Company generated $52.6 million in sales of these products. Carter's is the
leading supplier of layette products, with an approximate 16% market share in
its target distribution channels. Management attributes Carter's leading market
position to the Company's distinctive print designs, unique embroidery and the
reputation for quality Carter's has developed over its 130 year history. The
Company is currently introducing enhancements to its layette product offerings,
including new fabrics, prints and increased embroidery, which it believes will
enhance margins. The Company's primary competitors in the layette market are
private label manufacturers.
SLEEPWEAR. Baby and toddler sleepwear includes pajamas, long underwear and
one-piece footed sleepers made out of cotton. In fiscal 1996, the Company
generated $91.3 million in sales of these products. Carter's is the leading
supplier of baby and toddler sleepwear products with an approximate 28% market
share in its target distribution channels. As in layette, management attempts to
differentiate its sleepwear products from its competition by offering
consumer-tested prints and embroideries with an emotional appeal. In addition,
management believes Carter's baby sleepwear product line, which is well-
coordinated with its layette product line, features more functional, higher
quality products than those of its competitors. The Company's primary
competitors in the baby and toddler sleepwear market are both private label
manufacturers and other branded children's apparel companies.
PLAYWEAR. Baby and toddler playwear includes cotton knit apparel for
everyday use. In fiscal 1996, the Company generated $101.6 million in sales of
these products. Although the Company has historically focused on strengthening
its core volume layette and sleepwear products, it has recently begun to focus
on strengthening its playwear product offerings by introducing original print
designs and innovative artistic treatments in an effort to drive sales growth
and increase market share. Management believes that these new product offerings
and an increased marketing focus, in addition to Carter's high brand name
awareness and strong wholesale customer relationships, will allow the Company's
sales and market share in this category to grow. The success of this strategy is
reflected in the 33% increase in wholesale playwear
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shipments from fiscal 1995 to fiscal 1996. The baby and toddler playwear market
is highly fragmented, with no one branded competitor enjoying more than a 5%
share of the market.
OTHER. Other baby and toddler products include outerwear, shoes, socks,
diaper bags, lamps and hair accessories, including products for which the
Company licenses the CARTER'S name. In fiscal 1996, the Company generated $7.6
million in sales of these products.
YOUNG CHILDREN'S
From 1991 through 1995, total industry sales of young children's apparel
increased from $4.7 billion to $5.3 billion, a compound annual rate of 2.9%.
Carter's target distribution channels, which include department and specialty
stores, account for approximately half of this market. The Company is the second
largest supplier of young children's sleepwear products, and is also a supplier
of young children's playwear products. In fiscal 1996, the Company generated
$37.9 million of sales, or 13.0% of its total regular-priced sales, in the young
children's apparel market.
SLEEPWEAR. Young children's sleepwear product offerings include basic
two-piece pajamas, long underwear and polyester blanket-fleece one-piece
sleepers. In fiscal 1996, the Company generated $23.0 million in sales of these
products. As with baby and toddler sleepwear, the Company attempts to
differentiate its young children's sleepwear products from those of its
competitors by offering consumer-tested prints and embroideries with an
emotional appeal. The Company's primary competitors in the young children's
sleepwear market are both branded children's apparel companies and private label
manufacturers.
PLAYWEAR. Young children's playwear product offerings include cotton knit
apparel for everyday use. In fiscal 1996, the Company generated $14.9 million in
sales of these products. The Company's management elected to focus initially on
strengthening the Company's core products in layette and sleepwear when it
joined the Company in 1992. The Company has recently begun to leverage its high
brand awareness and leading market shares in layette and sleepwear to increase
its sales of young children's playwear. The Company's primary competitors in the
young children's playwear market are both branded children's apparel companies
and private label manufacturers.
OTHER. Other young children's products include underwear, outerwear, shoes,
socks, lamps and hair accessories, including products for which the Company
licenses the CARTER'S name. In fiscal 1996, the Company generated $1.5 million
in royalty income from the sale of these products.
BRAND NAMES
The Company markets its products under three distinct brands, each with its
own positioning, distribution and price point. The traditional CARTER'S brand is
positioned as a premium, moderately-priced core resource for department and
specialty stores and for the Company's retail outlet stores. CARTER'S CLASSICS
products are targeted solely for the baby market and are distributed only
through department stores and the Company's retail outlet stores at a price
point approximately 15% higher than CARTER'S brand products. Management expects
to increase the price differential between CARTER'S CLASSICS and CARTER'S over
time in order to create greater brand differentiation among the Company's
brands. BABY DIOR, the Company's only licensed brand, is also produced solely
for the baby market. BABY DIOR products are sold at a price point approximately
100% higher than that of the CARTER'S CLASSICS brand. In fiscal 1996,
approximately 87%, 7%, and 6% of the Company's sales were of CARTER'S, CARTER'S
CLASSICS, and BABY DIOR apparel, respectively.
CARTER'S
CARTER'S products are characterized by a distinct look representing classic
yet updated styling, practical yet innovative design and childlike yet
sophisticated artistic applications. The full assortment of products
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provides a 24-hour dressing "system," focusing on core resources and
complemented by themed collections. CARTER'S represents the Company's opening
price point and is positioned at the upper portion of the middle market. As a
result of this positioning, CARTER'S is represented prominently throughout the
Company's targeted distribution channels (i.e., all department and specialty
stores), as well as in Carter's retail outlet stores. Management expects that
growth will be driven by product line initiatives such as fabric innovation and
creative embroidery rather than by brand repositioning. Management believes that
further growth opportunity for the CARTER'S brand lies in additional licensing
potential. Currently, the CARTER'S name appears on diaper bags, lamps, socks,
strollers, hair accessories, outerwear, underwear and shoes.
CARTER'S CLASSICS
Introduced in 1994, the CARTER'S CLASSICS brand is positioned further
upscale than the CARTER'S brand. CARTER'S CLASSICS products are offered
primarily through the department store channel of distribution, and secondarily
through the Company's retail outlet stores. The Company currently produces only
baby products under the CARTER'S CLASSICS brand name. The Company maintains a
cohesive theme in the CARTER'S CLASSICS brand as contrasted with the broad
offerings available under the CARTER'S brand; colors tend to be pastels and
naturals, more luxurious fabrics are utilized and a greater amount of embroidery
is applied. CARTER'S CLASSICS is also differentiated from CARTER'S by packaging
in softer materials and colors. As a result of its higher price point, CARTER'S
CLASSICS products provide higher margins for both the Company and its wholesale
customers.
BABY DIOR
The Company is the exclusive sub-licensee of the BABY DIOR brand name for
baby clothes through 1998. This licensing relationship began in 1978 and BABY
DIOR is now positioned as the most elegant and luxurious brand marketed by the
Company. Over the past three years, management has focused on reducing the
complexity of the BABY DIOR line. The number of SKUs has been reduced as the
Company has moved toward core products and eliminated seasonal products. The
BABY DIOR line maintains a cohesive theme through soft-pastel or white clothing
designed with a European flair. As with CARTER'S CLASSICS, this product line
provides higher margins for both the Company and its wholesale customers.
Department stores and specialty retailers, as well as Carter's retail outlet
stores, offer BABY DIOR brand products.
PRODUCT DESIGN AND DEVELOPMENT
Since joining Carter's in 1992, the Company's management team has
significantly improved the Company's product design and development process by
investing in advanced design systems, improving its design staff and introducing
proven customer marketing tools. Whereas prior to 1993 the Company utilized a
single design staff for all of its product design requirements, the Company's
product design and development organization is now comprised of teams that focus
on each of the Company's primary product markets. Each team has its own artistic
and design staff to develop new ideas specifically for its respective market.
Management believes that this organizational structure provides the Company
greater flexibility and allows it to introduce products more quickly and with a
greater success rate.
The Company's design staff continuously strives toward product innovation.
Consumer preference testing drives the product offerings and defines the look
for the brand, while a few showpieces are developed each season to add variety
and interest. Generally, graphics and prints are used to provide originality and
depth. A sophisticated graphic computer network enhances artistic talent.
Due to the importance of graphics and prints, the Company devotes particular
effort to consumer preference testing for colors, prints, art and silhouettes.
Each year, more than 1,000 different prints are consumer-tested, of which 40%
are eventually used. As part of the Company's extensive testing program, more
than 10,000 potential consumers are surveyed in the Company's outlet stores as
well as in geographically-diverse malls. While testing of new prints is an
important aspect of consumer research,
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layette prints, for example, are changed, on average, once every two years.
Prints in "basic" items are tested quarterly by consumers as well as constantly
monitored through sales data. Consumer preference tests are also conducted on
sizing and functionality for new product introductions.
After consumer preference testing of a fabric or product occurs and internal
review committees approve selections, retailers are often shown a color drawing
in "board form" to register their reactions. Finally, product development teams
from the Company's merchandising department coordinate plans with the managers
from manufacturing to ensure cost-effective execution and quality of the
proposed item.
DISTRIBUTION AND SALES
The Company sells its products to wholesale accounts and through the
Company's retail outlet stores. In fiscal 1996, sales through the wholesale
channel accounted for 59.4% of total sales, while the retail channel accounted
for 40.6% of total sales.
WHOLESALE OPERATIONS
In fiscal 1996, more than 90% of the Company's wholesale business was
generated from department and specialty stores. The Company sells its products
in the United States to approximately 300 wholesale accounts with an estimated
4,600 store fronts through a network of 35 sales professionals. Sales
professionals work with each account in his/her jurisdiction to establish annual
plans for "basics" (primarily layette and certain baby apparel) within the
CARTER'S line, as well as all products in the CARTER'S CLASSICS and BABY DIOR
lines. Once an annual plan has been established with an account, Carter's places
the account on its semi-monthly automatic reorder plan for "basics." Management
intends to increase the number of accounts on this program to help better manage
inventories, control costs and increase sales. Automatic reorder allows the
Company to plan its manufacturing further in advance and benefits both the
Company and its wholesale customers by maximizing customers' in-stock positions,
thereby maximizing sales and profitability. Currently, Carter's non-basics
sleepwear and playwear are planned and ordered seasonally as new products are
introduced.
Since 1994 the Company has introduced its store-in-store concept to certain
locations of several of its major wholesale customers, including Macy's,
Bloomingdale's, Burdine's, Rich's and JCPenney, in which the Company creates a
Carter's-brand shop within its wholesale customers' children's apparel
departments. Sales performance at these sites has been strong, prompting
Carter's to roll this program out to more of its wholesale customers' locations.
The store-in-store shops have resulted in higher productivity and profitability
to both the Company and its wholesale customers by providing the Company with
dedicated selling space, superior and consistent brand presentation and greater
control of product mix, including the ability to dedicate more selling space to
playwear.
RETAIL OPERATIONS
The Company operates 135 retail outlet stores nationwide averaging 5,300
square feet, making it the fifteenth largest retail outlet store operator as
measured by number of stores. These stores sell all of CARTER'S products, as
well as accessories and certain items purchased from outside manufacturers which
are sold under the CARTER'S brand name. The product mix in the Company's retail
stores differs from that of its wholesale operations, with a greater amount of
playwear sold (approximately 53.6% of fiscal 1996 retail sales). Management
believes that strong consumer acceptance of its playwear products in its retail
outlet stores is an indication of significant opportunities to improve playwear
sales through the wholesale channel as more selling space in this channel
becomes dedicated to its playwear offerings.
Although total retail sales increased at a compound annual rate of 5.7% from
fiscal 1993 through fiscal 1996 (due to new store openings), comparable store
sales have declined since 1993. In an effort to stem declining same store sales,
improve profitability and better leverage the CARTER'S brand name, management
has recently integrated the retail division with the wholesale division under
the same
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marketing leadership and upgraded management and retailing skills at the
corporate, regional and store levels. To improve the value, quality and
convenience of products offered in the Company's retail outlet stores,
management has: (i) enhanced the CARTER'S CLASSICS offerings; (ii) shifted the
product mix more toward sleepwear, baby and core volume products; (iii) reduced
the complexity and assortment of products offered; and (iv) further developed
the gift business through pre-assembled gift assortments.
In addition, to make the consumer's shopping experience easier and more
convenient, the Company has redesigned its store layout by widening aisles,
improving signage and creating distinct product departments, with an increased
focus on the Company's core baby products. Since the beginning of the fourth
quarter of fiscal 1995, the Company has implemented these new store layouts in
24 of its 135 retail outlet stores (17 of which were new store openings), and
expects to have the new store layout implemented in 100 of its stores by the end
of 1997. The 17 new stores which have been opened since the beginning of the
fourth quarter of fiscal 1995 have had, in recent periods, higher sales per
square foot and higher gross margins, and they carry less inventory than the
Company's other stores. As leases expire, the Company evaluates a store's
current and future prospects and determines whether to continue to operate in
that location, to relocate in that market or to cease a store's operations.
MARKETING
Management's fundamental strategy has been to promote the Company's brand
image as the absolute leader in baby apparel products and to consistently
provide high quality, attractive products at a strong perceived value to
consumers. To this end, management employs a comprehensive four-step marketing
strategy which incorporates identifying core products through extensive consumer
preference testing; superior brand and product presentation at the consumer
point-of-purchase; marketing the brand name through dominant communications; and
providing consistent, premium service, including delivering and replenishing
products at the right time to fulfill customer and consumer needs. Management
believes that the Company has further strengthened its brand image to the
consumer through innovative product designs, national print advertising, joint
mailers with wholesale customers, meetings between senior account
representatives and Carter's executives, trade show participation and
store-in-store shops.
Despite the Company's high brand awareness and substantial sales growth
during the last three years, marketing support on the whole remains low with
only $1.1 million spent on national advertising in fiscal 1996. Management
believes that selective investments in its brand will result in high returns and
will help support continued growth.
MANUFACTURING
The Company is a vertically-integrated manufacturer that knits, dyes,
finishes, prints, cuts, sews and embroiders approximately 80% of the product it
sells. The Company believes that its vertical integration allows it to maintain
a competitive cost structure, accelerate speed to market and provide consistent,
premium quality. Domestically, the Company currently operates five sewing
facilities, as well as one combination distribution and sewing facility, one
textile facility, two other stand-alone distribution centers, a cutting facility
and an embroidery facility. Internationally, the Company operates two sewing
facilities in Costa Rica and one sewing facility in the Dominican Republic.
Despite the Company's historical operating improvements, management believes
significant additional opportunities exist to reduce product costs, shorten
cycle times and reduce inventories through the wider use of advanced information
systems, the expansion of off-shore production, reductions in SKUs and product
complexity and the enhancement of core product offerings. The Company intends to
further invest in the expansion of its off-shore sewing production capacity, as
sewing is currently the most labor-intensive portion of the Company's production
process. The Company established its first off-shore sewing production facility
in Costa Rica in 1991. The Company currently operates three off-shore sewing
plants which process approximately 40% of the Company's sewing requirements.
Management intends to increase its
45
<PAGE>
percentage of off-shore sewing to 60% by the end of 1998 and 80% by the end of
2001, which is expected to yield significant incremental cost savings in line
with the Company's historical experience.
DEMOGRAPHIC TRENDS
The total U.S. apparel industry generated more than $150 billion in sales in
1995, of which approximately $23 billion was spent on children's apparel. Of the
$23 billion spent on children's apparel, approximately $5.6 billion was spent on
baby and toddler apparel, and approximately $5.3 billion was spent on young
children's apparel. From 1991 through 1995, sales of baby and toddler apparel
grew at a compound annual rate of 6.1% and sales of young children's apparel
grew at a compound annual rate of 2.9%.
Management believes that numerous demographic trends have contributed to a
particularly strong baby, toddler and young children's apparel market during the
1990s, including the following:
- WOMEN HAVING CHILDREN LATER. In 1992, more than 32% of the births which
took place in the U.S. were to women over the age of 30, which represents
a 52% increase since 1980. Of these births, 25% were first children.
Management believes these trends have led to increased spending per child
as parents tend to spend more money on their first born child and older
parents generally have more disposable income.
- MORE WOMEN RETURNING TO THE WORKPLACE AFTER HAVING CHILDREN. In 1992, 54%
of women returned to work after having a baby, a 58% increase since 1980.
Management believes this trend has had a positive effect on sales of
children's apparel as dual income families tend to have more discretionary
income and greater day care apparel needs.
- GRANDPARENT BOOM. According to the U.S. Bureau of the Census, people in
the U.S. age 45 or older numbered approximately 85.7 million in 1995. The
U.S. Bureau of the Census projects this number to increase by
approximately 25% to approximately 107.3 million by the year 2005.
Management expects that this will result in an increase in the total
number of grandparents in the U.S., which is an important demographic
segment for children's apparel manufacturers.
- INCREASED FOCUS ON CHILDREN'S CLOTHING. Management believes that there is
an increasing social emphasis on attractive children's apparel, which is
resulting in increased spending per child. As a result of this, as well as
the other factors discussed above, from 1993 through 1995, when the
population of children from ages one to six was increasing at a 0.9%
compound annual rate, sales of baby and infant apparel increased at a 4.6%
compound annual rate.
Although total births are expected to remain relatively flat through the end
of the 1990s, management believes the aforementioned demographic trends, in
addition to other non-population growth factors, will continue to drive
increased spending per child for the foreseeable future and will lead to
increased sales of children's apparel in the Company's primary markets.
COMPETITION
The baby and toddler and young children's apparel markets are highly
competitive. Competition is generally based upon product quality, brand name
recognition, price, selection, service and convenience. Both branded and private
label manufacturers compete in the baby and toddler and young children's
markets. The Company's primary branded competitors include Health-Tex and
Oshkosh B'Gosh, together with Disney licensed products, in playwear and numerous
smaller branded companies, as well as Disney licensed products, in sleepwear.
Although management believes that the Company does not compete as directly with
most private label manufacturers in sleepwear and playwear, certain retailers,
including several which are customers of the Company, have significant private
label product offerings. The Company does not believe that it has any
significant branded competitors in its layette market in which
46
<PAGE>
most of the alternative products are offered by private label manufacturers.
Because of the highly fragmented nature of the industry, the Company also
competes with many small, local manufacturers and retailers. Certain of the
Company's competitors have greater financial resources than the Company, have
larger customer bases and are less financially leveraged.
REAL PROPERTY
The Company operates 135 leased retail outlet stores located primarily in
outlet centers across the United States, having an average size of 5,300 square
feet. The leases have an average term of approximately five years until final
expiration with additional five-year renewal options. Domestically, the Company
also owns three distribution and five manufacturing facilities in Georgia and
Pennsylvania, and has ground leases on three additional manufacturing facilities
in Texas and Mississippi. Internationally, the Company leases two sewing
facilities in Costa Rica and one in the Dominican Republic.
ENVIRONMENTAL MATTERS
The Company is subject to certain Environmental Laws. The Company believes
that it currently conducts its operations, and in the past has operated its
business, in substantial compliance with applicable Environmental Laws. From
time to time, operations of the Company have resulted or may result in
noncompliance with or liability pursuant to Environmental Laws. In July and
August 1996, the Company had Reports conducted by an environmental consultant
for 13 facilities. Based on available information, including the Reports, the
Company has identified certain non-compliance with Environmental Laws. The
Company has also identified certain actions which may be required in the future.
However, the Company believes that any existing noncompliance or liability or
future requirements under the Environmental Laws would not have a material
adverse effect on its results of operations and financial condition.
PATENTS, TRADEMARKS, COPYRIGHTS AND LICENSES
The Company owns many trademarks and tradenames, including
CARTER'S-REGISTERED TRADEMARK-, CARTER'S GROWBODY-REGISTERED TRADEMARK-,
CARTER-SET-REGISTERED TRADEMARK-, JAMAKINS-REGISTERED TRADEMARK-, TODAY'S
CLASSICS-REGISTERED TRADEMARK- and TYKES-REGISTERED TRADEMARK-, as well as
patents and copyrights, most of which are registered in the United States and in
46 foreign countries. The Company licenses the CARTER'S name and many of its
trademarks, tradenames and patents to third-party manufacturers to produce and
distribute children's apparel and related products such as diaper bags, lamps,
socks, strollers, hair accessories, outwear, underwear and shoes. BABY
DIOR-REGISTERED TRADEMARK- is a registered trademark sub-licensed to, but not
owned by, the Company.
EMPLOYEES
As of December 28, 1996, the Company had approximately 6,910 employees,
4,422 of which were employed on a full-time basis in the Company's domestic
operations, 1,080 of which were employed on a part-time basis in the Company's
domestic operations and 1,408 of which were employed on a full-time basis in the
Company's foreign operations. None of the Company's employees is unionized. The
Company has had no labor-related work stoppages and believes that its labor
relations are good.
LEGAL PROCEEDINGS
From time to time, the Company has been involved in various legal
proceedings. Management believes that all of such litigation is routine in
nature and incidental to the conduct of its business, and that none of such
litigation, if determined adversely to the Company, would have a material
adverse effect on the financial condition or results of operations of the
Company.
47
<PAGE>
MANAGEMENT
DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth the name, age and position of each of the
directors and executive officers of the Company. Each director of the Company
will hold office until the next annual meeting of shareholders of the Company or
until his successor has been elected and qualified. Officers of the Company are
elected by the Board of Directors of the Company and serve at the discretion of
the Board of Directors.
<TABLE>
<CAPTION>
NAME AGE POSITIONS
- ------------------------------ --- -------------------------------------------------------
<S> <C> <C>
Frederick J. Rowan, II........ 57 President, Chief Executive Officer and Chairman of the
Board of Directors.
Joseph Pacifico............... 47 Executive Vice President--Marketing.
Charles E. Whetzel, Jr........ 46 Executive Vice President--Manufacturing & Operations.
David A. Brown................ 39 Senior Vice President--Business Planning &
Administration and Director.
Jay A. Berman................. 46 Senior Vice President, Chief Financial Officer,
Treasurer and Director.
Christopher J. O'Brien........ 38 Director.
Charles J. Philippin.......... 46 Director.
Christopher J. Stadler........ 32 Director.
</TABLE>
FREDERICK J. ROWAN, II joined the Company in 1992 as President and Chief
Executive Officer and became Chairman of the Board of Directors of the Company
in October 1996. Prior to joining the Company, Mr. Rowan was Group Vice
President of VF Corporation, a multi-division apparel company and, among other
positions, served as President and Chief Executive Officer of both the H.D. Lee
Company and Bassett-Walker, Inc., divisions of VF Corporation. Mr. Rowan, who
has been involved in the textile and apparel industries for 32 years, has been
in senior executive positions for nearly 20 of those years. Mr. Rowan began his
career at the DuPont Corporation and later joined Aileen Inc., a manufacturer of
women's apparel, where he subsequently became President and Chief Operating
Officer.
JOSEPH PACIFICO joined the Company in 1992 as Executive Vice
President--Sales and Marketing. Mr. Pacifico began his career with VF
Corporation in 1981 as a sales representative for the H.D. Lee Company and was
promoted ultimately to the position of Vice President of Marketing in 1989, a
position he held until 1992.
CHARLES E. WHETZEL, JR. joined the Company in 1992 as Executive Vice
President--Operations. Mr. Whetzel began his career at Aileen Inc. in 1971 in
the Quality function and was later promoted to Vice President of Apparel.
Following Aileen Inc., Mr. Whetzel held positions of increasing responsibility
with Mast Industries, Health-Tex and Wellmade Industries, respectively. In 1988,
Mr. Whetzel joined Bassett-Walker, Inc. and was later promoted to Vice President
of Manufacturing for the H.D. Lee Company.
DAVID A. BROWN joined the Company in 1992 as Senior Vice
President--Business Planning and Administration and became a director of the
Company in October 1996. Prior to 1992, Mr. Brown held various positions at VF
Corporation including Vice President--Human Resources for both the H.D. Lee
Company and Bassett-Walker, Inc. Mr. Brown also held personnel-focused positions
with Blue Bell, Inc. and Milliken & Company earlier in his career.
48
<PAGE>
JAY A. BERMAN joined the Company in 1988 as Treasurer and was named Chief
Financial Officer and Senior Vice President in 1989. Mr. Berman became a
director of the Company in October 1996. Prior to joining the Company, Mr.
Berman was employed by Warnaco, Inc., where he served in various capacities from
1981 to 1988 including Treasurer and head of Financial Planning. Prior to 1981,
Mr. Berman was employed by Coopers & Lybrand and the Connecticut Savings Bank.
CHRISTOPHER J. O'BRIEN became a director of the Company in October 1996. He
has been an executive of Investcorp, its predecessor or one or more of its
wholly owned subsidiaries since December 1993. Prior to joining Investcorp, Mr.
O'Brien was a Managing Director of Mancuso & Company for four years. Mr. O'Brien
is a director of Simmons Holdings, Inc., Star Markets Holdings, Inc., Prime
Service, Inc. and CSK Auto, Inc.
CHARLES J. PHILIPPIN became a director of the Company in October 1996. He
has been an executive of Investcorp, its predecessor or one or more of its
wholly owned subsidiaries since July 1994. Prior to joining Investcorp, Mr.
Philippin was a partner of Coopers & Lybrand L.L.P. Mr. Philippin is a director
of Saks Holdings, Inc., Prime Service, Inc. and CSK Auto, Inc.
CHRISTOPHER J. STADLER became a director of the Company in October 1996. He
has been an executive of Investcorp, its predecessor or one or more of its
wholly owned subsidiaries since April 1996. Prior to joining Investcorp, Mr.
Stadler was a Director with CS First Boston Corporation. Mr. Stadler is a
director of Prime Service, Inc. and CSK Auto, Inc.
DIRECTOR COMPENSATION
The Company pays no additional remuneration to its employees or to
executives of Investcorp for serving as directors. See "--Executive
Compensation." There are no family relationships among any of the directors or
executive officers.
49
<PAGE>
EXECUTIVE COMPENSATION
The following table sets forth all cash compensation earned in fiscal 1996
by the Company's Chief Executive Officer and each of the other four most highly
compensated executive officers whose remuneration exceeded $100,000. The current
compensation arrangements for each of these officers are described in
"Employment Arrangements" below.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
OTHER ANNUAL
SALARY BONUS (A) COMPENSATION(B)
NAME AND PRINCIPAL POSITION YEAR ($) ($) ($)
- -------------------------------------------------------- --------- --------- ----------- -------------
<S> <C> <C> <C> <C>
Frederick J. Rowan, II ................................. 1996 475,200 469,300 6,007,875
President, Chief Executive Officer
and Chairman of the Board of Directors
Joseph Pacifico ........................................ 1996 315,000 202,100 1,418,172
Executive Vice President--Marketing
Charles E. Whetzel, Jr. ................................ 1996 208,000 133,500 1,421,962
Executive Vice President--Manufacturing & Operations
David A. Brown ......................................... 1996 197,000 126,400 1,416,526
Senior Vice President--Business Planning &
Administration and Director
Jay A. Berman .......................................... 1996 177,000 113,500 1,420,446
Senior Vice President, Chief Financial Officer,
Treasurer and Director
</TABLE>
- ------------
(a) Earned in 1996 but paid in 1997.
(b) Includes Management Equity Participation Plan and Long-Term Incentive Plan
distributions, Holdings' Class C Stock compensation, supplemental retirement
plan benefits, automobile allowances, insurance premiums, and medical cost
reimbursement.
EMPLOYMENT ARRANGEMENTS
Frederick J. Rowan, II, President and Chief Executive Officer, and the
Company entered into a three-year employment agreement as of October 30, 1996,
which automatically extends annually for successive one-year terms, subject to
termination upon notice. Pursuant to such agreement, Mr. Rowan is entitled to
receive (i) a base salary, currently $475,200 per year (subject to annual cost
of living adjustments and any increases approved by the Board of Directors),
(ii) annual cash bonuses based upon a bonus plan to be determined each year by
the Board of Directors in conjunction with the Company's achievement of targeted
performance levels as defined in the plan and (iii) certain specified fringe
benefits, including a retirement trust. If Mr. Rowan's employment with the
Company is terminated without cause (as defined), he will continue to receive
his then current salary for the remainder of the employment term and the Company
will maintain certain fringe benefits on his behalf until either the expiration
of the remainder of the employment term or his 65th birthday. Mr. Rowan has
agreed not to compete with the Company for the two-year period following the end
of his employment with the Company, unless he is terminated without cause, in
which case the duration of such period is one year.
50
<PAGE>
Joseph Pacifico, Charles E. Whetzel, Jr., David A. Brown and Jay A. Berman
(each, an "Executive") entered into two-year employment agreements with the
Company as of October 30, 1996, which automatically extend annually for
successive one-year terms, subject to termination upon notice. Pursuant to such
agreements, Messrs. Pacifico, Whetzel, Brown and Berman are entitled to receive
(i) a base salary, currently $315,000, $208,000, $197,000 and $177,000,
respectively (subject to annual cost of living adjustments and any increases
approved by the Board of Directors), (ii) annual cash bonuses based upon a bonus
plan to be determined each year by the Board of Directors and (iii) certain
specified fringe benefits. If an Executive's employment with the Company is
terminated without cause (as defined), he will continue to receive his then
current salary for the remainder of the employment term and the Company will
maintain certain fringe benefits on his behalf until either the expiration of
the remainder of the employment term or his 65th birthday. Each Executive has
agreed not to compete with the Company for a one-year period following the end
of his employment with the Company, unless he is terminated without cause, in
which case the duration of such period is six months. All executive officers are
eligible to participate in the Company's Annual Cash Bonus Plan, payments under
which are based upon the Company's achievement of targeted performance levels as
determined by the Board of Directors.
MANAGEMENT STOCK INCENTIVE PLAN
Upon the consummation of the Acquisition, Holdings adopted a Management
Stock Incentive Plan (the "Plan"), in order to provide incentives to employees
and directors of Holdings and the Company by granting them awards tied to the
Class C Stock of Holdings. The Plan is administered by a committee of the Board
of Directors of Holdings (the "Compensation Committee"), which has broad
authority to administer and interpret the Plan. Awards to employees are not
restricted to any specified form or structure and may include, without
limitation, restricted stock, stock options, deferred stock or stock
appreciation rights (collectively, "Awards"). Options granted under the Plan may
be options intended to qualify as incentive stock options under Section 422 of
the Code or options not intended to so qualify. An Award granted under the Plan
to an employee may include a provision terminating the Award upon termination of
employment under certain circumstances or accelerating the receipt of benefits
upon the occurrence of specified events, including, at the discretion of the
Compensation Committee, any change of control of the Company.
In connection with the Acquisition, Holdings granted options to purchase up
to 75,268 shares of its Class C Stock to certain members of the Company's senior
management, other officers and employees of the Company. The exercise price of
each such option is $60.00 per share, which is the same price per share paid by
existing holders of Class C Stock of Holdings to acquire such Class C Stock. The
exercise price of each option granted in the future will be equal to the fair
market value of the Company's common stock at the time of the grant. Each option
will be subject to certain vesting provisions. To the extent not earlier vested
or terminated, all options will vest on the tenth anniversary of the date of
grant and will expire 30 days thereafter if not exercised.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 13 of Chapter 156B of the Massachusetts Business Corporation Law
(the "MBCL") authorizes a Massachusetts corporation to include a provision in
its articles of organization limiting or eliminating the personal liability of
its directors to the corporation and its shareholders for monetary damages for
breach of the directors' fiduciary duty of care. The duty of care requires that,
when acting on behalf of the corporation, directors exercise an informed
business judgment based on all material information reasonably available to
them. Absent the limitations authorized by such provision, directors are
accountable to corporations and their shareholders for monetary damages for
conduct constituting gross negligence in the exercise of their duty of care.
Although Section 13 of Chapter 156B of the MBCL does not change a director's
duty of care, it enables corporations to limit available relief to equitable
remedies such as injunction or rescission. The Company's Articles of
Organization and Bylaws include provisions which limit or eliminate the personal
liability of its directors to the fullest extent permitted by Section 13 of
51
<PAGE>
Chapter 156B of the MBCL. Consequently, a director or officer will not be
personally liable to the Company or its shareholders for monetary damages for
breach of fiduciary duty as a director, except for (i) any breach of the
director's duty of loyalty to the Company or its shareholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) unlawful payments of dividends or unlawful stock
repurchases, redemptions, loans or other distributions and (iv) any transaction
from which the director derived an improper personal benefit.
The Company's Bylaws also provide, in effect, to the fullest extent under
the circumstances permitted by Section 67 of Chapter 156B of the MBCL, the
Company will indemnify any person who was or is made a party or is threatened to
be made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is or was a director or an officer of the Company or is or was
serving at the request of the Company as a director, officer, employee or agent
of another corporation or enterprise. The inclusion of these indemnification
provisions in the Company's Articles of Organization and Bylaws is intended to
enable the Company to attract qualified persons to serve as directors and
officers who might otherwise be reluctant to do so. The Company may, in it
discretion, similarly indemnify its employees and agents.
Depending upon the character of the proceeding, the Company may indemnify
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred in connection with any action,
suit or proceeding if the person indemnified acted in good faith and in a manner
he or she reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had no
cause to believe his or her conduct was unlawful. To the extent that a director
or officer of the Company has been successful in the defense of any action, suit
or proceeding referred to above, the Company would have the right to indemnify
him or her against expenses (including attorneys' fees) actually and reasonably
incurred in connection therewith.
52
<PAGE>
OWNERSHIP OF VOTING SECURITIES
All of the Company's issued and outstanding capital stock is owned by
Holdings. Class D Stock, par value $.01 per share, is the only class of
Holdings' stock that currently possesses voting rights. At January 31, 1997,
there were 5,000 shares of Holdings' Class D Stock issued and outstanding.
Members of the Company's management own 143,490 shares of Class C Stock of
Holdings, which stock has no voting rights except in certain limited
circumstances. The following table sets forth the beneficial ownership of each
class of issued and outstanding securities of Holdings, as of the date hereof,
by each director of the Company, each of the executive officers of the Company
listed under "Management," the directors and executive officers of the Company
as a group and each person who beneficially owns more than 5% of the outstanding
shares of any class of voting securities of Holdings.
CLASS D VOTING STOCK:
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME SHARES (A) CLASS (A)
- ---------------------------------------------------------------------- ----------- ------------
<S> <C> <C>
INVESTCORP S.A.(b)(c)................................................. 5,000 100.0%
SIPCO Limited(d)...................................................... 5,000 100.0
CIP Limited(e)(f)..................................................... 4,600 92.0
Ballet Limited(e)(f).................................................. 460 9.2
Denary Limited(e)(f).................................................. 460 9.2
Gleam Limited(e)(f)................................................... 460 9.2
Highlands Limited(e)(f)............................................... 460 9.2
Noble Limited(e)(f)................................................... 460 9.2
Outrigger Limited(e)(f)............................................... 460 9.2
Quill Limited(e)(f)................................................... 460 9.2
Radial Limited(e)(f).................................................. 460 9.2
Shoreline Limited(e)(f)............................................... 460 9.2
Zinnia Limited(e)(f).................................................. 460 9.2
INVESTCORP Investment Equity Limited(c)............................... 400 8.0
</TABLE>
- ------------
(a) As used in this table, beneficial ownership means the sole or shared power
to vote, or to direct the voting of a security, or the sole or shared power
to dispose, or direct the disposition of, a security.
(b) Investcorp does not directly own any stock in Holdings. The number of shares
shown as owned by Investcorp includes all of the shares owned by INVESTCORP
Investment Equity Limited (see (c) below). Investcorp owns no stock in
Ballet Limited, Denary Limited, Gleam Limited, Highlands Limited, Noble
Limited, Outrigger Limited, Quill Limited, Radial Limited, Shoreline
Limited, Zinnia Limited, or in the beneficial owners of these entities (see
(f) below). Investcorp may be deemed to share beneficial ownership of the
shares of voting stock held by these entities because the entities have
entered into revocable management services or similar agreements with an
affiliate of Investcorp, pursuant to which each of such entities has granted
such affiliate the authority to direct the voting and disposition of the
Holdings voting stock owned by such entity for so long as such agreement is
in effect. Investcorp is a Luxembourg corporation with its address at 37 rue
Notre-Dame, Luxembourg.
(c) INVESTCORP Investment Equity Limited is a Cayman Islands corporation, and a
wholly-owned subsidiary of Investcorp, with its address at P.O. Box 1111,
West Wind Building, George Town, Grand Cayman, Cayman Islands.
(d) SIPCO Limited may be deemed to control Investcorp through its ownership of a
majority of a company's stock that indirectly owns a majority of
Investcorp's shares. SIPCO Limited's address is P.O. Box 1111, West Wind
Building, George Town, Grand Cayman, Cayman Islands.
(e) CIP ("CIP") owns no stock in Holdings. CIP indirectly owns less than 0.1 %
of the stock in each of Ballet Limited, Denary Limited, Gleam Limited,
Highlands Limited, Noble Limited, Outrigger Limited, Quill Limited, Radial
Limited, Shoreline Limited and Zinnia Limited (see (f) below). CIP may be
deemed to share beneficial ownership of the shares of voting stock of
Holdings held by such entities because CIP acts as a director of such
entities and the ultimate beneficial shareholders of each of those entities
have granted to CIP revocable proxies in companies that own those entities'
stock. None of the ultimate beneficial owners of such entities beneficially
owns individually more than 5% of Holdings' voting stock.
(f) Each of CIP Limited, Ballet Limited, Denary Limited, Gleam Limited,
Highlands Limited, Noble Limited, Outrigger Limited, Quill Limited, Radial
Limited, Shoreline Limited and Zinnia Limited is a Cayman Islands
corporation with its address at P.O. Box 2197, West Wind Building, George
Town, Grand Cayman, Cayman Islands.
53
<PAGE>
CLASS C NON-VOTING STOCK:
<TABLE>
<CAPTION>
NUMBER OF
NAME SHARES (A)
- ---------------------------------------------------------------------------------- -----------
<S> <C>
Frederick J. Rowan, II(b)......................................................... 56,649
Joseph Pacifico(b)................................................................ 15,051
Charles E. Whetzel, Jr.(b)........................................................ 15,051
David A. Brown(b)................................................................. 15,051
Jay A. Berman(c).................................................................. 15,051
All directors and executive officers of the Company as a group (8 persons)........ 116,854
</TABLE>
- ------------
(a) As used in this table, beneficial ownership means the sole or shared power
to vote, or to direct the voting of a security, or the sole or shared power
to dispose, or direct the disposition of, a security.
(b) The address of each of Messrs. Rowan, Pacifico, Whetzel and Brown is c/o the
Company, 1590 Adamson Parkway, Suite 400, Morrow, Georgia 30260.
(c) The address of Mr. Berman is c/o the Company, 1000 Bridgeport Avenue, P.O.
Box 879, Shelton, Connecticut 06484.
CERTAIN TRANSACTIONS
Holdings was formed to consummate the Acquisition on behalf of affiliates of
Investcorp, management and certain other investors. Financing for the
Acquisition was provided in part by $70.9 million of capital provided by
affiliates of Investcorp and other investors. In addition, certain employees of
the Company exchanged capital stock of the Company with an aggregate value of
$9.1 million for non-voting stock of Holdings, representing approximately 15% of
the outstanding equity of Holdings.
In connection with the issuance by Holdings of $20.0 million of senior
subordinated debt, Invifin SA ("Invifin"), an affiliate of Investcorp, received
a fee of $2.2 million. In connection with the Acquisition, the Company paid
Investcorp International Inc. ("International") advisory fees aggregating $2.25
million. Holdings also paid $1.5 million to Invifin in fees in connection with
providing a standby commitment for up to $100.0 million to fund the Acquisition.
In connection with the closing of the Acquisition, the Company entered into an
agreement for management advisory and consulting services (the "Management
Agreement") with International pursuant to which the Company agreed to pay
International $1.35 million per annum for a five-year term. At the closing of
the Acquisition, the Company paid International $4.05 million for the first
three years of the term of the Management Agreement in accordance with its
terms. Upon the Acquisition, the Company was required to pay the Management
Payments in an aggregate amount of $11.3 million to certain members of
management.
In October 1996, the Company made a $1.5 million loan to an officer. The
loan has a term of five years, is secured by the officer's stock of Holdings and
bears interest at 6.49%, compounded semi-annually. The loan is prepayable with
the proceeds of any disposition by the officer of his stock in Holdings.
CAPITAL STRUCTURE
SENIOR CREDIT FACILITY
GENERAL. The Senior Credit Facility, dated as of October 30, 1996, among
the Company, the several lenders from time to time parties thereto
(collectively, the "Lenders") and The Chase Manhattan Bank, as administrative
agent for the Lenders (the "Administrative Agent"), provides for a $100.0
million term and revolving loan credit facility (the "Loans").
At December 28, 1996, the amount under the revolving credit portion of the
Senior Credit Facility that was available to be drawn was approximately $50
million, excluding $4.2 million that was reserved in
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respect of the Company's obligations under outstanding letters of credit. The
remaining availability under the revolving credit facility may be utilized to
meet the Company's current working capital requirements, including issuance of
stand-by and trade letters of credit. The Company also may utilize the remaining
availability under the revolving credit facility to fund acquisitions and
capital expenditures.
The Loans are collateralized by a first priority security interest in
substantially all the personal property and certain real property of the Company
and a pledge of all the issued and outstanding stock of the Company and its
domestic subsidiary, as well as 65% of the issued and outstanding stock of the
Company's foreign subsidiaries. Upon the request of the Administrative Agent,
any domestic subsidiary of the Company formed in the future that has material
assets will also be required to issue a guarantee of the Loans which will be
secured by a first priority security interest in substantially all personal
property of such subsidiary, and, upon the request of the Administrative Agent,
the Company will be required to pledge the issued and outstanding capital stock
of such subsidiary owned by the Company or any of its subsidiaries or up to 65%
of the issued and outstanding capital stock of any foreign subsidiary owned by
the Company or any of its subsidiaries that has material assets to secure
indebtedness under the Senior Credit Facility.
TERM LOANS. The Senior Credit Facility provides for a $50.0 million Tranche
B term loan facility. The Tranche B term loans have a final scheduled maturity
date of October 31, 2003. The principal amounts of the Tranche B term loans are
required to be repaid in 14 consecutive semi-annual installments totaling $1.0
million in each of fiscal years 1997 through 2000, $6.0 million in fiscal year
2001, $15.0 million in fiscal year 2002 and $25.0 million in fiscal year 2003.
In November 1996, the term loan was reduced by $5.0 million with proceeds from
the issuance of the Old Notes. The future scheduled payments under the Senior
Credit Facility will be reduced ratably for this payment.
REVOLVING CREDIT FACILITY. The Senior Credit Facility provides for a $50.0
million revolving credit facility. The revolving credit facility will expire on
the earlier of (a) October 31, 2001 and (b) such other date as the revolving
credit commitments thereunder shall terminate in accordance with the terms of
the Senior Credit Facility.
INTEREST RATES. Borrowings under the Senior Credit Facility accrue interest
at either the Alternate Base Rate (the "Alternate Base Rate") or an adjusted
Eurodollar Rate (the "Eurodollar Rate"), at the option of the Company, plus the
applicable interest margin. The Alternate Base Rate at any time is determined to
be the highest of (i) the Federal Effective Funds Rate plus 1/2 of 1% per annum,
(ii) the Base CD Rate plus 1% per annum and (iii) The Chase Manhattan Bank's
Prime Rate. The applicable interest margin with respect to loans made under the
revolving credit facility is 2.50% per annum with respect to loans that accrue
interest at the Eurodollar Rate and 1.50% per annum for loans that accrue
interest at the Alternate Base Rate. The applicable interest margin with respect
to Tranche B term loans is 3.00% per annum for loans that accrue interest at the
Eurodollar Rate and 2.00% per annum for loans that accrue interest at the
Alternate Base Rate.
MANDATORY AND OPTIONAL PREPAYMENTS. The Senior Credit Facility requires
that upon a public offering by the Company, Holdings or any subsidiary of the
Company of its common or other voting stock, 50% of the net proceeds from such
offering (only after the redemption or repurchase or cancellation of the
Preferred Stock and the redemption of up to 35% of the Notes) is required to be
applied toward the prepayment of indebtedness under the Senior Credit Facility.
Upon the incurrence of any additional indebtedness (other than indebtedness
permitted under the Senior Credit Facility), or upon the receipt of proceeds
from certain asset sales and exchanges, 100% of the net proceeds from such
incurrence, sale or exchange is required to be so applied. In addition, the
Senior Credit Facility requires that either 75% or 50% (depending on certain
circumstances) of Excess Cash Flow (as defined in the Senior Credit Facility) is
required to be applied toward the prepayment of indebtedness under the Senior
Credit Facility. Such prepayments are required to be applied first to the
prepayment of the term loans and, second, to reduce permanently the revolving
credit commitments. Subject to certain conditions, the Company may, from time to
time, make optional prepayments of Loans without premium or penalty.
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COVENANTS. The Senior Credit Facility imposes certain covenants and other
requirements on the Company and its subsidiaries. In general, the affirmative
covenants provide for mandatory reporting by the Company of financial and other
information to the Lenders and notice by the Company to the Lenders upon the
occurrence of certain events. The affirmative covenants also include standard
operating covenants requiring the Company to operate its business in an orderly
manner consistent with past practice.
The Senior Credit Facility also contains certain negative covenants and
restrictions on actions by the Company and its subsidiaries that, among other
things, restrict: (i) the incurrence and existence of indebtedness, (ii)
consolidations, mergers and sales of assets; (iii) the incurrence and existence
of liens or other encumbrances; (iv) the incurrence and existence of contingent
obligations; (v) the payment of dividends and repurchases of common stock; (vi)
prepayments and amendments of certain subordinated debt instruments (including
the Notes and the Indenture) and equity; (vii) investments, loans and advances;
(viii) capital expenditures; (ix) changes in fiscal year; (x) certain
transactions with affiliates; and (xi) changes in lines of business. In
addition, the Senior Credit Facility requires that the Company comply with
specified financial ratios and tests, including minimum cash flow, a maximum
ratio of indebtedness to cash flow and a minimum interest coverage ratio.
EVENTS OF DEFAULT. The Senior Credit Facility specifies certain customary
events of default including non-payment of principal, interest or fees,
violation of covenants, inaccuracy of representations and warranties in any
material respect, cross default and cross-acceleration to certain other
indebtedness and agreements, bankruptcy and insolvency events, material
judgments and liabilities, change of control, unenforceability of certain
documents under the Senior Credit Facility and any amendment or other
modification of the Subordinated Loan Facility or the Notes made without all
required written consents in accordance with the terms of the Senior Credit
Facility. If certain bankruptcy and insolvency events of default occur, then all
amounts owing under the Senior Credit Facility become immediately due and
payable. If any other event of default occurs, and so long as such event of
default continues, the Administrative Agent may, with the consent of, or shall
upon the request of, a majority of the Lenders, declare all amounts owing under
the Senior Credit Facility to be due and payable.
FEES AND EXPENSES. The Company is required to pay to the Administrative
Agent an agent's fee in an amount agreed between the Company and the
Administrative Agent.
The description of the Senior Credit Facility set forth above does not
purport to be complete and is qualified in its entirety by reference to the
Senior Credit Facility, which is available upon request from the Company.
PREFERRED STOCK
The Company is authorized to issue 5,000 shares of preferred stock, par
value $.01 per share. At January 31, 1997, there were 5,000 shares of Preferred
Stock outstanding, all of which were held by Holdings.
Dividends on the Preferred Stock accrue at a rate of 12% per annum.
Dividends are cumulative and are payable when and as declared by the Board of
Directors of the Company, out of assets legally available therefor, on May 1 and
November 1 of each year, commencing on May 1, 1997. To the extent that dividends
are accrued, but have not been declared and paid, such undeclared and unpaid
dividends will accrue additional dividends from the date upon which such
dividends accrued until the date upon which they are paid at the rate of 14% per
annum.
The shares of Preferred Stock are redeemable at the option of the Company at
a redemption price of $4,000 per share plus accrued and unpaid dividends thereon
to the date fixed for redemption. If permitted under the Senior Credit Facility
and the Indenture, the shares of Preferred Stock may be redeemed in whole, or in
not more than two partial redemptions, provided that in the first of such two
partial redemptions not less than 50% of the number of shares of Preferred Stock
then outstanding shall be
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redeemed, and that in the second of such two partial redemptions all of the
shares of Preferred Stock then outstanding shall be redeemed. On December 15,
2007, the Company is required to redeem all outstanding shares of Preferred
Stock at a redemption price of $4,000 per share plus accrued and unpaid
dividends thereon to the date fixed for redemption. All outstanding shares of
Preferred Stock are pledged to secure the Company's obligations under the Senior
Credit Facility.
The shares of Preferred Stock have no voting rights, other than as provided
by Massachusetts law. However, the consent of holders of at least a majority of
all of the shares of Preferred Stock is necessary for authorizing, effecting or
validating the amendment, alteration or repeal of any of the provisions of the
Articles of Organization of the Company or of any amendatory statement thereto
(including any statement with respect to shares or any similar document relating
to any series of Preferred Stock) so as to affect materially and adversely the
rights, preferences, privileges or voting power of shares of the Preferred
Stock.
In the event of any involuntary or voluntary liquidation, dissolution or
winding-up of the affairs of the Company, the holders of the Preferred Stock are
entitled to receive out of the assets of the Company available for distribution
to shareholders, before any payment or distribution shall be made on any common
stock or on any other class of stock ranking junior to the Preferred Stock upon
liquidation, the amount of $4,000 per share, plus a sum equal to all dividends
on such shares accrued and unpaid thereon to the date of final distribution.
COMMON STOCK
The authorized common stock of the Company consists of 1,000 shares of
common stock, par value $.01 per share ("Common Stock"). At January 31, 1997,
there were 1,000 shares of Common Stock issued and outstanding, all of which are
held of record by Holdings. All outstanding shares of Common Stock are pledged
to secure the Company's obligations under the Senior Credit Facility. Each share
of Common Stock entitles the holder thereof to one vote on all matters to be
voted on by shareholders of the Company. Pursuant to the restrictions contained
in the Senior Credit Facility and the Indenture, the Company is not expected to
be able to pay dividends on its Common Stock for the foreseeable future, other
than certain limited dividends permitted by the Senior Credit Facility and the
Indenture. In the event of a liquidation, dissolution or winding-up of the
Company, the holders of the Common Stock are entitled to share in the remaining
assets of the Company after payment of all liabilities (including payments
required to be made to holders of the Notes) and after satisfaction of all
liquidation preferences payable to the holders of all shares of stock ranking
senior to the Common Stock in respect of any distribution upon the liquidation,
dissolution or winding-up of the Company. The Common Stock has no pre-emptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the Common Stock. All outstanding shares
of the Common Stock are fully paid and non-assessable.
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DESCRIPTION OF NOTES
GENERAL
The New Notes are to be issued under an Indenture, dated as of November 25,
1996 (the "Indenture"), between the Company and State Street Bank and Trust
Company, as Trustee (the "Trustee"), a copy of which is available upon request
to the Company.
The following summary of certain provisions of the Indenture and the Notes
does not purport to be complete and is subject to, and is qualified in its
entirety by reference to, all the provisions of the Indenture, including the
definitions of certain terms therein and those terms made a part thereof by the
Trust Indenture Act of 1939, as amended ("TIA"). Capitalized terms used herein
and not otherwise defined have the meanings set forth in "--Certain
Definitions."
Principal of, premium, if any, and interest on the Notes will be payable,
and the Notes may be exchanged or transferred, at the office or agency of the
Company in the Borough of Manhattan, The City of New York (which initially shall
be the corporate trust office of the Trustee's agent, at State Street Bank and
Trust Company N.A., 61 Broadway, Concourse Level, Corporate Trust Window, New
York, New York 10006), except that, at the option of the Company, payment of
interest may be made by check mailed to the addresses of the Holders as such
addresses appear in the Note Register.
The 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
will be made for any registration of transfer or exchange of 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.
TERMS OF THE NOTES
The Notes will be unsecured senior subordinated obligations of the Company,
limited to $100.0 million aggregate principal amount, and will mature on
December 1, 2006. Each Note will bear interest at a rate per annum shown on the
front cover of this Prospectus from November 25, 1996, or from the most recent
date to which interest has been paid or provided for, payable semiannually to
Holders at the close of business on the May 15 or November 15 immediately
preceding the interest payment date on June 1 and December 1 of each year,
commencing June 1, 1997.
OPTIONAL REDEMPTION
Except as set forth below, the Notes will not be redeemable at the option of
the Company prior to December 1, 2001. On and after such date, the Notes will be
redeemable, at the Company's option, in whole or in part, at any time upon not
less than 30 nor more than 60 days prior notice mailed by first-class mail to
each Holder's registered address, at the following redemption prices (expressed
in percentages of principal amount), plus accrued interest to the Redemption
Date (subject to the right of Holders on the relevant record date to receive
interest due on the relevant interest payment date):
If redeemed during the 12-month period commencing on December 1 of the years
set forth below:
<TABLE>
<CAPTION>
REDEMPTION
PERIOD PRICE
- ------------------------------------------------------------------------------- -----------
<S> <C>
2001........................................................................... 105.188%
2002........................................................................... 103.458%
2003........................................................................... 101.729%
2004 and thereafter............................................................ 100.000%
</TABLE>
In addition, at any time and from time to time on or prior to December 1,
1999, the Company may redeem in the aggregate up to 35% of the original
aggregate principal amount of Notes with the proceeds of one or more Public
Equity Offerings by Holdings (so long as substantially all its assets consist of
its
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investment in the Company) or the Company following which there is a Public
Market, at a redemption price (expressed as a percentage of principal amount) of
110.375% plus accrued interest to the Redemption Date (subject to the right of
Holders on the relevant record date to receive interest due on the relevant
interest payment date); PROVIDED, HOWEVER, that at least 65% of the aggregate
principal amount of the Notes originally issued must remain outstanding after
each such redemption.
At any time on or prior to December 1, 2001, the Notes may also be redeemed
as a whole but not in part at the option of the Company upon the occurrence of a
Change of Control, upon not less than 30 nor more than 60 days' prior notice
(but in no event more than 90 days after the occurrence of such Change of
Control) mailed by first-class mail to each Holder's registered address, at a
redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium as of, and accrued but unpaid interest, if any, to, the
Redemption Date (subject to the right of Holders on the relevant record date to
receive interest due on the relevant interest payment date).
"Applicable Premium" means, with respect to a Note at any Redemption Date,
the greater of (i) 1.0% of the principal amount of such Note and (ii) the excess
of (A) the present value at such time of (1) the redemption price of such Note
at December 1, 2001 (such redemption price being described under "-- Optional
Redemption") plus (2) all required interest payments (excluding accrued but
unpaid interest) due on such Note through December 1, 2001, computed using a
discount rate equal to the Treasury Rate plus 100 basis points, over (B) the
principal amount of such Note.
"Treasury Rate" means the yield to maturity at the time of computation of
United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H. 15(519)
which has become publicly available at least two Business Days prior to the
Redemption Date (or, if such Statistical Release is no longer published, any
publicly available source or similar market data)) most nearly equal to the
period from the Redemption Date to December 1, 2001, PROVIDED, HOWEVER, that if
the period from the Redemption Date to December 1, 2001 is not equal to the
constant maturity of a United States Treasury security for which a weekly
average yield is given, the Treasury Rate shall be obtained by linear
interpolation (calculated to the nearest one-twelfth of a year) from the weekly
average yields of United States Treasury securities for which such yields are
given, except that if the period from the Redemption Date to December 1, 2001 is
less than one year, the weekly average yield on actually traded United States
Treasury securities adjusted to a constant maturity of one year shall be used.
SELECTION
In the case of any partial redemption, selection of the Notes for redemption
will be made by the Trustee on a PRO RATA basis, by lot or by such other method
as the Trustee in its sole discretion shall deem to be fair and appropriate,
provided that no Note of $1,000 in original principal amount or less will be
redeemed in part. If any Note is to be redeemed in part only, the notice of
redemption relating to such Note shall state the portion of the principal amount
thereof to be redeemed. A new Note in principal amount equal to the unredeemed
portion thereof will be issued in the name of the Holder thereof upon
cancellation of the original Note.
RANKING
The payment of the principal of, premium (if any) and interest on the Notes
is subordinated in right of payment, as set forth in the Indenture, to the
payment when due of all Senior Indebtedness of the Company. However, payment
from the money or the proceeds of U.S. Government Obligations held in any
defeasance trust described under "Defeasance" below is not subordinated to any
Senior Indebtedness or subject to the restrictions described herein. At December
28, 1996, the outstanding Senior Indebtedness of the Company was $45.0 million.
Although the Indenture contains limitations on the amount of additional
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Indebtedness which the Company may incur, under certain circumstances the amount
of such Indebtedness could be substantial and, in any case, such Indebtedness
may be Senior Indebtedness. See "--Certain Covenants--Limitation on
Indebtedness" below.
"Senior Indebtedness" whether outstanding on the date of the Indenture or
thereafter issued, is defined as: (i) all obligations consisting of the Bank
Indebtedness; (ii) all obligations consisting of the principal of and premium,
if any, and accrued and unpaid interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company regardless of whether post-filing interest is allowed in such
proceeding) in respect of (A) indebtedness of the Company for money borrowed and
(B) indebtedness evidenced by notes, debentures, bonds or other similar
instruments for the payment of which the Company is responsible or liable; (iii)
all Capitalized Lease Obligations of the Company; (iv) all obligations of the
Company (A) for the reimbursement of any obligor on any letter of credit,
banker's acceptance or similar credit transaction, (B) under Hedging Obligations
entered into in respect of any obligations described in clauses (i), (ii) and
(iii) or (C) the deferred purchase price of newly acquired property, or the
price of construction or improvement of any property, in each case used in the
ordinary course of business of the Company and its Subsidiaries, whether such
indebtedness is owed to the seller or Person carrying out such construction or
improvement or to any third party; (v) all obligations of other persons of the
type referred to in clauses (ii), (iii) and (iv) and all dividends of other
persons for the payment of which, in either case, the Company is responsible or
liable, directly or indirectly, as obligor, guarantor or otherwise, including
Guarantees of such obligations and dividends; and (vi) all obligations of the
Company consisting of modifications, renewals, extensions, replacements and
refundings of any obligations described in clauses (i), (ii), (iii), (iv) or
(v); unless, in each case in the instrument creating or evidencing the same or
pursuant to which the same is outstanding, it is provided that such obligations
are not superior in right of payment to the Notes; PROVIDED, HOWEVER, that
Senior Indebtedness will not include (1) any obligation of the Company to any
Subsidiary, (2) any liability for Federal, state, local or other taxes owed or
owing by the Company, (3) any accounts payable or other liability to trade
creditors arising in the ordinary course of business (including Guarantees
thereof or instruments evidencing such liabilities), (4) any Indebtedness,
Guarantee or obligation of the Company that is subordinate or junior to any
other Indebtedness, Guarantee or obligation of the Company or (5) any
Indebtedness that is incurred in violation of the Indenture. If any Designated
Senior Indebtedness is disallowed, avoided or subordinated pursuant to the
provisions of Section 548 of Title 11 of the United States Code or any
applicable state fraudulent conveyance law, such Designated Senior Indebtedness
nevertheless will constitute Senior Indebtedness.
Only Indebtedness of the Company that is Senior Indebtedness will rank
senior to the Notes in accordance with the provisions of the Indenture. The
Notes will in all respects rank PARI PASSU with all Indebtedness of the Company
other than Senior Indebtedness or Subordinated Obligations. The Company has
agreed in the Indenture that it will not incur, directly or indirectly, any
Indebtedness which is subordinate or junior in right of payment to Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
expressly subordinated in right of payment to Senior Subordinated Indebtedness.
Unsecured Indebtedness is not deemed to be subordinate or junior to secured
Indebtedness merely because it is unsecured.
The Company may not pay principal of, premium (if any) or interest on, the
Notes or make any deposit pursuant to the provisions described under
"Defeasance" below and may not otherwise purchase or retire any Notes
(collectively, "pay the Notes") if (i) any Senior Indebtedness is not paid as
and when due or (ii) any other default on Senior Indebtedness occurs and the
maturity of such Senior Indebtedness is accelerated in accordance with its terms
unless, in either case, the default has been cured or waived and any such
acceleration has been rescinded or such Senior Indebtedness has been paid in
full. However, the Company may pay the Notes without regard to the foregoing if
the Company and the Trustee receive written notice approving such payment from
the Representative of the Designated Senior Indebtedness with respect to which
either of the events set forth in clause (i) or (ii) of the immediately
preceding
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sentence has occurred and is continuing. During the continuance of any default
(other than a default described in clause (i) or (ii) of the second preceding
sentence) with respect to any Designated Senior Indebtedness pursuant to which
the maturity thereof may be accelerated immediately without further notice
(except such notice as may be required to effect such acceleration) or the
expiration of any applicable grace periods, the Company may not pay the Notes
for a period (a "Payment Blockage Period") commencing upon the receipt by the
Trustee (with a copy to the Company) of written notice (a "Blockage Notice") of
such default from the Representative of the Designated Senior Indebtedness
specifying an election to effect a Payment Blockage Period and ending 179 days
thereafter (or earlier if such Payment Blockage Period is terminated (i) by
written notice to the Trustee and the Company from the Person or Persons who
gave such Blockage Notice, (ii) because the default giving rise to such Blockage
Notice is no longer continuing or (iii) because such Designated Senior
Indebtedness has been repaid in full). Notwithstanding the provisions described
in the immediately preceding sentence, unless the holders of such Designated
Senior Indebtedness or the Representative of such holders have accelerated the
maturity of such Designated Senior Indebtedness, the Company may resume payments
on the Notes after the end of such payment Blockage Period. Not more than one
Blockage Notice may be given in any consecutive 360-day period, irrespective of
the number of defaults with respect to Designated Senior Indebtedness during
such period. However, if any Blockage Notice within such 360-day period is given
by or on behalf of any holders of Designated Senior Indebtedness (other than the
Bank Indebtedness), the Representative of the Bank Indebtedness may give another
Blockage Notice within such period. In no event, however, may the total number
of days during which any Payment Blockage Period or Periods is in effect exceed
179 days in the aggregate during any consecutive 360-day period.
Upon any payment or distribution of the assets of the Company upon a total
or partial liquidation or dissolution, whether voluntary or involuntary, or any
reorganization, bankruptcy or receivership of or similar proceeding relating to
the Company or its property, or any assignment for the benefit of creditors or
other marshalling of assets or liabilities of the Company, the holders of Senior
Indebtedness will be entitled to receive payment in full of the Senior
Indebtedness before the Noteholders are entitled to receive any payment and
until the Senior Indebtedness is paid in full, any payment or distribution to
which Noteholders would be entitled, but for the subordination provisions of the
Indenture, will be made to holders of the Senior Indebtedness as their interest
may appear. If a distribution is made to Noteholders that, due to the
subordination provisions, should not have been made to them, such Noteholders
are required to hold it in trust for the holders of Senior Indebtedness and
promptly pay it over to them as their interests may appear.
If payment of the Notes is accelerated because of an Event of Default, the
Company or the Trustee shall promptly notify the holders of the Designated
Senior Indebtedness or the Representative of such holders of the acceleration.
The Company may not pay the Notes until five Business Days after such holders or
the Representative of the Designated Senior Indebtedness receive notice of such
acceleration and, thereafter, may pay the Notes only if the subordination
provisions of the Indenture otherwise permit payment at that time.
By reason of such subordination provisions contained in the Indenture, in
the event of insolvency, creditors of the Company who are holders of Senior
Indebtedness may recover more, ratably, than the Noteholders, and creditors of
the Company who are not holders of Senior Indebtedness or of Senior Subordinated
Indebtedness (including the Notes) may recover less, ratably, than holders of
Senior Indebtedness and may recover more, ratably, than the holders of Senior
Subordinated Indebtedness (including the Notes).
CHANGE OF CONTROL
Upon the occurrence of any of the following events (each a "Change of
Control"), each Holder will have the right to require the Company to repurchase
all or any part of such Holder's Notes at a purchase price in cash equal to 101%
of the principal amount thereof plus accrued and unpaid interest, if any, to the
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date of purchase (subject to the right of Holders on the relevant record date to
receive interest due on the relevant interest payment date):
(i) prior to the first public offering of Voting Stock of the Company or
Holdings, as the case may be, the Permitted Holders cease to be the
"beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the Exchange
Act), directly or indirectly, of majority voting power of the Voting Stock
of Holdings or Holdings shall cease to own 100% of the issued and
outstanding Voting Stock of the Company, whether as a result of issuance of
securities of the Company or Holdings, as the case may be, any merger,
consolidation, liquidation or dissolution of the Company or Holdings, as the
case may be, any direct or indirect transfer of securities by any Permitted
Holder or otherwise (for purposes of this clause (i) and clause (ii) below,
the Permitted Holders will be deemed to beneficially own any Voting Stock of
a corporation (the "specified corporation") held by any other corporation
(the "parent corporation") so long as the Permitted Holders beneficially own
(as so defined), directly or indirectly, a majority of the Voting Stock of
the parent corporation);
(ii) following the first public offering of Voting Stock of the Company
or Holdings, as the case may be, any "person" (as such term is used in
Sections 13(d) and 14(d) of the Exchange Act), other than one or more
Permitted Holders, is or becomes the beneficial owner (as defined in clause
(i) above, except that a person shall be deemed to have "beneficial
ownership" of all shares that any such person has the right to acquire,
whether such right is exercisable immediately or only after the passage of
time), directly or indirectly, of more than 40% of the total voting power of
the Voting Stock of the Company or Holdings, as the case may be; provided
that Permitted Holders beneficially own (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of the Company or Holdings, as the case may
be, than such other person and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority
of the board of directors of the Company or Holdings, as the case may be
(for purposes of this clause (ii), such other person shall be deemed to
beneficially own any Voting Stock of a specified corporation held by a
parent corporation, if such other person "beneficially owns" (as defined in
this clause (ii)), directly or indirectly, more than 40% of the voting power
of the Voting Stock of such parent corporation and the Permitted Holders
"beneficially own" (as defined in clause (i) above), directly or indirectly,
in the aggregate a lesser percentage of the voting power of the Voting Stock
of such parent corporation and do not have the right or ability by voting
power, contract or otherwise to elect or designate for election a majority
of the board of directors of such parent corporation); or
(iii) following the first public offering of Voting Stock of the Company
or Holdings, as the case may be, (a) any person (other than Investcorp, its
Affiliates and members of the Management Group, or their designated board
members) nominates one or more individuals for election to the board of
directors of the Company or Holdings, as the case may be, and solicits
proxies, authorizations or consents in connection therewith and (b) as a
result, such number of nominees elected to serve on the board of directors
represents a majority of the board of directors of the Company or Holdings,
as the case may be, following such election.
In the event that at the time of such Change of Control the terms of the
Bank Indebtedness restrict or prohibit the repurchase of Notes pursuant to this
covenant, then prior to the mailing of the notice to Holders provided for in the
immediately following paragraph but in any event within 30 days following any
Change of Control, the Company shall (i) repay in full all Bank Indebtedness or
offer to repay in full all Bank Indebtedness and repay the Bank Indebtedness of
each lender who has accepted such offer or (ii) obtain the requisite consent
under the agreements governing the Bank Indebtedness to permit the repurchase of
the Notes as provided for in the immediately following paragraph, unless notice
of redemption of all of the Notes has been given pursuant to the fourth
paragraph of "Optional Redemption" above and such redemption is permitted by the
terms of the Bank Indebtedness (or the requisite number of lenders thereof has
consented thereto).
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Within 30 days following any Change of Control, unless notice of redemption
of the Notes has then been given pursuant to the fourth paragraph of "Optional
Redemption" above, the Company shall mail a notice to each Holder with a copy to
the Trustee stating: (1) that a Change of Control has occurred and that such
Holder has the right to require the Company to purchase such Holder's Notes at a
purchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase (subject to the
right of Holders of record on a record date to receive interest on the relevant
interest payment date); (2) the circumstances and relevant facts and financial
information regarding such Change of Control; (3) the repurchase date (which
shall be no earlier than 30 days nor later than 60 days from the date such
notice is mailed and not more than 90 days after the Change of Control); and (4)
the instructions determined by the Company, consistent with this covenant, that
a Holder must follow in order to have its Notes purchased.
The Company will comply, to the extent applicable, with the requirements of
Section 14(e) of the Exchange Act and any other securities laws or regulations
in connection with the repurchase of Notes pursuant to this covenant. To the
extent that the provisions of any securities laws or regulations conflict with
provisions of this covenant, the Company will comply with the applicable
securities laws and regulations and will not be deemed to have breached its
obligations under this paragraph by virtue thereof.
The Change of Control purchase feature is a result of negotiations between
the Company and the Initial Purchasers. Management has no present intention to
engage in a transaction involving a Change of Control, although it is possible
that the Company would decide to do so in the future. Subject to the limitations
discussed below, the Company could, in the future, enter into certain
transactions, including acquisitions, refinancings or other recapitalizations,
that would not constitute a Change of Control under the Indenture, but that
could increase the amount of indebtedness outstanding at such time or otherwise
affect the Company's capital structure or credit ratings.
The occurrence of certain of the events that would constitute a Change of
Control would constitute a default under the Senior Credit Facility. Future
Senior Indebtedness of the Company may contain prohibitions of certain events
which would constitute a Change of Control or require such Senior Indebtedness
to be repurchased upon a Change of Control. Moreover, the exercise by the
Holders of their right to require the Company to repurchase the Notes could
cause a default under such Senior Indebtedness, even if the Change of Control
itself does not. Finally, the Company's ability to pay cash to the Holders upon
a repurchase may be limited by the Company's then existing financial resources.
There can be no assurance that sufficient funds will be available when necessary
to make any required repurchases.
SINKING FUND
There will be no mandatory sinking fund for the Notes.
CERTAIN COVENANTS
The Indenture contains covenants including, among others, the following:
LIMITATION ON INDEBTEDNESS. (a) The Company will not, and will not permit
any Restricted Subsidiary to, Incur any Indebtedness; PROVIDED, HOWEVER, that
the Company may Incur Indebtedness if on the date thereof the Consolidated
Coverage Ratio would be greater than 2.00:1.00, if such Indebtedness is incurred
on or prior to September 30, 1998; and 2.25:1.00 if such Indebtedness is
Incurred thereafter.
(b) Notwithstanding the foregoing paragraph (a), the Company and its
Restricted Subsidiaries may incur the following Indebtedness: (i) Indebtedness
under the Senior Credit Facility (as the same may be amended from time to time)
and any Refinancing Indebtedness with respect thereto in each case in an
aggregate principal amount that, when added to all other Indebtedness Incurred
pursuant to this clause (i) and then outstanding, shall not exceed $100.0
million less the sum of all repayments thereon made with the Net Cash Proceeds
from Asset Dispositions (to the extent, in the case of repayment of revolving
credit Indebtedness, that the corresponding commitments have been permanently
reduced); PROVIDED, HOWEVER, that any Refinancing Indebtedness with respect to
Indebtedness Incurred pursuant to this clause (i) shall
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not be subject to the limitations contained in clauses (i) and (ii) of the
definition of Refinancing Indebtedness set forth in "--Certain Definitions"
below; (ii) Indebtedness (A) of the Company to any Restricted Subsidiary, (B) of
any Restricted Subsidiary to the Company or any other Restricted Subsidiary;
(iii) Indebtedness represented by the Notes, any Indebtedness (other than the
Indebtedness described in clauses (i) and (ii) above) outstanding on the date of
the Indenture and any Refinancing Indebtedness Incurred in respect of any
Indebtedness described in this clause (iii) or paragraph (a); (iv) Indebtedness
of the Company and its Restricted Subsidiaries in respect of (A) industrial
revenue bonds or other similar governmental and municipal bonds and (B) the
deferred purchase price of newly acquired property of the Company and its
Restricted Subsidiaries, or the price of construction or improvement of any
property of the Company or its Subsidiaries, in each case used in the ordinary
course of business of the Company and its Subsidiaries, including Capitalized
Lease Obligations, whether such Indebtedness is owed to the seller or Person
carrying out such construction or improvement or to any third party (PROVIDED
such financing is entered into within 180 days of the acquisition or the
conclusion of such construction or improvement of such property) in an amount
(based on the remaining balance of the obligations therefor on the books of the
Company and its Restricted Subsidiaries) which in the case of the preceding
clauses (A) and (B) shall not exceed $12.0 million in the aggregate at any time
outstanding; (v) Indebtedness of the Company or any of its Restricted
Subsidiaries (which may comprise Bank Indebtedness) in an aggregate principal
amount at any time outstanding not in excess of $15.0 million; (vi) Indebtedness
in an aggregate principal amount at any time outstanding not in excess of $5.0
million in respect of letters of credit (other than letters of credit issued
under the Senior Credit Facility); (vii) (A) Indebtedness assumed in connection
with acquisitions permitted under the Senior Credit Facility or any Refinancing
Indebtedness in respect thereof (so long as such Indebtedness was not incurred
in anticipation of such acquisitions), (B) Indebtedness of newly acquired
Subsidiaries acquired in such acquisitions (so long as such Indebtedness was not
incurred in anticipation of such acquisitions) and (C) Indebtedness owed to the
seller in any acquisition permitted under the Senior Credit Facility or any
Refinancing Indebtedness in respect thereof constituting part of the purchase
price thereof, all in an aggregate principal amount at any time outstanding not
in excess of $5.0 million; (viii) Indebtedness represented by the Note
Guarantees and Guarantees of Indebtedness Incurred pursuant to clause (i), (iv)
or (v) above; (ix) Indebtedness incurred in connection with the repurchase of
shares of the Capital Stock of the Company or Holdings as permitted by paragraph
(b)(vi)(C) of the covenant described under "--Limitation on Restricted
Payments"; (x) Refinancing Indebtedness with respect to Indebtedness permitted
pursuant to clauses (iv), (vii) or (ix) of this paragraph (b) (provided that
such Refinancing Indebtedness shall be included in determining the aggregate
amount of Indebtedness for purposes of the monetary limitations contained in
such clauses); and (xi) Hedging Obligations designed to protect the Company or
its Subsidiaries from fluctuations in interest or exchange rates.
(c) Notwithstanding any other provision of this covenant, the Company will
not incur any Indebtedness (i) pursuant to paragraph (b) if the proceeds thereof
are used, directly or indirectly, to repay, prepay, redeem, defease, retire,
refund or refinance any Subordinated Obligations unless such Indebtedness shall
be subordinated to the Notes to at least the same extent as such Subordinated
Obligations or (ii) pursuant to paragraph (a) or (b) if such Indebtedness is
subordinate or junior in right of payment to any Senior Indebtedness unless such
Indebtedness is Senior Subordinated Indebtedness or is expressly subordinated in
right of payment to Senior Subordinated Indebtedness.
LIMITATION ON RESTRICTED PAYMENTS. (a) The Company will not, and will not
permit any Restricted Subsidiary, directly or indirectly, to (i) declare or pay
any dividend or make any distribution on or in respect of its Capital Stock
(including any payment in connection with any merger or consolidation involving
the Company) except dividends or distributions payable solely in its Capital
Stock (other than Disqualified Stock) and except dividends or distributions
payable to the Company or another Restricted Subsidiary (and, if such Restricted
Subsidiary is not wholly owned, to its other shareholders on a PRO RATA basis),
(ii) repurchase, redeem, retire or otherwise acquire for value any Capital Stock
of the Company or any Restricted Subsidiary held by Persons other than the
Company or another Restricted Subsidiary, (iii)
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purchase, repurchase, redeem, defease or otherwise acquire or retire for value,
prior to scheduled maturity, scheduled repayment or scheduled sinking fund
payment any Subordinated Obligations (other than the purchase, repurchase or
other acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition), or (iv) make any
Investment (other than a Permitted Investment) in any Person (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement, payment or Investment being herein referred to as a "Restricted
Payment") if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment: (1) a Default shall have occurred and be continuing (or
would result therefrom); (2) the Company could not Incur at least $1.00 of
additional Indebtedness pursuant to paragraph (a) of the covenant described
under "--Limitation on Indebtedness"; or (3) the aggregate amount of such
Restricted Payment and all other Restricted Payments (the amount so expended, if
other than in cash, to be determined in good faith by the Board of Directors,
whose determination shall be conclusive and evidenced by a resolution of the
Board of Directors) declared or made subsequent to the Issue Date would exceed
the sum of: (A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal quarter
during which the Notes are originally issued to the end of the most recent
fiscal quarter ending prior to the date of such Restricted Payment for which
consolidated income statements of the Company are available (or, in case such
Consolidated Net Income shall be a deficit, minus 100% of such deficit); (B) the
aggregate Net Cash Proceeds received by the Company from capital contribution by
Holding with respect to, or the issue or sale of, the Company's Capital Stock
(other than Disqualified Stock) subsequent to the Issue Date (other than an
issuance or sale to a Subsidiary of the Company or an employee stock ownership
plan or other trust established by the Company or any of its Subsidiaries); (C)
the amount by which Indebtedness of the Company or its Restricted Subsidiaries
is reduced on the Company's balance sheet upon the conversion or exchange (other
than by a Subsidiary) subsequent to the Issue Date of any Indebtedness of the
Company or its Restricted Subsidiaries convertible into or exchangeable for
Capital Stock (other than Disqualified Stock) of the Company (less the amount of
any cash or other property distributed by the Company or any Restricted
Subsidiary upon such conversion or exchange); and (D) without duplication, the
sum of (x) the aggregate amount returned in cash on or with respect to
Investments (other than Permitted Investments) made subsequent to the Issue Date
whether through interest payments, principal payments, dividends or other
distributions or payments, (y) the Net Cash Proceeds received by the Company or
any Restricted Subsidiary from the disposition of all or any portion of such
Investments (other than to a Subsidiary of the Company) and (z) upon
redesignation of an Unrestricted Subsidiary as a Restricted Subsidiary, the fair
market value of such Subsidiary; PROVIDED, HOWEVER, that with respect to all
Investments made in any Unrestricted Subsidiary or joint venture the sum of
clauses (x), (y) and (z) above with respect to such Investments shall not exceed
the aggregate amount of all such Investments made subsequent to the date hereof
in such Unrestricted Subsidiary.
(b) The provisions of the foregoing paragraph shall not prohibit: (i) any
purchase or redemption of Capital Stock of the Company or Subordinated
Obligations made out of a substantially concurrent capital contribution to, or
by exchange for, or out of the proceeds of the substantially concurrent sale of,
Capital Stock of the Company (other than Disqualified Stock and other than
Capital Stock issued or sold to a Subsidiary or an employee stock ownership plan
or other trust established by the Company or any of its Subsidiaries); PROVIDED,
HOWEVER, that (A) such capital contribution, purchase or redemption will be
excluded in the calculation of the amount of Restricted Payments and (B) the Net
Cash Proceeds from such capital contribution or sale applied in the manner set
forth in this clause (i) will be excluded from clause (3)(B) of paragraph (a);
(ii) any purchase or redemption of Subordinated Obligations made by exchange
for, or out of the proceeds of the substantially concurrent sale of,
Indebtedness of the Company that is permitted to be Incurred pursuant to the
covenant described under "--Limitation on Indebtedness"; PROVIDED, HOWEVER, that
such purchase or redemption will be excluded in the calculation of the amount of
Restricted Payments; (iii) any purchase or redemption of Subordinated
Obligations from Net Available Cash to the extent permitted by the covenant
described under "--Limitation on Sales of Assets and Subsidiary Stock";
PROVIDED, HOWEVER, that such purchase or redemption will be excluded in the
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calculation of the amount of Restricted Payments; (iv) dividends paid within 60
days after the date of declaration thereof if at such date of declaration such
dividend would have complied with paragraph (a); PROVIDED, HOWEVER, that such
dividend will be included in the calculation of the amount of Restricted
Payments; (v) payments by the Company to members of management of the Company
under the management incentive and equity participation plans as a result of and
upon the Acquisition; PROVIDED, HOWEVER, that such payments shall be excluded in
the calculation of the amount of Restricted Payments; (vi) payment of dividends,
other distributions or other amounts by the Company for the purposes set forth
in clauses (A) through (D) below; PROVIDED, HOWEVER, that such dividend,
distribution or amount set forth in clauses (A), (C) and (D) will be included in
the calculation of the amount of Restricted Payments for purposes of the
preceding paragraph: (A) to Holdings in amounts equal to the amounts required
for Holdings to pay franchise taxes and other fees required to maintain its
corporate existence and provide for other operating costs of up to $500,000 per
fiscal year; (B) to Holdings in amounts equal to amounts required for Holdings
to pay Federal, state and local income taxes to the extent such income taxes are
attributable to the income of the Company and its Restricted Subsidiaries (and,
to the extent of amounts actually received from its Unrestricted Subsidiaries,
in amounts required to pay such taxes to the extent attributable to the income
of such Unrestricted Subsidiaries); PROVIDED, HOWEVER, that such dividend or
distribution from an Unrestricted Subsidiary shall not be included in the
calculation of Consolidated Net Income and any such dividend or distribution to
Holdings shall not be included in the amount of Restricted Payments; (C) to
Holdings in amounts equal to amounts expended by Holdings to repurchase Capital
Stock of Holdings owned by former employees of the Company or its Subsidiaries
or their assigns, estates and heirs; PROVIDED, HOWEVER, that the aggregate
amount paid, loaned or advanced to Holdings pursuant to this clause (C) shall
not, in the aggregate, exceed $2.5 million per fiscal year of the Company, up to
a maximum aggregate amount of $7.5 million during the term of the Indenture,
plus any amounts contributed by Holdings to the Company as a result of resales
of such repurchased shares of Capital Stock; (D) so long as, after giving effect
thereto, no Default has occurred and is continuing, on May 1 and November 1 in
each year (or, if such day is not a Business Day, on the next succeeding
Business Day), the Company may pay cash dividends to Holdings on the Existing
Preferred Stock to enable Holdings to pay dividends or interest to the holders
of the Holding Securities in respect of the six-month period ended on such day
(or accrued deferred interest in respect of any prior period); provided that
within 20 days Holdings uses such dividends to pay current or accrued cash
interest on the Holding Securities; (vii) payments which would otherwise be
Restricted Payments in an aggregate amount not to exceed $2.5 million; PROVIDED,
HOWEVER, that such payments shall be included in the calculation of the amount
of Restricted Payments; or (viii) after December 1, 1998, Investments in
Unrestricted Subsidiaries or joint ventures in an amount not to exceed $2.5
million at any time outstanding; PROVIDED, HOWEVER, that such Investments shall
be included in the calculation of the amount of Restricted Payments.
LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM RESTRICTED
SUBSIDIARIES. The Company will not, and will not permit any Restricted
Subsidiary to, create or otherwise cause or permit to exist or become effective
any consensual encumbrance or restriction on the ability of any Restricted
Subsidiary to (i) pay dividends or make any other distributions on its Capital
Stock or pay any Indebtedness or other obligations owed to the Company, (ii)
make any loans or advances to the Company or (iii) transfer any of its property
or assets to the Company, except: (1) any encumbrance or restriction pursuant to
an agreement in effect at or entered into on the date of the Indenture; (2) any
encumbrance or restriction with respect to a Restricted Subsidiary pursuant to
an agreement relating to any Indebtedness Incurred by such Restricted Subsidiary
prior to the date on which such Restricted Subsidiary was acquired by the
Company or designated as a Restricted Subsidiary (other than Indebtedness
Incurred as consideration in, or to provide all or any portion of the funds or
credit support utilized to consummate, the transaction or series of related
transactions pursuant to which such Restricted Subsidiary became a Restricted
Subsidiary or was acquired by the Company) and outstanding on such date; (3) any
encumbrance or restriction pursuant to an agreement effecting a refinancing of
Indebtedness Incurred pursuant to an agreement referred to in clause (1) or (2)
of this covenant or this clause (3) or contained in any amendment, supplement or
other
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modification to an agreement referred to in clause (1) or (2) of this covenant
or this clause (3); PROVIDED, HOWEVER, that the encumbrances and restrictions
contained in any such refinancing agreement or amendment, supplement or other
modification are not materially less favorable to the Noteholders than
encumbrances and restrictions contained in such agreements; (4) in the case of
clause (iii), any encumbrance or restriction (A) that restricts in a customary
manner the subletting, assignment or transfer of any property or asset that is
subject to a lease, license or similar contract, (B) by virtue of any transfer
of, agreement to transfer, option or right with respect to, or Lien on, any
property or assets of the Company or any Restricted Subsidiary not otherwise
prohibited by the Indenture or (C) contained in security agreements or mortgages
securing Indebtedness of a Restricted Subsidiary to the extent such encumbrance
or restrictions restrict the transfer of the property subject to such security
agreements or mortgages; and (5) any restriction with respect to a Restricted
Subsidiary imposed pursuant to an agreement entered into for the sale or
disposition of all or substantially all the Capital Stock or assets of such
Restricted Subsidiary pending the closing of such sale or disposition.
LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK. (a) The Company will
not, and will not permit any Restricted Subsidiary to, make any Asset
Disposition unless (i) the Company or such Restricted Subsidiary receives
consideration (including by way of relief from, or by any other Person assuming
sole responsibility for, any liabilities, contingent or otherwise) at the time
of such Asset Disposition at least equal to fair market value of the shares and
assets subject to such Asset Disposition, (ii) at least 80% of the consideration
thereof received by the Company or such Restricted Subsidiary is in the form of
cash and (iii) an amount equal to 100% of the Net Available Cash from such Asset
Disposition is applied by the Company (or such Restricted Subsidiary, as the
case may be): (A) FIRST, to the extent the Company elects (or is required by the
terms of any Senior Indebtedness or Indebtedness (other than Preferred Stock) of
a Wholly Owned Subsidiary), to prepay, repay or purchase Senior Indebtedness or
such Indebtedness (other than Preferred Stock) of a Wholly Owned Subsidiary (in
each case other than Indebtedness owed to the Company or an Affiliate of the
Company) within twelve months after the later of the date of such Asset
Disposition or the receipt of such Net Available Cash; (B) SECOND, to the extent
of the balance of Net Available Cash after application in accordance with clause
(A), to the extent the Company or such Restricted Subsidiary elects, to reinvest
in Additional Assets (including by means of an Investment in Additional Assets
by a Restricted Subsidiary with Net Available Cash received by the Company or
another Restricted Subsidiary) within twelve months from the later of the date
of such Asset Disposition or the receipt of such Net Available Cash; (C) THIRD,
to the extent of the balance of such Net Available Cash after application in
accordance with clauses (A) and (B), to make an offer to purchase Notes pursuant
and subject to the conditions of the Indenture to the Noteholders at a purchase
price of 100% of the principal amount thereof plus accrued and unpaid interest
to the purchase date; and (D) FOURTH, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (A), (B) and (C), to
any application not prohibited by the Indenture. The Company and the Restricted
Subsidiaries will not be required to apply any Net Available Cash in accordance
with this covenant except to the extent that the aggregate Net Available Cash
from all Asset Dispositions that is not applied in accordance with this covenant
exceeds $2.0 million.
For the purposes of this covenant, the following will be deemed to be cash:
(x) the assumption of Indebtedness of the Company (other than Disqualified Stock
of the Company) or any Restricted Subsidiary and the release of the Company or
such Restricted Subsidiary from all liability on such Indebtedness in connection
with such Asset Disposition; and (y) securities received by the Company or any
Restricted Subsidiary from the transferee that are converted by the Company or
such Restricted Subsidiary into cash within twelve months.
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(b) In the event of an Asset Disposition that requires the purchase of Notes
pursuant to clause (a)(iii)(C), the Company will be required to purchase Notes
tendered pursuant to an offer by the Company for the Notes (the "Offer") at a
purchase price of 100% of their principal amount plus accrued and unpaid
interest to the Purchase Date in accordance with the procedures (including
prorating in the event of oversubscription) set forth in the Indenture. If the
aggregate purchase price of the Notes tendered pursuant to the Offer is less
than the Net Available Cash allotted to the purchase of the Notes, the Company
will apply the remaining Net Available Cash in accordance with clause
(a)(iii)(D) above. The Company shall not be required to make an Offer for Notes
pursuant to this covenant if the Net Available Cash available therefor (after
application of the proceeds as provided in clauses (a)(iii)(A) and (a)(iii)(B))
is less than $5.0 million for any particular Asset Disposition (which lesser
amounts shall be carried forward for purposes of determining whether an Offer is
required with respect to the Net Available Cash from any subsequent Asset
Disposition).
(c) The Company will comply, to the extent applicable, with the requirements
of Section 14(e) of the Exchange Act and any other securities laws or
regulations in connection with the repurchase of Notes pursuant to this
covenant. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this covenant, the Company will comply
with the applicable securities laws and regulations and will not be deemed to
have breached its obligations under this covenant by virtue thereof.
LIMITATION ON AFFILIATE TRANSACTIONS. (a) The Company will not, and will
not permit any Restricted Subsidiary to, directly or indirectly, enter into or
conduct any transaction (including the purchase, sale, lease or exchange of any
property or the rendering of any service) with any Affiliate of the Company (an
"Affiliate Transaction") on terms (i) that are less favorable to the Company or
such Restricted Subsidiary, as the case may be, than those that could be
obtained at the time of such transaction in arm's-length dealing with a Person
who is not such an Affiliate and (ii) that, in the event such Affiliate
Transactions involves an aggregate amount in excess of $500,000, are not in
writing and have not been approved by a majority of the members of the Board of
Directors having no personal stake in such Affiliate Transaction. In addition,
any transaction involving aggregate payments or other transfers by the Company
and its Restricted Subsidiaries in excess of $3.0 million will also require an
opinion from an independent investment banking firm or appraiser that is
nationally recognized, as appropriate, to the effect that such transaction is
fair to the Company or such Restricted Subsidiary from a financial point of
view.
(b) The provisions of the foregoing paragraph (a) will not apply to (i) any
Permitted Investment or Restricted Payment permitted to be made or paid pursuant
to the covenant described under "--Limitation on Restricted Payments," (ii) the
performance of the Company's or Subsidiary's obligations under any employment
contract, collective bargaining agreement, employee benefit plan, related trust
agreement or any other similar arrangement heretofore or hereafter entered into
in the ordinary course of business, (iii) payment of compensation to employees,
officers, directors or consultants in the ordinary course of business, (iv)
maintenance in the ordinary course of business (and payments required thereby)
of benefit programs or arrangements for employees, officers or directors,
including vacation plans, health and life insurance plans, deferred compensation
plans, directors' and officers' indemnification agreements, arrangements and
insurance and retirement or savings plans and similar plans, (v) any transaction
between the Company and a Wholly Owned Subsidiary or between Wholly Owned
Subsidiaries, (vi) beginning November 1, 1999, the payment of certain fees under
the Management Agreement or any amendment or supplement thereto, to the extent
that such payment will not exceed an aggregate amount of $1.35 million during
any twelve-month period or (vii) payments made to Holdings to reimburse Holdings
for costs, fees and expenses incident to a registration of any of the capital
stock of Holdings for a primary offering under the Securities Act, so long as
the net proceeds (after application to the redemption of the Holding Securities)
of such offering (if it is completed) are contributed to, or otherwise used for
the benefit of, the Company.
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LIMITATION ON LIENS. The Company will not, and will not permit any
Restricted Subsidiary to, directly or indirectly, create or permit to exist any
Lien on any of its property or assets (including Capital Stock), whether owned
on the date of the Indenture or thereafter acquired, securing any obligation
other than Permitted Liens unless the obligations due under the Indenture and
the Notes are secured, on an equal and ratable basis (or on a senior basis, in
the case of Indebtedness subordinated in right of payment to the Notes), with
the obligations so secured.
COMMISSION REPORTS. The Company shall file with the Trustee and provide
Noteholders, within 15 days after it files them with the Commission, copies of
its annual report and the information, documents and other reports which the
Company is required to file with the Commission pursuant to Section 13 or 15(d)
of the Exchange Act. Notwithstanding that the Company may not be subject to the
reporting requirements of Section 13 or 15(d) of the Exchange Act, the Company
shall file with the Commission (if then permissible) and, within 15 days after
such reports would be required to be filed, provide the Trustee and Noteholders
(at their addresses as set forth in the register of Notes) with the annual
reports and the information, documents and other reports which are specified in
Sections 13 and 15(d) of the Exchange Act. The Company shall also comply with
the other provisions of TIA 314(a).
FUTURE NOTE GUARANTORS. The Company will cause each Domestic Subsidiary
that Incurs Indebtedness and each Restricted Subsidiary that is a guarantor of
Indebtedness Incurred, in each case, pursuant to clause (b)(i) of the covenant
described under "--Limitation on Indebtedness" to execute and deliver to the
Trustee a Note Guarantee pursuant to which such Subsidiary will Guarantee
payment of the Notes. Each Note Guarantee will be limited in amount to an amount
not to exceed the maximum amount that can be Guaranteed by that Subsidiary
without rendering the Note Guarantee, as it relates to such Subsidiary, voidable
under applicable law relating to fraudulent conveyance or fraudulent transfer or
similar laws affecting the rights of creditors generally.
Each such Note Guarantee will be subordinated to Senior Indebtedness of the
respective Note Guarantor on the same basis and to the same extent as the Notes
are subordinated to Senior Indebtedness of the Company. See "--Ranking." Each
Note Guarantor may consolidate with or merge into or sell its assets, and may be
released from its obligations under its Note Guarantee, upon the terms and
conditions set forth in the Indenture.
LIMITATION ON LINES OF BUSINESS. The Company will not, and will not permit
any Restricted Subsidiary to, engage in any business, other than a Related
Business.
MERGER AND CONSOLIDATION. The Company will not consolidate with or merge
with or into, or convey, transfer or lease all or substantially all its assets
to, any Person, unless: (i) the resulting, surviving or transferee Person (the
"Successor Company") is a corporation organized and existing under the laws of
the United States of America, any State thereof of the District of Columbia and
the Successor Company (if not the Company) expressly assumes, by a supplemental
indenture, executed and delivered to the Trustee, in form satisfactory to the
Trustee, all the obligations of the Company under the Notes and the Indenture;
(ii) immediately after giving effect to such transaction (and treating any
Indebtedness that becomes an obligation of the Successor Company or any
Restricted Subsidiary as a result of such transaction as having been Incurred by
the Successor Company or such Restricted Subsidiary at the time of such
transaction), no Default will have occurred and be continuing; (iii) immediately
after giving effect of such transaction, the Successor Company would be able to
incur an additional $1.00 of Indebtedness pursuant to paragraph (a) of the
covenant described under "--Limitation on Indebtedness"; (iv) immediately after
giving effect to such transaction, the Successor Company will have Consolidated
Net Worth in an amount that is not less than the Consolidated Net Worth of the
Company immediately prior to such transaction; and (v) the Company will have
delivered to the Trustee an Officers' Certificate and an Opinion of Counsel,
each stating that such consolidation, merger or transfer and such supplemental
indenture (if any) comply with the Indenture.
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The Successor Company will succeed to, and be substituted for, and may
exercise every right and power of, the Company under the Indenture, but the
predecessor Company in the case of a lease of all or substantially all its
assets will not be released from the obligation to pay the principal of and
interest on the Notes.
Notwithstanding the foregoing clauses (ii), (iii) and (v), (1) any
Restricted Subsidiary may consolidate with, merge into or transfer all or part
of its properties and assets to the Company and (2) the Company may merge with
an Affiliate incorporated for the purpose of reincorporating the Company in
another jurisdiction to realize tax or other benefits.
DEFAULTS
An Event of Default is defined in the Indenture as (i) a default in any
payment of interest on any Note when due, continued for 30 days, (ii) a default
in the payment of principal of any Note when due at its Stated Maturity, upon
optional redemption, upon required repurchase, upon declaration or otherwise,
whether or not such payment is prohibited by the provisions described under
"--Ranking" above, (iii) the failure by the Company to comply with its
obligations under the covenant described under "--Merger and Consolidation"
above, (iv) the failure by the Company to comply for 30 days after notice with
any of its obligations under the covenants described under "--Change of Control"
above or under the covenants described under "--Certain Covenants--Limitation on
Indebtedness", "--Limitation on Restricted Payments," "--Limitation on Sales of
Assets and Subsidiary Stock" and "--Future Note Guarantors" above (in each case,
other than a failure to purchase Notes), (v) the failure by the Company to
comply for 60 days after notice with its other agreements contained in the
Indenture, (vi) the failure by the Company or any Significant Subsidiary to pay
any Indebtedness within any applicable grace period after final maturity or
acceleration by the holders thereof because of a default if the total amount of
such Indebtedness unpaid or accelerated exceeds $10 million (the "cross
acceleration provision"), (vii) certain events of bankruptcy, insolvency or
reorganization of the Company or a Significant Subsidiary (the "bankruptcy
provisions"), (viii) the rendering of any judgment or decree for the payment or
money in excess of $10 million against the Company or a Significant Subsidiary
if (A) an enforcement proceeding thereon is commenced or (B) such judgment or
decree remains outstanding for a period of 60 days following such judgment and
is not discharged, waived or stayed (the "judgment default provision") or (ix)
the failure of any Note Guarantee by a Note Guarantor which is a Significant
Subsidiary to be in full force and effect (except as contemplated by the terms
thereof or the Indenture) or the denial or disaffirmation by any such Note
Guarantor of its obligations under the Indenture or any Note Guarantee if such
Default continues for 10 days. However, a default under clauses (iv) and (v)
will not constitute an Event of Default until the Trustee or the Holders of 25%
in principal amount of the outstanding Notes notify the Company of the default
and the Company does not cure such default within the time specified in clauses
(iv) and (v) hereof after receipt of such notice.
If an Event of Default occurs and is continuing, the Trustee or the Holders
of at least 25% in principal amount of the outstanding Notes by notice to the
Company may declare the principal of and accrued but unpaid interest on all the
Notes to be due and payable. Upon such a declaration, such principal and
interest shall be due and payable immediately. If an Event of Default relating
to certain events of bankruptcy, insolvency or reorganization of the Company
occurs and is continuing, the principal of and interest on all the Notes will
become immediately due and payable without any declaration or other act on the
part of the Trustee or any Holders. Under certain circumstances, the Holders of
a majority in principal amount of the outstanding Notes any rescind any such
acceleration with respect to the Notes and its consequences.
Subject to the provisions of the Indenture relating to the duties of the
Trustee, in case an Event of Default occurs and is continuing, the Trustee will
be under no obligation to exercise any of the rights or powers under the
Indenture at the request or direction of any of the Holders unless such Holders
have offered to the Trustee reasonable indemnity or security against any loss,
liability or expense. Except to
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enforce the right to receive payment of principal, premium (if any) or interest
when due, no Holder may pursue any remedy with respect to the Indenture or the
Notes unless (i) such Holder has previously given the Trustee notice that an
Event of Default is continuing, (ii) Holders of at least 25% in principal amount
of the outstanding Notes have requested the Trustee to pursue the remedy, (iii)
such Holders have offered the Trustee reasonable security or indemnity against
any loss, liability or expense, (iv) the Trustee has not complied with such
request within 60 days after the receipt of the request and the offer of
security or indemnity and (v) the Holders or a majority in principal amount of
the outstanding Notes have not given the Trustee a direction inconsistent with
such request within such 60-day period. Subject to certain restrictions, the
Holders of a majority in principal amount of the outstanding Notes are given the
right to direct the time, method and place of conducting any proceeding for any
remedy available to the Trustee or of exercising any trust or power conferred on
the Trustee. The Trustee, however, may refuse to follow any direction that
conflicts with law or the Indenture or that the Trustee determines is unduly
prejudicial to the rights of any other Holder or that would involve the Trustee
in personal liability. Prior to taking any action under the Indenture, the
Trustee shall be entitled to indemnification satisfactory to it in its sole
discretion against all losses and expenses caused by taking or not taking such
action.
The Indenture provides that if a Default occurs and is continuing and is
known to the Trustee, the Trustee must mail to each Holder notice of the Default
no later than the date that is the earlier of 90 days after such default occurs
or 30 days after it is known to a trust officer or written notice is received by
the Trustee. Except in the case of a Default in the payment of principal of,
premium (if any) or interest on any Note, the Trustee may withhold notice if and
so long as a committee of its Trust officers in good faith determines that
withholding notice is in the interests of the Noteholders. In addition, the
Company is required to deliver to the Trustee, within 120 days after the end of
each fiscal year, a certificate indicating whether the signers thereof know of
any Default that occurred during the previous year. The Company also is required
to deliver to the Trustee, within 30 days after the occurrence thereof, written
notice of any event which would constitute certain Defaults, their status and
what action the Company is taking or proposes to take in respect thereof.
AMENDMENTS AND WAIVERS
Subject to certain exceptions, the Indenture may be amended with the consent
of the Holders of a majority in principal amount of the Notes then outstanding
and any past default or compliance with any provisions may be waived with the
consent of the Holders of a majority in principal amount of the Notes then
outstanding. However, without the consent of each Holder of an outstanding Note
affected, no amendment may, among other things, (i) reduce the amount of Notes
whose Holders must consent to an amendment, (ii) reduce the rate of or extend
the time for payment of interest on any Note, (iii) reduce the principal of or
extend the Stated Maturity of any Note, (iv) reduce the premium payable upon the
redemption of any Note or change the time at which any Note may be redeemed as
described under "-- Optional Redemption" above, (v) make any Note payable in
money other than that stated in the Note, (vi) may any change to the
subordination provisions of the Indenture that adversely affects the rights of
any Holder, (vii) impair the right of any Holder to receive payment of principal
of and interest on such Holder's Notes on or after the due dates therefor or to
institute suit for the enforcement of any payment on or with respect to such
Holder's Notes or (viii) make any change in the amendment provisions which
require each Holder's consent or in the waiver provisions.
Without the consent of any Holder, the Company and Trustee may amend the
Indenture to cure any ambiguity, omission, defect or inconsistency, to provide
for the assumption by a successor corporation of the obligations of the Company
or any Note Guarantor under the Indenture or under any Note Guarantee, as the
case may be, to provide for uncertificated Notes in addition to or in place of
certificated Notes (PROVIDED, HOWEVER, that the uncertificated Notes are issued
in registered form for purposes of Section 163(f) of the Code, or in a manner
such that the uncertificated Notes are described in Section 163(f)(2)(b) of the
Code), to add Note Guarantees with respect to the Notes, to secure the Notes, to
add
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to the covenants of the Company for the benefit of the Noteholders or to
surrender any right or power conferred upon the Company, to make any change that
does not adversely affect the rights of any Holder or to comply with any
requirement of the Commission in connection with the qualification of the
Indenture under the Trust Indenture Act. However, no amendment may be made to
the subordination provisions of the Indenture that adversely affects the rights
of any holder of Senior Indebtedness then outstanding unless the holders of such
Senior Indebtedness (or any group or representative thereof authorized to give a
consent) consent to such change.
The consent of the Noteholders is not necessary under the Indenture to
approve the particular form of any proposed amendment. It is sufficient if such
consent approves the substance of the proposed amendment.
After an amendment under the Indenture becomes effective, the Company is
required to mail to Noteholders a notice briefly describing such amendment.
However, the failure to give such notice to all Noteholders, or any defect
therein, will not impair or affect the validity of the amendment.
TRANSFER AND EXCHANGE
A Noteholder may transfer or exchange Notes in accordance with the
Indenture. Upon any transfer or exchange, the registrar and the Trustee may
require a Noteholder, among other things, to furnish appropriate endorsements
and transfer documents and the Company may require a Noteholder to pay any taxes
or other governmental charges required by law or permitted by the Indenture. The
Company is not required to transfer or exchange any Note selected for redemption
or repurchase or to transfer or exchange any Note for a period of 15 days prior
to a selection of Notes to be redeemed or repurchased. The Notes will be issued
in registered form and the registered holder of a Note will be treated as the
owner of such Note for all purposes.
DEFEASANCE
The Company and the Note Guarantors, if any, at any time may terminate all
their obligations under the Notes and the Note Guarantees and the Indenture
("legal defeasance"), except for certain obligations, including those respecting
the defeasance trust and obligations to register the transfer or exchange of the
Notes, to replace mutilated, destroyed, lost or stolen Notes and to maintain a
registrar and paying agent in respect of the Notes. The Company at any time may
terminate its obligations under the covenants described under "--Certain
Covenants," the operation of the cross acceleration provision, the bankruptcy
provisions with respect to Subsidiaries and the judgment default provision
described under "--Defaults" above and the limitations contained in clauses
(iii) and (iv) under "--Merger and Consolidation" above ("covenant defeasance").
The Company may exercise its legal defeasance option notwithstanding its
prior exercise of its covenant defeasance option. If the Company exercises its
legal defeasance option, payment of the Notes may not be accelerated because of
an Event of Default with respect thereto. If the Company exercises its covenant
defeasance option, payment of the Notes may not be accelerated because of an
Event of Default under the provisions described in the last sentence of the
foregoing paragraph.
In order to exercise either defeasance option, the Company must irrevocably
deposit in trust (the "defeasance trust") with the Trustee money or U.S.
Government Obligations for the payment of principal, premium (if any) and
interest on the Notes to redemption or maturity, as the case may be, and must
comply with certain other conditions, including delivery to the Trustee of an
Opinion of Counsel to the effect that holders of the Notes will not recognize
income, 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 amount and
in the same manner and at the same times as would have been the case if such
deposit and defeasance had
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not occurred (and, in the case of legal defeasance only, such Opinion of Counsel
must be based on a ruling of the Internal Revenue Service or other change in
applicable Federal income tax law).
BOOK-ENTRY, DELIVERY AND FORM
Except as set forth below, the New Notes will initially be issued in the
form of one or more permanent global Notes in definitive, fully registered form
without interest coupons (each, a "Global Note"). Upon issuance, each Global
Note will be deposited with the Trustee as custodian for, and registered in the
name of, a nominee of The Depository Trust Company ("DTC").
If a holder tendering Old Notes so requests, such holder's New Notes will be
issued as described below under "--Certificated Securities" in registered form
without coupons (the "Certificated Securities").
Ownership of beneficial interests in a Global Note will be limited to
persons who have accounts with DTC ("participants") or persons who hold
interests through participants. Ownership of beneficial interests in a Global
Note will be shown on, and the transfer of that ownership will be effected only
through, records maintained by DTC or its nominee (with respect to interests of
participants) and the records of participants (with respect to interests of
persons other than participants).
So long as DTC, or its nominee, is the registered owner or Holder of a
Global Note, DTC or such nominee, as the case may be, will be considered the
sole owner or Holder of the Notes represented by such Global Note for all
purposes under the Indenture and the Notes. No beneficial owner of an interest
in a Global Note will be able to transfer that interest except in accordance
with DTC's applicable procedures, in addition to those provided for under the
Indenture.
Payments of the principal of, premium, if any, and interest, on a Global
Note will be made to DTC or its nominee, as the case may be, as the registered
owner thereof. Neither the Company, the Trustee nor any Paying Agent will have
any responsibility or liability for any aspects of the records relating to or
payments made on account of beneficial ownership interests in a Global Note 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, premium, if any, and interest in respect of a Global Note, will
credit participants' accounts with payments in amounts proportionate to their
respective beneficial interests in the principal amount of such Global Note as
shown on the records of DTC or its nominee. The Company also expects that
payments by participants to owners of beneficial interests in such Global Note
held through such participants will be governed by standing instructions and
customary practices, as is now the case with securities held for the accounts of
customers registered in the names of nominees for such customers. Such payments
will be the responsibility of such participants.
Transfers between participants in DTC will be effected in the ordinary way
in accordance with DTC rules and will be settled in same-day funds.
The Company expects that DTC will take any action permitted to be taken by a
Holder of a Note only at the direction of one or more participants to whose
account the DTC interests in a Global Note is credited and only in respect of
such portion of the aggregate principal amount of a Note as to which such
participant or participants has or have given direction.
DTC has advised the Company that it is a limited purpose trust company
organized under the laws of the State of New York, a "banking organization"
within the meaning of New York Banking Law, a member of the Federal Reserve
System, a "clearing corporation" within the meaning of the Uniform Commercial
Code and a "Clearing Agency" registered pursuant to the provisions of Section
17A of the Exchange Act. DTC was created to hold securities for its participants
and to facilitate the clearance and settlement of securities transactions
between participants through electronic book-entry changes in accounts of its
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participants. Indirect access to the DTC system is available to others such as
banks, brokers, dealers and trust companies that clear through or maintain a
custodial relationship with a participant, either directly or indirectly.
Although DTC is expected to follow the foregoing procedures in order to
facilitate transfers of interests in a Global Note among participants of DTC, it
is under no obligation to perform or continue to perform such procedures, and
such procedures may be discontinued at any time. Neither the Company nor the
Trustee will have any responsibility for the performance by DTC or its
respective participants or indirect participants of their respective obligations
under the rules and procedures governing their operations.
CERTIFICATED SECURITIES
If (i) the Company notifies the Trustee in writing that DTC is no longer
willing or able to act as a depository and the Company is unable to locate a
qualified successor within 90 days or (ii) the Company, at its option, notifies
the Trustee in writing that it elects to cause the issuance of Notes in
definitive form under the Indenture, then, upon surrender by DTC of its Global
Note, Certificated Securities will be issued to each person that DTC identifies
as the beneficial owner of the New Notes represented by the Global Note. In
addition, any person having a beneficial interest in a Global Note or any holder
of Old Notes whose Old Notes have been accepted for exchange may, upon request
to the Trustee or the Exchange Agent, as the case may be, exchange such
beneficial interest or Old Notes for Certificated Securities. Upon any such
issuance, the Trustee is required to register such Certificated Securities in
the name of such person or persons (or the nominee of any thereof), and cause
the same to be delivered thereto.
Neither the Company nor the Trustee shall be liable for any delay by DTC or
any participant or indirect participant in identifying the beneficial owners of
the related New Notes and each such person may conclusively rely on, and shall
be protected in relying on, instructions from DTC for all purposes (including
with respect to the registration and delivery, and the respective principal
amounts, of the New Notes to be issued).
CONCERNING THE TRUSTEE
State Street Bank and Trust Company is to be the Trustee under the Indenture
and has been appointed by the Company as Registrar and Paying Agent with regard
to the Notes.
GOVERNING LAW
The Indenture provides that it and the Notes will be governed by, and
construed in accordance with, the laws of the State of New York without giving
effect to applicable principles of conflicts of law to the extent that the
application of the law of another jurisdiction would be required thereby.
CERTAIN DEFINITIONS
"Additional Assets" means (i) any property or assets (other that
Indebtedness and Capital Stock of the acquiring Person) to be used by the
Company or a Restricted Subsidiary in a Related Business; (ii) the Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the acquisition
of such Capital Stock by the Company or another Restricted Subsidiary; or (iii)
Capital Stock constituting a minority interest in any Person that at such time
is a Restricted Subsidiary; PROVIDED, HOWEVER, that, in the case of clauses (ii)
and (iii), such Restricted Subsidiary is primarily engaged in a Related
Business.
"Affiliate" of any specified Person means (i) any other Person, directly or
indirectly, controlling or controlled by or under direct or indirect common
control with such specified Person or (ii) any Person who
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is a director or officer (a) of such Person, (b) of any Subsidiary of such
Person or (c) of any Person described in clause (i) above. 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" means any sale, lease, transfer or other disposition of
shares of Capital Stock of a Restricted Subsidiary (other than directors'
qualifying shares), property or other assets (each referred to for the purposes
of this definition as a "disposition") by the Company or any of its Restricted
Subsidiaries (including any disposition by means of a merger, consolidation or
similar transaction) other than: (i) a disposition by a Restricted Subsidiary to
the Company or by the Company or a Restricted Subsidiary to a Wholly Owned
Subsidiary; (ii) a disposition of property or assets in the ordinary course of
business; (iii) for purposes of the covenants described under "--Certain
Covenants--Limitation on Sales of Assets and Subsidiary Stock" only, a
disposition subject to the covenants described under "--Certain
Covenants--Limitation on Restricted Payments" and "--Merger and Consolidation";
(iv) leases or subleases to third parties of real property owned in fee or
leased by the Company or its Subsidiaries; (v) a disposition of a lease of real
property; and (vi) any disposition of property of the Company or any of its
Subsidiaries that, in the reasonable judgment of the Company, has become
uneconomic, obsolete or worn out.
"Average Life" means, as of the date of determination, with respect to any
Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the sum
of the products of the numbers of years from the date of determination to the
dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in respect of
the Senior Credit Facility and the other Senior Credit Documents and the
Refinancing Indebtedness with respect thereto, as amended, supplemented or
otherwise modified from time to time, including increases in the principal
amount thereof permitted under the Indenture and including principal, premium
(if any), interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not a claim for post filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement obligations, guarantees and all other amounts
payable thereunder or in respect thereof.
"Board of Directors" means the Board of Directors of the Company or any
committee thereof duly authorized to act on behalf of such Board.
"Business Day" means a day other than a Saturday, Sunday or other day on
which commercial banking institutions (including, without limitation, the
Federal Reserve System) are authorized or required by law to close in New York
City.
"Capital Stock" of any Person means any and all shares, interests, rights to
purchase, warrants, options, participations or other equivalents of or interests
in (however designated) equity of such Person, including any Preferred Stock,
but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligation" means an obligation that is required to be
classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP, and the amount of Indebtedness represented by
such obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP; and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease.
"Code" means the Internal Revenue Code of 1986, as amended.
"Consolidated Coverage Ratio" as of any date of determination means the
ratio of (i) the aggregate amount of EBITDA for the period of the most recent
four consecutive fiscal quarters ending prior to the
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date of such determination to (ii) Consolidated Interest Expense for such four
fiscal quarters; PROVIDED, HOWEVER, that (1) if the Company or any Restricted
Subsidiary (x) has Incurred any Indebtedness (other than Indebtedness Incurred
for working capital purposes under a revolving credit facility) since the
beginning of such period that remains outstanding on such date of determination
or if the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such Indebtedness as if such Indebtedness had been Incurred
on the first day of such period and the discharge of any other Indebtedness
repaid, repurchased, defeased or otherwise discharged with the proceeds of such
new Indebtedness as if such discharge had occurred on the first day of such
period, or (y) has repaid, repurchased, defeased or otherwise discharged any
Indebtedness since the beginning of the period that is no longer outstanding on
such date of determination, or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio involves a discharge of Indebtedness,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving effect to such discharge of such Indebtedness, including with the
proceeds of such new Indebtedness, as if such discharge had occurred on the
first day of such period (except that, in making such computation, the amount of
Indebtedness under any revolving credit facility shall be computed based upon
the average daily balance of such Indebtedness during such four-quarter period);
(2) if since the beginning of such period the Company or any Restricted
Subsidiary shall have made any Asset Disposition of a company, business or group
of assets comprising an operating unit, the EBITDA for such period shall be
reduced by any amount equal to the EBITDA (if positive) directly attributable to
the assets that are the subject of such Asset Disposition for such period or
increased by an amount equal to the EBITDA (if negative) directly attributable
thereto for such period and Consolidated Interest Expense for such period shall
be reduced by an amount equal to the Consolidated Interest Expense directly
attributable to any Indebtedness of the Company or any Restricted Subsidiary
repaid, repurchased, defeased or otherwise discharged with respect to the
Company and its continuing Restricted Subsidiaries in connection with such Asset
Disposition for such period (or, if the Capital Stock of any Restricted
Subsidiary is sold, the Consolidated Interest Expense for such period directly
attributable to the Indebtedness of such Restricted Subsidiary to the extent the
Company and its continuing Restricted Subsidiaries are no longer liable for such
Indebtedness after such sale), (3) if since the beginning of such period the
Company or any Restricted Subsidiary (by merger or otherwise) shall have made an
Investment in any Restricted Subsidiary (or any Person that becomes a Restricted
Subsidiary) or an acquisition of assets, including any acquisition of assets
occurring in connection with a transaction causing a calculation to be made
hereunder, which constitutes all or substantially all of an operating unit of a
business, EBITDA and Consolidated Interest Expense for such period shall be
calculated after giving pro forma effect thereto (including the Incurrence of
any Indebtedness) as if such Investment or acquisition occurred on the first day
of such period and (4) if since the beginning of such period any Person (that
subsequently became a Restricted Subsidiary or was merged with or into the
Company or any Restricted Subsidiary since the beginning of such period) shall
have made any Asset Disposition or any Investment or acquisition of assets that
would have required an adjustment pursuant to clause (2) or (3) above if made by
the Company or a Restricted Subsidiary during such period, EBITDA and
Consolidated Interest Expense for such period shall be calculated after giving
pro forma effect thereto as if such Asset Disposition, Investment or acquisition
of assets occurred on the first day of such period. For purposes of this
definition, whenever pro forma effect is to be given to an acquisition of
assets, the amount of income or earnings relating thereto and the amount of
Consolidated Interest Expense associated with any Indebtedness Incurred in
connection therewith, the pro forma calculations shall be determined in good
faith by a responsible financial or accounting Officer of the Company. If any
Indebtedness bears a floating rate of interest and is being given pro forma
effect, the interest expense on such Indebtedness shall be calculated as if the
rate in effect on the date of determination had been the applicable rate for the
entire period (taking into account any Interest Rate Agreement applicable to
such Indebtedness if such Interest Rate Agreement has a remaining term as at the
date of determination in excess of twelve months).
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"Consolidated Interest Expense" means, for any period, the total interest
expense of the Company and its consolidated Subsidiaries, plus, to the extent
incurred by the Company and its Subsidiaries in such period but not included in
such interest expense, (i) interest expense attributable to Capitalized Lease
Obligations, (ii) amortization of debt discount, (iii) capitalized interest,
(iv) noncash interest expense (excluding amortization of debt issuance costs,
commissions, and other fees and expenses), (v) commissions, discounts and other
fees and charges attributable to letters of credit and bankers' acceptance
financing, (vi) interest actually paid by the Company or any such Subsidiary
under any Guarantee of Indebtedness or other obligation of any other Person,
(vii) net costs associated with Hedging Obligations (including amortization of
fees), and (viii) the product of (a) all Preferred Stock dividends in respect of
all Preferred Stock of Subsidiaries of the Company and Disqualified Stock of the
Company (excluding the Existing Preferred Stock) held by Persons other than the
Company or a Wholly Owned Subsidiary multiplied by (b) a fraction, the numerator
of which is one and the denominator of which is one minus the then current
combined federal, state and local statutory tax rate of the Company, expressed
as a decimal, in each case, determined on a consolidated basis in accordance
with GAAP; PROVIDED, HOWEVER, that there shall be excluded therefrom any such
interest expense of any Unrestricted Subsidiary to the extent the related
Indebtedness is not Guaranteed or paid by the Company or any Restricted
Subsidiary.
"Consolidated Net Income" means, for any period, the net income (loss) of
the Company and its consolidated Subsidiaries before any reduction in respect of
Preferred Stock dividends plus, in each case, to the extent deducted in
determining net income for such period, any expenses incurred in connection with
the Acquisition (other than the amortization of the prepaid management fee)
including, without limitation, management bonuses and payments under the
management incentive and equity participation plans; PROVIDED, HOWEVER, that
there shall not be included in such Consolidated Net Income: (i) any net income
of any Person if such Person is not a Restricted Subsidiary, except that (A)
subject to the limitations contained in clause (iv) below, the Company's equity
in the net income of any such Person for such period shall be included in such
Consolidated Net Income up to the aggregate amount of cash actually distributed
by such Person during such period to the Company or a Restricted Subsidiary as a
dividend or other distribution (subject, in the case of a dividend or other
distribution to a Restricted Subsidiary, to the limitations contained in clause
(iv) below) and (B) the Company's equity in a net loss of any such Person (other
than an Unrestricted Subsidiary) for such period shall be included in
determining such Consolidated Net Income; (ii) any expense recognized (net of
tax benefits related thereto) as a consequence of payments permitted to be made
by the Company under clauses (vi)(A), (B) and (D) of paragraph (b) of the
covenant described under "--Certain Covenants--Limitation on Restricted
Payments"; (iii) any net income (loss) of any person acquired by the Company or
a Subsidiary in a pooling of interests transaction for any period prior to the
date of such acquisition; (iv) any net income (loss) of any Restricted
Subsidiary if such Subsidiary is subject to restrictions, directly or
indirectly, on the payment of dividends or the making of distributions by such
Restricted Subsidiary, directly or indirectly, to the Company, except that (A)
subject to the limitations contained in (v) below, the Company's equity in the
net income of any such Restricted Subsidiary for such period shall be included
in such Consolidated Net Income up to the aggregate amount of cash that could
have been distributed by such Restricted Subsidiary during such period to the
Company or another Restricted Subsidiary as a dividend (subject, in the case of
a dividend that could have been made to another Restricted Subsidiary, to the
limitation contained in this clause) and (B) the Company's equity in a net loss
of any such Restricted Subsidiary for such period shall be included in
determining such Consolidated Net Income; (v) any gain or loss realized upon the
sale or other disposition of any asset of the Company or its consolidated
Subsidiaries (including pursuant to any sale/leaseback transaction) that is not
sold or otherwise disposed of in the ordinary course of business and any gain or
loss realized upon the sale or other disposition of any Capital Stock of any
Person; (vi) any extraordinary or non-recurring gain, loss or charge (together
with any related provision for taxes on such extraordinary or non-recurring
gain, loss or charge); and (vii) the cumulative effect of a change in accounting
principles (effected either through cumulative effect adjustment or a
retroactive application, in each case, in accordance with GAAP).
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"Consolidated Net Worth" means the total of the amounts shown on the balance
sheet of the Company and the Restricted Subsidiaries, determined on a
consolidated basis, as of the end of the most recent fiscal quarter of the
Company ending prior to the taking of any action for the purpose of which the
determination is being made, as (i) the par or stated value of all outstanding
Capital Stock of the Company plus (ii) paid-in capital or capital surplus
relating to such Capital Stock plus (iii) any retained earnings or earned
surplus less (A) any accumulated deficit and (B) any amounts attributable to
Disqualified Stock.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time or
both would be, an Event of Default.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and (ii)
any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount of, or under which, at the date of determination, the
holders thereof, are committed to lend up to, at least $10.0 million and is
specifically designated by the Company in the instrument evidencing or governing
such Senior Indebtedness as "Designated Senior Indebtedness" for purposes of the
Indenture.
"Disqualified Stock" means, with respect to any Person, any Capital Stock
that by its terms (or by the terms of any security into which it is convertible
or for which it is exchangeable or exercisable) or upon the happening of any
event (other than as a result of a Change of Control) (i) matures or is
mandatorily redeemable pursuant to a sinking fund obligation or otherwise, (ii)
is convertible or exchangeable for Indebtedness or Disqualified Stock or (iii)
is redeemable at the option of the holder thereof, in whole or in part, in each
case on or prior to the first anniversary of the Stated Maturity of the Notes.
"Domestic Subsidiary" means any Restricted Subsidiary of the Company other
than a Foreign Subsidiary.
"EBITDA" means, for any period, the Consolidated Net Income for such period,
plus the following to the extent deducted in calculating such Consolidated Net
Income: (i) total income tax expense, (ii) Consolidated Interest Expense
together with amortization of debt issuance costs, commissions, and other fees
and expenses, (iii) depreciation expense, (iv) amortization expense, including
amortization of inventory write-up under APB 16, amortization of intangibles
(including, but not limited to, goodwill and the costs of Interest Rate
Agreements or Currency Agreements, license agreements and non-competition
agreements) and organization costs, (v) non-cash expenses related to the
amortization of prepaid management fees pursuant to certain agreements referred
to in the Indenture, (vi) costs of surety bonds in connection with financing
activities, (vii) non-cash amortization of Capitalized Lease Obligations, (viii)
franchise taxes, (ix) expenses recorded in historical periods through the
Acquisition Date related to the management incentive and equity participation
plans and allocation of "C" stock, (x) any other write-downs, write-offs,
minority interests and other non-cash charges in determining such Consolidated
Net Income for such period, and (xi) all extraordinary non-cash charges in
determining such Consolidated Net Income for such period; provided that the
impact of foreign currency translations shall be excluded.
"Existing Preferred Stock" means the 12% preferred stock of the Company
issued outstanding on the Issue Date, and any extensions, refinancings, renewals
or replacements thereof (the "Refinancing Preferred Stock"); provided that (i)
the aggregate liquidation preference of such Refinancing Preferred Stock does
not exceed the aggregate liquidation preference of the Existing Preferred Stock,
(ii) the dividend rate per annum of such Refinancing Preferred Stock does not
exceed the dividend rate per annum of the Existing Preferred Stock and (iii) the
Refinancing Preferred Stock has a mandatory redemption date no earlier than the
Existing Preferred Stock.
"Foreign Subsidiary" means any Restricted Subsidiary of the Company that is
not organized under the laws of the United States of America or any state
thereof or the District of Columbia.
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"GAAP" means generally accepted accounting principles in the United States
of America as in effect from time to time, including those set forth in the
opinions and pronouncements of the Accounting Principles Board of the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as approved by a significant segment of the accounting profession.
All ratios and computations based on GAAP contained in the Indenture shall be
computed in conformity with GAAP as in effect as of the Issue Date.
"Government Authority" means any nation or government, any state or other
political subdivision thereof or any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
"Guarantee" means any obligation, contingent or otherwise, of any Person
directly or indirectly guaranteeing any Indebtedness or other obligation of any
other Person and any obligation, direct or indirect, contingent or otherwise, of
such Person (i) to purchase or pay (or advance or supply funds for the purchase
or payment of) such Indebtedness or other obligation of such other Person
(whether arising by virtue of partnership arrangements, or by agreement to
keep-well, to purchase assets, goods, securities or services, to take-or-pay, or
to maintain financial statement conditions or otherwise) or (ii) entered into
for purposes of assuring in any other manner the obligee of such Indebtedness or
other obligation of the payment thereof or to protect such obligee against loss
in respect thereof (in whole or in part); PROVIDED, HOWEVER, that the term
"Guarantee" shall not include endorsements for collection or deposit in the
ordinary course of business. The term "Guarantee" used as a verb has a
corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such Person
pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Noteholder" means the Person in whose name a Note is registered
in the Note Register.
"Holding Securities" means the $20.0 million aggregate principal amount of
senior subordinated notes of Holdings, as amended from time to time.
"Holdings" means Carter Holdings, Inc., a Massachusetts corporation.
"Incur" means issue, assume, Guarantee, incur or otherwise become liable
for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a Person
existing at the time such person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication) (i) the principal of and premium (if any) in
respect of indebtedness of such Person for borrowed money; (ii) the principal of
and premium (if any) in respect of obligations of such Person evidenced by
bonds, debentures, notes or other similar instruments; (iii) all obligations of
such Person in respect of letters of credit or other similar instruments
(including reimbursement obligations with respect thereto but excluding letters
of credit supporting the purchase of goods in the ordinary course of business
and expiring no more than six months from the date of issuance); (iv) all
obligations of such Person to pay the deferred and unpaid purchase price of
property or services (except Trade Payables), which purchase price is due more
than six months after the date of placing such property in service or taking
delivery and title thereto or the completion of such services; (v) all
Capitalized Lease Obligations of such Person; (vi) the amount of all obligations
of such Person with respect to the redemption, repayment or other repurchase of
any Disqualified Stock or, with respect to any Subsidiary of the Company, any
Preferred Stock (but excluding, in each case, any accrued dividends); (vii) all
Indebtedness of other Persons secured by a Lien on any asset of such Person,
whether or not such Indebtedness is assumed by such Person; PROVIDED, HOWEVER,
that the amount of Indebtedness of such Person shall be the lesser of (A) the
fair market value of such asset at such date of determination and (B) the amount
of such Indebtedness of such other Persons; (viii) all Indebtedness of other
Persons to the extent Guaranteed by such Person; and (ix) to the extent not
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otherwise included in this definition, Hedging Obligations of such Person. The
amount of Indebtedness of any Person at any date shall be the outstanding
balance at such date of all unconditional obligations as described above and the
liability, assuming the occurrence of the contingency giving rise to the
obligation, of any contingent obligations at such date. For purposes of
clarification, Indebtedness shall not include undrawn commitments on credit
facilities.
"Interest Rate Agreement" means with respect to any Person any interest rate
protection agreement, interest rate future agreement, interest rate option
agreement, interest rate swap agreement, interest rate cap agreement, interest
rate collar agreement, interest rate hedge agreement or other similar agreement
or arrangement as to which such Person is party or a beneficiary.
"Investment" in any Person means any direct or indirect advance, loan (other
than advances to customers in the ordinary course of business that are recorded
as accounts receivable on the balance sheet of such Person) or other extension
of credit (including by way of Guarantee or similar arrangement) or capital
contribution to (by means of any transfer of cash or other property to others or
any payment for property or services for the account or use of others), or any
purchase or acquisition of Capital Stock, Indebtedness or other similar
instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary" and the covenant described under "--Certain
Covenants--Limitation on Restricted Payments," (i) "Investment" shall include
the portion (proportionate to the Company's equity interest in such Subsidiary)
of the fair market value of the net assets of any Subsidiary of the Company at
the time that such Subsidiary is designated an Unrestricted Subsidiary; and (ii)
any property transferred to or from an Unrestricted Subsidiary shall be valued
at its fair market value at the time of such transfer, in each case as
determined in good faith by the Board of Directors.
"Issue Date" means the date on which the Notes are originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance, lien or
charge of any kind (including any conditional sale or other title retention
agreement or lease in the nature thereof).
"Management Group" means the senior management of the Company or Holdings.
"Net Available Cash" from an Asset Disposition means cash payments received
(including any cash payments received by way of deferred payment of principal
pursuant to a note or installment receivable or otherwise, but only as and when
received, but excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred (including legal, accounting and investment banking fees and any
relocation expenses incurred as a result of an Asset Disposition), and all
Federal, state, provincial, foreign and local taxes required to be paid or
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(ii) all payments made on any Indebtedness that is secured by any assets subject
to such Asset Disposition, in accordance with the terms of any Lien upon such
assets, or that must by its terms, 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 required to
be made to minority interest holders in Subsidiaries or joint ventures as a
result of such Asset Disposition and (iv) appropriate amounts to be provided by
the seller as a reserve, in accordance with GAAP, against any liabilities
associated with the assets disposed of in such Asset Disposition and retained
(including by way of indemnification obligations) by the Company or any
Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds" means, with respect to any issuance or sale of Capital
Stock or disposition of any Investment by the Company or any Subsidiary, the
cash proceeds of such issuance, sale or disposition net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
commissions and brokerage, consultant and other fees actually incurred in
connection with such issuance, sale or disposition and net of taxes paid or
payable as a result thereof.
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"Note Guarantee" means any guarantee executed and delivered by a Note
Guarantor pursuant to the provisions of the covenant described under "--Certain
Covenants--Future Note Guarantors". Each such Note Guarantee will be in the form
prescribed in the Indenture.
"Note Guarantor" means each of the Company's Subsidiaries that in the future
executes a supplemental indenture in which such Subsidiary agrees to be bound by
the terms of the Indenture as a Note Guarantor; provided that any Person
constituting a Note Guarantor as described above shall cease to constitute a
Note Guarantor when its respective Note Guarantee is released in accordance with
the terms thereof.
"Officer" means the President, the Treasurer or the Clerk of the Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Permitted Holders" means Investcorp, its Affiliates, members of the
Management Group, the international investors who are the initial holders of the
Capital Stock of Holdings and any Person acting in the capacity of an
underwriter in connection with a public or private offering of the Company's or
Holdings' Capital Stock.
"Permitted Investment" means an Investment by the Company or any Restricted
Subsidiary in (i) a Restricted Subsidiary, the Company or a Person that will,
upon the making of such Investment, become a Restricted Subsidiary; PROVIDED,
HOWEVER, that the primary business of such Restricted Subsidiary is a Related
Business; (ii) another Person if as a result of such Investment such other
Person is merged or consolidated with or into, or transfers or conveys all or
substantially all its assets to, the Company or a Restricted Subsidiary;
PROVIDED, HOWEVER, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; PROVIDED,
HOWEVER, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel, entertainment, relocation and similar
advances that are made in the ordinary course of business; (vi) loans or
advances to employees made in the ordinary course of business consistent with
past practices of the Company or such Restricted Subsidiary; (vii) loans or
advances to employees (or guarantees of third party loans to employees) in an
aggregate amount not to exceed $2.5 million at any time outstanding; (viii)
stock, obligations or securities received in settlement of debts created in the
ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; or (ix) securities received in
connection with an Asset Disposition complying with the provisions of the
covenant described under "--Certain Covenants--Limitation on Sales of Assets and
Subsidiary Stock".
"Permitted Liens" means: (a) Liens securing Senior Indebtedness (or
Indebtedness of a Subsidiary of the Company which if incurred by the Company
would be Senior Indebtedness) permitted to be Incurred under the Indenture; (b)
Liens for taxes, assessments or other governmental charges not yet delinquent or
that are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of the
Company or such Restricted Subsidiary, as the case may be, in accordance with
GAAP; (c) carriers', warehousemen's, mechanics', landlords', materialmen's,
repairmen's or other like Liens arising in the ordinary course of business in
respect of obligations that are not yet due or that are bonded or that are being
contested in good faith and by appropriate proceedings if adequate reserves with
respect thereto are maintained on the books of the Company or such Restricted
Subsidiary, as the case may be, in accordance with GAAP; (d) pledges or deposits
in connection with workmen's compensation, unemployment insurance and other
social security legislation; (e) deposits to secure the performance of bids,
tenders, trade or government contracts (other than for borrowed money), leases,
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licenses, statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of business;
(f) easements (including reciprocal easement agreements), rights-of-way,
building, zoning and similar restrictions, utility agreements, covenants,
reservations, restrictions, encroachments, changes, and other similar
encumbrances or title defects incurred, or leases or subleases granted to
others, in the ordinary course of business, which do not in the aggregate
materially detract from the aggregate value of the properties of the Company and
its Subsidiaries, taken as a whole or in the aggregate materially interfere with
or adversely affect in any material respect the ordinary conduct of the business
of the Company and its Subsidiaries on the properties subject thereto, taken as
a whole; (g) Liens pursuant to the Senior Credit Documents, Liens in connection
with industrial revenue bonds, Liens securing the Bank Indebtedness and bankers'
Liens arising by operation of law; (h) Liens on property of the Company or any
of its Restricted Subsidiaries created solely for the purpose of securing
Indebtedness permitted by clause (b)(iv) of the covenant described under
"--Certain Covenants-- Limitation on Indebtedness" or incurred in connection
with Indebtedness permitted by clause (b)(vii) thereof; PROVIDED, HOWEVER that,
in the case of Liens described in such clause (b)(iv), no such Lien shall extend
to or cover other property of the Company or such Restricted Subsidiary other
than the respective property so acquired, and the principal amount of
Indebtedness secured by any such Lien shall at no time exceed the original
purchase price of such property; (i) Liens existing on the date of the
Indenture; (j) Liens on goods (and the proceeds thereof) and documents of title
and the property covered thereby securing Indebtedness in respect of commercial
letters of credit; (k) (i) mortgages, liens, security interests, restrictions,
encumbrances or any other matters of record that have been placed by any
developer, landlord or other third party on property over which the Company or
any Restricted Subsidiary of the Company has easement rights or on any real
property leased by the Company on the Issue Date and subordination or similar
agreements relating thereto and (ii) any condemnation or eminent domain
proceedings affecting any real property; (l) leases or subleases to third
parties; (m) Liens in connection with workmen's compensation obligations and
general liability exposure of the Company and its Restricted Subsidiaries; (n)
Liens securing Indebtedness Incurred under clauses (a) or (b)(v) of the covenant
described under "-- Certain Covenants--Limitation on Indebtedness" PROVIDED,
HOWEVER, that such Indebtedness is not subordinate or junior in ranking to the
Notes; and (o) Liens securing Indebtedness of any Subsidiary of the Company to
the Company.
"Person" means any individual, corporation, partnership, joint venture,
association, joint-stock company, trust, unincorporated organization, government
or any agency or political subdivision thereof or any other entity.
"Preferred Stock" as applied to the Capital Stock of any corporation means
Capital Stock of any class or classes (however designated) that is preferred as
to the payment of dividends, or as to the distribution of assets upon any
voluntary or involuntary liquidation or dissolution of such corporation, over
shares of Capital Stock of any other class of such corporation.
"principal" of a Note means the principal of the Note plus the premium, if
any, payable on the Note that is due or overdue or is to become due at the
relevant time.
"Public Equity Offering" means an underwritten primary public offering of
common stock (or other voting stock) of the Company or Holdings pursuant to an
effective registration statement (other than a registration statement on Form
S-4, S-8 or any successor or similar forms) under the Securities Act.
"Public Market" means any time after (x) a Public Equity Offering has been
consummated and (y) at least 15% of the total issued and outstanding common
stock of the Company or Holdings (as applicable) has been distributed by means
of an effective registration statement under the Securities Act.
"Refinancing Indebtedness" means Indebtedness that is Incurred to refund,
refinance, replace, renew, repay or extend (including pursuant to any defeasance
or discharge mechanism) (collectively, "refinances," and "refinanced" shall have
a correlative meaning) any Indebtedness existing on the date of the Indenture or
Incurred in compliance with the Indenture (including Indebtedness of the Company
that refinances
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Indebtedness of any Restricted Subsidiary (to the extent permitted in the
Indenture) and Indebtedness of any Restricted Subsidiary that refinances
Indebtedness of another Restricted Subsidiary) including Indebtedness that
refinances Refinancing Indebtedness; PROVIDED, HOWEVER, that (i) except in the
case of any refunding, refinancing, replacement, renewal, repayment or extension
of any Bank Indebtedness, the Refinancing Indebtedness has a Stated Maturity no
earlier than the Stated Maturity of the Indebtedness being refinanced, (ii)
except in the case of any refunding, refinancing, replacement, renewal,
repayment or extension of any Bank Indebtedness, the Refinancing Indebtedness
has an Average Life at the time such Refinancing Indebtedness is Incurred that
is equal to or greater than the Average Life of the Indebtedness being
refinanced and (iii) such Refinancing Indebtedness is Incurred in an aggregate
principal amount (or if issued with original issue discount, an aggregate issue
price) that is equal to or less than the sum of (A) the aggregate principal
amount (or if issued with original issue discount, the aggregate accreted value)
then outstanding of the Indebtedness being refinanced, (B) in the case of
revolving credit Indebtedness, the unused commitment thereunder, plus (C) fees,
underwriting discounts and other costs and expenses incurred in connection with
such Refinancing Indebtedness; PROVIDED FURTHER, HOWEVER, that Refinancing
Indebtedness shall not include (x) Indebtedness of a Restricted Subsidiary that
refinances Indebtedness of the Company or (y) Indebtedness of the Company or a
Restricted Subsidiary that refinances Indebtedness of an Unrestricted
Subsidiary.
"Related Business" means those businesses in which the Company or any of its
Subsidiaries are engaged on the date of the Indenture, or that are related
thereto.
"Representative" means the trustee, agent or representative (if any) for an
issue of Senior Indebtedness.
"Restricted Subsidiary" means any Subsidiary of the Company other than an
Unrestricted Subsidiary.
"Senior Credit Documents" means collectively, the Senior Credit Facility,
the notes issued pursuant thereto and the Guarantees thereof, and the Security
Agreements, the Mortgages and the Pledge Agreements (each as defined in the
Senior Credit Facility).
"Senior Credit Facility" means the credit agreement dated as of October 30,
1996, as amended, waived or otherwise modified from time to time, including
increases in the principal amount thereof, among the Company, the several
lenders party thereto and The Chase Manhattan Bank, a New York banking
corporation, as administrative agent (except to the extent that any such
amendment, waiver or other modification thereto would be prohibited by the terms
of the Indenture, unless otherwise agreed to by the Holders of at least a
majority in aggregate principal amount of Notes at the time outstanding).
"Senior Subordinated Indebtedness" means the Notes and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank PARI PASSU with the Notes or is not subordinated by its terms to any
Indebtedness or other obligation of the Company that is not Senior Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that would be a
"Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the Commission.
"Stated Maturity" means, with respect to any security, the date specified in
such security as the fixed dated on which the payment of principal of such
security is due and payable, including pursuant to any mandatory redemption
provision (but excluding any provision for the repurchase of such security at
the option of the holder thereof upon the happening of any contingency beyond
the control of the issuer unless such contingency has occurred).
"Subordinated Obligation" means any Indebtedness of the Company (whether
outstanding on the date of the Indenture or thereafter Incurred) that is
subordinate or junior in right of payment to the Notes pursuant to a written
agreement.
"Subsidiary" of any Person means any corporation, association, partnership
or other business entity of which more than 50% of the total voting power of
shares of Capital Stock or other interests (including
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partnership interests) entitled (without regard to the occurrence of any
contingency) to vote in the election of directors, managers or trustees thereof
is at the time owned or controlled, directly or indirectly, by (i) such Person
or (ii) one or more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any investment
in direct obligations of the United States of America or any agency or
instrumentality thereof or obligations Guaranteed by the United States of
America or any agency or instrumentality thereof; (ii) investments in time
deposit accounts, certificates of deposit and money market deposits maturing
within 180 days of the date of acquisition thereof, bankers' acceptances with
maturities of 180 days or less and overnight bank deposits, in each case with or
issued by a bank or trust company that is organized under the laws of the United
States of America, any state thereof or any foreign country recognized by the
United States of America having capital, surplus and undivided profits
aggregating in excess of $300.0 million (or the foreign currency equivalent
thereof); (iii) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (i) or (ii) above
entered into with a bank meeting the qualifications described in clause (ii)
above; and (iv) investments in commercial paper, maturing not more than six
months after the date of acquisition, issued by any Lender (as defined under the
Senior Credit Facility) or the parent corporation of any Lender, and commercial
paper with a rating at the time as of which any investment therein is made of
"P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Rating Services, a division of The
McGraw-Hill Companies, Inc.
"Trade Payables" means, with respect to any Person, any accounts payable or
any indebtedness or monetary obligation to trade creditors created, assumed or
Guaranteed by such Person arising in the ordinary course of business in
connection with the acquisition of goods or services.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that at
the time of determination shall be designated an Unrestricted Subsidiary by the
Board of Directors in the manner provided below and (ii) any Subsidiary of an
Unrestricted Subsidiary. The Board of Directors may designate any Subsidiary of
the Company (including any newly acquired or newly formed Subsidiary of the
Company) to be an Unrestricted Subsidiary if (a) such Subsidiary or any of its
Subsidiaries does not own any Capital Stock or Indebtedness of, or own or hold
any Lien on any property of, the Company or any other Subsidiary of the Company
that is not a Subsidiary of the Subsidiary to be so designated; and (b) either
(A) the Subsidiary to be so designated has total consolidated assets of $1,000
or less or (B) if such Subsidiary has consolidated assets greater than $1,000,
then such designation would be permitted under the provisions of the covenant
described under "--Certain Covenants--Limitations on Restricted Payments." The
Board of Directors may designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; PROVIDED, HOWEVER, that immediately after giving effect to such
designation (x) the Company could Incur $1.00 of additional Indebtedness under
paragraph (a) of the covenant described under "--Certain Covenants--Limitation
on Indebtedness" and (y) no Default shall have occurred and be continuing. Any
such designation by the Board of Directors shall be evidenced to the Trustee by
promptly filing with the Trustee a copy of the resolution of the Board of
Directors giving effect to such designation and an Officers' Certificate
certifying that such designation complied with the foregoing provisions.
"U.S. Government Obligations" means direct obligations (or certificates
representing an ownership interest in such obligations) of the United States of
America (including any agency or instrumentality thereof) for the payment of
which the full faith and credit of the United States of America is pledged and
which are not callable or redeemable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of such
corporation then outstanding and normally entitled to vote in the election of
directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company all
the Capital Stock of which (other than directors' qualifying shares) is owned by
the Company or another Wholly Owned Subsidiary.
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CERTAIN FEDERAL INCOME TAX CONSIDERATIONS
The following discussion of the material United States federal income tax
consequences of the Exchange Offer is for general information only. It is based
on the Internal Revenue Code of 1986, as amended to the date hereof (the
"Code"), existing and proposed Treasury regulations, and judicial and
administrative determinations, all of which are subject to change at any time,
possibly on a retroactive basis. The following relates only to Old Notes, and
New Notes received therefor, that are held as "capital assets" within the
meaning of Section 1221 of the Code by persons who are citizens or residents of
the United States. It does not discuss state, local, or foreign tax
consequences, nor does it discuss tax consequences to categories of holders that
are subject to special rules, such as foreign persons, tax-exempt organizations,
insurance companies, banks, and dealers in stocks and securities. Tax
consequences may vary depending on the particular status of an investor. No
rulings will be sought from the Internal Revenue Service ("IRS") with respect to
the federal income tax consequences of the Exchange Offer.
THIS SECTION DOES NOT PURPORT TO DEAL WITH ALL ASPECTS OF FEDERAL INCOME
TAXATION THAT MAY BE RELEVANT TO AN INVESTOR'S DECISION TO PURCHASE THE NOTES.
EACH INVESTOR SHOULD CONSULT WITH ITS OWN TAX ADVISOR CONCERNING THE APPLICATION
OF THE FEDERAL INCOME TAX LAWS AND OTHER TAX LAWS TO ITS PARTICULAR SITUATION
BEFORE DETERMINING WHETHER TO PURCHASE THE NOTES.
THE EXCHANGE OFFER
The exchange of Old Notes for New Notes pursuant to the Exchange Offer will
not constitute a material modification of the terms of the Notes and,
accordingly, such exchange will not constitute an exchange for federal income
tax purposes. Accordingly, such exchange will have no federal income tax
consequences to holders of Notes, either those who exchange or those who do not,
and each holder of Notes will continue to be required to include interest on the
Notes in its gross income in accordance with its method of accounting for
federal income tax purposes and the Company intends, to the extent required, to
take such position.
BACKUP WITHHOLDING
Under the Code, a holder of a Note may be subject, under certain
circumstances, to "backup withholding" at a 31% rate with respect to payments in
respect of interest thereon or the gross proceeds from the disposition thereof.
This withholding generally applies only if the holder (i) fails to furnish his
or her social security or other taxpayer identification number ("TIN") within a
reasonable time after request therefor, (ii) furnishes an incorrect TIN, (iii)
is notified by the IRS that he or she has failed to report properly payments of
interest and dividends and the IRS has notified the Company that he or she is
subject to backup withholding, or (iv) fails, under certain circumstances, to
provide a certified statement, signed under penalty of perjury, that the TIN
provided is his or her correct number and that he or she is not subject to
backup withholding. Any amount withheld from a payment to a holder under the
backup withholding rules is allowable as a credit against such holder's federal
income tax liability, provided that the required information is furnished to the
IRS. Corporations and certain other entities described in the Code and Treasury
regulations are exempt from such withholding if their exempt status is properly
established.
85
<PAGE>
PLAN OF DISTRIBUTION
Each broker-dealer that receives New 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 New 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 New Notes received in exchange for Old Notes where
such Old Notes were acquired as a result of market-making activities or other
trading activities. The Company has agreed that for a period of 90 days after
the Expiration Date, it will make this Prospectus, as amended or supplemented,
available to any broker-dealer for use in connection with any such resale. In
addition, until , 1997 (90 days after the date of this Prospectus),
all dealers effecting transactions in the New Notes may be required to deliver a
prospectus.
The Company will not receive any proceeds from any sale of New Notes by
broker-dealers. New 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 New Notes or a combination of such methods of
resale, at market prices prevailing at the time of resale, at prices related to
such prevailing market prices or at negotiated prices. Any such resale may be
made directly to purchasers or to or through brokers or dealers who may receive
compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such New Notes. Any broker-dealer
that resells New 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 New Notes may be deemed to be an "underwriter" within the meaning of the
Securities Act and any profit on any such resale of New 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.
For a period of 90 days after the Expiration Date, the Company will promptly
send additional copies of this Prospectus and any amendment or supplement to
this Prospectus to any broker-dealer that requests such documents in 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 Old
Notes), other than commissions or concessions of any brokers or dealers, and
will indemnify the holders of the Old Notes (including any broker-dealers)
against certain liabilities, including liabilities under the Securities Act.
LEGAL MATTERS
The validity of the Notes offered hereby will be passed upon for the Company
by Gibson, Dunn & Crutcher LLP, New York, New York.
EXPERTS
The consolidated financial statements of the Company as of December 30, 1995
and for the fiscal years ended December 31, 1994 and December 30, 1995 appearing
in this Prospectus have been so included in reliance on the report of Price
Waterhouse LLP, independent accountants, given on the authority of such firm as
experts in auditing and accounting.
The consolidated balance sheet as of December 28, 1996 and the consolidated
statements of operations, cash flows and changes in common stockholders' equity
for the periods December 31, 1995 through October 29, 1996 (predecessor) and
October 30, 1996 through December 28, 1996 (successor), included in this
Prospectus, have been included herein in reliance on the report, which includes
an explanatory paragraph regarding the October 30, 1996 change in controlling
ownership, of Coopers & Lybrand L.L.P., independent accountants, given on the
authority of that firm, as experts in accounting and auditing.
86
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
---------
<S> <C>
Report of Independent Accountants.......................................................................... F-2
Consolidated Balance Sheet at December 28, 1996............................................................ F-3
Consolidated Statement of Operations for the periods December 31, 1995 through October 29, 1996
(Predecessor) and October 30, 1996 through December 28, 1996 (Successor)................................. F-4
Consolidated Statement of Cash Flows for the periods December 31, 1995 through October 29, 1996
(Predecessor) and October 30, 1996 through December 28, 1996 (Successor)................................. F-5
Consolidated Statement of Changes in Common Stockholders' Equity for the periods December 31, 1995 through
October 29, 1996 (Predecessor) and October 30, 1996 through December 28, 1996 (Successor)................ F-6
Notes to Consolidated Financial Statements................................................................. F-7
Report of Independent Accountants.......................................................................... F-20
Consolidated Balance Sheet at December 30, 1995............................................................ F-21
Consolidated Statement of Income for the fiscal years ended
December 31, 1994 and December 30, 1995.................................................................. F-22
Consolidated Statement of Cash Flows for the fiscal years ended December 31, 1994 and December 30, 1995.... F-23
Consolidated Statement of Changes in Stockholders' Equity for the fiscal years ended December 31, 1994 and
December 30, 1995........................................................................................ F-24
Notes to Consolidated Financial Statements................................................................. F-25
</TABLE>
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholder of
The William Carter Company:
We have audited the accompanying consolidated balance sheet of The William
Carter Company and its subsidiaries (the "Company") as of December 28, 1996 and
the related consolidated statements of operations, cash flows and changes in
common stockholders' equity for the period from December 31, 1995 through
October 29, 1996 ("Predecessor," as defined in Note 1) and for the period from
October 30, 1996 through December 28, 1996 ("Successor," as defined in Note 1).
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 audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
As explained in Note 1 to the financial statements, controlling ownership of
the Predecessor was acquired by the Company's parent in a purchase transaction
as of October 30, 1996. The acquisition was accounted for as a purchase and,
accordingly, the purchase price was allocated to the assets and liabilities of
the Predecessor based upon their estimated fair value at October 30, 1996.
Accordingly, the financial statements of the Successor are not comparable to
those of the Predecessor.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of The William
Carter Company and its subsidiaries as of December 28, 1996, and the
consolidated results of their operations and their cash flows for the
Predecessor period from December 31, 1995 through October 29, 1996 and the
consolidated results of their operations and their cash flows for the Successor
period from October 30, 1996 through December 28, 1996 in conformity with
generally accepted accounting principles.
Coopers & Lybrand L.L.P.
Stamford, Connecticut
February 20, 1997
F-2
<PAGE>
THE WILLIAM CARTER COMPANY
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SUCCESSOR, AT DECEMBER
28, 1996
-------------------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents............................................................ $ 1,961
Accounts receivable, net of allowance for doubtful accounts of $2,691................ 19,259
Inventories.......................................................................... 76,540
Prepaid expenses and other current assets............................................ 6,378
Deferred income taxes................................................................ 14,502
--------
Total current assets............................................................. 118,640
Property, plant and equipment, net..................................................... 48,221
Tradename, net......................................................................... 99,583
Cost in excess of fair value of net assets acquired, net............................... 38,363
Deferred debt issuance costs, net...................................................... 8,618
Other assets........................................................................... 5,284
--------
$ 318,709
--------
--------
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Current maturities of long-term debt................................................. $ 900
Accounts payable..................................................................... 14,593
Other current liabilities............................................................ 32,355
--------
Total current liabilities........................................................ 47,848
Long-term debt......................................................................... 144,100
Deferred income taxes.................................................................. 40,861
Other long-term liabilities............................................................ 10,178
--------
Total liabilities................................................................ 242,987
Commitments and contingencies
Redeemable preferred stock, par value $.01 per share, $4,000 per share liqudation and
redemption value, 5,000 shares authorized, issued and outstanding.................... 18,234
Common stockholder's equity:
Common stock, par value $.01 per share, 1,000 shares authorized, issued and
outstanding........................................................................ --
Additional paid-in capital........................................................... 59,566
Accumulated deficit.................................................................. (2,078)
--------
Common stockholder's equity...................................................... 57,488
--------
Total liabilities and stockholder's equity..................................... $ 318,709
--------
--------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
F-3
<PAGE>
THE WILLIAM CARTER COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR FOR SUCCESSOR FOR
THE PERIOD FROM THE PERIOD FROM
DECEMBER 31, 1995 OCTOBER 30, 1996
THROUGH THROUGH
OCTOBER 29, 1996 DECEMBER 28, 1996
----------------- -----------------
<S> <C> <C>
Net sales.................................................................. $ 266,739 $ 51,496
Cost of goods sold......................................................... 170,027 31,708
----------------- -----------------
Gross profit............................................................... 96,712 19,788
Selling, general and administrative........................................ 79,296 16,672
Nonrecurring charge........................................................ 8,834 --
----------------- -----------------
Operating income........................................................... 8,582 3,116
Interest expense........................................................... 7,075 2,631
----------------- -----------------
Income before income taxes and extraordinary item.......................... 1,507 485
Provision for income taxes................................................. 1,885 212
----------------- -----------------
Income (loss) before extraordinary item.................................... (378) 273
Extraordinary item, net of income tax benefit of $1,270.................... -- 2,351
----------------- -----------------
Net loss................................................................... (378) (2,078)
Dividend requirements on preferred/redeemable preferred and accretion on
redeemable
preferred stock.......................................................... (1,132) (434)
----------------- -----------------
Net loss applicable to common stockholder.................................. $ (1,510) $ (2,512)
----------------- -----------------
----------------- -----------------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
F-4
<PAGE>
THE WILLIAM CARTER COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
FOR THE FOR THE
PERIOD FROM PERIOD FROM
DECEMBER 31, 1995 OCTOBER 30, 1996
THROUGH THROUGH
OCTOBER 29, 1996 DECEMBER 28, 1996
----------------- -----------------
<S> <C> <C>
Cash flows from operating activities:
Net loss................................................................. $ (378) $ (2,078)
Extraordinary loss, net of taxes......................................... -- 2351
Adjustments to reconcile net loss to net cash provided
by operating activities:
Depreciation and amortization........................................ 6,979 2,588
Deferred tax provision............................................... 2,381 212
Effect of changes in operating assets and liabilities:
Decrease (increase) in accounts receivable......................... (12,540) 7,975
Decrease (increase) in inventories................................. 8,392 (704)
Decrease (increase) in prepaid expenses and other assets........... 2,759 (4,432)
Increase in accounts payable and other liabilities................. 16,812 1,183
-------- -----------------
Net cash provided by operating activities.......................... 24,405 7,095
-------- -----------------
Cash flow from investing activities:
Capital expenditures..................................................... (4,007) (3,749)
Payment to Sellers for the Acquisition................................... -- (117,773)
Payments of Acquisition costs............................................ -- (21,705)
-------- -----------------
Net cash used in investing activities.............................. (4,007) (143,227)
-------- -----------------
Cash flows from financing activities:
Proceeds from Successor revolving line of credit......................... -- 6,100
Payments of Successor revolving line of credit........................... -- (6,100)
Proceeds from other Successor debt....................................... -- 240,000
Payments of other Successor debt......................................... -- (95,000)
Payments of Predecessor revolving line of credit......................... (19,000) --
Payments of other Predecessor debt....................................... (433) (68,062)
Payment of Predecessor accrued interest.................................. -- (1,059)
Payments of financing costs.............................................. (12,432)
Proceeds from issuance of Successor common stock......................... -- 60,000
Proceeds from issuance of Successor preferred stock...................... -- 20,000
Stock issuance costs of Successor preferred stock........................ -- (2,200)
Payment of Predecessor preferred stock dividends......................... -- (2,747)
Payment of Predecessor's guaranteed yield dividend on common stock....... -- (4,237)
-------- -----------------
Net cash (used in) provided by financing activities................ (19,433) 134,263
-------- -----------------
Net increase (decrease) in cash and cash equivalents....................... 965 (1,869)
Cash and cash equivalents at beginning of period........................... 2,865 3,830
-------- -----------------
Cash and cash equivalents at end of period................................. $ 3,830 $ 1,961
-------- -----------------
-------- -----------------
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements
F-5
<PAGE>
THE WILLIAM CARTER COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN COMMON STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
CLASS A CLASS B CLASS C ADDITIONAL
COMMON COMMON COMMON PAID- ACCUMULATED
COMMON STOCK STOCK STOCK STOCK IN CAPITAL DEFICIT
-------------- ----------- ----------- ----------- --------------- ------------
<S> <C> <C> <C> <C> <C> <C>
PREDECESSOR:
BALANCE AT DECEMBER 30, 1995............... $ -- $ -- $ -- $ 92,379 $ (97,057)
Net loss................................... (378)
Preferred stock dividend................... (2,747)
Common stock guaranteed-
yield dividend........................... (4,237)
----- ----- ----- ------- ------------
BALANCE AT OCTOBER 29, 1996................ $ -- $ -- $ -- $ 92,379 $ (104,419)
----- ----- ----- ------- ------------
----- ----- ----- ------- ------------
SUCCESSOR:
BALANCE AT OCTOBER 30, 1996................ $ -- $ -- $ --
Sale of Common Stock on October 30, 1996... 60,000
Accrued dividends and accretion on
redeemable preferred stock............... (434)
Net loss................................... (2,078)
------- ------- ------------
BALANCE AT DECEMBER 28, 1996............... $ -- $ 59,566 $ (2,078)
------- ------- ------------
------- ------- ------------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-6
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1--THE COMPANY
The William Carter Company, Inc. (the "Company") is a wholly-owned
subsidiary of Carter Holdings, Inc. ("Holdings"). On October 30, 1996, Holdings,
a company organized on behalf of affiliates of INVESTCORP S.A. ("Investcorp"),
management and certain other investors, acquired 100% of the previously
outstanding common and preferred stock of the Company from MBL Life Assurance
Corporation, CHC Charitable Irrevocable Trust and certain management
stockholders (collectively, the "Sellers"). Financing for the acquisition
totalled $226.1 million and was provided by (i) $56.1 million borrowings under a
$100.0 million senior credit facility; (ii) $90.0 million of borrowings under a
subordinated loan facility; (iii) $70.9 million of capital invested by
affiliates of Investcorp and certain other investors in Holdings, which included
a $20.0 million investment by Holdings in the Company's newly issued redeemable
preferred stock; and (iv) issuance of non-voting stock of Holdings valued at
$9.1 million to certain members of management.
In addition to purchasing or exchanging and retiring the previously issued
capital stock of the Company, the proceeds of the acquisition and financing were
used to make certain contractual payments to management ($11.3 million), pay for
costs of the transactions ($20.9 million), and to retire all outstanding
balances on the Company's previously outstanding long-term debt along with
accrued interest thereon ($69.1 million). In November 1996, the Company offered
and sold in a private placement $100 million of Senior Subordinated Notes, the
net proceeds of which were used to retire the $90 million of subordinated loan
facility borrowings and $5 million of borrowings under the Senior Credit
Facility. Holdings has no assets or investments other than the shares of stock
of The William Carter Company.
For purposes of identification and description, the Company is referred to
as the "Predecessor" for the period prior to the Acquisition, the "Successor"
for the period subsequent to the Acquisition and the "Company" for both periods.
The Acquisition was accounted for by the purchase method. Accordingly, the
assets and liabilities of the Predecessor were adjusted to reflect the
allocation of the purchase price based on estimated fair values. A summary of
the purchase price allocation is as follows ($000):
<TABLE>
<CAPTION>
Total financed purchase price..................................... $ 226,100
<S> <C>
Less, amounts applied to pay Predecessor expenses and dividends... (14,915)
---------
$ 211,185
---------
---------
Allocated to:
Cash and cash equivalents......................................... $ 3,830
Accounts receivable, net.......................................... 27,234
Inventories....................................................... 75,836
Prepaid expenses and other current assets......................... 4,696
Property, plant and equipment, net................................ 46,081
Tradename......................................................... 100,000
Cost in excess of fair value...................................... 38,522
Deferred debt issuance costs...................................... 8,283
Other assets...................................................... 1,303
Accounts payable.................................................. (13,393)
Other current liabilities......................................... (47,797)
Other long-term liabilities....................................... (9,590)
Net deferred tax liabilities...................................... (26,020)
Preferred stock issuance costs.................................... 2,200
---------
$ 211,185
---------
---------
</TABLE>
The allocation of the purchase price shown above is, in certain instances,
based on preliminary information and is therefore subject to revision when
additional information concerning asset and liability
F-7
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1--THE COMPANY (CONTINUED)
valuations is obtained. In the opinion of the Company's management, the final
asset and liability valuation for the Acquisition will not be materially
different than the above.
The nonrecurring charge in the Predecessor period December 31, 1995 through
October 29, 1996 reflects compensation-related charges of $5.3 million for
amounts paid to management in connection with the Acquisition and other expense
charges of $3.5 million for costs and fees that the Company incurred in
connection with the Acquisition.
The following unaudited pro forma statement of operations presents the
results of operations for the fiscal year ended December 28, 1996 as though the
controlling ownership of the Predecessor had been acquired on December 31, 1995,
with financing established through the private placement, and assumes that there
were no other changes in the operations of the Predecessor. The pro forma
results are not necessarily indicative of the financial results that might have
occurred had the transaction included in the pro forma statement actually taken
place on December 31, 1995, or of future results of operations ($000).
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
FOR THE FOR THE
PERIOD FROM PERIOD FROM PRO FORMA
DECEMBER 31, OCTOBER 30, FOR THE
1995 THROUGH 1996 THROUGH YEAR ENDED
OCTOBER 29, DECEMBER 28, PRO FORMA DECEMBER 28,
1996 1996 ADJUSTMENTS 1996
------------ ------------ ----------- ------------
<S> <C> <C> <C> <C>
Net Sales............................................ $ 266,739 $ 51,496 -- $ 318,235
Gross profit......................................... 96,712 19,788 (282)(a) 116,218
Selling, general and administrative.................. 79,296 16,672 3,668(b) 99,636
Nonrecurring charge.................................. 8,834 -- (8,834)(c) --
Operating income..................................... 8,582 3,116 4,884 16,582
Interest expense..................................... 7,075 2,631 7,172(d) 16,878
Income (loss) before income taxes and extraordinary
item............................................... 1,507 485 (2,288) (296)
Provision for income taxes........................... 1,885 212 (1,848)(e) 249
Income (loss) before extraordinary item.............. (378) 273 (440) (545)
Extraordinary item, net.............................. -- 2,351 (2,351)(f) --
Net income (loss).................................... $ (378) $ (2,078) $ 1,911 (545)
Dividend and accretion on redeemable preferred
stock.............................................. $ (434) $ (2,186)(g) (2,620)
Net loss applicable to common stockholder............ $ (3,165)
</TABLE>
Pro forma adjustments represent: (a) increase in depreciation expenses
relating to revaluation of property, plant and equipment; (b) amortization of
tradename and cost in excess of fair value of net assets acquired; decrease to
periodic expense for postretirement benefits; and management fee expense in
accordance with the terms of the Company's new management agreement with
Holdings; (c) elimination of nonrecurring charges directly related to the
transactions; (d) increases in interest expense resulting from the change in the
Company's debt structure; (e) income tax effects of pro forma adjustments; (f)
elimination of extraordinary charges directly related to the transactions; and
(g) dividend and accretion requirements on redeemable preferred stock.
F-8
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The Company is a United States based manufacturer and marketer of premier
branded childrenswear under the Carter's and Baby Dior labels. The Company
manufactures its products in plants located in the southern United States, Costa
Rica and the Dominican Republic. Products are manufactured for wholesale
distribution to major domestic retailers, and for the Company's 135 retail
outlet stores that market its brand name merchandise and certain products
manufactured by other companies. The retail operations represent approximately
40.6% of consolidated net sales.
PRINCIPLES OF CONSOLIDATION:
The consolidated financial statements include the accounts of the Company
and its wholly owned subsidiaries. These subsidiaries consist of facilities in
Costa Rica and the Dominican Republic and represent approximately 40% of the
Company's sewing production. All intercompany transactions and balances have
been eliminated in consolidation.
FISCAL YEAR:
The Company's fiscal year ends on the Saturday in December or January
nearest the last day of December. The accompanying consolidated financial
statements reflect the Company's financial position as of December 28, 1996 and
results of operations for the ten month period prior to the Acquisition,
December 31, 1995 through October 29, 1996 (the "Predecessor period") and the
two month period subsequent to the Acquisition, October 30, 1996 through
December 28, 1996 (the "Successor period"). Collectively, the fiscal 1996
Predecessor and Successor periods contain 52 weeks.
REVENUE RECOGNITION:
Revenues from the Company's wholesale operations are recognized upon
shipment; revenues from retail operations are recognized at point of sale.
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments that have original
maturities of three months or less to be cash equivalents. At December 28, 1996,
approximately $1.2 million of the Company's cash and cash equivalents were held
in three banks in excess of deposit insurance limits.
ACCOUNTS RECEIVABLE:
Approximately 75% of the Company's gross accounts receivable at December 28,
1996 were from its ten largest wholesale customers, primarily major department
store chains.
INVENTORIES:
Inventories are stated at the lower of cost (first-in, first-out basis for
wholesale inventories and retail method for retail inventories) or market.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. When fixed assets are sold
or otherwise disposed, the accounts are relieved of the original costs of the
assets and the related accumulated depreciation and
F-9
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
any resulting profit or loss is credited or charged to income. For financial
reporting purposes, depreciation is computed on the straight-line method over
the estimated useful lives of the assets as follows: buildings-- 15 to 50 years;
and machinery and equipment--3 to 10 years. Leasehold improvements are amortized
over the lesser of the asset life or related lease term.
TRADENAME:
The value of the Company's tradename is being amortized on a straight-line
basis over its estimated life of 40 years. Accumulated amortization at December
28, 1996 was $417,000.
COST IN EXCESS OF FAIR VALUE OF NET ASSETS ACQUIRED:
Cost in excess of fair value of net assets acquired ("goodwill") represents
the excess of the cost of the Acquisition over the fair value of the net assets
acquired. At each balance sheet date, management will assess whether there has
been a permanent impairment in the value of goodwill by comparing anticipated
undiscounted future cash flows from operating activities with the carrying value
of the goodwill. The amount of any resulting impairment will be calculated using
the present value of the same cash flows from operating activities. The factors
considered by management in this assessment will include operating results,
trends, and prospects, as well as the effects of demand, competition and other
economic factors.
Goodwill is amortized on a straight-line basis over its estimated life of 40
years. Accumulated amortization at December 28, 1996 was $159,000.
DEFERRED DEBT ISSUANCE COSTS:
Debt issuance costs are deferred and amortized to interest expense using the
effective interest method over the lives of the related debt. Amortization
approximated $367,000 and $174,000 for the Predecessor and Successor periods,
respectively. An extraordinary item for the Successor period reflects the
write-off of $3.4 million and $0.2 million of deferred debt issuance costs
related to the $90 million Subordinated Loan Facility and portion of the Senior
Credit Facility repaid with the proceeds of the $100 million Senior Subordinated
Notes in November 1996, net of income tax effects.
STOCK-BASED EMPLOYEE COMPENSATION ARRANGEMENTS:
The Company accounts for stock-based compensation in accordance with the
provisions of Accounting Principles Board Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations. Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation," which
the Company was required to adopt in fiscal 1996, has been adopted for
disclosure purposes only. See Note 10.
INCOME TAXES:
The Company accounts for income taxes under the provisions of Statement of
Financial Accounting Standards No. 109, "Accounting for Income Taxes" ("SFAS
109"). In accordance with SFAS 109, the deferred tax provision is determined
under the liability method. Deferred tax assets and liabilities are recognized
based on differences between the book and tax bases of assets and liabilities
using presently enacted tax rates. Valuation allowances are established when it
is more likely than not that a deferred tax asset will not be recovered. The
provision for income taxes is the sum of the amount of income taxes paid
F-10
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2--NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
or payable for the year as determined by applying the provisions of enacted tax
laws to the taxable income for that year; the net change during the year in the
Company's deferred tax assets and liabilities; and the net change during the
year in any valuation allowances.
SUPPLEMENTAL CASH FLOWS INFORMATION:
Interest paid in cash approximated $6,708,000 and $2,463,000 for the
Predecessor and Successor periods, respectively. Income taxes paid (received) in
cash approximated $903,000 and $(771,000) for the Predecessor and Successor
periods, respectively.
USE OF ESTIMATES IN THE PREPARATION OF THE CONSOLIDATED FINANCIAL
STATEMENTS:
The preparation of these consolidated financial statements in conformity
with generally accepted accounting principles requires management of the Company
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities, at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
NOTE 3--INVENTORIES:
Inventories at December 28, 1996 consisted of the following ($000):
<TABLE>
<S> <C>
Finished goods.................................................. $ 51,700
Work in process................................................. 15,884
Raw materials and supplies...................................... 8,956
-----------
$ 76,540
-----------
-----------
</TABLE>
NOTE 4--FIXED ASSETS:
Fixed assets at December 28, 1996 consisted of the following ($000):
<TABLE>
<S> <C>
Land, buildings and improvements................................ $ 12,679
Machinery and equipment......................................... 37,155
-----------
49,834
Accumulated depreciation and amortization....................... (1,613)
-----------
$ 48,221
-----------
-----------
</TABLE>
Depreciation expense ($000) was $6,612 and $1,613 for the Predecessor and
Successor periods, respectively.
NOTE 5--LONG-TERM DEBT:
Long-term debt at December 28, 1996 consisted of the following ($000):
<TABLE>
<S> <C>
Senior Credit Facility term loan.................................. $ 45,000
Senior Credit Facility revolving credit........................... --
10 3/8% Senior Subordinated Notes due 2006........................ 100,000
---------
145,000
Current maturities................................................ (900)
---------
$ 144,100
---------
---------
</TABLE>
F-11
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--LONG-TERM DEBT: (CONTINUED)
The Senior Credit Facility provides for a $50.0 million Tranche B term loan
facility. The Tranche B term loans have a final scheduled maturity date of
October 31, 2003. The principal amounts of the Tranche B term loans are required
to be repaid in 14 consecutive semi-annual installments totaling $0.9 million in
each of fiscal years 1997 through 2000, $5.4 million in fiscal year 2001, $13.5
million in fiscal year 2002 and $22.5 million in fiscal year 2003. In November
1996, proceeds of the 10 3/8% Senior Subordinated Notes were used to repay $5.0
million of the term loan. The repayment schedule has been adjusted ratably for
this payment.
The Senior Credit Facility also provides for a $50.0 million revolving
credit facility. The revolving credit facility will expire on the earlier of (a)
October 31, 2001 and (b) such other date as the revolving credit commitments
thereunder shall terminate in accordance with the terms of the Senior Credit
Facility. The facility has a sublimit of $5.0 million for letters of credit of
which $4.2 million were used for letters of credit as of December 28, 1996. A
commitment fee of 1/2 of 1% per annum is charged on the unused portion of the
revolving credit facility.
Borrowings under the Senior Credit Facility accrue interest at either the
Alternate Base Rate (the "Alternate Base Rate") or an adjusted Eurodollar Rate
(the "Eurodollar Rate"), at the option of the Company, plus the applicable
interest margin. The Alternate Base Rate at any time is determined to be the
highest of (i) the Federal Effective Funds Rate plus 1/2 of 1% per annum, (ii)
the Base CD Rate plus 1% per annum and (iii) The Chase Manhattan Bank's Prime
Rate. The applicable interest margin with respect to loans made under the
revolving credit facility is 2.50% per annum with respect to loans that accrue
interest at the Eurodollar Rate and 1.50% per annum for loans that accrue
interest at the Alternate Base Rate. The applicable interest margin with respect
to Tranche B term loans is 3.00% per annum for loans that accrue interest at the
Eurodollar Rate and 2.00% per annum for loans that accrue interest at the
Alternate Base Rate. The effective interest rate on borrowings outstanding at
December 28, 1996 was 9.8%.
The Senior Facility requires that upon a public offering by the Company,
Holdings or any subsidiary of the Company of its common or other voting stock,
50% of the net proceeds from such offering (only after the redemption or
repurchase or cancellation of the Redeemable Preferred Stock and the redemption
of up to 35% of the Notes) is required to be applied toward the prepayment of
indebtedness under the Senior Credit Facility. Upon the incurrence of any
additional indebtedness (other than indebtedness permitted under the Senior
Credit Facility), or upon the receipt of proceeds from certain asset sales and
exchanges, 100% of the net proceeds from such incurrence, sale or exchange is
required to be so applied. In addition, the Senior Credit Facility requires that
either 75% or 50% (depending on certain circumstances) of Excess Cash Flow (as
defined in the Senior Credit Facility) is required to be applied toward the
prepayment of indebtedness under the Senior Credit Facility. Such prepayments
are required to be applied first to the prepayment of the term loans and,
second, to reduce permanently the revolving credit commitments. Subject to
certain conditions, the Company may, from time to time, make optional
prepayments of loans without premium or penalty.
F-12
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5--LONG-TERM DEBT: (CONTINUED)
The loans are collateralized by a first priority interest in substantially
all the personal property and certain real property of the Company and a pledge
of all the issued and outstanding stock of the Company and its domestic
subsidiary, as well as 65% of the issued and outstanding stock of the Company's
foreign subsidiaries.
The Senior Credit Facility imposes certain covenants, requirements, and
restrictions on actions by the Company and its subsidiaries that, among other
things, restrict: (i) the incurrence and existence of indebtedness; (ii)
consolidations, mergers and sales of assets; (iii) the incurrence and existence
of liens or other encumbrances; (iv) the incurrence and existence of contingent
obligations; (v) the payment of dividends and repurchases of common stock; (vi)
prepayments and amendments of certain subordinated debt instruments and equity;
(vii) investments, loans and advances; (viii) capital expenditures; (ix) changes
in fiscal year; (x) certain transactions with affiliates; and (xi) changes in
lines of business. In addition, the Senior Credit Facility requires that the
Company comply with specified financial ratios and tests, including minimum cash
flow, a maximum ratio of indebtedness to cash flow and a minimum interest
coverage ratio.
The 10 3/8% Senior Subordinated Notes were issued in November 1996. The
proceeds from the Notes were used to repay $90.0 million of Acquisition-related
financing and $5.0 million of the Senior Credit Facility term loan. The Notes
are uncollateralized.
Interest will be paid semi-annually on June 1 and December 1 of each year,
commencing on June 1, 1997. The Notes will be redeemable, in whole or in part,
at the option of the Company on or after December 1, 2001 at the following
redemption prices, plus accrued interest to the date of redemption:
<TABLE>
<CAPTION>
YEAR REDEMPTION PRICE
- ---------------------------------------------------------------------------- ----------------
<S> <C>
2001........................................................................ 105.188%
2002........................................................................ 103.458%
2003........................................................................ 101.729%
2004 and thereafter......................................................... 100.000%
</TABLE>
The Notes contain provisions and covenants, including limitations on other
indebtedness, restricted payments and distributions, sales of assets and
subsidiary stock, liens, and certain other transactions.
Aggregate minimum scheduled maturities of long-term debt during each of the
next five fiscal years are as follows ($000): fiscal year ended December 28,
1997--$900; 1998--$900; 1999--$900; 2000--$900; and 2001--$5,400.
NOTE 6--REDEEMABLE PREFERRED STOCK
On October 30, 1996, the Company authorized and issued 5,000 shares of
preferred stock, par value $.01 per share. At December 28, 1996, there were
5,000 shares of Preferred Stock outstanding, all of which were held by Holdings.
Dividends on the Preferred Stock accrue at a rate of 12% per annum.
Dividends are cumulative and are payable when and as declared by the Board of
Directors of the Company, out of assets legally available therefor, on May 1 and
November 1 of each year, commencing on May 1, 1997. To the extent that dividends
are accrued, but have not been declared and paid, such undeclared and unpaid
dividends will
F-13
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6--REDEEMABLE PREFERRED STOCK (CONTINUED)
accrue additional dividends from the date upon which such dividends accrued
until the date upon which they are paid at the rate of 14% per annum.
The shares of Preferred Stock are redeemable at the option of the Company at
a redemption price of $4,000 per share plus accrued and unpaid dividends thereon
to the date fixed for redemption. If permitted under the Senior Credit Facility
and the Indenture, the shares of Preferred Stock may be redeemed in whole, or in
not more than two partial redemptions, provided that in the first of such two
partial redemptions not less than 50% of the number of shares of Preferred Stock
then outstanding shall be redeemed, and that in the second of such two partial
redemptions all of the shares of Preferred Stock then outstanding shall be
redeemed. On December 15, 2007, the Company is required to redeem all
outstanding shares of Preferred Stock at a redemption price of $4,000 per share
plus accrued and unpaid dividends. All outstanding shares of Preferred Stock are
pledged to collateralize the Company's obligations under the Senior Credit
Facility.
The shares of Preferred Stock have no voting rights, other than as provided
by Massachusetts law.
In the event of liquidation, the holders of the Preferred Stock are entitled
to receive out of the assets of the Company available for distribution to
shareholders, on a priority basis, the amount of $4,000 per share, plus a sum
equal to all dividends on such shares accrued and unpaid.
The Preferred Stock was issued for $20,000,000 and was recorded net of
issuance costs of $2,200,000. The carrying amount is increased by periodic
accretion, using the interest method with charges to retained earnings or
paid-in capital, so that the carrying amount will equal the mandatory redemption
amount, including accrued but undeclared or unpaid dividends, at the mandatory
redemption date.
NOTE 7--COMMON STOCK
At December 28, 1996, the authorized common stock of the Company consists of
1,000 shares of common stock, par value $.01 per share. At December 28, 1996,
there were 1,000 shares of Common Stock issued and outstanding, all of which are
held of record by Holdings. All outstanding shares of Common Stock are pledged
to collateralize the Company's obligations under the Senior Credit Facility.
Pursuant to the restrictions contained in the Senior Credit Facility and the
Indenture, the Company is not expected to be able to pay dividends on its Common
Stock for the foreseeable future, other than certain limited dividends or
winding up of the Company. Each share of Common Stock entitles the holder
thereof to one vote on all matters to be voted on by shareholders of the
Company. In the event of a liquidation, the holders of the Common Stock are
entitled to share in the remaining assets of the Company after payment of all
liabilities and after satisfaction of all liquidation preferences payable to the
holders of Preferred Stock.
NOTE 8--PREDECESSOR CAPITAL STOCK:
At December 30, 1995 and until October 30, 1996, the Company had outstanding
50,000 shares of Series A preferred stock, $.01 par value per share, carried at
$50 million; 10,000 shares of Class A Common, $.01 par value per share; 10,000
shares of Class B Common, $.01 par value per share; 2,785 shares of Class C
Common; and $92.4 million of additional paid-in-capital. In conjunction with the
Acquisition, cumulative dividends totalling $2.8 million on the Series A
preferred, and $4.2 million guaranteed-yield dividends on the common were
required to be paid to the respective stockholders, and all shares were acquired
and retired.
F-14
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--EMPLOYEE BENEFIT PLANS:
The Company offers a comprehensive plan to current and certain future
retirees and their spouses until they become eligible for Medicare and a
Medicare Supplement plan. The Company also offers life insurance to current and
certain future retirees. Employee contributions are required as a condition of
participation for both medical benefits and life insurance, and the Company's
liabilities are net of these employee contributions.
The following table sets forth the components of the accumulated
postretirement benefit obligation (APBO) at December 28, 1996 ($000):
<TABLE>
<S> <C>
Retirees............................................................ $ 5,527
Actives ineligible to retire........................................ 2,552
Actives eligible to retire.......................................... 406
---------
Total APBO.......................................................... $ 8,485
---------
---------
</TABLE>
The funded status of the plan is reconciled to the accrued postretirement
benefit liability recognized in the accompanying consolidated balance sheet at
December 28, 1996 as follows ($000):
<TABLE>
<S> <C>
Total APBO.......................................................... $ 8,485
Plan assets at fair value........................................... --
Unrecognized net loss............................................... 56
---------
Accrued postretirement benefit liability............................ $ 8,541
---------
---------
</TABLE>
Net periodic postretirement benefit cost (NPPBC) charged to operations for
the predecessor period from December 31, 1995 through October 29, 1996 and
successor period from October 30, 1996 through December 28, 1996 included the
following components ($000):
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
PERIOD FROM PERIOD FROM
DECEMBER 31, 1995 OCTOBER 30, 1996
THROUGH THROUGH
OCTOBER 29, 1996 DECEMBER 28, 1996
------------------- -------------------
<S> <C> <C>
Service cost........................................... $ 100 $ 21
Interest cost.......................................... 482 95
Amortization of transition obligation.................. 318 --
Amortization of net loss............................... 45 --
----- -----
Total NPPBC............................................ $ 945 $ 116
----- -----
----- -----
</TABLE>
The discount rate used in determining the APBO was 7.0% as of December 28,
1996. In conjunction with purchase accounting for the Acquisition, the Company
was required to record a liability on its balance sheet for the accumulated
postretirement benefit obligation at the Acquisition date. Accordingly, net
periodic postretirement benefit cost for the Successor is not comparable to that
for the Predecessor. The effects on the Company's plan of all future increases
in health care cost are borne by employees; accordingly, increasing medical
costs are not expected to have any material effect on the Company's future
financial results.
F-15
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9--EMPLOYEE BENEFIT PLANS: (CONTINUED)
The Company has an obligation under a defined benefit plan covering certain
former officers. At December 28, 1996, the present value of the estimated
remaining payments under this plan was approximately $1.8 million and is
included in other long-term liabilities.
Prior to the Acquisition, the Company also maintained a Management Equity
Participation Plan ("MEPP") and a Long Term Incentive Plan ("LTIP") for
executive and other key salaried employees. These plans were terminated in
conjunction with the Acquisition. Expense related to these two plans for the
Predecessor period totalled $4.9 million, including $3.3 million triggered as a
result of the Acquisition.
NOTE 10--MANAGEMENT STOCK INCENTIVE PLAN:
Upon consummation of the Acquisition, Holdings adopted a Management Stock
Incentive Plan in order to provide incentives to employees and directors of
Holdings and the Company by granting them awards tied to Class C stock of
Holdings. In October 1996, Holdings granted options to purchase up to 75,268
shares of its Class C stock to certain employees of the Company, all of which
remain outstanding as of December 28, 1996. The exercise price of each such
option is $60.00 per share, which is the same price per share paid by existing
holders of Holdings' Class C stock, and which is deemed to be the fair market
value of the Company's common stock at the time the options were granted.
Accordingly, no compensation expense has been recognized on these options in the
statement of operations for the Successor period. The options granted vest
ratably over the next five years and contingent upon the Company meeting
specific earnings targets, with weighted average remaining contractual lives of
approximately ten years at December 28, 1996. No options were exercisable as of
December 28, 1996.
The fair value of each granted option, at the date of grant, has been
estimated to be $29.50. This was estimated using a minimum value method, at a
risk free interest rate assumption of 7.0%, expected life of ten years, and no
expected dividends.
If the fair value based method required by Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation," had been applied,
there would have been no compensation cost associated with these option grants
for the Successor period and the Company's net income for the Successor period
would have been unchanged.
NOTE 11--INCOME TAXES:
The provision for income taxes consisted of the following ($000):
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
PERIOD FROM PERIOD FROM
DECEMBER 31, 1995 OCTOBER 30, 1996
THROUGH THROUGH
OCTOBER 29, 1996 DECEMBER 28, 1996
----------------- -------------------
<S> <C> <C>
Current tax provision (benefit):
Federal.............................................. $ (484) $ --
State................................................ (12) --
------ -----
Total current provision (benefit)................ (496) --
------ -----
Deferred tax provision:
Federal.............................................. 2,121 188
State................................................ 260 24
------ -----
Total deferred provision......................... 2,381 212
------ -----
Total provision.................................. $ 1,885 $ 212
------ -----
------ -----
</TABLE>
F-16
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11--INCOME TAXES: (CONTINUED)
Components of net deferred tax assets and liabilities are as follows, at
December 28, 1996 ($000):
<TABLE>
<S> <C>
Deferred tax assets:
Accounts receivable allowance............................. $ 1,279
Inventory valuation....................................... 7,740
Liability accruals........................................ 6,659
Deferred employee benefits................................ 3,820
Loss and tax credit carryforwards......................... 1,149
Other..................................................... 808
-------
Total deferred tax assets............................. $ 21,455
-------
Deferred tax liabilities
Tradename................................................. $ 36,846
Depreciation.............................................. 8,788
Deferred employee benefits................................ 1,733
Other..................................................... 447
-------
Total deferred tax liabilities........................ $ 47,814
-------
-------
</TABLE>
The difference between the Company's effective income tax rate and the
federal statutory tax rate is reconciled below:
<TABLE>
<CAPTION>
PREDECESSOR SUCCESSOR
PERIOD FROM PERIOD FROM
DECEMBER 31, 1995 OCTOBER 30, 1996
THROUGH THROUGH
OCTOBER 29, 1996 DECEMBER 28, 1996
--------------------- ---------------------
<S> <C> <C>
Statutory federal income tax rate.......................................... 34% 34%
State income taxes, net of federal income tax benefit...................... 11 3
Non-deductible Acquisition costs........................................... 77 --
Goodwill amortization...................................................... -- 11
Non-taxable foreign income................................................. (3) (2)
Other...................................................................... 6 (2)
--- ---
Total...................................................................... 125% 44%
--- ---
--- ---
</TABLE>
F-17
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12--LEASE COMMITMENTS:
Annual rent expense under operating leases was $10,902 and $2,148 in the
Predecessor and Successor periods, respectively. Minimum annual rental
commitments under current noncancelable operating leases as of December 28, 1996
were as follows ($000):
<TABLE>
<CAPTION>
BUILDINGS,
PRIMARILY TOTAL
RETAIL TRANSPORTATION DATA PROCESSING NONCANCELABLE
YEAR STORES EQUIPMENT EQUIPMENT LEASES
- ---------------------------------------------------- ----------- --------------- ----------------- -------------
<S> <C> <C> <C> <C>
1997................................................ $ 10,905 $ 544 $ 180 $ 11,629
1998................................................ 8,254 262 180 8,696
1999................................................ 6,359 157 -- 6,516
2000................................................ 4,125 96 -- 4,221
2001................................................ 2,193 40 -- 2,233
Thereafter.......................................... 2,445 -- -- 2,445
----------- ------ ----- -------------
Total............................................... $ 34,281 $ 1,099 $ 360 $ 35,740
----------- ------ ----- -------------
----------- ------ ----- -------------
</TABLE>
NOTE 13--OTHER CURRENT LIABILITIES:
Other current liabilities as of December 28, 1996 consisted of the following
($000):
<TABLE>
<S> <C>
Accrued liability for retail store closures................. $ 6,000
Accrued liability for plant closures........................ 3,000
Accrued income taxes........................................ 4,477
Accrued workers compensation................................ 3,000
Accrued incentive compensation.............................. 2,400
Other current liabilities................................... 13,478
-------
$ 32,355
-------
-------
</TABLE>
NOTE 14--VALUATION AND QUALIFYING ACCOUNTS:
Information regarding valuation and qualifying accounts for the Predecessor
and Successor periods are as follows ($000):
<TABLE>
<CAPTION>
ALLOWANCE FOR
DOUBTFUL ACCOUNTS
-----------------
<S> <C>
Predecessor:
Balance, December 30, 1995..................................................................... $ 2,888
Additions, charged to expense................................................................ 408
Writeoffs.................................................................................... (772)
------
Balance, October 29, 1996...................................................................... $ 2,524
------
------
Successor:
Balance, October 30, 1996...................................................................... $ 2,524
Additions, charged to expense................................................................ 156
Recoveries................................................................................... 11
------
Balance, December 28, 1996..................................................................... $ 2,691
------
------
</TABLE>
F-18
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15--RELATED PARTY TRANSACTIONS:
In connection with the Acquisition, Invifin SA ("Invifin"), an affiliate of
Investcorp, received a fee of $2.2 million. Also in connection with the
Acquisition, the Company paid Investcorp International, Inc. ("International")
advisory fees aggregating $2.25 million. Holdings also paid $1.5 million to
Invifin in fees in connection with providing a standby commitment to fund the
Acquisition. In connection with the closing of the Acquisition, the Company
entered into an agreement for management advisory and consulting services (the
"Management Agreement") with International pursuant to which the Company agreed
to pay International $1.35 million per annum for a five-year term. At the
closing of the Acquisition, the Company prepaid International $4.05 million for
the first three years of the term of the Management Agreement in accordance with
its terms.
In October 1996, the Company made a $1.5 million loan to an officer of the
Company. The loan has a term of five years, is collateralized by the officer's
stock of Holdings and bears interest at 6.49%, compounded semi-annually. The
loan is prepayable with the proceeds of any disposition of his stock in
Holdings.
NOTE 16--DISCLOSURES ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS:
At December 28, 1996, the carrying value of the Company's debt is deemed to
approximate its fair value, since the terms of such debt, including interest
rates, are variable with market rates and/or were recently negotiated.
NOTE 17--SUBSEQUENT EVENT:
In February 1997, the Company is filing a registration statement on Form S-4
with the Securities and Exchange Commission related to an Exchange Offer for
$100,000,000 of 10 3/8% Series A Senior Subordinated Notes for a like amount of
the 10 3/8% Senior Subordinated Notes issued in the November 1996 private
placement.
F-19
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
The William Carter Company
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, of cash flows and of changes in stockholders'
equity present fairly, in all material respects, the financial position of The
William Carter Company and its subsidiaries at December 30, 1995 and the results
of their operations and their cash flows for the fiscal years ended December 31,
1994 and December 30, 1995 in conformity with generally accepted accounting
principles. 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 of these statements in
accordance with generally accepted auditing standards which 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, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.
Price Waterhouse LLP
February 16, 1996
F-20
<PAGE>
THE WILLIAM CARTER COMPANY
CONSOLIDATED BALANCE SHEET
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
DECEMBER 30,
1995
------------
<S> <C>
ASSETS
Current assets:
Cash and cash equivalents......................................................................... $ 2,865
Accounts receivable, net of allowances for doubtful accounts of $2,888............................ 14,694
Inventories....................................................................................... 94,428
Prepaid expenses and other current assets......................................................... 6,206
------------
Total current assets.......................................................................... 118,193
Property, plant and equipment, net.................................................................. 46,785
Other assets........................................................................................ 2,238
------------
$ 167,216
------------
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current maturities of long-term debt.............................................................. $ 5,143
Accounts payable.................................................................................. 10,947
Other current liabilities......................................................................... 17,510
------------
Total current liabilities..................................................................... 33,600
Long-term debt...................................................................................... 82,352
Other long-term liabilities......................................................................... 5,942
------------
Total liabilities............................................................................. 121,894
Stockholders' equity:
Preferred stock, Series A, par value $.01 per share, 50,000 shares authorized and outstanding..... 50,000
Common stock, Class A, 100,000 shares authorized, 10,000 shares issued and outstanding, par value
$.01 per share.................................................................................. --
Common stock, Class B, 100,000 shares authorized, 10,000 shares issued and outstanding, par value
$.01 per share.................................................................................. --
Common stock, Class C, 100,000 shares authorized, 2,785 issued and outstanding.................... --
Capital in excess of par value.................................................................... 92,379
Accumulated deficit............................................................................... (97,057)
------------
Total stockholders' equity.................................................................... 45,322
------------
$ 167,216
------------
------------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
F-21
<PAGE>
THE WILLIAM CARTER COMPANY
CONSOLIDATED STATEMENT OF INCOME
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
--------------------------
DECEMBER 31, DECEMBER 30,
1994 1995
------------ ------------
<S> <C> <C>
Net sales............................................................................ $ 271,549 $ 295,431
Cost of goods sold................................................................... 175,244 191,105
------------ ------------
Gross profit......................................................................... 96,305 104,326
Selling, general and administrative.................................................. 77,472 83,223
------------ ------------
Operating income..................................................................... 18,833 21,103
Interest expense..................................................................... 6,445 7,849
------------ ------------
Income before income taxes........................................................... 12,388 13,254
Provision for income taxes........................................................... 4,000 5,179
------------ ------------
Net income........................................................................... $ 8,388 $ 8,075
------------ ------------
------------ ------------
</TABLE>
The accompanying notes are an integral part of the
consolidated financial statements
F-22
<PAGE>
THE WILLIAM CARTER COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
---------------------------
<S> <C> <C>
DECEMBER 31, DECEMBER 30,
1994 1995
------------- ------------
Cash flows from operating activities:
Net income......................................................................... $ 8,388 $ 8,075
Adjustments to reconcile net income to net cash provided
by operating activities:
Depreciation and amortization.................................................. 6,915 7,737
Deferred income tax benefit.................................................... (1,407) (465)
(Gain) loss on disposal of assets.............................................. 189 (40)
Compensation charge on stock issued to employees............................... -- 276
Changes in assets and liabilities:
(Increase) decrease in assets:
Accounts receivable............................................................ 744 (3,878)
Inventories.................................................................... (5,459) (28,099)
Prepaid expenses and other current assets...................................... 382 1,641
Increase in liabilities:
Accounts payable............................................................... 1,914 3,981
Other current liabilities...................................................... 1,131 3,431
Other long-term liabilities.................................................... 1,846 1,825
------------- ------------
Net cash provided by (used in) operating activities........................ 14,643 (5,516)
------------- ------------
Cash flows from investing activities:
Proceeds from sale of assets....................................................... 70 346
Capital expenditures............................................................... (10,996) (13,715)
------------- ------------
Net cash used in investing activities...................................... (10,926) (13,369)
------------- ------------
Cash flows from financing activities:
Borrowings under revolving credit facility......................................... -- 19,000
Payments under term loan and subordinated note agreements.......................... (1,243) (2,732)
Payments of industrial revenue bond................................................ (503) (433)
Preferred stock dividend........................................................... -- (1,678)
------------- ------------
Net cash (used in) provided by financing activities........................ (1,746) 14,157
------------- ------------
Net increase (decrease) in cash and cash equivalents................................. 1,971 (4,728)
Cash and cash equivalents at beginning of period..................................... 5,622 7,593
------------- ------------
Cash and cash equivalents at end of period........................................... $ 7,593 $ 2,865
------------- ------------
------------- ------------
</TABLE>
The accompanying notes are an integral part of
the consolidated financial statements
F-23
<PAGE>
THE WILLIAM CARTER COMPANY
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
SERIES A CLASS A CLASS B CLASS C CAPITAL IN
PREFERRED COMMON COMMON COMMON EXCESS ACCUMULATED
STOCK STOCK STOCK STOCK OF PAR VALUE DEFICIT TOTAL
--------- ----------- ----------- ----------- --------------- ------------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCE AT JANUARY 1, 1994.............. $ 50,000 -- -- -- $ 92,103 $ (111,842) $ 30,261
Net income.............................. -- -- -- -- -- 8,388 8,388
--------- ----- ----- ----- ------- ------------ ---------
BALANCE AT DECEMBER 31, 1994............ 50,000 -- -- -- 92,103 (103,454) 38,649
Preferred stock dividend................ -- -- -- -- -- (1,678) (1,678)
Issuance of Class C common stock to
employees............................. -- -- -- -- 276 -- 276
Net income.............................. -- -- -- -- -- 8,075 8,075
--------- ----- ----- ----- ------- ------------ ---------
BALANCE AT DECEMBER 30, 1995............ $ 50,000 $ -- $ -- $ -- $92,379 $ (97,057) $45,322
--------- ----- ----- ----- ------- ------------ ---------
--------- ----- ----- ----- ------- ------------ ---------
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements
F-24
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS)
NOTE 1--NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
The William Carter Company (the "Company") is a United States based
manufacturer and marketer of premier branded childrenswear under the Carter's
and Baby Dior labels. The Company manufactures its products in plants located in
the southern United States, Costa Rica and the Dominican Republic.
Products are manufactured for wholesale distribution to major domestic
retailers, and for the Company's more than 120 retail outlet stores that market
its brand name merchandise and certain products manufactured by other companies.
Approximately 56.5% of the Company's 1995 net sales were wholesale and 43.5%
were retail.
PRINCIPLES OF CONSOLIDATION:
Effective January 1, 1995, Carter Holdings Corp., the former parent company,
was merged into the Company. The consolidated financial statements include the
accounts of the Company and its wholly owned subsidiaries. All intercompany
transactions and balances have been eliminated in consolidation.
FISCAL YEAR:
The Company's fiscal year ends on the Saturday in December or January
nearest the last day of December. The fiscal years ended December 31, 1994 and
December 30, 1995 each contain 52 weeks.
REVENUE RECOGNITION:
Revenues from the Company's wholesale operations are recognized upon
shipment; revenues from retail operations are recognized at point of sale.
CASH AND CASH EQUIVALENTS:
The Company considers all highly liquid investments that have original
maturities of three months or less to be cash equivalents.
INVENTORIES:
Inventories are stated at the lower of cost (first-in, first-out basis for
wholesale inventories and retail method for retail inventories) or market.
PROPERTY, PLANT AND EQUIPMENT:
Property, plant and equipment are stated at cost. When fixed assets are sold
or otherwise disposed, the accounts are relieved of the original costs of the
assets and the related accumulated depreciation and any resulting profit or loss
is credited or charged to income. For financial reporting purposes, depreciation
is computed on the straight-line method over the estimated useful lives of the
assets as follows: buildings-- 15 to 50 years; and machinery and equipment--4 to
10 years. Leasehold improvements are amortized over the lesser of the asset life
or related lease term.
DEBT ISSUE COSTS:
Debt issue costs are deferred and amortized over a five year period ending
in fiscal year 1996. Amortization approximated $400 in fiscal 1994 and 1995.
F-25
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 1--NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
(CONTINUED)
INCOME TAXES:
The Company accounts for income taxes under the provisions of FASB Statement
No. 109, "Accounting for Income Taxes" (FAS 109). In accordance with FAS 109,
the deferred tax provision is determined under the liability method. Deferred
tax assets and liabilities are recognized based on differences between the book
and tax bases of assets and liabilities using presently enacted tax rates. The
provision for income taxes is the sum of the amount of income taxes paid or
payable for the year as determined by applying the provisions of enacted tax
laws to the taxable income for that year and the net change during the year in
the Company's deferred tax assets and liabilities.
SUPPLEMENTAL CASH FLOWS INFORMATION:
Interest paid in cash approximated $5,840 and $7,323 for the fiscal years
ended December 31, 1994 and December 30, 1995, respectively. Income taxes paid
in cash approximated $5,342 and $4,212 in fiscal 1994 and 1995 respectively.
USE OF ESTIMATES IN THE PREPARATION OF THE CONSOLIDATED FINANCIAL
STATEMENTS:
The preparation of these consolidated financial statements in conformity
with generally accepted accounting principles requires management of the Company
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities, at the date of
the financial statements, and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
NOTE 2--INVENTORIES:
Inventories at December 30, 1995 consisted of the following:
<TABLE>
<S> <C>
Finished goods.................................................. $ 61,032
Work in process................................................. 20,402
Raw materials and supplies...................................... 12,994
-----------
$ 94,428
-----------
-----------
</TABLE>
NOTE 3--FIXED ASSETS:
Fixed assets at December 30, 1995 consisted of the following:
<TABLE>
<S> <C>
Land, buildings and improvements................................ $ 19,218
Machinery and equipment......................................... 64,476
-----------
83,694
Accumulated depreciation and amortization....................... (36,909)
-----------
$ 46,785
-----------
-----------
</TABLE>
F-26
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 4--LONG-TERM DEBT:
Long-term debt at December 30, 1995 consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 30,
1995
------------
<S> <C>
Term loan....................................................................... $ 46,962
Revolving credit facility....................................................... 19,000
Senior subordinated note--prime plus 1%......................................... 4,485
Subordinated note--prime plus 1%................................................ 15,702
Industrial revenue bond, interest at 90-day CD rate, payable in installments
through 1999.................................................................. 1,346
------------
87,495
Current maturities.............................................................. (5,143)
------------
$ 82,352
------------
------------
</TABLE>
The revolving credit facility provides for maximum borrowings of $30,000, of
which $19,000 was outstanding as of December 30, 1995. The facility has a
sublimit of $5,000 for letters of credit, of which $3,868 and $3,306 were used
for letters of credit as of December 31, 1994 and December 30, 1995,
respectively. Interest on the term loan and revolving credit facilities is
payable at the greater of the lender's prime rate or the federal funds rate plus
50 basis points, plus an additional margin percentage. Each $5,000 repayment of
the term loan facility results in a 20 basis point reduction in the margin until
the margin reaches zero. As of December 30, 1995, the interest rate on the term
loan and revolving credit facility was equal to the prime rate plus 60 basis
points.
Amounts drawn under the revolving credit facility may not exceed the
borrowing base (as defined) calculated by reference to certain percentages of
eligible accounts receivable and eligible inventory. Prepayments of the term
loan are required to be made from the net cash proceeds realized from sales of
assets, other than inventory sold in the normal course of business.
The facilities agreement contains various covenants which require the
Company to meet certain defined financial tests including net worth, current
ratio, capital expenditures, interest coverage ratio, a debt to worth ratio and
dividend restrictions. The agreement is collateralized by all assets of the
Company.
Interest on the senior subordinated note and the subordinated note is
payable on a semi-annual basis. Interest on the subordinated note is payable at
the rate of prime plus 1%, but may not exceed 14%.
Principal payments on the term loan, senior subordinated note and the
subordinated note are required to be made in fiscal 1994 through 1996 from the
excess cash flows (as defined) generated in each of the preceding fiscal years.
Cash flow payments will be allocated on a pro rata basis based on the
outstanding balances of the three classes of debt. Principal payments equal to
75% of defined excess cash flows for the preceding fiscal year are required to
be made on or before April 30 of the subsequent year. There was no defined
excess cash flow generated in fiscal 1995.
The term loan must be reduced by a minimum of $5,000 each year from 1994 to
1996. As of December 30, 1995, the term loan has been reduced by payments of
$12,790, of which $10,290 qualifies toward minimum payments due under the
agreement. If in any one year the Company is unable to meet its minimum payment,
it will be given credit toward the shortfall for any defined excess cash flow
payments
F-27
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 4--LONG-TERM DEBT: (CONTINUED)
made in prior years above minimum payments for those years. The Company can, at
any time, prepay without penalty indebtedness under the term loan and revolving
credit facilities. The revolving credit and term loan facilities agreement
expires on December 31, 1996, by which time management expects to have
refinancing in place. The subordinated notes are due on December 31, 2001.
Aggregate minimum scheduled maturities of long-term debt during each of the
next five fiscal years are as follows: fiscal year ended December 28,
1996--$5,143; 1997--$61,685; 1998--$433; 1999--$47, and 2000--$0.
Industrial revenue bond financing was obtained in connection with the
construction of a distribution facility. Financing of $6,500 originally
available under this agreement has been expended and the obligation is secured
by the related building, machinery and equipment.
FASB Statement No. 107, "Disclosure about Fair Value of Financial
Instruments," requires the Company to estimate and disclose, if practicable, the
fair value of its long-term debt. The Company has disclosed the carrying
amounts, interest rates and maturity dates of its long-term debt. Management
estimates that the aggregate fair value of these obligations and other financial
instruments approximates their aggregate carrying value.
NOTE 5--CAPITAL STOCK:
For each of Class A and Class B common stock, 100,000 shares of stock, par
value $.01 per share, are authorized. There were 10,000 shares each of Class A
and Class B common stock issued and outstanding at the end of fiscal 1995. The
holders of Class A and Class B common stock are entitled to four votes per share
and one vote per share, respectively.
In January 1995, 100,000 shares of Class C non-voting common stock, par
value $.01 per share, were authorized of which 2,785 shares were issued to
participants in the Management Equity Participation Plan (see Note 6).
As of the end of fiscal 1995, 50,000 shares of non-voting Series A preferred
stock, par value $.01 per share, were authorized, issued and outstanding.
Dividends on Series A preferred stock are payable on May 31 of each year,
commencing May 31, 1995, and will be equal to the lesser of (1) 20% of
consolidated net income for the preceding fiscal year or (2) 5% of the
liquidation value of all preferred stock; such dividends are cumulative. The
dividend payable on May 31, 1996, calculated based on 1995 consolidated net
income, will be $1,615. The dividend paid on May 31, 1995 was $1,678.
NOTE 6--EMPLOYEE BENEFIT PLANS:
The Company offers a comprehensive plan to current and certain future
retirees and their spouses until they become eligible for Medicare and a
Medicare Supplement plan. The Company also offers life insurance to current and
certain future retirees. Employee contributions are required as a condition of
participation for both medical benefits and life insurance, and the Company's
liabilities are net of these employee contributions.
F-28
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 6--EMPLOYEE BENEFIT PLANS: (CONTINUED)
The following table sets forth the components of the accumulated
postretirement benefit obligation (APBO) as of December 30, 1995:
<TABLE>
<CAPTION>
DECEMBER 30,
1995
-------------
<S> <C>
Retirees........................................................................ $ 5,748
Actives ineligible to retire.................................................... 2,300
Actives eligible to retire...................................................... 590
Disableds....................................................................... --
------
Total APBO...................................................................... $ 8,638
------
------
</TABLE>
The funded status of the plan is reconciled to the accrued postretirement
benefit liability recognized in the accompanying consolidated balance sheet:
<TABLE>
<CAPTION>
DECEMBER 30,
1995
------------
<S> <C>
Total APBO...................................................................... $ 8,638
Plan assets at fair value....................................................... --
Unrecognized transition obligation.............................................. (6,485)
Unrecognized net loss........................................................... (1,353)
------------
Accrued postretirement benefit liability........................................ $ 800
------------
------------
</TABLE>
Net periodic postretirement benefit cost (NPPBC) charged to operations for
fiscal 1994 and 1995 included the following components:
<TABLE>
<CAPTION>
1994 1995
--------- ---------
<S> <C> <C>
Service cost............................................................... $ 116 $ 121
Interest cost.............................................................. 539 577
Amortization of transition obligation...................................... 381 381
Amortization of net loss................................................... -- 54
--------- ---------
Total NPPBC................................................................ $ 1,036 $ 1,133
--------- ---------
--------- ---------
</TABLE>
The discount rate used in determining the APBO was 7.0% as of December 30,
1995. The effects on the Company's plan of all future increases in health care
cost are borne by employees; accordingly, increasing medical costs are not
expected to have any material effect on the Company's future financial results.
The Company has an obligation under a defined benefit plan covering certain
former officers. At December 30, 1995, the present value of the estimated
remaining payments under this plan was approximately $1,934.
The Company also maintains a Management Equity Participation Plan ("MEPP")
and Long Term Incentive Plan ("LTIP") for executive and other key salaried
employees. Long-term liabilities under these plans as of December 30, 1995 were
$1,976 and $2,908, respectively. In 1995, the Board of Directors
F-29
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 6--EMPLOYEE BENEFIT PLANS: (CONTINUED)
capped the amount payable under the MEPP at $5,000, and approved the issuance to
plan participants of 2,785 shares of Class C common stock of the Company (see
Note 5).
Distributions under the MEPP are payable upon a "trigger event" (as defined)
which includes, among other things, the sale of the Company. In the absence of a
trigger event, distributions to MEPP participants are payable upon the later of
age 62 or January 1, 2002. LTIP awards are determined annually based on five
percent of the Company's earnings before interest and taxes. Cumulative LTIP
awards will be distributed to plan participants in 1997.
NOTE 7--INCOME TAXES:
The provision for income taxes for fiscal years 1994 and 1995 consisted of
the following:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
---------------------------
<S> <C> <C>
DECEMBER 31, DECEMBER 30,
1994 1995
------------ -------------
Current tax provision:
Federal........................................................ $ 4,387 $ 4,612
State.......................................................... 1,020 1,032
------------ ------
Total current.............................................. 5,407 5,644
Deferred tax provision (benefit):
Federal........................................................ (1,407) (372)
State.......................................................... -- (93)
Deferred tax benefit............................................. (1,407) (465)
------------ ------
Total provision............................................ $ 4,000 $ 5,179
------------ ------
------------ ------
</TABLE>
Temporary differences which give rise to deferred tax assets and liabilities
at December 30, 1995 are as follows:
<TABLE>
<S> <C>
Deferred tax assets:
Inventory valuation........................................... $ 4,801
Accrued liabilities........................................... 2,426
Accounts receivable allowance................................. 1,376
State taxes................................................... 481
Debt issue costs.............................................. 265
Deferred compensation......................................... 2,459
-----------
Total deferred tax assets................................. 11,808
-----------
Deferred tax liabilities
Depreciation.................................................. 7,746
Deferred employee benefits.................................... 2,190
-----------
Total deferred tax liabilities............................ 9,936
-----------
Net deferred tax assets................................... $ 1,872
-----------
-----------
</TABLE>
F-30
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 7--INCOME TAXES: (CONTINUED)
Deferred tax assets are included in the accompanying consolidated balance
sheet under the caption "other assets." The deferred tax asset at the beginning
of 1994 was fully offset by a valuation allowance. The valuation allowance was
released during 1994 based on the Company's sustained profitability.
The difference between the Company's effective income tax rate and the
federal statutory tax rate is reconciled below:
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
--------------------------------
DECEMBER 31, DECEMBER 30,
1994 1995
--------------- ---------------
<S> <C> <C>
Statutory federal income tax rate.................................................... 35.0% 35.0%
State income taxes, net of federal income tax benefit................................ 5.4 4.6
Alternative minimum tax.............................................................. (1.7) --
Valuation allowance reversal, net.................................................... (5.4) --
Jobs tax credit...................................................................... (1.6) (0.7)
Other................................................................................ 0.6 0.2
--- ---
Total................................................................................ 32.3% 39.1%
--- ---
--- ---
</TABLE>
NOTE 8--LEASE COMMITMENTS:
Annual rent expense under operating leases was $9,653 and $11,228 in fiscal
1994 and 1995, respectively. Minimum annual rental commitments under current
noncancelable operating leases as of December 30, 1995 were as follows:
<TABLE>
<CAPTION>
BUILDINGS,
PRIMARILY TOTAL
RETAIL TRANSPORTATION DATA PROCESSING NONCANCELABLE
YEAR STORES EQUIPMENT EQUIPMENT LEASES
- ---------------------------------------------------- ----------- -------------- ----------------- -------------
<S> <C> <C> <C> <C>
1996................................................ $ 10,893 $ 490 $ 262 $ 11,645
1997................................................ 9,388 469 -- 9,857
1998................................................ 7,057 206 -- 7,263
1999................................................ 5,122 110 -- 5,232
2000................................................ 2,878 50 -- 2,928
Thereafter.......................................... 3,806 -- -- 3,806
----------- ------- ----- -------------
Total............................................... $ 39,144 $ 1,325 $ 262 $ 40,731
----------- ------- ----- -------------
----------- ------- ----- -------------
</TABLE>
NOTE 9--OTHER CURRENT LIABILITIES:
Other current liabilities at December 30, 1995 consisted of the following:
<TABLE>
<S> <C>
Accrued income taxes payable................................. $ 5,962
Accrued health insurance..................................... 3,082
Accrued incentive compensation............................... 1,753
Other current liabilities.................................... 6,713
-------------
$ 17,510
-------------
-------------
</TABLE>
F-31
<PAGE>
THE WILLIAM CARTER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
(DOLLARS IN THOUSANDS)
NOTE 10--VALUATION AND QUALIFYING ACCOUNTS:
Information regarding valuation and qualifying accounts for fiscal years
1994 and 1995 are as follows:
<TABLE>
<CAPTION>
ALLOWANCE FOR
DOUBTFUL ACCOUNTS
---------------------
<S> <C>
Balance at January 1, 1994............................................. $ 2,535
Additions, charged to expense........................................ 622
Writeoffs............................................................ (1,006)
-------
Balance at December 31, 1994........................................... $ 2,151
-------
-------
Balance at December 31, 1994........................................... $ 2,151
Additions, charged to expense........................................ 653
Recoveries........................................................... 84
-------
Balance at December 30, 1995........................................... $ 2,888
-------
-------
</TABLE>
F-32
<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 ANY 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>
Available Information..................................................... 2
Summary................................................................... 3
Risk Factors.............................................................. 12
Use of Proceeds........................................................... 16
The Acquisition........................................................... 17
Capitalization............................................................ 18
Unaudited Pro Forma Condensed Consolidated Financial Statements........... 19
Selected Historical and Pro Forma Financial
Data.................................................................... 23
Management's Discussion and Analysis of Financial Condition and Results of
Operations.............................................................. 26
The Exchange Offer........................................................ 32
Business.................................................................. 38
Management................................................................ 48
Ownership of Voting Securities............................................ 53
Certain Transactions...................................................... 54
Capital Structure......................................................... 54
Description of Notes...................................................... 58
Certain Federal Income Tax Considerations................................. 85
Plan of Distribution...................................................... 86
Legal Matters............................................................. 86
Experts................................................................... 86
Index to Consolidated Financial Statements................................ F-1
</TABLE>
-------------------
UNTIL , 1997 (90 DAYS AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE NOTES, WHETHER OR NOT PARTICIPATING IN THE
ORIGINAL DISTRIBUTION, MAY BE REQUIRED TO DELIVER A PROSPECTUS. THIS IS IN
ADDITION TO THE OBLIGATION OF DEALERS TO DELIVER A PROSPECTUS WHEN ACTING AS
UNDERWRITERS AND WITH RESPECT TO THEIR UNSOLD ALLOTMENTS OR SUBSCRIPTIONS.
--------------
PROSPECTUS
--------------
$100,000,000
THE WILLIAM CARTER COMPANY
10 3/8% SERIES A
SENIOR SUBORDINATED NOTES
DUE 2006
, 1997
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 13 of Chapter 156B of the Massachusetts Business Corporation Law
(the "MBCL") authorizes a Massachusetts corporation to include a provision in
its articles of organization limiting or eliminating the personal liability of
its directors to the corporation and its shareholders for monetary damages for
breach of the directors' fiduciary duty of care except for (i) any breach of the
directors' duty of loyalty to the Company or its shareholders, (ii) acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of law, (iii) unlawful payments of dividends or unlawful stock
repurchases, redemptions, loans or other distributions and (iv) any transaction
from which the director derived an improper personal benefit. Although Section
13 of Chapter 156B of the MBCL does not change a director's duty of care, it
enables corporations to limit available relief to equitable remedies such as
injunction or rescission. The Company's Articles of Organization includes a
provision which limits or eliminates the personal liability of its directors to
the fullest extent permitted by Section 13 of Chapter 156B of the MBCL.
The Company's Bylaws provide, in effect, that, to the fullest extent under
the circumstances permitted by Section 67 of Chapter 156B of the MBCL, the
Company will indemnify against any expense, liability and loss (including
attorneys' fees) any person who was or is made a party or is threatened to be
made a party to or is otherwise involved in any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he or she is or was a director or an officer of the Company or is or was
serving at the request of the Company as a director, officer, employee, agent,
partner or trustee of another corporation or enterprise. Under Section 67 of
Chapter 156B of the MBCL, no indemnification shall be provided for any person
with respect to any matter as to which such person shall have been adjudicated
in any proceeding not to have acted in good faith in the reasonable belief that
their action was in the best interest of the Company. The inclusion of these
indemnification provisions in the Company's Bylaws is intended to enable the
Company to attract qualified persons to serve as directors and officers who
might otherwise be reluctant to do so. The Company is also required, under
certain circumstances, to advance expenses to an indemnitee.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits:
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
2 Agreement of Merger between TWCC Acquisition Corp. and the Company, dated September 18, 1996.
3.1 Amended and Restated Articles of Organization of the Company.
3.2 Articles of Merger of the Company.
3.3 By-laws of the Company.
3.4 Certificate of Designation relating to the Preferred Stock of the Company, dated October 30, 1996
(included in Exhibit 3.2).
4.1 Indenture between the Company and State Street Bank and Trust Company, as Trustee, dated as of November
25, 1996.
4.2 Exchange and Registration Rights Agreement between the Company and BT Securities Corporation, Bankers
Trust International plc, Chase Securities Inc. and Goldman, Sachs & Co. dated November 25, 1996.
4.3 Letter of Transmittal.
*5.1 Opinion of Gibson, Dunn & Crutcher LLP.
*5.2 Opinion of Testa, Hurwitz & Thibeault LLP.
10.1 Employment Agreement between the Company and Frederick J. Rowan, II.
</TABLE>
II-1
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION OF EXHIBITS
- ----------- --------------------------------------------------------------------------------------------------------
<C> <S>
10.2 Employment Agreement between the Company and Joseph Pacifico.
10.3 Employment Agreement between the Company and Charles E. Whetzel, Jr.
10.4 Employment Agreement between the Company and David A. Brown.
10.5 Employment Agreement between the Company and Jay A. Berman.
10.6 Credit Agreement dated October 30, 1996 among the Company, certain lenders and The Chase Manhattan Bank,
as administrative agent.
10.7 Purchase Agreement dated November 20, 1996 between the Company and BT Securities Corporation, Bankers
Trust International plc, Chase Securities Inc. and Goldman, Sachs & Co.
12 Statement re: Computation of Ratio of Earnings to Fixed Charges.
16 Letter of Price Waterhouse LLP.
21 Subsidiaries of the Company.
23.1 Consent of Price Waterhouse LLP.
23.2 Consent of Coopers & Lybrand L.L.P.
*23.3 Consent of Gibson, Dunn & Crutcher LLP (included in Exhibit 5.1).
*23.4 Consent of Testa, Hurwitz & Thibeault LLP (included in Exhibit 5.2).
25 Statement of Eligibility of Trustee.
27 Financial Data Schedule.
</TABLE>
- ---------
* to be filed by amendment
(b) Financial Statement Schedules:
(1) Financial Statement Schedules filed herewith:
None applicable.
ITEM 22. UNDERTAKINGS
(a) The Company undertakes:
(1) To file, during any period in which offers or sales are being made,
a post-effective amendment to this Registration Statement (i) to include any
prospectus required by Section 10(a)(3) of the Securities Act of 1933, as
amended; (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; and (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 of 1933, each such post-effective amendment will be deemed to
be a new registration statement relating to the securities offered therein,
and the offering of such securities at that time will 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.
(b) The Company undertakes to respond to requests for information that is
incorporated by reference into the prospectus pursuant to Item 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.
(c) The Company undertakes to supply by means of a post-effective amendment
all information concerning a transaction, and the company being acquired
involved therein, that was not the subject of and included in the Registration
Statement when it became effective.
II-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 Morrow, Georgia on February 20, 1997.
THE WILLIAM CARTER COMPANY
BY: /S/ FREDERICK J. ROWAN II
-----------------------------------------
Frederick J. Rowan, II
CHAIRMAN OF THE BOARD, PRESIDENT AND
CHIEF EXECUTIVE OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS that each person whose signature appears
below constitutes and appoints David A. Brown and Charles J. Phillippin his true
and lawful attorneys-in-fact and agents, each 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 to this Registration
Statement, including post-effective amendments, and to file the same, with all
exhibits thereto, and all documents in connection therewith, with the Securities
and Exchange Commission, granting unto said attorneys-in-fact and agents, and
each of them, full power and authority to do and perform each and every act and
thing requisite and necessary to be done in and about the premises, as fully to
all intents and purposes as he might or could do in person, and hereby ratifies
and confirms all that said attorneys-in-fact and agents, each acting alone, or
their substitute or substitutes, may lawfully do or cause to be done.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated on February 20, 1997.
NAME TITLE
- ------------------------------ ---------------------------
Chairman of the Board of
/s/ FREDERICK J. ROWAN II Directors, President,
- ------------------------------ Chief Executive Officer
Frederick J. Rowan, II and Director (Principal
Executive Officer)
Senior Vice
/s/ DAVID A. BROWN President--Business
- ------------------------------ Planning & Administration
David A. Brown and Director
Senior Vice President,
/s/ JAY A. BERMAN Chief Financial Officer
- ------------------------------ and Director (Principal
Jay A. Berman Accounting Officer)
/s/ CHRISTOPHER J. O'BRIEN Director
- ------------------------------
Christopher J. O'Brien
/s/ CHARLES J. PHILLIPPIN Director
- ------------------------------
Charles J. Phillippin
/s/ CHRISTOPHER J. STADLER Director
- ------------------------------
Christopher J. Stadler
II-3
<PAGE>
(This page has been left blank intentionally.)
<PAGE>
EXHIBIT 2
AGREEMENT AND PLAN OF MERGER
DATED AS OF SEPTEMBER 18, 1996
by and between
TWCC ACQUISITION CORP.
and
THE WILLIAM CARTER COMPANY
<PAGE>
TABLE OF CONTENTS
Page
ARTICLE 1
THE MERGER.....................................................................1
1.01. The Merger......................................................1
1.02. Effective Time of the Merger....................................1
1.03. Effect of Merger................................................1
1.04. Supplementary Action............................................1
ARTICLE 2
THE SURVIVING CORPORATION......................................................2
2.01. Name............................................................2
2.02. Articles of Organization........................................2
2.03. Bylaws..........................................................2
2.04. Directors.......................................................2
2.05. Officers........................................................2
2.06. Purpose.........................................................2
2.07. Authorized Capitalization.......................................3
ARTICLE 3
CONVERSION OF SHARES...........................................................3
3.01. Conversion of Shares............................................3
3.02. No Further Transfers............................................4
3.03. Adjustment of Merger Consideration..............................4
ARTICLE 4
PAYMENT........................................................................5
4.01. Exchange Procedure..............................................5
4.02. Lost Certificates...............................................6
ARTICLE 5
CLOSING........................................................................6
5.01. Time and Place..................................................6
5.02. Actions at Closing..............................................6
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................................7
6.01. Capitalization..................................................7
6.02. Subsidiaries....................................................8
6.03. Organization....................................................8
6.04. Annual and Quarterly Reports....................................8
6.05. Absence of Certain Changes or Events............................9
6.06. Title to Assets.................................................9
i
<PAGE>
TABLE OF CONTENTS (cont'd)
6.07. Intellectual Property..........................................10
6.08. Commitments....................................................11
6.09. Litigation.....................................................12
6.10. Compliance With Laws...........................................12
6.11. Environmental Matters..........................................12
6.12. Corporate Power and Authority; No Violations...................13
6.13. Employee Benefit Plans.........................................14
6.14. Consents.......................................................15
6.15. Taxes..........................................................15
6.16. Disclaimer.....................................................16
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF PURCHASER...................................16
7.01. Organization; Capitalization...................................16
7.02. Corporate Power and Authority; Effect of Agreement.............17
7.03. Consents.......................................................17
7.04. Litigation.....................................................17
7.05. Purchase for Investment........................................17
7.06. Adequate Funds.................................................17
ARTICLE 8
COVENANTS OF THE PARTIES......................................................18
8.01. Efforts........................................................18
8.02. Conduct of Business............................................18
8.03. Access.........................................................20
8.04. No Solicitation................................................20
8.05. Books and Records; Personnel..................................20
8.06. Liabilities and Indemnification................................21
8.07. Insurance......................................................21
8.08. Subsequent Disclosures by Company..............................21
8.09. Environmental Matters..........................................22
8.10. Indebtedness...................................................22
ARTICLE 9
CONDITIONS TO PURCHASER'S OBLIGATIONS.........................................22
9.01. Representations, Warranties and Covenants of the Company.......22
9.02. No Prohibition.................................................23
9.03. Third Party Consents...........................................23
9.04. Governmental Consents..........................................23
9.05. Company Counsel Opinion........................................23
9.06. Title Insurance................................................23
ii
<PAGE>
TABLE OF CONTENTS (cont'd)
9.07. Surveys........................................................24
9.08. Shareholder Approval...........................................24
9.09. Release of Liens...............................................24
ARTICLE 10
CONDITIONS TO THE COMPANY'S OBLIGATIONS.......................................24
10.01. Representations, Warranties and Covenants of Purchaser.........24
10.02. No Prohibition.................................................25
10.03. Governmental Consents..........................................25
10.04. Repayment of Indebdtedness.....................................25
10.05. Purchaser Counsel Opinion......................................25
ARTICLE 11
TERMINATION PRIOR TO CLOSING..................................................25
11.01. Termination....................................................25
11.02. Effect of Termination..........................................26
ARTICLE 12
MISCELLANEOUS.................................................................26
12.01. Non-Survival of Representations and Warranties.................26
12.02. Interpretive Provisions; Certain Definitions...................27
12.03. Entire Agreement...............................................27
12.04. Successors and Assigns.........................................27
12.05. Headings.......................................................28
12.06. Modification and Waiver........................................28
12.07. Expenses.......................................................28
12.08. Notices........................................................28
12.09. Governing Law..................................................29
12.10. Public Announcements...........................................29
12.11. Counterparts...................................................29
EXHIBITS
Exhibit 1.02 Articles of Merger
Exhibit 3.01 Distribution of Merger Consideration
iii
<PAGE>
LIST OF DEFINED TERMS
TERM PLACE OF DEFINITION
- ---- -------------------
"Affiliate" Section 6.15(a)
"Affiliates" Section 6.15(a)
"Agreement" Preamble
"Allocated Merger Consideration" Section 3.01(a)
"Articles of Merger" Section 1.02
"Balance Sheet" Section 6.04
"Benefit Plan" Section 6.13(a)
"Certificates" Section 3.01
"Class A Common" Section 6.01
"Class B Common" Section 6.01
"Class C Common" Section 6.01
"Closing Date" Section 5.01
"Closing" Section 5.01
"Commitments" Section 6.08(a)
"Company Capital Stock" Section 3.01(a)
"Company" Preamble
"Company Related Parties" Section 6.16
"Company's Certificate" Section 9.01(c)
"Confidentiality Agreement" Section 8.03
"Constituent Corporations" Preamble
"Corporation Law" Preamble
"Credit Agreement" Section 12.02(b)
"Debt" Section 3.03(a)
"Defaulting Party" Section 11.02
"Disclosure Schedule" Article 6
"Domestic Listed Intellectual Property" Section 6.07
"ERISA" Section 6.13(a)
"Effective Time" Section 1.02
"Encumbrances" Section 6.02
"Environmental Laws" Section 6.11(b)
"Environmental Lien" Section 6.11(c)
"Exchange Agent" Section 4.01(a)
"Exchange Fund" Section 4.01(a)
"Financial Statements" Section 6.04
"Government Entity" Section 6.09
"HSR Act" Section 6.14
"Indebtedness" Section 12.02(b)
"Indemnified Party" Section 8.06(b)
"Initial Merger Consideration" Section 3.01(a)
"Insurance Policies" Section 6.08(c)
"Intellectual Property" Section 6.07
iv
<PAGE>
"Leased Property" Section 6.06(b)
"Liabilities" Section 8.06(a)
"Listed Intellectual Property" Section 6.07
"Litigation" Section 6.09
"Losses" Section 8.06(a)
"Management Payment" Section 8.02(c)
"Material Adverse Effect" Section 6.03
"MBL Subordinated Note" Section 12.02(b)
"MEP" Section 4.01(a)
"MEP Payment" Section 4.01(a)
"Merger" Preamble
"Merger Consideration" Section 3.01(a)
"Owned Property" Section 6.06(b)
"Permitted Encumbrances" Section 6.06(a)
"Permits" Section 6.10
"Person" Section 12.02(b)
"Property Leases" Section 6.06(b)
"Purchaser" Preamble
"Purchaser's Certificate" Section 10.01(c)
"Purchaser Common Stock" Section 3.01(c)
"Purchaser Merger Conditions" Section 3.03(b)
"Real Property" Section 6.06(b)
"Required Consents" Section 9.03
"Required Government Consents" Section 9.04
"Returns" Section 6.15(a)
"Revolving Credit Facility" Section 3.03(a)
"Section 8.08 Notice" Section 8.08
"Senior Subordinated Notes" Section 12.02(b)
"Series A Preferred" Section 6.01
"Stockholder" Section 3.01
"Subsidiaries" Section 6.02
"Subsidiary" Section 6.02
"Surviving Corporation" Preamble
"Taxes" Section 6.15(f)
"Title Documents" Section 6.06(b)
"to the Company's knowledge" or Section 12.02(a)
"to the knowledge of the Company"
"to Purchaser's knowledge" or Section 12.02(a)
"to the knowledge of Purchaser"
v
<PAGE>
AGREEMENT AND PLAN OF MERGER
This AGREEMENT AND PLAN OF MERGER ("Agreement"), dated as of September
18, 1996, is made by and between The William Carter Company, a Massachusetts
corporation (the "Company") and TWCC Acquisition Corp., a Massachusetts
corporation ("Purchaser").
The Boards of Directors and stockholders of the Company and Purchaser
deem it advisable and in the best interests of each such corporation and its
respective stockholders to cause the merger of Purchaser with and into the
Company (the "Merger") upon the terms and conditions set forth herein and in
accordance with the General Laws of the Commonwealth of Massachusetts (the
"Corporation Law"). (Purchaser and the Company being hereinafter sometimes
referred to as the "Constituent Corporations" and the Company, following the
effectiveness of the Merger, as the "Surviving Corporation".)
THEREFORE, in consideration of the mutual representations, warranties,
covenants and conditions contained herein, and in order to set forth the terms
and conditions of the Merger and the mode of carrying the same into effect, the
parties hereby agree as follows:
ARTICLE 1
THE MERGER
1.01. THE MERGER. Upon the terms and subject to the conditions
hereof as promptly as practicable following the satisfaction or waiver of the
conditions set forth in Articles 9 and 10 hereof, Purchaser shall be merged with
and into the Company and the separate existence of Purchaser shall thereupon
cease, and the Company, as the Surviving Corporation, shall continue to exist
under and be governed by the Corporation Law.
1.02. EFFECTIVE TIME OF THE MERGER. The Merger shall become
effective when properly executed Articles of Merger in substantially the form
of Exhibit 1.02 attached hereto (the "Articles of Merger") are filed with the
Secretary of the Commonwealth of Massachusetts as provided in the Corporation
Law. When used in this Agreement, the term "Effective Time" shall mean the date
and time at which the Articles of Merger are so filed.
1.03. EFFECT OF MERGER. The Merger shall have the effects set
forth in the Corporation Law.
1.04. SUPPLEMENTARY ACTION. If, at any time after the Effective
Time, the Surviving Corporation shall consider or be advised that any further
assignments or assurances are necessary or desirable to vest or to perfect or
confirm of record in the Surviving Corporation the title to any property or
rights of either of the Constituent Corporations, or otherwise to carry out the
provisions of this Agreement, the officers and directors of the Surviving
Corporation are hereby authorized and empowered on behalf of the respective
Constituent Corporations, in the name of and on behalf of
<PAGE>
the appropriate Constituent Corporation, to execute and deliver any and all
things necessary or proper to vest or to perfect or confirm title to such
property or rights in the Surviving Corporation, and otherwise to carry out the
purposes and provisions of this Agreement.
ARTICLE 2
THE SURVIVING CORPORATION
2.01. NAME. The name of the Surviving Corporation will be The
William Carter Company.
2.02. ARTICLES OF ORGANIZATION. The Articles of Organization of
Purchaser as amended by the Articles of Merger shall be the articles of
organization of the Surviving Corporation. The Articles of Organization of the
Surviving Corporation thereafter may be amended in accordance with its terms and
as provided by law.
2.03. BYLAWS. The Bylaws of Purchaser immediately prior to the
Effective Time shall be the Bylaws of the Surviving Corporation.
2.04. DIRECTORS. The directors of Purchaser immediately prior to
the Effective Time shall be the directors of the Surviving Corporation until
their respective successors are duly elected and qualified in the manner
provided in the Articles of Organization and Bylaws of the Surviving
Corporation, or until their earlier resignation or removal, or as otherwise
provided by law.
2.05. OFFICERS. The officers of the Company immediately prior to
the Effective Time shall be the officers of the Surviving Corporation until
their successors are duly elected and qualified in the manner provided in the
Articles of Organization and Bylaws of the Surviving Corporation, or until their
earlier resignation or removal, or as otherwise provided by law.
2.06. PURPOSE. The purposes of the Surviving Corporation shall be
as follows:
(a) To manufacture, produce, buy, sell, export, import, and otherwise
deal in any and all kinds of merchandise, yarns, threads, textile fabrics,
clothing, underclothing, wearing apparel of every kind, all articles,
materials and supplies used or capable of being used in such manufacture or
dealing, the products and by-products of the same, and all equipment and
materials necessary or useful in manufacturing or marketing merchandise.
(b) To carry on any manufacturing, mercantile, selling, management,
service or other business, operation or activity which may be lawfully
carried on by a corporation organized under the Corporation Law, whether or
not related to those referred to in the foregoing paragraph.
(c) To carry on any business, operation or activity through a wholly
or partly owned subsidiary.
2
<PAGE>
(d) To carry on any business, operation or activity referred to in
the foregoing paragraphs to the same extent as might an individual, whether
as principal, agent, contractor or otherwise, and either alone or in
conjunction or a joint venture or other arrangement with any corporation,
association, trust, firm or individual.
(e) To have as additional purposes all powers granted to corporations
by the laws of The Commonwealth of Massachusetts, provided that no such
purpose shall include any activity inconsistent with the Business
Corporation Law or the general laws of said Commonwealth.
2.07. AUTHORIZED CAPITALIZATION. The authorized capitalization of
the Surviving Corporation shall be 1,000 shares of Common Stock, par value $.01
per share. After the Effective Time, the authorized capitalization of the
Surviving Corporation may be changed as provided by the Articles of Organization
and by law.
ARTICLE 3
CONVERSION OF SHARES
3.01. CONVERSION OF SHARES. As of the Effective Time, by virtue
of the Merger and without any action on the part of any record holder
("Stockholder") of certificates representing shares of the Company's capital
stock ("Certificates"):
(a) The issued and outstanding shares of the Company's Series A
Preferred Stock, Class A Common Stock, Class B Common Stock and Class C Common
Stock (collectively, the "Company Capital Stock"), excluding any such shares
held in the Company's treasury, shall be automatically converted into and shall
represent only the right to receive, in the aggregate, $202,500,000.00 (Two
Hundred Two Million Five Hundred Thousand Dollars) (the "Initial Merger
Consideration") subject to adjustment as provided in Section 3.03 hereof (the
"Merger Consideration"). Each share of Company Capital Stock shall be
automatically converted into and shall represent only the right to receive the
portion of the Merger Consideration (as defined below) as set forth on Exhibit
3.01 hereto (the "Allocated Merger Consideration").
(b) Each share of the Company Capital Stock held in the treasury
of the Company shall be canceled and retired and all rights in respect thereof
shall cease to exist and no payment shall be made in respect thereof; PROVIDED,
HOWEVER, that shares of the Company's Class C Common Stock authorized for sale
pursuant to the Company's Master Executive Stock Purchase Plan but not allocated
to any individual for purchase shall receive payment from the Merger
Consideration in accordance with such plan.
(c) Each issued and outstanding share of Purchaser's Common
Stock, par value $.01 per share ("Purchaser Common Stock"), shall be converted
into one share of the Surviving Corporation's Common Stock, par value $.01 per
share.
3
<PAGE>
3.02. NO FURTHER TRANSFERS. At the Effective Time, the stock
transfer books of the Company shall be closed and no transfer of Company Capital
Stock shall thereafter be made.
3.03. ADJUSTMENT OF MERGER CONSIDERATION.
(a) The Initial Merger Consideration shall be reduced by the
following amounts:
(i) the amount of all Debt (as defined below)
outstanding on the Closing Date (as defined below), plus all principal
payments on such Debt made since June 29, 1996;
(ii) all costs, fees and expenses paid or payable by the
Company in connection with the process relating to the proposed sale
of the Company, including, without limitation, the costs, fees and
expenses paid or payable to Goldman, Sachs & Co. and all costs, fees
and expenses incurred in connection with the preparation for,
negotiation of and closing of the Merger;
(iii) all costs, fees and expenses associated with the
prepayment or other early termination of any Debt;
(iv) 68.42% of the first $9,600,000.00 and 100% of any
amount in excess of such amount of payments due under the MEP (as
defined below) and The William Carter Company Long Term Incentive Plan
as a consequence of the Merger;
(v) 60% of any Management Payment (as defined in Section
8.02(c)) in excess of $790,000 or such lesser amount as shall be
determined pursuant to the last sentence of Section 8.02(c); and
(vi) the amount of any payments made by the Company prior
to the Closing Date in respect of deferred or accrued and unpaid
dividends on the Company Capital Stock.
For purposes of this Section 3.03(a), "Debt" means any liability (including
without limitation accrued but unpaid interest) in respect of (A) borrowed money
(other than borrowings under the Revolving Credit Facility (as defined below)),
(B) capitalized lease obligations, (C) the deferred purchase price of property
or services (other than trade payables in the ordinary course of business and
consistent with past practice), (D) obligations under interest rate agreements
and currency agreements and (E) guarantees of any of the foregoing. "Revolving
Credit Facility" means those certain revolving credit loans outstanding under
the terms of the Credit Agreement.
(b) In the event the Merger does not occur on or before
September 30, 1996, the Merger Consideration shall be increased as follows:
4
<PAGE>
(i) for each day in the month of October 1996, including
October 1, 1996, on which the Merger does not occur, the Initial
Merger Consideration shall be increased by $50,000; and
(ii) for each day in the month of November 1996, on which
the Merger does not occur, the Initial Merger Consideration shall be
increased by $66,666.67.
PROVIDED, HOWEVER, that in the event the Purchaser has fulfilled, or has
indicated it is ready to fulfill, all of the conditions required to be fulfilled
by it ("Purchaser Merger Conditions"), and the failure of the Merger to occur is
directly related to the failure of the Company to comply with any condition to
the Merger required by it (other than a failure not within the control of the
Company), for purposes of clauses (i) and (ii) of this Section 3.03(b) the
Merger shall be deemed to have occurred on the date the Purchaser has either
fulfilled, or indicated its readiness to fulfill, such Purchaser Merger
Conditions.
ARTICLE 4
PAYMENT
4.01. EXCHANGE PROCEDURE.
(a) At the Closing, Purchaser shall deposit in trust with an
exchange agent selected by the Company (the "Exchange Agent") funds sufficient
to pay in full the Merger Consideration and all amounts due pursuant to the
terms of the Company's Management Equity Participation Plan (the "MEP") (such
amounts, the "MEP Payment"; the MEP Payment and the Merger Consideration,
together, the "Exchange Fund"). Prior to the Closing, the Exchange Agent shall
deliver to each Stockholder a form of letter of transmittal for return to the
Exchange Agent (which shall specify that delivery shall be effected, and risk of
loss and title to the Certificates shall pass only upon proper delivery of the
Certificates to the Exchange Agent and shall include an agreement by each
Stockholder that such Stockholder's respective allocation of the Merger
Consideration represents all such Stockholder is owed by the Company pursuant to
this Agreement, and that such Stockholder has waived and released the Company
from any claims by such Stockholder to receive any additional amounts in excess
of that provided for herein) and instructions for use in effecting the surrender
of the Certificates and payment of the Allocated Merger Consideration due in
respect thereof. Upon surrender to the Exchange Agent of a Certificate,
together with such letter of transmittal duly executed, the Stockholder holding
such Certificate shall be paid in exchange therefor the Allocated Merger
Consideration payable in respect of such shares, and the Certificate so
surrendered shall forthwith be canceled. The payments by the Exchange Agent of
Allocated Merger Consideration shall include payments to persons who surrender
Certificates representing shares of Series A Preferred Stock of all deferred or
accrued and unpaid dividends in respect of such shares, and payments of
Liquidating Dividends payable pursuant to Article VI, Part B, Section 1A of the
Articles of Organization of the Company as if the consummation of the Merger
were a Liquidation Event (as such term is defined in such Articles of
Organization).
5
<PAGE>
(b) Until surrendered as contemplated by Section 4.01, each
Certificate shall be deemed at any time after the Effective Time to represent
only the right to receive upon such surrender the Allocated Merger
Consideration. No interest shall be paid or will accrue on the amount payable
at the Effective Time upon surrender of a Certificate. If payment is to be made
to a Stockholder other than the person in whose name the Certificate surrendered
is registered, it shall be a condition of payment that the Certificate so
surrendered shall be properly endorsed or otherwise in proper form for transfer
and that the Stockholder requesting such payment shall pay any transfer or other
taxes required by reason of the payment to a person other than the registered
holder of the Certificate surrendered or establish that such tax has been paid
or is not applicable.
(c) At the Closing, the Exchange Agent shall pay the MEP Payment
to the beneficiaries under the MEP in accordance with the terms and provisions
thereof.
4.02. LOST CERTIFICATES. In the event any Certificate shall have
been lost, stolen or destroyed, upon the making of an affidavit of that fact by
the registered holder of such lost, stolen or destroyed Certificate in form and
substance acceptable to the Exchange Agent and Purchaser and accompanied by a
bond in an amount satisfactory to the Exchange Agent and Purchaser, the Exchange
Agent will issue in exchange for such lost, stolen or destroyed Certificate the
Allocated Merger Consideration in respect thereof in the manner set forth in
Section 4.01.
ARTICLE 5
CLOSING
5.01. TIME AND PLACE. The closing of the transactions
contemplated hereby (the "Closing") shall take place on October 31, 1996 (the
"Closing Date"), or such date prior to or after October 31, 1996 as shall be
specified in a notice from Purchaser to the Company delivered at least two days
prior to the Closing Date specified therein, upon satisfaction or waiver of the
conditions set forth in Articles 9 and 10 hereof (other than those conditions
which by their terms are intended to be satisfied on the Closing Date), which
time also shall be the Effective Time; PROVIDED, HOWEVER that in the event of a
Closing later than October 31, 1996, the Closing Date shall not be later than
the third business day following the satisfaction or waiver of the conditions
set forth in Articles 9 and 10 hereof (other than those conditions which by
their terms are intended to be satisfied on the Closing Date). The Closing
shall take place at the offices of Gibson, Dunn & Crutcher, 200 Park Avenue, New
York, NY 10166.
5.02. ACTIONS AT CLOSING. At the Closing:
(a) There shall be delivered to Purchaser, the Company and the
Stockholders the certificates, opinions and other documents and instruments
provided to be delivered under Articles 9 and 10 hereof.
6
<PAGE>
(b) The Company shall cause the Articles of Merger to be filed
in accordance with the Corporation Law, and shall take any and all other lawful
actions, and do any other lawful things necessary to effect the Merger and to
enable the Merger to become effective.
(c) Purchaser shall deposit the Exchange Fund with the Exchange
Agent as described in Section 4.01 hereof.
(d) The Exchange Agent shall make the payments described in
Section 4.01 hereof.
(e) The Company shall pay all amounts payable to employees under
The William Carter Company Long Term Incentive Plan.
(f) The Company shall pay all costs, fees and expenses in
connection with the process relating to the proposed sale of the Company,
including, without limitation, the costs, fees and expenses paid or payable to
Goldman, Sachs & Co. and all costs, fees and expenses incurred in connection
with the preparation for, negotiation of and closing of the Merger.
ARTICLE 6
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
Except as otherwise set forth in the disclosure schedule delivered by
the Company to the Purchaser in connection herewith (the "Disclosure Schedule"),
the Company represents and warrants to the Purchaser as follows:
6.01. CAPITALIZATION. The authorized capital stock of the Company
consists of (a) 50,000 shares of Series A Preferred Stock, par value $.01 per
share ("Series A Preferred"), of which 50,000 shares are issued and
outstanding; (b) 100,000 shares of Class A Common Stock, par value $.01 per
share ("Class A Common"), of which 10,000 shares are issued and outstanding;
(c) 100,000 shares of Class B Common Stock, par value $.01 per share ("Class B
Common"), of which 10,000 shares are issued and outstanding; and (d) 100,000
shares of Class C Common Stock, par value $.01 per share ("Class C Common"), of
which 2,769 shares are issued and outstanding ( and of which 431 shares remain
available for allocation and issuance pursuant to the Master Executive Stock
Plan, dated as of January 1, 1995, as amended); all of such 72,769 of Company
Capital Stock are owned of record by the Stockholders as set forth in
Section 6.01 of the Disclosure Schedule. All of such shares are validly issued,
fully paid and non-assessable. There are no securities presently outstanding,
and at the Effective Time there will not be any outstanding securities which
are, convertible into, exchangeable for, or carrying the right to acquire,
equity securities of the Company, or subscriptions, warrants, options, calls,
convertible securities, registration or other rights or other arrangements or
commitments obligating the Company to issue, transfer or dispose of any of its
equity securities or any ownership interest therein.
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6.02. SUBSIDIARIES. Except as set forth in Section 6.02 of the
Disclosure Schedule, the Company does not own, directly or indirectly, any
capital stock or any other equity interest in any person. The entities so set
forth in Section 6.02 of the Disclosure Schedule are referred to herein
individually as a "Subsidiary" and collectively as the "Subsidiaries." The
name, jurisdiction of incorporation, capitalization and ownership of each
Subsidiary is set forth in Section 6.02 of the Disclosure Schedule. Except for
director's qualifying shares, the Company owns all of the issued and outstanding
shares of capital stock of the Subsidiaries which they purport to own, free and
clear of any imperfections to title, liens, claims, security interests, pledges,
charges or other encumbrances ("Encumbrances"), and all of such shares are
(except to the extent such concepts do not apply to the foreign subsidiaries, in
which case no representation is made) validly issued, fully paid and
non-assessable. Except as set forth on Section 6.02 of the Disclosure Schedule,
there are not now, and at the Effective Time there will be no, outstanding
securities convertible into, exchangeable for, or carrying the right to acquire,
equity securities of any of the Subsidiaries, or subscriptions, warrants,
options, calls, convertible securities, registration or other rights or other
arrangements or commitments obligating any Subsidiary to issue, transfer or
dispose of any of its equity securities or any ownership interest therein or
voting trusts or other agreements or understandings to which the Company or any
of the Subsidiaries is bound with respect to the voting of the capital stock of
any of the Subsidiaries.
6.03. ORGANIZATION. The Company and each of the Subsidiaries is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation (except for any of the Subsidiaries
organized under the laws of a jurisdiction in which the concept of good standing
is inapplicable, as to which no representation or warranty regarding good
standing is made) with all requisite corporate power and authority to own, lease
and operate its properties and assets and to carry on its business as it is now
being conducted. The Company and each of the Subsidiaries is duly qualified to
do business and in good standing as a foreign corporation in the jurisdictions
set forth in Section 6.03 of the Disclosure Schedule which are all of the
jurisdictions where the nature of the property owned or leased by it, or the
nature of the business conducted by it, makes such qualification necessary and
the absence of such qualification would have a material adverse effect on the
assets, business, operations or financial condition of the Company and the
Subsidiaries taken as a whole other than such effects attributable to general
economic conditions or to other change generally affecting companies in the same
business as the Company (a "Material Adverse Effect"). True and complete copies
of the certificate of incorporation and by-laws (or substantially equivalent
documents) of the Company and each of the Subsidiaries have been delivered or
made available to Purchaser.
6.04. ANNUAL AND QUARTERLY REPORTS. The Company has previously
furnished to Purchaser true and complete copies of its audited consolidated
balance sheet, consolidated statement of income and consolidated statement of
cash flows and consolidated statement of changes in stockholders' equity,
together with notes thereto, for the fiscal year ended December 30, 1995 and the
unaudited consolidated balance sheet, consolidated statement of income and
consolidated statement of cash flows for the period ended June 29, 1996
(collectively, the "Financial Statements"). The Financial Statements fairly
present the consolidated financial position, the consolidated results of
operations, stockholders' equity or deficiency, cash flows and the other
information included therein of the Company and the Subsidiaries for the periods
or as of the dates therein set forth,
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in each case in accordance with generally accepted accounting principles
consistently applied during the periods involved, except that the unaudited
Financial Statements are subject to normal year end adjustments and lack
footnotes required for full disclosure under generally accepted accounting
principles. The unaudited consolidated balance sheet at June 29, 1996 is
sometimes referred to herein as the "Balance Sheet."
6.05. ABSENCE OF CERTAIN CHANGES OR EVENTS. Since the date of the
Balance Sheet, neither the Company nor any of the Subsidiaries has (a) suffered
any damage, destruction or casualty loss to any of its assets which,
individually or in the aggregate, has a Material Adverse Effect, (b) incurred or
discharged any material obligation or liability, or entered into any other
material transaction, except in the ordinary course of business, (c) suffered
any Material Adverse Effect (excluding normal shifts in working capital
occurring in the ordinary course of business) or (d) failed to operate its
business only in the ordinary course consistent with past practice or, except
for proposed amendments to the Company's Articles of Organization contemplated
in connection with the Merger, taken any of the actions prohibited under Section
8.02(b).
6.06. TITLE TO ASSETS.
(a) Each of the Company and the Subsidiaries has good (and, in
the case of real property, marketable) title (or leasehold interest with respect
to capital leases) to all of the assets and properties which are material to the
conduct of the business of the Company (including those reflected on the Balance
Sheet), except for assets and properties sold, consumed or otherwise disposed of
in the ordinary course of business since the date of the Balance Sheet, free and
clear of all Encumbrances, except (i) lack of title and other Encumbrances as
set forth in Section 6.06(a) of the Disclosure Schedule, (ii) liens for taxes
not yet due and payable or being contested in good faith by appropriate
proceedings, (iii) liens of carriers, warehousemen, mechanics, materialmen and
other similar liens incurred in the ordinary course of business that
individually or in the aggregate do not have a Material Adverse Effect and
(iv) lack of title and other Encumbrances which individually or in the aggregate
do not have a Material Adverse Effect (the matters set forth in the foregoing
clauses (i), (ii), (iii) and (iv) being referred to herein as the "Permitted
Encumbrances").
(b) Section 6.06(b) of the Disclosure Schedule sets forth (i) an
accurate and complete list of all real property that the Company or any of the
Subsidiaries owns, or in which the Company or any of the Subsidiaries has legal,
beneficial or equitable title (the "Owned Property"); (ii) an accurate and
complete list of all real property with respect to which the Company or any of
the Subsidiaries in a lessee, sublessee, licensee or other occupant or user (the
"Leased Property"); and (iii) an accurate and complete list of each lease,
sublease, license or other agreement or understanding, oral or written, pursuant
to which any party other than the Company or a Subsidiary occupies or uses all
or any part of the Owned Property or Leased Property. The Owned Property and
the Leased Property are sometimes collectively referred to herein as the "Real
Property." True and complete copies of (A) all leases, subleases, licenses or
other documents, instruments, agreements or understandings to which the Company
or any Subsidiary is a party, whether as lessee, lessor, sublessee, sublessor,
licensee or licensor, pertaining to the current or future use or occupancy of
any Real Property or any current or future right to use or occupy any Real
Property, together with all amendments, modifications, and supplements thereto
(collectively, the
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"Property Leases"), and (B) all deeds, title insurance policies, surveys,
mortgages, agreements and other documents, instruments, agreements or
understandings granting to the Company or any of the Subsidiaries title to or an
interest in or otherwise affecting or evidencing the state of title to any Real
Property, together with all amendments, modifications and supplements thereto
(collectively, the "Title Documents"), have been delivered to the Purchaser.
Except as set forth in Section 6.06(b) of the Disclosure Schedule, to the
knowledge of the Company, neither the Company nor any of the Subsidiaries is in
breach or default under (and no event has occurred which with notice or the
passage of time or both would constitute a breach or default under) any of the
Property Leases or Title Documents nor, to the knowledge of the Company, is any
other party to any of the Property Leases or Title Documents in default
thereunder (and no event has occurred which with notice or the passage of time
or both would constitute a breach or default thereunder); excluding, however, in
each instance, breaches or defaults which, in the aggregate, are not reasonably
likely to have a Material Adverse Effect. The Company and the Subsidiaries have
good and marketable title in fee simple to the Owned Property, good and
marketable leasehold title to the Leased Property, and good and marketable title
to all plants, buildings, fixtures and improvements located on the Real
Property, in each case free and clear of all Encumbrances except Permitted
Encumbrances.
6.07. INTELLECTUAL PROPERTY. Section 6.07 of the Disclosure
Schedule sets forth an accurate and complete list of all active patents, pending
patent applications, trademarks, pending trademark applications and trade names
licensed to, applied for or registered in the name of, the Company or any
Subsidiary, or in which the Company or any Subsidiary has any rights, and all
active copyright registrations or pending applications for registration of the
Company or any Subsidiary, or in which the Company or any Subsidiary has any
rights, in each case which are material to the conduct of the business of the
Company, together with the application or registration number, the jurisdiction
and the record owner of such intellectual property (the "Listed Intellectual
Property"). Except as set forth in Section 6.07 of the Disclosure Schedule,
with respect to the Listed Intellectual Property insofar as it relates to rights
in the United States of America or any state or jurisdiction therein (the
"Domestic Listed Intellectual Property"), no registration relating thereto has
lapsed, expired or been abandoned or canceled or is the subject of cancellation
proceedings except for such lapses, expirations, abandonments, cancellations or
proceedings that individually or in the aggregate do not have a Material Adverse
Effect. The Company and the Subsidiaries own or possess adequate and
enforceable licenses (free of Encumbrances other than Permitted Encumbrances) to
use all Listed Intellectual Property and any other material intellectual
property rights (including, without limitation, drawings, trade secrets,
know-how and confidential information) necessary to permit the Company and the
Subsidiaries to conduct their businesses as now conducted (the Listed
Intellectual Property and the other material intellectual property rights
hereinafter collectively called the "Intellectual Property"). Section 6.07 of
the Disclosure Schedule sets forth all material licenses to which the Company or
any of the Subsidiaries is a party relating to the Intellectual Property.
Except as set forth on Section 6.07 of the Disclosure Schedule, no claim is
pending or, to the knowledge of the Company, threatened nor to the knowledge of
the Company is there any basis for any claim which would have a reasonable
likelihood of prevailing, to the effect that the present or past operations
within the last three years of the Company or any Subsidiary infringes upon or
conflicts with the rights of any other person in respect of any intellectual
property, and no claim is pending or, to the knowledge of the Company,
threatened nor to the knowledge of the Company is there any basis for any claim
which would have a reasonable likelihood of prevailing, to the effect that any
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Intellectual Property is invalid or unenforceable; excluding, however, claims or
potential claims which, in the aggregate, are not reasonably likely to have a
Material Adverse Effect. To the Company's knowledge, except as set forth on
Section 6.07 of the Disclosure Schedule, no person is materially infringing upon
or violating any of the Intellectual Property; and no claim is pending or, to
the Company's knowledge, threatened to that effect. Except as set forth on
Section 6.07 of the Disclosure Schedule, no contract, agreement or understanding
between the Company or any of the Subsidiaries and any party exists and no
Encumbrances exist which in either case would impede or prevent the continued
use by the Company, the Subsidiaries or their successors of the entire right,
title and interest of the Company and the Subsidiaries in and to any of the
Intellectual Property; excluding, however, contracts, agreements, understandings
and Encumbrances which, in the aggregate, are not reasonably likely to have a
Material Adverse Effect.
6.08. COMMITMENTS.
(a) Section 6.08(a) of the Disclosure Schedule sets forth an
accurate and complete list of each material contract or material agreement,
whether written or oral (including any and all amendments thereto) to which the
Company or any of the Subsidiaries is a party or by which the Company or any of
the Subsidiaries is bound which (i) relates to the borrowing of money or the
guaranty of any obligation to borrow money; (ii) involves revenues or
expenditures in excess of $250,000 (excluding purchase and sale orders entered
into in the ordinary course consistent with past practice); (iii) is a
collective bargaining agreement; (iv) obligates the Company or any Subsidiary
not to compete with any business or which otherwise restrains or prevents the
Company or any of the Subsidiaries from carrying on any lawful business
(excluding customary restrictive covenants contained in agreements identified
pursuant to clause (i) above); (v) relates to employment, compensation,
severance, consulting or indemnification between the Company or any Subsidiary
and any of their respective officers, directors, employees or consultants who
are entitled to compensation thereunder in excess of $100,000 per annum; or (vi)
is material to the assets, business, operations or financial condition of the
Company and the Subsidiaries taken as a whole (collectively, the "Commitments").
The Company previously has furnished or made available to Purchaser true and
correct copies of all Commitments. To the Company's knowledge, all of the
Commitments are enforceable by the Company or the Subsidiary which is a party
thereto in accordance with their terms except to the extent that such
enforceability (a) may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar laws relating to creditors' rights generally, and
(b) is subject to general principles of equity and public policy. Except as set
forth in Section 6.08(a) of the Disclosure Schedule, neither the Company nor any
of the Subsidiaries is in breach or default under (and no event has occurred
which with notice or the passage of time or both would constitute a breach or
default under) any agreements listed or required to be listed in Section 6.08(a)
of the Disclosure Schedule nor, to the knowledge of the Company, is any other
party to any of the agreements listed or required to be listed in Section
6.08(a) of the Disclosure Schedule in default thereunder (and no event has
occurred which with notice or the passage of time or both would constitute a
breach or default thereunder); excluding, however, in each instance, breaches or
defaults which, in the aggregate, are not reasonably likely to have a Material
Adverse Effect.
(b) Except as set forth in Section 6.08(b) of the Disclosure
Schedule, neither the Company nor any Subsidiary is a party to any material
contract, agreement or
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understanding which contains a "change in control," "potential change in
control" or similar provision or which could result in a potential "parachute
payment" within the meaning of Section 280G of the Internal Revenue Code.
Except as set forth in Section 6.08(b) of the Disclosure Schedule, the
consummation of the transactions contemplated hereby will not (either alone or
upon the passage of time and/or occurrence of any additional acts or events)
result in any payment (severance pay or otherwise) becoming due from the Company
or any Subsidiary to any person or accelerate the time of payment or vesting, or
increase the amount of compensation due, any person; excluding, however, any
such payments, accelerations or increases which could have occurred upon the
passage of time and/or occurrence of any additional acts or events even if the
"change of control" or "potential change of control" occurring upon the
execution and delivery of this Agreement and the consummation of the
transactions contemplated herein did not occur.
(c) Section 6.08(c) of the Disclosure Schedule sets forth as
accurate and complete list of all insurance policies maintained by the Company
and its Subsidiaries (the "Insurance Policies"), and the Insurance Policies
provide substantially equivalent coverage to that which has been maintained by
the Company and the Subsidiaries since January 1, 1995.
6.09. LITIGATION. Except as set forth on Section 6.09 of the
Disclosure Schedule, there is no action, suit, investigation or proceeding
("Litigation") pending or, to the Company's knowledge, threatened, involving the
Company or any of the Subsidiaries before any court or before any public body or
authority, domestic or foreign (a "Government Entity") which individually or in
the aggregate is reasonably likely to have a Material Adverse Effect or which
would be reasonably likely to have a material adverse effect on the ability of
the Company to perform its obligations hereunder, or which seeks to enjoin or
obtain damages in respect of the consummation of the transactions contemplated
hereby. Neither the Company nor any of the Subsidiaries is subject to any
outstanding orders, rulings, judgments or decrees that would be reasonably
likely to have a Material Adverse Effect. Section 6.09 of the Disclosure
Schedule also sets forth a list of each outstanding order, ruling, judgment or
decree to which the Company or any Subsidiary or any of its or their assets is
bound or subject.
6.10. COMPLIANCE WITH LAWS. The Company and the Subsidiaries are
in compliance with all applicable laws, rules, regulations, ordinances, decrees
or orders of any Government Entity currently in effect, except where the failure
to comply therewith is not reasonably likely to have a Material Adverse Effect.
The Company and the Subsidiaries have all governmental permits, licenses and
authorizations necessary for the conduct of their businesses as presently
conducted ("Permits") and are in compliance with the terms of the Permits,
except for any non-compliance which is not reasonably likely to have a Material
Adverse Effect.
6.11. ENVIRONMENTAL MATTERS.
(a) Except as set forth on Section 6.11 of the Disclosure
Schedule, or except as would not, in the aggregate, be reasonably likely to
result in a fine, penalty or cost that would have a Material Adverse Effect:
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(i) the Company and the Subsidiaries are in compliance
with Environmental Laws;
(ii) neither the Company nor any of the Subsidiaries has
received written notice from a Government Entity alleging that the
Company or any Subsidiary is not in compliance with Environmental
Laws; and
(iii) no Environmental Lien has attached to any property
that is currently owned or operated by the Company or any Subsidiary.
(b) "Environmental Laws" shall mean all statutes, regulations,
ordinances and similar provisions having the force and effect of law of any
Governmental Entity concerning the pollution or protection of the environment,
including without limitation the federal Clean Air Act, the Clean Water Act, the
Solid Waste Disposal Act, the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, and the Emergency Planning and
Community Right-To-Know Act of 1986.
(c) "Environmental Lien" shall mean a lien, either recorded or
unrecorded, in favor of any Governmental Entity, arising under Environmental
Laws.
6.12. CORPORATE POWER AND AUTHORITY; NO VIOLATIONS. The Company
has full corporate power and authority to execute, deliver and perform this
Agreement and to consummate the transactions contemplated hereby. The
execution, delivery and performance by the Company of this Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly authorized by all necessary corporate action on the part of the Company,
including due and valid authorization by the Board of Directors and the
Stockholders of the Company and no other corporate proceedings on the part of
the Company are necessary to authorize this Agreement or to consummate the
transactions contemplated hereby. This Agreement has been duly and validly
executed and delivered by the Company and constitutes the valid and binding
obligation of the Company, enforceable against the Company in accordance with
its terms, except to the extent that such enforceability (i) may be limited by
bankruptcy, insolvency, reorganization, moratorium or other similar laws
relating to creditors' rights generally, and (ii) is subject to general
principles of equity. Except as set forth in Section 6.12 of the Disclosure
Schedule, neither the execution, delivery and performance by the Company of this
Agreement nor the consummation by the Company of the transactions contemplated
hereby will, with or without the giving of notice or the passage of time, or
both, (x) violate any provision of law, rule, regulation, order, judgment, writ,
injunction or decree applicable to the Company or any of the Subsidiaries or any
of their properties or assets, (y) conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any note, bond, mortgage, indenture, license, contract or agreement to
which the Company or any of the Subsidiaries is a party or by which the Company
or any of the Subsidiaries or any of their assets is bound or result in the
imposition of any Encumbrance (other than Permitted Encumbrances) upon any of
the assets of the Company or any of the Subsidiaries; or (z) conflict with or
violate any provision of the Articles of Organization or bylaws (or
substantially equivalent documents) of the Company or any of the Subsidiaries,
except, in the case of (x) or (y), for
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violations, conflicts, breaches, defaults, accelerations, terminations,
modifications, cancellations or failures to give notice or Encumbrances which in
the aggregate would not be reasonably likely to have a Material Adverse Effect
and would not prevent or materially delay, hinder or impair the consummation of
the transactions contemplated hereby.
6.13. EMPLOYEE BENEFIT PLANS.
(a) Section 6.13 of the Disclosure Schedule sets forth an
accurate and complete list of each employee benefit plan (as such term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA")), and any other bonus, deferred compensation, incentive
compensation, stock, severance or other plan or arrangement, other than a
non-material fringe benefit plan (each of the foregoing, a "Benefit Plan"),
currently maintained, contributed to or required to be contributed to by the
Company or any Subsidiary or with respect to which the Company or any Subsidiary
has any material liability or obligation. With respect to each Benefit Plan,
the Company previously has furnished to Purchaser a true and correct copy of,
where applicable, (i) the most recent annual report (Form 5500) filed with the
IRS, (ii) the plan document, (iii) each trust agreement and group annuity
contract or other funding vehicle, if any, relating to such Benefit Plan,
(iv) the most recent actuarial report or valuation relating to such Benefit Plan
(in the event such Benefit Plan is subject to Title IV of ERISA), (v) the most
recent summary plan description and (vi) the most recent determination letter
issued by the IRS.
(b) Neither the Company nor any Subsidiary has, or during the
most recent six years has had, an obligation to contribute to any multiemployer
plan (as defined in Section 3(37) of ERISA) and, no Benefit Plan is or ever was
subject to Title IV of ERISA. Except as set forth in Section 6.13 of the
Disclosure Schedule with respect to the Benefit Plans or other benefit or
compensation arrangements, all required contributions and payments to date by
the Company have been timely made or, if not yet due and owing, properly
accrued.
(c) Each of the Benefit Plans has been administered in
accordance with its terms in all material respects and is in compliance in all
material respects with applicable laws and regulations.
(d) Except as set forth in Section 6.13 of the Disclosure
Schedule, each of the Benefit Plans which is intended to be a qualified plan
within the meaning of Section 401(a) of the Code is so qualified and has been
determined by the IRS to be so qualified from its inception to the present, and,
to the knowledge of the Company, nothing has occurred to cause the loss of such
qualified status.
(e) Except as set forth in Section 6.13 of the Disclosure
Schedule, no Benefit Plan provides health, medical or life insurance benefits
with respect to current or former employees of the Company or any Subsidiary
beyond their retirement or other termination of service other than (i) coverage
mandated by applicable law, or (ii) benefits the full cost of which are borne by
the current or former employee (or his or her beneficiary).
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(f) Except for the pension benefit obligations to retired
executives set forth in Section 6.13 of the Disclosure Schedule, neither the
Company nor any Subsidiary maintains, participates in, contributes to, or has
any liability or obligation with respect to any defined benefit plan (as defined
in Section 3(35) of ERISA). Section 6.13 of the Disclosure Schedule lists all
frozen or terminated defined benefit plans, whether or not tax-qualified,
previously established or maintained by or on behalf of the Company or any
Subsidiary, or with respect to which the Company or any Subsidiary contributed
or had an obligation to contribute or otherwise had or has any liability or
obligation, and with respect thereto also lists any remaining or outstanding
obligations or liabilities.
(g) Neither the Company nor any Subsidiary has any liability
with respect to any "employee benefit plan" (as defined in Section 3(3) of
ERISA) solely by reason of being treated or having been treated as a single
employer under Section 414 of the Code with any trade, business or entity other
than the Company and the Subsidiaries.
(h) No audit or investigation by any governmental authority is
pending, or, to the knowledge of the Company, threatened, regarding any Benefit
Plan, and, neither the Company nor any Subsidiary nor, to the knowledge of the
Company, any other party dealing with any Benefit Plan has engaged in any
non-exempt prohibited transactions (within the meaning of Section 406 of ERISA
or Section 4975 of the Code).
6.14. CONSENTS. Except as set forth in Section 6.14 of the
Disclosure Schedule, no consent, approval or authorization of, or exemption by,
or filing with, any governmental authority (other than pursuant to the
Hart-Scott-Rodino Antitrust Improvements Act (the "HSR Act")) is required in
connection with the execution, delivery and performance by the Company of this
Agreement or the taking of any other action contemplated hereby, excluding,
however, consents, approvals, authorizations, exemptions and filings, if any,
which Purchaser is required to obtain or make and consents or authorizations
which, if not obtained, are not reasonable likely to have a Material Adverse
Effect.
6.15. TAXES. Except in each case as set forth in Section 6.15 of
the Disclosure Schedule:
(a) Each of the Company, the Subsidiaries, and any affiliated,
combined or unitary group of which any such corporation is a member
(individually, an "Affiliate" of the Company and, collectively, the Company's
"Affiliates") has: ((i)timely filed and in all material respects correctly
prepared all returns, declarations, reports, estimates, information returns and
statements ("Returns") required to be filed or sent by or with respect to them
in respect of any Taxes (as hereinafter defined); ((ii)properly paid all Taxes
that are shown due and payable on such Returns; ((iii)established on their
books and records and in the consolidated financial statements of the Company
and the Subsidiaries included in the Company Reports reserves in accordance with
generally accepted accounting principles for the payment of all accrued Taxes
not yet due and payable; and ((iv)complied in all material respects with all
applicable laws, rules and regulations relating to the payment and withholding
of Taxes from employees and other persons.
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(b) There are no liens for Taxes upon the assets of the Company
or any of the Subsidiaries, except liens for Taxes not yet due and other
immaterial liens.
(c) No written claim or deficiency for any Taxes has been
asserted against the Company or any of the Subsidiaries which has not been
resolved and paid in full.
(d) There are no outstanding waivers or comparable consents
given by the Company or any of the Subsidiaries regarding the application of the
statute of limitations with respect to any Taxes or Returns.
(e) No proceedings before any Government Entity are presently
pending with regard to any Taxes or Returns and the Company and the Subsidiaries
have not received any written notices of any such audits or proceedings.
(f) For purposes of this Agreement, "Taxes" shall mean federal,
state, local or foreign income, gross receipts, windfall profits, severance,
property, production, sales, use, license, excise, franchise, employment,
withholding, alternative minimum or add-on minimum or similar taxes imposed on
the income, properties or operations of the Company or any of the Subsidiaries,
customs duties or levies of any kind, together with any interest, additions or
penalties with respect thereto and any interest in respect of such additions or
penalties.
6.16. DISCLAIMER. Except as set forth in this Agreement, neither
the Company, any Subsidiary nor any officer, director, employee, agent,
stockholder, or affiliate of the Company or any Subsidiary (such officers,
directors, employees, agents, stockholders (including the Stockholders) and
affiliates being collectively referred to herein as the "Company Related
Parties") makes any representation or warranty, express or implied (including
those referred to in section 2-312 of the N.Y.S. Uniform Commercial Code or in
any statute applicable to real property), about or concerning the assets,
liabilities and business of the Company and the Subsidiaries.
ARTICLE 7
REPRESENTATIONS AND WARRANTIES OF PURCHASER
The Purchaser hereby represents and warrants to the Company as
follows:
7.01. ORGANIZATION; CAPITALIZATION. Purchaser is a corporation
duly organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation, and has all requisite corporate power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted, and to execute, deliver and perform this Agreement
and to consummate the transactions contemplated hereby. The authorized capital
stock of Purchaser consists solely of 1,000 shares of Common Stock, par value
$.01 per share, of which 1,000 are outstanding and owned of record and
beneficially by TWCC Holdings Company, Inc. a Massachusetts corporation .
There are outstanding no securities convertible into, exchangeable for, or
carrying the right to acquire, equity securities of Purchaser, or subscriptions,
warrants, options,
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calls, convertible securities, registration or other rights or other
arrangements or commitments obligating Purchaser to issue, transfer or dispose
of any of its equity securities or any ownership interest therein.
7.02. CORPORATE POWER AND AUTHORITY; EFFECT OF AGREEMENT. The
execution, delivery and performance by Purchaser of this Agreement and the
consummation of the transactions contemplated hereby have been duly authorized
by all necessary corporate action on their part, including due and valid
authorization by the Board of Directors of Purchaser and the stockholders of
Purchaser. This Agreement has been duly and validly executed and delivered by
Purchaser and constitutes the valid and binding obligation of Purchaser,
enforceable against Purchaser in accordance with its terms, except to the extent
that such enforceability (a) may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws relating to creditors' rights
generally, and (b) is subject to general principles of equity. The execution,
delivery and performance by Purchaser of this Agreement and the consummation by
it of the transactions contemplated hereby will not, with or without the giving
of notice or the lapse of time, or both, (x) violate any provision of law, rule,
regulation, any order, judgment, writ, injunction or decree applicable to it,
(y) conflict with, result in a breach of, constitute a default under, result in
the acceleration of, create in any party the right to accelerate, terminate,
modify, or cancel, or require any notice under any material agreement to which
Purchaser is a party or by which Purchaser or Purchaser's assets are bound; or
(z) violate any provision of their respective Articles of Organization or
bylaws; except, in the case of (x) or (y), for violations, conflicts, breaches,
defaults, accelerations, terminations, modifications, cancellations, or failures
to give notice, which in the aggregate, would not materially delay, hinder or
impair the consummation of the transactions contemplated hereby.
7.03. CONSENTS. Except as set forth in Section 7.03 of the
Disclosure Schedule, no consent, approval or authorization of, or exemption by,
or filing with, any governmental authority (other than pursuant to the HSR Act)
is required in connection with the execution, delivery and performance by
Purchaser of this Agreement, or the taking of any other action contemplated
hereby excluding, however, consents, approvals, authorizations, exemptions and
filings, if any, which the Company is required to obtain or make.
7.04. LITIGATION. There is no Litigation pending or to
Purchaser's knowledge threatened, involving Purchaser or any of its affiliates
(a) which is reasonably likely to have a material adverse effect on the ability
of Purchaser to perform its respective obligations under this Agreement or
(b) which seeks to enjoin or obtain damages in respect of the consummation of
the transactions contemplated hereby. Neither Purchaser nor any of its
affiliates is subject to any outstanding orders, rulings, judgments or decrees
which would be reasonably likely to have a material adverse effect on the
ability of Purchaser to perform its obligations under this Agreement.
7.05. PURCHASE FOR INVESTMENT. Purchaser is acquiring the Company
for investment and not with a view to any public resale or other distribution
thereof in violation of the Securities Act or any applicable state securities
laws.
7.06. ADEQUATE FUNDS. Purchaser has, or has access to, adequate
funds to meet its obligations under this Agreement.
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ARTICLE 8
COVENANTS OF THE PARTIES
8.01. EFFORTS. Subject to the terms and conditions herein
provided, each of the parties hereto and their respective affiliates agree to
use their commercially reasonable efforts to take, or cause to be taken, all
action, and to do, or cause to be done, all things necessary, proper or
advisable under applicable laws and regulations or otherwise to consummate and
effect the transactions contemplated by this Agreement on or before October 31,
1996, including, without limitation, obtaining all required consents and
approvals, making all required filings and applications and complying with or
responding to any requests by governmental agencies.
8.02. CONDUCT OF BUSINESS.
(a) Except as may be otherwise contemplated by this Agreement or
Section 8.02 of the Disclosure Schedule or any agreements or arrangements
disclosed in the Disclosure Schedule or as Purchaser may otherwise consent to in
writing, from the date hereof and prior to the Effective Time, the Company will,
and will cause each of the Subsidiaries to operate its business only in the
ordinary course consistent with past practice.
(b) Without limiting the generality of the foregoing, except as
may be otherwise contemplated by this Agreement or Section 8.02 of the
Disclosure Schedule or any agreements or arrangements disclosed in the
Disclosure Schedule or as Purchaser may otherwise consent to in writing, from
the date hereof and prior to the Effective Time, neither the Company nor any of
the Subsidiaries will:
(i) (A) declare, set aside or pay any dividend or other
distribution (whether in cash, stock or property or any combination
thereof) in respect of any of its capital stock; (B) split, combine or
reclassify any of its capital stock or issue or authorize or propose
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (C) amend the terms
of, repurchase, redeem or otherwise acquire, or permit any Subsidiary
to repurchase, redeem or otherwise acquire, any of its securities or
any securities of the Subsidiaries, or propose to do any of the
foregoing;
(ii) authorize for issuance, issue, sell, deliver or
agree or commit to issue, sell or deliver (whether through the
issuance or granting of options, warrants, commitments, subscriptions,
rights to purchase or otherwise) any stock of any class or any other
securities (including indebtedness having the right to vote) or equity
equivalents (including, without limitation, stock appreciation
rights), or amend in any respect any of the terms of any such
securities or equity equivalents outstanding on the date hereof;
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(iii) amend or propose to amend its Articles of
Organization or by-laws or equivalent documents;
(iv) acquire, sell, lease, encumber, transfer or dispose
of any assets (except that the Company and the Subsidiaries may sell
inventory in the ordinary course of business, consistent with past
practice) or make any capital expenditures aggregating over $100,000,
except in each case pursuant to Commitments in effect on the date
hereof or pursuant to the Company's capital expenditure budget; modify
or amend any Commitments (including any relating to Indebtedness)
outside of the ordinary course of business; enter into any material
contract, commitment or transaction outside the ordinary course of
business; reduce the coverage provided by the Insurance Policies;
(v) except for revolving credit loans under the
Revolving Credit Facility and letters of credit obtained in the
ordinary course of business or to make payments contemplated
hereunder, incur or assume any indebtedness for borrowed money or
guarantee any such indebtedness or issue or sell any debt securities
or warrants or rights to acquire any debt securities of the Company or
any of the Subsidiaries or guarantee (or become liable for) any debt
of others or mortgage, pledge or otherwise encumber any assets or
consensually create any Encumbrance thereupon other than Permitted
Encumbrances;
(vi) make any loans, advances or capital contributions
outside of the ordinary course of business, except to wholly-owned
Subsidiaries;
(vii) except as may otherwise be required by generally
accepted accounting principles or the Financial Accounting Standards
Board, (A) change any of the accounting principles or practices used
by it or (B) make any tax election except in the ordinary course of
business; or
(viii) (A) enter into, adopt, amend or terminate any
Benefit Plan or any agreement, arrangement, plan or policy between
itself and one or more of its directors or executive officers or
(B) increase in any manner the compensation or fringe benefits of any
director, officer or employee or pay any benefit not required by any
plan or arrangement as in effect as of the date hereof, except in the
case of officers and employees for normal increases in compensation
and normal year-end bonuses in the ordinary course of business and
consistent with past practice; or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing;
(ix) agree to take any of the foregoing actions.
(c) Notwithstanding anything else in this Section 8.02, the Company
may pay to certain executives on or before the Closing Date the sum of (i)
$790,000 (representing the aggregate "grossed up" tax benefit to the Company on
account of the allocation of Class C Common to such executives described on
Section 8.02 of the Disclosure Schedule) and (ii) an amount not to exceed
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$1,500,000 (such sum, the "Management Payment"). The payment to executives of
the Management Payment shall be in addition to any salary or bonus such
executives are otherwise entitled to receive under current company practice or
existing agreements. The allocation of Class C Common described on Section 8.02
of the Disclosure Schedule and the Management Payment shall be made so as to
assure that the tax deductions will occur in the taxable year of the Company
ending on the Closing Date. Purchaser and the Company agree that the payment
under clause (i), above, shall be reduced to the extent that such payment
exceeds the tax benefits to be realized for taxable years of the Company ending
on or before the Closing Date from the allocation of Class C Stock described on
Section 8.02 of the Disclosure Schedule.
8.03. ACCESS. From the date hereof and prior to the Effective
Time, the Company shall provide Purchaser with such information as Purchaser may
from time to time reasonably request with respect to the Company and the
Subsidiaries and their assets and properties and the transactions contemplated
by this Agreement, and shall provide Purchaser and its representatives
reasonable access during regular business hours and upon reasonable notice to
the personnel, representatives, properties, books and records of the Company and
the Subsidiaries as Purchaser may from time to time reasonably request. Any
disclosure whatsoever during such investigation by Purchaser shall not
constitute any enlargement or additional representations or warranties of the
Company or any of its Affiliates beyond those specifically set forth in this
Agreement. All such information and access shall be subject to the terms and
conditions of the Confidentiality Agreement, dated June 4, 1996 executed by
Investcorp International, Inc., acting on behalf of Purchaser (the
"Confidentiality Agreement"), as though Purchaser was a party to such
Confidentiality Agreement.
8.04. NO SOLICITATION. Neither the Company nor any of the
Subsidiaries, Affiliates, officers, directors, employees, representatives or
agents, shall, directly or indirectly, encourage, solicit, participate in,
initiate or continue discussions or negotiations with, or provide any
information to, any person (other than Purchaser and its affiliates and
representatives) concerning any merger, sale of assets, sale of shares of
capital stock or similar transactions involving the Company or any Subsidiary or
division of the Company and any existing discussions or negotiations with third
persons relating thereto shall be terminated immediately; PROVIDED, HOWEVER that
the directors of the Company shall be permitted to provide information regarding
the transactions contemplated by this Agreement to Stockholders and to entities
regulating such Stockholders.
8.05. BOOKS AND RECORDS; PERSONNEL. For a period of seven (7)
years from the Closing Date, Purchaser shall, and shall cause the Company and
the Subsidiaries to, provide to any Stockholder for any purpose relating to such
Stockholder's ownership of any securities of the Company, access to the books
and records of the Company upon reasonable advance written notice during regular
business hours for the sole purpose of obtaining information for use as
aforesaid and will permit such Stockholder to make such extracts and copies
thereof as may be necessary. Such Stockholder shall reimburse the Company or
the Subsidiary for the reasonable out-of-pocket expenses incurred by any of them
in performing the covenants contained in this Section 8.05.
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8.06. LIABILITIES AND INDEMNIFICATION.
(a) Purchaser understands and agrees that, from and after the
Closing, neither the Stockholders nor any of their affiliates shall have any
liability or responsibility for any liability or obligation of the Company or
any of the Subsidiaries (such liabilities and obligations, being collectively
referred to as the "Liabilities"). Accordingly, Purchaser agrees that,
effective upon the Closing, Purchaser shall be responsible for and indemnify the
Stockholders and their affiliates and hold each of them harmless against any
liability, loss, damage, claim, cost or expense (including, without limitation,
reasonable attorneys' fees and disbursements) (collectively, "Losses") incurred
or suffered by any of them arising out of any of the Liabilities which were
reflected in the Balance Sheet, disclosed in the Disclosure Schedule or incurred
in the ordinary course of business since June 29, 1996.
(b) After the Effective Time, Purchaser, the Surviving
Corporation and each Subsidiary shall exculpate (to the greatest extent
permitted by applicable law) and shall indemnify, defend and hold harmless, the
present and former officers and directors of the Company and the Subsidiaries
(each an "Indemnified Party") against all Losses, arising out of actions or
omissions in their capacities as such occurring at or prior to the Effective
Time to the fullest extent permitted under Massachusetts law or the Company's
Articles of Organization or Bylaws in effect at the date of this Agreement,
including, without limitation, provisions relating to advances of expenses
incurred in the defense of any action or suit, PROVIDED that the Surviving
Corporation shall pay for only one counsel for all Indemnified Parties unless
the use of one counsel for such Indemnified Parties would present such counsel
with a conflict of interest; subject to such Indemnified Party's agreement to
return any advanced funds if a court of competent jurisdiction, after all time
for appeals having been exhausted, shall have determined that such Indemnified
Party is not entitled to such amounts under Massachusetts law or the Company's
Articles of Organization or Bylaws.
8.07. INSURANCE. The Surviving Corporation shall maintain, and
Purchaser and its affiliates shall cause the Surviving Corporation to maintain,
the Company's existing officers' and directors' liability insurance, if
available, for a period of not less than seven years after the Effective Time;
PROVIDED, that the Surviving Corporation may substitute therefor policies of
insurers with at least equal rating with at least the same coverage containing
terms and conditions which are no less advantageous to the beneficiaries thereof
and, PROVIDED FURTHER, that the Surviving Corporation shall not be required to
expend annual premiums for such insurance in excess of 150% of the amount of
such annual premiums currently paid by the Company.
8.08. SUBSEQUENT DISCLOSURES BY COMPANY. If, at any time prior to
the Closing, the Company becomes aware of the failure of any of its
representations and warranties in this Agreement to be true and correct (whether
as a result of the discovery of facts or circumstances not known as of the date
of this Agreement, the occurrence of any developments after the date of this
Agreement, or any other reason), which the Company believes is reasonably likely
to have or constitute a Material Adverse Effect, the Company shall immediately
so notify Purchaser in writing (a "Section 8.08 Notice").
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8.09. ENVIRONMENTAL MATTERS. Purchaser and the Company agree that
the only representations and warranties of the Company herein as to any
environmental matters are those contained in Section 6.11.
8.10. INDEBTEDNESS. At Closing, Purchaser shall cause the Company
to repay all Debt of the Company or Purchaser shall have negotiated the right to
keep all Indebtedness in place notwithstanding consummation of the Merger.
ARTICLE 9
CONDITIONS TO PURCHASER'S OBLIGATIONS
The obligations of Purchaser to consummate the Merger shall be subject
to the satisfaction (or waiver) on or prior to the Closing Date of all of the
following conditions:
9.01. REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE COMPANY.
(a) The Company shall have performed and complied in all
material respects with its agreements and covenants contained herein to be
performed on or prior to the Closing Date.
(b) Except as otherwise contemplated by this Agreement, the
representations and warranties of the Company contained herein shall be true and
correct at and as of the earlier to occur of (i) the Closing or (ii) October 31,
1996, ignoring for this purpose all qualifications as to Material Adverse Effect
or otherwise as to materiality in such representations and warranties. This
condition will be deemed to be satisfied unless the failures of such
representations and warranties (ignoring such qualifications) to be true and
correct at and as of the earlier of said dates (with all such failures
considered in the aggregate) would have or constitute a Material Adverse Effect.
If, in making a determination pursuant to this Section 9.01(b) as to whether all
representations and warranties of the Company set forth herein are true and
correct at and as of the Closing Date, (i) there are no failures of any such
representations or warranties other than the failure of a representation or
warranty disclosed in a Section 8.08 Notice, and (ii) Purchaser did not exercise
its right to terminate this Agreement pursuant to Section 11.01(c) hereof, then
this condition will be deemed to be satisfied notwithstanding such failure;
PROVIDED, HOWEVER, that if the Company delivers more than one Section 8.08
Notice, nothing herein shall preclude Purchaser from considering all Section
8.08 Notices in the aggregate in making a determination pursuant to this Section
9.01(b).
(c) Purchaser shall have received a certificate of the Company,
dated as of the Closing Date and signed by the Chief Executive Officer and the
Chief Financial Officer of the Company, certifying as to the fulfillment of the
conditions set forth in this Section 9.01 (the "Company's Certificate").
(d) Purchaser shall have received (i) evidence from the Company
of the waiver by the beneficiaries under the
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MEP of any rights to receive aggregate payments under the MEP in excess of
$5,043,941 and (ii) evidence from the Company that each Stockholder has agreed
to his, her or its respective allocation of the Merger Consideration and has
waived and releases the Company from any claims by such Stockholder to receive
any additional amounts of Merger Consideration in excess of that provided for
herein or any dividends other than those payable from the Merger Consideration
as contemplated by Exhibit 3.01 hereto, or an opinion from counsel for the
Company, in form and substance reasonably acceptable to Purchaser and its
counsel, that no further payments of Merger Consideration are owed by the
Company to the Stockholders pursuant to this Agreement and that no such
additional dividends are payable.
9.02. NO PROHIBITION. No order, decree or injunction of any court
or government authority shall be in effect which prohibits the consummation of
the transactions contemplated hereby.
9.03. THIRD PARTY CONSENTS. The Company shall have received all
consents, authorizations and approvals from non-governmental third parties, in
form reasonably acceptable to Purchaser, which, based upon Purchaser's
representations to the Company regarding the net worth of the Surviving
Corporation, are necessary in order to enable (a) Purchaser to consummate the
transactions contemplated hereby and (b) the Company and the Subsidiaries to
conduct their businesses after the Effective Time on the same basis as conducted
prior to the date hereof (except with respect to clauses (a) and (b) for the
failure to obtain any consents, approvals, authorizations, exemptions and
waivers the failure of which to obtain would not, in the aggregate, reasonably
be expected to result in a Material Adverse Effect and consents necessary to
permit outstanding Indebtedness to remain outstanding after the Closing Date)
(the "Required Consents"). The Required Consents are listed on Section 9.03 of
the Disclosure Schedule.
9.04. GOVERNMENTAL CONSENTS. The applicable waiting period under
the HSR Act shall have expired or been terminated and all other consents,
approvals, authorizations, exemptions and waivers from Government Entities that
shall be required in order to (a) enable Purchaser to consummate the
transactions contemplated hereby (except for such consents, approvals,
authorizations, exemptions and waivers, the absence of which would not prohibit
consummation of such transactions or render such consummation illegal) and
(b) enable the Company and the Subsidiaries to conduct their businesses after
the Effective Time on the same basis as conducted prior to the date hereof shall
have been obtained (excluding, however, the failure to obtain new Certificates
or transfer of the existing Certificates and further excluding the failure to
obtain any consents, approvals, authorizations, exemptions and waivers the
failure of which to obtain would not reasonably be expected to result in a
Material Adverse Effect) (the "Required Government Consents"). The Required
Government Consents are listed on Section 9.04 of the Disclosure Schedule.
9.05. COMPANY COUNSEL OPINION. Purchaser shall have received an
opinion from Kirkland & Ellis dated the Closing Date, substantially in form and
substance reasonably satisfactory to Purchaser.
9.06. TITLE INSURANCE. The Company shall have delivered, at
Purchaser's sole cost and expense, an ALTA Owner's Policy of Title Insurance
Form B-1970 for each parcel of Owned
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Property issued by a title insurer reasonably satisfactory to Purchaser insuring
title to the Real Property in Purchaser subject only to the Permitted
Encumbrances.
9.07. SURVEYS. The Company shall have delivered, at Purchaser's
sole cost and expense, a current ALTA/ACSM survey of each parcel of Owned
Property made in accordance with the 1992 ALTA/ACSM standards including Table A
Items Nos. 1-4 and 6-13.
9.08. SHAREHOLDER APPROVAL. Appropriate shareholder approval, in
form and substance reasonably satisfactory to Purchaser and its counsel, shall
have been obtained by the Company and any relevant Subsidiary under Internal
Revenue Code Section 280G that will exempt the Company and any relevant
Subsidiary from any loss of deduction under Code Section 280G and exempt any
recipient from any excise tax under Code Section 4999 for any excess parachute
payments paid or payable to any employee as a result of the Merger.
9.09. RELEASE OF LIENS. Upon payment by the Company of the Debt
at Closing, the Company shall be immediately able to obtain the release of all
Encumbrances on all assets of the Company securing such Debt, and shall be able
to provide or arrange to be provided to Purchaser releases and other documents
in form and substance reasonably satisfactory to Purchaser to demonstrate such
release of Encumbrances and to promptly thereafter clear all public records of
any such Encumbrances.
ARTICLE 10
CONDITIONS TO THE COMPANY'S OBLIGATIONS
The obligations of the Company to consummate the Merger shall be subject to
the satisfaction (or waiver) on or prior to the Closing Date of all of the
following conditions:
10.01. REPRESENTATIONS, WARRANTIES AND COVENANTS OF PURCHASER.
(a) Purchaser each shall have performed and complied in all
material respects with their respective agreements and covenants contained
herein to be performed on or prior to the Closing Date.
(b) The representations and warranties of Purchaser contained
herein shall be true and correct in all respects at and as of the earlier of
October 31, 1996 and the Closing Date, ignoring for this purpose all
qualifications as to materiality in such representations and warranties, except
where any and all failures of such representations and warranties to be true and
correct in all respects at and as of the earlier of said dates (with all such
failures considered in the aggregate) would not have a Material Adverse Effect
on the ability of Purchaser to perform its obligations under this Agreement.
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(c) The Company and its Stockholders shall have received
certificates of Purchaser, dated as of the Closing Date and signed by two
officers of Purchaser, certifying as to the fulfillment of the conditions set
forth in this Section 10.01 (the "Purchaser's Certificate").
10.02. NO PROHIBITION. No order, decree or injunction of any court
or government authority shall be in effect which prohibits the consummation of
the transactions contemplated hereby.
10.03. GOVERNMENTAL CONSENTS. The applicable waiting period under
the HSR Act shall have expired or been terminated and all other consents,
approvals, authorizations, exemptions and waivers from Government Entities that
shall be required in order to enable the Company to consummate the transactions
contemplated hereby shall have been obtained (except for such consents,
approvals, authorizations, exemptions and waivers, the absence of which would
not prohibit consummation of such transactions or render such consummation
illegal).
10.04. REPAYMENT OF INDEBDTEDNESS. At Closing, Purchaser shall
cause the Company to repay all Debt of the Company or Purchaser shall have
negotiated the right to keep all Indebtedness in place notwithstanding the
consummation of the Merger.
10.05. PURCHASER COUNSEL OPINION. The Company shall have received
an opinion from counsel to Purchaser reasonably acceptable to the Company, dated
the Closing Date, substantially in form and substance reasonably satisfactory to
the Company.
ARTICLE 11
TERMINATION PRIOR TO CLOSING
11.01. TERMINATION. This Agreement may be terminated as follows:
(a) On or before September 24, 1996 by Purchaser in the event
the Company fails to deliver to Purchaser, on or before September 20, 1996, (i)
an agreement to vote in favor of the Merger, in form and substance satisfactory
to Purchaser and its counsel, from Stockholders holding shares of Company
Capital Stock sufficient to approve the Merger under the Corporation Law and
(ii) the signatures of the holder of the Class A Common and the holder of the
Class B Common and the Series A Preferred on that certain side letter concerning
the possible amendment of this Agreement to provide for a purchase of the Class
A Common, the Class B Common and the Series A Preferred followed by a merger of
Purchaser with and into the Company; or
(b) At any time prior to the Closing by the mutual written
consent of Purchaser and the Company; or
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(c) At any time prior to the Closing by either the Company or
Purchaser in writing, without liability to the terminating party on account of
such termination (except as otherwise provided in Section 11.02), if the Closing
shall not have occurred on or before November 30, 1996; or
(d) At any time prior to the Closing by Purchaser in writing
within 14 days after receipt by Purchaser of a Section 8.08 Notice, provided
that Purchaser may not terminate this Agreement pursuant to this
Section 11.01(d) until the earlier of November 30, 1996, or the 30th day
following receipt of the Section 8.08 Notice if the Company states in such
Section 8.08 Notice that it is undertaking to cure the problem which provided
the basis for the Section 8.08 Notice and then such termination may occur only
if the Company fails to cure such problem prior to the earlier of said dates ;
or
(e) At any time prior to the Closing by either the Company or
Purchaser if (i) the conditions to such party's obligations shall have become
impossible to satisfy on or before November 30, 1996 (after giving effect to any
potential actions the non-terminating party or the Stockholders may propose to
take to cure such failure of condition after reasonable notice from the party
proposing to terminate this Agreement), PROVIDED that no party shall be entitled
to terminate this Agreement pursuant to this clause (e) if the reason for such
impossibility is due to a breach by the party proposing to terminate this
Agreement or (ii) any permanent injunction or other order of a Government Entity
preventing the consummation of the Merger shall have become final and
non-appealable.
11.02. EFFECT OF TERMINATION. Termination of this Agreement
pursuant to this Article 11 shall terminate all obligations of the parties
hereunder, except for the obligations under Sections 11.02, 12.07, 12.09, and
12.10, the Confidentiality Agreement and the Performance Guaranty Agreement,
PROVIDED, HOWEVER, that nothing in this Section 11.02 shall relieve or limit the
liability or obligations hereunder of any party (the "Defaulting Party") to the
other party or parties on account of a breach of a covenant or agreement
contained herein, or any fraudulent representation or warranty contained herein
by the Defaulting Party. In the case of such a willful and intentional breach
or fraud, in addition to any damages for which the Defaulting Party may be
liable, the Defaulting Party shall reimburse the other party or parties for any
expenses incurred by such party or parties in order to enforce its or their
rights under this Agreement (including reasonable attorney's fees and expenses).
Nothing in this Agreement shall constitute a waiver by any party hereto of its
rights to compel specific performance of the obligations of any other party
hereto.
ARTICLE 12
MISCELLANEOUS
12.01. NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. None of the
representations and warranties in this Agreement or any certificate delivered
pursuant to this Agreement shall survive the Effective Time.
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12.02. INTERPRETIVE PROVISIONS; CERTAIN DEFINITIONS.
(a) Whenever used in this Agreement, "to the Company's
knowledge" or "to the knowledge of the Company" shall mean the actual knowledge
of those persons who are listed in Section 12.02(a)(i) of the Disclosure
Schedule and "to Purchaser's knowledge" or "to the knowledge of Purchaser" shall
mean the actual knowledge of the persons listed in Section 12.02(a)(ii) of the
Disclosure Statement. The inclusion of any information on the Disclosure
Schedule shall not be deemed to be an admission or acknowledgment by the
Company, in and of itself, that such information is required to be listed on the
Disclosure Schedules or is material to or outside the ordinary course of the
business of the Company and its Subsidiaries. The language used in this
Agreement will be deemed to be the language chosen by the parties hereto to
express their mutual intent, and no rule of strict construction will be applied
against any person.
(b) The term "Person" shall be construed broadly, and shall
include an individual, corporation, partnership, trust, proprietorship,
association, governmental body, agency or subdivision or other entity.
"Indebtedness" means the aggregate amount of all long term indebtedness of the
Company and the Subsidiaries, including current portions, including all interest
expense accrued but unpaid, and any prepayment premiums payable thereon and all
other amounts payable pursuant to the Credit Agreement, the Senior Subordinated
Notes and the MBL Subordinated Note; excluding, however, any amounts owing to
the Company or any Subsidiary from the Company or any Subsidiary. "Credit
Agreement" means the Second Amended and Restated Credit Agreement, dated as of
December 5, 1991, by and among Carter Holdings Corp. (predecessor by merger to
the Company), the Company, The Bank of New York, The Bank of Nova Scotia,
Kleinwort Benson Ltd., Kredietbank N.V., Grand Cayman Branch, The Daiwa Bank
Limited, Pitney Bowes Credit Corporation and The Bank of New York, as Agent and
Issuing Bank. "Senior Subordinated Notes" means the senior subordinated notes
of Carter Holdings Corp. in the aggregate principal amount of $5 million issued
to the CHC Charitable Irrevocable Trust pursuant to that certain Purchase
Agreement, dated as of December 6, 1991, by and among Carter Holdings Corp., the
Company and the CHC Charitable Irrevocable Trust. "MBL Subordinated Note" means
the subordinated note of Carter Holdings Corp. in the aggregate principal amount
of $20 million issued to Mutual Benefit Life Insurance Company in Rehabilitation
pursuant to that certain Securities Exchange Agreement, dated as of December 6,
1991, by and among Carter Holdings Corp., the Company and the Mutual Benefit
Life Insurance Company in Rehabilitation.
12.03. ENTIRE AGREEMENT. This Agreement (including the Disclosure
Schedule), the Confidentiality Agreement and the Performance Guaranty Agreement
constitute the sole understanding of the parties with respect to the subject
matter hereof. Matters disclosed in the Disclosure Schedule pursuant to any
Section of this Agreement shall be deemed to be disclosed with respect to all
Sections of this Agreement.
12.04. SUCCESSORS AND ASSIGNS. The terms and conditions of this
Agreement shall inure to the benefit of and be binding upon the respective
successors and assigns of the parties hereto; PROVIDED, HOWEVER, that this
Agreement may not be assigned by any party without the prior written consent of
the other parties and any such attempted assignments shall be null and void,
except that the Purchaser may assign this Agreement to any of its affiliates,
but no such assignment
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shall release Purchaser from any liability hereunder. From and after the
Closing, the Company Related Parties shall be third party beneficiaries of this
Agreement to the extent herein provided.
12.05. HEADINGS. The headings of the articles, sections and
paragraphs of this Agreement are inserted for convenience only and shall not be
deemed to constitute part of this Agreement or to affect the construction
hereof.
12.06. MODIFICATION AND WAIVER. No amendment, modification or
alteration of the terms or provisions of this Agreement shall be binding unless
the same shall be in writing and duly executed by the parties hereto, except
that any of the terms or provisions of this Agreement may be waived in writing
at any time by the party which is entitled to the benefits of such waived terms
or provisions. No waiver of any of the provisions of this Agreement shall be
deemed to or shall constitute a waiver of any other provision hereof (whether or
not similar). No delay on the part of any party in exercising any right, power
or privilege hereunder shall operate as a waiver thereof.
12.07. EXPENSES. Except as otherwise provided herein, the Company
on the one hand and the Purchaser on the other hand shall each pay all costs and
expenses incurred by it or on its behalf in connection with this Agreement and
the transactions contemplated hereby including, without limiting the generality
of the foregoing, fees and expenses of its own financial consultants,
accountants and counsel.
12.08. NOTICES. Any notice, request, instruction or other document
to be given hereunder by any party hereto to any other party shall be in writing
and shall be given (and will be deemed to have been duly given upon receipt) by
delivery in person, by electronic facsimile transmission, by overnight courier
or by registered or certified mail, postage prepaid,
if to the Company to:
The William Carter Company
1590 Adamson Parkway, Suite 400
Morrow, GA 30260
Attention: David A. Brown
Telecopy: 770-960-1556
with a copy to:
Kirkland & Ellis
655 15th Street, N.W.
Suite 1200
Washington, DC 20005
Attention: Jack M. Feder, Esq.
Telecopy: 202-879-5200
28
<PAGE>
if to Purchaser to:
TWCC Acquisition Corp.
c/o Investcorp International, Inc.
280 Park Avenue
New York, NY 10017
Attention: Christopher J. O'Brien
Telecopy: 212-983-7073
with a copy to:
Gibson, Dunn & Crutcher
200 Park Avenue
New York, NY 10166
Attention: Charles K. Marquis, Esq.
Telecopy: 212-351-4035
12.09. GOVERNING LAW. This Agreement shall be construed in
accordance with and governed by the laws of the State of New York applicable to
agreements made and to be performed wholly within such jurisdiction. Each of
the parties hereto hereby irrevocably and unconditionally consents to submit to
the exclusive jurisdiction of the courts of the State of New York and of the
United States of America, in each ease located in County of New York, for any
litigation arising out of or relating to this Agreement and the transactions
contemplated hereby (and agrees not to commence any litigation relating thereto
except in such courts), and further agrees that: service of any process,
summons, notice or document by U.S. registered mail to its respective address
set forth in Section 12.10 shall be effective service of process for any
Litigation brought against it in any such court. Each of the parties hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any litigation arising out of this Agreement or the transactions
contemplated hereby in the courts of the State of New York or the United States
of America, in each case located in County of New York, and hereby further
irrevocably and unconditionally waives and agrees not to plead or claim in any
such court that any such litigation brought in any such court has been brought
in an inconvenient forum.
12.10. PUBLIC ANNOUNCEMENTS. None of the parties shall make any
public statements, including, without limitation, any press releases, with
respect to this Agreement and the transactions contemplated hereby without the
prior written consent of the other parties except as may be required by law or
pursuant to any Commitment. If a public statement is required to be made by law
or pursuant to any Commitment, the parties shall consult with each other in
advance as to the contents and timing thereof.
12.11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall for all purposes be deemed to be an original
and all of which shall constitute the same instrument.
* * *
29
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed under seal on its behalf as of the date first above
written.
THE WILLIAM CARTER COMPANY
SEAL
By: /s/ David A. Brown
---------------------------------------------
Name: David A. Brown
Title: Senior Vice President
By: /s/ Jay A. Berman
---------------------------------------------
Name: Jay A. Berman
Title: Chief Financial Officer and Treasurer
TWCC ACQUISITION CORP.
SEAL
By: /s/ Christopher J. O'Brien
---------------------------------------------
Name: Christopher J. O'Brien
Title: President
By: /s/ Robert Sharp
---------------------------------------------
Name: Robert Sharp
Title: Clerk
<PAGE>
EXHIBIT 1.02
TO THE AGREEMENT AND PLAN OF MERGER
ARTICLES OF MERGER
ATTACHED
<PAGE>
EXHIBIT 3.01
TO THE AGREEMENT AND PLAN OF MERGER
DISTRIBUTION OF MERGER CONSIDERATION
capitalized terms used in this Exhibit and not defined in the Merger Agreement
shall have the meanings given such terms in the Articles of Incorporation of the
Company
The Merger Consideration shall be distributed as follows:
FIRST
to pay an amount equal to accrued and unpaid dividends on Series A
Preferred Stock to the holders thereof in accordance with Article IV, Part
B, Section 1A of the Articles of Incorporation of the Company;
SECOND
to pay an amount equal to the Liquidating Dividend due on Series A
Preferred Stock to the holders thereof calculated in accordance with
Article IV, Part B, Section 1A of the Articles of Incorporation of the
Company as if the Merger were a Liquidation Event;
THIRD
to pay an amount equal to the aggregate Liquidation Value of the Series A
Preferred Stock to the holders thereof as if the Merger were a Liquidation
Event;
FOURTH
to pay an amount equal to the aggregate Unpaid Yield on the Class A Common
Stock to the holders thereof;
FIFTH
to pay an amount equal to the lesser of (i) the remaining Merger
Consideration and (ii) the Unpaid Preference Amount to the holders of
Common Stock in accordance with Article IV, Part C, Section 3(ii) of such
Articles of Incorporation; and
SIXTH
any amount remaining thereafter shall be distributed pro rata to the
holders of Common Stock.
<PAGE>
Exhibit 3.1
FEDERAL IDENTIFICATION
NO. 041156680
The Commonwealth of Massachusetts
William Francis Galvin
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
RESTATED ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B, Section 74)
We, Frederick J. Rowan, II , President
and David A. Brown , Clerk
of The William Carter Company
(Exact name of corporation)
located at 369 Elliott St., Newton Upper Falls, MA 02164
(Street address of corporation Massachusetts)
do hereby certify that the following Restatement of the Articles of Organization
was duly adopted at a meeting held on October 21, 1996 by a vote of:
50,000 shares of Series A Preferred Stock of 50,000 shares outstanding,
(Type, class & series, if any)
10,000 shares of Class A Common Stock of 10,000 shares outstanding, and
(Type, class & series, if any)
10,000 shares of Class B Common Stock of 10,000 shares outstanding.
(Type, class & series, if any)
2,213 shares of Class C Common Stock of 2,769 shares outstanding being at least
two-thirds of each type, class or series outstanding and entitled to vote
thereon and of each type, class or series of stock whose rights are adversely
affected thereby:
ARTICLE I
The name of the corporation is:
The William Carter Company
ARTICLE II
The purpose of the corporation is to engage in the following business
activities:
See page 2A attached hereto.
* Delete the inapplicable words. ** Delete the inapplicable clause.
Note: If the space provided under any article or item on this form is
insufficient, additions shall be set forth on separate 8 1/2 x 11 sheets of
paper with a left margin of at least 1 inch. Additions in more than one article
may be made on a single sheet so long as each article requiring each addition is
clearly indicated.
<PAGE>
ARTICLE III
State the total number of shares and par value, if any, of each class of stock
which the corporation is authorized to issue:
- --------------------------------------------------------------------------------
WITHOUT PAR VALUE WITH PAR VALUE
- --------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- --------------------------------------------------------------------------------
Common: Common: Class A 100,000 $ .01
- --------------------------------------------------------------------------------
Class B 100,000 $ .01
Class C 100,000 $ .01
- --------------------------------------------------------------------------------
Preferred: Preferred: Series A 50,000 $ .01
- --------------------------------------------------------------------------------
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
See pages 4A-4M attached hereto.
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are:
None.
ARTICLE VI
** Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
See pages 6A-6D attached hereto.
** If there are no provisions, state "None".
Note: The preceding six (6) articles are considered to be permanent and may ONLY
be changed by filing appropriate Articles of Amendment.
<PAGE>
ARTICLE II
The purposes for which the corporation is formed are as follows:
(a) To manufacture, produce, buy, sell, export, import, and otherwise deal
in any and all kinds of merchandise, yarns, threads, textile fabrics, clothing,
underclothing, wearing apparel of every kind, all articles, materials and
supplies used or capable of being used in such manufacture or dealing, the
products and by-products of the same, and all equipment and materials necessary
or useful in manufacturing or marketing merchandise.
(b) To carry on any manufacturing, mercantile, selling, management,
service or other business, operation or activity which may be lawfully carried
on by a corporation organized under the Business Corporation Law of The
Commonwealth of Massachusetts, whether or not related to those referred to in
the foregoing paragraph.
(c) To carry on any business, operation or activity through a wholly or
partly owned subsidiary.
(d) To carry on any business, operation or activity referred to in the
foregoing paragraphs to the same extent as might an individual, whether as
principal, agent, contractor or otherwise, and either alone or in conjunction or
a joint venture or other arrangement with any corporation, association, trust,
firm or individual.
(c) To have as additional purposes all powers granted to corporations by
the laws of The Commonwealth of Massachusetts, provided that no such purpose
shall include any activity inconsistent with the Business Corporation Law or the
general laws of said Commonwealth.
2A
<PAGE>
ARTICLE IV
Part A. Authorized Shares
The total number of shares of capital stock which the Corporation
has authority to issue is 350,000 shares, consisting of:
(1) 50,000 shares of Series A Preferred Stock, par value $.01
per share ("Series A Preferred");
(2) 100,000 shares of Class A Common Stock, par value $.01 per
share ("Class A Common");
(3) 100,000 shares of Class B Common Stock, par value $.01 per
share ("Class B Common"); and
(4) 100,000 shares of Class C Common Stock, par value $.01 per
share ("Class C Common").
The Class A Common, Class B Common and Class C Common and any
other common stock authorized and issued hereafter are referred to collectively
as the "Common Stock." The Series A Preferred and any other preferred stock
authorized and issued hereafter are referred to collectively as the "Preferred
Stock." Capitalized terms used but not otherwise defined in Part A, Part B or
Part C of this Article IV are defined in Part D of this Article IV.
Part B. Series A Preferred
Section 1. Dividends.
1A. General Obligation. The Corporation's board of directors
shall declare, and the Corporation shall pay, preferential dividends to the
holders of the Series A Preferred as provided in this Section 1. Except as
otherwise provided herein, dividends on each share of the Series A Preferred (a
"Share") shall be payable on May 31 of each year, beginning on May 31, 1995 (the
"Dividend Reference Dates"), and shall be equal to the lesser of (i) 20% of the
Corporation's Consolidated Net Income Per Share in respect of the immediately
preceding fiscal year of the Corporation, or (ii) 5% of the Liquidation Value of
each Share; provided that such dividends shall be payable no later than 90 days
after any Liquidation Date occurring after December 31, 1994. The Corporation
shall be obligated to declare such dividends each and every Dividend Reference
Date
4A
<PAGE>
unless it is prohibited from doing so by any applicable provision of law.
Notwithstanding the foregoing, no dividends otherwise owing on the Series A
Preferred shall be paid (a) if at the time of such payment a default or event of
default exists with respect to any Significant Debt or if (and only to the
extent that) the payment of such dividend would immediately thereafter result in
a default or event of default with respect to any Significant Debt, (b) if at
the time of such payment a Default or Event of Default (as such terms are
defined in the Trust Purchase Agreement) under Section 7(A)(i) of the Trust
Purchase Agreement (a "Trust Payment Default") exist or (c) if (and only to the
extent that) the payment of such dividend would exceed the maximum amount
permitted under the Massachusetts Business Corporation Law. Such unpaid
dividends, together with any other earned by unpaid dividends, shall be
cumulated. Cumulative dividends shall be paid from time to time when no default
or event of default exists with respect to any Significant Debt, no Trust
Payment Default exists and when permitted under the Massachusetts Business
Corporation Law and only to the extent that such payments will not immediately
thereafter cause a default or event of default with respect to any Significant
Debt and only to the extent that such payments are permitted under the
Massachusetts Business Corporation Law. In the event a Liquidation Event occurs
on or after January 2, 1994, then after the payment in full (or provision
therefor) of all debts of the Corporation, a special liquidating distribution on
each Share of Series A Preferred (without duplication of clauses (i) and (ii)
above) (the "Liquidating Dividends") shall be declared by the Corporation's
Board of Directors, shall be paid within 90 days after the Liquidation Date and
shall be equal to the lesser of (A)(1) if the Liquidation Event occurs in the
first fiscal month of any fiscal year of the Corporation, an amount equal to the
product of (x) 20% of the Corporation's Consolidated Net Income Per Share in
respect of the immediately preceding fiscal year and (y) a fraction, the
numerator of which is the number of days in the fiscal year in which the
Liquidation Date occurs prior to the Liquidation Date, and the denominator of
which is the number of days in the entire immediately preceding fiscal year, or
(2) if the Liquidation Event occurs after the first fiscal month of any fiscal
year of the Corporation, 20% of the sum of (x) the Corporation's Consolidated
Net Income Per Share in respect of the portion of the fiscal year in which the
Liquidation Date occurs ending with the fiscal month immediately preceding the
fiscal month in which the Liquidation Date occurs, and (y) an amount equal to
the amount determined in clause (A)(2)(x) above, multiplied by a fraction the
numerator of which is the number of days in the fiscal month in which the
Liquidation Event occurs prior to the Liquidation Event and the denominator of
which is the aggregate number of days contained in the fiscal months used to
determine Consolidated Net Income Per Share in clause (A)(2)(x) above, and (B)
the product of (1) 5% of the Liquidation Value of each share and (2) a fraction,
the numerator of which is the number of days in the fiscal year in which the
Liquidation Date occurs prior to the Liquidation Date, and the denominator of
which is the number of days in the entire fiscal year in which the Liquidation
Date occurs.
1B. Distribution of Dividend Payments. Except as otherwise
provided herein, each payment of dividends shall be distributed ratably among
the holders of Series A Preferred based upon the number of Shares held by each
such holder.
4B
<PAGE>
1C. Priority of Dividends. So long as any Share remains
outstanding, no dividends shall be paid or declared on any Junior Securities
other than a dividend payable in Junior Securities unless (i) such dividend paid
or declared on any Junior Securities does not exceed 80% of the Corporation's
Consolidated Net Income Per Share in respect of the immediately preceding fiscal
year of the Corporation and (ii) a dividend equal to the sum of (A) 5% of the
Liquidation Value of each Share and (B) any accrued but unpaid cumulative
dividends on each Share was paid on the Shares on the immediately preceding
Dividend Reference Date.
Section 2. Liquidation
Upon any liquidation, dissolution or winding up of the
Corporation, each holder of Series A Preferred shall be entitled to be paid,
before any distribution or payment is made upon any Junior Securities, an amount
in cash equal to the aggregate Liquidation Value (plus any outstanding
cumulative dividends and the Liquidation Dividend (if any)) of all Shares held
by such holder, and the holders of Series A Preferred shall not be entitled to
any further payment. If upon any such liquidation, dissolution or winding up of
the Corporation, the Corporation's assets to be distributed among the holders of
the Series A Preferred are insufficient to permit payment to such holders of the
aggregate amount which they are entitled to be paid, then the entire assets to
be distributed shall be distributed ratably among such holders based upon the
aggregate Liquidating Value (plus any outstanding cumulative dividends and the
Liquidation Dividend (if any)) of the Series A Preferred held by each such
holder. The Corporation shall mail written notice of any such liquidation,
dissolution or winding up, not less than 30 days prior to the payment date
stated therein, to each record holder of Series A Preferred. Neither the
consolidation or merger of the Corporation into or with any other entity or
entities, nor the sale or transfer by the Corporation of all or any part of its
assets, nor the reduction of the capital stock of the Corporation, shall be
deemed to be a liquidation, dissolution or winding up of the Corporation within
the meaning of this Section 2.
Section 3. Voting Rights; Restrictions
Section 3A. Voting Rights. The holders of shares of Series A
Preferred shall have the following voting rights:
(i) The holder of the shares of the Series A Preferred shall
not, except as otherwise requite by law or as set forth herein, have any right
or power to vote on any matter or in any proceeding or to be represented at, or
to receive notice of, any meeting of stockholders. The holders of the Series A
Preferred shall be entitled to one vote for each share held on any matter as to
which they shall be entitled to vote.
(ii) If, at any time, on two or more consecutive Dividend
Reference Dates the Corporation fails to pay a dividend equal to 5% of the
Liquidation Value of each Share because of the failure of the Corporation to
earn sufficient Consolidated Net Income Per Share for the applicable fiscal
years, then during the period (the "Class Voting Period") commencing with such
second of such consecutive Dividend Reference Dates and ending on the next
Dividend Reference
4C
<PAGE>
Date following a fiscal year in which the Corporation earned any Consolidated
Net Income Per Share sufficient to pay a dividend equal to 5% of the Liquidation
Value of each Share, the holders of the Series A Preferred shall be given notice
of all stockholders' meetings and shall have the right, voting together as a
class to the exclusion of the holders of all other classes or series of stock of
the Corporation, to elect one additional director. Upon the commencement of any
Class Voting Period, the number of directors constituting the Corporation's
board of directors shall, without further action, be increased by one director
and the holders of a majority of the outstanding shares of the Series A
Preferred shall be entitled to nominate and elect a director to fill such newly
created directorship.
(iii) During the Class Voting Period, the right of the holders of
the Preferred Stock to elect a director may be exercised initially either at a
special meeting of the holders of the Series A Preferred, called as hereinafter
provided, or at any annual meeting of stockholders held for the purpose of
electing directors and thereafter at such annual meetings or by the written
consent of the holders of the Preferred pursuant to section 43 of the
Massachusetts Business Corporation Law.
(iv) At any time after the Class Voting Period shall have
commenced, and if the voting rights of the holders of the Series A Preferred
shall not already have been initially exercised, the President or the directors
may, and the Clerk (or in the case of death, absence, incapacity or refusal of
the clerk, any other officers) shall, upon written request of one or more
holders of record of at least 10% of the shares of the Series A Preferred then
outstanding, call a special meeting of the holders of the Series A Preferred for
the purpose of electing directors to fill the one additional directorship
created by the commencement of the Class Voting Period. Such meeting shall be
held at the earliest practicable date upon at least seven day's notice to
stockholders, such meeting to be held at the place of holding annual meetings of
stockholders of the Corporation or, if none, at a place designated by the Clerk
of the Corporation. In the event that none of the officers is able and willing
to call a special meeting, the Massachusetts Supreme Judicial Court or the
Massachusetts Superior Court, upon application of one or more holders of record
who hold at least 10% in interest of the Shares of Series A Preferred
outstanding, shall have jurisdiction in equity to authorize one or more of such
holders to call a meeting by giving such notice as required by law.
(v) At any meeting held for the purpose of electing directors at
which the holders of the Series A Preferred shall have the right to elect a
director as provided herein, the presence in person or by proxy of the holders
of a majority of the then outstanding shares of Series A Preferred shall be
required and be sufficient to constitute a quorum of such class for the election
of a director by such class. At such meeting or adjournment thereof, the
absence of a quorum of the holders of capital stock entitled to elect such
directors other than the director to be elected by the holders of the Series A
Preferred shall not prevent the election of a director by such holders of the
Series A Preferred. Any such action by the holders of Series A Preferred may
also be taken by unanimous written consent.
(vi) A director who shall have been elected by holders of the
Series A Preferred may be removed at any time during the Class Voting Period,
either with or without cause, by, and only by, the affirmative vote of the
holders of a majority of the outstanding shares of the Series A
4D
<PAGE>
Preferred given at an annual meeting or a special meeting of such stockholders
called for such purpose, and any vacancy thereby created may be filled during
such Class Voting Period by the affirmative vote of the holders of a majority of
the outstanding shares of the Series A Preferred present in person or
represented by proxy at such meeting. If a director elected by holders of the
Series A Preferred dies, resigns, or otherwise ceases to be a director, the
resulting vacancy shall be filled by the affirmative vote of the holders of a
majority of the outstanding shares of the Series A Preferred present in person
or by proxy at an annual or a special meeting of such shareholders called for
such purpose.
(vii) At the end of the Class Voting Period or in the event that
no shares of the Series A Preferred are outstanding, (a) the holders of the
Series A Preferred, if any, shall be automatically and immediately divested of
all voting power vested in them hereunder, subject always to the subsequent
vesting hereunder of voting rights in the holders of the Series A Preferred, as
herein provided, (b) the term of the director elected by the holders of the
Series A Preferred pursuant to the provisions hereof shall automatically and
immediately expire and such director shall execute a resignation upon the
request of the Corporation and (c) the number of directors constituting the
board of directors of the Corporation shall, without further action,
automatically and immediately be decreased by one director.
(viii) The provisions of Section 3.2 of the Bylaws shall not be
waived or amended without the prior written consent of the holders of a majority
of the Shares then outstanding.
Section 3B. Restrictions.
Except with the consent of the holders of at least a majority of
the Series A Preferred then outstanding voting as a class, given by vote at a
meeting duly called and held for the purpose, or given in such other manner as
may be authorized by law, the Corporation shall not: (i) authorize or issue any
class of capital stock having priority over the Series A Preferred in respect of
the payment of dividends or payments in the case of liquidation, dissolution or
winding up of the Corporation, (ii) increase the rights or preferences or number
of authorized shares of any such prior ranking stock; (iii) issue any share of
any such prior ranking stock more than 12 months after the date of any
authorization by the holders of Series A Preferred with respect to clauses (i)
or (ii) above; or (iv) waive, amend, alter, or repeal any of the rights,
preferences and voting powers of the holders of the Series A Preferred as to
affect adversely any such rights, preferences and voting powers.
Section 4. Ranking.
Unless otherwise provided herein, the Series A Preferred shall
rank senior to all other Preferred Stock and Common Stock of the Corporation
with respect to the payment of dividends and distribution of assets. So long as
any Series A Preferred Stock remains outstanding, the Corporation shall not, and
shall cause each of its Subsidiaries not to, redeem, purchase or otherwise
acquire
4E
<PAGE>
directly or indirectly any Junior Securities other than the exchange or
conversion of one Junior Security for or into another Junior Security.
Section 5. Financial Information.
The Corporation shall timely furnish the following reports to
holders of the Series A Preferred:
5A. Annual Reports. As soon as practicable after the end of
each fiscal year of the Corporation, and in any event within 90 days thereafter,
a copy of the consolidated financial statements of the Corporation and its
Subsidiaries for each year, including balance sheet and statements of income,
surplus, operations, changes in cash flow, and accompanying notes thereto, all
prepared in conformity with generally accepted accounting principles,
consistently applied, and setting forth in each case in comparative form the
figures for the previous fiscal year, all in reasonable form, issued by
independent certified public accountants of recognized national standing
retained by the Corporation.
5B. Quarterly Reports. As soon as practicable after the end of
the first, second and third quarterly accounting periods in each such fiscal
year of the Corporation and in any event within 45 days thereafter, unaudited
consolidated statements of operations for such quarter and for the fiscal year
to date, and a consolidated balance sheet as of the end of such quarter prepared
in reasonable detail and in conformity with generally accepted accounting
principles, consistently applied (except that such financial statements may be
in condensed form, need not contain footnotes and are subject to normal year-end
adjustments),
Section 6. Confidentiality.
All financial information furnished by the Corporation or any
subsidiary pursuant to Section 5 of this Part B of Article IV will be treated as
confidential by the holders of Series A Preferred, but nothing herein contained
shall limit or impair the rights of a holder of the Series A Preferred, and a
holder of the Series A Preferred shall be entitled, (i) to disclose the same to
any governmental entity or judicial body, if advisable to do so, or to any
prospective or actual participants or purchaser of an interest in the Series A
Preferred who agree to be subject to this Section 6, or (ii) to use such
information to the extent pertinent to an evaluation of the Series A Preferred.
Section 7. Registration of Transfer.
The Corporation shall keep at is principal office a register for
the registration of Series A Preferred. Upon the surrender of any certificate
representing Series A Preferred at such place, the Corporation shall, at the
request of the record holder of such certificate, execute and deliver (at the
Corporation's expense) a new certificate or certificates in exchange therefor
4F
<PAGE>
representing in the aggregate the number of Shares represented by the
surrendered certificate. Each such new certificate shall be registered in such
name and shall represent such number of Shares as is requested by the holder of
the surrendered certificate and shall be substantially identical in form to the
surrendered certificate, and dividends shall accrue on the Series A Preferred
represented by such new certificate from the date to which dividends have been
fully paid on such Series A Preferred represented by the surrendered
certificates.
Section 8. Replacement.
Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder shall be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing Shares, and in the case of any such loss, theft or destruction, upon
receipt of indemnity reasonably satisfactory to the Corporation (provided that
if the holder is a financial institution or other institutional investor its own
agreement shall be satisfactory), or, in the case of any such mutilation upon
surrender of such certificate, the Corporation shall (at its expense) execute
and deliver in lieu of such certificate a new certificate of like kind
representing the number of Shares represented by such lost, stolen, destroyed or
mutilated certificate and dated the date of such loss, stolen, destroyed or
mutilated certificate, and dividends shall accrue o the Series A Preferred
represented by such new certificate from the date to which dividends have been
fully paid on such lost, stolen, destroyed or mutilated certificate.
Section 9. Amendment and Waiver.
In addition to the vote of any other stockholders required by
law, any amendment tot his Part B of Article IV or any definitions in Part D of
this Article IV applicable hereto, shall be approved by the majority vote of the
Series A Preferred then outstanding. Any waiver of any provision of this Part B
of Article IV or any definitions in Part D of this Article IV applicable hereto
approved by the prior written consent of a majority of the Series A Preferred
Stock then outstanding shall be effective and binding upon all holders of Series
A Preferred Stock.
Section 10. Notices.
Except as otherwise expressly provided hereunder, all notices
referred to herein shall be in writing and shall be delivered by registered or
certified mail, return receipt requested and postage prepaid, or by reputable
overnight courier service, charges prepaid, or by personal delivery or facsimile
and shall be deemed to have been given three days after being so mailed, one day
after being so sent by such overnight courier, when received if delivered
personally, and when sent if sent by facsimile (i) to the Corporation, at is
principal executive offices and (ii) to any stockholder, at such holder's
address as it appears in the stock records of the Corporation (unless otherwise
indicated by any such holder.
4G
<PAGE>
Part C. Common Stock.
Except as otherwise provided in this Part C or as otherwise
required by applicable law, all shares of Class A Common, Class B Common and
Class C Common shall be identical in all respects and shall entitle the holders
thereof to the same rights and privileges, subject to the same qualifications,
limitations and restrictions.
Section 1. Voting Rights.
Except as otherwise provided in this Article IV or as otherwise
required by applicable law, the holders of Class A Common shall be entitled to
four votes per share on all matters to be voted on by the Corporation's holders
of Class A Common, the holders of Class B Common shall be entitled to one vote
per share on all matters to be voted on by the Corporation's holders of Common
Stock and the holders of Class C Common shall not be entitled to vote. Except
as provided in Section 2 of this Part C of Article IV, the holders of the Class
A Common and Class B Common shall vote together as one class on all issues
brought to a vote of holders of Common Stock.
Section 2. Number of Directors; Classes and Elections.
Subject to paragraph 3A of Part B of this Article IV, the number
of directors of the Corporation shall be determined from time to time by the
Class A Directors or by resolution of the holders of Class A Common holding a
majority of the votes of the shares of Class A Common; provided that, subject to
paragraph 3A of Part B of this Article IV, the number of directors of the
Corporation shall not be less than five (5) nor more than eleven (11). Two of
the directors shall be Class B Directors who shall be elected, removed and
replaced by the holders of Class B Common. The remaining directors shall be
Class A Directors who shall be elected, removed and replaced by the holders of
Class A Common. If a vacancy of a Class A Director exists (no matter how
created), then the remaining Class A Directors may fill such vacancy. If a
vacancy of a Class B Director exists (no matter how created), then the remaining
Class B Director may fill such vacancy.
Section 3. Distributions.
At the time of any Distribution to holders of Class A, Class B or
Class C Common, such Distribution shall be made to the holders of Class A
common, Class B and Class C Common in the following priority:
(i) First, the holders of Class A Common, as a separate class,
shall be entitled to receive all or a portion of such Distribution (ratably
among such holders based upon the aggregate Unpaid Yield of Class A Common held
by each such holder as of the time of such Distribution) equal to the aggregate
Unpaid Yield on the outstanding shares of Class A Common as of the time of such
Distribution, and no Distribution or any portion thereof shall be made under
paragraphs 3(ii)
4H
<PAGE>
or 3(iii) below until the entire amount of the Unpaid Yield on the outstanding
shares of Class A Common as of the time of such Distribution has been paid in
full.
(ii) After the required amount of a Distribution has been made
pursuant to paragraph (3)(i) above the next amount distributed, the "Section
3(ii) Amount," shall equal the lesser of (A) the amount remaining for
distribution and (B) the Unpaid Preference Amount, and shall be distributed to
holders of Common Stock in the following proportions: (a) the holders of Class A
Common shall be entitled to receive thirty five and ninety one one hundredths
percent (35.95%) of the Section 3(ii) Amount (ratably among such holders based
upon the number of shares of Class A Common held by each such holder as of the
time of such Distribution), (b) the holders of Class B Common shall be entitled
to receive fifty and twenty-nine one hundredths percent (50.29%) of the Section
3(ii) Amount (ratably among such holders based upon the number of shares of
Class B Common held by each such holder as of the time of such Distribution),
and (c) the holders of Class C common stock shall be entitled to receive
thirteen and eight tenths percent (13.8%) of the Section 3(ii) Amount (ratably
among such holders based upon the number of shares of Class C Common held by
each such holder as of the time of such Distribution), and no Distribution or
any portion thereof shall be made under paragraph 3(iii) below until the entire
Section 3(ii) Amount as of the time of such Distribution has been paid in full.
(iii) After the required amount of a Distribution has been made
pursuant to paragraphs 3(i) and 3(ii) above, the holders of Class A Common,
Class B Common and Class C Common, as a group, shall be entitled to receive the
remaining portion of such Distribution (ratably among such holders based upon
the number of shares of Class A Common, Class B Common and Class C Common held
by each such holder as of the time of such Distribution).
Section 4. Stock Splits and Stock Dividends.
The Corporation shall not in any manner subdivide (by stock
split, stock dividend or otherwise) or combine (by stock split, stock dividend
or otherwise) the outstanding Common Stock of one class unless the outstanding
Common Stock of all the other classes shall be proportionately subdivided or
combined. All such subdivisions and combinations shall be payable only in Class
A Common to the holders of Class A Common and in Class B Common to the holders
of Class B Common and in Class C Common to the holders of Class C Common.
Section 5. Registration of Transfer
The Corporation shall keep at its principal office (or such other
place as the Corporation reasonably designates) a register for the registration
of shares of Common Stock. Upon the surrender of any certificate representing
shares of any class of Common Stock at such place, the Corporation shall, at the
request of the registered holder of such certificate, execute and deliver a new
certificate or certificates in exchange therefor representing in the aggregate
the number of shares of such class represented by the surrendered certificate,
and the Corporation forthwith shall cancel such surrendered certificate. Each
such new certificate will be registered in such name and
4I
<PAGE>
will represent such number of shares of such class as is requested by the holder
of the surrendered certificate and shall be substantially identical in form to
the surrendered certificate. The issuance of new certificates shall be made
without charge to the holders of the surrendered certificates for any issuance
tax in respect thereof or other cost incurred by the Corporation in connection
with such issuance.
Section 6. Replacement.
Upon receipt of evidence reasonably satisfactory to the
Corporation (an affidavit of the registered holder will be satisfactory) of the
ownership and the loss, theft, destruction or mutilation of any certificate
evidencing one or more shares of any class of Common Stock, and in the case of
any such loss, theft or destruction, upon receipt of indemnity reasonably
satisfactory to the Corporation (provided that if the holder is a financial
institution or other institutional investor its own agreement will be
satisfactory), or, in the case of any such mutilation upon surrender of such
certificate, the Corporation shall (at its expense) execute and deliver in lieu
of such certificate a new certificate of like kind representing the number of
Shares represented by such class represented by such lost, stolen, destroyed or
mutilated certificate and dated the date of such loss, stolen, destroyed or
mutilated certificate.
Section 7. Notices.
Except as otherwise expressly provided hereunder, all notices
referred to herein shall be in writing and shall be delivered by registered or
certified mail, return receipt requested and postage prepaid, or by reputable
overnight courier service, charges prepaid, or by personal delivery or facsimile
and shall be deemed to have been given three days after being so mailed, one day
after being so sent by such overnight courier, when received if delivered
personally, and when sent if sent by facsimile (i) to the Corporation, at is
principal executive offices and (ii) to any stockholder, at such holder's
address as it appears in the stock records of the Corporation (unless otherwise
indicated by any such holder.
Section 8. Amendment and Waiver.
Except as otherwise required by law or by Section 9, Part B of
this Article IV, any amendment to this Article IV shall be approved by a
majority vote of the then outstanding shares of Common Stock voting as a single
class; provided that any such amendment which would adversely affect the rights,
preferences or voting powers of a class of Common Stock shall be approved by a
majority vote of such class of Common Stock then outstanding. Any waiver of any
provision of this Article IV approved by the prior written consent of a majority
of the holders of the Common Stock then outstanding shall be effective and
binding upon all holders of Common Stock; provided that any such waiver which
would adversely affect the rights, preferences or voting powers of a class of
Common Stock shall be approved by the advance written consent of a majority of
the holders of such class of Common Stock then outstanding.
4J
<PAGE>
Part D. Definitions.
"Consolidated Net Income Per Share" means, for any period, an
amount equal to (x) the after tax consolidated net income (or loss) of the
Corporation and its Subsidiaries for such period determined in conformity with
GAAP dividend by (y) the number of Shares of Series A Preferred Stock
outstanding on the applicable Dividend Reference Date or the date on which a
Liquidation Event occurs. Such Consolidated Net Income Per Share, absent gross
manifest errors, shall be presumptively determined to be equal to (i) in the
case of any fiscal year, the Consolidated Net Income Per Share set forth in the
Corporation's audited financial statements prepared by the Corporation's
auditors and (ii) in the case of any other period, the Consolidated Net Income
Per Share set forth in the Corporation's unaudited financial statements prepared
by the Corporation's or its Subsidiaries' management.
"Credit Agreement" means that (i) certain Second Amended and
Restated Credit Agreements, dated as of December 5, 1991, among the Company, The
Bank of New York, The Bank of Nova Scotia, Kleinwort Benson Ltd., Kredietbank
N.V., Grand Cayman Branch, The Daiwa Bank Limited, Pitney Bowes Credit
Corporation and The Bank of New York, as Agent under the Credit Agreement, and
(ii) all agreements and instruments executed in connection with such agreement.
"Debt" of any Person means (without duplication) any
indebtedness, contingent or otherwise, in respect of borrowed money (whether or
not the recourse of the lender is to the whole of the assets of such Person or
only to a portion thereof), or evidenced by bonds, notes, debentures or similar
instruments or representing the balance deferred and unpaid of the purchase
price of any property, including capitalized lease obligations (except any such
balance that constitutes a trade payable).
"Distribution" means each distribution made by the Corporation to
holders of Common Stock, whether in cash, property, or securities of the
Corporation and whether by dividend, liquidating distributions or otherwise;
provided that neither any subdivision (by stock split, stock dividend or
otherwise) nor any combination (by stock split, stock dividend or otherwise) of
any outstanding shares of Common Stock shall be a Distribution.
`GAAP" means generally accepted accounting principles in the
United States of America in effect from time to time, applied on a consistent
basis both as to classification of items and amounts.
"Junior Securities" means any of the Corporation's equity
securities other than Preferred Stock.
"Liquidation Date" means the date a Liquidation Event occurs.
"Liquidation Event" means the liquidation, dissolution or winding
up of the Corporation.
4K
<PAGE>
"Liquidation Value" of any Share as of any particular date shall
be equal to $1,000.
"Original Cost" of any share of Class A Common shall be equal to
$1,000 per share (as proportionately adjusted for all stock splits, stock
dividends and other recapitalizations affecting the Class A Common).
"Person" means an individual, a partnership, a corporation, an
association, a joint stock company, a trust, a joint venture, an unincorporated
organization and a governmental entity or any department, agency or political
subdivision thereof.
"Prime Rate" means a variable rate per annum equal to The Bank of
New York's "prime rate" (or if The Bank of New York no longer exists or no
longer publishes a prime rate, in lieu thereof the rate published by the Wall
Street Journal, from time to time, as the prime rate at large U.S. money center
banks). Adjustments in the Prime Rate will be made on each date such prime rate
changes.
"Senior Subordinated Notes" means the senior subordinated notes
of the Corporation in the original aggregate principal amount of $5,000,000
issued to the CHC Charitable Irrevocable Trust pursuant to the Trust Purchase
Agreement.
"Significant Debt" means all obligations (present and future)
outstanding under the Credit Agreement and all other Debt in the original
aggregate principal amount of $1 million or greater created, incurred, assumed
or guaranteed by the Company (and all renewals, extensions or refundings
thereof), unless the instrument under which such Debt is created, incurred,
assumed or guaranteed expressly provides that such Debt is not "Significant
Debt" for purposes of this definition. Notwithstanding anything to the contrary
in the foregoing, Significant Debt shall not include (i) any Debt of the Company
or any of its Subsidiaries to the Company or any of its Subsidiaries, (ii) may
trade payable of the Company or any Subsidiary, even if overdue, or (iii) any
Senior Subordinated Notes.
"Subsidiary" means with respect to any Person, any corporation or
which the shares of outstanding capital stock possessing a majority of the
general voting power (under ordinary circumstances) in electing the board of
directors are, at the time as of which any determination is being made, owned by
such Person either directly or indirectly through Subsidiaries.
"Trust Purchase Agreement" means (i) the Purchase Agreement, date
as of December 6, 1991, by and among the Corporation, The William Carter Company
and the CHC Charitable Irrevocable Trust and (ii) all agreements and instruments
executed in connection with such Purchase Agreement.
"Unpaid Preference Amount" means, with respect to all shares of
Class A Common, Class B Common and Class C Common, as a group, an amount equal
to the excess, if any, of (i) $27,842,000 over (ii) the aggregate amount of
Distributions made by the Corporation to the holders
4L
<PAGE>
of Class A Common, Class B Common and Class C Common pursuant to paragraph 3(ii)
of Part C of this Article IV.
"Unpaid Yield" of any share of Class A means an amount equal to
the excess, if any, of (i) the aggregate Yield accrued on such share, over (ii)
the aggregate amount of Distributions made by the Corporation.
"Yield" means, with respect to each share of Class A Common, such
amount as shall be required to provide an internal rate of return in respect of
the Original Cost of such share of Class A Common, at a rate equal to the Prime
Rate, compounded semiannually from the date of such share's issuance.
4M
<PAGE>
ARTICLE VI
Other lawful provision, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
(a) The directors may make, amend or repeal the by-laws in whole or
in part, except with respect to any provision thereof which by law or the
by-laws requires action by the stockholders.
(b) Meetings of the stockholders may be held anywhere in the United
States.
(c) No stockholder shall have any right to examine any property or
any books, accounts or other writings of the corporation if there is
reasonable ground for belief that such examination will for any reason be
adverse to the interests of the corporation, and a vote of the directors
refusing permission to make such examination and setting forth that in the
opinion of the directors such examination would be adverse to the interests
of the corporation shall be prima facie evidence that such examination
would be adverse to the interests of the corporation. Every such
examination shall be subject to such reasonable regulations as the
directors may establish in regard thereto.
6A
<PAGE>
(d) The directors may specify the manner in which the accounts of the
corporation shall be kept and may determine what constitutes net earnings,
profits and surplus, what amounts, if any, shall be reserved for any
corporate purpose, and what amounts, if any, shall be declared as
dividends. Unless the directors otherwise specify, the excess of the
consideration for any share of its capital stock with par value issued by
it over such par value shall be paid-in surplus. The directors may
allocate to capital stock less than all of the consideration for any share
of its capital stock without par value issued by the corporation, in which
case the balance of such consideration shall be paid-in surplus. All
surplus shall be available for any corporate purpose, including the payment
of dividends.
(e) The purchase or other acquisition or retention by the corporation
of shares of its own capital shall not be deemed a reduction of its capital
stock. Upon any reduction of capital or capital stock, no stockholder
shall have any right to demand any distribution from the corporation,
except as and to the extent that the stockholders shall so have provided at
the time of authorizing such reduction.
(f) The directors shall have the power to fix from time to time their
compensation. No person shall be disqualified from holding any office by
reason of any interest. In the absence of fraud, any director, officer or
stockholder of this corporation individually, or any individual having any
interest in any concern which is a stockholder of this corporation, or any
concern in which any such directors, officers, stockholders or individuals
have any interest, may be a part to, or may be pecuniarily or otherwise
interested in, any contract, transaction or other act of this corporation,
and
(1) such contract, transactions or act shall not be in any way
invalidated or otherwise affected by that fact;
(2) no such director, officer, stockholder or individual shall
be liable to account to this corporation for any profit or benefit
realized through any such contract, transaction or act; and
(3) any such director of this corporation may be counted in
determining the existence of a quorum at any meeting of the directors
or of any committee thereof which shall authorize any such contract,
transaction or act, and may vote to authorize the same;
provided, however, that any contract, transaction or act in which any
director or officer of this corporation is so interested individually, or
as a director, officer, trustee or member of any concern which is not a
subsidiary or affiliate of this corporation, or in which any directors or
officers are so interested as holders, collectively, of a majority of
shares of capital stock or other beneficial interest at the time
outstanding in any concern which is not a subsidiary or affiliate of this
corporation, shall be duly authorized or ratified by a majority
6B
<PAGE>
of the directors who are not so interested and to whom the nature of such
interest has been disclosed.
As used in this paragraph (i) the term "interest" means personal
interest and interest as a director, officer, stockholder, shareholder,
trustee, member or beneficiary of any concern; the term "concern" means any
corporation, association, trust, partnership, firm, person or other entity
other than this corporation; and the phrase "subsidiary or affiliate" means
a concern in which a majority of the directors, trustees, partners or
controlling persons are elected or appointed by the directors of this
corporation, or are constituted of the directors or officers of this
corporation.
To the extent permitted by law, the authorizing or ratifying vote
of a majority in interest of each class of the capital stock of this
corporation outstanding and entitled to vote for directors at an annual
meeting or a special meeting duly called for the purpose (whether such vote
is passed before or after judgment rendered in a suit with respect to such
contract, transaction or act) shall validate any contract, transaction or
act of this corporation, or of the board of directors or any committee
thereof, with regard to all stockholders of this corporation, whether or
not of record at the time of such vote, and with regard to all creditors
and other claimants against this corporation; provided, however, that with
respect to the authorization or ratification of contracts, transactions or
acts in which any of the directors, officers or stockholders of this
corporation have an interest, the nature of such contracts, transactions or
acts and the interest therein of any director, officer or record or (to the
corporation's knowledge) beneficial holder of 10% or more of any class of
outstanding capital stock of the corporation shall be summarized in the
notice of any such annual or special meeting, or in a statement or letter
accompanying such notice, and shall be fully disclosed at any such meeting.
Interested stockholders may vote at any such meeting. Any failure of the
stockholders to authorize or ratify such contract, transaction or act shall
not be deemed in any way to invalidate the same or to deprive this
corporation, its directors, officers or employees of its or their right to
proceed with such contract, transaction or act. No contract, transaction
or act shall be avoided by reason of any provision of this paragraph (f)
which would be valid but for such provisions.
(g) Repealed.
(h) A vote of 80% of the shares of each class and series of stock
outstanding and entitled to vote thereon (or in the case of two or more
classes or series which are to vote as a single class, a vote representing
80% of the combined votes of the classes or series voting together) shall
be required to approve or authorize a merger, consolidation, dissolution or
sale, mortgage, pledge, lease or exchange of all or substantially all of
the property and assets of this corporation, and shall also be required to
amend this paragraph (h). Any 80% voting requirement of this paragraph,
and any two-thirds voting requirement under applicable law for any
amendment to the corporation's Article of Organization, shall not be
applicable if the "Continuing Directors" (as hereinafter defined) by a two-
thirds vote of all Continuing
6C
<PAGE>
Directors then in office shall have expressly approved any such transaction
or amendment in advance and shall have determined that such voting
requirement shall not be applicable to such transaction or amendment, in
which event the voting requirement shall be a majority rather than 80% or
two-thirds. For purposes of this paragraph (h), the term "Continuing
Directors" shall mean any director (a) who has continuously been a member
of the Board of Directors of the corporation since not later than January
1, 1986, or (b) who is a successor of a Continuing Director as defined in
(a) if such successor (and any intervening successor) shall have been
recommended or elected to succeed a Continuing Director by a majority of
the then Continuing Directors. The provisions of this paragraph (h) are
subject to the provisions of the Business Corporation Law, and if any
provision of this paragraph (h) shall be determined to be inconsistent with
the Business Corporation Law, it shall if feasible be construed or narrowed
so as to comply with the Business Corporation Law, and any invalidity or
partial invalidity of any provision of this paragraph (h) shall not affect
any other provision, unless the context requires otherwise.
(i) No director of the corporation shall be personally liable to the
corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director notwithstanding any provision of law imposing
such liability; provided, however, that this paragraph (i) shall not
eliminate the liability of a director, to the extent that such liability is
provided by applicable law, (a) for any breach of the director's duty of
loyalty to the corporation or its stockholders, (b) for acts or omissions
not in good faith or which involve intentional misconduct or a knowing
violation of law, (c) under Section 61 or 62 (or successor provisions) of
the Massachusetts Business Corporation Law, or (d) for any transaction from
which the director derived an improper personal benefit. No amendment to
or repeal of this provision shall apply to or have any effect on the
liability or alleged liability of any director of the corporation for or
with respect to any acts or omissions of such director occurring prior to
such amendment or repeal.
6D
<PAGE>
OFFICERS OF THE WILLIAM CARTER COMPANY
1. Full Legal Name: Frederick J. Rowan, II
Title(s): President & CEO
Residence Addr: 1835 Ballybunion Drive
Duluth, GA 30155
Business Addr: 1590 Adamson Parkway
Suite 400
Morrow, GA 30260
2. Full Legal Name: David A. Brown
Title(s): Senior Vice President
Business Planning & Administration Clerk
Residence Addr: 103 Pierrepont Isle
Duluth, GA 30155
Business Addr: 1590 Adamson Parkway
Suite 400
Morrow, GA 30260
3. Full Legal Name: Joseph Pacifico
Title(s): Executive Vice President - Marketing
Residence Addr: 1828 Ballybunion Drive
Duluth, GA 30155
Business Addr: 1590 Adamson Parkway
Suite 400
Morrow, GA 30260
4. Full Legal Name: Charles E. Whetzel, Jr.
Title(s): Executive Vice President - Operations
Residence Addr: 10910 Old Stone Court
Duluth, GA 30155
Business Addr: 1590 Adamson Parkway
Suite 400
Morrow, GA 30260
5. Full Legal Name: Jay A. Berman
Title(s): Chief Financial Officer & Treasurer
Residence Addr: 33 Carriage Hill Drive
Branford, CT 06405
Business Addr: 1000 Bridgeport Avenue
Shelton, CT 06434
6. Full Legal Name: Michael D. Casey
Title(s): Vice President - Finance
Residence Addr: 27 Windy Ridge
Trumbull, CT 06611
Business Addr: 1000 Bridgeport Avenue
Shelton, CT 06434
8A
<PAGE>
Directors of The William Carter Company
- --------------------------------------------------------------------------------
NAME OF DIRECTOR BUSINESS ADDRESS RESIDENTIAL ADDRESS
- --------------------------------------------------------------------------------
Frederick J. Rowan, II 150 Adamson Parkway 1835 Ballybunion Drive
Suite 400 Duluth, GA 30155
Morrow, GA 30260
- --------------------------------------------------------------------------------
Kurt Borowsky Van Beuren Management 28 Post Kennel Road
330 South Street Plain Hills, NJ 07930
Morristown, NJ 07960
- --------------------------------------------------------------------------------
Alan Bowers Mutual Benefit Life 7 Homestead Road
Assurance Company Metchen, NJ 08840
520 Broad Street
Newark, NJ 07101
- --------------------------------------------------------------------------------
Thomas M. Conney 9200 Montgomery Road 15 Hampton Lane
Suite 23A Cincinnati, OH 45208
Cincinnati, OH 45242-7716
- --------------------------------------------------------------------------------
David James Mutual Benefit Life 15 Lincoln Avenue
Assurance Company Chatham, NJ 07928
520 Broad Street
Newark, NJ 07101
- --------------------------------------------------------------------------------
Leonard Lieberman 1 Gateway Center 1605 Harmon Cove Towers
Suite 532 Secaucus, NJ 07904
Newark, NJ 07102-5311
- --------------------------------------------------------------------------------
8B
<PAGE>
ARTICLE VII
The effective date of the restated Articles of Organization of the corporation
shall be the date approved and filed by the Secretary of the Commonwealth. If a
later effective date is desired, specify such date which shall not be more than
thirty days after the date of filing.
ARTICLE VIII
The information contained in Article VIII is not a permanent part of the
Articles of Organization.
a. The street address (post office boxes are not acceptable) of the principal
office of the corporation in Massachusetts is:
369 Elliott St., Newton Upper Falls, MA 02164
b. The name, residential address and post office address of each director and
officer of the corporation is as follows:
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
President:
See pages 8A-8B attached hereto.
Treasurer:
Clerk:
Directors:
c. The fiscal year (i.e., tax year) of the corporation shall end on the last
day of the month of:
The Saturday in December or January nearest the last day of December.
d. The name and business address of the resident agent, if any, of the
corporation is:
Corporation Service Company
84 State Street, Boston, MA 02109-2202
** We further certify that the foregoing Restated Articles of Organization
affect no amendments to the Articles of Organization of the corporation as
heretofore amended, except amendments to the following articles. Briefly
describe amendments below:
Article 4. Class C Common Stock changed from voting to non-voting.
SIGNED UNDER THE PENALTIES OF PERJURY, this 28th day of October, 1996.
/s/Frederick J. Rowan, II , * President
- --------------------------------------------
Frederick J. Rowan, II
/s/David A. Brown , * Clerk
- --------------------------------------------
David A. Brown
* Delete the inapplicable words. ** If there are no amendments, state `None'.
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
RESTATED ARTICLES OF ORGANIZATION
(General Laws, Chapter 156B, Section 74)
================================================================================
I hereby approve the within Restated Articles of Organization and,
the filing fee in the amount of $300 having been paid, said
articles are deemed to have been filed with me this 29th day of
October, 1996.
Effective Date: __________________________________________________
/s/William Francis Galvin
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
TO BE FILLED IN BY CORPORATION
Photocopy of document to be sent to:
Elaine M. Desrochers, Paralegal
Ropes & Gray
One International Place
Boston, MA 02110
Telephone: (617) 951-7635
<PAGE>
EXHIBIT 3.2
FEDERAL IDENTIFICATION FEDERAL IDENTIFICATION
NO. 04-1156680 NO. 13-3912935
THE COMMONWEALTH OF MASSACHUSETTS
WILLIAM FRANCIS GALVIN
Secretary of the Commonwealth
One Ashburton Place, Boston, Massachusetts 02108-1512
ARTICLES OF /*MERGER
(GENERAL LAWS, CHAPTER 156B, SECTION 78)
*merger of The William Carter Company and
-----------------------------------------
TWCC Acquisition Corp. 549133
-----------------------------------------
-----------------------------------------
-----------------------------------------
-----------------------------------------,
the constituent corporations, into
The William Carter Company
-----------------------------------------,
*one of the constituent corporations.
The undersigned officers of each of the constituent corporations certify under
the penalties of perjury as follows:
1. An agreement of *merger has been duly adopted in compliance with the
requirements of General Laws, Chapter 156B, Section 78, and will be kept as
provided by Subsection (d) thereof. The *surviving corporation will furnish a
copy of said agreement to any of its stockholders, or to any person who was a
stockholder of any constituent corporation, upon written request and without
charge.
2. The effective date of the *merger determined pursuant to the agreement of
*merger shall be the date approved and filed by the Secretary of the
Commonwealth. If a LATER effective date is desired, specify such date which
shall not be more than THIRTY DAYS after the date of filing.
3. (FOR A MERGER)
**The following amendments to the Articles of Organization of the SURVIVING
Corporation have been effected pursuant to the agreement of merger:
Articles III --) VI are being amended as follows:
[See attached pages]
*DELETE THE INAPPLICABLE WORD. **IF THERE ARE NO PROVISIONS STATE "NONE".
NOTE: IF THE SPACE PROVIDED UNDER ANY ARTICLE OR ITEM ON THIS FORM IS
INSUFFICIENT, ADDITIONS SHALL BE SET FORTH ON SEPARATE 8 1/2 x 11 SHEETS OF
PAPER WITH A LEFT MARGIN OF AT LEAST 1 INCH. ADDITIONS TO MORE THAN ONE ARTICLE
MAY BE MADE ON A SINGLE SHEET AS LONG AS EACH ARTICLE REQUIRING EACH ADDITION IS
CLEARLY INDICATED.
<PAGE>
(FOR A CONSOLIDATION)
(a) The purpose of the RESULTING corporation is to engage in the following
business activities:
(b) State the total number of shares and the par value, if any, of each class of
stock which the RESULTING corporation is authorized to issue.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
WITHOUT PAR VALUE WITH PAR VALUE
- ----------------------------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Common: Common:
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Preferred: Preferred:
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
**(c) If more than one class of stock is authorized, state a distinguishing
designation for each class and provide a description of the preferences, voting
powers, qualifications, and special or relative rights or privileges of each
class and of each series then established.
**(d) The restrictions, if any, on the transfer of stock contained in the
agreement of consolidation are:
**(e) Other lawful provisions, if any, for the conduct and regulation of the
business and affairs of the corporation, for its voluntary dissolution, or for
limiting, defining, or regulating the powers of the corporation, or of its
directors or stockholders, or of any class of stockholders:
**IF THERE ARE NO PROVISIONS STATE "NONE".
<PAGE>
ARTICLE III
State the total number of shares and par value, if any, of each class of stock
which the corporation is authorized to issue.
- -------------------------------------------------------------------------------
WITHOUT PAR VALUE WITH PAR VALUE
- -------------------------------------------------------------------------------
TYPE NUMBER OF SHARES TYPE NUMBER OF SHARES PAR VALUE
- -------------------------------------------------------------------------------
COMMON: COMMON: 1,000 $.01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
PREFERRED: PREFERRED: 5,000 $.01
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
ARTICLE IV
If more than one class of stock is authorized, state a distinguishing
designation for each class. Prior to the issuance of any shares of a class, if
shares of another class are outstanding, the corporation must provide a
description of the preferences, voting powers, qualifications, and special or
relative rights or privileges of that class and of each other class of which
shares are outstanding and of each series then established within any class.
[See attached pages]
ARTICLE V
The restrictions, if any, imposed by the Articles of Organization upon the
transfer of shares of stock of any class are:
None
ARTICLE VI
Other lawful provisions, if any for the conduct and regulation of the business
and affairs of the corporation, for its voluntary dissolution, or for limiting,
defining or regulating the powers of the corporation, or if its directors or
stockholders, or of any class of stockholders:
Add to article VI:
The directors may from time to time determine the relative rights and
preferences of any series of a class of stock.
<PAGE>
ARTICLE IV
Part A. AUTHORIZED SHARES
Total number of shares of capital stock which the Corporation has authority
to issue is 6,000 shares, consisting of:
(i) 5,000 shares of Cumulative Preferred Stock, par value $.01 per share
("Cumulative Preferred Stock").
(ii) 1,000 shares of Common Stock ("Common Stock").
The Cumulative Preferred Stock authorized and issued hereafter are
referred to collectively as the "Preferred Stock".
Part B. Cumulative Preferred Stock.
(a) [intentionally left blank]
(b) DIVIDEND RATE.
(1) Dividends on the shares of Preferred Stock shall accrue from the date
of their original issue at a rate of twelve percent (12%) per annum computed on
the basis of the actual number of days elapsed in a 360-day year, and, to the
extent any such dividends and any other dividends accrued with respect to such
dividends pursuant to this paragraph (1) shall not have accrued, but are in
arrears because they have not been declared and paid, such undeclared and unpaid
dividends shall accrue additional dividends from the date upon which such
undeclared and unpaid dividends accrued until the date upon which they are paid
at the rate of fourteen percent (14%) per annum (compounded on the Dividend
Payment Dates and computed on the basis of the actual number of days elapsed in
a 360-day year). All such dividends shall be cumulative and shall be payable
when and as declared by the Board of Directors of the Corporation, out of assets
legally available for
<PAGE>
such purpose, on May 1 and November 1 of each year commencing, in the case of
the first issuance of shares of Preferred Stock, May 1, 1997 (each such date
being hereinafter individually a "Dividend Payment Date" and collectively the
"Dividend Payment Dates"), except that if any Dividend Payment Date is a
Saturday, Sunday or legal holiday then such dividend shall be paid on the next
business day following such Dividend Payment Date and no additional amount shall
accrue as a result of such delay.
(2) Each dividend shall be paid to the holders of record of shares of
Preferred Stock as they appear on the books of the Corporation on the record
date, not exceeding 30 days prior to the Dividend Payment Date thereof, as
shall be fixed by the Board of Directors of the Corporation. Dividends in
arrears may be declared and paid at any time, without reference to any
regular Dividend Payment Date, to holders of record on such date, not
exceeding 45 days preceding the payment date thereof, as may be fixed by the
Board of Directors of the Corporation.
(3) Except as hereinafter provided, no dividends shall be declared or
paid or set apart for payment on the shares of Preferred Stock for any period
if the Corporation shall be in default in the payment of any dividends
(including cumulative dividends, if applicable) on any shares of Preferred
Stock ranking, as to dividends, prior to the Preferred Stock, unless a
dividend sufficient to cure such default shall be contemporaneously declared
and paid.
(4) Except as hereinafter provided, no dividends shall be declared or
paid or set apart for payment on the Preferred Stock of any series ranking,
as to dividends, on a parity with or junior to the Preferred Stock for any
period unless full cumulative dividends have been or contemporaneously are
declared and paid on the Preferred Stock through the last Dividend Payment
Date. When dividends are not paid in full, as aforesaid, upon the shares of
Preferred Stock and any other Preferred Stock ranking on a parity as to
dividends with the Preferred Stock, all dividends declared upon shares of the
Preferred Stock and any other Preferred Stock ranking on a parity as to
dividends with the Preferred Stock shall be declared pro rata so that the
amount of dividends declared per share on the Preferred Stock and such other
Preferred Stock shall in all cases bear to each other the same ratio that
accrued dividends per share on the shares of the Preferred Stock and such
other Preferred Stock bear to each other. Holders of shares of Preferred
Stock shall not be entitled to any dividends, whether payable in cash,
property or stock, in excess of full cumulative dividends, as provided in
paragraphs (1) and (2) of this Section (b), on the Preferred Stock.
(5) So long as any share of the Preferred Stock is outstanding, no
dividend (other than (i) a dividend in the Corporation's Common Stock, par
value $.01 per share (the "Common Stock"), or in any other stock of the
Corporation ranking junior to the Preferred Stock as to dividends and upon
liquidation or (ii) as provided in paragraph (4) of this Section (b)), shall
be declared or paid or set aside for payment, or other distribution declared
or made, upon the Common Stock or upon any other stock of the Corporation
ranking junior to or on a parity with the Preferred Stock as to dividends or
upon liquidation, nor shall any Common Stock nor any other stock of the
Corporation ranking
2
<PAGE>
junior to or on a parity with the Preferred stock as to dividends or upon
liquidation be redeemed, purchased or otherwise acquired for any consideration
(or any moneys be paid to or made available for a sinking fund for the
redemption of any shares of any such stock) by the Corporation (except by
conversion into or exchange for stock of the Corporation ranking junior to the
Preferred Stock as to dividends and upon liquidation) unless, in each case, the
full cumulative dividends on all outstanding shares of the Preferred Stock shall
have been paid or contemporaneously are declared and paid through the prevent
the Corporation from repurchasing or redeeming any of its capital stock pursuant
to the terms of any subscription agreement entered into with any officer,
director or employee of the Corporation or any of it subsidiaries.
(c) OPTIONAL REDEMPTION. The shares of Preferred Stock are redeemable
on the terms and conditions set forth below, at any time or from time to
time, at the option of the Corporation expressed by resolution of the Board
of Directors, at a per share redemption price of Four Thousand Dollars
($4,000) plus, in each case, accrued and unpaid dividends thereon to the date
fixed for redemption. The shares of Preferred Stock may be redeemed in whole
or in not more than two partial redemptions, provided that in the first of
such two partial redemptions not less than 50% of the number of shares of
Preferred Stock then outstanding shall be redeemed and that in the second of
two such partial redemptions all of the shares of Preferred Stock then
outstanding shall be redeemed.
(d) MANDATORY REDEMPTION.
On December 15, 2007 the Corporation shall redeem all outstanding
shares of Preferred Stock at a per share redemption price of Four Thousand
Dollars ($4,000) plus accrued and unpaid dividends thereon to the date fixed for
redemption.
(e) PROCEDURE FOR REDEMPTION.
(1) If fewer than all the outstanding shares of Preferred Stock are to be
redeemed, the number of shares to be redeemed shall be determined by the Board
of Directors, subject to the provisions of Sections (c) and (d) above, and the
shares to be redeemed shall be determined by lot or pro rata as may be
determined by the Board of Directors or by any other method as may be determined
by the Board of Directors in its sole discretion to be equitable.
(2) Notice of a 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 record of the shares to be redeemed, a
such holder's address as the same appears on the books of the Corporation.
Each such notice shall state: (i) the redemption date; (ii) the number of
shares of Preferred Stock to be redeemed and, if fewer than all the shares
the same appears on the books of the Corporation. Each such notice shall
state: (i) the redemption date; (ii) the number of shares of Preferred Stock
to be redeemed and, if fewer than all the shares held by such holder are to
be redeemed, the number of such shares to be redeemed from such holder;
(iii) the redemption price; (iv) the place or places where
3
<PAGE>
certificates for such shares are to be surrendered for payment of the
redemption price; (v) that dividends on the shares to be redeemed will cease
to accrue on such redemption date; and (vi) any other information required by
applicable laws or regulations.
(3) Notice having been mailed as aforesaid, from and after the redemption
date (unless default shall be made by the Corporation in providing money for the
payment of the redemption price of the shares called for redemption) dividends
on the shares of Preferred Stock so called for redemption shall cease to accrue,
and said shares shall no longer be deemed to be outstanding, and all rights of
the holders thereof as stockholders of the Corporation (except the right to
receive from the Corporation the redemption price plus accrued and unpaid
dividends to the date fixed for redemption) shall cease. Upon surrender of the
certificates for any shares so redeemed in accordance with said notice (properly
endorsed or assigned for transfer, if the Board of Directors of the Corporation
shall so require and the notice shall so state), such shares shall be redeemed
by the Corporation at the redemption price aforesaid. In case fewer than all of
the shares represented by any such certificate are redeemed, a new certificate
shall be issued representing the unredeemed shares without cost to the holder
thereof.
(4) Any shares of Preferred Stock which shall at any time have been
redeemed shall, after such redemption, have the status of authorized but
unissued shares of Preferred Stock, without designation as to series until such
shares are once more designated as part of a particular series by the Board of
Directors. None of such redeemed shares of Preferred Stock shall be reissued as
shares of Preferred Stock.
(5) If the Corporation shall be in default in the payment of any
dividends on any shares of Preferred Stock ranking, as to dividends, prior to
the Preferred Stock, then no shares of Preferred Stock shall be redeemed and
the Corporation shall not purchase or otherwise acquire any shares of
Preferred Stock.
(6) Notwithstanding the foregoing provisions of this Section(e), unless
the full cumulative dividends on all outstanding shares of Preferred Stock
shall have been paid or contemporaneously are declared and paid through the
last Dividend Payment Date, no shares of Preferred Stock shall be redeemed
unless all outstanding shares of Preferred Stock are simultaneously redeemed,
provided however, that the foregoing shall not prevent the purchase or
acquisition of shares of Preferred Stock pursuant to a purchase or exchange
offer made on the same terms to all holders of outstanding shares of
Preferred Stock.
(f) VOTING.
The shares of Preferred Stock shall not have any voting powers either
general or special, except as required by law or regulation and except that
unless the vote or consent of the holders of a greater number of shares shall
then be required by law, the consent of the holders of a least a majority of all
of the shares of Preferred Stock, and all other series of Preferred Stock
ranking on a parity with the Preferred Stock either as to dividends or upon
liquidation and upon which like voting rights have been conferred and are then
4
<PAGE>
exercisable, at the time outstanding, given in person or by proxy, either in
writing or by a vote at a meeting called for the purpose at which the holders
of such shares shall vote together as a single class without regard to
series, shall be necessary for authorizing, effecting or validating the
amendment, alteration or repeal of any of the provisions of the Articles of
Organization or of any amendatory Statement thereto (including any Statement
with Respect to Shares or any similar document relating to any series of
Preferred Stock) so as to affect materially and adversely the rights,
preferences, privileges or voting power of shares of Preferred Stock. In
case the shares of Preferred Stock would be so affected in a materially
different manner than any other series of Preferred Stock then outstanding by
any such action, the holders of shares of Preferred Stock shall be entitled
to vote as a separate class, and the Corporation shall not take such action
without the consent or affirmative vote, as above provided, of at least a
majority of the total number of shares of Preferred Stock then outstanding,
in addition to or as a specific part of the consent or affirmative vote
hereinabove otherwise required. The increase of the authorized amount of the
Preferred Stock, or the creation, authorization or issuance of any shares of
any other class of stock of the Corporation ranking, (i) junior to the
Preferred Stock, or (ii) on a parity with the shares of Preferred Stock, as
to dividends or upon liquidation, or the reclassification of any authorized
or outstanding stock of the Corporation into any such junior or parity
shares, or the creation, authorization or issuance of any obligation or
security convertible into or evidencing the right to purchase any such junior
or parity shares shall not be deemed to affect materially and adversely the
rights, preferences, privileges or voting power of shares of Preferred Stock.
(g) LIQUIDATION RIGHTS
(1) Upon the dissolution, liquidation or winding up of the Corporation,
whether voluntary or involuntary, the holders of the shares of Preferred Stock
shall be entitled to receive out of the assets of the Corporation available for
distribution to stockholders, before any payment or distribution shall be made
on the Common Stock or on any other class of stock ranking junior to Preferred
Stock upon liquidation, the amount of Four Thousand Dollars ($4,000) per share,
plus a sum equal to all dividends (whether or not earned or declared) on such
shares accrued and unpaid thereon to the date of final distribution, subject
only to the provisions of this paragraph (1) of this Section (g). All shares of
Preferred Stock ranking in whole or in part prior to the shares of Preferred
Stock as to liquidation shall be entitled to be paid to the extent of such
priority in full in cash, or money for the payment thereof set apart, before
any payment provided for in this Section (g) shall be made with respect to the
shares of Preferred Stock.
(2) Neither the sale, lease or exchange (for cash, shares of stock,
securities or other consideration) of all or substantially all the property
and assets of the Corporation nor the merger or consolidation of the Corporation
into or with any other corporation or the merger or consolidation of any other
corporation into or with the Corporation, shall be deemed to be a dissolution,
liquidation or winding up, voluntary or involuntary, for the purposes of this
Section (g).
5
<PAGE>
(3) After the payment to the holders of the shares of Preferred Stock of
the full preferential amounts provided for in this Section (g), the holders
of shares of Preferred Stock as such shall have no right or claim to any of
the remaining assets of the Corporation.
(4) In the event the assets of the Corporation available for distribution
to the holders of shares of Preferred Stock upon any dissolution,
liquidation or winding up of the Corporation, whether voluntary or
involuntary, shall be insufficient to pay in full all amounts to which such
holders are entitled pursuant to paragraph (1) of this Section (g), no such
distribution shall be made on account of any of shares of any other class or
series of Preferred Stock ranking in whole or in party on a parity with the
shares of Preferred Stock upon such dissolution, liquidation or winding up
unless proportionate distributive amounts shall be paid on account of the
shares of Preferred Stock, ratably, in proportion to the full distributable
parity amounts for which holders of all such parity shares are respectively
entitled upon such dissolution, liquidation or winding up.
(h) PRIORITY.
For purposes of this resolution, any stock of any class or classes of the
Corporation shall be deemed to rank:
(1) Prior to the shares of the Preferred Stock, either as to dividends or
upon liquidation, if the holders of such class or classes shall be entitled
to the receipt of dividends or of amounts distributable upon dissolution,
liquidation or winding up of the Corporation, whether voluntary or
involuntary, as the case may be, in preference or priority to the holders of
shares of Preferred Stock. Each holder of any share of Preferred Stock, by
his acceptance thereof, expressly covenants and agrees that the rights of
the holders of any shares of any other series of Preferred Stock of the
Corporation to receive dividends or amounts distributable upon dissolution,
liquidation or winding up of the Corporation, whether voluntary or
involuntary, shall be and hereby are expressly prior to his rights unless in
the case of any particular series of Preferred Stock the certificate or
other instrument creating or evidencing the same expressly provides that
the rights of the holders of such series shall not be prior to the shares
of Preferred Stock.
(2) On a parity with shares of Preferred Stock, either as to dividends or
upon liquidation, whether or not the dividend rates, dividend payment dates
or redemption or liquidation prices per share or sinking fund provisions,
if any, be different from those of the Preferred Stock, if the holders of
such stock shall be entitled to the receipt of dividends or of amounts
distributable upon dissolution, liquidation or winding up of the
Corporation, whether voluntary or involuntary, as the case may be, in
proportion to their respective dividend rates or liquidation prices,
without preference or priority, one over the other, as between the
holders of such stock and the holders of shares of Preferred Stock.
(3) Junior to shares of Preferred Stock, either as to dividends or upon
liquidation, if such class or classes shall be Common Stock or if the
holders of shares of Preferred Stock shall be entitled to receipt of
dividends or of amounts distributable upon
6
<PAGE>
dissolution, liquidation or winding up of the Corporation, whether voluntary
or involuntary, as the case may be, in preference or priority to the holders
of shares of such class or classes.
(i) PAYMENTS. All payments to a holder of Preferred Stock shall be
made at the office or agency of the Corporation maintained for such purpose
in such coin or currency of the United States of America as at the time of
payment is legal tender for the payment of public and private debts;
provided, however, that at the option of the Corporation payment may be made
(i) by check mailed to such holder at his address appearing on the records of
the Corporation or, (ii) at the request of such holder, by wire transfer of
immediately available funds to the address designated by such holder in
writing.
Part C. COMMON STOCK.
The holders of the Common Stock shall have the exclusive right to vote for
the election of directors and on all other matters requiring action by the
stockholders or submitted to the stockholders for action, except as to holders
of Preferred Stock as provided in Part B hereof, or as may otherwise be required
by law, and each share of the Common Stock shall entitle the holder thereof to
one vote.
The holders of the Common Stock shall be entitled to receive, to the extent
permitted by law, such dividends as may from time to time be declared by the
Board of Directors.
Upon any voluntary or involuntary liquidation, dissolution or winding
up of the corporation, the holders of the Common Stock shall be entitled to
receive the net assets of the corporation, after the corporation shall have
satisfied or made provisions for its debts and obligations and for payment to
the holders of shares of any class or series having preferential rights to
receive distributions of the net assets of the corporation.
7
<PAGE>
4. The information contained in Item 4 is NOT a PERMANENT part of the Articles
of Organization of the * surviving corporation.
(a) The street address of the * surviving corporation in Massachusetts is: (POST
OFFICE BOXES ARE NOT ACCEPTABLE) c/o Precision Corporate Services, Inc. 18
Tremont Street, Suite 146, Boston, MA 02108
(b) The name, residential address, and post office address of each director and
officer of the *resulting/*surviving corporation is:
<TABLE>
<CAPTION>
NAME RESIDENTIAL ADDRESS POST OFFICE ADDRESS
<S> <C> <C>
PRESIDENT: Frederick J. Rowan, II 1835 Balleybunion Drive, Duluth, Georgia 30316
TREASURER: Jay A. Berman 33 Carridge Hill Drive, Bramford, Connecticut 06465
CLERK: David A. Brown 103 Perrepont Isle, Duluth, Georgia 30136
DIRECTORS: Frederick J. Rowan, II 1835 Balleybunion Drive, Duluth, Georgia 30316
Jay A. Berman 33 Carridge Hill Drive, Bramford, Connecticut 06465
David A. Brown 103 Perrepont Isle, Duluth, Georgia 30316
Christopher J. O'Brien 320 Cognewaugh Road, Cos Cob, Connecticut 06807
Charles J. Philippin 7 Tunxis Trail, Redding, Connecticut 06896
Christopher J. Stadler 307 Freeman's Lane, Franklin Lakes, New Jersey 07417
</TABLE>
(c) The fiscal year (i.e. tax year) of the * surviving corporation shall end on
the last * Saturday closest to December 31.
(d) The name and business address of the resident agent, if any, of the
*surviving corporation is:
Precision Corporate Services, Inc., 18 Tremont Street, Suite 146,
Boston, MA 02108
The undersigned officers of the several constituent corporations listed above
further state under the penalties of perjury as to their respective corporations
that the agreement of *consolidation/*merger has been duly executed on behalf
of such corporation and duly approved by the stockholders of such corporation in
the manner required by General Laws, Chapter 156B, Section 78.
/s/ Christopher J. O'Brien , *President
- --------------------------------------------------------------------
Christopher J. O'Brien
/s/ Robert Sharp , *Clerk
- ------------------------------------------------------------------------
of TWCC Acquisition Corp.
------------------------------------------------------------------------------
(NAME OF CONSTITUENT CORPORATION)
/s/ Frederick J. Rowan, II , *President
- --------------------------------------------------------------------
Frederick J. Rowan, II
/s/ David A. Brown , *Clerk
- ------------------------------------------------------------------------
of The William Carter Company
------------------------------------------------------------------------------
(NAME OF CONSTITUENT CORPORATION)
* DELETE THE INAPPLICABLE WORDS.
<PAGE>
THE COMMONWEALTH OF MASSACHUSETTS
ARTICLES OF *CONSOLIDATION/*MERGER
(GENERAL LAWS, CHAPTER 156B, SECTION 78)
----------------------------------------
----------------------------------------
I hereby approve the within Articles of
*Consolidation/*Merger and the filing fee
in the amount of $250.00, having been paid,
said articles are deemed to have been filed
with me this 30th day of October, 1996.
EFFECTIVE DATE:
-------------------------
/s/ William Francis Galvin
WILLIAM FRANCIS GALVIN
SECRETARY OF THE COMMONWEALTH
[Notary]
TO BE FILLED IN BY CORPORATION
PHOTOCOPY OF DOCUMENT TO BE SENT TO:
Peter Kaiser
----------------------------------------
Gibson, Dunn & Crutcher LLP
----------------------------------------
200 Park Avenue, 48th Floor,
New York, NY 10166
----------------------------------------
Telephone: (212) 351-4000
------------------------------
<PAGE>
EXHIBIT 3.3
THE WILLIAM CARTER COMPANY
BY-LAWS
ARTICLE I - STOCKHOLDERS
1. Place of Meetings. All meetings of the stockholders shall be held
either at the principal office of the Corporation or at such other place within
the United States as is determined by the Board of Directors and stated in the
notice of the meeting.
2. Annual Meetings. The annual meeting of the stockholders entitled to
vote shall be held at ten o'clock in the forenoon (or at such other time as is
determined by the Board of Directors and stated in the notice) on a date to be
determined by the Board of Directors within six months after the end of each
fiscal year, on any day that is not a Saturday, Sunday or legal holiday, and if
a Saturday, Sunday or legal holiday, then on the next succeeding day that is not
a Saturday, Sunday or legal holiday, at such location as is determined by the
Board of Directors and stated in the notice. The purposes for which an annual
meeting is to be held, in addition to those prescribed by law, by the Articles
of Organization and by these By-Laws, may be specified by the Board of
Directors. If no annual meeting is held on the date fixed, or by adjournment
therefrom, a special meeting of the stockholders may be held in lieu thereof,
and any action taken at such special meeting shall have the same force and
effect as if taken at the annual meeting.
3. Special Meetings. Subject to the rights of the holders of any class or
series of preferred stock of the Corporation, special meetings of the
stockholders entitled to vote may be called by the Board of Directors, and shall
be called by the Clerk, or in case of the death, absence, incapacity or refusal
of the Clerk, by any other officer, upon written application of one or more
stockholders who are entitled to vote and who hold at least one-tenth part in
interest of the capital stock entitled to vote at the meeting.
4. Notice of Meetings. Notice of all meetings of stockholders, stating the
place, date and hour thereof, and the purposes for which the meeting is called,
shall be given to each stockholder entitled to vote thereat by the Clerk or
Assistant Clerk or other person calling the meeting. Notice must be given in
writing and such writing shall be sufficient if given personally or by
postage-prepaid mailing, or by any other means permitted by law. Notice must be
given at least seven (7) days before the meeting, to each stockholder entitled
to vote thereat and to each stockholder who, by law, the Articles of
Organization or these By-Laws, is entitled to such notice, such notice addressed
to his usual place of business or residence as it appears upon the books of the
Corporation. Notice shall be deemed given when it is received, if hand
delivered, or when dispatched, if delivered through the mails or by courier,
telegraph, telex, telecopy or cable. No notice of a meeting of the stockholders
need be given to any stockholder if such stockholder, by a writing (including,
without limitation, by telegraph, telex, telecopy or cable) filed with the
records of the meeting (and whether executed before or after such meeting)
waives such notice, or if such stockholder attends the meeting without
protesting prior thereto or at its
<PAGE>
commencement the lack of notice to him. Every stockholder who is present at a
meeting (whether in person or by proxy) shall be deemed to have waived notice
thereof.
5. Quorum. At any meeting of stockholders, the holders of a majority in
interest of all stock issued, outstanding and entitled to vote at a meeting
shall constitute a quorum, except that, if two or more classes of stock are
outstanding and entitled to vote as separate classes, then in the case of each
such class, a quorum shall consist of the holders of a majority in interest of
the stock of that class issued, outstanding and entitled to vote.
6. Adjournments. Any meeting of the stockholders may be adjourned to any
other time and to any other place by the stockholders present or represented at
the meeting, although less than a quorum, or by any officer entitled to preside
or to act as clerk of such meeting if no stockholder is present in person or by
proxy. It shall not be necessary to notify any stockholder of any adjournment.
Any business which could have been transacted at any meeting of the stockholders
as originally called may be transacted at any adjournment thereof.
7. Votes and Proxies. At all meetings of the stockholders, each
stockholder shall have one vote for each share of stock having voting power
registered in such stockholder's name, and a proportionate vote for any
fractional shares, unless otherwise provided or required by the Massachusetts
Business Corporation Law, the Articles of Organization or these By-Laws. Script
shall not carry any right to vote unless otherwise provided therein, but if
scrip provides for the right vote, such voting shall be on the same basis as
fractional shares. Stockholders may vote either in person or by written proxy.
No proxy which is dated more than six months before the meeting at which it is
to be used shall be accepted, and no proxy shall be valid after the final
adjournment of such meeting. Proxies need not be sealed or attested.
Notwithstanding the foregoing, a proxy coupled with an interest sufficient in
law to support an irrevocable power, including, without limitation, an interest
in the stock or in the Corporation generally, may be made irrevocable if it so
provides, need not specify the meeting to which it relates, and shall be valid
and enforceable until the interest terminates, or for such shorter period as may
be specified in the proxy. A proxy with respect to stock held in the name of two
or more persons shall be valid if executed by one of them unless at or prior to
exercise of the proxy the Corporation receives a specific written notice to the
contrary from any one of them. A proxy purporting to be executed by or on behalf
of a stockholder shall be deemed valid unless challenged at or prior to its
exercise.
8. Conduct of Business. The Chairman of the Board of Directors or his
designee, or, if there is no Chairman of the Board or such designee, then a
person appointed by a majority of the Board of Directors, shall preside at any
meeting of stockholders. The chairman of any meeting of stockholders shall
determine the order of business and the procedures at the meeting, including
such regulation of the manner of voting and the conduct of discussion as seem to
him in order.
9. Action at a Meeting. When a quorum is present, the holders of a
majority of the stock present or represented and entitled to vote and voting on
a matter (or if there are two or more classes of stock entitled to vote as
separate classes, then in the case of each such class, the
2
<PAGE>
holders of a majority of the stock of that class present or represented and
entitled to vote and voting on a matter), except where a larger vote is required
by law, the Articles of Organization or these By-Laws, shall decide any matter
to be voted on by the stockholders. Any election by stockholders shall be
determined by a plurality of the votes cast by the stockholders entitled to vote
at the election. No ballot shall be required for such election unless requested
by a stockholder present or represented at the meeting and entitled to vote in
the election. The Corporation shall not directly or indirectly vote any share of
its stock. Nothing in this section shall be construed to limit the right of the
Corporation to vote any shares of stock held directly or indirectly by it in a
fiduciary capacity.
10. Action Without a Meeting. Any action required or permitted to be taken
at any meeting of the stockholders may be taken without a meeting if all
stockholders entitled to vote on the matter consent to the action in writing and
the written consents are filed with the records of the meetings of stockholders.
Such consents shall be treated for all purposes as a vote at a meeting.
ARTICLE II - BOARD OF DIRECTORS
1. Powers. The Board of Directors may exercise all the powers of the
Corporation except such as are required by law or by the Articles of
Organization or these By-Laws to be otherwise exercised, and the business and
affairs of the Corporation shall be managed under the direction of the Board of
Directors. Without limiting the generality of the foregoing, the Board of
Directors shall have power, unless otherwise provided by law, to purchase and to
lease, pledge, mortgage and sell such property (including the stock of the
Corporation) and to make such contracts and agreements as they deem
advantageous, to fix the price to be paid for or in connection with any property
or rights purchased, sold, or otherwise dealt with by the Corporation, to borrow
money, issue bonds, notes and other obligations of the Corporation, and to
secure payment thereof by the mortgage or pledge of all or any part of the
property of the Corporation. The Board of Directors may determine the
compensation of Directors. The Board of Directors or such officer or committee
as the Board of Directors shall designate, may determine the compensation and
duties, in addition to those prescribed by these By-Laws, of all officers,
agents and employees of the Corporation.
2. Number. The corporation shall have a Board of Directors consisting of
such number (but not less than the minimum number required by the Massachusetts
Business Corporation Law or the Articles of Organization) as may be fixed by the
stockholders. At each annual meeting, the stockholders shall fix the number of
Directors to be elected, and shall elect the Directors. At any meeting, the
stockholders may increase or decrease the number of Directors within the limits
above specified. No Director need be a stockholder. The Chairman of the Board,
if any, shall be elected by and from the Board of Directors.
3. Tenure. Except as otherwise provided by law, by the Articles of
Organization, or by these By-Laws, each Director, including the Chairman of the
Board, if any, shall hold office until the next annual meeting or stockholders
and until his successor is elected and qualified or until he sooner dies,
resigns, is removed or becomes disqualified. Any Director may resign by
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giving written notice of his resignation to the Chairman of the Board, if any,
the President, the Clerk or the Secretary, if any, or to the Board of Directors
at a meeting of the Board, and such resignation shall become effective at the
time specified therein.
4. Removal. Subject to the rights of the holders of any class or series of
stock which may be then outstanding, any Director, or the entire Board of
Directors, may be removed from office at any time with or without cause by the
affirmative vote of the holders of at least a majority of the voting power of
all of the shares of the Corporation entitled to vote generally in the election
of Directors. A Director may be removed for cause only after a reasonable notice
and opportunity to be heard before the body proposing to remove him.
5. Vacancies. Subject to the Articles of Organization, any vacancy in the
office of Director may be filled by a majority vote of the Directors then in
office even though less than a quorum, or by a sole remaining Director. Subject
to the Articles of Organization, newly created directorships resulting from an
increase in the authorized number of Directors may be filled by a majority vote
of the Board of Directors then in office even though less than quorum, or by a
sole remaining Director.
6. Meetings. Meetings of the Directors need not be held in the
Commonwealth.
(a) Regular Meetings. Regular meetings of the Board of Directors may
be held without call or notice at such places and at such times as may be
fixed by the Board of Directors from time to time, provided that any
Director who is absent when such determination is made shall be given
notice of the determination. A regular meeting of the Board of Directors
may be held without call or notice at the same place as the annual meeting
of stockholders, or the special meeting held in lieu thereof, immediately
following such meeting of stockholders.
(b) Special Meetings. Special meetings of the Board of Directors may
be called by the Chairman of the Board, if any, the President, the
Treasurer, the Clerk, or one or more Directors. Notice of the time and
place of all special meetings shall be given by the Clerk or Assistant
Clerk or the Secretary or the officer or Directors calling the meeting.
Notice must be given orally, by telephone, or by telegraph, telex,
telecopy or cable or in writing, and such notice shall be sufficient if
given in time to enable the Director to attend, or in any case if sent by
mail, by courier or telegraph, telex, telecopy or cable at least three
days before the meeting, addressed to a Director's usual or last known
place of business or residence. No notice of any meeting of the Board of
Directors need be given to any Director if such Director, by a writing
(including, without limitation, by telegraph, telex, telecopy or cable)
filed with the records of the meeting (and whether executed before or
after such meeting), waives such notice, or if such Director attends the
meeting without protesting prior thereto or at its commencement the lack
of notice to him. A notice or waiver of notice need not specify the
purpose of any special meeting.
7. Quorum of Directors. At any meeting of the Board of Directors, a
majority of the number of Directors then constituting a full Board of Directors
then serving shall constitute a quorum, but a lesser number may adjourn any
meeting from time to time without further notice.
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In the event of a vacancy in the Board of Directors, the remaining Directors,
except as otherwise provided by law, may exercise the powers of the full Board
of Directors until the vacancy is filled.
8. Action at a Meeting. Unless otherwise provided by law, the Articles of
Organization or these By-Laws, action on any matter brought before any meeting
at which there is a quorum may be taken by vote of a majority of the Directors
then present at the meeting, unless a difference vote is required by law, the
Articles of Organization or these By-Laws.
9. Action Without a Meeting. Unless otherwise provided by law, the
Articles or Organization or these By-Laws, any action required or permitted to
be taken at any meeting of the Directors may be taken without a meeting if all
the Directors then in office consent to the action in writing and the written
consents are filed with the records of the meetings of Directors. Such consents
shall be treated for all purposes as a vote at a meeting.
10. Committees of Directors. The Board of Directors may, by vote of a
majority of the number of Directors then constituting a full Board, elect from
its membership an Executive Committee (to be chaired by the Chairman of the
Board, if any,) and such other committees as it may determine, comprised of such
number of its members as it may from time to time determine (but in any event
not less than two), and delegate to any such committee or committees some or all
of its powers, except those which by law, the Articles of Organization or these
By-Laws it is prohibited from delegating. Except as the Directors may otherwise
determine, any such committee may make rules for the conduct of its business,
but, unless otherwise provided by the Directors or in such rules, its business
shall be conducted as nearly as may be in the manner as is provided by these
By-Laws for the Directors.
11. Telephone Conference Meetings. The Board of Directors or any committee
thereof may participate in a meeting of such Board of Directors or committee
thereof by means of a conference telephone call (or similar communications
equipment) by means of which all persons participating in the meeting can hear
each other at the same time, and participation by such means shall constitute
presence in person at a meeting.
ARTICLE III - OFFICERS
1. Enumeration. The officers of the Corporation shall be the President,
the Treasurer, the Clerk and such other officers as the Board of Directors may
determine, including, but not limited to, a Chairman of the Board of Directors,
one or more Vice Presidents, one or more Assistant Treasurers, one or more
Assistant Clerks, and a Secretary.
2. Election. The Chairman of the Board, if any, the President, the
Treasurer and the Clerk shall be elected annually by the Directors at their
first meeting following the annual meeting of the stockholders or special
meeting in lieu thereof. The Board of Directors or the Chairman of the Board, if
any, may, from time to time, elect or appoint such other officers as it or he
may determine, including, but not limited to, one or more Vice-Presidents, one
or more Assistant Treasurers, one or more Assistant Clerks, and a Secretary.
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3. Qualification. No officer need be a stockholder. The Chairman of the
Board, if any, and any Vice Chairman appointed to act in the absence of the
Chairman, if any, shall be elected by and from the Board of Directors, but no
other officer need be a Director. Two or more offices may be held by any one
person. If required by vote of the Board of Directors, an officer shall give
bond to the Corporation for the faithful performance of his duties, in such form
and amount and with such sureties as the Board of Directors may determine. The
premiums for such bonds shall be paid by the Corporation.
4. Tenure. Each officer elected or appointed by the Board of Directors
shall hold office until the first meeting of the Board of Directors following
the next annual meeting of the stockholders or special meeting in lieu thereof
and until his successor is elected or appointed and qualified, or until he dies,
resigns, is removed or becomes disqualified, unless a shorter term is specified
in the vote electing or appointing said officer. Each officer appointed by the
Chairman of the Board, if any, shall hold office until his successor is elected
or appointed and qualified, or until he dies, resigns, is removed or becomes
disqualified, unless a shorter term is specified by any agreement or other
instrument appointing said officer. Any officer may resign by giving written
notice of his resignation to the Chairman of the Board, if any, the President,
the Clerk or the Secretary, if any, or to the Board of Directors at a meeting of
the Board, and such resignation shall become effective at the time specified
therein.
5. Removal. Any officer elected or appointed by the Board of Directors or
Chairman of the Board, if any, may be removed from office with or without cause
by vote of a majority of the Directors then in office. An officer may be removed
for cause only after a reasonable notice and opportunity to be heard before the
body or person proposing to remove him.
6. Chairman of the Board. The Chairman of the Board, if any, shall preside
at all meetings of the Board of Directors and stockholders at which he is
present and shall have such authority and perform such duties as may be
prescribed by these By-Laws or from time to time determined by the Board of
Directors.
7. President. The President shall, subject to the control and direction of
the Board of Directors, have and perform such powers and duties as may be
prescribed by these By-Laws or from time to time be determined by the Board of
Directors.
8. Vice Presidents. The Vice Presidents, if any, in the order of their
election, or in such other order as the Board of directors may determine, shall
have and perform the powers and duties of the President (or such of the powers
and duties as the Board of Directors may determine) whenever the President is
absent or unable to act. The Vice Presidents, if any, shall also have such other
powers and duties as may from time to time be determined by the Board of
Directors.
9. Treasurer and Assistant Treasurers. The Treasurer shall, subject to the
control and direction of the Board of Directors, have and perform such powers
and duties as may be prescribed in these By-Laws or be determined from time to
time by the Board of Directors. All property of the Corporation in the custody
of the Treasurer shall be subject at all times to the inspection and control of
the Board of Directors. Unless otherwise voted by the Board of
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Directors, each Assistant Treasurer, if any, shall have and perform the powers
and duties of the Treasurer whenever the Treasurer is absent or unable to act,
and may at any time exercise such of the powers of the Treasurer, and such other
powers and duties, as may from time to time be determined by the Board of
Directors.
10. Clerk and Assistant Clerks. The Clerk shall be a resident of
Massachusetts unless the Corporation has a resident agent appointed for the
purpose of service of process. He shall have and perform the powers and duties
prescribed in these By-laws and such other powers and duties as may from time to
time be determined by the Board of Directors. He shall attend all meetings of
the stockholders and shall record upon the record book of the Corporation all
votes of the stockholders and minutes of the proceedings at such meetings. He
shall have custody of the record books of the Corporation. Assistant Clerks, if
any, shall have such powers as the Board of Directors may from time to time
designate. In the absence of the Clerk from any meeting of stockholders, an
Assistant Clerk, if one be elected, otherwise a Temporary Clerk designated by
the person presiding at the meeting, shall perform the duties of the Clerk.
11. Secretary and Assistant Secretaries. The Board of Directors may
appoint a Secretary and, in his absence, an Assistant Secretary, but if no
Secretary or Assistant Secretary is elected, the Clerk (or, in the absence of
the Clerk, any Assistant Clerk) shall act as the Secretary. The Secretary or, in
his absence, any Assistant Secretary, shall attend all meetings of the Directors
and shall record all votes of the Board of Directors and minutes of the
proceedings a such meetings. The Secretary or, in his absence, any Assistant
Secretary (or the Clerk), shall notify the Directors of their meetings, and
shall have and perform such other powers and duties as may from time to time be
determined by the Board of Directors. If a Secretary or an Assistant Secretary
is elected but is absent from any such meeting, the Clerk (or any Assistant
Clerk) may perform the duties of the Secretary; otherwise, a Temporary Secretary
may be appointed by the meeting.
ARTICLE IV - CAPITAL STOCK
1. Certificates of Stock. Each stockholder shall be entitled to a
certificate or certificates representing in the aggregate the shares of the
capital stock of the Corporation owned by him, except that the Board of
Directors may provide by resolution that some or all of any or all classes and
series of shares of the Corporation shall be uncertificated shares, to the
extent permitted by law. All certificates for shares of stock of the Corporation
shall state the number and class of shares evidenced thereby (and designate the
series, if any), shall be signed by either the President or a Vice President and
either the Treasurer or an Assistant Treasurer, and may (but need not) bear the
seal of the Corporation and shall contain such further statements as shall be
required by law. The Board of Directors may determine the form of certificates
of stock except insofar as prescribed by law or by these By-Laws, and may
provide for the use of facsimile signatures thereon to the extent permitted by
law. In case any officer who has signed or whose facsimile signature has been
placed on such certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the Corporation with the same effect
as if he were such officer at the time of its issue. Every certificate for
shares which are subject to any
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restrictions on transfer pursuant to the Articles of Organization, these By-Laws
or any agreement to which the Corporation is a party, shall have the
restrictions noted conspicuously on the certificate and shall also set forth
upon the face or back thereof either the full text of the restrictions or a
statement of the existence of such restrictions and a statement that the
Corporation will furnish a copy thereof to the holder of such certificate upon
written request and without charge. Every stock certificate issued while the
Corporation is authorized to issue more than one class or series of stock, shall
set forth on the face or back thereof either the full text of the preferences,
voting powers, qualifications and special and relative rights of the shares of
each class and series, if any, authorized to be issued as set forth in the
Articles of Organization, or a statement of the existence of such preferences,
powers, qualifications and rights, and a statement that the Corporation will
furnish a copy thereof to the holder of such certificate upon written request
and without charge.
2. Transfers of Stock. The transfer of all shares of stock of the
Corporation, so as to affect the rights of the Corporation, shall be effected
only by transfer recorded on the books of the Corporation, in person or by duly
authorized attorney, and upon the surrender of the certificate properly endorsed
or assigned. The transfer of all shares of stock of the Corporation shall be
subject to the restrictions, if any, imposed by the Articles of Organization,
these By-Laws or any agreement to which the Corporation is a party.
3. Holders of Record. The person registered on the books of the
Corporation as the owner of the shares shall have the exclusive right to receive
dividends thereon and to vote thereon as such owner, shall be held liable for
such calls and assessments as may lawfully be made thereon, and except only as
may be required by law, may in all respects be treated by the Corporation as the
exclusive owner thereof. It shall be the duty of each stockholder to notify the
Corporation of his post office address. The Corporation shall not be bound to
recognize any equitable or other claim to or interest in shares of stock of the
Corporation on the part of any other person except as may be otherwise expressly
provided by law.
4. Lost or Destroyed Certificates. The Directors of the Corporation may,
subject to Section 29 of the Massachusetts Business Corporation Law, as amended
from time to time, or any successor statute, determine the conditions upon which
a new certificate of stock may be issued in place of any certificate alleged to
have been lost, destroyed or mutilated.
5. Record Date. The Board of Directors may fix in advance a date not more
than sixty days preceding the date of any meeting of stockholders or the date
for the payment of any dividend or the making of any distribution to
stockholders or the last day on which the consent or dissent of stockholders may
be effectively expressed for any purpose, as the record date for determining the
stockholders having the right to notice of and to vote at such meeting and any
adjournment thereof, or the right to receive such dividend or distribution, or
the right to give such consent or dissent. In such case, only stockholders of
record on such record date shall have such right, notwithstanding any transfer
of stock on the books of the Corporation after the record date. Without fixing
such record date the Board of Directors may, for any such purposes, close the
transfer books for all or any part of such sixty-day period. If no record date
is fixed and the transfer books are not closed, the record date for determining
stockholders having the right to
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notice of or to vote at a meeting of stockholders shall be at the close of
business on the day next preceding the day on which notice is given, and the
record date for determining stockholders for any other purpose shall be at the
close of business on the day on which the Board of Directors acts with respect
thereto.
6. Issue of Stock. Subject to the Articles of Organization, the whole or
any part of any unissued balance of the authorized capital stock of the
Corporation or the whole or any part of any capital stock of the Corporation
held in its treasury may be issued or disposed of by vote of the Board of
Directors in such manner, for such consideration and on such terms as the Board
of Directors may determine.
ARTICLE V - MISCELLANEOUS PROVISIONS
1. Fiscal Year. Except as otherwise determined by the Board of Directors
from time to time, the fiscal year of the Corporation shall be a 52/53 week year
with the end of the fiscal year to end on the Saturday closest to December 31.
2. Seal. The Board of Directors shall have the power to adopt and alter
the seal of the Corporation.
3. Execution of Instruments. All deeds, leases, transfers, contracts,
bonds, notes, checks, drafts and other obligations authorized to be executed by
an officer of the Corporation in its behalf shall be signed by such person or
persons as may be authorized from time to time by vote of the Board of
Directors.
4. Voting of Securities. Except as the Board of Directors may otherwise
designate, the President or Treasurer may waive notice of and act on behalf of
the Corporation, or appoint any person or persons to act as proxy or attorney in
fact for the Corporation (with or without discretionary power and/or power of
substitution) at any meeting of stockholders of any other corporation or
organization any of the securities of which may be held by the Corporation.
5. Dividends. Unless otherwise required by the Massachusetts Business
Corporation Law or the Articles of Organization, the Board of Directors may
declare and pay dividends upon the shares of capital stock of the Corporation,
which dividends may be paid either in cash, securities of the Corporation or
other property.
6. Indemnification of Officers and Directors.
(a) Right to Indemnification. Each person who was or is made a party
or is threatened to be made a party to or is otherwise involved in any
action, suit or proceeding, whether civil, criminal, administrative or
investigative (hereinafter a "proceeding"), by reason of the fact that he
or she is or was a director or an officer of the Corporation or is or was
serving at the request of the Corporation as a director, officer,
employee, agent, partner or trustee of another corporation, including,
without limitation, any corporation or other entity of which a majority of
any class of equity security is owned directly or indirectly, by the
Corporation (a "Subsidiary") or any Affiliate of the
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Corporation as such term is defined in Rule 12b-2 of the General Rules and
Regulations under the 1934 Act or of a partnership, joint venture, trust
or other enterprise, including service with respect to an employee benefit
plan (hereinafter an "indemnitee"), whether the basis of such proceeding
is alleged action in an official capacity as a director, officer,
employee, agent, partner or trustee or in any other capacity while serving
as a director, officer, employee, agent, partner or trustee shall be
indemnified and held harmless by the Corporation to the fullest extent
authorized by the Massachusetts Business Corporation Law, as the same
exists or may hereafter be amended (but, in the case of any such
amendment, only to the extent that such amendment permits the Corporation
to provide broader indemnification rights than such law permitted the
Corporation to provide prior to such amendment), against all expense,
liability and loss (including, without limitation, attorneys fees,
judgments, fines, ERISA excise taxes or penalties, costs of investigation
and preparation of defense and amounts paid or to be paid in settlement)
reasonably incurred or suffered by such indemnitee in connection
therewith; provided, however, that, except as provided in Section (c)
hereof with respect to proceedings to enforce rights of indemnification,
the Corporation shall indemnify any such indemnitee in connection with a
proceeding (or part thereof) initiated by such indemnitee only if such
proceeding (or part thereof) was authorized by the Board of Directors of
the Corporation.
(b) Advance of Expenses. The right to indemnification conferred in
Section (a) of this Section 6 shall include the right to be paid by the
Corporation the expenses incurred in defending any such proceeding in
advance of its final disposition (hereinafter an "advancement of
expenses"); provided, however, that an advancement of expenses incurred by
an indemnitee shall be made only upon delivery to the Corporation of an
undertaking (hereinafter an "undertaking"), by or on behalf of such
indemnitee, to repay all amounts so advanced if it shall ultimately be
determined by final judicial decision from which there is no further right
to appeal (hereinafter a "final adjudication") that such indemnitee is not
entitled to be indemnified for such expenses under this Section 6 or
otherwise. The rights to indemnification and to the advancement of
expenses conferred in Sections (a) and (b) of this Section 6 shall be
contract rights and such rights shall continue as to an indemnitee who has
ceased to be a director of officer and shall inure to the benefit of the
indemnitee's heirs, executors and administrators.
(c) Right of Indemnitee to Bring Suit. If a claim under Section (a)
or (b) of this Section 6 is not paid in full by the Corporation within
sixty days after a written claim has been received by the Corporation,
except in the case of a claim for an advancement of expenses, in which
case the applicable period shall be thirty days, the indemnitee may at any
time thereafter bring suit against the Corporation to recover the unpaid
amount of the claim. If the indemnitee is successful in whole or in part
in any such suit, or in a suit brought by the Corporation to recover an
advancement of expenses pursuant to the terms of an undertaking, the
indemnitee shall be entitled to be paid also the expense of prosecuting or
defending such suit. In (i) any suit brought by the indemnitee to enforce
a right to indemnification hereunder (but not in a suit brought by the
indemnitee to enforce a right to an advancement of expenses) it shall be a
defense that, and (ii) in any suit by the Corporation to recover an
advancement of expenses pursuant to the terms of an
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undertaking the Corporation shall be entitled to recover such expenses
upon a final adjudication that, the indemnitee has not met any applicable
standard for indemnification set forth in the Massachusetts Business
Corporation Law. Neither the failure of the Corporation (including its
Board of Directors, independent legal counsel, or its stockholders) to
have made a determination prior to the commencement of such suit that
indemnification of the indemnitee is proper in the circumstances because
the indemnitee has met the applicable standard of conduct set forth in the
Massachusetts Business Corporation Law, nor an actual determination by the
Corporation (including its Board of Directors, independent legal counsel,
or its stockholders) that the indemnitee has not met such applicable
standard of conduct, shall create a presumption that the indemnitee has
not met the applicable standard of conduct or, in the case of such a suit
brought by the indemnitee, be a defense to such suit. In any suit brought
by the indemnitee to enforce a right to indemnification or to an
advancement of expenses, or by the Corporation to recover an advancement
of expenses pursuant to the terms of an undertaking, the burden of proving
that the indemnitee is not entitled to be indemnified, or to such
advancement of expenses, under this Section 6 or otherwise shall be on the
Corporation.
(d) Rights Not Exclusive. The rights to indemnification and to the
advancement of expenses conferred in this Section 6 shall not be exclusive
of any other right which any person may have or hereafter acquire under
any statue, the Corporation's Articles of Organization, these By-Laws, or
any agreement, vote of stockholders or disinterested directors or
otherwise.
(e) Insurance. The Corporation may purchase and maintain insurance,
at its expense, to protect itself and any director, officer, employee or
agent of the Corporation or another corporation, partnership, joint
venture, trust or other enterprise, including, without limitation, any
Subsidiary or Affiliate or any employee benefit plan, against any expense,
liability or loss, whether or not the Corporation would have the power to
indemnify such person against such expense, liability or loss, under the
Massachusetts Business Corporation Law. The Corporation's obligation to
provide indemnification under this Section 6 shall be offset to the extent
of any other source of indemnification or any otherwise applicable
insurance coverage under a policy maintained by the Corporation or any
other person.
(f) Employees and Agents. The Corporation may, to the extent
authorized from time to time by the Board of Directors, grant rights to
indemnification and to the advancement of expenses to any employees or
agent of the Corporation or any Subsidiary or Affiliate to the fullest
extent of the provisions of this Section 6 with respect to the
indemnification of and advancement of expenses to directors and officers
of the Corporation.
(g) Agreements. The Corporation may, to the extent authorized from
time to time by the Board of Directors, enter into agreement with any
director, officer, employee or agent of the Corporation or any Subsidiary
or Affiliate to the fullest extent to the
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provisions of this Section 6 with respect to the indemnification of and
advancement of expenses to such person.
(h) Amendment. Without the consent of a person entitled to the
indemnification and other rights provided in this Section 6 (unless
otherwise required by the Massachusetts Business Corporation Law), no
amendment modifying or terminating such rights shall adversely affect such
person's rights under this Section 9 with respect to the period prior to
such amendment.
(i) Savings Clause. If this Section 6 or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Corporation shall nevertheless indemnify each indemnitee as to any
liabilities and expenses with respect to any proceeding to the fullest
extent permitted by any applicable portion of this Section 6 that shall
not have been invalidated and to the fullest extent permitted by
applicable law.
7. Corporate Records. The original, or attested copies, of the Articles of
Organization, By-Laws and records of all meetings of the incorporators and
stockholders, and the stock and transfer records, which shall contain the names
of all stockholders and the record address and the amount of stock held by each,
shall be kept in the Commonwealth at the principal office of the Corporation, or
at an office of its transfer agent, Clerk or resident agent, and shall be open
at all reasonable times to the inspection of any stockholder for any proper
purpose, but not to secure a list of stockholders or other information for the
purpose of selling said list or information or copies thereof or of using the
same for a purpose other than in the interest of the applicant, as a
stockholder, relative to the affairs of the Corporation.
8. Contributions. The Board of Directors shall have the authority to make
donations from the funds of the Corporation, in such amounts as the Board of
Directors may determine to be reasonable and irrespective of corporate benefit,
for the public welfare or for community fund, hospital, charitable, religious,
education, scientific, civic or similar purposes, and in time of war or other
natural emergency in aid thereof.
9. Evidence of Authority. A certificate by the Clerk, an Assistant Clerk,
the Secretary or an Assistant Secretary, or a Temporary Clerk or Temporary
Secretary, as to any action taken by the stockholders, Board of Directors, any
committee of the Board of Directors or any officer or representative of the
Corporation shall, as to all persons who rely thereon in good faith, be
conclusive evidence of such action.
10. Ratification. Any action taken on behalf of the Corporation by the
Directors or any officer or representative of the Corporation which requires
authorization by the stockholders or the Directors of the Corporation shall be
deemed to have been authorized if subsequently ratified by the stockholders
entitled to vote or by the Directors, as the case may be, at a meeting held in
accordance with these By-Laws.
11. Reliance upon Books, Records and Reports. Each Director or officer of
the Corporation shall be entitled to rely on information, opinions, reports or
records, including
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financial statements, books of account and other financial records, in each case
presented by or prepared by or under the supervision of (1) one or more officers
or employees of the Corporation whom the Director or officer reasonably believes
to be reliable and competent in the matters presented, or (2) counsel, public
accountants or other persons as to matters which the Director or officer
reasonably believes to be within such person's professional or expert
competence, or (3) in the case of a Director, a duly constituted committee of
the Board of Directors upon which he does not serve, as to matters within its
delegated authority, which committee the Director reasonably believes to merit
confidence, but he shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would case such reliance to be
unwarranted. The fact that a Director or officer so performed his duties shall
be a complete defense to any claim asserted against him, except as expressly
provided by statue, by reason of his being or having been a Director or officer
of the Corporation.
12. Articles of Organization. All references in the By-Laws to the
Articles of Organization shall be deemed to refer to the Articles of
Organization of the Corporation, as amended and in effect from time to time.
13. Interpretation. The Board of Directors shall have the power to
interpret all of the terms and provisions of these By-Laws and the Articles of
Organization, which interpretation shall be conclusive.
14. Gender. Whenever the masculine gender is used in these By-Laws, it
shall include the feminine and the neuter wherever appropriate.
ARTICLE VI - AMENDMENTS
The power to make, amend or repeal these By-Laws shall be in the
stockholders. In addition, as authorized by the Articles of Organization, these
By-Laws may also be made, amended or repealed, in whole or in part, by the vote
of a majority of Directors of the Corporation, except with respect to any
provision thereof which by law, the Articles of Organization or these By-Laws
requires action by the stockholders. If required by Massachusetts General Laws,
Chapter 156B, not later than the time of giving notice of the meeting of
stockholders next following the making, amending or repealing by the Directors
of any By-Law, notice thereof stating the substance of such change shall be
given to all stockholders entitled to vote on amending the By-Laws.
Any By-Law adopted by the Directors may be amended or repealed by the
stockholders.
A true copy.
ATTEST:
/s/ Robert Sharp
------------------------
Clerk
<PAGE>
================================================================================
THE WILLIAM CARTER COMPANY
10 3/8% Senior Subordinated Notes due 2006
___________________________
INDENTURE
Dated as of November 25, 1996
___________________________
STATE STREET BANK AND TRUST COMPANY,
Trustee
================================================================================
<PAGE>
CROSS-REFERENCE TABLE
TIA Indenture
Section Section
- ------- ---------
310(a)(1) . . . . . . . . . . . . . . . . . . 7.10
(a)(2) . . . . . . . . . . . . . . . . . . 7.10
(a)(3) . . . . . . . . . . . . . . . . . . N.A.
(a)(4) . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . 7.08; 7.10
(c) . . . . . . . . . . . . . . . . . . . N.A.
311(a) . . . . . . . . . . . . . . . . . . . 7.11
(b) . . . . . . . . . . . . . . . . . . . 7.11
(c) . . . . . . . . . . . . . . . . . . . N.A.
312(a) . . . . . . . . . . . . . . . . . . . 2.05
(b) . . . . . . . . . . . . . . . . . . . 11.03
(c) . . . . . . . . . . . . . . . . . . . 11.03
313(a) . . . . . . . . . . . . . . . . . . . 7.06
(b)(1) . . . . . . . . . . . . . . . . . . N.A.
(b)(2) . . . . . . . . . . . . . . . . . . 7.06
(c) . . . . . . . . . . . . . . . . . . . 11.02
(d) . . . . . . . . . . . . . . . . . . . 7.06
314(a) . . . . . . . . . . . . . . . . . . . 4.02; 4.12; 11.02
(b) . . . . . . . . . . . . . . . . . . . N.A.
(c)(1) . . . . . . . . . . . . . . . . . . 11.04
(c)(2) . . . . . . . . . . . . . . . . . . 11.04
(c)(3) . . . . . . . . . . . . . . . . . . N.A.
(d) . . . . . . . . . . . . . . . . . . . N.A.
(e) . . . . . . . . . . . . . . . . . . . 11.05
(f) . . . . . . . . . . . . . . . . . . . 4.12
315(a) . . . . . . . . . . . . . . . . . . . 7.01
(b) . . . . . . . . . . . . . . . . . . . 7.05; 11.02
(c) . . . . . . . . . . . . . . . . . . . 7.01
(d) . . . . . . . . . . . . . . . . . . . 7.01
(e) . . . . . . . . . . . . . . . . . . . 6.11
316(a) (last sentence) . . . . . . . . . . . 11.06
(a)(1)(A). . . . . . . . . . . . . . . . . 6.05
(a)(1)(B). . . . . . . . . . . . . . . . . 6.04
(a)(2) . . . . . . . . . . . . . . . . . . N.A.
(b) . . . . . . . . . . . . . . . . . . . 6.07
317(a)(1) . . . . . . . . . . . . . . . . . . 6.08
(a)(2) . . . . . . . . . . . . . . . . . . 6.09
(b) . . . . . . . . . . . . . . . . . . . 2.04
318(a) . . . . . . . . . . . . . . . . . . . 11.01
N.A. means Not Applicable.
__________________
Note: This Cross-Reference Table shall not, for any purpose, be deemed to be
part of the Indenture.
<PAGE>
TABLE OF CONTENTS
-----------------
Page
----
ARTICLE 1
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. Definitions . . . . . . . . . . . . . . . . . . . 1
SECTION 1.02. Other Definitions . . . . . . . . . . . . . . . . . 26
SECTION 1.03. Incorporation by Reference of Trust . . . . . . . .
Indenture Act . . . . . . . . . . . . . . . . . . 26
SECTION 1.04. Rules of Construction . . . . . . . . . . . . . . . 27
ARTICLE 2
The Securities
--------------
SECTION 2.01. Form and Dating . . . . . . . . . . . . . . . . . . 28
SECTION 2.02. Execution and Authentication. . . . . . . . . . . . 30
SECTION 2.03. Registrar and Paying Agent. . . . . . . . . . . . . 31
SECTION 2.04. Paying Agent to Hold Money in Trust . . . . . . . . 31
SECTION 2.05. Securityholder Lists. . . . . . . . . . . . . . . . 32
SECTION 2.06. Transfer and Exchange . . . . . . . . . . . . . . . 32
SECTION 2.07. Replacement Securities. . . . . . . . . . . . . . . 40
SECTION 2.08. Outstanding Securities. . . . . . . . . . . . . . . 41
SECTION 2.09. Temporary Securities. . . . . . . . . . . . . . . . 42
SECTION 2.10. Cancellation. . . . . . . . . . . . . . . . . . . . 42
SECTION 2.11. Defaulted Interest. . . . . . . . . . . . . . . . . 42
SECTION 2.12. CUSIP Numbers . . . . . . . . . . . . . . . . . . . 42
ARTICLE 3
Redemption
----------
SECTION 3.01. Notices to Trustee. . . . . . . . . . . . . . . . . 43
SECTION 3.02. Selection of Securities to Be
Redeemed. . . . . . . . . . . . . . . . . . . . . 43
SECTION 3.03. Notice of Redemption. . . . . . . . . . . . . . . . 44
SECTION 3.04. Effect of Notice of Redemption. . . . . . . . . . . 44
SECTION 3.05. Deposit of Redemption Price . . . . . . . . . . . . 45
SECTION 3.06. Securities Redeemed in Part . . . . . . . . . . . . 45
SECTION 3.07. Optional Redemption . . . . . . . . . . . . . . . . 45
-i-
<PAGE>
Page
----
ARTICLE 4
Covenants
---------
SECTION 4.01. Payment of Securities . . . . . . . . . . . . . . . 46
SECTION 4.02. SEC Reports . . . . . . . . . . . . . . . . . . . . 47
SECTION 4.03. Limitation on Indebtedness. . . . . . . . . . . . . 47
SECTION 4.04. Limitation on Restricted Payments . . . . . . . . . 50
SECTION 4.05. Limitation on Restrictions on
Distributions from Restricted
Subsidiaries. . . . . . . . . . . . . . . . . . . 54
SECTION 4.06. Limitation on Sales of Assets and
Subsidiary Stock. . . . . . . . . . . . . . . . . 55
SECTION 4.07. Limitation on Transactions with
Affiliates. . . . . . . . . . . . . . . . . . . . 59
SECTION 4.08. Change of Control . . . . . . . . . . . . . . . . . 60
SECTION 4.09. Compliance Certificates . . . . . . . . . . . . . . 62
SECTION 4.10. Further Instruments and Acts. . . . . . . . . . . . 62
SECTION 4.11. Limitation on Liens . . . . . . . . . . . . . . . . 62
SECTION 4.12. Subsidiary Guarantees . . . . . . . . . . . . . . . 63
SECTION 4.13. Limitation on Lines of Business . . . . . . . . . . 63
ARTICLE 5
Successor Company
-----------------
SECTION 5.01. When Company May Merge or Transfer
Assets. . . . . . . . . . . . . . . . . . . . . . 63
ARTICLE 6
Defaults and Remedies
---------------------
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . 64
SECTION 6.02. Acceleration. . . . . . . . . . . . . . . . . . . . 67
SECTION 6.03. Other Remedies. . . . . . . . . . . . . . . . . . . 67
SECTION 6.04. Waiver of Past Defaults . . . . . . . . . . . . . . 68
SECTION 6.05. Control by Majority . . . . . . . . . . . . . . . . 68
SECTION 6.06. Limitation on Suits . . . . . . . . . . . . . . . . 68
SECTION 6.07. Rights of Holders to Receive Payment. . . . . . . . 69
SECTION 6.08. Collection Suit by Trustee. . . . . . . . . . . . . 69
SECTION 6.09. Trustee May File Proofs of Claim. . . . . . . . . . 69
SECTION 6.10. Priorities. . . . . . . . . . . . . . . . . . . . . 70
SECTION 6.11. Undertaking for Costs . . . . . . . . . . . . . . . 70
SECTION 6.12. Waiver of Stay or Extension Laws. . . . . . . . . . 70
-ii-
<PAGE>
Page
----
ARTICLE 7
Trustee
-------
SECTION 7.01. Duties of Trustee . . . . . . . . . . . . . . . . . 71
SECTION 7.02. Rights of Trustee . . . . . . . . . . . . . . . . . 72
SECTION 7.03. Individual Rights of Trustee. . . . . . . . . . . . 73
SECTION 7.04. Trustee's Disclaimer. . . . . . . . . . . . . . . . 74
SECTION 7.05. Notice of Defaults. . . . . . . . . . . . . . . . . 74
SECTION 7.06. Reports by Trustee to Holders . . . . . . . . . . . 74
SECTION 7.07. Compensation and Indemnity. . . . . . . . . . . . . 74
SECTION 7.08. Replacement of Trustee. . . . . . . . . . . . . . . 76
SECTION 7.09. Successor Trustee by Merger . . . . . . . . . . . . 77
SECTION 7.10. Eligibility; Disqualification . . . . . . . . . . . 77
SECTION 7.11. Preferential Collection of Claims
Against Company . . . . . . . . . . . . . . . . . 77
ARTICLE 8
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.01. Discharge of Liability on Securities;
Defeasance. . . . . . . . . . . . . . . . . . . . 78
SECTION 8.02. Conditions to Defeasance. . . . . . . . . . . . . . 79
SECTION 8.03. Application of Trust Money. . . . . . . . . . . . . 80
SECTION 8.04. Repayment to Company. . . . . . . . . . . . . . . . 80
SECTION 8.05. Indemnity for Government
Obligations . . . . . . . . . . . . . . . . . . . 81
SECTION 8.06. Reinstatement . . . . . . . . . . . . . . . . . . . 81
ARTICLE 9
Amendments
----------
SECTION 9.01. Without Consent of Holders. . . . . . . . . . . . . 81
SECTION 9.02. With Consent of Holders . . . . . . . . . . . . . . 82
SECTION 9.03. Compliance with Trust Indenture Act . . . . . . . . 83
SECTION 9.04. Revocation and Effect of Consent
and Waivers . . . . . . . . . . . . . . . . . . . 83
SECTION 9.05. Notation on or Exchange of
Securities. . . . . . . . . . . . . . . . . . . . 84
SECTION 9.06. Trustee to Sign Amendments. . . . . . . . . . . . . 84
SECTION 9.07. Payment for Consent . . . . . . . . . . . . . . . . 85
-iii-
<PAGE>
Page
----
ARTICLE 10
Subordination
-------------
SECTION 10.01. Agreement to Subordinate. . . . . . . . . . . . . . 85
SECTION 10.02. Liquidation, Dissolution, Bankruptcy. . . . . . . . 85
SECTION 10.03. Default on Senior Indebtedness. . . . . . . . . . . 86
SECTION 10.04. Acceleration of Payment of
Securities. . . . . . . . . . . . . . . . . . . . 87
SECTION 10.05. When Distribution Must Be Paid Over . . . . . . . . 87
SECTION 10.06. Subrogation . . . . . . . . . . . . . . . . . . . . 87
SECTION 10.07. Relative Rights . . . . . . . . . . . . . . . . . . 87
SECTION 10.08. Subordination May Not Be Impaired
by Company. . . . . . . . . . . . . . . . . . . . 88
SECTION 10.09. Rights of Trustee and Paying Agent. . . . . . . . . 88
SECTION 10.10. Distribution or Notice to
Representative. . . . . . . . . . . . . . . . . . 89
SECTION 10.11. Article 10 Not To Prevent Events of
Default or Limit Right To
Accelerate. . . . . . . . . . . . . . . . . . . . 89
SECTION 10.12. Trust Moneys Not Subordinated . . . . . . . . . . . 89
SECTION 10.13. Trustee Entitled To Rely. . . . . . . . . . . . . . 89
SECTION 10.14. Trustee To Effectuate Subordination . . . . . . . . 90
SECTION 10.15. Trustee Not Fiduciary for Holders
of Senior Indebtedness. . . . . . . . . . . . . . 90
SECTION 10.16. Reliance by Holders of Senior
Indebtedness on Subordination
Provisions. . . . . . . . . . . . . . . . . . . . 90
SECTION 10.17. Trustee's Compensation Not
Prejudiced. . . . . . . . . . . . . . . . . . . . 90
ARTICLE 11
Miscellaneous
-------------
SECTION 11.01. Trust Indenture Act Controls. . . . . . . . . . . . 91
SECTION 11.02. Notices . . . . . . . . . . . . . . . . . . . . . 91
SECTION 11.03. Communication by Holders with Other
Holders . . . . . . . . . . . . . . . . . . . . . 92
SECTION 11.04. Certificate of Opinion as to
Conditions Precedent. . . . . . . . . . . . . . . 92
SECTION 11.05. Statements Required in Certificate or
Opinion . . . . . . . . . . . . . . . . . . . . . 92
SECTION 11.06. When Securities Disregarded . . . . . . . . . . . . 93
SECTION 11.07. Rules by Trustee, Paying Agent and
Registrar . . . . . . . . . . . . . . . . . . . . 93
SECTION 11.08. Legal Holidays. . . . . . . . . . . . . . . . . . . 93
SECTION 11.09. Governing Law . . . . . . . . . . . . . . . . . . . 93
-iv-
<PAGE>
Page
----
SECTION 11.10. No Recourse Against Others. . . . . . . . . . . . . 93
SECTION 11.11. Successors. . . . . . . . . . . . . . . . . . . . . 94
SECTION 11.12. Multiple Originals. . . . . . . . . . . . . . . . . 94
SECTION 11.13. Table of Contents; Headings . . . . . . . . . . . . 94
Exhibit A - Form of Initial Security
Exhibit B - Form of Exchange Security
Exhibit C - Form of Certificate of Transfer
Exhibit D - Form of Transferee Letter of Representation
Exhibit E - Form of Note Guarantee
-v-
<PAGE>
INDENTURE dated as of November 25, 1996, between The William Carter
Company, a Massachusetts corporation (the "Company"), and State Street Bank and
Trust Company, a Massachusetts trust company (the "Trustee").
Each party agrees as follows for the benefit of the other party and
for the equal and ratable benefit of the Holders of the Company's 10 3/8% Senior
Subordinated Notes due 2006 Series A (the "Initial Securities") and, when and
if issued as provided in the Exchange and Registration Rights Agreement of even
date herewith, the Company's 10 3/8% Senior Subordinated Notes due 2006 Series B
(the "Exchange Securities", and together with the Initial Securities, the
"Securities").
ARTICLE A.
Definitions and Incorporation by Reference
------------------------------------------
SECTION 1.01. DEFINITIONS.
"Acquisition" means the acquisition on October 30, 1996, by Carter
Holdings, Inc. ("Holdings"), a company organized on behalf of affiliates of
Investcorp S.A. ("Investcorp"), management and certain other investors, through
the merger of TWCC Acquisition Corp., a wholly owned subsidiary of Holdings,
with and into the Company.
"Additional Assets" means (i) any property or assets (other than
Indebtedness and Capital Stock of the acquiring person) to be used by the
Company or a Restricted Subsidiary in a Related Business; (ii) the Capital Stock
of a Person that becomes a Restricted Subsidiary as a result of the acquisition
of such Capital Stock by the Company or another Restricted Subsidiary; or
(iii) Capital Stock constituting a minority interest in any Person that at such
time is a Restricted Subsidiary; provided, however, that, in the case of clauses
(ii) and (iii), such Restricted Subsidiary is primarily engaged in a Related
Business.
"Affiliate" of any specified Person means (i) any other Person,
directly or indirectly, controlling or controlled by or under direct or indirect
common control with such specified Person or (ii) any person who is a director
or officer (a) of such Person, (b) of any Subsidiary of such Person or (c) of
any Person described in clause (i) above. 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.
<PAGE>
-2-
"Applicable Premium" means, with respect to a Security at any
Redemption Date, the greater of (i) 1.0% of the principal amount of such
Security and (ii) the excess of (A) the present value at such time of (1) the
redemption price of such Security at December 1, 2001, as set forth in Section
3.07, plus (2) all required interest payments (excluding accrued but unpaid
interest) due on such Security through December 1, 2001, computed using a
discount rate equal to the Treasury Rate plus 100 basis points, over (B) the
principal amount of such Security.
"Asset Disposition" means any sale, lease, transfer or other
disposition of shares of Capital Stock of a Restricted Subsidiary (other than
directors' qualifying shares), property or other assets (each referred to for
the purposes of this definition as a "disposition") by the Company or any of its
Restricted Subsidiaries (including any disposition by means of a merger,
consolidation or similar transaction) other than (i) a disposition by a
Restricted Subsidiary to the Company or by the Company or a Restricted
Subsidiary to a Wholly Owned Subsidiary; (ii) a disposition of property or
assets in the ordinary course of business; (iii) for purposes of Section 4.06
only, a disposition subject to Section 4.04 and 5.01; (iv) leases or subleases
to third parties of real property owned in fee or leased by the Company or its
Subsidiaries; (v) a disposition of a lease of real property; and (vi) any
disposition of property of the Company or any of its Subsidiaries that, in
reasonable judgment of the Company, has become uneconomic, obsolete or worn out.
"Average Life" means, as of the date of determination, with respect to
any Indebtedness or Preferred Stock, the quotient obtained by dividing (i) the
sum of the products of the numbers of years from the date of determination to
the dates of each successive scheduled principal payment of such Indebtedness or
redemption or similar payment with respect to such Preferred Stock multiplied by
the amount of such payment by (ii) the sum of all such payments.
"Bank Indebtedness" means any and all amounts payable under or in
respect of the Senior Credit Facility, the other Senior Credit Documents and the
Refinancing Indebtedness with respect thereto, as amended, supplemented or
otherwise modified from time to time, including increases in the principal
amount thereof permitted under the Indenture and including principal, premium
(if any), interest (including interest accruing on or after the filing of any
petition in bankruptcy or for reorganization relating to the Company whether or
not a claim for post-filing interest is allowed in such proceedings), fees,
charges, expenses, reimbursement
<PAGE>
-3-
obligations, guarantees and all other amounts payable thereunder or in respect
thereof.
"Banks" has the meaning specified in the Senior Credit Facility.
"Board of Directors" means the Board of Directors of the Company or
any committee thereof duly authorized to act on behalf of such Board.
"Business Day" means a day other than a Saturday, Sunday or other day
on which commercial banking institutions (including, without limitation, the
Federal Reserve System) are authorized or required by law to close in New York
City.
"Capital Stock" of any Person means any and all shares, interests,
rights to purchase, warrants, options, participations or other equivalents of or
interests in (however designated) equity of such Person, including any Preferred
Stock, but excluding any debt securities convertible into such equity.
"Capitalized Lease Obligation" means an obligation that is required to
be classified and accounted for as a capitalized lease for financial reporting
purposes in accordance with GAAP; the amount of Indebtedness represented by such
obligation shall be the capitalized amount of such obligation determined in
accordance with GAAP, and the Stated Maturity thereof shall be the date of the
last payment of rent or any other amount due under such lease.
"Change of Control" means the occurrence of any of the following
events:
(i) prior to the the first public offering of Voting Stock of the
Company or Holdings, as the case may be, the Permitted Holders cease to be
the "beneficial owner" (as defined in Rules 13d-3 and 13d-5 under the
Exchange Act), directly or indirectly, of a majority of the voting power of
the Voting Stock of Holdings or Holdings shall cease to own 100% of the
issued and outstanding Voting Stock of the Company, whether as a result of
issuance of securities of the Company or Holdings, as the case may be, any
merger, consolidation, liquidation or dissolution of the Company or
Holdings, as the case may be, any direct or indirect transfer of securities
by any Permitted Holder or otherwise (for purposes of this clause (i) and
clause (ii) below, the Permitted Holders shall be deemed to own
beneficially any Voting Stock of a corporation (the "specified
corporation") held by any other corporation (the "parent corporation") so
<PAGE>
-4-
long as the Permitted Holders beneficially own (as so defined), directly or
indirectly, a majority of the Voting Stock of the parent corporation);
(ii) following the first public offering of Voting Stock of the
Company or Holdings, as the case may be, (A) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Exchange Act), other than one or
more Permitted Holders, is or becomes the beneficial owner (as defined in
clause (i) above, except that a person shall be deemed to have "beneficial
ownership" of all shares that such person has the right to acquire, whether
such right is exercisable immediately or only after the passage of time),
directly or indirectly, of more than 40% of the total voting power of the
Voting Stock of the Company or Holdings, as the case may be, provided that
the Permitted Holders "beneficially own" (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the total
voting power of the Voting Stock of the Company or Holdings, as the case
may be, than such other person and do not have the right or ability by
voting power, contract or otherwise to elect or designate for election a
majority of the board of directors of the Company or Holdings, as the case
may be (for the purposes of this clause (ii), such other person shall be
deemed to beneficially own any Voting Stock of a specified corporation held
by a parent corporation, if such other person "beneficially owns" (as
defined in this clause (ii)), directly or indirectly, more than 40% of the
voting power of the Voting Stock of such parent corporation and the
Permitted Holders "beneficially own" (as defined in clause (i) above),
directly or indirectly, in the aggregate a lesser percentage of the voting
power of the Voting Stock of such parent corporation and do not have the
right or ability by voting power, contract or otherwise to elect or
designate for election a majority of the board of directors of such parent
corporation); or
(iii) following the first public offering of Voting Stock of the
Company or Holdings, as the case may be, (a) any Person (other than
Investcorp, its Affiliates and members of the Management Group) nominates
one or more individuals for election to the board of directors of the
Company or Holdings, as the case may be, and solicits proxies,
authorizations or consents in connection therewith and (b) as a result,
such number of nominees elected to serve on the board of directors
represents a majority of the board of directors of the Company or Holdings,
as the case may be, following such election.
<PAGE>
-5-
"Closing Date" means the date of this Indenture as set forth in the
preamble.
"Code" means the Internal Revenue Code of 1986, as amended.
"Company" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor and, for purposes of
any provision contained herein and required by the TIA, each other obligor on
the indenture securities.
"Consolidated Coverage Ratio" as of any date of determination means
the ratio of (i) the aggregate amount of EBITDA for the period of the most
recent four consecutive fiscal quarters ending prior to the date of such
determination to (ii) Consolidated Interest Expense for such four fiscal
quarters; provided, however, that (A) if the Company or any Restricted
Subsidiary (1) has Incurred any Indebtedness (other than Indebtedness Incurred
for working capital purposes under a revolving credit facility) since the
beginning of such period that remains outstanding on such date of determination
or if the transaction giving rise to the need to calculate the Consolidated
Coverage Ratio is an Incurrence of Indebtedness, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving effect on a
pro forma basis to such Indebtedness as if such Indebtedness had been Incurred
on the first day of such period and the discharge of any other Indebtedness
repaid, repurchased, defeased or otherwise discharged with the proceeds of such
new Indebtedness as if such discharge had occurred on the first day of such
period, or (2) has repaid, repurchased, defeased or otherwise discharged any
Indebtedness since the beginning of the period that is no longer outstanding on
such date of determination, or if the transaction giving rise to the need to
calculate the Consolidated Coverage Ratio involves a discharge of Indebtedness,
EBITDA and Consolidated Interest Expense for such period shall be calculated
after giving effect to such discharge of such Indebtedness, including with the
proceeds of such new Indebtedness, as if such discharge had occurred on the
first day of such period (except that, in making such computation, the amount of
Indebtedness under any revolving credit facility shall be computed based upon
the average daily balance of such Indebtedness during such four-quarter period);
(B) if since the beginning of such period the Company or any Restricted
Subsidiary shall have made any Asset Disposition of a company, business or group
of assets comprising an operating unit, the EBITDA for such period shall be
reduced by an amount equal to the EBITDA (if positive) directly attributable to
the assets which are the subject of such Asset Disposition for such period or
increased by an amount equal to the EBITDA (if negative) directly attributable
thereto for such
<PAGE>
-6-
period and Consolidated Interest Expense for such period shall be reduced by an
amount equal to the Consolidated Interest Expense directly attributable to any
Indebtedness of the Company or any Restricted Subsidiary repaid, repurchased,
defeased or otherwise discharged with respect to the Company and its continuing
Restricted Subsidiaries in connection with such Asset Disposition for such
period (or, if the Capital Stock of any Restricted Subsidiary is sold, the
Consolidated Interest Expense for such period directly attributable to the
Indebtedness of such Restricted Subsidiary to the extent the Company and its
continuing Restricted Subsidiaries are no longer liable for such Indebtedness
after such sale), (C) if since the beginning of such period the Company or any
Restricted Subsidiary (by merger or otherwise) shall have made an Investment in
any Restricted Subsidiary (or any Person which becomes a Restricted Subsidiary)
or an acquisition of assets, including any acquisition of assets occurring in
connection with a transaction causing a calculation to be made hereunder, which
constitutes all or substantially all of an operating unit of a business, EBITDA
and Consolidated Interest Expense for such period shall be calculated after
giving pro forma effect thereto (including the Incurrence of any Indebtedness)
as if such Investment or acquisition occurred on the first day of such period
and (D) if since the beginning of such period any Person (that subsequently
became a Restricted Subsidiary or was merged with or into the Company or any
Restricted Subsidiary since the beginning of such period) shall have made any
Asset Disposition or any Investment or acquisition of assets that would have
required an adjustment pursuant to clause (B) or (C) above if made by the
Company or a Restricted Subsidiary during such period, EBITDA and Consolidated
Interest Expense for such period shall be calculated after giving pro forma
effect thereto as if such Asset Disposition, Investment or acquisition of assets
occurred on the first day of such period. For purposes of this definition,
whenever pro forma effect is to be given to an acquisition of assets, the amount
of income or earnings relating thereto and the amount of Consolidated Interest
Expense associated with any Indebtedness Incurred in connection therewith, the
pro forma calculations shall be determined in good faith by a responsible
financial or accounting Officer of the Company. If any Indebtedness bears a
floating rate of interest and is being given pro forma effect, the interest
expense on such Indebtedness shall be calculated as if the rate in effect on the
date of determination had been the applicable rate for the entire period (taking
into account any Interest Rate Agreement applicable to such Indebtedness if such
Interest Rate Agreement has a remaining term as at the date of determination in
excess of 12 months).
<PAGE>
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"Consolidated Interest Expense" means, for any period, the total
interest expense of the Company and its consolidated Subsidiaries, plus, to the
extent incurred by the Company and its Subsidiaries in such period but not
included in such interest expense, (i) interest expense attributable to
Capitalized Lease Obligations, (ii) amortization of debt discount, (iii)
capitalized interest, (iv) non-cash interest expense (excluding amortization of
debt issuance costs, commissions, and other fees and expenses), (v) commissions,
discounts and other fees and charges attributable to letters of credit and
bankers' acceptance financing, (vi) interest actually paid by the Company or any
such Subsidiary under any Guarantee of Indebtedness or other obligation of any
other Person, (vii) net costs associated with Hedging Obligations (including
amortization of fees), (viii) the product of (A) all Preferred Stock dividends
in respect of all Preferred Stock of Subsidiaries of the Company and
Disqualified Stock of the Company (excluding the Existing Preferred Stock) held
by Persons other than the Company or a Wholly Owned Subsidiary multiplied by
(B) a fraction, the numerator of which is one and the denominator of which is
one minus the then current combined federal, state and local statutory tax rate
of the Company, expressed as a decimal, in each case, determined on a
consolidated basis in accordance with GAAP; PROVIDED, HOWEVER, that there shall
be excluded therefrom any such interest expense of any Unrestricted Subsidiary
to the extent the related Indebtedness is not Guaranteed or paid by the Company
or any Restricted Subsidiary.
"Consolidated Net Income" means, for any period, the net income (loss)
of the Company and its consolidated Subsidiaries before any reduction in respect
of Preferred Stock dividends plus, in each case, to the extent deducted in
determining net income for such period, any expenses incurred in connection with
the Acquisition (other than the amortization of the prepaid management fee)
including without limitation, management bonuses and payments under the
management incentive and equity participation plans; PROVIDED, HOWEVER, that
there shall not be included in such Consolidated Net Income:
(i) any net income of any Person if such Person is not a Restricted
Subsidiary, except that (A) subject to the limitations contained in clause
(iv) below, the Company's equity in the net income of any such Person for
such period shall be included in such Consolidated Net Income up to the
aggregate amount of cash actually distributed by such Person during such
period to the Company or a Restricted Subsidiary as a dividend or other
distribution (subject, in the case of a dividend or other distribution to a
Restricted Subsidiary, to the limitations contained in clause (iv) below)
and (B)
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the Company's equity in a net loss of any such Person (other than an
Unrestricted Subsidiary) for such period shall be included in determining
such Consolidated Net Income,
(ii) any expense recognized (net of tax benefits related thereto) as a
consequence of payments permitted to be made by the Company under clauses
(b)(vi)(A), (B) and (D) of Section 4.04;
(iii) any net income (loss) of any person acquired by the Company or a
Subsidiary in a pooling of interests transaction for any period prior to
the date of such acquisition,
(iv) any net income (loss) of any Restricted Subsidiary if such
Subsidiary is subject to restrictions, directly or indirectly, on the
payment of dividends or the making of distributions by such Restricted
Subsidiary, directly or indirectly, to the Company, except that (A) subject
to the limitations contained in (v) below, the Company's equity in the net
income of any such Restricted Subsidiary for such period shall be included
in such Consolidated Net Income up to the aggregate amount of cash that
could have been distributed by such Restricted Subsidiary during such
period to the Company or another Restricted Subsidiary as a dividend
(subject, in the case of a dividend that could have been made to another
Restricted Subsidiary, to the limitation contained in this clause) and (B)
the Company's equity in a net loss of any such Restricted Subsidiary for
such period shall be included in determining such Consolidated Net Income,
(v) any gain or loss realized upon the sale or other disposition of
any asset of the Company or its consolidated Subsidiaries (including
pursuant to any Sale/Leaseback Transaction) which is not sold or otherwise
disposed of in the ordinary course of business and any gain or loss
realized upon the sale or other disposition of any Capital Stock of any
Person,
(vi) any extraordinary or non-recurring gain, loss or charge (together
with any related provisions for taxes on such extraordinary or
non-recurring gain, loss or charge); and
(vii) the cumulative effect of a change in accounting principles
(effected either through cumulative effect adjustment or a retroactive
application, in each case, in accordance with GAAP).
<PAGE>
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"Consolidated Net Worth" means the total of the amounts shown on the
balance sheet of the Company and the Restricted Subsidiaries, determined on a
Consolidated basis, as of the end of the most recent fiscal quarter of the
Company ending prior to the taking of any action for the purpose of which the
determination is being made, as (i) the par or stated value of all outstanding
Capital Stock of the Company plus (ii) paid-in capital or capital surplus
relating to such Capital Stock plus (iii) any retained earnings or earned
surplus less (A) any accumulated deficit and (B) any amounts attributable to
Disqualified Stock.
"Consolidation" means the consolidation of the amounts of each of the
Restricted Subsidiaries with those of the Company in accordance with GAAP
consistently applied; provided, however, that "Consolidation" shall not include
consolidation of the accounts of any Unrestricted Subsidiary, but the interest
of the Company or any Restricted Subsidiary in a Unrestricted Subsidiary shall
be accounted for as an investment. The term "Consolidated" has a correlative
meaning.
"Currency Agreement" means in respect of a Person any foreign exchange
contract, currency swap agreement or other similar agreement as to which such
Person is a party or a beneficiary.
"Default" means any event which is, or after notice or passage of time
or both would be, an Event of Default.
"Definitive Securities" means Securities that are in the form of
Exhibit A or Exhibit B attached hereto that do not include the information
called for by footnote 1 thereof.
"Depository" means, with respect to the Securities issuable or issued
in whole or in part in global form, the person specified in Section 2.03 as the
Depository with respect to the Securities, until a successor shall have been
appointed and become such pursuant to the applicable provisions of this
Indenture, and thereafter "Depository" shall mean or include such successor.
"Designated Senior Indebtedness" means (i) the Bank Indebtedness and
(ii) any other Senior Indebtedness which, at the date of determination, has an
aggregate principal amount outstanding of, or under which, at the date of
determination, the holders thereof, are committed to lend up to, at least
$10,000,000 and is specifically designated by the Company in the instrument
evidencing or governing such Senior Indebtedness as "Designated Senior
Indebtedness" for purposes of this Indenture.
<PAGE>
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"Disqualified Stock" means, with respect to any Person, any Capital
Stock which by its terms (or by the terms of any security into which it is
convertible or for which it is exchangeable or exercisable) or upon the
happening of any event (other than as a result of a Change of Control)
(i) matures or is mandatorily redeemable pursuant to a sinking fund obligation
or otherwise, (ii) is convertible or exchangeable for Indebtedness or
Disqualified Stock or (iii) is redeemable at the option of the holder thereof,
in whole or in part, in each case on or prior to the first anniversary of the
Stated Maturity of the Securities.
"Domestic Subsidiary" means any Restricted Subsidiary of the Company
other than a Foreign Subsidiary.
"EBITDA" means, for any period, the Consolidated Net Income for such
period, plus the following to the extent deducted in calculating such
Consolidated Net Income: (i) total income tax expense, (ii) Consolidated
Interest Expense together with amortization of debt issuance costs, commissions,
and other fees and expenses, (iii) depreciation expense, (iv) amortization
expense, including amortization of inventory write-up under APB 16, amortization
of intangibles (including, but not limited to, goodwill and the costs of
Interest Rate Agreements or Currency Agreements, license agreements and
non-competition agreements) and organization costs, (v) non-cash expenses
related to the amortization of pre-paid management fees pursuant to certain
agreements referred to in the Indenture, (vi) costs of surety bonds in
connection with financing activities, (vii) non-cash amortization of Capitalized
Lease Obligations, (viii) franchise taxes, (ix) expenses recorded in historical
periods through the date of the Acquisition related to the management incentive
and equity participation plans and allocation of "C" stock, (x) any other
write-downs, write-offs, minority interests and other non-cash charges in
determining such Consolidated Net Income for such period, and (xi) all
extraordinary non-cash charges in determining such Consolidated Net Income for
such period; provided that the impact of foreign currency translations shall be
excluded.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
"Exchange and Registration Rights Agreement" means the Exchange and
Registration Rights Agreement dated November 25, 1996, by and between the
Initial Purchasers and the Company, as such
<PAGE>
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agreement may be amended, modified, or supplemented from time to time in
accordance with the terms thereof.
"Exchange Securities" means the 10 3/8% Senior Subordinated Notes due
2006 Series B to be issued pursuant to this Indenture in connection with the
offer to exchange Securities for the Initial Securities that may be made by the
Company pursuant to the Exchange and Registration Rights Agreement.
"Existing Preferred Stock" means the 12% preferred stock of the
Company issued and outstanding on the Issue Date, and any extensions,
refinancings, renewals, or replacements thereof (the "Refinancing Preferred
Stock"); PROVIDED that (i) the aggregate liquidation preference of such
Refinancing Preferred Stock does not exceed the aggregate liquidation preference
of the Existing Preferred Stock, (ii) the dividend rate per annum of such
Refinancing Preferred Stock does not exceed the dividend rate per annum of the
Existing Preferred Stock and (iii) the Refinancing Preferred Stock has a
mandatory redemption date no earlier than the Existing Preferred Stock.
"Foreign Subsidiary means any Restricted Subsidiary of the Company
which is not organized under the laws of the United States of America or any
state thereof or the District of Columbia.
"GAAP" means generally accepted accounting principles in the United
States of America as in effect from time to time, including those set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as approved by a significant segment of the
accounting profession. All ratios and computations based on GAAP contained in
this Indenture shall be computed in conformity with GAAP as in effect as of the
Issue Date.
"Global Security" means a Security that is in the form of Exhibit A or
Exhibit B hereto that includes the information called for by footnote 1 thereof.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government.
"Guarantee" means any obligation, contingent or otherwise, of any
Person directly or indirectly guaranteeing any Indebtedness or other obligation
of any other Person and any
<PAGE>
-12-
obligation, direct or indirect, contingent or otherwise, of such Person (i) to
purchase or pay (or advance or supply funds for the purchase or payment of) such
Indebtedness or other obligation of such other Person (whether arising by virtue
of partnership arrangements, or by agreement to keep-well, to purchase assets,
goods, securities or services, to take-or-pay, or to maintain financial
statement conditions or otherwise) or (ii) entered into for purposes of assuring
in any other manner the obligee of such Indebtedness or other obligation of the
payment thereof or to protect such obligee against loss in respect thereof (in
whole or in part); PROVIDED, HOWEVER, that the term "Guarantee" shall not
include endorsements for collection or deposit in the ordinary course of
business. The term "Guarantee" used as a verb has a corresponding meaning.
"Hedging Obligations" of any Person means the obligations of such
Person pursuant to any Interest Rate Agreement or Currency Agreement.
"Holder" or "Securityholder" means the Person in whose name a Security
is registered on the Registrar's books.
"Holdings" means Carter Holdings, Inc., a Massachusetts corporation.
"Holdings Securities" means the $20,000,000 aggregate principal amount
of senior subordinated notes of Holdings, as amended from time to time.
"Incur" means issue, assume, Guarantee, incur or otherwise become
liable for; PROVIDED, HOWEVER, that any Indebtedness or Capital Stock of a
Person existing at the time such Person becomes a Subsidiary (whether by merger,
consolidation, acquisition or otherwise) shall be deemed to be Incurred by such
Subsidiary at the time it becomes a Subsidiary.
"Indebtedness" means, with respect to any Person on any date of
determination (without duplication),
(i) the principal of and premium (if any) in respect of indebtedness
of such Person for borrowed money,
(ii) the principal of and premium (if any) in respect of obligations
of such Person evidenced by bonds, debentures, notes or other similar
instruments,
(iii) all obligations of such Person in respect of letters of credit or
other similar instruments (including
<PAGE>
-13-
reimbursement obligations with respect thereto but excluding letters of
credit supporting the purchase of goods in the ordinary course of business
and expiring no more than six months from the date of issuance),
(iv) all obligations of such Person to pay the deferred and unpaid
purchase price of property or services (except Trade Payables), which
purchase price is due more than six months after the date of placing such
property in service or taking delivery and title thereto or the completion
of such services,
(v) all Capitalized Lease Obligations of such Person,
(vi) the amount of all obligations of such Person with respect to the
redemption, repayment or other repurchase of any Disqualified Stock or,
with respect to any Subsidiary of the Company, any Preferred Stock (but
excluding, in each case, any accrued dividends),
(vii) all Indebtedness of other Persons secured by a Lien on any asset
of such Person, whether or not such Indebtedness is assumed by such Person;
provided, however, that the amount of Indebtedness of such Person shall be
the lesser of (A) the fair market value of such asset at such date of
determination and (B) the amount of such Indebtedness of such other
Persons,
(viii) all Indebtedness of other Persons to the extent Guaranteed by
such Person, and
(ix) to the extent not otherwise included in this definition, Hedging
Obligations of such Person.
The amount of Indebtedness of any Person at any date shall be the
outstanding balance at such date of all unconditional obligations as described
above and the liability, assuming the occurrence of the contingency giving rise
to the obligation, of any contingent obligations at such date. For purposes of
clarification, Indebtedness shall not include undrawn commitments on credit
facilities.
"Indenture" means this Indenture as amended or supplemented from time
to time.
"Initial Purchasers" means BT Securities Corporation, Chase Securities
Inc. and Goldman, Sachs & Co. in their capacity as initial purchasers of the
Securities.
<PAGE>
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"Initial Securities" means the 10 3/8% Senior Subordinated Notes due
2006 Series A, issued under this Indenture on or about the date hereof.
"Interest Rate Agreement" means with respect to any Person any
interest rate protection agreement, interest rate future agreement, interest
rate option agreement, interest rate swap agreement, interest rate cap
agreement, interest rate collar agreement, interest rate hedge agreement or
other similar agreement or arrangement as to which such Person is party or a
beneficiary.
"Investcorp" means INVESTCORP S.A., a Luxembourg corporation.
"Investment" in any Person means any direct or indirect advance, loan
(other than advances to customers in the ordinary course of business that are
recorded as accounts receivable on the balance sheet of such Person) or other
extension of credit (including by way of Guarantee or similar arrangement) or
capital contribution to (by means of any transfer of cash or other property to
others or any payment for property or services for the account or use of
others), or any purchase or acquisition of Capital Stock, Indebtedness or other
similar instruments issued by such Person. For purposes of the definition of
"Unrestricted Subsidiary" and Section 4.04, (i) "Investment" shall include the
portion (proportionate to the Company's equity interest in such Subsidiary) of
the fair market value of the net assets of any Subsidiary of the Company at the
time that such Subsidiary is designated an Unrestricted Subsidiary; and (ii) any
property transferred to or from an Unrestricted Subsidiary shall be valued at
its fair market value at the time of such transfer, in each case as determined
in good faith by the Board of Directors.
"Issue Date" means the date on which the Initial Securities are
originally issued.
"Lien" means any mortgage, pledge, security interest, encumbrance,
lien or charge of any kind (including any conditional sale or other title
retention agreement or lease in the nature thereof).
"Management Agreement" means the Management Services Agreement dated
as of October 30, 1996, between Investcorp International, Inc. and the Company.
"Management Group" means the senior management of the Company and/or
Holdings.
<PAGE>
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"Net Available Cash" from an Asset Disposition means cash payments
received (including any cash payments received by way of deferred payment of
principal pursuant to a note or installment receivable or otherwise, but only as
and when received, but excluding any other consideration received in the form of
assumption by the acquiring person of Indebtedness or other obligations relating
to the properties or assets that are the subject of such Asset Disposition or
received in any other noncash form) therefrom, in each case net of (i) all
legal, title and recording tax expenses, commissions and other fees and expenses
incurred (including legal, accounting and investment banking fees and any
relocation expenses incurred as a result of an Asset Disposition), and all
Federal, state, provincial, foreign and local taxes required to be paid or
accrued as a liability under GAAP, as a consequence of such Asset Disposition,
(ii) all payments made on any Indebtedness which is secured by any assets
subject to such Asset Disposition, in accordance with the terms of any Lien upon
such assets, or which must by its terms, 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
required to be made to minority interest holders in Subsidiaries or joint
ventures as a result of such Asset Disposition and (iv) appropriate amounts to
be provided by the seller as a reserve, in accordance with GAAP, against any
liabilities associated with the assets disposed of in such Asset Disposition and
retained (including by way of indemnification obligations) by the Company or any
Restricted Subsidiary after such Asset Disposition.
"Net Cash Proceeds", with respect to any issuance or sale of Capital
Stock or disposition of any Investment by the Company or any Subsidiary, means
the cash proceeds of such issuance, sale or disposition net of attorneys' fees,
accountants' fees, underwriters' or placement agents' fees, discounts or
disposition of any commissions and brokerage, consultant and other fees actually
incurred in connection with such issuance, sale or disposition and net of taxes
paid or payable as a result thereof.
"Note Guarantee" means any guarantee be executed and delivered by a
Note Guarantor pursuant to Section 4.12. Each such Note Guarantee will be in
the form prescribed in Exhibit E hereto.
"Note Guarantor" means each of the Company's Subsidiaries that in the
future executes a supplemental indenture in which such Subsidiary agrees to be
bound by the terms of the Indenture as a Note Guarantor; provided that any
Person constituting a Note Guarantor as described above shall cease to
constitute a Note
<PAGE>
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Guarantor when its respective Note Guarantee is released in accordance with the
terms thereof.
"Officer" means the President, the Treasurer, or the Clerk of the
Company.
"Officers' Certificate" means a certificate signed by two Officers.
"Opinion of Counsel" means a written opinion from legal counsel who is
acceptable to the Trustee. The counsel may be an employee of or counsel to the
Company or the Trustee.
"Permitted Holders" means Investcorp, its Affiliates, members of the
Management Group, the international investors who are initial holders of the
Capital Stock of Holdings and any Person acting in the capacity of an
underwriter in connection with a public or private offering of the Company's or
Holdings' Capital Stock.
"Permitted Investment" means an Investment by the Company or any
Restricted Subsidiary in (i) a Restricted Subsidiary, the Company or a Person
which will, upon the making of such Investment, become a Restricted Subsidiary;
PROVIDED, HOWEVER, that the primary business of such Restricted Subsidiary is a
Related Business; (ii) another Person if as a result of such Investment such
other Person is merged or consolidated with or into, or transfers or conveys all
or substantially all its assets to, the Company or a Restricted Subsidiary;
PROVIDED, HOWEVER, that such Person's primary business is a Related Business;
(iii) Temporary Cash Investments; (iv) receivables owing to the Company or any
Restricted Subsidiary, if created or acquired in the ordinary course of business
and payable or dischargeable in accordance with customary trade terms; PROVIDED,
HOWEVER, that such trade terms may include such concessionary trade terms as the
Company or any such Restricted Subsidiary deems reasonable under the
circumstances; (v) payroll, travel, entertainment, relocation and similar
advances that are made in the ordinary course of business; (vi) loans or
advances to employees made in the ordinary course of business consistent with
past practices of the Company or such Restricted Subsidiary; (vii) loans or
advances to employees (or guarantees of third party loans to employees) in an
aggregate amount not to exceed $2,500,000, at any time outstanding;
(viii) stock, obligations or securities received in settlement of debts created
in the ordinary course of business and owing to the Company or any Restricted
Subsidiary or in satisfaction of judgments; or (ix) securities received in
connection with an Asset Disposition complying with the provisions of Section
4.06.
<PAGE>
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"Permitted Liens" means (i) Liens securing Senior Indebtedness (or
Indebtedness of a Subsidiary of the Company which if incurred by the Company
would be Senior Indebtedness) permitted to be Incurred under this Indenture;
(ii) Liens for taxes, assessments or other governmental charges not yet
delinquent or that are being contested in good faith and by appropriate
proceedings if adequate reserves with respect thereto are maintained on the
books of the Company or such Restricted Subsidiary, as the case may be, in
accordance with GAAP; (iii) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other like Liens arising in the ordinary course of
business in respect of obligations that are not yet due or that are bonded or
that are being contested in good faith and by appropriate proceedings if
adequate reserves with respect thereto are maintained on the books of the
Company or such Restricted Subsidiary, as the case may be, in accordance with
GAAP; (iv) pledges or deposits in connection with workmen's compensation,
unemployment insurance and other social security legislation; (v) deposits to
secure the performance of bids, tenders, trade or government contracts (other
than for borrowed money), leases, licenses, statutory obligations, surety and
appeal bonds, performance bonds and other obligations of a like nature incurred
in the ordinary course of business; (vi) easements (including reciprocal
easement agreements), rights-of-way, building, zoning and similar restrictions,
utility agreements, covenants, reservations, restrictions, encroachments,
changes, and other similar encumbrances or title defects incurred, or leases or
subleases granted to others, in the ordinary course of business, which do not in
the aggregate materially detract from the aggregate value of the properties of
the Company and its Subsidiaries, taken as a whole, or in the aggregate
materially interfere with or adversely affect in any material respect the
ordinary conduct of the business of the Company and its Subsidiaries on the
properties subject thereto, taken as a whole; (vii) Liens pursuant to the
Senior Credit Documents, Liens in connection with industrial revenue bonds,
Liens securing the Bank Indebtedness and bankers' Liens arising by operation of
law; (viii) Liens on property of the Company or any of its Restricted
Subsidiaries created solely for the purpose of securing Indebtedness permitted
by clause (b)(iv) of Section 4.03 or incurred in connection with Indebtedness
permitted by clause (b)(vii) thereof; PROVIDED, HOWEVER that, in the case of
liens described in such clause (b)(iv), no such Lien shall extend to or cover
other property of the Company or such Restricted Subsidiary other than the
respective property so acquired, and the principal amount of Indebtedness
secured by any such Lien shall at no time exceed the original purchase price of
such property; (ix) Liens existing on the date of this Indenture; (x) Liens on
goods (and the proceeds thereof) and documents of title and the
<PAGE>
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property covered thereby securing Indebtedness in respect of commercial letters
of credit; (xi) (A) mortgages, liens, security interests, restrictions,
encumbrances or any other matters of record that have been placed by any
developer, landlord or other third party on property over which the Company or
any Restricted Subsidiary of the Company has easement rights or on any real
property leased by the Company on the Issue Date and subordination or similar
agreements relating thereto and (B) any condemnation or eminent domain
proceedings affecting any real property; (xii) leases or subleases to third
parties; (xiii) Liens in connection with workmen's compensation obligations and
general liability exposure of the Company and its Restricted Subsidiaries;
(xiv) Liens securing Indebtedness Incurred under clauses (a) or (b)(v) of
Section 4.03; PROVIDED, HOWEVER, that such Indebtedness is not subordinate or
junior in ranking to the Securities; and (xv) Liens securing Indebtedness of any
Subsidiary of the Company to the Company.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, trust, unincorporated organization,
government or any agency or political subdivision thereof or any other entity.
"Preferred Stock", as applied to the Capital Stock of any corporation,
means Capital Stock of any class or classes (however designated) that is
preferred as to the payment of dividends, or as to the distribution of assets
upon any voluntary or involuntary liquidation or dissolution of such
corporation, over shares of Capital Stock of any other class of such
corporation.
"principal" of a Security means the principal of the Security plus the
premium, if any, payable on the Security that is due or overdue or is to become
due at the relevant time.
"Public Equity Offering" means an underwritten primary public offering
of common stock (or other voting stock) of the Company or Holdings pursuant to
an effective registration statement (other than a registration statement on Form
S-4, S-8 or any successor or similar forms) under the Securities Act.
"Public Market" means any time after (i) a Public Equity Offering has
been consummated and (ii) at least 15% of the total issued and outstanding
common stock of the Company or Holdings (as applicable) has been distributed by
means of an effective registration statement under the Securities Act.
"Redemption Date" means the date on which the Securities are
optionally redeemed pursuant to Section 3.07.
<PAGE>
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"Refinancing Indebtedness" means Indebtedness that is Incurred to
refund, refinance, replace, renew, repay or extend (including pursuant to any
defeasance or discharge mechanism) (collectively, "refinances," and "refinanced"
shall have a correlative meaning) any Indebtedness existing on the date of this
Indenture or Incurred in compliance with this Indenture (including Indebtedness
of the Company that refinances Indebtedness of any Restricted Subsidiary (to the
extent permitted in this Indenture) and Indebtedness of any Restricted
Subsidiary that refinances Indebtedness of another Restricted Subsidiary)
including Indebtedness that refinances Refinancing Indebtedness; PROVIDED,
HOWEVER, that (i) except in the case of any refunding, refinancing, replacement,
renewal, repayment or extension of any Bank Indebtedness, the Refinancing
Indebtedness has a Stated Maturity no earlier than the Stated Maturity of the
Indebtedness being refinanced, (ii) except in the case of any refunding,
refinancing, replacement, renewal, repayment or extension of any Bank
Indebtedness, the Refinancing Indebtedness has an Average Life at the time such
Refinancing Indebtedness is Incurred that is equal to or greater than the
Average Life of the Indebtedness being refinanced and (iii) such Refinancing
Indebtedness is Incurred in an aggregate principal amount (or if issued with
original issue discount, an aggregate issue price) that is equal to or less than
the sum of (A) the aggregate principal amount (or if issued with original issue
discount, the aggregate accreted value) then outstanding of the Indebtedness
being refinanced, (B) in the case of revolving credit Indebtedness, the unused
commitment thereunder, plus (C) fees, underwriting discounts and other costs and
expenses incurred in connection with such Refinancing Indebtedness; PROVIDED,
FURTHER, HOWEVER, that Refinancing Indebtedness shall not include (A)
Indebtedness of a Restricted Subsidiary that refinances Indebtedness of the
Company or (B) Indebtedness of the Company or a Restricted Subsidiary that
refinances Indebtedness of an Unrestricted Subsidiary.
"Registered Exchange Offer" shall have the meaning set forth in the
Exchange and Registration Rights Agreement.
"Related Business" means those businesses in which the Company or any
of its Subsidiaries are engaged on the date of this Indenture, or that are
related thereto.
"Representative" means the trustee, agent or representative (if any)
for an issue of Senior Indebtedness.
"Restricted Securities Legend" means the legend set forth in Section
2.06 hereof.
<PAGE>
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"Restricted Subsidiary" means any Subsidiary of the Company other than
an Unrestricted Subsidiary.
"Sale/Leaseback Transaction" means an arrangement relating to property
now owned or hereafter acquired whereby the Company or a Restricted Subsidiary
transfers such property to a Person and the Company or a Restricted Subsidiary
leases it from such Person.
"SEC" means the Securities and Exchange Commission.
"Secured Indebtedness" means any Indebtedness of the Company secured
by a Lien.
"Securities" means, collectively, the Initial Securities and, when and
if issued as provided in the Exchange and Registration Rights Agreement, the
Exchange Securities.
"Securities Custodian" means the custodian with respect to the Global
Security (as appointed by the Depository), or any successor entity thereto and
shall initially be the Trustee.
"Senior Credit Documents" means, collectively, the Senior Credit
Facility, the notes issued pursuant thereto and the Guarantees thereof, and the
Security Agreements, the Mortgages and the Pledge Agreements (each as defined in
the Senior Credit Facility).
"Senior Credit Facility" means the credit agreement dated as of
October 30, 1996, as amended, waived or otherwise modified from time to time,
including increases in the principal amount thereof, among the Company, the
several lenders party thereto, and The Chase Manhattan Bank, a New York banking
corporation, as administrative agent (except to the extent that any such
amendment, waiver or other modification thereto would be prohibited by the terms
of this Indenture, unless otherwise agreed to by the Holders of at least a
majority in aggregate principal amount of Notes at the time outstanding).
"Senior Indebtedness" means, whether outstanding on the date of this
Indenture or thereafter issued, (i) all obligations consisting of the Bank
Indebtedness; (ii) all obligations consisting of the principal of and premium,
if any, and accrued and unpaid interest (including interest accruing on or after
the filing of any petition in bankruptcy or for reorganization relating to the
Company regardless of whether post-filing interest is allowed in such
proceeding) in respect of (A) indebtedness of the Company for money borrowed and
(B) indebtedness evidenced by notes, debentures,
<PAGE>
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bonds or other similar instruments for the payment of which the Company is
responsible or liable; (iii) all Capitalized Lease Obligations of the Company;
(iv) all obligations of the Company (A) for the reimbursement of any obligor on
any letter of credit, banker's acceptance or similar credit transaction, (B)
under Hedging Obligations entered into in respect of any obligations described
in clauses (i), (ii) and (iii) or (C) the deferred purchase price of newly
acquired property, or the price of construction or improvement of any property,
in each case used in the ordinary course of business of the Company and its
Subsidiaries, whether such indebtedness is owed to the seller or Person carrying
out such construction or improvement or to any third party; (v) all obligations
of other persons of the type referred to in clauses (ii), (iii) and (iv) and all
dividends of other persons for the payment of which, in either case, the Company
is responsible or liable, directly or indirectly, as obligor, guarantor or
otherwise, including Guarantees of such obligations and dividends; and (vi) all
obligations of the Company consisting of modifications, renewals, extensions,
replacements and refundings of any obligations described in clauses (i), (ii),
(iii), (iv) or (v); unless, in each case in the instrument creating or
evidencing the same or pursuant to which the same is outstanding, it is provided
that such obligations are not superior in right of payment to the Securities;
PROVIDED, HOWEVER, that Senior Indebtedness shall not include (1) any obligation
of the Company to any Subsidiary, (2) any liability for Federal, state, local or
other taxes owed or owing by the Company, (3) any accounts payable or other
liability to trade creditors arising in the ordinary course of business
(including Guarantees thereof or instruments evidencing such liabilities), (4)
any Indebtedness, Guarantee or obligation of the Company which is subordinate or
junior to any other Indebtedness, Guarantee or obligation of the Company or (5)
any Indebtedness that is incurred in violation of this Indenture. If any
Designated Senior Indebtedness is disallowed, avoided or subordinated pursuant
to the provisions of Section 548 of Title 11 of the United States Code or any
applicable state fraudulent conveyance law, such Designated Senior Indebtedness
nevertheless shall constitute Senior Indebtedness.
"Senior Subordinated Indebtedness" means the Securities and any other
Indebtedness of the Company that specifically provides that such Indebtedness is
to rank pari passu with the Securities or is not subordinated by its terms to
any Indebtedness or other obligation of the Company that is not Senior
Indebtedness.
"Significant Subsidiary" means any Restricted Subsidiary that would be
a "Significant Subsidiary" of the Company within the meaning of Rule 1-02 under
Regulation S-X promulgated by the SEC.
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"Stated Maturity" means, with respect to any security, the date
specified in such security as the fixed date on which the payment of principal
of such security is due and payable, including pursuant to any mandatory
redemption provision (but excluding any provision providing for the repurchase
of such security at the option of the holder thereof upon the happening of any
contingency beyond the control of the issuer unless such contingency has
occurred).
"Subordinated Obligation" means any Indebtedness of the Company
(whether outstanding on the date of this Indenture or thereafter Incurred) which
is subordinate or junior in right of payment to the Securities pursuant to a
written agreement.
"Subsidiary" of any Person means any corporation, association,
partnership or other business entity of which more than 50% of the total voting
power of shares of Capital Stock or other interests (including partnership
interests) entitled (without regard to the occurrence of any contingency) to
vote in the election of directors, managers or trustees thereof is at the time
owned or controlled, directly or indirectly, by (i) such Person or (ii) one or
more Subsidiaries of such Person.
"Temporary Cash Investments" means any of the following: (i) any
investment in direct obligations of the United States of America or any agency
or instrumentality thereof or obligations Guaranteed by the United States of
America or any agency or instrumentality thereof; (ii) investments in time
deposit accounts, certificates of deposit and money market deposits maturing
within 180 days of the date of acquisition thereof, bankers' acceptances with
maturities of 180 days or less and overnight bank deposits, in each case with or
issued by a bank or trust company that is organized under the laws of the United
States of America, any state thereof or any foreign country recognized by the
United States of America having capital, surplus and undivided profits
aggregating in excess of $300,000,000 (or the foreign currency equivalent
thereof); (iii) repurchase obligations with a term of not more than seven days
for underlying securities of the types described in clause (i) or (ii) above
entered into with a bank meeting the qualifications described in clause (ii)
above; and (iv) investments in commercial paper, maturing not more than six
months after the date of acquisition, issued by any Lender (as defined under the
Senior Credit Facility) or the parent corporation of any Lender, and commercial
paper with a rating at the time as of which any investment therein is made of
"P-1" (or higher) according to Moody's Investors Service, Inc. or "A-1" (or
higher) according to Standard and Poor's Ratings Services, a division of The
McGraw-Hill Companies, Inc.
<PAGE>
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"TIA" means the Trust Indenture Act of 1939 (15 U.S.C. 77aaa-77bbbb)
as in effect on the date of this Indenture.
"Trade Payables" means, with respect to any Person, any accounts
payable or any indebtedness or monetary obligation to trade creditors created,
assumed or Guaranteed by such Person arising in the ordinary course of business
in connection with the acquisition of goods or services.
"Transfer Restricted Securities" means Securities that bear or are
required to bear the legend set forth in Section 2.06 hereof.
"Treasury Rate" means the yield to maturity at the time of computation
of United States Treasury securities with a constant maturity (as compiled and
published in the most recent Federal Reserve Statistical Release H.15(519) which
has become publicly available at least two Business Days prior to the Redemption
Date (or, if such Statistical Release is no longer published, any publicly
available source or similar market data)) most nearly equal to the period from
the Redemption Date to December 1, 2001; PROVIDED, HOWEVER, that if the period
from the Redemption Date to December 1, 2001 is not equal to the constant
maturity of a United States Treasury security for which a weekly average yield
is given, the Treasury Rate shall be obtained by linear interpolation
(calculated to the nearest one-twelfth of a year) from the weekly average yields
of United States Treasury securities for which such yields are given, except
that if the period from the Redemption Date to December 1, 2001 is less than one
year, the weekly average yield on actually traded United States Treasury
securities adjusted to a constant maturity of one year shall be used.
"Trustee" means the party named as such in this Indenture until a
successor replaces it and, thereafter, means the successor.
"Trust Officer" means any officer or assistant officer of the Trustee
assigned to and working in the corporate trust department of the Trustee, and
also, with respect to a particular matter, any other officer to whom such matter
is referred because of such officer's knowledge and familiarity with the
particular subject.
"Uniform Commercial Code" means the New York Uniform Commercial Code
as in effect from time to time.
"Unrestricted Subsidiary" means (i) any Subsidiary of the Company that
at the time of determination shall be designated an Unrestricted Subsidiary by
the Board of Directors in the manner
<PAGE>
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provided below and (ii) any Subsidiary of an Unrestricted Subsidiary. The Board
of Directors may designate any Subsidiary of the Company (including any newly
acquired or newly formed Subsidiary of the Company) to be an Unrestricted
Subsidiary if (i) such Subsidiary or any of its Subsidiaries does not own any
Capital Stock or Indebtedness of, or own or hold any Lien on any property of,
the Company or any other Subsidiary of the Company that is not a Subsidiary of
the Subsidiary to be so designated and (ii) either (A) the Subsidiary to be so
designated has total consolidated assets of $1,000 or less or (B) if such
Subsidiary has consolidated assets greater than $1,000, then such designation
would be permitted under Section 4.04. The Board of Directors may designate any
Unrestricted Subsidiary to be a Restricted Subsidiary; PROVIDED, HOWEVER, that
immediately after giving effect to such designation (x) the Company could Incur
$1.00 of additional Indebtedness under Section 4.03(a) and (y) no Default shall
have occurred and be continuing. Any such designation by the Board of Directors
shall be evidenced to the Trustee by promptly filing with the Trustee a copy of
the resolution of the Board of Directors giving effect to such designation and
an Officers' Certificate certifying that such designation complied with the
foregoing provisions.
"U.S. Government Obligations" means direct obligations (or
certificates representing an ownership interest in such obligations) of the
United States of America (including any agency or instrumentality thereof) for
the payment of which the full faith and credit of the United States of America
is pledged and which are not callable or redeemable at the issuer's option.
"Voting Stock" of a corporation means all classes of Capital Stock of
such corporation then outstanding and normally entitled to vote in the election
of directors.
"Wholly Owned Subsidiary" means a Restricted Subsidiary of the Company
all the Capital Stock of which (other than directors' qualifying shares) is
owned by the Company or another Wholly Owned Subsidiary.
SECTION 1.02. OTHER DEFINITIONS.
Defined in
Term Section
---- ----------
"Affiliate Transaction" . . . . . . . . . . . . . . . . . . . 4.07
"Bankruptcy Law" . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Blockage Notice" . . . . . . . . . . . . . . . . . . . . . . 10.03
"covenant defeasance option" . . . . . . . . . . . . . . . . . 8.01(b)
<PAGE>
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"Custodian". . . . . . . . . . . . . . . . . . . . . . . . . . 6.01
"Event of Default" . . . . . . . . . . . . . . . . . . . . . . 6.01
"legal defeasance option". . . . . . . . . . . . . . . . . . . 8.01(b)
"Legal Holiday". . . . . . . . . . . . . . . . . . . . . . . . 11.08
"Offer". . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.06
"Offer Amount" . . . . . . . . . . . . . . . . . . . . . . . . 4.06
"Offer Period" . . . . . . . . . . . . . . . . . . . . . . . . 4.06
"pay the Securities" . . . . . . . . . . . . . . . . . . . . . 10.03
"Paying Agent" . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Payment Blockage Period". . . . . . . . . . . . . . . . . . . 10.03
"Purchase Date". . . . . . . . . . . . . . . . . . . . . . . . 4.06
"Registrar". . . . . . . . . . . . . . . . . . . . . . . . . . 2.03
"Restricted Payment" . . . . . . . . . . . . . . . . . . . . . 4.04
"Successor Company". . . . . . . . . . . . . . . . . . . . . . 5.01
SECTION 1.03. INCORPORATION BY REFERENCE OF TRUST INDENTURE ACT.
This Indenture is subject to the mandatory provisions of the TIA, which are
incorporated by reference in and made a part of this Indenture. The following
TIA terms have the following meanings:
"Commission" means the SEC.
"indenture securities" means the Securities.
"indenture security holder" means a Securityholder.
"indenture to be qualified" means this Indenture.
"indenture trustee" or "institutional trustee" means the Trustee.
"obligor" on the indenture securities means the Company and any other
obligor on the indenture securities.
All other TIA terms used in this Indenture that are defined by the
TIA, defined by TIA reference to another statute or defined by SEC rule have the
meanings assigned to them by such definitions.
SECTION 1.04. RULES OF CONSTRUCTION. Unless the context otherwise
requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning assigned
to it in accordance with GAAP;
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(3) "or" is not exclusive;
(4) "including" means including without limitation;
(5) words in the singular include the plural and words in the plural
include the singular;
(6) unsecured Indebtedness shall not be deemed to be subordinate or
junior to Secured Indebtedness merely by virtue of its nature as unsecured
Indebtedness;
(7) the principal amount of any non-interest bearing or other
discount security at any date shall be the principal amount thereof that
would be shown on a balance sheet of the issuer dated such date prepared in
accordance with GAAP and accretion of principal on such security shall be
deemed to be the Incurrence of Indebtedness; and
(8) the principal amount of any Preferred Stock shall be (i) the
maximum liquidation value of such Preferred Stock or (ii) the maximum
mandatory redemption or mandatory repurchase price with respect to such
Preferred Stock, whichever is greater.
ARTICLE B.
The Securities
--------------
SECTION 2.01. FORM AND DATING. The Initial Securities and the
Trustee's certificate of authentication shall be substantially in the form of
Exhibit A, which is hereby incorporated in and expressly made a part of this
Indenture. Any Exchange Securities and the Trustee's certificate of
authentication shall be substantially in the form of Exhibit B, which is
incorporated in and expressly made a part of this Indenture. The Securities may
have notations, legends or endorsements required by law, stock exchange rule,
agreements to which the Company is subject, if any, or usage (provided that any
such notation, legend or endorsement is in a form acceptable to the Company).
Each Security shall be dated the date of its authentication. The terms of the
Securities set forth in Exhibit A and B are part of the terms of this Indenture.
(a) Global Securities. The Initial Securities are being offered and
sold by the Company pursuant to a Purchase Agreement, dated November 20, 1996,
between the Company and the Initial Purchasers.
<PAGE>
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Initial Securities offered and sold to "qualified institutional
buyers" (as defined in Rule 144A under the Securities Act) ("QIBs") in
accordance with Rule 144A under the Securities Act ("Rule 144A") as provided in
the Purchase Agreement, shall be issued initially in the form of a single
permanent Global Security in definitive, fully registered form without interest
coupons with the legend set forth in footnote 1 to Exhibit A hereto (the
"Restricted Global Security"), which shall be deposited on behalf of the Initial
Purchasers with the Trustee, as Securities Custodian for the Depository, and
registered in the name of the Depository or a nominee of the Depository, duly
executed by the Company and authenticated by the Trustee as hereinafter
provided. The aggregate principal amount of the Restricted Global Security may
from time to time be increased or decreased by adjustments made on the records
of the Trustee, as Securities Custodian, and the Depository or its nominee as
hereinafter provided.
(b) Book-Entry Provisions. This Section 2.01(b) shall apply only to
Global Securities deposited with or on behalf of the Depository.
The Company shall execute and the Trustee shall, in accordance with
this Section 2.01(b), authenticate and deliver initially one or more Global
Securities that (i) shall be registered in the name of the Depository for such
Global Security or Global Securities or the nominee of such Depository and
(ii) shall be held by the Trustee as custodian for the Depository. After the
issuance of Exchange Securities under a Registered Exchange Offer, the Trustee
shall have no duty to hold any Global Security as custodian for the Depository
or any other Security registered in the name of the Depository or a nominee of
the Depository.
Members of, or participants in, the Depository ("Agent Members") shall
have no rights under this Indenture with respect to any Global Security held on
their behalf by the Depository or by the Trustee as the custodian of the
Depository or under such Global Security, and the Depository may be treated by
the Company, the Trustee and any agent of the Company or the Trustee as the
absolute owner of such Global Security for all purposes whatsoever.
Notwithstanding the foregoing, nothing herein shall prevent the Company, the
Trustee or any agent of the Company or the Trustee from giving effect to any
written certification, proxy or other authorization furnished by the Depository
or impair, as between the Depository and its Agent Members, the operation of
customary practices of such Depository governing the exercise of the rights of a
holder of a beneficial interest in any Global Security.
<PAGE>
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(c) CERTIFICATED SECURITIES. Except as otherwise provided herein,
owners of beneficial interests in Global Securities will not be entitled to
receive physical delivery of certificated Securities. Purchasers of Initial
Securities who are not QIBs (referred to herein as the "Non-Global Purchasers")
will receive certificated Initial Securities bearing the Restricted Securities
Legend set forth in Exhibit A hereto ("Restricted Certificated Securities");
provided, however, that upon transfer of such Restricted Certificated Securities
to a QIB or in accordance with Regulation S, such Restricted Certificated
Securities will, unless the relevant Global Security has previously been
exchanged, be exchanged for an interest in a Global Security pursuant to the
provisions of Section 2.06 hereof. Certificated Securities will include the
Restricted Securities Legend set forth in Exhibit A unless removed in accordance
with this Section 2.01(c) or Section 2.06(g) hereof.
After a transfer of any Initial Securities during the period of the
effectiveness of, and pursuant to, a Shelf Registration Statement with respect
to the Initial Securities, all requirements pertaining to legends on such
Initial Securities will cease to apply, the requirements requiring that any such
Initial Securities issued to certain Holders be issued in global form will cease
to apply, and certificated Initial Securities without legends will be made
available to the Holders of such Initial Securities. Upon the consummation of a
Registered Exchange Offer with respect to the Initial Securities pursuant to
which Holders of Initial Securities are offered Exchange Securities in exchange
for their Initial Securities, all requirements pertaining to such Initial
Securities that Initial Securities issued to certain Holders be issued in global
form will cease to apply and certificated Initial Securities with the Restricted
Securities Legend set forth in Exhibit A hereto will be available to Holders of
such Initial Securities that do not exchange their Initial Securities, and
Exchange Securities in certificated form will be available to Holders that
exchange such Initial Securities in such Registered Exchange Offer.
SECTION 2.02. EXECUTION AND AUTHENTICATION. Two Officers shall sign
the Securities for the Company by manual or facsimile signature. The Company's
seal shall be impressed, affixed, imprinted or reproduced on the Securities and
may be in facsimile form.
If an Officer whose signature is on a Security no longer holds that
office at the time the Trustee authenticates the Security, the Security shall be
valid nevertheless.
<PAGE>
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A Security shall not be valid until an authorized signatory of the
Trustee manually signs the certificate of authentication on the Security. The
signature shall be conclusive evidence that the Security has been authenticated
under this Indenture.
The Trustee shall authenticate and deliver (1) Initial Securities for
original issue in an aggregate principal amount of $100,000,000, and (2)
Exchange Securities for issue only in a Registered Exchange Offer, pursuant to
the Exchange and Registration Rights Agreement, for Initial Securities for a
like principal amount of Initial Securities exchanged pursuant thereto, in each
case upon a written order of the Company signed by two Officers or by an Officer
and either an Assistant Treasurer or an Assistant Secretary of the Company.
Such order shall specify the amount of the Securities to be authenticated, the
date on which the original issue of Securities is to be authenticated and
whether the Securities are to be Initial Securities or Exchange Securities. The
aggregate principal amount of Securities outstanding at any time may not exceed
$100,000,000 except as provided in Section 2.07.
The Trustee may appoint an authenticating agent reasonably acceptable
to the Company to authenticate the Securities. Unless limited by the terms of
such appointment, an authenticating agent may authenticate Securities whenever
the Trustee may do so. Each reference in this Indenture to authentication by
the Trustee includes authentication by such agent. An authenticating agent has
the same rights as any Registrar, Paying Agent or agent for service of notices
and demands.
SECTION 2.03. REGISTRAR AND PAYING AGENT. The Company shall
maintain an office or agency where Securities may be presented for registration
of transfer or for exchange (the "Registrar") and an office or agency where
Securities may be presented for payment (the "Paying Agent"). The Registrar
shall keep a register of the Securities and of their transfer and exchange. The
Company may have one or more co-registrars and one or more additional paying
agents. The term "Paying Agent" includes any additional paying agent.
The Company shall enter into an appropriate agency agreement with any
Registrar, Paying Agent or co-registrar not a party to this Indenture, which
shall incorporate the terms of the TIA. The agreement shall implement the
provisions of this Indenture that relate to such agent. The Company shall
notify the Trustee of the name and address of any such agent. If the Company
<PAGE>
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fails to maintain a Registrar or Paying Agent, the Trustee shall act as such and
shall be entitled to appropriate compensation therefor pursuant to Section 7.07.
The Company or any of its Wholly Owned Subsidiaries that is a Domestic
Subsidiary may act as Registrar, co-registrar or transfer agent. None of the
Company or any of its Subsidiaries may act as Paying Agent.
The Company initially appoints the Trustee as Registrar and Paying
Agent in connection with the Securities.
The Company initially appoints The Depository Trust Company to act as
Depository with respect to the Global Securities.
SECTION 2.04. PAYING AGENT TO HOLD MONEY IN TRUST. Prior to each due
date of the principal and interest on any Security, the Company shall deposit
with the Paying Agent a sum sufficient to pay such principal and interest when
so becoming due. The Company shall require each Paying Agent (other than the
Trustee) to agree in writing that the Paying Agent shall hold in trust for the
benefit of Securityholders or the Trustee all money held by the Paying Agent for
the payment of principal of or interest on the Securities and shall notify the
Trustee of any default by the Company in making any such payment. The Company
at any time may require a Paying Agent to pay all money held by it to the
Trustee and to account for any funds disbursed by the Paying Agent. Upon
complying with this Section, the Paying Agent shall have no further liability
for the money delivered to the Trustee.
SECTION 2.05. SECURITYHOLDER LISTS. The Trustee shall preserve in as
current a form as is reasonably practicable the most recent list available to it
of the names and addresses of Securityholders. If the Trustee is not the
Registrar, the Company shall furnish to the Trustee, in writing at least five
Business Days before each interest payment date and at such other times as the
Trustee may request in writing, a list in such form and as of such date as the
Trustee may reasonably require of the names and addresses of Securityholders.
SECTION 2.06. TRANSFER AND EXCHANGE.
(a) Transfer and Exchange of Definitive Securities. When Definitive
Securities are presented to the Registrar or a co-registrar with a request:
(x) to register the transfer of such Definitive Securities; or
<PAGE>
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(y) to exchange such Definitive Securities for an equal principal
amount of Definitive Securities of other authorized denominations,
the Registrar or co-registrar shall register the transfer or make the exchange
as requested if its reasonable requirements for such transaction are met;
PROVIDED, HOWEVER, that the Definitive Securities surrendered for transfer or
exchange:
(i) shall be duly endorsed or accompanied by a written instrument of
transfer in form reasonably satisfactory to the Company and the Registrar
or co-registrar, duly executed by the Holder thereof or his attorney duly
authorized in writing; and
(ii) in the case of Transfer Restricted Securities that are Definitive
Securities, are being transferred or exchanged pursuant to an effective
registration statement under the Securities Act or pursuant to clause (A),
(B) or (C) below, and are accompanied by the following additional
information and documents, as applicable:
(A) if such Transfer Restricted Securities are being delivered
to the Registrar by a Holder for registration in the name of such
Holder, without transfer, a certification from such Holder to that
effect (in substantially the form set forth in Exhibit C hereto); or
(B) if such Transfer Restricted Securities are being transferred
to the Company or to a "qualified institutional buyer" (as defined in
Rule 144A under the Securities Act) in accordance with Rule 144A under
the Securities Act, a certification to that effect (in substantially
the form set forth in Exhibit C hereto); or
(C) if such Transfer Restricted Securities are being transferred
(x) pursuant to an exemption from registration in accordance with Rule
144 or Regulation S under the Securities Act; or (y) to an
institutional "accredited investor" within the meaning of Rule
501(a)(1), (2), (3) or (7) under the Securities Act that is acquiring
the Securities for its own account, or for the account of such an
institutional accredited investor, in each case in a minimum principal
amount of the Securities of $250,000 for investment purposes and not
with a view to, or for offer or sale in connection with, any
distribution in violation of the Securities Act; or
<PAGE>
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(z) in reliance on another exemption from the registration
requirements of the Securities Act: (i) a certification to that effect
(in substantially the form set forth in Exhibit C hereto), (ii) in the
case of clause (y), a signed letter substantially in the form of
Exhibit D hereto and (iii) in the case of clause (Z), if the Company
or Registrar so requests, an Opinion of Counsel reasonably acceptable
to the Company and to the Registrar to the effect that such transfer
is in compliance with the Securities Act.
(b) RESTRICTIONS ON TRANSFER OF A DEFINITIVE SECURITY FOR A
BENEFICIAL INTEREST IN A GLOBAL SECURITY. A Definitive Security may not be
exchanged for a beneficial interest in a Global Security except upon
satisfaction of the requirements set forth below. Upon receipt by the Trustee
of a Definitive Security, duly endorsed or accompanied by appropriate
instruments of transfer, in form satisfactory to the Trustee, together with:
(i) if such Definitive Security is a Transfer Restricted Security,
certification, substantially in the form set forth in Exhibit C hereto,
that such Definitive Security is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act; and
(ii) whether or not such Definitive Security is a Transfer Restricted
Security, written instructions directing the Trustee to make, or to direct
the Securities Custodian to make, an adjustment on its books and records
with respect to such Global Security to reflect an increase in the
aggregate principal amount of the Securities represented by the Global
Security,
then the Trustee shall cancel such Definitive Security and cause, or direct the
Securities Custodian to cause, in accordance with the standing instructions and
procedures existing between the Depository and the Securities Custodian, the
aggregate principal amount of Securities represented by the Global Security to
be increased accordingly. If no Global Securities are then outstanding, the
Company shall issue and the Trustee shall authenticate, upon written order of
the Company in the form of an Officers' Certificate, a new Global Security in
the appropriate principal amount.
(c) TRANSFER AND EXCHANGE OF GLOBAL SECURITIES. The transfer and
exchange of Global Securities or beneficial interests therein shall be effected
through the Depository, in accordance
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with this Indenture (including applicable restrictions on transfer set forth
herein, if any) and the procedures of the Depository therefor.
(d) TRANSFER OF A BENEFICIAL INTEREST IN A GLOBAL SECURITY FOR A
DEFINITIVE SECURITY. (a)Any person having a beneficial interest in a Global
Security that is being transferred or exchanged pursuant to an effective
registration statement under the Securities Act or pursuant to clause (A), (B)
or (C) below may upon request, and if accompanied by the information specified
below, exchange such beneficial interest for a Definitive Security of the same
aggregate principal amount. Upon receipt by the Trustee of written instructions
or such other form of instructions as is customary for the Depository from the
Depository or its nominee on behalf of any Person having a beneficial interest
in a Global Security and upon receipt by the Trustee of a written order or such
other form of instructions as is customary for the Depository or the Person
designated by the Depository as having such a beneficial interest in a Transfer
Restricted Security only, the following additional information and documents
(all of which may be submitted by facsimile):
(A) if such beneficial interest is being transferred to the Person
designated by the Depository as being the owner of a beneficial interest in
a Global Security, a certification from such Person to that effect (in
substantially the form set forth in Exhibit C hereto); or
(B) if such beneficial interest is being transferred to a "qualified
institutional buyer" (as defined in Rule 144A under the Securities Act) in
accordance with Rule 144A under the Securities Act, a certification to that
effect (in substantially the form set forth in Exhibit C hereto); or
(C) if such beneficial interest is being transferred (x) pursuant to
an exemption from registration in accordance with Rule 144 or Regulation S
under the Securities Act; or (y) to an institutional "accredited investor"
within the meaning of Rule 501(a)(1), (2), (3) or (7) under the Securities
Act that is acquiring the Securities for its own account, or for the
account of such an institutional accredited investor, in each case in a
minimum principal amount of the Securities of $250,000 for investment
purposes and not with a view to, or for offer or sale in connection with,
any distribution in violation of the Securities Act; or (z) in reliance on
another exemption from the registration requirements of the Securities Act:
(i) a certification to that effect from the transferee or transferor (in
substantially the form set forth in Exhibit C
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hereto), (ii) in the case of clause (y), a signed letter substantially in
the form of Exhibit D hereto and (iii) in the case of clause (Z), if the
Company or Registrar so requests, an Opinion of Counsel from the transferee
or transferor reasonably acceptable to the Company and to the Registrar to
the effect that such transfer is in compliance with the Securities Act,
then the Trustee or the Securities Custodian, at the direction of the Trustee,
will cause, in accordance with the standing instructions and procedures existing
between the Depository and the Securities Custodian, the aggregate principal
amount of the Global Security to be reduced on its books and records and,
following such reduction, the Company will execute and the Trustee will
authenticate and deliver to the transferee a Definitive Security.
(ii) Definitive Securities issued in exchange for a beneficial
interest in a Global Security pursuant to this Section 2.06(d) shall be
registered in such names and in such authorized denominations as the Depository,
pursuant to instructions from its direct or indirect participants or otherwise,
shall instruct the Trustee. The Trustee shall deliver such Definitive
Securities to the Persons in whose names such Securities are so registered in
accordance with the instructions of the Depository.
(e) RESTRICTIONS ON TRANSFER AND EXCHANGE OF GLOBAL SECURITIES.
Notwithstanding any other provisions of this Indenture (other than the
provisions set forth in Section 2.06(f)), a Global Security may not be
transferred as a whole except by the Depository to a nominee of the Depository
or by a nominee of the Depository to the Depository or another nominee of the
Depository or by the Depository or any such nominee to a successor Depository or
a nominee of such successor Depository.
(f) AUTHENTICATION OF DEFINITIVE SECURITIES IN ABSENCE OF DEPOSITORY.
If at any time:
(i) the Depository for the Securities notifies the Company that the
Depository is unwilling or unable to continue as Depository for the Global
Securities and a successor Depository for the Global Securities is not
appointed by the Company within 90 days after delivery of such notice; or
(ii) the Company, in its sole discretion, notifies the Trustee in
writing that they elect to cause the issuance of Definitive Securities
under this Indenture,
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then the Company will execute, and the Trustee, upon receipt of an Officers'
Certificate requesting the authentication and delivery of Definitive Securities
to the Persons designated by the Company, will authenticate and deliver
Definitive Securities, in an aggregate principal amount equal to the principal
amount of Global Securities, in exchange for such Global Securities.
(g) LEGEND. (a) Except as permitted by the following paragraph
(ii), each Security certificate evidencing the Global Securities and the
Definitive Securities (and all Securities issued in exchange therefor or
substitution thereof) shall bear a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS.
NEITHER THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE
REOFFERED, SOLD, ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR
OTHERWISE DISPOSED OF WITHIN THE UNITED STATES TO, OR FOR THE ACCOUNT
OR BENEFIT OF, U.S. PERSONS IN THE ABSENCE OF SUCH REGISTRATION OR
UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT TO,
REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE
"RESALE RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE
LATER OF THE ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE
COMPANY OR ANY AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY
(OR ANY PREDECESSOR OF SUCH SECURITY), ONLY (A) TO THE COMPANY,
(B) PURSUANT TO A REGISTRATION STATEMENT THAT HAS BEEN DECLARED
EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS THE SECURITIES
ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE SECURITIES
ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR
FOR THE ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS
GIVEN THAT THE TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A,
(D) PURSUANT TO OFFERS AND SALES THAT OCCUR OUTSIDE THE UNITED STATES
WITHIN THE MEANING OF REGULATION S UNDER THE SECURITIES ACT, (E) TO AN
INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE MEANING OF RULE
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING
THE SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN
INSTITUTIONAL ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL
AMOUNT OF
<PAGE>
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THE SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO,
OR FOR OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF
THE SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S
AND THE TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT
TO CLAUSE (F) TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL,
CERTIFICATION AND/OR OTHER INFORMATION SATISFACTORY TO EACH OF THEM, AND IN
THE CASE OF THE FOREGOING CLAUSE (E), A CERTIFICATE OF TRANSFER (THE FORM
OF WHICH CAN BE OBTAINED FROM THE TRUSTEE) IS COMPLETED AND DELIVERED BY
THE TRANSFEROR TO THE COMPANY AND THE TRUSTEE. THIS LEGEND WILL BE
REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE RESALE RESTRICTION
TERMINATION DATE.
(ii) Upon any sale or transfer of a Transfer Restricted Security
(including any Transfer Restricted Security represented by a Global Security)
pursuant to Rule 144 under the Securities Act or an effective registration
statement under the Securities Act:
(A) in the case of any Transfer Restricted Security that is a
Definitive Security, the Registrar shall permit the Holder thereof to
exchange such Transfer Restricted Security for a Definitive Security that
does not bear the legend set forth above and rescind any restriction on the
transfer of such Transfer Restricted Security; and
(B) any such Transfer Restricted Security represented by a Global
Security shall not be subject to the provisions set forth in clause (i) of
this Section 2.06(g) (such sales or transfers being subject only to the
provisions of Section 2.06(c) hereof); provided, however, that with respect
to any request for an exchange of a Transfer Restricted Security that is
represented by a Global Security for a Definitive Security that does not
bear a legend, which request is made in reliance upon Rule 144, the Holder
thereof shall certify in writing to the Registrar that such request is
being made pursuant to Rule 144 (such certification to be substantially in
the form set forth in Exhibit C hereto).
(h) CANCELLATION AND/OR ADJUSTMENT OF GLOBAL SECURITY. At such time
as all beneficial interests in a Global Security have either been exchanged for
Definitive Securities, redeemed, repurchased or canceled, such Global Security
shall be returned to the Depository for cancellation or retained and canceled by
the Trustee. At any time prior to such cancellation, if any beneficial interest
in a Global Security is exchanged for Definitive
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Securities, redeemed, repurchased or canceled, the principal amount of
Securities represented by such Global Security shall be reduced and an
adjustment shall be made on the books and records of the Trustee (if it is then
the Securities Custodian for such Global Security) with respect to such Global
Security, by the Trustee or the Securities Custodian, to reflect such reduction.
(i) OBLIGATIONS WITH RESPECT TO TRANSFERS AND EXCHANGES OF
SECURITIES. (i) To permit registrations of transfers and exchanges, the
Company shall execute and the Trustee shall authenticate Definitive Securities
and Global Securities at the Registrar's or co-registrar's request.
(ii) No service charge shall be made to a Holder for any registration
of transfer or exchange, but the Company may require payment of a sum sufficient
to cover any transfer tax, assessments, or similar governmental charge payable
in connection therewith.
(iii) The Registrar or co-registrar shall not be required to register
the transfer of or exchange of (a) any Definitive Security selected for
redemption in whole or in part pursuant to Article 3, except the unredeemed
portion of any Definitive Security being redeemed in part, or (b) any Security
for a period beginning 15 Business Days before the mailing of a notice of an
offer to repurchase or redeem Securities [or 15 Business Days before an interest
payment date].
(iv) Prior to the due presentation for registration of transfer of any
Security, the Company, the Trustee, the Paying Agent, the Registrar or any
co-registrar may deem and treat the Person in whose name a Security is
registered as the absolute owner of such Security for the purpose of receiving
payment of principal of and interest on such Security and for all other purposes
whatsoever, whether or not such Security is overdue, and none of the Company,
the Trustee, the Paying Agent, the Registrar or any co-registrar shall be
affected by notice to the contrary.
(v) All Securities issued upon any transfer or exchange pursuant to
the terms of this Indenture shall evidence the same debt and shall be entitled
to the same benefits under this Indenture as the Securities surrendered upon
such transfer or exchange.
(j) NO OBLIGATION OF THE TRUSTEE. (i) The Trustee shall have no
responsibility or obligation to any beneficial owner of a Global Security, a
member of, or a participant in the Depository or other Person with respect to
the accuracy of the records of the Depository or its nominee or of any
participant or
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member thereof, with respect to any ownership interest in the Securities or with
respect to the delivery to any participant, member, beneficial owner or other
Person (other than the Depository) of any notice (including any notice of
redemption) or the payment of any amount, under or with respect to such
Securities. All notices and communications to be given to the Holders and all
payments to be made to Holders under the Securities shall be given or made only
to or upon the order of the registered Holders (which shall be the Depository or
its nominee in the case of a Global Security). The rights of beneficial owners
in any Global Security in global form shall be exercised only through the
Depository subject to the applicable rules and procedures of the Depository.
The Trustee may rely and shall be fully protected in relying upon information
furnished by the Depository with respect to its members, participants and any
beneficial owners.
(ii) The Trustee shall have no obligation or duty to monitor,
determine or inquire as to compliance with any restrictions on transfer imposed
under this Indenture or under applicable law with respect to any transfer of any
interest in any Security (including without limitation any transfers between or
among Depository participants, members or beneficial owners in any Global
Security) other than to require delivery of such certificates and other
documentation or evidence as are expressly required by, and to do so if and when
expressly required by, the terms of this Indenture, and to examine the same to
determine substantial compliance as to form with the express requirements
hereof.
SECTION 2.07. REPLACEMENT SECURITIES. If a mutilated Security is
surrendered to the Registrar or if the Holder of a Security claims that the
Security has been lost, destroyed or wrongfully taken, the Company shall issue
and the Trustee shall authenticate a replacement Security if the requirements of
Section 8-405 (or a successor provision) of the Uniform Commercial Code are met,
such that the Holder (i) satisfies the Company or the Trustee within a
reasonable time after he has notice of such loss, destruction or wrongful taking
and the Registrar does not register a transfer prior to receiving such
notification, (ii) so requests the Company or the Trustee prior to the Security
being acquired by a bona fide purchaser and (iii) satisfies any other reasonable
requirements of the Trustee. If required by the Trustee or the Company, such
Holder shall furnish an indemnity bond sufficient in the judgment of the Trustee
to protect the Company, the Trustee, the Paying Agent, the Registrar and any
co-registrar from any loss that any of them may suffer if a Security is
replaced. The Company and the Trustee may charge the Holder for their expenses
in replacing a Security.
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Every replacement Security is an additional obligation of the Company.
SECTION 2.08. OUTSTANDING SECURITIES. Securities outstanding at any
time are all Securities authenticated by the Trustee except for those canceled
by it, those delivered to it for cancellation and those described in this
Section as not outstanding. A Security does not cease to be outstanding because
the Company or an Affiliate of the Company holds the Security.
If a Security is replaced pursuant to Section 2.07, it ceases to be
outstanding unless the Trustee and the Company receive proof satisfactory to
them that the replaced Security is held by a bona fide purchaser.
If the Paying Agent segregates and holds in trust, in accordance with
this Indenture, on a redemption date or maturity date money sufficient to pay
all principal and interest payable on that date with respect to the Securities
(or portions thereof) to be redeemed or maturing, as the case may be, and the
Paying Agent is not prohibited from paying such money to the Securityholders on
that date pursuant to the terms of this Indenture, then on and after that date
such Securities (or portions thereof) cease to be outstanding and interest on
them ceases to accrue.
SECTION 2.09. TEMPORARY SECURITIES. Until definitive Securities are
ready for delivery, the Company may prepare and the Trustee shall authenticate
temporary Securities. Temporary Securities shall be substantially in the form
of Definitive Securities but may have variations that the Company considers
appropriate for temporary Securities. Without unreasonable delay, the Company
shall prepare and the Trustee shall authenticate Definitive Securities and
deliver them in exchange for temporary Securities.
SECTION 2.10. CANCELLATION. The Company at any time may deliver
Securities to the Trustee for cancellation. The Registrar and the Paying Agent
shall forward to the Trustee any Securities surrendered to them for registration
of transfer, exchange or payment. The Trustee and no one else shall cancel and
destroy (subject to the record retention requirements of the Exchange Act) all
Securities surrendered for registration of transfer, exchange, payment or
cancellation unless the Company directs the Trustee to deliver canceled
Securities to the Company. The Company may not issue new Securities to replace
Securities it has redeemed, paid or delivered to the Trustee for cancellation.
The Trustee shall not authenticate Securities in place of canceled Securities
other than pursuant to the terms of this Indenture.
<PAGE>
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SECTION 2.11. DEFAULTED INTEREST. If the Company defaults in a
payment of interest on the Securities, the Company shall pay the defaulted
interest (plus interest on such defaulted interest to the extent lawful) in any
lawful manner. The Company may pay the defaulted interest to the persons who
are Securityholders on a subsequent special record date. The Company shall fix
or cause to be fixed any such special record date and payment date to the
reasonable satisfaction of the Trustee and shall promptly mail to each
Securityholder a notice that states the special record date, the payment date
and the amount of defaulted interest to be paid.
SECTION 2.12. CUSIP NUMBERS. The Company in issuing the Securities
may use "CUSIP" numbers (if then generally in use) and, if so, the Trustee shall
use "CUSIP" numbers in notices of redemption as a convenience to Holders;
provided, however, that any such notice may state that no representation is made
as to the correctness of such numbers either as printed on the Securities or as
contained in any notice of a redemption and that reliance may be placed only on
the other identification numbers printed on the Securities, and any such
redemption shall not be affected by any defect in or omission of such numbers.
ARTICLE 3.
Redemption
----------
SECTION 3.01. NOTICES TO TRUSTEE. If the Company elects to redeem
Securities pursuant to paragraph 5 of the Securities, it shall notify the
Trustee in writing of the redemption date, the principal amount of Securities to
be redeemed and the paragraph of the Securities pursuant to which the redemption
will occur.
The Company shall give each notice to the Trustee provided for in this
Section at least 60 days before the redemption date unless the Trustee consents
to a shorter period. Such notice shall be accompanied by an Officers'
Certificate and an Opinion of Counsel from the Company to the effect that such
redemption will comply with the conditions herein. If fewer than all the
Securities are to be redeemed, the record date relating to such redemption shall
be selected by the Company and given to the Trustee, which record date shall be
not less than 15 days after the date of notice to the Trustee. Any such notice
may be canceled at any time prior to notice of such redemption being mailed to
any Holder and shall thereafter be void and of no effect.
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SECTION 3.02. SELECTION OF SECURITIES TO BE REDEEMED. If fewer than
all the Securities are to be redeemed, the Trustee shall select the Securities
to be redeemed pro rata or by lot or by a method that complies with applicable
legal and securities exchange requirements, if any, and that the Trustee
considers fair and appropriate. The Trustee shall make the selection from
outstanding Securities not previously called for redemption. The Trustee may
select for redemption portions of the principal of Securities that have
denominations larger than $1,000. Securities and portions of them the Trustee
selects shall be in amounts of $1,000 or a whole multiple of $1,000. Provisions
of this Indenture that apply to Securities called for redemption also apply to
portions of Securities called for redemption. The Trustee shall notify the
Company promptly of the Securities or portions of Securities to be redeemed.
SECTION 3.03. NOTICE OF REDEMPTION. At least 30 days but not more
than 60 days before a date for redemption of Securities, the Company shall mail
a notice of redemption by first-class mail to each Holder of Securities to be
redeemed.
The notice shall identify the Securities to be redeemed and shall
state:
(1) the redemption date;
(2) the redemption price;
(3) the name and address of the Paying Agent;
(4) that Securities called for redemption must be surrendered to the
Paying Agent to collect the redemption price;
(5) if fewer than all the outstanding Securities are to be redeemed,
the certificate numbers and principal amounts of the particular Securities
to be redeemed;
(6) that, unless the Company defaults in making such redemption
payment or the Paying Agent is prohibited from making such payment pursuant
to the terms of this Indenture, interest on Securities (or portion thereof)
called for redemption ceases to accrue on and after the redemption date;
(7) the paragraph of the Securities pursuant to which the Securities
called for redemption are being redeemed;
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(8) the CUSIP number, if any, printed on the Securities being
redeemed; and
(9) that no representation is made as to the correctness or accuracy
of the CUSIP number, if any, listed in such notice or printed on the
Securities.
At the Company's request, the Trustee shall give the notice of
redemption in the Company's name and at the Company's expense. In such event,
the Company shall provide the Trustee with the information required by this
Section.
SECTION 3.04. EFFECT OF NOTICE OF REDEMPTION. Once notice of
redemption is mailed, Securities called for redemption become due and payable on
the redemption date and at the redemption price stated in the notice. Upon
surrender to the Paying Agent, such Securities shall be paid at the redemption
price stated in the notice, plus accrued interest, if any, to the redemption
date; provided that if the redemption date is after a regular record date and on
or prior to the interest payment date, the accrued interest shall be payable to
the Securityholder of the redeemed Securities registered on the relevant record
date. Failure to give notice or any defect in the notice to any Holder shall
not affect the validity of the notice to any other Holder.
SECTION 3.05. DEPOSIT OF REDEMPTION PRICE. Prior to 10:00 a.m. on
the redemption date, the Company shall deposit with the Paying Agent money
sufficient to pay the redemption price of and accrued interest on all Securities
to be redeemed on that date other than Securities or portions of Securities
called for redemption which have been delivered by the Company to the Trustee
for cancellation.
SECTION 3.06. SECURITIES REDEEMED IN PART. Upon surrender of a
Security that is redeemed in part, the Company shall execute and the Trustee
shall authenticate for the Holder (at the Company's expense) a new Security
equal in principal amount to the unredeemed portion of the Security surrendered.
SECTION 3.07. OPTIONAL REDEMPTION. (a) Except as set forth in the
next two paragraphs, the Securities may not be redeemed at the option of the
Company prior to December 1, 2001. On and after that date, the Company may
redeem the Securities at its option in whole at any time or in part upon not
fewer than 30 nor more than 60 days prior notice mailed by first-class mail to
each Holder's registered address at the following redemption prices (expressed
in percentages of principal amount), plus accrued interest to the Redemption
Date (subject to the right of Holders of
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record on the relevant record date to receive interest due on the related
interest payment date), if redeemed during the 12-month period beginning on or
after December 1 of the years set forth below:
Redemption
Period Price
- ------ ----------
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.188%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.458%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.729%
2004 and thereafter . . . . . . . . . . . . . . . . . . . . . . . 100.000%
(b) Notwithstanding the foregoing, at any time prior to December 1,
1999, the Company may redeem in the aggregate up to 35% of the original
aggregate principal amount of Securities with the proceeds of one or more Public
Equity Offerings by Holdings (so long as substantially all its assets consist of
its investment in the Company) or the Company following which there is a Public
Market, at a redemption price (expressed as a percentage of principal amount) of
110.375% plus accrued interest to the Redemption Date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); provided, however, that at least 65% of the
original aggregate principal amount of the Securities must remain outstanding
after each such redemption.
(c) At any time on or prior to December 1, 2001, the Securities may
be redeemed as a whole but not in part at the option of the Company upon the
occurrence of a Change of Control, upon not fewer than 30 nor more than 60 days'
prior notice (but in no event more than 90 days after the occurrence of such
Change of Control) mailed by first-class mail to each Holder's registered
address, at a redemption price equal to 100% of the principal amount thereof
plus the Applicable Premium as of, and accrued but unpaid interest, if any, to,
the Redemption Date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
ARTICLE 4.
Covenants
---------
SECTION 4.01. PAYMENT OF SECURITIES. The Company shall promptly pay
the principal of and interest on the Securities on the dates and in the manner
provided in the Securities and in this Indenture. Principal and interest shall
be considered paid on the
<PAGE>
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date due if on such date the Trustee or the Paying Agent holds in accordance
with this Indenture money sufficient to pay all principal and interest then due
and the Trustee or the Paying Agent, as the case may be, is not prohibited from
paying such money to the Securityholders on that date pursuant to the terms of
this Indenture.
The Company shall pay interest on overdue principal at the rate
specified therefor in the Securities, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
SECTION 4.02. SEC REPORTS. The Company shall file with the Trustee
and provide the Securityholders, within 15 days after it files them with the
SEC, copies of its annual report and the information, documents and other
reports which the Company is required to file with the SEC pursuant to
Section 13 or 15(d) of the Exchange Act. Notwithstanding that the Company may
not be required to be subject to the reporting requirements of Section 13 or
15(d) of the Exchange Act, the Company shall file with the SEC (if then
permissible), and, within 15 days after such reports would be required to be
filed, provide the Trustee and the Securityholder with, copies of its annual
report and the information, documents and other reports which are specified in
Section 13 or 15(d) of the Exchange Act. In addition, following a Public Equity
Offering, the Company shall furnish to the Trustee and the Securityholders,
promptly upon their becoming available, copies of the annual report to
shareholders and any other information provided by the Company or Holdings to
its public shareholders generally. The Company also shall comply with the other
provisions of TIA Section 314(a).
SECTION 4.03. LIMITATION ON INDEBTEDNESS. (a) The Company shall
not, and shall not permit any Restricted Subsidiary to, Incur any Indebtedness;
PROVIDED, HOWEVER, that the Company may Incur Indebtedness if on the date
thereof the Consolidated Coverage Ratio would be greater than 2.00:1.00 if such
Indebtedness is Incurred on or prior to September 30, 1998, and 2.25:1.00 if
such Indebtedness is Incurred thereafter.
(b) NOTWITHSTANDING SECTION 4.03(A), the Company and its Restricted
Subsidiaries may Incur the following Indebtedness:
(i) Indebtedness under the Senior Credit Facility (as the same may be
amended from time to time) and any Refinancing Indebtedness with respect
thereto in each case in an aggregate principal amount which, when added to
all other Indebtedness Incurred pursuant to this clause (i) and then
outstanding, shall not exceed $100,000,000 less the sum of all repayments
<PAGE>
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thereon made with the Net Cash Proceeds from Asset Dispositions (to the
extent, in the case of repayment of revolving credit Indebtedness, that the
corresponding commitments have been permanently reduced); PROVIDED,
HOWEVER, that any Refinancing Indebtedness with respect to Indebtedness
Incurred pursuant to this clause (i) shall not be subject to the
limitations contained in clauses (i) and (ii) of the definition of
Refinancing Indebtedness;
(ii) Indebtedness (A) of the Company to any Restricted Subsidiary and
(B) of any Restricted Subsidiary to the Company or any other Restricted
Subsidiary;
(iii) Indebtedness represented by the Securities, any Indebtedness
(other than the Indebtedness described in clauses (i) and (ii) above)
outstanding on the date of this Indenture and any Refinancing Indebtedness
Incurred in respect of any Indebtedness described in this clause (iii) or
paragraph (a) of this Section 4.03;
(iv) Indebtedness of the Company and its Restricted Subsidiaries in
respect of (A) industrial revenue bonds or other similar governmental and
municipal bonds and (B) the deferred purchase price of newly acquired
property of the Company and its Restricted Subsidiaries, or the price of
construction or improvement of any property of the Company or its
Subsidiaries, in each case used in the ordinary course of business of the
Company and its Subsidiaries, including Capitalized Lease Obligations,
whether such Indebtedness is owed to the seller or Person carrying out such
construction or improvement or to a third party (provided such financing is
entered into within 180 days of the acquisition or conclusion of such
construction or improvement of such property) in an amount (based on the
remaining balance of the obligations therefor on the books of the Company
and its Restricted Subsidiaries) which in the case of the preceding clauses
(A) and (B) shall not exceed $12,000,000 in the aggregate at any time
outstanding;
(v) Indebtedness of the Company or any of its Restricted Subsidiaries
(which may comprise Bank Indebtedness) in an aggregate principal amount at
any time outstanding not in excess of $15,000,000;
(vi) Indebtedness in an aggregate principal amount at any time
outstanding not in excess of $5,000,000 in respect of letters of credit
(other than letters of credit issued under the Senior Credit Facility);
<PAGE>
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(vii) (A) Indebtedness assumed in connection with acquisitions
permitted under the Senior Credit Facility or any Refinancing Indebtedness
in respect thereof (so long as such Indebtedness was not incurred in
anticipation of such acquisitions), (B) Indebtedness of newly acquired
Subsidiaries acquired in such acquisitions (so long as such Indebtedness
was not incurred in anticipation of such acquisitions) and (C) Indebtedness
owed to the seller in any acquisition permitted under the Senior Credit
Facility or any Refinancing Indebtedness in respect thereof constituting
part of the purchase price thereof, all in an aggregate principal amount at
any time outstanding not in excess of $5,000,000;
(viii) Indebtedness represented by the Note Guarantees and Guarantees of
Indebtedness incurred pursuant to clause (i), (iv) or (v) above;
(ix) Indebtedness incurred in connection with the repurchase of shares
of the Capital Stock of the Company or Holdings as permitted by Section
4.04(b)(vi)(C);
(x) Refinancing Indebtedness with respect to Indebtedness permitted
pursuant to clauses (iv), (vii) or (ix) of this paragraph (b) (provided
that such Refinancing Indebtedness shall be included in determining the
aggregate amount of Indebtedness for purposes of the monetary limitations
contained in such clauses); and
(xi) Hedging Obligations designed to protect the company or its
subsidiaries from fluctuations in interest or exchange rates.
(c) Notwithstanding any other provision of this Section 4.03, the
Company shall not Incur any Indebtedness (i) pursuant to Section 4.03(b) if the
proceeds thereof are used, directly or indirectly, to repay, prepay, redeem,
defease, retire, refund or refinance any Subordinated Obligations unless such
Indebtedness shall be subordinated to the Securities to at least the same extent
as such Subordinated Obligations or (ii) pursuant to Section 4.03(a) or 4.03(b)
if such Indebtedness is subordinate or junior in right of payment to any Senior
Indebtedness unless such Indebtedness is Senior Subordinated Indebtedness or is
expressly subordinated in right of payment to Senior Subordinated Indebtedness.
(d) Notwithstanding any other provision of this Section 4.03, the
maximum amount of Indebtedness that the Company or any Restricted Subsidiary may
Incur pursuant to any provision of this
<PAGE>
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Section shall not be deemed to be exceeded solely as a result of fluctuations in
the exchange rates of currencies. For purposes of determining the outstanding
principal amount of any particular Indebtedness Incurred pursuant to this
Section 4.03, (1) Indebtedness Incurred pursuant to the Senior Credit Facility
prior to or on the date of this Indenture shall be treated as Incurred pursuant
to Section 4.03(b)(i), (2) Indebtedness permitted by this Section 4.03 need not
be permitted solely by reference to one provision permitting such Indebtedness
but may be permitted in part by one such provision and in part by one or more
other provisions of this Section permitting such Indebtedness and (3) in the
event that Indebtedness or any portion thereof meets the criteria of more than
one of the types of Indebtedness described in this Section, the Company, in its
sole discretion, shall classify such Indebtedness and only be required to
include the amount of such Indebtedness in one of such clauses.
SECTION 4.04. LIMITATION ON RESTRICTED PAYMENTS. (e)The Company
shall not, and shall not permit any Restricted Subsidiary, directly or
indirectly, to (i) declare or pay any dividend or make any distribution on or in
respect of its Capital Stock (including any payment in connection with any
merger or consolidation involving the Company) except dividends or distributions
payable solely in its Capital Stock (other than Disqualified Stock) and except
dividends or distributions payable to the Company or another Restricted
Subsidiary (and, if such Restricted Subsidiary is not wholly owned, to its other
shareholders on a pro rata basis), (ii) repurchase, redeem, retire or otherwise
acquire for value any Capital Stock of the Company or any Restricted Subsidiary
held by Persons other than the Company or another Restricted Subsidiary,
(iii) purchase, repurchase, redeem, defease or otherwise acquire or retire for
value, prior to scheduled maturity, scheduled repayment or scheduled sinking
fund payment any Subordinated Obligations (other than the purchase, repurchase
or other acquisition of Subordinated Obligations purchased in anticipation of
satisfying a sinking fund obligation, principal installment or final maturity,
in each case due within one year of the date of acquisition), or (iv) make any
Investment (other than a Permitted Investment) in any Person (any such dividend,
distribution, purchase, redemption, repurchase, defeasance, other acquisition,
retirement, payment or Investment being herein referred to as a "Restricted
Payment") if at the time the Company or such Restricted Subsidiary makes such
Restricted Payment:
(1) a Default shall have occurred and be continuing (or would result
therefrom);
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(2) the Company could not Incur at least $1.00 of additional
Indebtedness under Section 4.03(a); or
(3) the aggregate amount of such Restricted Payment and all other
Restricted Payments (the amount so expended, if other than in cash, to be
determined in good faith by the Board of Directors, whose determination
shall be conclusive and evidenced by a resolution of the Board of
Directors) declared or made subsequent to the Issue Date would exceed the
sum of:
(A) 50% of the Consolidated Net Income accrued during the period
(treated as one accounting period) from the beginning of the fiscal
quarter during which the Securities are originally issued to the end
of the most recent fiscal quarter ending prior to the date of such
Restricted Payment for which consolidated income statements of the
company are available (or, in case such Consolidated Net Income shall
be a deficit, minus 100% of such deficit);
(B) the aggregate Net Cash Proceeds received by the Company from
capital contribution by Holding with respect to, or the issue or sale
of, the Company's Capital Stock (other than Disqualified Stock)
subsequent to the Issue Date (other than an issuance or sale to a
Subsidiary of the Company or an employee stock ownership plan or other
trust established by the Company or any of its Subsidiaries);
(C) the amount by which Indebtedness of the Company or its
Restricted Subsidiaries is reduced on the Company's balance sheet upon
the conversion or exchange (other than by a Subsidiary) subsequent to
the Issue Date of any Indebtedness of the Company or its Restricted
Subsidiaries convertible into or exchangeable for Capital Stock (other
than Disqualified Stock) of the Company (less the amount of any cash
or other property distributed by the Company or any Restricted
Subsidiary upon such conversion or exchange); and
(D) without duplication, the sum of (x) the aggregate amount
returned in cash on or with respect to Investments (other than
Permitted Investments) made subsequent to the Issue Date whether
through interest payments, principal payments, dividends or other
distributions or payments, (y) the Net Cash Proceeds received by the
Company or any Restricted Subsidiary from
<PAGE>
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the disposition of all or any portion of such Investments (other than
to a Subsidiary of the Company) and (z) upon redesignation of an
Unrestricted Subsidiary as a Restricted Subsidiary, the fair market
value of such Subsidiary; PROVIDED, HOWEVER, that with respect to all
Investments made in any Unrestricted Subsidiary or joint venture the
sum of clauses (x), (y) and (z) above with respect to such Investments
shall not exceed the aggregate amount of all such Investments made
subsequent to the date hereof in such Unrestricted Subsidiary.
(b) The provisions of Section 4.04(a) shall not prohibit:
(i) any purchase or redemption of Capital Stock of the Company or
Subordinated Obligations made out of a substantially concurrent capital
contribution to, or by exchange for, or out of the proceeds of the
substantially concurrent sale of, Capital Stock of the Company (other than
Disqualified Stock and other than Capital Stock issued or sold to a
Subsidiary or an employee stock ownership plan or other trust established
by the Company or any of its Subsidiaries); PROVIDED, HOWEVER, that (A)
such capital contribution, purchase or redemption shall be excluded in the
calculation of the amount of Restricted Payments and (B) the Net Cash
Proceeds from such capital contribution or sale applied in the manner set
forth in this clause (i) shall be excluded from clause (3)(B) of Section
4.04(a);
(ii) any purchase or redemption of Subordinated Obligations made by
exchange for, or out of the proceeds of the substantially concurrent sale
of, Indebtedness of the Company which is permitted to be Incurred pursuant
to Section 4.03; PROVIDED, HOWEVER, that such purchase or redemption shall
be excluded in the calculation of the amount of Restricted Payments;
(iii) any purchase or redemption of Subordinated Obligations from Net
Available Cash to the extent permitted by Section 4.06; PROVIDED, HOWEVER,
that such purchase or redemption shall be excluded in the calculation of
the amount of Restricted Payments;
(iv) dividends paid within 60 days after the date of declaration
thereof if at such date of declaration such dividend would have complied
with Section 4.04(a); PROVIDED, HOWEVER, that such dividend shall be
included in the calculation of the amount of Restricted Payments;
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(v) payments by the Company to members of management of the Company
under the management incentive and equity participation plans as a result
of and upon the Acquisition; PROVIDED, HOWEVER, that such payments shall
be excluded in the calculation of the amount of Restricted Payments; or
(vi) payment of dividends, other distributions or other amounts by the
Company for the purposes set forth in clauses (A) through (D) below;
PROVIDED, HOWEVER, that such dividend, distribution or amount set forth in
clauses (A), (C) and (D) shall be included in the calculation of the amount
of Restricted Payments for the purposes of Section 4.04(a):
(A) to Holdings in amounts equal to the amounts required for
Holdings to pay franchise taxes and other fees required to maintain
its corporate existence and provide for other operating costs of up to
$500,000 per fiscal year;
(B) to Holdings in amounts equal to amounts required for
Holdings to pay Federal, state and local income taxes to the extent
such income taxes are attributable to the income of the Company and
its Restricted Subsidiaries (and, to the extent of amounts actually
received from its Unrestricted Subsidiaries, in amounts required to
pay such taxes to the extent attributable to the income of such
Unrestricted Subsidiaries); PROVIDED, HOWEVER, that such dividend or
distribution from an Unrestricted Subsidiary shall not be included in
the calculation of Consolidated Net Income and any such dividend or
distribution to Holdings shall not be included in the amount of
Restricted Payments;
(C) to Holdings in amounts equal to amounts expended by Holdings
to repurchase Capital Stock of Holdings owned by former employees of
the Company or its Subsidiaries or their assigns, estates and heirs;
PROVIDED, HOWEVER, that the aggregate amount paid, loaned or advanced
to Holdings pursuant to this clause (C) shall not, in the aggregate,
exceed $2,500,000 per fiscal year of the Company, up to a maximum
aggregate amount of $7,500,000 during the term of this Indenture, plus
any amounts contributed by Holdings to the Company as a result of
resales of such repurchased shares of Capital Stock;
(D) so long as, after giving effect thereto, no Default has
ocurred and is continuing, on May 1 and
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November 1 in each year (or, if such day is not a Business Day, on the
next succeeding Business Day), the Company may pay cash dividends to
Holdings on the Existing Preferred Stock to enable Holdings to pay
dividends or interest to the holders of the Holding Securities in
respect of the six-month period ended on such day (or accrued deferred
interest in respect of any prior period); provided that within 20 days
Holdings uses such dividends to pay current or accrued cash interest
on the Holding Securities;
(vii) payments which would otherwise be Restricted Payments in an
aggregate amount not to exceed $2,500,000; PROVIDED, HOWEVER, that such
payments shall be included in the calculation of the amount of Restricted
Payments; or
(viii) after, 1998, Investments in Unrestricted Subsidiaries or joint
ventures in an amount not to exceed $2,500,000 at any time outstanding;
provided, however, that such Investments shall be included in the
calculation of the amount of Restricted Payments.
SECTION 4.05. LIMITATION ON RESTRICTIONS ON DISTRIBUTIONS FROM
RESTRICTED SUBSIDIARIES. The Company shall not, and shall not permit any
Restricted Subsidiary to, create or otherwise cause or permit to exist or become
effective any consensual encumbrance or restriction on the ability of any
Restricted Subsidiary to (i) pay dividends or make any other distributions on
its Capital Stock or pay any Indebtedness or other obligations owed to the
Company, (ii) make any loans or advances to the Company or (iii) transfer any of
its property or assets to the Company, except:
(1) any encumbrance or restriction pursuant to an agreement in effect
at or entered into on the date of this Indenture;
(2) any encumbrance or restriction with respect to a Restricted
Subsidiary pursuant to an agreement relating to any Indebtedness Incurred
by such Restricted Subsidiary prior to the date on which such Restricted
Subsidiary was acquired by the Company or designated as a Restricted
Subsidiary (other than Indebtedness Incurred as consideration in, or to
provide all or any portion of the funds or credit support utilized to
consummate, the transaction or series of related transactions pursuant to
which such Restricted Subsidiary became a Restricted Subsidiary or was
acquired by the Company) and outstanding on such date;
<PAGE>
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(3) any encumbrance or restriction pursuant to an agreement effecting
a refinancing of Indebtedness Incurred pursuant to an agreement referred to
in clause (1) or (2) of this Section 4.05 or this clause (3) or contained
in any amendment, supplement or other modification to an agreement referred
to in clause (1) or (2) of this Section 4.05 or this clause (3); PROVIDED,
HOWEVER, that the encumbrances and restrictions contained in any such
refinancing agreement or amendment, supplement or other modification are
not materially less favorable to the Securityholders than encumbrances and
restrictions contained in such agreements;
(4) in the case of clause (iii), any encumbrance or restriction (A)
that restricts in a customary manner the subletting, assignment or transfer
of any property or asset that is subject to a lease, license or similar
contract, (B) by virtue of any transfer of, agreement to transfer, option
or right with respect to, or Lien on, any property or assets of the Company
or any Restricted Subsidiary not otherwise prohibited by this Indenture or
(C) contained in security agreements or mortgages securing Indebtedness of
a Restricted Subsidiary to the extent such encumbrance or restrictions
restrict the transfer of the property subject to such security agreements
or mortgages; and
(5) any restriction with respect to a Restricted Subsidiary imposed
pursuant to an agreement entered into for the sale or disposition of all or
substantially all the Capital Stock or assets of such Restricted Subsidiary
pending the closing of such sale or disposition.
SECTION 4.06. LIMITATION ON SALES OF ASSETS AND SUBSIDIARY STOCK.
(f) The Company shall not, and shall not permit any Restricted Subsidiary to,
make any Asset Disposition unless (i) the Company or such Restricted Subsidiary
receives consideration (including by way of relief from, or by any other Person
assuming sole responsibility for, any liabilities, contingent or otherwise) at
the time of such Asset Disposition at least equal to the fair market value of
the shares and assets subject to such Asset Disposition, (ii) at least 80% of
the consideration thereof received by the Company or such Restricted Subsidiary
is in the form of cash and (iii) an amount equal to 100% of the Net Available
Cash from such Asset Disposition is applied by the Company (or such Restricted
Subsidiary, as the case may be): (A) FIRST, to the extent the Company elects
(or is required by the terms of any Senior Indebtedness or Indebtedness (other
than Preferred Stock) of a Wholly Owned Subsidiary), to prepay, repay or
purchase Senior Indebtedness or such Indebtedness (other than
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Preferred Stock) of a Wholly Owned Subsidiary (in each case other than
Indebtedness owed to the Company or an Affiliate of the Company) within 12
months after the later of the date of such Asset Disposition or the receipt of
such Net Available Cash; (B) SECOND, to the extent of the balance of Net
Available Cash after application in accordance with clause (A), to the extent
the Company or such Restricted Subsidiary elects, to reinvest in Additional
Assets (including by means of an Investment in Additional Assets by a Restricted
Subsidiary with Net Available Cash received by the Company or another Restricted
Subsidiary) within 12 months from the later of the date of such Asset
Disposition or the receipt of such Net Available Cash; (C) THIRD, to the extent
of the balance of such Net Available Cash after application in accordance with
clauses (A) and (B), to make an Offer to purchase Securities pursuant and
subject to the conditions of this Indenture to the Securityholders at a purchase
price of 100% of the principal amount thereof plus accrued and unpaid interest
to the purchase date; and (D) FOURTH, to the extent of the balance of such Net
Available Cash after application in accordance with clauses (A), (B) and (C), to
any application not prohibited by this Indenture. The Company and the
Restricted Subsidiaries shall not be required to apply any Net Available Cash in
accordance with this Section 4.06 except to the extent that the aggregate Net
Available Cash from all Asset Dispositions that is not applied in accordance
with this Section 4.06 exceeds $2,000,000.
For the purposes of this Section 4.06, the following are deemed to be
cash: (x) the assumption of Indebtedness of the Company (other than
Disqualified Stock of the Company) or any Restricted Subsidiary and the release
of the Company or such Restricted Subsidiary from all liability on such
Indebtedness in connection with such Asset Disposition; and (y) securities
received by the Company or any Restricted Subsidiary from the transferee that
are converted by the Company or such Restricted Subsidiary into cash within 12
months.
(b) In the event of an Asset Disposition that requires the purchase
of Securities pursuant to Section 4.06(a)(iii)(C), the Company shall be required
to purchase Securities tendered pursuant to an offer by the Company for the
Securities (the "Offer") at a purchase price of 100% of their principal amount
plus accrued and unpaid interest to the Purchase Date in accordance with the
procedures (including prorating in the event of oversubscription) set forth in
Section 4.06(c). If the aggregate purchase price of Securities tendered
pursuant to the Offer is less than the Net Available Cash allotted to the
purchase of the Securities, the Company shall apply the remaining Net Available
Cash in accordance with Section 4.06(a)(iii)(D). The Company shall
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not be required to make an Offer for Securities pursuant to this Section if the
Net Available Cash available therefor (after application of the proceeds as
provided in clauses (A) and (B) of Section 4.06(a)(iii)) is less than $5,000,000
for any particular Asset Disposition (which lesser amounts shall be carried
forward for purposes of determining whether an Offer is required with respect to
the Net Available Cash from any subsequent Asset Disposition).
(c) (1) Promptly, and in any event within 10 days after the Company
becomes obligated to make an Offer, the Company shall be obligated to deliver to
the Trustee and send, by first-class mail to each Holder, a written notice
stating that the Holder may elect to have his Securities purchased by the
Company either in whole or in part (subject to prorationing as hereinafter
described in the event the Offer is oversubscribed) in integral multiples of
$1,000 of principal amount, at the applicable purchase price. The notice shall
specify a purchase date not less than 30 days nor more than 60 days after the
date of such notice (the "Purchase Date") and shall contain such information
concerning the business of the Company which the Company in good faith believes
will enable such Holders to make an informed decision (which at a minimum shall
include (i) the most recently filed Annual Report on Form 10-K (including
audited consolidated financial statements) of the Company, the most recent
subsequently filed Quarterly Report on Form 10-Q and any Current Report on Form
8-K of the Company filed subsequent to such Quarterly Report, other than Current
Reports describing Asset Dispositions otherwise described in the offering
materials (or corresponding successor reports), (ii) a description of material
developments in the Company's business subsequent to the date of the latest of
such reports, and (iii) if material, appropriate pro forma financial
information) and all instructions and materials necessary to tender Securities
pursuant to the Offer, together with the address referred to in clause (3).
(2) Not later than the date upon which written notice of an Offer is
delivered to the Trustee as provided above, the Company shall deliver to the
Trustee an Officers' Certificate as to (i) the amount of the Offer (the "Offer
Amount"), (ii) the allocation of the Net Available Cash from the Asset
Dispositions pursuant to which such Offer is being made and (iii) the compliance
of such allocation with the provisions of Section 4.06(a). On such date, the
Company shall also irrevocably deposit with the Trustee or with a Paying Agent
in Temporary Cash Investments an amount equal to the Offer Amount to be held for
payment in accordance with the provisions of this Section. Upon the expiration
of the period for which the Offer remains open (the "Offer Period"), the Company
shall deliver to the Trustee for cancellation the Securities or
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portions thereof which have been properly tendered to and are to be accepted by
the Company. From funds on hand and available for such purpose, the Trustee (or
the Paying Agent, if not the Trustee) shall, on the Purchase Date, mail or
deliver payment to each tendering Holder in the amount of the purchase price.
In the event that the aggregate purchase price of the Securities delivered by
the Company to the Trustee is less than the Offer Amount, the Trustee shall
deliver the excess to the Company immediately after the expiration of the Offer
Period for application in accordance with this Section 4.06.
(3) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the Purchase Date. Holders shall be entitled to withdraw their
election if the Trustee receives not later than one Business Day prior to the
Purchase Date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Security which was delivered
by the Holder for purchase and a statement that such Holder is withdrawing his
election to have such Security purchased. If at the expiration of the Offer
Period the aggregate principal amount of Securities surrendered by Holders
exceeds the Offer Amount, the Company shall select the Securities to be
purchased on a pro rata basis (with such adjustments as may be deemed
appropriate by the Company so that only Securities in denominations of $1,000,
or integral multiples thereof, shall be purchased). Holders whose Securities
are purchased only in part will be issued new Securities equal in principal
amount to the unpurchased portion of the Securities surrendered.
(4) At the time the Company delivers Securities to the Trustee which
are to be accepted for purchase, the Company shall also deliver an Officers'
Certificate stating that such Securities are to be accepted by the Company
pursuant to and in accordance with the terms of this Section 4.06; as well as an
Opinion of Counsel to the effect that all of the requirements of this Section
4.06 have been satisfied. A Security shall be deemed to have been accepted for
purchase at the time the Trustee, directly or through an agent, mails or
delivers payment therefor to the surrendering Holder.
(d) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.06. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.06, the Company shall
<PAGE>
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comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.06 by virtue
thereof.
SECTION 4.07. LIMITATION ON TRANSACTIONS WITH AFFILIATES. (a) The
Company shall not, and shall not permit any Restricted Subsidiary to, directly
or indirectly, enter into or conduct any transaction (including, the purchase,
sale, lease or exchange of any property or the rendering of any service) with
any Affiliate of the Company (an "Affiliate Transaction") on terms (i) that are
less favorable to the Company or such Restricted Subsidiary, as the case may be,
than those that could be obtained at the time of such transaction in
arm's-length dealings with a Person who is not such an Affiliate and (ii) that,
in the event such Affiliate Transaction involves an aggregate amount in excess
of $500,000, are not in writing and have not been approved by a majority of the
members of the Board of Directors having no personal stake in such Affiliate
Transaction. In addition, any transaction involving aggregate payments or other
transfers by the Company and its Restricted Subsidiaries in excess of
$3,000,000, shall also require an opinion from an independent investment banking
firm or appraiser that is nationally recognized, as appropriate, to the effect
that such transaction is fair to the Company or such Restricted Subsidiary from
a financial point of view.
(b) The provisions of Section 4.07(a) shall not apply to (i) any
Permitted Investment or Restricted Payment permitted to be made or paid
pursuant to Section 4.04, (ii) the performance of the Company's or Subsidiary's
obligations under any employment contract, collective bargaining agreement,
employee benefit plan, related trust agreement or any other similar arrangement
heretofore or hereafter entered into in the ordinary course of business,
(iii) payment of compensation to employees, officers, directors or consultants
in the ordinary course of business, (iv) maintenance in the ordinary course of
business (and payments required thereby) of benefit programs or arrangements for
employees, officers or directors, including vacation plans, health and life
insurance plans, deferred compensation plans, directors' and officers'
indemnification agreements, arrangements, and insurance and retirement or
savings plans and similar plans, (v) any transaction between the Company and a
Wholly Owned Subsidiary or between Wholly Owned Subsidiaries, (vi) beginning
November 1, 1999, the payment of certain fees under the Management Agreement or
any amendment or supplement thereto, to the extent that such payment shall not
exceed an aggregate amount of $1,350,000 during any 12- month period, or
(vii) payments made to Holdings to reimburse Holdings for costs, fees and
expenses incident to a registration of any of
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the capital stock of Holdings for a primary offering under the Securities Act of
1933, as amended, so long as the net proceeds (after application to the
redemption of the Holding Securities) of such offering (if it is completed) are
contributed to, or otherwise used for the benefit of, the Company.
SECTION 4.08. CHANGE OF CONTROL. (g) Upon a Change of Control, each
Holder shall have the right to require that the Company repurchase all or any
part of such Holder's Securities at a purchase price in cash equal to 101% of
the principal amount thereof plus accrued and unpaid interest, if any, to the
date of purchase (subject to the right of Holders of record on a record date to
receive interest due on the relevant interest payment date), in accordance with
the terms contemplated in Section 4.08(b); PROVIDED, HOWEVER, that
notwithstanding the occurrence of a Change in Control, the Company shall not be
obligated to purchase the Securities pursuant to this Section 4.08 in the event
that it has exercised its right to redeem all the Securities under Section 3.07
hereof and such redemption is permitted by the terms of the Bank Indebtedness
(or the requisite number of lenders thereof has consented thereto). In the
event that at the time of such Change of Control the terms of the Bank
Indebtedness restrict or prohibit the repurchase of Securities pursuant to this
Section 4.08, then prior to the mailing of the notice to Holders provided for
in Section 4.08(b) below but in any event within 30 days following any Change of
Control, the Company shall (i) repay in full all Bank Indebtedness or offer to
repay in full all Bank Indebtedness and repay the Bank Indebtedness of each
lender who has accepted such offer or (ii) obtain the requisite consent under
the agreements governing the Bank Indebtedness to permit the repurchase of the
Securities as provided for in Section 4.08(b).
(b) Within 30 days following any Change of Control (except as
provided in the proviso to the first sentence of Section 4.08(a)), the Company
shall mail a notice to each Holder with a copy to the Trustee stating:
(1) that a Change of Control has occurred and that such Holder has
the right to require the Company to purchase such Holder's Securities at a
purchase price in cash equal to 101% of the principal amount thereof plus
accrued and unpaid interest, if any, to the date of purchase (subject to
the right of Holders of record on a record date to receive interest due on
the relevant interest payment date);
(2) the circumstances and relevant facts and financial information
regarding such Change of Control;
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(3) the repurchase date (which shall be no earlier than 30 days nor
later than 60 days from the date such notice is mailed and not more than 90
days after the Change of Control); and
(4) the instructions determined by the Company, consistent with this
Section 4.08, that a Holder must follow in order to have its Securities
purchased.
(c) Holders electing to have a Security purchased shall be required
to surrender the Security, with an appropriate form duly completed, to the
Company at the address specified in the notice at least three Business Days
prior to the purchase date. Holders shall be entitled to withdraw their
election if the Trustee receives not later than one Business Day prior to the
purchase date, a telegram, telex, facsimile transmission or letter setting forth
the name of the Holder, the principal amount of the Security which was delivered
for purchase by the Holder and a statement that such Holder is withdrawing his
election to have such Security purchased.
(d) On the purchase date, all Securities purchased by the Company
under this Section 4.08 shall be delivered to the Trustee for cancellation, and
the Company shall pay the purchase price plus accrued and unpaid interest, if
any, to the purchase date to the Holders entitled thereto.
(e) The Company shall comply, to the extent applicable, with the
requirements of Section 14(e) of the Exchange Act and any other securities laws
or regulations in connection with the repurchase of Securities pursuant to this
Section 4.08. To the extent that the provisions of any securities laws or
regulations conflict with provisions of this Section 4.08, the Company shall
comply with the applicable securities laws and regulations and shall not be
deemed to have breached its obligations under this Section 4.08 by virtue
thereof.
SECTION 4.09. COMPLIANCE CERTIFICATE. The Company shall deliver to
the Trustee within 120 days after the end of each fiscal year of the Company an
Officers' Certificate complying with Section 314(a)(4) of the TIA and stating
that a review of its activities and the activities of its Subsidiaries during
the preceding fiscal year has been made under the supervision of the signing
Officers with a view to determining whether the Company has kept, observed,
performed and fulfilled its obligations under this Indenture and further
stating, as to each Officer signing such certificate, whether or not the signer
knows of any failure by the Company or any Subsidiary of the Company to comply
with any conditions or
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covenants in this Indenture, and, if such signer does know of such a failure to
comply, the certificate shall describe such failure with particularity and
describe what actions, if any, the Company proposes to take with respect to such
failure.
SECTION 4.10. FURTHER INSTRUMENTS AND ACTS. Upon request of the
Trustee, the Company shall execute and deliver such further instruments and do
such further acts as may be reasonably necessary or proper to carry out more
effectively the purpose of this Indenture.
SECTION 4.11. LIMITATION ON LIENS. The Company shall not, and shall
not permit any Restricted Subsidiary to, directly or indirectly, create or
permit to exist any Lien on any of its property or assets (including Capital
Stock), whether owned on the date of this Indenture or thereafter acquired,
securing any obligation other than Permitted Liens unless the obligations due
under the Indenture and the Notes are secured, on an equal and ratable basis
(or on a senior basis, in the case of Indebtedness subordinated in right of
payment to the Securities) with the obligations so secured.
SECTION 4.12. SUBSIDIARY GUARANTEES. The Company shall cause each
Domestic Subsidiary that Incurs Indebtedness and each Restricted Subsidiary that
is a guarantor of Indebtedness Incurred, in each case, pursuant to clause (b)(i)
of Section 4.03 to execute and deliver to the Trustee a Note Guarantee pursuant
to which such Subsidiary shall Guarantee payment of the Securities on the terms
and conditions set forth in this Indenture. Each Note Guarantee shall be
limited in amount to an amount not to exceed the maximum amount that can be
Guaranteed by that Subsidiary without rendering the Note Guarantee, as it
relates to such Subsidiary, voidable under applicable law relating to fraudulent
conveyance or fraudulent transfer or similar laws affecting the rights of
creditors generally.
SECTION 4.13. LIMITATION ON LINES OF BUSINESS. The Company shall
not, and shall not permit any Restricted Subsidiary to, engage in any business,
other than a Related Business.
ARTICLE 5.
Successor Company
-----------------
SECTION 5.01. WHEN COMPANY MAY MERGE OR TRANSFER ASSETS. The Company
shall not consolidate with or merge with or into, or
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convey, transfer or lease all or substantially all its assets to, any Person,
unless:
i. the resulting, surviving or transferee Person (the "Successor
Company") is a corporation organized and existing under the laws of the
United States of America, any State thereof or the District of Columbia and
the Successor Company (if not the Company) expressly assumes, by an
indenture supplemental hereto, executed and delivered to the Trustee, in
form satisfactory to the Trustee, all the obligations of the Company under
the Securities and this Indenture;
ii. immediately after giving effect to such transaction (and treating
any Indebtedness which becomes an obligation of the Successor Company or
any Restricted Subsidiary as a result of such transaction as having been
Incurred by the Successor Company or such Restricted Subsidiary at the time
of such transaction), no Default shall have occurred and be continuing;
iii. immediately after giving effect to such transaction, the
Successor Company would be able to incur an additional $1.00 of
Indebtedness pursuant to Section 4.03(a);
iv. immediately after giving effect to such transaction, the
Successor Company shall have Consolidated Net Worth in an amount which is
not less than the Consolidated Net Worth of the Company immediately prior
to such transaction; and
v. the Company shall have delivered to the Trustee an Officers'
Certificate and an Opinion of Counsel, each stating that such
consolidation, merger or transfer and such supplemental indenture (if any)
comply with this Indenture.
The Successor Company shall succeed to, and be substituted for, and
may exercise every right and power of, the Company under this Indenture, but the
predecessor Company in the case of a lease of all or substantially all its
assets shall not be released from the obligation to pay the principal of and
interest on the Securities.
Notwithstanding the foregoing clauses (ii), (iii) and (iv), (1) any
Restricted Subsidiary may consolidate with, merge into or transfer all or part
of its properties and assets to the Company and (2) the Company may merge with
an Affiliate incorporated for the purpose of reincorporating the Company in
another jurisdiction to realize tax or other benefits.
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ARTICLE 1.
Defaults and Remedies
---------------------
SECTION 6.01. EVENTS OF DEFAULT. An "Event of Default" occurs if:
(1) the Company defaults in any payment of interest on any Security
when the same becomes due and payable, whether or not such payment shall
be prohibited by Article 10, and such default continues for a period of 30
days;
(2) the Company defaults in the payment of the principal of any
Security when the same becomes due and payable at its Stated Maturity, upon
optional redemption, upon required repurchase (including those pursuant to
Section 4.06 and 4.08), upon declaration or otherwise, whether or not such
payment shall be prohibited by Article 10;
(3) the Company fails to comply with Section 5.01;
(4) the Company fails to comply with Section 4.03, 4.04, 4.06, 4.08 or
4.12 (other than a failure to purchase Securities when required under
Section 4.06 or 4.08) and such failure continues for 30 days after the
notice specified below;
(5) the Company fails to comply with any of its agreements in the
Securities or this Indenture (other than those referred to in (1), (2), (3)
or (4) above) and such failure continues for 60 days after the notice
specified below;
(6) Indebtedness of the Company or any Significant Subsidiary is not
paid within any applicable grace period after final maturity or the
acceleration by the holders thereof because of a default and the total
amount of such Indebtedness unpaid or accelerated exceeds $10,000,000 or
its foreign currency equivalent at the time;
(7) the Company or any Significant Subsidiary pursuant to or within
the meaning of any Bankruptcy Law:
(A) commences a voluntary case;
(B) consents to the entry of an order for relief against it in an
involuntary case;
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(C) consents to the appointment of a Custodian of it or for any
substantial part of its property;
(D) makes a general assignment for the benefit of its creditors;
or takes any comparable action under any foreign laws relating to
insolvency;
(8) a court of competent jurisdiction enters an order or decree under
any Bankruptcy Law that:
(A) is for relief against the Company or any Significant
Subsidiary in an involuntary case;
(B) appoints a Custodian of the Company or any Significant
Subsidiary or for any substantial part of its property; or
(C) orders the winding up or liquidation of the Company or any
Significant Subsidiary;
or any similar relief is granted under any foreign laws and the order or
decree remains unstayed and in effect for 60 days;
(9) any judgment or decree for the payment of money in excess of
$10,000,000 or its foreign currency equivalent at the time is entered
against the Company or any Significant Subsidiary and is not discharged,
waived or stayed and either (A) an enforcement proceeding has been
commenced by any creditor upon such judgment or decree or (B) there is a
period of 60 days following the entry of such judgment or decree during
which such judgment or decree is not discharged, waived or the execution
thereof stayed; or
(10) any Note Guarantee by a Guarantor which is a Significant
Subsidiary shall cease to be in full force and effect (except as
contemplated by the terms thereof) or any such Note Guarantor or person
acting by or on behalf of such Guarantor shall deny or disaffirm its
obligations under this Indenture or any Note Guarantee and such Default
continues for 10 days after the notice specified below.
The foregoing shall constitute Events of Default whatever the reason
for any such Event of Default and whether it is voluntary or involuntary or is
effected by operation of law or pursuant to any judgment, decree or order of any
court or any
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order, rule or regulation of any administrative or governmental body.
The term "Bankruptcy Law" means Title 11, United States Code, or any
similar federal or state law for the relief of debtors. The term "Custodian"
means any receiver, trustee, assignee, liquidator, custodian or similar official
under any Bankruptcy Law.
A Default under clause (4) or (5) is not an Event of Default until the
Trustee or the Holders of at least 25% in principal amount of the Securities
notify the Company of the Default and the Company does not cure such Default
within the time specified after receipt of such notice. Such notice must
specify the Default, demand that it be remedied and state that such notice is a
"Notice of Default".
The Company shall deliver to the Trustee, within 30 days after the
occurrence thereof, written notice in the form of an Officers' Certificate of
any Event of Default under clause (6) and any event which with the giving of
notice or the lapse of time would become an Event of Default under clause (4),
(5) or (9), its status and what action the Company is taking or proposes to take
with respect thereto.
SECTION 6.02. ACCELERATION. If an Event of Default (other than an
Event of Default specified in Section 6.01(7) or (8) with respect to the
Company) occurs and is continuing, the Trustee by notice to the Company, or the
Holders of at least 25% in principal amount of the Securities by notice to the
Company and the Trustee, may declare the principal of and accrued but unpaid
interest on all the Securities to be due and payable. Upon such a declaration,
such principal and interest shall be due and payable immediately. If an Event
of Default specified in Section 6.01(7) or (8) with respect to the Company
occurs, the principal of and interest on all the Securities shall IPSO FACTO
become and be immediately due and payable without any declaration or other act
on the part of the Trustee or any Securityholders. The Holders of a majority in
principal amount of the Securities by notice to the Trustee may rescind an
acceleration and its consequences if the rescission would not conflict with any
judgment or decree and if all existing Events of Default have been cured or
waived except nonpayment of principal or interest that has become due solely
because of acceleration. No such rescission shall affect any subsequent Default
or impair any right consequent thereto.
SECTION 6.03. OTHER REMEDIES. If an Event of Default occurs and is
continuing, the Trustee may pursue any available
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remedy to collect the payment of principal of or interest on the Securities or
to enforce the performance of any provision of the Securities or this Indenture.
The Trustee may maintain a proceeding even if it does not possess any
of the Securities or does not produce any of them in the proceeding. A delay or
omission by the Trustee or any Securityholder in exercising any right or remedy
accruing upon an Event of Default shall not impair the right or remedy or
constitute a waiver of or acquiescence in the Event of Default. No remedy is
exclusive of any other remedy. All available remedies are cumulative.
SECTION 6.04. WAIVER OF PAST DEFAULTS. The Holders of a majority in
principal amount of the Securities by notice to the Trustee may waive an
existing Default and its consequences except (i) a Default in the payment of the
principal of or interest on a Security or (ii) a Default in respect of a
provision that under Section 9.02 cannot be amended without the consent of each
Securityholder affected. When a Default is waived, it is deemed cured, but no
such waiver shall extend to any subsequent or other Default or impair any
consequent right.
SECTION 6.05. CONTROL BY MAJORITY. The Holders of a majority in
principal amount of the Securities may direct the time, method and place of
conducting any proceeding for any remedy available to the Trustee or of
exercising any trust or power conferred on the Trustee. However, the Trustee
may refuse to follow any direction that conflicts with law or this Indenture or,
subject to Section 7.01, that the Trustee determines is unduly prejudicial to
the rights of other Securityholders or would involve the Trustee in personal
liability; PROVIDED, HOWEVER, that the Trustee may take any other action deemed
proper by the Trustee that is not inconsistent with such direction. Prior to
taking any action hereunder, the Trustee shall be entitled to indemnification
satisfactory against all losses and expenses caused by taking or not taking such
action.
SECTION 6.06. LIMITATION ON SUITS. A Securityholder may not pursue
any remedy with respect to this Indenture or the Securities unless:
(1) the Holder gives to the Trustee written notice stating that an
Event of Default is continuing;
(2) the Holders of at least 25% in principal amount of the Securities
make a written request to the Trustee to pursue the remedy;
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(3) such Holder or Holders offer to the Trustee reasonable security
or indemnity against any loss, liability or expense;
(4) the Trustee does not comply with the request within 60 days after
receipt of the request and the offer of security or indemnity; and
(5) the Holders of a majority in principal amount of the Securities
do not give the Trustee a direction inconsistent with the request during
such 60-day period.
A Securityholder may not use this Indenture to prejudice the rights of
another Securityholder or to obtain a preference or priority over another
Securityholder.
SECTION 6.07. RIGHTS OF HOLDERS TO RECEIVE PAYMENT. Notwithstanding
any other provision of this Indenture, the right of any Holder to receive
payment of principal of and interest on the Securities held by such Holder, on
or after the respective due dates expressed in the Securities, or to bring suit
for the enforcement of any such payment on or after such respective dates, shall
not be impaired or affected without the consent of such Holder.
SECTION 6.08. COLLECTION SUIT BY TRUSTEE. If an Event of Default
specified in Section 6.01(1) or (2) occurs and is continuing, the Trustee may
recover judgment in its own name and as trustee of an express trust against the
Company for the whole amount then due and owing (together with interest on any
unpaid interest to the extent lawful) and the amounts provided for in Section
7.07.
SECTION 6.09. TRUSTEE MAY FILE PROOFS OF CLAIM. The Trustee may file
such proofs of claim and other papers or documents and take such other actions,
including participating as a member, voting or otherwise, of any committee of
creditors appointed in the matter, as may be necessary or advisable in order to
have the claims of the Trustee and the Securityholders allowed in any judicial
proceedings relative to the Company, any Subsidiary or Note Guarantor, their
creditors or their property and, unless prohibited by law or applicable
regulations, may vote on behalf of the Holders in any election of a trustee in
bankruptcy or other Person performing similar functions, and any Custodian in
any such judicial proceeding is hereby authorized by each Holder to make
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
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compensation, expenses, disbursements and advances of the Trustee, its agents
and its counsel, and any other amounts due the Trustee under Section 7.07.
SECTION 6.10. PRIORITIES. If the Trustee collects any money or
property pursuant to this Article 6, it shall pay out the money or property in
the following order:
FIRST: to the Trustee for amounts due under Section 7.07;
SECOND: to holders of Senior Indebtedness to the extent required by
Article 10;
THIRD: to Securityholders for amounts due and unpaid on the
Securities for principal and interest, ratably, without preference or
priority of any kind, according to the amounts due and payable on the
Securities for principal and interest, respectively; and
FOURTH: to the Company.
The Trustee may fix a record date and payment date for any payment to
Securityholders pursuant to this Section. At least 15 days before such record
date, the Trustee shall mail to each Securityholder and the Company a notice
that states the record date, the payment date and amount to be paid.
SECTION 6.11. UNDERTAKING FOR COSTS. In any suit for the enforcement
of any right or remedy under this Indenture or in any suit against the Trustee
for any action taken or omitted by it as Trustee, a court in its discretion may
require the filing by any party litigant in the suit of an undertaking to pay
the costs of the suit, and the court in its discretion may assess reasonable
costs, including reasonable attorneys' fees, against any party litigant in the
suit, having due regard to the merits and good faith of the claims or defenses
made by the party litigant. This Section does not apply to a suit by the
Company, a suit by the Trustee, a suit by a Holder pursuant to Section 6.07 or a
suit by Holders of more than 10% in principal amount of the Securities.
SECTION 6.12. WAIVER OF STAY OR EXTENSION LAWS. The Company (to the
extent it may lawfully do so) shall 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
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all benefit or advantage of any such law, and shall not hinder, delay or impede
the execution of any power herein granted to the Trustee, but shall suffer and
permit the execution of every such power as though no such law had been enacted.
ARTICLE 7.
Trustee
-------
SECTION 7.01. DUTIES OF TRUSTEE. (a) If an Event of Default has
occurred and is continuing, the Trustee shall exercise the rights and powers
vested in it by this Indenture and use the same degree of care and skill in
their exercise as a prudent person would exercise or use under the circumstances
in the conduct of such person's own affairs.
(b) Except during the continuance of an Event of Default:
(1) the Trustee undertakes to perform such duties and only such
duties as are specifically set forth in this Indenture and no implied
covenants or obligations shall be read into this Indenture against the
Trustee; and
(2) in the absence of bad faith on its part, the Trustee may
conclusively rely, as to the truth of the statements and the correctness of
the opinions expressed therein, upon certificates or opinions furnished to
the Trustee and conforming to the requirements of this Indenture. However,
the Trustee shall examine the certificates and opinions to determine
whether or not they conform to the requirements of this Indenture.
(c) The Trustee may not be relieved from liability for its own
negligent action, its own negligent failure to act or its own wilful misconduct,
except that:
(1) this paragraph does not limit the effect of paragraph (b) of this
Section;
(2) the Trustee shall not be liable for any error of judgment made in
good faith by a Trust Officer unless it is proved that the Trustee was
negligent in ascertaining the pertinent facts; and
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(3) the Trustee shall not be liable with respect to any action it
takes or omits to take in good faith in accordance with a direction
received by it pursuant to Section 6.05.
(d) Every provision of this Indenture that in any way relates to the
Trustee is subject to paragraphs (a), (b) and (c) of this Section 7.01 and to
the provisions of the TIA.
(e) The Trustee shall not be liable for interest on any money
received by it except as the Trustee may agree in writing with the Company.
(f) Money held in trust by the Trustee need not be segregated from
other funds except to the extent required by law.
(g) No provision of this Indenture shall require the Trustee to
expend or risk its own funds or otherwise incur 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 to believe that repayment
of such funds or adequate indemnity against such risk or liability is not
reasonably assured to it.
SECTION 7.02. RIGHTS OF TRUSTEE. Subject to Section 7.01:
(a) The Trustee may rely on any document believed by it to be genuine
and to have been signed or presented by the proper person. The Trustee
need not investigate any fact or matter stated in the document.
(b) Before the Trustee acts or refrains from acting, it may require
an Officers' Certificate or an Opinion of Counsel. The Trustee shall not
be liable for any action it takes or omits to take in good faith in
reliance on the Officers' Certificate or Opinion of Counsel.
(c) The Trustee may act through agents and shall not be responsible
for the misconduct or negligence of any agent appointed with due care.
(d) The Trustee shall not be liable for any action it takes or omits
to take in good faith which it believes to be authorized or within its
rights or powers; provided, however, that the Trustee's conduct does not
constitute wilful misconduct or negligence.
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(e) The Trustee may consult with counsel, and the advice or opinion
of counsel with respect to legal matters relating to this Indenture and the
Securities shall be full and complete authorization and protection from
liability in respect to any action taken, omitted or suffered by it
hereunder in good faith and in accordance with the advice or opinion of
such counsel.
(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, consent, order, approval,
bond, debenture, note or other paper or document unless requested in
writing to do so by the Holders of not less than a majority in principal
amount of the Securities at the time outstanding, but the Trustee, in its
discretion, may 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, during reasonable business hours and subject to executing a
confidentiality undertaking in customary form with respect to confidential
and/or proprietary information of the Company; PROVIDED, HOWEVER, that if
the payment within a reasonable time to the Trustee of the costs, expenses
or liabilities likely to be incurred by it in the making of such
investigation is, in the opinion of the Trustee, not reasonably assured to
the Trustee by the security afforded to it by the terms of this Indenture,
the Trustee may require reasonable indemnity against such expense or
liability as a condition to so proceeding.
(g) The Trustee shall not be deemed to have knowledge of any default
or fact the occurrence of which requires the Trustee to take any action
(other than a payment default hereunder) unless a Trust Officer knows of
such default or fact.
SECTION 7.03. INDIVIDUAL RIGHTS OF TRUSTEE. The Trustee in its
individual or any other capacity may become the owner or pledgee of Securities
and may otherwise deal with the Company or its Affiliates with the same rights
it would have if it were not Trustee. Any Paying Agent, Registrar, co-registrar
or co-paying agent may do the same with like rights. However, the Trustee must
comply with Sections 7.10 and 7.11.
SECTION 7.04. TRUSTEE'S DISCLAIMER. The Trustee shall not be
responsible for and makes no representation as to the
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validity or adequacy of this Indenture or the Securities, it shall not be
accountable for the Company's use of the proceeds from the Securities, and it
shall not be responsible for any statement of the Company in this Indenture or
in any document issued in connection with the sale of the Securities or in the
Securities other than the Trustee's certificate of authentication.
SECTION 7.05. NOTICE OF DEFAULTS. If a Default occurs and is
continuing and if it is known to a Trust Officer of the Trustee, the Trustee
shall mail to each Securityholder notice of the Default no later than the date
that is the earlier of 90 days after such default occurs or 30 days after it is
known to a Trust Officer or written notice is received by the Trustee. Except
in the case of a Default in payment of principal of or interest on any Security
(including payments pursuant to the mandatory redemption provisions of such
Security, if any), the Trustee may withhold the notice if and so long as a
committee of its Trust Officers in good faith determines that withholding the
notice is in the interests of Securityholders.
SECTION 7.06. REPORTS BY TRUSTEE TO HOLDERS. As promptly as
practicable after each May 15 beginning with the May 15 following the date of
this Indenture, but only upon the occurrence within the previous 12 months of
any events specified in TIA Section 313(a), the Trustee shall mail to each
Securityholder a brief report dated as of May 15 that complies with TIA Section
313(b).
A copy of each report at the time of its mailing to Securityholders
shall be filed with the SEC and each stock exchange (if any) on which the
Securities are listed. The Company agrees to notify promptly the Trustee
whenever the Securities become listed on any stock exchange and of any
delisting thereof.
SECTION 7.07. COMPENSATION AND INDEMNITY. The Company shall pay to
the Trustee, Paying Agent and Registrar from time to time reasonable
compensation for its services. The Trustee's compensation shall not be limited
by any law on compensation of a trustee of an express trust. The Company shall
reimburse the Trustee upon request for all reasonable out-of-pocket expenses
incurred or made by it, including costs of collection, in addition to the
compensation for its services. Such expenses shall include the reasonable
compensation and expenses, disbursements and advances of the Trustee's agents,
counsel, accountants and experts. The Company shall indemnify the Trustee,
Paying Agent, Registrar, and each of their officers, directors, agents and
employees (each in their respective capacities), for and hold each of them
harmless against any and all loss, liability or expense (including attorneys'
fees) incurred by them without negligence or bad faith
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on their part in connection with the administration of this trust and the
performance of their duties hereunder. The Trustee, Paying Agent and Registrar
shall notify the Company of any claim for which they may seek indemnity promptly
upon obtaining actual knowledge thereof; PROVIDED that any failure so to notify
the Company shall not relieve the Company of its indemnity obligations hereunder
except to the extent the Company shall have been adversely affected thereby.
The Company shall defend the claim and the indemnified party shall provide
reasonable cooperation at the Company's expense in the defense. Such
indemnified parties may have separate counsel and the Company shall pay the fees
and expenses of such counsel; PROVIDED that the Company shall not be required to
pay such fees and expenses if it assumes such indemnified parties' defense and,
in such indemnified parties' reasonable judgment, there is no conflict of
interest between the Company and such parties in connection with such defense.
The Company need not pay for any settlement made without its written consent.
The Company need not reimburse any expense or indemnify against any loss,
liability or expense incurred by an indemnified party through such party's own
wilful misconduct, negligence or bad faith.
To secure the Company's payment obligations in this Section 7.07, the
Trustee shall have a lien prior to the Securities on all money or property held
or collected by the Trustee other than money or property held in trust to pay
principal of and interest on particular Securities.
The Company's payment obligations pursuant to this Section shall
survive the discharge of this Indenture. When the Trustee, Paying Agent or
Registrar incurs expenses after the occurrence of a Default specified in Section
6.01(7) or (8) with respect to the Company, the expenses are intended to
constitute expenses of administration under the Bankruptcy Law.
SECTION 7.08. REPLACEMENT OF TRUSTEE. The Trustee may resign at any
time by so notifying the Company in writing. The Holders of a majority in
principal amount of the Securities may remove the Trustee by so notifying the
Company and the Trustee and may appoint a successor Trustee with the consent of
the Company, which shall not be unreasonably withheld. The Company shall remove
the Trustee if:
(1) the Trustee fails to comply with Section 7.10;
(2) the Trustee is adjudged bankrupt or insolvent;
(3) a receiver or other public officer takes charge of the Trustee or
its property; or
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(4) the Trustee otherwise becomes incapable of acting.
If the Trustee resigns, is removed by the Company or by the Holders of
a majority in principal amount of the Securities and such Holders do not
reasonably promptly appoint a successor Trustee, or if a vacancy exists in the
office of Trustee for any reason (the Trustee in such event being referred to
herein as the retiring Trustee), the Company shall promptly appoint a successor
Trustee.
A successor Trustee shall deliver a written acceptance of its
appointment to the retiring Trustee and to the Company. Thereupon the
resignation or removal of the retiring Trustee shall become effective, and the
successor Trustee shall have all the rights, powers and duties of the Trustee
under this Indenture. The successor Trustee shall mail a notice of its
succession to Securityholders. The retiring Trustee shall promptly transfer all
property held by it as Trustee to the successor Trustee, subject to the lien
provided for in Section 7.07.
If a successor Trustee does not take office within 60 days after the
retiring Trustee resigns or is removed, the retiring Trustee or the Holders of
10% in principal amount of the Securities may petition any court of competent
jurisdiction for the appointment of a successor Trustee.
If the Trustee fails to comply with Section 7.10, any Securityholder
may petition any court of competent jurisdiction for the removal of the Trustee
and the appointment of a successor Trustee.
Notwithstanding the replacement of the Trustee pursuant to this
Section 7.08, the Company's obligations under Section 7.07 shall continue for
the benefit of the retiring Trustee.
SECTION 7.09. SUCCESSOR TRUSTEE BY MERGER. If the Trustee
consolidates with, merges or converts into, or transfers all or substantially
all its corporate trust business or assets (including the trust created by this
Indenture) to, another corporation or banking association, the resulting,
surviving or transferee corporation without any further act shall be the
successor Trustee.
In case at the time such successor or successors by merger, conversion
or consolidation to the Trustee shall succeed to the trusts created by this
Indenture any of the Securities shall have been authenticated but not delivered,
any such successor to the Trustee may adopt the certificate of authentication of
any
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predecessor trustee, and deliver such Securities so authenticated; and in case
at that time any of the Securities shall not have been authenticated, any
successor to the Trustee may authenticate such Securities either in the name of
any predecessor hereunder or in the name of the successor to the Trustee; and in
all such cases such certificates shall have the full force which it is anywhere
in the Securities or in this Indenture provided that the certificate of the
Trustee shall have.
SECTION 7.10. ELIGIBILITY; DISQUALIFICATION. The Trustee shall at
all times satisfy the requirements of TIA Section 310(a). The Trustee shall
have a combined capital and surplus of at least $100,000,000 as set forth in its
most recent published annual report of condition. The Trustee shall comply with
TIA Section 310(b); PROVIDED, HOWEVER, that there shall be excluded from the
operation of TIA Section 310(b)(1) any indenture or indentures under which
other securities or certificates of interest or participation in other
securities of the Company are outstanding if the requirements for such exclusion
set forth in TIA 310(b)(1) are met.
SECTION 7.11. PREFERENTIAL COLLECTION OF CLAIMS AGAINST COMPANY. The
Trustee shall comply with TIA Section 311(a), excluding any creditor
relationship listed in TIA Section 311(b). A Trustee who has resigned or been
removed shall be subject to TIA Section 311(a) to the extent indicated.
ARTICLE 8.
Discharge of Indenture; Defeasance
----------------------------------
SECTION 8.01. Discharge of Liability on Securities; Defeasance. (a)
When (i) the Company delivers to the Trustee all outstanding Securities (other
than Securities replaced pursuant to Section 2.07) for cancellation or (ii) all
outstanding Securities have become due and payable, whether at maturity or as a
result of the mailing of a notice of redemption pursuant to Article 3 hereof and
the Company irrevocably deposits with the Trustee funds or U.S. Government
Obligations on which payment of principal, premium (if any) and interest when
due will be sufficient to pay at maturity or upon redemption all outstanding
Securities, including interest thereon to maturity or such redemption date
(other than Securities replaced pursuant to Section 2.07), and if in either case
the Company pays all other sums payable hereunder by the Company, then this
Indenture shall, subject to Section 8.01(c), cease to be of further effect. The
Trustee shall acknowledge satisfaction and discharge of this Indenture on demand
of the Company accompanied by
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an Officers' Certificate and an Opinion of Counsel and at the cost and expense
of the Company.
(b) Subject to Sections 8.01(c) and 8.02, the Company at any time may
terminate (i) all its obligations under the Securities and this Indenture
("legal defeasance option") or (ii) its obligations under Sections 4.02, 4.03,
4.04, 4.05, 4.06, 4.07, 4.08, 4.11, 4.12, 4.13, 5.01(iii) and 5.01(iv) and the
operation of Section 6.01(4), 6.01(6), 6.01(7) (with respect to Subsidiaries of
the Company only), 6.01(8) (with respect to Subsidiaries of the Company only)
and 6.01(9) ("covenant defeasance option"). The Company may exercise its legal
defeasance option notwithstanding its prior exercise of its covenant defeasance
option.
If the Company exercises its legal defeasance option, payment of the
Securities may not be accelerated because of an Event of Default. If the
Company exercises its covenant defeasance option, payment of the Securities may
not be accelerated because of an Event of Default specified in Section 6.01(4),
6.01(6), 6.01(7) (with respect to Subsidiaries of the Company only), 6.01(8)
(with respect to Subsidiaries of the Company only) and 6.01(9) or because of the
failure of the Company to comply with clauses (iii) and (iv) of Section 5.01.
Upon satisfaction of the conditions set forth herein and upon request
of the Company, the Trustee shall acknowledge in writing the discharge of those
obligations that the Company terminates.
(c) Notwithstanding clauses (a) and (b) above, the Company's
obligations in Sections 2.03, 2.04, 2.05, 2.06, 2.07, 7.07, 7.08, 8.04, 8.05 and
8.06 shall survive until the Securities have been paid in full. Thereafter, the
Company's obligations in Sections 7.07, 8.04 and 8.05 shall survive.
SECTION 8.02. CONDITIONS TO DEFEASANCE. The Company may exercise its
legal defeasance option or its covenant defeasance option only if:
(1) the Company irrevocably deposits in trust with the Trustee money
or U.S. Government Obligations for the payment of principal, premium (if
any) and interest on the Securities to maturity or redemption, as the case
may be;
(2) the Company delivers to the Trustee a certificate from a
nationally recognized firm of independent accountants expressing their
opinion that the payments of principal and interest when due and without
reinvestment on the deposited
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U.S. Government Obligations plus any deposited money without investment
will provide cash at such times and in such amounts as will be sufficient
to pay principal and interest when due on all the Securities to maturity or
redemption, as the case may be;
(3) 123 days pass after the deposit is made and during the 123-day
period no Default specified in Section 6.01(7) or (8) with respect to the
Company occurs which is continuing at the end of the period;
(4) the deposit does not constitute a default under any other
agreement binding on the Company and is not prohibited by the terms of any
Senior Indebtedness or Article 10;
(5) the Company delivers to the Trustee an Opinion of Counsel to the
effect that the trust resulting from the deposit does not constitute, or is
qualified as, a regulated investment company under the Investment Company
Act of 1940;
(6) in the case of the legal defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel stating that (i) the
Company has received from, or there has been published by, the Internal
Revenue Service a ruling, or (ii) since the date of this Indenture there
has been a change in the applicable federal income tax law, in either case
to the effect that, and based thereon such Opinion of Counsel shall confirm
that, the Securityholders will not recognize income, gain or loss for
federal income tax purposes as a result of such 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 defeasance had not
occurred;
(7) in the case of the covenant defeasance option, the Company shall
have delivered to the Trustee an Opinion of Counsel to the effect that the
Securityholders will not recognize income, gain or loss for federal income
tax purposes as a result of such covenant defeasance and will be subject to
federal income tax on the same amounts, in the same manner and at the same
times as would have been the case if such covenant defeasance had not
occurred; and
(8) the Company delivers to the Trustee an Officers' Certificate and
an Opinion of Counsel, each stating that all conditions precedent to the
defeasance and discharge of the Securities as contemplated by this Article
8 have been complied with.
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Before or after a deposit, the Company may make arrangements
satisfactory to the Trustee for the redemption of Securities at a future date in
accordance with Article 3.
SECTION 8.03. APPLICATION OF TRUST MONEY. The Trustee shall hold in
trust money or U.S. Government Obligations deposited with it pursuant to this
Article 8. It shall apply the deposited money and the money from U.S.
Government Obligations through the Paying Agent and in accordance with this
Indenture to the payment of principal of, premium (if any) and interest on the
Securities. Money and securities so held in trust are not subject to Article
10.
SECTION 8.04. REPAYMENT TO COMPANY. The Trustee and the Paying Agent
shall promptly turn over to the Company upon request any excess money or
securities held by them at any time.
Subject to any applicable abandoned property law, the Trustee and the
Paying Agent shall pay to the Company upon request any money held by them for
the payment of principal or interest that remains unclaimed for two years, and,
thereafter, Securityholders entitled to the money must look to the Company for
payment as general creditors.
SECTION 8.05. INDEMNITY FOR GOVERNMENT OBLIGATIONS. The Company
shall pay and shall indemnify the Trustee against any tax, fee or other charge
imposed on or assessed against deposited U.S. Government Obligations or the
principal and interest received on such U.S. Government Obligations.
SECTION 8.06. REINSTATEMENT. If the Trustee or Paying Agent is
unable to apply any money or U.S. Government Obligations in accordance with this
Article 8 by reason of any legal proceeding or by reason of any order or
judgment of any court or governmental authority enjoining, restraining or
otherwise prohibiting such application, the Company's obligations under this
Indenture and the Securities shall be revived and reinstated as though no
deposit had occurred pursuant to this Article 8 until such time as the Trustee
or Paying Agent is permitted to apply all such money or U.S. Government
Obligations in accordance with this Article 8; PROVIDED, HOWEVER, that, if the
Company has made any payment of interest on or principal of any Securities
because of the reinstatement of its obligations, the Company shall be subrogated
to the rights of the Holders of such Securities to receive such payment from the
money or U.S. Government Obligations held by the Trustee or Paying Agent.
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ARTICLE 9.
Amendments
----------
SECTION 9.01. WITHOUT CONSENT OF HOLDERS. The Company and the
Trustee may amend this Indenture or the Securities without notice to or consent
of any Securityholder:
(1) to cure any ambiguity, omission, defect or inconsistency;
(2) to comply with Article 5;
(3) to provide for uncertificated Securities in addition to or in
place of certificated Securities; PROVIDED, HOWEVER, that the
uncertificated Securities are issued in registered form for purposes of
Section 163(f) of the Code or in a manner such that the uncertificated
Securities are described in Section 163(f)(2)(B) of the Code;
(4) to make any change in Article 10 that would limit or terminate
the benefits available to any holder of Senior Indebtedness (or
Representatives therefor) under Article 10;
(5) to add Note Guarantees with respect to the Securities or to
secure the Securities;
(6) 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;
(7) to comply with any requirements of the SEC in connection with
qualifying this Indenture under the TIA;
(8) to make any change that does not adversely affect the rights of
any Securityholder; or
(9) to provide for the issuance and authorization of the Exchange
Securities.
An amendment under this Section may not make any change that adversely
affects the rights under Article 10 of any holder of Senior Indebtedness then
outstanding unless the holders of such Senior Indebtedness (or any group or
representative thereof authorized to give a consent) consent to such change.
After an amendment under this Section becomes effective, the Company
shall mail to Securityholders a notice briefly
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describing such amendment. The failure to give such notice to all
Securityholders, or any defect therein, shall not impair or affect the validity
of an amendment under this Section 9.01.
SECTION 9.02. WITH CONSENT OF HOLDERS. The Company and the Trustee
may amend this Indenture or the Securities without notice to any Securityholder
but with the written consent of the Holders of at least a majority in principal
amount of the Securities. However, without the consent of each Securityholder
affected, an amendment may not:
(1) reduce the amount of Securities whose Holders must consent to an
amendment;
(2) reduce the rate of or extend the time for payment of interest on
any Security;
(3) reduce the principal of or extend the Stated Maturity of any
Security;
(4) reduce the premium payable upon the redemption of any Security or
change the time at which any Security may be redeemed in accordance with
Article 3;
(5) make any Security payable in money other than that stated in the
Security;
(6) make any change in Article 10 that adversely affects the rights
of any Securityholder;
(7) impair the right of such Securityholder to receive payment of
principal of and interest on such Securityholder's Securities on or after
the due dates therefor or to institute suit for the enforcement of any
payment on or with respect to such Securityholder's Securities; or
(8) make any change in Section 6.04 or 6.07 or the second sentence of
this Section 9.02.
It shall not be necessary for the consent of the Holders under this
Section 9.02 to approve the particular form of any proposed amendment, but it
shall be sufficient if such consent approves the substance thereof.
An amendment under this Section 9.02 may not make any change that
adversely affects the rights under Article 10 of any holder of Senior
Indebtedness then outstanding unless the holders
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of such Senior Indebtedness (or any group or representative thereof authorized
to give a consent) consent to such change.
After an amendment under this Section 9.02 becomes effective, the
Company shall mail to Securityholders a notice briefly describing such
amendment. The failure to give such notice to all Securityholders, or any
defect therein, shall not impair or affect the validity of an amendment under
this Section 9.02.
SECTION 9.03. COMPLIANCE WITH TRUST INDENTURE ACT. Every amendment
to this Indenture or the Securities shall comply with the TIA as then in effect.
SECTION 9.04. REVOCATION AND EFFECT OF CONSENT AND WAIVERS. A
consent to an amendment or a waiver by a Holder of a Security shall bind the
Holder and every subsequent Holder of that Security or portion of the Security
that evidences the same debt as the consenting Holder's Security, even if
notation of the consent or waiver is not made on the Security. However, any
such Holder or subsequent Holder may revoke the consent or waiver as to such
Holder's Security or portion of the Security if the Trustee receives the notice
of revocation before the date the amendment or waiver becomes effective. After
an amendment or waiver becomes effective, it shall bind every Securityholder.
An amendment or waiver becomes effective once the requisite number of consents
are received by the Company or the Trustee.
The Company may, but shall not be obligated to, fix a record date for
the purpose of determining the Securityholders entitled to give their consent or
take any other action described above or required or permitted to be taken
pursuant to this Indenture. If a record date is fixed, then notwithstanding the
immediately preceding paragraph, those Persons who were Securityholders at such
record date (or their duly designated proxies), and only those Persons, shall be
entitled to give such consent or to revoke any consent previously given or to
take any such action, whether or not such Persons continue to be Holders after
such record date. No such consent shall be valid or effective for more than 120
days after such record date.
SECTION 9.05. NOTATION ON OR EXCHANGE OF SECURITIES. If an amendment
changes the terms of a Security, the Trustee may require the Holder of the
Security to deliver it to the Trustee. The Trustee may place an appropriate
notation on the Security regarding the changed terms and return it to the
Holder. Alternatively, if the Company or the Trustee so determines, the Company
in exchange for the Security shall issue and the Trustee shall authenticate a
new Security that reflects the changed terms.
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Failure to make the appropriate notation or to issue a new Security shall not
affect the validity of such amendment.
SECTION 9.06. TRUSTEE TO SIGN AMENDMENTS. The Trustee shall sign any
amendment authorized pursuant to this Article 9 if the amendment does not
adversely affect the rights, duties, liabilities or immunities of the Trustee.
If it does, the Trustee may but need not sign it. In signing such amendment the
Trustee shall be entitled to receive indemnity reasonably satisfactory to it and
to receive, and (subject to Section 7.01) shall be fully protected in relying
upon, an Officers' Certificate and an Opinion of Counsel stating that such
amendment is authorized or permitted by this Indenture and complies with the
provisions hereof (including Section 9.03).
SECTION 9.07. PAYMENT FOR CONSENT. Neither the Company nor any
Affiliate of the Company shall, directly or indirectly, pay or cause to be paid
any consideration, whether by way of interest, fee or otherwise, to any Holder
for or as an inducement to any consent, waiver or amendment of any of the terms
or provisions of this Indenture or the Securities unless such consideration is
offered to be paid to all Holders that so consent, waive or agree to amend in
the time frame set forth in solicitation documents relating to such consent,
waiver or agreement.
ARTICLE 10.
Subordination
-------------
SECTION 10.1. AGREEMENT TO SUBORDINATE. The Company agrees, and each
Securityholder by accepting a Security agrees, that the Indebtedness evidenced
by the Securities is subordinated in right of payment, to the extent and in the
manner provided in this Article 10, to the prior payment in full of all Senior
Indebtedness and that the subordination is for the benefit of and enforceable by
the holders of Senior Indebtedness. The Securities shall in all respects rank
PARI PASSU with all Indebtedness of the Company other than Senior Indebtedness
or Subordinated Obligations and only Indebtedness of the Company that is Senior
Indebtedness shall rank senior to the Securities in accordance with the
provisions set forth herein. For purposes of these subordination provisions,
the Indebtedness evidenced by the Securities is deemed to include the
liquidated damages payable pursuant to the provisions set forth in the
Securities and the Exchange and Registration Rights Agreement. All provisions
of this Article 10 shall be subject to Section 10.12.
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SECTION 10.2. LIQUIDATION, DISSOLUTION, BANKRUPTCY. Upon any payment
or distribution of the assets of the Company to creditors upon a total or
partial liquidation or a total or partial dissolution of the Company or in a
bankruptcy, reorganization, insolvency, receivership or similar proceeding
relating to the Company or its property:
(1) holders of Senior Indebtedness shall be entitled to receive
payment in full of the Senior Indebtedness before Securityholders shall be
entitled to receive any payment of principal of or interest on the
Securities; and
(2) until the Senior Indebtedness is paid in full, any payment or
distribution to which Securityholders would be entitled but for this
Article 10 shall be made to holders of Senior Indebtedness as their
interests may appear.
SECTION 10.3. DEFAULT ON SENIOR INDEBTEDNESS. The Company may not
pay the principal of, premium (if any) or interest on the Securities or make any
deposit pursuant to Section 8.01 and may not repurchase, redeem or otherwise
retire any Securities (collectively, "pay the Securities") if (i) any Senior
Indebtedness is not paid when due or (ii) any other default on Senior
Indebtedness occurs and the maturity of such Senior Indebtedness is accelerated
in accordance with its terms unless, in either case, (x) the default has been
cured or waived and any such acceleration has been rescinded or (y) such Senior
Indebtedness has been paid in full; PROVIDED, HOWEVER, that the Company may pay
the Securities without regard to the foregoing if the Company and the Trustee
receive written notice approving such payment from the Representative of the
Designated Senior Indebtedness with respect to which either of the events in
clause (i) or (ii) of this sentence has occurred and is continuing. During the
continuance of any default (other than a default described in clause (i) or (ii)
of the preceding sentence) with respect to any Designated Senior Indebtedness
pursuant to which the maturity thereof may be accelerated immediately without
further notice (except such notice as may be required to effect such
acceleration) or the expiration of any applicable grace periods, the Company may
not pay the Securities for a period (a "Payment Blockage Period") commencing
upon the receipt by the Company and the Trustee of written notice (a "Blockage
Notice") of such default from the Representative of such Designated Senior
Indebtedness specifying an election to effect a Payment Blockage Period and
ending 179 days thereafter (or earlier if such Payment Blockage Period is
terminated (i) by written notice to the Trustee (with a copy to the Company)
from the Person or Persons who gave such Blockage Notice, (ii) by repayment in
full of such Designated Senior Indebtedness or (iii) because the
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default giving rise to such Blockage Notice is no longer continuing).
Notwithstanding the provisions described in the immediately preceding sentence
(but subject to the provisions contained in the first sentence of this Section
10.03), unless the holders of such Designated Senior Indebtedness or the
Representative of such holders shall have accelerated the maturity of such
Designated Senior Indebtedness, the Company may resume payments on the
Securities after such Payment Blockage Period. Not more than one Blockage
Notice may be given in any consecutive 360-day period, irrespective of the
number of defaults with respect to Designated Senior Indebtedness during such
period; PROVIDED, HOWEVER, that if any Blockage Notice within such 360-day
period is given by or on behalf of any holders of Designated Senior Indebtedness
(other than the Bank Indebtedness), the Representative of the Bank Indebtedness
may give another Blockage Notice within such period; provided further, however,
that in no event may the total number of days during which any Payment Blockage
Period or Periods is in effect exceed 179 days in the aggregate during any 360
consecutive day period.
SECTION 10.04. ACCELERATION OF PAYMENT OF SECURITIES. If payment of
the Securities is accelerated because of an Event of Default, the Company or the
Trustee shall promptly notify the holders of the Designated Senior Indebtedness
(or their Representative) of the acceleration. If any Designated Senior
Indebtedness is outstanding, the Company may not pay the Securities until five
Business Days after such holders or the Representative of the Designated Senior
Indebtedness receive notice of such acceleration and, thereafter, may pay the
Securities only if this Article 10 otherwise permits payment at that time.
SECTION 10.05. WHEN DISTRIBUTION MUST BE PAID OVER. If a
distribution is made to Securityholders that because of this Article 10 should
not have been made to them, the Securityholders who receive the distribution
shall hold it in trust for holders of Senior Indebtedness and pay it over to
them as their interests may appear.
SECTION 10.06. SUBROGATION. After all Senior Indebtedness is paid in
full and until the Securities are paid in full, Securityholders shall be
subrogated to the rights of holders of Senior Indebtedness to receive
distributions applicable to Senior Indebtedness. A distribution made under this
Article 10 to holders of Senior Indebtedness which otherwise would have been
made to Securityholders is not, as between the Company and Securityholders, a
payment by the Company on Senior Indebtedness.
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SECTION 10.07. RELATIVE RIGHTS. This Article 10 defines the relative
rights of Securityholders and holders of Senior Indebtedness. Nothing in this
Indenture shall:
(1) impair, as between the Company and Securityholders, the
obligation of the Company, which is absolute and unconditional, to pay
principal of and interest on the Securities in accordance with their terms;
or
(2) prevent the Trustee or any Securityholder from exercising its
available remedies upon a Default, subject to the rights of holders of
Senior Indebtedness to receive distributions otherwise payable to
Securityholders.
SECTION 10.08 SUBORDINATION MAY NOT BE IMPAIRED BY COMPANY. No right
of any holder of Senior Indebtedness to enforce the subordination of the
Indebtedness evidenced by the Securities shall be impaired by any act or failure
to act by the Company or by its failure to comply with this Indenture.
SECTION 10.09. RIGHTS OF TRUSTEE AND PAYING AGENT. Notwithstanding
Section 10.03, the Trustee or Paying Agent may continue to make payments on the
Securities and shall not be charged with knowledge of the existence of facts
that would prohibit the making of any such payments unless, not less than two
Business Days prior to the date of such payment, a Trust Officer of the Trustee
receives notice satisfactory to it that payments may not be made under this
Article 10. The Company, the Registrar or co-registrar, the Paying Agent, a
Representative or a holder of Senior Indebtedness may give the notice; PROVIDED,
HOWEVER, that, if an issue of Senior Indebtedness has a Representative, only the
Representative may give the notice. The Trustee shall be entitled to rely on
the delivery to it of a written notice by a Person representing himself or
itself to be a holder of any Senior Indebtedness (or a Representative of such
holder) to establish that such notice has been given by a holder of such Senior
Indebtedness or Representative thereof.
The Trustee in its individual or any other capacity may hold Senior
Indebtedness with the same rights it would have if it were not Trustee. The
Registrar and co-registrar and the Paying Agent may do the same with like
rights. The Trustee shall be entitled to all the rights set forth in this
Article 10 with respect to any Senior Indebtedness which may at any time be held
by it, to the same extent as any other holder of Senior Indebtedness; and
nothing in Article 7 shall deprive the Trustee of any of its rights as such
holder. Nothing in this Article 10 shall apply to
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claims of, or payments to, the Trustee under or pursuant to Section 7.07.
SECTION 10.10. DISTRIBUTION OR NOTICE TO REPRESENTATIVE. Whenever a
distribution is to be made or a notice given to holders of Senior Indebtedness,
the distribution may be made and the notice given to their Representative (if
any).
SECTION 10.11. ARTICLE 10 NOT TO PREVENT EVENTS OF DEFAULT OR LIMIT
RIGHT TO ACCELERATE. The failure to make a payment pursuant to the Securities
by reason of any provision in this Article 10 shall not be construed as
preventing the occurrence of a Default. Nothing in this Article 10 shall have
any effect on the right of the Securityholders or the Trustee to accelerate the
maturity of the Securities.
SECTION 10.12. TRUST MONEYS NOT SUBORDINATED. Notwithstanding
anything contained herein to the contrary, payments from money or the proceeds
of U.S. Government Obligations held in trust under Article 8 by the Trustee for
the payment of principal of and interest on the Securities shall not be
subordinated to the prior payment of any Senior Indebtedness or subject to the
restrictions set forth in this Article 10, and none of the Securityholders shall
be obligated to pay over any such amount to the Company or any holder of Senior
Indebtedness of the Company or any other creditor of the Company.
SECTION 10.13. TRUSTEE ENTITLED TO RELY. Upon any payment or
distribution pursuant to this Article 10, the Trustee and the Securityholders
shall be entitled to rely (i) upon any order or decree of a court of competent
jurisdiction in which any proceedings of the nature referred to in Section 10.02
are pending, (ii) upon a certificate of the liquidating trustee or agent or
other Person making such payment or distribution to the Trustee or to the
Securityholders or (iii) upon the Representatives for the holders of Senior
Indebtedness for the purpose of ascertaining the Persons entitled to participate
in such payment or distribution, the holders of the Senior Indebtedness and
other Indebtedness of the Company, the amount thereof or payable thereon, the
amount or amounts paid or distributed thereon and all other facts pertinent
thereto or to this Article 10. In the event that the Trustee determines, in
good faith, that evidence is required with respect to the right of any Person as
a holder of Senior Indebtedness to participate in any payment or distribution
pursuant to this Article 10, the Trustee may request such Person to furnish
evidence to the reasonable satisfaction of the Trustee as to the amount of
Senior Indebtedness held by such Person, the extent to which such Person is
entitled to participate in such payment or distribution and
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other facts pertinent to the rights of such Person under this Article 10, 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. The provisions of Sections 7.01 and 7.02 shall be applicable to
all actions or omissions of actions by the Trustee pursuant to this Article 10.
SECTION 10.14. TRUSTEE TO EFFECTUATE SUBORDINATION. Each
Securityholder by accepting a Security authorizes and directs the Trustee on his
behalf to take such action as may be necessary or appropriate to acknowledge or
effectuate the subordination between the Securityholders and the holders of
Senior Indebtedness as provided in this Article 10 and appoints the Trustee as
attorney-in-fact for any and all such purposes.
SECTION 10.15. TRUSTEE NOT FIDUCIARY FOR HOLDERS OF SENIOR
INDEBTEDNESS. The Trustee shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such holders if it
shall mistakenly pay over or distribute to Securityholders or the Company or any
other Person, money or assets to which any holders of Senior Indebtedness shall
be entitled by virtue of this Article 10 or otherwise.
SECTION 10.16. RELIANCE BY HOLDERS OF SENIOR INDEBTEDNESS ON
SUBORDINATION PROVISIONS. Each Securityholder by accepting a Security
acknowledges and agrees that the foregoing subordination provisions are, and are
intended to be, an inducement and a consideration to each holder of any Senior
Indebtedness, whether such Senior Indebtedness was created or acquired before
or after the issuance of the Securities, to acquire and continue to hold, or to
continue to hold, such Senior Indebtedness and such holder of Senior
Indebtedness shall be deemed conclusively to have relied on such subordination
provisions in acquiring and continuing to hold, or in continuing to hold, such
Senior Indebtedness.
SECTION 10.17. TRUSTEE'S COMPENSATION NOT PREJUDICED. Nothing in
this Article shall apply to amounts due to the Trustee pursuant to other
sections of this Indenture.
ARTICLE 11.
Miscellaneous
-------------
SECTION 11.01. TRUST INDENTURE ACT CONTROLS. If any provision of
this Indenture limits, qualifies or conflicts with
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another provision which is required to be included in this Indenture by the TIA,
the required provision shall control.
SECTION 11.02. NOTICES. Any notice or communication shall be in
writing and delivered in person or mailed by first-class mail addressed as
follows:
if to the Company:
The William Carter Company
1590 Adamson Parkway, Suite 400
Morrow, GA 30260
Attention of:
Chief Financial Officer
if to the Trustee:
State Street Bank and Trust Company
Two International Plaza, 4th Floor
Boston, MA 02110
Attention of:
Corporate Trust Department
(the William Carter 10 3/8% Senior
Subordinated Notes due 2006)
The Company or the Trustee by notice to the other may designate
additional or different addresses for subsequent notices or communications.
Any notice or communication mailed to a Securityholder shall be mailed
to the Securityholder at the Securityholder's address as it appears on the
registration books of the Registrar and shall be sufficiently given if so mailed
within the time prescribed.
Failure to mail a notice or communication to a Securityholder or any
defect in it shall not affect its sufficiency with respect to other
Securityholders. If a notice or communication is mailed in the manner provided
above, it is duly given, whether or not the addressee receives it.
SECTION 11.03. COMMUNICATION BY HOLDERS WITH OTHER HOLDERS.
Securityholders may communicate pursuant to TIA Section 312(b) with other
Securityholders with respect to their rights under this Indenture or the
Securities. The Company, the Trustee, the
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Registrar and anyone else shall have the protection of TIA Section 312(c).
SECTION 11.04. CERTIFICATE AND OPINION AS TO CONDITIONS PRECEDENT.
Upon any request or application by the Company to the Trustee to take or refrain
from taking any action under this Indenture, the Company shall furnish to the
Trustee:
(1) an Officers' Certificate in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of the signers,
all conditions precedent, if any, provided for in this Indenture relating
to the proposed action have been complied with; and
(2) an Opinion of Counsel in form and substance reasonably
satisfactory to the Trustee stating that, in the opinion of such counsel,
all such conditions precedent have been complied with.
SECTION 11.05. STATEMENTS REQUIRED IN CERTIFICATE OR OPINION. Each
certificate or opinion with respect to compliance with a covenant or condition
provided for in this Indenture shall include:
(1) a statement that the individual making such certificate or
opinion has read such covenant or condition;
(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 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 or not, in the opinion of such
individual, such covenant or condition has been complied with; provided
that an Opinion of Counsel can rely as to matters of fact on an Officers'
Certificate or certificates of public officials.
SECTION 11.06 WHEN SECURITIES DISREGARDED. In determining whether
the Holders of the required principal amount of Securities have concurred in any
direction, waiver or consent, Securities owned by the Company or by any Person
directly or indirectly controlling or controlled by or under direct or indirect
common control with the Company shall be disregarded and deemed not
<PAGE>
-88-
to be outstanding, except that, for the purpose of determining whether the
Trustee shall be protected in relying on any such direction, waiver or consent,
only Securities which the Trustee knows are so owned shall be so disregarded.
Also, subject to the foregoing, only Securities outstanding at the time shall be
considered in any such determination.
SECTION 11.07. RULES BY TRUSTEE, PAYING AGENT AND REGISTRAR. The
Trustee may make reasonable rules for action by or a meeting of Securityholders.
The Registrar and the Paying Agent may make reasonable rules for their
functions.
SECTION 11.08. LEGAL HOLIDAYS. A "Legal Holiday" is a Saturday, a
Sunday or a day on which commercial banking institutions (including, without
limitation, the Federal Reserve System) are authorized or required by law to
close in New York City. If a payment date is a Legal Holiday, payment shall be
made on the next succeeding day that is not a Legal Holiday, and no interest
shall accrue for the intervening period. If a regular record date is a Legal
Holiday, the record date shall not be affected.
SECTION 11.09. GOVERNING LAW. This Indenture and the Securities
shall be governed by, and construed in accordance with, the laws of the State of
New York but without giving effect to applicable principles of conflicts of law
to the extent that the application of the laws of another jurisdiction would be
required thereby.
SECTION 11.10. NO RECOURSE AGAINST OTHERS. A director, officer,
employee or stockholder, as such, of the Company shall not have any liability
for any obligations of the Company under the Securities or this Indenture or for
any claim based on, in respect of or by reason of such obligations or their
creation. By accepting a Security, each Securityholder shall waive and release
all such liability. The waiver and release shall be part of the consideration
for the issue of the Securities.
SECTION 11.11. SUCCESSORS. All agreements of the Company in this
Indenture and the Securities shall bind its successors. All agreements of the
Trustee in this Indenture shall bind its successors.
SECTION 11.12. MULTIPLE ORIGINALS. The parties may sign any number
of copies of this Indenture. Each signed copy shall be an original, but all of
them together represent the same agreement. One signed copy is enough to prove
this Indenture.
<PAGE>
-89-
SECTION 11.13. TABLE OF CONTENTS; HEADINGS. The table of contents,
cross-reference sheet and headings of the Articles and Sections of this
Indenture have been inserted for convenience of reference only, are not intended
to be considered a part hereof and shall not modify or restrict any of the terms
or provisions hereof.
<PAGE>
-90-
IN WITNESS WHEREOF, the parties have caused this Indenture to be duly
executed as of the date first written above.
THE WILLIAM CARTER COMPANY
By: /s/ David A. Brown
----------------------------------------------
Name: David A. Brown
Title: Senior Vice President
STATE STREET BANK AND TRUST
COMPANY,
as Trustee
By: /s/ Donald Smith
----------------------------------------------
Name: Donald Smith
Title: Vice President
<PAGE>
EXHIBIT A
[FORM OF FACE OF INITIAL SECURITY]
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC"), TO THE
COMPANY OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR 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.1
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED (THE "SECURITIES ACT"), OR ANY STATE SECURITIES LAWS. NEITHER
THIS SECURITY NOR ANY INTEREST OR PARTICIPATION HEREIN MAY BE REOFFERED, SOLD,
ASSIGNED, TRANSFERRED, PLEDGED, ENCUMBERED OR OTHERWISE DISPOSED OF WITHIN THE
UNITED STATES TO, OR FOR THE ACCOUNT OR BENEFIT OF, U.S. PERSONS IN THE ABSENCE
OF SUCH REGISTRATION OR UNLESS SUCH TRANSACTION IS EXEMPT FROM, OR NOT SUBJECT
TO, REGISTRATION.
THE HOLDER OF THIS SECURITY BY ITS ACCEPTANCE HEREOF AGREES TO OFFER,
SELL OR OTHERWISE TRANSFER SUCH SECURITY, PRIOR TO THE DATE (THE "RESALE
RESTRICTION TERMINATION DATE") WHICH IS THREE YEARS AFTER THE LATER OF THE
ORIGINAL ISSUE DATE HEREOF AND THE LAST DATE ON WHICH THE COMPANY OR ANY
AFFILIATE OF THE COMPANY WAS THE OWNER OF THIS SECURITY (OR ANY PREDECESSOR OF
SUCH SECURITY) ONLY (A) TO THE COMPANY, (B) PURSUANT TO A REGISTRATION STATEMENT
THAT HAS BEEN DECLARED EFFECTIVE UNDER THE SECURITIES ACT, (C) FOR SO LONG AS
THE SECURITIES ARE ELIGIBLE FOR RESALE PURSUANT TO RULE 144A UNDER THE
SECURITIES ACT, TO A PERSON IT REASONABLY BELIEVES IS A "QUALIFIED INSTITUTIONAL
BUYER" AS DEFINED IN RULE 144A THAT PURCHASES FOR ITS OWN ACCOUNT OR FOR THE
ACCOUNT OF A QUALIFIED INSTITUTIONAL BUYER TO WHOM NOTICE IS GIVEN THAT THE
TRANSFER IS BEING MADE IN RELIANCE ON RULE 144A, (D) PURSUANT TO OFFERS AND
SALES THAT OCCUR OUTSIDE THE UNITED STATES WITHIN THE MEANING OF REGULATION S
UNDER THE SECURITIES ACT, (E) TO AN INSTITUTIONAL ACCREDITED INVESTOR WITHIN THE
MEANING OF RULE
- ---------------
1 This paragraph should only be added if the Security is issued in global form.
A-1
<PAGE>
501(A)(1), (2), (3) OR (7) UNDER THE SECURITIES ACT THAT IS ACQUIRING THE
SECURITY FOR ITS OWN ACCOUNT, OR FOR THE ACCOUNT OF SUCH AN INSTITUTIONAL
ACCREDITED INVESTOR, IN EACH CASE IN A MINIMUM PRINCIPAL AMOUNT OF THE
SECURITIES OF $250,000, FOR INVESTMENT PURPOSES AND NOT WITH A VIEW TO, OR FOR
OFFER OR SALE IN CONNECTION WITH, ANY DISTRIBUTION IN VIOLATION OF THE
SECURITIES ACT, OR (F) PURSUANT TO ANOTHER AVAILABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT, SUBJECT TO THE COMPANY'S OR THE
TRUSTEE'S RIGHT PRIOR TO ANY SUCH OFFER, SALE OR TRANSFER PURSUANT TO CLAUSE (F)
TO REQUIRE THE DELIVERY OF AN OPINION OF COUNSEL, CERTIFICATION AND/OR OTHER
INFORMATION SATISFACTORY TO EACH OF THEM, AND IN THE CASE OF THE FOREGOING
CLAUSE (E), A CERTIFICATE OF TRANSFER (THE FORM OF WHICH CAN BE OBTAINED FROM
THE TRUSTEE) IS COMPLETED AND DELIVERED BY THE TRANSFEROR TO THE COMPANY AND THE
TRUSTEE. THIS LEGEND WILL BE REMOVED UPON THE REQUEST OF THE HOLDER AFTER THE
RESALE RESTRICTION TERMINATION DATE.
THE WILLIAM CARTER COMPANY
10 3/8% SENIOR SUBORDINATED NOTE SERIES A DUE 2006
No. CUSIP No.
$
THE WILLIAM CARTER COMPANY, a Massachusetts corporation, promises to
pay to , or registered assigns, the principal sum of $ on
December 1, 2006.
Interest Payment Dates: June 1 and December 1.
Record Dates: May 15 and November 15.
A-2
<PAGE>
Additional provisions of this Security are set forth on the other side
of this Security.
Dated: , 1996
THE WILLIAM CARTER COMPANY
By:
----------------------------------------------
----------------------------------------------
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
STATE STREET BANK AND TRUST [Seal]
COMPANY, as Trustee,
certifies that this is one
of the Securities referred
to in the Indenture
By:__________________________
Authorized Signatory
A-3
<PAGE>
[FORM OF REVERSE SIDE OF INITIAL SECURITY]
10 3/8% Senior Subordinated Note Series A due 2006
1. INTEREST
The William Carter Company, a Massachusetts corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The
Company will use its best efforts to have the Exchange Offer Registration
Statement and, if applicable, a Shelf Registration Statement (each a
"Registration Statement") declared effective by the Commission as promptly as
practicable after the filing thereof. If (i) the Shelf Registration Statement
or Exchange Offer Registration Statement, as applicable under the Exchange and
Registration Rights Agreement is not filed with the Commission on or prior to 90
days after the Issue Date, (ii) the Exchange Offer Registration Statement or, as
the case may be, the Shelf Registration Statement, is not declared effective
within 135 days after the Issue Date, (iii) the Exchange Offer is not
consummated on or prior to 165 days after the Issue Date, or (iv) the Shelf
Registration Statement is filed and declared effective within 135 days after the
Issue Date but shall thereafter cease to be effective (at any time that the
Company is obligated to maintain the effectiveness thereof) without being
succeeded within 30 days by an additional Registration Statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Company will pay liquidated damages to each holder
of Transfer Restricted Securities, during the period of such Registration
Default, in an amount equal to $0.192 per week per $1,000 principal amount of
the Securities constituting Transfer Restricted Securities held by such holder
until the applicable Registration Statement is filed or declared effective, the
Exchange Offer is consummated or the Shelf Registration Statement again becomes
effective, as the case may be. All accrued liquidated damages shall be paid to
holders in the same manner as interest payments on the Securities on semi-annual
payment dates which correspond to interest payment dates for the Securities.
Following the cure of all Registration Defaults, the accrual of liquidated
damages will cease. The Trustee shall have no responsibility with respect to
the determination of the amount of any such liquidated damages.
The Company will pay interest semiannually on June 1 and December 1 of
each year. Interest on the Securities will accrue from the most recent date to
which interest has been paid or, if no interest has been paid, from
November 25, 1996. Interest will be computed on the basis of a 360-day year of
twelve 30-day months. The Company shall pay interest on overdue principal at
the rate borne by the Securities plus 1% per annum, and it shall pay
A-4
<PAGE>
interest on overdue installments of interest at the same rate to the extent
lawful.
2. METHOD OF PAYMENT
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the May 15 or November 15 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. However, the Company may pay principal and
interest by check payable in such money. It may mail an interest check to a
Holder's registered address.
3. PAYING AGENT AND REGISTRAR
Initially, State Street Bank and Trust Company, a Massachusetts trust
company ("Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its domestically incorporated Wholly Owned Subsidiaries
may act as Registrar or co-registrar.
4. INDENTURE
The Company issued the Securities under an Indenture dated as of
November 25, 1996 ("Indenture"), between the Company and the Trustee. The terms
of the Securities include those stated in the Indenture and those made part of
the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as in effect on the date of the Indenture (the "Act").
Terms defined in the Indenture and not defined herein have the meanings ascribed
thereto in the Indenture. The Securities are subject to all such terms, and
Securityholders are referred to the Indenture and the Act for a statement of
those terms.
The Securities are general unsecured obligations of the Company
limited to $100,000,000 aggregate principal amount at any one time outstanding
(subject to Section 2.07 of the Indenture). This Security is one of the Initial
Securities referred to in the Indenture. The Securities include the Initial
Securities and any Exchange Securities issued in exchange for the Initial
Securities pursuant to the Indenture. The Initial Securities and the Exchange
Securities are treated as a single class of securities under the Indenture. The
Indenture imposes certain limitations on the issuance of debt by the Company,
the payment of dividends and other distributions and acquisitions or retirements
of the Company's Capital Stock and Subordinated Obligations, the incurrence by
the
A-5
<PAGE>
Company and its Subsidiaries of Liens on its property and assets which do not
equally and ratably secure the Securities, the sale or transfer of assets and
Subsidiary Stock, investments by the Company, the lines of business in which the
Company may operate, consolidations, mergers and transfers of all or
substantially all of the Company's assets and transactions with Affiliates. In
addition, the Indenture limits the ability of the Company and its Subsidiaries
to restrict distributions and dividends from Subsidiaries.
5. OPTIONAL REDEMPTION
Except as set forth in the next two paragraphs, the Securities may not
be redeemed prior to December 1, 2001. On and after that date, the Company may
redeem the Securities in whole at any time or in part from time to time at the
following redemption prices (expressed in percentages of principal amount), plus
accrued interest to the Redemption Date (subject to the right of Holders of
record on the relevant record date to receive interest due on the related
interest payment date):
if redeemed during the 12-month period beginning on or after
December 1 of the years set forth below:
Redemption
Period Price
- ------ ----------
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.188%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.458%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.729%
2004 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . 100.000%
Notwithstanding the foregoing, at any time prior to December 1, 1999,
the Company may redeem in the aggregate up to 35% of the original aggregate
principal amount of Securities with the proceeds of one or more Public Equity
Offerings by Holdings (so long as substantially all its assets consist of its
investment in the Company) or the Company following which there is a Public
Market, at a redemption price (expressed as a percentage of principal amount) of
110.375% plus accrued interest to the Redemption Date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); PROVIDED, HOWEVER, that at least 65% of the
original aggregate principal amount of the Securities must remain outstanding
after each such redemption.
At any time on or prior to December 1, 2001, the Securities may also
be redeemed as a whole at the option of the Company upon the occurrence of a
Change of Control, upon not fewer than 30 nor more than 60 days prior notice
(but in no event more than 90 days after the occurrence of such Change of
Control) mailed by first-class mail to each Holder's registered address, at a
A-6
<PAGE>
redemption price equal to 100% of the principal amount thereof plus the
Applicable Premium as of, and accrued but unpaid interest, if any, to, the
Redemption Date (subject to the right of Holders of record on the relevant
record date to receive interest due on the relevant interest payment date).
6. NOTICE OF REDEMPTION
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Securities to be redeemed
at his registered address. Securities in denominations larger than $1,000 may
be redeemed in part but only in whole multiples of $1,000. If money sufficient
to pay the redemption price of and accrued interest on all Securities (or
portions thereof) to be redeemed on the redemption date is deposited with the
Paying Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Securities
(or such portions thereof) called for redemption.
7. PUT PROVISIONS
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions specified in the Indenture, to cause the
Company to repurchase all or any part of the Securities of such Holder at a
repurchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued interest to the date of repurchase (subject to the
right of holders of record on the relevant record date to receive interest due
on the related interest payment date) as provided in, and subject to the terms
of, the Indenture.
8. SUBORDINATION
The Securities are subordinated to Senior Indebtedness, as defined in
the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Company agrees, and each
Securityholder by accepting a Security agrees, to the subordination provisions
contained in the Indenture and authorizes the Trustee to give it effect and
appoints the Trustee as attorney-in-fact for such purpose.
9. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or
A-7
<PAGE>
exchange any Securities selected for redemption (except, in the case of a
Security to be redeemed in part, the portion of the Security not to be redeemed)
or any Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
10. PERSONS DEEMED OWNERS
The registered Holder of this Security may be treated as the owner of
it for all purposes.
11. UNCLAIMED MONEY
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
12. DISCHARGE AND DEFEASANCE
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
13. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount outstanding of the Securities
and (ii) any default or noncompliance with any provision may be waived with the
written consent of the Holders of a majority in principal amount outstanding of
the Securities. Subject to certain exceptions set forth in the Indenture,
without the consent of any Securityholder, the Company and the Trustee may amend
the Indenture or the Securities to cure any ambiguity, omission, defect or
inconsistency, or to comply with Article 5 of the Indenture, or to provide for
uncertificated Securities in addition to or in place of certificated Securities,
or to add guarantees with respect to the Securities or to secure the Securities,
or to add additional covenants or surrender rights and powers conferred on the
Company, or to comply with any request of the SEC in connection with qualifying
the Indenture under the Act, or to make certain changes in the subordination
provisions or to make any other change that does not adversely affect the rights
of any Securityholder, or to provide for the issuance and authorization of the
Exchange Securities.
A-8
<PAGE>
14. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default in payment of principal
on the Securities at maturity, upon redemption pursuant to paragraph 5 or 6 of
the Securities, upon acceleration or otherwise, or failure by the Company to
redeem or purchase Securities when required; (iii) failure by the Company to
comply with other agreements in the Indenture or the Securities, in certain
cases subject to notice and lapse of time; (iv) certain accelerations (including
failure to pay within any grace period after final maturity) of other
Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds
$10,000,000; (v) certain events of bankruptcy or insolvency with respect to the
Company and the Significant Subsidiaries; and (vi) certain judgments or decrees
for the payment of money in excess of $10,000,000. If an Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the Securities may declare all the Securities to be due and
payable immediately. Certain events of bankruptcy or insolvency are Events of
Default which will result in the Securities being due and payable immediately
upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in the interest of the Holders.
15. TRUSTEE DEALINGS WITH THE COMPANY
Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the Company
or the Trustee shall not have any liability for any obligations of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. By accepting a Security,
each Securityholder waives and releases all such liability. The waiver
A-9
<PAGE>
and release are part of the consideration for the issue of the Securities.
17. AUTHENTICATION
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. ABBREVIATIONS
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH HAS IN IT
THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:
THE WILLIAM CARTER COMPANY
1590 ADAMSON PARKWAY, SUITE 400
MORROW, GA 30260
ATTENTION OF CHIEF FINANCIAL OFFICER
A-10
<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
- --------------------------------------------------------------------------------
Date: ________________ Your Signature: _____________________
Signature Guarantee:_______________________________________
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
____________________________________________________________
Sign exactly as your name appears on the other side of this Security.
<PAGE>
OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.06 or 4.08 of the Indenture, check the box: / /
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:
$
Date: __________________ Your Signature: __________________
(Sign exactly as your name appears
on the other side of the Security)
Signature Guarantee:_______________________________________
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
<PAGE>
EXHIBIT B
[FORM OF FACE OF EXCHANGE SECURITY]
UNLESS AND UNTIL IT IS EXCHANGED IN WHOLE OR IN PART FOR SECURITIES IN
DEFINITIVE FORM, THIS SECURITY MAY NOT BE TRANSFERRED EXCEPT AS A WHOLE BY THE
DEPOSITORY TO A NOMINEE OF THE DEPOSITORY OR BY A NOMINEE OF THE DEPOSITORY TO
THE DEPOSITORY OR ANY SUCH NOMINEE TO A SUCCESSOR DEPOSITORY OR A NOMINEE OF
SUCH SUCCESSOR DEPOSITORY. UNLESS THIS CERTIFICATE IS PRESENTED BY AN
AUTHORIZED REPRESENTATIVE OF THE DEPOSITORY TRUST COMPANY ("DTC") TO THE COMPANY
OR ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT, AND ANY
CERTIFICATE ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR SUCH OTHER NAME AS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC (AND ANY PAYMENT IS MADE TO
CEDE & CO. OR SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED REPRESENTATIVE
OF DTC), ANY TRANSFER, PLEDGE OR OTHER USE HEREOF FOR VALUE OR OTHERWISE OR TO
ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER HEREOF, CEDE & CO., HAS
AN INTEREST HEREIN.2
THE WILLIAM CARTER COMPANY
10 3/8% SENIOR SUBORDINATED NOTE SERIES B DUE 2006
No. Cusip No.
$__________
THE WILLIAM CARTER COMPANY, a Massachusetts corporation, promises to
pay to , or registered assigns, the principal sum of on
December 1, 2006.
Interest Payment Dates: June 1 and December 1.
Record Dates: May 15 and November 15.
- --------------------
2 This paragraph should only be added if the Security is issued in global
form.
B-1
<PAGE>
Additional provisions of this Security are set forth on the other side
of this Security.
Dated: November 25, 1996
THE WILLIAM CARTER COMPANY
By:
-----------------------------------
---------------------------------
TRUSTEE'S CERTIFICATE OF
AUTHENTICATION
STATE STREET BANK AND TRUST [Seal]
COMPANY, as Trustee,
certifies that this is one
of the Securities referred
to in the Indenture
By:__________________________
Authorized Signatory
B-2
<PAGE>
[FORM OF REVERSE SIDE OF EXCHANGE SECURITY]
10 3/8% Senior Subordinated Note Series B due 2006
1. INTEREST
The William Carter Company, a Massachusetts corporation (such
corporation, and its successors and assigns under the Indenture hereinafter
referred to, being herein called the "Company"), promises to pay interest on the
principal amount of this Security at the rate per annum shown above. The
Company will pay interest semiannually on and of each year.
Interest on the Securities will accrue from the most recent date to which
interest has been paid or, if no interest has been paid, from , 1996.
Interest will be computed on the basis of a 360-day year of twelve 30-day
months. The Company shall pay interest on overdue principal at the rate borne
by the Securities plus 1% per annum, and it shall pay interest on overdue
installments of interest at the same rate to the extent lawful.
2. METHOD OF PAYMENT
The Company will pay interest on the Securities (except defaulted
interest) to the Persons who are registered holders of Securities at the close
of business on the May 15 or November 15 next preceding the interest payment
date even if Securities are canceled after the record date and on or before the
interest payment date. Holders must surrender Securities to a Paying Agent to
collect principal payments. The Company will pay principal and interest in
money of the United States that at the time of payment is legal tender for
payment of public and private debts. However, the Company may pay principal and
interest by check payable in such money. It may mail an interest check to a
Holder's registered address.
3. PAYING AGENT AND REGISTRAR
Initially, State Street Bank and Trust Company, a Massachusetts trust
company ("Trustee"), will act as Paying Agent and Registrar. The Company may
appoint and change any Paying Agent, Registrar or co-registrar without notice.
The Company or any of its domestically incorporated Wholly Owned Subsidiaries
may act as Registrar or coregistrar.
4. INDENTURE
The Company issued the Securities under an Indenture dated as of
November 25, 1996 ("Indenture"), between the Company and the Trustee. The
terms of the Securities include those stated in the Indenture and those made
part of the Indenture by reference to the Trust Indenture Act of 1939 (15 U.S.C.
Sections 77aaa-77bbbb) as
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in effect on the date of the Indenture (the "Act"). Terms defined in the
Indenture and not defined herein have the meanings ascribed thereto in the
Indenture. The Securities are subject to all such terms, and Securityholders
are referred to the Indenture and the Act for a statement of those terms.
The Securities are general unsecured obligations of the Company
limited to $100,000,000 aggregate principal amount at any one time outstanding
(subject to Section 2.07 of the Indenture). This Security is one of the
Exchange Securities referred to in the Indenture. The Securities include the
Initial Securities and any Exchange Securities issued in exchange for the
Initial Securities pursuant to the Indenture. The Initial Securities and the
Exchange Securities are treated as a single class of securities under the
Indenture. The Indenture imposes certain limitations on the issuance of debt by
the Company, the payment of dividends and other distributions and acquisitions
or retirements of the Company's Capital Stock and Subordinated Obligations, the
incurrence by the Company and its Subsidiaries of Liens on its property and
assets which do not equally and ratably secure the Securities, the sale or
transfer of assets and Subsidiary Stock, investments by the Company, the lines
of business in which the Company may operate, consolidations, mergers and
transfers of all or substantially all of the Company's assets and transactions
with Affiliates. In addition, the Indenture limits the ability of the Company
and its Subsidiaries to restrict distributions and dividends from Subsidiaries.
5. OPTIONAL REDEMPTION
Except as set forth in the next two paragraphs, the Securities may not
be redeemed prior to December 1, 2001. On and after that date, the Company may
redeem the Securities in whole at any time or in part from time to time at the
following redemption prices (expressed in percentages of principal amount), plus
accrued interest to the Redemption Date (subject to the right of Holders of
record on the relevant record date to receive interest due on the related
interest payment date):
if redeemed during the 12-month period beginning on or after December
1 of the years set forth below:
Redemption
Period Price
- ------ ----------
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105.188%
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 103.458%
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 101.729%
2004 and thereafter . . . . . . . . . . . . . . . . . . . . . . . . 100.000%
Notwithstanding the foregoing, at any time prior to December 1, 1999,
in the aggregate up to 35% of the original
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aggregate principal amount of Securities with the proceeds of one or more Public
Equity Offerings by Holdings (so long as substantially all its assets consist of
its investment in the Company) or the Company following which there is a Public
Market, at a redemption price (expressed as a percentage of principal amount) of
110.375% plus accrued interest to the Redemption Date (subject to the right of
Holders of record on the relevant record date to receive interest due on the
relevant interest payment date); PROVIDED, HOWEVER, that at least 65% of the
original aggregate principal amount of the Securities must remain outstanding
after each such redemption.
At any time on or prior to December 1, 2001, the Notes may also be
redeemed as a whole at the option of the Company upon the occurrence of a Change
of Control, upon not fewer than 30 nor more than 60 days prior notice (but in no
event more than 90 days after the occurrence of such Change of Control) mailed
by first-class mail to each Holder's registered address, at a redemption price
equal to 100% of the principal amount thereof plus the Applicable Premium as of,
and accrued but unpaid interest, if any, to, the Redemption Date (subject to the
right of Holders of record on the relevant record date to receive interest due
on the relevant interest payment date).
6. NOTICE OF REDEMPTION
Notice of redemption will be mailed at least 30 days but not more than
60 days before the redemption date to each Holder of Securities to be redeemed
at his registered address. Securities in denominations larger than $1,000 may
be redeemed in part but only in whole multiples of $1,000. If money sufficient
to pay the redemption price of and accrued interest on all Securities (or
portions thereof) to be redeemed on the redemption date is deposited with the
Paying Agent on or before the redemption date and certain other conditions are
satisfied, on and after such date interest ceases to accrue on such Securities
(or such portions thereof) called for redemption.
7. PUT PROVISIONS
Upon a Change of Control, any Holder of Securities will have the
right, subject to certain conditions specified in the Indenture, to cause the
Company to repurchase all or any part of the Securities of such Holder at a
repurchase price equal to 101% of the principal amount of the Securities to be
repurchased plus accrued interest to the date of repurchase (subject to the
right of holders of record on the relevant record date to receive interest due
on the related interest payment date) as provided in, and subject to the terms
of, the Indenture.
8. SUBORDINATION
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The Securities are subordinated to Senior Indebtedness, as defined in
the Indenture. To the extent provided in the Indenture, Senior Indebtedness
must be paid before the Securities may be paid. The Company agrees, and each
Securityholder by accepting a Security agrees, to the subordination provisions
contained in the Indenture and authorizes the Trustee to give it effect and
appoints the Trustee as attorney-in-fact for such purpose.
9. DENOMINATIONS; TRANSFER; EXCHANGE
The Securities are in registered form without coupons in denominations
of $1,000 and whole multiples of $1,000. A Holder may transfer or exchange
Securities in accordance with the Indenture. The Registrar may require a
Holder, among other things, to furnish appropriate endorsements or transfer
documents and to pay any taxes and fees required by law or permitted by the
Indenture. The Registrar need not register the transfer of or exchange any
Securities selected for redemption (except, in the case of a Security to be
redeemed in part, the portion of the Security not to be redeemed) or any
Securities for a period of 15 days before a selection of Securities to be
redeemed or 15 days before an interest payment date.
10. PERSONS DEEMED OWNERS
The registered Holder of this Security may be treated as the owner of
it for all purposes.
11. UNCLAIMED MONEY
If money for the payment of principal or interest remains unclaimed
for two years, the Trustee or Paying Agent shall pay the money back to the
Company at its request unless an abandoned property law designates another
Person. After any such payment, Holders entitled to the money must look only to
the Company and not to the Trustee for payment.
12. DISCHARGE AND DEFEASANCE
Subject to certain conditions, the Company at any time may terminate
some or all of its obligations under the Securities and the Indenture if the
Company deposits with the Trustee money or U.S. Government Obligations for the
payment of principal and interest on the Securities to redemption or maturity,
as the case may be.
13. AMENDMENT, WAIVER
Subject to certain exceptions set forth in the Indenture, (i) the
Indenture or the Securities may be amended with the written consent of the
Holders of at least a majority in principal amount
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outstanding of the Securities and (ii) any default or noncompliance with any
provision may be waived with the written consent of the Holders of a majority in
principal amount outstanding of the Securities. Subject to certain exceptions
set forth in the Indenture, without the consent of any Securityholder, the
Company and the Trustee may amend the Indenture or the Securities to cure any
ambiguity, omission, defect or inconsistency, or to comply with Article 5 of the
Indenture, or to provide for uncertificated Securities in addition to or in
place of certificated Securities, or to add guarantees with respect to the
Securities or to secure the Securities, or to add additional covenants or
surrender rights and powers conferred on the Company, or to comply with any
request of the SEC in connection with qualifying the Indenture under the Act, or
to make certain changes in the subordination provisions, or to make any change
that does not adversely affect the rights of any Securityholder.
14. DEFAULTS AND REMEDIES
Under the Indenture, Events of Default include (i) default for 30 days
in payment of interest on the Securities; (ii) default in payment of principal
on the Securities at maturity, upon redemption pursuant to paragraph 5 or 6 of
the Securities, upon acceleration or otherwise, or failure by the Company to
redeem or purchase Securities when required; (iii) failure by the Company to
comply with other agreements in the Indenture or the Securities, in certain
cases subject to notice and lapse of time; (iv) certain accelerations (including
failure to pay within any grace period after final maturity) of other
Indebtedness of the Company if the amount accelerated (or so unpaid) exceeds
$10,000,000; (v) certain events of bankruptcy or insolvency with respect to the
Company and the Significant Subsidiaries; and (vi) certain judgments or decrees
for the payment of money in excess of $10,000,000. If an Event of Default
occurs and is continuing, the Trustee or the Holders of at least 25% in
principal amount of the Securities may declare all the Securities to be due and
payable immediately. Certain events of bankruptcy or insolvency are Events of
Default which will result in the Securities being due and payable immediately
upon the occurrence of such Events of Default.
Securityholders may not enforce the Indenture or the Securities except
as provided in the Indenture. The Trustee may refuse to enforce the Indenture
or the Securities unless it receives reasonable indemnity or security. Subject
to certain limitations, Holders of a majority in principal amount of the
Securities may direct the Trustee in its exercise of any trust or power. The
Trustee may withhold from Securityholders notice of any continuing Default
(except a Default in payment of principal or interest) if it determines that
withholding notice is in the interest of the Holders.
15. TRUSTEE DEALINGS WITH THE COMPANY
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Subject to certain limitations imposed by the Act, the Trustee under
the Indenture, in its individual or any other capacity, may become the owner or
pledgee of Securities and may otherwise deal with and collect obligations owed
to it by the Company or its Affiliates and may otherwise deal with the Company
or its Affiliates with the same rights it would have if it were not Trustee.
16. NO RECOURSE AGAINST OTHERS
A director, officer, employee or stockholder, as such, of the Company
or the Trustee shall not have any liability for any obligations of the Company
under the Securities or the Indenture or for any claim based on, in respect of
or by reason of such obligations or their creation. By accepting a Security,
each Securityholder waives and releases all such liability. The waiver and
release are part of the consideration for the issue of the Securities.
17. AUTHENTICATION
This Security shall not be valid until an authorized signatory of the
Trustee (or an authenticating agent) manually signs the certificate of
authentication on the other side of this Security.
18. ABBREVIATIONS
Customary abbreviations may be used in the name of a Securityholder or
an assignee, such as TEN COM (=tenants in common), TEN ENT (=tenants by the
entireties), JT TEN (=joint tenants with rights of survivorship and not as
tenants in common), CUST (=custodian), and U/G/M/A (=Uniform Gift to Minors
Act).
19. CUSIP NUMBERS
Pursuant to a recommendation promulgated by the Committee on Uniform
Security Identification Procedures the Company has caused CUSIP numbers to be
printed on the Securities and has directed the Trustee to use CUSIP numbers in
notices of redemption as a convenience to Securityholders. No representation is
made as to the accuracy of such numbers either as printed on the Securities or
as contained in any notice of redemption and reliance may be placed only on the
other identification numbers placed thereon.
THE COMPANY WILL FURNISH TO ANY SECURITYHOLDER UPON WRITTEN REQUEST
AND WITHOUT CHARGE TO THE SECURITYHOLDER A COPY OF THE INDENTURE WHICH HAS IN IT
THE TEXT OF THIS SECURITY IN LARGER TYPE. REQUESTS MAY BE MADE TO:
THE WILLIAM CARTER COMPANY
1590 ADAMSON PARKWAY, SUITE 400
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<PAGE>
MORROW, GA 30260
ATTENTION OF CHIEF FINANCIAL OFFICER
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<PAGE>
ASSIGNMENT FORM
To assign this Security, fill in the form below:
I or we assign and transfer this Security to
(Print or type assignee's name, address and zip code)
(Insert assignee's soc. sec. or tax I.D. No.)
and irrevocably appoint agent to transfer this
Security on the books of the Company. The agent may substitute another to act
for him.
____________________________________________________________
Date: ________________ Your Signature: _____________________
Signature Guarantee:_______________________________________
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
____________________________________________________________
Sign exactly as your name appears on the other side of this Security.
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OPTION OF HOLDER TO ELECT PURCHASE
If you want to elect to have this Security purchased by the Company
pursuant to Section 4.06 or 4.08 of the Indenture, check the box: / /
If you want to elect to have only part of this Security purchased by
the Company pursuant to Section 4.06 or 4.08 of the Indenture, state the amount:
$
Date: __________________ Your Signature: __________________
(Sign exactly as your name appears on
the other side of the Security)
Signature Guarantee:_______________________________________
(Signature must be guaranteed by a
participant in a recognized signature
guarantee medallion program)
<PAGE>
EXHIBIT C
CERTIFICATE TO BE DELIVERED UPON TRANSFER
OR EXCHANGE OF TRANSFER RESTRICTED SECURITIES
This certificate relates to $_________ principal amount of Securities held in
(check applicable space) ____ book-entry or _____ definitive form by the
undersigned.
The undersigned (check one box below):
/ / has requested the Trustee by written order to deliver in exchange for its
beneficial interest in the Global Security held by the Depository a
Security or Securities in definitive, registered form of authorized
denominations and an aggregate principal amount equal to its beneficial
interest in such Global Security (or the portion thereof indicated above);
/ / has requested the Trustee by written order to exchange or register the
transfer of a Security or Securities.
In connection with any transfer or exchange of any of such Securities occurring
prior to the date that is three years after the later of the date of original
issuance of such Securities and the last date, if any, on which such Securities
were owned by the Company or any Affiliate of the Company, the undersigned
confirms that such Securities are being:
CHECK ONE BOX BELOW:
(1) / / acquired for the undersigned's own account, without transfer
(in satisfaction of Section 2.06(a)(ii)(A) or Section
2.06(d)(i)(A) of the Indenture); or
(2) / / transferred to the Company; or
(3) / / transferred pursuant to and in compliance with Rule 144A
under the Securities Act of 1933, as amended; or
(4) / / transferred pursuant to and in compliance with Regulation S
under the Securities Act of 1933, as amended; or
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<PAGE>
(5) / / transferred to an institutional "accredited investor" (as
defined in Rule 501(a)(1), (2), (3) or (7) under the
Securities Act of 1933, as amended) that has furnished to
the Trustee a signed letter containing certain
representations and agreements (the form of which letter
appears as Exhibit D to the Indenture); or
(6) / / transferred pursuant to another available exemption from the
registration requirements of the Securities Act of 1933, as
amended.
Unless one of the boxes is checked, the Trustee will refuse to register any of
the Securities evidenced by this certificate in the name of any person other
than the registered holder thereof; PROVIDED, HOWEVER, that if box (6) is
checked, the Trustee or the Company may require, prior to registering any such
transfer of the Securities, in their sole discretion, such legal opinions,
certifications and other information as the Trustee or Company has reasonably
requested to confirm that such transfer is being made pursuant to an exemption
from, or in a transaction not subject to, the registration requirements of the
Securities Act of 1933, as amended, such as the exemption provided by Rule 144
under such Act.
______________________________
Signature
Signature Guarantee:
_________________________ ______________________________
Signature
(Signature must be guaranteed
by a participant in a signature
guarantee medallion program)
____________________________________________________________
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EXHIBIT D
Transferee Letter of Representation
State Street Bank and Trust Company
Two International Plaza, 4th Floor
Boston, MA 20110
The William Carter Company
1590 Adamson Parkway, Suite 400
Morrow, GA 30260
Dear Sirs:
This certificate is delivered to request a transfer of $
principal amount of the 10 3/8% Senior Subordinated Notes due 2006 (the "Notes")
of The William Carter Company (the "Company").
Upon transfer, the Notes would be registered in the name of the new
beneficial owner as follows:
Name: ___________________________________
Address: ________________________________
Taxpayer ID Number: _____________________
The undersigned represents and warrants to you that:
1. We are an institutional "accredited investor" (as defined in Rule
501(a)(1), (2), (3) or (7) under the Securities Act of 1933, as amended (the
"Securities Act")) purchasing for our own account or for the account of such an
institutional "accredited investor," and we are acquiring the Notes not with a
view to, or for offer or sale in connection with, any distribution in violation
of the Securities Act. We have such knowledge and experience in financial and
business matters as to be capable of evaluating the merits and risk of our
investment in the Notes and invest in or purchase securities similar to the
Notes in the normal course of our business. We and any accounts for which we
are acting are each able to bear the economic risk of our or its investment.
2. We understand that the Notes have not been registered under the
Securities Act and, unless so registered, may not be sold except as permitted in
the following sentence. We agree on our own behalf and on behalf of any
investor account for which we are purchasing Notes to offer, sell or otherwise
transfer such Notes prior to the date which is three years after the later of
the date of original issue and the last date on which the Company or any
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<PAGE>
affiliate of the Company was the owner of such Notes (or any predecessor
thereto) (the "Resale Restriction Termination Date") only (a) to the Company,
(b) pursuant to a registration statement which has been declared effective under
the Securities Act, (c) in a transaction complying with the requirements of Rule
144A under the Securities Act, to a person we reasonably believe is a qualified
institutional buyer under Rule 144A (a "QIB") that purchases for its own account
or for the account of a QIB and to whom notice is given that the transfer is
being made in reliance on Rule 144A, (d) pursuant to offers and sales that occur
outside the United States within the meaning of Regulation S under the
Securities Act, (e) to an institutional "accredited investor" within the meaning
of Rule 501(a)(1), (2), (3) or (7) under the Securities Act that is purchasing
for its own account or for the account of such an institutional "accredited
investor", in each case in a minimum principal amount of Notes of $250,000 or
(f) pursuant to any other available exemption from the registration requirements
of the Securities Act, subject in each of the foregoing cases to any requirement
of law that the disposition of our property or the property of such investor
account or accounts be at all times within our or their control and in
compliance with any applicable state securities laws. The foregoing
restrictions on resale will not apply subsequent to the Resale Restriction
Termination Date. If any resale or other transfer of the Notes is proposed to
be made pursuant to clause (e) above prior to the Resale Restriction Termination
Date, the transferor shall deliver a letter from the transferee substantially in
the form of this letter to the Company and the Trustee, which shall provide,
among other things, that the transferee is an institutional "accredited
investor" within the meaning of Rule 501(a)(1), (2), (3) or (7) under the
Securities Act and that it is acquiring such Notes for investment purposes and
not for distribution in violation of the Securities Act. Each purchaser
acknowledges that the Company and the Trustee reserve the right prior to any
offer, sale or other transfer prior to the Resale Termination Date of the Notes
pursuant to clause (f) above to require the delivery of an opinion of counsel,
certifications and/or other information satisfactory to the Company and the
Trustee.
TRANSFEREE:_____________________
By: ____________________________
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<PAGE>
EXHIBIT E
FORM OF NOTE GUARANTEE
----------------------
NOTE GUARANTEE, dated as of , , made by
(the "Guarantor"), the undersigned subsidiary of The William Carter
Company, in favor of the Holders and the Trustee (as defined in the Indenture
referred to below).
Reference is made to the Indenture dated as of November 25, 1996 (as
amended, restated, supplemented, modified or waived from time to time, the
"Indenture"), between The William Carter Company (the "Company") and the
Trustee.
W I T N E S S E T H:
WHEREAS the Company is a party to the Indenture;
WHEREAS the Company owns directly all of or a majority interest in the
Guarantor;
WHEREAS the Guarantor will derive substantial direct and indirect
benefit from the transactions contemplated by the Indenture;
NOW, THEREFORE, in consideration of the promises thereby, the
Guarantor hereby agrees with and for the benefit of the Holders as follows:
ARTICLE I
Definitions
-----------
SECTION 1.01. DEFINED TERMS. As used in this Guarantee, terms
defined in the Indenture or in the preamble or recitals hereto are used herein
as therein defined, except that the term "Holders" in this guarantee shall refer
to the term "Holders" as defined in the Indenture and the Trustee acting on
behalf or for the benefit of such holders.
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ARTICLE II
Representations and Warranties of the Guarantor
-----------------------------------------------
SECTION 2.01. REPRESENTATIONS AND WARRANTIES. The Guarantor hereby
represents and warrants to the Holders as follows:
(a) DUE EXISTENCE; COMPLIANCE. The Guarantor is a corporation or
limited partnership duly organized, validly existing and in good standing,
where applicable, under the laws of the jurisdiction in which it was
incorporated or organized and has all requisite power and authority under
such laws to own or lease and operate its properties and to carry on its
business as now conducted and as proposed to be conducted, and to execute,
deliver and perform its obligations under this Guarantee. The Guarantor is
duly qualified or licensed to do business as a foreign corporation or
entity and is in good standing, where applicable, in all jurisdictions in
which it owns or leases property, or proposes to own or lease property, or
in which the conduct of its business requires it to so qualify or be
licensed, except to the extent that the failure to so qualify or be in good
standing would have no material adverse effect on the business, operations,
properties, prospects or condition (financial or otherwise) of the
Guarantor. The Guarantor is in compliance in all material respects with
all applicable law, rules, regulations and orders.
(b) CORPORATE AUTHORITIES; NO CONFLICTS. The execution, delivery and
performance by the Guarantor of this Guarantee is within its corporate or
limited partnership powers and has been duly authorized by all necessary
corporate and stockholder approvals or partnership approvals and (i) does
not contravene its organizational documents or any law, rule, regulation,
judgment, order or decree applicable to or binding on the Guarantor and
(ii) does not contravene, and will not result in the creation of any lien
under, any provision of any contract, indenture, mortgage or agreement to
which the Guarantor is a party, or by which it or any of its properties are
bound.
(c) GOVERNMENT APPROVALS AND AUTHORIZATIONS. No authorization or
approval or other action by, and no notice to or filing with, any
governmental authority or regulatory body is required for the due
execution, delivery and performance by or enforcement against the Guarantor
of this Guarantee (except such governmental approvals or authorizations as
have been duly obtained or made and remain in full force and effect).
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<PAGE>
(d) LEGAL, VALID AND BINDING. This Guarantee is the legal valid and
binding obligation of the Guarantor, enforceable against the Guarantor in
accordance with its terms.
(e) LITIGATION. There is no pending or threatened action or
proceeding affecting the Guarantor by or before any court, governmental
agency or arbitrator, which may materially adversely affect the condition,
operations, business, prospects, properties or assets of the Guarantor, or
prohibit, limit in any way or materially adversely affect the ability of
the Guarantor to perform its obligations under this Guarantee.
(f) IMMUNITIES. Neither the Guarantor nor its property has any
immunity from jurisdiction of any court or from any legal process (whether
through service or notice, attachment prior to judgment, attachment in aid
of execution, execution or otherwise) under applicable law.
(g) NO FILING. To ensure the legality, validity, enforceability or
admissibility in evidence of this Guarantee in each of the jurisdictions in
which the Guarantor is incorporated or organized and the Commonwealth of
Massachusetts or any other jurisdiction in which the Guarantor conducts
business, it is not necessary that this Guarantee be filed or recorded with
any court or other authority in such jurisdiction, or that any stamp or
similar tax be paid on or with respect to this Guarantee.
(h) NO DEFAULTS. There does not exist any event of default, or any
event that with notice or lapse of time or both would constitute an event
of default, under any agreement to which the Guarantor is a party or by
which it may be bound, or to which any of its properties or assets may be
subject which default would have a material adverse effect on the
Guarantor, or would materially adversely affect the Guarantor's ability to
perform its obligations under this Guarantee.
(i) SOLVENCY. The Guarantor is on the date hereof, and at all times
will be, solvent.
ARTICLE III
Guarantee
---------
SECTION 3.01. GUARANTEE. The Guarantor hereby unconditionally and
irrevocably guaranties to each Holder of the Securities (a) the full and
punctual payment of principal of and
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<PAGE>
interest on the Securities when due, whether at maturity, by acceleration, by
redemption or otherwise, and all other monetary obligations of the Company under
the Indenture and the Securities and (b) the full and punctual performance
within applicable grace periods of all other obligations of the Company under
the Indenture and the Securities (all the foregoing being hereinafter
collectively called the "Obligations"). The Guarantor further agrees that the
Obligations may be extended or renewed, in whole or in part, without notice or
further assent from it, and that it will remain bound under this Article III
notwithstanding any extension or renewal of any Obligation.
The Guarantor waives presentation to, demand of payment from and
protest to the Company of any of the Obligations and also waives notice of
protest for nonpayment. The Guarantor waives notice of any default under the
Securities or the Obligations. The obligations of the Guarantor hereunder shall
not be affected by (a) the failure of any Holder to assert any claim or demand
or to enforce any right or remedy against the Company or any other person under
the Indenture, the Securities or any other agreement or otherwise; (b) any
extension or renewal of any thereof; (c) any rescission, waiver, amendment or
modification of any of the terms or provisions of the Indenture, the Securities
or any other agreement; or (d) the failure of any Holder to exercise any right
or remedy against any other Guarantor of the Obligations.
The Guarantor further agrees that its Guarantee herein constitutes a
guarantee of payment, performance and compliance when due (and not a guarantee
of collection) and waives any right to require that any resort be had by any
Holder to any security held for payment of the Obligations.
Except as otherwise provided herein, the obligations of the Guarantor
hereunder shall not be subject to any reduction, limitation, impairment or
termination for any reason, including any claim of waiver, release, surrender,
alteration or compromise, and shall not be subject to any defense of setoff,
counterclaim, recoupment or termination whatsoever or by reason of the
invalidity, illegality or unenforceability of the Obligations or otherwise.
Without limiting the generality of the foregoing, the obligations of the
Guarantor herein shall not be discharged or impaired or otherwise affected by
the failure of any Holder to assert any claim or demand or to enforce any remedy
under the Indenture, the Securities or any other agreement, by any waiver or
modification of any thereof, by any default, failure or delay, willful or
otherwise, in the performance of the Obligations, or by any other act or thing
or omission or delay to do any other act or thing which may or might in any
manner or to any extent vary the risk of the Guarantor or would otherwise
operate as a discharge of the Guarantor as a matter of law or equity.
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The Guarantor further agrees that its Guarantee herein shall continue
to be effective or be reinstated, as the case may be, if at any time payment, or
any part thereof, of principal of or interest on any Obligation is rescinded or
must otherwise be restored by any Holder upon the bankruptcy or reorganization
of the Company or otherwise.
In furtherance of the foregoing and not in limitation of any other
right which any Holder has at law or in equity against the Guarantor by virtue
hereof, upon the failure of the Company to pay the principal of or interest on
any Obligation when and as the same shall become due, whether at maturity, by
acceleration, by redemption or otherwise, or to perform or comply with any other
Obligation, the Guarantor hereby promises to and will, upon receipt of written
demand by the Trustee or the Holders of a majority of the Securities (the
"Majority Securityholders"), forthwith pay, or cause to be paid, in cash, to the
Holders an amount equal to the sum of (i) the unpaid principal amount of such
Obligations, (ii) accrued and unpaid interest on such Obligations (but only to
the extent not prohibited by law) and (iii) all other monetary Obligations of
the Company to the Holders.
The Guarantor agrees that it shall not be entitled to any right of
subrogation in relation to the Holders in respect of any Obligations guarantied
hereby until payment in full of all Obligations. The Guarantor further agrees
that, as between such Guarantor, on the one hand, and the Holders, on the other
hand, (x) the maturity of the Obligations guarantied hereby may be accelerated
for the purposes of such Guarantor's Guarantee herein, notwithstanding any stay,
injunction or other prohibition preventing such acceleration in respect of the
Obligations guarantied hereby, and (y) in the event of any declaration of
acceleration of such Obligations, such Obligations (whether or not due and
payable) shall forthwith become due and payable by such Guarantor for the
purposes of this Section 3.01.
The Guarantor also agrees to pay any and all costs and expenses
(including reasonable attorneys' fees) incurred by any Holder in enforcing any
rights under this Section 3.01.
SECTION 3.02. LIMITATION ON LIABILITY. (a) Any term or provision of
this Guarantee to the contrary notwithstanding, the maximum aggregate amount of
the Obligations guarantied hereunder by the Guarantor shall not exceed the
maximum amount that can be hereby guarantied without rendering this Guarantee,
as it relates to such Guarantor, voidable under applicable law relating to
fraudulent conveyance or fraudulent transfer.
(b) This Guarantee shall terminate and be of no further force or
effect upon the sale or other transfer (i) by the
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Guarantor of all or substantially all of its assets or (ii) by the Company of
all of its stock or other equity interests in the Guarantor (whether by sale,
merger, consolidation or otherwise), to a Person that is not an Affiliate of the
Company; PROVIDED, HOWEVER, that such sale or transfer constitutes an Asset
Disposition as defined in the Indenture. Upon notice to the Trustee that such a
sale or transfer described in this clause 3.02(b) has occurred, the Trustee
shall return the original Guarantee to the Guarantor.
SECTION 3.03. SUCCESSORS AND ASSIGNS. Subject to Section 3.02(b)
hereof, this Article III shall be binding upon the Guarantor and its successors
and assigns and shall inure to the benefit of the successors and assigns of the
Holders and, in the event of any transfer or assignment of rights by any Holder,
the rights and privileges conferred upon that party in this Guarantee and in the
Securities shall automatically extend to and be vested in such transferee or
assignee, all subject to the terms and conditions of this Guarantee.
SECTION 3.04. NO WAIVER, ETC. Neither a failure nor a delay on the
part of the Holders or the Trustee in exercising any right, power or privilege
under this Article III shall operate as a waiver thereof, nor shall a single or
partial exercise thereof preclude any other or further exercise of any right,
power or privilege. The rights, remedies and benefits of the Holders and the
Trustee herein expressly specified are cumulative and not exclusive of any other
rights, remedies or benefits which either may have under this Article III at
law, in equity, by statute or otherwise.
SECTION 3.05. MODIFICATION, ETC. No modification, amendment or
waiver of any provision of this Article, nor the consent to any departure by the
Guarantor therefrom, shall in any event be effective unless the same shall be in
writing and signed by the Majority Securityholders holding a majority in
aggregate principal amount of the Securities then outstanding, and then such
waiver or consent shall be effective only in the specific instance and for the
purpose for which it was given. No notice to or demand on the Guarantor in any
case shall entitle such Guarantor or any other guarantor to any other or further
notice or demand in the same, similar or other circumstances.
ARTICLE IV
Subordination
-------------
SECTION 4.01. SUBORDINATION. The Obligations of the Guarantor under
this Guarantee are subordinate to the obligations
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<PAGE>
of the Guarantor under any Guarantee of the Senior Credit Facility and any other
Senior Indebtedness of the Company to the extent and in the manner that the
Indebtedness evidenced by the Securities is subordinate to the obligations of
the Company under the Senior Credit Facility and other Senior Indebtedness of
the Company under Article 10 of the Indenture. By acceptance of this Guarantee,
the Holders agree to be bound by the foregoing provisions.
ARTICLE V
Miscellaneous
-------------
SECTION 5.01. NOTICES. All notices and other communications
pertaining to this Guarantee or any Security shall be in writing and shall be
deemed to have been duly given upon the receipt thereof. Such notices shall be
delivered by hand, or mailed, certified or registered mail with postage prepaid
(a) if to the Guarantor, at its address set forth below, and (b) if to the
Holders or the Trustee, as provided in the Indenture.
SECTION 5.02. PARTIES. Nothing expressed or mentioned in this
Guarantee is intended or shall be construed to give any Person, firm or
corporation, other than the Holders and the Trustee and the holders of any
Senior Indebtedness, any legal or equitable right, remedy or claim under or in
respect of this Guarantee or any provision herein contained.
SECTION 5.03. GOVERNING LAW. This Agreement shall be governed by the
laws of the State of New York regardless of the laws that might otherwise govern
under applicable principles of conflict of laws thereof.
SECTION 5.04. SEVERABILITY CLAUSE. In case any provision in this
Guarantee 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 and such provision shall be ineffective only to the extent of
such invalidity, illegality or unenforceability.
SECTION 5.05. WAIVERS, AMENDMENTS AND REMEDIES. The failure to
insist in any one or more instances upon strict performance of any of the
provisions of this Guarantee or to take advantage of any of its rights hereunder
shall not be construed as a waiver of any such provisions or the relinquishment
of any such rights, but the same shall continue and remain in full force and
effect. Except as otherwise expressly limited in this Guarantee, all remedies
under this Guarantee shall be cumulative and in addition to every other remedy
provided for herein or by law.
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<PAGE>
SECTION 5.06. ENTIRE AGREEMENT. This Guarantee is intended by the
parties to be a final expression of their agreement in respect of the subject
matter contained herein and supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
SECTION 5.07. HEADINGS. The headings of the Articles and the
Sections in this Guarantee are for convenience of reference only and shall not
be deemed to alter or affect the meaning or interpretation of any provisions
hereof.
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<PAGE>
IN WITNESS WHEREOF, the Guarantor has duly executed this Guarantee as
of the date first above written.
[NAME OF GUARANTOR],
By:
---------------------------------------------
Name:
Title:
Address:
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<PAGE>
THE WILLIAM CARTER COMPANY
$100,000,000
10 3/8% Senior Subordinated Notes due 2006
EXCHANGE AND REGISTRATION RIGHTS AGREEMENT
------------------------------------------
November 25, 1996
BT SECURITIES CORPORATION
BANKERS TRUST INTERNATIONAL PLC
CHASE SECURITIES INC.
GOLDMAN SACHS & CO.
c/o BT Notes Corporation
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
The William Carter Company, a Massachusetts corporation (the
"Company"), proposes to issue and sell to certain purchasers (the "Initial
Purchasers"), upon the terms set forth in a purchase agreement dated
November 20, 1996 (the "Purchase Agreement"), $100,000,000 principal amount of
its 10 3/8% Senior Subordinated Notes due 2006 (the "Notes"). Capitalized terms
used but not specifically defined herein are defined in the Purchase Agreement.
As an inducement to the Initial Purchasers to enter into the Purchase Agreement
and in satisfaction of a condition to your obligations thereunder, the Company
agrees with you, for the benefit of the holders of the Notes (including the
Initial Purchasers) (the "Holders"), as follows:
1. REGISTERED EXCHANGE OFFER. The Company shall prepare and, not
later than 90 days following the Closing Date, shall file with the Commission a
registration statement (the "Exchange Offer Registration Statement") on an
appropriate form under the Securities Act with respect to a proposed offer (the
"Registered Exchange Offer") to the Holders to issue and deliver to such
Holders, in exchange for the Notes, a like aggregate principal amount of debt
securities of the Company (the "Exchange Notes") identical in all material
respects to the Notes, except for the transfer restrictions relating to the
Notes, shall use its best efforts to cause the Exchange Offer Registration
Statement to
<PAGE>
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become effective under the Securities Act within 135 days after the Closing Date
and shall keep the Exchange Offer Registration Statement effective for not less
than 30 days (or longer, if required by applicable law) after the date on which
notice of the Exchange Offer is mailed to the Holders (such period being called
the "Exchange Offer Registration Period"). The Exchange Notes will be issued
under the Indenture or an indenture (the "Exchange Notes Indenture") between the
Company and the Trustee or such other bank or trust company reasonably
satisfactory to you, as trustee (the "Exchange Notes Trustee"), such indenture
to be identical in all material respects with the Indenture except for the
transfer restrictions relating to the Notes (as described above).
Upon the effectiveness of the Exchange Offer Registration Statement,
the Company shall promptly commence the Registered Exchange Offer, it being the
objective of such Registered Exchange Offer to enable each Holder electing to
exchange Notes for Exchange Notes (assuming that such Holder is not an affiliate
of the Company within the meaning of the Securities Act, acquires the Exchange
Notes in the ordinary course of such Holder's business and has no arrangements
with any person to participate in the distribution of the Exchange Notes) to
trade such Exchange Notes from and after their receipt without any limitations
or restrictions under the Securities Act and without material restrictions under
the securities laws of the several states of the United States. The Company
acknowledges that, pursuant to current interpretations by the Commission's staff
of Section 5 of the Securities Act, each Holder that is a broker-dealer electing
to exchange Notes, acquired for its own account as a result of market making
activities or other trading activities, for Exchange Notes (an "Exchanging
Dealer"), is required to deliver a prospectus containing the information set
forth in Annex A hereto on the cover, in Annex B hereto in the "Exchange Offer
Procedures" section and the "Purpose of the Exchange Offer" section, and in
Annex C hereto in the "Plan of Distribution" section of such prospectus in
connection with a sale of any such Exchange Notes received by such Exchanging
Dealer pursuant to the Registered Exchange Offer.
In connection with the Registered Exchange Offer, the Company shall:
(a) mail to each Holder a copy of the prospectus forming part of the
Exchange Offer Registration Statement, together with an appropriate letter
of transmittal and related documents;
<PAGE>
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(b) keep the Registered Exchange Offer open for not less than 30 days
after the date notice thereof is mailed to the Holders (or longer if
required by applicable law);
(c) utilize the services of a Depositary for the Registered Exchange
Offer with an address in the Borough of Manhattan, The City of New York;
(d) permit Holders to withdraw tendered Notes at any time prior to
the close of business, New York time, on the last business day on which the
Registered Exchange Offer shall remain open; and
(e) otherwise comply in all respects with all applicable laws.
As soon as practicable after the close of the Registered Exchange
Offer, the Company shall:
(a) accept for exchange all Notes tendered and not validly withdrawn
pursuant to the Registered Exchange Offer;
(b) deliver to the Trustee for cancellation all Notes so accepted for
exchange; and
(c) cause the Trustee or the Exchange Notes Trustee, as the case may
be, promptly to authenticate and deliver to each Holder of Notes, Exchange
Notes equal in principal amount to the Notes of such Holder so accepted for
exchange.
Interest on each Exchange Security issued pursuant to the Registered
Exchange Offer will accrue from the last interest payment date on which interest
was paid on the Notes surrendered in exchange therefor or, if no interest has
been paid on the Notes, from the date of original issue of the Notes.
The Company may require each holder of Notes participating in the
Registered Exchange Offer to represent to the Company that at the time of the
consummation of the Registered Exchange Offer (i) any Exchange Notes received by
such holder will be acquired in the ordinary course of business, (ii) such
holder will have no arrangements or understanding with any person to participate
in the distribution of the Notes or the Exchange Notes within the meaning of the
Securities Act and (iii) such holder is not an affiliate of the Company within
the meaning of the Securities Act.
<PAGE>
-4-
Notwithstanding any other provisions hereof, the Company will ensure
that (i) any Exchange Offer Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Exchange Offer Registration Statement and any amendment
thereto does not, when it becomes effective, 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 and (iii) any prospectus
forming part of any Exchange Offer Registration Statement, and any supplement to
such prospectus, does not include an untrue statement of a material fact or omit
to state a material fact necessary in order to make the statements, in the light
of the circumstances under which they were made, not misleading.
If, prior to consummation of the Registered Exchange Offer, the
Initial Purchasers hold any Notes acquired by them and having, or which are
reasonably likely to be determined to have, the status of an unsold allotment in
the initial distribution, the Company upon the request of any of the Initial
Purchasers simultaneously with the delivery of the Exchange Notes in the
Registered Exchange Offer, will issue and deliver to the Initial Purchasers in
exchange (the "Private Exchange") for such Notes held by the Initial Purchasers
a like principal amount of debt securities of the Company that are identical in
all material respects to the Exchange Notes, except that they will continue to
bear a legend regarding transfer restrictions (the "Private Exchange Notes")
(and which are issued pursuant to the Exchange Notes Indenture). The Private
Exchange Notes shall bear the same CUSIP number as the Exchange Notes. The
Exchange Notes Indenture shall provide that the Exchange Notes and the Private
Exchange Notes shall vote and consent together on all matters as one class and
that neither the Exchange Notes nor the Private Exchange Notes will have the
right to vote or consent as a separate class on any matter.
2. SHELF REGISTRATION. If, because of any change in law or
applicable interpretations thereof by the Commission's staff, the Company
determines that it is not permitted to effect the Registered Exchange Offer as
contemplated by Section 1 hereof, or if for any other reason the Registered
Exchange Offer is not consummated within 165 days of the date hereof, or if any
Initial Purchaser so requests with respect to Private Exchange Notes or if any
Holder (other than an Exchanging Dealer) is not eligible to participate in the
Registered Exchange Offer or, in the case of any Holder that participates in the
Registered Exchange Offer (other than an Exchanging Dealer), does not receive
freely tradeable
<PAGE>
-5-
Exchange Notes in exchange for tendered Notes or if the Company so elects, the
following provisions shall apply:
(a) The Company shall as promptly as practicable file with the
Commission and thereafter shall use its best efforts to cause to be declared
effective a registration statement on an appropriate form under the Securities
Act relating to the offer and sale of the Transfer Restricted Notes (as defined
below) by the Holders from time to time in accordance with the methods of
distribution elected by such Holders and set forth in such registration
statement (hereafter, a "Shelf Registration Statement" and, together with any
Exchange Offer Registration Statement, a "Registration Statement").
(b) The Company shall use its best efforts to keep the Shelf
Registration Statement continuously effective in order to permit the prospectus
forming part thereof to be usable by Holders for a period of three years from
the date the Shelf Registration Statement is declared effective by the
Commission or such shorter period that will terminate when all the Notes covered
by the Shelf Registration Statement have been sold pursuant to the Registration
Statement (in any such case, such period being called the "Shelf Registration
Period"). The Company shall be deemed not to have used its best efforts to keep
the Shelf Registration Statement effective during the requisite period if it
voluntarily takes any action that would result in Holders of Notes covered
thereby not being able to offer and sell such Notes during that period, unless
(i) such action is required by applicable law, or (ii) such action is taken in
good faith and for valid business reasons (not including avoidance of the
Company's obligations hereunder), including the acquisition or divestiture of
assets, so long as the Company promptly thereafter comply with the requirements
of Section 4(j) hereof, if applicable.
(c) Notwithstanding any other provisions hereof, the Company will
ensure that (i) any Shelf Registration Statement and any amendment thereto and
any prospectus forming part thereof and any supplement thereto complies in all
material respects with the Securities Act and the rules and regulations
thereunder, (ii) any Shelf Registration Statement and any amendment thereto does
not, when it becomes effective, 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 and (iii) any prospectus forming part
of any Shelf Registration Statement, and any supplement to such prospectus, does
not include an untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements, in the
<PAGE>
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light of the circumstances under which they were made, not misleading.
3. LIQUIDATED DAMAGES. (a) The parties hereto agree that the
Holders of Notes will suffer damages if the Company fails to fulfill its
obligations under Section 1 or Section 2, as applicable, and that it would not
be feasible to ascertain the extent of such damages. Accordingly, if (i) the
applicable Registration Statement is not filed with the Commission on or prior
to 90 days after the Closing Date, (ii) the Exchange Offer Registration
Statement or, as the case may be, the Shelf Registration Statement, is not
declared effective within 135 days after the Closing Date, (iii) the Exchange
Offer is not consummated on or prior to 165 days after the Closing Date, or (iv)
the Shelf Registration Statement is filed and declared effective within 135 days
after the Closing Date but shall thereafter cease to be effective (at any time
that the Company is obligated to maintain the effectiveness thereof) without
being succeeded within 30 days by an additional Registration Statement filed and
declared effective (each such event referred to in clauses (i) through (iv), a
"Registration Default"), the Company will pay liquidated damages to each holder
of Transfer Restricted Notes (as defined below), during the period of such
Registration Default, in an amount equal to $0.192 per week (calculated on a pro
forma basis) per $1,000 principal amount of the Notes constituting Transfer
Restricted Notes held by such holder until the applicable Registration Statement
is filed or declared effective, the Exchange Offer is consummated or the Shelf
Registration Statement again becomes effective, as the case may be. Following
the cure of all Registration Defaults, the accrual of liquidated damages will
cease. "Transfer Restricted Notes" means each Security until (i) the date on
which such Security has been exchanged for a freely transferrable Exchange Note
in the Exchange Offer, (ii) the date on which such Security has been effectively
registered under the Securities Act and disposed of in accordance with the Shelf
Registration Statement or (iii) the date on which such Security is distributed
to the public pursuant to Rule 144 under the Securities Act or is salable
pursuant to Rule 144(k) under the Securities Act.
(b) The Company shall notify the Trustee and Paying Agent under the
Indenture immediately upon the happening of each and every Registration
Default. The Company shall pay the liquidated damages due on the Transfer
Restricted Notes by depositing with the Paying Agent, in trust, for the
benefit of the Holders thereof, prior to 10:00 a.m. New York City time on the
next interest payment date specified by the Indenture and the Notes, sums
sufficient to pay the liquidated damages then due. The liquidated damages
due shall be payable on each interest payment
<PAGE>
-7-
date specified by the Indenture to the record holder entitled to receive the
interest payment to be made on such date. Each obligation to pay liquidated
damages shall be deemed to accrue from and including the applicable Registration
Default.
(c) The parties hereto agree that the liquidated damages provided for
in this Section 3 constitute a reasonable estimate of and are intended to
constitute the sole damages that will be suffered by holders of Transfer
Restricted Notes by reason of the failure of the Shelf Registration, or the
Exchange Offer, to be filed, to be declared effective, to be consummated or to
remain effective, as the case may be, to the extent required by this Agreement.
4. REGISTRATION PROCEDURES. In connection with any Shelf
Registration Statement and, to the extent applicable, any Exchange Offer
Registration Statement, the following provisions shall apply:
(a) The Company shall (i) furnish to you, prior to the filing thereof
with the Commission, a copy of the Registration Statement and each amendment
thereof and each supplement, if any, to the prospectus included therein and, in
the event that the Initial Purchasers (with respect to any portion of an unsold
allotment from the original offering) is participating in the Registered
Exchange Offer or the Shelf Registration, shall use its best efforts to reflect
in each such document, when so filed with the Commission, such comments as you
reasonably may propose; (ii) include the information set forth in Annex A hereto
on the cover, in Annex B hereto in the "Exchange Offer Procedures" section and
the "Purpose of the Exchange Offer" section and in Annex C hereto in the "Plan
of Distribution" section of the prospectus forming a part of the Exchange Offer
Registration Statement, and include the information set forth in Annex D hereto
in the Letter of Transmittal delivered pursuant to the Registered Exchange
Offer; and (iii) if requested by any Initial Purchaser, include the information
required by Items 507 and/or 508 of Regulation S-K under the Securities Act, as
applicable, in the prospectus forming a part of the Exchange Offer Registration
Statement.
(b) The Company shall advise you and the Holders (if applicable),
and, if requested by you or any such Holder, confirm such advice in writing
(which advice pursuant to clauses (ii)-(v) hereof shall be accompanied by an
instruction to suspend the use of the prospectus until the requisite changes
have been made):
(i) when the Registration Statement and any amendment thereto has
been filed with the Commission and when the
<PAGE>
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Registration Statement or any posteffective amendment thereto has become
effective;
(ii) of any request by the Commission for amendments or supplements
to the Registration Statement or the prospectus included therein or for
additional information;
(iii) of the issuance by the Commission of any stop order suspending
the effectiveness of the Registration Statement or the initiation of any
proceedings for that purpose;
(iv) of the receipt by the Company of any notification with respect
to the suspension of the qualification of the Notes for sale in any
jurisdiction or the initiation or threatening of any proceeding for such
purpose; and
(v) of the happening of any event that requires the making of any
changes in the Registration Statement or the prospectus so that, as of such
date, the statements therein are not misleading and do not omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(c) The Company will make every reasonable effort to obtain the
withdrawal of any order suspending the effectiveness of any Registration
Statement at the earliest possible time.
(d) The Company will furnish to each Holder of Notes included within
the coverage of any Shelf Registration Statement, without charge, at least one
copy of such Shelf Registration Statement and any post-effective amendment
thereto, including financial statements and schedules, and, if the Holder so
requests in writing, all exhibits (including those incorporated by reference).
(e) The Company will deliver to each Holder of Notes included within
the coverage of any Shelf Registration Statement, without charge, as many copies
of the prospectus (including each preliminary prospectus) included in such Shelf
Registration Statement and any amendment or supplement thereto as such Holder
may reasonably request; and the Company consents to the use of the prospectus or
any amendment or supplement thereto by each of the selling Holders of Notes in
connection with the offering and sale of the Notes covered by the prospectus or
any amendment or supplement thereto.
(f) The Company will furnish to each Exchanging Dealer or the Initial
Purchaser, as applicable, that so requests, without
<PAGE>
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charge, at least one copy of the Exchange Offer Registration Statement and any
post-effective amendment thereto, including financial statements and schedules,
and, if the Exchanging Dealer or any Initial Purchaser, as applicable, so
requests in writing, all exhibits (including those incorporated by reference).
(g) The Company will, during the Exchange Offer Registration Period
and/or the Shelf Registration Period, as applicable, promptly deliver to each
Exchanging Dealer or the Initial Purchaser, as applicable, without charge, as
many copies of the prospectus included in such Exchange Offer Registration
Statement and any amendment or supplement thereto as such Exchanging Dealer or
any Initial Purchaser, as applicable, may reasonably request for delivery by
(i) such Exchanging Dealer in connection with a sale of Exchange Notes received
by it pursuant to the Registered Exchange Offer or (ii) such Initial Purchaser
in connection with a sale of Exchange Notes received by it in exchange for Notes
constituting any portion of an unsold allotment; and the Company consents to the
use of the prospectus or any amendment or supplement thereto by any such
Exchanging Dealer or any Initial Purchaser, as applicable, as aforesaid.
(h) Prior to any public offering of Notes pursuant to any
Registration Statement, the Company will use its reasonable best efforts to
register or qualify or cooperate with the Holders of Notes included therein and
their respective counsel in connection with the registration or qualification of
such Notes for offer and sale under the securities or blue sky laws of such
jurisdictions as any such Holder reasonably requests in writing and do any and
all other acts or things necessary or advisable to enable the offer and sale in
such jurisdictions of the Notes covered by such Shelf Registration Statement;
provided, however, that the Company will not be required to qualify generally to
do business in any jurisdiction where it is not then so qualified or to take
any action which would subject it to general service of process or to taxation
in any such jurisdiction where it is not then so subject.
(i) The Company will cooperate with the Holders of Notes to
facilitate the timely preparation and delivery of certificates representing
Notes to be sold pursuant to any Registration Statement free of any restrictive
legends and in such denominations and registered in such names as Holders may
request prior to sales of Notes pursuant to such Registration Statement.
(j) Upon the occurrence of any event contemplated by
paragraphs (b)(ii) through (v) above during the period for which the Company is
required to maintain an effective Registration
<PAGE>
-10-
Statement, the Company will promptly prepare a post-effective amendment to the
Registration Statement or a supplement to the related prospectus or file any
other required document so that, as thereafter delivered to purchasers of the
Notes or purchasers of Exchange Notes from an Exchanging Dealer or any Initial
Purchaser, as applicable, as contemplated in paragraph (g) above, as applicable,
the prospectus will not include an untrue statement of a material fact or omit
to state any material fact necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(k) Not later than the effective date of the applicable Registration
Statement, the Company will provide a CUSIP number for the Notes or Exchange
Notes, as the case may be, and provide the applicable trustee with printed
certificates for the Notes or Exchange Notes, as the case may be in a form
eligible for deposit with The Depositary Trust Company.
(l) The Company will comply with all applicable rules and regulations
of the Commission and will make generally available to its security holders as
soon as practicable after the effective date of the applicable Registration
Statement an earnings statement satisfying the provisions of Section 11(a) of
the Securities Act.
(m) The Company will cause the Indenture or the Exchange Notes
Indenture, as the case may be, to be qualified under the Trust Indenture Act as
required by applicable law in a timely manner.
(n) The Company may require each Holder of Notes to be sold pursuant
to any Shelf Registration Statement to furnish to the Company such information
regarding the Holder and the distribution of such Notes as the Company may from
time to time reasonably require for inclusion in such Registration Statement,
and the Company may exclude from such registration the Notes of any Holder that
unreasonably fails to furnish such information within a reasonable time after
receiving such request and such holder will not be entitled to benefit from the
provisions regarding liquidated damages set forth herein.
(o) The Company shall enter into such customary agreements (including
if requested an underwriting agreement in customary form) and take all such
other action, if any, as Holders of a majority in aggregate principal amount of
Notes being sold or the managing underwriters (if any) shall reasonably request
in order to facilitate the disposition of Notes pursuant to any Shelf
Registration Statement.
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(p) In the case of a Shelf Registration Statement, the Company shall
(i) make reasonably available for inspection by a representative of, and Special
Counsel acting for, the Holders, and any underwriter participating in any
disposition pursuant to a Shelf Registration Statement, all relevant financial
and other records, pertinent corporate documents and properties of the Company
and (ii) cause its officers, directors and employees to supply all relevant
information reasonably requested by such representative, counsel or any such
underwriter (an "Inspector") in connection with any such Registration Statement,
subject to executing a confidentiality undertaking in customary form with
respect to confidential and/or proprietary information of the Company.
(q) In the case of a Shelf Registration Statement, the Company, if
requested by Holders of a majority in aggregate principal amount, their Special
Counsel, or the managing underwriters (if any) in connection with any Shelf
Registration Statement, shall use its best efforts to cause (w) its counsel to
deliver an opinion relating to the Registration Statement and the Notes or the
Exchange Notes, as applicable, in customary form, (x) its officers to execute
and deliver all customary documents and certificates requested by Holders of a
majority in aggregate principal amount, their Special Counsel, or the managing
underwriters (if any) and (y) its independent public accountants to provide a
comfort letter in customary form, subject to receipt of appropriate
documentation as contemplated, and only if permitted by Statement of Auditing
Standards No. 72.
(r) The Company will use its best efforts to cause the Notes or the
Exchange Notes, as applicable, covered by a Registration Statement to be rated
with the appropriate rating agencies, if so requested by Holders of a majority
in aggregate principal amount of Notes covered by such Registration Statement or
the Exchange Notes, as the case may be, or the managing underwriters, if any.
(s) The Company will use its best efforts to cause the Notes or the
Exchange Notes, as applicable, covered by such Registration Statement to be
listed on each securities exchange, if any, on which debt securities issued by
the Company are then listed, if so requested by Holders of a majority in
aggregate principal amount of Notes covered by such Registration Statement or
the Exchange Notes, as the case may be, or the managing underwriters, if any.
(t) In the case of a Shelf Registration Statement, each Holder of
Notes agrees by acquisition of such Notes that, upon
<PAGE>
-12-
receipt of any notice of the Company pursuant to Section 4(b)(ii) through (v)
hereof, such Holder will discontinue disposition of such Notes covered by such
Registration Statement until such Holder's receipt of copies of the supplemental
or amended Prospectus contemplated by Section 4(j) hereof, or until advised in
writing (the "Advice") by the Company that the use of the applicable Prospectus
may be resumed. If the Company shall give any notice under Section 4(b)(ii)
through (v) during the period that the Company is required to maintain an
effective Registration Statement (the "Effectiveness Period"), such
Effectiveness Period shall be extended by the number of days during such period
from and including the date of the giving of such notice to and including the
date when each seller of Notes covered by such Registration Statement shall have
received (x) the copies of the supplemental or amended Prospectus contemplated
by Section 4(j) (if an amended or supplemental Prospectus is required) or
(y) the Advice (if no amended or supplemental Prospectus is required).
5. Registration Expenses. The Company will bear all expenses
---------------------
incurred in connection with the performance of its obligations under Sections 1,
2, 3 and 4 hereof and will reimburse the Initial Purchaser and/or the Holders
for the reasonable fees and disbursements of one firm of attorneys (in addition
to local counsel) chosen by the Holders of a majority in aggregate principal
amount of the Notes (the "Special Counsel") acting for the Initial Purchaser
and/or Holders in connection therewith.
6. Indemnification. (a) In the event of a Shelf Registration
---------------
Statement or in connection with any prospectus delivery pursuant to an Exchange
Offer Registration Statement by an Exchanging Dealer or any Initial Purchaser,
as applicable, as contemplated in Section 4(g) above, the Company shall
indemnify and hold harmless each Holder and each person, if any, who controls
such Holder within the meaning of Section 15 of the Securities Act or Section 20
of the Exchange Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in any such Registration
Statement or any prospectus forming part thereof or the omission or alleged
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading; and
(ii) against any and all expense whatsoever, as incurred (including,
subject to Section 6(c) hereof, the fees and disbursements of counsel
chosen by the indemnified party),
<PAGE>
-13-
reasonably incurred in investigating, preparing or defending against any
litigation, or any investigation or proceeding by any governmental or
regulatory agency or body, commenced or threatened, or any claim whatsoever
based upon any such untrue statement or omission, or any such alleged
untrue statement or omission;
PROVIDED, HOWEVER, that (i) this indemnity shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by the
indemnified party expressly for use in such Registration Statement and (ii) this
indemnity with respect to any untrue statement or alleged untrue statement or
omission or alleged omission in any related preliminary prospectus shall not
enure to the benefit of any indemnified party from whom the person asserting any
such loss, claim damage or liability received Notes if such persons did not
receive a copy of the final prospectus at or prior to the confirmation of the
sale of such Notes to such person in any case where such delivery is required by
the Securities Act and the untrue statement or omission of material fact
contained in the related preliminary prospectus was corrected in the final
prospectus unless such failure to deliver the final prospectus was a result of
noncompliance by the Company with Sections 4(d), 4(e), 4(f) or 4(g).
(b) In the event of a Shelf Registration Statement, each Holder
agrees to indemnify and hold harmless the Company, its directors, officers,
agents and employees and each person, if any, who controls the Company within
the meaning of Section 15 of the Securities Act or Section 20 of the Exchange
Act and the directors, officers, agents and employees of such controlling
persons against any and all loss, liability, claim, damage and expense described
in the indemnity contained in Section 6(a) hereof, as incurred, arising out of
or based upon any untrue statements or omissions, or alleged untrue statements
or omissions, made in the Registration Statement (or any amendment or supplement
thereto) in reliance on and in conformity with written information furnished to
the Company by such Holder expressly for use in the Registration Statement (or
in such amendment or supplement); PROVIDED, HOWEVER, that no such Holder shall
be liable for any indemnity claims hereunder in excess of the amount of net
proceeds received by such Holder from the sale of Notes pursuant to the
Registration Statement.
(c) Each indemnified party shall give notice as promptly as
reasonably practicable to each indemnifying party of any claim or action
commenced against it in respect of which indemnity may be
<PAGE>
-14-
sought hereunder, PROVIDED, that failure to so notify an indemnifying party
shall not relieve such indemnifying party from any obligation that it may have
pursuant to this Section except to the extent that it has been materially
prejudiced (through the forfeiture of substantive rights or defenses) by such
failure and, provided further that the failure to notify the indemnifying party
shall not relieve it from any liability that it may have to an indemnified party
otherwise than on account of this indemnity agreement. If any such claim or
action shall be brought against an indemnified party, the indemnified party
shall notify the indemnifying party thereof, the indemnifying party shall be
entitled to participate therein and, to the extent that it wishes, jointly with
any other similarly notified indemnifying party, to assume the defense thereof
with counsel reasonably satisfactory to the indemnified party. After notice
from the indemnifying party to the indemnified party of its election to assume
the defense of such claim or action, the indemnifying party shall not be liable
to the indemnified party under this Section 6 for any legal or other expenses
subsequently incurred by the indemnified party in connection with the defense
thereof (other than reasonable costs of investigation); provided, however, that
-------- -------
an indemnified party will have the right to employ its own counsel in any such
action, but the fees, expenses and other charges of such counsel will be at the
expense of such indemnified party unless (1) the employment of counsel by the
indemnified party has been authorized in writing by the indemnified party,
(2) the indemnified party has reasonably concluded (based on advice of counsel)
that there may be legal defenses available to it or other indemnified parties
that are different from or in addition to those available to the indemnifying
party, (3) a conflict or potential conflict exists (based on advice of counsel
to the indemnified party) between the indemnified party and indemnifying party
(in which case the indemnifying party will not have the right to direct the
defense of such action on behalf of the indemnified party) or (4) the
indemnifying party has not in fact employed counsel to assume the defense of
such action within a reasonable time after receiving notice of the commencement
of the action, in each of which cases the reasonable fees, disbursements and
other charges of counsel will be at the expense of the indemnifying party or
parties. It is understood that the indemnifying party or parties shall not, in
connection with any proceeding or related proceedings in the same jurisdiction,
be liable for the reasonable fees, disbursements and other charges of more than
one separate firm of attorneys (in addition to any local counsel) at any one
time for all such indemnified party or parties. Each indemnified party, as a
condition of the indemnity agreements contained in Sections 6(a) and 6(b), shall
use all reasonable efforts to cooperate with the indemnifying party in the
defense of any such action or claim. No
<PAGE>
-15-
indemnifying party shall be liable for any settlement of any such action
effected without its written consent (which consent shall not be unreasonably
withheld), but if settled with its written consent or if there be a final
judgment of the plaintiff in any such action, the indemnifying party agrees to
indemnify and hold harmless any indemnified party from and against any loss or
liability by reason of such settlement or judgment.
(d) If a claim by an indemnified party for indemnification under this
Section 6 is found unenforceable in a final judgment by a court of competent
jurisdiction (not subject to further appeal or review) even though the express
provisions hereof provide for indemnification in such case, then each applicable
indemnifying party, in lieu of indemnifying such indemnified party, shall
contribute to the amount paid or payable by such indemnified party as a result
of such losses in such proportion as is appropriate to reflect the relative
fault of the indemnifying party and indemnified party in connection with the
actions, statements or omissions that resulted in such losses as well as any
other relevant equitable considerations. The relative fault of such
indemnifying party and indemnified party shall be determined by reference to,
among other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission of a
material fact, has been taken or made by, or relates to information supplied by,
such indemnifying party or indemnified party, and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
action, statement or omission. The amount paid or payable by a party as a
result of any losses shall be deemed to include, subject to the limitations set
forth in Section 6(c) herein, any legal or other fees or expenses reasonably
incurred by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 6(d) were determined by pro rata
allocation or by any other method of allocation that does not take into
account the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section, an indemnifying
party that is a holder of Transfer Restricted Notes or Exchange Notes shall
not be required to contribute any amount in excess of the amount by which the
total price at which the securities sold by such indemnifying party and
distributed to the public were offered to the public exceeds the amount of
any damages that such indemnifying party 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
<PAGE>
-16-
entitled to any contribution from any person who was not guilty of such
fraudulent misrepresentation.
7. RULES 144 AND 144A. The Company shall use its best efforts to
file the reports required to be filed by them under the Securities Act and the
Exchange Act in a timely manner and, if at any time the Company is not required
to file such reports, it will, upon the request of any holder of Transfer
Restricted Notes, make publicly available other information so long as necessary
to permit sales of their securities pursuant to Rules 144 and 144A. The Company
covenants that it will take such further action as any holder of Transfer
Restricted Notes may reasonably request, all to the extent required from time to
time to enable such holder to sell Transfer Restricted Notes without
registration under the Securities Act within the limitation of the exemptions
provided by Rules 144 and 144A (including, without limitation, the requirements
of Rule 144A(d)(4)). Upon the request of any holder of Transfer Restricted
Notes, the Company shall deliver to such holder a written statement as to
whether the Company has complied with such requirements. Notwithstanding the
foregoing, nothing in this Section 7 shall be deemed to require the Company to
register any of its securities pursuant to the Exchange Act.
8. UNDERWRITTEN REGISTRATIONS. If any of the Transfer Restricted
Notes covered by any Shelf Registration are to be sold in an underwritten
offering, the investment banker or investment bankers and manager or managers
that will administer the offering will be selected by the holders of a majority
in aggregate principal amount of such Transfer Restricted Notes included in such
offering, subject to the consent of the Company (which shall not be unreasonably
withheld or delayed).
No person may participate in any underwritten registration hereunder
unless such person (i) agrees to sell such person's Transfer Restricted Notes on
the basis reasonably 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.
9. MISCELLANEOUS. (a) AMENDMENTS AND WAIVERS. The provisions of
this Agreement may not be amended, modified or supplemented, and waivers or
consents to departures from the provisions hereof may not be given, unless the
Company has obtained the written consent of Holders of a majority in aggregate
principal amount of the Notes. Notwithstanding the foregoing, a waiver or
consent to depart from the provisions hereof with respect to a
<PAGE>
-17-
matter that relates exclusively to the rights of the Holders of Notes whose
Notes are being sold pursuant to a Registration Statement and that does not
directly or indirectly affect the rights of other Holders may be given by
Holders of a majority in aggregate principal amount of the Notes being sold by
such Holders pursuant to such Registration Statement.
(b) Notices. All notices and other communications provided for or
-------
permitted hereunder shall be made in writing by hand-delivery, first-class mail,
telex, telecopier, or air courier guaranteeing overnight delivery:
(1) if to a Holder, at the most current address given by such Holder
to the Company in accordance with the provisions of this Section 9(b),
which address initially is, with respect to each Holder, the address of
such Holder maintained by the Registrar under the Indenture, with a copy
in like manner to BT Securities Corporation;
(2) if to you, initially at the respective addresses set forth in the
Purchase Agreement; and
(3) if to the Company, initially at its address set forth in the
Purchase Agreement.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; one business day after
being delivered to a next-day air courier; five business days after being
deposited in the mail; when answered back, if faxed; and when receipt is
acknowledged by the recipient's telecopier machine, if telecopied.
(c) Successors And Assigns. This Agreement shall be binding upon the
----------------------
Company and its successors and assigns.
(d) Counterparts. This agreement may be executed in any number of
------------
counterparts and by the parties hereto in separate counterparts, each of which
when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
(e) Headings. The headings in this agreement are for convenience of
--------
reference only and shall not limit or otherwise affect the meaning hereof.
<PAGE>
-18-
(f) GOVERNING LAW; SUBMISSION TO JURISDICTION; WAIVER OF JURY TRIAL.
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH
THE LAWS OF THE STATE OF NEW YORK, AS APPLIED TO CONTRACTS MADE AND PERFORMED
WITHIN THE STATE OF NEW YORK, WITHOUT REGARD TO PRINCIPLES OF CONFLICTS OF LAW.
THE COMPANY HEREBY IRREVOCABLY SUBMITS TO THE JURISDICTION OF ANY NEW YORK STATE
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK OR ANY FEDERAL
COURT SITTING IN THE BOROUGH OF MANHATTAN IN THE CITY OF NEW YORK IN RESPECT OF
ANY SUIT, ACTION OR PROCEEDING ARISING OUT OF OR RELATING TO THIS AGREEMENT, AND
IRREVOCABLY ACCEPTS FOR ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND
UNCONDITIONALLY, JURISDICTION OF THE AFORESAID COURTS. THE COMPANY IRREVOCABLY
WAIVES, TO THE FULLEST EXTENT IT MAY EFFECTIVELY DO SO UNDER APPLICABLE LAW,
TRIAL BY JURY AND ANY OBJECTION THAT THEY MAY NOW OR HEREAFTER HAVE TO THE
LAYING OF THE VENUE OF ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT AND ANY CLAIM THAT ANY SUCH SUIT, ACTION OR PROCEEDING BROUGHT IN ANY SUCH
COURT HAS BEEN BROUGHT IN AN INCONVENIENT FORUM. NOTHING HEREIN SHALL AFFECT
THE RIGHT OF ANY HOLDER OF A TRANSFER RESTRICTED SECURITY TO SERVE PROCESS IN
ANY MANNER PERMITTED BY LAW OR TO COMMENCE LEGAL PROCEEDINGS OR OTHERWISE
PROCEED AGAINST THE COMPANY IN ANY OTHER JURISDICTION.
(g) Remedies. In the event of a breach by the Company, or by a
--------
holder of Transfer Restricted Notes, of any of their obligations under this
Agreement, each holder of Transfer Restricted Notes or the Company, as the case
may be, in addition to being entitled to exercise all rights granted by law,
including recovery of damages, will be entitled to specific performance of its
rights under this Agreement. The Company and each holder of Transfer Restricted
Notes agree that monetary damages would not be adequate compensation for any
loss incurred by reason of a breach by it of any of the provisions of this
Agreement and hereby further agrees that, in the event of any action for
specific performance in respect of such breach, it shall waive the defense that
a remedy at law would be adequate.
(h) No Inconsistent Agreements. The Company has not, nor shall the
--------------------------
Company on or after the date of this Agreement, enter into any agreement that is
inconsistent with the rights granted to the holders of Transfer Restricted Notes
in this Agreement or otherwise conflicts with the provisions hereof. The
Company has not previously entered into any agreement granting any registration
rights with respect to any of its debt securities to any person. Without
limiting the generality of the foregoing, without the written consent of the
holders of a majority in aggregate principal
<PAGE>
-19-
amount of the then outstanding Transfer Restricted Notes, the Company shall not
grant to any person the right to request the Company to register any debt
securities of the Company under the Securities Act unless the rights so granted
are subject in all respects to the prior rights of the holders of Transfer
Restricted Notes set forth herein, and are not otherwise in conflict or
inconsistent with the provisions of the Agreement.
(i) No Piggyback on Registrations. Neither the Company nor any of
-----------------------------
its respective securityholders (other than the holders of Transfer Restricted
Notes in such capacity) shall have the right to include any securities of the
Company in any Shelf Registration or Exchange Offer other than Transfer
Restricted Notes.
(j) Severability. The remedies provided herein are cumulative and
------------
not exclusive of any remedies provided by law. If any term, provision, covenant
or restriction of this Agreement is held by a court of competent jurisdiction to
be invalid, illegal, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions set forth herein shall remain in full
force and effect and shall in no way be affected, impaired or invalidated, and
the parties hereto shall use their reasonable efforts to find and employ an
alternative means to achieve the same or substantially the same result as that
contemplated by such term, provision, covenant or restriction. It is hereby
stipulated and declared to be the intention of the parties that they would have
executed the remaining terms, provisions, covenants and restrictions without
including any of such that may be hereafter declared invalid, illegal, void or
unenforceable.
<PAGE>
-20-
Please confirm that the foregoing correctly sets forth the agreement
between the Company and you.
Very truly yours,
THE WILLIAM CARTER COMPANY
/s/ David A. Brown
-------------------------------------
By:
Name: David A. Brown
Title: Senior Vice President
Accepted in New York, New York
BT SECURITIES CORPORATION
By: /s/ Christine Barbella Foggia
---------------------------------
Name:
Title:
CHASE SECURITIES INC.
By: /s/ Gerard J. Murray
----------------------------------
Name: Gerard J. Murray
Title: Vice President
GOLDMAN SACHS & CO.
By: /s/ Goldman Sachs & Co.
----------------------------------
Name: Christopher Turner
Title: Vice President
BANKERS TRUST INTERNATIONAL
PLC
By: /s/ Stephen Robertson
-----------------------------------
Name:
Title:
<PAGE>
ANNEX A
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. The Letter of
Transmittal states that by so acknowledging and by delivering a prospectus, a
broker-dealer will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act. This Prospectus, as it may be amended or
supplemented from time to time, may be used by a broker-dealer in connection
with resales of Exchange Notes received in exchange for Existing Notes where
such Existing Notes were acquired by such broker-dealer as a result of
market-making activities or other trading activities. The Company has agreed
that, for a period of 90 days after the Expiration Date (as defined herein), it
will make this Prospectus available to any broker-dealer for use in connection
with any such resale. See "Plan of Distribution."
<PAGE>
ANNEX B
Each broker-dealer that receives Exchange Notes for its own account in
exchange for Existing Notes, where such Existing 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."
<PAGE>
ANNEX C
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 Existing Notes where such Existing Notes were acquired as a result
of market-making activities or other trading activities. The Company has agreed
that, for a period of 90 days after the Expiration Date, it will make this
prospectus, as amended or supplemented, available to any broker- dealer for use
in connection with any such resale. In addition, until November 25, 1999, all
dealers effecting transactions in the Exchange Notes may be required to deliver
a prospectus.1
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 market prices prevailing at the time of resale, at prices
related to such prevailing market prices or negotiated prices. Any such resale
may be made directly to purchasers or to or through brokers or dealers who may
receive compensation in the form of commissions or concessions from any such
broker-dealer and/or the purchasers of any such Exchange 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 on any
such resale of Exchange Notes and any commission 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.
For a period of 90 days after the Expiration Date the Company will
promptly send additional copies of this Prospectus and
- ----------------
1. In addition, the legend required by Item 502(e) of Regulation S-K will
appear on the back cover page of the Exchange Offer prospectus.
<PAGE>
-2-
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 Notes) other than commissions or concessions of
any brokers or dealers and will indemnify the Holders of the Notes (including
any broker-dealers) against certain liabilities, including liabilities under the
Securities Act.
<PAGE>
ANNEX D
/ / 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: _________________________________________
_________________________________________
If the undersigned is not a broker-dealer, the undersigned represents that it is
not engaged in, and does not intend to engage in, a distribution of Exchange
Notes. If the undersigned is a broker-dealer that will receive Exchange Notes
for its own account in exchange for Existing Notes that were acquired as a
result of market-making activities or other trading activities, it acknowledges
that it will deliver a prospectus in connection with any resale of such Exchange
Notes; however, by so acknowledging and by delivering a prospectus, the
undersigned will not be deemed to admit that it is an "underwriter" within the
meaning of the Securities Act.
<PAGE>
LETTER OF TRANSMITTAL
THE WILLIAM CARTER COMPANY
OFFER FOR ALL OUTSTANDING
10- 3/8% SENIOR SUBORDINATED NOTES DUE 2006
IN EXCHANGE FOR
10- 3/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2006
PURSUANT TO THE PROSPECTUS DATED , 1997
THE EXCHANGE OFFER WILL EXPIRE AT 5:00 P.M., NEW YORK CITY TIME, ON
, 1997, UNLESS EXTENDED (THE "EXPIRATION DATE"). TENDERS MAY BE
WITHDRAWN
PRIOR TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
BY HAND/OVERNIGHT EXPRESS/MAIL/OVERNIGHT DELIVERY
(INSURED OR REGISTERED RECOMMENDED)
<TABLE>
<S> <C> <C>
State Street Bank and Trust Company, N.A. State Street Bank and Trust Company, N.A.
Corporate Trust Window Corporate Trust Dept.
Concourse Level or 2 International Place--4th Floor
61 Broadway Boston, MA 02110
New York, NY 10006
</TABLE>
Via Facsimile:
(617) 664-5371
Attn: Lisa Guymont
For Information Call:
(617) 664-5618
DELIVERY OF THIS INSTRUMENT TO AN ADDRESS OTHER THAN AS SET FORTH ABOVE, OR
TRANSMISSION OF INSTRUCTIONS VIA FACSIMILE OTHER THAN AS SET FORTH ABOVE, WILL
NOT CONSTITUTE DELIVERY.
The undersigned acknowledges that he or she has received the Prospectus,
dated , 1997 (the "Prospectus"), of The William Carter Company, a
Massachusetts corporation (the "Company"), and this Letter of Transmittal (this
"Letter"), which together constitute the Company's offer (the "Exchange Offer")
to exchange an aggregate principal amount at maturity of up to $100,000,000 of
10- 3/8% Series A Senior Subordinated Notes Due 2006 (the "New Notes") of the
Company for a like principal amount at maturity of the issued and outstanding
10- 3/8% Senior Subordinated Notes Due 2006 (the "Old Notes") of the Company
from the holders thereof.
For each Old Note accepted for exchange, the holder of such Old Note will
receive a New Note having a principal amount at maturity equal to that of the
surrendered Old Note. Interest on the New Notes will accrue from the last
interest payment date on which interest was paid on the Old Notes surrendered in
exchange therefor or, if no interest has been paid on the Old Notes, from the
date of original issue of the Old Notes. Holders of Old Notes accepted for
exchange will be deemed to have waived the right to receive any other payments
or accrued interest on the Old Notes. The Company reserves the right, at any
time or from time to time, to extend the Exchange Offer at its discretion, in
which event the term "Expiration Date" shall mean the latest time and date to
which the Exchange Offer is extended. The Company shall notify holders of the
Old Notes of any extension by means of a press release or other public
announcement prior to 9:00 A.M., New York City time, on the next business day
after the previously scheduled Expiration Date.
This Letter is to be completed by a holder of Old Notes either if
certificates are to be forwarded herewith or if a tender of certificates for Old
Notes, if available, is to be made by book entry transfer to the account
maintained by the Exchange Agent at The Depository Trust Company (the
"Book-Entry Transfer Facility") pursuant to the procedures set forth in "The
Exchange Offer--Book-Entry Transfer" section of the Prospectus. Holders of Old
Notes whose certificates are not immediately available, or who are unable to
deliver their certificates or confirmation of the book-entry tender of their Old
Notes into the Exchange Agent's account at the Book-Entry Transfer Facility (a
"Book-Entry Confirmation") and all other documents required by this Letter to
the Exchange Agent on or prior to the Expiration Date, must tender their Old
Notes according to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus. (See
Instruction 1.) Delivery of documents to the Book-Entry Transfer Facility does
not constitute delivery to the Exchange Agent.
The undersigned has completed the appropriate boxes below and signed this
Letter to indicate the action the undersigned desires to take with respect to
the Exchange Offer.
<PAGE>
List below the Old Notes to which this Letter relates. If the space provided
below is inadequate, the certificate numbers and principal amount at maturity of
Old Notes should be listed on a separate signed schedule affixed hereto.
<TABLE>
<CAPTION>
DESCRIPTION OF OLD NOTES 1 2 3
AGGREGATE
PRINCIPAL PRINCIPAL
AMOUNT AMOUNT AT
NAME(S) AND ADDRESS(ES) OF REGISTERED HOLDER(S) CERTIFICATE AT MATURITY OF MATURITY
(PLEASE FILL IN, IF BLANK) NUMBER(S)* OLD NOTE(S) TENDERED**
<S> <C> <C> <C>
Total
</TABLE>
* Need not be completed if Old Notes are being tendered by book-entry
transfer.
** Unless otherwise indicated in this column, a holder will be deemed to
have tendered ALL of the Old Notes represented by the Old Notes indicated
in column 2. (See Instruction 2.) Old Notes tendered hereby must be in
denominations of principal amount at maturity of $1,000 and any integral
multiple thereof. (See Instruction 1.)
<TABLE>
<S> <C> <C> <C>
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED BY BOOK-ENTRY TRANSFER
MADE TO THE ACCOUNT MAINTAINED BY THE EXCHANGE AGENT WITH THE BOOK-ENTRY
TRANSFER FACILITY AND COMPLETE THE FOLLOWING:
Name of Tendering Institution:..............................................
</TABLE>
<TABLE>
<S> <C>
Account Number:................................. Transaction Code Number:..........................
</TABLE>
/ / CHECK HERE IF TENDERED OLD NOTES ARE BEING DELIVERED PURSUANT TO A NOTICE OF
GUARANTEED DELIVERY PREVIOUSLY SENT TO THE EXCHANGE AGENT AND COMPLETE THE
FOLLOWING:
Name(s) of Registered Holder(s):............................................
Window Ticket Number (if any):..............................................
Date of Execution of Notice of Guaranteed Delivery:.........................
IF DELIVERED BY BOOK-ENTRY TRANSFER, COMPLETE THE FOLLOWING:
<TABLE>
<S> <C>
Account Number:................................. Transaction Code Number:..........................
</TABLE>
/ / 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:....................................................................
....................................................................
<PAGE>
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
Ladies and Gentlemen:
Upon the terms and subject to the conditions of the Exchange Offer, the
undersigned hereby tenders to the Company the aggregate principal amount at
maturity of Old Notes indicated above. Subject to, and effective upon, the
acceptance for exchange of the Old Notes tendered hereby, the undersigned hereby
sells, assigns and transfers to, or upon the order of, the Company all right,
title and interest in and to such Old Notes as are being tendered hereby.
The undersigned hereby represents and warrants that the undersigned has full
power and authority to tender, sell, assign and transfer the Old Notes tendered
hereby and that 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 when the same are accepted by the Company. The
undersigned hereby further represents that any New Notes acquired in exchange
for Old Notes tendered hereby will have been acquired in the ordinary course of
business of the person receiving such New Notes, whether or not such person is
the undersigned, that neither the holder of such Old Notes nor any such other
person has an arrangement or understanding with any person to participate in the
distribution of such New Notes and that neither the holder of such Old Notes nor
any such other person is an "affiliate," as defined in Rule 405 under the
Securities Act of 1933, as amended (the "Securities Act"), of the Company.
The undersigned also acknowledges that this Exchange Offer is being made in
reliance on an interpretation by the staff of the Securities and Exchange
Commission (the "SEC") that the New Notes issued in exchange for the Old Notes
pursuant to the Exchange Offer may be offered for resale, resold and otherwise
transferred by holders thereof (other than any such holder that is an
"affiliate" of the Company within the meaning of Rule 405 under the Securities
Act), without compliance with the registration and prospectus delivery
provisions of the Securities Act, provided that such New Notes are acquired in
the ordinary course of such holders' business and such holders have no
arrangements with any person to participate in the distribution of such New
Notes. If the undersigned is not a broker-dealer, the undersigned represents
that it is not engaged in, and does not intend to engage in, a distribution of
New Notes. If the undersigned is a broker-dealer that will receive New Notes for
its own account in exchange for Old Notes that were acquired as a result of
market-making activities or other trading activities, it acknowledges that it
will deliver a prospectus in connection with any resale of such New Notes;
however, by so acknowledging and by delivering a prospectus, the undersigned
will not be deemed to admit that it is an "underwriter" within the meaning of
the Securities Act.
The undersigned will, upon request, execute and deliver any additional
documents deemed by the Company to be necessary or desirable to complete the
sale, assignment and transfer of the Old Notes tendered hereby. All authority
conferred or agreed to be conferred in this Letter and every obligation of the
undersigned hereunder shall be binding upon the successors, assigns, heirs,
executors, administrators, trustees in bankruptcy and legal representatives of
the undersigned and shall not be affected by, and shall survive, the death or
incapacity of the undersigned. This tender may be withdrawn only in accordance
with the procedures set forth in "The Exchange Offer--Withdrawal Rights" section
of the Prospectus.
Unless otherwise indicated in the box entitled "Special Issuance
Instructions" below, please deliver the New Notes (and, if applicable,
substitute certificates representing Old Notes for any Old Notes not exchanged)
in the name of the undersigned or, in the case of a book-entry delivery of Old
Notes, please credit the account indicated above maintained at the Book-Entry
Transfer Facility. Similarly, unless otherwise indicated under the box entitled
"Special Delivery Instructions" below, please send the New Notes (and, if
applicable, substitute certificates representing Old Notes for any Old Notes not
exchanged) to the undersigned at the address shown above in the box entitled
"Description of Old Notes."
<PAGE>
THE UNDERSIGNED, BY COMPLETING THE BOX ENTITLED "DESCRIPTION OF OLD NOTES"
ABOVE AND SIGNING THIS LETTER, WILL BE DEEMED TO HAVE TENDERED THE OLD NOTES AS
SET FORTH IN SUCH BOX ABOVE.
SPECIAL ISSUANCE
INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or New
Notes are to be issued in the name of and sent to someone other than the person
or persons whose signature(s) appear(s) on this Letter above, or if Old Notes
delivered by book-entry transfer which are not accepted for exchange are to be
returned by credit to an account maintained at the Book-Entry Transfer Facility
other than the account indicated above.
Issue: New Notes and/or Old Notes to:
Name(s).........................................................................
................................................................................
(PLEASE TYPE OR PRINT)
Address:........................................................................
................................................................................
(INCLUDING ZIP CODE)
(COMPLETE SUBSTITUTE FORM W-9)
/ / Credit unexchanged Old Notes delivered by book-entry transfer to the
Book-Entry Transfer Facility account set forth below
............................................................................
(BOOK-ENTRY TRANSFER FACILITY ACCOUNT
NUMBER, IF APPLICABLE)
SPECIAL DELIVERY
INSTRUCTIONS
(SEE INSTRUCTIONS 3 AND 4)
To be completed ONLY if certificates for Old Notes not exchanged and/or New
Notes are to be sent to someone other than the person or persons whose
signature(s) appear(s) on this Letter above or to such person or persons at an
address other than shown in the box entitled "Description of Old Notes" on this
Letter above.
Mail: New Notes and/or Old Notes to:
Name(s).........................................................................
................................................................................
(PLEASE TYPE OR PRINT)
Address:........................................................................
................................................................................
(INCLUDING ZIP CODE)
IMPORTANT: THIS LETTER OR A FACSIMILE HEREOF (TOGETHER WITH THE CERTIFICATES
FOR OLD NOTES OR A BOOK-ENTRY CONFIRMATION AND ALL OTHER REQUIRED DOCUMENTS OR
THE NOTICE OF GUARANTEED DELIVERY) MUST BE RECEIVED BY THE EXCHANGE AGENT PRIOR
TO 5:00 P.M., NEW YORK CITY TIME, ON THE EXPIRATION DATE.
<PAGE>
PLEASE READ THIS ENTIRE LETTER OF TRANSMITTAL
CAREFULLY BEFORE COMPLETING ANY BOX ABOVE.
PLEASE SIGN HERE
(TO BE COMPLETED BY ALL TENDERING HOLDERS)
(COMPLETE ACCOMPANYING SUBSTITUTE FORM W-9 ON REVERSE SIDE)
Dated ..............................................................., 1997
<TABLE>
<S> <C>
X ............................ X ..........................., 1997
X ............................ X ..........................., 1997
SIGNATURE(S) OF OWNER DATE
</TABLE>
Area Code and Telephone Number: ...........................................
If a holder is tendering any Old Notes, this Letter must be signed by the
registered holder(s) as the name(s) appear(s) on the certificate(s) for the Old
Notes or by any person(s) authorized to become registered holder(s) by
endorsements and documents transmitted herewith. If signature is by a trustee,
executor, administrator, guardian, officer or other person acting in a fiduciary
or representative capacity, please set forth full title. (See Instruction 3.)
NAME(S): .......................................................................
................................................................................
(PLEASE TYPE OR PRINT)
CAPACITY: ......................................................................
................................................................................
ADDRESSS: ......................................................................
................................................................................
(INCLUDING ZIP CODE)
SIGNATURE GUARANTEE
(IF REQUIRED BY INSTRUCTION 3)
Signature(s) Guaranteed by a
participant in a recognized signature guarantee medallion program:
................................................................................
(AUTHORIZED SIGNATURE)
................................................................................
(TITLE)
................................................................................
(NAME AND FIRM)
<PAGE>
INSTRUCTIONS
FORMING PART OF THE TERMS AND CONDITIONS OF THE EXCHANGE OFFER FOR THE
10 3/8% SERIES A SENIOR SUBORDINATED NOTES DUE 2006 IN EXCHANGE FOR THE
10 3/8% SENIOR SUBORDINATED NOTES DUE 2006 OF THE WILLIAM CARTER COMPANY
1. DELIVERY OF THIS LETTER AND NOTES; GUARANTEED DELIVERY PROCEDURES. This
Letter is to be completed by noteholders either if certificates are to be
forwarded herewith or if tenders are to be made pursuant to the procedures for
delivery by book-entry transfer set forth in "The Exchange Offer--Book-Entry
Transfer" section of the Prospectus. Certificates for all physically tendered
Old Notes, or Book-Entry Confirmation, as the case may be, as well as a properly
completed and duly executed Letter (or manually signed facsimile hereof) and any
other documents required by this Letter, must be received by the Exchange Agent
at the address set forth herein on or prior to the Expiration Date, or the
tendering holder must comply with the guaranteed delivery procedures set forth
below. Old Notes tendered hereby must be in denominations of principal amount of
maturity of $1,000 and any integral multiple thereof.
Noteholders whose certificates for Old Notes are not immediately available
or who cannot deliver their certificates and all other required documents to the
Exchange Agent on or prior to the Expiration Date, or who cannot complete the
procedure for book-entry transfer on a timely basis, may tender their Old Notes
pursuant to the guaranteed delivery procedures set forth in "The Exchange
Offer--Guaranteed Delivery Procedures" section of the Prospectus. Pursuant to
such procedures, (i) such tender must be made through an Eligible Institution
(as defined in Instruction 3 below), (ii) prior to the Expiration Date, the
Exchange Agent must receive from such Eligible Institution a properly completed
and duly executed Letter (or facsimile thereof) and Notice of Guaranteed
Delivery, substantially in the form provided by the Company (by facsimile
transmission, mail or hand delivery), setting forth the name and address of the
holder of Old Notes and the amount of Old Notes tendered, stating that the
tender is being made thereby and guaranteeing that within five New York Stock
Exchange ("NYSE") trading days after the date of execution of the Notice of
Guaranteed Delivery, the certificates for all physically tendered Old Notes, or
a Book-Entry Confirmation, and any other documents required by the Letter will
be deposited by the Eligible Institution with the Exchange Agent, and (iii) the
certificates for all physically tendered Old Notes, in proper form for transfer,
or Book-Entry Confirmation, as the case may be, and all other documents required
by this Letter, are received by the Exchange Agent within five NYSE trading days
after the date of execution of the Notice of Guaranteed Delivery.
The method of delivery of this Letter, the Old Notes and all other required
documents is at the election and risk of the tendering holders, but the delivery
will be deemed made only when actually received or confirmed by the Exchange
Agent. If Old Notes are sent by mail, it is suggested that the mailing be made
sufficiently in advance of the Expiration Date to permit the delivery to the
Exchange Agent prior to 5:00 p.m., New York City time, on the Expiration Date.
See "The Exchange Offer" section in the Prospectus.
2. PARTIAL TENDERS (NOT APPLICABLE TO NOTEHOLDERS WHO TENDER BY BOOK-ENTRY
TRANSFER). If less than all of the Old Notes evidenced by a submitted
certificate are to be tendered, the tendering holder(s) should fill in the
aggregate principal amount at maturity of Old Notes to be tendered in the box
above entitled "Description of Old Notes-- Principal Amount at Maturity
Tendered." A reissued certificate representing the balance of nontendered Old
Notes will be sent to such tendering holder, unless otherwise provided in the
appropriate box on this Letter, promptly after the Expiration Date. All of the
Old Notes delivered to the Exchange Agent will be deemed to have been tendered
unless otherwise indicated.
3. SIGNATURES ON THIS LETTER; POWERS OF ATTORNEY AND ENDORSEMENTS; GUARANTEE
OF SIGNATURES. If this Letter is signed by the registered holder of the Old
Notes tendered hereby, the signature must correspond exactly with the name as
written on the face of the certificates without any change whatsoever.
If any tendered Old Notes are owned of record by two or more joint owners,
all such owners must sign this Letter.
If any tendered Old Notes are registered in different names on several
certificates, it will be necessary to complete, sign and submit as many separate
copies of this Letter as there are different registrations of certificates.
When this Letter is signed by the registered holder or holders of the Old
Notes specified herein and tendered hereby, no endorsements of certificates or
separate powers of attorney are required. If, however, the New Notes are to be
issued, or any untendered Old Notes are to be reissued, to a person other than
the registered holder, then endorsements of any certificates transmitted hereby
or separate powers of attorney are required. Signatures on such certificate(s)
must be guaranteed by an Eligible Institution.
If this Letter is signed by a person other than the registered holder or
holders of any certificate(s) specified herein, such certificate(s) must be
endorsed or accompanied by appropriate powers of attorney, in either case signed
exactly as the name or names on the registered holder or holders appear(s) on
the certificate(s) and signatures on such certificate(s) must be guaranteed by
an Eligible Institution.
If this Letter or any certificates or powers of attorney are signed by
trustees, executors, administrators, guardians, attorneys-in-fact, officers of
corporations or others acting in fiduciary or representative capacity, such
persons should so indicate when signing, and unless waived by the Company,
proper evidence satisfactory to the Company of their authority to so act must be
submitted.
Endorsements on certificates for Old Notes or signatures on powers of
attorney required by this Instruction 3 must be guaranteed by a firm which is a
participant in a recognized signature guarantee medallion program ("Eligible
Institutions").
<PAGE>
Signatures on this Letter need not be guaranteed by an Eligible Institution,
provided the Old Notes are tendered (i) by a registered holder of Old Notes
(which term, for purposes of the Exchange Offer, includes any participant in the
Book-Entry Transfer Facility system whose name appears on a security position
listing as the holder of such Old Notes) who has not completed the box entitled
"Special Issuance Instructions" or "Special Delivery Instructions" on this
Letter, or (ii) for the account of an Eligible Institution.
4. SPECIAL ISSUANCE AND DELIVERY INSTRUCTIONS. Tendering holders of Old
Notes should indicate in the applicable box the name and address to which New
Notes issued pursuant to the Exchange Offer and/or substitute certificates
evidencing Old Notes not exchanged are to be issued or sent, if different from
the name or address of the person signing this letter. In the case of issuance
in a different name, the employer identification or social security number of
the person named must also be indicated. Noteholders tendering Old Notes by
book-entry transfer may request that Old Notes not exchanged be credited to such
account maintained at the Book-Entry Transfer Facility as such noteholder may
designate hereon. If no such instructions are given, such Old Notes not
exchanged will be returned to the name and address of the person signing this
Letter.
5. TAX IDENTIFICATION NUMBER. Federal income tax law generally requires
that a tendering holder whose Old Notes are accepted for exchange must provide
the Company (as payor) with such holder's correct Taxpayer Identification Number
("TIN") on Substitute Form W-9 below, which in the case of a tendering holder
who is an individual, is his or her social security number. If the Company is
not provided with the current TIN or an adequate basis for an exemption, such
tendering holder may be subject to a $50 penalty imposed by the Internal Revenue
Service. In addition, delivery to such tendering holder of New Notes may be
subject to backup withholding in an amount equal to 31% of all reportable
payments made after the exchange. If withholding results in an overpayment of
taxes, a refund may be obtained.
Exempt holders of Old Notes (including, among others, all corporations and
certain foreign individuals) are not subject to these backup withholding and
reporting requirements. See the enclosed Guidelines of Certification of Taxpayer
Identification Number on Substitute Form W-9 (the "W-9 Guidelines") for
additional instructions.
To prevent backup withholding, each tendering holder of Old Notes must
provide its correct TIN by completing the "Substitute Form W-9" set forth below,
certifying that the TIN provided is correct (or that such holder is awaiting a
TIN) and that (i) the holder is exempt from backup withholding, or (ii) the
holder has not been notified by the Internal Revenue Service that such holder is
subject to backup withholding as a result of a failure to report all interest or
dividends, or (iii) the Internal Revenue Service has notified the holder that
such holder is no longer subject to backup withholding. If the tendering holder
of Old Notes is a nonresident alien or foreign entity not subject to backup
withholding, such holder must provide the Company a completed Form W-8,
Certificate of Foreign Status. These forms may be obtained from the Exchange
Agent. If the Old Notes are in more than one name or are not in the name of the
actual owner, such holder should consult the W-9 Guidelines for information on
which TIN to report. If such holder does not have a TIN, such holder should
consult the W-9 Guidelines for instructions on applying for a TIN, check the box
in Part 2 of the Substitute Form W-9 and write "applied for" in lieu of its TIN.
6. TRANSFER TAXES. The Company will pay all transfer taxes, if any,
applicable to the transfer of Old Notes to it or its order pursuant to the
Exchange Offer. If however, New Notes and/or substitute Old Notes not exchanged
are to be delivered to, or are to be registered or issued in the name of, any
person other than the registered holder of the Old Notes tendered hereby, or if
tendered Old Notes are registered in the name of any person other than the
person signing this Letter, or if a transfer tax is imposed for any reason other
than the transfer of Old Notes to the Company or its order pursuant to the
Exchange Offer, 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 herewith, the amount of such transfer taxes will be billed directly to
such tendering holder.
Except as provided in this Instruction 6, it will not be necessary for
transfer tax stamps to be affixed to the Old Notes specified in this Letter.
7. WAIVER OF CONDITIONS. The Company reserves the absolute right to waive
satisfaction of any or all conditions enumerated in the Prospectus.
8. NO CONDITIONAL TRANSFERS. No alternative, conditional, irregular or
contingent tenders will be accepted. All tendering holders of Old Notes, by
execution of this Letter, shall waive any right to receive notice of the
acceptance of their Old Notes for exchange.
Neither the Company, the Exchange Agent nor any other person is obligated to
give notice of any defect or irregularity with respect to any tender of Old
Notes nor shall any of them incur any liability for failure to give any such
notice.
9. MUTILATED, LOST, STOLEN OR DESTROYED OLD NOTES. Any holder whose Old
Notes have been mutilated, lost, stolen or destroyed should contact the Exchange
Agent at the address indicated above for further instructions.
10. REQUESTS FOR ASSISTANCE OR ADDITIONAL COPIES. Questions relating to the
procedure for tendering, as well as requests for additional copies of the
Prospectus and this Letter, may be directed to the Exchange Agent, at the
address and telephone number indicated above.
<PAGE>
TO BE COMPLETED BY ALL TENDERING HOLDERS
(SEE INSTRUCTION 5)
PAYOR'S NAME: THE WILLIAM CARTER COMPANY
PART 1-- PLEASE
PROVIDE YOUR
TIN
TIN: _____________________
IN THE BOX AT
RIGHT AND Social Security Number or
CERTIFY BY
SIGNING AND
DATING BELOW.
Employer Identification
Number
PART 2--TIN Applied For / /
CERTIFICATION:
SUBSTITUTE
UNDER THE PENALTIES OF PERJURY, I CERTIFY THAT:
FORM W-9
(1) the number shown on this form is my correct
Taxpayer Identification
Department of the Treasury
Number (or I am waiting for a number to be issued
to me).
Internal Revenue Service
(2) I am not subject to backup withholding either
because:
(a) I am exempt from backup withholding, or
Payor's Request for Taxpayer
(b) I have not been notified by the Internal
Revenue Service (the "IRS") Identification
Number
that I am subject to backup withholding as a
result of a failure to ("TIN") and
Certification
report all interest or dividends, or
(c) the IRS has notified me that I am no longer
subject to backup withholding, and
(3) any other information provided on this form is
true and correct.
SIGNATURE _______________________________ DATE __
You must cross out item (2) of the above certification if you have been
notified by the IRS that you are subject to backup withholding because of
underreporting of interest or dividends on your tax return and you have not
been notified by the IRS that you are no longer subject to backup
withholding.
YOU MUST COMPLETE THE FOLLOWING CERTIFICATE IF YOU CHECKED THE BOX IN PART 2
OF 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 (a) I have mailed or delivered an
application to receive a taxpayer identification number to the appropriate
Internal Revenue Service Center or Social Security Administrative Office or
(b) 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 the exchange, 31 percent of all reportable payments made to me
thereafter will be withheld until I provide the number.
SIGNATURE ______________________________ DATE ______________________________
<PAGE>
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION
NUMBER ON SUBSTITUTE FORM W-9
GUIDELINES FOR DETERMINING THE PROPER IDENTIFICATION NUMBER TO GIVE 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.
<TABLE>
<CAPTION>
- --------------------------------------------------------
<S> <C>
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
(joint account) account or, if combined
funds, any one of the
individuals(1)
3. Husband and wife (joint The actual owner of the
account) account or, if joint
funds, either person(1)
4. Custodian account of a The minor(2)
minor (Uniform Gift to
Minors Act)
5. Adult and minor (joint The adult or, if the
account) minor is the only
contributor, the
minor(1)
6. Account in the name of The ward, minor, or
guardian or committee for a incompetent person(3)
designated ward, minor, or
incompetent person
7. a. The usual revocable The grantor-trustee(1)
savings trust account
(grantor is also
trustee)
b. So-called trust account The actual owner(1)
that is not a legal or
valid trust under State
law
8. Sole proprietorship The owner(4)
account
<CAPTION>
- --------------------------------------------------------
GIVE THE EMPLOYER
IDENTIFICATION
FOR THIS TYPE OF ACCOUNT: NUMBER OF--
<S> <C>
- --------------------------------------------------------
9. A valid trust, estate, or The legal entity (Do not
pension trust furnish the identifying
number of the personal
representative or
trustee unless the legal
entity itself is not
designated in the
account title.)(5)
10. Corporate account The corporation
11. Religious, charitable, or The organization
educational organization
account
12. Partnership account held The partnership
in the name of the
business
13. Association, club, or The organization
other tax-exempt
organization
14. A broker or registered The broker or nominee
nominee
15. Account with the The public entity
Department of Agriculture
in the name of a public
entity (such as a State or
local government, school
district, or prison) that
receives agricultural
program payments
</TABLE>
- --------------------------------------------------------------------------------
(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) Circle the ward's, minor's or incompetent person's name and furnish such
person's social security number.
(4) Show the name of the owner.
(5) List first and circle the name of the valid 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
PAGE 2
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 exempt from backup withholding on ALL payments include the
following:
- A corporation.
- A financial institution.
- An organization exempt from tax under section 501(a), or an individual
retirement plan.
- The United States or any agency or instrumentality thereof.
- A State, the District of Columbia, a possession of the United States, or any
subdivision or instrumentality thereof.
- A foreign government, a political subdivision of a foreign government, or
any agency, or instrumentality thereof.
- An international organization or any agency, or instrumentality thereof.
- A dealer in securities or commodities registered in the U.S. or a possession
of the U.S.
- A real estate investment trust.
- A common trust fund operated by a bank under section 584(a).
- An exempt charitable remainder trust, or a non-exempt trust described in
section 4947(a)(1).
- An entity registered at all times under the Investment Company Act of 1940.
- A foreign central bank of issue.
Payments of dividends and patronage dividends not generally subject to backup
withholding include the following:
- Payments to nonresident aliens subject to withholding under section 1441.
- Payments to partnerships not engaged in a trade or business in the U.S. and
which have at least one nonresident partner.
- Payments of patronage dividends where the amount received is not paid in
money.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
Payments of interest not generally subject to backup withholding include the
following:
- Payments of interest on obligations issued by individuals. Note: You may be
subject to backup withholding if this interest is $600 or more and is paid
in the course of the payer's trade or business and you have not provided
your correct taxpayer identification number to the payer.
- Payments of tax-exempt interest (including exempt interest dividends under
section 852).
- Payments described in section 6049(b)(5) to nonresident aliens.
- Payments on tax-free covenant bonds under section 1451.
- Payments made by certain foreign organizations.
- Payments made to a nominee.
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 FACE OF THE FORM, AND RETURN IT TO
THE PAYER, IF THE PAYMENTS ARE INTEREST, DIVIDENDS, OR PATRONAGE DIVIDENDS, ALSO
SIGN AND DATE THE FORM.
Certain payments other than interest, dividends, and patronage dividends, that
are not subject to information reporting are also not subject to backup
withholding. For details, see the regulations under sections 6041, 6041A(a),
6045 and 6050A.
PRIVACY ACT NOTICE.--Section 6109 requires most recipients of dividends,
interest, or other payments to give taxpayer identification numbers to payers
who must report the payments to IRS. IRS uses the numbers for identification
purposes. Payers must be given the numbers whether or not recipients are
required to file tax returns. Beginning January 1, 1993, 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 INTERNAL REVENUE SERVICE
<PAGE>
EXHIBIT 10.1
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of October 30,
1996, (the "Effective Date") among Carter Holdings, Inc., a Massachusetts
corporation ("Holdings"), The William Carter Company, a Massachusetts
corporation (the "Company"), and Frederick J. Rowan, II ("Executive") and shall
replace in its entirety the Amended and Restated Employment Agreement made as of
November 1, 1993, among Executive, Carter Holdings Corp., a Massachusetts
corporation, and the Company (the "Prior Agreement"). Certain capitalized terms
that are used in this Agreement are defined in paragraph 11.
The parties agree as follows:
1. Employment. Holdings and the Company agree to employ Executive, and
Executive hereby accepts employment with Holdings and the Company, upon the
terms and conditions set forth in this Agreement for the period beginning on the
"Effective Date" and ending as provided in paragraph 4 (the "Employment
Period").
2. Position and Duties.
(a) During the Employment Period, Executive shall serve as the
President, Chief Executive Officer and Chairman of the Board of Holdings and the
Company and shall have the normal duties, responsibilities and authority of such
positions, subject to any limitations imposed by the bylaws of Holdings or the
Company and to the power of the boards of directors of Holdings and the Company
to expand or limit such duties, responsibilities and authority and to override
actions of the Executive.
(b) Executive shall report to the boards of directors of Holdings
and the Company and Executive shall devote his best efforts and his full
business time and attention (except for permitted vacation periods and
reasonable periods of illness or other incapacity) to the business and affairs
of Holdings and the Company. Executive shall perform his duties and
responsibilities to the best of his abilities in a diligent, trustworthy,
businesslike and efficient manner.
(c) Executive's principal office and place of employment shall be at
the Company's facility located in the Atlanta, Georgia metropolitan area, unless
a different place is agreed upon by the Company and the Executive. For all
purposes of this Agreement, Holdings' and the Company's principal executive
offices shall be located wherever Executive has his principal office and place
of employment. This paragraph 2(c) is a material part of this Agreement.
3. Compensation.
(a) Base Salary. Executive's base salary shall be $475,200 per annum
initially. On each January 1 occurring after the Effective Date and during the
Employment Period, the Executive's base salary then in effect shall be increased
by the applicable Cost of
<PAGE>
Living Amount. The Company's Board of Directors may in its discretion increase
Executive's base salary at such times and in such amounts as the Board of
Directors determines but at no time shall Executive's base salary, in effect
from time to time, be decreased. As used in this Agreement, "Base Salary" means
the Executive's base salary as adjusted and in effect from time to time.
Executive's Base Salary shall be payable by the Company in regular installments
in accordance with the Company's general payroll practices.
(b) Annual Cash Bonus Plan. Executive shall be a participant in the
Company's Annual Cash Bonus Plan and be eligible for an annual award under such
plan at a maximum award level equal to no less than one hundred percent (100%)
of Executive's Base Salary in effect during the calendar year for which the
award is made.
(c) Vacation. Executive shall be entitled to four (4) weeks paid
vacation annually.
(d) Fringe Benefits. Executive shall receive the fringe benefits
described on Exhibit A to this Agreement and such other benefits as are made
available to executive level employees of the Company and such other benefits,
payments or allowances as the Company's Board of Directors (or an appropriate
committee of the board) may from time to time make available to Executive.
Without prejudice to Executive's rights under this Agreement, the Company
reserves the right (i) to modify the terms of any benefit plan that is generally
made available to executive level employees of the Company and in which
Executive participates so long as such changes affect all plan participants
equally (or in proportion to their respective interests), and (ii) to make
reasonable changes in benefits established for Executive at the direction of the
Company's Board of Directors, so long as the benefits available to Executive
after giving effect to such change are not materially different from those being
provided prior to such change.
(e) Business Expenses. The Company shall reimburse Executive for all
reasonable and necessary expenses incurred by him in connection with the
performance of his duties and responsibilities pursuant to this Agreement which
are consistent with the Company's policies in effect from time to time with
respect to travel, entertainment and other business expenses, subject to the
Company's reasonable requirements with respect to reporting and documentation of
such expenses.
4. Term and Termination.
(a) The Employment Period shall initially extend until October 31,
1999 but shall be extended for an additional one-year period on each Anniversary
Date unless either the Company or Executive gives the other written notice prior
to such Anniversary Date of its or his intention not to further extend the term
of this Agreement; provided that (i) the Employment Period shall terminate prior
to such date upon Executive's resignation, Retirement or death and (ii) the
Employment Period may be terminated by the Company at any time prior to such
date for Cause, Executive's Disability or Without Cause.
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(b) Any termination of Executive's employment by the Company
pursuant to clause 4(a) (ii) above, and any termination of Executive's
employment by the Executive pursuant to paragraph 4(a) (i) above, shall be
communicated by written Termination Notice given to the other party hereto;
provided that in the case of Executive's death, a Termination Notice shall be
deemed to have been given as of the date of his death; and, provided further
that, in the case of a termination for Cause, there shall also have been
delivered to the Executive the Board of Directors' resolution to be delivered if
and as provided in the definition of Cause. For purposes of this Agreement, a
"Termination Notice" shall mean a notice which shall indicate the specific
termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of the Executive's employment under the provision so indicated.
(c) "Termination Date" means (i) if this Agreement is terminated for
Disability, 30 days after Termination Notice is given (provided that the
Executive shall not have returned to the performance of his duties on a
full-time basis during such 30-day period), (ii) if Executive resigns or takes
Retirement, the date specified in the Executive's Termination Notice (or if no
Termination Notice is given, the date upon which such termination is effective),
(iii) if Executive dies, on the last day of the month next succeeding the month
during which Executive's death occurs, and (iv) if the Executive's employment is
terminated for any other reason, the date on which a Termination Notice is
given.
5. Severance Compensation.
(a) General. If Executive resigns, terminates employment by his
death or Retirement or is terminated for Cause, the Company will pay Executive
his Base Salary in effect at the time the Termination Notice is given (or deemed
given) through the Termination Date and neither Holdings nor the Company shall
have any further obligations to Executive under this Agreement. Without
prejudice to any accrued and vested rights Executive may have under the
Supplemental Retirement Agreement, the Annual Cash Bonus Plan, the Retirement
Savings Plan or the Severance Pay Plan and except as otherwise required by law,
all of Executive's rights to fringe benefits from the Company will cease as of
the Termination Date.
(b) Disability. During any period that the Executive fails to
perform his duties as a result of incapacity due to mental illness or physical
illness or injury, he shall continue to receive his full Base Salary and
benefits until the Company terminates his employment for Disability. Thereafter,
he will be entitled to major medical health insurance coverage under the
Company's employee group health insurance (or substantially similar health
insurance) until the Executive attains age 65 or obtains employment with another
employer that makes health insurance available to its employees, whichever
occurs first, and shall be entitled to receive disability benefits in accordance
with the disability income insurance plan or plans maintained by the Company
covering Executive at the Termination Date. Without prejudice to any accrued and
vested rights Executive may have under the Supplemental Retirement Agreement,
the Annual Cash Bonus Plan or the Retirements Savings Plan and except as
otherwise required by law or as provided in this paragraph 5(b), all of
Executive's rights to fringe benefits from the Company will cease as of the
Termination Date.
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<PAGE>
(c) Without Cause. If Executive is involuntarily terminated by the
Company Without Cause, (i) Executive shall be entitled to continue to receive
his Base Salary (as in effect on the Termination Date) through the remainder of
the Employment Period (as in effect immediately prior to the delivery of the
Termination Notice and without regard to the automatic extension provisions of
paragraph 4(a) hereof) (the "Remaining Term") so long as Executive has not
breached the provisions of paragraphs 6, 7 or 8, (ii) the Company will maintain
in full force and effect, for Executive's continued benefit, until the earlier
of (A) the expiration of the Remaining Term or (B) Executive's 65th birthday,
all life, medical and dental insurance programs in which Executive was entitled
to participate so long as his continued participation is possible under the
general terms and provisions of such programs (provided that, in the event
Executive's participation in any such program is barred, the Company will
arrange to provide the Executive with benefits substantially similar to those
which he was entitled to receive under such program) and thereafter (assuming
Executive has not then attained age 65) the Company will make such insurance
coverage available to Executive (at Executive's expense) until the Executive
attains the age of 65 or obtains employment with another employer that makes
such (or similar) insurance available to its employees, whichever occurs first,
(iii) notwithstanding any provision in the Annual Cash Bonus Plan to the
contrary, the Executive shall become fully vested and have a non-forfeitable
interest in the benefit which he has accrued under the Annual Cash Bonus Plan as
of the Termination Date (and shall be given full credit under the Annual Cash
Bonus Plan for the benefit that he would have accrued for the plan year during
which the Termination Date occurs (which determination may take into account
whether Company performance goals established by the plan or its administrator
for such year have been met, but which may not take into account whether
personal performance goals established for the Executive by the plan or its
administrator have been met) if he were employed by the Company on the last day
of such plan year), and (iv) Executive will be entitled to service credit under
the Supplemental Retirement Agreement through the Remaining Term of this
Agreement. The amounts payable in respect of accrued benefits under the Annual
Cash Bonus Plan shall be payable at the time provided for in, and in accordance
with the provisions of, the Annual Cash Bonus Plan. The amounts payable pursuant
to this paragraph 5(c) in respect of Base Salary may be payable, at Executive's
discretion, in one lump sum payment within 30 days following the Termination
Date equal to the present value (determined using a discount rate equal to the
"prime" rate of interest charged by Chase Manhattan Bank in New York plus two
percentage points) of the payments otherwise payable pursuant to this paragraph
5(c). This paragraph 5(c) sets forth Executive's exclusive remedy for a
termination of his employment Without Cause and Executive shall have no other
right or remedy against Holdings or the Company in connection therewith.
(d) The Executive's right to receive payments under this Agreement
shall not decrease the amount of, or otherwise adversely affect, any other
benefits payable to the Executive under any plan, agreement or arrangement
relating to employee benefits provided by the Company (or an Affiliated
Corporation); provided, however, that the amounts payable to the Executive under
paragraph 5(c)(i) shall be reduced by the amount of any severance compensation
payable to Executive under the Company's Severance Pay Plan.
(e) The Executive shall not be required to mitigate the amount of
any payment provided for in this paragraph 5 by seeking other employment or
otherwise, nor shall the amount
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of any payment or benefit provided for in this paragraph 5 be reduced by any
compensation earned by the Executive as the result of employment by another
employer or by reason of the Executive's receipt of or right to receive any
retirement or other benefits after the date of termination of employment or
otherwise (except as otherwise provided in this paragraph 5).
6. Confidential Information. The Executive acknowledges that the
non-public information obtained by him while employed by Holdings and the
Company concerning the business or affairs of Holdings, the Company or any other
Subsidiary of Holdings ("Confidential Information") are the property of
Holdings, the Company or such other Subsidiary. For purposes of this Agreement,
the term "Confidential Information" does not include information that Executive
can demonstrate (a) was in Executive's possession prior to his initial
employment by the Company, provided that such information is not known by
Executive to be subject to another confidentiality agreement with, or other
obligation of secrecy to, the Company or another party, (b) is generally
available to the public and became generally available to the public other than
as a result of a disclosure in violation of this Agreement, or (c) became
available to Executive on a non-confidential basis from a third party, provided
that such third party is not known by Executive to be bound by a confidentiality
agreement with, or other obligation of secrecy to, the Company or another party
or is otherwise prohibited from providing such information to Executive by a
contractual, legal or fiduciary obligation. Executive agrees that he will not
disclose Confidential Information to any person (other than employees of
Holdings, the Company or any Subsidiary thereof or any other person expressly
authorized by Holdings' Board of Directors to receive Confidential Information)
or use for his own account any Confidential Information without the prior
written consent of Holdings' Board of Directors. Executive shall deliver to the
Company at the termination of the Employment Period, or at any other time
Holdings' Board of Directors may request in writing, all memoranda, notes,
plans, records, reports, computer tapes and software and other documents and
data (and copies thereof) containing Confidential Information or Work Product
which he may then possess or have under his control.
7. Work Product. Executive agrees that all inventions, innovations,
improvements, developments, methods, designs, analyses, reports and all similar
or related information which relate to Holdings' or the Company's or any of its
Subsidiaries' actual or anticipated business, research and development or
existing or future products or services and which are conceived, developed or
made by Executive while employed with the Company ("Work Product") belong to
Holdings, the Company or such Subsidiary. Upon the written request of Holdings'
Board of Directors, Executive will promptly disclose such Work Product to
Holdings' Board of Directors and perform all actions reasonably requested by
Holdings' Board of Directors (whether during or after the Employment Period) to
establish and confirm such ownership.
8. Noncompete Non-Solicitation.
(a) Executive acknowledges that in the course of his employment with
Holdings and the Company he will become familiar with the trade secrets and
other confidential information of Holdings, the Company and other Subsidiaries
of Holdings and that his services will be of special, unique and extraordinary
value to Holdings and the Company. Therefore,
5
<PAGE>
Executive agrees that, during the Employment Period and for two years thereafter
(or one year thereafter, if Executive's employment is terminated Without Cause)
(the "Noncompete Period"), he shall not directly or indirectly own, manage,
control, participate in, consult with, render services for, or in any manner
engage in any business competing with the businesses of Holdings and the Company
or any of its Subsidiaries which (i) exist on the date of the termination of
Executive's employment or (ii) are commenced during the Noncompete Period (but,
for purposes of this clause (ii) only if Holdings, the Company or such
Subsidiary had determined prior to the Termination Date to enter into such
business or had committed substantial resources prior to the Termination Date to
determine the feasibility of entering into such business), within the United
States and any other geographical area in which Holdings or any of its
Subsidiaries engage in such businesses. Nothing herein shall prohibit Executive
from being a passive owner of not more than 2% of the outstanding stock of any
class of a corporation which is publicly traded so long as Executive has no
active participation in the business of such corporation.
(b) During the Noncompete Period, Executive shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of Holdings, the Company or any other Subsidiary of Holdings to leave the employ
of such person, or in any way interfere with the employee relationship between
Holdings, the Company or any other Subsidiary of Holdings and any employee
thereof, (ii) hire any person who was an employee of Holdings, the Company or
any other Subsidiary of Holdings at any time during the Employment Period (other
than individuals who have not been employed by Holdings, the Company or any
other Subsidiary of Holdings for a period of at least one year prior to
employment by Executive directly or indirectly through another entity), or (iii)
induce or attempt to induce any customer, supplier, licensee or other person
having a business relationship with Holdings, the Company or any other
Subsidiary of Holdings to cease doing business with Holdings, the Company or
such other Subsidiary of Holdings, or interfere materially with the relationship
between any such customer, supplier, licensee or other person having a business
relationship with Holdings, the Company or any other Subsidiary of Holdings.
(c) If, at the time of enforcement of this paragraph 8, a court
shall hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
(d) In the event of the breach or a threatened breach by Executive
of any of the provisions of this paragraph 8, each of Holdings and the Company,
in addition and supplementary to other rights and remedies existing in its
favor, may apply to any court of law or equity of competent jurisdiction for
specific performance or injunctive or other relief in order to enforce or
prevent any violations of the provisions hereof (without posting a bond or other
security).
9. Incapacity. Without prejudice to Executive's rights under this
Agreement, if at any time during the term of this Agreement Executive is absent
from his duties with the
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Company for 30 consecutive days as a result of incapacity due to mental illness
or physical illness or injury, each of Holdings' and the Company's boards of
directors may appoint an interim President and Chief Executive Officer or assume
extended management responsibilities for the duration of Executive's absence.
Unless Executive's employment has been terminated previously under this
Agreement, Executive shall be permitted to resume performance of his duties and
responsibilities under this Agreement upon regaining the capacity to do so.
10. Executive Representations. Executive hereby represents and warrants to
Holdings and the Company that (a) the execution, delivery and performance of
this Agreement by Executive does not and will not conflict with, breach, violate
or cause a default under any contract, agreement, instrument, order, judgment or
decree to which Executive is a party or by which he is bound, (b) Executive is
not a party to or bound by any employment agreement, noncompete agreement or
confidentiality agreement with any other person or entity with which this
Agreement would conflict or constitute a breach thereof and (c) upon the
execution and delivery of this Agreement by Holdings and the Company, this
Agreement shall be the valid and binding obligation of Executive, enforceable
against Executive in accordance with its terms, subject to bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and similar laws
affecting the enforceability of contractual obligations and creditor's rights
generally and to federal and state constitutional proscriptions and by the
application of equitable principles by courts of competent jurisdiction, sitting
at law or in equity.
11. Certain Defined Terms. As used in this Agreement, the following terms
shall have the meanings set forth below:
"Affiliated Corporation" means any corporation that is a member of the
"affiliated group" (as defined in Section 1504 of the Code) of which the Company
is a member.
"Anniversary Date" means any or a specific anniversary of the Effective
Date, as the context requires.
"Cause" means (a) conviction of Executive for a felony, or the entry by
Executive of a plea of guilty or nolo contendere to a felony, (b) a willful and
material breach by Executive of paragraph 6, 7 or 8 of this Agreement, (c) the
commission of an act of fraud involving dishonesty for personal gain which is
materially injurious to the Company, (d) the willful and continued refusal by
the Executive to substantially perform his duties with the Company (other than
any such refusal resulting from his incapacity due to mental illness or physical
illness or injury), after a demand for substantial performance is delivered to
the Executive by the Company's Board of Directors, where such demand
specifically identifies the manner in which the Company's Board of Directors
believes that the Executive has refused to substantially perform his duties and
the passage of a reasonable period of time for Executive to comply with such
demand or (e) the willful engaging by the Executive in gross misconduct
materially and demonstrably injurious to the Company or its Subsidiaries. For
purposes of this paragraph, no act or failure to act on the Executive's part
shall be considered "willful" unless done, or omitted to be done, by the
Executive not in good faith and without reasonable belief that his action or
omission was in the best interest of the Company or its Subsidiaries.
Notwithstanding the foregoing, with respect
7
<PAGE>
to termination for Cause arising out of conduct described in clause (b), (c),
(d) or (e) above, the Executive may not be terminated for Cause unless there
shall have been delivered to the Executive a copy of a resolution duly adopted
by the affirmative vote of not less than three-quarters of the entire Board of
Directors of the Company, at a meeting of such board called and held for that
purpose (after reasonable notice to the Executive and an opportunity for the
Executive, together with his counsel or other advisors, to be heard at such
meeting), finding that in the good faith opinion of the board the Executive had
engaged in conduct described above in clause (b), (c), (d), or (e) of the first
sentence of this paragraph and specifying the particulars thereof in detail.
Such a finding by the Board of Directors of the Company is a prerequisite to a
termination for Cause pursuant to clauses (b), (c), (d) or (e) above; provided,
however, that such a finding may be challenged, by appropriate judicial process,
on the merits (i.e., that Cause did not exist) or on the basis that the board's
finding was not made in good faith (provided that proof that Cause for
termination existed shall be a complete defense to any showing that the board's
findings was not made in good faith).
"Code" means the Internal Revenue Code of 1986, as amended.
"Cost of Living Amount" means an amount calculated by multiplying the Base
Salary then in effect by a fraction, (a) the numerator of which shall be the
amount (not less than zero) by which the latest Cost of Living Index available
as of the time of determination exceeds the Cost of Living Index for the same
period during the immediately preceding year, and (b) the denominator of which
shall be the latest Cost of Living Index for the same period during the
immediately preceding year.
"Cost of Living Index" means the Consumer Price Index for All Urban
Consumers, Atlanta, Georgia (1967-100) prepared by the Bureau of Labor
Statistics of the United States Department of Labor for the relevant period;
provided that if the index shall cease to be published, the parties shall use as
the index, the most comparable index published by the United States Government.
"Disability" means the Executive shall have been absent from his duties
with the Company for 26 consecutive weeks as a result of incapacity due to
mental illness or physical illness or injury, and he shall not have returned to
the full-time performance of his duties within 30 days after written notice of
termination of this Agreement is given by the Company's Board of Directors.
"Good Reason" means, unless Executive shall have consented in writing
thereto, any of the following:
(a) except as provided in paragraph 9, a material reduction in
Executive's title, duties, responsibilities or status, as compared to such
title, duties, responsibilities or status on the Effective Date;
(b) the assignment to Executive of a material amount of different or
additional duties that are significantly inconsistent with Executive's
office on the Effective Date;
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(c) the imposition on Executive of business travel obligations
substantially greater than his business travel obligations during the year
prior to the Effective Date; or
(d) any material breach of this Agreement on the part of Holdings or
the Company;
provided, however, that Executive shall not have the right to terminate his
employment for "Good Reason" unless he shall have given thirty (30) days prior
written notice to the Board of Directors of the Company in which Executive sets
forth in reasonable detail the circumstances that Executive believes constitute
"Good Reason" pursuant to the preceding clauses (a) through (d) and the Company
shall not have remedied the matter within said thirty (30) day period; and
provided, further, however that the fact that the Company does or does not so
remedy said matter shall not be deemed an admission by the Company that such
circumstances constitute "Good Reason".
"Person" means an individual, a partnership, a joint venture, a
corporation, an association, a joint stock company, a limited liability company,
a trust, an unincorporated organization or a government or any department or
agency or political subdivision thereof.
"Remaining Term" is defined in paragraph 5(c).
"Retirement" means termination of Executive's employment in accordance
with the Company's normal retirement policy generally applicable to its salaried
employees (or, at Executive's election, at any time [after attaining age 60] or
at any earlier time upon the occurrence of any event entitling Executive to
receive disability benefits under any long-term disability policy maintained by
the Company that covers the Executive) or in accordance with any other
retirement arrangement established with the Executive's consent with respect to
the Executive.
"Retirement Savings Plan" means the Company's Defined Contribution 40l(k)
savings plan in effect as of the Effective Date as the same is amended from time
to time.
"Severance Pay Plan" means the Company's Severance Pay Plan for Exempt
Employees, in effect as of the Effective Date, as the same is amended from time
to time.
"Subsidiary" means with respect to any corporation, another corporation of
which the securities having a majority of the voting power in electing directors
are, at the time of determination, owned by the first corporation, directly or
through one or more Subsidiaries.
"Supplemental Retirement Agreement" means the Supplemental Executive
Retirement Agreement between the Executive and the Company as amended though the
Effective Date.
"Termination Date" is defined in paragraph 4(c).
"Termination Notice" is defined in paragraph 4(b).
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"Without Cause" means an involuntary termination of Executive's employment
by the Company other than for Cause or due to Executive's death or Disability or
a termination of employment by Executive for Good Reason.
12. Survival. Paragraphs 6, 7 and 8 shall survive and continue in full
force in accordance with their terms notwithstanding any termination of the
Employment Period.
13. Expenses. The Company shall pay all of Executive's expenses (including
reasonable attorneys' fees and expenses) paid by Executive in connection with
the negotiation and preparation of this Agreement and all related documents. In
the event Executive prevails in any arbitration or litigation arising out of his
termination of employment or his seeking to obtain or enforce any right or
benefit provided by this Agreement or by any other plan or arrangement
maintained by the Company under which he is or may be entitled to receive
benefits, the Company shall pay all reasonable legal fees and related expenses
(including the costs of experts, evidence and counsel and other such expenses
included in connection with any litigation or appeal) incurred by the Executive
in such an arbitration or litigation. To the extent any of the foregoing expense
reimbursement generates taxable income to the Executive, the Executive will be
paid an additional amount to defray tax liability resulting from such expense
reimbursement (and such additional payment). The Company further agrees to pay
prejudgment interest on any money judgment against the Company obtained by the
Executive in any arbitration or litigation against it to enforce such rights
calculated at the Prime Rate as reported in the Wall Street Journal in effect
from time to time from the date it is determined that payment(s) to him should
have been made under this Agreement.
14. Notices. Any notice provided for in this Agreement shall be in writing
and shall be either personally delivered, or mailed by first class mail, return
receipt requested, to the recipient at the address below indicated:
Notices to Executive:
Frederick J. Rowan, II
Chairman and Chief Executive Officer
1835 Ballybunion Drive
Duluth, Georgia 30155
with a copy to:
Jack Feder, Esq.
Kirkland & Ellis
655 15th Street, NW
Washington, DC 20005
Notices to Holdings or the Company:
c/o The William Carter Company
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1590 Adamson Parkway
Suite 400
Morrow, GA 30260
Attn: David A. Brown
Senior Vice President
with copies to:
Investcorp International, Inc.
280 Park Avenue
New York, New York 10017
Attn: Christopher J. O'Brien
Charles K. Marquis, Esq.
Gibson, Dunn & Crutcher
200 Park Avenue
New York, New York 10166
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or on the second business day after being deposited for delivery with the United
States Postal Service.
15. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
16. Complete Agreement. This Agreement, those documents expressly referred
to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way,
including without limitation the Prior Agreement. Without limiting the
foregoing, Executive acknowledges and agrees that he has no rights under the
Prior Agreement against Holdings or the Company because a "Change of Control" as
defined in the Prior Agreement may have occurred.
17. Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
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18. Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive, Holdings, the Company and
their respective heirs, successors and assigns, except that no party may assign
his or its rights or delegate his or its obligations hereunder without the prior
written consent of the other parties to this Agreement. Without limiting the
foregoing, Executive acknowledges and agrees that he has no rights under the
Prior Agreement against Holdings or the Company because a "Change of Control" as
defined in the Prior Agreement may have occurred on or about the Effective Date.
19. Choice of Law. This Agreement will be governed by and construed in
accordance with the domestic law of the State of New York, without giving effect
to any choice of law or conflict of law provision or rule (whether of the State
of New York or any other jurisdiction) that would cause the application of the
laws of any jurisdiction other than the State of New York.
20. Amendment and Waiver. The provisions of this Agreement may be amended
or waived only with the prior written consent of the Company and Executive, and
no course of conduct or failure or delay in enforcing the provisions of this
Agreement shall affect the validity, binding effect or enforceability of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
CARTER HOLDINGS, INC.
By /s/
------------------------
Its _________________________
THE WILLIAM CARTER COMPANY
By /s/
---------------------------
Its _________________________
/s/ Frederick J. Rowan, II
-----------------------------
FREDERICK J. ROWAN, II
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EXHIBIT A TO EMPLOYMENT AGREEMENT
This Exhibit A is appended to and shall be considered a part of the
Employment Agreement dated as of October 30, 1996 (the "Agreement") among Carter
Holdings, Inc. ("Holdings"), The William Carter Company (the Company") and
Frederick J. Rowan, II (the "Executive"). Capitalized terms used but not defined
in this Exhibit A shall have the respective meanings given such terms in the
Agreement.
In addition to those benefits set forth in the foregoing Employment
Agreement, the Company will provide the following benefits to Executive:
1. Disability, Health and Life Insurance. The Company will provide
Executive with long-term disability insurance that provides coverage at 67% of
Base Salary (and if the Company fails to provide or keep in force such
disability insurance, the Company will be obligated to make payments to
Executive in such amounts and at such times as Executive would have been
entitled under such insurance), major medical health insurance and life
insurance with a death benefit equal to 250% of Base Salary.
2. Company Car. Executive will be paid a monthly car allowance of $1,000.
3. Country Club Fees and Dues. The Company or Holdings will pay all
periodic dues and fees (not to exceed $4,000 annually) for Executive's
membership in one country club or similar club or organization of Executive's
choice (provided that to the extent that any of such fees or any initiation fee
heretofore paid by the Company or Holdings are refundable, any such refund shall
be made to the Company and if Executive sells such membership the Company will
be entitled to receive from (but only to the extent of) the sale proceeds, the
amount of the initiation fee it paid on Executive's behalf).
4. Supplemental Executive Retirement Agreement and Trust. Executive,
Holdings and the Company will amend the Supplemental Executive Retirement
Agreement in the form attached hereto as Exhibit B and the Company will amend
The Frederick J. Rowan Retirement Trust substantially in the form attached
hereto as Exhibit C.
5. Company Loan. The Company agrees that, on or before October 31, 1996,
it shall loan to Executive the amount of $1,500,000 (or such lesser amount as
Executive shall request), which loan shall be payable in full on the 5th
anniversary date of the making thereof; shall be collateralized by, and be
prepayable out of 100% of proceeds realized by Executive from the disposition
of, his stock in Holdings; and shall bear interest at the minimum rate required
to avoid imputed interest under the Code, such interest to accrue until maturity
subject to annual payment from the amount payable to Executive under the Annual
Cash Bonus Plan.
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EXHIBIT 10.2
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of October 30,
1996 (the "Effective Date"), between The William Carter Company, a Massachusetts
corporation (the "Company"), and Joseph Pacifico ("Executive") and shall replace
in its entirety the Employment Agreement between the Executive and the Company
dated as of June 5, 1992 (the "Prior Agreement"). Certain capitalization terms
that are used in this Agreement are defined in paragraph 11.
The parties agree as follows:
1. Employment. The Company agrees to employ Executive, and Executive
hereby accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the Effective Date and
ending as provided in paragraph 4 (the "Employment Period").
2. Position and Duties.
(a) During the Employment Period, Executive shall serve as the
Executive Vice President--Marketing of the Company and shall have the normal
duties, responsibilities and authority of such offices, subject to any
limitations imposed by the bylaws of the Company and to the power of the boards
of directors and senior officers of the Company to expand or limit such duties,
responsibilities and authority and to override actions of Executive.
(b) Executive shall report to the Chief Executive Officer of the
Company and Executive shall devote his best efforts and his full business time
and attention (except for permitted vacation periods and reasonable periods of
illness or other incapacity) to the business and affairs of the Company.
Executive shall perform his duties and responsibilities to the best of his
abilities in a diligent, trustworthy, businesslike and efficient manner.
(c) Executive's principal office and place of employment shall be at
the Company's principal executive offices.
3. Compensation.
(a) Base Salary. Executive's base salary shall be $315,000 per annum
initially. On each January 1 occurring after the Effective Date and during the
Employment Period, Executive's base salary then in effect shall be increased by
the applicable Cost of Living Amount. The Company's board of directors may, in
its discretion, increase Executive's base salary at such times and in such
amounts as it determines but at no time shall Executive' base salary, in effect
from time to time, be decreased. As used in this Agreement, "Base Salary" means
Executive's base salary as adjusted and in effect from time to time. Executive's
Base Salary shall be payable by the Company in regular installments in
accordance with the Company's general payroll practices.
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(b) Annual Cash Bonus Plan. Executive shall be a participant in the
Company's Annual Cash Bonus Plan and be eligible for an annual award under such
plan at a maximum award level equal to no less than sixty-five percent (65%) of
Executive's average Base Salary in effect during the calendar year for which the
award is made.
(c) Vacation. Executive shall be entitled to three (3) weeks paid
vacation annually.
(d) Fringe Benefits. Executive shall receive such fringe benefits as
are made available to executive level employees of the Company, together with a
monthly car allowance of $600.00 and such other benefits, payments or allowances
as the Company's board of directors (or an appropriate committee of the board)
may from time to time make available to Executive (collectively, the "Fringe
Benefits"). Without prejudice to Executive's rights under this Agreement, the
Company reserves the right (i) to modify the terms of any benefit plan that is
generally made available to executive level employees of the Company and in
which Executive participates so long as such changes affect all plan
participants equally (or in proportion to their respective interests), and (ii)
to make reasonable changes in the Fringe Benefits at the direction of the
Company's board of directors, so long as the Fringe Benefits available to
Executive after giving effect to such change are not materially different from
those being provided prior to such change.
(e) Business Expenses. The Company shall reimburse Executive for all
reasonable and necessary expenses incurred by him in connection with the
performance of his duties and responsibilities pursuant to this Agreement which
are consistent with the Company's policies in effect from time to time with
respect to travel, entertainment and other business expenses, subject to the
Company's reasonable requirements with respect to reporting and documentation of
such expenses.
4. Term and Termination.
(a) The Employment Period shall initially extend until October 31,
1998 but shall be extended for an additional one-year period on each Anniversary
Date unless either the Company or Executive gives the other written notice at
least sixty (60) days prior to such Anniversary Date of its or his intention not
to further extend the term of this Agreement; provided that (i) the Employment
Period shall terminate prior to such date upon Executive's resignation,
Retirement or death and (ii) the Employment Period may be terminated by the
Company at any time prior to such date for Cause, Executive's Disability or
Without Cause.
(b) Any termination of Executive's employment by the Company
pursuant to clause 4(a)(ii) above, and any termination of Executive's employment
by Executive pursuant to clause 4(a)(i) above, shall be communicated by written
Termination Notice given to the other party hereto; provided, that in the case
of Executive's death, a Termination Notice shall be deemed to have been given as
of the date of his death; and provided, further, that, in the case of a
termination for Cause, there shall also have been delivered to Executive the
written findings by the Company's Chief Executive Officer as provided in the
definition of Cause. For purposes of this Agreement, a "Termination Notice"
shall mean a notice which shall indicate the specific
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termination provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a basis for
termination of Executive's employment under the provision so indicated.
(c) "Termination Date" means (i) if this Agreement is terminated for
Disability, 30 days after Termination Notice is given (provided that Executive
shall not have returned to the performance of his duties on a full-time basis
during such 30-day period), (ii) if Executive resigns or takes Retirement, the
date specified in Executive's Termination Notice (or if no Termination Notice is
given, the date upon which such termination is effective), (iii) if Executive
dies, on the last day of the month next succeeding the month during which
Executive's death occurs, and (iv) if Executive's employment is terminated for
any other reason, the date on which a Termination Notice is given.
5. Severance Compensation.
(a) General. If Executive resigns, terminates employment by his
death or Retirement or is terminated for Cause, the Company will pay Executive
his Base Salary in effect at the time the Termination Notice is given (or deemed
given) through the Termination Date and the Company shall not have any further
obligations to Executive under this Agreement. Without prejudice to any accrued
and vested rights Executive may have under the Annual Cash Bonus Plan, the
Retirement Savings Plan or the Severance Pay Plan and except as otherwise
required by law, all of Executive's rights to the Fringe Benefits from the
Company will cease as of the Termination Date.
(b) Disability. During any period that Executive fails to perform
his duties as a result of incapacity due to mental illness or physical illness
or injury, he shall continue to receive his full Base Salary and the Fringe
Benefits until the Company terminates his employment for Disability. Thereafter,
he will be entitled to major medical health insurance coverage under the
Company's employee group health insurance (or substantially similar health
insurance) until Executive attains age 65 or obtains employment with another
employer that makes health insurance available to its employees and Executive is
eligible to be covered under such insurance, whichever occurs first, and shall
be entitled to receive disability benefits in accordance with the disability
income insurance plan or plans maintained by the Company covering Executive at
the Termination Date. Without prejudice to any accrued and vested rights
Executive may have under the Annual Cash Bonus Plan or the Retirement Savings
Plan and except as otherwise required by law or this Section 5(b), all of
Executive's rights to the Fringe Benefits from the Company will cease as of the
Termination Date.
(c) Without Cause. If Executive is involuntarily terminated by the
Company Without Cause, (i) Executive shall be entitled to continue to receive
his full Base Salary, as in effect on the Termination Date, through the
remainder of the Employment Period (as in effect immediately prior the delivery
of the Termination Notice and without regard to the automatic extension
provisions of paragraph 4(a) hereof) (the "Remaining Term") so long as Executive
has not breached the provisions of paragraphs 6, 7 or 8, (ii) the Company will
maintain in full force and effect, for Executive's continued benefit, until the
earlier of (A) the expiration of the
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Remaining Term or (B) Executive's 65th birthday, all life, medical and dental
insurance programs in which Executive was entitled to participate so long as his
continued participation is possible under the general terms and provisions of
such programs (provided that, in the event Executive's participation in any such
program is barred, the Company will arrange to provide Executive with benefits
substantially similar to those which he was entitled to receive under such
programs) and thereafter the Company will make such insurance coverage available
to Executive (at Executive's expense) until Executive attains age 65 or obtains
employment with another employer that makes such (or similar) insurance
available to its employees and Executive is eligible to be covered under such
insurance, whichever occurs first, and (iii) notwithstanding any provision in
the Annual Cash Bonus Plan to the contrary, Executive shall become fully vested
and have a nonforfeitable interest in the benefits which he has accrued under
the Annual Cash Bonus Plan as of the Termination Date and he shall be given full
credit under the Annual Cash Bonus Plan for the benefit that he would have
accrued for the plan year during which the Termination Date occurs (which
determination may take into account whether Company performance goals
established by the plan or its administrator for such year have been met, but
which may not take into account whether personal performance goals established
for Executive by the plan or its administrator have been met) as if he were
employed by the Company on the last day of such plan year. The amounts payable
in respect of accrued benefits under the Annual Cash Bonus Plan shall be payable
at the time provided for in, and in accordance with the provision of, the Annual
Cash Bonus Plan. The amounts payable pursuant to this paragraph 5(c) in respect
of Base Salary may be payable, at Executive's discretion, in one lump sum
payment within 30 days following the Termination Date equal to the present value
(determined using a discount rate equal to the "prime" rate of interest charged
by Chase Manhattan Bank in New York plus two (2) percentage points) of the
payments otherwise payable pursuant to this paragraph 5(c). This paragraph 5(c)
sets forth Executive's exclusive remedy for a termination of his employment
Without Cause and Executive shall have no other right or remedy against the
Company in connection therewith.
(d) Executive's right to receive payments under this Agreement shall
not decrease the amount of, or otherwise adversely affect, any other benefits
payable to Executive under any plan, agreement or arrangement relating to
employee benefits provided by the Company (or an Affiliated Corporation);
provided, however, that the amounts payable to Executive under paragraph 5(c)(i)
shall be reduced by the amount of any severance compensation payable to
Executive under the Company's Severance Pay Plan.
(e) Executive shall not be required to mitigate the amount of any
payment provided for in this paragraph 5 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
paragraph 5 be reduced by any compensation earned by Executive as the result of
employment by another employer or by reason of Executive's receipt of, or right
to receive, any retirement or other benefits after the date of termination of
employment or otherwise (except as otherwise provided in this paragraph 5).
6. Confidential Information. Executive acknowledges that the non-public
information obtained by him while employed by the Company concerning the
business or affairs of the Company or any Subsidiary of the Company
("Confidential Information") are the property
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of the Company or such Subsidiary. For purposes of this Agreement, the term
"Confidential Information" does not include information that Executive can
demonstrate (a) was in Executive's possession prior to his initial employment by
the Company, provided that such information is not known by Executive to be
subject to another confidentiality agreement with, or other obligation of
secrecy to, the Company or another party, (b) is generally available to the
public and became generally available to the public other than as a result of a
disclosure in violation of this Agreement or (c) became available to Executive
on a non-confidential basis from a third party, provided that such third party
is not known by Executive to be bound by a confidentiality agreement with, or
other obligation of secrecy to, the Company or another party or is otherwise
prohibited from providing such information to Executive by a contractual, legal
or fiduciary obligation. Executive agrees that he will not disclose Confidential
Information to any person (other that employees of the Company or any of its
Subsidiaries or any other person expressly authorized by the Company's Chief
Executive Officer to receive Confidential Information) or use for his own
account any Confidential Information without the prior written consent of the
Company's Chief Executive Officer. Executive shall deliver to the Company at the
Termination of the Employment Period, or at any other time the Company's Chief
Executive Officer may request in writing, all memoranda, notes, plans, records,
reports, computer tapes and software and other documents and data (and copies
thereof) containing Confidential Information or Work Product which he may then
possess or have under his control.
7. Work Product. Executive agrees that all inventions, innovations,
improvements, developments, methods, designs, analyses, reports and all similar
or related information which relate to the Company's or any of its Subsidiaries
actual or anticipated business, research and development or existing or future
products or services and which are conceived, developed or made by Executive
while employed with the Company ("Work Product") belong to the Company or such
Subsidiary. Upon the written request of the Company's Chief Executive Officer,
Executive will promptly disclose such Work Product to the Company's Chief
Executive Officer and perform all actions reasonably requested by the Company's
Chief Executive Officer (whether during or after the Employment Period) to
establish and confirm such ownership.
8. Noncompete, Non-Solicitation.
(a) Executive acknowledges that in the course of his employment with
the Company he will become familiar with the trade secrets and other
confidential information of the Company and its Subsidiaries and that his
services will be of special, unique and extraordinary value to the Company.
Therefore, Executive agrees that, during the Employment Period and for one year
thereafter (or six months thereafter, if Executive's employment is terminated
Without Cause (the "Noncompete Period"), he shall not directly or indirectly
own, manage, control, participate in, consult with, render services for, or in
any manner engage in any business competing with the businesses of the Company
or any of its Subsidiaries which (i) exist on the date of the termination of
Executive's employment or (ii) are commenced during the Noncompete Period (but,
for purposes of this clause (ii) only if the Company or such Subsidiary had
determined prior to the Termination Date to enter into such business or had
committed substantial resources prior to the Termination Date to determine the
feasibility of entering into such business), within the United State and any
other geographical area in which the Company or
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any of its Subsidiaries engage in such businesses. Nothing herein shall prohibit
Executive from being a passive owner of not more than 2% of the outstanding
stock of any class of a corporation which is publicly traded, so long as
Executive has no active participation in the business of such corporation.
(b) During the Noncompete Period, Executive shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of the Company or any of its Subsidiaries to leave the employ of such person, or
in any way interfere with the employment relationship between the Company or any
of its Subsidiaries and any employee thereof, (ii) hire any person who was an
employee of the Company or any of its Subsidiaries at any time during the
Employment Period (other than individuals who have not been employed by the
Company or any of its Subsidiaries for a period of at least six months prior to
employment by Executive directly or indirectly through another entity), or (iii)
induce or attempt to induce any customer, supplier, licensee or other person
having a business relationship with the Company or any of its Subsidiaries to
cease doing business with the Company or such Subsidiary, or interfere
materially with the relationship between any such customer, supplier, licensee
or other person having a business relationship with the Company or any of its
Subsidiaries.
(c) If, at the time of enforcement of this paragraph 8, a court
shall hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
(d) In the event of the breach or a threatened breach by Executive
of any of the provisions of this paragraph 8, the Company, in addition and
supplementary to other rights and remedies existing in its favor, may apply to
any court of law or equity of competent jurisdiction for specific performance or
injunctive or other relief in order to enforce or prevent any violations of the
provisions hereof (without posting a bond or other security).
9. Incapacity. Without prejudice to Executive's rights under this
Agreement, if at any time during the term of this Agreement Executive is absent
from his duties with the Company for 30 consecutive days as a result of
incapacity due to mental illness or physical illness or injury, the Company's
board of directors or Chief Executive Officer may appoint an interim Executive
Vice President--Marketing or assume extended management responsibilities for the
duration of Executive's absence. Unless Executive's employment has been
terminated previously under this Agreement, Executive shall be permitted to
resume performance of his duties and responsibilities under this Agreement upon
regaining the capacity to do so.
10. Executive Representations. Executive hereby represents and warrants to
the Company that (a) the execution, delivery and performance of this Agreement
by Executive does not and will not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which Executive is a party or by which he is bound, (b) Executive is not a party
to or bound by any employment agreement, noncompete agreement or
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confidentiality agreement with any other person or entity with which this
Agreement would conflict or constitute a breach thereof and (c) upon the
execution and delivery of this Agreement by the Company, this Agreement shall be
the valid and binding obligation of Executive, enforceable against Executive in
accordance with its terms, subject to bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and similar laws affecting the
enforceability of contractual obligations and creditor's rights generally and to
federal and state constitutional proscriptions and by the application of
equitable principles by courts of competent jurisdiction, sitting at law or in
equity.
11. Certain Defined Terms. As used in this Agreement, the following terms
shall have the meanings set forth below:
"Affiliated Corporation" means any corporation that is a member of the
"affiliated group" (as defined in Section 1504 of the Code) of which the Company
is a member.
"Anniversary Date" means any or a specific anniversary of the Effective
Date, as the context requires.
"Base Salary" is defined in paragraph 3(a).
"Cause" means (a) conviction of Executive for a felony, or the entry by
Executive of a plea of guilty or nolo contendere to a felony, (b) a willful and
material breach by Executive of paragraph 6, 7 or 8 of this Agreement, (c) the
commission of an act of fraud involving dishonesty for personal gain which is
materially injurious to the Company, (d) the willful and continued refusal by
Executive to substantially perform his duties with the Company (other than any
such refusal resulting from his incapacity due to mental illness or physical
illness or injury), after a demand for substantial performance is delivered to
Executive by the Company's Chief Executive Officer where such demand
specifically identifies the manner in which the Company's Chief Executive
Officer believes that Executive has refused to substantially perform his duties
and the passage of a reasonable period of time for Executive to comply with such
demand or (e) the willful engaging by Executive in gross misconduct materially
and demonstrably injurious to the Company or its Subsidiaries. For purposes of
this paragraph, no act or failure to act on Executive's part shall be considered
"willful" unless done, or omitted to be done, by Executive not in good faith and
without reasonable belief that his action or omission was in the best interest
of the Company or its Subsidiaries. Notwithstanding the foregoing, with respect
to termination for Cause arising out of conduct described in clause (b), (c),
(d) or (e) above, Executive may not be terminated for Cause unless there shall
have been delivered to Executive a written finding by the Company's board of
directors or Chief Executive Officer, finding that in the good faith opinion of
the Board of Directors or the Company's Chief Executive Officer, Executive had
engaged in conduct described above in clause (b), (c) (d), or (e) of the first
sentence of this paragraph and specifying the particulars thereof in detail.
Such a finding by the Company's board of directors or Chief Executive Officer is
a prerequisite to a termination for cause pursuant to clauses (b), (c), (d) or
(e) above, provided, however, such a finding may be challenged, by appropriate
judicial process, on the merits (i.e., that Cause did not exist) or on the basis
that the Board's or Chief Executive Officer's finding was not made in good faith
(provided that proof that
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cause for termination existed shall be a complete defense to any showing that
the Board's or Chief Executive Officer's findings were not made in good faith).
"Code" means the Internal Revenue Code of 1986, as amended.
"Cost of Living Amount" means an amount calculated by multiplying the Base
Salary then in effect by a fraction, (a) the numerator of which shall be the
amount (not less than zero) by which the latest Cost of Living Index available
as of the time of determination exceeds the Cost of Living Index for same period
during the immediately preceding year, and (b) the denominator of which shall be
the Cost of Living Index for the same period during the immediately preceding
year.
"Cost of Living Index" means the Consumer Price Index for All Urban
Consumers, Atlanta, Georgia (1967-100) prepared by the Bureau of Labor
Statistics of the United States Department of Labor for the relevant period;
provided that if the index shall cease to be published, the parties shall use as
the index, the most comparable index published by the United States Government.
"Disability" means Executive shall have been absent from his duties with
the Company for 26 consecutive weeks as a result of incapacity due to mental
illness or physical illness or injury, and he shall not have returned to the
full-time performance of his duties within 30 days after written notice of
termination of this Agreement is given by the Company's board of directors or
Chief Executive Officer
"Fringe Benefits" is defined in paragraph 3(g).
"Good Reason" means, unless Executive shall have consented in writing
thereto, any of the following:
(a) except as provided in paragraph 9, a material reduction in
Executive's title, duties, responsibilities or status, as compared to such
title, duties, responsibilities or status on the Effective Date;
(b) the assignment to Executive of a material amount of different or
additional duties that are significantly inconsistent with Executive's office on
the Effective Date;
(c) a requirement that Executive relocate anywhere not acceptable to
him or the imposition on Executive of business travel obligations substantially
greater than his business travel obligations during the year prior to the
Effective Date; or
(d) any material breach of this Agreement by the Company;
provided, however, that Executive shall not have the right to terminate his
employment for "Good Reason" unless he shall have given thirty (30) days prior
written notice to the Board of Directors of the Company in which Executive sets
forth in reasonable detail the circumstances that Executive believes constitute
"Good Reason" pursuant to the preceding clauses (a) through
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(d) and the Company shall not have remedied the matter within said thirty (30)
day period; and provided, further, however that the fact that the Company does
or does not so remedy said matter shall not be deemed an admission by the
Company that such circumstances constitute "Good Reason".
"Person" means an individual, a partnership, a joint venture, a
corporation, an association, a joint stock company, a limited liability company,
a trust, an unincorporated organization or a government or any department or
agency or political subdivision thereof.
"Remaining Term" is defined in paragraph 5(c).
"Retirement" means termination of Executive's employment in accordance
with the Company's normal retirement policy generally applicable to its salaried
employees (or, at Executive's election, at any time after attaining age 60 or at
any earlier time upon the occurrence of any event entitling Executive to receive
disability benefits under any long-term disability policy maintained by the
Company that covers Executive) or in accordance with any other retirement
arrangement established with Executive's consent with respect to Executive.
"Retirement Savings Plan" means the Company's Defined Contribution 401(k)
savings plan in effect as of the Effective Date, as the same is amended from
time to time.
"Severance Pay Plan" means the Company's Severance Pay Plan for Exempt
Employees, in effect as of the Effective Date, as the same is amended from time
to time.
"Subsidiary" means with respect to any corporation, another corporation of
which the securities having a majority of the voting power in electing directors
are, at the time of determination, owned by the first corporation, directly or
through one of more Subsidiaries.
"Termination Date" is defined in paragraph 4(c).
"Termination Notice" is defined in paragraph 4(b).
"Without Cause" means an involuntary termination of Executive's employment
by the Company other than for Cause or due to Executive's death or Disability or
a termination of employment by Executive for Good Reason.
12. Survival. Paragraphs 6, 7 and 8 shall survive and continue in full
force in accordance with their terms notwithstanding any termination of the
Employment Period.
13. Expenses. The Company shall pay all of Executive's expenses (including
reasonable attorneys' fees and expenses) paid by Executive in connection with
the negotiation and preparation of this Agreement and all related documents. In
the event Executive prevails in any arbitration or litigation arising out of his
termination of employment or his seeking to obtain or enforce any right or
benefit provided by this Agreement or by any other plan or arrangement
maintained by the Company under which he is or may be entitled to receive
benefits, the Company shall pay all reasonable legal fees and related expenses
(including the costs of experts,
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evidence and counsel and other such expenses included in connection with any
litigation or appeal) incurred by Executive in such an arbitration or
litigation. The Company further agrees to pay prejudgment interest on any money
judgment against the Company obtained by Executive in any arbitration or
litigation against it to enforce such right calculated at the Prime Rate as
reported in the Wall Street Journal in effect from time to time from the date it
is determined that payment to him should have been made under this Agreement.
14. Notices. Any notice provided for in this Agreement shall be in writing
and shall be either personally delivered, or mailed by first class mail, return
receipt requested, to the recipient at the address below indicated:
Notices to Executive:
Joseph Pacifico
1828 Ballybunion Drive
Duluth, GA 30155
Notices to the Company:
c/o The William Carter Company
1590 Adamson Parkway
Morrow, Georgia 30260
Attn: Frederick J. Rowan, II
Chairman & Chief Executive Officer
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or on the second business day after being deposited for delivery with the United
States Postal Service.
15. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
16. Complete Agreement. This Agreement, those documents expressly referred
to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way
including, without limitation, the Prior Agreement. Without limiting the
foregoing, Executive acknowledges and agrees that he has no rights under the
Prior
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Agreement because a "Change of Control," as defined in the Prior Agreement, may
have occurred.
17. Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
18. Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that no party may assign his or
its rights or delegate his or its obligations hereunder without the prior
written consent of the other parties to this Agreement.
19. Choice of Law. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
any jurisdiction other than the State of New York.
20. Amendment and Waiver. The provision of this Agreement may be amended
or waived only with the prior written consent of the Company and Executive, and
no course of conduct or failure or delay in enforcing the provisions of this
Agreement shall affect the validity, binding effect or enforceability of this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
THE WILLIAM CARTER COMPANY
By: /s/ Frederick J. Rowan, II
--------------------------------
Frederick J. Rowan, II,
Chairman & Chief Executive Officer
/s/ Joseph Pacifico
--------------------------------
Joseph Pacifico
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EXHIBIT 10.3
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of October 30,
1996, (the "Effective Date") between The William Carter Company, a Massachusetts
corporation (the "Company"), and Charles E. Whetzel, Jr. ("Executive") and shall
replace in its entirety the Employment Agreement between Executive and the
Company dated as of June 5, 1992 (the "Prior Agreement"). Certain capitalization
terms that are used in this Agreement are defined in paragraph 11.
The parties agree as follows:
1. Employment. The Company agrees to employ Executive, and Executive
hereby accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the Effective Date and
ending as provided in paragraph 4 (the "Employment Period").
2. Position and Duties.
(a) During the Employment Period, Executive shall serve as the
Executive Vice President-Operations of the Company and shall have the normal
duties, responsibilities and authority of such offices, subject to any
limitations imposed by the bylaws of the Company and to the power of the boards
of directors and senior officers of the Company to expand or limit such duties,
responsibilities and authority and to override actions of Executive.
(b) Executive shall report to the Chief Executive Officer of the
Company and Executive shall devote his best efforts and his full business time
and attention (except for permitted vacation periods and reasonable periods of
illness or other incapacity) to the business and affairs of the Company.
Executive shall perform his duties and responsibilities to the best of his
abilities in a diligent, trustworthy, businesslike and efficient manner.
(c) Executive's principal office and place of employment shall be at
the Company's principal executive offices.
3. Compensation.
(a) Base Salary. Executive's base salary shall be $208,000 per annum
initially. On each January 1 occurring after the Effective Date and during the
Employment Period, Executive's base salary then in effect shall be increased by
the applicable Cost of Living Amount. The Company's board of directors may, in
its discretion, increase Executive's base salary at such times and in such
amounts as it determines but at no time shall Executive's base salary, in effect
from time to time, be decreased. As used in this Agreement, "Base Salary" means
Executive's base salary as adjusted and in effect from time
<PAGE>
to time. Executive's Base Salary shall be payable by the Company in regular
installments in accordance with the Company's general payroll practices.
(b) Annual Cash Bonus Plan. Executive shall be a participant in the
Company's Annual Cash Bonus Plan and be eligible for an annual award under such
plan at a maximum award level equal to no less than sixty-five percent (65%) of
Executive's average Base Salary in effect during the calendar year for which the
award is made.
(c) Vacation. Executive shall be entitled to three (3) weeks paid
vacation annually.
(d) Fringe Benefits. Executive shall receive such fringe benefits as
are made available to executive level employees of the Company, together with a
monthly car allowance of $600.00 and such other benefits, payments or allowances
as the Company's board of directors (or an appropriate committee of the board)
may from time to time make available to Executive (collectively, the "Fringe
Benefits"). Without prejudice to Executive's rights under this Agreement, the
Company reserves the right (i) to modify the terms of any benefit plan that is
generally made available to executive level employees of the Company and in
which Executive participates so long as such changes affect all plan
participants equally (or in proportion to their respective interests), and (ii)
to make reasonable changes in the Fringe Benefits at the direction of the
Company's board of directors, so long as the Fringe Benefits available to
Executive after giving effect to such change are not materially different from
those being provided prior to such change.
(e) Business Expenses. The Company shall reimburse Executive for all
reasonable and necessary expenses incurred by him in connection with the
performance of his duties and responsibilities pursuant to this Agreement which
are consistent with the Company's policies in effect from time to time with
respect to travel, entertainment and other business expenses, subject to the
Company's reasonable requirements with respect to reporting and documentation of
such expenses.
4. Term and Termination.
(a) The Employment Period shall initially extend until October 31,
1998 but shall be extended for an additional one-year period on each Anniversary
Date unless either the Company or Executive gives the other written notice at
least sixty (60) days prior to such Anniversary Date of its or his intention not
to further extend the term of this Agreement; provided that (i) the Employment
Period shall terminate prior to such date upon Executive's resignation,
Retirement or death and (ii) the Employment Period may be terminated by the
Company at any time prior to such date for Cause, Executive's Disability or
Without Cause.
(b) Any termination of Executive's employment by the Company
pursuant to clause 4(a)(ii) above, and any termination of Executive's employment
by Executive pursuant to clause 4(a)(i) above, shall be communicated by written
Termination Notice given to the other party hereto; provided, that in the case
of Executive's death, a Termination
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Notice shall be deemed to have been given as of the date of his death; and
provided, further, that, in the case of a termination for Cause, there shall
also have been delivered to Executive the written findings by the Company's
Chief Executive Officer as provided in the definition of Cause. For purposes of
this Agreement, a "Termination Notice" shall mean a notice which shall indicate
the specific termination provision in this Agreement relied upon and shall set
forth in reasonable detail the facts and circumstances claimed to provide a
basis for termination of Executive's employment under the provision so
indicated.
(c) "Termination Date" means (i) if this Agreement is terminated for
Disability, 30 days after Termination Notice is given (provided that Executive
shall not have returned to the performance of his duties on a full-time basis
during such 30-day period), (ii) if Executive resigns or takes Retirement, the
date specified in Executive's Termination Notice (or if no Termination Notice is
given, the date upon which such termination is effective), (iii) if Executive
dies, on the last day of the month next succeeding the month during which
Executive's death occurs, and (iv) if Executive's employment is terminated for
any other reason, the date on which a Termination Notice is given.
5. Severance Compensation.
(a) General. If Executive resigns, terminates employment by his
death or Retirement or is terminated for Cause, the Company will pay Executive
his Base Salary in effect at the time the Termination Notice is given (or deemed
given) through the Termination Date and the Company shall not have any further
obligations to Executive under this Agreement. Without prejudice to any accrued
and vested rights Executive may have under the Annual Cash Bonus Plan, the
Retirement Savings Plan or the Severance Pay Plan and except as otherwise
required by law, all of Executive's rights to the Fringe Benefits from the
Company will cease as of the Termination Date.
(b) Disability. During any period that Executive fails to perform
his duties as a result of incapacity due to mental illness or physical illness
or injury, he shall continue to receive his full Base Salary and the Fringe
Benefits until the Company terminates his employment for Disability. Thereafter,
he will be entitled to major medical health insurance coverage under the
Company's employee group health insurance (or substantially similar health
insurance) until Executive attains age 65 or obtains employment with another
employer that makes health insurance available to its employees and Executive is
eligible to be covered under such insurance, whichever occurs first, and shall
be entitled to receive disability benefits in accordance with the disability
income insurance plan or plans maintained by the Company covering Executive at
the Termination Date. Without prejudice to any accrued and vested rights
Executive may have under the Annual Cash Bonus Plan or the Retirement Savings
Plan and except as otherwise required by law or this Section 5(b), all of
Executive's rights to the Fringe Benefits from the Company will cease as of the
Termination Date.
(c) Without Cause. If Executive is involuntarily terminated by the
Company Without Cause, (i) Executive shall be entitled to continue to receive
his full Base
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Salary, as in effect on the Termination Date, through the remainder of the
Employment Period (as in effect immediately prior to the delivery of the
Termination Notice and without regard to the automatic extension provisions of
paragraph 4(a) hereof) (the "Remaining Term") so long as Executive has not
breached the provisions of paragraphs 6, 7 or 8, (ii) the Company will maintain
in full force and effect, for Executive's continued benefit, until the earlier
of (A) the expiration of the Remaining Term or (B) Executive's 65th birthday,
all life, medical and dental insurance programs in which Executive was entitled
to participate so long as his continued participation is possible under the
general terms and provisions of such programs (provided that, in the event
Executive's participation in any such program is barred, the Company will
arrange to provide Executive with benefits substantially similar to those which
he was entitled to receive under such programs) and thereafter the Company will
make such insurance coverage available to Executive (at Executive's expense)
until Executive attains age 65 or obtains employment with another employer that
makes such (or similar) insurance available to its employees and Executive is
eligible to be covered under such insurance, whichever occurs first, and (iii)
notwithstanding any provision in the Annual Cash Bonus Plan to the contrary,
Executive shall become fully vested and have a nonforfeitable interest in the
benefits which he has accrued under the Annual Cash Bonus Plan as of the
Termination Date and he shall be given full credit under the Annual Cash Bonus
Plan for the benefit that he would have accrued for the plan year during which
the Termination Date occurs (which determination may take into account whether
Company performance goals established by the plan or its administrator for such
year have been met, but which may not take into account whether personal
performance goals established for Executive by the plan or its administrator
have been met) as if he were employed by the Company on the last day of such
plan year. The amounts payable in respect of accrued benefits under the Annual
Cash Bonus Plan shall be payable at the time provided for in, and in accordance
with the provision of, the Annual Cash Bonus Plan. The amounts payable pursuant
to this paragraph 5(c) in respect of Base Salary may be payable, at Executive's
discretion, in one lump sum payment within 30 days following the Termination
Date equal to the present value (determined using a discount rate equal to the
"prime" rate of interest charged by Chase Manhattan Bank in New York plus two
(2) percentage points) of the payments otherwise payable pursuant to this
paragraph 5(c). This paragraph 5(c) sets forth Executive's exclusive remedy for
a termination of his employment Without Cause and Executive shall have no other
right or remedy against the Company in connection therewith.
(d) Executive's right to receive payments under this Agreement shall
not decrease the amount of, or otherwise adversely affect, any other benefits
payable to Executive under any plan, agreement or arrangement relating to
employee benefits provided by the Company (or an Affiliated Corporation);
provided, however, that the amounts payable to Executive under paragraph 5(c)(i)
shall be reduced by the amount of any severance compensation payable to
Executive under the Company's Severance Pay Plan.
(e) Executive shall not be required to mitigate the amount of any
payment provided for in this paragraph 5 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
paragraph 5 be reduced by any compensation earned by Executive as the result of
employment by another employer or by
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reason of Executive's receipt of, or right to receive, any retirement or other
benefits after the date of termination of employment or otherwise (except as
otherwise provided in this paragraph 5).
6. Confidential Information. Executive acknowledges that the non-public
information obtained by him while employed by the Company concerning the
business or affairs of the Company or any Subsidiary of the Company
("Confidential Information") are the property of the Company or such Subsidiary.
For purposes of this Agreement, the term "Confidential Information" does not
include information that Executive can demonstrate (a) was in Executive's
possession prior to his initial employment by the Company, provided that such
information is not known by Executive to be subject to another confidentiality
agreement with, or other obligation of secrecy to, the Company or another party,
(b) is generally available to the public and became generally available to the
public other than as a result of a disclosure in violation of this Agreement or
(c) became available to Executive on a non-confidential basis from a third
party, provided that such third party is not known by Executive to be bound by a
confidentiality agreement with, or other obligation of secrecy to, the Company
or another party or is otherwise prohibited from providing such information to
Executive by a contractual, legal or fiduciary obligation. Executive agrees that
he will not disclose Confidential Information to any person (other that
employees of the Company or any of its Subsidiaries or any other person
expressly authorized by the Company's Chief Executive Officer to receive
Confidential Information) or use for his own account any Confidential
Information without the prior written consent of the Company's Chief Executive
Officer. Executive shall deliver to the Company at the Termination of the
Employment Period, or at any other time the Company's Chief Executive Officer
may request in writing, all memoranda, notes, plans, records, reports, computer
tapes and software and other documents and data (and copies thereof) containing
Confidential Information or Work Product which he may then possess or have under
his control.
7. Work Product. Executive agrees that all inventions, innovations,
improvements, developments, methods, designs, analyses, reports and all similar
or related information which relate to the Company's or any of its Subsidiaries'
actual or anticipated business, research and development or existing or future
products or services and which are conceived, developed or made by Executive
while employed with the Company ("Work Product") belong to the Company or such
Subsidiary. Upon the written request of the Company's Chief Executive Officer,
Executive will promptly disclose such Work Product to the Company's Chief
Executive Officer and perform all actions reasonably requested by the Company's
Chief Executive Officer (whether during or after the Employment Period) to
establish and confirm such ownership.
8. Noncompete, Non-Solicitation.
(a) Executive acknowledges that in the course of his employment with
the Company he will become familiar with the trade secrets and other
confidential information of the Company and its Subsidiaries and that his
services will be of special, unique and extraordinary value to the Company.
Therefore, Executive agrees that, during the
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Employment Period and for one year thereafter (or six months thereafter, if
Executive's employment is terminated Without Cause (the "Noncompete Period"), he
shall not directly or indirectly own, manage, control, participate in, consult
with, render services for, or in any manner engage in any business competing
with the businesses of the Company or any of its Subsidiaries which (i) exist on
the date of the termination of Executive's employment or (ii) are commenced
during the Noncompete Period (but, for purposes of this clause (ii) only if the
Company or such Subsidiary had determined prior to the Termination Date to enter
into such business or had committed substantial resources prior to the
Termination Date to determine the feasibility of entering into such business),
within the United State and any other geographical area in which the Company or
any of its Subsidiaries engage in such businesses. Nothing herein shall prohibit
Executive from being a passive owner of not more than 2% of the outstanding
stock of any class of a corporation which is publicly traded, so long as
Executive has no active participation in the business of such corporation.
(b) During the Noncompete Period, Executive shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of the Company or any of its Subsidiaries to leave the employ of such person, or
in any way interfere with the employment relationship between the Company or any
of its Subsidiaries and any employee thereof, (ii) hire any person who was an
employee of the Company or any of its Subsidiaries at any time during the
Employment Period (other than individuals who have not been employed by the
Company or any of its Subsidiaries for a period of at least six months prior to
employment by Executive directly or indirectly through another entity), or (iii)
induce or attempt to induce any customer, supplier, licensee or other person
having a business relationship with the Company or any of its Subsidiaries to
cease doing business with the Company or such Subsidiary, or interfere
materially with the relationship between any such customer, supplier, licensee
or other person having a business relationship with the Company or any of its
Subsidiaries.
(c) If, at the time of enforcement of this paragraph 8, a court
shall hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
(d) In the event of the breach or a threatened breach by Executive
of any of the provisions of this paragraph 8, the Company, in addition and
supplementary to other rights and remedies existing in its favor, may apply to
any court of law or equity of competent jurisdiction for specific performance or
injunctive or other relief in order to enforce or prevent any violations of the
provisions hereof (without posting a bond or other security).
9. Incapacity. Without prejudice to Executive's rights under this
Agreement, if at any time during the term of this Agreement Executive is absent
from his duties with the Company for 30 consecutive days as a result of
incapacity due to mental illness or physical
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illness or injury, the Company's board of directors or Chief Executive Officer
may appoint an interim Executive Vice President--Operations or assume extended
management responsibilities for the duration of Executive's absence. Unless
Executive's employment has been terminated previously under this Agreement,
Executive shall be permitted to resume performance of his duties and
responsibilities under this Agreement upon regaining the capacity to do so.
10. Executive Representations. Executive hereby represents and warrants to
the Company that (a) the execution, delivery and performance of this Agreement
by Executive does not and will not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which Executive is a party or by which he is bound, (b) Executive is not a party
to or bound by any employment agreement, noncompete agreement or confidentiality
agreement with any other person or entity with which this Agreement would
conflict or constitute a breach thereof and (c) upon the execution and delivery
of this Agreement by the Company, this Agreement shall be the valid and binding
obligation of Executive, enforceable against Executive in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting the enforceability of contractual
obligations and creditor's rights generally and to federal and state
constitutional proscriptions and by the application of equitable principles by
courts of competent jurisdiction, sitting at law or in equity.
11. Certain Defined Terms. As used in this Agreement, the following terms
shall have the meanings set forth below:
"Affiliated Corporation" means any corporation that is a member of the
"affiliated group" (as defined in Section 1504 of the Code) of which the Company
is a member.
"Anniversary Date" means any or a specific anniversary of the Effective
Date, as the context requires.
"Base Salary" is defined in paragraph 3(a).
"Cause" means (a) conviction of Executive for a felony, or the entry by
Executive of a plea of guilty or nolo contendere to a felony, (b) a willful and
material breach by Executive of paragraph 6, 7 or 8 of this Agreement, (c) the
commission of an act of fraud involving dishonesty for personal gain which is
materially injurious to the Company, (d) the willful and continued refusal by
Executive to substantially perform his duties with the Company (other than any
such refusal resulting from his incapacity due to mental illness or physical
illness or injury), after a demand for substantial performance is delivered to
Executive by the Company's Chief Executive Officer where such demand
specifically identifies the manner in which the Company's Chief Executive
Officer believes that Executive has refused to substantially perform his duties
and the passage of a reasonable period of time for Executive to comply with such
demand or (e) the willful engaging by Executive in gross misconduct materially
and demonstrably injurious to the Company or its Subsidiaries. For purposes of
this paragraph, no act or failure to act on Executive's part shall be considered
"willful" unless done, or omitted to be done, by Executive not in good faith and
without reasonable belief that
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his action or omission was in the best interest of the Company or its
Subsidiaries. Notwithstanding the foregoing, with respect to termination for
Cause arising out of conduct described in clause (b), (c), (d) or (e) above,
Executive may not be terminated for Cause unless there shall have been delivered
to Executive a written finding by the Company's board of directors or Chief
Executive Officer, finding that in the good faith opinion of the Board of
Directors or the Company's Chief Executive Officer, Executive had engaged in
conduct described above in clause (b), (c) (d), or (e) of the first sentence of
this paragraph and specifying the particulars thereof in detail. Such a finding
by the Company's board of directors or Chief Executive Officer is a prerequisite
to a termination for cause pursuant to clauses (b), (c), (d) or (e) above,
provided, however, such a finding may be challenged, by appropriate judicial
process, on the merits (i.e., that Cause did not exist) or on the basis that the
Board's or Chief Executive Officer's finding was not made in good faith
(provided that proof that cause for termination existed shall be a complete
defense to any showing that the Board's or Chief Executive Officer's findings
were not made in good faith).
"Code" means the Internal Revenue Code of 1986, as amended.
"Cost of Living Amount" means an amount calculated by multiplying the Base
Salary then in effect by a fraction, (a) the numerator of which shall be the
amount (not less than zero) by which the latest Cost of Living Index available
as of the time of determination exceeds the Cost of Living Index for same period
during the immediately preceding year, and (b) the denominator of which shall be
the Cost of Living Index for the same period during the immediately preceding
year.
"Cost of Living Index" means the Consumer Price Index for All Urban
Consumers, Atlanta, Georgia (1967-100) prepared by the Bureau of Labor
Statistics of the United States Department of Labor for the relevant period;
provided that if the index shall cease to be published, the parties shall use as
the index, the most comparable index published by the United States Government.
"Disability" means Executive shall have been absent from his duties with
the Company for 26 consecutive weeks as a result of incapacity due to mental
illness or physical illness or injury, and he shall not have returned to the
full-time performance of his duties within 30 days after written notice of
termination of this Agreement is given by the Company's board of directors or
Chief Executive Officer.
"Fringe Benefits" is defined in paragraph 3(g).
"Good Reason" means, unless Executive shall have consented in writing
thereto, any of the following:
(a) except as provided in paragraph 9, a material reduction in
Executive's title, duties, responsibilities or status, as compared to such
title, duties, responsibilities or status on the Effective Date;
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(b) the assignment to Executive of a material amount of different or
additional duties that are significantly inconsistent with Executive's
office on the Effective Date;
(c) a requirement that Executive relocate anywhere not acceptable to
him or the imposition on Executive of business travel obligations
substantially greater than his business travel obligations during the year
prior to the Effective Date; or
(d) any material breach of this Agreement by the Company;
provided, however, that Executive shall not have the right to terminate his
employment for "Good Reason" unless he shall have given thirty (30) days prior
written notice to the Board of Directors of the Company in which Executive sets
forth in reasonable detail the circumstances that Executive believes constitute
"Good Reason" pursuant to the preceding clauses (a) through (d) and the Company
shall not have remedied the matter within said thirty (30) day period; and
provided, further, however that the fact that the Company does or does not so
remedy said matter shall not be deemed an admission by the Company that such
circumstances constitute "Good Reason".
"Person" means an individual, a partnership, a joint venture, a
corporation, an association, a joint stock company, a limited liability company,
a trust, an unincorporated organization or a government or any department or
agency or political subdivision thereof.
"Remaining Term" is defined in paragraph 5(c).
"Retirement" means termination of Executive's employment in accordance
with the Company's normal retirement policy generally applicable to its salaried
employees (or, at Executive's election, at any time after attaining age 60 or at
any earlier time upon the occurrence of any event entitling Executive to receive
disability benefits under any long-term disability policy maintained by the
Company that covers Executive) or in accordance with any other retirement
arrangement established with Executive's consent with respect to Executive.
"Retirement Savings Plan" means the Company's Defined Contribution 401(k)
savings plan in effect as of the Effective Date, as the same is amended from
time to time.
"Severance Pay Plan" means the Company's Severance Pay Plan for Exempt
Employees, in effect as of the Effective Date, as the same is amended from time
to time.
"Subsidiary" means with respect to any corporation, another corporation of
which the securities having a majority of the voting power in electing directors
are, at the time of determination, owned by the first corporation, directly or
through one of more Subsidiaries.
"Termination Date" is defined in paragraph 4(c).
"Termination Notice" is defined in paragraph 4(b).
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"Without Cause" means an involuntary termination of Executive's employment
by the Company other than for Cause or due to Executive's death or Disability or
a termination of employment by Executive for Good Reason.
12. Survival. Paragraphs 6, 7 and 8 shall survive and continue in full
force in accordance with their terms notwithstanding any termination of the
Employment Period.
13. Expenses. The Company shall pay all of Executive's expenses (including
reasonable attorneys' fees and expenses) paid by Executive in connection with
the negotiation and preparation of this Agreement and all related documents. In
the event Executive prevails in any arbitration or litigation arising out of his
termination of employment or his seeking to obtain or enforce any right or
benefit provided by this Agreement or by any other plan or arrangement
maintained by the Company under which he is or may be entitled to receive
benefits, the Company shall pay all reasonable legal fees and related expenses
(including the costs of experts, evidence and counsel and other such expenses
included in connection with any litigation or appeal) incurred by Executive in
such an arbitration or litigation. The Company further agrees to pay prejudgment
interest on any money judgment against the Company obtained by Executive in any
arbitration or litigation against it to enforce such right calculated at the
Prime Rate as reported in the Wall Street Journal in effect from time to time
from the date it is determined that payment to him should have been made under
this Agreement.
14. Notices. Any notice provided for in this Agreement shall be in writing
and shall be either personally delivered, or mailed by first class mail, return
receipt requested, to the recipient at the address below indicated:
Notices to Executive:
Charles E. Whetzel, Jr.
10910 Old Stone Court
Duluth, GA 30155
Notices to the Company:
c/o The William Carter Company
1590 Adamson Parkway
Morrow, Georgia 30260
Attn: Frederick J. Rowan, II
Chairman & Chief Executive Officer
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or on the second business day after being deposited for delivery with the United
States Postal Service.
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15. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
16. Complete Agreement. This Agreement, those documents expressly referred
to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way,
including, without limitation, the Prior Agreement. Without limiting the
foregoing, Executive acknowledges and agrees that he has no rights under the
Prior Agreement because a "Change of Control," as defined in the Prior
Agreement, may have occurred.
17. Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
18. Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that no party may assign his or
its rights or delegate his or its obligations hereunder without the prior
written consent of the other parties to this Agreement.
19. Choice of Law. This Agreement will be governed by and construed in
accordance with the domestic laws of the state of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
any jurisdiction other than the State of New York.
20. Amendment and Waiver. The provision of this Agreement may be amended
or waived only with the prior written consent of the Company and Executive, and
no course of conduct or failure or delay in enforcing the provisions of this
Agreement shall affect the validity, binding effect or enforceability this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
THE WILLIAM CARTER COMPANY
By: /s/ Frederick J. Rowan, II
---------------------------------
Frederick J. Rowan, II,
Chairman & Chief Executive
Officer
/s/ Charles E. Whetzel, Jr.
---------------------------------
Charles E. Whetzel, Jr.
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EXHIBIT 10.4
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of October 30,
1996 (the "Effective Date"), between The William Carter Company, a Massachusetts
corporation (the "Company"), and David A. Brown ("Executive") and shall replace
in its entirety the Employment Agreement between Executive and the Company dated
as of June 5, 1992 (the "Prior Agreement"). Certain capitalization terms that
are used in this Agreement are defined in paragraph 11.
The parties agree as follows:
1. Employment. The Company agrees to employ Executive, and Executive
hereby accepts employment with the Company, upon the terms and conditions set
forth in this Agreement for the period beginning on the Effective Date and
ending as provided in paragraph 4 (the "Employment Period").
2. Position and Duties.
(a) During the Employment Period, Executive shall serve as the
Senior Vice President--Business Planning and Administration of the Company and
shall have the normal duties, responsibilities and authority of such offices,
subject to any limitations imposed by the bylaws of the Company and to the power
of the boards of directors and senior officers of the Company to expand or limit
such duties, responsibilities and authority and to override actions of
Executive.
(b) Executive shall report to the Chief Executive Officer of the
Company and Executive shall devote his best efforts and his full business time
and attention (except for permitted vacation periods and reasonable periods of
illness or other incapacity) to the business and affairs of the Company.
Executive shall perform his duties and responsibilities to the best of his
abilities in a diligent, trustworthy, businesslike and efficient manner.
(c) Executive's principal office and place of employment shall be at
the Company's principal executive offices.
3. Compensation.
(a) Base Salary. Executive's base salary shall be $197,000 per annum
initially. On each January 1 occurring after the Effective Date and during the
Employment Period, Executive's base salary then in effect shall be increased by
the applicable Cost of Living Amount. The Company's board of directors may, in
its discretion, increase Executive's base salary at such times and in such
amounts as it determines but at no time shall Executive's base salary, in effect
from time to time, be decreased. As used in this Agreement, "Base Salary" means
Executive's base salary as adjusted and in effect from time to time. Executive's
Base
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Salary shall be payable by the Company in regular installments in accordance
with the Company's general payroll practices.
(b) Annual Cash Bonus Plan. Executive shall be a participant in the
Company's Annual Cash Bonus Plan and be eligible for an annual award under such
plan at a maximum award level equal to no less than sixty-five percent (65%) of
Executive's average Base Salary in effect during the calendar year for which the
award is made.
(c) Vacation. Executive shall be entitled to three (3) weeks paid
vacation annually.
(d) Fringe Benefits. Executive shall receive such fringe benefits as
are made available to executive level employees of the Company, together with a
monthly car allowance of $600.00 and such other benefits, payments or allowances
as the Company's board of directors (or an appropriate committee of the board)
may from time to time make available to Executive (collectively, the "Fringe
Benefits"). Without prejudice to Executive's rights under this Agreement, the
Company reserves the right (i) to modify the terms of any benefit plan that is
generally made available to executive level employees of the Company and in
which Executive participates so long as such changes affect all plan
participants equally (or in proportion to their respective interests), and (ii)
to make reasonable changes in the Fringe Benefits at the direction of the
Company's board of directors, so long as the Fringe Benefits available to
Executive after giving effect to such change are not materially different from
those being provided prior to such change.
(e) Business Expenses. The Company shall reimburse Executive for all
reasonable and necessary expenses incurred by him in connection with the
performance of his duties and responsibilities pursuant to this Agreement which
are consistent with the Company's policies in effect from time to time with
respect to travel, entertainment and other business expenses, subject to the
Company's reasonable requirements with respect to reporting and documentation of
such expenses.
4. Term and Termination.
(a) The Employment Period shall initially extend until October 31,
1998 but shall be extended for an additional one-year period on each Anniversary
Date unless either the Company or Executive gives the other written notice at
least sixty (60) days prior to such Anniversary Date of its or his intention not
to further extend the term of this Agreement; provided that (i) the Employment
Period shall terminate prior to such date upon Executive's resignation,
Retirement or death and (ii) the Employment Period may be terminated by the
Company at any time prior to such date for Cause, Executive's Disability or
Without Cause.
(b) Any termination of Executive's employment by the Company
pursuant to clause 4(a)(ii) above, and any termination of Executive's employment
by Executive pursuant to clause 4(a)(i) above, shall be communicated by written
Termination Notice given to the other party hereto; provided, that in the case
of Executive's death, a Termination Notice shall be deemed to have been given as
of the date of his death; and provided, further, that, in the case of a
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termination for Cause, there shall also have been delivered to Executive the
written findings by the Company's Chief Executive Officer as provided in the
definition of Cause. For purposes of this Agreement, a "Termination Notice"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
(c) "Termination Date" means (i) if this Agreement is terminated for
Disability, 30 days after Termination Notice is given (provided that Executive
shall not have returned to the performance of his duties on a full-time basis
during such 30-day period), (ii) if Executive resigns or takes Retirement, the
date specified in Executive's Termination Notice (or if no Termination Notice is
given, the date upon which such termination is effective), (iii) if Executive
dies, on the last day of the month next succeeding the month during which
Executive's death occurs, and (iv) if Executive's employment is terminated for
any other reason, the date on which a Termination Notice is given.
5. Severance Compensation.
(a) General. If Executive resigns, terminates employment by his
death or Retirement or is terminated for Cause, the Company will pay Executive
his Base Salary in effect at the time the Termination Notice is given (or deemed
given) through the Termination Date and the Company shall not have any further
obligations to Executive under this Agreement. Without prejudice to any accrued
and vested rights Executive may have under the Annual Cash Bonus Plan, the
Retirement Savings Plan or the Severance Pay Plan and except as otherwise
required by law, all of Executive's rights to the Fringe Benefits from the
Company will cease as of the Termination Date.
(b) Disability. During any period that Executive fails to perform
his duties as a result of incapacity due to mental illness or physical illness
or injury, he shall continue to receive his full Base Salary and the Fringe
Benefits until the Company terminates his employment for Disability. Thereafter,
he will be entitled to major medical health insurance coverage under the
Company's employee group health insurance (or substantially similar health
insurance) until Executive attains age 65 or obtains employment with another
employer that makes health insurance available to its employees and Executive is
eligible to be covered under such insurance, whichever occurs first, and shall
be entitled to receive disability benefits in accordance with the disability
income insurance plan or plans maintained by the Company covering Executive at
the Termination Date. Without prejudice to any accrued and vested rights
Executive may have under the Annual Cash Bonus Plan or the Retirement Savings
Plan and except as otherwise required by law or this Section 5(b), all of
Executive's rights to the Fringe Benefits from the Company will cease as of the
Termination Date.
(c) Without Cause. If Executive is involuntarily terminated by the
Company Without Cause, (i) Executive shall be entitled to continue to receive
his full Base Salary, as in effect on the Termination Date, through the
remainder of the Employment Period (as in effect immediately prior to the
delivery of the Termination Notice and without regard to the automatic
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extension provisions of paragraph 4(a) hereof) (the "Remaining Term") so long as
Executive has not breached the provisions of paragraphs 6, 7 or 8, (ii) the
Company will maintain in full force and effect, for Executive's continued
benefit, until the earlier of (A) the expiration of the Remaining Term or (B)
Executive's 65th birthday, all life, medical and dental insurance programs in
which Executive was entitled to participate so long as his continued
participation is possible under the general terms and provisions of such
programs (provided that, in the event Executive's participation in any such
program is barred, the Company will arrange to provide Executive with benefits
substantially similar to those which he was entitled to receive under such
programs) and thereafter the Company will make such insurance coverage available
to Executive (at Executive's expense) until Executive attains age 65 or obtains
employment with another employer that makes such (or similar) insurance
available to its employees and Executive is eligible to be covered under such
insurance, whichever occurs first and (iii) notwithstanding any provision in the
Annual Cash Bonus Plan to the contrary, Executive shall become fully vested and
have a nonforfeitable interest in the benefits which he has accrued under the
Annual Cash Bonus Plan as of the Termination Date and he shall be given full
credit under the Plan for the benefit that he would have accrued for the plan
year during which the Termination Date occurs (which determination may take into
account whether Company performance goals established by the plan or its
administrator for such year have been met, but which may not take into account
whether personal performance goals established for Executive by the plan or its
administrator have been met) as if he were employed by the Company on the last
day of such plan year. The amounts payable in respect of accrued benefits under
the Annual Cash Bonus Plan shall be payable at the time provided for in, and in
accordance with the provision of, the Annual Cash Bonus Plan. The amounts
payable pursuant to this paragraph 5(c) in respect of Base Salary may be
payable, at Executive's discretion, in one lump sum payment within 30 days
following the Termination Date equal to the present value (determined using a
discount rate equal to the "prime" rate of interest charged by Chase Manhattan
Bank in New York plus two (2) percentage points) of the payments otherwise
payable pursuant to this paragraph 5(c). This paragraph 5(c) sets forth
Executive's exclusive remedy for a termination of his employment Without Cause
and Executive shall have no other right or remedy against the Company in
connection therewith.
(d) Executive's right to receive payments under this Agreement shall
not decrease the amount of, or otherwise adversely affect, any other benefits
payable to Executive under any plan, agreement or arrangement relating to
employee benefits provided by the Company (or an Affiliated Corporation);
provided, however, that the amounts payable to Executive under paragraph 5(c)(i)
shall be reduced by the amount of any severance compensation payable to
Executive under the Company's Severance Pay Plan.
(e) Executive shall not be required to mitigate the amount of any
payment provided for in this paragraph 5 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
paragraph 5 be reduced by any compensation earned by Executive as the result of
employment by another employer or by reason of Executive's receipt of, or right
to receive, any retirement or other benefits after the date of termination of
employment or otherwise (except as otherwise provided in this paragraph 5).
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6. Confidential Information. Executive acknowledges that the non-public
information obtained by him while employed by the Company concerning the
business or affairs of the Company or any Subsidiary of the Company
("Confidential Information") are the property of the Company or such Subsidiary.
For purposes of this Agreement, the term "Confidential Information" does not
include information that Executive can demonstrate (a) was in Executive's
possession prior to his initial employment with the Company, provided that such
information is not known by Executive to be subject to another confidentiality
agreement with, or other obligation of secrecy to, the Company or another party,
(b) is generally available to the public and became generally available to the
public other than as a result of a disclosure in violation of this Agreement or
(c) became available to Executive on a non-confidential basis from a third
party, provided that such third party is not known by Executive to be bound by a
confidentiality agreement with, or other obligation of secrecy to, the Company
or another party or is otherwise prohibited from providing such information to
Executive by a contractual, legal or fiduciary obligation. Executive agrees that
he will not disclose Confidential Information to any person (other that
employees of the Company or any of its Subsidiaries or any other person
expressly authorized by the Company's Chief Executive Officer to receive
Confidential Information) or use for his own account any Confidential
Information without the prior written consent of the Company's Chief Executive
Officer. Executive shall deliver to the Company at the Termination of the
Employment Period, or at any other time the Company's Chief Executive Officer
may request in writing, all memoranda, notes, plans, records, reports, computer
tapes and software and other documents and data (and copies thereof) containing
Confidential Information or Work Product which he may then possess or have under
his control.
7. Work Product. Executive agrees that all inventions, innovations,
improvements, developments, methods, designs, analyses, reports and all similar
or related information which relate to the Company's or any of its Subsidiaries'
actual or anticipated business, research and development or existing or future
products or services and which are conceived, developed or made by Executive
while employed with the Company ("Work Product") belong to the Company or such
Subsidiary. Upon the written request of the Company's Chief Executive Officer,
Executive will promptly disclose such Work Product to the Company's Chief
Executive Officer and perform all actions reasonably requested by the Company's
Chief Executive Officer (whether during or after the Employment Period) to
establish and confirm such ownership.
8. Noncompete, Non-Solicitation.
(a) Executive acknowledges that in the course of his employment with
the Company he will become familiar with the trade secrets and other
confidential information of the Company and its Subsidiaries and that his
services will be of special, unique and extraordinary value to the Company.
Therefore, Executive agrees that, during the Employment Period and for one year
thereafter (or six months thereafter, if Executive's employment is terminated
Without Cause (the "Noncompete Period"), he shall not directly or indirectly
own, manage, control, participate in, consult with, render services for, or in
any manner engage in any business competing with the businesses of the Company
or any of its Subsidiaries which (i) exist on the date of the termination of
Executive's employment or (ii) are commenced during the Noncompete Period (but,
for purposes of this clause (ii) only if the Company or such Subsidiary had
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determined prior to the Termination Date to enter into such business or had
committed substantial resources prior to the Termination Date to determine the
feasibility of entering into such business), within the United State and any
other geographical area in which the Company or any of its Subsidiaries engage
in such businesses. Nothing herein shall prohibit Executive from being a passive
owner of not more than 2% of the outstanding stock of any class of a corporation
which is publicly traded, so long as Executive has no active participation in
the business of such corporation.
(b) During the Noncompete Period, Executive shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of the Company or any of its Subsidiaries to leave the employ of such person, or
in any way interfere with the employment relationship between the Company or any
of its Subsidiaries and any employee thereof, (ii) hire any person who was an
employee of the Company or any of its Subsidiaries at any time during the
Employment Period (other than individuals who have not been employed by the
Company or any of its Subsidiaries for a period of at least six months prior to
employment by Executive directly or indirectly through another entity), or (iii)
induce or attempt to induce any customer, supplier, licensee or other person
having a business relationship with the Company or any of its Subsidiaries to
cease doing business with the Company or such Subsidiary, or interfere
materially with the relationship between any such customer, supplier, licensee
or other person having a business relationship with the Company or any of its
Subsidiaries.
(c) If, at the time of enforcement of this paragraph 8, a court
shall hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
(d) In the event of the breach or a threatened breach by Executive
of any of the provisions of this paragraph 8, the Company, in addition and
supplementary to other rights and remedies existing in its favor, may apply to
any court of law or equity of competent jurisdiction for specific performance or
injunctive or other relief in order to enforce or prevent any violations of the
provisions hereof (without posting a bond or other security).
9. Incapacity. Without prejudice to Executive's rights under this
Agreement, if at any time during the term of this Agreement Executive is absent
from his duties with the Company for 30 consecutive days as a result of
incapacity due to mental illness or physical illness or injury, the Company's
board of directors or Chief Executive Officer may appoint an interim Senior Vice
President--Retail Stores and Administration or assume extended management
responsibilities for the duration of Executive's absence. Unless Executive's
employment has been terminated previously under this Agreement, Executive shall
be permitted to resume performance of his duties and responsibilities under this
Agreement upon regaining the capacity to do so.
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10. Executive Representations. Executive hereby represents and warrants to
the Company that (a) the execution, delivery and performance of this Agreement
by Executive does not and will not conflict with, breach, violate or cause a
default under any contract, agreement, instrument, order, judgment or decree to
which Executive is a party or by which he is bound, (b) Executive is not a party
to or bound by any employment agreement, noncompete agreement or confidentiality
agreement with any other person or entity with which this Agreement would
conflict or constitute a breach thereof and (c) upon the execution and delivery
of this Agreement by the Company, this Agreement shall be the valid and binding
obligation of Executive, enforceable against Executive in accordance with its
terms, subject to bankruptcy, insolvency, fraudulent conveyance, reorganization,
moratorium and similar laws affecting the enforceability of contractual
obligations and creditor's rights generally and to federal and state
constitutional proscriptions and by the application of equitable principles by
courts of competent jurisdiction, sitting at law or in equity.
11. Certain Defined Terms. As used in this Agreement, the following terms
shall have the meanings set forth below:
"Affiliated Corporation" means any corporation that is a member of the
"affiliated group" (as defined in Section 1504 of the Code) of which the Company
is a member.
"Anniversary Date" means any or a specific anniversary of the Effective
Date, as the context requires.
"Base Salary" is defined in paragraph 3(a).
"Cause" means (a) conviction of Executive for a felony, or the entry by
Executive of a plea of guilty or nolo contendere to a felony, (b) a willful and
material breach by Executive of paragraph 6, 7 or 8 of this Agreement, (c) the
commission of an act of fraud involving dishonesty for personal gain which is
materially injurious to the Company, (d) the willful and continued refusal by
Executive to substantially perform his duties with the Company (other than any
such refusal resulting from his incapacity due to mental illness or physical
illness or injury), after a demand for substantial performance is delivered to
Executive by the Company's Chief Executive Officer where such demand
specifically identifies the manner in which the Company's Chief Executive
Officer believes that Executive has refused to substantially perform his duties
and the passage of a reasonable period of time for Executive to comply with such
demand or (e) the willful engaging by Executive in gross misconduct materially
and demonstrably injurious to the Company or its Subsidiaries. For purposes of
this paragraph, no act or failure to act on Executive's part shall be considered
"willful" unless done, or omitted to be done, by Executive not in good faith and
without reasonable belief that his action or omission was in the best interest
of the Company or its Subsidiaries. Notwithstanding the foregoing, with respect
to termination for Cause arising out of conduct described in clause (b), (c),
(d) or (e) above, Executive may not be terminated for Cause unless there shall
have been delivered to Executive a written finding by the Company's board of
directors or Chief Executive Officer, finding that in the good faith opinion of
the Board of Directors or the Company's Chief Executive Officer, Executive had
engaged in conduct described above in clause (b), (c) (d), or (e) of the first
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sentence of this paragraph and specifying the particulars thereof in detail.
Such a finding by the Company's board of directors or Chief Executive Officer is
a prerequisite to a termination for cause pursuant to clauses (b), (c), (d) or
(e) above, provided, however, such a finding may be challenged, by appropriate
judicial process, on the merits (i.e., that Cause did not exist) or on the basis
that the Board's or Chief Executive Officer's finding was not made in good faith
(provided that proof that cause for termination existed shall be a complete
defense to any showing that the Board's or Chief Executive Officer's findings
were not made in good faith).
"Code" means the Internal Revenue Code of 1986, as amended.
"Cost of Living Amount" means an amount calculated by multiplying the Base
Salary then in effect by a fraction, (a) the numerator of which shall be the
amount (not less than zero) by which the latest Cost of Living Index available
as of the time of determination exceeds the Cost of Living Index for same period
during the immediately preceding year, and (b) the denominator of which shall be
the Cost of Living Index for the same period during the immediately preceding
year.
"Cost of Living Index" means the Consumer Price Index for All Urban
Consumers, Atlanta, Georgia (1967-100) prepared by the Bureau of Labor
Statistics of the United States Department of Labor for the relevant period;
provided that if the index shall cease to be published, the parties shall use as
the index, the most comparable index published by the United States Government.
"Disability" means Executive shall have been absent from his duties with
the Company for 26 consecutive weeks as a result of incapacity due to mental
illness or physical illness or injury, and he shall not have returned to the
full-time performance of his duties within 30 days after written notice of
termination of this Agreement is given by the Company's board of directors or
Chief Executive Officer.
"Fringe Benefits" is defined in paragraph 3(g).
"Good Reason" means, unless Executive shall have consented in writing
thereto, any of the following:
(a) except as provided in paragraph 9, a material reduction in
Executive's title, duties, responsibilities or status, as compared to such
title, duties, responsibilities or status on the Effective Date;
(b) the assignment to Executive of a material amount of different or
additional duties that are significantly inconsistent with Executive's office on
the Effective Date;
(c) a requirement that Executive relocate anywhere not acceptable to
him or the imposition on Executive of business travel obligations substantially
greater than his business travel obligations during the year prior to the
Effective Date; or
(d) any material breach of this Agreement by the Company;
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provided, however, that Executive shall not have the right to terminate his
employment for "Good Reason" unless he shall have given thirty (30) days prior
written notice to the Board of Directors of the Company in which Executive sets
forth in reasonable detail the circumstances that Executive believes constitute
"Good Reason" pursuant to the preceding clauses (a) through (d) and the Company
shall not have remedied the matter within said thirty (30) day period; and
provided, further, however that the fact that the Company does or does not so
remedy said matter shall not be deemed an admission by the Company that such
circumstances constitute "Good Reason".
"Person" means an individual, a partnership, a joint venture, a
corporation, an association, a joint stock company, a limited liability company,
a trust, an unincorporated organization or a government or any department or
agency or political subdivision thereof.
"Remaining Term" is defined in paragraph 5(c).
"Retirement" means termination of Executive's employment in accordance
with the Company's normal retirement policy generally applicable to its salaried
employees (or, at Executive's election, at any time after attaining age 60 or at
any earlier time upon the occurrence of any event entitling Executive to receive
disability benefits under any long-term disability policy maintained by the
Company that covers Executive) or in accordance with any other retirement
arrangement established with Executive's consent with respect to Executive.
"Retirement Savings Plan" means the Company's Defined Contribution 401(k)
savings plan in effect as of the Effective Date, as the same is amended from
time to time.
"Severance Pay Plan" means the Company's Severance Pay Plan for Exempt
Employees, in effect as of the Effective Date, as the same is amended from time
to time.
"Subsidiary" means with respect to any corporation, another corporation of
which the securities having a majority of the voting power in electing directors
are, at the time of determination, owned by the first corporation, directly or
through one of more Subsidiaries.
"Termination Date" is defined in paragraph 4(c).
"Termination Notice" is defined in paragraph 4(b).
"Without Cause" means an involuntary termination of Executive's employment
by the Company other than for Cause or due to Executive's death or Disability or
a termination of employment by Executive for Good Reason.
12. Survival. Paragraphs 6, 7 and 8 shall survive and continue in full
force in accordance with their terms notwithstanding any termination of the
Employment Period.
13. Expenses. The Company shall pay all of Executive's expenses (including
reasonable attorneys' fees and expenses) paid by Executive in connection with
the negotiation and preparation of this Agreement and all related documents. In
the event Executive prevails in
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any arbitration or litigation arising out of his termination of employment or
his seeking to obtain or enforce any right or benefit provided by this Agreement
or by any other plan or arrangement maintained by the Company under which he is
or may be entitled to receive benefits, the Company shall pay all reasonable
legal fees and related expenses (including the costs of experts, evidence and
counsel and other such expenses included in connection with any litigation or
appeal) incurred by Executive in such an arbitration or litigation. The Company
further agrees to pay prejudgment interest on any money judgment against the
Company obtained by Executive in any arbitration or litigation against it to
enforce such right calculated at the Prime Rate as reported in the Wall Street
Journal in effect from time to time from the date it is determined that payment
to him should have been made under this Agreement.
14. Notices. Any notice provided for in this Agreement shall be in writing
and shall be either personally delivered, or mailed by first class mail, return
receipt requested, to the recipient at the address below indicated:
Notices to Executive:
David A. Brown
103 Pierrepont Isle
Duluth, GA 30136
Notices to the Company:
c/o The William Carter Company
1590 Adamson Parkway
Morrow, Georgia 30260
Attn: Frederick J. Rowan, II
Chairman & Chief Executive Officer
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or on the second business day after being deposited for delivery with the United
States Postal Service.
15. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
16. Complete Agreement. This Agreement, those documents expressly referred
to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to
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the subject matter hereof in any way, including, without limitation, the Prior
Agreement. Without limiting the foregoing, Executive acknowledges and agrees
that he has no rights under the Prior Agreement because a "Change of Control,"
as defined in the Prior Agreement, may have occurred.
17. Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
18. Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that no party may assign his or
its rights or delegate his or its obligations hereunder without the prior
written consent of the other parties to this Agreement.
19. Choice of Law. This Agreement will be governed by and construed in
accordance with the domestic laws of the State of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
any jurisdiction other than the State of New York.
20. Amendment and Waiver. The provision of this Agreement may be amended
or waived only with the prior written consent of the Company and Executive, and
no course of conduct or failure or delay in enforcing the provisions of this
Agreement shall affect the validity, binding effect or enforceability this
Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
THE WILLIAM CARTER COMPANY
By: /s/ Frederick J. Rowan, II
----------------------------------
Frederick J. Rowan, II,
Chairman & Chief Executive
Officer
/s/ David A. Brown
----------------------------------
David A. Brown
<PAGE>
EXHIBIT 10.5
EMPLOYMENT AGREEMENT
This Employment Agreement (this "Agreement") is made as of October 30,
1996 (the "Effective Date"), between The William Carter Company, a Massachusetts
corporation (the "Company"), and Jay A. Berman ("Executive") and shall replace
in its entirety the Employment Agreement between Executive and the Company dated
as of September 1, 1993 (the "Prior Agreement"). Certain capitalized terms that
are used in this Agreement are defined in paragraph 11.
The parties agree as follows:
1. Employment. The Company agrees to employ Executive, and Executive
hereby accepts employment with the Company, upon the terms and conditions set
forth in this Agreement, for the period beginning on the Effective Date and
ending as provided in paragraph 4 (the "Employment Period").
2. Position and Duties.
(a) During the Employment Period, Executive shall serve as the
Senior Vice President and Chief Financial Officer of the Company and shall have
the normal duties, responsibilities and authority of such office, subject to any
limitations imposed by the bylaws of the Company and to the power of the boards
of directors and senior officers of the Company to expand or limit such duties,
responsibilities and authority and to override actions of Executive.
(b) Executive shall report to the Chief Executive Officer of the
Company and Executive shall devote his best efforts and his full business time
and attention (except for permitted vacation periods and reasonable periods of
illness or other incapacity) to the business and affairs of the Company.
Executive shall perform his duties and responsibilities to the best of his
abilities in a diligent, trustworthy, businesslike and efficient manner.
(c) Executive's principal office and place of employment shall be at
the Company's offices in Shelton, Connecticut. Corporation shall not require
Executive to make his principal place of business outside of Fairfield County,
Connecticut without Executive's prior written consent.
3. Compensation.
(a) Base Salary. Executive's base salary shall be $177,000 per
annum. On each January 1 occurring after the Effective Date and during the
Employment Period, Executive's base salary then in effect shall be increased by
the applicable Cost of Living Amount. The Company's board of directors may, in
its discretion, increase Executive's base salary at such times and in such
amounts as it determines but at no time shall Executive's base salary, in effect
from time to time, be decreased. As used in this Agreement, "Base Salary" means
Executive's base salary as adjusted and in effect from time to time. Executive's
Base Salary shall be payable
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by the Company in regular installments in accordance with the Company's general
payroll practices.
(b) Annual Cash Bonus Plan. Executive shall be a participant in the
Company's Annual Cash Bonus Plan and be eligible for an annual award under such
plan at a maximum award level equal to no less than sixty five percent (65%) of
Executive's average Base Salary in effect during the calendar year for which the
award is made.
(c) Vacation. Executive shall be entitled to three (3) weeks paid
vacation annually.
(d) Fringe Benefits. Executive shall receive such fringe benefits as
are made available to executive level employees of the Company, together with a
monthly car allowance of $600.00 and such other benefits, payments or allowances
as the Company's board of directors (or an appropriate committee of the board)
may from time to time make available to Executive (collectively, the "Fringe
Benefits"). Without prejudice to Executive's rights under this Agreement, the
Company reserves the right (i) to modify the terms of any benefit plan that is
generally made available to executive level employees of the Company and in
which Executive participates so long as such changes affect all plan
participants equally (or in proportion to their respective interests), and (ii)
to make reasonable changes in the Fringe Benefits at the direction of the
Company's board of directors, so long as the Fringe Benefits available to
Executive after giving effect to such change are not materially different from
those being provided prior to such change.
(e) Business Expenses. The Company shall reimburse Executive for all
reasonable and necessary expenses incurred by him in connection with the
performance of his duties and responsibilities pursuant to this Agreement which
are consistent with the Company's policies in effect from time to time with
respect to travel, entertainment and other business expenses, subject to the
Company's reasonable requirements with respect to reporting and documentation of
such expenses.
4. Term and Termination.
(a) The Employment Period shall initially extend until October 31,
1998 but shall be extended for an additional one-year period on each Anniversary
Date unless either the Company or Executive gives the other written notice at
least sixty (60) days prior to such Anniversary Date of its or his intention not
to further extend the term of the Agreement; provided that (i) the Employment
Period shall terminate prior to such date upon Executive's resignation,
Retirement or death and (ii) the Employment Period may be terminated by the
Company at any time prior to such date for Cause, Executive's Disability or
Without Cause.
(b) Any termination of Executive's employment by the Company
pursuant to clause 4(a)(ii) above, and any termination of Executive's employment
by Executive pursuant to paragraph 4(a)(i) above, shall be communicated by
written Termination Notice given to the other party hereto; provided, that in
the case of Executive's death, a Termination Notice shall be deemed to have been
given as of the date of his death; and provided, further, that, in the case of a
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termination for Cause, there shall also have been delivered to Executive the
written findings by the Company's Chief Executive Officer as provided in the
definition of Cause. For purposes of this Agreement, a "Termination Notice"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of Executive's
employment under the provision so indicated.
(c) "Termination Date" means (i) if this Agreement is terminated for
Disability, 30 days after Termination Notice is given (provided that Executive
shall not have returned to the performance of his duties on a full-time basis
during such 30-day period), (ii) if Executive resigns or takes Retirement, the
date specified in Executive's Termination Notice (or if no Termination Notice is
given, the date upon which such termination is effective), (iii) if Executive
dies, on the last day of the month next succeeding the month during which
Executive's death occurs, and (iv) if Executive's employment is terminated for
any other reason, the date on which a Termination Notice is given.
5. Severance Compensation.
(a) General. If Executive resigns, terminates employment by his
death or Retirement or is terminated for Cause, the Company will pay Executive
his Base Salary in effect at the time the Termination Notice is given (or deemed
given) through the Termination Date and the Company shall not have any further
obligations to Executive under this Agreement. Without prejudice to any accrued
and vested rights Executive may have under the Annual Cash Bonus Plan, the
Retirement Savings Plan and the Severance Pay Plan and except as otherwise
required by law, all of Executive's rights to the Fringe Benefits from the
Company will cease as of the Termination Date.
(b) Disability. During any period that Executive fails to perform
his duties as a result of incapacity due to mental illness or physical illness
or injury, he shall continue to receive his full Base Salary and the Fringe
Benefits until the Company terminates his employment for Disability. Thereafter,
he will be entitled to major medical health insurance coverage under the
Company's employee group health insurance (or substantially similar health
insurance) until Executive attains age 65 or obtains employment with another
employer that makes health insurance available to its employees and Executive is
eligible to be covered under such insurance, whichever occurs first, and shall
be entitled to receive disability benefits in accordance with the disability
income insurance plan or plans maintained by the Company covering Executive at
the Termination Date. Without prejudice to any accrued and vested rights
Executive may have under the Annual Cash Bonus Plan or the Retirement Savings
Plan and except as otherwise required by law or this section 5(b), all of
Executive's rights to the Fringe Benefits from the Company will cease as of the
Termination Date.
(c) Without Cause. If Executive is involuntarily terminated by the
Company Without Cause, (i) Executive shall be entitled to continue to receive
his Base Salary (as in effect on the Termination Date) through the remainder of
the Employment period (as in effect immediately prior to the delivery of the
Termination Notice and without regard to the automatic
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extension provision of paragraph 4(a) hereof) (the "Remaining Term") so long as
Executive has not breached the provisions of paragraphs 6, 7 or 8; (ii) the
Company will maintain in full force and effect, for Executive's continued
benefit, until the earlier of (A) the expiration of the Remaining Term or (B)
Executive's 65th birthday, all life, medical and dental insurance programs in
which Executive was entitled to participate so long as his continued
participation is possible under the general terms and provisions of such
programs (provided that, in the event Executive's participation in any such
program is barred, the Company will arrange to provide Executive with benefits
substantially similar to those which he was entitled to receive under such
programs) and thereafter the Company will make such insurance coverage available
to Executive (at Executive's expense) until Executive attains age 65 or obtains
employment with another employer that makes such (or similar) insurance
available to its employees and Executive is eligible to be covered under such
insurance, whichever occurs first, and (iii) notwithstanding any provision in
the Annual Cash Bonus Plan to the contrary, Executive shall become fully vested
and have a nonforfeitable interest in the benefits which he has accrued under
the Annual Cash Bonus Plan as of the Termination Date and he shall be given full
credit under the Annual Cash Bonus Plan for the benefit that he would have
accrued for the plan year during which the Termination Date occurs (which
determination may take into account whether Company performance goals
established by the plan or its administrator for such year have been met, but
which may not take into account whether personal performance goals established
for Executive by the plan or its administrator have been met) as if he were
employed by the Company on the last day of such plan year. The amounts payable
in respect of accrued benefits under the Annual Cash Bonus Plan shall be payable
at the time provided for in, and in accordance with the provision, of the Annual
Cash Bonus Plan. The amounts payable pursuant to this paragraph 5(c) in respect
to Base Salary may be payable, at Executive's discretion, in one lump sum
payment within 30 days following the Termination Date equal to the present value
(determined using a discount rate equal to the "prime" rate of interest charged
by Chase Manhattan Bank in New York plus two percentage points) of the payments
otherwise payable pursuant to this paragraph 5(c). This paragraph 5(c) sets
forth Executive's exclusive remedy for a termination of his employment Without
Cause and Executive shall have no other right or remedy against the Company in
connection therewith.
(d) Executive's right to receive payments under this Agreement shall
not decrease the amount of, or otherwise adversely affect, any other benefits
payable to Executive under any plan, agreement or arrangement relating to
employee benefits provided by the Company (or an Affiliated Corporation);
provided, however, that the amounts payable to Executive under paragraph 5(c)(i)
shall be reduced by the amount of any severance compensation payable to
Executive under the Company's Severance Pay Plan.
(e) Executive shall not be required to mitigate the amount of any
payment provided for in this paragraph 5 by seeking other employment or
otherwise, nor shall the amount of any payment or benefit provided for in this
paragraph 5 be reduced by any compensation earned by Executive as the result of
employment by another employer or by reason of Executive's receipt of, or right
to receive, any retirement or other benefits after the date of termination of
employment or otherwise (except as otherwise provided in this paragraph 5).
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6. Confidential Information. Executive acknowledges that the non-public
information obtained by him while employed by the company concerning the
business or affairs of the Company or any Subsidiary of the Company
("Confidential Information") are the property of the Company or such Subsidiary.
For purposes of this Agreement, the term "Confidential Information" does not
include information that Executive can demonstrate (a) was in Executive's
possession prior to his initial employment by the Company, provided that such
information is not known by Executive to be subject to another confidentiality
agreement with, or other obligation of secrecy to, the Company or another party,
(b) is generally available to the public and became generally available to the
public other than as a result of a disclosure in violation of this Agreement or
(c) became available to Executive on a non-confidential basis from a third
party, provided that such third party is not known by Executive to be bound by a
confidentiality agreement with, or other obligation of secrecy to, the Company
or another party or is otherwise prohibited from providing such information to
Executive by a contractual, legal or fiduciary obligation. Executive agrees that
he will not disclose Confidential Information to any person (other than
employees of the Company or any of its Subsidiaries or any other person
expressly authorized by the Company's Chief Executive Officer to receive
Confidential Information) or use for his own account any Confidential
Information without the prior written consent of the Company's Chief Executive
Officer. Executive shall deliver to the Company at the Termination of the
Employment Period, or at any other time the Company's Chief Executive Officer
may request in writing, all memoranda, notes, plans, records, reports, computer
tapes and software and other documents and data (and copies thereof) containing
Confidential Information or Work Product which he may then possess or have under
his control.
7. Work Product. Executive agrees that all inventions, innovations,
improvements, developments, methods, designs, analyses, reports and all similar
or related information which relate to the Company's or any of its Subsidiaries'
actual or anticipated business, research and development or existing or future
products or services and which are conceived, developed or made by Executive
while employed with the Company ("Work Product") belong to the Company or such
Subsidiary. Upon the written request of the Company's Chief Executive Officer,
Executive will promptly disclose such Work Product to the Company's Chief
Executive Officer and perform all actions reasonably requested by the Company's
Chief Executive Officer (whether during or after the Employment Period) to
establish and confirm such ownership.
8. Noncompete, Non-Solicitation.
(a) Executive acknowledges that in the course of his employment with
the Company he will become familiar with the trade secrets and other
confidential information of the Company and its Subsidiaries and that his
services will be of special, unique and extraordinary value to the Company.
Therefore, Executive agrees that, during the Employment Period and for one year
thereafter (or six months thereafter, if Executive's employment is terminated
Without Cause) (the "Noncompete Period"), he shall not directly or indirectly
own, manage, control, participate in, consult with, render services for, or in
any manner engage in any business competing with the businesses of the Company
or any of its Subsidiaries which (i) exist on the date of the termination of
Executive's employment or (ii) are commenced during the Noncompete Period (but,
for purposes of this clause (ii) only if the Company or such Subsidiary had
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determined prior to the Termination Date to enter into such business or had
committed substantial resources prior to the Termination Date to determine the
feasibility of entering into such business), within the United States and any
other geographical area in which the Company or any of its Subsidiaries engage
in such businesses. Nothing herein shall prohibit Executive from being a passive
owner of not more than 2% of the outstanding stock of any class of a corporation
which is publicly traded, so long as Executive has no active participation in
the business of such corporation.
(b) During the Noncompete Period, Executive shall not directly or
indirectly through another entity (i) induce or attempt to induce any employee
of the Company or any of its Subsidiaries to leave the employ of such person, or
in any way interfere with the employment relationship between the Company or any
of its Subsidiaries and any employee thereof, (ii) hire any person who was an
employee of the Company or any of its Subsidiaries at any time during the
Employment Period (other than individuals who have not been employed by the
Company or any of its Subsidiaries for a period of at least six months prior to
employment by Executive directly or indirectly through another entity), or (iii)
induce or attempt to induce any customer, supplier, licensee or other person
having a business relationship with the Company or any of its Subsidiaries to
cease doing business with the Company or such Subsidiary, or interfere
materially with the relationship between any such customer, supplier, licensee
or other person having a business relationship with the Company or any of its
Subsidiaries.
(c) If, at the time of enforcement of this paragraph 8, a court
shall hold that the duration, scope or area restrictions stated herein are
unreasonable under circumstances then existing, the parties agree that the
maximum duration, scope or area reasonable under such circumstances shall be
substituted for the stated duration, scope or area and that the court shall be
allowed to revise the restrictions contained herein to cover the maximum period,
scope and area permitted by law.
(d) In the event of the breach or a threatened breach by Executive
of any of the provisions of this paragraph 8, the Company, in addition and
supplementary to other rights and remedies existing in its favor, may apply to
any court of law or equity of competent jurisdiction for specific performance or
injunctive or other relief in order to enforce or prevent any violations of the
provisions hereof (without posting a bond or other security).
9. Incapacity. Without prejudice to Executive's rights under this
Agreement, if at any time during the term of this Agreement Executive is absent
from his duties with the Company for 30 consecutive days as a result of
incapacity due to mental illness or physical illness or injury, the Company's
board of directors or Chief Executive Officer may appoint an interior Chief
Financial Officer or assume extended management responsibilities for the
duration of Executive's absence. Unless Executive's employment has been
terminated previously under this Agreement, Executive shall be permitted to
resume performance of his duties and responsibilities under this Agreement upon
regaining the capacity to do so.
10. Executive Representations. Executive hereby represents and warrants to
the Company that (a) the execution, delivery and performance of this Agreement
by Executive does
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not and will not conflict with, breach, violate or cause a default under any
contract, agreement, instrument, order, judgment or decree to which Executive is
a party or by which he is bound, (b) Executive is not a party to or bound by any
employment agreement, noncompete agreement or confidentiality agreement with any
other person or entity with which this Agreement would conflict or constitute a
breach thereof and (c) upon the execution and delivery of this Agreement by the
Company, this Agreement shall be the valid and binding obligation of Executive,
enforceable against Executive in accordance with its terms, subject to
bankruptcy, insolvency, fraudulent conveyance, reorganization, moratorium and
similar laws affecting the enforceability of contractual obligations and
creditor's rights generally and to federal and state constitutional
proscriptions and by the application of equitable principles by courts of
competent jurisdiction, sitting at law or in equity.
11. Certain Defined Terms. As used in this Agreement, the following terms
shall have the meanings set forth below:
"Affiliated Corporation" means any corporation that is a member of the
"affiliated group" (as defined in Section 1504 of the Code) of which the Company
is a member.
"Anniversary Date" means any or a specific anniversary of the Effective
Date, as the context requires.
"Base Salary" is defined in paragraph 3(a).
"Cause" means (a) conviction of Executive for a felony, or the entry by
Executive of a plea of guilty or nolo contendere to a felony, (b) a willful and
material breach by Executive of paragraph 6, 7 or 8 of this Agreement, (c) the
commission of an act of fraud involving dishonesty for personal gain which is
materially injurious to the Company, (d) the willful and continued refusal by
Executive to substantially perform his duties with the Company (other than any
such refusal resulting from his incapacity due to mental illness or physical
illness or injury), after a demand for substantial performance is delivered to
Executive by the Company's Chief Executive Officer where such demand
specifically identifies the manner in which the Company's Chief Executive
Officer believes that Executive has refused to substantially perform his duties
and the passage of a reasonable period of time for Executive to comply with such
demand or (e) the willful engaging by Executive in gross misconduct materially
and demonstrably injurious to the Company or its Subsidiaries. For purposes of
this paragraph, no act or failure to act on Executive's part shall be considered
"willful" unless done, or omitted to be done, by Executive not in good faith and
without reasonable belief that his action or omission was in the best interest
of the Company or its Subsidiaries. Notwithstanding the foregoing, with respect
to termination for Cause arising out of conduct described in clause (b), (c),
(d) or (e) above, Executive may not be terminated for Cause unless there shall
have been delivered to Executive a written finding by the Company's board of
directors or Chief Executive Officer, Executive had engaged in conduct described
above in clause (b), (c), (d), or (e) of the first sentence of this paragraph
and specifying the particulars thereof in detail. Such a finding by the
Company's board of directors or Chief Executive Officer is a prerequisite to a
termination for cause pursuant to clauses (b), (c), (d) or (e) above, provided,
however, such a finding may be challenged, by appropriate judicial process,
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on the merits (i.e., that Cause did not exist) or on the basis that the Board's
or Chief Executive Officer's finding was not made in good faith (provided that
proof that cause for termination existed shall be a complete defense to any
showing that the Board's or Chief Executive Officer's findings were not made in
good faith).
"Code" means the Internal Revenue Code of 1986, as amended.
"Cost of Living Amount" means an amount calculated by multiplying the Base
Salary then in effect by a fraction, (a) the numerator of which shall be the
amount (not less than zero) by which the latest Cost of Living Index available
as of the time of determination exceeds the Cost of Living Index for same period
during the immediately preceding year, and (b) the denominator of which shall be
the Cost of Living Index for the same period during the immediately preceding
year.
"Cost of Living Index" means the Consumer Price Index for All Urban
Consumers, Atlanta, Georgia (1967-100) prepared by the Bureau of Labor
Statistics of the United States Department of Labor for the relevant period;
provided that if the index shall cease to be published, the parties shall use as
the index, the most comparable index published by the United States Government.
"Disability" means Executive shall have been absent from his duties with
the Company for 26 consecutive weeks as a result of incapacity due to mental
illness or physical illness or injury, and he shall not have returned to the
full-time performance of his duties within 30 days after written notice of
termination of this Agreement is given by the Company's board of directors or
Chief Executive Officer.
"Fringe Benefits" is defined in paragraph 3(c).
"Good Reason" means, unless Executive shall have consented in writing
thereto, any of the following:
(a) except as provided in paragraph 9, a material reduction in
Executive's title, duties, responsibilities or status, as compared to such
title, duties, responsibilities or status on the Effective Date;
(b) the assignment to Executive of a material amount of different or
additional duties that are significantly inconsistent with Executive's office on
the Effective Date;
(c) a requirement that Executive relocate anywhere not acceptable to
him or the imposition on Executive of business travel obligations substantially
greater than his business travel obligations during the year prior to the
Effective Date; or
(d) any material breach of this Agreement by the Company;
provided, however, that Executive shall not have the right to terminate his
employment for "Good Reason" unless he shall have given thirty (30) days prior
written notice to the Board of
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Directors of the Company in which Executive sets forth in reasonable detail the
circumstances that Executive believes constitute "Good Reason" pursuant to the
preceding clauses (a) through (d) and the Company shall not have remedied the
matter within said thirty (30) day period; and provided, further, however that
the fact that the Company does or does not so remedy said matter shall not be
deemed an admission by the Company that such circumstances constitute "Good
Reason".
"Person" means an individual, a partnership, a joint venture, a
corporation, an association, a joint stock company, a limited liability company,
a trust, an unincorporated organization or a government or any department or
agency or political subdivision thereof.
"Remaining Term" is defined in paragraph 5(c).
"Retirement" means termination of Executive's employment in accordance
with the Company's normal retirement policy generally applicable to its salaried
employees (or, at Executive's election, at any time after attaining age 60 or at
any earlier time upon the occurrence of any event entitling Executive to receive
disability benefits under any long-term disability policy maintained by the
Company that covers Executive) or in accordance with any other retirement
arrangement established with Executive's consent with respect to Executive.
"Retirement Savings Plan" means the Company's Defined Contribution 401(k)
savings plan in effect as of the Effective Date, as the same is amended from
time to time.
"Severance Pay Plan" means the Company's Severance Pay Plan for Exempt
Employees, in effect as of the Effective Date as the same is amended from time
to time.
"Subsidiary" means with respect to any corporation, another corporation of
which the securities having a majority of the voting power in electing directors
are, at the time of determination, owned by the first corporation, directly or
through one or more Subsidiaries.
"Termination Date" is defined in paragraph 4(c).
"Termination Notice" is defined in paragraph 4(b).
"Without Cause" means an involuntary termination of Executive's employment
by the Company other than for Cause or due to Executive's death or Disability or
a termination of Employment by Executive for Good Reason.
12. Survival. Paragraphs 6, 7, and 8 shall survive and continue in full
force in accordance with their terms notwithstanding any termination of the
Employment Period.
13. Expenses. The Company shall pay all of Executive's expenses (including
reasonable attorneys' fees and expenses) paid by Executive in connection with
the negotiation and preparation of this Agreement and all related documents. In
the event Executive prevails in any arbitration or litigation arising out of his
termination of employment or his seeking to obtain or enforce any right or
benefit provided by this Agreement or by any other plan or arrangement
9
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maintained by the Company under which he is or may be entitled to receive
benefits, the Company shall pay all reasonable legal fees and related expenses
(including the costs of experts, evidence and counsel and other such expenses
included in connection with any litigation or appeal) incurred by Executive in
such an arbitration or litigation. The Company further agrees to pay prejudgment
interest on any money judgment against the Company obtained by Executive in any
arbitration or litigation against it to enforce such right calculated at the
Prime Rate as reported in the Wall Street Journal in effect from time to time
from the date it is determined that payment to him should have been made under
this Agreement.
14. Notices. Any notice provided for in this Agreement shall be in writing
and shall be either personally delivered, or mailed by first class mail, return
receipt requested, to the recipient at the address below indicated:
Notices to Executive:
Jay A. Berman
27 Windy Ridge
Trumbull, CT 06611
Notices to the Company:
c/o The William Carter Company
1590 Adamson Parkway
Morrow, GA 30260
Attn: Frederick J. Rowan, II
Chairman and Chief Executive Officer
or such other address or to the attention of such other person as the recipient
party shall have specified by prior written notice to the sending party. Any
notice under this Agreement will be deemed to have been given when so delivered
or on the second business day after being deposited for delivery with the United
States Postal Service.
15. Severability. Whenever possible, each provision of this Agreement will
be interpreted in such manner as to be effective and valid under applicable law,
but if any provision of this Agreement is held to be invalid, illegal or
unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability will not affect
any other provision or any other jurisdiction, but this Agreement will be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
16. Complete Agreement. This Agreement, those documents expressly referred
to herein and other documents of even date herewith embody the complete
agreement and understanding among the parties and supersede and preempt any
prior understandings, agreements or representations by or among the parties,
written or oral, which may have related to the subject matter hereof in any way,
including, without limitation, the Prior Agreement. Without limited the
foregoing, Executive acknowledges and agrees that he has no rights under
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the Prior Agreement because a "Change of Control," as defined in the Prior
Agreement, may have occurred.
17. Counterparts. This Agreement may be executed in separate counterparts,
each of which is deemed to be an original and all of which taken together
constitute one and the same agreement.
18. Successors and Assigns. This Agreement is intended to bind and inure
to the benefit of and be enforceable by Executive, the Company and their
respective heirs, successors and assigns, except that no party may assign his or
its rights or delegate his or its obligations hereunder without the prior
written consent of the other parties to this Agreement.
19. Choice of Law. This Agreement will be governed by and construed in
accordance with the domestic laws of the state of New York, without giving
effect to any choice of law or conflict of law provision or rule (whether of the
State of New York or any other jurisdiction) that would cause the application of
any jurisdiction other than the State of New York.
20. Amendment and Waiver. The provision of this Agreement may be amended
or waived only with the prior written consent of the Company and Executive, and
no course of conduct or failure to delay in enforcing the provisions of the
Agreement shall affect the validity, binding effect or enforceability of this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
THE WILLIAM CARTER COMPANY
By: /s/ Frederick J. Rowan, II
-------------------------------
Frederick J. Rowan, II,
Chairman & Chief Executive Officer
/s/ Jay A. Berman
---------------------------------
Jay A. Berman
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EXHIBIT 10.6
EXECUTION COPY
================================================================================
TWCC ACQUISITION CORP.
(to be merged with and into The William Carter Company)
------------------------------------
CREDIT AGREEMENT
dated as of October 30, 1996
------------------------------------
$100,000,000
Credit Facility
------------------------------------
CHASE SECURITIES INC.,
as Advisor and as Arranger,
BT SECURITIES CORPORATION,
as Arranger,
BANKERS TRUST COMPANY,
as Syndication Agent,
GOLDMAN SACHS CREDIT PARTNERS L.P.,
as Documentation Agent,
and
THE CHASE MANHATTAN BANK,
as Administrative Agent
================================================================================
<PAGE>
TABLE OF CONTENTS
Page
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SECTION 1. DEFINITIONS.................................................... 1
1.1 Defined Terms............................................... 1
1.2 Other Definitional Provisions............................... 22
SECTION 2. TERM LOANS.................................................. 23
2.1 Term Loans.................................................. 23
2.2 Repayment of Term Loans..................................... 23
2.3 Use of Proceeds............................................. 23
SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT
COMMITMENTS................................................. 23
3.1 Revolving Credit Commitments................................ 23
3.2 Commitment Fee.............................................. 24
3.3 Proceeds of Revolving Credit Loans.......................... 24
3.4 Swing Line Commitment....................................... 24
3.5 Issuance of Letters of Credit............................... 26
3.6 Participating Interests..................................... 26
3.7 Procedure for Opening Letters of Credit..................... 26
3.8 Payments in Respect of Letters of Credit.................... 27
3.9 Letter of Credit Fees....................................... 27
3.10 Letter of Credit Reserves................................... 28
3.11 Further Assurances.......................................... 29
3.12 Obligations Absolute........................................ 29
3.13 Assignments................................................. 30
3.14 Participations.............................................. 30
SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS...................... 30
4.1 Procedure for Borrowing..................................... 30
4.2 Conversion and Continuation Options......................... 31
4.3 Changes of Commitment Amounts............................... 32
4.4 Optional and Mandatory Prepayments; Repayments of Term
Loans....................................................... 33
4.5 Interest Rates and Payment Dates............................ 36
4.6 Computation of Interest and Fees............................ 36
4.7 Certain Fees................................................ 37
4.8 Inability to Determine Interest Rate........................ 37
4.9 Pro Rata Treatment and Payments............................. 37
4.10 Illegality.................................................. 40
4.11 Requirements of Law......................................... 40
4.12 Indemnity................................................... 43
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Page
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4.13 Repayment of Loans; Evidence of Debt........................ 44
4.14 Replacement of Lenders...................................... 45
SECTION 5. REPRESENTATIONS AND WARRANTIES.............................. 45
5.1 Financial Condition......................................... 45
5.2 No Change................................................... 46
5.3 Corporate Existence; Compliance with Law.................... 47
5.4 Corporate Power; Authorization.............................. 47
5.5 Enforceable Obligations..................................... 48
5.6 No Legal Bar................................................ 48
5.7 No Material Litigation...................................... 49
5.8 Investment Company Act...................................... 49
5.9 Federal Regulation.......................................... 49
5.10 No Default.................................................. 49
5.11 Taxes....................................................... 49
5.12 Subsidiaries................................................ 50
5.13 Ownership of Property; Liens................................ 50
5.14 ERISA....................................................... 50
5.15 Collateral Documents........................................ 51
5.16 Copyrights, Patents, Permits, Trademarks and Licenses....... 52
5.17 Environmental Matters....................................... 52
5.18 Accuracy and Completeness of Information.................... 53
SECTION 6. CONDITIONS PRECEDENT........................................ 53
6.1 Conditions to Initial Loans and Letters of Credit........... 53
6.2 Conditions to All Loans and Letters of Credit............... 58
SECTION 7. AFFIRMATIVE COVENANTS....................................... 59
7.1 Financial Statements........................................ 59
7.2 Certificates; Other Information............................. 60
7.3 Payment of Obligations...................................... 62
7.4 Conduct of Business and Maintenance of Existence............ 62
7.5 Maintenance of Property; Insurance.......................... 62
7.6 Inspection of Property; Books and Records; Discussions...... 63
7.7 Notices..................................................... 63
7.8 Environmental Laws.......................................... 64
7.9 Additional Collateral....................................... 65
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Page
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SECTION 8. NEGATIVE COVENANTS.......................................... 67
8.1 Indebtedness................................................ 67
8.2 Limitation on Liens......................................... 70
8.3 Limitation on Contingent Obligations........................ 71
8.4 Prohibition of Fundamental Changes.......................... 72
8.5 Prohibition on Sale of Assets............................... 72
8.6 Limitation on Investments, Loans and Advances............... 73
8.7 Capital Expenditures........................................ 75
8.8 Consolidated EBITDA......................................... 75
8.9 Debt to EBITDA.............................................. 76
8.10 Interest Coverage........................................... 77
8.11 Limitation on Dividends..................................... 78
8.12 Transactions with Affiliates................................ 80
8.13 Prepayments and Amendments of Subordinated Debt and Equity.. 80
8.14 Limitation on Changes in Fiscal Year........................ 81
8.15 Limitation on Lines of Business............................. 81
SECTION 9. EVENTS OF DEFAULT........................................... 81
SECTION 10. THE ADMINISTRATIVE AGENT; THE ISSUING LENDER................ 84
10.1 Appointment................................................. 84
10.2 Delegation of Duties........................................ 85
10.3 Exculpatory Provisions...................................... 85
10.4 Reliance by Administrative Agent............................ 85
10.5 Notice of Default........................................... 86
10.6 Non-Reliance on Administrative Agent and Other Lenders...... 86
10.7 Indemnification............................................. 87
10.8 The Administrative Agent in its Individual Capacity......... 87
10.9 Successor Administrative Agent.............................. 87
10.10 Issuing Lender as Issuer of Letters of Credit............... 88
SECTION 11. MISCELLANEOUS............................................... 88
11.1 Amendments and Waivers...................................... 88
11.2 Notices..................................................... 90
11.3 No Waiver; Cumulative Remedies.............................. 91
11.4 Survival of Representations and Warranties.................. 91
11.5 Payment of Expenses and Taxes............................... 91
11.6 Successors and Assigns; Participations and Assignments...... 92
11.7 Adjustments; Set-off........................................ 96
11.8 Counterparts................................................ 97
11.9 Governing Law; No Third Party Rights........................ 97
- iii -
<PAGE>
Page
----
11.10 Submission to Jurisdiction; Waivers......................... 98
11.11 Releases.................................................... 98
11.12 Interest.................................................... 98
11.13 Special Indemnification..................................... 99
11.14 Permitted Payments and Transactions.........................100
SCHEDULES
Schedule I List of Addresses for Notices; Lending Offices; Commitment
Amounts
Schedule II List of Letters of Credit
Schedule 5.1(b) Capital Stock
Schedule 5.12 Subsidiaries
Schedule 5.13 Fee and Leased Properties
Schedule 5.15(b) UCC Filing Offices
Schedule 5.16 Trademarks and Copyrights
Schedule 8.1(a) Indebtedness to Remain Outstanding
Schedule 8.2(h) Existing Liens
Schedule 8.3(d) Existing Contingent Obligations
EXHIBITS
EXHIBIT A Form of Revolving Credit Note
EXHIBIT B Form of Term Loan Note
EXHIBIT C Form of Swing Line Note
EXHIBIT D Form of Assignment and Acceptance
EXHIBIT E Form of Company Security Agreement
EXHIBIT F-1 Form of Holdings Guarantee
EXHIBIT F-2 Form of Subsidiary Guarantee
EXHIBIT G-1 Form of Holdings Pledge Agreement
EXHIBIT G-2 Form of Company Pledge Agreement
EXHIBIT H Form of L/C Participation Certificate
EXHIBIT I Form of Swing Line Loan Participation Certificate
EXHIBIT J Form of Subsection 4.11(d)(2) Certificate
EXHIBIT K-1 Form of Opinion of Gibson, Dunn & Crutcher LLP
EXHIBIT K-2 Form of Opinion of Testa, Hurwitz & Thibeault, LLP
EXHIBIT L-1 Form of Company Closing Certificate
EXHIBIT L-2 Form of Subsidiaries Closing Certificate
EXHIBIT L-3 Form of Holdings Closing Certificate
EXHIBIT M Form of Mortgage Counterpart
- iv -
<PAGE>
CREDIT AGREEMENT, dated as of October 30, 1996, among TWCC
ACQUISITION CORP., a Massachusetts corporation ("AcquisitionCo" or as
hereinafter defined to the extent provided in such definition, the "Company")
(to be merged with and into The William Carter Company, a Massachusetts
corporation ("Carter's"), the several lenders from time to time parties hereto
(the "Lenders"), CHASE SECURITIES INC. ("CSI") and BT SECURITIES CORPORATION
("BTSC"), as arrangers (the "Arrangers"), CSI, as advisor to the Company in
connection with the Merger (as defined below) and the other transactions
contemplated hereby, BANKERS TRUST COMPANY, as syndication agent (in such
capacity, the "Syndication Agent"), GOLDMAN SACHS CREDIT PARTNERS L.P. ("Goldman
Sachs"), as documentation agent (in such capacity, the "Documentation Agent")
and THE CHASE MANHATTAN BANK, a New York banking corporation, as administrative
agent for the Lenders (in such capacity, the "Administrative Agent").
W I T N E S S E T H:
WHEREAS, AcquisitionCo and Carter's have entered into an Agreement
and Plan of Merger dated as of September 18, 1996 (as amended, supplemented or
otherwise modified from time to time, the "Merger Agreement"), pursuant to which
AcquisitionCo will be merged with and into Carter's (the "Merger"), Carter's
being the surviving corporation of the Merger, and (i) the shares of the Capital
Stock (as defined below) of Carter's outstanding immediately prior to the Merger
will be converted into and will represent the right to receive $202,500,000, as
such amount may be adjusted pursuant to the Merger Agreement (the "Merger
Consideration") and (ii) each outstanding share of common stock of AcquisitionCo
will be converted into one share of the common stock of the surviving
corporation; and
WHEREAS, in connection with the Merger, the Company has entered into
a Bridge Loan Agreement (as defined below) providing for $90,000,000 of Bridge
Subordinated Debt, the proceeds of which will be used to finance a portion of
the Merger; and
WHEREAS, prior to the Merger, AcquisitionCo, and thereafter,
Carter's (the "Company") have requested the Lenders to make loans and other
extensions of credit available to the Company to enable the Company to finance a
portion of the Merger and for the other purposes set forth herein;
NOW, THEREFORE, the Company, the Administrative Agent, the
Syndication Agent, the Documentation Agent and the Lenders agree as follows:
SECTION 1. DEFINITIONS
1.1 Defined Terms. As used in this Agreement, the terms defined in
the caption hereto shall have the meanings set forth therein, and the following
terms have the following meanings:
<PAGE>
2
"Additional Mortgage": as defined in subsection 7.9(e).
"Affiliate": of any Person (a) any Person (other than a Subsidiary)
which, directly or indirectly, is in control of, is controlled by, or is
under common control with such Person, or (b) any Person who is a director
or officer (i) of such Person, (ii) of any Subsidiary of such Person or
(iii) of any Person described in clause (a) above. For purposes of this
definition, control of a Person shall mean the power, direct or indirect,
(x) to vote 25% or more of the securities having ordinary voting power for
the election of directors of such Person, whether by ownership of
securities, contract, proxy or otherwise, or (y) to direct or cause the
direction of the management and policies of such Person, whether by
ownership of securities, contract, proxy or otherwise.
"Agreement": this Credit Agreement, as amended, supplemented or
modified from time to time.
"Alternate Base Rate": for any day, a rate per annum (rounded
upwards, if necessary, to the next 1/16 of 1%) equal to the greatest of
(a) the Prime Rate in effect on such day, (b) the Base CD Rate in effect
on such day plus 1% and (c) the Federal Funds Effective Rate in effect on
such day plus 1/2 of 1%. For purposes hereof: "Prime Rate" shall mean the
rate of interest per annum publicly announced from time to time by the
Administrative Agent as its prime rate in effect at its principal office
in New York City (the Prime Rate not being intended to be the lowest rate
of interest charged by the Administrative Agent in connection with
extensions of credit to debtors); "Base CD Rate" shall mean the sum of (a)
the product of (i) the Three-Month Secondary CD Rate and (ii) a fraction,
the numerator of which is one and the denominator of which is one minus
the C/D Reserve Percentage and (b) the C/D Assessment Rate; "Three-Month
Secondary CD Rate" shall mean, for any day, the secondary market rate for
three-month certificates of deposit reported as being in effect on such
day (or, if such day shall not be a Business Day, the next preceding
Business Day) by the Board through the public information telephone line
of the Federal Reserve Bank of New York (which rate will, under the
current practices of the Board, be published in Federal Reserve
Statistical Release H.15(519) during the week following such day), or, if
such rate shall not be so reported on such day or such next preceding
Business Day, the average of the secondary market quotations for
three-month certificates of deposit of major money center banks in New
York City received at approximately 10:00 A.M., New York City time, on
such day (or, if such day shall not be a Business Day, on the next
preceding Business Day) by the Administrative Agent from three New York
City negotiable certificate of deposit dealers of recognized standing
selected by it; and "Federal Funds Effective Rate" shall mean, for any
day, the weighted average of the rates on overnight federal funds
transactions with members of the Federal Reserve System arranged by
federal funds brokers, as published on the next succeeding Business Day by
the Federal Reserve Bank of New York, or, if such rate is not so published
for any day which is a Business Day, the average of the quotations for the
day of such transactions received
<PAGE>
3
by the Administrative Agent from three federal funds brokers of recognized
standing selected by it. Any change in the Alternate Base Rate due to a
change in the Prime Rate, the Base CD Rate or the Federal Funds Effective
Rate shall be effective as of the opening of business on the effective day
of such change in the Prime Rate, the Base CD Rate or the Federal Funds
Effective Rate, respectively.
"Alternate Base Rate Lending Office": as to each Lender, the office
of such Lender located within the United States which shall be making or
maintaining Alternate Base Rate Loans.
"Alternate Base Rate Loans": Loans at such time as they are made
and/or being maintained at a rate of interest based upon the Alternate
Base Rate.
"Applicable Cash Flow Percentage": for any fiscal year, 75%, which
percentage shall be reduced to 50% on or after the date that is the later
of (x) the last day of the 1997 fiscal year and (y) any date on which the
ratio of Consolidated Funded Indebtedness to Consolidated EBITDA
determined pursuant to subsection 8.9 is less than or equal to 3.75 to
1.00.
"Applicable Margin": for Term Loans, Revolving Credit Loans and
Swing Line Loans of the Types set forth below, the rate per annum set
forth under the relevant column heading opposite such Loans below:
Alternate
Base Rate Eurodollar
Loans Loans
--------- ----------
Term Loans: 2.00% 3.00%
Revolving Credit Loans: 1.50% 2.50%
Swing Line Loans: 1.50% Not applicable
"Arrangers": as defined in the Preamble hereto.
"Asset Sale": any sale, sale-leaseback, or other disposition by the
Company or any Subsidiary thereof of any of its property or assets,
including the stock of any Subsidiary of the Company, except sales and
dispositions permitted by subsections 8.5(a), (b), (c), (f) and (g).
"Assignee": as defined in subsection 11.6(c).
"Assignment and Acceptance": an assignment and acceptance
substantially in the form of Exhibit D.
"Available Revolving Credit Commitment": as to any Lender, at a
particular time, an amount equal to (a) the amount of such Lender's
Revolving Credit
<PAGE>
4
Commitment at such time less (b) the sum of (i) the aggregate unpaid
principal amount at such time of all Revolving Credit Loans made by such
Lender pursuant to subsection 3.1, (ii) such Lender's Revolving Credit
Commitment Percentage of the aggregate unpaid principal amount at such
time of all Swing Line Loans, provided that for purposes of calculating
the Revolving Credit Commitments pursuant to subsection 3.2 the amount
referred to in this clause (ii) shall be zero, (iii) such Lender's L/C
Participating Interest in the aggregate amount available to be drawn at
such time under all outstanding Letters of Credit issued by the Issuing
Lender and (iv) such Lender's Revolving Credit Commitment Percentage of
the aggregate outstanding amount of L/C Obligations; collectively, as to
all the Lenders, the "Available Revolving Credit Commitments".
"Bankruptcy Code": Title I of the Bankruptcy Reform Act of 1978, as
amended and codified at Title 11 of the United States Code.
"Board": the Board of Governors of the Federal Reserve System,
together with any successor.
"Borrowing Date": any Business Day specified in a notice pursuant to
(a) subsection 3.4 or 4.1 as a date on which the Company requests the
Swing Line Lender or the Lenders to make Loans hereunder or (b) subsection
3.5 as a date on which the Company requests the Issuing Lender to issue a
Letter of Credit hereunder.
"Bridge Loan Agreement": the Bridge Loan Agreement dated as of
October 30, 1996 among AcquisitionCo, Bankers Trust Company, as
administrative agent, and the lenders from time to time parties thereto,
as the same may be amended, supplemented or otherwise modified from time
to time in accordance with its terms and the terms of this Agreement.
"Bridge Subordinated Debt": the subordinated bridge loans or
exchange notes of the Company outstanding from time to time pursuant to
the Bridge Loan Agreement or the Indenture contemplated thereby.
"Bridge Subordinated Debt Documents": the Bridge Loan Agreement and
the notes evidencing the Bridge Subordinated Debt.
"Business Day": a day other than a Saturday, Sunday or other day on
which commercial banks in New York City are authorized or required by law
to close.
"Capital Expenditures": for any period, all amounts which would, in
accordance with GAAP, be set forth as capital expenditures (exclusive of
any amount attributable to capitalized interest) on the consolidated
statement of cash flows or other similar statement of the Company and its
Subsidiaries for such period and shall in any event include expenditures
to acquire all or a portion of the Capital Stock or assets of any Person
(exclusive of expenses and fees incurred in connection with an acquisition
<PAGE>
5
and expenditures for the acquisition of cash or working capital) but shall
exclude any expenditures made with the proceeds of condemnation or eminent
domain proceedings affecting real property or with insurance proceeds;
provided that any Capital Expenditures financed with the proceeds of any
Indebtedness permitted hereunder (other than Indebtedness incurred
hereunder) shall be deemed to be a Capital Expenditure only in the period
in which, and by the amount which, any principal of such Indebtedness is
repaid.
"Capital Stock": any and all shares, interests, participations or
other equivalents (however designated) of capital stock of a corporation,
any and all equivalent ownership interests in a Person (other than a
corporation) and any and all warrants or options to purchase any of the
foregoing.
"Carter's": as defined in the Recitals hereto.
"Cash Equivalents": (a) securities issued or directly and fully
guaranteed or insured by the United States or any agency or
instrumentality thereof having maturities of not more than six months from
the date of acquisition, (b) certificates of deposit and eurodollar time
deposits with maturities of six months or less from the date of
acquisition, bankers' acceptances with maturities not exceeding six months
and overnight bank deposits, in each case with any Lender or with any
domestic commercial bank having capital and surplus in excess of
$300,000,000, (c) repurchase obligations with a term of not more than
seven days for underlying securities of the types described in clauses (a)
and (b) entered into with any financial institution meeting the
qualifications specified in clause (b) above, and (d) commercial paper
issued by any Lender or the parent corporation of any Lender, and
commercial paper rated A-1 or the equivalent thereof by Standard & Poor's
Ratings Services or P-1 or the equivalent thereof by Moody's Investors
Service, Inc. and in each case maturing within six months after the date
of acquisition.
"C/D Assessment Rate": for any day the net annual assessment rate
(rounded upwards, if necessary, to the next 1/100 of 1%) determined by the
Administrative Agent to be payable on such day to the Federal Deposit
Insurance Corporation or any successor ("FDIC") for FDIC's insuring time
deposits made in Dollars at offices of the Administrative Agent in the
United States.
"C/D Reserve Percentage": for any day as applied to any Base CD
Rate, that percentage (expressed as a decimal) which is in effect on such
day, as prescribed by the Board for determining maximum reserve
requirement for a Depositary Institution (as defined in Regulation D of
the Board) in respect of new non-personal time deposits in Dollars having
a maturity of 30 days or more.
"Change in Law": with respect to any Lender, the adoption of, or
change in, any law, rule, regulation, policy, guideline or directive
(whether or not having the force of law) or any change in the
interpretation or application thereof by any
<PAGE>
6
Governmental Authority having jurisdiction over such Lender, in each case
after the Closing Date.
"Change of Control": shall be considered to have occurred if (i) at
any time prior to an IPO by the Company or Holdings, the Investors or any
of their Affiliates (provided that, for purposes of this definition only,
the reference to 25% in the definition of Affiliate contained in
subsection 1.1 shall be deemed to be 51%) or Subsidiaries, shall cease to
own, directly or indirectly, in the aggregate, at least 51% of the issued
and outstanding voting stock of Holdings, or Holdings shall cease to own
100% of the issued and outstanding voting stock of the Company, in each
case free and clear of all Liens (except, in the case of the Capital Stock
of the Company owned by Holdings, for Liens created by the Holdings Pledge
Agreement) and (ii) at any time after an IPO by the Company or Holdings,
if any Person (other than the Investors, any of their Affiliates or
Subsidiaries, any Person that is a member of the senior management of the
Company or Holdings, any entity the majority of the equity ownership
interests of which is owned by such senior management of the Company or
Holdings or any Person acting in the capacity of an underwriter), whether
singly or in concert with one or more Persons, shall, directly or
indirectly, have acquired, or acquire the power (x) to vote or direct the
voting of 30% or more, on a fully diluted basis, of the outstanding common
stock of the Company or of the common stock of Holdings or (y) to elect or
designate for election a majority of the Board of Directors of the Company
by voting power, contract or otherwise.
"Chase": The Chase Manhattan Bank, a New York banking corporation,
and its successors.
"Closing Date": the date (which shall be on or prior to November 30,
1996) on which the Lenders make their initial Loans or the Issuing Lender
issues the initial Letter of Credit.
"Code": the Internal Revenue Code of 1986, as amended from time to
time.
"Collateral": all assets of the Credit Parties, now owned or
hereafter acquired, upon which a Lien is purported to be created by any
Security Document.
"Commercial L/C": a commercial documentary Letter of Credit under
which the Issuing Lender agrees to make payments in Dollars for the
account of the Company, on behalf of the Company or a Subsidiary thereof,
in respect of obligations of the Company or such Subsidiary in connection
with the purchase of goods or services in the ordinary course of business.
"Commitment": as to any Lender at any time, such Lender's Swing Line
Commitment, Term Loan Commitment and Revolving Credit Commitment;
collectively, as to all the Lenders, the "Commitments".
<PAGE>
7
"Commitment Percentage": as to any Lender at any time, its Term Loan
Commitment Percentage or its Revolving Credit Commitment Percentage, as
the context may require.
"Commonly Controlled Entity": an entity, whether or not
incorporated, which is under common control with the Company within the
meaning of Section 4001 of ERISA or is part of a group which includes the
Company and which is treated as a single employer under Section 414 of the
Code.
"Company": as defined in the Recitals hereto.
"Company Pledge Agreement": the Pledge Agreement, substantially in
the form of Exhibit G-2, to be made by the Company in favor of the
Administrative Agent, for the ratable benefit of the Lenders, as the same
may be amended, modified or supplemented from time to time.
"Company Preferred Stock": the fixed-rate preferred stock of the
Company to be issued on or before the Closing Date having an aggregate
liquidation value of $20,000,000 (net of an allocable fee not to exceed
$3,000,000).
"Company Security Agreement": the Company Security Agreement,
substantially in the form of Exhibit E, to be made by the Company in favor
of the Administrative Agent, for the ratable benefit of the Lenders, as
the same may be amended, modified or supplemented from time to time.
"Consolidated Current Assets": at a particular date, all amounts
which would, in conformity with GAAP, be included under current assets on
a consolidated balance sheet of the Company and its Subsidiaries as at
such date.
"Consolidated Current Liabilities": at a particular date, all
amounts which would, in conformity with GAAP, be included under current
liabilities on a consolidated balance sheet of the Company and its
Subsidiaries as at such date, excluding the current portion of long-term
debt and the entire outstanding principal amount of the Revolving Credit
Loans.
"Consolidated EBITDA": for any period, the consolidated net income
of the Company and its Subsidiaries for such period, plus, without
duplication and to the extent reflected as a charge in the statement of
such consolidated net income for such period, the sum of (a) total income
tax expense (including the tax expense or benefit related to the Company
Preferred Stock), (b) interest expense, amortization or writeoff of debt
discount, debt issuance, warrant and other equity (including Company
Preferred Stock) issuance costs and commissions, discounts, redemption
premium and other fees and charges associated with the Loans, Standby
L/Cs, the Subordinated Debt or the acquisition or repayment of any debt
securities of the Company permitted hereunder, and net costs associated
with Interest Rate Agreements to which the
<PAGE>
8
Company is a party in respect of the Loans (including commitment fees and
other periodic bank charges), (c) costs of surety bonds, (d) depreciation
and amortization expense, (e) amortization of inventory write-up under APB
16, amortization of intangibles (including, but not limited to, goodwill
and costs of interest-rate caps, license agreements and the cost of
non-competition agreements) and organization costs, (f) non-cash
amortization of Financing Leases, (g) franchise taxes, (h) management fees
paid as contemplated by subsection 11.14(a) and charges related to
management fees prepaid in connection with the Merger, (i) all cash
dividend payments (and non-cash dividend expenses) on any series of
preferred stock (including the Company Preferred Stock), (j) any expenses
incurred in connection with the Merger including but not limited to
bonuses paid to management, seller's and Company's fees and expenses and
payments under the Long-Term Incentive Compensation and Management Equity
Participation Agreements, (k) expenses recorded in historical periods
through the Closing Date related to the Long-Term Incentive Compensation
Plan, Management Equity Participation Plan and Allocation of Class C
Common Stock, (l) any other write-downs, write-offs, minority interests
and other non-cash charges in determining such consolidated net income for
such period and (m) all extraordinary non-cash charges in determining such
consolidated net income for such period; provided that (i) the cumulative
effect of a change in accounting principles (effected either through
cumulative effect adjustment or a retroactive application) shall be
excluded, (ii) the net income of any Person acquired in a pooling of
interests transaction for any period prior to the date of such acquisition
shall be excluded; (iii) the impact of foreign currency translations shall
be excluded; and (iv) all other extraordinary gains and losses shall be
excluded.
"Consolidated Funded Indebtedness": at a particular date, all
Indebtedness (other than Indebtedness described in clauses (b), (c), (d)
or (e) of the definition of "Indebtedness" included in this subsection
1.1) of the Company and its Subsidiaries determined on a consolidated
basis in accordance with GAAP at such date.
"Contingent Obligation": as to any Person, any obligation of such
Person guaranteeing or in effect guaranteeing any Indebtedness, dividends
or other obligations ("primary obligations") of any other Person (the
"primary obligor") in any manner, whether directly or indirectly,
including, without limitation, any obligation of such Person, whether or
not contingent (a) to purchase any such primary obligation or any property
constituting direct or indirect security therefor, (b) to advance or
supply funds (i) for the purchase or payment of any such primary
obligation or (ii) to maintain working capital or equity capital of the
primary obligor or otherwise to maintain the net worth or solvency of the
primary obligor, (c) to purchase property, securities or services
primarily for the purpose of assuring the owner of any such primary
obligation of the ability of the primary obligor to make payment of such
primary obligation or (d) otherwise to assure or hold harmless the owner
of any such primary obligation against loss in respect thereof; provided,
however, that the term Contingent Obligation shall not include
endorsements of instruments for deposit or collection in the ordinary
course of business. The amount of any Contingent Obligation shall be
<PAGE>
9
deemed to be an amount equal to the stated or determinable amount (based
on the maximum reasonably anticipated net liability in respect thereof as
determined by the Company in good faith) of the primary obligation or
portion thereof in respect of which such Contingent Obligation is made or,
if not stated or determinable, the maximum reasonably anticipated net
liability in respect thereof (assuming such Person is required to perform
thereunder) as determined by the Company in good faith.
"Contractual Obligation": as to any Person, any provision of any
security issued by such Person or of any agreement, instrument or
undertaking to which such Person is a party or by which it or any of the
property owned by it is bound.
"Credit Documents": the collective reference to this Agreement, the
Notes, the Pledge Agreements, the Security Agreements and the Guarantees.
"Credit Parties": the collective reference to Holdings, the Company
and each Subsidiary of the Company which may from time to time be party to
a Credit Document.
"Default": any of the events specified in Section 9, whether or not
any requirement for the giving of notice, the lapse of time, or both, has
been satisfied.
"Dollars" and "$": dollars in lawful currency of the United States.
"Domestic Subsidiary": any Subsidiary of the Company other than a
Foreign Subsidiary.
"Environmental Laws": any and all foreign, Federal, state, local or
municipal laws, rules, orders, regulations, statutes, ordinances, codes,
decrees or requirements of any Governmental Authority or requirements of
law (including, without limitation, common law) regulating or imposing
liability or standards of conduct concerning environmental or public
health protection matters, including, without limitation, Hazardous
Materials, as now or may at any time hereafter be in effect.
"Environmental Permits": any and all permits, licenses,
registrations, notifications, exemptions and any other authorizations
required under any Environmental Law.
"ERISA": the Employee Retirement Income Security Act of 1974, as
amended from time to time.
"Eurocurrency Reserve Requirements": for any day as applied to a
Eurodollar Loan, the aggregate (without duplication) of the rates
(expressed as a decimal fraction) of reserve requirements in effect on
such day (including, without limitation, basic, supplemental, marginal and
emergency reserves under any regulations of the Board of Governors of the
Federal Reserve System or other Governmental Authority having
<PAGE>
10
jurisdiction with respect thereto) dealing with reserve requirements
prescribed for eurocurrency funding (currently referred to as
"Eurocurrency Liabilities" in Regulation D of such Board) maintained by a
member bank of such System.
"Eurodollar Base Rate": with respect to each day during each
Interest Period pertaining to a Eurodollar Loan, the rate per annum
determined by the Administrative Agent to be the arithmetic mean (rounded
to the nearest 1/100th of 1%) of the offered rates for deposits in Dollars
with a term comparable to such Interest Period that appears on the
Telerate British Bankers Assoc. Interest Settlement Rates Page (as defined
below) at approximately 11:00 A.M., London time, on the second full
Business Day preceding the first day of such Interest Period; provided,
however, that if there shall at any time no longer exist a Telerate
British Bankers Assoc. Interest Settlement Rates Page, "Eurodollar Base
Rate" shall mean, with respect to each day during each Interest Period
pertaining to a Eurodollar Loan, the rate per annum equal to the rate at
which Chase is offered Dollar deposits at or about 10:00 A.M., New York
City time, two Business Days prior to the beginning of such Interest
Period in the interbank eurodollar market where the eurodollar and foreign
currency and exchange operations in respect of its Eurodollar Loans are
then being conducted for delivery on the first day of such Interest Period
for the number of days comprised therein and in an amount comparable to
the amount of its Eurodollar Loan to be outstanding during such Interest
Period. "Telerate British Bankers Assoc. Interest Settlement Rates Page"
shall mean the display designated as Page 3750 on the Telerate System
Incorporated Service (or such other page as may replace such page on such
service for the purpose of displaying the rates at which Dollar deposits
are offered by leading banks in the London interbank deposit market).
"Eurodollar Lending Office": as to any Lender the office of such
Lender which shall be making or maintaining Eurodollar Loans.
"Eurodollar Loans": Loans at such time as they are made and/or being
maintained at a rate of interest based upon a Eurodollar Rate.
"Eurodollar Rate": with respect to each day during each Interest
Period pertaining to a Eurodollar Loan, a rate per annum determined for
such day in accordance with the following formula (rounded upward to the
nearest 1/100th of 1%):
Eurodollar Base Rate
-----------------------------------------
1.00 - Eurocurrency Reserve Requirements
"Event of Default": any of the events specified in Section 9,
provided that any requirement for the giving of notice, the lapse of time,
or both, has been satisfied.
"Excess Cash Flow": for any fiscal year of the Company, commencing
with the fiscal year ending on December 31, 1997, the excess of (a)
Consolidated EBITDA for such fiscal year over (b) the sum, without
duplication, of (i) the aggregate amount
<PAGE>
11
actually paid by the Company and its Subsidiaries in cash during such
fiscal year on account of capital expenditures (other than capital
expenditures made with the proceeds of eminent domain or condemnation
proceedings to the extent such proceeds are not included in the
determination of Consolidated EBITDA for such fiscal year), (ii) the
aggregate amount of payments of principal in respect of any Indebtedness
during such fiscal year (other than any such payments of principal
pursuant to subsections 4.4(b)(i), (ii), (iii) and (iv) or any such
payments of principal in respect of any revolving credit facility to the
extent that there is not an equivalent reduction in such facility), (iii)
increases in working capital (calculated as Consolidated Current Assets at
the end of such fiscal year minus Consolidated Current Liabilities as at
the end of such fiscal year) of the Company and its Subsidiaries for such
fiscal year (excluding any increase in cash or Cash Equivalents above an
increase deemed in good faith by the Company to be necessary or desirable
for the operation of the business of the Company and its Subsidiaries),
(iv) cash interest expense (including fees paid in connection with Letters
of Credit and surety bonds and commitment fees and other periodic bank
charges) of the Company, (v) the amount of dividends actually paid in cash
by the Company to Holdings during such fiscal year to the extent not
deducted from revenues in determining consolidated net income of the
Company and its Subsidiaries for such fiscal year, in accordance with
subsection 8.11(c)(i), (ii), (iv) and (v), (vi) the amount of taxes
actually paid in cash by the Company and its Subsidiaries for such fiscal
year either during such fiscal year or within a normal payment period
thereof, (vii) the amount of cash actually paid to repurchase Capital
Stock of Holdings pursuant to subsection 8.11(c)(iii), (viii) to the
extent added to consolidated net income of the Company and its
Subsidiaries in calculating Consolidated EBITDA for such fiscal year, the
net cost of Interest Rate Agreements, franchise taxes and management fees,
(ix) the net income of any Subsidiary shall be excluded to the extent that
such amount is accounted for under the equity method to the extent cash
dividends are not paid or the declaration or payment of dividends is not
permitted without prior governmental approval (which has not been
obtained), and (x) the amount of cash actually paid by the Company in
connection with clauses (b) (without duplication) (g), (h), (i), (j), (k)
and (iii) and (iv) of clause (m) in the definition of Consolidated EBITDA.
"Existing Credit Agreement": the Second Amended and Restated Credit
Agreement, dated as of December 5, 1991, among The William Carter Company
(for itself and as successor in interest to Carter Holdings Corp.), the
Lenders named therein, and The Bank of New York, as Agent and Issuing
Bank, as amended by Amendment Nos. 1, 2, 3, 4, 5 and 6 dated September 30,
1993, June 30, 1994, October 31, 1994, November 18, 1994, April 30, 1995,
and May 23, 1996, respectively, and all agreements and instruments related
thereto.
"Fee Property": as defined in subsection 5.13.
"Financing Lease": (a) any lease of property, real or personal, the
obligations under which are capitalized on a consolidated balance sheet of
the Company and its consolidated Subsidiaries, and (b) any other such
lease to the extent that the then
<PAGE>
12
present value of any rental commitment thereunder should, in accordance
with GAAP, be capitalized on a balance sheet of the lessee.
"Foreign Subsidiary": any Subsidiary of the Company which is not
organized under the laws of the United States or any state thereof or the
District of Columbia. For purposes of subsections 8.1, 8.3 and 8.6,
Carter's de San Pedro, Inc., a Delaware corporation, shall be deemed to be
a Foreign Subsidiary except to the extent that any Indebtedness incurred
by it, any Guarantee made for its benefit or any investment, loan or
advance made to it are for the purpose of financing the acquisition or
construction of assets or the conduct of businesses (including its
existing business in the Dominican Republic) that are generally the
subject of liens perfected in accordance with a Subsidiary Security
Agreement or other Security Document reasonably satsfactory to the
Administrative Agent.
"GAAP": generally accepted accounting principles in the United
States in effect from time to time.
"Governmental Authority": any nation or government, any state or
other political subdivision thereof or any entity exercising executive,
legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Guarantees": the collective reference to the Holdings Guarantee,
the Subsidiary Guarantee and any guarantee which may from time to time be
executed and delivered by a Subsidiary of the Company pursuant to
subsection 7.9.
"Hazardous Materials": any hazardous materials, hazardous wastes,
hazardous pesticides or hazardous or toxic substances, and any other
material that may give rise to liability under any Environmental Law,
including, without limitation, asbestos, petroleum, any other petroleum
products (including gasoline, crude oil or any fraction thereof),
polychlorinated biphenyls and urea-formaldehyde insulation.
"Holdings": Carter Holdings, Inc., a Massachusetts corporation.
"Holdings Guarantee": the Holdings Guarantee substantially in the
form of Exhibit F-1, to be made by Holdings in favor of the Administrative
Agent, for the ratable benefit of the Lenders, as the same may be amended,
modified or supplemented from time to time.
"Holdings Pledge Agreement": the Pledge Agreement, substantially in
the form of Exhibit G-1, to be made by Holdings in favor of the
Administrative Agent, for the ratable benefit of the Lenders, as the same
may be amended, modified or supplemented from time to time.
"Holdings Subordinated Debt": as defined in subsection 6.1(c)(ii).
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13
"Indebtedness": of a Person, at a particular date, (a) all
indebtedness of such Person for borrowed money or for the deferred
purchase price of property or services, (b) the undrawn face amount of all
letters of credit issued for the account of such Person and, without
duplication, all drafts drawn thereunder and unpaid reimbursement
obligations with respect thereto, (c) all liabilities (other than Lease
Obligations) secured by any Lien on any property owned by such Person,
even though such Person has not assumed or become liable for the payment
thereof, (d) Financing Leases and (e) all indebtedness of such Person
arising under acceptance facilities; but excluding (i) trade and other
accounts payable and accrued expenses payable in the ordinary course of
business which are not overdue for a period of more than 90 days or, if
overdue for more than 90 days, as to which a dispute exists and adequate
reserves in conformity with GAAP have been established on the books of
such Person and (ii) letters of credit supporting the purchase of goods in
the ordinary course of business and expiring no more than six months from
the date of issuance.
"Insolvency": with respect to any Multiemployer Plan, the condition
that such Plan is insolvent within the meaning of Section 4245 of ERISA.
"Insolvent": pertaining to a condition of Insolvency.
"Installment Payment Date": as defined in subsection 4.4(c).
"Interest Coverage Ratio": on the last day of any fiscal quarter of
the Company, the ratio of (a) Consolidated EBITDA for the period of four
fiscal quarters ending on such day (or, if shorter, the period commencing
on the first day of the first fiscal quarter commencing on or after the
Closing Date and ending on such day) to (b) cash interest expense
(excluding fees payable on account of Letters of Credit, and, to the
extent included in interest expense in accordance with GAAP, net costs
associated with Interest Rate Agreements to which the Company is party in
respect of the Loans and other periodic bank charges and amortization of
debt discount (including discount of liabilities and reserves established
under APB 16), costs of debt issuance and interest expense on customer
deposits) for such period net of interest income, in each case for or
during such period on a consolidated basis for the Company and its
Subsidiaries.
"Interest Payment Date": (a) as to Alternate Base Rate Loans, the
last day of each March, June, September and December, commencing on the
first such day to occur after any Alternate Base Rate Loans are made or
any Eurodollar Loans are converted to Alternate Base Rate Loans, (b) as to
any Eurodollar Loan in respect of which the Company has selected an
Interest Period of one, two or three months, the last day of such Interest
Period and (c) as to any Eurodollar Loan in respect of which the Company
has selected a longer Interest Period than the periods described in clause
(b), the last day of each March, June, September and December falling
within such Interest Period and the last day of such Interest Period.
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14
"Interest Period": with respect to any Eurodollar Loan:
(a) initially, the period commencing on, as the case may be,
the Borrowing Date or conversion date with respect to such
Eurodollar Loan and ending one, two, three or six months thereafter
(or, if and when available to all the relevant Lenders, nine or
twelve months thereafter) as selected by the Company in its notice
of borrowing as provided in subsection 4.1 or its notice of
conversion as provided in subsection 4.2; and
(b) thereafter, each period commencing on the last day of the
next preceding Interest Period applicable to such Eurodollar Loan
and ending one, two, three or six months thereafter (or, if and when
available to all the relevant Lenders, nine or twelve months
thereafter) as selected by the Company by irrevocable notice to the
Administrative Agent not less than three Business Days prior to the
last day of the then current Interest Period with respect to such
Eurodollar Loan;
provided that the foregoing provisions relating to Interest Periods are
subject to the following:
(A) if any Interest Period would otherwise end on a day which
is not a Business Day, that Interest Period shall be extended to the
next succeeding Business Day, unless the result of such extension
would be to carry such Interest Period into another calendar month,
in which event such Interest Period shall end on the immediately
preceding Business Day;
(B) any Interest Period that would otherwise extend beyond (i)
in the case of an Interest Period for a Term Loan, the final
Installment Payment Date listed on Schedule II for such Term Loan
shall end on such Installment Payment Date or, if such Installment
Payment Date shall not be a Business Day, on the next preceding
Business Day; and (ii) in the case of any Interest Period for a
Revolving Credit Loan, the Revolving Credit Termination Date shall
end on the Revolving Credit Termination Date, or if the Revolving
Credit Termination Date shall not be a Business Day, on the next
preceding Business Day;
(C) if the Company shall fail to give notice as provided above
in clause (b), it shall be deemed to have selected a conversion of a
Eurodollar Loan into an Alternate Base Rate Loan (which conversion
shall occur automatically and without need for compliance with the
conditions for conversion set forth in subsection 4.2);
(D) any Interest Period that begins on the last day of a
calendar month (or on a day for which there is no numerically
corresponding day in the
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15
calendar month at the end of such Interest Period) shall end on the
last Business Day of a calendar month; and
(E) the Company shall select Interest Periods so as not to
require a prepayment (to the extent practicable) or a scheduled
payment of a Eurodollar Loan during an Interest Period for such
Eurodollar Loan.
"Interest Rate Agreement": any interest rate swap agreement,
interest rate cap agreement, interest rate collar agreement or other
similar agreement or arrangement.
"Investcorp": Investcorp S.A., a Luxembourg corporation.
"Investors": Investcorp, certain Affiliates and the international
investors who are the initial holders of the Holdings Capital Stock.
"IPO": any sale by either the Company or Holdings through a public
offering of its common (or other voting) stock pursuant to an effective
registration statement (other than a registration statement on Form S-4,
S-8 or any successor or similar form) filed under the Securities Act of
1933, as amended.
"Issuing Lenders": Chase and any of its Affiliates, including The
Chase Manhattan Bank Delaware, as issuer of the Letters of Credit; with
respect to any Letter of Credit, the term "Issuing Lender" shall mean the
Issuing Lender with respect to such Letter of Credit.
"L/C Application": as defined in subsection 3.5(a).
"L/C Obligations": the obligations of the Company to reimburse the
Issuing Lender for any payments made by the Issuing Lender under any
Letter of Credit that have not been reimbursed by the Company pursuant to
subsection 3.8(a).
"L/C Participating Interest": an undivided participating interest in
the face amount of each issued and outstanding Letter of Credit and the
L/C Application relating thereto.
"L/C Participation Certificate": a certificate in substantially the
form of Exhibit I.
"Lease Obligations": of the Company and its Subsidiaries, as of the
date of any determination thereof, the rental commitments of the Company
and its Subsidiaries determined on a consolidated basis, if any, under
leases for real and/or personal property (net of rental commitments from
sub-leases thereof), excluding however, obligations under Financing
Leases.
"Leased Properties": as defined in subsection 5.13.
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16
"Letters of Credit": the collective reference to the Commercial L/Cs
and the Standby L/Cs; individually, a "Letter of Credit".
"Lien": any mortgage, pledge, hypothecation, assignment, deposit
arrangement, encumbrance, lien (statutory or other), or preference,
priority or other security agreement or preferential arrangement of any
kind or nature whatsoever (including, without limitation, any conditional
sale or other title retention agreement, any financing lease having
substantially the same economic effect as any of the foregoing, and the
filing of any financing statement under the Uniform Commercial Code or
comparable law of any jurisdiction in respect of any of the foregoing
except for the filing of financing statements in connection with Lease
Obligations incurred by the Company or its Subsidiaries to the extent that
such financing statements relate to the property subject to such Lease
Obligations).
"Loans": the collective reference to the Swing Line Loans, the Term
Loans and the Revolving Credit Loans; individually, a "Loan".
"Merger": as defined in the Recitals hereto.
"Merger Agreement": as defined in the Recitals hereto.
"Merger Consideration": as defined in the Recitals hereto.
"Mortgages" as defined in subsection 7.9(d).
"Mortgaged Properties": the Real Property designated as "Mortgaged
Property" on Schedule 5.13.
"Multiemployer Plan": a Plan which is a multiemployer plan as
defined in Section 4001(a)(3) of ERISA.
"Net Proceeds": the aggregate cash proceeds received by Holdings,
the Company or any Subsidiary of the Company in respect of:
(a) (i) any issuance or borrowing of any debt securities or
loans by the Company or any Subsidiary other than debt or loans
permitted to be incurred or borrowed pursuant to subsection 8.1
(except for the amount of Bridge Subordinated Debt or Permanent
Subordinated Debt to be applied to prepay the Loans pursuant to
subsection 8.1(d), which amount shall be "Net Proceeds") or (ii) any
issuance of Capital Stock (excluding any such issuance to any
Investor or any Affiliate thereof);
(b) any Asset Sale, excluding (i) any net proceeds received
upon any condemnation or exercise of rights of eminent domain to the
extent the same shall be deemed not to constitute Net Proceeds
pursuant to the proviso to
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17
subsection 8.5(d) and (ii) any proceeds of insurance received upon
any casualty or loss;
(c) any cash received in respect of substantially like-kind
exchanges of property to the extent provided in the proviso to
subsection 8.5(e); and
(d) any cash payments received in respect of promissory notes
delivered to the Company or such Subsidiary in respect of an Asset
Sale;
in each case net of (without duplication) (A) the amount required to repay
any Indebtedness (other than the Loans) secured by a Lien on any assets of
the Company or a Subsidiary of the Company that are collateral for any
such debt securities or loans that are sold or otherwise disposed of in
connection with such Asset Sale, (B) the reasonable expenses (including
legal fees and brokers' and underwriters' commissions, lenders fees or
credit enhancement fees, in any case, paid to third parties or, to the
extent permitted hereby, Affiliates) incurred in effecting such issuance
or sale and (C) any taxes reasonably attributable to such sale and
reasonably estimated by the Company or such Subsidiary to be actually
payable.
"Non-Funding Lender": as defined in subsection 4.9(c).
"Notes": the collective reference to the Swing Line Note, the
Revolving Credit Notes and the Term Loan Notes; each of the Notes, a
"Note".
"Participants": as defined in subsection 11.6(b).
"Participating Lender": any Lender (other than the Issuing Lender)
with respect to its L/C Participating Interest in each Letter of Credit.
"Payment Sharing Notice": a written notice from the Company or any
Lender informing the Administrative Agent that an Event of Default has
occurred and is continuing and directing the Administrative Agent to
allocate payments thereafter received from or on behalf of the Company in
accordance with the provisions of subsection 4.9.
"PBGC": the Pension Benefit Guaranty Corporation established
pursuant to Subtitle A of Title IV of ERISA or any successor.
"Permanent Subordinated Debt": (i) unsecured notes or debentures of
the Company, subordinated to the prior payment of the Loans and the other
obligations under the Credit Documents, that may be issued by the Company
after the Closing Date, provided that (a) unless otherwise agreed to by
the Supermajority Lenders, no part of the principal amount of any such
notes or debentures shall have a maturity date earlier than October 31,
2004, (b) unless otherwise agreed to by the Required Lenders, the
subordination provisions of which are as favorable to the Lenders as the
Exchange
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18
Notes issued under, and as defined in, the Bridge Loan Agreement, the
other terms and conditions thereof (including, without limitation,
subordination, covenant and events of default provisions thereof but
excluding any call protection provisions) taken as a whole shall be at
least as favorable to the Company and the Lenders as the Exchange Notes
issued under, and as defined in, the Bridge Loan Agreement and the
non-default cash interest rate thereon shall not exceed 14% per annum and
the total non-default interest rate shall not exceed 16% per annum, (c) no
covenant contained in this Agreement or any of the other Credit Documents
would be violated on the proposed issuance date after giving effect to (I)
the issuance of such notes or debentures, (II) the payment of all issuance
costs, commissions, discounts, redemption premiums and other fees and
charges associated therewith, (III) the use of proceeds thereof and (IV)
the redemption, repayment, retirement and repurchase of all Indebtedness
of the Company and its Subsidiaries to be redeemed, repaid or repurchased
in connection therewith and (d) substantially final drafts of the
documentation governing any such notes or debentures, showing the terms
thereof, shall have been furnished to the Lenders at least 5 days prior to
the date of issuance of such notes or debentures and (ii) unsecured notes
or debentures of the Company, subordinated to the prior payment of the
Loans and the other obligations under the Credit Documents, that may be
issued by the Company to refinance previously issued Permanent
Subordinated Debt, provided that (a) unless otherwise agreed to by the
Required Lenders, the maturity date, interest rate, scheduled
amortization, final maturity and subordination provisions shall be at
least as favorable to the Company and the Lenders as such refinanced
Permanent Subordinated Debt and the other terms and conditions thereof
(including, without limitation the covenant and event of default
provisions thereof) taken as a whole shall be at least as favorable to the
Company and the Lenders as such refinanced Permanent Subordinated Debt and
(b) the conditions contained in clauses (i)(c) and (d) of this definition
shall be met.
"Permitted Liens": Liens permitted to exist under subsection 8.2.
"Person": an individual, partnership, corporation, business trust,
joint stock company, limited liability company, trust, unincorporated
association, joint venture, Governmental Authority or other entity of
whatever nature.
"Phase I Environmental Site Assessments": the Phase I Environmental
Site Assessments for William Carter Company Mill Nos. 2, 5, 6, 8, 9, 10,
11, 12, 15, 17, the Leola Distribution Facility, the Hogansville
Distribution Facility and the Griffin Operations Facility prepared by
Strata Environmental in July and August 1996 and the Environmental Due
Diligence Memoranda on The William Carter Company prepared by
Environmental Performance, Inc., dated August 23, 1996 and October 8,
1996.
"Plan": at a particular time, any employee benefit plan which is
covered by ERISA and in respect of which the Company or a Commonly
Controlled Entity is (or, if such plan were terminated at such time, would
under Section 4069 of ERISA be deemed to be) an "employer" as defined in
Section 3(5) of ERISA.
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19
"Pledge Agreements": the collective reference to the Holdings Pledge
Agreement, the Company Pledge Agreement and any pledge agreement from time
to time executed and delivered by the Company providing for the pledge of
the Capital Stock of any Subsidiary pursuant to subsection 7.9.
"Real Property": each Fee Property and Leased Property listed on
Schedule 5.13.
"Refunded Swing Line Loans": as defined in subsection 3.4(b).
"Register": as defined in subsection 11.6(d).
"Related Document": any agreement, certificate, document or
instrument relating to a Letter of Credit.
"Reorganization": with respect to any Multiemployer Plan, the
condition that such Plan is in reorganization as such term is used in
Section 4241 of ERISA.
"Reportable Event": any of the events set forth in Section 4043(c)
of ERISA, other than those events as to which the thirty day notice period
is waived under subsections .13, .14, .16, .18, .19 or .20 of PBGC Reg.
ss. 2615.
"Required Lenders": at a particular time, the holders of at least
51% of the sum of (i) the aggregate unpaid principal amount of the Term
Loans, if any, and (ii) the Revolving Credit Commitments or, if the
Revolving Credit Commitments are terminated, the aggregate unpaid
principal amount of the Revolving Credit Loans, and participations in
Swing Line Loans and the aggregate amount available to be drawn at such
time under all outstanding Letters of Credit and L/C Obligations. The Term
Loans and the Revolving Credit Commitments of any Non-Funding Lender shall
be disregarded in determining Required Lenders at any time.
"Requirement of Law": as to any Person, the Articles or Certificate
of Incorporation and By-Laws or other organizational or governing
documents of such Person, and any law, treaty, rule or regulation, order,
or determination of an arbitrator or a court or other Governmental
Authority, in each case applicable to or binding upon such Person or any
of its property, or to which such Person or any of its property is
subject.
"Responsible Officer": with respect to any Person, the president,
chief executive officer, the chief operating officer, the chief financial
officer, treasurer, controller or any vice president of such Person.
"Revolving Credit Commitment": as to any Lender, its obligations to
make Revolving Credit Loans to the Company pursuant to subsection 3.1, and
to purchase its L/C Participating Interest in any Letter of Credit, in an
aggregate amount not to
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20
exceed the amount set forth under such Lender's name in Schedule I
opposite the caption "Revolving Credit Commitment" or in Schedule 1 to the
Assignment and Acceptance by which such Lender acquired its Revolving
Credit Commitment, as the same may be reduced from time to time pursuant
to subsection 4.3 or 4.4(b) or adjusted pursuant to subsection 11.6(c);
collectively, as to all the Lenders, the "Revolving Credit Commitments".
"Revolving Credit Commitment Percentage": as to any Lender at any
time, the percentage of the aggregate Revolving Credit Commitments then
constituted by such Lender's Revolving Credit Commitment.
"Revolving Credit Commitment Period": the period from and including
the Closing Date to but not including the Revolving Credit Termination
Date.
"Revolving Credit Loan" and "Revolving Credit Loans": as defined in
subsection 3.1(a).
"Revolving Credit Lender": any Lender with a Revolving Credit
Commitment.
"Revolving Credit Note": as defined in subsection 4.13(e).
"Revolving Credit Termination Date": the earlier of (a) October 31,
2001 and (b) such other earlier date as the Revolving Credit Commitments
shall terminate hereunder.
"Security Agreements": the collective reference to the Company
Security Agreement, the Subsidiary Security Agreement and any security
agreement which may from time to time be executed and delivered by a
Subsidiary of the Company pursuant to subsection 7.9.
"Security Documents": the collective reference to the Pledge
Agreements, the Security Agreements and the Mortgages.
"Sellers": as defined in the Recitals hereto.
"Single Employer Plan": any Plan which is covered by Title IV of
ERISA, but which is not a Multiemployer Plan.
"Standby L/C": an irrevocable letter of credit under which the
Issuing Lender agrees to make payments in Dollars for the account of the
Company, on behalf of the Company or any Subsidiary thereof in respect of
obligations of the Company or such Subsidiary incurred pursuant to
contracts made or performances undertaken or to be undertaken or like
matters relating to contracts to which the Company or such Subsidiary is
or proposes to become a party in the ordinary course of the Company's or
such Subsidiary's business, including, without limiting the foregoing, for
insurance
<PAGE>
21
purposes or in respect of advance payments or as bid or performance bonds
or for any other purpose for which a standby letter of credit might
customarily be issued.
"Subordinated Debt": collectively, the Bridge Subordinated Debt and
the Permanent Subordinated Debt.
"Subsection 4.11(d)(2) Certificate": as defined in subsection
4.11(d).
"Subsidiary": as to any Person, a corporation, partnership, limited
liability company or other entity of which shares of stock of each class
or other interests having ordinary voting power (other than stock or other
interests having such power only by reason of the happening of a
contingency) to elect a majority of the board of directors or other
managers of such corporation, partnership or other entity are at the time
owned, or the management of which is otherwise controlled, by such Person
or by one or more Subsidiaries of such Person or by such Person and one or
more Subsidiaries of such Person. (A Subsidiary shall be deemed
wholly-owned by a Person who owns all of the voting shares of stock or
other interests of such Subsidiary having voting power under ordinary
circumstances to vote for directors or other managers of such corporation,
partnership or other entity, except for directors' qualifying shares.)
Unless otherwise qualified, all references to a "Subsidiary" or to
"Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Company.
"Subsidiary Guarantee": the Subsidiary Guarantee, substantially in
the form of Exhibit F-2, to be made by each Domestic Subsidiary of the
Company in favor of the Administrative Agent for the ratable benefit of
the Lenders, as the same may be amended, modified or supplemented from
time to time.
"Subsidiary Security Agreement": the Subsidiary Security Agreement,
in form and substance reasonably satisfactory to the Administrative Agent,
to be made by certain Domestic Subsidiaries of the Company in favor of the
Administrative Agent for the ratable benefit of the Lenders, as the same
may be amended, modified or supplemented from time to time.
"Supermajority Lenders": at a particular time, the holders of at
least 66-2/3% of the sum of (i) the aggregate unpaid principal amount of
the Term Loans, if any, and (ii) the Revolving Credit Commitments or, if
the Revolving Credit Commitments are terminated, the aggregate unpaid
principal amount of the Revolving Credit Loans, and participations in
Swing Line Loans and the aggregate amount available to be drawn at such
time under all outstanding Letters of Credit and L/C Obligations. The Term
Loans and the Revolving Credit Commitments of any Non-Funding Lender shall
be disregarded in determining Supermajority Lenders at any time.
"Swing Line Commitment": the Swing Line Lender's obligation to make
Swing Line Loans pursuant to subsection 3.4.
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22
"Swing Line Lender": Chase in its capacity as lender of the Swing
Line Loans.
"Swing Line Loan Participation Certificate": a certificate in
substantially the form of Exhibit I.
"Swing Line Loans": as defined in subsection 3.4(a).
"Swing Line Note": as defined in subsection 4.13(e).
"Term Loan" and "Term Loans": as defined in subsection 2.1.
"Term Loan Commitment": as to any Lender, its obligation to make a
Term Loan to the Company pursuant to subsection 2.1 in an aggregate amount
not to exceed the amount set forth under such Lender's name in Schedule I
opposite the caption "Term Loan Commitment" or in Schedule 1 to the
Assignment and Acceptance pursuant to which a Lender acquires its Term
Loan Commitment, as the same may be adjusted pursuant to subsection
11.6(c); collectively, as to all the Lenders, the "Term Loan Commitments".
"Term Loan Commitment Percentage": as to any Lender at any time, the
percentage of the aggregate Term Loan Commitments then constituted by such
Lender's Term Loan Commitment.
"Term Loan Note": as defined in subsection 4.13(e).
"Transferee": as defined in subsection 11.6(f).
"Type": as to any Loan, its nature as an Alternate Base Rate Loan or
Eurodollar Loan.
"Uniform Customs": the Uniform Customs and Practice for Documentary
Credits (1993 Revision), International Chamber of Commerce Publication No.
500, and any amendments thereof.
"United States": the United States of America.
1.2 Other Definitional Provisions. (a) Unless otherwise specified
therein, all terms defined in this Agreement shall have the defined meanings
when used in the Notes, any other Credit Document or any certificate or other
document made or delivered pursuant hereto.
(b) As used herein and in the Notes, any other Credit Document and
any certificate or other document made or delivered pursuant hereto, accounting
terms relating to the Company and its Subsidiaries not defined in subsection 1.1
and accounting terms partly defined in subsection 1.1 to the extent not defined,
shall have the respective meanings given
<PAGE>
23
to them under GAAP. To the extent there are any changes in GAAP from the date of
this Agreement, the financial covenants set forth herein at the option of the
Company will either (i) continue to be determined in accordance with GAAP in
effect on the Closing Date, as applicable, or (ii) be adjusted or reset to
reflect such changes in GAAP, such adjustments or resets to be mutually agreed
to by the Company and the Administrative Agent.
(c) The words "hereof", "herein" and "hereunder" and words of
similar import when used in this Agreement shall refer to this Agreement as a
whole and not to any particular provision of this Agreement, and section,
subsection, schedule and exhibit references are to this Agreement unless
otherwise specified.
(d) The meanings given to terms defined herein shall be equally
applicable to the singular and plural forms of such terms.
SECTION 2. TERM LOANS
2.1 Term Loans. Subject to the terms and conditions hereof, each
Lender severally agrees to make a loan in Dollars (individually, a "Term Loan";
and collectively, the "Term Loans") to the Company on the Closing Date, in an
aggregate principal amount equal to such Lender's Term Loan Commitment. The Term
Loans shall be made initially as Alternate Base Rate Loans.
2.2 Repayment of Term Loans. The Company shall repay the Term Loans
as provided in subsection 4.4(c).
2.3 Use of Proceeds. The proceeds of the Term Loans shall be used
(a) to finance a portion of the Merger Consideration and other payments pursuant
to the Merger Agreement and to pay fees, expenses and financing costs in
connection therewith, and (b) to refinance certain of the existing Indebtedness
of the Company and its Subsidiaries.
SECTION 3. AMOUNT AND TERMS OF REVOLVING CREDIT COMMITMENTS
3.1 Revolving Credit Commitments. (a) Subject to the terms and
conditions hereof, each Lender severally agrees to the extent of its Revolving
Credit Commitment to extend credit to the Company from time to time on any
Borrowing Date during the Revolving Credit Commitment Period (i) by purchasing
an L/C Participating Interest in each Letter of Credit issued by the Issuing
Lender and (ii) by making loans in Dollars (individually, such a Loan is a
"Revolving Credit Loan", and collectively such Loans are the "Revolving Credit
Loans") to the Company from time to time. Notwithstanding the above, in no event
shall any Revolving Credit Loans be made, or Letter of Credit be issued, if the
aggregate amount of the Revolving Credit Loans to be made or Letter of Credit to
be issued would, after giving effect to the use of proceeds, if any, thereof,
exceed the aggregate Available Revolving Credit
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24
Commitments nor shall any Letter of Credit be issued if after giving effect
thereto the sum of the undrawn amount of all outstanding Letters of Credit and
the amount of all L/C Obligations would exceed $10,000,000. During the Revolving
Credit Commitment Period, the Company may use the Revolving Credit Commitments
by borrowing, prepaying the Revolving Credit Loans in whole or in part, and
reborrowing, all in accordance with the terms and conditions hereof, and/or by
having the Issuing Lender issue Letters of Credit, having such Letters of Credit
expire undrawn upon or if drawn upon, reimbursing the Issuing Lender for such
drawing, and having the Issuing Lender issue new Letters of Credit.
(b) The Revolving Credit Loans made on the Closing Date shall be
made initially as Alternate Base Rate Loans. Each borrowing of Revolving Credit
Loans pursuant to the Revolving Credit Commitments shall be in an aggregate
principal amount of the lesser of (i) $500,000 or a whole multiple of $100,000
in excess thereof in the case of Alternate Base Rate Loans, and $1,000,000 or a
whole multiple of $500,000 in excess thereof, in the case of Eurodollar Loans
and (ii) the Available Revolving Credit Commitments, except that any borrowing
of Revolving Credit Loans to be used solely to pay a like amount of Swing Line
Loans may be in the aggregate principal amount of such Swing Line Loans.
3.2 Commitment Fee. The Company agrees to pay to the Administrative
Agent for the account of each Lender (other than any Non-Funding Lender) a
commitment fee from and including the Closing Date to and including the
Revolving Credit Termination Date, computed at the rate of 1/2 of 1% per annum
on the average daily amount of the Available Revolving Credit Commitment of such
Lender during the period for which payment is made (whether or not the Company
shall have satisfied the applicable conditions to borrow or for issuance of a
Letter of Credit set forth in Section 6). Such commitment fee shall be payable
quarterly in arrears on the last day of each March, June, September and December
and on the Revolving Credit Termination Date, commencing on the first such date
to occur on or following the Closing Date (or, if earlier, the Revolving Credit
Termination Date).
3.3 Proceeds of Revolving Credit Loans. The Company shall use the
proceeds of Revolving Credit Loans (a) as set forth in subsection 2.3 and (b)
for general corporate purposes of the Company and its Subsidiaries.
3.4 Swing Line Commitment. (a) Subject to the terms and conditions
hereof, the Swing Line Lender agrees, so long as the Administrative Agent has
not received notice that an Event of Default has occurred and is continuing, to
make swing line loans (individually, a "Swing Line Loan"; collectively, the
"Swing Line Loans") to the Company from time to time during the Revolving Credit
Commitment Period in an aggregate principal amount at any one time outstanding
not to exceed $5,000,000, provided that no Swing Line Loan may be made if the
aggregate principal amount of the Swing Line Loans to be made would exceed the
aggregate Available Revolving Credit Commitments at such time. Amounts borrowed
by the Company under this subsection 3.4 may be repaid and, through but
excluding the Revolving Credit Termination Date, reborrowed. All Swing Line
Loans shall be made as Alternate Base Rate Loans and shall not be entitled to be
converted into Eurodollar Loans. The Company shall give the Swing Line Lender
irrevocable notice (which
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25
notice must be received by the Swing Line Lender prior to 3:00 p.m., New York
City time) on the requested Borrowing Date specifying the amount of each
requested Swing Line Loan, which shall be in an aggregate minimum amount of
$250,000 or a whole multiple of $100,000 in excess thereof. The proceeds of each
Swing Line Loan will be made available by the Swing Line Lender to the Company
by crediting the account of the Company at the office of the Swing Line Lender
with such proceeds. The proceeds of Swing Line Loans may be used solely for the
purposes referred to in subsection 3.3.
(b) The Swing Line Lender at any time in its sole and absolute
discretion may, and on the fifteenth day (or if such day is not a Business Day,
the next Business Day) and last Business Day of each month shall, on behalf of
the Company (which hereby irrevocably directs the Swing Line Lender to act on
its behalf) request each Revolving Credit Lender, including the Swing Line
Lender, to make a Revolving Credit Loan in an amount equal to such Lender's
Revolving Credit Commitment Percentage of the amount of the Swing Line Loans
(the "Refunded Swing Line Loans") outstanding on the date such notice is given.
Unless any of the events described in paragraph (f) of Section 9 shall have
occurred (in which event the procedures of paragraph (c) of this subsection 3.4
shall apply) each such Lender shall make the proceeds of its Revolving Credit
Loan available to the Swing Line Lender for the account of the Swing Line Lender
at the Alternate Base Rate Lending Office of the Swing Line Lender prior to
12:00 noon (New York City time) in funds immediately available on the Business
Day next succeeding the date such notice is given. The proceeds of such
Revolving Credit Loans shall be immediately applied to repay the Refunded Swing
Line Loans.
(c) If prior to the making of a Revolving Credit Loan pursuant to
paragraph (b) of this subsection 3.4 one of the events described in paragraph
(f) of Section 9 shall have occurred, each Revolving Credit Lender will, on the
date such Loan was to have been made, purchase an undivided participating
interest in the Refunded Swing Line Loan in an amount equal to its Revolving
Credit Commitment Percentage of such Refunded Swing Line Loan. Each such Lender
will immediately transfer to the Swing Line Lender in immediately available
funds, the amount of its participation and upon receipt thereof the Swing Line
Lender will deliver to such Lender a Swing Line Loan Participation Certificate
dated the date of receipt of such funds and in such amount.
(d) Whenever, at any time after the Swing Line Lender has received
from any Revolving Credit Lender such Lender's participating interest in a
Refunded Swing Line Loan, the Swing Line Lender receives any payment on account
thereof, the Swing Line Lender will distribute to such Lender its participating
interest in such amount (appropriately adjusted, in the case of interest
payments, to reflect the period of time during which such Lender's participating
interest was outstanding and funded) in like funds as received; provided,
however, that in the event that such payment received by the Swing Line Lender
is required to be returned, such Lender will return to the Swing Line Lender any
portion thereof previously distributed by the Swing Line Lender to it in like
funds as such payment is required to be returned by the Swing Line Lender.
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26
(e) The obligation of each Revolving Credit Lender to purchase
participating interests pursuant to subsection 3.4(c) shall be absolute and
unconditional and shall not be affected by any circumstance, including, without
limitation, (i) any set-off, counterclaim, recoupment, defense or other right
which such Lender may have against the Swing Line Lender, the Company or any
other Person for any reason whatsoever; (ii) the occurrence or continuance of an
Event of Default; (iii) any adverse change in the condition (financial or
otherwise) of the Company; (iv) any breach of this Agreement by the Company or
any other Lender; or (v) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
3.5 Issuance of Letters of Credit. (a) The Company may from time to
time request the Issuing Lender to issue a Standby L/C or a Commercial L/C by
delivering to the Administrative Agent at its address specified in subsection
11.2 a letter of credit application in the Issuing Lender's then customary form
(the "L/C Application") completed to the satisfaction of the Issuing Lender,
together with the proposed form of such Letter of Credit (which shall comply
with the applicable requirements of paragraph (b) below) and such other
certificates, documents and other papers and information as the Issuing Lender
may reasonably request; provided that if the Issuing Lender informs the Company
that it is for any reason unable to open such Letter of Credit, the Company may
request any Lender to open such Letter of Credit upon the same terms offered to
the Issuing Lender and each reference to the Issuing Lender for purposes of
subsections 3.5 through 3.14, 6.1 and 6.2 shall be deemed to be a reference to
such issuing Lender.
(b) Each Standby L/C and Commercial L/C issued hereunder shall,
among other things, (i) be in such form requested by the Company as shall be
acceptable to the Issuing Lender in its sole discretion and (ii) in the case of
each Standby L/C, have an expiry date occurring not later than 365 days after
the date of issuance of such Standby L/C and, in the case of each Commercial
L/C, have an expiry date occurring not later than 180 days after the date of
issuance of such Commercial L/C and, in all cases, may be automatically renewed
on its expiry date for an additional period equal to the initial term, but in no
case shall any Letter of Credit have an expiry date occurring later than the
Revolving Credit Termination Date. Each L/C Application and each Letter of
Credit shall be subject to the Uniform Customs and, to the extent not
inconsistent therewith, the laws of the State of New York.
3.6 Participating Interests. Effective in the case of each Standby
L/C and Commercial L/C (if applicable) as of the date of the opening thereof,
the Issuing Lender agrees to allot and does allot, to itself and each other
Revolving Credit Lender, and each such Lender severally and irrevocably agrees
to take and does take in such Letter of Credit and the related L/C Application
(if applicable), an L/C Participating Interest in a percentage equal to such
Lender's Revolving Credit Commitment Percentage.
3.7 Procedure for Opening Letters of Credit. The Issuing Lender will
notify each Lender after the end of each calendar month of any L/C Applications
received by the Issuing Lender from the Company during such month. Upon receipt
of any L/C Application from the Company, the Issuing Lender will process such
L/C Application, and the other
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27
certificates, documents and other papers delivered to the Issuing Lender in
connection therewith, in accordance with its customary procedures and, subject
to the terms and conditions hereof, shall promptly open such Letter of Credit by
issuing the original of such Letter of Credit to the beneficiary thereof and by
furnishing a copy thereof to the Company and, after the end of the calendar
month in which such Letter of Credit was opened, to the other Lenders, provided
that no such Letter of Credit shall be issued if subsection 3.1 would be
violated thereby.
3.8 Payments in Respect of Letters of Credit. (a) The Company agrees
forthwith upon demand by the Issuing Lender and otherwise in accordance with the
terms of the L/C Application relating thereto, (i) to reimburse the Issuing
Lender for any payment made by the Issuing Lender under any Letter of Credit
issued for the account of the Company and (ii) to pay interest on any
unreimbursed portion of any such payment from the date of such payment until
reimbursement in full thereof at a rate per annum equal to (A) on or prior to
the date which is one Business Day after the day on which the Issuing Lender
demands reimbursement from the Company for such payment, the Alternate Base Rate
plus the Applicable Margin for the Revolving Credit Loans and (B) thereafter,
the Alternate Base Rate plus the Applicable Margin for the Revolving Credit
Loans plus 2%.
(b) In the event that the Issuing Lender makes a payment under any
Letter of Credit and is not reimbursed in full therefor forthwith upon demand of
the Issuing Lender, and otherwise in accordance with the terms of the L/C
Application relating to such Letter of Credit, the Issuing Lender will promptly
notify each other Revolving Credit Lender. Forthwith upon its receipt of any
such notice, each such other Lender will transfer to the Issuing Lender, in
immediately available funds, an amount equal to such other Lender's pro rata
share (based on its Revolving Credit Commitment) of the L/C Obligation arising
from such unreimbursed payment. Promptly, upon its receipt from such other
Lender of such amount, the Issuing Lender will complete, execute and deliver to
such other Lender an L/C Participation Certificate dated the date of such
receipt and in such amount.
(c) Whenever, at any time after the Issuing Lender has made a
payment under any Letter of Credit and has received from any other Revolving
Credit Lender such other Lender's pro rata share of the L/C Obligation arising
therefrom, the Issuing Lender receives any reimbursement on account of such L/C
Obligation or any payment of interest on account thereof, the Issuing Lender
will promptly distribute to such other Lender its pro rata share thereof in like
funds as received; provided, however, that in the event that the receipt by the
Issuing Lender of such reimbursement or such payment of interest (as the case
may be) is required to be returned, such other Lender will return to the Issuing
Lender any portion thereof previously distributed by the Issuing Lender to it in
like funds as such reimbursement or payment is required to be returned by the
Issuing Lender.
3.9 Letter of Credit Fees. (a) In lieu of any letter of credit
commissions and fees provided for in any L/C Application relating to Standby or
Commercial L/Cs (other than standard issuance, amendment and negotiation fees),
the Company agrees to pay the Administrative Agent, for the account of the
Issuing Lender and the Participating Lenders,
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28
with respect to each Standby or Commercial L/C issued for the account of the
Company, a Standby or Commercial L/C fee, as the case may be, equal to the
Applicable Margin for Revolving Credit Loans which are Eurodollar Loans per
annum (of which the Issuing Lender shall retain for its own account, as the
issuing bank and not on account of its L/C Participating Interest therein, 1/4
of 1% per annum) on the daily average amount available to be drawn under each
Standby L/C in the case of a Standby L/C and on the maximum fee amount of each
Commercial L/C in the case of a Commercial L/C, in either case, payable, in
arrears, on the last day of each fiscal quarter of the Company. The
Administrative Agent will disburse any Standby or Commercial L/C fees received
pursuant to this subsection 3.9(a) to the respective Lenders promptly following
the receipt of any such fees in the case of a Standby L/C and, in the case of a
Commercial L/C, following the end of the calendar month in which such Commercial
L/C fees were received. Notwithstanding the foregoing, the Company agrees to pay
standard issuance, amendment and negotiation fees to the Issuing Lender.
(b) For purposes of any payment of fees required pursuant to this
subsection 3.9, the Administrative Agent agrees to provide to the Company a
statement of any such fees to be so paid; provided that the failure by the
Administrative Agent to provide the Company with any such invoice shall not
relieve the Company of its obligation to pay such fees.
3.10 Letter of Credit Reserves. (a) If any Change in Law shall
either (i) impose, modify, deem or make applicable any reserve, special deposit,
assessment or similar requirement against letters of credit issued by the
Issuing Lender or (ii) impose on the Issuing Lender any other condition
regarding this Agreement (with respect to Letters of Credit) or any Letter of
Credit, and the result of any event referred to in clause (i) or (ii) above
shall be to increase the cost of the Issuing Lender of issuing or maintaining
any Letter of Credit (which increase in cost shall be the result of the Issuing
Lender's reasonable allocation of the aggregate of such cost increases resulting
from such events), then, upon demand by the Issuing Lender, the Company shall
immediately pay to the Issuing Lender, from time to time as specified by the
Issuing Lender, additional amounts which shall be sufficient to compensate the
Issuing Lender for such increased cost, together with interest on each such
amount from the date demanded until payment in full thereof at a rate per annum
equal to the rate applicable to Alternate Base Rate Loans pursuant to subsection
4.5(b). The Company shall not be required to make any payments to the Issuing
Lender for any additional amounts pursuant to this subsection 3.10(a) unless the
Issuing Lender has given written notice to the Company of its intent to request
such payments prior to or within 60 days after the date on which the Issuing
Lender became entitled to claim such amounts. A certificate, setting forth in
reasonable detail the calculation of the amounts involved, submitted by the
Issuing Lender to the Company concurrently with any such demand by the Issuing
Lender, shall be conclusive, absent manifest error, as to the amount thereof.
(b) In the event that any Change in Law with respect to the Issuing
Lender shall, in the opinion of the Issuing Lender, require that any obligation
under any Letter of Credit be treated as an asset or otherwise be included for
purposes of calculating the appropriate amount of capital to be maintained by
the Issuing Lender or any corporation
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29
controlling the Issuing Lender, and such Change in Law shall have the effect of
reducing the rate of return on the Issuing Lender's or such corporation's
capital, as the case may be, as a consequence of the Issuing Lender's
obligations under such Letter of Credit to a level below that which the Issuing
Lender or such corporation, as the case may be, could have achieved but for such
Change in Law (taking into account the Issuing Lender's or such corporation's
policies, as the case may be, with respect to capital adequacy) by an amount
deemed by the Issuing Lender to be material, then from time to time following
notice by the Issuing Lender to the Company of such Change in Law, within 15
days after demand by the Issuing Lender, the Company shall pay to the Issuing
Lender such additional amount or amounts as will compensate the Issuing Lender
or such corporation, as the case may be, for such reduction. The Issuing Lender
agrees that, upon the occurrence of any event giving rise to the operation of
paragraph (a) or (b) of this subsection 3.10 with respect to the Issuing Lender,
it will, if requested by the Company and to the extent permitted by law or by
the relevant Governmental Authority, endeavor in good faith to avoid or minimize
the increase in costs or reduction in payments resulting from such event;
provided, however, that such avoidance or minimization can be made in such a
manner that the Issuing Lender, in its sole determination, suffers no economic,
legal or regulatory disadvantage. The Company shall not be required to make any
payments to the Issuing Lender for any additional amounts pursuant to this
subsection 3.10(b) unless the Issuing Lender has given written notice to the
Company of its intent to request such payments prior to or within 60 days after
the date on which the Issuing Lender became entitled to claim such amounts. A
certificate, in reasonable detail setting forth the calculation of the amounts
involved, submitted by the Issuing Lender to the Company concurrently with any
such demand by the Issuing Lender, shall be conclusive, absent manifest error,
as to the amount thereof.
(c) The Company and each Participating Lender agree that the
provisions of the foregoing paragraphs (a) and (b) shall apply equally to each
Participating Lender in respect of its L/C Participating Interest in such Letter
of Credit, as if the references in such paragraphs and provisions referred to,
where applicable, such Participating Lender or, in the case of paragraph (b),
any corporation controlling such Participating Lender.
3.11 Further Assurances. The Company hereby agrees, from time to
time, to do and perform any and all acts and to execute any and all further
instruments reasonably requested by the Issuing Lender more fully to effect the
purposes of this Agreement and the issuance of Letters of Credit hereunder.
3.12 Obligations Absolute. The payment obligations of the Company
under this Agreement with respect to the Letters of Credit shall be
unconditional and irrevocable and shall be paid strictly in accordance with the
terms of this Agreement under all circumstances, including, without limitation,
the following circumstances:
(i) the existence of any claim, set-off, defense or other right
which the Company or any of its Subsidiaries may have at any time against
any beneficiary, or any transferee, of any Letter of Credit (or any
Persons for whom any such beneficiary or any such transferee may be
acting), the Issuing Lender, the Administrative Agent or
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30
any Lender, or any other Person, whether in connection with this
Agreement, any Credit Document, the transactions contemplated herein, or
any unrelated transaction;
(ii) any statement or any other document presented under any Letter
of Credit proving to be forged, fraudulent or invalid or any statement
therein being untrue or inaccurate in any respect;
(iii) payment by the Issuing Lender under any Letter of Credit
against presentation of a draft or certificate or other document which
does not comply with the terms of such Letter of Credit or is insufficient
in any respect, except where such payment constitutes gross negligence or
willful misconduct on the part of the Issuing Lender; or
(iv) any other circumstances or happening whatsoever, whether or not
similar to any of the foregoing, except for any such circumstances or
happening constituting gross negligence or willful misconduct on the part
of the Issuing Lender.
3.13 Assignments. No Participating Lender's participation in any
Letter of Credit or any of its rights or duties hereunder shall be subdivided,
assigned or transferred (other than in connection with a transfer of part or all
of such Participating Lender's Revolving Credit Commitment in accordance with
subsection 11.6(c)) without the prior written consent of the Issuing Lender,
which consent will not be unreasonably withheld. Such consent may be given or
withheld without the consent or agreement of any other Participating Lender.
Notwithstanding the foregoing, a Participating Lender may subparticipate its L/C
Participating Interest without obtaining the prior written consent of the
Issuing Lender.
3.14 Participations. The obligation of each Revolving Credit Lender
to purchase participating interests pursuant to subsection 3.6 shall be absolute
and unconditional and shall not be affected by any circumstance, including,
without limitation, (i) any set-off, counterclaim, recoupment, defense or other
right which such Lender may have against the Issuing Lender, the Company or any
other Person for any reason whatsoever; (ii) the occurrence or continuance of an
Event of Default; (iii) any adverse change in the condition (financial or
otherwise) of the Company; (iv) any breach of this Agreement by the Company or
any other Lender; or (v) any other circumstance, happening or event whatsoever,
whether or not similar to any of the foregoing.
SECTION 4. GENERAL PROVISIONS APPLICABLE TO LOANS
4.1 Procedure for Borrowing. (a) The Company may borrow under the
Commitments on any Business Day, provided that, with respect to any borrowing,
the Company shall give the Administrative Agent irrevocable notice (which notice
must be received by the Administrative Agent prior to 12:00 noon (or, with
respect to Swing Line Loans, 3:00 p.m.), New York City time, (i) three Business
Days prior to the requested Borrowing Date if all or any part of the Loans are
to be Eurodollar Loans and (ii) one
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Business Day prior to the requested Borrowing Date (or, in the case of Swing
Line Loans and, if the Closing Date occurs on the date this Agreement is
executed and delivered, Loans made on the Closing Date, on the requested
Borrowing Date) if the borrowing is to be solely of Alternate Base Rate Loans)
and specifying (A) the amount of the borrowing, (B) whether such Loans are
initially to be Eurodollar Loans or Alternate Base Rate Loans or a combination
thereof, (C) if the borrowing is to be entirely or partly Eurodollar Loans, the
length of the Interest Period for such Eurodollar Loans and (D) whether the Loan
is a Term Loan, a Swing Line Loan or a Revolving Credit Loan; provided, however,
that the Loans made on the Closing Date shall be made initially as Alternate
Base Rate Loans. Upon receipt of such notice the Administrative Agent shall
promptly notify each Lender. Not later than 12:00 noon, New York City time, on
the Borrowing Date specified in such notice, each Lender shall make available to
the Administrative Agent at the office of the Administrative Agent specified in
subsection 11.2 (or at such other location as the Administrative Agent may
direct) an amount in immediately available funds equal to the amount of the Loan
to be made by such Lender (except that proceeds of Swing Line Loans will be made
available to the Company in accordance with subsection 3.4(a)). Loan proceeds
received by the Administrative Agent hereunder shall promptly be made available
to the Company by the Administrative Agent's crediting the account of the
Company, at the office of the Administrative Agent specified in subsection 11.2,
with the aggregate amount actually received by the Administrative Agent from the
Lenders and in like funds as received by the Administrative Agent.
(b) Any borrowing of Eurodollar Loans hereunder shall be in such
amounts and be made pursuant to such elections so that, after giving effect
thereto, (i) the aggregate principal amount of all Eurodollar Loans having the
same Interest Period shall not be less than $1,000,000 or a whole multiple of
$500,000 in excess thereof and (ii) no more than sixteen Interest Periods shall
be in effect at any one time.
4.2 Conversion and Continuation Options. (a) Subject to subsection
4.12, the Company may elect from time to time to convert Eurodollar Loans into
Alternate Base Rate Loans by giving the Administrative Agent irrevocable notice
of such election, to be received by the Administrative Agent prior to 12:00
noon, New York City time, at least three Business Days prior to the proposed
conversion date. The Company may elect from time to time to convert all or a
portion of the Alternate Base Rate Loans (other than Swing Line Loans) then
outstanding to Eurodollar Loans by giving the Administrative Agent irrevocable
notice of such election, to be received by the Administrative Agent prior to
12:00 noon, New York City time, at least three Business Days prior to the
proposed conversion date, specifying the Interest Period selected therefor, and,
if no Default or Event of Default has occurred and is continuing, such
conversion shall be made on the requested conversion date or, if such requested
conversion date is not a Business Day, on the next succeeding Business Day. Upon
receipt of any notice pursuant to this subsection 4.2, the Administrative Agent
shall promptly notify each Lender thereof. All or any part of the outstanding
Loans (other than Swing Line Loans) may be converted as provided herein,
provided that partial conversions of Alternate Base Loans shall be in the
aggregate principal amount of $500,000 or a whole multiple of $100,000 in excess
thereof and the aggregate principal amount of the resulting Eurodollar
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32
Loans outstanding in respect of any one Interest Period shall be at least
$1,000,000 or a whole multiple of $500,000 in excess thereof.
(b) Any Eurodollar Loans may be continued as such upon the
expiration of the then current Interest Period with respect thereto by the
Company giving notice to the Administrative Agent, in accordance with the
applicable provisions of the term "Interest Period" set forth in subsection 1.1,
of the length of the next Interest Period to be applicable to such Loans,
provided that no Eurodollar Loan may be continued as such (i) when any Event of
Default has occurred and is continuing and the Administrative Agent or the
Required Lenders have, by written notice to the Company, determined that such a
continuation is not appropriate, (ii) if, after giving effect thereto,
subsection 4.1(b) would be contravened or (iii) after the date that is one month
prior to the Revolving Credit Termination Date (in the case of continuations of
Revolving Credit Loans) or the date of the final installment of principal of the
Term Loans.
(c) Notwithstanding anything in this Agreement to the contrary,
unless otherwise agreed to by Chase, no Loan shall be made as, converted to or
continued as a Eurodollar Loan during the period commencing on the Closing Date
and ending on the 33rd day following the Closing Date; provided that all or a
portion of the Loans made on the Closing Date may, at the Company's option,
subject to the other provisions of this Agreement, be converted to Eurodollar
Loans with an Interest Period of one month on or after the third day following
the Closing Date.
4.3 Changes of Commitment Amounts. (a) The Company shall have the
right, upon not less than five Business Days' notice to the Administrative
Agent, to terminate or from time to time to permanently reduce the Revolving
Credit Commitments, subject to the provisions of this subsection 4.3. To the
extent, if any, that the sum of the amount of the Revolving Credit Loans, Swing
Line Loans and L/C Obligations then outstanding and the amounts available to be
drawn under outstanding Letters of Credit exceeds the amount of the Revolving
Credit Commitments as then reduced, the Company shall be required to make a
prepayment equal to such excess amount, the proceeds of which shall be applied
first, to payment of the Swing Line Loans then outstanding, second, to payment
of the Revolving Credit Loans then outstanding, third, to payment of any L/C
Obligations then outstanding, and fourth, to cash collateralize any outstanding
Letters of Credit on terms reasonably satisfactory to the Administrative Agent.
Any such termination of the Revolving Credit Commitments shall be accompanied by
prepayment in full of the Revolving Credit Loans, Swing Line Loans and L/C
Obligations then outstanding and by cash collateralization of any outstanding
Letters of Credit on terms reasonably satisfactory to the Administrative Agent.
Upon termination of the Revolving Credit Commitments, any Letter of Credit then
outstanding which has been so cash collateralized shall no longer be considered
a "Letter of Credit" as defined in subsection 1.1 and any L/C Participating
Interests heretofore granted by the Issuing Lender to the Lenders in such Letter
of Credit shall be deemed terminated (subject to automatic reinstatement in the
event that such cash collateral is returned and the Issuing Lender is not fully
reimbursed for any such L/C Obligations) but the Letter of Credit fees payable
under subsection 3.9 shall continue to accrue to the Issuing Lender and the
Participating Lenders
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33
(or, in the event of any such automatic reinstatement, as provided in subsection
3.9) with respect to such Letter of Credit until the expiry thereof.
(b) In the case of termination of the Revolving Credit Commitments,
interest accrued on the amount of any prepayment relating thereto and any unpaid
commitment fee accrued hereunder shall be paid on the date of such termination.
Any such partial reduction of the Revolving Credit Commitments shall be in an
amount of $1,000,000, or a whole multiple of $500,000 in excess thereof, and
shall, in each case, reduce permanently the amount of the Revolving Credit
Commitments then in effect.
4.4 Optional and Mandatory Prepayments; Repayments of Term Loans.
(a) Subject to subsection 4.12, the Company may at any time and from time to
time prepay Loans, in whole or in part, without premium or penalty, by
irrevocable notice to the Administrative Agent by 10:00 a.m., New York City
time, on the same Business Day (or, in the case of Swing Line Loans, by
irrevocable notice to the Administrative Agent by 12:00 noon, New York City
time, on the same Business Day) in the case of Alternate Base Rate Loans, and
three Business Days' irrevocable notice to the Administrative Agent in the case
of Eurodollar Loans, specifying the date and amount of prepayment and whether
the prepayment is of Revolving Credit Loans or Term Loans. Upon receipt of such
notice the Administrative Agent shall promptly notify each Lender thereof. If
such notice is given, the Company shall make such prepayment, and the payment
amount specified in such notice shall be due and payable, on the date specified
therein. Partial prepayments (i) of Term Loans shall be in an aggregate
principal amount equal to the lesser of (A) $1,000,000, or a whole multiple of
$500,000 in excess thereof and (B) the aggregate unpaid principal amount of the
Term Loans, and (ii) of Revolving Credit Loans shall be in an aggregate
principal amount equal to the lesser of (A) $500,000 or a whole multiple of
$500,000 in excess thereof and (B) the aggregate unpaid principal amount of the
Revolving Credit Loans, as the case may be. Prepayments of the Term Loans
pursuant to this subsection 4.4(a) shall be applied to the remaining
installments thereof ratably according to the amounts of such installments.
(b) (i) If, subsequent to the Closing Date, Holdings, the Company or
any of its Subsidiaries shall issue any equity in a primary public offering, 50%
of the Net Proceeds thereof (excluding amounts provided by the Investors or
their Affiliates or by management employees of such issuer) shall be promptly
applied toward the prepayment of the Term Loans; provided, that Net Proceeds of
any public issuance of equity shall be deemed to be Net Proceeds of such
issuance for purposes of this subsection 4.4(b)(i) only after deducting
therefrom the redemption or repurchase or cancellation of the Preferred Stock of
the Company held by Holdings (and the concurrent redemption or repurchase by
Holdings of the Holdings Subordinated Debt) and the redemption of up to 35% of
the Permanent Subordinated Debt under the "equity clawback" provision and, in
each case, the payment of any premium or penalties or accrued interest or
dividends with respect thereto.
(ii) If, subsequent to the Closing Date, the Company or any of its
Subsidiaries shall incur or permit the incurrence of any Indebtedness (other
than Indebtedness permitted pursuant to subsection 8.1 except to the extent
provided in subsection 8.1(d)(ii))
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34
100% of the Net Proceeds thereof shall be promptly applied toward the prepayment
of the Loans and reduction of the Commitments as set forth in clause (v) of this
subsection 4.4(b).
(iii) If, subsequent to the Closing Date, the Company or any of its
Subsidiaries shall receive Net Proceeds from any Asset Sale, such Net Proceeds
shall be promptly applied toward the prepayment of the Loans and reduction of
the Commitments as set forth in clause (v) of this subsection 4.4(b); provided
that such Net Proceeds need not be applied to the prepayment of the Loans and
the reduction of the Commitments until the earlier of the date that the
aggregate amount of Net Proceeds received by the Company or any of its
Subsidiaries from any Asset Sales exceeds $2,000,000 (and has not yet been
applied to the prepayment of the Loans and the reduction of the Commitments
hereunder) and the date which is six months after the last application of Net
Proceeds pursuant to this subsection 4.4(b)(iii).
(iv) So long as any Term Loans are outstanding, if for any fiscal
year, commencing with its fiscal year ending December 31, 1997, there shall be
Excess Cash Flow for such fiscal year, (x) for the fiscal year ending December
31, 1997, 75% of such Excess Cash Flow and (y) for each such fiscal year after
the fiscal year ending December 31, 1997, a percentage of such Excess Cash Flow
for such fiscal year equal to the Applicable Cash Flow Percentage for such
fiscal year shall be applied toward prepayment of the Term Loans (applied to the
remaining installments thereof ratably according to the outstanding principal
amounts thereof until paid in full). Each such prepayment shall be made not
later than 120 days after the end of such fiscal year.
(v) Prepayments made pursuant to subsections 4.4(b)(i), (ii) and
(iii), and, only to the extent set forth therein, subsection 8.1(d) shall be
applied by the Company, first, to the prepayment of the Term Loans (applied to
the remaining installments thereof ratably according to the outstanding
principal amounts thereof until paid in full) and, second, to reduce permanently
the Revolving Credit Commitments. Any such reduction of the Revolving Credit
Commitments shall be accompanied by prepayment of, first, the Swing Line Loans,
second, the Revolving Credit Loans and, third, the L/C Obligations to the
extent, if any, that the sum of the aggregate outstanding principal amount of
Revolving Credit Loans, the aggregate outstanding principal amount of all Swing
Line Loans, the aggregate amount available to be drawn under all outstanding
Letters of Credit and the aggregate outstanding amount of all L/C Obligations,
in each case of all Lenders, exceeds the amount of the aggregate Revolving
Credit Commitments as so reduced, provided that if the aggregate principal
amount of Revolving Credit Loans, Swing Line Loans and L/C Obligations then
outstanding is less than the amount of such excess (because Letters of Credit
constitute a portion thereof), the Company shall, to the extent of the balance
of such excess, replace outstanding Letters of Credit and/or deposit an amount
in cash in a cash collateral account established for the benefit of the Lenders.
(vi) The Company shall give the Administrative Agent (which shall
promptly notify each Lender) at least one Business Day's notice of each
prepayment or mandatory reduction pursuant to this subsection 4.4(b) setting
forth the date and amount
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35
thereof. Except as otherwise may be agreed by the Company and the Required
Lenders, and subject to Subsection 4.4(b)(v), any prepayment of Loans pursuant
to this subsection 4.4 shall be applied, first, to any Alternate Base Rate Loans
then outstanding and the balance of such prepayment, if any, to the Eurodollar
Loans then outstanding; provided that prepayments of Eurodollar Loans, if not on
the last day of the Interest Period with respect thereto, shall, at the
Company's option, be prepaid subject to the provisions of subsection 4.12 or the
amount of such prepayment (after application to any Alternate Base Rate Loans)
shall be deposited with the Administrative Agent as cash collateral for the
Loans on terms reasonably satisfactory to the Administrative Agent and
thereafter shall be applied in the order of the Interest Periods next ending
most closely to the date such prepayment is required to be made and on the last
day of each such Interest Period. After such application, unless an Event of
Default shall have occurred and be continuing, any remaining interest earned on
such cash collateral shall be paid to the Company.
(c) The Term Loans shall be repaid in 14 consecutive semi-annual
installments, in each case on the dates set forth below (each such day, an
"Installment Payment Date"), in each case, commencing on June 30, 1997, in an
aggregate amount with respect to the Term Loans equal to the amount specified
for each such Installment Payment Date.
Installment Payment Date Installment Amount
------------------------ ------------------
June 30, 1997 $ 500,000
December 31, 1997 $ 500,000
June 30, 1998 $ 500,000
December 31, 1998 $ 500,000
June 30, 1999 $ 500,000
December 31, 1999 $ 500,000
June 30, 2000 $ 500,000
December 31, 2000 $ 500,000
June 30, 2001 $ 3,000,000
December 31, 2001 $ 3,000,000
June 30, 2002 $ 7,500,000
December 31, 2002 $ 7,500,000
June 30, 2003 $12,500,000
October 31, 2003 $12,500,000
Amounts repaid on account of the Term Loans pursuant to this subsection 4.4 or
otherwise may not be reborrowed. Accrued interest on the amount of any
prepayments shall be paid on
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36
the Interest Payment Date next succeeding the date of any partial prepayment and
on the date on such prepayment in the case of a prepayment in full of any Loans.
4.5 Interest Rates and Payment Dates. (a) Eurodollar Loans shall
bear interest for each day during each Interest Period applicable thereto,
commencing on (and including) the first day of such Interest Period to, but
excluding, the last day of such Interest Period, on the unpaid principal amount
thereof at a rate per annum equal to the Eurodollar Rate determined for such
Interest Period plus the Applicable Margin.
(b) Alternate Base Rate Loans shall bear interest for the period
from and including the date such Loans are made to, but excluding, the maturity
date thereof, or to, but excluding, the conversion date if such Loans are
earlier converted into Eurodollar Loans on the unpaid principal amount thereof
at a rate per annum equal to the Alternate Base Rate plus the Applicable Margin.
(c) If all or a portion of (i) the principal amount of any of the
Loans or (ii) any interest payable thereon shall not be paid when due (whether
at the stated maturity, by acceleration or otherwise) such Loan, if a Eurodollar
Loan, shall be converted into an Alternate Base Rate Loan at the end of the
then-current Interest Period for said Eurodollar Loan (which conversion shall
occur automatically and without need for compliance with the conditions for
conversion set forth in subsection 4.2), and any such overdue amount shall,
without limiting the rights of the Lenders under Section 9, bear interest (which
shall be payable on demand) at a rate per annum which is 2% plus the Alternate
Base Rate plus the Applicable Margin (or, in the case of a Eurodollar Loan, the
Eurodollar Rate for the Interest Period plus the Applicable Margin plus 2%, if
higher) from the date of such non-payment until paid in full (as well after as
before judgment).
(d) Except as otherwise expressly provided for in this subsection
4.5, interest shall be payable in arrears on each Interest Payment Date.
4.6 Computation of Interest and Fees. (a) Interest in respect of
Alternate Base Rate Loans, at any time that the Alternate Base Rate is
determined by reference to the Prime Rate, and all fees hereunder shall be
calculated on the basis of a 365 (or 366 as the case may be) day year for the
actual days elapsed. Interest in respect of Eurodollar Loans and in respect of
Alternate Base Rate Loans, at any time that the Alternate Base Rate is
determined by reference to the Base CD Rate or the Federal Funds Effective Rate,
shall be calculated on the basis of a 360 day year for the actual days elapsed.
The Administrative Agent shall as soon as practicable notify the Company and the
Lenders of each determination of a Eurodollar Rate. Any change in the interest
rate on a Loan resulting from a change in the Alternate Base Rate or the
Eurocurrency Reserve Requirements shall become effective as of the opening of
business on the day on which such change in the Alternate Base Rate is announced
or such change in the Eurocurrency Reserve Requirements becomes effective, as
the case may be. The Administrative Agent shall as soon as practicable notify
the Company and the Lenders of the effective date and the amount of each such
change.
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37
(b) Each determination of an interest rate by the Administrative
Agent pursuant to any provision of this Agreement shall be conclusive and
binding on the Company and the Lenders in the absence of manifest error. The
Administrative Agent shall, at the request of the Company or any Lender, deliver
to the Company or such Lender a statement showing the quotations used by the
Administrative Agent in determining the Eurodollar Rate.
4.7 Certain Fees. The Company agrees to pay to the Administrative
Agent, for its own account, a non-refundable agent's fee in an amount previously
agreed to with the Administrative Agent, payable in advance on the Closing Date
and on the first day of each fiscal quarter of the Company thereafter.
4.8 Inability to Determine Interest Rate. In the event that the
Administrative Agent shall have determined (which determination shall be
conclusive and binding upon the Company) that (a) by reason of circumstances
affecting the interbank eurodollar market, adequate and reasonable means do not
exist for ascertaining the Eurodollar Rate for any Interest Period with respect
to (i) proposed Loans that the Company has requested be made as Eurodollar
Loans, (ii) any Eurodollar Loans that will result from the requested conversion
of all or part of the Alternate Base Rate Loans into Eurodollar Loans or (iii)
the continuation of any Eurodollar Loan as such for an additional Interest
Period, or (b) dollar deposits in the relevant amount and for the relevant
period with respect to any such Eurodollar Loan are not generally available to
the Lenders in their respective Eurodollar Lending Offices' interbank eurodollar
markets, the Administrative Agent shall forthwith give telecopy notice of such
determination, confirmed in writing, to the Company and the Lenders at least one
day prior to, as the case may be, the requested Borrowing Date, the conversion
date or the last day of such Interest Period. If such notice is given (i) any
requested Eurodollar Loans shall be made as Alternate Base Rate Loans, (ii) any
Alternate Base Rate Loans that were to have been converted to Eurodollar Loans
shall be continued as Alternate Base Rate Loans, and (iii) any outstanding
Eurodollar Loans shall be converted, on the last day of the then current
Interest Period applicable thereto, into Alternate Base Rate Loans. Until such
notice has been withdrawn by the Administrative Agent, no further Eurodollar
Loans shall be made and no Alternate Base Rate Loans shall be converted to
Eurodollar Loans.
4.9 Pro Rata Treatment and Payments. (a) Except to the extent
otherwise provided herein, each borrowing of Loans by the Company from the
Lenders and any reduction of the Commitments of the Lenders hereunder shall be
made pro rata according to the relevant Commitment Percentages of the Lenders
with respect to the Loans borrowed or the Commitments to be reduced.
(b) Whenever any payment received by the Administrative Agent under
this Agreement or any Note or any other Credit Document is insufficient to pay
in full all amounts then due and payable to the Administrative Agent and the
Lenders under this Agreement:
(i) If the Administrative Agent has not received a Payment Sharing
Notice (or, if the Administrative Agent has received a Payment Sharing
Notice but the Event
<PAGE>
38
of Default specified in such Payment Sharing Notice has been cured or
waived in accordance with the provisions of this Agreement), such payment
shall be distributed by the Administrative Agent and applied by the
Administrative Agent and the Lenders in the following order: First, to the
payment of fees and expenses due and payable to the Administrative Agent
under and in connection with this Agreement and the other Credit
Documents; Second, to the payment of all expenses due and payable under
subsection 11.5, ratably among the Lenders in accordance with the
aggregate amount of such payments owed to each such Lender; Third, to the
payment of fees due and payable under subsections 3.2 and 3.9, ratably
among the Lenders in accordance with the Commitment Percentage of each
Lender of the Commitment for which such payment is owed and, in the case
of the Issuing Lender, the amount retained by the Issuing Lender for its
own account pursuant to subsection 3.9; Fourth, to the payment of interest
then due and payable on the Loans and on the L/C Obligations, ratably in
accordance with the aggregate amount of interest owed to each such Lender;
and Fifth, to the payment of the principal amount of the Loans and the L/C
Obligations which is then due and payable, ratably among the Lenders in
accordance with the aggregate principal amount owed to each such Lender;
or
(ii) If the Administrative Agent has received a Payment Sharing
Notice which remains in effect, all payments received by the
Administrative Agent under this Agreement or any Note shall be distributed
by the Administrative Agent and applied by the Administrative Agent and
the Lenders in the following order: First, to the payment of all amounts
described in clauses "First" through "Third" of the foregoing clause (i),
in the order set forth therein; Second, to the payment of the interest
accrued on all Loans and L/C Obligations, regardless of whether any such
amount is then due and payable, ratably among the Lenders in accordance
with the aggregate accrued interest plus the aggregate principal amount of
all Loans and L/C Obligations then due and payable and owed to such
Lender; and Third, to the payment of the principal amount of all Loans and
L/C Obligations, regardless of whether any such amount is then due and
payable, ratably among the Lenders in accordance with the aggregate
principal amount owed to such Lender.
(c) If any Lender (a "Non-Funding Lender") has (x) failed to make a
Revolving Credit Loan required to be made by it hereunder, and the
Administrative Agent has determined that such Lender is not likely to make such
Revolving Credit Loan or (y) given notice to the Company or the Administrative
Agent that it will not make, or that it has disaffirmed or repudiated any
obligation to make, any Revolving Credit Loan, in each case by reason of the
provisions of the Financial Institutions Reform, Recovery and Enforcement Act of
1989, as amended, or otherwise, (i) any payment made on account of the principal
of the Revolving Credit Loans outstanding shall be made as follows:
(A) in the case of any such payment made on any date when and to the
extent that, in the determination of the Administrative Agent, the Company
would be able, under the terms and conditions hereof, to reborrow the
amount of such payment under the Commitments and to satisfy any applicable
conditions precedent set forth in
<PAGE>
39
Section 6 to such reborrowing, such payment shall be made on account of
the outstanding Revolving Credit Loans held by the Lenders other than the
Non-Funding Lender pro rata according to the respective outstanding
principal amounts of the Revolving Credit Loans of such Lenders; and
(B) otherwise, such payment shall be made on account of the
outstanding Revolving Credit Loans held by the Lenders pro rata according
to the respective outstanding principal amounts of such Revolving Credit
Loans; and
(ii) any payment made on account of interest on the Revolving Credit Loans shall
be made pro rata according to the respective amounts of accrued and unpaid
interest due and payable on the Revolving Credit Loans with respect to which
such payment is being made. The Company agrees to give the Administrative Agent
such assistance in making any determination pursuant to subparagraph (i)(A) of
this paragraph as the Administrative Agent may reasonably request. Any such
determination by the Administrative Agent shall be conclusive and binding on the
Lenders.
(d) All payments (including prepayments) to be made by the Company
on account of principal, interest and fees shall be made without set-off or
counterclaim and shall be made to the Administrative Agent, for the account of
the Lenders at the Administrative Agent's office located at 270 Park Avenue, New
York, New York 10017, in lawful money of the United States and in immediately
available funds. The Administrative Agent shall promptly distribute such
payments in accordance with the provisions of subsection 4.9(b) promptly upon
receipt in like funds as received. If any payment hereunder (other than payments
on Eurodollar Loans) would become due and payable on a day other than a Business
Day, such payment shall become due and payable on the next succeeding Business
Day and, with respect to payments of principal, interest thereon shall be
payable at the then applicable rate during such extension. If any payment on a
Eurodollar Loan becomes due and payable on a day other than a Business Day, the
maturity thereof shall be extended to the next succeeding Business Day (and with
respect to payments of principal, interest thereon shall be payable at the then
applicable rate during such extension), unless the result of such extension
would be to extend such payment into another calendar month in which event such
payment shall be made on the immediately preceding Business Day.
(e) Unless the Administrative Agent shall have been notified in
writing by any Lender prior to a borrowing that such Lender will not make the
amount which would constitute its Commitment Percentage of such borrowing
available to the Administrative Agent, the Administrative Agent may assume that
such Lender is making such amount available to the Administrative Agent in
accordance with subsection 4.1 and the Administrative Agent may, in reliance
upon such assumption, make available to the Company a corresponding amount. If
such amount is not made available to the Administrative Agent by the required
time on the Borrowing Date therefor, such Lender shall pay to the Administrative
Agent, on demand, such amount with interest thereon at a rate equal to the daily
average Federal Funds Effective Rate for the period until such Lender makes such
amount immediately available to the Administrative Agent. A certificate of the
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40
Administrative Agent submitted to any Lender with respect to any amounts owing
under this subsection 4.9(e) shall be conclusive, absent manifest error. If such
Lender's Commitment Percentage of such borrowing is not in fact made available
to the Administrative Agent by such Lender within three Business Days of such
Borrowing Date, the Administrative Agent shall also be entitled to recover such
amount with interest thereon at the rate per annum applicable to Alternate Base
Rate Loans hereunder, on demand, from the Company, without prejudice to any
rights which the Company or the Administrative Agent may have against such
Lender hereunder. Nothing contained in this subsection 4.9 shall relieve any
Lender which has failed to make available its ratable portion of any borrowing
hereunder from its obligation to do so in accordance with the terms hereof.
(f) The failure of any Lender to make the Loan to be made by it on
any Borrowing Date shall not relieve any other Lender of its obligation, if any,
hereunder to make its Loan on such Borrowing Date, but no Lender shall be
responsible for the failure of any other Lender to make the Loan to be made by
such other Lender on such Borrowing Date.
(g) All payments and optional prepayments (other than prepayments as
set forth in subsection 4.11 with respect to increased costs) of Eurodollar
Loans hereunder shall be in such amounts and be made pursuant to such elections
so that, after giving effect thereto, the aggregate principal amount of all
Eurodollar Loans with the same Interest Period shall not be less than $1,000,000
or a whole multiple of $500,000 in excess thereof.
4.10 Illegality. Notwithstanding any other provision herein, if any
Change in Law occurring after the date that any lender becomes a Lender party to
this Agreement, shall make it unlawful for such Lender to make or maintain
Eurodollar Loans as contemplated by this Agreement, the commitment of such
Lender hereunder to make Eurodollar Loans or to convert all or a portion of
Alternate Base Rate Loans into Eurodollar Loans shall forthwith be suspended
until such time, if any, as such illegality shall no longer exist and such
Lender's Loans then outstanding as Eurodollar Loans, if any, shall be converted
automatically to Alternate Base Rate Loans for the duration of the respective
Interest Periods (or, if permitted by applicable law, at the end of such
Interest Periods) and all payments of principal which would otherwise be applied
to such Eurodollar Loans shall be applied instead to such Lender's Alternate
Base Rate Loans. The Company hereby agrees to pay any Lender, promptly upon its
demand, any amounts payable pursuant to subsection 4.12 in connection with any
conversion in accordance with this subsection 4.10 (such Lender's notice of such
costs, as certified in reasonable detail as to such amounts to the Company
through the Administrative Agent, to be conclusive absent manifest error).
4.11 Requirements of Law. (a) In the event that any Change in Law or
compliance by any Lender with any request or directive (whether or not having
the force of law) from any central bank or other Governmental Authority
occurring after the date that any lender becomes a Lender party to this
Agreement:
(i) does or shall subject any such Lender or its Eurodollar Lending
Office to any tax of any kind whatsoever with respect to this Agreement,
any Note or any
<PAGE>
41
Eurodollar Loans made by it, or change the basis of taxation of payments
to such Lender or its Eurodollar Lending Office of principal, the
commitment fee, interest or any other amount payable hereunder (except for
(x) net income and franchise taxes imposed on the net income of such
Lender or its Eurodollar Lending Office by the jurisdiction under the laws
of which such Lender is organized or any political subdivision or taxing
authority thereof or therein, or by any jurisdiction in which such
Lender's Eurodollar Lending Office is located or any political subdivision
or taxing authority thereof or therein, including changes in the rate of
tax on the overall net income of such Lender or such Eurodollar Lending
Office, and (y) taxes resulting from the substitution of any such system
by another system of taxation, provided that the taxes payable by Lenders
subject to such other system of taxation are not generally charged to
borrowers from such Lenders having loans or advances bearing interest at a
rate similar to the Eurodollar Rate);
(ii) does or shall impose, modify or hold applicable any reserve,
special deposit, compulsory loan or similar requirement against assets
held by, or deposits or other liabilities in or for the account of,
advances or loans by, or other credit extended by, or any other
acquisition of funds by, any office of such Lender which are not otherwise
included in the determination of the Eurodollar Rate; or
(iii) does or shall impose on such Lender any other condition;
and the result of any of the foregoing is to increase the cost to such Lender or
its Eurodollar Lending Office of making, converting, renewing or maintaining
advances or extensions of credit or to reduce any amount receivable hereunder,
in each case, in respect of its Eurodollar Loans, then, in any such case, the
Company shall promptly pay such Lender, upon its demand, any additional amounts
necessary to compensate such Lender for such additional cost or reduced amount
receivable which such Lender deems to be material as determined by such Lender
with respect to such Eurodollar Loans, together with interest on each such
amount from the date demanded until payment in full thereof at a rate per annum
equal to the Alternate Base Rate plus 1%.
(b) In the event that any Change in Law occurring after the date
that any lender becomes a Lender party to this Agreement with respect to any
such Lender shall, in the opinion of such Lender, require that any Commitment of
such Lender be treated as an asset or otherwise be included for purposes of
calculating the appropriate amount of capital to be maintained by such Lender or
any corporation controlling such Lender, and such Change in Law shall have the
effect of reducing the rate of return on such Lender's or such corporation's
capital, as the case may be, as a consequence of such Lender's obligations
hereunder to a level below that which such Lender or such corporation, as the
case may be, could have achieved but for such Change in Law (taking into account
such Lender's or such corporation's policies, as the case may be, with respect
to capital adequacy) by an amount deemed by such Lender to be material, then
from time to time following notice by such Lender to the Company of such Change
in Law as provided in paragraph (c) of this subsection 4.11, within 15 days
after demand by such Lender, the Company shall pay to such
<PAGE>
42
Lender such additional amount or amounts as will compensate such Lender or such
corporation, as the case may be, for such reduction.
(c) The Company shall not be required to make any payments to any
Lender for any additional amounts pursuant to this subsection 4.11 unless such
Lender has given written notice to the Company, through the Administrative
Agent, of its intent to request such payments prior to or within 60 days after
the date on which such Lender became entitled to claim such amounts. If any
Lender has notified the Company through the Administrative Agent of any
increased costs pursuant to paragraph (a) of this subsection 4.11, the Company
at any time thereafter may, upon at least three Business Days' notice to the
Administrative Agent (which shall promptly notify the Lenders thereof), and
subject to subsection 4.12, prepay (or convert into Alternate Base Rate Loans)
all (but not a part) of the Eurodollar Loans then outstanding. Each Lender
agrees that, upon the occurrence of any event giving rise to the operation of
paragraph (a) of this subsection 4.11 with respect to such Lender, it will, if
requested by the Company and to the extent permitted by law or by the relevant
Governmental Authority, endeavor in good faith to avoid or minimize the increase
in costs or reduction in payments resulting from such event (including, without
limitation, endeavoring to change its Eurodollar Lending Office); provided,
however, that such avoidance or minimization can be made in such a manner that
such Lender, in its sole determination, suffers no economic, legal or regulatory
disadvantage. If any Lender requests compensation from the Company under this
subsection 4.11, the Company may, by notice to such Lender (with a copy to the
Administrative Agent), suspend the obligation of such Lender thereafter to make
or continue Loans of the Type with respect to which such compensation is
requested, or to convert Loans of any other Type into Loans of such Type, until
the Requirement of Law giving rise to such request ceases to be in effect,
provided that such suspension shall not affect the right of such Lender to
receive the compensation so requested.
(d) Each Lender (and in case of an Assignee on the date it becomes a
Lender) that is not a United States Person (as defined in Section 7701(a)(30) of
the Code) for federal income tax purposes either (1) in the case of a Lender
that is a "bank" within the meaning of Section 881(c)(3)(A) of the Code, (i)
represents to the Company (for the benefit of the Company and the Administrative
Agent) that under applicable law and treaties no taxes are required to be
withheld by the Company or the Administrative Agent with respect to any payments
to be made to such Lender in respect of the Loans or the L/C Participating
Interests, (ii) agrees to furnish to the Company, with a copy to the
Administrative Agent, either U.S. Internal Revenue Service Form 4224 or U.S.
Internal Revenue Service Form 1001 (wherein such Lender claims entitlement to
complete exemption from U.S. federal withholding tax on all interest payments
hereunder) and (iii) agrees (for the benefit of the Company and the
Administrative Agent), to the extent it may lawfully do so at such times, to
provide the Company, with a copy to the Administrative Agent, a new Form 4224 or
Form 1001 upon the expiration or obsolescence of any previously delivered form
and comparable statements in accordance with applicable U.S. laws and
regulations and amendments duly executed and completed by such Lender, and to
comply from time to time with all applicable U.S. laws and regulations with
regard to such withholding tax exemption or (2) in the case of a Lender that is
not a "bank" within the meaning of Section 881(c)(3)(A) of the Code, (i)
represents to the
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43
Company (for the benefit of the Company and the Administrative Agent) that it is
not a bank within the meaning of Section 881(c)(3)(A) of the Code, (ii) agrees
to furnish to the Company, with a copy to the Administrative Agent, (A) a
certificate substantially in the form of Exhibit J hereto (any such certificate,
a "Subsection 4.11(d)(2) Certificate") and (B) two accurate and complete
original signed copies of Internal Revenue Service Form W-8, certifying to such
Lender's legal entitlement at the Closing Date to an exemption from U.S.
withholding tax under the provisions of Section 881(c) of the Code with respect
to all payments to be made under this Agreement, and (iii) agrees, to the extent
legally entitled to do so, upon reasonable request by the Company, to provide to
the Company (for the benefit of the Company and the Administrative Agent) such
other forms as may be required in order to establish the legal entitlement of
such Lender to an exemption from withholding with respect to payments under this
Agreement. Notwithstanding any provision of this subsection 4.11 to the
contrary, the Company shall have no obligation to pay any amount to or for the
account of any Lender (or the Eurodollar Lending Office of any Lender) on
account of any taxes pursuant to this subsection 4.11, to the extent that such
amount results from (i) the failure of any Lender to comply with its obligations
pursuant to this subsection 4.11, (ii) any representation or warranty made or
deemed to be made by any Lender pursuant to this subsection 4.11(d) proving to
have been incorrect, false or misleading in any material respect when so made or
deemed to be made or (iii) any Change in Law or compliance by any Lender with
any request or directive (whether or not having the force of law) from any
central bank or other Governmental Authority, the effect of which would be to
subject to any taxes any payment made pursuant to this Agreement to any Lender
making the representation and covenants set forth in subsection 4.11(d)(2),
which payment would not be subject to such taxes were such Lender eligible to
make and comply with, and actually made and complied with, the representation
and covenants set forth in subsection 4.11(d)(1) hereinabove.
(e) A certificate in reasonable detail as to any amounts submitted
by such Lender, through the Administrative Agent, to the Company, shall be
conclusive in the absence of manifest error. The covenants contained in this
subsection 4.11 shall survive the termination of this Agreement and repayment of
the Loans.
4.12 Indemnity. The Company agrees to indemnify each Lender and to
hold such Lender harmless from any loss or expense (but without duplication of
any amounts payable as default interest) which such Lender may sustain or incur
as a consequence of (a) default by the Company in payment of the principal
amount of or interest on any Eurodollar Loans of such Lender, including, but not
limited to, any such loss or expense arising from interest or fees payable by
such Lender to lenders of funds obtained by it in order to make or maintain its
Eurodollar Loans hereunder, (b) default by the Company in making a borrowing
after the Company has given a notice in accordance with subsection 4.1 or in
making a conversion of Alternate Base Rate Loans to Eurodollar Loans or in
continuing Eurodollar Loans as such, in either case, after the Company has given
notice in accordance with subsection 4.2, (c) default by the Company in making
any prepayment after the Company has given a notice in accordance with
subsection 4.4 or (d) a payment or prepayment of a Eurodollar Loan or conversion
(including without limitation, as a result of subsection 4.4 and/or a conversion
pursuant to subsection 4.10) of any Eurodollar Loan into an Alternate
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44
Base Rate Loan, in either case on a day which is not the last day of an Interest
Period with respect thereto, including, but not limited to, any such loss or
expense arising from interest or fees payable by such Lender to lenders of funds
obtained by it in order to maintain its Eurodollar Loans hereunder (but
excluding loss of profit). This covenant shall survive termination of this
Agreement and repayment of the Loans.
4.13 Repayment of Loans; Evidence of Debt. (a) The Company hereby
unconditionally promises to pay to the Administrative Agent for the account of
each Lender (i) the then unpaid principal amount of each Revolving Credit Loan
of such Lender on the Revolving Credit Termination Date, (ii) the principal
amount of the Term Loan of such Lender, in 14 consecutive installments, payable
on each Installment Payment Date (or the then unpaid principal amount of such
Term Loan, on the date that the Term Loans become due and payable pursuant to
Section 9), and (iii) the then unpaid principal amount of the Swing Line Loans
of the Swing Line Lender on the Revolving Credit Termination Date. The Company
hereby further agrees to pay interest on the unpaid principal amount of the
Loans from time to time outstanding from the date hereof until payment in full
thereof at the rates per annum, and on the dates, set forth in subsection 4.5.
(b) Each Lender shall maintain in accordance with its usual practice
an account or accounts evidencing indebtedness of the Company to such Lender
resulting from each Loan of such Lender from time to time, including the amounts
of principal and interest payable and paid to such Lender from time to time
under this Agreement.
(c) The Administrative Agent shall maintain the Register pursuant to
subsection 11.6(d), and a subaccount therein for each Lender, in which shall be
recorded (i) the amount of each Revolving Credit Loan and Term Loan made
hereunder, the Type thereof and each Interest Period applicable thereto, (ii)
the amount of any principal or interest due and payable or to become due and
payable from the Company to each Lender hereunder and (iii) both the amount of
any sum received by the Administrative Agent hereunder from the Company and each
Lender's share thereof.
(d) The entries made in the Register and the accounts of each Lender
maintained pursuant to subsection 4.13(b) shall, to the extent permitted by
applicable law, be prima facie evidence of the existence and amounts of the
obligations of the Company therein recorded; provided, however, that the failure
of any Lender or the Administrative Agent to maintain the Register or any such
account, or any error therein, shall not in any manner affect the obligation of
the Company to repay (with applicable interest) the Loans made to such Company
by such Lender or to repay any other obligations in accordance with the terms of
this Agreement.
(e) The Company agrees that, upon the request to the Administrative
Agent by any Lender, the Company will execute and deliver to such Lender (i) a
promissory note of the Company evidencing the Revolving Credit Loans of such
Lender, substantially in the form of Exhibit A with appropriate insertions as to
date and principal amount (a "Revolving Credit Note"), and/or (ii) a promissory
note of the Company evidencing the Term Loan of such
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45
Lender, substantially in the form of Exhibit B with appropriate insertions as to
date and principal amount (a "Term Loan Note"), and/or (iii) in the case of the
Swing Line Lender, a promissory note of the Company evidencing the Swing Line
Loans of the Swing Line Lender, substantially in the form of Exhibit C with
appropriate insertions as to date and principal amount (the "Swing Line Note").
4.14 Replacement of Lenders. In the event any Lender or the Issuing
Lender exercises its rights pursuant to subsection 4.10 or requests payments
pursuant to subsections 3.10 or 4.11, the Company may require, at the Company's
expense (including payment of any processing fees under subsection 11.6(e)) and
subject to subsection 4.12, such Lender or the Issuing Lender to assign, at par
plus accrued interest and fees, without recourse (in accordance with subsection
11.6) all of its interests, rights and obligations hereunder (including all of
its Commitments and the Loans and other amounts at the time owing to it
hereunder and its Notes and its interest in the Letters of Credit) to a bank,
financial institution or other entity specified by the Company, provided that
(i) such assignment shall not conflict with or violate any law, rule or
regulation or order of any court or other Governmental Authority, (ii) the
Company shall have received the written consent of the Administrative Agent,
which consent shall not unreasonably be withheld, to such assignment, (iii) the
Company shall have paid to the assigning Lender or the Issuing Lender all monies
other than principal, interest and fees accrued and owing hereunder to it
(including pursuant to subsections 3.10, 4.10, 4.11 and 4.12) and (iv) in the
case of a required assignment by the Issuing Lender, the Letters of Credit shall
be canceled and returned to the Issuing Lender.
SECTION 5. REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders to enter into this Agreement and to
make the Loans and to induce the Issuing Lender to issue, and the Participating
Lenders to participate in, the Letters of Credit, the Company hereby represents
and warrants to each Lender and the Administrative Agent, as of the Closing Date
and as of the making of any extension of credit hereunder:
5.1 Financial Condition. (a) The consolidated audited balance sheets
of the Company and its consolidated Subsidiaries as at January 1, 1994, December
31, 1994 and December 30, 1995 and the related consolidated statements of
operations and of cash flows for the fiscal year ended on each such date,
audited by Price Waterhouse LLP, copies of which have heretofore been furnished
to each Lender, present fairly in accordance with GAAP the consolidated
financial condition of the Company and its consolidated Subsidiaries as at such
date, and the consolidated results of their operations and their consolidated
cash flows for the fiscal year then ended. All such financial statements have
been prepared in accordance with GAAP applied consistently throughout the
periods involved (except as approved by such accountants and as disclosed
therein). Neither the Company nor any of its consolidated Subsidiaries had, at
the date of each balance sheet referred to above, any material Contingent
Obligation, contingent liability or liability for taxes, or any long-term lease
or unusual forward or long-term commitment, including, without limitation, any
material interest rate or
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46
foreign currency swap or exchange transaction, which is not reflected in the
foregoing statements or in the notes thereto or expressly permitted to be
incurred hereunder.
(b) The unaudited consolidated balance sheet of the Company and its
consolidated Subsidiaries as at September 28, 1996, certified by a Responsible
Officer of the Company, copies of which have heretofore been furnished to each
Lender, present fairly in accordance with GAAP the financial position of the
Company and its consolidated Subsidiaries as at such dates. Such balance sheets,
including the related schedules and notes thereto, have been prepared in
accordance with GAAP (except as approved by such Responsible Officer and
disclosed therein). The Company and its consolidated Subsidiaries did not have
at the dates of such balance sheets, any material Contingent Obligation,
contingent liability or liability for taxes, or any long-term lease or unusual
forward or long-term commitment, including, without limitation, any interest
rate or foreign currency exchange transaction, which is not reflected in such
balance sheets or in the notes thereto. During the period from December 31, 1995
to the Closing Date, except as set forth in Schedule 5.1(b), no dividends or
other distributions have been declared, paid or made upon the Capital Stock of
the Company or any of its consolidated Subsidiaries nor has any of the Capital
Stock of the Company or any of its consolidated Subsidiaries been redeemed,
retired, purchased or otherwise acquired for value by the Company or any of its
consolidated Subsidiaries, respectively.
(c) The unaudited consolidated pro forma balance sheets of (i)
Holdings, (ii) AcquisitionCo and (iii) the Company and its consolidated
Subsidiaries, in each case, as of September 28, 1996, certified by a Responsible
Officer of Holdings, AcquisitionCo and the Company, respectively (the "Pro Forma
Balance Sheets"), copies of which have been furnished to each Lender, are the
unaudited balance sheets of Holdings, AcquisitionCo and the Company and its
consolidated Subsidiaries, respectively, adjusted in each case to give effect
(as if such events had occurred on such date) to (i) the Merger and each of the
transactions contemplated by the Merger Agreement, (ii) the incurrence of the
Loans and the issuance of the Letters of Credit to be incurred or issued, as the
case may be, on the Closing Date and (iv) the incurrence of the Bridge
Subordinated Debt and all other Indebtedness that the Company and its
consolidated Subsidiaries expect to incur, and the payment of all amounts the
Company and its consolidated Subsidiaries expect to pay, in connection with the
Merger. The Pro Forma Balance Sheets, together with the notes thereto, were
prepared based on good faith assumptions in accordance with GAAP and are based
on the best information available to Holdings, AcquisitionCo and the Company,
respectively, as of the date of delivery thereof, and reflect on a pro forma
basis the financial position of Holdings, AcquisitionCo and the Company and its
consolidated Subsidiaries, respectively, as of September 30, 1996, as adjusted,
as described above, assuming that the events specified in the preceding sentence
had actually occurred as of September 30, 1996.
5.2 No Change. Since December 31, 1995, (a) there has been no
change, and (as of the Closing Date only) no development or event which has had
or could reasonably be expected to have a material adverse effect on the
business, assets, condition (financial or otherwise) or results of operations of
the Company and its Subsidiaries taken as a whole and
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47
(b) no dividends or other distributions have been declared, paid or made upon
the Capital Stock of the Company nor has any of the Capital Stock of the Company
been redeemed, retired, repurchased or otherwise acquired for value by the
Company or any of its Subsidiaries, except as permitted by subsection 8.11 and
as set forth in Schedule 5.1(b).
5.3 Corporate Existence; Compliance with Law. Each of the Company
and its Subsidiaries (a) is a corporation duly organized and validly existing
under the laws of the jurisdiction of its incorporation, (b) has full corporate
power and authority and possesses all governmental franchises, licenses,
permits, authorizations and approvals necessary to enable it to use its
corporate name and to own, lease or otherwise hold its properties and assets and
to carry on its business as presently conducted other than such franchises,
licenses, permits, authorizations and approvals the lack of which, individually
or in the aggregate, would not have a material adverse effect on the business,
assets, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries, taken as a whole, (c) is duly qualified and in
good standing to do business in each jurisdiction in which the nature of its
business or the ownership, leasing or holding of its properties makes such
qualification necessary, except such jurisdictions where the failure so to
qualify would not have a material adverse effect on the business, assets,
condition (financial or otherwise) or results of operations of the Company and
its Subsidiaries, taken as a whole, and (d) except as disclosed in the Phase I
Environmental Assessments is in compliance with all applicable statutes, laws,
ordinances, rules, orders, permits and regulations of any governmental authority
or instrumentality, domestic or foreign (including, without limitation, those
related to Hazardous Materials and substances), except where noncompliance would
not have a material adverse effect on the business, assets, condition (financial
or otherwise) or results of operations of the Company and its Subsidiaries,
taken as a whole. Except as disclosed in the Phase I Environmental Assessments,
neither the Company nor any of its Subsidiaries has received any written
communication from a Governmental Authority that alleges that the Company or any
of its Subsidiaries is not in compliance, in all material respects, with all
material federal, state, local or foreign laws, ordinances, rules and
regulations.
5.4 Corporate Power; Authorization. Each of the Company and its
Subsidiaries has the corporate power and authority to make, deliver and perform
each of the Credit Documents to which it is a party, and the Company has the
corporate power and authority and legal right to borrow hereunder and to have
Letters of Credit issued for its account hereunder. Each of the Company and its
Subsidiaries has taken all necessary corporate action to authorize the
execution, delivery and performance of each of the Credit Documents to which it
is or will be a party and the Company has taken all necessary corporate action
to authorize the borrowings hereunder and the issuance of Letters of Credit for
its account hereunder. No consent or authorization of, or filing with, any
Person (including, without limitation, any Governmental Authority) is required
in connection with the execution, delivery or performance by the Company or any
of its Subsidiaries, or for the validity or enforceability against the Company
or any of its Subsidiaries, of any Credit Document except for consents,
authorizations and filings which have been obtained or made and are in full
force and effect and except (i) such consents, authorizations and filings, the
failure to obtain or perform (x) which would not have a material adverse effect
on the
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48
business, assets, condition (financial or otherwise) or results of operations of
the Company and its Subsidiaries taken as a whole and (y) which would not
adversely affect the validity or enforceability of any of the Credit Documents
or the rights or remedies of the Administrative Agent or the Lenders thereunder,
and (ii) such filings as are necessary to perfect the Liens of the Lenders
created pursuant to this Agreement and the Security Documents.
5.5 Enforceable Obligations. This Agreement and the Merger Agreement
have been, and each of the other Credit Documents and any other agreement to be
entered into by any Credit Party pursuant to the Merger Agreement will be duly
executed and delivered on behalf of such Credit Party that is party thereto. The
Merger Agreement has been duly executed and delivered (a) to the best knowledge
of AcquisitionCo, on behalf of Carter's and (b) on behalf of AcquisitionCo. This
Agreement and the Merger Agreement each constitutes, and each of the other
Credit Documents and any other agreement to be entered into by any Credit Party
pursuant to the Merger Agreement will constitute upon execution and delivery,
the legal, valid and binding obligation of such Credit Party, and is enforceable
against such Credit Party in accordance with its terms, except as may be limited
by applicable bankruptcy, insolvency, reorganization, moratorium, or similar
laws affecting creditors' rights generally and by general principles of equity
(regardless of whether enforcement is sought in a proceeding in equity or at
law). The Merger Agreement constitutes the legal, valid and binding obligation
of (a) to the best knowledge of AcquisitionCo, Carter's enforceable against
Carter's in accordance with its terms and (b) AcquisitionCo enforceable against
such Person in accordance with its terms, except, in each case, as may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium, or
similar laws affecting creditors' rights generally and by general principles of
equity (regardless of whether enforcement is sought in a proceeding in equity or
at law).
5.6 No Legal Bar. The execution, delivery and performance of each
Credit Document, the incurrence or issuance of and use of the proceeds of the
Loans, the Bridge Subordinated Debt, any Permanent Subordinated Debt and of
drawings under the Letters of Credit and the transactions contemplated by the
Merger Agreement, the Credit Documents and the Bridge Subordinated Debt
Documents, (a) will not violate any Requirement of Law or any Contractual
Obligation applicable to or binding upon each of Holdings, AcquisitionCo and the
Company or any Subsidiary of the Company or any of their respective properties
or assets, in any manner which, individually or in the aggregate, (i) would have
a material adverse effect on the ability of Holdings, AcquisitionCo, the Company
or any such Subsidiary to perform its obligations under the Credit Documents,
the Merger Agreement, and any other agreement to be entered into pursuant to the
Merger Agreement, to which it is a party, (ii) would give rise to any liability
on the part of the Administrative Agent or any Lender, or (iii) would have a
material adverse effect on the business, assets, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries taken as
a whole, and (b) will not result in the creation or imposition of any Lien on
any of its properties or assets pursuant to any Requirement of Law applicable to
it, as the case may be, or any of its Contractual Obligations, except for the
Liens arising under the Security Documents.
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49
5.7 No Material Litigation. No litigation by, investigation known to
the Company by, or proceeding of, any Governmental Authority is pending against
the Company or any of its Subsidiaries (including after giving effect to the
Merger) with respect to the validity, binding effect or enforceability of any
Merger Document, any Credit Document, the Loans made hereunder, the use of
proceeds thereof, of the Bridge Subordinated Debt, any Permanent Subordinated
Debt or of any drawings under a Letter of Credit and the other transactions
contemplated hereby or by the Merger Agreement. No lawsuits, claims, proceedings
or investigations are pending or, to the best knowledge of the Company,
threatened as of the Closing Date against or affecting the Company or a
Subsidiary of the Company or any of their respective properties, assets,
operations or businesses (including after giving effect to the Merger), in which
there is a probability of an adverse determination, and is reasonably likely, if
adversely decided, to have a material adverse effect on the business, assets,
condition (financial or otherwise) or results of operations of the Company and
its Subsidiaries, taken as a whole.
5.8 Investment Company Act. Neither the Company nor any Subsidiary
of the Company is an "investment company" or a company "controlled" by an
"investment company" (as each of the quoted terms is defined or used in the
Investment Company Act of 1940, as amended).
5.9 Federal Regulation. No part of the proceeds of any of the Loans
or Subordinated Debt or any drawing under a Letter of Credit will be used for
any purpose which violates the provisions of Regulation G, T, U or X of the
Board. Neither the Company nor any of its Subsidiaries is engaged or will
engage, principally or as one of its important activities, in the business of
extending credit for the purpose of "purchasing" or "carrying" any "margin
stock" within the respective meanings of each of the quoted terms under said
Regulation U.
5.10 No Default. The Company and each of its Subsidiaries have
performed all material obligations required to be performed by them under their
respective Contractual Obligations (including after giving effect to the Merger)
and they are not (with or without the lapse of time or the giving of notice, or
both) in breach or default in any respect thereunder, except to the extent that
such breach or default would not have a material adverse effect on the business,
assets, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries taken as a whole. Neither the Company nor any of
its Subsidiaries (including after giving effect to the Merger) is in default
under any material judgment, order or decree of any Governmental Authority,
domestic or foreign, applicable to it or any of its respective properties,
assets, operations or business, except to the extent that any such defaults
would not, in the aggregate, have a material adverse effect on the business,
assets, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries, taken as a whole.
5.11 Taxes. Except as set forth on Schedule 5.12, each of the
Company and its Subsidiaries (including after giving effect to the Merger) has
filed or caused to be filed all material tax returns which, to the knowledge of
the Company, are required to be filed and has
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50
paid all taxes shown to be due and payable on said returns or on any assessments
made against it or any of its property and all other taxes, fees or other
charges imposed on it or any of its property by any Governmental Authority
(other than any the amount of which is currently being contested in good faith
by appropriate proceedings and with respect to which reserves (or other
sufficient provisions) in conformity with GAAP have been provided on the books
of the Company or its Subsidiaries (including after giving effect to the
Merger), as the case may be); and no tax Lien has been filed, and, to the
knowledge of the Company, no written claim is being asserted, with respect to
any such tax, fee or other charges.
5.12 Subsidiaries. After giving effect to the consummation of the
Merger, the Subsidiaries of the Company, their jurisdiction of incorporation and
their approximate net book value shall be as set forth on Schedule 5.12. As of
the Closing Date, and at all times prior to any occurrence of an IPO pursuant to
which the Capital Stock of the Company is sold in a public offering, Holdings
owns no less than 100% of the issued and outstanding Capital Stock of the
Company.
5.13 Ownership of Property; Liens. As of the Closing Date and as of
the making of any extension of credit hereunder (subject to transfers and
dispositions of property permitted under subsection 8.5), each of the Company
and its Subsidiaries has good and valid title to all of its material assets
(other than real property or interests in real property) in each case free and
clear of all mortgages, liens, security interests or encumbrances of any nature
whatsoever except Permitted Liens. With respect to real property or interests in
real property, as of the Closing Date, each of the Company and its Subsidiaries
has (i) fee title to all of the real property listed on Schedule 5.13 under the
heading "Fee Properties" (each, a "Fee Property"), and (ii) good and valid title
to the leasehold estates in all of the real property leased by it and listed on
Schedule 5.13 under the heading "Leased Properties" (each, a "Leased Property"),
in each case free and clear of all mortgages, liens, security interests,
easements, covenants, rights-of-way and other similar restrictions of any nature
whatsoever, except (A) Permitted Liens, (B) any conditions that may be shown by
a current, accurate survey or physical inspection of any Fee Property or Leased
Property, (C) as to Leased Property, the terms and provisions of the respective
lease therefor, including, without limitation, the matters set forth on Schedule
5.13, and any matters affecting the fee title and any estate superior to the
leasehold estate related thereto, and (D) title defects, or leases or subleases
granted to others, which are not material to the Fee Properties or the Leased
Properties, as the case may be, taken as a whole. The Fee Properties and the
Leased Properties constitute, as of the Closing Date, all of the real property
owned in fee or leased by the Company and its Subsidiaries.
5.14 ERISA. Neither a Reportable Event nor an "accumulated funding
deficiency" (within the meaning of Section 412 of the Code or Section 302 of
ERISA) has occurred during the five-year period prior to the date on which this
representation is made or deemed made with respect to any Plan that would result
in a material liability to the Company, and each Plan has complied in all
material respects with the applicable provisions of ERISA and the Code. Neither
the Company nor any Commonly Controlled Entity has: been involved in any
transaction that would cause the Company to be subject to material
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51
liability with respect to a Plan to which the Company or any Commonly Controlled
Entity contributed or was obligated to contribute during the six-year period
ending on the date this representation is made or deemed made; or incurred any
material liability under Title IV of ERISA which would become or remain a
material liability of the Company after the Closing Date. No termination of a
Single Employer Plan has occurred, and no Lien in favor of the PBGC or a Plan
has arisen, during such five-year period that would result in a material
liability to the Company. The present value of all accrued benefits under each
Single Employer Plan (based on those assumptions used to fund such Plans) did
not, as of the last annual valuation date prior to the date on which this
representation is made or deemed made, exceed the value of the assets of such
Plan allocable to such accrued benefits that would result in a material
liability to the Company. Neither the Company nor any Commonly Controlled Entity
has had a complete or partial withdrawal from any Multiemployer Plan, and
neither the Company nor any Commonly Controlled Entity would become subject to
any liability under ERISA if the Company or any such Commonly Controlled Entity
were to withdraw completely from all Multiemployer Plans as of the valuation
date most closely preceding the date on which this representation is made or
deemed made, in either case that would result in a material liability to the
Company. To the knowledge of the Company, no such Multiemployer Plan is in
Reorganization or Insolvent. The present value (determined using actuarial and
other assumptions which are reasonable in respect of the benefits provided and
the employees participating) of the liability of the Company and each Commonly
Controlled Entity for post retirement benefits to be provided to their current
and former employees under Plans which are welfare benefit plans (as defined in
Section 3(1) of ERISA) does not, in the aggregate, exceed the assets under all
such Plans allocable to such benefits by an amount that would result in a
material liability to the Company.
5.15 Collateral Documents. (a) Upon execution and delivery thereof
by the parties thereto, each of the Pledge Agreements will be effective to
create in favor of the Administrative Agent, for the ratable benefit of the
Lenders, a legal, valid and enforceable security interest in the pledged stock
described therein and, when stock certificates representing or constituting the
pledged stock described in each of the Pledge Agreements are delivered to the
Administrative Agent, such security interest shall constitute a perfected first
lien on, and security interest in, all right, title and interest of the pledgor
party thereto in the pledged stock described therein.
(b) Upon execution and delivery thereof by the parties thereto, each
of the Security Agreements will be effective to create in favor of the
Administrative Agent, for the ratable benefit of the Lenders, a legal, valid and
enforceable security interest in the collateral described therein and Uniform
Commercial Code financing statements have been filed in each of the
jurisdictions listed on Schedule 5.15(b), or arrangements have been made for
such filing in such jurisdictions, and upon such filing, and upon the taking of
possession by the Administrative Agent of any such collateral the security
interests in which may be perfected only by possession, such security interests
will, subject to the existence of Permitted Liens, constitute perfected first
priority liens on, and security interests in, all right, title and interest of
the debtor party thereto in the collateral described therein, except to the
extent that a
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52
security interest cannot be perfected therein by the filing of a financing
statement or the taking of possession under the Uniform Commercial Code of the
relevant jurisdiction.
5.16 Copyrights, Patents, Permits, Trademarks and Licenses. Schedule
5.16 sets forth a true and complete list of all material trademarks (registered
or unregistered), trade names, service marks, patents, pending patent
applications and copyrights and applications therefor owned, used or filed by or
licensed to the Company and its Subsidiaries (after giving effect to the Merger)
and, with respect to registered trademarks (if any), contains a list of all
jurisdictions in which such trademarks are registered or applied for and all
registration and application numbers. Except as disclosed on Schedule 5.16, the
Company or a Subsidiary (after giving effect to the Merger) owns or has the
right to use, without payment to any other party, trademarks (registered or
unregistered), trade names, service marks, patents, pending patent applications
and copyrights and applications therefor referred to in such Schedule. Except as
set forth on Schedule 5.16, to the best knowledge of the Company, no claims are
pending by any Person with respect to the ownership, validity, enforceability or
the Company's or any Subsidiary's use of any such trademarks (registered or
unregistered), trade names, service marks, patents, pending patent applications
and copyrights, or applications therefor, challenging or questioning the
validity or effectiveness of any of the foregoing, in any jurisdiction, domestic
or foreign.
5.17 Environmental Matters. Except (x) as set forth in the Phase I
Environmental Assessment, or (y) insofar as any exceptions to the following,
individually or in the aggregate, could not reasonably be expected to result in
a material adverse effect on the business, assets, conditions (financial or
otherwise) or operations of the Company and its Subsidiaries taken as a whole:
(a) to the best knowledge of the Company, the properties owned,
leased, or otherwise operated by the Company or any of its Subsidiaries do
not contain, and have not previously contained, in, on or under,
including, without limitation, the soil and groundwater thereunder, any
Hazardous Materials in amounts or concentrations that constitute or
constituted a violation of, or could reasonably give rise to liability
under, Environmental Laws;
(b) to the best knowledge of the Company, the properties owned or
leased, or otherwise operated by the Company or any of its Subsidiaries
and all operations and facilities at such properties are in compliance
with all Environmental Laws, and there is no contamination or violation of
any Environmental Law which could interfere with the continued operation
of, or impair the fair saleable value of, such property;
(c) neither the Company nor any of its Subsidiaries has received or
is aware of any written complaint, notice of violation, alleged violation,
or notice of investigation or of potential liability under Environmental
Laws with regard to the Company or its Subsidiaries, nor does the Company
or any of its Subsidiaries have knowledge that any such action is being
contemplated, considered or threatened;
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(d) to the best knowledge of the Company, Hazardous Materials have
not been generated, treated, stored or disposed of at, on or under any
properties presently or formerly owned, leased, or otherwise operated by
the Company or any of its Subsidiaries, nor have any Hazardous Materials
been transported from any such property, or come to be located at any
other property, in violation of or in a manner that could reasonably give
rise to liability under any Environmental Laws; and
(e) there are no governmental administrative actions or judicial
proceedings pending or, to the best knowledge of the Company and its
Subsidiaries, threatened under any Environmental Law to which the Company
or any of its Subsidiaries is a party, nor are there any consent decrees
or other decrees, consent orders, administrative orders or other orders,
or other administrative or judicial requirements, other than permits
authorizing operations by the Company or any of its Subsidiaries,
outstanding under any Environmental Law.
5.18 Accuracy and Completeness of Information. The factual
statements contained in the financial statements referred to in subsection
5.1(a), the Credit Documents (including the schedules thereto), the Merger
Agreement and any other certificates or documents furnished or to be furnished
to the Administrative Agent or the Lenders from time to time in connection with
this Agreement, taken as a whole, do not and will not, to the best knowledge of
the Company, as of the date when made, contain any untrue statement of a
material fact or omit to state a material fact necessary in order to make the
statements contained therein not misleading in light of the circumstances in
which the same were made, all except as otherwise qualified herein or therein,
such knowledge qualification being given only with respect to factual statements
made by Persons other than the Company or any of its Subsidiaries.
SECTION 6. CONDITIONS PRECEDENT
6.1 Conditions to Initial Loans and Letters of Credit. The
obligation of each Lender to make its Loans, and the obligation of the Issuing
Lender to issue any Letter of Credit, on the Closing Date are subject to the
satisfaction, or waiver by such Lender, immediately prior to or concurrently
with the making of such Loans or the issuance of such Letters of Credit, as the
case may be, of the following conditions:
(a) Agreement; Notes. The Administrative Agent shall have received
(i) a counterpart of this Agreement for each Lender duly executed and
delivered by a duly authorized officer of the Company, (ii) for the
account of each Revolving Credit Lender requesting the same pursuant to
subsection 4.13, a Revolving Credit Note of the Company conforming to the
requirements hereof and executed by a duly authorized officer of the
Company, (iii) for the account of each Term Loan Lender requesting the
same pursuant to subsection 4.13, a Term Loan Note, conforming to the
requirements hereof and
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executed by a duly authorized officer of the Company, and (iv) for the
account of Chase, a Swing Line Note, conforming to the requirements hereof
and executed by a duly authorized officer of the Company. The
Administrative Agent shall have received a copy of the Merger Agreement.
(b) Merger. The Merger shall have been consummated pursuant to the
Merger Agreement with all fees, costs and expenses incurred in connection
therewith not to exceed approximately $22,000,000, all of the conditions
precedent set forth in Articles 9 and 10 of the Merger Agreement shall
have been satisfied or waived by Carter's, and no material provision of
the Merger Agreement shall have been amended, supplemented, waived or
otherwise modified by the Company without the prior written consent of the
Administrative Agent, which consent shall not be unreasonably withheld.
(c) Capitalization; Capital Structure (i) The Company shall have
been capitalized by Holdings with at least $80,000,000 (net of an
allocable fee not to exceed $3,000,000) in cash from the issuance of its
Capital Stock, of which at least $60,000,000 shall be in the form of
Common Stock (having material terms satisfactory to the Arrangers) and
$20,000,000 (net of an allocable fee not to exceed $3,000,000) in the form
of preferred stock with material terms reasonably satisfactory to the
Agents.
(ii) (x) Holdings shall have been capitalized by the Investors
with at least $80,000,000, of which at least $60,000,000 shall be in cash
from the issuance of its Capital Stock and; (y) Holdings shall have issued
unsecured subordinated indebtedness (the "Holdings Subordinated Debt") to
the Investors in an aggregate principal amount of $20,000,000 (having
material terms reasonably satisfactory to the Agents).
(iii) After giving effect to the transactions contemplated
herein, Holdings shall have no material indebtedness other than the
Holdings Subordinated Debt.
(iv) The Bridge Loan Agreement shall have been executed and
delivered by the parties thereto (and the October 25, 1996 draft thereof,
subject to changes agreed upon by the Administrative Agent, shall be in
form and substance satisfactory to the Lenders) shall be in full force and
effect and none of the provisions thereof shall have been amended, waived,
supplemented or otherwise modified without the prior written consent of
the Administrative Agent; and the Company shall have issued the Bridge
Subordinated Debt in a principal amount of at least $90,000,000.
(v) The terms and conditions, and documentation, of any
material Indebtedness and all equity securities of the Company or any of
its Subsidiaries to be outstanding at or after the Closing Date, the
certificate of incorporation, by-laws, other governing documents and the
corporate and capital structure of the Company and its Subsidiaries, in
each case after giving effect to the consummation of the Merger, shall be
in form and substance satisfactory to the Agents.
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55
The execution and delivery of this Agreement by the Lenders and the Agents
shall be deemed to evidence the satisfaction of the Lenders and the Agents
with such of the matters referenced and in clauses (i) through (v) of this
paragraph (c) as shall have been disclosed and made available to the
Agents prior to the date hereof.
(d) Financial Statements. (i) The Lenders shall have received
audited consolidated financial statements of the Company for its three
most recently completed fiscal years, which financial statements shall
have been prepared in accordance with GAAP.
(ii) The Lenders shall have received unaudited interim
consolidated financial statements of the Company for each fiscal month and
each quarterly period ended during the portion of the 1996 fiscal year
through September 30, 1996 and such financial statements shall not reflect
any material adverse change in the consolidated financial condition of the
Company as reflected in the financial statements or projections previously
delivered to the Lenders.
(iii) The Lenders shall have received satisfactory pro forma
balance sheets of Holdings and, on a consolidated basis, of the Company
and its Subsidiaries as of the Closing Date reflecting and giving effect
to the transactions contemplated hereby.
(e) Fees. The Agents, the Advisor, the Arrangers and the Lenders
shall have received all fees, expenses and other consideration presented
for payment required to be paid or delivered on or before the Closing
Date.
(f) Lien Searches. The Administrative Agent shall have received the
results of a search of Uniform Commercial Code, tax and judgment filings
made with respect to each of the Company and its Subsidiaries in the
jurisdictions set forth on Schedule 5.15(b), together with copies of
financing statements disclosed by such searches and such searches shall
disclose no Liens on any assets encumbered by any Security Document,
except for Liens permitted hereunder or, if unpermitted Liens are
disclosed, the Administrative Agent shall have received satisfactory
evidence of the release of such Liens.
(g) Environmental Reports. The Administrative Agent shall have
received, with copies for each Lender, if requested, the Phase I
Environmental Assessments which shall be in form and substance
satisfactory to the Agents (the execution and delivery of this Agreement
by the Lenders and the Administrative Agent being deemed to evidence the
satisfaction of the Administrative Agent with such of the above-referenced
reports as shall have been disclosed and made available to the
Administrative Agent prior to the date hereof along with letters from the
firms preparing such reports entitling the Administrative Agent and each
Lender to rely on such reports as if prepared for and addressed to each of
them).
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56
(h) Holdings Pledge Agreement. The Administrative Agent shall have
received the Holdings Pledge Agreement executed and delivered by a duly
authorized officer of Holdings, together with stock certificates
representing at least 100% of all issued and outstanding shares of Capital
Stock of the Company, and undated stock powers for each certificate,
executed in blank and delivered by a duly authorized officer of Holdings
and the acknowledgment and consent of the Company thereunder, in the form
annexed to the Holdings Pledge Agreement.
(i) Company Pledge Agreement. The Administrative Agent shall have
received the Company Pledge Agreement executed and delivered by a duly
authorized officer of the Company, together with stock certificates
representing 100% of all issued and outstanding shares of Capital Stock of
each of the Domestic Subsidiaries of the Company and 65% of the voting
Capital Stock of the Foreign Subsidiaries of the Company, and undated
stock powers for each certificate, executed in blank and delivered by a
duly authorized officer of the Company and the acknowledgment and consent
of the issuer thereunder, in the form annexed to the Company Pledge
Agreement.
(j) Company Security Agreement. The Administrative Agent shall have
received the Company Security Agreement, executed and delivered by a duly
authorized officer of the Company.
(k) Holdings Guarantee. The Administrative Agent shall have received
the Holdings Guarantee, executed and delivered by a duly authorized
officer of Holdings.
(l) Subsidiary Guarantee. The Administrative Agent shall have
received a Subsidiary Guarantee, executed and delivered by a duly
authorized officer of each of the Domestic Subsidiaries of the Company.
(m) Legal Opinion. The Administrative Agent shall have received,
dated the Closing Date and addressed to the Administrative Agent and the
Lenders, an opinion of (i) Gibson, Dunn & Crutcher LLP, counsel to the
Credit Parties, in substantially the form of Exhibit K-1, with such
changes thereto as may be approved by the Administrative Agent and its
counsel and (ii) Testa, Hurwitz and Thibeault, LLP, counsel to the Credit
Parties, in substantially the form of Exhibit K-2, with such changes
thereto as may be approved by the Administrative Agent and its counsel.
(n) Closing Certificate. The Administrative Agent shall have
received a Closing Certificate of each Credit Party dated the Closing
Date, in substantially the form of Exhibits L-1, L-2 and L-3,
respectively, with appropriate insertions and attachments, in form and
substance satisfactory to the Administrative Agent and its counsel,
executed by the President or any Vice President and the Secretary or any
Assistant Secretary of the Company, Holdings and the Subsidiaries of the
Company, respectively.
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57
(o) Consents, Authorizations and Filings, etc. Except for the
financing statements contemplated by the Company Security Agreement, all
consents, authorizations and filings, if any, required in connection with
the execution, delivery and performance by the Credit Parties, and the
validity and enforceability against the Credit Parties, of the Credit
Documents to which any of them is a party, shall have been obtained or
made, and such consents, authorizations and filings shall be in full force
and effect, except such consents, authorizations and filings, the failure
to obtain which would not have a material adverse effect on the business,
assets, condition (financial or otherwise) or results of operations of the
Company and its Subsidiaries, taken as a whole.
(p) Insurance. The Administrative Agent shall have received (i) a
schedule describing all insurance maintained by the Company and its
Subsidiaries pursuant to subsection 7.5, and (ii) binders (or other
customary evidence as to the obtaining and maintenance by the Company of
such insurance) for each policy set forth on such schedule insuring
against casualty and other usual and customary risks.
(q) Existing Credit Agreements; Indebtedness. (i) On the Closing
Date, the commitments under the Existing Credit Agreement shall have been
terminated, all loans thereunder shall have been repaid in full, together
with interest thereon, all letters of credit issued thereunder shall have
been terminated or incorporated hereunder as, or supported hereunder by,
Letters of Credit, and all other amounts owing pursuant to the Existing
Credit Agreement shall have been repaid in full, and the Administrative
Agent shall have received evidence in form, scope and substance reasonably
satisfactory to it that the matters set forth in this subsection 6.1(r)
have been satisfied at such time.
(ii) On the Closing Date, the creditors under the Existing Credit
Agreement shall have terminated and released all Liens on the capital
stock of and assets owned by the Company and its Subsidiaries, and the
Administrative Agent shall have received all such releases as may have
been requested by the Administrative Agent, which releases shall be in
form and substance reasonably satisfactory to the Administrative Agent.
(r) Other Agreements. The Administrative Agent shall have received
each additional document or instrument reasonably requested by the
Required Lenders.
(s) Litigation. On the Closing Date, there shall be no actions,
suits or proceedings pending or threatened against any Credit Party (a)
with respect to this Agreement or any other Credit Document or the
transactions contemplated hereby or thereby (including the Merger) which
would be reasonably expected to have a material adverse effect on the
rights or remedies of the Lenders under the Credit Documents or (b) which
the Administrative Agent or the Required Lenders shall determine could
reasonably be expected to have a material adverse effect on the rights or
remedies of the Lenders hereunder or under any other Credit Document or on
the ability of any
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58
Credit Party to perform its respective obligations to the Lenders
hereunder or under any other Credit Document.
(t) Approvals. On the Closing Date, all necessary governmental
approvals and all necessary authorizations, consents, approvals or waivers
of other third parties in connection with the transactions contemplated by
the Credit Documents and the Merger Agreement shall have been obtained and
remain in effect (except where the failure to do so would not reasonably
be expected to have a material adverse effect on (x) the business,
operations, property, condition (financial or otherwise) of the Company
and its Subsidiaries, taken as a whole, or (y) (I) the validity or
enforceability of this Agreement, any of the Notes or the other Credit
Documents or (II) the rights or remedies of the Administrative Agent or
the Lenders hereunder or thereunder), and all applicable waiting periods
shall have expired without any action being taken by any competent
authority which restrains or prevents such transactions or imposes
materially adverse conditions upon the consummation of such transactions.
6.2 Conditions to All Loans and Letters of Credit. The obligation of
each Lender to make any Loan (other than any Revolving Credit Loan the proceeds
of which are to be used to repay Refunded Swing Line Loans) and the obligation
of the Issuing Lender to issue any Letter of Credit is subject to the
satisfaction of the following conditions precedent on the relevant Borrowing
Date:
(a) Representations and Warranties. Each of the representations and
warranties made in or pursuant to Section 5 or which are contained in any
other Credit Document shall be true and correct in all material respects
on and as of the date of such Loan or of the issuance of such Letter of
Credit as if made on and as of such date (unless stated to relate to a
specific earlier date, in which case, such representations and warranties
shall be true and correct in all material respects as of such earlier
date).
(b) No Default or Event of Default. No Default or Event of Default
shall have occurred and be continuing on such Borrowing Date or after
giving effect to such Loan to be made or such Letter of Credit to be
issued on such Borrowing Date.
(c) Certificate. The Administrative Agent shall have received, with
a copy for each Lender, a certificate of a Responsible Officer of the
Company to the effect that the applicable statements contained in
paragraphs (a) and (b) above are true and correct as at the Borrowing
Date.
Each borrowing by the Company hereunder and the issuance of each Letter of
Credit by the Issuing Lender hereunder shall constitute a representation and
warranty by the Company as of the date of such borrowing or issuance that the
conditions in clauses (a) and (b) and of this subsection 6.2 have been
satisfied.
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59
SECTION 7. AFFIRMATIVE COVENANTS
The Company hereby agrees that, so long as the Commitments remain in
effect, any Loan, Note or L/C Obligation remains outstanding and unpaid, any
amount (unless cash in an amount equal to such amount has been deposited to a
cash collateral account established by the Administrative Agent) remains
available to be drawn under any Letter of Credit or any other amount is owing to
any Lender or the Administrative Agent hereunder or under any of the other
Credit Documents, it shall, and, in the case of the agreements contained in
subsections 7.3 through 7.6, and 7.8 through 7.10, the Company shall cause each
of its Subsidiaries to:
7.1 Financial Statements. Furnish to the Administrative Agent (with
sufficient copies for each Lender which the Administrative Agent shall promptly
furnish to each Lender):
(a) as soon as available, but in any event within 90 days after the
end of each fiscal year of the Company, a copy of the consolidated balance
sheet of the Company and its consolidated Subsidiaries as at the end of
such fiscal year and the related consolidated statements of stockholders'
equity and cash flows and the consolidated statements of income of the
Company and its Subsidiaries for such fiscal year, setting forth in each
case in comparative form the figures for the previous year and, in the
case of the consolidated balance sheet referred to above, reported on,
without a "going concern" or like qualification or exception, or
qualification arising out of the scope of the audit, or qualification
which would affect the computation of financial covenants, by independent
certified public accountants of nationally recognized standing;
(b) as soon as available, but in any event not later than 45 days
after the end of each of the first three quarterly periods of each fiscal
year of the Company, the unaudited consolidated balance sheet of the
Company and its Subsidiaries as at the end of each such quarter and the
related unaudited consolidated statements of income and cash flows of the
Company and its Subsidiaries for such quarterly period and the portion of
the fiscal year of the Company through such date, setting forth in each
case in comparative form the figures for the corresponding quarter in, and
year to date portion of, the previous year, and the figures for such
periods in the budget prepared by the Company and furnished to the
Administrative Agent, certified by the chief financial officer, controller
or treasurer of the Company as being fairly stated in all material
respects;
(c) as soon as practicable, and in any event within 35 days after
the end of each calendar month of each year, commencing with the first
full month ended following the Closing Date, the unaudited consolidated
balance sheet of the Company and its Subsidiaries as at the end of such
month and the related unaudited consolidated statement of income of the
Company and its Subsidiaries for such month and for the portion of the
fiscal year of the Company through such date in the form and detail
similar to those customarily prepared by management of the Company for
internal use,
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setting forth in each case in comparative form the consolidated figures
for the corresponding month of, and year to date portion of, the previous
year and the figures for such periods in the budget prepared by the
Company and furnished to the Administrative Agent, certified by the chief
financial officer, controller or treasurer of the Company as being fairly
stated in all material respects;
(d) as soon as available, but in any event not later than (i) 60
days after the beginning of the 1997 fiscal year and (ii) 30 days after
the beginning of each fiscal year of the Company thereafter to which such
budget relates, a preliminary consolidated operating budget for the
Company and its Subsidiaries taken as a whole; and as soon as available,
any material revision to or any final revision of any such preliminary
annual operating budget or any such consolidated operating budget; and
(e) concurrently with the delivery of financial statements pursuant
to subsection 7.1(a) or (b), a certificate of the chief financial officer
of the Company setting forth, in reasonable detail, the computations of
Consolidated EBITDA as of the last day of the fiscal period covered by
such financial statements, Capital Expenditures as of such last day, the
ratio of Consolidated Funded Indebtedness to Consolidated EBITDA as of
such last day, and the Interest Coverage Ratio as of such last day;
all such financial statements to be complete and correct in all material
respects (subject, in the case of interim statements, to normal year-end audit
adjustments) and to be prepared in reasonable detail and (except in the case of
the statements referred to in paragraphs (c) and (d) of this subsection 7.1) in
accordance with GAAP.
7.2 Certificates; Other Information. Furnish to the Administrative
Agent (with sufficient copies for each Lender which the Administrative Agent
shall promptly deliver to each Lender):
(a) concurrently with the delivery of the consolidated financial
statements referred to in subsection 7.1(a), a letter from the independent
certified public accountants reporting on such financial statements
stating that in making the examination necessary to express their opinion
on such financial statements no knowledge was obtained of any Default or
Event of Default under subsections 4.4(b)(i), (ii) and (iii), 8.1, 8.3,
and 8.6 through 8.11, except as specified in such letter;
(b) within 15 days of the delivery of the financial statements
referred to in subsections 7.1(a) and (b) (except that the certificate
referred to in clause (iii) below shall be delivered concurrently with
such financial statements), a certificate of the chief financial officer
of the Company stating that, to the best of such officer's knowledge,
during such period (i) no Subsidiary has been formed or acquired (or, if
any such Subsidiary has been formed or acquired, the Company has complied
with the requirements of subsection 7.9 with respect thereto), (ii)
neither the Company nor any of its Subsidiaries has changed its name, its
principal place of business, its chief executive office or the location of
any material item of tangible Collateral without
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61
complying with the requirements of this Agreement and the Security
Documents with respect thereto, (iii) each of the Company and its
Subsidiaries has observed or performed all of its respective covenants and
other agreements, and satisfied every material condition, contained in
this Agreement, the Notes and the other Credit Documents to be observed,
performed or satisfied by it, and that such officer has obtained no
knowledge of any Default or Event of Default except as specified in such
certificate, (iv) showing in detail as of the end of the related fiscal
period the figures and calculations supporting such statement in respect
of clause (e) of subsection 8.1, clauses (b) and (e) of subsection 8.3 and
subsections 8.7 through 8.12 and any other calculations reasonably
requested by the Administrative Agent with respect to the quantitative
aspects of the other covenants contained herein, and (v) if not specified
in the financial statements delivered pursuant to subsection 7.1,
specifying the aggregate amount of interest paid or accrued by the Company
and its Subsidiaries, and the aggregate amount of depreciation, depletion
and amortization charged on the books of the Company and its Subsidiaries,
during such accounting period;
(c) promptly upon receipt thereof, copies of all final reports
submitted to the Company or to any of its Subsidiaries by independent
certified public accountants in connection with each annual, interim or
special audit of the books of the Company or any of its Subsidiaries made
by such accountants, including, without limitation, any final comment
letter submitted by such accountants to management in connection with
their annual audit;
(d) promptly upon their becoming available, copies of all financial
statements, reports, notices and proxy statements sent or made available
to the public generally by the Company or any of its Subsidiaries, if any,
and all regular and periodic reports and all final registration statements
and final prospectuses, if any, filed by the Company or any of its
Subsidiaries with any securities exchange or with the Securities and
Exchange Commission or any Governmental Authority succeeding to any of its
functions;
(e) concurrently with the delivery of the financial statements
referred to in subsections 7.1(a) and (b), and within 45 days following
each calendar month with respect to which the financial statements
referred to in subsection 7.1(c) are required to be delivered, a
management summary describing and analyzing the performance of the Company
and its Subsidiaries during the periods covered by such financial
statements;
(f) within 45 days after the end of each fiscal quarter, a summary
of all Asset Sales during such fiscal quarter including the amount of all
Net Proceeds from such Asset Sales not previously applied to prepayments
of the Loans and reductions of the Commitments pursuant to the proviso to
subsection 4.4(b)(iii); and
(g) promptly, such additional financial and other information as any
Lender may from time to time reasonably request.
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7.3 Payment of Obligations. Pay, discharge or otherwise satisfy at
or before maturity or before they become delinquent, as the case may be, all its
obligations and liabilities of whatever nature, except (a) when the amount or
validity thereof is currently being contested in good faith by appropriate
proceedings and reserves in conformity with GAAP with respect thereto have been
provided on the books of the Company or any of its Subsidiaries, as the case may
be, (b) for delinquent obligations which do not have a material adverse effect
on the business, assets, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries taken as a whole and (c) for
trade and other accounts payable in the ordinary course of business which are
not overdue for a period of more than 90 days or, if overdue for more than 90
days, as to which a dispute exists and adequate reserves in conformity with GAAP
have been established on the books of the Company or any of its Subsidiaries, as
the case may be.
7.4 Conduct of Business and Maintenance of Existence. Continue to
engage in businesses of the same general type as now conducted by it (after
giving effect to the Merger), and preserve, renew and keep in full force and
effect its corporate existence and take all reasonable action to maintain all
material rights, material privileges, franchises, copyrights, patents,
trademarks and trade names necessary or desirable in the normal conduct of its
business except for rights, privileges, franchises, copyrights, patents,
trademarks and tradenames the loss of which would not in the aggregate have a
material adverse effect on the business, assets, condition (financial or
otherwise) or results of operations of the Company and its Subsidiaries taken as
a whole, and except as otherwise permitted by subsections 8.4 and 8.5; and
comply with all applicable Requirements of Law except to the extent that the
failure to comply therewith would not, in the aggregate, have a material adverse
effect on the business, assets, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries taken as a whole.
7.5 Maintenance of Property; Insurance. (a) Keep all property useful
and necessary in its business in good working order and condition (ordinary wear
and tear excepted); and
(b) Maintain with financially sound and reputable insurance
companies insurance on all its property in at least such amounts and with only
such deductibles as are usually maintained by, and against at least such risks
(but including, in any event, public liability insurance) as are usually insured
against in the same general area by, companies engaged in the same or a similar
business, and furnish to each Lender, (i) annually, a schedule disclosing (in a
manner substantially similar to that used in the schedule provided pursuant to
subsection 6.1(q)) all insurance against products liability risk maintained by
the Company and its Subsidiaries pursuant to this subsection 7.5(b) or otherwise
and (ii) upon written request of any Lender, full information as to the
insurance carried; provided that the Company may implement programs of self
insurance in the ordinary course of business and in accordance with industry
standards for a company of similar size so long as reserves are maintained in
accordance with GAAP for the liabilities associated therewith.
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7.6 Inspection of Property; Books and Records; Discussions. Keep
proper books of record and account in which full, true and correct entries are
made of all dealings and transactions in relation to its business and activities
which permit financial statements to be prepared in conformity with GAAP and all
Requirements of Law; and permit representatives of any Lender upon reasonable
notice (but no more frequently than monthly unless a Default or Event of Default
shall have occurred and be continuing), to visit and inspect any of its
properties and examine and make abstracts from any of its books and records at
any reasonable time and as often as may reasonably be requested upon reasonable
notice, and to discuss the business, operations, assets and financial and other
condition of the Company and its Subsidiaries with officers and employees
thereof and with their independent certified public accountants.
7.7 Notices. Promptly give notice to the Administrative Agent and
each Lender:
(a) of the occurrence of any Default or Event of Default;
(b) of any (i) default or event of default under any instrument or
other agreement, guarantee or collateral document of the Company or any of
its Subsidiaries which default or event of default has not been waived and
would have a material adverse effect on the business, assets, condition
(financial or otherwise) or results of operations of the Company and its
Subsidiaries taken as a whole, or any other default or event of default
under any such instrument, agreement, guarantee or other collateral
document which, but for the proviso to clause (e) of Section 9, would have
constituted a Default or Event of Default under this Agreement, or (ii)
litigation, investigation or proceeding which may exist at any time
between the Company or any of its Subsidiaries and any Governmental
Authority, or receipt of any notice of any environmental claim or
assessment against the Company or any of its Subsidiaries by any
Governmental Authority, which in any such case would have a material
adverse effect on the business, assets, condition (financial or otherwise)
or results of operations of the Company and its Subsidiaries taken as a
whole;
(c) of any litigation or proceeding against the Company or any of
its Subsidiaries (i) in which more than $2,000,000 of the amount claimed
is not covered by insurance or (ii) in which injunctive or similar relief
is sought which if obtained would have a material adverse effect on the
business, assets, condition (financial or otherwise) or results of
operations of the Company and its Subsidiaries taken as a whole;
(d) of the following events, as soon as practicable after, and in
any event within 30 days after, the Company knows or has reason to know
thereof: (i) the occurrence of any Reportable Event with respect to any
Plan which Reportable Event could reasonably result in material liability
to the Company and its Subsidiaries taken as a whole, or (ii) the
institution of proceedings or the taking of any other action by PBGC, the
Company or any Commonly Controlled Entity to terminate, withdraw or
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partially withdraw from any Plan and, with respect to a Multiemployer
Plan, the Reorganization or Insolvency of such Plan, in each of the
foregoing cases which could reasonably result in material liability to the
Company and its Subsidiaries taken as a whole, and in addition to such
notice, deliver to the Administrative Agent and each Lender whichever of
the following may be applicable: (A) a certificate of a Responsible
Officer of the Company setting forth details as to such Reportable Event
and the action that the Company or such Commonly Controlled Entity
proposes to take with respect thereto, together with a copy of any notice
of such Reportable Event that may be required to be filed with PBGC, or
(B) any notice delivered by PBGC evidencing its intent to institute such
proceedings or any notice to PBGC that such Plan is to be terminated, as
the case may be;
(e) concurrently with the delivery of the information delivered
pursuant to subsection 7.2(f) and each prepayment required pursuant to
subsection 4.4(b)(iii), of any Asset Sale or substantially like-kind
exchange of real property by the Company or any of its Subsidiaries; and
(f) of a material adverse change known to the Company or its
Subsidiaries in the business, assets, condition (financial or otherwise)
or results of operations of the Company and its Subsidiaries taken as a
whole.
Each notice pursuant to this subsection 7.7 shall be accompanied by a statement
of a Responsible Officer of the Company setting forth details of the occurrence
referred to therein and (in the cases of clauses (a) through (d)) stating what
action the Company proposes to take with respect thereto.
7.8 Environmental Laws. (a)(i) Comply with all Environmental Laws
applicable to it, and obtain, comply with and maintain any and all Environmental
Permits necessary for its operations as conducted and as planned; and (ii) take
reasonable efforts to ensure that all of its tenants, subtenants, contractors,
subcontractors, and invitees comply with all Environmental Laws, and obtain,
comply with and maintain any and all Environmental Permits, applicable to any of
them insofar as any failure to so comply, obtain or maintain could adversely
affect the Borrower or any of its Subsidiaries. Noncompliance by the Borrower or
any of its Subsidiaries with any applicable Environmental Law or Environmental
Permit shall be deemed not to constitute a breach of this 7.8(a); provided that,
upon learning of any such noncompliance, the Borrower and its Subsidiaries shall
promptly undertake reasonable efforts to achieve compliance, and provided
further that, in any case, such noncompliance, and any other noncompliance with
Environmental Law, individually or in the aggregate, could not reasonably be
expected to give rise to a Material Adverse Effect.
(b) Comply in a timely manner with all orders and lawful directives
regarding Environmental Laws issued to the Borrower or any of its Subsidiaries
by any Governmental Authority, other than such orders and lawful directives as
to which an appeal or other challenge has been timely and properly taken in good
faith and the pendency of any and all
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such appeals and other challenges could not reasonably be expected to give rise
to a Material Adverse Effect.
(c) Maintain, update as appropriate, and implement in all material
respects an environmental program reasonably designed to (i) ensure that the
Borrower, its Subsidiaries, any of their respective operations (including,
without limitation, disposal), and any properties owned, leased or operated by
any of them, attain and remain in substantial compliance with all applicable
Environmental Laws; (ii) reasonably and prudently manage any liabilities or
potential liabilities that the Borrower, any of the other Loan Parties, any of
their respective operations (including, without limitation, disposal), and any
properties owned or leased by any of them, may have under all applicable
Environmental Laws; and (iii) ensure that the Borrower and its Subsidiaries
undertake reasonable efforts to identify, and reasonably evaluate, issues of
compliance with and liability under Environmental Laws prior to acquiring,
directly or indirectly, any ownership or leasehold interest in real property, or
other interest in any real property that could give rise to Borrower or any of
its Subsidiaries being subjected to liability under any Environmental Law as a
result of such acquisition.
7.9 Additional Collateral. (a) Subject to subsection 7.9(e), with
respect to any assets acquired after the Closing Date by the Company or any of
its Domestic Subsidiaries that are intended to be subject to the Lien created by
any of the Security Documents but which are not so subject (other than (y) any
assets described in paragraph (b) or (c) of this subsection and (z) immaterial
assets), promptly (and in any event within 30 days after the acquisition
thereof): (i) execute and deliver to the Administrative Agent such amendments to
the relevant Security Documents or such other documents as the Administrative
Agent shall deem necessary or advisable to grant to the Administrative Agent,
for the benefit of the Lenders, a Lien on such assets, and (ii) take all actions
necessary or advisable to cause such Lien to be duly perfected to the extent
required by such Security Document in accordance with all applicable
Requirements of Law, including, without limitation, the filing of financing
statements in such jurisdictions as may be reasonably requested by the
Administrative Agent.
(b) With respect to any Person that is or becomes a Subsidiary
(other than any Foreign Subsidiary) that has material assets, promptly upon the
request of the Administrative Agent: (i) execute and deliver to the
Administrative Agent, for the benefit of the Lenders, a new pledge agreement or
such amendments to the relevant Pledge Agreement as the Administrative Agent
shall deem necessary or advisable to grant to the Administrative Agent, for the
benefit of the Lenders, a Lien on the Capital Stock of such Subsidiary which is
owned by the Company or any of its Subsidiaries, (ii) deliver to the
Administrative Agent the certificates representing such Capital Stock, together
with undated stock powers executed and delivered in blank by a duly authorized
officer of the Company or such Subsidiary, as the case may be, and (iii) cause
such new Subsidiary (A) to become a party to a subsidiary guarantee and a
subsidiary security agreement, in each case pursuant to documentation which is
in form and substance reasonably satisfactory to the Administrative Agent, and
(B) to take all actions necessary or advisable to cause the Lien created by the
subsidiary security agreement to be duly perfected to the extent required by
such security agreement in accordance with all applicable Requirements of Law,
including, without limitation, the filing
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66
of financing statements in such jurisdictions as may be reasonably requested by
the Administrative Agent.
(c) With respect to any Person that is or becomes a Foreign
Subsidiary and that has material assets, promptly upon the request of the
Administrative Agent: (i) execute and deliver to the Administrative Agent a new
pledge agreement or such amendments to the relevant Pledge Agreement as the
Administrative Agent shall deem necessary or advisable to grant to the
Administrative Agent, for the benefit of the Lenders, a Lien on the Capital
Stock of such Subsidiary which is owned by the Company or any of its
Subsidiaries (provided that in no event shall more than 65% of the Capital Stock
of any such Subsidiary be required to be so pledged), (ii) deliver to the
Administrative Agent any certificates representing such Capital Stock, together
with undated stock powers executed and delivered in blank by a duly authorized
officer of the Company or such Subsidiary, as the case may be, and take or cause
to be taken all such other actions under the law of the jurisdiction of
organization of such Foreign Subsidiary as may be necessary or advisable to
perfect such Lien on such Capital Stock, and if requested by the Administrative
Agent, deliver to the Administrative Agent legal opinions relating to the
matters described in clauses (i) and (ii) immediately preceding, which opinions
shall be in form and substance, and from counsel, reasonably satisfactory to the
Administrative Agent.
(d) Within 60 days of the Closing Date, the Administrative Agent
shall have received (i) fully executed counterparts of deeds of trust, leasehold
deeds of trust, mortgages, leasehold mortgages and similar documents in each
case in form and substance reasonably satisfactory to the Administrative Agent
and substantially in the form of Exhibit M (each a "Mortgage" and collectively,
the "Mortgages") covering all the Mortgaged Properties, and arrangements
reasonably satisfactory to the Administrative Agent shall be in place to provide
that counterparts of such Mortgages shall be promptly recorded upon execution in
all places to the extent necessary or desirable, in the judgment of the
Administrative Agent, effectively to create a valid and enforceable first
priority Lien, subject only to Permitted Liens, on each Mortgaged Property in
favor of the Administrative Agent (or such other trustee as may be required or
desired under local law) for the benefit of the Lenders, (ii) a lender's title
insurance policy, paid for by the Borrower, issued by a nationally recognized
title insurance company, together with such endorsements, coinsurance and
reinsurance as may be reasonably requested by the Administrative Agent, in form
and substance reasonably acceptable to the Agent, insuring each Mortgage as a
first lien on the relevant Mortgaged Property and subject only to Liens
expressly agreed to by the Administrative Agent and (iii) such other documents
(including without limitation, current ALTA/ASCM surveys of any parcel of Real
Property made in accordance with ALTA/ASCM standards, including Table A, Items
Nos. 1-4 and 6- 13) as are reasonably required by the Administrative Agent.
(e) Upon the request of the Administrative Agent or the Required
Lenders, the Company will, and will cause its Domestic Subsidiaries to, grant to
the Administrative Agent, within 60 days of such request, security interests and
mortgages (an "Additional Mortgage") in such owned Real Property of the Company
and its Domestic Subsidiaries as are acquired after the Closing Date by the
Company or such Subsidiary and that, together with any
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improvements thereon, individually have a value of at least $1,000,000, as
additional security for the obligations of the Credit Parties under any Credit
Document. Such Mortgages shall be granted pursuant to documentation reasonably
satisfactory in form and substance to the Administrative Agent and shall
constitute valid and enforceable perfected Liens subject only to Permitted Liens
and such other Liens reasonably acceptable to the Administrative Agent. The
Additional Mortgages or instruments related thereto shall be duly recorded or
filed in such manner and in such places as are required by law to establish,
perfect, preserve and protect the Liens in favor of the Administrative Agent
required to be granted pursuant to the Additional Mortgages and all taxes, fees
and other charges payable in connection therewith shall be paid in full. If
requested by the Administrative Agent or the Required Lenders, the Company shall
provide a lender's title policy with respect to each such Additional Mortgage
conforming to the requirements of subsection 7.9(d).
SECTION 8. NEGATIVE COVENANTS
The Company hereby agrees that it shall not, and the Company shall
not permit any of its Subsidiaries to, directly or indirectly so long as the
Commitments remain in effect or any Loan, Note or L/C Obligation remains
outstanding and unpaid, any amount (unless cash in an amount equal to such
amount has been deposited to a cash collateral account established by the
Administrative Agent) remains available to be drawn under any Letter of Credit
or any other amount is owing to any Lender or the Administrative Agent hereunder
or under any other Credit Document (it being understood that each of the
permitted exceptions to each of the covenants in this Section 8 is in addition
to, and not overlapping with, any other of such permitted exceptions except to
the extent expressly provided):
8.1 Indebtedness. Create, incur, assume or suffer to exist any
Indebtedness, except:
(a) the Indebtedness outstanding on the Closing Date and reflected
on Schedule 8.1(a), but excluding the refinancing of any such
Indebtedness;
(b) Indebtedness consisting of the Loans and in connection with the
Letters of Credit and this Agreement;
(c) Indebtedness (i) of the Company to any Subsidiary, (ii) of any
Domestic Subsidiary to the Company or any other Subsidiary and (iii) of
any Foreign Subsidiary to the Company or any other Subsidiary in an
aggregate principal amount at any time outstanding not to exceed
$10,000,000 less the sum of (A) the amount of any Indebtedness outstanding
pursuant to subsection 8.1(g), (B) the amount of any guarantees of
obligations of Foreign Subsidiaries pursuant to subsection 8.3(c)(ii) and
(C) the amount of any investments made in a Foreign Subsidiary pursuant to
subsection 8.6(b)(iii), provided that such $10,000,000 amount may be
increased by up to $25,000,000 (subject to reduction as provided herein)
the proceeds of which incremental amount shall be used for (x) Capital
Expenditures (which shall be subject to subsection 8.7) for the
acquisition of production plants and/or production assets and
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68
(y) for production related costs (including, without limitation, costs
related to personnel and inventory) provided further that such
Indebtedness referred to in this clause (c), if to the Company or any
Domestic Subsidiary, is evidenced by a promissory note or promissory notes
which has or have been pledged to the Administrative Agent on terms and
conditions satisfactory to the Administrative Agent;
(d) Indebtedness of the Company in respect of:
(i) up to $90,000,000 principal amount of Bridge Subordinated
Debt issued on the Closing Date, and additional principal amount of
Bridge Subordinated Debt issued in lieu of cash interest on the
outstanding Bridge Subordinated Debt and otherwise as contemplated
by the Bridge Loan Agreement upon exchange of Bridge Subordinated
Debt into exchange notes;
(ii) any Permanent Subordinated Debt not to exceed
$110,000,000, the proceeds (net of any fees and expenses in
connection therewith) of which are used, to the extent available, as
follows:
(A) first, such net proceeds shall be applied to prepay,
redeem, retire or repurchase the outstanding principal amount
of the Bridge Subordinated Debt;
(B) second, any net proceeds in excess of the amount
applied pursuant to clause (A) shall be applied to the
prepayment, in an aggregate amount not to exceed $5,000,000,
of the Term Loans and reduction of the Commitments in
accordance with subsection 4.4(b)(v);
(C) third, the difference between (x) $100,000,000 and
(y) the net proceeds applied pursuant to clauses (A) and (B)
shall be applied to the prepayment of the outstanding
Revolving Credit Loans, if any, without any reduction of the
Commitments (but not otherwise required to be applied to
Indebtedness under this Agreement); and
(D) fourth, if the aggregate net proceeds of such
Permanent Subordinated Debt exceeds $100,000,000, (x) 50% of
such proceeds in excess of $100,000,000 shall be applied to
the prepayment of the Term Loans and reduction of the
Commitments in accordance with subsection 4.4(b)(v) and (y)
50% of such proceeds shall be applied to the prepayment of
outstanding Revolving Credit Loans, if any, without any
reduction of the Commitments (but not otherwise required to be
applied to Indebtedness under this Agreement); and
(iii) any refinancing of the Permanent Subordinated Debt
contemplated in the definition thereof.
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(e) Indebtedness of the Company and its Subsidiaries for industrial
revenue bonds or other similar governmental and municipal bonds, for the
deferred purchase price of newly acquired property and to finance
equipment of the Company and its Subsidiaries (pursuant to purchase money
mortgages or otherwise and whether owed to the seller or a third party)
used in the ordinary course of business (provided such financing is
entered into within 180 days of the acquisition of such property) of the
Company and its Subsidiaries in an amount (based on the remaining balance
of the obligations therefor on the books of the Company and its
Subsidiaries) which shall not exceed $10,000,000 in the aggregate at any
one time outstanding and Indebtedness of the Company and its Subsidiaries
in respect of Financing Leases to the extent subsections 8.7 and 8.10
would not be contravened;
(f) Indebtedness of the Company and its Domestic Subsidiaries in an
aggregate principal amount at any one time outstanding not in excess of
$10,000,000;
(g) Indebtedness of Foreign Subsidiaries in an aggregate principal
amount at any time outstanding not in excess of the equivalent at the date
of each incurrence thereof of $10,000,000, as reduced by amounts pursuant
to ss.8.1(c)(iii), ss.8.3(c)(ii) and ss.8.6(b)(iii), provided that such
$10,000,000 amount may be increased by up to $25,000,000 (subject to
reduction as provided herein) the proceeds of which incremental amount
shall be used for (i) Capital Expenditures (which shall be subject to
subsection 8.7) for the acquisition of production plants and/or production
assets and (ii) for production related costs (including, without
limitation, costs related to personnel and inventory);
(h) Indebtedness in respect of letters of credit (other than Letters
of Credit issued hereunder) in an aggregate principal amount equal to
$5,000,000;
(i) (i) Indebtedness assumed in connection with acquisitions
permitted by subsection 8.7 (so long as such Indebtedness was not incurred
in anticipation of such acquisitions), (ii) Indebtedness of newly acquired
Subsidiaries acquired in such acquisitions (so long as such Indebtedness
was not incurred in anticipation of such acquisition) and (iii)
Indebtedness owed to the seller in any acquisition permitted by subsection
8.7 constituting part of the purchase price thereof, all of which
Indebtedness permitted by this subsection 8.1(i) shall not exceed in the
aggregate at any time $5,000,000;
(j) Indebtedness in connection with workmen's compensation
obligations and general liability exposure of the Company and its
Subsidiaries; and
(k) Additional unsecured subordinated indebtedness of the Company
and its Subsidiaries provided that (i) such Indebtedness shall not exceed
$10,000,000 in aggregate principal amount at any time outstanding plus any
additional principal amount of such Indebtedness issued in lieu of cash
interest on such outstanding Indebtedness, (ii) no part of the principal
amount of such Indebtedness shall have a
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maturity date earlier than the one-year anniversary of the final
Installment Payment Date and (iii) the non-default interest rate thereon
shall not exceed 12% per annum.
8.2 Limitation on Liens. Create, incur, assume or suffer to exist
any Lien upon any of its property, assets, income or profits, whether now owned
or hereafter acquired, except:
(a) Liens for taxes, assessments or other governmental charges not
yet delinquent or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the Company or such Subsidiary, as the case may
be, in accordance with GAAP;
(b) carriers', warehousemen's, mechanics', landlords',
materialmen's, repairmen's or other like Liens arising in the ordinary
course of business in respect of obligations which are not yet due or
which are bonded or which are being contested in good faith and by
appropriate proceedings if adequate reserves with respect thereto are
maintained on the books of the Company or such Subsidiary, as the case may
be, in accordance with GAAP;
(c) pledges or deposits in connection with workmen's compensation,
unemployment insurance and other social security legislation;
(d) deposits to secure the performance of bids, tenders, trade or
government contracts (other than for borrowed money), leases, licenses,
statutory obligations, surety and appeal bonds, performance bonds and
other obligations of a like nature incurred in the ordinary course of
business;
(e) easements (including, without limitation, reciprocal easement
agreements), rights-of-way, building, zoning and similar restrictions,
utility agreements, covenants, reservations, restrictions, encroachments,
changes, and other similar encumbrances or title defects incurred, or
leases or subleases granted to others, in the ordinary course of business,
which do not in the aggregate materially detract from the aggregate value
of the properties of the Company and its Subsidiaries, taken as a whole,
or in the aggregate materially interfere with or adversely affect in any
material respect the ordinary conduct of the business of the Company and
its Subsidiaries on the properties subject thereto, taken as a whole;
(f) Liens in favor of the Administrative Agent and the Lenders
pursuant to the Credit Documents and bankers' liens arising by operation
of law;
(g) Liens on property of the Company or any of its Subsidiaries
created solely for the purpose of securing Indebtedness permitted by
subsection 8.1(e), 8.1(g) (it being understood that such Liens shall
attach only to the property of the Foreign Subsidiaries) or subsection
8.1(i)(i) or (ii) (so long as such Lien was not incurred in anticipation
of the related acquisition), representing or incurred to finance,
refinance or
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refund the purchase price of property, provided that no such Lien incurred
in connection with Indebtedness pursuant to subsection 8.1(e) and
8.1(i)(i) or (ii) shall extend to or cover other property of the Company
or such Subsidiary other than the respective property so acquired, and the
principal amount of Indebtedness secured by any such Lien shall at no time
exceed the original purchase price of such property;
(h) Liens existing on the Closing Date after giving effect to the
consummation of the Merger and described in subsection 5.13 or Schedule
8.2(h), provided that no such Lien shall extend to or cover other property
of the Company or the respective Subsidiary other than the respective
property so encumbered, and the principal amount of Indebtedness secured
by any such Lien shall at no time exceed the original principal amount of
the Indebtedness so secured.
(i) Liens on documents of title and the property covered thereby
securing Indebtedness in respect of the Commercial L/Cs;
(j) (i) mortgages, liens, security interests, restrictions,
encumbrances or any other matter of record that have been placed by any
developer, landlord or other third party on property over which the
Company or any Subsidiary of the Company has easement rights or on any
Leased Property and subordination or similar agreements relating thereto
and (ii) any condemnation or eminent domain proceedings affecting any real
property;
(k) Liens in connection with workmen's compensation obligations and
general liability exposure of the Company and its Subsidiaries; and
(l) Liens on goods (and Proceeds thereof) securing reimbursement
obligations in respect of commercial letters of credit issued in
accordance with the terms of this Agreement.
8.3 Limitation on Contingent Obligations. Create, incur, assume or
suffer to exist any Contingent Obligation except:
(a) the Guarantees;
(b) other guarantees by the Company incurred in the ordinary course
of business for an aggregate amount not to exceed $2,000,000 at any one
time;
(c) guarantees by the Company or any Domestic Subsidiary (i) of
obligations of its Domestic Subsidiaries and (ii) of obligations of its
Foreign Subsidiaries in an aggregate principal amount not to exceed
$10,000,000, as reduced by amounts outstanding in accordance with
subsections 8.1(c)(iii), 8.1(g) or 8.6(b)(iii), provided that such
$10,000,000 amount may be increased by up to $25,000,000 (subject to
reduction as provided herein) the proceeds of which incremental amount
shall be used for (x) Capital Expenditures (which shall be subject to
subsection 8.7) for the
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acquisition of production plants and/or production assets and (y) for
production related costs (including, without limitation, costs related to
personnel and inventory);
(d) Contingent Obligations existing on the Closing Date and
described in Schedule 8.3(d);
(e) guarantees of obligations to third parties in connection with
relocation of employees of the Company or any of its Subsidiaries, in an
amount which, together with all loans and advances made pursuant to
subsection 8.6(f), shall not exceed $2,000,000 at any time outstanding;
(f) Contingent Obligations in connection with workmen's compensation
obligations and general liability exposure of the Company and its
Subsidiaries; and
(g) subordinated guarantees in respect of the Subordinated Debt
issued by Subsidiaries of the Company which have also issued Guarantees,
provided such subordinated guarantees are subordinated to the Guarantees
on the same basis as the Subordinated Debt is subordinated to the Loans.
8.4 Prohibition of Fundamental Changes. Enter into any merger or
consolidation or amalgamation, or liquidate, wind up or dissolve itself (or
suffer any liquidation or dissolution), or engage in any type of business other
than of the same general type now conducted by it, except (a) for the
transactions otherwise permitted pursuant to clause (b) of subsection 8.5, (b)
any Subsidiary of the Company may be merged with and into the Company or a
wholly-owned Domestic Subsidiary of the Company, (c) Subsidiaries with a net
book value not greater than $100,000 may be dissolved and (d) any Subsidiary may
otherwise be dissolved provided that upon dissolution, the assets of such
Subsidiary are transferred to the Company or a wholly-owned Subsidiary of the
Company on the terms and subject to the conditions set forth in subsection
8.5(b).
8.5 Prohibition on Sale of Assets. Convey, sell, lease (other than a
sublease of real property), assign, transfer or otherwise dispose of (including
through a transaction of merger or consolidation of any Subsidiary of the
Company) any of its property, business or assets (including, without limitation,
other payments and receivables but excluding leasehold interests), whether now
owned or hereafter acquired, except:
(a) for sales or other dispositions of inventory in the ordinary
course of business;
(b) that any Subsidiary of the Company may sell, lease, transfer or
otherwise dispose of any or all of its assets (upon voluntary liquidation
or otherwise) to, or merge with and into, the Company or a wholly-owned
Subsidiary of the Company and any Subsidiary of the Company may sell or
otherwise dispose of, or part with control of any or all of, the stock of
any Subsidiary to a wholly-owned Subsidiary of the Company, provided that
no such transaction may be effected if it would result in the
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transfer of any assets of, or any stock of, a Subsidiary to, or the merger
with and into, another Subsidiary all of the Capital Stock of which owned
by the Company or any Subsidiary has not been pledged to the
Administrative Agent and which has not guaranteed the obligations of the
Company, for the benefit of the Lenders, under the Notes and this
Agreement, and granted liens or security interests in favor of the
Administrative Agent, for the benefit of the Lenders, on substantially all
of its assets to secure such guarantee, pursuant to a guarantee, security
agreement and other documentation reasonably satisfactory to the
Administrative Agent;
(c) leases of Fee Properties and other real property owned in fee;
(d) any condemnation or eminent domain proceedings affecting any
real property, provided, however, that the parties hereto agree that the
net proceeds received in connection with such proceeding shall be deemed
not to constitute "Net Proceeds" if such net proceeds are reinvested in
new or existing properties within eighteen months;
(e) substantially like-kind exchanges of real property provided that
any cash received by the Company or any Subsidiary of the Company in
connection with such an exchange (net of all costs and expenses incurred
in connection with such transaction or with the commencement of operation
of real property received in such exchange) shall be deemed to be Net
Proceeds and shall be applied as provided for herein;
(f) for the sale or other disposition of any property that, in the
reasonable judgment of the Company has become uneconomic, obsolete or worn
out, and which in each case is disposed of in the ordinary course of
business; and
(g) for the sale or other disposition of any property the aggregate
amount of the net proceeds received in respect of which shall not exceed
$5,000,000.
8.6 Limitation on Investments, Loans and Advances. Make any advance,
loan, extension of credit or capital contribution to, or purchase any stock,
bonds, notes, debentures or other securities of, or make any other investment in
(including, without limitation, any acquisition of all or any substantial
portion of the assets, and any acquisition of a business or a product line, of
other companies, other than the acquisition of inventory in the ordinary course
of business), any Person (except to the extent permitted by Section 8.7),
except:
(a) the Company may make loans or advances to any Subsidiary, and
any Subsidiary may make loans or advances to the Company or any other
Subsidiary, to the extent in each case the Indebtedness created thereby is
permitted by subsection 8.1(c);
(b) (i) any Subsidiary may make investments in the Company (by way
of capital contribution or otherwise), (ii) the Company and any Subsidiary
may make investments in, or create, any wholly-owned Domestic Subsidiary
(by way of capital
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contribution or otherwise) or make investments permitted by subsection
8.5(b), provided that, in any such case, the requirements of subsection
7.9 are satisfied and (iii) the Company and any Subsidiary may make
investments in, or create, any wholly-owned Foreign Subsidiary (by way of
capital contribution or otherwise) or make investments permitted by
subsection 8.5(b), provided that (x) the requirements of subsection 7.9
are satisfied and (y) the aggregate amount of all investments in such
Foreign Subsidiaries shall not exceed (I) $10,000,000 (net of any
dividends or distributions, or repayments or payments of interest by such
Foreign Subsidiaries to the Company or any Domestic Subsidiary), minus
(II) the amount of any Indebtedness of any Foreign Subsidiary at any such
time outstanding in accordance with subsection 8.1(c)(iii), 8.1(g) or
8.3(c)(ii), provided that such $10,000,000 amount may be increased by up
to $25,000,000 (subject to reduction as provided herein) the proceeds of
which incremental amount shall be used for (A) Capital Expenditures (which
shall be subject to subsection 8.7) for the acquisition of production
plants and/or production assets and (B) for production related costs
(including, without limitation, costs related to personnel and inventory);
(c) the Company and its Subsidiaries may invest in, acquire and hold
Cash Equivalents;
(d) the Company or any of its Subsidiaries may make payroll advances
in the ordinary course of business;
(e) the Company or any of its Subsidiaries may acquire and hold
receivables owing to it, if created or acquired in the ordinary course of
business and payable or dischargeable in accordance with customary trade
terms (provided that nothing in this clause (e) shall prevent the Company
or any Subsidiary from offering such concessionary trade terms, or from
receiving such investments, in connection with the bankruptcy or
reorganization of their respective suppliers or customers or the
settlement of disputes with such customers or suppliers arising in the
ordinary course of business, as management deems reasonable in the
circumstances); and
(f) the Company or any of its Subsidiaries may make travel and
entertainment advances and relocation and other loans to officers and
employees of the Company or any such Subsidiary, provided that the
aggregate principal amount of all such loans and advances outstanding at
any one time, together with the guarantees of such loans and advances made
pursuant to subsection 8.3(e), shall not exceed $5,000,000 at any one time
outstanding.
For the purposes of this subsection 8.6, the payment by the Company
of expenses and operating costs of any Subsidiary incurred in the ordinary
course of its business shall not be considered to be a loan, advance or other
investment of the Company in such Subsidiary and shall be permitted under this
Agreement.
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8.7 Capital Expenditures. Make or commit to make any Capital
Expenditures (including acquisitions of companies engaged primarily in
businesses similar to the businesses in which the Company and its Subsidiaries
are engaged), except that the Company and its Subsidiaries may make or commit to
make Capital Expenditures not exceeding the amount set forth below (the "Base
Amount") for each of the fiscal years or periods of the Company (or other
period) set forth below:
Fiscal Year
or Period Base Amount
--------- -----------
Closing Date $19,300,000
through end of
fiscal year 1997
1998 $11,500,000
1999 $12,800,000
2000 $13,000,000
2001 $13,700,000
2002 $14,100,000
January 1, 2003 to $14,500,000
October 31, 2003
provided, however, that for any fiscal year commencing with the 1997 fiscal year
of the Company the Base Amount set forth above may be increased by a maximum of
$5,000,000 for any such fiscal year by carrying over to any such fiscal year any
portion of the Base Amount (as increased) not spent in the immediately preceding
fiscal year; provided, further, that, notwithstanding anything to the contrary
herein, additional Capital Expenditures may be made with net proceeds received
in property sales or dispositions under subsection 8.5(g).
8.8 Consolidated EBITDA. At the last day of any fiscal quarter set
forth below, commencing with the first fiscal quarter of the 1997 fiscal year of
the Company, permit Consolidated EBITDA for the period of four fiscal quarters
ending on such day to be less than the amount set forth opposite such fiscal
quarter below:
Fiscal Year Fiscal Quarter Amount
----------- -------------- ------
1997 First $28,000,000
Second $28,000,000
Third $28,500,000
Fourth $29,000,000
1998 First $29,000,000
Second $30,000,000
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76
Fiscal Year Fiscal Quarter Amount
----------- -------------- ------
Third $31,000,000
Fourth $32,000,000
1999 First $32,000,000
Second $33,000,000
Third $34,000,000
Fourth $37,000,000
2000 First $37,000,000
Second $38,000,000
Third $39,000,000
Fourth $42,000,000
2001 First $42,000,000
Second $43,000,000
Third $44,000,000
Fourth $45,000,000
2002 First $45,000,000
Second $46,000,000
Third $47,000,000
Fourth $50,000,000
2003 First $50,000,000
Second $51,000,000
Third $52,000,000
8.9 Debt to EBITDA. At the last day of any fiscal quarter set forth
below, commencing with the first fiscal quarter of the 1997 fiscal year of the
Company, permit the ratio of Consolidated Funded Indebtedness as of such day to
Consolidated EBITDA for the period of four fiscal quarters ending on such day to
be greater than the ratio set forth below for such fiscal quarter; provided
that, with respect to any acquisition permitted by subsection 8.7, the last four
fiscal quarters of Consolidated EBITDA (as may be adjusted for post acquisition
cost savings reasonably agreed to by the Company and the Administrative Agent)
of the acquired company shall be added for the purposes of calculating this
ratio:
Fiscal Year Fiscal Quarter Ratio
----------- -------------- -----
1997 First 5.75 to 1.00
Second 5.75 to 1.00
Third 5.75 to 1.00
Fourth 5.75 to 1.00
1998 First 5.75 to 1.00
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77
Fiscal Year Fiscal Quarter Ratio
----------- -------------- -----
Second 5.75 to 1.00
Third 5.50 to 1.00
Fourth 5.00 to 1.00
1999 First 5.00 to 1.00
Second 5.00 to 1.00
Third 4.75 to 1.00
Fourth 4.50 to 1.00
2000 First 4.50 to 1.00
Second 4.50 to 1.00
Third 4.00 to 1.00
Fourth 4.00 to 1.00
2001 First 4.00 to 1.00
Second 4.00 to 1.00
Third 4.00 to 1.00
Fourth 3.50 to 1.00
2002 First 3.50 to 1.00
Second 3.50 to 1.00
Third 3.50 to 1.00
Fourth 3.25 to 1.00
2003 First 3.25 to 1.00
Second 3.25 to 1.00
Third 3.25 to 1.00
8.10 Interest Coverage. At the last day of any fiscal quarter set
forth below, permit the Interest Coverage Ratio to be less than the ratio set
forth below for such fiscal quarter:
Interest
Coverage
Fiscal Year Fiscal Quarter Ratio
----------- -------------- -----
1997 First 1.50 to 1.00
Second 1.50 to 1.00
Third 1.60 to 1.00
Fourth 1.60 to 1.00
1998 First 1.60 to 1.00
Second 1.60 to 1.00
Third 1.75 to 1.00
Fourth 1.75 to 1.00
<PAGE>
78
Interest
Coverage
Fiscal Year Fiscal Quarter Ratio
----------- -------------- -----
1999 First 1.75 to 1.00
Second 1.75 to 1.00
Third 2.00 to 1.00
Fourth 2.00 to 1.00
2000 First 2.00 to 1.00
Second 2.00 to 1.00
Third 2.25 to 1.00
Fourth 2.25 to 1.00
2001 First 2.25 to 1.00
Second 2.25 to 1.00
Third 2.50 to 1.00
Fourth 2.50 to 1.00
2002 First 2.50 to 1.00
Second 2.50 to 1.00
Third 2.75 to 1.00
Fourth 2.75 to 1.00
2003 First 2.75 to 1.00
Second 2.75 to 1.00
Third 3.00 to 1.00
8.11 Limitation on Dividends. Declare any dividends on any shares of
any class of stock, or make any payment on account of, or set apart assets for a
sinking or other analogous fund for, the purchase, redemption, retirement or
other acquisition of any shares of any class of stock, or any warrants or
options to purchase such stock, whether now or hereafter outstanding, or make
any other distribution in respect thereof, either directly or indirectly,
whether in cash or property or in obligations of the Company or any of its
Subsidiaries; except that:
(a) Subsidiaries may pay dividends to the Company or to Domestic
Subsidiaries which are directly or indirectly wholly-owned by the Company;
(b) the Company may pay or make dividends or distributions to any
holder of its capital stock in the form of additional shares of Capital
Stock of the same class and type, provided such shares of Capital Stock
paid, dividended or distributed to Holdings are pledged to the
Administrative Agent for the benefit of the Lenders; and
(c) the Company may pay dividends or make other distributions:
(i) to Holdings in amounts equal to the amounts required for
Holdings to pay franchise taxes and other fees required to maintain
its
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79
corporate existence and provide for other operating costs of up to
$500,000 per fiscal year;
(ii) to Holdings in amounts equal to amounts required for
Holdings to pay Federal, state and local income taxes to the extent
such income taxes are attributable to the income of the Company and
its Subsidiaries;
(iii) to Holdings in amounts equal to amounts expended by
Holdings to repurchase Capital Stock of Holdings owned by former
employees of the Company or its Subsidiaries or their assigns,
estates and heirs, provided that the aggregate amount paid, loaned
or advanced to Holdings pursuant to this clause (iii) shall not, in
the aggregate, exceed $5,000,000 per fiscal year of the Company, up
to a maximum aggregate amount of $10,000,000 during the term of this
Agreement, plus any amounts contributed by Holdings to the Company
as a result of resales of such repurchased shares of Capital Stock;
and
(iv) so long as, after giving effect thereto, no Default or
Event of Default has occurred and is continuing and the most recent
financial statements required to be delivered pursuant to subsection
7.1(b), have been delivered, the Company may pay scheduled cash
dividends on the Company Preferred Stock to enable Holdings to pay
interest at a non-default rate per annum not in excess of 14% to the
holders of the Holdings Subordinated Debt in respect of the
six-month period ended on such day (or accrued deferred interest in
respect of any prior period), provided that within 20 days Holdings
uses such dividends to pay current or accrued cash dividends or
interest on the Holdings Subordinated Debt; and
(v) if the Company is prohibited from paying cash dividends
pursuant to subsection 8.11(c)(iv) because of the occurrence of a
Default or Event of Default, the Company may pay the cash dividends
which it would have otherwise paid on its preferred stock to
Holdings on a prior date on any succeeding date to enable Holdings
to pay interest at a non-default rate per annum not in excess of 14%
to the holders of the Holdings Subordinated Debt
in respect of any prior period (or accrued deferred interest in
respect of any prior period), provided that (A) so long as, after
giving effect thereto, no Default or Event of Default has occurred
and is continuing (including compliance with the Interest Coverage
Ratio set forth in subsection 8.10 on a pro forma basis assuming
such dividends that are proposed to be paid at such time pursuant to
this clause (v) but were not paid under clause (iv) of this
subsection 8.11(c) had been paid on the last day of the most
recently ended fiscal quarter of the Company (for purposes of
calculating compliance with the Interest Coverage Ratio pursuant to
this subsection 8.11(c)(v) only, the denominator of the Interest
Coverage Ratio shall include the amount of such dividends paid in
cash by the Company to Holdings pursuant to this subsection
8.11(c)(v))), (B) the financial statements required to be delivered
in respect of
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80
such fiscal quarter have been delivered pursuant to subsection
7.1(b) and (C) within 20 days Holdings uses such dividends to pay
current or accrued interest on the Holdings Subordinated Debt.
8.12 Transactions with Affiliates. Enter into any transaction,
including, without limitation, any purchase, sale, lease or exchange of property
or the rendering of any service, with any Affiliate except for transactions
which are otherwise permitted under this Agreement and which are in the ordinary
course of the Company's or a Subsidiary's business and which are upon fair and
reasonable terms no less favorable to the Company or such Subsidiary than it
would obtain in a hypothetical comparable arm's length transaction with a Person
not an Affiliate, provided, however, that nothing in this subsection 8.12 shall
prohibit the Company or its Subsidiaries from engaging in the following
transactions: (x) the performance of the Company's or any Subsidiary's
obligations under any employment contract, collective bargaining agreement,
employee benefit plan, related trust agreement or any other similar arrangement
heretofore or hereafter entered into in the ordinary course of business, (y)
payment of compensation to employees, officers, directors or consultants in the
ordinary course of business, and (z) maintenance of benefit programs or
arrangements for employees, officers or directors, including, without
limitation, vacation plans, health and life insurance plans, deferred
compensation plans, and retirement or savings plans and similar plans, in each
case, in the ordinary course of business.
8.13 Prepayments and Amendments of Subordinated Debt and Equity. (a)
Optionally prepay, retire, redeem, purchase, defease or exchange, or make any
mandatory prepayment of any Subordinated Debt (other than (x) redemption of the
Bridge Subordinated Debt with proceeds of the Permanent Subordinated Debt, (y)
any refinancing of the Permanent Subordinated Debt contemplated in the
definition thereof and (z) any redemption of Subordinated Debt with the proceeds
of the issuance of Capital Stock to the extent permitted by subsection 4.4(b))
or pay any interest on Subordinated Debt in cash if such interest may be paid by
the issuance of additional Subordinated Debt or (b) amend, supplement or
otherwise modify any documentation governing any Subordinated Debt (other than
(i) amendments to such Subordinated Debt which reduce the interest rate or
extend the maturity thereof, (ii) waivers of compliance by the Company with any
of the terms or conditions of such Subordinated Debt (except those which by
their terms run to the benefit of the Lenders) and (iii) any amendment,
supplement or modification described in clause (i) of Section 9(k)).
8.14 Limitation on Changes in Fiscal Year. Permit the fiscal year of
the Company to end on a day other than the Saturday in December or January
closest to the last day of December in any calendar year.
8.15 Limitation on Lines of Business. Enter into any business,
either directly or through any Subsidiary, except for those businesses in which
the Company or any Subsidiary is engaged on the date of this Agreement (or which
are directly related thereto).
<PAGE>
81
SECTION 9. EVENTS OF DEFAULT
Upon the occurrence and during the continuance of any of the
following events:
(a) The Company shall fail to (i) pay any principal of any Note when
due in accordance with the terms hereof or thereof or to reimburse the
Issuing Lender in accordance with subsection 3.8 or (ii) pay any interest
on any Loan or any other amount payable hereunder within five days after
any such interest or other amount becomes due in accordance with the terms
thereof or hereof; or
(b) Any representation or warranty made or deemed made by any Credit
Party in any Credit Document shall prove to have been incorrect in any
material respect on or as of the date made or deemed made; or
(c) The Company shall default in the observance or performance of
any agreement contained in subsection 7.7(a) or 7.9 or Section 8 of this
Agreement or Holdings shall default in the observance or performance of
any agreement contained in Section 5 of the Holdings Pledge Agreement or
the Company shall default in the observance or performance of any
agreement contained in subsections 5(a), (h) through (k) and (o) of the
Company Security Agreement or Holdings shall default in the observance or
performance of any agreement contained in Section 10 of the Holdings
Guarantee, or, with respect to any Subsidiary which becomes a Credit Party
after the Closing Date, the Company or such Subsidiary shall default in
the observance or performance of the corresponding provisions of the
pledge agreement, guarantee and security agreement to which it is a party;
or
(d) Any Credit Party shall default in the observance or performance
of any other agreement contained in any Credit Document and such default
shall continue unremedied for a period of 30 days; or
(e) The Company or any of its Subsidiaries shall (i) default in any
payment of principal of or interest on or other amounts in respect of any
Indebtedness (other than the Loans, the L/C Obligations and any
inter-company debt) or Interest Rate Agreement or in the payment of any
Contingent Obligation, beyond the period of grace, if any, provided in the
instrument or agreement under which such Indebtedness, Interest Rate
Agreement or Contingent Obligation was created; or (ii) default in the
observance or performance of any other agreement or condition relating to
any such Indebtedness, Interest Rate Agreement or Contingent Obligation or
contained in any instrument or agreement evidencing, securing or relating
thereto, or any other event shall occur or condition exist, the effect of
which default or other event or condition is to cause, or to permit the
holder or holders of such Indebtedness or beneficiary or beneficiaries of
such Contingent Obligation (or a trustee or agent on behalf of such holder
or holders or beneficiary or beneficiaries) to cause, with the giving of
notice if required, such Indebtedness to become due prior to its stated
maturity, any applicable grace period having expired, or such Contingent
Obligation to become payable, any
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82
applicable grace period having expired; in each case, provided that the
aggregate principal amount of all such Indebtedness, Interest Rate
Agreements and Contingent Obligations under which a default exists or
which would then become due or payable equals or exceeds $5,000,000; or
(f) (i) The Company or any of its Subsidiaries or Holdings shall
commence any case, proceeding or other action (A) under any existing or
future law of any jurisdiction, domestic or foreign, relating to
bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it as bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking
appointment of a receiver, trustee, custodian or other similar official
for it or for all or any substantial part of its assets, or the Company or
any of its Subsidiaries or Holdings shall make a general assignment for
the benefit of its creditors; or (ii) there shall be commenced against the
Company or any of its Subsidiaries or Holdings any case, proceeding or
other action of a nature referred to in clause (i) above which (A) results
in the entry of an order for relief or any such adjudication or
appointment or (B) remains undismissed, undischarged or unbonded for a
period of 60 days; or (iii) there shall be commenced against the Company
or any of its Subsidiaries or Holdings any case, proceeding or other
action seeking issuance of a warrant of attachment, execution, distraint
or similar process against all or any substantial part of its assets which
results in the entry of an order for any such relief which shall not have
been vacated, discharged, or stayed or bonded pending appeal within 60
days from the entry thereof; or (iv) the Company or any of its
Subsidiaries or Holdings shall take any action in furtherance of, or
indicating its consent to, approval of, or acquiescence in, any of the
acts set forth in clause (i), (ii), or (iii) above; or (v) the Company or
any of its Subsidiaries or Holdings shall generally not, or shall be
unable to, or shall admit in writing its inability to, pay its debts as
they become due; or
(g) (i) Any Person shall engage in any "prohibited transaction" (as
defined in Section 406 of ERISA or Section 4975 of the Code) involving any
Plan, (ii) any "accumulated funding deficiency" (as defined in Section 302
of ERISA), whether or not waived, shall exist with respect to any Plan or
any Lien in favor of the PBGC or a Plan shall arise on the assets of the
Company or any Commonly Controlled Entity, (iii) a Reportable Event shall
occur with respect to, or proceedings shall commence to have a trustee
appointed, or a trustee shall be appointed, to administer or to terminate,
any Single Employer Plan, which Reportable Event or commencement of
proceedings or appointment of a trustee is, in the reasonable opinion of
the Required Lenders, likely to result in the termination of such Plan for
purposes of Title IV of ERISA, (iv) any Single Employer Plan shall
terminate for purposes of Title IV of ERISA, (v) the Company or any
Commonly Controlled Entity shall, or in the reasonable opinion of the
Required Lenders is likely to, incur any liability in connection with a
withdrawal from, or the Insolvency or Reorganization of, a Multiemployer
Plan or (vi) any other event or condition shall occur or exist with
respect to a Plan, and such event or condition, together with all other
such events or
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83
conditions, relating to a Plan, if any, would be reasonably likely to
subject the Company or any of its Subsidiaries to any tax, penalty or
other liabilities in the aggregate material in relation to the business,
assets, condition (financial or otherwise) or results of the Company and
its Subsidiaries taken as a whole; or
(h) One or more judgments or decrees shall be entered against the
Company or any of its Subsidiaries involving in the aggregate a liability
(not paid or fully covered by insurance) of $5,000,000 or more and all
such judgments or decrees shall not have been vacated, discharged, stayed
or bonded pending appeal within the time required by the terms of such
judgment; or
(i) Any Credit Document shall cease, for any reason, to be in full
force and effect or any Credit Party or any of its Subsidiaries shall so
assert in writing, or any Pledge Agreement, or Security Agreement shall
cease to be effective to grant a perfected Lien on the collateral
described therein with the priority purported to be created thereby (other
than as a result of any action or inaction on the part of the
Administrative Agent or the Lenders), subject to such exceptions as may be
permitted therein, and in the case of any Security Agreement such
condition shall continue unremedied for 30 days after notice thereof to
the Company by the Administrative Agent or any Lender; or
(j) There shall have occurred a Change in Control; or
(k) (i) There shall have occurred any amendment, supplement or other
modification of the Bridge Subordinated Debt Documents or the Bridge
Subordinated Debt, or any other Subordinated Debt or the documents
governing such Subordinated Debt, which in any such case shall not have
been consented to in advance in writing by the Administrative Agent and
the Required Lenders, except (A) as otherwise expressly permitted by
subsection 8.13 or (B) to the extent such amendment, supplement or
modification gives effect to any prepayment, retirement or redemption of
Subordinated Debt expressly permitted by this Agreement or (ii) the
subordination provisions of any Bridge Subordinated Debt Document or any
document governing any Subordinated Debt shall cease, for any reason, to
be valid or any Credit Party or any of its Subsidiaries shall so assert in
writing; or
(l) Holdings shall at any time engage in any business or activity
other than the owning of Capital Stock of the Company and any actions
reasonably incidental thereto;
then, and in any such event, (a) if such event is an Event of Default specified
in clause (i) or (ii) of paragraph (f) above with respect to the Company,
automatically (i) the Commitments shall immediately terminate and the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the Notes shall immediately become due and payable, and (ii) all
obligations of the Company in respect of the Letters of Credit, although
contingent and unmatured, shall become immediately due and payable and the
Issuing
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84
Lender's obligations to issue the Letters of Credit shall immediately terminate
and (b) if such event is any other Event of Default, so long as any such Event
of Default shall be continuing, either or both of the following actions may be
taken: (i) with the consent of the Required Lenders, the Administrative Agent
may, or upon the request of the Required Lenders, the Administrative Agent
shall, by notice to the Company, declare the Commitments and the Issuing
Lender's obligations to issue the Letters of Credit to be terminated forthwith,
whereupon the Commitments and such obligations shall immediately terminate; and
(ii) with the consent of the Required Lenders, the Administrative Agent may, or
upon the request of the Required Lenders, the Administrative Agent shall, by
notice of default to the Company, (A) declare all or a portion of the Loans
hereunder (with accrued interest thereon) and all other amounts owing under this
Agreement and the Notes to be due and payable forthwith, whereupon the same
shall immediately become due and payable, and (B) declare all or a portion of
the obligations of the Company in respect of the Letters of Credit, although
contingent and unmatured, to be due and payable forthwith, whereupon the same
shall immediately become due and payable and/or demand that the Company
discharge any or all of the obligations supported by the Letters of Credit by
paying or prepaying any amount due or to become due in respect of such
obligations. All payments under this Section 9 on account of undrawn Letters of
Credit shall be made by the Company directly to a cash collateral account
established by the Administrative Agent for such purpose for application to the
Company's reimbursement obligations under subsection 3.8 as drafts are presented
under the Letters of Credit, with the balance, if any, to be applied to the
Company's obligations under this Agreement and the Notes as the Administrative
Agent shall determine with the approval of the Required Lenders. Except as
expressly provided above in this Section 10, presentment, demand, protest and
all other notices of any kind are hereby expressly waived.
SECTION 10. THE ADMINISTRATIVE AGENT; THE ISSUING LENDER
10.1 Appointment. Each Lender hereby irrevocably designates and
appoints Chase as the Administrative Agent, Bankers Trust Company as the
Syndication Agent, and Goldman Sachs Credit Partners L.P. as the Documentation
Agent under this Agreement and irrevocably authorizes Chase as Administrative
Agent, Bankers Trust Company as Syndication Agent, and Goldman Sachs Credit
Partners L.P. as Documentation Agent for such Lender, to take such action on its
behalf under the provisions of the Credit Documents and to exercise such powers
and perform such duties as are expressly delegated to the Administrative Agent,
the Syndication Agent, and the Documentation Agent by the terms of the Credit
Documents, together with such other powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary elsewhere in this Agreement, the
Administrative Agent, the Syndication Agent, and the Documentation Agent shall
not have any duties or responsibilities, except those expressly set forth
herein, or any fiduciary relationship with any Lender, and no implied covenants,
functions, responsibilities, duties, obligations or liabilities shall be read
into the Credit Documents or otherwise exist against the Administrative Agent,
the Syndication Agent, and the Documentation Agent.
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85
10.2 Delegation of Duties. The Administrative Agent may execute any
of its duties under this Agreement and each of the other Credit Documents by or
through agents or attorneys-in-fact and shall be entitled to advice of counsel
concerning all matters pertaining to such duties. The Administrative Agent shall
not be responsible for the negligence or misconduct of any agents or
attorneys-in-fact selected by it with reasonable care, except as otherwise
provided in subsection 10.3.
10.3 Exculpatory Provisions. Neither the Administrative Agent nor
any of its officers, directors, employees, agents, attorneys-in-fact or
Affiliates shall be (i) liable for any action lawfully taken or omitted to be
taken by it or such Person under or in connection with the Credit Documents
(except for its or such Person's own gross negligence or willful misconduct), or
(ii) responsible in any manner to any of the Lenders for any recitals,
statements, representations or warranties made by any Credit Party or any
officer thereof contained in the Credit Documents or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Administrative Agent under or in connection with, the Credit Documents or for
the value, validity, effectiveness, genuineness, enforceability or sufficiency
of the Credit Documents or for any failure of any Credit Party to perform its
obligations thereunder. The Administrative Agent shall not be under any
obligation to any Lender to ascertain or to inquire as to the observance or
performance of any of the agreements contained in, or conditions of, any Credit
Document, or to inspect the properties, books or records of any Credit Party.
10.4 Reliance by Administrative Agent. The Administrative Agent
shall be entitled to rely, and shall be fully protected in relying, upon any
Note, entries maintained in the Register, writing, resolution, notice, consent,
certificate, affidavit, letter, cablegram, telegram, telecopy, telex or teletype
message, statement, order or other document or conversation believed by it to be
genuine and correct and to have been signed, sent or made by the proper Person
or Persons and upon advice and statements of legal counsel (including, without
limitation, counsel to the Company), independent accountants and other experts
selected by the Administrative Agent. The Administrative Agent may deem and
treat the payee of any Note as the owner thereof for all purposes unless a
written notice of assignment, negotiation or transfer thereof shall have been
filed with the Administrative Agent. The Administrative Agent shall be fully
justified in failing or refusing to take any action under any Credit Document
unless it shall first receive such advice or concurrence of the Required Lenders
(or, where a higher percentage of the Lenders is expressly required hereunder,
such Lenders) as it deems appropriate or it shall first be indemnified to its
satisfaction by the Lenders against any and all liability and expense which may
be incurred by it by reason of taking or continuing to take any such action. The
Administrative Agent shall in all cases be fully protected in acting, or in
refraining from acting, under any Credit Document in accordance with a request
of the Required Lenders (unless a higher percentage of Lenders is expressly
required), and such request and any action taken or failure to act pursuant
thereto shall be binding upon all the Lenders and all future holders of the
Notes.
10.5 Notice of Default. The Administrative Agent shall not be deemed
to have knowledge or notice of the occurrence of any Default or Event of Default
hereunder
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86
unless the Administrative Agent has received written notice from a Lender or the
Company or any other Credit Party referring to this Agreement, describing such
Default or Event of Default and stating that such notice is a "notice of
default". In the event that the Administrative Agent receives such a notice, the
Administrative Agent shall promptly give notice thereof to the Lenders. The
Administrative Agent shall take such action with respect to such Default or
Event of Default as shall be reasonably directed by the Required Lenders;
provided that unless and until the Administrative Agent shall have received such
directions, the Administrative Agent may (but shall not be obligated to) take
such action, or refrain from taking such action, with respect to such Default or
Event of Default as it shall deem advisable in the best interests of the
Lenders.
10.6 Non-Reliance on Administrative Agent and Other Lenders. Each
Lender expressly acknowledges that neither the Administrative Agent nor any of
its officers, directors, employees, agents, attorneys-in-fact or Affiliates has
made any representations or warranties to it and that no act by the
Administrative Agent hereafter taken, including any review of the affairs of the
Credit Parties, shall be deemed to constitute any representation or warranty by
the Administrative Agent to any Lender. Each Lender represents to the
Administrative Agent that it has, independently and without reliance upon the
Administrative Agent or any other Lender, and based on such documents and
information as it has deemed appropriate, made its own appraisal of and
investigation into the business, operations, property, financial and other
condition and creditworthiness of Holdings, AcquisitionCo and the Company and
its Subsidiaries and made its own decision to make its Loans hereunder and enter
into this Agreement. Each Lender also represents that it will, independently and
without reliance upon the Administrative Agent or any other Lender, and based on
such documents and information as it shall deem appropriate at the time,
continue to make its own credit analysis, appraisals and decisions in taking or
not taking action under the Credit Documents, and to make such investigation as
it deems necessary to inform itself as to the business, operations, property,
financial and other condition and creditworthiness of Holdings, AcquisitionCo
and the Company and its Subsidiaries. Except for notices, reports and other
documents expressly required to be furnished to the Lenders by the
Administrative Agent hereunder, the Administrative Agent shall not have any duty
or responsibility to provide any Lender with any credit or other information
concerning the business, operations, property, financial and other condition or
creditworthiness of the Credit Parties which may come into the possession of the
Administrative Agent or any of its officers, directors, employees, agents,
attorneys-in-fact or Affiliates.
10.7 Indemnification. The Lenders agree to indemnify the
Administrative Agent in its capacity as such (to the extent not reimbursed by
the Credit Parties and without limiting the obligation of the Credit Parties to
do so), ratably according to the respective amounts of their respective
Commitments (or, to the extent such Commitments have been terminated, according
to the respective outstanding principal amounts of the Loans and the L/C
Obligations and the respective obligations, whether as Issuing Lender or a
Participating Lender, under the Letter of Credit), from and against any and all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind whatsoever which may at any time
(including without limitation at any time following
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the payment of the Loans) be imposed on, incurred by or asserted against the
Administrative Agent in any way relating to or arising out of the Credit
Documents or any documents contemplated by or referred to herein or the
transactions contemplated hereby or any action taken or omitted by the
Administrative Agent under or in connection with any of the foregoing; provided
that no Lender shall be liable for the payment of any portion of such
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements resulting solely from the Administrative
Agent's gross negligence or willful misconduct. The agreements in this
subsection 10.7 shall survive the repayment of the Loans and all other amounts
payable hereunder.
10.8 The Administrative Agent in its Individual Capacity. The
Administrative Agent and its Affiliates may make loans to, accept deposits from
and generally engage in any kind of business with Holdings, the Company and its
Subsidiaries as though the Administrative Agent were not the Administrative
Agent hereunder. With respect to its Loans made or renewed by it and any Note
issued to it, the Administrative Agent shall have the same rights and powers,
duties and liabilities under the Credit Documents as any Lender and may exercise
the same as though it were not the Administrative Agent and the terms "Lender"
and "Lenders" shall include the Administrative Agent in its individual capacity.
10.9 Successor Administrative Agent. The Administrative Agent may
resign as Administrative Agent upon 30 days' notice to the Lenders. If the
Administrative Agent shall resign as Administrative Agent under the Credit
Documents, then the Required Lenders shall appoint from among the Lenders a
successor agent for the Lenders which successor agent shall, so long as no Event
of Default has occurred and is continuing, be approved by the Company, which
shall not unreasonably withhold its approval, whereupon such successor agent
shall succeed to the rights, powers and duties of the Administrative Agent, and
the term "Administrative Agent" shall mean such successor agent effective upon
such appointment and approval, and the former Administrative Agent's rights,
powers and duties as Administrative Agent shall be terminated, without any other
or further act or deed on the part of such former Administrative Agent or any of
the parties to this Agreement or any holders of the Notes. After any retiring
Administrative Agent's resignation hereunder as Administrative Agent, the
provisions of this Section 10 shall inure to its benefit as to any actions taken
or omitted to be taken by it while it was the Administrative Agent under the
Credit Documents.
10.10 Issuing Lender as Issuer of Letters of Credit. Each Lender
which is a holder of a Revolving Credit Commitment (collectively "Revolving
Credit Lenders") hereby acknowledges that the provisions of this Section 10
shall apply to the Issuing Lender, in its capacity as issuer of the Letters of
Credit, in the same manner as such provisions are expressly stated to apply to
the Administrative Agent, except that obligations to indemnify the Issuing
Lender shall be ratable among the Revolving Credit Lenders in accordance with
their respective Revolving Credit Commitments (or, if the Revolving Credit
Commitments have been terminated, the outstanding principal amount of their
respective Revolving Credit Loans and L/C Obligations and their respective
participating interests in the outstanding Letters of Credit).
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SECTION 11. MISCELLANEOUS
11.1 Amendments and Waivers. Except as otherwise expressly set forth
in this Agreement, no Credit Document nor any terms thereof may be amended,
supplemented, waived or modified except in accordance with the provisions of
this subsection 11.1. With the written consent of the Required Lenders, the
Administrative Agent and the respective Credit Parties or their Subsidiaries
may, from time to time, enter into written amendments, supplements or
modifications hereto for the purpose of adding any provisions to any Credit
Document to which they are parties or changing in any manner the rights of the
Lenders or of any such Credit Party or its Subsidiaries thereunder or waiving,
on such terms and conditions as the Administrative Agent may specify in such
instrument, any of the requirements of any such Credit Document or any Default
or Event of Default and its consequences; provided, however, that:
(a) no such waiver and no such amendment, supplement or modification
shall release collateral not required or permitted by any Credit Document
to be released and which, in the aggregate with all other collateral
released pursuant to this clause (a) (other than collateral released
pursuant to the proviso to this clause (a)) during the calendar year in
which such proposed release would be effected and the immediately
preceding calendar year, has fair market value on the proposed date of
release in excess of 20% of the fair market value of all collateral
(including any Guarantee) on such date without the written consent of the
Supermajority Lenders; provided that, notwithstanding the foregoing, this
clause (a) shall not be applicable to and no consent shall be required for
(i) releases of collateral in connection with any Asset Sales permitted by
subsection 8.5 as in effect on the Closing Date, (ii) releases of
collateral in accordance with subsection 11.11 or (iii) upon the
reincorporation of the Company or any Subsidiary in a new jurisdiction or
the creation of a new Subsidiary of the Company, any release of collateral
in connection with the transfer of such released collateral to such
reincorporated entity or new Subsidiary in compliance with subsection 8.4,
provided that the Administrative Agent, in its sole discretion, determines
that such release and transfer, together with any grant and perfection of
a new Lien therein in favor of the Administrative Agent, will cause no
material impairment of the value of the collateral taken as a whole, after
giving effect to such release and transfer;
(b) no such waiver and no such amendment, supplement or modification
shall extend the final maturity date of any Note or the scheduled payment
date of any installment of any Loan, or reduce the rate or extend the time
of payment of interest thereon, or change the method of calculating
interest thereon, or reduce any fee payable to the Lenders hereunder, or
reduce the principal amount thereof, or change the amount of any Lender's
Commitment or Commitment Percentage, or amend, modify or waive any
provision of subsection 4.9(b) or this subsection 11.1 or reduce the
percentage specified in the definition of Required Lenders or reduce the
percentage specified in the definition of Supermajority Lenders or consent
to the assignment or transfer by any Credit Party of any of its rights and
obligations under any Credit
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Document, in each case, without the prior written consent of each Lender
directly affected thereby;
(c) no such waiver and no such amendment, supplement or modification
affecting the then Administrative Agent or Issuing Lender shall amend,
modify or waive any provision of Section 10 without the written consent of
such Administrative Agent and Issuing Lender;
(d) without the consent of each of the Lenders which are Revolving
Credit Lenders only, each of the Lenders which are holders of the Term
Loan Notes may amend this Agreement and the Term Loan Notes to extend the
maturities of the installments of the Term Loans, and without the consent
of each of the Lenders which are holders of the Term Loans only, the
Revolving Credit Lenders may amend this Agreement and the Revolving Credit
Notes to extend the Revolving Credit Termination Date; and
(e) no such waiver, and no such amendment, supplement or
modification shall amend, modify or waive the prepayment requirements
specified in subsection 4.4(b)(i), (ii) and (iii) or the order of
application of prepayments specified in subsection 4.4(a) or 4.4(b)(v)
without the written consent of the holders of at least 51% of each of (i)
the aggregate unpaid principal amount of the Term Loans, if any, and (ii)
the Revolving Credit Commitments or, if the Revolving Credit Commitments
are terminated, the aggregate unpaid principal amount of the Revolving
Credit Loans (the Term Loans and the Revolving Credit Commitments of any
Non-Funding Lender to be disregarded in determining such percentage at any
time);
any such waiver and any such amendment, supplement or modification described in
this subsection 11.1 shall apply equally to each of the Lenders and shall be
binding upon each Credit Party and its Subsidiaries, the Lenders, the Agents and
the Issuing Lender and all future holders of the Notes and the Loans. Any
extension of a Letter of Credit by the Issuing Lender shall be treated hereunder
as a new Letter of Credit. In the case of any waiver, the Credit Parties, the
Lenders, the Agents and Issuing Lender shall be restored to their former
position and rights hereunder and under the outstanding Notes, and any Default
or Event of Default waived shall be deemed to be cured and not continuing; but
no such waiver shall extend to any subsequent or other Default or Event of
Default, or impair any right consequent thereon.
11.2 Notices. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy or telex, if one is listed), and, unless otherwise expressly provided
herein, shall be deemed to have been duly given or made when delivered by hand,
or three Business Days after being deposited in the mail, postage prepaid, or,
in the case of telecopy notice, when sent, confirmation of receipt received, or,
in the case of telex notice, when sent, answerback received, addressed as
follows in the case of the Company, the Administrative Agent, and as set forth
in Schedule I in the
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case of any Lender, or to such other address as may be hereafter notified by the
respective parties hereto and any future holders of the Notes:
The Company: The William Carter Company
1590 Adamson Parkway, Suite 400
Morrow, Georgia 30260
Attention: David A. Brown
Telecopy: (770) 960-1556
With a copy to: Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attention: Janet Vance, Esq.
Telecopy: (212) 351-4035
The Administrative Agent: The Chase Manhattan Bank
1375 Broadway, Suite 800
New York, New York 10018
Attention: Joseph A. Pollicino, Jr.
Telecopy: (212) 827-4497
With a copy to: Chase Securities Inc.
270 Park Avenue, 4th Floor
New York, New York 10017
Attention: Douglas V. Traver
Telecopy: (212) 270-1063
With a copy to: The Chase Manhattan Bank Agent Bank
Services
1 Chase Manhattan Plaza, 8th floor
New York, New York 10081
Attention: Janet Belden
Telecopy: (212) 622-0122
provided that any notice, request or demand to or upon the Administrative Agent
or the Lenders pursuant to subsections 3.4, 3.5, 4.1, 4.2, 4.3 and 4.4 shall not
be effective until received and provided that the failure to provide the copies
of notices to the Company provided for in this subsection 11.2 shall not result
in any liability to the Administrative Agent.
11.3 No Waiver; Cumulative Remedies. No failure to exercise and no
delay in exercising, on the part of the Administrative Agent or any Lender, any
right, remedy, power or privilege hereunder, shall operate as a waiver thereof;
nor shall any single or partial exercise of any right, remedy, power or
privilege hereunder preclude any other or further exercise thereof or the
exercise of any other right, remedy, power or privilege. The rights,
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remedies, powers and privileges herein provided are cumulative and not exclusive
of any rights, remedies, powers and privileges provided by law.
11.4 Survival of Representations and Warranties. All representations
and warranties made hereunder and in any document, certificate or statement
delivered pursuant hereto or in connection herewith shall survive the execution
and delivery of this Agreement, the Letters of Credit and the Notes.
11.5 Payment of Expenses and Taxes. The Company agrees (a) to pay or
reimburse the Agents, the Advisor and the Arrangers for all their reasonable
out-of-pocket costs and expenses incurred in connection with the development,
negotiation, preparation and execution of the Credit Documents and any other
documents prepared in connection herewith, and the consummation of the
transactions contemplated hereby and thereby, including, without limitation, the
reasonable fees and disbursements of one counsel to the Agents, the Advisor and
the Arrangers (b) to pay or reimburse all of the reasonable expenses, including
without limitation, reasonable fees and expenses of counsel, incurred by the
Administrative Agent in connection with the administration of the Facilities or
in connection with any amendments, waivers, work-outs or restructurings in
respect thereof, (c) to pay or reimburse the Agents, the Advisor, the Arrangers
and each Lender for all their costs and expenses incurred in connection with,
and to pay, indemnify, and hold the Agents, the Advisor, the Arrangers and each
Lender harmless from and against any and all other liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever arising out of or in connection
with, the enforcement or preservation of any rights under any Credit Document
and any such other documents, including, without limitation, reasonable fees and
disbursements of counsel to the Agents, the Advisor, the Arrangers and each
Lender incurred in connection with the foregoing and in connection with advising
the Administrative Agent with respect to its rights and responsibilities under
this Agreement and the documentation relating thereto, (d) to pay, indemnify,
and to hold the Administrative Agent and each Lender harmless from any and all
recording and filing fees and any and all liabilities with respect to, or
resulting from any delay in paying, stamp, excise and other similar taxes (other
than withholding taxes), if any, which may be payable or determined to be
payable in connection with the execution and delivery of, or consummation of any
of the transactions contemplated by, or any amendment, supplement or
modification of, or any waiver or consent under or in respect of, any Credit
Document and any such other documents, and (e) to pay, indemnify, and hold the
Agents, the Arrangers, the Advisor, the Issuing Bank and each Lender and their
respective Affiliates, officers, directors and trustees harmless from and
against any and all other liabilities, obligations, losses, damages, penalties,
actions, judgments, suits, costs, expenses or disbursements of any kind or
nature whatsoever (including, without limitation, reasonable fees and
disbursements of counsel) which may be incurred by or asserted against the
Agents, the Arrangers, the Advisor, the Issuing Bank or the Lenders or such
Affiliates, officers, directors or trustees (x) arising out of or in connection
with any investigation, litigation or proceeding related to this Agreement, the
other Credit Documents, the proceeds of the Loans or the Subordinated Debt and
the transactions contemplated by or in respect of such use of proceeds, or any
of the other transactions contemplated hereby, whether or not the Agents, the
Arrangers, the Advisor, the Issuing Bank
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or any of the Lenders or such Affiliates, officers, directors or trustees is a
party thereto, including, without limitation, any of the foregoing relating to
the violation of, noncompliance with or liability under, any Environmental Law
applicable to the Company, any of its Subsidiaries or any of the facilities and
properties owned, leased or operated by the Company or any of its Subsidiaries,
or (y) without limiting the generality of the foregoing, by reason of or in
connection with the execution and delivery or transfer of, or payment or failure
to make payments under, Letters of Credit (it being agreed that nothing in this
subsection 11.5(d)(y) is intended to limit the Company's obligations pursuant to
subsection 3.8) (all the foregoing, collectively, the "indemnified
liabilities"), provided that the Company shall have no obligation hereunder with
respect to indemnified liabilities of the Agents, the Arrangers, the Advisor,
the Issuing Bank or any Lender or any of their respective Affiliates, officers,
directors and trustees arising from (i) the gross negligence or willful
misconduct of the person seeking indemnification or (ii) legal proceedings
commenced against the Agents, the Arrangers, the Advisor, the Issuing Bank or
Lender by any security holder or creditor thereof arising out of and based upon
rights afforded any such security holder or creditor solely in its capacity as
such or (iii) legal proceedings commenced against the Agents, the Arrangers, the
Advisor, the Issuing Bank or any such Lender by any Transferee (as defined in
subsection 11.6). Without limiting the foregoing, and to the extent permitted by
applicable law, the Company agrees not to assert, and hereby waives (and shall
cause the Subsidiaries not to assert and to waive) all rights for contribution
or any other rights of recovery with respect to all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever, under or related to
Environmental Laws, that any of them might have by statute or otherwise against
the Agents, the Arrangers, the Advisor, the Issuing Lender or any Lender. The
agreements in this subsection 11.5 shall survive repayment of the Loans and all
other amounts payable hereunder.
11.6 Successors and Assigns; Participations and Assignments. (a)
This Agreement shall be binding upon and inure to the benefit of the Company,
the Lenders, the Agents, all future holders of the Notes and the Loans, and
their respective successors and assigns, except that the Company may not assign
or transfer any of its rights or obligations under this Agreement without the
prior written consent of each Lender.
(b) Any Lender may, in the ordinary course of its commercial banking
or lending business and in accordance with applicable law, at any time sell to
one or more banks or other entities ("Participants") participating interests in
any Loan owing to such Lender, any participating interest in the Letters of
Credit of such Lender, any Note held by such Lender, any Commitment of such
Lender or any other interest of such Lender hereunder. In the event of any such
sale by a Lender of participating interests to a Participant, such Lender's
obligations under this Agreement to the other parties to this Agreement shall
remain unchanged, such Lender shall remain solely responsible for the
performance thereof, such Lender shall remain the holder of any such Note for
all purposes under this Agreement and Holdings, the Company and the
Administrative Agent shall continue to deal solely and directly with such Lender
in connection with such Lender's rights and obligations under this Agreement and
the other Credit Documents. The Company agrees that if amounts outstanding under
this Agreement and the Notes are due and unpaid, or shall have been declared or
shall
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have become due and payable upon the occurrence of an Event of Default, each
Participant shall be deemed to have the right of setoff in respect of its
participating interest in amounts owing under this Agreement and any Note to the
same extent as if the amount of its participating interest were owing directly
to it as a Lender under this Agreement or any Note; provided, that such right of
setoff shall be subject to the obligation of such Participant to share with the
Lenders, and the Lenders agree to share with such Participant, as provided in
subsection 11.7. The Company also agrees that each Participant shall be entitled
to the benefits of subsections 3.10, 4.11 and 4.12 with respect to its
participation in the Letters of Credit and in the Commitments and the Loans
outstanding from time to time as if it were a Lender; provided, that no
Participant shall be entitled to receive any greater amount pursuant to any such
subsection than the transferor Lender would have been entitled to receive in
respect of the amount of the participation transferred by such transferor Lender
to such Participant had no such transfer occurred. Each Lender agrees that the
participation agreement pursuant to which any Participant acquires its
participating interest (or any other document) may afford voting rights to such
Participant, or any right to instruct such Lender with respect to voting
hereunder, only with respect to matters requiring the consent of either all of
the Lenders hereunder or all of the Lenders holding the relevant Term Loans or
Revolving Credit Commitments subject to such participation.
(c) Subject to paragraph (g) of this subsection 11.6, any Lender
may, in the ordinary course of its commercial banking, lending or investment
business and in accordance with applicable law, (i) at any time and from time to
time assign all or any part of its rights and obligations under this Agreement
and the Notes to any Lender or any Affiliate thereof, provided that, in the
event of a sale of less than all of such rights and obligations, such assigning
Lender after any such sale to any other Lender or any Affiliate of such Lender
shall retain Commitments and/or Loans and/or L/C Participating Interests
aggregating at least $5,000,000 (or such lesser amount as the Administrative
Agent may determine) and (ii) with the consent of the Company and the
Administrative Agent (which in each case shall not be unreasonably withheld or
delayed) at any time and from time to time assign to one or more additional
banks, mutual funds or financial institutions or entities (each, an "Assignee"),
all or any part of its rights and obligations under this Agreement and the
Notes, pursuant to an Assignment and Acceptance, executed by such Assignee, such
transferor Lender (and, in the case of an Assignee that is not then a Lender or
an Affiliate thereof, by the Company and the Administrative Agent), and
delivered to the Administrative Agent for its acceptance and recording in the
Register (as defined below); provided that (A) each such sale pursuant to clause
(ii) of this subsection 11.6(c) shall be in a principal amount of $5,000,000 or
more unless the Assigning Lender is transferring all of its rights and
obligations and (B) in the event of a sale of less than all of such rights and
obligations, such Lender after any such sale shall retain Commitments and/or
Loans and/or L/C Participating Interests aggregating at least $5,000,000 (or
such lesser amount as the Administrative Agent and the Company may determine).
Upon such execution, delivery, acceptance and recording, from and after the
effective date determined pursuant to such Assignment and Acceptance, (x) the
Assignee thereunder shall be a party hereto and, to the extent provided in such
Assignment and Acceptance, have the rights and obligations of a Lender hereunder
with a Commitment as set forth therein, and (y) the assigning Lender thereunder
shall, to the extent of the interest
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transferred, as reflected in such Assignment and Acceptance, be released from
its obligations under this Agreement (and, in the case of a Assignment and
Acceptance covering all or the remaining portion of a transferor Lender's rights
and obligations under this Agreement, such transferor Lender shall cease to be a
party hereto but shall continue to be entitled to the benefits of the
indemnification provisions set forth in subsection 11.5).
(d) The Administrative Agent, which for purposes of this subsection
11.6(d) only shall be deemed to be the agent of the Company, shall maintain at
the address of the Administrative Agent referred to in subsection 11.2 a copy of
each Assignment and Acceptance delivered to it and a register (the "Register")
for the recordation of the names and addresses of the Lenders and the
Commitments of, and principal amounts of the Loans owing to, each Lender from
time to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Company, the Administrative Agent and the Lenders shall
treat each Person whose name is recorded in the Register as the owner of a Loan
or other obligation hereunder as the owner thereof for all purposes of this
Agreement and the other Loan Documents, notwithstanding any notice to the
contrary. Any assignment of any Loan or other obligation hereunder shall be
effective only upon appropriate entries with respect thereto being made in the
Register. The Register shall be available for inspection by the Company or any
Lender at any reasonable time and from time to time upon reasonable prior
notice.
(e) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender and an Assignee (and, in the case of an Assignee that is not
then a Lender or an Affiliate thereof, by the Company and the Administrative
Agent), together with payment to the Administrative Agent of a registration and
processing fee of $4,000 if the Assignee is not a Lender prior to the execution
of such supplement and $1,000 otherwise, the Administrative Agent shall (i)
promptly accept such Assignment and Acceptance and (ii) on the effective date
determined pursuant thereto record the information contained therein in the
Register and give notice of such acceptance and recordation to the Lenders and
the Company. On or prior to such effective date, the Company at its own expense,
shall execute and deliver to the Administrative Agent (in exchange for any or
all of the Term Loan Notes or Revolving Credit Notes of the assigning Lender, if
any) new Term Loan Notes or Revolving Credit Notes, as the case may be, to the
order of such Assignee (if requested) in an amount equal to the Revolving Credit
Commitment or the Term Loans, as the case may be, assumed by it pursuant to such
Assignment and Acceptance and, if the assigning Lender has retained a Commitment
or any Term Loans hereunder, new Term Loan Notes or Revolving Credit Notes, as
the case may be, to the order of the assigning Lender in an amount equal to the
Commitment or such Term Loans, as the case may be, retained by it hereunder (if
requested). Such new Notes shall be dated the Closing Date and shall otherwise
be in the form of the Notes replaced thereby.
(f) The Lenders agree that they will use reasonable efforts to
protect the confidentiality of any confidential information concerning Holdings,
the Company and its Subsidiaries and Affiliates. Notwithstanding the foregoing,
the Company authorizes each Lender to disclose to any Participant or Assignee
(each, a "Transferee") and any prospective
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95
Transferee any and all information in such Lender's possession concerning
Holdings, the Company and its Subsidiaries which has been delivered to such
Lender by or on behalf of Holdings or the Company pursuant to this Agreement or
which has been delivered to such Lender by or on behalf of Holdings, or the
Company in connection with such Lender's credit evaluation of Holdings, the
Company and its Subsidiaries prior to becoming a party to this Agreement;
provided that each Lender shall cause its respective prospective Transferees to
agree in writing to protect the confidentiality of any confidential information
concerning Holdings, the Company and its Subsidiaries and Affiliates.
(g) If, pursuant to this subsection 11.6, any interest in this
Agreement or any Note is transferred to any Transferee which is organized under
the laws of any jurisdiction other than the United States or any State thereof,
the transferor Lender shall cause such Transferee, concurrently with the
effectiveness of such transfer either (1) in the case of a Transferee that is a
"bank" within the meaning of Section 881(c)(3)(A) of the Code, (i) to represent
to the transferor Lender (for the benefit of the transferor Lender, the
Administrative Agent and the Company) that under applicable law and treaties no
taxes will be required to be withheld by the Administrative Agent, the Company
or the transferor Lender with respect to any payments to be made to such
Transferee in respect of the Loans or L/C Participating Interests, (ii) to
furnish to the transferor Lender (and, in the case of any Transferee registered
in the Register, the Administrative Agent and the Company) either U.S. Internal
Revenue Service Form 4224 or U.S. Internal Revenue Service Form 1001 (wherein
such Transferee claims entitlement to complete exemption from U.S. federal
withholding tax on all interest payments hereunder) and (iii) to agree (for the
benefit of the transferor Lender, the Administrative Agent and the Company) to
provide the transferor Lender (and, in the case of any Transferee registered in
the Register, the Administrative Agent and the Company) a new Form 4224 or Form
1001 upon the expiration or obsolescence of any previously delivered form and
comparable statements in accordance with applicable U.S. laws and regulations
and amendments duly executed and completed by such Transferee, and to comply
from time to time with all applicable U.S. laws and regulations with regard to
such withholding tax exemption or (2) in the case of any Transferee that is not
a "bank" within the meaning of Section 881(c)(3)(A) of the Code, (i) to
represent to the transferor Lender (for the benefit of the transferor Lender,
the Administrative Agent and the Company) that it is not a "bank" within the
meaning of Section 881(c)(3)(A) of the Code, (ii) to furnish to the transferor
Lender (and, in the case of any Transferee registered in the Register, to the
Company), with a copy to the Administrative Agent, (A) a Subsection 5.11(d)(2)
Certificate and (B) two (2) accurate and complete original signed copies of
Internal Revenue Service Form W-8, certifying to such Transferee's legal
entitlement on the date of the effectiveness of such transfer to an exemption
from U.S. withholding tax under the provisions of Section 881(c) of the Code
with respect to all payments to be made under this Agreement, and (iii) to agree
(for the benefit of the transferor Lender, the Administrative Agent and the
Company), to the extent legally entitled to do so, upon reasonable request by
the transferor Lender (or, in the case of any Transferee registered in the
Register, the Administrative Agent or the Company), to provide to the transferor
Lender, the Administrative Agent and the Company such other forms as may be
required to establish the legal entitlement of such Transferee to an exemption
from withholding tax with respect to payments under this Agreement.
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(h) For avoidance of doubt, the parties to this Agreement
acknowledge that the provisions of this subsection concerning assignments of
Loans and Notes relate only to absolute assignments and that such provisions do
not prohibit assignments creating security interests, including, without
limitation, any pledge or assignment by a Lender of any Loan or Note to any
Federal Reserve Bank in accordance with applicable law.
11.7 Adjustments; Set-off. (a) If any Lender (a "benefitted Lender")
shall at any time receive any payment of all or part of any of its Loans or L/C
Participating Interests, as the case may be, or interest thereon, or receive any
collateral in respect thereof (whether voluntarily or involuntarily, by set-off,
pursuant to events or proceedings of the nature referred to in clause (f) of
Section 9, or otherwise) in a greater proportion than any such payment to and
collateral received by any other Lender, if any, in respect of such other
Lender's Loans or L/C Participating Interests, as the case may be, or interest
thereon, such benefitted Lender shall purchase for cash from the other Lenders
such portion of each such other Lender's Loans or L/C Participating Interests,
as the case may be, or shall provide such other Lenders with the benefits of any
such collateral, or the proceeds thereof, as shall be necessary to cause such
benefitted Lender to share the excess payment or benefits of such collateral or
proceeds ratably with each of the Lenders; provided, however, that if all or any
portion of such excess payment or benefits is thereafter recovered from such
benefitted Lender, such purchase shall be rescinded, and the purchase price and
benefits returned, to the extent of such recovery, but without interest. The
Company agrees that each Lender so purchasing a portion of another Lender's
Loans and/or L/C Participating Interests may exercise all rights of payment
(including, without limitation, rights of set-off) with respect to such portion
as fully as if such Lender were the direct holder of such portion. The
Administrative Agent shall promptly give the Company notice of any set-off,
provided that the failure to give such notice shall not affect the validity of
such set-off.
(b) In addition to any rights and remedies of the Lenders provided
by law, each Lender shall have the right, without prior notice to the Company,
any such notice being expressly waived by the Company to the extent permitted by
applicable law, upon the filing of a petition under any of the provisions of the
federal bankruptcy code or amendments thereto, by or against; the making of an
assignment for the benefit of creditors by; the application for the appointment,
or the appointment, of any receiver of, or of any substantial portion of the
property of; the issuance of any execution against any substantial portion of
the property of; the issuance of a subpoena or order, in supplementary
proceedings, against or with respect to any substantial portion of the property
of; or the issuance of a warrant of attachment against any substantial portion
of the property of; the Company to set off and apply against any indebtedness,
whether matured or unmatured, of the Company to such Lender, any amount owing
from such Lender to the Company, at or at any time after, the happening of any
of the above mentioned events, and as security for such indebtedness, the
Company hereby grants to each Lender a continuing security interest in any and
all deposits, accounts or moneys of the Company then or thereafter maintained
with such Lender, subject in each case to subsection 11.7(a) of this Agreement.
The aforesaid right of set-off may be exercised by such Lender against the
Company or against any trustee in bankruptcy, debtor in possession, assignee for
the benefit of creditors, receiver or execution, judgment or attachment
<PAGE>
97
creditor of the Company, or against anyone else claiming through or against the
Company or such trustee in bankruptcy, debtor in possession, assignee for the
benefit of creditors, receiver, or execution, judgment or attachment creditor,
notwithstanding the fact that such right of set-off shall not have been
exercised by such Lender prior to the making, filing or issuance, or service
upon such Lender of, or of notice of, any such petition; assignment for the
benefit of creditors; appointment or application for the appointment of a
receiver; or issuance of execution, subpoena, order or warrant. Each Lender
agrees promptly to notify the Company and the Administrative Agent after any
such set-off and application made by such Lender, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
11.8 Counterparts. This Agreement may be executed by one or more of
the parties to this Agreement on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument. A set of the copies of this Agreement signed by all the parties
shall be lodged with the Company and the Administrative Agent. This Agreement
shall become effective with respect to the Company, the Agents and the Lenders
when the Administrative Agent shall have received copies of this Agreement
executed by the Company, the Agents and the Lenders, or, in the case of any
Lender, shall have received telephonic confirmation from such Lender stating
that such Lender has executed counterparts of this Agreement or the signature
pages hereto and sent the same to the Administrative Agent.
11.9 Governing Law; No Third Party Rights. This Agreement and the
Notes and the rights and obligations of the parties under this Agreement and the
Notes shall be governed by, and construed and interpreted in accordance with,
the law of the State of New York. This Agreement is solely for the benefit of
the parties hereto and their respective successors and assigns, and, except as
set forth in subsection 11.6, no other Persons shall have any right, benefit,
priority or interest under, or because of the existence of, this Agreement.
11.10 Submission to Jurisdiction; Waivers. (a) Each party to this
Agreement hereby irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Agreement or any of the other Credit
Documents, or for recognition and enforcement of any judgment in respect
thereof, to the non-exclusive general jurisdiction of the courts of the
State of New York, the courts of the United States for the Southern
District of New York, and appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not
to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by registered or
certified mail (or any substantially
<PAGE>
98
similar form of mail), postage prepaid, to such party at its address set
forth in subsection 11.2 or at such other address of which the
Administrative Agent shall have been notified pursuant thereto; and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in any other jurisdiction.
(b) Each party hereto unconditionally waives trial by jury in any
legal action or proceeding referred to in paragraph (a) above and any
counterclaim therein.
11.11 Releases. The Administrative Agent and Lenders agree to
cooperate with the Company and its Subsidiaries with respect to any sale or
other disposition permitted by subsection 8.5 and promptly take such action and
execute and deliver such instruments and documents necessary to release the
liens and security interests created by the Security Documents relating to any
of the assets or property affected by any such sale permitted by subsection 8.5.
including, without limitation, any Uniform Commercial Code amendment, release or
termination or partial release or termination statements.
11.12 Interest. Each provision in this Agreement and each other
Credit Document is expressly limited so that in no event whatsoever shall the
amount paid, or otherwise agreed to be paid, by the Company for the use,
forbearance or detention of the money to be loaned under this Agreement or any
other Credit Document or otherwise (including any sums paid as required by any
covenant or obligation contained herein or in any other Credit Document which is
for the use, forbearance or detention of such money), exceed that amount of
money which would cause the effective rate of interest to exceed the highest
lawful rate permitted by applicable law (the "Highest Lawful Rate"), and all
amounts owed under this Agreement and each other Credit Document shall be held
to be subject to reduction to the effect that such amounts so paid or agreed to
be paid which are for the use, forbearance or detention of money under this
Agreement or such other Credit Document shall in no event exceed that amount of
money which would cause the effective rate of interest to exceed the Highest
Lawful Rate. Notwithstanding any provision in this Agreement or any other Credit
Document to the contrary, if the maturity of the Loans or the obligations in
respect of the other Credit Documents are accelerated for any reason, or in the
event of any prepayment of all or any portion of the Loans or the obligations in
respect of the other Credit Documents by the Company or in any other event,
earned interest on the Loans and such other obligations of the Company may never
exceed the Highest Lawful Rate, and any unearned interest otherwise payable on
the Loans or the obligations in respect of the other Credit Documents that is in
excess of the Highest Lawful Rate shall be cancelled automatically as of the
date of such acceleration or prepayment or other such event and (if theretofore
paid) shall, at the option of the holder of the Loans or such other obligations,
be either refunded to the Company or credited on the principal of the Loans. In
determining whether or not the interest paid or payable, under any specific
contingency, exceeds the Highest Lawful Rate, the Company and the Lenders shall,
to the maximum extent permitted by applicable law, amortize, prorate, allocate
and spread, in equal parts during the period of the actual term of this
Agreement, all
<PAGE>
99
interest at any time contracted for, charged, received or reserved in connection
with this Agreement.
11.13 Special Indemnification. Notwithstanding any provision in this
Agreement to the contrary, (A) each Lender, or Transferee of any Lender pursuant
to subsection 11.6(g) of this Agreement, shall indemnify the Company and the
Administrative Agent, and hold each of them harmless against any and all
payments, expenses or taxes which the Company or the Administrative Agent may
become subject to or obligated to pay if and to the extent that, (i) on the
Closing Date or the effective date of transfer, as the case may be, such Lender,
or such Transferee of a Lender pursuant to subsection 11.6(g) of this Agreement,
(a) makes the representation and covenants set forth in subsection 4.11(d)(2) of
this Agreement, or, in the case of a Transferee, pursuant to subsection
11.6(g)(2) of this Agreement and the Assignment and Acceptance, and (b) is not
in fact also qualified to make the representation and covenants set forth in
subsection 4.11(d)(1) of this Agreement or, in the case of a Transferee,
pursuant to subsection 11.6(g)(2) of this Agreement and the Assignment and
Acceptance, and (ii) as a result of any Change in Law or compliance by such
Lender, or Transferee, with any request or directive (whether or not having the
force of law) from any central bank or other Governmental Authority the Company
or the Administrative Agent is required to make any additional payments on
account of U.S. withholding taxes and amounts related thereto with respect to
any payments under this Agreement, any Note, or a Eurodollar Loan, made prior to
such Change in Law or request or directive, none of which payments would have
been required if such Lender, or Transferee, was qualified on the Closing Date
or the date of the transfer, as the case may be, to make the representation and
covenants set forth in subsection 4.11(d)(1) of this Agreement or pursuant to
subsection 11.6(g)(1) of this Agreement and the Assignment and Acceptance, as
the case may be, and (B) each Lender, or Transferee, agrees that to the extent
any amount payable by such Lender or Transferee pursuant to this subsection
11.13 remains unpaid on any Interest Payment Date or the date on which any
prepayment is made, the Company shall have the right to set-off against any
payment due to such Lender or Transferee on such date any amounts owing to the
Company pursuant to this subsection 11.13.
11.14 Permitted Payments and Transactions. Notwithstanding any
provision to the contrary contained in this Agreement, the Company and its
Subsidiaries shall be permitted to pay fees and expenses pursuant to or in
respect of, the following agreements, and, in the case of clauses (a) and (d)
below, to engage in the following transactions: (a)(i) the Agreement for
Management Advisory, Strategic Planning and Consulting Services between
Investcorp International, Inc. ("III") and the Company dated as of October 30,
1996, (ii) the Financing Advisory Agreement between III and the Company dated as
of October 30, 1996, (iii) the Letter Agreement relating to Mergers and
Acquisitions Advisory Services between III and the Company dated October 30,
1996, (iv) the Senior Debt Standby Commitment Agreement between the Company and
Invifin S.A. dated as of October 30, 1996, (v) the Merger Agreement and (vi)
dividends set forth on Schedule 5.1(b) hereto; (b) agreements with any Person or
Persons providing for the payment of customary fees in connection with serving
as a director of the Company or any Subsidiary of the Company; (c) agreements
providing for the payment of commercially reasonable fees in connection with any
permitted
<PAGE>
100
financing, refinancing, sale, transfer, sale and leaseback or other permitted
disposition of any assets of the Company or its Subsidiaries; (d) the borrowing
of any Indebtedness to the extent, and upon the terms and conditions, the same
is expressly permitted under subsection 8.1; and (e) agreements providing for
commercially reasonable fees in connection with any permitted purchase or
acquisition of stock or assets by the Company or any of its Subsidiaries.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed and delivered in New York, New York by their proper and duly
authorized officers as of the day and year first above written.
TWCC ACQUISITION CORP.
By: /s/
------------------------------------
Title:
THE CHASE MANHATTAN BANK, as
Administrative Agent, Issuing Lender
and a Lender
By /s/
-------------------------------------
Title:
BANKERS TRUST COMPANY, as Syndication
Agent and as a Lender
By: /s/
------------------------------------
Title:
GOLDMAN SACHS CREDIT PARTNERS L.P., as
Documentation Agent and as a Lender
By: /s/
------------------------------------
Title:
<PAGE>
THE FIRST NATIONAL BANK OF BOSTON
By: /s/
------------------------------------
Title:
<PAGE>
FIRST UNION NATIONAL BANK
By: /s/
------------------------------------
Title:
<PAGE>
PROTECTIVE LIFE INSURANCE COMPANY
By: /s/
------------------------------------
Title:
<PAGE>
FLEET BANK, N.A.
By: /s/
------------------------------------
Title:
<PAGE>
VAN KAMPEN AMERICAN CAPITAL PRIME
RATE INCOME TRUST
By: /s/
------------------------------------
Title:
<PAGE>
PRIME INCOME TRUST
By: /s/
------------------------------------
Title:
<PAGE>
MERRILL LYNCH SENIOR FLOATING RATE
FUND, INC.
By: /s/
------------------------------------
Title:
<PAGE>
Schedule 1 to the
Credit Agreement
Lenders, Addresses and Commitments
<TABLE>
<CAPTION>
Revolving Credit Term Loan
Commitment Commitment Total
---------------- -------------- ---------------
<S> <C> <C> <C>
THE CHASE MANHATTAN BANK $ 9,500,000.00 $21,000,000.00 $ 30,500,000.00
1375 Broadway, Suite 800
New York, NY 10018
Attn. Joseph A. Pollicino, Jr
Telecopy: 212-827-4497
BANKERS TRUST COMPANY $ 8,500,000.00 -- $ 8,500,000.00
130 Liberty Street
New York, NY 10016
Attn. Larry Benison
Telecopy: 212-250-7351
GOLDMAN SACHS CREDIT PARTNERS L.P. $ 8,000,000.00 -- $ 8,000,000.00
85 Broad Street, 27th Floor
New York, NY 10004
Attn. Christopher H. Turner
Telecopy: 212 902-2417
FIRST UNION NATIONAL BANK OF NORTH $ 8,000,000.00 -- $ 8,000,000.00
CAROLINA
One First Union Center
301 S. College Street, DC-5
Charlotte, NC 28288-0737
Attn. Thomas Molitor
Telecopy: 704-374-3300
THE FIRST NATIONAL BANK OF BOSTON $ 8,000,000.00 -- $ 8,000,000.00
100 Federal Street
Boston, MA 02110
Attn. Kimberly F. Harris
Telecopy: 617-434-4929
FLEET BANK, N.A. AGRICOLE $ 8,000,000.00 -- $ 8,000,000.00
56 E. 42nd Street
New York, NY 10017
Attn. Alex Sade
Telecopy: 212-907-5610
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Revolving Credit Term Loan
Commitment Commitment Total
---------------- -------------- ---------------
<S> <C> <C> <C>
VAN KAMPEN AMERICAN CAPITAL -- $ 8,000,000.00 $ 8,000,000.00
PRIME RATE INCOME TRUST
c/o Van Kamper American Capital
One Parkview Plaza
Oakbrook Terrace, IL 60181
Attn. Brian Murphy
Telecopy: 630-684-6740
MERRILL LYNCH SENIOR FLOATING RATE -- $ 7,000,000.00 $ 7,000,000.00
FUND, INC
800 Scudders Mill Road
Area 2C
Plainsboro, NJ 08536
Attn. Anthony Clemente
Telecopy: 609-282-2756
PRIME INCOME TRUST -- $ 7,000,000.00 $ 7,000,000.00
Two World Trade Center
72nd Floor
New York, NY 10048
Attn. Rafael Scolari
Telecopy: 212-392-5345
PROTECTIVE LIFE INSURANCE COMPANY -- $ 7,000,000.00 $ 7,000,000.00
Two Galleria Tower
13455 Noel Road-LB #45
Dallas, Tx 75420
Attn. Mark Okada
Telecopy: 214-233-4343
Total Allocation $50,000,000.00 $50,000,000.0$ $100,000,000.00
</TABLE>
<PAGE>
EXHIBIT A
TO THE
CREDIT AGREEMENT
FORM OF REVOLVING CREDIT NOTE
$__________ New York, New York
___________, 1996
FOR VALUE RECEIVED, the undersigned, TWCC ACQUISITION CORP., a
Massachusetts corporation (the "Company"), hereby promises to pay to the order
of ________________ (the "Lender") on the Revolving Credit Termination Date, as
defined in the Credit Agreement referred to below, at the office of The Chase
Manhattan Bank, located at 270 Park Avenue, New York, New York 10017, in lawful
money of the United States of America and in immediately available funds, the
principal amount of the lesser of (a) _______________ DOLLARS ($__________) and
(b) the aggregate unpaid principal amount of all Revolving Credit Loans made by
the Lender to the Company pursuant to subsection 3.1 of the Credit Agreement
defined below. The Company further agrees to pay interest in like money at such
office on the unpaid principal amount hereof from time to time from the date
hereof at the rates, and on the dates, specified in subsection 4.5 of such
Credit Agreement. The holder of this Note is authorized to record the Borrowing
Date, Type and amount of each Revolving Credit Loan made by the Lender pursuant
to subsection 3.1 of the Credit Agreement, the date and amount of each payment
or prepayment of principal hereof, and the date of each interest rate conversion
or continuation pursuant to subsection 4.2 of the Credit Agreement and the
principal amount subject thereto, on the schedules annexed hereto and made a
part hereof and any such recordation shall constitute prima facie evidence of
the accuracy of the information so recorded; provided, however, that the failure
of the Lender to make any such recordation (or any error in such recordation)
shall not affect the obligations of the Company hereunder or under the Credit
Agreement.
This Note is one of the Revolving Credit Notes referred to in the
Credit Agreement dated as of ___________, 1996 (as amended, supplemented or
otherwise modified from time to time, the "Credit Agreement"), among the
Company, the Lender, the several other banks and financial institutions from
time to time parties thereto, and The Chase Manhattan Bank, as administrative
agent, is subject to the provisions thereof and is subject to optional and
mandatory prepayment in whole or in part as provided therein. Terms used herein
which are defined in the Credit Agreement shall have such defined meanings
unless otherwise defined herein or unless the context otherwise requires.
<PAGE>
2
This Note is secured and guaranteed as provided in the Security
Documents and the Guarantees. Reference is hereby made to the Security Documents
and the Guarantees for a description of the properties and assets in which a
security interest has been granted, the nature and extent of the security and
guarantees, the terms and conditions upon which the security interest and each
guarantee was granted and the rights of the holder of this Note in respect
thereof. The undersigned hereby agrees to pay all costs and expenses incurred by
the Lender in connection with the enforcement of its rights and remedies under
the Credit Agreement, this Note, the Security Documents and each other Credit
Document.
Upon the occurrence of any one or more of the Events of Default
specified in the Credit Agreement, all amounts then remaining unpaid on this
Note shall become, or may be declared to be, immediately due and payable, all as
provided therein.
All parties now and hereafter liable with respect to this Note,
whether maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS
OF THE CREDIT AGREEMENT. TRANSFERS OF THIS NOTE MUST BE RECORDED IN THE REGISTER
MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF THE CREDIT
AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
TWCC ACQUISITION CORP.
By: _______________________________
Title:
<PAGE>
Schedule A to
Revolving Credit Note
ALTERNATE BASE RATE LOANS
AND REPAYMENTS OF ALTERNATE BASE RATE LOANS
<TABLE>
<CAPTION>
Unpaid Principal
Amount of Amount Balance of
Alternate Converted to Alternate Base
Base Rate Alternate Amount of Amount Converted Rate Notation Made
Date Loans Base Rate Loans Principal Repaid to Eurodollar Loans Loans By
- --------- ------------- ----------------- ---------------- ------------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
_________ _____________ _________________ ________________ ___________________ ________________ _____________
_________ _____________ _________________ ________________ ___________________ ________________ _____________
_________ _____________ _________________ ________________ ___________________ ________________ _____________
_________ _____________ _________________ ________________ ___________________ ________________ _____________
_________ _____________ _________________ ________________ ___________________ ________________ _____________
_________ _____________ _________________ ________________ ___________________ ________________ _____________
_________ _____________ _________________ ________________ ___________________ ________________ _____________
_________ _____________ _________________ ________________ ___________________ ________________ _____________
_________ _____________ _________________ ________________ ___________________ ________________ _____________
_________ _____________ _________________ ________________ ___________________ ________________ _____________
_________ _____________ _________________ ________________ ___________________ ________________ _____________
_________ _____________ _________________ ________________ ___________________ ________________ _____________
_________ _____________ _________________ ________________ ___________________ ________________ _____________
_________ _____________ _________________ ________________ ___________________ ________________ _____________
</TABLE>
<PAGE>
Schedule B to
Revolving Credit Note
EURODOLLAR LOANS
AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
Amount Interest Period Amount Unpaid
Amount of Converted to and Eurodollar Converted Principal
Euro- Euro- Rate with Amount of to Alternate Base Balance of
dollar dollar Respect Principal Rate Eurodollar Notation
Date Loans Loans Thereto Repaid Loans Loans Made By
- ---------- ------------ ------------- --------------- -------------- ---------------- --------------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
__________ ____________ _____________ _______________ ______________ ________________ _______________ _________
__________ ____________ _____________ _______________ ______________ ________________ _______________ _________
__________ ____________ _____________ _______________ ______________ ________________ _______________ _________
__________ ____________ _____________ _______________ ______________ ________________ _______________ _________
__________ ____________ _____________ _______________ ______________ ________________ _______________ _________
__________ ____________ _____________ _______________ ______________ ________________ _______________ _________
__________ ____________ _____________ _______________ ______________ ________________ _______________ _________
__________ ____________ _____________ _______________ ______________ ________________ _______________ _________
__________ ____________ _____________ _______________ ______________ ________________ _______________ _________
__________ ____________ _____________ _______________ ______________ ________________ _______________ _________
__________ ____________ _____________ _______________ ______________ ________________ _______________ _________
__________ ____________ _____________ _______________ ______________ ________________ _______________ _________
__________ ____________ _____________ _______________ ______________ ________________ _______________ _________
__________ ____________ _____________ _______________ ______________ ________________ _______________ _________
</TABLE>
<PAGE>
EXHIBIT B
TO THE
CREDIT AGREEMENT
FORM OF TERM LOAN NOTE
$__________ New York, New York
___________, 1996
FOR VALUE RECEIVED, the undersigned, TWCC ACQUISITION CORP., a
Massachusetts corporation (the "Company"), promises to pay to the order of
_______________ (the "Lender") at the office of The Chase Manhattan Bank, 270
Park Avenue, New York, New York 10017, in lawful money of the United States of
America and in immediately available funds, the principal amount of
____________________ DOLLARS ($__________), or, if less, the aggregate unpaid
principal amount of all loans made by the Lender pursuant to subsection 2.1 of
the Credit Agreement referred to below, which sum shall be due and payable in
such amounts and on such dates as are set forth in the Credit Agreement, dated
as of October __, 1996 among the Company, the Lender and certain other banks and
financial institutions parties thereto, and The Chase Manhattan Bank, as
administrative agent (as the same may be from time to time amended, supplemented
or otherwise modified, the "Credit Agreement"; terms defined therein being used
herein as so defined). The undersigned further agrees to pay interest at said
office, in like money, from the date hereof on the unpaid principal amount
hereof from time to time outstanding at the rates and on the dates specified in
subsection 4.5 of the Credit Agreement. The holder of this Note is authorized to
record the date, Type and amount of the Term Loan made by the Lender pursuant to
subsection 2.1 of the Credit Agreement, the date and amount of each payment or
prepayment of principal hereof, and the date of each interest rate conversion or
continuation pursuant to subsection 4.2 of the Credit Agreement and the
principal amount subject thereto, on the schedules annexed hereto and made a
part hereof and any such recordation shall constitute prima facie evidence of
the information so recorded, provided that the failure of the Lender to make
such recordation (or any error in such recordation) shall not affect the
obligations of the Company hereunder or under the Credit Agreement.
This Note is one of the Term Loan Notes referred to in the Credit
Agreement and is entitled to the benefits thereof and is subject to optional and
mandatory prepayment in whole or in part as provided therein.
This Note is secured and guaranteed as provided in the Security Documents
and the Guarantees. Reference is hereby made to the Security Documents and the
Guarantees for a description of the properties and assets in which a security
interest has been granted, the nature and extent of the security and guarantees,
the terms and conditions upon which the security interest and each guarantee was
granted and the rights of the holder of this Note in respect thereof. The
undersigned agrees to pay all costs and expenses incurred by the Lender in
<PAGE>
2
connection with the enforcement of its rights and remedies under the Credit
Agreement, this Note, the Security Documents and each other Credit Document.
Upon the occurrence of any one or more of the Events of Default specified
in the Credit Agreement, all amounts then remaining unpaid on this Note shall
become, or may be declared to be, immediately due and payable all as provided
therein.
All parties now and hereafter liable with respect to this Note, whether
maker, principal, surety, guarantor, endorser or otherwise, hereby waive
presentment, demand, protest and all other notices of any kind.
THIS NOTE MAY NOT BE TRANSFERRED EXCEPT IN COMPLIANCE WITH THE TERMS OF
THE CREDIT AGREEMENT. TRANSFERS OF THIS NOTE MUST BE RECORDED IN THE REGISTER
MAINTAINED BY THE ADMINISTRATIVE AGENT PURSUANT TO THE TERMS OF THE CREDIT
AGREEMENT.
THIS NOTE SHALL BE GOVERNED BY, AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
TWCC ACQUISITION CORP.,
By:_____________________________
Title:
<PAGE>
Schedule A to
Term Loan Note
ALTERNATE BASE RATE LOANS
AND REPAYMENTS OF ALTERNATE BASE RATE LOANS
<TABLE>
<CAPTION>
Unpaid Principal
Amount of Amount Balance of
Alternate Converted to Alternate Base
Base Rate Alternate Amount of Amount Converted Rate Notation Made
Date Loans Base Rate Loans Principal Repaid to Eurodollar Loans Loans By
- --------- ------------- ---------------- ---------------- ------------------- ---------------- -------------
<S> <C> <C> <C> <C> <C> <C>
_________ _____________ ________________ ________________ ___________________ ________________ _____________
_________ _____________ ________________ ________________ ___________________ ________________ _____________
_________ _____________ ________________ ________________ ___________________ ________________ _____________
_________ _____________ ________________ ________________ ___________________ ________________ _____________
_________ _____________ ________________ ________________ ___________________ ________________ _____________
_________ _____________ ________________ ________________ ___________________ ________________ _____________
_________ _____________ ________________ ________________ ___________________ ________________ _____________
_________ _____________ ________________ ________________ ___________________ ________________ _____________
_________ _____________ ________________ ________________ ___________________ ________________ _____________
_________ _____________ ________________ ________________ ___________________ ________________ _____________
_________ _____________ ________________ ________________ ___________________ ________________ _____________
_________ _____________ ________________ ________________ ___________________ ________________ _____________
_________ _____________ ________________ ________________ ___________________ ________________ _____________
_________ _____________ ________________ ________________ ___________________ ________________ _____________
</TABLE>
<PAGE>
Schedule B to
Term Loan Note
EURODOLLAR LOANS
AND REPAYMENTS OF EURODOLLAR LOANS
<TABLE>
<CAPTION>
Amount Interest Period Amount Unpaid
Amount of Converted to and Eurodollar Converted Principal
Euro- Euro- Rate with Amount of to Alternate Base Balance of
dollar dollar Respect Principal Rate Eurodollar Notation
Date Loans Loans Thereto Repaid Loans Loans Made By
- ---------- ------------ ------------- --------------- -------------- ---------------- --------------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
__________ ____________ _____________ _______________ ______________ ________________ _______________ __________
__________ ____________ _____________ _______________ ______________ ________________ _______________ __________
__________ ____________ _____________ _______________ ______________ ________________ _______________ __________
__________ ____________ _____________ _______________ ______________ ________________ _______________ __________
__________ ____________ _____________ _______________ ______________ ________________ _______________ __________
__________ ____________ _____________ _______________ ______________ ________________ _______________ __________
__________ ____________ _____________ _______________ ______________ ________________ _______________ __________
__________ ____________ _____________ _______________ ______________ ________________ _______________ __________
__________ ____________ _____________ _______________ ______________ ________________ _______________ __________
__________ ____________ _____________ _______________ ______________ ________________ _______________ __________
__________ ____________ _____________ _______________ ______________ ________________ _______________ __________
__________ ____________ _____________ _______________ ______________ ________________ _______________ __________
__________ ____________ _____________ _______________ ______________ ________________ _______________ __________
__________ ____________ _____________ _______________ ______________ ________________ _______________ __________
</TABLE>
<PAGE>
EXHIBIT D
TO THE
CREDIT AGREEMENT
FORM OF
ASSIGNMENT AND ACCEPTANCE
Reference is made to the Credit Agreement, dated as of ______________,
1996 (as amended, supplemented or otherwise modified from time to time, the
"Credit Agreement"), among TWCC Acquisition Corp., a Massachusetts corporation
(to be merged with and into The William Carter Company, the "Company"), the
Lenders named therein, Bankers Trust Company, as syndication agent, Goldman
Sachs Credit Partners L.P., as documentation agent and The Chase Manhattan Bank,
as administrative agent for the Lenders (in such capacity, the "Administrative
Agent"). Terms defined in the Credit Agreement are used herein with the same
meanings.
________________________ (the "Assignor") and ____________________ (the
"Assignee") agree as follows:
1. The Assignor hereby irrevocably sells and assigns to the Assignee
without recourse to the Assignor, and the Assignee hereby irrevocably purchases
and assumes from the Assignor without recourse to the Assignor, as of the
Effective Date (as defined below), the interest (the "Assigned Interest") in and
to the Assignor's rights and obligations under the Credit Agreement with respect
to those credit facilities contained in the Credit Agreement as are set forth on
Schedule 1 (individually, an "Assigned Facility"; collectively, the "Assigned
Facilities"), in a principal amount for each Assigned Facility as set forth on
Schedule 1.
2. The Assignor (i) makes no representation or warranty and assumes no
responsibility with respect to any statements, warranties or representations
made in or in connection with the Credit Agreement, any other Credit Document or
any other instrument or document furnished pursuant thereto, or the execution,
legality, validity, enforceability, genuineness, sufficiency or value of the
Credit Agreement, any other Credit Document or any other instrument or document
furnished pursuant thereto, other than it has not created any adverse claim upon
the interest being assigned by it hereunder and that such interest is free and
clear of any such adverse claim; (ii) makes no representation or warranty and
assumes no responsibility with respect to the financial condition of the
Company, any of the Company's Subsidiaries or any other obligor or the
performance or observance by the Company, any of the Company's Subsidiaries or
any other obligor of any of their respective obligations under the Credit
Agreement or any other Credit Document or any other instrument or document
furnished pursuant hereto or thereto; (iii) attaches the Note(s), if any, held
by it evidencing the Assigned Facilities and requests that the Administrative
Agent exchange such Note(s) for a new Note or Notes payable to the Assignee (if
requested by the Assignee) and (if the Assignor has retained any interest in the
Assigned Facility) a new Note or Notes payable to the Assignor (if requested by
the Assignor) in the respective amounts which reflect the assignment being made
hereby (and after giving effect to any other assignments which have become
effective on the Effective Date); and (iv) represents and warrants that it is
legally authorized to enter into this Assignment and Acceptance.
<PAGE>
2
3. The Assignee (i) represents and warrants that it is legally authorized
to enter into this Assignment and Acceptance; (ii) confirms that it has received
a copy of the Credit Agreement, together with copies of the financial statements
referred to in subsection 7.1 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
this Assignment and Acceptance; (iii) agrees that it will, independently and
without reliance upon the Assignor, the Administrative Agent or any other Lender
and based on such documents and information as it shall deem appropriate at the
time, continue to make its own credit decisions in taking or not taking action
under the Credit Agreement, the other Credit Documents or any other instrument
or document furnished pursuant hereto or thereto; (iv) appoints and authorizes
the Administrative Agent to take such action as agent on its behalf and to
exercise such powers and discretion under the Credit Agreement, the other Credit
Documents or any other instrument or document furnished pursuant hereto or
thereto as are delegated to the Administrative Agent by the terms thereof,
together with such powers as are incidental thereto; and (v) agrees that it will
be bound by the provisions of the Credit Agreement and will perform in
accordance with its terms all the obligations which by the terms of the Credit
Agreement are required to be performed by it as a Lender including, if it is
organized under the laws of a jurisdiction outside the United States, its
obligations pursuant to subsections 4.11(d) and 11.6(g) of the Credit Agreement
to deliver the forms prescribed by the Internal Revenue Service of the United
States certifying as to the Assignee's exemption from United States withholding
taxes with respect to all payments to be made to the Assignee under the Credit
Agreement, or such other documents as are necessary to indicate that all such
payments are subject to such tax at a rate reduced by an applicable tax treaty.
4. The effective date of this Assignment and Acceptance shall be
__________, (the "Effective Date"). Following the execution of this Assignment
and Acceptance, it will be delivered to the Administrative Agent for acceptance
by it and recording by the Administrative Agent pursuant to subsection 11.6(d)
of the Credit Agreement, effective as of the Effective Date (which shall not,
unless otherwise agreed to by the Administrative Agent, be earlier than five
Business Days after the date of such acceptance and recording by the
Administrative Agent).
5. Upon such acceptance and recording, from and after the Effective Date,
the Administrative Agent shall make all payments in respect of the Assigned
Interest (including payments of principal, interest, fees and other amounts) to
the Assignee whether such amounts have accrued prior to the Effective Date or
accrue subsequent to the Effective Date. The Assignor and the Assignee shall
make all appropriate adjustments in payments by the Administrative Agent for
periods prior to the Effective Date or with respect to the making of this
assignment directly between themselves.
6. From and after the Effective Date, (i) the Assignee shall be a party to
the Credit Agreement and, to the extent provided in this Assignment and
Acceptance, have the rights and obligations of a Lender thereunder and under the
other Credit Documents and shall be bound by the provisions thereof and (ii) the
Assignor shall, to the extent provided in this Assignment and Acceptance,
relinquish its rights and be released from its obligations under the Credit
Agreement.
<PAGE>
3
7. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the parties hereto have caused this Assignment and
Acceptance to be executed as of the date first above written by their respective
duly authorized officers on Schedule 1 hereto.
[ASSIGNEE] [ASSIGNOR]
By:____________________ By:___________________
Name: Name:
Title: Title:
<PAGE>
4
Accepted [and Consented to]:*
[TWCC ACQUISITION CORP.] THE CHASE MANHATTAN BANK, as
Administrative Agent
By:_______________________ By:_______________________
Name: Name:
Title: Title:
- ----------
* Consents only required where Assignee is not a Lender or an Affiliate of a
Lender.
<PAGE>
Schedule 1 to Assignment and Acceptance relating to the Credit Agreement,
dated as of October ___, 1996,
among
TWCC ACQUISITION CORP., a Massachusetts corporation (to be merged
with and into The William Carter Company), the Lenders named
therein, and The Chase Manhattan Bank, as administrative agent for the
Lenders (in such capacity, the "Administrative Agent")
----------------------------------------------------------
Name of Assignor:
Name of Assignee:
Effective Date of Assignment:
Commitment Percentages Assigned
(to at least fifteen decimals)
Credit Principal (shown as a percentage of aggregate
Facility Assigned Amount Assigned principal amount of all Lenders)
- ----------------- --------------- --------------------------------
<PAGE>
EXHIBIT E TO
CREDIT AGREEMENT
FORM OF
COMPANY SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of October __, 1996 made by TWCC
ACQUISITION CORP., a Massachusetts corporation (to be merged with and into The
William Carter Company, the "Company"), in favor of THE CHASE MANHATTAN BANK, a
New York banking corporation, as administrative agent (in such capacity, the
"Administrative Agent") for the several lenders (the "Lenders") from time to
time parties to the Credit Agreement (as defined below).
W I T N E S S E T H :
WHEREAS, pursuant to a Credit Agreement, dated as of the date hereof
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Company, the Lenders and the Administrative Agent, the
Lenders have severally agreed to make loans to, and the Issuing Lender (as
defined in the Credit Agreement) has agreed to issue and certain of the other
Lenders have agreed to participate in letters of credit for the account of, the
Company upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective loans to, and the obligation of the Issuing
Lender to issue and the Lenders to participate in letters of credit for the
account of, the Company under the Credit Agreement that the Company shall have
executed and delivered this Security Agreement to the Administrative Agent for
the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
make their respective loans to, and to issue or participate in letters of credit
for the account of, the Company under the Credit Agreement, the Company hereby
agrees with the Administrative Agent, for the ratable benefit of the Lenders, as
follows:
1. Defined Terms. Unless otherwise defined herein or in the preamble
or recitals hereto, terms which are defined in the Credit Agreement and used
herein are so used as so defined; the following terms which are defined in the
Uniform Commercial Code in effect in the State of New York on the date hereof
are used herein as so defined: Chattel Paper, Farm Products, Documents, Goods,
Instruments and Inventory; and the following terms shall have the following
meanings:
"Accounts" means all accounts receivable, book debts, notes, drafts,
instruments, documents, acceptances and other forms of obligations now
owned or hereafter received or acquired by or belonging or owing to the
Company (including under any trade names,
<PAGE>
2
styles or divisions thereof) whether arising out of personal property
owned or leased by it, Goods sold by it or services rendered by it or from
any other transaction, whether or not the same involves the lease of
personal property, sale of Goods or performance of services by the Company
(including, without limitation, any such obligation which would be
characterized as an account, general intangible or chattel paper under the
Code) and all of the Company's rights in, to and under all purchase orders
now owned or hereafter received or acquired by it for Goods or services,
and all of the Company's rights to any Goods represented by any of the
foregoing (including returned or repossessed Goods and unpaid seller's
rights) and all moneys due or to become due to the Company under all
contracts for the sale of Goods and/or the performance of services by it
(whether or not yet earned by performance), under any lease of real or
personal property (to the extent the grant of such a security interest is
permitted by applicable law and is not prohibited by such lease), or under
any franchise agreement, or in connection with any other transaction, now
in existence or hereafter arising, including without limitation the right
to receive the proceeds of said purchase orders and contracts and rents
under such leases, and all collateral security and guarantees of any kind
given by any Person with respect to any of the foregoing.
"Code" means the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Collateral" has the meaning assigned to it in Section 2 of this
Security Agreement.
"Contract" means, with respect to an Account, any agreement relating
to the terms of payment or the terms of performance thereof, including,
without limitation, (a) all rights of the Company to receive moneys due
and to become due to it thereunder or in connection therewith, (b) all
rights of the Company to damages arising out of, or for, breach or default
in respect thereof and (c) all rights of the Company to perform and to
exercise all remedies thereunder.
"Copyright License" means any written agreement, naming the Company,
as licensor or licensee, granting any right in the United States to use
any Copyright including, without limitation, any referred to in Schedule I
hereto.
"Copyrights" means all of the following to the extent the Company
now or hereafter has any right, title or interest: (a) all United States
copyrights and all registrations and applications therefor, including,
without limitation, any referred to in Schedule I hereto, and (b) all
renewals of such copyrights.
"Equipment" means all machinery, equipment and furniture except
Vehicles, now owned or hereafter acquired by the Company or in which the
Company now has or hereafter may acquire any right, title or interest and
any and all additions, substitutions and replacements thereof, wherever
located, together with all attachments, components, parts, equipment and
accessories installed therein or affixed thereto, including, but not
limited to, all equipment as defined in Section 9-109(2) of the Code.
"General Intangibles" has the meaning given to it in the Code and
includes, whether or not so included in such meaning, any franchise
agreements or rights in favor
<PAGE>
3
of or granted by the Company to know-how, trade secrets, product or
service development ideas and designs, advertising commercials,
renderings, strategies and plans, blueprints, architectural drawings, site
location, personnel and franchisee information, proprietary information,
computer and software technology and programs, contracts with
distributors, and any similar items, all interest rate, foreign currency
or similar agreements and general intangibles attributable to the Capital
Stock of each of the Subsidiaries of the Company.
"License" means any Copyright License, Patent License or Trademark
License.
"Obligations" means (i) the unpaid principal amount of, and interest
on (including interest accruing on or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether or not a claim for such
post-filing or post-petition interest is allowed), the Loans and all other
obligations and liabilities of the Company to the Administrative Agent,
the Issuing Lender or the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit
Agreement, any Letter of Credit or L/C Application, the other Credit
Documents and any other document executed and delivered or given in
connection therewith or herewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all reasonable fees and disbursements of
counsel to the Administrative Agent, the Issuing Lender or to the Lenders
that are required to be paid by the Company pursuant to the terms of the
Credit Agreement) or otherwise, and (ii) all obligations of the Company to
any Lender or Lenders or its or their Affiliates under or in respect of
any Interest Rate Agreement.
"Patent License" means any agreement, whether written or oral,
providing for the grant by or to the Company of any right to manufacture,
use or sell any invention covered by a Patent, including, without
limitation, any thereof referred to in Schedule II hereto.
"Patents" means (a) all letters patent of the United States or any
other country and all reissues and extensions thereof, including, without
limitation, any thereof referred to in Schedule II hereto, and (b) all
applications for letters patent of the United States and all divisions,
continuations and continuations-in-part thereof or any other country,
including, without limitation, any thereof referred to in Schedule II
hereto.
"Proceeds" means "proceeds", as such term is defined in Section
9-306(1) of the Code and, to the extent not included in such definition,
shall include, without limitation, (a) any and all proceeds of any
insurance, indemnity, warranty, guaranty or letter of credit payable to
the Company, from time to time with respect to any of the Collateral, (b)
all payments (in any form whatsoever) paid or payable to the Company from
time to time in connection with any taking of all or any part of the
Collateral by any Governmental Authority or any Person acting under color
of Governmental Authority, (c) all judgments in favor of the Company in
respect of the Collateral and (d) all other amounts from time
<PAGE>
4
to time paid or payable or received or receivable under or in connection
with any of the Collateral.
"Security Agreement" means this Security Agreement, as amended,
supplemented or otherwise modified from time to time.
"Trademark License" means any agreement, written or oral, providing
for the grant by or to the Company of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule III
hereto.
"Trademarks" means (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source of business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications
in connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any state
thereof or any other country or any political subdivision thereof, or
otherwise, including, without limitation, any thereof referred to in
Schedule III hereto, and (b) all renewals thereof.
"Vehicles" means all cars, trucks, trailers and other vehicles
covered by a certificate of title law of any state.
2. Grant of Security Interest. (a) As collateral security for the
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, the Company hereby
grants to the Administrative Agent for the ratable benefit of the Lenders a
security interest in all of the following property now owned or at any time
hereafter acquired by the Company or in which the Company now has or at any time
in the future may acquire any right, title or interest (collectively, the
"Collateral"):
(i) all Accounts;
(ii) all Chattel Paper;
(iii) all Contracts;
(iv) all Copyrights;
(v) all Copyright Licenses;
(vi) all Documents;
(vii) all Equipment;
(viii) all General Intangibles;
<PAGE>
5
(ix) all Instruments;
(x) all Inventory;
(xi) all Patents;
(xii) all Patent Licenses;
(xiii) all Trademarks;
(xiv) all Trademark Licenses;
(xv) all other Goods and personal property of the Company
other than Vehicles, whether tangible or intangible and
whether now or hereafter owned by the Company, and
wherever located; and
(xvi) to the extent not otherwise included, all Proceeds and
products of any and all of the foregoing.
3. Rights of Administrative Agent and Lenders; Limitations on
Administrative Agent's and Lenders' Obligations.
(a) Company Remains Liable under Accounts, Licenses, Contracts, Etc.
Anything herein to the contrary notwithstanding, the Company shall remain
liable under each of the Accounts, Licenses and Contracts to observe and
perform all the material conditions and obligations to be observed and
performed by it thereunder, all in accordance with the terms of any
agreement giving rise to each such Account, License or Contract. Neither
the Administrative Agent nor any Lender shall have any obligation or
liability under any Account, License or Contract by reason of or arising
out of this Security Agreement or the receipt by the Administrative Agent
or any Lender of any payment relating to such Account, License or Contract
pursuant hereto, nor shall the Administrative Agent or any Lender be
obligated in any manner to perform any of the obligations of the Company
under or pursuant to any Account, License or Contract, to make any
payment, to make any inquiry as to the nature or the sufficiency of any
payment received by it or as to the sufficiency of any performance by any
party under any Account, License or Contract, to present or file any
claim, to take any action to enforce any performance or to collect the
payment of any amounts which may have been assigned to it or to which it
may be entitled at any time or times.
(b) Notice to Account Debtors and Contracting Parties. At any time
after an Event of Default has occurred and so long as such Event of
Default shall be continuing, upon the request of the Administrative Agent
the Company shall, and the Administrative Agent may (with concurrent
notice to the Company thereof), notify account debtors on the Accounts and
parties to the Contracts and Licenses that the Accounts, Contracts and
Licenses have been assigned to the Administrative Agent for the ratable
benefit of the
<PAGE>
6
Lenders and that payments in respect thereof shall be made directly to the
Administrative Agent. At any time after an Event of Default shall have
occurred and be continuing, the Administrative Agent may in its own name
or in the name of others communicate with account debtors on the Accounts
and parties to the Contracts and Licenses to verify with them to its
satisfaction the existence, amount and terms thereof.
(c) Verification of Accounts and Inventory. The Administrative Agent
shall have the right to make test verifications of the Accounts and
Inventory in any reasonable manner and through any medium that it
considers advisable, and the Company agrees to furnish all such assistance
and information as the Administrative Agent may reasonably require in
connection therewith provided that, so long as no Event of Default shall
have occurred and be continuing, any such verification shall be conducted
in the name of the Company or in such other manner as shall not disclose
the Administrative Agent's identity or interest in the Collateral. The
Administrative Agent may after the occurrence and during the continuance
of an Event of Default in its own name or in the name of others
communicate with account debtors in order to verify with them to the
Administrative Agent's satisfaction the existence, amount and terms of any
Accounts and/or Inventory.
4. Representations and Warranties. The Company hereby represents and
warrants that:
(a) Title; No Other Liens. Except for the Lien granted to the
Administrative Agent for the ratable benefit of the Lenders pursuant to
this Security Agreement and the other Liens permitted to exist on the
Collateral pursuant to the Credit Agreement, the Company owns each item of
the Collateral free and clear of any and all Liens. No security agreement,
financing statement or other public notice with respect to all or any part
of the Collateral is on file or of record in any public office, except (i)
such as may have been filed in favor of the Administrative Agent, for the
ratable benefit of the Lenders, pursuant to this Security Agreement, or
(ii) as may be permitted pursuant to the Credit Agreement.
(b) Perfected First Priority Liens. The Liens granted pursuant to
this Security Agreement constitute perfected Liens on the Collateral in
favor of the Administrative Agent, for the ratable benefit of the Lenders,
to the extent that (i) such Liens constitute Liens on General Intangibles,
or (ii) such Liens constitute Liens on Equipment located in a jurisdiction
listed on Schedule IV, or (iii) such Liens can be perfected by filing a
financing statement under the Uniform Commercial Code, as in effect in the
relevant jurisdiction, or (iv) such Liens constitute Liens on Vehicles the
perfection of which has been requested pursuant to subsection 5(r), which
Lien has been properly notated on certificates of title received by the
Company, in respect of such Liens that can be perfected by notation
thereof on the certificates of title in respect of such Vehicles in
accordance with the law of the relevant jurisdiction, or (v) the Company
is required to deliver such Collateral to the Administrative Agent
pursuant to Section 5(a) hereof, which are prior to all other Liens on the
Collateral created by the Company and in existence on the date hereof,
except for Liens permitted to exist on the Collateral pursuant to the
Credit
<PAGE>
7
Agreement, and which are enforceable as such against all creditors of and
purchasers from the Company.
(c) Accounts and Records. The amount represented by the Company to
the Administrative Agent from time to time as owing by each account debtor
or by all account debtors in respect of the Accounts will at such time be
the correct amount actually owing by such account debtor or debtors
thereunder in all material respects, subject to adjustments in the
ordinary course of business. No amount payable to the Company under or in
connection with any Account, Contract or License in excess of $250,000 is
evidenced by any Instrument or Chattel Paper which has not been delivered
to the Administrative Agent. The place where the Company keeps its records
concerning the Accounts and the other Collateral is 1590 Adamson Parkway,
Suite 400, Morrow, Georgia 30260.
(d) Consents. Each Contract and License is in full force and effect
and, to the best knowledge of the Company, constitutes a valid and legally
enforceable obligation of the other obligor in respect thereof or parties
thereto, except as enforceability may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting the
enforcement of creditors' rights generally. No consent or authorization
of, filing with or other act by or in respect of any Governmental
Authority is required in connection with the execution, delivery,
performance, validity or enforceability of any of the Accounts, Licenses
or Contracts by any party thereto other than those which have been duly
obtained, made or performed, are in full force and effect and do not
subject the scope of any such Account, License or Contract to any material
adverse limitation, either specific or general in nature. Neither the
Company nor (to the best of the Company's knowledge) any other party to
any Account, License or Contract is in default in the performance or
observance of any of the terms thereof. The Company has fully performed
all its material obligations under each License and Contract to the extent
such obligations are required to be performed on or prior to the date
hereof. The right, title and interest of the Company in, to and under each
Account, License and Contract are not subject to any defense, offset,
counterclaim or claim which would materially adversely affect the value of
such Account, License or Contract as Collateral, nor have any of the
foregoing been asserted or alleged against the Company as to any of the
foregoing.
(e) Inventory. The Inventory is kept at the locations listed on
Schedule IV hereto, as amended or supplemented from time to time pursuant
to Section 5(l) hereof.
(f) Equipment. The Equipment is kept at the locations listed on
Schedule IV hereto, as amended or supplemented from time to time pursuant
to Section 5(o) hereof.
(g) Chief Executive Office. The Company's chief executive office and
chief place of business is located at 1590 Adamson Parkway, Suite 400,
Morrow, Georgia 30260.
<PAGE>
8
(h) Farm Products. None of the Collateral constitutes, or is the
Proceeds of, Farm Products.
(i) Patents, Trademarks and Copyrights. Schedule II hereto includes
all material Patents and Patent Licenses owned by the Company in its own
name as of the date hereof. Schedule III hereto includes all material
Trademarks and Trademark Licenses owned by the Company in its own name as
of the date hereof. Schedule I hereto includes all material Copyrights in
which the Company has any colorable claim of ownership as of the date
hereof. To the best of the Company's knowledge, except as set forth on
Schedule II or Schedule III, each Patent and Trademark is valid,
subsisting, unexpired and enforceable and has not been abandoned. Except
as set forth in Schedule II or on Schedule III, none of such Patents and
Trademarks is the subject of any licensing or franchise agreement. All
licenses of the Company's Trademarks are in force and, to the best
knowledge of the Company, not in default. No holding, decision or judgment
has been rendered by any Governmental Authority with respect to any Patent
or Trademark which would limit, cancel or question the validity of any
Patent or Trademark. Except as set forth on Schedule II or Schedule III,
no action or proceeding is pending or, to the knowledge of the Company,
threatened (i) seeking to limit, cancel or question the validity of any
material Patent or Trademark or the Company's ownership thereof, or (ii)
which, if adversely determined, would have a material adverse effect on
the value of any material Patent or Trademark.
(j) Power and Authority; Authorization. The Company has the
corporate power and authority and the right to execute and deliver, to
perform its obligations under, and to grant the Lien on the Collateral
pursuant to, this Security Agreement and has taken all necessary corporate
action to authorize its execution, delivery and performance of, and grant
of the Lien on the Collateral pursuant to, this Security Agreement.
(k) No Litigation. No litigation, investigation or proceeding of or
before any arbitrator or Governmental Authority is pending or, to the
knowledge of the Company, threatened by or against the Company or against
any of its properties or revenues with respect to this Security Agreement
or any of the transactions contemplated hereby which would have a material
adverse effect upon any material portion of the Collateral or the granting
of the security interests hereby.
5. Covenants. The Company covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Security Agreement until the Obligations are paid in full, the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent:
(a) Further Documentation; Pledge of Instruments and Chattel Paper.
(i) At any time and from time to time, upon the written request of the
Administrative Agent, and at the sole expense of the Company, the Company
will promptly and duly execute and deliver such further instruments and
documents and take such further action as the
<PAGE>
9
Administrative Agent may reasonably request for the purpose of obtaining
or preserving the full benefits of this Security Agreement and of the
rights and powers herein granted, including, without limitation, the
filing of any financing or continuation statements under the Uniform
Commercial Code in effect in any jurisdiction with respect to the Liens
created hereby. The Company also hereby authorizes the Administrative
Agent to file any such financing or continuation statement without the
signature of the Company to the extent permitted by applicable law. A
carbon, photographic or other reproduction of this Security Agreement
shall be sufficient as a financing statement for filing in any
jurisdiction.
(ii) If any amounts payable under or in connection with any of the
Collateral having a face value in excess of $1,250,000 in the aggregate at
any one time outstanding shall be or become evidenced by any Instruments
or Chattel Paper, such Instruments or Chattel Paper shall be immediately
delivered to the Administrative Agent, duly endorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral
pursuant to this Security Agreement. So long as no Default or Event of
Default has occurred and is continuing, upon request by the Company, the
Administrative Agent shall make available any pledged Collateral to the
Company, or its designee, that the Company specifies is required for the
purpose of ultimate sale, exchange, presentation, collection, renewal,
registration or transfer thereof, provided that in each case arrangements
reasonably satisfactory to the Administrative Agent shall be made for the
return of such pledged Collateral within 21 days from the time of delivery
by the Administrative Agent, except for pledged Collateral that has been
fully repaid, satisfied, or transferred as permitted hereunder.
(iii) Notwithstanding anything set forth in this Security Agreement
to the contrary, so long as no Default or Event of Default has occurred
and is continuing, the Company shall not be required to deliver to the
Administrative Agent any Instruments or Chattel Paper to be held by the
Administrative Agent as Collateral pursuant to this Security Agreement so
long as the aggregate amount evidenced by all such Instruments and Chattel
Paper does not exceed $1,250,000 at any one time outstanding.
(b) Indemnification. The Company agrees to pay, and to save the
Administrative Agent and the Lenders harmless from, any and all
liabilities, costs and expenses (including, without limitation, reasonable
legal fees and expenses) (i) with respect to, or resulting from, any delay
in paying, any and all excise, sales or other taxes which may be payable
or determined to be payable with respect to any of the Collateral, (ii)
with respect to, or resulting from, any delay by the Company in complying
with any Requirement of Law applicable to any of the Collateral or (iii)
in connection with any of the transactions contemplated by this Security
Agreement; provided, that the Company shall not be liable for the payment
of any portion of such liabilities, costs or expenses resulting from the
gross negligence or willful misconduct of the Administrative Agent or any
of the Lenders. Without limiting the preceding sentence, the Company will
indemnify and save and keep harmless the Administrative Agent and each
Lender from and against all expense, loss or damage suffered by reason of
any counterclaim of the
<PAGE>
10
account debtor or obligor thereunder, arising out of a breach by the
Company of any obligation thereunder or arising out of any other
agreement, indebtedness or liability at any time owing to or in favor of
such account debtor or obligor or its successors from the Company.
(c) Maintenance of Records. The Company will keep and maintain at
its own cost and expense satisfactory and complete records of the
Collateral, including, without limitation, a record of all payments
received and all credits granted with respect to the Accounts, Contracts
and Licenses. The Company will mark its internal books and records
pertaining to the Collateral to evidence this Security Agreement and the
security interests granted hereby. For the Administrative Agent's and the
Lenders' further security, the Administrative Agent, for the ratable
benefit of the Lenders, shall have a security interest in all of the
Company's books and records pertaining to the Collateral, and the Company
shall make available for review any such books and records to the
Administrative Agent or to its representatives during normal business
hours at the reasonable request of the Administrative Agent. The Company
shall permit representatives of any Lender, upon reasonable notice (but no
more frequently than monthly unless a Default or Event of Default shall
have occurred and be continuing), to visit and inspect any of its
properties and examine and make abstracts from any of its books and
records at any reasonable time and as often as may reasonably be requested
upon reasonable notice, and to discuss the business, operations, assets
and financial and other condition of the Company and its Subsidiaries with
officers and employees thereof and with their independent certified public
accountants.
(d) Right of Inspection. The Administrative Agent and the Lenders
shall upon reasonable notice (but no more frequently than monthly) unless
a Default or Event of Default shall have occurred and be continuing, have
full and free reasonable access during normal business hours to all the
books, correspondence and records of the Company, and the Administrative
Agent and the Lenders and their respective representatives may examine the
same, take extracts therefrom and make photocopies thereof at any
reasonable time and as may be reasonably required upon reasonable notice,
and the Company agrees to render to the Administrative Agent at the
Company's cost and expense, and to the Lenders, such clerical and other
assistance as may be reasonably requested with regard thereto. The
Administrative Agent and the Lenders shall keep such information thereby
obtained confidential to the extent set forth in subsection 11.6(f) of the
Credit Agreement.
(e) Compliance with Laws, etc. The Company will comply in all
material respects with all Requirements of Law applicable to the
Collateral or any part thereof or to the operation of the Company's
business; provided, however, that the Company may contest any Requirement
of Law in any reasonable manner which shall not, in the reasonable opinion
of the Administrative Agent, adversely affect the Administrative Agent's
or the Lenders' rights or the priority of their Liens on the Collateral.
<PAGE>
11
(f) Compliance with Terms of Contracts, etc. The Company will
perform and comply in all material respects with all its obligations under
the Contracts and all its other Contractual Obligations relating to the
Collateral.
(g) Payment of Obligations. The Company will pay promptly when due
all material taxes, assessments and governmental charges or levies imposed
upon the Collateral or in respect of its income or profits therefrom, as
well as all claims of any kind (including, without limitation, claims for
labor, materials and supplies) against or with respect to the Collateral,
except that no such charge need be paid if (i) the validity thereof is
being contested in good faith by appropriate proceedings, (ii) such
proceedings do not involve any material danger of the sale, forfeiture or
loss of any of the Collateral or any interest therein and (iii) such
charge is adequately reserved against on the Company's books in accordance
with GAAP.
(h) Limitation on Liens on Collateral. The Company will not create,
incur or permit to exist, will take all commercially reasonable actions to
defend the Collateral against, and will take such other commercially
reasonable action as is necessary to remove, any Lien or claim on or to
the Collateral, other than the Liens created hereby and other than as
permitted pursuant to the Credit Agreement, and will take all commercially
reasonable actions to defend the right, title and interest of the
Administrative Agent and the Lenders in and to any of the Collateral
against the claims and demands of all Persons whomsoever.
(i) Limitations on Dispositions of Collateral. The Company will not
sell, transfer, lease or otherwise dispose of any of the Collateral, or
attempt, offer or contract to do so except for sales of assets permitted
by the Credit Agreement. Concurrently with any such permitted disposition,
the property acquired by a transferee in such disposition shall
automatically be released from the security interest created by this
Security Agreement (the "Security Interest"). It is acknowledged and
agreed that notwithstanding any release of property from the Security
Interest in accordance with the foregoing provisions of this Section, the
Security Interest shall in any event continue in the Proceeds of
Collateral. The Administrative Agent shall promptly execute and deliver
(and, when appropriate, shall cause any separate agent, co-agent or
trustee to execute and deliver) any releases, instruments or documents
reasonably requested by the Company to accomplish or confirm the release
of Collateral provided by this Section. Any such release of Collateral
provided by the Administrative Agent shall specifically describe that
portion of the Collateral to be released, shall be expressed to be
unconditional and shall be without recourse or warranty (other than a
warranty that the Administrative Agent has not assigned its rights and
interests to any other Person). The Company shall pay all of the
Administrative Agent's reasonable expenses in connection with any release
of Collateral.
(j) Limitations on Modifications, Waivers, Extensions of Agreements
Giving Rise to Accounts. The Company will not (i) amend, modify, terminate
or waive any provision of any Contract, agreement or lease giving rise to
an Account or License in any manner which could reasonably be expected to
materially adversely affect the value of
<PAGE>
12
such Contract, Account or License as Collateral, except in a manner
consistent with the ordinary and customary conduct of its business, (ii)
fail to exercise promptly and diligently each and every material right
which it may have under each material Contract, agreement or lease giving
rise to an Account or License (other than any right of termination),
except in a manner consistent with the ordinary and customary conduct of
its business or (iii) fail to deliver to the Administrative Agent upon its
reasonable request a copy of each material demand, notice or document
received by it relating in any way to any material Contract, agreement or
lease giving rise to an Account or License.
(k) Limitations on Discounts, Compromises, Extensions of Accounts.
Other than in the ordinary course of business as generally conducted by
the Company over a period of time, the Company will not grant any
extension of the time of payment of any of the Accounts, compromise,
compound or settle the same for less than the full amount thereof,
release, wholly or partially, any Person liable for the payment thereof,
or allow any credit or discount whatsoever thereon.
(l) Maintenance of Equipment. The Company will maintain each item of
Equipment in good operating condition, ordinary wear and tear and
immaterial impairments of value and damage by the elements excepted, and
will provide all maintenance, service and repairs necessary for such
purpose.
(m) Further Identification of Collateral. The Company will furnish
to the Administrative Agent from time to time statements and schedules
further identifying and describing the Collateral and such other reports
in connection with the Collateral as the Administrative Agent may
reasonably request, all in reasonable detail.
(n) Notices. The Company will advise the Administrative Agent and
the Lenders promptly, in reasonable detail, at their respective addresses
set forth in the Credit Agreement, (i) of any Lien (other than Liens
created hereby or permitted under the Credit Agreement) on, or claim
asserted against, any of the Collateral and (ii) of the occurrence of any
other event which could reasonably be expected to have a material adverse
effect on the aggregate value of the Collateral or on the Liens created
hereunder.
(o) Changes in Locations, Name, etc. The Company will not (i) change
the location of its chief executive office/chief place of business from
that specified in Section 4(g) or remove its books and records from the
location specified in Section 4(c), (ii) remove any material amount of the
Inventory or Equipment to, or keep any material amount of Inventory or
Equipment at, a location other than those listed on Schedule IV hereto, or
(iii) change its name (including the adoption of any new trade name),
identity or corporate structure to such an extent that any financing
statement filed by the Administrative Agent in connection with this
Security Agreement would become seriously misleading, unless it shall have
provided at least 15 days prior written notice to the Administrative Agent
of any such event and provide the Administrative Agent with the new
location of its chief executive office/chief place of business and its
books and records, the location of the Inventory and Equipment and the
change in the Company's
<PAGE>
13
name, as the case may be. Any notice given pursuant to this Section 5(o)
shall be deemed to amend Section 4(c) and 4(g) hereof or Schedule IV
hereto, as the case may be. In connection with any actions permitted
pursuant to clause (i) of this Section 5(o), the Administrative Agent
shall be entitled to receive any legal opinions it reasonably requests as
to the continued perfection of the security interest granted hereby in the
Collateral, which opinions shall be deemed satisfactory to the
Administrative Agent if substantially similar to the perfection opinions
given by Gibson, Dunn & Crutcher on the Closing Date.
(p) Copyrights. The Company (i) will employ the Copyright for each
material published work with such notice of copyright as may be required
by law to secure copyright protection and (ii) will not do any act or
knowingly omit to do any act whereby any material Copyright may become
invalidated and:
(A) will not do any act, or omit to do any act, whereby any
material Copyright may become injected into the public domain;
(B) shall notify the Administrative Agent immediately if it
knows, or has reason to know, that any material Copyright may become
injected into the public domain or of any adverse determination or
development (including, without limitation, the institution of, or
any such determination or development in, any court or tribunal in
the United States or any other country) regarding the Company's
ownership of any such Copyright or its validity;
(C) will take all necessary steps as it shall deem appropriate
under the circumstances, to maintain and pursue each application
(and to obtain the relevant registration) and to maintain each
registration of each material Copyright owned by the Company
including, without limitation, filing of applications for renewal,
where necessary; and
(D) will promptly notify the Administrative Agent of any
material infringement of any material Copyright of the Company of
which it becomes aware and will take such actions as it shall
reasonably deem appropriate under the circumstances to protect such
Copyright, including, where appropriate, the bringing of suit for
infringement, seeking injunctive relief and seeking to recover any
and all damages for such infringement.
(q) Patents and Trademarks.
(i) The Company (either itself or through licensees) will,
except with respect to any Trademark that the Company shall
reasonably determine is of immaterial economic value to it or
otherwise reasonably determines not to do so, (A) continue to use
each Trademark on each and every trademark class of goods applicable
to its current line as reflected in its current catalogs, brochures
and price lists in order to maintain such Trademark in full force
free from any claim of abandonment for non-use, (B) maintain as in
the past the quality of products
<PAGE>
14
and services offered under such Trademark, (C) use reasonable
efforts to employ such Trademark with the appropriate notice of
registration, (D) not adopt or use any mark which is confusingly
similar or a colorable imitation of such Trademark unless within 45
days after such use or adoption the Administrative Agent, for the
ratable benefit of the Lenders, shall obtain a perfected security
interest in such mark pursuant to this Security Agreement, and (E)
not (and not permit any licensee or sublicensee thereof to) do any
act or knowingly omit to do any act whereby any Trademark may become
invalidated.
(ii) The Company will not, except with respect to any Patent
that the Company shall reasonably determine is of immaterial
economic value to it or otherwise reasonably determine so to do, do
any act, or omit to do any act, whereby any Patent may become
abandoned or dedicated.
(iii) The Company will notify the Administrative Agent and the
Lenders immediately if it knows, or has reason to know, that any
application relating to any Patent, or any application or
registration relating to any Trademark may become abandoned or
dedicated, or of any adverse determination or material development
(including, without limitation, the institution of, or any such
determination or development in, any proceeding in the United States
Patent and Trademark Office or any court or tribunal in any country)
regarding the Company's ownership of any Patent or Trademark or its
right to register the same or to keep and maintain the same.
(iv) Whenever the Company, either by itself or through any
agent, employee, licensee or designee, shall file an application for
any Patent or for the registration of any Trademark with the United
States Patent and Trademark Office or any similar office or agency
in any other country or any political subdivision thereof, the
Company shall report such filing to the Administrative Agent and the
Lenders within five Business Days after the last day of the fiscal
quarter in which such filing occurs. Upon request of the
Administrative Agent, the Company shall execute and deliver any and
all agreements, instruments, documents, and papers as the
Administrative Agent may request to evidence the Administrative
Agent's and the Lenders' security interest in any Patent or
Trademark and the goodwill and general intangibles of the Company
relating thereto or represented thereby, and the Company hereby
appoints and constitutes the Administrative Agent its
attorney-in-fact to execute and file all such writings for the
foregoing purposes, all acts of such attorney being hereby ratified
and confirmed; such power being coupled with an interest and is
irrevocable until the Obligations are paid in full, the Commitments
are terminated and no Letters of Credit are outstanding.
(v) The Company, except with respect to any Patent or
Trademark the Company shall reasonably determine is of immaterial
economic value to it or it otherwise reasonably determines not to so
do and except with respect to any Trademark that is not registrable,
will take all reasonable and necessary steps,
<PAGE>
15
including, without limitation, in any proceeding before the United
States Patent and Trademark Office, or any similar office or agency
in any other country or any political subdivision thereof, to
maintain and pursue each application (and to obtain the relevant
registration or Patent) and to maintain each Patent and each
registration of Trademarks, including, without limitation, filing of
applications for renewal, affidavits of use and affidavits of
incontestability when appropriate.
(vi) In the event that any Patent or Trademark included in the
Collateral is infringed, misappropriated or diluted by a third
party, the Company shall promptly notify the Administrative Agent
and the Lenders after it learns thereof and shall, unless the
Company shall reasonably determine that such Patent or Trademark is
of immaterial economic value to the Company, which determination the
Company shall promptly report to the Administrative Agent and the
Lenders, promptly sue for infringement, misappropriation or
dilution, to seek injunctive relief where appropriate and to recover
any and all damages for such infringement, misappropriation or
dilution, or take such other actions as the Company shall reasonably
deem appropriate under the circumstances to protect such Patent or
Trademark.
6. Administrative Agent's Appointment as Attorney-in-Fact.
(a) Powers. The Company hereby irrevocably constitutes and appoints
the Administrative Agent and any officer or agent thereof, with full power
of substitution, as its true and lawful attorney-in-fact with full
irrevocable power and authority in the place and stead of the Company and
in the name of the Company or in its own name, from time to time after the
occurrence, and during the continuation, of an Event of Default in the
Administrative Agent's discretion, for the purpose of carrying out the
terms of this Security Agreement, to take any and all appropriate action
and to execute any and all documents and instruments which may be
necessary or desirable to accomplish the purposes of this Security
Agreement, and, without limiting the generality of the foregoing, the
Company hereby gives the Administrative Agent the power and right, on
behalf of the Company, without notice to or assent by the Company, to do
the following:
(i) in the name of the Company or its own name, or otherwise,
to take possession of and indorse and collect any checks, drafts,
notes, acceptances or other instruments for the payment of moneys
due under any Account, Instrument, License or General Intangible or
with respect to any other Collateral and to file any claim or to
take any other action or proceeding in any court of law or equity or
otherwise deemed appropriate by the Administrative Agent for the
purpose of collecting any and all such moneys due under any Account,
Instrument, License or General Intangible or with respect to any
other Collateral whenever payable;
(ii) to pay or discharge taxes and Liens levied or placed on
or threatened against the Collateral, provided that if such taxes
are being contested
<PAGE>
16
in good faith and by appropriate proceedings, the Administrative
Agent and the Lenders will consult with the Company before making
any such payment; and
(iii) (A) to direct any party liable for any payment under any
of the Collateral to make payment of any and all moneys due or to
become due thereunder directly to the Administrative Agent or as the
Administrative Agent shall direct; (B) to ask or demand for,
collect, receive payment of and receipt for, any and all moneys,
claims and other amounts due or to become due at any time in respect
of or arising out of any Collateral; (C) to sign and indorse any
invoices, freight or express bills, bills of lading, storage or
warehouse receipts, drafts against debtors, assignments,
verifications, notices and other documents in connection with any of
the Collateral; (D) to commence and prosecute any suits, actions or
proceedings at law or in equity in any court of competent
jurisdiction to collect the Collateral or any thereof and to enforce
any other right in respect of any Collateral; (E) to defend any
suit, action or proceeding brought against the Company with respect
to any Collateral; (F) to settle, compromise or adjust any suit,
action or proceeding described in clause (E) above and, in
connection therewith, to give such discharges or releases as the
Administrative Agent may deem appropriate; (G) to assign any Patent
or Trademark (along with the goodwill of the business to which any
such Trademark pertains), throughout the world for such term or
terms, on such conditions, and in such manner, as the Administrative
Agent shall in its sole discretion determine; and (H) generally, to
sell, transfer, pledge and make any agreement with respect to or
otherwise deal with any of the Collateral as fully and completely as
though the Administrative Agent were the absolute owner thereof for
all purposes, and to do, at the Administrative Agent's option and
the Company's expense, at any time, or from time to time, all acts
and things which the Administrative Agent reasonably deems necessary
to protect, preserve or realize upon the Collateral and the
Administrative Agent's and the Lenders' Liens thereon and to effect
the intent of this Security Agreement, all as fully and effectively
as the Company might do.
The Company hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
(b) Other Powers. The Company also authorizes the Administrative
Agent and the Lenders, at any time and from time to time, to execute, in
connection with the sale provided for in Section 8 hereof, any
indorsement, assignments or other instruments of conveyance or transfer
with respect to the Collateral.
(c) No Duty on Administrative Agent's or Lenders' Part. The powers
conferred on the Administrative Agent and the Lenders hereunder are solely
to protect the Administrative Agent's and the Lenders' interests in the
Collateral and shall not impose any duty upon the Administrative Agent or
any Lender to exercise any such powers. The Administrative Agent and the
Lenders shall be accountable only for amounts that they
<PAGE>
17
actually receive as a result of the exercise of such powers, and neither
they nor any of their officers, directors, employees or agents shall be
responsible to the Company for any act or failure to act hereunder, except
for their own gross negligence or willful misconduct or failure to comply
with mandatory provisions of applicable law.
7. Performance by Administrative Agent of Company's Obligations. If
the Company fails to perform or comply with any of its agreements contained
herein and the Administrative Agent, as provided for by the terms of this
Security Agreement, shall itself perform or comply, or otherwise cause
performance or compliance, with such agreement, the expenses of the
Administrative Agent incurred in connection with such performance or compliance,
together with interest thereon at a rate per annum equal to 2% plus the
Alternate Base Rate, shall be payable by the Company to the Administrative Agent
on demand and shall constitute Obligations secured hereby; provided, however,
that the Administrative Agent shall in any event first have given the Company
written notice of its intent to do the same and the Company shall not have,
within 30 days of such notice (or such shorter period as the Administrative
Agent may reasonably determine is necessary in order to preserve the benefits of
this Security Agreement with respect to any material portion of the Collateral),
paid such claim or obtained to the Administrative Agent's satisfaction the
release of the claim or Lien to which such notice relates.
8. Remedies. If an Event of Default shall occur and be continuing,
the Administrative Agent on behalf of the Lenders may exercise, in addition to
all other rights and remedies granted to them in this Security Agreement and in
any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Administrative Agent, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon the Company or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, lease, assign, give an option or
options to purchase, or otherwise dispose of and deliver the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, at any exchange, broker's board or office of
the Administrative Agent or any Lender or elsewhere upon such terms and
conditions as it may deem advisable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Administrative Agent or any Lender shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Company, which right or equity is
hereby waived and released. The Administrative Agent shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the
Administrative Agent and the Lenders hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment in whole or in part
of the Obligations, in such order as the Administrative Agent may elect subject
to subsection 4.9 of the Credit Agreement,
<PAGE>
18
and only after such application and after the payment by the Administrative
Agent of any other amount required by any provision of law, including, without
limitation, Section 9-504(1)(c) of the Code, need the Administrative Agent
account for the surplus, if any, to the Company. To the extent permitted by
applicable law, the Company waives all claims, damages and demands it may
acquire against the Administrative Agent or any Lender arising out of the
exercise by them of any rights hereunder, except to the extent arising from the
gross negligence or willful misconduct of the Administrative Agent or such
Lender. If any notice of a proposed sale or other disposition of Collateral
shall be required by law, such notice shall be deemed reasonable and proper if
given at least 10 days before such sale or other disposition. The Company shall
remain liable for any deficiency if the proceeds of any sale or other
disposition of the Collateral are insufficient to pay the Obligations and the
fees and disbursements of any attorneys employed by the Administrative Agent or
any Lender to collect such deficiency.
9. Amendments, etc. with Respect to the Obligations. The Company
shall remain obligated hereunder, and the Collateral shall remain subject to the
Lien granted hereby notwithstanding that, without any reservation of rights
against the Company, and without notice to or further assent by the Company, any
demand for payment of any of the Obligations made by the Administrative Agent,
the Issuing Lender or any Lender may be rescinded by the Administrative Agent,
the Issuing Lender or any Lender, and any of the Obligations continued, and the
Obligations, or the liability of the Company or any other Person upon or for any
part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered, or released by the Administrative Agent, the Issuing Lender or any
Lender, and the Credit Agreement, the Notes, the other Credit Documents and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or part, as the Administrative
Agent, the Issuing Lender or any Lender may deem advisable from time to time,
and any guarantee, right of offset or other collateral security at any time held
by the Administrative Agent, the Issuing Lender or any Lender for the payment of
the Obligations may be sold, exchanged, waived, surrendered or released. None of
the Administrative Agent, the Issuing Lender or any Lender shall have any
obligation to protect, secure, perfect or insure this or any other Lien at any
time held by it as security for the Obligations or any property subject thereto.
The Company waives any and all notice of the creation, renewal, extension or
accrual of any of the Obligations and notice of or proof of reliance by the
Administrative Agent, the Issuing Lender or any Lender upon this Security
Agreement; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred in reliance upon this Security
Agreement; and all dealings between the Company and the Administrative Agent,
the Issuing Lender or any Lender, shall likewise be conclusively presumed to
have been had or consummated in reliance upon this Security Agreement. The
Company waives diligence, presentment, protest, demand for payment and notice of
default or nonpayment to or upon the Company with respect to the Obligations.
10. Limitation on Duties Regarding Preservation of Collateral. The
Administrative Agent's sole duty with respect to the custody, safekeeping and
physical preservation of the Collateral in its possession, under Section 9-207
of the Code or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar
<PAGE>
19
property for its own account. Neither the Administrative Agent, any Lender, nor
any of their respective directors, officers, employees or agents shall be liable
for failure to demand, collect or realize upon all or any part of the Collateral
or for any delay in doing so or shall be under any obligation to sell or
otherwise dispose of any Collateral upon the request of the Company or
otherwise.
11. Delegation of Duties. The Administrative Agent may execute any
of its duties under this Security Agreement by or through agents or
attorneys-in-fact and shall be entitled to advice of counsel concerning all
matters pertaining to such duties. The Administrative Agent shall not be
responsible for the negligence or misconduct of any agents or attorneys-in-fact
selected by it with reasonable care, except as otherwise provided in subsection
10.3 of the Credit Agreement.
12. Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
13. Severability. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14. Section Headings. The section headings used in this Security
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
15. No Waiver; Cumulative Remedies. Neither the Administrative
Agent, the Issuing Lender nor any Lender shall by any act (except by a written
instrument pursuant to Section 16 hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent, the Issuing Lender or any
Lender, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent,
the Issuing Lender or any Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the
Administrative Agent, the Issuing Lender or such Lender would otherwise have on
any future occasion. The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
16. Integration; Waivers and Amendments; Successors and Assigns;
Governing Law. This Security Agreement represents the entire agreement of the
Company with respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent or any Lender relative to the
subject matter hereof not reflected herein or in the other
<PAGE>
20
Credit Documents. None of the terms or provisions of this Security Agreement may
be waived, amended, supplemented or otherwise modified except by a written
instrument executed by the Company and the Administrative Agent, provided that
any provision of this Security Agreement may be waived by the Administrative
Agent in a written letter or agreement executed by the Administrative Agent or
by telex or facsimile transmission from the Administrative Agent. This Security
Agreement shall be binding upon the successors and assigns of the Company and
shall inure to the benefit of the Administrative Agent and the Lenders and their
respective successors and assigns. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
17. Notices. All notices, requests and demands to or upon the
Company or the Administrative Agent or any Lender to be effective shall be in
writing or by telecopy or telex and unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or, in
the case of mail, three days after deposit in the postal system, first class
postage prepaid, or, in the case of telecopy notice, when sent, or, in the case
of telex notice, when sent, answerback received, addressed to a party at the
address provided for such party in the Credit Agreement.
18. Counterparts. This Security Agreement may be executed by one or
more of the parties hereto on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
19. Authority of Administrative Agent. The Company acknowledges that
the rights and responsibilities of the Administrative Agent under this Security
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Security Agreement shall, as between the Administrative
Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and the Company, the Administrative Agent
shall be conclusively presumed to be acting as agent for the Lenders with full
and valid authority so to act or refrain from acting, and the Company shall not
be under any obligation, or entitlement, to make any inquiry respecting such
authority.
20. Releases. The Administrative Agent and the Lenders agree to
cooperate with the Company and its Subsidiaries with respect to any sale
permitted by subsection 8.5 of the Credit Agreement and promptly take such
action and execute and deliver such instruments and documents necessary to
release the Liens and security interests created hereby relating to any of the
assets or property affected by any sale permitted by subsection 8.5 of the
Credit Agreement including, without limitation, any necessary Uniform Commercial
Code amendment, termination or partial termination statement.
21. Termination. This Security Agreement (other than with respect to
any cash collateral securing any outstanding Letter of Credit) shall terminate
when all the Obligations have
<PAGE>
21
been paid in full, the Commitments are terminated and either no Letters of
Credit are outstanding or each outstanding Letter of Credit has been cash
collateralized so that it is fully secured to the satisfaction of the
Administrative Agent. Upon such termination, the Administrative Agent shall
reassign and redeliver (or cause to be reassigned and redelivered) to the
Company, or to such person or persons as the Company shall designate, or to
whomever may be lawfully entitled to receive such surplus, against receipt, such
of the Collateral (if any) (other than with respect to any cash collateral
securing any outstanding Letter of Credit) as shall not have been sold or
otherwise applied by the Administrative Agent pursuant to the terms hereof and
shall still be held by it hereunder, together with appropriate instruments or
reassignment and release. Any such reassignment and release shall be without
recourse upon or warranty by the Administrative Agent (other than a warranty
that the Administrative Agent has not assigned its rights and interests
hereunder to any Person) and at the expense of the Company.
IN WITNESS WHEREOF, the Company and the Administrative Agent have
caused this Security Agreement to be duly executed and delivered as of the date
first above written.
TWCC ACQUISITION CORP.
By:_________________________________
Title:
THE CHASE MANHATTAN BANK, as
Administrative Agent
By:_________________________________
Title:
<PAGE>
Schedule I to
Security Agreement
Copyrights and Copyright Licenses
<PAGE>
Schedule II to
Security Agreement
Patents and Patent Licenses
<PAGE>
Schedule III to
Security Agreement
Trademarks and Trademark Licenses
<PAGE>
Schedule IV to
Security Agreement
Locations of Inventory and Equipment Locations
<PAGE>
EXHIBIT F-1 TO
CREDIT AGREEMENT
FORM OF
HOLDINGS GUARANTEE
HOLDINGS GUARANTEE, dated as of October __, 1996, made by CARTER
HOLDINGS, INC., a Massachusetts corporation (the "Guarantor") in favor of THE
CHASE MANHATTAN BANK, a New York banking corporation, as administrative agent
(in such capacity, the "Administrative Agent") for the banks and other financial
institutions (the "Lenders") that are parties to the Credit Agreement (as
hereafter defined).
W I T N E S S E T H :
WHEREAS, TWCC Acquisition Corp., a Massachusetts corporation (to be
merged with and into The William Carter Company, a Massachusetts corporation,
the "Company"), is party to a Credit Agreement, dated as of the date hereof,
with the Administrative Agent and the Lenders (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement");
WHEREAS, pursuant to the terms of the Credit Agreement, the Lenders
severally agreed to make certain extensions of credit to the Company;
WHEREAS, the Guarantor owns directly 100% of the issued and
outstanding common and preferred stock of the Company;
WHEREAS, the Guarantor will derive substantial direct and indirect
benefit from the making of the extensions of credit; and
WHEREAS, under the Credit Agreement, the obligation of the Lenders
to make the extensions of credit to the Company on and after the date hereof is
conditioned upon, among other things, the execution and delivery by the
Guarantor of this Guarantee;
NOW, THEREFORE, in consideration of the premises and to induce the
Lenders to enter into the Credit Agreement and to make their respective
extensions of credit to the Company under the Credit Agreement, the Guarantor
hereby agrees with and for the benefit of the Administrative Agent and the
Lenders as follows:
<PAGE>
2
1. Defined Terms. As used in this Guarantee, terms defined in the
Credit Agreement or in the preamble or recitals hereto are used herein as
therein defined, and the following term shall have the following meaning:
"Obligations" means (i) the unpaid principal amount of, and interest
on (including interest accruing on or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether or not a claim for such
post-filing or post-petition interest is allowed), the Loans and all other
obligations and liabilities of the Company to the Administrative Agent,
the Issuing Lender or the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit
Agreement, any Letter of Credit or L/C Application, the other Credit
Documents and any other document executed and delivered or given in
connection therewith or herewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all reasonable fees and disbursements of
counsel to the Administrative Agent, the Issuing Lender or to the Lenders
that are required to be paid by the Company pursuant to the terms of the
Credit Agreement) or otherwise and (ii) all obligations of the Company to
any Lender or Lenders or its or their Affiliates under or in respect of
any Interest Rate Agreement.
2. Guarantee. (a) The Guarantor hereby, unconditionally and
irrevocably, guarantees to the Administrative Agent and the Lenders and their
respective successors, indorsees, transferees and assigns, the prompt and
complete payment by the Company when due (whether at the stated maturity, by
acceleration or otherwise) of the Obligations, and the Guarantor further agrees
to pay any and all expenses (including, without limitation, all reasonable fees
and disbursements of counsel) which may be paid or incurred by the
Administrative Agent, the Issuing Lender or any Lender in enforcing, or
obtaining advice of counsel in respect of, any rights with respect to, or
collecting, any or all of the Obligations and/or enforcing any rights with
respect to, or collecting against, the Guarantor under this Guarantee.
(b) No payment or payments made by any of the Company, the
Guarantor, any other guarantor or any other Person or received or collected by
the Administrative Agent or any Lender from the Company, the Guarantor, any
other guarantor or any other Person by virtue of any action or proceeding or any
set-off or appropriation or application at any time or from time to time in
reduction of or in payment of the Obligations shall be deemed to modify, reduce,
release or otherwise affect the liability of the Guarantor hereunder which
shall, notwithstanding any such payment or payments other than payments made by
the Guarantor in respect of the Obligations or payments received or collected
from the Guarantor in respect of the Obligations, remain liable for the
Obligations until the Obligations are paid in full, the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent.
(c) The Guarantor agrees that whenever, at any time, or from time to
time, it shall make any payment to the Administrative Agent or any Lender on
account of its liability
<PAGE>
3
hereunder, it will notify the Administrative Agent in writing that such payment
is made under this Guarantee for such purpose.
3. Right of Set-off. Upon the occurrence of any Event of Default
under any Credit Document, the Guarantor hereby irrevocably authorizes each
Lender at any time and from time to time without notice to the Guarantor, any
such notice being expressly waived by the Guarantor, to set off and appropriate
and apply any and all deposits (general or special, time or demand, provisional
or final), in any currency, and any other credits, indebtedness or claims, in
any currency, in each case whether direct or indirect, absolute or contingent,
matured or unmatured, at any time held or owing by such Lender to or for the
credit or the account of the Guarantor, or any part thereof in such amounts as
such Lender may elect, against and on account of the obligations and liabilities
of the Guarantor to such Lender hereunder or under the Credit Agreement, the
Notes, or the other Credit Documents, as such Lender may elect, whether or not
the Administrative Agent or any Lender has made any demand for payment and
although such obligations, liabilities and claims may be contingent or
unmatured. Each Lender agrees to notify the Guarantor promptly of any such
set-off and the application made by such Lender, provided that the failure to
give such notice shall not affect the validity of such set-off and application.
The rights of each Lender under this paragraph are in addition to other rights
and remedies (including, without limitation, other rights of set-off) which such
Lender may have.
4. No Subrogation. Notwithstanding any payment or payments made by
the Guarantor hereunder or any set-off or application of funds of the Guarantor
by any Lender, the Guarantor shall not be entitled to be subrogated to any of
the rights of the Administrative Agent or any Lender against the Company or any
collateral security or guarantee or right of offset held by any Lender for the
payment of the Obligations, nor shall the Guarantor seek or be entitled to seek
any contribution or reimbursement from the Company in respect of payments made
by the Guarantor hereunder, and any such rights of subrogation and reimbursement
of the Guarantor are hereby waived until all amounts owing to the Administrative
Agent and the Lenders by the Company on account of the Obligations are paid in
full, the Commitments are terminated and either no Letters of Credit are
outstanding or each outstanding Letter of Credit has been cash collateralized so
that it is fully secured to the satisfaction of the Administrative Agent.
5. Amendments, etc. with respect to the Obligations; Waiver of
Rights. The Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of rights against the Guarantor and without notice to or
further assent by the Guarantor, any demand for payment of any of the
Obligations made by the Administrative Agent, the Issuing Lender or any Lender
may be rescinded by such party and any of the Obligations continued, and the
Obligations, or the liability of any other party upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered or released by
the Administrative Agent, the Issuing Lender or any Lender and the Credit
Agreement, the Notes, the other Credit Documents, any Letter of Credit, any
Interest Rate Agreement with any Lender or Lenders and any other collateral
security document or other guarantee or document in connection therewith may be
amended, modified, supplemented or terminated, in whole or in part, as the
Administrative Agent, the Issuing Lender and/or any Lender may deem advisable
from time to time, and any collateral security, guarantee or right of
<PAGE>
4
offset at any time held by the Administrative Agent or any Lender for the
payment of the Obligations may be sold, exchanged, waived, surrendered or
released. Neither the Administrative Agent nor any Lender shall have any
obligation to protect, secure, perfect or insure any Lien at any time held by it
as security for the Obligations or for this Guarantee or any property subject
thereto. When making any demand hereunder against the Guarantor, the
Administrative Agent or any Lender may, but shall be under no obligation to,
make a similar demand on any other guarantor, and any failure by the
Administrative Agent or any Lender to make any such demand or to collect any
payments from any such other guarantor or any release of any such other
guarantor shall not relieve the Guarantor in respect of which a demand or
collection is not made, and shall not impair or affect the rights and remedies,
express or implied, or as a matter of law, of the Administrative Agent or any
Lender against the Guarantor. For the purposes hereof "demand" shall include the
commencement and continuance of any legal proceedings.
6. Guarantee Absolute and Unconditional. The Guarantor waives any
and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent, the
Issuing Lender or any Lender upon this Guarantee or acceptance of this
Guarantee; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred, or renewed, extended, amended or
waived, in reliance upon this Guarantee; and all dealings between the Company or
the Guarantor and the Administrative Agent, the Issuing Lender or any Lender
shall likewise be conclusively presumed to have been had or consummated in
reliance upon this Guarantee. The Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Company or the Guarantor with respect to the Obligations. The Guarantor
understands and agrees that this Guarantee shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to (a) the
validity, regularity or enforceability of the Credit Agreement, the Notes, any
other Credit Document, the Letters of Credit, any Interest Rate Agreement with
any Lender or Lenders, any of the Obligations or any other collateral security
therefor or guarantee or right of offset with respect thereto at any time or
from time to time held by the Administrative Agent, the Issuing Lender or any
Lender, (b) any defense, set-off or counterclaim (other than a defense of
payment or performance) which may at any time be available to or be asserted by
the Company, the Guarantor or any other Person against the Administrative Agent,
the Issuing Lender or any Lender, or (c) any other circumstance whatsoever (with
or without notice to or knowledge of the Company or the Guarantor) which
constitutes, or might be construed to constitute, an equitable or legal
discharge of any of the Company for the Obligations, or of the Guarantor under
this Guarantee, in bankruptcy or in any other instance. When pursuing its rights
and remedies hereunder against the Guarantor, the Administrative Agent and/or
any Lender may, but shall be under no obligation to, pursue such rights and
remedies as it may have against the Company or any other Person or against any
collateral security or guarantee for the Obligations or any right of offset with
respect thereto, and any failure by the Administrative Agent or any Lender to
pursue such other rights or remedies or to collect any payments from the Company
or any such other Person or to realize upon any such collateral security or
guarantee or to exercise any such right of offset, or any release of the Company
or any such other Person or any such collateral security, guarantee or right of
offset, shall not relieve the Guarantor of any liability hereunder, and shall
not impair or affect the rights and remedies, whether express, implied or
available as a matter of law, of the Administrative Agent or any Lender against
the Guarantor. This Guarantee shall remain in full force and effect
<PAGE>
5
and be binding in accordance with and to the extent of its terms upon the
Guarantor and the successors and assigns thereof, and shall inure to the benefit
of the Administrative Agent and the Lenders, and their respective successors,
indorsees, transferees and assigns, until all the Obligations and the
obligations of the Guarantor under this Guarantee shall have been satisfied by
payment in full, either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent and the Commitments shall be
terminated, notwithstanding that from time to time during the term of the Credit
Agreement the Company may be free from any Obligations.
7. Reinstatement. This Guarantee shall continue to be effective, or
be reinstated, as the case may be, if at any time payment, or any part thereof,
of the Obligations is rescinded or must otherwise be restored or returned by the
Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Company or of the Guarantor, or upon or as
a result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Company or the Guarantor or any substantial
part of its property, or otherwise, all as though such payments had not been
made.
8. Payments. The Guarantor hereby guarantees that payments hereunder
will be paid in Dollars to the Administrative Agent without set-off or
counterclaim at the office of the Administrative Agent located at 270 Park
Avenue, New York, New York 10017, U.S.A. or at such other office as the
Administrative Agent may notify to the Guarantor in accordance with Section 15.
9. Representations and Warranties. The Guarantor hereby represents
and warrants that:
(a) it is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has
the corporate power and authority and the legal right to own and operate
its property, to lease the property it operates and to conduct the
business in which it is currently engaged;
(b) it is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct or proposed conduct of its business
requires such qualification and is in compliance with all Requirements of
Law except to the extent that the failure to comply therewith could not
reasonably be expected to have a material adverse effect on its business,
operations, assets or financial or other condition or on its ability to
perform its obligations under this Guarantee or the other Credit Documents
to which it is a party;
(c) it has the corporate power and authority and the legal right to
execute and deliver, and to perform its obligations under, this Guarantee
and the other Credit Documents to which the Guarantor is a party and to
grant the Liens granted by it pursuant to the other Credit Documents to
which the Guarantor is a party, and has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Guarantee and the other Credit Documents to which the Guarantor is a party
and to grant the Liens granted by it pursuant to the other Credit
Documents to which it is a party;
<PAGE>
6
(d) it owns 100% of the issued and outstanding shares of all classes
of Capital Stock of the Company and has Subsidiaries only as specified and
permitted under the terms of the Credit Agreement;
(e) no consent, license, permit, approval or authorization of, or
filing with, or notice or report to, or registration, filing or
declaration with, or other act by or in respect of, any arbitrator or
Governmental Authority and no consent of any other Person (including,
without limitation, any stockholder or creditor of such Guarantor), is
required in connection with the execution, delivery, performance, validity
or enforceability by or against the Guarantor of this Guarantee and the
other Credit Documents to which the Guarantor is a party;
(f) this Guarantee and the other Credit Documents to which the
Guarantor is a party have been duly executed and delivered on behalf of
the Guarantor and each of this Guarantee and the other Credit Documents to
which the Guarantor is a party constitutes a legal, valid and binding
obligation of the Guarantor enforceable against the Guarantor in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and by
general principles of equity;
(g) the execution, delivery and performance of this Guarantee and
the other Credit Documents to which the Guarantor is a party do not and
will not violate any Requirement of Law or any material Contractual
Obligation of the Guarantor and will not result in the creation or
imposition of any Lien on any of the properties or revenues of the
Guarantor pursuant to any Requirement of Law or Contractual Obligation
other than the Liens created by the Holdings Pledge Agreement;
(h) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of
the Guarantor, threatened by or against the Guarantor or against any of
its properties or revenues (i) with respect to this Guarantee or the other
Credit Documents to which the Guarantor is a party or any of the
transactions contemplated hereby or thereby or (ii) which could have a
material adverse effect on the business, operations, property or financial
condition of the Guarantor and its Subsidiaries taken as a whole or on the
ability of the Guarantor to perform its obligations under this Guarantee
or the other Credit Documents to which it is a party; and
(i) the Guarantor has filed or caused to be filed all tax returns
required to be filed by it, and has paid all taxes due on said returns or
on any assessments made against it (other than (a) those the amount or
validity of which is currently being contested in good faith by
appropriate proceedings for which adequate reserves have been provided on
its books and (b) those which, individually or in the aggregate, are not
material to the Guarantor and its Subsidiaries taken as a whole).
The Guarantor agrees that the foregoing representations and warranties shall be
deemed to have been made by the Guarantor on each Borrowing Date occurring on or
after the date hereof under
<PAGE>
7
the Credit Agreement on and as of such Borrowing Date as though made hereunder
on and as of such Borrowing Date.
10. Covenants. The Guarantor hereby covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Guarantee until the Obligations are paid in full and the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent, the Guarantor shall engage in no
business other than holding the Capital Stock of the Company, and businesses
incidental thereto.
11. Severability. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12. Paragraph Headings. The paragraph headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
13. No Waiver; Cumulative Remedies. Neither the Administrative
Agent, the Issuing Lender nor any Lender shall by any act (except by a written
instrument pursuant to paragraph 14 hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any default or event of default under any Credit Document or in
any breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Administrative Agent or any
Lender, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent or
any Lender of any right or remedy hereunder on any one occasion shall not be
construed as a bar to any right or remedy which the Administrative Agent or such
Lender would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any rights or remedies provided by law.
14. Integration; Waivers and Amendments; Successors and Assigns;
Governing Law. This Guarantee represents the entire agreement of the Guarantor
with respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent or any Lender relative to the
subject matter hereof not reflected herein or in the other Credit Documents.
None of the terms or provisions of this Guarantee may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
the Guarantor and the Administrative Agent, provided that any provision of this
Guarantee may be waived by the Administrative Agent and the Lenders in a letter
or agreement executed by the Administrative Agent or by telex or facsimile
transmission from the Administrative Agent. This Guarantee shall be binding upon
the successors and assigns of the Guarantor and shall inure to the benefit of
the Administrative Agent and the Lenders and their respective successors and
assigns. THIS
<PAGE>
8
GUARANTEE SHALL BE GOVERNED BY, AND BE CONSTRUED AND INTERPRETED IN ACCORDANCE
WITH, THE LAWS OF THE STATE OF NEW YORK.
15. Notices. All notices, requests and demands to or upon the
Guarantor or the Administrative Agent or any Lender to be effective shall be in
writing or by telecopy or telex and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or, in
the case of mail, three days after deposit in the postal system, first class
postage pre-paid, or, in the case of telecopy notice, confirmation of receipt
received, or, in the case of telex notice, when sent, answerback received,
addressed to a party at the address provided for such party in the Credit
Agreement or Schedule I hereto, as the case may be, or to such other address as
may be hereafter notified to the parties hereto.
16. Counterparts. This Guarantee may be executed by one or more of
the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
17. Authority of Administrative Agent. The Guarantor acknowledges
that the rights and responsibilities of the Administrative Agent under this
Guarantee with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Guarantee shall, as between the Administrative Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Guarantor, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and the Guarantor shall not be under
any obligation, or entitlement, to make any inquiry respecting such authority.
18. Submission to Jurisdiction; Waivers. (a) The Guarantor hereby
irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Guarantee or any other Credit Document, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the State of New York,
the courts of the United States for the Southern District of New York, and
appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not
to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be affected by mailing a copy thereof by registered or
certified mail, postage prepaid, to the Guarantor at its address set forth
on Schedule I hereto or at such other address of which the Administrative
Agent shall have been notified pursuant to paragraph 14; and
<PAGE>
9
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in other jurisdiction.
(b) The Guarantor and the Administrative Agent, on behalf of itself
and the Lenders, hereby unconditionally waive trial by jury in any legal action
or proceeding referred to in paragraph (a) above.
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee to be duly executed and delivered by its duly authorized officer as of
the day and year first above written.
CARTER HOLDINGS, INC.
By:_______________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as
Administrative Agent
By:_______________________________
Name:
Title:
<PAGE>
SCHEDULE I
Holdings Guarantee
Address of Guarantor
Carter Holdings, Inc.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attention: Charles K. Marquis, Esq./
Christopher O'Brien
Telecopy: (212) 351-4035
With a copy to:
The William Carter Company
1590 Adamson Parkway
Suite 400
Morrow, Georgia 30260
Attention: David A. Brown
Telecopy: (770) 960-1556
With a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attention: Janet Vance, Esq.
Telecopy: (212) 351-4035
<PAGE>
EXHIBIT F-2 TO
CREDIT AGREEMENT
FORM OF
SUBSIDIARIES' GUARANTEE
SUBSIDIARIES' GUARANTEE, dated as of October 30, 1996, made by each
of the corporations that are signatories hereto (the "Guarantors"), in favor of
THE CHASE MANHATTAN BANK, a New York banking corporation, as administrative
agent (in such capacity, the "Administrative Agent") for the banks and other
financial institutions (the "Lenders") that are parties to the Credit Agreement
(as hereafter defined).
W I T N E S S E T H :
WHEREAS, TWCC Acquisition Corp., a Massachusetts corporation (to be
merged with and into The William Carter Company, a Massachusetts corporation,
the "Company"), is party to a Credit Agreement, dated as of the date hereof,
with the Administrative Agent and the Lenders (as the same may be amended,
supplemented or otherwise modified from time to time, the "Credit Agreement");
WHEREAS, pursuant to the terms of the Credit Agreement, the Lenders
severally agreed to make certain extensions of credit to the Company;
WHEREAS, the Company owns directly all of the issued and outstanding
Capital Stock of each Guarantor;
WHEREAS, the proceeds of the extensions of credit will be used in
part to enable the Company to make valuable transfers (as determined as provided
herein) to each Guarantor in connection with the operation of its respective
business;
WHEREAS, the Company and the Guarantors are engaged in related
businesses, and each Guarantor will derive substantial direct and indirect
benefit from the making of the extensions of credit; and
WHEREAS, under the Credit Agreement, the obligation of the Lenders
to make the extensions of credit to the Company on and after the date hereof is
conditioned upon, among other things, the execution and delivery by the
Guarantors of this Guarantee;
<PAGE>
2
NOW, THEREFORE, in consideration of the premises and to induce the
Lenders to enter into the Credit Agreement and to make their respective
extensions of credit to the Company under the Credit Agreement, the Guarantors
hereby agree with and for the benefit of the Administrative Agent and the
Lenders as follows:
1. Defined Terms. As used in this Guarantee, terms defined in the
Credit Agreement or in the preamble or recitals hereto are used herein as
therein defined, and the following term shall have the following meaning:
"Obligations" (i) shall mean the unpaid principal amount of, and
interest on (including interest accruing on or after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Company, whether or not
a claim for such post-filing or post-petition interest is allowed), the
Loans and all other obligations and liabilities of the Company to the
Administrative Agent, the Issuing Lender or the Lenders, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with,
the Credit Agreement, any Letter of Credit or L/C Application, the other
Credit Documents and any other document executed and delivered or given in
connection therewith or herewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all reasonable fees and disbursements of
counsel to the Administrative Agent, the Issuing Lender or the Lenders
that are required to be paid by the Company or the Guarantors pursuant to
the terms of the Credit Agreement) or otherwise, and (ii) all obligations
of the Company to any Lender or Lenders or its or their Affiliates under
or in respect of any Interest Rate Agreement.
2. Guarantee. (a) Each Guarantor hereby, jointly and severally,
unconditionally and irrevocably, guarantees to the Agent, for the ratable
benefit of the Lenders and their respective successors, indorsees, transferees
and assigns, the prompt and complete payment and performance by the Company when
due (whether at the stated maturity, by acceleration or otherwise) of the
Obligations, and each of the Guarantors further agrees to pay any and all
expenses (including, without limitation, all reasonable fees and disbursements
of counsel) which may be paid or incurred by the Administrative Agent, the
Issuing Lender or any Lender in enforcing, or obtaining advice of counsel in
respect of, any rights with respect to, or collecting, any or all of the
Obligations and/or enforcing any rights with respect to, or collecting against,
the Guarantors under this Guarantee.
(b) Anything herein or in any other Loan Document to the contrary
notwithstanding, the maximum liability of each Guarantor hereunder and under the
other Loan Documents shall in no event exceed the amount which can be guaranteed
by such Guarantor under applicable federal and state laws relating to the
insolvency of debtors.
(c) Each Guarantor agrees that the Obligations may at any time and
from time to time exceed the amount of the liability of such Guarantor hereunder
without impairing this Guarantee or affecting the rights of the Administrative
Agent or any Lender hereunder.
(d) No payment or payments made by any of the Company, the
Guarantors, any other guarantor or any other Person or received or collected by
the Administrative Agent or any Lender from the Company, the Guarantors, any
other guarantor or any other Person by virtue
<PAGE>
3
of any action or proceeding or any set-off or appropriation or application at
any time or from time to time in reduction of or in payment of the Obligations
shall be deemed to modify, reduce, release or otherwise affect the liability of
any Guarantor hereunder which shall, notwithstanding any such payment or
payments other than payments made by such Guarantor in respect of the
Obligations or payments received or collected from such Guarantor in respect of
the Obligations, remain liable for the Obligations up to the maximum liability
of such Guarantor hereunder until the Obligations are paid in full, the
Commitments are terminated and either no Letters of Credit are outstanding or
each outstanding Letter of Credit has been cash collateralized so that it is
fully secured to the satisfaction of the Administrative Agent.
(e) Each Guarantor agrees that whenever, at any time, or from time
to time, it shall make any payment to the Administrative Agent or any Lender on
account of its liability hereunder, it will notify the Administrative Agent in
writing that such payment is made under this Guarantee for such purpose.
3. Right of Set-off. Upon the occurrence of any Event of Default
under any Credit Document, each Guarantor hereby irrevocably authorizes each
Lender at any time and from time to time without notice to such Guarantor or any
other guarantor, any such notice being expressly waived by each Guarantor, to
set off and appropriate and apply any and all deposits (general or special, time
or demand, provisional or final), in any currency, and any other credits,
indebtedness or claims, in any currency, in each case whether direct or
indirect, absolute or contingent, matured or unmatured, at any time held or
owing by such Lender to or for the credit or the account of the Guarantor, or
any part thereof in such amounts as such Lender may elect, against and on
account of the obligations and liabilities of such Guarantor to such Lender
hereunder or under the Credit Agreement, the Notes, or the other Credit
Documents, as such Lender may elect, whether or not the Administrative Agent or
any Lender has made any demand for payment and although such obligations,
liabilities and claims may be contingent or unmatured. Each Lender agrees to
notify such Guarantor promptly of any such set-off and the application made by
such Lender, provided that the failure to give such notice shall not affect the
validity of such set-off and application. The rights of each Lender under this
paragraph are in addition to other rights and remedies (including, without
limitation, other rights of set-off) which such Lender may have.
4. No Subrogation. Notwithstanding any payment or payments made by
any of the Guarantors hereunder or any set-off or application of funds of any of
the Guarantors by any Lender, no Guarantor shall be entitled to be subrogated to
any of the rights of the Administrative Agent or any Lender against the Company
or any other Guarantor or any collateral security or guarantee or right of
offset held by any Lender for the payment of the Obligations, nor shall any
Guarantor seek or be entitled to seek any contribution or reimbursement from the
Company or any other Guarantor in respect of payments made by such Guarantor
hereunder, and any such rights of subrogation and reimbursement of the
Guarantors are hereby waived until all amounts owing to the Administrative Agent
and the Lenders by the Company on account of the Obligations are paid in full,
the Commitments are terminated and either no Letters of Credit are outstanding
or each outstanding Letter of Credit has been cash collateralized so that it is
fully secured to the satisfaction of the Administrative Agent.
<PAGE>
4
5. Amendments, etc. with respect to the Obligations; Waiver of
Rights. Each Guarantor shall remain obligated hereunder notwithstanding that,
without any reservation of rights against any Guarantor and without notice to or
further assent by any Guarantor, any demand for payment of any of the
Obligations made by the Administrative Agent, the Issuing Lender or any Lender
may be rescinded by such party and any of the Obligations continued, and the
Obligations, or the liability of any other party upon or for any part thereof,
or any collateral security or guarantee therefor or right of offset with respect
thereto, may, from time to time, in whole or in part, be renewed, extended,
amended, modified, accelerated, compromised, waived, surrendered or released by
the Administrative Agent, the Issuing Lender or any Lender and the Credit
Agreement, the Notes, the other Credit Documents, any Letter of Credit, any
Interest Rate Agreement and any other collateral security document or other
guarantee or document in connection therewith may be amended, modified,
supplemented or terminated, in whole or in part, as the Administrative Agent,
the Issuing Lender and/or any Lender may deem advisable from time to time, and
any collateral security, guarantee or right of offset at any time held by the
Administrative Agent or any Lender for the payment of the Obligations may be
sold, exchanged, waived, surrendered or released. Neither the Administrative
Agent nor any Lender shall have any obligation to protect, secure, perfect or
insure any Lien at any time held by it as security for the Obligations or for
this Guarantee or any property subject thereto. When making any demand hereunder
against any particular Guarantor, the Administrative Agent or any Lender may,
but shall be under no obligation to, make a similar demand on any other
Guarantor or guarantor, and any failure by the Administrative Agent or any
Lender to make any such demand or to collect any payments from any such other
Guarantor or guarantor or any release of any such other Guarantor or guarantor
shall not relieve such Guarantor in respect of which a demand or collection is
not made or any of the Guarantors not so released of their several obligations
or liabilities hereunder, and shall not impair or affect the rights and
remedies, express or implied, or as a matter of law, of the Administrative Agent
or any Lender against any of the Guarantors. For the purposes hereof "demand"
shall include the commencement and continuance of any legal proceedings.
6. Guarantee Absolute and Unconditional. Each Guarantor waives any
and all notice of the creation, renewal, extension or accrual of any of the
Obligations and notice of or proof of reliance by the Administrative Agent, the
Issuing Lender or any Lender upon this Guarantee or acceptance of this
Guarantee; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred, or renewed, extended, amended or
waived, in reliance upon this Guarantee; and all dealings between the Company or
any of the Guarantors and the Administrative Agent, the Issuing Lender or any
Lender shall likewise be conclusively presumed to have been had or consummated
in reliance upon this Guarantee. Each Guarantor waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon the
Company or any of the Guarantors with respect to the Obligations. Each Guarantor
understands and agrees that this Guarantee shall be construed as a continuing,
absolute and unconditional guarantee of payment without regard to (a) the
validity, regularity or enforceability of the Credit Agreement, the Notes, any
other Credit Document, the Letters of Credit, any Interest Rate Agreements, any
of the Obligations or any other collateral security therefor or guarantee or
right of offset with respect thereto at any time or from time to time held by
the Administrative Agent, the Issuing Lender or any Lender, (b) any defense,
set-off or counterclaim (other than a defense of payment or performance) which
may at any time be
<PAGE>
5
available to or be asserted by the Company, any of the Guarantors or any other
Person against the Administrative Agent, the Issuing Lender or any Lender, or
(c) any other circumstance whatsoever (with or without notice to or knowledge of
the Company or such Guarantor) which constitutes, or might be construed to
constitute, an equitable or legal discharge of any of the Company for the
Obligations, or of any Guarantor under this Guarantee, in bankruptcy or in any
other instance. When pursuing its rights and remedies hereunder against any
Guarantor, the Administrative Agent and/or any Lender may, but shall be under no
obligation to, pursue such rights and remedies as it may have against the
Company or any other Person or against any collateral security or guarantee for
the Obligations or any right of offset with respect thereto, and any failure by
the Administrative Agent or any Lender to pursue such other rights or remedies
or to collect any payments from the Company or any such other Person or to
realize upon any such collateral security or guarantee or to exercise any such
right of offset, or any release of the Company or any such other Person or any
such collateral security, guarantee or right of offset, shall not relieve such
Guarantor of any liability hereunder, and shall not impair or affect the rights
and remedies, whether express, implied or available as a matter of law, of the
Administrative Agent or any Lender against such Guarantor. This Guarantee shall
remain in full force and effect and be binding in accordance with and to the
extent of its terms upon each Guarantor and the successors and assigns thereof,
and shall inure to the benefit of the Administrative Agent and the Lenders, and
their respective successors, indorsees, transferees and assigns, until all the
Obligations and the obligations of each Guarantor under this Guarantee shall
have been satisfied by payment in full, either no Letters of Credit are
outstanding or each outstanding Letter of Credit has been cash collateralized so
that it is fully secured to the satisfaction of the Administrative Agent and the
Commitments shall be terminated, notwithstanding that from time to time during
the term of the Credit Agreement the Company may be free from any Obligations.
7. Reinstatement. This Guarantee shall continue to be effective, or
be reinstated, as the case may be, if at any time payment, or any part thereof,
of the Obligations is rescinded or must otherwise be restored or returned by the
Administrative Agent or any Lender upon the insolvency, bankruptcy, dissolution,
liquidation or reorganization of the Company or of any Guarantor, or upon or as
a result of the appointment of a receiver, intervenor or conservator of, or
trustee or similar officer for, the Company or any Guarantor or any substantial
part of its property, or otherwise, all as though such payments had not been
made.
8. Payments. Each Guarantor hereby guarantees that payments
hereunder will be paid in Dollars to the Administrative Agent without set-off or
counterclaim at the office of the Administrative Agent located at 270 Park
Avenue, New York, New York 10017, U.S.A. or at such other office as the
Administrative Agent may notify to the Guarantor in accordance with Section 15.
9. Representations and Warranties. Each Guarantor hereby represents
and warrants that:
(a) it is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has
the corporate power and
<PAGE>
6
authority and the legal right to own and operate its property, to lease
the property it operates and to conduct the business in which it is
currently engaged;
(b) it is duly qualified as a foreign corporation and in good
standing under the laws of each jurisdiction where its ownership, lease or
operation of property or the conduct or proposed conduct of its business
requires such qualification and is in compliance with all Requirements of
Law except to the extent that the failure to comply therewith could not
reasonably be expected to have a material adverse effect on its business,
operations, assets or financial or other condition or on its ability to
perform its obligations under this Guarantee or the other Credit Documents
to which it is a party;
(c) it has the corporate power and authority and the legal right to
execute and deliver, and to perform its obligations under, this Guarantee
and the other Credit Documents to which the Guarantor is a party and to
grant the Liens granted by it pursuant to the other Credit Documents to
which such Guarantor is a party, and has taken all necessary corporate
action to authorize the execution, delivery and performance of this
Guarantee and the other Credit Documents to which such Guarantor is a
party and to grant the Liens granted by it pursuant to the other Credit
Documents to which it is a party;
(d) it is a Subsidiary of the Company;
(e) no consent, license, permit, approval or authorization of, or
filing with, or notice or report to, or registration, filing or
declaration with, or other act by or in respect of, any arbitrator or
Governmental Authority and no consent of any other Person (including,
without limitation, any stockholder or creditor of any Guarantor), is
required in connection with the execution, delivery, performance, validity
or enforceability by or against any Guarantor of this Guarantee and the
other Credit Documents to which each Guarantor is a party;
(f) this Guarantee and the other Credit Documents to which each
Guarantor is a party have been duly executed and delivered on behalf of
such Guarantor and each of this Guarantee and the other Credit Documents
to which each Guarantor is a party constitutes a legal, valid and binding
obligation of such Guarantor enforceable against such Guarantor in
accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar
laws affecting the enforcement of creditors' rights generally and by
general principles of equity;
(g) the execution, delivery and performance of this Guarantee and
the other Credit Documents to which each Guarantor is a party do not and
will not violate any Requirement of Law or any material Contractual
Obligation of such Guarantor and will not result in the creation or
imposition of any Lien on any of the properties or revenues of such
Guarantor pursuant to any Requirement of Law or Contractual Obligation
other than the Liens created by the Subsidiaries Pledge Agreement and
Subsidiaries Security Agreements;
<PAGE>
7
(h) no litigation, investigation or proceeding of or before any
arbitrator or Governmental Authority is pending or, to the knowledge of
such Guarantor, threatened by or against such Guarantor or against any of
its properties or revenues of any Guarantor (i) with respect to this
Guarantee or the other Credit Documents to which such Guarantor is a party
or any of the transactions contemplated hereby or thereby or (ii) which
could have a material adverse effect on the business, operations, property
or financial condition of any Guarantor and any such Guarantor's
Subsidiaries taken as a whole or on the ability of any Guarantor to
perform its obligations under this Guarantee or the other Credit Documents
to which it is a party; and
(i) each Guarantor has filed or caused to be filed all tax returns
required to be filed by it, and has paid all taxes due on said returns or
on any assessments made against it (other than (a) those the amount or
validity of which is currently being contested in good faith by
appropriate proceedings for which adequate reserves have been provided on
its books and (b) those which, individually or in the aggregate, are not
material to such Guarantor and its Subsidiaries taken as a whole).
(j) Each Guarantor agrees that the foregoing representations and
warranties shall be deemed to have been made by each Guarantor on each
Borrowing Date occurring on or after the date hereof under the Credit
Agreement on and as of such Borrowing Date as though made hereunder on and
as of such Borrowing Date.
10. Covenants. Each Guarantor hereby covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Guarantee until the Obligations are paid in full and the Commitments are
terminated and no Letter of Credit is outstanding, each Guarantor will comply
with provisions of Sections 8 and 9 of the Credit Agreement to the extent such
provisions apply to such Guarantors.
11. Severability. Any provision of this Guarantee which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
12. Paragraph Headings. The paragraph headings used in this
Guarantee are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
13. No Waiver; Cumulative Remedies. Neither the Administrative
Agent, the Issuing Lender nor any Lender shall by any act (except by a written
instrument pursuant to paragraph 13 hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any default or event of default under any Credit Document or in
any breach of any of the terms and conditions hereof. No failure to exercise,
nor any delay in exercising, on the part of the Administrative Agent or any
Lender, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise
<PAGE>
8
thereof or the exercise of any other right, power or privilege. A waiver by the
Administrative Agent or any Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the
Administrative Agent or such Lender would otherwise have on any future occasion.
The rights and remedies herein provided are cumulative, may be exercised singly
or concurrently and are not exclusive of any rights or remedies provided by law.
14. Integration; Waivers and Amendments; Successors and Assigns;
Governing Law. This Guarantee represents the entire agreement of each Guarantor
with respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent or any Lender relative to the
subject matter hereof not reflected herein or in the other Credit Documents.
None of the terms or provisions of this Guarantee may be waived, amended,
supplemented or otherwise modified except by a written instrument executed by
each Guarantor and the Administrative Agent, provided that any provision of this
Guarantee may be waived by the Administrative Agent and the Lenders in a letter
or agreement executed by the Administrative Agent or by telex or facsimile
transmission from the Administrative Agent. This Guarantee shall be binding upon
the successors and assigns of each Guarantor and shall inure to the benefit of
the Administrative Agent and the Lenders and their respective successors and
assigns. THIS GUARANTEE SHALL BE GOVERNED BY, AND BE CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
15. Notices. All notices, requests and demands to or upon each
Guarantor or the Administrative Agent or any Lender to be effective shall be in
writing or by telecopy or telex and, unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or, in
the case of mail, three days after deposit in the postal system, first class
postage pre-paid, or, in the case of telecopy notice, confirmation of receipt
received, or, in the case of telex notice, when sent, answerback received,
addressed to a party at the address provided for such party in the Credit
Agreement or Schedule I hereto, as the case may be, or to such other address as
may be hereafter notified to the parties hereto.
16. Counterparts. This Guarantee may be executed by one or more of
the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
17. Authority of Administrative Agent. Each Guarantor acknowledges
that the rights and responsibilities of the Administrative Agent under this
Guarantee with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Guarantee shall, as between the Administrative Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Administrative Agent and each Guarantor, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and no Guarantor shall be under any
obligation, or entitlement, to make any inquiry respecting such authority.
<PAGE>
9
18. Submission to Jurisdiction; Waivers. (a) Each Guarantor hereby
irrevocably and unconditionally:
(i) submits for itself and its property in any legal action or
proceeding relating to this Guarantee or any other Credit Document, or for
recognition and enforcement of any judgment in respect thereof, to the
non-exclusive general jurisdiction of the courts of the State of New York,
the courts of the United States for the Southern District of New York, and
appellate courts from any thereof;
(ii) consents that any such action or proceeding may be brought in
such courts, and waives any objection that it may now or hereafter have to
the venue of any such action or proceeding in any such court or that such
action or proceeding was brought in an inconvenient court and agrees not
to plead or claim the same;
(iii) agrees that service of process in any such action or
proceeding may be affected by mailing a copy thereof by registered or
certified mail, postage prepaid, to such Guarantor at its address set
forth on Schedule I hereto or at such other address of which the
Administrative Agent shall have been notified pursuant to paragraph 17;
and
(iv) agrees that nothing herein shall affect the right to effect
service of process in any other manner permitted by law or shall limit the
right to sue in other jurisdiction.
(b) Each Guarantor and the Administrative Agent, on behalf of itself
and the Lenders, hereby unconditionally waive trial by jury in any legal action
or proceeding referred to in paragraph (a) above.
<PAGE>
10
IN WITNESS WHEREOF, each of the undersigned has caused this
Guarantee to be duly executed and delivered by its duly authorized officer as of
the day and year first above written.
CARTER'S DE SAN PEDRO, INC.
By:_______________________________
Name:
Title:
Accepted and agreed to:
THE CHASE MANHATTAN BANK, as
Administrative Agent
By:_______________________________
Name:
Title:
<PAGE>
SCHEDULE I
Subsidiary Guarantee
Address of Guarantors
CARTER'S DE SAN PEDRO, INC.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attention: Charles K. Marquis, Esq./
Christopher O'Brien
Telecopy: (212) 351-4035
With a copy to:
The William Carter Company
1590 Adamson Parkway, Suite 400
Morrow, Georgia 30260
Attention: David A. Brown
Telecopy: (770) 960-1556
With a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attention: Janet Vance, Esq.
Telecopy: (212) 351-4035
<PAGE>
EXHIBIT G-1 TO
CREDIT AGREEMENT
FORM OF
HOLDINGS PLEDGE AGREEMENT
PLEDGE AGREEMENT, dated as of October __, 1996, made by CARTER
HOLDINGS, INC., a Massachusetts corporation (the "Pledgor"), in favor of THE
CHASE MANHATTAN BANK, a New York banking corporation, as administrative agent
(in such capacity, the "Administrative Agent") for the several lenders (the
"Lenders") from time to time parties to the Credit Agreement, dated as of the
date hereof (as amended, supplemented or otherwise modified from time to time,
the "Credit Agreement"), among TWCC Acquisition Corp., a Massachusetts
corporation (to be merged with and into The William Carter Company, the
"Company"), the Lenders and the Administrative Agent.
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make loans to, and the Issuing Lender (as defined in the
Credit Agreement) has agreed to issue and certain of the Lenders have agreed to
participate in certain letters of credit for the account of the Company upon the
terms and subject to the conditions set forth therein, such loans being
evidenced by the notes issued by the Company;
WHEREAS, the Pledgor is the owner of the shares of Pledged Stock (as
hereinafter defined) issued by the Company listed on Schedule I hereto; and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective loans to, and the obligation of the Issuing
Lender to issue and the Lenders to participate in letters of credit for the
account of, the Company under the Credit Agreement that the Pledgor shall have
executed and delivered this Pledge Agreement to the Administrative Agent for the
ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent, the Issuing Lender and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their respective loans and
the Issuing Lender to issue and the Lenders to participate in the letters of
credit under the Credit Agreement, the Pledgor hereby agrees with the
Administrative Agent, for the ratable benefit of the Lenders, as follows:
<PAGE>
2
1. Defined Terms. Unless otherwise defined herein, terms that are
defined in the Credit Agreement and used herein are so used as so defined, and
the following terms shall have the following meanings:
"Code" means the Uniform Commercial Code from time to time in effect
in the State of New York.
"Collateral" means the Pledged Stock and all Proceeds.
""Obligations" means (i) the unpaid principal amount of, and
interest on (including interest accruing on or after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Company, whether or not
a claim for such post-filing or post-petition interest is allowed), the
Loans and all other obligations and liabilities of the Company to the
Administrative Agent, the Issuing Lender or the Lenders, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with,
the Credit Agreement, any Letter of Credit or L/C Application, the other
Credit Documents and any other document executed and delivered or given in
connection therewith or herewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all reasonable fees and disbursements of
counsel to the Administrative Agent, the Issuing Lender or to the Lenders
that are required to be paid by the Company pursuant to the terms of the
Credit Agreement) or otherwise, and (ii) all obligations of the Company to
any Lender or Lenders or its or their Affiliates under or in respect of
any Interest Rate Agreement.
"Pledge Agreement" means this Pledge Agreement, as amended,
supplemented or otherwise modified from time to time.
"Pledged Stock" means the shares of capital stock of the Company
listed on Schedule I hereto, together with all stock certificates, options
or rights of any nature whatsoever that may be issued or granted by the
Company to the Pledgor while this Pledge Agreement is in effect.
"Proceeds" means all "proceeds", as such term is defined in Section
9-306(1) of the Code on the date hereof, of the Pledged Stock, and, in any
event, shall include, without limitation, all dividends or other income
from the Pledged Stock, collections thereon or distributions with respect
thereto.
2. Pledge; Grant of Security Interest. The Pledgor hereby delivers
to the Administrative Agent, for the ratable benefit of the Lenders, all
certificates or instruments representing or evidencing the Pledged Stock on the
date hereof, and hereby transfers and grants to the Administrative Agent, for
the ratable benefit of the Lenders, a first priority security interest in all of
the Pledgor's right, title and interest in the Collateral, as collateral
security for the prompt and complete payment and performance when due (whether
at the stated maturity, by acceleration or otherwise) of the Obligations.
<PAGE>
3
3. Stock Powers. Concurrently with the delivery to the
Administrative Agent of each certificate representing one or more shares of
Pledged Stock, the Pledgor shall deliver an undated stock power covering such
certificate, duly executed in blank by the Pledgor.
4. Representations and Warranties. The Pledgor represents and
warrants that:
(a) the shares of Pledged Stock constitute (i) all the issued and
outstanding shares of all classes of the Capital Stock of the Company owned by
the Pledgor and (ii) on the date hereof, 100% of the issued and outstanding
shares of all classes of the Capital Stock of the Company;
(b) all the shares of Pledged Stock have been duly and validly
issued and are fully paid and nonassessable;
(c) the Pledgor is the record and beneficial owner of the Pledged
Stock, free of any and all Liens or options in favor of, or claims of, any other
Person, except the Lien created by this Pledge Agreement; and
(d) upon delivery to the Administrative Agent of the stock
certificates evidencing the Pledged Stock, the Lien granted pursuant to this
Pledge Agreement will constitute a valid, perfected first priority Lien on the
Collateral (except, with respect to Proceeds, only to the extent permitted by
Section 9-306 of the Code), enforceable as such against all creditors of the
Pledgor and any Persons purporting to purchase any Collateral from the Pledgor.
The Pledgor agrees that the foregoing representations and warranties shall be
deemed to have been made by the Pledgor on each Borrowing Date occurring on or
after the date hereof under the Credit Agreement, on and as of such Borrowing
Date as though made hereunder on and as of such date.
5. Covenants. The Pledgor covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Pledge Agreement until the Obligations are paid in full and the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent:
(a) If the Pledgor shall, as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option
or rights in respect of capital stock of the Company, whether in addition to, in
substitution of, as a conversion of, or in exchange for any shares of the
Pledged Stock, or otherwise in respect thereof, the Pledgor shall accept the
same as the agent of the Administrative Agent and the Lenders, hold the same in
trust for the Administrative Agent and the Lenders and deliver the same
forthwith to the Administrative Agent in the exact form received, duly indorsed
by the Pledgor to the Administrative Agent, if required, together with an
undated stock power covering such certificate duly executed in blank by the
Pledgor and with, if the Administrative Agent so
<PAGE>
4
requests, signature guaranteed, to be held by the Administrative Agent, subject
to the terms hereof, as additional collateral security for the Obligations.
(b) Without the prior written consent of the Administrative Agent,
the Pledgor will not (i) sell, assign, transfer, exchange, or otherwise dispose
of, or grant any option with respect to, the Collateral, or (ii) create, incur
or permit to exist any Lien or option in favor of, or any claim of any Person
with respect to, any of the Collateral, or any interest therein, except for the
Lien provided for by this Pledge Agreement. The Pledgor will defend the right,
title and interest of the Administrative Agent, the Issuing Lender and the
Lenders in and to the Collateral against the claims and demands of all Persons
whomsoever.
(c) At any time and from time to time, upon the written request of
the Administrative Agent, and at the sole expense of the Pledgor, the Pledgor
will promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Administrative Agent may
reasonably request for the purposes of obtaining or preserving the full benefits
of this Pledge Agreement and of the rights and powers herein granted. If any
amount payable under or in connection with any of the Collateral shall be or
become evidenced by any promissory note, other instrument or chattel paper, such
note, instrument or chattel paper shall be immediately delivered to the
Administrative Agent, duly endorsed in a manner satisfactory to the
Administrative Agent, to be held as Collateral pursuant to this Pledge
Agreement.
(d) The Pledgor agrees to pay, and to save the Administrative Agent,
the Issuing Lender and the Lenders harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamp, excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of the transactions
contemplated by this Pledge Agreement.
6. Cash Dividends; Voting Rights. Unless an Event of Default shall
have occurred and be continuing, the Pledgor shall be permitted to receive all
cash dividends paid by the Company to the extent permitted in the Credit
Agreement in respect of the Pledged Stock and to exercise all voting and
corporate rights with respect to the Pledged Stock, provided, however, that the
Pledgor agrees that it shall not vote in any way which would be inconsistent
with or result in any violation of any provision of the Credit Agreement, the
Notes, the Security Documents or any of the other Credit Documents. The
Administrative Agent shall, at the Pledgor's sole cost and expense, execute and
deliver (or cause to be executed and delivered) to the Pledgor all proxies and
other instruments as the Pledgor may reasonably request for the purpose of
enabling the Pledgor to exercise the voting and other rights that it is entitled
to exercise pursuant to this Section 6.
7. Rights of the Lenders and the Administrative Agent. (a) If an
Event of Default shall occur and be continuing, (i) the Administrative Agent
shall have the right to receive any and all cash dividends paid in respect of
the Pledged Stock and make application thereof to the Obligations in such order
as the Administrative Agent may determine, and (ii) all shares of the Pledged
Stock may be registered in the name of the Administrative Agent or its nominee,
and, subject to the terms of this Agreement, the Administrative Agent or its
nominee may thereafter exercise (A) all voting, corporate and other rights
pertaining to such shares of the Pledged Stock
<PAGE>
5
at any meeting of shareholders of the Company or otherwise and (B) any and all
rights of conversion, exchange, subscription and any other rights, privileges or
options pertaining to such shares of the Pledged Stock as if it were the
absolute owner thereof (including, without limitation, the right to exchange at
its discretion any and all of the Pledged Stock upon the merger, consolidation,
reorganization, recapitalization or other fundamental change in the corporate
structure of the Company, or upon the exercise by the Pledgor or the
Administrative Agent of any right, privilege or option pertaining to such shares
of the Pledged Stock, and in connection therewith, the right to deposit and
deliver any and all of the Pledged Stock with any committee, depositary,
transfer agent, registrar or other designated agency upon such terms and
conditions as it may determine), all without liability except to account for
property actually received by it and except for its gross negligence or willful
misconduct or failure to comply with the provisions of Section 12, but the
Administrative Agent shall have no duty to the Pledgor to exercise any such
right, privilege or option and shall not be responsible for any failure to do so
or delay in so doing.
(b) The rights of the Administrative Agent, the Issuing Lender and
the Lenders hereunder shall not be conditioned or contingent upon the pursuit by
the Administrative Agent, the Issuing Lender or any Lender of any right or
remedy against any other Person which may be or become liable in respect of all
or any part of the Obligations or against any collateral security therefor,
guarantee therefor or right of offset with respect thereto. None of the
Administrative Agent, the Issuing Lender and any Lender shall be liable for any
failure to demand, collect or realize upon all or any part of the Collateral or
for any delay in doing so, nor shall the Administrative Agent be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
the Pledgor or any other Person or to take any other action whatsoever with
regard to the Collateral or any part thereof. The Administrative Agent agrees to
release promptly to the Pledgor any dividends, cash, securities, instruments and
other property paid, payable or otherwise distributed in respect of the
Collateral which it may receive under Section 7(a) if, prior to the occurrence
of an acceleration of any of the Obligations, all Defaults and Events of Default
have been waived or are no longer continuing.
(c) The Administrative Agent may execute any of its duties under
this Pledge Agreement by or through agents or attorneys-in-fact and shall be
entitled to advice of counsel concerning all matters pertaining to such duties.
The Administrative Agent shall not be responsible for the negligence or
misconduct of any agents or attorneys-in-fact selected by it with reasonable
care, except as otherwise provided in subsection 10.3 of the Credit Agreement.
8. Remedies. In the event that any portion of the Obligations has
been declared or becomes due and payable in accordance with the terms of the
Credit Agreement, the Administrative Agent, on behalf of the Lenders, may
exercise, in addition to all other rights and remedies granted in this Pledge
Agreement and in any other instrument or agreement securing, evidencing or
relating to the Obligations, all rights and remedies of a secured party under
the Code. Without limiting the generality of the foregoing, the Administrative
Agent, without demand of performance or other demand, presentment, protest,
advertisement or notice of any kind (except any notice required by law referred
to below) to or upon the Pledgor, the Company or any other Person (all and each
of which demands, defenses, advertisements and notices are hereby waived), may
in such circumstances forthwith collect, receive, appropriate and realize
<PAGE>
6
upon the Collateral, or any part thereof, and/or may forthwith sell, assign,
give option or options to purchase or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, in the over-the-counter
market, at any exchange, broker's board or office of the Administrative Agent,
the Issuing Lender or any Lender or elsewhere upon such terms and conditions as
it may deem commercially reasonable and at such prices as it may deem best, for
cash or on credit or for future delivery without assumption of any credit risk.
The Administrative Agent, the Issuing Lender or any Lender shall have the right
upon any such public sale or sales, and, to the extent permitted by law, upon
any such private sale or sales, to purchase the whole or any part of the
Collateral so sold, free of any right or equity of redemption in the Pledgor,
which right or equity is hereby waived and released. The Administrative Agent
promptly shall apply any Proceeds from time to time held by it and the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred in respect thereof or incidental to the care or safekeeping of any of
the Collateral or in any way relating to the Collateral or the rights of the
Administrative Agent, the Issuing Lender and the Lenders hereunder, including,
without limitation, reasonable attorneys' fees and disbursements of counsel to
the Administrative Agent, to the payment in whole or in part of the Obligations,
in such order as the Administrative Agent may elect subject to subsection 4.9 of
the Credit Agreement, and only after such application and after the payment by
the Administrative Agent of any other amount required by any provision of law,
including, without limitation, Section 9-504(1)(c) of the Code, need the
Administrative Agent account for the surplus, if any, to the Pledgor. To the
extent permitted by applicable law, the Pledgor waives all claims, damages and
demands it may acquire against the Administrative Agent, the Issuing Lender or
any Lender arising out of the lawful exercise by them of any rights hereunder.
If any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition. The Pledgor further waives
and agrees not to assert any rights or privileges which it may acquire under
Section 9-112 of the Code. The Pledgor shall remain liable for any deficiency if
the proceeds of any sale or other disposition of the Collateral are insufficient
to pay the Obligations and the fees and disbursements of any attorneys employed
by the Administrative Agent or any Lender to collect such deficiency.
9. Registration Rights; Private Sales. (a) If the Administrative
Agent shall determine to exercise its right to sell any or all of the Pledged
Stock pursuant to Section 8, and if in the opinion of the Administrative Agent
it is necessary or advisable to have the Pledged Stock, or that portion thereof
to be sold, registered under the provisions of the Securities Act of 1933, as
amended (the "Securities Act"), the Pledgor will cause the Company to (i)
execute and deliver, and cause the directors and officers of the Company to
execute and deliver, all such instruments and documents, and do or cause to be
done all such other acts as may be, in the opinion of the Administrative Agent,
necessary or advisable to register the Pledged Stock, or that portion thereof to
be sold, under the provisions of the Securities Act, (ii) use its best efforts
to cause the registration statement relating thereto to become effective and to
remain effective for a period of 90 days from the date of the first public
offering of the Pledged Stock, or that portion thereof to be sold, and (iii)
make all amendments thereto and/or to the related prospectus that, in the
opinion of the Administrative Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange
<PAGE>
7
Commission applicable thereto. The Pledgor agrees to cause the Company to comply
with the provisions of the securities or "Blue Sky" laws of any and all
jurisdictions that the Administrative Agent shall reasonably designate and to
make available to its security holders, as soon as practicable, an earnings
statement (which need not be audited) that will satisfy the provisions of
Section 11(a) of the Securities Act.
(b) The Pledgor recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers that will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. The
Pledgor acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale conducted
in a manner that the Administrative Agent in good faith believes to be
commercially reasonable under the circumstances shall be deemed to have been
made in a commercially reasonable manner. The Administrative Agent shall be
under no obligation to delay the sale of any of the Pledged Stock for the period
of time necessary to permit the Company to register such securities for public
sale under the Securities Act, or under applicable state securities laws, even
if the Company would agree to do so.
(c) The Pledgor further agrees to use its best efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Stock, pursuant to this Section 9
valid and binding and in compliance with any and all other applicable
Requirements of Law. The Pledgor further agrees that a breach of any of the
covenants contained in this Section 9 will cause irreparable injury to the
Administrative Agent, the Issuing Lender and the Lenders, that the
Administrative Agent, the Issuing Lender and the Lenders have no adequate remedy
at law in respect of such breach and, as a consequence, that each and every
covenant contained in this Section 9 shall be specifically enforceable against
the Pledgor, and the Pledgor hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants.
10. No Subrogation. Notwithstanding any payment or payments made by
the Pledgor hereunder, or any setoff or application of funds of the Pledgor by
any Lender, or the receipt of any amounts by the Administrative Agent, the
Issuing Lender or any Lender with respect to any of the Collateral, the Pledgor
shall not be entitled to be subrogated to any of the rights of the
Administrative Agent, the Issuing Lender or any Lender against the Company or
against any other collateral security held by the Administrative Agent, the
Issuing Lender or any Lender for the payment of the Obligations, nor shall the
Pledgor seek any reimbursement from the Company in respect of payments made by
the Pledgor in connection with the Collateral, or amounts realized by the
Administrative Agent, the Issuing Lender or any Lender in connection with the
Collateral, and any such rights of subrogation and reimbursement of the Pledgor
are hereby waived until all amounts owing to the Administrative Agent and the
Lenders by the Company on account of the Obligations are paid in full, the
Commitments are terminated and either no Letters of Credit are outstanding or
each outstanding Letter of Credit has been cash collateralized so that it is
fully secured to the satisfaction of the Administrative Agent.
<PAGE>
8
11. Amendments, etc. with Respect to the Obligations. The Pledgor
shall remain obligated hereunder, and the Collateral shall remain subject to the
Lien granted hereby, notwithstanding that, without any reservation of rights
against the Pledgor, and without notice to or further assent by the Pledgor, any
demand for payment of any of the Obligations made by the Administrative Agent,
the Issuing Lender or any Lender may be rescinded by the Administrative Agent,
the Issuing Lender or such Lender, and any of the Obligations continued, and the
Obligations, or the liability of the Company or any other Person upon or for any
part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered, or released by the Administrative Agent, the Issuing Lender or any
Lender, and the Credit Agreement, the Notes, the Security Documents, the other
Credit Documents, any Interest Rate Agreement entered into with any Lender or
Lenders and any other documents executed and delivered in connection therewith
may be amended, modified, supplemented or terminated, in whole or in part, as
the Lenders (or the Required Lenders, as the case may be) may deem advisable
from time to time, and any guarantee, right of offset or other collateral
security at any time held by the Administrative Agent, the Issuing Lender or any
Lender for the payment of the Obligations may be sold, exchanged, waived,
surrendered or released. None of the Administrative Agent, the Issuing Lender
and the Lenders shall have any obligation to protect, secure, perfect or insure
any other Lien at any time held by it as security for the Obligations or any
property subject thereto. The Pledgor waives any and all notice of the creation,
renewal, extension or accrual of any of the Obligations and notice of or proof
of reliance by the Administrative Agent, the Issuing Lender or any Lender upon
this Pledge Agreement; the Obligations, and any of them shall conclusively be
deemed to have been created, contracted or incurred in reliance upon this Pledge
Agreement; and all dealings between the Company and the Pledgor, on the one
hand, and the Administrative Agent, the Issuing Lender and the Lenders, on the
other, shall likewise be conclusively presumed to have been had or consummated
in reliance upon this Pledge Agreement. The Pledgor waives diligence,
presentment, protest, demand for payment and notice of default or nonpayment to
or upon the Company or the Pledgor with respect to the Obligations.
12. Limitation on Duties Regarding Collateral. The Administrative
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in its possession, under Section 9-207 of the
Code or otherwise, shall be to deal with it in the same manner as the
Administrative Agent deals with similar securities and property for its own
account. None of the Administrative Agent, the Issuing Lender, any Lender nor
any of their respective directors, officers, employees or agents shall be liable
for failure to demand, collect or realize upon any of the Collateral or for any
delay in doing so or shall be under any obligation to sell or otherwise dispose
of any Collateral upon the request of the Pledgor or otherwise.
13. Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
14. Severability. Any provision of this Pledge Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any
<PAGE>
9
such prohibition or unenforceability in any jurisdiction shall not invalidate or
render unenforceable such provision in any other jurisdiction.
15. Section Headings. The section headings used in this Pledge
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
16. No Waiver; Cumulative Remedies. Neither the Administrative
Agent, the Issuing Lender nor any Lender shall by any act (except by a written
instrument pursuant to Section 17 hereof) be deemed to have waived any right or
remedy hereunder or to have acquiesced in any default of any obligation under
any Credit Document or in any breach of any of the terms and conditions hereof
or thereof. No failure to exercise, nor any delay in exercising, on the part of
the Administrative Agent, the Issuing Lender or any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Administrative Agent, the Issuing Lender or any Lender of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Administrative Agent, the Issuing Lender or such
Lender would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any other rights or remedies provided by law.
17. Integration; Waivers and Amendments; Successors and Assigns;
Governing Law. This Pledge Agreement represents the entire agreement of the
Pledgor with respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent or any Lender relative to the
subject matter hereof not reflected herein or in the other Credit Documents.
None of the terms or provisions of this Pledge Agreement may be amended,
supplemented or otherwise modified except by a written instrument executed by
the Pledgor and the Administrative Agent, provided that any provision of this
Pledge Agreement may be waived by the Administrative Agent in a letter or
agreement executed by the Administrative Agent or by telex or facsimile
transmission from the Administrative Agent. This Pledge Agreement shall be
binding upon the successors and assigns of the Pledgor and shall inure to the
benefit of the Administrative Agent, the Issuing Lender and the Lenders and
their respective successors and assigns. THIS PLEDGE AGREEMENT SHALL BE GOVERNED
BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF
NEW YORK.
18. Notices. Notices by the Administrative Agent to the Pledgor or
the Company may be given by mail, by telex or by facsimile transmission,
addressed or transmitted to the Pledgor or the Company at its address or
transmission number set forth in subsection 11.2 of the Credit Agreement in the
case of the Company and on Schedule II hereto in the case of the Pledgor and
shall be effective (a) in the case of mail, three days after deposit in the
postal system, first class postage pre-paid, and (b) in the case of telex or
facsimile notices, when sent. The Pledgor and the Company may change their
respective addresses and transmission numbers by written notice to the
Administrative Agent.
<PAGE>
10
19. Counterparts. This Pledge Agreement may be executed by one or
more of the parties hereto on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
20. Irrevocable Authorization and Instruction to Company. The
Pledgor hereby authorizes and instructs the Company to comply with any
instruction received by it from the Administrative Agent in writing that (a)
states that an Event of Default has occurred and is continuing and (b) is
otherwise in accordance with the terms of this Pledge Agreement, without any
other or further instructions from the Pledgor, and the Pledgor agrees that the
Company shall be fully protected in so complying.
21. Authority of Administrative Agent. The Pledgor acknowledges that
the rights and responsibilities of the Administrative Agent under this Pledge
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, voting
right, request, judgment or other right or remedy provided for herein or
resulting or arising out of this Pledge Agreement shall, as between the
Administrative Agent and the Lenders, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Pledgor, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Lenders with full and valid authority so to act or refrain from acting, and
neither the Pledgor nor the Company shall be under any obligation, or
entitlement, to make any inquiry respecting such authority.
22. Termination. This Pledge Agreement shall terminate when all the
Obligations have been fully paid and performed and the Commitments terminated.
Upon such termination, the Administrative Agent shall on its behalf and on
behalf of the Lenders reassign and redeliver (or cause to be reassigned and
redelivered) to the Pledgor, or to such person or persons as the Pledgor shall
designate or to whomever may be lawfully entitled to receive such surplus,
against receipt, such of the Collateral (if any) as shall not have been sold or
otherwise applied by the Administrative Agent pursuant to the terms hereof and
shall still be held by it hereunder, together with appropriate instruments of
reassignment and release. Any such reassignment shall be without recourse upon
or warranty by the Administrative Agent (other than a warranty that the
Administrative Agent has not assigned its rights and interests hereunder to any
other Person) and at the sole cost and expense of the Pledgor.
<PAGE>
11
IN WITNESS WHEREOF, the undersigned have caused this Pledge
Agreement to be duly executed and delivered as of the date first above written.
CARTER HOLDINGS, INC.
By: _______________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as
Administrative Agent
By: _______________________________
Name:
Title:
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
The Company referred to in the foregoing Pledge Agreement hereby
acknowledges receipt of a copy thereof and agrees to be bound thereby and to
comply with the terms thereof insofar as such terms are applicable to it. The
Company agrees to notify the Administrative Agent promptly in writing of the
occurrence of any of the events described in Section 5(a) of the Pledge
Agreement. The Company further agrees that the terms of Section 9(c) of the
Pledge Agreement shall apply to it, mutatis mutandis, with respect to all
actions that may be required of it under or pursuant to or arising out of
Section 9 of the Pledge Agreement.
TWCC ACQUISITION CORP.
By: _______________________________
Name:
Title:
<PAGE>
SCHEDULE I
Holdings Pledge Agreement
DESCRIPTION OF PLEDGED STOCK
Class Stock Certi- No. of
Issuer of Stock ficate No. Shares
- ------ -------- ---------- ------
<PAGE>
SCHEDULE II
Holdings Pledge Agreement
ADDRESS OF PLEDGOR
Carter Holdings, Inc.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attention: Charles K. Marquis, Esq./
Christopher O'Brien
Telecopy: (212) 351-4035
With a copy to:
The William Carter Company
1590 Adamson Parkway, Suite 400
Morrow, Georgia 30260
Attention: David A. Brown
Telecopy: (770) 960-1556
With a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attention: Janet Vance, Esq.
Telecopy: (212) 351-4035
<PAGE>
EXHIBIT G-2 TO
CREDIT AGREEMENT
FORM OF
COMPANY PLEDGE AGREEMENT
Agreement (this "Agreement"), dated as of October __, 1996, made by
TWCC ACQUISITION CORP., a Massachusetts corporation (to be merged with and into
The William Carter Company, the "Company"), in favor of THE CHASE MANHATTAN
BANK, a New York banking corporation, as administrative agent (in such capacity,
the "Administrative Agent"), for the several lenders (the "Lenders") from time
to time parties to the Credit Agreement, dated as of the date hereof (as
amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Company, the Lenders and the Administrative Agent.
W I T N E S S E T H :
WHEREAS, pursuant to the Credit Agreement, the Lenders have
severally agreed to make loans to, and the Issuing Lender (as defined in the
Credit Agreement) has agreed to issue and certain of the Lenders have agreed to
participate in certain letters of credit for the account of, the Company upon
the terms and subject to the conditions set forth therein, such loans being
evidenced by the notes issued by the Company;
WHEREAS, the Company is the legal and beneficial owner of the shares
of Pledged Stock (as hereinafter defined) issued by the Issuers (as hereinafter
defined); and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective loans to, and the obligation of the Issuing
Lender to issue and the Lenders to participate in letters of credit for the
account of, the Company under the Credit Agreement that the Company shall have
executed and delivered this Agreement to the Administrative Agent for the
ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent, the Issuing Lender and the Lenders to enter into the
Credit Agreement and to induce the Lenders to make their respective loans and
the Issuing Lender to issue and the Lenders to participate in the letters of
credit under the Credit Agreement, the Company hereby agrees with the
Administrative Agent, for the ratable benefit of the Lenders, as follows:
1. Defined Terms. Unless otherwise defined herein, terms that are
defined in the Credit Agreement and used herein are so used as so defined, and
the following terms shall have the following meanings:
<PAGE>
2
"Agreement" means this Pledge Agreement, as the same may be amended,
modified or otherwise supplemented from time to time.
"Code" means the Uniform Commercial Code from time to time in effect
in the State of New York.
"Collateral" means the Domestic Collateral and the Foreign
Collateral.
"Domestic Collateral" means the Domestic Pledged Stock and all
Proceeds thereof.
"Domestic Issuers" means the collective reference to Issuers
incorporated in any state of the United States.
"Domestic Pledged Stock" means the shares of capital stock of the
Domestic Issuers listed on Schedule I hereto, together with all stock
certificates, options or rights of any nature whatsoever that may be
issued or granted by any Domestic Issuer to the Company while this
Agreement is in effect.
"Foreign Collateral" means the Foreign Pledged Stock and all
Proceeds thereof.
"Foreign Issuers" means the collective reference to all Issuers that
are not Domestic Issuers.
"Foreign Pledged Stock" means the shares of capital stock of the
Foreign Issuers listed on Schedule I hereto, together with all stock
certificates, options or rights of any nature whatsoever that may be
issued or granted by any Foreign Issuer to the Company while this
Agreement is in effect; provided, however, that in no event shall the
"Foreign Pledged Stock" in respect of any Foreign Issuer exceed at any
time 65% of the shares of any class of the capital stock of such Issuer
and any shares of capital stock of any Foreign Issuer in excess of 65% of
the shares of any class of capital stock of such Issuer held at any time
by the Administrative Agent shall not be "Foreign Pledged Stock" and shall
not be subject to the security interest granted hereby and shall be held
by the Security Agent solely for the benefit of the Company.
"Issuers" means the collective reference to the companies identified
on Schedule 1 attached hereto as the issuers of the Pledged Stock and any
other direct Subsidiaries of the Company created or acquired after the
date hereof; individually, each an "Issuer."
"Obligations": means (i) the unpaid principal amount of, and
interest on (including interest accruing on or after the filing of any
petition in bankruptcy, or the commencement of any insolvency,
reorganization or like proceeding, relating to the Company, whether or not
a claim for such post-filing or post-petition interest is allowed), the
Loans and all other obligations and liabilities of the Company to the
Administrative Agent, the Issuing Lender or the Lenders, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with,
the Credit Agreement, any Letter of Credit or L/C Application, the other
Credit Documents and any other document executed and delivered or given in
connection therewith or herewith, whether on account of principal,
interest,
<PAGE>
3
reimbursement obligations, fees, indemnities, costs, expenses (including,
without limitation, all reasonable fees and disbursements of counsel to
the Administrative Agent, the Issuing Lender or to the Lenders that are
required to be paid by the Company pursuant to the terms of the Credit
Agreement) or otherwise, and (ii) all obligations of the Company to any
Lender or Lenders or its or their Affiliates under or in respect of any
Interest Rate Agreement.
"Pledged Stock" means the Domestic Pledged Stock and the Foreign
Pledged Stock.
"Proceeds" means all "proceeds", as such term is defined in Section
9-306(1) of the Code on the date hereof, of the Pledged Stock, and, in any
event, shall include, without limitation, all dividends or other income
from the Pledged Stock, collections thereon or distributions with respect
thereto.
2. Pledge; Grant of Security Interest. The Company hereby delivers
to the Administrative Agent, for the ratable benefit of the Lenders, all
certificates or instruments representing or evidencing the Pledged Stock on the
date hereof, and hereby transfers and grants to the Administrative Agent, for
the ratable benefit of the Lenders, a first priority security interest in all of
the Company's right, title and interest in the Domestic Collateral, and a
security interest in all of the Company's right, title or interest in the
Foreign Collateral, as collateral security for the prompt and complete payment
and performance when due (whether at the stated maturity, by acceleration or
otherwise) of the Obligations.
3. Stock Powers. Concurrently with the delivery to the
Administrative Agent of each certificate representing one or more shares of
Pledged Stock, the Company shall deliver an undated stock power covering such
certificate, duly executed in blank by the Company.
4. Representations and Warranties. The Company represents and
warrants that:
(a) the shares of Domestic Pledged Stock constitute (i) all the
issued and outstanding shares of all classes of the Capital Stock of each
Domestic Issuer owned by the Company and (ii) on the date hereof, 100% of the
issued and outstanding shares of all classes of the Capital Stock of each
Domestic Issuer;
(b) all the shares of Domestic Pledged Stock have been duly and
validly issued and are fully paid and nonassessable;
(c) the Company is the record and beneficial owner of the Pledged
Stock, free of any and all Liens or options in favor of, or claims of, any other
Person, except the Lien created by this Agreement; and
(d) upon delivery to the Administrative Agent of the stock
certificates evidencing the Domestic Pledged Stock, the Lien granted pursuant to
this Agreement will constitute a valid, perfected first priority Lien on the
Domestic Collateral (except, with respect
<PAGE>
4
to Proceeds, only to the extent permitted by Section 9-306 of the Code),
enforceable as such against all creditors of the Company and any Persons
purporting to purchase any Domestic Collateral from the Company.
The Company agrees that the foregoing representations and warranties shall be
deemed to have been made by the Company on each Borrowing Date occurring on or
after the date hereof under the Credit Agreement, on and as of such Borrowing
Date as though made hereunder on and as of such date.
5. Covenants. The Company covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Agreement until the Obligations are paid in full and the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent:
(a) If the Company shall, as a result of its ownership of the
Pledged Stock, become entitled to receive or shall receive any stock certificate
(including, without limitation, any certificate representing a stock dividend or
a distribution in connection with any reclassification, increase or reduction of
capital or any certificate issued in connection with any reorganization), option
or rights in respect of capital stock of any Issuer, whether in addition to, in
substitution of, as a conversion of, or in exchange for any shares of the
Pledged Stock, or otherwise in respect thereof, the Company shall accept the
same as the agent of the Administrative Agent and the Lenders, hold the same in
trust for the Administrative Agent and the Lenders and deliver the same
forthwith to the Administrative Agent in the exact form received, duly indorsed
by the Company to the Administrative Agent, if required, together with an
undated stock power covering such certificate duly executed in blank by the
Company and with, if the Administrative Agent so requests, signature guaranteed,
to be held by the Administrative Agent, subject to the terms hereof, as
additional collateral security for the Obligations.
(b) Without the prior written consent of the Administrative Agent,
the Company will not (i) except as permitted by subsection 8.5 of the Credit
Agreement, sell, assign, transfer, exchange, or otherwise dispose of, or grant
any option with respect to, the Collateral, or (ii) create, incur or permit to
exist any Lien or option in favor of, or any claim of any Person with respect
to, any of the Collateral, or any interest therein, except for the Lien provided
for by this Agreement. The Company will defend the right, title and interest of
the Administrative Agent, the Issuing Lender and the Lenders in and to the
Collateral against the claims and demands of all Persons whomsoever.
(c) At any time and from time to time, upon the written request of
the Administrative Agent, and at the sole expense of the Company, the Company
will promptly and duly execute and deliver such further instruments and
documents and take such further actions as the Administrative Agent may
reasonably request for the purposes of obtaining or preserving the full benefits
of this Agreement and of the rights and powers herein granted. If any amount
payable under or in connection with any of the Collateral shall be or become
evidenced by any promissory note, other instrument or chattel paper, such note,
instrument or chattel paper shall
<PAGE>
5
be immediately delivered to the Administrative Agent, duly endorsed in a manner
satisfactory to the Administrative Agent, to be held as Collateral pursuant to
this Agreement.
(d) The Company agrees to pay, and to save the Administrative Agent,
the Issuing Lender and the Lenders harmless from, any and all liabilities with
respect to, or resulting from any delay in paying, any and all stamp, excise,
sales or other taxes which may be payable or determined to be payable with
respect to any of the Collateral or in connection with any of the transactions
contemplated by this Agreement.
6. Cash Dividends; Voting Rights. Unless an Event of Default shall
have occurred and be continuing, the Company shall be permitted to receive all
cash dividends paid by each Issuer to the extent permitted in the Credit
Agreement in respect of the Pledged Stock and to exercise all voting and
corporate rights with respect to the Pledged Stock, provided, however, that the
Company agrees that it shall not vote in any way which would be inconsistent
with or result in any violation of any provision of the Credit Agreement, the
Notes, the Security Documents or any of the other Credit Documents. The
Administrative Agent shall, at the Company's sole cost and expense, execute and
deliver (or cause to be executed and delivered) to the Company all proxies and
other instruments as the Company may reasonably request for the purpose of
enabling the Company to exercise the voting and other rights that it is entitled
to exercise pursuant to this Section 6.
7. Rights of the Lenders and the Administrative Agent. (a) If an
Event of Default shall occur and be continuing, (i) the Administrative Agent
shall have the right to receive any and all cash dividends paid in respect of
the Pledged Stock and make application thereof to the Obligations in such order
as the Administrative Agent may determine, and (ii) all shares of the Pledged
Stock may be registered in the name of the Administrative Agent or its nominee,
and, subject to the terms of this Agreement, the Administrative Agent or its
nominee may thereafter exercise (A) all voting, corporate and other rights
pertaining to such shares of the Pledged Stock at any meeting of shareholders of
such Issuer or otherwise and (B) any and all rights of conversion, exchange,
subscription and any other rights, privileges or options pertaining to such
shares of the Pledged Stock as if it were the absolute owner thereof (including,
without limitation, the right to exchange at its discretion any and all of the
Pledged Stock upon the merger, consolidation, reorganization, recapitalization
or other fundamental change in the corporate structure of the Issuer, or upon
the exercise by the Company or the Administrative Agent of any right, privilege
or option pertaining to such shares of the Pledged Stock, and in connection
therewith, the right to deposit and deliver any and all of the Pledged Stock
with any committee, depositary, transfer agent, registrar or other designated
agency upon such terms and conditions as it may determine), all without
liability except to account for property actually received by it and except for
its gross negligence or willful misconduct or failure to comply with the
provisions of Section 12, but the Administrative Agent shall have no duty to the
Company to exercise any such right, privilege or option and shall not be
responsible for any failure to do so or delay in so doing.
(b) The rights of the Administrative Agent, the Issuing Lender and
the Lenders hereunder shall not be conditioned or contingent upon the pursuit by
the Administrative Agent, the Issuing Lender or any Lender of any right or
remedy against any other Person which may be
<PAGE>
6
or become liable in respect of all or any part of the Obligations or against any
collateral security therefor, guarantee therefor or right of offset with respect
thereto. None of the Administrative Agent, the Issuing Lender and any Lender
shall be liable for any failure to demand, collect or realize upon all or any
part of the Collateral or for any delay in doing so, nor shall the
Administrative Agent be under any obligation to sell or otherwise dispose of any
Collateral upon the request of the Company or any other Person or to take any
other action whatsoever with regard to the Collateral or any part thereof. The
Administrative Agent agrees to release promptly to the Company any dividends,
cash, securities, instruments and other property paid, payable or otherwise
distributed in respect of the Collateral which it may receive under Section 7(a)
if, prior to the occurrence of an acceleration of any of the Obligations, all
Defaults and Events of Default have been waived or are no longer continuing.
(c) The Administrative Agent may execute any of its duties under
this Agreement by or through agents or attorneys-in-fact and shall be entitled
to advice of counsel concerning all matters pertaining to such duties. The
Administrative Agent shall not be responsible for the negligence or misconduct
of any agents or attorneys-in-fact selected by it with reasonable care, except
as otherwise provided in subsection 10.3 of the Credit Agreement.
8. Remedies. In the event that any portion of the Obligations has
been declared or becomes due and payable in accordance with the terms of the
Credit Agreement, the Administrative Agent, on behalf of the Lenders, may
exercise, in addition to all other rights and remedies granted in this Agreement
and in any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Administrative Agent, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon the Company, any Issuer or any other Person (all and each of which demands,
defenses, advertisements and notices are hereby waived), may in such
circumstances forthwith collect, receive, appropriate and realize upon the
Collateral, or any part thereof, and/or may forthwith sell, assign, give option
or options to purchase or otherwise dispose of and deliver the Collateral or any
part thereof (or contract to do any of the foregoing), in one or more parcels at
public or private sale or sales, in the over-the-counter market, at any
exchange, broker's board or office of the Administrative Agent, the Issuing
Lender or any Lender or elsewhere upon such terms and conditions as it may deem
commercially reasonable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. The
Administrative Agent, the Issuing Lender or any Lender shall have the right upon
any such public sale or sales, and, to the extent permitted by law, upon any
such private sale or sales, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption in the Company, which right
or equity is hereby waived and released. The Administrative Agent promptly shall
apply any Proceeds from time to time held by it and the net proceeds of any such
collection, recovery, receipt, appropriation, realization or sale, after
deducting all reasonable costs and expenses of every kind incurred in respect
thereof or incidental to the care or safekeeping of any of the Collateral or in
any way relating to the Collateral or the rights of the Administrative Agent,
the Issuing Lender and the Lenders hereunder, including, without limitation,
reasonable attorneys' fees and disbursements of counsel to the Administrative
Agent, to the payment in whole or in part of the Obligations, in such order as
the Administrative Agent may elect subject to subsection 4.9
<PAGE>
7
of the Credit Agreement, and only after such application and after the payment
by the Administrative Agent of any other amount required by any provision of
law, including, without limitation, Section 9-504(1)(c) of the Code, need the
Administrative Agent account for the surplus, if any, to the Company. To the
extent permitted by applicable law, the Company waives all claims, damages and
demands it may acquire against the Administrative Agent, the Issuing Lender or
any Lender arising out of the lawful exercise by them of any rights hereunder.
If any notice of a proposed sale or other disposition of Collateral shall be
required by law, such notice shall be deemed reasonable and proper if given at
least 10 days before such sale or other disposition. The Company further waives
and agrees not to assert any rights or privileges which it may acquire under
Section 9-112 of the Code. The Company shall remain liable for any deficiency if
the proceeds of any sale or other disposition of the Collateral are insufficient
to pay the Obligations and the fees and disbursements of any attorneys employed
by the Administrative Agent or any Lender to collect such deficiency.
9. Registration Rights; Private Sales. (a) If the Administrative
Agent shall determine to exercise its right to sell any or all of the Pledged
Stock pursuant to Section 8, and if in the opinion of the Administrative Agent
it is necessary or advisable to have the Pledged Stock, or that portion thereof
to be sold, registered under the provisions of the Securities Act of 1933, as
amended (the "Securities Act"), the Company will cause such Issuer to (i)
execute and deliver, and cause the directors and officers of such Issuer to
execute and deliver, all such instruments and documents, and do or cause to be
done all such other acts as may be, in the opinion of the Administrative Agent,
necessary or advisable to register the Pledged Stock, or that portion thereof to
be sold, under the provisions of the Securities Act, (ii) use its best efforts
to cause the registration statement relating thereto to become effective and to
remain effective for a period of 90 days from the date of the first public
offering of the Pledged Stock, or that portion thereof to be sold, and (iii)
make all amendments thereto and/or to the related prospectus that, in the
opinion of the Administrative Agent, are necessary or advisable, all in
conformity with the requirements of the Securities Act and the rules and
regulations of the Securities and Exchange Commission applicable thereto. The
Company agrees to cause each Issuer to comply with the provisions of the
securities or "Blue Sky" laws of any and all jurisdictions that the
Administrative Agent shall reasonably designate and to make available to its
security holders, as soon as practicable, an earnings statement (which need not
be audited) that will satisfy the provisions of Section 11(a) of the Securities
Act.
(b) The Company recognizes that the Administrative Agent may be
unable to effect a public sale of any or all the Pledged Stock, by reason of
certain prohibitions contained in the Securities Act and applicable state
securities laws or otherwise, and may be compelled to resort to one or more
private sales thereof to a restricted group of purchasers that will be obliged
to agree, among other things, to acquire such securities for their own account
for investment and not with a view to the distribution or resale thereof. The
Company acknowledges and agrees that any such private sale may result in prices
and other terms less favorable than if such sale were a public sale and,
notwithstanding such circumstances, agrees that any such private sale conducted
in a manner that the Administrative Agent in good faith believes to be
commercially reasonable under the circumstances shall be deemed to have been
made in a commercially reasonable manner. The Administrative Agent shall be
under no obligation to delay the sale of any of the Pledged Stock for the period
of time necessary to permit such Issuer to register such securities
<PAGE>
8
for public sale under the Securities Act, or under applicable state securities
laws, even if such Issuer would agree to do so.
(c) The Company further agrees to use its best efforts to do or
cause to be done all such other acts as may be necessary to make such sale or
sales of all or any portion of the Pledged Stock, pursuant to this Section 9
valid and binding and in compliance with any and all other applicable
Requirements of Law. The Company further agrees that a breach of any of the
covenants contained in this Section 9 will cause irreparable injury to the
Administrative Agent, the Issuing Lender and the Lenders, that the
Administrative Agent, the Issuing Lender and the Lenders have no adequate remedy
at law in respect of such breach and, as a consequence, that each and every
covenant contained in this Section 9 shall be specifically enforceable against
the Company, and the Company hereby waives and agrees not to assert any defenses
against an action for specific performance of such covenants.
10. Amendments, etc. with Respect to the Obligations. The Company
shall remain obligated hereunder, and the Collateral shall remain subject to the
Lien granted hereby, notwithstanding that, without any reservation of rights
against the Company, and without notice to or further assent by the Company, any
demand for payment of any of the Obligations made by the Administrative Agent,
the Issuing Lender or any Lender may be rescinded by the Administrative Agent,
the Issuing Lender or such Lender, and any of the Obligations continued, and the
Obligations, or the liability of each Issuer or any other Person upon or for any
part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered, or released by the Administrative Agent, the Issuing Lender or any
Lender, and the Credit Agreement, the Notes, the Security Documents, and the
other Credit Documents, any Interest Rate Agreement entered into with any Lender
or Lenders and any other documents executed and delivered in connection
therewith may be amended, modified, supplemented or terminated, in whole or in
part, as the Lenders (or the Required Lenders, as the case may be) may deem
advisable from time to time, and any guarantee, right of offset or other
collateral security at any time held by the Administrative Agent, the Issuing
Lender or any Lender for the payment of the Obligations may be sold, exchanged,
waived, surrendered or released. None of the Administrative Agent, the Issuing
Lender and the Lenders shall have any obligation to protect, secure, perfect or
insure any other Lien at any time held by it as security for the Obligations or
any property subject thereto. The Company waives any and all notice of the
creation, renewal, extension or accrual of any of the Obligations and notice of
or proof of reliance by the Administrative Agent, the Issuing Lender or any
Lender upon this Agreement; the Obligations, and any of them shall conclusively
be deemed to have been created, contracted or incurred in reliance upon this
Agreement; and all dealings between each Issuer and the Company, on the one
hand, and the Administrative Agent, the Issuing Lender and the Lenders, on the
other, shall likewise be conclusively presumed to have been had or consummated
in reliance upon this Agreement. The Company waives diligence, presentment,
protest, demand for payment and notice of default or nonpayment to or upon each
Issuer or the Company with respect to the Obligations.
11. Limitation on Duties Regarding Collateral. The Administrative
Agent's sole duty with respect to the custody, safekeeping and physical
preservation of the Collateral in
<PAGE>
9
its possession, under Section 9-207 of the Code or otherwise, shall be to deal
with it in the same manner as the Administrative Agent deals with similar
securities and property for its own account. None of the Administrative Agent,
the Issuing Lender, any Lender nor any of their respective directors, officers,
employees or agents shall be liable for failure to demand, collect or realize
upon any of the Collateral or for any delay in doing so or shall be under any
obligation to sell or otherwise dispose of any Collateral upon the request of
the Company or otherwise.
12. Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
13. Severability. Any provision of this Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
14. Section Headings. The section headings used in this Agreement
are for convenience of reference only and are not to affect the construction
hereof or be taken into consideration in the interpretation hereof.
15. No Waiver; Cumulative Remedies. Neither the Administrative
Agent, the Issuing Lender nor any Lender shall by any act (except by a written
instrument pursuant to Section 17 hereof) be deemed to have waived any right or
remedy hereunder or to have acquiesced in any default of any obligation under
any Credit Document or in any breach of any of the terms and conditions hereof
or thereof. No failure to exercise, nor any delay in exercising, on the part of
the Administrative Agent, the Issuing Lender or any Lender, any right, power or
privilege hereunder shall operate as a waiver thereof. No single or partial
exercise of any right, power or privilege hereunder shall preclude any other or
further exercise thereof or the exercise of any other right, power or privilege.
A waiver by the Administrative Agent, the Issuing Lender or any Lender of any
right or remedy hereunder on any one occasion shall not be construed as a bar to
any right or remedy which the Administrative Agent, the Issuing Lender or such
Lender would otherwise have on any future occasion. The rights and remedies
herein provided are cumulative, may be exercised singly or concurrently and are
not exclusive of any other rights or remedies provided by law.
16. Integration; Waivers and Amendments; Successors and Assigns;
Governing Law. This Agreement represents the entire agreement of the Company
with respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent or any Lender relative to the
subject matter hereof not reflected herein or in the other Credit Documents.
None of the terms or provisions of this Agreement may be amended, supplemented
or otherwise modified except by a written instrument executed by the Company and
the Administrative Agent, provided that any provision of this Agreement may be
waived by the Administrative Agent in a letter or agreement executed by the
Administrative Agent or by telex or facsimile transmission from the
Administrative Agent. This Agreement shall be binding upon the successors and
assigns of the Company and shall inure to the benefit of the Administrative
Agent, the Issuing Lender and the Lenders and their respective successors and
assigns. THIS AGREEMENT SHALL BE
<PAGE>
10
GOVERNED BY, AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE
STATE OF NEW YORK.
17. Notices. Notices by the Administrative Agent to the Company or
any Issuer may be given by mail, by telex or by facsimile transmission,
addressed or transmitted to the Company or such Issuer at its address or
transmission number set forth in subsection 11.2 of the Credit Agreement in the
case of the Company and on Schedule II hereto in the case of each Issuer and
shall be effective (a) in the case of mail, with respect to a Domestic Issuer,
three days after deposit in the postal system, first class postage pre-paid, and
with respect to a Foreign Issuer, ten days after deposit in the postal system,
first class postage pre-paid, and (b) in the case of telex or facsimile notices,
when sent. The Company and any Issuer may change their respective addresses and
transmission numbers by written notice to the Administrative Agent.
18. Counterparts. This Agreement may be executed by one or more of
the parties hereto on any number of separate counterparts and all of said
counterparts taken together shall be deemed to constitute one and the same
instrument.
19. Irrevocable Authorization and Instruction to Company. The
Company hereby authorizes and instructs each Issuer to comply with any
instruction received by it from the Administrative Agent in writing that (a)
states that an Event of Default has occurred and is continuing and (b) is
otherwise in accordance with the terms of this Agreement, without any other or
further instructions from the Company, and the Company agrees that each Issuer
shall be fully protected in so complying.
20. Authority of Administrative Agent. The Company acknowledges that
the rights and responsibilities of the Administrative Agent under this Agreement
with respect to any action taken by the Administrative Agent or the exercise or
non-exercise by the Administrative Agent of any option, voting right, request,
judgment or other right or remedy provided for herein or resulting or arising
out of this Agreement shall, as between the Administrative Agent and the
Lenders, be governed by the Credit Agreement and by such other agreements with
respect thereto as may exist from time to time among them, but, as between the
Administrative Agent and the Company, the Administrative Agent shall be
conclusively presumed to be acting as agent for the Lenders with full and valid
authority so to act or refrain from acting, and neither the Company nor any
Issuer shall be under any obligation, or entitlement, to make any inquiry
respecting such authority.
21. Agent's Appointment as Attorney-in-Fact. (a) The Company hereby
irrevocably constitutes and appoints the Agent and any officer or agent of the
Agent, with full power of substitution, as its true and lawful attorney-in-fact
with full irrevocable power and authority in the place and stead of the Company
and in the name of the Company or in the Agent's own name, from time to time in
the Agent's discretion, for the purpose of carrying out the terms of this
Agreement, to take any and all appropriate action and to execute any and all
documents and instruments which may be necessary or desirable to accomplish the
purposes of this Agreement, including, without limitation, any financing
statements, endorsements, assignments or other instruments of transfer.
<PAGE>
11
(b) The Company hereby ratifies all that said attorneys shall lawfully do
or cause to be done pursuant to the power of attorney granted in paragraph
21(a). All powers, authorizations and agencies contained in this Agreement are
coupled with an interest and are irrevocable until this Agreement is terminated
and the security interests created hereby are released.
22. Termination. This Agreement shall terminate when all the
Obligations have been fully paid and performed and the Commitments terminated.
Upon such termination, the Administrative Agent shall on its behalf and on
behalf of the Lenders reassign and redeliver (or cause to be reassigned and
redelivered) to the Company, or to such person or persons as the Company shall
designate or to whomever may be lawfully entitled to receive such surplus,
against receipt, such of the Collateral (if any) as shall not have been sold or
otherwise applied by the Administrative Agent pursuant to the terms hereof and
shall still be held by it hereunder, together with appropriate instruments of
reassignment and release. Any such reassignment shall be without recourse upon
or warranty by the Administrative Agent (other than a warranty that the
Administrative Agent has not assigned its rights and interests hereunder to any
other Person) and at the sole cost and expense of the Company.
<PAGE>
12
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
duly executed and delivered as of the date first above written.
TWCC ACQUISITION CORP.
By: __________________________________
Name:
Title:
THE CHASE MANHATTAN BANK, as
Administrative Agent
By: __________________________________
Name:
Title:
<PAGE>
ACKNOWLEDGEMENT AND CONSENT
Each Issuer referred to in the foregoing Pledge Agreement hereby
acknowledge receipt of a copy thereof and agrees to be bound thereby and to
comply with the terms thereof insofar as such terms are applicable to it. Each
Issuer agrees to notify the Administrative Agent promptly in writing of the
occurrence of any of the events described in Section 5(a) of the Pledge
Agreement. Each Issuer further agrees that the terms of Section 9(c) of the
Pledge Agreement shall apply to it, mutatis mutandis, with respect to all
actions that may be required of it under or pursuant to or arising out of
Section 9 of the Pledge Agreement.
CARTER'S DE SAN PEDRO, INC.
By: __________________________________
Name:
Title:
CARTERCO, S.A.
By: __________________________________
Name:
Title:
CARTER'S DE BARRANCA, S.A.
By: __________________________________
Name:
Title:
<PAGE>
SCHEDULE I
Company Pledge Agreement
DESCRIPTION OF PLEDGED STOCK
Class Stock Certi- No. of
Issuer of Stock ficate No. Shares
- ------ -------- ---------- ------
<PAGE>
SCHEDULE II
Company Pledge Agreement
ADDRESS OF COMPANY
Carter Holdings, Inc.
c/o Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attention: Charles K. Marquis, Esq./
Christopher O'Brien
Telecopy: (212) 351-4035
With a copy to:
The William Carter Company
1590 Adamson Parkway, Suite 400
Morrow, Georgia 30260
Attention: David A. Brown
Telecopy: (770) 960-1556
With a copy to:
Gibson, Dunn & Crutcher LLP
200 Park Avenue
New York, New York 10166
Attention: Janet Vance, Esq.
Telecopy: (212) 351-4035
<PAGE>
EXHIBIT H to
CREDIT AGREEMENT
FORM OF
LETTER OF CREDIT PARTICIPATION CERTIFICATE
[Date]
[Name of Participating Lender]
[Address of Participating Lender]
Dear Sirs:
Pursuant to subsection 3.8(b) of the Credit Agreement, dated as of
October __, 1996 (as the same may from time to time be amended, supplemented or
otherwise modified, the "Credit Agreement"; terms defined in the Credit
Agreement being used herein with their respective defined meanings) among TWCC
Acquisition Corp. (to be merged with and into The William Carter Company), the
Lenders parties thereto, Bankers Trust Company, as syndication agent, Goldman
Sachs Credit Partners L.P., as documentation agent and The Chase Manhattan Bank,
as Administrative Agent, the undersigned hereby acknowledges receipt from you on
the date hereof of the L/C Participating Interest in the amount of
_______________ DOLLARS ($_________) in the following Letter of Credit and the
L/C Application relating thereto:
[Describe Letter of Credit (i.e. Letter of Credit number, face
amount, date of issuance and beneficiary)]
Very truly yours,
THE CHASE MANHATTAN BANK,
as Issuing Lender
By:_____________________________
Name:
Title:
<PAGE>
EXHIBIT I TO
CREDIT AGREEMENT
FORM OF
SWING LINE LOAN PARTICIPATION CERTIFICATE
[Date]
[Name of Lender]
________________
________________
Dear Sirs:
Pursuant to subsection 3.4(c) of the Credit Agreement, dated as of
October __, 1996 among TWCC Acquisition Corp. (to be merged with and into The
William Carter Company), the several lenders (the "Lenders") parties thereto and
The Chase Manhattan Bank, as Administrative Agent for the Lenders, the
undersigned hereby acknowledges receipt from you of $__________ as payment for a
participating interest in the following Swing Line Loan:
Date of Swing Line Loan: ______________________________________
Principal Amount of Swing Line Loan: __________________________
Very truly yours,
THE CHASE MANHATTAN BANK, as
Swing Line Lender
By:_____________________________
Name:
Title:
<PAGE>
EXHIBIT J TO
CREDIT AGREEMENT
FORM OF
SUBSECTION 4.11(d)(2) CERTIFICATE
Reference is hereby made to the Credit Agreement, dated as of October
__, 1996 among TWCC Acquisition Corp. (to be merged with and into The William
Carter Company), the banks and other financial institutions from time to time
party thereto and The Chase Manhattan Bank, as Administrative Agent (the "Credit
Agreement"). Pursuant to the provisions of subsection 4.11(d)(2) of the Credit
Agreement, the undersigned hereby certifies that it is not a "bank" as such term
is used in Section 881(c)(3)(A) of the Internal Revenue Code of 1986, as
amended.
[NAME OF LENDER]
By: __________________________
Title:
Date:
<PAGE>
COPYRIGHT SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of October 30, 1996 made by TWCC
ACQUISITION CORP., a Massachusetts corporation (to be merged with and into The
William Carter Company, the "Company"), in favor of THE CHASE MANHATTAN BANK, a
New York banking corporation, as administrative agent (in such capacity, the
"Administrative Agent") for the several lenders (the "Lenders") from time to
time parties to the Credit Agreement (as defined below).
W I T N E S S E T H :
WHEREAS, pursuant to a Credit Agreement, dated as of the date hereof
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Company, the Lenders and the Administrative Agent, the
Lenders have severally agreed to make loans to, and the Issuing Lender (as
defined in the Credit Agreement) has agreed to issue and certain of the other
Lenders have agreed to participate in letters of credit for the account of, the
Company upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the obligation of the
Lenders to make their respective loans to, and the obligation of the Issuing
Lender to issue and the Lenders to participate in letters of credit for the
account of, the Company under the Credit Agreement that the Company shall have
executed and delivered this Security Agreement to the Administrative Agent for
the ratable benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
make their respective loans to, and to issue or participate in letters of credit
for the account of, the Company under the Credit Agreement, the Company hereby
agrees with the Administrative Agent, for the ratable benefit of the Lenders, as
follows:
ARTICLE I
SECURITY INTERESTS
1.1 Grant of Security Interest. (a) As collateral security for the
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, the Company hereby
grants to the Administrative Agent for the ratable benefit of the Lenders a
continuing security interest in all of the right, title and interest of the
Company in, to and under (i) all Copyrights and Copyright Licenses, whether now
existing or hereafter from time to time acquired; and (ii) all Proceeds and
Products thereof (all of the above, collectively, the "Collateral").
<PAGE>
2
(b) The security interest of the Administrative Agent under this
Agreement extends to all Collateral of the kind which is the subject of
this Agreement which the Company may acquire at any time during the
continuation of this Agreement.
ARTICLE II
SPECIAL PROVISIONS CONCERNING COPYRIGHTS
2.1 Rights of Administrative Agent and Lenders; Limitations on
Administrative Agent's and Lenders' Obligations. (a) Company Remains Liable
under Copyright Licenses. Anything herein to the contrary notwithstanding, the
Company shall remain liable under each of the Copyright Licenses to observe and
perform all the material conditions and obligations to be observed and performed
by it thereunder, all in accordance with the terms of any agreement giving rise
to each such Copyright License. Neither the Administrative Agent nor any Lender
shall have any obligation or liability under any Copyright License by reason of
or arising out of this Security Agreement or the receipt by the Administrative
Agent or any Lender of any payment relating to such Copyright License pursuant
hereto, nor shall the Administrative Agent or any Lender be obligated in any
manner to perform any of the obligations of the Company under or pursuant to any
Copyright License, to make any payment, to make any inquiry as to the nature or
the sufficiency of any payment received by it or as to the sufficiency of any
performance by any party under any Copyright License, to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to it or to which it may be entitled
at any time or times.
(b) Notice to Contracting Parties. At any time after an Event of
Default has occurred and so long as such Event of Default shall be
continuing, upon the request of the Administrative Agent the Company
shall, and the Administrative Agent may (with concurrent notice to the
Company thereof), notify parties to the Copyright Licenses that the
Copyright Licenses have been assigned to the Administrative Agent for the
ratable benefit of the Lenders and that payments in respect thereof shall
be made directly to the Administrative Agent. At any time after an Event
of Default shall have occurred and be continuing, the Administrative Agent
may in its own name or in the name of others communicate with parties to
the Copyright Licenses to verify with them to its satisfaction the
existence, amount and terms thereof.
2.2 Representations and Warranties. The Company hereby represents
and warrants that: (i) Schedule I hereto includes all material Copyrights in
which the Company has any colorable claim of ownership as of the date hereof;
(ii) to the best of the Company's knowledge, except as set forth on Schedule I,
each Copyright is valid, subsisting, unexpired and enforceable and has not been
abandoned. Except as set forth in Schedule I, none of such Copyrights is the
subject of any licensing or franchise agreement. All licenses of the Company's
Copyrights are in force and, to the best knowledge of the Company, not in
default. No holding, decision or judgment has been rendered by any Governmental
Authority with respect to any Copyright which would limit, cancel or question
the validity of any Copyright. Except as set
<PAGE>
3
forth on Schedule I, no action or proceeding is pending or, to the knowledge of
the Company, threatened (i) seeking to limit, cancel or question the validity of
any material Copyright or the Company's ownership thereof, or (ii) which, if
adversely determined, would have a material adverse effect on the value of any
material Copyright.
2.3 Covenants. The Company covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Security Agreement until the Obligations are paid in full, the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent: (a) the Company (i) will employ the
Copyright for each material published work with such notice of copyright as may
be required by law to secure copyright protection and (ii) will not do any act
or knowingly omit to do any act whereby any material Copyright may become
invalidated and:
(A) will not do any act, or omit to do any act, whereby any
material Copyright may become injected into the public domain;
(B) shall notify the Administrative Agent immediately if it
knows, or has reason to know, that any material Copyright may become
injected into the public domain or of any adverse determination or
development (including, without limitation, the institution of, or
any such determination or development in, any court or tribunal in
the United States or any other country) regarding the Company's
ownership of any such Copyright or its validity;
(C) will take all necessary steps as it shall deem appropriate
under the circumstances, to maintain and pursue each application
(and to obtain the relevant registration) and to maintain each
registration of each material Copyright owned by the Company
including, without limitation, filing of applications for renewal,
where necessary; and
(D) will promptly notify the Administrative Agent of any
material infringement of any material Copyright of the Company of
which it becomes aware and will take such actions as it shall
reasonably deem appropriate under the circumstances to protect such
Copyright, including, where appropriate, the bringing of suit for
infringement, seeking injunctive relief and seeking to recover any
and all damages for such infringement.the Company will not, except
with respect to any Copyright that the Company shall reasonably
determine is of immaterial economic value to it or otherwise
reasonably determine so to do, do any act, or omit to do any act,
whereby any Copyright may become abandoned or dedicated.
2.4 Administrative Agent's Appointment as Attorney-in-Fact. The
Company hereby irrevocably constitutes and appoints the Administrative Agent and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of the Company and in the name of the Company or
<PAGE>
4
in its own name, from time to time after the occurrence, and during the
continuation, of an Event of Default in the Administrative Agent's discretion,
for the purpose of carrying out the terms of this Security Agreement, to take
any and all appropriate action and to execute any and all documents and
instruments which may be necessary or desirable to accomplish the purposes of
this Security Agreement, and, without limiting the generality of the foregoing,
the Company hereby gives the Administrative Agent the power and right, on behalf
of the Company, without notice to or assent by the Company, to do the following:
(a) in the name of the Company or its own name, or otherwise, to
take possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Copyright License or with respect to any other Collateral and to file any
claim or to take any other action or proceeding in any court of law or
equity or otherwise deemed appropriate by the Administrative Agent for the
purpose of collecting any and all such moneys due under any Copyright
License or with respect to any other Collateral whenever payable;
(b) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, provided that if such taxes are being
contested in good faith and by appropriate proceedings, the Administrative
Agent and the Lenders will consult with the Company before making any such
payment; and
(c) (i) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; (ii) to ask or demand for, collect, receive payment of
and receipt for, any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any Collateral;
(iii) to commence and prosecute any suits, actions or proceedings at law
or in equity in any court of competent jurisdiction to collect the
Collateral or any thereof and to enforce any other right in respect of any
Collateral; (iv) to defend any suit, action or proceeding brought against
the Company with respect to any Collateral; (v) to settle, compromise or
adjust any suit, action or proceeding described in clause (iv) above and,
in connection therewith, to give such discharges or releases as the
Administrative Agent may deem appropriate; (vi) to assign any Copyright
throughout the world for such term or terms, on such conditions, and in
such manner, as the Administrative Agent shall in its sole discretion
determine; and (vii) generally, to sell, transfer, pledge and make any
agreement with respect to or otherwise deal with any of the Collateral as
fully and completely as though the Administrative Agent were the absolute
owner thereof for all purposes, and to do, at the Administrative Agent's
option and the Company's expense, at any time, or from time to time, all
acts and things which the Administrative Agent reasonably deems necessary
to protect, preserve or realize upon the Collateral and the Administrative
Agent's and the Lenders' Liens thereon and to effect the intent of this
Security Agreement, all as fully and effectively as the Company might do.
<PAGE>
5
The Company hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
2.5 Remedies. If an Event of Default shall occur and be continuing,
the Administrative Agent on behalf of the Lenders may exercise, in addition to
all other rights and remedies granted to them in this Security Agreement and in
any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Administrative Agent, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon the Company or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the Collateral, or any
part thereof, and/or may forthwith sell, assign, give an option or options to
purchase, or otherwise dispose of and deliver the Collateral or any part thereof
(or contract to do any of the foregoing), in one or more parcels at public or
private sale or sales, at any exchange, broker's board or office of the
Administrative Agent or any Lender or elsewhere upon such terms and conditions
as it may deem advisable and at such prices as it may deem best, for cash or on
credit or for future delivery without assumption of any credit risk. The
Administrative Agent or any Lender shall have the right upon any such public
sale or sales, and, to the extent permitted by law, upon any such private sale
or sales, to purchase the whole or any part of the Collateral so sold, free of
any right or equity of redemption in the Company, which right or equity is
hereby waived and released. The Administrative Agent shall apply the net
proceeds of any such collection, recovery, receipt, appropriation, realization
or sale, after deducting all reasonable costs and expenses of every kind
incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the
Administrative Agent and the Lenders hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment in whole or in part
of the Obligations, in such order as the Administrative Agent may elect subject
to subsection 4.9 of the Credit Agreement, and only after such application and
after the payment by the Administrative Agent of any other amount required by
any provision of law, including, without limitation, Section 9-504(1)(c) of the
Code, need the Administrative Agent account for the surplus, if any, to the
Company. To the extent permitted by applicable law, the Company waives all
claims, damages and demands it may acquire against the Administrative Agent or
any Lender arising out of the exercise by them of any rights hereunder, except
to the extent arising from the gross negligence or willful misconduct of the
Administrative Agent or such Lender. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition. The Company shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to pay the
Obligations and the fees and disbursements of any attorneys employed by the
Administrative Agent or any Lender to collect such deficiency.
ARTICLE III
<PAGE>
6
DEFINITIONS
Unless otherwise defined herein or in the preamble or recitals
hereto, terms which are defined in the Credit Agreement and used herein are so
used as so defined and the following terms shall have the following meanings:
"Code" means the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Copyright License" means any written agreement, naming the Company,
as licensor or licensee, granting any right in the United States to use
any Copyright including, without limitation, any referred to in Schedule I
hereto.
"Copyrights" means all of the following to the extent the Company
now or hereafter has any right, title or interest: (a) all United States
copyrights and all registrations and applications therefor, including,
without limitation, any referred to in Schedule I hereto, and (b) all
renewals of such copyrights.
"Obligations" means (i) the unpaid principal amount of, and interest
on (including interest accruing on or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether or not a claim for such
post-filing or post-petition interest is allowed), the Loans and all other
obligations and liabilities of the Company to the Administrative Agent,
the Issuing Lender or the Lenders, whether direct or indirect, absolute or
contingent, due or to become due, or now existing or hereafter incurred,
which may arise under, out of, or in connection with, the Credit
Agreement, any Letter of Credit or L/C Application, the other Credit
Documents and any other document executed and delivered or given in
connection therewith or herewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all reasonable fees and disbursements of
counsel to the Administrative Agent, the Issuing Lender or to the Lenders
that are required to be paid by the Company pursuant to the terms of the
Credit Agreement) or otherwise, and (ii) all obligations of the Company to
any Lender or Lenders or its or their Affiliates under or in respect of
any Interest Rate Agreement.
"Proceeds" means "proceeds", as such term is defined in Section
9-306(1) of the Code and, to the extent not included in such definition,
shall include, without limitation, (a) any and all proceeds of any
insurance, indemnity, warranty, guaranty or letter of credit payable to
the Company, from time to time with respect to any of the Collateral, (b)
all payments (in any form whatsoever) paid or payable to the Company from
time to time in connection with any taking of all or any part of the
Collateral by any Governmental Authority or any Person acting under color
of Governmental Authority, (c) all judgments in favor of the Company in
respect of the Collateral and (d) all other amounts from time to time paid
or payable or received or receivable under or in connection with any of
the Collateral.
<PAGE>
7
"Products" are used herein as so defined in the Code.
ARTICLE IV
MISCELLANEOUS
4.1 Amendments, etc. with Respect to the Obligations. The Company
shall remain obligated hereunder, and the Collateral shall remain subject to the
Lien granted hereby notwithstanding that, without any reservation of rights
against the Company, and without notice to or further assent by the Company, any
demand for payment of any of the Obligations made by the Administrative Agent,
the Issuing Lender or any Lender may be rescinded by the Administrative Agent,
the Issuing Lender or any Lender, and any of the Obligations continued, and the
Obligations, or the liability of the Company or any other Person upon or for any
part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered, or released by the Administrative Agent, the Issuing Lender or any
Lender, and the Credit Agreement, the Notes, the other Credit Documents and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or part, as the Administrative
Agent, the Issuing Lender or any Lender may deem advisable from time to time,
and any guarantee, right of offset or other collateral security at any time held
by the Administrative Agent, the Issuing Lender or any Lender for the payment of
the Obligations may be sold, exchanged, waived, surrendered or released. None of
the Administrative Agent, the Issuing Lender or any Lender shall have any
obligation to protect, secure, perfect or insure this or any other Lien at any
time held by it as security for the Obligations or any property subject thereto.
The Company waives any and all notice of the creation, renewal, extension or
accrual of any of the Obligations and notice of or proof of reliance by the
Administrative Agent, the Issuing Lender or any Lender upon this Security
Agreement; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred in reliance upon this Security
Agreement; and all dealings between the Company and the Administrative Agent,
the Issuing Lender or any Lender, shall likewise be conclusively presumed to
have been had or consummated in reliance upon this Security Agreement. The
Company waives diligence, presentment, protest, demand for payment and notice of
default or nonpayment to or upon the Company with respect to the Obligations.
4.2 Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
4.3 Severability. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
<PAGE>
8
4.4 Section Headings. The section headings used in this Security
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
4.5 No Waiver; Cumulative Remedies. Neither the Administrative
Agent, the Issuing Lender nor any Lender shall by any act (except by a written
instrument pursuant to Subsection 4.6 hereof), delay, indulgence, omission or
otherwise be deemed to have waived any right or remedy hereunder or to have
acquiesced in any Default or Event of Default or in any breach of any of the
terms and conditions hereof. No failure to exercise, nor any delay in
exercising, on the part of the Administrative Agent, the Issuing Lender or any
Lender, any right, power or privilege hereunder shall operate as a waiver
thereof. No single or partial exercise of any right, power or privilege
hereunder shall preclude any other or further exercise thereof or the exercise
of any other right, power or privilege. A waiver by the Administrative Agent,
the Issuing Lender or any Lender of any right or remedy hereunder on any one
occasion shall not be construed as a bar to any right or remedy which the
Administrative Agent, the Issuing Lender or such Lender would otherwise have on
any future occasion. The rights and remedies herein provided are cumulative, may
be exercised singly or concurrently and are not exclusive of any rights or
remedies provided by law.
4.6 Integration; Waivers and Amendments; Successors and Assigns;
Governing Law. This Security Agreement represents the entire agreement of the
Company with respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent or any Lender relative to the
subject matter hereof not reflected herein or in the other Credit Documents.
None of the terms or provisions of this Security Agreement may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Company and the Administrative Agent, provided that any
provision of this Security Agreement may be waived by the Administrative Agent
in a written letter or agreement executed by the Administrative Agent or by
telex or facsimile transmission from the Administrative Agent. This Security
Agreement shall be binding upon the successors and assigns of the Company and
shall inure to the benefit of the Administrative Agent and the Lenders and their
respective successors and assigns. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
4.7 Notices. All notices, requests and demands to or upon the
Company or the Administrative Agent or any Lender to be effective shall be in
writing or by telecopy or telex and unless otherwise expressly provided herein,
shall be deemed to have been duly given or made when delivered by hand, or, in
the case of mail, three days after deposit in the postal system, first class
postage prepaid, or, in the case of telecopy notice, when sent, or, in the case
of telex notice, when sent, answerback received, addressed to a party at the
address provided for such party in the Credit Agreement.
4.8 Counterparts. This Security Agreement may be executed by one or
more of the parties hereto on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
<PAGE>
9
4.9 Authority of Administrative Agent. The Company acknowledges that
the rights and responsibilities of the Administrative Agent under this Security
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Security Agreement shall, as between the Administrative
Agent and the Lenders, be governed by the Credit Agreement and by such other
agreements with respect thereto as may exist from time to time among them, but,
as between the Administrative Agent and the Company, the Administrative Agent
shall be conclusively presumed to be acting as agent for the Lenders with full
and valid authority so to act or refrain from acting, and the Company shall not
be under any obligation, or entitlement, to make any inquiry respecting such
authority.
4.10 Releases. The Administrative Agent and the Lenders agree to
cooperate with the Company and its Subsidiaries with respect to any sale
permitted by subsection 8.5 of the Credit Agreement and promptly take such
action and execute and deliver such instruments and documents necessary to
release the Liens and security interests created hereby relating to any of the
assets or property affected by any sale permitted by subsection 8.5 of the
Credit Agreement including, without limitation, any necessary Uniform Commercial
Code amendment, termination or partial termination statement.
4.11 Termination. This Security Agreement (other than with respect
to any cash collateral securing any outstanding Letter of Credit) shall
terminate when all the Obligations have been paid in full, the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent. Upon such termination, the
Administrative Agent shall reassign and redeliver (or cause to be reassigned and
redelivered) to the Company, or to such person or persons as the Company shall
designate, or to whomever may be lawfully entitled to receive such surplus,
against receipt, such of the Collateral (if any) (other than with respect to any
cash collateral securing any outstanding Letter of Credit) as shall not have
been sold or otherwise applied by the Administrative Agent pursuant to the terms
hereof and shall still be held by it hereunder, together with appropriate
instruments or reassignment and release. Any such reassignment and release shall
be without recourse upon or warranty by the Administrative Agent (other than a
warranty that the Administrative Agent has not assigned its rights and interests
hereunder to any Person) and at the expense of the Company.
<PAGE>
10
IN WITNESS WHEREOF, the Company and the Administrative Agent have
caused this Security Agreement to be duly executed and delivered as of the date
first above written.
TWCC ACQUISITION CORP.
By: /s/
-------------------------------
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By: /s/
-------------------------------
Title:
<PAGE>
Schedule 1 to the Copyright Security Agreement
IV. Copyrights (Restrictions and Applications)
Registration No. Registration Date Title
---------------- ----------------- -----
VAu 317-368 11/16/94 Circus Bear
VAu 317-367 11/16/94 Theo Bear
VAu 317-365 11/16/94 Toy Bear
VAu 317-366 11/16/94 Letter Bunny
<PAGE>
[Georgia]
DEED TO SECURE DEBT
THIS DEED TO SECURE DEBT, dated as of December 23, 1996 is made by The
WILLIAM CARTER COMPANY, a Massachusetts corporation, whose address is 1590
Adamson Parkway, Suite 400, Morrow, Georgia 30260, Attn: David A. Brown
("Grantor"), to THE CHASE MANHATTAN BANK, a New York banking corporation, whose
address is 1375 Broadway, Suite 800, New York, New York 10018, Attn: Joseph
Pullicino, as Administrative Agent (in such capacity, "Grantee") for itself and
the several lenders from time to time parties to that certain Credit Agreement
dated as of October 30, 1996 among TWCC ACQUISITION CORP., a Massachusetts
corporation ("AcquisitionCo"), the several banks and other financial
institutions from time to time parties thereto, including Grantee (the
"Lenders"), (as the same may be amended, restated, supplemented, modified or
replaced from time to time, the "Credit Agreement"). References to this "Deed"
shall mean this instrument and any and all renewals, modifications, amendments,
supplements, extensions, consolidations, substitutions, spreaders and
replacements of this instrument. Unless otherwise defined herein, capitalized
terms shall have the meanings ascribed to them in the Credit Agreement.
Background
WHEREAS, AcquisitionCo and Grantor have entered into an Agreement and
Plan of Merger dated as of September 18, 1996 (as amended, supplemented, or
otherwise modified from time to time, the "Merger Agreement"), pursuant to which
AcquisitionCo intends to be merged with and into Grantor (the "Merger"), Grantor
being the surviving corporation of the Merger; and
WHEREAS, prior to the Merger, AcquisitionCo, and thereafter, Grantor
(collectively, the "Company"), have requested the Lenders to make loans and
other extensions of credit available to the Company for the purposes set forth
in the Credit Agreement;
WHEREAS Mortgagor is the fee owner of the parcels of real property
together with the improvements located thereon (the "Improvements") described on
Schedule A attached hereto (the "Real Estate"):
WHEREAS, pursuant to the terms of the Credit Agreement, Grantor is
obligated to deliver this Deed to Secure Debt to Grantee:
Granting Clauses
THIS CONVEYANCE is intended to operate and is to be construed as a
deed passing title to the Subject Property (as defined below) to Grantee and is
made under those provisions of the existing laws of the State of Georgia
relating to deeds to secure debt, and not as a mortgage. For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Grantor agrees that this Deed is given to secure the following:
<PAGE>
2
(a) (i) payment of all obligations and liabilities of Grantor which
may arise under, out of, or in connection with, the Credit Agreement, the
Notes, the Loans and the Letters of Credit in the aggregate principal
amount of $100,000,000 ("Notes", "Loans" and "Letters of Agreements" being
defined in the Credit Agreement), and (ii) all interest and fees payable
thereon (the items set forth in clauses (i) and (ii) being hereafter
collectively referred to as the "Indebtedness"); and
(b) the performance by Grantor of all covenants, agreements,
obligations and liabilities of Grantor (the "Obligations") under or
pursuant to the provisions of the Credit Agreement, and the Notes, the
Loans and the Letters of Credit defined therein, this Deed to Secure Debt,
and any other document securing payment of the Indebtedness to which
Grantor is a party (the Credit Agreement, and the Notes, the Loans and the
Letters of Credit, this Deed to Secure Debt, and any other document
securing payment of the Indebtedness to which Grantor is a party being,
collectively, the "Security Documents"), any other documents relating to
the Loans and any amendments, supplements, extensions, renewals,
restatements, replacements or modifications of any of the foregoing (the
Security Documents and all other documents and instruments from time to
time relating to the Loans or evidencing, securing or guaranteeing the
payment of the Indebtedness or the performance of the Obligations, as any
of the same may be amended, supplemented, extended, renewed, restated,
replaced or modified from time to time, are collectively referred to as the
"Loan Documents");
GRANTOR HEREBY:
has bargained, sold, conveyed, granted, assigned, granted a security interest
in, warranted, pledged, given, aliened, remised, released, confirmed,
transferred and set over and by these presents does hereby bargain, sell,
convey, grant, assign, grant a security interest in, warrant, pledge, give,
alien, remise, release, confirm, transfer and set over unto Grantee, its
successors and assigns forever, in fee simple with power of sale, for the
benefit of Grantee, its successors and assigns:
(A) the Real Estate;
(B) all the estate, right, title, claim or demand whatsoever of
Grantor, in possession or expectancy, in and to the Real Estate or any part
thereof;
(C) all right, title and interest of Grantor in, to and under all
present and future easements, rights of way, gores of land, streets, ways,
alleys, passages, sewer rights, waters, water courses, water and riparian
rights, development rights, air rights, mineral rights and all estates,
rights, titles, interests, privileges, licenses, tenements, hereditaments
and appurtenances belonging, relating or appertaining to the Real Estate,
and any reversions, remainders, rents, issues, profits and revenue thereof
and all land lying in the bed of any street, road or avenue, in front of or
adjoining the Real Estate to the center line thereof;
(D) all of the fixtures, chattels, business machines, machinery,
apparatus, equipment, furnishings, fittings and articles of personal
property of every kind and nature
<PAGE>
3
whatsoever, and all appurtenances and additions thereto and substitutions
or replacements thereof (together with, in each case, attachments,
components, parts and accessories) currently owned or subsequently acquired
by Grantor and now or subsequently attached to, or contained in or used or
usable in any way in connection with any operation or letting of the Real
Estate, including but without limiting the generality of the foregoing, all
screens, awnings, shades, blinds, curtains, draperies, artwork, carpets,
rugs, storm doors and windows, furniture and furnishings, heating,
electrical, and mechanical equipment, lighting, switchboards, plumbing,
ventilating, air conditioning and air-cooling apparatus, refrigerating, and
incinerating equipment, escalators, elevators, loading and unloading
equipment and systems, stoves, ranges, laundry equipment, cleaning systems
(including window cleaning apparatus), telephones, communication systems
(including satellite dishes and antennae), televisions, computers,
sprinkler systems and other fire prevention and extinguishing apparatus and
materials, security systems, motors, engines, machinery, pipes, pumps,
tanks, conduits, appliances, fittings and fixtures of every kind and
description (all of the foregoing in this paragraph (D) being referred to
as the "Equipment");
(E) all right, title and interest of Grantor in and to all substitutes
and replacements of, and all additions and improvements to, the Real Estate
and the Equipment, subsequently acquired by or released to Grantor or
constructed, assembled or placed by Grantor on the Real Estate, immediately
upon such acquisition, release, construction, assembling or placement,
including, without limitation, any and all building materials whether
stored at the Real Estate or offsite, and, in each such case, without any
further mortgage, conveyance, assignment or other act by Grantor;
(F) all right, title and interest of Grantor in, to and under all
leases, subleases, underlettings, concession agreements, management
agreements, licenses and other agreements relating to the use or occupancy
of the Real Estate or the Equipment or any part thereof, now existing or
subsequently entered into by Grantor and whether written or oral and all
guarantees of any of the foregoing (collectively, as any of the foregoing
may be amended, restated, extended, renewed or modified from time to time,
the "Leases"), and all rights of Grantor in respect of cash and securities
deposited thereunder and the right to receive and collect the revenues,
income, rents, issues and profits thereof, together with all other rents,
royalties, issues, profits, revenue, income and other benefits arising from
the use and enjoyment of the Subject Property (as defined below)
(collectively, the "Rents");
(G) all trade names, trade marks, logos, copyrights, good will and
books and records relating to or used in connection with the operation of
the Real Estate or the Equipment or any part thereof; all general
intangibles related to the operation of the Improvements now existing or
hereafter arising;
(H) all unearned premiums under insurance policies now or subsequently
obtained by Grantor relating to the Real Estate or Equipment and Grantor's
interest in and to all proceeds of any such insurance policies (including
title insurance policies) including the right to collect and receive such
proceeds, subject to the provisions relating to insurance generally set
forth below; and all awards and other compensation, including the interest
payable thereon
<PAGE>
4
and the right to collect and receive the same, made to the present or any
subsequent owner of the Real Estate or Equipment for the taking by eminent
domain, condemnation or otherwise, of all or any part of the Real Estate or
any easement or other right therein;
(I) all right, title and interest of Grantor in and to (i) all
contracts from time to time executed by Grantor or any manager or agent on
its behalf relating to the ownership, construction, maintenance, repair,
operation, occupancy, sale or financing of the Real Estate or Equipment or
any part thereof and all agreements relating to the purchase or lease of
any portion of the Real Estate or any property which is adjacent or
peripheral to the Real Estate, together with the right to exercise such
options and all leases of Equipment (collectively, the "Contracts"), (ii)
all consents, licenses, building permits, certificates of occupancy and
other governmental approvals relating to construction, completion,
occupancy, use or operation of the Real Estate or any part thereof
(collectively, the "Permits") and (iii) all drawings, plans, specifications
and similar or related items relating to the Real Estate (collectively, the
"Plans");
(J) any and all monies now or subsequently on deposit for the payment
of real estate taxes or special assessments against the Real Estate or for
the payment of premiums on insurance policies covering the foregoing
property or otherwise on deposit with or held by Grantee as provided in
this Deed; all capital, operating, reserve or similar accounts held by or
on behalf of Grantor and related to the operation of the Subject Property,
whether now existing or hereafter arising and all monies held in any of the
foregoing accounts and any certificates or instruments related to or
evidencing such accounts;
(K) all accounts and revenues arising from the operation of the
Improvements; and
(L) all proceeds, both cash and noncash, of the foregoing;
(All of the foregoing property and rights and interests now owned or
held or subsequently acquired by Grantor and described in the foregoing clauses
(A) through (E) are collectively referred to as the "Premises", and those
described in the foregoing clauses (A) through (L) are collectively referred to
as the "Subject Property").
TO HAVE AND TO HOLD the Subject Property and the estate, members,
rights, privileges and appurtenances hereby granted or intended to be granted
unto Grantee, its successors and assigns in fee simple, forever, for the uses
and purposes set forth herein, and to the use, benefit and behoof of Grantee,
its successors and assigns, until the Indebtedness is fully paid and the
Obligations fully performed.
Should the indebtedness secured by this Deed be paid according to the
tenor and effect thereof when the same shall become due and payable, and should
Grantor perform all covenants herein contained in a timely manner, then this
Deed shall be cancelled and surrendered.
<PAGE>
5
Terms and Conditions
Grantor further represents, warrants, covenants and agrees with
Grantee as follows:
1. Warranty of Title. Grantor warrants that Grantor has good title to
the Real Estate in fee simple and good title to the rest of the Subject
Property, subject only to the matters that are set forth in Schedule B of the
title insurance policy or policies being issued to Grantee to insure the lien of
this Deed (the "Permitted Exceptions") and Grantor shall warrant, defend and
preserve such title and the grant and lien of this Deed with respect thereto
against all claims of all persons and entities. Grantor further warrants that it
is lawfully seized and possessed of the Subject Property and has the right to
grant this Deed.
2. Payment of Indebtedness. Grantor shall pay the Indebtedness at the
times and places and in the manner specified in the Notes and shall perform all
the Obligations.
3. Requirements. Grantor shall promptly comply with, or cause to be
complied with, and conform to all present and future laws, statutes, codes,
ordinances, orders, judgments, decrees, rules, regulations and requirements, and
irrespective of the nature of the work to be done, of each of the United States
of America, any State and any municipality, local government or other political
subdivision thereof and any agency, department, bureau, board, commission or
other instrumentality of any of them, now existing or subsequently created
(collectively, "Governmental Authority") which has jurisdiction over the Subject
Property and all covenants, restrictions and conditions now or later of record
which may be applicable to any of the Subject Property, or to the use, manner of
use, occupancy, possession, operation, maintenance, alteration, repair or
reconstruction of any of the Subject Property. All present and future laws,
statutes, codes, ordinances, orders, judgments, decrees, rules, regulations and
requirements of every Governmental Authority applicable to Grantor or to any of
the Subject Property and all covenants, restrictions, and conditions which now
or later may be applicable to any of the Subject Property are collectively
referred to as the "Legal Requirements".
4. Payment of Taxes and Other Impositions. (a) Prior to delinquency,
Grantor shall pay and discharge all taxes of every kind and nature (including,
without limitation, all real and personal property, income, franchise,
withholding, transfer, gains, profits, gross receipts, and intangible recording
taxes), all charges for any easement or agreement maintained for the benefit of
any of the Subject Property, all general and special assessments, levies,
permits, inspection and license fees, all water and sewer rents and charges and
all other public charges even if unforeseen or extraordinary, imposed upon or
assessed against or which may become a lien on any of the Subject Property, or
arising in respect of the occupancy, use or possession thereof, together with
any penalties or interest on any of the foregoing (all of the foregoing are
collectively referred to as the "Impositions"). Upon request by Grantee, Grantor
shall deliver to Grantee (i) original or copies of receipted bills and cancelled
checks evidencing payment of such Imposition if it is a real estate tax or other
public charge and (ii) evidence acceptable to Grantee showing the payment of any
other such Imposition. If by law any Imposition, at Grantor's option, may be
paid in installments (whether or not interest shall accrue on the unpaid balance
of such Imposition), Grantor may elect to pay such Imposition in such
installments and shall be responsible for the payment of such installments with
interest, if any.
<PAGE>
6
(b) Nothing herein shall affect any right or remedy of Grantee under
this Deed or otherwise, without notice or demand to Grantor, to pay any
Imposition after the date such Imposition shall have become delinquent, and to
add to the Indebtedness the amount so paid, together with interest from the time
of payment at the Default Rate. Any sums paid by Grantee in discharge of any
Impositions shall be (i) a lien on the Premises secured hereby prior to any
right or title to, interest in, or claim upon the Premises subordinate to the
lien of this Deed, and (ii) payable on demand by Grantor to Grantee together
with interest at the Default Rate as set forth above.
(c) Grantor shall not claim, demand or be entitled to receive any
credit or credits toward the satisfaction of this Deed or on any interest
payable thereon for any taxes assessed against the Subject Property or any part
thereof, and shall not claim any deduction from the taxable value of the Subject
Property by reason of this Deed.
(d) Grantor shall have the right before any delinquency occurs to
contest or object in good faith to the amount or validity of any Imposition by
appropriate legal proceedings, but such right shall not be deemed or construed
in any way as relieving, modifying, or extending Grantor's covenant to pay any
such Imposition at the time and in the manner provided in this Section unless
(i) Grantor has given prior written notice to Grantee of Grantor's intent so to
contest or object to an Imposition, (ii) Grantor shall demonstrate to Grantee's
reasonable satisfaction that the legal proceedings shall operate conclusively to
prevent the sale of the Subject Property, or any part thereof, to satisfy such
Imposition prior to final determination of such proceedings and (iii) Grantor
shall furnish a good and sufficient bond or surety as reasonably requested by
and reasonably satisfactory to Grantee in the amount of the Impositions which
are being contested plus any interest and penalty which may be imposed thereon
and which could become a lien against the Real Estate or any part of the Subject
Property.
(e) Upon written notice to Grantor, Grantee after the occurrence of
and during the continuation of an Event of Default (as defined below) shall be
entitled to require Grantor to pay monthly in advance to Grantee the equivalent
of 1/12th of the estimated annual Impositions. Grantee may commingle such funds
with its own funds and Grantor shall not be entitled to interest thereon.
5. Insurance. (a) In addition to any insurance required by the Credit
Agreement, Grantor shall maintain or cause to be maintained on all of the
Premises:
(i) property insurance against loss or damage by fire, lightning,
windstorm, tornado, water damage, flood, earthquake and by such other
further risks and hazards as now are or subsequently may be covered by an
"all risk" policy or a fire policy covering "special" causes of loss. The
policy shall include building ordinance law endorsements and the policy
limits shall be automatically reinstated after each loss;
(ii) comprehensive general liability insurance under a policy
including the "broad form CGL endorsement" (or which incorporates the
language of such endorsement), covering all claims for personal injury,
bodily injury or death, or property damage occurring on, in or about the
Premises in amounts not less than the usual amount insured for in the same
general area
<PAGE>
7
by companies engaged in the same or a similar business plus such excess
limits as Grantee shall reasonably request from time to time;
(iii) when and to the extent required by Grantee, insurance against
loss or damage by any other risk commonly insured against by persons
occupying or using like properties in the locality or localities in which
the Real Estate is situated;
(iv) insurance against rent loss, extra expense or business
interruption (and/or soft costs, in the case of new construction), if
applicable, in amounts satisfactory to Grantee, but not less than one
year's gross rent or gross income;
(v) during the course of any construction or repair of Improvements,
comprehensive general liability insurance under a policy including the
"broad form CGL endorsement" (or which incorporates the language of such
endorsement), (including coverage for elevators and escalators, if any).
The policy shall include coverage for independent contractors and completed
operations. The completed operations coverage shall stay in effect for two
years after construction of any Improvements has been completed. The policy
shall provide coverage on an occurrence basis against claims for personal
injury, including, without limitation, bodily injury, death or property
damage occurring on, in or about the Premises and the adjoining streets,
sidewalks and passageways, such insurance to afford immediate minimum
protection to a limit of not less than that required by Grantee with
respect to personal injury, bodily injury or death to any one or more
persons or damage to property;
(vi) during the course of any construction or repair of the
Improvements, workers' compensation insurance (including employer's
liability insurance) for all employees of Grantor engaged on or with
respect to the Premises in such amounts as are established by law;
(vii) during the course of any construction, addition, alteration or
repair of the Improvements, builder's risk completed value form insurance
against "all risks of physical loss," including collapse, water damage,
flood and earthquake and transit coverage, during construction or repairs
of the Improvements, with deductible approved by Grantee, in nonreporting
form, covering the total value of work performed and equipment, supplies
and materials furnished (with an appropriate limit for soft costs in the
case of construction);
(viii) boiler and machinery property insurance covering pressure
vessels, air tanks, boilers, machinery, pressure piping, heating, air
conditioning and elevator equipment and escalator equipment, provided the
Improvements contain equipment of such nature, and insurance against rent,
extra expense, business interruption and soft costs, if applicable, arising
from any such breakdown, in such amounts as are usually insured for in the
same general area by companies engaged in the same or a similar business
plus such excess limits as Grantee shall reasonably request from time to
time;
(ix) if any portion of the Premises are located in an area identified
as a special flood hazard area by the Federal Emergency Management Agency
or other applicable agency, flood
<PAGE>
8
insurance in an amount satisfactory to Grantee, but in no event less than
the maximum limit of coverage available under the National Flood Insurance
Act of 1968, as amended; and
(x) such other insurance in such amounts as Grantee may reasonably
request from time to time.
Each insurance policy (other than flood insurance written under the National
Flood Insurance Act of 1968, as amended, in which case to the extent available)
shall (i) provide that it shall not be cancelled, non-renewed or materially
amended without 30-days' prior written notice to Grantee, and (ii) with respect
to all property insurance, provide for a deductible not to exceed the amount
usually maintained by companies engaged in the same or a similar business,
contain a "Replacement Cost Endorsement" without any deduction made for
depreciation and with no co-insurance penalty (or attaching an agreed amount
endorsement satisfactory to Grantee), with loss payable solely to Grantee
(modified, if necessary, to provide that proceeds in the amount of replacement
cost may be retained by Grantee without the obligation to rebuild) as its
interest may appear, without contribution, under a "standard" or "New York"
mortgagee clause acceptable to Grantee and be written by financially sound and
reputable insurance companies. Liability insurance policies shall name Grantee
as an additional insured and contain a waiver of subrogation against Grantee;
all such policies shall indemnify and hold Grantee harmless from all liability
claims occurring on, in or about the Premises and the adjoining streets,
sidewalks and passageways. The amounts of each insurance policy and the form of
each such policy shall at all times be reasonably satisfactory to Grantee. Each
policy shall expressly provide that any proceeds which are payable to Grantee
shall be paid by check payable to the order of Grantee only and requiring the
endorsement of Grantee only. If any required insurance shall expire, be
withdrawn, become void by breach of any condition thereof by Grantor or by any
lessee of any part of the Subject Property or become void by reason of the
failure or impairment of the capital of any insurer, Grantor shall immediately
obtain new or additional insurance reasonably satisfactory to Grantee. Grantor
shall not take out any separate or additional insurance which is contributing in
the event of loss unless it is properly endorsed and otherwise satisfactory to
Grantee in all respects.
(b) Grantor shall deliver to Grantee an original of each insurance
policy required to be maintained, or a certificate of such insurance acceptable
to Grantee, together with a copy of the declaration page for each such policy.
Grantor shall (i) pay as they become due all premiums for such insurance, (ii)
not later than 15 days prior to the expiration of each policy to be furnished
pursuant to the provisions of this Section, deliver a renewed policy or
policies, or duplicate original or originals thereof, marked "premium paid," or
accompanied by such other evidence of payment satisfactory to Grantee with
standard non-contributory mortgage clauses in favor of and acceptable to
Grantee. Upon request of Grantee, Grantor shall cause its insurance underwriter
or broker to certify to Grantee in writing that all the requirements of this
Deed governing insurance have been satisfied.
(c) If Grantor is in default of its obligations to insure or deliver
any such prepaid policy or policies, then Grantee, at its option and without
notice, may effect such insurance from year to year, and pay the premium or
premiums therefor, and Grantor shall pay to Grantee on demand such premium or
premiums so paid by Grantee with interest from the time of payment at the
Default Rate and the same shall be deemed to be secured by this Deed and shall
be collectible in the same manner as the Indebtedness secured by this Deed.
<PAGE>
9
(d) Grantor shall increase the amount of property insurance required
to equal 100% replacement cost pursuant to the provisions of this Section at the
time of each renewal of each policy (but not later than 12 months from the date
of this Deed and each successive 12 month period to occur thereafter) by using
the F.W. Dodge Building Index to determine whether there shall have been an
increase in the replacement value since the most recent adjustment and, if there
shall have been such an increase, the amount of insurance required shall be
adjusted accordingly.
(e) Grantor promptly shall comply with and conform to (i) all
provisions of each such insurance policy, and (ii) all requirements of the
insurers applicable to Grantor or to any of the Subject Property or to the use,
manner of use, occupancy, possession, operation, maintenance, alteration or
repair of any of the Subject Property. Grantor shall not use or permit the use
of the Subject Property in any manner which would permit the insurer to cancel
any insurance policy or void coverage required to be maintained by this Deed.
(f) If the Subject Property, or any part thereof, shall be destroyed
or damaged by fire or any other casualty, whether insured or uninsured, or in
the event any claim is made against Grantor for any personal injury, bodily
injury or property damage incurred on or about the Premises, Grantor shall give
prompt notice thereof to Grantee. If the Subject Property is damaged by fire or
other casualty and the cost to repair such damage is less than $500,000, then
provided that no Event of Default shall have occurred and be continuing, Grantor
shall have the right to adjust such loss, and the insurance proceeds relating to
such loss may be paid over to Grantor; provided that Grantor shall, promptly
after any such damage, repair all such damage regardless of whether any
insurance proceeds have been received or whether such proceeds, if received, are
sufficient to pay for the costs of repair. If the Subject Property is damaged by
fire or other casualty, and the cost to repair such damage exceeds the above
limit, or if an Event of Default shall have occurred and be continuing, then
Grantor authorizes and empowers Grantee, at Grantee's option and in Grantee's
sole discretion, as attorney-in-fact for Grantor, to make proof of loss, to
adjust and compromise any claim under any insurance policy, to appear in and
prosecute any action arising from any policy, to collect and receive insurance
proceeds and to deduct therefrom Grantee's expenses incurred in the collection
process. Each insurance company concerned is hereby authorized and directed to
make payment for such loss directly to Grantee. Grantee shall have the right to
require Grantor to repair or restore the Subject Property, and Grantor hereby
designates Grantee as its attorney-in-fact for the purpose of making any
election required or permitted under any insurance policy relating to repair or
restoration. If Grantee requires restoration of the Subject Property or if no
Event of Default has occurred and is continuing, insurance proceeds must first
be made available to restoration. If an Event of Default shall have occurred and
be continuing, the insurance proceeds or any part thereof received by Grantee
may be applied by Grantee toward reimbursement of all costs and expenses of
Grantee in collecting such proceeds, and the balance, at Grantee's option in its
sole and absolute discretion, to the principal (to the installments in inverse
order of maturity, if payable in installments) and interest due or to become due
under the Notes, to fulfill any other Obligation of Grantor, to the restoration
or repair of the property damaged, or released to Grantor. In the event Grantee
elects to release such proceeds to Grantor, Grantor shall be obligated to use
such proceeds to restore or repair the Subject Property. Application by Grantee
of any insurance proceeds toward the last maturing installments of principal and
interest due or to become due under the Notes shall not excuse Grantor from
making any regularly
<PAGE>
10
scheduled payments due thereunder, nor shall such application extend or reduce
the amount of such payments.
(g) In the event of the exercise of any of Grantee's rights under this
Deed (including, without limitation, exercise of the power of sale granted
herein and foreclosure of this Deed as a mortgage) or other transfer of title to
the Subject Property in extinguishment of the Indebtedness, all right, title and
interest of Grantor in and to any insurance policies then in force shall pass to
the purchaser or grantee and Grantor hereby appoints Grantee its
attorney-in-fact, in Grantor's name, to assign and transfer all such policies
and proceeds to such purchaser or grantee.
(h) Upon written notice to Grantor, Grantee after the occurrence of
and during the continuation of an Event of Default shall be entitled to require
Grantor to pay monthly in advance to Grantee the equivalent of 1/12th of the
estimated annual premiums due on such insurance.
(i) Grantor may maintain insurance required under this Deed by means
of one or more blanket insurance policies maintained by Grantor; provided,
however, that (A) any such policy shall specify, or Grantor shall furnish to
Grantee a written statement from the insurer so specifying, the maximum amount
of the total insurance afforded by such blanket policy that is allocated to the
Premises and the other Subject Property and any sublimits in such blanket policy
applicable to the Premises and the other Subject Property, (B) each such blanket
policy shall include an endorsement providing that, in the event of a loss
resulting from an insured peril, insurance proceeds shall be allocated to the
Subject Property in an amount equal to the coverages required to be maintained
by Grantor as provided above and (C) the protection afforded under any such
blanket policy shall be no less than that which would have been afforded under a
separate policy or policies relating only to the Subject Property.
6. Restrictions on Liens and Encumbrances. Except as may be permitted
by the Credit Agreement, Grantor shall not further mortgage, nor otherwise
encumber the Subject Property nor create or suffer to exist any lien, charge or
encumbrance on the Subject Property, or any part thereof, whether superior or
subordinate to the lien of this Deed and whether recourse or non-recourse.
7. Due on Sale and Other Transfer Restrictions. Except as may be
permitted in the Credit Agreement, Grantor shall not sell, transfer, convey or
assign all or any portion of, or any interest in, the Subject Property.
8. Maintenance. Grantor shall maintain or cause to be maintained all
the Improvements in good condition and repair (normal wear and tear excepted)
and shall not commit or suffer any waste of the Improvements. Subject to the
provisions of Section 5, Grantor shall repair, restore, replace or rebuild
promptly any part of the Premises which may be damaged or destroyed by any
casualty whatsoever. The Improvements shall not be demolished or materially
altered, nor any material additions built, without the prior written consent of
Grantee, which shall not be unreasonably withheld or delayed.
9. Condemnation/Eminent Domain. Immediately upon obtaining knowledge
of the institution of any proceedings for the condemnation of the Subject
Property, or any portion thereof, Grantor will notify Grantee of the pendency of
such proceedings. Grantor authorizes Grantee, at Grantee's option and in
Grantee's sole discretion, as attorney-in-fact for Grantor, to commence,
<PAGE>
11
appear in and prosecute, in Grantee's or Grantor's name, any action or
proceeding relating to any condemnation of the Subject Property, or any portion
thereof, and to settle or compromise any claim in connection with such
condemnation. If Grantee elects not to participate in such condemnation
proceeding, then Grantor shall, at its expense, diligently prosecute any such
proceeding and shall consult with Grantee, its attorneys and experts and
cooperate with them in any defense of any such proceedings. All awards and
proceeds of condemnation shall be assigned to Grantee to be applied in the same
manner as insurance proceeds, as provided above, and Grantor agrees to execute
any such assignments of all such awards as Grantee may request.
10. Restoration. If funds are released to Grantor for restoration of
any of the Subject Property, then such restoration shall be performed only in
accordance with the following conditions:
(i) prior to the commencement of any restoration, the plans and
specifications for such restoration, and the budgeted costs, shall be
submitted to and approved by Grantee, which approval shall not be
unreasonably withheld or delayed;
(ii) prior to making any advance of restoration funds, Grantee shall
be reasonably satisfied that the remaining restoration funds are sufficient
to complete the restoration
and to pay all related expenses, including interest on the Indebtedness and
real estate taxes on the Premises, during restoration;
(iii) at the time of any disbursement of the restoration funds, (A) no
Event of Default shall then exist, (B) no mechanics' or materialmen's liens
shall have been filed and remain undischarged, except those discharged by
the disbursement of the requested restoration funds and (C) a satisfactory
bring-down or continuation of title insurance on the Premises shall be
delivered to Grantee;
(iv) disbursements shall be made from time to time in an amount not
exceeding the cost of the work completed since the last disbursement, upon
receipt of reasonably satisfactory evidence of the stage of completion and
of performance of the work in a good and workmanlike manner and in
accordance with the contracts, plans and specifications acceptable to
Grantee;
(v) with respect to each advance of restoration funds, Grantee may
retain 10% of the amount of such advance as a holdback until the
restoration is fully completed;
(vi) Grantee may impose such other conditions as are customarily
imposed by construction lenders; and
(vii) any restoration funds remaining shall be retained by Grantee and
shall be applied by Grantee to its Indebtedness.
11. Leases. (a) Except as may be permitted in the Credit Agreement,
Grantor shall not lease any portion, or any interest in, the Subject Property.
<PAGE>
12
(b) In the event of the enforcement by Grantee of any remedy under
this Deed, the lessee under any Lease shall, if requested by Grantee or any
other person succeeding to the interest of Grantee as a result of such
enforcement, attorn to Grantee or to such person and shall recognize Grantee or
such successor in interest as lessor under the Lease without change in the
provisions thereof; provided however, that Grantee or such successor in interest
shall not be: (i) bound by any payment of an installment of rent or additional
rent which may have been made more than 30 days before the due date of such
installment; (ii) bound by any material amendment or modification to the Lease
made without the consent of Grantee or such successor in interest; (iii) liable
for any previous act or omission of Grantor (or its predecessors in interest);
(iv) responsible for any monies owing by Grantor to the credit of such lessee or
subject to any credits, offsets, claims, counterclaims, demands or defenses
which the lessee may have against Grantor (or its predecessors in interest); (v)
bound by any covenant to undertake or complete any construction of the Premises
or any portion thereof unless set forth in the Lease or any amendment approved
by Grantee; or (vi) obligated to make any payment to such lessee other than any
security deposit actually delivered to Grantee or such successor in interest.
Each lessee or other occupant, upon request by Grantee or such successor in
interest, shall execute and deliver an instrument or instruments confirming such
attornment. In addition, Grantor agrees that each Lease entered into after the
date of this Deed shall include language to the effect of subsections (d)-(g) of
this Section; provided that the provisions of such subsections shall be
self-operative and any failure of any Lease to include such language shall not
impair the binding effect of such provisions on any lessee under such Lease.
12. Further Assurances/Estoppel Certificates. To further assure
Grantee's rights under this Deed, Grantor agrees upon written demand of Grantee
to do any act or execute any additional documents (including, but not limited
to, security agreements on any personalty included or to be included in the
Subject Property and a separate assignment of each Lease in recordable form) as
may be reasonably required by Grantee to confirm the lien of this Deed and all
other rights or benefits conferred on Grantee.
13. Grantee's Right to Perform. If Grantor fails to perform any of the
covenants or agreements of Grantor, Grantee, without waiving or releasing
Grantor from any obligation or default under this Deed, may, at any time (but
shall be under no obligation to) pay or perform the same, and the amount or cost
thereof, with interest at the Default Rate, shall be due from Grantor to Grantee
promptly after written demand and the same shall be secured by this Deed and
shall be a lien on the Subject Property prior to any right, title to, interest
in or claim upon the Subject Property attaching subsequent to the lien of this
Deed. No payment or advance of money by Grantee under this Section shall be
deemed or construed to cure Grantor's default or waive any right or remedy of
Grantee.
14. Hazardous Materials, Etc.. (a) Grantor represents that other than
as specifically identified in the Environmental Reports (as defined in the
Credit Agreement) Grantor has never caused or permitted any Hazardous Materials
(as defined in the Credit Agreement) to be placed, held, located or disposed of
on, under or at the Premises, or any part thereof, in violation of applicable
law and the Premises have never been used by Grantor as a dump site or storage
(whether permanent or temporary) site for any Hazardous Materials in violation
of applicable law.
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13
(b) Grantor represents that other than as specifically identified in
the Environmental Reports (as defined in the Credit Agreement) (i) to Grantor's
knowledge, the Premises are free of all Hazardous Materials (other than
Hazardous Materials handled or stored in accordance with applicable law) and
(ii) the Premises have not been adversely affected by any Hazardous Material and
are not in violation of any applicable Environmental Law (as defined in the
Credit Agreement.
(c) Grantor shall comply substantially with any and all applicable
Environmental Laws, shall pay promptly when due the costs of removal of any
Hazardous Material, and shall keep the Premises free of any lien imposed
pursuant to any Environmental Law. In the event Grantor fails to do so, after
notice to Grantor and the expiration of the earlier of (i) applicable cure
periods hereunder, or (ii) the cure period permitted under the applicable Legal
Requirement, Grantee may declare such failure an Event of Default or cause the
Premises to be freed from the Hazardous Material and the cost of the removal
with interest at the Default Rate shall be due from Grantor to Grantee and the
same shall be added to the Indebtedness and be secured by this Deed. Grantor
further agrees not to release or dispose of any Hazardous Material at the
Premises in violation of applicable law or in a manner that could reasonably be
expected to adversely affect the value or marketability of the Premises. In
addition, Grantor agrees not to allow the manufacture, storage, transmission,
presence or disposal of any Hazardous Material over or upon the Premises in
violation of applicable law or in a manner that could reasonably be expected to
adversely affect the value or marketability of the Premises. Upon a default by
Grantor under this Section, Grantor shall give Grantee and its agents and
employees access to the Premises to remove Hazardous Material. Grantor agrees to
defend, indemnify and hold Grantee free and harmless from and against all loss,
costs, damage and expense (including attorneys' fees and costs and consequential
damages) Grantee may sustain by reason of (i) the imposition or recording of a
lien by any Governmental Authority pursuant to any Environmental Law; (ii)
claims of any private parties regarding violation of or liabilities under any
Environmental Law; (iii) costs and expenses (including, without limitation,
attorneys' fees and fees incidental to the securing of repayment of such costs
and expenses) incurred by Grantor or Grantee in connection with the removal of
any such lien or in connection with Grantor's or Grantee's compliance with or
liability under any Environmental Law; and (iv) the assertion against Grantee by
any party of any claim in connection with any Environmental Law.
(d) The foregoing indemnification shall be a recourse obligation of
Grantor and shall survive repayment of the Notes, notwithstanding any
limitations on recourse which may be contained herein or in any Loan Documents
or the delivery of any satisfaction, release or release deed, discharge or deed
of reconveyance, or the assignment of this Deed by Grantee.
15. Asbestos. Grantor shall not install or permit to be installed in
the Premises asbestos or any substance containing asbestos and with respect to
any such material currently present in the Premises shall promptly either (a)
remove any material which such Environmental Laws deem harmful, hazardous or
injurious and require to be removed or (b) otherwise comply with such
Environmental Laws, at Grantor's expense. If Grantor shall fail to so remove or
otherwise comply within 30 days after written notice from Grantee, Grantee may
declare an Event of Default and/or do whatever is necessary to eliminate such
substances from the Premises or otherwise comply with the applicable Legal
Requirement, and the costs thereof, with interest at the Default Rate, shall be
due from Grantor to Grantee within 10 days after written demand and the same
shall be added to the
<PAGE>
14
Indebtedness and be secured by this Deed. Grantor shall give Grantee and its
agents and employees access to the Premises to remove such asbestos or
substances. Grantor shall defend, indemnify, and save Grantee harmless from all
loss, costs, damages and expense (including reasonable attorneys' fees and costs
and consequential damages) asserted or proven against Grantee by any party, as a
result of the presence of such substances or any removal or compliance with such
Environmental Laws. The foregoing indemnification shall be a recourse obligation
of Grantor and shall survive repayment of the Notes, notwithstanding any
limitation on recourse which may be contained herein or in any of the Loan
Documents or the delivery of any satisfaction, release or release deed,
discharge or deed of reconveyance, or the assignment of this Deed by Grantee.
16. Events of Default. The occurrence of an Event of Default under the
Credit Agreement shall constitute an Event of Default hereunder.
17. Remedies.
(a) Upon the occurrence of any Event of Default, in addition to any
other rights and remedies Grantee may have pursuant to the Loan Documents, or as
provided by law, and without limitation, (a) if such event is an Event of
Default specified in clause (i) or (ii) of Section 9(f) of the Credit Agreement
with respect to the Grantor (an "Automatic Acceleration Default"), automatically
the Indebtedness and all other amounts owing under the Notes, this Deed and the
other Security Documents immediately shall become due and payable, and (b) if
such event is any other Event of Default, by notice to Grantor, Grantee may
declare the Indebtedness (together with accrued interest thereon) and all other
amounts payable under the Notes, this Deed and the other Security Documents to
be immediately due and payable. Except as expressly provided above in this
Section or in the Credit Agreement, presentment, demand, protest and all other
notices of any kind are hereby expressly waived. In addition, upon the
occurrence of any Event of Default, Grantee may immediately take such action,
without further notice or demand, as it deems advisable to protect and enforce
its rights against Grantor and in and to the Subject Property, including, but
not limited to, the following actions, each of which may be pursued concurrently
or otherwise, at such time and in such manner as Grantee may determine, in its
sole discretion, without impairing or otherwise affecting the other rights and
remedies of Grantee:
(i) Grantee may, to the extent permitted by applicable law, (A)
institute and maintain an action to foreclose this Deed as a lien against
all or any part of the Subject Property, (B) institute and maintain an
action on the Notes, (C) sell all or part of the Subject Property (Grantor
expressly granting to Grantee the power of sale as more particularly
described in subsection (iii) below), or (D) take such other action at law
or in equity for the enforcement of this Deed or any of the Loan Documents
as the law may allow. Grantee may proceed in any such action to final
judgment and execution thereon for all sums due hereunder, together with
interest thereon at the Default Rate and all costs of suit, including,
without limitation, reasonable attorneys' fees and disbursements.
(ii) Grantee may personally, or by its agents, attorneys and employees
and without regard to the adequacy or inadequacy of the Subject Property or
any other collateral as security for the Indebtedness and Obligations enter
into and upon the Subject Property and each and every
<PAGE>
15
part thereof and exclude Grantor and its agents and employees therefrom
without liability for trespass, damage or otherwise (Grantor hereby
agreeing to surrender possession of the Subject Property to Grantee upon
demand at any such time) and use, operate, manage, maintain and control the
Subject Property and every part thereof. Following such entry and taking of
possession, Grantee shall be entitled, without limitation, (x) to lease all
or any part or parts of the Subject Property for such periods of time and
upon such conditions as Grantee may, in its discretion, deem proper, (y) to
enforce, cancel or modify any Lease and (z) generally to execute, do and
perform any other act, deed, matter or thing concerning the Subject
Property as Grantee shall deem appropriate as fully as Grantor might do.
(iii) Grantor hereby grants to Grantee and assigns, the following
irrevocable power of attorney and agency (which are coupled with an
interest): to sell all or part of the Subject Property at auction, at the
usual place for conducting sales at the Court House in the County where the
land or any part thereof lies, in the State of Georgia, to the highest
bidder for cash, after advertising the time, terms and place of such sale
once a week for four weeks immediately preceding such sale (but without
regard to the number of days) in a newspaper published in the County where
the land lies, or in the paper in which the Sheriff's advertisements for
such County are published, all other notice being hereby waived by Grantor,
and Grantee or any person on behalf of Grantee, or assigns, may bid and
purchase at such sale and thereupon execute and deliver to the purchaser or
purchasers at such sale a sufficient conveyance of said Subject Property
with full warranty of title (or without warranties if Grantee shall so
elect), in fee simple, which conveyance shall contain recitals as to the
happenings of the default upon which the execution of the power of sale
herein granted depends, and Grantor hereby constitutes and appoints Grantee
and assigns, the agent and attorney in fact of Grantor to make such
recitals, and hereby covenants and agrees that the recitals so to be made
by Grantee, or assigns, shall be binding and conclusive upon Grantor, and
assigns of Grantor, and that the conveyance to be made by Grantee or
assigns, shall be effectual to perpetually bar all suits in law and in
equity and the equity of redemption of Grantor, or the successors in
interest of Grantor, in and to the Subject Property, and Grantee or
assigns, shall collect the proceeds of such sale, and after reserving
therefrom the entire amount of principal and accrued interest due, together
with the amount of any taxes, liens, charges, including utility charges, if
any, assessments and premiums of insurance or other payments theretofore
paid by Grantee, with interest thereon from date of payment, together with
all costs and expenses of sale and fifteen percentum of the aggregate
amount due for attorney's fees, shall pay any over-plus to Grantor, or to
the heirs or assigns of Grantor as provided by law. The power and agency
hereby granted are coupled with an interest and are irrevocable and are
granted as cumulative to all other remedies for collection and enforcement
of the Indebtedness and the Obligations provided for herein or otherwise
provided by law.
(iv) Grantee may adjourn from time to time any sale by Grantee to be
made under or by virtue of this Deed by announcement at the time and place
appointed for such sale or for such adjourned sale or sales and upon notice
to Grantor; and, except as otherwise provided by any applicable provision
of law, Grantee, without further notice or publication, may make such sale
at the time and place to which the same shall be so adjourned.
<PAGE>
16
(v) Upon the completion of any sale or sales made by Grantee under or
by virtue of this Section, Grantee, or an officer of any court empowered to
do so, shall execute and deliver to the accepted purchaser or purchasers a
good and sufficient instrument, or good and sufficient instruments,
conveying, assigning and transferring all estate, right, title and interest
in and to the property and rights sold. Grantee is hereby irrevocably
appointed the true and lawful attorney of Grantor, in its name and stead,
to make all necessary conveyances, assignments, transfers and deliveries of
the Subject Property and rights so sold and for that purpose Grantee may
execute all necessary instruments of conveyance, assignment and transfer,
and may substitute one or more persons with like power, Grantor hereby
ratifying and confirming all that its said attorney or such substitute or
substitutes shall lawfully do by virtue hereof. Any such sale or sales made
under or by virtue of this Section, whether made under the power of sale
herein granted or under or by virtue of judicial proceedings or of a
judgment or decree of foreclosure and sale, shall operate to divest all the
estate, right, title, interest, claim and demand whatsoever, whether at law
or in equity, of Grantor in and to the properties and rights so sold, and
shall be a perpetual bar both at law and in equity against Grantor and
against any and all persons claiming or who may claim the same, or any part
thereof from, through or under Grantor.
(vi) No recovery of any judgment by Grantee and no levy of an
execution under any judgment upon the Subject Property or upon any other
property of Grantor shall affect in any manner or to any extent, the lien
and title of this Deed upon the Subject Property or any part thereof, or
any liens, title, rights, powers or remedies of Grantee hereunder, but such
liens, titles, rights, powers and remedies of Grantee shall continue
unimpaired as before.
(b) The holder of this Deed, in any action to exercise the rights
granted hereunder (including, without limitation, exercise of the power of sale
contained herein or foreclosure of this Deed as a mortgage), shall be entitled
to the appointment of a receiver. In case of a any sale pursuant to this Deed,
the Real Estate may be sold, at Grantee's election, in one parcel or in more
than one parcel and Grantee is specifically empowered, (without being required
to do so, and in its sole and absolute discretion) to cause successive sales of
portions of the Subject Property to be held.
(c) In the event of any breach of any of the covenants, agreements,
terms or conditions contained in this Deed, and notwithstanding to the contrary
any exculpatory or non-recourse language which may be contained herein, Grantee
shall be entitled to enjoin such breach and obtain specific performance of any
covenant, agreement, term or condition and Grantee shall have the right to
invoke any equitable right or remedy as though other remedies were not provided
for in this Deed.
18. Right of Grantee to Credit Sale. Upon the occurrence of any sale
made under this Deed, whether made under the power of sale or by virtue of
judicial proceedings or of a judgment or decree of foreclosure and sale, Grantee
may bid for and acquire the Subject Property or any part thereof. In lieu of
paying cash therefor, Grantee may make settlement for the purchase price by
crediting upon the Indebtedness or other sums secured by this Deed the net sales
price after deducting therefrom the expenses of sale and the cost of the action
and any other sums which Grantee is authorized to deduct under this Deed. In
such event, this Deed, the Notes and documents evidencing expenditures
<PAGE>
17
secured hereby may be presented to the person or persons conducting the sale in
order that the amount so used or applied may be credited upon the Indebtedness
as having been paid.
19. Appointment of Receiver. If an Event of Default shall have
occurred and be continuing, Grantee as a matter of right and without notice to
Grantor, unless otherwise required by applicable law, and without regard to the
adequacy or inadequacy of the Subject Property or any other collateral as
security for the Indebtedness and Obligations or the interest of Grantor
therein, shall have the right to apply to any court having jurisdiction to
appoint a receiver or receivers or other manager of the Subject Property, and
Grantor hereby irrevocably consents to such appointment and waives notice of any
application therefor (except as may be required by law). Any such receiver or
receivers shall have all the usual powers and duties of receivers in like or
similar cases and all the powers and duties of Grantee in case of entry as
provided in this Deed, including, without limitation and to the extent permitted
by law, the right to enter into leases of all or any part of the Subject
Property, and shall continue as such and exercise all such powers until the date
of confirmation of sale of the Subject Property unless such receivership is
sooner terminated.
20. Extension, Release, etc. (a) Without affecting the lien or charge
of this Deed upon any portion of the Subject Property not then or theretofore
released as security for the full amount of the Indebtedness, Grantee may, from
time to time and without notice, agree to (i) release any person liable for the
Indebtedness, (ii) extend the maturity or alter any of the terms of the
Indebtedness or any guaranty thereof, (iii) grant other indulgences, (iv)
release or reconvey, or cause to be released or reconveyed at any time at
Grantee's option any parcel, portion or all of the Subject Property, (v) take or
release any other or additional security for any obligation herein mentioned, or
(vi) make compositions or other arrangements with debtors in relation thereto.
If at any time this Deed shall secure less than all of the principal amount of
the Indebtedness, it is expressly agreed that any repayments of the principal
amount of the Indebtedness shall not reduce the amount of the lien of this Deed
until the lien amount shall equal the principal amount of the Indebtedness
outstanding.
(b) No recovery of any judgment by Grantee and no levy of an execution
under any judgment upon the Subject Property or upon any other property of
Grantor shall affect the estate granted by this Deed or any liens, rights,
powers or remedies of Grantee hereunder, and such liens, rights, powers and
remedies shall continue unimpaired.
(c) If Grantee shall have the right to exercise the rights granted
herein (including, without limitation, exercise of the power of sale or
foreclosure of this Deed as a mortgage), Grantor authorizes Grantee at its
option to sell the Subject Property or to foreclose the lien of this Deed
subject to the rights of any tenants of the Subject Property. The failure to
make any such tenants parties defendant to any such sale or proceeding and to
extinguish their rights will not be asserted by Grantor as a defense to any
proceeding instituted by Grantee to collect the Indebtedness or to foreclose the
lien of this Deed.
(d) Unless expressly provided otherwise, in the event that ownership
of this Deed and title to the Subject Property or any estate therein shall
become vested in the same person or
<PAGE>
18
entity, this Deed shall not merge in such title but shall continue as a valid
lien on the Subject Property for the amount secured hereby.
21. Security Agreement under Uniform Commercial Code. (a) It is the
intention of the parties hereto that this Deed shall constitute a Security
Agreement within the meaning of the Uniform Commercial Code (the "Code") of the
State of Georgia. If an Event of Default shall occur under this Deed, then in
addition to having any other right or remedy available at law or in equity,
Grantee shall have the option of either (i) proceeding under the Code and
exercising such rights and remedies as may be provided to a secured party by the
Code with respect to all or any portion of the Subject Property which is
personal property (including, without limitation, taking possession of and
selling such property) or (ii) treating such property as real property and
proceeding with respect to both the real and personal property constituting the
Subject Property in accordance with Grantee's rights, powers and remedies with
respect to the real property (in which event the default provisions of the Code
shall not apply). If Grantee shall elect to proceed under the Code, then five
days' notice of sale of the personal property shall be deemed reasonable notice
and the reasonable expenses of retaking, holding, preparing for sale, selling
and the like incurred by Grantee shall include, but not be limited to,
attorneys' fees and legal expenses. At Grantee's request, Grantor shall assemble
the personal property and make it available to Grantee at a place designated by
Grantee which is reasonably convenient to both parties.
(b) Grantor and Grantee agree, to the extent permitted by law, that:
(i) all of the goods described within the definition of the word "Equipment" are
or are to become fixtures on the Real Estate; (ii) this Deed upon recording or
registration in the real estate records of the proper office shall constitute a
financing statement filed as a "fixture filing" within the meaning of Sections
9-313 and 9-402 of the Code; (iii) Grantor is the record owner of the Real
Estate; and (iv) the addresses of Grantor and Grantee are as set forth on the
first page of this Deed.
(c) Grantor, upon request by Grantee from time to time, shall execute,
acknowledge and deliver to Grantee one or more separate security agreements, in
form satisfactory to Grantee, covering all or any part of the Subject Property
and will further execute, acknowledge and deliver, or cause to be executed,
acknowledged and delivered, any financing statement, affidavit, continuation
statement or certificate or other document as Grantee may reasonably request in
order to perfect, preserve, maintain, continue or extend the security interest
under and the priority of this Deed and such security instrument. Grantor
further agrees to pay to Grantee within 10 days after written demand all costs
and expenses incurred by Grantee in connection with the preparation, execution,
recording, filing and refiling of any such document and all reasonable costs and
expenses of any record searches for financing statements Grantee shall
reasonably require. Grantor shall from time to time, on request of Grantee,
deliver to Grantee an inventory in reasonable detail of any of the Subject
Property which constitutes personal property. If Grantor shall fail to furnish
any financing or continuation statement within 10 days after request by Grantee,
then pursuant to the provisions of the Code, Grantor hereby authorizes Grantee,
without the signature of Grantor, to execute and file any such financing and
continuation statements. The filing of any financing or continuation statements
in the records relating to personal property or chattels shall not be construed
as in any way impairing the right of Grantee to proceed against any personal
property encumbered by this Deed as real property, as set forth above.
<PAGE>
19
22. Assignment of Rents. Grantor hereby assigns to Grantee the Rents
as further security for the payment of the Indebtedness and performance of the
Obligations, and Grantor grants to Grantee the right to enter the Subject
Property for the purpose of collecting the same and to let the Subject Property
or any part thereof, and to apply the Rents on account of the Indebtedness. The
foregoing assignment and grant is present and absolute and shall continue in
effect until the Indebtedness is paid in full, but Grantee hereby waives the
right to enter the Subject Property for the purpose of collecting the Rents and
Grantor shall be entitled to collect, receive, use and retain the Rents until
the occurrence of an Event of Default under this Deed; such right of Grantor to
collect, receive, use and retain the Rents may be revoked by Grantee upon the
occurrence of any Event of Default under this Deed by giving not less than five
days' written notice of such revocation to Grantor; in the event such notice is
given, Grantor shall pay over to Grantee, or to any receiver appointed to
collect the Rents, any lease security deposits. Grantor shall not accept
prepayments of installments of Rent to become due for a period of more than one
month in advance (except for security deposits and estimated payments of
percentage rent, if any).
23. Trust Funds. All lease security deposits of the Real Estate shall
be treated as trust funds not to be commingled with any other funds of Grantor.
Within 10 days after request by Grantee, Grantor shall furnish Grantee
satisfactory evidence of compliance with this subsection, together with a
statement of all lease security deposits by lessees and copies of all Leases not
previously delivered to Grantee, which statement shall be certified by Grantor.
24. Additional Rights. The holder of any subordinate lien or deed to
secure debt on the Subject Property shall have no right to terminate any Lease
whether or not such Lease is subordinate to this Deed nor shall any holder of
any subordinate lien or deed to secure debt join any tenant under any Lease in
any action to foreclose the lien or exercise the rights under such deed to
secure debt or modify, interfere with, disturb or terminate the rights of any
tenant under any Lease. By recordation of this Deed all holders or subordinate
liens or deeds to secure debt are subject to and notified of this provision, and
any action taken by any such holder contrary to this provision shall be null and
void. Upon the occurrence of any Event of Default, Grantee may, in its sole
discretion and without regard to the adequacy of its security under this Deed,
apply all or any part of any amounts on deposit with Grantee under this Deed
against all or any part of the Indebtedness. Any such application shall not be
construed to cure or waive any Default or Event of Default or invalidate any act
taken by Grantee on account of such Default or Event of Default.
25. Notices. All notices, requests, demands and other communications
hereunder shall be deemed to have been sufficiently given or served when served
in the manner set forth in the Credit Agreement.
26. No Oral Modification. This Deed may not be changed or terminated
orally. Any agreement made by Grantor and Grantee after the date of this Deed
relating to this Deed shall be superior to the rights of the holder of any
intervening or subordinate lien or encumbrance.
27. Partial Invalidity. In the event any one or more of the provisions
contained in this Deed shall for any reason be held to be invalid, illegal or
unenforceable in any respect, such invalidity, illegality or unenforceability
shall not affect any other provision hereof, but each shall
<PAGE>
20
be construed as if such invalid, illegal or unenforceable provision had never
been included. Notwithstanding to the contrary anything contained in this Deed
or in any provisions of the Indebtedness or Loan Documents, the obligations of
Grantor and of any other obligor under the Indebtedness or Loan Documents shall
be subject to the limitation that Grantee shall not charge, take or receive, nor
shall Grantor or any other obligor be obligated to pay to Grantee, any amounts
constituting interest in excess of the maximum rate permitted by law to be
charged by Grantee.
28. Grantor's Waiver of Rights. To the fullest extent permitted by
law, Grantor waives the benefit of all laws now existing or that may
subsequently be enacted providing for (i) any appraisement before sale of any
portion of the Subject Property, (ii) any extension of the time for the
enforcement of the collection of the Indebtedness or the creation or extension
of a period of redemption from any sale made in collecting such debt and (iii)
exemption of the Subject Property from attachment, levy or sale under execution
or exemption from civil process. To the full extent Grantor may do so, Grantor
agrees that Grantor will not at any time insist upon, plead, claim or take the
benefit or advantage of any law now or hereafter in force providing for any
appraisement, valuation, stay, exemption, homestead, extension or redemption, or
requiring Grantee to exercise the rights granted herein (including, without
limitation, exercise of the power of sale or foreclosure of this Deed as a
mortgage) before exercising any other remedy granted hereunder and Grantor, for
Grantor and its successors and assigns, and for any and all persons ever
claiming any interest in the Subject Property, to the extent permitted by law,
hereby waives and releases all rights of redemption, homestead, valuation,
appraisement, stay of execution, notice of election to mature or declare due the
whole of the secured indebtedness and marshalling in the event of Grantee's
exercise of the rights granted herein (including, without limitation, exercise
of the power of sale or foreclosure of this Deed as a mortgage).
29. Remedies Not Exclusive. Grantee shall be entitled to enforce
payment of the Indebtedness and performance of the Obligations and to exercise
all rights and powers under this Deed or under any of the other Loan Documents
or other agreement or any laws now or hereafter in force, notwithstanding some
or all of the Indebtedness and Obligations may now or hereafter be otherwise
secured, whether by deed to secure debt, mortgage, security agreement, pledge,
lien, assignment or otherwise. Neither the acceptance of this Deed nor its
enforcement, shall prejudice or in any manner affect Grantee's right to realize
upon or enforce any other security now or hereafter held by Grantee, it being
agreed that Grantee shall be entitled to enforce this Deed and any other
security now or hereafter held by Grantee in such order and manner as Grantee
may determine in its absolute discretion. No remedy herein conferred upon or
reserved to Grantee is intended to be exclusive of any other remedy herein or by
law provided or permitted, but each shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute. Every power or remedy given by any of the Loan Documents
to Grantee or to which it may otherwise be entitled, may be exercised,
concurrently or independently, from time to time and as often as may be deemed
expedient by Grantee. In no event shall Grantee, in the exercise of the remedies
provided in this Deed (including, without limitation, in connection with the
assignment of Rents to Grantee, or the appointment of a receiver and the entry
of such receiver on to all or any part of the Subject Property), be deemed a
"mortgagee in possession," and Grantee shall not in any way be made liable for
any act, either of commission or omission, in connection with the exercise of
such remedies.
<PAGE>
21
30. Multiple Security. If (a) the Premises shall consist of one or
more parcels, whether or not contiguous and whether or not located in the same
county, or (b) in addition to this Deed, Grantee shall now or hereafter hold one
or more additional deeds to secure debt, mortgages, liens, deeds of trust or
other security (directly or indirectly) for the Indebtedness upon other property
in the State in which the Premises are located (whether or not such property is
owned by Grantor or by others) or (c) both the circumstances described in
clauses (a) and (b) shall be true, then to the fullest extent permitted by law,
Grantee may, at its election, commence or consolidate in a single sale or
foreclosure action all sales and foreclosure proceedings against all such
collateral securing the Indebtedness (including the Subject Property), which
action may be brought or consolidated in the courts of any county in which any
of such collateral is located. Grantor acknowledges that the right to maintain a
consolidated sale or foreclosure action is a specific inducement to Grantee to
extend the Indebtedness, and Grantor expressly and irrevocably waives any
objections to the commencement or consolidation of the sale or foreclosure
proceedings in a single action and any objections to the laying of venue or
based on the grounds of forum non conveniens which it may now or hereafter have.
Grantor further agrees that if Grantee shall be prosecuting one or more sale or
foreclosure or other proceedings against a portion of the Subject Property or
against any collateral other than the Subject Property, which collateral
directly or indirectly secures the Indebtedness, or if Grantee shall have
fulfilled the statutory requirements for a sale or shall have obtained a
judgment of foreclosure and sale or similar judgment against such collateral,
then, whether or not such sale or other proceedings are being maintained or
judgments were obtained in or outside the State in which the Premises are
located, Grantee may commence or continue sale or foreclosure proceedings and
exercise its other remedies granted in this Deed against all or any part of the
Subject Property and Grantor waives any objections to the commencement or
continuation of a sale or foreclosure pursuant to this Deed or exercise of any
other remedies hereunder based on such other proceedings or judgments, and
waives any right to seek to dismiss, stay, remove, transfer or consolidate
either any action under this Deed or such other proceedings on such basis.
Neither the commencement nor continuation of proceedings to sell the Subject
Property pursuant hereto or to foreclose this Deed nor the exercise of any other
rights hereunder nor the recovery of any judgment by Grantee in any such
proceedings shall prejudice, limit or preclude Grantee's right to commence or
continue one or more sales or foreclosure or other proceedings or obtain a
judgment against any other collateral (either in or outside the State in which
the Premises are located) which directly or indirectly secures the Indebtedness,
and Grantor expressly waives any objections to the commencement of, continuation
of, or entry of a judgment in such other sales or proceedings or exercise of any
remedies in such proceedings based upon any action or judgment connected to this
Deed, and Grantor also waives any right to seek to dismiss, stay, remove,
transfer or consolidate either such other proceedings or any action under this
Deed on such basis. It is expressly understood and agreed that to the fullest
extent permitted by law, Grantee may, at its election, cause the sale of all
collateral which is the subject of a single sale or foreclosure action at either
a single sale or at multiple sales conducted simultaneously and take such other
measures as are appropriate in order to effect the agreement of the parties to
dispose of and administer all collateral securing the Indebtedness (directly or
indirectly) in the most economical and least time-consuming manner.
31. Successors and Assigns. All covenants of Grantor contained in this
Deed are imposed solely and exclusively for the benefit of Grantee and its
successors and assigns, and no other person or entity shall have standing to
require compliance with such covenants or be deemed, under any
<PAGE>
22
circumstances, to be a beneficiary of such covenants, any or all of which may be
freely waived in whole or in part by Grantee at any time if in its sole
discretion (subject to the terms of the Credit Agreement) it deems such waiver
advisable. All such covenants of Grantor shall run with the land and bind
Grantor, the successors and assigns of Grantor (and each of them) and all
subsequent owners, encumbrancers and tenants of the Subject Property, and shall
inure to the benefit of Grantee, its successors and assigns. The word "Grantor"
shall be construed as if it read "Grantors" whenever the sense of this Deed so
requires and if there shall be more than one Grantor, the obligations of the
Grantors shall be joint and several.
32. No Waivers, etc. Any failure by Grantee to insist upon the strict
performance by Grantor of any of the terms and provisions of this Deed shall not
be deemed to be a waiver of any of the terms and provisions hereof, and Grantee,
notwithstanding any such failure, shall have the right thereafter to insist upon
the strict performance by Grantor of any and all of the terms and provisions of
this Deed to be performed by Grantor. Grantee may release, regardless of
consideration and without the necessity for any notice to or consent by the
holder of any subordinate lien on the Subject Property, any part of the security
held for the obligations secured by this Deed without, as to the remainder of
the security, in any way impairing or affecting the lien of this Deed or the
priority of such lien over any subordinate lien.
33. Governing Law, etc. This Deed shall be governed by and construed
in accordance with the laws of the State of Georgia, except that Grantor
expressly acknowledges that by its terms the Notes shall be governed and
construed in accordance with the laws of the State of New York, without regard
to principles of conflict of law, and for purposes of consistency, Grantor
agrees that in any in personam proceeding related to this Deed the rights of the
parties to this Deed shall also be governed by and construed in accordance with
the laws of the State of New York governing contracts made and to be performed
in that State, without regard to principles of conflict of law.
34. Waiver of Trial by Jury. Grantor and Grantee each hereby
irrevocably and unconditionally waive trial by jury in any action, claim, suit
or proceeding relating to this Deed and for any counterclaim brought therein.
35. Certain Definitions. Unless the context clearly indicates a
contrary intent or unless otherwise specifically provided herein, words used in
this Deed shall be used interchangeably in singular or plural form and the word
"Grantor" shall mean "each Grantor or any subsequent owner or owners of the
Subject Property or any part thereof or interest therein," the word "Grantee"
shall mean "Grantee or any subsequent holder of the Notes," the word "Notes"
shall mean "the Notes or any other evidence of indebtedness secured by this
Deed," the word "person" shall include any individual, corporation, partnership,
trust, unincorporated association, government, governmental authority, or other
entity, and the words "Subject Property" shall include any portion of the
Subject Property or interest therein. Whenever the context may require, any
pronouns used herein shall include the corresponding masculine, feminine or
neuter forms, and the singular form of nouns and pronouns shall include the
plural and vice versa. The captions in this Deed are for convenience or
reference only and in no way limit or amplify the provisions hereof.
<PAGE>
23
36. WAIVER OF GRANTOR'S RIGHTS. BY EXECUTION OF THIS DEED AND BY
INITIALING THIS ARTICLE, GRANTOR EXPRESSLY: (A) ACKNOWLEDGES THE RIGHT TO
ACCELERATE THE INDEBTEDNESS EVIDENCED BY THE NOTES AND THE POWER OF ATTORNEY
GIVEN HEREIN TO GRANTEE TO SELL THE SUBJECT PROPERTY BY NONJUDICIAL SALE UPON
DEFAULT BY GRANTOR WITHOUT ANY JUDICIAL HEARING AND WITHOUT ANY NOTICE (EXCEPT
AS OTHERWISE PROVIDED HEREIN); (B) EXCEPT TO THE EXTENT PROVIDED OTHERWISE
HEREIN, WAIVES ANY AND ALL RIGHTS WHICH GRANTOR MAY HAVE UNDER THE CONSTITUTION
OF THE UNITED STATES (INCLUDING THE FIFTH AND FOURTEENTH AMENDMENTS THEREOF),
THE VARIOUS PROVISIONS OF THE CONSTITUTIONS FOR THE SEVERAL STATES, OR BY REASON
OF ANY OTHER APPLICABLE LAW, TO NOTICE AND TO JUDICIAL HEARING PRIOR TO THE
EXERCISE BY GRANTEE OF ANY RIGHT OR REMEDY HEREIN PROVIDED TO GRANTEE; (C)
ACKNOWLEDGES THAT GRANTOR HAS READ THIS DEED AND ITS PROVISIONS HAVE BEEN
EXPLAINED FULLY TO GRANTOR AND GRANTOR HAS CONSULTED WITH COUNSEL OF GRANTOR'S
CHOICE PRIOR TO EXECUTING THIS DEED; AND (D) ACKNOWLEDGES THAT ALL WAIVERS OF
THE AFORESAID RIGHTS OF GRANTOR HAVE BEEN MADE KNOWINGLY, INTENTIONALLY AND
WILLINGLY BY GRANTOR AS PART OF A BARGAINED FOR LOAN TRANSACTION:
INITIALED BY GRANTOR:
/s/
----------------
By:_____________
<PAGE>
24
This Deed has been duly executed by Grantor on the date first above
written.
THE WILLIAM CARTER COMPANY
By: /s/
--------------------------------
Name:
[CORPORATE SEAL]
Signed, sealed and delivered
this ____ day of December, 1996,
in the presence of:
/s/
- --------------------------------
Unofficial Witness
________________________________
Notary Public
My commission expires:
[NOTARY SEAL]
<PAGE>
25
Schedule A
Description of the Premises
[Attach Legal Description of all parcels]
<PAGE>
[Lamar County, Georgia]
After recording, please return to:
Simpson Thacher & Bartlett
a partnership which includes
professional corporations
425 Lexington Avenue
New York, New York 10017
Attention: Dennis D. Kiely
DEED TO SECURE DEBT
AND SECURITY AGREEMENT
from
THE WILLIAM CARTER COMPANY, Grantor
to
THE CHASE MANHATTAN BANK, as Administrative Agent, Grantee
DATED AS OF DECEMBER 23, 1996
NOTICE: THIS INSTRUMENT CONTAINS, INTER ALIA, OBLIGATIONS WHICH MAY PROVIDE FOR
A VARIABLE RATE OF INTEREST AND/OR FUTURE AND/OR REVOLVING CREDIT ADVANCES OR
READVANCES, WHICH, WHEN MADE, SHALL HAVE THE SAME PRIORITY AS ADVANCES OR
READVANCES MADE ON THE DATE HEREOF WHETHER OR NOT (I) ANY ADVANCES OR READVANCES
WERE MADE ON THE DATE HEREOF AND (II) ANY INDEBTEDNESS IS OUTSTANDING AT THE
TIME ANY ADVANCE OR READVANCE IS MADE.
THE AGGREGATE PRINCIPAL AMOUNT OF THE NOTES AND ALL OTHER OBLIGATIONS SECURED BY
THIS MORTGAGE IS $100,000,000.
<PAGE>
[Spalding County, Georgia]
After recording, please return to:
Simpson Thacher & Bartlett
a partnership which includes
professional corporations
425 Lexington Avenue
New York, New York 10017
Attention: Dennis D. Kiely
DEED TO SECURE DEBT
AND SECURITY AGREEMENT
from
THE WILLIAM CARTER COMPANY, Grantor
to
THE CHASE MANHATTAN BANK, as Administrative Agent, Grantee
DATED AS OF DECEMBER 23, 1996
NOTICE: THIS INSTRUMENT CONTAINS, INTER ALIA, OBLIGATIONS WHICH MAY PROVIDE FOR
A VARIABLE RATE OF INTEREST AND/OR FUTURE AND/OR REVOLVING CREDIT ADVANCES OR
READVANCES, WHICH, WHEN MADE, SHALL HAVE THE SAME PRIORITY AS ADVANCES OR
READVANCES MADE ON THE DATE HEREOF WHETHER OR NOT (I) ANY ADVANCES OR READVANCES
WERE MADE ON THE DATE HEREOF AND (II) ANY INDEBTEDNESS IS OUTSTANDING AT THE
TIME ANY ADVANCE OR READVANCE IS MADE.
THE AGGREGATE PRINCIPAL AMOUNT OF THE NOTES AND ALL OTHER OBLIGATIONS SECURED BY
THIS MORTGAGE IS $100,000,000.
<PAGE>
[Troup County, Georgia]
After recording, please return to:
Simpson Thacher & Bartlett
a partnership which includes
professional corporations
425 Lexington Avenue
New York, New York 10017
Attention: Dennis D. Kiely
DEED TO SECURE DEBT
AND SECURITY AGREEMENT
from
THE WILLIAM CARTER COMPANY, Grantor
to
THE CHASE MANHATTAN BANK, as Administrative Agent, Grantee
DATED AS OF DECEMBER 23, 1996
NOTICE: THIS INSTRUMENT CONTAINS, INTER ALIA, OBLIGATIONS WHICH MAY PROVIDE FOR
A VARIABLE RATE OF INTEREST AND/OR FUTURE AND/OR REVOLVING CREDIT ADVANCES OR
READVANCES, WHICH, WHEN MADE, SHALL HAVE THE SAME PRIORITY AS ADVANCES OR
READVANCES MADE ON THE DATE HEREOF WHETHER OR NOT (I) ANY ADVANCES OR READVANCES
WERE MADE ON THE DATE HEREOF AND (II) ANY INDEBTEDNESS IS OUTSTANDING AT THE
TIME ANY ADVANCE OR READVANCE IS MADE.
THE AGGREGATE PRINCIPAL AMOUNT OF THE NOTES AND ALL OTHER OBLIGATIONS SECURED BY
THIS MORTGAGE IS $100,000,000.
<PAGE>
TRADEMARK SECURITY AGREEMENT
SECURITY AGREEMENT, dated as of October 30, 1996 made by TWCC
ACQUISITION CORP., a Massachusetts corporation (to be merged with and into The
William Carter Company, the "Company"), in favor of THE CHASE MANHATTAN BANK, a
New York banking corporation, as administrative agent (in such capacity, the
"Administrative Agent") for the several lenders (the "Lenders") from time to
time parties to the Credit Agreement (as defined below).
W I T N E S S E T H :
WHEREAS, pursuant to a Credit Agreement, dated as of the date hereof
(as amended, supplemented or otherwise modified from time to time, the "Credit
Agreement"), among the Company, the Lenders and the Administrative Agent, the
Lenders have severally agreed to make loans to, and the Issuing Lender (as
defined in the Credit Agreement) has agreed to issue and certain of the other
Lenders have agreed to participate in letters of credit for the account of, the
Company upon the terms and subject to the conditions set forth therein; and
WHEREAS, it is a condition precedent to the obligation of the Lenders
to make their respective loans to, and the obligation of the Issuing Lender to
issue and the Lenders to participate in letters of credit for the account of,
the Company under the Credit Agreement that the Company shall have executed and
delivered this Security Agreement to the Administrative Agent for the ratable
benefit of the Lenders;
NOW, THEREFORE, in consideration of the premises and to induce the
Administrative Agent and the Lenders to enter into the Credit Agreement and to
make their respective loans to, and to issue or participate in letters of credit
for the account of, the Company under the Credit Agreement, the Company hereby
agrees with the Administrative Agent, for the ratable benefit of the Lenders, as
follows:
ARTICLE I
SECURITY INTERESTS
1.1 Grant of Security Interest. (a) As collateral security for the
prompt and complete payment and performance when due (whether at the stated
maturity, by acceleration or otherwise) of the Obligations, the Company hereby
grants to the Administrative Agent for the ratable benefit of the Lenders a
continuing security interest in all of the right, title and interest of the
Company in, to and under (i) all Trademarks and Trademark Licenses, whether now
existing
<PAGE>
2
or hereafter from time to time acquired; and (ii) all Proceeds and Products
thereof (all of the above, collectively, the "Collateral").
(b) The security interest of the Administrative Agent under this
Agreement extends to all Collateral of the kind which is the subject of
this Agreement which the Company may acquire at any time during the
continuation of this Agreement.
ARTICLE II
SPECIAL PROVISIONS CONCERNING TRADEMARKS
2.1 Rights of Administrative Agent and Lenders; Limitations on
Administrative Agent's and Lenders' Obligations. (a) Company Remains Liable
under Trademark Licenses. Anything herein to the contrary notwithstanding, the
Company shall remain liable under each of the Trademark Licenses to observe and
perform all the material conditions and obligations to be observed and performed
by it thereunder, all in accordance with the terms of any agreement giving rise
to each such Trademark License. Neither the Administrative Agent nor any Lender
shall have any obligation or liability under any Trademark License by reason of
or arising out of this Security Agreement or the receipt by the Administrative
Agent or any Lender of any payment relating to such Trademark License pursuant
hereto, nor shall the Administrative Agent or any Lender be obligated in any
manner to perform any of the obligations of the Company under or pursuant to any
Trademark License, to make any payment, to make any inquiry as to the nature or
the sufficiency of any payment received by it or as to the sufficiency of any
performance by any party under any Trademark License, to present or file any
claim, to take any action to enforce any performance or to collect the payment
of any amounts which may have been assigned to it or to which it may be entitled
at any time or times.
(b) Notice to Contracting Parties. At any time after an Event of
Default has occurred and so long as such Event of Default shall be
continuing, upon the request of the Administrative Agent the Company shall,
and the Administrative Agent may (with concurrent notice to the Company
thereof), notify parties to the Trademark Licenses that the Trademark
Licenses have been assigned to the Administrative Agent for the ratable
benefit of the Lenders and that payments in respect thereof shall be made
directly to the Administrative Agent. At any time after an Event of Default
shall have occurred and be continuing, the Administrative Agent may in its
own name or in the name of others communicate with parties to the Trademark
Licenses to verify with them to its satisfaction the existence, amount and
terms thereof.
2.2 Representations and Warranties. The Company hereby represents and
warrants that: (i) Schedule I hereto includes all material Trademarks and
Trademark Licenses owned by the Company in its own name as of the date hereof;
(ii) to the best of the Company's knowledge, except as set forth on Schedule I,
each Trademark is valid, subsisting, unexpired and enforceable and has not been
abandoned; (iii) except as set forth in Schedule I, none of such
<PAGE>
3
Trademarks is the subject of any licensing or franchise agreement; (iv) all
licenses of the Company's Trademarks are in force and, to the best knowledge of
the Company, not in default; (v) no holding, decision or judgment has been
rendered by any Governmental Authority with respect to any Trademark which would
limit, cancel or question the validity of any Trademark; (vi) except as set
forth on Schedule I, no action or proceeding is pending or, to the knowledgeof
the Company, threatened (x) seeking to limit, cancel or question the validity of
any material Trademark or the Company's ownership thereof, or (y) which, if
adversely determined, would have a material adverse effect on the value of any
material Trademark.
2.3 Covenants. The Company covenants and agrees with the
Administrative Agent and the Lenders that, from and after the date of this
Security Agreement until the Obligations are paid in full, the Commitments are
terminated and either no Letters of Credit are outstanding or each outstanding
Letter of Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent (i) the Company (either itself or
through licensees) will, except with respect to any Trademark that the Company
shall reasonably determine is of immaterial economic value to it or otherwise
reasonably determines not to do so, (A) continue to use each Trademark on each
and every trademark class of goods applicable to its current line as reflected
in its current catalogs, brochures and price lists in order to maintain such
Trademark in full force free from any claim of abandonment for non-use, (B)
maintain as in the past the quality of products and services offered under such
Trademark, (C) use reasonable efforts to employ such Trademark with the
appropriate notice of registration, (D) not adopt or use any mark which is
confusingly similar or a colorable imitation of such Trademark unless within 45
days after such use or adoption the Administrative Agent, for the ratable
benefit of the Lenders, shall obtain a perfected security interest in such mark
pursuant to this Security Agreement, and (E) not (and not permit any licensee or
sublicensee thereof to) do any act or knowingly omit to do any act whereby any
Trademark may become invalidated.
(b) The Company will notify the Administrative Agent and the Lenders
immediately if it knows, or has reason to know, that any application or
registration relating to any Trademark may become abandoned or dedicated,
or of any adverse determination or material development (including, without
limitation, the institution of, or any such determination or development
in, any proceeding in the United States Patent and Trademark Office or any
court or tribunal in any country) regarding the Company's ownership of any
Trademark or its right to register the same or to keep and maintain the
same.
(c) Whenever the Company, either by itself or through any agent,
employee, licensee or designee, shall file for the registration of any
Trademark with the United States Patent and Trademark Office or any similar
office or agency in any other country or any political subdivision thereof,
the Company shall report such filing to the Administrative Agent and the
Lenders within five Business Days after the last day of the fiscal quarter
in which such filing occurs. Upon request of the Administrative Agent, the
Company shall execute and deliver any and all agreements, instruments,
documents, and papers as the Administrative Agent may request to evidence
the Administrative Agent's and the Lenders'
<PAGE>
4
security interest in any Trademark and the goodwill and general intangibles
of the Company relating thereto or represented thereby, and the Company
hereby appoints and constitutes the Administrative Agent its
attorney-in-fact to execute and file all such writings for the foregoing
purposes, all acts of such attorney being hereby ratified and confirmed;
such power being coupled with an interest and is irrevocable until the
Obligations are paid in full, the Commitments are terminated and no Letters
of Credit are outstanding.
(d) The Company, except with respect to any Trademark the Company
shall reasonably determine is of immaterial economic value to it or it
otherwise reasonably determines not to so do and except with respect to any
Trademark that is not registrable, will take all reasonable and necessary
steps, including, without limitation, in any proceeding before the United
States Patent and Trademark Office, or any similar office or agency in any
other country or any political subdivision thereof, to maintain and pursue
each application (and to obtain the relevant registration) and to maintain
each registration of Trademarks, including, without limitation, filing of
applications for renewal, affidavits of use and affidavits of
incontestability when appropriate.
(e) In the event that any Trademark included in the Collateral is
infringed, misappropriated or diluted by a third party, the Company shall
promptly notify the Administrative Agent and the Lenders after it learns
thereof and shall, unless the Company shall reasonably determine that such
Trademark is of immaterial economic value to the Company, which
determination the Company shall promptly report to the Administrative Agent
and the Lenders, promptly sue for infringement, misappropriation or
dilution, to seek injunctive relief where appropriate and to recover any
and all damages for such infringement, misappropriation or dilution, or
take such other actions as the Company shall reasonably deem appropriate
under the circumstances to protect such Trademark.
2.4 Administrative Agent's Appointment as Attorney-in-Fact. The
Company hereby irrevocably constitutes and appoints the Administrative Agent and
any officer or agent thereof, with full power of substitution, as its true and
lawful attorney-in-fact with full irrevocable power and authority in the place
and stead of the Company and in the name of the Company or in its own name, from
time to time after the occurrence, and during the continuation, of an Event of
Default in the Administrative Agent's discretion, for the purpose of carrying
out the terms of this Security Agreement, to take any and all appropriate action
and to execute any and all documents and instruments which may be necessary or
desirable to accomplish the purposes of this Security Agreement, and, without
limiting the generality of the foregoing, the Company hereby gives the
Administrative Agent the power and right, on behalf of the Company, without
notice to or assent by the Company, to do the following:
(a) in the name of the Company or its own name, or otherwise, to take
possession of and indorse and collect any checks, drafts, notes,
acceptances or other instruments for the payment of moneys due under any
Trademark License or with respect to any other Collateral and to file any
claim or to take any other action or proceeding in any court
<PAGE>
5
of law or equity or otherwise deemed appropriate by the Administrative
Agent for the purpose of collecting any and all such moneys due under any
Trademark License or with respect to any other Collateral whenever payable;
(b) to pay or discharge taxes and Liens levied or placed on or
threatened against the Collateral, provided that if such taxes are being
contested in good faith and by appropriate proceedings, the Administrative
Agent and the Lenders will consult with the Company before making any such
payment; and
(c) (i) to direct any party liable for any payment under any of the
Collateral to make payment of any and all moneys due or to become due
thereunder directly to the Administrative Agent or as the Administrative
Agent shall direct; (ii) to ask or demand for, collect, receive payment of
and receipt for, any and all moneys, claims and other amounts due or to
become due at any time in respect of or arising out of any Collateral;
(iii) to commence and prosecute any suits, actions or proceedings at law or
in equity in any court of competent jurisdiction to collect the Collateral
or any thereof and to enforce any other right in respect of any Collateral;
(iv) to defend any suit, action or proceeding brought against the Company
with respect to any Collateral; (v) to settle, compromise or adjust any
suit, action or proceeding described in clause (iv) above and, in
connection therewith, to give such discharges or releases as the
Administrative Agent may deem appropriate; (vi) to assign any Trademark
(along with the goodwill of the business to which any such Trademark
pertains)throughout the world for such term or terms, on such conditions,
and in such manner, as the Administrative Agent shall in its sole
discretion determine; and (vii) generally, to sell, transfer, pledge and
make any agreement with respect to or otherwise deal with any of the
Collateral as fully and completely as though the Administrative Agent were
the absolute owner thereof for all purposes, and to do, at the
Administrative Agent's option and the Company's expense, at any time, or
from time to time, all acts and things which the Administrative Agent
reasonably deems necessary to protect, preserve or realize upon the
Collateral and the Administrative Agent's and the Lenders' Liens thereon
and to effect the intent of this Security Agreement, all as fully and
effectively as the Company might do.
The Company hereby ratifies all that said attorneys shall lawfully do or cause
to be done by virtue hereof. This power of attorney is a power coupled with an
interest and shall be irrevocable.
2.5 Remedies. If an Event of Default shall occur and be continuing,
the Administrative Agent on behalf of the Lenders may exercise, in addition to
all other rights and remedies granted to them in this Security Agreement and in
any other instrument or agreement securing, evidencing or relating to the
Obligations, all rights and remedies of a secured party under the Code. Without
limiting the generality of the foregoing, the Administrative Agent, without
demand of performance or other demand, presentment, protest, advertisement or
notice of any kind (except any notice required by law referred to below) to or
upon the Company or any other Person (all and each of which demands, defenses,
advertisements and notices are hereby waived), may in such circumstances
forthwith collect, receive, appropriate and realize upon the
<PAGE>
6
Collateral, or any part thereof, and/or may forthwith sell, assign, give an
option or options to purchase, or otherwise dispose of and deliver the
Collateral or any part thereof (or contract to do any of the foregoing), in one
or more parcels at public or private sale or sales, at any exchange, broker's
board or office of the Administrative Agent or any Lender or elsewhere upon such
terms and conditions as it may deem advisable and at such prices as it may deem
best, for cash or on credit or for future delivery without assumption of any
credit risk. The Administrative Agent or any Lender shall have the right upon
any such public sale or sales, and, to the extent permitted by law, upon any
such private sale or sales, to purchase the whole or any part of the Collateral
so sold, free of any right or equity of redemption in the Company, which right
or equity is hereby waived and released. The Administrative Agent shall apply
the net proceeds of any such collection, recovery, receipt, appropriation,
realization or sale, after deducting all reasonable costs and expenses of every
kind incurred therein or incidental to the care or safekeeping of any of the
Collateral or in any way relating to the Collateral or the rights of the
Administrative Agent and the Lenders hereunder, including, without limitation,
reasonable attorneys' fees and disbursements, to the payment in whole or in part
of the Obligations, in such order as the Administrative Agent may elect subject
to subsection 4.9 of the Credit Agreement, and only after such application and
after the payment by the Administrative Agent of any other amount required by
any provision of law, including, without limitation, Section 9-504(1)(c) of the
Code, need the Administrative Agent account for the surplus, if any, to the
Company. To the extent permitted by applicable law, the Company waives all
claims, damages and demands it may acquire against the Administrative Agent or
any Lender arising out of the exercise by them of any rights hereunder, except
to the extent arising from the gross negligence or willful misconduct of the
Administrative Agent or such Lender. If any notice of a proposed sale or other
disposition of Collateral shall be required by law, such notice shall be deemed
reasonable and proper if given at least 10 days before such sale or other
disposition. The Company shall remain liable for any deficiency if the proceeds
of any sale or other disposition of the Collateral are insufficient to pay the
Obligations and the fees and disbursements of any attorneys employed by the
Administrative Agent or any Lender to collect such deficiency.
ARTICLE III
DEFINITIONS
Unless otherwise defined herein or in the preamble or recitals hereto,
terms which are defined in the Credit Agreement and used herein are so used as
so defined and the following terms shall have the following meanings:
"Code" means the Uniform Commercial Code as from time to time in
effect in the State of New York.
"Obligations" means (i) the unpaid principal amount of, and interest
on (including interest accruing on or after the filing of any petition in
bankruptcy, or the commencement of any insolvency, reorganization or like
proceeding, relating to the Company, whether
<PAGE>
7
or not a claim for such post-filing or post-petition interest is allowed),
the Loans and all other obligations and liabilities of the Company to the
Administrative Agent, the Issuing Lender or the Lenders, whether direct or
indirect, absolute or contingent, due or to become due, or now existing or
hereafter incurred, which may arise under, out of, or in connection with,
the Credit Agreement, any Letter of Credit or L/C Application, the other
Credit Documents and any other document executed and delivered or given in
connection therewith or herewith, whether on account of principal,
interest, reimbursement obligations, fees, indemnities, costs, expenses
(including, without limitation, all reasonable fees and disbursements of
counsel to the Administrative Agent, the Issuing Lender or to the Lenders
that are required to be paid by the Company pursuant to the terms of the
Credit Agreement) or otherwise, and (ii) all obligations of the Company to
any Lender or Lenders or its or their Affiliates under or in respect of any
Interest Rate Agreement.
"Proceeds" means "proceeds", as such term is defined in Section
9-306(1) of the Code and, to the extent not included in such definition,
shall include, without limitation, (a) any and all proceeds of any
insurance, indemnity, warranty, guaranty or letter of credit payable to the
Company, from time to time with respect to any of the Collateral, (b) all
payments (in any form whatsoever) paid or payable to the Company from time
to time in connection with any taking of all or any part of the Collateral
by any Governmental Authority or any Person acting under color of
Governmental Authority, (c) all judgments in favor of the Company in
respect of the Collateral and (d) all other amounts from time to time paid
or payable or received or receivable under or in connection with any of the
Collateral.
"Products" are used herein as so defined in the Code.
"Trademark License" means any agreement, written or oral, providing
for the grant by or to the Company of any right to use any Trademark,
including, without limitation, any thereof referred to in Schedule I
hereto.
"Trademarks" means (a) all trademarks, trade names, corporate names,
company names, business names, fictitious business names, trade styles,
service marks, logos and other source of business identifiers, and the
goodwill associated therewith, now existing or hereafter adopted or
acquired, all registrations and recordings thereof, and all applications in
connection therewith, whether in the United States Patent and Trademark
Office or in any similar office or agency of the United States, any state
thereof or any other country or any political subdivision thereof, or
otherwise, including, without limitation, any thereof referred to in
Schedule I hereto, and (b) all renewals thereof.
ARTICLE IV
MISCELLANEOUS
<PAGE>
8
4.1 Amendments, etc. with Respect to the Obligations. The Company
shall remain obligated hereunder, and the Collateral shall remain subject to the
Lien granted hereby notwithstanding that, without any reservation of rights
against the Company, and without notice to or further assent by the Company, any
demand for payment of any of the Obligations made by the Administrative Agent,
the Issuing Lender or any Lender may be rescinded by the Administrative Agent,
the Issuing Lender or any Lender, and any of the Obligations continued, and the
Obligations, or the liability of the Company or any other Person upon or for any
part thereof, or any collateral security or guarantee therefor or right of
offset with respect thereto, may, from time to time, in whole or in part, be
renewed, extended, amended, modified, accelerated, compromised, waived,
surrendered, or released by the Administrative Agent, the Issuing Lender or any
Lender, and the Credit Agreement, the Notes, the other Credit Documents and any
other documents executed and delivered in connection therewith may be amended,
modified, supplemented or terminated, in whole or part, as the Administrative
Agent, the Issuing Lender or any Lender may deem advisable from time to time,
and any guarantee, right of offset or other collateral security at any time held
by the Administrative Agent, the Issuing Lender or any Lender for the payment of
the Obligations may be sold, exchanged, waived, surrendered or released. None of
the Administrative Agent, the Issuing Lender or any Lender shall have any
obligation to protect, secure, perfect or insure this or any other Lien at any
time held by it as security for the Obligations or any property subject thereto.
The Company waives any and all notice of the creation, renewal, extension or
accrual of any of the Obligations and notice of or proof of reliance by the
Administrative Agent, the Issuing Lender or any Lender upon this Security
Agreement; the Obligations, and any of them, shall conclusively be deemed to
have been created, contracted or incurred in reliance upon this Security
Agreement; and all dealings between the Company and the Administrative Agent,
the Issuing Lender or any Lender, shall likewise be conclusively presumed to
have been had or consummated in reliance upon this Security Agreement. The
Company waives diligence, presentment, protest, demand for payment and notice of
default or nonpayment to or upon the Company with respect to the Obligations.
4.2 Powers Coupled with an Interest. All authorizations and agencies
herein contained with respect to the Collateral are irrevocable and powers
coupled with an interest.
4.3 Severability. Any provision of this Security Agreement which is
prohibited or unenforceable in any jurisdiction shall, as to such jurisdiction,
be ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
4.4 Section Headings. The section headings used in this Security
Agreement are for convenience of reference only and are not to affect the
construction hereof or be taken into consideration in the interpretation hereof.
4.5 No Waiver; Cumulative Remedies. Neither the Administrative Agent,
the Issuing Lender nor any Lender shall by any act (except by a written
instrument pursuant to Subsection 4.6 hereof), delay, indulgence, omission or
otherwise be deemed to have waived any
<PAGE>
9
right or remedy hereunder or to have acquiesced in any Default or Event of
Default or in any breach of any of the terms and conditions hereof. No failure
to exercise, nor any delay in exercising, on the part of the Administrative
Agent, the Issuing Lender or any Lender, any right, power or privilege hereunder
shall operate as a waiver thereof. No single or partial exercise of any right,
power or privilege hereunder shall preclude any other or further exercise
thereof or the exercise of any other right, power or privilege. A waiver by the
Administrative Agent, the Issuing Lender or any Lender of any right or remedy
hereunder on any one occasion shall not be construed as a bar to any right or
remedy which the Administrative Agent, the Issuing Lender or such Lender would
otherwise have on any future occasion. The rights and remedies herein provided
are cumulative, may be exercised singly or concurrently and are not exclusive of
any rights or remedies provided by law.
4.6 Integration; Waivers and Amendments; Successors and Assigns;
Governing Law. This Security Agreement represents the entire agreement of the
Company with respect to the subject matter hereof and there are no promises or
representations by the Administrative Agent or any Lender relative to the
subject matter hereof not reflected herein or in the other Credit Documents.
None of the terms or provisions of this Security Agreement may be waived,
amended, supplemented or otherwise modified except by a written instrument
executed by the Company and the Administrative Agent, provided that any
provision of this Security Agreement may be waived by the Administrative Agent
in a written letter or agreement executed by the Administrative Agent or by
telex or facsimile transmission from the Administrative Agent. This Security
Agreement shall be binding upon the successors and assigns of the Company and
shall inure to the benefit of the Administrative Agent and the Lenders and their
respective successors and assigns. THIS SECURITY AGREEMENT SHALL BE GOVERNED BY,
AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW
YORK.
4.7 Notices. All notices, requests and demands to or upon the Company
or the Administrative Agent or any Lender to be effective shall be in writing or
by telecopy or telex and unless otherwise expressly provided herein, shall be
deemed to have been duly given or made when delivered by hand, or, in the case
of mail, three days after deposit in the postal system, first class postage
prepaid, or, in the case of telecopy notice, when sent, or, in the case of telex
notice, when sent, answerback received, addressed to a party at the address
provided for such party in the Credit Agreement.
4.8 Counterparts. This Security Agreement may be executed by one or
more of the parties hereto on any number of separate counterparts and all of
said counterparts taken together shall be deemed to constitute one and the same
instrument.
4.9 Authority of Administrative Agent. The Company acknowledges that
the rights and responsibilities of the Administrative Agent under this Security
Agreement with respect to any action taken by the Administrative Agent or the
exercise or non-exercise by the Administrative Agent of any option, right,
request, judgment or other right or remedy provided for herein or resulting or
arising out of this Security Agreement shall, as between the
<PAGE>
10
Administrative Agent and the Lenders, be governed by the Credit Agreement and by
such other agreements with respect thereto as may exist from time to time among
them, but, as between the Administrative Agent and the Company, the
Administrative Agent shall be conclusively presumed to be acting as agent for
the Lenders with full and valid authority so to act or refrain from acting, and
the Company shall not be under any obligation, or entitlement, to make any
inquiry respecting such authority.
4.10 Releases. The Administrative Agent and the Lenders agree to
cooperate with the Company and its Subsidiaries with respect to any sale
permitted by subsection 8.5 of the Credit Agreement and promptly take such
action and execute and deliver such instruments and documents necessary to
release the Liens and security interests created hereby relating to any of the
assets or property affected by any sale permitted by subsection 8.5 of the
Credit Agreement including, without limitation, any necessary Uniform Commercial
Code amendment, termination or partial termination statement.
4.11 Termination. This Security Agreement (other than with respect to
any cash collateral securing any outstanding Letter of Credit) shall terminate
when all the Obligations have been paid in full, the Commitments are terminated
and either no Letters of Credit are outstanding or each outstanding Letter of
Credit has been cash collateralized so that it is fully secured to the
satisfaction of the Administrative Agent. Upon such termination, the
Administrative Agent shall reassign and redeliver (or cause to be reassigned and
redelivered) to the Company, or to such person or persons as the Company shall
designate, or to whomever may be lawfully entitled to receive such surplus,
against receipt, such of the Collateral (if any) (other than with respect to any
cash collateral securing any outstanding Letter of Credit) as shall not have
been sold or otherwise applied by the Administrative Agent pursuant to the terms
hereof and shall still be held by it hereunder, together with appropriate
instruments or reassignment and release. Any such reassignment and release shall
be without recourse upon or warranty by the Administrative Agent (other than a
warranty that the Administrative Agent has not assigned its rights and interests
hereunder to any Person) and at the expense of the Company.
<PAGE>
11
IN WITNESS WHEREOF, the Company and the Administrative Agent have
caused this Security Agreement to be duly executed and delivered as of the date
first above written.
TWCC ACQUISITION CORP.
By: /s/
--------------------------------
Title:
THE CHASE MANHATTAN BANK,
as Administrative Agent
By: /s/
--------------------------------
Title:
<PAGE>
Schedule I to the Trademark Security Agreement
I. Trademarks and Servicemarks (Registration or Application)
All registered trademarks, unless otherwise noted, are registered in the United
States
<TABLE>
<CAPTION>
Mark Number Date Comments
<S> <C> <C> <C>
B# SHARP and design 704,992 9/27/60 Security interest
B# SHARP and design 1,245,366 7/12/83 Security interest; CANCELLED
9/14/90
CARTER'S 74/006,465 11/16/89 Published 6/18/91; Security interest;
Pending opposition action by Carter
Footwear, Inc. filed 9/13/91
CARTER'S 74/006,457 11/16/89 ABANDONED 1/5/91
CARTER'S 74/006,465 11/16/89 Allowance filed; 8/25/92; Security
interest
CARTER'S 1,117,280 5/1/79 Security interest
CARTER'S 1,823,529 2/22/94 Security interest
CARTER'S 1,830,836 4/12/94 Security interest
CARTER'S 1,839,028 6/7/94 Security interest
CARTER'S 1,861,582 1/8/94
CARTER'S block letters 65,969 11/5/07 Renewed 11/5/87; Security interest
CARTER'S stylized letters 153,906 3/28/22 Renewed 3/28/82; Security interest
CARTER'S stylized letters 328,815 10/8/35 Renewed 8/28/95; Security interest
CARTER BABY 1,255,389 10/25/83 CANCELLED 2/28/90; Security
interest
CARTERETTE stylized letters 551,796 12/4/51 EXPIRED; Security interest
CARTER'S COMFORT YOU'VE 74/485,195 2/1/95 ABANDONED 7/20/95
GROWN TO LOVE
CARTER'S COMFORT YOU'VE 74/654,960 4/3/95 Pending
GROWN TO LOVE
CARTER'S DIFFERENT BY 74/428,169 8/24/93 ABANDONED 7/20/95
DESIGN
CARTER'S DIFFERENT BY 74/654,959 4/3/95 Pending
DESIGN
CARTER'S DIFFERENT BY 74/428,159 8/24/93 ABANDONED 7/20/95
DESIGN and design
CARTER'S DIFFERENT BY 74/654,962 4/3/95 Pending
DESIGN and design
</TABLE>
<PAGE>
2
<TABLE>
Mark Number Date Comments
<S> <C> <C> <C>
CARTER'S FOR KIDS 74/723,096 8/31/95 Pending
CARTER'S FUZZY FLEECE 75/063,631 2/26/96 Pending
CARTER'S GROWBODY and 1.819.993 2/8/94
design
CARTER'S LITTLE HEIRLOOMS 74/646,836 3/15/95 Pending
CARTER-SET 685,606 9/22/59 Renewed 9/22/79; Security interest
CARTER-SET stylized letters 572,460 3/24/53 EXPIRED; Security interest
THIS GARMENT IS CARTER-SET 572,462 3/24/53 Renewed 8/6/93; Security interest
WILL NOT SHRINK OUT OF FIT
and design
COMFORT YOU'VE GROWN TO 74/485,175 2/1/94 ABANDONED 7/20/95
LOVE
COMFORT YOU'VE GROWN TO 74/654,961 4/3/95
LOVE
Design only 74/163,278 5/3/91 ABANDONED 1/15/93; Security
interest
Design only 1,305,988 1/20/84 CANCELLED 11/4/92; Security
interest
Design only 1,813,781 12/28/93
DIAPENDA 507,250 3/1/49 EXPIRED 3/1/89; Security interest
HANDY-CUFFS stylized letters 608,901 7/12/55 Renewed 7/12/95; Security interest
HEART/TREE LOGO 74/059,944 5/17/90 ABANDONED 6/24/91; Security
interest
JAMAKINS 1,418,444 11/25/86 Security interest
JIFFON 333,749 4/7/36 Renewed 1/23/96; Security interest
NEVABIND 500,112 4/20/48 Renewed 4/20/88; Security interest
SINGING NEEDLES and design 620,434 1/31/56 Renewed 1/31/76; Renewed in 1966;
Security interest
SPANKY PANTS stylized letters 583,493 12/8/53 EXPIRED; Security interest
TODAY'S CLASSICS 1,552,944 8/22/89 Security interest
T.O.T.S. 74/555,673 8/1/94 Allowance filed 3/5/96
TRIGS 993,457 9/24/74 EXPIRED; Security interest
TYKES 1,515,444 12/6/88 Security interest
TYKES and design 1,515,445 12/6/88 Security interest
TYKES stylized letters 353,040 12/21/37 Renewed 12/21/77; Security interest
</TABLE>
<PAGE>
3
II. Trademark Licenses
A. The William Carter Company, as Licensor
Licensee Expiration Date Renewal Options
Borden Home Wallcoverings 12/31/97 No
Dolly, Inc. 12/31/96 No
Excellence Underwear 12/31/99 No
Gold, Inc. 12/31/00 Yes
Kolcraft Enterprises, Inc. 12/31/97 No
Mitzi International 12/31/96 Yes
Monogram 12/31/96 No
Mount Vernon Mills 12/31/97 Yes
Prestige Toy Corp. 12/31/00 Exercised
Samara Bros., Inc. 12/31/99 Exercised
Sara Lee 12/21/00 Yes
Stonemark, Inc. 12/31/98 Yes
B. The William Carter Company, as Licensee
Licensee Expiration Date Renewal Options
Christian Dior New York, Inc., 12/31/98 No
licensing to Carole Hochman Designs,
licensing to Lehoc, Inc., licensing
to The William Carter Company
III. Trade Names
BABY DIOR
BOYNTON FOR KIDS
CAMPBELL KIDS
CARTERS
CARTER'S
CARTER'S GROWBODY
CARTER'S NATURAL
CHRISTIAN DIOR
INNERWOOL
REMIRA
TYKES
<PAGE>
EXHIBIT 10.7
THE WILLIAM CARTER COMPANY
$100,000,000
10 3/8% SENIOR SUBORDINATED NOTES DUE 2006
PURCHASE AGREEMENT
November 20, 1996
BT SECURITIES CORPORATION
BANKERS TRUST INTERNATIONAL PLC
CHASE SECURITIES INC.
GOLDMAN, SACHS & CO.
c/o BT Securities Corporation
Bankers Trust Plaza
130 Liberty Street
New York, New York 10006
Ladies and Gentlemen:
The William Carter Company, a Massachusetts corporation (the
"COMPANY"), hereby confirms its agreement with you (the "INITIAL PURCHASERS"),
as set forth below.
1. THE NOTES. Subject to the terms and conditions herein contained,
the Company proposes to issue and sell to the Initial Purchasers $100,000,000
aggregate principal amount of its 10 3/8% Senior Subordinated Notes due 2006,
Series A (the "NOTES"). The Notes are to be issued under an indenture (the
"INDENTURE") to be dated as of November 25, 1996 by and between the Company and
State Street Bank and Trust Company, as Trustee (the "TRUSTEE").
The Notes will be offered and sold to the Initial Purchasers without
being registered under the Securities Act of 1933, as amended (the "ACT"), in
reliance on exemptions therefrom.
In connection with the sale of the Notes, the Company has prepared a
preliminary offering memorandum dated November 7, 1996 (the "PRELIMINARY
MEMORANDUM"), and a final offering memorandum dated November 20, 1996 (the
"FINAL MEMORANDUM"; the Preliminary Memorandum and the Final Memorandum each
herein being referred to as a "MEMORANDUM") setting forth or including a
description of the terms of the Notes, the terms of the offering of the Notes, a
description of the Company and any material developments relating
<PAGE>
-2-
to the Company occurring after the date of the most recent historical financial
statements included therein.
The Initial Purchasers and their direct and indirect transferees of
the Notes will be entitled to the benefits of the Exchange and Registration
Rights Agreement, substantially in the form attached hereto as EXHIBIT A (the
"REGISTRATION RIGHTS AGREEMENT"), pursuant to which the Company has agreed,
among other things, to file a registration statement (the "REGISTRATION
STATEMENT") with the Securities and Exchange Commission (the "COMMISSION")
registering the Notes or the Exchange Notes (as defined in the Registration
Rights Agreement) under the Act.
2. REPRESENTATIONS AND WARRANTIES. The Company represents and
warrants to and agrees with each of the Initial Purchasers that:
(a) Neither the Preliminary Memorandum as of the date thereof nor the
Final Memorandum nor any amendment or supplement thereto as of the date thereof
and at all times subsequent thereto up to the Closing Date (as defined in
Section 3 below) contained or contains any untrue statement of a material fact
or omitted or omits to state a material fact necessary to make the statements
therein, in the light of the circumstances under which they were made, not
misleading, except that the representations and warranties set forth in this
Section 2(a) do not apply to statements or omissions made in reliance upon and
in conformity with information relating to any of the Initial Purchasers
furnished to the Company in writing by any of the Initial Purchasers expressly
for use in the Preliminary Memorandum, the Final Memorandum or any amendment or
supplement thereto.
(b) The Company has the authorized, issued and outstanding
capitalization set forth in the Final Memorandum; all of the subsidiaries of the
Company are listed in SCHEDULE 2 attached hereto (each, a "SUBSIDIARY" and
collectively, the "SUBSIDIARIES"); all of the outstanding shares of capital
stock of the Company and the Subsidiaries have been, and as of the Closing Date
will be, duly authorized and validly issued, are fully paid and nonassessable
and were not issued in violation of any preemptive or similar rights. Except as
set forth in the Final Memorandum, all of the outstanding shares of capital
stock of the Company and of each of the Subsidiaries will be free and clear of
all liens, encumbrances, equities and claims or restrictions on transferability
(other than those imposed by the Act and the securities or "Blue Sky" laws of
certain jurisdictions) or voting; except as set forth in the Final Memorandum,
there are no (i) options, warrants or other rights to purchase, (ii) agreements
<PAGE>
-3-
or other obligations to issue or (iii) other rights to convert any obligation
into, or exchange any securities for, shares of capital stock of or ownership
interests in the Company or any of the Subsidiaries outstanding. Except for the
Subsidiaries or as disclosed in the Final Memorandum, the Company does not own,
directly or indirectly, any shares of capital stock or any other equity or
long-term debt securities or have any equity interest in any firm, partnership,
joint venture or other entity.
(c) Each of the Company and the Subsidiaries is duly incorporated,
validly existing and in good standing under the laws of its respective
jurisdiction of incorporation; each of the Company and the Subsidiaries has all
requisite corporate power and authority to own its properties and conducts its
business as now conducted and as described in the Final Memorandum, and is duly
qualified to do business as a foreign corporation in good standing in all other
jurisdictions where the ownership or leasing of its properties or the conduct of
its business requires such qualification, except where the failure to be so
qualified or to have such power or authority would not, individually or in the
aggregate, have a material adverse effect on the business, condition (financial
or otherwise), prospects or results of operations of the Company and the
Subsidiaries, taken as a whole (any such event, a "MATERIAL ADVERSE EFFECT").
(d) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Notes and the
Exchange Notes. The Notes, when issued, will be substantially in the form of
Exhibit A to the Indenture. The Notes and the Exchange Notes have each been
duly and validly authorized by the Company and, when executed by the Company and
authenticated by the Trustee in accordance with the provisions of the Indenture
and, in the case of the Notes, when delivered to and paid for by the Initial
Purchasers in accordance with the terms of this Agreement, will constitute valid
and legally binding obligations of the Company, entitled to the benefits of the
Indenture, and enforceable against the Company in accordance with their terms,
except that the enforcement thereof may be subject to (i) bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other similar
laws now or hereafter in effect relating to or affecting creditors' rights and
remedies generally, and (ii) general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity).
(e) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Indenture. The Indenture
conforms to the requirements of the Trust Indenture Act of 1939, as amended (the
"TIA"), applicable to an
<PAGE>
-4-
indenture which is qualified thereunder (assuming the due authorization,
execution and delivery of the Indenture by the Trustee provided that no
representation or warranty is made with respect to the Statement of Eligibility
of the Trustee on Form T-1). The Indenture has been duly and validly authorized
by the Company and, when executed and delivered by the Company (assuming the due
authorization, execution and delivery by the Trustee), will constitute a valid
and legally binding agreement of the Company, enforceable against the Company in
accordance with its terms, except that the enforcement thereof may be subject to
(i) bankruptcy, insolvency, reorganization, moratorium, fraudulent transfer or
other similar laws now or hereafter in effect relating to or affecting
creditors' rights and remedies generally and (ii) general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity).
(f) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under the Registration Rights
Agreement. The Registration Rights Agreement has been duly and validly
authorized by the Company and, when executed and delivered by the Company
(assuming the due authorization, execution and delivery by the Initial
Purchasers), will constitute a valid and legally binding agreement of the
Company enforceable against the Company in accordance with its terms, except
that the enforcement thereof may be subject to (i) bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws now or
hereafter in effect relating to or affecting creditors' rights and remedies
generally and (ii) general principles of equity (regardless of whether
enforcement is sought in a proceeding at law or in equity) and any rights to
indemnity or contribution thereunder may be limited by federal and state
securities laws and public policy considerations.
(g) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby. This Agreement and the
consummation by the Company of the transactions contemplated hereby have been
duly and validly authorized by the Company. This Agreement has been duly
executed and delivered by the Company.
(h) No consent, approval, authorization or order of any court or
governmental agency or body, or third party is required for the issuance and
sale by the Company of the Notes to the Initial Purchasers or the consummation
by the Company of the other transactions contemplated hereby, except such as
have been or, prior to the Closing Date, will have been obtained and such as may
be required (i) under state securities or "Blue Sky" laws in
<PAGE>
-5-
connection with the purchase and resale of the Notes by the Initial Purchasers
and (ii) by federal or state securities regulatory authorities in connection
with or pursuant to the Registration Rights Agreement. None of the Company or
the Subsidiaries is (i) in violation of its certificate of incorporation or
bylaws (or similar organizational document), (ii) in breach or violation of any
statute, judgment, decree, order, rule or regulation applicable to any of them
or any of their respective properties or assets, except for any such breach or
violation which would not, individually or in the aggregate, have a Material
Adverse Effect, or (iii) in breach of or default under (nor has any event
occurred which, with notice or passage of time or both, would constitute a
default under) or in violation of any of the terms or provisions of any
indenture, mortgage, deed of trust, loan agreement, note, lease, license,
franchise agreement, permit, certificate, contract or other agreement or
instrument to which any of them is a party or to which any of them or their
respective properties or assets is subject (collectively, "CONTRACTS"), except
for any such breach, default, violation or event which would not have,
individually or in the aggregate, a Material Adverse Effect.
(i) The execution, delivery and performance by the Company of this
Agreement, the Indenture and the Registration Rights Agreement and the
consummation by the Company of the transactions contemplated hereby and thereby
(including, without limitation, the issuance and sale of the Notes to the
Initial Purchasers) will not conflict with or constitute or result in a breach
of or a default under (or an event which with notice or passage of time or both
would constitute a default under) or violation of any of (i) the terms or
provisions of any Contract, except for any such conflict, breach, violation,
default or event which would not have, individually or in the aggregate, a
Material Adverse Effect, (ii) the certificate of incorporation or bylaws (or
similar organizational document) of the Company or any of the Subsidiaries, or
(iii) (assuming compliance with all applicable state securities or "Blue Sky"
laws and assuming the accuracy of the representations and warranties of the
Initial Purchasers in Section 8 hereof and assuming compliance with the Act with
respect to the exchange of the Notes for the Exchange Notes and the obligations
of the Company under the Registration Rights Agreement) any statute, judgment,
decree, order, rule or regulation applicable to the Company or any of the
Subsidiaries or any of their respective properties or assets, except for any
such conflict, breach or violation which would not have, individually or in the
aggregate, a Material Adverse Effect.
(j) The audited consolidated financial statements of the Company and
the Subsidiaries included in the Final Memorandum
<PAGE>
-6-
present fairly in all material respects the financial position, results of
operations and cash flows of the Company and the Subsidiaries at the dates and
for the periods to which they relate and have been prepared in accordance with
generally accepted accounting principles applied on a consistent basis, except
as otherwise stated therein. The summary and selected financial and statistical
data in the Final Memorandum present fairly in all material respects the
information shown therein and have been prepared and compiled on a basis
consistent with the audited financial statements included therein, except as
otherwise stated therein. Price Waterhouse LLP and Coopers & Lybrand LLP are
each an independent public accounting firm within the meaning of the Act and the
rules and regulations promulgated thereunder.
(k) The pro forma financial statements (including the notes thereto)
and the other pro forma financial information included in the Final Memorandum
(i) comply as to form in all material respects with the applicable requirements
of Regulation S-X promulgated under the Securities Exchange Act of 1934, as
amended (the "EXCHANGE ACT"), (ii) have been prepared in accordance with the
Commission's rules and guidelines with respect to pro forma financial
statements, and (iii) have been properly computed on the bases described
therein; the assumptions used in the preparation of the pro forma financial data
and other pro forma financial information included in the Final Memorandum are
reasonable and the adjustments used therein are appropriate to give effect to
the transactions or circumstances referred to therein.
(l) Except as disclosed in the Final Memorandum, each of the Company
and the Subsidiaries possesses all material licenses, permits, certificates,
consents, orders, approvals and other authorizations from, and has made all
declarations and filings with, all federal, state, local and other governmental
authorities, all self-regulatory organizations and all courts and other
tribunals, presently required or necessary to own or lease, as the case may be,
and to operate its respective properties and to carry on its respective
businesses as now or proposed to be conducted as set forth in the Final
Memorandum ("PERMITS"), except where the failure to obtain such Permits would
not have, individually or in the aggregate, a Material Adverse Effect; and none
of the Company or the Subsidiaries has received any notice of any proceeding
relating to revocation or modification of any such Permit, except as described
in the Final Memorandum and except where such revocation or modification would
not have, individually or in the aggregate, a Material Adverse Effect.
(m) Since the date of the most recent financial statements appearing
in the Final Memorandum, except as described
<PAGE>
-7-
in the Final Memorandum or as reflected in the pro forma financial statements
included therein, (i) none of the Company or the Subsidiaries has incurred any
liabilities or obligations, direct or contingent, or entered into or agreed to
enter into any transactions or contracts (written or oral) not in the ordinary
course of business which liabilities, obligations, transactions or contracts
would, individually or in the aggregate, be material to the business, condition
(financial or otherwise), prospects or results of operations of the Companies
and its Subsidiaries, taken as a whole, (ii) none of the Company or the
Subsidiaries has purchased any of its outstanding capital stock, nor declared,
paid or otherwise made any dividend or distribution of any kind on its capital
stock (other than with respect to any of such Subsidiaries, the purchase of, or
dividend or distribution on, capital stock owned by the Company or in connection
with the Acquisition (as defined in the Final Memorandum)) and (iii) there has
been no material change in the capital stock or long-term indebtedness of the
Company or the Subsidiaries.
(n) Each of the Company and the Subsidiaries has filed all necessary
federal, state and foreign income and franchise tax returns, except where the
failure to so file such returns would not have, individually or in the
aggregate, a Material Adverse Effect, and has paid all material taxes shown as
due thereon; and other than tax deficiencies which the Company or any Subsidiary
is contesting in good faith and for which the Company or such Subsidiary has
provided adequate reserves, there is no tax deficiency that has been asserted
against the Company or any of the Subsidiaries that would have, individually or
in the aggregate, a Material Adverse Effect.
(o) The statistical and market-related data included in the Final
Memorandum are based on or derived from sources which the Company and the
Subsidiaries believe to be reliable and accurate in all material respects.
(p) None of the Company, the Subsidiaries or any agent acting on
their behalf has taken or will take any action that might cause this Agreement
or the sale of the Notes to violate Regulation G, T, U or X of the Board of
Governors of the Federal Reserve System, in each case as in effect, or as the
same may hereafter be in effect, on the Closing Date.
(q) Each of the Company and the Subsidiaries has good and marketable
title to all real property and good title to all personal property described in
the Final Memorandum as being owned by it and good and marketable title to a
leasehold estate in the real and personal property described in the Final
Memorandum as
<PAGE>
-8-
being leased by it free and clear of all liens, charges, encumbrances or
restrictions, except as described in the Final Memorandum or to the extent the
failure to have such title or the existence of such liens, charges, encumbrances
or restrictions would not have, individually or in the aggregate, a Material
Adverse Effect. The Company and the Subsidiaries own or possess adequate
licenses or other rights to use all patents, trademarks, service marks, trade
names, copyrights and know-how necessary to conduct the businesses now or
proposed to be operated by them as described in the Final Memorandum, and none
of the Company or the Subsidiaries has received any notice of infringement of or
conflict with (or knows of any such infringement of or conflict with) asserted
rights of others with respect to any patents, trademarks, service marks, trade
names, copyrights or know-how which would reasonably be expected to have, if
such assertion of infringement or conflict were sustained, a Material Adverse
Effect.
(r) There are no legal or governmental proceedings involving or
affecting the Company or any Subsidiary or any of their respective properties or
assets which would be required to be described in a prospectus pursuant to the
Act that are not described in the Final Memorandum or which seek to restrain,
enjoin, prevent the consummation of or otherwise challenge the issuance or sale
of the Notes to be sold hereunder or the consummation of the other transactions
described in the Final Memorandum; there are no material contracts or other
documents which would be required to be described in a prospectus pursuant to
the Act that are not described in the Final Memorandum.
(s) Except as disclosed in the Final Memorandum, to the best
knowledge of the Company, there has been no storage, generation, transportation,
handling, treatment, disposal, discharge, emission, or other release of any kind
of toxic or other wastes or other hazardous substances by, due to, or caused by
the Company (or, to the best of the Company's knowledge, any other entity for
whose acts or omissions the Company is or may reasonably be expected to be
liable) upon any of the property now or, to the actual knowledge of the current
chief executive officer, chief financial officer, treasurer or secretary of the
Company, previously owned or leased by the Company (i) in violation of any
statute or any ordinance, rule, regulation, order, judgment, decree or permit or
(ii) which would, under any statute or any ordinance, rule (including rule of
common law), regulation, order, judgment, decree or permit, give rise to any
liability, except in the case of both clauses (i) and (ii) for any violation or
liability which would not have, individually or in the aggregate with all such
violations and liabilities, a Material Adverse Effect; there has been no
disposal, discharge, emission or other release of any kind
<PAGE>
-9-
onto such property or into the environment surrounding such property of any
toxic or other wastes or other hazardous substances with respect to which the
Company has knowledge, except for any such disposal, discharge, emission, or
other release of any kind which would not have, individually or in the aggregate
with all such discharges and other releases, a Material Adverse Effect.
(t) There is no strike, labor dispute, slowdown or work stoppage with
the employees of the Company or any of the Subsidiaries which is pending or, to
the knowledge of the Company or any of the Subsidiaries, threatened.
(u) Each of the Company and the Subsidiaries carries insurance in
such amounts and covering such risks in each case as is in accordance with
industry practice to protect its business and the value of its properties.
(v) None of the Company or the Subsidiaries has any material
liability for any prohibited transaction or funding deficiency or any complete
or partial withdrawal liability with respect to any pension, profit sharing or
other plan which is subject to the Employee Retirement Income Security Act of
1974, as amended ("ERISA"), to which the Company or any of the Subsidiaries
makes or ever has made a contribution and in which any employee of the Company
or of any Subsidiary is or has ever been a participant. With respect to such
plans, the Company and each Subsidiary is in compliance in all material respects
with all applicable provisions of ERISA.
(w) Each of the Company and the Subsidiaries (i) makes and keeps
accurate books and records and (ii) maintains internal accounting controls which
provide reasonable assurance that (A) transactions are executed in accordance
with management's authorization, (B) transactions are recorded as necessary to
permit preparation of its financial statements and to maintain accountability
for its assets, (C) access to its assets is permitted only in accordance with
management's authorization and (D) the reported accountability for its assets is
compared with existing assets at reasonable intervals.
(x) None of the Company or the Subsidiaries immediately after the
sale of the Notes to be sold hereunder and the application of the proceeds from
such sale (as described in the Final Memorandum under the heading "Use of
Proceeds") will be required to register as an "investment company" or "promoter"
or "principal underwriter" for an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended, and the rules and
regulations thereunder.
<PAGE>
-10-
(y) To the extent that the Final Memorandum contains descriptions of
certain provisions of the Notes, the Indenture and the Registration Rights
Agreement, such descriptions are accurate in all material respects.
(z) No holder of securities of the Company or any Subsidiary will be
entitled to have such securities registered under the registration statements
required to be filed by the Company pursuant to the Registration Rights
Agreement other than as expressly permitted thereby.
(aa) Immediately after the consummation of the transactions
contemplated by this Agreement, the fair value and present fair saleable value
of the assets of each of the Company and the Subsidiaries (each on a
consolidated basis) will exceed the sum of its stated liabilities and identified
contingent liabilities; none of the Company or the Subsidiaries (each on a
consolidated basis) is, nor will any of the Company or the Subsidiaries (each on
a consolidated basis) be, after giving effect to the execution, delivery and
performance of this Agreement, and the consummation of the transactions
contemplated hereby, (a) left with unreasonably small capital with which to
carry on its business as it is proposed to be conducted, (b) unable to pay its
debts (contingent or otherwise) as they mature or (c) otherwise insolvent.
(bb) None of the Company, the Subsidiaries or any of their respective
Affiliates (as defined in Rule 501(b) of Regulation D under the Act) has
directly, or through any agent, (i) sold, offered for sale, solicited offers to
buy or otherwise negotiated in respect of, any "security" (as defined in the
Act) which is or could be integrated with the sale of the Notes in a manner that
would require the registration under the Act of the Notes or (ii) engaged in any
form of general solicitation or general advertising (as those terms are used in
Regulation D under the Act) in connection with the offering of the Notes or in
any manner involving a public offering within the meaning of Section 4(2) of the
Act. Assuming the accuracy of the representations and warranties of the Initial
Purchasers in Section 8 hereof, it is not necessary in connection with the
offer, sale and delivery of the Notes to the Initial Purchasers in the manner
contemplated by this Agreement to register any of the Notes under the Act or to
qualify the Indenture under the TIA.
(cc) No securities of the Company or any Subsidiary are of the same
class (within the meaning of Rule 144A under the Act) as the Notes and listed on
a national securities exchange
<PAGE>
-11-
registered under Section 6 of the Exchange Act, or quoted in a U.S. automated
inter-dealer quotation system.
(dd) None of the Company or the Subsidiaries has taken, nor will any
of them take, directly or indirectly, any action designed to, or that might be
reasonably expected to, cause or result in stabilization or manipulation of the
price of the Notes.
Any certificate signed by any officer of the Company or any Subsidiary
and delivered to any Initial Purchaser or to counsel for the Initial Purchasers
shall be deemed a joint and several representation and warranty by the Company
and each of the Subsidiaries to each Initial Purchaser as to the matters covered
thereby.
3. PURCHASE, SALE AND DELIVERY OF THE NOTES. On the basis of the
representations, warranties, agreements and covenants herein contained and
subject to the terms and conditions herein set forth, the Company agrees to
issue and sell to the Initial Purchasers, and each of the Initial Purchasers,
acting severally and not jointly, agrees to purchase the Notes in the respective
amounts set forth on SCHEDULE 1 hereto from the Company at 97.0% of their
principal amount. One or more certificates in definitive form for the Notes
that the Initial Purchasers have agreed to purchase hereunder, and in such
denomination or denominations and registered in such name or names as the
Initial Purchasers request upon notice to the Company at least 36 hours prior to
the Closing Date, shall be delivered by or on behalf of the Company to the
Initial Purchasers, against payment by or on behalf of the Initial Purchasers of
the purchase price therefor by wire transfer (same day funds), net of the
overnight cost of such funds, to such account or accounts as the Company shall
specify prior to the Closing Date, or by such means as the parties hereto shall
agree prior to the Closing Date. Such delivery of and payment for the Notes
shall be made at the offices of Cahill Gordon & Reindel, 80 Pine Street, New
York, New York at 10:00 A.M., New York time, on November 25, 1996, or at such
other place, time or date as the Initial Purchasers, on the one hand, and the
Company, on the other hand, may agree upon, such time and date of delivery
against payment being herein referred to as the "CLOSING DATE." The Company
will make such certificate or certificates for the Notes available for checking
and packaging by the Initial Purchasers at the offices of BT Securities
Corporation in New York, New York, or at such other place as BT Securities
Corporation may designate, at least 24 hours prior to the Closing Date.
<PAGE>
-12-
The Company shall not be obligated to deliver any of the Notes except
upon payment for all the Notes to be purchased as provided herein.
4. OFFERING BY THE INITIAL PURCHASERS. The Initial Purchasers
propose to make an offering of the Notes at the price and upon the terms set
forth in the Final Memorandum, as soon as practicable after this Agreement is
entered into and as in the judgment of the Initial Purchasers is advisable.
5. COVENANTS OF THE COMPANY. The Company covenants and agrees with
each of the Initial Purchasers that:
(a) The Company will not amend or supplement the Final Memorandum or
any amendment or supplement thereto of which the Initial Purchasers shall not
previously have been advised and furnished a copy for a reasonable period of
time prior to the proposed amendment or supplement and as to which the Initial
Purchasers shall not have given their consent. The Company will promptly, upon
the reasonable request of the Initial Purchasers or counsel for the Initial
Purchasers, make any amendments or supplements to the Preliminary Memorandum or
the Final Memorandum that may be necessary or advisable in connection with the
resale of the Notes by the Initial Purchasers.
(b) The Company will cooperate with the Initial Purchasers in
arranging for the qualification of the Notes for offering and sale under the
securities or "Blue Sky" laws of such jurisdictions as the Initial Purchasers
may designate and will continue such qualifications in effect for as long as may
be necessary to complete the resale of the Notes; PROVIDED, HOWEVER, that in
connection therewith, the Company shall not be required to qualify as a foreign
corporation or to execute a general consent to service of process in any
jurisdiction or subject itself to taxation in excess of a nominal dollar amount
in any such jurisdiction where it is not then so subject.
(c) If, at any time prior to the completion of the distribution by
the Initial Purchasers of the Notes, any event occurs or information becomes
known as a result of which the Final Memorandum as then amended or supplemented
would include any untrue statement of a material fact, or omit to state a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, or if for any other
reason it is necessary at any time to amend or supplement the Final Memorandum
to comply with applicable law, the Company will promptly notify the Initial
Purchasers thereof and will prepare, at the expense of the Company, an amendment
or supplement
<PAGE>
-13-
to the Final Memorandum that corrects such statement or omission or effects such
compliance.
(d) The Company will, without charge, provide to the Initial
Purchasers and to counsel for the Initial Purchasers as many copies of the
Preliminary Memorandum and the Final Memorandum or any amendment or supplement
thereto as the Initial Purchasers may reasonably request.
(e) The Company will apply the net proceeds from the sale of the
Notes as set forth under "Use of Proceeds" in the Final Memorandum.
(f) For so long as any of the Notes remain outstanding, the Company
will furnish to the Initial Purchasers copies of all reports and other
communications (financial or otherwise) furnished by the Company to the Trustee
or to the holders of the Notes and, as soon as available, copies of any reports
or financial statements furnished to or filed by the Company with the Commission
or any national securities exchange on which any class of securities of the
Company may be listed.
(g) If such financial statements become available, prior to the
Closing Date, the Company will furnish to the Initial Purchasers, as soon as
they have been prepared, a copy of any unaudited interim financial statements of
the Company for any period subsequent to the period covered by the most recent
financial statements appearing in the Final Memorandum.
(h) None of the Company or any of its Affiliates will sell, offer for
sale or solicit offers to buy or otherwise negotiate in respect of any
"security" (as defined in the Act) which could be integrated with the sale of
the Notes in a manner which would require the registration under the Act of the
Notes.
(i) The Company will not, and will not permit any of the Subsidiaries
to, engage in any form of general solicitation or general advertising (as those
terms are used in Regulation D under the Act) in connection with the offering of
the Notes or in any manner involving a public offering within the meaning of
Section 4(2) of the Act.
(j) For so long as any of the Notes remain outstanding, the Company
will make available at its expense, upon request, to any holder of such Notes
and any prospective purchaser thereof the information specified in
Rule 144A(d)(4) under the Act, unless the Company is then subject to Section 13
or 15(d) of the Exchange Act.
<PAGE>
-14-
(k) The Company will use its best efforts to (i) permit the Notes to
be designated PORTAL securities in accordance with the rules and regulations
adopted by the NASD relating to trading in the Private Offerings, Resales and
Trading through Automated Linkages market (the "PORTAL MARKET") and (ii) permit
the Notes to be eligible for clearance and settlement through The Depository
Trust Company.
(l) In connection with Notes offered and sold in an offshore
transaction (as defined in Regulation S) the Company will not register any
transfer of such Notes not made in accordance with the provisions of Regulation
S and will not, except in accordance with the provisions of Regulation S, if
applicable, issue any such Notes in the form of definitive securities.
6. EXPENSES. The Company agrees to pay all costs and expenses
incident to the performance of its obligations under this Agreement, whether or
not the transactions contemplated herein are consummated or this Agreement is
terminated pursuant to Section 11 hereof, including all costs and expenses
incident to (i) the printing, word processing or other production of documents
with respect to the transactions contemplated hereby, including any costs of
printing the Preliminary Memorandum and the Final Memorandum and any amendment
or supplement thereto, and any "Blue Sky" memoranda, (ii) all arrangements
relating to the delivery to the Initial Purchasers of copies of the foregoing
documents, (iii) the fees and disbursements of the counsel, the accountants and
any other experts or advisors retained by the Company, (iv) preparation
(including printing), issuance and delivery to the Initial Purchasers of the
Notes, (v) the qualification of the Notes under state securities and "Blue Sky"
laws, including filing fees and reasonable fees and disbursements of counsel for
the Initial Purchasers relating thereto, (vi) expenses in connection with any
meetings with prospective investors in the Notes, (vii) fees and expenses of the
Trustee including fees and expenses of counsel, (viii) all expenses and listing
fees incurred in connection with the application for quotation of the Notes on
the PORTAL Market and (ix) any fees charged by investment rating agencies for
the rating of the Notes. If the sale of the Notes provided for herein is not
consummated because any condition to the obligations of the Initial Purchasers
set forth in Section 7 hereof is not satisfied or because of any failure,
refusal or inability on the part of the Company to perform all obligations and
satisfy all conditions on its part to be performed or satisfied hereunder (other
than solely by reason of a default by the Initial Purchasers of their
obligations hereunder after all conditions hereunder have been satisfied in
accordance herewith), the Company agrees to promptly reimburse the Initial
Purchasers upon demand for all out-of-pocket
<PAGE>
-15-
expenses (including reasonable fees, disbursements and charges of Cahill Gordon
& Reindel, counsel for the Initial Purchasers) that shall have been incurred by
the Initial Purchasers in connection with the proposed purchase and sale of the
Notes.
7. CONDITIONS OF THE INITIAL PURCHASERS' OBLIGATIONS. The
obligation of the Initial Purchasers to purchase and pay for the Notes shall, in
their sole discretion, be subject to the satisfaction or waiver of the following
conditions on or prior to the Closing Date:
(a) On the Closing Date, the Initial Purchasers shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchasers, of Testa Hurwitz & Thibeault, LLP, special Massachusetts counsel for
the Company, in form and substance satisfactory to counsel for the Initial
Purchasers, to the effect that:
(i) The Company is duly incorporated and is validly existing under
the laws of Massachusetts and has all requisite corporate power and
authority to own or lease its properties and to conduct its business in the
manner in which it presently is conducted. The Company is duly qualified
to do business as a foreign corporation in good standing in the
jurisdictions set forth on an annex to such opinion.
(ii) The Company has the authorized, issued and outstanding
capitalization set forth in the Final Memorandum; all of the outstanding
shares of capital stock of the Company have been duly authorized and
validly issued, and are fully paid and nonassessable and were not issued in
violation of any preemptive or similar rights; the Company's authorized
capital stock conforms to the description thereof contained in the Final
Memorandum.
(iii) The Company has all requisite corporate power and authority to
execute, deliver and perform each of its obligations under the Indenture,
the Notes, the Exchange Notes and the Registration Rights Agreement; each
of the Indenture, the Notes, the Exchange Notes and the Registration Rights
Agreement has been duly and validly authorized by the Company; the
Indenture, the Notes and the Registration Rights Agreement have been duly
executed and delivered by the Company.
(iv) The Company has all requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and to
consummate the transactions contemplated hereby; this Agreement and the
consummation by
<PAGE>
-16-
the Company of the transactions contemplated hereby have been duly and
validly authorized by the Company. This Agreement has been duly
executed and delivered by the Company.
(v) The execution, delivery and performance of this Agreement, the
Indenture and the Registration Rights Agreement and the consummation of the
transactions contemplated hereby and thereby (including, without
limitation, the issuance and sale of the Notes to the Initial Purchasers)
will not contravene or constitute or result in a breach or a default under
or violation of any of (i) the articles of organization or bylaws of the
Company, or (ii) (assuming compliance with all applicable state securities
or "Blue Sky" laws and assuming the accuracy of the representations and
warranties of the Initial Purchasers in Section 8 hereof and assuming
compliance with the Act with respect to the exchange of the Notes for the
Exchange Notes and the obligations of the Company under the Registration
Rights Agreement) any Massachusetts statute, judgment, decree, order, rule
or regulation known to such counsel to be applicable to the Company or any
of its properties or assets, except for any such conflict, breach or
violation which would not, individually or in the aggregate, have a
Material Adverse Effect.
(vi) No consent, approval, authorization or order of any Massachusetts
governmental authority is required for the issuance and sale by the Company
of the Notes to the Initial Purchasers or the consummation by the Company
of the other transactions contemplated hereby, except such as may be
required under Blue Sky laws, as to which such counsel need express no
opinion, and those which have previously been obtained.
The opinion of Testa Hurwitz & Thibeault, LLP described in this
Section may be limited to matters of Massachusetts law and shall be
rendered to the Initial Purchasers at the request of the Company and shall
so state therein.
(b) On the Closing Date, the Initial Purchasers shall have received
the opinion, dated as of the Closing Date and addressed to the Initial
Purchasers, of Gibson, Dunn & Crutcher LLP, counsel for the Company, in form and
substance satisfactory to counsel for the Initial Purchasers, to the effect
that:
(i) The Indenture conforms to the requirements for qualification
under the TIA (assuming due execution and delivery thereof by the Company
and the Trustee and provided
<PAGE>
-17-
that such counsel need express no opinion with respect to the
Statement of Eligibility of the Trustee on Form T-1); the Indenture,
when duly executed and delivered by the Company (assuming the due
authorization, execution and delivery thereof by the Trustee), will
constitute the valid and legally binding agreement of the Company,
enforceable against the Company in accordance with its terms, subject
to applicable bankruptcy, insolvency, reorganization, moratorium,
fraudulent transfer or other similar laws now or hereafter in effect
relating to or affecting creditors' rights and remedies generally and
to general principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity).
(ii) The Notes are substantially in the form of Exhibit A to the
Indenture. The Notes, when duly executed and delivered by the Company and
paid for by the Initial Purchasers in accordance with the terms of this
Agreement (assuming the due authorization, execution and delivery of the
Indenture by the Company and the Trustee and due authentication and
delivery of the Notes by the Trustee in accordance with the Indenture),
will constitute the valid and legally binding obligations of the Company,
entitled to the benefits of the Indenture, and enforceable against the
Company in accordance with their terms, subject to applicable bankruptcy,
insolvency, reorganization, moratorium, fraudulent transfer or other
similar laws now or hereafter in effect relating to or affecting creditors'
rights and remedies generally and to general principles of equity
(regardless of whether enforcement is sought in a proceeding at law or in
equity).
(iii) The Exchange Notes, when duly executed and delivered by the
Company in accordance with the terms of the Registration Rights Agreement
and the Indenture (assuming the due authorization, execution and delivery
of the Indenture by the Company and the Trustee and due authentication and
delivery of the Exchange Notes by the Trustee in accordance with the
Indenture), and when duly and validly exchanged for the Notes, and assuming
compliance with federal or state securities laws, will constitute the valid
and legally binding obligations of the Company, entitled to the benefits of
the Indenture, and enforceable against the Company in accordance with their
terms, subject to applicable bankruptcy, insolvency, reorganization,
moratorium, fraudulent transfer or other similar laws now or hereafter in
effect relating to or affecting creditors' rights and remedies generally
and to
<PAGE>
-18-
general principles of equity (regardless of whether enforcement is
sought in a proceeding at law or in equity).
(iv) The Registration Rights Agreement, when duly executed and
delivered by the Company (assuming due authorization, execution and
delivery thereof by the Initial Purchasers), will constitute the valid and
legally binding agreement of the Company, enforceable against the Company
in accordance with its terms, subject to applicable bankruptcy, insolvency,
reorganization, moratorium, fraudulent transfer or other similar laws now
or hereafter in effect relating to or affecting creditors' rights and
remedies generally and to general principles of equity (regardless of
whether enforcement is sought in a proceeding at law or in equity) and
except to the extent that indemnification or contribution provisions may be
unenforceable.
(v) Except as set forth in the Final Memorandum, no holder of
securities of the Company or any Subsidiary is entitled pursuant to any
Contract identified to such counsel in a certificate of the Company as
being a material instrument to have such securities registered under a
registration statement filed by the Company pursuant to the Registration
Rights Agreement.
(vi) The Company is not in breach or default under (nor has any event
occurred which, with notice or passage of time or both, would constitute a
default under) or in violation of any of the terms or provisions of any
Contract identified to such counsel in a certificate of the Company as
being a material instrument, except for any such breach, default, violation
or event which would not, individually or in the aggregate, have a
Material Adverse Effect.
(vii) The execution, delivery and performance by the Company of this
Agreement, the Indenture and the Registration Rights Agreement (including,
without limitation, the issuance and sale of the Notes to the Initial
Purchasers) will not conflict with or constitute or result in a breach or a
default under (or an event which with notice or passage of time or both
would constitute a default under) or violation of any of the terms or
provisions as they exist on the Closing Date of any Contract identified to
such counsel in a certificate of the Company as being a material
instrument, except for any such conflict, breach, violation, default or
event which would not, individually or in the aggregate, have a Material
Adverse Effect, or (assuming compliance with all applicable state
securities or "Blue Sky" laws and assuming the accuracy of the
<PAGE>
-19-
representations and warranties of the Initial Purchasers in Section 8
hereof and assuming compliance with the Act with respect to the
exchange of the Notes for the Exchange Notes and the obligations of
the Company under the Registration Rights Agreement and excluding
federal and state securities laws and regulations as to which such
counsel shall not express an opinion pursuant to this paragraph (vii))
any statute, judgment, decree, order, rule or regulation known to such
counsel to be applicable to the Company, except for any such conflict,
breach or violation which would not, individually or in the aggregate,
have a Material Adverse Effect.
(viii) No consent, approval, authorization or order of any governmental
authority is required for the issuance and sale by the Company of the Notes
to the Initial Purchasers or the consummation by the Company of the other
transactions contemplated hereby (assuming compliance with federal and
state securities laws in connection with or pursuant to the Registration
Rights Agreement and provided that such counsel need express no opinion in
this paragraph (viii) regarding indemnification provisions), except such as
may be required under Blue Sky laws, as to which such counsel need express
no opinion, and those which have previously been obtained.
(ix) None of the Company or the Subsidiaries is, or immediately after
the sale of the Notes to be sold hereunder and the application of the
proceeds from such sale (as described in the Final Memorandum under the
caption "Use of Proceeds") will be, required to be registered as an
"investment company" as such term is defined in the Investment Company Act
of 1940, as amended.
(x) No registration under the Act of the Notes is required in
connection with the sale of the Notes to the Initial Purchasers as
contemplated by this Agreement, the Indenture and the Final Memorandum or
in connection with the initial resale of the Notes by the Initial
Purchasers in accordance with Section 8 of this Agreement, and prior to the
commencement of the Registered Exchange Offer (as defined in the
Registration Rights Agreement) or the effectiveness of the Shelf
Registration Statement (as defined in the Registration Rights Agreement),
the Indenture is exempt from the qualification requirements of the TIA, in
each case assuming (i) (A) that the purchasers who buy such Notes in the
initial resale thereof are qualified institutional buyers as defined in
Rule 144A promulgated under the Act ("QIBs") or accredited investors as
defined in Rule 501(a)(1), (2), (3) or (7)
<PAGE>
-20-
promulgated under the Act ("Accredited Investors") or (B) that the
offer or sale of the Notes is made in an offshore transaction as
defined in Regulation S, (ii) the accuracy of the Initial Purchasers'
representations in Section 8 and those of the Company contained in
this Agreement and compliance with their respective agreements as set
forth in this Agreement and (iii) that the offering of the Notes will
be conducted solely in the manner contemplated by this Agreement, the
Indenture and the Final Memorandum.
(xi) Neither the consummation by the Company of the transactions
contemplated by this Agreement nor the sale, issuance, execution or
delivery of the Notes by the Company will result in a violation by the
Company of Regulation G, T, U or X of the Board of Governors of the Federal
Reserve System.
At the time the foregoing opinion is delivered, Gibson Dunn & Crutcher
LLP shall additionally state that it has participated in conferences with
officers and other representatives of the Company, representatives of the
independent public accountants for the Company, representatives of the Initial
Purchasers and counsel for the Initial Purchasers, at which conferences the
contents of the Final Memorandum and related matters were discussed, because the
purpose of its professional engagement was not to establish or confirm factual
matters and because the scope of its examination of the affairs of the Company
did not permit it to verify the accuracy, completeness or fairness of the
statements set forth in the Final Memorandum, it is not passing upon and does
not assume any responsibility for the accuracy, completeness or fairness of the
statements contained in the Final Memorandum (except to the extent set forth
below in clause (ii) of the following sentence), and on the basis of the
foregoing, no facts have come to its attention which lead it to believe that the
Final Memorandum, on the date thereof or at the Closing Date, contained an
untrue statement of a material fact or omitted to state a material fact
necessary to make the statements contained therein, in light of the
circumstances under which they were made, not misleading (it being understood
that such firm need express no opinion with respect to the financial statements
and related schedules and notes thereto and the other financial, statistical and
accounting data included in the Final Memorandum). The opinion of Gibson, Dunn
& Crutcher LLP shall also state that (i) to its knowledge, there are no legal or
governmental proceedings involving or affecting the Company or any of its
properties or assets which would be required to be described in a prospectus
pursuant to the Act that are not described in the Final Memorandum or which seek
to restrain, enjoin, prevent the
<PAGE>
-21-
consummation of or otherwise challenge the issuance or sale of the Notes to be
sold hereunder or the consummation of the other transactions described in the
Final Memorandum under the caption "Use of Proceeds" and (ii) to the extent that
the Final Memorandum contains descriptions of certain provisions of the
Indenture, the Notes and the Registration Rights Agreement, such descriptions
have been reviewed by it and are correct in all material respects. The opinion
of Gibson Dunn & Crutcher LLP described in this Section may be limited to
matters of New York, Federal and Delaware corporate law and shall be rendered to
the Initial Purchasers at the request of the Company and shall so state therein.
References to the Final Memorandum in this subsection (b) shall
include any amendment or supplement thereto prepared in accordance with the
provisions of this Agreement at the Closing Date. In rendering such opinion,
Gibson, Dunn & Crutcher LLP may rely as to matters of fact to the extent such
counsel deems proper, on certificates of responsible officers of the Company and
public officials which are furnished to the Initial Purchasers.
(c) On the Closing Date, the Initial Purchasers shall have received
the opinion, in form and substance satisfactory to the Initial Purchasers, dated
as of the Closing Date and addressed to the Initial Purchasers, of Cahill Gordon
& Reindel, counsel for the Initial Purchasers, with respect to certain legal
matters relating to this Agreement and such other related matters as the Initial
Purchasers may reasonably require. In rendering such opinion, Cahill Gordon &
Reindel shall have received and may rely upon such certificates and other
documents and information as it may reasonably request to pass upon such
matters.
(d) The Initial Purchasers shall have received from Price Waterhouse
LLP and Coopers & Lybrand LLP a comfort letter or letters dated the date hereof
and the Closing Date, in form and substance satisfactory to counsel for the
Initial Purchasers.
(e) The representations and warranties of the Company contained in
this Agreement shall be true and correct on and as of the date hereof and on and
as of the Closing Date as if made on and as of the Closing Date; the statements
of the Company's officers made pursuant to any certificate delivered in
accordance with the provisions hereof shall be true and correct on and as of the
date made and on and as of the Closing Date; the Company shall have performed
all covenants and agreements and satisfied all conditions on its part to be
performed or satisfied hereunder at or prior to the Closing Date; and, except as
described in the Final Memorandum (exclusive of any amendment or supplement
thereto after the date hereof), subsequent to the date of the most recent
financial
<PAGE>
-22-
statements in such Final Memorandum, there shall have been no event or
development, and no information shall have become known, that, individually or
in the aggregate, has or would be reasonably likely to have a Material Adverse
Effect.
(f) The sale of the Notes hereunder shall not be enjoined
(temporarily or permanently) on the Closing Date.
(g) Subsequent to the date of the most recent financial statements in
the Final Memorandum (exclusive of any amendment or supplement thereto after the
date hereof), none of the Company or any of the Subsidiaries shall have
sustained any loss or interference with respect to its business or properties
from fire, flood, hurricane, accident or other calamity, whether or not covered
by insurance, or from any strike, labor dispute, slow down or work stoppage or
from any legal or governmental proceeding, order or decree, which loss or
interference, individually or in the aggregate, has or would be reasonably
likely to have a Material Adverse Effect.
(h) The Initial Purchasers shall have received a certificate of the
Company, dated the Closing Date, signed on behalf of the Company by its Chairman
of the Board, President or any Senior Vice President and the Chief Financial
Officer, to the effect that:
(i) The representations and warranties of the Company contained in
this Agreement are true and correct on and as of the date hereof and on and
as of the Closing Date, and the Company has performed all covenants and
agreements and satisfied all conditions on its part to be performed or
satisfied hereunder at or prior to the Closing Date;
(ii) At the Closing Date, since the date hereof or since the date of
the most recent financial statements in the Final Memorandum (exclusive of
any amendment or supplement thereto after the date hereof), no event or
development has occurred, and no information has become known, that,
individually or in the aggregate, has or would be reasonably likely to have
a Material Adverse Effect; and
(iii) The sale of the Notes hereunder has not been enjoined
(temporarily or permanently).
(i) On the Closing Date, the Initial Purchasers shall have received
the Registration Rights Agreement executed by the Company and such agreement
shall be in full force and effect at all times from and after the Closing Date.
<PAGE>
-23-
On or before the Closing Date, the Initial Purchasers and counsel for
the Initial Purchasers shall have received such further documents, opinions,
certificates, letters and schedules or instruments relating to the business,
corporate, legal and financial affairs of the Company and the Subsidiaries as
they shall have heretofore reasonably requested from the Company.
All such documents, opinions, certificates, letters, schedules or
instruments delivered pursuant to this Agreement will comply with the provisions
hereof only if they are reasonably satisfactory in all material respects to the
Initial Purchasers and counsel for the Initial Purchasers. The Company shall
furnish to the Initial Purchasers such conformed copies of such documents,
opinions, certificates, letters, schedules and instruments in such quantities as
the Initial Purchasers shall reasonably request.
8. OFFERING OF NOTES; RESTRICTIONS ON TRANSFER. (a) Each of the
Initial Purchasers represents and warrants (as to itself only) that it is either
a QIB or an Institutional Accredited Investor. Each of the Initial Purchasers
agrees with the Company (as to itself only) that (i) it has not and will not
solicit offers for, or offer or sell, the Notes by any form of general
solicitation or general advertising (as those terms are used in Regulation D
under the Act) or in any manner involving a public offering within the meaning
of Section 4(2) of the Act; and (ii) it has and will solicit offers for the
Notes only from, and will offer the Notes only to, (A) in the case of offers
inside the United States, (x) persons whom the Initial Purchasers reasonably
believe to be QIBs or, if any such person is buying for one or more
institutional accounts for which such person is acting as fiduciary or agent,
only when the Initial Purchasers reasonably believe that each such account is a
QIB, to whom notice has been given that such sale or delivery is being made in
reliance on Rule 144A, and, in each case, in transactions under Rule 144A or
(y) a limited number of other institutional investors reasonably believed by the
Initial Purchasers to be Accredited Investors that, prior to their purchase of
the Notes, deliver to the Initial Purchasers a letter containing the
representations and agreements set forth in Annex A to the Final Memorandum and
(B) in the case of offers outside the United States, to persons other than U.S.
persons ("foreign purchasers," which term shall include dealers or other
professional fiduciaries in the United States acting on a discretionary basis
for foreign beneficial owners (other than an estate or trust)); PROVIDED,
HOWEVER, that, in the case of clause (y), in purchasing such Notes such persons
are deemed to have represented and agreed as provided under the caption
"Transfer Restrictions" contained in the Final Memorandum (or, if the Final
Memorandum is not in existence, in the most recent Memorandum).
<PAGE>
-24-
(b) Each of the Initial Purchasers represents and warrants (as to
itself only) with respect to offers and sales outside the United States that (i)
it has and will comply with all applicable laws and regulations in each
jurisdiction in which it acquires, offers, sells or delivers Notes or has in its
possession or distributes any Memorandum or any such other material, in all
cases at its own expense; (ii) the Notes have not been and will not be offered
or sold within the United States or to, or for the account or benefit of, U.S.
persons except in accordance with Regulation S under the Act or pursuant to an
exemption from the registration requirements of the Act; (iii) it has offered
the Notes and will offer and sell the Notes (A) as part of its distribution at
any time and (B) otherwise until 40 days after the later of the commencement of
the offering and the Closing Date, only in accordance with Rule 903 of
Regulation S and, accordingly, neither it nor any persons acting on its behalf
have engaged or will engage in any directed selling efforts (within the meaning
of Regulation S) with respect to the Notes, and any such persons have complied
and will comply with the offering restrictions requirement of Regulation S; and
(iv) it agrees that, at or prior to confirmation of sales of the Notes, it will
have sent to each distributor, dealer or person receiving a selling concession,
fee or other remuneration that purchases Notes from it during the restricted
period a confirmation or notice to substantially the following effect:
"The Securities covered hereby have not been registered under the
United States Securities Act of 1933 (the "Securities Act") and may
not be offered and sold within the United States or to, or for the
account or benefit of, U.S. persons (i) as part of the distribution of
the Securities at any time or (ii) otherwise until 40 days after the
later of the commencement of the offering and the closing date of the
offering, except in either case in accordance with Regulation S (or
Rule 144A if available) under the Securities Act. Terms used above
have the meaning given to them in Regulation S."
Terms used in this Section 8 and not defined in this Agreement have the meanings
given to them in Regulation S.
9. INDEMNIFICATION AND CONTRIBUTION. (a) The Company agrees to
indemnify and hold harmless the Initial Purchasers, and each person, if any, who
controls any Initial Purchaser within the meaning of Section 15 of the Act or
Section 20 of the Exchange Act, against any losses, claims, damages or
liabilities to which any Initial Purchaser or such controlling person may become
subject under the Act, the Exchange Act or otherwise, insofar as any such
<PAGE>
-25-
losses, claims, damages or liabilities (or actions in respect thereof) arise
out of or are based upon:
(i) any untrue statement or alleged untrue statement of any material
fact contained in any Memorandum or any amendment or supplement thereto or
any application or other document, or any amendment or supplement thereto,
executed by the Company or based upon written information furnished by or
on behalf of the Company filed in any jurisdiction in order to qualify the
Notes under the securities or "Blue Sky" laws thereof or filed with any
securities association or securities exchange (each an "Application"); or
(ii) the omission or alleged omission to state, in any Memorandum or
any amendment or supplement thereto or any Application, a material fact
required to be stated therein or necessary to make the statements therein
not misleading,
and will reimburse, as incurred, the Initial Purchasers and each such
controlling person for any legal or other expenses reasonably incurred by the
Initial Purchasers or such controlling person in connection with investigating,
defending against or appearing as a third-party witness in connection with any
such loss, claim, damage, liability or action; PROVIDED, HOWEVER, the Company
will not be liable in any such case to the extent that any such loss, claim,
damage, or liability arises out of or is based upon any untrue statement or
alleged untrue statement or omission or alleged omission made in any Memorandum
or any amendment or supplement thereto or any Application in reliance upon and
in conformity with written information concerning the Initial Purchasers
furnished to the Company by any of the Initial Purchasers specifically for use
therein. This indemnity agreement will be in addition to any liability that the
Company may otherwise have to the indemnified parties. The Company shall not be
liable under this Section 9 for any settlement of any claim or action effected
without its prior written consent, which shall not be unreasonably withheld; and
PROVIDED FURTHER, that with respect to any such untrue statement or omission
made in the Preliminary Memorandum, the indemnity contained in this Section 9(a)
(to the extent and only to the extent that such losses, claims, damages or
liabilities resulted from the untrue statement or omission described in (B)
below) shall not inure to the benefit of the Initial Purchaser from whom the
person asserting any such losses, claims, damages or liabilities purchased the
Securities concerned if it shall be established that both (A) a copy of the
amended or supplemented Memorandum was not sent or given to such person at or
prior to the delivery of the Notes to such person, and (B) the untrue statement
or omission in the Preliminary Memorandum was corrected in the amended or
<PAGE>
-26-
supplemented Memorandum unless, in either case, such failure to deliver the
amended or supplemented Memorandum was a result of noncompliance by the Company
with Section 5(a).
(b) The Initial Purchasers agree to indemnify and hold harmless the
Company, its directors, its officers and each person, if any, who controls the
Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act against any losses, claims, damages or liabilities to which the
Company or any such director, officer or controlling person may become subject
under the Act, the Exchange Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are based
upon (i) any untrue statement or alleged untrue statement of any material fact
contained in any Memorandum or any amendment or supplement thereto or any
Application, or (ii) the omission or the alleged omission to state therein a
material fact required to be stated in any Memorandum or any amendment or
supplement thereto or any Application, 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
concerning such Initial Purchaser, furnished to the Company by the Initial
Purchasers specifically for use therein; and subject to the limitation set forth
immediately preceding this clause, will reimburse, as incurred, any legal or
other expenses reasonably incurred by the Company or any such director, officer
or controlling person in connection with investigating or defending against or
appearing as a third party witness in connection with any such loss, claim,
damage, liability or action in respect thereof. This indemnity agreement will
be in addition to any liability that the Initial Purchasers may otherwise have
to the indemnified parties. The Initial Purchasers shall not be liable under
this Section 9 for any settlement of any claim or action effected without their
consent, which shall not be unreasonably withheld. The Company shall not,
without the prior written consent of the Initial Purchasers, effect any
settlement or compromise of any pending or threatened proceeding in respect of
which any Initial Purchaser is or could have been a party, or indemnity could
have been sought hereunder by any Initial Purchaser, unless such settlement
(A) includes an unconditional written release of the Initial Purchasers, in form
and substance reasonably satisfactory to the Initial Purchasers, from all
liability on claims that are the subject matter of such proceeding and (B) does
not include any statement as to an admission of fault, culpability or failure to
act by or on behalf of any Initial Purchaser.
<PAGE>
-27-
(c) Promptly after receipt by an indemnified party under this
Section 9 of notice of the commencement of any action for which such indemnified
party is entitled to indemnification under this Section 9, such indemnified
party will, if a claim in respect thereof is to be made against the indemnifying
party under this Section 9, notify the indemnifying party of the commencement
thereof in writing; but the omission to so notify the indemnifying party
(i) will not relieve it from any liability under paragraph (a) or (b) above
unless and to the extent such failure results in the forfeiture by the
indemnifying party of substantial rights and defenses and (ii) will not, in any
event, relieve the indemnifying party from any obligations to any indemnified
party other than the indemnification obligation provided in paragraphs (a) and
(b) above. In case any such action is brought against any indemnified party,
and it notifies the indemnifying party of the commencement thereof, the
indemnifying party will be entitled to participate therein and, to the extent
that it may wish, jointly with any other indemnifying party similarly notified,
to assume the defense thereof, with counsel reasonably satisfactory to such
indemnified party; PROVIDED, HOWEVER, that if (i) the use of counsel chosen by
the indemnifying party to represent the indemnified party would present such
counsel with a conflict of interest, (ii) the defendants in any such action
include both the indemnified party and the indemnifying party and the
indemnified party shall have been advised by counsel that there may be one or
more legal defenses available to it and/or other indemnified parties that are
different from or additional to those available to the indemnifying party, or
(iii) the indemnifying party shall not have employed counsel reasonably
satisfactory to the indemnified party to represent the indemnified party within
a reasonable time after receipt by the indemnifying party of notice of the
institution of such action, then, in each such case, the indemnifying party
shall not have the right to direct the defense of such action on behalf of such
indemnified party or parties and such indemnified party or parties shall have
the right to select separate counsel to defend such action on behalf of such
indemnified party or parties. After notice from the indemnifying party to such
indemnified party of its election so to assume the defense thereof and approval
by such indemnified party of counsel appointed to defend such action, the
indemnifying party will not be liable to such indemnified party under this
Section 9 for any legal or other expenses, other than reasonable costs of
investigation, subsequently incurred by such indemnified party in connection
with the defense thereof, unless (i) the indemnified party shall have employed
separate counsel in accordance with the proviso to the immediately preceding
sentence (it being understood, however, that in connection with such action the
indemnifying party shall not be liable for the expenses of more than one
separate counsel (in addition to local counsel) in any one
<PAGE>
-28-
action or separate but substantially similar actions in the same jurisdiction
arising out of the same general allegations or circumstances, designated by the
Initial Purchasers in the case of paragraph (a) of this Section 9 or the Company
in the case of paragraph (b) of this Section 9, representing the indemnified
parties under such paragraph (a) or paragraph (b), as the case may be, who are
parties to such action or actions) or (ii) the indemnifying party has authorized
in writing the employment of counsel for the indemnified party at the expense of
the indemnifying party. After such notice from the indemnifying party to such
indemnified party, the indemnifying party will not be liable for the costs and
expenses of any settlement of such action effected by such indemnified party
without the prior written consent of the indemnifying party (which consent shall
not be unreasonably withheld), unless such indemnified party waived in writing
its rights under this Section 9, in which case the indemnified party may effect
such a settlement without such consent.
(d) In circumstances in which the indemnity agreement provided for in
the preceding paragraphs of this Section 9 is unavailable to, or insufficient to
hold harmless, an indemnified party in respect of any losses, claims, damages or
liabilities (or actions in respect thereof), each indemnifying party, in order
to provide for just and equitable contribution, 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 (i) the relative benefits received by the indemnifying
party or parties on the one hand and the indemnified party on the other from the
offering of the Notes or (ii) if the allocation provided by the foregoing clause
(i) is not permitted by applicable law, not only such relative benefits but
also the relative fault of the indemnifying party or parties on the one hand and
the indemnified party on the other in connection with the statements or
omissions or alleged statements or omissions that resulted in such losses,
claims, damages or liabilities (or actions in respect thereof). The relative
benefits received by the Company on the one hand and any Initial Purchaser on
the other shall be deemed to be in the same proportion as the total proceeds
from the offering of the Notes (before deducting expenses) received by the
Company bear to the total discounts and commissions received by such Initial
Purchaser. The relative fault of the parties shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
relates to information supplied by the Company on the one hand, or such Initial
Purchaser on the other, the parties' relative intent, knowledge, access to
<PAGE>
-29-
information and opportunity to correct or prevent such statement or omission or
alleged statement or omission, and any other equitable considerations
appropriate in the circumstances. The Company and the Initial Purchasers agree
that it would not be equitable if the amount of such contribution were
determined by pro rata or per capita allocation or by any other method of
allocation that does not take into account the equitable considerations referred
to in the first sentence of this paragraph (d). Notwithstanding any other
provision of this paragraph (d), no Initial Purchaser shall be obligated to make
contributions hereunder that in the aggregate exceed the total discounts,
commissions and other compensation received by such Initial Purchaser under this
Agreement, less the aggregate amount of any damages that such Initial Purchaser
has otherwise been required to pay by reason of the untrue or alleged untrue
statements or the omissions or alleged omissions to state a material fact, and
no person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the Act) shall be entitled to contribution from any person who
was not guilty of such fraudulent misrepresentation. For purposes of this
paragraph (d), each person, if any, who controls an Initial Purchaser within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act shall have
the same rights to contribution as the Initial Purchasers, and each director of
the Company, each officer of the Company and each person, if any, who controls
the Company within the meaning of Section 15 of the Act or Section 20 of the
Exchange Act, shall have the same rights to contribution as the Company.
10. SURVIVAL CLAUSE. The respective representations, warranties,
agreements, covenants, indemnities and other statements of the Company, its
officers and the Initial Purchasers set forth in this Agreement or made by or on
behalf of them pursuant to this Agreement shall remain in full force and effect,
regardless of (i) any investigation made by or on behalf of the Company, any of
its officers or directors, the Initial Purchasers or any controlling person
referred to in Section 9 hereof and (ii) delivery of and payment for the Notes.
The respective agreements, covenants, indemnities and other statements set forth
in Sections 6, 9 and 15 hereof shall remain in full force and effect, regardless
of any termination or cancellation of this Agreement.
11. TERMINATION. (a) This Agreement may be terminated in the sole
discretion of the Initial Purchasers by notice to the Company given prior to the
Closing Date in the event that the Company shall have failed, refused or been
unable to perform all obligations and satisfy all conditions on its part to be
performed or satisfied hereunder at or prior thereto or, if at or prior to the
Closing Date:
<PAGE>
-30-
(i) any of the Company or the Subsidiaries shall have sustained
any loss or interference with respect to its businesses or properties
from fire, flood, hurricane, accident or other calamity, whether or
not covered by insurance, or from any strike, labor dispute, slow down
or work stoppage or any legal or governmental proceeding, which loss
or interference, in the sole judgment of the Initial Purchasers, has
had or has a Material Adverse Effect, or there shall have been, in the
sole judgment of the Initial Purchasers, any event or development
that, individually or in the aggregate, has or could be reasonably
likely to have a Material Adverse Effect (including without limitation
a change in control of the Company), except in each case as described
in the Final Memorandum (exclusive of any amendment or supplement
thereto);
(ii) trading in securities of the Company or in securities
generally on the New York Stock Exchange, American Stock Exchange or
the NASDAQ National Market shall have been suspended or minimum or
maximum prices shall have been established on any such exchange or
market;
(iii) a banking moratorium shall have been declared by New York or
United States authorities;
(iv) there shall have been (A) an outbreak or escalation of
hostilities between the United States and any foreign power, or (B) an
outbreak or escalation of any other insurrection or armed conflict
involving the United States or any other national or international
calamity or emergency, or (C) any material change in the financial
markets of the United States which, in the case of (A), (B) or (C)
above and in the sole judgment of the Initial Purchasers, makes it
impracticable or inadvisable to proceed with the offering or the
delivery of the Notes as contemplated by the Final Memorandum; or
(v) any securities of the Company shall have been downgraded or
placed on any "watch list" for possible downgrading by any nationally
recognized statistical rating organization.
(b) Termination of this Agreement pursuant to this Section 11 shall
be without liability of any party to any other party except as provided in
Section 10 hereof.
12. INFORMATION SUPPLIED BY THE INITIAL PURCHASERS. The statements
set forth in the last paragraph on each of the front cover page and the inside
front cover page and in the second and
<PAGE>
-31-
third sentences of the third paragraph under the heading "Private Placement" in
the Final Memorandum constitute the only information furnished by any of the
Initial Purchasers to the Company for the purposes of Sections 2(a) and 9
hereof.
13. NOTICES. All communications hereunder shall be in writing and,
if sent to the Initial Purchasers, shall be mailed or delivered to BT Securities
Corporation, 130 Liberty Street, New York, New York 10006, Attention: Corporate
Finance Department; if sent to the Company, shall be mailed or delivered to the
Company at 1590 Adamson Parkway, Suite 400, Morrow, Georgia, Attention: Chief
Financial Officer; with a copy to Gibson, Dunn & Crutcher LLP, 200 Park Avenue,
New York, New York 10166, Attention: Charles K. Marquis, Esq.
All such notices and communications shall be deemed to have been duly
given: when delivered by hand, if personally delivered; five business days
after being deposited in the mail, postage prepaid, if mailed; and one business
day after being timely delivered to a next-day air courier.
14. SUCCESSORS. This Agreement shall inure to the benefit of and be
binding upon the Initial Purchasers, the Company and their respective successors
and legal representatives, and nothing expressed or mentioned in this Agreement
is intended or shall be construed to give any other person any legal or
equitable right, remedy or claim under or in respect of this Agreement, or any
provisions herein contained; this Agreement and all conditions and provisions
hereof being intended to be and being for the sole and exclusive benefit of such
persons and for the benefit of no other person except that (i) the indemnities
of the Company contained in Section 9 of this Agreement shall also be for the
benefit of any person or persons who control the Initial Purchasers within the
meaning of Section 15 of the Act or Section 20 of the Exchange Act and (ii) the
indemnities of the Initial Purchasers contained in Section 9 of this Agreement
shall also be for the benefit of the directors of the Company, its officers and
any person or persons who control the Company within the meaning of Section 15
of the Act or Section 20 of the Exchange Act. No purchaser of Notes from the
Initial Purchasers will be deemed a successor because of such purchase.
15. APPLICABLE LAW. THE VALIDITY AND INTERPRETATION OF THIS
AGREEMENT, AND THE TERMS AND CONDITIONS SET FORTH HEREIN SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
CONTRACTS MADE AND TO BE PERFORMED WHOLLY THEREIN, WITHOUT GIVING EFFECT TO ANY
PROVISIONS THEREOF RELATING TO CONFLICTS OF LAW.
<PAGE>
-32-
16. COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
If the foregoing correctly sets forth our understanding, please
indicate your acceptance thereof in the space provided below for that purpose,
whereupon this letter shall constitute a binding agreement among the Company and
the Initial Purchasers.
Very truly yours,
THE WILLIAM CARTER COMPANY
By: /s/ David A. Brown
-------------------------------------
Name:
Title:
The foregoing Agreement is
hereby confirmed and accepted
as of the date first above
written.
BT SECURITIES CORPORAITON
By: /s/ Christine Barbella Foggia
------------------------------
Name:
Title:
CHASE SECURITIES INC.
By: /s/ Gerard J. Murray
------------------------------
Name:
Title:
GOLDMAN, SACHS & CO.
By: /s/ Goldman Sachs & Co.
------------------------------
Name: Christopher Turner
Title: Vice President
BANKERS TRUST INTERNATIONAL PLC
By: /s/ Stephen Robertson
------------------------------
Name:
Title:
<PAGE>
SCHEDULE 1
PRINCIPAL
AMOUNT OF
INITIAL PURCHASER NOTES
- ----------------- ---------
BT Securities Corporation. . . . . . . . . . . . . . . . . $ 39,000,000
Bankers Trust International plc. . . . . . . . . . . . . . 1,000,000
Chase Securities Inc.. . . . . . . . . . . . . . . . . . . 30,000,000
Goldman, Sachs & Co. . . . . . . . . . . . . . . . . . . . 30,000,000
------------
Total . . . . . . . . . . . . . . . . . . . . . . $100,000,000
<PAGE>
SCHEDULE 2
SUBSIDIARIES OF THE COMPANY
JURISDICTION OF
NAME INCORPORATION
Carter's de San Pedro, Inc. Delaware
Carterco, S.A. Costa Rica
Carter's de Barranca, S.A. Costa Rica
<PAGE>
Exhibit 12
<TABLE>
<CAPTION>
The William Carter Company
Schedule of Ratio of Earnings to Fixed Charges
(dollars in thousands)
Predecessor for Successor for
the period from the period from
Fiscal Year December 31, 1995 October 30, 1996
------------------------------------ through through
1992 1993 1994 1995 October 29, 1996 December 28, 1996
----- ----- ----- ----- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Income (loss) before income taxes
and extraordinary item ($9,792) $ 6,830 $12,388 $13,254 $ 1,507 $ 485
Add, Fixed charges, below 9,423 8,594 9,663 11,592 10,709 3,347
------- ------- ------- -------- ----------------- --------------
(A) Earnings, as defined ($ 369) $15,424 $22,051 $24,846 $ 12,216 $ 3,832
======= ======= ======= ======== ================= ==============
Fixed Charges:
Interest expense, including amortization
of deferred debt issuance costs $ 7,368 $ 5,957 $6,445 $7,849 $ 7,075 $ 2,631
Portion of rental expense
representing interest 2,055 2,637 3,218 3,743 3,634 716
------- ------- ------- -------- ----------------- --------------
(B) Fixed charges, as defined $ 9,423 $ 8,594 $9,663 $11,592 $ 10,709 $ 3,347
======= ======= ======= ======== ================= ==============
Ratio of Earnings to Fixed Charges (A/B)(3) -- 1.8 2.3 2.1 1.1 1.1
======= ======= ======= ======== ================= ==============
<CAPTION>
Adjusted
Pro Forma Pro Forma
Fiscal 1996(1) Fiscal 1996(2)
----------------- --------------
(unaudited)
<C> <C>
Earnings:
Income (loss) before income taxes
and extraordinary item $ (296) $ (396)
Add, Fixed charges, below 21,228 21,328
----------------- --------------
(A) Earnings, as defined $ 20,932 $ 20,932
================= ==============
Fixed Charges:
Interest expense, including amortization
of deferred debt issuance costs
Portion of rental expense $ 16,878 $ 16,978
representing interest 4,350 4,350
----------------- --------------
(B) Fixed charges, as defined $ 21,228 $ 21,328
================= ==============
Ratio of Earnings to Fixed Charges (A/B)(3) -- --
================= ==============
</TABLE>
- ---------------
(1) Assumes the Acquisition and financing, including issuance of the Old Notes,
took place on December 31, 1995.
(2) Further assumes that the exchange of the New Notes for the Old Notes took
place on December 31, 1995.
(3) Earnings were insufficient to cover fixed charges by $9,792 in fiscal 1992,
$296 for pro forma fiscal 1996 and $396 for adjusted pro forma fiscal 1996.
- --------------------------------------------------------------------------------
<PAGE>
Exhibit 16
February 21, 1997
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
Ladies and Gentlemen:
The William Carter Company
We have read the "Change in Accountants" paragraph, located on page 31 of
The William Carter Company's Form S-4 dated February 21, 1997 and are in
agreement with the statements contained therein.
Yours very truly,
/s/ Price Waterhouse LLP
<PAGE>
Exhibit 21
SUBSIDIARIES
SUBSIDIARY OUTSTANDING SHARES OWNERSHIP
1. Carter's de San Pedro, Inc., 1,500 shares of wholly owned by The
a Delaware corporation Common Stock, William Carter
doing business in the without par value Company
Dominican Republic
2. Carter's de Barranca, S.A., a 2,000 common wholly owned by The
corporation organized under shares William Carter
the laws of Costa Rica Company
3. Carterco, S.A., a 2,000 common wholly owned by The
corporation organized under shares William Carter
the laws of Costa Rica Company
4
<PAGE>
EXHIBIT 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-4 of The William Carter Company of our
report dated February 16, 1996 relating to the financial statements of The
William Carter Company, which appears in such Prospectus. We also consent to
the reference to us under the heading "Experts" in such Prospectus.
Price Waterhouse LLP
February 21, 1997
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the inclusion in this registration statement on Form S-4 (File
No. ) of our report, which includes an explanatory paragraph regarding the
October 30, 1996 change in controlling ownership, dated February 20, 1997, on
our audit of the fiscal year 1996 financial statements of The William Carter
Company. We also consent to the reference to our firm under the caption
"Experts."
Stamford, Connecticut
February 20, 1997
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM T-1
_________
STATEMENT OF ELIGIBILITY UNDER THE
TRUST INDENTURE ACT OF 1939 OF A
CORPORATION DESIGNATED TO ACT AS TRUSTEE
CHECK IF AN APPLICATION TO DETERMINE ELIGIBILITY
OF A TRUSTEE PURSUANT TO SECTION 305(B)(2) __
STATE STREET BANK AND TRUST COMPANY
(EXACT NAME OF TRUSTEE AS SPECIFIED IN ITS CHARTER)
Massachusetts 04-1867445
(JURISDICTION OF INCORPORATION OR (I.R.S. EMPLOYER
ORGANIZATION IF NOT A U.S. NATIONAL BANK) IDENTIFICATION NO.)
225 Franklin Street, Boston, Massachusetts 02110
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
John R. Towers, Esq. Senior Vice President and Corporate Secretary
225 Franklin Street, Boston, Massachusetts 02110
(617)654-3253
(NAME, ADDRESS AND TELEPHONE NUMBER OF AGENT FOR SERVICE)
_____________________
THE WILLIAM CARTER COMPANY
(EXACT NAME OF OBLIGOR AS SPECIFIED IN ITS CHARTER)
MASSACHUSETTS 13-3912935
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
1590 ADAMSON PARKWAY, SUITE 400
MORROW, GA 30260
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
____________________
10 3/8% SENIOR SUBORDINATED NOTES DUE 2006
(TITLE OF INDENTURE SECURITIES)
<PAGE>
GENERAL
ITEM 1. GENERAL INFORMATION.
FURNISH THE FOLLOWING INFORMATION AS TO THE TRUSTEE:
(A) NAME AND ADDRESS OF EACH EXAMINING OR SUPERVISORY AUTHORITY TO
WHICH IT IS SUBJECT.
Department of Banking and Insurance of The Commonwealth of
Massachusetts, 100 Cambridge Street, Boston, Massachusetts.
Board of Governors of the Federal Reserve System,
Washington, D.C., Federal Deposit Insurance Corporation,
Washington, D.C.
(B) WHETHER IT IS AUTHORIZED TO EXERCISE CORPORATE TRUST POWERS.
Trustee is authorized to exercise corporate trust powers.
ITEM 2. AFFILIATIONS WITH OBLIGOR.
IF THE OBLIGOR IS AN AFFILIATE OF THE TRUSTEE, DESCRIBE EACH SUCH
AFFILIATION.
The obligor is not an affiliate of the trustee or of its
parent, State Street Boston Corporation.
(See note on page 2.)
ITEM 3. THROUGH ITEM 15. NOT APPLICABLE.
ITEM 16. LIST OF EXHIBITS.
LIST BELOW ALL EXHIBITS FILED AS PART OF THIS STATEMENT OF
ELIGIBILITY.
1. A COPY OF THE ARTICLES OF ASSOCIATION OF THE TRUSTEE AS NOW IN
EFFECT.
A copy of the Articles of Association of the trustee, as now
in effect, is on file with the Securities and Exchange
Commission as Exhibit 1 to Amendment No. 1 to the Statement of
Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
2. A COPY OF THE CERTIFICATE OF AUTHORITY OF THE TRUSTEE TO COMMENCE
BUSINESS, IF NOT CONTAINED IN THE ARTICLES OF ASSOCIATION.
A copy of a Statement from the Commissioner of Banks of
Massachusetts that no certificate of authority for the
trustee to commence business was necessary or issued is on file with
the Securities and Exchange Commission as Exhibit 2 to Amendment No. 1
to the Statement of Eligibility and Qualification of Trustee (Form
T-1) filed with the Registration Statement of Morse Shoe, Inc. (File
No. 22-17940) and is incorporated herein by reference thereto.
3. A COPY OF THE AUTHORIZATION OF THE TRUSTEE TO EXERCISE CORPORATE
TRUST POWERS, IF SUCH AUTHORIZATION IS NOT CONTAINED IN THE DOCUMENTS
SPECIFIED IN PARAGRAPH (1) OR (2), ABOVE.
A copy of the authorization of the trustee to exercise
corporate trust powers is on file with the Securities and
Exchange Commission as Exhibit 3 to Amendment No. 1 to the Statement
of Eligibility and Qualification of Trustee (Form T-1) filed with the
Registration Statement of Morse Shoe, Inc. (File No. 22-17940) and is
incorporated herein by reference thereto.
4. A COPY OF THE EXISTING BY-LAWS OF THE TRUSTEE, OR INSTRUMENTS
CORRESPONDING THERETO.
A copy of the by-laws of the trustee, as now in effect, is
on file with the Securities and Exchange Commission as
Exhibit 4 to the Statement of Eligibility and Qualification
of Trustee (Form T-1) filed with the Registration Statement
of Eastern Edison Company (File No. 33-37823) and is
incorporated herein by reference thereto.
1
<PAGE>
5. A COPY OF EACH INDENTURE REFERRED TO IN ITEM 4. IF THE OBLIGOR IS
IN DEFAULT.
Not applicable.
6. THE CONSENTS OF UNITED STATES INSTITUTIONAL TRUSTEES REQUIRED BY
SECTION 321(B) OF THE ACT.
The consent of the trustee required by Section 321(b) of the
Act is annexed hereto as Exhibit 6 and made a part hereof.
7. A COPY OF THE LATEST REPORT OF CONDITION OF THE TRUSTEE PUBLISHED
PURSUANT TO LAW OR THE REQUIREMENTS OF ITS SUPERVISING OR EXAMINING
AUTHORITY.
A copy of the latest report of condition of the trustee
published pursuant to law or the requirements of its supervising or
examining authority is annexed hereto as Exhibit 7 and made a part
hereof.
NOTES
In answering any item of this Statement of Eligibility which relates
to matters peculiarly within the knowledge of the obligor or any underwriter for
the obligor, the trustee has relied upon information furnished to it by the
obligor and the underwriters, and the trustee disclaims responsibility for the
accuracy or completeness of such information.
The answer furnished to Item 2. of this statement will be amended, if
necessary, to reflect any facts which differ from those stated and which would
have been required to be stated if known at the date hereof.
SIGNATURE
Pursuant to the requirements of the Trust Indenture Act of 1939, as
amended, the trustee, State Street Bank and Trust Company, a corporation
organized and existing under the laws of The Commonwealth of Massachusetts, has
duly caused this statement of eligibility to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of Boston and The
Commonwealth of Massachusetts, on the 19th day of February, 1997.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Donald E. Smith
---------------------------
DONALD E. SMITH
VICE PRESIDENT
2
<PAGE>
EXHIBIT 6
CONSENT OF THE TRUSTEE
Pursuant to the requirements of Section 321(b) of the Trust Indenture Act
of 1939, as amended, in connection with the proposed issuance by The William
Carter Company. of its 10 3/8% Senior Subordinated Notes due 2006, we hereby
consent that reports of examination by Federal, State, Territorial or District
authorities may be furnished by such authorities to the Securities and Exchange
Commission upon request therefor.
STATE STREET BANK AND TRUST COMPANY
By: /s/ Donald E. Smith
----------------------------
DONALD E. SMITH
VICE PRESIDENT
DATED: FEBRUARY 19, 1997
3
<PAGE>
EXHIBIT 7
Consolidated Report of Condition of State Street Bank and Trust Company of
Boston, Massachusetts and foreign and domestic subsidiaries, a state banking
institution organized and operating under the banking laws of this commonwealth
and a member of the Federal Reserve System, at the close of business September
30, 1996, published in accordance with a call made by the Federal Reserve Bank
of this District pursuant to the provisions of the Federal Reserve Act and in
accordance with a call made by the Commissioner of Banks under General Laws,
Chapter 172, Section 22(a).
Thousands of
ASSETS Dollars
Cash and balances due from depository institutions:
Noninterest-bearing balances and currency and coin ............. 1,385,597
Interest-bearing balances ...................................... 6,205,892
Securities ......................................................... 8,693,549
Federal funds sold and securities purchased
under agreements to resell in domestic offices
of the bank and its Edge subsidiary ............................ 5,707,012
Loans and lease financing receivables:
Loans and leases, net of unearned income ....................... 4,352,939
Allowance for loan and lease losses ............................ 71,421
Loans and leases, net of unearned income and allowances ........ 4,281,518
Assets held in trading accounts .................................... 702,030
Premises and fixed assets .......................................... 364,550
Other real estate owned ............................................ 1,100
Investments in unconsolidated subsidiaries ......................... 65,775
Customers' liability to this bank on acceptances outstanding ....... 36,351
Intangible assets .................................................. 71,688
Other assets........................................................ 835,647
---------
Total assets ....................................................... 28,350,709
----------
----------
LIABILITIES
Deposits:
In domestic offices ............................................ 8,283,786
Noninterest-bearing ....................................... 6,040,773
Interest-bearing .......................................... 2,243,013
In foreign offices and Edge subsidiary ......................... 9,309,212
Noninterest-bearing ....................................... 53,213
Interest-bearing .......................................... 9,255,999
Federal funds purchased and securities sold under
agreements to repurchase in domestic offices of
the bank and of its Edge subsidiary ............................ 7,014,421
Demand notes issued to the U.S. Treasury and Trading Liabilities ... 698,705
Other borrowed money ............................................... 690,865
Bank's liability on acceptances executed and outstanding ........... 37,357
Other liabilities .................................................. 695,718
----------
Total liabilities .................................................. 26,730,064
----------
EQUITY CAPITAL
Common stock ....................................................... 29,931
Surplus ............................................................ 277,023
Undivided profits .................................................. 1,311,920
Cumulative foreign currency translation adjustments ............... 1,771
----------
Total equity capital 1,620,645
----------
Total liabilities and equity capital 28,350,709
----------
----------
4
<PAGE>
I, Rex S. Schuette, Senior Vice President and Comptroller of the above named
bank do hereby declare that this Report of Condition has been prepared in
conformance with the instructions issued by the Board of Governors of the
Federal Reserve System and is true to the best of my knowledge and belief.
Rex S. Schuette
We, the undersigned directors, attest to the correctness of this Report of
Condition and declare that it has been examined by us and to the best of our
knowledge and belief has been prepared in conformance with the instructions
issued by the Board of Governors of the Federal Reserve System and is true and
correct.
David A. Spina
Marshall N. Carter
Charles F. Kaye
5
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C> <C>
<PERIOD-TYPE> 2-MOS 10-MOS
<FISCAL-YEAR-END> DEC-28-1996 DEC-28-1996
<PERIOD-START> OCT-30-1996 DEC-31-1995
<PERIOD-END> DEC-28-1996 OCT-29-1996
<CASH> 1,961 0
<SECURITIES> 0 0
<RECEIVABLES> 21,950 0
<ALLOWANCES> 2,691 0
<INVENTORY> 76,540 0
<CURRENT-ASSETS> 118,640 0
<PP&E> 49,834 0
<DEPRECIATION> 1,613 0
<TOTAL-ASSETS> 318,709 0
<CURRENT-LIABILITIES> 47,848 0
<BONDS> 144,100 0
18,234 0
0 0
<COMMON> 0 0
<OTHER-SE> 57,488 0
<TOTAL-LIABILITY-AND-EQUITY> 318,704 0
<SALES> 51,496 266,739
<TOTAL-REVENUES> 51,496 266,739
<CGS> 31,708 170,027
<TOTAL-COSTS> 31,708 170,027
<OTHER-EXPENSES> 0 0
<LOSS-PROVISION> 0 0
<INTEREST-EXPENSE> 2,631 7,075
<INCOME-PRETAX> 485 1,507
<INCOME-TAX> 212 1,885
<INCOME-CONTINUING> 273 (378)
<DISCONTINUED> 0 0
<EXTRAORDINARY> (2,351) 0
<CHANGES> 0 0
<NET-INCOME> (2,078) (378)
<EPS-PRIMARY> 0 0
<EPS-DILUTED> 0 0
</TABLE>
