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________________________________________________________________________________
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
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(Mark One) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
X THE SECURITIES EXCHANGE ACT OF 1934
--- [FEE REQUIRED]
FOR THE FISCAL YEAR ENDED JANUARY 6, 1996
OR
--- TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM __________ TO ____________
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COMMISSION FILE NUMBER: 1-4715
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THE WARNACO GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
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DELAWARE 95-4032739
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
90 PARK AVENUE 10016
NEW YORK, NEW YORK (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (212) 661-1300
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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Class A Common Stock, par value $0.01 per share New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE
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Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment of this Form 10-K. [x]
The aggregate market value of the voting stock held by non-affiliates of
the registrant as of March 15, 1996 was approximately $1,201,722,000.
The number of shares outstanding of the registrant's Class A Common Stock
as of March 15, 1996: 51,787,312.
Documents incorporated by reference: The definitive Proxy Statement of The
Warnaco Group, Inc. relating to the 1996 Annual Meeting of Stockholders is
incorporated by reference in Part III hereof.
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PART I
ITEM 1. BUSINESS.
(A) GENERAL DEVELOPMENT OF BUSINESS.
The Warnaco Group, Inc. ('Company'), a Delaware corporation, was organized
in 1986 for the purpose of acquiring Warnaco Inc. ('Warnaco'), a publicly traded
apparel company. As a result, Warnaco became a wholly owned subsidiary of the
Company. The Company designs, manufactures and markets a broad line of women's
intimate apparel, such as bras, panties and sleepwear, and men's apparel, such
as sportswear, underwear and accessories, all of which are sold under a variety
of internationally recognized owned and licensed brand names. In March 1994, the
Company acquired the worldwide trademarks, rights and business of Calvin
Klein'r' men's underwear and licensed the Calvin Klein trademark for men's
accessories. In addition, the acquisition included the worldwide trademarks and
rights of Calvin Klein women's intimate apparel upon the expiration of an
existing license on December 31, 1994. The Company seeks to continue its growth
strategy by capitalizing on its highly recognized brand names worldwide while
broadening its channels of distribution and improving manufacturing efficiencies
and cost controls. The Company attributes the strength of its brand names to the
quality, fit and design of its products which have developed a high degree of
consumer loyalty and a high level of repeat business. The Company operates three
divisions, Intimate Apparel, Menswear and Retail Outlet Stores, which accounted
for 75%, 20% and 5%, respectively, of net revenues in fiscal 1995, with the
Intimate Apparel Division accounting for a larger percentage of the Company's
gross profit for the same period.
The Intimate Apparel Division designs, manufactures and markets moderate to
premium-priced intimate apparel for women under the Warner's'r', Olga'r', Calvin
Klein'r', Valentino Intimo'r', Scaasi'r', Van Raalte'r', White Stag'r', Fruit of
the Loom'r' and Speedo'r' brand names. In addition, the Intimate Apparel
Division designs, manufactures and markets men's underwear under the Calvin
Klein brand name. The Intimate Apparel Division is the leading marketer of
women's bras to department and specialty stores in the United States, accounting
for approximately 30% of such women's bra sales over the last three years. The
Warner's and Olga brand names, which are owned by the Company, are 122 and 55
years old, respectively.
The Intimate Apparel Division's strategy is to increase its channels of
distribution and expand its highly recognized brand names worldwide. In 1991,
the Company entered into a license agreement with Fruit of the Loom, Inc. for
the design, manufacture and marketing of moderate priced bras, daywear and other
related items to be distributed through mass merchandisers, such as Wal-Mart and
Kmart, under the Fruit of the Loom brand name and has built its market share to
nearly 7% in the mass merchandise market. This license was renewed by the
Company in 1994. The Company has a 3-year distribution agreement with Avon
Products, Inc. ('Avon') to distribute Warner's and Fruit of the Loom bras on an
exclusive basis and Scaasi sleepwear throughout the United States. In late 1994,
the Company purchased the Van Raalte trademark for $1 million and launched an
intimate apparel line through Sears stores in July 1995. In February 1996, the
Company acquired substantially all of the assets of the GJM Group of companies
('GJM'), a private label manufacturer and marketer of women's sleepwear and
lingerie.
The Menswear Division designs, manufactures, imports and markets moderate
to premium-priced men's apparel and accessories under the Chaps by Ralph
Lauren'r', Calvin Klein'r', Hathaway'r' and Catalina'r' brand names. Chaps by
Ralph Lauren has increased its net revenues by approximately 500% since 1989
from $23 million to $138.2 million in 1995 by refocusing its products to the age
25 to 50 consumer and predominantly by using natural fibers in its products. The
Menswear Division's strategy is to build on the strength of its brand names and
eliminate those businesses whose profit contribution is below the Company's
required return. Consistent with this strategy, the Company has eliminated
several under-performing brands since 1992. In 1995, the Company extended its
Chaps by Ralph Lauren license through December 31, 2004.
The Company licenses certain of its brand names throughout the world and
has been expanding the activities of its wholly owned operating subsidiaries in
Canada, Europe and Mexico. International
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operations generated $108.7 million of net revenues or 11.9% of the Company's
net revenues in fiscal 1995 compared to $94.2 million of net revenues in fiscal
1994 or 11.9% of the Company's net revenues.
The Company's business strategy with respect to its Retail Outlet Stores
Division is to provide a channel for disposing of the Company's excess and
irregular inventory, thereby limiting its exposure to off-price retailers and to
shift to more profitable intimate apparel stores to improve its margins. The
Company had 56 stores at the end of fiscal 1995 compared to 53 stores and 48
stores at the end of fiscal 1994 and fiscal 1993, respectively.
The Company's products are distributed to over 5,000 customers operating
more than 15,000 department, specialty and mass merchandising stores, including
such leading retailers in the United States as Dayton-Hudson, Federated
Department Stores, J.C. Penney, Victoria's Secret, Macy's, The May Department
Stores, Sears and Wal-Mart and such leading retailers in Canada as Eaton's and
The Hudson Bay Company. The Company's products are also distributed to such
leading European retailers as Marks & Spencer, House of Fraser, British Home
Stores, Harrods, Galeries Lafayette and Au Printemps. The Company has also
opened new channels of distribution by entering into a three-year agreement with
Avon Products, Inc. to distribute Warner's and Fruit of the Loom bras on an
exclusive basis and Scaasi sleepware throughout the United States and by joining
in a joint venture arrangement with News Corp Limited to market the Company's
products directly to consumers in Asia through the Satellite Television Asian
Region Network ('STAR').
(B) FINANCIAL INFORMATION ABOUT INDUSTRY SEGMENTS.
The Company operates within one dominant industry segment, the manufacture
and distribution of apparel. No customer accounted for 10% or more of the
Company's net revenues in any of the three years in the period ended January 6,
1996. (See Note 7 of Notes to Consolidated Financial Statements on pages F-7 to
F-22).
(C) NARRATIVE DESCRIPTION OF BUSINESS.
The Company designs, manufactures and markets a broad line of women's
intimate apparel and men's apparel and accessories sold under a variety of
internationally recognized owned and licensed brand names. The Company operates
three divisions, Intimate Apparel, Menswear and Retail Outlet Stores, which
accounted for 75%, 20% and 5%, respectively, of net revenues in fiscal 1995.
INTIMATE APPAREL
The Company's Intimate Apparel Division designs, manufactures and markets
women's intimate apparel which includes bras, panties, sleepwear and daywear.
The Company also designs and markets men's underwear. The Company's bra brands
accounted for approximately 30% of women's bra sales over the last three years
in department and specialty stores in the United States. Management considers
the Intimate Apparel Division's primary strengths to include its strong brand
recognition, product quality and design innovation, low cost production, strong
relationships with department and specialty stores and its ability to deliver
its merchandise rapidly. Building on the strength of its brand names and
reputation for quality, the Company has historically focused its intimate
apparel products on the upper moderate to premium-priced range distributed
through leading department and specialty stores. In order to expand its market
penetration in recent years the Company (i) in 1992, entered into a license
agreement with Fruit of the Loom, Inc. and began to distribute moderate priced
bras, daywear and other related items under this license through the mass
merchandise market, (ii) in late 1993, signed a 3-year distribution agreement
with Avon Products, Inc. to distribute Warner's and Fruit of the Loom bras on an
exclusive basis and Scaasi sleepwear throughout the United States, (iii) in
March 1994, acquired the worldwide trademarks, rights and businesses of Calvin
Klein men's underwear and the worldwide trademarks, rights and businesses of
Calvin Klein women's intimate apparel upon the expiration of an existing license
on December 31, 1994, (iv) in late 1994, purchased the Van Raalte trademark for
$1 million and launched an intimate apparel line through Sears stores in July
1995, (v) in June 1995, entered an agreement to manufacture and distribute
intimate apparel products under the Speedo brand
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name and (vi) in February 1996, acquired substantially all of the assets of GJM,
a private label manufacturer of women's sleepwear and lingerie.
The Intimate Apparel Division markets its lines under the following brand
names:
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BRAND NAME PRICE RANGE TYPE OF APPAREL
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Warner's........................... upper moderate to better intimate apparel
Olga............................... better intimate apparel
Valentino Intimo................... premium intimate apparel
Calvin Klein....................... better to premium intimate apparel/men's underwear
Scaasi............................. premium sleepwear
Van Raalte(1)...................... moderate intimate apparel
Fruit of the Loom.................. moderate intimate apparel
White Stag......................... moderate intimate apparel
Speedo(2).......................... better intimate apparel
</TABLE>
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(1) Shipments began in the third quarter of fiscal 1995.
(2) The Company entered an exclusive license agreement for the design and
marketing of certain intimate apparel products in June 1995; shipments began
in the fourth quarter of fiscal 1995.
The Company owns the Warner's, Olga, Calvin Klein (underwear and intimate
apparel) and Van Raalte brand names and trademarks. The Company has an exclusive
license in perpetuity for White Stag for women's sportswear and intimate
apparel. The Company licenses the other brand names under which it markets its
product lines, primarily on an exclusive basis. The Company also manufactures
intimate apparel on a private and exclusive label basis for certain leading
specialty and department stores. The Intimate Apparel Division's revenues are
primarily generated by sales of the Company's own brand names. The Warner's
brand is 122 years old and the Olga brand is 55 years old.
In August 1991, the Company entered into an exclusive license agreement
with Fruit of the Loom, Inc. for the design, manufacture and marketing of
moderate priced bras which are distributed through mass merchandisers, such as
Wal-Mart and Kmart under the Fruit of the Loom brand name. The license agreement
has since been extended to include daywear, full slips, half slips, culottes and
petticoats as well as coordinated fashion sets (bras and panties) and certain
control bottoms and sleepwear. The Company began shipping Fruit of the Loom
products in June 1992 and has built its current market share to nearly 7% in the
mass merchandise market. The agreement with Fruit of the Loom, Inc. has allowed
the Company to enter the mass merchandise market, which is growing faster than
the department and specialty store market.
In March 1994, the Company acquired the worldwide trademarks, rights and
business of Calvin Klein men's underwear and effective January 1, 1995, the
worldwide trademark and rights for Calvin Klein women's intimate apparel. The
purchase price was approximately $60.9 million and consisted of cash payments of
$33.1 million in fiscal 1994, $5.0 million in fiscal 1995 and the issuance of
1,699,492 shares of the Company's Common Stock valued at fair market value
($22.8 million) for such shares. In addition, the Company entered into an
exclusive license agreement to produce men's accessories and small leather goods
under the Calvin Klein label. The growth potential of the Calvin Klein brand is
evidenced in the Company's financial results for fiscal 1995. The Calvin Klein
brand accounted for net revenues of $159.7 million in fiscal 1995, an increase
of 162% over the $61.0 million recorded in fiscal 1994.
The Company attributes the strength of its brands to the quality, fit and
design of its intimate apparel which has developed a high degree of customer
loyalty and a high level of repeat business. The Company believes that it has
maintained its leadership position, in part, through product innovation with
accomplishments such as introducing the alphabet bra (A, B, C and D cup sizes),
the first all-stretch bra, the body stocking, the use of two-way stretch
fabrics, the cotton-lycra bra and the sports bra. The Company also introduced
the use of hangers and certain point of sale hang tags for in-store display of
bras, which was a significant change from marketing bras in boxes and enabled
women, for
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the first time, to see the product in the store. The Company's product
innovations have become standards in the industry.
Growth in the intimate apparel industry is benefiting from a shift in
consumer attitudes. Women increasingly view intimate apparel as a
fashion-oriented purchase rather than as a purchase of a basic necessity. The
shift has been driven by the expansion of intimate apparel specialty stores and
catalogs such as Victoria's Secret and an increase in space allocated to
intimate apparel by department stores. The Company believes that it is
well-positioned to benefit from increased demand for intimate apparel due to its
reputation for forward-looking design, quality, fit and fashion and to the
breadth of its product lines at a range of price points. Over the past five
years, the Company has further improved its position by obtaining the licenses
to produce intimate apparel under the Valentino Intimo and Scaasi names in the
premium end of the market, by continuing to introduce new products under the
Warner's and Olga brands in the better end of the market, by obtaining the
license from Fruit of the Loom, Inc. to produce bras, daywear and other related
items, by producing White Stag bras for the mass merchandise segment of the
market, by acquiring the Calvin Klein trademarks for premium priced women's
intimate apparel and better priced men's underwear, by purchasing the Van Raalte
trademark and introducing an intimate apparel line through Sears stores in July
1995, by entering an agreement to manufacture and distribute intimate apparel
products under the Speedo brand name and by making strategic acquisitions to
expand product lines and distribution channels such as the GJM acquisition in
February 1996. The Company has further improved its position by continuing to
strengthen its relationships with its department store, specialty store and mass
merchandise customers.
The Intimate Apparel Division's net revenues have increased at a 19.3%
compounded annual growth rate since 1991, to $689.2 million in fiscal 1995, as
the Company increased its penetration with existing accounts, expanded sales to
new customers by capitalizing on the high growth in such specialty stores as
Victoria's Secret and sales of Fruit of the Loom to mass merchandisers such as
Wal-Mart and Kmart and broadened its product lines to include men's underwear.
The Company's strong sales increase was accomplished despite the softening of
the general retail market due to poor economic conditions and the bankruptcy,
reorganization or liquidation of certain major retail store customers during
this period. The Intimate Apparel Division has reduced operating expenses as a
percentage of net revenue by narrowing its product lines, controlling selling,
administrative and general expenses and improving manufacturing efficiency. The
Company believes that it is one of the lowest-cost producers of intimate apparel
in the United States, producing approximately nine million dozen garments per
year.
The Company's bras are sold primarily in the department and specialty
stores that have been the Company's traditional customer base for intimate
apparel. In June 1992, the Company expanded into a new channel of distribution,
mass merchandisers, with its Fruit of the Loom product line, which offers a
range of styles designed to meet the needs of the consumer profile of this
market. In late 1993 the Company further expanded its channels of distribution
by signing a three-year agreement with Avon Products, Inc. to distribute
Warner's and Fruit of the Loom bras on an exclusive basis and Scaasi sleepwear
throughout the United States. The Company also sees opportunities for continued
growth in the Intimate Apparel Division for bras specifically designed for the
'full figure' market, as well as in the panties and daywear product lines.
The Intimate Apparel Division has subsidiaries in Canada and Mexico in
North America and in the United Kingdom, France, Belgium, Ireland, Spain and
Germany in Europe. International sales accounted for approximately 14.5% of the
Intimate Apparel Division's net revenues in fiscal 1995. Net revenues
attributable to the international divisions of the Intimate Apparel Division
were $84.5 million, $84.1 million and $100.0 million in fiscal years 1993, 1994
and 1995, respectively. Management's strategy is to increase its market
penetration in Europe and to open additional channels of distribution. In 1994,
the Company joined in a joint venture arrangement with News Corp Limited to
market, on an exclusive basis, the Company's products over the Satellite
Television Asian Region Network ('STAR'), serving Asia and the Middle East. The
STAR network reaches over 60 million households in 53 countries in an area that
includes two-thirds of the world's population.
Initial shipments of merchandise to STAR were made in the fourth quarter of
fiscal 1995. In addition, the Company began distributing its products directly
in Spain, Portugal and Italy in 1994, having taken back these territories from
its previous licensee. In addition to the international marketing
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of its product lines, the Company has licensed its intimate apparel brand names
to manufacturers in several other foreign countries.
The Company's intimate apparel products are manufactured principally in the
Company's facilities in North America, Central America, the Caribbean Basin,
Ireland and the United Kingdom. Over the last three years the Company has opened
five new manufacturing facilities in response to increased demand. Certain
direct and incremental plant start-up costs associated with the establishment of
new manufacturing facilities in countries where special efforts are needed to
recruit and train entire work forces are capitalized and amortized over five
years. Capitalized costs represent direct and incremental costs associated with
the new facility and include site selection and site development, worker
training costs, rent and other operating costs incurred prior to achieving full
production in the facility. This amortization, together with the initial
inefficiencies associated with the new facilities resulted in a lower gross
profit margin (gross profit as a percentage of net revenues) during the 1993 and
1994 fiscal years. The Company achieved a portion of the expected future
benefits associated with these plants in fiscal 1995 with gross profit margin
increasing 140 basis points (See Management's Discussion and Analysis of
Financial Condition and Results of Operations on pages 14 to 20). In the
Company's experience, it is approximately five years before new facilities
achieve the manufacturing efficiencies of established plants.
Although the Intimate Apparel Division generally markets its product lines
for three retail selling seasons (spring, fall and holiday), its sales and
revenues are somewhat seasonal with approximately 56% of net revenues and 59% of
operating income generated during the second half of the fiscal year.
MENSWEAR
The Menswear Division designs, manufactures, imports and markets moderate
to better-priced dress shirts and neckwear, sportswear and men's accessories.
Management considers the Menswear Division's primary strengths to include its
strong brand recognition, product quality, reputation for fashion styling,
strong relationships with department and specialty stores and its ability to
deliver merchandise rapidly.
The Menswear Division markets its lines under the following brand names:
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BRAND NAME PRICE RANGE TYPE OF APPAREL
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Hathaway............................ better dress shirts, neckwear, knit and
woven sportshirts and sweaters
Calvin Klein........................ better/premium men's underwear(a) and
accessories
Chaps by Ralph Lauren............... upper moderate dress shirts, neckwear, knit and
woven sportshirts, sweaters,
sportswear and bottoms
Catalina............................ moderate men's and women's sportswear and
dress shirts and furnishings
</TABLE>
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(a) See Intimate Apparel Division
The Hathaway brand name is owned by the Company. The Chaps by Ralph Lauren,
Catalina and Calvin Klein accessories brand names are licensed on an exclusive
basis by the Company.
The Menswear Division's strategy is to build on the strength of its brand
names, strengthen its position as a global apparel company and eliminate those
businesses whose profit contribution is below the Company's required return.
Since 1993, to improve profitability in this division, the Company (i)
discontinued its manufactured dress shirt, neckwear and accessories business
segment under the Christian Dior label (See Note 4 of Notes to Consolidated
Financial Statements on pages F-7 to F-22), (ii) sold the Puritan label in the
United States to Wal-Mart in December 1993 and (iii) did not renew its Golden
Bear by Jack Nicklaus license which expired in June 1994.
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Due to the strategic decision to discontinue approximately $100 million of
net revenues in under-performing brands, the Menswear Division's net revenues
have increased slightly from $180.8 million in fiscal year 1991 to $185.7
million in fiscal 1995. The reduction in net revenues from discontinued brands
has been offset by the tremendous success of the Chaps by Ralph Lauren brand
which has increased its net revenues by approximately 253% since fiscal 1991 to
$138.2 million in fiscal 1995.
Sportswear. In 1989, the Company began repositioning its Chaps by Ralph
Lauren product lines by changing to the use of all natural fibers and updating
its styling, which has generated significant net revenue increases as mentioned
above. The Company sold, for $7.7 million, its Puritan label in the United
States to Wal-Mart in 1993 due to the difficult price points for men's
sportswear in the mass merchandise market. During 1992 and 1994, the Company
sold or terminated its licenses for Christian Dior sportswear, neckwear, dress
shirts and accessories. In addition, the Company did not renew its Golden Bear
by Jack Nicklaus license which expired in June 1994. In 1993, the Company
entered a license agreement to design men's and women's sportswear and men's
dress shirts and furnishings bearing the Catalina trademark. Catalina brand
products are sold in the mass merchandise segment of the market. The Company
recorded approximately $2.0 million of royalty income associated with Catalina
products in fiscal 1995. The Company is in the process of expanding its line of
pants and casual bottoms under the Chaps by Ralph Lauren brand.
Accessories. The Menswear Division markets men's small leather goods, men's
jewelry and belts under the Calvin Klein brand name under a worldwide license.
The first shipments of Calvin Klein accessories were made in the third quarter
of fiscal 1995 to United States customers and accounted for approximately $3.9
million of net revenues in fiscal 1995. Management believes that one of the
strengths of its accessories lines is the high level of international consumer
recognition associated with the Calvin Klein label. The Company's strategy is to
expand the accessories business, which on a consistent basis has generated
higher margins than other menswear products.
Dress Shirts and Neckwear. The Menswear Division designs, manufactures,
imports and markets three principal lines of dress shirts: basic,
intermediate-fashion and fashion. The average full retail prices of the dress
shirts, which are marketed under the Hathaway and Chaps by Ralph Lauren brand
names, range from $20 to $45. Substantially all of the division's dress shirts
are manufactured at Company owned or leased facilities in North America and the
Caribbean Basin. The dress shirt and neckwear market has deteriorated during the
last three years due to an oversupply and a shift toward casual wear. As a
result, the Menswear Division discontinued the Christian Dior portion of its
manufactured dress shirt and neckwear business segment in 1994 in an effort to
improve the Company's profitability and operating margins.
International sales accounted for approximately 5% of net revenues of the
Menswear Division in fiscal l995. Net revenues attributable to international
divisions of the Menswear Division were $14.1 million, $10.2 million and $8.8
million in fiscal years l993, 1994 and 1995, respectively. The decrease in
international sales over the last three years reflects the Company's strategic
decision to terminate the Christian Dior licenses, as previously mentioned.
The Menswear Division's sportswear, consisting of knit shirts and sweaters
and other apparel, is sourced principally from the Far East. The Menswear
Division manufactures its dress shirts in North America and sources certain
styles of dress shirts in the Far East and in the Caribbean Basin. Accessories
are sourced in the United States, Europe and the Far East. Neckwear is sourced
primarily in the United States.
The Menswear Division, like the Intimate Apparel Division, generally
markets its apparel products for three retail selling seasons (spring, fall and
holiday). The Menswear Division introduces new styles, fabrics and colors based
upon consumer preferences and market trends and to coincide with the appropriate
retail selling season. The sales of the Menswear Division's product lines follow
individual seasonal shipping patterns ranging from one season to three seasons,
with multiple releases in some of the division's more fashion-oriented lines.
Consistent with industry and consumer buying patterns, approximately 56% of the
Menswear Division's net revenues and 59% of the Menswear Division's operating
profit are generated in the second half of the calendar year, reflecting the
strength of the fall and holiday shopping seasons.
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RETAIL OUTLET STORES DIVISION
The Retail Outlet Stores Division primarily sells the Company's products to
the general public. The Company's business strategy with respect to its retail
outlet stores is to provide a channel for disposing of the Company's excess and
irregular inventory, thereby limiting its exposure to off-price retailers. The
Company's retail outlet stores are situated in areas where they generally do not
conflict with the Company's principal channels of distribution. The Company's
newer retail outlet stores are principally intimate apparel stores located in
outlet shopping malls. The Company has found that it has improved margins by
operating retail outlet stores that sell products of only one of the Company's
divisions, and has converted most of its outlets to the exclusive sale of
intimate apparel. EBITDA for the Retail Outlet Stores Division in fiscal 1995
improved 25% over fiscal 1994 to $3.5 million. As of January 6, 1996, the
Company operated 56 stores, of which 41 carried intimate apparel only, 3 carried
menswear only and 12 carried both lines.
INTERNATIONAL OPERATIONS
The Company has subsidiaries in Canada and Mexico in North America and in
the United Kingdom, Ireland, Belgium, France, Spain and Germany in Europe which
engage in sales and marketing activities. With the exception of the fluctuation
of local currencies against the United States dollar, the Company does not
believe that the operations in Canada and Western Europe are subject to risks
which are significantly different from domestic operations. Mexico has
historically been subject to high rates of inflation and currency restrictions
which may, from time to time, impact the Mexican operation. The Company also
sells directly to customers in Mexico. Net revenues from these shipments
represent less than 1% of the Company's net revenues in fiscal 1995.
The Company maintains manufacturing facilities in Mexico, Honduras, Costa
Rica, the Dominican Republic, Canada, Ireland and the United Kingdom and
warehousing facilities in Canada, Mexico, the United Kingdom and contracts for
warehousing in Spain. The Intimate Apparel Division operates manufacturing
facilities in Mexico and in the Caribbean Basin pursuant to duty-advantaged
(commonly referred to as 'Item 807') programs. The Company's manufacturing
policy is to have many potential sources of manufacturing so that a disruption
of production at any one facility will not significantly impact the Company.
The majority of the Company's imported purchases are invoiced in United
States dollars and, therefore, are not subject to short-term currency
fluctuations.
SALES AND MARKETING
The Intimate Apparel and Menswear Divisions sell to over 5,000 customers
operating more than 15,000 department, mass merchandise and men's and women's
specialty stores throughout North America and Europe. None of the Company's
customers accounted for more than 10% of the Company's net revenues during any
of the three years in the period ended January 6, 1996.
The Company's retail customers are served by approximately 200 sales
representatives. The Company also employs marketing coordinators who work with
the Company's customers in designing in-store displays and planning the
placement of merchandise. The Company has implemented Electronic Data
Interchange (commonly referred to as 'EDI') programs with most of its retailing
customers which permit the Company to receive purchase orders electronically
from these customers and, in some cases, to transmit invoices electronically.
These innovations assist the Company in getting its products to customers on a
timely basis and at the lowest cost possible.
The Company utilizes various forms of advertising media. In fiscal l995,
the Company spent approximately $41.0 million or 4.5% of net revenues for
advertising and promotion of its various product lines. This compares to $37.2
million or 4.7% of net revenues in fiscal 1994. The statement of income for
fiscal 1995 also includes a special charge for advertising costs previously
deferable of $11.7 million ($7.3 million after giving effect to income tax
benefits of $4.4 million) related to the change in accounting for certain
advertising costs in accordance with Statement of Position 93-7 ('SOP 93-7')
issued by the American Institute of Certified Public Accountants ('AICPA') in
December 1993 for years beginning after July 1994. The increase in advertising
costs in fiscal 1995 compared to fiscal 1994
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reflects the introductions of Calvin Klein intimate apparel and accessories and
Van Raalte intimate apparel and the Company's desire to maintain its strong
market position in Warner's, Olga and Fruit of the Loom intimate apparel and
Calvin Klein men's underwear. The Company participates on a cooperative basis
with retailers, principally through newspaper advertisements.
COMPETITION
The apparel industry is highly competitive. The Company's competitors
include apparel manufacturers of all sizes, some of which have greater resources
than the Company.
The Company also competes with foreign producers, but to date, such foreign
competition has not materially affected the Intimate Apparel or Menswear
Divisions. The Company believes that its manufacturing skills, coupled with its
existing Central American and Caribbean Basin manufacturing facilities and
selective use of off-shore sourcing, enable the Company to maintain a cost
structure competitive with other major apparel manufacturers. In addition to
competition from other branded apparel manufacturers, the Company competes in
certain product lines with department store private label programs.
The Company believes that it has a significant competitive advantage
because of high consumer recognition and acceptance of its brand names and its
strong presence and strong market share in the major department and specialty
store chains.
A substantial portion of the Company's sales are of products, such as
intimate apparel and mens underwear, that are not very susceptible to rapid
design changes. This relatively stable base of business is a significant
contributing factor to the Company's favorable competitive and cost position in
the apparel industry.
RAW MATERIALS
The Company's raw materials are principally cotton, wool, silk, synthetic
and cotton-synthetic blends of fabrics and yarns. Raw materials used by the
Intimate Apparel and Menswear Divisions are available from multiple sources.
IMPORT QUOTAS
Approximately one-third of the Company's products are manufactured by
contractors located outside the United States. These products are imported and
are subject to federal customs laws, which impose tariffs as well as import
quota restrictions established by the Department of Commerce. While importation
of goods from certain countries may be subject to embargo by U.S. Customs
authorities if shipments exceed quota limits, the Company closely monitors
import quotas through its Washington, D.C. office and can, in most cases, shift
production to contractors located in countries with available quotas or to
domestic manufacturing facilities. The existence of import quotas has,
therefore, not had a material effect on the Company's business.
EMPLOYEES
The Company and its subsidiaries employ approximately 16,200 employees.
Approximately 18% of the Company's employees, all of whom are engaged in the
manufacture and distribution of its products, are represented by labor unions.
The Company considers labor relations with employees to be satisfactory and has
not experienced significant interruption of operations due to labor
disagreements.
TRADEMARKS AND LICENSING AGREEMENTS
The Company has license agreements permitting it to manufacture and market
specific products using the trademarks of others. The Company's exclusive
license and design agreements for the Chaps by Ralph Lauren trademark expire on
December 31, 2004. These licenses grant the Company an exclusive right to use
the Chaps by Ralph Lauren trademark in the United States of America. The
Company's license to use the Valentino Intimo trademark for intimate apparel in
the United States of
8
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<PAGE>
America, its territories and possessions, Puerto Rico and Canada, expires on
December 31, 2002, and is extendable subject to the mutual agreement of the
parties. In October, 1995, the Company entered into a worldwide licensing
arrangement granting the Company exclusive, worldwide rights to use the
Valentino Intimo trademark for intimate apparel for a period co-terminus with
the Company's United States license, through December 31, 2002, subject to
extension by mutual agreement of the parties. The Company has an exclusive
license to use the Scaasi trademark in the United States of America, its
territories and possessions, Puerto Rico, Canada, Mexico, and numerous Caribbean
Islands until December 31, l999. The Company's exclusive license agreement to
use the Fruit of the Loom trademark in the United States of America, its
territories and possessions, Canada and Mexico expires December 31, 1996 and is
currently under negotiation for renewal.
The Company's exclusive license agreement with Calvin Klein, Inc. to
produce Calvin Klein men's accessories is for a period of five years through
March 14, 1999 and is renewable for a five-year period through March 14, 2004,
solely at the option of the Company. The Company has entered into license
agreements with Authentic Fitness Corporation to produce and sell men's and
women's sportswear and men's dress shirts and furnishings under the Catalina
label and certain intimate apparel under the Speedo label. The Company's
exclusive license to use the Catalina trademark for these products worldwide
expires in December 2003 and the exclusive license for use of the Speedo name
for intimate apparel products continues in perpetuity.
Although the specific terms of each of the Company's license agreements
vary, generally such agreements provide for minimum royalty payments and/or
royalty payments based on a percentage of net sales. Such license agreements
also generally grant the licensor the right to approve any designs marketed by
the licensee.
The Company owns other trademarks, the most important of which are
Warner's, Olga, Calvin Klein men's underwear, Calvin Klein intimate apparel, Van
Raalte and Hathaway. The Company has a license in perpetuity for White Stag
women's sportswear and intimate apparel.
The Company licenses the Warner's, Hathaway, White Stag, Catalina and
Calvin Klein brand names to domestic and international licensees for a variety
of products. These agreements generally require the licensee to pay royalties
and fees to the Company based on a percentage of the licensee's net sales. The
Company regularly monitors product design, development, quality, merchandising
and marketing and schedules meetings throughout the year with licensees, to
assure compliance with the Company's overall marketing, merchandising and design
strategies, and to ensure uniformity and quality control. The Company, on an
ongoing basis, evaluates entering into license agreements with other companies
that would permit such companies to market products under the Warner's,
Hathaway, White Stag, Catalina, Calvin Klein and other trademarks. Generally, in
evaluating a potential licensee, the Company considers the experience, financial
stability, manufacturing performance and marketing ability of the proposed
licensee. Royalty income derived from such licensing was approximately $15.0
million (including the sale of the Puritan trademark in the United States for
$7.7 million), $11.5 million (including the sale of certain trademarks to
Authentic Fitness Corporation for $6.6 million) and $10.8 million in fiscal
years 1993, 1994 and 1995, respectively.
The Company believes that only the trademarks mentioned herein are material
to the business of the Company.
BACKLOG
A substantial portion of net revenues is based on orders for immediate
delivery and, therefore, backlog is not necessarily indicative of future net
revenues.
(D) FINANCIAL INFORMATION ABOUT FOREIGN AND DOMESTIC OPERATIONS AND EXPORT
SALES.
The information required by this portion of Item 1 is incorporated herein
by reference to Note 7 of Notes to Consolidated Financial Statements on pages
F-7 to F-22.
9
<PAGE>
<PAGE>
ITEM 2. PROPERTIES.
The principal executive offices of the Company are located at 90 Park
Avenue, New York, New York 10016 and are occupied pursuant to a lease that
expires in 2004. In addition to its executive offices, the Company leases
offices in Connecticut and California, pursuant to leases that expire in 1999
and 2000, respectively.
The Company has 14 domestic manufacturing and warehouse facilities located
in Alabama, Connecticut, Georgia, Kentucky, Pennsylvania, Maine, California, New
York and Tennessee and 19 international manufacturing and warehouse facilities
located in Costa Rica, the Dominican Republic, Honduras, Mexico, Canada, the
United Kingdom, Ireland and Spain. Certain of the Company's manufacturing and
warehouse facilities are also used for administrative and retail functions. The
Company owns eight of its domestic and three of its international facilities.
The balance of the facilities are leased. Lease terms, except for four
month-to-month leases, expire from 1996 to 2007. No facility is under-utilized
except for one facility located in Sylvania, Georgia, which the Company has
listed for sale.
The Company leases sales offices in a number of major cities, including
Dallas and New York in the United States; Brussels, Belgium; Frankfurt, Germany;
Toronto, Canada; London, England; Madrid, Spain and Paris, France. The sales
office leases expire between 1996 and 2001 and are renewable at the Company's
option. The Company leases 55 retail outlet store locations. Outlet store
leases, except for two month-to-month leases, expire from 1996 to 2006 and are
generally renewable at the Company's option.
All of the Company's production and warehouse facilities are located in
appropriately designed buildings which are kept in good repair. All such
facilities have well maintained equipment and sufficient capacity to handle
present volumes. The Company has expanded its production capacity in the
Caribbean Basin in the last three years and anticipates additional expansion in
Mexico to support the Company's continued growth.
ITEM 3. LEGAL PROCEEDINGS.
The Company is not a party to any litigation, other than routine litigation
incidental to the business of the Company, which is individually or in the
aggregate material to the business of the Company.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the Company, their ages and their positions are
set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------------------------------- --- ---------------------------------------------------
<S> <C> <C>
Linda J. Wachner................................... 50 Director, Chairman of the Board, President and
Chief Executive Officer
William S. Finkelstein............................. 47 Director, Senior Vice President and Chief Financial
Officer
Stanley P. Silverstein............................. 43 Vice President, General Counsel and Secretary
Wallis H. Brooks................................... 40 Vice President and Controller
Carl J. Deddens.................................... 43 Vice President and Treasurer
</TABLE>
Mrs. Wachner has been a Director, President and Chief Executive Officer of
the Company since August 1987, and the Chairman of the Board since August 1991.
Mrs. Wachner was a Director and President of the Company from March 1986 to
August 1987. Mrs. Wachner held various positions, including President and Chief
Executive Officer, with Max Factor and Company from December 1978
10
<PAGE>
<PAGE>
to October 1984. Mrs. Wachner also serves as a Director of Travelers Group, Inc.
and Authentic Fitness Corporation.
Mr. Finkelstein has been Senior Vice President of the Company since May
1992 and Chief Financial Officer and Director of the Company since May 1995. Mr.
Finkelstein served as Vice President and Controller of the Company from November
1988 until his appointment as Senior Vice President. Mr. Finkelstein served as
Vice President of Finance of the Company's Activewear and Olga divisions from
March 1988 until his appointment as Controller of the Company. Mr. Finkelstein
served as Vice President and Controller of SPI Pharmaceuticals Inc. from
February 1986 to March 1988 and held various financial positions, including
Assistant Corporate Controller with Max Factor and Company, between 1977 and
1985. Mr. Finkelstein also serves as a Director of Authentic Fitness
Corporation.
Mr. Silverstein has been Vice President, General Counsel and Secretary of
the Company since December 1990. Mr. Silverstein served as Assistant Secretary
of the Company from June 1986 until his appointment as Secretary in January
1987.
Mr. Brooks has been Vice President and Controller of the Company since May
1995. Mr. Brooks served as Senior Vice President and Chief Financial Officer of
Authentic Fitness Corporation from November 1993 until April 1995. Mr. Brooks
held various financial positions with the Company from November 1988 until
October 1993 including Treasurer of the Company from May 1992 until October
1993. Prior to joining the Company, Mr. Brooks was associated with the
predecessor to the international accounting firm Ernst & Young LLP.
Mr. Deddens has been Vice President and Treasurer of the Company since
March 1996 . Prior to joining the Company, Mr. Deddens served as Vice President
and Treasurer of Revlon, Inc. from 1991 to 1996 and as Assistant Treasurer from
1987 to 1991. Mr. Deddens held various financial positions with Allied-Signal
Corporation and Union Texas Petroleum Corporation from 1981 to 1987.
PART II
ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
The Company's Common Stock is listed on the New York Stock Exchange under
the symbol 'WAC'. The table below sets forth, for the periods indicated, the
high and low sales prices of the Company's Common Stock, as reported on the New
York Stock Exchange Composite Tape. Prices have been adjusted to reflect the
two-for one stock split effective October 3, 1994.
<TABLE>
<CAPTION>
PERIOD HIGH LOW
- ---------------------------------------------------------------------------------- --------------- ---------------
<S> <C> <C>
1993:
First Quarter................................................................ $19 5/8 $13 3/8
Second Quarter............................................................... 18 15/16 14 13/16
Third Quarter................................................................ 17 1/16 14 3/8
Fourth Quarter............................................................... 17 13/16 14 1/4
1994:
First Quarter................................................................ $15 5/8 $13 1/8
Second Quarter............................................................... 17 5/8 14 5/8
Third Quarter................................................................ 18 5/8 14 5/16
Fourth Quarter............................................................... 19 1/4 14 1/8
1995:
First Quarter................................................................ $18 14 7/8
Second Quarter............................................................... 21 1/4 16 1/2
Third Quarter................................................................ 24 3/8 20
Fourth Quarter............................................................... 26 7/8 21 7/8
1996:
First Quarter (through March 15, 1996)....................................... $28 21 3/8
</TABLE>
11
<PAGE>
<PAGE>
A recent last sales price for the shares of Common Stock as reported on the
New York Stock Exchange Composite Tape was $26 5/8 on March 15, 1996. On March
1, 1996 there were 161 holders of Class A Common Stock, based upon the number of
holders of record and the number of individual participants in certain security
position listings.
In fiscal 1995, the Company initiated a regular cash dividend of $0.28 per
annum. The initial cash dividend was paid on June 30, 1995. On February 22,
1996, the Company's Board of Directors approved a cash dividend of $0.07 per
share payable on April 8, 1996 to shareholders of record on March 1, 1996. Total
dividends paid or accrued on the Company's Common Stock were approximately $9.5
million in the year ended January 6, 1996 (none in the years ended January 8,
1994 and January 7, 1995, respectively).
ITEM 6. SELECTED FINANCIAL DATA.
The following selected consolidated financial data should be read in
conjunction with the Consolidated Financial Statements and the Notes thereto
included elsewhere herein. The consolidated statement of income data set forth
below with respect to the fiscal years ended January 8, 1994, January 7, 1995
and January 6, 1996, the consolidated balance sheet data at January 7, 1995 and
January 6, 1996 are derived from, and are qualified by reference to, the audited
consolidated financial statements included herein and should be read in
conjunction with those financial statements and notes thereto. The consolidated
statement of income data for the fiscal years ended January 4, 1992 and January
2, 1993 and the consolidated balance sheet data at January 4, 1992, January 2,
1993 and January 8, 1994 are derived from audited consolidated financial
statements not included herein.
12
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
---------------------------------------------------------------------
JANUARY 4, JANUARY 2, JANUARY 8, JANUARY 7, JANUARY 6,
1992(A) 1993 1994(A)(B) 1995(A)(C) 1996(E)
---------------------------------------------------------------------
(IN MILLIONS, EXCEPT RATIOS AND SHARE DATA)
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA:
Net revenues........................ $ 562.5 $ 625.1 $ 703.8 $ 788.8 $ 916.2
Gross profit........................ 195.4 219.3 236.4 255.8 309.7
Income before non-recurring items,
special items, interest and income
taxes............................. 70.8 89.8 92.2 99.2 125.6
Interest expense.................... 72.3 48.8 38.9 32.5 33.9
Income (loss) before non-recurring
and special items, net of income
taxes............................. (6.5) 47.6 53.3 66.3 56.9
Income (loss) from continuing
operations........................ (19.5) 47.6 53.3 63.3 49.6
Preferred stock dividends paid...... 5.5 2.7 -- -- --
Income (loss) from continuing
operations applicable to common
stock............................. (25.0) 44.9 53.3 63.3 49.6
Net income (loss) applicable to
common stock(d)................... (33.9) (20.2) 24.1 63.3 46.5
Dividends on common stock........... -- -- -- -- 9.5
Per share amounts:(d)
Income (loss) before non-recurring
and special items, net of income
taxes............................. (0.34) 1.25 1.34 1.61 1.26
Income (loss) from continuing
operations........................ (1.31) 1.18 1.34 1.53 1.10
Net income (loss)................... (1.78) (0.53) 0.61 1.53 1.03
Weighted average number of shares of
Common Stock outstanding(d)....... 19,059,062 38,109,450 39,770,482 41,285,355 45,278,117
Divisional Summary:
Net revenues:
Intimate Apparel................ $ 339.7 $ 384.8 $ 423.2 $ 565.3 $ 689.2
Menswear........................ 180.8 200.0 243.2 183.8 185.7
Retail Outlet Stores............ 42.0 40.3 37.4 39.7 41.3
---------- ---------- ---------- ---------- ----------
$ 562.5 $ 625.1 $ 703.8 $ 788.8 $ 916.2
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
Percentage of net revenues:
Intimate Apparel................ 60.4% 61.6% 60.1% 71.7% 75.2%
Menswear........................ 32.1 32.0 34.6 23.3 20.3
Retail Outlet Stores............ 7.5 6.4 5.3 5.0 4.5
---------- ---------- ---------- ---------- ----------
100.0% 100.0% 100.0% 100.0% 100.0%
---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ----------
BALANCE SHEET DATA (AT FISCAL YEAR
END):
Working capital................. $ 109.3 $ 141.5 $ 122.0 $ 104.5 $ 309.5
Total assets.................... 540.5 629.6 688.6 780.6 939.1
Long term debt (excluding
current maturities)........... 344.8 277.6 245.5 206.8 194.3
Redeemable preferred stock...... 41.5 -- -- -- --
Stockholders' equity
(deficit)..................... (1.7) 135.8 159.1 240.5 500.3
</TABLE>
- ------------------------
(a) On September 4, 1991, the Company's Board of Directors determined that the
Company should restructure its knitwear operations. The restructuring
resulted in a non-recurring charge of $13 million (or $0.68 per share) in
fiscal 1991. Such charge was associated with the closing of the Company's
knitwear manufacturing facilities and the liquidation of the related
inventory. In October 1993, the Company decided to discontinue a portion of
its men's manufactured dress shirt and neckwear business segment. This
resulted in a non-recurring charge of $19.9 million. Also, the Company
incurred a $2.6 million non-recurring charge associated with a previously
discontinued business. The total non-recurring charge recorded in fiscal
1993 was $22.5 million (or $0.56 per share). In fiscal 1994, the Company
incurred a $3 million (or $0.07 per share) charge related to the California
earthquake.
(b) Fiscal 1993 includes a $10.5 million charge (or $0.26 per share) for the
cumulative effect of the Company changing its method of accounting for
postretirement benefits other than pensions.
13
<PAGE>
<PAGE>
(c) Income reflects the benefits of utilizing the Company's net operating loss
carryforward to offset the Company's federal income tax provision. Income
before non-recurring items, after giving effect to a normalized tax
provision at the Company's fiscal 1995 effective income tax rate of 38% was
$41.1 million (or $1.00 per share).
(d) All share and per share amounts have been adjusted to reflect the
two-for-one stock split effective October 3, 1994 and includes all Common
Stock and Common Stock equivalents.
(e) Effective with the 1995 fiscal year, the Company adopted Statement of
Position 93-7 ('SOP 93-7'), dealing with certain types of advertising and
promotion costs. SOP 93-7 requires, among other things, that certain costs,
which had previously been deferred for amortization against future
revenues, be currently expensed. The Company incurred a special charge for
advertising costs previously deferable of $11.7 million ($7.3 million net
of income tax benefits) (or $0.16 per share) primarily in the fourth
quarter of fiscal 1995 related to SOP 93-7.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
During the last several years, the Company has implemented a number of
strategies designed to reduce operating expenses and refocus its business on
less fashion sensitive and higher margin product lines with world brand
potential. As a result of this strategic refocusing, and notwithstanding the
bankruptcy, reorganization or liquidation of several of the Company's retail
customers, including B. Altman & Co., Bonwit Teller, Carter Hawley Hale,
Federated Department Stores, Miller & Rhoades, R.H. Macy & Co., Woodward &
Lathrop, and P.A. Bergner & Co., and the general softening of the retail market
as a result of the economic slowdown from 1989 through 1994, the Company has
significantly increased operating income.
The Intimate Apparel Division's net revenues have grown at a compounded
annual growth rate of approximately 19% since 1991.
Menswear Division net revenues have decreased from $213.9 million in fiscal
1989 to $185.7 million in fiscal 1995, reflecting the Company's strategic
decisions to eliminate cash intensive businesses and businesses that did not
demonstrate the potential to achieve profitability levels acceptable to
management (See Note 4 of Notes to Consolidated Financial Statements on pages
F-7 to F-22). The strategic decisions included (i) not renewing the Company's
license with Pringle of Scotland in 1989, (ii) closing its knitwear
manufacturing facilities in 1991, (iii) restructuring the Company's dress shirt
and neckwear manufacturing facilities in 1993, (iv) not renewing the Company's
license for Golden Bear by Jack Nicklaus in 1994, (v) terminating the Christian
Dior licenses for dress shirts, neckwear and accessories in 1994 and selling the
Christian Dior license for sportswear in 1992 and (vi) selling the Puritan
trademark in the United States to Wal-Mart in 1993. The negative impact on net
revenues of the discontinued businesses was partially offset by strong growth in
the Company's Chaps by Ralph Lauren line which has increased net revenues by
approximately 500% since 1989.
RESULTS OF OPERATIONS
The consolidated statements of income for the Company are summarized below.
The Divisional Summary includes the Retail Outlet Stores Division for reporting
purposes; however, since the Company's business strategy is to use its retail
outlet stores as a channel for its excess inventory and the Company does not
consider the results of such division to be material, the Retail Outlet Stores
Division is not discussed further.
14
<PAGE>
<PAGE>
STATEMENT OF INCOME
(SELECTED DATA)
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------------------------
JANUARY 8, % OF NET JANUARY 7, % OF NET JANUARY 6, % OF NET
1994 REVENUES 1995 REVENUES 1996 REVENUES
---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Net revenues............................... $703.8 100.0% $788.8 100.0% $916.2 100.0%
Cost of goods sold......................... 467.4 66.4% 533.0 67.6% 606.5 66.2%
---------- -------- ---------- -------- ---------- --------
Gross profit............................... 236.4 33.6% 255.8 32.4% 309.7 33.8%
Selling, administrative and general
expenses................................. 144.2 20.5% 156.6 19.9% 184.0 20.1%
Income before non-recurring and special
items, interest and income taxes......... 92.2 13.1% 99.2 12.5% 125.6 13.7%
Interest expense........................... 38.9 32.5 33.9
Income before extraordinary items and
cumulative effect of the change in the
method of accounting..................... 53.3 63.3 49.6
Income before non-recurring and special
items, adjusted for a normalized income
tax provision of 38%..................... 33.0 41.4 56.9
</TABLE>
DIVISIONAL SUMMARY
<TABLE>
<CAPTION>
FISCAL YEAR ENDED
--------------------------------------------------------------------------
% OF % OF % OF
JANUARY 8, GROSS JANUARY 7, GROSS JANUARY 6, GROSS
1994 PROFIT 1995 PROFIT 1996 PROFIT
---------- -------- ---------- -------- ---------- --------
<S> <C> <C> <C> <C> <C> <C>
Net revenues:
Intimate Apparel...................... $423.2 $565.3 $689.2
Menswear.............................. 243.2 183.8 185.7
Retail Outlet Stores.................. 37.4 39.7 41.3
---------- ---------- ----------
$703.8 $788.8 $916.2
---------- ---------- ----------
---------- ---------- ----------
Gross profit:
Intimate Apparel...................... $167.7 70.9% $203.5 79.6% $259.2 83.7%
Menswear.............................. 53.7 22.7% 38.2 14.9% 35.5 11.5%
Retail Outlet Stores.................. 15.0 6.4% 14.1 5.5% 15.0 4.8%
---------- -------- ---------- -------- ---------- --------
$236.4 100.0% $255.8 100.0% $309.7 100.0%
---------- -------- ---------- -------- ---------- --------
---------- -------- ---------- -------- ---------- --------
</TABLE>
COMPARISON OF FISCAL 1995 WITH FISCAL 1994.
Net revenues increased 16.2% to $916.2 million from the $788.8 million
recorded in fiscal 1994 due primarily to a 21.9% increase in intimate apparel
net revenues.
INTIMATE APPAREL DIVISION. Net revenues increased 21.9% to $689.2 million
in fiscal 1995 from $565.3 million in fiscal 1994. Warner's and Olga
domestic net revenues increased 12.6% (including Victoria's Secret and
Avon). Calvin Klein net revenues increased 162% to $159.7 million compared
to $61.0 million in fiscal 1994 (nine months of operations in fiscal 1994).
The increase in Calvin Klein is a result of the launch of Calvin Klein
women's intimate apparel and an over 70% increase in the Calvin Klein men's
underwear business. Fruit of the Loom net revenues decreased 17.3% in
fiscal 1995 compared to fiscal 1994 primarily as a result of a decrease of
approximately $27 million in Avon shipments. Fruit of the Loom net revenues
in the mass merchandise market (without Avon) increased 30.7% in fiscal
1995 compared to fiscal 1994. International sales increased 18.9% to $100.0
million compared to $84.1 million in fiscal 1994 which represents a
significant turnaround compared to prior years.
15
<PAGE>
<PAGE>
MENSWEAR DIVISION. Net revenues increased 1.1% to $185.7 million in fiscal
1995 from $183.8 million in fiscal 1994. Excluding discontinued brands
(Dior, Puritan and Nicklaus), net revenues increased 13.6% primarily
attributable to continued growth in Chaps by Ralph Lauren where net
revenues increased 14.3% in fiscal 1995 compared to fiscal 1994 and to the
launch of Calvin Klein accessories which generated net revenues of $3.9
million in its first four months of shipping. Hathaway net revenues
decreased 6% in fiscal 1995 compared to fiscal 1994 reflecting continued
softness in the men's dress shirt market.
Gross profit increased 21.1% to $309.7 million in fiscal 1995 compared to
$255.8 million in fiscal 1994. Gross profit as a percentage of net revenues
increased to 33.8% in fiscal 1995 compared to 32.4% in fiscal 1994. The increase
in gross profit as a percentage of net revenues of 140 basis points primarily
reflects manufacturing efficiencies achieved in the Intimate Apparel Division
and a more favorable mix due to growth in the Calvin Klein business.
INTIMATE APPAREL DIVISION. Intimate Apparel Division gross profit increased
27.4% to $259.2 million (37.6% of net revenues) in fiscal 1995 from $203.5
million (36.0% of net revenues) in fiscal 1994. Gross profit as a
percentage of net revenues increased to 37.6% of net revenues from 36.0% in
fiscal 1994 due primarily to manufacturing efficiencies associated with the
Company's new manufacturing facilities and a better mix of sales reflecting
the sales increase in the Calvin Klein business.
MENSWEAR DIVISION. Gross profit in the Menswear Division decreased slightly
to $35.5 million (19.1% of net revenues) in fiscal 1995 from $38.2 million
in fiscal 1994 (20.7% of net revenues). The decrease in net revenues and
gross profit as a percentage of net revenues reflects softness in the men's
dress shirt business and the final liquidation of merchandise related to
discontinued brands.
Selling, administrative and general expenses increased 17.5% to $184.0
million (20.1% of net revenues) in fiscal 1995 from $156.6 million (19.9% of net
revenues) in fiscal 1994. The increase in selling, administrative and general
expenses reflects higher sales volume and an increase in marketing and
advertising expenses (not including the special charge for advertising costs
previously deferable in accordance with SOP 93-7) of approximately $4 million in
fiscal 1995 compared to fiscal 1994. The increase in advertising and promotion
expenses is primarily related to the launch of Calvin Klein women's intimate
apparel. Selling, administrative and general expenses as a percentage of net
revenues for fiscal 1995 were essentially equal to fiscal 1994, reflecting
continuing efforts to control operating expenses.
Interest expense increased slightly to $33.9 million in fiscal 1995 from
$32.5 million in fiscal 1994. The increase in interest expenses reflects
increased interest costs supporting the increased working capital required for
the 16.2% sales growth achieved in fiscal 1995 offset by the favorable impact
from the proceeds from the Company's offering of Common Stock which was
completed in October 1995.
The Company's treatment of certain advertising costs changed in fiscal 1995
reflecting the American Institute of Certified Public Accountants Statement of
Position 93-7 ('SOP 93-7'). SOP 93-7 requires, among other things, that certain
advertising costs previously deferred and amortized over the period benefited,
be expensed in the period the advertising is first run. As a result of adopting
SOP 93-7, the Company incurred a special charge for advertising costs previously
deferable of $11.7 million ($7.3 million net of income tax benefits)
primarily in the fourth quarter of fiscal 1995.
Income tax expense for fiscal 1995 was $30.4 million corresponding to an
effective income tax rate of 38%. Income tax expense for fiscal 1994 was $0.4
million. Income tax expense for fiscal 1994 reflects $22.5 million of tax
benefits associated with the Company's net operating loss carryforwards. The
Company had utilized substantially all of its net operating loss carryforward
benefits for financial reporting purposes at the end of fiscal 1994 and, as a
result, had approximately $38.5 million of deferred tax assets at 1994 fiscal
year end.
The difference between the U.S. federal statutory income tax rate of 35%
and the Company's effective income tax rate of 38% for fiscal 1995 primarily
reflects the impact of state income taxes and the effect of non-deductible
intangible amortization partially offset by certain benefits associated with
state income tax net operating loss carryforwards.
16
<PAGE>
<PAGE>
For income tax purposes, the Company has net operating loss carryforwards
available to offset future taxable income amounting to approximately $39.8
million at January 6, 1996. These carryforwards, which the Company expects to
fully utilize, will result in a future tax savings of approximately $13.9
million at current U.S. federal corporate income tax rates. The net operating
loss carryforwards expire beginning in 2001 and fully expire in 2007.
As a result of the Company's Common Stock offerings in 1991 and 1992 and
other changes in the ownership of the Company's Common Stock, certain provisions
of the Internal Revenue Code could limit the rate at which the Company will be
able to utilize its net operating loss carryforwards. The Company believes that
it will realize all of the benefits attributable to its net operating loss
carryforwards; however, the amount of such benefits that the Company will
realize and the period in which any benefit is realized are subject to several
factors including the general level of economic activity, the level of earnings
and future changes in U.S. corporate income tax laws and regulations (See Note 8
of Notes to Consolidated Financial Statements on pages F-7 to F-22).
Income before non-recurring and special items, adjusted to reflect a
normalized income tax rate of 38%, increased 37.4% to $56.9 million in fiscal
1995 compared to $41.4 million in fiscal 1994. The increase reflects higher
operating income.
In October 1995, the Company entered into new bank credit agreements and
wrote-off deferred financing costs related to the prior bank credit agreement.
The write-off resulted in an extraordinary item of $3.1 million (net of income
tax benefits of $1.9 million) due to the early extinguishment of debt.
Net income, after non-recurring, special and extraordinary charges was
$46.5 million in fiscal 1995 compared to $63.3 million in fiscal 1994. The
decrease in net income in fiscal 1995 compared to fiscal 1994 reflects the
impact of the full income tax provision in fiscal 1995 and the special charge
for SOP 93-7, partially offset by higher operating income, as noted above.
COMPARISON OF FISCAL 1994 WITH FISCAL 1993.
Net revenues increased 12.1% from $703.8 million in fiscal 1993 to $788.8
million in fiscal 1994. The increase in net revenue was accomplished despite a
planned reduction of approximately $90 million in discontinued Menswear brands
and is attributable to continued growth in the Company's Intimate Apparel
Division of 33.6% and continued net revenue growth in the Company's Chaps by
Ralph Lauren line of 36%.
INTIMATE APPAREL DIVISION. Net revenues increased 33.6% to $565.3 million
in fiscal 1994 from the $423.2 million recorded in fiscal 1993. The
increase was driven by the acquisition of Calvin Klein which generated net
revenues of $61.0 million in fiscal 1994, an increase in Fruit of the Loom
net revenues of 95.4% to $64.3 million and increases in the net revenues of
Warner's and Olga of 13.2%.
MENSWEAR DIVISION. Net revenues for fiscal 1994 decreased to $183.8 million
from $243.2 million in fiscal 1993. The decrease in sales is attributable
to the Company's strategic decisions in fiscal 1993 and 1994 to (i) sell
the Puritan trademark to Wal-Mart, (ii) discontinue the Golden Bear by Jack
Nicklaus product line, and (iii) terminate the Christian Dior licenses for
men's dress shirts, neckwear and accessories in 1995. Without these
discontinued brands, Menswear Division net revenues increased 15.3% in
fiscal 1994 to $164.5 million from $142.9 million in fiscal 1993. The
increase is attributable to continued growth of 36.0% in the net revenues
of Chaps by Ralph Lauren.
Gross profit increased to $255.8 million in fiscal 1994 from $236.4 million
in fiscal 1993. Gross profit as a percentage of net revenues decreased to 32.4%
in fiscal 1994 from 33.6% in fiscal 1993. The decrease in gross profit as a
percentage of net revenue reflects the higher mix of Fruit of the Loom sales,
the amortization of start up costs in the Fruit of the Loom business and
decreased manufacturing efficiency due to the start up of four new plants.
INTIMATE APPAREL DIVISION. Intimate Apparel Division gross profit increased
21.3% to $203.5 million (36.0% of net revenues) from the $167.7 million
(39.6% of net revenues) recorded in fiscal 1993. The increase in gross
profit reflects the higher net revenues noted above. Gross profit as a
percentage of net revenues decreased from 39.6% to 36.0% due to the mix of
Fruit of the Loom
17
<PAGE>
<PAGE>
sales, the amortization of Fruit of the Loom start-up costs and decreased
manufacturing efficiency, as noted above.
MENSWEAR DIVISION. Menswear Division gross profit decreased to $38.2
million (20.7% of net revenues) in fiscal 1994 from $53.7 million (22.1% of
net revenues) last year. The decrease in gross profit reflects the lower
sales volume due to discontinued brands, as discussed above. The decrease
in gross profit as a percentage of net revenues reflects the favorable
impact in fiscal 1993 from the sale of the Puritan trademark.
Selling, administrative and general expenses increased 8.6% in fiscal 1994
to $156.6 million (19.9% of net revenue) from $144.2 million (20.5% of net
revenue) in fiscal 1993. The increase in selling, administrative and general
expenses reflects sales volume increases and an increase in marketing expenses
of $5.6 million to $37 million. Marketing expenses increased to 4.7% of net
revenue in fiscal 1994 from 4.5% in fiscal 1993 and 3.2% in fiscal 1992. The
decrease in selling, administrative and general expenses as a percentage of net
revenue reflects continued efforts to control operating expenses by the Company
and the favorable impact of increased sales to mass merchandisers and Avon which
have lower selling expense than the Company's traditional channels of
distribution.
Interest expense decreased 17% to $32.5 million in fiscal 1994 from $38.9
million in fiscal 1993 despite a significant increase in interest rates during
1994. The decrease in interest expense is a result of the refinancing of the
Company's credit agreement in the fourth quarter of fiscal 1993, the attainment
of an Investment Grade credit rating of BBB- from Standard & Poor's in May 1994,
and the renegotiation of the Company's cost of borrowing in June 1994. The
combination of the refinancing, the improved credit rating and the renegotiated
borrowing rate lowered the Company's cost of borrowing by 75 basis points to
LIBOR plus 0.5%. In addition, the Company has purchased interest rate swap
agreements which effectively fix the Company's rate of interest on $275 million
of debt at approximately 6.2% through fiscal 1995.
In January 1994, the Company's leased warehouse located in Sylmar,
California suffered significant structural damage due to the California
earthquake and was permanently closed. The Company was able to recover
substantially all of its inventory, transfer the inventory to other locations,
and begin shipping at normal levels in March, 1994. The Company has earthquake
insurance and, other than a deductible of approximately $3 million, which was
recorded as a non-recurring expense in the first quarter of fiscal 1994, expects
to fully recover its losses.
The provision for income taxes for fiscal 1994 reflects the recognition of
tax benefits of $22.6 million related to the Company's net operating loss
carryforwards which offset substantially all of the Company's income tax
provision for fiscal 1994. The Company has utilized substantially all of its net
operating loss carryforwards for financial reporting purposes at the end of
fiscal 1994. The Company had total deferred tax assets of approximately $38.5
million at the end of fiscal 1994 and as a result began reporting fully taxed
earnings in fiscal 1995. The Company recognized $31.3 million of income tax
benefits related to future periods in fiscal years 1992 and 1993.
For income tax purposes the Company had net operating loss carryforwards
available to offset future taxable income amounting to approximately $110
million at January 7, 1995. These carryforwards, which the Company expects to
fully utilize, will result in a future tax savings of approximately $38.5
million at current U.S. federal corporate income tax rates as of the end of
fiscal 1994. The net operating loss carryforwards expire beginning in 2001 and
fully expire in 2007.
As a result of the Company's Common Stock offerings in 1991 and 1992 and
other changes in the ownership of the Company's Common Stock, certain provisions
of the Internal Revenue Code may limit the rate at which the Company will be
able to utilize its net operating loss carryforwards. The Company believes that
it will realize all of the benefits attributable to its net operating loss
carryforwards; however, the amount of such benefits that the Company will
realize and the period in which any benefit is realized are subject to several
factors including the general level of economic activity, the level of earnings
and future changes in U.S. corporate income tax laws and regulations (See Note 8
of Notes to Consolidated Financial Statements on pages F-7 to F-22).
18
<PAGE>
<PAGE>
Income from continuing operations for fiscal 1994 was $63.3 million
compared to $53.3 million in fiscal 1993. The increase in income from continuing
operations of $10.0 million or 18.8% is attributable to increased operating
income and lower interest expense, as noted above.
Net income for fiscal 1994 was $63.3 million compared to $24.1 million in
fiscal 1993. Net income for fiscal 1993 included an extraordinary item of $18.6
million (without income tax benefit) primarily related to premium payments and
the write-off of deferred financing costs associated with the early
extinguishment of debt. In addition, fiscal 1993 included a $10.5 million
non-cash charge for the cumulative effective of adopting Statement of Financial
Accounting Standards No. 106.
CAPITAL RESOURCES AND LIQUIDITY
The Company's liquidity requirements arise primarily from its debt service
requirements and the funding of the Company's working capital needs, primarily
inventory and accounts receivable. The Company's borrowing requirements are
seasonal, with peak working capital needs arising at the end of the second
quarter and during the third quarter of the fiscal year. The Company typically
generates nearly all of its net operating cash flow in the fourth quarter of the
fiscal year, reflecting third quarter and fourth quarter shipments and the sale
of inventory built during the first half of the fiscal year. (See
'Seasonality').
In October 1995, the Company sold 9,717,000 shares of Class A Common Stock
in an underwritten public offering. Net proceeds of the offering were
approximately $223 million and were used to repay outstanding debt. In addition,
the Company refinanced its bank credit agreement. The new bank credit agreements
consist of a term loan of $200 million and revolving loans of $350 million. In
addition, the Company entered a new letter of credit bank facility that allows
the Company to issue up to $200 million in trade letters of credit and finance
up to $100 million of the trade letters of credit for up to 90 days. Borrowings
under the above credit agreements are essentially unsecured and bear interest at
the bank's base lending rate or at approximately LIBOR plus 0.375%. The rate of
interest payable on outstanding borrowing decreases as the Company's implied
senior debt rating from certain credit rating agencies improves. In January
1996, the Company achieved an implied senior debt rating of BBB from Standard
and Poors, Inc., its fifth debt rating upgrade in less than four years.
Cash used by operating activities for the 1995 fiscal year totaled
approximately $(13.6) million compared to cash provided by operating activities
of $77.8 million in fiscal 1994. The use of cash in fiscal 1995 compared to
fiscal 1994 reflects the increase in working capital, primarily inventory
necessary to support increases in net revenues for fiscal 1995 of over 16%. In
addition, the increase in inventory reflects management's decision to increase
inventory in core products and growth brands (Calvin Klein, Warner's and Chaps
by Ralph Lauren) to continue its growth and improve service levels to customers.
Interest expense for fiscal 1995 totalled $33.9 million, a slight increase
over the $32.5 million in fiscal 1994. Interest expense includes approximately
$1.2 million of non-cash interest in both fiscal 1995 and fiscal 1994. Non-cash
interest primarily reflects amortization of deferred debt issue costs. As a
result of receiving approximately $223 million of net proceeds from the
Company's stock offering in October 1995, the Company expects that interest
expense will be reduced to approximately $25 million in fiscal 1996. The actual
level of interest expense that the Company will incur in fiscal 1996 is
dependent on several factors, including the overall level of interest rates, the
general level of economic activity, the level of retail sales and the Company's
need for working capital to fund growth in its operations.
At January 6, 1996, the Company had approximately $293 million of
additional borrowing available under the revolving loan portions of its United
States bank facilities. The Company also has bank credit agreements in Canada
and Europe. At January 6, 1996, the Company had approximately $29 million of
additional credit available under these agreements. The Company believes that
funds available under its various bank facilities, together with cash flow to be
generated from future operations, will be sufficient to meet the capital
expenditure requirements and working capital needs of the Company, including
interest and debt principal payments for the next twelve months and for at least
the next several years.
Capital expenditures for new facilities, improvements to existing
facilities and for machinery and equipment were approximately $12.4 million,
$17.5 million and $39.1 million in the 1993, 1994 and 1995 fiscal years,
respectively. Depreciation expense was $9.2 million, $10.8 million and $13.3
million in the
19
<PAGE>
<PAGE>
1993, 1994 and 1995 fiscal years, respectively. The increase in capital
expenditures in fiscal 1995 compared to fiscal 1994 represents the significant
investment in store fixtures for both the Calvin Klein and Chaps by Ralph Lauren
brands.
SEASONALITY
The operations of the Company are somewhat seasonal, with approximately 56%
of net revenues, 60% of operating income before non-recurring items and
substantially all of the Company's net cash flow from operating activities
generated in the second half of the fiscal year. Generally, the Company's
operations during the first half of the year are financed by increased
borrowing. The following sets forth the net revenues, operating income before
non-recurring items and net cash flow from operating activities generated for
each quarter of fiscal 1994 and fiscal 1995.
<TABLE>
<CAPTION>
THREE MONTHS ENDED
----------------------------------------------------------------------------
(IN MILLIONS)
APR 9, JUL 9, OCT 8, JAN 7, APR 8, JUL 8, OCT 7, JAN 6,
1994 1994 1994 1995 1995 1995 1995 1996
------ ------ ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues....................... $147.7 $190.3 $217.9 $232.9 $195.2 $210.4 $239.5 $271.1
Operating income before non-
recurring items.................. $ 20.1 $ 18.1 $ 30.1 $ 30.9 $ 25.5 $ 24.4 $ 39.2 $ 36.5
Cash flow from operating
activities....................... $(41.0) $ (2.9) $ 17.7 $ 92.8 $(43.0) $ 0.4 $(70.4) $ 99.4
</TABLE>
INFLATION
The Company does not believe that the relatively moderate levels of
inflation which have been experienced in the United States, Canada and Western
Europe have had a significant effect on its net revenues or its profitability.
Management believes that, in the past, the Company has been able to offset such
effects by increasing prices or by instituting improvements in efficiency.
Mexico historically has been subject to high rates of inflation; however, the
effects of high rates of inflation on the operation of the Company's Mexican
subsidiaries have not had a material impact on the results of operations of the
Company.
IMPACT OF NEW ACCOUNTING STANDARDS
The American Institute of Certified Public Accountants issued Statement of
Position 93-7 -- Reporting on Advertising Costs ('SOP 93-7') in December 1993
effective for the Company's 1995 fiscal year. SOP 93-7 requires, among other
things, that certain advertising and promotional costs that the Company had
previously deferred and amortized over the period benefitted must be charged
directly to operations in the period the advertisement first runs. The Company
incurred a special charge for advertising costs previously deferable of $11.7
million ($7.3 million net of income tax benefits) primarily in the fourth
quarter of fiscal 1995 related to SOP 93-7.
In October 1995, the Financial Accounting Standards Board issued Statement
on Financial Accounting Standards No. 123, Accounting for Stock-Based
Compensation ('FAS 123'), which establishes market value accounting and
reporting standards for stock-based employee compensation plans. Companies may
elect to continue to account for stock-based compensation using the intrinsic
value approach under APB Opinion No. 25. The Company is required to adopt FAS
123 for its 1996 fiscal year and anticipates that the accounting for its
stock-based compensation will continue to follow APB Opinion 25. The Company
expects to provide pro-forma disclosure in fiscal 1996 using the fair market
value method specified in FAS 123.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The information required by Item 8 of Part II is incorporated herein by
reference to the Consolidated Financial Statements filed with this report; see
Item 14 of Part IV.
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None.
20
<PAGE>
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
The information required by Item 10 is incorporated by reference from pages
10-11 of Item 4 of Part I included herein and from the Proxy Statement of The
Warnaco Group, Inc.
ITEM 11. EXECUTIVE COMPENSATION.
The information required by Item 11 is hereby incorporated by reference
from the Proxy Statement of The Warnaco Group, Inc.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
The information required by Item 12 is hereby incorporated by reference
from the Proxy Statement of The Warnaco Group, Inc.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
The information required by Item 13 is hereby incorporated by reference
from the Proxy Statement of The Warnaco Group, Inc.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS ON FORM 8-K.
(a) 1. The Consolidated Financial Statements of The Warnaco Group, Inc.
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Report of Independent Accountants.......................................................................... F-1
Report of Independent Auditors............................................................................. F-2
Consolidated Balance Sheets as of January 7, 1995 and January 6, 1996...................................... F-3
Consolidated Statements of Income for the Years Ended January 8, 1994, January 7, 1995 and January 6,
1996..................................................................................................... F-4
Consolidated Statement of Stockholders' Equity for the Years Ended January 8, 1994, January 7, 1995 and
January 6, 1996.......................................................................................... F-5
Consolidated Statements of Cash Flows for the Years Ended January 8, 1994, January 7, 1995 and January 6,
1996..................................................................................................... F-6
Notes to Consolidated Financial Statements................................................................. F-7
</TABLE>
2. Financial Statement Schedules:
<TABLE>
<S> <C>
Report of Independent Accountants................................................................... S-1
II Valuation and Qualifying Accounts and Reserves.................................................. S-2
</TABLE>
Schedules not included with this additional financial data have been
omitted because they are not applicable or the required information is
shown in the Consolidated Financial Statements or Notes thereto.
21
<PAGE>
<PAGE>
3. Exhibits:
<TABLE>
<C> <S> <C>
3.1 Amended and Restated Certificate of Incorporation of the Company. (Incorporated herein by
reference to Exhibit 3.1 to the Company's Form 10-Q filed May 16, 1995)
3.2 Bylaws of the Company. (Incorporated herein by reference to Exhibit 3.2 to the Company's
Registration Statement on Form S-1, No. 33-45877.)
4.1 Registration Rights Agreement dated March 14, 1994 between the Company and Calvin Klein,
Inc. ('CKI'). (Incorporated herein by reference to Exhibit 4.1 to the Company's Form 10-Q
filed May 24, 1994).
10.1 Credit Agreement dated as of October 12, 1995 (the 'U.S. $450,000,000 Credit Agreement')
among the Company, Warnaco Inc.; The Bank of Nova Scotia and Citibank, N.A., as Managing
Agents; Citibank N.A. as Documentation Agent; The Bank of Nova Scotia as Paying Agent,
Competitive Bid Agent, Swing Line Lender and an Issuing Bank and certain other lenders named
therein (Incorporated herein by reference to Exhibit 10.1 to the Company's Form 10-Q filed
November 21, 1995).
10.2 Credit Agreement dated as of October 12, 1995 (the 'U.S. $100,000,000 364-day Revolving
Credit Agreement') among the Warnaco Inc. and The Bank of Nova Scotia and Citibank, N.A. as
Managing Agents; Citibank N.A. as Documentation Agent; The Bank of Nova Scotia as Paying
Agent, Competitive Bid Agent, Swing Line Lender and an Issuing Bank and certain other
lenders named therein (Incorporated herein by reference to Exhibit 10.1 to the Company's
Form 10-Q filed November 21, 1995).
10.3 Credit Agreement dated as of December 4, 1995 (the 'U.S. $200,000,000 Credit Agreement')
among Warnaco Inc., the Company and The Bank of Nova Scotia, as agent for the Lenders and
certain other lenders named therein.
10.4 Employment Agreement, dated as of January 6, 1991, between the Company and Linda J. Wachner.
(Incorporated herein by reference to Exhibit 10.7 to the Company's Registration Statement on
Form S-1, No. 33-42641.)
10.5 Incentive Compensation Plan. (Incorporated herein by reference to Exhibit 10.8 to the
Company's Registration Statement on Form S-1, No. 33-45877.)
10.6 1991 Stock Option Plan. (Incorporated herein by reference to Exhibit 10.9 to the Company's
Registration Statement on Form S-1, No. 33-45877.)
10.7 Amended and Restated 1988 Employee Stock Purchase Plan, as amended. (Incorporated herein by
reference to Exhibit 10.10 to the Company's Registration Statement on Form S-1, No.
33-45877.)
10.8 Warnaco Employee Retirement Plan. (Incorporated herein by reference to Exhibit 10.11 to the
Company's Registration Statement on Form S-1, No. 33-45877.)
10.9 Executive Management Agreement dated as of May 9, 1991 between the Company, Warnaco Inc. and
The Spectrum Group, Inc. (Incorporated herein by reference to Exhibit 10.13 to the Company's
Registration Statement on Form S-1, No. 33-45877.)
10.10 1993 Non-Employee Director Stock Plan (Incorporated herein by reference to Company's Proxy
Statement for its 1994 Annual Meeting of Shareholders.)
10.11 Amended and Restated 1993 Stock Plan. (Incorporated herein by reference to the Company's
Proxy Statement for its 1994 Annual Meeting of Shareholders.)
10.12 The Warnaco Group, Inc. Supplemental Incentive Compensation Plan. (Incorporated herein by
reference to the Company's Proxy Statement for its 1994 Annual Meeting of Shareholders.)
11.1 Computation of earnings per common share.
22.1 Subsidiaries of the Company.
24.1(a) Consent of Independent Accountants
24.1(b) Consent of Independent Auditors
24.1(c) Consent of Independent Auditors
</TABLE>
- ------------------
(b) Reports on Form 8-K.
No reports on Form 8-K were filed by the registrant in the last quarter of
the 1995 fiscal year.
22
<PAGE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of New
York, State of New York, on the 20th day of March, 1996.
THE WARNACO GROUP, INC.
By: /S/ LINDA J. WACHNER
----------------------------------
Linda J. Wachner
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
- ------------------------------------------ -------------------------------------------- -------------------
<C> <S> <C>
LINDA J. WACHNER Chairman of the Board; Director; March 20, 1996
- ------------------------------------------ President and Chief Executive
(LINDA J. WACHNER) Officer (Principal Executive Officer)
WILLIAM S. FINKELSTEIN Director; Senior Vice President and Chief March 20, 1996
- ------------------------------------------ Financial Officer (Principal Financial and
(WILLIAM S. FINKELSTEIN) Accounting Officer)
JOSEPH A. CALIFANO, JR. Director March 20, 1996
- ------------------------------------------
(JOSEPH A. CALIFANO, JR.)
ANDREW G. GALEF Director March 20, 1996
- ------------------------------------------
(ANDREW G. GALEF)
STEWART A. RESNICK Director March 20, 1996
- ------------------------------------------
(STEWART A. RESNICK)
ROBERT D. WALTER Director March 20, 1996
- ------------------------------------------
(ROBERT D. WALTER)
</TABLE>
23
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and
Stockholders of The Warnaco Group, Inc.
In our opinion, the accompanying consolidated balance sheet and the related
consolidated statements of income, stockholders' equity and cash flows present
fairly, in all material respects, the financial position of The Warnaco Group,
Inc. and its subsidiaries at January 6, 1996, and the results of their
operations and their cash flows for the year then ended 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 audit. We conducted our audit
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 audit provides a
reasonable basis for the opinion expressed above.
As discussed in Note 3 to the consolidated financial statements, the Company
adopted the provisions of the American Institute of Certified Public
Accountants' Statement of Position 93-7, 'Reporting on Advertising Costs' during
the year ended January 6, 1996.
PRICE WATERHOUSE LLP
New York, New York
February 21, 1996
F-1
<PAGE>
<PAGE>
REPORT OF INDEPENDENT AUDITORS
The Board of Directors and Stockholders
The Warnaco Group, Inc.
We have audited the accompanying consolidated balance sheet of The Warnaco
Group, Inc. as of January 7, 1995, and the related consolidated statements of
income, stockholders' equity and cash flows for each of the two years in the
period ended January 7, 1995. Our audits also included the financial statement
schedule listed in the Index at Item 14(a). These financial statements and
schedule are the responsibility of the Company's management. Our responsibility
is to express an opinion on these financial statements and schedule based on our
audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position of
The Warnaco Group, Inc. at January 7, 1995, and the consolidated results of its
operations and its cash flows for each of the two years in the period ended
January 7, 1995, in conformity with generally accepted accounting principles.
Also, in our opinion, the related financial statement schedule, when considered
in relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
As discussed in Note 9 to the consolidated financial statements, the
Company changed its method of accounting for postretirement benefits other than
pensions in 1993.
ERNST & YOUNG LLP
New York, New York
February 23, 1995
F-2
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
JANUARY 7, JANUARY 6,
1995 1996
----------- -----------
<S> <C> <C>
ASSETS
Current assets:
Cash, restricted $1,918 -- 1994 and $3,939 -- 1995................................. $ 3,791 $ 6,162
Accounts receivable, less allowance for doubtful accounts of $2,858 -- 1994 and
$1,960 -- 1995.................................................................... 148,659 156,607
Inventories........................................................................ 252,183 356,466
Prepaid expenses................................................................... 15,892 23,148
----------- -----------
Total current assets.......................................................... 420,525 542,383
----------- -----------
Property, plant and equipment, at cost:
Land and land improvements......................................................... 5,696 5,741
Buildings and building improvements................................................ 62,301 67,667
Machinery and equipment............................................................ 81,138 113,968
----------- -----------
149,135 187,376
Less: Accumulated depreciation.......................................................... 68,203 81,051
----------- -----------
Net property, plant and equipment.................................................. 80,932 106,325
----------- -----------
Other assets:
Deferred financing costs, less accumulated amortization of $1,589 -- 1994 and
$139 -- 1995...................................................................... 6,160 1,522
Trademarks, licenses, intangible and other assets, at cost, less accumulated
amortization of $52,495 -- 1994 and $57,596 -- 1995............................... 118,534 158,817
Excess of cost over net assets acquired, less accumulated amortization of
$33,420 -- 1994 and $37,066 -- 1995............................................... 115,897 112,805
Deferred income tax asset.......................................................... 38,505 17,277
----------- -----------
Total other assets............................................................ 279,096 290,421
----------- -----------
$ 780,553 $ 939,129
----------- -----------
----------- -----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowing under revolving credit facilities........................................ $ 115,679 $ 51,033
Borrowing under foreign credit facilities.......................................... 9,822 --
Current portion of long term debt.................................................. 50,315 26,700
Accounts payable................................................................... 109,786 123,447
Accrued liabilities................................................................ 27,838 26,503
Federal and other income taxes..................................................... 2,611 5,231
----------- -----------
Total current liabilities..................................................... 316,051 232,914
----------- -----------
Long-term debt.......................................................................... 206,792 194,301
Other long-term liabilities............................................................. 17,238 11,613
Stockholders' equity:
Preferred Stock; $.01 par value, 10,000,000 shares authorized, none issued......... -- --
Class A Common Stock; $.01 par value, shares authorized 65,000,000 -- 1994,
130,000,000 -- 1995, shares outstanding 41,734,192 -- 1994, 51,745,512 -- 1995.... 421 521
Capital in excess of par value..................................................... 337,872 567,965
Cumulative translation adjustment.................................................. (1,732) (3,745)
Accumulated deficit................................................................ (83,897) (46,896)
Treasury stock, at cost............................................................ (5,000) (5,000)
Notes receivable for Common Stock issued and unearned stock compensation........... (7,192) (12,544)
----------- -----------
Total stockholders' equity.................................................... 240,472 500,301
----------- -----------
$ 780,553 $ 939,129
----------- -----------
----------- -----------
</TABLE>
This Statement should be read in conjunction with the accompanying Notes to
Consolidated Financial Statements.
F-3
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(IN THOUSANDS EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
--------------------------------------
JANUARY 8, JANUARY 7, JANUARY 6,
1994 1995 1996
---------- ---------- ----------
<S> <C> <C> <C>
Net revenues................................................................. $ 703,769 $ 788,758 $ 916,179
---------- ---------- ----------
Cost of goods sold........................................................... 467,362 532,998 606,498
Selling, administrative and general expenses................................. 144,219 156,573 184,048
Special charge for advertising costs previously deferable (in 1995) and
non-recurring items (in 1993 and 1994)..................................... 22,500 3,000 11,745
---------- ---------- ----------
Income before interest and income taxes...................................... 69,688 96,187 113,888
Interest expense............................................................. 38,935 32,459 33,867
---------- ---------- ----------
Income before income taxes................................................... 30,753 63,728 80,021
Provision (benefit) for income taxes......................................... (22,500) 400 30,408
---------- ---------- ----------
Income before extraordinary items and cumulative effect of the change in the
method of accounting....................................................... 53,253 63,328 49,613
Extraordinary items, net of income tax benefits of $ 0 -- 1993 and
$1,913 -- 1995............................................................. (18,637) -- (3,120)
Cumulative effect of the change in the method of accounting for
postretirement benefits other than pensions................................ (10,500) -- --
---------- ---------- ----------
Net income................................................................... $ 24,116 $ 63,328 $ 46,493
---------- ---------- ----------
---------- ---------- ----------
Income per common share:
Income before extraordinary items and cumulative effect of change in the
method of accounting.................................................. $ 1.34 $ 1.53 $ 1.10
Extraordinary items..................................................... (0.47) -- (0.07)
Cumulative effect of the change in the method of accounting for
postretirement benefits other than pensions........................... (0.26) -- --
---------- ---------- ----------
Net income per common share.................................................. $ 0.61 $ 1.53 $ 1.03
---------- ---------- ----------
---------- ---------- ----------
Weighted average number of shares of common stock outstanding................ 39,770 41,285 45,278
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
This Statement should be read in conjunction with the accompanying Notes to
Consolidated Financial Statements.
F-4
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
NOTES
RECEIVABLE
CAPITAL FOR COMMON
CLASS A IN CUMULATIVE STOCK AND
COMMON EXCESS OF TRANSLATION ACCUMULATED TREASURY UNEARNED STOCK
STOCK PAR VALUE ADJUSTMENT DEFICIT STOCK COMPENSATION
------- ---------- ----------- ------------ --------- --------------
<S> <C> <C> <C> <C> <C> <C>
Balance at January 2, 1993.................... $ 404 $315,209 $ 1,960 ($ 171,341) $ -- ($10,390)
Repurchased 57,750 shares of Class A Common
Stock from employees........................ (141) 141
Payments of employee notes receivable......... 858
Net income.................................... 24,116
Change in cumulative translation adjustment... (1,681)
------- ---------- ----------- ------------ --------- --------------
Balance at January 8, 1994.................... 404 315,068 279 (147,225) -- (9,391)
Issued 1,699,492 shares of Class A Common
Stock in connection with the Calvin Klein
business.................................... 17 22,804
Payments of employee notes receivable......... 2,199
Net income.................................... 63,328
Change in cumulative translation adjustment... (2,011)
Purchase of 286,600 shares of Treasury
Stock....................................... (5,000)
------- ---------- ----------- ------------ --------- --------------
Balance at January 7, 1995.................... 421 337,872 (1,732) (83,897) (5,000) (7,192)
Sold 9,717,000 shares of Class A Common Stock
net of expenses of $10,180.................. 97 222,931
Payments of employee notes receivable......... 1,028
Issued 320,000 shares of restricted stock..... 3 6,957 (6,960)
Dividends..................................... (9,492)
Employee stock options exercised including tax
benefit..................................... -- 205
Amortization of unearned stock compensation... 580
Net income.................................... 46,493
Change in cumulative translation adjustment... (2,013)
------- ---------- ----------- ------------ --------- --------------
Balance at January 6, 1996.................... $ 521 $567,965 ($3,745) ($ 46,896) ($ 5,000) ($12,544)
------- ---------- ----------- ------------ --------- --------------
------- ---------- ----------- ------------ --------- --------------
<CAPTION>
TOTAL
--------
<S> <C>
Balance at January 2, 1993.................... $135,842
Repurchased 57,750 shares of Class A Common
Stock from employees........................ --
Payments of employee notes receivable......... 858
Net income.................................... 24,116
Change in cumulative translation adjustment... (1,681)
--------
Balance at January 8, 1994.................... 159,135
Issued 1,699,492 shares of Class A Common
Stock in connection with the Calvin Klein
business.................................... 22,821
Payments of employee notes receivable......... 2,199
Net income.................................... 63,328
Change in cumulative translation adjustment... (2,011)
Purchase of 286,600 shares of Treasury
Stock....................................... (5,000)
--------
Balance at January 7, 1995.................... 240,472
Sold 9,717,000 shares of Class A Common Stock
net of expenses of $10,180.................. 223,028
Payments of employee notes receivable......... 1,028
Issued 320,000 shares of restricted stock..... --
Dividends..................................... (9,492)
Employee stock options exercised including tax
benefit..................................... 205
Amortization of unearned stock compensation... 580
Net income.................................... 46,493
Change in cumulative translation adjustment... (2,013)
--------
Balance at January 6, 1996.................... $500,301
--------
--------
</TABLE>
This Statement should be read in conjunction with the accompanying Notes to
Consolidated Financial Statements.
F-5
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
INCREASE (DECREASE) IN CASH
(IN THOUSANDS OF DOLLARS)
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
----------------------------------------
<S> <C> <C> <C>
JANUARY 8, JANUARY 7, JANUARY 6,
1994 1995 1996
---------- ---------- ----------
Cash flow from operations:
Net income........................................................................ $ 24,116 $ 63,328 $ 46,493
Non cash items included in net income:
Depreciation and amortization.................................................. 18,525 18,798 22,058
Interest....................................................................... 3,309 1,233 1,205
Extraordinary items............................................................ 18,637 -- 3,120
Cumulative effect of the change in the method of accounting.................... 10,500 -- --
Amortization of unearned stock compensation.................................... -- -- 580
Write down of fixed assets included in non-recurring expenses.................. 1,159 -- --
(Increase) decrease in deferred income tax assets.............................. (24,700) (2,467) 21,641
Other changes in operating accounts............................................... (38,661) (519) (103,305)
Income taxes paid................................................................. (1,008) (2,547) (5,373)
---------- ---------- ----------
Net cash provided from (used for) operations........................................ 11,877 77,826 (13,581)
---------- ---------- ----------
Cash flow from investing activities:
Proceeds from the sale of fixed assets............................................ 1,739 773 616
Increase in intangibles and other assets.......................................... (7,467) (9,936) (34,320)
Purchase of property, plant and equipment......................................... (12,438) (17,534) (39,122)
Purchase of Calvin Klein license -- Canada........................................ -- -- (6,200)
Purchase of Calvin Klein net assets............................................... -- (33,103) (5,000)
---------- ---------- -----------
Net cash used for investing activities.............................................. (18,166) (59,800) (84,026)
---------- ---------- -----------
Cash flow from financing activities:
Proceeds from sale of Class A Common Stock and payment of notes
receivable from employees..................................................... 858 2,199 224,261
Borrowing (repayment) under credit facility....................................... 37,774 14,835 (64,646)
Proceeds from issuance of other debt.............................................. 428,721 8,582 872
Repayments of debt................................................................ (453,832) (41,841) (46,800)
Increase in deferred financing costs.............................................. (8,360) (1,767) (1,599)
Cash dividends paid............................................................... -- -- (5,868)
Purchase of treasury stock........................................................ -- (5,000) --
Other............................................................................. 2,016 4,106 (6,242)
---------- ---------- -----------
Cash provided from (used for) financing activities.................................. 7,177 (18,886) 99,978
---------- ---------- -----------
Increase (decrease) in cash......................................................... 888 (860) 2,371
Cash at beginning of year........................................................... 3,763 4,651 3,791
---------- ---------- -----------
Cash at end of year................................................................. $ 4,651 $ 3,791 $ 6,162
---------- ---------- -----------
---------- ---------- -----------
Other changes in operating accounts:
Accounts receivable............................................................... ($ 3,613) ($ 14,328) ($ 7,948)
Inventories....................................................................... (30,206) (4,646) (104,283)
Prepaid expenses.................................................................. (2,119) 6,256 (7,256)
Accounts payable and accrued expenses............................................. 7,139 13,810 8,702
Federal and other income taxes.................................................... 2,876 400 9,493
Other............................................................................. (12,738) (2,011) (2,013)
---------- ---------- -----------
($ 38,661) ($ 519) ($103,305)
---------- ---------- -----------
---------- ---------- -----------
</TABLE>
This Statement should be read in conjunction with the accompanying Notes to
Consolidated Financial Statements.
F-6
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Organization: The Warnaco Group, Inc. (the 'Company') was incorporated in
Delaware on March 14, 1986 and on May 10, 1986 acquired substantially all of the
outstanding shares of Warnaco Inc. ('Warnaco') ('Acquisition'). Warnaco is the
principal operating subsidiary of the Company.
Nature of Operations: The Company designs, manufactures and markets a broad
line of women's intimate apparel, men's underwear and men's sportswear,
accessories and dress furnishings under a number of owned and licensed brand
names. The Company's products are sold to department and specialty stores, mass
merchandise stores, catalog and other retailers throughout the United States,
Canada, Mexico and Western Europe.
Basis of Consolidation and Presentation: The accompanying Consolidated
Financial Statements include the accounts of The Warnaco Group, Inc. and all
subsidiary companies for the years ended January 8, 1994 ('Fiscal 1993'),
January 7, 1995 ('Fiscal 1994') and January 6, 1996 ('Fiscal 1995'). Fiscal 1993
included 53 weeks of operations. The impact of the additional week of operations
was not material to the operations of the Company.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities, at the date of the financial
statements, and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Certain amounts have been reclassified to conform to the current year
presentation.
Translation of Foreign Currencies: Cumulative translation adjustments arise
primarily from consolidating foreign operations and are applied directly to
stockholders' equity.
Inventories: Inventories are stated at the lower of cost, determined on a
first-in-first-out basis, or market.
Depreciation and Amortization: Provision is made for depreciation of
property, plant and equipment computed over the estimated useful lives of the
assets using the straight-line method, as summarized below:
<TABLE>
<S> <C>
Buildings...................................................................... 20-40 years
Building improvements.......................................................... 2-20 years
Machinery and equipment........................................................ 3-10 years
</TABLE>
Licenses, trademarks and other intangible assets are amortized over the
estimated economic life of the assets which range from 20 to 40 years. The
excess of cost over net assets acquired is amortized over 40 years. The carrying
value of the excess of cost over net assets acquired will be reviewed if facts
and circumstances suggest that it may be impaired. If such a determination is
made, the Company will reduce the carrying value of this asset. Deferred
financing costs are amortized over the life of the related debt, using the debt
outstanding method.
Start-Up Costs: The Company defers certain costs associated with the
start-up of new manufacturing facilities and certain new businesses. Deferred
costs are amortized using the straight-line method principally over five years.
Start-up costs, net of accumulated amortization, were $19,982,000 and
$34,673,000 at January 7, 1995 and January 6, 1996, respectively, and are
included in other assets.
Employee Retirement Plans: The Company has a non-contributory pension plan
and defined contribution retirement plans for the benefit of qualifying
employees. Contributions are deposited with fund managers who invest the assets
of the plans.
Income Taxes: The provision for income taxes and income taxes payable are
determined in accordance with Statement of Financial Accounting Standards No.
109.
F-7
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Capitalized Leases: The asset values and related amortization of
capitalized leases are included with property, plant and equipment and
accumulated depreciation and the associated debt is included with long-term
debt.
Revenue Recognition: The Company recognizes revenue when goods are shipped
to customers.
Income per Common Share: Income per common share is based on the weighted
average number of shares of Common Stock outstanding taking into account
potential dilution from Common Stock equivalents.
Concentration of Credit Risk: The Company sells its products to department
stores, specialty outlets, catalogs, direct sellers and mass merchandisers. The
Company performs periodic credit evaluations of its customers' financial
condition and generally does not require collateral. Credit losses have been
within management's expectations. No customer accounted for more than 10% of the
Company's net revenues in any of the three years in the period ended January 6,
1996.
NOTE 2 - ACQUISITION
On March 14, 1994, the Company acquired certain assets and the worldwide
trademarks, rights and business of Calvin Klein men's underwear, licensed the
Calvin Klein trademark for men's accessories and acquired the worldwide
trademarks and rights of Calvin Klein women's intimate apparel upon the
expiration of an existing license on December 31, 1994. The purchase price was
approximately $60,924,000 and consisted of cash payments of $33,103,000 in
fiscal 1994 and $5,000,000 in fiscal 1995 and the issuance of 1,699,492 shares
of the Company's Common Stock valued at the fair market value ($13.43 per share
or $22,821,000) for such shares. The acquisition was accounted for under the
purchase method of accounting. Accordingly, the accompanying financial
statements include the results of the Calvin Klein businesses commencing March
15, 1994.
The purchase price was allocated to the fair value of assets acquired as
summarized below (in millions of dollars):
<TABLE>
<S> <C>
Accounts receivable......................................................... $ 7.4
Inventories................................................................. 7.9
Property and equipment...................................................... 0.2
Intangible and other assets................................................. 45.4
------
Total purchase price........................................................ $ 60.9
------
------
</TABLE>
In February 1995, the Company terminated the license agreement for the
production of men's underwear and women's intimate apparel bearing the Calvin
Klein name in Canada. The Company will directly design, produce and market
Calvin Klein men's underwear and women's intimate apparel in Canada. The cost of
terminating the license agreement before its expiration in the year 2000 was
$6,200,000.
NOTE 3 - SPECIAL CHARGE FOR ADVERTISING COSTS PREVIOUSLY DEFERABLE
In December 1993, the American Institute of Certified Public Accountants
issued Statement of Position 93-7 -- Reporting on Advertising Costs ('SOP
93-7'). SOP 93-7 requires, among other things, that certain advertising and
promotion costs that the Company had previously deferred and amortized over the
period the advertising benefitted, be expensed when the advertisement first
runs. As a result, the Company recorded a special charge for advertising costs
previously deferable of $11,745,000 ($7,282,000 net of income tax benefits of
$4,463,000) primarily in the fourth quarter of fiscal 1995 related to SOP 93-7.
Advertising and promotion expense was $31,578,000, $37,192,000 and $40,988,000
(excluding the special charge) in the years ended January 8, 1994, January 7,
1995 and January 6, 1996, respectively.
F-8
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 - NON-RECURRING EXPENSES
On October 3, 1993, the Company made a strategic decision to discontinue a
portion of its men's manufactured dress shirt and neckwear business. Net
revenues for the year ended January 8, 1994 approximated $33,500,000 for this
operation. Non-recurring expense for fiscal 1993 includes a $19,900,000 charge
for fourth quarter losses and anticipated future losses from operations through
the estimated date of disposal and losses and expenses associated with the
disposal of assets, liquidation of inventories and termination of employees.
In addition, non-recurring expense for the year ended January 8, 1994
includes $2,600,000 of costs associated with the final wind-up of the Company's
Canadian womenswear business, which had been discontinued in a prior year.
In January 1994, the Company's leased warehouse located in Sylmar,
California suffered significant structural damage due to the California
earthquake and was permanently closed. The Company was able to recover
substantially all of its inventory, transfer the inventory to other locations,
and begin shipping at normal levels in March, 1994. The Company has earthquake
insurance and, other than a deductible of approximately $3 million, which was
recorded as a non-recurring expense in the first quarter of fiscal 1994, expects
to fully recover its losses.
NOTE 5 - EXTRAORDINARY ITEMS
In October 1993, in conjunction with a refinancing of the Company's credit
agreement, the Company recorded non-cash extraordinary charges of $18,637,000
(without income tax benefit, due to the Company's then existing net operating
loss carryforwards) related to the write-off of deferred financing costs under
the Company's previous credit agreement.
In October 1995, in conjunction with a refinancing of the Company's credit
agreement, as more fully described in Note 11, the Company recorded a non-cash
extraordinary charge of $3,120,000 (net of income tax benefits of $1,913,000)
related to the write-off of deferred financing costs under the Company's
previous credit agreement.
NOTE 6 - RELATED PARTY TRANSACTIONS
In 1990, the Company sold its activewear division to a newly formed
company, Authentic Fitness Corporation ('Authentic Fitness'). Certain directors
and officers of the Company are also directors and officers of Authentic
Fitness. The Company maintained an equity interest in Authentic Fitness equal to
approximately 3% of the outstanding equity of Authentic Fitness. The equity
interest was sold in March 1995 pursuant to an option granted at the time of the
sale. Authentic Fitness purchases certain occupancy services related to leased
facilities, computer service, laboratory testing and transportation services
from the Company, all of which are charged at the Company's cost. Total charges
to Authentic Fitness for these services were approximately $1,412,000,
$6,292,000 and $5,335,000 in the years ended January 8, 1994, January 7, 1995
and January 6, 1996, respectively.
In 1994, the Company sold certain trademarks and trade names to Authentic
Fitness for $6,550,000 (net book value of $0), a purchase price determined at
arms-length based on an independent third party appraisal. The Company sells
certain inventory to Authentic Fitness for sale in its outlet stores, such sales
totaled $2,400,000 and $2,668,000 in the years ended January 7, 1995 and January
6, 1996 (none in the year ended January 8, 1994). The Company purchases certain
design and occupancy services from Authentic Fitness. All services are charged
at Authentic Fitness' cost. Charges for design and occupancy services were
approximately $500,000, $1,600,000 and $2,206,000 in the years ended January 8,
1994, January 7, 1995 and January 6, 1996, respectively. The Company purchases
inventory from Authentic Fitness for sale in the Company's outlet stores.
Inventory purchases from Authentic Fitness were $700,000, $2,547,000 and
$7,562,000 in the years ended January 8, 1994, January 7, 1995 and January 6,
F-9
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1996, respectively. The Company purchased certain machinery and equipment from
Authentic Fitness in fiscal 1994 for a total purchase price of $1,400,000 (none
in fiscal year ended January 8, 1994 and January 6, 1996).
In December 1993, the Company sold its Checotah, Oklahoma manufacturing
facility to Authentic Fitness. The sales price of $3,317,000 was determined by
an independent appraisal, and resulted in a gain of $901,000.
In June 1995, the Company and Authentic Fitness entered into a sub-license
agreement whereby the Company will produce certain intimate apparel using the
Speedo brand name. The Company will pay a royalty to Authentic Fitness for
garments sold under the Speedo label. The Company paid Authentic Fitness
$1,000,000 for this sub-license. Royalty expense under this agreement was
approximately $78,000 in the year ended January 6, 1996.
A Director and a stockholder of the Company is the sole stockholder,
President and a director of The Spectrum Group, Inc. ('Spectrum'). Spectrum and
the Company are parties to an agreement under which Spectrum provides consulting
services to the Company. The Spectrum consulting agreement was amended on May 9,
1991 to provide for annual fees of $350,000 or such higher amount, including
expenses, not to exceed $500,000 (plus cost of living increases) for a period of
five years. The contract expires on May 9, 1996. Amounts charged to expense
pursuant to this agreement were $500,000 in each of the three fiscal years ended
January 6, 1996.
NOTE 7 - SEGMENT REPORTING
The Company operates within one industry segment -- the marketing and
manufacturing of apparel. The Company has no customer which accounted for more
than 10% of the Company's net revenues for any of the three years in the period
ended January 6, 1996. The Company operates in several geographic areas.
<TABLE>
<CAPTION>
(AMOUNTS IN THOUSANDS)
CANADA AND
FOR THE YEAR ENDED JANUARY 8, 1994 UNITED STATES LATIN AMERICA EUROPE CONSOLIDATED
- ----------------------------------------------------- ------------- ------------- ------- ------------
<S> <C> <C> <C> <C>
Net revenues......................................... $ 605,124 $52,945 $45,700 $703,769
------------- ------------- ------- ------------
------------- ------------- ------- ------------
Operating profit..................................... $ 105,438 $ 6,366 $ 3,441 $115,245
------------- ------------- -------
------------- ------------- -------
General corporate expense -- net..................... (45,557)
Interest expense..................................... (38,935)
------------
Income before income taxes, extraordinary item and
cumulative effect.................................. $ 30,753
------------
------------
<CAPTION>
FOR THE YEAR ENDED JANUARY 7, 1995
- -----------------------------------------------------
<S> <C> <C> <C> <C>
Net revenues......................................... $ 696,174 $47,668 $44,916 $788,758
------------- ------------- ------- ------------
------------- ------------- ------- ------------
Operating profit..................................... $ 113,752 $ 5,937 $ 2,561 $122,250
------------- ------------- -------
------------- ------------- -------
General corporate expense -- net..................... (26,063)
Interest expense..................................... (32,459)
------------
Income before income taxes........................... $ 63,728
------------
------------
Identifiable assets at January 7, 1995............... $ 635,888 $30,482 $31,307 $697,677
------------- ------------- -------
------------- ------------- -------
Corporate assets..................................... 82,876
------------
Total assets at January 7, 1995...................... $780,553
------------
------------
</TABLE>
F-10
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
CANADA AND
FOR THE YEAR ENDED JANUARY 6, 1996 UNITED STATES LATIN AMERICA EUROPE CONSOLIDATED
- ----------------------------------------------------- ------------- ------------- ------- ------------
<S> <C> <C> <C> <C>
Net revenues......................................... $ 807,491 $57,820 $50,868 $916,179
------------- ------------- ------- ------------
------------- ------------- ------- ------------
Operating profit..................................... $ 142,673 $ 9,948 $ 2,449 $155,070
------------- ------------- -------
------------- ------------- -------
General corporate expense -- net..................... (41,182)
Interest expense..................................... (33,867)
------------
Income before income taxes and extraordinary item.... $ 80,021
------------
------------
Identifiable assets at January 6, 1996............... $ 705,300 $43,093 $39,329 $787,722
------------- ------------- -------
------------- ------------- -------
Corporate assets..................................... 151,407
------------
Total assets at January 6, 1996...................... $939,129
------------
------------
</TABLE>
Operating profit is total revenue less operating expenses. In computing
operating profit, none of the following items has been added or deducted:
general corporate expenses-net, interest expense, and income taxes.
Non-recurring expense of $22,500,000 in fiscal 1993 and $3,000,000 in fiscal
1994 is included in general corporate expense-net. The special charge related to
the adoption of SOP 93-7 of $11,745,000 in fiscal 1995 are included in general
corporate expense-net.
Identifiable assets are those assets of the Company that are associated
with the operations in each geographic area. Corporate assets are principally
accounts receivable, prepaid expenses, property and equipment, deferred
financing costs, deferred income tax assets and other assets.
NOTE 8 - INCOME TAXES
The following presents the U.S. and foreign components of income from
operations before income taxes and the related provision (benefit) for U.S.
federal and other income taxes:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------------------------------
JANUARY 8, JANUARY 7, JANUARY 6,
1994 1995 1996
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
U.S. income from operations before income taxes..................... $ 29,750 $ 63,574 $ 75,542
Foreign income before taxes......................................... 1,003 154 4,479
---------- ---------- ----------
Income before income taxes, extraordinary items and cumulative
effect of change in method of accounting.......................... $ 30,753 $ 63,728 $ 80,021
---------- ---------- ----------
---------- ---------- ----------
Current:
U.S. federal........................................................ $ 10,413 $ 18,295 $ 1,790
State and Puerto Rico............................................... 643 4,253 6,013
Foreign............................................................. 1,557 487 1,923
---------- ---------- ----------
12,613 23,035 9,726
Deferred:
U.S. federal........................................................ (35,113) (22,635) 23,792
State and Puerto Rico............................................... -- -- (3,110)
---------- ---------- ----------
(35,113) (22,635) 20,682
---------- ---------- ----------
Total............................................................... $(22,500) $ 400 $ 30,408
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
During fiscal 1993, the Company recognized a deferred tax asset of
$1,541,000 (offset in its entirety by a valuation allowance) related to an
increase in the Company's statutory tax rate resulting from tax legislation
passed in fiscal 1993. The Company re-evaluated its deferred tax asset in fiscal
1993 and fiscal
F-11
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1994 and reversed portions of its valuation allowance amounting to $24,700,000
and $22,635,000, respectively.
At January 7, 1995 and January 6, 1996, the Company had net deferred income
tax assets of $38,505,000 and $17,277,000, respectively. Future tax benefits of
$3,000,000 were realized in fiscal 1994 from the treatment of acquisition
related liabilities and were credited against goodwill.
The following presents the reconciliation of the provision for income taxes
to U.S. federal income taxes computed at the statutory rate:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------------------------------
JANUARY 8, JANUARY 7, JANUARY 6,
1994 1995 1996
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Income before income taxes, extraordinary items and cumulative
effect of the change in the method of accounting.................. $ 30,753 $ 63,728 $ 80,021
---------- ---------- ----------
---------- ---------- ----------
Provision for income taxes at the statutory rate.................... 10,764 22,304 28,007
Foreign income taxes at rates in excess of the statutory rate....... 1,206 433 300
State income taxes -- net of federal benefit........................ 343 2,764 3,908
Puerto Rico income taxes............................................ 300 -- --
Non-deductible intangible amortization.............................. -- 1,321 1,256
Other -- net........................................................ -- -- 234
Current benefit of capital loss carryforward........................ -- (3,787) (1,275)
Benefit of U.S. NOL carryforwards................................... (35,113) (22,635) (2,022)
---------- ---------- ----------
Provision (benefit) for income taxes................................ ($22,500) $ 400 $ 30,408
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
For tax purposes, the Company has estimated U.S. net operating loss
carryforwards of approximately $42,910,000 which expire from 2001 through 2007.
As a result of the 1992 public stock offering, the 1991 initial public
offering and other ownership changes occurring during the prior three-year
period, a change of ownership occurred under Internal Revenue Code Section 382,
which effectively limits the rate at which the Company may utilize its net
operating loss carryforwards. Nevertheless, the Company expects that it will be
able to utilize substantially all of the net operating loss carryforwards it
would have used, absent any Section 382 limitation.
F-12
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The components of deferred tax assets and liabilities as of January 7, 1995
and January 6, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
JANUARY 7, JANUARY 6,
1995 1996
---------- ----------
<S> <C> <C>
Deferred tax assets:
Discounts and sales allowances................................................. $ 1,516 $ 1,502
Inventory...................................................................... 474 (462)
Postretirement benefits........................................................ 3,675 3,675
State and local taxes.......................................................... 620 620
Amortization of intangibles.................................................... 3,656 4,635
Alternative minimum tax credit carryforwards................................... -- 1,832
Net operating loss carryforwards............................................... 38,505 13,935
---------- ----------
$ 48,446 $ 25,737
---------- ----------
---------- ----------
Deferred tax liabilites:
Prepaid advertising............................................................ $ 3,203 $ 1,453
Deferred expenses.............................................................. 2,165 2,165
Investment in Authentic Fitness stock.......................................... 1,275 --
Depreciation................................................................... 803 1,678
Retirement plans............................................................... 485 485
Other.......................................................................... 2,010 3,092
---------- ----------
$ 9,941 $ 8,873
---------- ----------
---------- ----------
</TABLE>
NOTE 9 - EMPLOYEE RETIREMENT PLANS
PENSIONS
The Company has a defined benefit pension plan which covers substantially
all non-union domestic employees (the 'Plan'). The Plan is noncontributory and
benefits are based upon years of service and average earnings for the seven
highest consecutive calendar years of compensation (increasing to ten years in
1999 and fifteen years in 2000) during the years immediately preceding
retirement. Pension contributions are also made to foreign plans and directly to
union sponsored plans.
The funding policy for the Plan is to make, as a minimum contribution, the
equivalent of the minimum required by the Employee Retirement Income Security
Act of 1974 (ERISA).
Pension costs were:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
------------------------------------------
JANUARY 8, JANUARY 7, JANUARY 6,
1994 1995 1996
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Benefits earned..................................................... $ 2,004 $ 2,372 $ 1,676
Interest cost on projected benefits................................. 7,367 7,630 7,801
Actual (return) loss on investments................................. (12,834) 5,085 (20,976)
Net amortization/deferral........................................... 3,899 (13,981) 13,271
---------- ---------- ----------
Cost of Company plan................................................ 436 1,106 1,772
Cost of other plans................................................. 343 519 539
---------- ---------- ----------
Net pension cost.................................................... $ 779 $ 1,625 $ 2,311
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
The Plan had projected benefit obligations in excess of Plan assets at
January 7, 1995 and January 6, 1996. Plan investments include fixed income
securities and marketable equity securities, including 71,800 and 71,800 shares
of the Company's Class A Common Stock, which had a fair market value of
F-13
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
$1,239,000 and $1,795,000 at January 7, 1995 and January 6, 1996, respectively.
The Plan also owned 101,300 and 101,300 shares of Authentic Fitness' common
stock which had a fair market value of $1,406,000 and $2,102,000 at January 7,
1995 and January 6, 1996, respectively.
The following table presents a reconciliation of the funded status of the
Plan at January 7, 1995 and January 6, 1996:
<TABLE>
<CAPTION>
JANUARY 7, JANUARY 6,
1995 1996
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Plan assets at fair value........................................................... $ 88,618 $ 101,905
---------- ----------
---------- ----------
Actuarial present value of benefit obligation:
Vested............................................................................ 84,146 98,379
Non-vested........................................................................ 2,101 2,403
---------- ----------
Accumulated benefit obligation...................................................... 86,247 100,782
Effect of projected future salary increases......................................... 7,663 7,471
---------- ----------
Projected benefit obligation........................................................ 93,910 108,253
---------- ----------
Plan assets less than projected benefit obligation.................................. 5,292 6,348
Unrecognized prior service cost..................................................... -- 794
Unrecognized net loss............................................................... (2,044) (2,122)
---------- ----------
Accrued pension cost of the Plan.................................................... 3,248 5,020
Accrued pension cost -- others...................................................... 31 --
---------- ----------
Amounts accrued for employee retirement plans....................................... $ 3,279 $ 5,020
---------- ----------
---------- ----------
Assumptions used for Company pension plans:
Discount rate..................................................................... 8.75% 7.50%
</TABLE>
The actuarial assumption for long term rate of return on plan assets is 9%
for all periods presented. The actuarial assumption for increases in salary
levels are based on employee's attained age and years of service and range from
4.6% to 14% per annum.
OTHER POSTRETIREMENT BENEFITS
In addition to providing pension benefits, the Company has defined benefit
health care and life insurance plans that provide postretirement benefits to
retired employees and former directors. The plans are contributory, with retiree
contributions adjusted annually, and contain cost sharing features including
deductibles and co-insurance. The Company does not fund postretirement benefits.
Effective January 3, 1993, the Company adopted Statement of Financial
Accounting Standards No. 106, Employers' Accounting for Postretirement Benefits
Other than Pensions ('SFAS No. 106') and, as a result, recorded an expense for
the cumulative effect of a change in the method of accounting for postretirement
benefits of $10,500,000 (without income tax benefit). Net periodic
postretirement benefit cost is as follows:
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
--------------------------------------
JANUARY 8, JANUARY 7, JANUARY 6,
1994 1995 1996
---------- ---------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost............................................. $ 103 $ 83 $109
Interest cost............................................ 897 655 599
Net amortization/deferral................................ -- (57) (220)
---------- ---------- ----------
$1,000 $681 $488
---------- ---------- ----------
---------- ---------- ----------
</TABLE>
F-14
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The funded status of the plans is as follows:
<TABLE>
<CAPTION>
JANUARY 7, JANUARY 6,
1995 1996
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Accumulated postretirement benefit obligation:
Retirees.......................................................................... $6,620 $6,438
Actives, fully eligible........................................................... 316 222
Actives, not fully eligible....................................................... 1,198 900
Unrecognized net gain from
experience differences and
changes in assumptions............................................................ 1,685 2,045
---------- ----------
Amount accrued for postretirement benefit costs..................................... $9,819 $9,605
---------- ----------
---------- ----------
</TABLE>
The weighted average annual assumed rate of increase in the per capita
costs of covered benefits (health care cost trend rate) for the year ended
January 8, 1994 was 13% for years 1-4, 10% for years 5-9 and 5% for years
thereafter. The weighted average annual assumed rate of increase in the per
capita costs of covered benefits (health care cost trend rate) for the years
ended January 7, 1995 and January 6, 1996 was 11% for years 1-3, 9% for years
4-8, and 5% for years thereafter. A 1% increase in the trend rate assumption
would have increased the cumulative effect adjustment by approximately $442,000
and would increase the periodic postretirement benefit cost by approximately
$44,000, $34,000 and $34,000 for the years ended January 8, 1994, January 7,
1995, and January 6, 1996, respectively. The weighted average discount rate used
in determining the accumulated postretirement benefit obligation is 8.75% and
7.50% at January 7, 1995 and January 6, 1996, respectively. The rate is
consistent with the discount rate used in valuing the Company's pension plans.
The Company also sponsors a defined contribution plan for substantially all
of its domestic employees. Employees can contribute to the plan, on a pre-tax
and after tax basis, a percentage of their qualifying compensation up to the
legal limits allowed. Beginning July 1, 1995, the Company contributes amounts
equal to 15% of the first 6% of employee contributions to the defined
contribution plan. The maximum Company contribution on behalf of any employee is
$1,350 in any year. Employees vest in the Company contribution over four years.
Company contribution to the defined contribution plan totaled $125,000 for the
year ended January 6, 1996 (none in the years ended January 8, 1994 and January
7, 1995).
NOTE 10 - INVENTORIES
Inventories consist of the following:
<TABLE>
<CAPTION>
JANUARY 7, JANUARY 6,
1995 1996
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Finished goods...................................................................... $ 131,450 $ 214,252
Work in process..................................................................... 60,513 77,940
Raw materials....................................................................... 60,220 64,274
---------- ----------
$ 252,183 $ 356,466
---------- ----------
---------- ----------
</TABLE>
F-15
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11 - DEBT
Long-term debt consists of the following:
<TABLE>
<CAPTION>
JANUARY 7, JANUARY 6,
1995 1996
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Term Note due 1996-2000............................................................. $ 232,000 $ 200,000
Capital lease obligations........................................................... 6,700 4,975
Other............................................................................... 18,407 16,026
---------- ----------
257,107 221,001
Less: amounts due within one year................................................... 50,315 26,700
---------- ----------
$ 206,792 $ 194,301
---------- ----------
---------- ----------
</TABLE>
Approximate maturities of long-term debt are as follows:
<TABLE>
<CAPTION>
AMOUNT
YEAR (IN THOUSANDS)
---- --------------
<S> <C>
1996.......................................................... $ 26,700
1997.......................................................... 49,867
1998.......................................................... 41,090
1999.......................................................... 51,006
2000.......................................................... 50,517
2001 -- Thereafter............................................ 1,821
</TABLE>
On October 12, 1995, the Company entered into Bank Credit Agreements (the
'1995 Bank Credit Agreements') with substantially the same lenders as those in
the Company's previous bank credit agreement. The 1995 Bank Credit Agreements
provide for a term loan of $200 million, a five year revolving loan in the
amount of $250 million and a 364 day revolving loan in the amount of $100
million ('Revolving Credit Facilities'). The 364 day revolving loan is renewable
at the Company's option. Amounts outstanding under the 1995 Bank Credit
Agreements bear interest at the Bank's base lending rate, or at LIBOR plus
0.425%. In addition, the 1995 Bank Credit Agreements allow the Company to place
amounts borrowed under the $250 million revolving loan portion of the 1995 Bank
Credit Agreements for bid with participating credit institutions. The Company
has the right to accept or reject any bids offered by the participating
institutions. Amounts drawn under the Revolving Credit Facilities are not
limited to any borrowing base. Borrowings under the 1995 Credit Agreements are
unsecured. The Company is required to pay a commitment fee on unused portions of
the Revolving Credit Facilities equal to 0.175% per annum in the case of the
$250 million revolving loan and 0.125% per annum on the 364 day revolving loan.
Unused commitments under the Revolving Credit Facilities at January 6, 1996
amounted to approximately $293 million. The rate of interest payable on amounts
outstanding under the 1995 Bank Credit Agreements and the commitment fee payable
on unused portion of the Revolving Credit Facilities decreases as the Company's
implied senior debt rating, from certain credit rating agencies, improves.
The 1995 Bank Credit Agreements contain various covenants involving
additional debt, liens on Company property, mergers, investments in other
entities, asset sales and other items. The 1995 Bank Credit Agreements also
require the Company to meet certain financial tests, which as of January 6,
1996, were as follows: (1) Minimum net worth -- $471,300,000, (2) Leverage ratio
of .550 to 1, and (3) Fixed charge coverage ratio of 1.20 to 1. As of January 6,
1996, the Company was in compliance with all of the covenants under the 1995
Bank Credit Agreements.
On October 14, 1993, the Company entered into a Financing Agreement (the
'1993 Financing'). The 1993 Financing provided for a revolving loan of up to
$200 million (subsequently increased to $235 million) and a term note of $300
million at the lender's base rate plus .25%. It also provided for a
F-16
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
LIBOR option at a rate of LIBOR plus 1.25%. In May 1994, the Company obtained a
senior credit rating of BBB- from certain credit rating agencies, which reduced
the interest rate payable on the Company's outstanding debt to the bank's base
rate or LIBOR plus .875%. In addition, in June 1994 the Company negotiated a
further reduction in the interest rate on the Company's outstanding debt
obligations to LIBOR plus 50 basis points. The 1993 Financing was replaced in
October 1995 by the 1995 Bank Credit Agreements.
Certain provisions in the 1993 Financing required the Company to fix the
interest rate on $125 million of the Company's $500 million (subsequently
increased to $535 million) facility. As a result, the Company entered into
agreements which effectively fixed the Company's interest rate on $25 million at
6.31%, $150 million at 6.57% and $100 million at 4.29%. The agreements expired
prior to their maturity in October 1995, when the Company entered into the 1995
Bank Credit Agreements. There was no cost to the Company to terminate these
agreements prior to their maturity. The related write-off of deferred debt issue
costs associated with the 1993 Financing amounted to $3,120,000 (net of income
tax benefits of $1,913,000) and was recorded in October 1995 as an extraordinary
item related to the early extinguishment of debt.
In October 1995, in conjunction with entering the 1995 Bank Credit
Agreements, the Company entered into an agreement with a bank whereby the
interest rate on $150,000,000 of the Company's variable rate debt was fixed for
a term of three years at an interest rate of 5.99%. Differences between the
fixed interest rate and the three month LIBOR interest rate are settled
quarterly between the Company and the bank. The Company made a payment under
this agreement amounting to $20,000 in the year ended January 6, 1996. The
Company estimates that the cost to terminate the agreement as of January 6, 1996
would have been approximately $3,214,000.
Cash interest paid amounted to $37,069,000, $30,680,000 and $32,667,000 in
the years ended January 8, 1994, January 7, 1995 and January 6, 1996,
respectively.
The Company's average interest rate on all its outstanding bank debt was
approximately 6.35% and 6.19% at January 7, 1995 and January 6, 1996,
respectively.
In December 1995, the Company entered into a $200,000,000 credit agreement
with its banks which provides the Company with a credit facility for the
issuance of commercial letters of credit (the 'L/C Facility'). The L/C Facility
replaced a previous facility with the same lenders in an aggregate amount of
$80,000,000 (subsequently increased to $100,000,000). In addition to providing
for the issue of trade letters of credit, the L/C Facility provides that the
Company may borrow, for a period of 90 days, the amounts due under maturing
trade letters of credit ('90 Day Loans'). Total amounts outstanding under the
L/C Facility, including the face amount of trade letters of credit and 90 Day
Loans may not exceed $200,000,000 in the aggregate. The total amount of 90 Day
Loans outstanding may not exceed $100,000,000 at any time. Amounts outstanding
under 90 Day Loans accrue interest at the bank's base rate or at LIBOR plus
0.4250%. The interest rate payable on outstanding 90 Day Loans decreases as the
Company's implied senior debt rating improves. The L/C Facility is for a term of
one year. The Company is required to pay a commitment fee on the unused portion
of the L/C Facility equal to 0.125% per annum of the average unused portion of
the L/C Facility. The Company classifies 90 Day Loans with trade accounts
payable. The amount of 90 Day Loans outstanding at January 7, 1995 and January
6, 1996 was $7,244,000 and $41,369,000, respectively.
The Company issues stand-by and commercial letters of credit guaranteeing
the Company's performance under certain purchase agreements. The letters of
credit are issued under the terms of the 1995 Bank Credit Agreements and the L/C
Facility. At January 7, 1995 and January 6, 1996, the Company had outstanding
letters of credit totalling approximately $42,515,000 and $49,785,000,
respectively, of which $10,599,000 and $6,490,000, respectively, reduced amounts
available under the Revolving Credit Facilities.
F-17
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The Company and certain of its foreign subsidiaries have entered into
credit agreements that provide for revolving lines of credit ('Foreign Credit
Facilities'). The terms of the Foreign Credit Facilities are substantially
similar to the 1995 Bank Credit Agreements. At January 6, 1996, the total amount
of credit available under the Foreign Credit Facilities was approximately $29
million.
The Company is required to maintain compensating balances securing certain
credit arrangements. Such balances amounted to $114,000 and $100,000 at January
7, 1995 and January 6, 1996, respectively. In addition, the Company classifies
lock box receipts not available until the next business day as restricted cash.
Such balances amounted to $1,804,000 and $3,839,000 at January 7, 1995 and
January 6, 1996, respectively.
NOTE 12 - CAPITAL STOCK
On August 25, 1994, the Company's Board of Directors authorized a
two-for-one stock split for stockholders of record on September 8, 1994 and
effective October 3, 1994. The split increased the number of outstanding shares
of Class A Common Stock and outstanding options by 100%. Exercise prices for
outstanding options were adjusted to reflect the split. All outstanding shares
and per share information has been restated to reflect the split as if it had
occurred at the beginning of each period presented.
On May 14, 1993, the stockholders of the Company approved amendments to the
Company's Amended and Restated Certificate of Incorporation which authorized the
issuance of up to 10,000,000 shares of preferred stock with a par value of $.01
and increased the authorized number of shares of Common Stock from 40,000,000 to
65,000,000. On May 11, 1995, the Company approved amendments to the Company's
Amended and restated Certificate of Incorpoation increasing the authorized
number of shares of Common Stock from 65,000,000 to 130,000,000.
Prior to May 1994, dividends to common stockholders were restricted under
certain covenants of the debt agreements. The provision of the debt agreements
restricting the Company's ability to pay dividends were automatically modified
upon the Company's achievement of an investment grade senior debt rating of
BBB-from Standard & Poor's and, as a result, the Company may declare and pay
dividends. On June 30, 1995 the Company paid its first quarterly dividend on its
Common Stock equal to $.07 per common share. Total dividends paid during the
year ended January 6, 1996 were $5,868,000. In addition, on November 7, 1995 the
Company's declared a quarterly dividend of $0.07 per share payable on January 8,
1996 to shareholders of record on December 1, 1995. The accrued dividend
amounted to $3,624,000 and was paid on January 8, 1996. On February 22, 1996,
the Company declared a quarterly cash dividend of $0.07 per share payable on
April 5, 1996 to shareholders of record on March 1, 1996. The 1995 Bank Credit
Agreements include certain restrictions on the amount of dividends the Company
may declare in any period.
In 1988, the Company adopted the 1988 Employee Stock Purchase Plan ('Stock
Purchase Plan'). The Stock Purchase Plan provides for sales of up to 4,800,000
shares of Class A Common Stock of the Company to certain key employees. At both
January 7, 1995 and January 6, 1996, 4,521,300 shares were issued and
outstanding pursuant to grants under the Stock Purchase Plan. The Stock Purchase
Plan is administered by the Employee Stock Purchase Plan Administrative
Committee of the Board of Directors which has full authority to determine the
number of shares granted or sold, vesting requirements, voting requirements and
conditions of any stock purchase agreement between the Company and a key
employee.
All shares were sold at amounts determined to be equal to the fair market
value of the shares. The shares are subject to vesting requirements and
restrictions on the transfer of ownership. In addition, certain employees
elected to pay for the shares granted by executing a promissory note payable to
the Company. Notes totalling $6,561,000 and $5,971,000 at January 7, 1995 and
January 6, 1996 are non-
F-18
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
interest bearing, while the balance earn interest at approximately 8%. The note
maturities range from five to ten years.
Notes receivable from employees are deducted from stockholders' equity and
are principally owed by officers and directors of the Company.
During 1991, the Company established The Warnaco Group, Inc. 1991 Stock
Option Plan ('Option Plan') and authorized the issuance of up to 1,500,000
shares of Class A Common Stock to cover grants to be made under the plan. The
Option Plan is administered by a committee of the Board of Directors of the
Company which determines the number of stock options to be granted under the
Option Plan, and the terms and conditions of such grants. The Option Plan
provides for the granting of qualified stock options within the meaning of
Internal Revenue Code Section 422 and non-qualified stock options. In addition,
the Option Plan limits the amount of qualified stock options that may become
exercisable by any individual during a calendar year and limits the vesting
period for options awarded under the Option Plan.
On May 14, 1993, the stockholders approved the adoption of The Warnaco
Group, Inc. 1993 Stock Plan ('Stock Plan'). The Stock Plan provided for the
issuance of up to 2,000,000 shares of Common Stock of the Company through awards
of stock options, stock appreciation rights, performance awards, restricted
stock units and stock unit awards. On May 12, 1994, the stockholders approved an
amendment to the Stock Plan whereby the number of shares issuable under the
Stock Plan is automatically increased each year by 3% of the outstanding number
of shares of Class A Common Stock of the Company as of the beginning of each
fiscal year. The total number of shares available for issuance under the Stock
Plan as of January 6, 1996 was 5,873,601. The Compensation Committee of the
Board of Directors has the sole and complete authority to make awards under the
Stock Plan and to determine the specific terms and conditions of such awards,
except that the exercise price of any option award may not be less than the fair
market value of the Company's Common Stock at the date of the grant.
In May 1994, the Company's stockholders approved the adoption of the 1993
Non-Employee Director Stock Plan ('Director Plan'). The Director Plan provides
for awards of non-qualified stock options to directors of the Company who are
not employees of the Company. Options granted under the Director Plan are
exercisable in whole or in part until the earlier of ten years from the date of
the grant or one year from the date on which an optionee ceases to be a Director
eligible for grants. Options are granted at the fair market value of the
Company's Common Stock at the date of the grant. The Director Plan provides for
the automatic grant of options to purchase (i) 30,000 shares of Common Stock
upon a Director's election to the Company's Board of Directors and (ii) 10,000
shares of Common Stock immediately following each annual shareholders' meeting
as of the date of such meeting.
Options issued, exercised, cancelled and outstanding under the Stock Plan,
the Option Plan and the Director Plan at January 6, 1996 are summarized below:
<TABLE>
<CAPTION>
PRICE RANGE SHARES
----------------- ---------
<S> <C> <C>
Outstanding January 3, 1993.............................................. $ 17.31 812,000
Options granted.......................................................... 15.81-18.31 2,410,000
Options cancelled........................................................ 15.81-18.31 (243,000)
----------------- ---------
Outstanding January 8, 1994.............................................. 15.81-18.31 2,979,000
Options granted.......................................................... 13.13-17.38 670,000
Options cancelled........................................................ 13.38-17.38 (162,000)
----------------- ---------
Outstanding January 7, 1995.............................................. 13.13-18.31 3,487,000
Options granted.......................................................... 15.75-18.50 2,570,000
Options exercised........................................................ 15.81-18.31 (106,500)
Options cancelled........................................................ 15.81-18.31 (362,500)
----------------- ---------
Outstanding January 6, 1996.............................................. $ 13.13-18.50 5,588,000
----------------- ---------
----------------- ---------
</TABLE>
F-19
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Under the above plans, options to purchase a total of 5,588,000 shares of
Common Stock were outstanding, 3,583,000 of which were exercisable. Options are
exercisable for a period of ten years from date of the grant and vest when
granted in the case of the Director Plan and from the grant date to four years
for the Stock Plan and Option Plan. Options expire from February 14, 2002 to May
22, 2005.
The Company has reserved 7,467,101 shares of Class A Common Stock for
issuance under the above plans as of January 6, 1996.
In August 1995, in accordance with the provisions of the Stock Plan, the
Company granted 320,000 shares of restricted stock to certain employees,
including certain officers of the Company. The restricted shares vest over four
years and will be fully vested in August 1999. The fair market value of the
restricted shares was $6,960,000 at the date of grant. The Company will
recognize compensation expense equal to the fair value of the restricted shares
over the vesting period. Compensation expense for the year ended January 6, 1996
was $580,000. The outstanding amount of unearned stock compensation at January
6, 1996 was $6,380,000 and is deducted from stockholders' equity.
In August 1994, the Company purchased 286,600 shares of its outstanding
Common Stock on the open market at an average price of $17.45 per share. Total
cost of the purchase was $5,000,000 and was funded by increasing amounts
outstanding under the Company's revolving line of credit.
NOTE 13 - LEASES
Rental expense was $14,213,000, $15,100,000 and $16,545,000 for the years
ended January 8, 1994, January 7, 1995 and January 6, 1996, respectively.
The following is a schedule of future minimum rental payments required
under operating leases with terms in excess of one year, as of January 6, 1996:
<TABLE>
<CAPTION>
RENTAL PAYMENTS
------------------------
(IN THOUSANDS)
REAL ESTATE EQUIPMENT
----------- ---------
<S> <C> <C>
1996................................................................ $ 9,944 $ 3,522
1997................................................................ $ 8,460 $ 3,160
1998................................................................ $ 7,926 $ 2,834
1999................................................................ $ 7,250 $ 2,657
2000................................................................ $ 8,277 $ 2,628
2001 - thereafter................................................... $11,804 $13,123
</TABLE>
NOTE 14 - QUARTERLY RESULTS OF OPERATIONS
The following summarizes the unaudited quarterly results of operations of
the Company for the 1994 and 1995 fiscal years.
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 7, 1995
--------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net revenues..................................................... $147,731 $190,302 $217,872 $232,853
Gross profit..................................................... 50,376 56,990 69,896 78,498
Net income....................................................... $ 8,961 $ 9,086 $ 21,711 $ 23,570
-------- -------- -------- --------
-------- -------- -------- --------
Net income per common share...................................... $ 0.22 $ .022 $ .052 $ .057
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
F-20
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
YEAR ENDED JANUARY 6, 1996
--------------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C>
Net revenues..................................................... $195,156 $210,395 $239,569 $271,059
Gross profit..................................................... 66,824 68,219 84,628 90,010
Income before extraordinary item................................. 10,620 9,265 18,091 11,637
Extraordinary item............................................... -- -- -- 3,120
Net income....................................................... $ 10,620 $ 9,265 $ 18,091 $ 8,517
-------- -------- -------- --------
-------- -------- -------- --------
Income before extraordinary item per common share................ $ 0.26 $ 0.22 $ 0.41 $ 0.22
-------- -------- -------- --------
-------- -------- -------- --------
Net income....................................................... $ 0.26 $ 0.22 $ 0.41 $ 0.16
-------- -------- -------- --------
-------- -------- -------- --------
</TABLE>
NOTE 15 - FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments.
Revolving and term loans. The carrying amounts of the Company's outstanding
balances under its 1995 Credit Agreements and other outstanding debt approximate
the fair value because the interest rate on the outstanding borrowings is
variable and there are no prepayment penalties.
Interest rate swap agreement. The fair value of the Company's agreement to
fix the interest rate on $150,000,000 of its outstanding debt is based upon
quoted market prices.
Letters of credit. Letters of credit collaterlize the Company's obligation
to third parties and have terms ranging from 30 days to one year. The face
amount of the letters of credit are a reasonable estimate of the fair value
since the value for each is fixed over its relatively short maturity.
The carrying amounts and fair value of the Company's financial instruments
as of January 7, 1995 and January 6, 1996 are as follows (in thousands):
<TABLE>
<CAPTION>
JANUARY 7, 1995 JANUARY 6, 1996
-------------------- --------------------
CARRYING FAIR CARRYING FAIR
AMOUNT VALUE AMOUNT VALUE
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revolving loans........................................ $125,501 $125,501 $ 51,033 $ 51,033
Term Loan.............................................. 232,000 232,000 200,000 200,000
Interest rate swap..................................... -- 1,821 -- (3,214)
Letters of credit...................................... 42,515 42,515 49,785 49,785
</TABLE>
NOTE 16 - SUBSEQUENT EVENT -- ACQUISITION
On February 9, 1996 the Company acquired substantially all of the assets of
the GJM Group of companies ('GJM'), a private label manufacturer of women's
sleepwear and lingerie. The purchase price consisted of a cash payment of
$12,500,000 at closing and a cash payment of $1,500,000 due upon the
satisfactory completion of an audit of the net assets acquired. The purchase
price is subject to adjustment if the net assets acquired, as determined by the
audit of the balance sheet of the acquired assets, are not equal to a
predetermined amount.
F-21
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The preliminary estimated allocation of purchase price to the fair value of
the assets acquired is summarized below (in millions of dollars):
<TABLE>
<S> <C>
Accounts receivable....................................................................... $10.7
Inventories............................................................................... 7.7
Prepaid expenses.......................................................................... 1.4
Property and equipment.................................................................... 2.9
Intangible and other assets............................................................... 7.5
Liabilities assumed....................................................................... (16.2)
-----
Total purchase price................................................................. $14.0
-----
-----
</TABLE>
F-22
<PAGE>
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
ON FINANCIAL STATEMENT SCHEDULE
To the Board of Directors of
The Warnaco Group, Inc.
Our audit of the consolidated financial statements referred to in our report
dated February 21, 1996 appearing on page F-1 of this Form 10-K also included an
audit of the Financial Statement Schedule listed in Item 14(a)2 of this Form
10-K as of and for the year ended January 6, 1996. In our opinion, this
Financial Statement Schedule presents fairly, in all material respects, the
information set forth therein when read in conjunction with the related
consolidated financial statements.
PRICE WATERHOUSE LLP
New York, New York
February 21, 1996
S-1
<PAGE>
<PAGE>
SCHEDULE II
THE WARNACO GROUP, INC.
VALUATION & QUALIFYING ACCOUNTS & RESERVES
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE AT CHARGED TO
BEGINNING COSTS AND BALANCE AT
DESCRIPTION OF YEAR EXPENSES DEDUCTIONS(1) END OF YEAR
- -------------------------------------------------------- ---------- ---------- ------------- -----------
<S> <C> <C> <C> <C>
Year Ended January 8, 1994
Allowance for doubtful accounts....................... $1,770 $1,199 $ 1,556 $ 1,413
---------- ---------- ------------- -----------
---------- ---------- ------------- -----------
Year Ended January 7, 1995
Allowance for doubtful accounts....................... $1,413 $1,965 $ 520 $ 2,858
---------- ---------- ------------- -----------
---------- ---------- ------------- -----------
Year Ended January 6, 1996
Allowance for doubtful accounts....................... $2,858 $ 827 $ 1,725 $ 1,960
---------- ---------- ------------- -----------
---------- ---------- ------------- -----------
</TABLE>
- ------------------
(1) Uncollectible accounts written off, net of recoveries.
The above reserves are deducted from the related assets in the consolidated
balance sheets.
S-2
<PAGE>
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT SEQUENTIALLY
NUMBER EXHIBIT DESCRIPTION NUMBERED PAGE
- ------- ---------------------------------------------------------------------------------------- -------------
<S> <C> <C>
10.3 -- Credit Agreement, dated as of December 4, 1995 (the 'U.S. $200,000,000 Credit
Agreement') among Warnaco Inc., the Company and The Bank of Nova Scotia, as Agent
for the Lenders named therein.
11.1 -- Calculation of Income per common share.
22.1 -- Subsidiaries of the Company
24.1(a) -- Consent of Independent Accountants
24.1(b) -- Consent of Independent Auditors
24.1(c) -- Consent of Independent Auditors
27 -- Financial Data Schedule
</TABLE>
<PAGE>
<PAGE>
[EXECUTION COPY]
U.S. $200,000,000
CREDIT AGREEMENT,
dated as of December 4, 1995,
among
WARNACO INC.,
as the Borrower,
THE WARNACO GROUP, INC.,
as the Guarantor,
CERTAIN FINANCIAL INSTITUTIONS,
as the Lenders,
and
THE BANK OF NOVA SCOTIA,
as the Agent for the Lenders.
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<C> <S> <C>
Article I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms....................................................................2
1.2. Use of Defined Terms........................................................... 13
1.3. Cross-References............................................................... 13
1.4. Accounting and Financial Determinations........................................ 14
Article II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
2.1. Commitments.................................................................... 14
2.1.1. Loan Commitment................................................................ 14
2.1.2. Commitment to Issue Letters of Credit.......................................... 15
2.1.3. Lenders Not Permitted or Required to Make
Loans and Fronting Bank Not Permitted or
Required to Issue Letters of Credit Under
Certain Circumstances....................................................... 15
2.2. Reduction of Commitment Amounts................................................ 17
2.3. Borrowing Procedure............................................................ 17
2.4. Continuation and Conversion Elections.......................................... 19
2.5. Funding........................................................................ 20
2.6. Notes.......................................................................... 20
2.7. Extension of Commitment Termination Date....................................... 21
Article III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
3.1. Repayments and Prepayments..................................................... 21
3.2. Interest Provisions............................................................ 22
3.2.1. Rates.......................................................................... 22
3.2.2. Post-Maturity Rates............................................................ 23
3.2.3. Payment Dates.................................................................. 23
3.2.4. Allocation of Interest Payments................................................ 24
3.3. Fees........................................................................... 25
3.3.1. Letter of Credit Face Amount Fee............................................... 25
3.3.2. Letter of Credit Fees.......................................................... 25
3.3.3. Fee Letter..................................................................... 26
3.3.4. Commitment Fee................................................................. 26
</TABLE>
-i-
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<C> <S> <C>
Article IV
LETTERS OF CREDIT
4.1. Issuance Requests.............................................................. 27
4.2. Issuances and Extensions....................................................... 28
4.3. Destruction of Goods, etc...................................................... 28
4.5. Disbursements.................................................................. 30
4.6. Reimbursement; Outstanding Letters, etc........................................ 30
4.7. Deemed Disbursements........................................................... 33
4.8. Nature of Reimbursement Obligations............................................ 34
4.9. Existing Letters of Credit..................................................... 34
Article V
CERTAIN LIBO RATE AND OTHER PROVISIONS
5.1. LIBO Rate Lending Unlawful..................................................... 35
5.2. Deposits Unavailable........................................................... 35
5.3. Increased LIBO Rate Loan Costs, etc............................................ 35
5.4. Funding Losses................................................................. 36
5.5. Increased Capital Costs, etc................................................... 36
5.6. Taxes.......................................................................... 37
5.7. Payments, Computations, etc.................................................... 39
5.8. Sharing of Payments............................................................ 40
5.9. Setoff......................................................................... 40
5.10. Use of Proceeds................................................................ 41
Article VI
CONDITIONS PRECEDENT
6.1. Initial Credit Extension....................................................... 41
6.1.1. Resolutions, etc............................................................... 41
6.1.2. Delivery of Notes.............................................................. 41
6.1.3. Group Guaranty................................................................. 41
6.1.4. Subsidiary Guaranty............................................................ 42
6.1.5. Certificates as to No Default, etc............................................. 42
6.1.6. No Material Adverse Change..................................................... 42
6.1.7. Tradexpress Agreement.......................................................... 42
6.1.8. Opinions of Counsel............................................................ 42
6.1.9. Closing Fees, Expenses, etc.................................................... 42
6.1.10. Delivery of Form 1001 or 4224.................................................. 43
6.2. All Credit Extensions.......................................................... 43
6.2.1. Compliance with Warranties, No Default, etc.................................... 43
6.2.2. Credit Request................................................................. 44
</TABLE>
-ii-
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<C> <S> <C>
6.2.3. Satisfactory Legal Form........................................................ 44
Article VII
REPRESENTATIONS AND WARRANTIES
7.1. Organization, etc.............................................................. 44
7.2. Due Authorization, Non-Contravention, etc...................................... 45
7.3. Government Approval, Regulation, etc........................................... 45
7.4. Validity, etc.................................................................. 45
7.5. No Material Adverse Change..................................................... 45
7.6. Litigation, Labor Controversies, etc........................................... 46
7.7. Regulations G, U and X......................................................... 46
7.8. Accuracy of Information........................................................ 46
7.9. U.S. Credit Agreement
Representations and Warranties.............................................. 46
Article VIII
COVENANTS
8.1. Covenants...................................................................... 47
8.1.1. Financial Information, Reports, Notices,
etc......................................................................... 47
8.1.2. Future Subsidiaries of Group................................................... 47
8.1.3. U.S. Credit Agreement Covenants................................................ 47
8.1.4. Default Notice................................................................. 48
Article IX
EVENTS OF DEFAULT
9.1. Listing of Events of Default................................................... 48
9.1.1. Non-Payment of Obligations..................................................... 48
9.1.2. Breach of Warranty............................................................. 48
9.1.3. Non-Performance of Certain
Covenants and Obligations................................................... 48
9.1.4. Non-Performance of Other
Covenants and Obligations................................................... 48
9.1.5. Default Under U.S. Credit Agreement............................................ 49
9.1.6. Bankruptcy, Insolvency, etc.................................................... 49
9.1.7. Termination, etc. of Loan Documents............................................ 49
9.2. Action Upon Bankruptcy......................................................... 49
9.3. Action Upon Other Event of Default............................................. 49
</TABLE>
-iii-
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<C> <S> <C>
Article X
THE AGENT
10.1. Actions........................................................................ 49
10.2. Copies, etc.................................................................... 50
10.3. Exculpation.................................................................... 50
10.4. Successor...................................................................... 51
10.5. Loans or Letters of Credit Issued by
Scotiabank.................................................................. 51
10.6. Credit Decisions............................................................... 52
Article XI
MISCELLANEOUS PROVISIONS
11.1. Waivers, Amendments, etc....................................................... 52
11.2. Notices........................................................................ 53
11.3. Payment of Costs and Expenses.................................................. 53
11.4. Indemnification................................................................ 54
11.5. Survival....................................................................... 55
11.6. Severability................................................................... 55
11.7. Headings....................................................................... 55
11.8. Execution in Counterparts, Effectiveness,
etc......................................................................... 55
11.9. Governing Law; Entire Agreement................................................ 55
11.10. Successors and Assigns......................................................... 55
11.11. Sale and Transfer of Loans and Notes;
Participations in Loans and Notes........................................... 56
11.11.1. Assignments.................................................................... 56
11.11.2. Participations................................................................. 57
11.11.3. Fronting Bank Assignments...................................................... 58
11.12. Other Transactions............................................................. 59
11.13. Forum Selection and Consent to Jurisdiction.................................... 59
11.14. Waiver of Jury Trial........................................................... 59
11.15. UCP; etc....................................................................... 60
11.16. Usury Restraint................................................................ 60
11.17. Termination of Existing Credit Agreement,
etc......................................................................... 61
</TABLE>
-iv-
<PAGE>
<PAGE>
SCHEDULE I - List of Existing Letters of Credit and Existing Loans
EXHIBIT A - Form of Note
EXHIBIT B - Form of Issuance Request
EXHIBIT C - Form of Borrowing Request
EXHIBIT D - Form of Continuation/Conversion Notice
EXHIBIT E - Form of Lender Assignment Agreement
EXHIBIT F-1 - Form of Group Guaranty
EXHIBIT F-2 - Form of Subsidiary Guaranty
EXHIBIT G - Form of Opinion of New York Counsel to the Obligors
-v-
<PAGE>
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT, dated as of December 4, 1995, among WARNACO INC.,
a Delaware corporation (the "Borrower"), THE WARNACO GROUP, INC., a Delaware
corporation ("Group"), the various financial institutions as are or may become
parties hereto (collectively, the "Lenders") and THE BANK OF NOVA SCOTIA
("Scotiabank"), as agent (in such capacity, the "Agent") for the Lenders.
W I T N E S S E T H:
WHEREAS, the Borrower, certain financial institutions and Scotiabank are
parties to a Credit Agreement, dated as of July 16, 1993 (as amended or
otherwise modified to the date hereof, the "Existing Credit Agreement"),
pursuant to which, inter alia, such financial institutions have made (or
participated in) loans to the Borrower, as listed on Schedule I hereto, and
Scotiabank provides a documentary letter of credit facility in favor of the
Borrower and has issued those letters of credit (the "Existing Letters of
Credit") listed on Schedule I hereto;
WHEREAS, the Borrower, certain financial institutions and Scotiabank, as
agent, are parties to an Amended and Restated Credit Agreement, dated as of
August 31, 1995 (as amended or otherwise modified to the date hereof, the
"Existing Amended and Restated Agreement"), pursuant to which such financial
institutions have made (or participated in) loans to the Borrower (such loans,
together with the loans made to the Borrower under the Existing Credit Agreement
are collectively referred to as the "Existing Loans"), as listed on Schedule I
hereto;
WHEREAS, the Borrower has requested that the Lenders refinance and
replace the Existing Credit Agreement and the Existing Amended and Restated
Agreement with this Agreement; providing a documentary letter of credit facility
in an aggregate principal amount not exceeding the Letter of Credit Commitment
Amount;
WHEREAS, pursuant to this Agreement the Borrower desires to obtain
Commitments from the Lenders pursuant to which
(a) documentary Letters of Credit will be issued by the Fronting
Bank for the account of the Borrower to support obligations of the
Borrower and its wholly-owned Subsidiaries (and their respective
divisions) and, under the several obligations hereunder, each of the
Lenders will, to the extent of such Lender's Percentage, participate in
Letters of Credit (including the Existing Letters of Credit) issued from
time to time hereunder prior to the Commitment Termination Date; and
<PAGE>
<PAGE>
(b) Loans will be made by the Fronting Bank to the Borrower and,
under the several obligations hereunder, each of the Lenders will, to
the extent of such Lender's Percentage, participate in or make the Loans
from time to time prior to the Commitment Termination Date;
WHEREAS, the Fronting Bank and the Lenders are willing, on the terms and
subject to the conditions hereinafter set forth (including Article VI), to
extend such Commitments, make and participate in such Loans and issue and
participate in such Letters of Credit; and
WHEREAS, the proceeds of Loans will be used for the sole purpose of
providing the Borrower with up to a three-month (or 90-day, in the case of Base
Rate Loans) trade credit in respect of disbursements made to the beneficiaries
of Letters of Credit and Letters of Credit will be issued solely to support the
worldwide sourcing of merchandise by the Borrower and its wholly- owned
Subsidiaries (or divisions);
NOW, THEREFORE, the parties hereto agree as follows:
Article I
DEFINITIONS AND ACCOUNTING TERMS
Section 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Agent" is defined in the preamble and includes each other Person as
shall have subsequently been appointed as the successor Agent pursuant to
Section 10.4.
"Agreement" means, on any date, this Credit Agreement as originally in
effect on the Effective Date and as thereafter from time to time amended,
supplemented, amended and restated, or otherwise modified and in effect on such
date.
"Alternate Base Rate" means, on any date and with respect to all Base
Rate Loans, a fluctuating rate of interest per annum equal to the higher of
(a) the rate of interest most recently announced by
Scotiabank at its Domestic Office as its base rate for
Dollar loans; and
(b) the Federal Funds Rate most recently determined by the Agent
plus 1/2 of 1%.
-2-
<PAGE>
<PAGE>
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by Scotiabank in connection with extensions of credit.
Changes in the rate of interest on that portion of any Loans maintained as Base
Rate Loans will take effect simultaneously with each change in the Alternate
Base Rate. The Agent will give notice promptly to the Borrower of changes in the
Alternate Base Rate.
"Applicable Margin" means, on any date, a percentage per annum
determined by reference to the Implied Senior Rating in effect on such date as
set forth below:
<TABLE>
<CAPTION>
Implied Senior
- --------------
Rating Base Rate Loans LIBO Rate Loans
- ------ --------------- ----------------
<S> <C> <C>
BB+ or below 0.250% 0.875%
BBB- 0.000% 0.500%
BBB 0.000% 0.425%
BBB+ 0.000% 0.375%
A- or above 0.000% 0.300%
</TABLE>
The Applicable Margin shall be determined by reference to the Implied
Senior Rating in effect from time to time; provided, however, that no change in
the Applicable Margin shall be effective until three Business Days after the
date on which the Agent receives evidence reasonably satisfactory to it from
Group or the Borrower that a new Implied Senior Rating is in effect. In the
event that at any time no Implied Senior Rating shall be in effect, the
Applicable Margin shall be 0.250% for each Base Rate Loan and 0.875% for each
LIBO Rate Loan. Notwithstanding the foregoing, until the sixth-month anniversary
of the Effective Date, the Applicable Margin shall be 0.000% for each Base Rate
Loan and 0.425% for each LIBO Rate Loan.
"Assignee Lender" is defined in Section 11.11.1.
"Authorized Officer" means, relative to the Borrower or any other
Obligor, those of its officers whose signatures and incumbency shall have been
certified to the Agent and the Lenders pursuant to Section 6.1.1.
"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"Borrower" is defined in the preamble.
"Borrowing" means the making of Loans of the same type and, in the case
of LIBO Rate Loans, having the same Interest Period by the Fronting Bank
following a disbursement under a Letter of
-3-
<PAGE>
<PAGE>
Credit and the funding of a Lender's Percentage of such Loans, in each case in
accordance with the terms of this Agreement.
"Borrowing Request" means a loan request and certificate duly executed
by an Authorized Officer of the Borrower, substantially in the form of Exhibit C
hereto.
"Business Day" means
(a) any day which is neither a Saturday or Sunday nor
a legal holiday on which banks are authorized or required
to be closed in New York; and
(b) relative to the making, continuing, prepaying or repaying of
any LIBO Rate Loans, any day on which dealings in Dollars are carried on
in the London interbank market.
"Commitment" means, as the context may require, a Lender's Loan
Commitment or the Fronting Bank's or a Lender's Letter of Credit Commitment.
"Commitment Amount" means, as the context may require, either the Loan
Commitment Amount or the Letter of Credit Commitment Amount.
"Commitment Termination Date" means the earliest of
(a) December 1, 1996, as such date may be extended
pursuant to the terms of this Agreement;
(b) the date on which the Commitment Amounts are
terminated in full or reduced to zero pursuant to Section
2.2; and
(c) the date on which any Commitment Termination
Event occurs.
Upon the occurrence of any event described in clause (b) or (c), the Commitments
shall terminate automatically and without any further action.
"Commitment Termination Event" means
(a) the occurrence of any event or condition
described in clause (e) of Section 6.01 of the U.S. Credit
Agreement;
(b) the occurrence and continuance of any other Event
of Default and either
(i) the declaration of the Loans to be due and
payable pursuant to Section 9.3, or
-4-
<PAGE>
<PAGE>
(ii) in the absence of such declaration, the giving of
notice by the Agent, acting at the direction of the Required
Lenders, to the Borrower that the Commitments have been
terminated; or
(c) the termination of, or any refinancing,
refunding, replacement, renewal or restatement of, the U.S. Credit
Agreement.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of the
Borrower, substantially in the form of Exhibit D hereto.
"Credit Extension" means and includes
(a) the advancing of any Loans by the Lenders in connection with
a Borrowing (including the making of a Loan by the Fronting Bank to the
Borrower on a Disbursement Date and the refunding and refinancing of
such Loans by the Lenders); and
(b) any issuance or extension by the Fronting Bank of
a Letter of Credit.
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event of
Default.
"Disbursement" means any payment made under a Letter of Credit by the
Fronting Bank to the beneficiary of such Letter of Credit.
"Disbursement Date" is defined in Section 4.5.
"Dollar" and the sign "$" mean lawful money of the United
States.
"Domestic Office" means, relative to any Lender, the office of such
Lender designated as such below its signature hereto or designated in the Lender
Assignment Agreement or such other office of a Lender (or any successor or
assign of such Lender) within the United States as may be designated from time
to time by notice from such Lender, as the case may be, to each other Person
party hereto.
"Domestic Subsidiary" means any Subsidiary of Group (other than the
Borrower) organized under the laws of the United States or any state thereof.
-5-
<PAGE>
<PAGE>
"Draft" means and includes any draft, bill, cable or written demand for
payment or receipt drawn or issued under a Letter of Credit.
"Effective Date" means the date this Agreement becomes effective
pursuant to Section 11.8.
"Event of Default" is defined in Section 9.1.
"Excess" is defined in Section 11.16.
"Existing Amended and Restated Agreement" is defined in the
second recital.
"Existing Credit Agreement" is defined in the first recital.
"Existing Loans" is defined in the second recital.
"Existing Letters of Credit" is defined in the first
recital.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to
(a) 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 for such day (or, if such day is not
a Business Day, for the next preceding Business Day) by the Federal
Reserve Bank of New York; or
(b) if such rate is not so published for any day which is a
Business Day, the average of the quotations for such day on such
transactions received by the Agent from three federal funds brokers of
recognized standing selected by it.
If for any reason the Agent shall have determined (which determination shall be
conclusive, absent manifest error) that it is unable to ascertain the Federal
Funds Rate for any reason, including without limitation, the inability or
failure of the Agent to obtain sufficient bids or publications in accordance
with the terms hereof, the rate announced by the Agent at its New York Agency as
its "Base Rate New York" shall be the Alternate Base Rate until the
circumstances giving rise to such inability no longer exists.
"Fee Letter" means the confidential Fee Letter, dated October 17, 1995,
between the Borrower and the Agent.
"Fiscal Quarter" means any quarter of a Fiscal Year.
-6-
<PAGE>
<PAGE>
"Fiscal Year" means the fiscal year of the Borrower ending on or about
December 31 of each year.
"Fronting Bank" means Scotiabank, in its capacity as the issuer of
Letters of Credit and in its capacity as the Lender of Loans made prior to a
Funding Date pursuant to the terms of this Agreement.
"F.R.S. Board" means the Board of Governors of the Federal
Reserve System or any successor thereto.
"Funding Date" is defined in clause (c) of Section 2.3.
"GAAP" has the meaning set forth in the U.S. Credit
Agreement.
"Goods" means, collectively, all goods (including, without limitation,
all inventory), wares, merchandise and other commodities purchased by or shipped
to or to the order of the Borrower under or by virtue of or in connection with
the issuance of a Letter of Credit.
"Group" is defined in the preamble.
"Group Guaranty" means the Guaranty executed and delivered by an
Authorized Officer of Group pursuant to Section 6.1.3, substantially in the form
of Exhibit F-1 hereto, as amended, supplemented, restated or otherwise modified
from time to time.
"herein", "hereof", "hereto", "hereunder" and similar terms contained in
this Agreement or any other Loan Document refer to this Agreement or such other
Loan Document, as the case may be, as a whole and not to any particular Section,
paragraph or provision of this Agreement or such other Loan Document.
"Implied Senior Rating" means the rating assigned by S&P to Group's
unsecured "implied senior debt" from time to time, as notified to Group by S&P
in its letter dated May 24, 1994 or any subsequent letter issued by S&P (which
rating on the date hereof is BBB-), or, if such rating is unavailable, the
equivalent rating assigned by Moody's to Group's unsecured "implied senior
debt", as notified in writing to Group by Moody's. For purposes of this
Agreement, the following is the equivalent rating by Moody's for each rating by
S&P:
<TABLE>
<CAPTION>
S&P Moody's
--- -------
<S> <C>
BB+ Ba1
BBB- Baa3
BBB Baa2
BBB+ Baa1
A- A3.
</TABLE>
-7-
<PAGE>
<PAGE>
"including" means including without limiting the generality of any
description preceding such term.
"Indebtedness" of any Person means, without duplication:
(a) all obligations of such Person for borrowed money and all
obligations of such Person evidenced by bonds, debentures, notes or
other similar instruments;
(b) all obligations, contingent or otherwise, relative to the
face amount of all letters of credit, whether or not drawn, and banker's
acceptances issued for the account of such Person;
(c) all obligations of such Person as lessee under leases which
have been or should be, in accordance with GAAP, recorded as capitalized
lease liabilities;
(d) all obligations of such Person to pay the deferred purchase
price of property or services (other than trade debt incurred in the
ordinary course of business), and indebtedness (excluding prepaid
interest thereon) secured by a Lien on property owned or being purchased
by such Person (including indebtedness arising under conditional sales
or other title retention agreements), whether or not such indebtedness
shall have been assumed by such Person or is limited in recourse; and
(e) all contingent liabilities of such Person in respect of any
of the foregoing.
"Indemnified Liabilities" is defined in Section 11.4.
"Indemnified Parties" is defined in Section 11.4.
"Interest Period" means, relative to any LIBO Rate Loans, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or 2.4
and ending on (but excluding) the day which numerically corresponds to such date
one or, two or three months thereafter (or, if such month has no numerically
corresponding day, on the last Business Day of such month), in each case as such
Loan may be made or as the Borrower may select in its relevant notice pursuant
to Section 2.3 or 2.4; provided, however, that
(a) Interest Periods commencing on the same date for
Loans comprising part of the same Borrowing shall be of the
same duration;
(b) if such Interest Period would otherwise end on a day which is
not a Business Day, such Interest Period shall
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end on the next following Business Day (unless such next following
Business Day is the first Business Day of a calendar month, in which
case such Interest Period shall end on the Business Day next preceding
such numerically corresponding day); and
(c) no Interest Period may end later than the Stated Maturity
Date for such Loan or, if earlier, the date set forth in clause (a) of
the definition of "Commitment Termination Date", as such date may be
extended from time to time pursuant to the terms of this Agreement.
"Issuance Request" means either (a) a request delivered by the Borrower
to the Fronting Bank in accordance with the provisions of the Tradexpress
Agreement or (b) a request and certificate duly executed by an Authorized
Officer of the Borrower, in substantially the form of Exhibit B attached hereto
(with such changes thereto as may be agreed upon from time to time by the Agent
and the Borrower).
"Lender Assignment Agreement" means a Lender Assignment Agreement
substantially in the form of Exhibit E hereto.
"Lenders" is defined in the preamble.
"Letter of Credit" is defined in Section 4.1, and shall also mean and
include each Existing Letter of Credit.
"Letter of Credit Availability" means, at any time, the then existing
Letter of Credit Commitment Amount minus the aggregate amount of all Letter of
Credit Outstandings.
"Letter of Credit Commitment" means, relative to the Fronting Bank, the
Fronting Bank's obligation to issue Letters of Credit pursuant to Section 2.1.2
and, with respect to each of the other Lenders, the obligations of each such
Lender to participate in such Letters of Credit pursuant to the terms of this
Agreement.
"Letter of Credit Commitment Amount" means, on any date a maximum amount
of $100,000,000, as such amount may be reduced from time to time pursuant to
Section 2.2.
"Letter of Credit Outstandings" means, at any time, an
amount equal to the sum of
(a) the aggregate Stated Amount at such time of all Letters of
Credit then outstanding and undrawn (as such aggregate Stated Amount
shall be adjusted, from time to time, as a result of drawings, the
issuance of Letters of Credit, or otherwise),
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plus
(b) the then aggregate amount of all unpaid and
outstanding Reimbursement Obligations.
"LIBO Rate" is defined in Section 3.2.1.
"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" is defined in Section 3.2.1.
"LIBOR Office" means, relative to any Lender, the office of such Lender
designated as such below its signature hereto or designated in the Lender
Assignment Agreement or such other office of any Lender as designated from time
to time by notice from such Lender to the Borrower and the Agent, whether or not
outside the United States, which shall be making or maintaining LIBO Rate Loans
hereunder.
"LIBOR Reserve Percentage" is defined in Section 3.2.1.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"Loans" is defined in Section 2.1.1, and shall also mean and include the
Existing Loans.
"Loan Commitment" means, relative to (i) the Fronting Bank (in such
capacity), its obligation to make Loans to the Borrower on a Disbursement Date
and (ii) each Lender (other than the Fronting Bank in such capacity), such
Lender's obligation to participate in the Loans made by the Fronting Bank to the
Borrower and, as set forth in this Agreement, to refund and reimburse the
Fronting Bank for such Loans, in each case pursuant to the terms of this
Agreement.
"Loan Commitment Amount" means $100,000,000, as such amount may be
reduced by Section 2.2.
"Loan Document" means this Agreement, each Note, the Tradexpress
Agreement, the Group Guaranty, the Subsidiary Guaranty, the Fee Letter and each
other agreement, document or instrument delivered in connection with this
Agreement, whether or not specifically mentioned herein.
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"Maximum Rate" is defined in Section 11.16.
"Moody's" means Moody's Investors Service, Inc.
"Note" means any promissory note of the Borrower payable to the order of
any Lender (including the Fronting Bank), in the form of Exhibit A (as any such
promissory note may be amended, endorsed or otherwise modified from time to
time), evidencing the aggregate Indebtedness of the Borrower to such Lender
resulting from outstanding Loans made by such Lender, and also means all other
promissory notes accepted from time to time in substitution therefor or renewal
thereof.
"Obligations" means all obligations (monetary or otherwise) of the
Borrower and each other Obligor arising under or in connection with this
Agreement, the Notes and each other Loan Document.
"Obligor" means the Borrower and each other Person (other than the Agent
and the Lenders) obligated under any Loan Document.
"Order" is defined in clause (b) of Section 4.6.
"Organic Document" means, relative to any Obligor, as applicable, its
certificate of incorporation, by-laws, certificate of formation or limited
liability company agreement, and all shareholder agreements, voting trusts
and similar arrangements applicable to any of the authorized shares of capital
stock or other ownership interest of such Obligor.
"Participant" is defined in Section 11.11.2.
"Percentage" means, relative to any Lender, the percentage set forth
opposite its signature hereto or set forth in a Lender Assignment Agreement, as
such percentage may be adjusted from time to time pursuant to the terms hereof
or a Lender Assignment Agreement executed by such Lender and its Assignee Lender
and delivered pursuant to Section 11.11; provided, that the Percentage of each
Lender's Loan Commitment and Letter of Credit Commitment shall be identical.
"Person" means any natural person, corporation, limited liability
company, partnership, firm, association, trust, government, governmental agency
or any other entity, whether acting in an individual, fiduciary or other
capacity.
Quarterly Payment Date" means the last day of each March, June,
September, and December or, if any such day is not a Business Day, the next
succeeding Business Day.
"Received Amount" is defined in clause (c) of Section 4.6.
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"Reimbursement Obligation" is defined in Section 4.6.
"Required Lenders" means, at any time, Lenders holding at least 51% of
the then aggregate outstanding principal amount of the Notes then held by the
Lenders or, if no such principal amount is then outstanding, Lenders having
Percentages that equal at least 51% of the Loan Commitments; provided, that so
long as the Fronting Bank (in such capacity) has any Loans outstanding and owing
to it from the Borrower, each Lender will be deemed to have outstanding and
owing to it a principal amount equal to such Lender's Percentage multiplied by
the aggregate outstanding principal amount of Loans owing to the Fronting Bank.
"S&P" means Standard & Poor's Ratings Group, a division of McGraw-Hill,
Inc.
"Scotiabank" is defined in the preamble.
"Stated Amount" of each Letter of Credit means the maximum amount of
such Letter of Credit that may then be drawn under such Letter of Credit whether
or not the conditions for drawing thereunder have been met.
"Stated Expiry Date" is defined in Section 4.1.
"Stated Maturity Date" means, in the case of any Loan, the earlier of
(a) the three-month anniversary of the making of such Loan (in the case of a
Loan initially made as a LIBO Rate Loan) or (in the case of a Loan initially
made as a Base Rate Loan), the date that is 90 days after the making of such
Loan and (b) the Commitment Termination Date (as such date may be extended
pursuant to the terms of this Agreement).
"Stated Rate" is defined in Section 11.16.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which) more
than 50% of (a) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such limited
liability company, partnership or joint venture or (c) the beneficial interest
in such trust or estate is at the time directly or indirectly owned or
controlled by such Person, by such Person and one or more of its other
Subsidiaries or by one or more of such Person's other Subsidiaries. The term
"wholly owned Subsidiary" shall exclude any directors' or officers' qualifying
shares which may be outstanding.
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"Subsidiary Guaranty" means the Subsidiary Guaranty executed and
delivered by each Domestic Subsidiary pursuant to Section 6.1.4 or Section
8.1.3, substantially in the form of Exhibit F-2 hereto, as amended,
supplemented, restated or otherwise modified from time to time.
"Taxes" is defined in Section 5.6.
"Tradexpress Agreement" means the Tradexpress Transmission Agreement
duly executed and delivered by the Borrower and the Fronting Bank pursuant to
Section 6.1.7 in a form agreed to by the Fronting Bank and the Borrower.
"type" means, relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"UCP" is defined in Section 11.15.
"United States" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"U.S. Credit Agreement" means the Credit Agreement, dated as of October
12, 1995, among the Borrower, Group, the initial lenders named therein, The Bank
of Nova Scotia and Citibank, N.A., as managing agents, Citibank, N.A., as
documentation agent, and The Bank of Nova Scotia, as paying agent, competitive
bid agent, swing line bank and an issuing bank, as such agreement was in effect
on the Effective Date, and as amended, restated or waived from time to time with
the consent of the Required Lenders hereunder solely for purposes of this
Agreement, and regardless of whether such U.S. Credit Agreement is terminated,
unless in connection with such termination a replacement credit facility
satisfactory to the Required Lenders hereunder is entered into, in which case
the affirmative and negative covenants in such facility shall become the subject
of this Agreement.
"Usury Restraint" is defined in Section 11.16.
Section 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in each Note, Borrowing Request,
Continuation/Conversion Notice, Loan Document, notice and other communication
delivered from time to time in connection with this Agreement or any other Loan
Document.
Section 1.3. Cross-References. Unless otherwise specified, references in
this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in any
Article,
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Section or definition to any clause are references to such clause of such
Article, Section or definition.
Section 1.4. Accounting and Financial Determinations. Unless otherwise
specified, all accounting terms used herein shall be interpreted, all accounting
determinations and computations hereunder shall be made, and all financial
statements required to be delivered hereunder or thereunder shall be prepared in
accordance with, GAAP.
Article II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
Section 2.1. Commitments. On the terms and subject to the conditions of
this Agreement (including Article VI), each Lender severally agrees as follows:
Section 2.1.1. Loan Commitment. From time to time on any Business Day
each Lender severally agrees, subject to the terms of this Agreement (including
Article VI) that
(a) in the case of the Fronting Bank, it will make trade credit
loans (the "Loans") to the Borrower on the Disbursement Date of each
Letter of Credit for a period not to exceed the Stated Maturity Date for
such Loan in a principal amount equal to the aggregate amount of
Disbursements made under one or more Letters of Credit on such
Disbursement Date; and
(b) in the case of each Lender (other than the Fronting Bank in
such capacity), such Lender will participate in the Loans made by the
Fronting Bank pursuant to this Agreement and, if required pursuant to
the terms of this Agreement, such Lender will refinance and reimburse
the Fronting Bank for the outstanding principal amount of Loans
previously made by the Fronting Bank in an amount equal to its
Percentage of the aggregate amount of all (or, if elected by the
Fronting Bank, less than all) Loans then outstanding and owing to the
Fronting Bank (in its capacity as the Fronting Bank), and upon the
receipt by the Fronting Bank of immediately available funds from a
Lender in respect of the reimbursement or refinancing of a Loan
previously made by and owing to the Fronting Bank, the amount so
received by the Fronting Bank will thereafter be a Loan owing to such
Lender (and no longer owing to the Fronting Bank). No Lender's
obligation to make any Loan shall be affected by any other Lender's
failure to make any Loan. On the terms and subject to the conditions
hereof, the Borrower may from time to time borrow Loans and continue or
convert such Loans as Base Rate Loans or LIBO Rate Loans pursuant to
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the terms hereof, but once a particular Loan is repaid or prepaid by the
Borrower, it cannot be reborrowed. Notwithstanding anything contained
herein to the contrary, so long as any Lender shall be in default in its
obligation to fund its pro rata share of any Loans (as notified to such
Lender by the Agent, the Agent agreeing to use good faith efforts to
give such notification promptly following the occurrence of such
default) or shall have rejected its obligations under its Commitments,
then such Lender shall not be entitled to receive any payments of
principal of or interest on its pro rata share of the Loans or its share
of any commitment or other fees payable hereunder (including fees
payable pursuant to Section 3.3) unless and until (x) the Loans of all
the other Lenders and all interest thereon have been paid in full, (y)
such failure to fulfill its obligation to fund is cured or (z) the
Obligations under this Agreement shall have been declared or shall have
become immediately due and payable, and for purposes of voting or
consenting to matters with respect to the Loan Documents, such Lender
shall be deemed not to be a "Lender" hereunder and such Lender's
Percentage shall each be deemed to be zero (0) (with each other Lender's
Percentage being increased proportionately for purposes of the
definition of "Required Lenders" so that all such non-defaulting
Lenders' Percentages shall collectively equal 100%). No Commitment of
any Lender shall be increased or otherwise affected by any such failure
or rejections by any other Lender. Any payments of principal of or
interest on Obligations which would, but for this Section, be paid to
any Lender, shall be paid to the Lenders who shall not be in default
under their respective Commitments and who shall not have rejected any
Commitment, for application to the Obligations or cash collateral in
respect of Letters of Credit in such manner and order (pro rata among
such Lenders) as shall be determined by the Agent. The parties hereto
acknowledge and agree that a Lender's failure to make a Loan based on
the Borrower's failure to satisfy one or more of the conditions
precedent to the making of Loans set forth in Article VI shall not be
construed as such Lender being in default of its obligations to fund its
pro rata share of Loans or a rejection of such Lender's Commitments.
Section 2.1.2. Commitment to Issue Letters of Credit. From time to time
on any Business Day prior to the Commitment Termination Date, the Fronting Bank
will issue, and each Lender will participate in, the Letters of Credit, in
accordance with Article IV.
Section 2.1.3. Lenders Not Permitted or Required to Make Loans and
Fronting Bank Not Permitted or Required to Issue Letters of Credit Under Certain
Circumstances. In addition to the other terms of this Agreement (including
Article VI:)
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(a) No Lender (other than, in the case of clause (a)(iii), the
Fronting Bank acting in such capacity) shall be permitted or required to
make any Loan if, after giving effect thereto (and the payment of any
Reimbursement Obligations with the proceeds of such Loans or the
refunding and refinancing of Loans made by the Fronting Bank with the
proceeds of the Loans made by the Lenders hereunder), the aggregate
outstanding principal amount of all Loans
(i) together with all Letter of Credit Outstandings, would
exceed $200,000,000 (as such amount may be reduced from time to
time pursuant to reductions in the Commitment Amounts),
(ii) would exceed the then effective Loan
Commitment Amount, or
(iii) owing by such Lender would exceed the amount of such
Lender's Percentage multiplied by the Loan Commitment Amount.
(b) The Fronting Bank shall not be permitted or required to issue
any Letter of Credit or extend for an additional period of time the
Stated Expiry Date of a previously issued Letter of Credit if, after
giving effect thereto
(i) all Letter of Credit Outstandings together with the
aggregate outstanding principal amount of all Loans would exceed
$200,000,000 (as such amount may be reduced from time to time
pursuant to reductions in the Commitment Amounts), or
(ii) all Letter of Credit Outstandings would exceed the
then effective Letter of Credit Commitment Amount.
(c) The Fronting Bank shall not be permitted or required to make
any Loan on any Disbursement Date if, after giving effect thereto (and
the payment of any Reimbursement Obligations with the proceeds of such
Loans), the aggregate outstanding principal amount of all Loans
(i) together with all Letter of Credit Outstandings, would
exceed $200,000,000 (as such amount may be reduced from time to
time pursuant to reductions in the Commitment Amounts), or
(ii) (including Loans made by other Lenders to refund and
refinance Loans previously made by the Fronting Bank) would
exceed the then effective Loan Commitment Amount.
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Section 2.2. Reduction of Commitment Amounts. The Borrower may, from
time to time on any Business Day, voluntarily reduce the amount of either
Commitment Amount; provided, however, that all such reductions shall require at
least three Business Days' prior notice to the Agent and be permanent and any
reduction to either Commitment Amount shall immediately and without any action
required on the part of any Person irrevocably cause a corresponding Dollar for
Dollar reduction in the other Commitment Amount.
Section 2.3. Borrowing Procedure. (a) Upon any Disbursements being made
in respect of one or more Letters of Credit (whether such Letters of Credit were
issued to support the obligations of the Borrower or any Subsidiary of the
Borrower (or any of their respective divisions)), the Borrower shall (unless it
shall have given notice to the Agent to the contrary prior to 3:00 p.m., New
York time, at least three Business Days prior to the date of such Disbursement)
be deemed to have delivered to the Agent a Borrowing Request pursuant to which
the Borrower shall have been deemed to irrevocably request that the Fronting
Bank make a LIBO Rate Loan with a three month Interest Period in a principal
amount equal to the aggregate amount of the Disbursements made on such date. The
Borrower hereby acknowledges and agrees that each Borrowing Request deemed to be
delivered hereunder, the making of a Loan by the Fronting Bank to reimburse the
Fronting Bank for Disbursements made under the Letters of Credit and the
acceptance by the Borrower of the proceeds of the Borrowing shall constitute a
representation and warranty by the Borrower that on the date of such Borrowing
(both immediately before and after giving effect to such Borrowing and the
application of the proceeds thereof) the statements made in Section 6.2.1 are in
each case true and correct. Proceeds of such Loans shall be used to fund the
Reimbursement Obligations in respect of Letters of Credit under which one or
more Disbursements were made on the date of the Loan. In addition, to the extent
that the amount available under the Loan Commitment is not sufficient to fund
the entire aggregate amount of the Disbursements made on the date the Loans are
being made, then the Borrower shall have been deemed to request that Scotiabank,
in its capacity as Swingline Bank under (and as defined in) the U.S. Credit
Agreement, make a Swingline Advance (as such term is defined in the U.S. Credit
Agreement) in an amount necessary to fund the remainder of such Disbursements
(after giving effect to the Loans being made hereunder). Notwithstanding
anything to the contrary contained herein, Scotiabank shall only be required to
make such Swingline Advances if the Borrower has satisfied all of the conditions
to making Swingline Advances under the U.S. Credit Agreement as in effect on the
date of the making of such Swingline Advances and the Borrower hereby
acknowledges and agrees that all the terms and conditions (including as to
repayment, accrual of interest and otherwise) contained in the U.S. Credit
Agreement shall be applicable to all Swingline
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Advances made pursuant to this Section. Each of the parties hereto acknowledge
and agree that upon the satisfaction of the conditions precedent set forth in
Section 6.1, the Existing Loans shall be deemed to be Loans made by the Fronting
Bank on the Effective Date under the terms of this Agreement and shall
thereafter accrue interest and fees pursuant to the terms hereof, and each
Lender shall participate in such Loans in an amount equal to such Lender's
Percentage of the outstanding principal amount of the Existing Loans.
(b) In addition to the provisions of the making of Loans set forth in
clause (a), above, by delivering a Borrowing Request to the Agent on or before
11:00 a.m., New York time, on a Business Day, the Borrower may from time to time
irrevocably request, on not less than three nor more than five Business Days'
notice (in the case of LIBO Rate Loans) and on the date of such Borrowing (in
the case of Base Rate Loans), that a Borrowing be made as other than a LIBO Rate
Loan having a three month Interest Period or in an amount other than the full
amount of Disbursements with respect to which such Loan is to be made. If the
Borrower elects that a Borrowing be made as a LIBO Rate Loan having a one or two
month Interest Period pursuant to this clause, then upon the expiration of such
Interest Period the Borrower shall (unless it shall have given notice to the
Agent to the contrary prior to 11:00 a.m., New York time, at least three
Business Days prior to the date of such Disbursement) be deemed to have
delivered to the Agent a Continuation/Conversion Notice pursuant to which the
Borrower shall have been deemed to irrevocably request that the Fronting Bank
continue the outstanding LIBO Rate Loan as a LIBO Rate Loan with an Interest
Period of (i) one month, in the case of the expiration of a two month or the
second of two one month Interest Periods, or (ii) two months, in the case of the
expiration of a one month Interest Period, in each case in a principal amount
equal to the amount of the LIBO Rate Loan with an Interest Period then expiring.
On the terms and subject to the conditions of this Agreement, each Borrowing
shall be comprised of the type of Loans, and shall be made on the Business Day,
specified (or deemed to be specified) in such Borrowing Request.
(c) The Fronting Bank may, at any time (whether or not a Default or
Event of Default has occurred and is then continuing), in its sole and absolute
discretion but subject to clause (a)(iii) of Section 2.1.3, demand that each
other Lender make a Loan in an amount equal to such Lender's Percentage of the
aggregate principal amount of all or a portion of the Loans outstanding on the
date such demand is made. Each Lender (other than the Fronting Bank) irrevocably
agrees that it shall (whether or not the conditions to the making of a Credit
Extension contained in Article VI have been (or can be) satisfied) make such
Loan by depositing the amount so demanded in same day funds in an account
specified by the Fronting Bank on or before 11:00
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a.m. New York City time on the first Business Day following receipt of such a
demand. The Fronting Bank agrees to apply all such funds received by it under
this clause to refund and refinance the Loans previously made by it to the
Borrower, as identified in the demand that it delivers to the Lenders pursuant
to this clause. On the date (a "Funding Date") that the Lenders (other than the
Fronting Bank) advance funds to the Fronting Bank pursuant to this clause, the
principal amount so refunded and refinanced shall become a Loan outstanding
under such Lender's Note and shall no longer be a Loan owed to the Fronting Bank
under the Fronting Bank's Note.
All interest payable with respect to any Loans made pursuant to this
clause shall be appropriately adjusted to reflect the period of time during
which such Loans were owing to the Fronting Bank and, on and subsequent to a
Funding Date, such Loans were owing to the Lenders.
The obligation of each Lender to make Loans by way of advancing
immediately available funds to the Fronting Bank on a Funding Date to be applied
to refund and refinance the Loans previously made by the Fronting Bank under
this clause shall be absolute and unconditional and shall not be affected by any
circumstance, including (i) any set-off, counterclaim, recoupment, defense or
other right which any Lender may have against Scotiabank, the Borrower or any
other Person for any reason whatsoever; (ii) the occurrence or continuance of
any Default or the inability of the Borrower to otherwise satisfy the conditions
precedent set forth in Article VI; (iii) any adverse change in the condition
(financial or otherwise) of the Borrower or any other Obligor; (iv) the
acceleration or maturity of any Loans or other Obligations or the termination of
any Commitment after the making of any Loan; (v) any breach of this Agreement or
any other Loan Document by the Borrower, any other Obligor or any Lender; or
(vi) any other circumstance, happening or event whatsoever, whether or not
similar to any of the foregoing.
Section 2.4. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Agent on or before 10:00 a.m., New York
time, on a Business Day, the Borrower may from time to time irrevocably elect,
on not less than three nor more than five Business Days' notice that all, or any
portion of any Loans be, in the case of Base Rate Loans, converted into LIBO
Rate Loans or, in the case of a LIBO Rate Loan, converted into a Base Rate Loan
or continued as a LIBO Rate Loan (in the absence of delivery of a
Continuation/Conversion Notice with respect to any LIBO Rate Loan at least three
Business Days before the last day of the then current Interest Period with
respect thereto, such LIBO Rate Loan shall, on such last day, automatically
convert to a LIBO Rate Loan pursuant to the provisions of clause (b) of Section
2.3, unless such Loan is otherwise required to be paid pursuant to the terms of
this
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Agreement (including the first sentence of Section 3.1)); provided, however,
that (i) no portion of the outstanding principal amount of any Loans may be
continued as, or be converted into, LIBO Rate Loans when any Default has
occurred and is continuing and (ii) the maximum length of any Interest Period or
combination of Interest Periods for any particular Loan shall not exceed three
months.
Section 2.5. Funding. Each Lender may, if it so elects, fulfill its
obligation to participate in, and to make, continue or convert LIBO Rate Loans
hereunder by causing one of its foreign branches or affiliates (or an
international banking facility all of the capital stock or other ownership
interests of which are wholly-owned by such Lender) to make or maintain such
LIBO Rate Loan; provided, however, that such LIBO Rate Loan shall nonetheless be
deemed to have been made and to be held by such Lender, and the obligation of
the Lender to refund and refinance such LIBO Rate Loan on the Funding Date and
the obligation of the Borrower to repay such LIBO Rate Loan shall nevertheless
be of or to such Lender for the account of such foreign branch, affiliate or
international banking facility; provided, further that the Borrower shall not be
required to pay any amount under this Section or Section 5.6 that is greater
than the amount which it would have been required to pay had such Lender not
caused such branch, affiliate or facility to make or maintain such LIBO Rate
Loan. In addition, the Borrower hereby consents and agrees that, for purposes of
any determination to be made for purposes of Section 5.1, 5.2, 5.3 or 5.4, it
shall be conclusively assumed that such Lender elected to fund all LIBO Rate
Loans by purchasing Dollar deposits in its LIBOR Office's interbank eurodollar
market.
Section 2.6. Notes. The Loans of the Fronting Bank under the Loan
Commitment shall be evidenced by a Note payable to the order of the Fronting
Bank in a maximum principal amount equal to the then existing Loan Commitment
Amount, and the Loans of each Lender (other than the Fronting Bank) under the
Loan Commitment shall be evidenced by a Note payable to the order of such Lender
in a maximum principal amount equal to such Lender's Percentage multiplied by
the Loan Commitment Amount. The Borrower hereby irrevocably authorizes each
Lender to make (or cause to be made) appropriate notations on the grid attached
to such Lender's Note (or on any continuation of such grid), which notations, if
made, shall evidence, inter alia, the date of, the outstanding principal of, and
the interest rate and Interest Period applicable to the Loans evidenced thereby
and the principal amount of Loans that have been repaid (including, in the case
of the Fronting Bank, Loans that have been refunded and refinanced by the
Lenders on a Funding Date). Such notations shall be conclusive and binding on
the Borrower absent manifest error; provided, however, that the failure of any
Lender to make any
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such notations shall not limit or otherwise affect any Obligations of the
Borrower.
Section 2.7. Extension of Commitment Termination Date. The Commitment
Termination Date may be extended by the Lenders in their sole and absolute
discretion upon written request of the Borrower received at least 60 days but
not more than 90 days prior to the then effective Commitment Termination Date
(as such date may have been extended). The Lenders shall give written notice to
the Borrower of their decision and, if approved, of the new Commitment
Termination Date; provided, that notwithstanding any other provision in this
Agreement to the contrary, in no event shall the modified Commitment Termination
Date exceed 364 days from the then expiring Commitment Termination Date. The
Lenders shall give written notice to the Borrower of their decision within 30
days of request. In the absence of the approval of any one of the Lenders, the
then effective Commitment Termination Date shall not be extended and shall
terminate and expire as otherwise provided in this Agreement, and the failure of
any Lender to deliver a written notice within the requisite period set forth
above shall be deemed to be an election by that Lender not to extend the
Commitment Termination Date.
Article III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
Section 3.1. Repayments and Prepayments. The Borrower shall repay in
full the entire unpaid principal amount of each Loan upon the Stated Maturity
Date therefor. Prior thereto (and subject to Section 2.1.1), the Borrower
(a) may, from time to time on any Business Day, make a voluntary
prepayment, in whole or in part, of the outstanding principal amount of
any Loans; provided, however, that all such voluntary prepayments shall
require at least one Business Day's prior written notice to the Agent;
(b) shall, on each date when any reduction in the Letter of
Credit Commitment Amount shall become effective (which reduction shall
be subject to Section 2.2), make a mandatory prepayment (which shall be
applied (or held as cash collateral for application, as the case may be)
by the Agent to the payment of Reimbursement Obligations of the then
Letter of Credit Outstandings) equal to the excess, if any, of the
aggregate, outstanding principal amount of all Letter of Credit
Outstandings over the Letter of Credit Commitment Amount as so reduced;
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(c) shall, on each date when any reduction in the Loan Commitment
Amount shall become effective (which reduction shall be subject to
Section 2.2), make a mandatory prepayment of the aggregate outstanding
principal amount of all Loans then outstanding in an amount equal to the
excess, if any, of the aggregate outstanding principal amount of all
Loans over the Loan Commitment Amount, as so reduced; and
(d) shall, immediately upon any acceleration of the Stated
Maturity Date of any Obligations pursuant to Section 9.2 or Section 9.3,
repay all Obligations, unless, pursuant to Section 9.3, only a portion
of all Obligations is so accelerated.
Each prepayment of any Loans made pursuant to this Section shall be without
premium or penalty, except as may be required by Section 5.4. No voluntary
prepayment of principal of any Loans shall cause a reduction in the Loan
Commitment Amount.
Section 3.2. Interest Provisions. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with this Section 3.2.
Section 3.2.1. Rates. Loans comprising a Borrowing shall accrue interest
at a rate per annum:
(a) on that portion maintained from time to time as a Base Rate
Loan, equal to the sum of the Alternate Base Rate from time to time in
effect plus the Applicable Margin in effect from time to time; or
(b) on that portion maintained as a LIBO Rate Loan (whether made
pursuant to clause (a) or clause (b) of Section 2.3), during each
Interest Period applicable thereto, equal to the sum of the LIBO Rate
(Reserve Adjusted) for such Interest Period plus the Applicable
Margin in effect from time to time.
The "LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be
made, continued or maintained as, or converted into, a LIBO Rate Loan for any
Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) determined pursuant to the following formula:
LIBO Rate = LIBO Rate
(Reserve Adjusted) --------------------------------
1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans
will be determined by the Agent on the basis of the LIBOR Reserve Percentage in
effect on, and the applicable rates furnished to and received by the Agent from
Scotiabank, two Business Days before the first day of such Interest Period.
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"LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans,
the rate of interest per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) reported, on the first day of such Interest Period as of 11:00 a.m.
London time, on Telerate Access Service Page 3750 (British Bankers Association
Settlement Rate) as the London Interbank Offered Rate for Dollar deposits having
a term comparable to such Interest Period and in an amount of $1,000,000 or more
(or, if said page shall cease to be publicly available, as reported by any
publicly available source of similar market data selected by the Agent that, in
the Agent's reasonable judgment, accurately reflects such London Interbank
Offered Rate).
"LIBOR Reserve Percentage" means, relative to any Interest Period for
LIBO Rate Loans, the reserve percentage, if any (expressed as a decimal) equal
to the maximum aggregate reserve requirements (including all basic, emergency,
supplemental, marginal and other reserves and taking into account any
transitional adjustments or other scheduled changes in reserve requirements)
specified under regulations issued from time to time by the F.R.S. Board and
then applicable to assets or liabilities consisting of and including
"Eurocurrency Liabilities", as currently defined in Regulation D of the F.R.S.
Board, having a term approximately equal or comparable to such Interest Period.
All LIBO Rate Loans shall bear interest from and including the first day
of the applicable Interest Period to (but not including) the last day of such
Interest Period at the interest rate determined as applicable to such LIBO Rate
Loan.
Section 3.2.2. Post-Maturity Rates. After the date any principal amount
of any Loan is due and payable (whether on the Stated Maturity Date, upon
acceleration or otherwise), or after any other monetary Obligation of the
Borrower shall have become due and payable, the Borrower shall pay, but only to
the extent permitted by law, interest (after as well as before judgment) on such
amounts at a rate per annum equal to the greater of (i) the Alternate Base Rate
plus a margin of 2%, and (ii) the then applicable interest rate plus a margin of
1%.
Section 3.2.3. Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) on the date of any optional or required payment or
prepayment, in whole or in part, of principal outstanding on such Loan
(including, with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period for such LIBO Rate Loan);
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(c) with respect to any Base Rate Loans converted into LIBO Rate
Loans on a day when interest would not otherwise have been payable
pursuant to the terms hereof, on the date of such conversion; and
(d) on that portion of any Loans the Stated Maturity Date of
which is accelerated pursuant to Section 9.2 or Section 9.3, immediately
upon such acceleration.
Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.
Section 3.2.4. Allocation of Interest Payments. Accrued and unpaid
interest on the outstanding principal amount of the Loans shall be allocated and
payable to the Lenders as set forth in this Section:
(a) Interest shall be payable by the Borrower to the Fronting
Bank (for its own account) on the outstanding principal amount of the
Loans from the date such Loans are made to (but excluding) the Funding
Date in an amount equal to the difference between (x) (i) in the case of
LIBO Rate Loans, the LIBO Rate (Reserve Adjusted) or, in the case of
Base Rate Loans, the Alternate Base Rate, plus the Applicable Margin
then in effect for LIBO Rate Loans or Base Rate Loans (as applicable)
multiplied by (ii) the outstanding principal amount of the LIBO Rate
Loans or Base Rate Loans, as the case may be, minus (y) the Interest
Amount (as defined below). Prior to the Funding Date each Lender (other
than the Fronting Bank) shall be paid interest in an aggregate amount
(referred to as the "Interest Amount") equal to such Lender's Percentage
of (i) the principal amount of the Loans outstanding prior to a Funding
Date multiplied by (ii) the Applicable Margin then in effect for LIBO
Rate Loans (in the case of the outstanding principal amount of LIBO Rate
Loans) or Base Rate Loans (in the case of the outstanding principal
amount of Base Rate Loans).
(b) On and subsequent to a Funding Date, interest shall be
payable by the Borrower for the account of each Lender (including the
Fronting Bank, in its capacity as a Lender) in accordance with its
Percentage on the principal amount of the Loans actually funded by such
Lender in an amount equal to (in the case of the outstanding principal
amount of LIBO Rate Loans) the LIBO Rate (Reserve Adjusted) plus the
Applicable Margin for such LIBO Rate Loans or, if applicable (in the
case of the outstanding principal amount
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of Base Rate Loans), the Alternate Base Rate plus the Applicable Margin
for Base Rate Loans.
Section 3.3. Fees. The Borrower agrees to pay the fees
set forth in this Section 3.3. All such fees shall be non-
refundable.
Section 3.3.1. Letter of Credit Face Amount Fee. The Borrower agrees to
pay to the Agent, for the pro rata account of the Lenders determined in
accordance with each Lender's Percentage, a fee for each Letter of Credit for
the period from and including the date of the issuance of such Letter of Credit
to (but not including) the earlier of (a) the date upon which such Letter of
Credit expires and (b) the date upon which the Stated Amount of such Letter of
Credit is irrevocably reduced to zero (by the making of a Disbursement by the
Fronting Bank or otherwise), at the rates per annum determined by reference to
the Implied Senior Rating in effect from time to time as set forth below
(provided, however, that no change in the rate for Letters of Credit shall be
effective until three Business Days after the date on which the Agent receives
evidence reasonably satisfactory to it from Group or the Borrower that a new
Implied Senior Rating is in effect):
<TABLE>
<CAPTION>
Rate for
Implied Senior Rating Letters of Credit
--------------------- -----------------
<S> <C>
BB+ or below 0.625%
BBB- 0.450%
BBB 0.375%
BBB+ 0.375%
A- or above 0.300%
</TABLE>
In the event that at any time no Implied Senior Rating shall be in effect, the
applicable rate per annum for purposes of determining the Letter of Credit fees
provided for under this Section shall be 0.625%. Notwithstanding the foregoing,
until the six-month anniversary of the Effective Date, the Letter of Credit fee
rate provided for under this Section will be 0.375%. Such fee shall be payable
by the Borrower in arrears on each Quarterly Payment Date (commencing on the
first such date after the issuance of such Letter of Credit), on the Commitment
Termination Date and, in the case of Letters of Credit with expiry dates that
extend beyond the Commitment Termination Date, on the expiration of or, if
earlier, on the date of any disbursement made under, such Letter of Credit, in
each case, for any period then ending for which such fee shall not theretofore
have been paid.
Section 3.3.2. Letter of Credit Fees. The Borrower agrees to pay to the
Fronting Bank the fees relating to Letters of
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Credit in accordance with the fees currently paid by the Borrower on the
Effective Date for each Letter of Credit for the period from and including the
date of issuance of such Letter of Credit to (but not including) the date upon
which such Letter of Credit expires.
Section 3.3.3. Fee Letter. The Borrower agrees to pay to Scotiabank, for
its own account, such fees in the amounts and on the dates set forth in the Fee
Letter.
Section 3.3.4. Commitment Fee. The Borrower agrees to pay to the Agent,
for the pro rata account of each Lender determined in accordance with each
Lender's Percentage, for the period commencing on the Effective Date and
continuing through the Commitment Termination Date, a commitment fee on the sum
of the average daily unused portion of each of the Commitment Amounts at the
rates per annum determined by reference to the Implied Senior Rating in effect
from time to time as set forth below; (provided, however, that no change in the
commitment fee rate shall be effective until three Business Days after the date
on which the Agent receives evidence reasonably satisfactory to it from Group or
the Borrower that a new Implied Senior Rating is in effect):
<TABLE>
<CAPTION>
Commitment
Implied Senior Rating Fee Rate
--------------------- --------
<S> <C>
BB+ or below 0.375%
BBB- 0.175%
BBB 0.125%
BBB+ 0.095%
A- or above 0.070%
</TABLE>
In the event that at any time no Implied Senior Rating shall be in effect, the
applicable rate per annum for purposes of determining the commitment fees
provided for under this Section shall be 0.375%. Notwithstanding the foregoing,
until the six-month anniversary of the Effective Date, the commitment fee rate
will be 0.125%. The fee payable under this Section shall be payable by the
Borrower in arrears on each Quarterly Payment Date, commencing on the first such
date after the Effective Date, and on the Commitment Termination Date for any
period then ending for which such fee shall not theretofore have been paid. The
amount of any Loans made by the Fronting Bank and not funded by the other
Lenders will constitute usage of the Loan Commitment Amount for purposes of
calculating the commitment fee payable to Lenders (other than the Fronting Bank)
pursuant to this Section.
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Article IV
LETTERS OF CREDIT
Section 4.1. Issuance Requests. By delivering to the Agent and the
Fronting Bank an Issuance Request (such request being, in the Borrower's sole
discretion, either delivered (by telex, teletransmission or otherwise) in
accordance with the terms of the Tradexpress Agreement or in the form attached
hereto as Exhibit B) on or before 3:00 p.m., New York time on the Business Day
on which a Letter of Credit is to be issued, the Borrower or any wholly-owned
Subsidiary of the Borrower (or any of their respective divisions) may request,
from time to time on or prior to the Commitment Termination Date, that the
Fronting Bank issue an irrevocable sight documentary letter of credit in such
form as may be requested by the Borrower or such Subsidiary and approved by the
Fronting Bank (each a "Letter of Credit"), to facilitate the Borrower's and the
Borrower's Subsidiaries' worldwide sourcing of merchandise. Each Letter of
Credit shall by its terms:
(a) be issued in a Stated Amount which does not
exceed (or would not exceed) the then Letter of Credit
Availability;
(b) be stated to expire on a date (its "Stated Expiry Date") no
later than 180 days from its date of issuance (it being acknowledged and
agreed by the Fronting Bank and the Lenders that the Stated Expiry Date
may be a date that is up to 179 days subsequent to the Commitment
Termination Date); and
(c) on or prior to its Stated Expiry Date:
(i) terminate immediately upon notice to the Fronting Bank
thereof from the beneficiary thereunder that all obligations
covered thereby have been terminated, paid, or otherwise
satisfied in full, and
(ii) reduce in part immediately and to the extent the
beneficiary thereunder has notified the Fronting Bank thereof
that the obligations covered thereby have been paid or otherwise
satisfied in part.
So long as no Default has occurred and is continuing, by delivery to the
Fronting Bank and the Agent of an Issuance Request (such request being, in the
Borrower's sole discretion, either delivered (by telex, teletransmission or
otherwise) in accordance with the terms of the Tradexpress Agreement or in the
form attached hereto as Exhibit B) on or before 3:00 p.m., New York time, on the
Stated Expiry Date of any Letter of Credit, the Borrower may on or prior to the
then existing Commitment
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Termination Date request the Fronting Bank to extend the Stated Expiry Date of
such Letter of Credit for an additional period not to exceed the earlier of 180
days from its date of extension and 179 days after the Commitment Termination
Date. Notwithstanding any other provision in this Agreement to the contrary, the
Fronting Bank may in its discretion refuse to issue any Letter of Credit if such
issuance would, in the Fronting Bank's reasonable determination, contravene any
sanctions, laws or regulations of any State of the United States or any Federal
body or authority of the United States (including but not limited to the
regulations of the Federal Reserve Bank) or the laws, regulations or sanctions
of any other applicable jurisdiction or authority or if, in the Fronting Bank's
reasonable determination, any of the above-mentioned laws, regulations or
sanctions would affect the Fronting Bank's ability to perform its obligations
with respect to any such Letter of Credit if issued.
Section 4.2. Issuances and Extensions. On the terms and subject to the
conditions of this Agreement (including Article VI), the Fronting Bank shall
issue Letters of Credit, and extend the Stated Expiry Dates of outstanding
Letters of Credit, in accordance with the Issuance Requests made therefor. The
Fronting Bank will make available the original of each Letter of Credit which it
issues in accordance with the Issuance Request therefor to the beneficiary
thereof (and, at the request of a Lender, will provide such Lender on a monthly
basis with a schedule of the outstanding Letters of Credit as of the last day of
the prior month) and will notify the beneficiary under any Letter of Credit of
any extension of the Stated Expiry Date thereof.
Section 4.3. Destruction of Goods, etc. Neither the Fronting Bank nor
its agents or correspondents shall be responsible for the negligence or
fraudulence of any beneficiary of a Letter of Credit for the existence, nature,
condition, description, value, quality or quantity of the Goods, for the
packing, shipment, export, import, handling, storage or delivery thereof, or for
the safety or preservation thereof at any time, and neither the Fronting Bank
nor its agents or correspondents shall be liable for any loss resulting from the
total or partial destruction of or damage to or deterioration or fall in value
of the Goods, or from the delay in arrival or failure to arrive of either the
Goods or of any of the documents relating thereto, or from the inadequacy or
invalidity of any document or insurance, or from the default or insolvency of
any insurer, carrier or other Person issuing any document with respect to the
Goods, or from failure to give or delay in giving notice of arrival of the Goods
or any other notice, or from any error in or misinterpretation of or default or
delay in the sending, transmission, arrival or delivery of any message, whether
in writing or not, by post, telegraph, cable, wireless or otherwise, and the
obligations hereunder of the Borrower to the Fronting
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Bank shall not be in any way lessened or affected if any Draft or document
accepted, paid or acted upon by the Fronting Bank or its agents or
correspondents does not bear a reference or sufficient reference to a Letter of
Credit or if no note thereof is made on a Letter of Credit.
Section 4.4. Other Lenders' Participation. Each Letter of Credit issued
pursuant to Section 4.2 shall, effective upon its issuance and without further
action, be issued on behalf of all Lenders (including the Fronting Bank thereof)
according to their respective Percentages. Each Lender shall, to the extent of
its Percentage, be deemed irrevocably to have participated in the issuance of
such Letter of Credit and shall be responsible to reimburse promptly the
Fronting Bank thereof for Reimbursement Obligations which have not been
converted into a Loan on the Disbursement Date pursuant to the terms of this
Agreement or reimbursed by the Borrower in accordance with Section 4.5, or which
have been converted into a Loan on the Disbursement Date pursuant to the terms
of this Agreement or reimbursed by the Borrower but must be returned, restored
or disgorged by the Fronting Bank for any reason, and each Lender shall, to the
extent of its Percentage, be entitled to receive from the Agent a ratable
portion of the letter of credit fees received by the Agent pursuant to Section
3.3.1, with respect to each Letter of Credit. In the event that the Borrower
shall fail to reimburse the Fronting Bank, or if for any reason Loans shall not
be made to fund any Reimbursement Obligation, in each case as provided in this
Agreement and in an amount equal to the Disbursement amount, or in the event the
Fronting Bank must for any reason return or disgorge such reimbursement, the
Fronting Bank shall promptly notify each Lender of the unreimbursed amount of
such drawing and of such Lender's respective participation therein. Each Lender
shall make available to the Fronting Bank, whether or not any Default shall have
occurred and be continuing, an amount equal to its respective participation in
same day or immediately available funds at the office of the Fronting Bank
specified in such notice not later than 11:00 a.m., New York City time, on the
Business Day after the date notified by the Fronting Bank. In the event that any
Lender fails to make available to the Fronting Bank the amount of such Lender's
participation in such Letter of Credit as provided herein, the Fronting Bank
shall be entitled to recover such amount on demand from such Lender together
with interest at the Federal Funds Rate from the date such amount is due through
(but excluding) the date such payment is made (together with such other
compensatory amounts as may be required to be paid by such Lender to the Agent
pursuant to the Rules for Interbank Compensation of the council on International
Banking or the Clearinghouse Compensation Committee, as the case may be, as in
effect from time to time). Nothing in this Section shall be deemed to prejudice
the right of any Lender to recover from the Fronting Bank any amounts made
available by such Lender to the Fronting Bank pursuant to this Section in the
event that it is
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determined by a court of competent jurisdiction that the payment with respect to
a Letter of Credit by the Fronting Bank in respect of which payment was made by
such Lender constituted gross negligence or wilful misconduct on the part of the
Fronting Bank. The Fronting Bank shall distribute to each other Lender which has
paid all amounts payable by it under this Section with respect to any Letter of
Credit issued by the Fronting Bank such other Lender's Percentage of all
payments received by the Fronting Bank from the Borrower in reimbursement of
drawings honored by the Fronting Bank under such Letter of Credit when such
payments are received.
Section 4.5. Disbursements. The Fronting Bank will notify the Borrower
and the Agent promptly of the presentment for payment of any Letter of Credit,
together with notice of the date (a "Disbursement Date") such payment shall be
made. Subject to the terms and provisions of such Letter of Credit, and the
delivery to the Fronting Bank of all documents and instruments required as a
condition to making a Disbursement under such Letter of Credit, the Fronting
Bank shall make such payment to the beneficiary (or its designee) of such Letter
of Credit (with proceeds of Loans (and, if applicable, Swingline Loans) pursuant
to Section 2.3 or otherwise). If and to the extent that Loans (and, if
applicable, Swingline Loans) are not made to fund a Reimbursement Obligation
pursuant to Section 2.3, then the Borrower will reimburse the Fronting Bank
within one Business Day following the Disbursement Date for all amounts which
the Fronting Bank has disbursed under the Letter of Credit.
Section 4.6. Reimbursement; Outstanding Letters, etc. (a) The Borrower's
obligation (a "Reimbursement Obligation") under Section 4.5 to reimburse the
Fronting Bank with respect to each Disbursement (including fees and interest
thereon payable pursuant to Section 3.2.2 and Section 3.3.1), and each Lender's
obligation to make participation payments pursuant to Section 4.4 in each
Disbursement, shall be absolute, unconditional and irrevocable and shall not be
reduced by any event or occurrence including, without limitation,
(i) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any Letter of Credit or any document submitted by any
party in connection with the application for and issuance of a Letter of
Credit, even if it should in fact prove to be in any or all respects
invalid, insufficient, inaccurate, fraudulent or forged;
(ii) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any instrument transferring or assigning or purporting
to transfer or assign a Letter of Credit or the rights or benefits
thereunder or the proceeds thereof in whole or in part, which may prove
to be invalid or ineffective for any reason;
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(iii) failure of the beneficiary to comply fully with conditions
required in order to demand payment under a Letter of Credit;
(iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable,
telegraph, telex or otherwise;
(v) any loss or delay in the transmission or
otherwise of any document or draft required in order to make a
Disbursement under a Letter of Credit;
(vi) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations in respect of any
Letter of Credit or any other amendment or waiver of or any consent to
departure from any Letter of Credit;
(vii) the existence of any claim, set-off, defense or other right
that the Borrower may have at any time against any beneficiary or any
transferee of a Letter of Credit (or any Persons for whom any such
beneficiary or any such transferee may be acting), the Fronting Bank or
any other Person, whether in connection with the transactions
contemplated by the applicable Letter of Credit or any unrelated
transaction;
(viii) payment by the Fronting Bank under a Letter of Credit
against presentation of a draft or certificate that does not strictly
comply with the terms of such Letter of Credit;
(ix) any release or amendment or waiver of or consent
to departure from any guaranty, for all or any of the
Obligations in respect of the applicable Letter of Credit;
or
(x) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including any other circumstance
that might otherwise constitute a defense available to, or a discharge
of, the Borrower or a guarantor.
The obligations of the Borrower and the Lenders hereunder shall remain in full
force and effect and shall apply to any alteration to or extension of the
expiration date of any Letter of Credit or any Letter of Credit issued to
replace, extend or alter any Letter of Credit during the term of this Agreement.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted to the Fronting Bank or any Lender hereunder. In
furtherance and extension and not in limitation or derogation of any of the
foregoing, any action taken or omitted
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to be taken by an Fronting Bank in good faith (and not constituting gross
negligence or willful misconduct) shall be binding upon the Borrower, each
Obligor and each such Lender, and shall not put such Fronting Bank under any
resulting liability to the Borrower, any Obligor or any such Lender, as the case
may be.
(b) The Borrower shall pay to the Fronting Bank an amount equal to then
Stated Amount and all unpaid fees in respect of (i) any Letter of Credit
outstanding under this Agreement upon any termination of this Agreement and (ii)
any Letter of Credit which is affected by, or becomes the subject matter of, any
order, judgment, injunction or other such determination (an "Order") or any
petition or other application for any Order by the Borrower or any other party,
restricting payment by the Fronting Bank under and in accordance with such
Letter of Credit or extending the Fronting Bank's or any Lender's liability
under such Letter of Credit beyond the expiration date stated therein, or if not
stated therein, which would otherwise apply to such Letter of Credit. Payment in
respect of each such Letter of Credit described in (i) and (ii) in this clause
shall be due forthwith upon demand and in Dollars.
(c) The Fronting Bank hereby agrees that it will, with respect to each
Letter of Credit subjected to any such demand for payment under the preceding
clause (b), upon the later of:
(i) the date on which any final and non-appealable order,
judgment or other such determination has been rendered or issued either
terminating any applicable Order or permanently enjoining the Fronting
Bank from paying under such Letter; and
(ii) the earlier of (x) the date on which either the original
counterpart of such Letter of Credit is returned to the Fronting Bank
for cancellation or the Fronting Bank is released by the beneficiary
thereof from any further obligations in respect of such Letter of
Credit, and (y) the expiry of such Letter of Credit;
pay to the Borrower an amount in Dollars equal to any excess of the amount
received by the Fronting Bank pursuant to clause (b) above in respect of such
Letter of Credit (the "Received Amount") over the equivalent in Dollars of the
total of amounts applied to reimburse the Fronting Bank for amounts paid by it
under such Letter of Credit, if any (the Fronting Bank having the right to so
appropriate such funds), together with an additional amount in Dollars computed
by applying to the amount of such excess from time to time a per annum rate
equal to 3% less than the Alternate Base Rate. Such additional amount shall be
calculated daily on the basis of a 360 day year for the actual number of days
elapsed from and including the date of payment to the Fronting Bank of
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the Received Amount to (but not including) the date of return to the Borrower of
the excess.
Section 4.7. Deemed Disbursements. Upon (i) the occurrence of any
Commitment Termination Event of the type described in clause (c) of the
definition of "Commitment Termination Event", (ii) the occurrence and during the
continuation of any event or condition specified in clause (e) of Section 6.01
of the U.S. Credit Agreement, or (iii) the occurrence and during the continuance
of any other Event of Default,
(a) an amount equal to that portion of Letter of Credit
Outstandings attributable to outstanding and undrawn Letters of Credit
shall, without demand upon or notice to the Borrower, be deemed to have
been paid or disbursed by the Fronting Bank under such Letters of Credit
(notwithstanding that such amount may not in fact have been so paid or
disbursed); and
(b) upon notification by the Fronting Bank to the Agent and the
Borrower of its obligations under this Section, the Borrower shall be
immediately obligated to reimburse the Fronting Bank the amount deemed
to have been so paid or disbursed by the Fronting Bank.
Any amounts so received by the Fronting Bank from the Borrower pursuant to this
Section shall be held as collateral security for the repayment of the Borrower's
Obligations in connection with the Letters of Credit issued by the Fronting
Bank. At any time when such Letters of Credit shall terminate and all
Obligations of the Fronting Bank are either terminated or paid or reimbursed to
the Fronting Bank in full, the Obligations of the Borrower under this Section
shall be reduced accordingly (subject, however, to reinstatement in the event
any payment in respect of such Letters of Credit is recovered in any manner from
the Fronting Bank), and the Fronting Bank will return to the Borrower the
excess, if any, of
(c) the aggregate amount deposited by the Borrower
with the Fronting Bank and not theretofore applied by the
Fronting Bank to any Reimbursement Obligation
over
(d) the aggregate amount of all Reimbursement Obligations to the
Fronting Bank pursuant to this Section, as so adjusted.
At such time when all Events of Default shall have been cured or waived, the
Fronting Bank shall return to the Borrower all amounts then on deposit with the
Fronting Bank pursuant to this Section together with an additional amount in
dollars computed by
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applying to the amount so returned to the Borrower from time
to time a per annum rate equal to 3% less than the Alternate Base Rate. Such
additional amount shall be calculated daily on the basis of a 360 day year for
the actual number of days elapsed from and including the date of payment to the
Fronting Bank by the Borrower to (but not including) the date of return to the
Borrower of such amounts.
Section 4.8. Nature of Reimbursement Obligations. The Borrower shall
assume all risks of the acts, omissions, or misuse of any Letter of Credit by
the beneficiary thereof. Any action, inaction or omission taken or suffered by
the Fronting Bank or any of the Fronting Bank's correspondents under or in
connection with a Letter of Credit or any Draft made thereunder or any document
relating thereto, if in good faith and in conformity with foreign or domestic
laws, regulations or customs applicable thereto shall be binding upon the
Borrower and shall not place the Fronting Bank or any of its correspondents
under any resulting liability to the Borrower. Without limiting the generality
of the foregoing, the Fronting Bank and its correspondents may receive, accept
or pay as complying with the terms of a Letter of Credit, any Draft thereunder,
otherwise in order which may be signed by, or issued to, the administrator or
any executor of, or the trustee in bankruptcy of, or the receiver for any
property of, or other Person or entity acting as the representative or in the
place of, such beneficiary or its successors and assigns. The Borrower covenants
that it will not take any steps, issue any instructions to the Fronting Bank or
any of its correspondents or institute any proceedings intended to derogate from
the right or ability of the Fronting Bank or its correspondents to honor and pay
any Draft or Drafts. Without in any way limiting the provisions of Section 4.6,
and notwithstanding anything to the contrary contained in this Agreement or in
any other Loan Document, the Borrower irrevocably acknowledges and agrees that
it is unconditionally liable for all Reimbursement Obligations with respect to
each Disbursement (including fees and interest thereon) under each Letter of
Credit, regardless of whether such Letter of Credit was issued in respect of the
sourcing or other corporate requirements or needs of the Borrower or any
Subsidiary of the Borrower, or otherwise.
Section 4.9. Existing Letters of Credit. Upon the payment to Scotiabank
of all fees and other amounts due and owing to Scotiabank and the lenders
parties thereto under the terms of the Existing Credit Agreement, the Existing
Letters of Credit, and the amount and payment date of fees on Letters of Credit
(including such Existing Letters of Credit deemed to be Letters of Credit
hereunder), shall be governed by this Agreement. Simultaneously with the
effectiveness of this Agreement pursuant to Section 11.8, the Existing Credit
Agreement shall be terminated and of no further force and effect, except to the
extent of any provisions of the Existing Credit Agreement which
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by their express terms survive termination of the Existing Credit Agreement.
Article V
CERTAIN LIBO RATE AND OTHER PROVISIONS
Section 5.1. LIBO Rate Lending Unlawful. If any Lender shall determine
(which determination shall, upon notice thereof to the Borrower, be conclusive
and binding on the Borrower) that the introduction of or any change in or in the
interpretation of any law makes it unlawful, or any central bank or other
governmental authority asserts that it is unlawful, for such Lender to make,
continue or maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan,
the obligations of the Lenders to make, continue, maintain or convert into any
such Loans shall, upon such determination, forthwith be suspended until such
Lender shall notify the Borrower that the circumstances causing such suspension
no longer exist, and all LIBO Rate Loans shall automatically convert into Base
Rate Loans at the end of the then current Interest Periods with respect thereto
or sooner, if required by such law or assertion.
Section 5.2. Deposits Unavailable. If any Lender shall
have determined that
(a) Dollar deposits in the relevant amount and for
the relevant Interest Period are not available to it in its
relevant market; or
(b) by reason of circumstances affecting such Lender's relevant
market, adequate means do not exist for ascertaining the interest rate
applicable hereunder to LIBO Rate Loans,
then, upon notice from such Lender to the Borrower and the Agent, the
obligations of the Lenders under Section 2.3 and Section 2.4 to make or continue
any Loans as, or to convert any Loans into, LIBO Rate Loans shall forthwith be
suspended until such Lender shall notify the Borrower and the Agent that the
circumstances causing such suspension no longer exist.
Section 5.3. Increased LIBO Rate Loan Costs, etc. The Borrower agrees to
reimburse each Lender for any increase in the cost to such Lender of, or any
reduction in the amount of any sum receivable by such Lender in respect of,
making or continuing (or of its obligation to make or continue) any Loans as, or
of converting (or of its obligation to convert) any Loans into, LIBO Rate Loans.
Each Lender shall promptly notify the Borrower and the Agent in writing of the
occurrence of any such event, such notice to state, in reasonable detail, the
reasons therefor and
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the additional amount required fully to compensate such lender for such
increased cost or reduced amount. Such additional amounts shall be payable by
the Borrower directly to such Lender within five Business Days of its receipt of
such notice, and such notice shall, in the absence of manifest error, be
conclusive and binding on the Borrower.
Section 5.4. Funding Losses. In the event any Lender shall incur any
loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue or maintain any portion of the principal amount of any Loan
as, or to convert any portion of the principal amount of any Loan into, a LIBO
Rate Loan, but excluding the loss of any anticipated or expected profits in
respect of such LIBO Rate Loan) as a result of
(a) any conversion or repayment or prepayment of the principal
amount of any LIBO Rate Loans on a date other than the scheduled last
day of the Interest Period applicable thereto, whether pursuant to
Section 3.1 or otherwise;
(b) any Loans not being made as LIBO Rate Loans in
accordance with the Borrowing Request therefor; or
(c) any Loans not being continued as, or converted into, LIBO
Rate Loans in accordance with the Continuation/ Conversion Notice
therefor,
then, upon the written notice of such Lender to the Borrower and the Agent, the
Borrower shall, within five Business Days of its receipt thereof, pay directly
to such Lender such amount as will (in the reasonable determination of such
Lender) reimburse such Lender for such loss or expense. Such written notice
(which shall include calculations in reasonable detail) shall, in the absence of
manifest error, be conclusive and binding on the Borrower.
Section 5.5. Increased Capital Costs, etc. If the implementation of or,
after the date hereof, the introduction or any change in the interpretation of,
or any change in its application to the Borrower, the Fronting Bank and/or the
Lenders of, any law or any regulation or guideline issued by any central bank or
other governmental authority (whether or not having the force of law), including
any eurocurrency or other reserve or special deposit requirement or any tax
(other than tax which is on a Lender's general net or gross income or in respect
of a Lender's franchise taxes) or any capital requirement, has, due to a
Lender's or the Fronting Bank's compliance, the effect, directly or indirectly,
of (i) increasing the cost to such Lender or Fronting Bank of performing its
obligations hereunder or under any Letter of Credit or Loan; (ii) reducing any
amount received or receivable by such Lender or Fronting Bank or its effective
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return hereunder or in respect of any Letter of Credit or Loan or on its
capital; or (iii) causing such Lender or Fronting Bank to make any payment or to
forgo any return based on any amount received or receivable by such Lender or
Fronting Bank hereunder or in respect of any Letter of Credit or Loan, then upon
demand from time to time the Borrower shall pay such amount as shall compensate
such Lender or Fronting Bank for any such cost, reduction, payment or foregone
return upon receipt of the certificate referred to in the last sentence of this
paragraph. The Borrower shall further indemnify the Fronting Bank for all costs,
losses and expenses incurred by the Fronting Bank in connection with any Letter
of Credit and agrees that the Fronting Bank shall have no liability to the
Borrower for any reason in respect of any Letter of Credit other than on account
of the Fronting Bank's gross negligence or wilful misconduct. Any certificate of
the Fronting Bank or any Lender in respect of the foregoing will be conclusive
and binding upon the Borrower, except for manifest error, and shall set forth a
determination of the amounts owing to the Fronting Bank or such Lender in good
faith using any reasonable averaging and attribution methods. Anything in this
Agreement or any Loan Document to the contrary notwithstanding, no Lender or
Fronting Bank shall be indemnified for, exculpated from, or relieved from
liability, under this Agreement or any Loan Document, for any act or omission
constituting gross negligence or wilful misconduct.
Section 5.6. Taxes. (a) Each payment made by the Borrower under this
Agreement shall be made free and clear of, and without deduction for, any
present or future withholding or other taxes imposed on such payments by or on
behalf of any government or any political subdivision or agency thereof or
therein, except for any income, franchise and other taxes imposed on the Lender
(which for purposes of this Section 5.6 shall include any branch, affiliate or
international banking facility created by a Lender to make or maintain a LIBO
Rate Loan pursuant to Section 2.5) by the jurisdiction under the laws of which
such Lender is organized or any political subdivision or agency thereof or by
the jurisdiction of such Lender's branch or lending office or principal place of
business (all such non-excluded taxes being hereinafter referred to as "Taxes").
Whenever any Taxes are payable by the Borrower with respect to any payments
hereunder, the Borrower shall promptly furnish to the Agent for the account of
the applicable Lender official receipts (to the extent that the relevant
governmental authority delivers such receipts) evidencing payment of any such
Taxes so withheld or deducted.
(b) Each Lender that is not a "United States person" (as such term is
defined in Section 7701(a)(3) of the Internal Revenue Code of 1986) shall submit
to the Borrower on or before the Effective Date (or, in the case of a Person
that becomes a Lender after the Effective Date by assignment or pursuant to
Section 2.5 promptly upon such assignment or funding) two duly
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completed and signed copies of either (1) Form 1001 of the United States
Internal Revenue Service entitling such Lender to a complete exemption from
withholding on all amounts to be received by such Lender pursuant to this
Agreement or (2) Form 4224 of the United States Internal Revenue Service
relating to all amounts to be received by such Lender pursuant to this
Agreement. Each such Lender shall, from time to time after submitting either
such form, submit to the Borrower and the Agent such additional duly completed
and signed copies of one or the other such forms (or such successor forms or
other documents as shall be adopted from time to time by the relevant United
States taxing authorities) as may be (1) reasonably requested in writing by the
Borrower or the Agent and (2) appropriate under then current United States law
or regulations to avoid United States withholding taxes on payments in respect
of any amounts to be received by such Lender pursuant to this Agreement. Upon
the reasonable request of the Borrower or the Agent, each Lender that has not
provided the forms or other documents, as provided above, on the basis of being
a "United States person" shall submit to the Borrower and the Agent a
certificate to the effect that it is such a "United States person".
(c) If any Lender which is not a "United States person" determines that
it is unable to submit to the Borrower and the Agent any form or certificate
that such Lender is requested to submit pursuant to the preceding paragraph, or
that it is required to withdraw or cancel any such form or certificate, or that
any such form or certificate previously submitted has otherwise become
ineffective or inaccurate, such Lender shall promptly notify the Borrower and
the Agent of such fact.
(d) The Borrower shall not be required to pay any additional amount in
respect of Taxes to any Lender if and only to the extent that (A) such Lender is
subject to such Taxes on the Effective Date (or in the case of a Person that
became a Lender after the Effective Date by assignment or pursuant to Section
2.5 on the date of such assignment or funding) or would be subject to such Taxes
on such date if a payment under this Agreement has been received by it on such
date; (B) such Lender becomes subject to such Taxes subsequent to the date
referred to in clause (A) above (or in the case of a Lender which is not a
"United States person", the first date on which it delivers the appropriate form
or certificate to the Borrower as referred to in clause (b) of this Section) as
a result of a change in the circumstances of such Lender (other than a change in
applicable law), including without limitation a change in the residence, place
of incorporation or principal place of business of the Lender, a change in the
branch or lending office of the Lender participating in the transactions set
forth herein or as a result of the sale by the Lender of participating interests
in such Lender's creditor position(s) hereunder; or (C) such Taxes would not
have been incurred but for the failure of such Lender to file
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with the appropriate tax authorities and/or provide to the Borrower any form or
certificate that it was required so to do pursuant to clause (b) of this
Section, unless the Lender is not entitled to provide such form or certificate
as a result of a change in applicable law after the Effective Date (or in the
case of a Person that became a Lender after the Effective Date by assignment or
pursuant to Section 2.5 the date of such assignment or funding).
(e) Within thirty (30) days after the written reasonable request of the
Borrower, each Lender shall execute and deliver to the Borrower such
certificates, forms or other documents which can be furnished consistent with
the facts and which are reasonably necessary to assist the Borrower in applying
for refunds of Taxes paid by the Borrower hereunder or making payment of Taxes
hereunder; provided, however, that no Lender shall be required to furnish to the
Borrower any financial information with respect to itself or other information
which it considers confidential.
(f) The Borrower shall have the right to require any Lender which is not
a "United States person" to which the Borrower is required to make additional
payments pursuant to Section 5.6 hereof on account of Taxes (or would, upon
payment to such Lender of an amount hereunder, be so required) to assign such
Lender's total Loans and Commitments to one or more banks or financial
institutions identified by the Borrower and acceptable to the Agent at a
purchase price equal to the then outstanding amount of all principal, interest,
fees and other amounts then owed to such Lender.
Section 5.7. Payments, Computations, etc. Unless otherwise expressly
provided herein (including as set forth in Section 2.3 and Section 4.5), all
payments by the Borrower pursuant to this Agreement, the Notes or any other Loan
Document shall be made by the Borrower to the Agent for the account of the
Lenders entitled to receive such payment. All such payments required to be made
to the Agent shall be made, without setoff, deduction or counterclaim, not later
than 11:00 a.m., New York time, on the date due, in same day or immediately
available funds, to such account as the Agent shall specify from time to time by
notice to the Borrower. To the extent the Agent receives such funds prior to
12:00 noon, New York time, the Agent shall promptly remit in same day funds to
each Lender its share, if any, of such payments received by the Agent for the
account of such Lender. All interest and fees shall be computed on the basis of
the actual number of days (including the first day but excluding the last day)
occurring during the period for which such interest or fee is payable over a
year comprised of 360 days. Whenever any payment to be made shall otherwise be
due on a day which is not a Business Day, such payment shall (except as
otherwise required by clause (b) of the definition of the term "Interest
Period") be
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made on the next succeeding Business Day and such extension of time shall be
included in computing interest and fees, if any, in connection with such
payment.
Section 5.8. Sharing of Payments. If any Lender shall obtain any payment
or other recovery (whether voluntary, involuntary, by application of setoff or
otherwise) on account of any Letter of Credit or Loan in excess of its
Percentage of payments then or therewith obtained by all Lenders, such Lender
shall purchase from the other Lenders such participations in Letters of Credit
or Loans, as the case may be, as shall be necessary to cause such purchasing
Lender to share the excess payment or other recovery ratably with each of them;
provided, however, that if all or any portion of the excess payment or other
recovery is thereafter recovered from such purchasing Lender, the purchase shall
be rescinded and each Lender which has sold a participation to the purchasing
Lender shall repay to the purchasing Lender the purchase price to the ratable
extent of such recovery together with an amount equal to such selling Lender's
ratable share (according to the proportion of
(a) the amount of such selling Lender's required
repayment to the purchasing Lender
to
(b) the total amount so recovered from the purchasing
Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section may, to
the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to Section 5.9) with respect to such participation as fully
as if such Lender were the direct creditor of the Borrower in the amount of such
participation. If under any applicable bankruptcy, insolvency or other similar
law, any Lender receives a secured claim in lieu of a setoff to which this
Section applies, such Lender shall, to the extent practicable, exercise its
rights in respect of such secured claim in a manner consistent with the rights
of the Lenders entitled under this Section to share in the benefits of any
recovery on such secured claim.
Section 5.9. Setoff. Each Lender shall, upon the occurrence of any event
or condition described in clause (e) of Section 6.01 of the U.S. Credit
Agreement or, with the consent of the Required Lenders, upon the occurrence of
any other Event of Default, have the right to appropriate and apply to the
payment of the Obligations owing to it (whether or not then due) any and all
balances, credits, deposits, accounts or moneys of the
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Borrower then or thereafter maintained with or otherwise held by such Lender;
provided, however, that any such appropriation and application shall be subject
to the provisions of Section 5.8. Each Lender agrees promptly to notify the
Borrower and the Agent after any such setoff and application made by such
Lender; provided, however, that the failure to give such notice shall not affect
the validity of such setoff and application. The rights of each Lender under
this Section are in addition to other rights and remedies (including other
rights of setoff under applicable law or otherwise) which such Lender may have.
Section 5.10. Use of Proceeds. The Borrower shall apply
the proceeds of each Credit Extension in accordance with the
sixth recital.
Article VI
CONDITIONS PRECEDENT
Section 6.1. Initial Credit Extension. The obligations of the Lenders to
make any Credit Extension and the Fronting Bank to issue any Letters of Credit
shall be subject to the delivery to the Agent of this Agreement duly executed
and delivered by each Lender, the Agent, the Borrower and Group, and the prior
or concurrent satisfaction of each of the conditions precedent set forth below
in this Section 6.1.
Section 6.1.1. Resolutions, etc. The Agent shall have received from each
Obligor originally executed copies of a certificate, each dated the date of the
Effective Date, of its Secretary or Assistant Secretary as to
(a) resolutions of its Board of Directors then in full force and
effect authorizing the execution, delivery and performance of this
Agreement, the Notes and each other Loan Document to be executed by it;
and
(b) the incumbency and signatures of those of its officers
authorized to act with respect to this Agreement, the Notes and each
other Loan Document executed by it,
upon which certificate each Lender may conclusively rely until it shall have
received a further certificate of the Secretary of such Obligor canceling or
amending such prior certificate.
Section 6.1.2. Delivery of Notes. Each Lender shall have received its
Note duly executed and delivered by the Borrower.
Section 6.1.3. Group Guaranty. The Agent shall have received originally
executed counterparts for each Lender of the
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Group Guaranty, dated as of the date hereof, duly executed by an Authorized
Officer of Group.
Section 6.1.4. Subsidiary Guaranty. The Agent shall have received
originally executed counterparts for each Lender of the Subsidiary Guaranty,
duly executed by an Authorized Officer of each of the Domestic Subsidiaries.
Section 6.1.5. Certificates as to No Default, etc. No default shall have
occurred in the performance of any affirmative or negative covenants contained
in the U.S. Credit Agreement, none of the events described in clauses (a), (b),
(d), (e), (f), (g), (h), (i), (j), (k) or (l) of Section 6.01 of the U.S. Credit
Agreement shall have occurred, and no Event of Default shall have occurred or
would occur under the U.S. Credit Agreement or would result from the issuance of
any Letter of Credit or the making of any Loan, and the Agent shall have
received originally executed certificates for each Lender dated the Effective
Date from an Authorized Officer of the Borrower certifying as to the above.
Section 6.1.6. No Material Adverse Change. Since January 7, 1995, there
shall have been no material adverse change in the financial condition,
operations, assets, business, properties or prospects of (i) the Borrower or
(ii) Group and its Subsidiaries, taken as a whole, and the Agent shall have
received originally executed certificates for each Lender from an Authorized
Officer of the Borrower and Group certifying as such.
Section 6.1.7. Tradexpress Agreement. The Agent shall have received a
completed Tradexpress Transmission Agreement, duly executed and delivered by the
Borrower and the Fronting Bank.
Section 6.1.8. Opinions of Counsel. The Agent shall have received
opinions, dated the date of the initial Borrowing and addressed to the Agent and
all Lenders, from Skadden, Arps, Slate, Meagher & Flom, New York counsel to the
Obligors, substantially in the form of Exhibit G hereto.
Section 6.1.9. Closing Fees, Expenses, etc. The Agent shall have
received (a) for its own account, or for the account of each Lender, as the case
may be, all fees, costs and expenses (i) previously agreed to between the Agent
and the Borrower, (ii) as otherwise due and payable pursuant to Section 3.3 and,
if then invoiced, Section 11.3, and (b) evidence satisfactory to it that all
fees and other amounts that have accrued through (and including) the Effective
Date or that are otherwise payable under the terms of the Existing Credit
Agreement and the Amended and Restated Agreement to the lenders parties to such
agreements and to Scotiabank (in its capacity as agent thereunder) have been
paid in full.
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Section 6.1.10. Delivery of Form 1001 or 4224. The Agent shall have
received two executed copies of either Internal Revenue Service Form 1001 or
Form 4224, as applicable, from each non-U.S. Lender.
Section 6.2. All Credit Extensions. The obligation of each Lender or the
Fronting Bank to make any Credit Extension (including the initial Credit
Extension) on any date other than a Funding Date shall be subject to the
satisfaction of each of the conditions precedent set forth in this Section 6.2.
Section 6.2.1. Compliance with Warranties, No Default, etc. Both before
and after giving effect to any Credit Extension the following statements shall
be true and correct
(a) no event or circumstances has occurred and is continuing, or
would result from the making of such Credit Extension, which constitutes
a Default, or which when considered by itself or together with other
past or then existing events or circumstances, constitutes or would
constitute a material adverse change in the business, condition
(financial or otherwise), operations, performance, properties or
prospects of the Borrower or of Group and its Subsidiaries taken as a
whole;
(b) no event of default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an event
of default shall have occurred (unless otherwise waived by the Required
Lenders) in the performance of any affirmative and negative covenants
contained in Sections 5.01, 5.02 or 5.03 of the U.S. Credit Agreement
and regardless of whether such U.S. Credit Agreement is terminated,
unless in connection with such termination a replacement credit facility
which the Required Lenders hereunder have approved is entered into in
which case, the affirmative and negative covenants in such facility
shall become the subject of this clause;
(c) none of the events described in clauses (a), (b), (d), (e),
(f), (g), (h), (i), (j), (k) or (l) of Section 6.01 of the U.S. Credit
Agreement (without giving effect to any termination of the U.S. Credit
Agreement, unless in connection with such termination a replacement
credit facility to which the Required Lenders hereunder have approved,
in which case the analogous provisions of such replacement credit
facility shall become the subject of this clause), shall have occurred
(unless, in the case of other than such clause (e), otherwise waived by
the Required Lenders); and
(d) the representations and warranties set forth in Article VII,
Article III of the Subsidiary Guaranty and
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Article III of the Group Guaranty shall, in each case, be true and
correct with the same effect as if then made (unless stated to relate
solely to an earlier date, in which case such representations and
warranties shall be true and correct as of such earlier date).
Section 6.2.2. Credit Request. To the extent that Loans are made in
accordance with clause (b) of Section 2.3 or the Borrower requests that the
Fronting Bank issue a Letter of Credit other than by means of notification in
accordance with the terms of the Tradexpress Agreement, the Agent shall have
received a Borrowing Request or Issuance Request, as the case may be, for such
Credit Extension. Each of the delivery (or deemed delivery pursuant to the terms
of this Agreement) of a Borrowing Request or an Issuance Request and the
acceptance by the Borrower of the proceeds of the Borrowing or the issuance of
the Letter of Credit, or the making of a Loan upon a Disbursement, as
applicable, shall constitute a representation and warranty by the Borrower that
on the date of such Credit Extension (both immediately before and after giving
effect to such Credit Extension and the application of the proceeds thereof) or
the issuance of the Letter of Credit, as applicable, the statements made in
Section 6.2.1 are in each case true and correct.
Section 6.2.3. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of Group or any of its Subsidiaries
shall be satisfactory in form and substance to the Agent; the Agent shall have
received all information, approvals, opinions, documents or instruments as the
Agent may reasonably request.
Article VII
REPRESENTATIONS AND WARRANTIES
In order to induce the Lenders and the Agent to enter into this
Agreement and to make Loans and issue Letters of Credit hereunder, each of the
Borrower and Group represents and warrants unto the Agent and each Lender as set
forth in this Article VII.
Section 7.1. Organization, etc. Group and each of its Subsidiaries is a
corporation or limited liability company, as the case may be, validly organized
and existing and in good standing under the laws of the jurisdiction of its
incorporation or organization, is duly qualified to do business and is in good
standing as a foreign corporation or foreign entity, as applicable, in each
jurisdiction where the nature of its business requires such qualification,
except where the failure to so qualify would not have a Material Adverse Effect
(as defined in the U.S. Credit Agreement), and each Obligor has full power and
authority and holds all requisite governmental licenses, permits
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and other approvals to enter into and perform its Obligations under this
Agreement, the Notes and each other Loan Document to which it is a party and to
own and hold under lease its property and to conduct its business substantially
as currently conducted by it.
Section 7.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance (i) by the Borrower and Group of this Agreement, the
Notes and each other Loan Document executed or to be executed by it, and (ii) by
each other Obligor of each Loan Document executed and delivered by it, are, in
each case, within such Obligor's corporate (or other, as applicable) powers,
have been duly authorized by all necessary corporate (or other, as applicable)
action, and do not
(a) contravene such Obligor's Organic Documents;
(b) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on
or affecting such Obligor; or
(c) result in, or require the creation or imposition
of, any Lien on any of such Obligor's properties.
Section 7.3. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for the due execution,
delivery or performance by the Borrower, Group or any other Obligor of this
Agreement, the Notes or any other Loan Document to which it is a party. Neither
Group nor any of its Subsidiaries is an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, or a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
Section 7.4. Validity, etc. This Agreement constitutes, and the Notes
and each other Loan Document executed by the Borrower and each other Obligor
will, on the due execution and delivery thereof, constitute, the legal, valid
and binding obligations of the Borrower or such Obligor enforceable in
accordance with their respective terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors rights generally and by general equity
principles.
Section 7.5. No Material Adverse Change. Since January 7, 1995, there
has been no material adverse change in the business, condition (financial or
otherwise), operations, performance,
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properties or prospects of (i) the Borrower or (ii) Group and its Subsidiaries,
taken a whole.
Section 7.6. Litigation, Labor Controversies, etc. There is no pending
or, to the knowledge of either the Borrower or Group, threatened litigation,
action, proceeding, or labor controversy affecting the Borrower or Group and its
Subsidiaries, taken as a whole, or any of their respective properties,
businesses, assets or revenues, which could reasonably be expected to materially
adversely affect the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Borrower or Group and its
Subsidiaries, taken as a whole, or which purports to affect the legality,
validity or enforceability of this Agreement, the Notes or any other Loan
Document.
Section 7.7. Regulations G, U and X. The Borrower is not engaged in the
business of extending credit for the purpose of purchasing or carrying margin
stock, and no proceeds of any Loans will be used for a purpose which violates,
or would be inconsistent with, F.R.S. Board Regulation G, U or X. Terms for
which meanings are provided in F.R.S. Board Regulation G, U or X or any
regulations substituted therefor, as from time to time in effect, are used in
this Section with such meanings.
Section 7.8. Accuracy of Information. All factual information heretofore
or contemporaneously furnished by or on behalf of the Borrower or Group in
writing to the Agent or any Lender for purposes of or in connection with this
Agreement or any transaction contemplated hereby is, and all other such factual
information hereafter furnished by or on behalf of the Borrower to the Agent or
any Lender will be, true and accurate in every material respect on the date as
of which such information is dated or certified and as of the date of execution
and delivery of this Agreement by the Agent and such Lender, and such
information is not, or shall not be, as the case may be, incomplete by omitting
to state any material fact necessary to make such information not misleading.
The parties acknowledge and agree that nothing contained in this Section shall
constitute a representation or warranty by the Borrower or Group as to the
future financial performance or the results of operations of either the Borrower
or Group; provided, however, that any projections delivered pursuant to this
Agreement have been (and will be) prepared on the basis of the assumptions
accompanying them, and such projections and assumptions, as of the date of
preparation thereof and as of the date hereof, are reasonable and represent the
Borrower's or Group's good faith estimate of its future financial performance.
Section 7.9. U.S. Credit Agreement Representations and Warranties. As to
all representations and warranties contained in Article IV of the U.S. Credit
Agreement and each Loan Document
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(as such term is defined by the U.S. Credit Agreement), as in effect on the date
hereof, insofar as applicable to the Borrower, Group or any other Obligor, the
properties of the Borrower, Group or any other Obligor or the obligations of the
Borrower, Group or any other Obligor under the documents executed and delivered
in connection with the U.S. Credit Agreement, each such representation and
warranty set forth in such Article (insofar as so applicable) and all other
terms of the U.S. Credit Agreement and each Loan Document (as such term is
defined by the U.S. Credit Agreement), as in effect on the date hereof, to which
reference is made therein, together with all related definitions and ancillary
provisions, are hereby incorporated into this Agreement by reference with
respect to the Borrower, Group or any other Obligor as though specifically set
forth in this Section 7.9.
Article VIII
COVENANTS
Section 8.1. Covenants. Each of the Borrower and Group agrees with the
Agent and each Lender that, until all Commitments have terminated and all
Obligations have been paid and performed in full, the Borrower and Group will
perform, and will cause each of their respective Subsidiaries to perform, the
obligations set forth in this Section 8.1.
Section 8.1.1. Financial Information, Reports, Notices, etc. Unless the
information set forth below is otherwise delivered to a Lender under the terms
of the U.S. Credit Agreement, Group will furnish, or will cause to be furnished,
to each Lender and the Agent copies of the financial statements, reports,
notices and information required pursuant to clause (j) of Section 5.01 of the
U.S. Credit Agreement.
Section 8.1.2. Future Subsidiaries of Group. Group covenants and agrees
that, upon any Person becoming a Subsidiary after the Effective Date, Group
shall cause such Person to become party to the Subsidiary Guaranty if such
Person is required to deliver a guaranty pursuant to clause (k) of Section 5.01
of the U.S. Credit Agreement (without giving effect to any waiver of such
Section's requirements unless consented to by the Required Lenders).
Section 8.1.3. U.S. Credit Agreement Covenants. Each of the Borrower and
Group will comply with and be bound by, and will cause each of the Subsidiaries
to comply with and be bound by, all of the agreements, covenants and obligations
contained in Article V of the U.S. Credit Agreement, as in effect on the date
hereof. Each such agreement, covenant and obligation contained in such Sections
and all other terms of the U.S. Credit Agreement
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and the documents executed in connection therewith to which reference is made
therein, together with all related definitions and ancillary provisions, each as
in effect on the date hereof, is hereby incorporated into this Agreement by
reference as though specifically set forth in this Section 8.1.3, and each such
agreement, covenant and obligation shall, for purposes hereof, survive the
termination of the U.S. Credit Agreement.
Section 8.1.4. Default Notice. The Borrower will furnish, or will cause
to be furnished, to each Lender as soon as possible and in any event within two
Business Days after the occurrence of each Default a statement of its chief
financial officer setting forth details of such Default and the action that the
Borrower has taken and proposes to take with respect thereto.
Article IX
EVENTS OF DEFAULT
Section 9.1. Listing of Events of Default. Each of the following events
or occurrences described in this Section 9.1 shall constitute an "Event of
Default".
Section 9.1.1. Non-Payment of Obligations. The Borrower shall default in
the payment or prepayment when due of (i) any principal of or interest on any
Loan, (ii) any Reimbursement Obligation, or (iii) any fee or of any other
Obligation, and in each case such default in payment or prepayment shall
continue unremedied for more than three Business Days from the date such payment
or prepayment was due.
Section 9.1.2. Breach of Warranty. Any representation or warranty of the
Borrower or any other Obligor made or deemed to be made hereunder or in any
other Loan Document executed by it (including any certificates delivered
pursuant to Article VI) is or shall be incorrect when made or deemed made in any
material respect.
Section 9.1.3. Non-Performance of Certain Covenants and Obligations. The
Borrower or Group shall default in the due performance and observance of any of
its obligations under Sections 8.1.2 or 8.1.4, or any Obligor shall default in
the due performance or observance of any of its obligations under any other
covenant in a Loan Document which is impossible to remedy.
Section 9.1.4. Non-Performance of Other Covenants and Obligations. The
Borrower or any other Obligor shall default in the due performance and
observance of any other agreement contained herein or in any other Loan Document
executed by it, and such default shall continue unremedied for a period of ten
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Business Days after notice thereof shall have been given to the Borrower by the
Agent or any Lender.
Section 9.1.5. Default Under U.S. Credit Agreement. Any Event of Default
under (and as defined in) the U.S. Credit Agreement or any replacement credit
facility shall have occurred whether or not such Event of Default is waived by
the lenders under the U.S. Credit Agreement, or an amendment of the U.S. Credit
Agreement is entered into with the effect of waiving or curing such Event of
Default.
Section 9.1.6. Bankruptcy, Insolvency, etc. Any event or condition
described in clause (e) of Section 6.01 of the U.S. Credit Agreement (or similar
provision of any replacement credit facility) shall have occurred and be
continuing.
Section 9.1.7. Termination, etc. of Loan Documents. Any Loan Document
shall (except in accordance with its terms), in whole or in part, terminate,
cease to be effective or cease to be the legally valid, binding and enforceable
obligation of the Obligor that is a party thereto; or the Borrower or any other
Obligor shall, directly or indirectly, contest in any manner such effectiveness,
validity, binding nature or enforceability (except as aforesaid).
Section 9.2. Action Upon Bankruptcy. If any Event of Default described
in Section 9.1.6 shall occur, the Commitments (if not theretofore terminated)
shall automatically terminate and the outstanding principal amount of all
outstanding Loans and all other Obligations shall automatically be and become
immediately due and payable, without notice or demand.
Section 9.3. Action Upon Other Event of Default. If any Event of Default
(other than any Event of Default described in Section 9.1.6) shall occur for any
reason, whether voluntary or involuntary, and be continuing, the Agent, upon the
direction of the Required Lenders, shall by notice to the Borrower declare all
or any portion of the outstanding principal amount of the Loans and other
Obligations in respect of the Loans or otherwise to be due and payable and/or
the Commitments (if not theretofore terminated) to be terminated, whereupon the
full unpaid amount of such Loans and other Obligations which shall be so
declared due and payable shall be and become immediately due and payable,
without further notice, demand or presentment, and/or, as the case may be, the
Commitments shall terminate.
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Article X
THE AGENT
Section 10.1. Actions. Each Lender hereby appoints Scotiabank as its
Agent under and for purposes of this Agreement, the Notes and each other Loan
Document. Each Lender authorizes the Agent to act on behalf of such Lender under
this Agreement, the Notes and each other Loan Document and, in the absence of
other written instructions from the Required Lenders received from time to time
by the Agent (with respect to which the Agent agrees that it will comply, except
as otherwise provided in this Section or as otherwise advised by counsel), to
exercise such powers hereunder and thereunder as are specifically delegated to
or required of the Agent by the terms hereof and thereof, together with such
powers as may be reasonably incidental thereto. Each Lender hereby indemnifies
(which indemnity shall survive any termination of this Agreement) the Agent, pro
rata according to such Lender's Percentage, from and against any and all
liabilities, obligations, losses, damages, claims, costs or expenses of any kind
or nature whatsoever which may at any time be imposed on, incurred by, or
asserted against, the Agent in any way relating to or arising out of this
Agreement, the Notes and any other Loan Document, including reasonable
attorneys' fees, and as to which the Agent is not reimbursed by the Borrower;
provided, however, that no Lender shall be liable for the payment of any portion
of such liabilities, obligations, losses, damages, claims, costs or expenses
which are determined by a court of competent jurisdiction in a final proceeding
to have resulted solely from the Agent's gross negligence or wilful misconduct.
The Agent shall not be required to take any action hereunder, under the Notes or
under any other Loan Document, or to prosecute or defend any suit in respect of
this Agreement, the Notes or any other Loan Document, unless it is indemnified
hereunder to its satisfaction. If any indemnity in favor of the Agent shall be
or become, in the Agent's determination, inadequate, the Agent may call for
additional indemnification from the Lenders and cease to do the acts indemnified
against hereunder until such additional indemnity is given.
Section 10.2. Copies, etc. The Agent shall give prompt notice to each
Lender of each notice or request required or permitted to be given to the Agent
by the Borrower pursuant to the terms of this Agreement (unless concurrently
delivered to the Lenders by the Borrower). The Agent will distribute to each
Lender each document or instrument received for its account and copies of all
other communications received by the Agent from the Borrower for distribution to
the Lenders by the Agent in accordance with the terms of this Agreement.
Section 10.3. Exculpation. Neither the Agent nor any of its directors,
officers, employees or agents shall be liable to
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any Lender for any action taken or omitted to be taken by it under this
Agreement or any other Loan Document, or in connection herewith or therewith,
except for its own wilful misconduct or gross negligence, nor responsible for
any recitals or warranties herein or therein, nor for the effectiveness,
enforceability, validity or due execution of this Agreement or any other Loan
Document, nor for the creation, perfection or priority of any Liens (if any)
purported to be created by any of the Loan Documents, or the validity,
genuineness, enforceability, existence, value or sufficiency of collateral
security (if any), nor to make any inquiry respecting the performance by the
Borrower of its obligations hereunder or under any other Loan Document. Any such
inquiry which may be made by the Agent shall not obligate it to make any further
inquiry or to take any action. The Agent shall be entitled to rely upon advice
of counsel concerning legal matters and upon any notice, consent, certificate,
statement or writing which the Agent believes to be genuine and to have been
presented by a proper Person.
Section 10.4. Successor. The Agent may resign as such at any time upon
at least 30 days' prior notice to the Borrower and all Lenders. If the Agent at
any time shall resign, the Required Lenders may appoint another Lender as a
successor Agent which shall thereupon become the Agent hereunder. If no
successor Agent shall have been so appointed by the Required Lenders, and shall
have accepted such appointment, within 30 days after the retiring Agent's giving
notice of resignation, then the retiring Agent may, on behalf of the Lenders,
appoint a successor Agent, which shall be one of the Lenders or a commercial
banking institution organized under the laws of the U.S. (or any State thereof)
or a U.S. branch or agency of a commercial banking institution, and having a
combined capital and surplus of at least $500,000,000. Upon the acceptance of
any appointment as Agent hereunder by a successor Agent, such successor Agent
shall be entitled to receive from the retiring Agent such documents of transfer
and assignment as such successor Agent may reasonably request, and shall
thereupon succeed to and become vested with all rights, powers, privileges and
duties of the retiring Agent, and the retiring Agent shall be discharged from
its duties and obligations under this Agreement. After any retiring Agent's
resignation hereunder as the Agent, the provisions of
(a) this Article X shall inure to its benefit as to any actions
taken or omitted to be taken by it while it was the Agent under this
Agreement; and
(b) Section 11.3 and Section 11.4 shall continue to
inure to its benefit.
Section 10.5. Loans or Letters of Credit Issued by Scotiabank.
Scotiabank shall have the same rights and powers with respect to (x) the Loans
made by it or any of its
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affiliates, (y) the Notes held by it or any of its affiliates, and (z) its
participating interests in the Letters of Credit as any other Lender and may
exercise the same as if it were not the Agent. Scotiabank and its affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the Borrower or any Subsidiary or affiliate of the Borrower as if
Scotiabank were not the Agent hereunder.
Section 10.6. Credit Decisions. Each Lender acknowledges that it has,
independently of the Agent and each other Lender, and based on such Lender's
review of the financial information of the Borrower, this Agreement, the other
Loan Documents (the terms and provisions of which being satisfactory to such
Lender) and such other documents, information and investigations as such Lender
has deemed appropriate, made its own credit decision to extend its Commitment.
Each Lender also acknowledges that it will, independently of the Agent and each
other Lender, and based on such other documents, information and investigations
as it shall deem appropriate at any time, continue to make its own credit
decisions as to exercising or not exercising from time to time any rights and
privileges available to it under this Agreement or any other Loan Document.
Article XI
MISCELLANEOUS PROVISIONS
Section 11.1. Waivers, Amendments, etc. The provisions of this Agreement
and of each other Loan Document may from time to time be amended, modified or
waived, if such amendment, modification or waiver is in writing and consented to
by the Borrower and the Required Lenders; provided, however, that no such
amendment, modification or waiver which would:
(a) modify any requirement hereunder that any particular action
be taken by all the Lenders or by the Required Lenders shall be
effective unless consented to by each Lender;
(b) modify this Section 11.1, change the definition of "Required
Lenders", increase any Commitment Amount or (except as otherwise
contemplated by this Agreement) the Percentage of any Lender, reduce any
fees described in Article III, release any guarantor under the
Subsidiary Guaranty or the Group Guaranty, or extend any Commitment
Termination Date shall be made without the consent of each Lender and
each holder of a Note;
(c) extend the due date for, or reduce the amount of, any
scheduled repayment or prepayment of principal of or interest on or fees
payable in respect of any Loan (or
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reduce the principal amount of or rate of interest on or fees payable in
respect of any Loan) shall be made without the consent of the holder of
that Note evidencing such Loan;
(d) affect adversely the interests, rights or obligations of the
Fronting Bank in its capacity as the Fronting Bank shall be made without
the consent of the Fronting Bank; or
(e) affect adversely the interests, rights or obligations of the
Agent in its capacity as the Agent shall be made without consent of the
Agent.
No failure or delay on the part of the Agent, any Lender or the holder of any
Note in exercising any power or right under this Agreement or any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. No notice to or demand on
the Borrower in any case shall entitle it to any notice or demand in similar or
other circumstances. No waiver or approval by the Agent, any Lender or the
holder of any Note under this Agreement or any other Loan Document shall, except
as may be otherwise stated in such waiver or approval, be applicable to
subsequent transactions. No waiver or approval hereunder shall require any
similar or dissimilar waiver or approval thereafter to be granted hereunder.
Section 11.2. Notices. All notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing or by facsimile and addressed, delivered or transmitted to such party at
its address, or facsimile number set forth below its signature hereto or set
forth in the Lender Assignment Agreement or at such other address or facsimile
number as may be designated by such party in a notice to the other parties. Any
notice, if mailed and properly addressed with postage prepaid or if properly
addressed and sent by pre-paid courier service, shall be deemed given when
received; any notice, if transmitted by facsimile, shall be deemed given when
transmitted.
Section 11.3. Payment of Costs and Expenses. The Borrower agrees to pay
on demand all reasonable expenses of the Agent (including the reasonable fees
and out-of-pocket expenses of counsel to the Agent and of local counsel, if any,
who may be retained by counsel to the Agent) in connection with
(a) the negotiation, preparation, execution and delivery of this
Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from
time
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to time hereafter be required, whether or not the transactions
contemplated hereby are consummated, and
(b) the preparation and review of the form of any
document or instrument relevant to this Agreement or any
other Loan Document.
The Borrower covenants to pay on demand all reasonable costs and expenses of the
Agent, the Fronting Bank and the Lenders incurred in the enforcement of the
Agent's, the Fronting Bank's or any Lender's rights under this Agreement and any
Loan Document (including the reasonable fees and expenses of counsel for the
Agent, the Fronting Bank and each Lender with respect thereto) and, further,
covenants that it will indemnify the Agent, the Fronting Bank and the Lenders on
demand against all loss or damage to such Persons arising out of the issuance of
or other action taken by such Persons in connection with any Letter of Credit or
Loan including, without limitation, the costs relating to any legal process
instituted by any party restraining or seeking to restrain the Fronting Bank
from accepting or paying any Letter of Credit or Draft. The Borrower also agrees
that neither the Agent, the Fronting Bank or any Lender shall have any liability
to it for any reason in respect of the issuance of any Letter of Credit or Loan
other than on account of such Agent's, Fronting Bank's or Lender's gross
negligence or wilful misconduct. All payments to be made to the Agent, the
Fronting Bank and the Lenders hereunder shall, subject to Section 5.6, be made
for value on the date due and free of any withholding tax or levy, other than
taxes imposed on the net income of the Agent, the Fronting Bank or a Lender, and
the Borrower covenants that such taxes or levies, other than as excepted, shall
be paid by the Borrower. The provisions of this paragraph will survive payment
in full hereunder.
Section 11.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitments,
the Borrower hereby indemnifies, exonerates and holds the Agent, the Fronting
Bank and each Lender and each of their respective officers, directors, employees
and agents (collectively, the "Indemnified Parties") free and harmless from and
against any and all actions, causes of action, suits, losses, costs, liabilities
and damages, and expenses incurred in connection therewith (irrespective of
whether any such Indemnified Party is a party to the action for which
indemnification hereunder is sought), including the reasonable fees and expenses
of counsel for the Agent, the Fronting Bank and each Lender with respect thereto
(collectively, the "Indemnified Liabilities"), incurred by the Indemnified
Parties or any of them as a result of, or arising out of, or relating to
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(a) any transaction financed or to be financed in
whole or in part, directly or indirectly, with the proceeds
of any Loan or the use of any Letter of Credit; or
(b) the entering into and performance of this Agreement and any
other Loan Document by any of the Indemnified Parties (including any
action brought by or on behalf of the Borrower as the result of any
determination by the Required Lenders pursuant to Article VI not to make
any Credit Extension);
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or wilful misconduct.
Section 11.5. Survival. The obligations of the Borrower under Sections
5.3, 5.4, 5.5, 5.6, 11.3 and 11.4, and the obligations of the Lenders under
Section 10.1, shall in each case survive any termination of this Agreement, the
payment in full of all Obligations and the termination of all Commitments. The
representations and warranties made by the Borrower in this Agreement and in
each other Loan Document shall survive the execution and delivery of this
Agreement and each such other Loan Document.
Section 11.6. Severability. Any provision of this Agreement or any other
Loan Document which is prohibited or unenforceable in any jurisdiction shall, as
to such provision and such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the remaining provisions of
this Agreement or such Loan Document or affecting the validity or enforceability
of such provision in any other jurisdiction.
Section 11.7. Headings. The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.
Section 11.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be executed by the Borrower and the Agent and be deemed to be an
original and all of which shall constitute together but one and the same
agreement. This Agreement shall become effective when counterparts hereof
executed on behalf of the Borrower and each Lender (or notice thereof
satisfactory to the Agent) shall have been received by the Agent and notice
thereof shall have been given by the Agent to the Borrower and each Lender.
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Section 11.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE NOTES
AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE UNDER
AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This Agreement, the
Notes and the other Loan Documents constitute the entire understanding among the
parties hereto with respect to the subject matter hereof and supersede any prior
agreements, written or oral, with respect thereto.
Section 11.10. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:
(a) the Borrower may not assign or transfer its
rights or obligations hereunder without the prior written consent
of the Agent and all Lenders; and
(b) the rights of sale, assignment and transfer of
the Lenders are subject to Section 11.11.
Section 11.11. Sale and Transfer of Loans and Notes; Participations in
Loans and Notes. Each Lender may assign, or sell participations in, its Loans
and Commitments to one or more other Persons in accordance with this Section
11.11.
Section 11.11.1. Assignments. Any Lender,
(a) with the written consent of the Borrower (which consent shall
not be unreasonably delayed or withheld) and the Agent may at any time
assign and delegate to one or more commercial banks or other financial
institutions; and
(b) with the consent of the Fronting Bank, and notice
to the Borrower and the Agent, but without the consent of
the Borrower or the Agent, may assign and delegate to any
other Lender or any Lender under the U.S. Credit Agreement
(each Person described in either of the foregoing clauses as being the Person to
whom such assignment and delegation is to be made, being hereinafter referred to
as an "Assignee Lender"), all or a fraction of such Lender's total Loans and
Commitments; provided, that (i) after giving effect to such assignment or
transfer, such Lender and its Assignee Lender shall each hold not less than
$10,000,000 of Loans and/or Commitments and (ii) each Lender must assign an
equal amount of its Loan Commitment and Letter of Credit Commitment to such
Assignee Lender; provided, further, that the Borrower shall not be required to
pay an amount under Section 5.6 that is greater than the amount which it would
have been required to pay had no assignment been made and provided, further,
however, that, the Borrower and the Agent shall be entitled to continue to deal
solely and directly with
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such Lender in connection with the interests so assigned and delegated to an
Assignee Lender until
(c) written notice of such assignment and delegation, together
with payment instructions, addresses and related information with
respect to such Assignee Lender, shall have been given to the Borrower
and the Agent by such Lender and such Assignee Lender,
(d) such Assignee Lender shall have executed and delivered to the
Borrower and the Agent a Lender Assignment Agreement, accepted by the
Agent, and
(e) the processing fees described below shall have
been paid.
From and after the date that the Agent accepts such Lender Assignment Agreement,
(x) the Assignee Lender thereunder shall be deemed automatically to have become
a party hereto and to the extent that rights and obligations hereunder have been
assigned and delegated to such Assignee Lender in connection with such Lender
Assignment Agreement, shall have the rights and obligations of a Lender
hereunder and under the other Loan Documents, and (y) the assignor Lender, to
the extent that rights and obligations hereunder have been assigned and
delegated by it in connection with such Lender Assignment Agreement, shall be
released from its obligations hereunder and under the other Loan Documents.
Within five Business Days after its receipt of notice that the Agent has
received an executed Lender Assignment Agreement with respect to the assignment
of Loans, the Borrower shall execute and deliver to the Agent (for delivery to
the relevant Assignee Lender) new Notes evidencing such Assignee Lender's
assigned Loans and Commitments and, if the assignor Lender has Loans and
Commitments hereunder, replacement Notes in the principal amount of the Loans
and Commitments retained by the assignor Lender hereunder (such Notes to be in
exchange for, but not in payment of, those Notes then held by such assignor
Lender). Each such Note shall be dated the date of the predecessor Notes. The
assignor Lender shall mark the predecessor Notes "exchanged" and deliver them to
the Borrower. Accrued interest on that part of the predecessor Notes evidenced
by the new Notes, and accrued fees, shall be paid as provided in the Lender
Assignment Agreement. Accrued interest on that part of the predecessor Notes
evidenced by the replacement Notes shall be paid to the assignor Lender. Accrued
interest and accrued fees shall be paid at the same time or times provided in
the predecessor Notes and in this Agreement. Such assignor Lender or such
Assignee Lender must also pay a processing fee to the Agent upon delivery of any
Lender Assignment Agreement in the amount of $2,500. Any attempted assignment
and delegation not made in accordance with this Section 11.11.1 shall be null
and void. Nothing in this Section shall prevent or prohibit any Lender from
-57-
<PAGE>
<PAGE>
pledging its rights (but not its obligations to make Loans and to issue or
participate in Letters of Credit) under this Agreement and/or its Loans and/or
Notes hereunder to a Federal Reserve Bank in support of borrowing made by such
Lender from such Federal Reserve Bank.
Section 11.11.2. Participations. Any Lender may at any time sell to one or
more commercial banks or other Persons (each of such commercial banks and other
Persons being herein called a "Participant") participating interests (or a
sub-participating interest, in the case of a Lender's participating interest in
a Letter of Credit) in any of the Loans, Commitments, or other interests of such
Lender hereunder; provided, however, that
(a) no participation or sub-participation contemplated in this
Section 11.11 shall relieve such Lender from its Commitments or its
other obligations hereunder or under any other Loan Document,
(b) such Lender shall remain solely responsible for
the performance of its Commitments and such other
obligations,
(c) the Borrower and the Agent shall continue to deal solely and
directly with such Lender in connection with such Lender's rights and
obligations under this Agreement and each of the other Loan Documents,
(d) no Participant, unless such Participant is an affiliate of
such Lender, or is itself a Lender, shall be entitled to require such
Lender to take or refrain from taking any action hereunder or under any
other Loan Document, except that such Lender may agree with any
Participant that such Lender will not, without such Participant's
consent, take any actions of the type described in clause (b) or (c) of
Section 11.1, and
(e) the Borrower shall not be required to pay any amount under
Section 5.6 that is greater than the amount which it would have been
required to pay had no participating interest been sold.
Section 11.11.3. Fronting Bank Assignments. In the event that S&P, Moody's
or Thompson's BankWatch (or InsuranceWatch Ratings Service, in the case of
Lenders that are insurance companies (or Best's Insurance Reports, if such
insurance company is not rated by InsuranceWatch Ratings Service)) shall, after
the date that any Lender becomes a Lender, downgrade the long-term certificate
of deposit ratings of such Lender, and the resulting ratings shall be below
BBB-, Baa3 and B (or BB, in the case of Lender that is an insurance company (or
B, in the case of an insurance company not rated by InsuranceWatch Ratings
Service)),
-58-
<PAGE>
<PAGE>
then the Fronting Bank or the Borrower shall have the right, but not the
obligation, upon notice to such Lender, to replace (or, in the case of a request
by the Fronting Bank, to request the Borrower to use its reasonable efforts to
replace) such Lender with an Assignee Lender (in accordance with and subject to
the restrictions contained in Section 11.11.1), and such affected Lender hereby
agrees to transfer and assign without recourse (in accordance with and subject
to the restrictions contained in Section 11.11.1) all of its interests, rights
and obligations in respect of its Commitment, Loans and other Obligations owing
to it, together with the obligations of such affected Lender hereunder, to such
Assignee Lender; provided, however, that (i) no such assignment shall conflict
with any law, rule and regulation or order of any governmental authority and
(ii) such Assignee Lender shall pay to such affected Lender in immediately
available funds on the date of such assignment the principal of and interest
accrued to the date of payment on the Loans made by such Lender hereunder and
all other amounts accrued for such Lender's account or owed to it hereunder.
Section 11.12. Other Transactions. Nothing contained herein shall
preclude the Agent or any other Lender from engaging in any transaction, in
addition to those contemplated by this Agreement or any other Loan Document,
with the Borrower or any of its affiliates in which the Borrower or such
affiliate is not restricted hereby from engaging with any other Person.
Section 11.13. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH, THIS
AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENT, THE
LENDERS OR THE BORROWER SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN THE
COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR THE
SOUTHERN DISTRICT OF NEW YORK. THE PARTIES HERETO HEREBY EXPRESSLY AND
IRREVOCABLY SUBMITS TO THE JURISDICTION OF THE COURTS OF THE STATE OF NEW YORK
AND OF THE UNITED STATES DISTRICT COURT FOR THE SOUTHERN DISTRICT OF NEW YORK
FOR THE PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREES
TO BE BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION.
THE BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF NEW YORK. THE BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE
FULLEST EXTENT PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER
MAY HAVE TO THE LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT
REFERRED TO ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN
INCONVENIENT FORUM. TO THE EXTENT THAT THE BORROWER HAS OR HEREAFTER MAY ACQUIRE
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 OR OTHERWISE) WITH RESPECT TO
-59-
<PAGE>
<PAGE>
ITSELF OR ITS PROPERTY, THE BORROWER HEREBY IRREVOCABLY WAIVES SUCH IMMUNITY IN
RESPECT OF ITS OBLIGATIONS UNDER THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS.
Section 11.14. Waiver of Jury Trial. THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE AGENT, THE LENDERS, THE FRONTING BANK OR THE BORROWER. THE
PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND SUFFICIENT
CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH OTHER LOAN
DOCUMENT TO WHICH IT IS A PARTY) AND THE BORROWER ACKNOWLEDGES THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENT, THE FRONTING BANK AND THE
LENDERS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER LOAN DOCUMENT.
Section 11.15. UCP; etc. (a) The Uniform Customs and Practice for
Documentary Credits as most recently published by the International Chamber of
Commerce (the "UCP") shall in all respects apply to each Letter of Credit issued
hereunder and shall be deemed for such purpose to be a part hereof as if fully
incorporated herein. In the event of any conflict between the UCP and the
governing law of the Agreement, the UCP shall prevail to the extent necessary to
remove the conflict.
(b) In the event of any issuance of a further Letter of Credit for which
the Borrower may apply from time to time hereafter, or, of any extension of the
maturity or time for presentation of any Draft, or, of any renewal, extension or
increase in the amount of a Letter of Credit or any other modifications of its
terms, in each case with the consent or at the request of the Borrower, the
terms of the Agreement shall continue in force and apply to the further Letter
of Credit so issued, or, to a Letter of Credit so renewed, extended, increased
or otherwise modified, or, to any, Draft, document or property covered thereby
and to any action taken by the Fronting Bank or its agents or correspondents in
accordance with such issuance, renewal, extension, increase or other
modification.
Section 11.16. Usury Restraint. The provisions of this Agreement shall
be subject to any applicable law, regulation, order, rule or direction (a "Usury
Restraint") which prohibits or restricts the charging, receipt or retention of
interest or other amounts at the rates and amounts set forth herein (the "Stated
Rate") in excess (the "Excess") of the maximum rates or amount (the "Maximum
Rate") stipulated in the Usury Restraint. The provisions of this Agreement shall
not require the payment or permit the collection of interest in excess of the
Maximum Rate from time to time. If the Lenders comply (whether or not
-60-
<PAGE>
<PAGE>
required to do so at law) with such Usury Restraint then, to the extent
permitted by law, a subsequent reduction in the Stated Rate below the Maximum
Rate shall be deemed not to reduce the Stated Rate below the Maximum Rate until
the total amount of interest and other amounts earned and retained, measured by
a dollar amount, equals the amount of interest and other amounts which would
have been earned and retained hereunder, inclusive of the Excess, measured by a
dollar amount, if the Stated Rate had not been held at the Maximum Rate or any
amount had not been refunded to the Borrower.
Section 11.17. Termination of Existing Credit Agreement, etc. The
parties hereto acknowledge and agree that upon the date of the satisfaction of
all of the conditions precedent set forth in Section 6.1, the Existing Credit
Agreement and the Existing Amended and Restated Agreement shall, without any
further action by any Person, be automatically terminated and no longer in force
and effect (other than, in each case, any provisions of such agreements which by
their terms survive termination of such agreements), and the commitments of the
financial institutions thereunder to make extensions of credit to the Borrower
shall be terminated.
-61-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
WARNACO INC.
By [SIGNATURE]
-------------------------------------
Title: Chief Financial Officer
Address: 90 Park Avenue
New York, New York 10016
Facsimile No.: 212-687-0480
Attention: Chief Financial Officer
THE WARNACO GROUP, INC.
By [SIGNATURE]
-------------------------------------
Title: Chief Financial Officer
Address: 90 Park Avenue
New York, New York 10016
Facsimile No.: 212-687-0480
Attention: Chief Financial Officer
THE BANK OF NOVA SCOTIA,
as Agent
By
-------------------------------------
Title:
Address: One Liberty Plaza
New York, New York 10006
Facsimile No.: 212-225-5090
Attention: Kevin Clark
-62-
<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
WARNACO INC.
By
-------------------------------------
Title:
Address: 90 Park Avenue
New York, New York 10016
Facsimile No.: 212-687-0480
Attention: Chief Financial Officer
THE WARNACO GROUP, INC.
By
-------------------------------------
Title:
Address: 90 Park Avenue
New York, New York 10016
Facsimile No.: 212-687-0480
Attention: Chief Financial Officer
THE BANK OF NOVA SCOTIA,
as Agent
By [SIGNATURE]
-------------------------------------
Title: Vice President
Address: One Liberty Plaza
New York, New York 10006
Facsimile No.: 212-225-5090
Attention: Kevin Clark
-63-
<PAGE>
<PAGE>
PERCENTAGE LENDERS
---------- -------
20.00000% THE BANK OF NOVA SCOTIA
By [SIGNATURE]
-------------------------------------
Title: Vice President
Domestic
Office: One Liberty Plaza
New York, New York 10006
Facsimile No.: 212-225-5090
Attention: Kevin Clark
LIBOR
Office: One Liberty Plaza
New York, New York 10006
Facsimile No.: 212-225-5090
Attention: Kevin Clark
-64-
<PAGE>
<PAGE>
PERCENTAGE
----------
10.00000% BANK OF AMERICA NATIONAL
TRUST & SAVINGS ASSOCIATION
By [SIGNATURE]
-------------------------------------
Title: Vice President
By [SIGNATURE]
-------------------------------------
Title: Vice President
Domestic
Office: c/o Int'l Trade Bank SW#1769
333 South Beaudry Street
20th Floor
Los Angeles, California 90017
Facsimile No.: 213-345-6712
Attention: John Gilbaugh
Facsimile No.: 213-345-6712
Attention: David Hoye
LIBOR
Office: c/o Int'l Trade Bank SW#1769
333 South Beaudry Street
20th Floor
Los Angeles, California 90017
Facsimile No.: 213-345-6712
Attention: John Gilbaugh
Facsimile No.: 213-345-6712
Attention: David Hoye
-65-
<PAGE>
<PAGE>
PERCENTAGE
----------
10.00000% THE BANK OF NEW YORK
By [SIGNATURE]
-------------------------------------
Title: Vice President
Domestic
Office: 530 Fifth Avenue
New York, New York 10036
Facsimile No.: 212-852-4252
Attention: Allison White
LIBOR
Office: 530 Fifth Avenue
New York, New York 10036
Facsimile No.: 212-852-4252
Attention: Allison White
-66-
<PAGE>
<PAGE>
PERCENTAGE
----------
10.00000% COMMERZBANK AG, NEW YORK BRANCH
By /s/ ROBERT DONOHUE
-------------------------------------
ROBERT DONOHUE
Title: Vice President
By /s/ TOM AUSFAHL
-------------------------------------
TOM AUSFAHL
Title: Assistant Vice President
Domestic
Office: 2 World Financial Center
New York, New York 10281
Facsimile No.: 212-266-7235
Attention: Bob Donohue
LIBOR
Office: 2 World Financial Center
New York, New York 10281
Facsimile No.: 212-266-7235
Attention: Bob Donohue
-67-
<PAGE>
<PAGE>
PERCENTAGE
----------
10.00000% CREDIT SUISSE, NEW YORK BRANCH
By /s/ J. HAMILTON CRAWFORD
-------------------------------------
J. HAMILTON CRAWFORD
Title: Associate
By /s/ MICHAEL C. MAST
-------------------------------------
MICHAEL C. MAST
Title: Member of Senior Management
Domestic
Office: 12 East 49th Street
New York, New York 10017
Facsimile No.: 212-238-5439
Attention: Ed Siddons
LIBOR
Office: 12 East 49th Street
New York, New York 10017
Facsimile No.: 212-238-5439
Attention: Ed Siddons
-68-
<PAGE>
<PAGE>
PERCENTAGE
----------
10.00000% FIRST UNION NATIONAL BANK OF
NORTH CAROLINA
By /s/ MARK M. HARDEN
-------------------------------------
MARK M. HARDEN
Title: Vice President
Domestic
Office: 301 South College Street
TW-19
Charlotte, North Carolina 28288
Facsimile No.: 704-374-2802
Attention: Allison C. Zollicoffer
LIBOR
Office: 301 South College Street
TW-19
Charlotte, North Carolina 28288
Facsimile No.: 704-374-2802
Attention: Allison C. Zollicoffer
-69-
<PAGE>
<PAGE>
PERCENTAGE
----------
10.00000% FLEET NATIONAL BANK OF CONNECTICUT
By [SIGNATURE]
-------------------------------------
Title: Director
Domestic
Office: 777 Main Street
MSN 397
Hartford, Connecticut 06115
Facsimile No.: 203-986-5367/4261
Attention: Daniel P. Senecal
LIBOR
Office: 777 Main Street
MSN 397
Hartford, Connecticut 06115
Facsimile No.: 203-986-5367/4261
Attention: Daniel P. Senecal
-70-
<PAGE>
<PAGE>
PERCENTAGE
----------
10.00000% SOCIETE GENERALE
By [SIGNATURE]
-------------------------------------
Title: Vice President
Domestic
Office: 1221 Avenue of the Americas
New York, New York 10020
Facsimile No.: 212-278-7430
Attention: Sedare Coradin
LIBOR
Office: 1221 Avenue of the Americas
New York, New York 10020
Facsimile No.: 212-278-7430
Attention: Sedare Coradin
-71-
<PAGE>
<PAGE>
PERCENTAGE
----------
10.00000% UNION BANK OF SWITZERLAND,
NEW YORK BRANCH
By /s/ STEPHEN A. CAYER
-------------------------------------
STEPHEN A. CAYER
Title: Assistant Treasurer
By PETER B. YEARLEY
-------------------------------------
PETER B. YEARLEY
Title: Vice President
Domestic
Office: 299 Park Avenue
New York, New York 10171
Facsimile No.: 212-821-3383
Attention: Peter B. Yearley
Facsimile No.: 212-821-3259
Attention: Mike Peterson
LIBOR
Office: 299 Park Avenue
New York, New York 10171
Facsimile No.: 212-821-3383
Attention: Peter B. Yearley
Facsimile No.: 212-821-3259
Attention: Mike Peterson
------
100%
-72-
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
OUTSTANDINGS FOR WARNACO'S LETTER OF CREDIT FACILITY AS OF 12/04/95 Page # 1
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SCHEDULE I
LETTER OF CREDIT # CURRENCY ORIGINAL AMOUNT CURRENT OUTSTANDING U.S.$ EQUIVALENT MATURITY DATE
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6242/95 USD 1,923,863.01 272,132.51 272,132.51 12/25/50
6261/95 USD 72,322.43 249,164.38 249,164.38 09/20/95
6280/95 USD 55,648.43 170,693.93 170,693.93 10/23/95
6286/95 USD 221,256.00 221,256.00 221,256.00 10/10/95
6290/95 USD 179,518.50 153,534.75 153,534.75 11/06/95
6304/95 USD 2,845,668.09 262,908.82 262,908.82 01/22/96
6305/95 USD 750,658.13 232,876.46 232,876.46 11/06/95
6309/95 USD 829,763.55 344,453.79 344,453.79 01/22/96
6315/95 USD 271,653.11 2,764.89 2,764.89 10/06/95
6322/95 USD 136,451.70 13,296.76 13,296.76 10/07/95
6324/95 USD 299,658.24 11,893.15 11,893.15 10/27/95
6325/95 USD 311,018.40 14,224.48 14,224.48 10/23/95
6340/95 USD 202,437.90 28,275.02 28,275.02 10/18/95
6341/95 USD 413,267.40 197,125.69 197,125.69 11/02/95
6343/95 USD 134,996.40 100,682.88 100,682.88 10/18/95
6357/95 USD 231,570.00 2,573.62 2,573.62 10/23/95
6364/95 USD 398,112.75 37,325.80 37,325.80 10/20/95
6366/95 USD 159,039.72 61,343.85 61,343.85 12/11/95
6370/95 USD 525,283.28 25,034.10 25,034.10 09/21/95
6372/95 USD 236,313.00 236,313.00 236,313.00 11/17/95
6375/95 USD 496,577.81 241,011.56 241,011.56 11/20/95
6378/95 USD 29,162.70 2,714.50 2,714.50 11/17/95
6389/95 USD 131,544.00 388,133.55 388,133.55 12/22/95
6390/95 USD 341,717.67 68,596.82 68,596.82 11/06/95
6391/95 USD 83,909.70 18,222.00 18,222.00 11/21/95
6392/95 USD 167,435.10 167,800.50 167,800.50 12/21/95
6393/95 USD 136,420.20 217,148.70 217,148.70 12/20/95
6394/95 USD 252,031.50 278,573.40 278,573.40 11/17/95
6396/95 USD 484,470.00 17,016.20 17,016.20 12/12/95
6399/95 USD 7,061.67 7,061.67 7,061.67 11/06/95
6403/95 USD 1,122,699.33 134,691.77 134,691.77 11/06/95
6405/95 USD 48,384.00 2,304.00 2,304.00 01/17/96
6411/95 USD 147,420.00 147,420.00 147,420.00 11/06/95
6412/95 USD 52,920.00 16,411.20 16,411.20 12/28/95
6413/95 USD 101,619.00 388,294.20 388,294.20 11/21/95
6414/95 USD 33,415.20 33,911.14 33,911.14 01/22/96
6415/95 USD 140,060.45 156,761.86 156,761.86 01/02/96
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
OUTSTANDINGS FOR WARNACO'S LETTER OF CREDIT FACILITY AS OF 12/04/95 Page # 2
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LETTER OF CREDIT # CURRENCY ORIGINAL AMOUNT CURRENT OUTSTANDING U.S.$ EQUIVALENT MATURITY DATE
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6416/95 USD 98,478.45 6,185.17 6,185.17 11/21/95
6417/95 USD 199,130.40 310,242.21 310,242.21 01/02/96
6419/95 USD 147,262.50 14,465.00 14,465.00 01/02/96
6420/95 USD 63,866.88 64,320.48 64,320.48 12/26/95
6421/95 USD 63,976.50 2,774.58 2,774.58 12/04/95
6422/95 USD 142,682.40 73,345.29 73,345.29 12/11/95
6423/95 USD 244,789.65 244,789.65 244,789.65 11/21/95
6424/95 USD 198,431.10 217,980.21 217,980.21 12/15/95
6425/95 USD 50,163.12 25,792.62 25,792.62 12/18/95
6426/95 USD 12,726.00 14,348.25 14,348.25 02/01/96
6427/95 USD 28,161.00 1,145.00 1,145.00 11/21/95
6428/95 USD 226,359.00 187,659.00 187,659.00 11/17/95
6429/95 USD 83,790.00 4,788.00 4,788.00 11/21/95
6431/95 USD 27,886.95 1,055.55 1,055.55 12/11/95
6432/95 USD 53,928.00 244,741.77 244,741.77 01/17/96
6433/95 USD 50,500.80 57,862.80 57,862.80 12/07/95
6434/95 USD 186,860.52 186,860.52 186,860.52 12/22/95
6436/95 USD 329,357.70 34,384.05 34,384.05 12/18/95
6438/95 USD 238,140.00 20,034.00 20,034.00 12/18/95
6439/95 USD 201,222.00 114,562.80 114,562.80 12/18/95
6440/95 USD 21,420.00 1,278.40 1,278.40 12/18/95
6441/95 USD 34,757.10 173,785.50 173,785.50 01/12/96
6442/95 USD 24,885.00 24,885.00 24,885.00 01/01/96
6443/95 USD 48,384.00 48,384.00 48,384.00 02/19/96
6444/95 USD 157,500.00 157,500.00 157,500.00 12/22/95
6445/95 USD 103,950.00 103,950.00 103,950.00 11/21/95
6446/95 USD 110,565.00 34,495.50 34,495.50 12/07/95
6447/95 USD 38,272.50 38,272.50 38,272.50 12/18/95
6448/95 USD 92,736.00 93,844.80 93,844.80 12/18/95
6449/95 USD 19,845.00 19,845.00 19,845.00 11/21/95
6451/95 USD 1,365,115.50 518,377.74 518,377.74 01/22/96
6452/95 USD 436,432.50 436,432.50 436,432.50 12/18/95
6453/95 USD 532,394.04 157,257.81 157,257.81 12/07/95
6456/95 USD 66,150.00 116,524.80 116,524.80 01/02/96
6457/95 USD 47,628.00 47,628.00 47,628.00 12/22/95
6458/95 USD 1,107,689.31 1,156,769.58 1,156,769.58 01/05/96
6459/95 USD 55,282.50 55,282.50 55,282.50 12/22/95
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
OUTSTANDINGS FOR WARNACO'S LETTER OF CREDIT FACILITY AS OF 12/04/95 Page # 3
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LETTER OF CREDIT # CURRENCY ORIGINAL AMOUNT CURRENT OUTSTANDING U.S.$ EQUIVALENT MATURITY DATE
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6460/95 USD 32,004.00 32,004.00 32,004.00 12/22/95
6461/95 USD 360,419.85 362,366.55 362,366.55 12/22/95
6462/95 USD 58,432.50 58,527.00 58,527.00 12/22/95
6463/95 USD 9,292.50 9,292.50 9,292.50 01/08/96
6464/95 USD 250,740.00 253,008.00 253,008.00 01/02/96
6465/95 USD 16,159.50 352,587.31 352,587.31 01/17/96
6466/95 USD 261,292.50 279,720.00 279,720.00 12/11/95
6467/95 USD 41,176.80 41,176.80 41,176.80 12/22/95
6468/95 USD 57,919.05 62,209.35 62,209.35 12/22/95
6469/95 USD 440,757.45 462,506.93 462,506.93 12/22/95
6470/95 USD 304,193.48 305,097.15 305,097.15 03/04/96
6472/95 USD 131,490.07 132,768.09 132,768.09 01/22/96
6474/95 USD 265,494.92 7,965.28 7,965.28 12/07/95
6476/95 USD 126,054.60 136,048.50 136,048.50 01/19/96
6477/95 USD 1,099,643.61 122,125.25 122,125.25 12/07/95
6478/95 USD 530,901.00 561,393.00 561,393.00 02/01/96
6480/95 USD 80,718.75 138,786.15 138,786.15 12/18/95
6481/95 USD 104,658.12 104,658.12 104,658.12 01/02/96
6482/95 USD 19,687.50 19,687.50 19,687.50 12/26/95
6483/95 USD 311,124.24 308,599.95 308,599.95 12/22/95
6485/95 USD 32,046.05 1,526.00 1,526.00 12/07/95
6486/95 USD 33,633.89 1,607.39 1,607.39 12/21/95
6487/95 USD 75,728.61 13,720.50 13,720.50 12/14/95
6488/95 USD 318,149.69 15,149.99 15,149.99 12/07/95
6489/95 USD 37,257.15 2,017.90 2,017.90 12/07/95
6491/95 USD 382,767.21 384,388.83 384,388.83 12/08/95
6492/95 USD 18,480.00 881.10 881.10 12/07/95
6493/95R USD 10,382.40 35,758.80 35,758.80 02/05/96
6494/95 USD 33,075.00 33,075.00 33,075.00 12/26/95
6495/95 USD 322,468.65 322,468.65 322,468.65 01/22/96
6496/95 USD 156,958.20 156,958.20 156,958.20 01/09/96
6497/95 USD 243,478.12 273,529.12 273,529.12 01/23/96
6498/95 USD 212,461.83 213,195.15 213,195.15 01/22/96
6499/95 USD 350,344.13 350,344.13 350,344.13 02/01/96
6500/95 USD 173,054.70 173,495.70 173,495.70 01/22/96
6501/95 USD 9,081.07 9,100.47 9,100.47 01/22/96
6502/95 USD 9,072.00 4,838.40 4,838.40 12/18/95
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
OUTSTANDINGS FOR WARNACO'S LETTER OF CREDIT FACILITY AS OF 12/04/95 Page # 4
-------------------------------------------------------------------
LETTER OF CREDIT # CURRENCY ORIGINAL AMOUNT CURRENT OUTSTANDING U.S.$ EQUIVALENT MATURITY DATE
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6503/95 USD 116,928.00 117,306.00 117,306.00 04/02/96
6504/95 USD 274,207.50 228,343.50 228,343.50 01/02/96
6505/95 USD 12,322.04 12,322.04 12,322.04 12/28/95
6507/95 USD 173,222.28 173,222.28 173,222.28 01/17/96
6508/95 USD 56,038.50 56,038.50 56,038.50 01/17/96
6509/95 USD 264,589.42 265,140.54 265,140.54 02/02/96
6512/95 USD 32,760.00 103,708.20 103,708.20 12/22/95
6513/95 USD 83,687.94 23,708.64 23,708.64 12/22/95
6514/95 USD 259,313.25 322,628.25 322,628.25 02/21/96
6515/95 USD 192,250.80 218,156.40 218,156.40 02/01/96
6516/95 USD 80,145.45 80,145.45 80,145.45 02/01/96
6517/95 USD 250,349.40 250,349.40 250,349.40 02/18/96
6518/95 USD 40,660.20 18,864.12 18,864.12 12/22/95
6519/95 USD 46,588.50 46,588.50 46,588.50 01/22/96
6520/95 USD 12,058.20 12,058.20 12,058.20 11/17/95
6521/95 USD 6,435.45 40,757.85 40,757.85 02/12/96
6522/95 USD 1,121,690.17 1,121,690.17 1,121,690.17 02/05/96
6523/95 USD 16,726.34 21,418.58 21,418.58 02/05/96
6524/95 USD 327,527.01 198,094.86 198,094.86 01/08/96
6525/95 USD 1,039,743.02 684,317.83 684,317.83 01/06/96
6526/95 USD 248,170.14 195,028.83 195,028.83 01/08/96
6527/95 USD 708,152.41 517,722.88 517,722.88 01/15/96
6528/95 USD 38,421.68 36,158.41 36,158.41 01/15/96
6529/95 USD 22,041.18 22,041.18 22,041.18 01/08/96
6530/95 USD 12,360.35 598.60 598.60 11/21/95
6531/95 USD 28,350.00 56,700.00 56,700.00 01/16/96
6532/95 USD 36,036.00 36,036.00 36,036.00 01/02/96
6533/95 USD 106,722.00 786,483.94 786,483.94 02/01/96
6534/95 USD 23,385.60 160,666.63 160,666.63 02/01/96
6535/95 USD 266,283.99 346,665.69 346,665.69 02/01/96
6536/95 USD 283,500.00 303,187.50 303,187.50 01/17/96
6537/95 USD 142,882.32 152,273.52 152,273.52 01/21/96
6538/95 USD 21,420.00 54,495.00 54,495.00 01/17/96
6539/95 USD 442,323.00 442,323.00 442,323.00 01/17/96
6540/95 USD 275,121.00 316,691.55 316,691.55 02/23/96
6541/95 USD 110,964.42 231,197.90 231,197.90 01/22/96
6542/95 USD 80,262.00 80,262.00 80,262.00 01/22/96
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
OUTSTANDINGS FOR WARNACO'S LETTER OF CREDIT FACILITY AS OF 12/04/95 Page # 5
-------------------------------------------------------------------
LETTER OF CREDIT # CURRENCY ORIGINAL AMOUNT CURRENT OUTSTANDING U.S.$ EQUIVALENT MATURITY DATE
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
6543/95 USD 291,129.30 345,340.80 345,340.80 01/28/96
6544/95 USD 316,156.05 394,121.70 394,121.70 02/01/96
6545/95 USD 127,587.60 127,587.60 127,587.60 01/22/96
6546/95 USD 185,991.12 185,991.12 185,991.12 01/22/96
6547/95 USD 17,425.80 17,425.80 17,425.80 01/22/96
6548/95 USD 20,223.00 20,223.00 20,223.00 01/22/96
6549/95 USD 100,661.40 101,934.00 101,934.00 01/22/96
6550/95 USD 365,245.08 230,152.95 230,152.95 12/22/95
6551/95 USD 8,568.00 8,568.00 8,568.00 01/17/96
6552/95 USD 1,385,519.94 1,280,392.03 1,280,392.03 12/22/95
6767/95A3 USD 27,176.18 27,176.18 27,176.18 12/05/95
6767/95A4 USD 19,558.50 19,558.50 19,558.50 12/21/95
6774/95 USD 86,114.24 41,609.39 41,609.39 11/27/95
6776/95 USD 108,360.00 108,360.00 108,360.00 02/05/96
6777/95 USD 84,892.00 84,892.00 84,892.00 01/05/96
6778/95 USD 96,626.00 96,626.00 96,626.00 01/15/96
6779/95 USD 10,700.00 10,700.00 10,700.00 01/24/96
6780/95 USD 23,184.00 23,184.00 23,184.00 01/09/96
6781/95 USD 69,386.00 78,616.00 78,616.00 02/05/96
6782/95 USD 16,485.00 16,485.00 16,485.00 01/25/96
6783/95 USD 140,251.00 140,521.00 140,521.00 01/10/96
6784/95 USD 78,354.00 78,354.00 78,354.00 12/26/95
6916/95 USD 85,279.93 1,621.88 1,621.88 11/15/95
6919/95 USD 114,408.00 114,408.00 114,408.00 12/15/95
6920/95R USD 222,390.00 239,022.00 239,022.00 01/02/96
6921/95 USD 12,490.00 1,280.54 1,280.54 12/13/95
7000/96 USD 318,149.69 160,142.67 160,142.67 01/09/96
7001/96 USD 95,954.04 95,954.04 95,954.04 01/29/96
7002/96 USD 5,129.15 5,129.15 5,129.15 01/29/96
7003/96 USD 492,017.43 492,017.43 492,017.43 01/22/96
7004/96 USD 774,849.35 774,849.35 774,849.35 02/06/96
7005/96 USD 9,105.52 9,105.52 9,105.52 02/06/96
7006/96 USD 520,667.57 520,667.57 520,667.57 01/26/96
7007/96 USD 55,820.31 1,230,054.04 1,230,054.04 01/22/96
7008/96 USD 1,000,000.00 461,651.98 461,651.98 12/26/95
7009/96 USD 14,755.10 14,755.10 14,755.10 12/22/95
7010/96 USD 226,726.86 226,726.86 226,726.86 12/22/95
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
OUTSTANDINGS FOR WARNACO'S LETTER OF CREDIT FACILITY AS OF 12/04/95 Page # 6
-------------------------------------------------------------------
LETTER OF CREDIT # CURRENCY ORIGINAL AMOUNT CURRENT OUTSTANDING U.S.$ EQUIVALENT MATURITY DATE
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
7011/96 USD 265,343.40 345,073.05 345,073.05 02/01/96
7012/96R USD 23,461.20 23,461.20 23,461.20 01/08/96
7013/96 USD 16,726.50 16,726.50 16,726.50 02/01/96
7014/96 USD 11,554.20 11,554.20 11,554.20 02/01/96
7015/96 USD 26,460.00 26,460.00 26,460.00 02/01/96
7016/96 USD 89,208.00 89,208.00 89,208.00 03/04/96
7017/96 USD 24,560.55 46,634.63 46,634.63 03/04/96
7018/96 USD 109,431.00 109,431.00 109,431.00 02/19/96
7019/96 USD 48,692.70 48,692.70 48,692.70 02/21/96
7020/96 USD 85,072.05 85,072.05 85,072.05 02/12/96
7021/96 USD 25,527.60 25,527.60 25,527.60 02/21/96
7022/96 USD 23,625.00 23,625.00 23,625.00 02/21/96
7023/96 USD 23,360.40 23,360.40 23,360.40 02/13/96
7024/96 USD 79,130.63 79,130.63 79,130.63 01/15/96
7025/96 USD 37,031.40 37,031.40 37,031.40 12/22/95
7027/96 USD 782,187.40 646,085.53 646,085.53 02/13/96
7028/96 USD 60,762.56 60,762.56 60,762.56 02/13/96
7029/96 USD 5,453.60 5,453.60 5,453.60 02/06/96
7030/96 USD 162,685.50 162,685.50 162,685.50 02/06/96
7031/96 USD 1,540,635.52 1,540,635.52 1,540,635.52 02/06/96
7032/96 USD 165,224.87 165,224.87 165,224.87 02/06/96
7033/96 USD 360,359.18 360,359.18 360,359.18 01/22/96
7034/96 USD 1,538.25 1,538.25 1,538.25 01/16/96
7035/96 USD 21,684.52 21,684.52 21,684.52 01/22/96
7036/96 USD 2,272,246.91 2,272,246.91 2,272,246.91 01/22/96
7037/96 USD 174,903.75 174,903.75 174,903.75 02/21/96
7038/96 USD 75,612.60 75,612.60 75,612.60 03/19/96
7039/96 USD 84,716.10 84,716.10 84,716.10 02/19/96
7040/96 USD 167,580.00 176,689.30 176,689.30 02/21/96
7041/96 USD 201,237.75 201,237.75 201,237.75 03/19/96
7042/96 USD 144,172.92 144,172.92 144,172.92 02/26/96
7043/96 USD 126,630.00 126,630.00 126,630.00 03/04/96
7044/96 USD 273,345.28 273,345.28 273,345.28 02/21/96
7045/96 USD 307,251.25 307,251.25 307,251.25 02/21/96
7046/96 USD 166,414.50 166,414.50 166,414.50 02/05/96
7047/96 USD 45,095.40 45,095.40 45,095.40 02/01/96
7048/96 USD 239,557.50 239,557.50 239,557.50 02/19/96
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
OUTSTANDINGS FOR WARNACO'S LETTER OF CREDIT FACILITY AS OF 12/04/95 Page # 7
-------------------------------------------------------------------
LETTER OF CREDIT # CURRENCY ORIGINAL AMOUNT CURRENT OUTSTANDING U.S.$ EQUIVALENT MATURITY DATE
-------------------------------------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
7049/96 USD 103,635.00 103,635.00 103,635.00 02/21/96
7050/96 USD 164,515.31 164,515.31 164,515.31 02/21/96
7051/96 USD 47,250.00 47,250.00 47,250.00 02/05/96
7052/96 USD 300,762.00 300,762.00 300,762.00 02/21/96
7053/96 USD 18,149.99 18,149.99 18,149.99 03/06/96
7054/96 USD 306,225.99 306,225.99 306,225.99 03/11/96
7055/96 USD 36,855.00 36,855.00 36,855.00 02/21/96
7056/96R USD 103,420.55 103,420.55 103,420.55 02/21/96
7057/96 USD 66,937.50 66,937.50 66,937.50 02/19/96
7058/96 USD 358,139.25 358,139.25 358,139.25 02/19/96
7059/96 USD 54,613.44 54,692.82 54,692.82 02/19/96
7060/96 USD 221,281.20 221,281.20 221,281.20 02/19/96
7061/96 USD 35,280.00 35,280.00 35,280.00 02/21/96
7062/96 USD 34,322.40 34,322.40 34,322.40 03/04/96
7063/96 USD 772,216.20 772,216.20 772,216.20 03/19/96
7065/96 USD 213,392.03 213,392.03 213,392.03 01/26/96
7066/96 USD 841,244.36 841,244.36 841,244.36 01/22/96
7070/96 USD 146,412.00 146,412.00 146,412.00 01/09/96
7800/96 USD 91,904.40 91,904.40 91,904.40 03/07/96
7801/96 USD 45,379.95 52,555.98 52,555.98 01/12/96
7900/96 USD 29,400.00 9,697.95 9,697.95 12/21/95
7901/96 USD 34,440.00 34,440.00 34,440.00 02/09/96
7950/96 USD 48,747.98 18,447.98 18,447.98 01/02/96
7951/96 USD 304,604.41 304,604.41 304,604.41 01/30/96
------------- ------------- -------------
55,235,252.60 43,776,650.90 43,776,650.90
------------- ------------- -------------
------------- ------------- -------------
6365/95 ESP 68,677,182.00 2,984,634.00 24,364.36 11/21/95
6506/95 ESP 5,918,850.00 1,050.00 8.57 12/07/95
------------- ------------- -------------
74,596,032.00 2,985,684.00 24,372.93
------------- ------------- -------------
------------- ------------- -------------
7026/96 ITL 42,679,350.00 42,679,350.00 26,758.20 01/02/96
------------- ------------- -------------
42,679,350.00 42,679,350.00 26,758.20
------------- ------------- -------------
------------- ------------- -------------
TOTAL OUTSTANDING IN USD 43,827,782.03
--------------------------------------------------
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
12/05/95 WARNACO $100MM REFINANCING FACILITY Page 1
CUST_NAME REFERENCE MATURITY CUR AMOUNT
<S> <C> <C> <C>
WARNACO INC. 1RR/96R 19960130 USD 552310.62
WARNACO INC. 2R/96R 19960131 USD 1496218.54
WARNACO INC. 344/95 19951205 USD 1290950.74
WARNACO INC. 346/95 19951206 USD 310793.54
WARNACO INC. 348/95 19951207 USD 778755.69
WARNACO INC. 349/95 19951211 USD 803843.30
WARNACO INC. 350/95R 19951211 USD 1432182.27
WARNACO INC. 351/95RR 19951212 USD 819561.28
WARNACO INC. 352/95 19951213 USD 736507.60
WARNACO INC. 355/95R 19951214 USD 857474.46
WARNACO INC. 356/95 19951218 USD 1446286.36
WARNACO INC. 357/95R 19951218 USD 1113636.69
WARNACO INC. 360/95 19951219 USD 504525.99
WARNACO INC. 361/95R 19951220 USD 1916432.71
WARNACO INC. 362/95 19951221 USD 925798.70
WARNACO INC. 363/95 19951226 USD 603758.75
WARNACO INC. 364/95 19951226 USD 728962.66
WARNACO INC. 366/95 19951226 USD 401839.93
WARNACO INC. 368/95 19951227 USD 564835.68
WARNACO INC. 372/95 19951228 USD 688570.64
WARNACO INC. 373/95RR 19960102 USD 1180258.27
WARNACO INC. 374/95 19960102 USD 997911.28
WARNACO INC. 376/95R 19960102 USD 239751.45
WARNACO INC. 377/95R 19960103 USD 1157663.33
WARNACO INC. 378/95R 19960104 USD 844967.19
WARNACO INC. 379/95 19960108 USD 348122.75
WARNACO INC. 381/95 19960109 USD 1306427.72
WARNACO INC. 382/95 19960110 USD 1038800.99
WARNACO INC. 384/95 19960111 USD 754332.40
WARNACO INC. 385/95 19960116 USD 716757.52
WARNACO INC. 386/95R 19960116 USD 1570700.33
WARNACO INC. 387/95 19960116 USD 921007.47
WARNACO INC. 388/95 19960117 USD 1513218.14
WARNACO INC. 389/95R1 19960118 USD 768433.95
WARNACO INC. 391/95 19960122 USD 178679.95
</TABLE>
<PAGE>
<PAGE>
<TABLE>
<CAPTION>
12/05/95 WARNACO $100MM REFINANCING FACILITY Page 2
CUST_NAME REFERENCE MATURITY CUR AMOUNT
<S> <C> <C> <C>
WARNACO INC. 393/95 19960122 USD 395882.91
WARNACO INC. 395/95 19960123 USD 614435.15
WARNACO INC. 396/95 19960124 USD 514994.62
WARNACO INC. 398/95 19960125 USD 751985.01
WARNACO INC. 3R/96 19960201 USD 280194.52
WARNACO INC. 402/95 19960129 USD 7548.90
WARNACO INC. 403/95 19960129 USD 132681.01
WARNACO INC. 4R/96 19960205 USD 542254.38
WARNACO INC. R11/96 19960208 USD 503985.35
WARNACO INC. R12/96 19960212 USD 611739.41
WARNACO INC. R13/96 19960212 USD 526432.45
WARNACO INC. R14/96 19960213 USD 383323.28
WARNACO INC. R15/96 19960214 USD 813829.60
WARNACO INC. R16/96 19960215 USD 455386.36
WARNACO INC. R20/96 19960220 USD 725028.23
WARNACO INC. R22/96 19960220 USD 208869.70
WARNACO INC. R23/96 19960220 USD 613799.99
WARNACO INC. R24/96 19960222 USD 896415.06
WARNACO INC. R25/96 19960226 USD 81024.09
WARNACO INC. R28/96 19960226 USD 1297161.04
WARNACO INC. R32/96 19960227 USD 771561.20
WARNACO INC. R34/96R 19960228 USD 925730.63
WARNACO INC. R35/96 19960229 USD 449804.11
WARNACO INC. R36/96R 19960304 USD 1144896.83
WARNACO INC. R6/96 19960205 USD 246342.28
WARNACO INC. R7/96R 19960206 USD 1287887.51
WARNACO INC. R8/96 19960207 USD 157505.41
Total 46850977.92
</TABLE>
STATEMENT OF DIFFERENCES
------------------------
The registered trademark symbol shall be expressed as 'r'
<PAGE>
<PAGE>
EXHIBIT 11.1
THE WARNACO GROUP, INC.
CALCULATION OF INCOME PER COMMON SHARE
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
---------------------------------------------
JANUARY 8, JANUARY 7, JANUARY 6,
1994 1995 1996
----------- ----------- -----------
<S> <C> <C> <C>
Income before extraordinary items and cumulative effect of the
change in the method of accounting.......................... $53,253,000 $63,328,000 $49,613,000
----------- ----------- -----------
----------- ----------- -----------
Extraordinary items........................................... ($18,637,000)(1) -- (3,120,000)(2)
----------- ----------- -----------
----------- ----------- -----------
Cumulative effect of change in method of accounting for
postretirement benefits other than pensions................. ($10,500,000) -- --
----------- ----------- -----------
----------- ----------- -----------
Net income.................................................... $24,116,000 $63,328,000 $46,493,000
----------- ----------- -----------
----------- ----------- -----------
Weighted average shares outstanding:
Class A common shares outstanding........................ 35,800,000 35,800,000 37,499,492
Shares of restricted stock issued........................ -- -- 130,989
Shares issued in underwritten public offering............ -- -- 2,807,002
Shares issued upon exercise of options................... -- -- 4,129
Shares issued for purchase of assets..................... -- 1,391,342 --
Common stock equivalents................................. 3,970,482 4,205,031 5,123,105
Treasury shares repurchased.............................. -- (111,018) (286,600)
----------- ----------- -----------
Total weighted average shares................................. 39,770,482 41,285,355 45,278,117
----------- ----------- -----------
----------- ----------- -----------
Income per common share:
Income before extraordinary items and cumulative effect
of the change in the method of accounting.............. $1.34 $1.53 $1.10
Extraordinary items...................................... (0.47) -- (0.07)
Cumulative effect of change in method of accounting for
postretirement benefits................................ (0.26) -- --
----------- ----------- -----------
Income per common share....................................... $0.61 $1.53 $1.03
----------- ----------- -----------
----------- ----------- -----------
</TABLE>
- ------------
(1) Extraordinary item without income tax benefit due to the Company's net
operating loss carryforwards.
(2) Extraordinary item net of income tax benefit of $1,913,000.
<PAGE>
<PAGE>
EXHIBIT 22.1
SUBSIDIARIES OF THE COMPANY
<TABLE>
<CAPTION>
STATE OR JURISDICTION
ENTITY OF INCORPORATION
- ------ ---------------------
<S> <C>
Warnaco Inc........................................................................... Delaware
184 Benton Street Inc................................................................. Delaware
C.F. Hathaway Company................................................................. Delaware
Juarmex, S.A. de C.V.................................................................. Mexico
Linda Vista de Tlaxcala, S.A. de C.V.................................................. Mexico
Olga de Villanueva, S.A............................................................... Honduras
Olguita de Mexico, S.A................................................................ Mexicali B.C., Mexico
Warmana Limited....................................................................... Delaware
Warnaco of Canada Limited............................................................. Canada
Warnaco Limited....................................................................... England
Warnaco Sourcing Inc.................................................................. Delaware
Warner's Aiglon, S.A.................................................................. France
Warner's Company (Belgium) S.A........................................................ Belgium
Warner's de Costa Rica Inc............................................................ Delaware
Warner's de Honduras, S.A............................................................. Honduras
Warner's de Mexico, S.A. de C.V....................................................... Mexico
Warner's (Eire) Teoranta.............................................................. Ireland
Warner's Lenceria Femenina, S.A....................................................... Spain
Warner's (United Kingdom) Limited..................................................... Northern Ireland
Warnaco (Hong Kong) Ltd............................................................... Barbados
</TABLE>
<PAGE>
<PAGE>
EXHIBIT 24.1(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Forms S-8 (No. 33-58146 and No. 33-58148) of The Warnaco Group,
Inc. of our report dated February 21, 1996 appearing on page F-1 of this Form
10-K. We also consent to the incorporation by reference of our report on the
Financial Statement Schedule, which appears on page S-1 of this Form 10-K.
PRICE WATERHOUSE LLP
New York, New York
March 18, 1996
<PAGE>
<PAGE>
EXHIBIT 24.1(b)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
and related Reoffer Prospectus (Form S-8 No. 33-58146) pertaining to the Amended
and Restated 1988 Employee Stock Purchase Plan of The Warnaco Group, Inc. of our
report dated February 23, 1995, with respect to the consolidated financial
statements and schedule of The Warnaco Group, Inc. included in the Annual Report
(Form 10-K) for the year ended January 6, 1996.
ERNST & YOUNG LLP
New York, New York
March 18, 1996
<PAGE>
<PAGE>
EXHIBIT 24.1(c)
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-58148) pertaining to the 1991 Stock Option Plan of The Warnaco
Group, Inc. of our report dated February 23, 1995, with respect to the
consolidated financial statements and schedule of The Warnaco Group, Inc.
included in the Annual Report (Form 10-K) for the year ended January 6, 1996.
ERNST & YOUNG LLP
New York, New York
March 18, 1996
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> JAN-6-1996
<PERIOD-END> JAN-6-1996
<CASH> 6,162
<SECURITIES> 0
<RECEIVABLES> 158,567
<ALLOWANCES> 1,960
<INVENTORY> 356,466
<CURRENT-ASSETS> 542,383
<PP&E> 187,376
<DEPRECIATION> 81,051
<TOTAL-ASSETS> 939,129
<CURRENT-LIABILITIES> 232,914
<BONDS> 194,301
<COMMON> 521
0
0
<OTHER-SE> 499,780
<TOTAL-LIABILITY-AND-EQUITY> 939,129
<SALES> 916,179
<TOTAL-REVENUES> 916,179
<CGS> 606,498
<TOTAL-COSTS> 184,048
<OTHER-EXPENSES> 11,745<F1>
<LOSS-PROVISION> 827
<INTEREST-EXPENSE> 33,867
<INCOME-PRETAX> 80,021
<INCOME-TAX> 30,408
<INCOME-CONTINUING> 49,613
<DISCONTINUED> 0
<EXTRAORDINARY> 3,120
<CHANGES> 0
<NET-INCOME> 49,493
<EPS-PRIMARY> 1.03
<EPS-DILUTED> 1.03
<FN>
<F1> Special charge for advertising costs previously deferable.
</FN>
</TABLE>
