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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED OCTOBER 3, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-10857
THE WARNACO GROUP, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 95-4032739
(STATE OR OTHER JURISDICTION (I.R.S. EMPLOYER
OF INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
90 PARK AVENUE
NEW YORK, NEW YORK 10016
(ADDRESS OF REGISTRANT'S PRINCIPAL EXECUTIVE OFFICES)
(212) 661-1300
(REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE)
COPIES OF ALL COMMUNICATIONS TO:
THE WARNACO GROUP, INC.
90 PARK AVENUE
NEW YORK, NEW YORK 10016
ATTENTION: VICE PRESIDENT AND GENERAL COUNSEL
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.
[X] Yes [ ] No
The number of shares outstanding of the registrant's Class A Common Stock as of
November 13, 1998 is as follows: 59,631,076.
- - --------------------------------------------------------------------------------
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<PAGE>
THE WARNACO GROUP, INC.
I N D E X
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
PART I. FINANCIAL INFORMATION
Item 1 - Financial Statements:
Consolidated Condensed Balance Sheets - October 3, 1998 and January 3, 1998.. 3
Consolidated Condensed Statements of Income - Three and Nine Months
Ended October 3, 1998 and October 4, 1997................................. 4
Consolidated Condensed Statements of Cash Flows - Nine Months
Ended October 3, 1998 and October 4, 1997................................. 5
Notes to Consolidated Condensed Financial Statements......................... 6
Item 2 - Management's Discussion and Analysis of Results of Operations
and Financial Condition...................................................... 12
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K........................................ 17
</TABLE>
- 2 -
<PAGE>
<PAGE>
PART I
FINANCIAL INFORMATION
Item 1. Financial Statements
THE WARNACO GROUP, INC.
CONSOLIDATED CONDENSED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
OCTOBER 3, JANUARY 3,
1998 1998
----------- -----------
(UNAUDITED)
<S> <C> <C>
ASSETS
Current assets:
Cash .......................................................... $ 17,189 $ 12,009
Accounts receivable - net ..................................... 459,697 296,378
Inventories:
Finished goods .............................................. 415,514 340,246
Work in process ............................................. 151,638 107,495
Raw materials ............................................... 58,393 78,444
---------- ----------
Total inventories ............................................. 625,545 526,185
Other current assets .......................................... 40,453 45,228
---------- ----------
Total current assets ............................................ 1,142,884 879,800
Property, plant and equipment (net of accumulated depreciation of
$120,717 and $101,982, respectively) .......................... 212,914 130,400
Other assets:
Excess of cost over net assets acquired - net ................. 428,815 349,235
Other assets - net ............................................ 453,724 368,213
---------- ----------
Total other assets .............................................. 882,539 717,448
---------- ----------
$2,238,337 $1,727,648
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Borrowing under foreign credit facilities ..................... $ 26,297 $ 12,751
Short-term borrowings ......................................... 25,000 --
Current portion of long-term debt ............................. 8,838 7,850
Accounts payable .............................................. 451,793 289,817
Accrued liabilities ........................................... 120,136 116,892
Income taxes payable .......................................... 4,954 5,203
---------- ----------
Total current liabilities ....................................... 637,018 432,513
---------- ----------
Long-term debt .................................................. 627,030 354,263
Other long-term liabilities ..................................... 12,383 14,022
Deferred income taxes ........................................... 34,496 18,009
Company-Obligated Mandatorily Redeemable Convertible Preferred
Securities of Designer Finance Trust Holding Solely
Convertible Debentures ........................................ 101,566 100,758
Stockholders' equity:
Preferred Stock; $.01 par value ............................... -- --
Common Stock; $.01 par value .................................. 692 633
Additional paid-in capital .................................... 957,866 940,461
Cumulative translation adjustment ............................. (17,720) (14,838)
Retained earnings/(deficit) ................................... 13,414 (63,900)
Treasury stock, at cost ....................................... (108,553) (38,567)
Notes receivable for common stock issued
and unearned stock compensation ............................. (19,855) (15,706)
---------- ----------
Total stockholders' equity ...................................... 825,844 808,083
---------- ----------
$2,238,337 $1,727,648
========== ==========
</TABLE>
This Statement should be read in conjunction with the accompanying Notes to
Consolidated Condensed Financial Statements.
- 3 -
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<PAGE>
THE WARNACO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF INCOME
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
----------------------- ------------------------
OCTOBER 3, OCTOBER 4, OCTOBER 3, OCTOBER 4,
1998 1997 1998 1997
---------- ---------- ---------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C>
Net revenue ...................................................... $544,125 $333,413 $1,402,207 $875,143
Cost of goods sold ............................................... 357,194 209,410 915,993 559,093
-------- -------- ---------- --------
Gross profit ..................................................... 186,931 124,003 486,214 316,050
Selling, administrative and general expenses ..................... 104,390 61,707 296,528 175,401
-------- -------- ---------- --------
Income before interest and income taxes .......................... 82,541 62,296 189,686 140,649
Interest expense ................................................. 15,077 11,484 43,856 31,999
-------- -------- ---------- --------
Income before income taxes ....................................... 67,464 50,812 145,830 108,650
Provision for income taxes ....................................... 23,349 18,731 51,478 41,288
-------- -------- ---------- --------
Net income ....................................................... $ 44,115 $ 32,081 $ 94,352 $ 67,362
======== ======== ========== ========
Earnings per share:
Basic ........................................................ $0.71 $0.62 $1.52 $1.31
===== ===== ===== =====
Diluted ...................................................... $0.70 $0.60 $1.48 $1.26
===== ===== ===== =====
Cash dividends per share of common stock ......................... $0.09 $0.08 $0.27 $0.24
===== ===== ===== =====
Weighted average number of shares of common stock outstanding:
Basic ........................................................ 61,830 51,444 62,197 51,328
======== ======== ========== ========
Diluted ...................................................... 63,300 53,636 63,807 53,378
======== ======== ========== ========
</TABLE>
This Statement should be read in conjunction with the accompanying Notes to
Consolidated Condensed Financial Statements.
- 4 -
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THE WARNACO GROUP, INC.
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------
OCTOBER 3, OCTOBER 4,
1998 1997
---------- ---------
(UNAUDITED)
<S> <C> <C>
Cash flow from operations:
Net income ...................................................... $ 94,352 $ 67,362
Non-cash items included in net income:
Depreciation and amortization ............................... 44,660 22,492
Amortization of unearned stock compensation ................. 3,533 2,486
Change in deferred income taxes ............................. 52,132 --
Other changes in operating accounts ......................... (105,814) (178,351)
--------- ---------
Net cash provided (used) in operations before non-recurring items 88,863 (86,011)
Cash expenses related to non-recurring charges .................. (4,811) (3,994)
--------- ---------
Net cash provided by (used in) operations ....................... 84,052 (90,005)
--------- ---------
Cash flow from investing activities:
Proceeds from sale of fixed assets .......................... 2,210 610
Purchase of property, plant & equipment ..................... (103,737) (32,086)
Payment of assumed liabilities and acquisition accruals ..... (18,801) (15,027)
Acquisition of assets and licenses .......................... (44,088) --
Increase in intangible and other assets ..................... (116,284) (15,400)
--------- ---------
Net cash used in investing activities ........................... (280,700) (61,903)
--------- ---------
Cash flow from financing activities:
Borrowings under revolving credit facilities ................ 322,637 351,197
Borrowings under term loan agreement ........................ 42,206 --
Repayment of borrowings under term loan agreement ........... (21,500) --
Repayment of debt ........................................... (34,438) (189,828)
Proceeds from the exercise of options and payment of
notes receivable from employees ...................... 41,982 4,188
Purchase of treasury shares and payment of withholding taxes
on option exercises ..................................... (105,631) (8,120)
Dividends paid .............................................. (16,082) (12,074)
Other ....................................................... (33,393) (786)
--------- ---------
Net cash provided by financing activities ....................... 195,781 144,577
--------- ---------
Effect of exchange rate changes on cash ......................... 6,047 7,176
--------- ---------
Increase (decrease) in cash ..................................... 5,180 (155)
Cash at beginning of period ................................. 12,009 11,840
--------- ---------
Cash at end of period ....................................... $ 17,189 $ 11,685
========= =========
Other changes in operating accounts:
Accounts receivable ......................................... $(166,305) $ (63,312)
Inventories ................................................. (95,269) (145,918)
Other current assets ........................................ 4,554 (1,284)
Accounts payable and accrued liabilities .................... 151,694 34,996
Income taxes payable ........................................ (488) 981
Other ....................................................... -- (3,814)
--------- ---------
$(105,814) $(178,351)
========= =========
</TABLE>
This Statement should be read in conjunction with the accompanying Notes to
Consolidated Condensed Financial Statements.
- 5 -
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THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
NOTE 1 - Basis of Presentation
The accompanying unaudited consolidated condensed financial statements have been
prepared in accordance with generally accepted accounting principles and
Securities and Exchange Commission rules and regulations for interim financial
information. Accordingly, they do not contain all of the information and notes
required by generally accepted accounting principles for complete financial
statements. In the opinion of the Company, the accompanying consolidated
condensed financial statements contain all adjustments (all of which were of a
normal recurring nature) necessary to present fairly the financial position of
the Company as of October 3, 1998 as well as its results of operations and cash
flows for the periods ended October 3, 1998 and October 4, 1997. Operating
results for interim periods may not be indicative of results for the full fiscal
year. For further information, refer to the consolidated financial statements
and notes thereto included in the Company's Annual Report on Form 10-K for the
fiscal year ended January 3, 1998. Certain amounts for prior periods have been
reclassified to be comparable with the current period presentation.
NOTE 2 - ACQUISITIONS
In June 1998, the Company acquired certain inventory and other assets as well as
the sub-license to produce Calvin Klein jeans and jeans-related products for
children in the United States, Mexico and Central and South America from
Commerce Clothing Company LLC ("Commerce") for approximately $36.9 million. A
preliminary allocation of the purchase price to the fair value of the assets
acquired is summarized below:
<TABLE>
<CAPTION>
(in millions)
<S> <C>
Inventories................................... $ 5.3
Other current assets.......................... 0.3
Fixed assets.................................. 0.3
Intangible and other assets................... 39.0
Accrued liabilities........................... (8.0)
-----
Purchase price................................ $36.9
=====
</TABLE>
In addition, the Company entered into a supply agreement with a subsidiary of
Commerce whereby the Company will purchase, at a specified price, certain
products for a period of eighteen months.
In June 1998, the Company also acquired certain assets as well as the
sub-license to distribute Calvin Klein jeans, jeans-related products and khakis
for men and women in Mexico and Central Mexico from Macro Jeans S.A. de C.V. for
approximately $4.0 million.
These acquisitions, accounted for as purchases, did not have a material
pro-forma impact on 1998 consolidated earnings.
NOTE 3 - CAPITAL STOCK
On August 19, 1998, the Company's Board of Director's declared a quarterly cash
dividend of $0.09 per share to be paid on October 8, 1998 to shareholders of
record as of September 3, 1998. During
- 6 -
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THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
the first nine months of fiscal 1998, the Company repurchased approximately
2,609,200 shares in open market purchases and under equity option arrangements
at a cost of approximately $72.3 million. Excluded from these amounts are the
repurchase of approximately 1,446,700 shares at a cost of $34.2 million, for
which settlement did not occur prior to the end of the Company's fiscal quarter.
Including the shares settling subsequent to the Company's quarter end, a total
of approximately 5,038,400 shares have been repurchased under the current
authorization of 12,420,000 million shares leaving approximately 7,381,600
shares available to repurchase. In addition, as of October 3, 1998 the Company
had options outstanding on approximately 2,257,700 shares at an average forward
price of approximately $36.48 per share. These option arrangements expire
between November 1998 and August 1999. Under these option arrangements, the
Company is obligated to either purchase its common stock at the forward price or
pay or receive cash for the difference between the forward price and the market
price of the Company's common stock at the option expiration date. After
accounting for these options, the Company has approximately 5,123,900 shares
available to repurchase. As of October 3, 1998, treasury stock includes
approximately 3,985,100 shares at a cost of $108.6 million. The change in
additional paid-in capital during the first nine months of fiscal 1998 primarily
relates to stock options exercised in which previously owned shares were
tendered for payment of the exercise price of the options and the related
employee withholding taxes, net of related tax benefits to the Company.
NOTE 4 - RESTRICTED STOCK
In May 1998, the Company's Board of Directors authorized the issuance of 182,903
shares of restricted stock to certain employees, including certain officers and
directors of the Company. The restricted shares vest ratably over four years and
will be fully vested in May 2002. The fair market value of the restricted shares
was approximately $7.7 million at the date of grant. The Company will recognize
compensation expense equal to the fair value of the restricted shares over the
vesting period.
NOTE 5 - NEW ACCOUNTING STANDARDS
In June 1997, the FASB issued Statement of Financial Accounting Standards No.
131, "Disclosures about Segments of an Enterprise and Related Information" (SFAS
No. 131). In December 1997, the FASB issued SFAS No. 132, "Employers'
Disclosures about Pensions and Other Postretirement Benefits" (SFAS No. 132),
which revises disclosure requirements for employers' pension and other retiree
benefits. These statements are effective for the Company for fiscal 1998. The
Company is studying the application of these new statements to evaluate the
disclosure requirements. The adoption of these statements will have no impact on
the Company's consolidated financial position, liquidity, cash flows or results
of operations. However, the Company will present reportable segment information
pursuant to the adoption of SFAS No. 131.
In February, 1998, the FASB approved the issuance of an AICPA Statement of
Position (SOP 98-5) requiring that pre-operating costs relating to the start-up
of new manufacturing facilities and product launches be expensed as incurred. It
has been the Company's consistent accounting policy to capitalize such costs for
amortization over appropriate periods not to exceed five years. Adoption of the
SOP will be required for the Company in fiscal 1999 and will be reported as the
cumulative effect of a change in accounting principle, net of tax. Based on
amounts capitalized at October 3, 1998 and projected pre-operating costs to be
incurred through the balance of the fiscal year, net of amortization, the impact
of the change in accounting could result in a non-cash charge of approximately
$120.0 million, net of income tax benefits.
In June 1998, the FASB issued Statement of Financial Accounting Standards No.
133, "Accounting for Derivative Instruments and Hedging Activities" (SFAS No.
133). This statement, which is effective for the fiscal year beginning January
3, 2000, establishes accounting and reporting standards for derivative
instruments and hedging activities. SFAS No. 133 requires the recognition of all
derivatives as either assets or liabilities in the statement of financial
position along with the measurement of such instruments at fair value.
Management believes that the implementation of SFAS No. 133 will not have a
material impact on the Company's consolidated financial position, liquidity,
cash flows or results of operations.
- 7 -
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THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
NOTE 6 - COMPREHENSIVE INCOME
The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income" (SFAS No. 130) effective with the beginning of
fiscal 1998. SFAS No. 130 establishes standards for reporting of changes in
equity from nonowner sources in the financial statements; however, the adoption
of SFAS No. 130 has no impact on the Company's net earnings or stockholders'
equity. Under SFAS No. 130, among other things, foreign currency translation
adjustments, which are reported separately in stockholders' equity, are included
in other comprehensive income.
Total comprehensive income, representing changes in foreign currency translation
adjustments, was $39.5 million and $28.2 million for the three month periods
ended October 3, 1998 and October 4, 1997 and $92.5 million and $64.1 million
for the nine month periods ending October 3, 1998 and October 4, 1997,
respectively.
NOTE 7 - DEBT
In April 1998, the Company amended a 1996 bank credit agreement (the
"Agreement") to increase a revolving loan facility to 480 million French Francs
from 120 million French Francs. Borrowings under the Agreement bear interest at
LIBOR plus .40% and mature on December 31, 2001.
In July 1998, the Company amended its $300 million Trade Letter of Credit
Facility (the "L/C Facility") to increase the size of the facility to $450
million, to extend the borrowing period for amounts due under the maturing
letters of credit from 120 days to 180 days, to extend the maturity of the L/C
Facility to July 29, 1999 and to eliminate certain restrictions relating to debt
and investments. In conjunction with the amendment of the L/C Facility, the
Company also amended its $600 million revolving credit facility and its $200
million 364-day credit facility to allow for the increase in the L/C Facility
and the elimination of certain restrictions relating to debt and investments.
The Company uses derivative financial instruments in the management of interest
rate and foreign currency exposures. The Company does not use derivative
financial instruments for trading or speculative purposes. During the first nine
months of fiscal 1998, the Company entered into new
- 8 -
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<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
interest rate swap agreements and amended certain existing interest rate swap
agreements with several of its lenders to convert variable rate obligations of
$610.0 million, including amounts under the L/C Facility, to fixed rate
borrowings bearing interest at 5.99%. The agreements mature in September 2004.
The Company follows accrual accounting for these interest rate swap agreements.
NOTE 8 - SUMMARIZED FINANCIAL AND PRO-FORMA INFORMATION
The following is summarized unaudited financial information of the Company's
wholly-owned subsidiary, Designer Holdings as of October 3, 1998 and January 3,
1998 and for the nine month periods ended October 3, 1998 and September 30,
1997, respectively. Designer Holdings, acquired by the Company in the fourth
quarter of 1997, develops, manufactures and markets designer jeanswear and
jeans-related sportswear for men, women and juniors and holds a 40-year
extendable license from Calvin Klein, Inc. to develop, manufacture and market
designer jeanswear and jeans- related sportswear collections in North, South and
Central America under the Calvin Klein Jeans(R), CK Calvin Klein Jeans(R), and
CK/Calvin Klein/Khakis(R) labels.
<TABLE>
<CAPTION>
(DOLLARS IN THOUSANDS)
BALANCE SHEET SUMMARY: OCTOBER 3, JANUARY 3,
1998 1998
--------- ---------
<S> <C> <C>
Current assets............................. $148,745 $129,285
Noncurrent assets.......................... 528,334 497,557
Current liabilities........................ 122,126 104,458
Noncurrent liabilities..................... 58,500 59,800
Redeemable preferred securities............ 101,566 100,758
Stockholders' equity....................... 394,887 361,826
<CAPTION>
INCOME STATEMENT SUMMARY: NINE MONTHS ENDED
--------------------------
OCTOBER 3, SEPTEMBER 30,
--------- -------------
1998(A) 1997(B)
<S> <C> <C>
Net revenues............................... $332,806 $365,049
Cost of good sold.......................... 223,449 262,759
Net income before extraordinary item....... 33,061 274
Net income (loss).......................... 33,061 (633)
</TABLE>
(a) Excludes net revenues of $59.3 million now reported as Retail division
net revenues. As a result of the continuing integration of Designer
Holdings into the operations of the Company, cost of goods sold and net
income associated with these net revenues cannot be separately
identified.
(b) The summarized income statement information for the nine months ended
September 30, 1997 is presented on a historical basis and does not
reflect the effect of the acquisition by the Company. Certain amounts
have been reclassified to cost of goods sold to conform to the current
year presentation.
The following summarized unaudited pro forma information combines the historical
results of operations of the Company with Designer Holdings, after the effects
of estimated purchase accounting adjustments, assuming the acquisition had
occurred at the beginning of fiscal 1997. The pro forma information does not
reflect any cost savings or other benefits anticipated as a result of the
acquisition. The pro forma information does not purport to be indicative of the
results that would have been obtained if the operations had actually been
combined during the period presented nor are they indicative of future results
for the combined companies.
- 9 -
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THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
<TABLE>
<CAPTION>
(dollars in thousands)
NINE MONTHS ENDED
OCTOBER 4, 1997
<S> <C>
Statement of Income Data:
Net revenues......................................... $1,240,100
Net income before extraordinary item................. $ 68,100
Net income........................................... $ 67,200
Income per common share before extraordinary item:
Basic............................................ $1.10
=====
Diluted.......................................... $1.07
=====
Income per common share:
Basic............................................ $1.09
=====
Diluted.......................................... $1.05
=====
</TABLE>
The final assessment of the purchase accounting estimates have not yet been
completed. During the nine months ended October 3, 1998, adjustments to these
estimates (primarily for revisions to estimated liabilities assumed) increased
the excess of cost over net assets acquired by approximately $70.0 million.
NOTE 9 - EARNINGS PER SHARE
The following table sets forth the computation of basic and diluted earnings per
share:
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
---------------------- -----------------------
OCTOBER 3, OCTOBER 4, OCTOBER 3, OCTOBER 4,
1998 1997 1998 1997
---------- ---------- ---------- ----------
(IN THOUSANDS EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C>
Numerator for basic and diluted earnings per share:
Net income....................................... $ 44,115 $ 32,081 $ 94,352 $ 67,362
========= ========= ======== =========
Denominator for basic earnings per share--
weighted average shares........................ 61,830 51,444 62,197 51,328
--------- --------- -------- ---------
Effect of dilutive securities:
Employee stock options......................... 521 1,721 1,019 1,605
Restricted stock shares........................ 507 471 481 445
Shares under put option contracts.............. 442 -- 110 --
--------- --------- -------- ---------
Dilutive potential common shares................. 1,470 2,192 1,610 2,050
--------- --------- -------- ---------
Denominator for diluted earnings per share--
weighted average adjusted shares............... 63,300 53,636 63,807 53,378
========= ========= ======== =========
Basic earnings per share......................... $0.71 $0.62 $1.52 $1.31
========= ========= ======== =========
Diluted earnings per share....................... $0.70 $0.60 $1.48 $1.26
========= ========= ======== =========
</TABLE>
Options to purchase 315,000 shares of common stock at prices ranging from $39.25
to $42.88 per share were outstanding during the first nine months of fiscal 1998
but were not included in the computation of diluted earnings per share because
the options' exercise price was greater than the average market price of the
common shares. The options, which expire from March 2008 through July 2008, were
still outstanding as of October 3, 1998.
Incremental shares issuable on the assumed conversion of the preferred
securities (1,653,177 shares) were not included in the computation of diluted
earnings per share as the impact would have been antidilutive.
NOTE 10 - CASH FLOW INFORMATION
<TABLE>
<CAPTION>
NINE MONTHS ENDED
-----------------------
OCTOBER 3, OCTOBER 4,
1998 1997
---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C>
Cash paid (received) for:
Interest (net of amounts capitalized of $962 in fiscal 1998;
0 in fiscal 1997)......................................... $ 42,224 $ 29,923
Income taxes, net of refunds received....................... $ (7,571) $ 5,573
</TABLE>
- 10 -
<PAGE>
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS - (Continued)
NOTE 11 - SUBSEQUENT EVENTS
In October 1998, the Company entered into a $200 million revolving accounts
receivable securitization facility. Under this facility, the Company entered
into agreements to sell, for a period of up to five years, undivided
participation interests in designated pools of U. S. trade receivables.
Participation interests in new receivables may be sold as collections reduce
previously sold participation interests. The participation interests are sold
at a discount to reflect normal dilution. Net proceeds to the company were
$200 million.
As part of a continuing strategic review of facilities, products and functions
following significant acquisitions in 1996 and 1997, the Company intends to
implement programs designed to streamline operations and improve profitability.
As a result of this review, the Company expects to report a charge in the fourth
quarter of fiscal 1998, currently estimated to be approximately $55 million, net
of tax benefits. The charge will be for the consolidation of both domestic and
international manufacturing, warehouse and distribution and administrative
operations and facilities and the discontinuation of non-strategic
brands/licenses. Included in the fourth quarter charge will be employee costs,
non-cash inventory and other asset write-downs and other costs related to these
actions. These programs will commence in the fourth quarter of fiscal 1998 and
are expected to be substantially completed by mid-1999, generating annual cash
savings of approximately $10 million on a pre-tax basis.
- 11 -
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION.
RESULTS OF OPERATIONS
STATEMENTS OF INCOME (SELECTED DATA)
(AMOUNTS IN MILLIONS OF DOLLARS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED
OCTOBER 3, OCTOBER 4, OCTOBER 3, OCTOBER 4,
1998 1997 1998 1997
--------- ---------- ---------- --------
<S> <C> <C> <C> <C>
Net revenues ............................... $ 544.1 $ 333.4 $1,402.2 $875.1
Cost of goods sold ......................... 357.2 209.4 916.0 559.1
-------- -------- -------- ------
Gross profit ............................... 186.9 124.0 486.2 316.0
% of net revenues ........................ 34.4% 37.2% 34.7% 36.1%
Selling, administrative and general expenses 104.4 61.7 296.5 175.4
-------- -------- -------- ------
Income before interest and income taxes .... 82.5 62.3 189.7 140.6
% to net revenues ...................... 15.2% 18.7% 13.5% 16.1%
Interest expense ........................... 15.1 11.5 43.8 32.0
Provision for income taxes ................. 23.3 18.7 51.5 41.2
-------- -------- -------- ------
Net income ................................. $ 44.1 $ 32.1 $ 94.4 $ 67.4
======== ======== ======== ======
</TABLE>
Net revenues in the third quarter of fiscal 1998 were $544.1 million, $210.7
million or 63.2% higher than the $333.4 million recorded in the third quarter of
fiscal 1997. 1998 net revenues include $169.8 million associated with the Calvin
Klein Jeanswear acquisitions, completed in the fourth quarter of 1997 and the
second quarter of 1998. Excluding the impact of the above acquisitions, net
revenues increased $40.9 million or 12.3%. International net revenues increased
$15.7 million or 21.7% during the quarter due to strength in the Calvin Klein
business in Europe coupled with increases at the Company's Lejaby division. Net
revenues for the nine months ended October 3, 1998 were $1,402.2 million, an
increase of $527.1 million or 60.2% over the $875.1 million in the first nine
months of fiscal 1997. Acquisitions contributed $409.1 million to net revenues
for the nine month period ended October 3, 1998. Excluding net revenues
attributable to the Calvin Klein Jeanswear acquisitions, net revenues increased
$118.0 million or 13.5%.
Intimate apparel division net revenues increased $9.4 million or 4.0% to $245.1
million from $235.7 million in the third quarter of fiscal 1997. The increase in
net revenues in the third quarter of fiscal 1998 compared with fiscal 1997 was
generated by a strong increase in core domestic branded products, attributed
substantially to the continued success of Olga's Simply Perfect and Warner's
Naked Truth lines. In addition, Calvin Klein Underwear net revenues increased
approximately 9.5% and Bodyslimmers net revenues nearly tripled during the
period. Partially offsetting these increases were declines in private label net
revenues, reflecting the Company's strategic decision to reduce private label
business. Net revenues for the nine months ended October 3, 1998 increased
$39.1 million or 6.1% to $683.6 million compared with $644.5 million in the
first nine months of 1997. The increase was due to stronger shipments of core
domestic branded products as well as increases in Bodyslimmers and Lejaby.
Sportswear division net revenues increased $177.9 million or 210.3% to $262.5
million in the third quarter of fiscal 1998. The Calvin Klein Jeanswear
acquisitions in the fourth quarter of 1997 and the second quarter of 1998 added
$152.9 million to the Sportswear division's net revenues. Excluding these
acquisitions, net revenues increased by $25.0 million or 29.6%. This increase
is attributable to a 31.1% increase in Chaps by Ralph Lauren. Net revenues for
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<PAGE>
<PAGE>
the nine months ended October 3, 1998 increased $429.6 million or 220.9% to
$624.1 million compared with $194.5 million in the first nine months of fiscal
1997. Excluding the Calvin Klein jeanswear and kidswear acquisitions for the
nine-month period, net revenues increased by $64.5 million or 33.2%. The
increase for the nine months primarily reflects an increase in net revenues of
34.5% in Chaps by Ralph Lauren and an 11.4% increase for Calvin Klein
accessories.
Gross profit increased by $62.9 million or 50.7% to $186.9 million in the third
quarter of fiscal 1998 compared with $124.0 million in the third quarter of
fiscal 1997. Gross profit as a percentage of net revenues was 34.4% in the third
quarter of fiscal 1998 compared with 37.2% in the third quarter of fiscal 1997.
The decrease in gross margin was a result of the addition of the jeanswear
business, which carries a lower gross margin than the intimate apparel division.
Gross profit for the first nine months of fiscal 1998 increased $170.2 million
or 53.9% to $486.2 million from $316.0 million in the first nine months of
fiscal 1997. Gross profit as a percentage of net revenues was 34.7% for the nine
months of fiscal 1998 compared with 36.1% in 1997. The year-to-date gross margin
reflects the inclusion of the jeanswear business, which carries a lower gross
margin.
Selling, administrative and general expenses increased $42.7 million or 69.2% to
$104.4 million (19.2% of net revenues) in the third quarter of fiscal 1998
compared with $61.7 million (18.5% of net revenues) in the third quarter of
fiscal 1997. Selling, administrative and general expenses for the first nine
months of fiscal 1998 increased $121.1 million or 69.0% to $296.5 million (21.1%
of net revenues) compared with $175.4 million (20.0 % of net revenues) in fiscal
1997. The increase in selling, administrative and general expenses is due
primarily to higher marketing and corporate expenses reflecting additional
headcount and costs associated with information services related to new systems
and the year 2000 implementation.
Interest expense increased $3.6 million in the third quarter of fiscal 1998 to
$15.1 million. Interest expense for the nine months ended October 3, 1998
increased $11.8 million to $43.8 million from $32.0 million in the first nine
months of fiscal 1997. The increase in 1998 interest expense reflects the
funding of the Company's recent acquisitions and stock buyback program.
The estimated full year effective tax rate for fiscal 1998 was lowered to 35.3%
resulting in an effective tax rate of 34.6% for the third quarter. The
difference between the United States federal statutory rate of 35% and the
Company's estimated effective tax rate of 35.3% reflects the impact of state
income taxes and the effects of non-deductible intangible amortization offset by
foreign income taxed at rates more favorable than the United States statutory
rate.
Net income for the third quarter of fiscal 1998 was $44.1 million, an increase
of $12.0 million or 37.4% compared with $32.1 million in the third quarter of
fiscal 1997. Net income for the first nine months of fiscal 1998 increased $27.0
million or 40.1% to $94.4 million compared with $67.4 million in the first nine
months of fiscal 1997. The increase for both the quarter and nine months
reflects higher net revenues and associated gross profit mentioned above.
CAPITAL RESOURCES AND LIQUIDITY
The Company's liquidity requirements arise primarily from its debt service
requirements, capital expenditures related to the Company's year 2000 compliance
program and the funding of the Company's working capital needs, primarily
inventory and accounts receivable. The Company's borrowing requirements are
seasonal, with peak needs generally 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 operating cash flow in the fourth quarter of the fiscal year
reflecting third and fourth quarter shipments and the sale of inventory built
during the first half of the fiscal year.
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<PAGE>
<PAGE>
Cash provided by/(used in) operations before non-recurring items was $88.9
million in the first nine months of fiscal 1998 compared with $(86.0) million in
the first nine months of fiscal 1997. The increase in cash provided by operating
activities reflects better management of working capital and higher net income.
Receivable levels increased at quarter end in line with the third quarter sales
increase and inventory levels were up in anticipation of fourth quarter shipment
levels.
Cash used in investing activities was $280.7 million for the first nine months
of fiscal 1998 compared with $61.9 million in the first nine months of fiscal
1997. Capital expenditures were $103.7 million in the first nine months of
fiscal 1998, compared with $32.1 million in the first nine months of fiscal 1997
and included amounts for information systems and store fixture programs for
Calvin Klein Jeans "shop in shops". During the second quarter of 1998, the
Company acquired certain inventory and other assets as well as the sub-license
to produce Calvin Klein jeans and jeans-related products for children in the
United States, Mexico and Central and South America. In addition, the Company
acquired certain assets as well as the sub-license to distribute Calvin Klein
jeans and jeans-related products and khakis for men and women in Mexico and
Central America. The purchase price of these acquisitions was approximately
$40.9 million.
Cash provided from financing activities was $195.8 million in the first nine
months of fiscal 1998 compared with $144.6 million in the first nine months of
fiscal 1997. The increase in the Company's revolving credit balance during the
first nine months of fiscal 1998 was $322.6 million compared with $351.2 million
in the first nine months of fiscal 1997 due to the funding of the most recent
acquisitions and stock repurchase program and capital expenditures for the
Company's year 2000 compliance program. The Company paid approximately $105.6
million for the repurchase of shares and withholding taxes on option exercises
in the first nine months of fiscal 1998. The Company repurchased approximately
2.6 million shares of its common stock in the first nine months of fiscal 1998
at an average cost of approximately $27.72 per share or approximately $72.3
million. Excluded from these amounts are the repurchase of approximately 1.4
million shares at a cost of approximately $34.2 million, for which settlement
did not occur prior to the end of the Company's fiscal quarter. Including these
shares, the Company has purchased approximately 5.0 million shares of its common
stock under the current repurchase authorization of 12.4 million shares, leaving
approximately 7.4 million shares available to repurchase. At October 3, 1998 the
Company has options outstanding on approximately 2.3 million of its shares at an
average forward price of $36.48 per share, expiring between November 1998 and
August 1999. Under these option arrangements, the Company is obligated to either
purchase its stock at the forward price or pay or receive cash for the
difference between the forward price and the market price of the Company's stock
at the option expiration date. If fully exercised, the aggregate purchase price
for the Company's stock under these options would be $82.4 million.
In April 1998, the Company amended its 1996 Bank Credit Agreements (the
"Agreement") to increase its revolving loan facilities to 480 million French
Francs from 120 million French Francs. Borrowings under the Agreement bear
interest at LIBOR plus .40% and mature on December 31, 2001. In July 1998, the
Company amended its $300 million Trade Letter of Credit Facility (the "L/C
Facility") to increase the size of the facility to $450 million, to extend the
borrowing period for amounts due under the maturing letters of credit from 120
days to 180 days, to extend the maturity of the L/C Facility to July 29, 1999
and to eliminate certain restrictions relating to debt and investments. The
amount of borrowings available under both the 1996 Bank Credit Agreements and
the L/C Facility was increased to accommodate the internal growth of the
Company's business as well as the increased demand for finished product
purchases stemming from the acquisition of Designer Holdings in the fourth
quarter of 1997 and the acquisition of the CK Kids business in the second
quarter of 1998. In conjunction with the amendment of the L/C Facility, the
Company also
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<PAGE>
amended its $600 million revolving credit facility and its $200 million 364-day
credit facility to allow for the increase in the L/C Facility and the
elimination of certain restrictions relating to debt and investments.
In October 1998, the Company entered into a $200 million revolving accounts
receivable securitization facility. Under this facility, the Company entered
into agreements to sell, for a period of up to five years, undivided
participation interests in designated pools of U. S. trade receivables.
Participation interests in new receivables may be sold as collections reduce
previously sold participation interests. The participation interests are sold at
a discount to reflect normal dilution. Net proceeds to the Company from the
initial funding were $200 million, and were used primarily to retire long-term
debt.
YEAR 2000 AND ECONOMIC AND MONETARY UNION ("EMU") COMPLIANCE.
The Year 2000 issue is the result of computer programs being written using
two digits rather than four to define the applicable year. Any of the Company's
computer programs that have time- sensitive software may recognize a date
using "00" as the year 1900 rather than the year 2000. These programs, including
some that are critical to the Company's operations, could fail to properly
process data that contain dates after 1999 unless they are modified or replaced.
Following a comprehensive review of current systems and future requirements
to support international growth, the Company initiated a program to replace
existing capabilities with enhanced hardware and software applications. The
objectives of the program are to achieve competitive benefits for the Company,
as well as assuring that all information systems will meet Year 2000 and EMU
compliance. Full implementation of this program is expected to require
expenditures, primarily capital, of approximately $17 million over the next
twelve to eighteen months, primarily for Year 2000 compliance and system
upgrades. Funding requirements have been incorporated into the Company's capital
expenditure planning and are not expected to have a material adverse impact on
financial condition, results of operations or liquidity. Approximately $43.2
million has been incurred through October 3, 1998 and such amounts are included
in property and equipment. The implementation and testing processes are expected
to be complete in the first quarter of fiscal 1999 for the Chaps and Calvin
Klein Underwear divisions and in mid-1999 for all of the remaining divisions
of the Company.
As a part of its Year 2000 process, the Company intends to test its Year 2000
readiness for critical business processes and application systems. The Company
anticipates that minor issues will be identified during this test period and
intends to address such issues during the first half of fiscal 1999. The Company
has contacted key suppliers and vendors in order to determine the status of such
third parties' Year 2000 remediation plans. The Company recognizes the need for
Year 2000 contingency plans in the event that remediation is not fully
successful or that the remediation efforts of its vendors, suppliers and
governmental/regulatory agencies are not timely completed. This process will be
on-going throughout 1999 and the Company will be better able to assess the risk
and prepare contingency plans when third party processes are more complete.
The Company recognizes that issues related to Year 2000 constitute a material
known uncertainty. The Company also recognizes the importance of ensuring its
operations will not be adversely affected by Year 2000 issues. It believes that
the processes described above will be effective to manage the risks associated
with the problem. However, there can be no assurance that the process can be
completed on the timetable described above or that the remediation process will
be fully effective. The failure to identify and remediate Year 2000 problems
or, the failure of key third
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<PAGE>
<PAGE>
parties who do business with the Company or governmental regulatory agencies to
timely remediate their Year 2000 issues could cause system failures or errors
and business interruptions.
Readers are cautioned that forward-looking statements contained in the Year 2000
update should be read in conjunction with the Company's disclosure under
"Statement Regarding Forward-looking Disclosures".
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company is exposed to market risk related to changes in interest rates
and foreign currency exchange rates, and selectively uses financial instruments
to manage these risks. The Company does not enter into financial instruments for
speculative or trading purposes. The Company has interest rate agreements with
several financial institutions to limit exposure to interest rate volatility.
Additionally, the Company enters into foreign currency forward and option
contracts to mitigate the risks of doing business in foreign currencies. The
Company hedges currency exposures of firm commitments and anticipated
transactions denominated in non-functional currencies to protect against the
possibility of diminished cash flow and adverse impacts on earnings. The Company
is exposed to credit loss in the event of nonperformance by counterparties on
foreign exchange contracts and interest rate swap agreements. The Company
minimizes such risk exposure by limiting the counterparties to major
international banks and financial institutions. The Company's currency exposures
vary, but are primarily concentrated in the Canadian dollar, Mexican peso,
British pound, German mark, French franc and Hong Kong dollar.
The value of market risk sensitive instruments is subject to change as a
result of movement in market rates and prices.
STATEMENT REGARDING FORWARD-LOOKING DISCLOSURE
This Report includes "forward-looking statements" within the meaning of
Section 27A of Securities Act of 1933, as amended and Section 21E of the
Securities Exchange Act of 1934, as amended which represent the Company's
expectations or beliefs concerning future events that involve risks and
uncertainties, including those associated with the effect of national and
regional economic conditions, the overall level of consumer spending, the
performance of the Company's products within the prevailing retail environment,
customer acceptance of both new designs and newly-introduced product lines, and
financial difficulties encountered by customers. All statements other than
statements of historical facts included in this quarterly report, including,
without limitation, the statements under Management's Discussion and Analysis of
Financial Condition, are forward-looking statements. Although the Company
believes that the expectations reflected in such forward-looking statements are
reasonable, it can give no assurance that such expectations will prove to have
been correct.
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<PAGE>
<PAGE>
PART II -- OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
10.4 Amended and Restated Master Agreement of Sale, dated as of September
30, 1998, among Warnaco Inc., as Originator, and Gregory Street, Inc.,
as Buyer and Servicer.
10.5 Master Agreement of Sale, dated as of September 30, 1998, among Calvin
Klein Jeanswear Company, as Originator, and Gregory Street, Inc., as
Buyer and Servicer.
10.6 Purchase and Sale Agreement, dated as of September 30, 1998, among
Gregory Street, Inc., as Seller and initial Servicer and Warnaco
Operations Corporation, as Buyer.
10.7 Parallel Purchase Commitment, dated as of September 30, 1998, among
Warnaco Operations Corporation, as Seller and certain commercial
lending institutions, as the Banks, and Gregory Street, Inc., as the
initial Servicer and The Bank of Nova Scotia, as Agent.
10.8 Receivables Purchase Agreement, dated as of September 30, 1998, among
Warnaco Operations Corporation, as Seller, Gregory Street, Inc., as
Servicer, Liberty Street Funding Corp. and Corporate Asset Funding
Company, Inc., as Investors and The Bank of Nova Scotia, as Agent, and
Citicorp North America, Inc., as Co-Agent.
27.1 -- Financial Data Schedule
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the third quarter of fiscal
1998.
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<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
THE WARNACO GROUP, INC.
Date: November 17, 1998 By: /s/ WILLIAM S. FINKELSTEIN
---------------------------------
William S. Finkelstein
Director, Senior Vice President
and Chief Financial Officer
Principal Financial and
Accounting Officer
Date: November 17, 1998 By: /s/ STANLEY P. SILVERSTEIN
--------------------------------
Stanley P. Silverstein
Vice President, General Counsel
and Secretary
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<PAGE>
<PAGE>
[Exhibit 10.4]
- - --------------------------------------------------------------------------
AMENDED AND RESTATED
MASTER AGREEMENT OF SALE
Dated as of September 30, 1998
between
WARNACO INC.,
as Originator
and
GREGORY STREET, INC.,
as Buyer and as Servicer
- - --------------------------------------------------------------------------
<PAGE>
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
PURCHASES AND SALES
<TABLE>
<S> <C> <C>
1.1. Purchases and Sales.......................................2
1.2. Timing of Purchases.......................................3
1.3. Consideration for Purchases...............................3
1.4. Purchase and Sale Termination Date........................3
1.5. Intention of the Parties..................................3
</TABLE>
ARTICLE II
CALCULATION OF PURCHASE PRICE
<TABLE>
<S> <C> <C>
2.1. Calculation of Purchase Price.............................4
</TABLE>
ARTICLE III
PAYMENT OF PURCHASE PRICE
<TABLE>
<S> <C> <C>
3.1. Payment of Purchase Price.................................6
3.2. Settlement as to Specific Receivables.....................6
3.3. Reconveyance of Receivables...............................7
</TABLE>
i
<PAGE>
<PAGE>
ARTICLE IV
CONDITIONS OF PURCHASES
<TABLE>
<S> <C> <C>
4.1. Conditions Precedent to this Agreement and the
Initial Purchase..........................................8
4.2. Certification as to Representations and Warranties........8
</TABLE>
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE ORIGINATOR
<TABLE>
<S> <C> <C>
5.1. Representations and Warranties; Covenants.................9
</TABLE>
ARTICLE VI
ADDITIONAL RIGHTS AND OBLIGATIONS IN RESPECT
OF THE RECEIVABLES
<TABLE>
<S> <C> <C>
6.1. Rights of the Buyer.......................................9
6.2. Responsibilities of the Originator........................9
6.3. Further Action Evidencing Purchases......................10
6.4. Application of Collections...............................11
</TABLE>
ARTICLE VII
PURCHASE AND SALE TERMINATION EVENTS
<TABLE>
<S> <C> <C>
7.1. Purchase and Sale Termination Events.....................12
7.2. Remedies.................................................13
</TABLE>
ii
<PAGE>
<PAGE>
ARTICLE VIII
INDEMNIFICATION
<TABLE>
<S> <C> <C>
8.1. Indemnities by the Originator............................14
</TABLE>
ARTICLE IX
MISCELLANEOUS
<TABLE>
<S> <C> <C>
9.1. Amendments, etc..........................................16
9.2. Notices, etc.............................................16
9.3. No Waiver; Cumulative Remedies...........................17
9.4. Binding Effect; Assignability............................17
9.5. Costs, Expenses and Taxes................................17
9.6. Governing Law and Jurisdiction...........................17
9.7. Waiver of Jury Trial.....................................18
9.8. Headings.................................................18
9.9. Execution in Counterparts................................18
9.10. Acknowledgment and Agreement............................18
</TABLE>
SCHEDULES
<TABLE>
<S> <C>
SCHEDULE I Office Locations
SCHEDULE II Trade Names
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A Form of Purchase Report
EXHIBIT B Representations and Warranties
EXHIBIT C Covenants
</TABLE>
iii
<PAGE>
<PAGE>
AMENDED AND RESTATED
MASTER AGREEMENT OF SALE
THIS AMENDED AND RESTATED MASTER AGREEMENT OF SALE (as
amended, supplemented or otherwise modified and in effect from time to time,
this "Agreement"), dated as of September 30, 1998, is between WARNACO INC., a
Delaware corporation (together with its successors and assigns, "Warnaco"), as
originator (together with its successors and assigns in such capacities, the
"Originator") and GREGORY STREET, INC., a Delaware corporation (together with
its successors and assigns in such capacities, "Gregory Street"), as buyer
(together with its successors and assigns in such capacity, the "Buyer") and as
servicer (together with its successors and assigns in such capacity, the
"Servicer").
Definitions
Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in, or incorporated by reference
into, the Purchase and Sale Agreement of even date herewith (as amended,
supplemented or otherwise modified and in effect from time to time, the
"Purchase and Sale Agreement"), between Gregory Street and Warnaco Operations
Corporation, a Delaware corporation (together with its successors and assigns,
"Warnaco Operations").
Recitals
1. The parties hereto wish to amend and restate that certain
Master Agreement of Sale, dated as of January 5, 1997, between the Originator
and the Buyer on the terms and conditions set forth herein.
2. The Originator wishes to continue selling certain
Receivables and Related Rights (collectively, the "Transferred Assets") from
time to time to the Buyer, and the Buyer is willing, on the terms and subject to
the conditions set forth herein, to purchase such Receivables and Related Rights
from the Originator.
3. The Buyer intends to sell to Warnaco Operations the
Purchased Assets acquired hereunder pursuant to the Purchase and Sale
Agreement in order to finance in part its purchases of Purchased Assets
hereunder.
NOW, THEREFORE, in consideration of the premises and the
mutual agreements herein contained, the parties hereto agree as follows:
<PAGE>
<PAGE>
ARTICLE I
PURCHASES AND SALES
1.1. Purchases and Sales. On the terms and subject to the
conditions set forth in this Agreement (including Article IV), and in
consideration of the Purchase Price, the Originator agrees to sell to the Buyer,
and does hereby sell to the Buyer, and the Buyer agrees to purchase from the
Originator, and does hereby purchase from the Originator, without recourse and
without regard to collectibility, all of the Originator's right, title and
interest in, to and under:
(a) each Receivable in existence and owned by the
Originator as of the close of the Originator's business on the Closing Date;
(b) each Receivable generated by the Originator from the close
of the Originator's business on the Closing Date to and including the Purchase
and Sale Termination Date;
(c) all rights to, but not the obligations under, all
Related Security;
(d) all monies due or to become due with respect to any
of the foregoing;
(e) all books and records related to any of the foregoing; and
(f) all proceeds thereof (as defined in the applicable UCC)
received on or after the date hereof including, without limitation, all funds
which either are received by the Originator or the Servicer from or on behalf of
the Obligors in payment of any amounts owed (including, without limitation,
finance charges, interest and all other charges) in respect of Receivables, or
are applied to such amounts owed by the Obligors.
All purchases hereunder shall be made without recourse, but
shall be made pursuant to and in reliance upon the representations, warranties
and covenants of the Originator set forth in this Agreement and each other
Transaction Document. The Buyer's foregoing commitment to purchase such
Receivables (the "Purchased Receivables") and the proceeds and rights described
in subsections (c) through (f) of this Section 1.1 (collectively, the "Related
Rights") is herein called the "Purchase Facility".
2
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1.2. Timing of Purchases. The Originator's entire right, title
and interest in (i) each Receivable in existence and owned by the Originator as
of the close of the Originator's business on the Closing Date and (ii) all
Related Rights with respect thereto shall be deemed to have been sold to the
Buyer on the Closing Date. After the Closing Date, each Receivable owned by the
Originator and all Related Rights shall be sold and assigned to the Buyer
(without any further action) upon the creation of such Receivable by the
Originator.
1.3. Consideration for Purchases. On the terms and subject to
the conditions set forth in this Agreement, the Buyer agrees to make all
Purchase Price payments to the Originator in accordance with Article III.
1.4. Purchase and Sale Termination Date. The "Purchase and
Sale Termination Date" shall be the earlier to occur of (a) the date of the
termination of this Agreement pursuant to Section 7.2 and (b) the Payment Date
immediately following the day on which the Originator shall have given notice to
the Buyer (with a copy to the Agent) that the Originator desires to terminate
this Agreement. As used herein, "Payment Date" means (i) the Closing Date and
(ii) each Business Day thereafter that the Originator is open for business.
1.5. Intention of the Parties. It is the express intent of the
parties hereto that the transfers of the Receivables and Related Rights by the
Originator to the Buyer, as contemplated by this Agreement be, and be treated
as, sales and not as loans secured by the Receivables and Related Rights. If,
however, notwithstanding the intent of the parties, such transfers are deemed to
be loans, the Originator hereby grants to the Buyer a first priority security
interest in all of the Originator's right, title and interest in and to the
Receivables and the Related Rights now existing and hereafter created, all
monies due or to become due and all amounts received with respect thereto, and
all proceeds thereof, to secure all of the Originator's obligations hereunder.
3
<PAGE>
<PAGE>
ARTICLE II
CALCULATION OF PURCHASE PRICE
2.1. Calculation of Purchase Price. On each Monthly Report
Date, the Servicer shall deliver to the Buyer, the Agent and the Co-Agent a
report in substantially the form of Exhibit A (each such report being herein
called a "Purchase Report") with respect to the matters set forth therein and
the Buyer's purchases of Purchased Assets from the Originator that:
(a) are to be made on the Closing Date (in the case of the
Purchase Report to be delivered on the Closing Date), or
(b) were made during the period commencing on the Monthly
Report Date immediately preceding such Monthly Report Date to (but not
including) such Monthly Report Date (in the case of each subsequent Monthly
Report).
The "Purchase Price" (to be paid by the Buyer to the
Originator in accordance with the terms of Article III) for any Purchased Assets
that are acquired by the Buyer hereunder shall be equal to (i) the Net Face
Amount of the Purchased Assets minus (ii) the Factoring Charge related thereto.
As used herein:
"Net Face Amount" shall mean, with respect to any
Purchased Asset, the face amount of such Purchased Asset less all Trade
Discounts, if applicable, and less an established rate for chargebacks
of eight percent (8%).
"Factoring Charge" shall mean, with respect to any
Purchased Asset, an amount equal to the sum of (i) the product of (x)
the Net Face Amount of such Purchased Asset multiplied by (y) seven
percent (7%) divided by Accounts Receivable Turns plus (ii) the Net
Face Amount of such Purchased Asset multiplied by a seventy-five one
hundredth (0.75) percent administration charge.
"Accounts Receivable Turns" shall be six (6) for
Accounting Year 1998 or as otherwise agreed upon between the Originator
and the Buyer (with notice to the Agent and the Co-Agent).
4
<PAGE>
<PAGE>
"Accounting Year" shall mean the 52-53 week year
which the Originator and the Buyer shall agree upon, which year shall
always end on a Saturday.
"Trade Discounts" shall mean, with respect to any
Purchased Asset, all predetermined discounts extended by the Originator
to the Originator's customers for any reason whatsoever.
5
<PAGE>
<PAGE>
ARTICLE III
PAYMENT OF PURCHASE PRICE
3.1. Payment of Purchase Price. On the terms and subject to
the conditions set forth in this Agreement, the Buyer agrees to pay to the
Originator (i) on the Closing Date, the Purchase Price for all Purchased Assets
in existence and owned by the Originator at the close of business of the
Originator on the Closing Date and (ii) on each Business Day after the Closing
Date, the Purchase Price for all Purchased Assets with respect to which a sale
is made to the Buyer hereunder.
3.2. Settlement as to Specific Receivables and Dilution.
(a) If on the day of purchase of any Receivable from the
Originator hereunder, any of the representations or warranties of the Originator
set forth in paragraph (d), (g) or (z) of Exhibit B is not true with respect to
such Receivable or as a result of any action or inaction of the Originator, on
any day any of such representations or warranties set forth in paragraph (d),
(g) or (z) is no longer true with respect to such a Receivable, then the
Purchase Price with respect to such Receivables shall be reduced by an amount
equal to the Outstanding Balance of such Receivable and shall be accounted to
the Originator as provided in subsection (c) below; provided that if the Buyer
thereafter receives payment on account of Collections due with respect to such
Receivable, the Buyer promptly shall deliver such funds to the Originator.
(b) If, on any day, the Outstanding Balance of any Receivable
purchased hereunder is reduced or adjusted as a result of any defective,
rejected, returned goods or services, or any discount or other adjustment made
by the Originator, the Buyer or the Servicer or any offset, setoff or dispute
between the Originator or the Servicer and an Obligor as indicated on the books
of the Buyer (or, for periods prior to the Closing Date, the books of the
Originator), then the Purchase Price with respect to such Receivable shall be
reduced by the amount of such net reduction and shall be accounted to the
Originator as provided in subsection (c) below.
(c) Any reduction in the Purchase Price of any Receivable
pursuant to subsection (a) or (b) above shall be applied as a credit for the
account of the Buyer against the Purchase Price of Receivables subsequently
purchased by the Buyer from the Originator hereunder; provided, however, if
there are no purchases of Receivables from the Originator (or insufficiently
large purchases of Receivables) to
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create a Purchase Price sufficient to so apply such credit against, the amount
of such credit shall be paid in cash to the Buyer by the Originator in the
manner to be determined at such time between the Buyer and the Originator;
provided, further, that at any time (y) when a Termination Event or Unmatured
Termination Event exists under the Receivables Purchase Agreement or (z) on or
after the Purchase and Sale Termination Date, the amount of any such credit
shall be paid by the Originator to the Buyer by deposit in immediately available
funds into the Collection Account for application by the Servicer to the same
extent as if Collections of the applicable Receivable in such amount had
actually been received on such date.
(d) Each Purchase Report (other than the Purchase Report
delivered on the Closing Date) shall include, in respect of the Receivables
purchased by the Originator, a calculation of the aggregate reductions described
in subsection (a) or (b) relating to such Receivables since the last Purchase
Report delivered hereunder, as indicated on the books of the Buyer (or, for such
period prior to the Closing Date, the books of the Originator).
3.3. Reconveyance of Receivables. In the event that the
Originator has paid to the Buyer the full Outstanding Balance of any Receivable
pursuant to Section 3.2, the Buyer shall reconvey such Receivable to the
Originator, without representation or warranty, but free and clear of all liens
created by the Buyer.
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ARTICLE IV
CONDITIONS OF PURCHASES
4.1. Conditions Precedent to this Agreement and the Initial
Purchase. The effectiveness of this Agreement and the purchase hereunder of the
Receivables in existence on the Closing Date are each subject to the conditions
precedent that the Buyer shall have received, in form and substance satisfactory
to the Buyer, the following (the date on which such conditions have been
satisfied in full, the "Closing Date"):
(a) This Agreement, the Purchase and Sale Agreement and the
Receivables Purchase Agreement, duly executed by the parties thereto, together
with evidence that all conditions precedent thereunder shall have been met; and
(b) Such other agreements, instruments, certificates, opinions
and other documents as the Buyer shall reasonably request.
Payment by the Buyer of the Purchase Price for the Receivables
in existence at the close of business of the Originator on the Closing Date
shall be deemed to be the Buyer's agreement that all such conditions precedent
have been satisfied or waived.
4.2. Certification as to Representations and Warranties. The
Originator, by accepting the Purchase Price related to each purchase of
Purchased Assets, shall be deemed to have certified that the representations and
warranties contained in Exhibit B are true and correct on and as of such day,
with the same effect as though made on and as of such day.
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ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE ORIGINATOR
5.1. Representations and Warranties; Covenants. In order to
induce the Buyer to enter into this Agreement and to make purchases hereunder,
the Originator hereby makes the representations and warranties and hereby agrees
to perform and observe the covenants set forth in Exhibits B and C,
respectively.
ARTICLE VI
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE RECEIVABLES
6.1. Rights of the Buyer. The Originator hereby authorizes the
Buyer and the Servicer or their respective designees to take any and all steps
in the Originator's name necessary or desirable, in their respective
determination, to collect all amounts due under any and all Receivables and
Related Rights, including, without limitation, endorsing the Originator's name
on checks and other instruments representing Collections and enforcing such
Receivables and the provisions of the related Contracts that concern payment
and/or enforcement of rights to payment.
Upon acquisition by the Buyer of any Transferred Asset, the
Buyer shall become entitled to all of the ownership, title, right, securities or
guaranties possessed by the Originator in respect to such Transferred Assets,
including the right to stoppage-in-transit and to replevin in any of the
merchandise covered by such Transferred Assets including, but not limited to,
any and all of the merchandise that may be rejected, returned, or reconsigned
and in any new claim or account created through the resale or exchange of
merchandise and including the right to collect and receive all moneys due
thereunder.
6.2. Responsibilities of the Originator. Anything herein to
the contrary notwithstanding:
(a) The Originator agrees to (A) direct, and hereby grants to
each of the Buyer and its assignees the authority to direct, all Obligors of
Receivables purchased by the Buyer to make payments of such Receivables directly
to the Collection Account or to post office boxes to which only the Collection
Account
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Bank has access, and (B) to transfer any Collections that it receives directly,
into the Collection Account within two (2) Business Days of receipt thereof, and
agrees that all such Collections shall be deemed to be received in trust for the
Buyer.
(b) The Originator shall perform its obligations hereunder,
and the exercise by the Buyer or its assignees of their respective rights
hereunder shall not relieve the Originator from such obligations.
(c) None of the Buyer, the Servicer or any assignee of the
Buyer shall have any obligation or liability to any Obligor or any other third
party with respect to any Receivables, Contracts related thereto or any other
related agreements, nor shall the Buyer, the Servicer or any assignee of the
Buyer be obligated to perform any of the obligations of the Originator
thereunder.
(d) The Originator hereby grants to the Buyer, the Servicer
and the assignees of the Buyer an irrevocable power of attorney, with full power
of substitution, coupled with an interest, to take in the name of the Originator
all steps necessary or advisable to indorse, negotiate or otherwise realize on
any writing or other right of any kind held or transmitted by the Originator or
transmitted or received by the Buyer (whether or not from the Originator) in
connection with any Receivable or Related Right.
6.3. Further Action Evidencing Purchases. The Originator
agrees that from time to time, at its expense, it will promptly execute and
deliver all further instruments and documents, and take all further action that
the Buyer or the Servicer may reasonably request in order to perfect, protect or
more fully evidence the Receivables (and the Related Rights) purchased by the
Buyer hereunder, or to enable the Buyer to exercise or enforce any of its rights
hereunder or under any other Transaction Document. Without limiting the
generality of the foregoing, upon the request of the Buyer, the Originator will
(a) execute and file such financing or continuation statements, or amendments
thereto or assignments thereof, and such other instruments or notices, as may be
necessary or appropriate and (b) mark the summary master control data processing
records with a legend indicating that the Purchased Assets have been sold to the
Buyer and subsequently sold by the Buyer under the Purchase and Sale Agreement.
The Originator hereby authorizes the Buyer or its assignees to
file one or more financing or continuation statements, and amendments thereto
and assignments thereof, relative to all or any of the Receivables (and the
Related Rights) now owned by or hereafter acquired by the Originator. If the
Originator fails to perform any of its agreements or obligations under this
Agreement, the Buyer or its
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assignees may (but shall not be required to) itself perform, or cause
performance of, such agreement or obligation, and the expenses of the Buyer or
its assignees incurred in connection therewith shall be payable by the
Originator as provided in Section 8.1.
In furtherance of the foregoing, upon written request of
Buyer, the Originator agrees to furnish the Buyer with originals or copies of
any invoices or evidence of shipment of goods underlying the Purchased Assets.
6.4. Application of Collections. Any payment by an Obligor in
respect of any indebtedness owed by it to the Originator shall, except as
otherwise specified by such Obligor or otherwise required by contract or law and
unless otherwise instructed by the Buyer or the Administrator, be applied first,
as a Collection of any Receivables of such Obligor, in the order of the age of
such Receivables, starting with the oldest of such Receivables, and second, to
any other indebtedness of such Obligor.
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ARTICLE VII
PURCHASE AND SALE TERMINATION EVENTS
7.1. Purchase and Sale Termination Events. Each of the
following events or occurrences described in this Section 8.1 shall constitute a
"Purchase and Sale Termination Event":
(a) A Purchase and Sale Termination Event under the Purchase
and Sale Agreement shall have occurred; or
(b) The Originator shall fail to make when due any payment or
deposit to be made by the Originator under this Agreement within three (3)
Business Days of the date on which such payment or deposit is due; or
(c) Any representation or warranty made or deemed to be made
by the Originator (or any of its officers) under or in connection with this
Agreement, any other Transaction Document or any other information or report
delivered pursuant hereto or thereto shall prove to have been incorrect or
untrue in any material respect when made or deemed made or delivered; or
(d) The Originator shall fail to perform or observe in any
material respect any other term, covenant or agreement contained in this
Agreement on its part to be performed or observed and such failure shall remain
unremedied for thirty (30) days after the Originator shall have obtained actual
knowledge or notice thereof; or
(e)(i) The Originator shall generally not pay its debts as
such debts become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors; or
any proceeding shall be instituted by or against the Originator seeking to
adjudicate it a bankrupt or insolvent, or seeking liquidation, winding up,
reorganization, arrangement, adjustment, protection, relief, or composition of
it or its debts under any law relating to bankruptcy, insolvency or
reorganization or relief of debtors, or seeking the entry of an order for relief
or the appointment of a receiver, trustee, or other similar official for it or
for all or any substantial part of its property and, in the case of any such
proceeding instituted against it (but not instituted by it), such proceeding
shall remain undismissed or unstayed for a period of 60 days, or any of the
actions sought in such proceeding (including the entry of an order for relief
against, or the appointment of a receiver, trustee, custodian or other similar
official for, it or for any
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substantial part of its property) shall occur; or (ii) the Originator shall take
any corporate action to authorize any of the actions set forth in clause (i)
above in this Section 7.1(e); or
(f) either: (i) a contribution failure shall occur with
respect to any Benefit Plan sufficient to give rise to a lien under Section
302(f) of ERISA, (ii) the Internal Revenue Service shall file a notice of a lien
asserting a claim or claims pursuant to the Internal Revenue Code with regard to
any of the assets of the Originator or any ERISA Affiliate, or (iii) the Pension
Benefit Guaranty Corporation shall file notice of a lien asserting a claim
pursuant to ERISA with regard to any assets of the Originator or an ERISA
Affiliate.
(g) There shall have occurred any event that would, with the
giving of notice or the passing of time or both, have a Material Adverse Effect.
7.2. Remedies.
(i) Optional Termination. Upon the occurrence of a
Purchase and Sale Termination Event, the Buyer shall have the option by
notice to the Originator (with a copy to Warnaco Operations and the
Agent) to declare the Purchase and Sale Termination Date to have
occurred.
(ii) Remedies Cumulative. Upon any termination of the
Purchase Facility pursuant to this Section 7.2, the Buyer shall have,
in addition to all other rights and remedies under this Agreement or
otherwise, all other rights and remedies provided under the UCC of each
applicable jurisdiction and other applicable laws, which rights shall
be cumulative.
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ARTICLE VIII
INDEMNIFICATION
8.1. Indemnities by the Originator. Without limiting any other
rights which the Buyer or any Purchase and Sale Indemnified Party may have
hereunder or under applicable law, the Originator hereby agrees to indemnify the
Buyer and each of its assigns, officers, directors, employees and agents (each
of the foregoing Persons being individually called a "Purchase and Sale
Indemnified Party"), forthwith on demand, from and against any and all claims,
damages, expenses, costs, losses and liabilities (including Attorney Costs) (all
of the foregoing being collectively referred to as "Purchase and Sale
Indemnified Amounts") awarded against or incurred by any of them arising out of
or resulting from this Agreement (whether directly or indirectly), the use of
the proceeds acquired by the Originator hereunder, the ownership of the
Receivables and Related Rights or in respect of any Receivable, Related Security
or Contract (other than with respect to the collectibility of the Receivables
for credit-related reasons). Without limiting or being limited by the foregoing,
and subject to the exclusions set forth below, the Originator shall pay on
demand to each Purchase and Sale Indemnified Party any and all amounts necessary
to indemnify such party from and against any and all Purchase and Sale
Indemnified Amounts resulting from any of the following:
(a) the transfer by the Originator of an interest in any
Receivable or Related Right to any Person other than the Buyer;
(b) the breach of any representation or warranty made by the
Originator under or in connection with this Agreement or any other Transaction
Document, or any information or report delivered by the Originator pursuant
hereto or thereto which shall have been false or incorrect in any respect when
made or deemed made;
(c) the failure by the Originator to comply with any
applicable law, rule or regulation with respect to any Receivable or the related
Contract, or the nonconformity of any Receivable or the related Contract with
any such applicable law, rule or regulation;
(d) the failure to vest and maintain vested in the Buyer an
ownership interest in the Receivables and the Related Rights free and clear of
any Adverse Claim;
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(e) the failure of the Originator to file with respect to
itself, or any delay by the Originator in filing, financing statements or other
similar instruments or documents under the UCC of any applicable jurisdiction or
other applicable laws with respect to any Receivables or purported Receivables
or any Related Rights, whether at the time of any purchase or at any subsequent
time;
(f) any dispute, claim, offset or defense (other than
discharge in bankruptcy) of the Obligor to the payment of any Receivable or
purported Receivable (including, without limitation, a defense based on such
Receivable or the related Contract not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with its terms),
or any other claim resulting from the goods or services related to any such
Receivable or the furnishing of or failure to furnish such goods or services;
(g) any product liability claim arising out of or in
connection with goods or services that are the subject of any Receivable;
(h) any litigation, proceeding or investigation against the
Originator;
(i) any tax or governmental fee or charge (other than any tax
excluded pursuant to the proviso below), all interest and penalties thereon or
with respect thereto, and all out-of-pocket costs and expenses, including the
reasonable fees and expenses of counsel in defending against the same, which may
arise by reason of the purchase or ownership of the Receivables or any Related
Right connected with any such Receivables; and
(j) any failure of the Originator to perform its duties or
obligations in accordance with the provisions of this Agreement or any other
Transaction Document;
excluding, however, (i) Purchase and Sale Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part of a Purchase
and Sale Indemnified Party, (ii) any indemnification which has the effect of
recourse for non-payment of the Receivables due to credit reasons to any
indemnitor (except as otherwise specifically provided under this Section 8.1)
and (iii) any tax based upon or measured by net income or gross receipts.
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ARTICLE IX
MISCELLANEOUS
9.1. Amendments, etc.
(a) The provisions of this Agreement may from time to time be
amended, modified or waived, if such amendment, modification or waiver is in
writing and consented to by the Buyer, the Servicer, the Agent and the
Originator (with respect to an amendment) or by the Buyer (with respect to a
waiver or consent by it).
(b) No failure or delay on the part of the Buyer, the
Servicer, the Originator or any third-party beneficiary in exercising any power
or right hereunder 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 Buyer, the Servicer or the Originator in any case shall entitle it
to any notice or demand in similar or other circumstances. No waiver or approval
by the Buyer or Servicer under this Agreement shall, except as may otherwise be
stated in such waiver or approval, be applicable to subsequent transactions. No
waiver or approval under this Agreement shall require any similar or dissimilar
waiver or approval thereafter to be granted hereunder.
9.2. Notices, etc. All notices and other communications
provided for hereunder shall, unless otherwise stated herein, be in writing
(which shall include facsimile communication) and be sent or delivered to each
party hereto at its address set forth below or at such other address as shall be
designated by such party in a written notice to the other parties hereto.
Notices and communications by facsimile shall be effective when sent (and shall
be followed by hard copy sent by first-class mail) and notices and
communications sent by other means shall be effective when received.
If to the Buyer:
GREGORY STREET, INC.
325 Lafayette Street
Bridgeport, Connecticut 06601
Attention: Carl J. Deddens, Assistant Treasurer
Telephone: (203) 579-8040
Telecopy: (203) 334-6621
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If to the Originator:
WARNACO INC.
90 Park Avenue, 26th Floor
New York, New York 10016
Attention: Stanley P. Silverstein
Telephone: (212) 370-8455
Telecopy: (212) 687-0480
9.3. No Waiver; Cumulative Remedies. The remedies herein
provided are cumulative and not exclusive of any remedies provided by law.
9.4. Binding Effect; Assignability. This Agreement shall be
binding upon and inure to the benefit of the Buyer and the Originator and their
respective successors and permitted assigns; provided, however, that the
Originator may not assign its rights hereunder or any interest herein or
delegate its duties hereunder without the prior consent of the Buyer and the
Agent. This Agreement shall create and constitute the continuing obligations of
the parties hereto in accordance with its terms, and shall remain in full force
and effect until the date after the Purchase and Sale Termination Date on which
the Originator has received payment in full for all Receivables and Related
Rights purchased pursuant to Section 1.1 hereof. The rights and remedies with
respect to any breach of any representation and warranty made by the Originator
pursuant to Article V and the indemnification and payment provisions of Article
VIII and Section 9.5 shall be continuing and shall survive any termination of
this Agreement.
9.5. Costs, Expenses and Taxes. In addition to the obligations
of the Originator under Article XIII, the Originator agrees to pay on demand:
(a) all reasonable costs and expenses in connection with the
enforcement of this Agreement and the other Transaction Documents; and
(b) all stamp and other similar taxes and fees payable or
determined to be payable in connection with the execution, delivery, filing and
recording of this Agreement or the other Transaction Documents, and agrees to
indemnify each Purchase and Sale Indemnified Party against any liabilities with
respect to or resulting from any delay in paying or omission to pay such taxes
and fees.
9.6. Governing Law and Jurisdiction. This Agreement shall be
deemed to be a contract made under and governed by the internal laws of the
State of
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New York (including for such purpose Sections 5-1401 and 5-1402 of the General
Obligations Law of the State of New York) except to the extent that the validity
or perfection of a security interest or remedies hereunder, in respect of any
particular collateral are governed by the laws of a jurisdiction other than the
State of New York.
9.7. Waiver of Jury Trial. Each of the parties hereto waives
its rights to a trial by jury of any claim or cause of action based upon or
arising out of or related to this agreement or the transactions contemplated
hereby in any action, proceeding or other litigation of any type brought by any
of the parties against any other party or parties, whether with respect to
contract claims, tort claims or otherwise. Each of the parties hereto agrees
that any such claim or cause of action shall be tried by a court trial without a
jury. Without limiting the foregoing, each of the parties hereto further agrees
that its respective right to a trial by jury is waived by operation of this
section as to any action, counterclaim or other proceeding that seeks, in whole
or in part, to challenge the validity or enforceability of this agreement or any
provision hereof. This waiver shall apply to any subsequent amendments,
renewals, supplements or modifications to this agreement.
9.8. Headings. The captions and headings of this Agreement and
any Exhibit, Schedule or Annex hereto are for convenience of reference only and
shall not affect the interpretation hereof or thereof.
9.9. Execution in Counterparts. This Agreement may be executed
in any number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an original
and all of which when taken together shall constitute one and the same
Agreement.
9.10. Acknowledgment and Agreement. By execution below, the
Originator expressly acknowledges and agrees that all of the Buyer's rights,
title, and interests in, to, and under this Agreement shall be assigned by the
Buyer to Warnaco Operations pursuant to the Purchase and Sale Agreement, and the
Originator consents to such assignment. Each of the parties hereto acknowledges
and agrees that Warnaco Operations is a third-party beneficiary of the rights of
the Buyer arising hereunder and under the other Transaction Documents to which
the Originator is a party.
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IN WITNESS WHEREOF, the parties have caused this Amended and
Restated Master Agreement of Sale to be executed by their respective officers
thereunto duly authorized, as of the date first above written.
WARNACO INC.,
as Originator
By: /s/ William S. Finkelstein
----------------------------
Name: William S. Finkelstein
Title: Senior Vice President and
Chief Financial Officer
GREGORY STREET, INC., as Buyer and
as Servicer
By: /s/ Carl J. Deddens
---------------------
Name: Carl J. Deddens
Title: Assistant Treasurer
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SCHEDULE I
OFFICE LOCATIONS
90 Park Avenue, 26th Floor
New York, New York 10016
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SCHEDULE II
TRADE NAMES
Calvin Klein Mens Underwear
Calvin Klein Womens Underwear/Sleepwear
Chaps Sportswear & Dress
Warners Intimate Apparel
Olga Intimate Apparel
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EXHIBIT A
[FORM OF PURCHASE REPORT]
A-1
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EXHIBIT B
REPRESENTATIONS AND WARRANTIES
1. Representations and Warranties of the Originator. The
Originator represents and warrants as follows:
(a) The Originator is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, and is
duly qualified to do business and is in good standing as a foreign corporation
in every jurisdiction where the nature of its business requires it to be so
qualified, except where the failure to be so qualified would not have a Material
Adverse Effect.
(b) The execution, delivery and performance by the Originator
of this Agreement and the other Transaction Documents to which it is a party:
(i) are within its corporate powers; (ii) have been duly authorized by all
necessary corporate action; (iii) do not contravene in any material respect or
result in a default under or conflict with: (A) its charter or by-laws, (B) any
law, rule or regulation applicable to it, (C) any indenture, loan agreement,
mortgage, deed of trust or other agreement or instrument to which it is a party
or by which it is bound, or (D) any law or any order, writ, judgment, award,
injunction or decree binding on or affecting it or any of its property; and (iv)
do not result in or require the creation of any Adverse Claim upon or with
respect to any of its properties. The Agreement and the other Transaction
Documents to which it is a party have been duly executed and delivered by the
Originator.
(c) No authorization, approval or other action by, and no
notice to or filing with, any Governmental Authority or other Person is required
for the due execution, delivery and performance by the Originator of the
Agreement or any other Transaction Document to which it is a party, other than
the Uniform Commercial Code filings referred to in Exhibit II to the Receivables
Purchase Agreement, all of which shall have been filed on or before the date of
the first purchase hereunder.
(d) Each sale of Receivables and Related Rights made by the
Originator pursuant to this Agreement shall constitute a valid sale, transfer
and assignment thereof to the Buyer, enforceable against creditors of, and
purchasers from, the Originator; and each of the Agreement and the other
Transaction Documents to which the Originator is a party constitutes its legal,
valid and binding obligation of the Originator enforceable against the
Originator in accordance with its terms, except as such enforceability may be
limited by bankruptcy, insolvency,
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reorganization or other similar laws from time to time in effect affecting the
enforcement of creditors' rights generally and by general principles of equity,
regardless of whether such enforceability is considered in a proceeding in
equity or at law.
(e) There is no litigation or, to the Originator's knowledge,
any proceeding or investigation pending before any court, regulatory body,
arbitrator, administrative agency, or other tribunal or governmental
instrumentality (a) asserting the invalidity of any Transaction Document, (b)
seeking to prevent the sale of Receivables and Related Rights to the Buyer or
the consummation of any of the other transactions contemplated by any
Transaction Document or (c) seeking any determination or ruling that could
reasonably be expected to have a Material Adverse Effect.
(f) No proceeds acquired by the Originator under this
Agreement will be used by the Originator to acquire any equity security of a
class that is registered pursuant to Section 12 of the Securities Exchange Act
of 1934.
(g) The Originator is the legal and beneficial owner of each
Receivable (together with the Related Rights) which is to be sold to the Buyer
hereunder, free and clear of any Adverse Claim. Whenever the Buyer makes a
purchase hereunder, it shall have acquired a valid and enforceable perfected
ownership interest in such Receivable and in the Related Security, Collections
and other proceeds with respect thereto, free and clear of any Adverse Claim. No
effective financing statement or other instrument similar in effect covering any
such Receivable is on file in any recording office, except those filed in favor
of (A) the Buyer pursuant to this Agreement, (B) Warnaco Operations pursuant to
the Purchase and Sale Agreement and (C) the Agent pursuant to the Receivables
Purchase Agreement.
(h) Each Purchase Report (if prepared by the Originator or one
of its Affiliates, or to the extent that information contained therein is
supplied by the Originator or an Affiliate), information, exhibit, financial
statement, document, book, record or report furnished or to be furnished at any
time by or on behalf of the Originator to the Agent in connection with the
Agreement or any other Transaction Document to which it is a party is or will be
complete and accurate in all material respects as of its date or as of the date
so furnished.
(i) The Originator's principal place of business and chief
executive office (as such terms are used in the UCC) is located at the address
set forth in Section 9.2 hereof, and the office where it keeps its records
concerning the
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Receivables are located at the address specified on Schedule I (or at such other
locations, notified to Servicer and the Agent in accordance with paragraph 1(b)
of Exhibit C, where all actions required by Section 6.3 of this Agreement have
been taken and completed).
(j) The Originator is not in violation of any order of any
court, arbitrator or Governmental Authority, the violation of which would have a
Material Adverse Effect on the Originator.
(k) No proceeds acquired by the Originator under this
Agreement will be used for any purpose that violates any applicable law, rule or
regulation, including Regulations T, U or X of the Federal Reserve Board.
(l) Unless otherwise identified to the Buyer in the related
Purchase Report, each Receivable sold hereunder is on the date of sale an
Eligible Receivable.
(m) No transaction contemplated hereby acquires compliance
with any sales bulk act or similar law.
(n) The Originator has complied in all material respects with
the Credit and Collection Policy.
(o) The Originator has complied in all material respects with
all of the terms, covenants and agreements contained in the Agreement and the
other Transaction Documents that are applicable to it.
(p) The Originator's complete corporate name is set forth in
the preamble to the Agreement, and it does not use and has not since its
incorporation used any other corporate name, trade name, doing-business name or
fictitious name, except as set forth on Schedule II to this Agreement.
(q) The Originator is not an "investment company," or a
company "controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. In addition, the Originator is not a
"holding company," 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.
(r) The Originator has reviewed the areas within its business
and operations which could be adversely affected by, and has developed or is
developing
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<PAGE>
a program to address on a timely basis, the risk that certain computer
applications used by the Originator may be unable to recognize and perform
properly date-sensitive functions involving dates prior to and after December
31, 1999 (the "Year 2000 Problem"). Based on such review and program, the Year
2000 Problem could not reasonably be expected to have any Material Adverse
Effect.
(s) The Originator has filed all material tax returns and
reports required by law to have been filed by it and has paid all taxes and
governmental charges thereby shown to be owing, except any such taxes which are
not yet delinquent or are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
generally accepted accounting principles shall have been set aside on its books.
(t) The Originator has not failed to obtain any licenses,
permits, franchises or other governmental authorizations necessary to the
ownership of its properties or to the conduct of its business, which violation
or failure to obtain would be reasonably likely to have a Material Adverse
Effect, and there are no labor controversies pending against the Originator that
have had (or are reasonably likely to have) a Material Adverse Effect.
(u) The Originator is in compliance, in all material respects,
with the requirements of (i) all applicable laws, rules, regulations, and orders
of all governmental authorities (including, without limitation, Regulation Z,
laws, rules and regulations relating to usury, truth in lending, fair credit
billing, fair credit reporting, equal credit opportunity, fair debt collection
practices and privacy and all other consumer laws applicable to the Receivables
and related Contracts) (excluding with respect to environmental matters which
are covered by clause (ii)), and (ii) to the best of its knowledge, all
applicable environmental laws, rules, regulations and orders of all governmental
authorities.
(v) The Originator is aware that Warnaco Operations, the
Investors, the Agent and the Co-Agent are entering into the Transaction
Documents to which they are parties in reliance upon the Buyer's identity as a
legal entity separate from the Originator.
(w) The purchase price payable by the Buyer to the Originator
hereunder is intended by the Originator and Buyer to be consistent with the
terms that would be obtained in an arm's-length sale.
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(x) On the date hereof, and on the date of each sale of
Receivables by the Originator to the Buyer (both before and after giving effect
to such sale), the Originator shall be Solvent.
(y) The balance sheets of the Originator and its consolidated
Subsidiaries as at January 3, 1998, and the related income and retained earnings
for the fiscal year then ended, copies of which have been furnished to the Agent
and the Co-Agent, fairly present the financial condition of the Originator and
its consolidated Subsidiaries as at such date and the results of the operations
of the Originator and its Subsidiaries for the period ended on such date, all in
accordance with generally accepted accounting principles consistently applied,
and since January 3, 1998 there has been no event or circumstance which has had
a Material Adverse Effect.
(z) At the time of each purchase of Receivables and Related
Rights hereunder by the Buyer, the Originator shall be deemed to represent and
warrant that: (i) it owns all of such Transferred Assets free and clear of any
liens, claims, charges, options, or encumbrances, (ii) each and every account
receivable which is part of the Transferred Assets represents a bona fide sale
covering the kind, quantity, and quality of merchandise stated therein and the
same has been delivered, and there are no counterclaims or offsets against the
amounts shown due on the related account, and the merchandise has not been sold
on consignment nor with any return privilege whatsoever, except defective
merchandise, and (iii) the Originator has no information or reason to suspect
that any Obligor under a Transferred Asset is other than a good financial risk.
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<PAGE>
EXHIBIT C
COVENANTS
1. Covenants of the Originator. From the date hereof until the
first day following the Purchase and Sale Termination Date:
(a) Compliance with Laws, Etc. The Originator shall comply in
all material respects with all applicable laws, rules, regulations and orders,
and preserve and maintain its corporate existence, rights, franchises,
qualifications and privileges, except to the extent that the failure so to
comply with such laws, rules and regulations or the failure so to preserve and
maintain such rights, franchises, qualifications and privileges would not have a
Material Adverse Effect.
(b) Offices, Records and Books of Account, Etc. The
Originator: (i) shall keep its principal place of business and chief executive
office (as such terms or similar terms are used in the UCC) and the office where
it keeps its records concerning the Receivables at the address of the Originator
set forth under its name on the signature page to the Agreement or, upon 30
days' prior written notice to the Buyer and the Agent, at any other locations in
jurisdictions where all actions reasonably requested by the Buyer or its
assignees to protect and perfect the interest of the Buyer in the Receivables
and Related Rights have been taken and completed and (ii) shall provide the
Buyer and its assignees with at least 30 days' written notice before making any
change in the Originator's name or making any other change in the Originator's
identity or corporate structure (including a Change in Control) that could
render any UCC financing statement filed in connection with this Agreement
"seriously misleading" as such term (or similar term) is used in the UCC; each
notice to the Buyer or its assignees pursuant to this sentence shall set forth
the applicable change and the effective date thereof. The Originator also will
maintain and implement (or cause the Servicer to maintain and implement)
administrative and operating procedures (including an ability to recreate
records evidencing Receivables and related Contracts in the event of the
destruction of the originals thereof), and keep and maintain (or cause the
Servicer to keep and maintain) all documents, books, records, computer tapes and
disks and other information reasonably necessary or advisable for the collection
of all Receivables (including records adequate to permit, as and when necessary,
the daily identification of each Receivable and all Collections of and
adjustments to each existing Receivable).
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<PAGE>
(c) Performance and Compliance with Credit and Collection
Policy. The Originator shall fully comply in all material respects with the
Credit and Collection Policy.
(d) Sales, Liens, Etc. The Originator shall not sell, assign
(by operation of law or otherwise) or otherwise dispose of, or create or suffer
to exist any Adverse Claim upon or with respect to, any or all of its right,
title or interest in, to or under any Receivable, Related Rights or Collections,
or upon or with respect to any account to which any Collections of any
Receivables are sent), or assign any right to receive income in respect of any
items contemplated by this paragraph; it being understood that the Servicer may
sell a Defaulted Receivable if the Servicer believes in good faith that such
sale will maximize the amount to be received by the Buyer with respect to such
Receivable.
(e) Change in Credit and Collection Policy. The Originator
shall not make any material change in the character of its business or the
Credit and Collection Policy that would materially adversely affect the
collectibility of the Receivables or the enforceability of any related Contract
or the ability of the Originator to perform its obligations under the Agreement.
(f) Audits. (i) The Originator shall from time to time during
regular business hours as reasonably requested in advance (unless a Purchase and
Sale Termination Event exists) by the Buyer, Warnaco Operations, the Agent or
the Co-Agent, permit the Buyer, Warnaco Operations, the Agent or the Co-Agent,
or their agents or representatives: (A) to examine and make copies of and
abstracts from all books, records and documents (including computer tapes and
disks) in the possession or under the control of the Originator relating to
Receivables and the Related Security, including the related Contracts, and (B)
to visit the offices and properties of the Originator for the purpose of
examining such materials described in clause (i)(A) above, and to discuss
matters relating to Receivables and the Related Security or the Originator's
performance under the Transaction Documents with any of the officers, employees,
agents or contractors of the Originator, having knowledge of such matters; and
(ii) without limiting the provisions of clause (i) next above, from time to time
during regular business hours, upon five Business Days prior written notice from
the Buyer, Warnaco Operations, the Agent or the Co-Agent, permit certified
public accountants or other auditors acceptable to the Buyer, Warnaco
Operations, the Agent or the Co-Agent to conduct a review of the Originator's
books and records, at the Originator's expense, with respect to the Receivables.
(g) Change in Collection Account Bank, Collection Account and
Payment Instructions to Obligors. The Originator shall not, and shall not permit
the
C-2
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<PAGE>
Servicer to, terminate the Collection Account Bank or the Collection Account, or
make any change in its instructions to Obligors regarding payments to be made to
the Originator, such Originator, the Servicer or the Collection Account (or
related post office box), unless the Agent shall have consented thereto in
writing (which consent shall not be unreasonably withheld) and the Agent shall
have received copies of all agreements and documents (including a Collection
Account Agreement) that it may request in connection therewith.
(h) Deposits to Collection Account. The Originator shall (or
shall cause the Servicer to): (i) instruct all Obligors to make payments of all
Receivables to the Collection Account or to post office boxes to which only the
Collection Account Bank has access (and shall instruct the Collection Account
Bank to cause all items and amounts relating to such Receivables received in
such post office boxes to be removed and deposited into the Collection Account
on a daily basis), and (ii) deposit, or cause to be deposited, any Collections
received by it, the Servicer or any Originator into the Collection Account not
later than two (2) Business Days after receipt thereof. The Originator will not
(and will not permit the Servicer to) deposit or otherwise credit, or cause or
permit to be so deposited or credited, to the Collection Account cash or cash
proceeds other than Collections.
(i) Reporting Requirements. The Originator shall provide to
the Buyer and the Agent the following:
(i) As soon as available and in any event within 45
days after the end of each of the first three quarters of each fiscal
year of the Originator, (a) a copy of the unaudited balance sheet of
the Originator, as at the end of such quarter, together with unaudited
statements of earnings, stockholders' equity for such quarter and the
portion of the fiscal year through such quarter, prepared in accordance
with GAAP and certified by the chief financial officer, treasurer or
chief accounting officer of the Originator, and (b) a letter from the
chief financial officer, treasurer or chief accounting officer of the
Originator, certifying to the best knowledge of such officer, that
neither a Purchase and Sale Termination Event nor an Unmatured Purchase
and Sale Termination Event has occurred and is continuing;
(ii) As soon as available and in any event within 90
days after the end of each fiscal year of the Originator, (a) a copy of
the unaudited balance sheet of the Originator, as at the end of such
fiscal year, together with the related statements of earnings,
stockholders' equity for such fiscal year, prepared in accordance with
GAAP applied consistently throughout the periods reflected therein, and
(b) a letter from the chief financial officer,
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<PAGE>
treasurer or chief accounting officer of the Originator, certifying to
the best knowledge of such officer, that neither a Purchase and Sale
Termination Event nor an Unmatured Purchase and Sale Termination Event
has occurred and is continuing, in each case as at the end of each such
fiscal year and the date of delivery of such letter;
(iii) promptly after the filing or receiving thereof,
copies of all reports and notices that the Originator or any Affiliate
files under ERISA with the Internal Revenue Service, the Pension
Benefit Guaranty Corporation or the U.S. Department of Labor or that
the Originator or any Affiliate receives from any of the foregoing or
from any multi-employer plan (within the meaning of Section 4001(a)(3)
of ERISA) to which the Originator or any of its Affiliates is or was,
within the preceding five years, a contributing employer, in each case
in respect of the assessment of withdrawal liability or an event or
condition that could, in the aggregate, result in the imposition of
liability on the Originator and/or any such Affiliate;
(iv) promptly after the Originator obtains knowledge
thereof, notice of any: (A) material litigation, investigation or
proceeding that may exist at any time between the Originator and any
Person or (B) material litigation or proceeding relating to any
Transaction Document;
(v) promptly after the occurrence thereof, notice of
a change in the business, operations, property or financial or other
condition of the Originator or the Servicer which would have a Material
Adverse Effect; and
(vi) such other information respecting the
Receivables or the condition or operations, financial or otherwise, of
the Originator or any of its Affiliates as the Buyer, Warnaco
Operations, the Agent or the Co-Agent may from time to time reasonably
request upon reasonable notice.
(j) Certain Agreements. Without the prior written consent of
the Agent and the Co-Agent, the Originator will not amend, modify, waive, revoke
or terminate any Transaction Document to which it is a party.
(k) Extension or Amendment of Receivables. Except as provided
in Section 4.2(a) of the Receivables Purchase Agreement and the Credit and
Collection Policy, the Originator shall not extend the maturity or adjust the
Outstanding Balance or otherwise modify the terms of any Receivable, or amend,
modify or waive any term or condition of any related Contract.
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(l) Receivables Not to be Evidenced by Promissory Notes or
Chattel Paper. The Originator shall not take any action to cause or permit any
Receivable purchased by it to become evidenced by any "instrument" or "chattel
paper" (as defined in the applicable UCC) unless such "instrument" or "chattel
paper" shall be delivered to the Buyer (which in turn shall deliver the same to
the Agent on behalf of the Issuers).
(m) Mergers, Acquisitions, Sales, etc. The Originator shall
not merge or consolidate with another Person (except pursuant to a merger or
consolidation involving the Originator where the Originator is the surviving
corporation), or convey, transfer, lease or otherwise dispose of (whether in one
or in a series of transactions), all or substantially all of its assets (whether
now owned or hereafter acquired), other than pursuant to this Agreement).
(n) Accounting for Purchases. The Originator shall not account
for or treat (whether in financial statements or otherwise) the transactions
contemplated hereby in any manner other than as sales of the Receivables and
Related Rights by the Originator to the Buyer.
(o) Transaction Documents. The Originator shall not enter
into, execute, deliver or otherwise become bound by any agreement, instrument,
document or other arrangement that restricts the right of the Originator to
amend, supplement, amend and restate or otherwise modify, or to extend or renew,
or to waive any right under, this Agreement or any other Transaction Documents.
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<PAGE>
[Exhibit 10.5]
- - ------------------------------------------------------------------------------
MASTER AGREEMENT OF SALE
Dated as of September 30, 1998
between
CALVIN KLEIN JEANSWEAR COMPANY,
as Originator
and
GREGORY STREET, INC.,
as Buyer and as Servicer
- - -------------------------------------------------------------------------------
<PAGE>
<PAGE>
TABLE OF CONTENTS
PAGE
ARTICLE I
PURCHASES AND SALES
<TABLE>
<S> <C> <C>
1.1. Purchases and Sales...............................................2
1.2. Timing of Purchases...............................................3
1.3. Consideration for Purchases.......................................3
1.4. Purchase and Sale Termination Date................................3
1.5. Intention of the Parties..........................................3
</TABLE>
ARTICLE II
CALCULATION OF PURCHASE PRICE
<TABLE>
<S> <C> <C>
2.1. Calculation of Purchase Price.....................................4
</TABLE>
ARTICLE III
PAYMENT OF PURCHASE PRICE
<TABLE>
<S> <C> <C>
3.1. Payment of Purchase Price..........................................6
3.2. Settlement as to Specific Receivables..............................6
3.3. Reconveyance of Receivables........................................7
</TABLE>
ARTICLE IV
CONDITIONS OF PURCHASES
<TABLE>
<S> <C> <C>
4.1. Conditions Precedent to this Agreement and the Initial Purchase....8
4.2. Certification as to Representations and Warranties.................8
</TABLE>
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<PAGE>
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE ORIGINATOR
<TABLE>
<S> <C> <C>
5.1. Representations and Warranties; Covenants`1.......................9
</TABLE>
ARTICLE VI
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE RECEIVABLES
<TABLE>
<S> <C> <C>
6.1. Rights of the Buyer...............................................9
6.2. Responsibilities of the Originator................................9
6.3. Further Action Evidencing Purchases..............................10
6.4. Application of Collections.......................................11
</TABLE>
ARTICLE VII
PURCHASE AND SALE TERMINATION EVENTS
<TABLE>
<S> <C> <C>
7.1. Purchase and Sale Termination Events............................12
7.2. Remedies........................................................13
</TABLE>
ARTICLE VIII
INDEMNIFICATION
<TABLE>
<S> <C> <C>
8.1. Indemnities by the Originator..................................14
</TABLE>
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ARTICLE IX
MISCELLANEOUS
<TABLE>
<S> <C> <C>
9.1. Amendments, etc................................................16
9.2. Notices, etc...................................................16
9.3. No Waiver; Cumulative Remedies.................................17
9.4. Binding Effect; Assignability..................................17
9.5. Costs, Expenses and Taxes......................................17
9.6. Governing Law and Jurisdiction.................................17
9.7. Waiver of Jury Trial...........................................18
9.8. Headings.......................................................18
9.9. Execution in Counterparts......................................18
9.10. Acknowledgment and Agreement...................................18
</TABLE>
SCHEDULES
<TABLE>
<S> <C>
SCHEDULE I Office Locations
SCHEDULE II Trade Names
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A Form of Purchase Report
EXHIBIT B Representations and Warranties
EXHIBIT C Covenants
</TABLE>
iii
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<PAGE>
MASTER AGREEMENT OF SALE
THIS MASTER AGREEMENT OF SALE (as amended, supplemented or
otherwise modified and in effect from time to time, this "Agreement"), dated as
of September 30, 1998, is between CALVIN KLEIN JEANSWEAR COMPANY, a Delaware
corporation (together with its successors and assigns, "Warnaco"), as originator
(together with its successors and assigns in such capacities, the "Originator")
and GREGORY STREET, INC., a Delaware corporation (together with its successors
and assigns in such capacities, "Gregory Street"), as buyer (together with its
successors and assigns in such capacity, the "Buyer") and as servicer (together
with its successors and assigns in such capacity, the "Servicer").
Definitions
Capitalized terms used herein and not otherwise defined herein
shall have the meanings assigned to such terms in, or incorporated by reference
into, the Purchase and Sale Agreement of even date herewith (as amended,
supplemented or otherwise modified and in effect from time to time, the
"Purchase and Sale Agreement"), between Gregory Street and Warnaco Operations
Corporation, a Delaware corporation (together with its successors and assigns,
"Warnaco Operations").
Recitals
1. The Originator wishes to continue selling certain Receivables
and Related Rights (collectively, the "Purchased Assets") from time to time to
the Buyer, and the Buyer is willing, on the terms and subject to the conditions
set forth herein, to purchase such Receivables and Related Rights from the
Originator.
2. The Buyer intends to sell to Warnaco Operations the Purchased
Assets acquired hereunder pursuant to the Purchase and Sale Agreement in order
to finance in part its purchases of Purchased Assets hereunder.
NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
<PAGE>
<PAGE>
ARTICLE I
PURCHASES AND SALES
1.1. Purchases and Sales. On the terms and subject to the
conditions set forth in this Agreement (including Article IV), and in
consideration of the Purchase Price, the Originator agrees to sell to the Buyer,
and does hereby sell to the Buyer, and the Buyer agrees to purchase from the
Originator, and does hereby purchase from the Originator, without recourse and
without regard to collectibility, all of the Originator's right, title and
interest in, to and under:
(a) each Receivable in existence and owned by the Originator as
of the close of the Originator's business on the Closing Date;
(b) each Receivable generated by the Originator from the close of
the Originator's business on the Closing Date to and including the Purchase and
Sale Termination Date;
(c) all rights to, but not the obligations under, all Related
Security;
(d) all monies due or to become due with respect to any of the
foregoing;
(e) all books and records related to any of the foregoing; and
(f) all proceeds thereof (as defined in the applicable UCC)
received on or after the date hereof including, without limitation, all funds
which either are received by the Originator or the Servicer from or on behalf of
the Obligors in payment of any amounts owed (including, without limitation,
finance charges, interest and all other charges) in respect of Receivables, or
are applied to such amounts owed by the Obligors.
All purchases hereunder shall be made without recourse, but shall
be made pursuant to and in reliance upon the representations, warranties and
covenants of the Originator set forth in this Agreement and each other
Transaction Document. The Buyer's foregoing commitment to purchase such
Receivables (the "Purchased Receivables") and the proceeds and rights described
in subsections (c) through (f) of this Section 1.1 (collectively, the "Related
Rights") is herein called the "Purchase Facility".
2
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1.2. Timing of Purchases. The Originator's entire right, title
and interest in (i) each Receivable in existence and owned by the Originator as
of the close of the Originator's business on the Closing Date and (ii) all
Related Rights with respect thereto shall be deemed to have been sold to the
Buyer on the Closing Date. After the Closing Date, each Receivable owned by the
Originator and all Related Rights shall be sold and assigned to the Buyer
(without any further action) upon the creation of such Receivable by the
Originator.
1.3. Consideration for Purchases. On the terms and subject to
the conditions set forth in this Agreement, the Buyer agrees to make all
Purchase Price payments to the Originator in accordance with Article III.
1.4. Purchase and Sale Termination Date. The "Purchase and Sale
Termination Date" shall be the earlier to occur of (a) the date of the
termination of this Agreement pursuant to Section 7.2 and (b) the Payment Date
immediately following the day on which the Originator shall have given notice to
the Buyer (with a copy to the Agent) that the Originator desires to terminate
this Agreement. As used herein, "Payment Date" means (i) the Closing Date and
(ii) each Business Day thereafter that the Originator is open for business.
1.5. Intention of the Parties. It is the express intent of the
parties hereto that the transfers of the Receivables and Related Rights by the
Originator to the Buyer, as contemplated by this Agreement be, and be treated
as, sales and not as loans secured by the Receivables and Related Rights. If,
however, notwithstanding the intent of the parties, such transfers are deemed to
be loans, the Originator hereby grants to the Buyer a first priority security
interest in all of the Originator's right, title and interest in and to the
Receivables and the Related Rights now existing and hereafter created, all
monies due or to become due and all amounts received with respect thereto, and
all proceeds thereof, to secure all of the Originator's obligations hereunder.
3
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ARTICLE II
CALCULATION OF PURCHASE PRICE
2.1. Calculation of Purchase Price. On each Monthly Report Date,
the Servicer shall deliver to the Buyer, the Agent and the Co-Agent a report in
substantially the form of Exhibit A (each such report being herein called a
"Purchase Report") with respect to the matters set forth therein and the Buyer's
purchases of Purchased Assets from the Originator that:
(a) are to be made on the Closing Date (in the case of the
Purchase Report to be delivered on the Closing Date), or
(b) were made during the period commencing on the Monthly Report
Date immediately preceding such Monthly Report Date to (but not including) such
Monthly Report Date (in the case of each subsequent Monthly Report).
The "Purchase Price" (to be paid by the Buyer to the Originator
in accordance with the terms of Article III) for any Purchased Assets that are
acquired by the Buyer hereunder shall be equal to (i) the Net Face Amount of the
Purchased Assets minus (ii) the Factoring Charge related thereto. As used
herein:
"Net Face Amount" shall mean, with respect to any
Purchased Asset, the face amount of such Purchased Asset less all Trade
Discounts, if applicable, and less an established rate for chargebacks
of eight percent (8%).
"Factoring Charge" shall mean, with respect to any
Purchased Asset, an amount equal to the sum of (i) the product of (x)
the Net Face Amount of such Purchased Asset multiplied by (y) seven
percent (7%) divided by Accounts Receivable Turns plus (ii) the Net Face
Amount of such Purchased Asset multiplied by a seventy-five one
hundredth (0.75) percent administration charge.
"Accounts Receivable Turns" shall be six (6) for
Accounting Year 1998 or as otherwise agreed upon between the Originator
and the Buyer (with notice to the Agent and the Co-Agent).
4
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<PAGE>
"Accounting Year" shall mean the 52-53 week year which the
Originator and the Buyer shall agree upon, which year shall always end
on a Saturday.
"Trade Discounts" shall mean, with respect to any
Purchased Asset, all predetermined discounts extended by the Originator
to the Originator's customers for any reason whatsoever.
5
<PAGE>
<PAGE>
ARTICLE III
PAYMENT OF PURCHASE PRICE
3.1. Payment of Purchase Price. On the terms and subject to the
conditions set forth in this Agreement, the Buyer agrees to pay to the
Originator (i) on the Closing Date, the Purchase Price for all Purchased Assets
in existence and owned by the Originator at the close of business of the
Originator on the Closing Date and (ii) on each Business Day after the Closing
Date, the Purchase Price for all Purchased Assets with respect to which a sale
is made to the Buyer hereunder.
3.2. Settlement as to Specific Receivables and Dilution.
(a) If on the day of purchase of any Receivable from the
Originator hereunder, any of the representations or warranties of the Originator
set forth in paragraph (d), (g) or (z) of Exhibit B is not true with respect to
such Receivable or as a result of any action or inaction of the Originator, on
any day any of such representations or warranties set forth in paragraph (d),
(g) or (z) is no longer true with respect to such a Receivable, then the
Purchase Price with respect to such Receivables shall be reduced by an amount
equal to the Outstanding Balance of such Receivable and shall be accounted to
the Originator as provided in subsection (c) below; provided that if the Buyer
thereafter receives payment on account of Collections due with respect to such
Receivable, the Buyer promptly shall deliver such funds to the Originator.
(b) If, on any day, the Outstanding Balance of any Receivable
purchased hereunder is reduced or adjusted as a result of any defective,
rejected, returned goods or services, or any discount or other adjustment made
by the Originator, the Buyer or the Servicer or any offset, setoff or dispute
between the Originator or the Servicer and an Obligor as indicated on the books
of the Buyer (or, for periods prior to the Closing Date, the books of the
Originator), then the Purchase Price with respect to such Receivable shall be
reduced by the amount of such net reduction and shall be accounted to the
Originator as provided in subsection (c) below.
(c) Any reduction in the Purchase Price of any Receivable
pursuant to subsection (a) or (b) above shall be applied as a credit for the
account of the Buyer against the Purchase Price of Receivables subsequently
purchased by the Buyer from the Originator hereunder; provided, however, if
there are no purchases of Receivables from the Originator (or insufficiently
large purchases of Receivables) to
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create a Purchase Price sufficient to so apply such credit against, the amount
of such credit shall be paid in cash to the Buyer by the Originator in the
manner to be determined at such time between the Buyer and the Originator;
provided, further, that at any time (y) when a Termination Event or Unmatured
Termination Event exists under the Receivables Purchase Agreement or (z) on or
after the Purchase and Sale Termination Date, the amount of any such credit
shall be paid by the Originator to the Buyer by deposit in immediately available
funds into the Collection Account for application by the Servicer to the same
extent as if Collections of the applicable Receivable in such amount had
actually been received on such date.
(d) Each Purchase Report (other than the Purchase Report
delivered on the Closing Date) shall include, in respect of the Receivables sold
by the Originator, a calculation of the aggregate reductions described in
subsection (a) or (b) relating to such Receivables since the last Purchase
Report delivered hereunder, as indicated on the books of the Buyer (or, for such
period prior to the Closing Date, the books of the Originator).
3.3. Reconveyance of Receivables. In the event that the
Originator has paid to the Buyer the full Outstanding Balance of any Receivable
pursuant to Section 3.2, the Buyer shall reconvey such Receivable to the
Originator, without representation or warranty, but free and clear of all liens
created by the Buyer.
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ARTICLE IV
CONDITIONS OF PURCHASES
4.1. Conditions Precedent to this Agreement and the Initial
Purchase. The effectiveness of this Agreement and the purchase hereunder of the
Receivables in existence on the Closing Date are each subject to the conditions
precedent that the Buyer shall have received, in form and substance satisfactory
to the Buyer, the following (the date on which such conditions have been
satisfied in full, the "Closing Date"):
(a) This Agreement, the Purchase and Sale Agreement and the
Receivables Purchase Agreement, duly executed by the parties thereto, together
with evidence that all conditions precedent thereunder shall have been met; and
(b) Such other agreements, instruments, certificates, opinions
and other documents as the Buyer shall reasonably request.
Payment by the Buyer of the Purchase Price for the Receivables in
existence at the close of business of the Originator on the Closing Date shall
be deemed to be the Buyer's agreement that all such conditions precedent have
been satisfied or waived.
4.2. Certification as to Representations and Warranties. The
Originator, by accepting the Purchase Price related to each purchase of
Purchased Assets, shall be deemed to have certified that the representations and
warranties contained in Exhibit B are true and correct on and as of such day,
with the same effect as though made on and as of such day.
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ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS
OF THE ORIGINATOR
5.1. Representations and Warranties; Covenants. In order to
induce the Buyer to enter into this Agreement and to make purchases hereunder,
the Originator hereby makes the representations and warranties and hereby agrees
to perform and observe the covenants set forth in Exhibits B and C,
respectively.
ARTICLE VI
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE RECEIVABLES
6.1. Rights of the Buyer. The Originator hereby authorizes the
Buyer and the Servicer or their respective designees to take any and all steps
in the Originator's name necessary or desirable, in their respective
determination, to collect all amounts due under any and all Receivables and
Related Rights, including, without limitation, endorsing the Originator's name
on checks and other instruments representing Collections and enforcing such
Receivables and the provisions of the related Contracts that concern payment
and/or enforcement of rights to payment.
Upon acquisition by the Buyer of any Purchased Asset, the Buyer
shall become entitled to all of the ownership, title, right, securities or
guaranties possessed by the Originator in respect to such Purchased Assets,
including the right to stoppage-in-transit and to replevin in any of the
merchandise covered by such Purchased Assets including, but not limited to, any
and all of the merchandise that may be rejected, returned, or reconsigned and in
any new claim or account created through the resale or exchange of merchandise
and including the right to collect and receive all moneys due thereunder.
6.2. Responsibilities of the Originator. Anything herein to the
contrary notwithstanding:
(a) The Originator agrees to (A) direct, and hereby grants to
each of the Buyer and its assignees the authority to direct, all Obligors of
Receivables purchased by the Buyer to make payments of such Receivables directly
to the Collection Account or to post office boxes to which only the Collection
Account
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Bank has access, and (B) to transfer any Collections that it receives directly,
into the Collection Account within two (2) Business Days of receipt thereof, and
agrees that all such Collections shall be deemed to be received in trust for the
Buyer.
(b) The Originator shall perform its obligations hereunder, and
the exercise by the Buyer or its assignees of their respective rights hereunder
shall not relieve the Originator from such obligations.
(c) None of the Buyer, the Servicer or any assignee of the Buyer
shall have any obligation or liability to any Obligor or any other third party
with respect to any Receivables, Contracts related thereto or any other related
agreements, nor shall the Buyer, the Servicer or any assignee of the Buyer be
obligated to perform any of the obligations of the Originator thereunder.
(d) The Originator hereby grants to the Buyer, the Servicer and
the assignees of the Buyer an irrevocable power of attorney, with full power of
substitution, coupled with an interest, to take in the name of the Originator
all steps necessary or advisable to indorse, negotiate or otherwise realize on
any writing or other right of any kind held or transmitted by the Originator or
transmitted or received by the Buyer (whether or not from the Originator) in
connection with any Receivable or Related Right.
6.3. Further Action Evidencing Purchases. The Originator agrees
that from time to time, at its expense, it will promptly execute and deliver all
further instruments and documents, and take all further action that the Buyer or
the Servicer may reasonably request in order to perfect, protect or more fully
evidence the Receivables (and the Related Rights) purchased by the Buyer
hereunder, or to enable the Buyer to exercise or enforce any of its rights
hereunder or under any other Transaction Document. Without limiting the
generality of the foregoing, upon the request of the Buyer, the Originator will
(a) execute and file such financing or continuation statements, or amendments
thereto or assignments thereof, and such other instruments or notices, as may be
necessary or appropriate and (b) mark the summary master control data processing
records with a legend indicating that the Purchased Assets have been sold to the
Buyer and subsequently sold by the Buyer under the Purchase and Sale Agreement.
The Originator hereby authorizes the Buyer or its assignees to
file one or more financing or continuation statements, and amendments thereto
and assignments thereof, relative to all or any of the Receivables (and the
Related Rights) now owned by or hereafter acquired by the Originator. If the
Originator fails to perform any of its agreements or obligations under this
Agreement, the Buyer or its
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assignees may (but shall not be required to) itself perform, or cause
performance of, such agreement or obligation, and the expenses of the Buyer or
its assignees incurred in connection therewith shall be payable by the
Originator as provided in Section 8.1.
In furtherance of the foregoing, upon written request of Buyer,
the Originator agrees to furnish the Buyer with originals or copies of any
invoices or evidence of shipment of goods underlying the Purchased Assets.
6.4. Application of Collections. Any payment by an Obligor in
respect of any indebtedness owed by it to the Originator shall, except as
otherwise specified by such Obligor or otherwise required by contract or law and
unless otherwise instructed by the Buyer or the Administrator, be applied first,
as a Collection of any Receivables of such Obligor, in the order of the age of
such Receivables, starting with the oldest of such Receivables, and second, to
any other indebtedness of such Obligor.
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ARTICLE VII
PURCHASE AND SALE TERMINATION EVENTS
7.1. Purchase and Sale Termination Events. Each of the following
events or occurrences described in this Section 8.1 shall constitute a
"Purchase and Sale Termination Event":
(a) A Purchase and Sale Termination Event under the Purchase and Sale
Agreement shall have occurred; or
(b) The Originator shall fail to make when due any payment or deposit
to be made by the Originator under this Agreement within three (3) Business
Days of the date on which such payment or deposit is due; or
(c) Any representation or warranty made or deemed to be made by the
Originator (or any of its officers) under or in connection with this
Agreement, any other Transaction Document or any other information or
report delivered pursuant hereto or thereto shall prove to have been
incorrect or untrue in any material respect when made or deemed made or
delivered; or
(d) The Originator shall fail to perform or observe in any material
respect any other term, covenant or agreement contained in this Agreement
on its part to be performed or observed and such failure shall remain
unremedied for thirty (30) days after the Originator shall have obtained
actual knowledge or notice thereof; or
(e)(i) The Originator shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts
generally, or shall make a general assignment for the benefit of creditors;
or any proceeding shall be instituted by or against the Originator seeking
to adjudicate it a bankrupt or insolvent, or seeking liquidation, winding
up, reorganization, arrangement, adjustment, protection, relief, or
composition of it or its debts under any law relating to bankruptcy,
insolvency or reorganization or relief of debtors, or seeking the entry of
an order for relief or the appointment of a receiver, trustee, or other
similar official for it or for all or any substantial part of its property
and, in the case of any such proceeding instituted against it (but not
instituted by it), such proceeding shall remain undismissed or unstayed for
a period of 60 days, or any of the actions sought in such proceeding
(including the entry of an order for relief against, or the appointment of
a receiver, trustee, custodian or other similar official for, it or for any
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substantial part of its property) shall occur; or (ii) the Originator shall
take any corporate action to authorize any of the actions set forth in
clause (i) above in this Section 7.1(e); or
(f) either: (i) a contribution failure shall occur with respect to any
Benefit Plan sufficient to give rise to a lien under Section 302(f) of
ERISA, (ii) the Internal Revenue Service shall file a notice of a lien
asserting a claim or claims pursuant to the Internal Revenue Code with
regard to any of the assets of the Originator or any ERISA Affiliate, or
(iii) the Pension Benefit Guaranty Corporation shall file notice of a lien
asserting a claim pursuant to ERISA with regard to any assets of the
Originator or an ERISA Affiliate.
(g) There shall have occurred any event that would, with the giving of
notice or the passing of time or both, have a Material Adverse Effect.
7.2. Remedies.
(i) Optional Termination. Upon the occurrence of a
Purchase and Sale Termination Event, the Buyer shall have the option by
notice to the Originator (with a copy to Warnaco Operations and the Agent)
to declare the Purchase and Sale Termination Date to have occurred.
(ii) Remedies Cumulative. Upon any termination of the
Purchase Facility pursuant to this Section 7.2, the Buyer shall have, in
addition to all other rights and remedies under this Agreement or
otherwise, all other rights and remedies provided under the UCC of each
applicable jurisdiction and other applicable laws, which rights shall be
cumulative.
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ARTICLE VIII
INDEMNIFICATION
8.1. Indemnities by the Originator. Without limiting any other rights
which the Buyer or any Purchase and Sale Indemnified Party may have
hereunder or under applicable law, the Originator hereby agrees to
indemnify the Buyer and each of its assigns, officers, directors, employees
and agents (each of the foregoing Persons being individually called a
"Purchase and Sale Indemnified Party"), forthwith on demand, from and
against any and all claims, damages, expenses, costs, losses and
liabilities (including Attorney Costs) (all of the foregoing being
collectively referred to as "Purchase and Sale Indemnified Amounts")
awarded against or incurred by any of them arising out of or resulting from
this Agreement (whether directly or indirectly), the use of the proceeds
acquired by the Originator hereunder, the ownership of the Receivables and
Related Rights or in respect of any Receivable, Related Security or
Contract (other than with respect to the collectibility of the Receivables
for credit-related reasons). Without limiting or being limited by the
foregoing, and subject to the exclusions set forth below, the Originator
shall pay on demand to each Purchase and Sale Indemnified Party any and all
amounts necessary to indemnify such party from and against any and all
Purchase and Sale Indemnified Amounts resulting from any of the following:
(a) the transfer by the Originator of an interest in any Receivable or
Related Right to any Person other than the Buyer;
(b) the breach of any representation or warranty made by the
Originator under or in connection with this Agreement or any other
Transaction Document, or any information or report delivered by the
Originator pursuant hereto or thereto which shall have been false or
incorrect in any respect when made or deemed made;
(c) the failure by the Originator to comply with any applicable law,
rule or regulation with respect to any Receivable or the related Contract,
or the nonconformity of any Receivable or the related Contract with any
such applicable law, rule or regulation;
(d) the failure to vest and maintain vested in the Buyer an ownership
interest in the Receivables and the Related Rights free and clear of any
Adverse Claim;
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(e) the failure of the Originator to file with respect to itself, or
any delay by the Originator in filing, financing statements or other
similar instruments or documents under the UCC of any applicable
jurisdiction or other applicable laws with respect to any Receivables or
purported Receivables or any Related Rights, whether at the time of any
purchase or at any subsequent time;
(f) any dispute, claim, offset or defense (other than discharge in
bankruptcy) of the Obligor to the payment of any Receivable or purported
Receivable (including, without limitation, a defense based on such
Receivable or the related Contract not being a legal, valid and binding
obligation of such Obligor enforceable against it in accordance with its
terms), or any other claim resulting from the goods or services related to
any such Receivable or the furnishing of or failure to furnish such goods
or services;
(g) any product liability claim arising out of or in connection with
goods or services that are the subject of any Receivable;
(h) any litigation, proceeding or investigation against the
Originator;
(i) any tax or governmental fee or charge (other than any tax excluded
pursuant to the proviso below), all interest and penalties thereon or with
respect thereto, and all out-of-pocket costs and expenses, including the
reasonable fees and expenses of counsel in defending against the same,
which may arise by reason of the purchase or ownership of the Receivables
or any Related Right connected with any such Receivables; and
(j) any failure of the Originator to perform its duties or obligations
in accordance with the provisions of this Agreement or any other
Transaction Document;
excluding, however, (i) Purchase and Sale Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part of a
Purchase and Sale Indemnified Party, (ii) any indemnification which has the
effect of recourse for non-payment of the Receivables due to credit reasons
to any indemnitor (except as otherwise specifically provided under this
Section 8.1) and (iii) any tax based upon or measured by net income or
gross receipts.
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ARTICLE IX
MISCELLANEOUS
9.1. Amendments, etc.
(a) The provisions of this Agreement may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing
and consented to by the Buyer, the Servicer, the Agent and the Originator
(with respect to an amendment) or by the Buyer (with respect to a waiver or
consent by it).
(b) No failure or delay on the part of the Buyer, the Servicer, the
Originator or any third-party beneficiary in exercising any power or right
hereunder 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 Buyer, the Servicer or the Originator in any case shall
entitle it to any notice or demand in similar or other circumstances. No
waiver or approval by the Buyer or Servicer under this Agreement shall,
except as may otherwise be stated in such waiver or approval, be applicable
to subsequent transactions. No waiver or approval under this Agreement
shall require any similar or dissimilar waiver or approval thereafter to be
granted hereunder.
9.2. Notices, etc. All notices and other communications provided for
hereunder shall, unless otherwise stated herein, be in writing (which shall
include facsimile communication) and be sent or delivered to each party
hereto at its address set forth below or at such other address as shall be
designated by such party in a written notice to the other parties hereto.
Notices and communications by facsimile shall be effective when sent (and
shall be followed by hard copy sent by first-class mail) and notices and
communications sent by other means shall be effective when received.
If to the Buyer:
----------------
GREGORY STREET, INC.
325 Lafayette Street
Bridgeport, Connecticut 06601
Attention: Carl J. Deddens, Assistant Treasurer
Telephone: (203) 579-8040
Telecopy: (203) 334-6621
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If to the Originator:
---------------------
CALVIN KLEIN JEANSWEAR COMPANY
90 Park Avenue, 26th Floor
New York, New York 10016
Attention: Stanley P. Silverstein
Telephone: (212) 370-8455
Telecopy: (212) 687-0480
9.3. No Waiver; Cumulative Remedies. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
9.4. Binding Effect; Assignability. This Agreement shall be binding
upon and inure to the benefit of the Buyer and the Originator and their
respective successors and permitted assigns; provided, however, that the
Originator may not assign its rights hereunder or any interest herein or
delegate its duties hereunder without the prior consent of the Buyer and
the Agent. This Agreement shall create and constitute the continuing
obligations of the parties hereto in accordance with its terms, and shall
remain in full force and effect until the date after the Purchase and Sale
Termination Date on which the Originator has received payment in full for
all Receivables and Related Rights purchased pursuant to Section 1.1
hereof. The rights and remedies with respect to any breach of any
representation and warranty made by the Originator pursuant to Article V
and the indemnification and payment provisions of Article VIII and Section
9.5 shall be continuing and shall survive any termination of this
Agreement.
9.5. Costs, Expenses and Taxes. In addition to the obligations of the
Originator under Article XIII, the Originator agrees to pay on demand:
(a) all reasonable costs and expenses in connection with the
enforcement of this Agreement and the other Transaction Documents; and
(b) all stamp and other similar taxes and fees payable or determined
to be payable in connection with the execution, delivery, filing and
recording of this Agreement or the other Transaction Documents, and agrees
to indemnify each Purchase and Sale Indemnified Party against any
liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.
9.6. Governing Law and Jurisdiction. This Agreement shall be deemed
to be a contract made under and governed by the internal laws of the State
of
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New York (including for such purpose Sections 5-1401 and 5-1402 of the
General Obligations Law of the State of New York) except to the extent that
the validity or perfection of a security interest or remedies hereunder, in
respect of any particular collateral are governed by the laws of a
jurisdiction other than the State of New York.
9.7. Waiver of Jury Trial. Each of the parties hereto waives its
rights to a trial by jury of any claim or cause of action based upon or
arising out of or related to this agreement or the transactions
contemplated hereby in any action, proceeding or other litigation of any
type brought by any of the parties against any other party or parties,
whether with respect to contract claims, tort claims or otherwise. Each of
the parties hereto agrees that any such claim or cause of action shall be
tried by a court trial without a jury. Without limiting the foregoing, each
of the parties hereto further agrees that its respective right to a trial
by jury is waived by operation of this section as to any action,
counterclaim or other proceeding that seeks, in whole or in part, to
challenge the validity or enforceability of this agreement or any provision
hereof. This waiver shall apply to any subsequent amendments, renewals,
supplements or modifications to this agreement.
9.8. Headings. The captions and headings of this Agreement and any
Exhibit, Schedule or Annex hereto are for convenience of reference only and
shall not affect the interpretation hereof or thereof.
9.9. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed shall be deemed to be an
original and all of which when taken together shall constitute one and the
same Agreement.
9.10. Acknowledgment and Agreement. By execution below, the
Originator expressly acknowledges and agrees that all of the Buyer's
rights, title, and interests in, to, and under this Agreement shall be
assigned by the Buyer to Warnaco Operations pursuant to the Purchase and
Sale Agreement, and the Originator consents to such assignment. Each of the
parties hereto acknowledges and agrees that Warnaco Operations is a
third-party beneficiary of the rights of the Buyer arising hereunder and
under the other Transaction Documents to which the Originator is a party.
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IN WITNESS WHEREOF, the parties have caused this Master Agreement of
Sale to be executed by their respective officers thereunto duly authorized, as
of the date first above written.
CALVIN KLEIN JEANSWEAR COMPANY,
as Originator
By: /s/ William S. Finkelstein
----------------------------
Name: William S. Finkelstein
Title: Vice President and Treasurer
GREGORY STREET, INC., as Buyer and
as Servicer
By: /s/ Carl J. Deddens
---------------------
Name: Carl J. Deddens
Title: Vice President and Secretary
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SCHEDULE I
OFFICE LOCATIONS
90 Park Avenue, 26th Floor
New York, New York 10016
<PAGE>
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SCHEDULE II
TRADE NAMES
Calvin Klein Junior Jeans
Calvin Klein Womens Jeans
Calvin Klein Mens Jeans
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EXHIBIT A
[FORM OF PURCHASE REPORT]
A-1
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EXHIBIT B
REPRESENTATIONS AND WARRANTIES
1. Representations and Warranties of the Originator. The Originator
represents and warrants as follows:
(a) The Originator is a corporation duly incorporated, validly
existing and in good standing under the laws of the State of Delaware, and
is duly qualified to do business and is in good standing as a foreign
corporation in every jurisdiction where the nature of its business requires
it to be so qualified, except where the failure to be so qualified would
not have a Material Adverse Effect.
(b) The execution, delivery and performance by the Originator of this
Agreement and the other Transaction Documents to which it is a party: (i)
are within its corporate powers; (ii) have been duly authorized by all
necessary corporate action; (iii) do not contravene in any material respect
or result in a default under or conflict with: (A) its charter or by-laws,
(B) any law, rule or regulation applicable to it, (C) any indenture, loan
agreement, mortgage, deed of trust or other agreement or instrument to
which it is a party or by which it is bound, or (D) any law or any order,
writ, judgment, award, injunction or decree binding on or affecting it or
any of its property; and (iv) do not result in or require the creation of
any Adverse Claim upon or with respect to any of its properties. The
Agreement and the other Transaction Documents to which it is a party have
been duly executed and delivered by the Originator.
(c) No authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority or other Person is required for the
due execution, delivery and performance by the Originator of the Agreement
or any other Transaction Document to which it is a party, other than the
Uniform Commercial Code filings referred to in Exhibit II to the
Receivables Purchase Agreement, all of which shall have been filed on or
before the date of the first purchase hereunder.
(d) Each sale of Receivables and Related Rights made by the Originator
pursuant to this Agreement shall constitute a valid sale, transfer and
assignment thereof to the Buyer, enforceable against creditors of, and
purchasers from, the Originator; and each of the Agreement and the other
Transaction Documents to which the Originator is a party constitutes its
legal, valid and binding obligation of the Originator enforceable against
the Originator in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency,
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reorganization or other similar laws from time to time in effect affecting
the enforcement of creditors' rights generally and by general principles of
equity, regardless of whether such enforceability is considered in a
proceeding in equity or at law.
(e) There is no litigation or, to the Originator's knowledge, any
proceeding or investigation pending before any court, regulatory body,
arbitrator, administrative agency, or other tribunal or governmental
instrumentality (a) asserting the invalidity of any Transaction Document,
(b) seeking to prevent the sale of Receivables and Related Rights to the
Buyer or the consummation of any of the other transactions contemplated by
any Transaction Document or (c) seeking any determination or ruling that
could reasonably be expected to have a Material Adverse Effect.
(f) No proceeds acquired by the Originator under this Agreement will
be used by the Originator to acquire any equity security of a class that is
registered pursuant to Section 12 of the Securities Exchange Act of 1934.
(g) The Originator is the legal and beneficial owner of each
Receivable (together with the Related Rights) which is to be sold to the
Buyer hereunder, free and clear of any Adverse Claim. Whenever the Buyer
makes a purchase hereunder, it shall have acquired a valid and enforceable
perfected ownership interest in such Receivable and in the Related
Security, Collections and other proceeds with respect thereto, free and
clear of any Adverse Claim. No effective financing statement or other
instrument similar in effect covering any such Receivable is on file in any
recording office, except those filed in favor of (A) the Buyer pursuant to
this Agreement, (B) Warnaco Operations pursuant to the Purchase and Sale
Agreement and (C) the Agent pursuant to the Receivables Purchase Agreement.
(h) Each Purchase Report (if prepared by the Originator or one of its
Affiliates, or to the extent that information contained therein is supplied
by the Originator or an Affiliate), information, exhibit, financial
statement, document, book, record or report furnished or to be furnished at
any time by or on behalf of the Originator to the Agent in connection with
the Agreement or any other Transaction Document to which it is a party is
or will be complete and accurate in all material respects as of its date or
as of the date so furnished.
(i) The Originator's principal place of business and chief executive
office (as such terms are used in the UCC) is located at the address set
forth in Section 9.2 hereof, and the office where it keeps its records
concerning the
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Receivables are located at the address specified on Schedule I (or at such
other locations, notified to Servicer and the Agent in accordance with
paragraph 1(b) of Exhibit C, where all actions required by Section 6.3 of
this Agreement have been taken and completed).
(j) The Originator is not in violation of any order of any court,
arbitrator or Governmental Authority, the violation of which would have a
Material Adverse Effect on the Originator.
(k) No proceeds acquired by the Originator under this Agreement will
be used for any purpose that violates any applicable law, rule or
regulation, including Regulations T, U or X of the Federal Reserve Board.
(l) Unless otherwise identified to the Buyer in the related Purchase
Report, each Receivable sold hereunder is on the date of sale an Eligible
Receivable.
(m) No transaction contemplated hereby acquires compliance with any
sales bulk act or similar law.
(n) The Originator has complied in all material respects with the
Credit and Collection Policy.
(o) The Originator has complied in all material respects with all of
the terms, covenants and agreements contained in the Agreement and the
other Transaction Documents that are applicable to it.
(p) The Originator's complete corporate name is set forth in the
preamble to the Agreement, and it does not use and has not since its
incorporation used any other corporate name, trade name, doing-business
name or fictitious name, except as set forth on Schedule II to this
Agreement.
(q) The Originator is not an "investment company," or a company
"controlled" by an "investment company" within the meaning of the
Investment Company Act of 1940, as amended. In addition, the Originator is
not a "holding company," 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.
(r) The Originator has reviewed the areas within its business and
operations which could be adversely affected by, and has developed or is
developing
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a program to address on a timely basis, the risk that certain computer
applications used by the Originator may be unable to recognize and perform
properly date-sensitive functions involving dates prior to and after
December 31, 1999 (the "Year 2000 Problem"). Based on such review and
program, the Year 2000 Problem could not reasonably be expected to have any
Material Adverse Effect.
(s) The Originator has filed all material tax returns and reports
required by law to have been filed by it and has paid all taxes and
governmental charges thereby shown to be owing, except any such taxes which
are not yet delinquent or are being diligently contested in good faith by
appropriate proceedings and for which adequate reserves in accordance with
generally accepted accounting principles shall have been set aside on its
books.
(t) The Originator has not failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary to the ownership
of its properties or to the conduct of its business, which violation or
failure to obtain would be reasonably likely to have a Material Adverse
Effect, and there are no labor controversies pending against the Originator
that have had (or are reasonably likely to have) a Material Adverse Effect.
(u) The Originator is in compliance, in all material respects, with
the requirements of (i) all applicable laws, rules, regulations, and orders
of all governmental authorities (including, without limitation, Regulation
Z, laws, rules and regulations relating to usury, truth in lending, fair
credit billing, fair credit reporting, equal credit opportunity, fair debt
collection practices and privacy and all other consumer laws applicable to
the Receivables and related Contracts) (excluding with respect to
environmental matters which are covered by clause (ii)), and (ii) to the
best of its knowledge, all applicable environmental laws, rules,
regulations and orders of all governmental authorities.
(v) The Originator is aware that Warnaco Operations, the Investors,
the Agent and the Co-Agent are entering into the Transaction Documents to
which they are parties in reliance upon the Buyer's identity as a legal
entity separate from the Originator.
(w) The purchase price payable by the Buyer to the Originator
hereunder is intended by the Originator and Buyer to be consistent with the
terms that would be obtained in an arm's-length sale.
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(x) On the date hereof, and on the date of each sale of Receivables by
the Originator to the Buyer (both before and after giving effect to such
sale), the Originator shall be Solvent.
(y) The balance sheets of the Originator and its consolidated
Subsidiaries as at January 3, 1998, and the related income and retained
earnings for the fiscal year then ended, copies of which have been
furnished to the Agent and the Co-Agent, fairly present the financial
condition of the Originator and its consolidated Subsidiaries as at such
date and the results of the operations of the Originator and its
Subsidiaries for the period ended on such date, all in accordance with
generally accepted accounting principles consistently applied, and since
January 3, 1998 there has been no event or circumstance which has had a
Material Adverse Effect.
(z) At the time of each purchase of Receivables and Related Rights
hereunder by the Buyer, the Originator shall be deemed to represent and
warrant that : (i) it owns all of such Purchased Assets free and clear of
any liens, claims, charges, options, or encumbrances, (ii) each and every
account receivable which is part of the Purchased Assets represents a bona
fide sale covering the kind, quantity, and quality of merchandise stated
therein and the same has been delivered, and there are no counterclaims or
offsets against the amounts shown due on the related account, and the
merchandise has not been sold on consignment nor with any return privilege
whatsoever, except defective merchandise, and (iii) the Originator has no
information or reason to suspect that any Obligor under a Purchased Asset
is other than a good financial risk.
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EXHIBIT C
COVENANTS
1. Covenants of the Originator. From the date hereof until the first
day following the Purchase and Sale Termination Date:
(a) Compliance with Laws, Etc. The Originator shall comply in all
material respects with all applicable laws, rules, regulations and orders,
and preserve and maintain its corporate existence, rights, franchises,
qualifications and privileges, except to the extent that the failure so to
comply with such laws, rules and regulations or the failure so to preserve
and maintain such rights, franchises, qualifications and privileges would
not have a Material Adverse Effect.
(b) Offices, Records and Books of Account, Etc. The Originator: (i)
shall keep its principal place of business and chief executive office (as
such terms or similar terms are used in the UCC) and the office where it
keeps its records concerning the Receivables at the address of the
Originator set forth under its name on the signature page to the Agreement
or, upon 30 days' prior written notice to the Buyer and the Agent, at any
other locations in jurisdictions where all actions reasonably requested by
the Buyer or its assignees to protect and perfect the interest of the Buyer
in the Receivables and Related Rights have been taken and completed and
(ii) shall provide the Buyer and its assignees with at least 30 days'
written notice before making any change in the Originator's name or making
any other change in the Originator's identity or corporate structure
(including a Change in Control) that could render any UCC financing
statement filed in connection with this Agreement "seriously misleading" as
such term (or similar term) is used in the UCC; each notice to the Buyer or
its assignees pursuant to this sentence shall set forth the applicable
change and the effective date thereof. The Originator also will maintain
and implement (or cause the Servicer to maintain and implement)
administrative and operating procedures (including an ability to recreate
records evidencing Receivables and related Contracts in the event of the
destruction of the originals thereof), and keep and maintain (or cause the
Servicer to keep and maintain) all documents, books, records, computer
tapes and disks and other information reasonably necessary or advisable for
the collection of all Receivables (including records adequate to permit, as
and when necessary, the daily identification of each Receivable and all
Collections of and adjustments to each existing Receivable).
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(c) Performance and Compliance with Credit and Collection Policy. The
Originator shall fully comply in all material respects with the Credit and
Collection Policy.
(d) Sales, Liens, Etc. The Originator shall not sell, assign (by
operation of law or otherwise) or otherwise dispose of, or create or suffer
to exist any Adverse Claim upon or with respect to, any or all of its
right, title or interest in, to or under any Receivable, Related Rights or
Collections, or upon or with respect to any account to which any
Collections of any Receivables are sent), or assign any right to receive
income in respect of any items contemplated by this paragraph; it being
understood that the Servicer may sell a Defaulted Receivable if the
Servicer believes in good faith that such sale will maximize the amount to
be received by the Buyer with respect to such Receivable.
(e) Change in Credit and Collection Policy. The Originator shall not
make any material change in the character of its business or the Credit and
Collection Policy that would materially adversely affect the collectibility
of the Receivables or the enforceability of any related Contract or the
ability of the Originator to perform its obligations under the Agreement.
(f) Audits. (i) The Originator shall from time to time during regular
business hours as reasonably requested in advance (unless a Purchase and
Sale Termination Event exists) by the Buyer, Warnaco Operations, the Agent
or the Co-Agent, permit the Buyer, Warnaco Operations, the Agent or the
Co-Agent, or their agents or representatives: (A) to examine and make
copies of and abstracts from all books, records and documents (including
computer tapes and disks) in the possession or under the control of the
Originator relating to Receivables and the Related Security, including the
related Contracts, and (B) to visit the offices and properties of the
Originator for the purpose of examining such materials described in clause
(i)(A) above, and to discuss matters relating to Receivables and the
Related Security or the Originator's performance under the Transaction
Documents with any of the officers, employees, agents or contractors of the
Originator, having knowledge of such matters; and (ii) without limiting the
provisions of clause (i) next above, from time to time during regular
business hours, upon five Business Days prior written notice from the
Buyer, Warnaco Operations, the Agent or the Co-Agent, permit certified
public accountants or other auditors acceptable to the Buyer, Warnaco
Operations, the Agent or the Co-Agent to conduct a review of the
Originator's books and records, at the Originator's expense, with respect
to the Receivables.
(g) Change in Collection Account Bank, Collection Account and Payment
Instructions to Obligors. The Originator shall not, and shall not permit
the
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Servicer to, terminate the Collection Account Bank or the Collection
Account, or make any change in its instructions to Obligors regarding
payments to be made to the Originator, such Originator, the Servicer or the
Collection Account (or related post office box), unless the Agent shall
have consented thereto in writing (which consent shall not be unreasonably
withheld) and the Agent shall have received copies of all agreements and
documents (including a Collection Account Agreement) that it may request in
connection therewith.
(h) Deposits to Collection Account. The Originator shall (or shall
cause the Servicer to): (i) instruct all Obligors to make payments of all
Receivables to the Collection Account or to post office boxes to which only
the Collection Account Bank has access (and shall instruct the Collection
Account Bank to cause all items and amounts relating to such Receivables
received in such post office boxes to be removed and deposited into the
Collection Account on a daily basis), and (ii) deposit, or cause to be
deposited, any Collections received by it, the Servicer or any Originator
into the Collection Account not later than two (2) Business Days after
receipt thereof. The Originator will not (and will not permit the Servicer
to) deposit or otherwise credit, or cause or permit to be so deposited or
credited, to the Collection Account cash or cash proceeds other than
Collections.
(i) Reporting Requirements. The Originator shall provide to the Buyer
and the Agent the following:
(i) As soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of the
Originator, (a) a copy of the unaudited balance sheet of the
Originator, as at the end of such quarter, together with unaudited
statements of earnings, stockholders' equity for such quarter and the
portion of the fiscal year through such quarter, prepared in
accordance with GAAP and certified by the chief financial officer,
treasurer or chief accounting officer of the Originator, and (b) a
letter from the chief financial officer, treasurer or chief accounting
officer of the Originator, certifying to the best knowledge of such
officer, that neither a Purchase and Sale Termination Event nor an
Unmatured Purchase and Sale Termination Event has occurred and is
continuing;
(ii) As soon as available and in any event within 90 days after
the end of each fiscal year of the Originator, (a) a copy of the
unaudited balance sheet of the Originator, as at the end of such
fiscal year, together with the related statements of earnings,
stockholders' equity for such fiscal year, prepared in accordance with
GAAP applied consistently throughout the periods reflected therein,
and (b) a letter from the chief financial officer,
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treasurer or chief accounting officer of the Originator, certifying to
the best knowledge of such officer, that neither a Purchase and Sale
Termination Event nor an Unmatured Purchase and Sale Termination Event
has occurred and is continuing, in each case as at the end of each
such fiscal year and the date of delivery of such letter;
(iii) promptly after the filing or receiving thereof, copies of
all reports and notices that the Originator or any Affiliate files
under ERISA with the Internal Revenue Service, the Pension Benefit
Guaranty Corporation or the U.S. Department of Labor or that the
Originator or any Affiliate receives from any of the foregoing or from
any multi-employer plan (within the meaning of Section 4001(a)(3) of
ERISA) to which the Originator or any of its Affiliates is or was,
within the preceding five years, a contributing employer, in each case
in respect of the assessment of withdrawal liability or an event or
condition that could, in the aggregate, result in the imposition of
liability on the Originator and/or any such Affiliate;
(iv) promptly after the Originator obtains knowledge thereof,
notice of any: (A) material litigation, investigation or proceeding
that may exist at any time between the Originator and any Person or
(B) material litigation or proceeding relating to any Transaction
Document;
(v) promptly after the occurrence thereof, notice of a change in
the business, operations, property or financial or other condition of
the Originator or the Servicer which would have a Material Adverse
Effect; and
(vi) such other information respecting the Receivables or the
condition or operations, financial or otherwise, of the Originator or
any of its Affiliates as the Buyer, Warnaco Operations, the Agent or
the Co-Agent may from time to time reasonably request upon reasonable
notice.
(j) Certain Agreements. Without the prior written consent of the Agent
and the Co-Agent, the Originator will not amend, modify, waive, revoke or
terminate any Transaction Document to which it is a party.
(k) Extension or Amendment of Receivables. Except as provided in
Section 4.2(a) of the Receivables Purchase Agreement and the Credit and
Collection Policy, the Originator shall not extend the maturity or adjust
the Outstanding Balance or otherwise modify the terms of any Receivable, or
amend, modify or waive any term or condition of any related Contract.
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(l) Receivables Not to be Evidenced by Promissory Notes or Chattel
Paper. The Originator shall not take any action to cause or permit any
Receivable purchased by it to become evidenced by any "instrument" or
"chattel paper" (as defined in the applicable UCC) unless such "instrument"
or "chattel paper" shall be delivered to the Buyer (which in turn shall
deliver the same to the Agent on behalf of the Issuers).
(m) Mergers, Acquisitions, Sales, etc. The Originator shall not merge
or consolidate with another Person (except pursuant to a merger or
consolidation involving the Originator where the Originator is the
surviving corporation), or convey, transfer, lease or otherwise dispose of
(whether in one or in a series of transactions), all or substantially all
of its assets (whether now owned or hereafter acquired), other than
pursuant to this Agreement).
(n) Accounting for Purchases. The Originator shall not account for or
treat (whether in financial statements or otherwise) the transactions
contemplated hereby in any manner other than as sales of the Receivables
and Related Rights by the Originator to the Buyer.
(o) Transaction Documents. The Originator shall not enter into,
execute, deliver or otherwise become bound by any agreement, instrument,
document or other arrangement that restricts the right of the Originator to
amend, supplement, amend and restate or otherwise modify, or to extend or
renew, or to waive any right under, this Agreement or any other Transaction
Documents.
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[Exhibit 10.6]
PURCHASE AND SALE AGREEMENT
Dated as of September 30, 1998
among
GREGORY STREET, INC.,
as Seller and initial Servicer
and
WARNACO OPERATIONS CORPORATION,
as Buyer
<PAGE>
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<C> <S> <C>
ARTICLE I
AGREEMENT TO PURCHASE AND SELL
1.1. Agreement to Purchase and Sell ........................................... 2
1.2. Timing of Purchases ...................................................... 3
1.3. Consideration for Purchases .............................................. 3
1.4. Purchase and Sale Termination Date ....................................... 3
1.5. Intention of the Parties ................................................. 3
ARTICLE II
CALCULATION OF PURCHASE PRICE
2.1. Calculation of Purchase Price ............................................ 4
ARTICLE III
CONTRIBUTION OF RECEIVABLES;
PAYMENT OF PURCHASE PRICE
3.1. Contribution of Receivables .............................................. 5
3.2. Initial Purchase Price Payment ........................................... 5
3.3. Subsequent Purchase Price Payments ....................................... 5
3.4. Settlement as to Specific Receivables .................................... 6
3.5. Reconveyance of Receivables .............................................. 7
ARTICLE IV
CONDITIONS OF PURCHASES
4.1. Conditions Precedent to Initial Purchase ................................. 7
4.2. Certification as to Representations and Warranties ....................... 8
ARTICLE V
REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER
5.1. Representations and Warranties; Covenants ................................ 8
</TABLE>
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<TABLE>
<C> <S> <C>
ARTICLE VI
ADDITIONAL RIGHTS AND OBLIGATIONS IN RESPECT OF THE RECEIVABLE
6.1. Rights of the Company .................................................... 8
6.2. Responsibilities of The Seller ........................................... 8
6.3. Further Action Evidencing Purchases ...................................... 9
6.4. Application of Collections ...............................................10
ARTICLE VII
PURCHASE AND SALE TERMINATION EVENTS
7.1. Purchase and Sale Termination Events .....................................10
7.2. Remedies .................................................................11
ARTICLE VIII
INDEMNIFICATION
8.1. Indemnities by the Seller ................................................12
ARTICLE IX
MISCELLANEOUS
9.1. Amendments, etc ..........................................................13
9.2. Notices, etc .............................................................14
9.3. No Waiver; Cumulative Remedies ...........................................14
9.4. Binding Effect; Assignability ............................................14
9.5. Costs, Expenses and Taxes ................................................14
9.6. Governing Law and Jurisdiction ...........................................15
9.7. Waiver of Jury Trial .....................................................15
9.8. Headings .................................................................16
9.9. Execution in Counterparts ................................................16
9.10. Acknowledgment and Agreement .............................................16
9.11. Assignment of Rights under Sale Agreements ...............................16
</TABLE>
SCHEDULES
<TABLE>
<S> <C>
SCHEDULE I Office Locations
</TABLE>
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<TABLE>
<S> <C>
SCHEDULE II Trade Names
</TABLE>
EXHIBITS
<TABLE>
<S> <C>
EXHIBIT A Form of Purchase Report
EXHIBIT B Form of Subordinated Note
EXHIBIT C Representations and Warranties
EXHIBIT D Covenants
</TABLE>
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PURCHASE AND SALE AGREEMENT
THIS PURCHASE AND SALE AGREEMENT (as amended, supplemented or modified
from time to time, this "Agreement"), dated as of September 30, 1998, is among
GREGORY STREET, INC., a Delaware corporation ("Gregory"), as Seller (the
"Seller") and as the initial Servicer (in such capacity, the "Servicer"), and
WARNACO OPERATIONS CORPORATION, a Delaware corporation (the "Company"), as
Buyer.
Definitions
Unless otherwise indicated, certain terms that are capitalized and
used throughout this Agreement are defined in Exhibit I to the Receivables
Purchase Agreement of even date herewith (as amended, supplemented or otherwise
modified from time to time, the "Receivables Purchase Agreement"), among the
Company, the Servicer, LIBERTY STREET FUNDING CORP. and CORPORATE ASSET FUNDING
COMPANY, INC. (the "Issuers"), THE BANK OF NOVA SCOTIA, as Agent (together with
its successors and assigns, the "Agent"), and CITICORP NORTH AMERICA, INC., as
Co-Agent (together with its successors and assigns, the "Co-Agent").
Background
1. The Company is a special purpose corporation, all of the capital
stock of which is wholly-owned by Gregory.
2. The Seller wishes to sell or contribute certain Receivables and
Related Rights from time to time to the Company, and the Company is willing, on
the terms and subject to the conditions set forth herein, to purchase such
Receivables and Related Rights and accept such contribution from the Seller.
3. The Company intends to sell to the Issuers undivided variable
percentage interests in its Receivables and Related Rights pursuant to the
Receivables Purchase Agreement in order to finance its purchases of certain
Receivables and Related Rights hereunder.
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NOW, THEREFORE, in consideration of the premises and the mutual
agreements herein contained, the parties hereto agree as follows:
ARTICLE I
AGREEMENT TO PURCHASE AND SELL
1.1. Agreement to Purchase and Sell. On the terms and subject to the
conditions set forth in this Agreement (including Article IV), and in
consideration of the Purchase Price, the Seller agrees to sell to the Company,
and does hereby sell to the Company, and the Company agrees to purchase from the
Seller, and does hereby purchase from the Seller, without recourse and without
regard to collectibility, all of the Seller's right, title and interest in and
to:
(a) each Receivable in existence and owned by the Seller as of the
close of the Seller's business on the date of the initial purchase under the
Receivables Purchase Agreement (the "Closing Date") (other than the Receivables
and Related Rights contributed by the Seller to the Company pursuant to Section
3.1 (the "Contributed Receivables"));
(b) each Receivable purchased by the Seller from the close of the
Seller's business on the Closing Date to and including the Purchase and Sale
Termination Date;
(c) all rights to, but not the obligations under, all Related
Security;
(d) all monies due or to become due with respect to any of the
foregoing;
(e) all books and records related to any of the foregoing; and
(f) all proceeds thereof (as defined in the applicable UCC) received
on or after the date hereof including, without limitation, all funds which
either are received by the Seller, the Originators, the Company or the Servicer
from or on behalf of the Obligors in payment of any amounts owed (including,
without limitation, finance charges, interest and all other charges) in respect
of Receivables, or are applied to such amounts owed by the
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Obligors (including, without limitation, insurance payments, if any, that any
Originator, the Seller or the Servicer applies in the ordinary course of its
business to amounts owed in respect of any Receivable).
All purchases and contributions hereunder shall be made without recourse, but
shall be made pursuant to and in reliance upon the representations, warranties
and covenants of the Seller set forth in this Agreement and each other
Transaction Document. The Company's foregoing commitment to purchase such
Receivables and the proceeds and rights described in subsections (c) through (f)
of this Section 1.1 (collectively, the "Related Rights") is herein called the
"Purchase Facility."
1.2. Timing of Purchases.
(a) Closing Date Purchases. The Seller's entire right, title and
interest in (i) each Receivable owned by the Seller as of the close of the
Seller's business on the Closing Date (other than Contributed Receivables), and
(ii) all Related Rights with respect thereto shall be deemed to have been sold
to the Company on the Closing Date.
(b) Regular Purchases. After the Closing Date, each Receivable
purchased by the Seller and all Related Rights shall be purchased and owned by
the Company (without any further action) upon the purchase of such Receivable by
the Seller.
1.3. Consideration for Purchases. On the terms and subject to the
conditions set forth in this Agreement, the Company agrees to make all Purchase
Price payments to the Seller, and to reflect all contributions, in accordance
with Article III.
1.4. Purchase and Sale Termination Date. The "Purchase and Sale
Termination Date" shall be the earlier to occur of (a) the date of the
termination of this Agreement pursuant to Section 7.2 and (b) the Payment Date
immediately following the day on which the Seller shall have given notice to the
Company (with a copy to the Agent) that the Seller desires to terminate this
Agreement.
As used herein, "Payment Date" means (i) the Closing Date and (ii)
each Business Day thereafter that the Seller is open for business.
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1.5. Intention of the Parties. It is the express intent of the
parties hereto that the transfers of the Receivables and Related Rights by the
Seller to the Company, as contemplated by this Agreement be, and be treated as,
sales or contributions, as applicable, and not as loans secured by the
Receivables and Related Rights. If, however, notwithstanding the intent of the
parties, such transfers are deemed to be loans, the Seller hereby grants to the
Company a first priority security interest in all of the Seller's right, title
and interest in and to the Receivables and the Related Rights now existing and
hereafter created, all monies due or to become due and all amounts received with
respect thereto, and all proceeds thereof, to secure all of the Seller's
obligations hereunder.
ARTICLE II
CALCULATION OF PURCHASE PRICE
2.1. Calculation of Purchase Price. On each Monthly Report Date, the
Servicer shall deliver to the Company, the Agent and the Co-Agent a report in
substantially the form of Exhibit A (each such report being herein called a
"Purchase Report") with respect to the matters set forth therein and the
Company's purchases of Receivables from the Seller that:
(a) are to be made on the Closing Date (in the case of the Purchase
Report to be delivered on the Closing Date), or
(b) were made during the period commencing on the Monthly Report Date
immediately preceding such Monthly Report Date to (but not including) such
Monthly Report Date (in the case of each subsequent Monthly Report).
The "Purchase Price" (to be paid to the Seller in accordance with the terms of
Article III) for the Receivables and the Related Rights that are purchased
hereunder shall be determined in accordance with the following formula:
PP = OB X FMVD
where:
PP = Purchase Price for each Receivable as calculated on the
relevant Payment Date.
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OB = the Outstanding Balance of such Receivable.
FMVD = Fair Market Value Discount, as measured on such Payment
Date, which is equal to the quotient (expressed as
percentage) of (a) one divided by (b) the sum of (i) one,
plus (ii) the product of (A) the Prime Rate on such Payment
Date, and (B) a fraction, the numerator of which is the
Days' Sales Outstanding (calculated as of the last day of
the Fiscal Month next preceding such Payment Date) and the
denominator of which is 365.
"Prime Rate" means a per annum rate equal to the "prime rate" as
published in the "Money Rates" section of The Wall Street Journal or such other
publication as determined by the Agent in its sole discretion.
ARTICLE III
CONTRIBUTION OF RECEIVABLES;
PAYMENT OF PURCHASE PRICE
3.1. Contribution of Receivables. On the Closing Date, the Seller
shall, and hereby does, contribute to the capital of the Company, Receivables
and Related Rights with respect thereto consisting of each Receivable owned by
the Seller on the Closing Date, beginning with the oldest of such Receivables
and continuing chronologically thereafter, such that the aggregate Outstanding
Balance of all such contributed Receivables shall be equal to $25,000,000.
3.2. Initial Purchase Price Payment. On the terms and subject to the
conditions set forth in this Agreement, the Company agrees to pay to the Seller
the Purchase Price for the purchase of Receivables to be made on the Closing
Date, partially in cash in the amount of the proceeds of the purchases made by
the Issuers on the Closing Date under the Receivables Purchase Agreement, and
partially by issuing a promissory note in the form of Exhibit B to the Seller
with an initial principal balance equal to the remaining Purchase Price (as such
promissory note may be amended, supplemented, indorsed or otherwise modified
from time to time, together with all promissory notes issued from time to time
in substitution therefor or renewal thereof in accordance with the
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Transaction Documents, being herein called the "Subordinated Note").
3.3. Subsequent Purchase Price Payments. On each Business Day falling
after the Closing Date and on or prior to the Purchase and Sale Termination
Date, on the terms and subject to the conditions set forth in this Agreement,
the Company shall pay to the Seller the Purchase Price for the Receivables sold
by the Seller to the Company on such Business Day, in cash, to the extent
provided under Section 1.2 of the Receivables Purchase Agreement, and to the
extent any of such Purchase Price remains unpaid, such remaining portion of such
Purchase Price shall be paid by means of an automatic increase to the
outstanding principal amount of the Subordinated Note.
Servicer shall make all appropriate record keeping entries with
respect to the Subordinated Note or otherwise to reflect the foregoing payments
and to reflect adjustments pursuant to Section 3.4, and Servicer's books and
records shall constitute rebuttable presumptive evidence of the principal amount
of and accrued interest on any Subordinated Note at any time. Furthermore,
Servicer shall hold the Subordinated Note for the benefit of the Seller, and all
payments under the Subordinated Note shall be made to the Servicer for the
account of the Seller. The Seller hereby irrevocably authorizes Servicer to mark
the Subordinated Note "CANCELLED" and to return the Subordinated Note to the
Company upon the final payment thereof after the occurrence of the Purchase and
Sale Termination Date.
3.4. Settlement as to Specific Receivables and Dilution.
(a) If on the day of purchase or contribution of any Receivable from
the Seller hereunder, any of the representations or warranties of the Seller set
forth in paragraph (d) or (g) of Exhibit C is not true with respect to such
Receivable or as a result of any action or inaction of the Seller, on any day
any of such representations or warranties set forth in paragraph(d) or (g) is no
longer true with respect to such a Receivable, then the Purchase Price (or in
the case of a Contributed Receivable, the Outstanding Balance of such Receivable
(the "Contributed Value")) with respect to such Receivables shall be reduced by
an amount equal to the Outstanding Balance of such Receivable and shall be
accounted to the Seller as provided in subsection (c) below; provided, that if
the Company thereafter receives payment on
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account of Collections due with respect to such Receivable, the Company promptly
shall deliver such funds to the Seller.
(b) If, on any day, the Outstanding Balance of any Receivable
(including any Contributed Receivable) purchased (or contributed) hereunder is
reduced or adjusted as a result of any defective, rejected, returned goods or
services, or any discount or other adjustment made by any Originator, the
Seller, the Company or the Servicer or any offset, setoff or dispute between
such Originator, the Seller, or the Servicer and an Obligor as indicated on the
books of the Company (or, for periods prior to the Closing Date, the books of
such Originator or the Seller), then the Purchase Price or the Contributed
Value, as the case may be, with respect to such Receivable shall be reduced by
the amount of such net reduction and shall be accounted to the Seller as
provided in subsection (c) below.
(c) Any reduction in the Purchase Price (or Contributed Value) of any
Receivable pursuant to subsection (a) or (b) above shall be applied as a credit
for the account of the Company against the Purchase Price of Receivables
subsequently purchased by the Company from the Seller hereunder; provided,
however, if there are no purchases of Receivables from the Seller (or
insufficiently large purchases of Receivables) to create a Purchase Price
sufficient to so apply such credit against, the amount of such credit
(i) shall be paid in cash to the Company by the Seller in the
manner and for application as described in the following proviso, or
(ii) shall be deemed to be a payment under, and shall be
deducted from the principal amount outstanding under, the Subordinated Note
payable to the extent permitted under Section 1(n) of Exhibit IV of the
Receivables Purchase Agreement;
provided, further, that at any time (y) when a Termination Event or Unmatured
Termination Event exists under the Receivables Purchase Agreement or (z) on or
after the Purchase and Sale Termination Date, the amount of any such credit
shall be paid by the Seller to the Company by deposit in immediately available
funds into the Collection Account for application by Servicer to the same extent
as if Collections of the applicable Receivable in such amount had actually been
received on such date.
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(d) Each Purchase Report (other than the Purchase Report delivered on
the Closing Date) shall include, in respect of the Receivables purchased by the
Seller (including the Contributed Receivables), a calculation of the aggregate
reductions described in subsection (a) or (b) relating to such Receivables since
the last Purchase Report delivered hereunder, as indicated on the books of the
Company (or, for such period prior to the Closing Date, the books of the
Seller).
3.5. Reconveyance of Receivables. In the event that the Seller has
paid to the Company the full Outstanding Balance of any Receivable pursuant to
Section 3.4, the Company shall reconvey such Receivable to the Seller, without
representation or warranty, but free and clear of all liens created by the
Company.
ARTICLE IV
CONDITIONS OF PURCHASES
4.1. Conditions Precedent to Initial Purchase. The initial purchase
and contribution hereunder is subject to the condition precedent that the
Company shall have received, on or before the Closing Date, the following, each
(unless otherwise indicated) dated the Closing Date, and each in form, substance
and date satisfactory to the Company, the Agent and the Co-Agent:
(a) The Receivables Purchase Agreement, duly executed by the parties
thereto, together with evidence that all conditions precedent to the initial
purchase thereunder shall have been met; and;
(b) Such other agreements, instruments, certificates, opinions and
other documents as the Company, the Agent or the Co-Agent shall reasonably
request.
4.2. Certification as to Representations and Warranties. The Seller,
by accepting the Purchase Price related to each purchase of Receivables (and
Related Rights), shall be deemed to have certified that the representations and
warranties contained in Exhibit C are true and correct on and as of such day,
with the same effect as though made on and as of such day.
ARTICLE V
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REPRESENTATIONS, WARRANTIES AND COVENANTS OF THE SELLER
5.1. Representations and Warranties; Covenants. In order to induce
the Company to enter into this Agreement and to make purchases and accept
contributions hereunder, the Seller hereby makes the representations and
warranties and hereby agrees to perform and observe the covenants set forth in
Exhibits C and D, respectively.
ARTICLE VI
ADDITIONAL RIGHTS AND OBLIGATIONS IN
RESPECT OF THE RECEIVABLES
6.1. Rights of the Company. The Seller hereby authorizes the Company
and the Servicer or their respective designees to take any and all steps in the
Seller's name necessary or desirable, in their respective determination, to
collect all amounts due under any and all Receivables and Related Rights,
including, without limitation, endorsing the Seller's name on checks and other
instruments representing Collections and enforcing such Receivables and the
provisions of the related Contracts that concern payment and/or enforcement of
rights to payment.
6.2. Responsibilities of The Seller. Anything herein to the contrary
notwithstanding:
(a) The Seller agrees to (A) direct, and hereby grants to each of the
Company and the Agent the authority to direct, all Obligors of Receivables
purchased by the Seller to make payments of such Receivables directly to the
Collection Account or to post office boxes to which only the Collection Account
Bank has access, and (B) to transfer any Collections that it receives directly,
into the Collection Account within two Business Days of receipt thereof, and
agrees that all such Collections shall be deemed to be received in trust for the
Company.
(b) The Seller shall perform its obligations hereunder, and the
exercise by the Company or its designee of its rights hereunder shall not
relieve the Seller from such obligations.
(c) None of the Company, the Servicer, the Issuers, the Agent or
Co-Agent shall have any obligation or liability to any Obligor or any other
third Person with respect to any Receivables,
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Contracts related thereto or any other related agreements, nor shall the
Company, the Servicer, the Investors, the Agent or the Co-Agent be obligated
to perform any of the obligations of the Seller thereunder.
(d) The Seller hereby grants to the Company, the Servicer and the
Agent an irrevocable power of attorney, with full power of substitution, coupled
with an interest, to take in the name of the Seller all steps necessary or
advisable to indorse, negotiate or otherwise realize on any writing or other
right of any kind held or transmitted by the Seller or transmitted or received
by the Company (whether or not from the Seller) in connection with any
Receivable or Related Right.
6.3. Further Action Evidencing Purchases. The Seller agrees that from
time to time, at its expense, it will promptly execute and deliver all further
instruments and documents, and take all further action that the Company or the
Servicer may reasonably request in order to perfect, protect or more fully
evidence the Receivables (and the Related Rights) purchased by, or contributed
to, the Company hereunder, or to enable the Company to exercise or enforce any
of its rights hereunder or under any other Transaction Document. Without
limiting the generality of the foregoing, upon the request of the Company, the
Seller will (a) execute and file such financing or continuation statements, or
amendments thereto or assignments thereof, and such other instruments or
notices, as may be necessary or appropriate and (b) mark the summary master
control data processing records with the following legend:
"THE RECEIVABLES DESCRIBED HEREIN HAVE BEEN SOLD TO WARNACO OPERATIONS
CORPORATION PURSUANT TO A PURCHASE AND SALE AGREEMENT, DATED AS OF
SEPTEMBER 30, 1998, AMONG GREGORY STREET, INC., AND WARNACO OPERATIONS
CORPORATION; AND AN INTEREST IN THE RECEIVABLES DESCRIBED HEREIN HAS
BEEN GRANTED TO LIBERTY STREET FUNDING CORP. AND CORPORATE ASSET
FUNDING COMPANY, INC., PURSUANT TO A RECEIVABLES PURCHASE AGREEMENT,
DATED AS OF SEPTEMBER 30, 1998, AMONG WARNACO OPERATIONS CORPORATION,
GREGORY STREET, INC., LIBERTY STREET FUNDING CORP., CORPORATE ASSET
FUNDING COMPANY, INC., THE BANK OF NOVA SCOTIA, AS AGENT AND, CITICORP
NORTH AMERICA, INC., AS CO-AGENT."
The Seller hereby authorizes the Company or its designee to file one or more
financing or continuation statements, and amendments
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thereto and assignments thereof, relative to all or any of the Receivables (and
the Related Rights) now owned by or hereafter acquired by the Seller. If the
Seller fails to perform any of its agreements or obligations under this
Agreement, the Company or its designee may (but shall not be required to) itself
perform, or cause performance of, such agreement or obligation, and the expenses
of the Company or its designee incurred in connection therewith shall be payable
by the Seller as provided in Section 8.1.
6.4. Application of Collections. Any payment by an Obligor in respect
of any indebtedness owed by it to any Originator or the Seller shall, except as
otherwise specified by such Obligor or otherwise required by contract or law and
unless otherwise instructed by the Company or the Administrator, be applied
first, as a Collection of any Receivables of such Obligor, in the order of the
age of such Receivables, starting with the oldest of such Receivables, and
second, to any other indebtedness of such Obligor.
ARTICLE VII
PURCHASE AND SALE TERMINATION EVENTS
7.1. Purchase and Sale Termination Events. Each of the following
events or occurrences described in this Section 8.1 shall constitute a "Purchase
and Sale Termination Event":
(a) The Facility Termination Date (as defined in the Receivables
Purchase Agreement) shall have occurred; or
(b) The Seller shall fail to make when due any payment or deposit to
be made by the Seller under this Agreement within three Business Days of the
date on which such payment or deposit is due; or
(c) Any representation or warranty made or deemed to be made by the
Seller (or any of its officers) under or in connection with this Agreement, any
other Transaction Document or any other information or report delivered pursuant
hereto or thereto shall prove to have been incorrect or untrue in any material
respect when made or deemed made or delivered; or
(d) The Seller shall fail to perform or observe in any material
respect any other term, covenant or agreement contained
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in this Agreement on its part to be performed or observed and such failure shall
remain unremedied for thirty (30) days after the Seller shall have obtained
actual knowledge or notice thereof; or
(e) (i) The Seller shall generally not pay its debts as such debts
become due, or shall admit in writing its inability to pay its debts generally,
or shall make a general assignment for the benefit of creditors; or any
proceeding shall be instituted by or against the Seller seeking to adjudicate it
a bankrupt or insolvent, or seeking liquidation, winding up, reorganization,
arrangement, adjustment, protection, relief, or composition of it or its debts
under any law relating to bankruptcy, insolvency or reorganization or relief of
debtors, or seeking the entry of an order for relief or the appointment of a
receiver, trustee, or other similar official for it or for all or any
substantial part of its property and, in the case of any such proceeding
instituted against it (but not instituted by it), such proceeding shall remain
undismissed or unstayed for a period of 60 days, or any of the actions sought in
such proceeding (including the entry of an order for relief against, or the
appointment of a receiver, trustee, custodian or other similar official for, it
or for any substantial part of its property) shall occur; or (ii) the Seller
shall take any corporate action to authorize any of the actions set forth in
clause (i) above in this Section 7.1(e); or
(f) either: (i) a contribution failure shall occur with respect to any
Benefit Plan sufficient to give rise to a lien under Section 302(f) of ERISA,
(ii) the Internal Revenue Service shall file a notice of a lien asserting a
claim or claims pursuant to the Internal Revenue Code with regard to any of the
assets of the Seller or any ERISA Affiliate, or (iii) the Pension Benefit
Guaranty Corporation shall file notice of a lien asserting a claim pursuant to
ERISA with regard to any assets of the Seller or an ERISA Affiliate.
(g) There shall have occurred any event that would, with the giving of
notice or the passing of time or both, have a Material Adverse Effect.
7.2. Remedies.
(i) Optional Termination. Upon the occurrence of a Purchase and
Sale Termination Event, the Company shall have the option by notice to
the Seller (with a copy to the Agent)
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to declare the Purchase and Sale Termination Date to have occurred.
(ii) Remedies Cumulative. Upon any termination of the Purchase
Facility pursuant to this Section 7.2, the Company shall have, in
addition to all other rights and remedies under this Agreement or
otherwise, all other rights and remedies provided under the UCC of
each applicable jurisdiction and other applicable laws, which rights
shall be cumulative.
ARTICLE VIII
INDEMNIFICATION
8.1. Indemnities by the Seller. Without limiting any other rights
which the Company or any Purchase and Sale Indemnified Party may have hereunder
or under applicable law, the Seller hereby agrees to indemnify the Company and
each of its assigns, officers, directors, employees and agents (each of the
foregoing Persons being individually called a "Purchase and Sale Indemnified
Party"), forthwith on demand, from and against any and all claims, damages,
expenses, costs, losses and liabilities (including Attorney Costs) (all of the
foregoing being collectively referred to as "Purchase and Sale Indemnified
Amounts") awarded against or incurred by any of them arising out of or resulting
from this Agreement (whether directly or indirectly), the use of the proceeds
acquired by the Seller hereunder , the ownership of the Receivables and Related
Rights or in respect of any Receivable, Related Security or Contract. Without
limiting or being limited by the foregoing, and subject to the exclusions set
forth below, the Seller shall pay on demand to each Purchase and Sale
Indemnified Party any and all amounts necessary to indemnify such party from and
against any and all Purchase and Sale Indemnified Amounts resulting from any of
the following:
(a) the transfer by the Seller of an interest in any Receivable or
Related Right to any Person other than the Company;
(b) the breach of any representation or warranty made by the Seller
under or in connection with this Agreement or any other Transaction Document, or
any information or report delivered by the Seller pursuant hereto or thereto
which shall have been false or incorrect in any respect when made or deemed
made;
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(c) the failure by the Seller to comply with any applicable law, rule
or regulation with respect to any Receivable or the related Contract, or the
nonconformity of any Receivable or the related Contract with any such applicable
law, rule or regulation;
(d) the failure to vest and maintain vested in the Company an
ownership interest in the Receivables and the Related Rights free and clear of
any Adverse Claim;
(e) the failure of the Seller to file with respect to itself, or any
delay by the Seller in filing, financing statements or other similar instruments
or documents under the UCC of any applicable jurisdiction or other applicable
laws with respect to any Receivables or purported Receivables or any Related
Rights, whether at the time of any purchase or contribution or at any subsequent
time;
(f) any dispute, claim, offset or defense (other than discharge in
bankruptcy) of the Obligor to the payment of any Receivable or purported
Receivable (including, without limitation, a defense based on such Receivable or
the related Contract not being a legal, valid and binding obligation of such
Obligor enforceable against it in accordance with its terms), or any other claim
resulting from the goods or services related to any such Receivable or the
furnishing of or failure to furnish such goods or services;
(g) any product liability claim arising out of or in connection with
goods or services that are the subject of any Receivable;
(h) any litigation, proceeding or investigation against the Seller;
(i) any tax or governmental fee or charge (other than any tax excluded
pursuant to the proviso below), all interest and penalties thereon or with
respect thereto, and all out-of-pocket costs and expenses, including the
reasonable fees and expenses of counsel in defending against the same, which may
arise by reason of the purchase, contribution or ownership of the Receivables or
any Related Right connected with any such Receivables; and
(j) any failure of the Seller to perform its duties or obligations in
accordance with the provisions of this Agreement or any other Transaction
Document;
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excluding, however, (i) Purchase and Sale Indemnified Amounts to the extent
resulting from gross negligence or willful misconduct on the part of a Purchase
and Sale Indemnified Party, (ii) any indemnification which has the effect of
recourse for non-payment of the Receivables due to credit reasons to any
indemnitor (except as otherwise specifically provided under this Section 8.1)
and (iii) any tax based upon or measured by net income or gross receipts.
ARTICLE IX
MISCELLANEOUS
9.1. Amendments, etc.
(a) The provisions of this Agreement may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Company, the Servicer, the Agent and the Seller (with
respect to an amendment) or by the Company (with respect to a waiver or consent
by it).
(b) No failure or delay on the part of the Company, the Servicer, the
Seller or any third party beneficiary in exercising any power or right hereunder
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 Company, the
Servicer or the Seller in any case shall entitle it to any notice or demand in
similar or other circumstances. No waiver or approval by the Company or Servicer
under this Agreement shall, except as may otherwise be stated in such waiver or
approval, be applicable to subsequent transactions. No waiver or approval under
this Agreement shall require any similar or dissimilar waiver or approval
thereafter to be granted hereunder.
9.2. Notices, etc. All notices and other communications provided for
hereunder shall, unless otherwise stated herein, be in writing (which shall
include facsimile communication) and be sent or delivered to each party hereto
at its address set forth under its name on the signature pages hereof or at such
other address as shall be designated by such party in a written notice to the
other parties hereto. Notices and communications by facsimile shall be effective
when sent (and shall be followed by
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hard copy sent by first-class mail) and notices and communications sent by other
means shall be effective when received.
9.3. No Waiver; Cumulative Remedies. The remedies herein provided are
cumulative and not exclusive of any remedies provided by law.
9.4. Binding Effect; Assignability. This Agreement shall be binding
upon and inure to the benefit of the Company and the Seller and their respective
successors and permitted assigns; provided, however, that the Seller may not
assign its rights hereunder or any interest herein or delegate its duties
hereunder without the prior consent of the Company and the Agent. This Agreement
shall create and constitute the continuing obligations of the parties hereto in
accordance with its terms, and shall remain in full force and effect until the
date after the Purchase and Sale Termination Date on which the Seller has
received payment in full for all Receivables and Related Rights purchased
pursuant to Section 1.1 hereof. The rights and remedies with respect to any
breach of any representation and warranty made by the Seller pursuant to
Article V and the indemnification and payment provisions of Article VIII and
Section 9.5 shall be continuing and shall survive any termination of this
Agreement.
9.5. Costs, Expenses and Taxes. In addition to the obligations of the
Seller under Article XIII, the Seller agrees to pay on demand:
(a) all reasonable costs and expenses in connection with the
enforcement of this Agreement and the other Transaction Documents; and
(b) all stamp and other similar taxes and fees payable or determined
to be payable in connection with the execution, delivery, filing and recording
of this Agreement or the other Transaction Documents, and agrees to indemnify
each Purchase and Sale Indemnified Party against any liabilities with respect to
or resulting from any delay in paying or omission to pay such taxes and fees.
9.6. Governing Law and Jurisdiction.
(a) THIS AGREEMENT SHALL BE DEEMED TO BE A CONTRACT MADE UNDER AND
GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK (INCLUDING FOR SUCH
PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
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GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK) EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF A SECURITY INTEREST OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT
MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES
FOR THE SOUTHERN DISTRICT OF NEW YORK; AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES
HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE
MAY BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
9.7. Waiver of Jury Trial. EACH OF THE PARTIES HERETO WAIVES ITS
RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED UPON OR ARISING
OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY IN
ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE
PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT
CLAIMS, TORT CLAIMS OR OTHERWISE. EACH OF THE PARTIES HERETO AGREES THAT ANY
SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A JURY.
WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO FURTHER AGREES THAT
ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS SECTION
AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING THAT SEEKS, IN WHOLE OR IN
PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY
PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
9.8. Headings. The captions and headings of this Agreement and any
Exhibit, Schedule or Annex hereto are for convenience of reference only and
shall not affect the interpretation hereof or thereof.
9.9. Execution in Counterparts. This Agreement may be executed in any
number of counterparts and by different parties hereto in separate counterparts,
each of which when so
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executed shall be deemed to be an original and all of which when taken together
shall constitute one and the same Agreement.
9.10. Acknowledgment and Agreement. By execution below, the Seller
expressly acknowledges and agrees that all of the Company's rights, title, and
interests in, to, and under this Agreement shall be assigned by the Company to
the Issuers pursuant to the Receivables Purchase Agreement, and the Seller
consents to such assignment. Each of the parties hereto acknowledges and agrees
that the Agent, the Co-Agent and the Issuers are third party beneficiaries of
the rights of the Company arising hereunder and under the other Transaction
Documents to which the Seller is a party.
9.11. Assignment of Rights under Sale Agreements. The Seller hereby
assigns to the Company all of the Seller's rights, title and interests under the
Calvin Klein Sale Agreement and the Warnaco Sale Agreement, including, without
limitation, the Seller's right to indemnification and payment under Sections
[8.1] and [9.5] of the Calvin Klein Sale Agreement and Sections 8.1 and 9.5 of
the Warnaco Sale Agreement.
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
GREGORY STREET, INC., as Seller
and Servicer
By: /s/ Carl J. Deddens
_____________________________________
Name: Carl J. Deddens
Title: Assistant Treasurer
325 Lafayette Street
Bridgeport, Connecticut 06601
Attention: Carl J. Deddens
Assistant Treasurer
Telephone: (203) 579-8040
Facsimile: (203) 334-6621
WARNACO OPERATIONS CORPORATION
By: /s/ William S. Finkelstein
_____________________________________
Name: William S. Finkelstein
Title: President
325 Lafayette Street
Bridgeport, Connecticut 06601
Attention: President
Telephone: (203) 579-8550
Facsimile: (203) 334-6621
<PAGE>
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SCHEDULE I
OFFICE LOCATIONS
325 Lafayette Street
Bridgeport, Connecticut 06601
<PAGE>
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SCHEDULE II
TRADE NAMES
None.
<PAGE>
<PAGE>
EXHIBIT A
FORM OF PURCHASE REPORT
<PAGE>
<PAGE>
EXHIBIT B
FORM OF SUBORDINATED NOTE
<PAGE>
<PAGE>
EXHIBIT C
REPRESENTATIONS AND WARRANTIES
1. Representations and Warranties of the Seller. The Seller represents and
warrants as follows:
(a) The Seller is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, and is duly qualified to
do business and is in good standing as a foreign corporation in every
jurisdiction where the nature of its business requires it to be so qualified,
except where the failure to be so qualified would not have a Material Adverse
Effect.
(b) The execution, delivery and performance by the Seller of the Agreement
and the other Transaction Documents to which it is a party: (i) are within its
corporate powers; (ii) have been duly authorized by all necessary corporate
action; (iii) do not contravene in any material respect or result in a default
under or conflict with: (A) its charter or by-laws, (B) any law, rule or
regulation applicable to it, (C) any indenture, loan agreement, mortgage, deed
of trust or other agreement or instrument to which it is a party or by which it
is bound, or (D) any law or any order, writ, judgment, award, injunction or
decree binding on or affecting it or any of its property; and (iv) do not result
in or require the creation of any Adverse Claim upon or with respect to any of
its properties. The Agreement and the other Transaction Documents to which it is
a party have been duly executed and delivered by the Seller.
(c) No authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority or other Person is required for the due
execution, delivery and performance by the Seller of the Agreement or any other
Transaction Document to which it is a party, other than the Uniform Commercial
Code filings referred to in Exhibit II to the Receivables Purchase Agreement,
all of which shall have been filed on or before the date of the first purchase
or contribution, as the case may be, hereunder.
(d) Each sale or contribution, as the case may be, of Receivables and
Related Rights made by the Seller pursuant to this Agreement shall constitute a
valid sale or contribution, as the case may be, transfer and assignment thereof
to the Company,
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enforceable against creditors of, and purchasers from, the Seller; and each of
the Agreement and the other Transaction Documents to which the Seller is a party
constitutes its legal, valid and binding obligation of the Seller enforceable
against the Seller in accordance with its terms, except as such enforceability
may be limited by bankruptcy, insolvency, reorganization or other similar laws
from time to time in effect affecting the enforcement of creditors' rights
generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) There is no litigation or, to the Seller's knowledge, any proceeding or
investigation pending before any court, regulatory body, arbitrator,
administrative agency, or other tribunal or governmental instrumentality (i)
asserting the invalidity of any Transaction Document, (ii) seeking to prevent
the sale or contribution of Receivables and Related Rights to the Company or the
consummation of any of the other transactions contemplated by any Transaction
Document, or (iii) seeking any determination or ruling that could reasonably be
expected to have a Material Adverse Effect.
(f) No proceeds acquired by the Seller under this Agreement will be used by
the Seller to acquire any equity security of a class that is registered pursuant
to Section 12 of the Securities Exchange Act of 1934.
(g) The Seller is the legal and beneficial owner of each Receivable
(together with the Related Rights) which is to be sold or contributed to the
Company hereunder, free and clear of any Adverse Claim. Whenever the Company
makes a purchase, or accepts a contribution, hereunder, it shall have acquired a
valid and enforceable perfected ownership interest in such Receivable and in the
Related Security, Collections and other proceeds with respect thereto, free and
clear of any Adverse Claim. No effective financing statement or other instrument
similar in effect covering any such Receivable is on file in any recording
office, except those filed in favor of (A) Gregory pursuant to the Warnaco Sale
Agreement and the Calvin Klein Sale Agreement, (B) the Company pursuant to this
Agreement and (C) the Agent pursuant to the Receivables Purchase Agreement.
(h) Each Purchase Report (if prepared by the Seller or one of its
Affiliates, or to the extent that information contained therein is supplied by
the Seller or an Affiliate), information, exhibit, financial statement,
document, book, record or report furnished or to be furnished at any time by or
on behalf of the Seller to the Agent in connection with the Agreement or any
other Transaction Document to which it is a party is or will be complete and
accurate in all material respects as of its date or as of the date so furnished.
(i) The Seller's principal place of business and chief executive office (as
such terms are used in the UCC) is located at the address set forth under the
Seller's signature hereto, and the office where it keeps its records concerning
the Receivables are located at the address
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specified on Schedule I (or at such other locations, notified to Servicer and
the Agent in accordance with paragraph 1(b) of Exhibit D, where all actions
required by Section 6.3 of this Agreement have been taken and completed.
(j) The Seller is not in violation of any order of any court, arbitrator or
Governmental Authority, the violation of which would have a Material Adverse
Effect on the Seller.
(k) No proceeds acquired by the Seller under this Agreement will be used
for any purpose that violates any applicable law, rule or regulation, including
Regulations T, U or X of the Federal Reserve Board.
(l) Unless otherwise identified to the Company in the related Purchase
Report, each Receivable sold or contributed hereunder is on the date of sale or
contribution an Eligible Receivable.
(m) No transaction contemplated hereby requires compliance with any sales
bulk act or similar law.
(n) The Seller has complied in all material respects with the Credit and
Collection Policy.
(o) The Seller has complied in all material respects with all of the terms,
covenants and agreements contained in the Agreement and the other Transaction
Documents that are applicable to it.
(p) The Seller's complete corporate name is set forth in the preamble to
the Agreement, and it does not use and has not since its incorporation used any
other corporate name, trade name, doing-business name or fictitious name, except
as set forth on Schedule II to the Agreement and except for names first used
after the date of the Agreement and set forth in a notice delivered to the Agent
pursuant to paragraph 1(b) of Exhibit D to the Agreement.
(q) The Seller is not an "investment company," or a company "controlled" by
an "investment company" within the meaning of the Investment Company Act of
1940, as amended. In addition, the Seller is not a "holding company," 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.
(r) The Seller has reviewed the areas within its business and operations
which could be adversely affected by, and has developed or is developing a
program to address on a timely basis, the risk that certain computer
applications used by the Seller may be unable to recognize and perform properly
date-sensitive functions involving dates prior to and after December 31,
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1999 (the "Year 2000 Problem"). Based on such review and program, the Year 2000
Problem could not reasonably be expected to have any Material Adverse Effect.
(s) The Seller has filed all material tax returns and reports required by
law to have been filed by it and has paid all taxes and governmental charges
thereby shown to be owing, except any such taxes which are not yet delinquent or
are being diligently contested in good faith by appropriate proceedings and for
which adequate reserves in accordance with generally accepted accounting
principles shall have been set aside on its books.
(t) (i) The Seller has not failed to obtain any licenses, permits,
franchises or other governmental authorizations necessary to the ownership of
its properties or to the conduct of its business, which violation or failure to
obtain would be reasonably likely to have a Material Adverse Effect; and
(ii) There are no labor controversies pending against the Seller that
have had (or are reasonably likely to have) a Material Adverse Effect.
(u) The Seller is in compliance, in all material respects, with the
requirements of (i) all applicable laws, rules, regulations, and orders of all
governmental authorities (including, without limitation, Regulation Z, laws,
rules and regulations relating to usury, truth in lending, fair credit billing,
fair credit reporting, equal credit opportunity, fair debt collection practices
and privacy and all other consumer laws applicable to the Receivables and
related Contracts) (excluding with respect to environmental matters which are
covered by clause (ii)), and (ii) to the best of its knowledge, all applicable
environmental laws, rules, regulations and orders of all governmental
authorities.
(v) The Seller is aware that the Investors, the Agent and the Co-Agent are
entering into the Transaction Documents to which they are parties in reliance
upon the Company's identity as a legal entity separate from the Seller and the
Originators.
(w) The purchase price payable by the Company to the Seller hereunder is
intended by the Seller and Company to be consistent with the terms that would be
obtained in an arm's length sale.
(x) On the date hereof, and on the date of each sale of Receivables by the
Seller to the Company (both before and after giving effect to such sale), the
Seller shall be Solvent.
(y) The balance sheets of Warnaco and its consolidated Subsidiaries as at
January 3, 1998, and the related income and retained earnings for the fiscal
year then ended, copies of which have been furnished to the Agent and the
Co-Agent, fairly present the financial condition of Warnaco and its consolidated
Subsidiaries as at such date and the results of the operations of Warnaco and
its Subsidiaries for the period ended on such date, all in accordance with
generally accepted accounting principles consistently applied, and since January
3, 1998 there has been no event or circumstance which has had a Material Adverse
Effect.
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EXHIBIT D
COVENANTS
1. Covenants of the Seller. From the date hereof until the first day following
the Purchase and Sale Termination Date:
(a) Compliance with Laws, Etc. The Seller shall comply in all material
respects with all applicable laws, rules, regulations and orders, and preserve
and maintain its corporate existence, rights, franchises, qualifications and
privileges, except to the extent that the failure so to comply with such laws,
rules and regulations or the failure so to preserve and maintain such rights,
franchises, qualifications and privileges would not have a Material Adverse
Effect.
(b) Offices, Records and Books of Account, Etc. The Seller: (i) shall keep
its principal place of business and chief executive office (as such terms or
similar terms are used in the UCC) and the office where it keeps its records
concerning the Receivables at the address of the Seller set forth under its name
on the signature page to the Agreement or, upon 30 days' prior written notice to
the Company and the Agent, at any other locations in jurisdictions where all
actions reasonably requested by the Company or the Agent to protect and perfect
the interest of the Company in the Receivables and Related Rights have been
taken and completed and (ii) shall provide the Company and the Agent with at
least 30 days' written notice before making any change in the Seller's name or
making any other change in the Seller's identity or corporate structure
(including a Change in Control) that could render any UCC financing statement
filed in connection with this Agreement "seriously misleading" as such term (or
similar term) is used in the UCC; each notice to the Company or the Agent
pursuant to this sentence shall set forth the applicable change and the
effective date thereof. The Seller also will maintain and implement (or cause
the Servicer to maintain and implement) administrative and operating procedures
(including an ability to recreate records evidencing Receivables and related
Contracts in the event of the destruction of the originals thereof), and keep
and maintain (or cause the Servicer to keep and maintain) all documents, books,
records, computer tapes and disks and other information reasonably necessary or
advisable for the collection
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of all Receivables (including records adequate to permit, as and when necessary,
the daily identification of each Receivable and all Collections of and
adjustments to each existing Receivable).
(c) Performance and Compliance with Credit and Collection Policy. The
Seller shall fully comply in all material respects with the Credit and
Collection Policy.
(d) Sales, Liens, Etc. The Seller shall not sell, assign (by operation of
law or otherwise) or otherwise dispose of, or create or suffer to exist any
Adverse Claim upon or with respect to, any or all of its right, title or
interest in, to or under any Receivable, Related Rights or Collections, or upon
or with respect to any account to which any Collections of any Receivables are
sent), or assign any right to receive income in respect of any items
contemplated by this paragraph; it being understood that the Servicer may sell a
Defaulted Receivable if the Servicer believes in good faith that such sale will
maximize the amount to be received by the Company with respect to such
Receivable.
(e) Change in Credit and Collection Policy. The Seller shall not make any
material change in the character of its business or the Credit and Collection
Policy that would materially adversely affect the collectibility of the
Receivables or the enforceability of any related Contract or the ability of the
Seller to perform its obligations under the Agreement.
(f) Audits. (i) The Seller shall from time to time during regular business
hours as reasonably requested in advance (unless a Purchase and Sale Termination
Event exists) by the Company, the Agent or the Co-Agent, permit the Company, the
Agent or the Co-Agent, or their agents or representatives: (A) to examine and
make copies of and abstracts from all books, records and documents (including
computer tapes and disks) in the possession or under the control of the Seller
relating to Receivables and the Related Security, including the related
Contracts, and (B) to visit the offices and properties of the Seller for the
purpose of examining such materials described in clause (i)(A) above, and to
discuss matters relating to Receivables and the Related Security or the Seller's
performance under the Transaction Documents with any of the officers, employees,
agents or contractors of the Seller, having knowledge of such matters; and (ii)
without limiting the provisions of
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clause (i) next above, from time to time during regular business hours, upon
five Business Days prior written notice from the Company, the Agent or the
Co-Agent, permit certified public accountants or other auditors acceptable to
the Company, the Agent or the Co-Agent to conduct a review of the Seller's books
and records, at the Seller's expense, with respect to the Receivables.
(g) Change in Payment Instructions to Obligors. The Seller shall not, and
shall not permit the Servicer or any Originator to make any change in its
instructions to Obligors regarding payments to be made to the Seller, such
Originator, the Servicer or the Collection Account (or related post office box),
unless the Agent shall have consented thereto in writing (which consent shall
not be unreasonably withheld).
(h) Deposits to Collection Account. The Seller shall (or shall cause the
Servicer to): (i) instruct all Obligors to make payments of all Receivables to
the Collection Account or to post office boxes to which only the Collection
Account Bank has access (and shall instruct the Collection Account Bank to cause
all items and amounts relating to such Receivables received in such post office
boxes to be removed and deposited into the Collection Account on a daily basis),
and (ii) deposit, or cause to be deposited, any Collections received by it, the
Servicer or any Originator into the Collection Account not later than two
Business Days after receipt thereof. The Collection Account shall at all times
be subject to the Collection Account Agreement. The Seller will not (and will
not permit the Servicer to) deposit or otherwise credit, or cause or permit to
be so deposited or credited, to the Collection Account cash or cash proceeds
other than Collections.
(i) Reporting Requirements. The Seller shall provide to the Agent the
following:
(i) As soon as available and in any event within 45 days after the end
of each of the first three quarters of each fiscal year of the Seller, (a)
a copy of the unaudited balance sheet of the Seller, as at the end of such
quarter, together with unaudited statements of earnings and stockholders'
equity for such quarter and the portion of the fiscal year through such
quarter, prepared in accordance with GAAP and certified by the chief
financial officer, treasurer or chief accounting officer of the
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Seller, and (b) a letter from the chief financial officer, treasurer or
chief accounting officer of the Seller, certifying to the best knowledge of
such officer, that neither a Purchase and Sale Termination Event nor an
Unmatured Purchase and Sale Termination Event has occurred and is
continuing;
(ii) As soon as available and in any event within 90 days after the
end of each fiscal year of the Seller, (a) a copy of the unaudited balance
sheet of the Seller, as at the end of such fiscal year, together with the
related statements of earnings and stockholders' equity for such fiscal
year, prepared in accordance with GAAP applied consistently throughout the
periods reflected therein, and (b) a letter from the chief financial
officer, treasurer or chief accounting officer of the Seller, certifying to
the best knowledge of such officer, that neither a Purchase and Sale
Termination Event nor an Unmatured Purchase and Sale Termination Event has
occurred and is continuing, in each case as at the end of each such fiscal
year and the date of delivery of such letter;
(iii) promptly after the filing or receiving thereof, copies of all
reports and notices that the Seller or any Affiliate files under ERISA with
the Internal Revenue Service, the Pension Benefit Guaranty Corporation or
the U.S. Department of Labor or that the Seller or any Affiliate receives
from any of the foregoing or from any multi employer plan (within the
meaning of Section 4001(a)(3) of ERISA) to which the Seller or any of its
Affiliates is or was, within the preceding five years, a contributing
employer, in each case in respect of the assessment of withdrawal liability
or an event or condition that could, in the aggregate, result in the
imposition of liability on the Seller and/or any such Affiliate;
(iv) promptly after the Seller obtains knowledge thereof, notice of
any: (A) material litigation, investigation or proceeding that may exist at
any time between the Seller and any Person or (B) material litigation or
proceeding relating to any Transaction Document;
(v) promptly after the occurrence thereof, notice of a change in the
business, operations, property or financial or other condition of the
Seller, the Servicer or any Originator which would have a Material Adverse
Effect; and
(vi) such other information respecting the Receivables or the
condition or operations, financial or otherwise, of
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the Seller or any of its Affiliates as the Company, Agent or the Co-Agent
may from time to time reasonably request upon reasonable notice.
(j) Certain Agreements. Without the prior written consent of the Agent and
the Co-Agent, the Seller will not (and will not permit any Originator to) amend,
modify, waive, revoke or terminate any Transaction Document to which it is a
party.
(k) Extension or Amendment of Receivables. Except as provided in Section
4.2(a) of the Receivables Purchase Agreement and the Credit and Collection
Policy, the Seller shall not extend the maturity or adjust the Outstanding
Balance or otherwise modify the terms of any Receivable, or amend, modify or
waive any term or condition of any related Contract.
(l) Receivables Not to be Evidenced by Promissory Notes or Chattel Paper.
The Seller shall not take any action to cause or permit any Receivable purchased
by it to become evidenced by any "instrument" or "chattel paper" (as defined in
the applicable UCC) unless such "instrument" or "chattel paper" shall be
delivered to the Company (which in turn shall deliver the same to the Agent on
behalf of the Issuers.
(m) Mergers, Acquisitions, Sales, etc. The Seller shall not merge or
consolidate with another Person (except pursuant to a merger or consolidation
involving the Seller where the Seller is the surviving corporation), or convey,
transfer, lease or otherwise dispose of (whether in one or in a series of
transactions), all or substantially all of its assets (whether now owned or
hereafter acquired), other than pursuant to this Agreement).
(n) Accounting for Purchases. The Seller shall not account for or treat
(whether in financial statements or otherwise) the transactions contemplated
hereby in any manner other than as sales or contributions of the Receivables and
Related Rights by the Seller to the Company.
(o) Transaction Documents. The Seller shall not enter into, execute,
deliver or otherwise become bound by any agreement, instrument, document or
other arrangement that restricts the right of the Seller to amend, supplement,
amend and restate or otherwise modify, or to extend or renew, or to waive any
right under, this Agreement or any other Transaction Documents.
(p) Separate Existence. From and after the date hereof, the Seller shall
take all steps specifically required by the Agreement or reasonably required by
the Agent to continue the Company's identity as a separate legal entity and to
make it apparent to third Persons that the Company is an entity with assets and
liabilities distinct from those of the Seller and the Originators and any other
Person, and is not a division of the Seller, its Affiliates or any
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other Person. Without limiting the generality of the foregoing and in addition
to and consistent with the other covenants set forth herein, the Seller shall
take such actions as shall be required in order that:
(i) the Company's operating expenses (other than certain organization
expenses and expenses incurred in connection with the preparation,
negotiation and delivery of the Transaction Documents) will not be paid by
the Seller or its Affiliates;
(ii) the Company's books and records will be maintained separately
from those of the Seller and its Affiliates;
(iii) all financial statements of the Seller and its Affiliates that
are consolidated to include the Company will contain detailed notes clearly
stating that (A) all of the Company's assets are owned by the Company, and
(B) the Company is a separate entity with creditors who have received
interests in the Company's assets;
(iv) each of the Seller and its Affiliates will strictly observe
corporate formalities in its dealing with the Company;
(v) except as otherwise provided in the Receivables Purchase Agreement
in connection with the servicing of Receivables, the Seller shall not
commingle its funds with any funds of the Company;
(vi) each of the Seller and its Affiliates will maintain arm's length
relationships with the Company, and each of the Seller and its Affiliates
will be compensated at market rates for any services it renders or
otherwise furnishes to the Company; and
(vii) the Seller will not be, and will not hold itself out to be,
responsible for the debts of the Company or the decisions or actions in
respect of the daily business and affairs of the Company.
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[Exhibit 10.7]
U.S. $200,000,000
PARALLEL PURCHASE COMMITMENT
Dated as of September 30, 1998
Among
WARNACO OPERATIONS CORPORATION
as the Seller
and
CERTAIN COMMERCIAL LENDING INSTITUTIONS
as the Banks
and
GREGORY STREET, INC.
as the Initial Servicer
and
THE BANK OF NOVA SCOTIA
as the Agent
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TABLE OF CONTENTS
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ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 1.1. Commitment.................................................................................1
SECTION 1.2. Making Purchases...........................................................................2
SECTION 1.3. Incorporation by Reference.................................................................3
SECTION 1.4. Settlement Procedures......................................................................3
SECTION 1.5. Fees.......................................................................................7
SECTIONS 1.6. through 1.8 Incorporation by Reference....................................................7
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
EVENTS OF TERMINATION
SECTION 2.1. Representations and Warranties; Covenants..................................................7
SECTION 2.2. Termination Events.........................................................................7
ARTICLE III.
INDEMNIFICATION
SECTIONS 3.1. through 3.2. Incorporation by Reference...................................................7
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
SECTION 4.1. Appointment of the Servicer................................................................8
SECTION 4.2. Duties of the Servicer.....................................................................8
SECTIONS 4.3. through 4.4. Incorporation by Reference....................................................9
SECTION 4.5. Responsibilities of the Seller.............................................................9
SECTION 4.6. Servicing Fee..............................................................................9
</TABLE>
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TABLE OF CONTENTS
(CONTINUED)
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ARTICLE V.
THE AGENT
SECTION 5.1. Appointment and Authorization.............................................................10
SECTION 5.2. Delegation of Duties......................................................................10
SECTION 5.3. Liability of Agent........................................................................10
SECTION 5.4. Reliance by Agent.........................................................................11
SECTION 5.5. Notice of Termination Events..............................................................11
SECTION 5.6. Credit Decision...........................................................................11
SECTION 5.7. Indemnification...........................................................................12
SECTION 5.8. Agent in Individual Capacity..............................................................12
SECTION 5.9. Successor Agent...........................................................................13
ARTICLE VI.
MISCELLANEOUS
SECTION 6.1. Amendments, Etc...........................................................................13
SECTION 6.2. Notices, Etc..............................................................................13
SECTION 6.3. Assignability.............................................................................14
SECTION 6.4. Costs, Expenses and Taxes.................................................................14
SECTION 6.5. Governing Law and Jurisdiction............................................................15
SECTION 6.6. Execution in Counterparts.................................................................15
SECTION 6.7. Termination...............................................................................15
SECTION 6.8. WAIVER OF JURY TRIAL......................................................................15
SECTION 6.9. Entire Agreement..........................................................................16
SECTION 6.10. Headings..................................................................................16
</TABLE>
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EXHIBITS
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EXHIBIT I Definitions
EXHIBIT II Conditions of Purchases
EXHIBIT III Representations and Warranties***
EXHIBIT IV Covenants***
EXHIBIT V Termination Event***
SCHEDULE I Credit and Collection Policy***
SCHEDULE II Trade Names***
SCHEDULE III Special Concentration Percentages***
SCHEDULE IV Fiscal Months***
ANNEX A Form of Monthly Report***
ANNEX B Form of Purchase Notice
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*** Incorporated by reference from Receivables Purchase Agreement.
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PARALLEL PURCHASE COMMITMENT
Dated as of September 30, 1998
This Parallel Purchase Commitment (as amended, supplemented or
otherwise modified from time to time, this "Agreement") is entered into as of
September 30, 1998 among Warnaco Operations Corporation, a Delaware corporation
(the "Seller"), Gregory Street, Inc., a Delaware corporation ("Gregory"), as
initial Servicer (in such capacity, together with its successors and permitted
assigns in such capacity, the "Servicer"), The Bank of Nova Scotia, a Canadian
chartered bank acting through its New York branch ("BNS"), as agent for the
Banks (in such capacity together with its successors and assigns in such
capacity, the "Agent"), and the various other financial institutions as are or
may become parties hereto (collectively, the "Banks"), agree as follows:
PRELIMINARY STATEMENTS. Certain terms that are capitalized and used
throughout this Agreement are defined in Exhibit I. References in the Exhibits
hereto to "the Agreement" refer to this Agreement, as amended, modified or
supplemented and in effect from time to time.
The Seller has Pool Receivables in which it is prepared to sell,
transfer and assign an undivided variable percentage ownership interest
(referred to herein as the "Purchased Interest"). The Banks are prepared to make
purchases from time to time with respect to such Purchased Interest on the terms
set forth herein. Accordingly, the parties agree as follows:
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
SECTION 1.1. Commitment. (a) On the terms and conditions hereinafter
set forth, the Banks shall purchase, ratably in accordance with their respective
Percentages, and make reinvestments in, ownership interests with regard to the
Purchased Interest from the Seller from time to time during the period from the
date hereof to the Commitment Termination Date. Under no circumstances shall the
Banks be obligated to make any such purchase or reinvestment (i) if, after
giving effect to such purchase or reinvestment, the aggregate outstanding
Capital of the Purchased Interest, together with the aggregate outstanding
"Capital" of the "Purchased Interests" purchased by the Investors under the
Receivables Purchase Agreement (the "Total Outstanding Capital"), would exceed
the Total Commitment, or (ii) the aggregate outstanding Capital of the Purchased
Interest purchased by any Bank together with the outstanding "Capital" of the
"Purchased Interests" purchased under the Receivables Purchase Agreement by such
Bank's Related Conduit Purchaser would exceed such Bank's Percentage of the
Total Outstanding Capital.
(b) The Seller may, upon at least 30 days' written notice to the Agent,
terminate in whole or reduce in part the unused portion of the Total Commitment;
provided that each partial reduction shall be in the amount of at least
$10,000,000 or an integral multiple of $5,000,000 in excess thereof
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and that, unless terminated in whole, the Total Commitment shall in no event be
reduced below $100,000,000.
SECTION 1.2. Making Purchases. (a) Each purchase (but not reinvestment)
of undivided percentage ownership interests with regard to the Purchased
Interest hereunder shall be made upon the Seller's irrevocable written notice in
the form of Annex B delivered to the Agent in accordance with Section 6.2 (which
notice must be received by the Agent before 11:00 a.m., New York City time).
Each such notice of a purchase shall specify (i) the amount requested to be paid
to the Seller (such amount, which shall not be less than $2,000,000, being the
"Capital" relating to the undivided ownership interest then being purchased, and
(ii) the date of such purchase (which shall be a Business Day). Such notice of
purchase shall be sent by telecopier, telex or cable to all Banks concurrently
and shall specify the date of such purchase, each Bank's Percentage multiplied
by the aggregate amount of Capital of undivided ownership interest of the
Purchased Interest being purchased and whether Discount for such undivided
ownership interest of the Purchased Interest is calculated based on the
Eurodollar Rate (which may be selected only if such notice is given at least two
Business Days prior to the purchase date) or the Base Rate.
(b) Prior to 12:00 noon New York City time, on the date of each such
purchase of an undivided ownership interest in the Purchased Interest, the
Banks, ratably in accordance with their respective Percentages, shall, upon
satisfaction of the applicable conditions set forth in Exhibit II hereto, make
available to the Agent the amount of their respective purchases by deposit of
the applicable amount in immediately available funds to the Agent's Account and,
after receipt by the Agent of such funds, the Agent will cause such funds to be
made available to the Seller in same day funds at Citibank, N.A., account
#4077-4094, ABA #021-00-0089.
(c) Effective on the date of each purchase pursuant to this Section 1.2
and each reinvestment pursuant to Section 1.4, the Seller hereby sells and
assigns to the Agent, for the benefit of the Banks, an undivided percentage
ownership interest, to the extent of the Purchased Interest then in effect, in:
(i) each Pool Receivable then existing, (ii) all Related Security with respect
to such Pool Receivables, and (iii) all Collections with respect to, and other
proceeds of, such Pool Receivables and Related Security.
(d) To secure all of the Seller's obligations (monetary or otherwise)
under this Agreement and the other Transaction Documents to which it is a party,
whether now or hereafter existing or arising, due or to become due, direct or
indirect, absolute or contingent, the Seller hereby grants to the Agent, for the
benefit of the Banks, a security interest in all of the Seller's right, title
and interest (including any undivided interest of the Seller) in, to and under
all of the following, whether now or hereafter owned, existing or arising: (i)
all Pool Receivables, (ii) all Related Security with respect to such Pool
Receivables, (iii) all Collections with respect to such Pool Receivables, (iv)
the Collection Account and all amounts on deposit therein, and all certificates
and instruments, if any, from time to time evidencing the Collection Account and
amounts on deposit therein, (v) all rights (but none of the obligations) of the
Seller under the Gregory Sale Agreement, and (vi) all proceeds of, and all
amounts received or receivable under any or all of, the foregoing (collectively,
the "Pool Assets"). Upon the sale of a Defaulted Receivable by the Servicer as
permitted by Section 1(e) of Exhibit IV,
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the security interest of the Agent in such Defaulted Receivable shall
automatically be released and the Agent shall take such actions as may be
reasonably requested by the purchaser of such Defaulted Receivable to evidence
such release. The Agent, for the benefit of the Banks, shall have, with respect
to the Pool Assets, and in addition to all the other rights and remedies
available to the Agent and the Banks hereunder, all the rights and remedies of a
secured party under any applicable UCC.
(e) Each Bank's obligation shall be several, such that the failure of
any Bank to make available to the Seller any funds in connection with any
purchase shall not relieve any other Bank of its obligation, if any, hereunder
to make funds available on the date of such purchase, but no Bank shall be
responsible for the failure of any other Bank to make funds available in
connection with any purchase.
SECTION 1.3. Incorporation by Reference. Section 1.3 of the Receivables
Purchase Agreement is hereby incorporated herein by this reference, except that
each reference therein to an "Investor," the "Investors" or the "Facility
Termination Date" shall be deemed to be a reference to a Bank, the Banks and the
Commitment Termination Date, respectively.
SECTION 1.4. Settlement Procedures. (a) The collection of the Pool
Receivables shall be administered by the Servicer in accordance with this
Agreement. The Seller shall provide to the Servicer on a timely basis all
information needed for such administration, including notice of the occurrence
of any Termination Day and current computations of the Purchased Interest.
(b) The Servicer shall, on each day on which Collections of Pool
Receivables are received (or deemed received in accordance with Section 1.4(e))
by the Seller or Servicer, transfer such Collections into the Collection
Account. With respect to such Collections on such day, the Servicer shall:
(i) set aside in the Collection Account for the benefit of
each Bank, out of such Bank's Share of the percentage of such
Collections represented by the Purchased Interest, first an amount
equal to such Bank's Share of the Discount accrued through such day for
each Portion of Capital of such Purchased Interest and not previously
set aside, second, an amount equal to the Fees payable to such Bank
accrued through such day and not previously set aside, and third, the
Servicing Fee accrued through such day for the Purchased Interest and
not previously set aside; and
(ii) subject to Section 1.4(f), if such day is not a
Termination Day, remit to the Seller, on behalf of the Banks, the
remainder of the percentage of such Collections represented by the
Purchased Interest, to the extent representing a return on the Capital;
such Collections shall be automatically reinvested in Pool Receivables,
and in the Related Security and Collections and other proceeds with
respect thereto, and the Purchased Interest shall be automatically
recomputed pursuant to Section 1.3;
(iii) if such day is a Termination Day, (A) set aside and
retain in the Collection Account for each Bank, the entire remainder of
such Bank's Share of the percentage of the
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Collections represented by the Purchased Interest; provided that, so
long as the Facility Termination Date has not occurred, if any amounts
are so set aside and retained in the Collection Account on any
Termination Day and thereafter, the conditions set forth in Section 2
of Exhibit II are satisfied or are waived by the Agent and the Majority
Banks, such previously set aside amounts shall, to the extent
representing a return on the Capital, be reinvested in accordance with
the preceding paragraph (ii) on the day of such subsequent satisfaction
or waiver of conditions, and (B) set aside and retain in the Collection
Account the Banks' Pro Rata Share of the entire remainder of the
Collections in the Collection Account represented by the Seller's Share
of the Collections, if any; provided, that so long as the Commitment
Termination Date has not occurred, if any amounts are so set aside and
retained in the Collection Account on any Termination Day and
thereafter, the conditions set forth in Section 2 of Exhibit II are
satisfied or are waived by the Agent and the Majority Banks, such
previously set aside amounts shall be distributed to the Seller on the
day of such subsequent satisfaction or waiver of conditions; and
(iv) during such times as amounts are required to be
reinvested in accordance with the foregoing paragraph (ii) or the
proviso to paragraph (iii), release to the Seller (subject to Section
1.4(f)) for its own account any Collections in excess of (x) such
amounts, (y) the amounts that are required to be set aside and retained
in the Collection Account pursuant to paragraph (i) above and (z) in
the event Gregory (or any Affiliate of Warnaco) is not the Servicer,
all reasonable and appropriate out-of-pocket costs and expenses of such
Servicer of servicing, collecting and administering the Pool
Receivables.
(c) The Servicer shall deposit into an account designated by the Agent
for the benefit of the Banks, on each Settlement Date:
(i) Collections held on deposit in the Collection Account for
the benefit of each Bank pursuant to Section 1.4(b)(i) in respect of
accrued Discount and accrued and unpaid Fees;
(ii) Collections held on deposit in the Collection Account for
the benefit of each Bank pursuant to Section 1.4(f); and
(iii) on any Termination Day, the lesser of (x) the sum of (i)
the amount of Collections then held on deposit in the Collection
Account for the benefit of each Bank pursuant to Section 1.4(b)(iii)(A)
plus (ii) each Bank's Percentage of the amount of Collections then on
deposit in the Collection Account in respect of the Seller's Share of
Collections pursuant to Section 1.4(b)(iii)(B) and (y) the aggregate
amount of Capital.
The Servicer shall deposit to its own account from Collections held on deposit
in the Collection Account pursuant to Section 1.4(b)(i) in respect of the
accrued Servicing Fee, an amount equal to such accrued Servicing Fee.
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(d) Upon receipt of funds deposited into the Agent's account pursuant
to Section 1.4(c), the Agent shall distribute to each Bank the portion of such
funds payable to such Bank and each Bank shall cause such funds to be
distributed as follows:
(i) if such distribution occurs on a day that is not a
Termination Day, first to such Bank in payment in full of all accrued
Discount and accrued and unpaid Fees payable to such Bank, and second,
if the Servicer has set aside amounts in respect of the Servicing Fee
pursuant to Section 1.4(b)(i) and has not retained such amounts
pursuant to Section 1.4(c), to the Servicer (payable in arrears on each
Settlement Date) in payment in full of each Bank's Share of accrued
Servicing Fees so set aside, and
(ii) if such distribution occurs on a Termination Day or on a
day when the Purchased Interest exceeds 100%, first to such Bank in
payment in full of all accrued Discount and accrued and unpaid Fees
payable to such Bank, second to such Bank in payment in full of its
Capital (or, if such day is not a Termination Day, the amount necessary
to reduce the Purchased Interest to 100%), third, if Gregory or an
Affiliate of Warnaco is not the Servicer, to the Servicer in payment in
full of all accrued Servicing Fees, fourth, if the Capital of the
Purchased Interest and accrued Discount with respect to each Portion of
Capital thereof have been reduced to zero, and all accrued Servicing
Fees payable to the Servicer (if other than Gregory or an Affiliate of
Warnaco) have been paid in full, to such Bank, the Agent, and any other
Indemnified Party or Affected Person in payment in full of any other
amounts owed thereto by the Seller hereunder and, fifth, unless such
amount has been retained by the Servicer pursuant to Section 1.4(c), to
the Servicer (if the Servicer is Gregory or an Affiliate of Warnaco) in
payment in full of all accrued Servicing Fees for such Purchased
Interest.
After the Capital, Discount, Fees and Servicing Fees with respect to the
Purchased Interest, and any other amounts payable by the Seller and the Servicer
to the Banks, the Agent, or any other Indemnified Party or Affected Person
hereunder, have been paid in full, all additional Collections with respect to
the Purchased Interest shall be paid to the Seller for its own account.
(e) For the purposes of this Section 1.4:
(i) if on any day the Outstanding Balance of any Pool
Receivable is reduced or adjusted as a result of any defective,
rejected, returned, repossessed or foreclosed goods or services, or any
revision, cancellation, allowance, discount or other adjustment made by
any Originator, the Servicer, the Seller or any Affiliate of the
Seller, or any setoff or dispute between any Originator, the Seller or
any Affiliate of the Seller and an Obligor, the Seller shall be deemed
to have received on such day a Collection of such Pool Receivable in
the amount of such reduction or adjustment;
(ii) if on any day any of the representations or warranties in
Section 1(g) or (m) of Exhibit III is not true with respect to any Pool
Receivable, the Seller shall be deemed to have received on such day a
Collection of such Pool Receivable in full;
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(iii) except as otherwise required by applicable law or the
relevant Contract, all Collections received from an Obligor of any
Receivable shall be applied to the Receivables of such Obligor in the
order of the age of such Receivables, starting with the oldest such
Receivable, unless such Obligor designates in writing its payment for
application to specific Receivables; and
(iv) if and to the extent the Agent or any Bank shall be
required for any reason to pay over to an Obligor (or any trustee,
receiver, custodian or similar official in any Insolvency Proceeding)
any amount received by it hereunder, such amount shall be deemed not to
have been so received by the Agent or such Bank, as the case may be,
but rather to have been retained by the Seller and, accordingly, the
Agent or such Bank, as the case may be, shall have a claim against the
Seller for such amount, payable when and to the extent that any
distribution from or on behalf of such Obligor is made in respect
thereof.
(f) If at any time the Seller shall wish to cause the reduction of
Capital of the Purchased Interest, the Seller may do so as follows:
(i) the Seller shall give the Agent and the Servicer at least
five Business Days' prior written notice thereof (including the amount
of such proposed reduction and the proposed date on which such
reduction will commence);
(ii) on the proposed date of commencement of such reduction
and on each day thereafter, the Servicer shall cause Collections not to
be reinvested until the amount thereof not so reinvested shall equal
the desired amount of reduction; and
(iii) the Servicer shall hold such Collections in the
Collection Account for the benefit of the Banks, for payment to the
Agent on behalf of each Bank on the next Settlement Date immediately
following the current Settlement Period, and the Capital of each
Purchased Interest shall be deemed reduced in the amount to be paid to
the applicable Bank only when in fact finally so paid;
provided, that:
(A) the amount of any such reduction shall be not less than
$2,000,000 and shall be an integral multiple of $100,000, and the
entire Capital of the Purchased Interest after giving effect to such
reduction shall be not less than $2,000,000 and shall be in an integral
multiple of $100,000 (unless such Capital shall have been reduced to
zero);
(B) the Seller shall choose a reduction amount, and the date
of commencement thereof, so that to the extent practicable such
reduction shall commence and conclude in the same Settlement Period;
and
(C) The Capital of each Bank shall be reduced pro-rata such
that after giving effect to such reduction, the outstanding Capital of
the Purchased Interest of such Bank hereunder
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and the outstanding "Capital" of any Purchased Interest purchased under
the Receivables Purchase Agreement by such Bank's Related Conduit
Purchaser (or such Bank's pro rata portion of such amount if more than
one Bank is related to such Bank's Related Conduit Purchaser) is equal
to such Bank's Percentage of the Total Outstanding Capital.
SECTION 1.5. Fees. The Seller shall pay to the Agent for the account of
the Banks certain fees in the amounts and on the dates set forth in a letter,
dated the date hereof, among the Seller and the Agent (as such letter may be
amended, supplemented or otherwise modified from time to time, the "Fee
Letter").
SECTIONS 1.6. through 1.8 Incorporation by Reference. Sections 1.6
through 1.8 of the Receivables Purchase Agreement are hereby incorporated herein
by this reference, except that each reference therein to an "Investor" or the
"Investors" shall be deemed to be a reference to a Bank or the Banks,
respectively.
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
EVENTS OF TERMINATION
SECTION 2.1. Representations and Warranties; Covenants. The Seller
hereby makes the representations and warranties, and hereby agrees to perform
and observe the covenants, set forth in Exhibits III and IV, respectively,
hereto.
SECTION 2.2. Termination Events. If any of the Termination Events set
forth in Exhibit V shall occur, the Agent (at the direction of the Required
Banks) may, by notice to the Seller, declare the Commitment Termination Date to
have occurred (in which case the Commitment Termination Date shall be deemed to
have occurred); provided that, automatically upon the occurrence of any event
(without any requirement for the passage of time or the giving of notice)
described in paragraph (f) of Exhibit V, the Commitment Termination Date shall
occur. Upon any such declaration, occurrence or deemed occurrence of the
Commitment Termination Event, the Banks and the Agent shall have, in addition to
the rights and remedies which they may have under this Agreement, all other
rights and remedies provided after default under the New York UCC and under
other applicable law, which rights and remedies shall be cumulative.
ARTICLE III.
INDEMNIFICATION
SECTIONS 3.1. through 3.2. Incorporation by Reference. Each of Sections
3.1 through 3.2 of the Receivables Purchase Agreement is hereby incorporated
herein by this reference, except that: (i) each reference therein to an
"Investor" or the "Investors" shall be deemed to a Bank or be a reference to the
Banks and (ii) each occurrence of the phrase ", the Agent or the Co-Agent" shall
be replaced with the phrase "or the Agent".
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ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
SECTION 4.1. Appointment of the Servicer. (a) The servicing,
administering and collection of the Pool Receivables shall be conducted by the
Person so designated from time to time as the Servicer in accordance with this
Section. Until the Agent gives notice to Gregory (in accordance with this
Section) of the designation of a new Servicer, Gregory is hereby designated as,
and hereby agrees to perform the duties and obligations of, the Servicer
pursuant to the terms hereof. Upon the occurrence of a Termination Event, the
Agent may designate as Servicer any Person (including itself) to succeed Gregory
or any successor Servicer, on the condition in each case that any such Person so
designated shall agree to perform the duties and obligations of the Servicer
pursuant to the terms hereof.
(b) Upon the designation of a successor Servicer as set forth in
Section 4.1(a), Gregory agrees that it will terminate its activities as Servicer
hereunder in a manner that the Agent reasonably determines will facilitate the
transition of the performance of such activities to the new Servicer, and
Gregory shall cooperate with and assist such new Servicer. Such cooperation
shall include access to and transfer of related records and use by the new
Servicer of all licenses, hardware or software necessary or desirable to collect
the Pool Receivables and the Related Security.
(c) Gregory acknowledges that, in making their decision to execute and
deliver this Agreement, the Agent and the Banks have relied on Gregory's
agreement to act as Servicer hereunder. Accordingly, Gregory agrees that it will
not voluntarily resign as Servicer.
(d) The Servicer may delegate its duties and obligations hereunder to
any subservicer (each a "Sub-Servicer"); provided, that, in each such
delegation: (i) such Sub-Servicer shall agree in writing to perform the duties
and obligations of the Servicer pursuant to the terms hereof, (ii) the Servicer
shall remain primarily liable for the performance of the duties and obligations
so delegated, (iii) the Seller, the Agent and the Banks shall have the right to
look solely to the Servicer for performance and (iv) the terms of any agreement
with any Sub-Servicer shall provide that the Agent may terminate such agreement
upon the termination of the Servicer hereunder by giving notice of its desire to
terminate such agreement to the Servicer (and the Servicer shall provide
appropriate notice to each such Sub-Servicer); provided, however, that if any
such delegation is to any Person other than Warnaco or an Affiliate of Warnaco,
the Agent shall have consented in writing in advance to such delegation.
SECTION 4.2. Duties of the Servicer. (a) The Servicer shall take or
cause to be taken all such action as may be necessary or advisable to administer
and collect each Pool Receivable from time to time, all in accordance with this
Agreement and all applicable laws, rules and regulations, with reasonable care
and diligence, and in accordance with the Credit and Collection Policies. The
Servicer shall set aside, for the accounts of the Seller and the Banks, the
amount of the Collections to which each is entitled in accordance with Article
I. The Servicer may, in accordance with the applicable Credit and Collection
Policy, extend the maturity of any Pool Receivable, so long as no Termination
Event or Unmatured Termination Event has occurred or would result from such
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extension, and extend the maturity or adjust the Outstanding Balance of any
Defaulted Receivable as the Servicer may determine to be appropriate to maximize
Collections thereof; provided, however, that: (i) such extension or adjustment
shall not alter the status of such Pool Receivable as a Defaulted Receivable or
limit the rights of the Banks or the Agent under this Agreement and (ii) if a
Termination Event has occurred and Gregory or an Affiliate of Warnaco is serving
as the Servicer, Gregory or such Affiliate may make such extension or adjustment
only upon the prior approval of the Agent. The Seller shall deliver to the
Servicer and the Servicer shall hold for the benefit of the Seller and the Agent
(for the benefit of the Banks), in accordance with their respective interests,
all records and documents (including computer tapes or disks) with respect to
each Pool Receivable. Notwithstanding anything to the contrary contained herein,
for so long as a Termination Event has occurred and is continuing, the Agent may
direct the Servicer (whether the Servicer is Gregory or any other Person) to
commence or settle any legal action to enforce collection of any Pool Receivable
or to foreclose upon or repossess any Related Security.
(b) The Servicer shall, as soon as practicable following actual receipt
of collected funds, turn over to the Seller the collections of any indebtedness
that is not a Pool Receivable, less, if Gregory or an Affiliate of Warnaco is
not the Servicer, all reasonable and appropriate out-of-pocket costs and
expenses of such Servicer of servicing, collecting and administering such
collections. The Servicer, if other than Gregory or an Affiliate of Warnaco,
shall, as soon as practicable upon demand, deliver to the Seller all records in
its possession that evidence or relate to any indebtedness that is not a Pool
Receivable, and copies of records in its possession that evidence or relate to
any indebtedness that is a Pool Receivable.
(c) The Servicer's obligations hereunder shall terminate on the later
of: (i) the Commitment Termination Date and (ii) the date on which all amounts
required to be paid to the Banks, the Agent and any other Indemnified Party or
Affected Person hereunder shall have been paid in full.
After such termination, if Gregory or an Affiliate of Warnaco was not
the Servicer on the date of such termination, the Servicer shall promptly
deliver to the Seller all books, records and related materials that the Seller
previously provided to the Servicer, or that have been obtained by the Servicer,
in connection with this Agreement.
SECTIONS 4.3. through 4.4. Incorporation by Reference. Each of Sections
4.3 and 4.4 of the Receivables Purchase Agreement are hereby incorporated herein
by this reference except that each reference therein to the "Investors" shall be
deemed to be a reference to the Banks.
SECTION 4.5. Responsibilities of the Seller. Anything herein to the
contrary notwithstanding, the Seller shall pay when due any taxes, including any
sales taxes payable in connection with the Pool Receivables and their creation
and satisfaction. Neither the Agent nor any Bank shall have any obligation or
liability with respect to any Pool Asset, nor shall either of them be obligated
to perform any of the obligations of the Seller or Gregory thereunder.
SECTION 4.6. Servicing Fee. (a) Subject to Section 4.6(b), the Servicer
shall be paid a fee equal to .75% per annum (the "Servicing Fee Rate") of the
daily average aggregate Outstanding
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Balance of the Pool Receivables. Each Bank's Share of such fee shall be paid
solely from the distributions contemplated by Section 1.4(d), and the Seller's
Share of such fee shall be paid by the Seller.
(b) If the Servicer ceases to be Gregory or an Affiliate of Warnaco,
the servicing fee shall be the greater of: (i) the amount calculated pursuant to
clause (a), and (ii) an alternative amount reasonably specified by the successor
Servicer not to exceed 100% of the aggregate reasonable costs and expenses
incurred by such successor Servicer in connection with the performance of its
obligations as Servicer.
ARTICLE V.
THE AGENT
SECTION 5.1. Appointment and Authorization. Each Bank hereby
irrevocably appoints, designates and authorizes the Agent to take such action on
its behalf under the provisions of this Agreement and each other Transaction
Document and to exercise such powers and perform such duties as are expressly
delegated to it by the terms of this Agreement or any other Transaction
Document, together with such powers as are reasonably incidental thereto.
Notwithstanding any provision to the contrary contained elsewhere in this
Agreement or in any other Transaction Document, the Agent shall not have any
duties or responsibilities, except those expressly set forth herein, nor shall
the Agent have or be deemed to have any fiduciary relationship with any Bank,
and no implied covenants, functions, responsibilities, duties, obligations or
liabilities shall be read into this Agreement or any other Transaction Document
or otherwise exist against the Agent.
SECTION 5.2. Delegation of Duties. The Agent may execute any of its
duties under this Agreement or any other Transaction Document by or through
agents, employees or attorneys-in-fact and shall be entitled to advice of
counsel concerning all matters pertaining to such duties. The Agent shall not be
responsible for the negligence or misconduct of any agent or attorney-in-fact
that it selects with reasonable care.
SECTION 5.3. Liability of Agent. None of the Agent or any of its
affiliates, officers, directors, employees, agents or attorneys-in-fact (each,
an "Agent-Related Person") shall (i) be liable for any action taken or omitted
to be taken by any of them under or in connection with this Agreement or any
other Transaction Document or the transactions contemplated hereby (except for
its own gross negligence or willful misconduct), or (ii) be responsible in any
manner to any of the Banks for any recital, statement, representation or
warranty made by an Originator, the Seller or the Servicer or any Subsidiary or
Affiliate of the Seller, the Servicer, or any officer thereof, contained in this
Agreement or in any other Transaction Document, or in any certificate, report,
statement or other document referred to or provided for in, or received by the
Agent under or in connection with, this Agreement or any other Transaction
Document, or the validity, effectiveness, genuineness, enforceability or
sufficiency of this Agreement or any other Transaction Document, or for any
failure of an Originator, Seller, Servicer or any other party to any Transaction
Document to perform its obligations hereunder or thereunder. No Agent-Related
Person shall be under any obligation to any
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Bank to ascertain or to inquire as to the observance or performance of any of
the agreements contained in, or conditions of, this Agreement or any other
Transaction Document, or to inspect the properties, books or records of any
Originator, Seller, Servicer or any of the Originators', Seller's, or Servicer's
Subsidiaries or Affiliates.
SECTION 5.4. Reliance by Agent. (a) The Agent shall be entitled to
rely, and shall be fully protected in relying, upon any writing, resolution,
notice, consent, certificate, affidavit, letter, telegram, facsimile, telex or
telephone message, statement or other document or conversation believed by it to
be genuine and correct and to have been signed, sent or made by the proper
Person or Persons, and upon advice and statements of legal counsel (including
counsel to the Originator, Seller or Servicer), independent accountants and
other experts selected by the Agent. The Agent shall be fully justified in
failing or refusing to take any action under this Agreement or any other
Transaction Document unless it shall first receive such advice or concurrence of
the Majority Banks as it deems appropriate and, if it so requests, it shall
first be indemnified to its satisfaction by the Banks against any and all
liability and expense which may be incurred by it by reason of taking or
continuing to take any such action. The Agent shall in all cases be fully
protected in acting, or in refraining from acting, under this Agreement or any
other Transaction Document in accordance with a request or consent of the
Majority Banks and such request and any action taken or failure to act pursuant
thereto shall be binding upon all of the Banks.
(b) For purposes of determining compliance with the conditions
specified in Section 1.2, each Bank that has executed this Agreement shall be
deemed to have consented to, approved or accepted or to be satisfied with, each
document or other matter either sent by the Agent to such Bank for consent,
approval, acceptance or satisfaction, or required thereunder to be consented to
or approved by or acceptable or satisfactory to the Bank.
SECTION 5.5. Notice of Termination Events. The Agent shall not be
deemed to have knowledge or notice of the occurrence of any Termination Event,
except with respect to defaults in any payment in respect of Capital and
Discount and fees required to be paid to the Agent for the account of the Banks,
unless the Agent shall have received written notice from a Bank or the Seller,
or Servicer referring to this Agreement, describing such Termination Event and
stating that such notice is a "notice of Termination Event." The Agent will
notify the Banks of its receipt of any such notice. The Agent shall take such
action with respect to such Termination Event as may be requested by the
Majority Banks in accordance with Section 2.2; provided, however, that unless
and until the Agent has received any such request, the Agent may (but shall not
be obligated to) take such action, or refrain from taking such action, with
respect to such Termination Event as it shall deem advisable or in the best
interest of the Banks.
SECTION 5.6. Credit Decision. Each Bank acknowledges that none of the
Agent-Related Persons has made any representation or warranty to it, and that no
act by the Agent hereinafter taken, including any review of the affairs of the
Originators, Seller or Servicer and its Subsidiaries, shall be deemed to
constitute any representation or warranty by any Agent-Related Person to any
Bank. Each Bank represents to the Agent that it has, independently and without
reliance upon any Agent-Related Person and based on such documents and
information as it has deemed appropriate, made
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its own appraisal of and investigation into the business, prospects, operations,
property, financial and other condition and creditworthiness of the Originators,
Seller or Servicer and its Subsidiaries, and all applicable bank regulatory laws
relating to the transactions contemplated hereby, and made its own decision to
enter into this Agreement and to extend credit to the Seller hereunder. Each
Bank also represents that it will, independently and without reliance upon any
Agent-Related Person and based on such documents and information as it shall
deem appropriate at the time, continue to make its own credit analysis,
appraisals and decisions in taking or not taking action under this Agreement and
the other Transaction Documents, and to make such investigations as it deems
necessary to inform itself as to the business, prospects, operations, property,
financial and other condition and creditworthiness of the Originators, Seller
and Servicer. Except for notices, reports and other documents expressly herein
required to be furnished to the Banks by the Agent, the Agent shall not have any
duty or responsibility to provide any Bank with any credit or other information
concerning the business, prospects, operations, property, financial and other
condition or creditworthiness of the Originators, Seller or Servicer which may
come into the possession of any of the Agent-Related Persons.
SECTION 5.7. Indemnification. Whether or not the transactions
contemplated hereby are consummated, the Banks shall indemnify upon demand the
Agent-Related Persons (to the extent not reimbursed by or on behalf of the
Seller and without limiting the obligation of the Seller to do so), pro rata,
from and against any and all Indemnified Amounts; provided, however, that no
Bank shall be liable for the payment to the Agent-Related Persons of any portion
of such Indemnified Amounts resulting solely from such Person's gross negligence
or willful misconduct. Without limitation of the foregoing, each Bank shall
reimburse the Agent upon demand for its ratable share of any costs or
out-of-pocket expenses (including Attorney Costs) incurred by the Agent in
connection with the preparation, execution, delivery, administration,
modification, amendment or enforcement (whether through negotiations, legal
proceedings or otherwise) of, or legal advice in respect of rights or
responsibilities under, this Agreement, any other Transaction Document, or any
document contemplated by or referred to herein, to the extent that the Agent is
not reimbursed for such expenses by or on behalf of the Seller. The undertaking
in this Section shall survive the repurchase by the Seller of all of the
undivided ownership interests of the Purchased Interest purchased by the Banks
hereunder and the resignation or replacement of the Agent.
SECTION 5.8. Agent in Individual Capacity. BNS and its Affiliates may
make loans to, issue letters of credit for the account of, accept deposits from,
acquire equity interests in and generally engage in any kind of banking, trust,
financial advisory, underwriting or other business with any Originator, Seller
or Servicer and their respective Subsidiaries and Affiliates as though BNS were
not the Agent hereunder and without notice to or consent of the Banks. The Banks
acknowledge that, pursuant to such activities, BNS or its Affiliates may receive
information regarding the Originators, Seller or Servicer or their respective
Affiliates (including information that may be subject to confidentiality
obligations in favor of the Originators, Seller, Servicer or such Affiliate) and
acknowledge that the Agent shall be under no obligation to provide such
information to them. With respect to its undivided ownership interests in the
Purchased Interest, BNS shall have the same rights and powers under this
Agreement as any other Bank and may exercise the same as
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though it were not the Agent, and the terms "Bank" and "Banks" include BNS in
its individual capacity.
SECTION 5.9. Successor Agent. The Agent may resign as Agent upon 30
days' notice to the Banks. The Agent may be removed at any time by the
affirmative vote of the Majority Banks upon 30 days' prior written notice
thereof to the Investors and the Agent, if the Agent shall have engaged in
willful misconduct or shall have been grossly negligent in the performance of
its duties as Agent. If the Agent resigns under this Agreement, the Majority
Banks shall appoint from among the Banks a successor agent for the Banks which
successor agent shall be approved by the Seller. If no successor agent is
appointed prior to the effective date of the resignation of the Agent, the Agent
may appoint, after consulting with the Banks and the Seller, a successor agent
from among the Banks. Upon the acceptance of its appointment as successor agent
hereunder, such successor agent shall succeed to all the rights, powers and
duties of the retiring Agent and the term "Agent" shall mean such successor
agent and the retiring Agent's appointment, powers and duties as Agent shall be
terminated. After any retiring Agent's resignation hereunder as Agent, the
provisions of Article III and this Article V and Sections 1.7 and 1.8, shall
inure to its benefit as to any actions taken or omitted to be taken by it while
it was Agent under this Agreement. If no successor agent has accepted
appointment as Agent by the date which is 30 days following a retiring Agent's
notice of resignation, the retiring Agent's resignation shall nevertheless
thereupon become effective and the Banks shall perform all of the duties of the
Agent hereunder until such time, if any, as the Majority Banks appoint a
successor agent as provided for above.
ARTICLE VI.
MISCELLANEOUS
SECTION 6.1. Amendments, Etc. No amendment or waiver of any provision
of this Agreement (including, without limitation, any provision of the
Receivables Purchase Agreement which is incorporated herein by reference) or any
other Transaction Document, or consent to any departure by the Seller or the
Servicer therefrom, shall be effective unless in a writing signed by the Agent
and the Majority Banks, and, in the case of any amendment, by the other parties
thereto; and then such amendment, waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given; provided,
however, that without the prior written permission of each Bank, no amendment or
waiver of any provision of this Agreement shall (a) reduce the amount of the
Capital or Discount that is payable on account of any undivided ownership
interest of the Purchased Interest or delay any scheduled date for payment
thereof; or (b) increase the Total Commitment hereunder. No failure on the part
of the Banks or the Agent to exercise, and no delay in exercising, any right
hereunder shall operate as a waiver thereof; nor shall any single or partial
exercise of any right hereunder preclude any other or further exercise thereof
or the exercise of any other right.
SECTION 6.2. Notices, Etc. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which shall
include facsimile communication) and be sent or delivered to each party hereto
at its address set forth under its name on the signature pages hereof
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<PAGE>
<PAGE>
or its address specified in the Assignment and Acceptance pursuant to which it
became a Bank, or, as to each party, at such other address as shall be
designated by such party in a written notice to the other parties hereto.
Notices and communications by facsimile shall be effective when sent (and shall
be followed by hard copy sent by first class mail), and notices and
communications sent by other means shall be effective when received.
SECTION 6.3. Assignability. (a) Each Bank (and its successors and
assigns) may assign all or a portion of its rights and obligations hereunder
(including without limitation, all or a portion of its Percentage of the Total
Commitment and any undivided ownership interest of the Purchased Interest owned
by it) with the prior consent of the Seller; provided, however, that such
consent shall not be unreasonably withheld; and provided further, that no such
consent shall be required if the assignment is made to any other Bank, any
Affiliate of such Bank (other than a director or officer thereof), any Purchaser
or other Program Support Provider.
(b) Each Bank may, without the prior written consent of the Seller, at
any time grant one or more Program Support Providers, participating interests in
such Bank's undivided ownership interest of the Purchased Interest. In the event
of any such grant by such Bank of a participating interest to a Program Support
Provider, such Bank shall remain responsible for the performance of its
obligations hereunder. The Seller agrees that each Program Support Provider
shall be entitled to the benefits of Sections 1.7 and 1.8.
(c) Except as provided in Section 4.1(d), neither the Seller nor the
Servicer may assign its rights or delegate its obligations hereunder or any
interest herein without prior written consent of the Agent.
(d) Without limiting any other rights that may be available under
applicable law, the rights of the Banks may be enforced through them or by their
agents.
SECTION 6.4. Costs, Expenses and Taxes. (a) In addition to the rights
of indemnification granted under Section 3.1 hereof, the Seller agrees to pay on
demand all reasonable costs and expenses in connection with the preparation,
execution, delivery and administration (including periodic internal audits by
the Agent or its designees of Pool Receivables) of this Agreement, the other
Transaction Documents and the other documents and agreements to be delivered
hereunder (and all reasonable costs and expenses in connection with any
amendment, waiver or modification of any thereof), including: (i) Attorney Costs
for the Agent, the Banks and their respective Affiliates and agents with respect
thereto and with respect to advising the Agent, the Banks and their respective
Affiliates and agents as to their rights and remedies under this Agreement and
the other Transaction Documents, and (ii) all reasonable costs and expenses
(including Attorney Costs), if any, of the Agent, the Banks and their respective
Affiliates and agents in connection with the enforcement of this Agreement and
the other Transaction Documents.
(b) In addition, the Seller shall pay on demand any and all stamp and
other taxes and fees payable in connection with the execution, delivery, filing
and recording of this Agreement or the other documents or agreements to be
delivered hereunder, and agrees to save each Indemnified Party
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<PAGE>
<PAGE>
harmless from and against any liabilities with respect to or resulting from any
delay in paying or omission to pay such taxes and fees.
SECTION 6.5. Governing Law and Jurisdiction. (a) THIS AGREEMENT SHALL
BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK) EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF A SECURITY INTEREST OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF NEW YORK; AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES
HERETO IRREVOCABLY WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY
OBJECTION, INCLUDING ANY OBJECTION TO THE LAYING OF VENUE OR BASED ON THE
GROUNDS OF FORUM NON CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE
BRINGING OF ANY ACTION OR PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS
AGREEMENT OR ANY DOCUMENT RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES
PERSONAL SERVICE OF ANY SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE MAY
BE MADE BY ANY OTHER MEANS PERMITTED BY NEW YORK LAW.
SECTION 6.6. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which when so executed shall be deemed to
be an original and all of which when taken together shall constitute one and the
same agreement.
SECTION 6.7. Termination. This Agreement shall create and constitute
the continuing obligations of the parties hereto in accordance with its terms,
and shall remain in full force and effect until the Final Payout Date. The then
current date set forth in clause (a) of the definition of Commitment Termination
Date may be extended for additional 364-day periods in the sole discretion of
the Banks upon no less than 30 days' written notice to the Seller prior to the
then current Commitment Termination Date. The provisions of Sections 1.7, 1.8,
3.1, 3.2, 6.4, 6.5 and 6.8 shall survive any termination of this Agreement.
SECTION 6.8. WAIVER OF JURY TRIAL. THE BANKS, THE SELLER, THE SERVICER
AND THE AGENT EACH WAIVE THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM
OR CAUSE OF ACTION BASED UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR
THE TRANSACTIONS CONTEMPLATED HEREBY, IN ANY ACTION, PROCEEDING OR OTHER
LITIGATION OF ANY TYPE BROUGHT BY ANY OF THE PARTIES AGAINST ANY
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<PAGE>
<PAGE>
OTHER PARTY OR PARTIES, WHETHER WITH RESPECT TO CONTRACT CLAIMS, TORT CLAIMS, OR
OTHERWISE. THE BANKS, THE SELLER, THE MASTER SERVICER AND THE AGENT EACH AGREE
THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL WITHOUT A
JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO FURTHER AGREES
THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY OPERATION OF THIS
SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING WHICH SEEKS, IN WHOLE
OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF THIS AGREEMENT OR ANY
PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY SUBSEQUENT AMENDMENTS,
RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
SECTION 6.9. Entire Agreement. This Agreement and the other Transaction
Documents embody the entire agreement and understanding between the parties
hereto, and supersede all prior or contemporaneous agreements and understandings
of such Persons, verbal or written, relating to the subject matter hereof and
thereof.
SECTION 6.10. Headings. The captions and headings of this Agreement and
in any Exhibit, Schedule or Annex hereto are for convenience of reference only
and shall not affect the interpretation hereof or thereof.
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<PAGE>
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
SELLER: WARNACO OPERATIONS CORPORATION
By: /s/ William S. Finkelstein
_____________________________________
Name: William S. Finkelstein
Title: President
Address: 325 Lafayette Street
Bridgeport, Connecticut 06601
Attention: President
Telephone No.: (203) 579-8550
Facsimile No.: (203) 334-6621
50% THE BANK OF NOVA SCOTIA
By: /s/ Terry K. Fryett
_____________________________________
Name: Terry K. Fryett
Title: Unit Head
Address: One Liberty Plaza
New York, New York 10006
Attention: Richard A. Josephs
Telephone No.: (212) 225-5118
Facsimile No.: (212) 225-5090
50% CITICORP NORTH AMERICA, INC.
By: /s/ Radford C. West
_____________________________________
Name: Radford C. West
Title: Vice President
Address: 399 Park Avenue
New York, New York 10043
Attention: Radford C. West
Telephone No.: (212) 559-3811
facsimile No.: (212) 758-7258
<PAGE>
<PAGE>
SERVICER: GREGORY STREET, INC.
By: /s/ Carl J. Deddens
_____________________________________
Name: Carl J. Deddens
Title: Assistant Treasurer
Address: 325 Lafayette Street
Bridgeport, Connecticut 06601
Attention: Carl J. Deddens
Assistant Treasurer
Telephone No.: (203) 579-8040
Facsimile No.: (203) 334-6621
AGENT: THE BANK OF NOVA SCOTIA
By: /s/ Terry K. Fryett
_____________________________________
Name: Terry K. Fryett
Title: Unit Head
Address: One Liberty Plaza
New York, New York 10006
Attention: Richard A. Josephs
Telephone No.: (212) 225-5118
Facsimile No.: (212) 225-5090
<PAGE>
<PAGE>
EXHIBIT I
DEFINITIONS
As used in the Agreement (including its Exhibits), the following terms
shall have the following meanings (such meanings to be equally applicable to
both the singular and plural forms of the terms defined):
"Affected Person" means the Agent, any Bank or any of their respective
Affiliates.
"Agent-Related Person" has the meaning set forth in Section 5.3.
"Agent's Account" means the special account (account number 2158-13) of
the Agent maintained at the office of The Bank of Nova Scotia, New York Agency
(ABA# 026002532, Reference: Liberty Street Funding Corp.) for the benefit of the
Banks.
"Assignee" means any Person (other than the Agent and a Bank then a
party to this Agreement) who shall have executed an Assignment and Acceptance
and shall have become a Bank hereunder pursuant to Section 6.3(a).
"Assignment and Acceptance" means an assignment and acceptance
agreement entered into by a Bank, an Assignee and the Agent, pursuant to which
such Assignee may become a party to the Agreement.
"Banks' Pro Rata Share" means a fraction, expressed as a Percentage,
the numerator of which is the aggregate outstanding Capital of the Purchased
Interest hereunder and the denominator of which is the Total Outstanding
Capital.
"Bank's Share" with respect to any Bank of an amount means such amount
multiplied by such Bank's Percentage of the Purchased Interest.
"Banks" means each of the banks parties to this Agreement and each
Assignee of such banks that shall become a party to the Agreement pursuant to
Section 6.3.
"Capital" means the amount paid to the Seller in respect of the
Purchased Interest by the Banks, pursuant to the Agreement, in each case reduced
from time to time by Collections distributed on account of such Capital pursuant
to Section 1.4(d); provided that if such Capital shall have been reduced by any
distribution and thereafter all or a portion of such distribution is rescinded
or must otherwise be returned for any reason, such Capital shall be increased by
the amount of such rescinded or returned distribution, as though it had not been
made.
"Commitment Termination Date" means the earliest of (a) September 29,
1999, (b) the Facility Termination Date under the Receivables Purchase
Agreement, (c) the date determined
Exhibit I-1
<PAGE>
<PAGE>
pursuant to Section 2.2, and (d) the date the Total Commitment reduces to zero.
The date set forth in clause (a) above may be extended pursuant to Section 6.7
of the Agreement.
"Discount" means for any Portion of Capital of the Purchased Interest
for any Settlement Period the result of:
AR x C x ED/360 + TF
where:
AR = the Assignee Rate for the Portion of Capital
for such Settlement Period
C = the weighted average of such portion of
Capital during such Settlement Period
ED = the actual number of days elapsed during such
Settlement Period
TF = the Termination Fee, if any, for the Portion
of Capital for such Settlement Period;
provided that no provision of the Agreement shall require the payment or permit
the collection of Discount in excess of the maximum permitted by applicable law;
and provided, further, that Discount for the Portion of Capital of the Purchased
Interest shall not be considered paid by any distribution to the extent that at
any time all or a portion of such distribution is rescinded or must otherwise be
returned for any reason.
"Fee Letter" has the meaning set forth in Section 1.5.
"Fees" means the fees payable by the Seller to the Agent for the
account of the Banks pursuant to the Fee Letter.
"Indemnified Party" means the Banks, the Agent or any of their
respective Affiliates, employees, officers, directors, agents, counsel,
successors, transferees or assigns.
"Majority Banks" means at any time Banks holding undivided ownership
interests of the Purchased Interest having Capital equal to more than 50% of the
aggregate outstanding Capital of all undivided ownership interests of the
Purchased Interest or, if no Capital is then outstanding, Banks having more than
50% of the Total Commitment.
"Percentage" of any Bank means, (a) with respect to any Bank that is a
party hereto as of the date hereof, the percentage set forth next to its
signature on this Agreement, as reduced by any Assignment and Acceptance entered
into with an Assignee, or (b) with respect to a Bank that
Exhibit I-2
<PAGE>
<PAGE>
has entered into an Assignment and Acceptance, the amount set forth therein as
such Bank's Percentage, or such amount as reduced by an Assignment and
Acceptance entered into between such Bank and subsequent Assignee.
"Receivables Purchase Agreement" means the Receivables Purchase
Agreement, dated as of the date hereof, among the Seller, Gregory Street, Inc.,
as Servicer, Liberty Street Funding Corp. and Corporate Asset Funding Company,
Inc., as Investors, The Bank of Nova Scotia, as Agent, and Citicorp North
America, Inc., as Co-Agent, as the same may, from time to time, be amended,
modified or supplemented.
"Required Banks" means at any time Banks holding undivided ownership
interests of the Purchased Interest having Capital equal to more than 66 2/3% of
the aggregate outstanding Capital of all undivided ownership interests of the
Purchased Interest or, if no Capital is then outstanding, Banks having more than
662/3% of the Total Commitment.
"Servicer" means Gregory Street, Inc., in its capacity as servicer
hereunder.
"Termination Day" means: (a) each day on which the conditions set forth
in Section 2 of Exhibit II to the Agreement are not satisfied and (b) each day
that occurs on or after the Commitment Termination Date.
"Termination Event" has the meaning specified in Exhibit V.
"Total Commitment" means $200,000,000, as such amount may be (a)
reduced pursuant to Section 1.1 or (b) increased upon the request of the Seller
and with the consent of the Banks; it being understood that the Banks shall be
under no obligation to consent to an increase in the Total Commitment at any
time and that such consent may be withheld by the Banks in their sole and
absolute discretion without regard to whether such consent has been unreasonably
withheld. References to the unused portion of the Total Commitment shall mean,
at any time, the Total Commitment (as then reduced pursuant to Section 1.1(b) or
pursuant to the next sentence or as then increased pursuant to the preceding
sentence), minus the sum of the then outstanding Capital of the Purchased
Interest under the Agreement and the then outstanding "Capital" of the
"Purchased Interests" under the Receivables Purchase Agreement. Furthermore, on
each day on which the Seller reduces the unused portion of (or terminates) the
"Purchase Limit" under the Receivables Purchase Agreement, the Total Commitment
automatically shall reduce by the same amount (or so terminate).
Defined Terms Incorporated by Reference. Unless otherwise defined in
the Agreement and subject to the modifications herein set forth, capitalized
terms used in the Agreement or in any provisions of the Receivables Purchase
Agreement incorporated in the Agreement by reference shall have the meanings
given to them in the Receivables Purchase Agreement. Without limiting the
foregoing, the defined terms "Credit and Collection Policy" and "Monthly Report"
are hereby incorporated by reference together with the related Schedule 1 and
Annex A to the Receivables Purchase Agreement. All references to the "Agent" and
"Agreement" in
Exhibit I-3
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<PAGE>
provisions of the Receivables Purchase Agreement (including Exhibits and
Schedules) incorporated in the Agreement by reference shall, without further
reference, mean BNS, as Agent under the Agreement, and the Agreement,
respectively. Furthermore, all references in such incorporated provisions to
"Collections," "Net Receivables Pool Balance," "Pool Receivable," "Purchased
Interest," "Receivables Pool" and "Related Security" shall mean the Collections,
the Net Receivables Pool Balance, a Pool Receivable, a Purchased Interest, the
Receivables Pool and the Related Security under the Agreement, respectively. To
the extent any word or phrase is defined in the Agreement, any such word or
phrase appearing in provisions so incorporated by reference from the Receivables
Purchase Agreement shall have the meaning given to it in the Agreement. The
incorporation by reference into the Agreement from the Receivables Purchase
Agreement is for convenience only, and the Agreement and the Receivables
Purchase Agreement shall at all times be, and be treated as, separate and
distinct facilities. Incorporations by reference in the Agreement from the
Receivables Purchase Agreement shall not be affected or impaired by any
subsequent expiration or termination of the Receivables Purchase Agreement, nor
by any amendment thereof or waiver thereunder unless the Agent, as Agent for the
Banks, shall have consented to such amendment or waiver in writing.
Other Terms. All accounting terms not specifically defined herein shall
be construed in accordance with generally accepted accounting principles. All
terms used in Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such Article 9.
Exhibit I-4
<PAGE>
<PAGE>
EXHIBIT II
CONDITIONS OF PURCHASES
1. Conditions Precedent to Initial Purchase. The initial purchase of an
undivided ownership interest in the Purchased Interest under the Agreement is
subject to the conditions precedent that the conditions precedent to the initial
purchase under the Receivables Purchase Agreement shall have been satisfied on
or prior to the date of such purchase under the Agreement and that the Agent
shall have received on or before the date of such purchase under the Agreement
the following, each (unless otherwise indicated) dated such date, in form and
substance satisfactory to the Agent:
(a) each of the documents, instruments and writings described in
paragraphs 1(a) through 1(n) of Exhibit II to the Receivables Purchase
Agreement;
(b) the Fee Letter; and
(c) such other approvals, documents and opinions as the Agent may
reasonably request.
2. Conditions Precedent to All Purchases and Reinvestments. Each
purchase and each reinvestment shall be subject to the further conditions
precedent that
(a) in the case of each purchase (other than the initial purchase), the
Servicer shall have delivered to the Agent on or before such purchase, in form
and substance satisfactory to the Agent, a completed pro forma Monthly Report to
reflect the level of Capital and related reserves after such subsequent
purchase;
(b) on the date of such purchase (including the initial purchase) or
reinvestment the following statements shall be true (and acceptance of the
proceeds of such purchase or reinvestment shall be deemed a representation and
warranty by the Seller that such statements are then true):
(i) the representations and warranties contained in Exhibit
III to the Agreement are true and correct in all material respects on
and as of the date of such purchase or reinvestment as though made on
and as of such date;
(ii) no event has occurred and is continuing, or would result
from such purchase or reinvestment, that constitutes a Termination
Event or that would constitute an Unmatured Termination Event, and
Exhibit II-1
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<PAGE>
(iii) the sum of (a) the aggregate Capital and Total Reserves
of the Purchased Interest under this Agreement and (b) the aggregate
"Capital" and "Total Reserves" of all Purchased Interests under the
Receivables Purchase Agreement would not exceed the Adjusted Net
Receivables Pool Balance.
(c) the Agent shall have received such other approvals, opinions or
documents as it may reasonably request.
Exhibit II-2
<PAGE>
<PAGE>
EXHIBIT III
REPRESENTATIONS AND WARRANTIES
Exhibit III of the Receivables Purchase Agreement is hereby
incorporated herein by reference, except that each reference therein to an
"Investor" or the "Investors" shall be deemed to be a reference to a Bank or the
Banks, respectively.
Exhibit III-1
<PAGE>
<PAGE>
EXHIBIT IV
COVENANTS
Exhibit IV of the Receivables Purchase Agreement is hereby incorporated
herein by reference, except that: (i) each reference therein to the "Agent and
the Co-Agent" or the "Agent or the Co-Agent" shall be deemed to be a reference
to the Agent, (ii) each reference to the "Agent or the Co-Agent, or their agents
or representatives" shall be deemed to be a reference to the Agent or its agents
or representatives and (iii) each reference therein to the "Facility Termination
Date, an "Investor" or the "Investors" shall be deemed to be a reference to the
Commitment Termination Date, a Bank or the Banks, respectively.
Exhibit IV-1
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<PAGE>
EXHIBIT V
TERMINATION EVENT
Each of the "Termination Events" set forth in Exhibit V of the
Receivables Purchase Agreement is hereby incorporated by reference, except that
(i) each reference therein to the "Agent and the Co-Agent, acting together"
shall be deemed to be a reference to the Agent, (ii) each reference therein to
an "Investor" or the "Investors" shall be deemed to be a reference to a Bank or
the Banks, respectively, and (iii) the references in subsection (i) thereof to
the "Parallel Purchase Commitment" shall be deemed to be a reference to the
Receivables Purchase Agreement.
Exhbit V-1
<PAGE>
<PAGE>
SCHEDULE I
See Schedule I to the Receivables Purchase Agreement.
<PAGE>
<PAGE>
SCHEDULE II
See Schedule II to the Receivables Purchase Agreement.
<PAGE>
<PAGE>
SCHEDULE III
See Schedule III to the Receivables Purchase Agreement.
<PAGE>
<PAGE>
SCHEDULE IV
See Schedule IV to the Receivables Purchase Agreement.
<PAGE>
<PAGE>
ANNEX A
See Annex A to the Receivables Purchase Agreement.
<PAGE>
<PAGE>
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[Exhibit 10.8]
RECEIVABLES PURCHASE AGREEMENT
dated as of September 30, 1998
among
WARNACO OPERATIONS CORPORATION, as Seller
GREGORY STREET, INC., as Servicer
LIBERTY STREET FUNDING CORP. and
CORPORATE ASSET FUNDING COMPANY, INC.,
as the Investors
and
THE BANK OF NOVA SCOTIA,
as Agent
and
CITICORP NORTH AMERICA, INC.,
as the Co-Agent
- - --------------------------------------------------------------------------------
<PAGE>
<PAGE>
TABLE OF CONTENTS
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
<TABLE>
<S> <C>
Section 1.1. Purchase Facility................................................1
Section 1.2. Making Purchases.................................................2
Section 1.3. Purchased Interest Computation...................................3
Section 1.4. Settlement Procedures............................................3
Section 1.5. Fees.............................................................8
Section 1.6. Payments and Computations, Etc...................................8
Section 1.7. Increased Costs..................................................8
Section 1.8. Requirements of Law..............................................9
ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
TERMINATION EVENTS
Section 2.1. Representations and Warranties; Covenants.......................10
Section 2.2. Termination Events..............................................10
ARTICLE III.
INDEMNIFICATION
Section 3.1. Indemnities by the Seller.......................................11
Section 3.2. Indemnities by the Servicer.....................................13
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of the Servicer.....................................13
Section 4.2. Duties of the Servicer..........................................14
Section 4.3. Establishment and Use of Certain Accounts.......................15
Section 4.4. Enforcement Rights..............................................16
Section 4.5. Responsibilities of the Seller..................................17
Section 4.6. Servicing Fee...................................................17
</TABLE>
ARTICLE V.
i
<PAGE>
<PAGE>
MISCELLANEOUS
<TABLE>
<S> <C>
Section 5.1. Amendments, Etc.................................................17
Section 5.2. Notices, Etc....................................................18
Section 5.3. Assignability...................................................18
Section 5.4. Costs, Expenses and Taxes.......................................19
Section 5.5. No Proceedings; Limitation on Payments..........................19
Section 5.6. GOVERNING LAW AND JURISDICTION
Section 5.7. Execution in Counterparts.......................................20
Section 5.8. Survival of Termination.........................................20
Section 5.9. WAIVER OF JURY TRIAL............................................20
Section 5.10. Entire Agreement................................................20
Section 5.11. Headings........................................................21
Section 5.12. Investor's Liabilities..........................................21
EXHIBIT I Definitions
EXHIBIT II Conditions of Purchases
EXHIBIT III Representations and Warranties
EXHIBIT IV Covenants
EXHIBIT V Termination Events
SCHEDULE I Credit and Collection Policy
SCHEDULE II Trade Names
SCHEDULE III Special Concentration Percentages
SCHEDULE IV Fiscal Months
ANNEX A Form of Monthly Report
ANNEX B Form of Purchase Notice
</TABLE>
ii
<PAGE>
<PAGE>
This RECEIVABLES PURCHASE AGREEMENT (as amended, supplemented or
otherwise modified and in effect from time to time, this "Agreement") is entered
into as of September 30, 1998, among WARNACO OPERATIONS CORPORATION, a Delaware
corporation, as seller (the "Seller"), GREGORY STREET, INC., a Delaware
corporation ("Gregory"), as initial servicer (in such capacity, together with
its successors and permitted assigns in such capacity, the "Servicer"), LIBERTY
STREET FUNDING CORP., a Delaware corporation ("Liberty Street"), CORPORATE ASSET
FUNDING COMPANY, INC., a Delaware corporation ("CAFCO"), THE BANK OF NOVA
SCOTIA, a Canadian chartered bank acting through its New York branch ("BNS"), as
agent for the Investors (in such capacity, together with its successors and
assigns in such capacity, together with its successors and assigns in such
capacity, the "Agent"), and CITICORP NORTH AMERICA, INC., a Delaware corporation
("CNAI"), as co-agent (in such capacity, together with its successors and
assigns in such capacity, the "Co-Agent").
PRELIMINARY STATEMENTS. Certain terms that are capitalized and used
throughout this Agreement are defined in Exhibit I. References in the Exhibits
hereto to the "Agreement" refer to this Agreement, as amended, supplemented or
otherwise modified and in effect from time to time.
The Seller desires to sell, transfer and assign to Liberty Street and
CAFCO undivided variable percentage ownership interests in a pool of
receivables, and Liberty Street and CAFCO desire to acquire such undivided
variable percentage ownership interests on the terms and subject to the
conditions set forth herein.
In consideration of the mutual agreements, provisions and covenants
contained herein, the parties hereto agree as follows:
ARTICLE I.
AMOUNTS AND TERMS OF THE PURCHASES
Section 1.1. Purchase Facility. (a) On the terms and conditions
hereinafter set forth, each of Liberty Street and CAFCO may, in its sole
discretion, purchase, and make reinvestments in, undivided percentage ownership
interests with regard to its Purchased Interest from the Seller from time to
time from the date hereof to the Facility Termination Date. Under no
circumstances shall any Investor make any such purchase or reinvestment if,
after giving effect thereto, (i) the aggregate outstanding Capital of the
Purchased Interests purchased by the Investors hereunder, together with the
aggregate outstanding "Capital" of the "Purchased Interest" purchased by the
Banks under the Parallel Purchase Commitment (the "Total Outstanding Capital")
would exceed the Purchase Limit or (ii) the aggregate outstanding Capital of the
Purchased Interest purchased by any Investor hereunder together with the
outstanding "Capital" of the "Purchased Interest" purchased under the Parallel
Purchase Commitment by the Bank(s) that is a member of such Investor's Group
would exceed such Investor's "Percentage" (as defined below) of the Total
Outstanding Capital. ("Percentage" with respect to any Investor means a fraction
expressed as a percentage, the numerator
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of which is such Investor's Purchase Limit and the denominator of which is the
aggregate of the Purchase Limits of all Investors).
(b) The Seller may, upon at least 30 days' written notice to the Agent
and Co-Agent, terminate in whole or reduce in part the unused portion of the
Purchase Limit; provided, that each partial reduction shall be in the amount of
at least $10,000,000, or an integral multiple of $5,000,000 in excess thereof,
and that, unless terminated in whole, the Purchase Limit shall in no event be
reduced below $100,000,000.
Section 1.2. Making Purchases. (a) Each purchase (but not reinvestment)
of undivided percentage ownership interests with regard to the Purchased
Interests hereunder shall be made upon the Seller's irrevocable written notice
in the form of Annex B delivered to the Agent and the Co-Agent in accordance
with Section 5.2 (which notice must be received by the Agent and the Co-Agent
before 11:00 a.m., New York City time) at least three Business Days before the
requested purchase date, which notice shall specify: (A) the amount requested to
be paid to the Seller (such amount, which shall not be less than $2,000,000,
being the "Capital" relating to the undivided percentage ownership interest then
being purchased with respect to each Purchased Interest), and (B) the date of
such purchase (which shall be a Business Day).
(b) On the date of each purchase (but not reinvestment) each Investor
purchasing undivided percentage ownership interests with regard to its Purchased
Interest hereunder, shall, upon satisfaction of the applicable conditions set
forth in Exhibit II, make available to the Seller in same day funds, at
Citibank, N.A., account number 4077-4094, ABA 021-00-0089, an amount equal to
the Capital relating to its Purchased Interest then being purchased.
(c) Effective on the date of each purchase pursuant to this Section and
each reinvestment pursuant to Section 1.4, the Seller hereby sells and assigns
to the Agent, for the benefit of each Investor purchasing undivided percentage
ownership interests with regard to its Purchased Interest, an undivided
percentage ownership interest in: (i) each Pool Receivable then existing, (ii)
all Related Security with respect to such Pool Receivables, and (iii) all
Collections with respect to, and other proceeds of, such Pool Receivables and
Related Security.
(d) To secure all of the Seller's obligations (monetary or otherwise)
under this Agreement and the other Transaction Documents to which it is a party,
whether now or hereafter existing or arising, due or to become due, direct or
indirect, absolute or contingent, the Seller hereby grants to the Agent, for the
benefit of the Investors, a security interest in all of the Seller's right,
title and interest (including any undivided interest of the Seller) in, to and
under all of the following, whether now or hereafter owned, existing or arising:
(i) all Pool Receivables, (ii) all Related Security with respect to such Pool
Receivables, (iii) all Collections with respect to such Pool Receivables, (iv)
the Collection Account and all amounts on deposit therein, and all certificates
and instruments, if any, from time to time evidencing the Collection Account and
amounts on deposit therein, (v) all rights (but none of the obligations) of the
Seller under the Gregory Sale Agreement, and (vi) all proceeds of, and all
amounts received or receivable under any or all of, the foregoing (collectively,
the "Pool Assets"). Upon the sale of a Defaulted Receivable by the Servicer as
permitted by Section 1(e) of
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Exhibit IV, the security interest of the Agent in such Defaulted Receivable
shall automatically be released and the Agent shall take such actions as may be
reasonably requested by the purchaser of such Defaulted Receivable to evidence
such release. The Agent, for the benefit of the Investors, shall have, with
respect to the Pool Assets, and in addition to all the other rights and remedies
available to the Agent and the Investors hereunder, all the rights and remedies
of a secured party under any applicable UCC.
Section 1.3. Purchased Interest Computation. The Purchased Interest of
each Investor shall be initially computed on the date of its initial purchase
hereunder. Thereafter, until the Facility Termination Date, each Purchased
Interest shall be automatically recomputed (or deemed to be recomputed) on each
Business Day other than a Termination Day. Each Purchased Interest as computed
(or deemed recomputed) as of the day before the Facility Termination Date shall
thereafter remain constant. Each Purchased Interest shall become zero on the
Final Payout Date.
Section 1.4. Settlement Procedures. (a) The collection of the Pool
Receivables shall be administered by the Servicer in accordance with this
Agreement. The Seller shall provide to the Servicer on a timely basis all
information needed for such administration, including notice of the occurrence
of any Termination Day and current computations of the Purchased Interests.
(b) The Servicer shall, on each day on which Collections of Pool
Receivables are received (or deemed received in accordance with Section 1.4(e))
by the Seller or Servicer, transfer such Collections into the Collection
Account. With respect to such Collections on such day, the Servicer shall:
(i) set aside in the Collection Account for the benefit of
each Investor, out of the percentage of such Collections represented by
the Purchased Interest of such Investor, first an amount equal to the
Discount accrued through such day for each Portion of Capital of such
Purchased Interest and not previously set aside, second, an amount
equal to the Fees payable to such Investor and accrued through such day
and not previously set aside, and third, an amount equal to such
Investor's Share of the Servicing Fee accrued through such day and not
previously set aside; and
(ii) subject to Section 1.4(f), if such day is not a
Termination Day, remit to the Seller, on behalf of such Investor, the
remainder of the percentage of such Collections, represented by its
Purchased Interest, to the extent representing a return on the Capital;
such Collections shall be automatically reinvested in Pool Receivables,
and in the Related Security and Collections and other proceeds with
respect thereto, and the Purchased Interest of such Investor shall be
automatically recomputed pursuant to Section 1.3;
(iii) if such day is a Termination Day, (A) set aside and
retain in the Collection Account for such Investor, the entire
remainder of the percentage of the Collections represented by the
Purchased Interest of such Investor; provided that, so long as the
Facility Termination Date has not occurred, if any amounts are so set
aside and retained in the Collection Account on any Termination Day and
thereafter, the conditions set forth in
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Section 2 of Exhibit II are satisfied or are waived by the Agent and
the Co-Agent, such previously set aside amounts shall, to the extent
representing a return on the Capital, be reinvested in accordance with
the preceding paragraph (ii) on the day of such subsequent satisfaction
or waiver of conditions, and (B) set aside and retain in the Collection
Account the Investors' Pro Rata Share of the entire remainder of the
Collections in the Collection Account represented by the Seller's Share
of the Collections, if any; provided, that so long as the Facility
Termination Date has not occurred, if any amounts are so set aside and
retained in the Collection Account on any Termination Day and
thereafter, the conditions set forth in Section 2 of Exhibit II are
satisfied or are waived by the Agent and the Co-Agent, such previously
set aside amounts shall be distributed to the Seller on the day of such
subsequent satisfaction or waiver of conditions; and
(iv) during such times as amounts are required to be
reinvested in accordance with the foregoing paragraph (ii) or the
proviso to paragraph (iii), release to the Seller (subject to Section
1.4(f)) for its own account any Collections in excess of (x) such
amounts, (y) the amounts that are required to be set aside and retained
in the Collection Account pursuant to paragraph (i) above and (z) in
the event Gregory (or any Affiliate of Warnaco) is not the Servicer,
all reasonable and appropriate out-of-pocket costs and expenses of such
Servicer of servicing, collecting and administering the Pool
Receivables.
(c) The Servicer shall deposit into an account designated by the Agent
for the benefit of the Investors, on each Settlement Date for the Purchased
Interest of each Investor or for the payment of Fees payable to each Investor:
(i) Collections held on deposit in the Collection Account for
the benefit of each Investor pursuant to Section 1.4(b)(i) in respect
of accrued Discount and accrued and unpaid Fees;
(ii) Collections held on deposit in the Collection Account for
the benefit of each Investor pursuant to Section 1.4(f); and
(iii) on any Termination Day, the lesser of (x) the sum of (i)
the amount of Collections then held on deposit in the Collection
Account for the benefit of each Investor pursuant to Section
1.4(b)(iii)(A) plus (ii) such Investor's Percentage of the amount of
Collections then on deposit in the Collection Account in respect of the
Seller's Share of Collections pursuant to Section 1.4(b)(iii)(B) and
(y) the aggregate amount of Capital.
The Servicer shall deposit to its own account from Collections held on deposit
in the Collection Account pursuant to Section 1.4(b)(i) in respect of the
accrued Servicing Fee, an amount equal to such accrued Servicing Fee.
(d) Upon receipt of funds deposited into the Agent's account pursuant
to Section 1.4(c), the Agent shall distribute to each Investor the portion of
such funds payable to such Investor and each Investor shall cause such funds to
be distributed as follows:
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(i) if such distribution occurs on a day that is not a
Termination Day, first to such Investor in payment in full of all
accrued Discount and accrued and unpaid Fees payable to such Investor,
and second, if the Servicer has set aside amounts in respect of the
Servicing Fee pursuant to Section 1.4(b)(i) and has not retained such
amounts pursuant to Section 1.4(c), to the Servicer (payable in arrears
on each Settlement Date) in payment in full of each Investor's Share of
accrued Servicing Fees so set aside, and
(ii) if such distribution occurs on a Termination Day or on a
day when the Purchased Interest exceeds 100%, first to such Investor in
payment in full of all accrued Discount and such accrued and unpaid
Fees payable to such Investor, second to such Investor in payment in
full of its Capital (or, if such day is not a Termination Day, the
amount necessary to reduce the Purchased Interest to 100%), third, if
Gregory or an Affiliate of Warnaco is not the Servicer, to the Servicer
in payment in full of all accrued Servicing Fees, fourth, if the
Capital of the Purchased Interest of such Investor and accrued Discount
with respect to each Portion of Capital thereof have been reduced to
zero, and all accrued Servicing Fees payable to the Servicer (if other
than Gregory or an Affiliate of Warnaco) have been paid in full, to
such Investor, the Agent, the Co-Agent and any other Indemnified Party
or Affected Person in payment in full of any other amounts owed thereto
by the Seller hereunder and, fifth, unless such amount has been
retained by the Servicer pursuant to Section 1.4(c), to the Servicer
(if the Servicer is Gregory or an Affiliate of Warnaco) in payment in
full of such Investor's Share of all accrued Servicing Fees.
After the Capital, Discount, Fees and Servicing Fees with respect to each
Purchased Interest, and any other amounts payable by the Seller and the Servicer
to the Investors, the Agent, the Co-Agent or any other Indemnified Party or
Affected Person hereunder, have been paid in full, all additional Collections
with respect to the Purchased Interests shall be paid to the Seller for its own
account.
(e) For the purposes of this Section 1.4:
(i) if on any day the Outstanding Balance of any Pool
Receivable is reduced or adjusted as a result of any defective,
rejected, returned, repossessed or foreclosed goods or services, or any
revision, cancellation, allowance, discount or other adjustment made by
any Originator, the Servicer, the Seller or any Affiliate of the
Seller, or any setoff or dispute between any Originator, the Seller or
any Affiliate of the Seller and an Obligor, the Seller shall be deemed
to have received on such day a Collection of such Pool Receivable in
the amount of such reduction or adjustment;
(ii) if on any day any of the representations or warranties in
Section 1(g) or (m) of Exhibit III is not true with respect to any Pool
Receivable, the Seller shall be deemed to have received on such day a
Collection of such Pool Receivable in full;
(iii) except as otherwise required by applicable law or the
relevant Contract, all Collections received from an Obligor of any
Receivable shall be applied to the Receivables of such Obligor in the
order of the age of such Receivables, starting with the oldest such
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Receivable, unless such Obligor designates in writing its payment for
application to specific Receivables; and
(iv) if and to the extent the Agent, the Co-Agent or any
Investor shall be required for any reason to pay over to an Obligor (or
any trustee, receiver, custodian or similar official in any Insolvency
Proceeding) any amount received by it hereunder, such amount shall be
deemed not to have been so received by the Agent, the Co-Agent or such
Investor, as the case may be, but rather to have been retained by the
Seller and, accordingly, the Agent, the Co-Agent or such Investor, as
the case may be, shall have a claim against the Seller for such amount,
payable when and to the extent that any distribution from or on behalf
of such Obligor is made in respect thereof.
(f) If at any time the Seller shall wish to cause the reduction of
Capital of the Purchased Interests, the Seller may do so as follows:
(i) the Seller shall give the Agent, the Co-Agent and the
Servicer at least five Business Days' prior written notice thereof
(including the amount of such proposed reduction and the proposed date
on which such reduction will commence);
(ii) on the proposed date of commencement of such reduction
and on each day thereafter, the Servicer shall cause Collections not to
be reinvested until the amount thereof not so reinvested shall equal
the desired amount of reduction; and
(iii) the Servicer shall hold such Collections in the
Collection Account for the benefit of the Investors, for payment to the
Agent on behalf of each Investor on the next Settlement Date
immediately following the current Settlement Period, and the Capital of
each Purchased Interest shall be deemed reduced in the amount to be
paid to the applicable Investor only when in fact finally so paid;
provided, that:
(A) the amount of any such reduction shall be not less than
$2,000,000 and shall be an integral multiple of $100,000, and the
entire Capital of each Purchased Interest after giving effect to such
reduction shall be not less than $2,000,000 and shall be in an integral
multiple of $100,000 (unless such Capital shall have been reduced to
zero);
(B) the Seller shall choose a reduction amount, and the date
of commencement thereof, so that to the extent practicable such
reduction shall commence and conclude in the same Settlement Period;
and
(C) The Capital of each Investor shall be reduced pro-rata
such that after giving effect to such reduction, the outstanding
Capital of the Purchased Interest of such Investor hereunder and the
outstanding "Capital" of any Purchased Interest purchased under the
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Parallel Purchase Commitment by any Bank that is a member of such
Investor's Group is equal to such Investor's Percentage of the Total
Outstanding Capital.
Section 1.5. Fees. The Seller shall pay to the Agent for the account of
Liberty Street and CAFCO certain fees in the amounts and on the dates set forth
in a letter, dated the date hereof, among the Seller, the Agent and the Co-Agent
(as such letter agreement may be amended, supplemented or otherwise modified
from time to time, the "Fee Letter").
Section 1.6. Payments and Computations, Etc. (a) All amounts to be paid
or deposited by the Seller or the Servicer hereunder shall be made without
reduction for offset or counterclaim and shall be paid or deposited no later
than 12:00 noon (New York City time) on the day when due in same day funds to
the account designated by the Agent. All amounts received after 12:00 noon (New
York City time) will be deemed to have been received on the next Business Day.
(b) The Seller or the Servicer, as the case may be, shall, to the
extent permitted by law, pay interest on any amount not paid or deposited by the
Seller or the Servicer for the account of the Agent, any Investor or any other
Affected Person, as the case may be, within three Business Days of the date such
payment or deposit is due, at an interest rate equal to 2.0% per annum above the
Base Rate, payable on demand.
(c) All computations of interest under Section 1.6(b) and all
computations of Discount, fees and other amounts hereunder shall be made on the
basis of a year of 360 (or 365 or 366, as applicable, with respect to Discount
or other amounts calculated by reference to the Base Rate) days for the actual
number of days elapsed. Whenever any payment or deposit to be made hereunder
shall be due on a day other than a Business Day, such payment or deposit shall
be made on the next Business Day and such extension of time shall be included in
the computation of such payment or deposit.
Section 1.7. Increased Costs. (a) If any Affected Person determines
that the existence of or compliance with: (i) any law or regulation or any
change therein or in the interpretation or application thereof, in each case
adopted, issued or occurring after the date hereof, or (ii) any request,
guideline or directive from any central bank or other Governmental Authority
(whether or not having the force of law) issued or occurring after the date of
this Agreement, affects or would affect the amount of capital required or
expected to be maintained by such Affected Person, and such Affected Person
determines that the amount of such capital is increased by or based upon the
existence of any commitment to make purchases of (or otherwise to maintain the
investment in) Pool Receivables related to this Agreement or any related
liquidity facility, credit enhancement facility and other commitments of the
same type, then, upon demand by such Affected Person (with a copy to the Agent),
the Seller shall pay to the Agent within 30 days of such demand, for the account
of such Affected Person, additional amounts sufficient to compensate such
Affected Person. A certificate submitted to the Seller and the Agent by such
Affected Person, certifying, in reasonably specific detail, the basis for and
calculation of such amounts, shall be conclusive and binding for all purposes,
absent manifest error.
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(b) If, due to either: (i) the introduction of or any change in or in
the interpretation of any law or regulation or (ii) compliance with any
guideline or request from any central bank or other Governmental Authority
(whether or not having the force of law), there shall be any increase in the
cost to any Affected Person of agreeing to purchase or purchasing, or
maintaining the ownership of, the Purchased Interest in respect of which
Discount is computed by reference to the Eurodollar Rate, then, upon demand by
such Affected Person, the Seller shall pay to such Affected Person within 30
days of such demand, additional amounts sufficient to compensate such Affected
Person for such increased costs. A certificate submitted to the Seller and the
Agent by such Affected Person, certifying, in reasonably specific detail, the
basis for and calculation of such amounts, shall be conclusive and binding for
all purposes, absent manifest error.
Section 1.8. Requirements of Law. If any Affected Person reasonably
determines that the existence of or compliance with: (a) any law or regulation
or any change therein or in the interpretation or application thereof, in each
case adopted, issued or occurring after the date hereof, or (b) any request,
guideline or directive from any central bank or other Governmental Authority
(whether or not having the force of law) issued or occurring after the date of
this Agreement:
(i) does or shall subject such Affected Person to any tax of
any kind whatsoever with respect to this Agreement, any increase in any
Purchased Interest or in the amount of Capital relating thereto, or
does or shall change the basis of taxation of payments to such Affected
Person on account of Collections, Discount or any other amounts payable
hereunder (excluding taxes imposed on the overall pre-tax net income of
such Affected Person, and franchise taxes imposed on such Affected
Person, by the jurisdiction under the laws of which such Affected
Person is organized or a political subdivision thereof),
(ii) does or shall impose, modify or hold applicable any
reserve, special deposit, compulsory loan or similar requirement
against assets held by, or deposits or other liabilities in or for the
account of, purchases, advances or loans by, or other credit extended
by, or any other acquisition of funds by, any office of such Affected
Person, or
(iii) does or shall impose on such Affected Person any other
condition,
and the result of any of the foregoing is: (A) to increase the cost to such
Affected Person of acting as Agent, or of agreeing to purchase or purchasing or
maintaining the ownership of undivided percentage ownership interests with
regard to any Purchased Interest (or interests therein) or any Portion of
Capital, or (B) to reduce any amount receivable hereunder (whether directly or
indirectly), then, in any such case, upon demand by such Affected Person, the
Seller shall pay to such Affected Person within 30 days of such demand
additional amounts necessary to compensate such Affected Person for such
additional cost or reduced amount receivable. All such amounts shall be payable
as incurred. A certificate from such Affected Person to the Seller, certifying,
in reasonably specific detail, the basis for and calculation of the amount of
such additional costs or reduced amount receivable, shall be conclusive and
binding for all purposes, absent manifest error.
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ARTICLE II.
REPRESENTATIONS AND WARRANTIES; COVENANTS;
TERMINATION EVENTS
Section 2.1. Representations and Warranties; Covenants. Each of the
Seller and the Servicer hereby makes the representations and warranties, and
hereby agrees to perform and observe the covenants, applicable to it set forth
in Exhibits III and IV, respectively.
Section 2.2. Termination Events. If any of the Termination Events set
forth in Exhibit V shall occur, the Agent may, by notice to the Seller, declare
the Facility Termination Date to have occurred (in which case the Facility
Termination Date shall be deemed to have occurred); provided, that automatically
upon the occurrence of any event (without any requirement for the passage of
time or the giving of notice) described in paragraph (f) of Exhibit V, the
Facility Termination Date shall occur. Upon any such declaration, occurrence or
deemed occurrence of the Facility Termination Date, the Investors and the Agent
shall have, in addition to the rights and remedies that they may have under this
Agreement, all other rights and remedies provided after default under the New
York UCC and under other applicable law, which rights and remedies shall be
cumulative.
ARTICLE III.
INDEMNIFICATION
Section 3.1. Indemnities by the Seller. Without limiting any other
rights that any Indemnified Party may have hereunder or under applicable law,
the Seller hereby agrees to indemnify each Indemnified Party from and against
any and all claims, damages, expenses, costs, losses and liabilities (including
Attorney Costs) (all of the foregoing being collectively referred to as
"Indemnified Amounts") arising out of or resulting from this Agreement (whether
directly or indirectly), the use of proceeds of purchases or reinvestments, the
ownership of the Purchased Interest, or any interest therein, or, in respect of
any Receivable, Related Security or Contract, excluding, however: (a)
Indemnified Amounts to the extent resulting from gross negligence or willful
misconduct on the part of such Indemnified Party, (b) recourse (except as
otherwise specifically provided in this Agreement) for uncollectible
Receivables, or (c) any overall net income taxes or franchise taxes imposed on
such Indemnified Party by the jurisdiction under the laws of which such
Indemnified Party is organized or any political subdivision thereof. Without
limiting or being limited by the foregoing, and subject to the exclusions set
forth in the preceding sentence, the Seller shall pay on demand to each
Indemnified Party any and all amounts necessary to indemnify such Indemnified
Party from and against any and all Indemnified Amounts relating to or resulting
from any of the following:
(i) the failure of any Receivable included in the calculation
of the Net Receivables Pool Balance as an Eligible Receivable to be an
Eligible Receivable, the failure of any information contained in a
Monthly Report to be true and correct, or the failure of any other
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information provided to any Investor, the Agent or the Co-Agent with
respect to Receivables or this Agreement to be true and correct,
(ii) the failure of any representation, warranty or statement
made or deemed made by the Seller (or any of its officers) under or in
connection with this Agreement to have been true and correct as of the
date made or deemed made in all respects when made,
(iii) the failure by the Seller to comply with any applicable
law, rule or regulation with respect to any Pool Receivable or the
related Contract, or the failure of any Pool Receivable or the related
Contract to conform to any such applicable law, rule or regulation,
(iv) the failure to vest in the Agent, for the benefit of each
Investor, a valid and enforceable: (A) perfected undivided percentage
ownership interest, to the extent of the Purchased Interest of such
Investor, in the Receivables in, or purporting to be in, the
Receivables Pool and the other Pool Assets, or (B) first priority
perfected security interest in the Pool Assets, in each case, free and
clear of any Adverse Claim,
(v) the failure to have filed, or any delay in filing,
financing statements or other similar instruments or documents under
the UCC of any applicable jurisdiction or other applicable laws with
respect to any Receivables in, or purporting to be in, the Receivables
Pool and the other Pool Assets, whether at the time of any purchase or
reinvestment or at any subsequent time,
(vi) any dispute, claim, offset or defense (other than
discharge in bankruptcy of the Obligor) of the Obligor to the payment
of any Receivable in, or purporting to be in, the Receivables Pool
(including a defense based on such Receivable or the related Contract
not being a legal, valid and binding obligation of such Obligor
enforceable against it in accordance with its terms), or any other
claim resulting from the sale of the goods or services related to such
Receivable or the furnishing or failure to furnish such goods or
services or relating to collection activities with respect to such
Receivable (if such collection activities were performed by the Seller
or any of its Affiliates acting as Servicer or by any agent or
independent contractor retained by the Seller or any of its
Affiliates),
(vii) any failure of the Seller (or any of its Affiliates
acting as the Servicer) to perform its duties or obligations in
accordance with the provisions hereof or under the Contracts,
(viii) any products liability or other claim, investigation,
litigation or proceeding arising out of or in connection with
merchandise, insurance or services that are the subject of any
Contract,
(ix) the commingling of Collections at any time with other
funds,
(x) the use of proceeds by the Seller of purchases or
reinvestments, or
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(xi) any reduction in Capital as a result of the distribution
of Collections pursuant to Section 1.4(d), if all or a portion of such
distributions shall thereafter be rescinded or otherwise must be
returned for any reason.
Section 3.2. Indemnities by the Servicer. Without limiting any other
rights that the Agent, the Investors or any other Indemnified Party may have
hereunder or under applicable law, the Servicer hereby agrees to indemnify each
Indemnified Party from and against any and all Indemnified Amounts arising out
of or resulting from (whether directly or indirectly): (a) the failure of any
information contained in a Monthly Report to be true and correct, or the failure
of any other information provided to any Investor, the Agent or the Co-Agent by,
or on behalf of, the Servicer to be true and correct, (b) the failure of any
representation, warranty or statement made or deemed made by the Servicer (or
any of its officers) under or in connection with this Agreement to have been
true and correct in all respects as of the date made or deemed made, (c) the
failure by the Servicer to comply with any applicable law, rule or regulation
with respect to any Pool Receivable or the related Contract, or (d) any failure
of the Servicer to perform its covenants, duties or obligations in accordance
with the provisions hereof.
ARTICLE IV.
ADMINISTRATION AND COLLECTIONS
Section 4.1. Appointment of the Servicer. (a) The servicing,
administering and collection of the Pool Receivables shall be conducted by the
Person so designated from time to time as the Servicer in accordance with this
Section. Until the Agent gives notice to Gregory (in accordance with this
Section) of the designation of a new Servicer, Gregory is hereby designated as,
and hereby agrees to perform the duties and obligations of, the Servicer
pursuant to the terms hereof. Upon the occurrence of a Termination Event, the
Agent and the Co-Agent may designate as Servicer any Person (including itself)
to succeed Gregory or any successor Servicer, on the condition in each case that
any such Person so designated shall agree to perform the duties and obligations
of the Servicer pursuant to the terms hereof.
(b) Upon the designation of a successor Servicer as set forth in
Section 4.1(a), Gregory agrees that it will terminate its activities as Servicer
hereunder in a manner that the Agent reasonably determines will facilitate the
transition of the performance of such activities to the new Servicer, and
Gregory shall cooperate with and assist such new Servicer. Such cooperation
shall include access to and transfer of related records and use by the new
Servicer of all licenses, hardware or software necessary or desirable to collect
the Pool Receivables and the Related Security.
(c) Gregory acknowledges that, in making their decision to execute and
deliver this Agreement, the Agent, the Co-Agent and the Investors have relied on
Gregory's agreement to act as Servicer hereunder. Accordingly, Gregory agrees
that it will not voluntarily resign as Servicer.
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(d) The Servicer may delegate its duties and obligations hereunder to
any subservicer (each a "Sub-Servicer"); provided, that, in each such
delegation: (i) such Sub-Servicer shall agree in writing to perform the duties
and obligations of the Servicer pursuant to the terms hereof, (ii) the Servicer
shall remain primarily liable for the performance of the duties and obligations
so delegated, (iii) the Seller, the Agent, the Co-Agent and the Investors shall
have the right to look solely to the Servicer for performance and (iv) the terms
of any agreement with any Sub-Servicer shall provide that the Agent and the
Co-Agent may terminate such agreement upon the termination of the Servicer
hereunder by giving notice of its desire to terminate such agreement to the
Servicer (and the Servicer shall provide appropriate notice to each such
Sub-Servicer); provided, however, that if any such delegation is to any Person
other than Warnaco or an Affiliate of Warnaco, the Agent and the Co-Agent shall
have consented in writing in advance to such delegation.
Section 4.2. Duties of the Servicer. (a) The Servicer shall take or
cause to be taken all such action as may be necessary or advisable to administer
and collect each Pool Receivable from time to time, all in accordance with this
Agreement and all applicable laws, rules and regulations, with reasonable care
and diligence, and in accordance with the Credit and Collection Policies. The
Servicer shall set aside, for the accounts of the Seller and the Investors, the
amount of the Collections to which each is entitled in accordance with Article
I. The Servicer may, in accordance with the applicable Credit and Collection
Policy, extend the maturity of any Pool Receivable, so long as no Termination
Event or Unmatured Termination Event has occurred or would result from such
extension, and extend the maturity or adjust the Outstanding Balance of any
Defaulted Receivable as the Servicer may determine to be appropriate to maximize
Collections thereof; provided, however, that: (i) such extension or adjustment
shall not alter the status of such Pool Receivable as a Defaulted Receivable or
limit the rights of the Investors or the Agent under this Agreement and (ii) if
a Termination Event has occurred and Gregory or an Affiliate of Warnaco is
serving as the Servicer, Gregory or such Affiliate may make such extension or
adjustment only upon the prior approval of the Agent and the Co-Agent. The
Seller shall deliver to the Servicer and the Servicer shall hold for the benefit
of the Seller and the Agent (for the benefit of the Investors), in accordance
with their respective interests, all records and documents (including computer
tapes or disks) with respect to each Pool Receivable. Notwithstanding anything
to the contrary contained herein, for so long as a Termination Event has
occurred and is continuing, the Agent may direct the Servicer (whether the
Servicer is Gregory or any other Person) to commence or settle any legal action
to enforce collection of any Pool Receivable or to foreclose upon or repossess
any Related Security.
(b) The Servicer shall, as soon as practicable following actual receipt
of collected funds, turn over to the Seller the collections of any indebtedness
that is not a Pool Receivable, less, if Gregory or an Affiliate of Warnaco is
not the Servicer, all reasonable and appropriate out-of-pocket costs and
expenses of such Servicer of servicing, collecting and administering such
collections. The Servicer, if other than Gregory or an Affiliate of Warnaco,
shall, as soon as practicable upon demand, deliver to the Seller all records in
its possession that evidence or relate to any indebtedness that is not a Pool
Receivable, and copies of records in its possession that evidence or relate to
any indebtedness that is a Pool Receivable.
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(c) The Servicer's obligations hereunder shall terminate on the later
of: (i) the Facility Termination Date and (ii) the date on which all amounts
required to be paid to the Investors, the Agent, the Co-Agent and any other
Indemnified Party or Affected Person hereunder shall have been paid in full.
After such termination, if Gregory or an Affiliate of Warnaco was not
the Servicer on the date of such termination, the Servicer shall promptly
deliver to the Seller all books, records and related materials that the Seller
previously provided to the Servicer, or that have been obtained by the Servicer,
in connection with this Agreement.
Section 4.3. Establishment and Use of Certain Accounts. (a) The Seller
(or the Servicer on its behalf) agrees to establish the Collection Account on or
before the date of the first purchase hereunder. The Collection Account shall be
used to accept the transfer of Collections of Pool Receivables pursuant to
Section 1.4(b) and for such other purposes described in the Transaction
Documents.
(b) Upon the occurrence of a Termination Event or a Downgrade Event,
the Agent may at any time thereafter give notice to the Collection Account Bank
that the Agent is exercising its rights under the Collection Account Agreement
to do any or all of the following: (i) to have the exclusive ownership and
control of the Collection Account transferred to the Agent and to exercise
exclusive dominion and control over the funds deposited therein, (ii) to have
the proceeds that are sent to the Collection Account redirected pursuant to the
Agent's instructions rather than deposited in the Collection Account, and (iii)
to take any or all other actions permitted under the Collection Account
Agreement. The Seller hereby agrees that if the Agent at any time takes any
action set forth in the preceding sentence, the Agent shall have exclusive
control of the proceeds (including Collections) of all Pool Receivables and the
Seller hereby further agrees to take any other action that the Agent may
reasonably request to transfer such control. Any proceeds of Pool Receivables
received by the Seller or the Servicer thereafter shall be sent immediately to
the Agent (or its designee).
Section 4.4. Enforcement Rights. (a) At any time following the
occurrence of a Termination Event:
(i) the Agent may direct the Obligors that payment of all
amounts payable under any Pool Receivable is to be made directly to the
Agent or its designee,
(ii) the Agent may give notice of the Investors' interests in
Pool Receivables to each Obligor, which notice shall direct that
payments be made directly to the Agent or its designee, and
(iii) the Agent may request the Servicer to, and upon such
request the Servicer shall: (A) assemble all of the records necessary
or desirable to collect the Pool Receivables and the Related Security,
and transfer or license to a successor Servicer the use of all software
necessary or desirable to collect the Pool Receivables and the Related
Security, and
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make the same available to the Agent or its designee at a place
selected by the Agent, and (B) segregate all cash, checks and other
instruments received by it from time to time constituting Collections
in a manner acceptable to the Agent and, promptly upon receipt, remit
all such cash, checks and instruments, duly endorsed or with duly
executed instruments of transfer, to the Agent or its designee.
(b) The Seller hereby authorizes the Agent, and irrevocably appoints
the Agent as its attorney-in-fact with full power of substitution and with full
authority in the place and stead of the Seller, which appointment is coupled
with an interest, to take any and all steps in the name of the Seller and on
behalf of the Seller necessary or desirable, in the determination of the Agent,
after the occurrence of a Termination Event, to collect any and all amounts or
portions thereof due under any and all Pool Assets, including endorsing the name
of the Seller on checks and other instruments representing Collections and
enforcing such Pool Assets. Notwithstanding anything to the contrary contained
in this subsection, none of the powers conferred upon such attorney-in-fact
pursuant to the preceding sentence shall subject such attorney-in-fact to any
liability if any action taken by it shall prove to be inadequate or invalid, nor
shall they confer any obligations upon such attorney-in-fact in any manner
whatsoever.
Section 4.5. Responsibilities of the Seller. Anything herein to the
contrary notwithstanding, the Seller shall pay when due any taxes, including any
sales taxes payable in connection with the Pool Receivables and their creation
and satisfaction. None of the Agent, the Co-Agent or any Investor shall have any
obligation or liability with respect to any Pool Asset, nor shall either of them
be obligated to perform any of the obligations of the Seller or Gregory
thereunder.
Section 4.6. Servicing Fee. (a) Subject to Section 4.6(b), the Servicer
shall be paid a fee equal to .75% per annum (the "Servicing Fee Rate") of the
daily average aggregate Outstanding Balance of the Pool Receivables. Each
Investor's Share of such fee shall be paid solely from the distributions
contemplated by Section 1.4(d), and the Seller's Share of such fee shall be paid
by the Seller.
(b) If the Servicer ceases to be Gregory or an Affiliate of Warnaco,
the servicing fee shall be the greater of: (i) the amount calculated pursuant to
clause (a), and (ii) an alternative amount reasonably specified by the successor
Servicer not to exceed 100% of the aggregate reasonable costs and expenses
incurred by such successor Servicer in connection with the performance of its
obligations as Servicer.
ARTICLE V.
MISCELLANEOUS
Section 5.1. Amendments, Etc. No amendment or waiver of any provision
of this Agreement or any other Transaction Document, or consent to any departure
by the Seller or the Servicer therefrom, shall be effective unless in a writing
signed by the Agent and the Co-Agent, and, in the
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case of any amendment, by the other parties thereto; and then such amendment,
waiver or consent shall be effective only in the specific instance and for the
specific purpose for which given; provided, however, that no such material
amendment shall be effective until both Moody's and Standard & Poor's have
notified the Agent in writing that such action will not result in a reduction or
withdrawal of the rating of any Notes issued by Liberty Street. No failure on
the part of any Investor, the Agent or the Co-Agent to exercise, and no delay in
exercising any right hereunder shall operate as a waiver thereof, nor shall any
single or partial exercise of any right hereunder preclude any other or further
exercise thereof or the exercise of any other right. The Agent shall provide
each Rating Agency with a copy of each amendment to or waiver or consent under
this Agreement promptly following the effective date thereof.
Section 5.2. Notices, Etc. All notices and other communications
hereunder shall, unless otherwise stated herein, be in writing (which shall
include facsimile communication) and be sent or delivered to each party hereto
at its address set forth under its name on the signature pages hereof or at such
other address as shall be designated by such party in a written notice to the
other parties hereto. Notices and communications by facsimile shall be effective
when sent (and shall be followed by hard copy sent by first class mail), and
notices and communications sent by other means shall be effective when received.
Section 5.3. Assignability. (a) This Agreement and each Investor's
rights and obligations herein (including ownership of its Purchased Interest or
an interest therein) shall be assignable, in whole or in part, by such Investor
and its successors and assigns with the prior written consent of the Seller;
provided, however, that such consent shall not be unreasonably withheld; and
provided, further, that no such consent shall be required if the assignment is
made to BNS, CNAI, any Affiliate thereof, any Program Support Provider or any
Person that is: (i) in the business of issuing Notes and (ii) associated with or
administered by BNS, CNAI or any Affiliate thereof.
(b) Each Investor may, without the consent of the Seller, at any time
grant one or more Program Support Providers, participating interests in the
Purchased Interest of such Investor. In the event of any such grant by such
Investor of a participating interest to a Program Support Provider, such
Investor shall remain responsible for the performance of its obligations
hereunder. The Seller agrees that each Program Support Provider shall be
entitled to the benefits of Sections 1.7 and 1.8.
(c) Each Investor agrees that it will not permit any Program Support
Provider to assign, in whole or in part, its commitment under any Liquidity
Agreement to any Person (other than an Affiliate of such Program Support
Provider) unless such Person has been approved by the Seller; provided that such
approval by the Seller may not be unreasonably withheld.
(d) Except as provided in Section 4.1(d), neither the Seller nor the
Servicer may assign its rights or delegate its obligations hereunder or any
interest herein without the prior written consent of the Agent or the Co-Agent.
(e) Without limiting any other rights that may be available under
applicable law, the rights of each Investor may be enforced through it or by its
agents.
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Section 5.4. Costs, Expenses and Taxes. (a) In addition to the rights
of indemnification granted under Section 3.1, the Seller agrees to pay on demand
all reasonable costs and expenses in connection with the preparation, execution,
delivery and administration (including periodic internal audits by the Agent,
the Co-Agent or their respective designees of Pool Receivables) of this
Agreement, the other Transaction Documents and the other documents and
agreements to be delivered hereunder (and all reasonable costs and expenses in
connection with any amendment, waiver or modification of any thereof, other than
any costs and expenses in connection with the confirmation by Moody's or
Standard & Poor's of the rating of any Notes), including: (i) Attorney Costs for
the Agent, the Co-Agent, the Investors and their respective Affiliates and
agents with respect thereto and with respect to advising the Agent, the
Co-Agent, the Investors and their respective Affiliates and agents as to their
rights and remedies under this Agreement and the other Transaction Documents,
and (ii) all reasonable costs and expenses (including Attorney Costs), if any,
of the Agent, the Co-Agent, the Investors and their respective Affiliates and
agents in connection with the enforcement of this Agreement and the other
Transaction Documents.
(b) In addition, the Seller shall pay on demand any and all stamp and
other taxes and fees payable in connection with the execution, delivery, filing
and recording of this Agreement or the other documents or agreements to be
delivered hereunder, and agrees to save each Indemnified Party harmless from and
against any liabilities with respect to or resulting from any delay in paying or
omission to pay such taxes and fees.
Section 5.5. No Proceedings; Limitation on Payments. Each of the
Seller, Gregory, the Servicer, the Agent, the Co-Agent, each assignee of the
Purchased Interest or any interest therein, hereby covenants and agrees that it
will not institute against, or join any other Person in instituting against, any
Investor any bankruptcy, reorganization, arrangement, insolvency or liquidation
proceeding, or other proceeding under any federal or state bankruptcy or similar
law, for one year and one day after the latest maturing Note issued by such
Investor is paid in full. The provision of this Section 5.5 shall survive any
termination of this Agreement.
Section 5.6. GOVERNING LAW AND JURISDICTION. (a) THIS AGREEMENT SHALL
BE DEEMED TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE
STATE OF NEW YORK (INCLUDING FOR SUCH PURPOSE SECTIONS 5-1401 AND 5-1402 OF THE
GENERAL OBLIGATIONS LAW OF THE STATE OF NEW YORK) EXCEPT TO THE EXTENT THAT THE
VALIDITY OR PERFECTION OF A SECURITY INTEREST OR REMEDIES HEREUNDER, IN RESPECT
OF ANY PARTICULAR COLLATERAL ARE GOVERNED BY THE LAWS OF A JURISDICTION OTHER
THAN THE STATE OF NEW YORK.
(b) ANY LEGAL ACTION OR PROCEEDING WITH RESPECT TO THIS AGREEMENT MAY
BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF THE UNITED STATES FOR
THE SOUTHERN DISTRICT OF NEW YORK; AND, BY EXECUTION AND DELIVERY OF THIS
AGREEMENT, EACH OF THE PARTIES HERETO CONSENTS, FOR ITSELF AND IN RESPECT OF ITS
PROPERTY, TO THE NON-EXCLUSIVE JURISDICTION OF THOSE COURTS. EACH OF THE PARTIES
HERETO IRREVOCABLY
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WAIVES, TO THE MAXIMUM EXTENT PERMITTED BY LAW, ANY OBJECTION, INCLUDING ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
CONVENIENS, THAT IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY ACTION OR
PROCEEDING IN SUCH JURISDICTION IN RESPECT OF THIS AGREEMENT OR ANY DOCUMENT
RELATED HERETO. EACH OF THE PARTIES HERETO WAIVES PERSONAL SERVICE OF ANY
SUMMONS, COMPLAINT OR OTHER PROCESS, WHICH SERVICE MAY BE MADE BY ANY OTHER
MEANS PERMITTED BY NEW YORK LAW.
Section 5.7. Execution in Counterparts. This Agreement may be executed
in any number of counterparts, each of which, when so executed, shall be deemed
to be an original, and all of which, when taken together, shall constitute one
and the same agreement.
Section 5.8. Survival of Termination. This Agreement shall create and
constitute the continuing obligations of the parties hereto in accordance with
its terms, and shall remain in full force and effect until the Final Payout
Date. The provisions of Sections 1.7, 1.8, 3.1, 3.2, 5.4, 5.5, 5.6, 5.9 and 5.12
shall survive any termination of this Agreement.
Section 5.9. WAIVER OF JURY TRIAL. EACH OF THE PARTIES HERETO WAIVES
THEIR RESPECTIVE RIGHTS TO A TRIAL BY JURY OF ANY CLAIM OR CAUSE OF ACTION BASED
UPON OR ARISING OUT OF OR RELATED TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY IN ANY ACTION, PROCEEDING OR OTHER LITIGATION OF ANY TYPE
BROUGHT BY ANY OF THE PARTIES AGAINST ANY OTHER PARTY OR PARTIES, WHETHER WITH
RESPECT TO CONTRACT CLAIMS, TORT CLAIMS OR OTHERWISE. EACH OF THE PARTIES HERETO
AGREES THAT ANY SUCH CLAIM OR CAUSE OF ACTION SHALL BE TRIED BY A COURT TRIAL
WITHOUT A JURY. WITHOUT LIMITING THE FOREGOING, EACH OF THE PARTIES HERETO
FURTHER AGREES THAT ITS RESPECTIVE RIGHT TO A TRIAL BY JURY IS WAIVED BY
OPERATION OF THIS SECTION AS TO ANY ACTION, COUNTERCLAIM OR OTHER PROCEEDING
THAT SEEKS, IN WHOLE OR IN PART, TO CHALLENGE THE VALIDITY OR ENFORCEABILITY OF
THIS AGREEMENT OR ANY PROVISION HEREOF. THIS WAIVER SHALL APPLY TO ANY
SUBSEQUENT AMENDMENTS, RENEWALS, SUPPLEMENTS OR MODIFICATIONS TO THIS AGREEMENT.
Section 5.10. Entire Agreement. This Agreement and the other
Transaction Documents embody the entire agreement and understanding between the
parties hereto, and supersede all prior or contemporaneous agreements and
understandings of such Persons, verbal or written, relating to the subject
matter hereof and thereof.
Section 5.11. Headings. The captions and headings of this Agreement and
any Exhibit, Schedule or Annex hereto are for convenience of reference only and
shall not affect the interpretation hereof or thereof.
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Section 5.12. Investor's Liabilities. The obligations of each Investor
under the Transaction Documents are solely the corporate obligations of such
Investor. No recourse shall be had for any obligation or claim arising out of or
based upon any Transaction Document against any stockholder, employee, officer,
director or incorporator of any Investor; provided, however, that this Section
shall not relieve any such Person of any liability it might otherwise have for
its own gross negligence or willful misconduct.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed by their respective officers thereunto duly authorized, as of the date
first above written.
WARNACO OPERATIONS CORPORATION
By: /s/ William S. Finkelstein
-----------------------------------------
Name: William S. Finkelstein
Title: President
Address: 325 Lafayette Street
Bridgeport, Connecticut 06601
Attention: President
Telephone No.: (203) 579-8550
Facsimile No.: (203) 334-6621
GREGORY STREET, INC.
By: /s/ Carl J. Deddens
-----------------------------------------
Name: Carl J. Deddens
Title: Assistant Treasurer
Address: 325 Lafayette Street
Bridgeport, Connecticut 06601
Attention: Carl J. Deddens
Assistant Treasurer
Telephone No.: (203) 579-8040
Facsimile No.: (203) 334-6621
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LIBERTY STREET FUNDING CORP.
By: /s/ Andrew L. Stidd
-----------------------------------------
Name: Andrew L. Stidd
Title: President
Address: c/o Global Securitization
Services, LLC
25 West 43rd Street, Suite 704
New York, New York 10036
Attention: Andrew L. Stidd
Telephone No.: (212) 302-8330
Facsimile No.: (212) 302-8767
With a copy to:
THE BANK OF NOVA SCOTIA
One Liberty Plaza
New York, New York 10006
Attention: Richard A. Josephs
Telephone No.: (212) 225-5118
Facsimile No.: (212) 225-5090
THE BANK OF NOVA SCOTIA,
as Agent
By: /s/ Terry K. Fryett
-----------------------------------------
Name: Terry K. Fryett
Title: Unit Head
Address: One Liberty Plaza
New York, New York 10006
Attention: Richard A. Josephs
Telephone No.: (212) 225-5118
Facsimile No.: (212) 225-5090
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CORPORATE ASSET FUNDING COMPANY, INC.
By: Citicorp North America, Inc.,
as Attorney-in-Fact
By: /s/ Radford C. West
-----------------------------------------
Name: Radford C. West
Title: Vice President
Address: 399 Park Avenue
New York, NY 10043
Attention: Radford C. West
Telephone No.:(212)559-3811
Facsimile No.:(212)758-7258
CITICORP NORTH AMERICA, INC.,
as Co-Agent
By: /s/ Radford C. West
-----------------------------------------
Name: Radford C. West
Title: Vice President
Address: 399 Park Avenue
New York, NY 10043
Attention: Radford C. West
Telephone No.: (212)559-3811
Facsimile No.: (212)758-7258
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EXHIBIT I
DEFINITIONS
As used in the Agreement (including its Exhibits, Schedules and
Annexes), the following terms shall have the following meanings (such meanings
to be equally applicable to both the singular and plural forms of the terms
defined). Unless otherwise indicated, all Section, Annex, Exhibit and Schedule
references in this Exhibit are to Sections of and Annexes, Exhibits and
Schedules to the Agreement.
"Adjusted Net Receivables Pool Balance" means at any time the sum of
(a) the Net Receivables Pool Balance and (b) the Permitted Dilution Amount.
"Adverse Claim" means a lien, security interest or other charge or
encumbrance, or any other type of preferential arrangement; it being understood
that any thereof in favor of any Investor or the Agent (for the benefit of any
Investor) shall not constitute an Adverse Claim.
"Affected Person" means the Agent, the Co-Agent, any Investor, any
Program Support Provider or any of their respective Affiliates.
"Affiliate" means, as to any Person: (a) any Person that, directly or
indirectly, is in control of, is controlled by or is under common control with
such Person, or (b) who is a director or officer: (i) of such Person or (ii) of
any Person described in clause (a), except that, with respect to any Investor,
Affiliate shall mean the holder(s) of its capital stock. For purposes of this
definition, control of a Person shall mean the power, direct or indirect: (x) to
vote 25% or more of the securities having ordinary voting power for the election
of directors of such Person, or (y) to direct or cause the direction of the
management and policies of such Person, in either case whether by ownership of
securities, contract, proxy or otherwise.
"Affiliated Obligor" means, (a) in relation to an Obligor that is a
Governmental Authority, any other Obligor that is a Governmental Authority, and
(b) in relation to an Obligor that is not a Governmental Authority, each Obligor
that is an Affiliate of such Obligor.
"Agent" has the meaning set forth in the preamble to the Agreement.
"Agreement" has the meaning set forth in the preamble to the Agreement.
"Applicable Margin" has the meaning set forth in the Fee Letter.
"Assignee Rate" for any Settlement Period for any Portion of Capital of
any Purchased Interest means an interest rate per annum equal to, at the
Seller's option: (a) the Applicable Margin per annum above the Eurodollar Rate
for such Settlement Period, or (b) the Base Rate for such Settlement Period;
provided, however, that in the case of:
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(i) any Settlement Period on or before the first day of which
the Agent shall have been notified by any Investor or any Program
Support Provider that the introduction of or any change in or in the
interpretation of any law or regulation makes it unlawful, or any
central bank or other Governmental Authority asserts that it is
unlawful, for such Investor or Program Support Provider, as applicable,
to fund any Portion of Capital based on the Eurodollar Rate (and such
Investor or Program Support Provider shall not have subsequently
notified the Agent that such circumstances no longer exist),
(ii) any Settlement Period of one to (and including) 29 days,
(iii) any Settlement Period as to which: (A) the Agent and the
Co-Agent do not receive notice before noon (New York City time) on: the
third Business Day preceding the first day of such Settlement Period
that the Seller desires that the related Portion of Capital be funded
at the Assignee Rate and based on the Eurodollar Rate, or (B) the Agent
or the Co-Agent, as applicable, shall have notified the Seller that
funding the related Portion of Capital at the CP Rate is economically
inadvisable to the Investor for which it is the agent or the Seller or
any similarly situated Person, or such Investor is not permitted to
issue Notes to fund its Purchased Interest hereunder, or
(iv) any Settlement Period relating to a Portion of Capital
that is less than $2,000,000,
the "Assignee Rate" for each such Settlement Period shall be an interest rate
per annum equal to the Base Rate in effect on each day of such Settlement
Period. The "Assignee Rate" for any day while a Termination Event exists shall
be an interest rate equal to 1% per annum above the Base Rate in effect on such
day.
"Attorney Costs" means and includes all reasonable fees and
disbursements of any law firm or other external counsel, the reasonable
allocated cost of internal legal services and all reasonable disbursements of
internal counsel.
"Bank" has the meaning set forth in the Parallel Purchase Commitment.
"Bankruptcy Code" means the United States Bankruptcy Reform Act of 1978
(11 U.S.C. 'SS' 101, et seq.), as amended from time to time.
"Base Rate" means, for any day, a fluctuating interest rate per annum
as shall be in effect from time to time, which rate shall be at all times equal
to the higher of:
(a) the weighted average of (a) the rate of interest in effect
for such day as publicly announced from time to time by BNS in New
York, New York as its "base rate" and (b) the rate of interest for such
day as publicly announced from time to time by CNAI in New York, New
York as its "base rate". Such "base rates" are set by BNS and CNAI,
respectively, based upon various factors, including their respective
costs and desired return, general
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economic conditions and other factors, and is used as a reference point
for pricing some loans, which may be priced at, above or below such
announced rates, and
(b) 0.50% per annum above the latest Federal Funds Rate.
"Benefit Plan" means any employee benefit pension plan as defined in
Section 3(2) of ERISA in respect of which the Seller, any Originator, Gregory or
any ERISA Affiliate is, or at any time during the immediately preceding six
years was, an "employer" as defined in Section 3(5) of ERISA.
"BNS" has the meaning set forth in the preamble to the Agreement
"Business Day" means any day (other than a Saturday or Sunday) on
which: (a) banks are not authorized or required to close in New York City, New
York and (b) if this definition of "Business Day" is utilized in connection with
the Eurodollar Rate, dealings are carried out in the London interbank market.
"Calvin Klein" means Calvin Klein Jeanswear Company, a Delaware
corporation.
"Calvin Klein Sale Agreement" means the Master Agreement of Sale, dated
as of September 30, 1998 between Calvin Klein and Gregory, as the same may be
amended, amended and restated, supplemented or otherwise modified from time to
time.
"Capital" means with respect to any Purchased Interest the aggregate
amounts paid to the Seller in respect of such Purchased Interest by the
applicable Investor pursuant to Section 1.2 of the Agreement reduced from time
to time by Collections distributed and applied on account of such Capital
pursuant to Section 1.4(d) of the Agreement; provided, that if such Capital
shall have been reduced by any distribution, and thereafter all or a portion of
such distribution is rescinded or must otherwise be returned for any reason,
such Capital shall be automatically increased by the amount of such rescinded or
returned distribution as though it had not been made.
"Change in Control" means that Warnaco ceases to own, directly or
indirectly, 100% of the capital stock of the Seller free and clear of all
Adverse Claims.
"Closing Date" means September 30, 1998.
"CNAI" has the meaning set forth in the preamble to the Agreement.
"Co-Agent" has the meaning set forth in the preamble to the Agreement.
"Collection Account" means that certain bank account numbered 4071-9191
maintained at Citibank, N.A. in New York, New York which is identified as the
"Warnaco Operations Corporation and The Bank of Nova Scotia: Collection
Account".
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"Collection Account Agreement" means a letter agreement among the
Seller, the Agent and Citibank, N.A., as the same may be amended, supplemented,
amended and restated, or otherwise modified from time to time in accordance with
the Agreement.
"Collection Account Bank" means Citibank, N.A.
"Collections" means, with respect to any Pool Receivable: (a) all funds
that are received by any Originator, the Seller or the Servicer in payment of
any amounts owed in respect of such Receivable (including purchase price,
finance charges, interest and all other charges), or applied to amounts owed in
respect of such Receivable (including insurance payments and net proceeds of the
sale or other disposition of repossessed goods or other collateral or property
of the related Obligor or any other Person directly or indirectly liable for the
payment of such Pool Receivable and available to be applied thereon), (b) all
Collections deemed to have been received pursuant to Section 1.4(e) of the
Agreement and (c) all other proceeds of such Pool Receivable.
"Concentration Percentage" with respect to any Obligor and its
Affiliated Obligors means the greater of (a) 4% and (b) the Special
Concentration Percentage, if any, for such Obligor.
"Contract" means, with respect to any Receivable, any and all
contracts, purchase orders, instruments, agreements, leases, invoices, notes or
other writings pursuant to which such Receivable arises or that evidence such
Receivable or under which an Obligor becomes or is obligated to make payment in
respect of such Receivable.
"Contributed Value" has the meaning set forth in Section 3.4 of the
Gregory Sale Agreement.
"CP Rate" for any Settlement Period for any Portion of Capital of any
Purchased Interest means, to the extent the Investor that owns such Purchased
Interest funds such Portion of Capital by issuing Notes, a rate per annum equal
to the sum of (i) the rate (or if more than one rate, the weighted average of
the rates) of the Notes of such Investor which are allocated in whole or in
part, by the Co-Agent, in the case of CAFCO, or the Agent, in the case of
Liberty Street, on behalf of such Investor, during such Settlement Period to
fund such Portion of Capital; provided, that if the rate (or rates) is a
discount rate (or rates), then such rate shall be the rate (or if more than one
rate, the weighted average of the rates) resulting from converting such discount
rate (or rates) to an interest-bearing equivalent rate per annum, plus (ii) the
commissions and charges charged by such placement agent or commercial paper
dealer with respect to such Notes, expressed as a percentage of such face amount
and converted to an interest-bearing equivalent rate per annum.
"Credit and Collection Policy" means, as the context may require, those
receivables credit and collection policies and practices of Warnaco in effect on
the date of the Agreement and described in Schedule I to the Agreement, as
modified in compliance with the Agreement.
"Cut-off Date" has the meaning set forth in the Gregory Sale Agreement.
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"Days' Sales Outstanding" means, for any Fiscal Month, an amount
computed as of the last day of such Fiscal Month equal to: (a) the average of
the Outstanding Balance of all Eligible Receivables as of the last day of each
of the three most recent Fiscal Months ended on the last day of such Fiscal
Month divided by (b) Domestic Sales during the three Fiscal Months ended on or
before the last day of such Fiscal Month multiplied by (c) 90.
"Debt" means: (a) indebtedness for borrowed money, (b) obligations
evidenced by bonds, debentures, notes or other similar instruments, (c)
obligations to pay the deferred purchase price of property or services, (d)
obligations as lessee under leases that shall have been or should be, in
accordance with generally accepted accounting principles, recorded as capital
leases, and (e) obligations under direct or indirect guaranties in respect of,
and obligations (contingent or otherwise) to purchase or otherwise acquire, or
otherwise to assure a creditor against loss in respect of, indebtedness or
obligations of others of the kinds referred to in clauses (a) through (d).
"Default Ratio" means the ratio (expressed as a percentage and rounded
to the nearest 1/100 of 1%) computed as of the last day of each Fiscal Month by
dividing (i) the aggregate Outstanding Balance of all Domestic Pool Receivables
that became Defaulted Receivables during such month and (ii) Domestic Sales
during the Fiscal Month that is four Fiscal Months before such Fiscal Month.
"Defaulted Receivable" means a Receivable:
(a) as to which any payment, or part thereof, remains unpaid
for 91 days or more from the original due date for such payment, or
(b) without duplication (i) as to which an Event of Bankruptcy
shall have occurred with respect to the Obligor thereof or any other
Person obligated thereon or owning any Related Security with respect
thereto, or (ii) which, has been, or, consistent with the Credit and
Collection Policy would be, written off the Seller's books as
uncollectible.
"Delinquency Ratio" means the ratio (expressed as a percentage and
rounded upwards to the nearest 1/100th of 1%) computed as of the last day of
each Fiscal Month of (a) the Outstanding Balance of all Domestic Pool
Receivables (other than Defaulted Receivables) as to which any payment, or part
thereof, remains unpaid for more than 60 days from the original due date for
such payment, to (b) the Adjusted Net Receivables Pool Balance.
"Dilution Ratio" means the ratio (expressed as a percentage and rounded
upwards to the nearest 1/100th of 1%) computed as of the last day of each Fiscal
Month of (a) the Monthly Net Charge Back Amount for such Fiscal Month, to (b)
Domestic Sales during the preceding Fiscal Month.
"Dilution Reserve" for any Purchased Interest means, (a) on any day
prior to the occurrence of a Downgrade Event, an amount equal to: (i) the
Capital thereof on such date, multiplied by (ii) (x) 5%, divided by (y) 1 minus
5% and (b) on any day after the occurrence of a Downgrade Event, the dilution
reserve that would be required by Standard & Poor's consistent with its current
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methodology then in effect for trade receivables securitization transactions
rated or deemed rated at least "A".
"Discount" means:
(a) for any Portion of Capital of any Purchased Interest for
any Settlement Period to the extent the related Investor will be
funding such Portion of Capital during such Settlement Period through
the issuance of Notes:
CPR x C x ED/360
(b) for the Portion of Capital for any Settlement Period to
the extent the related Investor will not be funding such Portion of
Capital during such Settlement Period through the issuance of Notes:
AR x C x ED/Year + TF
where:
AR = the Assignee Rate for the Portion of Capital for such
Settlement Period,
C = the weighted average of such Portion of Capital during
such Settlement Period,
CPR = the CP Rate for the Portion of Capital,
ED = the actual number of days during such Settlement
Period,
Year = if such Portion of Capital is funded based upon:
(i) the Eurodollar Rate, 360 days, and (ii) the Base
Rate, 365 or 366 days, as applicable, and
TF = the Termination Fee, if any, for the Portion of Capital
for such Settlement Period;
provided, however, that during the occurrence and continuance of a Termination
Event, the CP Rate shall not be available and Discount for each Portion of
Capital shall be determined for each day in a Settlement Period using a rate
equal to the Base Rate in effect on such day plus 1%; provided, further, that no
provision of the Agreement shall require the payment or permit the collection of
Discount in excess of the maximum permitted by applicable law; and provided
further, that Discount for the Portion of Capital shall not be considered paid
by any distribution to the extent that at any time all or a portion of such
distribution is rescinded or must otherwise be returned for any reason.
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"Discount Reserve" for any Purchased Interest means the sum of (i) the
Termination Discount at such time for such Purchased Interest, and (ii) the then
accrued and unpaid Discount for such Purchased Interest.
"Dollars" means dollars in lawful money of the United States of
America.
"Domestic Pool Receivable" means a Pool Receivable, the Obligor of
which is organized under the laws of the United States or any state thereof and
has its principal place of business located in the United States.
"Domestic Sales" for any period, means the aggregate amount of new
Domestic Pool Receivables generated by the Originators during such period.
"Downgrade Event" means that Warnaco's long-term public senior debt
rating shall fall below "BBB-" by Standard & Poor's or "Baa3" by Moody's or
shall be withdrawn by any such rating agency as a result of the financial
condition of Warnaco.
"Eligible Receivable" means, at any time, a Pool Receivable:
(a) the Obligor of which (i) either (A) is organized under the
laws of the United States or any state thereof and has its principal
place of business located in the United States or (B) has been approved
by the Agent (after notice to Moody's and Standard & Poor's), and (ii)
is not an Affiliate of Seller or Warnaco,
(b) that does not have a stated maturity which is more than 30
days after the original invoice date of such Receivable,
(c) that arises under a duly authorized Contract for the sale
and delivery of goods and services in the ordinary course of any
Originator's business,
(d) that arises under a duly authorized Contract that is in
full force and effect and that is a legal, valid and binding obligation
of the related Obligor, enforceable against such Obligor in accordance
with its terms,
(e) that conforms in all material respects with all applicable
laws, rulings and regulations in effect,
(f) that is not the subject of any dispute, offset, hold back
defense, Adverse Claim or other claim other than such adjustments in
the ordinary course of the applicable Originator's business as such
Originator's business is conducted on the Closing Date,
(g) that satisfies all applicable requirements of the
applicable Credit and Collection Policy,
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(h) that has not been modified, waived or restructured since
its creation,
(i) in which the Seller owns good and marketable title, free
and clear of any Adverse Claims, and that is freely assignable by the
Seller (including without any consent of the related Obligor),
(j) for which the Agent, for the benefit of the Investors,
shall have a valid and enforceable undivided percentage ownership or
security interest, to the extent of each Purchased Interest, and a
valid and enforceable first priority perfected security interest
therein and in the Related Security and Collections with respect
thereto, in each case free and clear of any Adverse Claim,
(k) that constitutes an account as defined in the UCC, and
that is not evidenced by instruments or chattel paper,
(l) that is not a Defaulted Receivable,
(m) that represents all or part of the sales price of
merchandise, insurance or services within the meaning of Section
3(c)(5) of the Investment Company Act of 1940,
(n) for which Defaulted Receivables of the related Obligor do
not exceed 25% of the Outstanding Balance of all such Obligor's
Receivables,
(o) which is denominated and payable only in Dollars in the
United States, and
(p) that represents amounts earned and payable by the Obligor
that are not subject to the performance of additional services by the
Originator of such Receivable.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from time to time.
References to sections of ERISA also refer to any successor sections.
"ERISA Affiliate" means: (a) any corporation that is a member of the
same controlled group of corporations (within the meaning of Section 414(b) of
the Internal Revenue Code) as the Seller or Warnaco, (b) a trade or business
(whether or not incorporated) under common control (within the meaning of
Section 414(c) of the Internal Revenue Code) with the Seller or Warnaco, or (c)
a member of the same affiliated service group (within the meaning of Section
414(m) of the Internal Revenue Code) as the Seller, Warnaco, any corporation
described in clause (a) or any trade or business described in clause (b).
"Eurodollar Rate" means, for any Settlement Period, an interest rate
per annum (rounded upward to the nearest 1/16th of 1%) determined pursuant to
the following formula:
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LIBOR
---------------------------------
100% - Eurodollar Rate Reserve Percentage
where "Eurodollar Rate Reserve Percentage" means, for any Settlement Period, the
maximum reserve percentage (expressed as a decimal, rounded upward to the
nearest 1/100th of 1%) in effect on the date LIBOR for such Settlement Period is
determined under regulations issued from time to time by the Federal Reserve
Board for determining the maximum reserve requirement (including any
emergency, supplemental or other marginal reserve requirement) with respect to
"Eurocurrency" funding (currently referred to as "Eurocurrency liabilities")
having a term comparable to such Settlement Period.
"Event of Bankruptcy" means (a) any case, action or proceeding before
any court or other governmental authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors or (b) any general assignment for the benefit of creditors
of a Person composition, marshaling of assets for creditors of a Person, or
other similar arrangement in respect of its creditors generally or any
substantial portion of its creditors; in each of cases (a) and (b) undertaken
under U.S. Federal, state or foreign law, including the U.S. Bankruptcy Code.
"Excess Concentration" means the sum of the amounts by which the
Outstanding Balance of Eligible Receivables of each Obligor then in the
Receivables Pool exceeds an amount equal to: (a) the Concentration Percentage
for such Obligor multiplied by (b) the Outstanding Balance of all Eligible
Receivables then in the Receivables Pool.
"Facility Termination Date" means the earliest to occur of: (a)
September 30, 2003, (b) the date determined pursuant to Section 2.2 of the
Agreement following the occurrence of a Termination Event, (c) the date the
Purchase Limit reduces to zero pursuant to Section 1.1(b) of the Agreement and
(d) the date that the commitments of the Program Support Providers terminate
under the Liquidity Agreement.
"Federal Funds Rate" means, for any day, the per annum rate set forth
in the weekly statistical release designated as H.15(519), or any successor
publication, published by the Federal Reserve Board (including any such
successor, "H.15(519)") for such day opposite the caption "Federal Funds
(Effective)." If on any relevant day such rate is not yet published in
H.15(519), the rate for such day will be the rate set forth in the daily
statistical release designated as the Composite 3:30 p.m. Quotations for U.S.
Government Securities, or any successor publication, published by the Federal
Reserve Bank of New York (including any such successor, the "Composite 3:30 p.m.
Quotations") for such day under the caption "Federal Funds Effective Rate." If
on any relevant day the appropriate rate is not yet published in either
H.15(519) or the Composite 3:30 p.m. Quotations, the rate for such day will be
the arithmetic mean as determined by the Agent of the rates for the last
transaction in overnight Federal funds arranged before 9:00 a.m. (New York time)
on that day by each of three leading brokers of Federal funds transactions in
New York City selected by the Agent.
"Federal Reserve Board" means the Board of Governors of the Federal
Reserve System, or any entity succeeding to any of its principal functions.
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"Fee Letter" has the meaning set forth in Section 1.5 of the Agreement.
"Fees" means the fees payable by the Seller to the Investors pursuant
to the Fee Letter.
"Final Payout Date" means the date following the Facility Termination
Date on which the Capital of all Purchased Interests and Discount thereon shall
have been paid in full and all the amounts owed by the Seller and the Servicer
under the Transaction Documents shall have been paid in full.
"Fiscal Month" means, with respect to any date, the monthly period
designated with respect to such date on Schedule IV hereto, as such Schedule may
be modified or replaced from time to time.
"GAAP" means the generally accepted United States accounting principles
promulgated or adopted by the Financial Accounting Standards Board and its
predecessors and successors from time to time.
"Governmental Authority" means any nation or government, any state or
other political subdivision thereof, any central bank (or similar monetary or
regulatory authority) thereof, any body or entity exercising executive,
legislative, judicial, regulatory or administrative functions of or pertaining
to government, including any court, and any Person owned or controlled, through
stock or capital ownership or otherwise, by any of the foregoing.
"Gregory" has the meaning set forth in the preamble to the Agreement.
"Gregory Sale Agreement" means the Purchase and Sale Agreement, dated
as of September 30, 1998, between the Seller and Gregory, as such agreement may
be amended, amended and restated, supplemented or otherwise modified from time
to time.
"Impermissible Qualification" means, relative to the opinion or
certification of any independent public accountant as to any financial statement
of Seller or Warnaco, any qualification or exception to such opinion or
certification:
(i) which is of a "going concern" or similar nature; or
(ii) which relates to the limited scope of examination of
matters relevant to such financial statement (other than any standard
qualification of such nature).
"Indemnified Amounts" has the meaning set forth in Section 3.1 of the
Agreement.
"Indemnified Party" means the Agent, the Co-Agent, the Investors, any
Program Support Provider or any of their respective Affiliates, employees,
officers, directors, agents, counsel, successors, transferees or assigns.
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"Independent Director" has the meaning set forth in paragraph 3(c) of
Exhibit IV to the Agreement.
"Insolvency Proceeding" means: (a) any case, action or proceeding
before any court or other Governmental Authority relating to bankruptcy,
reorganization, insolvency, liquidation, receivership, dissolution, winding-up
or relief of debtors, or (b) any general assignment for the benefit of
creditors, composition, marshaling of assets for creditors, or other, similar
arrangement in respect of its creditors generally or any substantial portion of
its creditors, in each case undertaken under U.S. Federal, state or foreign law,
including the Bankruptcy Code.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and any successor statute of similar import, together
with the regulations thereunder, in each case as in effect from time to time.
References to sections of the Internal Revenue Code also refer to any successor
sections.
"Investors" means Liberty Street and CAFCO and includes all other
owners by assignment or otherwise of a Purchased Interest.
"Investors Group" means (a) with respect to Liberty Street, Liberty
Street and BNS, and (b) with respect to CAFCO, CAFCO and CNAI.
"Investors' Pro Rata Share" means a fraction, expressed as a
Percentage, the numerator of which is the aggregate outstanding Capital of the
Purchased Interests purchased by the Investors hereunder and the denominator of
which is the Total Outstanding Capital.
"Investor's Share" with respect to any Investor of any amount means
such amount multiplied by the Purchased Interest of such Investor at the time of
determination.
"LIBOR" means, for any Settlement Period, the rate of interest per
annum equal to the rate per annum at which dollar deposits in the approximate
amount of the Portion of Capital to be funded at the Eurodollar Rate during such
Settlement Period would be offered by major banks in the London interbank market
to The Bank of Nova Scotia at its request at or about 11:00 a.m. (London time)
on the second Business Day before the commencement of such Settlement Period.
"Liquidity Agent" means BNS in its capacity as the Liquidity Agent
pursuant to the Liquidity Agreement.
"Liquidity Agreement" means (a) the Liquidity Asset Purchase Agreement,
dated as of September 30, 1998 between the purchasers from time to time party
thereto, Liberty Street and BNS, as administrator and Liquidity Agent and (b)
the Asset Purchase Agreement between the purchasers from time to time party
thereto, CAFCO and CNAI, as agent, in each case, as the same may be further
amended, supplemented or otherwise modified from time to time.
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"Loss Horizon Ratio" as of any date means the ratio (expressed as a
percentage) of (i) Domestic Sales during the four most recent Fiscal Months
divided by (ii) the Adjusted Net Receivables Pool Balance.
"Loss-to-Liquidation Ratio" means the ratio (expressed as a percentage
and rounded upward to the nearest 1/100th of 1%) computed as of the last day of
each Fiscal Month by dividing (a) the sum of (i) the aggregate Outstanding
Balance of all Domestic Pool Receivables written off by the Seller or Servicer,
or which should have been written off by the Seller or Servicer in accordance
with the Credit and Collection Policy, during such Fiscal Month plus (ii) 50% of
the aggregate Outstanding Balance of all Domestic Pool Receivables as to which
any payment, or part thereof, remains unpaid for more than 120 days from the
original due date for such payment by (b) the aggregate amount of Collections of
Domestic Pool Receivables (other than deemed Collections) received during such
period.
"Loss Reserve" for any Purchased Interest means, on any date, an amount
equal to (a) the Capital thereof at the close of business of the Servicer on
such date multiplied by (b)(i) the Loss Reserve Percentage on such date divided
by (ii) one minus the Loss Reserve Percentage on such date.
"Loss Reserve Percentage" means, on any date, the greater of: (a) 15%
and (b) the product of (i) 2 times (ii) the greatest average of the Default
Ratios for any three consecutive Fiscal Months during the twelve most recent
Fiscal Months times (iii) the Loss Horizon Ratio.
"Material Adverse Effect" means, relative to any Person with respect to
any event or circumstance, a material adverse effect on:
(a) the assets, operations, business or financial condition of
such Person,
(b) the ability of any such Person to perform its obligations
under the Agreement or any other Transaction Document to which it is a
party,
(c) the validity or enforceability of any other Transaction
Document, or the validity, enforceability or collectibility of a
material portion of the Pool Receivables, or
(d) the status, perfection, enforceability or priority of the
Agent or any Investor's or the Seller's interest in the Pool Assets.
"Monthly Net Charge Back Amount" means the amount shown as the "U.S.
Domestic Net Charge Back Amount" on the most recent Monthly Report less
advertising, allowances and returns.
"Monthly Report" means a report, in substantially the form of Annex A
to the Agreement, furnished to the Agent and the Co-Agent pursuant to the
Agreement.
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"Monthly Report Date" means the seventeenth day of each calendar month
(or if such day is not a Business Day, then the next following Business Day).
"Moody's" means Moody's Investors Service, Inc., and its successors.
"Net Receivables Pool Balance" means, at any time: (a) the Outstanding
Balance of Eligible Receivables then in the Receivables Pool minus (b) the
Excess Concentration.
"Notes" means with respect to any Investor, the short-term promissory
notes issued, or to be issued, by such Investor to fund its investments in
accounts receivable or other financial assets.
"Obligor" means, with respect to any Receivable, the Person obligated
to make payments pursuant to the Contract relating to such Receivable.
"Originator" means any of Warnaco or Calvin Klein or their respective
successors and permitted assigns.
"Outstanding Balance" of any Receivable at any time means the then
outstanding principal balance thereof.
"Parallel Purchase Commitment" means the Parallel Purchase Commitment,
dated as of the date hereof, among the Seller, BNS, CNAI and (if applicable)
certain other banks, and BNS, as Agent, as the same may, from time to time, be
amended, modified or supplemented.
"Payment Date" has the meaning set forth in Section 1.4 of the Gregory
Sale Agreement.
"Permitted Dilution Amount" means at any time 50% of the Monthly Net
Charge Back Amount.
"Person" means an individual, partnership, corporation (including a
business trust), joint stock company, trust, unincorporated association, joint
venture, limited liability company or other entity, or a government or any
political subdivision or agency thereof.
"Pool Assets" has the meaning set forth in Section 1.2(d) of the
Agreement.
"Pool Receivable" means a Receivable in the Receivables Pool.
"Portion of Capital" means, at any time, each portion of Capital of the
Purchased Interest accruing Discount by reference to the same Rate Type at such
time. In addition, at any time when the Capital of the Purchased Interest is not
divided into two or more such portions, "Portion of Capital" means 100% of the
Capital.
"Program Support Agreement" means and includes the Liquidity Agreement
and any other liquidity asset purchase agreement, asset purchase agreement or
any other agreement entered into
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by any Program Support Provider providing for: (a) the issuance of one or more
letters of credit for the account of any Investor, (b) the issuance of one or
more surety bonds for which any Investor is obligated to reimburse the
applicable Program Support Provider for any drawings thereunder, (c) the sale by
any Investor to any Program Support Provider of the Purchased Interest (or
portions thereof) and/or (d) the making of loans and/or other extensions of
credit to any Investor in connection with such Investor's
receivables-securitization program contemplated in the Agreement, together with
any letter of credit, surety bond or other instrument issued thereunder.
"Program Support Provider" means and includes any Person now or
hereafter extending credit or having a commitment to extend credit to or for the
account of, or to make purchases from, any Investor pursuant to any Program
Support Agreement for the purpose of providing liquidity or credit enhancement
for the Notes issued by such Investor.
"Purchase and Sale Indemnified Amounts" has the meaning set forth in
Section 8.1 of the Gregory Sale Agreement.
"Purchase and Sale Indemnified Party" has the meaning set forth in
Section 8.1 of the Gregory Sale Agreement.
"Purchase and Sale Termination Date" has the meaning set forth in
Section 1.4 of the Gregory Sale Agreement.
"Purchase and Sale Termination Event" has the meaning set forth in
Section 7.1 of the Gregory Sale Agreement.
"Purchase Facility" has the meaning set forth in Section 1.1 of the
Gregory Sale Agreement.
"Purchase Limit" means, for all Investors, $200,000,000 (and, for each
Liberty Street and CAFCO, $100,000,000), as such amount may be (a) reduced
pursuant to Section 1.1(b) or (b) increased upon the request of the Seller and
with the consent of the Investors; it being understood that the Investors shall
be under no obligation to consent to an increase in the Purchase Limit at any
time and that such consent may be withheld by the Investors in their sole and
absolute discretion without regard to whether such consent has been unreasonably
withheld. References to the unused portion of the Purchase Limit shall mean, at
any time, the Purchase Limit (as then reduced pursuant to Section 1.1(b) or
pursuant to the next sentence or as then increased pursuant to the preceding
sentence), minus the sum of the then outstanding Capital of Purchased Interests
under the Agreement and the then outstanding "Capital" of the "Purchased
Interests" under the Parallel Purchase Commitment. Furthermore, on each day on
which the Seller reduces the unused portion of (or terminates) the "Total
Commitment" under the Parallel Purchase Commitment, the aggregate Purchase Limit
for all Investors automatically shall reduce in an equal the amount of such
reduction (or so terminate) and the Purchase Limit of Liberty Street and CAFCO
shall be reduced pro rata, and if the Parallel Purchase Commitment shall be so
terminated, the Purchase Limit of Liberty Street and CAFCO shall be reduced to
zero.
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"Purchase Price" has the meaning set forth in Section 2.1 of the
Gregory Sale Agreement.
"Purchase Report" has the meaning set forth in Section 2.1 of the
Gregory Sale Agreement.
"Purchased Interest" means, at any time, an undivided percentage
ownership interest in: (a) each and every Pool Receivable now existing or
hereafter arising, (b) all Related Security with respect to such Pool
Receivables and (c) all Collections with respect to, and other proceeds of, such
Pool Receivables and Related Security. Such undivided percentage interest shall
be computed as:
Capital + Total Reserves
---------------------------------
Adjusted Net Receivables Pool Balance
Each Purchased Interest shall be determined from time to time pursuant to
Section 1.3 of the Agreement.
"Rate Type" means the Eurodollar Rate, the Base Rate or the CP Rate.
"Rate Variance Factor" means the number, computed from time to time in
good faith by the Agent and the Co-Agent, that reflects the largest potential
variance (from minimum to maximum) in selected interest rates over a period of
time selected by the Agent and the Co-Agent from time to time, as set forth in a
written notice by the Agent to the Seller and the Servicer; provided that the
Rate Variance Factor shall at no time exceed 1%.
"Receivable" means any indebtedness and other obligations owed to the
Seller as assignee of the Originators or any Originator by, or any right of the
Seller or any Originator to payment from or on behalf of, an Obligor), whether
constituting an account, chattel paper, instrument or general intangible arising
in connection with the sale of goods or the rendering of services by the
Originator, and includes the obligation to pay any finance charges, fees and
other charges with respect thereto.
"Receivables Pool" means, at any time, all of the then outstanding
Receivables purchased or purported to be purchased by the Seller or contributed
to the Seller pursuant to the Gregory Sale Agreement prior to the Facility
Termination Date.
"Related Rights" has the meaning set forth in Section 1.1 of the
Gregory Sale Agreement.
"Related Security" means, with respect to any Receivable:
(a) all of the Seller's, Gregory's and each Originator's
interest in any goods (including returned goods), and documentation of
title evidencing the shipment or storage of any goods (including
returned goods), relating to any sale giving rise to such Receivable,
(b) all instruments and chattel paper that may evidence such
Receivable,
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(c) all other security interests or liens and property subject
thereto from time to time purporting to secure payment of such
Receivable, whether pursuant to the Contract related to such Receivable
or otherwise, together with all UCC financing statements or similar
filings relating thereto, and
(d) all of the Seller's, Gregory's and each Originator's
rights, interests and claims under the Contracts and all guaranties,
indemnities and other agreements (including the related Contract) or
arrangements of whatever character from time to time supporting or
securing payment of such Receivable or otherwise relating to such
Receivable, whether pursuant to the Contract related to such Receivable
or otherwise.
"Seller" has the meaning set forth in the preamble to the Agreement.
"Seller's Share" of any amount means the greater of: (a) $0 and (b) the
product of (i) such amount multiplied by (ii) a percentage equal to (A) 100%
minus (B) the sum (expressed as a percentage) of the aggregate Purchased
Interests of all Investors hereunder and the aggregate "Purchased Interests" of
all Banks under the Parallel Purchase Commitment.
"Servicer" has the meaning set forth in the preamble to the Agreement.
"Servicing Fee" shall mean the fee referred to in Section 4.6 of the
Agreement.
"Servicing Fee Rate" shall mean the rate referred to in Section 4.6(a)
of the Agreement.
"Servicing Fee Reserve" with respect to any Purchased Interest at any
time means the sum of (a) the then accrued and unpaid Servicing Fee relating to
such Purchased Interest plus (b) the product of (i) Capital of such Purchased
Interest at such time, times (ii) the product of (x) the Servicing Fee Rate
divided by one minus the Servicing Fee Rate multiplied by (y) a fraction, the
numerator of which is 1.5 times the Days' Sales Outstanding (calculated on the
last day of the most recent preceding Fiscal Month) and the denominator of which
is 360.
"Settlement Date" means (a) prior to the Facility Termination Date, the
fifth day of each calendar month (or if such day is not a Business Day, then the
next following Business Day) and (b) for any Portion of Capital on and after the
Facility Termination Date, each day selected from time to time by the Agent (it
being understood that the Agent may select such Settlement Date to occur as
frequently as daily), or, in the absence of any such selection, the day which
would be the Settlement Date for such Portion of Capital pursuant to clause (a)
of this definition.
"Settlement Period" means, with respect to each Portion of Capital of
any Purchased Interest: (a) with respect to any Portion of Capital funded by the
issuance of Notes, (i) initially the period commencing on (and including) the
date of the initial purchase or funding of such Portion of Capital and ending on
(and including) the last day of the current calendar month, and (ii) thereafter,
each period commencing on (and including) the first day after the last day of
the immediately preceding Settlement Period for such Portion of Capital and
ending on (and including) the last day of the
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current calendar month; and (b) with respect to any Portion of Capital not
funded by the issuance of Notes, (i) initially the period commencing on (and
including) the date of the initial purchase or funding of such Portion of
Capital and ending on (but excluding) the next following Settlement Date, and
(ii) thereafter, each period commencing on a Settlement Date and ending on (but
excluding) the next following Settlement Date; provided, that
(i) any Settlement Period (other than of one day)
which would otherwise end on a day which is not a Business Day
shall be extended to the next succeeding Business Day;
provided, however, if Discount in respect of such Settlement
Period is computed by reference to the Eurodollar Rate, and
such Settlement Period would otherwise end on a day which is
not a Business Day, and there is no subsequent Business Day in
the same calendar month as such day, such Settlement Period
shall end on the next preceding Business Day;
(ii) in the case of any Settlement Period for any
Portion of Capital of the Purchased Interest which commences
before the Facility Termination Date and would otherwise end
on a date occurring after the Facility Termination Date, such
Settlement Period shall end on such Facility Termination Date
and the duration of each Settlement Period which commences on
or after the Facility Termination Date shall be of such
duration as shall be selected by the Agent; and
(iii) any Settlement Period in respect of which
Discount is computed by reference to the CP Rate may be
terminated at the election of, and upon notice thereof to the
Seller, by the Agent any time, in which case the Portion of
Capital allocated to such terminated Settlement Period shall
be allocated to a new Settlement Period commencing on (and
including) the date of such termination and ending on (but
excluding) the next following Settlement Date, and shall
accrue Discount at the Assignee Rate and based on the Base
Rate.
"Solvent" means, with respect to any Person at any time, a condition
under which:
(i) the fair value and present fair saleable value of such
Person's total assets is, on the date of determination, greater than
such Person's total liabilities (including contingent and unliquidated
liabilities) at such time;
(ii) the fair value and present fair saleable value of such
Person's assets is greater than the amount that will be required to pay
such Person's probable liability on its existing debts as they become
absolute and matured ("debts," for this purpose, includes all legal
liabilities, whether matured or unmatured, liquidated or unliquidated,
absolute, fixed, or contingent);
(iii) such Person is and shall continue to be able to pay all
of its liabilities as such liabilities mature; and
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(iv) such Person does not have unreasonably small capital with
which to engage in its current and in its anticipated business.
For purposes of this definition:
(A) the amount of a Person's contingent or unliquidated
liabilities at any time shall be that amount which, in light of all the
facts and circumstances then existing, represents the amount which can
reasonably be expected to become an actual or matured liability;
(B) the "fair value" of an asset shall be the amount which may
be realized within a reasonable time either through collection or sale
of such asset at its regular market value;
(C) the "regular market value" of an asset shall be the amount
which a capable and diligent business person could obtain for such
asset from an interested buyer who is willing to Purchase such asset
under ordinary selling conditions; and
(D) the "present fair saleable value" of an asset means the
amount which can be obtained if such asset is sold with reasonable
promptness in an arm's-length transaction in an existing and not
theoretical market.
"Special Concentration Percentage" with respect to any Obligor and its
Affiliated Obligor's means the percentage, if any, set forth opposite such
Obligor's name on Schedule III to the Agreement.
"Standard & Poor's" means Standard & Poor's, a division of The
McGraw-Hill Companies, Inc., and its successors.
"Subordinated Note" has the meaning set forth in Section 3.2 of the
Gregory Sale Agreement.
"Subsidiary" means, as to any Person, a corporation, partnership,
limited liability company or other entity of which shares of stock of each class
or other interests having ordinary voting power (other than stock or other
interests having such power only by reason of the happening of a contingency) to
elect a majority of the Board of Directors or other managers of such entity are
at the time owned, or management of which is otherwise controlled: (a) by such
Person, (b) by one or more Subsidiaries of such Person or (c) by such Person and
one or more Subsidiaries of such Person.
"Termination Day" means: (a) each day on which the conditions set forth
in Section 2 of Exhibit II to the Agreement are not satisfied or (b) each day
that occurs on or after the Facility Termination Date.
"Termination Discount" means, for any Purchased Interest on any date,
an amount equal to the product of (i) the Capital of such Purchased Interest on
such date and (ii) the product of (a) the Base Rate plus the Rate Variance
Factor and (b) a fraction having as its numerator the Days' Sales Outstanding
and 360 as its denominator.
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"Termination Event" has the meaning specified in Exhibit V to the
Agreement.
"Termination Fee" means, for any Settlement Period during which a
Termination Day occurs, the amount, if any, by which: (a) the additional
Discount (calculated without taking into account any Termination Fee or any
shortened duration of such Settlement Period pursuant to the definition thereof)
that would have accrued during such Settlement Period on the reductions of
Capital relating to such Settlement Period had such reductions not been made,
exceeds (b) the income, if any, received by the related Investor from investing
the proceeds of such reductions of Capital, as determined by such Investor,
which determination shall be binding and conclusive for all purposes, absent
manifest error.
"Total Reserves" means, at any time the sum of : (a) the Loss Reserve
plus (b) the Dilution Reserve plus (c) the Discount Reserve plus (d) the
Servicing Fee Reserve.
"Transaction Documents" means the Agreement, the Parallel Purchase
Commitment, the Collection Account Agreement, the Fee Letter, the Warnaco Sale
Agreement, the Calvin Klein Sale Agreement, the Gregory Sale Agreement and all
other certificates, instruments, UCC financing statements, reports, notices,
agreements and documents executed or delivered under or in connection with the
Agreement, in each case as the same may be amended, supplemented or otherwise
modified from time to time in accordance with the Agreement.
"UCC" means the Uniform Commercial Code as from time to time in effect
in the applicable jurisdiction.
"Unmatured Purchase and Sale Termination Event" means any event which,
with the giving of notice or lapse of time, or both, would become a Purchase and
Sale Termination Event.
"Unmatured Termination Event" means an event that, with the giving of
notice or lapse of time, or both, would constitute a Termination Event.
"Warnaco" means Warnaco, Inc., a Delaware corporation.
"Warnaco Sale Agreement" means the Amended and Restated Master
Agreement of Sale, dated as of September 30, 1998, between Warnaco and Gregory,
as such agreement may be amended, amended and restated, supplemented or
otherwise modified from time to time.
Other Terms. All accounting terms not specifically defined herein shall
be construed in accordance with generally accepted accounting principles. All
terms used in Article 9 of the UCC in the State of New York, and not
specifically defined herein, are used herein as defined in such Article 9.
Unless the context otherwise requires, "or" means "and/or," and "including" (and
with correlative meaning "include" and "includes") means including without
limiting the generality of any description preceding such term.
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EXHIBIT II
CONDITIONS OF PURCHASES
1. Conditions Precedent to Initial Purchase. The Initial Purchase under
this Agreement is subject to the following conditions precedent that the Agent
shall have received on or before the date of such purchase, each in form and
substance (including the date thereof) satisfactory to the Agent:
(a) A counterpart of the Agreement and the other Transaction Documents
executed by the parties thereto.
(b) Certified copies of: (i) the resolutions of the Board of Directors
of each of the Seller, the Originators and Gregory authorizing the execution,
delivery and performance by the Seller, each Originator and Gregory, as the case
may be, of the Agreement and the other Transaction Documents to which it is a
party; (ii) all documents evidencing other necessary corporate action and
governmental approvals, if any, with respect to the Agreement and the other
Transaction Documents and (iii) the certificate of incorporation and by-laws of
the Seller, each Originator and Gregory.
(c) A certificate of the Secretary or Assistant Secretary of the
Seller, each Originator and Gregory certifying the names and true signatures of
its officers who are authorized to sign the Agreement and the other Transaction
Documents. Until the Agent receives a subsequent incumbency certificate from the
Seller, each Originator or Gregory, as the case may be, the Agent shall be
entitled to rely on the last such certificate delivered to it by the Seller,
such Originator or Gregory, as the case may be.
(d) Copies of duly executed financing statements, in proper form for
filing under the UCC of all jurisdictions that the Agent may deem necessary or
desirable in order to perfect the interests of the Seller, the Agent and the
Investors contemplated by the Transaction Documents.
(e) Acknowledgment copies, or time-stamped receipt copies, of proper
financing statements, if any, necessary to release all security interests and
other rights of any Person in the Receivables, Contracts or Related Security
previously granted by any Originator, Gregory or the Seller.
(f) Completed UCC search reports, dated on or shortly before the date
of the initial purchase hereunder, listing the financing statements filed in all
applicable jurisdictions referred to in subsection (e) above that name any
Originator, Gregory or the Seller as debtor, together with copies of such other
financing statements, and similar search reports with respect to judgment liens,
federal tax liens and liens of the Pension Benefit Guaranty Corporation in such
jurisdictions, as the Agent may request, showing no Adverse Claims on any Pool
Assets.
(g) an executed copy of the Collection Account Agreement.
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(h) Favorable opinions, including a true sale/non-substantive
consolidation opinion, in form and substance reasonably satisfactory to the
Agent, of: (i) special counsel for the Seller, the Originators and the Servicer,
and (ii) Stanley P. Silverstein, counsel for Seller, the Originators and the
Servicer.
(i) Satisfactory results of a review and audit (performed by
representatives of the Co-Agent) of the Servicer's collection, operating and
reporting systems, the Credit and Collection Policy, historical receivables data
and accounts, including satisfactory results of a review of the Servicer's
operating location(s) and satisfactory review and approval of the Eligible
Receivables in existence on the date of the initial purchase under the
Agreement.
(j) A Monthly Report representing the performance of the Receivables
Pool for the Fiscal Month ending October 3, 1998.
(k) Evidence of payment by the Seller of all accrued and unpaid fees
(including those contemplated by the Fee Letter), costs and expenses to the
extent then due and payable and invoiced on the date thereof, including any such
costs, fees and expenses arising under or referenced in Section 5.4 of the
Agreement and the Fee Letter.
(l) The Fee Letter duly executed by the Seller.
(m) Good standing certificates with respect to each of the Seller, the
Originators and Gregory issued by the Secretary of State (or similar official)
of the state of each such Person's organization and principal place of business.
(n) Letters from each of the rating agencies then rating the Notes of
Liberty Street confirming the rating of such Notes after giving effect to the
transaction contemplated by the Agreement.
(o) The other Transaction Documents duly executed by the parties
thereto.
(p) Such other approvals, opinions or documents as the Agent or any
Investor may reasonably request.
2. Conditions Precedent to All Purchases and Reinvestments. Each
purchase and each reinvestment shall be subject to the further conditions
precedent that:
(a) in the case of each purchase (other than the initial purchase), the
Servicer shall have delivered to the Agent on or before such purchase, in form
and substance satisfactory to the Agent and the Co-Agent, a completed pro forma
Monthly Report to reflect the level of Capital and related reserves after such
subsequent purchase; and
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(b) on the date of such purchase (including the initial purchase) or
reinvestment the following statements shall be true (and acceptance of the
proceeds of such purchase or reinvestment shall be deemed a representation and
warranty by the Seller that such statements are then true):
(i) the representations and warranties contained in Exhibit
III to the Agreement are true and correct in all material respects on
and as of the date of such purchase or reinvestment as though made on
and as of such date;
(ii) no event has occurred and is continuing, or would result
from such purchase or reinvestment, that constitutes a Termination
Event or an Unmatured Termination Event; and
(iii) the sum of (a) the aggregate Capital and Total Reserves
of all Purchased Interests under this Agreement and (b) the aggregate
"Capital" and "Total Reserves" of the Purchased Interest under the
Parallel Purchase Commitment would not exceed the Adjusted Net
Receivables Pool Balance.
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EXHIBIT III
REPRESENTATIONS AND WARRANTIES
1. Representations and Warranties of the Seller. The Seller represents
and warrants as follows:
(a) The Seller is a corporation duly incorporated, validly existing and
in good standing under the laws of the State of Delaware, and is duly qualified
to do business and is in good standing as a foreign corporation in every
jurisdiction where the nature of its business requires it to be so qualified,
except where the failure to be so qualified would not have a Material Adverse
Effect.
(b) The execution, delivery and performance by the Seller of the
Agreement and the other Transaction Documents to which it is a party, including
its use of the proceeds of purchases and reinvestments: (i) are within its
corporate powers; (ii) have been duly authorized by all necessary corporate
action; (iii) do not contravene in any material respect or result in a default
under or conflict with: (A) its charter or by-laws, (B) any law, rule or
regulation applicable to it, (C) any indenture, loan agreement, mortgage, deed
of trust or other agreement or instrument to which it is a party or by which it
is bound, or (D) any order, writ, judgment, award, injunction or decree binding
on or affecting it or any of its property; and (iv) do not result in or require
the creation of any Adverse Claim upon or with respect to any of its properties.
The Agreement and the other Transaction Documents to which it is a party have
been duly executed and delivered by the Seller.
(c) No authorization, approval or other action by, and no notice to or
filing with, any Governmental Authority or other Person is required for the due
execution, delivery and performance by the Seller of the Agreement or any other
Transaction Document to which it is a party, other than the Uniform Commercial
Code filings referred to in Exhibit II to the Agreement, all of which shall have
been filed on or before the date of the first purchase hereunder.
(d) Each of the Agreement and the other Transaction Documents to which
the Seller is a party constitutes its legal, valid and binding obligation of the
Seller enforceable against the Seller in accordance with its terms, except as
such enforceability may be limited by bankruptcy, insolvency, reorganization or
other similar laws from time to time in effect affecting the enforcement of
creditors' rights generally and by general principles of equity, regardless of
whether such enforceability is considered in a proceeding in equity or at law.
(e) There is no pending or, to the Seller's best knowledge, threatened
action or proceeding affecting the Seller or any of its properties before any
Governmental Authority or arbitrator.
(f) No proceeds of any purchase or reinvestment will be used by the
Seller to acquire any equity security of a class that is registered pursuant to
Section 12 of the Securities Exchange Act of 1934.
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(g) The Seller is the legal and beneficial owner of the Pool
Receivables and Related Security, free and clear of any Adverse Claim. Upon each
purchase or reinvestment, each Investor, through the Agent, shall acquire a
valid and enforceable perfected undivided percentage ownership or security
interest, to the extent of its Purchased Interest, in each Pool Receivable then
existing or thereafter arising and in the Related Security, Collections and
other proceeds with respect thereto, free and clear of any Adverse Claim. The
Agreement creates a security interest in favor of the Agent, for the benefit of
the Investors, in the Pool Assets, and the Agent on behalf of the Investors has
a first priority perfected security interest in the Pool Assets, free and clear
of any Adverse Claims. No effective financing statement or other instrument
similar in effect covering any Pool Asset is on file in any recording office,
except those filed in favor of (A) Gregory pursuant to the Warnaco Sale
Agreement and the Calvin Klein Sale Agreement, (B) the Seller pursuant to the
Gregory Sale Agreement and (C) the Agent relating to the Agreement.
(h) Each Monthly Report (if prepared by the Seller or one of its
Affiliates, or to the extent that information contained therein is supplied by
the Seller or an Affiliate), information, exhibit, financial statement,
document, book, record or report furnished or to be furnished at any time by or
on behalf of the Seller to the Agent in connection with the Agreement or any
other Transaction Document to which it is a party is or will be complete and
accurate in all material respects as of its date or as of the date so furnished.
(i) The Seller's principal place of business and chief executive office
(as such terms are used in the UCC) and the office where it keeps its records
concerning the Receivables are located at the address referred to in Sections
1(b) and 2(b) of Exhibit IV to the Agreement.
(j) The Seller is not in violation of any order of any court,
arbitrator or Governmental Authority, the violation of which would have a
Material Adverse Effect on the Seller.
(k) No proceeds of any purchase or reinvestment will be used for any
purpose that violates any applicable law, rule or regulation, including
Regulation U of the Federal Reserve Board.
(l) Each Pool Receivable included as an Eligible Receivable in the
calculation of the Net Receivables Pool Balance is an Eligible Receivable.
(m) No event has occurred and is continuing, or would result from a
purchase in respect of, or reinvestment in respect of, the Purchased Interests
or from the application of the proceeds therefrom, that constitutes a
Termination Event or an Unmatured Termination Event.
(n) The Seller has complied in all material respects with the Credit
and Collection Policy.
(o) The Seller has complied in all material respects with all of the
terms, covenants and agreements contained in the Agreement and the other
Transaction Documents that are applicable to it.
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(p) The Seller's complete corporate name is set forth in the preamble
to the Agreement, and it does not use and has not since its incorporation used
any other corporate name, trade name, doing-business name or fictitious name,
except as set forth on Schedule III to the Agreement and except for names first
used after the date of the Agreement and set forth in a notice delivered to the
Agent pursuant to Section 1(i)(iv) of Exhibit III to the Agreement.
(q) The Seller is not an "investment company," or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended. In addition, the Seller is not a "holding
company," 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.
(r) The Seller has reviewed the areas within its business and
operations which could be adversely affected by, and has developed or is
developing a program to address on a timely basis, the risk that certain
computer applications used by the Seller may be unable to recognize and perform
properly date-sensitive functions involving dates prior to and after December
31, 1999 (the "Year 2000 Problem"). Based on such review and program, the Year
2000 Problem could not reasonably be expected to have any Material Adverse
Effect.
2. Representations and Warranties of Gregory (including in its capacity
as the Servicer). Gregory, individually and in its capacity as the Servicer,
represents and warrants as follows:
(a) Gregory is a corporation duly incorporated, validly existing and in
good standing under the laws of the State of Delaware, and is duly qualified to
do business and is in good standing as a foreign corporation in every
jurisdiction where the nature of its business requires it to be so qualified,
except where the failure to be so qualified would not have a Material Adverse
Effect.
(b) The execution, delivery and performance by Gregory of the Agreement
and the other Transaction Documents to which it is a party, including the
Servicer's use of the proceeds of purchases and reinvestments: (i) are within
its corporate powers; (ii) have been duly authorized by all necessary corporate
action; (iii) do not contravene in any material respect or result in a default
under or conflict with: (A) its charter or by-laws, (B) any law, rule or
regulation applicable to it, (C) any indenture, loan agreement, mortgage, deed
of trust or other material agreement or instrument to which it is a party or by
which it is bound, or (D) any order, writ, judgment, award, injunction or decree
binding on or affecting it or any of its property; and (iv) do not result in or
require the creation of any Adverse Claim upon or with respect to any of its
properties. The Agreement and the other Transaction Documents to which Gregory
is a party have been duly executed and delivered by Gregory.
(c) No authorization, approval or other action by, and no notice to or
filing with any Governmental Authority or other Person, is required for the due
execution, delivery and performance by Gregory of the Agreement or any other
Transaction Document to which it is a party.
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(d) Each of the Agreement and the other Transaction Documents to which
Gregory is a party constitutes the legal, valid and binding obligation of
Gregory enforceable against Gregory in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization or other
similar laws from time to time in effect affecting the enforcement of creditors'
rights generally and by general principles of equity, regardless of whether such
enforceability is considered in a proceeding in equity or at law.
(e) The balance sheets of Warnaco and its consolidated Subsidiaries as
at January 3, 1998, and the related income and retained earnings for the fiscal
year then ended, copies of which have been furnished to the Agent and the
Co-Agent, fairly present the financial condition of Warnaco and its consolidated
Subsidiaries as at such date and the results of the operations of Warnaco and
its Subsidiaries for the period ended on such date, all in accordance with
generally accepted accounting principles consistently applied, and since January
3, 1998 there has been no event or circumstances which has had a Material
Adverse Effect.
(f) Except as disclosed in the most recent audited financial statements
of Gregory furnished to the Agent, there is no pending or, to its best
knowledge, threatened action or proceeding affecting it or any of its
Subsidiaries before any Governmental Authority or arbitrator that would have a
Material Adverse Effect.
(g) Each Monthly Report (if prepared by Gregory or one of its
Affiliates, or to the extent that information contained therein is supplied by
Gregory or an Affiliate), information, exhibit, financial statement, document,
book, record or report furnished or to be furnished at any time by or on behalf
of the Servicer to the Agent in connection with the Agreement is or will be
complete and accurate in all material respects as of its date or (except as
otherwise disclosed to the Agent at such time) as of the date so furnished.
(h) Gregory is not in violation of any order of any court, arbitrator
or Governmental Authority, which could have a Material Adverse Effect.
(i) Gregory has complied in all material respects with the Credit and
Collection Policy.
(j) Gregory has reviewed the areas within its business and operations
which could be adversely affected by, and has developed or is developing a
program to address on a timely basis, the risk that certain computer
applications used by Gregory may be unable to recognize and perform properly
date-sensitive functions involving dates prior to and after December 31, 1999
(the "Year 2000 Problem"). Based on such review and program, the Year 2000
Problem could not reasonably be expected to have any Material Adverse Effect.
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EXHIBIT IV
COVENANTS
1. Covenants of the Seller. Until the Final Payout Date:
(a) Compliance with Laws, Etc. The Seller shall comply in all material
respects with all applicable laws, rules, regulations and orders, and preserve
and maintain its corporate existence, rights, franchises, qualifications and
privileges, except to the extent that the failure so to comply with such laws,
rules and regulations or the failure so to preserve and maintain such rights,
franchises, qualifications and privileges would not have a Material Adverse
Effect.
(b) Offices, Records and Books of Account, Etc. The Seller: (i) shall
keep its principal place of business and chief executive office (as such terms
or similar terms are used in the UCC) and the office where it keeps its records
concerning the Receivables at the address of the Seller set forth under its name
on the signature page to the Agreement or, pursuant to clause (j)(iv) below, at
any other locations in jurisdictions where all actions reasonably requested by
the Agent to protect and perfect the interest of the Investors in the
Receivables and related items (including the Pool Assets) have been taken and
completed and (ii) shall provide the Agent with at least 30 days' written notice
before making any change in the Seller's name or making any other change in the
Seller's identity or corporate structure (including a Change in Control) that
could render any UCC financing statement filed in connection with this Agreement
"seriously misleading" as such term (or similar term) is used in the UCC; each
notice to the Agent pursuant to this sentence shall set forth the applicable
change and the effective date thereof. The Seller also will maintain and
implement (or cause the Servicer to maintain and implement) administrative and
operating procedures (including an ability to recreate records evidencing
Receivables and related Contracts in the event of the destruction of the
originals thereof), and keep and maintain (or cause the Servicer to keep and
maintain) all documents, books, records, computer tapes and disks and other
information reasonably necessary or advisable for the collection of all
Receivables (including records adequate to permit, as and when necessary, the
daily identification of each Receivable and all Collections of and adjustments
to each existing Receivable).
(c) Performance and Compliance with Contracts and Credit and Collection
Policy. The Seller shall (and shall cause the Servicer to) fully comply in all
material respects with the Credit and Collection Policy.
(d) Ownership Interest, Etc. The Seller shall (and shall cause the
Servicer to), at its expense, take all action necessary or desirable to
establish and maintain a valid and enforceable undivided percentage ownership or
security interest, to the extent of the Purchased Interests, in the Pool
Receivables, the Related Security and Collections with respect thereto, and a
first priority perfected security interest in the Pool Assets, in each case free
and clear of any Adverse Claim, in favor of the Agent, for the benefit of the
Investors, including taking such action to perfect, protect or more fully
evidence the interests of the Agent and Investors as the Agent may reasonably
request.
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(e) Sales, Liens, Etc. The Seller shall not sell, assign (by operation
of law or otherwise) or otherwise dispose of, or create or suffer to exist any
Adverse Claim upon or with respect to, any or all of its right, title or
interest in, to or under any Pool Assets (including the Seller's undivided
interest in any Receivable, Related Security or Collections, or upon or with
respect to any account to which any Collections of any Receivables are sent), or
assign any right to receive income in respect of any items contemplated by this
paragraph; it being understood that the Servicer may sell a Defaulted Receivable
if the Servicer believes in good faith that such sale will maximize the amount
of Collections with respect to such Receivable.
(f) Change in Credit and Collection Policy. The Seller shall not make
(or permit any Originator to make) any material change in the character of its
business or the Credit and Collection Policy that would materially adversely
affect the collectibility of the Receivables Pool or the enforceability of any
related Contract or the ability of the Seller or Servicer to perform its
obligations under the Agreement.
(g) Audits. (i) The Seller shall (and shall cause each Originator to),
from time to time during regular business hours as reasonably requested in
advance (unless a Termination Event or Unmatured Termination Event exists) by
the Agent or the Co-Agent, permit the Agent or the Co-Agent, or their agents or
representatives: (A) to examine and make copies of and abstracts from all books,
records and documents (including computer tapes and disks) in the possession or
under the control of the Seller (or any Originator) relating to Receivables and
the Related Security, including the related Contracts, and (B) to visit the
offices and properties of the Seller, Gregory and each Originator for the
purpose of examining such materials described in clause (i)(A) above, and to
discuss matters relating to Receivables and the Related Security or the
Seller's, Gregory's or such Originator's performance under the Transaction
Documents or such Originator's performance under the Contracts with any of the
officers, employees, agents or contractors of the Seller, Gregory or such
Originator having knowledge of such matters; and (ii) without limiting the
provisions of clause (i) next above, from time to time during regular business
hours, upon five Business Days prior written notice from the Agent or the
Co-Agent, permit certified public accountants or other auditors acceptable to
the Agent or the Co-Agent to conduct a review of the Seller's or any
Originator's books and records, at the Seller's or such Originator's expense (as
the case may be), with respect to the Receivables.
(h) Change in Payment Instructions to Obligors. The Seller shall not,
and shall not permit the Servicer or any Originator to make any change in its
instructions to Obligors regarding payments to be made to the Seller, such
Originator, the Servicer or the Collection Account (or related post office box),
unless the Agent shall have consented thereto in writing (which consent shall
not be unreasonably withheld).
(i) Deposits to Collection Account. The Seller shall (or shall cause
the Servicer to): (i) instruct all Obligors to make payments of all Receivables
to the Collection Account or to post office boxes to which only the Collection
Account Bank has access (and shall instruct the Collection Account Bank to cause
all items and amounts relating to such Receivables received in such post office
boxes to be removed and deposited into the Collection Account on a daily basis),
and (ii)
IV-2
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<PAGE>
deposit, or cause to be deposited, any Collections received by it, the Servicer
or any Originator into the Collection Account not later than two Business Days
after receipt thereof. The Collection Account shall at all times be subject to
the Collection Account Agreement. The Seller will not (and will not permit the
Servicer to) deposit or otherwise credit, or cause or permit to be so deposited
or credited, to the Collection Account cash or cash proceeds other than
Collections.
(j) Reporting Requirements. The Seller shall provide to the Agent the
following:
(i) as soon as available and in any event within 90 days after
the end of each fiscal year of the Seller, a copy of its unaudited
balance sheet and income statement for such year certified as to
accuracy by the chief financial officer or treasurer of the Seller;
(ii) as soon as possible and in any event within five days
after the occurrence of each Termination Event or Unmatured Termination
Event, a statement of the chief financial officer of the Seller setting
forth details of such Termination Event or Unmatured Termination Event
and the action that the Seller has taken and proposes to take with
respect thereto;
(iii) promptly after the filing or receiving thereof, copies
of all reports and notices that the Seller or any Affiliate files under
ERISA with the Internal Revenue Service, the Pension Benefit Guaranty
Corporation or the U.S. Department of Labor or that the Seller or any
Affiliate receives from any of the foregoing or from any multiemployer
plan (within the meaning of Section 4001(a)(3) of ERISA) to which the
Seller or any of its Affiliates is or was, within the preceding five
years, a contributing employer, in each case in respect of the
assessment of withdrawal liability or an event or condition that could,
in the aggregate, result in the imposition of liability on the Seller
and/or any such Affiliate;
(iv) at least 30 days before any change in the Seller's name
or any other change requiring the amendment of UCC financing
statements, a notice setting forth such changes and the effective date
thereof;
(v) promptly after the Seller obtains knowledge thereof,
notice of any: (A) material litigation, investigation or proceeding
that may exist at any time between the Seller and any Person or (B)
material litigation or proceeding relating to any Transaction Document;
(vi) promptly after the occurrence thereof, notice of a change
in the business, operations, property or financial or other condition
of the Seller, the Servicer or any Originator which would have a
Material Adverse Effect; and
(vii) such other information respecting the Receivables or the
condition or operations, financial or otherwise, of the Seller or any
of its Affiliates as the Agent or the Co-Agent may from time to time
reasonably request upon reasonable notice.
IV-3
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<PAGE>
(k) Certain Agreements. Without the prior written consent of the Agent
and the Co-Agent, the Seller will not (and will not permit any Originator to)
amend, modify, waive, revoke or terminate any Transaction Document to which it
is a party or any provision of Seller's certificate of incorporation or by-laws.
(l) Restricted Payments. (i) Except pursuant to clause (ii) below, the
Seller will not: (A) purchase or redeem any shares of its capital stock, (B)
declare or pay any dividend or set aside any funds for any such purpose, (C)
prepay, purchase or redeem any Debt, (D) lend or advance any funds or (E) repay
any loans or advances to, for or from any of its Affiliates (the amounts
described in clauses (A) through (E) being referred to as "Restricted
Payments").
(ii) Subject to the limitations set forth in clause (iii)
below, the Seller may make Restricted Payments so long as such
Restricted Payments are made only in one or more of the following ways:
(A) the Seller may make cash payments (including prepayments) on the
Subordinated Note in accordance with its terms, and (B) if no amounts
are then outstanding under the Subordinated Note, the Seller may
declare and pay dividends.
(iii) The Seller may make Restricted Payments only out of the
funds it receives pursuant to Sections 1.4(b)(ii) and (iv) of the
Agreement. Furthermore, the Seller shall not pay, make or declare: (A)
any dividend if, after giving effect thereto, the Seller's tangible net
worth would be less than $20,000,000, or (B) any Restricted Payment
(including any dividend) if, after giving effect thereto, any
Termination Event or Unmatured Termination Event shall have occurred
and be continuing.
(m) Other Business. The Seller will not: (i) engage in any business
other than the transactions contemplated by the Transaction Documents and its
Certificate of Incorporation and Bylaws; (ii) create, incur or permit to exist
any Debt of any kind (or cause or permit to be issued for its account any
letters of credit or bankers' acceptances) other than pursuant to this Agreement
or the Subordinated Notes; or (iii) form any Subsidiary or make any investments
in any other Person; provided, however, that the Seller shall be permitted to
incur minimal obligations to the extent necessary for the day-to-day operations
of the Seller (such as expenses for stationery, audits, maintenance of legal
status, etc.); provided that such miscellaneous expenses shall not exceed an
aggregate amount of $9,750 at any one time outstanding.
(n) Use of Seller's Share of Collections. The Seller shall apply the
Seller's Share of Collections to make payments in the following order of
priority: (i) the payment of its expenses (including all obligations payable to
the Investors under the Agreement and under the Fee Letter); (ii) the payment of
accrued and unpaid interest on the Subordinated Notes; and (iii) Restricted
Payments and other legal and valid corporate purposes.
(o) Tangible Net Worth. The Seller will not permit its tangible net
worth, at any time, to be less than $20,000,000.
IV-4
<PAGE>
<PAGE>
(p) Extension or Amendment of Receivables. Except as provided in
Section 4.2 of the Agreement and the Credit and Collection Policy, the Seller
shall not, and shall not permit the Servicer to, extend the maturity or adjust
the Outstanding Balance or otherwise modify the terms of any Pool Receivable, or
amend, modify or waive any term or condition of any related Contract.
2. Covenants of the Servicer and Gregory. Until the Final Payout Date:
(a) Compliance with Laws, Etc. The Servicer and, to the extent that it
ceases to be the Servicer, Gregory shall comply in all material respects with
all applicable laws, rules, regulations and orders, and preserve and maintain
its corporate existence, rights, franchises, qualifications and privileges,
except to the extent that the failure so to comply with such laws, rules and
regulations or the failure so to preserve and maintain such existence, rights,
franchises, qualifications and privileges would not have a Material Adverse
Effect.
(b) Records and Books of Account, Etc. The Servicer shall maintain and
implement administrative and operating procedures (including an ability to
recreate records evidencing Receivables and related Contracts in the event of
the destruction of the originals thereof), and keep and maintain all documents,
books, records, computer tapes and disks and other information reasonably
necessary or advisable for the collection of all Receivables (including records
adequate to permit the daily identification of each Receivable and all
Collections of and adjustments to each existing Receivable).
(c) Change in Credit and Collection Policy. The Servicer shall not make
any material change in the character of its business or in the Credit and
Collection Policy that would materially adversely affect the collectibility of
the Receivables Pool or the enforceability of any related Contract or its
ability to perform its obligations under the Agreement.
(d) Audits. (i) The Servicer shall from time to time during regular
business hours as reasonably requested in advance (unless a Termination Event or
Unmatured Termination Event exists) by the Agent or the Co-Agent, permit the
Agent or the Co-Agent, or their agents or representatives: (A) to examine and
make copies of and abstracts from all books, records and documents (including
computer tapes and disks) in its possession or under its control relating to
Receivables and the Related Security, including the related Contracts, and (B)
to visit its offices and properties for the purpose of examining such materials
described in clause (i)(A) above, and to discuss matters relating to Receivables
and the Related Security or its performance hereunder or under the Contracts
with any of its officers, employees, agents or contractors having knowledge of
such matters; and (ii) without limiting the provisions of clause (i) next above,
from time to time during regular business hours, upon five Business Days prior
written notice from the Agent or the Co-Agent, permit certified public
accountants or other auditors acceptable to the Agent to conduct, at Servicer's
expense, a review of the Servicer's books and records with respect to the
Receivables.
(e) Deposits to Collection Account. The Servicer shall: (i) instruct
all Obligors to make payments of all Receivables to the Collection Account or to
post office boxes to which only the Collection Account Bank has access (and
shall instruct the Collection Account Bank to cause all
IV-5
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<PAGE>
items and amounts relating to such Receivables received in such post office
boxes to be removed and deposited into the Collection Account on a daily basis);
and (ii) deposit, or cause to be deposited, any Collections received by it into
the Collection Account not later than two Business Days after receipt thereof.
The Collection Account shall at all times be subject to the Collection Account
Agreement. The Servicer will not deposit or otherwise credit, or cause or permit
to be so deposited or credited, to the Collection Account cash or cash proceeds
other than Collections.
(f) Reporting Requirements. Gregory shall provide to the Agent and the
Co-Agent the following:
(i) As soon as available and in any event within 45 days after
the end of each of the first three quarters of each fiscal year of
Warnaco and Gregory, (a) copies of (A) the unaudited consolidated
balance sheet of Warnaco and its consolidated Subsidiaries and (B) the
unaudited balance sheet of Gregory, in each case as at the end of such
quarter, together with unaudited statements of earnings and
stockholders' equity for such quarter and the portion of the fiscal
year through such quarter, prepared in accordance with GAAP and
certified by the chief financial officer, treasurer or chief accounting
officer of Warnaco and Gregory, as applicable, and (b) a letter from
the chief financial officer, treasurer or chief accounting officer of
Warnaco or Gregory, as applicable, certifying to the best knowledge of
such officer, that neither a Termination Event nor an Unmatured
Termination Event has occurred and is continuing;
(ii) As soon as available and in any event within 90 days
after the end of each fiscal year of Warnaco and Gregory, (a) a copy of
(A) the consolidated balance sheet of Warnaco and its consolidated
Subsidiaries and (B) the unaudited balance sheet of Gregory, in each
case as at the end of such fiscal year, together with the related
statements of earnings and stockholders' equity for such fiscal year,
each prepared in accordance with GAAP applied consistently throughout
the periods reflected therein (Warnaco's consolidated balance sheet and
such related statements to be certified without any Impermissible
Qualification by independent certified public accountants of nationally
recognized standing), and (b) a letter from the chief financial
officer, treasurer or chief accounting officer of Warnaco or Gregory,
as applicable, certifying to the best knowledge of such officer, that
neither a Termination Event nor an Unmatured Termination Event has
occurred and is continuing, in each case as at the end of each such
fiscal year and the date of delivery of such letter;
(iii) As to the Servicer only, as soon as available and in any
event not later than the Monthly Report Date for each month, a Monthly
Report as of the last day of the most recently ended Fiscal Month or,
within ten Business Days of a request by the Agent, a Monthly Report
for such periods as is specified by the Agent (including on a
semi-monthly, weekly or daily basis);
(iv) Promptly after the sending or filing thereof, copies of
all reports that Warnaco sends to any of its security holders, and
copies of all reports and registration statements that
IV-6
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<PAGE>
Warnaco or any Subsidiary files with the Securities and Exchange
Commission or any national securities exchange;
(v) Promptly after the filing or receiving thereof, copies of
all reports and notices that Warnaco or any of its Affiliate files
under ERISA with the Internal Revenue Service, the Pension Benefit
Guaranty Corporation or the U.S. Department of Labor or that such
Person or any of its Affiliates receives from any of the foregoing or
from any multiemployer plan (within the meaning of Section 4001(a)(3)
of ERISA) to which such Person or any of its Affiliate is or was,
within the preceding five years, a contributing employer, in each case
in respect of the assessment of withdrawal liability or an event or
condition that could, in the aggregate, result in the imposition of
liability on Warnaco and/or any such Affiliate;
(vi) Promptly after Gregory obtains knowledge thereof, notice
of any: (A) litigation, investigation or proceeding that may exist at
any time between Gregory or any of its Affiliates and any Governmental
Authority that, if not cured or if adversely determined, as the case
may be, would have a Material Adverse Effect; (B) litigation or
proceeding adversely affecting such Person or any of its Subsidiaries
which would have a Material Adverse Effect; or (C) litigation or
proceeding relating to any Transaction Document;
(vii) As soon as available, a revised list of Fiscal Months as
may be necessary to update Schedule IV from time to time;
(viii) No later than 30 days after the Closing Date, good
standing certificates with respect to each of the Seller, the
Originators and Gregory issued by the Secretary of State (or similar
official) of the State of each such Person's organization and principal
place of business, to the extent any such certificate was not delivered
to the Agent on the Closing Date; and
(ix) Such other information respecting the Receivables or the
condition or operations, financial or otherwise, of Gregory or any of
its Affiliates as the Agent may from time to time reasonably request.
3. Separate Existence. Each of the Seller and Gregory hereby
acknowledges that the Investors and the Agent and the Co-Agent are entering into
the transactions contemplated by this Agreement and the other Transaction
Documents in reliance upon the Seller's identity as a legal entity separate from
Gregory and its Affiliates. Therefore, from and after the date hereof, each of
the Seller and Gregory shall take all steps specifically required by the
Agreement or reasonably required by the Agent to continue the Seller's identity
as a separate legal entity and to make it apparent to third Persons that the
Seller is an entity with assets and liabilities distinct from those of Gregory
and any other Person, and is not a division of Gregory, its Affiliates or any
other Person. Without limiting the generality of the foregoing and in addition
to and consistent with the other covenants set forth herein, each of the Seller
and Gregory shall take such actions as shall be required in order that:
IV-7
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(a) The Seller will be a limited purpose corporation whose
primary activities are restricted in its certificate of incorporation
to: (i) purchasing or otherwise acquiring from the Originators, owning,
holding, granting security interests or selling interests in, Pool
Assets, (ii) entering into agreements for the selling and servicing of
the Receivables Pool, and (iii) conducting such other activities as it
deems necessary or appropriate to carry out its primary activities;
(b) The Seller shall not engage in any business or activity,
or incur any indebtedness or liability, other than as expressly
permitted by the Transaction Documents;
(c) Not less than one member of the Seller's Board of
Directors (the "Independent Director") shall be an individual who is
not and has not been at any time during the preceding five years a
direct, indirect or beneficial stockholder, officer, director,
employee, creditor, affiliate, associate or supplier of Gregory or any
of its Affiliates. The certificate of incorporation of the Seller shall
provide that: (i) the Seller's Board of Directors shall not approve, or
take any other action to cause the filing of, a voluntary bankruptcy
petition with respect to the Seller unless the Independent Director
shall approve the taking of such action in writing before the taking of
such action, and (ii) such provision cannot be amended without the
prior written consent of the Independent Director;
(d) The Independent Director shall not at any time serve as a
trustee in bankruptcy for the Seller, Gregory or any Affiliate thereof;
(e) Any employee, consultant or agent of the Seller will be
compensated from the Seller's funds for services provided to the
Seller. The Seller will not engage any agents other than its attorneys,
auditors and other professionals, and a servicer and any other agent
contemplated by the Transaction Documents for the Receivables Pool,
which servicer will be fully compensated for its services by payment of
the Servicing Fee, and a manager, which manager will be fully
compensated from the Seller's funds;
(f) The Seller will contract with the Servicer to perform for
the Seller all operations required on a daily basis to service the
Receivables Pool. The Seller will pay the Servicer the Servicing Fee
pursuant to the Agreement. The Seller will not incur any material
indirect or overhead expenses for items shared with Gregory (or any
other Affiliate of Warnaco) that are not reflected in the Servicing
Fee. To the extent, if any, that the Seller (or any Affiliate thereof)
shares items of expenses not reflected in the Servicing Fee or the
manager's fee, such as legal, auditing and other professional services,
such expenses will be allocated to the extent practical on the basis of
actual use or the value of services rendered, and otherwise on a basis
reasonably related to the actual use or the value of services rendered;
it being understood that Warnaco shall pay all expenses relating to the
preparation, negotiation, execution and delivery of the Transaction
Documents, including legal, agency and other fees;
(g) The Seller's operating expenses will not be paid by
Gregory or any other Affiliate thereof;
IV-8
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(h) All of the Seller's business correspondence and other
communications shall be conducted in the Seller's own name and on its
own separate stationery;
(i) The Seller's books and records will be maintained
separately from those of Gregory and any other Affiliate thereof;
(j) All financial statements of Gregory or any Affiliate
thereof that are consolidated to include Seller will contain detailed
notes clearly stating that: (i) a special purpose corporation exists as
a Subsidiary of Warnaco, and (ii) Gregory has sold receivables and
other related assets to such special purpose Subsidiary that, in turn,
has sold undivided interests therein to certain financial institutions
and other entities;
(k) The Seller's assets will be maintained in a manner that
facilitates their identification and segregation from those of Gregory
or any Affiliate thereof;
(l) The Seller will strictly observe corporate formalities in
its dealings with Gregory or any Affiliate thereof, and funds or other
assets of the Seller will not be commingled with those of Gregory or
any Affiliate thereof. The Seller shall not maintain joint bank
accounts or other depository accounts to which Gregory or any Affiliate
thereof (other than Gregory in its capacity as the Servicer) has
independent access. The Seller will not guarantee the obligations of
any Person, and no Person will guarantee the obligations of the Seller.
The Seller will pay to the appropriate Affiliate the marginal increase
or, in the absence of such increase, the market amount of its portion
of the premium payable with respect to any insurance policy that covers
the Seller and such Affiliate; and
(m) The Seller will maintain arm's-length relationships with
Gregory (and any Affiliate thereof). Any Person that renders or
otherwise furnishes services to the Seller will be compensated by the
Seller at market rates for such services it renders or otherwise
furnishes to the Seller. Neither the Seller nor Gregory will be or will
hold itself out to be responsible for the debts of the other or the
decisions or actions respecting the daily business and affairs of the
other. The Seller and Gregory will immediately correct any known
misrepresentation with respect to the foregoing, and they will not
operate or purport to operate as an integrated single economic unit
with respect to each other or in their dealing with any other entity.
(n) Gregory shall not pay the salaries of Seller's employees,
if any.
IV-9
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EXHIBIT V
TERMINATION EVENTS
Each of the following shall be a "Termination Event":
(a)(i) the Seller, Gregory, any Originator or the Servicer shall fail
to make when due any payment or deposit to be made by it under the Agreement or
any other Transaction Document within three Business Days of the date on which
such payment or deposit is due, or (ii) the Seller, Gregory, any Originator or
the Servicer (if Gregory or any Affiliate of Warnaco) shall fail to perform or
observe in any material respect any other term, covenant or agreement under the
Agreement or any other Transaction Document and such failure shall continue for
30 days after the Seller, such Originator or the Servicer shall have obtained
actual knowledge or notice thereof;
(b) Gregory (or any Affiliate of Warnaco) shall fail to transfer to any
successor Servicer when required any rights pursuant to the Agreement that
Gregory (or such Affiliate) then has as Servicer;
(c) any representation or warranty made or deemed made by the Seller,
any Originator or Gregory (or any of their respective officers) under or in
connection with the Agreement or any other Transaction Document, or any
information or report (including any Monthly Report) delivered by the Seller or
any Originator or the Servicer pursuant to the Agreement or any other
Transaction Document, shall prove to have been incorrect or untrue in any
material respect when made or deemed made or delivered which in the sole
judgment of the Agent and the Co-Agent, acting together, has had or is
reasonably likely to have a Material Adverse Effect;
(d) the Seller or the Servicer shall fail to deliver the Monthly Report
pursuant to the Agreement, and such failure shall remain unremedied for five
Business Days;
(e) the Agreement or any purchase or reinvestment pursuant to the
Agreement shall for any reason: (i) cease to create, or the Purchased Interest
shall for any reason cease to be, a valid and enforceable perfected undivided
percentage ownership or security interest to the extent of such Purchased
Interest in each Pool Receivable, the Related Security and Collections with
respect thereto, free and clear of any Adverse Claim, or (ii) cease to create
with respect to the Pool Assets, or the interests of the Investors with respect
to such Pool Assets shall cease to be, a valid and enforceable first priority
perfected security interest, free and clear of any Adverse Claim,
(f) the Seller, Gregory or any Originator shall generally not pay its
debts as such debts become due, or shall admit in writing its inability to pay
its debts generally, or shall make a general assignment for the benefit of
creditors; or any proceeding shall be instituted by or against the Seller,
Gregory or any Originator seeking to adjudicate it a bankrupt or insolvent, or
seeking liquidation, winding up, reorganization, arrangement, adjustment,
protection, relief or composition of it or its debts under any law relating to
bankruptcy, insolvency or reorganization or relief of debtors, or seeking the
entry of an order for relief or the appointment of a receiver, trustee,
custodian or other
V-1
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similar official for it or for any substantial part of its property and, in the
case of any such proceeding instituted against it (but not instituted by it),
either such proceeding shall remain undismissed or unstayed for a period of 60
days, or any of the actions sought in such proceeding (including the entry of an
order for relief against, or the appointment of a receiver, trustee, custodian
or other similar official for, it or for any substantial part of its property)
shall occur; or the Seller, Gregory or any Originator shall take any corporate
action to authorize any of the actions set forth above in this paragraph;
(g)(i) the greatest average of the Default Ratios for any three
consecutive Fiscal Months during the twelve most recent Fiscal Months shall
exceed 9.0% or (ii) the greatest average of the Dilution Ratios for any three
consecutive Fiscal Months during the twelve most recent Fiscal Months shall
exceed 35.0%, (iii) the greatest average of the Loss-to-Liquidation Ratios for
any three consecutive Fiscal Months during the twelve most recent Fiscal Months
shall exceed 11.0% or (iv) the greatest average of the Delinquency Ratios for
any three consecutive Fiscal Months during the twelve most recent Fiscal Months
shall exceed 9.0%;
(h) a Change in Control shall occur;
(i) at any time, the sum of (a) the aggregate Capital and Total
Reserves under this Agreement and (b) the aggregate "Capital" and "Total
Reserves" under the Parallel Purchase Commitment exceeds the sum of (x) the
Adjusted Net Receivables Pool Balance and (y) the aggregate Investor's Share of
Collections then on deposit in the Collection Account (other than amounts set
aside therein in respect of Discount, Fees and Servicing Fee), and such
condition shall continue unremedied for two Business Days;
(j) (i) Warnaco shall fail to pay any principal of or premium or
interest on any of its Debt that is outstanding in a principal amount of at
least $20,000,000 in the aggregate when the same becomes due and payable
(whether by scheduled maturity, required prepayment, acceleration, demand or
otherwise), and such failure shall continue after the applicable grace period,
if any, specified in the agreement, mortgage, indenture or instrument relating
to such Debt (and shall have not been waived); or (ii) any other event shall
occur or condition shall exist under any agreement, mortgage, indenture or
instrument relating to any such Debt and shall continue after the applicable
grace period, if any, specified in such agreement, mortgage, indenture or
instrument (and shall have not been waived), if, in either case: (a) the effect
of such non-payment, event or condition is to give the applicable debtholders
the right (whether acted upon or not) to accelerate the maturity of such Debt,
or (b) any such Debt shall be declared to be due and payable, or required to be
prepaid (other than by a regularly scheduled required prepayment), redeemed,
purchased or defeased, or an offer to repay, redeem, purchase or defease such
Debt shall be required to be made, in each case before the stated maturity
thereof;
(k) either: (i) a contribution failure shall occur with respect to any
Benefit Plan sufficient to give rise to a lien under Section 302(f) of ERISA,
(ii) the Internal Revenue Service shall file a notice of lien asserting a claim
pursuant to the Internal Revenue Code with regard to any of the assets of Seller
or Gregory or any ERISA Affiliate, or (iii) the Pension Benefit Guaranty
Corporation
V-2
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shall file a notice of lien asserting a claim pursuant to ERISA with regard to
any assets of Seller, Gregory or any ERISA Affiliate;
(l) Warnaco's long-term senior debt rating shall fall below BB- by
Standard & Poor's or Ba3 by Moody's (if Moody's shall have provided such a
rating) or shall be withdrawn by any such rating agency as a result of the
financial condition of Warnaco; and
(m) There shall have occurred any event that would, with the giving of
notice or the passing of time or both, have a Material Adverse Effect.
V-3
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<PAGE>
SCHEDULE I
CREDIT AND COLLECTION POLICY
See attached.
Schedule I-1
<PAGE>
<PAGE>
SCHEDULE II
TRADE NAMES
None.
Schedule II-1
<PAGE>
<PAGE>
SCHEDULE III
SPECIAL CONCENTRATION PERCENTAGES
The Special Concentration Percentage with respect to any Obligor means
the percentage determined in accordance with the table below and the other
provisions of this Schedule III. For purposes of this Schedule III:
"Level I Downgrade Event" means, with respect to May Company, a
lowering of such Obligor's short-term debt rating to below A-1 by Standard &
Poor's or below P-1 by Moody's, and with respect to any other Obligor, a
lowering of such Obligor's long-term debt rating to below BBB-by Standard &
Poor's or below Baa3 by Moody's.
"Level II Downgrade Event" means, with respect to May Company, a
lowering of such Obligor's short-term debt rating to below A-3 by Standard &
Poor's or below P-3 by Moody's.
"Obligor Downgrade Event" means, either a Level I Downgrade Event or a
Level II Downgrade Event.
<TABLE>
<CAPTION>
Prior to an After a After a
Obligor Obligor Level I Level II
Downgrade Downgrade Event Downgrade Event
Event
<S> <C> <C> <C>
- - --------------------------------------------------------------------------------
May Company 20% 15% 4%
- - --------------------------------------------------------------------------------
Federated Department 15% 4% N/A
Stores
- - --------------------------------------------------------------------------------
TJ Maxx 15% 4% N/A
- - --------------------------------------------------------------------------------
Dillards 15% 4% N/A
- - --------------------------------------------------------------------------------
Dayton Hudson 15% 4% N/A
- - --------------------------------------------------------------------------------
</TABLE>
Schedule III-1
<PAGE>
<PAGE>
SCHEDULE IV
FISCAL MONTHS
Schedule IV-1
<PAGE>
<PAGE>
ANNEX A
TO RECEIVABLES PURCHASE AGREEMENT
FORM OF MONTHLY REPORT
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE WARNACO GROUP, INC. FOR THE QUARTER ENDED
OCTOBER 3, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> JAN-03-1999
<PERIOD-START> JAN-04-1998
<PERIOD-END> OCT-03-1998
<CASH> 17,189
<SECURITIES> 0
<RECEIVABLES> 481,178
<ALLOWANCES> (21,481)
<INVENTORY> 625,545
<CURRENT-ASSETS> 1,142,884
<PP&E> 333,631
<DEPRECIATION> (120,717)
<TOTAL-ASSETS> 2,238,337
<CURRENT-LIABILITIES> 637,018
<BONDS> 627,030
101,566
0
<COMMON> 692
<OTHER-SE> 825,152
<TOTAL-LIABILITY-AND-EQUITY> 2,238,337
<SALES> 1,402,207
<TOTAL-REVENUES> 1,402,207
<CGS> 915,993
<TOTAL-COSTS> 1,209,866
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 2,655
<INTEREST-EXPENSE> 43,856
<INCOME-PRETAX> 145,830
<INCOME-TAX> 51,478
<INCOME-CONTINUING> 94,352
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 94,352
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 1.48
</TABLE>
