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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended January 1, 2000
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 of (I.R.S. Employer
incorporation or organization) Identification No.)
90 Park Avenue
New York, New York 10016
(Address of principal executive offices)
Registrant's telephone number, including area code: (212) 661-1300
------------------------
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
------------------- -------------------
Class A Common Stock, par value $0.01 per share New York Stock Exchange
Convertible Trust Originated Preferred Securities* New York Stock Exchange
* Issued by Designer Finance Trust. Payments of distributions and payment on
liquidation or redemption are guaranteed by the registrant.
Securities registered pursuant to Section 12(g) of the act: NONE
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [x] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of the registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
The aggregate market value of the Class A Common Stock, the only voting
stock of the registrant issued and outstanding, held by non-affiliates of the
registrant as of March 29, 2000, was approximately $522,594,325.
The number of shares outstanding of the registrant's Class A Common Stock
as of March 29, 2000: 53,229,388.
Documents incorporated by reference: The definitive Proxy Statement of The
Warnaco Group, Inc. relating to the 2000 Annual Meeting of Stockholders is
incorporated by reference in Part III hereof.
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PART I
Item 1. Business.
(a) General Development of Business.
The Warnaco Group, Inc. (the "Company"), a Delaware corporation, was
organized in 1986 for the purpose of acquiring the outstanding shares of Warnaco
Inc. ("Warnaco"). As a result of the Company's acquisition of Warnaco, Warnaco
became a wholly-owned subsidiary of the Company.
The Company and its subsidiaries design, manufacture and market a broad
line of women's intimate apparel, such as bras, panties, sleepwear, shapewear
and daywear; men's apparel, such as sportswear, jeanswear, khakis, underwear and
accessories, women's and junior's apparel, such as sportswear and jeanswear and
active apparel, such as swimwear, swim accessories and fitness apparel all of
which are sold under a variety of internationally recognized owned and licensed
brand names. During fiscal 1999, the Company acquired Authentic Fitness
Corporation ("Authentic Fitness") which designs, manufactures and markets
swimwear, swim accessories and active fitness apparel under the Speedo'r',
Speedo Authentic Fitness'r', Catalina'r', Anne Cole'r', Cole of California'r',
Ralph Lauren'r', Polo Sport Ralph Lauren'r', Polo Sport-RLX'r', Oscar de la
Renta'r', Sunset Beach'r', and Sandcastle'r' brand names and activewear and
swimwear under the White Stag'r' brand name. In fiscal 1999, the Company also
acquired Penhaligon's Ltd., a United Kingdom based retailer of perfumes, soaps,
toiletries and other products for men and women; IZKA'r', a French retailer of
seam-free and seamless women's intimate apparel products; A.B.S. by Allen
Schwartz'r', a leading contemporary designer of casual sportswear and dress
lines, sold through better department and specialty stores and Chaps Canada, the
Canadian Chaps licensee for men's sportswear. In 1999, the Company also entered
into an exclusive license agreement with Weight Watchers International, Inc.,
("Weight Watchers") to market shapewear and activewear for the mass market under
the Weight Watchers'r' label, successfully launching its Shapewear line in June
1999. During fiscal 1998, the Company acquired the sub-license to produce Calvin
Klein'r' jeans and jeans-related products for children in the United States,
Mexico and Central and South America. The Company also acquired the sub-license
to distribute Calvin Klein jeans, jeans-related products and khakis for men and
women in Mexico, Central America and Canada. In addition, the Company
discontinued several underperforming product lines and styles. During fiscal
1997, the Company acquired Designer Holdings Ltd. ("Designer Holdings"), which
develops, manufactures and markets designer jeanswear and sportswear for men,
women and juniors, and holds a 40-year extendable license from Calvin Klein,
Inc. to develop, manufacture and market designer jeanswear, khakis 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.
The Company's growth strategy is to continue to capitalize on its highly
recognized brand names worldwide while broadening its channels of distribution
and improving manufacturing efficiencies and cost controls. The Company
attributes the strength of its brand names to the quality, fit and design of its
products which have developed a high degree of consumer loyalty and a high level
of repeat business. The Company operates in three business segments, Intimate
Apparel, Sportswear and Accessories and Retail Stores, which accounted
for 44.6%, 48.4% and 7.0%, respectively, of net revenues in fiscal 1999, and
47.4%, 46.7% and 5.9%, respectively, of the Company's gross profit for the same
period.
The Intimate Apparel Division designs, manufactures and markets moderate to
premium priced intimate apparel for women under the Warner's'r', Olga'r', Calvin
Klein'r', Lejaby'r', Van Raalte'r', Weight Watchers'r', Fruit of the Loom'r' and
Bodyslimmers'r' brand names. In addition, the Intimate Apparel Division designs,
manufactures and markets men's underwear under the Calvin Klein brand name. The
Intimate Apparel Division is the leading marketer of women's bras to department
and specialty stores in the United States, as measured by the NPD Group, Inc.
("NPD"), accounting for 39.0% of the women's bra
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market share in the 1999 calendar year, up 1.5% over 1998's 37.5%. The Warner's
and Olga brand names, which are owned by the Company, have been in business for
126 and 59 years, respectively. All of the Company's Intimate Apparel brands
are owned with the exception of Fruit of the Loom bras and Weight Watchers,
which are licensed.
The Intimate Apparel Division's strategy is to increase its channels of
distribution and expand its highly recognized brand names worldwide. In February
1996, the Company purchased the GJM Group of Companies ("GJM") from Cygne
Designs, Inc. GJM is a private label maker of sleepwear and intimate apparel.
The acquisition provided the Company with design, marketing and manufacturing
expertise in the sleepwear business, broadening the Company's product line and
contributing to the Company's base of low cost manufacturing capacity. In June
1996, the Company purchased Bodyslimmers which also increased the Company's
presence in a growing segment of the intimate apparel market. Bodyslimmers is
a leading designer and manufacturer of body slimming undergarments targeted at
aging baby boomers, In July 1996, the Company acquired the Lejaby/Euralis Group
of Companies ("Lejaby"). Lejaby is a leading maker of intimate apparel in
Europe. The Lejaby acquisition increased the size of the Company's operations
in Western Europe and provides the Company with an opportunity to expand the
distribution of its products in the critical European market.
In 1991, the Company entered into a license agreement with Fruit of the
Loom, Inc. for the design, manufacture and marketing of moderate priced bras,
daywear and other related items to be distributed through mass merchandisers,
such as Wal-Mart and KMart, under the Fruit of the Loom brand name and has
built its market share to 4.4% in the mass merchandise market as measured by
NPD. This license was renewed by the Company in 1994 and was further extended
and renewed in 1998. In late 1994, the Company purchased the Van Raalte
trademark for $1.0 million and launched an intimate apparel line through Sears
stores in July 1995. In fiscal 1999, the Company entered into the license
agreement with Weight Watchers to design, manufacture and market of shapewear
and activewear under the Weight Watchers brand name.
The Sportswear and Accessories Division designs, manufactures, imports and
markets moderate to premium priced men's apparel and accessories under the Chaps
by Ralph Lauren'r', Calvin Klein and Catalina brand names; better to premium
priced women's and junior's apparel under the Calvin Klein and A.B.S. by Allen
Schwartz'r' brand names; and moderate to better active apparel under the Speedo,
Speedo Authentic Fitness, Catalina, Anne Cole, Cole of California, Ralph Lauren,
Polo Sport Ralph Lauren, Polo Sport-RLX, Oscar de la Renta, Sunset Beach and
Sandcastle brand names. During fiscal 1999, the Company acquired Authentic
Fitness Corporation which designs, manufactures and markets swimwear, swim
accessories and active fitness apparel under the above listed brand names and
activewear and swimwear under the White Stag brand name. In fiscal 1999, the
Company also acquired A.B.S. by Allen Schwartz, a leading contemporary designer
of casual sportswear and dress lines, sold through better department and
specialty stores and Chaps Canada, the Canadian Chaps licensee for men's
sportswear. In December 1997, the Company completed the acquisition of Designer
Holdings which develops, manufactures and markets designer jeanswear and jeans
related sportswear for men, women and juniors under the Calvin Klein Jeans,
CK/Calvin Klein Jeans and CK/Calvin Klein/Khakis labels. The Calvin Klein Jeans,
CK/Calvin Klein Jeans and CK/Calvin Klein/Khakis brands complement the Company's
existing product lines, including Calvin Klein underwear for men and women and
Calvin Klein men's accessories. During fiscal 1998, the Company expanded the
Calvin Klein jeanswear business by acquiring 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 the sub-license
to distribute Calvin Klein jeans, jeans-related products and khakis for men and
women in Mexico, Central America and Canada. Chaps by Ralph Lauren has increased
its net revenues by approximately 700% since 1991 from $39.0 million to $317.4
million in 1999, predominantly by expanding product classifications and updating
its styles. In 1995, the Company extended its Chaps by Ralph Lauren license
through December 31, 2008. The Sportswear and Accessories Division's strategy is
to build on the
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strength of its brand names and eliminate those businesses which generate a
profit contribution below the Company's required return. Consistent with this
strategy, the Company has eliminated several underperforming brands since 1992,
including its Hathaway business, which was sold to a group of investors in
November 1996.
The Company has been expanding its brand names throughout the world by
increasing the activities of its wholly-owned operating subsidiaries in Canada,
Mexico, Europe and Asia. International operations generated $338.2 million, or
16% of the Company's net revenues in fiscal 1999, compared with $319.7 million,
or 16.4%, of the Company's net revenues in fiscal 1998, and $290.4 million, or
20.2%, of the Company's net revenues in fiscal 1997.
The Company's business strategy with respect to the outlet stores in its
Retail Stores Division is to provide a channel for disposing of the Company's
excess and irregular inventory. The Company does not manufacture or source
products exclusively for its outlet stores. The Company had 124 outlet stores
at the end of fiscal 1999 (including 9 stores in Canada, 12 stores in the
United Kingdom, one in France, and one in Spain) compared with 114 stores at
the end of fiscal 1998 and 106 stores at the end of fiscal 1997. During fiscal
1998, the Company announced plans to close 13 underperforming stores which
were all closed by the second quarter of 1999. In fiscal 1997, 35 stores were
added as a result of the acquisition of Designer Holdings. As a result of the
acquisition of Authentic Fitness in fiscal 1999, the Company operates 142
Speedo Authentic Fitness'r' stores. The Company's strategy for its full-price
Speedo Authentic Fitness stores is to offer a complete line of Speedo and
Speedo Authentic Fitness products that sell throughout the year.
The Company continues to expand its channels of distribution to include
electronic channels of distribution and is planning to commence marketing of its
products on the Internet in fiscal 2000. To facilitate this opportunity, the
Company in fiscal 1998 and fiscal 1999 invested $7.7 million to acquire a 3%
equity interest in Interworld Corporation, a leading provider of E-Commerce
software systems and other applications for electronic commerce sites. This
investment was sold during the first quarter of fiscal 2000 for approximately
$50.4 million, realizing a $42.7 million gain.
The Company's products are distributed to over 16,000 customers operating
more than 26,000 department, specialty and mass merchandise stores, including
such leading retailers in the United States as Dayton-Hudson, Macy's and other
units of Federated Department Stores, J.C. Penney, The May Department Stores,
Kohl's, Dillards, Sears, Kmart and Wal-Mart and such leading retailers in Canada
as The Hudson Bay Company and Zeller's. The Company's products are also
distributed to such leading European retailers as House of Fraser, Harrods,
Galeries Lafayette, Au Printemps, Karstadt, Kaufhof and El Corte Ingles.
(b) Financial Information about Industry Segments.
The Company operates within three business segments. One customer
accounted for 10.2% of the Company's net revenues in the three years ended in
fiscal 1999. See Note 6 to the Consolidated Financial Statements.
(c) Narrative Description of Business.
The Company designs, manufactures and markets a broad line of women's
intimate apparel, and men's apparel and accessories sold under a variety of
internationally recognized brand names owned or licensed by the Company. The
Company operates three divisions, Intimate Apparel, Sportswear and Accessories
and Retail Stores, which accounted for 44.6%, 48.4% and 7.0% respectively, of
net revenues in fiscal 1999.
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Intimate Apparel
The Company's Intimate Apparel Division designs, manufactures and markets
women's intimate apparel, which includes bras, panties, sleepwear, shapewear and
daywear. The Company also designs and markets men's underwear. The Company's bra
brands accounted for 39.0% of women's bra market share in the 1999 calendar year
in department and specialty stores in the United States, up 1.5% over 1998's
37.5% as measured by NPD. Management considers the Intimate Apparel Division's
primary strengths to include its strong brand recognition, product quality and
design innovation, low cost production, strong relationships with department and
specialty stores and its ability to deliver its merchandise rapidly. Building
on the strength of its brand names and reputation for quality, the Company has
historically focused its intimate apparel products on the upper moderate to
premium priced range distributed through leading department and specialty
stores.
The intimate apparel division markets its lines under the following brand
names:
<TABLE>
<CAPTION>
Brand Name Price Range Type of Apparel
---------- ----------- ---------------
<S> <C> <C>
Lejaby better to premium intimate apparel
Bodyslimmers better to premium intimate apparel
Calvin Klein better to premium intimate apparel/men's underwear
Olga better intimate apparel
Warner's upper moderate to better intimate apparel
White Stag moderate intimate apparel
Van Raalte moderate intimate apparel
Fruit of the Loom moderate intimate apparel
Weight Watchers moderate intimate apparel
</TABLE>
The Company owns the Warner's, Olga, Calvin Klein (underwear and intimate
apparel), Lejaby, Bodyslimmers and Van Raalte brand names and trademarks which
account for approximately 84% of the Company's Intimate Apparel net revenues.
The Company licenses the other brand names under which it markets its product
lines, primarily on an exclusive basis. The Company also manufactures intimate
apparel on a private and exclusive label basis for certain leading specialty and
department stores. The Warner's and Olga brands have been in business for 126
years and 59 years, respectively.
In August 1991, the Company entered into an exclusive license agreement
with Fruit of the Loom, Inc. ("Fruit of the Loom") for the design, manufacture
and marketing of moderate priced bras which are distributed through mass
merchandisers, such as Wal-Mart and Kmart, under the Fruit of the Loom brand
name. The license agreement has since been extended to include bodywear,
coordinating panties, fashion sleepwear, as well as coordinated fashion sets
(bras and panties) and certain control bottoms. The Company began shipping Fruit
of the Loom products in June 1992 and has built its current market share to 4.4%
as measured by NPD in the mass merchandise market. The agreement with Fruit of
the Loom has allowed the Company to enter the mass merchandise market, which is
growing at a rate faster than the department and specialty store market.
In March 1994, the Company acquired the worldwide trademarks, rights and
business of Calvin Klein men's underwear, and effective January 1, 1995, the
worldwide trademark, rights and business of Calvin Klein women's intimate
apparel. The purchase price was approximately $60.9 million and consisted of
cash payments of $33.1 million in fiscal 1994, $5.0 million in fiscal 1995 and
the issuance of 1,699,492 shares of the Company's common stock with a then fair
market value of $22.8 million for such shares. Since that time, the Company has
acquired the business of several former international licensees and distributors
of Calvin Klein underwear products including those in Canada, Germany, Italy,
Portugal,
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Scandinavia and Spain. In addition, the Company entered into an exclusive
worldwide license agreement to produce men's accessories and small leather goods
under the Calvin Klein label. The Calvin Klein underwear brand accounted for net
revenues of $331.1 million in fiscal 1999, an increase of 7.3% over the $308.7
million recorded in fiscal 1998, due to higher men's sales in the U.S. market.
In fiscal 1996, the Company acquired GJM, a private label maker of
sleepwear and intimate apparel. The acquisition provided the Company with
design, marketing and manufacturing expertise in the sleepwear business,
broadening the Company's product line and contributing to the Company's base of
low cost manufacturing capacity. In June 1996, the Company purchased
Bodyslimmers, a leading designer and manufacturer of body slimming undergarments
targeted at aging baby boomers. The purchase of Bodyslimmers increased the
Company's presence in a growing segment of the intimate apparel market. In July
1996, the Company acquired Lejaby. Lejaby is a leading maker of intimate apparel
in Europe. The Lejaby acquisition increased the size of the Company's operations
in Western Europe and provides the Company with an opportunity to expand the
distribution of its products, including Calvin Klein, in the critical
European market. These three divisions contributed $196.3 million in net
revenues for fiscal 1999, or 20.8% of the Company's Intimate Apparel net
revenues, compared to $170.3 million or 18.0% of the Company's Intimate Apparel
net revenue in fiscal 1998. In fiscal 1999, the Company entered into the Weight
Watchers license agreement.
The Company attributes the strength of its brands to the quality, fit and
design of its intimate apparel, which has developed a high degree of customer
loyalty and a high level of repeat business. The Company believes that it has
maintained its leadership position, in part, through product innovation with
accomplishments such as introducing the alphabet bra (A, B, C and D cup sizes),
the first all-stretch bra, the body stocking, the use of two way stretch
fabrics, seamless molded cups for smooth look bras, the cotton-Lycra bra
and the sports bra. The Company also introduced the use of hangers and
certain point-of-sale hang tags for in-store display of bras, which was
a significant change from marketing bras in boxes, and enabled women, for
the first time, to see the product in the store. The Company's product
innovations have become standards in the industry.
The Company believes that a shift in consumer attitudes is stimulating
growth in the intimate apparel industry. Women increasingly view intimate
apparel as a fashion-oriented purchase rather than as a purchase of a basic
necessity. The shift has been driven by the expansion of intimate apparel
specialty stores and catalogs, and an increase in space allocated to intimate
apparel by department stores. The Company believes that it is well-positioned to
benefit from increased demand for intimate apparel due to its reputation for
forward-looking design, quality, fit and fashion and to the breadth of its
product lines at a range of price points. Over the past five years, the Company
has further improved its position by continuing to introduce new products under
its Warner's and Olga brands in the better end of the market, by obtaining the
license from Weight Watchers to produce shapewear and activewear, by acquiring
the Calvin Klein trademarks for premium priced women's intimate apparel and
better priced men's underwear, by purchasing the Van Raalte trademark for
introduction of an intimate apparel line through Sears stores in July 1995, and
by making strategic acquisitions to expand product lines and distribution
channels such as GJM, Lejaby and Bodyslimmers in 1996. The Company has further
improved its position by continuing to strengthen its relationships with its
department store, specialty store and mass merchandise customers.
The Intimate Apparel Division's net revenues have increased at a compound
annual growth rate of 13.6% since 1991, to $943.4 million in fiscal 1999, as the
Company has increased its penetration with existing accounts, expanded sales to
new customers such as Van Raalte to Sears and Fruit of the Loom and Weight
Watchers to mass merchandisers such as Wal-Mart and Kmart and broadened its
product lines to include men's underwear. The Company believes that it is one of
the lowest-cost producers of intimate apparel in the United States, producing
approximately eight million dozen intimate apparel products per year.
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The Company also sees opportunities for continued growth in the Intimate
Apparel Division for bras specifically designed for the "full figure" market, as
well as in its panty and daywear product lines. To meet the needs of the
customer profile of this market acquired Bodyslimmers in June 1996 to provide
important brand name recognition in this growing segment of the intimate apparel
market for department and specialty stores and entered into the license
agreement with Weight Watchers to market shapewear for the mass market,
and in June 1999 began shipping product.
The Intimate Apparel Division has subsidiaries in Canada and Mexico in
North America, in the United Kingdom, France, Belgium, Ireland, Spain, Italy,
Austria, Switzerland and Germany in Europe, in Costa Rica, the Dominican
Republic and Honduras in Central America and in the Philippines, Sri Lanka, the
People's Republic of China, Japan and Hong Kong in Asia. International sales
accounted for approximately 28.7% of the Intimate Apparel Division's net
revenues in fiscal 1999 compared with 31.1% in fiscal 1998 and 30.1% in fiscal
1997. The decrease in International revenues in fiscal 1999 is primarily due to
the Company's decision to discontinue business with Marks & Spencer in the
U.K. market, and the full year effect of lower shipment levels for Calvin Klein
products in Russia and the Far East due to currency devaluation and economic
downturns. The increase in International revenues in fiscal 1998 is due to
higher Lejaby and Bodyslimmers revenues partially offset by lower shipment
levels for Calvin Klein products in Russia and the Far East. The Company has
acquired the businesses of several former distributors and licensees of its
Calvin Klein underwear products in previous years, including those in Canada,
Germany, Italy, Portugal, Scandinavia and Spain. The Company's objective in
acquiring its former licensees and distributors is to expand its business in
foreign markets through a coordinated set of product offerings, marketing and
pricing strategies and by consolidating distribution to obtain economies of
scale. Net revenues attributable to the international divisions of the Intimate
Apparel Division were $270.9 million, $293.4 million and $282.9 million in
fiscal 1999, 1998 and 1997, respectively. Management's strategy is to increase
its market penetration in Europe and to open additional channels of
distribution.
The Company's intimate apparel products are manufactured principally in
the Company's facilities in North America, Central America, the Caribbean Basin,
the United Kingdom, France, Ireland, Morocco (joint venture), the Philippines,
Sri Lanka and the People's Republic of China (joint venture). Over the last six
years, the Company has opened or expanded 12 manufacturing facilities. A new
cutting facility and distribution facility in Mexico will be opened in fiscal
2000. In connection with the start-up of these facilities, the Company incurred
substantial direct and incremental plant start-up costs to recruit and train
over 39,000 workers.
Although the Intimate Apparel Division generally markets its product lines
for three retail selling seasons (spring, fall and holiday), its revenues are
somewhat seasonal. Approximately 54% of the Intimate Apparel Division's net
revenues and 47% of the division's operating income were generated during the
second half of the 1999 fiscal year.
Sportswear and Accessories
The Sportswear and Accessories Division designs, manufactures, imports and
markets moderate to better priced men's and boy's jeanswear, khakis and
sportswear, better to premium priced men's accessories, moderate to better
priced dress shirts and neckwear, better to premium priced women's and junior's
sportswear and jeanswear and moderate to better active apparel. Management
considers the Sportswear and Accessories Division's primary strengths to
include its strong brand recognition, product quality, reputation for fashion
styling, strong relationships with department and specialty stores and its
ability to deliver merchandise rapidly.
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The Sportswear and Accessories Division markets its lines under the
following brand names:
<TABLE>
<CAPTION>
Brand Name Price Range Type of Apparel
---------- ----------- ---------------
<S> <C> <C>
Calvin Klein better/premium Men's, women's, juniors and children's
designer jeanswear, khakis and jeans related
sportswear and men's accessories
A.B.S by Allen Schwartz better/premium Women's and junior's casual sportswear and
dresses
Ralph Lauren better/premium Women's and girls swimwear
Polo Sport Ralph Lauren better/premium Women's and girls swimwear
Polo Sport-RLX better/premium Women's and girls swimwear
Oscar de la Renta better/premium Women's swimwear
Anne Cole better/premium Women's swimwear
Speedo better Men's and women's competitive swimwear and
swim accessories, men's swimwear and
coordinating T-shirts, women's fitness
swimwear, Speedo Authentic Fitness
activewear and children's swimwear
Cole of California upper moderate/better Women's swimwear
Sandcastle upper moderate/better Women's swimwear
Sunset Beach upper moderate/better Junior's swimwear
Chaps by Ralph Lauren upper moderate Dress shirts, neckwear, knit and woven
sport shirts, sweaters, sportswear and
bottoms
Catalina moderate Men's and women's sportswear
Women's swimwear
White Stag moderate Women's swimwear and activewear
</TABLE>
The Calvin Klein, Chaps by Ralph Lauren, Speedo, Oscar de la Renta,
Anne Cole, Ralph Lauren, Polo Sport Ralph Lauren and Polo Sport-RLX brand
names are licensed on an exclusive basis by the Company.
The Sportswear and Accessories Division's strategy is to build on the
strength of its brand names, strengthen its position as a global apparel company
and eliminate those businesses which generate a profit contribution below the
Company's required return. In order to improve profitability, the Company (i)
sold its Hathaway dress shirt business in November 1996, (ii) acquired Designer
Holdings during the fourth quarter of 1997, (iii) acquired 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 June 1998, (iv) acquired the
sub-license to distribute Calvin Klein jeans, jeans-related products and khakis
for men and women in Mexico, Central America and Canada in June 1998, (v)
acquired A.B.S by Allen Schwartz during the third quarter of fiscal 1999, (vi)
acquired the licensee for Chaps Canada in the second quarter of fiscal 1999, and
(vii) acquired Authentic Fitness during the fourth quarter of fiscal 1999. The
Company recorded losses associated with exiting the Hathaway business of
approximately $47.4 million in 1996 and $14.5 million in fiscal 1997, consisting
of losses related to the write-down of the Hathaway assets, including intangible
assets and operating losses incurred prior to the disposition. The acquisition
of Designer Holdings contributed $634.1 million and $537.8 million to net
revenues in fiscal 1999 and 1998, respectively.
Despite its strategic decisions to discontinue underperforming brands
which account for approximately $140.0 million of annualized net revenues since
1991, the Sportswear and Accessories Division's net revenues have increased at a
compound annual growth rate of 24.2% since 1991 to
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$1,022.8 million in fiscal 1999. The reduction in net revenues from discontinued
brands has been more than offset by the success of the Chaps by Ralph Lauren
brand which has increased its net revenues by approximately 700% since fiscal
1991 to $317.4 million in fiscal 1999, and the addition of the Calvin Klein
jeanswear and jeans related sportswear brands in 1997 and 1998.
Sportswear. In 1989, the Company began repositioning its Chaps by Ralph
Lauren product lines by updating its styling, which has generated significant
net revenue increases, as mentioned above. In 1993, the Company entered into a
license agreement to design men's and women's sportswear and men's dress shirts
and furnishings bearing the Catalina trademark. Catalina products are sold
through the mass merchandise segment of the market, generating royalty income of
approximately $4.4 million and $4.9 million in fiscal 1999 and 1998,
respectively. In 1997, the Company acquired Designer Holdings Ltd., which
develops, manufactures and markets Calvin Klein designer jeanswear and
sportswear for men, women and juniors in North, South and Central America.
During 1998, the Company expanded upon the Calvin Klein jeanswear business by
acquiring sub-licenses to distribute Calvin Klein jeans and jeans-related
products for children in the United States, Mexico and Central and South America
and Calvin Klein jeans, jeans-related products and khakis for men and women in
Mexico, Central America and Canada.
In 1999, the Company acquired Authentic Fitness which designs,
manufacturers and markets swimwear, swim accessories and active fitness apparel
for men, women and children in North America under the Speedo brand and
worldwide under all of its other brands. In addition, the Company also acquired
A.B.S. by Allen Schwartz which designs, manufactures and markets women's and
junior's casual sportswear and dresses and Chaps Canada which imports and
markets men's sportswear for the Canadian market under the Chaps by Ralph Lauren
brand name.
Accessories. The Sportswear and Accessories Division markets men's small
leather goods and belts and soft side luggage under the Calvin Klein brand name
pursuant to a worldwide license. The first shipments of Calvin Klein accessories
were made in the third quarter of fiscal 1995 to United States customers. The
line has already grown significantly, accounting for approximately $22.3 million
and $19.3 million of net revenues in fiscal 1999 and 1998, respectively.
Management believes that one of the strengths of its accessories lines is the
high level of international consumer recognition associated with the Calvin
Klein label. The Company's strategy is to expand the accessories business, which
has consistently generated higher margins than other sportswear products.
International sales accounted for approximately 4.3% of net revenues of
the Sportswear and Accessories Division in fiscal 1999, compared with 1.6% and
1.0% in fiscal 1998 and 1997, respectively. Net revenues attributable to
international operations of the Sportswear and Accessories Division were $44.4
million, $14.0 million and $4.1 million in fiscal 1999, 1998 and 1997,
respectively. The increase in international sales in fiscal 1999 and 1998
reflects the continued expansion of Calvin Klein Accessories as well as the
acquisition of Calvin Klein Jeans in Mexico. The Company expects to generate
future revenue from international sales of basic Calvin Klein jeanswear,
khakis, jeans related sportswear and accessories.
Sportswear apparel (knit shirts, sweaters and other apparel) is sourced
principally from the Far East. Dress shirts are sourced from the Far East and
the Caribbean Basin. Accessories are sourced from the United States, Europe and
the Far East. Neckwear is sourced primarily from the United States.
The Sportswear and Accessories Division, similar to the Intimate Apparel
Division, generally markets its apparel products for three retail selling
seasons (spring, fall and holiday). New styles, fabrics and colors are
introduced based upon consumer preferences, market trends and to coincide with
the appropriate retail selling season. Sales of the Sportswear and Accessories
Division's product lines follow individual seasonal shipping patterns ranging
from one season to three seasons, with multiple releases in some of the
division's more fashion-oriented lines. Consistent with industry and consumer
buying
9
<PAGE>
patterns, approximately 57.0% of the Sportswear and Accessories Division's net
revenues and 56% of the Sportswear and Accessories Division's operating income
were generated in the second half of 1999, reflecting the strength of the fall
and holiday shopping seasons.
Retail Stores Division
The Retail Stores Division is comprised of both outlet stores as well as
full-price retail stores, selling the Company's products to the general public.
The Company's business strategy with respect to its outlet stores is to
provide a channel for disposing of the Company's excess and irregular inventory.
The Company does not manufacture or source products exclusively for the retail
outlet stores. The Company's outlet stores are situated in areas where
they generally do not conflict with the Company's principal channels of
distribution. As of January 1, 2000, the Company operated 124 outlet stores,
101 in the U.S., 9 in Canada, 12 in the United Kingdom, 1 in France and 1 in
Spain. In addition, the Company operates Speedo Authentic Fitness full-price
retail stores designed to appeal to participants in water and land based fitness
activities, and to offer a complete line of Speedo and Speedo Authentic
Fitness products that sell throughout the year. As of January 1, 2000, the
Company operated 142 full-price retail stores, 139 in the U.S. and 3 in
Canada.
In fiscal 1999, the Company acquired Penhaligon's Ltd., a United Kingdom
based retailer of perfumes, soaps, toiletries and other products for men and
women and also acquired IZKA, a French retailer of seam-free and seamless
intimate apparel products.
International Operations
The Company has subsidiaries in Canada and Mexico in North America and in
the United Kingdom, France, Belgium, Ireland, Spain, Italy, Austria,
Switzerland, the Netherlands and Germany in Europe and Hong Kong and Japan in
Asia, which engage in sales, manufacturing and marketing activities. The results
of the Company's operations in these countries are influenced by the movement of
foreign currency exchange rates. With the exception of the fluctuation in the
rates of exchange of the local currencies in which these subsidiaries conduct
their business, the Company does not believe that the operations in Canada and
Western Europe are subject to risks which are significantly different from those
of the domestic operations. Mexico has historically been subject to high rates
of inflation and currency restrictions which may, from time to time, impact the
Mexican operation. The Company also sells directly to customers in Mexico. Net
revenues from these shipments represent approximately 1.7% of the Company's net
revenues.
The Company maintains manufacturing facilities in Mexico, Honduras, Costa
Rica, the Dominican Republic, Canada, Ireland, the United Kingdom, France,
Morocco (joint venture), Sri Lanka, the People's Republic of China (joint
venture) and the Philippines. The Company maintains warehousing facilities in
Canada, Mexico, the United Kingdom, Spain, Belgium, Italy, Austria, Switzerland,
France and Germany and contracts for warehousing in the Netherlands. The
Intimate Apparel Division operates manufacturing facilities in Mexico and in the
Caribbean Basin pursuant to duty-advantaged (commonly referred to as "Item 807")
programs. Over the last six years, the Company has opened or expanded 12
manufacturing facilities. A new cutting facility and distribution facility in
Mexico will be opened in fiscal 2000. The Company's policy is to have many
potential sources of manufacturing so that a disruption at any one facility
will not significantly impact the Company.
The majority of the Company's purchases which are imported into the United
States are invoiced in United States dollars and, therefore, are not subject to
currency fluctuations. The majority of the transactions denominated in foreign
currencies are denominated in the Hong Kong dollar, which currently is pegged to
the United States dollar and therefore does not create any currency risk.
10
<PAGE>
Sales and Marketing
The Intimate Apparel and Sportswear and Accessories Divisions sell to over
16,000 customers operating more than 26,000 department, mass merchandise and
men's and women's specialty store doors throughout North America and Europe.
The Company's retail customers are served by approximately 300 sales
representatives. The Company also employs marketing coordinators who work with
the Company's customers in designing in-store displays and planning the
placement of merchandise. The Company has implemented Electronic Data
Interchange ("EDI") programs with most of its retailing customers which permit
the Company to receive purchase orders electronically and, in some cases, to
transmit invoices electronically. These innovations assist the Company in
providing products to customers on a timely basis.
The Company utilizes various forms of advertising media. In fiscal 1999,
the Company spent approximately $118.0 million, or 5.6% of net revenues, for
advertising and promotion of its various product lines, compared with $102.6
million, or 5.3% of net revenues in fiscal 1998, and $86.2 million or 6.0% of
net revenues in fiscal 1997. The increase in advertising costs in fiscal 1999
compared with fiscal 1998 reflects the Company's desire to maintain its strong
market position in Calvin Klein underwear, jeanswear and accessories, Chaps by
Ralph Lauren sportswear and Warner's, Olga, and Fruit of the Loom intimate
apparel. The Company participates in advertising on a cooperative basis with
retailers, principally through newspaper advertisements.
Competition
The apparel industry is highly competitive. The Company's competitors
include apparel manufacturers of all sizes, some of which have greater resources
than the Company.
The Company also competes with foreign producers, but to date, such
foreign competition has not materially affected the Intimate Apparel or
Sportswear and Accessories Divisions. In addition to competition from other
branded apparel manufacturers, the Company competes in certain product lines
with department store private label programs. The Company believes that its
manufacturing skills, coupled with its existing Central American and Caribbean
Basin manufacturing facilities and selective use of off-shore sourcing, enable
the Company to maintain a cost structure competitive with other major apparel
manufacturers.
The Company believes that it has a significant competitive advantage
because of high consumer recognition and acceptance of its owned and licensed
brand names and its strong presence and market share in the major department,
specialty and mass merchandise store chains.
A substantial portion of the Company's sales are of products, such as
intimate apparel and men's underwear, that are basic and not very susceptible to
rapid design changes. This relatively stable base of business is a significant
contributing factor to the Company's favorable competitive and cost position in
the apparel industry.
11
<PAGE>
Raw Materials
The Company's raw materials are principally cotton, wool, silk, synthetic
and cotton-synthetic blends of fabrics and yarns. Raw materials used by the
Intimate Apparel and Sportswear and Accessories Division are available from
multiple sources.
Import Quotas
Substantially all of the Company's Sportswear and Accessories Division's
sportswear products, as well as Calvin Klein men's and women's underwear, are
manufactured by contractors located outside the United States. These products
are imported and are subject to federal customs laws, which impose tariffs as
well as import quota restrictions established by the Department of Commerce.
While importation of goods from certain countries may be subject to embargo by
United States Customs authorities if shipments exceed quota limits, the Company
closely monitors import quotas through its Washington, D.C. office and can, in
most cases, shift production to contractors located in countries with available
quotas or to domestic manufacturing facilities. The existence of import quotas
has, therefore, not had a material effect on the Company's business.
Substantially all of the Company's Intimate Apparel Division's products, with
the exception of Calvin Klein men's and women's underwear, are manufactured in
the Company's facilities located in Mexico, the Caribbean Basin, Europe and
Asia. The Company's policy is to have many potential manufacturing sources so
that a disruption at any one facility will not significantly impact the Company.
Employees
As of January 1, 2000, the Company and its subsidiaries employ 23,039
employees. Approximately 25.5% of the Company's employees, all of whom are
engaged in the manufacture and distribution of its products, are represented
by labor unions. The Company considers labor relations with employees to be
satisfactory and has not experienced any significant interruption of its
operations due to labor disagreements.
Trademarks and Licensing Agreements
The Company has license agreements permitting it to manufacture and market
specific products using the trademarks of others. The Company's exclusive
license and design agreements for the Chaps by Ralph Lauren trademark expire on
December 31, 2008. These licenses grant the Company an exclusive right to use
the Chaps by Ralph Lauren trademark in the United States, Canada and Mexico. The
Company's license to develop, manufacture and market designer jeanswear and
jeans related sportswear under the Calvin Klein trademark in North, South and
Central America extends for an initial term expiring on December 31, 2034 and is
extendable at the Company's option for a further 10 year term expiring on
December 31, 2044. The Company has an exclusive license agreement to use the
Fruit of the Loom trademark in the United States of America, its territories and
possessions, Canada and Mexico through December 31, 2004, subject to the
Company's compliance with certain terms and conditions. The Company also has the
right of first opportunity and negotiation with respect to other products and
territories. The Company's exclusive worldwide license agreement with Calvin
Klein, Inc. to produce Calvin Klein men's accessories expires June 30, 2004.
The Company has license agreements in perpetuity with Speedo
International, Ltd. which permit the Company to design, manufacture and market
certain men's, women's and children's apparel including swimwear, sportswear and
a wide variety of other products using the Speedo trademark and certain
12
<PAGE>
other trademarks including Speedo, Surf Walker, and Speedo Authentic
Fitness. The Company's license to use the Speedo'r' trademark and such other
trademarks was granted in perpetuity subject to certain conditions and is
exclusive in the United States, it territories and possessions, Canada, Mexico
and the Caribbean Islands. Speedo International, Ltd. retains the right to use
or license such brand names in other jurisdictions and actively uses or licenses
such brand names throughout the world outside of the Company's licensed areas.
The agreements provide for minimum royalty payments to be credited against
future royalty payments based on a percentage of net sales. The license
agreements may be terminated, with respect to a particular territory only in
the event the Company does not pay royalties, or abandons, the trademark in such
territory. Also, the license agreements may be terminated in the event the
Company manufactures or is controlled by a company that manufactures
racing/competitive swimwear, swimwear caps or swimwear accessories, under a
different trademark, as specifically defined in the license agreements. In
addition, the Company has certain rights to sublicense the Speedo trademark
within the geographic regions covered by the licenses.
In 1992, the Company entered into an agreement with Speedo Holdings B.V.,
and its successor Speedo International, Ltd. granting certain irrevocable rights
to the Company relating to the use of the Authentic Fitness name and service
mark, which rights are in addition to the rights under the license agreements
with Speedo International, Ltd.
In October 1993, the Company entered into a worldwide license agreement
with Anne Cole and Anne Cole Design Studio Ltd. Under the worldwide licensing
agreement, the Company obtained the exclusive right in perpetuity to use the
Anne Cole trademark for women's swimwear, activewear, beachwear and
children's swimwear, subject to certain terms and conditions. Under the license,
the licensee is required to pay certain minimum guaranteed annual royalties, to
be credited against earned royalties, based on a percentage of net sales. The
licensor has the right to approve products bearing the licensed trademark as
defined in the agreement.
In 1993, the Company entered into a worldwide license agreement with Oscar
de la Renta Licensing Corporation for the design, manufacture and marketing of
women's and girls' swimwear and activewear under the Oscar de la Renta brand
name. The agreement granting the exclusive right to use the Oscar de la Renta
trademark is valid for a term up to and including March 31, 2001 and provides
for the payment of certain minimum royalty payments to be credited against
earned royalty payments for each agreement year.
On February 1, 1998, the Company entered into an exclusive worldwide
license agreement with The Polo/Lauren Company, L.P. and PRL USA, Inc. and a
design services agreement with Polo/Ralph Lauren Corporation for Ralph Lauren,
Polo Sport Ralph Lauren and Polo Sport-RLX brand swimwear for women and
girls. Under the license, the Company produces and markets swimsuits, bathing
suits and coordinating cover-ups, tops and bottoms for women and girls. First
shipments under this license agreement occurred in January 1999.
In fiscal 1999, the Company entered into an exclusive licensing agreement
for an initial term of 5 years, extendable for a further term of 5 years through
July 2009 with Weight Watchers International, Inc., to manufacture and market
shapewear and activewear for the mass market in the United States and Canada.
The Company also has the right of first opportunity and negotiation with respect
to other products and territories.
Although the specific terms of each of the Company's license agreements
vary, generally such agreements provide for minimum royalty payments and/or
royalty payments based on a percentage of net sales. Such license agreements
also generally grant the licensor the right to approve any designs marketed by
the licensee.
13
<PAGE>
The Company owns other trademarks, the most important of which are
Warner's, Olga, Calvin Klein men's underwear and sleepwear, Calvin Klein women's
intimate apparel and sleepwear, Van Raalte, Lejaby, Rasurel'r', and
Bodyslimmers, Penhaligon's, White Stag, Catalina, A.B.S by Allen Schwartz,
Sunset Beach, Sandcastle and Cole of California..
The Company sub-licenses the White Stag and Catalina brand names to
domestic and international licensees for a variety of products. These agreements
generally require the licensee to pay royalties and fees to the Company based on
a percentage of the licensee's net sales. The Company regularly monitors product
design, development, quality, merchandising and marketing and schedules meetings
throughout the year with third-party licensees to assure compliance with the
Company's overall marketing, merchandising and design strategies, and to ensure
uniformity and quality control. The Company, on an ongoing basis, evaluates
entering into distribution or license agreements with other companies that would
permit such companies to market products under the Company's trademarks.
Generally, in evaluating a potential distributor or licensee, the Company
considers the experience, financial stability, manufacturing performance and
marketing ability of the proposed licensee. Royalty income derived from
licensing was approximately $17.7 million, $21.2 million and $12.2 million in
fiscal 1999, 1998 and 1997, respectively.
The Company believes that only the trademarks mentioned herein are
material to the business of the Company.
Backlog
A substantial portion of net revenues is based on orders for immediate
delivery and, therefore, backlog is not necessarily indicative of future net
revenues.
14
<PAGE>
(d) Financial Information About Foreign and Domestic Operations and Export
Sales.
The information required by this portion of Item 1 is incorporated herein
by reference to Note 6 to the Consolidated Financial Statements on pages F-1 to
F-34.
Item 2. Properties.
The principal executive offices of the Company are located at 90 Park
Avenue, New York, New York 10016 and are occupied pursuant to a lease that
expires in 2004. In addition to its executive offices, the Company leases
offices in Connecticut, California, Washington, D.C. and New York, pursuant
to leases that expire between 2000 and 2008.
The Company has twenty-four domestic manufacturing and warehouse
facilities located in Alabama, California, Connecticut, Georgia, Nevada, New
Jersey, Pennsylvania, South Carolina and Tennessee, and 48 international
manufacturing and warehouse facilities located in Austria, Belgium, Canada,
Costa Rica, the Dominican Republic, France, Germany, Holland, Honduras, Ireland,
Italy, Mexico, Morocco (joint-venture), People's Republic of China (joint
venture), the Philippines, Spain, Sri Lanka, Switzerland, and the United
Kingdom. Certain of the Company's manufacturing and warehouse facilities are
also used for administrative and retail functions. The Company owns six of its
domestic and six of its international facilities. The balance of the facilities
are leased. Lease terms, except for month-to-month leases, expire between 2000
and 2020. No material facility is underutilized.
The Company leases sales offices in a number of major cities, including
Atlanta, Dallas, Los Angeles and New York in the United States; Brussels,
Belgium; Toronto, Canada; Paris, France; Dusseldorf and Frankfurt, Germany; Hong
Kong; Milan, Italy; and Lausanne, Switzerland. The sales office leases expire
between 2000 and 2008 and are generally renewable at the Company's option. The
Company also occupies offices in London, England subject to a freehold lease
which expires in 2114. The Company leases 124 outlet store locations and
142 Speedo Authentic Fitness retail stores sites. Outlet store and retail store
leases, except for two month-to-month leases, expire between 2000 and 2008 and
are generally renewable at the Company's option.
All of the Company's production and warehouse facilities are located in
appropriately designed buildings, which are kept in good repair. All such
facilities have well maintained equipment and sufficient capacity to handle
present volumes.
Item 3. Legal Proceedings.
Between October 12, and October 13, 1999, six putative class action
complaints were filed in Delaware Chancery Court against the Company, Authentic
Fitness Corporation and certain of their officers and directors in connection
with the Company's proposed acquisition of Authentic Fitness.
On December 20, 1999, an Amended Class Action Complaint ("Amended Complaint")
was filed and on January 6, 2000 the court designated the Amended Complaint
as the operative complaint for a consolidated action captioned: In Re
Authentic Fitness Corporation Shareholders Litigation, C.A. No. 17464-NC
(consolidated). In the Amended Complaint (and all six complaints made virtually
identical claims), plaintiffs allege an unlawful scheme by certain of the
defendants, in breach of their fiduciary duties, to allow the Company to
acquire Authentic Fitness shares for inadequate consideration. Plantiffs are
seeking to have the court declare the action a proper class action, to
declare that the defendants have breached their fiduciary duties to the class,
and in the event the transaction is consummated, recission thereof and damages
awarded to the Class. The Company believes the claims to be without merit and
intends to vigorously defend these actions.
The Company is not a party to any other litigation, other than routine
litigation incidental to the business of the Company, that individually or
in the aggregate is material to the business of the Company.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
15
<PAGE>
Executive Officers of the Company
The executive officers of the Company, their age and their position are
set forth below.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
Linda J. Wachner 54 Director, Chairman of the Board,
President and Chief Executive
Officer
William S. Finkelstein 51 Director, Senior Vice President
and Chief Financial Officer
Philippe de La Chapelle 58 Senior Vice President - Legal
and Human Resources
Lawrence E. Kreider, Jr. 52 Senior Vice President - Finance
Stanley P. Silverstein 47 Vice President, General Counsel
and Secretary
Carl J. Deddens 47 Vice President and Treasurer
</TABLE>
Mrs. Wachner has been a Director, President and Chief Executive Officer of
the Company since August 1987, and the Chairman of the Board since August 1991.
Mrs. Wachner was a Director and President of the Company from March 1986 to
August 1987. Mrs. Wachner held various positions, including President and Chief
Executive Officer, with Max Factor and Company from December 1978 to October
1984. Mrs. Wachner also serves as a Director of Applied Graphics Technologies,
Inc. and The New York Stock Exchange.
Mr. Finkelstein has been Senior Vice President of the Company since May
1992 and Chief Financial Officer and Director of the Company since May 1995. Mr.
Finkelstein served as Vice President and Controller of the Company from November
1988 until his appointment as Senior Vice President. Mr. Finkelstein served as
Vice President of Finance of the Company's Activewear and Olga Divisions from
March 1988 until his appointment as Controller of the Company. Mr. Finkelstein
served as Vice President and Controller of SPI Pharmaceuticals Inc. from
February 1986 to March 1988 and held various financial positions, including
Assistant Corporate Controller with Max Factor and Company, between 1977 and
1985.
Mr. de La Chapelle has been Senior Vice President Legal-Human Resources
since February 2000. Prior to joining the Company, from 1966 to 1985 Mr. de La
Chapelle served as international counsel for W.R. Grace & Co., Assistant General
Counsel for Norton Simon Inc., Senior Vice President and General Counsel for
MasterCard Inc. and Senior Executive--International for Warner Communications
Inc. From 1985 to February 2000 Mr. de La Chapelle was affiliated with various
private investment banking firms.
Mr. Kreider has been Senior Vice President, Finance of the Company since
July, 1999. Prior to joining the Company, Mr. Kreider served as Senior Vice
President, Controller and Chief Accounting Officer of Revlon Inc. since 1994 and
was Vice President and Controller of Revlon, Inc. since 1992. Mr. Kreider served
as Vice President and held various other financial positions with MacAndrews &
Forbes from 1988 through 1992, including Controller of MacAndrews & Forbes from
1987 to 1998.
Mr. Silverstein has been Vice President, General Counsel and Secretary of
the Company since December 1990. Mr. Silverstein served as Assistant Secretary
of the Company from June 1986 until his appointment as Secretary in January
1987.
Mr. Deddens has been Vice President and Treasurer of the Company since
March 1996. Prior to joining the Company, Mr. Deddens served as Vice President
and Treasurer of Revlon, Inc. from 1991 to 1996 and as Assistant Treasurer from
1987 to 1991. Mr. Deddens held various financial positions with Allied-Signal
Corporation and Union Texas Petroleum Corporation from 1981 to 1987.
16
<PAGE>
PART II
Item 5. Market for the Company's Common Equity and Related Stockholder Matters.
The Company's Class A Common Stock, $0.01 par value per share (the "Common
Stock"), is listed on the New York Stock Exchange under the symbol "WAC". The
table below sets forth, for the periods indicated, the high and low sales prices
of the Company's Common Stock, as reported on the New York Stock Exchange
Composite Tape.
<TABLE>
<CAPTION>
Dividend
Period High Low Declared
------ ---- --- --------
<S> <C> <C> <C>
1998:
First Quarter $39-9/16 $30 $.09
Second Quarter $43-15/16 $39 $.09
Third Quarter $44-7/16 $18-1/2 $.09
Fourth Quarter $28-15/16 $19-1/8 $.09
1999:
First Quarter $27-1/4 $20-1/8 $.09
Second Quarter $30-1/16 $24-5/16 $.09
Third Quarter $27-3/8 $17-9/16 $.09
Fourth Quarter $19-1/8 $10-7/16 $.09
2000:
First Quarter (thru
March 29, 2000) $13-7/8 $9-5/8 $.09(a)
</TABLE>
(a) On February 17, 2000, the Company declared its regular quarterly cash
dividend of $0.09 per share payable on April 4, 2000 to stockholders of
record as of March 9, 2000.
--------------------------
As of March 29, 2000, there were 223 holders of the Common Stock, based
upon the number of holders of record and the number of individual participants
in certain security position listings.
In fiscal 1995, the Company initiated a regular cash dividend of $0.28 per
share per annum. The initial cash dividend was paid on June 30, 1995. On
February 20, 1997, the Company's Board of Directors approved an increase in the
Company's quarterly cash dividend to $0.08 per share. On November 21, 1997, the
Company's Board of Directors approved an increase in the quarterly cash dividend
to $0.09 per share.
Item 6. Selected Financial Data.
Set forth below is consolidated statement of income data with respect to
the fiscal years ended January 3, 1998, January 2, 1999 and January 1, 2000, and
consolidated balance sheet data at January 2, 1999 and January 1, 2000. The
selected financial data is derived from, and qualified by reference to, the
audited consolidated financial statements included herein and such data should
be read in conjunction with those financial statements and notes thereto. The
consolidated statement of income data for the fiscal years ended January 6, 1996
and January 4, 1997 and the consolidated balance sheet data at January 6, 1996,
January 4, 1997 and January 3, 1998 are derived from audited consolidated
financial statements not included herein.
17
<PAGE>
<TABLE>
<CAPTION>
Fiscal Year Ended
-----------------------------------------------------------------------
January 6, January 4, January 3, January 2, January 1,
1996(a)(b) 1997(c)(d) 1998(d)(e) 1999(f)(g) 2000(h)
-----------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Statement of Income Data:
Net revenues $ 916.2 $ 1,063.8 $ 1,435.7 $ 1,950.3 $ 2,114.2
Gross profit 309.7 289.7 375.2 537.2 701.0
Operating income (loss) 113.9 (12.0) 25.8 85.6 229.9
Interest expense 33.9 32.4 45.9 63.8 81.0
Income (loss) before extraordinary items
and cumulative effect of change
in accounting principle 49.6 (31.4) (12.3) 14.1 97.8
Extraordinary item (3.1) - - - -
Cumulative effect of change in
accounting principle - - - (46.3) -
Net income (loss) applicable to
Common Stock 46.5 (31.4) (12.3) (32.2) 97.8
Dividends on Common Stock 9.5 14.5 17.3 22.4 20.3
Per Share Data:
Income (loss) before cumulative effect
of change in accounting principle
Basic $ 1.12 $ (0.61) $ (0.23) $ 0.23 $ 1.75
Diluted $ 1.10 $ (0.61) $ (0.23) $ 0.22 $ 1.72
Net income (loss):
Basic $ 1.05 $ (0.61) $ (0.23) $ (0.52) $ 1.75
Diluted $ 1.03 $ (0.61) $ (0.23) $ (0.51) $ 1.72
Dividends declared $ 0.14 $ 0.28 $ 0.32 $ 0.36 $ 0.36
Shares used in computing earnings
per share:
Basic 44,214,690 51,308,017 52,813,982 61,361,843 55,910,371
Diluted 45,278,177 51,308,017 52,813,982 63,005,358 56,796,203
Divisional Summary Data:
Net revenues:
Intimate Apparel $ 689.2 $ 802.0 $ 941.2 $ 944.8 $ 943.4
Sportswear and Accessories 185.7 214.4 425.9 875.3 1,022.8
Retail Stores 41.3 47.4 68.6 130.2 148.0
---------- ---------- --------- --------- ---------
$ 916.2 $ 1,063.8 $ 1,435.7 $ 1,950.3 $ 2,114.2
========== ========== ========= ========= =========
Percentage of net revenues:
Intimate Apparel 75.2% 75.4% 65.6% 48.4% 44.6%
Sportswear and Accessories 20.3% 20.2% 29.7% 44.9% 48.4%
Retail Stores 4.5% 4.4% 4.7% 6.7% 7.0%
---------- ---------- --------- --------- ---------
100.0% 100.0% 100.0% 100.0% 100.0%
========== ========== ========= ========= =========
Balance Sheet Data:
Working capital $ 307.5 $ 172.6 $ 352.3 $ 28.4 $ 318.1
Total assets 941.1 1,119.8 1,651.1 1,783.1 2,763.0
Long-term debt (excluding
current maturities) 194.3 215.8 354.3 411.9 1,188.0
Mandatorily Redeemable
Convertible Preferred
Securities - - - 101.8 102.9
Stockholders' equity 500.3 452.5 749.6 578.1 563.3
</TABLE>
18
<PAGE>
(a) In fiscal 1995, the Company entered into a new bank credit agreement and
wrote-off deferred financing costs related to a prior bank credit
agreement. The write-off resulted in an extraordinary item of $3.1 million
(net of income tax benefits of $1.9 million or $0.07 per diluted share)
due to the early extinguishment of debt.
(b) Effective with the 1995 fiscal year, the Company adopted the provisions of
SOP 93-7 which requires, among other things, that certain advertising
costs which had previously been deferred and amortized against future
revenues be expensed when the advertisement first runs. The Company
incurred a pre-tax charge for advertising costs, previously deferrable, of
$11.7 million ($7.3 million net of income tax benefits, or $0.16 per
diluted share) in the fourth quarter of fiscal 1995.
(c) Fiscal 1996 includes pre-tax charges related to the sale of the Company's
Hathaway dress shirt operations of $38.7 million, consolidation and
realignment of the Company's Intimate Apparel Division of $78.1 million
and other items of $13.1 million. Total non-recurring items were $129.9
million ($83.2 million net of income tax benefits, or $1.62 per diluted
share). In addition, fiscal 1996 includes operating losses of the Hathaway
dress shirt operation of $8.6 million ($5.4 million net of income tax
benefits, or $0.10 per diluted share).
(d) The fiscal 1996 and 1997 financial statements were restated (in fiscal
1998) to reflect $38.0 million ($23.2 million net of income tax benefit
or $0.45 per diluted share) and $57.0 million ($35.4 million net of
income tax benefit or $0.67 per diluted share), respectively, of charges
related to an adjustment for inventory production and inefficiency costs.
(e) Fiscal 1997 reflects the acquisition of Designer Holdings during the
fourth quarter and includes pre-tax charges related to the merger and
integration of 1996 and 1997 acquisitions and the completion in 1997 of
certain consolidation and restructuring actions announced in 1996. Total
non-recurring items were $125.7 million ($77.9 million net of income tax
benefits, or $1.48 per diluted share). In addition, fiscal 1997 includes
operating losses of the Hathaway dress shirt operation of $4.0 million and
non-recurring losses of GJM of $1.1 million for a total of $5.1 million
($3.2 million net of income tax benefits, or $0.06 per diluted share).
(f) Fiscal 1998 includes restructuring, special charges and other
non-recurring items of $101.5 million ($65.7 million net of income tax
benefits, or $1.04 per diluted share) relating to the continuing strategic
review of facilities, products and functions and other items. In addition,
fiscal 1998 includes operating losses of the discontinued product lines
and styles of $5.3 million ($3.4 million net of income tax benefit or $0.5
per diluted share). Also included in fiscal 1998 operating earnings is the
current year impact related to the change in accounting for pre-operating
costs described in note (g) below of $40.8 million ($26.4 million net of
income tax benefits, or $ 0.42 per diluted share) (see Note 1 to the
Consolidated Financial Statements) and charges related to an adjustment
for inventory production and inefficiency costs of $49.6 million ($32.1
million net of income tax benefits, or $0.51 per diluted share).
(g) Effective with the 1998 fiscal year, the Company early adopted the
provisions of SOP 98-5 which requires, among other things, that certain
pre-operating costs which had previously been deferred and amortized be
expensed as incurred. The Company recorded the impact as the cumulative
effect of a change in accounting principle of $46.3 million, net of income
tax benefits, or $0.73 per diluted share.
(h) Fiscal 1999 includes a non-operating incremental cost of $16.0 million
($10.5 million of income tax benefit or $0.18 per diluted share), related
to the Calvin Klein Jeans distribution consolidation.
19
<PAGE>
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations.
Strategic Actions
Fiscal 1998 -- Restructuring, Special Charges and Other Non-Recurring Items
As a result of a strategic review of the Company's businesses,
manufacturing and other facilities, product lines and styles and worldwide
operations following significant acquisitions in 1996 and 1997, in the fourth
quarter of 1998 the Company initiated the implementation of programs designed to
streamline operations and improve profitability. As a result of the decision to
implement these programs, the Company recorded restructuring and special charges
of approximately $48.5 million ($31.4 million net of income tax benefits)
related to costs to exit certain facilities and activities, asset impairments
and employee termination and severance benefits. Of the total amount of the 1998
charges, $22.1 million is reflected in cost of goods sold and $26.4 million is
reflected in selling, administrative and general expenses in the accompanying
consolidated statement of operations. The detail of the charges recorded in
1998, including costs incurred to-date and reserves remaining at January 1, 2000
for costs estimated to be incurred through completion of the aforementioned
programs, anticipated by the end of fiscal 2000, are summarized below:
<TABLE>
<CAPTION>
Amounts
Total Utilized Balance
------ -------- -------
<S> <C> <C> <C>
Costs to exit facilities and activities $13.3 $ 13.3 $ --
Asset Impairments 23.8 23.8 --
Employee termination and severance benefits 6.1 5.8 0.3
Prior strategic initiatives 5.3 5.3 --
------ ------- -------
$ 48.5 $ 48.2 $ 0.3
====== ======= =======
</TABLE>
See Note 3 to the Consolidated Financial Statements for further detail.
In addition and related to the above actions, the fiscal 1998 operations
included $53.0 million ($34.3 million net of income tax benefits) related to the
first nine months of losses on discontinued product lines, severance associated
with reductions in headcount, incremental advertising, allowances and
manufacturing variances and $5.3 million ($3.4 million net of income tax
benefits) related to fourth quarter losses on discontinued product lines. Of the
total amount of $58.3 million, $27.0 million is reflected in cost of goods sold
and $31.3 million is reflected in selling, administrative and general expenses.
The total restructuring, special charges and other non-recurring items
including the associated operating losses are $106.8 million ($69.1 million, net
of income tax benefits or $1.10 per diluted share) for the year ended January 2,
1999. The Company anticipates that these programs will generate annual savings
of $15.0 million pre-tax.
Fiscal 1997 - Restructuring, Special Charges and Other Non-Recurring Items
During the fourth quarter of 1997, the Company reported a pre-tax charge
of $125.7 million related to the acquisition and integration of Designer
Holdings, the Intimate Apparel consolidation and realignment program initiated
in 1996 and other items, including the final disposition of Hathaway assets
(amounts in millions):
20
<PAGE>
<TABLE>
<S> <C>
Merger related integration costs.............................. $ 44.6
Intimate Apparel consolidation and realignment................ 59.5
Other items, including final disposition of Hathaway assets... 21.6
------
125.7
Less income tax benefits...................................... (47.8)
------
$ 77.9
======
</TABLE>
The charge consists primarily of a write-down of asset values, severance
and other employee costs, costs related to manufacturing realignment and lease
and other costs to combine existing retail outlet stores with those of Designer
Holdings.
Following the successful Intimate Apparel consolidation and realignment
program initiated in 1996, the Company initiated a new program to reexamine all
of its existing products in an effort to streamline its number of product
offerings. Accordingly, additional products and styles were discontinued and
slower moving inventory liquidated.
In addition, fiscal 1997 includes operating losses of the Hathaway dress
shirt operations of $4.0 million and non-recurring losses of the GJM operation
of $1.1 million for a total of $5.1 million ($3.2 million net of income tax
benefits). The total restructuring special charges and other non-recurring items
including the associated operating losses are $130. 8 million ($72.3 million,
net of income tax benefits) for the year ended January 3, 1998. Of the total
amount, $76.6 million is reflected in cost of goods sold and $54.2 million is
reflected in selling, administrative, and general expenses.
See Note 3 to the Consolidated Financial Statements for further detail.
DESIGNER HOLDINGS ACQUISITION
Prior to its acquisition by the Company, Designer Holdings experienced
substantial sales growth. A significant portion of this sales growth was
achieved through distribution to jobbers and off-price retailers. Additionally,
Designer Holdings had also announced a significant increase in the number of its
outlet stores. The Company viewed this growth and expansion as detrimental to
the long-term integrity and value of the brand. To sustain its growth strategy,
Designer Holdings committed to large quantities of inventories. When the primary
department store distribution channel was unable to absorb all of Designer
Holdings' committed production, it increased sales to the secondary and tertiary
distribution channels, including sales to jobbers, off-price retailers and
Designer Holdings' own outlet stores, which were expanded to serve as an
additional channel of distribution. The Company's post-acquisition strategy did
not embrace the outlet store expansion or expansion of secondary channels of
distribution, thereby significantly eliminating product distribution, resulting
in excess inventory.
The Company had a different plan from that of Designer Holdings for
realization of inventories and accounts receivable, as follows: Based
upon its strategy for the business, it had to quickly dispose of significantly
higher than desirable levels of inventory. It had to stabilize relationships
with its core department store customers. It had to collect receivable balances
from customers with whom the Company would no longer do business, and had to
respond to challenges from the core department store customers who were
adversely impacted by channel conflict and brand image issues. Finally, the
Company began a complete redesign of the product, the impact of which would not
be immediately felt at retail due to the fact that Designer Holdings had already
committed to inventory that was in production to be delivered for the ensuing
seasons.
The consequences related not only to the receivables and inventory
acquired, but also to the design, fabric and inventory purchases to which
Designer Holdings had previously committed. Immediately following the
acquisition, the Company began quickly liquidating excess inventories. Most of
these sales were below original cost. Not only did the Company fail to recover
cost (including royalties payable to the licensor), it was deprived of the
"reasonable gross profit" contemplated by APB Opinion 16 in valuing acquired
inventory. Accordingly, the Company reduced the historical carrying value of
inventory by $18 million. The $18 million fair value adjustment recorded
addressed all of these issues and represented the fair value of inventory
pursuant to APB Opinion 16.
The Company offered significant discounts (by negotiating settlements on a
customer by customer basis) to collect outstanding receivable balances in light
of product related issues raised, as well as the decision to discontinue certain
channels of distribution, realizing that these balances would become
increasingly more difficult to collect with the passage of time. In addition,
the core retail customers took substantial deductions against current invoices
for the Designer Holdings inventory in the stores, unilaterally revising the
economics of the initial sale transaction entered into by Designer Holdings.
Although these deductions relate to both the inventory acquired and
pre-acquisition accounts receivable, the decrease in asset value manifested
itself through accounts receivable as a result of these deductions. Accordingly,
the Company reduced the historical carrying value of accounts receivable by $31
million. The $31 million fair value adjustment, which was recorded pursuant to
APB Opinion 16, addresses these issues.
The Company believes that these strategies should enhance future results of
operations and cash flows, however, these fair value adjustments will result in
additional annual goodwill amortization of approximately $1.2 million.
21
<PAGE>
Results of Operations
The consolidated statements of income for the Company are summarized
below.
Selected Data
Statement of Income
(Dollars in millions)
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------------------------------
% of % of % of
January 3, net January 2, net January 1, net
1998 revenues 1999 revenues 2000 revenues
--------- ----- --------- ----- --------- -----
<S> <C> <C> <C> <C> <C> <C>
Net revenues $ 1,435.7 100.0% $ 1,950.3 100.0% $ 2,114.2 100.0%
Cost of goods sold (a) 1,060.5 73.9% 1,413.1 72.5% 1,413.2 66.8%
--------- ----- --------- ----- --------- -----
Gross profit (a) 375.2 26.1% 537.2 27.5% 701.0 33.2%
Selling, administrative and general
expenses (b) 349.4 24.3% 451.6 23.1% 471.1 22.3%
--------- ----- --------- ----- --------- -----
Operating income (loss) 25.8 1.8% 85.6 4.4% 229.9 10.9%
Interest expense (loss) 45.9 63.8 81.0
--------- --------- --------- -----
Income (loss) before income taxes and
cumulative effect of change in
accounting principle (20.1) 21.8 148.9
Income taxes (benefit) (7.8) 7.7 51.1
--------- --------- ---------
Income (loss) before cumulative effect
of change in accounting principle $ (12.3) $ 14.1 $ 97.8
========= ========= =========
</TABLE>
Divisional Summary
(Dollars in millions)
<TABLE>
<CAPTION>
Fiscal Year Ended
-------------------------------------------------------------------------------
% of % of % of
January 3, gross January 2, gross January 1, gross
1998 profit 1999 profit 2000 profit
----------- -------- ------------ ------- ---------- ------
<S> <C> <C> <C> <C> <C> <C>
Net revenues:
Intimate Apparel $ 941.2 $ 944.8 943.4
Sportswear & Accessories 425.9 875.3 1022.8
Retail Stores 68.6 130.2 148.0
---------- --------- ---------
$ 1,435.7 $ 1,950.3 $ 2,114.2
========== ========= =========
Gross profit (a):
Intimate Apparel $ 259.8 69.2% $ 255.3 47.5% $ 332.5 47.4%
Sportswear & Accessories 90.7 24.2% 241.4 44.9% 327.0 46.7%
Retail Stores 24.7 6.6% 40.5 7.6% 41.5 5.9%
---------- ------ --------- ------ -------- ------
$ 375.2 100.0% $ 537.2 100.0% $ 701.0 100.0%
========== ====== ========= ====== ======== ======
</TABLE>
22
<PAGE>
(a) Includes restructuring, special charges and other non-recurring items of
$76.6 million in fiscal 1997 related to the acquisition of Designer
Holdings and the completion of the Intimate Apparel restructuring actions
and $49.1 million in fiscal 1998 related to the continuing strategic
review of facilities, products and functions. Also included in fiscal 1998
is the current year impact related to the change in accounting for
pre-operating costs of $40.8 million and a charge for an inventory
adjustment related to production and inefficiency costs in fiscal 1997 and
1998 of $57.0 million and $49.6 million, respectively.
(b) Includes restructuring, special charges and other non-recurring items of
$54.2 million in fiscal 1997 related to the acquisition of Designer
Holdings and the completion of the Intimate Apparel restructuring actions
and $57.7 million in fiscal 1998 related to the continuing strategic
review of facilities, products and functions. Also, fiscal 1997 includes
$3.5 million attributable to minority interests in the income of Designer
Holdings applicable to the period of less than 100% ownership by the
Company.
Comparison of Fiscal 1999 to Fiscal 1998
Net revenues increased $163.9 million or 8.4% to $2,114.2 million in
fiscal 1999 compared with $1,950.3 million in fiscal 1998. Net revenues
contributed by the 1999 acquisitions of Authentic Fitness ($40.6), Penhaligon's
($7.9), IZKA ($0.2), Chaps Canada ($5.7) and ABS ($13.7) amounted to $68.1
million. In addition, the Company discontinued several underperforming brands
during 1998. These discontinued brands accounted for a reduction in net revenues
of $18.4 million in fiscal 1999. Excluding the impact of these items, net
revenues from continuing brands were up 5.8%.
Intimate Apparel Division. Net revenues decreased $1.4 million or 0.1% to
$943.4 million in fiscal 1999 compared with $944.8 million in fiscal 1998.
Discontinued brands accounted for a reduction in net revenues of $18.4 million
in fiscal 1999. Excluding the impact of the discontinued brands, net revenues
increased 1.9%, despite losing three major customers (Uptons, Eaton's and
Mercantile) which accounted for a loss of $30.0 million of net revenues in
fiscal 1999. Calvin Klein underwear net revenue increased $22.4 million or 7.3%
over fiscal 1998, driven by strong growth in the U.S. Men's business. Sleepwear
net revenues increased $16.7 million or 32.4% due to the addition of several new
customers, including Wal-Mart. The Bodyslimmers and Weight Watchers shapewear
brands increased $21.6 million or 89.6% due to the continued strength of the
Bodyslimmers line in department and specialty stores and the successful launch
of Weight Watchers in the mass market. These strong performances were partially
offset by core Warner's, Olga and private label business decreasing $42.1
million or 10.9% compared to fiscal 1998 results, due to the loss of the
customers previously mentioned. Bra market share in department and specialty
stores for the year was 39.0% compared with 37.5% in 1998.
Sportswear and Accessories Division. Net revenues increased $147.5 million
or 16.9% to $1,022.8 million in fiscal 1999 compared with $875.3 million in
fiscal 1998. Net revenues contributed by the 1999 Authentic Fitness ($36.4),
Chaps Canada ($5.7) and ABS ($13.7) acquisitions amounted to $55.8 million.
Excluding these acquisitions, net revenues increased $91.7 million or a strong
10.5%. The increase in net revenue was generated by the Calvin Klein Jeanswear
Division which increased $128.5 million or a very solid 25.7%, driven primarily
by the men's and women's business. This increase was partially offset by Chaps
which decreased $33.6 million or 9.6% due primarily to the lost accounts
mentioned above which attributed to over $25.0 million of their decrease.
Retail Stores Division. Net revenues increased $17.8 million or 13.7% in
fiscal 1999. Net revenues in 1999 contributed by the Authentic Fitness ($4.2),
Penhaligon's ($7.9) and IZKA ($0.2) acquisitions was $12.3 million, while the
core Warnaco and Calvin Klein outlet stores increased $5.5 million or 4.2%.
23
<PAGE>
Gross profit increased $163.8 million or 30.5% to $701.0 million in fiscal
1999 compared with $537.2 million in fiscal 1998. Gross margins improved 5.7% to
33.2% from 27.5%. Included in cost of sales in fiscal 1998 are restructuring and
special charges of $23.2 million, other non-recurring items of $25.9 million
(see discussion of Strategic Actions on pages 20-21), the current year impact of
the early adoption of SOP 98-5 of $40.8 million and a charge for an inventory
adjustment related to production and inefficiency costs of $49.6 million.
Excluding these 1998 items totaling $139.5 million, gross profit increased
$24.3 million or 3.6%. Gross margins on this basis were 33.2% in 1999
compared with 34.7% in 1998. The decrease in gross margins from fiscal 1998
was caused by $30.0 million of additional markdowns required to 1) liquidate
inventory planned for lost customers, 2) reduce inventory levels in Intimate
Apparel primarily from training new employees in start-up plants and 3) softness
in the Calvin Klein Junior Jeans business; and $10.0 million additional plant
start-up costs in the Company's new Intimate Apparel manufacturing facilities
in Mexico.
Intimate Apparel Division. Gross profit (excluding all non-recurring items
described above) decreased $46.1 million or 12.2% to $332.5 million in fiscal
1999 compared with $378.6 million in fiscal 1998. Gross margins on this basis
were 35.2% in 1999 compared with 40.1% in 1998. The decrease in margins resulted
from the incremental markdowns and additional plant start-up costs mentioned
above.
Sportswear and Accessories Division. Gross profit (excluding all
non-recurring items described above) increased $69.4 million or 26.9% to $327.0
million in fiscal 1999 compared with $257.6 million in fiscal 1998. The increase
in gross profit was due to the increase in net revenues mentioned above. Gross
margins in 1999 were 32.0% compared with 29.4% in 1998 with the improvement due
to sourcing efficiencies and cost reductions.
Retail Stores Division. Gross profit increased $1.0 million or 2.5% to
$41.5 million in fiscal 1999 compared with $40.5 million in fiscal 1998. Gross
margins in fiscal 1999 was 28.0% compared to 31.1% in fiscal 1998, with the
decrease caused by additional markdowns to liquidate excess inventories.
Selling, administrative and general expenses increased $19.5 million to
$471.1 million in fiscal 1999 compared with $451.6 million in fiscal 1998.
Selling, administrative and general expenses as a percentage of sales was 22.3%
in 1999 compared with 23.2% in 1998. Included in fiscal 1998 results are
restructuring and special charges of $30.6 million and other non-recurring items
of $27.1 million (see discussion of Strategic Actions on pages 20-21). The
Company anticipates that these programs will generate annual savings of
approximately $15.0 million pre-tax. Excluding restructuring, special charges
and other non-recurring items in 1998, selling, administrative and general
expenses were $471.1 million (22.3% of net revenues) in 1999 compared with
$393.9 million (20.2% of net revenues) in 1998. The increase in selling,
administrative and general expenses as a percentage of net revenues, primarily
attributable to 1) $16.0 million of non-operating incremental costs related to
the Calvin Klein Jeans distribution consolidation, 2) a 30 basis-point increase
of $15.4 in marketing spending to 5.6% of net revenues and 3) incremental data
processing costs related to Year 2000 conversion as well as the implementation
of new systems.
Operating Profit
Intimate Apparel Division. Operating profit decreased $35.1 million or
17.5% to $165.0 million in fiscal 1999 compared with $200.1 million in
fiscal 1998. This was attributable to the additional markdowns and plant
start-up costs mentioned above. In addition, fiscal 1998 includes
restructuring, non-recurring and special charges as outlined above of
$75.5 million and the effect of adopting SOP 98-5 of $40.8 million and a
charge for an inventory adjustment related to production and
inefficiency costs of $49.6 million.
24
<PAGE>
Sportswear and Accessories Division. Operating profit increased $14.3
million or 9.9% to $159.0 million in fiscal 1999 compared with $144.7
million in fiscal 1998. This was attributable to the 16.9% net revenue
increase mentioned above, partially offset by the $16.0 million
non-operating incremental cost related to the Calvin Klein Jeans
distribution consolidation. In addition, restructuring, non-recurring and
special charges as outlined above were $5.2 million in fiscal 1998.
Retail Stores Division. Operating profit decreased $6.6 million to $9.0
million in fiscal 1999 from $15.6 million in fiscal 1998, with the
decrease attributable to markdowns required to liquidate excess inventory.
In addition, restructuring, non-recurring and special charges as outlined
above were $4.8 million in fiscal 1998.
Interest expense increased $17.2 million to $81.0 million in fiscal 1999
compared with $63.8 million in fiscal 1998. The increase was caused primarily by
additional borrowings to finance the Company's stock buyback program and its
acquisitions in fiscal 1998 and 1999. (See Notes 2 and 13 to the Consolidated
Financial Statements.)
The income tax provision in fiscal 1999 was $51.1 or an overall effective
tax rate of 34.3%. This compares to an income tax benefit in fiscal 1998 of
$17.5 million consisting of a $7.7 million income tax expense on continuing
operations and a $25.2 million income tax benefit on the cumulative effect
of an accounting change, or an overall effective tax rate of 35.3%. The
decrease in the effective tax rate from 35.3% in fiscal 1998 to 34.3% in fiscal
1999 was due to a shift in the amount of income in foreign jurisdictions with
lower tax rates. The difference between the United States federal statutory rate
of 35.0% and the Company's effective tax rate of 34.3% primarily reflects the
impact of state income taxes (net of federal benefits), and the impact of
non-deductible intangible amortization, favorably offset by a shift in income to
foreign jurisdictions with lower tax rates than the U.S. The Company has
estimated United States net operating loss carryforwards of approximately $421.3
million at January 1, 2000 and foreign net operating loss carryforwards of
approximately $33.7 million available to offset future taxable income. The
United States and foreign loss carryforwards, which the Company expects to fully
utilize, should result in future cash tax savings of approximately $133.6
million at current United States income tax rates and $1.0 million at current
foreign income tax rates, respectively. The net operating loss carryforwards
expire between 2002 and 2018.
Income before cumulative effect of a change in accounting principle
improved $83.7 million to $97.8 million or $1.72 per diluted share in fiscal
1999 compared with $14.1 million or $0.22 per diluted share in fiscal 1998 due
to the charges included in fiscal 1998 as mentioned above.
Comparison of Fiscal 1998 to Fiscal 1997
Net revenues increased $514.6 million or 35.8% to $1,950.3 million in
fiscal 1998 compared with $1,435.7 million in fiscal 1997. Incremental net
revenues contributed by the 1997 and 1998 acquisitions of Calvin Klein Jeanswear
and Kidswear were $415.5 million. In addition, the Company discontinued several
underperforming brands during 1998. These discontinued brands accounted for a
reduction in net revenues of $30.9 million in fiscal 1998. Excluding the impact
of these items, net revenues from continuing brands were up 9.4%.
Intimate Apparel Division. Net revenues increased $3.6 million or 0.4% to
$944.8 million in fiscal 1998 compared with $941.2 million in fiscal 1997.
Discontinued brands accounted for a reduction in net revenues of $30.9 million
in fiscal 1998. Excluding the impact of the discontinued brands, net revenues
increased 3.9%. Core Warner's, Olga and private label business increased $29.3
million or 8.1% over fiscal 1997 results. Bra market share in department and
specialty stores for the year was 37.5% compared
25
<PAGE>
with 34.0% in 1997. Fiscal 1998 net revenues were negatively affected by
hurricanes in Costa Rica and Honduras which disrupted shipments during the 1998
fourth quarter. Calvin Klein net revenues declined 3.1% primarily on lower
international shipments in Russia of $6.3 million and the Far East of $0.8
million due to currency devaluation and economic downturns.
Sportswear and Accessories Division. Net revenues increased $449.4 million
or 105.5% to $875.3 million in fiscal 1998 compared with $425.9 million in
fiscal 1997. Incremental net revenues in 1998 contributed by the 1997 and 1998
Calvin Klein Jeanswear and Kidswear acquisitions were $366.8 million. Excluding
these acquisitions, net revenues increased $82.6 million or 28.2%. Improvements
were recorded across all brands with Chaps up $78.7 million or 28.9% and
Accessories up $2.0 million or 11.6%.
Retail Stores Division. Net revenues increased $61.6 million or 89.8% in
fiscal 1998. Incremental net revenues in 1998 contributed by the 1997 Designer
Holdings acquisition was $48.7 million. Excluding the acquisition, net revenues
increased $12.9 million or 22.4%.
Gross profit increased $162.0 million or 43.2% on an as-reported basis to
$537.2 million in fiscal 1998 compared with $375.2 million in fiscal 1997. The
increase is due primarily to the 1997 and 1998 Calvin Klein acquisitions. Gross
margins improved 1.4% to 27.5% from 26.1% resulting from a more favorable
regular to off-price mix across all brands. Included in cost of sales in fiscal
1998 are restructuring and special charges of $22.1 million, other non-recurring
items of $27.0 million (see discussion of Strategic Actions on pages 20-21) and
the current year impact of the early adoption of SOP 98-5 of $40.8 million
and a charge for an inventory adjustment related to production and inefficiency
costs of $49.6 million. Included in cost of sales in fiscal 1997 are
restructuring, special charges and other non-recurring items of $76.6 million
(see strategic actions on pages 20-21) and charges relating to an inventory
adjustment for production and inefficiency costs of $57.0 million. Excluding
these items, gross profit increased $167.9 million or 33.0% to $676.7 million
compared with $508.8 million in fiscal 1997. Gross margins on this basis were
34.7% in 1998 compared with 35.4% in 1997. The decrease in gross margins from
fiscal 1997 was caused by a higher mix of jeanswear and Chaps net revenues,
which has lower gross margins than Intimate Apparel.
Intimate Apparel Division. Gross profit (excluding all non-recurring items
described above) increased $11.1 million or 3.0% to $378.6 million in fiscal
1998 compared with $367.5 million in fiscal 1997. Gross margins were 40.1% in
1998 compared with 39.0% in 1997. The improvement in margins resulted from a
better regular price sales mix and cost savings initiatives implemented during
the year.
Sportswear and Accessories Division. Gross profit (excluding all
non-recurring items described above) increased $141.0 million or 120.9% to
$257.6 million in fiscal 1998 compared with $116.6 million in fiscal 1998. The
increase in gross profit was due to the 1997 and 1998 Calvin Klein acquisitions,
which contributed an incremental $121.9 million of gross profit. Excluding
acquisitions, gross profit was up $19.1 million compared with 1997 with most of
the increase in Chaps. Gross margins in 1998 were 29.4% compared with 27.4% in
1997 with the improvement due to the addition of Calvin Klein Jeanswear.
Retail Stores Division. Gross profit increased $15.8 million or 64.0% to
$40.5 million in fiscal 1998 compared with $24.7 million in fiscal 1997, with
the increase attributable to the Designer Holdings acquisition.
Selling, administrative and general expenses increased $102.2 million to
$451.6 million in fiscal 1998 compared with $349.4 million in fiscal 1997.
Selling, administrative and general expenses as a percentage of sales improved
to 23.1% in 1998 compared with 24.3% in 1997. Included in fiscal 1998 results
are restructuring and special charges of $26.4 million and other non-recurring
items of $31.3 million (see discussion of Strategic Actions on pages 20-21). The
Company anticipates that these programs will
26
<PAGE>
generate annual savings of approximately $15.0 million pre-tax. Included in
fiscal 1997 are restructuring, special charges and other non-recurring items of
$54.2 million. Excluding restructuring, special charges and other non-recurring
items in 1998 and 1997, selling, administrative and general expenses were $393.9
million (20.2% of net revenues) in 1998 compared with $295.2 million (20.6% of
net revenues) in 1997. The improvement in selling, administrative and general
expenses is attributable to the leverage attained through increased net revenues
of Calvin Klein Jeanswear.
Operating Profit
Intimate Apparel Division. Operating profit before special items increased
$4.6 million or 2.4% to $200.1 million in fiscal 1998 compared with $195.5
million in fiscal 1997. This was attributable to the increase in net
revenues and gross profit mentioned above. In addition, restructuring,
non-recurring and special charges as outlined above were $75.5 million in
fiscal 1998 and $68.0 million in fiscal 1997. The SOP 98-5 start-up costs
were $40.8 million in fiscal 1998 and a charge for an inventory adjustment
related to production and inefficiency costs was $49.6 million in fiscal
1998 and $57.0 million in fiscal 1997.
Sportswear and Accessories Division. Operating profit before special items
increased $82.9 million or 134.1% to $144.7 million in fiscal 1998
compared with $61.8 million in fiscal 1997. This was attributable to the
1997 and 1998 Calvin Klein acquisitions and the increased Chaps net
revenues mentioned above. In addition, restructuring, non-recurring and
special charges as outlined above were $5.2 million in fiscal 1998 and
$40.2 million in fiscal 1997.
Retail Stores Division. Operating profit before special items increased
$8.5 million or 119.7% to $15.6 million in fiscal 1998 compared with $7.1
million in fiscal 1997, with the increase attributable to the additional
stores acquired in the Designer Holdings acquisition. In addition,
restructuring, non-recurring and special charges as outlined above were
$4.8 million in fiscal 1998 and $18.7 million in fiscal 1997.
Interest expense increased $17.9 million to $63.8 million in fiscal 1998
compared with $45.9 million in fiscal 1997. The increase was caused primarily by
the company's stock buyback program and the Calvin Klein Jeanswear and Kidswear
acquisitions in fiscal 1997 and 1998.
The income tax benefit in fiscal 1998 was $17.5 million consisting of a
$7.7 million income tax expense on continuing operations and a $25.2 million
income tax benefit on the cumulative effect of an accounting change, or an
overall effective tax rate of 35.3%. The difference between the United States
federal statutory rate of 35.0% and the Company's effective tax rate of 35.3%
primarily reflects the impact of state income taxes (net of federal benefits),
foreign income taxes at rates other than the U. S. statutory rate, the impact of
non-deductible intangible amortization, offset by the realization of a $10.8
million deferred tax asset, principally related to a realization of a capital
loss carryover during the fourth quarter of fiscal 1998, previously subject to a
valuation allowance. The Company has estimated United States net operating loss
carryforwards of approximately $496.2 million at January 2, 1999 and foreign net
operating loss carryforwards of approximately $18.3 million available to offset
future taxable income. The United States and foreign loss carryforwards, which
the Company expects to fully utilize, should result in future cash tax savings
of approximately $130.7 million at current United States income tax rates. The
net operating loss carryforwards expire between 2002 and 2018.
Income before cumulative effect of the early adoption of SOP 98-5 improved
$26.4 million to $14.1 million or $0.22 per diluted share in fiscal 1998
compared with a loss of $12.3 million or $0.23 per diluted share in fiscal 1997.
Income before the effects of restructuring and special charges of $34.8 million,
other non-recurring items of $34.3 million and the current year impact of the
early adoption of SOP 98-5 and a charge for an inventory adjustment related to
production and inefficiency costs of $58.5 million, was $141.7 million or $2.25
per diluted share.
27
<PAGE>
Compared with fiscal 1997 net income (excluding non-recurring charges of $81.1
million and a charge for an inventory adjustment related to production and
inefficiency costs of $35.4 million) of $104.1 million or $1.87 per diluted
share, this represents an improvement of $37.6 million, or $0.38 per
diluted share.
Capital Resources and Liquidity
The Company's liquidity requirements arise primarily from its debt service
and the funding of working capital needs, primarily inventory and accounts
receivable and capital improvements programs. The Company's borrowing
requirements are seasonal, with peak working capital needs generally arising at
the end of the second quarter and during the third quarter of the fiscal year.
The Company typically generates a substantial amount 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.
During fiscal 1999, the Company acquired Authentic Fitness Corporation,
Penhaligon's Ltd., IZKA, A.B.S. by Allen Schwartz, and Chaps Canada.
During fiscal 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
and the sub-license to produce Calvin Klein jeans and related products for
children in Canada. Also during fiscal 1998, the Company 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, Central America and Canada. The
total purchase price of these acquisitions was approximately $53.1 million.
In December 1997, the Company completed the acquisition of Designer
Holdings, which develops, manufactures and markets designer jeanswear and
sportswear under a license from Calvin Klein, Inc. The purchase price consisted
of the issuance of 10,413,144 shares of the Company's stock valued at $353.4
million. Net assets acquired included $55.8 million of cash of Designer
Holdings.
In the third and fourth quarters of fiscal 1996, the Company acquired
Lejaby, a leading European intimate apparel manufacturer, for approximately $79
million, including certain fees and expenses and assumed liabilities. Funds to
consummate the transaction were provided by members of the Company's bank credit
group. The terms of the bank loans are substantially the same as the terms of
the Company's existing credit agreements and included a term loan totaling 370
million French Francs and revolving loan facilities totaling 150 million French
Francs (the "1996 Bank Credit Agreements").
Cash provided from operating activities in fiscal 1999 was $10.0 million
compared to $333.7 million in fiscal 1998. The decrease in cash flow from
operating activities from fiscal 1998 primarily resulted from 1) the favorable
impact of securitizing accounts receivable in fiscal 1998 ($145.1 million) and
2) the decrease in accounts payable and accrued expenses ($199.4 million)
primarily attributable to extended terms negotiated in fiscal 1998 which
favorably affected last year's cash flow. Cash flow from operating activities in
fiscal 1998 of $333.7 million increased $189.8 million compared with fiscal 1997
of $143.9 million as a result of 1) an increase in accounts payable and accrued
expenses of $118.5 million relating to extended payment terms negotiated in
fiscal 1998 and 2) the favorable impact of the accounts receivable
securitization of $170.5 million. Depreciation and amortization expense was
$61.0 million, $46.5 million and $47.4 million in fiscal 1999, 1998 and 1997
respectively. The increase in depreciation and amortization expense in fiscal
1999 reflects amortization of intangible assets acquired in fiscal 1998 and
1999.
28
<PAGE>
The provision for receivable allowances was $206.1 million, $166.3 million
and $139.5 million in fiscal 1999, 1998 and 1997 respectively. The increase in
fiscal 1999 over fiscal 1998 represents additional markdowns and allowances as
previously mentioned. The increase in fiscal 1998 over fiscal 1997 represents
the 35.9% sales increase primarily related to the Designer Holdings acquisition.
The provision for inventory write-downs was $6.2 million in fiscal 1999, $25.4
million in fiscal 1998 and $57.3 million in fiscal 1997. The decrease in fiscal
1999 and 1998 compared to fiscal 1997 reflected the Intimate Apparel
restructuring in fiscal 1998 and 1997 (see Note 3 to the Consolidated Financial
Statements.)
Cash used in investing activities was $736.5 million in fiscal 1999
compared with $221.8 million in fiscal 1998 and $22.0 million in fiscal 1997.
The increase is fiscal 1999 compared to fiscal 1998 relates to an increase in
acquisition of businesses of $572.4 million primarily related to the Authentic
Fitness acquisition in December 1999. The increase in fiscal 1998 compared to
fiscal 1997 reflects an increase in property, plant and equipment of $85.4
million primarily related to new MIS systems and store fixtures and an increase
in acquisition of businesses of $108.9 million, which includes a use of cash in
fiscal 1998 of $53.1 million primarily related to the Calvin Klein Kidswear
acquisition in fiscal 1998 compared to receiving $55.8 million of cash
acquired in connection with the acquisition of Designer Holdings for company
stock in fiscal 1997.
Cash (used in) provided by financing activities was $724.7 million,
$(116.3) million and $(125.2) million in fiscal 1999, 1998 and 1997
respectively. The increase in the cash provided from financing activities in
fiscal 1999 compared to fiscal 1998 reflects borrowing under an acquisition loan
facility of $586.2 million to acquire Authentic Fitness and an increase in
borrowings under the Company's credit facilities of $265.8 million to fund the
Company's stock buy-back program and purchase of property, plant and equipment.
During the year ended January 1, 2000, the Company repurchased 6.2 million
shares of its common stock at a cost of $144.7 million and paid cash dividends
of $20.6 million. During the year ended January 2, 1999, the Company repurchased
4.8 million shares of its common stock at a cost of $135.4 million and paid cash
dividends of $22.3 million. For the year ended January 3, 1998, the Company
repurchased 0.8 million shares of its common stock at a cost of $26.5 million
and paid cash dividends of $16.2 million. In exchange for shares received from
option holders with a fair market value of $2.6 million, $38.1 million and $0.6
million in fiscal years 1999, 1998 and 1997, respectively, the Company paid $2.6
million, $38.1 million and $0.6 million in fiscal years 1999, 1998 and 1997,
respectively, of withholding taxes on options that were exercised during the
year.
In November 1999 the Company entered into a $600 million, 364-day credit
facility with certain members of its bank credit group in order to consummate
the Authentic Fitness acquisition and refinance borrowings outstanding under
Authentic Fitness' bank credit agreement. Amounts borrowed under this facility
are subject to interest at a base rate or an interest rate based on the
Eurodollar rate plus a margin, which varies according to the Company's debt
rating. As of January 1, 2000, $586,200 was outstanding under this facility at a
weighted average interest rate of 7.15%. The terms of this facility are
substantially the same as the terms of the Company's existing credit agreements.
In November 1999, in conjunction with the Authentic Fitness acquisition,
and to replace its $200 million 364-day credit facility expiring in November
1999, the Company entered into a new $450 million revolving credit facility.
This new facility matures in November 2004 and carries terms that are
substantially the same as the terms of the Company's existing credit agreements.
Amounts borrowed under this facility are subject to interest at a base rate or
an interest rate based on the Eurodollar rate plus a margin, which varies
according to the Company's debt rating. As of January 1, 2000, there were no
borrowings outstanding under this facility.
Also in November 1999 the Company increased the amount of its Trade Letter
of Credit Facility (the "L/C Facility") from $450 million to $500 million to
refinance amounts outstanding under Authentic Fitness' Trade Letter of Credit
Facility.
As of January 1, 2000, the Company has excluded short-term obligations
totaling $487,134 from current liabilities because it intends to refinance
this obligation on a long-term basis. The Company has the ability to consummate
the refinancing by utilizing long-term commitments in place as of January 1,
2000.
29
<PAGE>
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 0.40% and mature on April 17, 2003. In July 1998, the
Company amended its $300 million 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 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 Calvin Klein Kids business in the second quarter of 1998. 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. In July 1999, the L/C
Facility was extended until July 27, 2000.
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 temporarily repay
long-term debt. At January 1, 2000, approximately $195.9 million was advanced
under this facility.
The Company has paid a quarterly cash dividend since June 1995. The
dividend payment was raised to $0.08 per share from $0.07 per share in February
1997 and increased to $0.09 per share in January 1998.
At January 1, 2000, the Company had approximately $469.2 million of
additional borrowing availability under the revolving loan portions of its
United States bank facilities. The Company also has bank credit agreements in
Canada, Europe and Asia. At January 1, 2000, the Company had approximately $53.1
million of additional borrowing availability under these agreements. The Company
believes that funds available under its various bank facilities, together with
cash flow to be generated from future operations, will be sufficient to meet the
capital expenditure requirements and working capital needs of the Company,
including interest and debt principal payments for the next twelve months and
for the next several years.
Year 2000 and Economic and Monetary Union ("EMU") Compliance
The Company is fully Year 2000 compliant with respect to all of its
operating systems. The Company did not experience any year 2000 related issues.
30
<PAGE>
In anticipation of the establishment of the European EMU and the
introduction of a single European unit of currency (the "Euro") scheduled for
January 1, 1999, Warnaco formed a Steering Committee in December 1997 to (1)
identify the related issues and their potential effect on Warnaco, and (2)
develop an action plan for EMU compliance.
The steering committee completed development of and implemented an action
plan which included preparation of banking arrangements for use of the Euro,
development of dual currency price lists and invoices, modification of prices to
mitigate the potential effects of price transparency and implementing necessary
computer-related remediation steps. As a result of this plan, as of January 1,
1999, Warnaco was EMU compliant. During 1999, the Company experienced no adverse
effects on its business as a result of the introduction of the Euro.
Statement Regarding Forward-looking Disclosure
This Report includes "forward-looking statements" within the meaning of
Section 27A of the 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 Annual 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.
Seasonality
The operations of the Company are somewhat seasonal. In fiscal 1999,
approximately 56% of net revenues, 50% of operating income, and substantially
all of the Company's net cash flow from operating activities were generated in
the second half of the year. Generally, the Company's operations during the
first half of the year are financed by increased borrowings. The following sets
forth the net revenues, operating income and net cash flow from operating
activities generated for each quarter of fiscal 1998 and fiscal 1997.
31
<PAGE>
<TABLE>
<CAPTION>
Three Months Ended
(in millions)
Apr. 4, July 4, Oct. 3, Jan. 2 Apr. 3, July 3, Oct. 2, Jan. 1,
1999 1998 1998 1999 1999 1999 1999 2000
---- ---- ---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Net revenues $ 419.2 $438.9 $544.1 $548.1 $444.1 $484.7 $579.6 $605.8
Operating income(loss) $ 23.4 $ 35.5 $ 56.0 $ (29.3) $52.2 $62.6 $90.2 $24.9
Cash flow from (used in)
operating activities $(145.4) $ 22.4 $162.2 $294.5 $(127.0) $(44.0) $2.7 $178.3
</TABLE>
Inflation
The Company does not believe that the relatively moderate levels of
inflation in the United States, Canada and Western Europe have had a significant
effect on its net revenues or its profitability. Management believes that, in
the past, the Company has been able to offset such effects by increasing prices
or by instituting improvements in productivity. Mexico historically has been
subject to high rates of inflation; however, the effects of inflation on the
operation of the Company's Mexican subsidiaries have not had a material impact
on the results of the Company.
Impact of New Accounting Standards
In June 1998, the Financial Accounting Standards Board (FASB) issued
Statement of Financial Accounting Standards (SFAS) No. 133, "Accounting for
Derivative Instruments and Hedging Activities". SFAS No. 133 was effective for
financial statements for fiscal years beginning after June 15, 1999. However, in
June 1999, the FASB issued SFAS 137 "Deferral of the effective date of FASB
Statement No. 133" delaying the effective date of SFAS 133 until fiscal years
beginning after June 15, 2000. The Company is evaluating the application of the
new statement and the impact on the Company's consolidated financial position,
liquidity, cash flows and results of operations.
Item 7A. 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
speculation or for trading purposes.
Interest Rate Risk
The Company is subject to market risk from exposure to changes in interest
rates based primarily on its financing activities. The Company enters into
interest rate swap agreements to reduce the impact of interest rate fluctuations
on cash flow and interest expense. As of January 1, 2000, approximately $691.5
million of the Company's $1,904.3 million of interest-rate sensitive obligations
were swapped to fixed rates. Of the total amount swapped, $610 million were
swapped to a fixed rate of 5.99% while $81.5 million were swapped to fixed rates
between 6.60% and 6.66%, thereby limiting the Company's risk to any future shift
in interest rates. As of January 1, 2000, the net fair value asset of all
financial instruments (primarily interest rate swap agreements) with exposure to
interest rate risk was approximately $22.1 million. As of January 1, 2000 the
Company had approximately $1,212.8 million of obligations subject to variable
interest rates in excess of such obligations that had been swapped to achieve a
fixed rate. A hypothetical 10% adverse change in interest rates as of January 1,
2000 would have had an $8.1 million unfavorable impact on the Company's pre-tax
earnings and cash flow over a one-year period.
32
<PAGE>
Foreign Exchange Risk
The Company has foreign currency exposures related to buying, selling and
financing in currencies other than the functional currency in which it operates.
These exposures are primarily concentrated in the Canadian dollar, Mexican peso,
Hong Kong dollar, British pound, Euro, Costa Rican colon, Honduran lempira,
Dominican Republic peso and the Chinese renminbi. The Company enters into
foreign currency forward and option contracts to mitigate the risk 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. As of January 1, 2000, the net fair value asset of
financial instruments with exposure to foreign currency risk, which included
currency option and forward contracts, was $0.1 million. The potential decrease
in fair value resulting from a hypothetical 10% adverse change in quoted foreign
currency exchange rates would be approximately $1.3 million.
Item 8. Financial Statements and Supplementary Data.
The information required by Item 8 of Part II is incorporated herein by
reference to the Consolidated Financial Statements filed with this report. See
Item 14 of Part IV.
Item 9. Changes in and Disagreements with Independent Accountants on Accounting
and Financial Disclosure.
Previous Independent Accountants
On November 18, 1999, the Audit Committee of the Board of Directors of
the Company approved the appointment of Deloitte & Touche LLP as its independent
auditors for fiscal 1999. PricewaterhouseCoopers LLP, the Company's previous
auditors, were dismissed.
The reports of PricewaterhouseCoopers LLP on the financial statements for
the last two fiscal years contained no adverse opinion or disclaimer of opinion,
and were not qualified or modified as to uncertainty, audit scope or accounting
principles.
In connection with its audits for the two most recent fiscal years
and through November 18, 1999, there were no disagreements with
PricewaterhouseCoopers LLP on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of
PricewaterhouseCoopers LLP, would have caused PricewaterhouseCoopers
LLP to make reference thereto in their report on the consolidated
financial statements for such years.
During the two most recent fiscal years and through November 18, 1999,
there have been no reportable events (as defined in Item 304(a)(1)(v) of
Regulation S-K.), except that in connection with the audit of the fiscal 1998
consolidated financial statements, PricewaterhouseCoopers LLP informed
management that the intimate apparel division manufacturing cost system may
not function to reduce to a relatively low level the risk that errors may
occur and not be detected within a timely period. The Company took actions
in fiscal 1998 which it believes have effectively addressed these matters.
The Registrant requested and PricewaterhouseCoopers LLP furnished it with
a letter addressed to the Securities and Exchange Commission (the "SEC")
stating whether or not it agreed with the above statements. Such letter dated
November 26, 1999 was filed as an exhibit to the Company's Form 8-K filed
November 26, 1999.
New Independent Accountants
The Registrant engaged Deloitte & Touche LLP as its new independent
accountants on November 18, 1999. During the two most recent fiscal years
and through November 18, 1999, the Registrant had not consulted with Deloitte
& Touche LLP on any of the matters or events set forth in Item 304(a) 2(i)
and (ii) of Regulation S-K.
33
<PAGE>
PART III
Item 10. Directors and Executive Officers of the Registrant.
The information required by Item 10 is incorporated by reference from page
15 of Item 4 of Part I included herein and from the Proxy Statement of The
Warnaco Group, Inc., to be filed with the Securities and Exchange Commission
within 120 days of the fiscal 1999 year-end relating to the 2000 Annual Meeting
of Stockholders.
Item 11. Executive Compensation.
The information required by Item 11 is hereby incorporated by reference
from the Proxy Statement of The Warnaco Group, Inc., to be filed with the
Securities and Exchange Commission within 120 days of the fiscal 1999 year-end,
relating to the 2000 Annual Meeting of Stockholders.
Item 12. Security Ownership of Certain Beneficial Owners and Management.
The information required by Item 12 is hereby incorporated by reference
from the Proxy Statement of The Warnaco Group, Inc., to be filed with the
Securities and Exchange Commission within 120 days of the fiscal 1999 year-end,
relating to the 2000 Annual Meeting of Stockholders.
Item 13. Certain Relationships and Related Transactions.
The information required by Item 13 is hereby incorporated by reference
from the Proxy Statement of The Warnaco Group, Inc., to be filed with the
Securities and Exchange Commission within 120 days of the fiscal 1999 year-end,
relating to the 2000 Annual Meeting of Stockholders.
34
<PAGE>
PART IV
Item 14. Exhibits, Financial Statements, Schedules and Reports on Form 8-K.
(a) 1. The Consolidated Financial Statements of The Warnaco Group, Inc.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Reports of Independent Accountants........................................ F-1 - F-2
Consolidated Balance Sheets as of January 2, 1999 and January 1, 2000..... F-3
Consolidated Statements of Operations for the Years Ended January 3, 1998,
January 2, 1999 and January 1, 2000....................................... F-4
Consolidated Statements of Stockholders' Equity and Comprehensive Income
For the Years Ended January 3, 1998, January 2, 1999 and January 1, 2000 F-5
Consolidated Statements of Cash Flows for the Years Ended January 3, 1998,
January 2, 1999 and January 1, 2000.................................... F-6
Notes to Consolidated Financial Statements................................ F-7 - F-45
2. Financial Statement Schedule:
Schedule II. Valuation and Qualifying Accounts and Reserves............. S-1
</TABLE>
All other schedules for which provision is made in the applicable
accounting regulations of the Securities and Exchange Commission which are
not included with this additional financial data have been omitted because
they are not applicable or the required information is shown in the
Consolidated Financial Statements or Notes thereto.
3. List of Exhibits:
2.1 Tender Offer Statement on Schedule 14D-1, dated November 17, 1999
(incorporated herein by reference to Exhibit 2.1 to the Company's
Form 8-K filed January 18, 2000).
2.2 Amendment No.1 to Schedule 14D-1 and Schedule 13D, dated December 16, 1999
(incorporated herein by reference to Exhibit 2.2 to the Company's
Form 8-K filed January 18, 2000).
3.1 Amended and Restated Certificate of Incorporation of the Company
(incorporated herein by reference to Exhibit 3.1 to the Company's Form
10-Q filed May 16, 1995)
3.2 Amended Bylaws of the Company (incorporated by reference to Exhibit 3.2 to
the Company's Form 10-K filed April 4, 1997).
4.1 Registration Rights Agreement dated March 14, 1994 between the Company and
Calvin Klein, Inc. ("CK") (incorporated herein by reference to Exhibit 4.1
to the Company's Form 10-Q filed May 24, 1994).
4.2 Amended and Restated Declaration of Trust of Designer Finance Trust, dated
as of November 6, 1996, among Designer Holdings, as Sponsor, IBJ Schroder
Bank & Trust Company, as Property Trustee, Delaware Trust Capital
Management, Inc. as Delaware Trustee and Merril M. Halpern and Arnold H.
Simon, as Trustees (incorporated herein by reference to Exhibit 4.1 to the
Company's Form 10-Q filed November 12, 1997).
4.3 First Supplemental Indenture dated as of March 31, 1998, between Designer
Holdings, The Warnaco Group, Inc. and IBJ Schroder Bank & Trust Company,
as Trustee (incorporated herein by reference to Exhibit 4.3 to the
Company's Form 10-K filed April 3, 1998)
4.4 Preferred Securities Guarantee Agreement dated as of March 31, 1998,
between The Warnaco Group, Inc., as Guarantor and IBJ Schroder Bank &
Trust Company, as Preferred Guarantee Trustee, with respect to the
Preferred Securities of Designer Finance Trust (incorporated herein by
reference to Exhibit 4.4 to the Company's Form 10-K filed April 3, 1998).
4.5 Rights Agreement, dated as of August 19, 1999 between the Warnaco Group,
Inc. and the Bank of New York (incorporated herein by reference to Exhibit
4.5 to the Company's Form 8-K filed August 20, 1999.
35
<PAGE>
10.1 Credit Agreement, dated as of August 12, 1997 (the 'U.S. $600,000,000
Credit Agreement'), among Warnaco Inc., as Borrower, and The Bank of Nova
Scotia and Citibank, N.A. as Managing Agents, Citibank, N.A. as
Documentation Agent, the Bank of Nova Scotia as Administrative Agent,
Competitive Bid Agent, Swing Line Bank and an Issuing Bank and certain
other lenders named therein (incorporated herein by reference to Exhibit
10.1 to the Company's Form 10-Q filed November 12, 1997)
10.2 Second Amended and Restated Credit Agreement, dated as of August 12, 1997
(the 'U.S. $300,000,000 Credit Agreement'), among Warnaco Inc., as the
U.S. Borrower, Warnaco (HK) Ltd., as the Foreign Borrower, Citibank, N.A.,
as the Documentation Agent, The Bank of Nova Scotia, as the Administrative
Agent, and certain other lenders named therein (incorporated herein by
reference to Exhibit 10.2 to the Company's Form 10-Q filed November 12,
1997).
10.3 First Amendment to the U.S. $300,000,000 Credit Agreement, dated as of
October 14, 1997 among Warnaco Inc., as the U.S. Borrower, Warnaco (HK)
Ltd. as the Foreign Borrower, Citibank, N.A., as the Documentation Agent,
The Bank of Nova Scotia, as Administrative Agent, and certain other
lenders party thereto (incorporated herein by reference to Exhibit 10.3 to
the Company's Form 10-Q filed November 12, 1997).
10.4 Employment Agreement, dated as of January 6, 1991, between the Company and
Linda J. Wachner (incorporated herein by reference to Exhibit 10.7 to the
Company's Registration Statement on Form S-1, No. 33-42641).
10.5 Incentive Compensation Plan (incorporated herein by reference to Exhibit
10.8 to the Company's Registration on Form S-1, No. 33-45877).
10.6 1991 Stock Option Plan (incorporated herein by reference to Exhibit 10.9
to the Company's Registration Statement on Form S-1, No. 33-45877).
10.7 Amended and Restated 1988 Employee Stock Purchase Plan, as amended
(incorporated herein by reference to Exhibit 10.10 to the Company's
Registration Statement on Form S-1, No. 33-45877).
10.8 Warnaco Employee Retirement Plan (incorporated herein by reference to
Exhibit 10.11 to the Company's Registration Statement on Form S-1, No.
33-4587
10.9 Executive Management Agreement, dated as of May 9, 1991, as extended,
between the Company, Warnaco Inc. and The Spectrum Group, Inc.
(incorporated herein by reference to Exhibit 10.13 to the Company's
Registration Statement on Form S-1, No. 33-45877
10.10 1993 Non-Employee Director Stock Plan (incorporated herein by reference to
the Company's Proxy Statement for its 1994 Annual Meeting of
Stockholders).
10.11 Amended and Restated 1993 Stock Plan (incorporated herein by reference to
the Company's Proxy Statement for its 1994 Annual Meeting of
Stockholders).
10.12 The Warnaco Group, Inc. Supplemental Incentive Compensation Plan
(incorporated herein by reference to the Company's Proxy Statements for
its 1994 and 1999 Annual Meetings of Stockholders).
10.13 Amended and Restated License Agreement dated as of January 1, 1996,
between Polo Ralph Lauren, L.P. and Warnaco Inc. (incorporated herein by
reference to Exhibit 10.4 to the Company's Form 10-Q filed November 12,
1997).
10.14 Amended and Restated Design Services Agreement dated as of January 1,
1996, between Polo Ralph Lauren Enterprises, L.P. and Warnaco Inc.
(incorporated herein by reference to Exhibit 10.5 to the Company's Form
10-Q filed November 12, 1997).
10.15 Agreement and Plan of Merger dated as of September 25, 1997 among The
Warnaco Group, Inc., WAC Acquisition Corporation and Designer Holdings
Ltd. (incorporated herein by reference to Exhibit 2, attached as Appendix
A to the Joint Proxy Statement/Prospectus to the Company's Registration
Statement on Form S-4, No. 333-40207).
36
<PAGE>
10.16 Stock Exchange Agreement dated as of September 25, 1997 among The Warnaco
Group, Inc, New Rio, L.L.C. and each of the members of New Rio signatory
hereto (incorporated herein by reference to Exhibit 10.1, attached as
Appendix B to the Joint Proxy Statement/Prospectus to the Company's
Registration Statement on Form S-4, No. 333-40207).
10.17 1997 Stock Option Plan (incorporated herein by reference to Exhibit 10.17
to the Company's Form 10-K filed April 3, 1998).
10.18 License Agreement dated as of August 4, 1994 between Calvin Klein, Inc.
and Calvin Klein Jeanswear Company; incorporated by reference to Exhibit
10.20 to Designer Holdings, Ltd.'s Registration Statement on Form S-1
(File No. 333-2236).
10.19 Amendment to the Calvin Klein License Agreement dated as of December 7,
1994; incorporated by reference to Exhibit 10.21 to Designer Holdings,
Ltd.'s Registration Statement on Form S-1 (File No. 333-2236).
10.20 Amendment to the Calvin Klein License Agreement dated as of January 10,
1995; incorporated by reference to Exhibit 10.22 to Designer Holdings,
Ltd.'s Registration Statement on Form S-1 (File No.333-2236).
10.21 Amendment to the Calvin Klein License Agreement dated as of February 28,
1995; incorporated by reference to Exhibit 10.23 to Designer Holdings,
Ltd.'s Registration Statement on Form S-1 (File No. 333-2236).
10.22 Amendment to the Calvin Klein License Agreement dated as of April 22,
1996; incorporated by reference to Exhibit 10.38 to Designer Holdings,
Ltd.'s Registration Statement on Form S-1 (File No. 333-2236).
10.23 Amendment No. 1, dated as of July 31, 1998, to the Credit Agreement dated
as of August 12, 1997, among Warnaco Inc. and The Warnaco Group, Inc., as
Borrowers, and The Bank of Nova Scotia, as Managing Agent and
Administrative Agent and Citibank N.A., as Managing Agent, and certain
other lenders named therein. (incorporated herein by reference to Exhibit
10.1 to the Company's Form 10-Q filed August 18, 1998).
10.24 Amendment No. 1, dated as of July 31, 1998, to the Credit Agreement dated
as of November 26, 1997, among Warnaco Inc. and The Warnaco Group, Inc.,
as Borrowers, and The Bank of Nova Scotia, as Managing Agent and
Administrative Agent and Citibank N.A., as Managing Agent, and certain
other lenders named therein. (incorporated herein by reference to Exhibit
10.2 to the Company's Form 10-Q filed August 18, 1998).
10.25 Fifth Amended and Restated Credit Agreement, dated as of July 31, 19988,
among Warnaco Inc., as the U.S. Borrower, Designer Holdings, Ltd. and
other wholly-owned domestic subsidiaries as designated from time to time,
as the Sub-Borrowers, Warnaco (HK) Ltd., Warnaco B.V., Warnaco Netherlands
B.V., as the Foreign Borrowers, the Warnaco Group, Inc., as a Guarantor,
and Societe Generale, as the Documentation Agent, Citibank, N.A., as the
Syndication Agent, and The Bank of Nova Scotia, as the Administrative
Agent, and certain other lenders named therein. (incorporated herein by
reference to Exhibit 10.3 to the Company's Form 10-Q filed August 18,
1998).
10.26 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. (incorporated herein by reference to Exhibit 10.4 to
the Company's Form 10-Q filed November 7, 1998).
10.27 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. (incorporated herein by reference to Exhibit 10.5 to the
Company's Form 10-Q filed November 7, 1998).
10.28 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. (incorporated herein by reference to Exhibit 10.6
to the Company's Form 10-Q filed November 7, 1998).
10.29 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.
37
<PAGE>
(incorporated herein by reference to Exhibit 10.7 to the Company's Form
10-Q filed November 7, 1998).
10.30 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. (incorporated herein by
reference to Exhibit 10.8 to the Company's Form 10-Q filed November 7,
1998).
10.31 1998 Stock Plan for Non-Employee Directors.
10.32 Agreement and Plan of Merger dated as of November 15, 1999 by and among
The Warnaco Group, Inc., A Acquisition Corp. and Authentic Fitness
Corporation (incorporated herein by reference to Exhibit C, to the
Company's Schedule 14D1 filed November 17, 1999).
10.33 U.S. $600,000,000 364-Day Credit Agreement, dated as of November 17, 1999
among Warnaco Inc., as Borrower, Morgan Guaranty Trust Company of New York
as Documentation Agent, The Bank of Nova Scotia as Administration Agent
and certain other lenders party thereto (incorporated herein by reference
to Exhibit B to the Company's Schedule 14D-1 filed November 17, 1999).
10.34 U.S. $600,000,000 Amended and Restated Credit Agreement dated as of
November 17, 1999 among Warnaco Inc. as Borrower, The Bank of Nova
Scotia as Administrative Agent, and Citibank, N.A. as Syndication Agent
amending Credit agreement dated August 12, 1997.
10.35 Five-Year Credit Agreement dated as of November 17, 1999 among Warnaco
Inc. as Borrower, The Bank of Nova Scotia as Administrative Agent,
Citibank, N.A. as Syndication Agent and Societe Generale and CommerzBank
AG as Co-Documentation Agents.
10.36 Sixth Amended and Restated Credit Agreement, dated as of November 17,
1999, among Warnaco Inc., as the U.S. Borrower, Designer Holdings,
Ltd., as the Sub Borrower, Those Wholly-owned Domestic Subsidiaries
Designated From Time To Time, as the Warnaco Sub Borrowers,
Warnaco (HK) Ltd., Warnaco B.V., Warnaco Netherlands B.V. and Warnaco
Holland B.V., as the Foreign Borrowers, The Warnaco Group, Inc., as a
Guarantor, Certain Financial Institutions, as the Lenders, and The Bank
of Nova Scotia, as the Administrative Agent for the Lenders.
21 Subsidiaries of the Company.
23.1 Consent of Deloitte & Touche LLP
23.2 Consent of PricewaterhouseCooopers LLP
27 Financial Data Schedule.
99.1 Designer Holdings, Ltd. Annual Report on Form 10-K for the year ended
December 31, 1996 (incorporated herein by reference -- Commission file
number 1-11707).
99.2 Authentic Fitness Corporation Annual Report on Form 10-K for the fiscal
year ended July 3, 1999 (incorporated herein by reference -- Commission
file number 1-11202).
(b) Reports on Form 8-K.
The Company filed reports on Form 8-K on August 20, 1999 and November 26,
1999.
38
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this Report to be signed on
its behalf by the undersigned, thereunto duly authorized in the City of New
York, State of New York, on the 3rd day of April, 2000.
THE WARNACO GROUP, INC.
/s/ LINDA J. WACHNER
--------------------
Linda J. Wachner
Chairman, President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed by the following persons in the capacities and on the
dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
<S> <C> <C>
/s/ LINDA J. WACHNER Chairman of the Board; Director; April 3, 2000
- -------------------------------------- President and Chief Executive
Linda J. Wachner Officer (Principal Executive Officer)
/s/ WILLIAM S. FINKELSTEIN Director; Senior Vice President, and April 3, 2000
- -------------------------------------- Chief Financial Officer (Principal
William S. Finkelstein Financial and Accounting Officer)
/s/ STUART D. BUCHALTER Director April 3, 2000
- --------------------------------------
Stuart D. Buchalter
/s/ JOSEPH A CALIFANO, JR. Director April 3, 2000
- --------------------------------------
Joseph A. Califano, Jr.
/s/ DONALD G. DRAPKIN Director April 3, 2000
- --------------------------------------
Donald G. Drapkin
/s/ JOSEPH H. FLOM, ESQ. Director April 3, 2000
- --------------------------------------
Joseph H. Flom, Esq.
/s/ ANDREW G. GALEF Director April 3, 2000
- --------------------------------------
Andrew G. Galef
/s/ WALTER F. LOEB Director April 3, 2000
- --------------------------------------
Walter F. Loeb
/s/ DR. MANUEL T. PACHECO Director April 3, 2000
- --------------------------------------
Dr. Manuel T. Pacheco
/s/ STEWART A. RESNICK Director April 3, 2000
- --------------------------------------
Stewart A. Resnick
</TABLE>
39
<PAGE>
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders of
The Warnaco Group, Inc.
We have audited the accompanying consolidated balance sheet of The Warnaco Group
Inc. and its subsidiaries as of January 1, 2000 and the related consolidated
statements of operations, stockholders' equity and comprehensive income and cash
flows for the year then ended. Our audit also included the financial statement
schedule for the year ended January 1, 2000 listed in the Index at Item 14(a) 2.
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on the financial statements and financial statement schedule based on
our audit.
We conducted our audit in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, such consolidated financial statements present fairly, in all
material respects, the financial position of The Warnaco Group, Inc. and
subsidiaries as of January 1, 2000, and the results of their operations and
their cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America. Also, in our
opinion, such financial statement schedule for the year ended January 1, 2000,
when considered in relation to the basic consolidated financial statements taken
as a whole, presents fairly in all material respects the information set forth
therein.
DELOITTE & TOUCHE LLP
New York, New York
March 3, 2000
F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of
The Warnaco Group, Inc.
In our opinion, the accompanying consolidated financial statements listed in the
index appearing under Item 14(a)(1) and (2) on page 35 present fairly, in all
material respects, the financial position of The Warnaco Group, Inc. and its
subsidiaries at January 2, 1999, and the results of their operations and their
cash flows for each of the two fiscal years in the period ended January 2, 1999,
in conformity with accounting principles generally accepted in the United
States. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with auditing standards generally accepted in the United States which
require that we plan and perform the audit to obtain reasonable assurance about
whether the financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for the opinion expressed above.
As described in Note 1 to the fiscal 1998 consolidated financial statements,
pursuant to the adoption of SOP 98-5 the Company changed its accounting for
deferred start-up costs effective the beginning of fiscal 1998. Also as
described in Note 1 to the fiscal 1998 consolidated financial statements, the
Company restated its fiscal 1997 and 1996 consolidated financial statements with
respect to accounting for inventory production and inefficiency costs.
PRICEWATERHOUSECOOPERS LLP
New York, New York
March 2, 1999
F-2
<PAGE>
THE WARNACO GROUP, INC.
CONSOLIDATED BALANCE SHEETS
(In thousands, excluding share data)
<TABLE>
<CAPTION>
January 2, January 1,
1999 2000
------------ -----------
ASSETS
<S> <C> <C>
Current assets:
Cash $ 9,495 $ 9,328
Accounts receivable, less reserves of $36,668 - 1998 and $32,872 - 1999 199,369 314,961
Marketable securities -- 72,921
Inventories 472,019 734,439
Prepaid expenses and other current assets 26,621 66,015
----------- -----------
Total current assets 707,504 1,197,664
----------- -----------
Property, plant and equipment, at cost:
Land and land improvements 7,060 8,158
Building and building improvements 81,928 113,974
Machinery and equipment 255,163 357,166
----------- -----------
344,151 479,298
Less: Accumulated depreciation and amortization (119,891) (152,946)
----------- -----------
Net property, plant and equipment 224,260 326,352
Other assets:
Licenses, trademarks, intangible and other assets, at cost, less
accumulated amortization of $78,116 -- 1998 and $86,606 -- 1999 306,932 337,997
Excess of cost over net assets acquired, less accumulated amortization
of $51,297 - 1998 and $66,551 - 1999 417,782 842,262
Deferred income taxes 126,655 58,710
----------- -----------
Total other assets 851,369 1,238,969
----------- -----------
$ 1,783,133 $ 2,762,985
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Current portion of long-term debt $ 9,387 $ 11,052
Short-term debt 20,844 133,752
Accounts payable 503,326 599,768
Accrued liabilities 128,248 111,262
Accrued income taxes payable 3,068 16,217
Deferred income taxes 14,276 7,468
----------- -----------
Total current liabilities 679,149 879,519
----------- -----------
Long-term debt 411,886 1,187,951
----------- -----------
Other long-term liabilities 12,129 29,295
----------- -----------
Commitment and Contingencies (Note 8, 11, 15 and 18)
Company-Obligated Mandatorily Redeemable Convertible Preferred
Securities ($120,000-par value) of Designer Finance Trust Holding
Solely Convertible Debentures 101,836 102,904
Stockholders' equity: (Note 13)
Class A Common Stock, $0.01 par value, 130,000,000 shares authorized,
65,172,608 and 65,393,038 issued in 1998 and 1999 652 654
Additional paid-in capital 953,512 961,368
Accumulated other comprehensive income (loss) (15,703) 24,877
Accumulated deficit (176,997) (99,461)
Treasury stock, at cost - 6,087,674 shares -1998 and 12,163,650 shares - 1999 (171,559) (313,138)
Unearned stock compensation (11,772) (10,984)
----------- -----------
Total stockholders' equity 578,133 563,316
----------- -----------
$ 1,783,133 $ 2,762,985
=========== ===========
</TABLE>
This Statement should be read in conjunction with the accompanying
Notes to Consolidated Financial Statements.
F-3
<PAGE>
THE WARNACO GROUP, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, excluding per share data)
<TABLE>
<CAPTION>
For the Year Ended
-----------------------------------------------------
January 3, January 2, January 1,
1998 1999 2000
----------------- ---------------- ---------------
<S> <C> <C> <C>
Net revenues $ 1,435,730 $ 1,950,251 $ 2,114,156
Cost of goods sold 1,060,526 1,413,036 1,413,149
Selling, administrative and general expenses 349,431 451,640 471,108
----------- ----------- -----------
Operating income 25,773 85,575 229,899
Interest expense 45,873 63,790 80,976
----------- ----------- -----------
Income (loss) before income taxes and cumulative effect of
change in accounting principle (20,100) 21,785 148,923
Provision (benefit) for income taxes (7,781) 7,688 51,137
----------- ----------- -----------
Income (loss) before cumulative effect of a change in
accounting principle (12,319) 14,097 97,786
Cumulative effect of change in accounting for deferred
start-up costs, net -- (46,250) --
----------- ----------- -----------
Net income (loss) $ (12,319) $ (32,153) $ 97,786
=========== =========== ===========
Basic earnings (loss) per common share:
Income (loss) before accounting change $ (0.23) $ 0.23 $ 1.75
Cumulative effect of accounting change -- (0.75) --
----------- ----------- -----------
Net income (loss) $ (0.23) $ (0.52) $ 1.75
=========== =========== ===========
Diluted earnings (loss) per common share:
Income (loss) before accounting change $ (0.23) $ 0.22 $ 1.72
Cumulative effect of accounting change -- (0.73) --
----------- ----------- -----------
Net income (loss) $ (0.23) $ (0.51) $ 1.72
=========== =========== ===========
Shares used in computing earnings per share:
Basic 52,814 61,362 55,910
=========== =========== ===========
Diluted 52,814 63,005 56,796
=========== =========== ===========
</TABLE>
This Statement should be read in conjunction with the accompanying
Notes to Consolidated Financial Statements.
F-4
<PAGE>
THE WARNACO GROUP, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
(In thousands, excluding share data)
<TABLE>
<CAPTION>
Accumulated
Other
Class A Additional Comprehensive
Common Paid-in Income Accumulated
Stock Capital (Loss) Deficit
---------- ------------ ------------- -----------
<S> <C> <C> <C> <C>
Balance at January 4, 1997 $ 524 $ 575,691 $ (3,307) $ (92,837)
---------- ------------ ------------- -----------
Net loss (12,319)
Translation adjustments (11,531)
Comprehensive income (loss)
Issuance of 137,135 shares of
restricted stock 1 3,600
Dividends declared (17,265)
Employee stock options exercised
and payment of employee
notes receivable 4 9,498
Net cash settlements under equity
option arrangements (1,620)
Amortization of unearned stock
compensation
Purchase of 839,319 shares of
treasury stock
Issuance of 10,413,144 shares for the
acquisition of Designer Holdings Ltd. 104 353,292
---------- ------------ ------------- ------------
Balance at January 3, 1998 633 940,461 (14,838) (122,421)
---------- ------------ ------------- ------------
Net loss (32,153)
Translation adjustments (865)
Comprehensive income (loss)
Employee stock options exercised
and payment of employee
note receivable 17 3,046
Net cash settlements under equity
option arrangements 2,325
Issuance of 182,903 shares of
restricted stock 2 7,680
Dividends declared (22,423)
Amortization of unearned stock
compensation
Purchase of 4,794,699 shares of
treasury stock
---------- ------------ ------------- -----------
Balance at January 2, 1999 652 953,512 (15,703) (176,997)
---------- ------------ ------------- -----------
Net income 97,786
Translation adjustments 1,614
Unrealized gain on marketable securities 38,966
Comprehensive income
Employee stock options exercised 3,131
Issuance of 190,680 shares of
restricted stock 2 5,456
Dividends declared (20,250)
Amortization of unearned stock
compensation
Purchase of 6,182,088 shares of
treasury stock
Issuance of 100,000 shares of
treasury stock for acquisition of ABS (731)
---------- ------------ ------------- -----------
Balance at January 1, 2000 $ 654 $ 961,368 $ 24,877 $ (99,461)
========== ============ ============= ===========
<CAPTION>
Treasury Unearned Stock
Stock Compensation Total
------------- ------------- ----------
<S> <C> <C> <C>
Balance at January 4, 1997 $(12,030) $ (15,497) $ 452,544
------------- ------------- ----------
Net loss (12,319)
Translation adjustments (11,531)
----------
Comprehensive income (loss) (23,850)
Issuance of 137,135 shares of
restricted stock (3,601) -
Dividends declared (17,265)
Employee stock options exercised
and payment of employee
notes receivable 70 9,572
Net cash settlements under equity
option arrangements (1,620)
Amortization of unearned stock
compensation 3,322 3,322
Purchase of 839,319 shares of
treasury stock (26,537) (26,537)
Issuance of 10,413,144 shares for the
acquisition of Designer Holdings Ltd. 353,396
-------------- -------------- ----------
Balance at January 3, 1998 (38,567) (15,706) 749,562
-------------- -------------- ----------
Net loss (32,153)
Translation adjustments (865)
----------
Comprehensive income (loss) (33,018)
Employee stock options exercised
and payment of employee
note receivable 2,424 5,971 11,458
Net cash settlements under equity
option arrangements 2,325
Issuance of 182,903 shares of
restricted stock (7,682) -
Dividends declared (22,423)
Amortization of unearned stock
compensation 5,645 5,645
Purchase of 4,794,699 shares of
treasury stock (135,416) (135,416)
------------- ------------- ----------
Balance at January 2, 1999 (171,559) (11,772) 578,133
------------- ------------- ----------
Net income 97,786
Translation adjustments 1,614
Unrealized gain on marketable securities 38,966
----------
----------
Comprehensive income 138,366
Employee stock options exercised 178 3,309
Issuance of 190,680 shares of
restricted stock (5,458) -
Dividends declared (20,250)
Amortization of unearned stock
compensation 6,246 6,246
Purchase of 6,182,088 shares of
treasury stock (144,688) (144,688)
Issuance of 100,000 shares of
treasury stock for acquisition of ABS 2,931 2,200
------------- ------------- ----------
Balance at January 1, 2000 $(313,138) $ (10,984) $ 563,316
============= ============= ==========
</TABLE>
This Statement should be read in conjunction with the accompanying
Notes to Consolidated Financial Statements.
F-5
<PAGE>
THE WARNACO GROUP, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<TABLE>
<CAPTION>
For the Year Ended
----------------------------------------------------
January 3, January 2, January 1,
1998 1999 2000
--------------- ------------------ ----------------
Cash flow from operating activities:
<S> <C> <C> <C>
Net income (loss) $ (12,319) $ (32,153) $ 97,786
Adjustments to reconcile net income (loss) to net cash from
operating activities:
Depreciation and amortization 47,385 46,500 60,956
Provision for receivable allowances 139,469 166,347 206,098
Provision for inventory write-downs 57,298 25,442 6,247
Cumulative effect of accounting change - 46,250 -
Amortization of unearned stock compensation 3,322 4,978 6,246
Non-recurring items 48,806 95,143 -
Deferred income taxes (13,906) (74,616) 34,151
Sale of accounts receivable - 170,500 25,400
Accounts receivable (145,652) (250,109) (268,767)
Inventories (71,944) (87,404) (153,491)
Prepaid expenses and other current assets 26,377 15,433 (17,797)
Accounts payable and accrued expenses 94,015 212,549 13,182
Cash portion of non-recurring items (28,972) (5,200) -
---------- ---------- ----------
Net cash from operating activities 143,879 333,660 10,011
---------- ---------- ----------
Cash flow from investing activities:
Proceeds from sale/leaseback transaction 33,223 21,713 23,185
Disposal of fixed assets 1,704 3,966 4,726
Increase in intangibles and other assets (26,964) (7,849) (29,813)
Purchase of property, plant and equipment (57,399) (142,787) (109,088)
Acquisition of businesses, net of cash acquired 55,800 (53,118) (625,515)
Payment of assumed liabilities and acquisition accruals (28,346) (43,765) -
---------- ---------- ----------
Net cash from investing activities (21,982) (221,840) (736,505)
---------- ---------- ----------
Cash flow from financing activities:
Proceeds from sale of common stock, sale of treasury
shares and payment of notes receivables from employees 7,270 46,476 3,309
Net borrowings (repayments) under credit facilities (153,394) 49,237 315,075
Borrowings under term loan agreements - 20,706 -
Borrowings under acquisition loan facility - - 586,200
Proceeds from debt issuance 291,109 2,027 -
Repayments of debt (224,281) (6,094) (9,387)
Cash dividends paid (16,220) (22,284) (20,631)
Payment of withholding taxes on option exercises (575) (38,095) (2,640)
Purchase of treasury shares and net cash settlements under
equity option arrangements (27,582) (132,992) (142,048)
Other (1,492) (35,280) (5,165)
---------- ---------- ----------
Net cash from financing activities (125,165) (116,299) 724,713
---------- ---------- ----------
Effect on cash due to currency translation 3,437 1,965 1,614
---------- ---------- ----------
Increase (decrease) in cash 169 (2,514) (167)
Cash at beginning of year 11,840 12,009 9,495
---------- ---------- ----------
Cash at end of year $ 12,009 $ 9,495 $ 9,328
========== ========== ==========
</TABLE>
F-6
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
Note 1 - Nature of Operations and Summary of Significant Accounting Policies
Organization: The Warnaco Group, Inc. (the "Company") was incorporated in
Delaware on March 14, 1986 and on May 10, 1986 acquired substantially all of the
outstanding shares of Warnaco Inc. ("Warnaco"). Warnaco is the principal
operating subsidiary of the Company.
Nature of Operations: The Company designs, manufactures and markets a
broad line of women's intimate apparel, designer jeanswear, khakis and jeans
related sportswear for men, women, juniors and children, men's underwear and
men's sportswear, accessories and dress furnishings and active apparel for men,
women and children under a number of owned and licensed brand names. The
Company's products are sold to department and specialty stores, chain stores,
mass merchandise stores, sporting goods stores, and catalog and other retailers
throughout the world.
Basis of Consolidation and Presentation: The accompanying consolidated
financial statements include the accounts of the Company and all subsidiary
companies for the years ended January 3, 1998 ("Fiscal 1997"), January 2, 1999
("Fiscal 1998") and January 1, 2000 ("Fiscal 1999"). All significant
intercompany accounts and transactions are eliminated in consolidation.
Use of Estimates: The Company utilizes estimates and assumptions in the
preparation of financial statements in conformity with generally accepted
accounting principles. These estimates and assumptions affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements. These estimates and
assumptions also affect the reported amounts of revenues and expenses during the
reporting periods. Actual results could differ from these estimates.
Translation of Foreign Currencies: Cumulative translation adjustments,
arising primarily from consolidating the net assets and liabilities of the
Company's foreign operations at current rates of exchange as of the respective
balance sheet date, are applied directly to stockholders' equity and are
included as part of accumulated other comprehensive income (loss). Income and
expense items for the Company's foreign operations are translated using monthly
average exchange rates.
Cash and Cash equivalents: Cash and cash equivalents represent cash and
short-term, highly liquid investments with original maturities of three months
or less.
Marketable Securities: Marketable securities are stated at fair value
based on quoted market prices. All investments were classified as
available-for-sale with any unrealized gains or losses, net of tax, included as
a component of stockholders' equity and included in other comprehensive income.
Inventories: Inventories are stated at the lower of cost or market, cost
being determined principally on a first-in, first-out basis.
Property, plant and equipment: Property, plant and equipment are stated at
cost less accumulated depreciation and amortization. Depreciation and
amortization are provided over the lesser of the estimated useful lives of the
assets or term of the lease, using the straight-line method, as summarized
below:
Buildings............................... 20-40 years
Building improvements................... 2-20 years
Machinery and equipment................. 3-10 years
Computer software ...................... 3- 7 years
F-7
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
Assets under capital lease and related amortization of capitalized leases
are included in property, plant and equipment and accumulated depreciation and
the associated liability is included in debt. Depreciation expense was $21,865,
$23,931 and $36,671 for fiscal years 1997, 1998 and 1999, respectively.
Computer Software Costs: Internal and external direct and incremental
costs incurred in developing or obtaining computer software for internal use are
capitalized in property, plant and equipment and amortized, under the
straight-line method, over the estimated useful life of the software, generally
3 to 7 years. General and administrative costs related to developing or
obtaining such software are expensed as incurred.
Intangible Assets: Intangible assets consist of goodwill, licenses,
trademarks, deferred financing costs and other intangible assets. Goodwill
represents the excess of cost over net assets acquired from business
acquisitions, and is amortized on a straight-line basis over the estimated
useful life, not exceeding 40 years. Deferred financing costs are amortized
over the life of the related debt and included in interest expense. Deferred
financing costs were $8,620 and $13,399 in fiscal years 1998 and 1999,
respectively. Licenses and trademarks were $243,400 in fiscal 1998 and
$272,894 in fiscal 1999. Licenses are amortized over the remaining life
of the license, which range between 5 and 40 years and trademarks are
amortized over the remaining life of the trademark not to exceed 20 years.
Other assets of $54,912 in fiscal 1998 and $51,704 in fiscal 1999 include
long-term investments, other non-current assets and deposits. Amortization
of intangible assets, included in selling, administrative and general expenses
was $10,021, $22,569 and $24,285 for fiscal years 1997, 1998 and 1999,
respectively.
The Company reviews impairment when changes in circumstances, which
include, but are not limited to, the historical and projected operating
performance of business operations, specific industry trends and general
economic conditions, indicate that the carrying value of business specific
intangibles or enterprise level goodwill may not be recoverable. Under these
circumstances, the Company estimates future cash flows using the recoverability
method (undiscounted and including related interest charges), as a basis for
recording any impairment loss. An impairment loss would then be recorded to
adjust the carrying value of intangibles to the recoverable amount. The
impairment loss taken would be no greater than the amount by which the carrying
value of the net assets of the business exceeds its fair value. No such
impairment losses have been recorded.
Advertising Costs: Advertising costs are included in selling,
administrative and general expenses and expensed as incurred. Cooperative
advertising allowances provided to customers are charged to operations, as
earned, and are included in selling, administrative and general expenses. The
amounts charged to operations for advertising costs and cooperative advertising
during fiscal 1997, 1998 and 1999 were $86,200, $102,600, and $118,029,
respectively.
Income Taxes: The provision for income taxes, income taxes payable and
deferred income taxes are determined using the liability method. Deferred tax
assets and liabilities are determined based on differences between the financial
reporting and tax basis of assets and liabilities and are measured by applying
enacted tax rates and laws to taxable years in which such differences are
expected to reverse. As of January 1, 2000, unremitted earnings of non-U.S.
subsidiaries were approximately $125,000. Since it is the Company's intention to
permanently reinvest these earnings, no U.S. taxes have been provided.
Management believes that the amount of additional taxes that might be payable on
the statutory earnings of foreign subsidiaries, if remitted, would be partially
offset by foreign tax credits, however, the determination of these additional
taxes is not practicable.
F-8
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
Revenue Recognition: The Company recognizes revenue when goods are shipped
to customers, net of estimates for normal returns, discounts and allowances.
Stock Options: The Company accounts for options granted using the
intrinsic value method. Because the exercise price of the Company's options
equals the market value of the underlying stock on the date of grant, no
compensation expense has been recognized for any period presented.
Financial Instruments: Derivative financial instruments are used by the
Company in the management of its interest rate and foreign currency exposures.
The Company also uses derivative financial instruments to execute purchases of
its shares under its stock buyback program. The Company does not use derivative
financial instruments for speculation or for trading purposes. Gains and losses
resulting from effective hedges of existing assets, liabilities or firm
commitments are deferred and recognized when the offsetting gains and losses are
recognized on the related hedged items. Income and expense are recorded in the
same category as that arising from the related asset or liability being hedged.
Changes in amounts to be received or paid under interest rate swap agreements
are recognized as interest expense. Gains and losses realized on termination of
interest rate swap contracts are deferred and amortized over the remaining terms
of the original hedged instrument. Premiums paid for foreign currency option
contracts are amortized over the life of the option contract.
A number of major international financial institutions are counterparties
to the Company's financial instruments, including derivative financial
instruments. The Company monitors its positions with, and the credit quality of,
these counterparty financial institutions and does not anticipate
non-performance of these counterparties. Management believes that the Company
would not suffer a material loss in the event of nonperformance by these
counterparties.
Equity Instruments Indexed to the Company's Common Stock: Equity
instruments are originally recorded at fair value. Proceeds received upon the
sale of equity instruments and amounts paid upon the purchase of equity
instruments are recorded as a component of stockholders' equity. Subsequent
changes in the fair value of the equity instrument contracts are not recognized.
Repurchases of common stock pursuant to the terms of the equity instruments are
recorded as treasury stock, at cost. If the contracts are ultimately settled in
cash, the amount of cash paid or received is recorded in additional paid-in
capital.
Concentration of Credit Risk: The Company sells its products to department
stores, specialty stores, chain stores, sporting goods stores, catalogs, direct
sellers and mass merchandisers. The Company performs periodic credit evaluations
of its customers' financial condition and generally does not require collateral.
The Company has credit insurance covering these customers within agreed upon
limits. Credit losses have been within management's expectations.
Comprehensive Income: Comprehensive income consists of net income,
unrealized gain/(loss) on marketable securities (net of tax), and cumulative
foreign currency translation adjustments. Because such cumulative translation
adjustments are considered a component of permanently invested unremitted
earnings of subsidiaries outside the United States, no income taxes are provided
on such amounts.
Start-Up Costs: In the fourth quarter of fiscal 1998, retroactive to the
beginning of the year, the Company early adopted the provisions of SOP 98-5
requiring that pre-operating costs relating to the start-up of new manufacturing
facilities, product lines and businesses be expensed as incurred. The Company
recognized $46,250, after taxes ($71,484 pre-tax), as the cumulative effect of a
change in accounting to reflect the new accounting and write-off the balance of
unamortized deferred start-up costs as of the beginning of 1998. In addition,
in fiscal 1998 the Company recognized a charge to earnings of approximately
$40,823, before taxes, related to current year costs that would have been
deferred under the Company's start-up accounting policy prior to the adoption of
SOP 98-5. Prior to the early adoption
F-9
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
of SOP 98-5, start-up costs were deferred and amortized using the straight line
method, principally over five years.
Reclassifications: Certain 1998 and 1997 amounts have been reclassified in
the 1999 consolidated financial statements to conform to the current
presentation.
Recent accounting pronouncements: In June 1998, the FASB issued SFAS No.
133 "Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
was originally effective for fiscal years beginning after June 15, 1999.
However, in June 1999, the FASB Issued SFAS No. 137 "Deferral of the effective
date of FASB Statement No. 133" delaying the effective date of SFAS No. 133
until fiscal years beginning after June 15, 2000. The Company is evaluating the
application of the new statement and the impact on the Company's consolidated
financial position, liquidity, cash flows and results of operations.
Note 2 - Acquisitions
Authentic Fitness
In December 1999, the Company acquired all of the outstanding common stock
of Authentic Fitness Corporation ("Authentic Fitness") for $437,100 (all of
which was financed), excluding debt assumed of approximately $154,170 and other
costs incurred in the acquisition of $3,255. The acquisition was accounted for
as a purchase. Accordingly, the accompanying consolidated financial statements
include the results of operations for Authentic Fitness commencing on
December 16, 1999. The preliminary allocation of the total purchase price,
exclusive of cash acquired of approximately $7,000, to the fair value of the net
assets acquired and liabilities assumed is summarized as follows:
Fair value of assets acquired............................. $ 674,256
Liabilities assumed....................................... (79,731)
-------
Purchase price -- net of cash balance..................... $ 594,525
-------
-------
Included in intangible and other assets for the Authentic Fitness
acquisition is $377,600 of goodwill. The final assessment of the purchase
accounting will be completed during fiscal 2000.
The following summarized unaudited pro forma information combines financial
information of the Company with Authentic Fitness for fiscal years 1998 and 1999
assuming the acquisition had occurred as January 4, 1998. The Unaudited Pro
Forma Combined Statements of Income combine Warnaco's results for its fiscal
years ended January 2, 1999 and January 1, 2000 with Authentic Fitness' results
for the twelve month periods ended January 2, 1999 and January 1, 2000. The
unaudited pro forma information does not reflect any cost savings or other
benefits anticipated by the Company's management as a result of the acquisition.
The unaudited pro forma information reflects interest expense on the additional
financing of $437,100 incurred for the acquisition and the amortization of
goodwill using a 40-year life.
F-10
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
<TABLE>
<CAPTION>
For the Year Ended
---------------------------
January 2, January 1,
Statement of Income Data: 1999 2000
------------ -------------
<S> <C> <C>
Net revenues $ 2,313,280 $ 2,473,771
Income before cumulative effect of change 8,550 65,994
in accounting principle
Net income (loss) $ (37,700) $ 65,994
=========== ===========
Basic earnings per common share before
accounting change $ 0.14 $ 1.18
=========== ===========
Diluted earnings per common share before
accounting change $ 0.14 $ 1.16
=========== ===========
</TABLE>
The unaudited pro forma combined information is not necessarily indicative
of the results of operations of the combined companies, had the acquisition
occurred on the dates specified above, nor is it indicative of future results of
operations for the combined companies at any future date or for any future
periods.
A.B.S. Clothing Collections, Inc.
In September 1999, the Company acquired all of the outstanding common
stock of A.B.S. Clothing Collection, Inc. ("ABS"). ABS is a leading contemporary
designer of casual sportswear and dresses sold through better department and
specialty stores. The purchase price consisted of a cash payment of $29,500,
shares of the Company's common stock with a fair market value of $2,200, a
deferred cash payment of $22,800 and other costs incurred in the acquisition
of approximately $1,208. The acquisition was accounted for as a purchase. The
preliminary allocation of the purchase price to the fair market value of
assets acquired is summarized as follows:
Fair value of asets acquired $59,720
Liabilities assumed 3,901
--------
Purchase price $55,708
=======
The acquisition did not have a material pro-forma impact on fiscal 1999
consolidated earnings. Included in intangible and other assets for the ABS
acquisition is $54,068 of goodwill which is being amortized over 20 years.
Other Acquisitions - 1999
During 1999, the Company acquired two other companies and certain
other licenses to sell products in Canada which were not significant and did not
have a significant pro forma impact on fiscal
F-11
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
1999 consolidated earnings. The excess purchase price over fair value of the net
assets acquired and liabilities assumed on these acquisitions was approximately
$5.0 million.
Other Acquisitions - 1998
During 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 and the
sub-license to produce Calvin Klein jeans and related products for children in
Canada. Also during 1998, the Company 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, Central America and Canada. The total cost of these
acquisitions, including related costs and expenses, was $53,100. The allocation
of the purchase prices to the fair value of the assets acquired as of January 2,
1999 is summarized below:
Inventories................................... $ 2,300
Other current assets.......................... 300
Fixed assets.................................. 300
Intangible and other assets................... 58,018
Accrued liabilities........................... (7,800)
----------
Purchase price................................ $ 53,118
==========
The acquisition which was accounted for as a purchase did not have a
material pro-forma effect on 1998 consolidated results of operations.
Designer Holdings Ltd.
In October 1997, the Company acquired 51.3% of Designer Holdings Ltd.
("Designer Holdings") outstanding common stock in exchange for 5,340,773 shares
of the Company's common stock and agreed, subject to shareholder approval, to
acquire the remaining shares outstanding at the same exchange ratio. In December
1997, the Company acquired the remaining 48.7% of the outstanding common stock
of Designer Holdings in exchange for 5,072,371 shares of the Company's common
stock. Designer Holdings develops, manufactures and markets designer jeanswear,
khakis and jeans related sportswear for men, women and juniors, and has a
40-year extendable license from Calvin Klein, Inc. to develop, manufacture and
market designer jeanswear, khakis and sportswear collections in North, South and
Central America under the Calvin Klein Jeans, CK/Calvin Klein Jeans and
CK/Calvin Klein/Khakis labels.
The acquisition was accounted for as a purchase. Accordingly, the
accompanying consolidated financial statements include the results of operations
for Designer Holdings commencing in October 1997. The minority interest for
periods of less than 100% ownership by the Company have been included in
selling, administrative and general expenses. In connection with this
acquisition, the Company issued a total of 10,413,144 shares of its common
stock, with a fair market value of $353,396. The allocation of the total
purchase price, exclusive of cash received of approximately $55,800 to the fair
value of the net assets acquired is summarized as follows:
Accounts receivable................................... $ 76,600
Inventories .......................................... 74,300
Prepaid and other current assets...................... 41,000
Property and equipment................................ 4,100
Intangible and other assets........................... 355,809
Accounts payable and accrued liabilities.............. (127,325)
Deferred income taxes................................. (25,884)
Other liabilities..................................... (500)
Mandatorily redeemable preferred securities........... (100,500)
--------
Purchase price -- net of cash balances................ $ 297,600
=========
Included in intangible and other assets for the Designer Holdings
acquisition are $163,600 for licenses and $171,500 of goodwill.
F-12
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
Prior to its acquisition by the Company, Designer Holdings experienced
substantial sales growth. A significant portion of this sales growth was
achieved through distribution to jobbers and off-price retailers. Additionally,
Designer Holdings had also announced a significant increase in the number of its
outlet stores. The Company viewed this growth and expansion as detrimental to
the long-term integrity and value of the brand. To sustain its growth strategy,
Designer Holdings committed to large quantities of inventories. When the primary
department store distribution channel was unable to absorb all of Designer
Holdings' committed production, it increased sales to the secondary and tertiary
distribution channels, including sales to jobbers, off-price retailers and
Designer Holdings' own outlet stores, which were expanded to serve as an
additional channel of distribution. The Company's post-acquisition strategy did
not embrace the outlet store expansion or expansion of secondary channels of
distribution, thereby significantly eliminating product distribution, resulting
in excess inventory.
The Company had a different plan from that of Designer Holdings for
realization of inventories and accounts receivable, as follows: Based
upon its strategy for the business, it had to quickly dispose of significantly
higher than desirable levels of inventory. It had to stabilize relationships
with its core department store customers. It had to collect receivable balances
from customers with whom the Company would no longer do business, and had to
respond to challenges from the core department store customers who were
adversely impacted by channel conflict and brand image issues. Finally, the
Company began a complete redesign of the product, the impact of which would not
be immediately felt at retail due to the fact that Designer Holdings had already
committed to inventory that was in production to be delivered for the ensuing
seasons.
The consequences related not only to the receivables and inventory
acquired, but also to the design, fabric and inventory purchases to which
Designer Holdings had previously committed. Immediately following the
acquisition, the Company began quickly liquidating excess inventories. Most of
these sales were below original cost. Not only did the Company fail to recover
cost (including royalties payable to the licensor), it was deprived of the
"reasonable gross profit" contemplated by APB Opinion 16 in valuing acquired
inventory. Accordingly, the Company reduced the historical carrying value of
inventory by $18 million. The $18 million fair value adjustment recorded
addressed all of these issues and represented the fair value of inventory
pursuant to APB Opinion 16.
The Company offered significant discounts (by negotiating settlements on a
customer by customer basis) to collect outstanding receivable balances in light
of product related issues raised, as well as the decision to discontinue certain
channels of distribution, realizing that these balances would become
increasingly more difficult to collect with the passage of time. In addition,
the core retail customers took substantial deductions against current invoices
for the Designer Holdings inventory in the stores, unilaterally revising the
economics of the initial sale transaction entered into by Designer Holdings.
Although these deductions relate to both the inventory acquired and
pre-acquisition accounts receivable, the decrease in asset value manifested
itself through accounts receivable as a result of these deductions. Accordingly,
the Company reduced the historical carrying value of accounts receivable by $31
million. The $31 million fair value adjustment, which was recorded pursuant to
APB Opinion 16, addresses these issues.
The Company believes that these strategies should enhance future results of
operations and cash flows, however, these fair value adjustments will result in
additional annual goodwill amortization of approximately $1.2 million.
F-13
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
The following summarized unaudited pro forma information combines
financial information of the Company with Designer Holdings for fiscal year 1997
assuming the acquisition had occurred as of January 5, 1997. The unaudited pro
forma information does not reflect any cost savings or other benefits
anticipated by the Company's management as a result of the acquisition.
<TABLE>
<CAPTION>
For the Year Ended
January 3,
1998
----
Statement of Income Data:
<S> <C>
Net revenues.................................................. $1,800,800
Income (loss) before extraordinary item....................... (16,700)
Net income (loss)............................................. (16,700)
Income (loss) per common share:
Basic......................................................... $ (0.34)
===========
Diluted....................................................... $ (0.36)
===========
</TABLE>
The unaudited pro forma combined information is not necessarily indicative
of the results of operations of the combined company had the acquisition
occurred on the dates specified above, nor is it indicative of future results of
operations for the combined companies at any future date or for any future
periods.
In conjunction with the allocation of purchase price of Designer Holdings,
the Company recorded accruals of approximately $48,313. These charges relate
generally to employee termination and severance benefits, facility exit costs,
including lease termination costs (representing future lease payments on
abandoned facilities) and contract termination costs. The details of the charges
recorded in the fourth quarter of fiscal 1997 and in fiscal 1998 and subsequent
activity, are summarized below:
<TABLE>
<CAPTION>
Severance and Facility
Other Employee Exit
Fiscal 1997 - 4th Quarter Related Costs Costs Other Total
----------- --------- ---------- --------
<S> <C> <C> <C> <C>
Total Provisions $ 20,631 $ 3,470 $ 900 $ 25,001
Cash Reductions (10,800) (3,300) (900) (15,000)
-------- -------- -------- --------
Balance as of January 3, 1998 9,831 170 -- 10,001
-------- -------- -------- --------
Total Provisions 5,957 17,300 55 23,312
Cash Reductions (6,266) (4,762) (55) (11,083)
-------- -------- -------- --------
Balance as of January 2, 1999 9,522 12,708 -- 22,230
Cash reductions (4,515) (1,839) -- (6,354)
Reversals (4,798) (10,869) -- (15,667)
------- -------- -------- --------
Balance as of January 1, 2000 $ 209 $ -- $ -- $ 209
======== ======== ======== ========
</TABLE>
Severance and other employee related costs - $26,588 (as detailed below)
- ------------------------------------------------------------------------
Contractual employee obligations - $19,000
The former CEO of Designer Holdings and nine senior executives of
Designer Holdings were terminated by the Company. The amounts represent
contractual obligations under their contracts with Designer Holdings.
Other employee severance and related benefit payments - $7,588
Represents $5,200 of severance and unfunded pension liabilities for 506
bargaining unit employees of Designer Holdings in the two factories and a
distribution facility that were closed in accordance with the Company's
exit plan and $2,388 of severance for 90 Designer Holdings' headquarters
and 40 Designer Holdings' Hong Kong office employees. The Company, in
fiscal 1999 was able to negotiate an exit from its distribution facility,
as contemplated by the exit plan, without incurring severance and unfunded
pension liability by concluding an agreement with a successor or employer.
As a result of these developments the Company, in fiscal 1999, reversed
$4.8 million in unused accruals as a reduction of goodwill.
As of January 1, 2000, the remaining accrual of $209 represents the remaining
severance costs for employees of Designer Holdings terminated prior to fiscal
1999, anticipated to be utilized by early fiscal 2000.
Facility exit costs - $20,770
Represents $9,000 for the anticipated lease buyout and the cost associated
with the unused portion of a distribution center, $5,000 of property, equipment
and leasehold improvements to be abandoned in connection with the two factories
and distribution facility that were closed and $6,770 for the lease buyout and
abandonment of leasehold improvements in connection with closing Designer
Holdings' headquarters and Hong Kong office. The Company, in fiscal 1999 was
able to negotiate an exit from its distribution facility, as contemplated by
the exit plan, without incurring certain facility exit costs by concluding an
agreement with a successor employer. As a result of these developments the
company in fiscal 1999 reversed $10.9 million in unused accruals as a reduction
of goodwill.
F-14
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
Contract termination costs - $9,000 (not included in the aforementioned table)
Represents fees and amounts paid in connection with terminating Designer
Holdings' accounts receivable factoring arrangement, including the settlement of
outstanding balances.
Note 3 - Restructuring, Special Charges and Other Non-Recurring Items
During 1998 and 1997, the Company recorded restructuring and restructuring
related charges of $40,000 ($25,874 net of tax benefit) and, $118,819 ($73,633
net of tax benefit), respectively.
These charges relate generally to exiting facilities, realignment of
manufacturing and distribution operations, discontinuing product lines and the
integration of businesses following acquisitions, and include charges related to
inventory write-downs, asset impairments, employee termination and severance
benefits and lease termination costs (representing future lease payments on
abandoned facilities). Any costs that do not qualify as exit costs have been
charged to expense as incurred.
Asset impairments relate principally to the write-off of unamortized
leasehold improvements for vacated locations. Any other fixed assets that were
written-down were abandoned and taken out of service at the time of the
write-down and related depreciation was discontinued at that time.
For inventory which management determined was salable, the estimated
write-down was based upon the differences between the expected net sales
proceeds of the inventory and the carrying value of the inventory. In the case
of scrapped inventory, the write-down was equal to the carrying value of the
inventory and the cost of disposal.
F-15
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
In addition, during 1998 and 1997, the Company incurred special and non-
recurring charges of $8,500 ($5,498 net of tax benefit) and, $6,846 ($4,246 net
of tax benefit), respectively.
The Company maintains a general allowance for doubtful accounts based upon
historical loss experience. The Company records specific provisions based upon
information about a particular customer when such information becomes known.
The Company regularly reviews the adequacy of its reserves and adjusts
them as appropriate based upon available information.
1998
As a result of a strategic review of the Company's businesses,
manufacturing and other facilities, product lines and styles and worldwide
operations following significant acquisitions in 1996 and 1997, in the fourth
quarter of 1998 the Company initiated the implementation of programs designed to
streamline operations and improve profitability. These programs resulted in
pre-tax charges of approximately $40,000 related to costs to exit certain
product lines and styles, as well as facilities and realignment of manufacturing
and distribution activities, including charges related to inventory write-downs
and employee termination and severance benefits.
Additionally, in the fourth quarter of fiscal 1998, the Company wrote-off
approximately $8,500 which included $8,000 of accounts receivable, consisting of
customer bankruptcies of $3,900 and other write-offs of $4.1 million (see Note 5
to the Consolidated Financial Statements).
Of the total $48,500 of 1998 charges, $22,100 is reflected in cost of
goods sold and $26,400 is reflected in selling, administrative and general
expenses.
The detail of the charges recorded in 1998, including costs incurred and
reserves remaining for costs estimated to be incurred through completion of the
aforementioned programs, are summarized below:
<TABLE>
<CAPTION>
Facilities Employee
shutdowns termination
Asset and Retail outlet and
write-offs realignment store closings severance Total
------------------ ------------------ ------------------- ---------------- ----------
<S> <C> <C> <C> <C> <C>
1998 Provision $ 15,300 $ 6,000 $ 4,800 $ 6,100 $ 32,200
Other related period costs,
charged to expense as incurred 2,500 2,500
Cash reductions (1,672) (2,500) (4,172)
Non-cash reductions (13,700) (6,000) (4,228) (23,928)
-------- -------- -------- -------- --------
Balance as of January 2, 1999 1,600 828 572 3,600 6,600
Cash reductions -- (828) (572) (3,263) (4,663)
Non-cash reductions (1,600) -- -- -- (1,600)
-------- -------- -------- -------- --------
Balance as of January 1, 2000 $ -- $ -- $ -- $ 337 $ 337
======== ======== ======== ======== ========
</TABLE>
F-16
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
Discontinued Product Lines and Styles and Manufacturing and Distribution
Realignment ($23,800)
Management's review of certain product lines resulted in the decision to
discontinue the manufacture and marketing of certain unprofitable product lines
during the fourth quarter of 1998, including the Valentino and Marilyn Monroe
product lines, as well as certain private label brands. The decision to
discontinue these product lines will enable the Company to focus its working
capital on more profitable product lines and styles. The Company also announced
the realignment of manufacturing and distribution operations as an effort to
reduce costs. Included in the amount above are charges for inventory write-downs
for obsolete and excess raw materials and finished goods of $13,500 (included in
cost of sales), and receivable write-offs of $1,800 (included in selling,
administrative and general expenses).
Costs for facility shutdowns of $6,000 represent the write-off of
unamortized leaseholds and fixed and other assets at the Company's former
administrative offices in Connecticut. The cost for facility realignment of
$2,500, all of which was incurred in 1998, includes charges for the relocation
of and realignment of existing factories and consolidation of warehouse and
distribution facilities.
For fiscal 1998, discontinued product lines and styles contributed net
revenues of $26,300 and operating losses of $13,400. Fourth quarter operating
losses incurred subsequent to the commitment date of the decision to discontinue
these product lines and styles were $5,300. These product lines contributed net
revenues of $56,800 and operating losses of $700 in fiscal 1997.
Retail Outlet Store Shutdowns ($4,800)
In an effort to improve the overall profitability of the retail outlet
store division, the Company announced plans to close 13 retail outlet stores.
Included in the charge are costs for the write-down of inventory of discontinued
product lines and styles which the Company intends to liquidate through these
stores at close-out prices of $4,100 and costs for terminating leases of $700.
The Company closed all of the stores by the second quarter of 1999.
Employee Termination and Severance ($6,100)
The Company recorded charges of approximately $800 related to the cost of
providing severance and benefits to approximately 381 manufacturing related
employees terminated as a result of the closure of certain facilities and $5,300
(all of which was charged to expense at the date when 123 managerial and
administrative employees were terminated) related to a reduction in work force
during the fourth quarter of 1998.
Additional Costs Related to Prior Strategic Initiatives ($5,300)
The Company expensed as incurred approximately $2,000 of additional costs,
(in part due to facilities remediation) related to the final disposition of
certain Hathaway assets that were retained following the sale of that division
in 1996.
The Company expensed as incurred approximately $3,300 of additional costs
related to the merger integration initiative undertaken in 1997 following the
Designer Holdings acquisition. These costs relate principally to settlements on
accounts receivable balances with common customers.( See 1997 chart below)
F-17
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
1997
During the fourth quarter of 1997, the Company recorded restructuring and
restructuring related pre-tax charges of $118,819. These charges related to the
integration of Designer Holdings ($44,620) following its acquisition, the
Intimate Apparel (including GJM) consolidation and realignment program
($63,699) and the disposition of certain retained Hathaway assets ($10,500).
Additionally, in the fourth quarter of fiscal 1997, the Company wrote-off
approximately $6,300 of accounts receivable, consisting of customer bankruptcies
($3,400) and other accounts receivable write-offs ($2,900) (see Note 5 to the
Consolidated Financial Statement) and incurred $546 of other non-recurring
expenses.
Of the total $125,665 of 1997 charges, $76,645 is reflected in cost of
goods sold and $49,020 is reflected in selling, administrative and general
expenses.
Merger Related Integration Costs ($44,620)
Designer Holdings (which was acquired in fiscal 1997) and the Company
previously operated retail outlets in several common locations, which the
Company elected to consolidate. As a result, the Company recorded a charge of
$18,420 as follows: $3,300 for anticipated lease termination costs related to
sixteen of its Warner's outlet stores, $1,200 for the write-off of related
leasehold improvements and $13,920 for the close-out of store inventories and
surplus stocks not considered suitable for redirected marketing efforts in the
new store format.
In addition, following the acquisition in December 1997, the Company
consolidated the credit and collection functions of the companies. In an effort
to accelerate cash collections from common customers following the Designer
Holdings acquisition, the Company initiated a program of consolidating
receivables from common customers, offering favorable settlement of prior
balances to accelerate collection efforts. This program resulted in a charge of
$21,700, which was charged to expense as incurred. The Company also charged to
expense as incurred $3,600 of special bonuses to Warnaco management and
severance and employee termination costs of $900, which were charged to expense
at the date the employees were terminated.
The detail of the charges recorded, including costs incurred and reserves
remaining at each year-end for costs estimated to be incurred through completion
of the aforementioned program are as follows:
F-18
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
<TABLE>
<CAPTION>
Lease Fixed Inventory Consolidation Terminations
termination asset write- of credit and Employee
costs write-offs downs functions severance Bonuses Total
------------ ---------- --------- --------------- ------------ -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
1997 Provision $ 3,300 $ 1,200 $ 13,920 $ 900 $ 19,320
Other related period
costs, charged to
expense as incurred -- -- -- $ 21,700 -- $ 3,600 25,300
Cash reductions (1,110) -- -- -- (845) (3,600) (5,555)
Non-cash reductions -- (1,200) (9,118) (21,700) -- -- (32,018)
-------- -------- -------- -------- -------- -------- --------
Balance as of January 3, 1998 2,190 -- 4,802 -- 55 -- 7,047
1998 Provision -- -- 800 2,500 -- -- 3,300
Cash reductions (2,190) -- -- -- (55) -- (2,245)
Non-cash reductions -- -- (5,602) (2,500) -- -- (8,102)
-------- -------- -------- -------- -------- -------- --------
Balance as of January 2, 1999 $ -- $ -- $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======== ======== ======== ========
</TABLE>
Intimate Apparel Consolidation and Realignment ($59,499)
Following the successful Intimate Apparel consolidation and realignment
program initiated in 1996, the Company initiated a new program to re-examine all
of its existing products in an effort to streamline its number of product
offerings. Accordingly, products and styles were discontinued and slower moving
inventory liquidated, incurring markdown losses of $32,600 to accommodate the
increased volumes of higher margin merchandise and $2,246 of receivable
write-offs related to these merchandising decisions. Further reconfiguration of
manufacturing facilities and the merger of Warner's Europe with Lejaby
operations achieved a workforce reduction greater than originally anticipated
but delayed realization of anticipated efficiencies and resulted in severance
and termination costs of $7,380, which were charged to expense at the date
approximately 150 employees were terminated. The cost for facility realignment
of $17,273 all of which was incurred in 1997, includes charges for the increased
costs related to the reconfiguration of the manufacturing facilities.
The detail of the charges recorded including costs incurred and reserves
remaining at each year-end for costs estimated to be incurred through completion
of the aforementioned program, are as follows:
F-19
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
<TABLE>
<CAPTION>
Accounts Employee
Inventory receivable termination Manufacturing
write-downs write-offs and severance realignment Total
------------- ------------ -------------------- --------------- ---------
<S> <C> <C> <C> <C>
1997 Provision $ 32,600 $ 2,246 $ 7,380 $ 42,226
Other related period costs
charged to expense as incurred -- -- -- $ 17,273 17,273
Cash reductions -- -- (5,916) (17,273) (23,189)
Non-cash reductions (11,585) (2,246) -- -- (13,831)
-------- -------- -------- -------- --------
Balance as of January 3, 1998 21,015 -- 1,464 -- 22,479
Cash reductions -- -- (1,464) -- (1,464)
Non-cash reductions (21,015) -- -- -- (21,015)
-------- -------- -------- -------- --------
Balance as of January 2, 1999 $ -- $ -- $ -- $ -- $ --
======== ======== ======== ======== ========
</TABLE>
GJM ($4,200)
The Company also restructured a portion of its GJM manufacturing business,
which was acquired in 1996, resulting in charges of $4,200, $700 of which was
for severance for five employees, $2,400 for accounts receivable write-offs,
which were expensed as incurred and $1,100 for asset write-offs.
GJM incurred other non-recurring losses of $1,139 related to these
operations in fiscal 1997 .
The detail of the charges recorded in 1997, including costs incurred and
reserves remaining for costs estimated to be incurred through completion of the
aforementioned program, are as follows:
<TABLE>
<CAPTION>
Employee
termination Accounts
and receivable Fixed asset
severance write-offs write-offs Total
----------- ---------- ----------- -----
<S> <C> <C> <C> <C>
1997 Provision $ 700 $ 2,400 $ 1,100 $ 4,200
Cash reductions (26) -- -- (26)
Non-cash reductions -- (2,400) (1,100) (3,500)
------- ------- ------- -------
Balance as of January 3, 1998 674 -- -- 674
Cash reductions (674) -- -- (674)
------- ------- ------- -------
Balance as of January 2, 1999 $ -- $ -- $ -- $ --
======= ======= ======= =======
</TABLE>
F-20
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
Additional Costs Related to Prior Strategic Initiative ($10,500)
During fiscal 1997, the Company incurred approximately $10,500 of costs
related to the disposal of certain Hathaway assets that were retained following
the sale of that division in 1996, including $4,200 on the liquidation of
inventories, $4,600 on the disposition of fixed assets and $1,700 of other
expenses, which were charged to expense as incurred.
In addition, the operations of the retained Hathaway assets (principally
foreign locations), had losses of $4,000 for fiscal 1997.
Note 4 - Sale of Accounts Receivable
In October 1998, the Company entered into a five-year revolving
receivables securitization facility whereby it can obtain up to $200,000 of
funding from the sale of eligible U.S. trade accounts receivable through a
bankruptcy remote special purpose subsidiary. The amount of funding varies based
upon the availability of the designated pool of eligible receivables and is
directly affected by changing business volumes. At January 1, 2000, the Company
had sold $342,151 of accounts receivable for which it received proceeds of
$195,900 in cash; at January 2, 1999, the Company had sold $330,100 of accounts
receivable for which it received proceeds of $170,500 in cash; the Company
retains the interest in and subsequent realization of the excess of amounts sold
over the proceeds received and provides allowances as appropriate on the entire
balance. Accounts receivable are presented net of the $195,900 and $170,500 for
fiscal years 1999 and 1998, respectively, of proceeds from trade receivables
sold, with the remaining $146,251 and $159,600, respectively, included in
accounts receivable. The sale is reflected as a reduction of accounts receivable
and the proceeds received are included in cash flows from operating activities.
Fees for this program are paid monthly and are based on variable rates indexed
to commercial paper.
Note 5 - Related Party Transactions
Prior to the December 1999 acquisition, Authentic Fitness was considered a
related party as certain directors and officers of the Company were also
directors and officers of Authentic Fitness. From time to time, the Company and
Authentic Fitness jointly negotiated contracts and agreements with vendors and
suppliers. In fiscal 1997, 1998 and 1999, Authentic Fitness paid the Company
$5,607, $15,566 and $24,614, respectively for certain occupancy services related
to leased facilities, computer services, laboratory testing, transportation and
contract production services. In fiscal 1997, 1998 and 1999, the Company paid
Authentic Fitness approximately $1,299, $462 and $865, respectively, for certain
design and occupancy services. The Company also purchased inventory from
Authentic Fitness for sale in its retail outlet stores of $16,201, $11,223 and
$16,833 in fiscal 1997, 1998 and 1999, respectively. The net amount due to
Authentic Fitness at January 2, 1999 was $784. In fiscal 1997 the Company had
a write-off of $2,875 primarily comprised of certain inventory and
administrative charges relating to activities with Authentic Fitness that should
have been charged to the Company's operations in prior periods rather than being
inadvertently reflected as receivables. When these facts became known during the
fourth quarter of fiscal 1997, it was determined that the amount should be
written-off and the appropriate charge was taken. In connection with the
fiscal 1998 year-end closing, the Company discovered an additional $4,139
relating to activities with Authentic Fitness. The Company determined that the
$4,139
F-21
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
consisted of certain cost overruns and royalty expenses that should have been
charged to the Company's operations in prior periods. As the related amounts
were not significant to any prior periods, the entire amount of the write-offs
were recorded in the fourth quarter of fiscals 1997 and 1998, respectively.
In June 1995, the Company paid $1,000 in connection with and under a
sub-license entered into with Authentic Fitness to design, manufacture and
distribute certain intimate apparel using the Speedo brand name. The Company
recognized royalty expense of $293, $58 and $10 in fiscal 1997, 1998 and 1999,
respectively. A director and a stockholder of the Company is the sole
stockholder, President and a director of The Spectrum Group, Inc. ("Spectrum").
The Company recognized consulting expenses of $500, $560 and $560 in fiscal
1997, 1998 and 1999, respectively, pursuant to a consulting agreement with
Spectrum that expires in May 2000. A director of the Company provides consulting
services to the Company from time to time and received $125 for such services
in fiscal 1998. A director of the Company is a partner in a law firm which
provides legal services to the Company from time to time. The Company believes
that the terms of the relationships and transactions described above are at
least as favorable to the Company as could have been obtained from an
unaffiliated third party.
Note 6 - Business Segments and Geographic Information
Business Segments
The Company operates in three segments: Intimate Apparel, Sportswear and
Accessories and Retail Stores.
The Company designs, manufactures and markets apparel within the Intimate
Apparel and Sportswear and Accessories markets and operates a Retail Store
Division, with stores under the Speedo Authentic Fitness name, as well as
Company outlet stores for the disposition of excess and irregular inventory.
The Intimate Apparel Division designs, manufactures and markets moderate
to premium priced intimate apparel for women under the Warner's, Olga,
Calvin Klein, Lejaby, Van Raalte, Fruit of the Loom, Weight
Watchers and Bodyslimmers brand names, and men's underwear under the
Calvin Klein brand name.
The Sportswear and Accessories Division designs, manufactures, imports and
markets moderate to premium priced men's, women's, junior's and children's
sportwear and jeanswear, men's accessories and men's, women's, junior's and
children's active apparel under the Chaps by Ralph Lauren, Calvin
Klein, Catelina, A.B.S by Allen Schwartz, Speedo, Oscar de la
Renta, Anne Cole, Cole of California, Sandcastle, Sunset Beach,
Ralph Lauren, Polo Sport Ralph Lauren, Polo Sport RLX and White
Stag brand names.
The Retail Store division which comprise of both outlet as well as
full-price retail stores, principally sells the Company's products to the
general public through 142 stores under the Speedo Authentic Fitness
name as well as 124 of the Company's outlet stores for the disposition of
excess and irregular inventory. The Company does not manufacture or source
products exclusively for the outlet stores.
The accounting policies of the segments are the same as those described in
the "Summary of Significant Accounting Policies" in Note 1. Transfers to the
Retail stores division occur at standard cost and are not reflected in net
revenues of the Intimate Apparel or Sportswear and Accessories segments. The
Company evaluates the performance of its segments based on earnings before
interest, taxes, amortization of intangibles and deferred financing costs and
restructuring, special charges and other non-
F-22
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
recurring items, as well as the effect of the early adoption of SOP 98-5 and the
charges relating to the fiscal 1998 restatement for an inventory adjustment
which affected fiscals 1996-1998 for production and inefficiency costs
("Adjusted EBIT"). Information by business segment is set forth below :
<TABLE>
<CAPTION>
Sportswear
Intimate and Retail
Apparel Accessories Stores Total
---------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
1999 Net Revenues $ 943,383 $ 1,022,783 $ 147,990 $ 2,114,156
Adjusted EBITDA 186,000 169,600 11,600 367,200
Depreciation 21,000 10,600 2,600 34,200
Adjusted EBIT 165,000 159,000 9,000 333,000
1998 Net Revenues 944,788 875,257 130,206 1,950,251
Adjusted EBITDA 218,600 149,200 17,000 384,800
Depreciation 18,500 4,500 1,400 24,400
Adjusted EBIT 200,100 144,700 15,600 360,400
1997 Net Revenues 941,188 425,974 68,568 1,435,730
Adjusted EBITDA 209,500 64,200 8,100 281,800
Depreciation 14,000 2,400 1,000 17,400
Adjusted EBIT 195,500 61,800 7,100 264,400
</TABLE>
A reconciliation of total segment Adjusted EBIT to total consolidated income
(loss) before taxes and cumulative effect of a change in accounting principle
for fiscal years January 3, 1998, January 2, 1999 and January 1, 2000 is as
follows:
<TABLE>
<CAPTION>
For the Year Ended
--------------------------------------------------------
January 3, January 2, January 1,
1998 1999 2000
--------------- ------------------- -----------------
<S> <C> <C> <C>
Total Adjusted EBIT for reportable segments $264,400 $ 360,400 $ 333,000
General corporate expenses not allocated 33,823 55,567 76,345
Depreciation of corporate assets and amortization 13,500 22,100 26,756
Restructuring, special and other non-recurring items 130,804 106,758 -
Effect of early adoption of SOP 98-5 - 40,800 -
Charges related to an inventory adjustment for production
and inefficiency costs 57,000 49,600 -
Interest expense 45,873 63,790 80,976
Minority interest 3,500 - -
--------------- ------------------- -----------------
Income (loss) before income taxes and cumulative effect of a
change in accounting principle $ (20,100) $ 21,785 $ 148,923
=============== =================== =================
</TABLE>
F-23
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
<TABLE>
<CAPTION>
Sportswear
Intimate and Retail Reconciling
Apparel Accessories Stores Items* Consolidated
----------- ---------------- ------------ ------------- -------------
Year Ended January 1, 2000
- ---------------------------------------
<S> <C> <C> <C> <C> <C>
Total assets $ 796,614 $ 1,507,533 $ 143,056 $ 315,782 $ 2,762,985
Depreciation and amortization 25,367 22,385 2,902 10,302 $ 60,956
Capital expenditures 38,937 23,571 9,008 37,572 $ 109,088
Year Ended January 2, 1999
- ---------------------------------------
Total assets $ 832,371 $ 665,297 $ 78,557 $ 206,908 $ 1,783,133
Depreciation and amortization 20,564 15,654 1,235 9,047 46,500
Capital expenditures 41,128 30,209 7,297 64,153 142,787
Year Ended January 3, 1998
- ---------------------------------------
Total assets $ 996,457 $ 544,352 $ 39,806 $ 70,503 $ 1,651,118
Depreciation and amortization 30,338 4,160 625 12,262 47,385
Capital expenditures 26,356 14,134 3,810 13,099 57,399
</TABLE>
* Includes Corporate items not allocated to business segments, primarily fixed
assets related to the Company's management information systems and corporate
facilities and goodwill, intangible and other assets.
F-24
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
Geographic Information
Included in the consolidated financial statements are the following amounts
relating to geographic locations:
<TABLE>
<CAPTION>
Fiscal Year Ended
----------------------------------------------------------
January 3, January 2, January 1,
1998 1999 2000
-------------- --------------- ------------
<S> <C> <C> <C>
Net revenues:
United States $1,145,276 $1,630,583 $1,775,905
Canada 56,525 55,072 68,953
United Kingdom 48,933 55,774 66,496
France 42,230 41,164 44,510
Germany 54,857 41,963 34,743
Mexico 11,709 21,209 35,636
Asia 13,617 14,534 25,069
All Other 62,583 89,952 62,844
---------- ---------- ----------
$1,435,730 $1,950,251 $2,114,156
========== ========== ==========
Property, plant and equipment, net
United States $ 113,644 $ 205,428 $ 291,360
Canada 4,716 5,394 8,964
All other 12,040 13,438 26,028
---------- ---------- ----------
$ 130,400 $ 224,260 $ 326,352
========== ========== ==========
</TABLE>
Information about Major Customers
In fiscal 1999 and 1997, no customer accounted for 10% of the Company's
net revenues. In fiscal 1998, the Company had one customer who accounted for
approximately $198,282 or 10.2% of net revenues. Such revenues are included in
the Intimate Apparel and Sportswear and accessories segments.
Note 7 - Income Taxes
The following presents the United States and foreign components of income
from operations before income taxes and the total provision (benefit) for United
States federal and other income taxes:
F-25
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
<TABLE>
<CAPTION>
Fiscal Year Ended
--------------------------------------------
January 3, January 2, January 1,
1998 1999 2000
-------------- ------------- ------------
<S> <C> <C> <C>
Income(loss) from operations before income taxes
and cumulative effect of change in accounting principle:
Domestic $ (50,957) $ 1,397 $ 92,523
Foreign 30,857 20,388 56,400
-------------- ------------- ------------
Total $ (20,100) $ 21,785 $148,923
============== ============= ============
Current provision
Federal $ - $ - $ 1,436
State and local 1,269 1,187 2,350
Foreign 6,480 10,231 13,200
-------------- ------------- ------------
7,749 11,418 16,986
-------------- ------------- ------------
Deferred provision (benefit):
Federal (12,560) 12,301 34,703
State and local (2,970) (5,213) 158
Foreign - - (328)
Reversal of valuation allowance - (10,818) (382)
-------------- ------------- ------------
(15,530) (3,730) 34,151
-------------- ------------- ------------
Provision (benefit) for income taxes $ (7,781) $ 7,688 $ 51,137
============== ============= ============
The provision (benefit) for income tax is included in the financial statements
as follows:
<CAPTION>
Fiscal Year Ended
----------------------------------------------
January 3, January 2, January 1,
1998 1999 2000
---------------- ------------- ------------
<S> <C> <C> <C>
Continuing operations $ (7,781) $ 7,688 $ 51,137
Cumulative effect of accounting change - (25,231) -
---------------- ------------- ------------
Total provision (benefit) $ (7,781) $ (17,543) $ 51,137
================ ============= ============
</TABLE>
F-26
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
The following presents the reconciliation of the provision for income taxes to
United States federal income taxes computed at the statutory rate:
<TABLE>
<CAPTION>
Fiscal Year Ended
---------------------------------------------------
January 3, January 2, January 1,
1998 1999 2000
------------- -------------- ------------
<S> <C> <C> <C>
Income (loss) from operations before income taxes $ (20,100) $ (49,698)(a) $ 148,923
============= ============== ============
Provision (benefit) for income taxes at the statutory rate $ (7,035) $ (17,394) $ 52,123
Foreign income taxes at rates in excess of (lower than)
the U.S. statutory rate (3,859) 7,408 (12,214)
State income taxes, net of federal benefit (951) (2,984) 1,630
Non-deductible intangible amortization and disposals 1,829 3,198 3,582
Changes in valuation allowance - (10,818) 4,528
Other, net 2,235 3,047 1,488
------------- -------------- ------------
Provision (benefit) for income taxes $ (7,781) $ (17,543) $ 51,137
============= ============== ============
</TABLE>
(a) Includes pre-tax impact of cumulative effect of accounting change of
$71,484.
The components of deferred tax assets and liabilities as of January 2, 1999 and
January 1, 2000 are as follows:
<TABLE>
<CAPTION>
January 2, January 1,
1999 2000
------------ -------------
<S> <C> <C>
Deferred Tax Assets:
Discounts and sales allowances $ 6,646 $ 8,337
Postretirement benefits 4,222 4,137
Alternative minimum tax credit carryovers 2,237 3,674
Non deductible reserves 49,647 26,827
Net operating loss carryovers 137,484 145,915
------------ -------------
Gross deferred tax assets 200,236 188,890
------------ -------------
Valuation allowances (6,802) (11,330)
------------ -------------
Deferred tax assets - net 193,434 177,560
------------ -------------
Deferred Tax Liabilities:
Prepaid and other assets 10,559 13,258
Depreciation and amortization 54,890 71,573
Bond discount 7,519 7,097
Unrealized gain on investment in securities - 25,494
Other 8,087 8,896
------------ -------------
Deferred tax liabilities 81,055 126,318
------------ -------------
Net deferred tax asset $112,379 $ 51,242
============ =============
</TABLE>
F-27
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
The Company has estimated United States net operating loss carryforwards
of approximately $421,300 and foreign net operating loss carryforwards of
approximately $33,700 at January 1, 2000. Net operating loss
carryforwards, which if unused, will expire from 2002 through 2018.
The net change in the valuation allowance of $4,528 at January 1, 2000
primarily relates to an increase in foreign net operating losses which will,
more likely than not, expire unused. The net decrease in the valuation allowance
of $10,818 at January 2, 1999 primarily relates to the utilization of a capital
loss carryover.
At January 1, 2000, other current assets include current income taxes
receivable of $26,058 (of which $1,015 relates to foreign entities) and current
liabilities include income taxes payable of $16,217 (of which $13,641
relates to foreign entities). At January 2, 1999, other current assets include
current income taxes receivable of $3,970 (of which $1,913 relates to foreign
entities).
Note 8 - Employee Retirement Plans
The Company has a defined benefit pension plan which covers substantially
all non-union domestic employees (the "Pension Benefit Plan"). The Plan is
noncontributory and benefits are based upon years of service. The Company also
has defined benefit health care and life insurance plans that provide
postretirement benefits to retired employees and former directors ("Other
Benefit Plans"). The Other Benefit Plans are contributory with retiree
contributions adjusted annually.
The components of net periodic benefit cost is as follows:
<TABLE>
<CAPTION>
Pension Benefit Plan Other Benefit Plans
For the Year Ended For the Year Ended
------------------------------------------- ----------------------------------------
January 3, January 2, January 1, January 3, January 2, January 1,
1998 1999 2000 1998 1999 2000
--------- ---------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
Service Cost $ 1,296 $ 1,732 2,279 $ 91 $ 190 $ 193
Interest Cost 7,799 8,660 8,867 672 528 394
Expected return on plan assets (9,001) (10,530) (11,586) -- -- --
Prior service cost (75) (74) (74) -- -- (33)
Recognized net actuarial gain (307) -- -- (20) (121) (163)
-------- -------- -------- -------- -------- --------
Net periodic benefit cost (income) (288) (212) (514) 743 597 391
Cost of other plans 479 300 -- -- -- --
-------- -------- -------- -------- -------- --------
Net benefit cost (income) $ 191 $ 88 $ (514) $ 743 $ 597 $ 391
======== ======== ======== ======== ======== ========
</TABLE>
F-28
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
A reconciliation of the balance of the benefit obligations is as follows:
<TABLE>
<CAPTION>
Pension Benefit Plan Other Benefit Plans
----------------------- -----------------------
January 2, January 1, January 2, January 1,
1999 2000 1999 2000
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Change in benefit obligations
Benefit obligation at beginning of year $ 115,494 $ 128,896 $ 8,992 $ 7,523
Service cost 1,732 2,279 190 193
Interest cost 8,660 8,867 529 394
Plan participants' contribution -- -- 294 304
Plan amendments -- -- -- (506)
Change in actuarial assumptions 11,653 (11,500) (1,646) (1,795)
Benefits paid (8,643) (8,908) (836) (751)
--------- --------- --------- ---------
Benefit obligation at end of year $ 128,896 $ 119,634 $ 7,523 $ 5,362
========= ========= ========= =========
A reconciliation of the change in the fair value of plan assets is as
follows:
<CAPTION>
Pension Benefit Plan Other Benefit Plans
----------------------- -----------------------
January 2, January 1, January 2, January 1,
1999 2000 1999 2000
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Fair value of plan assets at beginning of year $ 115,330 $ 126,637 $ -- $ --
Actual return on plan assets 19,950 5,142 -- --
Employer's contributions -- -- 541 447
Plan participants' contributions -- -- 294 304
Benefits paid (8,643) (8,908) (835) (751)
--------- --------- --------- ---------
Fair value of plan assets at end of year $ 126,637 $ 122,871 $ -- $ --
========= ========= ========= =========
Funded status $ (2,259) $ 3,238 $ (7,523) $ (5,362)
Unrecognized prior service cost (273) (198) -- (472)
Unrecognized net actuarial (gain) loss 1,676 (3,381) (1,484) (3,633)
--------- --------- --------- ---------
Accrued benefit cost $ (856) $ (341) $ (9,007) $ (9,467)
========= ========= ========= =========
</TABLE>
Pension Benefit Plan assets include fixed income securities and marketable
equity securities, including 340,000 and 1,100,800 shares of the
Company's Class A Common Stock, which had a fair market value of $8,585
and $13,554 at January 2, 1999 and January 1, 2000, respectively. The
Pension Benefit Plan also owned 502,800 shares of Authentic Fitness' common
stock at January 2, 1999. Such shares had a fair market value of $9,176 at
January 2, 1999. In December 1999 the Company acquired Authentic Fitness and,
as a result, the Pension Benefit Plan tendered all such shares (see Note 2 to
the Consolidated Financial Statments).
F-29
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
The Company contributes to a multi-employer defined benefit pension plan
on behalf of union employees of its two manufacturing facilities and a warehouse
and distribution facility, which amounts are not significant for the periods
presented.
The weighted-average assumptions used in the actuarial calculations were
as follows:
January 3, January 2, January 1,
1998 1999 2000
----- ---- ----
Discount rate.......................... 7.5% 7.0% 8.0%
Expected return on plan assets......... 9.0% 9.5% 9.5%
Rate of compensation increase.......... 5.0% 5.0% 5.0%
For measurement purposes, the weighted average annual assumed rate of
increase in the per capita cost of covered benefits (health care cost trend
rate) was 9% for the years through 2000 and 5% for the years 2001 and beyond.
Assumed health care cost trend rates have a significant effect on the amounts
reported for health care plans. A one-percentage-point change in assumed health
care cost trend rates would have the following effects:
One Percentage One Percentage
Point Point
Increase Decrease
-------------- -------------
Effect on total of service and interest cost
components $ 42 $ (28)
============== =============
Effect on health care component of the
accumulated postretirement benefit obligation $ 359 $ (332)
============== =============
The Company also sponsors a defined contribution plan for substantially
all of its domestic employees. Employees can contribute to the plan, on a
pre-tax and after-tax basis, a percentage of their qualifying compensation up to
the legal limits allowed. The Company contributes amounts equal to 15.0% of the
first 6.0% of employee contributions to the defined contribution plan. The
maximum Company contribution on behalf of any employee is $1,350 in one year.
Employees vest in the Company contribution over four years. Company
contributions to the defined contribution plan totaled $281, $386 and $388 for
the years ended January 3, 1998, January 2, 1999, and January 1, 2000,
respectively.
Note 9 - Marketable Securities
During the first quarter of fiscal 1999, the Company received shares of
marketable securities in exchange for the early termination of a non-compete
agreement with the former principal stockholder of its Designer Holdings
subsidiary. The fair market value of the securities received was $875, which
was recorded as a reduction of goodwill associated with the Designer Holdings
acquisition. During 1998 and 1999, the Company made investments, aggregating
$7,650, to acquire an interest in Interworld Corporation, a leading provider of
E-Commerce software systems and other applications for electronic commerce
sites. These investments are classified as available-for-sale securities and
recorded at fair value based on quoted market prices at January 1, 2000.
Unrealized gains at January 1, 2000 of $38,966 (net of deferred income taxes
of $25,494), were included as a separate component of stockholders' equity
F-30
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
Note 10 - Inventories
January 2, January 1,
1999 2000
--------- ---------
Finished goods $326,794 $563,583
Work in process 92,821 89,422
Raw materials 52,404 81,434
-------- --------
$472,019 $734,439
======== ========
Note 11 - Debt
January 2, January 1,
Short-term Debt 1999 2000
- --------------- ---------- ----------
364 day facility (1) $ -- $ 99,066
Foreign credit facilities 20,844 34,686
---------- ----------
20,844 133,752
---------- ----------
Long-term Debt
- --------------
364 day facility (1) -- 487,134
Revolving credit facilities 329,446 576,667
Term loan agreements 20,706 20,855
Term notes 59,220 49,060
Capital lease obligations 5,388 9,281
Foreign credit facilities 2,807 55,803
Other 3,706 203
---------- ----------
Total long-term debt 421,273 1,199,003
Current portion 9,387 11,052
---------- ----------
Long-term debt 411,886 1,187,951
---------- ----------
Total $ 442,117 $1,332,755
========== ==========
(1) As of January 1, 2000, the Company has excluded short-term obligations
totaling $487,134 from current liabilities because it intends to refinance
this obligation on a long-term basis. The Company has the ability to
consummate the refinancing by utilizing long-term commitments in place as
of January 1, 2000.
Approximate maturities of long-term debt as of January 1, 2000 are as follows:
Year Amount
---- ------
2000................................................. $ 11,052
2001................................................. 45,538
2002................................................. 601,774
2003................................................. 78,150
2004................................................. 454,295
2005 and thereafter.................................. 8,194
----------
$1,199,003
==========
F-31
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
$600,000 Revolving Credit Facility
The Company is a guarantor of Warnaco Inc. under a $600,000 Revolving
Credit Facility, which includes a $100,000 sub-facility available for letters of
credit. This facility expires on August 12, 2002 in accordance with the terms of
the Amended and Restated Credit Agreement, dated November 17, 1999, which
governs the facility. Amounts borrowed under this facility are subject to
interest at a base rate or at an interest rate based on the Eurodollar rate plus
a margin, which varies according to the debt rating of the Company. As of
January 1, 2000, the applicable margin under this facility was 0.375%. Under
this facility, a fee is charged based on the letters of credit outstanding as
well as a commitment fee based on the undrawn amount of the facility. Both of
these fees vary according to the Company's debt rating. As of January 2, 1999
and January 1, 2000, the amount of borrowings outstanding under this facility
was $329,446 and $576,667, respectively. Additionally, as of January 2, 1999 and
January 1, 2000, the amount of letters of credit outstanding under this facility
was $4,458 and $4,076, respectively. The weighted average interest rate under
this facility as of January 2, 1999 and January 1, 2000 was 5.71% and 6.40%,
respectively.
$450,000 Revolving Credit Facility
The Company also guarantees amounts borrowed by Warnaco Inc. under a
$450,000 Revolving Credit Facility. The credit agreement governing this
facility, dated November 17, 1999, provides that the term of the facility will
expire on November 17, 2004. Amounts borrowed under this facility are subject to
interest at a base rate or at an interest rate based on the Eurodollar rate plus
a margin, which varies according to the debt rating of the Company. As of
January 1, 2000, the applicable margin under this facility was 0.775%. Under
this facility, a commitment fee is charged based on the entire amount of the
facility which varies according to the Company's debt rating. As of January 1,
2000, there were no borrowings outstanding under this facility.
$600,000 364-Day Facility
The Company also guarantees amounts borrowed by Warnaco Inc. under a
$600,000 364-Day Facility. The credit agreement governing this facility, dated
November 17, 1999, provides that the term of the facility will expire on October
8, 2000. Amounts borrowed under this facility, which were used to finance the
Authentic Fitness acquisition, are subject to interest at a base rate or at an
interest rate based on the Eurodollar rate plus a margin, which varies
according to the debt rating of the Company. As of January 1, 2000, the
applicable margin under this facility was 1.0%. Under this facility, a
commitment fee is charged based on the undrawn amount of the facility which
varies according to the Company's debt rating. As of January 1, 2000, $586,200
was outstanding under this facility with a weighted average interest rate of
7.15%.
French Franc Facility
The Company and its subsidiaries entered into French Franc facilities in
July and August 1996 relating to its acquisition of Lejaby. These facilities,
which were amended in April 1998 and in August and November 1999, includes a
term loan facility in an original amount of 370 million French Francs and a
revolving credit facility of 480 million French Francs. Amounts borrowed under
these facilities are subject to interest at an interest rate based on the
Eurodollar rate plus a margin, which varies according to the debt rating of the
Company. As of January 1, 2000, the applicable margin under these facilities was
0.40%. The term loan is being repaid in annual installments, which began in July
1997, with a final installment due on December 31, 2001. As of January 1, 2000,
$49,100 equivalent of the term loan was outstanding. The revolving portion of
this facility provides for multi-currency revolving loans to be made to Warnaco
and a number of its European subsidiaries. As of January 1, 2000, approximately
$55,800
F-32
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
equivalent of revolving advances were outstanding under this facility with a
weighted average interest rate of 6.23%.
$500,000 Trade Credit Facility
The Company is a guarantor under a $500,000 Trade Credit Facility which
provides commercial letters of credit for the purchase of inventory from
suppliers and offers the Company extended terms, for periods of up to 180 days
("Trade Drafts"). Under the terms of the November 17, 1999 amended and restated
credit agreement governing this facility, the July 27, 2000 expiration date of
the credit agreement can be extended by the lenders upon written request.
Amounts drawn under this facility are subject to interest at an interest rate
based on the Eurodollar rate, plus a margin which varies according to the
Company's debt rating. As of January 1, 2000, the applicable margin under this
facility was 0.875%. The Company classifies the 180-day Trade Drafts in trade
accounts payable. As of January 2, 1999 and January 1, 2000 the amount of Trade
Drafts outstanding under this facility were $308,806 and $346,227, respectively.
Also at January 2, 1999 and January 1, 2000, the Company had outstanding letters
of credit under this facility totaling approximately $118,198 and $110,783,
respectively. Letters of credit issued under this facility are not recognized on
the balance sheet.
Other Facilities
The Company and certain of its foreign subsidiaries have entered into
credit agreements that provide for revolving lines of credit and issuance of
letters of credit ("Foreign Credit Facilities"). At January 2, 1999 and January
1, 2000 the total amounts of the Foreign Credit Facilities was approximately
$94,300 and $163,500, respectively of which approximately $52,000 and $35,100,
respectively was available.
In July 1998, the Company entered into a term loan agreement with a member
of its existing bank group. The balance of this loan as of January 2, 1999 and
January 1, 2000 was $20,706 and $20,855, respectively, and carried a fixed
interest rate of 6.85%. This loan is due to be repaid in installments beginning
in 2001 with a final maturity date of July 2006. During 1998 and 1999, two other
members of the existing bank group made available to the Company, on an
uncommitted basis, a total of $55,000 in short term credit facilities. The
Company had no outstanding borrowings under these facilities as of January 2,
1999 or January 1, 2000.
Restrictive Covenants
The Company's credit agreements contain various financial and
non-financial covenants related to additional debt, liens on Company property,
mergers, investments in other entities, asset sales and other items. The Company
was in compliance with all of the covenants under its credit agreements for the
three fiscal years ended January 1, 2000.
Interest Rate Swaps
As of January 1, 2000, the Company had five interest rate swap agreements
in place which were used to convert variable interest rate borrowings of
$691,500 to fixed interest rates. Under these agreements, borrowings of $610,000
were fixed at 5.99% until maturity in September 2004 and borrowings of $6,500
were fixed at 6.60% until maturity in June 2006 and, as a result of the
acquisition of Authentic Fitness during fiscal 1999, an additional agreement was
added fixing borrowings of $75,000 at 6.66% until maturity in September 2003.
F-33
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
As of January 1, 2000, the Company had five swap agreements in place, as
follows:
Notional Maturity
Amount Date
----------- --------------
$ 75.0 September 2003
$210.0 September 2004
$150.0 September 2004
$250.0 September 2004
$ 6.5 June 2006
As of January 2, 1999, the Company had four swap agreements in place, as
follows:
Notional Maturity
Amount Date
----------- --------------
$210.0 September 2004
$150.0 September 2004
$250.0 September 2004
$ 6.5 June 2006
These swaps are utilized to convert floating rate obligations, which
include bank debt and trade drafts under the letter of credit facility, to fixed
rate obligations. The outstanding variable rate obligations at January 1, 2000
exceed the notional amount of interest rate swap agreements and the Company
anticipates that they will continue to do so for at least the remaining term of
the swap agreements based upon the Company's ability and intent to refinance all
variable rate obligations as they come due. The counterparties to all of the
Company's interest rate swap agreements are banks who are lenders in the
Company's bank credit agreements.
Differences between the fixed interest rate on each swap and the one month
or three month LIBOR rate are settled at least quarterly between the Company and
each counterparty. Pursuant to its interest rate swap agreements, the Company
received payments totaling $575 in the year ended January 2, 1999 and made
payments totaling $4,853 in the year ended January 1, 2000.
The Company's average interest rate on its outstanding debt, after giving
effect to the interest rate swap agreements, was approximately 5.99% and 6.52%
at January 2, 1999 and January 1, 2000, respectively.
Note 12 - Mandatorily Redeemable Preferred Securities
In 1996, Designer Holdings issued 2.4 million Company-obligated
mandatorily redeemable convertible preferred securities of a wholly owned
subsidiary (the "Preferred Securities") for aggregate gross proceeds of
$120,000. The Preferred Securities represent preferred undivided beneficial
interests in the assets of Designer Finance Trust ("Trust"), a statutory
business trust formed under the laws of the State of Delaware in 1996. Designer
Holdings owns all of the common securities representing undivided
F-34
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
beneficial interests of the assets of the Trust. Accordingly, the Trust is
included in the consolidated financial statements of the Company. The Trust
exists for the sole purpose of (i) issuing the Preferred Securities and common
securities (together with the Preferred Securities, the "Trust Securities"),
(ii) investing the gross proceeds of the Trust Securities in 6% Convertible
Subordinated Debentures of Designer Holdings due 2016 ("Convertible Debentures")
and (iii) engaging in only those other activities necessary or incidental
thereto. The Company indirectly owns 100% of the voting common securities of the
Trust which is equal to 3% of the Trust's total capital.
Each Preferred Security is convertible at the option of the holder thereof
into 0.6888 of a share of Common Stock, par value $.01 per share, of the
Company, or 1,653,177 shares of the Company's Common Stock in the aggregate, at
an effective conversion price of $72.59 per share of common stock, subject to
adjustments in certain circumstances.
The holders of the Preferred Securities are entitled to receive cumulative
cash distributions at an annual rate of 6% of the liquidation amount of $50.00
per Preferred Security, payable quarterly in arrears. The distribution rate and
payment dates correspond to the interest rate and interest payment dates on the
Convertible Debentures, which are the sole assets of the Trust. As a result of
the acquisition of Designer Holdings by the Company, the Preferred Securities
were adjusted to their estimated fair value at the date of acquisition of
$100,500, resulting in a decrease in their recorded value of approximately
$19,500. This decrease is being amortized, using the effective interest rate
method to maturity of the Preferred Securities. As of January 1, 2000, the
unamortized balance is $17,096. Such distributions and accretion to redeemable
value are included in interest expense.
The Company has the right to defer payments of interest on the Convertible
Debentures and distributions on the Preferred Securities for up to twenty
consecutive quarters (five years), provided such deferral does not extend past
the maturity date of the Convertible Debentures. Upon the payment, in full, of
such deferred interest and distributions, the Company may defer such payments
for additional five-year periods.
The Preferred Securities are mandatorily redeemable upon the maturity of
the Convertible Debentures on December 31, 2016, or earlier to the extent of any
redemption by the Company of any Convertible Debenture, at a redemption price of
$50.00 per share plus accrued and unpaid distributions to the date fixed for
redemption. In addition, there are certain circumstances wherein the Trust will
be dissolved, with the result that the Convertible Debentures will be
distributed pro-rata to the holders of the Trust Securities.
The Company has guaranteed, on a subordinated basis, distributions and
other payments due on the Preferred Securities ("Guarantee"). In addition, the
Company has entered into a supplemental indenture pursuant to which it has
assumed, as a joint and several obligor with Designer Holdings, liability for
the payment of principal, premium, if any, and interest on the Convertible
Debentures, as well as the obligation to deliver shares of Common Stock, par
value $.01 per share, of the Company upon conversion of the Preferred Securities
as described above. The Guarantee, when taken together with the Company's
obligations in respect of the Convertible Debentures, provides a full and
unconditional guarantee of amounts due on the Preferred Securities.
The following is summarized financial information of Designer Holdings as
of January 2, 1999 and January 1, 2000 and for each of the three fiscal years
in the period ended January 1, 2000, respectively, which is presented as
required by reason of the public preferred securities issued by Designer
Holdings.
F-35
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
January 2, January 1,
1999(a) 2000
---------- ----------
Current assets $115,328 $160,296
Non-current assets 538,600 549,090
Current liabilities 123,325 107,408
Non-current liabilities 24,151 29,168
Redeemable preferred securities 101,836 102,904
Stockholder's equity 404,616 469,906
(a) Reclassification made to reflect the tax benefits attributable to certain
tax deductible purchase accounting adjustments.
<TABLE>
<CAPTION>
|
Predecessor |
------------ |
Nine Months | Three Months For the Year For the Year
Ended | Ended Ended Ended
September 30, | January 3, January 2, January 1,
1997 | 1998 1999(a) 2000(a)
------------- | ------------ ------------ ------------
<S> <C> | <C> <C> <C>
Net revenues $ 365,049 | $ 158,276 $ 453,229 $ 547,126
Cost of goods sold 262,759 | 115,958 310,738 353,029
Net income before extraordinary item 274 | 8,430 42,790 65,290
Net income (loss) (633) | 8,430 42,790 65,290
</TABLE>
(a) Excludes net revenues of $84,500 and $87,000 for fiscal 1998
and fiscal 1999 respectively, now reported as Retail Stores division net
revenues. As a result of the integration of Designer Holdings into the
operations of the Company, cost of goods sold and net income associated
with these revenues cannot be separately identified.
The above information is not indicative of the future operating results
primarily due to the integration of the operations of Designer Holdings with the
operations of the Company, the redirected marketing efforts in the new store
format and redirected marketing strategy.
Note 13 - Stockholders' Equity
On June 30, 1995 the Company paid its first quarterly dividend on its
Common Stock. Total dividends declared during fiscal years 1997, 1998 and 1999
were $17,265 ($0.32 per share), $22,423 ($0.36 per share) and $20,250 ($0.36 per
share), respectively.
The Company has 10,000,000 shares of authorized and unissued preferred
stock with a par value of $0.01 per share.
In August 1999, the Board of Directors of the Company adopted a rights
agreement (the "Rights Agreement"). Under the terms of the Rights Agreement, the
Company declared a dividend distribution of one right for each outstanding share
of common stock of the Company to stockholders of record on August 31, 1999.
Each right entitles the holder to purchase from the Company a unit consisting of
F-36
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
one one-thousandth of a Series A Junior Participating Preferred Stock, par value
$.01 per share at a purchase price of $100 per unit. The rights only become
exercisable, if not redeemed, ten days after a person or group has acquired 15%
or more of the Company's common stock or the announcement of a tender offer that
would result in a person or group acquiring 15% or more of the Company's common
stock. The Rights Agreement expires on August 31, 2009, unless earlier redeemed
or extended by the Company.
Stock Compensation Plans
The Board of Directors and Compensation Committee thereof are responsible
for administration of the Company's compensation plans and determine, subject to
the provisions of the plans, the number of shares to be issued, the terms of
awards, the sale or exercise price, the number of shares awarded and the rate at
which awards vest or become exercisable.
1988 Employee Stock Purchase Plan
In 1988, the Company adopted the 1988 Employee Stock Purchase Plan ("Stock
Purchase Plan") which provides for sales of up to 4,800,000 shares of Class A
Common Stock of the Company to certain key employees. At January 2, 1999 and
January 1, 2000, 4,521,300 shares were issued and outstanding pursuant to grants
under the Stock Purchase Plan. All shares were sold at amounts determined to be
equal to the fair market value. In addition, certain employees, principally owed
by an officer and director of the Company, elected to pay for the shares granted
by executing promissory notes payable to the Company. Notes totaling $5,971 were
outstanding at January 3, 1998 and were repaid during fiscal 1998.
1991 Stock Option Plan
In 1991, the Company established The Warnaco Group, Inc. 1991 Stock Option
Plan ("Option Plan") and authorized the issuance of up to 1,500,000 shares of
Class A Common Stock pursuant to incentive and non-qualified option grants to be
made under the plan. The exercise price on any stock option award may not be
less than the fair market value of the Company's Common Stock at the date of the
grant. The Option Plan limits the amount of qualified stock options that may
become exercisable by any individual during a calendar year. Options generally
expire 10 years from the date of grant and vest ratably over 4 years.
1993 Stock Plan
On May 14, 1993, the stockholders approved the adoption of The Warnaco
Group, Inc. 1993 Stock Plan ('Stock Plan') which provides for the issuance of up
to 2,000,000 shares of Class A Common Stock of the Company through awards of
stock options, stock appreciation rights, performance awards, restricted stock
units and stock unit awards. On May 12, 1994, the stockholders approved an
amendment to the Stock Plan whereby the number of shares issuable under the
Stock Plan is automatically increased each year by 3% of the number of
outstanding shares of Class A Common Stock of the Company as of the beginning of
each fiscal year. The exercise price of any stock option award may not be less
than the fair market value of the Company's Common Stock at the date of the
grant. Options generally expire 10 years from the date of grant and vest ratably
over 4 years.
In accordance with the provisions of the Stock Plan, the Company granted
182,903 and 190,680 shares of restricted stock to certain employees, including
certain officers of the Company, during the fiscal years ended January 2, 1999
and January 1, 2000, respectively. The restricted shares vest over four years.
The fair market value of the restricted shares was $7,682 and $5,458 at the
dates of grant, respectively. The Company recognizes compensation expense equal
to the fair value of the restricted
F-37
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
shares over the vesting period. Compensation expense for the fiscal years ended
January 3, 1998, January 2, 1999 and January 1, 2000 was $3,322, $4,978 and
$6,246, respectively. During 1998, 16,177 shares of non-vested restricted shares
were canceled resulting in a reduction in unearned compensation of $667. During
1999, there were no restricted shares cancelled. Unearned stock compensation at
January 2, 1999 and January 1, 2000 was $11,772 and $10,984, respectively, and
is deducted from stockholders' equity.
1993 Non-Employee Director Stock Plan and 1998 Director Plan
In May 1994, the Company's stockholders approved the adoption of the 1993
Non-Employee Director Stock Plan ("Director Plan"). The Director Plan provides
for awards of non-qualified stock options to non-employee directors of the
Company. Options granted under the Director Plan are exercisable in whole or in
part until the earlier of ten years from the date of the grant or one year from
the date on which an optionee ceases to be a Director eligible for grants.
Options are granted at the fair market value of the Company's Common Stock at
the date of the grant. In May 1998, the Board of Directors approved the adoption
of the 1998 Stock Plan for Non-Employee Directors ("1998 Director Plan", and
together with the Director Plan, "Combined Director Plan"). The 1998 Director
Plan includes the same features as the Director Plan and provides for issuance
of the Company's Common Stock held in treasury. The Combined Director Plan
provides for the automatic grant of options to purchase (i) 30,000 shares of
Common Stock upon a Director's election to the Company's Board of Directors and
(ii) 20,000 shares of Common Stock immediately following each annual
shareholders' meeting as of the date of such meeting.
1997 Stock Option Plan
In 1997, the Company's Board of Directors approved the adoption of The
Warnaco Group, Inc. 1997 Stock Option Plan ("1997 Plan") which provides for the
issuance of incentive and non-qualified stock options and restricted stock up to
the number of shares of common stock held in treasury. The exercise price on any
stock option award may not be less than the fair market value of the Company's
common stock on the date of grant. The Plan limits the amount of qualified stock
options that may become exercisable by any individual during a calendar year and
limits the vesting period for options awarded under the 1997 Plan.
A summary of the status of the Company's stock option plans are presented
below:
<TABLE>
<CAPTION>
Fiscal 1997 Fiscal 1998 Fiscal 1999
------------------------ ------------------------ ------------------------
Weighted Weighted Weighted
Average Average Average
Exercise Exercise Exercise
Options Price Options Price Options Price
----------- --------- ----------- -------- ----------- --------
<S> <C> <C> <C> <C> <C> <C>
Outstanding at beginning of year 6,691,000 $ 18.57 8,817,875 $ 22.00 8,908,932 $ 32.68
Granted 2,611,500 29.91 6,674,202 36.22 5,935,338 25.30
Exercised (251,259) 16.85 (5,625,014) 20.68 (29,750) 16.93
Canceled (233,366) 23.80 (958,131) 30.95 (957,174) 31.62
----------- ----------- -----------
Outstanding at end of year 8,817,875 22.00 8,908,932 32.68 13,857,346 29.85
=========== =========== ===========
Options exercisable at end of year 4,127,594 17.76 6,755,889 33.04 10,309,122 30.33
=========== =========== ===========
Weighted average fair value of
options granted $ 10.58 $ 12.28 $ 9.69
======= ======= =======
Options available for future grant 2,700,431 2,151,308 1,850,552
=========== =========== ===========
</TABLE>
F-38
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
In fiscal 1997, 1998 and 1999, in exchange for shares received from option
holders with a fair value of $575, $38,095 and $2,640, respectively, the Company
paid $575, $38,095 and $2,640, respectively of withholding taxes on options that
were exercised during the year. Such shares have been included in treasury at
cost, which equals fair value at date of option exercise.
Summary information related to options outstanding and exercisable at
January 1, 2000 is as follows:
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
----------------------------------------- ---------------------------
Weighted
Outstanding Average Weighted Exercisable Weighted
at Remaining Average at Average
January 1, Contractual Exercise January 1, Exercise
Range of Exercise prices 2000 Life Price 2000 Price
- ------------------------- ----------- ----------- -------- ----------- --------
(Years)
<S> <C> <C> <C> <C> <C> <C>
$10.01 - $20.00 834,750 4.66 $ 15.67 824,750 $ 15.63
$20.01 - $30.00 6,241,588 8.76 25.36 3,816,113 25.26
$30.01 - $40.00 6,548,258 8.16 35.52 5,610,071 35.82
$40.01 - $50.00 232,750 8.47 41.80 58,188 41.80
----------- ----------
13,857,346 8.22 29.85 10,309,122 30.33
=========== ==========
</TABLE>
The Company has reserved 9,674,196 shares of Class A Common Stock for
issuance under the Director Plan, Stock Plan and Option Plan as of January 1,
2000. In addition, there are 12,163,650 shares of Class A Common Stock in
treasury stock available for issuance under the 1997 Plan.
The fair value for these options was estimated at the date of grant using
a Black-Scholes option pricing model with the following assumptions:
<TABLE>
<CAPTION>
January 3, January 2, January 1,
1998 1999 2000
----- ---- ----
<S> <C> <C> <C>
Risk-free interest rate.................................. 6.20% 5.60% 4.83%
Dividend yield........................................... 1.08% 1.00% 1.43%
Expected volatility of market price of Company's
Common Stock.......................................... .3197 .3069 .4164
Expected option life..................................... 5 years 5 years 5 years
</TABLE>
The Company's pro forma information is as follows:
<TABLE>
<CAPTION>
January 3, January 2, January 1,
1998 1999 2000
---- ---- ----
<S> <C> <C> <C>
Pro forma income (loss) before cumulative effect
of accounting change in accounting principle.................... $(17,121) $ (41,814) $ 60,506
Pro forma basic income (loss) per common share
before accounting change........................................ $ (0.32) $ (0.68) $ 1.08
Pro forma diluted income (loss) per common share
before accounting change........................................ $ (0.32) $ (0.68) $ 1.07
</TABLE>
F-39
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
These pro forma effects may not be representative of the effects on future
years because of the prospective application required by SFAS No. 123, and the
fact that options vest over several years and new grants generally are made each
year.
The following are the number of shares of common and treasury stocks as of
January 3, 1998, January 2, 1999 and January 1, 2000.
<TABLE>
<CAPTION>
Number of Shares
---------------------------------------
January 3, January 2, January 1,
1998 1999 2000
----------- ----------- -----------
<S> <C> <C> <C>
Common Stock:
Balance at beginning of year 52,398,112 63,294,423 65,172,608
Shares issued upon exercise of stock options 383,975 1,707,097 29,750
Shares issued under restricted stock grants,
net of cancellations 99,192 171,088 190,680
Shares issued for acquisition of Designer
Holdings, Ltd. 10,413,144 -- --
----------- ----------- -----------
Balance at end of year 63,294,423 65,172,608 65,393,038
=========== =========== ===========
Treasury Stock:
Balance at beginning of year 536,600 1,375,919 6,087,674
Shares issued for acquisition of ABS -- -- (100,000)
Net additions 839,319 4,711,755 6,175,976
----------- ----------- -----------
Balance at end of year 1,375,919 6,087,674 12,163,650
=========== =========== ===========
</TABLE>
Stock Buyback Program
On November 14, 1996, the Board of Directors approved a stock buyback
program of up to 2.0 million shares. On May 14, 1997, the Company's Board of
Directors approved an increase of this program to 2.42 million shares. On
February 19, 1998 and on March 1, 1999, the Company's Board of Directors
authorized the repurchase of an additional 10.0 million shares, resulting in a
total authorization of 22.42 million shares. During fiscal 1997, 1998 and 1999,
the Company repurchased 839,319, 4,794,699 and 6,182,088 shares of its common
stock under the repurchase programs at a cost of $26,537, $135,416 and $144,688,
respectively. At January 1, 2000, there were 10,353,894 shares available for
repurchase under this program.
The Company has used a combined put-call option contract to facilitate the
repurchase of its common stock. This contract provides for the sale of a put
option giving the counterparty the right to sell the Company's shares to the
Company at a preset price at a future date and for the simultaneous purchase of
a call option giving the Company the right to purchase its shares from the
counterparty at the same price at the same future date.
At January 2, 1999, the Company held call options and had sold put options
(all covered by one contract) covering 1.5 million shares of common stock with
an average forward price of $35.35 per share. The equity instruments were
exercisable only at expiration of the contracts, with expiration dates ranging
from the first through third quarters of fiscal 1999. The equity instruments
were settled, at the election of the Company, through physical, net share or net
cash settlement. During fiscal 1998 and 1999, the Company repurchased
1,790,455 shares and 1,497,202 shares of common stock at a cost of $65,899 and
$52,919, which is reflected in treasury stock. In addition, the Company received
a net cash
F-40
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
settlement payment of $2,325 under these contracts in fiscal 1998, which was
reflected in additional paid-in-capital.
Note 14 - Earnings (Loss) per Share
<TABLE>
<CAPTION>
For the Year Ended
------------------------------------
January 3, January 2, January 1,
1998 1999 2000
---------- ---------- ----------
<S> <C> <C> <C>
Numerator for basic and diluted earnings (loss) per share -
Income (loss) before cumulative effect of change in accounting $ (12,319) $ 14,097 $ 97,786
Cumulative effect of change in accounting -- (46,250) --
--------- --------- ---------
Net income (loss) $ (12,319) $ (32,153) $ 97,786
========= ========= =========
Denominator for basic earnings (loss) per share -
Weighted average shares 52,814 61,362 55,910
--------- --------- ---------
Effect of dilutive securities:
Employee stock options -- 821 237
Restricted stock shares -- 473 462
Shares under put option contracts -- 349 187
--------- --------- ---------
Dilutive potential common shares -- 1,643 886
--------- --------- ---------
Denominator for diluted earnings (loss) per share-
Weighted average adjusted shares 52,814 63,005 56,796
========= ========= =========
Basic earnings (loss) per share before cumulative effect of
change in accounting $ (0.23) $ 0.23 $ 1.75
========= ========= =========
Diluted earnings (loss) per share before cumulative effect of
change in accounting $ (0.23) $ 0.22 $ 1.72
========= ========= =========
</TABLE>
Options to purchase 1,900,556, 7,456,708 and 7,484,606 shares of common
stock were outstanding during fiscal years 1997, 1998 and 1999 respectively.
These shares 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 fiscal 1999 options, which expire from February 2007 to
October 2009, were still outstanding at the end of fiscal 1999. Incremental
shares issuable on the assumed conversion of the Preferred Securities of
1,653,177 shares were not included in the fiscal 1998 and 1999 computation of
diluted earnings per share as the impact would have been antidilutive for each
period presented.
F-41
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
Note 15 - Lease Commitments
During fiscal 1997, the Company sold certain fixed assets for net book
value of approximately $33,223. The assets were leased back from the purchaser,
under the terms of an operating lease, over a six-year period. In fiscal 1998
and 1999, the Company sold certain equipment for cash proceeds of $21,713 and
$23,185, respectively, which approximated net book value. The equipment was
leased back from the purchaser under an operating lease with an initial term of
three years and a one-year renewal option. Under the terms of certain operating
leases, the Company guarantees a portion of the residual value loss, if any,
incurred by the lessors in remarketing or disposing the related assets upon
lease termination or expiration. The Company believes, based on existing facts
and circumstances and current values of such equipment, that a material payment
pursuant to such guarantee is unlikely.
Rental expense was $24,492, $35,534 and $37,967 for the years ended
January 3, 1998, January 2, 1999 and January 1, 2000, respectively.
The following is a schedule of future minimum rental payments required
under operating leases with terms in excess of one year, as of January 1, 2000:
Rental Payments
------------------------------
Real Estate Equipment
--------------- -------------
2000 $ 26,709 $ 15,238
2001 23,378 15,291
2002 18,685 19,498
2003 10,629 3,990
2004 11,849 2,857
2005 and thereafter 10,680 5,437
Note 16 - Financial Instruments
The following methods and assumptions were used by the Company in
estimating its fair value disclosures for financial instruments.
Accounts Receivable. The carrying amount of the Company's accounts
receivables approximate fair value.
Marketable Securities. Marketable securities are stated at fair value
based on quoted market prices.
Revolving, term loans and other borrowings. The carrying amounts of the
Company's outstanding balances under its various Bank Credit Agreements and
other outstanding debt approximate the fair value because the interest rate on
the outstanding borrowings is variable and there are no prepayment penalties.
Redeemable preferred securities. These securities are publically traded on
the New York Stock Exchange. The fair market value was determined based on the
closing price on the last trading date prior to the end of each fiscal year.
Interest rate swap agreements. The Company has entered into interest rate
swap agreements which have the effect of converting the Company's floating rate
obligations to fixed rate obligations. The fair value of the Company's interest
rate swap agreements at January 1, 2000 and January 2, 1999 are based
F-42
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
upon quotes from brokers and represent the cash requirement if the existing
agreements had been settled at year-end.
Letters of credit. Letters of credit collateralize the Company's
obligations to third parties and have terms ranging from 30 days to one year.
The face amount of the letters of credit are a reasonable estimate of the fair
value since the value for each is fixed over its relatively short maturity.
Equity option arrangements. These arrangements can be settled, at the
Company's option, by the purchase of shares, on a net basis in shares of the
Company's common stock or on a net cash basis. To the extent that the market
price of the Company's common stock on the settlement date is higher or lower
than the forward purchase price, the net differential can be paid or received by
the Company in cash or in the Company's common stock.
Foreign currency transactions. The Company enters into various foreign
currency forward and option contracts to hedge certain commercial transactions.
The fair value of open foreign currency forward and option contracts is based
upon quotes from brokers and reflects the cash benefit if the existing contracts
had been sold.
The carrying amounts and fair value of the Company's financial instruments
as of January 2, 1999 and January 1, 2000, are as follows:
<TABLE>
<CAPTION>
January 2, 1999 January 1, 2000
-------------------------- --------------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Accounts receivable $ 199,369 $ 199,369 $ 314,961 $ 314,961
Marketable securities -- -- 72,921 72,921
Revolving loans 353,097 353,097 667,156 667,156
Acquisition loan -- -- 586,200 586,200
Term loans 79,926 79,926 69,915 69,915
Other long term debt 9,094 9,094 9,484 9,484
Redeemable preferred securities 101,836 86,400 102,904 58,800
Interest rate swaps -- (24,324) -- 22,107
Letters of credit -- 129,802 -- 145,295
Equity option arrangements -- (15,144) -- --
Foreign currency purchased option
contracts 83 151 391 185
Foreign currency forward
contracts -- -- (111) (111)
</TABLE>
Foreign Currency-Risk Management
The Company's international operations are subject to certain
opportunities and risks, including currency fluctuations and government actions.
The Company closely monitors its operations in each country so that it can
respond to changing economic and political environments and to fluctuations in
foreign currencies. Accordingly, the Company utilizes foreign currency option
contracts and forward contracts to hedge its exposure on anticipated
transactions and firm commitments, primarily for receivables and payables
denominated in currencies other than the entities' functional currencies. The
Company also monitors its foreign exchange exposures to ensure the overall
effectiveness of its foreign currency hedge positions. Foreign currency
instruments generally have maturities that do not exceed twelve months.
The Company has foreign currency instruments, primarily denominated in
Canadian dollars, British pounds, Euros and Mexican pesos. At January 2, 1999
and January 1, 2000, the Company had $39,417 and $5,800 in foreign currency
instruments outstanding, respectively. For 1999, 1998 and 1997, the net realized
gains or losses associated with these types of instruments were not material.
The net unrealized gain (loss) as of January 2, 1999 and January 1, 2000,
based on the fair market value of the instruments, were not material to each
respective period.
F-43
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
Note 17 - Cash Flow Information
<TABLE>
<CAPTION>
For the Year Ended
------------------------------------
January 3, January 2, January 1,
1998 1999 2000
---------- ---------- ----------
<S> <C> <C> <C>
Cash paid (received) during the year for:
Interest, including $0, $1,897 and $4,038
capitalized in fiscal 1997, 1998 and 1999, respectively $ 42,932 $ 61,088 $ 82,517
Income taxes, net of refunds received 13,578 (12,538) 1,719
Supplemental Non-Cash Investing and Financing
Activities:
Details of acquisitions:
Fair value of assets acquired $ 607,609 $ 60,918 $ 740,976
Liabilities assumed (254,209) (7,800) (83,461)
Stock issued (353,400) -- (2,200)
--------- --------- ---------
Cash paid -- 53,118 655,315
Less cash acquired -- -- (7,000)
Less future cash payment (55,800) -- (22,800)
--------- --------- ---------
Net cash paid (acquired) $ (55,800) $ 53,118 $ 625,515
========= ========= =========
</TABLE>
Note 18 - Legal Matters
Between October 12, and October 13, 1999, six putative class action
complaints were filed in Delaware Chancery Court against the Company,
Authentic Fitness Corporation and certain of their officers and directors in
connection with the Company's proposed acquisition of Authentic Fitness.
On December 20, 1999, an Amended Class Action Complaint ("Amended
Complaint") was filed and on January 6, 2000 the court designated the Amended
Complaint as the operative complaint for the consolidated action captioned:
In Re Authentic Fitness Corporation Shareholders Litigation, C.A. No. 17464-NC
(consolidated). In the Amended Complaint (and all six complaints made virtually
identical claims), plaintiffs allege an unlawful scheme by certain of the
defendants, in breach of their fiduciary duties, to allow the Company to acquire
Authentic Fitness shares for inadequate consideration. Plaintiffs are seeking to
have the court declare the action a proper class action, to declare that the
defendants have breached their fiduciary duties to the class, and in the event
the transaction is consummated, recission thereof and damages awarded to the
Class. The Company believes the claims to be without merit and intends to
vigorously defend these actions.
The Company is not a party to any other litigation or other claims or
uncertainty, other than routine litigation incidental to the business of the
Company, that individually or in the aggregate is material to the business of
the Company.
Note 19 - Quarterly Results of Operations (Unaudited)
Year Ended January 1, 2000
-----------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
-------- -------- -------- --------
Net revenues $444,103 $484,737 $579,612 $605,704
Gross profit 154,089 173,263 201,488 172,167
Net income $ 22,892 $ 27,846 $ 44,379 $ 2,669
======== ======== ======== ========
Basic earnings per common share: $ 0.39 $ 0.50 $ 0.80 $ 0.05
======== ======== ======== ========
Diluted earnings per common share: $ 0.39 $ 0.49 $ 0.80 $ 0.05
======== ======== ======== ========
Note: The sum of the quarter per share amounts do not equal the full year
amounts.
F-44
<PAGE>
THE WARNACO GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Dollars in thousands, excluding share data)
<TABLE>
<CAPTION>
Year Ended January 2, 1999
-----------------------------------------------------
First Second Third Fourth
Quarter Quarter Quarter Quarter
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Net revenues $ 419,208 $ 438,874 $ 544,125 $ 548,044
Gross profit 119,550 131,496 160,392 125,777
Net income (loss) before cumulative effect of
accounting change 6,088 12,940 26,944 (31,875)
Cumulative effect of accounting change (46,250) -- -- --
----------- ----------- ----------- -----------
Net income (loss) $ (40,162) $ 12,940 $ 26,944 $ (31,875)
=========== =========== =========== ===========
Basic earnings (loss) per common share:
Income (loss) before accounting change $ 0.10 $ 0.21 $ 0.44 $ (0.54)
Cumulative effect of accounting change (0.75) -- -- --
----------- ----------- ----------- -----------
Net income (loss) $ (0.65) $ 0.21 $ 0.44 $ (0.54)
=========== =========== =========== ===========
Diluted earnings (loss) per common share:
Income (loss) before accounting change $ 0.10 $ 0.20 $ 0.43 $ (0.54)
Cumulative effect of accounting change (0.73) -- -- --
----------- ----------- ----------- -----------
Net income (loss) $ (0.63) $ 0.20 $ 0.43 $ (0.54)
=========== =========== =========== ===========
</TABLE>
Note: The sum of the quarter per share amounts do not equal the full year
amounts.
F-45
<PAGE>
SCHEDULE II
THE WARNACO GROUP, INC.
VALUATION & QUALIFYING ACCOUNTS & RESERVES (4)
(Dollars in thousands)
<TABLE>
<CAPTION>
Additions
Balance at Charges to
Beginning Costs and Other Balance at
Description of Year Expenses(1) Additions(2) Deductions(3) End of Year
- ----------- ---------- ----------- ------------ ------------- -----------
<S> <C> <C> <C> <C> <C>
Year Ended January 3, 1998
Receivable allowances $ 11,337 $ 139,469 $ 30,510 $(135,192) $ 46,124
======== ========= ========= ========= =========
Inventory reserves $ -- $ 57,298 $ 19,248 $ (37,371) $ 39,175
======== ========= ========= ========= =========
Year Ended January 2, 1999
Receivable allowances $ 46,124 $ 166,347 $ 21,500 $(197,303) $ 36,668
======== ========= ========= ========= =========
Inventory reserves $ 39,175 $ 25,442 $ 3,000 $ (50,716) $ 16,901
======== ========= ========= ========= =========
Year Ended January 1, 2000
Receivable allowances $ 36,668 $ 206,098 $ 4,383 $(214,277) $ 32,872
======== ========= ========= ========= =========
Inventory reserves $ 16,901 $ 6,247 $ 8,140 $ (16,914) $ 14,374
======== ========= ========= ========= =========
</TABLE>
(1) Includes bad debts, cash discounts, allowances and sales returns.
(2) Reserves related to assets acquired including fair value adjustments--See
Note 2.
(3) Amounts written-off, net of recoveries.
(4) See Notes 2 and 3 for other restructuring related activity and Note 7 for
tax valuation allowance information.
S-1
STATEMENT OF DIFFERENCES
------------------------
The registered trademark symbol shall be expressed as......................'r'
The section symbol shall be expressed as.................................. 'SS'
<PAGE>
EXECUTION COPY
U.S. $600,000,000
AMENDED AND RESTATED
CREDIT AGREEMENT
Dated as of November 17, 1999
Among
WARNACO INC.
as Borrower
and
THE WARNACO GROUP, INC.
and
THE INITIAL LENDERS NAMED HEREIN
as Initial Lenders
and
THE BANK OF NOVA SCOTIA and SALOMON SMITH BARNEY INC.
as Co-Lead Arrangers and Co-Book Managers
and
CITIBANK, N.A.
as Syndication Agent
and
COMMERZBANK A.G., NEW YORK BRANCH
as Documentation Agent
and
THE BANK OF NOVA SCOTIA
as Administrative Agent, Competitive Bid Agent,
Swing Line Bank and an Issuing Bank
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms . . . . . . . . . . . . . . . . . . . . . . . . .2
SECTION 1.02. Computation of Time Periods . . . . . . . . . . . . . . . . . . . . . 25
SECTION 1.03. Accounting Terms. . . . . . . . . . . . . . . . . . . . . . . . . . . 25
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. . . . . . . . . . . . . . . . . . . . . . . . . . . . .25
SECTION 2.02. Making the Advances . . . . . . . . . . . . . . . . . . . . . . . . .27
SECTION 2.03. Issuance of and Drawings and Reimbursement Under Letters of Credit 30
SECTION 2.04. The Competitive Bid Advances. . . . . . . . . . . . . . . . . . . . .32
SECTION 2.05. Repayment of Advances . . . . . . . . . . . . . . . . . . . . . . . .37
SECTION 2.06. Termination or Reduction of the Commitments . . . . . . . . . . . . .38
SECTION 2.07. Prepayments.. . . . . . . . . . . . . . . . . . . . . . . . . . . . .38
SECTION 2.08. Interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .39
SECTION 2.09. Fees. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .40
SECTION 2.10. Conversion of Advances. . . . . . . . . . . . . . . . . . . . . . . .41
SECTION 2.11. Increased Costs, Etc. . . . . . . . . . . . . . . . . . . . . . . . .42
SECTION 2.12. Illegality. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .43
SECTION 2.13. Payments and Computations . . . . . . . . . . . . . . . . . . . . . .43
SECTION 2.14. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45
SECTION 2.15. Sharing of Payments, Etc. . . . . . . . . . . . . . . . . . . . . . .48
SECTION 2.16. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . .48
SECTION 2.17. Defaulting Lenders. . . . . . . . . . . . . . . . . . . . . . . . . .48
SECTION 2.18. Evidence of Debt. . . . . . . . . . . . . . . . . . . . . . . . . . .51
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Amendment and
Restatement . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52
SECTION 3.02. Conditions Precedent to Each Borrowing and Issuance . . . . . . . . .53
SECTION 3.03. Determinations Under Section 3.01 . . . . . . . . . . . . . . . . .54
SECTION 3.04. Reference to and Effect on the Loan Documents . . . . . . . . . . . .54
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. . . . . . . . . . . . 54
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants . . . . . . . . . . . . . . . . . . . . . . . .58
SECTION 5.02. Negative Covenants. . . . . . . . . . . . . . . . . . . . . . . . . .61
SECTION 5.03. Financial Covenants . . . . . . . . . . . . . . . . . . . . . . . . .65
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default . . . . . . . . . . . . . . . . . . . . . . . . . .65
SECTION 6.02. Actions in Respect of the Letters of Credit upon Default. . . . . . .68
ARTICLE VII
THE AGENTS
SECTION 7.01. Authorization and Action. . . . . . . . . . . . . . . . . . . . . . .69
SECTION 7.02. Agents' Reliance, Etc.. . . . . . . . . . . . . . .. . . . . . . . .69
SECTION 7.03. Scotiabank, Citibank, Commerzbank and Affiliates. . . . . . . . . . .70
SECTION 7.04. Lender Credit Decision. . . . . . . . . . . . . . . . . . . . . . . .70
SECTION 7.05. Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . .70
SECTION 7.06. Successor Agents. . . . . . . . . . . . . . . . . . . . . . . . . . .71
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc . . . . . . . . . . . . . . . . . . . . . . . . . . .71
SECTION 8.02. Notices, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . .72
SECTION 8.03. No Waiver; Remedies . . . . . . . . . . . . . . . . . . . . . . . . .73
SECTION 8.04. Costs and Expenses. . . . . . . . . . . . . . . . . . . . . . . . . .73
SECTION 8.05. Right of Set-off. . . . . . . . . . . . . . . . . . . . . . . . . . .75
SECTION 8.06. Binding Effect. . . . . . . . . . . . . . . . . . . . . . . . . . . .75
SECTION 8.07. Assignments, Designations and Participations. . . . . . . . . . . . .75
SECTION 8.08. Confidentiality . . . . . . . . . . . . . . . . . . . . . . . . . . .81
SECTION 8.09. No Liability of the Issuing Banks.. . . . . . . . . . . . . . . . . .82
SECTION 8.10. Execution in Counterparts . . . . . . . . . . . . . . . . . . . . . .82
SECTION 8.11. Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . .82
SECTION 8.12. Jurisdiction, Etc.. . . . . . . . . . . . . . . . . . . . . . . . . .82
SECTION 8.13. Release of Guarantors . . . . . . . . . . . . . . . . . . . . . . . .83
SECTION 8.14. Waiver of Jury Trial. . . . . . . . . . . . . . . . . . . . . . . . .84
</TABLE>
<PAGE>
<TABLE>
<S> <C>
SCHEDULES
Schedule I - List of Applicable Lending Offices
Schedule II - Existing Debt
Schedule 4.01(b) - Subsidiaries
Schedule 5.02(d) - Assets Held For Sale
EXHIBITS
Exhibit A-1 - Form of Competitive Bid Note
Exhibit A-2 - Form of Revolving Credit Note
Exhibit B-1 - Form of Notice of Borrowing
Exhibit B-2 - Form of Notice of Competitive Bid Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Designation Agreement
Exhibit E - Form of Group Consent
Exhibit F - Form of Subsidiary Consent
</TABLE>
<PAGE>
AMENDED AND RESTATED CREDIT AGREEMENT
Dated as of November 17, 1999
AMENDED AND RESTATED CREDIT AGREEMENT among WARNACO
INC., a Delaware corporation (together with any successors-in-interest permitted
hereunder, the "Borrower"), THE WARNACO GROUP, INC., a Delaware corporation
(together with any successors-in-interest permitted hereunder, "Group"), the
banks, financial institutions and other institutional lenders (the "Initial
Lenders") listed on the signature pages hereof, and THE BANK OF NOVA SCOTIA
("Scotiabank") and SALOMON SMITH BARNEY, INC. ("SSB") as co- lead arrangers and
co-book managers (the "Arrangers") for the Lenders (as hereinafter defined),
CITIBANK, N.A. ("Citibank") as syndication agent ("Syndication Agent") for the
Lenders, COMMERZBANK A.G., New York Branch as documentation agent (the
"Documentation Agent") for the Lenders, and Scotiabank as administrative agent
(the "Administrative Agent") and competitive bid agent (the "Competitive Bid
Agent") for the Lenders and as a Swing Line Bank and an Issuing Bank hereunder.
PRELIMINARY STATEMENTS
(1) The Borrower and Group entered into a Credit Agreement dated as of
August 12, 1997, as amended by Amendment No.1 dated as of July 31, 1998 (as
amended, supplemented or otherwise modified through the date hereof, the
"Predecessor Credit Agreement"), with the financial institutions and other
institutional lenders party thereto (the "Predecessor Lenders"), Scotiabank as
managing agent, administrative agent and competitive bid agent for the
Predecessor Lenders and Citibank as managing agent and documentation agent for
the Lenders.
(2) The Borrower or a single-purpose wholly owned subsidiary of the
Borrower (the "Purchaser") will either (a) offer to acquire a controlling
interest in Authentic Fitness Corporation, a Delaware corporation ("Authentic
Fitness") through a tender offer (the "Tender Offer") for all of Authentic
Fitness's outstanding common stock (the "Authentic Fitness Stock"), but in any
event for not less than sufficient shares of Authentic Fitness's stock to enable
the Purchaser, voting without any other shareholders of Authentic Fitness, to
approve a merger of the Purchaser with Authentic Fitness and as promptly as
practicable after the closing of the Tender Offer, the Purchaser, if a
single-purpose wholly owned Subsidiary of the Borrower, will consummate a merger
with Authentic Fitness in which Authentic Fitness will be the surviving
corporation or (b) agree to merge with Authentic Fitness in which Authentic
Fitness will be the surviving corporation (such merger described in either
clause (a) or (b) above between the Purchaser and Authentic Fitness being the
"Merger").
<PAGE>
2
(3) The Borrower and the Initial Lenders hereunder have agreed to
amend and restate the Predecessor Credit Agreement as set forth below.
NOW, THEREFORE, in consideration of the premises and of the mutual
covenants and agreements contained herein, the parties hereto hereby agree that,
subject to the satisfaction of the conditions precedent set forth in Section
3.01, the Predecessor Credit Agreement is amended and restated in its entirety
to read as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this Agreement, 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):
"Administrative Agent" has the meaning specified in the recital of
parties to this Agreement.
"Administrative Agent's Account" means the account of the
Administrative Agent maintained by the Administrative Agent with Scotiabank
at its office at One Liberty Plaza, New York, New York 10006, Special
Management Account No. 0608335, Reference: Warnaco.
"Advance" means a Revolving Credit Advance, a Competitive Bid Advance,
a Swing Line Advance, or a Letter of Credit Advance.
"Affiliate" means, as to any Person, any other Person that, directly
or indirectly, controls, is controlled by or is under common control with
such Person or is a director or officer of such Person. For purposes of
this definition, the term "control" (including the terms "controlling",
"controlled by" and "under common control with") of a Person means the
possession, direct or indirect, of the power to vote 10% or more of the
Voting Stock of such Person or to direct or cause the direction of the
management and policies of such Person, whether through the ownership of
Voting Stock, by contract or otherwise.
"Agents" means each of the Arrangers, the Syndication Agent, the
Documentation Agent, the Administrative Agent and the Competitive Bid
Agent, together, in each case, with any successor or successors of any
thereof appointed pursuant to Article VII hereof.
<PAGE>
3
"Applicable Lending Office" means, with respect to each Lender, such
Lender's Domestic Lending Office in the case of a Base Rate Advance and
such Lender's Eurodollar Lending Office in the case of a Eurodollar Rate
Advance and, in the case of a Competitive Bid Advance, the office of such
Lender notified by such Lender to the Competitive Bid Agent as its
Applicable Lending Office with respect to such Competitive Bid Advance.
"Applicable Margin" means, as of any date, a percentage per annum
determined by reference to the Debt Rating in effect on such date as set
forth below:
<TABLE>
<CAPTION>
--------------------------------------------------------
Rating Debt Base Rate Eurodollar
Level Rating Advances Rate
Advances
--------------------------------------------------------
<S> <C> <C> <C>
Level 1 A- or A3 or 0.000% 0.250%
higher
--------------------------------------------------------
Level 2 BBB+ or Baa1 0.000% 0.275%
--------------------------------------------------------
Level 3 BBB or Baa2 0.000% 0.300%
--------------------------------------------------------
Level 4 BBB- or Baa3 0.000% 0.425%
--------------------------------------------------------
Level 5 BB+ or Ba1 or 0.250% 0.625%
lower
--------------------------------------------------------
</TABLE>
provided, that at any time that the Debt Rating is at Level 1, 2 or 3 and the
aggregate Available Amount of Letters of Credit plus the principal amount of
Advances exceeds 25% of the aggregate Commitments, the Applicable Margin shall
be increased by 0.075% per annum.
"Applicable Percentage" means, as of any date, a percentage per annum
determined by reference to the Debt Rating in effect on such date as set
forth below:
<TABLE>
<CAPTION>
----------------------------------------------
Rating Debt Applicable
Level Rating Percentage
----------------------------------------------
<S> <C> <C>
Level 1 A- or A3 or 0.080%
higher
----------------------------------------------
Level 2 BBB+ or Baa1 0.090%
----------------------------------------------
Level 3 BBB or Baa2 0.125%
----------------------------------------------
</TABLE>
<PAGE>
4
<TABLE>
<S> <C> <C>
----------------------------------------------
Level 4 BBB- or Baa3 0.150%
----------------------------------------------
Level 5 BB+ or Ba1 or 0.200%
lower
----------------------------------------------
</TABLE>
"Appropriate Lender" means, at any time, with respect to (a) the
Revolving Credit Facility, a Lender that has a Revolving Credit Commitment
at such time, (b) the Letter of Credit Facility, (i) the Issuing Banks and
(ii) if the other Revolving Credit Lenders shall have made Letter of Credit
Advances pursuant to Section 2.03(c) that are outstanding at such time,
each such other Revolving Credit Lender and (c) the Swing Line Facility,
(i) the Swing Line Bank and (ii) if the other Revolving Credit Lenders have
made Swing Line Advances pursuant to Section 2.02(b) that are outstanding
at such time, such other Revolving Credit Lenders.
"Approved Accounting Firm" means Arthur Andersen LLP, Coopers &
Lybrand L.L.P., Deloitte & Touche LLP, Ernst & Young LLP,
PricewaterhouseCoopers LLP or KPMG Peat Marwick LLP, or any successor
thereof.
"Arrangers" has the meaning specified in the recital of parties to
this Agreement.
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Lender and an Eligible Assignee, and accepted by the
Administrative Agent, in accordance with Section 8.07 and in substantially
the form of Exhibit C hereto.
"Authentic Fitness" has the meaning set forth in the Preliminary
Statements.
"Available Amount" of any Letter of Credit means, at any time, the
maximum amount available to be drawn under such Letter of Credit at such
time (assuming compliance at such time with all conditions to drawing).
"Base Rate" means a fluctuating interest rate per annum in effect from
time to time, which rate per annum shall at all times be equal to the
higher of:
(a) the rate of interest established by the Administrative Agent,
from time to time, at its Domestic Lending Office as its base rate for
loans in United States dollars; and
(b) 1/2 of one percent per annum above the Federal Funds Rate.
"Base Rate Advance" means an Advance that bears interest as provided
in Section 2.08(a)(i).
<PAGE>
5
"Borrower" has the meaning specified in the recital of parties to this
Agreement.
"Borrower's Account" means the account of the Borrower maintained by
the Borrower with Citibank at its office at 399 Park Avenue, New York, New
York 10043, Account No. 3846-9269.
"Borrowing" means a Revolving Credit Borrowing, a Competitive Bid
Borrowing or a Swing Line Borrowing.
"Business Day" means a day of the year on which banks are not required
or authorized by law to close in New York City and, if the applicable
Business Day relates to any Eurodollar Rate Advances, on which dealings are
carried on in the London interbank market.
"Capitalized Leases" has the meaning specified in clause (e) of the
definition of "Debt".
"Citibank" has the meaning specified in the recital of parties to this
Agreement.
"Commitment" means a Revolving Credit Commitment or a Letter of Credit
Commitment.
"Competitive Bid Advance" means an advance by a Lender to the Borrower
as part of a Competitive Bid Borrowing resulting from the competitive
bidding procedure described in Section 2.04 and refers to a Fixed Rate
Advance or a LIBO Rate Advance.
"Competitive Bid Agent" has the meaning specified in the recital of
parties to this Agreement.
"Competitive Bid Agent's Account" means the account of the Competitive
Bid Agent maintained by the Competitive Bid Agent with Scotiabank at its
office at One Liberty Plaza, New York, New York 10006, Special Management
Account No. 0608335, Reference: Warnaco.
"Competitive Bid Borrowing" means a borrowing consisting of
simultaneous Competitive Bid Advances from each of the Lenders whose offer
to make one or more Competitive Bid Advances as part of such borrowing has
been accepted under the competitive bidding procedure described in Section
2.04.
"Competitive Bid Note" means a promissory note of the Borrower payable
to the order of any Lender, in substantially the form of Exhibit A-1
hereto, evidencing the
<PAGE>
6
indebtedness of the Borrower to such Lender resulting from a Competitive
Bid Advance made by such Lender.
"Confidential Information" means any information, whether written or
oral that the Borrower or Group furnishes to any Agent or Lender which is
designated as confidential or which could reasonably be expected by such
Agent or Lender to be confidential, provided, that for purposes of this
definition, unless otherwise specified by the Borrower or Group, the term
"Confidential Information" will include, without limitation, any
information furnished by the Borrower or Group regarding proposed
acquisitions (including, without limitation, the acquisition of Authentic
Fitness) and new product launches by Group or its Subsidiaries, and
provided, further, that the term "Confidential Information" does not
include any information that is or becomes generally available to the
public or that is or becomes available to such Agent or Lender from a
source other than the Borrower or Group.
"Consolidated" refers to the consolidation of accounts in accordance
with GAAP.
"Control Date" means the date on which Persons designated or approved
by Group constitute a majority of the Board of Directors of Authentic
Fitness.
"Convert", "Conversion" and "Converted" each refers to a conversion of
Advances of one Type into Advances of the other Type pursuant to Section
2.10 or 2.11.
"Currency Hedge Agreements" means currency swap agreements, currency
future or option contracts and other similar agreements.
"Debt" of any Person means, without duplication, the following:
(a) all indebtedness of such Person for borrowed money,
(b) all Obligations of such Person for the deferred purchase
price of property or services (other than trade payables not overdue
by more than 90 days incurred in the ordinary course of such Person's
business), including, without limitation, the Trade Credit Facility,
(c) all Obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments,
(d) all Obligations of such Person created or arising under any
conditional sale or other title retention agreement with respect to
property
<PAGE>
7
acquired by such Person (even though the rights and remedies of the
seller or lender under such agreement in the event of default are
limited to repossession or sale of such property),
(e) all Obligations of such Person as lessee under leases that
have been or should be, in accordance with GAAP, recorded as capital
leases ("Capitalized Leases"),
(f) all Obligations, contingent or otherwise, of such Person
under acceptance, letter of credit or similar facilities,
(g) all Obligations of such Person to purchase, redeem, retire,
defease or otherwise make any payment in respect of any capital stock
of or other ownership or profit interest in such Person or any other
Person or any warrants, rights or options to acquire such capital
stock, valued, in the case of Redeemable preferred stock, at the
greater of its voluntary or involuntary liquidation preference plus
accrued and unpaid dividends,
(h) all Obligations of such Person in respect of Hedge
Agreements,
(i) all Debt of others of the kinds referred to in clauses (a)
through (h) above guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or indirectly by such
Person through an agreement (A) to pay or purchase such Debt or to
advance or supply funds for the payment or purchase of such Debt, (B)
to purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of enabling the
debtor to make payment of such Debt or to assure the holder of such
Debt against loss, (C) to supply funds to or in any other manner
invest in the debtor (including any agreement to pay for property or
services irrespective of whether such property is received or such
services are rendered) or (D) otherwise to assure a creditor against
loss, and
(j) all Debt referred to in clauses (a) through (h) above secured
by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on property
(including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable
for the payment of such Debt.
"Debt Rating" means, as of any date, the higher of the ratings that
have been most recently announced by S&P and Moody's for any class of
non-credit enhanced long-term senior unsecured debt issued by Group in
effect on such date, provided that if neither
<PAGE>
8
S&P nor Moody's shall have in effect such a rating, the Applicable Margin
and the Applicable Percentage will be set in accordance with Rating Level 5
under the definition of "Applicable Margin" or "Applicable Percentage", as
the case may be, subject, in the case of the Applicable Margin, to the
proviso to the definition of "Applicable Margin". For purposes of the
foregoing, (a) if only one of S&P and Moody's shall have in effect a Debt
Rating, the Applicable Margin and the Applicable Percentage shall be
determined by reference to the available rating; (b) if the ratings
established by S&P and Moody's shall fall within different levels separated
by two or more levels, the Applicable Margin and the Applicable Percentage
shall be based upon the level that is one level above the lower rating; (c)
if any rating established by S&P or Moody's shall be changed, such change
shall be effective as of the date on which such change is reported to
Group; and (d) if S&P or Moody's shall change the basis on which ratings
are established, each reference to the Debt Rating announced by S&P or
Moody's, as the case may be, shall refer to the then equivalent rating by
S&P or Moody's, as the case may be.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be given
or time elapse or both.
"Defaulted Advance" means, with respect to any Lender Party at any
time, the amount of any Advance required to be made by such Lender Party to
the Borrower or for the account of the Borrower pursuant to Section 2.01 at
or prior to such time which has not been so made as of such time; provided,
however, any Advance made by the Administrative Agent for the account of
such Lender Party pursuant to Section 2.02(e) shall not be considered a
Defaulted Advance even if, at such time, such Lender Party shall not have
reimbursed the Administrative Agent therefor as provided in Section
2.02(e). In the event that a portion of a Defaulted Advance shall be deemed
made pursuant to Section 2.17(a), the remaining portion of such Defaulted
Advance shall be considered a Defaulted Advance originally required to be
made pursuant to Section 2.01 on the same date as the Defaulted Advance so
deemed made in part.
"Defaulted Amount" means, with respect to any Lender Party at any
time, any amount required to be paid by such Lender to any Agent or any
other Lender Party hereunder or under any other Loan Document at or prior
to such time which has not been so paid as of such time, including, without
limitation, any amount required to be paid by such Lender Party to (a) the
Swing Line Bank pursuant to Section 2.02(b) to purchase a portion of a
Swing Line Advance made by the Swing Line Bank, (b) any Issuing Bank
pursuant to Section 2.03(c) to purchase a portion of a Letter of Credit
Advance made by such Issuing Bank, (c) the Administrative Agent pursuant to
Section 2.02(e) to reimburse the Administrative Agent for the amount of any
Advance made by the Administrative Agent for the account of such Lender
Party, (d) any other Lender Party pursuant to Section 2.15 to purchase any
participation in Advances owing to such other Lender Party
<PAGE>
9
and (e) any Agent pursuant to Section 7.05 to reimburse such Agent for such
Lender Party's ratable share of any amount required to be paid by the
Lender Parties to such Agent as provided therein. In the event that a
portion of a Defaulted Amount shall be deemed paid pursuant to Section
2.17(b), the remaining portion of such Defaulted Amount shall be considered
a Defaulted Amount originally required to be made hereunder or under any
other Loan Document on the same date as the Defaulted Amount so deemed paid
in part.
"Defaulting Lender" means, at any time, any Lender Party that, at such
time, (a) owes a Defaulted Advance or a Defaulted Amount or (b) shall take
or be the subject of any action or proceeding of a type described in
Section 6.01(e).
"Designated Lender" means each special purpose corporation that (i)
shall have been designated by a Designating Lender and shall have become a
party to this Agreement, all pursuant to Section 8.07(d), and (ii) is not
otherwise a Lender.
"Designating Lender" shall mean each Lender that is a party hereto
(other than by virtue of a Designation Agreement) that shall designate a
Designated Lender pursuant to a Designation Agreement in accordance with
Section 8.07(d).
"Designation Agreement" means a designation agreement entered into by
a Designating Lender and a Designated Lender, and accepted by the
Administrative Agent, in substantially the form of Exhibit D hereto.
"Designer Holdings" means Designer Holdings Ltd., a Delaware
corporation, together with its successors.
"Documentary Letter of Credit" means any Letter of Credit that is
issued under the Letter of Credit Facility for the benefit of a supplier of
Inventory to the Borrower or any of its Subsidiaries to effect payment for
such Inventory.
"Documentation Agent" has the meaning specified in the recital of
parties to this Agreement.
"Domestic Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Domestic Lending Office" opposite
its name on Schedule I hereto or in the Assignment and Acceptance pursuant
to which it became a Lender, or such other office of such Lender as such
Lender may from time to time specify to the Borrower and the Administrative
Agent.
<PAGE>
10
"Domestic Subsidiary" means any Subsidiary of Group organized under
the laws of the United States or any state thereof.
"EBITDA" means, for any period, net income (or net loss) from
operations (determined without giving effect to extraordinary or
non-recurring gains or losses) plus, to the extent deducted in calculating
such net income (loss), the sum of (a) Interest Expense, (b) income tax
expense, (c) depreciation expense, (d) amortization expense and (e)
minority interests in Authentic Fitness during the period commencing on the
date the Tender Offer, if any, is consummated and ending on the date of the
Merger less dividends paid to the minority interests in respect thereof, in
each case determined in accordance with GAAP and, on a pro forma basis, as
if any acquisitions consummated after the first day of the applicable
testing period occurred on the first day of such period.
"Effective Date" means the first date on which the conditions
specified in Section 3.01 have been satisfied.
"Eligible Assignee" means any Person approved by the Administrative
Agent and the Borrower, such approval not to be unreasonably withheld;
provided, however, that neither the Borrower nor an Affiliate of the
Borrower shall qualify as an Eligible Assignee.
"Environmental Action" means any administrative, regulatory or
judicial action, suit, demand, demand letter, claim, notice of
non-compliance or violation, notice of liability or potential liability,
investigation, proceeding, consent order or consent agreement relating in
any way to any Environmental Law, Environmental Permit or Hazardous
Materials or arising from alleged injury or threat of injury to health,
safety or the environment, including, without limitation, (a) by any
governmental or regulatory authority for enforcement, cleanup, removal,
response, remedial or other actions or damages and (b) by any governmental
or regulatory authority or any third party for damages, contribution,
indemnification, cost recovery, compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, judgment or decree
relating to the environment, health, safety or Hazardous Materials.
"Environmental Permit" means any permit, approval, identification
number, license or other authorization required under any Environmental
Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
<PAGE>
11
"ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of the Borrower's controlled group, or under common
control with the Borrower, within the meaning of Section 414 of the
Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable event,
within the meaning of Section 4043 of ERISA, with respect to any Plan
unless the 30-day notice requirement with respect to such event has been
waived by the PBGC, or (ii) the requirements of subsection (1) of Section
4043(b) of ERISA (without regard to subsection (2) of such Section) are met
with respect to a contributing sponsor, as defined in Section 4001(a)(13)
of ERISA, of a Plan, and an event described in paragraph (9), (10), (11),
(12) or (13) of Section 4043(c) of ERISA is reasonably expected to occur
with respect to such Plan within the following 30 days; (b) the application
for a minimum funding waiver with respect to a Plan; (c) the provision by
the administrator of any Plan of a notice of intent to terminate such Plan
pursuant to Section 4041(a)(2) of ERISA (including any such notice with
respect to a plan amendment referred to in Section 4041(e) of ERISA); (d)
the cessation of operations at a facility of the Borrower or any of its
ERISA Affiliates in the circumstances described in Section 4062(e) of
ERISA; (e) the withdrawal by the Borrower or any of its ERISA Affiliates
from a Multiple Employer Plan during a plan year for which it was a
substantial employer, as defined in Section 4001(a)(2) of ERISA; (f) the
failure by the Borrower or any of its ERISA Affiliates to make a payment to
a Plan if the conditions for the imposition of a lien under Section
302(f)(1) of ERISA are satisfied; (g) the adoption of an amendment to a
Plan requiring the provision of security to such Plan, pursuant to Section
307 of ERISA; or (h) the institution by the PBGC of proceedings to
terminate a Plan, pursuant to Section 4042 of ERISA, or the occurrence of
any event or condition described in Section 4042 of ERISA that could
constitute grounds for the termination of, or the appointment of a trustee
to administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to that term in
Regulation D of the Board of Governors of the Federal Reserve System, as in
effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender, the
office of such Lender specified as its "Eurodollar Lending Office" opposite
its name on Schedule I hereto or in the Assignment and Acceptance pursuant
to which it became a Lender (or, if no such office is specified, its
Domestic Lending Office), or such other office of such Lender as such
Lender may from time to time specify to the Borrower and the Administrative
Agent.
"Eurodollar Rate" means, for any Interest Period for all Eurodollar
Rate Advances comprising part of the same Borrowing, an interest rate per
annum equal to the rate per annum obtained by dividing (a) the rate per
annum (rounded upward to the nearest whole
<PAGE>
12
multiple of 1/16 of 1% per annum) appearing on Dow Jones Markets Telerate
Page 3750 (or any successor page) as the London interbank offered rate for
deposits in U.S. dollars at approximately 11:00 A.M. (London time) two
Business Days prior to the first day of such Interest Period for a term
comparable to such Interest Period or, if for any reason such rate is not
available, the rate at which deposits in U.S. dollars are offered by the
principal office of the Administrative Agent in London, England to prime
banks in the London interbank market at 11:00 A.M. (London time) two
Business Days before the first day of such Interest Period in an amount
substantially equal to the Administrative Agent's Eurodollar Rate Advance
comprising part of such Borrowing to be outstanding during such Interest
Period and for a period equal to such Interest Period by (b) a percentage
equal to 100% minus the Eurodollar Rate Reserve Percentage for such
Interest Period.
"Eurodollar Rate Advance" means an Advance that bears interest as
provided in Section 2.08(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period for all
Eurodollar Rate Advances or LIBO Rate Advances comprising part of the same
Borrowing means the reserve percentage applicable two Business Days before
the first day of such Interest Period under regulations issued from time to
time by the Board of Governors of the Federal Reserve System (or any
successor) for determining the maximum reserve requirement (including,
without limitation, any emergency, supplemental or other marginal reserve
requirement) for a member bank of the Federal Reserve System in New York
City with respect to liabilities or assets consisting of or including
Eurocurrency Liabilities (or with respect to any other category of
liabilities that includes deposits by reference to which the interest rate
on Eurodollar Rate Advances or LIBO Rate Advances is determined) having a
term equal to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Excluded Person" means (i) Linda J. Wachner or (ii) any trust of
which Linda J. Wachner is the sole trustee or is a trustee with effective
control over the voting stock held by such trust or over the management or
policies of Group (or, in case of her death or disability, another trustee
of comparable experience and ability selected by the Borrower within 180
days thereafter after consultation with the Arrangers).
"Excluded Subsidiary" means, provided that the terms of the Trust
Stock preclude the issuance of a guaranty, the Trust, provided, that
neither Group nor the Borrower nor any of their Subsidiaries shall make any
additional Investments in the Trust other than those Investments which
existed on the date of the Five Year Waiver and those
<PAGE>
13
Investments necessary to pay its normal operating expenses in the ordinary
course of business.
"Excluded Taxes" means, in the case of each Lender Party, franchise
taxes and taxes upon or determined by reference to such Lender Party's net
income (including, without limitation, branch profit taxes), in each case
imposed by the United States or any political subdivision or taxing
authority thereof or therein or by any jurisdiction in which such Lender
Party has its Applicable Lending Office, is resident or in which such
Lender Party is organized or has its principal or registered office and, in
the case of each Agent, franchise taxes and net income taxes upon or
determined by reference to such Agent's net income (including, without
limitation, branch profits taxes) imposed by the United States or by the
state or foreign jurisdiction under the laws of which such Agent is
organized (or by any political subdivision of such state or foreign
jurisdiction), is resident or has its principal or registered office.
"Existing Debt" means the Debt described in Schedule II hereto.
"Facility" means the Revolving Credit Facility, the Swing Line
Facility or the Letter of Credit Facility.
"Federal Funds Rate" means, for any period, a fluctuating interest
rate per annum equal for each day during such period to the weighted
average of the rates on overnight Federal funds transactions with members
of the Federal Reserve System arranged by Federal funds brokers, as
published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if
such rate is not so published for any day that is a Business Day, the
average of the quotations for such day on such transactions received by the
Administrative Agent from three Federal funds brokers of recognized
standing selected by it.
"Fiscal Quarter" means a fiscal quarter of Group and its Consolidated
Subsidiaries ending on or about March 31, June 30, September 30 or December
31 of each year.
"Fiscal Year" means a fiscal year of Group and its Consolidated
Subsidiaries ending on or about December 31 of each year.
"Five Year Waiver" means the Letter Waiver dated as of October 14,
1997 to the Predecessor Credit Agreement.
"Fixed Rate Advances" has the meaning specified in Section 2.04(a)(i).
"GAAP" has the meaning specified in Section 1.03.
<PAGE>
14
"Group" has the meaning specified in the recital of parties to this
Agreement.
"Group Guaranty" has the meaning specified in Section 3.01(d)(i).
"Guaranties" means the Group Guaranty and the Subsidiary Guaranty.
"Guarantors" means Group and each of its Domestic Subsidiaries that
are Material Subsidiaries (other than the Borrower and each Excluded
Subsidiary) and each other Subsidiary which is required to guarantee the
Borrower's Obligations under the Loan Documents pursuant to Section
5.01(k).
"Hazardous Materials" means petroleum and petroleum products,
byproducts or breakdown products, radioactive materials,
asbestos-containing materials, radon gas and any other chemicals, materials
or substances designated, classified or regulated as being "hazardous" or
"toxic", or words of similar import, under any Environmental Law.
"Hedge Agreements" means Currency Hedge Agreements and Interest Rate
Hedge Agreements.
"Indebtedness for Borrowed Money" of any Person means all Debt of such
Person for borrowed money or evidenced by notes, bonds, debentures or other
similar instruments (other than Trust Stock in a face amount of not more
than $120,000,000), all Obligations of such Person for the deferred
purchase price of any property, service or business (other than trade
accounts payable (including the Trade Credit Facility and other similar
financing arrangements to the extent that the aggregate principal amount of
Debt, including loans, acceptances and letters of credit thereunder, does
not exceed $550,000,000 (it being understood and agreed that to the extent
that the principal amount of Debt under the Trade Credit Facility and other
similar financing arrangements exceeds $550,000,000, a pro-rata portion of
such excess (calculated by reference to the relative amount of loans
constituting such Debt) shall be included in this definition of
"Indebtedness for Borrowed Money")) incurred in the ordinary course of
business and constituting current liabilities), and all Obligations of such
Person under Capitalized Leases (limited in each case to the principal
amount thereof).
"Indemnified Party" has the meaning specified in Section 8.04(b).
"Initial Lenders" has the meaning specified in the recital of parties
to this Agreement.
"Insufficiency" means, with respect to any Plan, the amount, if any,
of its unfunded benefit liabilities, as defined in Section 4001(a)(18) of
ERISA.
<PAGE>
15
"Interest Expense" means, with respect to any Person for any period of
measurement, the excess, if any, of (i) interest expense (whether cash or
accretion) of such Person during such period determined in accordance with
GAAP, and shall include in any event, without limitation, interest expense
with respect to Indebtedness for Borrowed Money, the Trade Credit Facility
and payments under Interest Rate Hedge Agreements over (ii) interest income
of such Person for such period, including payments received under Interest
Rate Hedge Agreements; provided, however, that interest expense for any
acquired entity, including Authentic Fitness, for any period beginning
prior to the acquisition date shall be such entity's actual interest
expense for such period.
"Interest Period" means, for each Eurodollar Rate Advance comprising
part of the same Revolving Credit Borrowing and each LIBO Rate Advance
comprising part of the same Competitive Bid Borrowing, the period
commencing on the date of such Eurodollar Rate Advance or LIBO Rate Advance
or the date of the Conversion of any Base Rate Advance into such Eurodollar
Rate Advance, and ending on the last day of the period selected by the
Borrower pursuant to the provisions below and, thereafter, with respect to
Eurodollar Rate Advances, each subsequent period commencing on the last day
of the immediately preceding Interest Period and ending on the last day of
the period selected by the Borrower pursuant to the provisions below. The
duration of each such Interest Period shall be one, two, three, four, five
or six months, or, if available to all Lenders, nine or twelve months, as
the Borrower may, upon notice received by the Administrative Agent not
later than 11:00 A.M. (New York City time) on the third Business Day prior
to the first day of such Interest Period, select; provided, however, that:
(a) the Borrower may not select any Interest Period that ends
after the Termination Date;
(b) Interest Periods commencing on the same date for Eurodollar
Rate Advances comprising part of the same Revolving Credit Borrowing
or for LIBO Rate Advances comprising part of the same Competitive Bid
Borrowing shall be of the same duration;
(c) whenever the last day of any Interest Period would otherwise
occur on a day other than a Business Day, the last day of such
Interest Period shall be extended to occur on the next succeeding
Business Day, provided, however, that, if such extension would cause
the last day of such Interest Period to occur in the next following
calendar month, the last day of such Interest Period shall occur on
the next preceding Business Day, unless the Borrower and the
Administrative Agent otherwise agree; and
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16
(d) whenever the first day of any Interest Period occurs on a day
of an initial calendar month for which there is no numerically
corresponding day in the calendar month that succeeds such initial
calendar month by the number of months equal to the number of months
in such Interest Period, such Interest Period shall end on the last
Business Day of such succeeding calendar month unless the Borrower and
the Administrative Agent otherwise agree.
"Interest Rate Hedge Agreements" means interest rate swap, cap or
collar agreements, interest rate future or option contracts and other
similar agreements.
"Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended from time to time, and the regulations promulgated and rulings
issued thereunder.
"Investment" in any Person means any loan or advance to such Person,
any purchase or other acquisition of any capital stock or other ownership
or profit interest, warrants, rights, options, obligations or other
securities of such Person, any capital contribution to such Person or any
other investment in such Person, including, without limitation, any
arrangement pursuant to which the investor incurs Debt of the types
referred to in clauses (i) or (j) of the definition of "Debt" in respect of
such Person.
"Issuing Bank" means Scotiabank and any other Revolving Credit Lender
approved by the Borrower and the Arrangers that is a commercial bank,
acting through a domestic branch, and has a Letter of Credit Commitment, as
issuer of a Letter of Credit.
"L/C Cash Collateral Account" means the interest-bearing cash
collateral account to be established and maintained by the Administrative
Agent, over which the Administrative Agent shall have sole dominion and
control, upon terms as may be satisfactory to the Administrative Agent.
"L/C Related Documents" has the meaning specified in Section
2.05(c)(ii)(A).
"Lender Party" means any Lender, any Issuing Bank and any Swing Line
Bank.
"Lenders" means the Initial Lenders and each Person that shall become
a party hereto pursuant to Section 8.07, including the Designated Lenders,
if any; provided, however, that the term "Lender" shall exclude each
Designated Lender when used (i) in reference to a Revolving Credit Advance
or the Commitments or terms relating thereto, except to the extent a
Designated Lender is the obligee of a Revolving Credit Advance actually
funded by such Designated Lender pursuant to Section 2.01(a) hereof and
(ii) in any determination or calculation of Required Lenders, it being
understood that for
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17
purposes hereof, any Advance made by a Designated Lender shall be deemed to
have been made by the applicable Designating Lender.
"Letter of Credit Advance" means an advance made by any Issuing Bank
or any Revolving Credit Lender pursuant to Section 2.03(c).
"Letter of Credit Agreement" has the meaning specified in Section
2.03(a).
"Letter of Credit Commitment" means, with respect to any Issuing Bank
at any time, the amount set forth opposite such Issuing Bank's name on
Schedule I hereto under the caption "Letter of Credit Commitment" or, if
such Issuing Bank has entered into one or more Assignments and Acceptances,
set forth for such Issuing Bank in the Register maintained by the
Administrative Agent pursuant to Section 8.07(c) as such Issuing Bank's
"Letter of Credit Commitment", as such amount may be reduced at or prior to
such time pursuant to Section 2.06.
"Letter of Credit Facility" means, at any time, an amount equal to the
lesser of (a) the aggregate amount of the Letter of Credit Commitments of
the Issuing Banks at such time and (b) $100,000,000, as such amount may be
reduced at or prior to such time pursuant to Section 2.06.
"Letters of Credit" has the meaning specified in Section 2.01(c).
"LIBO Rate" means, for any Interest Period for all LIBO Rate Advances
comprising part of the same Competitive Bid Borrowing, an interest rate per
annum equal to the rate per annum obtained by dividing (a) the rate per
annum at which deposits in U.S. dollars are offered by the principal office
of the Administrative Agent, in London, England to prime banks in the
London interbank market at 11:00 A.M. (London time) two Business Days
before the first day of such Interest Period in an amount substantially
equal to the amount that would be the Administrative Agent's ratable share
of such Borrowing if such Borrowing were to be a Revolving Credit Borrowing
to be outstanding during such Interest Period and for a period equal to
such Interest Period by (b) a percentage equal to 100% minus the Eurodollar
Rate Reserve Percentage for such Interest Period.
"LIBO Rate Advances" has the meaning specified in Section 2.04(a)(i).
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or retained security title of a
conditional vendor and any easement, right of way or other encumbrance on
title to real property.
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18
"Loan Documents" means (a) for purposes of this Agreement, the Notes,
if any, and any amendments or modifications hereof or thereof and for all
other purposes other than for purposes of the Guarantees, (i) this
Agreement, (ii) the Notes, if any, (iii) the Guarantees, (iv) each Letter
of Credit Agreement and (v) each L/C Related Document, and (b) for purposes
of the Guarantees, (i) this Agreement, (ii) the Notes, if any, (iii) the
Guarantees, (iv) each Letter of Credit Agreement, (v) each L/C Related
Document and (v) the Interest Rate Hedge Agreements entered into by Group
or the Borrower with Lender Parties, in the case of each of the foregoing
agreements referred to in clause (a) or (b), and any amendments,
supplements or modifications hereof or thereof.
"Loan Parties" means the Borrower and the Guarantors.
"Margin Stock" has the meaning specified in Regulation U.
"Material Adverse Change" means any material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or Group and its Subsidiaries taken
as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the Borrower or of Group and its Subsidiaries
taken as a whole, (b) the rights and remedies of any Agent or Lender Party
under any Loan Document or (c) the validity or enforceability of any Loan
Document.
"Material Guarantor" means, at any time, a Guarantor having (i) at
least 10% of Consolidated total assets of Group and its Subsidiaries
(determined as of the last day of the most recent Fiscal Quarter) or (ii)
at least 10% of Consolidated EBITDA of Group and its Subsidiaries for the
12-month period ending on the last day of the most recent Fiscal Quarter.
"Material Subsidiary" of any Person means, at any time, a Subsidiary
of such Person having (i) at least $15,000,000 in total assets (determined
as of the last day of the most recent fiscal quarter of such Person) or
(ii) EBITDA of at least $15,000,000 for the 12-month period ending on the
last day of the most recent fiscal quarter of such Person.
"Merger" has the meaning set forth in the Preliminary Statements.
"Moody's" means Moody's Investors Service, Inc.
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19
"Multiemployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which the Borrower or any of its ERISA Affiliates
is making or accruing an obligation to make contributions, or has within
any of the preceding five plan years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Borrower or any of its ERISA Affiliates and at least one Person other than
the Borrower and its ERISA Affiliates or (b) was so maintained and in
respect of which the Borrower or any of its ERISA Affiliates could have
liability under Section 4064 or 4069 of ERISA in the event such plan has
been or were to be terminated.
"New Five-Year Credit Agreement" means the Five-Year Credit Agreement
dated as of November 17, 1999 among the Borrower, Group, the lenders party
thereto, Scotiabank and Salomon Smith Barney, Inc., as co-lead arrangers
and co-book managers, Citibank, as syndication agent, Societe Generale and
Commerzbank AG, as co-documentation agents, Bank of America, N.A. and
Dai-Ichi Kangyo Bank as co-agents and Scotiabank, as administrative agent
and competitive bid agent, as such agreement may be amended, modified,
extended, renewed, refinanced, replaced or otherwise supplemented from time
to time.
"New 364-Day Credit Agreement" means the 364-Day Credit Agreement
dated as of November 17, 1999 among the Borrower, Group, the lenders party
thereto, Scotiabank and Salomon Smith Barney, Inc., as co-lead arrangers
and co-book managers, Citibank, as syndication agent, Morgan Guaranty Trust
Company of New York, as documentation agent, and Scotiabank, as
administrative agent, as such agreement may be amended, modified, extended,
renewed, refinanced, replaced or otherwise supplemented from time to time.
"Note" means a Revolving Credit Note or a Competitive Bid Note.
"Notice of Borrowing" has the meaning specified in Section 2.02(a).
"Notice of Competitive Bid Borrowing" has the meaning specified in
Section 2.04(a)(i).
"Notice of Issuance" has the meaning specified in Section 2.03(a).
"Notice of Swing Line Borrowing" has the meaning specified in Section
2.02(b).
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20
"Obligation" means, with respect to any Person, any obligation of such
Person of any kind, including, without limitation, any liability of such
Person on any claim, whether or not the right of any creditor to payment in
respect of such claim is reduced to judgment, liquidated, unliquidated,
fixed, contingent, matured, disputed, undisputed, legal, equitable, secured
or unsecured, and whether or not such claim is discharged, stayed or
otherwise affected by any proceeding referred to in Section 6.01(e).
Without limiting the generality of the foregoing, the Obligations of the
Loan Parties under the Loan Documents include (a) the obligation to pay
principal, interest, Letter of Credit commissions, charges, expenses, fees,
attorneys' fees and disbursements, indemnities and other amounts payable by
any Loan Party under any Loan Document and (b) the obligation to reimburse
any amount in respect of any of the foregoing that any Lender, in its sole
discretion, may elect to pay or advance on behalf of such Loan Party.
"Other Taxes" has the meaning specified in Section 2.14(b).
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"Permitted Liens" means the following:
(a) Liens, other than in favor of the PBGC, arising out of
judgments or awards in respect of which Group or any of its
Subsidiaries shall in good faith be prosecuting an appeal or
proceedings for review and in respect of which it shall have secured a
subsisting stay of execution pending such appeal or proceedings for
review, provided it shall have set aside on its books adequate
reserves, in accordance with GAAP, with respect to such judgment or
award and provided further that the aggregate amount secured by such
Liens does not exceed $5,000,000 in any one case or $10,000,000 in the
aggregate;
(b) Liens for taxes, assessments or governmental charges or
levies, provided payment thereof shall not at the time be required in
accordance with the provisions of Section 5.01(b) and such amount,
when taken together with any amount payable under Section 5.01(b) as
to which any Lien has been attached as described in the last phrase
thereof, shall not exceed $10,000,000;
(c) deposits, Liens or pledges to secure payments of workmen's
compensation and other payments, unemployment and other insurance,
old-age pensions or other social security obligations, or the
performance of bids, tenders, leases, contracts (other than contracts
for the payment of money), public or statutory obligations, surety,
stay or appeal bonds, or other similar obligations arising in the
ordinary course of business;
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21
(d) mechanics', workmen's, repairmen's, warehousemen's, vendors'
or carriers' Liens or other similar Liens arising in the ordinary
course of business and securing sums which are not past due, or
deposits or pledges to obtain the release of any such Liens;
(e) statutory landlord's Liens under leases to which Group or any
of its Subsidiaries is a party;
(f) any Lien constituting a renewal, extension or replacement of
a Lien constituting a Permitted Lien, but only if at the time such
Lien is granted and immediately after giving effect thereto, no
Default would exist;
(g) leases or subleases granted to other Persons not materially
interfering with the conduct of the business of Group and its
Subsidiaries, taken as a whole;
(h) zoning restrictions, easements, rights of way, licenses and
restrictions on the use of real property or minor irregularities in
title thereto, which do not materially impair the use of such property
in the normal operation of the business of Group or any of its
Subsidiaries or the value of such property for the purpose of such
business; and
(i) statutory or common law Liens (such as rights of set-off) on
deposit accounts of Group and its Subsidiaries and other Liens under
the L/C Related Documents.
"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.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Predecessor Credit Agreement" has the meaning specified in the
Preliminary Statements.
"Predecessor Lenders" has the meaning specified in the Preliminary
Statements.
"Pro Rata Share" of any amount means, with respect to any Revolving
Credit Lender at any time, the product of such amount times a fraction the
numerator of which is
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22
the amount of such Lender's Revolving Credit Commitment at such time and
the denominator of which is the Revolving Credit Facility at such time.
"Purchaser" has the meaning set forth in the Preliminary Statements.
"Redeemable" means, with respect to any capital stock, Debt or other
right or Obligation, any such right or Obligation that (a) the issuer has
undertaken to redeem at a fixed or determinable date or dates, whether by
operation of a sinking fund or otherwise, or upon the occurrence of a
condition not solely within the control of the issuer or (b) is redeemable
at the option of the holder.
"Register" has the meaning specified in Section 8.07(g).
"Regulation U" means Regulation U of the Board of Governors of the
Federal Reserve System, as in effect from time to time.
"Required Lenders" means, at any time, Lenders owed or holding more
than 50% of the sum of (a) the aggregate principal amount of the Advances
(other than Competitive Bid Advances) outstanding at such time, (b) the
aggregate Available Amount of all Letters of Credit outstanding at such
time and (c) the aggregate Unused Revolving Credit Commitments at such
time; provided, however, if any Lender shall be a Defaulting Lender at such
time, there shall be excluded from the determination of Required Lenders at
such time (i) the aggregate principal amount of the Advances owing to such
Lender (in its capacity as a Lender) and outstanding at such time, (ii)
such Lender's Pro Rata Share of the aggregate Available Amount of all
Letters of Credit outstanding at such time and (iii) the Unused Revolving
Credit Commitment of such Lender at such time and provided further, that
for purposes of this definition, any Advance made by a Designated Lender
shall be deemed to have been made by its applicable Designating Lender. For
purposes of this definition, the aggregate principal amount of Swing Line
Advances owing to the Swing Line Bank and of Letter of Credit Advances
owing to any Issuing Bank and the Available Amount of each Letter of Credit
shall be considered to be owed to the Revolving Credit Lenders ratably in
accordance with their respective Revolving Credit Commitments.
"Revolving Credit Advance" has the meaning specified in Section
2.01(a).
"Revolving Credit Borrowing" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by the
Revolving Credit Lenders pursuant to Section 2.01.
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23
"Revolving Credit Commitment" means, with respect to any Revolving
Credit Lender at any time, the amount set forth opposite such Lender's name
on Schedule I hereto under the caption "Revolving Credit Commitment" or, if
such Lender has entered into one or more Assignments and Acceptances, set
forth for such Lender in the Register maintained by the Administrative
Agent pursuant to Section 8.07(c) as such Lender's "Revolving Credit
Commitment", as such amount may be reduced at or prior to such time
pursuant to Section 2.06.
"Revolving Credit Facility" means, at any time, the aggregate amount
of the Revolving Credit Lenders' Revolving Credit Commitments at such time.
"Revolving Credit Lender" means any Lender that has a Revolving Credit
Commitment.
"Revolving Credit Note" has the meaning specified in Section 2.18.
"S&P" means Standard & Poor's Ratings Group, currently a division of
The McGraw-Hill Companies, Inc., or any successor thereto.
"Scotiabank" has the meaning specified in the recital of parties to
this Agreement.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the
Borrower or any of its ERISA Affiliates and no Person other than the
Borrower and its ERISA Affiliates or (b) was so maintained and in respect
of which the Borrower or any of its ERISA Affiliates could have liability
under Section 4069 of ERISA in the event such plan has been or were to be
terminated.
"Standby Letter of Credit" means any Letter of Credit issued under the
Letter of Credit Facility, other than a Documentary Letter of Credit.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which)
more than 50% of (a) the issued and outstanding capital stock having
ordinary voting power to elect a majority of the Board of Directors of such
corporation (irrespective of whether at the time capital stock of any other
class or classes of such corporation shall or might have voting power upon
the occurrence of any contingency), (b) the interest in the capital or
profits of such limited liability company, partnership or joint venture or
(c) the beneficial interest in such trust or estate is at the time directly
or indirectly owned or controlled by such Person and one or more of its
other Subsidiaries or by one or more of such Person's other
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24
Subsidiaries. The term "wholly owned Subsidiary" shall exclude any
directors' or officers' qualifying shares which may be outstanding.
"Subsidiary Guaranty" has the meaning specified Section 3.01(d)(ii).
"Swing Line Advance" means an advance made by (a) the Swing Line Bank
pursuant to Section 2.01(b), or (b) any Revolving Credit Lender pursuant to
Section 2.02(b).
"Swing Line Bank" means Scotiabank (and its successors and assigns),
provided that Scotiabank (and any such successors and assigns as Swing Line
Bank hereunder) may resign, and thereupon be released from its obligations,
as Swing Line Bank under this Agreement upon receipt by the Borrower and
the Arrangers, in writing and in a form reasonably satisfactory to the
Borrower and the Arrangers, of the assumption by another Revolving Credit
Lender of the rights and obligations of the Swing Line Bank hereunder.
"Swing Line Borrowing" means a borrowing consisting of a Swing Line
Advance made by the Swing Line Bank.
"Swing Line Facility" has the meaning specified in Section 2.01(b).
"Syndication Agent" has the meaning specified in the recital of
parties to this Agreement
"Tangible Assets" means total assets minus goodwill and intangibles,
in each case determined in accordance with GAAP.
"Taxes" has the meaning specified in Section 2.14(a).
"Tender Offer" has the meaning specified in the Preliminary
Statements.
"Termination Date" means the earlier of August 12, 2002 and the date
of termination in whole of the Commitments pursuant to Section 2.06 or
6.01.
"Trade Credit Facility" means the revolving loan facility under the
Sixth Amended and Restated Credit Agreement dated as of November 17, 1999
among the Borrower, certain lenders party thereto and Scotiabank, as agent
for said lenders, as each such agreement has been amended to date and the
same may be amended, extended, renewed, refinanced, replaced or otherwise
modified from time to time.
"Trust" means Designer Finance Trust, a trust formed under the laws of
Delaware.
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"Trust Stock" means the Trust Originated Preferred Securities issued
by the Trust.
"Type" refers to the distinction between Advances bearing interest at
the Base Rate and Advances bearing interest at the Eurodollar Rate.
"Unused Revolving Credit Commitment" means, with respect to any
Revolving Credit Lender at any time,
(a) such Lender's Revolving Credit Commitment at such time minus
(b) the sum of (i) the aggregate principal amount of all
Revolving Credit Advances, Swing Line Advances and Letter of Credit
Advances made by such Lender and outstanding at such time, plus (ii)
such Lender's Pro Rata Share of (A) the aggregate Available Amount of
all Letters of Credit outstanding at such time, (B) for all purposes
other than for purposes of calculating commitment fees pursuant to
Section 2.09(a), the aggregate amount of Competitive Bid Advances
outstanding at such time, (C) the aggregate principal amount of all
Letter of Credit Advances made by the Issuing Banks pursuant to
Section 2.03(c) and outstanding at such time other than any such
Letter of Credit Advance which, at or prior to such time, has been
assigned in part to such Revolving Credit Lender pursuant to Section
2.03(c) and other than, in the case of each Lender that is an Issuing
Bank, any such Letter of Credit Advance in respect of a Letter of
Credit issued by it and (D) for all purposes other than for purposes
of calculating commitment fees pursuant to Section 2.09(a), the
aggregate principal amount of all Swing Line Advances made by the
Swing Line Bank pursuant to Section 2.01(b) and outstanding at such
time other than any such Swing Line Advance which, at or prior to such
time, has been assigned in part to such Revolving Credit Lender
pursuant to Section 2.02(b).
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the happening of
such a contingency.
SECTION 1.02. Computation of Time Periods. In this Agreement in the
computation of periods of time from a specified date to a later specified date,
the word "from" means "from and including" and the words "to" and "until" each
mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not specifically
defined herein shall be construed in accordance with generally accepted
accounting principles
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26
consistent with those applied in the preparation of the financial statements
referred to in Section 4.01(f) ("GAAP").
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. (a) The Revolving Credit Advances. Each
Revolving Credit Lender severally agrees, on the terms and conditions
hereinafter set forth, to make Advances (each a "Revolving Credit Advance") to
the Borrower from time to time on any Business Day during the period from the
Effective Date until the Termination Date in an amount for each such Advance not
to exceed such Lender's Unused Revolving Credit Commitment at such time. Each
Revolving Credit Borrowing shall be in an aggregate amount of $5,000,000 or an
integral multiple of $1,000,000 in excess thereof (or, if less, an aggregate
amount equal to the amount by which the aggregate amount of a proposed
Competitive Bid Borrowing requested by the Borrower exceeds the aggregate amount
of Competitive Bid Advances offered to be made by the Revolving Credit Lenders
and accepted by the Borrower in respect of such Competitive Bid Borrowing, if
such Competitive Bid Borrowing is made on the same date as such Revolving Credit
Borrowing) and shall consist of Revolving Credit Advances of the same Type made
on the same day by the Revolving Credit Lenders ratably according to their
respective Revolving Credit Commitments. Within the limits of each Revolving
Credit Lender's Unused Revolving Credit Commitment in effect from time to time,
the Borrower may borrow under this Section 2.01(a), prepay pursuant to Section
2.07(a) and reborrow under this Section 2.01(a). For any Lender which is a
Designating Lender, any Revolving Credit Advance to be made by such Lender may
from time to time and upon notice to the Administrative Agent, be made by its
Designated Lender pursuant to the terms hereof in such Designating Lender's sole
discretion, and nothing herein shall constitute a Commitment to make Revolving
Credit Advances by such Designated Lender; provided, that (i) if any Designated
Lender elects not to, or fails for any reason whatsoever to, make such Revolving
Credit Advance, its Designating Lender hereby agrees that it shall make such
Revolving Credit Advance pursuant to the terms hereof and (ii) notwithstanding
anything to the contrary, neither the designation of a Designated Lender, the
election or other determination that a Designated Lender will make any Revolving
Credit Advance nor any other condition or circumstance relating to the
Designated Lender shall in any way release, diminish or otherwise affect the
relevant Designating Lender's Commitment or any of its other obligations
hereunder or under any other Loan Document or any rights of the Borrower, any
Agent or any Lender Party with respect to such Designating Lender. Any Revolving
Credit Advance actually funded by a Designated Lender shall constitute a
utilization of the Commitment of the Designating Lender for all purposes
hereunder.
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27
(b) The Swing Line Advances. The Borrower may request the Swing Line
Bank to make, and the Swing Line Bank shall make, on the terms and conditions
hereinafter set forth, Swing Line Advances to the Borrower from time to time on
any Business Day during the period from the date hereof until the Termination
Date (i) in an aggregate amount not to exceed at any time outstanding
$30,000,000 (the "Swing Line Facility") and (ii) in an amount for each such
Swing Line Borrowing not to exceed the aggregate of the Unused Revolving Credit
Commitments of the Revolving Credit Lenders at such time. No Swing Line Advance
shall be used for the purpose of funding the payment of principal of any other
Swing Line Advance. Each Swing Line Borrowing shall be in an amount of $100,000
or an integral multiple of $1,000 in excess thereof and shall be made as a Base
Rate Advance. Within the limits of the Swing Line Facility and within the limits
referred to in clause (ii) above, the Borrower may borrow under this Section
2.01(b), repay pursuant to Section 2.05(b) or prepay pursuant to Section 2.07(a)
and reborrow under this Section 2.01(b).
(c) Letters of Credit. Each Issuing Bank severally agrees, on the
terms and conditions hereinafter set forth, to issue letters of credit (the
"Letters of Credit") for the account of the Borrower from time to time on any
Business Day during the period from the date hereof until 10 days before the
Termination Date (i) in an aggregate Available Amount for all Letters of Credit
issued by such Issuing Bank not to exceed at any time such Issuing Bank's Letter
of Credit Commitment at such time and (ii) in an Available Amount for each such
Letter of Credit not to exceed the lesser of (x) the Letter of Credit Facility
at such time and (y) an amount equal to the Unused Revolving Credit Commitments
of the Revolving Credit Lenders at such time. No Letter of Credit shall have an
expiration date (including all rights of the Borrower or the beneficiary to
require renewal) later than the earlier of 10 days before the Termination Date
and, in the case of a Documentary Letter of Credit, 180 days after the date of
issuance thereof. Within the limits of the Letter of Credit Facility, and
subject to the limits referred to above, the Borrower may request the issuance
of Letters of Credit under this Section 2.01(c), repay any Letter of Credit
Advances resulting from drawings thereunder pursuant to Sections 2.03(c) and
2.05(c) and request the issuance of additional Letters of Credit under this
Section 2.01(c). Each Letter of Credit issued pursuant to this Section 2.01(c)
shall, effective upon its issuance and without further action, be issued on
behalf of all Lenders (including the applicable Issuing Bank) according to their
respective Pro Rata Shares. Each Lender shall, to the extent of its Pro Rata
Share, be deemed irrevocably to have participated in the issuance of such Letter
of Credit and shall be responsible to reimburse the Issuing Bank promptly for
Letter of Credit Advances in accordance with Section 2.03.
SECTION 2.02. Making the Advances. (a) Except as otherwise provided in
Section 2.02(b) or 2.03, each Borrowing shall be made on notice, given not later
than 11:00 A.M. (New York City time) on the third Business Day prior to the date
of the proposed Borrowing in the case of a Borrowing consisting of Eurodollar
Rate Advances, or on the date of the proposed Borrowing in the case of a
Borrowing consisting of Base Rate Advances, by the Borrower to the
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Administrative Agent, which shall give to each Appropriate Lender prompt notice
thereof by telecopier or telex. Each such notice of a Borrowing (a "Notice of
Borrowing") shall be by telephone, confirmed immediately in writing, or
telecopier or telex in substantially the form of Exhibit B-1 hereto, specifying
therein the requested (i) date of such Borrowing, (ii) Facility under which such
Borrowing is to be made, (iii) Type of Advances comprising such Borrowing, (iv)
aggregate amount of such Borrowing, and (v) in the case of a Borrowing
consisting of Eurodollar Rate Advances, initial Interest Period for each such
Advance. Each Appropriate Lender shall, before 12:00 Noon (New York City time)
on the date of such Borrowing, make available for the account of its Applicable
Lending Office to the Administrative Agent at the Administrative Agent's
Account, in same day funds, such Lender's ratable portion of such Borrowing in
accordance with the respective Commitments under the applicable Facility of such
Lender and the other Appropriate Lenders. After the Administrative Agent's
receipt of such funds and upon fulfillment of the applicable conditions set
forth in Article III, the Administrative Agent will make such funds available to
the Borrower by crediting the Borrower's Account; provided, however, that, in
the case of any Revolving Credit Borrowing, the Administrative Agent shall first
make a portion of such funds equal to the aggregate principal amount of any
Swing Line Advances and Letter of Credit Advances made by the Swing Line Bank or
any Issuing Bank, as the case may be, and by any other Revolving Credit Lender
and outstanding on the date of such Revolving Credit Borrowing, plus interest
accrued and unpaid thereon to and as of such date, available to the Swing Line
Bank or such Issuing Bank, as the case may be, and such other Revolving Credit
Lenders for repayment of such Swing Line Advances and Letter of Credit Advances.
(b) (i) Each Swing Line Borrowing shall be made on notice, given not
later than 11:30 A.M. (New York City time) on the date of the proposed Swing
Line Borrowing, by the Borrower to the Swing Line Bank and the Administrative
Agent. Each such notice of a Swing Line Borrowing (a "Notice of Swing Line
Borrowing") shall be by telephone, confirmed immediately in writing or telex or
telecopier, specifying therein the requested (A) date of such Borrowing and (B)
amount of such Borrowing and shall constitute a representation and warranty by
the Borrower (upon which the Swing Line Bank may conclusively rely, in the
absence of prior receipt by the Swing Line Bank of written notice from an Agent
or Revolving Credit Lenders holding more than 50% of the Revolving Credit
Commitments that the conditions precedent to the making of Swing Line Advances
have not been satisfied or duly waived). Upon fulfillment of the applicable
conditions set forth in Article III, the Swing Line Bank will make the amount
thereof available to the Borrower by crediting the Borrower's Account.
(ii) (A) (1) Subject to clause (ii)(B) below, in the event that on any
Business Day the Swing Line Bank desires that all or any portion of one or more
Swing Line Advances be paid, the Swing Line Bank shall promptly notify the
Administrative Agent to that effect and indicate the portion of the Swing Line
Advances to be paid.
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(2) The Administrative Agent agrees to promptly transmit to the
Lenders the information contained in each notice received by the Administrative
Agent under clause (ii)(A)(1) above, and shall concurrently notify the other
Agents and the Revolving Credit Lenders of each Revolving Credit Lender's Pro
Rata Share of the Swing Line Advances (or portion thereof) to be paid.
(3) Each Revolving Credit Lender hereby unconditionally and
irrevocably agrees to fund to the Administrative Agent for the benefit of the
Swing Line Bank, in lawful money of the United States and in same day funds, not
later than 12:00 noon (New York City time) on the Business Day immediately
following the Business Day of such Lender's receipt of such notice from the
Administrative Agent (provided that if any Lender shall receive such notice at
or prior to 1:00 P.M. (New York City time) on a Business Day, such funding shall
be made by such Lender on such Business Day), a Revolving Credit Advance in the
amount of such Lender's Pro Rata Share of the payment of the Swing Line Advances
to be made on such date, regardless, however, of whether (x) the conditions
precedent thereto set forth in Article III are then satisfied, (y) the Borrower
has provided a Notice of Borrowing under Section 2.02(a) hereof and (z) the
Revolving Credit Facility has been terminated, any Default or Event of Default
exists or all or any of the Advances have been accelerated, but subject to
clause (B) below and subject to the limitations in respect of the amount of
Revolving Credit Advances contained in Section 2.01(a). The proceeds of each
such Revolving Credit Advance shall be immediately paid over to the
Administrative Agent for the benefit of the Swing Line Bank for application to
the Swing Line Facility. Each such Revolving Credit Advance shall initially be a
Base Rate Advance and shall be deemed to be requested by the Borrower pursuant
to Section 2.02(a).
(B) In the event that Commitments of the Lenders shall have terminated
pursuant to Section 6.01 following an Event of Default of the type described in
Section 6.01(f) with respect to Group or the Borrower, no further Revolving
Credit Advances of the type described in clause (ii)(A) above shall be made, and
each of the Revolving Credit Lenders (other than the Swing Line Bank) shall be
deemed to have irrevocably, unconditionally and immediately purchased from the
Swing Line Bank such Revolving Credit Lender's Pro Rata Share of the principal
amount of the Swing Line Advances outstanding as of the date of the occurrence
of such Event of Default. Each Revolving Credit Lender shall effect such
purchase by making available an amount equal to its participation on the date of
such purchase in U.S. dollars in immediately available funds at the office of
the Swing Line Bank located at 600 Peachtree Street Northeast, Suite 2700,
Atlanta, Georgia 30308 or such other office as the Swing Line Bank may from time
to time direct for the account of such office of the Swing Line Bank.
(C) Each purchase made pursuant to clause (ii)(B) above by a Revolving
Credit Lender shall be made without recourse to the Swing Line Bank, and, except
as to the absence of liens created by the Swing Line Bank on the Swing Line
Advance and the Swing Line
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30
Bank's right to effect such sale, without representation or warranty of any
kind, and shall be effected and evidenced pursuant to documents reasonably
acceptable to the Swing Line Bank.
(D) The obligations of the Revolving Credit Lenders under this Section
2.02(b)(ii) shall be absolute, irrevocable and unconditional, shall be made
under all circumstances and shall not be affected, reduced or impaired for any
reason whatsoever, including (without limitation): (1) any Default, Event of
Default, misrepresentation, negligence, misconduct or other action or inaction
of any kind by any of the Loan Parties or any other Person, whether in, under or
in connection with this Agreement, the Guaranty or any of the other Loan
Documents; (2) any extension, renewal, release or waiver of the time of
performance of or compliance with any of the obligations or other provisions
hereof or of any other Loan Document; (3) any settlement, compromise or
subordination of any or all of the obligations to the claims of others, or any
failure by any Agent, the Swing Line Bank or any other Lender to mitigate
damages; (4) any amendment, modification or other waiver of any one or more of
the Loan Documents; (5) the insolvency, bankruptcy, reorganization or cessation
of existence of any of the Loan Parties; (6) any impossibility or illegality of
performance or the lack of genuineness, validity, legality or enforceability of
any of this Agreement or the other Loan Documents, or any term thereof or any
other agreement or instrument relating thereto for any reason, or the lack of
power or authority of any party to enter into any of the Loan Documents; (7) any
dispute, setoff, recoupment, counterclaim or other defense or right any Lender
may have at any time, whether against any Agent, the Swing Line Bank, any other
Lender or any of the Loan Parties; (8) any merger or consolidation of any of the
Loan Parties or any Lender, or any sale, lease or transfer of any or all of the
assets of any such Person; or (9) any other circumstances whether similar or
dissimilar to any of the foregoing.
(c) Anything in subsection (a) above to the contrary notwithstanding,
(i) the Borrower may not select Eurodollar Rate Advances for any Borrowing if
the aggregate amount of such Borrowing is less than $10,000,000 or if the
obligation of the Appropriate Lenders to make Eurodollar Rate Advances shall
then be suspended pursuant to Section 2.10, 2.11 or 2.12 and (ii) the Advances
under the Revolving Credit Facility may not be outstanding as part of more than
20 separate Borrowings.
(d) Each Notice of Borrowing and Notice of Swing Line Borrowing shall
be irrevocable and binding on the Borrower. In the case of any Borrowing that
the related Notice of Borrowing specifies is to be comprised of Eurodollar Rate
Advances, the Borrower shall indemnify each Appropriate Lender against any loss,
cost or expense incurred by such Lender as a result of any failure to fulfill on
or before the date specified in such Notice of Borrowing for such Borrowing the
applicable conditions set forth in Article III, including, without limitation,
any loss (excluding loss of anticipated profits), cost or expense incurred by
reason of the liquidation or reemployment of deposits or other funds acquired by
such Lender to fund the
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Advance to be made by such Lender as part of such Borrowing when such Advance,
as a result of such failure, is not made on such date.
(e) Unless the Administrative Agent shall have received notice from an
Appropriate Lender prior to the date of any Borrowing under a Facility under
which such Lender has a Commitment that such Lender will not make available to
the Administrative Agent such Lender's ratable portion of such Borrowing, the
Administrative Agent may assume that such Lender has made such portion available
to the Administrative Agent on the date of such Borrowing in accordance with
subsection (a) or (b) of this Section 2.02 and the Administrative Agent may, in
reliance upon such assumption, make available to the Borrower on such date a
corresponding amount. If and to the extent that such Lender shall not have so
made such ratable portion available to the Administrative Agent, the
Administrative Agent agrees to give prompt notice thereof to the Borrower
(provided that failure to give such notice shall not affect the obligations of
the Borrower under this Section 2.02(e)), and such Lender and the Borrower
severally agree to repay to the Administrative Agent forthwith on demand such
corresponding amount together with interest thereon, for each day from the date
such amount is made available to the Borrower until the date such amount is
repaid to the Administrative Agent, at (i) in the case of the Borrower, the
interest rate applicable at such time under Section 2.08 to Advances comprising
such Borrowing and (ii) in the case of such Lender, the Federal Funds Rate. If
such Lender shall repay to the Administrative Agent such corresponding amount,
such amount so repaid shall constitute such Lender's Advance as part of such
Borrowing for purposes of this Agreement.
(f) The failure of any Lender to make the Advance to be made by it as
part of any Borrowing shall not relieve any other Lender of its obligation, if
any, hereunder to make its Advance on the date of such Borrowing, but no Lender
shall be responsible for the failure of any other Lender to make the Advance to
be made by such other Lender on the date of any Borrowing.
SECTION 2.03. Issuance of and Drawings and Reimbursement Under Letters
of Credit. (a) Request for Issuance. Each Letter of Credit shall be issued upon
notice, given not later than 11:00 A.M. (New York City time) on the first
Business Day prior to the date of the proposed issuance of such Letter of
Credit, by the Borrower to any Issuing Bank, which shall give to the
Administrative Agent and each Revolving Credit Lender prompt notice thereof by
telex or telecopier. Each such notice of issuance of a Letter of Credit (a
"Notice of Issuance") shall be by telephone, confirmed immediately in writing,
or telex or telecopier, specifying therein the requested (A) date of such
issuance (which shall be a Business Day), (B) Available Amount of such Letter of
Credit, (C) expiration date of such Letter of Credit, (D) name and address of
the beneficiary of such Letter of Credit and (E) form of such Letter of Credit,
and shall be accompanied by such application and agreement for letter of credit
as such Issuing Bank may specify to the Borrower for use in connection with such
requested Letter of Credit (a "Letter of
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Credit Agreement"). If (x) the requested form of such Letter of Credit is
acceptable to such Issuing Bank in its sole discretion and (y) it has not
received written notice from an Agent or Lenders holding at least 51% of the
Revolving Credit Commitments that the conditions to issuing such Letter of
Credit have not been satisfied or duly waived, such Issuing Bank will, upon
fulfillment of the applicable conditions set forth in Article III, make such
Letter of Credit available to the Borrower at its office referred to in Section
8.02 or as otherwise agreed with the Borrower in connection with such issuance.
In the event and to the extent that the provisions of any Letter of Credit
Agreement shall conflict with this Agreement, the provisions of this Agreement
shall govern.
(b) Letter of Credit Reports. Each Issuing Bank shall furnish (A) to
the Administrative Agent, the Documentation Agent and each Revolving Credit
Lender on the first Business Day of each month a written report summarizing
issuance and expiration dates of Letters of Credit issued during the preceding
month and drawings during such month under all Letters of Credit issued by such
Issuing Bank and (B) to the Administrative Agent, the Documentation Agent and
each Revolving Credit Lender on the first Business Day of each calendar quarter
a written report setting forth the average daily aggregate Available Amount
during the preceding calendar quarter of all Letters of Credit issued by such
Issuing Bank.
(c) Drawing and Reimbursement. The payment by any Issuing Bank of a
draft drawn under any Letter of Credit shall constitute for all purposes of this
Agreement the making by such Issuing Bank of a Letter of Credit Advance, which
shall be a Base Rate Advance, in the amount of such draft. Upon written demand
by any Issuing Bank with an outstanding Letter of Credit Advance, with a copy of
such demand to the Administrative Agent, each Revolving Credit Lender shall
purchase from such Issuing Bank, and such Issuing Bank shall sell and assign to
each such Revolving Credit Lender, such Lender's Pro Rata Share of such
outstanding Letter of Credit Advance as of the date of such purchase, by making
available for the account of its Applicable Lending Office to the Administrative
Agent for the account of such Issuing Bank, by deposit to the Administrative
Agent's Account, in same day funds, an amount equal to the portion of the
outstanding principal amount of such Letter of Credit Advance to be purchased by
such Lender. Promptly after receipt thereof, the Administrative Agent shall
transfer such funds to such Issuing Bank. The Borrower hereby agrees to each
such sale and assignment. Each Revolving Credit Lender agrees to purchase its
Pro Rata Share of an outstanding Letter of Credit Advance on (i) the Business
Day on which demand therefor is made by the Issuing Bank, provided notice of
such demand is given not later than 11:00 A.M. (New York City time) on such
Business Day or (ii) the first Business Day next succeeding such demand if
notice of such demand is given after such time. Upon any such assignment by any
Issuing Bank to any other Revolving Credit Lender of a portion of a Letter of
Credit Advance, such Issuing Bank represents and warrants to such other Lender
that such Issuing Bank is the legal and beneficial owner of such interest being
assigned by it, free and clear of any liens, but makes no other representation
or warranty and assumes no responsibility with respect to such
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33
Letter of Credit Advance, the Loan Documents or any Loan Party. If and to the
extent that any Revolving Credit Lender shall not have so made the amount of
such Letter of Credit Advance available to the Administrative Agent, such
Revolving Credit Lender agrees to pay to the Administrative Agent forthwith on
demand such amount together with interest thereon, for each day from the date of
demand by such Issuing Bank until the date such amount is paid to the
Administrative Agent, at the Federal Funds Rate for its account or the account
of such Issuing Bank, as applicable. If such Lender shall pay to the
Administrative Agent such amount for the account of such Issuing Bank on any
Business Day, such amount so paid in respect of principal shall constitute a
Letter of Credit Advance made by such Lender on such Business Day for purposes
of this Agreement, and the outstanding principal amount of the Letter of Credit
Advance made by such Issuing Bank shall be reduced by such amount on such
Business Day.
(d) Failure to Make Letter of Credit Advances. The failure of any
Lender to make the Letter of Credit Advance to be made by it on the date
specified in Section 2.03(c) shall not relieve any other Lender of its
obligation hereunder to make its Letter of Credit Advance on such date, but no
Lender shall be responsible for the failure of any other Lender to make the
Letter of Credit Advance to be made by such other Lender on such date.
SECTION 2.04. The Competitive Bid Advances. (a) Each Lender severally
agrees that the Borrower may make Competitive Bid Borrowings under this Section
2.04 from time to time on any Business Day during the period from the date
hereof until the date occurring 10 days prior to the Termination Date in the
manner set forth below; provided that, following the making of each Competitive
Bid Borrowing, (x) the aggregate amount of the Advances then outstanding shall
not exceed the aggregate amount of the Revolving Credit Commitments of the
Lenders and (y) the aggregate amount of the Competitive Bid Advances then
outstanding shall not exceed $350,000,000.
(i) The Borrower may request a Competitive Bid Borrowing under this
Section 2.04 by delivering to the Competitive Bid Agent, by telecopier or
telex, a notice of a Competitive Bid Borrowing (a "Notice of Competitive
Bid Borrowing"), in substantially the form of Exhibit B-2 hereto,
specifying therein the requested (v) date of such proposed Competitive Bid
Borrowing, (w) aggregate amount of such proposed Competitive Bid Borrowing,
(x) in the case of a Competitive Bid Borrowing consisting of LIBO Rate
Advances, Interest Period, or in the case of a Competitive Bid Borrowing
consisting of Fixed Rate Advances, maturity date for repayment of each
Fixed Rate Advance to be made as part of such Competitive Bid Borrowing
(which maturity date may not be earlier than the date occurring 7 days
after the date of such Competitive Bid Borrowing or later than the earlier
of (I) 180 days after the date of such Competitive Bid Borrowing and (II)
the Termination Date), (y) interest payment date or dates relating thereto,
and (z) other terms (if any) to be applicable to such Competitive Bid
Borrowing, not later than 10:00 A.M. (New York City time) (A) at least four
Business Days prior to
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the date of the proposed Competitive Bid Borrowing, if the Borrower shall
specify in the Notice of Competitive Bid Borrowing that the rates of
interest to be offered by the Lenders shall be fixed rates per annum (the
Advances comprising any such Competitive Bid Borrowing being referred to
herein as "Fixed Rate Advances") and (B) at least four Business Days prior
to the date of the proposed Competitive Bid Borrowing, if the Borrower
shall instead specify in the Notice of Competitive Bid Borrowing that the
rates of interest be offered by the Lenders are to be based on the LIBO
Rate (the Advances comprising such Competitive Bid Borrowing being referred
to herein as "LIBO Rate Advances"). Each Notice of Competitive Bid
Borrowing shall be irrevocable and binding on the Borrower. The Competitive
Bid Agent shall in turn promptly notify each Lender of each request for a
Competitive Bid Borrowing received by it from the Borrower by sending such
Lender a copy of the related Notice of Competitive Bid Borrowing.
(ii) Each Lender may, if, in its sole discretion, it elects to do so,
irrevocably offer to make one or more Competitive Bid Advances to the
Borrower as part of such proposed Competitive Bid Borrowing at a rate or
rates of interest specified by such Lender in its sole discretion, by
notifying the Competitive Bid Agent (which shall give prompt notice thereof
to the Borrower), before 10:00 A.M. (New York City time) on the date of
such proposed Competitive Bid Borrowing in the case of a Competitive Bid
Borrowing consisting of Fixed Rate Advances and on the third Business Day
before the date of such proposed Competitive Bid Borrowing, in the case of
a Competitive Bid Borrowing consisting of LIBO Rate Advances, of the
minimum amount and maximum amount of each Competitive Bid Advance which
such Lender would be willing to make as part of such proposed Competitive
Bid Borrowing (which amounts may, subject to the proviso to the first
sentence of this Section 2.04(a), exceed such Lender's Revolving Credit
Commitment, if any), the rate or rates of interest therefor and such
Lender's Applicable Lending Office with respect to such Competitive Bid
Advance; provided that if the Competitive Bid Agent in its capacity as a
Lender shall, in its sole discretion, elect to make any such offer, it
shall notify the Borrower of such offer before 9:00 A.M. (New York City
time) on the date on which notice of such election is to be given to the
Competitive Bid Agent by the other Lenders. If any Lender shall elect not
to make such an offer, such Lender shall so notify the Competitive Bid
Agent, before 10:00 A.M. (New York City time) on the date on which notice
of such election is to be given to the Competitive Bid Agent by the other
Lenders, and such Lender shall not be obligated to, and shall not, make any
Competitive Bid Advance as part of such Competitive Bid Borrowing; provided
that the failure by any Lender to give such notice shall not cause such
Lender to be obligated to make any Competitive Bid Advance as part of such
proposed Competitive Bid Borrowing.
(iii) The Borrower shall, in turn, before 11:00 A.M. (New York City
time) on the date of such proposed Competitive Bid Borrowing in the case of
a Competitive Bid
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Borrowing consisting of Fixed Rate Advances, and before 1:00 P.M. (New York
City time) three Business Days before the date of such proposed Competitive
Bid Borrowing in the case of a Competitive Bid Borrowing consisting of LIBO
Rate Advances, either:
(x) cancel such Competitive Bid Borrowing by giving the
Competitive Bid Agent notice to that effect, or
(y) accept one or more of the offers made by any Lender or
Lenders pursuant to paragraph (ii) above, in its sole discretion, by
giving notice to the Competitive Bid Agent of the amount of each
Competitive Bid Advance (which amount shall be equal to or greater
than the minimum amount, and equal to or less than the maximum amount,
notified to the Borrower by the Competitive Bid Agent on behalf of
such Lender for such Competitive Bid Advance pursuant to paragraph
(ii) above) to be made by each Lender as part of such Competitive Bid
Borrowing, and reject any remaining offers made by Lenders pursuant to
paragraph (ii) above by giving the Competitive Bid Agent notice to
that effect. The Borrower shall accept the offers made by any Lender
or Lenders to make Competitive Bid Advances in order of the lowest to
the highest rates of interest offered by such Lenders. If two or more
Lenders have offered the same interest rate, the amount to be borrowed
at such interest rate will be allocated by the Competitive Bid Agent
among such Lenders in proportion to the maximum amount that each such
Lender offered at such interest rate.
(iv) If the Borrower notifies the Competitive Bid Agent that such
Competitive Bid Borrowing is canceled pursuant to paragraph (iii)(x) above,
the Competitive Bid Agent shall give prompt notice thereof to the Lenders
and such Competitive Bid Borrowing shall not be made.
(v) If the Borrower accepts one or more of the offers made by any
Lender or Lenders pursuant to paragraph (iii)(y) above, the Competitive Bid
Agent shall in turn promptly notify (A) each Lender that has made an offer
as described in paragraph (ii) above, of the date and aggregate amount of
such Competitive Bid Borrowing and whether or not any offer or offers made
by such Lender pursuant to paragraph (ii) above have been accepted by the
Borrower, (B) each Lender that is to make a Competitive Bid Advance as part
of such Competitive Bid Borrowing, of the amount of each Competitive Bid
Advance to be made by such Lender as part of such Competitive Bid
Borrowing, and (C) each Lender that is to make a Competitive Bid Advance as
part of such Competitive Bid Borrowing, upon receipt, that the Competitive
Bid Agent has received forms of documents, if any, requested pursuant to
Section 3.02(b). Each Lender that is to make a Competitive Bid Advance as
part of such Competitive Bid Borrowing shall, before 12:00 noon (New York
City time) on the date of such Competitive Bid Borrowing
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36
specified in the notice received from the Competitive Bid Agent pursuant to
clause (A) of the preceding sentence or any later time when such Lender
shall have received notice from the Competitive Bid Agent pursuant to
clause (C) of the preceding sentence, make available for the account of its
Applicable Lending Office to the Competitive Bid Agent at the Competitive
Bid Agent's Account, in same day funds, such Lender's portion of such
Competitive Bid Borrowing. Upon fulfillment of the applicable conditions
set forth in Article III and after receipt by the Competitive Bid Agent of
such funds, the Competitive Bid Agent will, as promptly as possible,
transfer such funds to the Borrower's Account. Promptly after each
Competitive Bid Borrowing, the Competitive Bid Agent will notify each
Lender of the amount of the Competitive Bid Borrowing, the consequent
deemed use of the aggregate amount of the Commitments as a result thereof
and the dates upon which such Competitive Bid Borrowing commenced and will
terminate. For any Lender which is a Designating Lender, any Competitive
Bid Advance to be made by such Lender may from time to time be made by its
Designated Lender pursuant to the terms hereof in such Designating Lender's
sole discretion, and nothing herein shall constitute a commitment to make
Competitive Bid Advances by such Designated Lender, provided, that (i) if
any Designated Lender elects not to, or fails for any reason whatsoever to,
make any such Competitive Bid Advance that has been accepted by the
Borrower in accordance with the foregoing, its Designating Lender hereby
agrees that it shall make such Competitive Bid Advance pursuant to the
terms hereof and (ii) notwithstanding anything to the contrary, neither the
designation of a Designated Lender, the election or other determination
that a Designated Lender will make any Competitive Bid Advance nor any
other condition or circumstance relating to the Designated Lender shall in
any way release, diminish or otherwise affect the relevant Designating
Lender's Commitment or any of its other obligations hereunder or under any
other Loan Document or any rights of the Borrower, any Agent or any Lender
Party with respect to such Designating Lender.
(vi) If the Borrower notifies the Competitive Bid Agent that it
accepts one or more of the offers made by any Lender or Lenders pursuant to
paragraph (iii)(y) above, such notice of acceptance shall be irrevocable
and binding on the Borrower. The Borrower shall indemnify each Lender
against any loss, cost or expense incurred by such Lender as a result of
any failure to fulfill on or before the date specified in the related
Notice of Competitive Bid Borrowing for such Competitive Bid Borrowing the
applicable conditions set forth in Article III, including, without
limitation, any loss (excluding loss of anticipated profits), cost or
expense incurred by reason of the liquidation or reemployment of deposits
or other funds acquired by such Lender to fund the Competitive Bid Advance
to be made by such Lender as part of such Competitive Bid Borrowing when
such Competitive Bid Advance, as a result of such failure, is not made on
such date.
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37
(b) Each Competitive Bid Borrowing shall be in an aggregate amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof and,
following the making of each Competitive Bid Borrowing, the Borrower shall be in
compliance with the limitation set forth in the proviso to the first sentence of
subsection (a) above.
(c) Within the limits and on the conditions set forth in this Section
2.04, the Borrower may from time to time borrow under this Section 2.04, repay
or prepay pursuant to subsection (d) below, and reborrow under this Section
2.04, provided that a Competitive Bid Borrowing shall not be made within three
Business Days of the date of any other Competitive Bid Borrowing.
(d) The Borrower shall repay to the Competitive Bid Agent for the
account of each Lender that has made a Competitive Bid Advance, on the maturity
date of each Competitive Bid Advance (such maturity date being that specified by
the Borrower for repayment of such Competitive Bid Advance in the related Notice
of Competitive Bid Borrowing delivered pursuant to subsection (a)(i) above and
provided in the Competitive Bid Note evidencing such Competitive Bid Advance),
the then unpaid principal amount of such Competitive Bid Advance. The Borrower
shall have no right to prepay any principal amount of any Competitive Bid
Advance unless, and then only on the terms, specified by the Borrower for such
Competitive Bid Advance in the related Notice of Competitive Bid Borrowing
delivered pursuant to subsection (a)(i) above, or unless separately agreed
between the Borrower and any Lender that has made a Competitive Bid Advance, and
set forth in the Competitive Bid Note evidencing such Competitive Bid Advance.
(e) The Borrower shall pay interest on the unpaid principal amount of
each Competitive Bid Advance from the date of such Competitive Bid Advance to
the date the principal amount of such Competitive Bid Advance is repaid in full,
at the rate of interest for such Competitive Bid Advance specified by the Lender
making such Competitive Bid Advance in its notice with respect thereto delivered
pursuant to subsection (a)(ii) above, payable on the interest payment date or
dates specified by the Borrower for such Competitive Bid Advance in the related
Notice of Competitive Bid Borrowing delivered pursuant to subsection (a)(i)
above, as provided in the Competitive Bid Note evidencing such Competitive Bid
Advance. Upon the occurrence and during the continuance of an Event of Default,
the Borrower shall pay interest on the amount of unpaid principal of and
interest on each Competitive Bid Advance owing to a Lender, payable in arrears
on the date or dates interest is payable thereon, at a rate per annum equal at
all times to 2% per annum above the rate per annum required to be paid on such
Competitive Bid Advance under the terms of the Competitive Bid Note evidencing
such Competitive Bid Advance unless otherwise agreed in such Competitive Bid
Note.
(f) The indebtedness of the Borrower resulting from each Competitive
Bid Advance made to the Borrower as part of a Competitive Bid Borrowing shall be
evidenced by a
<PAGE>
38
separate Competitive Bid Note of the Borrower payable to the order of the Lender
making such Competitive Bid Advance.
(g) Upon delivery of each Notice of Competitive Bid Borrowing, the
Borrower shall pay a non-refundable fee of $2,000 to the Competitive Bid Agent
for its own account.
SECTION 2.05. Repayment of Advances. (a) Revolving Credit Advances.
The Borrower shall repay to the Administrative Agent for the ratable account of
the Revolving Credit Lenders on the Termination Date the aggregate outstanding
principal amount of the Revolving Credit Advances then outstanding.
(b) Swing Line Advances. The Borrower shall repay to the
Administrative Agent for the account of the Swing Line Bank and each other
Revolving Credit Lender that has purchased a Swing Line Advance pursuant to
Section 2.02(b) the outstanding principal amount of each Swing Line Advance at
the times and in the manner and amounts specified in Section 2.02(b) and on the
Termination Date.
(c) Letter of Credit Advances. (i) The Borrower shall repay to the
Administrative Agent for the account of each Issuing Bank and each other
Revolving Credit Lender that has made a Letter of Credit Advance on the earlier
of demand and the Termination Date the outstanding principal amount of each
Letter of Credit Advance made by each of them.
(ii) The Obligations of the Borrower under this Agreement, any Letter
of Credit Agreement and any other agreement or instrument relating to any Letter
of Credit shall be unconditional and irrevocable, and shall be paid strictly in
accordance with the terms of this Agreement, such Letter of Credit Agreement and
such other agreement or instrument under all circumstances, including, without
limitation, the following circumstances:
(A) any lack of validity or enforceability of any Loan Document, any
Letter of Credit Agreement, any Letter of Credit or any other agreement or
instrument relating thereto (all of the foregoing being, collectively, the
"L/C Related Documents");
(B) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of the Borrower in respect of
any L/C Related Document or any other amendment or waiver of or any consent
to departure from all or any of the L/C Related Documents;
(C) the existence of any claim, set-off, defense or other right that
the Borrower may have at any time against any beneficiary or any transferee
of a Letter of Credit (or any Persons for whom any such beneficiary or any
such transferee may be acting), any
<PAGE>
39
Issuing Bank or any other Person, whether in connection with the
transactions contemplated by the L/C Related Documents or any unrelated
transaction;
(D) any statement or any other document presented under a Letter of
Credit proving to be forged, fraudulent, invalid or insufficient in any
respect or any statement therein being untrue or inaccurate in any respect;
(E) payment by any Issuing Bank under a Letter of Credit against
presentation of a draft or certificate that does not strictly comply with
the terms of such Letter of Credit;
(F) any exchange, release or non-perfection of any collateral, or any
release or amendment or waiver of or consent to departure from the
Guaranties or any other guaranty, for all or any of the Obligations of the
Borrower in respect of the L/C Related Documents; or
(G) any other circumstance or happening whatsoever, whether or not
similar to any of the foregoing, including, without limitation, any other
circumstance that might otherwise constitute a defense available to, or a
discharge of, the Borrower or a guarantor.
SECTION 2.06. Termination or Reduction of the Commitments. The
Borrower shall have the right, upon at least three Business Days' notice to the
Administrative Agent, to terminate in whole or reduce ratably in part the unused
portions of the respective Commitments of the Lenders, provided that each
partial reduction (i) shall be in the aggregate amount of $5,000,000 or an
integral multiple of $1,000,000 in excess thereof and (ii) shall be made ratably
among the Appropriate Lenders in accordance with their Commitments with respect
to such Facility, and provided further that after giving effect to any such
reduction, the Letter of Credit Commitments shall be less than or equal to the
Revolving Credit Commitments, and provided still further that the aggregate
amount of the Commitments of the Lenders shall not be reduced to an amount that
is less than the aggregate principal amount of the Competitive Bid Advances then
outstanding.
SECTION 2.07. Prepayments. (a) Optional. (i) The Borrower may, upon at
least one Business Day's notice in the case of the Swing Line Facility and Base
Rate Advances and three Business Days' notice in the case of any Eurodollar Rate
Advances, in each case to the Administrative Agent stating the proposed date and
aggregate principal amount of the prepayment, and if such notice is given the
Borrower shall, prepay the outstanding aggregate principal amount of the
Advances comprising part of the same Borrowing in whole or ratably in part,
together with accrued interest to the date of such prepayment on the aggregate
principal amount prepaid; provided, however, that (x) each partial prepayment of
the Revolving Credit Facility shall be in an aggregate principal amount of
$1,000,000 or an integral multiple of
<PAGE>
40
$1,000,000 in excess thereof and (y) any
such prepayment of a Eurodollar Rate Advance made other than on the last day of
an Interest Period therefor shall be made together with payment of all amounts,
if any, required pursuant to Section 8.04(c).
(ii) Competitive Bid Advances may be prepaid only in accordance with
the provisions of Section 2.04(d).
(b) Mandatory.
(i) The Borrower shall, on each Business Day, prepay an aggregate
principal amount of the Revolving Credit Advances comprising part of the
same Borrowings, the Letter of Credit Advances and the Swing Line Advances
equal to the amount by which (A) the sum of the aggregate principal amount
of (x) the Revolving Credit Advances, (y) the Letter of Credit Advances and
(z) the Swing Line Advances then outstanding plus the aggregate Available
Amount of all Letters of Credit then outstanding exceeds (B) the Revolving
Credit Facility on such Business Day.
(ii) The Borrower shall, on each Business Day, pay to the
Administrative Agent for deposit in the L/C Cash Collateral Account an
amount sufficient to cause the aggregate amount on deposit in such Account
to equal the amount by which the aggregate Available Amount of all Letters
of Credit then outstanding exceeds the Letter of Credit Facility on such
Business Day.
SECTION 2.08. Interest. (a) Scheduled Interest. The Borrower shall pay
interest on the unpaid principal amount of each Advance owing to each Lender
from the date of such Advance until such principal amount shall be paid in full,
at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is a Base
Rate Advance, a rate per annum equal at all times to the sum of (x) the
Base Rate in effect from time to time plus (y) the Applicable Margin in
effect from time to time, payable in arrears quarterly on the first day of
each January, April, July and October during such periods.
(ii) Eurodollar Rate Advances. During such periods as such Advance is
a Eurodollar Rate Advance, a rate per annum equal at all times during each
Interest Period for such Advance to the sum of (x) the Eurodollar Rate for
such Interest Period for such Advance plus (y) the Applicable Margin in
effect from time to time, payable in arrears on the last day of such
Interest Period and, if such Interest Period has a duration of more than
three months, on each day that occurs during such Interest Period every
three months from the first day of such Interest Period and on the date
such Eurodollar Rate Advance shall be Converted or paid in full.
<PAGE>
41
(b) Default Interest. Upon the occurrence and during the continuance
of an Event of Default, the Borrower shall pay interest on (i) the unpaid
principal amount of each Advance owing to each Lender (except as otherwise
provided in Section 2.04(e)), payable in arrears on the dates referred to in
clause (a)(i) or (a)(ii) above, at a rate per annum equal at all times to 2% per
annum above the rate per annum required to be paid on such Advance pursuant to
clause (a)(i) or (a)(ii) above and (ii) to the fullest extent permitted by law,
the amount of any interest, fee or other amount payable hereunder that is not
paid when due, from the date such amount shall be due until such amount shall be
paid in full, payable in arrears on the date such amount shall be paid in full
and on demand, at a rate per annum equal at all times to 2% per annum above the
rate per annum required to be paid on Base Rate Advances pursuant to clause
(a)(i) above.
SECTION 2.09. Fees. (a) Commitment Fee. The Borrower shall pay to the
Administrative Agent for the account of the Lenders a commitment fee, from the
date hereof in the case of each Initial Lender and from the effective date
specified in the Assignment and Acceptance pursuant to which it became a Lender
in the case of each other Lender until the Termination Date, payable quarterly
on the first Business Day of each January, April, July and October, commencing
January 7, 2000, and on the Termination Date, at the rate per annum equal to the
Applicable Percentage in effect from time to time on the average daily Unused
Revolving Credit Commitment of such Lender; provided, however, (i) that any
commitment fee accrued with respect to any of the Commitments of a Defaulting
Lender during the period prior to the time such Lender became a Defaulting
Lender and unpaid at such time shall not be payable by the Borrower so long as
such Lender shall be a Defaulting Lender except to the extent that such
commitment fee shall otherwise have been due and payable by the Borrower prior
to such time and (ii) that no commitment fee shall accrue on any of the
Commitments of a Defaulting Lender so long as such Lender shall be a Defaulting
Lender.
(b) Letter of Credit Fees, Etc. (i) The Borrower shall pay to the
Administrative Agent for the account of each Revolving Credit Lender a
commission, payable in arrears quarterly on the first Business Day of each
January, April, July and October, commencing January 7, 2000, and on the
earliest to occur of the full drawing, expiration, termination or cancellation
of any such Letter of Credit and on the Termination Date, on such Lender's Pro
Rata Share of the average daily aggregate Available Amount during such quarter
at a rate per annum determined by reference to the Debt Rating in effect from
time to time as set forth below:
<PAGE>
42
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------
Standby
Rating Debt Letters of Trade Letter
Level Rating Credit of Credit
- ----------------------------------------------------------------------
<S> <C> <C> <C>
Level 1 A- or A3 or 0.250% 0.175%
higher
Level 2 BBB+ or Baa1 0.275% 0.200%
Level 3 BBB or Baa2 0.300% 0.225%
Level 4 BBB- or Baa3 0.425% 0.350%
Level 5 BB+ or Ba1 or 0.625% 0.550%
lower
- ----------------------------------------------------------------------
</TABLE>
provided, that at any time that the Debt Rating is at Level 1, 2 or 3 and the
aggregate Available Amount of Letters of Credit plus the principal amount of
Advances exceeds 25% of the aggregate Commitments, the Letter of Credit fees
shall be increased by 0.075% per annum.
(ii) The Borrower shall pay to each Issuing Bank, for its own account,
such commissions, issuance fees, fronting fees, transfer fees and other fees and
charges in connection with the issuance or administration of each Letter of
Credit as the Borrower and such Issuing Bank shall agree.
(c) Agent's Fees. The Borrower shall pay to each of the Agents for its
own account such fees as may from time to time be agreed between the Borrower
and such Agent.
SECTION 2.10. Conversion of Advances. (a) Optional. The Borrower may
on any Business Day, upon notice given to the Administrative Agent not later
than 11:00 A.M. (New York City time) on the third Business Day prior to the date
of the proposed Conversion and subject to the provisions of Sections 2.10, 2.11
and 2.12, Convert all Advances of one Type comprising the same Borrowing into
Advances of the other Type; provided, however, that any Conversion of Eurodollar
Rate Advances into Base Rate Advances shall be made only on the last day of an
Interest Period for such Eurodollar Rate Advances, any Conversion of Base Rate
Advances into Eurodollar Rate Advances shall be in an amount not less than the
minimum amount specified in Section 2.02(c) and no Conversion of any Advances
shall result in more separate Borrowings than permitted under Section 2.02(c).
Each such notice of a Conversion shall, within the restrictions specified above,
specify (i) the date of such Conversion, (ii) the Advances to be Converted, and
(iii) if such Conversion is into Eurodollar Rate Advances, the duration of the
initial Interest Period for each such Advance. Each notice of Conversion shall
be irrevocable and binding on the Borrower.
<PAGE>
43
(b) Mandatory. (i) On the date on which the aggregate unpaid principal
amount of Eurodollar Rate Advances comprising any Borrowing shall be reduced, by
payment or prepayment or otherwise, to less than $10,000,000, such Advances
shall automatically Convert into Base Rate Advances.
(ii) If the Borrower shall fail to select the duration of any Interest
Period for any Eurodollar Rate Advances in accordance with the provisions
contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify the Borrower and the Appropriate
Lenders, whereupon each such Eurodollar Rate Advance will automatically, on the
last day of the then existing Interest Period therefor, Convert into a Base Rate
Advance.
(iii) Upon the occurrence and during the continuance of any Default,
(x) each Eurodollar Rate Advance will automatically, on the last day of the then
existing Interest Period therefor, Convert into a Base Rate Advance and (y) the
obligation of the Lenders to make, or to Convert Advances into, Eurodollar Rate
Advances shall be suspended.
SECTION 2.11. Increased Costs, Etc. (a) If, due to either (i) the
introduction of or any change in or in the interpretation of any law or
regulation or (ii) the 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 (other than in taxes, including
interest, additions to tax and penalties relating thereto, except to the extent
that the same are required to be paid pursuant to Section 2.14 hereof) to any
Lender Party of agreeing to make or of making, funding or maintaining Eurodollar
Rate Advances or LIBO Rate Advances or of agreeing to issue or of issuing or
maintaining Letters of Credit or of agreeing to make or of making or maintaining
Letter of Credit Advances (excluding for purposes of this Section 2.11 any such
increased costs resulting from (x) Taxes, Other Taxes, Excluded Taxes or taxes
excluded from the definitions of Taxes or Other Taxes in Section 2.14(e) or from
indemnification pursuant to Section 2.14(f) (as to which Section 2.14 shall
govern) and (y) changes in the basis of taxation of overall net income or
overall gross income by the United States or by the foreign jurisdiction or
state under the laws of which such Lender Party is organized or has its
Applicable Lending Office or any political subdivision thereof), then the
Borrower shall from time to time, upon demand by such Lender Party (with a copy
of such demand to the Administrative Agent), pay to the Administrative Agent for
the account of such Lender Party additional amounts sufficient to compensate
such Lender Party for such increased cost; provided, however, that, before
making any such demand, each Lender Party agrees to use reasonable efforts
(consistent with its internal policy and legal and regulatory restrictions) to
designate a different Applicable Lending Office if the making of such a
designation would avoid the need for, or reduce the amount of, such increased
cost and would not, in the reasonable judgment of such Lender Party, be
otherwise disadvantageous to such Lender Party and provided, further, that the
Borrower's obligations to any Designated Lender hereunder shall be limited as
set forth in Section 8.04(e).
<PAGE>
44
A certificate as to the amount of such increased cost, submitted to the Borrower
by such Lender Party, shall be conclusive and binding for all purposes, absent
manifest error.
(b) If any Lender Party determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having the force of law) affects or would
affect the amount of capital required or expected to be maintained by such
Lender Party or any corporation controlling such Lender Party and that the
amount of such capital is increased by or based upon the existence of such
Lender Party's commitment to lend or to issue Letters of Credit hereunder and
other commitments of such type or the issuance or maintenance of the Letters of
Credit (or similar contingent obligations), then, upon demand by such Lender
Party (with a copy of such demand to the Administrative Agent), the Borrower
shall pay to the Administrative Agent for the account of such Lender Party, from
time to time as specified by such Lender Party, additional amounts sufficient to
compensate such Lender Party in the light of such circumstances, to the extent
that such Lender Party reasonably determines such increase in capital to be
allocable to the existence of such Lender Party's commitment to lend or to issue
Letters of Credit hereunder or to the issuance or maintenance of any Letters of
Credit, provided, however, that the Borrower's obligations to any Designated
Lender hereunder shall be limited as set forth in Section 8.04(e). A certificate
as to such amounts submitted to the Borrower by such Lender Party shall be
conclusive and binding for all purposes, absent manifest error.
(c) If, with respect to any Eurodollar Rate Advances under any
Facility, Lenders (other than Designated Lenders) owed at least a majority of
the then aggregate unpaid principal amount thereof notify the Administrative
Agent that the Eurodollar Rate for any Interest Period for such Advances will
not adequately reflect the cost (excluding for purposes of this Section 2.11 any
such increased costs resulting from (i) Taxes, Other Taxes, Excluded Taxes or
taxes excluded from the definitions of Taxes or Other Taxes in Section 2.14(e)
or from indemnification pursuant to Section 2.14(f) (as to which Section 2.14
shall govern) and (ii) changes in the basis of taxation of overall net income or
overall gross income by the United States or by the foreign jurisdiction or
state under the laws of which such Lender Party is organized or has its
Applicable Lending Office or any political subdivision thereof) to such Lenders
of making, funding or maintaining their Eurodollar Rate Advances for such
Interest Period, the Administrative Agent shall forthwith so notify the Borrower
and the Appropriate Lenders, whereupon (i) each such Eurodollar Rate Advance
under any Facility will automatically, on the last day of the then existing
Interest Period therefor, Convert into a Base Rate Advance and (ii) the
obligation of the Appropriate Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended until the Administrative Agent shall
notify the Borrower that such Lenders have determined that the circumstances
causing such suspension no longer exist.
<PAGE>
45
SECTION 2.12. Illegality. Notwithstanding any other provision of this
Agreement, if any Lender (other than a Designated Lender) shall notify the
Administrative Agent 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 any Lender or
its Eurodollar Lending Office to perform its obligations hereunder to make
Eurodollar Rate Advances or LIBO Rate Advances or to fund or maintain Eurodollar
Rate Advances or LIBO Rate Advances hereunder, (i) each Eurodollar Rate Advance
or LIBO Rate Advance, as the case may be, will automatically, upon such demand,
Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make
Eurodollar Rate Advances or LIBO Rate Advances or to Convert Revolving Credit
Advances into Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist; provided, that if it
becomes unlawful for any Designated Lender or its Eurodollar Lending Office to
perform its obligations hereunder to make or fund or maintain Eurodollar Rate
Advances or LIBO Rate Advances, such Designated Lender shall immediately assign
its rights and obligations with respect to such Advance to its applicable
Designating Lender.
SECTION 2.13. Payments and Computations. (a) The Borrower shall make
each payment hereunder and under the Notes, if any, irrespective of counterclaim
or set-off (except as otherwise provided in Section 2.17), not later than 11:00
A.M. (New York City time) on the date when due in U.S. dollars to the
Administrative Agent at the Administrative Agent's Account in same day funds.
The Administrative Agent will promptly thereafter cause to be distributed like
funds relating to the payment of principal or interest or commitment fees
ratably (other than amounts payable pursuant to Section 2.04, 2.11, 2.14 or
8.04(c)) to the Lenders for the account of their respective Applicable Lending
Offices, and like funds relating to the payment of any other amount payable to
any Lender to such Lender for the account of its Applicable Lending Office, in
each case to be applied in accordance with the terms of this Agreement. Upon its
acceptance of an Assignment and Acceptance and recording of the information
contained therein in the Register pursuant to Section 8.07(c), from and after
the effective date specified in such Assignment and Acceptance, the
Administrative Agent shall make all payments hereunder and under any Notes
issued in connection therewith in respect of the interest assigned thereby to
the Lender assignee thereunder, and the parties to such Assignment and
Acceptance shall make all appropriate adjustments in such payments for periods
prior to such effective date directly between themselves.
(b) If the Administrative Agent receives funds for application to the
Obligations under the Loan Documents under circumstances for which the Loan
Documents do not specify the Advances or the Facility to which, or the manner in
which, such funds are to be applied, the Administrative Agent may, but shall not
be obligated to, elect to distribute such funds to each Lender Party ratably in
accordance with such Lender Party's proportionate share of the principal amount
of all outstanding Advances and the Available Amount of all Letters of
<PAGE>
46
Credit then outstanding, in repayment or prepayment of such of the outstanding
Advances or other Obligations owed to such Lender Party, and for application to
such principal installments, as the Administrative Agent shall direct.
(c) The Borrower hereby authorizes each Lender, if and to the extent
payment owed to such Lender is not made when due hereunder or under the Note, if
any, held by such Lender, to charge from time to time against any or all of the
Borrower's accounts with such Lender any amount so due.
(d) All computations of interest, fees and Letter of Credit
commissions shall be made by the Administrative Agent on the basis of a year of
360 days, in each case for the actual number of days (including the first day
but excluding the last day) occurring in the period for which such interest or
commitment fees are payable. Each determination by the Administrative Agent of
an interest rate hereunder shall be conclusive and binding for all purposes,
absent manifest error.
(e) Whenever any payment hereunder or under the Notes, if any, shall
be stated to be due on a day other than a Business Day, such payment shall be
made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest or commitment
fee, as the case may be; provided, however, that, if such extension would cause
payment of interest on or principal of Eurodollar Rate Advances or LIBO Rate
Advances to be made in the next following calendar month, such payment shall be
made on the next preceding Business Day.
(f) Unless the Administrative Agent shall have received notice from
the Borrower prior to the date on which any payment is due to the Lenders
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent the Borrower shall not have so made such payment in full to the
Administrative Agent, each Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate.
SECTION 2.14. Taxes. (a) Any and all payments by the Borrower
hereunder or under any Notes shall be made, in accordance with Section 2.13,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender Party and each Agent,
Excluded Taxes (all such non-Excluded Taxes, levies, imposts, deductions,
<PAGE>
47
charges, withholdings and liabilities being hereinafter referred to as "Taxes").
If the Borrower shall be required by law to deduct any Taxes from or in respect
of any sum payable hereunder or under any Note to any Lender Party or any Agent,
(i) the sum payable shall be increased as may be necessary so that after making
all required deductions (including deductions applicable to additional sums
payable under this Section 2.14) such Lender or such Agent (as the case may be)
receives an amount equal to the sum it would have received had no such
deductions been made, (ii) the Borrower shall make such deductions and (iii) the
Borrower shall pay the full amount deducted to the relevant taxation authority
or other authority in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or future
stamp or documentary taxes or any other excise or property taxes, charges or
similar levies that arise from any payment made hereunder or under any Notes or
from the execution, delivery or registration of, or otherwise with respect to,
this Agreement or any Note (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender Party and each Agent for
the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.14) paid by such Lender Party or such Agent (as the case may be) and
any liability (including penalties, interest and expenses) arising therefrom or
with respect thereto. This indemnification shall be made within 30 days from the
date such Lender Party or such Agent (as the case may be) makes written demand
therefor, including in such demand an identification of the Taxes or Other Taxes
(together with the amounts thereof) with respect to which such indemnification
is being sought.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower will furnish to the Administrative Agent and the Documentation Agent,
at their respective addresses referred to in Section 8.02, the original or a
certified copy of a receipt evidencing payment thereof. In the case of any
payment hereunder or under any Notes by or on behalf of the Borrower through an
account or branch outside the United States or on behalf of the Borrower by a
payor that is not a United States person, if the Borrower determines that no
Taxes are payable in respect thereof, the Borrower shall furnish, or shall cause
such payor to furnish, to the Administrative Agent and the Documentation Agent,
at such address, an opinion of counsel acceptable to the Administrative Agent
stating that such payment is exempt from Taxes. For purposes of this subsection
(d) and subsection (e), the terms "United States" and "United States person"
shall have the meanings specified in Section 7701 of the Internal Revenue Code.
(e) Each Lender Party organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement in the case of each Initial Lender or initial Issuing Bank, as
the case may be, and on the date of the Assignment and Acceptance or Designation
Agreement pursuant to which it becomes a Lender Party in the case of each other
Lender Party, and from time to time thereafter if requested in
<PAGE>
48
writing by the Borrower (but only so long as such Lender remains lawfully able
to do so), shall provide both the Borrower and the Administrative Agent with two
original Internal Revenue Service forms 1001, 4224 or W-8 as appropriate, or any
successor or other form prescribed by the Internal Revenue Service, certifying
that such Lender Party is exempt from or entitled to a reduced rate of United
States withholding tax on payments pursuant to this Agreement or the Notes, if
any. If any Lender Party which is not a "United States person" determines that
it is unable to submit to the Borrower or the Administrative Agent any form or
certificate that such Lender is otherwise required to submit pursuant to this
Section 2.14, or that it is required to withdraw or cancel any such form or
certificate, or that any such form or certificate previously submitted has
otherwise become ineffective or inaccurate, such Lender shall promptly notify
the Borrower and the Administrative Agent of such fact. In addition, if a Lender
provides a form W-8 (or any successor or related form) to the Administrative
Agent and the Borrower pursuant to this Section 2.14, such Lender shall also
provide a certificate stating that such Lender is not a "bank" within the
meaning of section 881(c)(3)(A) of the Internal Revenue Code of 1986 and shall
promptly notify the Administrative Agent and the Borrower if such Lender
determines that it is no longer able to provide such certification. If the form
provided by a Lender Party at the time such Lender Party first becomes a party
to this Agreement indicates a United States interest withholding tax rate in
excess of zero, withholding tax at such rate shall be considered excluded from
Taxes unless and until such Lender Party provides the appropriate form
certifying that a lesser rate applies, whereupon withholding tax at such lesser
rate only shall be considered excluded from Taxes for periods governed by such
form; provided, however, that, if at the date of the Assignment and Acceptance
pursuant to which a Lender Party becomes a party to this Agreement, the Lender
Party assignor was entitled to payments under subsection (a) in respect of
United States withholding tax with respect to interest paid at such date, then,
to such extent, the term Taxes shall include (in addition to withholding taxes
that may be imposed in the future or other amounts otherwise includable in
Taxes) United States withholding tax, if any, applicable with respect to the
Lender assignee on such date. Upon the reasonable request of the Borrower or the
Administrative Agent, each Lender Party that has not provided the forms or other
documents, as provided above, on the basis of being a United States person shall
submit to the Borrower and the Administrative Agent a certificate to the effect
that it is such a "United States person" (as defined in Section 7701(a)(30) of
the Internal Revenue Code).
(f) For any period with respect to which a Lender Party has failed to
provide the Borrower with the appropriate form described in Section 2.14(e)
(other than if such failure is due to a change in law occurring subsequent to
the date on which such Lender became a Lender Party hereunder, or if such form
otherwise is not required under the first sentence of subsection (e) above
because the Borrower has not requested in writing such form subsequent to the
date on which such Lender Party became a Lender Party hereunder), such Lender
Party shall not be entitled to indemnification under Section 2.14(a) or (c) with
respect to Taxes imposed by the United States; provided, however, that should a
Lender Party become subject to Taxes
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49
because of its failure to deliver a form required hereunder, the Borrower shall
take such steps as the Lender Party shall reasonably request to assist the
Lender Party to recover such Taxes.
(g) Any Lender Party or Agent claiming any additional amounts payable
pursuant to this Section 2.14 shall use reasonable efforts (consistent with its
internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Eurodollar Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such
Lender Party, be otherwise disadvantageous to such Lender Party.
(h) Within 60 days after the written request of the Borrower, each
Lender Party or Agent shall execute and deliver to the Borrower such
certificates or forms as are reasonably requested by the Borrower in such
request, which can be furnished consistent with the facts and which are
reasonably necessary to assist the Borrower in applying for refunds of Taxes
paid by the Borrower hereunder or making payment of Taxes hereunder; provided,
however, that no Lender Party or Agent shall be required to furnish to the
Borrower and financial or other information which it considers confidential. The
cost of preparing any materials referred to in the previous sentence shall be
borne by the Borrower. If a Lender Party or Agent determines in good faith that
it has received a refund of any Taxes or Other Taxes with respect to which
Borrower has made a payment of additional amounts, such Lender Party or Agent
shall pay to the Borrower an amount that such Lender Party or Agent determines
in good faith to be equal to the net benefit, after tax, that was obtained by
such Lender Party or Agent (as the case may be) as a consequence of such refund.
(i) All obligations of the Borrower owed to any Designated Lender
pursuant to this Section 2.14 shall be limited to the amount that the Borrower
would be obligated to pay to such Designated Lender's applicable Designating
Lender but for such designation, as set forth in Section 8.04(e).
SECTION 2.15. Sharing of Payments, Etc. If any Lender Party shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of Obligations owing to it (other
than pursuant to Section 2.11, 2.14 or 8.04(c)) in excess of its ratable share
of payments on account of the Obligations obtained by all the Lender Parties,
such Lender Party shall forthwith purchase from the other Lender Parties such
participations in Obligations owing to them as shall be necessary to cause such
purchasing Lender Party to share the excess payment ratably with each of them;
provided, however, that if all or any portion of such excess payment is
thereafter recovered from such purchasing Lender Party, such purchase from each
Lender Party shall be rescinded and such Lender Party shall repay to the
purchasing Lender Party the purchase price to the extent of such recovery
together with an amount equal to such Lender Party's ratable share (according to
the proportion of (i) the amount of such Lender Party's required repayment to
(ii) the total amount so recovered from the
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50
purchasing Lender Party) of any interest or other amount paid or payable by the
purchasing Lender Party in respect of the total amount so recovered. The
Borrower agrees that any Lender Party so purchasing a participation from another
Lender Party pursuant to this Section 2.15 may, to the fullest extent permitted
by law, exercise all its rights of payment (including the right of set-off) with
respect to such participation as fully as if such Lender Party were the direct
creditor of the Borrower in the amount of such participation.
SECTION 2.16. Use of Proceeds. The proceeds of the Advances shall be
available to provide working capital for the Borrower and for general corporate
purposes, including commercial paper backstop, of the Borrower and its
Subsidiaries.
SECTION 2.17. Defaulting Lenders. (a) In the event that, at any one
time, (i) any Lender Party shall be a Defaulting Lender, (ii) such Defaulting
Lender shall owe a Defaulted Advance to the Borrower and (iii) the Borrower
shall be required to make any payment hereunder or under any other Loan Document
to or for the account of such Defaulting Lender, then the Borrower may, so long
as no Default shall occur or be continuing at such time and to the fullest
extent permitted by applicable law, set off and otherwise apply the Obligation
of the Borrower to make such payment to or for the account of such Defaulting
Lender against the Obligation of such Defaulting Lender to make such Defaulted
Advance. In the event that, on any date, the Borrower shall so set off and
otherwise apply its Obligation to make any such payment against the Obligation
of such Defaulting Lender to make any such Defaulted Advance on or prior to such
date, the amount so set off and otherwise applied by the Borrower shall
constitute for all purposes of this Agreement and the other Loan Documents an
Advance by such Defaulting Lender made on the date under the Facility pursuant
to which such Defaulted Advance was originally required to have been made
pursuant to Section 2.01. Such Advance shall be a Base Rate Advance and shall be
considered, for all purposes of this Agreement, to comprise part of the
Borrowing in connection with which such Defaulted Advance was originally
required to have been made pursuant to Section 2.01, even if the other Advances
comprising such Borrowing shall be Eurodollar Rate Advances on the date such
Advance is deemed to be made pursuant to this subsection (a). The Borrower shall
notify the Administrative Agent at any time the Borrower exercises its right of
set-off pursuant to this subsection (a) and shall set forth in such notice (A)
the name of the Defaulting Lender and the Defaulted Advance required to be made
by such Defaulting Lender and (B) the amount set off and otherwise applied in
respect of such Defaulted Advance pursuant to this subsection (a). Any portion
of such payment otherwise required to be made by the Borrower to or for the
account of such Defaulting Lender which is paid by the Borrower, after giving
effect to the amount set off and otherwise applied by the Borrower pursuant to
this subsection (a), shall be applied by the Administrative Agent as specified
in subsection (b) or (c) of this Section 2.17.
(b) In the event that, at any one time, (i) any Lender Party shall be
a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount to
any Agent or
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51
any of the other Lender Parties and (iii) the Borrower shall make
any payment hereunder or under any other Loan Document to the Administrative
Agent for the account of such Defaulting Lender, then the Administrative Agent
may, on its behalf or on behalf of such other Lender Parties and to the fullest
extent permitted by applicable law, apply at such time the amount so paid by the
Borrower to or for the account of such Defaulting Lender to the payment of each
such Defaulted Amount to the extent required to pay such Defaulted Amount. In
the event that the Administrative Agent shall so apply any such amount to the
payment of any such Defaulted Amount on any date, the amount so applied by the
Administrative Agent shall constitute for all purposes of this Agreement and the
other Loan Documents payment, to such extent, of such Defaulted Amount on such
date. Any such amount so applied by the Administrative Agent shall be retained
by the Administrative Agent or distributed by the Administrative Agent to such
other Lender Parties, ratably in accordance with the respective portions of such
Defaulted Amounts payable at such time to the Administrative Agent and such
other Lender Parties and, if the amount of such payment made by the Borrower
shall at such time be insufficient to pay all Defaulted Amounts owing at such
time to the Administrative Agent and the other Lender Parties, in the following
order of priority:
(i) first, to the Agents for any Defaulted Amount then owing to the
Agents; and
(ii) second, to any other Lender Parties for any Defaulted Amounts
then owing to such other Lender Parties, ratably in accordance with such
respective Defaulted Amounts then owing to such other Lender Parties.
Any portion of such amount paid by the Borrower for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Administrative Agent pursuant to this subsection (b), shall be applied by the
Administrative Agent as specified in subsection (c) of this Section 2.17.
(c) In the event that, at any one time, (i) any Lender Party shall be
a Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted
Advance or a Defaulted Amount and (iii) the Borrower, any Agent or any other
Lender Party shall be required to pay or distribute any amount hereunder or
under any other Loan Document to or for the account of such Defaulting Lender,
then the Borrower or such other Lender Party shall pay such amount to the
Administrative Agent to be held by the Administrative Agent, to the fullest
extent permitted by applicable law, in escrow or the Administrative Agent shall,
to the fullest extent permitted by applicable law, hold in escrow such amount
otherwise held by it. Any funds held by the Administrative Agent in escrow under
this subsection (c) shall be deposited by the Administrative Agent in an account
with the Administrative Agent, in the name and under the control of the
Administrative Agent, but subject to the provisions of this subsection (c). The
terms applicable to such account, including the rate of interest payable with
respect to the credit
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52
balance of such account from time to time, shall be the Administrative Agent's
standard terms applicable to escrow accounts maintained with it. Any interest
credited to such account from time to time shall be held by the Administrative
Agent in escrow under, and applied by the Administrative Agent from time to time
in accordance with the provisions of, this subsection (c). The Administrative
Agent shall, to the fullest extent permitted by applicable law, apply all funds
so held in escrow from time to time to the extent necessary to make any Advances
required to be made by such Defaulting Lender and to pay any amount payable by
such Defaulting Lender hereunder and under the other Loan Documents to any Agent
or any other Lender Party, as and when such Advances or amounts are required to
be made or paid and, if the amount so held in escrow shall at any time be
insufficient to make and pay all such Advances and amounts required to be made
or paid at such time, in the following order of priority:
(i) first, to the Agents for any amount then due and payable by such
Defaulting Lender to the Agents hereunder;
(ii) second, to any other Lender Parties for any amount then due and
payable by such Defaulting Lender to such other Lender Parties hereunder,
ratably in accordance with such respective amounts then due and payable to
such other Lender Parties; and
(iii) third, to the Borrower for any Advance then required to be made
by such Defaulting Lender pursuant to a Commitment of such Defaulting
Lender.
In the event that any Lender Party that is a Defaulting Lender shall, at any
time, cease to be a Defaulting Lender, any funds held by the Administrative
Agent in escrow at such time with respect to such Lender Party shall be
distributed by the Administrative Agent to such Lender Party and applied by such
Lender Party to the Obligations owing to such Lender Party at such time under
this Agreement and the other Loan Documents ratably in accordance with the
respective amounts of such Obligations outstanding at such time.
(d) The rights and remedies against a Defaulting Lender under this
Section 2.17 are in addition to other rights and remedies that the Borrower may
have against such Defaulting Lender with respect to any Defaulted Advance and
that any Agent or any Lender Party may have against such Defaulting Lender with
respect to any Defaulted Amount.
SECTION 2.18. Evidence of Debt. (a) Each Lender shall maintain in
accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower to such Lender resulting from each Advance owing to
such Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder. The Borrower agrees
that upon notice by any Lender to the Borrower (with a copy of such notice to
the Administrative Agent) to the effect that a promissory note or other evidence
of indebtedness is required or appropriate in order for such Lender to evidence
(whether for
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53
purposes of pledge, enforcement or otherwise) the Revolving Credit Advances
owing to, or to be made by, such Lender, the Borrower shall promptly execute and
deliver to such Lender a promissory note substantially in the form of Exhibit
A-2 hereto (each a "Revolving Credit Note"), payable to the order of such Lender
in a principal amount equal to the Revolving Credit Commitment of such Lender.
(b) The Register maintained by the Administrative Agent pursuant to
Section 8.07(g) shall include a control account, and a subsidiary account for
each Lender, in which accounts (taken together) shall be recorded (i) the date
and amount of each Borrowing made hereunder, the Type of Advances comprising
such Borrowing and, if appropriate, the Interest Period applicable thereto, (ii)
the terms of each Assignment and Acceptance delivered to and accepted by it,
(iii) the amount of any principal or interest due and payable or to become due
and payable from the Borrower to each Lender hereunder, and (iv) the amount of
any sum received by the Administrative Agent from the Borrower hereunder and
each Lender's share thereof.
(c) Entries made in good faith by the Administrative Agent in the
Register pursuant to subsection (b) above, and by each Lender in its account or
accounts pursuant to subsection (a) above, shall be prima facie evidence of the
amount of principal and interest due and payable or to become due and payable
from the Borrower to, in the case of the Register, each Lender and, in the case
of such account or accounts, such Lender, under this Agreement, absent manifest
error; provided, however, that the failure of the Administrative Agent or such
Lender to make an entry, or any finding that an entry is incorrect, in the
Register or such account or accounts shall not limit or otherwise affect the
obligations of the Borrower under this Agreement.
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54
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness of Amendment and
Restatement. The amendment and restatement of the Predecessor Credit Agreement
pursuant hereto shall become effective on and as of the Effective Date, which
shall occur on such date on or prior to November 17, 1999, on which each of the
following conditions precedent shall have been satisfied:
(a) The Required Lenders (as defined in the Predecessor Credit
Agreement) shall have consented to this Agreement.
(b) All governmental and third party consents and approvals necessary
in connection with the Loan Documents shall have been obtained (without the
imposition of any conditions that are not acceptable to the Lender Parties)
and shall remain in effect, all applicable waiting periods shall have
expired without any action being taken by any competent authority and no
law or regulation shall be applicable in the reasonable judgment of the
Lender Parties that restrains, prevents or imposes materially adverse
conditions upon the Loan Documents.
(c) The Borrower shall have paid all accrued and invoiced fees and
expenses of the Agent and the Lender Parties (including the accrued and
invoiced fees and expenses of counsel to the Agent).
(d) The Agent shall have received on or before the Effective Date the
following, each dated such day (unless otherwise specified), in form and
substance satisfactory to the Agent (unless otherwise specified) and in
sufficient copies for each Lender Party:
(i) A consent in substantially the form of Exhibit F, by Group in
favor of the Lender Parties under the guaranty dated August 12, 1997
made by Group in favor of the Lender Parties (as amended, supplemented
or otherwise modified from time to time in accordance with its terms,
the "Group Guaranty"), duly executed by Group, consenting to the
amendment and restatement contemplated by this Agreement.
(ii) A consent in substantially the form of Exhibit G, by the
Guarantors (other than Group) in favor of the Lender Parties under the
subsidiary guaranty dated August 12, 1997 made by the Guarantors
(other than Group) in favor of the Lender Parties (together with each
other guaranty delivered pursuant to Section
<PAGE>
55
5.01(k), in each case as amended, supplemented or otherwise modified
from time to time in accordance with its terms, the "Subsidiary
Guaranty"), duly executed by each such Guarantor, consenting to the
amendment and restatement contemplated by this Agreement.
(iii) To the extent that any such information is changed from
that previously delivered under the Predecessor Credit Agreement, a
certificate of the Secretary or an Assistant Secretary of the Borrower
and each other Loan Party certifying the names and true signatures of
the officers of the Borrower and such other Loan Party authorized to
sign this Agreement, each other Loan Document to which they are or are
to be parties and the other documents to be delivered hereunder and
thereunder.
(iv) A certificate signed by a duly authorized officer of the
Borrower dated the Effective Date certifying as to the truth of the
representations and warranties contained in the Loan Documents as
though made on and as of such date and the absence of any event
occurring and continuing on the Effective Date that constitutes a
Default.
SECTION 3.02. Conditions Precedent to Each Borrowing and Issuance. The
obligation of each Appropriate Lender to make an Advance (other than a Letter of
Credit Advance and other than a Swing Line Advance made by a Revolving Credit
Lender pursuant to Section 2.02(b)) on the occasion of each Borrowing (including
the initial Borrowing), and the obligation of each Issuing Bank to issue a
Letter of Credit (including the initial issuance) and the right of the Borrower
to request a Swing Line Borrowing, shall be subject to the further conditions
precedent that on the date of such Borrowing or issuance:
(a) the following statements shall be true (and each of the giving of
the applicable Notice of Borrowing, Notice of Swing Line Borrowing or
Notice of Issuance and the acceptance by the Borrower of the proceeds of
such Borrowing or of such Letter of Credit shall constitute a
representation and warranty by the Borrower that on the date of such
Borrowing or issuance such statements are true):
(i) the representations and warranties contained in each Loan
Document are correct in all material respects on and as of the date of
such Borrowing or issuance, before and after giving effect to such
Borrowing or issuance (other than, solely with respect to Advances
used to fund the payment of commercial paper issued by the Borrower
from time to time, the representations and warranties contained in
Section 4.01(f)(ii) hereof) and to the application of the proceeds
therefrom, as though made on and as of such date other than any such
representations or warranties that, by their terms, refer to a
specific date
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56
other than the date of such Borrowing or issuance, in which case such
representations and warranties shall have been correct as of such
specific date, and
(ii) no event has occurred and is continuing, or would result
from such Borrowing or from the application of the proceeds therefrom,
that constitutes a Default; and
(b) the Documentation Agent shall have received such other approvals
or documents, if any, as any Appropriate Lender through the Documentation
Agent may reasonably request.
SECTION 3.03. Determinations Under Section 3.01. For purposes of
determining compliance with the conditions specified in Section 3.01, each
Lender Party shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lender Parties unless an
officer of the Documentation Agent responsible for the transactions contemplated
by Loan Documents shall have received notice from such Lender Party prior to the
date that the Borrower, by notice to the Lenders, designates as the proposed
Effective Date, specifying its objection thereto. The Administrative Agent shall
promptly notify the Lender Parties of the occurrence of the Effective Date.
SECTION 3.04. Reference to and Effect on the Loan Documents. (a) On
and after the Effectiveness of this Agreement, each reference in the Notes and
each of the other Loan Documents to "the Credit Agreement", "thereunder",
"thereof", or words of like import referring to the Predecessor Credit
Agreement, shall mean and be a reference to this Agreement.
(b) The Notes and each of the other Loan Documents, as specifically
amended by this Agreement, are and shall continue to be in full force and effect
and are hereby ratified and confirmed.
(c) The execution, delivery and effectiveness of this Agreement shall
not operate as a waiver of any right, power or remedy of any Lender or the
Administrative Agent under any of the Loan Documents, nor constitute a waiver of
any provision of the Loan Documents.
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57
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower. Each
of Group and the Borrower represents and warrants as follows:
(a) Each Loan Party (i) is a corporation duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified and in good standing as a foreign
corporation in each other jurisdiction in which it owns or leases property
or in which the conduct of its business requires it to so qualify or be
licensed except where the failure to so qualify or be licensed would not
have a Material Adverse Effect and (iii) has all requisite corporate power
and authority to own or lease and operate its properties and to carry on
its business as now conducted and as proposed to be conducted.
(b) Set forth on Schedule 4.01(b) hereto is a complete and accurate
list of all Subsidiaries of each Loan Party, showing as of the date hereof
(as to each such Subsidiary) whether or not such Subsidiary is a
wholly-owned Subsidiary. Each such Subsidiary (i) is a corporation duly
organized or a limited liability company or a trust duly formed, validly
existing and in good standing under the laws of the jurisdiction of its
incorporation, (ii) is duly qualified and in good standing as a foreign
corporation, limited liability company or trust in each other jurisdiction
in which it owns or leases property or in which the conduct of its business
requires it to so qualify or be licensed except where the failure to so
qualify or be licensed would not have a Material Adverse Effect and (iii)
has all requisite corporate power and authority to own or lease and operate
its properties and to carry on its business as now conducted and as
proposed to be conducted.
(c) The execution, delivery and performance by each Loan Party of this
Agreement and each other Loan Document to which it is or is to be a party,
and the consummation of the transactions contemplated hereby, are within
such Loan Party's corporate powers, have been duly authorized by all
necessary corporate action, and do not (i) contravene such Loan Party's
charter or by-laws, (ii) violate any law, rule, regulation, order, writ,
judgment, injunction, decree, determination or award, (iii) conflict with
or result in the breach of, or constitute a default under, any contract,
loan agreement, indenture, mortgage, deed of trust, lease or other
instrument binding on or affecting any Loan Party, any of its Subsidiaries
or any of their respective properties or (iv) result in or require the
creation or imposition of any Lien upon or with respect to any of the
properties of any Loan Party or any of its Subsidiaries. No Loan Party or
any of its Subsidiaries is in violation of any such law, rule, regulation,
order, writ, judgment, injunction, decree, determination or award or in
breach of any such contract, loan
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58
agreement, indenture, mortgage, deed of trust, lease or other instrument,
the violation or breach of which is or would be reasonably likely to have a
Material Adverse Effect.
(d) No authorization or approval or other action by, and no notice to
or filing with, any governmental authority or regulatory body or any other
third party is required for the due execution, delivery, recordation,
filing or performance by any Loan Party of this Agreement or any other Loan
Document to which it is or is to be a party, or for the consummation of the
transactions contemplated hereby.
(e) This Agreement has been, and each other Loan Document when
delivered hereunder will have been, duly executed and delivered by each
Loan Party party thereto. This Agreement is, and each other Loan Document
when delivered hereunder will be, the legal, valid and binding obligation
of each Loan Party party thereto, enforceable against such Loan Party in
accordance with its terms, except as enforcement may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or other
similar laws affecting creditors' rights generally and by general
principles of equity (regardless of whether enforcement is sought in equity
or at law).
(f) (i) The Consolidated balance sheets of Group and its Subsidiaries
as at January 2, 1999, and the related Consolidated statements of
operations, stockholders' equity and cash flow of Group and its
Subsidiaries for the fiscal years then ended, accompanied by an opinion of
PricewaterhouseCoopers LLP, independent public accountants, and the
Consolidated balance sheet of Group and its Subsidiaries as at July 3,
1999, and the related Consolidated statements of operations, stockholders'
equity and cash flow of Group and its Subsidiaries for the six months then
ended, duly certified by the chief financial officer of Group, copies of
which have been furnished to each Lender, fairly present, subject, in the
case of said balance sheet as at July 3, 1999, and said statements of
operations, stockholders' equity and cash flow for the six months then
ended, to year-end audit adjustments, the Consolidated financial condition
of Group and its Subsidiaries as at such dates and the Consolidated results
of the operations of Group and its Subsidiaries for the periods ended on
such dates, all in accordance with generally accepted accounting principles
applied on a consistent basis, and (ii) since January 2, 1999, there has
been no Material Adverse Change.
(g) There is no action, suit, investigation, litigation or proceeding
affecting any Loan Party or any of its Subsidiaries, including any
Environmental Action, pending or threatened before any court, governmental
agency or arbitrator that (i) purports to affect the legality, validity or
enforceability of this Agreement or any other Loan Document or (ii) is or
would be reasonably likely to have a Material Adverse Effect.
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59
(h) No proceeds of any Advance will be used to acquire any equity
security of a class that is registered pursuant to Section 12 of the
Securities Exchange Act of 1934, as amended (other than (i) shares of
capital stock of Group and (ii) to the extent applicable, in connection
with an acquisition of a company, so long as (x) the board of directors of
such company shall have approved such acquisition at the time such
acquisition is first publicly announced, (y) if such company shall have
been soliciting bids for its acquisition, the board of directors of such
company shall not have determined either to accept no offer or to accept an
offer other than the offer of Group or one of its Subsidiaries or (z) if
such company shall not have been soliciting bids for its acquisition or if
the board of directors of such company shall have solicited bids for its
acquisition but shall have initially determined either to accept no offer
or to accept an offer other than the offer of Group or one of its
Subsidiaries, the existence, amount and availability for the acquisition of
such company of the Commitments hereunder shall not have been disclosed,
orally or in writing, to such company or its advisors; provided, that the
public filing of this Agreement shall not be deemed to be disclosure of the
Commitments hereunder to such company or its advisors, until after such
time as the board of directors of such company shall have approved such
acquisition by Group or one of its Subsidiaries and so long as, in any
case, such acquisition is otherwise permitted hereunder).
(i) The Borrower is not engaged in the business of extending credit
for the purpose of purchasing or carrying Margin Stock, and no proceeds of
any Advance will be used to purchase or carry any Margin Stock or to extend
credit to others for the purpose of purchasing or carrying any Margin Stock
except for shares of capital stock of Group and Authentic Fitness and as
otherwise permitted in Section 4.01(h).
(j) Neither any Loan Party nor any of its Subsidiaries is an
"investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended. Neither the
making of any Advances, nor the issuance of any Letters of Credit, nor the
application of the proceeds or repayment thereof by the Borrower, nor the
consummation of the other transactions contemplated hereby, will violate
any provision of such Act or any rule, regulation or order of the
Securities and Exchange Commission thereunder.
(k) For any date on or before December 31, 1999, the Borrower has, and
as soon as practicable after the Control Date, Authentic Fitness will have
(i) initiated a review and assessment of all areas within its and each of
its Subsidiaries' business and operations (including those affected by
suppliers, vendors and customers) that could be adversely affected by the
risk that computer applications used by such Person or any of its
Subsidiaries (or suppliers, vendors and customers) may be unable to
recognize and
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perform properly date-sensitive functions involving certain dates prior to
and any date after December 31, 1999 (the "Year 2000 Problem"), (ii)
developed a plan and timetable for addressing the Year 2000 problem on a
timely basis and (iii) to date, implemented that plan in accordance with
such timetable. Based on the foregoing, each such Person believes that all
of its computer applications that are material to its or any of its
Subsidiaries' business and operations are reasonably expected on a timely
basis to be able to perform properly date-sensitive functions for all dates
before and after January 1, 2000, except to the extent that a failure to do
so could not reasonably be expected to have a Material Adverse Effect.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance shall
remain unpaid, any Letter of Credit shall be outstanding or any Lender Party
shall have any Commitment hereunder, Group and the Borrower will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable laws,
rules, regulations and orders, such compliance to include, without
limitation, compliance with ERISA and Environmental Laws, except where the
failure so to comply would not have a Material Adverse Effect.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each of its
Subsidiaries to pay and discharge, before the same shall become delinquent,
(i) all taxes, assessments and governmental charges or levies imposed upon
it or upon its property and (ii) all lawful claims that, if unpaid, would
reasonably be likely to by law become a Lien upon its property; provided,
however, that neither the Group nor any of its Subsidiaries shall be
required to pay or discharge any such tax, assessment, charge or claim that
is being contested in good faith and by proper proceedings and as to which
appropriate reserves are being maintained, unless and until any Lien
resulting therefrom attaches to its property and becomes enforceable
against its other creditors so long as any such amount, when taken together
with any amount required to be paid as described in clause (b) of the
definition of "Permitted Liens", shall not exceed $10 million.
(c) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such risks
as is usually carried by companies engaged in
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similar businesses and owning similar properties in the same general areas
in which the Borrower or such Subsidiary operates.
(d) Preservation of Corporate Existence, Etc. Preserve and maintain,
and cause each of its Subsidiaries to preserve and maintain, its corporate
existence, rights (charter and statutory) and franchises; provided,
however, that Group and its Subsidiaries may consummate the Merger and any
other merger, consolidation or voluntary dissolution or liquidation
permitted under Section 5.02(b).
(e) Visitation Rights. At any reasonable time and from time to time,
permit any Agent or any of the Lender Parties or any agents or
representatives thereof, upon reasonable notice to the Borrower to examine
and make copies of and abstracts from the records and books of account of,
and visit the properties of, the Borrower and any of its Subsidiaries, and
to discuss the affairs, finances and accounts of the Borrower and any of
its Subsidiaries with any of their officers or directors and with their
independent certified public accountants.
(f) Keeping of Books. Keep, and cause each of its Subsidiaries to
keep, proper books of record and account, in which full and correct entries
shall be made of all financial transactions and the assets and business of
the Borrower and each such Subsidiary in accordance with generally accepted
accounting principles in effect from time to time.
(g) Maintenance of Properties, Etc. Maintain and preserve, and cause
each of its Subsidiaries to maintain and preserve, all of its properties
that are used or useful in the conduct of its business in good working
order and condition, ordinary wear and tear excepted.
(h) Transactions with Affiliates. Conduct, and cause each of its
Subsidiaries to conduct, other than with respect to transactions among
Group and/or its wholly owned Subsidiaries, all transactions otherwise
permitted under the Loan Documents with any of their Affiliates on terms
that are no less favorable to Group or such Subsidiary than it would obtain
in a comparable arm's-length transaction with a Person not an Affiliate,
provided, however, that the foregoing restriction shall not apply to
transactions pursuant to any agreement referred to in Section 5.02(a)(ii)
and provided, further, that the Borrower shall not engage in any
transaction with any such Subsidiary that would render such Subsidiary
insolvent or cause a default under, or a breach of, any material contract
to which such Subsidiary is a party.
(i) [Intentionally Deleted]
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(j) Reporting Requirements. Furnish to the Lenders (and for purposes
hereof, any Designated Lender shall be deemed to have received the
following information from its Designating Lender):
(i) as soon as available and in any event within 50 days after
the end of each of the first three quarters of each Fiscal Year,
Consolidated balance sheets of Group and its Subsidiaries as of the
end of such quarter and Consolidated statements of income and
Consolidated statements of cash flows of Group and its Subsidiaries
for the period commencing at the end of the previous fiscal year and
ending with the end of such quarter, duly certified (subject to
year-end audit adjustments) by the chief financial officer of the
Borrower as having been prepared in accordance with generally accepted
accounting principles and a certificate of the chief financial officer
of Group as to compliance with the terms of this Agreement and setting
forth in reasonable detail the calculations necessary to demonstrate
compliance with Section 5.03, provided that in the event of any change
in GAAP used in the preparation of such financial statements, the
Borrower shall also provide, if necessary for the determination of
compliance with Section 5.03, a statement of reconciliation conforming
such financial statements to GAAP;
(ii) as soon as available and in any event within 95 days after
the end of each Fiscal Year of Group, a copy of the annual audit
report for such year for Group and its Subsidiaries, containing
Consolidated balance sheet of Group and its Subsidiaries as of the end
of such fiscal year and Consolidated statements of income and cash
flows of the Borrower and its Subsidiaries for such Fiscal Year, in
each case accompanied by an opinion acceptable to the Required Lenders
by any Approved Accounting Firm or by other independent public
accountants acceptable to the Required Lenders, and a certificate of
the chief financial officer or Group as to compliance with the terms
of this Agreement setting forth in reasonable detail the calculations
necessary to demonstrate compliance with Section 5.03 provided that in
the event of any change in GAAP used in the preparation of such
financial statements, the Borrower shall also provide, if necessary
for the determination of compliance with Section 5.03, a statement of
reconciliation conforming such financial statements to GAAP;
(iii) as soon as possible and in any event within two Business
Days after the occurrence of each Default continuing on the date of
such statement, a statement of the chief financial officer of the
Borrower setting forth details of such Default and the action that the
Borrower has taken and proposes to take with respect thereto;
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(iv) promptly after the sending or filing thereof, copies of all
reports that the Borrower sends to any of its security holders
generally, and copies of all reports and registration statements that
Group or any Subsidiary files with the Securities and Exchange
Commission or any national securities exchange;
(v) promptly after the commencement thereof, notice of all
actions and proceedings before any court, governmental agency or
arbitrator affecting the Borrower or any of its Subsidiaries of the
type described in Section 4.01(g);
(vi) within five Business Days after receipt thereof by any Loan
Party, copies of each notice from S&P or Moody's indicating any change
in the Debt Rating; and
(vii) such other information respecting the Borrower or any of
its Subsidiaries as any Lender Party through the Arrangers may from
time to time reasonably request.
(k) Covenant to Guarantee Obligations. At such time as any new direct
or indirect Domestic Subsidiary that is a Material Subsidiary (including,
without limitation, Authentic Fitness and its Subsidiaries as required by
Section 5.01(l) below) is formed or acquired, cause such new Subsidiary
that is a wholly owned Subsidiary to (i) within 30 days thereafter or such
later time as the Borrower and the Administrative Agent shall agree (but in
any event no later than 30 additional days thereafter), duly execute and
deliver to the Administrative Agent guarantees, in substantially the form
of Exhibit G and otherwise in form and substance reasonably satisfactory to
the Administrative Agent, guaranteeing the Borrower's Obligations under the
Loan Documents, provided, however, that the foregoing shall not apply to
(A) Excluded Subsidiaries, (B) joint ventures or (C) any Subsidiary
organized solely for the purpose of entering into any agreements and
transactions referred to in Section 5.02(a)(ii) to the extent that such
agreements require that such Subsidiary not be a Guarantor hereunder, and
(ii) within 30 days after the delivery of such guarantees or such later
time as the Borrower and the Administrative Agent shall agree (but in any
event no later than 30 additional days thereafter), deliver to the
Administrative Agent a signed copy of a favorable opinion, addressed to the
Administrative Agent, of counsel for the Loan Parties acceptable to the
Administrative Agent as to the documents contained in clause (i) above, as
to such guarantees being legal, valid and binding obligations of such
Subsidiaries enforceable in accordance with their terms and as to such
other matters as the Administrative Agent may reasonably request.
(l) Consummation of Merger. If there is a Tender Offer, cause the
Merger to be consummated in compliance with all applicable laws and
regulations as soon as
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practicable after consummation of the Tender Offer and cause Authentic
Fitness and its Subsidiaries to become a Guarantor pursuant to Section
5.01(k) as soon as practicable and, in any event, within 30 days after
consummation of the Merger.
(m) Authentic Fitness. As soon as practicable after consummation of
the Merger, cause the commitments under all Existing Debt of Authentic
Fitness and its Subsidiaries (other than Debt of Authentic Fitness and its
Subsidiaries that become Obligations under the Trade Credit Facility) to be
terminated and all such indebtedness to be repaid in full.
SECTION 5.02. Negative Covenants. So long as any Advance shall remain
unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have
any Commitment hereunder, neither Group nor the Borrower will at any time:
(a) Liens, Etc. Create or suffer to exist, or permit any of its
Subsidiaries to create, incur, assume or suffer to exist, any Lien on or
with respect to any of its properties of any character, whether now owned
or hereafter acquired, or assign, or permit any of its Subsidiaries to
assign, any right to receive income, other than:
(i) Permitted Liens,
(ii) Liens on receivables of any kind (and in property securing
or otherwise supporting such receivables) in connection with
agreements for limited recourse sales or financings by the Borrower or
any of its Subsidiaries or by Designer Holdings or any of its
Subsidiaries for cash of such receivables or interests therein,
provided that (A) any such agreement is of a type and on terms
customary for comparable transactions in the good faith judgment of
the Board of Directors of Group and (B) such agreement does not create
any interest in any asset other than receivables (and property
securing or otherwise supporting such receivables), related general
intangibles and proceeds of the foregoing,
(iii) other Liens securing Debt, including Liens incurred
pursuant to subsection (v) below, in an aggregate principal amount
outstanding at any time not to exceed 10% of Consolidated Tangible
Assets of Group and its Subsidiaries at such time, provided that Liens
securing Debt of Authentic Fitness Products Inc. under credit
facilities existing on the date that Authentic Fitness becomes a
Subsidiary of the Borrower are expressly permitted until the
consummation of the acquisition of 100% of the capital stock of
Authentic Fitness,
(iv) Liens arising from covenants by the Borrower or its
Subsidiaries to grant security interests in the assets of Warnaco of
Canada Limited or its
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Subsidiaries (the "Canadian Subsidiaries") to secure Debt of the
Canadian Subsidiaries in the event that the Lenders hereunder or under
the New 364-Day Credit Agreement, the New Five-Year Credit Agreement
or the Trade Credit Facility (as defined therein) are granted Liens by
Group or its Subsidiaries in their respective assets to secure the
Obligations under the Loan Documents, the New 364-Day Credit
Agreement, the New Five-Year Credit Agreement or the Trade Credit
Facility, as the case may be, and
(v) Liens on Margin Stock.
(b) Mergers, Etc. Merge into or consolidate with any Person or permit
any Person to merge into it, or permit any of its Subsidiaries (other than
Excluded Subsidiaries) to do so or to voluntarily liquidate, except that
(i) the Borrower or the Purchaser and Authentic Fitness may
consummate the Merger;
(ii) any Subsidiary of Group may merge into or consolidate with
any other Subsidiary of Group, provided that if any such Subsidiary is
a Domestic Subsidiary of Group, the person formed thereby shall be a
direct or indirect wholly owned Domestic Subsidiary of Group;
(iii) any Subsidiary of Group may merge into or consolidate with
any other Person pursuant to an acquisition, provided that, if any
such Subsidiary is a Domestic Subsidiary of Group, the Person formed
thereby shall be a direct or indirect wholly owned Domestic Subsidiary
of Group;
(iv) any Domestic Subsidiary of Group may merge into or
consolidate with Group;
(v) the Borrower may merge into or consolidate with any other
Person so long as the Borrower is the surviving corporation; and
(vi) any Subsidiary of Group may voluntarily liquidate and
distribute its assets to Group or any direct or indirect wholly owned
Domestic Subsidiary of Group, provided, in each case, that no Default
shall have occurred and be continuing at the time of such proposed
transaction or would result therefrom.
(c) Debt. Create, incur, assume or suffer to exist, or permit any of
its Subsidiaries (other than Excluded Subsidiaries) to create, incur,
assume or suffer to exist,
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66
any Debt if after giving effect thereto the Borrower shall fail to be in
compliance with each of the covenants set forth in Section 5.03.
(d) Sales, Etc. of Assets. Sell, lease, transfer or otherwise dispose
of, or permit any of its Subsidiaries to sell, lease, transfer or otherwise
dispose of, any assets, or grant any option or other right to purchase,
lease or otherwise acquire any assets, except:
(i) sales of inventory in the ordinary course of its business;
(ii) sales, leases, transfers or other disposals of assets, or
grants of any option or other right to purchase, lease or otherwise
acquire assets, following the Effective Date for fair value (valued at
the time of any such sale, lease, transfer or other disposal), in an
aggregate amount in each Fiscal Year not to exceed 20% per annum of
the Consolidated total assets of Group and its Subsidiaries as valued
at the end of the preceding Fiscal Year of the Borrower, and the fair
value of such assets shall have been determined in good faith by the
Board of Directors of Group;
(iii) sales of assets on terms customary for comparable
transactions in the good faith judgment of the Board of Directors of
Group pursuant to agreements referred to in Section 5.02(a)(ii);
(iv) transfers of assets between Group and its Subsidiaries;
(v) sales of assets listed on Schedule 5.02(d) hereto;
(vi) sales of assets and properties of Group and its Subsidiaries
in connection with sale-leaseback transactions otherwise permitted
hereunder (including, without limitation, under Section 5.02(c));
(vii) the sale or discount of accounts (A) owing by Persons
incorporated, residing or having their principal place of business in
the United States in an aggregate amount not exceeding $10,000,000 in
face amount per calendar year or (B) that are past due by more than 90
days, provided that the sale or discount of such accounts is in the
ordinary course of Group's business and consistent with prudent
business practices;
(viii) the licensing of trademarks and trade names by Group or
any of its Subsidiaries in the ordinary course of its business,
provided that such licensing takes place on an arm's-length basis;
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(ix) the rental by Group and its Subsidiaries, as lessors, in the
ordinary course of their respective businesses, on an arm's-length
basis, of real property and personal property, in each case under
leases (other than Capitalized Leases); and
(x) sales of Margin Stock for fair value as determined in good
faith by the Board of Directors of Group.
(e) Authentic Fitness. From and after the Control Date and prior to
the date that Authentic Fitness becomes a wholly-owned Subsidiary, permit
Authentic Fitness to (i) issue any securities, rights or options or (ii)
declare or make any dividends or distributions to the holders of Authentic
Fitness Stock, except, in each case, as contemplated by the terms of either
or both of the Tender Offer and the Merger and otherwise except to the
extent any such transactions are entered into and performed in the ordinary
course of Authentic Fitness's business as previously conducted and
necessary for the prudent operation of Authentic Fitness's business.
(f) Nature of Business. Make, or permit any of its Subsidiaries to
make, (A) except as otherwise permitted pursuant to subsection (B) below,
any change in the nature of its business as carried on at the date hereof
in a manner materially adverse to the Agents and the Lender Parties or (B)
any investments (except Investments in a net aggregate amount (after giving
effect to any dividends or other returns of capital) invested from the date
hereof not to exceed $100,000,000) other than in apparel manufacturing or
wholesaling businesses or apparel accessories manufacturing or wholesaling
businesses or in related retail businesses, provided that on an annual
basis, at least 51% of the revenue of Group and its Subsidiaries on a
Consolidated basis is derived from apparel manufacturing or wholesaling
businesses or apparel accessories manufacturing or wholesaling businesses.
(g) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in accounting policies (except
as required or permitted by the Financial Accounting Standards Board or
generally accepted accounting principles), reporting practices or Fiscal
Year.
SECTION 5.03. Financial Covenants. So long as any Advance shall remain
unpaid, any Letter of Credit shall be outstanding or any Lender Party shall have
any Commitment hereunder, Group and the Borrower will:
(a) Leverage Ratio. Maintain, at the end of each Fiscal Quarter a
ratio of (x) Indebtedness for Borrowed Money to (y) Consolidated EBITDA of
Group and its Subsidiaries for the preceding four Fiscal Quarters of not
more than 3.25 to 1.0; provided
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that if the Tender Offer is consummated, such ratio shall not be more than
3.75 to 1.0 for each Fiscal Quarter ending on or before September 30, 2000,
3.50 to 1.0 for each Fiscal Quarter ending on or about December 31, 2000
through the Fiscal Quarter ending on or about September 30, 2001 and 3.25
to 1.0 for each Fiscal Quarter thereafter.
(b) Coverage Ratio. Maintain, as of the end of each Fiscal Quarter, a
ratio of Consolidated EBITDA of Group and its Subsidiaries for the four
consecutive Fiscal Quarters then ended to Consolidated Interest Expense of
Group and its Subsidiaries for such period of not less than 3.00:1.00.
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following events
("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any Advance when
the same becomes due and payable; or the Borrower or any other Loan Party
shall fail to pay any interest on any Advance or make any other payment of
fees or other amounts payable under any Loan Document within three Business
Days after the same becomes due and payable; or
(b) Any representation or warranty made by any Loan Party (or any of
its officers) under or in connection with any Loan Document shall prove to
have been incorrect in any material respect when made; or
(c) (i) Group or the Borrower shall fail to perform or observe any
term, covenant or agreement contained in Section 5.01(d), (k) or (l), 5.02
or 5.03, or (ii) any Loan Party shall fail to perform or observe any other
term, covenant or agreement contained in any Loan Document on its part to
be performed or observed if such failure shall remain unremedied for 30
days (A) after written notice thereof shall have been given to the Borrower
by any Agent or any Lender or (B) after any officer of the Borrower obtains
knowledge thereof; or
(d) Any Loan Party or any of its Subsidiaries shall fail to pay any
principal of or premium or interest on any Debt under the Trade Credit
Facility or other Debt that is outstanding in a principal or notional
amount of at least $20,000,000 in the aggregate (but excluding Debt
outstanding hereunder) of such Loan Party or such Subsidiary (as the case
may be), when the same becomes due and payable (whether by scheduled
maturity,
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required prepayment, acceleration, demand or otherwise), and such failure
shall continue after the applicable grace period, if any, specified in the
agreement or instrument relating to such Debt; or any other event shall
occur or condition shall exist under any agreement or instrument relating
to any such Debt and shall continue after the applicable grace period, if
any, specified in such agreement or instrument, if the effect of such event
or condition is to accelerate, or to permit the acceleration of, the
maturity of such Debt; or any such Debt shall be declared to be due and
payable, or required to be prepaid or redeemed (other than by a regularly
scheduled required prepayment or redemption or other than as a result of
any event which provides cash to such Loan Party in an amount sufficient to
satisfy such redemption or prepayment), purchased or defeased, or an offer
to prepay, redeem, purchase or defease such Debt shall be required to be
made, in each case prior to the stated maturity thereof; or
(e) Group, the Borrower or any of their Material Subsidiaries (or any
group of Subsidiaries which, in the aggregate, would constitute a Material
Subsidiary) 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 any Group, the Borrower or any of their
Subsidiaries (or any group of Subsidiaries which, in the aggregate, would
constitute a Material Subsidiary) 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 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 30 days, or any of the
actions sought in such proceeding (including, without limitation, 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 such Loan Party or any of its Subsidiaries
shall take any corporate action to authorize any of the actions set forth
above in this subsection (e); or
(f) Any judgment or order for the payment of money in excess of
$20,000,000 shall be rendered against any Loan Party or any of its
Subsidiaries and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there shall
be any period of 10 consecutive days during which a stay of enforcement of
such judgment or order, by reason of a pending appeal or otherwise, shall
not be in effect unless the payment of such judgment or order is covered by
insurance and such insurance coverage is not in dispute.
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(g) Any non-monetary judgment or order shall be rendered against any
Loan Party or any of its Subsidiaries that could be reasonably expected to
have a Material Adverse Effect, and there shall be any period of 10
consecutive days during which a stay of enforcement of such judgment or
order, by reason of a pending appeal or otherwise, shall not be in effect;
or
(h) any provision of any Loan Document, after delivery thereof
pursuant to Section 3.01 or 5.01(k), shall for any reason cease to be valid
and binding on or enforceable against any Loan Party party to it, or any
such Loan Party shall so state in writing; or
(i) (A) Group shall at any time cease to have legal and beneficial
ownership of 100% of the capital stock of the Borrower (except if such
parties shall merge); or (B) any Person, or two or more Persons acting in
concert, shall have acquired beneficial ownership (within the meaning of
Rule 13d-3 of the Securities and Exchange Commission under the Securities
Exchange Act of 1934), directly or indirectly, of Voting Stock of Group (or
other securities convertible into such Voting Stock) representing 25% or
more of the combined voting power of all Voting Stock of Group (other than
Excluded Persons); or (C) any Person, or two or more Persons acting in
concert shall have acquired by contract or otherwise, or shall have entered
into a contract or arrangement that, upon consummation, will result in its
or their acquisition of, the power to exercise, directly or indirectly, a
controlling influence over the management or policies of Group, or control
over Voting Stock of Group (or other securities convertible into such
securities) representing 25% or more of combined voting power of all Voting
Stock of Group (other than Excluded Persons); or (D) Linda J. Wachner (or,
in the case of her death or disability, another officer or officers of
comparable experience and ability selected by the Borrower within 180 days
thereafter after consultation with the Administrative Agent) shall cease to
be Chairman and Chief Executive Officer of Group and the Borrower); or
(j) Any Loan Party or any of its ERISA Affiliates shall incur, or
shall be reasonably likely to incur, liability in excess of $20,000,000 in
the aggregate as a result of one or more of the following: (i) the
occurrence of any ERISA Event; (ii) the partial or complete withdrawal of
such Loan Party or any of its ERISA Affiliates from a Multiemployer Plan;
or (iii) the reorganization or termination of a Multiemployer Plan;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower,
declare the obligation of each Appropriate Lender to make Advances (other than
Letter of Credit Advances by an Issuing Bank or a Revolving Credit Lender
pursuant to Section 2.03(c) and Swing Line Advances by a Revolving Credit Lender
pursuant to Section 2.02(b)) and of each Issuing Bank to issue Letters of Credit
to be terminated, whereupon the same shall forthwith terminate, and (ii) shall
at the
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request, or may with the consent, of the Required Lenders, (A) by notice to the
Borrower, declare the Advances, all interest thereon and all other amounts
payable under this Agreement and the other Loan Documents to be forthwith due
and payable, whereupon the Advances, all such interest and all such amounts
shall become and be forthwith due and payable, without presentment, demand,
protest or further notice of any kind, all of which are hereby expressly waived
by the Borrower and (B) by notice to each party required under the terms of any
agreement in support of which a Standby Letter of Credit is issued, request that
all Obligations under such agreement be declared to be due and payable;
provided, however, that in the event of an actual or deemed entry of an order
for relief with respect to any Loan Party or any of its Material Subsidiaries
(or any group of Subsidiaries which, in the aggregate, would constitute a
Material Subsidiary) under the Federal Bankruptcy Code, (x) the obligation of
each Lender to make Advances (other than Letter of Credit Advances by the
Issuing Bank or a Revolving Credit Lender pursuant to Section 2.03(c) and Swing
Line Advances by a Revolving Credit Lender pursuant to Section 2.02(b)) and of
each Issuing Bank to issue Letters of Credit shall automatically be terminated
and (y) the Advances, all such interest and all such amounts shall automatically
become and be due and payable, without presentment, demand, protest or any
notice of any kind, all of which are hereby expressly waived by the Borrower.
SECTION 6.02. Actions in Respect of the Letters of Credit upon
Default. If any Event of Default shall have occurred and be continuing, the
Administrative Agent may, or shall at the request of the Required Lenders,
irrespective of whether they are taking any of the actions described in Section
6.01 or otherwise, make demand upon the Borrower to, and forthwith upon such
demand the Borrower will, pay to the Administrative Agent on behalf of the
Lender Parties in same day funds at the Administrative Agent's office designated
in such demand, for deposit in the L/C Cash Collateral Account, an amount equal
to the aggregate Available Amount of all Letters of Credit then outstanding. If
at any time the Administrative Agent determines that any funds held in the L/C
Cash Collateral Account are subject to any right or claim of any Person other
than the Agents and the Lender Parties or that the total amount of such funds is
less than the aggregate Available Amount of all Letters of Credit, the Borrower
will, forthwith upon demand by the Administrative Agent, pay to the
Administrative Agent, as additional funds to be deposited and held in the L/C
Cash Collateral Account, an amount equal to the excess of (a) such aggregate
Available Amount over (b) the total amount of funds, if any, then held in the
L/C Cash Collateral Account that the Administrative Agent determines to be free
and clear of any such right and claim.
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ARTICLE VII
THE AGENTS
SECTION 7.01. Authorization and Action. Each Lender Party hereby
appoints and authorizes each Agent to take such action as agent on its behalf
and to exercise such powers and discretion under this Agreement and the other
Loan Documents as are delegated to such Agent by the terms hereof, together with
such powers and discretion as are reasonably incidental thereto. As to any
matters not expressly provided for by this Agreement and the other Loan
Documents (including, without limitation, enforcement or collection of the
Notes, if any), each Agent shall not be required to exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall be binding
upon all Lender Parties and all holders of Notes; provided, however, that no
Agent shall be required to take any action that exposes such Agent to personal
liability or that is contrary to this Agreement or applicable law. Each Agent
agrees to give to each Lender prompt notice of each notice given to it by the
Borrower pursuant to the terms of this Agreement.
SECTION 7.02. Agents' Reliance, Etc. None of the Agents nor any of
their directors, officers, agents or employees shall be liable for any action
taken or omitted to be taken by it or them under or in connection with this
Agreement and the other Loan Documents, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, each Agent: (i) may treat the payee of any Note as the holder thereof
until the Administrative Agent receives and accepts an Assignment and Acceptance
entered into by the Lender that is the payee of such Note, as assignor, and an
Eligible Assignee, as assignee, as provided in Section 8.07; (ii) may consult
with legal counsel (including counsel for any Loan Party), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Lender Party and shall not be responsible to any Lender
Party for any statements, warranties or representations (whether written or
oral) made in or in connection with this Agreement and the other Loan Documents;
(iv) shall not have any duty to ascertain or to inquire as to the performance or
observance of any of the terms, covenants or conditions of this Agreement and
the other Loan Documents on the part of any Loan Party or to inspect the
property (including the books and records) of any Loan Party (v) shall not be
responsible to any Lender Party for the due execution, legality, validity,
enforceability, genuineness, sufficiency or value of or the other Loan Documents
or any other instrument or document furnished pursuant hereto; and (vi) shall
incur no liability under or in respect of this Agreement or the other Loan
Documents by acting upon any notice, consent, certificate or other instrument or
writing (which may be by telecopier, telegram or telex) believed by it to be
genuine and signed or sent by the proper party or parties.
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SECTION 7.03. Scotiabank, Citibank, Commerzbank and Affiliates. With
respect to its Commitment, the Advances made by it and any Notes issued to it,
each of Scotiabank, Citibank and Commerzbank shall have the same rights and
powers under this Agreement and the other Loan Documents as any other Lender and
may exercise the same as though it were not an Agent; and the term "Lender
Party" or "Lender Parties" shall, unless otherwise expressly indicated, include
Scotiabank, Citibank and Commerzbank in their individual capacities. Each of
Scotiabank, Citibank and Commerzbank and their Affiliates may accept deposits
from, lend money to, act as trustee under indentures of, accept investment
banking engagements from and generally engage in any kind of business with, any
Loan Party, any of its Subsidiaries and any Person who may do business with or
own securities of any Loan Party or any such Subsidiary, all as if Scotiabank,
Citibank and Commerzbank were not Agents and without any duty to account
therefor to the Lender Parties.
SECTION 7.04. Lender Credit Decision. Each Lender Party acknowledges
that it has, independently and without reliance upon any Agent or any other
Lender Party and based on the financial statements referred to in Section 4.01
and such other documents and information as it has deemed appropriate, made its
own credit analysis and decision to enter into this Agreement. Each Lender Party
also acknowledges that it will, independently and without reliance upon any
Agent or any other Lender Party and based on such documents and information as
it shall deem appropriate at the time, continue to make its own credit decisions
in taking or not taking action under this Agreement.
SECTION 7.05. Indemnification. Each Lender Party (other than the
Designated Lenders which have only Competitive Bid Advances outstanding) agrees
to indemnify each Agent (to the extent not reimbursed by the Borrower), ratably
according to the respective principal amounts of the Advances then owed to each
of them (or if no Advances are at the time outstanding or if any Advances are
owed to Persons that are not Lenders, ratably according to the respective
amounts of their Commitments), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against such Agent in any way relating to or
arising out of this Agreement or the other Loan Documents or any action taken or
omitted by such Agent under this Agreement or the other Loan Documents, provided
that no Lender Party shall be liable for any portion of such liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements resulting from the Agent's gross negligence or willful
misconduct; and provided, further, that no Designated Lender shall be liable for
any payment under this Section 7.05 so long as, and to the extent that, its
Designating Lender makes such payments on its behalf. The Borrower, the Agents
and the other Lender Parties shall continue to deal solely and directly with the
Designating Lender in connection with the Designated Lender's rights and
obligations under this Agreement. Without limitation of the foregoing, each
Lender Party (other than the Designated Lenders which have only Competitive Bid
Advances outstanding) agrees to reimburse each Agent promptly upon
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demand for its ratable share of any out-of-pocket expenses (including counsel
fees) incurred by such 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 and the other Loan
Documents, to the extent that such Agent is not reimbursed for such expenses by
the Borrower.
SECTION 7.06. Successor Agents. Any Agent may resign at any time by
giving written notice thereof to the Lender Parties and the Borrower and may be
removed at any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent with the approval of the Borrower. If no successor Agent shall
have been so appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the retiring Agent's giving of notice of
resignation or the Required Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which
shall be a commercial bank organized under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, discretion, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article VII shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any provision
of this Agreement, nor consent to any departure by the Borrower therefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Required Lenders, and then such waiver or consent shall be effective only in the
specific instance and for the specific purpose for which given; provided,
however, that (a) no amendment, waiver or consent shall, unless in writing and
signed by all the Lenders (other than the Designated Lenders and other than any
Lender Party which is, at such time, a Defaulting Lender), do any of the
following at any time: (i) waive any of the conditions specified in Section 3.01
or, in the case of the initial Borrowing, Section 3.02, (ii) change the
percentage of the Commitments or of the aggregate unpaid principal amount of the
Advances, or the number of Lenders, that shall be required for the Lenders or
any of them to take any action hereunder, (iii) release any Material Guarantor,
or (vi) amend this Section 8.01, (b) no amendment, waiver or consent shall,
unless in writing and signed by the Required Lenders and each Lender affected by
such amendment, waiver or consent (other than
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the Designated Lenders and other than any Lender which is, at such time, a
Defaulting Lender), (i) reduce the principal of, or interest on, the Advances
owed to such Lender or any fees or other amounts payable hereunder to such
Lender or (ii) postpone any date fixed for any payment of principal of, or
interest on, the Advances owed to such Lender or any fees or other amounts
payable hereunder to such Lender and (c) no amendment, waiver or consent shall,
unless in writing and signed by the Required Lenders and, for each Facility
directly affected by such amendment, waiver or consent, each Lender that has a
Commitment under such Facility (other than the Designated Lenders and other than
any Lender which is, at such time, a Defaulting Lender), increase the
Commitments of such Lender or subject such Lender to any additional obligations;
provided further that no amendment, waiver or consent shall, unless in writing
and signed by the Swing Line Bank or any Issuing Bank, as the case may be, in
addition to the Lenders required above to take such action, affect the rights or
obligations of the Swing Line Bank or of such Issuing Bank, as the case may be,
under this Agreement; and provided further that no amendment, waiver or consent
shall, unless in writing and signed by an Agent in addition to the Lenders
required above to take such action, affect the rights or duties of such Agent
under this Agreement. Each Designating Lender shall act as its Designated
Lender's agent and attorney in fact and exercise on behalf of its Designated
Lender all rights, if any, to vote and to grant and make approvals, waivers,
consents or waivers in accordance with this Section 8.01. The Borrower, the
Agents and the other Lender Parties shall continue to deal solely and directly
with the Designating Lender in connection with the Designated Lender's rights
and obligations under this Agreement. Any request by any Loan Party for an
amendment or waiver of any provision of any Loan Document shall be made by such
Loan Party by giving a written request therefor to the Documentation Agent.
SECTION 8.02. Notices, Etc. All notices and other communications
provided for hereunder shall be in writing (including telegraphic, telecopy,
telex or cable communication) and mailed, telegraphed, telecopied, telexed,
cabled or delivered, if to the Borrower, at its address at 90 Park Avenue, New
York, New York 10016, Attention: Chief Financial Officer, with a copy to General
Counsel; if to any Initial Lender or initial Issuing Bank or Agent, at its
Domestic Lending Office specified opposite its name on Schedule I hereto; if to
any other Lender Party, at its Domestic Lending Office specified in the
Assignment and Acceptance pursuant to which it became a Lender; or, as to each
party, at such other address as shall be designated by such party in a written
notice to the other parties. All such notices and communications shall, when
mailed, telegraphed, telecopied, telexed or cabled, be effective when deposited
in the mails, delivered to the telegraph company, transmitted by telecopier,
confirmed by telex answerback or delivered to the cable company, respectively,
except that notices and communications to an Agent pursuant to Article II, III
or VII shall not be effective until received by such Agent. Delivery by
telecopier of an executed counterpart of any amendment or waiver of any
provision of this Agreement or of any Exhibit hereto to be executed and
delivered hereunder shall be effective as delivery of a manually executed
counterpart thereof.
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SECTION 8.03. No Waiver; Remedies. No failure on the part of any
Lender Party or 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 such right preclude any other or further exercise thereof or the
exercise of any other right. The remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) Group and the Borrower agree to
pay on demand (i) all reasonable costs and expenses (other than taxes, including
interest, additions to tax and penalties relating thereto, except to the extent
that the same are required to be paid pursuant to Section 2.14 hereof) of the
Agents in connection with the preparation, execution, delivery, administration,
modification and amendment of the Loan Documents (including, without limitation,
(A) all due diligence, syndication (including printing, distribution and bank
meetings), transportation, computer, duplication, appraisal, audit, insurance,
consultant, search, filing and recording fees and all other out-of-pocket
expenses and (B) the reasonable fees and expenses of counsel for the Agents with
respect thereto, with respect to advising the Agents as to their respective
rights and responsibilities, or the protection or preservation of rights or
interests, under the Loan Documents, with respect to negotiations with any Loan
Party or with other creditors of any Loan Party or any of its Subsidiaries
arising out of any Default or any events or circumstances that may give rise to
a Default and with respect to presenting claims in or otherwise participating in
or monitoring any bankruptcy, insolvency or other similar proceeding involving
creditors' rights generally, and any proceeding ancillary thereto) and (ii) all
reasonable costs and expenses (other than taxes, including interest, additions
to tax and penalties relating thereto, except to the extent that the same are
required to be paid pursuant to Section 2.14 hereof) of the Agents and the
Lender Parties in connection with the enforcement of the Loan Documents, whether
in any action, suit or litigation, any bankruptcy, insolvency or other similar
proceeding affecting creditors' rights generally or otherwise (including,
without limitation, the reasonable fees and expenses of counsel for the Agents
and each Lender Party with respect thereto).
(b) Group and the Borrower agree to indemnify and hold harmless each
of the Agents and each Lender (other than any Designated Lender to the extent
such indemnification obligation exceeds that which the Borrower would owe to its
Designating Lender) and each of their Affiliates and their officers, directors,
employees, agents and advisors (each, an "Indemnified Party") from and against
any and all claims, damages, losses, liabilities and expenses (including,
without limitation, reasonable fees and expenses of counsel, but other than
taxes, including interest, additions to tax and penalties relating thereto,
except to the extent that the same are required to be paid pursuant to Section
2.14 hereof) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of, or in connection with the preparation for a defense of, any
investigation, litigation or proceeding arising out of, related to or in
connection with (i) the Facilities or the actual or proposed use of the proceeds
of the Advances or (ii) the actual or alleged presence of Hazardous Materials on
any property of the Borrower or any of its Subsidiaries or any
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Environmental Action relating in any way to the Borrower or any of its
Subsidiaries, in each case whether or not such investigation, litigation or
proceeding is brought by the Borrower, its directors, shareholders or creditors
or an Indemnified Party or any other Person or any Indemnified Party is
otherwise a party thereto and whether or not the transactions contemplated
hereby, the Tender Offer or the Merger are consummated, except to the extent
such claim, damage, loss, liability or expense is found in a final,
non-appealable judgment by a court of competent jurisdiction to have resulted
from such Indemnified Party's gross negligence or willful misconduct. The
Borrower also agrees not to assert any claim against any Agent, any Lender, any
of their Affiliates, or any of their respective directors, officers, employees,
attorneys and agents, on any theory of liability, for special, indirect,
consequential or punitive damages arising out of or otherwise relating to this
Agreement, any of the transactions contemplated herein, the Tender Offer, the
Merger or the actual or proposed use of the proceeds of the Advances, except in
the event of gross negligence or willful misconduct on the part of such Agent,
Lender or Affiliate.
(c) If any payment of principal of any Eurodollar Rate Advance or LIBO
Rate Advance, or any Conversion of any Eurodollar Rate Advance, is made by the
Borrower to or for the account of a Lender other than on the last day of the
Interest Period for such Advance, as a result of a payment or Conversion
pursuant to Section 2.07, Section 2.10(b)(1) or Section 2.12, acceleration of
the maturity of the Advances pursuant to Section 6.01 or for any other reason,
the Borrower shall, upon demand by such Lender Party (with a copy of such demand
to the Administrative Agent), pay to the Administrative Agent for the account of
such Lender Party any amounts required to compensate such Lender Party for any
additional losses, costs or expenses that it may reasonably incur as a result of
such payment or Conversion, including, without limitation, any loss (excluding
loss of anticipated profits and taxes, including interest, additions to tax and
penalties relating thereto, except to the extent that the same are required to
be paid pursuant to Section 2.14 hereof), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by any
Lender Party to fund or maintain such Advance; provided, however, that
notwithstanding any of the foregoing, the Borrower shall not be required to
compensate any Designated Lender for any losses, costs or expenses to the extent
such amounts exceed that which the Borrower would owe to its Designating Lender,
but for such designation.
(d) Without prejudice to the survival of any other agreement of the
Borrower hereunder, the agreements and obligations of the Borrower contained in
Section 2.11, Section 2.14 and this Section 8.04 and the agreements and
obligations of any Lender Party or Agent contained in Section 2.14 shall survive
the payment in full of principal, interest and all other amounts payable
hereunder.
(e) Notwithstanding anything to the contrary, neither the designation
of any Designated Lender, any Advance made by any Designated Lender, nor any
other condition or
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circumstance relating to any Designated Lender shall increase (i) any
obligations or liabilities of the Borrower hereunder, including, without
limitation, pursuant to Section 2.07, Section 2.10(b)(1) or Section 2.12 or this
Section 8.04, or (ii) any obligations or liabilities of the Borrower under any
Loan Documents, in each case, as compared with any obligations or liabilities
which would arise if the Designating Lender were the Lender for all purposes and
had not otherwise appointed a Designated Lender.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and during the
continuance of any Event of Default and (ii) the making of the request or the
granting of the consent specified by Section 6.01 to authorize the
Administrative Agent to declare the Advances due and payable pursuant to the
provisions of Section 6.01, each Lender Party and each of its Affiliates is
hereby authorized at any time and from time to time, to the fullest extent
permitted by law, to set off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held and other indebtedness at
any time owing by such Lender Party or such Affiliate to or for the credit or
the account of the Borrower against any and all of the Obligations of the
Borrower now or hereafter existing under this Agreement and any Note held by
such Lender, whether or not such Lender Party shall have made any demand under
this Agreement or such Note, if any, and although such obligations may be
unmatured. Each Lender agrees promptly to notify the Borrower after any such
set-off and application, provided that the failure to give such notice shall not
affect the validity of such set-off and application. The rights of each Lender
Party and its Affiliates under this Section are in addition to other rights and
remedies (including, without limitation, other rights of set-off) that such
Lender Party and its Affiliates may have.
SECTION 8.06. Binding Effect. This Agreement shall become effective
(other than Sections 2.01 and 2.03, which shall only become effective upon
satisfaction of the conditions precedent set forth in Section 3.01) when it
shall have been executed by the Borrower, Group and the Agents and when the
Administrative Agent shall have been notified by each Initial Lender and initial
Issuing Bank that such Initial Lender and initial Issuing Bank has executed it
and thereafter shall be binding upon and inure to the benefit of the Borrower,
the Agents and each Lender Party and their respective successors and assigns,
except that the Borrower shall not have the right to assign its rights hereunder
or any interest herein without the prior written consent of the Lender Parties.
SECTION 8.07. Assignments, Designations and Participations (a) Each
Lender Party (other than any Designated Lender except for an assignment to its
Designating Lender) may assign, and, if demanded by the Borrower upon at least
30 Business Days' notice to such Lender and the Administrative Agent following
either (w) such Lender becoming a Defaulting Lender, (x) a payment by the
Borrower of Taxes with respect to such Lender in accordance with Section 2.14,
(y) the occurrence of an event that would, upon payment to such Lender of
amounts hereunder, require a payment by the Borrower of Taxes with respect to
such Lender in
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accordance with Section 2.14 or (z) a demand for payment under Section 2.11 will
assign, to one or more banks or other entities all or a portion of its rights
and obligations under this Agreement (including, without limitation, all or a
portion of its Commitment or Commitments, the Advances owing to it (including
accrued interest) and any Revolving Credit Note held by it but not including
Competitive Bid Advances owing to it and Competitive Bid Notes), with (except in
the case of an assignment to an Affiliate of such Lender) the prior written
consent of the Administrative Agent and (so long as no Default has occurred and
is continuing) the Borrower, such consent not to be unreasonably withheld or
delayed; provided, however, that except in the case of (x) an assignment to a
Person that, immediately prior to such assignment, was a Lender, (y) an
assignment to an Affiliate of the assigning Lender (including an assignment by a
Designated Lender to its Designating Lender) or (z) an assignment of all of a
Lender's rights and obligations under this Agreement, the amount of the
Commitment of the assigning Lender being assigned pursuant to each such
assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $10,000,000 or an
integral multiple of $1,000,000 in excess thereof, and the amount of the
Commitment of the assigning Lender being retained by such Lender immediately
after giving effect to such assignment (determined as of the effective date of
the Assignment and Acceptance with respect to such assignment) shall in no event
be less than $10,000,000, (C) each such assignment shall be to an Eligible
Assignee, (D) each such assignment made as a result of a demand by the Borrower
pursuant to this Section 8.07(a) shall be arranged by the Borrower after
consultation with the Administrative Agent and shall be either an assignment of
all of the rights and obligations of the assigning Lender under this Agreement
or an assignment of a portion of such rights and obligations made concurrently
with another such assignment or other such assignments that together cover all
of the rights and obligations of the assigning Lender under this Agreement, (E)
no Lender shall be obligated to make any such assignment as a result of a demand
by the Borrower pursuant to this Section 8.07(a) unless and until such Lender
shall have received one or more payments from either the Borrower or one or more
Eligible Assignees in an aggregate amount at least equal to the aggregate
outstanding principal amount of the Advances owing to such Lender, together with
accrued interest thereon to the date of payment of such principal amount and all
other amounts payable to such Lender under this Agreement, (F) no such
assignments will be permitted without the consent of the Arrangers until the
Arrangers shall have notified the Lender Parties that syndication of the
Commitments thereunder has been completed, and (G) the parties to each such
assignment shall execute and deliver to the Administrative Agent, for its
acceptance and recording in the Register, an Assignment and Acceptance, together
with any Revolving Credit Note subject to such assignment and a processing and
recordation fee of $3,500, provided that the Borrower shall pay such recordation
fee in the case of any assignment demanded by the Borrower pursuant to this
Section 8.07(a). Upon such execution, delivery, acceptance and recording, from
and after the effective date specified in each Assignment and Acceptance, (x)
the assignee thereunder shall be a party hereto and, to the extent that rights
and obligations hereunder have been assigned to it pursuant to such Assignment
and Acceptance, have the rights and obligations of a
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Lender Party's hereunder and (y) the Lender Party's assignor thereunder shall,
to the extent that rights and obligations hereunder have been assigned by it
pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender Party's rights and obligations under this Agreement, such Lender Party
shall cease to be a party hereto).
(b) By executing and delivering an Assignment and Acceptance, the
Lender Party assignor thereunder and the assignee thereunder confirm to and
agree with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender Party makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
or any other Loan Document or any other instrument or document furnished
pursuant hereto; (ii) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Loan Party or the performance or observance by any Loan Party of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto or thereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Section 4.01 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the any Agent, such assigning Lender Party or any other
Lender Party and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such assignee confirms that it is an
Eligible Assignee; (vi) such assignee appoints and authorizes each Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under this Agreement as are delegated to the each Agent by the terms hereof,
together with such powers and discretion as are reasonably incidental thereto;
and (vii) such assignee agrees that it will perform in accordance with their
terms all of the obligations that by the terms of this Agreement are required to
be performed by it as a Lender Party.
(c) Upon its receipt of an Assignment and Acceptance executed by an
assigning Lender Party and an assignee representing that it is an Eligible
Assignee, together with any Revolving Credit Note subject to such assignment,
the Administrative Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit C hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Borrower.
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(d) (i) Any Lender (other than a Designated Lender) may at any time
designate not more than one Designated Lender to fund Revolving Credit Advances
and/or Competitive Bid Advances on behalf of such Designating Lender subject to
the terms of this Section 8.07(d). Such designation may occur by execution by
such parties of a Designation Agreement. The parties to each such designation
shall execute and deliver to the Administrative Agent and the Borrower for their
acceptance a Designation Agreement. Upon receipt of an appropriately completed
Designation Agreement executed by a Designating Lender and a designee
representing that it is a Designated Lender and consented by the Borrower, the
Administrative Agent will accept such Designation Agreement and will give prompt
notice thereof to the Borrower and the other Lenders, whereupon, (A) upon the
written request of the Designating Lender, the Borrower shall execute and
deliver to the Designating Lender a Revolving Credit Note and/or from time to
time a Competitive Bid Note, as the case may be, in each case payable to the
order of the Designated Lender, (B) from and after the effective date specified
in the Designation Agreement, the Designated Lender shall become a party to this
Agreement with a right to make Revolving Credit Advances and/or Competitive Bid
Advances on behalf of its Designating Lender pursuant to Sections 2.01(a) and
2.04, respectively, and (C) the Designated Lender shall not be required to make
payments with respect to any obligations in this Agreement except to the extent
of excess cash flow of such Designated Lender which is not otherwise required to
repay obligations of such Designated Lender which are then due and payable;
provided, however, that regardless of such designation and assumption by the
Designated Lender, the Designating Lender (1) shall be and remain obligated to
the Borrower, the Agents and the Lender Parties for each and every of the
obligations of the Designating Lender and its related Designated Lender with
respect to this Agreement, including, without limitation, any indemnification
obligations under Section 7.05 hereof and any sums otherwise payable to the
Borrower by the Designated Lender and (2) neither the designation of a
Designated Lender, the election or other determination that a Designated Lender
will make any Advance nor any other condition or circumstance relating to the
Designated Lender shall in any way release, diminish or otherwise affect the
relevant Designating Lender's Commitment or any other of its obligations
hereunder or under any other Loan Document or any rights of the Borrower, any
Agent or any Lender with respect to such Designating Lender.
(ii) The Borrower, the Agents and the Lender Parties may, at their
option, pursue remedies against any Designating Lender which arise out of any
failure of its Designated Lender to perform such Designated Lender's obligations
under this Agreement or any other Loan Document. Each Designating Lender shall
serve as the administrative agent and attorney in fact for its Designated Lender
and shall on behalf of its Designated Lender: (A) receive any and all payments
made for the benefit of such Designated Lender and (B) give and receive all
communications and notices and take all actions hereunder, including, without
limitation, votes, approvals, waivers, consents and amendments under or relating
to this Agreement and the other Loan Documents to the extent, if any, such
Designated Lender shall
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have any rights hereunder or thereunder. To the extent a Designated Lender shall
have the right to receive or give any such notice, communication, vote,
approval, waiver, consent or amendment, it shall be signed by its Designating
Lender as administrative agent and attorney in fact for such Designated Lender
and need not be signed by such Designated Lender on his own behalf. The
Borrower, the Agents and the Lender Parties may rely thereon without any
requirement that the Designated Lender sign or acknowledge the same.
Notwithstanding anything to the contrary contained herein, no Designated Lender
may assign or transfer all or any portion of its interest hereunder or under any
other Loan Document, other than via an assignment to its Designating Lender in
accordance with the provisions of this Section 8.07.
(e) By executing and delivering a Designation Agreement, the Lender
Party making the designation thereunder and its designee thereunder confirm and
agree with each other and the other parties hereto as follows: (i) such Lender
Party makes no representation or warranty and assumes no responsibility with
respect to any statements, warranties or representations made in or in
connection with this Agreement or the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
instrument or document furnished pursuant hereto; (ii) such Lender Party makes
no representation or warranty and assumes no responsibility with respect to the
financial condition of the Borrower or the performance or observance by the
Borrower of any of its obligations under this Agreement or any other instrument
or document furnished pursuant hereto; (iii) such designee confirms that it has
received a copy of this Agreement, together with copies of the financial
statements referred to in Section 4.01 and such other documents and information
as it has deemed appropriate to make its own credit analysis and decision to
enter into such Designation Agreement; (iv) such designee will, independently
and without reliance upon any Agent, such designating Lender Party or any other
Lender Party and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement; (v) such designee confirms that it is a
Designated Lender; (vi) such designee appoints and authorizes each Agent to take
such action as agent on its behalf and to exercise such powers and discretion
under this Agreement as are delegated to such Agent by the terms hereof,
together with such powers and discretion as are reasonably incidental thereto;
and (vii) such designee agrees that it will perform in accordance with their
terms all of the obligations which by the terms of this Agreement are required
to be performed by it as a Lender Party.
(f) Upon its receipt of a Designation Agreement executed by a
designating Lender Party and a designee representing that it is a Designated
Lender, the Administrative Agent shall, if such Designation Agreement has been
completed and is substantially in the form of Exhibit D hereto, (i) accept such
Designation Agreement, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Borrower.
<PAGE>
83
(g) The Administrative Agent shall maintain at its address referred to
in Section 8.02 a copy of each Assignment and Acceptance and each Designation
Agreement delivered to and accepted by it and a register for the recordation of
the names and addresses of the Lender Parties and, with respect to Lenders other
than Designated Lenders, the Commitment of, and principal amount of the Advances
owing to, each Lender from time to time (the "Register"). The entries in the
Register shall be conclusive and binding for all purposes, absent manifest
error, and the Borrower, the Agents and the Lender Parties may treat each Person
whose name is recorded in the Register as a Lender Party hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Lender Party at any reasonable time and from time to time
upon reasonable prior notice.
(h) Each Lender Party may sell participations to one or more banks or
other entities in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment and the Advances owing to it); provided, however, that (i) such
Lender Party's obligations under this Agreement (including, without limitation,
its Commitment to the Borrower hereunder) shall remain unchanged, (ii) such
Lender Party shall remain solely responsible to the other parties hereto for the
performance of such obligations, (iii) such Lender Party shall remain the holder
of any Note issued to it for all purposes of this Agreement, (iv) the Borrower,
the Agents and the other Lender Parties shall continue to deal solely and
directly with such Lender Party in connection with such Lender Party's rights
and obligations under this Agreement and (v) no participant under any such
participation shall have any right to approve any amendment or waiver of any
provision of this Agreement or any Loan Document, or any consent to any
departure by any Loan Party therefrom, except to the extent that such amendment,
waiver or consent would (i) reduce the principal of, or interest on, the
Advances or any fees or other amounts payable hereunder, in each case to the
extent subject to such participation, (ii) postpone any date fixed for any
payment of principal of, or interest on, the Advances or any fees or other
amounts payable hereunder, in each case to the extent subject to such
participation or (iii) release any Material Guarantor.
(i) Any Lender Party may, in connection with any assignment,
designation or participation or proposed assignment, designation or
participation pursuant to this Section 8.07, disclose to the assignee, designee
or participant or proposed assignee, designee or participant, any information
relating to the Borrower furnished to such Lender Party by or on behalf of the
Borrower; provided that, prior to any such disclosure, the assignee, designee or
participant or proposed assignee, designee or participant shall agree to
preserve the confidentiality of any Confidential Information relating to the
Borrower received by it from such Lender Party.
(j) Each Issuing Bank may assign to one or more Eligible Assignees
all or a portion of its rights and obligations under the undrawn portion of its
Letter of Credit
<PAGE>
84
Commitment at any time; provided, however, that (i) except in the case of an
assignment to a Person that immediately prior to such assignment was an Issuing
Bank or an assignment of all of an Issuing Bank's rights and obligations under
this Agreement, the amount of the Letter of Credit Commitment of the assigning
Issuing Bank being assigned pursuant to each such assignment (determined as of
the date of the Assignment and Acceptance with respect to such assignment) shall
in no event be less than $10,000,000 and shall be in an integral multiple of
$1,000,000 in excess thereof, (ii) each such assignment shall be to an Eligible
Assignee and (iii) the parties to each such assignment shall execute and deliver
to the Agent, for its acceptance and recording in the Register, an Assignment
and Acceptance, together with a processing and recordation fee of $3,500.
(k) Notwithstanding any other provision set forth in this Agreement,
any Lender Party may (without the prior consent of the Borrower and the
Administrative Agent) at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and any Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
(l) Each of the Borrower, the Lenders and the Agents agrees that it
will not institute against any Designated Lender or join any other Person in
instituting against any Designated Lender any bankruptcy, reorganization,
arrangement, insolvency or liquidation proceeding under any federal or state
bankruptcy or similar law, for one year and one day after the payment in full of
the latest maturing commercial paper note issued by such Designated Lender.
Notwithstanding the foregoing, the Designating Lender unconditionally agrees to
indemnify the Borrower, the Agents and each Lender Party against all
liabilities, obligations, losses, damages, penalties, actions, judgments, suits,
costs, expenses or disbursements of any kind or nature whatsoever which may be
incurred by or asserted against the Borrower, such Agent or such Lender Party,
as the case may be, in any way relating to or arising as a consequence of any
such forbearance or delay in the initiation of any such proceeding against its
Designated Lender.
SECTION 8.08. Confidentiality. None of the Agents nor any Lender Party
shall disclose any Confidential Information to any other Person without the
consent of Group and the Borrower, other than (a) to such Agent's or such Lender
Party's Affiliates and their officers, directors, employees, agents and advisors
and, as contemplated by Section 8.07(i), to actual or prospective assignees and
participants, and then only on a confidential basis, (b) as required by any law,
rule or regulation or judicial process, (c) to any rating agency when required
by it, provided that, prior to any such disclosure, such rating agency shall
undertake to preserve the confidentiality of any Confidential Information
relating to Group or the Borrower received by it from such Lender Party and (d)
as requested or required by any state, federal or foreign authority or examiner
regulating banks or banking.
<PAGE>
85
SECTION 8.09. No Liability of the Issuing Banks. The Borrower assumes
all risks of the acts or omissions of any beneficiary or transferee of any
Letter of Credit with respect to its use of such Letter of Credit. Neither any
Issuing Bank nor any of its officers or directors shall be liable or responsible
for: (a) the use that may be made of any Letter of Credit or any acts or
omissions of any beneficiary or transferee in connection therewith; (b) the
validity, sufficiency or genuineness of documents, or of any endorsement
thereon, even if such documents should prove to be in any or all respects
invalid, insufficient, fraudulent or forged; (c) payment by such Issuing Bank
against presentation of documents that do not comply with the terms of a Letter
of Credit, including failure of any documents to bear any reference or adequate
reference to the Letter of Credit; or (d) any other circumstances whatsoever in
making or failing to make payment under any Letter of Credit, except that the
Borrower shall have a claim against such Issuing Bank, and such Issuing Bank
shall be liable to the Borrower, to the extent of any direct, but not
consequential, damages suffered by the Borrower that the Borrower proves were
caused by (i) such Issuing Bank's willful misconduct or gross negligence in
determining whether documents presented under any Letter of Credit comply with
the terms of the Letter of Credit or (ii) such Issuing Bank's willful failure to
make lawful payment under a Letter of Credit after the presentation to it of a
draft and certificates strictly complying with the terms and conditions of the
Letter of Credit. In furtherance and not in limitation of the foregoing, such
Issuing Bank may accept documents that appear on their face to be in order,
without responsibility for further investigation, regardless of any notice or
information to the contrary.
SECTION 8.10. 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 taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.11. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of New York.
SECTION 8.12. Jurisdiction, Etc. (a) Each of the parties hereto hereby
irrevocably and unconditionally submits, for itself and its property, to the
nonexclusive jurisdiction of any New York State court or federal court of the
United States of America sitting in New York City, and any appellate court from
any thereof, in any action or proceeding arising out of or relating to this
Agreement or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in any such
New York State court or, to the extent permitted by law, in such federal court.
Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that any party may
<PAGE>
86
otherwise have to bring any action or proceeding relating to this Agreement in
the courts of any jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally waives,
to the fullest extent it may legally and effectively do so, any objection that
it may now or hereafter have to the laying of venue of any suit, action or
proceeding arising out of or relating to this Agreement in any New York State or
federal court. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
SECTION 8.13. Release of Guarantors. By execution below, the Required
Lenders hereby agree that each of the Domestic Subsidiaries that are (a)
Guarantors (as defined in the Predecessor Credit Agreement) and (b) not Material
Subsidiaries, are hereby released from their obligations under the Subsidiary
Guaranty.
<PAGE>
[PAGE LEFT INTENTIONALLY BLANK]
<PAGE>
SECTION 8.14. Waiver of Jury Trial. Each of the Borrower, the Agents
and the Lender Parties hereby irrevocably waives all right to trial by jury in
any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the actions of any
Agent or any Lender Party in the negotiation, administration, performance or
enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
WARNACO INC.
By Carl J. Deddens
-------------------------------------------
Title: VICE PRESIDENT AND TREASURER
THE WARNACO GROUP, INC.
By Carl J. Deddens
-------------------------------------------
Title: VICE PRESIDENT AND TREASURER
THE BANK OF NOVA SCOTIA
Administrative Agent, Competitive Bid Agent,
Swing Line Bank and an Issuing Bank
By
-------------------------------------------
Title:
CITIBANK, N.A.
as Syndication Agent
By
-------------------------------------------
Title:
COMMERZBANK A.G.,
NEW YORK BRANCH
as Documentation Agent
By
-------------------------------------------
Title:
<PAGE>
SECTION 8.14. Waiver of Jury Trial. Each of the Borrower, the Agents
and the Lender Parties hereby irrevocably waives all right to trial by jury in
any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the actions of any
Agent or any Lender Party in the negotiation, administration, performance or
enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
WARNACO INC.
By
-------------------------------------------
Title:
THE WARNACO GROUP, INC.
By
-------------------------------------------
Title:
THE BANK OF NOVA SCOTIA
Administrative Agent, Competitive Bid
Agent, Swing Line Bank and an Issuing Bank
By [SIGNATURE ILLEGIBLE]
-------------------------------------------
Title:
CITIBANK, N.A.
as Syndication Agent
By
-------------------------------------------
Title:
COMMERZBANK A.G.,
NEW YORK BRANCH
as Documentation Agent
By
-------------------------------------------
Title:
<PAGE>
SECTION 8.14. Waiver of Jury Trial. Each of the Borrower, the Agents
and the Lender Parties hereby irrevocably waives all right to trial by jury in
any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the actions of any
Agent or any Lender Party in the negotiation, administration, performance or
enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
WARNACO INC.
By
-------------------------------------------
Title:
THE WARNACO GROUP, INC.
By
-------------------------------------------
Title:
THE BANK OF NOVA SCOTIA
Administrative Agent, Competitive Bid
Agent, Swing Line Bank and an Issuing Bank
By
-------------------------------------------
Title:
CITIBANK, N.A.
as Syndication Agent
By [SIGNATURE ILLEGIBLE]
-------------------------------------------
Title: [TITLE ILLEGIBLE]
COMMERZBANK A.G.,
NEW YORK BRANCH
as Documentation Agent
By
-------------------------------------------
Title:
<PAGE>
SECTION 8.14. Waiver of Jury Trial. Each of the Borrower, the Agents
and the Lender Parties hereby irrevocably waives all right to trial by jury in
any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the actions of any
Agent or any Lender Party in the negotiation, administration, performance or
enforcement thereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be executed by their respective officers thereunto duly authorized, as of the
date first above written.
WARNACO INC.
By:
-------------------------------------------
Title:
THE WARNACO GROUP, INC.
By:
-------------------------------------------
Title:
THE BANK OF NOVA SCOTIA
Administrative Agent, Competitive Bid Agent,
Swing Line Bank and an Issuing Bank
By:
-------------------------------------------
Title:
CITIBANK, N.A.
as Syndication Agent
By:
-------------------------------------------
Title:
COMMERZBANK A.G.,
New York and Grand Cayman Branches
As Documentation Agent
By: MARKUS TAPPE
-------------------------------------------
Name: MARKUS TAPPE
Title: VICE PRESIDENT
By: PETER DOYLE
-------------------------------------------
Name: PETER DOYLE
Title: ASSISTANT VICE PRESIDENT
<PAGE>
Initial Lenders
THE BANK OF NOVA SCOTIA
By [SIGNATURE ILLEGIBLE]
-------------------------------------------
Title:
CITIBANK, N.A.
By
-------------------------------------------
Title:
UNION BANK OF CALIFORNIA, N.A.
By
-------------------------------------------
Title:
THE BANK OF NEW YORK
By [SIGNATURE ILLEGIBLE]
-------------------------------------------
Title:
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By
-------------------------------------------
Title:
BANKBOSTON, N.A.
By
-------------------------------------------
Title:
<PAGE>
Initial Lenders
THE BANK OF NOVA SCOTIA
By
-------------------------------------------
Title:
CITIBANK, N.A.
By MARC MERLINO
-------------------------------------------
Title: MARC MERLINO-VP
UNION BANK OF CALIFORNIA, N.A.
By
-------------------------------------------
Title:
THE BANK OF NEW YORK
By
-------------------------------------------
Title:
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By
-------------------------------------------
Title:
BANKBOSTON, N.A.
By
-------------------------------------------
Title:
<PAGE>
Initial Lenders
THE BANK OF NOVA SCOTIA
By
-------------------------------------------
Title:
CITIBANK, N.A.
By
-------------------------------------------
Title:
UNION BANK OF CALIFORNIA, N.A.
By DAVID W. KINKOLA
-------------------------------------------
Name: DAVID W. KINKOLA
Title: VICE PRESIDENT
THE BANK OF NEW YORK
By
-------------------------------------------
Title:
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By
-------------------------------------------
Title:
BANKBOSTON, N.A.
By
-------------------------------------------
Title:
<PAGE>
Initial Lenders
THE BANK OF NOVA SCOTIA
By
-------------------------------------------
Title:
CITIBANK, N.A.
By
-------------------------------------------
Title:
UNION BANK OF CALIFORNIA, N.A.
By
-------------------------------------------
Title:
THE BANK OF NEW YORK
By [SIGNATURE ILLEGIBLE]
-------------------------------------------
Title: VICE PRESIDENT
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By
-------------------------------------------
Title:
BANKBOSTON, N.A.
By
-------------------------------------------
Title:
<PAGE>
Initial Lenders
THE BANK OF NOVA SCOTIA
By
-------------------------------------------
Title:
CITIBANK, N.A.
By
-------------------------------------------
Title:
UNION BANK OF CALIFORNIA, N.A.
By
-------------------------------------------
Title:
THE BANK OF NEW YORK
By
-------------------------------------------
Title:
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By N. SAFFRA
-------------------------------------------
Title: N. SAFFRA
VICE PRESIDENT
BANKBOSTON, N.A.
By
-------------------------------------------
Title:
<PAGE>
Initial Lenders
THE BANK OF NOVA SCOTIA
By
-------------------------------------------
Title:
CITIBANK, N.A.
By
-------------------------------------------
Title:
UNION BANK OF CALIFORNIA, N.A.
By
-------------------------------------------
Title:
THE BANK OF NEW YORK
By
-------------------------------------------
Title:
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By
-------------------------------------------
Title:
BANKBOSTON, N.A.
By [SIGNATURE ILLEGIBLE]
-------------------------------------------
Title: DIRECTOR
<PAGE>
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By [ILLEGIBLE SIGNATURE]
-------------------------------------
Title:
BANK OF AMERICA, N.A.
By
-------------------------------------
Title:
THE SANWA BANK, LIMITED,
NEW YORK BRANCH
By
-------------------------------------
Title:
SOCIETE GENERALE
By
-------------------------------------
Title:
WACHOVIA BANK, N.A.
By
-------------------------------------
Title:
FUJI BANK
By
-------------------------------------
Title:
<PAGE>
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By
-------------------------------------
Title:
BANK OF AMERICA, N.A.
By David H. Dinkins
-------------------------------------
Title: David H. Dinkins
Vice President
THE SANWA BANK, LIMITED,
NEW YORK BRANCH
By
-------------------------------------
Title:
SOCIETE GENERALE
By
-------------------------------------
Title:
WACHOVIA BANK, N.A.
By
-------------------------------------
Title:
FUJI BANK
By
-------------------------------------
Title:
<PAGE>
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By
-------------------------------------
Title:
BANK OF AMERICA, N.A.
By
-------------------------------------
Title:
THE SANWA BANK, LIMITED,
NEW YORK BRANCH
By
-------------------------------------
Title:
SOCIETE GENERALE
By Robert Petersen
-------------------------------------
Title: Robert Petersen
Vice President
WACHOVIA BANK, N.A.
By
-------------------------------------
Title:
FUJI BANK
By
-------------------------------------
Title:
<PAGE>
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By
-------------------------------------
Title:
BANK OF AMERICA, N.A.
By
-------------------------------------
Title:
THE SANWA BANK, LIMITED,
NEW YORK BRANCH
By
-------------------------------------
Title:
SOCIETE GENERALE
By
-------------------------------------
Title:
WACHOVIA BANK, N.A.
By [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: Senior Vice President
FUJI BANK
By
-------------------------------------
Title:
<PAGE>
COMMERZBANK AG
NEW YORK AND GRAND CAYMAN BRANCHES
By Markus Tappe
-------------------------------------
Name: Markus Tappe
Title: Vice President
By Peter Doyle
-------------------------------------
Name: Peter Doyle
Title: Assistant Vice President
UNICREDITO ITALIANO
By
-------------------------------------
Name:
Title:
By
-------------------------------------
Name:
Title:
DAI-ICHI KANGYO BANK, LIMITED
By
-------------------------------------
Name:
Title:
FIRST UNION NATIONAL BANK
By
-------------------------------------
Name:
Title:
FLEET BANK, N.A.
By
-------------------------------------
Name:
Title:
<PAGE>
COMMERZBANK AG
NEW YORK BRANCH
By
-------------------------------------
Title:
UNICREDITO ITALIANO
By Christopher J. Eldin
-------------------------------------
Title: Christopher J. Eldin
First Vice President &
Deputy Manager
By [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: First Vice President
DAI-ICHI KANGYO BANK, LIMITED
By
-------------------------------------
Title:
FIRST UNION NATIONAL BANK
By
-------------------------------------
Title:
FLEET BANK, N.A.
By
-------------------------------------
Title:
<PAGE>
COMMERZBANK AG
NEW YORK BRANCH
By
-------------------------------------
Title:
CREDITO ITALIANO
By
-------------------------------------
Title:
By
-------------------------------------
Title:
DAI-ICHI KANGYO BANK, LIMITED
By [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: Assistant Vice President
FIRST UNION NATIONAL BANK
By
-------------------------------------
Title:
FLEET BANK, N.A.
By
-------------------------------------
Title:
<PAGE>
COMMERZBANK AG
NEW YORK BRANCH
By
-------------------------------------
Title:
CREDITO ITALIANO
By
-------------------------------------
Title:
By
-------------------------------------
Title:
DAI-ICHI KANGYO BANK, LIMITED
By
-------------------------------------
Title:
FIRST UNION NATIONAL BANK
By [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: V.P.
FLEET BANK, N.A.
By
-------------------------------------
Title:
<PAGE>
COMMERZBANK AG
NEW YORK BRANCH
By
-------------------------------------
Title:
CREDITO ITALIANO
By
-------------------------------------
Title:
By
-------------------------------------
Title:
DAI-ICHI KANGYO BANK, LIMITED
By
-------------------------------------
Title:
FIRST UNION NATIONAL BANK
By
-------------------------------------
Title:
FLEET BANK, N.A.
By [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: S.V.P.
<PAGE>
THE INDUSTRIAL BANK OF JAPAN,
LTD., NEW YORK BRANCH
By J. Kenneth Biegen
-------------------------------------
Title: J. Kenneth Biegen
Senior Vice President
GENERAL ELECTRIC CAPITAL
CORPORATION
By
-------------------------------------
Title:
KREDIETBANK N.V.
By
-------------------------------------
Title:
MARINE MIDLAND BANK
By
-------------------------------------
Title:
MERITA BANK PLC - NEW YORK
BRANCH
By
-------------------------------------
Title:
By
-------------------------------------
Title:
<PAGE>
THE INDUSTRIAL BANK OF JAPAN,
LTD., NEW YORK BRANCH
By
-------------------------------------
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION
By [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: Duly Authorized Signatory
KREDIETBANK N.V.
By
-------------------------------------
Title:
MARINE MIDLAND BANK
By
-------------------------------------
Title:
MERITA BANK PLC - NEW YORK
BRANCH
By
-------------------------------------
Title:
By
-------------------------------------
Title:
<PAGE>
THE INDUSTRIAL BANK OF JAPAN,
LTD., NEW YORK BRANCH
By
-------------------------------------
Title:
GENERAL ELECTRIC CAPITAL
CORPORATION
By
-------------------------------------
Title:
KREDIETBANK N.V.
By
-------------------------------------
Title:
MARINE MIDLAND BANK
By
-------------------------------------
Title:
MERITA BANK PLC - NEW YORK
BRANCH
By [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: V.P.
By [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: S.V.P.
<PAGE>
KBC BANK NV
By Robert M. Surram, Jr.
-------------------------------------
Title: Robert M. Surram, Jr.
Vice President
By Robert Snauffer
-------------------------------------
Title: Robert Snauffer
First Vice President
<PAGE>
EXECUTION COPY
FIVE-YEAR CREDIT AGREEMENT
Dated as of November 17, 1999
Among
WARNACO INC.
as Borrower
and
THE WARNACO GROUP, INC.
and
THE INITIAL LENDERS NAMED HEREIN
as Initial Lenders
and
THE BANK OF NOVA SCOTIA AND SALOMON SMITH BARNEY INC.
as Co-Lead Arrangers and Co-Book Managers
and
CITIBANK, N.A.
as Syndication Agent
and
SOCIETE GENERALE AND COMMERZBANK AG
as Co-Documentation Agents
and
BANK OF AMERICA, N.A AND THE DAI-ICHI KANGYO BANK, LTD.
as Co-Agents
and
THE BANK OF NOVA SCOTIA
as Administrative Agent, Competitive Bid Agent,
and Swing Line Bank
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms.................................2
SECTION 1.02. Computation of Time Periods..........................24
SECTION 1.03. Accounting Terms.....................................24
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances.........................................26
SECTION 2.02. Making the Advances..................................26
SECTION 2.03. The Competitive Bid Advances
SECTION 2.04. Repayment of Advances................................34
SECTION 2.05. Termination or Reduction of the Commitments..........34
SECTION 2.06. Prepayments..........................................34
SECTION 2.07. Interest.............................................35
SECTION 2.08. Fees.................................................36
SECTION 2.09. Conversion of Advances...............................36
SECTION 2.10. Increased Costs, Etc.................................37
SECTION 2.11. Illegality...........................................38
SECTION 2.12. Payments and Computations............................39
SECTION 2.13. Taxes................................................40
SECTION 2.14. Sharing of Payments, Etc.............................43
SECTION 2.15. Use of Proceeds......................................43
SECTION 2.16. Defaulting Lenders...................................43
SECTION 2.17. Evidence of Debt.....................................46
SECTION 2.18. Increase in Revolving Credit Commitments.............46
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness................47
SECTION 3.02. Conditions Precedent to Each Borrowing...............49
SECTION 3.03. Determinations Under Section 3.01....................50
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower.......50
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants................................53
SECTION 5.02. Negative Covenants...................................57
SECTION 5.03. Financial Covenants..................................60
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default....................................61
ARTICLE VII
THE AGENTS
SECTION 7.01. Authorization and Action.............................64
SECTION 7.02. Agents' Reliance, Etc................................64
SECTION 7.03. Scotiabank, Citibank, SocGen, Commerzbank,
Bank of America, DKB and Affiliates..................64
SECTION 7.04. Lender Credit Decision...............................65
SECTION 7.05. Indemnification......................................65
SECTION 7.06. Successor Agents.....................................66
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc......................................66
SECTION 8.02. Notices, Etc.........................................67
SECTION 8.03. No Waiver; Remedies..................................67
SECTION 8.04. Costs and Expenses...................................67
SECTION 8.05. Right of Set-off.....................................69
SECTION 8.06. Binding Effect.......................................70
SECTION 8.07. Assignments, Designations and Participations.........70
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C>
SECTION 8.08. Confidentiality......................................75
SECTION 8.09. Execution in Counterparts............................75
SECTION 8.10. Governing Law........................................75
SECTION 8.11. Jurisdiction, Etc....................................75
SECTION 8.12. Waiver of Jury Trial.................................76
SCHEDULES
Schedule I - List of Commitments and Applicable Lending Offices
Schedule II - Existing Debt
Schedule 4.01(b) - Subsidiaries
Schedule 4.01(g) - Disclosed Litigation
Schedule 5.02(d) - Assets Held For Sale
EXHIBITS
Exhibit A-1 Form of Revolving Credit Note
Exhibit A-2 - Form of Competitive Bid Note
Exhibit B-1 - Form of Notice of Borrowing
Exhibit B-2 - Form of Notice of Competitive Bid Borrowing
Exhibit C - Form of Assignment and Acceptance
Exhibit D - Form of Designation Agreement
Exhibit E-1 - Form of Opinion of Skadden, Arps, Slate, Meagher &
Flom LLP, special counsel for the Loan Parties
Exhibit E-2 - Form of Opinion of Stanley P. Silverstein, General
Counsel for the Borrower
Exhibit F - Form of Group Guaranty
Exhibit G - Form of Subsidiary Guaranty
Exhibit H - From of Assumption Agreement
</TABLE>
<PAGE>
FIVE-YEAR CREDIT AGREEMENT
Dated as of November 17, 1999
WARNACO INC., a Delaware corporation (together with any
successors-in-interest permitted hereunder, (the "Borrower"), THE WARNACO GROUP,
INC., a Delaware corporation (together with any successors-in-interest permitted
hereunder, "Group"), the banks, financial institutions and other institutional
lenders (the "Initial Lenders") listed on the signature pages hereof, THE BANK
OF NOVA SCOTIA ("Scotiabank") and SALOMON SMITH BARNEY, INC. ("SSB"), as co-lead
arrangers and co-book managers (the "Arrangers"), CITIBANK, N.A. ("Citibank"),
as syndication agent (the "Syndication Agent") for the Lenders (as hereinafter
defined), SOCIETE GENERALE ("SocGen") and COMMERZBANK AG ("Commerzbank"), as
co-documentation agents (the "Documentation Agents") for the Lenders, BANK OF
AMERICA N.A. ("Bank of America") and THE DAI-ICHI KANGYO BANK, LTD. ("DKB"), as
co-agents (the "Co-Agents"), and Scotiabank, as administrative agent (the
"Administrative Agent") and competitive bid agent (the "Competitive Bid Agent")
for the Lenders and as a Swing Line Bank hereunder, agree as follows:
PRELIMINARY STATEMENTS
(1) The Borrower or a single-purpose wholly owned subsidiary
of the Borrower (the "Purchaser") will either (a) offer to acquire a controlling
interest in Authentic Fitness Corporation, a Delaware corporation ("Authentic
Fitness"), through a tender offer (the "Tender Offer") for all of Authentic
Fitness's outstanding common stock (the "Authentic Fitness Stock"), but in any
event for not less than sufficient shares of Authentic Fitness's stock to enable
the Purchaser, voting without any other shareholders of Authentic Fitness, to
approve a merger of the Purchaser with Authentic Fitness and as promptly as
practicable after the closing of the Tender Offer, the Purchaser, if a
single-purpose wholly owned Subsidiary of the Borrower, will consummate a merger
with Authentic Fitness in which Authentic Fitness will be the surviving
corporation or (b) agree to merge with Authentic Fitness in which Authentic
Fitness will be the surviving corporation (such merger described in either
clause (a) or (b) above between the Purchaser and Authentic Fitness being the
"Merger"and the surviving corporation of each such merger being the "Surviving
Corporation").
(2) The Borrower has requested that the Initial Lenders lend
to the Borrower up to $450,000,000 under this Agreement to pay transaction fees
and expenses, pay severance and other reorganization expenses in connection with
the acquisition of Authentic Fitness and for general corporate purposes (other
than for the purpose of paying the holders of Authentic Fitness Stock the cash
consideration for their shares in the Tender Offer or the subsequent Merger).
The Initial
<PAGE>
2
Lenders have indicated their willingness to agree to lend such amounts on the
terms and conditions of this Agreement.
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.01. Certain Defined Terms. As used in this
Agreement, 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):
"Administrative Agent" has the meaning specified in the
recital of parties to this Agreement.
"Administrative Agent's Account" means the account of the
Administrative Agent maintained by the Administrative Agent with
Scotiabank at its office at One Liberty Plaza, New York, New York
10006, Special Management Account No. 0608335, Reference: Warnaco New
Five Year Revolver.
"Advance" means a Revolving Credit Advance, a Competitive Bid
Advance or a Swing Line Advance.
"Affiliate" means, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by or is under common
control with such Person or is a director or officer of such Person.
For purposes of this definition, the term "control" (including the
terms "controlling", "controlled by" and "under common control with")
of a Person means the possession, direct or indirect, of the power to
vote 10% or more of the Voting Stock of such Person or to direct or
cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or
otherwise.
"Agents" means each of the Syndication Agent, each
Documentation Agent, each Co-Agent, the Administrative Agent and the
Competitive Bid Agent, together, in each case, with any successor or
successors of any thereof appointed pursuant to Article VII hereof.
"Applicable Lending Office" means, with respect to each
Lender, such Lender's Domestic Lending Office in the case of a Base
Rate Advance and such Lender's Eurodollar Lending Office in the case of
a Eurodollar Rate Advance and, in the case of a Competitive Bid
Advance, the office of such Lender notified by such Lender to the
Competitive Bid Agent as its Applicable Lending Office with respect to
such Competitive Bid Advance.
<PAGE>
3
"Applicable Margin" means, as of any date, a percentage per
annum determined by reference to the Debt Rating in effect on such date
as set forth below:
<TABLE>
<CAPTION>
Rating Debt Base Rate Eurodollar
Level Rating Advances Rate Advances
<S> <C> <C> <C>
- ---------------------------------------------------------------------------
Level 1 A- or A3 or 0.000% 0.500%
higher
- ---------------------------------------------------------------------------
Level 2 BBB+ or Baa1 0.000% 0.575%
- ---------------------------------------------------------------------------
Level 3 BBB or Baa2 0.000% 0.775%
- ---------------------------------------------------------------------------
Level 4 BBB- or Baa3 0.000% 0.950%
- ---------------------------------------------------------------------------
Level 5 BB+ or Ba1 0.500% 1.125%
- ---------------------------------------------------------------------------
Level 6 Lower than 0.750% 1.250%
Level 5 or
unrated
</TABLE>
"Applicable Percentage" means, as of any date, a percentage
per annum determined by reference to the Debt Rating in effect on such
date as set forth below:
<PAGE>
4
<TABLE>
<CAPTION>
Rating Debt Applicable
Level Rating Percentage
<S> <C> <C>
- ----------------------------------------------------------------------
Level 1 A- or A3 or higher 0.125%
- ----------------------------------------------------------------------
Level 2 BBB+ or Baa1 0.175%
- ----------------------------------------------------------------------
Level 3 BBB or Baa2 0.225%
- ----------------------------------------------------------------------
Level 4 BBB- or Baa3 0.300%
- ----------------------------------------------------------------------
Level 5 BB+ or Ba1 0.375%
- ----------------------------------------------------------------------
Level 6 Lower than Level 0.500%
5 or unrated
</TABLE>
"Applicable Utilization Percentage" means, as of any date that
the aggregate Advances exceed 33 1/3% of the aggregate Commitments, a
percentage per annum determined by reference to the Debt Rating in
effect on such date as set forth below:
<TABLE>
<CAPTION>
Rating Level Debt Rating Applicable Utilization
Percentage
<S> <C> <C>
- -----------------------------------------------------------------------------
Level 1 A- or A3 or higher 0.125%
- -----------------------------------------------------------------------------
Level 2 BBB+ or Baa1 0.125%
- -----------------------------------------------------------------------------
Level 3 BBB or Baa2 0.250%
- -----------------------------------------------------------------------------
Level 4 BBB- or Baa3 0.250%
- -----------------------------------------------------------------------------
Level 5 BB+ or Ba1 0.250%
- -----------------------------------------------------------------------------
Level 6 Lower than Level 5 0.250%
or unrated
</TABLE>
"Approved Accounting Firm" means Arthur Andersen LLP, Deloitte
& Touche LLP, Ernst & Young LLP, PricewaterhouseCoopers LLP or KPMG
Peat Marwick LLP, or any successor thereof.
"Arrangers" has the meaning specified in the recital of
parties to this Agreement.
<PAGE>
5
"Assignment and Acceptance" means an assignment and acceptance
entered into by a Lender and an Eligible Assignee, and accepted by the
Administrative Agent, in accordance with Section 8.07 and in
substantially the form of Exhibit C hereto.
"Assumption Agreement" means an agreement entered into by a
party in order to become a Lender hereunder pursuant to Section 2.18,
in substantially the form of Exhibit H hereto.
"Authentic Fitness" has the meaning set forth in the
Preliminary Statements.
"Authentic Fitness Stock" has the meaning set forth in the
Preliminary Statements.
"Bank of America" has the meaning specified in the recital of
the parties to this Agreement.
"Base Rate" means a fluctuating interest rate per annum in
effect from time to time, which rate per annum shall at all times be
equal to the highest of:
(a) the rate of interest established by the
Administrative Agent, from time to time, at its Domestic
Lending Office as its base rate for loans in United States
dollars;
(b) 1/2 of one percent per annum above the Federal
Funds Rate; and
(c) for the period from December 15, 1999 through
January 15, 2000, 2 percent per annum above the Federal Funds
Rate.
"Base Rate Advance" means an Advance that bears interest as
provided in Section 2.07(a)(i).
"Borrower" has the meaning specified in the recital of parties
to this Agreement.
"Borrower's Account" means the account of the Borrower
maintained by the Borrower with Citibank at its office at 399 Park
Avenue, New York, New York 10043, Account No. 3846-9269.
"Borrowing" means a Revolving Credit Borrowing, a Competitive
Bid Borrowing or a Swing Line Borrowing.
"Business Day" means a day of the year on which banks are not
required or authorized by law to close in New York City and, if the
applicable Business Day relates to
<PAGE>
6
any Eurodollar Rate Advances, on which dealings are carried on in the
London interbank market.
"Capitalized Leases" has the meaning specified in clause (e)
of the definition of "Debt".
"Citibank" has the meaning specified in the recital of parties
to this Agreement.
"Co-Agents" has the meaning specified in the recital of the
parties to this Agreement.
"Commitment" means, with respect to any Lender at any time,
(a) the amount set forth opposite such Lender's name on Schedule I
hereto under the caption "Revolving Credit Commitment", (b) if such
Lender has entered into one or more Assignments and Acceptances, the
amount set forth for such Lender in the Register maintained by the
Administrative Agent pursuant to Section 8.07(c) as such Lender's
"Revolving Credit Commitment", as such amount may be reduced at or
prior to such time pursuant to Section 2.05 or (c) if such Lender has
entered into an Assumption Agreement, the amount set forth for such
Lender in such Assumption Agreement.
"Competitive Bid Advance" means an advance by a Lender to the
Borrower as part of a Competitive Bid Borrowing resulting from the
competitive bidding procedure described in Section 2.03 and refers to a
Fixed Rate Advance or a LIBO Rate Advance.
"Competitive Bid Agent" has the meaning specified in the
recital of parties to this Agreement.
"Competitive Bid Agent's Account" means the account of the
Competitive Bid Agent maintained by the Competitive Bid Agent with
Scotiabank at its office at One Liberty Plaza, New York, New York
10006, Special Management Account No. 0608335, Reference: Warnaco New
Five Year Revolver.
"Competitive Bid Borrowing" means a borrowing consisting of
simultaneous Competitive Bid Advances from each of the Lenders whose
offer to make one or more Competitive Bid Advances as part of such
borrowing has been accepted under the competitive bidding procedure
described in Section 2.03.
"Competitive Bid Note" means a promissory note of the Borrower
payable to the order of any Lender, in substantially the form of
Exhibit A-2 hereto, evidencing the indebtedness of the Borrower to such
Lender resulting from a Competitive Bid Advance made by such Lender.
<PAGE>
7
"Confidential Information" means any information, whether
written or oral that the Borrower or Group furnishes to any Agent or
Lender which is designated as confidential or which could reasonably be
expected by such Agent or Lender to be confidential, provided, that for
purposes of this definition, unless otherwise specified by the Borrower
or Group, the term "Confidential Information" will include, without
limitation, any information furnished by the Borrower or Group
regarding proposed acquisitions (including, without limitation, the
acquisition of Authentic Fitness) and new product launches by Group or
its Subsidiaries, and provided, further, that the term "Confidential
Information" does not include any information that is or becomes
generally available to the public or that is or becomes available to
such Agent or Lender from a source other than the Borrower or Group.
"Consolidated" refers to the consolidation of accounts in
accordance with GAAP.
"Control Date" means the date on which Persons designated or
approved by Group constitute a majority of the Board of Directors of
Authentic Fitness.
"Convert", "Conversion" and "Converted" each refers to a
conversion of Advances of one Type into Advances of the other Type
pursuant to Section 2.09, 2.10 or 2.11.
"Currency Hedge Agreements" means currency swap agreements,
currency future or option contracts and other similar agreements.
"Debt" of any Person means, without duplication, the
following:
(a) all indebtedness of such Person for borrowed
money,
(b) all Obligations of such Person for the deferred
purchase price of property or services (other than trade
payables not overdue by more than 90 days incurred in the
ordinary course of such Person's business), including, without
limitation, the Trade Credit Facility,
(c) all Obligations of such Person evidenced by
notes, bonds, debentures or other similar instruments,
(d) all Obligations of such Person created or arising
under any conditional sale or other title retention agreement
with respect to property acquired by such Person (even though
the rights and remedies of the seller or lender under such
agreement in the event of default are limited to repossession
or sale of such property),
<PAGE>
8
(e) all Obligations of such Person as lessee under
leases that have been or should be, in accordance with GAAP,
recorded as capital leases ("Capitalized Leases"),
(f) all Obligations, contingent or otherwise, of such
Person under acceptance, letter of credit or similar
facilities,
(g) all Obligations of such Person to purchase,
redeem, retire, defease or otherwise make any payment in
respect of any capital stock of or other ownership or profit
interest in such Person or any other Person or any warrants,
rights or options to acquire such capital stock, valued, in
the case of Redeemable preferred stock, at the greater of its
voluntary or involuntary liquidation preference plus accrued
and unpaid dividends,
(h) all Obligations of such Person in respect of
Hedge Agreements,
(i) all Debt of others of the kinds referred to in
clauses (a) through (h) above guaranteed directly or
indirectly in any manner by such Person, or in effect
guaranteed directly or indirectly by such Person through an
agreement (A) to pay or purchase such Debt or to advance or
supply funds for the payment or purchase of such Debt, (B) to
purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of
enabling the debtor to make payment of such Debt or to assure
the holder of such Debt against loss, (C) to supply funds to
or in any other manner invest in the debtor (including any
agreement to pay for property or services irrespective of
whether such property is received or such services are
rendered) or (D) otherwise to assure a creditor against loss,
and
(j) all Debt referred to in clauses (a) through (h)
above secured by (or for which the holder of such Debt has an
existing right, contingent or otherwise, to be secured by) any
Lien on property (including, without limitation, accounts and
contract rights) owned by such Person, even though such Person
has not assumed or become liable for the payment of such Debt.
"Debt Rating" means, as of any date, the higher of the ratings
that have been most recently announced by S&P and Moody's for any class
of non-credit enhanced long-term senior unsecured debt issued by Group
in effect on such date, provided that if neither S&P nor Moody's shall
have in effect such a rating, the Applicable Margin, the Applicable
Percentage and the Applicable Utilization Percentage will be set in
accordance with Rating Level 6 under the definition of "Applicable
Margin", "Applicable Percentage" or "Applicable Utilization
Percentage", as the case may be. For purposes of the foregoing, (a) if
only one of S&P and Moody's shall have in effect a Debt Rating, the
Applicable Margin, the
<PAGE>
9
Applicable Percentage and the Applicable Utilization Percentage shall
be determined by reference to the available rating; (b) if the ratings
established by S&P and Moody's shall fall within different levels
separated by two or more levels, the Applicable Margin, the Applicable
Percentage and the Applicable Utilization Percentage shall be based
upon the level that is one level above the lower rating; (c) if any
rating established by S&P or Moody's shall be changed, such change
shall be effective as of the date on which such change is reported to
Group; and (d) if S&P or Moody's shall change the basis on which
ratings are established, each reference to the Debt Rating announced by
S&P or Moody's, as the case may be, shall refer to the then equivalent
rating by S&P or Moody's, as the case may be.
"Default" means any Event of Default or any event that would
constitute an Event of Default but for the requirement that notice be
given or time elapse or both.
"Defaulted Advance" means, with respect to any Lender at any
time, the amount of any Advance required to be made by such Lender to
the Borrower or for the account of the Borrower pursuant to Section
2.01 at or prior to such time which has not been so made as of such
time; provided, however, any Advance made by the Administrative Agent
for the account of such Lender pursuant to Section 2.02(e) shall not be
considered a Defaulted Advance even if, at such time, such Lender shall
not have reimbursed the Administrative Agent therefor as provided in
Section 2.02(e). In the event that a portion of a Defaulted Advance
shall be deemed made pursuant to Section 2.16(a), the remaining portion
of such Defaulted Advance shall be considered a Defaulted Advance
originally required to be made pursuant to Section 2.01 on the same
date as the Defaulted Advance so deemed made in part.
"Defaulted Amount" means, with respect to any Lender at any
time, any amount required to be paid by such Lender to any Agent or any
other Lender hereunder or under any other Loan Document at or prior to
such time which has not been so paid as of such time, including,
without limitation, any amount required to be paid by such Lender to
(a) the Swing Line Bank pursuant to Section 2.02(b) to purchase a
portion of a Swing Line Advance made by the Swing Line Bank, (b) the
Administrative Agent pursuant to Section 2.02(e) to reimburse the
Administrative Agent for the amount of any Advance made by the
Administrative Agent for the account of such Lender, (c) any other
Lender pursuant to Section 2.15 to purchase any participation in
Advances owing to such other Lender and (d) any Agent pursuant to
Section 7.05 to reimburse such Agent for such Lender's ratable share of
any amount required to be paid by the Lenders to such Agent as provided
therein. In the event that a portion of a Defaulted Amount shall be
deemed paid pursuant to Section 2.16(b), the remaining portion of such
Defaulted Amount shall be considered a Defaulted Amount originally
required to be made hereunder or under any other Loan Document on the
same date as the Defaulted Amount so deemed paid in part.
<PAGE>
10
"Defaulting Lender" means, at any time, any Lender that, at
such time, (a) owes a Defaulted Advance or a Defaulted Amount or (b)
shall take or be the subject of any action or proceeding of a type
described in Section 6.01(e).
"Designated Lender" means each special purpose corporation
that (i) shall have been designated by a Designating Lender and shall
have become a party to this Agreement, all pursuant to Section 8.07(d),
and (ii) is not otherwise a Lender.
"Designating Lender" shall mean each Lender that is a party
hereto (other than by virtue of a Designation Agreement) that shall
designate a Designated Lender pursuant to a Designation Agreement in
accordance with Section 8.07(d).
"Designation Agreement" means a designation agreement entered
into by a Designating Lender and a Designated Lender, and accepted by
the Administrative Agent, in substantially the form of Exhibit D
hereto.
"Designer Holdings" means Designer Holdings Ltd., a Delaware
corporation, together with its successors.
"DKB" has the meaning specified in the recital of the parties
to this Agreement.
"Documentation Agents" has the meaning specified in the
recital of parties to this Agreement.
"Domestic Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Domestic Lending Office"
opposite its name on Schedule I hereto, in the Assignment and
Acceptance pursuant to which it became a Lender or in the Assumption
Agreement pursuant to which it became a Lender, or such other office of
such Lender as such Lender may from time to time specify to the
Borrower and the Administrative Agent.
"Domestic Subsidiary" means any Subsidiary of Group organized
under the laws of the United States or any state thereof.
"EBITDA" means, for any period, net income (or net loss) from
operations (determined without giving effect to extraordinary or
non-recurring gains or losses) plus, to the extent deducted in
calculating such net income (loss), the sum of (a) Interest Expense,
(b) income tax expense, (c) depreciation expense, (d) amortization
expense and (e) minority interests in Authentic Fitness during the
period commencing on the date the Tender Offer, if any, is consummated
and ending on the date of the Merger less dividends paid to the
minority interests in respect thereof, in each case determined in
accordance with GAAP and,
<PAGE>
11
on a pro forma basis, as if any acquisitions consummated after the
first day of the applicable testing period occurred on the first day of
such period.
"Effective Date" means the first date on which the conditions
specified in Section 3.01 have been satisfied.
"Eligible Assignee" means any Person approved by the
Administrative Agent and the Borrower, such approval not to be
unreasonably withheld; provided, however, that neither the Borrower nor
an Affiliate of the Borrower shall qualify as an Eligible Assignee.
"Environmental Action" means any administrative, regulatory or
judicial action, suit, demand, demand letter, claim, notice of
non-compliance or violation, notice of liability or potential
liability, investigation, proceeding, consent order or consent
agreement relating in any way to any Environmental Law, Environmental
Permit or Hazardous Materials or arising from alleged injury or threat
of injury to health, safety or the environment, including, without
limitation, (a) by any governmental or regulatory authority for
enforcement, cleanup, removal, response, remedial or other actions or
damages and (b) by any governmental or regulatory authority or any
third party for damages, contribution, indemnification, cost recovery,
compensation or injunctive relief.
"Environmental Law" means any federal, state, local or foreign
statute, law, ordinance, rule, regulation, code, order, judgment or
decree relating to the environment, health, safety or Hazardous
Materials.
"Environmental Permit" means any permit, approval,
identification number, license or other authorization required under
any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"ERISA Affiliate" means any Person that for purposes of Title
IV of ERISA is a member of the Borrower's controlled group, or under
common control with the Borrower, within the meaning of Section 414 of
the Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable
event, within the meaning of Section 4043 of ERISA, with respect to any
Plan unless the 30-day notice requirement with respect to such event
has been waived by the PBGC, or (ii) the requirements of subsection (1)
of Section 4043(b) of ERISA (without regard to subsection (2) of such
Section) are met with respect to a contributing sponsor, as defined in
Section 4001(a)(13) of ERISA, of a Plan, and an event described in
paragraph (9), (10), (11), (12) or (13) of Section 4043(c) of ERISA is
reasonably expected to occur with respect to such Plan within the
<PAGE>
12
following 30 days; (b) the application for a minimum funding waiver
with respect to a Plan; (c) the provision by the administrator of any
Plan of a notice of intent to terminate such Plan pursuant to Section
4041(a)(2) of ERISA (including any such notice with respect to a plan
amendment referred to in Section 4041(e) of ERISA); (d) the cessation
of operations at a facility of the Borrower or any of its ERISA
Affiliates in the circumstances described in Section 4062(e) of ERISA;
(e) the withdrawal by the Borrower or any of its ERISA Affiliates from
a Multiple Employer Plan during a plan year for which it was a
substantial employer, as defined in Section 4001(a)(2) of ERISA; (f)
the failure by the Borrower or any of its ERISA Affiliates to make a
payment to a Plan if the conditions for the imposition of a lien under
Section 302(f)(1) of ERISA are satisfied; (g) the adoption of an
amendment to a Plan requiring the provision of security to such Plan,
pursuant to Section 307 of ERISA; or (h) the institution by the PBGC of
proceedings to terminate a Plan, pursuant to Section 4042 of ERISA, or
the occurrence of any event or condition described in Section 4042 of
ERISA that could constitute grounds for the termination of, or the
appointment of a trustee to administer, a Plan.
"Eurocurrency Liabilities" has the meaning assigned to that
term in Regulation D of the Board of Governors of the Federal Reserve
System, as in effect from time to time.
"Eurodollar Lending Office" means, with respect to any Lender,
the office of such Lender specified as its "Eurodollar Lending Office"
opposite its name on Schedule I hereto, in the Assignment and
Acceptance pursuant to which it became a Lender (or, if no such office
is specified, its Domestic Lending Office) or in the Assumption
Agreement pursuant to which it became a Lender, or such other office of
such Lender as such Lender may from time to time specify to the
Borrower and the Administrative Agent.
"Eurodollar Rate" means, for any Interest Period for all
Eurodollar Rate Advances comprising part of the same Borrowing, an
interest rate per annum equal to the rate per annum obtained by
dividing (a) the rate per annum (rounded upward to the nearest whole
multiple of 1/16 of 1% per annum) appearing on Dow Jones Markets
Telerate Page 3750 (or any successor page) as the London interbank
offered rate for deposits in U.S. dollars at approximately 11:00 A.M.
(London time) two Business Days prior to the first day of such Interest
Period for a term comparable to such Interest Period or, if for any
reason such rate is not available, the rate at which deposits in U.S.
dollars are offered by the principal office of the Administrative Agent
in London, England to prime banks in the London interbank market at
11:00 A.M. (London time) two Business Days before the first day of such
Interest Period in an amount substantially equal to the Administrative
Agent's Eurodollar Rate Advance comprising part of such Borrowing to be
outstanding during such Interest Period and for a period equal to such
Interest Period by (b) a percentage equal to 100% minus the Eurodollar
Rate Reserve Percentage for such Interest Period.
<PAGE>
13
"Eurodollar Rate Advance" means an Advance that bears interest
as provided in Section 2.07(a)(ii).
"Eurodollar Rate Reserve Percentage" for any Interest Period
for all Eurodollar Rate Advances or LIBO Rate Advances comprising part
of the same Borrowing means the reserve percentage applicable two
Business Days before the first day of such Interest Period under
regulations issued from time to time by the Board of Governors of the
Federal Reserve System (or any successor) for determining the maximum
reserve requirement (including, without limitation, any emergency,
supplemental or other marginal reserve requirement) for a member bank
of the Federal Reserve System in New York City with respect to
liabilities or assets consisting of or including Eurocurrency
Liabilities (or with respect to any other category of liabilities that
includes deposits by reference to which the interest rate on Eurodollar
Rate Advances or LIBO Rate Advances is determined) having a term equal
to such Interest Period.
"Events of Default" has the meaning specified in Section 6.01.
"Excluded Person" means (i) Linda J. Wachner or (ii) any trust
of which Linda J. Wachner is the sole trustee or is a trustee with
effective control over the voting stock held by such trust or over the
management or policies of Group (or, in case of her death or
disability, another trustee of comparable experience and ability
selected by the Borrower within 180 days thereafter after consultation
with the Administrative Agent).
"Excluded Subsidiary" means, provided that the terms of the
Trust Stock preclude the issuance of a guaranty, the Trust, provided
that neither Group nor the Borrower nor any of their Subsidiaries shall
make any additional Investments in the Trust other than those
Investments which existed on the date of the Five Year Waiver and those
Investments necessary to pay its normal operating expenses in the
ordinary course of business.
"Excluded Taxes" means, in the case of each Lender, franchise
taxes and taxes upon or determined by reference to such Lender's net
income (including, without limitation, branch profit taxes), in each
case imposed by the United States or any political subdivision or
taxing authority thereof or therein or by any jurisdiction in which
such Lender has its Applicable Lending Office, is resident or in which
such Lender is organized or has its principal or registered office and,
in the case of each Agent, franchise taxes and net income taxes upon or
determined by reference to such Agent's net income (including, without
limitation, branch profits taxes) imposed by the United States or by
the state or foreign jurisdiction under the laws of which such Agent is
organized (or by any political subdivision of such state or foreign
jurisdiction), is resident or has its principal or registered office.
"Existing Debt" means the Debt described in Schedule II
hereto.
<PAGE>
14
"Existing Five Year Credit Agreement" means the Credit
Agreement dated as of August 12, 1997 as amended and restated by the
Amended and Restated Credit Agreement dated as of November 17, 1999
among the Borrower, the lenders party thereto, Scotiabank and SSB, as
co-lead arrangers and co-book managers, Citibank, as Syndication Agent,
Commerzbank, as documentation agent, and Scotiabank, as administrative
agent, competitive bid agent, swing line bank and an issuing bank, as
such agreement may be amended, modified, extended, renewed, refinanced,
replaced or otherwise supplemented through the date hereof and from
time to time.
"Existing 364 Day Credit Agreement" means the Credit Agreement
dated as of November 26, 1997 as amended through the date hereof among
the Borrower, the lenders party thereto, Scotiabank, Citibank and
Commerzbank as managing agents, Commerzbank as documentation agent,
Scotiabank as Administrative Agent and Citibank as syndication agent.
"Facility" means the Revolving Credit Facility and the Swing
Line Facility.
"Federal Funds Rate" means, for any period, a fluctuating
interest rate per annum equal for each day during such period to the
weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds
brokers, as published for such day (or, if such day is not a Business
Day, for the next preceding Business Day) by the Federal Reserve Bank
of New York, or, if such rate is not so published for any day that is a
Business Day, the average of the quotations for such day on such
transactions received by the Administrative Agent from three Federal
funds brokers of recognized standing selected by it.
"Fiscal Quarter" means a fiscal quarter of Group and its
Consolidated Subsidiaries ending on or about March 31, June 30,
September 30 or December 31 of each year.
"Fiscal Year" means a fiscal year of Group and its
Consolidated Subsidiaries ending on or about December 31 of each year.
"Five Year Waiver" means the Letter Waiver dated as of October
14, 1997 to the Existing Five Year Credit Agreement.
"Fixed Rate Advances" has the meaning specified in Section
2.03(a)(i).
"GAAP" has the meaning specified in Section 1.03.
"Group" has the meaning specified in the recital of parties to
this Agreement.
<PAGE>
15
"Group Guaranty" has the meaning specified in Section
3.01(i)(i).
"Guaranties" means the Group Guaranty and the Subsidiary
Guaranty.
"Guarantors" means Group and each of its Domestic Subsidiaries
that are Material Subsidiaries (other than the Borrower and each
Excluded Subsidiary) and each other Subsidiary which is required to
guarantee the Borrower's Obligations under the Loan Documents pursuant
to Section 5.01(j).
"Hazardous Materials" means petroleum and petroleum products,
byproducts or breakdown products, radioactive materials,
asbestos-containing materials, radon gas and any other chemicals,
materials or substances designated, classified or regulated as being
"hazardous" or "toxic", or words of similar import, under any
Environmental Law.
"Hedge Agreements" means Currency Hedge Agreements and
Interest Rate Hedge Agreements.
"Indebtedness for Borrowed Money" of any Person means all Debt
of such Person for borrowed money or evidenced by notes, bonds,
debentures or other similar instruments (other than Trust Stock in a
face amount of not more than $120,000,000), all Obligations of such
Person for the deferred purchase price of any property, service or
business (other than trade accounts payable (including the Trade Credit
Facility and other similar financing arrangements to the extent that
the aggregate principal amount of Debt, including loans, acceptances
and letters of credit thereunder, does not exceed $550,000,000 (it
being understood and agreed that to the extent that the principal
amount of Debt under the Trade Credit Facility and other similar
financing arrangements exceeds $550,000,000, a pro-rata portion of such
excess (calculated by reference to the relative amount of loans
constituting such Debt) shall be included in this definition of
"Indebtedness for Borrowed Money")) incurred in the ordinary course of
business and constituting current liabilities), and all Obligations of
such Person under Capitalized Leases (limited in each case to the
principal amount thereof).
"Indemnified Party" has the meaning specified in Section
8.04(b).
"Initial Lenders" has the meaning specified in the recital of
parties to this Agreement.
"Insufficiency" means, with respect to any Plan, the amount,
if any, of its unfunded benefit liabilities, as defined in Section
4001(a)(18) of ERISA.
"Interest Expense" means, with respect to any Person for any
period of measurement, the excess, if any, of (i) interest expense
(whether cash or accretion) of such Person during
<PAGE>
16
such period determined in accordance with GAAP, and shall include in
any event, without limitation, interest expense with respect to
Indebtedness for Borrowed Money, the Trade Credit Facility and payments
under Interest Rate Hedge Agreements over (ii) interest income of such
Person for such period, including payments received under Interest Rate
Hedge Agreements; provided, however, that interest expense for any
acquired entity, including Authentic Fitness, for any period beginning
prior to the acquisition date shall be such entity's actual interest
expense for such period.
"Interest Period" means, for each Eurodollar Rate Advance
comprising part of the same Revolving Credit Borrowing and each LIBO
Rate Advance comprising part of the same Competitive Bid Borrowing, the
period commencing on the date of such Eurodollar Rate Advance or LIBO
Rate Advance or the date of the Conversion of any Base Rate Advance
into such Eurodollar Rate Advance, and ending on the last day of the
period selected by the Borrower pursuant to the provisions below and,
thereafter, with respect to Eurodollar Rate Advances, each subsequent
period commencing on the last day of the immediately preceding Interest
Period and ending on the last day of the period selected by the
Borrower pursuant to the provisions below. The duration of each such
Interest Period shall be one, two, three, four, five or six months, or,
if available to all Lenders, nine or twelve months, as the Borrower
may, upon notice received by the Administrative Agent not later than
11:00 A.M. (New York City time) on the third Business Day prior to the
first day of such Interest Period, select; provided, however, that:
(a) the Borrower may not select any Interest Period
that ends after the Termination Date;
(b) Interest Periods commencing on the same date for
Eurodollar Rate Advances comprising part of the same Revolving
Credit Borrowing or for LIBO Rate Advances comprising part of
the same Competitive Bid Borrowing shall be of the same
duration;
(c) whenever the last day of any Interest Period
would otherwise occur on a day other than a Business Day, the
last day of such Interest Period shall be extended to occur on
the next succeeding Business Day, provided, however, that, if
such extension would cause the last day of such Interest
Period to occur in the next following calendar month, the last
day of such Interest Period shall occur on the next preceding
Business Day, unless the Borrower and the Administrative Agent
otherwise agree; and
(d) whenever the first day of any Interest Period
occurs on a day of an initial calendar month for which there
is no numerically corresponding day in the calendar month that
succeeds such initial calendar month by the number of months
equal to the number of months in such Interest Period, such
Interest Period shall end
<PAGE>
17
on the last Business Day of such succeeding calendar month
unless the Borrower and the Administrative Agent otherwise
agree.
"Interest Rate Hedge Agreements" means interest rate swap, cap
or collar agreements, interest rate future or option contracts and
other similar agreements
"Internal Revenue Code" means the Internal Revenue Code of
1986, as amended from time to time, and the regulations promulgated and
rulings issued thereunder.
"Investment" in any Person means any loan or advance to such
Person, any purchase or other acquisition of any capital stock or other
ownership or profit interest, warrants, rights, options, obligations or
other securities of such Person, any capital contribution to such
Person or any other investment in such Person, including, without
limitation, any arrangement pursuant to which the investor incurs Debt
of the types referred to in clauses (i) or (j) of the definition of
"Debt" in respect of such Person.
"Lenders" means the Initial Lenders, each Person that shall
become a party hereto pursuant to Section 8.07, including the
Designated Lenders, if any, and each Person that shall become a party
hereto pursuant to Section 2.18; provided, however, that the term
"Lender" shall exclude each Designated Lender when used (i) in
reference to an Advance or the Commitments or terms relating thereto,
except to the extent a Designated Lender is the obligee of an Advance
actually funded by such Designated Lender pursuant to Section 2.01
hereof and (ii) in any determination or calculation of Required
Lenders, it being understood that for purposes hereof, any Advance made
by a Designated Lender shall be deemed to have been made by the
applicable Designating Lender.
"LIBO Rate" means, for any Interest Period for all LIBO Rate
Advances comprising part of the same Competitive Bid Borrowing, an
interest rate per annum equal to the rate per annum obtained by
dividing (a) the rate per annum at which deposits in U.S. dollars are
offered by the principal office of the Administrative Agent, in London,
England to prime banks in the London interbank market at 11:00 A.M.
(London time) two Business Days before the first day of such Interest
Period in an amount substantially equal to the amount that would be the
Administrative Agent's ratable share of such Borrowing if such
Borrowing were to be a Revolving Credit Borrowing to be outstanding
during such Interest Period and for a period equal to such Interest
Period by (b) a percentage equal to 100% minus the Eurodollar Rate
Reserve Percentage for such Interest Period.
"LIBO Rate Advances" has the meaning specified in Section
2.03(a)(i).
"Lien" means any lien, security interest or other charge or
encumbrance of any kind, or any other type of preferential arrangement,
including, without limitation, the lien or
<PAGE>
18
retained security title of a conditional vendor and any easement, right
of way or other encumbrance on title to real property.
"Loan Documents" means (a) for purposes of this Agreement, the
Notes, if any, and any amendments or modifications hereof or thereof
and for all other purposes other than for purposes of the Guarantees,
(i) this Agreement, (ii) the Notes, if any and (iii) the Guarantees and
(b) for purposes of the Guarantees, (i) this Agreement, (ii) the Notes,
if any, (iii) the Guarantees and (iv) the Interest Rate Hedge
Agreements entered into by Group or the Borrower with Lenders, in the
case of each of the foregoing agreements referred to in clause (a) or
(b), and any amendments, supplements or modifications hereof or
thereof.
"Loan Parties" means the Borrower and the Guarantors.
"Margin Stock" has the meaning specified in Regulation U.
"Material Adverse Change" means any material adverse change in
the business, condition (financial or otherwise), operations,
performance, properties or prospects of the Borrower or Group and its
Subsidiaries taken as a whole.
"Material Adverse Effect" means a material adverse effect on
(a) the business, condition (financial or otherwise), operations,
performance, properties or prospects of (i) the Borrower or Group and
its Subsidiaries taken as a whole, (b) the rights and remedies of any
Agent or Lender under any Loan Document or (c) the validity or
enforceability of any Loan Document.
"Material Guarantor" means, at any time, a Guarantor having
(i) at least 10% of Consolidated total assets of Group and its
Subsidiaries (determined as of the last day of the most recent Fiscal
Quarter) or (ii) at least 10% of Consolidated EBITDA of Group and its
Subsidiaries for the 12-month period ending on the last day of the most
recent Fiscal Quarter.
"Material Subsidiary" of any Person means, at any time, a
Subsidiary of such Person having (i) at least $15,000,000 in total
assets (determined as of the last day of the most recent fiscal quarter
of such Person) or (ii) EBITDA of at least $15,000,000 for the 12-month
period ending on the last day of the most recent fiscal quarter of such
Person.
"Merger" has the meaning set forth in the Preliminary
Statements.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan, as defined in
Section 4001(a)(3) of ERISA, to which the Borrower or any of its ERISA
Affiliates is making or accruing an
<PAGE>
19
obligation to make contributions, or has within any of the preceding
five plan years made or accrued an obligation to make contributions.
"Multiple Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Borrower or any of its ERISA Affiliates and at least
one Person other than the Borrower and its ERISA Affiliates or (b) was
so maintained and in respect of which the Borrower or any of its ERISA
Affiliates could have liability under Section 4064 or 4069 of ERISA in
the event such plan has been or were to be terminated.
"New 364 Day Credit Agreement" means the 364 Day Credit
Agreement expected to be entered into by the Borrower, the lenders
party thereto, Scotiabank and SSB, as co-lead arrangers and co-book
runners, Citibank, as syndication agent, Morgan Guaranty Trust Company
of New York as documentation agent, and Scotiabank, as administrative
agent, as such agreement may be amended, modified, extended, renewed,
refinanced, replaced or otherwise supplemented from time to time.
"Note" means a Revolving Credit Note or a Competitive Bid
Note.
"Notice of Borrowing" has the meaning specified in Section
2.02(a).
"Notice of Competitive Bid Borrowing" has the meaning
specified in Section 2.03(a).
"Notice of Swing Line Borrowing" has the meaning specified in
Section 2.02(b).
"Obligation" means, with respect to any Person, any obligation
of such Person of any kind, including, without limitation, any
liability of such Person on any claim, whether or not the right of any
creditor to payment in respect of such claim is reduced to judgment,
liquidated, unliquidated, fixed, contingent, matured, disputed,
undisputed, legal, equitable, secured or unsecured, and whether or not
such claim is discharged, stayed or otherwise affected by any
proceeding referred to in Section 6.01(e). Without limiting the
generality of the foregoing, the Obligations of the Loan Parties under
the Loan Documents include (a) the obligation to pay principal,
interest, charges, expenses, fees, attorneys' fees and disbursements,
indemnities and other amounts payable by any Loan Party under any Loan
Document and (b) the obligation to reimburse any amount in respect of
any of the foregoing that any Lender, in its sole discretion, may elect
to pay or advance on behalf of such Loan Party.
"Other Taxes" has the meaning specified in Section 2.13(b).
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
<PAGE>
20
"Permitted Liens" means the following:
(a) Liens, other than in favor of the PBGC, arising
out of judgments or awards in respect of which Group or any of
its Subsidiaries shall in good faith be prosecuting an appeal
or proceedings for review and in respect of which it shall
have secured a subsisting stay of execution pending such
appeal or proceedings for review, provided it shall have set
aside on its books adequate reserves, in accordance with GAAP,
with respect to such judgment or award and provided further
that the aggregate amount secured by such Liens does not
exceed $5,000,000 in any one case or $10,000,000 in the
aggregate;
(b) Liens for taxes, assessments or governmental
charges or levies, provided payment thereof shall not at the
time be required in accordance with the provisions of Section
5.01(b) and such amount, when taken together with any amount
payable under Section 5.01(b) as to which any Lien has been
attached as described in the last phrase thereof, shall not
exceed $10,000,000;
(c) deposits, Liens or pledges to secure payments of
workmen's compensation and other payments, unemployment and
other insurance, old-age pensions or other social security
obligations, or the performance of bids, tenders, leases,
contracts (other than contracts for the payment of money),
public or statutory obligations, surety, stay or appeal bonds,
or other similar obligations arising in the ordinary course of
business;
(d) mechanics', workmen's, repairmen's,
warehousemen's, vendors' or carriers' Liens or other similar
Liens arising in the ordinary course of business and securing
sums which are not past due, or deposits or pledges to obtain
the release of any such Liens;
(e) statutory landlord's Liens under leases to which
Group or any of its Subsidiaries is a party;
(f) any Lien constituting a renewal, extension or
replacement of a Lien constituting a Permitted Lien, but only
if at the time such Lien is granted and immediately after
giving effect thereto, no Default would exist;
(g) leases or subleases granted to other Persons not
materially interfering with the conduct of the business of
Group and its Subsidiaries, taken as a whole;
(h) zoning restrictions, easements, rights of way,
licenses and restrictions on the use of real property or minor
irregularities in title thereto, which do not materially
impair the use of such property in the normal operation of the
business of
<PAGE>
21
Group or any of its Subsidiaries or the value of such
property for the purpose of such business; and
(i) statutory or common law Liens (such as rights of
set-off) on deposit accounts of Group and its Subsidiaries and
other Liens under the L/C Related Documents (as defined in the
Existing Five Year Credit Agreement).
"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.
"Plan" means a Single Employer Plan or a Multiple Employer
Plan.
"Pro Rata Share" of any amount means, with respect to any
Lender at any time, the product of such amount times a fraction the
numerator of which is the amount of such Lender's Revolving Credit
Commitment at such time and the denominator of which is the Revolving
Credit Facility at such time.
"Purchaser" has the meaning set forth in the Preliminary
Statements.
"Redeemable" means, with respect to any capital stock, Debt or
other right or Obligation, any such right or Obligation that (a) the
issuer has undertaken to redeem at a fixed or determinable date or
dates, whether by operation of a sinking fund or otherwise, or upon the
occurrence of a condition not solely within the control of the issuer
or (b) is redeemable at the option of the holder.
"Register" has the meaning specified in Section 8.07(g).
"Regulation U" means Regulation U of the Board of Governors of
the Federal Reserve System, as in effect from time to time.
"Required Lenders" means, at any time, Lenders owed or holding
more than 50% of the sum of (a) the aggregate principal amount of the
Revolving Credit Advances outstanding at such time and (b) the
aggregate Unused Revolving Credit Commitments at such time; provided,
however, if any Lender shall be a Defaulting Lender at such time, there
shall be excluded from the determination of Required Lenders at such
time (i) the aggregate principal amount of the Revolving Credit
Advances owing to such Lender (in its capacity as a Lender) and
outstanding at such time and (ii) the Unused Revolving Credit
Commitment of such Lender at such time and provided further that for
purposes of this definition, any Revolving Credit Advance made by a
Designated Lender shall be deemed to have been made by its applicable
Designating Lender. For purposes of this definition, the aggregate
principal amount of Swing Line Advances owing to the Swing Line Bank
shall be considered to be
<PAGE>
22
owed to the Lenders ratably in accordance with their respective
Revolving Credit Commitments.
"Revolving Credit Advance" means an advance by a Lender to the
Borrower as part of a Revolving Credit Borrowing and refers to a Base
Rate Advance or a Eurodollar Rate Advance (each of which shall be a
"Type" of Revolving Credit Advance).
"Revolving Credit Borrowing" means a borrowing consisting of
simultaneous Revolving Credit Advances of the same Type made by the
Lenders pursuant to Section 2.01.
"Revolving Credit Commitment" means, with respect to any
Lender at any time, the amount set forth opposite such Lender's name on
Schedule I hereto under the caption "Revolving Credit Commitment" or,
if such Lender has entered into one or more Assignments and
Acceptances, set forth for such Lender in the Register maintained by
the Administrative Agent pursuant to Section 8.07(c) as such Lender's
"Revolving Credit Commitment" or if such Lender has entered into an
Assumption Agreement, the amount set forth in such Assumption
Agreement, as such amount may be reduced at or prior to such time
pursuant to Section 2.06. The aggregate Revolving Credit Commitments
may be increased to an amount not more than $500,000,000 to the extent
additional Lenders become parties hereto pursuant to Section 2.18.
"Revolving Credit Facility" means, at any time, the aggregate
amount of the Lenders' Revolving Credit Commitments at such time.
"Revolving Credit Note" has the meaning specified in Section
2.17.
"S&P" means Standard & Poor's Ratings Group, currently a
division of The McGraw-Hill Companies, Inc., or any successor thereto.
"Scotiabank" has the meaning specified in the recital of
parties to this Agreement.
"Single Employer Plan" means a single employer plan, as
defined in Section 4001(a)(15) of ERISA, that (a) is maintained for
employees of the Borrower or any of its ERISA Affiliates and no Person
other than the Borrower and its ERISA Affiliates or (b) was so
maintained and in respect of which the Borrower or any of its ERISA
Affiliates could have liability under Section 4069 of ERISA in the
event such plan has been or were to be terminated.
"Subsidiary" of any Person means any corporation, partnership,
joint venture, limited liability company, trust or estate of which (or
in which) more than 50% of (a) the issued and outstanding capital stock
having ordinary voting power to elect a majority of the Board of
Directors of such corporation (irrespective of whether at the time
capital stock of any other
<PAGE>
23
class or classes of such corporation shall or might have voting power
upon the occurrence of any contingency), (b) the interest in the
capital or profits of such limited liability company, partnership or
joint venture or (c) the beneficial interest in such trust or estate is
at the time directly or indirectly owned or controlled by such Person,
by such Person and one or more of its other Subsidiaries or by one or
more of such Person's other Subsidiaries. The term "wholly owned
Subsidiary" shall exclude any directors' or officers' qualifying shares
which may be outstanding.
"Subsidiary Guaranty" has the meaning specified in Section
3.01(i)(ii).
"Swing Line Advance" means an advance made by (a) the Swing
Line Bank pursuant to Section 2.01(b), or (b) any Lender pursuant to
Section 2.02(b).
"Swing Line Bank" means Scotiabank (and its successors and
assigns), provided that Scotiabank (and any such successors and assigns
as Swing Line Bank hereunder) may resign, and thereupon be released
from its obligations, as Swing Line Bank under this Agreement upon
receipt by the Borrower and the Arrangers, in writing and in a form
reasonably satisfactory to the Borrower and the Arrangers, of the
assumption by another Lender of the rights and obligations of the Swing
Line Bank hereunder.
"Swing Line Borrowing" means a borrowing consisting of a Swing
Line Advance made by the Swing Line Bank.
"Swing Line Facility" has the meaning specified in Section
2.01(b).
"Surviving Corporation" has the meaning set forth in the
Preliminary Statements.
"Syndication Agent" has the meaning specified in the recital
of parties to this Agreement.
"Tangible Assets" means total assets minus goodwill and
intangibles, in each case determined in accordance with GAAP.
"Taxes" has the meaning specified in Section 2.13(a).
"Tender Offer" has the meaning set forth in the Preliminary
Statements.
"Termination Date" means the earlier of November 17, 2004 and
the date of termination in whole of the Commitments pursuant to Section
2.05 or 6.01.
"Trade Credit Facility" means the revolving loan facility
under the Sixth Amended and Restated Credit Agreement dated as of
November 17, 1999 among the Borrower, certain
<PAGE>
24
lenders party thereto and Scotiabank, as agent for said lenders, as
each such agreement has been amended to date and the same may be
amended, extended, renewed, refinanced, replaced or otherwise modified
from time to time.
"Trust" means Designer Finance Trust, a trust formed under the
laws of Delaware.
"Trust Stock" means the Trust Originated Preferred Securities
issued by the Trust.
"Type" refers to the distinction between Advances bearing
interest at the Base Rate and Advances bearing interest at the
Eurodollar Rate.
"Unused Revolving Credit Commitment" means, with respect to
any Lender at any time,
(a) such Lender's Revolving Credit Commitment at such
time minus
(b) the sum of the aggregate principal amount of all
Revolving Credit Advances and Swing Line Advances made by such
Lender and outstanding at such time, plus, such Lender's Pro
Rata Share of the aggregate amount of Competitive Bid Advances
outstanding at such time and the aggregate principal amount of
all Swing Line Advances made by the Swing Line Bank pursuant
to Section 2.01(b) and outstanding at such time other than any
such Swing Line Advance which, at or prior to such time, has
been assigned in part to such Lender pursuant to Section
2.02(b).
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are
ordinarily, in the absence of contingencies, entitled to vote for the
election of directors (or persons performing similar functions) of such
Person, even if the right so to vote has been suspended by the
happening of such a contingency.
SECTION 1.02. Computation of Time Periods. In this Agreement
in the computation of periods of time from a specified date to a later specified
date, the word "from" means "from and including" and the words "to" and "until"
each mean "to but excluding".
SECTION 1.03. Accounting Terms. All accounting terms not
specifically defined herein shall be construed in accordance with generally
accepted accounting principles consistent with those applied in the preparation
of the financial statements referred to in Section 4.01(f) ("GAAP").
<PAGE>
25
ARTICLE II
AMOUNTS AND TERMS OF THE ADVANCES
SECTION 2.01. The Advances. (a) The Revolving Credit Advances.
Each Lender severally agrees, on the terms and conditions hereinafter set forth,
to make Revolving Credit Advances to the Borrower from time to time on any
Business Day during the period from the Effective Date until the Termination
Date in an amount for each such Revolving Credit Advance not to exceed such
Lender's Unused Revolving Credit Commitment at such time. Each Revolving Credit
Borrowing shall be in an aggregate amount of $5,000,000 or an integral multiple
of $1,000,000 in excess thereof (or, if less, an aggregate amount equal to the
amount by which the aggregate amount of a proposed Competitive Bid Borrowing
requested by the Borrower exceeds the aggregate amount of Competitive Bid
Advances offered to be made by the Lenders and accepted by the Borrower in
respect of such Competitive Bid Borrowing, if such Competitive Bid Borrowing is
made on the same date as such Revolving Credit Borrowing) and shall consist of
Revolving Credit Advances of the same Type made on the same day by the Lenders
ratably according to their respective Revolving Credit Commitments. Within the
limits of each Lender's Unused Revolving Credit Commitment in effect from time
to time, the Borrower may borrow under this Section 2.01(a), prepay pursuant to
Section 2.06(a) and reborrow under this Section 2.01(a). For any Lender which is
a Designating Lender, any Revolving Credit Advance to be made by such Lender may
from time to time and upon notice to the Administrative Agent, be made by its
Designated Lender pursuant to the terms hereof in such Designating Lender's sole
discretion, and nothing herein shall constitute a Commitment to make Revolving
Credit Advances by such Designated Lender; provided that (i) if any Designated
Lender elects not to, or fails for any reason whatsoever to, make such Revolving
Credit Advance, its Designating Lender hereby agrees that it shall make such
Revolving Credit Advance pursuant to the terms hereof and (ii) notwithstanding
anything to the contrary, neither the designation of a Designated Lender, the
election or other determination that a Designated Lender will make any Revolving
Credit Advance nor any other condition or circumstance relating to the
Designated Lender shall in any way release, diminish or otherwise affect the
relevant Designating Lender's Commitment or any of its other obligations
hereunder or under any other Loan Document or any rights of the Borrower, any
Agent or any Lender with respect to such Designating Lender. Any Revolving
Credit Advance actually funded by a Designated Lender shall constitute a
utilization of the Commitment of the Designating Lender for all purposes
hereunder.
(b) The Swing Line Advances. The Borrower may request the
Swing Line Bank to make, and the Swing Line Bank shall make, on the terms and
conditions hereinafter set forth, Swing Line Advances to the Borrower from time
to time on any Business Day during the period from the Effective Date until the
Termination Date (i) in an aggregate amount not to exceed at any time
outstanding $30,000,000 (the "Swing Line Facility") and (ii) in an amount for
each such Swing Line Borrowing not to exceed the aggregate of the Unused
Revolving Credit Commitments of the Lenders at such time. No Swing Line Advance
shall be used for the purpose of funding the payment of principal of any other
Swing Line Advance. Each Swing Line Borrowing shall be in an amount
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26
of $100,000 or an integral multiple of $1,000 in excess thereof and shall be
made as a Base Rate Advance. Within the limits of the Swing Line Facility and
within the limits referred to in clause (ii) above, the Borrower may borrow
under this Section 2.01(b), repay pursuant to Section 2.04(b) or prepay pursuant
to Section 2.06(a) and reborrow under this Section 2.01(b).
SECTION 2.02. Making the Advances. (a) Except as otherwise
provided in Section 2.02(b), each Borrowing shall be made on notice, given not
later than 11:00 A.M. (New York City time) on the third Business Day prior to
the date of the proposed Borrowing in the case of a Borrowing consisting of
Eurodollar Rate Advances, or on the date of the proposed Borrowing in the case
of a Borrowing consisting of Base Rate Advances, by the Borrower to the
Administrative Agent, which shall give to each Lender prompt notice thereof by
telecopier or telex. Each such notice of a Borrowing (a "Notice of Borrowing")
shall be by telephone, confirmed immediately in writing, or telecopier or telex,
in substantially the form of Exhibit B-1 hereto, specifying therein the
requested (i) date of such Borrowing, (ii) Facility under which such Borrowing
is to be made, (iii) Type of Advances comprising such Borrowing, (iv) aggregate
amount of such Borrowing, and (v) in the case of a Borrowing consisting of
Eurodollar Rate Advances, initial Interest Period for each such Advance. Each
Lender shall, before 12:00 Noon (New York City time) on the date of such
Borrowing, make available for the account of its Applicable Lending Office to
the Administrative Agent at the Administrative Agent's Account, in same day
funds, such Lender's ratable portion of such Borrowing in accordance with the
respective Commitments of such Lender and the other Lenders. After the
Administrative Agent's receipt of such funds and upon fulfillment of the
applicable conditions set forth in Article III, the Administrative Agent will
make such funds available to the Borrower by crediting the Borrower's Account;
provided, however, that, in the case of any Revolving Credit Borrowing, the
Administrative Agent shall first make a portion of such funds in an amount equal
to the aggregate principal amount of any Swing Line Advances made by the Swing
Line Bank and by any other Lender that are outstanding on the date of such
Revolving Credit Borrowing, plus interest accrued and unpaid thereon to and as
of such date, available to the Swing Line Bank and such other Lenders for
repayment of such Swing Line Advances.
(b) (i) Each Swing Line Borrowing shall be made on notice,
given not later than 11:30 A.M. (New York City time) on the date of the proposed
Swing Line Borrowing, by the Borrower to the Swing Line Bank and the
Administrative Agent. Each such notice of a Swing Line Borrowing (a "Notice of
Swing Line Borrowing") shall be by telephone, confirmed immediately in writing
or telex or telecopier, specifying therein the requested (A) date of such
Borrowing and (B) amount of such Borrowing and shall constitute a representation
and warranty by the Borrower (upon which the Swing Line Bank may conclusively
rely, in the absence of prior receipt by the Swing Line Bank of written notice
from an Agent or Lenders holding more than 50% of the Revolving Credit
Commitments that the conditions precedent to the making of Swing Line Advances
have not been satisfied or duly waived). Upon fulfillment of the applicable
conditions set forth in Article III, the Swing Line Bank will make the amount
thereof available to the Borrower by crediting the Borrower's Account.
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27
(ii) (A) (1) Subject to clause (ii)(B) below, in the event
that on any Business Day the Swing Line Bank desires that all or any portion of
one or more Swing Line Advances be paid, the Swing Line Bank shall promptly
notify the Administrative Agent to that effect and indicate the portion of the
Swing Line Advances to be paid.
(2) The Administrative Agent agrees to promptly transmit to
the Lenders the information contained in each notice received by the
Administrative Agent under clause (ii)(A)(1) above, and shall concurrently
notify the other Agents and the Lenders of each Lender's Pro Rata Share of the
Swing Line Advances (or portion thereof) to be paid.
(3) Each Lender hereby unconditionally and irrevocably agrees
to fund to the Administrative Agent for the benefit of the Swing Line Bank, in
lawful money of the United States and in same day funds, not later than 12:00
noon (New York City time) on the Business Day immediately following the Business
Day of such Lender's receipt of such notice from the Administrative Agent
(provided that if any Lender shall receive such notice at or prior to 1:00 P.M.
(New York City time) on a Business Day, such funding shall be made by such
Lender on such Business Day), a Revolving Credit Advance in the amount of such
Lender's Pro Rata Share of the payment of the Swing Line Advances to be made on
such date, regardless, however, of whether (x) the conditions precedent thereto
set forth in Article III are then satisfied, (y) the Borrower has provided a
Notice of Borrowing under Section 2.02(a) hereof and (z) the Revolving Credit
Facility has been terminated, any Default or Event of Default exists or all or
any of the Advances have been accelerated, but subject to clause (B) below and
subject to the limitations in respect of the amount of Revolving Credit Advances
contained in Section 2.01(a). The proceeds of each such Revolving Credit Advance
shall be immediately paid over to the Administrative Agent for the benefit of
the Swing Line Bank for application to the Swing Line Facility. Each such
Revolving Credit Advance shall initially be a Base Rate Advance and shall be
deemed to be requested by the Borrower pursuant to Section 2.02(a).
(B) In the event that Commitments of the Lenders shall have
terminated pursuant to Section 6.01 following an Event of Default of the type
described in Section 6.01(f) with respect to Group or the Borrower, no further
Revolving Credit Advances of the type described in clause (ii)(A) above shall be
made, and each of the Lenders (other than the Swing Line Bank) shall be deemed
to have irrevocably, unconditionally and immediately purchased from the Swing
Line Bank such Lender's Pro Rata Share of the principal amount of the Swing Line
Advances outstanding as of the date of the occurrence of such Event of Default.
Each Lender shall effect such purchase by making available an amount equal to
its participation on the date of such purchase in U.S. dollars in immediately
available funds at the office of the Swing Line Bank located at 600 Peachtree
Street Northeast, Suite 2700, Atlanta, Georgia 30308 or such other office as the
Swing Line Bank may from time to time direct for the account of such office of
the Swing Line Bank.
(C) Each purchase made pursuant to clause (ii)(B) above by a
Lender shall be made without recourse to the Swing Line Bank, and, except as to
the absence of liens created by the
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28
Swing Line Bank on the Swing Line Advance and the Swing Line Bank's right to
effect such sale, without representation or warranty of any kind, and shall be
effected and evidenced pursuant to documents reasonably acceptable to the Swing
Line Bank.
(D) The obligations of the Lenders under this Section
2.02(b)(ii) shall be absolute, irrevocable and unconditional, shall be made
under all circumstances and shall not be affected, reduced or impaired for any
reason whatsoever, including (without limitation): (1) any Default, Event of
Default, misrepresentation, negligence, misconduct or other action or inaction
of any kind by any of the Loan Parties or any other Person, whether in, under or
in connection with this Agreement, the Guaranty or any of the other Loan
Documents; (2) any extension, renewal, release or waiver of the time of
performance of or compliance with any of the obligations or other provisions
hereof or of any other Loan Document; (3) any settlement, compromise or
subordination of any or all of the obligations to the claims of others, or any
failure by any Agent, the Swing Line Bank or any other Lender to mitigate
damages; (4) any amendment, modification or other waiver of any one or more of
the Loan Documents; (5) the insolvency, bankruptcy, reorganization or cessation
of existence of any of the Loan Parties; (6) any impossibility or illegality of
performance or the lack of genuineness, validity, legality or enforceability of
any of this Agreement or the other Loan Documents, or any term thereof or any
other agreement or instrument relating thereto for any reason, or the lack of
power or authority of any party to enter into any of the Loan Documents; (7) any
dispute, setoff, recoupment, counterclaim or other defense or right any Lender
may have at any time, whether against any Agent, the Swing Line Bank, any other
Lender or any of the Loan Parties; (8) any merger or consolidation of any of the
Loan Parties or any Lender, or any sale, lease or transfer of any or all of the
assets of any such Person; or (9) any other circumstances whether similar or
dissimilar to any of the foregoing.
(c) Anything in subsection (a) above to the contrary
notwithstanding, (i) the Borrower may not select Eurodollar Rate Advances for
any Revolving Credit Borrowing if the aggregate amount of such Revolving Credit
Borrowing is less than $10,000,000 or if the obligation of the Lenders to make
Eurodollar Rate Advances shall then be suspended pursuant to Section 2.09, 2.10
or 2.11 and (ii) the Revolving Credit Advances may not be outstanding as part of
more than 20 separate Revolving Credit Borrowings.
(d) Each Notice of Borrowing and Notice of Swing Line
Borrowing shall be irrevocable and binding on the Borrower. In the case of any
Revolving Credit Borrowing that the related Notice of Borrowing specifies is to
be comprised of Eurodollar Rate Advances, the Borrower shall indemnify each
Lender against any loss, cost or expense incurred by such Lender as a result of
any failure to fulfill on or before the date specified in such Notice of
Revolving Credit Borrowing for such Revolving Credit Borrowing the applicable
conditions set forth in Article III, including, without limitation, any loss
(excluding loss of anticipated profits), cost or expense incurred by reason of
the liquidation or reemployment of deposits or other funds acquired by such
Lender to fund the Revolving Credit Advance to be made by such Lender as part of
such Revolving Credit Borrowing when such Revolving Credit Advance, as a result
of such failure, is not made on such date.
<PAGE>
29
(e) Unless the Administrative Agent shall have received notice
from a Lender prior to the date of any Revolving Credit Borrowing that such
Lender will not make available to the Administrative Agent such Lender's ratable
portion of such Revolving Credit Borrowing, the Administrative Agent may assume
that such Lender has made such portion available to the Administrative Agent on
the date of such Revolving Credit Borrowing in accordance with subsection (a) of
this Section 2.02 and the Administrative Agent may, in reliance upon such
assumption, make available to the Borrower on such date a corresponding amount.
If and to the extent that such Lender shall not have so made such ratable
portion available to the Administrative Agent, the Administrative Agent agrees
to give prompt notice thereof to the Borrower (provided that failure to give
such notice shall not affect the obligations of the Borrower under this Section
2.02(e)), and such Lender and the Borrower severally agree to repay to the
Administrative Agent forthwith on demand such corresponding amount together with
interest thereon, for each day from the date such amount is made available to
the Borrower until the date such amount is repaid to the Administrative Agent,
at (i) in the case of the Borrower, the interest rate applicable at such time
under Section 2.07 to Advances comprising such Revolving Credit Borrowing and
(ii) in the case of such Lender, the Federal Funds Rate. If such Lender shall
repay to the Administrative Agent such corresponding amount, such amount so
repaid shall constitute such Lender's Advance as part of such Revolving Credit
Borrowing for purposes of this Agreement.
(f) The failure of any Lender to make the Revolving Credit
Advance to be made by it as part of any Revolving Credit Borrowing shall not
relieve any other Lender of its obligation, if any, hereunder to make its
Revolving Credit Advance on the date of such Revolving Credit Borrowing, but no
Lender shall be responsible for the failure of any other Lender to make the
Revolving Credit Advance to be made by such other Lender on the date of any
Revolving Credit Borrowing.
SECTION 2.03. The Competitive Bid Advances. (a) Each Lender
severally agrees that the Borrower may make Competitive Bid Borrowings under
this Section 2.03 from time to time on any Business Day during the period from
the Effective Date until the date occurring 10 days prior to the Termination
Date in the manner set forth below; provided that, following the making of each
Competitive Bid Borrowing, (x) the aggregate amount of the Advances then
outstanding shall not exceed the aggregate amount of the Revolving Credit
Commitments of the Lenders and (y) the aggregate amount of the Competitive Bid
Advances then outstanding shall not exceed $300,000,000.
(i) The Borrower may request a Competitive Bid Borrowing under
this Section 2.03 by delivering to the Competitive Bid Agent, by
telecopier or telex, a notice of a Competitive Bid Borrowing (a "Notice
of Competitive Bid Borrowing"), in substantially the form of Exhibit
B-2 hereto, specifying therein the requested (v) date of such proposed
Competitive Bid Borrowing, (w) aggregate amount of such proposed
Competitive Bid Borrowing, (x) in the case of a Competitive Bid
Borrowing consisting of LIBO Rate Advances, Interest Period, or in the
case of a Competitive Bid Borrowing consisting of Fixed Rate Advances,
maturity date for repayment of each Fixed Rate Advance to be made as
part
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30
of such Competitive Bid Borrowing (which maturity date may not be
earlier than the date occurring 7 days after the date of such
Competitive Bid Borrowing or later than the earlier of (I) 180 days
after the date of such Competitive Bid Borrowing and (II) the
Termination Date), (y) interest payment date or dates relating thereto,
and (z) other terms (if any) to be applicable to such Competitive Bid
Borrowing, not later than 10:00 A.M. (New York City time) (A) at least
four Business Days prior to the date of the proposed Competitive Bid
Borrowing, if the Borrower shall specify in the Notice of Competitive
Bid Borrowing that the rates of interest to be offered by the Lenders
shall be fixed rates per annum (the Advances comprising any such
Competitive Bid Borrowing being referred to herein as "Fixed Rate
Advances") and (B) at least four Business Days prior to the date of the
proposed Competitive Bid Borrowing, if the Borrower shall instead
specify in the Notice of Competitive Bid Borrowing that the rates of
interest offered by the Lenders are to be based on the LIBO Rate (the
Advances comprising such Competitive Bid Borrowing being referred to
herein as "LIBO Rate Advances"). Each Notice of Competitive Bid
Borrowing shall be irrevocable and binding on the Borrower. The
Competitive Bid Agent shall in turn promptly notify each Lender of each
request for a Competitive Bid Borrowing received by it from the
Borrower by sending such Lender a copy of the related Notice of
Competitive Bid Borrowing.
(ii) Each Lender may, if, in its sole discretion, it elects to
do so, irrevocably offer to make one or more Competitive Bid Advances
to the Borrower as part of such proposed Competitive Bid Borrowing at a
rate or rates of interest specified by such Lender in its sole
discretion, by notifying the Competitive Bid Agent (which shall give
prompt notice thereof to the Borrower), before 10:00 A.M. (New York
City time) on the date of such proposed Competitive Bid Borrowing in
the case of a Competitive Bid Borrowing consisting of Fixed Rate
Advances and on the third Business Day before the date of such proposed
Competitive Bid Borrowing, in the case of a Competitive Bid Borrowing
consisting of LIBO Rate Advances, of the minimum amount and maximum
amount of each Competitive Bid Advance which such Lender would be
willing to make as part of such proposed Competitive Bid Borrowing
(which amounts may, subject to the proviso to the first sentence of
this Section 2.03(a), exceed such Lender's Revolving Credit Commitment,
if any), the rate or rates of interest therefor and such Lender's
Applicable Lending Office with respect to such Competitive Bid Advance;
provided that if the Competitive Bid Agent in its capacity as a Lender
shall, in its sole discretion, elect to make any such offer, it shall
notify the Borrower of such offer before 9:00 A.M. (New York City time)
on the date on which notice of such election is to be given to the
Competitive Bid Agent by the other Lenders. If any Lender shall elect
not to make such an offer, such Lender shall so notify the Competitive
Bid Agent, before 10:00 A.M. (New York City time) on the date on which
notice of such election is to be given to the Competitive Bid Agent by
the other Lenders, and such Lender shall not be obligated to, and shall
not, make any Competitive Bid Advance as part of such Competitive Bid
Borrowing; provided that the failure by any Lender to give such notice
shall not cause such Lender to be obligated to make any Competitive Bid
Advance as part of such proposed Competitive Bid Borrowing.
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31
(iii) The Borrower shall, in turn, before 11:00 A.M. (New York
City time) on the date of such proposed Competitive Bid Borrowing in
the case of a Competitive Bid Borrowing consisting of Fixed Rate
Advances, and before 1:00 P.M. (New York City time) three Business Days
before the date of such proposed Competitive Bid Borrowing in the case
of a Competitive Bid Borrowing consisting of LIBO Rate Advances,
either:
(x) cancel such Competitive Bid Borrowing by giving
the Competitive Bid Agent notice to that effect, or
(y) accept one or more of the offers made by any
Lender or Lenders pursuant to paragraph (ii) above, in its
sole discretion, by giving notice to the Competitive Bid Agent
of the amount of each Competitive Bid Advance (which amount
shall be equal to or greater than the minimum amount, and
equal to or less than the maximum amount, notified to the
Borrower by the Competitive Bid Agent on behalf of such Lender
for such Competitive Bid Advance pursuant to paragraph (ii)
above) to be made by each Lender as part of such Competitive
Bid Borrowing, and reject any remaining offers made by Lenders
pursuant to paragraph (ii) above by giving the Competitive Bid
Agent notice to that effect. The Borrower shall accept the
offers made by any Lender or Lenders to make Competitive Bid
Advances in order of the lowest to the highest rates of
interest offered by such Lenders. If two or more Lenders have
offered the same interest rate, the amount to be borrowed at
such interest rate will be allocated by the Competitive Bid
Agent among such Lenders in proportion to the maximum amount
that each such Lender offered at such interest rate.
(iv) If the Borrower notifies the Competitive Bid Agent that
such Competitive Bid Borrowing is canceled pursuant to paragraph
(iii)(x) above, the Competitive Bid Agent shall give prompt notice
thereof to the Lenders and such Competitive Bid Borrowing shall not be
made.
(v) If the Borrower accepts one or more of the offers made by
any Lender or Lenders pursuant to paragraph (iii)(y) above, the
Competitive Bid Agent shall in turn promptly notify (A) each Lender
that has made an offer as described in paragraph (ii) above, of the
date and aggregate amount of such Competitive Bid Borrowing and whether
or not any offer or offers made by such Lender pursuant to paragraph
(ii) above have been accepted by the Borrower, (B) each Lender that is
to make a Competitive Bid Advance as part of such Competitive Bid
Borrowing, of the amount of each Competitive Bid Advance to be made by
such Lender as part of such Competitive Bid Borrowing, and (C) each
Lender that is to make a Competitive Bid Advance as part of such
Competitive Bid Borrowing, upon receipt, that the Competitive Bid Agent
has received forms of documents, if any, requested pursuant to Section
3.02(b). Each Lender that is to make a Competitive Bid Advance as part
of such Competitive Bid Borrowing shall, before 12:00 noon (New York
City time) on the date of
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32
such Competitive Bid Borrowing specified in the notice received from
the Competitive Bid Agent pursuant to clause (A) of the preceding
sentence or any later time when such Lender shall have received notice
from the Competitive Bid Agent pursuant to clause (C) of the preceding
sentence, make available for the account of its Applicable Lending
Office to the Competitive Bid Agent at the Competitive Bid Agent's
Account, in same day funds, such Lender's portion of such Competitive
Bid Borrowing. Upon fulfillment of the applicable conditions set forth
in Article III and after receipt by the Competitive Bid Agent of such
funds, the Competitive Bid Agent will, as promptly as possible,
transfer such funds to the Borrower's Account. Promptly after each
Competitive Bid Borrowing, the Competitive Bid Agent will notify each
Lender of the amount of the Competitive Bid Borrowing, the consequent
deemed use of the aggregate amount of the Commitments as a result
thereof and the dates upon which such Competitive Bid Borrowing
commenced and will terminate. For any Lender which is a Designating
Lender, any Competitive Bid Advance to be made by such Lender may from
time to time be made by its Designated Lender pursuant to the terms
hereof in such Designating Lender's sole discretion, and nothing herein
shall constitute a commitment to make Competitive Bid Advances by such
Designated Lender, provided that (i) if any Designated Lender elects
not to, or fails for any reason whatsoever to, make any such
Competitive Bid Advance that has been accepted by the Borrower in
accordance with the foregoing, its Designating Lender hereby agrees
that it shall make such Competitive Bid Advance pursuant to the terms
hereof and (ii) notwithstanding anything to the contrary, neither the
designation of a Designated Lender, the election or other determination
that a Designated Lender will make any Competitive Bid Advance nor any
other condition or circumstance relating to the Designated Lender shall
in any way release, diminish or otherwise affect the relevant
Designating Lender's Commitment or any of its other obligations
hereunder or under any other Loan Document or any rights of the
Borrower, any Agent or any Lender with respect to such Designating
Lender.
(vi) If the Borrower notifies the Competitive Bid Agent that
it accepts one or more of the offers made by any Lender or Lenders
pursuant to paragraph (iii)(y) above, such notice of acceptance shall
be irrevocable and binding on the Borrower. The Borrower shall
indemnify each Lender against any loss, cost or expense incurred by
such Lender as a result of any failure to fulfill on or before the date
specified in the related Notice of Competitive Bid Borrowing for such
Competitive Bid Borrowing the applicable conditions set forth in
Article III, including, without limitation, any loss (excluding loss of
anticipated profits), cost or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such
Lender to fund the Competitive Bid Advance to be made by such Lender as
part of such Competitive Bid Borrowing when such Competitive Bid
Advance, as a result of such failure, is not made on such date.
(b) Each Competitive Bid Borrowing shall be in an aggregate
amount of $5,000,000 or an integral multiple of $1,000,000 in excess thereof
and, following the making of each
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33
Competitive Bid Borrowing, the Borrower shall be in compliance with the
limitation set forth in the proviso to the first sentence of subsection (a)
above.
(c) Within the limits and on the conditions set forth in this
Section 2.03, the Borrower may from time to time borrow under this Section 2.03,
repay or prepay pursuant to subsection (d) below, and reborrow under this
Section 2.03, provided that a Competitive Bid Borrowing shall not be made within
three Business Days of the date of any other Competitive Bid Borrowing.
(d) The Borrower shall repay to the Competitive Bid Agent for
the account of each Lender that has made a Competitive Bid Advance, on the
maturity date of each Competitive Bid Advance (such maturity date being that
specified by the Borrower for repayment of such Competitive Bid Advance in the
related Notice of Competitive Bid Borrowing delivered pursuant to subsection
(a)(i) above and provided in the Competitive Bid Note evidencing such
Competitive Bid Advance), the then unpaid principal amount of such Competitive
Bid Advance. The Borrower shall have no right to prepay any principal amount of
any Competitive Bid Advance unless, and then only on the terms, specified by the
Borrower for such Competitive Bid Advance in the related Notice of Competitive
Bid Borrowing delivered pursuant to subsection (a)(i) above, or unless
separately agreed between the Borrower and any Lender that has made a
Competitive Bid Advance, and set forth in the Competitive Bid Note evidencing
such Competitive Bid Advance.
(e) The Borrower shall pay interest on the unpaid principal
amount of each Competitive Bid Advance from the date of such Competitive Bid
Advance to the date the principal amount of such Competitive Bid Advance is
repaid in full, at the rate of interest for such Competitive Bid Advance
specified by the Lender making such Competitive Bid Advance in its notice with
respect thereto delivered pursuant to subsection (a)(ii) above, payable on the
interest payment date or dates specified by the Borrower for such Competitive
Bid Advance in the related Notice of Competitive Bid Borrowing delivered
pursuant to subsection (a)(i) above, as provided in the Competitive Bid Note
evidencing such Competitive Bid Advance. Upon the occurrence and during the
continuance of an Event of Default, the Borrower shall pay interest on the
amount of unpaid principal of and interest on each Competitive Bid Advance owing
to a Lender, payable in arrears on the date or dates interest is payable
thereon, at a rate per annum equal at all times to 2% per annum above the rate
per annum required to be paid on such Competitive Bid Advance under the terms of
the Competitive Bid Note evidencing such Competitive Bid Advance unless
otherwise agreed in such Competitive Bid Note.
(f) The indebtedness of the Borrower resulting from each
Competitive Bid Advance made to the Borrower as part of a Competitive Bid
Borrowing shall be evidenced by a separate Competitive Bid Note of the Borrower
payable to the order of the Lender making such Competitive Bid Advance.
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34
(g) Upon delivery of each Notice of Competitive Bid Borrowing,
the Borrower shall pay a non-refundable fee of $2,000 to the Competitive Bid
Agent for its own account.
SECTION 2.04. Repayment of Advances. (a) Revolving Credit
Advances. The Borrower shall repay to the Administrative Agent for the ratable
account of the Lenders on the Termination Date the aggregate outstanding
principal amount of the Revolving Credit Advances then outstanding.
(b) Swing Line Advances. The Borrower shall repay to the
Administrative Agent for the account of the Swing Line Bank and each other
Lender that has purchased a Swing Line Advance pursuant to Section 2.02(b) the
outstanding principal amount of each Swing Line Advance at the times and in the
manner and amounts specified in Section 2.02(b) and on the Termination Date.
SECTION 2.05. Termination or Reduction of the Commitments. (a)
Optional. The Borrower shall have the right, upon at least three Business Days'
notice to the Administrative Agent, to terminate in whole or reduce ratably in
part the unused portions of the respective Commitments of the Lenders, provided
that each partial reduction (i) shall be in the aggregate amount of $10,000,000
or an integral multiple of $1,000,000 in excess thereof and (ii) shall be made
ratably among the Lenders in accordance with their respective Commitments, and
provided further that the aggregate amount of the Commitments of the Lenders
shall not be reduced to an amount that is less than the aggregate principal
amount of the Competitive Bid Advances then outstanding.
(b) Mandatory. If the Merger shall not have been consummated
on or prior to the date that is one year after the Effective Date, then on the
earlier of such date and the date the Borrower notifies the Administrative Agent
in writing that the Merger will not be consummated (such earlier date, the
"Relevant Date"):
(i) if as of the Relevant Date the aggregate Commitments
exceed $300,000,000, the Commitments shall automatically be reduced
(ratably among the Lenders) to an aggregate amount equal to
$300,000,000;
(ii) the Borrower shall prepay Advances in an amount (if any)
equal to the excess of the aggregate amount of Advances outstanding as
at the Relevant Date over the Commitments so reduced on the Relevant
Date; and
(iii) the Termination Date shall automatically be amended to
be the date that is one year after the Relevant Date.
SECTION 2.06. Prepayments. (a) Optional. (i) The Borrower may,
upon the same Business Day's notice in the case of the Swing Line Facility and
Base Rate Advances and two Business Days' notice in the case of any Eurodollar
Rate Advances, in each case to the
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35
Administrative Agent stating the proposed date and aggregate principal amount of
the prepayment, and if such notice is given the Borrower shall, prepay the
outstanding aggregate principal amount of the Revolving Credit Advances
comprising part of the same Revolving Credit Borrowing in whole or ratably in
part, together with accrued interest to the date of such prepayment on the
aggregate principal amount prepaid; provided, however, that (A) each partial
prepayment of the Facility shall be in an aggregate principal amount of
$5,000,000 or an integral multiple of $1,000,000 in excess thereof and (B) any
such prepayment of a Eurodollar Rate Advance made other than on the last day of
an Interest Period therefor shall be made together with payment of all amounts,
if any, required pursuant to Section 8.04(c).
(ii) Competitive Bid Advances may be prepaid only in
accordance with the provisions of Section 2.03(d).
(b) Mandatory.
(i) The Borrower shall, on each Business Day, prepay an
aggregate principal amount of the Revolving Credit Advances comprising
part of the same Borrowings and the Swing Line Advances equal to the
amount by which (A) the sum of the aggregate principal amount of (x)
the Revolving Credit Advances and (y) the Swing Line Advances then
outstanding exceeds (B) the Revolving Credit Facility on such Business
Day.
SECTION 2.07. Interest. (a) Scheduled Interest. The Borrower
shall pay interest on the unpaid principal amount of each Advance owing to each
Lender from the date of such Advance until such principal amount shall be paid
in full, at the following rates per annum:
(i) Base Rate Advances. During such periods as such Advance is
a Base Rate Advance, a rate per annum equal at all times to the sum of
(x) the Base Rate in effect from time to time plus (y) the Applicable
Margin in effect from time to time, payable in arrears quarterly on the
first day of each January, April, July and October during such periods.
(ii) Eurodollar Rate Advances. During such periods as such
Advance is a Eurodollar Rate Advance, a rate per annum equal at all
times during each Interest Period for such Advance to the sum of (x)
the Eurodollar Rate for such Interest Period for such Advance plus (y)
the Applicable Margin in effect from time to time plus (z) the
Applicable Utilization Percentage, if any, in effect from time to time,
payable in arrears on the last day of such Interest Period and, if such
Interest Period has a duration of more than three months, on each day
that occurs during such Interest Period every three months from the
first day of such Interest Period and on the date such Eurodollar Rate
Advance shall be Converted or paid in full.
(b) Default Interest. Upon the occurrence and during the
continuance of an Event of Default, the Borrower shall pay interest on (i) the
unpaid principal amount of each Advance owing
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36
to each Lender (except as otherwise provided in Section 2.03(e)), payable in
arrears on the dates referred to in clause (a)(i) or (a)(ii) above, at a rate
per annum equal at all times to 2% per annum above the rate per annum required
to be paid on such Advance pursuant to clause (a)(i) or (a)(ii) above and (ii)
to the fullest extent permitted by law, the amount of any interest, fee or other
amount payable hereunder that is not paid when due, from the date such amount
shall be due until such amount shall be paid in full, payable in arrears on the
date such amount shall be paid in full and on demand, at a rate per annum equal
at all times to 2% per annum above the rate per annum required to be paid on
Base Rate Advances pursuant to clause (a)(i) above.
SECTION 2.08. Fees. (a) Facility Fee. The Borrower shall pay
to the Administrative Agent for the account of the Lenders a facility fee, from
the Effective Date in the case of each Initial Lender and from the effective
date specified in the Assignment and Acceptance or the Assumption Agreement, as
the case may be, pursuant to which it became a Lender in the case of each other
Lender until the Termination Date, payable quarterly on the first day of each
January, April, July and October, commencing January 7, 2000, and on the
Termination Date, at the rate per annum equal to the Applicable Percentage in
effect from time to time on the Revolving Credit Commitment of such Lender;
provided, however, (i) that any facility fee accrued with respect to any of the
Commitments of a Defaulting Lender during the period prior to the time such
Lender became a Defaulting Lender and unpaid at such time shall not be payable
by the Borrower so long as such Lender shall be a Defaulting Lender except to
the extent that such facility fee shall otherwise have been due and payable by
the Borrower prior to such time and (ii) that no facility fee shall accrue on
any of the Commitments of a Defaulting Lender so long as such Lender shall be a
Defaulting Lender.
(b) Agents' Fees. The Borrower shall pay to each of the Agents
for its own account such fees as may from time to time be agreed between the
Borrower and such Agent.
SECTION 2.09. Conversion of Advances. (a) Optional. The
Borrower may on any Business Day, upon notice given to the Administrative Agent
not later than 11:00 A.M. (New York City time) on the third Business Day prior
to the date of the proposed Conversion and subject to the provisions of Sections
2.09, 2.10 and 2.11, Convert all Revolving Credit Advances of one Type
comprising the same Revolving Credit Borrowing into Revolving Credit Advances of
the other Type; provided, however, that any Conversion of Eurodollar Rate
Advances into Base Rate Advances shall be made only on the last day of an
Interest Period for such Eurodollar Rate Advances, any Conversion of Base Rate
Advances into Eurodollar Rate Advances shall be in an amount not less than the
minimum amount specified in Section 2.02(b) and no Conversion of any Revolving
Credit Advances shall result in more separate Revolving Credit Borrowings than
permitted under Section 2.02(b). Each such notice of a Conversion shall, within
the restrictions specified above, specify (i) the date of such Conversion, (ii)
the Revolving Credit Advances to be Converted, and (iii) if such Conversion is
into Eurodollar Rate Advances, the duration of the initial Interest Period for
each such Revolving Credit Advance. Each notice of Conversion shall be
irrevocable and binding on the Borrower.
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37
(b) Mandatory. (i) On the date on which the aggregate unpaid
principal amount of Eurodollar Rate Advances comprising any Revolving Credit
Borrowing shall be reduced, by payment or prepayment or otherwise, to less than
$10,000,000, such Advances shall automatically Convert into Base Rate Advances.
(ii) If the Borrower shall fail to select the duration of any
Interest Period for any Eurodollar Rate Advances in accordance with the
provisions contained in the definition of "Interest Period" in Section 1.01, the
Administrative Agent will forthwith so notify the Borrower and the Lenders,
whereupon each such Eurodollar Rate Advance will automatically, on the last day
of the then existing Interest Period therefor, Convert into a Base Rate Advance.
(iii) Upon the occurrence and during the continuance of any
Default, (x) each Eurodollar Rate Advance will automatically, on the last day of
the then existing Interest Period therefor, Convert into a Base Rate Advance and
(y) the obligation of the Lenders to make, or to Convert Advances into,
Eurodollar Rate Advances shall be suspended.
SECTION 2.10. Increased Costs, Etc. (a) If, due to either (i)
the introduction of or any change in or in the interpretation of any law or
regulation or (ii) the 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 (other than in taxes, including
interest, additions to tax and penalties relating thereto, except to the extent
that the same are required to be paid pursuant to Section 2.13 hereof) to any
Lender of agreeing to make or of making, funding or maintaining Eurodollar Rate
Advances or LIBO Rate Advances (excluding for purposes of this Section 2.10 any
such increased costs resulting from (x) Taxes, Other Taxes, Excluded Taxes or
taxes excluded from the definitions of Taxes or Other Taxes in Section 2.13(e)
or from indemnification pursuant to Section 2.13(f) (as to which Section 2.13
shall govern) and (y) changes in the basis of taxation of overall net income or
overall gross income by the United States or by the foreign jurisdiction or
state under the laws of which such Lender is organized or has its Applicable
Lending Office or any political subdivision thereof), then the Borrower shall
from time to time, upon demand by such Lender (with a copy of such demand to the
Administrative Agent), pay to the Administrative Agent for the account of such
Lender additional amounts sufficient to compensate such Lender for such
increased cost; provided, however, that, before making any such demand, each
Lender agrees to use reasonable efforts (consistent with its internal policy and
legal and regulatory restrictions) to designate a different Applicable Lending
Office if the making of such a designation would avoid the need for, or reduce
the amount of, such increased cost and would not, in the reasonable judgment of
such Lender, be otherwise disadvantageous to such Lender and provided further
that the Borrower's obligations to any Designated Lender hereunder shall be
limited as set forth in Section 8.04(e). A certificate as to the amount of such
increased cost, submitted to the Borrower by such Lender, shall be conclusive
and binding for all purposes, absent manifest error.
(b) If any Lender determines that compliance with any law or
regulation or any guideline or request from any central bank or other
governmental authority (whether or not having
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38
the force of law) affects or would affect the amount of capital required or
expected to be maintained by such Lender or any corporation controlling such
Lender and that the amount of such capital is increased by or based upon the
existence of such Lender's commitment to lend, then, upon demand by such Lender
(with a copy of such demand to the Administrative Agent), the Borrower shall pay
to the Administrative Agent for the account of such Lender, from time to time as
specified by such Lender, additional amounts sufficient to compensate such
Lender in the light of such circumstances, to the extent that such Lender
reasonably determines such increase in capital to be allocable to the existence
of such Lender's commitment to lend, provided, however, that the Borrower's
obligations to any Designated Lender hereunder shall be limited as set forth in
Section 8.04(e). A certificate as to such amounts submitted to the Borrower by
such Lender shall be conclusive and binding for all purposes, absent manifest
error.
(c) If, with respect to any Eurodollar Rate Advances, Lenders
(other than Designated Lenders) owed at least a majority of the then aggregate
unpaid principal amount thereof notify the Administrative Agent that the
Eurodollar Rate for any Interest Period for such Advances will not adequately
reflect the cost (excluding for purposes of this Section 2.10 any such increased
costs resulting from (i) Taxes, Other Taxes, Excluded Taxes or taxes excluded
from the definitions of Taxes or Other Taxes in Section 2.13(e) or from
indemnification pursuant to Section 2.13(f) (as to which Section 2.13 shall
govern) and (ii) changes in the basis of taxation of overall net income or
overall gross income by the United States or by the foreign jurisdiction or
state under the laws of which such Lender is organized or has its Applicable
Lending Office or any political subdivision thereof) to such Lenders of making,
funding or maintaining their Eurodollar Rate Advances for such Interest Period,
the Administrative Agent shall forthwith so notify the Borrower and the Lenders,
whereupon (i) each such Eurodollar Rate Advance will automatically, on the last
day of the then existing Interest Period therefor, Convert into a Base Rate
Advance and (ii) the obligation of the Lenders to make, or to Convert Advances
into, Eurodollar Rate Advances shall be suspended until the Administrative Agent
shall notify the Borrower that such Lenders have determined that the
circumstances causing such suspension no longer exist.
SECTION 2.11. Illegality. Notwithstanding any other provision
of this Agreement, if any Lender (other than a Designated Lender) shall notify
the Administrative Agent 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 any Lender or
its Eurodollar Lending Office to perform its obligations hereunder to make
Eurodollar Rate Advances or LIBO Rate Advances or to fund or maintain Eurodollar
Rate Advances or LIBO Rate Advances hereunder, (i) each Eurodollar Rate Advance
or LIBO Rate Advance, as the case may be, will automatically, upon such demand,
Convert into a Base Rate Advance and (ii) the obligation of the Lenders to make
Eurodollar Rate Advances or LIBO Rate Advances or to Convert Revolving Credit
Advances into Eurodollar Rate Advances shall be suspended until the
Administrative Agent shall notify the Borrower and the Lenders that the
circumstances causing such suspension no longer exist; provided that if it
becomes unlawful for any Designated Lender or its Eurodollar Lending Office to
perform its obligations hereunder to make or fund or maintain Eurodollar Rate
Advances or LIBO
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39
Rate Advances, such Designated Lender shall immediately assign its rights and
obligations with respect to such Advance to its applicable Designating Lender.
SECTION 2.12. Payments and Computations. (a) The Borrower
shall make each payment hereunder and under the Notes, if any, irrespective of
counterclaim or set-off (except as otherwise provided in Section 2.16), not
later than 11:00 A.M. (New York City time) on the day when due in U.S. dollars
to the Administrative Agent at the Administrative Agent's Account in same day
funds. The Administrative Agent will promptly thereafter cause to be distributed
like funds relating to the payment of principal or interest or commitment fees
ratably (other than amounts payable pursuant to Section 2.03, 2.10, 2.13 or
8.04(c)) to the Lenders for the account of their respective Applicable Lending
Offices, and like funds relating to the payment of any other amount payable to
any Lender to such Lender for the account of its Applicable Lending Office, in
each case to be applied in accordance with the terms of this Agreement. Upon its
acceptance of an Assignment and Acceptance and recording of the information
contained therein in the Register pursuant to Section 8.07(c), from and after
the effective date specified in such Assignment and Acceptance, the
Administrative Agent shall make all payments hereunder and under any Notes
issued in connection therewith in respect of the interest assigned thereby to
the Lender assignee thereunder, and the parties to such Assignment and
Acceptance shall make all appropriate adjustments in such payments for periods
prior to such effective date directly between themselves.
(b) If the Administrative Agent receives funds for application
to the Obligations under the Loan Documents under circumstances for which the
Loan Documents do not specify the Advances to which, or the manner in which,
such funds are to be applied, the Administrative Agent may, but shall not be
obligated to, elect to distribute such funds to each Lender ratably in
accordance with such Lender's proportionate share of the principal amount of all
outstanding Advances, in repayment or prepayment of such of the outstanding
Advances or other Obligations owed to such Lender, and for application to such
principal installments, as the Administrative Agent shall direct.
(c) The Borrower hereby authorizes each Lender, if and to the
extent payment owed to such Lender is not made when due hereunder or under the
Note, if any, held by such Lender, to charge from time to time against any or
all of the Borrower's accounts with such Lender any amount so due.
(d) All computations of interest based on clause (a) of the
definition of Base Rate shall be made by the Administrative Agent on the basis
of a year of 365 or 366 days, as the case may be, and all computations of
interest based on the Eurodollar Rate, the LIBO Rate or the Federal Funds Rate
and fees shall be made by the Administrative Agent on the basis of a year of 360
days, in each case for the actual number of days (including the first day but
excluding the last day) occurring in the period for which such interest or
commitment fees are payable. Each determination by the Administrative Agent of
an interest rate hereunder shall be conclusive and binding for all purposes,
absent manifest error.
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(e) Whenever any payment hereunder or under the Notes, if any,
shall be stated to be due on a day other than a Business Day, such payment shall
be made on the next succeeding Business Day, and such extension of time shall in
such case be included in the computation of payment of interest or commitment
fee, as the case may be; provided, however, that, if such extension would cause
payment of interest on or principal of Eurodollar Rate Advances or LIBO Rate
Advances to be made in the next following calendar month, such payment shall be
made on the next preceding Business Day.
(f) Unless the Administrative Agent shall have received notice
from the Borrower prior to the date on which any payment is due to the Lenders
hereunder that the Borrower will not make such payment in full, the
Administrative Agent may assume that the Borrower has made such payment in full
to the Administrative Agent on such date and the Administrative Agent may, in
reliance upon such assumption, cause to be distributed to each Lender on such
due date an amount equal to the amount then due such Lender. If and to the
extent the Borrower shall not have so made such payment in full to the
Administrative Agent, each Lender shall repay to the Administrative Agent
forthwith on demand such amount distributed to such Lender together with
interest thereon, for each day from the date such amount is distributed to such
Lender until the date such Lender repays such amount to the Administrative
Agent, at the Federal Funds Rate.
SECTION 2.13. Taxes. (a) Any and all payments by the Borrower
hereunder or under any Notes shall be made, in accordance with Section 2.12,
free and clear of and without deduction for any and all present or future taxes,
levies, imposts, deductions, charges or withholdings, and all liabilities with
respect thereto, excluding, in the case of each Lender and each Agent, Excluded
Taxes (all such non-Excluded Taxes, levies, imposts, deductions, charges,
withholdings and liabilities being hereinafter referred to as "Taxes"). If the
Borrower shall be required by law to deduct any Taxes from or in respect of any
sum payable hereunder or under any Note to any Lender or any Agent, (i) the sum
payable shall be increased as may be necessary so that after making all required
deductions (including deductions applicable to additional sums payable under
this Section 2.13) such Lender or such Agent (as the case may be) receives an
amount equal to the sum it would have received had no such deductions been made,
(ii) the Borrower shall make such deductions and (iii) the Borrower shall pay
the full amount deducted to the relevant taxation authority or other authority
in accordance with applicable law.
(b) In addition, the Borrower agrees to pay any present or
future stamp or documentary taxes or any other excise or property taxes, charges
or similar levies that arise from any payment made hereunder or under any Notes
or from the execution, delivery or registration of, or otherwise with respect
to, this Agreement or any Note (hereinafter referred to as "Other Taxes").
(c) The Borrower will indemnify each Lender and each Agent for
the full amount of Taxes or Other Taxes (including, without limitation, any
Taxes or Other Taxes imposed by any jurisdiction on amounts payable under this
Section 2.13) paid by such Lender or such Agent (as the case may be) and any
liability (including penalties, interest and expenses) arising therefrom or with
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41
respect thereto. This indemnification shall be made within 30 days from the date
such Lender or such Agent (as the case may be) makes written demand therefor,
including in such demand an identification of the Taxes or Other Taxes (together
with the amounts thereof) with respect to which such indemnification is being
sought.
(d) Within 30 days after the date of any payment of Taxes, the
Borrower will furnish to the Administrative Agent and the Documentation Agents,
at their respective addresses referred to in Section 8.02, the original or a
certified copy of a receipt evidencing payment thereof. In the case of any
payment hereunder or under any Notes by or on behalf of the Borrower through an
account or branch outside the United States or on behalf of the Borrower by a
payor that is not a United States person, if the Borrower determines that no
Taxes are payable in respect thereof, the Borrower shall furnish, or shall cause
such payor to furnish, to the Administrative Agent and the Documentation Agents,
at such address, an opinion of counsel acceptable to the Administrative Agent
stating that such payment is exempt from Taxes. For purposes of this subsection
(d) and subsection (e), the terms "United States" and "United States person"
shall have the meanings specified in Section 7701 of the Internal Revenue Code.
(e) Each Lender organized under the laws of a jurisdiction
outside the United States, on or prior to the date of its execution and delivery
of this Agreement in the case of each Initial Lender, and on the date of the
Assignment and Acceptance or Designation Agreement pursuant to which it becomes
a Lender in the case of each other Lender, and from time to time thereafter if
requested in writing by the Borrower (but only so long as such Lender remains
lawfully able to do so), shall provide both the Administrative Agent and the
Borrower with two original Internal Revenue Service forms 1001, 4224 or W-8 as
appropriate, or any successor or other form prescribed by the Internal Revenue
Service, certifying that such Lender is exempt from or entitled to a reduced
rate of United States withholding tax on payments pursuant to this Agreement or
the Notes, if any. If any Lender which is not a "United States person"
determines that it is unable to submit to the Borrower or the Administrative
Agent any form or certificate that such Lender is otherwise required to submit
pursuant to this Section 2.13, or that it is required to withdraw or cancel any
such form or certificate, or that any such form or certificate previously
submitted has otherwise become ineffective or inaccurate, such Lender shall
promptly notify the Borrower and the Administrative Agent of such fact. In
addition, if a Lender provides a form W-8 (or any successor or related form) to
the Administrative Agent and the Borrower pursuant to this Section 2.13, such
Lender shall also provide a certificate stating that such Lender is not a "bank"
within the meaning of section 881(c)(3)(A) of the Internal Revenue Code of 1986
and shall promptly notify the Administrative Agent and the Borrower if such
Lender determines that it is no longer able to provide such certification. If
the form provided by a Lender at the time such Lender first becomes a party to
this Agreement indicates a United States interest withholding tax rate in excess
of zero, withholding tax at such rate shall be considered excluded from Taxes
unless and until such Lender provides the appropriate form certifying that a
lesser rate applies, whereupon withholding tax at such lesser rate only shall be
considered excluded from Taxes for periods governed by such form; provided,
however, that, if at the date of the Assignment and Acceptance pursuant to which
a Lender
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42
becomes a party to this Agreement, the Lender assignor was entitled to payments
under subsection (a) in respect of United States withholding tax with respect to
interest paid at such date, then, to such extent, the term Taxes shall include
(in addition to withholding taxes that may be imposed in the future or other
amounts otherwise includable in Taxes) United States withholding tax, if any,
applicable with respect to the Lender assignee on such date. Upon the reasonable
request of the Borrower or the Administrative Agent, each Lender that has not
provided the forms or other documents, as provided above, on the basis of being
a United States person shall submit to the Borrower and the Administrative Agent
a certificate to the effect that it is such a "United States person" (as defined
in Section 7701(a)(30) of the Internal Revenue Code).
(f) For any period with respect to which a Lender has failed
to provide the Borrower with the appropriate form described in Section 2.13(e)
(other than if such failure is due to a change in law occurring subsequent to
the date on which such Lender became a Lender hereunder, or if such form
otherwise is not required under the first sentence of subsection (e) above
because the Borrower has not requested in writing such form subsequent to the
date on which such Lender became a Lender hereunder), such Lender shall not be
entitled to indemnification under Section 2.13(a) or (c) with respect to Taxes
imposed by the United States; provided, however, that should a Lender become
subject to Taxes because of its failure to deliver a form required hereunder,
the Borrower shall take such steps as the Lender shall reasonably request to
assist the Lender to recover such Taxes.
(g) Any Lender or Agent claiming any additional amounts
payable pursuant to this Section 2.13 shall use reasonable efforts (consistent
with its internal policy and legal and regulatory restrictions) to change the
jurisdiction of its Eurodollar Lending Office if the making of such a change
would avoid the need for, or reduce the amount of, any such additional amounts
that may thereafter accrue and would not, in the reasonable judgment of such
Lender, be otherwise disadvantageous to such Lender.
(h) Within 60 days after the written request of the Borrower,
each Lender or Agent shall execute and deliver to the Borrower such certificates
or forms as are reasonably requested by the Borrower in such request, which can
be furnished consistent with the facts and which are reasonably necessary to
assist the Borrower in applying for refunds of Taxes paid by the Borrower
hereunder or making payment of Taxes hereunder; provided, however, that no
Lender or Agent shall be required to furnish to the Borrower and financial or
other information which it considers confidential. The cost of preparing any
materials referred to in the previous sentence shall be borne by the Borrower.
If a Lender or Agent determines in good faith that it has received a refund of
any Taxes or Other Taxes with respect to which Borrower has made a payment of
additional amounts, such Lender or Agent shall pay to the Borrower an amount
that such Lender or Agent determines in good faith to be equal to the net
benefit, after tax, that was obtained by such Lender or Agent (as the case may
be) as a consequence of such refund.
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(i) All obligations of the Borrower owed to any Designated
Lender pursuant to this Section 2.13 shall be limited to the amount that the
Borrower would be obligated to pay to such Designated Lender's applicable
Designating Lender but for such designation, as set forth in Section 8.04(e).
SECTION 2.14. Sharing of Payments, Etc. If any Lender shall
obtain any payment (whether voluntary, involuntary, through the exercise of any
right of set-off, or otherwise) on account of Obligations owing to it (other
than pursuant to Section 2.10, 2.13 or 8.04(c)) in excess of its ratable share
of payments on account of the Obligations obtained by all the Lenders, such
Lender shall forthwith purchase from the other Lenders such participations in
Obligations owing to them as shall be necessary to cause such purchasing Lender
to share the excess payment ratably with each of them; provided, however, that
if all or any portion of such excess payment is thereafter recovered from such
purchasing Lender, such purchase from each Lender shall be rescinded and such
Lender shall repay to the purchasing Lender the purchase price to the extent of
such recovery together with an amount equal to such Lender's ratable share
(according to the proportion of (i) the amount of such Lender's required
repayment to (ii) the total amount so recovered from the purchasing Lender) of
any interest or other amount paid or payable by the purchasing Lender in respect
of the total amount so recovered. The Borrower agrees that any Lender so
purchasing a participation from another Lender pursuant to this Section 2.14
may, to the fullest extent permitted by law, exercise all its rights of payment
(including the right of set-off) with respect to such participation as fully as
if such Lender were the direct creditor of the Borrower in the amount of such
participation.
SECTION 2.15. Use of Proceeds. The proceeds of the Advances
shall be available (and the Borrower agrees that it shall use such proceeds)
solely (a) to pay severance and other reorganization expenses in connection with
the Tender Offer and the Merger and transaction fees and expenses in connection
with the Tender Offer and the Merger and (b) for general corporate purposes
(other than for the purposes of paying the holders of Authentic Fitness Stock
the cash consideration for their shares in the Tender Offer or the Merger).
SECTION 2.16. Defaulting Lenders. (a) In the event that, at
any one time, (i) any Lender shall be a Defaulting Lender, (ii) such Defaulting
Lender shall owe a Defaulted Advance to the Borrower and (iii) the Borrower
shall be required to make any payment hereunder or under any other Loan Document
to or for the account of such Defaulting Lender, then the Borrower may, so long
as no Default shall occur or be continuing at such time and to the fullest
extent permitted by applicable law, set off and otherwise apply the Obligation
of the Borrower to make such payment to or for the account of such Defaulting
Lender against the Obligation of such Defaulting Lender to make such Defaulted
Advance. In the event that, on any date, the Borrower shall so set off and
otherwise apply its Obligation to make any such payment against the Obligation
of such Defaulting Lender to make any such Defaulted Advance on or prior to such
date, the amount so set off and otherwise applied by the Borrower shall
constitute for all purposes of this Agreement and the other Loan Documents an
Advance by such Defaulting Lender made on the date on which such Defaulted
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44
Advance was originally required to have been made pursuant to Section 2.01. Such
Advance shall be a Base Rate Advance and shall be considered, for all purposes
of this Agreement, to comprise part of the Borrowing in connection with which
such Defaulted Advance was originally required to have been made pursuant to
Section 2.01, even if the other Advances comprising such Borrowing shall be
Eurodollar Rate Advances on the date such Advance is deemed to be made pursuant
to this subsection (a). The Borrower shall notify the Administrative Agent at
any time the Borrower exercises its right of set-off pursuant to this subsection
(a) and shall set forth in such notice (A) the name of the Defaulting Lender and
the Defaulted Advance required to be made by such Defaulting Lender and (B) the
amount set off and otherwise applied in respect of such Defaulted Advance
pursuant to this subsection (a). Any portion of such payment otherwise required
to be made by the Borrower to or for the account of such Defaulting Lender which
is paid by the Borrower, after giving effect to the amount set off and otherwise
applied by the Borrower pursuant to this subsection (a), shall be applied by the
Administrative Agent as specified in subsection (b) or (c) of this Section 2.16.
(b) In the event that, at any one time, (i) any Lender shall
be a Defaulting Lender, (ii) such Defaulting Lender shall owe a Defaulted Amount
to any Agent or any of the other Lenders and (iii) the Borrower shall make any
payment hereunder or under any other Loan Document to the Administrative Agent
for the account of such Defaulting Lender, then the Administrative Agent may, on
its behalf or on behalf of such other Lenders and to the fullest extent
permitted by applicable law, apply at such time the amount so paid by the
Borrower to or for the account of such Defaulting Lender to the payment of each
such Defaulted Amount to the extent required to pay such Defaulted Amount. In
the event that the Administrative Agent shall so apply any such amount to the
payment of any such Defaulted Amount on any date, the amount so applied by the
Administrative Agent shall constitute for all purposes of this Agreement and the
other Loan Documents payment, to such extent, of such Defaulted Amount on such
date. Any such amount so applied by the Administrative Agent shall be retained
by the Administrative Agent or distributed by the Administrative Agent to such
other Lenders, ratably in accordance with the respective portions of such
Defaulted Amounts payable at such time to the Administrative Agent and such
other Lenders and, if the amount of such payment made by the Borrower shall at
such time be insufficient to pay all Defaulted Amounts owing at such time to the
Administrative Agent and the other Lenders, in the following order of priority:
(i) first, to the Agents for any Defaulted Amount then owing
to the Agents; and
(ii) second, to any other Lenders for any Defaulted Amounts
then owing to such other Lenders, ratably in accordance with such
respective Defaulted Amounts then owing to such other Lenders.
Any portion of such amount paid by the Borrower for the account of such
Defaulting Lender remaining, after giving effect to the amount applied by the
Administrative Agent pursuant to this subsection (b), shall be applied by the
Administrative Agent as specified in subsection (c) of this Section 2.16.
<PAGE>
45
(c) In the event that, at any one time, (i) any Lender shall
be a Defaulting Lender, (ii) such Defaulting Lender shall not owe a Defaulted
Advance or a Defaulted Amount and (iii) the Borrower, any Agent or any other
Lender shall be required to pay or distribute any amount hereunder or under any
other Loan Document to or for the account of such Defaulting Lender, then the
Borrower or such other Lender shall pay such amount to the Administrative Agent
to be held by the Administrative Agent, to the fullest extent permitted by
applicable law, in escrow or the Administrative Agent shall, to the fullest
extent permitted by applicable law, hold in escrow such amount otherwise held by
it. Any funds held by the Administrative Agent in escrow under this subsection
(c) shall be deposited by the Administrative Agent in an account with the
Administrative Agent, in the name and under the control of the Administrative
Agent, but subject to the provisions of this subsection (c). The terms
applicable to such account, including the rate of interest payable with respect
to the credit balance of such account from time to time, shall be the
Administrative Agent's standard terms applicable to escrow accounts maintained
with it. Any interest credited to such account from time to time shall be held
by the Administrative Agent in escrow under, and applied by the Administrative
Agent from time to time in accordance with the provisions of, this subsection
(c). The Administrative Agent shall, to the fullest extent permitted by
applicable law, apply all funds so held in escrow from time to time to the
extent necessary to make any Advances required to be made by such Defaulting
Lender and to pay any amount payable by such Defaulting Lender hereunder and
under the other Loan Documents to any Agent or any other Lender, as and when
such Advances or amounts are required to be made or paid and, if the amount so
held in escrow shall at any time be insufficient to make and pay all such
Advances and amounts required to be made or paid at such time, in the following
order of priority:
(i) first, to the Agents for any amount then due and payable
by such Defaulting Lender to the Agents hereunder;
(ii) second, to any other Lenders for any amount then due and
payable by such Defaulting Lender to such other Lenders hereunder,
ratably in accordance with such respective amounts then due and payable
to such other Lenders; and
(iii) third, to the Borrower for any Advance then required to
be made by such Defaulting Lender pursuant to a Commitment of such
Defaulting Lender.
In the event that any Lender that is a Defaulting Lender shall, at any time,
cease to be a Defaulting Lender, any funds held by the Administrative Agent in
escrow at such time with respect to such Lender shall be distributed by the
Administrative Agent to such Lender and applied by such Lender to the
Obligations owing to such Lender at such time under this Agreement and the other
Loan Documents ratably in accordance with the respective amounts of such
Obligations outstanding at such time.
(d) The rights and remedies against a Defaulting Lender under
this Section 2.16 are in addition to other rights and remedies that the Borrower
may have against such Defaulting
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46
Lender with respect to any Defaulted Advance and that any Agent or any Lender
may have against such Defaulting Lender with respect to any Defaulted Amount.
SECTION 2.17. Evidence of Debt. (a) Each Lender shall maintain
in accordance with its usual practice an account or accounts evidencing the
indebtedness of the Borrower to such Lender resulting from each Advance owing to
such Lender from time to time, including the amounts of principal and interest
payable and paid to such Lender from time to time hereunder. The Borrower agrees
that upon notice by any Lender to the Borrower (with a copy of such notice to
the Administrative Agent) to the effect that a promissory note or other evidence
of indebtedness is required or appropriate in order for such Lender to evidence
(whether for purposes of pledge, enforcement or otherwise) the Revolving Credit
Advances owing to, or to be made by, such Lender, the Borrower shall promptly
execute and deliver to such Lender a promissory note substantially in the form
of Exhibit A-1 hereto (each a "Revolving Credit Note"), payable to the order of
such Lender in a principal amount equal to the Revolving Credit Commitment of
such Lender.
(b) The Register maintained by the Administrative Agent
pursuant to Section 8.07(g) shall include a control account, and a subsidiary
account for each Lender, in which accounts (taken together) shall be recorded
(i) the date and amount of each Borrowing made hereunder, the Type of Advances
comprising such Borrowing and, if appropriate, the Interest Period applicable
thereto, (ii) the terms of each Assignment and Acceptance delivered to and
accepted by it, (iii) the amount of any principal or interest due and payable or
to become due and payable from the Borrower to each Lender hereunder, and (iv)
the amount of any sum received by the Administrative Agent from the Borrower
hereunder and each Lender's share thereof.
(c) Entries made in good faith by the Administrative Agent in
the Register pursuant to subsection (b) above, and by each Lender in its account
or accounts pursuant to subsection (a) above, shall be prima facie evidence of
the amount of principal and interest due and payable or to become due and
payable from the Borrower to, in the case of the Register, each Lender and, in
the case of such account or accounts, such Lender, under this Agreement, absent
manifest error; provided, however, that the failure of the Administrative Agent
or such Lender to make an entry, or any finding that an entry is incorrect, in
the Register or such account or accounts shall not limit or otherwise affect the
obligations of the Borrower under this Agreement.
SECTION 2.18. Increase in Revolving Credit Commitments. From
time to time during the period from the Effective Date until the date that is
forty (40) days after the Effective Date, additional Persons may become parties
hereto as Lenders by executing and delivering an Assumption Agreement to the
Administrative Agent which indicates the amount of Revolving Credit Commitment
of such Lender; provided that in no event shall the aggregate Revolving Credit
Commitments exceed $500,000,000. At the time an Assumption Agreement is accepted
by the Administrative Agent, (a) the new Lender party to such Assumption
Agreement shall fund its pro rata share of the aggregate outstanding Revolving
Credit Advances, (b) each existing Lender's share of the outstanding Revolving
Credit Advances shall be proportionately reduced by the amount
<PAGE>
47
funded by such new Lender and (c) any such reduction of the Revolving Credit
Advances of the existing Lenders on any day other than on the last day of an
Interest Period shall be accompanied by a payment by the Borrower of all
amounts, if any, required pursuant to Section 8.04(c).
ARTICLE III
CONDITIONS TO EFFECTIVENESS AND LENDING
SECTION 3.01. Conditions Precedent to Effectiveness. This
Agreement shall become effective on and as of the first date (the "Effective
Date") on which the following conditions precedent have been satisfied:
(a) All governmental and third party consents and approvals
necessary in connection with the Loan Documents shall have been
obtained (without the imposition of any conditions that are not
acceptable to the Lenders) and shall remain in effect, all applicable
waiting periods shall have expired without any action being taken by
any competent authority and no law or regulation shall be applicable in
the reasonable judgment of the Lenders that restrains, prevents or
imposes materially adverse conditions on the Loan Documents.
(b) The Borrower shall have paid all accrued and invoiced fees
and expenses of the Agents and the Lenders (including the accrued and
invoiced fees and expenses of counsel to the Agents).
(c) On the Effective Date, the following statements shall be
true and the Administrative Agent shall have received for the account
of each Lender a certificate signed by a duly authorized officer of the
Borrower, dated the Effective Date, stating that:
(i) The representations and warranties contained in
each Loan Document are correct on and as of the Effective
Date, and
(ii) No event has occurred and is continuing that
constitutes a Default.
(d) There shall have occurred no Material Adverse Change since
January 2, 1999, and all information provided by or on behalf of the
Borrower to the Lenders shall be true and correct in all material
aspects.
(e) There shall exist no action, suit, investigation,
litigation or proceeding affecting any Loan Party or any of its
Subsidiaries, including any Environmental Action, pending or threatened
before any court, governmental agency or arbitrator that (i) purports
to affect the legality, validity or enforceability of this Agreement,
any other Loan Document
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48
or (ii) is or would be reasonably likely to have a Material Adverse
Effect, except, in the case of this clause (ii), for any such action,
suit, investigation, litigation or proceeding described on Schedule
4.01(g) hereto.
(f) The Lenders shall be reasonably satisfied that the
Existing 364 Day Credit Facility has been (or concurrently will be)
prepaid, redeemed or defeased in full or otherwise satisfied and
extinguished.
(g) The Lenders and the Agents shall be reasonably satisfied
with the corporate and legal structure and capitalization of the
Borrower and the Guarantors, including, without limitation, the charter
and by-laws of the Borrower and the Guarantors.
(h) The Administrative Agent shall have received on or before
the Effective Date the following, each dated such day, in form and
substance satisfactory to the Administrative Agent and in sufficient
copies for each Lender:
(i) A guaranty in substantially the form of Exhibit F
(as amended, supplemented or otherwise modified from time to
time in accordance with its terms, the "Group Guaranty"), duly
executed by Group.
(ii) A guaranty in substantially the form of Exhibit
G (together with each other guaranty delivered pursuant to
Section 5.01(j), in each case as amended, supplemented or
otherwise modified from time to time in accordance with its
terms, the "Subsidiary Guaranty"), duly executed by the
Guarantors (other than Group).
(iii) Certified copies of the resolutions of the
Board of Directors of the Borrower and each other Loan Party
approving this Agreement and each other Loan Document to which
it is or is to be a party and the transactions contemplated
hereby, and of all documents evidencing other necessary
corporate action and governmental approvals, if any, with
respect to this Agreement and each other Loan Document.
(iv) A certificate of the Secretary or an Assistant
Secretary of the Borrower and each other Loan Party certifying
the names and true signatures of the officers of the Borrower
and such other Loan Party authorized to sign this Agreement,
each other Loan Document to which they are or are to be
parties and the other documents to be delivered hereunder and
thereunder.
(v) If requested by any Lender, a Revolving Credit
Note to the order of such Lender.
(vi) A favorable opinion of Skadden, Arps, Slate,
Meagher & Flom LLP, special counsel for the Loan Parties, in
substantially the form of Exhibit E-1 hereto
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49
with such changes as may approved by the Administrative Agent
and as to such other matters as any Lender through the
Administrative Agent may reasonably request.
(vii) A favorable opinion of Stanley P. Silverstein,
General Counsel for the Borrower, in substantially the form of
Exhibit E-2 hereto with such changes as may approved by the
Administrative Agent and as to such other matters as any
Lender through the Administrative Agent may reasonably
request.
(viii) A favorable opinion of Shearman & Sterling,
counsel for the Arrangers, in form and substance reasonably
satisfactory to the Arrangers.
(ix) The Existing Five Year Credit Agreement, in form
and substance satisfactory to the Arrangers, duly executed by
all parties required thereunder and the Trade Credit Facility,
in form and substance satisfactory to the Arrangers, duly
executed by all parties required thereunder.
(x) Copies of amendments to such of the other credit
facilities of the Borrower and Group and their respective
Subsidiaries which are necessary to make such facilities
consistent with the Existing Five Year Credit Agreement, in
form and substance reasonably satisfactory to the Arrangers.
SECTION 3.02. Conditions Precedent to Each Borrowing. The
obligation of each Lender to make an Advance (other than a Swing Line Advance
made by a Lender pursuant to Section 2.02(b)(ii)), and the right of the Borrower
to request a Swing Line Borrowing, shall be subject to the further conditions
precedent that on the date of such Borrowing (including the initial Borrowing)
the following statements shall be true (and each of the giving of the applicable
Notice of Borrowing or Notice of Swing Line Borrowing and the acceptance by the
Borrower of the proceeds of such Borrowing shall constitute a representation and
warranty by the Borrower that on the date of such Borrowing such statements are
true):
(a) the representations and warranties contained in each Loan
Document are correct in all material respects on and as of the date of
such Borrowing, before and after giving effect to such Borrowing (other
than solely with respect to Revolving Credit Advances used to the fund
the payment of commercial paper issued by the Borrower from time to
time, the representation and warranties contained in Section
4.01(f)(ii) hereof) and to the application of the proceeds therefrom,
as though made on and as of such date other than any such
representations or warranties that, by their terms, refer to a specific
date other than the date of such Borrowing, in which case such
representations and warranties shall have been correct as of such
specific date, and
(b) no event has occurred and is continuing, or would result
from such Borrowing or from the application of the proceeds therefrom,
that constitutes a Default.
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50
SECTION 3.03. Determinations Under Section 3.01. For purposes
of determining compliance with the conditions specified in Section 3.01, each
Lender shall be deemed to have consented to, approved or accepted or to be
satisfied with each document or other matter required thereunder to be consented
to or approved by or acceptable or satisfactory to the Lenders unless an officer
of the Administrative Agent responsible for the transactions contemplated by
Loan Documents shall have received notice from such Lender prior to the date
that the Borrower, by notice to the Lenders, designates as the proposed
Effective Date, specifying its objection thereto. The Administrative Agent shall
promptly notify the Lenders of the occurrence of the Effective Date.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
SECTION 4.01. Representations and Warranties of the Borrower.
Each of Group and the Borrower represents and warrants as follows:
(a) Each Loan Party (i) is a corporation duly organized,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) is duly qualified and in good
standing as a foreign corporation in each other jurisdiction in which
it owns or leases property or in which the conduct of its business
requires it to so qualify or be licensed except where the failure to so
qualify or be licensed would not have a Material Adverse Effect and
(iii) has all requisite corporate power and authority to own or lease
and operate its properties and to carry on its business as now
conducted and as proposed to be conducted.
(b) Set forth on Schedule 4.01(b) hereto is a complete and
accurate list of all Subsidiaries of each Loan Party, showing as of the
date hereof (as to each such Subsidiary) whether or not such Subsidiary
is a wholly-owned Subsidiary. Each such Subsidiary (i) is a corporation
duly organized, a limited liability company or a trust duly formed,
validly existing and in good standing under the laws of the
jurisdiction of its incorporation, (ii) is duly qualified and in good
standing as a foreign corporation, limited liability company or trust
in each other jurisdiction in which it owns or leases property or in
which the conduct of its business requires it to so qualify or be
licensed except where the failure to so qualify or be licensed would
not have a Material Adverse Effect and (iii) has all requisite
corporate power and authority to own or lease and operate its
properties and to carry on its business as now conducted and as
proposed to be conducted.
(c) The execution, delivery and performance by each Loan Party
of this Agreement and each other Loan Document to which it is or is to
be a party, and the consummation of the transactions contemplated
hereby are, within such Loan Party's corporate powers, have been duly
authorized by all necessary corporate action, and do not (i) contravene
such Loan Party's charter or by-laws, (ii) violate any law, rule,
regulation,
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51
order, writ, judgment, injunction, decree, determination or award,
(iii) conflict with or result in the breach of, or constitute a default
under, any contract, loan agreement, indenture, mortgage, deed of
trust, lease or other instrument binding on or affecting any Loan
Party, any of its Subsidiaries or any of their respective properties or
(iv) result in or require the creation or imposition of any Lien upon
or with respect to any of the properties of any Loan Party or any of
its Subsidiaries. No Loan Party or any of its Subsidiaries is in
violation of any such law, rule, regulation, order, writ, judgment,
injunction, decree, determination or award or in breach of any such
contract, loan agreement, indenture, mortgage, deed of trust, lease or
other instrument, the violation or breach of which is or would be
reasonably likely to have a Material Adverse Effect.
(d) No authorization or approval or other action by, and no
notice to or filing with, any governmental authority or regulatory body
or any other third party is required for the due execution, delivery,
recordation, filing or performance by any Loan Party of this Agreement
or any other Loan Document to which it is or is to be a party, or for
the consummation of the transactions contemplated hereby.
(e) This Agreement has been, and each other Loan Document when
delivered hereunder will have been, duly executed and delivered by each
Loan Party party thereto. This Agreement is, and each other Loan
Document when delivered hereunder will be, the legal, valid and binding
obligation of each Loan Party party thereto, enforceable against such
Loan Party in accordance with its terms, except as enforcement may be
limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other similar laws affecting creditors' rights generally
and by general principles of equity (regardless of whether enforcement
is sought in equity or at law).
(f) (i) The Consolidated balance sheets of Group and its
Subsidiaries as at January 2, 1999, and the related Consolidated
statements of operations, stockholders' equity and cash flow of Group
and its Subsidiaries for the fiscal years then ended, accompanied by an
opinion of PricewaterhouseCoopers LLP, independent public accountants,
and the Consolidated balance sheet of Group and its Subsidiaries as at
July 3, 1999, and the related Consolidated statements of operations,
stockholders' equity and cash flow of Group and its Subsidiaries for
the six months then ended, duly certified by the chief financial
officer of Group, copies of which have been furnished to each Lender,
fairly present, subject, in the case of said balance sheet as at July
3, 1999, and said statements of operations, stockholders' equity and
cash flow for the six months then ended, to year-end audit adjustments,
the Consolidated financial condition of Group and its Subsidiaries as
at such dates and the Consolidated results of the operations of Group
and its Subsidiaries for the periods ended on such dates, all in
accordance with generally accepted accounting principles applied on a
consistent basis, and (ii) since January 2, 1999, there has been no
Material Adverse Change.
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52
(g) There is no action, suit, investigation, litigation or
proceeding affecting any Loan Party or any of its Subsidiaries,
including any Environmental Action, pending or threatened before any
court, governmental agency or arbitrator that (i) purports to affect
the legality, validity or enforceability of this Agreement or any other
Loan Document or (ii) is or would be reasonably likely to have a
Material Adverse Effect.
(h) No proceeds of any Advance will be used to acquire any
equity security of a class that is registered pursuant to Section 12 of
the Securities Exchange Act of 1934, as amended (other than (i) shares
of capital stock of Group and (ii) to the extent applicable, in
connection with an acquisition of a company, so long as (x) the board
of directors of such company shall have approved such acquisition at
the time such acquisition is first publicly announced, (y) if such
company shall have been soliciting bids for its acquisition, the board
of directors of such company shall not have determined either to accept
no offer or to accept an offer other than the offer of Group or one of
its Subsidiaries or (z) if such company shall not have been soliciting
bids for its acquisition or if the board of directors of such company
shall have solicited bids for its acquisition but shall have initially
determined either to accept no offer or to accept an offer other than
the offer of Group or one of its Subsidiaries, the existence, amount
and availability for the acquisition of such company of the Commitments
hereunder shall not have been disclosed, orally or in writing, to such
company or its advisors; provided, that the public filing of this
Agreement shall not be deemed to be disclosure of the Commitments
hereunder to such company or its advisors, until after such time as the
board of directors of such company shall have approved such acquisition
by Group or one of its Subsidiaries and so long as, in any case, such
acquisition is otherwise permitted hereunder).
(i) Neither any Loan Party nor any of its Subsidiaries is an
"investment company," or an "affiliated person" of, or "promoter" or
"principal underwriter" for, an "investment company," as such terms are
defined in the Investment Company Act of 1940, as amended. Neither the
making of any Advances, nor the application of the proceeds or
repayment thereof by the Borrower, nor the consummation of the other
transactions contemplated hereby, will violate any provision of such
Act or any rule, regulation or order of the Securities and Exchange
Commission thereunder.
(j) The Borrower is not engaged in the business of extending
credit for the purpose of purchasing or carrying Margin Stock, and no
proceeds of any Advance will be used to purchase or carry any Margin
Stock or to extend credit to others for the purpose of purchasing or
carrying any Margin Stock except for shares of capital stock of Group
and Authentic Fitness and as otherwise permitted in Section 4.01(h).
(k) For any date on or before December 31, 1999, the Borrower
has, and as soon as practicable after the Control Date, Authentic
Fitness will have (i) initiated a review and assessment of all areas
within its and each of its Subsidiaries' business and operations
(including those affected by suppliers, vendors and customers) that
could be adversely
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53
affected by the risk that computer applications used by such Person or
any of its Subsidiaries (or suppliers, vendors and customers) may be
unable to recognize and perform properly date-sensitive functions
involving certain dates prior to and any date after December 31, 1999
(the "Year 2000 Problem"), (ii) developed a plan and timetable for
addressing the Year 2000 problem on a timely basis and (iii) to date,
implemented that plan in accordance with such timetable. Based on the
foregoing, each such Person believes that all of its computer
applications that are material to its or any of its Subsidiaries'
business and operations are reasonably expected on a timely basis to be
able to perform properly date-sensitive functions for all dates before
and after January 1, 2000, except to the extent that a failure to do so
could not reasonably be expected to have a Material Adverse Effect.
ARTICLE V
COVENANTS OF THE BORROWER
SECTION 5.01. Affirmative Covenants. So long as any Advance
shall remain unpaid or any Lender shall have any Commitment hereunder, Group and
the Borrower will:
(a) Compliance with Laws, Etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable
laws, rules, regulations and orders, such compliance to include,
without limitation, compliance with ERISA and Environmental Laws,
except where the failure so to comply would not have a Material Adverse
Effect.
(b) Payment of Taxes, Etc. Pay and discharge, and cause each
of its Subsidiaries to pay and discharge, before the same shall become
delinquent, (i) all taxes, assessments and governmental charges or
levies imposed upon it or upon its property and (ii) all lawful claims
that, if unpaid, would reasonably be likely to by law become a Lien
upon its property; provided, however, that neither Group nor any of its
Subsidiaries shall be required to pay or discharge any such tax,
assessment, charge or claim that is being contested in good faith and
by proper proceedings and as to which appropriate reserves are being
maintained, unless and until any Lien resulting therefrom attaches to
its property and becomes enforceable against its other creditors so
long as any such amount, when taken together with any amount required
to be paid as described in clause (b) of the definition of "Permitted
Liens", shall not exceed $10 million.
(c) Maintenance of Insurance. Maintain, and cause each of its
Subsidiaries to maintain, insurance with responsible and reputable
insurance companies or associations in such amounts and covering such
risks as is usually carried by companies engaged in similar businesses
and owning similar properties in the same general areas in which it or
such Subsidiary operates.
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54
(d) Preservation of Corporate Existence, Etc. Preserve and
maintain, and cause each of its Subsidiaries to preserve and maintain,
its corporate existence, rights (charter and statutory) and franchises;
provided, however, that Group and its Subsidiaries may consummate the
Merger and any other merger, consolidation or voluntary dissolution or
liquidation permitted under Section 5.02(b).
(e) Visitation Rights. At any reasonable time and from time to
time, permit any Agent or any of the Lenders or any agents or
representatives thereof, upon reasonable notice to the Borrower to
examine and make copies of and abstracts from the records and books of
account of, and visit the properties of, the Borrower and any of its
Subsidiaries, and to discuss the affairs, finances and accounts of the
Borrower and any of its Subsidiaries with any of their officers or
directors and with their independent certified public accountants.
(f) Keeping of Books. Keep, and cause each of its Subsidiaries
to keep, proper books of record and account, in which full and correct
entries shall be made of all financial transactions and the assets and
business of the Borrower and each such Subsidiary in accordance with
generally accepted accounting principles in effect from time to time.
(g) Maintenance of Properties, Etc. Maintain and preserve, and
cause each of its Subsidiaries to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in
good working order and condition, ordinary wear and tear excepted.
(h) Transactions with Affiliates. Conduct, and cause each of
its Subsidiaries to conduct, other than with respect to transactions
among Group and/or its wholly owned Subsidiaries, all transactions
otherwise permitted under the Loan Documents with any of their
Affiliates on terms that are no less favorable to Group or such
Subsidiary than it would obtain in a comparable arm's-length
transaction with a Person not an Affiliate, provided, however, that the
foregoing restriction shall not apply to transactions pursuant to any
agreement referred to in Section 5.02(a)(ii), and provided further that
the Borrower shall not engage in any transaction with any such
Subsidiary that would render such Subsidiary insolvent or cause a
default under, or a breach of, any material contract to which such
Subsidiary is a party.
(i) Reporting Requirements. Furnish to the Lenders (and for
purposes hereof, any Designated Lender shall be deemed to have received
the following information from its Designating Lender):
(i) as soon as available and in any event within 50
days after the end of each of the first three quarters of each
Fiscal Year, Consolidated balance sheets of Group and its
Subsidiaries as of the end of such quarter and Consolidated
statements of income and Consolidated statements of cash flows
of Group and its Subsidiaries
<PAGE>
55
for the period commencing at the end of the previous fiscal
year and ending with the end of such quarter, duly certified
(subject to year-end audit adjustments) by the chief financial
officer of the Borrower as having been prepared in accordance
with generally accepted accounting principles and a
certificate of the chief financial officer of Group as to
compliance with the terms of this Agreement and setting forth
in reasonable detail the calculations necessary to demonstrate
compliance with Section 5.03, provided that in the event of
any change in GAAP used in the preparation of such financial
statements, the Borrower shall also provide, if necessary for
the determination of compliance with Section 5.03, a statement
of reconciliation conforming such financial statements to
GAAP;
(ii) as soon as available and in any event within 95
days after the end of each Fiscal Year of Group, a copy of the
annual audit report for such year for Group and its
Subsidiaries, containing Consolidated balance sheet of Group
and its Subsidiaries as of the end of such fiscal year and
Consolidated statements of income and cash flows of the
Borrower and its Subsidiaries for such Fiscal Year, in each
case accompanied by an opinion acceptable to the Required
Lenders by any Approved Accounting Firm or by other
independent public accountants acceptable to the Required
Lenders, and a certificate of the chief financial officer or
Group as to compliance with the terms of this Agreement
setting forth in reasonable detail the calculations necessary
to demonstrate compliance with Section 5.03, provided that in
the event of any change in GAAP used in the preparation of
such financial statements, the Borrower shall also provide, if
necessary for the determination of compliance with Section
5.03, a statement of reconciliation conforming such financial
statements to GAAP;
(iii) as soon as possible and in any event within two
Business Days after the occurrence of each Default continuing
on the date of such statement, a statement of the chief
financial officer of the Borrower setting forth details of
such Default and the action that the Borrower has taken and
proposes to take with respect thereto;
(iv) promptly after the sending or filing thereof,
copies of all reports that the Borrower sends to any of its
security holders generally, and copies of all reports and
registration statements that Group or any Subsidiary files
with the Securities and Exchange Commission or any national
securities exchange;
(v) promptly after the commencement thereof, notice
of all actions and proceedings before any court, governmental
agency or arbitrator affecting the Borrower or any of its
Subsidiaries of the type described in Section 4.01(g);
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56
(vi) within five Business Days after receipt thereof
by any Loan Party, copies of each notice from S&P or Moody's
indicating any change in the Debt Rating; and
(vii) such other information respecting the Borrower
or any of its Subsidiaries as any Lender through the
Administrative Agent may from time to time reasonably request.
(j) Covenant to Guarantee Obligations. At such time as any new
direct or indirect Domestic Subsidiary that is a Material Subsidiary
(including, without limitation, Authentic Fitness and its Subsidiaries
as required by Section 5.01(k) below) is formed or acquired, cause such
new Subsidiary that is a wholly owned Subsidiary to (i) within 30 days
thereafter or such later time as the Borrower and the Administrative
Agent shall agree (but in any event no later than 30 additional days
thereafter), duly execute and deliver to the Administrative Agent
guarantees, in substantially the form of Exhibit H and otherwise in
form and substance reasonably satisfactory to the Administrative Agent,
guaranteeing the Borrower's Obligations under the Loan Documents,
provided, however, that the foregoing shall not apply to (A) Excluded
Subsidiaries, (B) joint ventures or (C) any Subsidiary organized solely
for the purpose of entering into any agreements and transactions
referred to in Section 5.02(a)(ii) to the extent that such agreements
require that such Subsidiary not be a Guarantor hereunder, and (ii)
within 30 days after the delivery of such guarantees or such later time
as the Borrower and the Administrative Agent shall agree (but in any
event no later than 30 additional days thereafter), deliver to the
Administrative Agent a signed copy of a favorable opinion, addressed to
the Administrative Agent, of counsel for the Loan Parties acceptable to
the Administrative Agent as to the documents contained in clause (i)
above, as to such guarantees being legal, valid and binding obligations
of such Subsidiaries enforceable in accordance with their terms and as
to such other matters as the Administrative Agent may reasonably
request.
(k) Consummation of Merger. If there is a Tender Offer, cause
the Merger to be consummated in compliance with all applicable laws and
regulations as soon as practicable after consummation of the Tender
Offer and cause Authentic Fitness and its Subsidiaries to become a
Guarantor pursuant to Section 5.01(j) as soon as practicable and, in
any event, within 30 days after consummation of the Merger.
(l) Authentic Fitness. As soon as practicable after
consummation of the Merger, cause the commitments under all Existing
Debt of Authentic Fitness and its Subsidiaries (other than Debt of
Authentic Fitness and its Subsidiaries that become Obligations under
the Trade Credit Facility) to be terminated and all such indebtedness
to be repaid in full.
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57
SECTION 5.02. Negative Covenants. So long as any Advance shall
remain unpaid or any Lender shall have any Commitment hereunder, neither Group
nor the Borrower will at any time:
(a) Liens, Etc. Create or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to exist, any Lien
on or with respect to any of its properties of any character, whether
now owned or hereafter acquired, or assign, or permit any of its
Subsidiaries to assign, any right to receive income, other than:
(i) Permitted Liens,
(ii) Liens on receivables of any kind (and in
property securing or otherwise supporting such receivables) in
connection with agreements for limited recourse sales or
financings by the Borrower or any of its Subsidiaries or by
Designer Holdings or any of its Subsidiaries for cash of such
receivables or interests therein, provided that (A) any such
agreement is of a type and on terms customary for comparable
transactions in the good faith judgment of the Board of
Directors of Group and (B) such agreement does not create any
interest in any asset other than receivables (and property
securing or otherwise supporting such receivables), related
general intangibles and proceeds of the foregoing,
(iii) other Liens securing Debt, including Liens
incurred pursuant to subsection (v) below, in an aggregate
principal amount outstanding at any time not to exceed 10% of
Consolidated Tangible Assets of Group and its Subsidiaries at
such time; provided that Liens securing Debt of Authentic
Fitness Products Inc. under credit facilities existing on the
date that Authentic Fitness becomes a Subsidiary of the
Borrower are expressly permitted until the consummation of the
acquisition of 100% of the capital stock of Authentic Fitness,
(iv) Liens arising from covenants by the Borrower or
its Subsidiaries to grant security interests in the assets of
Warnaco of Canada Limited or its Subsidiaries (the "Canadian
Subsidiaries") to secure Debt of the Canadian Subsidiaries in
the event that the Lenders hereunder or lenders under the
Existing Five Year Credit Agreement, the New 364 Day Credit
Agreement or the Trade Credit Facility are granted Liens by
Group or its Subsidiaries in their respective assets to secure
the Obligations under the Loan Documents, the Existing Five
Year Credit Agreement, the New 364 Day Credit Agreement or the
Trade Credit Facility, as the case may be, and
(v) Liens on Margin Stock.
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(b) Mergers, Etc. Merge into or consolidate with any Person or
permit any Person to merge into it, or permit any of its Subsidiaries
(other than Excluded Subsidiaries) to do so or to voluntarily
liquidate, except that:
(i) the Borrower or the Purchaser and Authentic
Fitness may consummate the Merger;
(ii) any Subsidiary of Group may merge into or
consolidate with any other Subsidiary of Group, provided that
if any such Subsidiary is a Domestic Subsidiary of Group, the
person formed thereby shall be a direct or indirect wholly
owned Domestic Subsidiary of Group;
(iii) any Subsidiary of Group may merge into or
consolidate with any other Person pursuant to an acquisition,
provided that, if any such Subsidiary is a Domestic Subsidiary
of Group, the Person formed thereby shall be a direct or
indirect wholly owned Domestic Subsidiary of Group;
(iv) any Domestic Subsidiary of Group may merge into
or consolidate with Group;
(v) the Borrower may merge into or consolidate with
any other Person so long as the Borrower is the surviving
corporation; and
(vi) any Subsidiary of Group may voluntarily
liquidate and distribute its assets to Group or any direct or
indirect wholly owned Domestic Subsidiary of Group, provided,
in each case, that no Default shall have occurred and be
continuing at the time of such proposed transaction or would
result therefrom.
(c) Debt. Create, incur, assume or suffer to exist, or permit
any of its Subsidiaries (other than Excluded Subsidiaries) to create,
incur, assume or suffer to exist, any Debt if after giving effect
thereto the Borrower shall fail to be in compliance with each of the
covenants set forth in Section 5.03.
(d) Sales, Etc., of Assets. Sell, lease, transfer or otherwise
dispose of, or permit any of its Subsidiaries to sell, lease, transfer
or otherwise dispose of, any assets, or grant any option or other right
to purchase, lease or otherwise acquire any assets, except:
(i) sales of inventory in the ordinary course of its
business;
(ii) sales, leases, transfers or other disposals of
assets, or grants of any option or other right to purchase,
lease or otherwise acquire assets, following the Effective
Date for fair value (valued at the time of any such sale,
lease, transfer or
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59
other disposal), in an aggregate amount in each Fiscal Year
not to exceed 20% per annum of the Consolidated total assets
of Group and its Subsidiaries as valued at the end of the
preceding Fiscal Year of the Borrower, and the fair value of
such assets shall have been determined in good faith by the
Board of Directors of Group;
(iii) sales of assets on terms customary for
comparable transactions in the good faith judgment of the
Board of Directors of Group pursuant to agreements referred to
in Section 5.02(a)(ii);
(iv) transfers of assets between Group and its
Subsidiaries;
(v) sales of assets listed on Schedule 5.02(d)
hereto;
(vi) sales of assets and properties of Group and its
Subsidiaries in connection with sale-leaseback transactions
otherwise permitted hereunder (including, without limitation,
under Section 5.02(c));
(vii) the sale or discount of accounts (A) owing by
Persons incorporated, residing or having their principal place
of business in the United States in an aggregate amount not
exceeding $10,000,000 in face amount per calendar year or (B)
that are past due by more than 90 days, provided that the sale
or discount of such accounts is in the ordinary course of
Group's business and consistent with prudent business
practices;
(viii) the licensing of trademarks and trade names by
Group or any of its Subsidiaries in the ordinary course of its
business, provided that such licensing takes place on an
arm's-length basis;
(ix) the rental by Group and its Subsidiaries, as
lessors, in the ordinary course of their respective
businesses, on an arm's-length basis, of real property and
personal property, in each case under leases (other than
Capitalized Leases); and
(x) sales of Margin Stock for fair value as
determined in good faith by the Board of Directors of Group.
(e) Authentic Fitness. From and after the Control Date and
prior to the date that Authentic Fitness becomes a wholly-owned
Subsidiary, permit Authentic Fitness to (i) issue any securities,
rights or options or (ii) declare or make any dividends or
distributions to the holders of Authentic Fitness Stock, except, in
each case, as contemplated by the terms of either or both of the Tender
Offer and the Merger and otherwise except to the extent any such
transactions are entered into and performed in the ordinary course of
Authentic Fitness's
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60
business as previously conducted and necessary for the prudent
operation of Authentic Fitness's business.
(f) Nature of Business. Make, or permit any of its
Subsidiaries to make, (A) except as otherwise permitted pursuant to
subsection (B) below, any change in the nature of its business as
carried on at the date hereof in a manner materially adverse to the
Agents and the Lenders or (B) any investments (except Investments in a
net aggregate amount (after giving effect to any dividends or other
returns of capital) invested from the date hereof not to exceed
$100,000,000) other than in apparel manufacturing or wholesaling
businesses or apparel accessories manufacturing or wholesaling
businesses or in related retail businesses, provided that, on an annual
basis, at least 51% of the revenue of Group and its Subsidiaries on a
Consolidated basis is derived from apparel manufacturing or wholesaling
businesses or apparel accessories manufacturing or wholesaling
businesses.
(g) Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in accounting policies
(except as required or permitted by the Financial Accounting Standards
Board or generally accepted accounting principles), reporting practices
or Fiscal Year.
SECTION 5.03. Financial Covenants. So long as any Advance
shall remain unpaid or any Lender shall have any Commitment hereunder, Group
and the Borrower will:
(a) Leverage Ratio. Maintain, at the end of each Fiscal
Quarter, a ratio of (x) Indebtedness for Borrowed Money to (y)
Consolidated EBITDA of Group and its Subsidiaries for the preceding
four Fiscal Quarters of not more than 3.25 to 1.0; provided that if the
Tender Offer is consummated, such ratio shall not be more than 3.75 to
1.0 for each Fiscal Quarter ending on or before September 30, 2000,
3.50 to 1.0 for each Fiscal Quarter ending on or about December 31,
2000 through the Fiscal Quarter ending on or about September 30, 2001,
and 3.25 to 1.0 for each Fiscal Quarter thereafter.
(b) Coverage Ratio. Maintain, as of the end of each Fiscal
Quarter, a ratio of Consolidated EBITDA of Group and its Subsidiaries
for the four consecutive Fiscal Quarters then ended to Consolidated
Interest Expense of Group and its Subsidiaries for such period of not
less than 3.00:1.00.
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61
ARTICLE VI
EVENTS OF DEFAULT
SECTION 6.01. Events of Default. If any of the following
events ("Events of Default") shall occur and be continuing:
(a) The Borrower shall fail to pay any principal of any
Advance when the same becomes due and payable; or the Borrower or any
other Loan Party shall fail to pay any interest on any Advance or make
any other payment of fees or other amounts payable under any Loan
Document within three Business Days after the same becomes due and
payable; or
(b) Any representation or warranty made by any Loan Party (or
any of its officers) under or in connection with any Loan Document
shall prove to have been incorrect in any material respect when made;
or
(c) (i) Group or the Borrower shall fail to perform or observe
any term, covenant or agreement contained in Section 5.01(d), (j) or
(k), 5.02 or 5.03, or (ii) any Loan Party shall fail to perform or
observe any other term, covenant or agreement contained in any Loan
Document on its part to be performed or observed if such failure shall
remain unremedied for 30 days (A) after written notice thereof shall
have been given to the Borrower by any Agent or any Lender or (B) after
any officer of the Borrower obtains knowledge thereof; or
(d) Any Loan Party or any of its Subsidiaries shall fail to
pay any principal of or premium or interest on any Debt under the Trade
Credit Facility or other Debt that is outstanding in a principal or
notional amount of at least $20,000,000 in the aggregate (but excluding
Debt outstanding hereunder) of such Loan Party or such Subsidiary (as
the case may be), 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 or instrument relating to
such Debt; or any other event shall occur or condition shall exist
under any agreement or instrument relating to any such Debt and shall
continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such
Debt; or any such Debt shall be declared to be due and payable, or
required to be prepaid or redeemed (other than by a regularly scheduled
required prepayment or redemption or other than as a result of any
event which provides cash to such Loan Party in an amount sufficient to
satisfy such redemption or prepayment), purchased or defeased, or an
offer to prepay, redeem, purchase or defease such Debt shall be
required to be made, in each case prior to the stated maturity thereof;
or
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62
(e) Group, the Borrower or any of their Material Subsidiaries
(or any group of Subsidiaries which, in the aggregate, would constitute
a Material Subsidiary) 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 any
Group, the Borrower or any of their Subsidiaries (or any group of
Subsidiaries which, in the aggregate, would constitute a Material
Subsidiary) 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 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 30 days, or any of the actions sought in such proceeding
(including, without limitation, 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 such Loan Party or any of its Subsidiaries shall take
any corporate action to authorize any of the actions set forth above in
this subsection (e); or
(f) Any judgment or order for the payment of money in excess
of $20,000,000 shall be rendered against any Loan Party or any of its
Subsidiaries and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order or (ii) there
shall be any period of 10 consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect unless the payment of such judgment
or order is covered by insurance and such insurance coverage is not in
dispute; or
(g) Any non-monetary judgment or order shall be rendered
against any Loan Party or any of its Subsidiaries that could be
reasonably expected to have a Material Adverse Effect, and there shall
be any period of 10 consecutive days during which a stay of enforcement
of such judgment or order, by reason of a pending appeal or otherwise,
shall not be in effect; or
(h) any provision of any Loan Document, after delivery thereof
pursuant to Section 3.01 or 5.01(j), shall for any reason cease to be
valid and binding on or enforceable against any Loan Party party to it,
or any such Loan Party shall so state in writing; or
(i) (A) Group shall at any time cease to have legal and
beneficial ownership of 100% of the capital stock of the Borrower
(except if such parties shall merge); or (B) any Person, or two or more
Persons acting in concert, shall have acquired beneficial ownership
(within the meaning of Rule 13d-3 of the Securities and Exchange
Commission under the Securities Exchange Act of 1934), directly or
indirectly, of Voting Stock of Group (or other
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63
securities convertible into such Voting Stock) representing 25% or more
of the combined voting power of all Voting Stock of Group (other than
Excluded Persons); or (C) any Person, or two or more Persons acting in
concert shall have acquired by contract or otherwise, or shall have
entered into a contract or arrangement that, upon consummation, will
result in its or their acquisition of, the power to exercise, directly
or indirectly, a controlling influence over the management or policies
of Group, or control over Voting Stock of Group (or other securities
convertible into such securities) representing 25% or more of combined
voting power of all Voting Stock of Group (other than Excluded
Persons); or (D) Linda J. Wachner (or, in the case of her death or
disability, another officer or officers of comparable experience and
ability selected by the Borrower within 180 days thereafter after
consultation with the Administrative Agent) shall cease to be Chairman
and Chief Executive Officer of Group and the Borrower); or
(j) Any Loan Party or any of its ERISA Affiliates shall incur,
or shall be reasonably likely to incur, liability in excess of
$20,000,000 in the aggregate as a result of one or more of the
following: (i) the occurrence of any ERISA Event; (ii) the partial or
complete withdrawal of such Loan Party or any of its ERISA Affiliates
from a Multiemployer Plan; or (iii) the reorganization or termination
of a Multiemployer Plan;
then, and in any such event, the Administrative Agent (i) shall at the request,
or may with the consent, of the Required Lenders, by notice to the Borrower,
declare the obligation of each Lender to make Advances (other than Swing Line
Advances by a Lender pursuant to Section 2.02(b)(ii)) to be terminated,
whereupon the same shall forthwith terminate, and (ii) shall at the request, or
may with the consent, of the Required Lenders, by notice to the Borrower,
declare the Advances, all interest thereon and all other amounts payable under
this Agreement and the other Loan Documents to be forthwith due and payable,
whereupon the Advances, all such interest and all such amounts shall become and
be forthwith due and payable, without presentment, demand, protest or further
notice of any kind, all of which are hereby expressly waived by the Borrower;
provided, however, that in the event of an actual or deemed entry of an order
for relief with respect to any Loan Party or any of its Material Subsidiaries
(or any group of Subsidiaries which, in the aggregate, would constitute a
Material Subsidiary) under the Federal Bankruptcy Code, (x) the obligation of
each Lender to make Advances (other than Swing Line Advances by a Lender
pursuant to Section 2.02(b)(ii)) shall automatically be terminated and (y) the
Advances, all such interest and all such amounts shall automatically become and
be due and payable, without presentment, demand, protest or any notice of any
kind, all of which are hereby expressly waived by the Borrower.
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64
ARTICLE VII
THE AGENTS
SECTION 7.01. Authorization and Action. Each Lender hereby
appoints and authorizes each Agent to take such action as agent on its behalf
and to exercise such powers and discretion under this Agreement and the other
Loan Documents as are delegated to such Agent by the terms hereof, together with
such powers and discretion as are reasonably incidental thereto. As to any
matters not expressly provided for by this Agreement and the other Loan
Documents (including, without limitation, enforcement or collection of the
Notes, if any), each Agent shall not be required to exercise any discretion or
take any action, but shall be required to act or to refrain from acting (and
shall be fully protected in so acting or refraining from acting) upon the
instructions of the Required Lenders, and such instructions shall be binding
upon all Lenders and all holders of Notes; provided, however, that no Agent
shall be required to take any action that exposes such Agent to personal
liability or that is contrary to this Agreement or applicable law. Each Agent
agrees to give to each Lender prompt notice of each notice given to it by the
Borrower pursuant to the terms of this Agreement.
SECTION 7.02. Agents' Reliance, Etc. None of the Agents nor
any of their directors, officers, agents or employees shall be liable for any
action taken or omitted to be taken by it or them under or in connection with
this Agreement and the other Loan Documents, except for its or their own gross
negligence or willful misconduct. Without limitation of the generality of the
foregoing, each Agent: (i) may treat the payee of any Note as the holder thereof
until the Administrative Agent receives and accepts an Assignment and Acceptance
entered into by the Lender that is the payee of such Note, as assignor, and an
Eligible Assignee, as assignee, as provided in Section 8.07; (ii) may consult
with legal counsel (including counsel for any Loan Party), independent public
accountants and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants or experts; (iii) makes no warranty or
representation to any Lender and shall not be responsible to any Lender for any
statements, warranties or representations (whether written or oral) made in or
in connection with this Agreement and the other Loan Documents; (iv) shall not
have any duty to ascertain or to inquire as to the performance or observance of
any of the terms, covenants or conditions of this Agreement and the other Loan
Documents on the part of any Loan Party or to inspect the property (including
the books and records) of any Loan Party; (v) shall not be responsible to any
Lender for the due execution, legality, validity, enforceability, genuineness,
sufficiency or value of or the other Loan Documents or any other instrument or
document furnished pursuant hereto; and (vi) shall incur no liability under or
in respect of this Agreement or the other Loan Documents by acting upon any
notice, consent, certificate or other instrument or writing (which may be by
telecopier, telegram or telex) believed by it to be genuine and signed or sent
by the proper party or parties.
SECTION 7.03. Scotiabank, Citibank, SocGen, Commerzbank, Bank
of America, DKB and Affiliates. With respect to its Commitment, the Advances
made by it and any Notes issued
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65
to it, each of Scotiabank, Citibank, SocGen, Commerzbank, Bank of America and
DKB shall have the same rights and powers under this Agreement and the other
Loan Documents as any other Lender and may exercise the same as though it were
not an Agent; and the term "Lender" or "Lenders" shall, unless otherwise
expressly indicated, include Scotiabank, Citibank, SocGen, Commerzbank, Bank of
America and DKB in their individual capacities. Each of Scotiabank, Citibank,
SocGen, Commerzbank, Bank of America and DKB and their Affiliates may accept
deposits from, lend money to, act as trustee under indentures of, accept
investment banking engagements from and generally engage in any kind of business
with, any Loan Party, any of its Subsidiaries and any Person who may do business
with or own securities of any Loan Party or any such Subsidiary, all as if
Scotiabank, Citibank, SocGen, Commerzbank, Bank of America and DKB were not
Agents and without any duty to account therefor to the Lenders.
SECTION 7.04. Lender Credit Decision. Each Lender acknowledges
that it has, independently and without reliance upon any Agent or any other
Lender and based on the financial statements referred to in Section 4.01 and
such other documents and information as it has deemed appropriate, made its own
credit analysis and decision to enter into this Agreement. Each Lender also
acknowledges that it will, independently and without reliance upon any Agent or
any other Lender and based on such documents and information as it shall deem
appropriate at the time, continue to make its own credit decisions in taking or
not taking action under this Agreement.
SECTION 7.05. Indemnification. Each Lender (other than the
Designated Lenders which have only Competitive Bid Advances outstanding) agrees
to indemnify each Agent (to the extent not reimbursed by the Borrower), ratably
according to the respective principal amounts of the Advances then owed to each
of them (or if no Advances are at the time outstanding or if any Advances are
owed to Persons that are not Lenders, ratably according to the respective
amounts of their Commitments), from and against any and all liabilities,
obligations, losses, damages, penalties, actions, judgments, suits, costs,
expenses or disbursements of any kind or nature whatsoever that may be imposed
on, incurred by, or asserted against such Agent in any way relating to or
arising out of this Agreement or the other Loan Documents or any action taken or
omitted by such Agent under this Agreement or the other Loan Documents, provided
that no Lender shall be liable for any portion of such liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements resulting from the Agent's gross negligence or willful misconduct;
and provided further that no Designated Lender shall be liable for any payment
under this Section 7.05 so long as, and to the extent that, its Designating
Lender makes such payments on its behalf. The Borrower, the Agents and the other
Lenders shall continue to deal solely and directly with the Designating Lender
in connection with the Designated Lender's rights and obligations under this
Agreement. Without limitation of the foregoing, each Lender (other than the
Designated Lenders which have only Competitive Bid Advances outstanding) agrees
to reimburse each Agent promptly upon demand for its ratable share of any
out-of-pocket expenses (including counsel fees) incurred by such 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
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66
respect of rights or responsibilities under, this Agreement and the other Loan
Documents, to the extent that such Agent is not reimbursed for such expenses by
the Borrower.
SECTION 7.06. Successor Agents. Any Agent may resign at any
time by giving written notice thereof to the Lenders and the Borrower and may be
removed at any time with or without cause by the Required Lenders. Upon any such
resignation or removal, the Required Lenders shall have the right to appoint a
successor Agent with the approval of the Borrower. If no successor Agent shall
have been so appointed by the Required Lenders, and shall have accepted such
appointment, within 30 days after the retiring Agent's giving of notice of
resignation or the Required Lenders' removal of the retiring Agent, then the
retiring Agent may, on behalf of the Lenders, appoint a successor Agent, which
shall be a commercial bank organized under the laws of the United States of
America or of any State thereof and having a combined capital and surplus of at
least $500,000,000. Upon the acceptance of any appointment as Agent hereunder by
a successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, discretion, privileges and duties of the
retiring Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement and the other Loan Documents. After any
retiring Agent's resignation or removal hereunder as Agent, the provisions of
this Article VII shall inure to its benefit as to any actions taken or omitted
to be taken by it while it was Agent under this Agreement.
ARTICLE VIII
MISCELLANEOUS
SECTION 8.01. Amendments, Etc. No amendment or waiver of any
provision of this Agreement, nor consent to any departure by the Borrower
therefrom, shall in any event be effective unless the same shall be in writing
and signed by the Required Lenders, and then such waiver or consent shall be
effective only in the specific instance and for the specific purpose for which
given; provided, however, that (a) no amendment, waiver or consent shall, unless
in writing and signed by all the Lenders (other than the Designated Lenders and
other than any Lender which is, at such time, a Defaulting Lender), do any of
the following at any time: (i) waive any of the conditions specified in Section
3.01 or, in the case of the initial Borrowing, Section 3.02, (ii) change the
percentage of the Commitments or of the aggregate unpaid principal amount of the
Advances, or the number of Lenders, that shall be required for the Lenders or
any of them to take any action hereunder, (iii) release any Material Guarantor,
or (iv) amend this Section 8.01, (b) no amendment, waiver or consent shall,
unless in writing and signed by the Required Lenders and each Lender affected by
such amendment, waiver or consent (other than the Designated Lenders and other
than any Lender which is, at such time, a Defaulting Lender), (i) reduce the
principal of, or interest on, the Advances owed to such Lender or any fees or
other amounts payable hereunder to such Lender or (ii) postpone any date fixed
for any payment of principal of, or interest on, the Advances owed to such
Lender or any fees or other amounts payable hereunder to such Lender and (c) no
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amendment, waiver or consent shall, unless in writing and signed by the Required
Lenders and each affected Lender (other than the Designated Lenders and other
than any Lender which is, at such time, a Defaulting Lender), increase the
Commitments of such Lender or subject such Lender to any additional obligations;
provided further, that no amendment, waiver or consent shall, unless in writing
and signed by the Swing Line Bank in addition to the Lenders required above to
take such action, affect the rights and obligations of the Swing Line Bank under
this Agreement; provided further, that no amendment, waiver or consent shall,
unless in writing and signed by an Agent in addition to the Lenders required
above to take such action, affect the rights or duties of such Agent under this
Agreement. Each Designating Lender shall act as its Designated Lender's agent
and attorney in fact and exercise on behalf of its Designated Lender all rights,
if any, to vote and to grant and make approvals, waivers, consents or waivers in
accordance with this Section 8.01. The Borrower, the Agents and the other
Lenders shall continue to deal solely and directly with the Designating Lender
in connection with the Designated Lender's rights and obligations under this
Agreement. Any request by any Loan Party for an amendment or waiver of any
provision of any Loan Document shall be made by such Loan Party by giving a
written request therefor to the Administrative Agent.
SECTION 8.02. Notices, Etc. All notices and other
communications provided for hereunder shall be in writing (including
telegraphic, telecopy, telex or cable communication) and mailed, telegraphed,
telecopied, telexed, cabled or delivered, if to the Borrower, at its address at
90 Park Avenue, New York, New York 10016, Attention: Chief Financial Officer,
with a copy to General Counsel; if to any Initial Lender or Agent, at its
Domestic Lending Office specified opposite its name on Schedule I hereto, if to
any other Lender, at its Domestic Lending Office specified in the Assignment and
Acceptance pursuant to which it became a Lender; or, as to each party, at such
other address as shall be designated by such party in a written notice to the
other parties. All such notices and communications shall, when mailed,
telegraphed, telecopied, telexed or cabled, be effective when deposited in the
mails, delivered to the telegraph company, transmitted by telecopier, confirmed
by telex answerback or delivered to the cable company, respectively, except that
notices and communications to an Agent pursuant to Article II, III or VII shall
not be effective until received by such Agent. Delivery by telecopier of an
executed counterpart of any amendment or waiver of any provision of this
Agreement or of any Exhibit hereto to be executed and delivered hereunder shall
be effective as delivery of a manually executed counterpart thereof.
SECTION 8.03. No Waiver; Remedies. No failure on the part of
any Lender or 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 such right preclude any other or further exercise thereof or the exercise of
any other right. The remedies herein provided are cumulative and not exclusive
of any remedies provided by law.
SECTION 8.04. Costs and Expenses. (a) Group and the Borrower
agree to pay on demand (i) all reasonable costs and expenses (other than taxes,
including interest, additions to tax and penalties relating thereto, except to
the extent that the same are required to be paid pursuant to
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68
Section 2.13 hereof) of the Agents in connection with the preparation,
execution, delivery, administration, modification and amendment of the Loan
Documents (including, without limitation, (A) all due diligence, syndication
(including printing, distribution and bank meetings), transportation, computer,
duplication, appraisal, audit, insurance, consultant, search, filing and
recording fees and all other out-of-pocket expenses and (B) the reasonable fees
and expenses of counsel for the Agents with respect thereto, with respect to
advising the Agents as to their respective rights and responsibilities, or the
protection or preservation of rights or interests, under the Loan Documents,
with respect to negotiations with any Loan Party or with other creditors of any
Loan Party or any of its Subsidiaries arising out of any Default or any events
or circumstances that may give rise to a Default and with respect to presenting
claims in or otherwise participating in or monitoring any bankruptcy, insolvency
or other similar proceeding involving creditors' rights generally, and any
proceeding ancillary thereto) and (ii) all reasonable costs and expenses (other
than taxes, including interest, additions to tax and penalties relating thereto,
except to the extent that the same are required to be paid pursuant to Section
2.13 hereof) of the Agents and the Lenders in connection with the enforcement of
the Loan Documents, whether in any action, suit or litigation, any bankruptcy,
insolvency or other similar proceeding affecting creditors' rights generally or
otherwise (including, without limitation, the reasonable fees and expenses of
counsel for the Agents and each Lender with respect thereto).
(b) Group and the Borrower agree to indemnify and hold
harmless each of the Agents and each Lender (other than any Designated Lender to
the extent such indemnification obligation exceeds that which the Borrower would
owe to its Designating Lender) and each of their Affiliates and their officers,
directors, employees, agents and advisors (each, an "Indemnified Party") from
and against any and all claims, damages, losses, liabilities and expenses
(including, without limitation, reasonable fees and expenses of counsel, but
other than taxes, including interest, additions to tax and penalties relating
thereto, except to the extent that the same are required to be paid pursuant to
Section 2.13 hereof) that may be incurred by or asserted or awarded against any
Indemnified Party, in each case arising out of or in connection with or by
reason of, or in connection with the preparation for a defense of, any
investigation, litigation or proceeding arising out of, related to or in
connection with (i) the Facility or the actual or proposed use of the proceeds
of the Advances or (ii) the actual or alleged presence of Hazardous Materials on
any property of the Borrower or any of its Subsidiaries or any Environmental
Action relating in any way to the Borrower or any of its Subsidiaries, in each
case whether or not such investigation, litigation or proceeding is brought by
the Borrower, its directors, shareholders or creditors or an Indemnified Party
or any other Person or any Indemnified Party is otherwise a party thereto and
whether or not the transactions contemplated hereby, the Tender Offer or the
Merger are consummated, except to the extent such claim, damage, loss, liability
or expense is found in a final, non-appealable judgment by a court of competent
jurisdiction to have resulted from such Indemnified Party's gross negligence or
willful misconduct. The Borrower also agrees not to assert any claim against any
Agent, any Lender, any of their Affiliates, or any of their respective
directors, officers, employees, attorneys and agents, on any theory of
liability, for special, indirect, consequential or punitive damages arising out
of or otherwise relating to this Agreement, any of the transactions contemplated
herein, the Tender Offer,
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the Merger or the actual or proposed use of the proceeds of the Advances, except
in the event of gross negligence or willful misconduct on the part of such
Agent, Lender or Affiliate.
(c) If any payment of principal of any Eurodollar Rate Advance
or LIBO Rate Advance, or any Conversion of any Eurodollar Rate Advance, is made
by the Borrower to or for the account of a Lender other than on the last day of
the Interest Period for such Advance, as a result of a payment or Conversion
pursuant to Section 2.06, 2.09 or 2.11, acceleration of the maturity of the
Advances pursuant to Section 6.01 or for any other reason, the Borrower shall,
upon demand by such Lender (with a copy of such demand to the Administrative
Agent), pay to the Administrative Agent for the account of such Lender any
amounts required to compensate such Lender for any additional losses, costs or
expenses that it may reasonably incur as a result of such payment or Conversion,
including, without limitation, any loss (excluding loss of anticipated profits
and taxes, including interest, additions to tax and penalties relating thereto,
except to the extent that the same are required to be paid pursuant to Section
2.12 hereof), cost or expense incurred by reason of the liquidation or
reemployment of deposits or other funds acquired by any Lender to fund or
maintain such Advance; provided, however, that notwithstanding any of the
foregoing, the Borrower shall not be required to compensate any Designated
Lender for any losses, costs or expenses to the extent such amounts exceed that
which the Borrower would owe to its Designating Lender, but for such
designation.
(d) Without prejudice to the survival of any other agreement
of the Borrower hereunder, the agreements and obligations of the Borrower
contained in Sections 2.10, 2.13 and 8.04 and the agreements and obligations of
any Lender or Agent contained in Section 2.13 shall survive the payment in full
of principal, interest and all other amounts payable hereunder.
(e) Notwithstanding anything to the contrary, neither the
designation of any Designated Lender, any Advance made by any Designated Lender,
nor any other condition or circumstance relating to any Designated Lender shall
increase (i) any obligations or liabilities of the Borrower hereunder,
including, without limitation, pursuant to Section 2.10, 2.11, 2.13 or this
Section 8.04, or (ii) any obligations or liabilities of the Borrower under any
Loan Documents, in each case, as compared with any obligations or liabilities
which would arise if the Designating Lender were the Lender for all purposes and
had not otherwise appointed a Designated Lender.
SECTION 8.05. Right of Set-off. Upon (i) the occurrence and
during the continuance of any Event of Default and (ii) the making of the
request or the granting of the consent specified by Section 6.01 to authorize
the Administrative Agent to declare the Advances due and payable pursuant to the
provisions of Section 6.01, each Lender and each of its Affiliates is hereby
authorized at any time and from time to time, to the fullest extent permitted by
law, to set off and apply any and all deposits (general or special, time or
demand, provisional or final) at any time held and other indebtedness at any
time owing by such Lender or such Affiliate to or for the credit or the account
of the Borrower against any and all of the Obligations of the Borrower now or
hereafter existing under this Agreement and any Note held by such Lender,
whether or not such Lender shall have made any demand under this Agreement or
such Note, if any, and although such obligations
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may be unmatured. Each Lender agrees promptly to notify the Borrower after any
such set-off and application, provided that the failure to give such notice
shall not affect the validity of such set-off and application. The rights of
each Lender and its Affiliates under this Section are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
that such Lender and its Affiliates may have.
SECTION 8.06. Binding Effect. This Agreement shall become
effective (other than Sections 2.01 and 2.03, which shall only become effective
upon satisfaction of the conditions precedent set forth in Section 3.01) when it
shall have been executed by the Borrower, Group and the Agents and when the
Administrative Agent shall have been notified by each Initial Lender that such
Initial Lender has executed it and thereafter shall be binding upon and inure to
the benefit of the Borrower, the Agents and each Lender and their respective
successors and assigns, except that the Borrower shall not have the right to
assign its rights hereunder or any interest herein without the prior written
consent of the Lenders.
SECTION 8.07. Assignments, Designations and Participations.
(a) Each Lender (other than any Designated Lender except for an assignment to
its Designating Lender) may assign, and, if demanded by the Borrower upon at
least 30 Business Days' notice to such Lender and the Administrative Agent
following either (w) such Lender becoming a Defaulting Lender, (x) a payment by
the Borrower of Taxes with respect to such Lender in accordance with Section
2.13, (y) the occurrence of an event that would, upon payment to such Lender of
amounts hereunder, require a payment by the Borrower of Taxes with respect to
such Lender in accordance with Section 2.13 or (z) a demand for payment under
Section 2.10 and will assign, to one or more banks or other entities all or a
portion of its rights and obligations under this Agreement (including, without
limitation, all or a portion of its Commitment or Commitments, the Advances
owing to it (including accrued interest) and any Revolving Credit Note held by
it but not including Competitive Bid Advances owing to it and Competitive Bid
Notes), with (except in the case of an assignment to an Affiliate of such
Lender) the prior written consent of the Administrative Agent and (so long as no
Default has occurred and is continuing) the Borrower, such consent not to be
unreasonably withheld or delayed; provided, however, that (A) except in the case
of (x) an assignment to a Person that, immediately prior to such assignment, was
a Lender, (y) an assignment to an Affiliate of the assigning Lender (including
an assignment by a Designated Lender to its Designating Lender) or (z) an
assignment of all of a Lender's rights and obligations under this Agreement, the
amount of the Commitment of the assigning Lender being assigned pursuant to each
such assignment (determined as of the date of the Assignment and Acceptance with
respect to such assignment) shall in no event be less than $10,000,000 or an
integral multiple of $1,000,000 in excess thereof, and the amount of the
Commitment of the assigning Lender being retained by such Lender immediately
after giving effect to such assignment (determined as of the effective date of
the Assignment and Acceptance with respect to such assignment) shall in no event
be less than $10,000,000, (B) each such assignment shall be to an Eligible
Assignee, (C) each such assignment made as a result of a demand by the Borrower
pursuant to this Section 8.07(a) shall be arranged by the Borrower after
consultation with the Administrative Agent and shall be either an assignment of
all of the rights and obligations
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of the assigning Lender under this Agreement or an assignment of a portion of
such rights and obligations made concurrently with another such assignment or
other such assignments that together cover all of the rights and obligations of
the assigning Lender under this Agreement, (D) no Lender shall be obligated to
make any such assignment as a result of a demand by the Borrower pursuant to
this Section 8.07(a) (1) unless and until such Lender shall have received one or
more payments from either the Borrower or one or more Eligible Assignees in an
aggregate amount at least equal to the aggregate outstanding principal amount of
the Advances owing to such Lender, together with accrued interest thereon to the
date of payment of such principal amount and all other amounts payable to such
Lender under this Agreement and (2) if a Default has occurred and is continuing,
(E) no such assignments will be permitted until the earlier to occur of the
Effective Date and the date that syndication of the Commitments hereunder has
been completed as notified by the Administrative Agent to the Lenders, and (F)
the parties to each such assignment shall execute and deliver to the
Administrative Agent, for its acceptance and recording in the Register, an
Assignment and Acceptance, together with any Note subject to such assignment and
a processing and recordation fee of $3,500, provided that the Borrower shall pay
such recordation fee in the case of any assignment demanded by the Borrower
pursuant to this Section 8.07(a) that is not made to another Lender. Upon such
execution, delivery, acceptance and recording, from and after the effective date
specified in each Assignment and Acceptance, (x) the assignee thereunder shall
be a party hereto and, to the extent that rights and obligations hereunder have
been assigned to it pursuant to such Assignment and Acceptance, have the rights
and obligations of a Lender hereunder and (y) the Lender's assignor thereunder
shall, to the extent that rights and obligations hereunder have been assigned by
it pursuant to such Assignment and Acceptance, relinquish its rights and be
released from its obligations under this Agreement (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of an assigning
Lender's rights and obligations under this Agreement, such Lender shall cease to
be a party hereto).
(b) By executing and delivering an Assignment and Acceptance,
the Lender assignor thereunder and the assignee thereunder confirm to and agree
with each other and the other parties hereto as follows: (i) other than as
provided in such Assignment and Acceptance, such assigning Lender makes no
representation or warranty and assumes no responsibility with respect to any
statements, warranties or representations made in or in connection with this
Agreement or any other Loan Document the execution, legality, validity,
enforceability, genuineness, sufficiency or value of this Agreement or any other
or any other Loan Document or any other instrument or document furnished
pursuant hereto; (ii) such assigning Lender makes no representation or warranty
and assumes no responsibility with respect to the financial condition of any
Loan Party or the performance or observance by any Loan Party of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto or thereto; (iii) such assignee confirms that it has received a
copy of this Agreement, together with copies of the financial statements
referred to in Section 4.01 and such other documents and information as it has
deemed appropriate to make its own credit analysis and decision to enter into
such Assignment and Acceptance; (iv) such assignee will, independently and
without reliance upon the any Agent, such assigning Lender or any other Lender
and based on such documents and information as it shall deem appropriate at the
time,
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continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such assignee confirms that it is an Eligible Assignee; (vi)
such assignee appoints and authorizes each Agent to take such action as agent on
its behalf and to exercise such powers and discretion under this Agreement as
are delegated to the each Agent by the terms hereof, together with such powers
and discretion as are reasonably incidental thereto; and (vii) such assignee
agrees that it will perform in accordance with their terms all of the
obligations that by the terms of this Agreement are required to be performed by
it as a Lender.
(c) Upon its receipt of an Assignment and Acceptance executed
by an assigning Lender and an assignee representing that it is an Eligible
Assignee, together with any Revolving Credit Note subject to such assignment,
the Administrative Agent shall, if such Assignment and Acceptance has been
completed and is in substantially the form of Exhibit C hereto, (i) accept such
Assignment and Acceptance, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Borrower.
(d) Any Lender (other than a Designated Lender) may at any
time designate not more than one Designated Lender to fund Advances on behalf of
such Designating Lender subject to the terms of this Section 8.07(d). Such
designation may occur by execution by such parties of a Designation Agreement.
The parties to each such designation shall execute and deliver to the
Administrative Agent and the Borrower for their acceptance a Designation
Agreement. Upon receipt of an appropriately completed Designation Agreement
executed by a Designating Lender and a designee representing that it is a
Designated Lender and consented by the Borrower, the Administrative Agent will
accept such Designation Agreement and will give prompt notice thereof to the
Borrower and the other Lenders, whereupon, (i) upon the written request of the
Designating Lender, the Borrower shall execute and deliver to the Designating
Lender a Revolving Credit Note and/or from time to time a Competitive Bid Note,
as the case may be, in each case payable to the order of the Designated Lender,
(ii) from and after the effective date specified in the Designation Agreement,
the Designated Lender shall become a party to this Agreement with a right to
make Revolving Credit Advances and/or Competitive Bid Advances on behalf of its
Designating Lender pursuant to Section 2.01 and Section 2.03, respectively and
(iii) the Designated Lender shall not be required to make payments with respect
to any obligations in this Agreement except to the extent of excess cash flow of
such Designated Lender which is not otherwise required to repay obligations of
such Designated Lender which are then due and payable; provided, however, that
regardless of such designation and assumption by the Designated Lender, the
Designating Lender (i) shall be and remain obligated to the Borrower, the Agents
and the Lenders for each and every of the obligations of the Designating Lender
and its related Designated Lender with respect to this Agreement, including,
without limitation, any indemnification obligations under Section 7.05 hereof
and any sums otherwise payable to the Borrower by the Designated Lender and (ii)
neither the designation of a Designated Lender, the election or other
determination that a Designated Lender will make any Advance nor any other
condition or circumstance relating to the Designated Lender shall in any way
release, diminish or otherwise affect the relevant Designating Lender's
Commitment or any other of
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its obligations hereunder or under any other Loan Document or any rights of the
Borrower, any Agent or any Lender with respect to such Designating Lender.
The Borrower, the Agents and the Lenders may, at their option, pursue remedies
against any Designating Lender which arise out of any failure of its Designated
Lender to perform such Designated Lender's obligations under this Agreement or
any other Loan Document. Each Designating Lender shall serve as the
administrative agent and attorney in fact for its Designated Lender and shall on
behalf of its Designated Lender: (i) receive any and all payments made for the
benefit of such Designated Lender and (ii) give and receive all communications
and notices and take all actions hereunder, including, without limitation,
votes, approvals, waivers, consents and amendments under or relating to this
Agreement and the other Loan Documents to the extent, if any, such Designated
Lender shall have any rights hereunder or thereunder. To the extent a Designated
Lender shall have the right to receive or give any such notice, communication,
vote, approval, waiver, consent or amendment, it shall be signed by its
Designating Lender as administrative agent and attorney in fact for such
Designated Lender and need not be signed by such Designated Lender on his own
behalf. The Borrower, the Agents and the Lenders may rely thereon without any
requirement that the Designated Lender sign or acknowledge the same.
Notwithstanding anything to the contrary contained herein, no Designated Lender
may assign or transfer all or any portion of its interest hereunder or under any
other Loan Document, other than via an assignment to its Designating Lender in
accordance with the provisions of this Section 8.07.
(e) By executing and delivering a Designation Agreement, the
Lender making the designation thereunder and its designee thereunder confirm and
agree with each other and the other parties hereto as follows: (i) such Lender
makes no representation or warranty and assumes no responsibility with respect
to any statements, warranties or representations made in or in connection with
this Agreement or the execution, legality, validity, enforceability,
genuineness, sufficiency or value of this Agreement or any other instrument or
document furnished pursuant hereto; (ii) such Lender makes no representation or
warranty and assumes no responsibility with respect to the financial condition
of the Borrower or the performance or observance by the Borrower of any of its
obligations under this Agreement or any other instrument or document furnished
pursuant hereto; (iii) such designee confirms that it has received a copy of
this Agreement, together with copies of the financial statements referred to in
Section 4.01 and such other documents and information as it has deemed
appropriate to make its own credit analysis and decision to enter into such
Designation Agreement; (iv) such designee will, independently and without
reliance upon any Agent, such designating Lender or any other Lender and based
on such documents and information as it shall deem appropriate at the time,
continue to make its own credit decisions in taking or not taking action under
this Agreement; (v) such designee confirms that it is a Designated Lender; (vi)
such designee appoints and authorizes each Agent to take such action as agent on
its behalf and to exercise such powers and discretion under this Agreement as
are delegated to such Agent by the terms hereof, together with such powers and
discretion as are reasonably incidental thereto; and (vii) such designee agrees
that it will perform in accordance with their terms all of the obligations which
by the terms of this Agreement are required to be performed by it as a Lender.
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(f) Upon its receipt of a Designation Agreement executed by a
designating Lender and a designee representing that it is a Designated Lender,
the Administrative Agent shall, if such Designation Agreement has been completed
and is substantially in the form of Exhibit D hereto, (i) accept such
Designation Agreement, (ii) record the information contained therein in the
Register and (iii) give prompt notice thereof to the Borrower.
(g) The Administrative Agent shall maintain at its address
referred to in Section 8.02 a copy of each Assignment and Acceptance and each
Designation Agreement delivered to and accepted by it and a register for the
recordation of the names and addresses of the Lenders and, with respect to
Lenders other than Designated Lenders, the Commitment of, and principal amount
of the Advances owing to, each Lender from time to time (the "Register"). The
entries in the Register shall be conclusive and binding for all purposes, absent
manifest error, and the Borrower, the Agents and the Lenders may treat each
Person whose name is recorded in the Register as a Lender hereunder for all
purposes of this Agreement. The Register shall be available for inspection by
the Borrower or any Lender at any reasonable time and from time to time upon
reasonable prior notice.
(h) Each Lender may sell participations to one or more banks
or other entities in or to all or a portion of its rights and obligations under
this Agreement (including, without limitation, all or a portion of its
Commitment and the Advances owing to it); provided, however, that (i) such
Lender's obligations under this Agreement (including, without limitation, its
Commitment to the Borrower hereunder) shall remain unchanged, (ii) such Lender
shall remain solely responsible to the other parties hereto for the performance
of such obligations, (iii) such Lender shall remain the holder of any Note
issued to it for all purposes of this Agreement, (iv) the Borrower, the Agents
and the other Lenders shall continue to deal solely and directly with such
Lender in connection with such Lender's rights and obligations under this
Agreement and (v) no participant under any such participation shall have any
right to approve any amendment or waiver of any provision of this Agreement or
any Loan Document, or any consent to any departure by any Loan Party therefrom,
except to the extent that such amendment, waiver or consent would (i) reduce the
principal of, or interest on, the Advances or any fees or other amounts payable
hereunder, in each case to the extent subject to such participation, (ii)
postpone any date fixed for any payment of principal of, or interest on, the
Advances or any fees or other amounts payable hereunder, in each case to the
extent subject to such participation or (iii) release any Material Guarantor.
(i) Any Lender may, in connection with any assignment,
designation or participation or proposed assignment, designation or
participation pursuant to this Section 8.07, disclose to the assignee, designee
or participant or proposed assignee, designee or participant, any information
relating to the Borrower furnished to such Lender by or on behalf of the
Borrower; provided that, prior to any such disclosure, the assignee, designee or
participant or proposed assignee, designee or participant shall agree to
preserve the confidentiality of any Confidential Information relating to the
Borrower received by it from such Lender.
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(j) Notwithstanding any other provision set forth in this
Agreement, any Lender may (without the prior consent of the Borrower and the
Administrative Agent) at any time create a security interest in all or any
portion of its rights under this Agreement (including, without limitation, the
Advances owing to it and any Note or Notes held by it) in favor of any Federal
Reserve Bank in accordance with Regulation A of the Board of Governors of the
Federal Reserve System.
(k) Each of the Borrower, the Lenders and the Agents agrees
that it will not institute against any Designated Lender or join any other
Person in instituting against any Designated Lender any bankruptcy,
reorganization, arrangement, insolvency or liquidation proceeding under any
federal or state bankruptcy or similar law, for one year and one day after the
payment in full of the latest maturing commercial paper note issued by such
Designated Lender. Notwithstanding the foregoing, the Designating Lender
unconditionally agrees to indemnify the Borrower, the Agents and each Lender
against all liabilities, obligations, losses, damages, penalties, actions,
judgments, suits, costs, expenses or disbursements of any kind or nature
whatsoever which may be incurred by or asserted against the Borrower, such Agent
or such Lender, as the case may be, in any way relating to or arising as a
consequence of any such forbearance or delay in the initiation of any such
proceeding against its Designated Lender.
SECTION 8.08. Confidentiality. None of the Agents nor any
Lender shall disclose any Confidential Information to any other Person without
the consent of Group and the Borrower, other than (a) to such Agent's or such
Lender's Affiliates and their officers, directors, employees, agents and
advisors and, as contemplated by Section 8.07(i), to actual or prospective
assignees and participants, and then only on a confidential basis, (b) as
required by any law, rule or regulation or judicial process, (c) to any rating
agency when required by it, provided that, prior to any such disclosure, such
rating agency shall undertake to preserve the confidentiality of any
Confidential Information relating to Group or the Borrower received by it from
such Lender and (d) as requested or required by any state, federal or foreign
authority or examiner regulating banks or banking.
SECTION 8.09. 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 taken together shall constitute one and the same
agreement. Delivery of an executed counterpart of a signature page to this
Agreement by telecopier shall be effective as delivery of a manually executed
counterpart of this Agreement.
SECTION 8.10. Governing Law. This Agreement shall be governed
by, and construed in accordance with, the laws of the State of New York.
SECTION 8.11. Jurisdiction, Etc. (a) Each of the parties
hereto hereby irrevocably and unconditionally submits, for itself and its
property, to the nonexclusive jurisdiction of any New York State court or
federal court of the United States of America sitting in New York City, and any
appellate court from any thereof, in any action or proceeding arising out of or
relating to this
<PAGE>
76
Agreement or for recognition or enforcement of any judgment, and each of the
parties hereto hereby irrevocably and unconditionally agrees that all claims in
respect of any such action or proceeding may be heard and determined in any such
New York State court or, to the extent permitted by law, in such federal court.
Each of the parties hereto agrees that a final judgment in any such action or
proceeding shall be conclusive and may be enforced in other jurisdictions by
suit on the judgment or in any other manner provided by law. Nothing in this
Agreement shall affect any right that any party may otherwise have to bring any
action or proceeding relating to this Agreement in the courts of any
jurisdiction.
(b) Each of the parties hereto irrevocably and unconditionally
waives, to the fullest extent it may legally and effectively do so, any
objection that it may now or hereafter have to the laying of venue of any suit,
action or proceeding arising out of or relating to this Agreement in any New
York State or federal court. Each of the parties hereto hereby irrevocably
waives, to the fullest extent permitted by law, the defense of an inconvenient
forum to the maintenance of such action or proceeding in any such court.
SECTION 8.12. Waiver of Jury Trial. Each of the Borrower, the
Agents and the Lenders hereby irrevocably waives all right to trial by jury in
any action, proceeding or counterclaim (whether based on contract, tort or
otherwise) arising out of or relating to this Agreement or the actions of any
Agent or any Lender in the negotiation, administration, performance or
enforcement thereof.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their respective officers thereunto duly authorized,
as of the date first above written.
WARNACO INC.
By Carl J. Deddens
------------------------------------
Title: VICE PRESIDENT AND TREASURER
THE WARNACO GROUP, INC.
By Carl J. Deddens
------------------------------------
Title: VICE PRESIDENT AND TREASURER
<PAGE>
THE BANK OF NOVA SCOTIA
as Administrative Agent, Competitive
Bid Agent and Swing Line Bank
By [SIGNATURE ILLEGIBLE]
------------------------------------
Title:
CITIBANK, N.A.
as Syndication Agent
By
------------------------------------
Title:
COMMERZBANK A.G.
as Co-Documentation Agent
By
------------------------------------
Title:
SOCIETE GENERALE
as Co-Documentation Agent
By
------------------------------------
Title:
<PAGE>
THE BANK OF NOVA SCOTIA
as Administrative Agent, Competitive
Bid Agent and Swing Line Bank
By
------------------------------------
Title:
CITIBANK, N.A.
as Syndication Agent
By
------------------------------------
Title:
COMMERZBANK AG
New York and Grand Cayman Bahamas
As Co-Documentation Agent
By MARKUS TAPPE
------------------------------------
Name: MARKUS TAPPE
Title: VICE PRESIDENT
By PETER DOYLE
------------------------------------
Name: PETER DOYLE
Title: ASSISTANT VICE PRESIDENT
SOCIETE GENERALE
as Co-Documentation Agent
By
------------------------------------
Title:
<PAGE>
THE BANK OF NOVA SCOTIA
as Administrative Agent, Competitive
Bid Agent and Swing Line Bank
By
------------------------------------
Title:
CITIBANK, N.A.
as Syndication Agent
By MARC MERLINO
------------------------------------
Title: MARC MERLINO-VP
COMMERZBANK A.G.
As Co-Documentation Agent
By
------------------------------------
Title:
SOCIETE GENERALE
as Co-Documentation Agent
By
------------------------------------
Title:
<PAGE>
THE BANK OF NOVA SCOTIA
as Administrative Agent, Competitive
Bid Agent and Swing Line Bank
By
------------------------------------
Title:
CITIBANK, N.A.
as Syndication Agent
By
------------------------------------
Title:
COMMERZBANK A.G.
As Co-Documentation Agent
By
------------------------------------
Title:
SOCIETE GENERALE
as Co-Documentation Agent
By ROBERT PETERSEN
------------------------------------
ROBERT PETERSEN
Title: VICE PRESIDENT
<PAGE>
Initial Lenders
THE BANK OF NOVA SCOTIA
By [SIGNATURE ILLEGIBLE]
------------------------------------
Title:
CITIBANK, N.A.
By
------------------------------------
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By
------------------------------------
Title:
SOCIETE GENERALE
By
------------------------------------
Title:
COMMERZBANK AG
By
------------------------------------
Title:
THE BANK OF NEW YORK
By
------------------------------------
Title:
<PAGE>
Initial Lenders
THE BANK OF NOVA SCOTIA
By
------------------------------------
Title:
CITIBANK, N.A.
By MARC MERLINO
------------------------------------
Title: MARC MERLINO-VP
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By
------------------------------------
Title:
SOCIETE GENERALE
By
------------------------------------
Title:
COMMERZBANK AG
By
------------------------------------
Title:
THE BANK OF NEW YORK
By
------------------------------------
Title:
<PAGE>
Initial Lenders
THE BANK OF NOVA SCOTIA
By
------------------------------------
Title:
CITIBANK, N.A.
By
------------------------------------
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By [SIGNATURE ILLEGIBLE]
------------------------------------
Title:
SOCIETE GENERALE
By
------------------------------------
Title:
COMMERZBANK AG
By
------------------------------------
Title:
THE BANK OF NEW YORK
By
------------------------------------
Title:
<PAGE>
Initial Lenders
THE BANK OF NOVA SCOTIA
By
------------------------------------
Title:
CITIBANK, N.A.
By
------------------------------------
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By
------------------------------------
Title:
SOCIETE GENERALE
By
------------------------------------
Title:
COMMERZBANK AG
NEW YORK AND GRAND CAYMAN BRANCHES
By MARKUS TAPPE
------------------------------------
Name: MARKUS TAPPE
Title: VICE PRESIDENT
By PETER DOYLE
------------------------------------
Name: PETER DOYLE
Title: ASSISTANT VICE PRESIDENT
THE BANK OF NEW YORK
By
------------------------------------
Title:
<PAGE>
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By N. SAFFRA
------------------------------------
N. SAFFRA
Title: VICE PRESIDENT
DAI-ICHI KANGYO BANK, LIMITED
By
------------------------------------
Title:
BANCO BIBLAO VIZCAYA
By
------------------------------------
Title:
BANK HAPOALIM
By
------------------------------------
Title:
DEN DANSKE BANK
By
------------------------------------
Title:
FIRST COMMERCIAL BANK
By
------------------------------------
Title:
FLEET BANK, N.A.
By
------------------------------------
Title:
<PAGE>
GENERAL ELECTRIC CAPITAL
CORPORATION
By [SIGNATURE ILLEGIBLE]
------------------------------------
Title: DULY AUTHORIZED SIGNATORY
HSBC BANK USA
By
------------------------------------
Title:
SUN TRUST BANK
By
------------------------------------
Title:
BANK OF AMERICA, N.A.
By
------------------------------------
Title:
<PAGE>
GENERAL ELECTRIC CAPITAL
CORPORATION
By
------------------------------------
Title:
HSBC BANK USA
By
------------------------------------
Title:
SUN TRUST BANK
By
------------------------------------
Title:
BANK OF AMERICA, N.A.
By DAVID H. DINKINS
------------------------------------
DAVID H. DINKINS
Title: VICE PRESIDENT
<PAGE>
BANK OF TOKYO-MITSUBISHI
TRUST COMPANY
By
------------------------------------
Title:
DAI-ICHI KANGYO BANK, LIMITED
By [SIGNATURE ILLEGIBLE]
------------------------------------
TITLE: ASSISTANT VICE PRESIDENT
BANCO BIBLAO VIZCAYA
By
------------------------------------
Title:
BANK HAPOALIM
By
------------------------------------
Title:
DEN DANSKE BANK
By
------------------------------------
Title:
FIRST COMMERCIAL BANK
By
------------------------------------
Title:
FLEET BANK, N.A.
By
------------------------------------
Title:
<PAGE>
BANKBOSTON, N.A.
By [SIGNATURE ILLEGIBLE]
------------------------------------
Title: DIRECTOR
<PAGE>
Initial Lenders
THE BANK OF NOVA SCOTIA
By
------------------------------------
Title:
CITIBANK, N.A.
By
------------------------------------
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By
------------------------------------
Title:
SOCIETE GENERALE
By
------------------------------------
Title:
COMMERZBANK AG
By
------------------------------------
Title:
THE BANK OF NEW YORK
By [SIGNATURE ILLEGIBLE]
------------------------------------
Title:
<PAGE>
GENERAL ELECTRIC CAPITAL
CORPORATION
By
------------------------------------
Title:
HSBC BANK USA
By
------------------------------------
Title:
SUN TRUST BANK
By LAURA KAHN
------------------------------------
LAURA KAHN
Title: DIRECTOR, SENIOR RELATIONSHIP
MANAGER
BANK OF AMERICA, N.A.
By
------------------------------------
Title:
<PAGE>
GENERAL ELECTRIC CAPITAL
CORPORATION
By
------------------------------------
Title:
HSBC BANK USA
By
------------------------------------
Title:
SUN TRUST BANK
By LAURA KAHN
------------------------------------
LAURA KAHN
Title: DIRECTOR, SENIOR RELATIONSHIP
MANAGER
BANK OF AMERICA, N.A.
By
------------------------------------
Title:
<PAGE>
[FINAL EXECUTION COPY]
SIXTH AMENDED AND RESTATED CREDIT AGREEMENT,
dated as of November 17, 1999,
among
WARNACO INC.,
as the U.S. Borrower,
DESIGNER HOLDINGS, LTD.,
as the Sub Borrower,
THOSE WHOLLY-OWNED DOMESTIC SUBSIDIARIES
DESIGNATED FROM TIME TO TIME,
as the Warnaco Sub Borrowers,
WARNACO (HK) LTD.,
WARNACO B.V.,
WARNACO NETHERLANDS B.V. and
WARNACO HOLLAND B.V.,
as the Foreign Borrowers,
THE WARNACO GROUP, INC.,
as a Guarantor,
CERTAIN FINANCIAL INSTITUTIONS,
as the Lenders,
SOCIETE GENERALE,
as the Documentation Agent for the Lenders
CITIBANK, N.A.,
as the Syndication Agent for the Lenders
and
THE BANK OF NOVA SCOTIA,
as the Administrative Agent for the Lenders.
Co-Lead Arrangers and Co-Book Managers:
THE BANK OF NOVA SCOTIA
and
SALOMON SMITH BARNEY, INC.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
1.1. Defined Terms................................................................................................. -3-
1.2. Use of Defined Terms..........................................................................................-27-
1.3. Cross-References..............................................................................................-27-
1.4. Accounting and Financial Determinations.......................................................................-27-
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
2.1. Commitments...................................................................................................-27-
2.1.1. Loan Commitment...............................................................................................-27-
2.1.2. Commitment to Issue Letters of Credit and Create Acceptances..................................................-29-
2.1.3. Lenders Not Permitted or Required to Make Loans and Fronting Bank Not Permitted
or Required to Issue Letters of Credit or Create Acceptances Under Certain
Circumstances.................................................................................................-29-
2.2. Reduction of the Commitment Amount............................................................................-30-
2.3. Borrowing Procedure...........................................................................................-31-
2.4. Continuation and Conversion Elections.........................................................................-33-
2.5. Funding.......................................................................................................-33-
2.6. Notes.........................................................................................................-34-
2.7. Extension of Commitment Termination Date......................................................................-34-
2.8. Authentic LIBO Rate Loans.....................................................................................-35-
ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
3.1 Repayments and Prepayments....................................................................................-36-
3.2. Interest Provisions...........................................................................................-37-
3.2.1. Rates.........................................................................................................-37-
3.2.2. Post-Maturity Rates...........................................................................................-38-
3.2.3. Payment Dates.................................................................................................-38-
3.2.4. Allocation of Interest Payments...............................................................................-39-
3.3. Fees..........................................................................................................-40-
3.3.1. Letter of Credit and Acceptance Fees Payable to the Lenders...................................................-40-
</TABLE>
-i-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
3.3.2. Letter of Credit and Acceptance Fees Payable to the Fronting Bank.............................................-41-
3.3.3. Fee Letter....................................................................................................-41-
3.3.4. Commitment Fee. .............................................................................................-41-
3.4. Guaranty......................................................................................................-42-
3.4.1. Guaranty......................................................................................................-42-
3.4.2. Acceleration of Guaranty......................................................................................-42-
3.4.3. Guarantee Absolute, etc.......................................................................................-43-
3.4.4. Reinstatement, etc............................................................................................-44-
3.4.5. Waiver, etc...................................................................................................-44-
3.4.6. Postponement of Subrogation, etc..............................................................................-45-
ARTICLE IV
LETTERS OF CREDIT AND ACCEPTANCES
4.1. Issuance of Letters of Credit and Creation of Acceptances.....................................................-46-
4.1.1. Letters of Credit.............................................................................................-46-
4.1.2. Non-U.S. Letters of Credit....................................................................................-47-
4.1.3. Acceptances...................................................................................................-48-
4.2. Issuances, Extensions and Creations...........................................................................-50-
4.3. Destruction of Goods, etc.....................................................................................-50-
4.4. Other Lenders' Participation..................................................................................-51-
4.5. Disbursements and Maturities..................................................................................-52-
4.6. Reimbursement; Outstanding Letters, etc.......................................................................-52-
4.7. Deemed Disbursements..........................................................................................-55-
4.8. Nature of Reimbursement Obligations...........................................................................-56-
4.9. Existing Letters of Credit and Acceptances....................................................................-57-
4.10. Authentic Letters of Credit and Acceptances...................................................................-57-
ARTICLE V
CERTAIN LIBO RATE AND OTHER PROVISIONS
5.1. LIBO Rate Lending Unlawful....................................................................................-57-
5.2. Deposits Unavailable..........................................................................................-57-
5.3. Increased LIBO Rate Loan Costs, etc...........................................................................-58-
5.4. Funding Losses................................................................................................-58-
</TABLE>
-ii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
5.5. Increased Capital Costs, etc..................................................................................-59-
5.6. Taxes.........................................................................................................-59-
5.7. Payments, Computations, etc...................................................................................-62-
5.8. Sharing of Payments...........................................................................................-62-
5.9. Setoff........................................................................................................-63-
5.10. Use of Proceeds...............................................................................................-63-
5.11. Currency Fluctuations, etc....................................................................................-63-
5.12. European Monetary Union.......................................................................................-63-
ARTICLE VI
CONDITIONS PRECEDENT
6.1. Initial Credit Extension......................................................................................-64-
6.1.1. Resolutions, etc..............................................................................................-64-
6.1.2. Delivery of Notes.............................................................................................-65-
6.1.3. Affirmation and Consent to Guarantees.........................................................................-65-
6.1.4. Supplement to Subsidiary Guaranty.............................................................................-65-
6.1.5. Certificates as to No Default, etc............................................................................-65-
6.1.6. No Material Adverse Change....................................................................................-65-
6.1.7. Amendment of U.S. Credit Agreement............................................................................-65-
6.1.8. Opinions of Counsel...........................................................................................-65-
6.2. All Credit Extensions.........................................................................................-66-
6.2.1. Compliance with Warranties, No Default, etc...................................................................-66-
6.2.2. Credit Request................................................................................................-67-
6.2.3. Satisfactory Legal Form.......................................................................................-67-
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
7.1. Organization, etc.............................................................................................-67-
7.2. Due Authorization, Non-Contravention, etc.....................................................................-68-
7.3. Government Approval, Regulation, etc..........................................................................-68-
7.4. Validity, etc.................................................................................................-69-
7.5. Financial Statements; No Material Adverse Change..............................................................-69-
7.6. Litigation, etc...............................................................................................-69-
</TABLE>
-iii-
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
7.7. Regulations U and X...........................................................................................-69-
7.8. Accuracy of Information.......................................................................................-69-
7.9. Year 2000.....................................................................................................-70-
ARTICLE VIII
COVENANTS
8.1. Affirmative Covenants.........................................................................................-70-
8.1.1. Compliance with Laws, etc.....................................................................................-70-
8.1.2. Payment of Taxes, etc.........................................................................................-71-
8.1.3. Maintenance of Insurance......................................................................................-71-
8.1.4. Preservation of Corporate Existence, etc......................................................................-71-
8.1.5. Visitation Rights.............................................................................................-71-
8.1.6. Keeping of Books..............................................................................................-71-
8.1.7. Maintenance of Properties, etc................................................................................-71-
8.1.8. Transactions with Affiliates..................................................................................-72-
8.1.9. [INTENTIONALLY DELETED]......................................................................................-72-
8.1.10. Reporting Requirements........................................................................................-72-
8.1.11. Covenant to Guarantee Obligations.............................................................................-73-
8.1.12. Consummation of Merger........................................................................................-73-
8.1.13. Authentic Fitness.............................................................................................-74-
8.2. Negative Covenants............................................................................................-74-
8.2.1. Liens, etc....................................................................................................-74-
8.2.2. Mergers, etc..................................................................................................-75-
8.2.3. Debt..........................................................................................................-75-
8.2.4. Sales, etc. of Assets.........................................................................................-75-
8.2.5. Nature of Business............................................................................................-76-
8.2.6. Accounting Changes............................................................................................-77-
8.2.7. Authentic Fitness.............................................................................................-77-
8.3. Financial Covenants...........................................................................................-77-
8.3.1. Leverage Ratio................................................................................................-77-
8.3.2. Coverage Ratio................................................................................................-77-
ARTICLE IX
EVENTS OF DEFAULT
9.1. Listing of Events of Default..................................................................................-77-
</TABLE>
-iv-
<PAGE>
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
9.1.1. Non-Payment of Obligations....................................................................................-78-
9.1.2. Breach of Warranty............................................................................................-78-
9.1.3. Non-Performance of Certain Covenants and Obligations..........................................................-78-
9.1.4. Non-Performance of Other Covenants and Obligations............................................................-78-
9.1.5. Default Under Other Agreements................................................................................-78-
9.1.6. Bankruptcy, Insolvency, etc...................................................................................-79-
9.1.7. Judgments, etc................................................................................................-79-
9.1.8. Termination, etc., of Loan Documents..........................................................................-79-
9.1.9. Change in Control.............................................................................................-80-
9.1.10. ERISA.........................................................................................................-80-
9.2. Action Upon Bankruptcy........................................................................................-80-
9.3. Action Upon Other Event of Default............................................................................-80-
ARTICLE X
THE AGENTS
10.1. Actions.......................................................................................................-81-
10.2. Copies, etc...................................................................................................-81-
10.3. Exculpation...................................................................................................-82-
10.4. Successor.....................................................................................................-82-
10.5. Loans Made, Letters of Credit Issued or Acceptances Created by Scotiabank
and Loans Made by Societe Generale............................................................................-82-
10.6. Credit Decisions..............................................................................................-83-
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.1. Waivers, Amendments, etc......................................................................................-83-
11.2. Notices.......................................................................................................-85-
11.3. Payment of Costs and Expenses.................................................................................-85-
11.4. Indemnification...............................................................................................-86-
11.5. Survival......................................................................................................-86-
11.6. Severability..................................................................................................-87-
11.7. Headings......................................................................................................-87-
11.8. Execution in Counterparts, Effectiveness, etc.................................................................-87-
11.9. Governing Law; Entire Agreement...............................................................................-87-
11.10. Successors and Assigns........................................................................................-87-
</TABLE>
-v-
<PAGE>
<TABLE>
<CAPTION>
Section Page
- ------- ----
<S> <C> <C>
11.11. Sale and Transfer of Loans and Notes; Participations in Loans and Notes......................................-88-
11.11.1. Assignments..................................................................................................-88-
11.11.2. Participations...............................................................................................-89-
11.11.3. Fronting Bank Assignments....................................................................................-90-
11.12. Other Transactions...........................................................................................-90-
11.13. Forum Selection and Consent to Jurisdiction..................................................................-91-
11.14. Waiver of Jury Trial.........................................................................................-92-
11.15. UCP; etc.....................................................................................................-92-
11.16. Usury Restraint..............................................................................................-92-
11.17. Judgment Currency............................................................................................-93-
11.18. Future Wholly-Owned Domestic Subsidiaries Designated as Warnaco Sub Borrowers................................-93-
11.19. Assumption of Certain Loans by U.S. Borrower.................................................................-94-
11.20. Release of non-Material Subsidiary Guarantors................................................................-95-
</TABLE>
SCHEDULE I - List of Warnaco Sub Borrowers
SCHEDULE 7.1 - List of Subsidiaries
SCHEDULE 8.2 - Assets Held for Sale
EXHIBIT A - Form of Note
EXHIBIT B - Form of Issuance Request
EXHIBIT C - Form of Borrowing Request
EXHIBIT D - Form of Continuation/Conversion Notice
EXHIBIT E - Form of Lender Assignment Agreement
EXHIBIT F-1 - Form of Group Guaranty
EXHIBIT F-2 - Form of Subsidiary Guaranty
EXHIBIT G - Form of Opinion of New York Counsel to the Obligors
EXHIBIT H - Form of Opinion of General Counsel for the U.S. Borrower
EXHIBIT I - Form of Opinion of Barbados Counsel for the Foreign Borrower
EXHIBIT J - Form of Opinion of Dutch counsel for Warnaco B.V., Warnaco
Netherlands and Warnaco Holland
EXHIBIT K - Form of Joinder Agreement
EXHIBIT L - Form of Designation and Release Certificate
-vi-
<PAGE>
SIXTH AMENDED AND RESTATED
CREDIT AGREEMENT
THIS SIXTH AMENDED AND RESTATED CREDIT AGREEMENT, dated as of November
17, 1999 (amending and restating the Existing Credit Agreement (as defined
below)), is among WARNACO INC., a Delaware corporation (the "U.S. Borrower"),
DESIGNER HOLDINGS, LTD., a Delaware corporation (the "Sub Borrower"), the
wholly-owned Domestic Subsidiaries designated by Group (as hereinafter defined)
from time to time in accordance with Section 11.18 and set forth on Schedule I
annexed hereto (the "Warnaco Sub Borrowers"), WARNACO (HK) LTD., a company
organized under the laws of Barbados ("Warnaco (HK)"), WARNACO B.V., a company
organized under the laws of The Netherlands ("Warnaco B.V."), WARNACO
NETHERLANDS B.V., a company organized under the laws of The Netherlands
("Warnaco Netherlands"), WARNACO HOLLAND B.V., a company organized under the
laws of The Netherlands ("Warnaco Holland"; together with Warnaco (HK), Warnaco
B.V. and Warnaco Netherlands, the "Foreign Borrowers"), THE WARNACO GROUP, INC.,
a Delaware corporation ("Group"), the various financial institutions as are or
may become parties hereto (collectively, the "Lenders"), SOCIETE GENERALE, as
documentation agent (in such capacity, the "Documentation Agent") for the
Lenders, CITIBANK, N.A. ("Citibank"), as syndication agent (in such capacity,
the "Syndication Agent") for the Lenders, THE BANK OF NOVA SCOTIA
("Scotiabank"), as administrative agent (in such capacity, the "Administrative
Agent") for the Lenders and Scotiabank and Salomon Smith Barney, Inc. as co-lead
arrangers and co-book managers (the "Arrangers").
W I T N E S S E T H:
WHEREAS, the Borrowers, Group, certain financial institutions, Citibank
and Scotiabank are parties to the Fifth Amended and Restated Credit Agreement,
dated as of July 31, 1998 (as amended, supplemented, amended and restated or
otherwise modified prior to the date hereof, the "Existing Credit Agreement"),
pursuant to which, inter alia, such financial institutions have made (or
participated in) loans to the Borrowers (the "Existing Loans"), and Scotiabank
provides documentary and standby letter of credit facilities in favor of each of
the Borrowers and has (a) issued certain letters of credit (the "Existing
Letters of Credit") and (b) created certain Acceptances (the "Existing
Acceptances");
WHEREAS, the U.S. Borrower or a single-purpose wholly owned Subsidiary
(the "Purchaser") intends to either (a) offer to acquire a controlling interest
in Authentic Fitness Corporation, a Delaware corporation ("Authentic Fitness"),
through a tender offer (the "Tender Offer") for all of the issued and
outstanding shares of common stock of Authentic Fitness, but in any event not
less than a sufficient number of shares of the stock of Authentic Fitness to
enable the Purchaser, voting without any other shareholders of Authentic
Fitness, to approve a merger of the Purchaser with Authentic Fitness, and, as
promptly as practicable after the closing of the Tender Offer, the Purchaser, if
the Purchaser is a single-purpose
<PAGE>
wholly owned Subsidiary of the U.S. Borrower, will consummate a merger with
Authentic Fitness in which Authentic Fitness will be the surviving corporation
or (b) agree to merge with Authentic Fitness (such merger described in either
clause (a) or (b) above between the Purchaser and Authentic Fitness being
hereafter referred to as the "Merger");
WHEREAS, the Borrowers have requested that the Lenders and the Fronting
Bank amend and restate the Existing Credit Agreement with this Agreement;
WHEREAS, pursuant to this Agreement the Borrowers desire to obtain
Commitments from the Lenders and the Fronting Bank pursuant to which
(a) Documentary Letters of Credit will be issued by the
Fronting Bank for the account of (i) the U.S. Borrower to support
obligations of the U.S. Borrower and its wholly-owned Subsidiaries (and
their respective divisions), (ii) each Foreign Borrower to support
obligations of such Foreign Borrower, (iii) the Sub Borrower to support
obligations of the Sub Borrower and its wholly-owned Subsidiaries (and
their respective divisions) and (iv) each Warnaco Sub Borrower to
support obligations of such Warnaco Sub Borrower and its wholly-owned
Subsidiaries (and their respective divisions) and, under the several
obligations hereunder, each of the Lenders will, to the extent of such
Lender's Percentage, participate in Letters of Credit (including the
Existing Letters of Credit) issued from time to time hereunder on or
prior to the Commitment Termination Date;
(b) Acceptances will be created by the Fronting Bank for the
account of (i) the U.S. Borrower to support obligations of the U.S.
Borrower and its wholly-owned Subsidiaries (and their respective
divisions), (ii) the Sub Borrower to support obligations of the Sub
Borrower and its wholly-owned Subsidiaries (and their respective
divisions) and (iii) each Warnaco Sub Borrower to support obligations
of such Warnaco Sub Borrower and its wholly-owned Subsidiaries (and
their respective divisions) and, under the several obligations
hereunder, each of the Lenders will, to the extent of such Lender's
Percentage, participate in Acceptances created from time to time
hereunder on or prior to the Commitment Termination Date; and
(c) Loans will be made by the Fronting Bank to the Borrowers
and, under the several obligations hereunder, each of the Lenders will,
to the extent of such Lender's Percentage, participate in or make the
Loans from time to time on or prior to the Commitment Termination Date;
WHEREAS, the Fronting Bank and the Lenders are willing, on the terms
and subject to the conditions hereinafter set forth (including Article VI), to
amend and restate the Existing Credit Agreement pursuant to the terms and
conditions of this Agreement, extend such Commitments hereunder, make and
participate in such Loans, issue and participate in such Letters of Credit and
create and participate in such Acceptances; and
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WHEREAS, (i) the proceeds of Loans will be used for the sole purpose of
providing the Borrowers with up to a six-month (or 180-day, in the case of Base
Rate Loans) trade credit in respect of disbursements made to the beneficiaries
of Letters of Credit and payments made to the payees of matured Acceptances and
(ii) Letters of Credit will be issued and Acceptances will be created solely to
support the worldwide sourcing of merchandise by the U.S. Borrower, the Warnaco
Sub Borrowers, the Sub Borrower and the Foreign Borrowers and their respective
wholly-owned Subsidiaries (and divisions);
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS AND ACCOUNTING TERMS
SECTION 1.1. Defined Terms. The following terms (whether or not
underscored) when used in this Agreement, including its preamble and recitals,
shall, except where the context otherwise requires, have the following meanings
(such meanings to be equally applicable to the singular and plural forms
thereof):
"Acceptance" means an acceptance created by the Fronting Bank under the
Acceptance Commitment in accordance with Article IV and for the account of the
U.S. Borrower, any Warnaco Sub Borrower or the Sub Borrower and their respective
wholly-owned Subsidiaries, including all Existing Acceptances.
"Acceptance Availability" means, at any time, the then existing
Commitment Amount minus the sum of (i) the outstanding principal amount of all
Loans plus (ii) the amount of all Acceptance Obligations plus (iii) all Letter
of Credit Outstandings.
"Acceptance Commitment" means, relative to the Fronting Bank, the
Fronting Bank's obligation to create Acceptances pursuant to Section 2.1.2 and,
with respect to each of the other Lenders, the obligations of each such Lender
to participate in such Acceptances pursuant to the terms of this Agreement.
"Acceptance Obligations" means the sum of (a) the aggregate face amount
of all unmatured Acceptances plus (b) the aggregate face amount of all unpaid
and outstanding Acceptance Reimbursement Obligations.
"Acceptance Parties" is defined in Section 3.4.1
"Acceptance Reimbursement Obligation" is defined in Section 4.6.
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"Administrative Agent" is defined in the preamble and includes each
other Person as shall have subsequently been appointed as the successor
Administrative Agent pursuant to Section 10.4.
"Affiliate" means, as to any Person, any other Person that, directly or
indirectly, controls, is controlled by or is under common control with such
Person or is a director or officer of such Person. For purposes of this
definition, the term "control" (including the terms "controlling", "controlled
by" and "under common control with") of a Person means the possession, direct or
indirect, of the power to vote 10% or more of the Voting Stock of such Person or
to direct or cause the direction of the management and policies of such Person,
whether through the ownership of Voting Stock, by contract or otherwise.
"Agent" means, as the context may require, the Administrative Agent,
the Documentation Agent and/or the Managing Agents.
"Agreement" means, on any date, this Sixth Amended and Restated Credit
Agreement as originally in effect on the Effective Date and as thereafter from
time to time amended, supplemented, amended and restated, or otherwise modified
and in effect on such date.
"Alternate Base Rate" means, on any date and with respect to all Base
Rate Loans, a fluctuating rate of interest per annum equal to the higher of
(a) the rate of interest most recently announced by Scotiabank
at its Domestic Office as its base rate for Dollar loans; and
(b) the Federal Funds Rate most recently determined by the
Administrative Agent plus 1/2 of 1%.
The Alternate Base Rate is not necessarily intended to be the lowest rate of
interest determined by Scotiabank in connection with extensions of credit.
Changes in the rate of interest on that portion of any Loans maintained as Base
Rate Loans will take effect simultaneously with each change in the Alternate
Base Rate. The Administrative Agent will give notice promptly to the U.S.
Borrower of changes in the Alternate Base Rate.
"Amendment No. 1" means the First Amendment, dated as of June 14, 1999,
to this Agreement among the Borrowers, Group, the Lenders parties thereto and
the Administrative Agent.
"Applicable Exchange Rate" shall mean, on any day, with respect to any
Qualified Foreign Currency, the foreign exchange rate reflected in The Wall
Street Journal at which Dollars were offered on the preceding Business Day for
such Qualified Foreign Currency; provided, however, that if for any reason, no
such rate is provided, the Administrative Agent
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may use any reasonable method it deems appropriate for leading commercial banks
to determine such rate, and such determination shall be conclusive absent
manifest error.
"Applicable Location" means (i) except as provided in clauses (ii) and
(iii), New York, (ii) except as provided in clause (iii), in the case of
Non-U.S. Letters of Credit issued for the account of the Foreign Borrowers,
London, and (iii) in the case of Non-U.S. Letters of Credit issued for the
account of Warnaco (HK) or, following Authentic Fitness (HK) becoming a Borrower
hereunder in accordance with the terms of Section 11.18, Authentic Fitness (HK),
Hong Kong.
"Applicable Margin" means, on any date, a percentage per annum
determined by reference to the Debt Rating in effect on such date as set forth
below:
<TABLE>
<CAPTION>
Applicable Applicable
Rating Margin for Margin for
Level Debt Rating Base Rate Loans LIBO Rate Loans
- ----- ----------- --------------- ---------------
<S> <C> <C> <C>
Level 1 A- or A3 or higher 0.000% 0.625%
Level 2 BBB+ or Baa1 0.000% 0.750%
Level 3 BBB or Baa2 0.000% 0.875%
Level 4 BBB- or Baa3 0.000% 1.000%
Level 5 BB+ or Ba1 or 0.250% 1.250%
lower
</TABLE>
The Applicable Margin shall be determined by reference to the Debt
Rating in effect from time to time; provided, however, that no change in the
Applicable Margin shall be effective until three Business Days after the date on
which the Administrative Agent receives evidence reasonably satisfactory to it
from Group or the U.S. Borrower that a new Debt Rating is in effect. In the
event that at any time no Debt Rating shall be in effect, the Applicable Margin
shall be 0.250% for each Base Rate Loan and 1.250% for each LIBO Rate Loan.
"Applicable Time" shall mean (i) except as provided in clauses (ii) and
(iii), New York time, (ii) except as provided in clause (iii), in the case of
actions or notices by or relating to the Foreign Borrowers, London time, and
(iii) in the case of any actions or notices by or relating to Warnaco (HK) or,
following Authentic Fitness (HK) becoming a Borrower hereunder in accordance
with the terms of Section 11.18, Authentic Fitness (HK), Hong Kong time.
"Approved Accounting Firm" means Arthur Andersen LLP, Deloitte & Touche
LLP, Ernst & Young LLP, PricewaterhouseCoopers LLP or KPMG Peat Marwick LLP, or
any successor thereof.
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"Arrangers" is defined in the preamble.
"Assignee Lender" is defined in Section 11.11.1.
"Authentic Acceptances" means, collectively, those existing bankers'
acceptances created by Scotiabank prior to the consummation of the Merger, for
the account of Authentic Fitness Products, pursuant to the terms and conditions
of the Authentic Trade Credit Facility. Notwithstanding the foregoing, no
Authentic Acceptance shall be deemed to be an Acceptance hereunder unless such
bankers' acceptance shall meet the requirements and qualifications necessary for
the creation of Acceptances hereunder pursuant to Section 4.1.3.
"Authentic Fitness" is defined in the second recital.
"Authentic Fitness Products" means Authentic Fitness Products Inc., a
Delaware corporation.
"Authentic Fitness (HK)" means Authentic Fitness (HK) Ltd., a company
organized under the laws of Barbados.
"Authentic Letters of Credit" means, collectively, those existing
letters of credit issued by Scotiabank prior to the consummation of the Merger,
for the account of Authentic Fitness Products, pursuant to the terms and
conditions of the Authentic Trade Credit Facility. Notwithstanding the
foregoing, no Authentic Letter of Credit shall be deemed to be a Letter of
Credit hereunder unless such letter of credit shall meet the requirements and
qualifications necessary for the issuance of a Letter of Credit hereunder
pursuant to clauses (a) and (b) of Section 4.1.1.
"Authentic LIBO Rate Loans" means, collectively, those existing LIBO
Rate Loans (as defined in the Authentic Trade Credit Facility) made by
Scotiabank as the Fronting Bank (as defined in the Authentic Trade Credit
Facility) prior to the consummation of the Merger, for the account of Authentic
Fitness Products, pursuant to the terms and conditions of the Authentic Trade
Credit Facility. Notwithstanding the foregoing, no Authentic LIBO Rate Loan
shall be deemed to be a LIBO Rate Loan hereunder unless such Authentic LIBO Rate
Loan shall meet the requirements and qualifications necessary for the making of
a LIBO Rate Loan hereunder pursuant to clause (a) of Section 2.1.3.
"Authentic Trade Credit Facility" means the Credit Agreement, dated as
of December 23, 1998, among Authentic Fitness Products, Authentic Fitness, the
lenders parties thereto and Scotiabank as the lead arranger and as
administrative agent (as amended, supplemented or otherwise modified prior to
the consummation of the Merger).
"Authorized Officer" means, relative to any Borrower or any other
Obligor, those of its officers whose signatures and incumbency shall have been
certified to the Managing Agents and the Lenders pursuant to Section 6.1.1.
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"Base Rate Loan" means a Loan bearing interest at a fluctuating rate
determined by reference to the Alternate Base Rate.
"Borrowers" means, collectively, the U.S. Borrower, the Foreign
Borrowers, the Warnaco Sub Borrowers and the Sub Borrower.
"Borrowing" means the making of Loans of the same type and, in the case
of LIBO Rate Loans, having the same Interest Period by the Fronting Bank
following a Disbursement or the maturity of an Acceptance and the funding of a
Lender's Percentage of such Loans, in each case in accordance with the terms of
this Agreement.
"Borrowing Request" means a loan request and certificate duly executed
by an Authorized Officer of a Borrower, substantially in the form of Exhibit C
hereto.
"Business Day" means
(a) any day which is neither a Saturday or Sunday nor a legal
holiday on which banks are authorized or required to be closed (i) in,
except as provided in clauses (ii) and (iii), New York or, (ii) except
as provided in clause (iii), in the case of actions relating to the
Foreign Borrowers, in London, or (iii) in the case of actions relating
to Warnaco (HK) or, following Authentic Fitness (HK) becoming a
Borrower hereunder in accordance with the terms of Section 11.18,
Authentic Fitness (HK), in Hong Kong; and
(b) relative to the making, continuing, prepaying or repaying
of any LIBO Rate Loans, any day on which dealings in Dollars are
carried on in the London interbank market.
"Calculation Date" shall mean (a) the last Business Day of each
calendar month and (b) at any time when the sum of the outstanding principal
amount of all Loans plus the amount of all Acceptance Obligations plus all
Letter of Credit Outstandings exceeds 95% of the then-existing Commitment
Amount, the last Business Day of each calendar week (or at the option of the
Administrative Agent any longer period).
"Citibank" is defined in the preamble.
"Commitment" means, as the context may require, a Lender's Loan
Commitment or the Fronting Bank's or a Lender's (a) Letter of Credit Commitment
or (b) Acceptance Commitment.
"Commitment Amount" means (a) at all times prior to the occurrence of
the 100% Effective Date, $450,000,000 and (b) at all times from and after the
occurrence of the 100% Effective Date, $500,000,000, in each case, as such
amount may be reduced pursuant to Section 2.2.
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"Commitment Fee" is defined in Section 3.3.4.
"Commitment Termination Date" means the earliest of
(a) July 27, 2000, as such date may be extended pursuant to
the terms of this Agreement;
(b) the date on which the Commitment Amount is terminated in
full or reduced to zero pursuant to Section 2.2; and
(c) the date on which any Commitment Termination Event occurs.
Upon the occurrence of any event described in clause (b) or (c), the Commitments
shall terminate automatically and without any further action.
"Commitment Termination Event" means
(a) the occurrence of any event or condition described in
Section 9.1.6;
(b) the occurrence and continuance of any other Event of
Default and either
(i) the declaration of the Loans to be due and
payable pursuant to Section 9.3, or
(ii) in the absence of such declaration, the giving
of notice by the Administrative Agent, acting at the direction
of the Required Lenders, to the Borrowers that the Commitments
have been terminated; or
(c) the termination of, or any refinancing, refunding,
replacement, renewal or restatement of, the U.S. Credit Agreement which
occurs following the date hereof.
"Consolidated" refers to the consolidation of accounts in accordance
with GAAP.
"Control Date" means the date on which Persons designated or approved
by Group constitute a majority of the Board of Directors of Authentic Fitness.
"Continuation/Conversion Notice" means a notice of continuation or
conversion and certificate duly executed by an Authorized Officer of a Borrower,
substantially in the form of Exhibit D hereto.
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<PAGE>
"Credit Extension" means and includes
(a) the advancing of any Loans by the Lenders in connection
with a Borrowing (including the making of a Loan by the Fronting Bank
to a Borrower on a Disbursement Date or the Maturity Date of an
Acceptance and the refunding and refinancing of such Loans by the
Lenders); and
(b) any (i) issuance or extension by the Fronting Bank of a
Letter of Credit or (ii) creation by the Fronting Bank of an
Acceptance.
"Currency Hedge Agreements" means currency swap agreements, currency
future or option contracts and other similar agreements.
"Debt" of any Person means, without duplication, the following:
(a) all indebtedness of such Person for borrowed money,
(b) all obligations of such Person for the deferred purchase
price of property or services (other than trade payables not overdue by
more than 90 days incurred in the ordinary course of such Person's
business), including, without limitation, under this Agreement,
(c) all obligations of such Person evidenced by notes, bonds,
debentures or other similar instruments,
(d) all obligations of such Person created or arising under
any conditional sale or other title retention agreement with respect to
property acquired by such Person (even though the rights and remedies
of the seller or lender under such agreement in the event of default
are limited to repossession or sale of such property),
(e) all obligations of such Person as lessee under leases that
have been or should be, in accordance with GAAP, recorded as capital
leases,
(f) all obligations, contingent or otherwise, of such Person
under acceptance, letter of credit or similar facilities,
(g) all obligations of such Person to purchase, redeem,
retire, defease or otherwise make any payment in respect of any capital
stock of or other ownership or profit interest in such Person or any
other Person or any warrants, rights or options to acquire such capital
stock, valued, in the case of Redeemable preferred stock, at the
greater of its voluntary or involuntary liquidation preference plus
accrued and unpaid dividends,
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(h) all obligations of such Person in respect of Hedge
Agreements,
(i) all Debt of others of the kinds referred to in clauses (a)
through (h) above guaranteed directly or indirectly in any manner by
such Person, or in effect guaranteed directly or indirectly by such
Person through an agreement (i) to pay or purchase such Debt or to
advance or supply funds for the payment or purchase of such Debt, (ii)
to purchase, sell or lease (as lessee or lessor) property, or to
purchase or sell services, primarily for the purpose of enabling the
debtor to make payment of such Debt or to assure the holder of such
Debt against loss, (iii) to supply funds to or in any other manner
invest in the debtor (including any agreement to pay for property or
services irrespective of whether such property is received or such
services are rendered) or (iv) otherwise to assure a creditor against
loss, and
(j) all Debt referred to in clauses (a) through (i) above
secured by (or for which the holder of such Debt has an existing right,
contingent or otherwise, to be secured by) any Lien on property
(including, without limitation, accounts and contract rights) owned by
such Person, even though such Person has not assumed or become liable
for the payment of such Debt.
"Debt Rating" means, as of any date, the higher of the ratings that
have been most recently announced by S&P and Moody's for any class of non-credit
enhanced long-term senior unsecured debt issued by Group in effect on such date,
provided that if neither S&P nor Moody's shall have in effect such a rating, the
Applicable Margin will be set in accordance with Rating Level 5 under the
definition of "Applicable Margin", subject, to the proviso to the definition of
"Applicable Margin". For purposes of the foregoing, (a) if only one of S&P and
Moody's shall have in effect a Debt Rating, the Applicable Margin shall be
determined by reference to the available rating; (b) if the ratings established
by S&P and Moody's shall fall within different levels separated by two or more
levels, the Applicable Margin shall be based upon the level that is one level
above the lower rating; (c) if any rating established by S&P or Moody's shall be
changed, such change shall be effective as of the date on which such change is
reported to Group; and (d) if S&P or Moody's shall change the basis on which
ratings are established, each reference to the Debt Rating announced by S&P or
Moody's, as the case may be, shall refer to the then equivalent rating by S&P or
Moody's, as the case may be.
"Declining Lender" is defined in clause (b) of Section 2.7.
"Default" means any Event of Default or any condition, occurrence or
event which, after notice or lapse of time or both, would constitute an Event of
Default.
"Designation and Release Certificate" means the Designation and Release
Certificate, substantially in the form of Exhibit L attached hereto, executed
and delivered by Group pursuant to Section 11.18.
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"Disbursement" means any payment made under a Letter of Credit by the
Fronting Bank to the applicable Letter of Credit Beneficiary.
"Disbursement Date" is defined in Section 4.5.
"Documentary Letter of Credit" is defined in Section 4.1.1, and shall
also mean and include certain Existing Letters of Credit.
"Documentation Agent" is defined in the preamble and includes each
other Person as shall have subsequently been appointed as the successor
Documentation Agent pursuant to Section 10.4.
"Dollar" and the sign "$" mean lawful money of the United States.
"Domestic Office" means, relative to any Lender, the office of such
Lender designated as such below its signature hereto or designated in the Lender
Assignment Agreement or such other office of a Lender (or any successor or
assign of such Lender) within the United States as may be designated from time
to time by notice from such Lender, as the case may be, to each other Person
party hereto.
"Domestic Subsidiary" means any Subsidiary of Group (other than the
U.S. Borrower) organized under the laws of the United States or any state
thereof.
"Draft" means and includes any draft, bill, cable or written demand for
payment or receipt drawn or issued under a Letter of Credit.
"Drawer" is defined in Section 4.1.3.
"EBITDA" means, for any period, net income (or net loss) from
operations (determined without giving effect to extraordinary or non-recurring
gains or losses) plus, to the extent deducted in calculating such net income
(loss), the sum of (a) Interest Expense, (b) income tax expense, (c)
depreciation expense, (d) amortization expense and (e) minority interests in
Authentic Fitness during the period commencing on the date the Tender Offer, if
any, is consummated and ending on the date of the Merger less dividends paid to
the minority interests in respect thereof, in each case determined in accordance
with GAAP and, on a pro forma basis, as if any acquisitions consummated after
the first day of the applicable testing period occurred on the first day of such
period.
"Effective Date" means the date this Agreement becomes effective
pursuant to Section 11.8.
"Environmental Action" means any administrative, regulatory or judicial
action, suit, demand, demand letter, claim, notice of non-compliance or
violation, notice of liability or potential liability, investigation,
proceeding, consent order or consent agreement relating in
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any way to any Environmental Law, Environmental Permit or Hazardous Materials or
arising from alleged injury or threat of injury to health, safety or the
environment, including (a) by any governmental or regulatory authority for
enforcement, cleanup, removal, response, remedial or other actions or damages
and (b) by any governmental or regulatory authority or any third party for
damages, contribution, indemnification, cost recovery, compensation or
injunctive relief.
"Environmental Law" means any federal, state, local or foreign statute,
law, ordinance, rule, regulation, code, order, judgment or decree relating to
the environment, health, safety or Hazardous Materials.
"Environment Permit" means any permit, approval, identification number,
license or other authorization required under any Environmental Law.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations promulgated and rulings issued
thereunder.
"ERISA Affiliate" means any Person that for purposes of Title IV of
ERISA is a member of the U.S. Borrower's controlled group, or under common
control with the U.S. Borrower, within the meaning of Section 414 of the
Internal Revenue Code.
"ERISA Event" means (a) (i) the occurrence of a reportable event,
within the meaning of Section 4043 of ERISA, with respect to any Plan unless the
30-day notice requirement with respect to such event has been waived by the
PBGC, or (ii) the requirements of subsection (1) of Section 4043(b) of ERISA
(without regard to subsection (2) of such Section) are met with respect to a
contributing sponsor, as defined in Section 4001(a)(13) of ERISA, of a Plan, and
an event described in paragraph (9), (10), (11), (12) or (13) of Section 4043(c)
of ERISA is reasonably expected to occur with respect to such Plan within the
following 30 days; (b) the application for a minimum funding waiver with respect
to a Plan; (c) the provision by the administrator of any Plan of a notice of
intent to terminate such Plan pursuant to Section 4041(a)(2) of ERISA (including
any such notice with respect to a plan amendment referred to in Section 4041(e)
of ERISA); (d) the cessation of operations at a facility of the U.S. Borrower or
any of its ERISA Affiliates in the circumstances described in Section 4062(e) of
ERISA; (e) the withdrawal by the U.S. Borrower or any of its ERISA Affiliates
from a Multiple Employer Plan during a plan year for which it was a substantial
employer, as defined in Section 4001(a)(2) of ERISA; (f) the failure by the U.S.
Borrower or any of its ERISA Affiliates to make a payment to a Plan if the
conditions for the imposition of a Lien under Section 302(f)(1) of ERISA are
satisfied; (g) the adoption of an amendment to a Plan requiring the provision of
security to such Plan, pursuant to Section 307 of ERISA; or (h) the institution
by the PBGC of proceedings to terminate a Plan, pursuant to Section 4042 of
ERISA, or the occurrence of any event or condition described in Section 4042 of
ERISA that could constitute grounds for the termination of, or the appointment
of a trustee to administer, a Plan.
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"Event of Default" is defined in Section 9.1.
"Excess" is defined in Section 11.16.
"Excluded Person" means (i) Linda J. Wachner or (ii) any trust of which
Linda J. Wachner is the sole trustee or is a trustee with effective control over
the Voting Stock held by such trust or over the management or policies of Group
(or, in case of her death or disability, another trustee of comparable
experience and ability selected by the U.S. Borrower within 180 days thereafter
after consultation with the Arrangers).
"Excluded Subsidiary" means, provided that the terms of the Trust Stock
preclude the issuance of a guaranty, the Trust, provided, that neither Group nor
the U.S. Borrower nor any of their Subsidiaries shall make any additional
Investments in the Trust other than those Investments which existed on the date
of the Five Year Waiver and those Investments necessary to pay its normal
operating expenses in the ordinary course of business.
"Existing Acceptances" is defined in the first recital.
"Existing Authentic Debt" means Debt of Authentic Fitness Products
outstanding on the date hereof under (a) the Authentic Trade Credit Facility and
(b) the Restated Credit Agreement, dated as of March 18, 1998, among Authentic
Fitness Products, Authentic Fitness, certain financial institutions, Scotiabank
and General Electric Capital Corporation, as Agents, Scotiabank, as
administrative agent, paying agent, swing line bank and fronting bank, General
Electric Capital Corporation, as documentation agent and collateral agent, and
Societe Generale as co-agent, and as further amended, restated or waived prior
to the date hereof.
"Existing Credit Agreement" is defined in the first recital.
"Existing Letters of Credit" is defined in the first recital.
"Existing Loans" is defined in the first recital.
"Extending Lender" is defined in clause (a) of Section 2.7.
"Federal Funds Rate" means, for any period, a fluctuating interest rate
per annum equal for each day during such period to
(a) the weighted average of the rates on overnight federal
funds transactions with members of the Federal Reserve System arranged
by federal funds brokers, as published for such day (or, if such day is
not a Business Day, for the next preceding Business Day in New York) by
the Federal Reserve Bank of New York; or
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(b) if such rate is not so published for any day which is a
Business Day in New York, the average of the quotations for such day on
such transactions received by the Administrative Agent from three
federal funds brokers of recognized standing selected by it.
If for any reason the Administrative Agent shall have determined (which
determination shall be conclusive, absent manifest error) that it is unable to
ascertain the Federal Funds Rate for any reason, including the inability or
failure of the Administrative Agent to obtain sufficient bids or publications in
accordance with the terms hereof, the rate announced by the Administrative Agent
at its New York Agency as its "Base Rate New York" shall be the Alternate Base
Rate until the circumstances giving rise to such inability no longer exists.
"Fee Letter" means the confidential Fee Letter, dated July 14, 1997,
between the U.S. Borrower and the Administrative Agent as the same may have been
amended, supplemented or otherwise modified from time to time.
"Fiscal Quarter" means a fiscal quarter of Group and its Consolidated
Subsidiaries ending on or about March 31, June 30, September 30 or December 31
of each year.
"Fiscal Year" means a fiscal year of Group and its Consolidated
Subsidiaries ending on or about December 31 of each year.
"Five Year Waiver" means the Letter Waiver to the U.S. Credit Agreement
dated as of October 14, 1997.
"for the account of", "for its account" and similar phrases used in
this Agreement with reference to Acceptances mean Acceptances created for the
account of such Person, on the behalf of such Person or at the direction of such
Person.
"Foreign Borrowers" is defined in the preamble.
"Foreign Borrower Tradexpress Agreements" means (i) the Tradexpress
Teletransmission Agreement, dated as of August 12, 1997, duly executed and
delivered by Warnaco (HK) and the Fronting Bank and/or (as the context may
require) (ii) the Tradexpress Teletransmission Agreements, dated as of April 24,
1998, duly executed and delivered by each of Warnaco B.V., Warnaco Netherlands
and Warnaco Holland and the Fronting Bank.
"Fronting Bank" means Scotiabank, in its capacity as the issuer of
Letters of Credit and creator of Acceptances (in each case, regardless of which
office, branch or agency of Scotiabank issues a Letter of Credit or creates an
Acceptance) and in its capacity as the Lender of Loans made prior to a Funding
Date pursuant to the terms of this Agreement.
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"F.R.S. Board" means the Board of Governors of the Federal Reserve
System or any successor thereto.
"Funding Date" is defined in clause (c) of Section 2.3.
"GAAP" has the meaning set forth in Section 1.4.
"Goods" means, collectively, all goods (including all inventory),
wares, merchandise and other commodities purchased by or shipped to or to the
order of a Borrower under or by virtue of or in connection with the issuance of
a Letter of Credit.
"Group" is defined in the preamble.
"Group Guaranty" means the Second Amended and Restated Guaranty, dated
as of July 31, 1998, executed and delivered by an Authorized Officer of Group, a
conformed copy of which is annexed hereto as Exhibit F-1, as amended,
supplemented, restated or otherwise modified from time to time.
"Guaranteed Parties" is defined in Section 3.4.1.
"Hazardous Materials" means petroleum and petroleum products,
byproducts or breakdown products, radioactive materials, asbestos-containing
materials, radon gas and any other chemicals, materials or substances
designated, classified or regulated as being "hazardous" or "toxic", or words of
similar import, under any Environmental Law.
"Hedge Agreements" means Currency Hedge Agreements and Interest Rate
Hedge Agreements.
"herein", "hereof", "hereto", "hereunder" and similar terms contained
in this Agreement or any other Loan Document refer to this Agreement or such
other Loan Document, as the case may be, as a whole and not to any particular
Section, paragraph or provision of this Agreement or such other Loan Document.
"including" means including without limiting the generality of any
description preceding such term.
"Indebtedness for Borrowed Money" of any Person means all Debt of such
Person for borrowed money or evidenced by notes, bonds, debentures or other
similar instruments (other than Trust Stock in a face amount of not more than
$120,000,000), all obligations of such Person for the deferred purchase price of
any property, service or business (other than trade accounts payable (including
pursuant to this Agreement and other similar financing arrangements to the
extent that the aggregate principal amount of Debt, including loans, acceptances
and letters of credit thereunder, does not exceed $550,000,000 (it being
understood and agreed that to the extent the principal amount of Debt under this
Agreement
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and other similar financing arrangements exceeds $550,000,000, a pro-rata
portion of such excess (calculated by reference to the relative amount of loans
constituting such Debt) shall be included in this definition of "Indebtedness
for Borrowed Money")) incurred in the ordinary course of business and
constituting current liabilities), and all obligations of such Person under
capitalized leases (limited in each case to the principal amount thereof).
"Indemnified Liabilities" is defined in Section 11.4.
"Indemnified Parties" is defined in Section 11.4.
"Interest Expense" means, with respect to any Person for any period of
measurement, the excess, if any, of (i) interest expense (whether cash or
accretion) of such Person during such period determined in accordance with GAAP,
and shall include in any event, without limitation, interest expense with
respect to Indebtedness for Borrowed Money, this Agreement and payments under
Interest Rate Hedge Agreements over (ii) interest income of such Person for such
period, including payments received under Interest Rate Hedge Agreements;
provided, however, that interest expense for any acquired entity, including
Authentic Fitness, for any period beginning prior to the acquisition date shall
be such entity's actual interest expense for such period.
"Interest Period" means, relative to any LIBO Rate Loans, the period
beginning on (and including) the date on which such LIBO Rate Loan is made or
continued as, or converted into, a LIBO Rate Loan pursuant to Section 2.3 or 2.4
and ending on (but excluding) the day which numerically corresponds to such date
one, three or six months thereafter (or, if such month has no numerically
corresponding day, on the last Business Day of such month), in each case as such
Loan may be made or as a Borrower may select in its relevant notice pursuant to
Section 2.3 or 2.4; provided, however, that
(a) Interest Periods commencing on the same date for Loans
comprising part of the same Borrowing shall be of the same duration;
(b) if such Interest Period would otherwise end on a day which
is not a Business Day, such Interest Period shall end on the next
following Business Day (unless such next following Business Day is the
first Business Day of a calendar month, in which case such Interest
Period shall end on the Business Day next preceding such numerically
corresponding day); and
(c) no Interest Period may end later than the Stated Maturity
Date for such Loan.
"Interest Rate Hedge Agreements" means interest rate swap, cap or
collar agreements, interest rate future or option contracts and other similar
agreements.
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"Investment" in any Person means any loan or advance to such Person,
any purchase or other acquisition of any capital stock or other ownership or
profit interest, warrants, rights, options, obligations or other securities of
such Person, any capital contribution to such Person or any other investment in
such Person, including, without limitation, any arrangement pursuant to which
the investor incurs Debt of the types referred to in clauses (i) or (j) of the
definition of "Debt" in respect of such Person.
"Issuance Request" means either (i) a request delivered by a Borrower
to the Fronting Bank in accordance with the provisions of the Tradexpress
Agreement or (ii) a request and certificate duly executed by an Authorized
Officer of a Borrower, in substantially the form of Exhibit B attached hereto
(with such changes thereto as may be agreed upon from time to time by the
Administrative Agent and the U.S. Borrower).
"Joinder Agreement" means the Joinder Agreement, substantially in the
form of Exhibit K attached hereto (provided, that with respect to Authentic
Fitness (HK), the Joinder Agreement shall be revised in certain conforming
respects), executed and delivered by each Warnaco Sub Borrower in accordance
with Section 11.18 and in effect until such Warnaco Sub Borrower shall become a
Released Borrower.
"Lender Assignment Agreement" means a Lender Assignment Agreement
substantially in the form of Exhibit E hereto.
"Lender Parties" is defined in Section 3.4.1.
"Lenders" is defined in the preamble.
"Letter of Credit" means the Documentary Letters of Credit and the
Existing Letters of Credit.
"Letter of Credit Availability" means, at any time, the then existing
Commitment Amount minus the sum of the aggregate outstanding principal amount of
all Loans, together with the aggregate amount of all Letter of Credit
Outstandings and Acceptance Obligations.
"Letter of Credit Beneficiary" means a beneficiary of a Letter of
Credit.
"Letter of Credit Commitment" means, relative to the Fronting Bank, the
Fronting Bank's obligation to issue Letters of Credit pursuant to Section 2.1.2
and, with respect to each of the other Lenders, the obligations of each such
Lender to participate in such Letters of Credit pursuant to the terms of this
Agreement.
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"Letter of Credit Outstandings" means, at any time, an amount equal to
the sum of
(a) the aggregate Stated Amount at such time of all Letters of
Credit then outstanding and undrawn (as such aggregate Stated Amount
shall be adjusted, from time to time, as a result of drawings, the
issuance of Letters of Credit, or otherwise),
plus
(b) the then aggregate amount of all unpaid and outstanding
Reimbursement Obligations.
"LIBO Rate" is defined in Section 3.2.1.
"LIBO Rate Loan" means a Loan bearing interest, at all times during an
Interest Period applicable to such Loan, at a fixed rate of interest determined
by reference to the LIBO Rate (Reserve Adjusted).
"LIBO Rate (Reserve Adjusted)" is defined in Section 3.2.1.
"LIBOR Office" means, relative to any Lender, the office of such Lender
designated as such below its signature hereto or designated in the Lender
Assignment Agreement or such other office of any Lender as designated from time
to time by notice from such Lender to the U.S. Borrower and the Administrative
Agent, whether or not outside the United States, which shall be making or
maintaining LIBO Rate Loans hereunder.
"LIBOR Reserve Percentage" is defined in Section 3.2.1.
"Lien" means any security interest, mortgage, pledge, hypothecation,
assignment, deposit arrangement, encumbrance, lien (statutory or otherwise),
charge against or interest in property to secure payment of a debt or
performance of an obligation or other priority or preferential arrangement of
any kind or nature whatsoever.
"Loan Commitment" means, relative to (i) the Fronting Bank (in such
capacity), its obligation to make Loans to the Borrowers on (a) a Disbursement
Date and (b) an Acceptance maturity date, and (ii) each Lender (other than the
Fronting Bank in such capacity), such Lender's obligation to participate in the
Loans made by the Fronting Bank to the Borrowers and, as set forth in this
Agreement, to refund and reimburse the Fronting Bank for such Loans, in each
case pursuant to the terms of this Agreement.
"Loan Document" means this Agreement, each Note, the Tradexpress
Agreements, the Group Guaranty, the Subsidiary Guaranty, each Joinder Agreement,
the Fee Letter and each other agreement, document or instrument delivered in
connection with this Agreement, whether or not specifically mentioned herein,
together with any amendments, supplements or modifications hereof or thereof.
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"Loans" is defined in Section 2.1.1, and shall also mean and include
the Existing Loans.
"L/C Party" is defined in Section 3.4.1.
"L/C Reimbursement Obligation" is defined in Section 4.6.
"Managing Agents" means, collectively, Scotiabank and Citibank.
"Margin Stock" has the meaning specified in Regulation U.
"Material Adverse Change" means any material adverse change in the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the U.S. Borrower or of Group and its Subsidiaries
taken as a whole.
"Material Adverse Effect" means a material adverse effect on (a) the
business, condition (financial or otherwise), operations, performance,
properties or prospects of the U.S. Borrower or of Group and its Subsidiaries
taken as a whole, (b) the rights and remedies of any Managing Agent or Lender
under any Loan Document or (c) the validity or enforceability of any Loan
Document.
"Material Subsidiary" of any Person means, at any time, a Subsidiary of
such Person having (i) at least $15,000,000 in total assets (determined as of
the last day of the most recent fiscal quarter of such Person) or (ii) EBITDA of
at least $15,000,000 for the 12-month period ending on the last day of the most
recent fiscal quarter of such Person.
"Maturity Date" means, relative to any Acceptance, the date of maturity
therefor.
"Maximum Rate" is defined in Section 11.16.
"Merger" is defined in the second recital.
"Moody's" means Moody's Investors Service, Inc.
"Multiemployer Plan" means a multiemployer plan, as defined in Section
4001(a)(3) of ERISA, to which the U.S. Borrower or any of its ERISA Affiliates
is making or accruing an obligation to make contributions, or has within any of
the preceding five plan years made or accrued an obligation to make
contributions.
"Multiple Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the U.S.
Borrower or any of its ERISA Affiliates and at least one Person other than the
U.S. Borrower and its ERISA Affiliates or (b) was so maintained and in respect
of which the U.S. Borrower or any
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of its ERISA Affiliates could have liability under Section 4064 or 4069 of ERISA
in the event such plan has been or were to be terminated.
"New Five Year Revolver" means the Credit Agreement, dated as of
November 17, 1999, among the U.S. Borrower, Group, the initial lenders named
therein, Scotiabank and Salomon Smith Barney Inc., as co-lead arrangers and
co-book managers, Citibank, as syndication agent, Societe Generale and
Commerzbank, as co-documentation agents, and Scotiabank, as administrative agent
and competitive bid agent (as the same may be amended, supplemented or otherwise
modified from time to time).
"New 364-Day Credit Agreement" means the 364-Day Credit Agreement,
dated as of November 17, 1999, among the U.S. Borrower, Group, the initial
lenders named therein, Scotiabank and Salomon Smith Barney Inc., as co-lead
arrangers and co-book managers, Citibank, as syndication agent, Morgan Guaranty
Trust Company of New York, as documentation agent, and Scotiabank, as
administrative agent (as the same may be amended, supplemented or otherwise
modified from time to time).
"Non-U.S. Letter of Credit" means any Letter of Credit which provides
for the payment of drawings in a Qualified Foreign Currency.
"Note" means any promissory note of any Borrower payable to the order
of any Lender (including the Fronting Bank), in the form of Exhibit A (as any
such promissory note may be amended, endorsed or otherwise modified from time to
time), evidencing the aggregate Debt of such Borrower to such Lender resulting
from outstanding Loans made by such Lender, and also means all other promissory
notes accepted from time to time in substitution therefor or renewal thereof.
"Notice of Extension" is defined in clause (a) of Section 2.7,
substantially in the form of Exhibit B to Amendment No. 1.
"Obligations" means all obligations (monetary or otherwise) of the
Borrowers and each other Obligor arising under or in connection with this
Agreement, the Notes, any Letter of Credit, any Acceptance and each other Loan
Document.
"Obligor" means the Borrowers and each other Person (other than the
Agents, the Fronting Bank and the Lenders) obligated under any Loan Document.
"Order" is defined in clause (b) of Section 4.6.
"Organic Document" means, relative to any Obligor, as applicable, its
certificate of incorporation, by-laws, certificate of formation or limited
liability company agreement, and all shareholder agreements, voting trusts and
similar arrangements applicable to any of the authorized shares of capital stock
or other ownership interest of such Obligor.
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"Participant" is defined in Section 11.11.2.
"PBGC" means the Pension Benefit Guaranty Corporation (or any
successor).
"Percentage" means, relative to any Lender, the percentage set forth
opposite its name on Schedule II hereto or set forth in a Lender Assignment
Agreement, as such percentage may be adjusted from time to time pursuant to the
terms hereof (including, following the 100% Effective Date and an increase in
the Commitment Amount, conforming changes to the percentage of any Lender which
does not agree to participate in such increase to reflect such Lender's
decreased percentage of such increased Commitment Amount) or a Lender Assignment
Agreement executed by such Lender and its Assignee Lender and delivered pursuant
to Section 11.11; provided, that the Percentage of each Lender's Loan
Commitment, Letter of Credit Commitment and Acceptance Commitment shall be
identical.
"Permitted Liens" means the following:
(a) Liens, other than in favor of the PBGC, arising out of
judgments or awards in respect of which Group or any of its
Subsidiaries shall in good faith be prosecuting an appeal or
proceedings for review and in respect of which it shall have secured a
subsisting stay of execution pending such appeal or proceedings for
review, provided it shall have set aside on its books adequate
reserves, in accordance with GAAP, with respect to such judgment or
award and provided further that the aggregate amount secured by such
Liens does not exceed $5,000,000 in any one case or $10,000,000 in the
aggregate;
(b) Liens for taxes, assessments or governmental charges or
levies, provided payment thereof shall not at the time be required in
accordance with the provisions of Section 8.1.2 and such amount, when
taken together with any amount payable under Section 8.1.2 as to which
any Lien has been attached as described in the last phrase thereof,
shall not exceed $10,000,000;
(c) deposits, Liens or pledges to secure payments of workmen's
compensation and other payments, unemployment and other insurance,
old-age pensions or other social security obligations, or the
performance of bids, tenders, leases, contracts (other than contracts
for the payment of money), public or statutory obligations, surety,
stay or appeal bonds, or other similar obligations arising in the
ordinary course of business;
(d) mechanics', workmen's, repairmen's, warehousemen's,
vendors' or carriers' Liens or other similar Liens arising in the
ordinary course of business and securing sums which are not past due,
or deposits or pledges to obtain the release of any such Liens;
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(e) statutory landlord's Liens under leases to which Group or
any of its Subsidiaries is a party;
(f) any Lien constituting a renewal, extension or replacement
of a Lien constituting a Permitted Lien, but only if at the time such
Lien is granted and immediately after giving effect thereto, no Default
would exist;
(g) leases or subleases granted to other Persons not
materially interfering with the conduct of the business of Group and
its Subsidiaries, taken as a whole;
(h) zoning restrictions, easements, rights of way, licenses
and restrictions on the use of real property or minor irregularities in
title thereto, which do not materially impair the use of such property
in the normal operation of the business of Group or any of its
Subsidiaries or the value of such property for the purpose of such
business; and
(i) statutory or common law Liens (such as rights of set-off)
on deposit accounts of Group and its Subsidiaries and other Liens under
any Loan Document, any Letter of Credit or any other agreement or
instrument relating thereto.
"Person" means any natural person, corporation, limited liability
company, partnership, firm, association, trust, government, governmental agency
or any other entity, whether acting in an individual, fiduciary or other
capacity.
"Plan" means a Single Employer Plan or a Multiple Employer Plan.
"Purchaser" is defined in the second recital.
"Qualified Foreign Currency" means any currency other than Dollars
which is approved by the Administrative Agent in its sole discretion and, in any
event, for which both an Applicable Exchange Rate and a Spot Exchange Rate may
be calculated.
"Quarterly Payment Date" means the first day of each April, July,
October and January or, if any such day is not a Business Day in New York, the
next succeeding Business Day in New York.
"Received Amount" is defined in clause (c) of Section 4.6.
"Redeemable" means, with respect to any capital stock, Debt or other
right or Obligation, any such right or Obligation that (a) the issuer has
undertaken to redeem at a fixed or determinable date or dates, whether by
operation of a sinking fund or otherwise, or upon the occurrence of a condition
not solely within the control of the issuer or (b) is redeemable at the option
of the holder.
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"Reimbursement Obligation" is defined in Section 4.6.
"Released Borrower" is defined in clause (b) of Section 11.18.
"Replacement Lender" is defined in clause (c) of Section 2.7.
"Request Date" is defined in clause (a) of Section 2.7.
"Required Lenders" means, at any time, Lenders holding more than 50% of
the then aggregate outstanding principal amount of the Notes then held by the
Lenders or, if no such principal amount is then outstanding, Lenders having
Percentages that equal more than 50% of the Commitments; provided, that so long
as the Fronting Bank (in such capacity) has any Loans outstanding and owing to
it from any Borrower, each Lender will be deemed to have outstanding and owing
to it a principal amount equal to such Lender's Percentage multiplied by the
aggregate outstanding principal amount of Loans owing to the Fronting Bank.
"Reset Date" is defined in Section 5.11.
"S&P" means Standard & Poor's Ratings Group, currently a division of
McGraw-Hill, Inc., or any successor thereto.
"Scotiabank" is defined in the preamble.
"Single Employer Plan" means a single employer plan, as defined in
Section 4001(a)(15) of ERISA, that (a) is maintained for employees of the U.S.
Borrower or any of its ERISA Affiliates and no Person other than the U.S.
Borrower and its ERISA Affiliates or (b) was so maintained and in respect of
which the U.S. Borrower or any of its ERISA Affiliates could have liability
under Section 4069 of ERISA in the event such plan has been or were to be
terminated.
"Spot Exchange Rate" shall mean, on any date of determination with
respect to any Qualified Foreign Currency, the spot rate at which Dollars are
offered on such day by The Bank of Nova Scotia in the Applicable Location for
such Qualified Foreign Currency at approximately 11:00 a.m. (Applicable Time);
provided, however, that if for any reason, no such spot rate is being quoted,
the Administrative Agent shall use the Applicable Exchange Rate for such
Qualified Foreign Currency.
"Stated Amount" of each Letter of Credit means the maximum amount of
such Letter of Credit that may then be drawn under such Letter of Credit whether
or not the conditions for drawing thereunder have been met.
"Stated Expiry Date" is defined in clause (c) of Section 4.1.1.
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"Stated Maturity Date" means, in the case of any Loan, the date which
is six months following the date of the making of such Loan (in the case of a
Loan initially made as a LIBO Rate Loan) or (in the case of a Loan initially
made as a Base Rate Loan), the date that is 180 days after the making of such
Loan.
"Stated Rate" is defined in Section 11.16.
"Sub Borrower" is defined in the preamble.
"Sub Borrower Tradexpress Agreement" means the Tradexpress
Teletransmission Agreement, dated as of December 19, 1997, duly executed and
delivered by the Sub Borrower and the Fronting Bank.
"Subsidiary" of any Person means any corporation, partnership, joint
venture, limited liability company, trust or estate of which (or in which) more
than 50% of (a) the issued and outstanding capital stock having ordinary voting
power to elect a majority of the Board of Directors of such corporation
(irrespective of whether at the time capital stock of any other class or classes
of such corporation shall or might have voting power upon the occurrence of any
contingency), (b) the interest in the capital or profits of such limited
liability company, partnership or joint venture or (c) the beneficial interest
in such trust or estate is at the time directly or indirectly owned or
controlled by such Person and one or more of its other Subsidiaries or by one or
more of such Person's other Subsidiaries. The term "wholly-owned Subsidiary"
shall exclude any directors' or officers' qualifying shares which may be
outstanding.
"Subsidiary Guaranty" means the Second Amended and Restated Guaranty
executed and delivered by each Domestic Subsidiary, dated as of July 31, 1998, a
conformed copy of which is annexed hereto as Exhibit F-2, or pursuant to Section
8.1.11, substantially in the form of Exhibit F-2 hereto, as amended,
supplemented, restated or otherwise modified from time to time.
"Syndication Agent" is defined in the preamble.
"Tangible Assets" means total assets minus goodwill and intangibles, in
each case determined in accordance with GAAP.
"Taxes" is defined in Section 5.6.
"Tender Offer" is defined in the second recital.
"Terminated Commitments" is defined in clause (b) of Section 2.7.
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"Tradexpress Agreement" means, as the context may require, the U.S.
Borrower Tradexpress Agreement, the Sub Borrower Tradexpress Agreement, the
Warnaco Sub Borrower Tradexpress Agreements and/or the Foreign Borrower
Tradexpress Agreements.
"Trust" means Designer Finance Trust, a trust formed under the laws of
Delaware.
"Trust Stock" means the Trust Originated Preferred Securities issued by
the Trust.
"type" means relative to any Loan, the portion thereof, if any, being
maintained as a Base Rate Loan or a LIBO Rate Loan.
"UCP" is defined in Section 11.15.
"United States" or "U.S." means the United States of America, its fifty
States and the District of Columbia.
"U.S. Borrower" is defined in the preamble.
"U.S. Borrower Tradexpress Agreement" means the Tradexpress
Teletransmission Agreement, dated as of August 12, 1997, duly executed and
delivered by the U.S. Borrower and the Fronting Bank.
"U.S. Credit Agreement" means the Credit Agreement, dated as of August
12, 1997, among the U.S. Borrower, Group, the initial lenders named therein,
Scotiabank and Citibank, as managing agents, Citibank, as documentation agent,
and Scotiabank, as administrative agent, competitive bid agent, swing line bank
and an issuing bank, as in effect on the Effective Date, as amended by Amendment
No. 1 thereto and as further amended, restated or waived from time to time.
"U.S. Dollar Equivalent" means, with respect to any Non-U.S. Letter of
Credit, the amount determined as provided in Section 4.1.2.
"U.S. Letter of Credit" means any Letter of Credit which provides for
the payment of drawings in Dollars.
"Usury Restraint" is defined in Section 11.16.
"Voting Stock" means capital stock issued by a corporation, or
equivalent interests in any other Person, the holders of which are ordinarily,
in the absence of contingencies, entitled to vote for the election of directors
(or persons performing similar functions) of such Person, even if the right so
to vote has been suspended by the happening of such a contingency.
"Warnaco Sub Borrower" is defined in the preamble.
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"Warnaco Sub Borrower Tradexpress Agreements" means the Tradexpress
Teletransmission Agreements duly executed and delivered by each Warnaco Sub
Borrower in connection with the Joinder Agreements executed by such Warnaco Sub
Borrowers pursuant to Section 11.18 in substantially similar form to the other
Tradexpress Agreements.
"100% Effective Date" means the date, following the Effective Date,
when each of the 100% Effective Date Conditions Precedent shall have been
satisfied and when counterparts hereof executed on behalf of each Borrower and
each Lender (or notice thereof satisfactory to the Agents) shall have been
received by the Agents and notice thereof shall have been given by the Agents to
the U.S. Borrower and each Lender.
"100% Effective Date Conditions Precedent" means, collectively,
Sections 6.1.2, 6.1.9 and 6.1.10.
SECTION 1.2. Use of Defined Terms. Unless otherwise defined or the
context otherwise requires, terms for which meanings are provided in this
Agreement shall have such meanings when used in each Note, Borrowing Request,
Continuation/Conversion Notice, Loan Document, notice and other communication
delivered from time to time in connection with this Agreement or any other Loan
Document.
SECTION 1.3. Cross-References. Unless otherwise specified, references
in this Agreement and in each other Loan Document to any Article or Section are
references to such Article or Section of this Agreement or such other Loan
Document, as the case may be, and, unless otherwise specified, references in any
Article, Section or definition to any clause are references to such clause of
such Article, Section or definition.
SECTION 1.4. Accounting and Financial Determinations. Unless otherwise
specified, all accounting terms used herein shall be interpreted, all accounting
determinations and computations hereunder shall be made, and all financial
statements required to be delivered hereunder or thereunder shall be prepared in
accordance with, generally accepted accounting principles consistent with those
applied in the preparation of the financial statements referred to in Section
7.5 ("GAAP").
ARTICLE II
COMMITMENTS, BORROWING PROCEDURES AND NOTES
SECTION 2.1. Commitments. On the terms and subject to the conditions of
this Agreement (including Article VI), each Lender severally agrees as follows:
SECTION 2.1.1. Loan Commitment. The Borrowers, Group, the Agents, the
Fronting Bank and the Lenders hereby agree that the Existing Credit Agreement is
hereby
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amended and restated in its entirety to become effective and binding on the
Borrowers, Group and the other parties to this Agreement pursuant to the terms
of this Agreement, and that the commitments which the Fronting Bank and the
Lenders have agreed to extend to the Borrowers under the Existing Credit
Agreement shall be extended or advanced to the Borrowers upon the amended and
restated terms and conditions contained in this Agreement with the intent that
the terms of this Agreement shall supersede the terms of the Existing Credit
Agreement (which shall hereafter have no further effect upon the parties
thereto, other than for accrued fees and expenses, and indemnification
provisions, accrued and owing under the terms of the Existing Credit Agreement
on or prior to the date hereof or arising (in the case of an indemnification)
under the terms of the Existing Credit Agreement). In furtherance of the
foregoing, from time to time on any Business Day occurring on or prior to the
then existing Commitment Termination Date, each Lender severally agrees, subject
to the terms of this Agreement (including Article VI) that
(a) in the case of the Fronting Bank, it will make loans (the
"Loans") to (i) the U.S. Borrower (in the case of each Letter of Credit
issued and each Acceptance created for the account of the U.S. Borrower
or a Subsidiary thereof), (ii) the Foreign Borrowers and Authentic
Fitness (HK) (in the case of each U.S. Letter of Credit and each
Non-U.S. Letter of Credit issued for the account of such Foreign
Borrower and/or Authentic Fitness (HK)), (iii) each Warnaco Sub
Borrower other than Authentic Fitness (HK) (in the case of each Letter
of Credit issued and each Acceptance created for the account of such
Warnaco Sub Borrower or its Subsidiary (other than Authentic Fitness
(HK)) and (iv) the Sub Borrower (in the case of each Letter of Credit
issued and each Acceptance created for the account of the Sub Borrower
or a Subsidiary thereof), in each case, as applicable, on (A) the
Disbursement Date of each Letter of Credit and (B) the Maturity Date of
each Acceptance, (in each case) for a period not to exceed the Stated
Maturity Date for such Loan in a principal amount equal to the
aggregate amount of (x) Disbursements made under one or more Letters of
Credit on such Disbursement Date and (y) matured and unreimbursed
Acceptances; and
(b) in the case of each Lender (other than the Fronting Bank
in such capacity), such Lender will participate in the Loans made by
the Fronting Bank pursuant to this Agreement and, if required pursuant
to the terms of this Agreement, such Lender will refinance and
reimburse the Fronting Bank for the outstanding principal amount of
Loans previously made by the Fronting Bank in an amount equal to its
Percentage of the aggregate amount of all (or, if elected by the
Fronting Bank, less than all) Loans (determined, in the sole discretion
of the Fronting Bank, as between Loans made to the U.S. Borrower, the
Foreign Borrowers, the Warnaco Sub Borrowers and the Sub Borrower) then
outstanding and owing to the Fronting Bank (in its capacity as the
Fronting Bank), and upon the receipt by the Fronting Bank of
immediately available funds from a Lender in respect of the
reimbursement or refinancing of a Loan previously made by and owing to
the Fronting Bank, the amount so received by the Fronting Bank will
thereafter be a Loan to the applicable
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Borrower owing to such Lender (and no longer owing to the Fronting
Bank). No Lender's obligation to make any Loan shall be affected by any
other Lender's failure to make any Loan. On the terms and subject to
the conditions hereof, the Borrowers may from time to time borrow Loans
and continue or convert such Loans as Base Rate Loans or LIBO Rate
Loans pursuant to the terms hereof, but once a particular Loan is
repaid or prepaid by a Borrower, it cannot be reborrowed.
Notwithstanding anything contained herein to the contrary, so long as
any Lender shall be in default in its obligation to fund its pro rata
share of any Loans (as notified to such Lender by the Administrative
Agent, the Administrative Agent agreeing to use good faith efforts to
give such notification promptly following the occurrence of such
default) or shall have rejected its obligations under its Commitments,
then such Lender shall not be entitled to receive any payments of
principal of or interest on its pro rata share of the Loans or its
share of any commitment or other fees payable hereunder (including fees
payable pursuant to Section 3.3) unless and until (i) the Loans of all
the other Lenders and all interest thereon have been paid in full, (ii)
such failure to fulfill its obligation to fund is cured or (iii) the
Obligations under this Agreement shall have been declared or shall have
become immediately due and payable, and for purposes of voting or
consenting to matters with respect to the Loan Documents, such Lender
shall be deemed not to be a "Lender" hereunder and such Lender's
Percentage shall each be deemed to be zero (0) (with each other
Lender's Percentage being increased proportionately for purposes of the
definition of "Required Lenders" so that all such non-defaulting
Lenders' Percentages shall collectively equal 100%). No Commitment of
any Lender shall be increased or otherwise affected by any such failure
or rejections by any other Lender. Any payments of principal of or
interest on Obligations which would, but for this Section, be paid to
any Lender, shall be paid to the Lenders who shall not be in default
under their respective Commitments and who shall not have rejected any
Commitment, for application to the Obligations or cash collateral in
respect of Letters of Credit or Acceptances in such manner and order
(pro rata among such Lenders) as shall be determined by the
Administrative Agent. The parties hereto acknowledge and agree that a
Lender's failure to make a Loan based on any Borrower's failure to
satisfy one or more of the conditions precedent to the making of Loans
set forth in Article VI shall not be construed as such Lender being in
default of its obligations to fund its pro rata share of Loans or a
rejection of such Lender's Commitments.
SECTION 2.1.2. Commitment to Issue Letters of Credit and Create
Acceptances. From time to time on any Business Day on or prior to the Commitment
Termination Date, the Fronting Bank will issue and create, and each Lender will
participate in, the Letters of Credit and the Acceptances, in accordance with
Article IV.
SECTION 2.1.3. Lenders Not Permitted or Required to Make Loans and
Fronting Bank Not Permitted or Required to Issue Letters of Credit or Create
Acceptances Under Certain Circumstances. In addition to the other terms of this
Agreement (including Article VI):
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(a) No Lender (other than, in the case of clause (a)(ii), the
Fronting Bank acting in such capacity) shall be permitted or required
to make any Loan if, after giving effect thereto (and the payment of
any Reimbursement Obligations with the proceeds of such Loans or the
refunding and refinancing of Loans made by the Fronting Bank with the
proceeds of the Loans made by the Lenders hereunder), the aggregate
outstanding principal amount of all Loans
(i) together with the aggregate amount of all Letter
of Credit Outstandings and all Acceptance Obligations, would
exceed the Commitment Amount, or
(ii) of such Lender, together with such Lender's
Percentage of the aggregate amount of all Letter of Credit
Outstandings and all Acceptance Obligations would exceed the
amount of such Lender's Percentage multiplied by the
Commitment Amount;
(b) The Fronting Bank shall not be permitted or required to
issue any Letter of Credit or extend for an additional period of time
the Stated Expiry Date of a previously issued Letter of Credit if,
after giving effect thereto the aggregate amount of all Letter of
Credit Outstandings, together with all Acceptance Obligations and the
aggregate outstanding principal amount of all Loans would exceed the
Commitment Amount;
(c) The Fronting Bank shall not be permitted or required to
create any Acceptance if, (i) after giving effect thereto the aggregate
amount of all Acceptance Obligations, together with all Letter of
Credit Outstandings and the aggregate outstanding principal amount of
all Loans would exceed the Commitment Amount, (ii) any requested
Acceptance is not in form and substance reasonably acceptable to the
Fronting Bank or (iii) an Acceptance is not in lieu of its Disbursement
obligation and the original executed Letter of Credit in respect of
which such Acceptance is to be created has not been received by the
Fronting Bank for cancellation; and
(d) The Fronting Bank shall not be permitted or required to
make any Loan on any Disbursement Date or Maturity Date if, after
giving effect thereto (and the payment of any Reimbursement Obligations
with the proceeds of such Loans), the aggregate outstanding principal
amount of all Loans, together with the aggregate amount of all Letter
of Credit Outstandings and all Acceptance Obligations, would exceed the
Commitment Amount.
SECTION 2.2. Reduction of the Commitment Amount. The U.S. Borrower may,
from time to time on any Business Day, voluntarily reduce the amount of the
Commitment Amount; provided, however, that all such reductions shall be binding
on each Borrower, shall require at least three Business Days' prior notice to
the Administrative Agent and shall be permanent.
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SECTION 2.3. Borrowing Procedure. (a) Upon (i) any Disbursements being
made in respect of one or more Letters of Credit or (ii) the occurrence of any
Maturity Date for any Acceptance (whether or not, in the case of Letters of
Credit, such Letters of Credit were issued to support the obligations of any
Borrower or any of their Subsidiaries (or any of their respective divisions) and
in the case of Acceptances, whether or not such Acceptances were created to
support the obligations of the Warnaco Sub Borrowers, the Sub Borrower, the U.S.
Borrower or any of their Subsidiaries (or any of their respective divisions)),
such Borrower shall (unless it shall have given notice to the Administrative
Agent to the contrary prior to 3:00 p.m., Applicable Time, at least three
Business Days prior to the date of such Disbursement or occurrence of such
Maturity Date) be deemed to have delivered to the Administrative Agent a
Borrowing Request pursuant to which such Borrower shall have been deemed to
irrevocably request that the Fronting Bank make a LIBO Rate Loan to such
Borrower with a six month Interest Period in a principal amount equal to the
aggregate amount of (A) in the case of U.S. Letters of Credit, the
Disbursements, and in the case of Non-U.S. Letters of Credit, the U.S. Dollar
Equivalent of the Disbursements made on such date or (B) in the case of the U.S.
Borrower, the Warnaco Sub Borrowers or the Sub Borrower, the aggregate face
amount of those Acceptances having Maturity Dates on such date, as applicable.
Each Borrower, as applicable, hereby acknowledges and agrees that each Borrowing
Request deemed to be delivered hereunder, the making of a Loan by the Fronting
Bank (a) to reimburse the Fronting Bank for Disbursements made under the Letters
of Credit or (b) payment made on the Maturity Date of any Acceptance, and the
acceptance by any Borrower of the proceeds of the Borrowing shall constitute a
representation and warranty by the Borrowers that on the date of such Borrowing
(both immediately before and after giving effect to such Borrowing and the
application of the proceeds thereof) the statements made in Section 6.2.1 are in
each case true and correct. Proceeds of such Loans shall be used to fund the
Reimbursement Obligations in respect of (a) Letters of Credit under which one or
more Disbursements were made and (b) as applicable, Acceptances which had
Maturity Dates occurring, in each case, on the date of the Loan. Each of the
parties hereto acknowledges and agrees that upon the satisfaction of the
conditions precedent set forth in Section 6.1, the Existing Loans shall be
deemed to be Loans made by the Fronting Bank on the Effective Date under the
terms of this Agreement and shall thereafter accrue interest and fees pursuant
to the terms hereof, and each Lender shall continue to participate in such Loans
in an amount equal to such Lender's Percentage of the outstanding principal
amount of the Existing Loans.
(b) In addition to the provisions of the making of Loans set forth in
clause (a), above, by delivering a Borrowing Request to the Administrative Agent
on or before 11:00 a.m., Applicable Time, on a Business Day, a Borrower may from
time to time irrevocably request, on not less than three nor more than five
Business Days' notice (in the case of LIBO Rate Loans) and on the date of such
Borrowing (in the case of Base Rate Loans), that a Borrowing be made as other
than a LIBO Rate Loan having a six month Interest Period or in an amount other
than the full amount of Disbursements with respect to which such Loan is to be
made. If any Borrower elects that a Borrowing be made as a LIBO Rate Loan having
a one or three month Interest Period pursuant to this clause, then upon the
expiration of such
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Interest Period such Borrower shall (unless it shall have given notice to the
Administrative Agent to the contrary prior to 11:00 a.m., Applicable Time, at
least three Business Days prior to the date of such Disbursement) be deemed to
have delivered to the Administrative Agent a Continuation/Conversion Notice
pursuant to which such Borrower shall have been deemed to irrevocably request
that the Fronting Bank continue the outstanding LIBO Rate Loan as a LIBO Rate
Loan with an Interest Period of (i) three months, in the case of the expiration
of a three month Interest Period or Interest Periods which, in the aggregate,
equal three months or (ii) five months, in the case of the expiration of a one
month Interest Period, in each case in a principal amount equal to the amount of
the LIBO Rate Loan with an Interest Period then expiring. On the terms and
subject to the conditions of this Agreement, each Borrowing shall be comprised
of the type of Loans, and shall be made on the Business Day, specified (or
deemed to be specified) in such Borrowing Request.
(c) The Fronting Bank may, at any time (whether or not a Default or
Event of Default has occurred and is then continuing), in its sole and absolute
discretion but subject to clause (a)(ii) of Section 2.1.3, demand that each
other Lender make a Loan in an amount equal to such Lender's Percentage of the
aggregate principal amount of all or a portion of the Loans outstanding on the
date such demand is made, and may (in its sole discretion) elect which Loans (as
among the Borrowers) are to be chosen as the Loans to be refunded by the
Lenders. Each Lender (other than the Fronting Bank) irrevocably agrees that it
shall (whether or not the conditions to the making of a Credit Extension
contained in Article VI have been (or can be) satisfied) make such Loan by
depositing the amount so demanded in same day funds in an account specified by
the Fronting Bank on or before 11:00 a.m. New York City time on the first
Business Day following receipt of such a demand. The Fronting Bank agrees to
apply all such funds received by it under this clause to refund and refinance
the Loans previously made by it to any Borrower, as identified in the demand
that it delivers to the Lenders pursuant to this clause. On the date (a "Funding
Date") that the Lenders (other than the Fronting Bank) advance funds to the
Fronting Bank pursuant to this clause, the principal amount so refunded and
refinanced shall become a Loan to the Borrower identified by the Fronting Bank
outstanding under such Lender's Note to that particular Borrower and shall no
longer be a Loan owed to the Fronting Bank under the Fronting Bank's Note to
that particular Borrower.
All interest payable with respect to any Loans made pursuant to this
clause shall be appropriately adjusted to reflect the period of time during
which such Loans were owing to the Fronting Bank and, on and subsequent to a
Funding Date, such Loans were owing to the Lenders.
The obligation of each Lender to make Loans by way of advancing
immediately available funds to the Fronting Bank on a Funding Date to be applied
to refund and refinance the Loans previously made by the Fronting Bank to the
Borrowers (or any one of them) under this clause shall be absolute and
unconditional and shall not be affected by any circumstance, including (i) any
set-off, counterclaim, recoupment, defense or other right which any Lender may
have against Scotiabank, the Borrowers or any other Person for any
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reason whatsoever; (ii) the occurrence or continuance of any Default or the
inability of the Borrowers to otherwise satisfy the conditions precedent set
forth in Article VI; (iii) any adverse change in the condition (financial or
otherwise) of any Borrower or any other Obligor; (iv) the acceleration or
maturity of any Loans or other Obligations or the termination of any Commitment
after the making of any Loan; (v) any breach of this Agreement or any other Loan
Document by any Borrower, any other Obligor or any Lender; or (vi) any other
circumstance, happening or event whatsoever, whether or not similar to any of
the foregoing.
SECTION 2.4. Continuation and Conversion Elections. By delivering a
Continuation/Conversion Notice to the Administrative Agent on or before 10:00
a.m., Applicable Time, on a Business Day, any Borrower may from time to time
irrevocably elect, on not less than three nor more than five Business Days'
notice that all, or any portion of any Loans made to it be, in the case of Base
Rate Loans, converted into LIBO Rate Loans or, in the case of a LIBO Rate Loan,
converted into a Base Rate Loan or continued as a LIBO Rate Loan (in the absence
of delivery of a Continuation/Conversion Notice with respect to any LIBO Rate
Loan at least three Business Days before the last day of the then current
Interest Period with respect thereto, such LIBO Rate Loan shall, on such last
day, automatically convert to a LIBO Rate Loan pursuant to the provisions of
clause (b) of Section 2.3, unless such Loan is otherwise required to be paid
pursuant to the terms of this Agreement (including the first sentence of Section
3.1)); provided, however, that (i) no portion of the outstanding principal
amount of any Loans may be continued as, or be converted into, LIBO Rate Loans
when any Default has occurred and is continuing and (ii) the maximum length of
any Interest Period or combination of Interest Periods for any particular Loan
shall not exceed six months.
SECTION 2.5. Funding. Each Lender may, if it so elects, fulfill its
obligation to participate in, and to make, continue or convert LIBO Rate Loans
hereunder by causing one of its foreign branches or affiliates (or an
international banking facility all of the capital stock or other ownership
interests of which are wholly-owned by such Lender) to make or maintain such
LIBO Rate Loan; provided, however, that such LIBO Rate Loan shall nonetheless be
deemed to have been made and to be held by such Lender, and the obligation of
the Lender to refund and refinance such LIBO Rate Loan on the Funding Date and
the obligation of the Borrowers to repay such LIBO Rate Loan shall nevertheless
be of or to such Lender for the account of such foreign branch, affiliate or
international banking facility; provided, further that the Borrowers shall not
be required to pay any amount under this Section or Section 5.6 that is greater
than the amount which it would have been required to pay had such Lender not
caused such branch, affiliate or facility to make or maintain such LIBO Rate
Loan. In addition, each of the Borrowers hereby consents and agrees that, for
purposes of any determination to be made for purposes of Section 5.1, 5.2, 5.3
or 5.4, it shall be conclusively assumed that such Lender elected to fund all
LIBO Rate Loans by purchasing Dollar deposits in its LIBOR Office's interbank
eurodollar market.
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SECTION 2.6. Notes. The Loans of the Fronting Bank under the Loan
Commitment shall be evidenced by Notes payable to the order of the Fronting Bank
from each Borrower in an aggregate maximum principal amount equal to the
original Commitment Amount, and the Loans of each Lender (other than the
Fronting Bank) under the Loan Commitment shall be evidenced by Notes payable
from each Borrower to the order of such Lender in a maximum principal amount
equal to such Lender's Percentage multiplied by the original Commitment Amount.
Each Borrower hereby irrevocably authorizes each Lender to make (or cause to be
made) appropriate notations on the grid attached to such Lender's Notes (or on
any continuation of such grid), which notations, if made, shall evidence, inter
alia, the date of, the outstanding principal of, and the interest rate and
Interest Period applicable to the Loans evidenced thereby and the principal
amount of Loans that have been repaid (including, in the case of the Fronting
Bank, Loans that have been refunded and refinanced by the Lenders on a Funding
Date). Such notations shall be conclusive and binding on the Borrowers absent
manifest error; provided, however, that the failure of any Lender to make any
such notations shall not limit or otherwise affect any Obligations of any
Borrower.
SECTION 2.7. Extension of Commitment Termination Date. (a) The
Commitment Termination Date may be extended by the Lenders in their sole and
absolute discretion upon written request of the Administrative Agent by the U.S.
Borrower, at least 60 days but not more than 90 days (such date the "Request
Date") prior to the then effective Commitment Termination Date (as such date may
have been extended) for a period not to exceed 364 days from the then expiring
Commitment Termination Date. Within five days of the Request Date, the
Administrative Agent will forward the request to the Lenders. If a Lender
agrees, in its individual and sole discretion, to so extend all or a portion of
its Commitment (an "Extending Lender"), it will deliver to the Administrative
Agent and the U.S. Borrower a notice of its agreement to do so and may also set
forth the amount, if any, by which it would be willing to increase its
Commitment pursuant to this Section (a "Notice of Extension"), within 45 days of
the Request Date; provided that such notice shall in no event be given later
than 30 days prior to the then effective Commitment Termination Date (as such
date may have been extended).
(b) The Commitment of any Lender that fails to accept or
respond to the U.S. Borrower's request for extension of the Commitment
Termination Date (a "Declining Lender") and the portion of the
Commitment of any Extending Lender which such Extending Lender has not
elected to extend pursuant to clause (a) (such Commitments of the
Declining Lenders and such Extending Lenders being collectively, the
"Terminated Commitments") will be terminated on the Commitment
Termination Date then in effect (without regard to any extension by
other Lenders) and on such Commitment Termination Date the U.S.
Borrower will pay (or cause to be paid) in full the outstanding
principal amount of all Loans with respect to the Terminated
Commitments owing to each such Declining Lender or Extending Lender, as
the case may be, together with accrued but unpaid interest thereon to
the date of payment of such principal amount, all accrued but unpaid
commitment fees, other fees and all other amounts payable to such
Declining Lender and such Extending Lender
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with respect to the Terminated Commitments under this Agreement
(including any increased costs or other additional amounts (computed in
accordance with Section 5.3) and any Taxes incurred and reimbursable
hereunder by such Declining Lender and such Extending Lender prior to
such Commitment Termination Date and amounts payable under Section
11.3).
(c) The Extending Lenders, or any of them, or any Person that
would be an Assignee Lender permitted by Section 11.11.1 (a
"Replacement Lender") may offer in their sole discretion, to increase
their respective Commitment by, or to provide a commitment in, as the
case may be, an aggregate amount that will not exceed the aggregate
amount of the Terminated Commitments. Should such offers exceed the
aggregate amount of the Terminated Commitments, the Terminated
Commitments shall be allocated among such Extending Lenders and/or
Replacement Lenders as determined by the Administrative Agent and the
U.S. Borrower. Each such Extending Lender or Replacement Lender will
deliver to the Administrative Agent a notice, of its offer to so
increase its Commitment or to provide a commitment, as the case may be,
no later than 5 days prior to such Commitment Termination Date. The
U.S. Borrower will, no later than one day before the Commitment
Termination Date, deliver to the Administrative Agent a notice setting
forth the Commitments of the Extending Lenders and Replacement Lenders,
if any, that are to become or be effective as of the Commitment
Termination Date. If the Extending Lenders and Replacement Lenders
provide Commitments in an aggregate amount equal to 75% of the
aggregate amount of the Commitments requested by the U.S. Borrower to
be extended, then, effective on the Commitment Termination Date in
effect at the time of the U.S. Borrower's request, (i) the Commitment
Termination Date will be extended by 364 days for such Extending
Lenders' and Replacement Lenders' Commitments, (ii) the Commitment of
each Extending Lender and each Replacement Lender will be the amount
specified in the notice provided by the U.S. Borrower to the
Administrative Agent (which amount will not exceed the amount specified
by each such Extending Lender and Replacement Lender in its most recent
notice to the Administrative Agent) and (iii) each Replacement Lender
will become a party hereto and will be a Lender hereunder.
SECTION 2.8. Authentic LIBO Rate Loans. Upon the consummation of the
Merger and the termination of the Authentic Trade Credit Facility, at the option
of the U.S. Borrower and following notice thereof to the Administrative Agent,
each Authentic LIBO Rate Loan (and the amount and payment date of fees thereon)
shall be deemed to be a LIBO Rate Loan hereunder with the LIBO Rate (Reserve
Adjusted), Interest Period and the Stated Maturity Date that are applicable
thereto under the Authentic Trade Credit Facility at such time and shall be
governed by this Agreement.
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ARTICLE III
REPAYMENTS, PREPAYMENTS, INTEREST AND FEES
SECTION 3.1. Repayments and Prepayments. The Borrowers shall repay in
full the entire unpaid principal amount of each Loan upon the Stated Maturity
Date therefor; provided, that notwithstanding anything contained in this
Agreement or any Loan Document to the contrary, each Foreign Borrower and
Authentic Fitness (HK) shall only be obligated to repay the principal amount of
the Loans made to it and Reimbursement Obligations in respect of Letters of
Credit issued for its account. Prior thereto (and subject to Section 2.1.1),
each Borrower
(a) may, from time to time on any Business Day, make a
voluntary prepayment, in whole or in part, of the outstanding principal
amount of any Loans; provided, however, that all such voluntary
prepayments shall require at least one Business Day's prior written
notice to the Administrative Agent;
(b) shall, on each date when any reduction in the Commitment
Amount shall become effective (which reduction shall be subject to
Section 2.2), make a mandatory prepayment (which shall be applied (or
held as cash collateral for application to the aggregate amount of all
Letter of Credit Outstandings or, as applicable, Acceptance
Obligations, in each case not consisting of unpaid and outstanding
Reimbursement Obligations) by the Administrative Agent to the payment
of the Loans and unpaid and outstanding Reimbursement Obligations of
the then Letter of Credit Outstandings and, as applicable, Acceptance
Obligations) equal to the excess, if any, of the aggregate outstanding
principal amount of all Loans, together with the aggregate amount of
all Letter of Credit Outstandings and, as applicable, Acceptance
Obligations over the Commitment Amount as so reduced;
(c) shall, if upon any Reset Date, the sum of the outstanding
principal amount of all Loans plus the amount of all Acceptance
Obligations plus all Letter of Credit Outstandings exceeds the then
existing Commitment Amount, make a mandatory prepayment (which shall be
applied (or held as cash collateral for application to the aggregate
amount of all Letter of Credit Outstandings or, as applicable,
Acceptance Obligations, in each case not consisting of unpaid and
outstanding Reimbursement Obligations) by the Administrative Agent to
the payment of the Loans and unpaid and outstanding Reimbursement
Obligations of the then Letter of Credit Outstandings and, as
applicable, Acceptance Obligations) in an amount equal to such excess;
and
(d) shall, immediately upon any acceleration of the Stated
Maturity Date of any Obligations pursuant to Section 9.2 or Section
9.3, repay all Obligations, unless, pursuant to Section 9.3, only a
portion of all Obligations is so accelerated.
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Each prepayment of any Loans made pursuant to this Section shall be without
premium or penalty, except as may be required by Section 5.4. No voluntary
prepayment of principal of any Loans shall cause a reduction in the Commitment
Amount.
SECTION 3.2. Interest Provisions. Interest on the outstanding principal
amount of Loans shall accrue and be payable in accordance with this Section 3.2.
SECTION 3.2.1. Rates. Loans comprising a Borrowing shall accrue
interest at a rate per annum:
(a) on that portion maintained from time to time as a Base
Rate Loan, equal to the sum of the Alternate Base Rate from time to
time in effect plus the Applicable Margin in effect from time to time;
or
(b) on that portion maintained as a LIBO Rate Loan (whether
made pursuant to clause (a) or clause (b) of Section 2.3), during each
Interest Period applicable thereto, equal to the sum of the LIBO Rate
(Reserve Adjusted) for such Interest Period plus the Applicable Margin
in effect from time to time.
The "LIBO Rate (Reserve Adjusted)" means, relative to any Loan to be
made, continued or maintained as, or converted into, a LIBO Rate Loan for any
Interest Period, a rate per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) determined pursuant to the following formula:
LIBO Rate = LIBO Rate
-------------------------------
(Reserve Adjusted) 1.00 - LIBOR Reserve Percentage
The LIBO Rate (Reserve Adjusted) for any Interest Period for LIBO Rate Loans
will be determined by the Administrative Agent on the basis of the LIBOR Reserve
Percentage in effect on, and the applicable rates furnished to and received by
the Administrative Agent from Scotiabank, two Business Days before the first day
of such Interest Period.
"LIBO Rate" means, relative to any Interest Period for LIBO Rate Loans,
the rate of interest per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) reported, on the first day of such Interest Period as of 11:00 a.m.
London time, on Telerate Access Service Page 3750 (British Bankers Association
Settlement Rate) as the London Interbank Offered Rate for Dollar deposits having
a term comparable to such Interest Period and in an amount of $1,000,000 or more
(or, if said page shall cease to be publicly available, as reported by any
publicly available source of similar market data selected by the Administrative
Agent that, in the Administrative Agent's reasonable judgment, accurately
reflects such London Interbank Offered Rate).
"LIBOR Reserve Percentage" means, relative to any Interest Period for
LIBO Rate Loans, the reserve percentage, if any (expressed as a decimal) equal
to the maximum
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aggregate reserve requirements (including all basic, emergency, supplemental,
marginal and other reserves and taking into account any transitional adjustments
or other scheduled changes in reserve requirements) specified under regulations
issued from time to time by the F.R.S. Board and then applicable to assets or
liabilities consisting of and including "Eurocurrency Liabilities", as currently
defined in Regulation D of the F.R.S. Board, having a term approximately equal
or comparable to such Interest Period.
All LIBO Rate Loans shall bear interest from and including the first
day of the applicable Interest Period to (but not including) the last day of
such Interest Period at the interest rate determined as applicable to such LIBO
Rate Loan.
SECTION 3.2.2. Post-Maturity Rates. After and during the continuance of
an Event of Default (after giving effect to any grace periods in respect thereof
in the case of an Event of Default described in Section 9.1.1), the Borrowers
shall pay interest (after as well as before judgment) on (a) the unpaid
principal amount of each outstanding Loan at a rate per annum equal to 2% per
annum above the then applicable interest rate in respect of such Loan and (b) to
the fullest extent permitted by law, the amount of any interest, fee or other
amount payable hereunder at a rate per annum equal at all times to 2% per annum
above the Alternate Base Rate then in effect.
SECTION 3.2.3. Payment Dates. Interest accrued on each Loan shall be
payable, without duplication:
(a) on the Stated Maturity Date therefor;
(b) with respect to Base Rate Loans, on each Quarterly Payment
Date occurring after the date of the initial Borrowing hereunder;
(c) with respect to LIBO Rate Loans, on the last day of each
applicable Interest Period (and, if such Interest Period shall exceed
three months, at the end of each three month period occurring during
such Interest Period);
(d) on the date of any optional or required payment or
prepayment, in whole or in part, of principal outstanding on such Loan;
(e) with respect to any Base Rate Loans converted into LIBO
Rate Loans on a day when interest would not otherwise have been payable
pursuant to the terms hereof, on the date of such conversion; and
(f) on that portion of any Loans the Stated Maturity Date of
which is accelerated pursuant to Section 9.2 or Section 9.3,
immediately upon such acceleration.
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Interest accrued on Loans or other monetary Obligations arising under this
Agreement or any other Loan Document after the date such amount is due and
payable (whether on the Stated Maturity Date, upon acceleration or otherwise)
shall be payable upon demand.
SECTION 3.2.4. Allocation of Interest Payments. Accrued and unpaid
interest on the outstanding principal amount of the Loans shall be allocated and
payable to the Lenders as set forth in this Section:
(a) Interest shall be payable by a Borrower to the Fronting
Bank (for its own account) on the outstanding principal amount of its
Loans from the date such Loans are made to (but excluding) the Funding
Date in an amount equal to the difference between (i) (x) in the case
of LIBO Rate Loans, the LIBO Rate (Reserve Adjusted) or, in the case of
Base Rate Loans, the Alternate Base Rate, plus the Applicable Margin
then in effect for LIBO Rate Loans or Base Rate Loans (as applicable)
multiplied by (y) the outstanding principal amount of the LIBO Rate
Loans or Base Rate Loans, as the case may be, minus (ii) the Interest
Amount (as defined below). Prior to the Funding Date each Lender (other
than the Fronting Bank) shall be paid interest in an aggregate amount
(referred to as the "Interest Amount") equal to such Lender's
Percentage of (x) the principal amount of the Loans outstanding prior
to a Funding Date multiplied by (y) the Applicable Margin then in
effect for LIBO Rate Loans (in the case of the outstanding principal
amount of LIBO Rate Loans) or Base Rate Loans (in the case of the
outstanding principal amount of Base Rate Loans).
(b) On and subsequent to a Funding Date, interest shall be
payable by a Borrower for the account of each Lender (including the
Fronting Bank, in its capacity as a Lender) in accordance with its
Percentage on the principal amount of its Loans actually funded by such
Lender in an amount equal to (in the case of the outstanding principal
amount of LIBO Rate Loans) the LIBO Rate (Reserve Adjusted) plus the
Applicable Margin for such LIBO Rate Loans or, if applicable (in the
case of the outstanding principal amount of Base Rate Loans), the
Alternate Base Rate plus the Applicable Margin for Base Rate Loans.
SECTION 3.3. Fees. Each Borrower agrees to pay the fees payable by it
set forth in this Section 3.3. All such fees shall be non-refundable.
SECTION 3.3.1. Letter of Credit and Acceptance Fees Payable to the
Lenders. The Borrowers agree to pay to the Administrative Agent, for the pro
rata account of the Lenders determined in accordance with each Lender's
Percentage, a fee for each Letter of Credit and each Acceptance for the period
from and including the date of the issuance of such Letter of Credit or creation
of the Acceptance to (but not including) (a) in the case of a Letter of Credit,
the earlier of (i) the date upon which such Letter of Credit expires and (ii)
the date upon which the Stated Amount of such Letter of Credit is irrevocably
reduced to zero (by the making of a Disbursement by the Fronting Bank or
otherwise), and (b) in the case of an Acceptance, the Maturity Date therefor at
the rates per annum determined by reference to the
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Debt Rating in effect from time to time as set forth below for Letters of Credit
or Acceptances calculated on the average daily sum of (x) the maximum amount
available to be drawn under outstanding Letters of Credit (in the case of
Letters of Credit) and (y) the aggregate face amount of outstanding unmatured
Acceptances (in the case of Acceptances) (provided, however, that no change in
the fees payable for Letters of Credit or Acceptances shall be effective until
three Business Days after the date on which the Administrative Agent receives
evidence reasonably satisfactory to it from Group or the U.S. Borrower that a
new Debt Rating is in effect):
<TABLE>
<CAPTION>
Rate for
Letters of Rate for
Debt Rating Credit Acceptances
----------- ------ -----------
<S> <C> <C>
A- or A3 or higher 0.300% 0.625%
BBB+ or Baa1 0.325% 0.750%
BBB or Baa2 0.375% 0.875%
BBB- or Baa3 0.450% 1.000%
BB+ or Ba1 or lower 0.600% 1.250%
</TABLE>
Notwithstanding anything in this Agreement to the contrary, each Foreign
Borrower and Authentic Fitness (HK) shall only be liable for the fee that has
accrued on those Letters of Credit issued for its own account. In the event that
at any time no Debt Rating shall be in effect, the applicable rate per annum for
purposes of determining the Letter of Credit and Acceptance fees provided for
under this Section shall be 0.600% (in the case of Letters of Credit) and 1.250%
(in the case of Acceptances). Such fee shall be payable by the applicable
Borrower in arrears on each Quarterly Payment Date (commencing on the first such
date after the issuance of such Letter of Credit or the creation of such
Acceptance), on the Commitment Termination Date and in addition to the above
payment dates, in the case of (x) Letters of Credit with expiry dates that
extend beyond the Commitment Termination Date, on the expiration of or, if
earlier, on the date of any disbursement made under, such Letter of Credit, or
(y) Acceptances which mature after the Commitment Termination Date, on such
Maturity Date, in each case, for any period then ending for which such fee shall
not theretofore have been paid; provided that, notwithstanding the foregoing,
such fees shall be payable not less often than every 90 days.
SECTION 3.3.2. Letter of Credit and Acceptance Fees Payable to the
Fronting Bank. The Borrowers agree to pay to the Fronting Bank the fees relating
to Letters of Credit and Acceptances in accordance with the Fee Letter and such
customary fees currently paid by the Borrowers on the Effective Date for each
Letter of Credit issued and each Acceptance created for the period from and
including the date of issuance of such Letter of Credit or creation of such
Acceptance to (but not including) the date upon which such Letter of Credit
expires or such Acceptance matures; provided, that each Foreign Borrower and
Authentic
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Fitness (HK) shall be obligated to pay such fees only on those Letters of Credit
issued for its account.
SECTION 3.3.3. Fee Letter. The U.S. Borrower agrees to pay to
Scotiabank, for its own account, such fees in the amounts and on the dates set
forth in the Fee Letter.
SECTION 3.3.4. Commitment Fee. The U.S. Borrower agrees to pay to the
Administrative Agent, for the pro rata account of each Lender determined in
accordance with each Lender's Percentage, for the period commencing on the
Effective Date and continuing through the Commitment Termination Date, a
commitment fee (the "Commitment Fee") on the sum of the average daily unused
portion of the Commitment Amount at the rates per annum determined by reference
to the Debt Rating in effect from time to time as set forth below; (provided,
however, that no change in the commitment fee rate shall be effective until
three Business Days after the date on which the Administrative Agent receives
evidence reasonably satisfactory to it from Group or the U.S. Borrower that a
new Debt Rating is in effect):
<TABLE>
<CAPTION>
Commitment
Debt Rating Fee Rate
----------- --------
<S> <C>
A- or A3 or higher 0.100%
BBB+ or Baa1 0.125%
BBB or Baa2 0.150%
BBB- or Baa3 0.200%
BB+ or Ba1 or lower 0.250%
</TABLE>
In the event that at any time no Debt Rating shall be in effect, the
applicable rate per annum for purposes of determining the commitment
fees provided for under this Section shall be 0.250%. The fee payable
under this Section shall be payable by the U.S. Borrower in arrears on
each Quarterly Payment Date, commencing on the first such date after
the Effective Date, and on the Commitment Termination Date for any
period then ending for which such fee shall not theretofore have been
paid.
The amount of any Loans made, Letters of Credit issued and
Acceptances created by the Fronting Bank and not funded by the other
Lenders will constitute usage of the Commitment Amount for purposes of
calculating the commitment fee payable to Lenders (other than the
Fronting Bank) pursuant to this Section.
SECTION 3.4. Guaranty. The U.S. Borrower shall guaranty the Obligations
of each Foreign Borrower, the Sub Borrower, each Warnaco Sub Borrower and each
other Guaranteed Party as set forth below.
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SECTION 3.4.1. Guaranty. The U.S. Borrower hereby absolutely,
unconditionally and irrevocably
(a) guarantees (referred to as its "Guaranty") the full and
punctual payment when due, whether at stated maturity, by required
prepayment, declaration, acceleration, demand or otherwise, of all
Obligations of the Sub Borrower, each Foreign Borrower and each Warnaco
Sub Borrower and each of their respective Subsidiaries (and/or
divisions thereof) for whom (i) a Letter of Credit has been issued
(collectively referred to as the "L/C Parties") or (ii) as to the Sub
Borrower, each Warnaco Sub Borrower or any other Subsidiary of the U.S.
Borrower other than the Foreign Borrowers and Authentic Fitness (HK),
an Acceptance has been created (collectively referred to as the
"Acceptance Parties"; together with the L/C Parties, the "Guaranteed
Parties"), whether for principal, interest, fees, expenses or otherwise
(including all such amounts which would become due but for the
operation of the automatic stay under Section 362(a) of the United
States Bankruptcy Code, 11 U.S.C. 'SS'362(a), and the operation of
Sections 502(b) and 506(b) of the United States Bankruptcy Code, 11
U.S.C. 'SS'502(b) and 'SS'506(b)); and
(b) indemnifies and holds harmless each Lender, the Fronting
Bank and each Agent, and their respective successors, transferees and
assigns (collectively referred to as the "Lender Parties") for any and
all costs and expenses (including reasonable attorney's fees and
expenses) incurred by such Lender Party in enforcing any rights under
this Section 3.4.1.
This Guaranty constitutes a guaranty of payment when due and not of collection,
and the U.S. Borrower specifically agrees that it shall not be necessary or
required that any Lender Party exercise any right, assert any claim or demand or
enforce any remedy whatsoever against any Guaranteed Party or any other Obligor
(or any other Person) before or as a condition to the obligations of the U.S.
Borrower hereunder.
SECTION 3.4.2. Acceleration of Guaranty. The U.S. Borrower agrees that,
in the event of the dissolution or insolvency of any Foreign Borrower, any
Warnaco Sub Borrower or the Sub Borrower or the dissolution (other than to the
extent permitted by this Agreement) or insolvency of any other Guaranteed Party,
Obligor, or the U.S. Borrower, or the inability or failure of any Obligor, any
Guaranteed Party or the U.S. Borrower to pay debts as they become due, or an
assignment by any Obligor, any Guaranteed Party or the U.S. Borrower for the
benefit of creditors, or the commencement of any case or proceeding in respect
of any of the foregoing Persons under any bankruptcy, insolvency or similar
laws, and with respect to any involuntary case or proceeding, such case or
proceeding remains undismissed for a period of 30 days; and if any such event
shall occur at a time when any of the Obligations of any Guaranteed Party and
each other Obligor may not then be due and payable, the U.S. Borrower will pay
to the Administrative Agent (for the account of the Lender Parties) forthwith
the full amount which would be payable hereunder by the U.S. Borrower if all
such Obligations were then due and payable.
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<PAGE>
SECTION 3.4.3. Guarantee Absolute, etc. This Guaranty shall in all
respects be a continuing, absolute, unconditional and irrevocable guaranty of
payment, and shall remain in full force and effect until all Obligations of each
Foreign Borrower, each Warnaco Sub Borrower, the Sub Borrower, each other
Guaranteed Party and each other Obligor have been paid in full, all obligations
of the U.S. Borrower hereunder shall have been paid in full and all Commitments
shall have terminated. The U.S. Borrower guarantees that the Obligations of each
Foreign Borrower, each Warnaco Sub Borrower, the Sub Borrower, each other
Guaranteed Party and each other Obligor and their respective Subsidiaries will
be paid strictly in accordance with the terms of this Agreement and each other
Loan Document under which they arise, regardless of any law, regulation or order
now or hereafter in effect in any jurisdiction affecting any of such terms or
the rights of any Lender Party with respect thereto. The liability of the U.S.
Borrower under this Guaranty shall be absolute, unconditional and irrevocable
irrespective of:
(a) any lack of validity, legality or enforceability of this
Agreement, any Note, any Letter of Credit, any Acceptance or any other
Loan Document;
(b) the failure of any Lender Party
(i) to assert any claim or demand or to enforce any
right or remedy against any Foreign Borrower, any Warnaco Sub
Borrower, the Sub Borrower, any other Guaranteed Party, any
other Obligor or any other Person (including any other
guarantor) under the provisions of this Agreement, any Note,
any Letter of Credit, any Acceptance, any other Loan Document
or otherwise, or
(ii) to exercise any right or remedy against any
other guarantor of any Obligations of any Foreign Borrower,
any Warnaco Sub Borrower, the Sub Borrower, any other
Guaranteed Party or any other Obligor;
(c) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations of any Foreign
Borrower, any Warnaco Sub Borrower, the Sub Borrower, any other
Guaranteed Party or any other Obligor, or any other extension,
compromise or renewal of any Obligation of any Foreign Borrower, any
Warnaco Sub Borrower, the Sub Borrower, any other Guaranteed Party or
any other Obligor;
(d) any reduction, limitation, impairment or termination of
the Obligations of any Foreign Borrower, any Warnaco Sub Borrower, the
Sub Borrower, any other Guaranteed Party or any other Obligor for any
reason, including any claim of waiver, release, surrender, alteration
or compromise, and shall not be subject to (and the U.S. Borrower
hereby waives any right to or claim of) any defense or setoff,
counterclaim, recoupment or termination whatsoever by reason of the
invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting the
Obligations of any Foreign Borrower, any Warnaco Sub
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Borrower, the Sub Borrower, any other Guaranteed Party, any other
Obligor or otherwise;
(e) any amendment to, rescission, waiver, or other
modification of, or any consent to departure from, any of the terms of
this Agreement, any Note, any Letter of Credit, any Acceptance or any
other Loan Document;
(f) any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Lender Party
securing any of the Obligations of any Foreign Borrower, any Warnaco
Sub Borrower, the Sub Borrower, any other Guaranteed Party or any other
Obligor; or
(g) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, any Foreign
Borrower, any Warnaco Sub Borrower, the Sub Borrower, any other
Guaranteed Party, any other Obligor, any surety or any guarantor.
SECTION 3.4.4. Reinstatement, etc. The U.S. Borrower agrees that this
Guaranty shall continue to be effective or be reinstated, as the case may be, if
at any time any payment (in whole or in part) of any of the Obligations is
rescinded or must otherwise be restored by any Lender Party, upon the
insolvency, bankruptcy or reorganization of any Foreign Borrower, any Warnaco
Sub Borrower, the Sub Borrower, any other Guaranteed Party, any other Obligor or
otherwise, all as though such payment had not been made.
SECTION 3.4.5. Waiver, etc. The U.S. Borrower hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
Obligations of any Foreign Borrower, any Warnaco Sub Borrower, the Sub Borrower,
any other Guaranteed Party or any other Obligor and this Guaranty and any
requirement that any Agent or any other Lender Party protect, secure, perfect or
insure any security interest or Lien, or any property subject thereto, or
exhaust any right or take any action against any Foreign Borrower, any Warnaco
Sub Borrower, the Sub Borrower, any other Guaranteed Party, any other Obligor or
any other Person (including any other guarantor) or entity or any collateral
securing the Obligations of any Foreign Borrower, any Warnaco Sub Borrower, the
Sub Borrower, any other Guaranteed Party or any other Obligor, as the case may
be.
SECTION 3.4.6. Postponement of Subrogation, etc. The U.S. Borrower will
not exercise any rights which it may acquire by way of rights of subrogation
under this Guaranty, by any payment made hereunder or otherwise, until the prior
payment, in full and in cash, of all Obligations of each Foreign Borrower, each
Warnaco Sub Borrower, the Sub Borrower, each other Guaranteed Party and each
other Obligor. Any amount paid to the U.S. Borrower on account of any such
subrogation rights prior to the payment in full of all Obligations of each
Foreign Borrower, each Warnaco Sub Borrower, the Sub Borrower, each other
Guaranteed Party and each other Obligor shall be held in trust for the benefit
of the Lender Parties and shall immediately be paid to the Administrative Agent
and credited and
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applied against the Obligations of each Foreign Borrower, each Warnaco Sub
Borrower, the Sub Borrower, each other Guaranteed Party and each other Obligor,
whether matured or unmatured, in accordance with the terms of this Agreement;
provided, however, that if
(a) the U.S. Borrower has made payment to the Lender Parties
of all or any part of the Obligations of any Foreign Borrower, any
Warnaco Sub Borrower, the Sub Borrower, any other Guaranteed Party or
any other Obligor; and
(b) all Obligations of each Foreign Borrower, each Warnaco Sub
Borrower, the Sub Borrower, each other Guaranteed Party and each other
Obligor have been paid in full and all Commitments have been
permanently terminated;
each Lender Party agrees that, at the U.S. Borrower's request, the
Administrative Agent, on behalf of the Lender Parties, will execute and deliver
to the U.S. Borrower appropriate documents (without recourse and without
representation or warranty) necessary to evidence the transfer by subrogation to
the U.S. Borrower of an interest in the Obligations of each Foreign Borrower,
each Warnaco Sub Borrower, the Sub Borrower, each other Guaranteed Party and
each other Obligor resulting from such payment by the U.S. Borrower. In
furtherance of the foregoing, for so long as any Obligations or Commitments
remain outstanding, the U.S. Borrower shall refrain from taking any action or
commencing any proceeding against any Foreign Borrower, any Warnaco Sub
Borrower, the Sub Borrower, any other Guaranteed Party or any other Obligor (or
its successors or assigns, whether in connection with a bankruptcy proceeding or
otherwise) to recover any amounts in respect of payments made under this
Guaranty to any Lender Party.
ARTICLE IV
LETTERS OF CREDIT AND ACCEPTANCES
SECTION 4.1. Issuance of Letters of Credit and Creation of Acceptances.
Letters of Credit shall be issued and Acceptances shall be created on the terms
set forth below.
SECTION 4.1.1. Letters of Credit. Any Borrower or any wholly-owned
Subsidiary of the U.S. Borrower, the Warnaco Sub Borrowers or the Sub Borrower
(or any of their respective divisions) may request, from time to time on or
prior to the Commitment Termination Date, by delivering to the Administrative
Agent and the Fronting Bank an Issuance Request (such request being, in any
Borrower's sole discretion, either delivered (by telex, teletransmission or
otherwise) in the form attached hereto as Exhibit B or in accordance with the
terms of the Tradexpress Agreement) on or before 3:00 p.m., Applicable Time on
the Business Day on which a Letter of Credit is to be issued that the Fronting
Bank issue an irrevocable sight documentary letter of credit in such form as may
be requested by such Borrower or such Subsidiary and approved by the Fronting
Bank (each a "Documentary Letter of Credit").
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Letters of Credit shall be issued to facilitate such Borrower's (and in the case
of the U.S. Borrower, the Warnaco Sub Borrowers and the Sub Borrower, their
respective Subsidiaries') worldwide sourcing of merchandise. Each Letter of
Credit shall by its terms:
(a) be issued in a Stated Amount which does not exceed (or
would not exceed) the then existing Letter of Credit Availability;
(b) except as provided in Section 4.1.2, be denominated in,
and all payments in respect thereof shall be made in, Dollars;
(c) be stated to expire on a date (its "Stated Expiry Date")
no later than 180 days from its date of issuance (it being acknowledged
and agreed by the Borrowers, the Fronting Bank and the Lenders that the
Stated Expiry Date for a Letter of Credit may be a date that is up to
179 days subsequent to the Commitment Termination Date; and
(d) on or prior to its Stated Expiry Date:
(i) terminate immediately upon notice to the Fronting
Bank thereof from the applicable Letter of Credit Beneficiary
that all obligations covered thereby have been terminated,
paid, or otherwise satisfied in full, and
(ii) reduce in part immediately and to the extent the
applicable Letter of Credit Beneficiary has notified the
Fronting Bank thereof that the obligations covered thereby
have been paid or otherwise satisfied in part.
So long as no Default has occurred and is continuing, by delivery to the
Fronting Bank and the Administrative Agent of an Issuance Request (such request
being, in any Borrower's sole discretion, either delivered (by telex,
teletransmission or otherwise) in accordance with the terms of the Tradexpress
Agreement or in the form attached hereto as Exhibit B) on or before 3:00 p.m.,
Applicable Time, on the Stated Expiry Date of any Letters of Credit, any
Borrower may on or prior to the then existing Commitment Termination Date
request the Fronting Bank to extend the Stated Expiry Date of such Letter of
Credit for an additional period not to exceed the earlier of (x) 180 days from
the date of extension of such Letter of Credit and (y) 179 days after the
Commitment Termination Date. Notwithstanding any other provision in this
Agreement to the contrary, the Fronting Bank may in its discretion refuse to
issue, or extend the Stated Expiry Date of, any Letter of Credit or create any
Acceptance if such issuance or creation would, in the Fronting Bank's reasonable
determination, contravene any sanctions, laws or regulations of any State of the
United States or any Federal body or authority of the United States (including
but not limited to the regulations of the Federal Reserve Bank) or the laws,
regulations or sanctions of any other applicable jurisdiction or authority or
if, in the Fronting Bank's reasonable determination, any of the above-mentioned
laws, regulations or sanctions would affect the Fronting Bank's ability to
perform its obligations with respect to any such Letter of Credit if issued or
Acceptance if created.
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SECTION 4.1.2. Non-U.S. Letters of Credit. Any Borrower may request the
issuance of a Non-U.S. Letter of Credit subject to the terms and conditions of
this Section 4.1.2, in addition to the other conditions applicable to the
issuance of Letters of Credit generally. The issuance of any Non-U.S. Letter of
Credit shall be subject to the approval of the Fronting Bank. If any Non-U.S.
Letter of Credit is issued, the following provisions shall apply:
(a) For purposes of determining the Letter of Credit
Outstandings and for purposes of calculating fees payable under
Sections 3.3.1 and 3.3.2, the Stated Amount of any Non-U.S. Letter of
Credit and of any L/C Reimbursement Obligations in respect thereof
shall be deemed to be, as of any date of determination, the U.S. Dollar
Equivalent thereof at such date. The initial U.S. Dollar Equivalent of
any Non-U.S. Letter of Credit shall be determined by the Fronting Bank
on the date of issuance thereof based upon the Applicable Exchange Rate
determined on the most recent Reset Date in accordance with Section
5.11(a) and adjusted from time to time thereafter as provided below.
The Fronting Bank shall provide the Administrative Agent and the U.S.
Borrower with written notice (together with back-up calculations
therefor) of adjustments to the U.S. Dollar Equivalent of each
outstanding Non-U.S. Letter of Credit on each Reset Date in accordance
with Section 5.11(b). If a Disbursement is made by the Fronting Bank
under any Non-U.S. Letter of Credit, the U.S. Dollar Equivalent of such
Disbursement shall be determined by the Fronting Bank on the
Disbursement Date related thereto. The Fronting Bank shall make such
determination by calculating the amount in Dollars that would be
required in order for the Fronting Bank to purchase an amount of the
applicable Qualified Foreign Currency equal to the amount of the
relevant L/C Reimbursement Obligation on the Disbursement Date at the
Spot Exchange Rate, with respect to such Qualified Foreign Currency on
such Disbursement Date. The Fronting Bank shall notify the
Administrative Agent and the applicable Borrower promptly of such U.S.
Dollar Equivalent determined by it, on the date that such determination
is required to be made;
(b) The obligation of the applicable Borrower to reimburse the
Fronting Bank for any Disbursement under any Non-U.S. Letter of Credit,
and to pay interest thereon, shall be payable only in Dollars
(calculated pursuant to clause (a) above), and shall not be discharged
by paying an amount in any Qualified Foreign Currency or any other
currency; and
(c) The obligations of each Lender under Section 4.4 to pay
its Percentage of any L/C Reimbursement Obligation under any Non-U.S.
Letter of Credit shall be payable only in Dollars and shall be in an
amount equal to such Percentage of the U.S. Dollar Equivalent of such
L/C Reimbursement Obligation determined as provided in clause (a)
above. Under no circumstances shall the provisions hereof permitting
the issuance of Letters of Credit in a Qualified Foreign Currency be
construed, by implication or otherwise, as imposing any obligation upon
any Lender
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to make any Loan or other payment under any Loan Document, or to accept
any payment from any Borrower in respect of any L/C Reimbursement
Obligation, in any currency other than Dollars, it being understood
that the parties intend all Obligations to be denominated and payable
only in Dollars.
SECTION 4.1.3. Acceptances. In lieu of the Fronting Bank honoring its
Disbursement obligation, the U.S. Borrower, the Warnaco Sub Borrowers and the
Sub Borrower hereby irrevocably authorize and direct the Fronting Bank to create
Acceptances upon the presentation of drafts to the Fronting Bank for acceptance
by the Fronting Bank as Acceptances pursuant to this Agreement, provided that
such Acceptances shall be properly executed and drawn by the U.S. Borrower, any
Warnaco Sub Borrower, the Sub Borrower or (provided that the Letter of Credit
giving rise to such Disbursement obligation was issued for the account of the
U.S. Borrower, any Warnaco Sub Borrower or the Sub Borrower) any Letter of
Credit Beneficiary (each such party referred to as a "Drawer"). To facilitate
the acceptance of Acceptances drawn by the U.S. Borrower, the Warnaco Sub
Borrowers or the Sub Borrower, each of the U.S. Borrower, the Warnaco Sub
Borrowers and the Sub Borrower shall from time to time as required by the
Fronting Bank provide to the Fronting Bank an appropriate number of executed
drafts drawn in blank by such Borrower in the form prescribed by the Fronting
Bank. The U.S. Borrower, the Warnaco Sub Borrowers or the Sub Borrower may, at
their option, execute any draft so presented by the facsimile signature or
signatures of any one or more designated signing officers of such Borrower. In
any event, the Fronting Bank is hereby authorized to accept or pay, as the case
may be, any draft of a Drawer which purports to bear its facsimile signature or
signatures notwithstanding that any such individual has ceased to be a
designated signing officer of such Drawer and any such draft or Acceptance shall
be as valid as if such individual were a designated signing officer of such
Drawer at the date of issue of such Acceptance. Each draft or Acceptance not
originally executed by a Drawer (but instead executed by facsimile, stamp or
otherwise) may be dealt with by the Fronting Bank for all intents and purposes
and shall bind each Borrower as if duly originally executed by the applicable
Drawer's authorized officer (or other person with authority to bind such Drawer)
and issued by such Borrower. Without limiting the effect of the indemnity
provided under Section 11.4 but in addition to such provision, each of the U.S.
Borrower, the Sub Borrower and each Warnaco Sub Borrower will and hereby does
undertake to hold the Fronting Bank harmless against, and to indemnify, and each
such Borrower hereby does agree to indemnify, the Fronting Bank from, all
losses, costs, damages and expenses arising out of the payment or negotiation of
any such draft or Acceptance on which a facsimile signature of any Drawer has
been wrongly affixed, except to the extent caused by the gross negligence or
willful misconduct of the Fronting Bank. The Fronting Bank shall not be liable
for its failure to accept an Acceptance as required hereunder if the cause of
such failure is, in whole or in part, due to the failure of any Drawer to
provide executed drafts to the Fronting Bank on a timely basis. Without creating
any obligation to effect such a purchase, Acceptances may be purchased by the
Fronting Bank and may be held by it for its own account until maturity or sold
by it at any time prior thereto in any relevant market therefor in the United
States or elsewhere, in the Fronting Bank's sole discretion.
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Each Acceptance shall by its terms:
(a) be created with a face amount which does not exceed (or
would not exceed) the then existing Acceptance Availability, and
(b) subject to the next sentence, have a Maturity Date
occurring no later than 180 days from its date of creation.
Notwithstanding anything to the contrary contained in this Agreement,
(i) no Acceptance shall be created in respect of a Non-U.S.
Letter of Credit,
(ii) no Acceptance shall have a Maturity Date scheduled to
occur later than 180 days after the Stated Expiry Date of the Letter of
Credit with reference to which such Acceptance was created,
(iii) Acceptances shall only be created in respect of Letters
of Credit for which the account party is the U.S. Borrower, a Warnaco
Sub Borrower, the Sub Borrower or a wholly-owned Subsidiary of any such
Borrower,
(iv) the face amount of any Acceptance shall be in an amount
equal to the Stated Amount of the Letter of Credit with reference to
which such Acceptance was created, and
(v) this Agreement shall control in the event of any conflict
with any Acceptance-related document (other than any Acceptance).
SECTION 4.2. Issuances, Extensions and Creations. On the terms and
subject to the conditions of this Agreement (including Sections 4.1.1, 4.1.2,
4.1.3 and Article VI), the Fronting Bank shall issue Letters of Credit, extend
the Stated Expiry Dates of outstanding Letters of Credit and create Acceptances,
all in accordance with the terms of this Agreement. The Fronting Bank will make
available the original of each Letter of Credit which it issues and each
Acceptance which it creates to the beneficiary or payee, as applicable, thereof
(and, at the request of a Lender, will provide such Lender on a monthly basis
with a schedule of the outstanding Letters of Credit and Acceptances as of the
last day of the prior month) and will notify the applicable Letter of Credit
Beneficiary of any extension of the Stated Expiry Date thereof.
SECTION 4.3. Destruction of Goods, etc. Neither the Fronting Bank nor
its agents or correspondents shall be responsible for the negligence or
fraudulence of any Letter of Credit Beneficiary or payee of Acceptance, for the
existence, nature, condition, description, value, quality or quantity of the
Goods, for the packing, shipment, export, import, handling, storage or delivery
thereof, or for the safety or preservation thereof at any time, and neither the
Fronting Bank nor its agents or correspondents shall be liable for any loss
resulting from
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the total or partial destruction of or damage to or deterioration or fall in
value of the Goods, or from the delay in arrival or failure to arrive of either
the Goods or of any of the documents relating thereto, or from the inadequacy or
invalidity of any document or insurance, or from the default or insolvency of
any insurer, carrier or other Person issuing any document with respect to the
Goods, or from failure to give or delay in giving notice of arrival of the Goods
or any other notice, or from any error in or misinterpretation of or default or
delay in the sending, transmission, arrival or delivery of any message, whether
in writing or not, by post, telegraph, cable, wireless or otherwise, and the
obligations hereunder of each Borrower to the Fronting Bank shall not be in any
way lessened or affected if any Draft or document accepted, paid or acted upon
by the Fronting Bank or its agents or correspondents does not bear a reference
or sufficient reference to a Letter of Credit or if no note thereof is made on a
Letter of Credit.
SECTION 4.4. Other Lenders' Participation. Each Letter of Credit issued
and each Acceptance created pursuant to Section 4.2 shall, effective upon its
issuance or creation, as the case may be, and without further action, be issued
and/or created on behalf of all Lenders (including the Fronting Bank thereof)
according to their respective Percentages. Each Lender shall, to the extent of
its Percentage, be deemed irrevocably to have participated in the issuance of
such Letter of Credit and the creation of such Acceptance and shall be
responsible to reimburse promptly the Fronting Bank thereof for Reimbursement
Obligations which have not been converted into a Loan on the Disbursement Date
or Maturity Date related thereto pursuant to the terms of this Agreement or
reimbursed by the Borrowers in accordance with Section 4.5, or which have been
converted into a Loan on the Disbursement Date or Maturity Date related thereto
pursuant to the terms of this Agreement or reimbursed by the Borrowers but must
be returned, restored or disgorged by the Fronting Bank for any reason, and each
Lender shall, to the extent of its Percentage, be entitled to receive from the
Administrative Agent a ratable portion of all fees and interest with respect to
such Letter of Credit and/or such Acceptance (including the letter of credit
fees received by the Administrative Agent pursuant to Section 3.3.1, with
respect to each Letter of Credit, but excluding any fronting fees and other
charges payable to the Fronting Bank qua Fronting Bank). In the event that any
Borrower shall fail to reimburse the Fronting Bank, or if for any reason Loans
shall not be made to fund any Reimbursement Obligation, in each case as provided
in this Agreement and in an amount equal to the Disbursement amount or the face
amount of any matured Acceptance, as applicable, or in the event the Fronting
Bank must for any reason return or disgorge such reimbursement, the Fronting
Bank shall promptly notify each Lender of the unreimbursed amount of such
drawing or face amount of such matured Acceptance and of such Lender's
respective participation therein. Each Lender shall make available to the
Fronting Bank, whether or not any Default shall have occurred and be continuing,
an amount equal to its respective participation in same day or immediately
available funds at the office of the Fronting Bank specified in such notice not
later than 11:00 a.m., New York City time, on the Business Day after the date
notified by the Fronting Bank. In the event that any Lender fails to make
available to the Fronting Bank the amount of such Lender's participation in such
Letter of Credit or such Acceptance as provided herein, the Fronting Bank shall
be entitled to recover such amount on demand from such Lender
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together with interest at the Federal Funds Rate from the date such amount is
due through (but excluding) the date such payment is made (together with such
other compensatory amounts as may be required to be paid by such Lender to the
Administrative Agent pursuant to the Rules for Interbank Compensation of the
council on International Banking or the Clearinghouse Compensation Committee, as
the case may be, as in effect from time to time). Nothing in this Section shall
be deemed to prejudice the right of any Lender to recover from the Fronting Bank
any amounts made available by such Lender to the Fronting Bank pursuant to this
Section in the event that it is determined by a court of competent jurisdiction
that the payment with respect to a Letter of Credit or an Acceptance by the
Fronting Bank in respect of which payment was made by such Lender constituted
gross negligence or wilful misconduct on the part of the Fronting Bank. The
Fronting Bank shall distribute to each other Lender which has paid all amounts
payable by it under this Section with respect to any Letter of Credit issued or
Acceptance created by the Fronting Bank, such other Lender's Percentage of all
payments received by the Fronting Bank from the applicable Borrower in
reimbursement of the face amount of such matured Acceptance or drawings honored
by the Fronting Bank under such Letter of Credit when such payments are
received.
SECTION 4.5. Disbursements and Maturities. The Fronting Bank will
notify the applicable Borrower and the Administrative Agent promptly of the
presentment for payment of (a) any Letter of Credit, together with notice of the
date (a "Disbursement Date") such payment shall be made and (b) any matured
Acceptance. Subject to the terms and provisions of such Letter of Credit and
Acceptance, and the delivery to the Fronting Bank of all drafts, certificates,
documents and/or instruments required as a condition to making a Disbursement
under such Letter of Credit or payment on such matured Acceptance, the Fronting
Bank shall make such payment to such Letter of Credit Beneficiary (or its
designee) or the payee (or its designee) of such Acceptance. If and to the
extent that Loans are not made to fund a Reimbursement Obligation pursuant to
Section 2.3, then the Borrowers will reimburse the Fronting Bank within one
Business Day following (i) the Disbursement Date for all amounts which the
Fronting Bank has disbursed under the Letter of Credit and (ii) the payment date
on such matured Acceptance (whether or not such Acceptance was drawn by the U.S.
Borrower, a Warnaco Sub Borrower, the Sub Borrower or any Letter of Credit
Beneficiary); provided, that each Foreign Borrower and Authentic Fitness (HK)
shall only be obligated to reimburse the Fronting Bank for disbursements under
Letters of Credit issued for its account.
SECTION 4.6. Reimbursement; Outstanding Letters, etc. (a) Each
Borrower's obligation under Section 4.5 to reimburse the Fronting Bank with
respect to each Disbursement (a "L/C Reimbursement Obligation") or, as
applicable, each payment made by the Fronting Bank upon the maturity of an
Acceptance (an "Acceptance Reimbursement Obligation"; together with a L/C
Reimbursement Obligation, a "Reimbursement Obligation") (including fees and
interest thereon payable pursuant to Section 3.2 and Section 3.3), and each
Lender's obligation to make participation payments pursuant to Section 4.4 in
each Disbursement and each payment in respect of a matured Acceptance, shall be
absolute, unconditional and irrevocable and shall not be reduced by any event or
occurrence including
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(i) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any Letter of Credit or Acceptance or any document
submitted by any party in connection with the application for and
issuance of a Letter of Credit or creation of an Acceptance, even if it
should in fact prove to be in any or all respects invalid,
insufficient, inaccurate, fraudulent or forged;
(ii) the form, validity, sufficiency, accuracy, genuineness or
legal effect of any instrument transferring or assigning or purporting
to transfer or assign a Letter of Credit or Acceptance or the rights or
benefits thereunder or the proceeds thereof in whole or in part, which
may prove to be invalid or ineffective for any reason;
(iii) failure of the beneficiary to comply fully with
conditions required in order to demand payment under a Letter of Credit
or an Acceptance;
(iv) errors, omissions, interruptions or delays in
transmission or delivery of any messages, by mail, cable, telegraph,
telex or otherwise;
(v) any loss or delay in the transmission or otherwise of any
document or draft required in order to make a Disbursement under a
Letter of Credit or payment in respect of a matured Acceptance;
(vi) any change in the time, manner or place of payment of, or
in any other term of, all or any of the Obligations in respect of any
Letter of Credit or Acceptance or any other amendment or waiver of or
any consent to departure from any Letter of Credit;
(vii) the existence of any claim, set-off, defense or other
right that any Borrower may have at any time against any beneficiary or
any transferee of a Letter of Credit or an Acceptance (or any Persons
for whom any such beneficiary or any such transferee may be acting),
the Fronting Bank or any other Person, whether in connection with the
transactions contemplated by the applicable Letter of Credit or
Acceptance or any unrelated transaction;
(viii) payment by the Fronting Bank under a Letter of Credit
or an Acceptance against presentation of a draft or certificate that
does not strictly comply with the terms of such Letter of Credit or
Acceptance;
(ix) any release or amendment or waiver of or consent to
departure from any guaranty, for all or any of the Obligations in
respect of the applicable Letter of Credit or Acceptance; or
(x) any other circumstance or happening whatsoever, whether or
not similar to any of the foregoing, including any other circumstance
that might otherwise constitute a defense available to, or a discharge
of, any Borrower or a guarantor.
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The obligations of each Borrower and the Lenders hereunder shall remain in full
force and effect and shall apply to any alteration to or extension of the
expiration date of any Letter of Credit or any Letter of Credit issued to
replace, extend or alter any Letter of Credit during the term of this Agreement.
None of the foregoing shall affect, impair or prevent the vesting of any of the
rights or powers granted to the Fronting Bank or any Lender hereunder. In
furtherance and extension and not in limitation or derogation of any of the
foregoing, any action taken or omitted to be taken by the Fronting Bank in good
faith (and not constituting gross negligence or willful misconduct) shall be
binding upon each Borrower, each Obligor and each such Lender, and shall not put
the Fronting Bank under any resulting liability to any Borrower, any Obligor or
any such Lender, as the case may be.
(b) The applicable Borrower shall pay to the Fronting Bank an amount
equal to (i) the then Stated Amount and (ii) the aggregate face amount of all
unmatured Acceptances then outstanding and all unpaid fees in respect of (x) any
Letter of Credit or Acceptance outstanding under this Agreement upon any
termination of this Agreement (other than the occurrence of the Commitment
Termination Date pursuant to clause (a) of the definition thereof) and (y) any
Letter of Credit or Acceptance which is affected by, or becomes the subject
matter of, any order, judgment, injunction or other such determination (an
"Order") or any petition or other application for any Order by any Borrower or
any other party, restricting payment by the Fronting Bank under and in
accordance with such Letter of Credit or Acceptance or extending the Fronting
Bank's or any Lender's liability under such Letter of Credit beyond the
expiration date stated therein, or if not stated therein, which would otherwise
apply to such Letter of Credit. Payment in respect of each such Letter of Credit
or Acceptance described in (x) and (y) in this clause shall be due forthwith
upon demand and in Dollars.
(c) The Fronting Bank hereby agrees that it will, with respect to each
Letter of Credit and each Acceptance subjected to any such demand for payment
under the preceding clause (b), upon the later of:
(i) the date on which any final and non-appealable order,
judgment or other such determination has been rendered or issued either
terminating any applicable Order or permanently enjoining the Fronting
Bank from paying under such Letter of Credit and/or Acceptance; and
(ii) (x) in the case of a Letter of Credit, the earlier of (A)
the date on which either the original counterpart of such Letter of
Credit is returned to the Fronting Bank for cancellation or the
Fronting Bank is released by the beneficiary thereof from any further
obligations in respect of such Letter of Credit, and (B) the expiry of
such Letter of Credit and (y) in the case of an Acceptance, on the date
on which either the original Acceptance is returned to the Fronting
Bank for cancellation or the Fronting Bank is released by the payee
thereto from any further obligations in respect of such Acceptance;
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pay to the applicable Borrower an amount in Dollars equal to any excess of the
amount received by the Fronting Bank pursuant to clause (b) above in respect of
such Letter of Credit or such Acceptance (the "Received Amount") over the
equivalent in Dollars of the total of amounts applied to reimburse the Fronting
Bank for amounts paid by it under such Letter of Credit or such Acceptance, if
any (the Fronting Bank having the right to so appropriate such funds), together
with an additional amount in Dollars computed by applying to the amount of such
excess from time to time a per annum rate equal to 3% less than the Alternate
Base Rate. Such additional amount shall be calculated daily on the basis of a
360 day year for the actual number of days elapsed from and including the date
of payment to the Fronting Bank of the Received Amount to (but not including)
the date of return to the applicable Borrower of the excess.
SECTION 4.7. Deemed Disbursements. Upon (a) the occurrence of any
Commitment Termination Event of the type described in clause (c) of the
definition of "Commitment Termination Event", (b) the occurrence and during the
continuation of any event or condition specified in Section 9.1.6, or (c) the
occurrence and during the continuance of any other Event of Default, in the case
of clause (c), upon the request of the Required Lenders,
(i) an amount equal to that portion of (x) Letter of Credit
Outstandings attributable to outstanding and undrawn Letters of Credit
and (y) Acceptance Obligations attributable to outstanding and
unmatured Acceptances shall, without demand upon or notice to any
Borrower, be deemed to have been paid or disbursed by the Fronting Bank
under such Letters of Credit or Acceptances, as the case may be,
(notwithstanding that such amount may not in fact have been so paid or
disbursed); and
(ii) upon notification by the Fronting Bank to the
Administrative Agent and the U.S. Borrower of its obligations under
this Section, the Borrowers shall be immediately obligated to reimburse
the Fronting Bank the amount deemed to have been so paid or disbursed
by the Fronting Bank; provided, that each Foreign Borrower and
Authentic Fitness (HK) shall only be obligated to reimburse the
Fronting Bank for amounts deemed to have been disbursed under Letters
of Credit issued for its account.
Any amounts so received by the Fronting Bank from the Borrowers pursuant to this
Section shall be held as collateral security for the repayment of such
Borrower's Obligations in connection with, as applicable, the Letters of Credit
issued and the Acceptances created by the Fronting Bank. At any time when such
Letters of Credit shall terminate, such Acceptances mature and are paid and all
Obligations of the Fronting Bank are either terminated or paid or reimbursed to
the Fronting Bank in full, the Obligations of the Borrowers under this Section
shall be reduced accordingly (subject, however, to reinstatement in the event
any payment in respect of such Letters of Credit or Acceptances is
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recovered in any manner from the Fronting Bank), and the Fronting Bank will
return to the applicable Borrower the excess, if any, of
(a) the aggregate amount deposited by the Borrowers with the
Fronting Bank and not theretofore applied by the Fronting Bank to any
Reimbursement Obligation
over
(b) the aggregate amount of all Reimbursement Obligations to
the Fronting Bank pursuant to this Section, as so adjusted.
At such time when all Events of Default shall have been cured or waived, the
Fronting Bank shall return to the applicable Borrower all amounts then on
deposit with the Fronting Bank pursuant to this Section together with an
additional amount in Dollars computed by applying to the amount so returned to
the applicable Borrower from time to time a per annum rate equal to 3% less than
the Alternate Base Rate. Such additional amount shall be calculated daily on the
basis of a 360 day year for the actual number of days elapsed from and including
the date of payment to the Fronting Bank by the applicable Borrower to (but not
including) the date of return to the applicable Borrower of such amounts.
SECTION 4.8. Nature of Reimbursement Obligations. The Borrowers, as
applicable, shall assume all risks of the acts, omissions, or misuse of any (a)
Letter of Credit by the beneficiary thereof and (b) Acceptance by the payee
thereof. Any action, inaction or omission taken or suffered by the Fronting Bank
or any of the Fronting Bank's correspondents under or in connection with a
Letter of Credit, any Draft made under any Letter of Credit or any Acceptance or
any document relating thereto, if in good faith and in conformity with foreign
or domestic laws, regulations or customs applicable thereto shall be binding
upon the applicable Borrowers and shall not place the Fronting Bank or any of
its correspondents under any resulting liability to such Borrowers. Without
limiting the generality of the foregoing, the Fronting Bank and its
correspondents may receive, accept or pay as complying with the terms of a
Letter of Credit, any Draft under any Letter of Credit, an Acceptance, otherwise
in order which may be signed by, or issued to, the administrator or any executor
of, or the trustee in bankruptcy of, or the receiver for any property of, or
other Person or entity acting as the representative or in the place of, such
beneficiary or its successors and assigns. The Borrowers covenant that they will
not take any steps, issue any instructions to the Fronting Bank or any of its
correspondents or institute any proceedings intended to derogate from the right
or ability of the Fronting Bank or its correspondents to honor and pay any Draft
or Drafts. Without in any way limiting the provisions of Section 4.6, and
notwithstanding anything to the contrary contained in this Agreement or in any
other Loan Document, each Borrower irrevocably acknowledges and agrees that it
is unconditionally liable for all Reimbursement Obligations with respect to each
Disbursement under each Letter of Credit issued or paid, as the case may be, for
its account and each payment made on a matured Acceptance created for its
account, as applicable (including fees and interest thereon), in each case,
regardless (in the case of each of the U.S. Borrower,
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each Warnaco Sub Borrower and the Sub Borrower) whether such Letter of Credit
was issued or such Advance created in respect of the sourcing or other corporate
requirements or needs of the U.S. Borrower, the Sub Borrower or any Subsidiary
of the U.S. Borrower or Sub Borrower, or otherwise.
SECTION 4.9. Existing Letters of Credit and Acceptances. The Existing
Letters of Credit and the Existing Acceptances, and the amount and payment date
of fees thereon (including such Existing Letters of Credit deemed to be Letters
of Credit hereunder), shall be governed by this Agreement. Simultaneously with
the effectiveness of this Agreement pursuant to Section 11.8 and the
satisfaction or waiver of the conditions set forth in Section 6.1, the Existing
Credit Agreement shall be superseded in its entirety by this Agreement, except
to the extent of any provisions of the Existing Credit Agreement which by their
express terms survive termination of the Existing Credit Agreement.
SECTION 4.10. Authentic Letters of Credit and Acceptances. Upon the
consummation of the Merger and termination of the Authentic Trade Credit
Facility, each Authentic Letter of Credit and each Authentic Acceptance (and the
amount and payment date of fees thereon) shall be deemed to be Letters of Credit
and Acceptances hereunder and shall be governed by this Agreement.
ARTICLE V
CERTAIN LIBO RATE AND OTHER PROVISIONS
SECTION 5.1. LIBO Rate Lending Unlawful. If any Lender, including the
Fronting Lender, shall determine (which determination shall, upon notice thereof
to the U.S. Borrower, be conclusive and binding on the Borrowers) that the
introduction of or any change in or in the interpretation of any law makes it
unlawful, or any central bank or other governmental authority asserts that it is
unlawful, for such Lender, including the Fronting Lender, to make, continue or
maintain any Loan as, or to convert any Loan into, a LIBO Rate Loan, or to
create Acceptances, the obligations of the Lenders, including the Fronting
Lender, to make, continue, maintain or convert into any such Loans or to create
Acceptances, as the case may be, shall, upon such determination, forthwith be
suspended until such Lender, including the Fronting Lender, shall notify the
U.S. Borrower that the circumstances causing such suspension no longer exist,
and all LIBO Rate Loans shall automatically convert into Base Rate Loans at the
end of the then current Interest Periods with respect thereto or sooner, if
required by such law or assertion.
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SECTION 5.2. Deposits Unavailable. If any Lender shall have determined
that
(a) Dollar deposits in the relevant amount and for the
relevant Interest Period are not available to it in its relevant
market; or
(b) by reason of circumstances affecting such Lender's
relevant market, adequate means do not exist for ascertaining the
interest rate applicable hereunder to LIBO Rate Loans,
then, upon notice from such Lender to the U.S. Borrower and the Administrative
Agent, the obligations of the Lenders under Section 2.3 and Section 2.4 to make
or continue any Loans as, or to convert any Loans into, LIBO Rate Loans shall
forthwith be suspended until such Lender shall notify the U.S. Borrower and the
Administrative Agent that the circumstances causing such suspension no longer
exist.
SECTION 5.3. Increased LIBO Rate Loan Costs, etc. The Borrowers agree
to reimburse each Lender for any increase in the cost to such Lender of, or any
reduction in the amount of any sum receivable by such Lender in respect of,
making or continuing (or of its obligation to make or continue) any Loans as, or
of converting (or of its obligation to convert) any Loans into, LIBO Rate Loans.
Each Lender shall promptly notify the U.S. Borrower and the Administrative Agent
in writing of the occurrence of any such event, such notice to state, in
reasonable detail, the reasons therefor and the additional amount required fully
to compensate such lender for such increased cost or reduced amount. Such
additional amounts shall be payable by the U.S. Borrower directly to such Lender
within five Business Days of its receipt of such notice, and such notice shall,
in the absence of manifest error, be conclusive and binding on the U.S.
Borrower.
SECTION 5.4. Funding Losses. In the event any Lender shall incur any
loss or expense (including any loss or expense incurred by reason of the
liquidation or reemployment of deposits or other funds acquired by such Lender
to make, continue or maintain any portion of the principal amount of any Loan
as, or to convert any portion of the principal amount of any Loan into, a LIBO
Rate Loan, but excluding the loss of any anticipated or expected profits in
respect of such LIBO Rate Loan) as a result of
(a) any conversion or repayment or prepayment of the principal
amount of any LIBO Rate Loans on a date other than the scheduled last
day of the Interest Period applicable thereto, whether pursuant to
Section 3.1 or otherwise;
(b) any Loans not being made as LIBO Rate Loans in accordance
with the Borrowing Request therefor; or
(c) any Loans not being continued as, or converted into, LIBO
Rate Loans in accordance with the Continuation/ Conversion Notice
therefor,
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then, upon the written notice of such Lender to the U.S. Borrower and the
Administrative Agent, the U.S. Borrower shall, within five Business Days of its
receipt thereof, pay directly to such Lender such amount as will (in the
reasonable determination of such Lender) reimburse such Lender for such loss or
expense. Such written notice (which shall include calculations in reasonable
detail) shall, in the absence of manifest error, be conclusive and binding on
the U.S. Borrower.
SECTION 5.5. Increased Capital Costs, etc. If the implementation of or,
after the date hereof, the introduction or any change in the interpretation of,
or any change in its application to the Borrowers, the Fronting Bank and/or the
Lenders of, any law or any regulation or guideline issued by any central bank or
other governmental authority (whether or not having the force of law), including
any eurocurrency or other reserve or special deposit requirement or any tax
(other than tax which is on a Lender's general net or gross income or in respect
of a Lender's franchise taxes) or any capital requirement, has, due to a
Lender's or the Fronting Bank's compliance, the effect, directly or indirectly,
of (a) increasing the cost to such Lender or Fronting Bank of performing its
obligations hereunder or under any Letter of Credit, Acceptance or Loan; (b)
reducing any amount received or receivable by such Lender or Fronting Bank or
its effective return hereunder or in respect of any Letter of Credit, Acceptance
or Loan or on its capital; or (c) causing such Lender or Fronting Bank to make
any payment or to forgo any return based on any amount received or receivable by
such Lender or Fronting Bank hereunder or in respect of any Letter of Credit,
Acceptance or Loan, then upon demand from time to time the U.S. Borrower shall
pay such amount as shall compensate such Lender or Fronting Bank for any such
cost, reduction, payment or foregone return upon receipt of the certificate
referred to in the last sentence of this paragraph. The Borrowers shall further
indemnify the Fronting Bank for all costs, losses and expenses incurred by the
Fronting Bank in connection with any Letter of Credit or Acceptance and agrees
that the Fronting Bank shall have no liability to the Borrowers for any reason
in respect of any Letter of Credit or Acceptance other than on account of the
Fronting Bank's gross negligence or wilful misconduct. Any certificate of the
Fronting Bank or any Lender in respect of the foregoing will be conclusive and
binding upon the Borrowers, except for manifest error, and shall set forth a
determination of the amounts owing to the Fronting Bank or such Lender in good
faith using any reasonable averaging and attribution methods. Anything in this
Agreement or any Loan Document to the contrary notwithstanding, no Lender or
Fronting Bank shall be indemnified for, exculpated from, or relieved from
liability, under this Agreement or any Loan Document, for any act or omission
constituting gross negligence or wilful misconduct.
SECTION 5.6. Taxes. (a) Each payment made by each Borrower under this
Agreement shall be made free and clear of, and without deduction for, any
present or future withholding or other taxes imposed on such payments by or on
behalf of any government or any political subdivision or agency thereof or
therein, except for any income, franchise and other taxes imposed on the Lender
(which for purposes of this Section 5.6 shall include any branch, affiliate or
international banking facility created by a Lender to make or maintain a LIBO
Rate Loan pursuant to Section 2.5) by the jurisdiction under the laws of which
such
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Lender is organized or any political subdivision or agency thereof or by the
jurisdiction of such Lender's branch or lending office or principal place of
business (all such non-excluded taxes being hereinafter referred to as "Taxes").
If the Administrative Agent or any Lender is required by law at any time to pay
any Taxes or to make any payment on account of Taxes on, in relation to or
calculated by reference to any sum received or receivable hereunder, or any
liability for Taxes in respect of any such sum is imposed, levied or assessed
against any Lender or the Administrative Agent, then the U.S. Borrower will
indemnify each such Lender and the Administrative Agent for the full amount of
Taxes (including Taxes attributable to any payment on account of such
indemnification and any interest, penalties and costs with respect to any such
Taxes), whether or not such Taxes were correctly or legally asserted. Such
indemnification shall be made within 30 days of the written demand of the Lender
or the Administrative Agent therefor. Whenever any Taxes are payable by any
Borrower with respect to any payments hereunder, such Borrower shall promptly
furnish to the Administrative Agent for the account of the applicable Lender
official receipts (to the extent that the relevant governmental authority
delivers such receipts) evidencing payment of any such Taxes so withheld or
deducted.
(b) Each Lender that is not a "United States person" (as such term is
defined in Section 7701(a)(30) of the Internal Revenue Code of 1986, as amended)
shall submit to the U.S. Borrower and the Administrative Agent on or before the
Effective Date (or, in the case of a Person that becomes a Lender after the
Effective Date by assignment or pursuant to Section 2.5 promptly upon such
assignment or funding) two duly completed and signed copies of either (i) Form
W-8BEN of the United States Internal Revenue Service entitling such Lender to a
complete exemption from withholding on all amounts to be received by such Lender
pursuant to this Agreement or (ii) Form W-8ECI of the United States Internal
Revenue Service relating to all amounts to be received by such Lender pursuant
to this Agreement, or in either case, an applicable successor form. Each such
Lender shall, from time to time after submitting either such form, submit to the
U.S. Borrower and the Administrative Agent such additional duly completed and
signed copies of one or the other such forms (or such successor forms or other
documents as shall be adopted from time to time by the relevant United States
taxing authorities) as may be (i) reasonably requested in writing by the U.S.
Borrower or the Administrative Agent and (ii) appropriate under then current
United States law or regulations to avoid United States withholding taxes on
payments in respect of any amounts to be received by such Lender pursuant to
this Agreement. Upon the reasonable request of the U.S. Borrower or the
Administrative Agent, each Lender that has not provided the forms or other
documents, as provided above, on the basis of being a "United States person"
shall submit to the U.S. Borrower and the Administrative Agent a certificate to
the effect that it is such a "United States person".
(c) If any Lender which is not a "United States person" determines that
it is unable to submit to the U.S. Borrower and the Administrative Agent any
form or certificate that such Lender is requested to submit pursuant to the
preceding paragraph, or that it is required to withdraw or cancel any such form
or certificate, or that any such form or certificate
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previously submitted has otherwise become ineffective or inaccurate, such Lender
shall promptly notify the U.S. Borrower and the Administrative Agent of such
fact.
(d) The Borrowers shall not be required to pay any additional amount in
respect of United States federal withholding tax imposed with respect to any
Lender if and only to the extent that (i) such Lender is subject to such United
States federal withholding tax on the Effective Date (or in the case of a Person
that became a Lender after the Effective Date by assignment or pursuant to
Section 2.5 on the date of such assignment or funding) or would be subject to
United States federal withholding tax on such date if a payment under this
Agreement had been received by it on such date; (ii) such Lender becomes subject
to United States federal withholding tax subsequent to the date referred to in
clause (i) above (or in the case of a Lender which is not a "United States
person", the first date on which it delivers the appropriate form or certificate
to the U.S. Borrower as referred to in clause (b) of this Section) as a result
of a change in the circumstances of such Lender (other than a change in
applicable law), including a change in the residence, place of incorporation or
principal place of business of the Lender, a change in the branch or lending
office of the Lender participating in the transactions set forth herein or as a
result of the sale by the Lender of participating interests in such Lender's
creditor position(s) hereunder; or (iii) such United States federal withholding
tax would not have been incurred but for the failure of such Lender to file with
the appropriate tax authorities and/or provide to the U.S. Borrower any form or
certificate that it was required so to do pursuant to clause (b) of this
Section, unless the Lender is not entitled to provide such form or certificate
as a result of a change in applicable law after the Effective Date (or in the
case of a Person that became a Lender after the Effective Date by assignment or
pursuant to Section 2.5 the date of such assignment or funding).
(e) Within thirty (30) days after the written reasonable request of the
U.S. Borrower, each Lender shall execute and deliver to the U.S. Borrower such
certificates, forms or other documents which can be furnished consistent with
the facts and which are reasonably necessary to assist the U.S. Borrower in
applying for refunds of Taxes imposed by the United States paid by the U.S.
Borrower hereunder or making payment of Taxes imposed by the United States
hereunder; provided, however, that no Lender shall be required to furnish to the
U.S. Borrower any financial information with respect to itself or other
information which it considers confidential.
(f) The U.S. Borrower shall have the right to require any Lender which
is not a "United States person" to which the U.S. Borrower is required to make
additional payments pursuant to Section 5.6 hereof on account of Taxes imposed
by the United States (or would, upon payment to such Lender of an amount
hereunder, be so required) to assign such Lender's total Loans and Commitments
to one or more banks or financial institutions identified by the U.S. Borrower
and acceptable to the Administrative Agent at a purchase price equal to the then
outstanding amount of all principal, interest, fees and other amounts then owed
to such Lender if such assignment would reduce or eliminate the U.S. Borrower's
obligation to make such additional payments pursuant to Section 5.6 hereof.
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SECTION 5.7. Payments, Computations, etc. Unless otherwise expressly
provided herein (including as set forth in Section 2.3 and Section 4.5), all
payments by the Borrowers pursuant to this Agreement, the Notes or any other
Loan Document shall be made by the Borrowers to the Administrative Agent for the
account of the Lenders entitled to receive such payment. All such payments
required to be made to the Administrative Agent shall be made, without setoff,
deduction or counterclaim, not later than 11:00 a.m., Applicable Time, on the
date due, in same day or immediately available funds, to such account as the
Administrative Agent shall specify from time to time by notice to the U.S.
Borrower. To the extent the Administrative Agent receives such funds prior to
12:00 noon, Applicable Time, the Administrative Agent shall promptly remit in
same day funds to each Lender its share, if any, of such payments received by
the Administrative Agent for the account of such Lender. All interest and fees
shall be computed on the basis of the actual number of days (including the first
day but excluding the last day) occurring during the period for which such
interest or fee is payable over a year comprised of 360 days. Whenever any
payment to be made shall otherwise be due on a day which is not a Business Day
in New York, such payment shall (except as otherwise required by clause (b) of
the definition of the term "Interest Period") be made on the next succeeding
Business Day and such extension of time shall be included in computing interest
and fees, if any, in connection with such payment.
SECTION 5.8. Sharing of Payments. If any Lender shall obtain any
payment or other recovery (whether voluntary, involuntary, by application of
setoff or otherwise) on account of any Letter of Credit, Acceptance or Loan in
excess of its Percentage of payments then or therewith obtained by all Lenders,
such Lender shall purchase from the other Lenders such participations in Letters
of Credit, Acceptances or Loans, as the case may be, as shall be necessary to
cause such purchasing Lender to share the excess payment or other recovery
ratably with each of them; provided, however, that if all or any portion of the
excess payment or other recovery is thereafter recovered from such purchasing
Lender, the purchase shall be rescinded and each Lender which has sold a
participation to the purchasing Lender shall repay to the purchasing Lender the
purchase price to the ratable extent of such recovery together with an amount
equal to such selling Lender's ratable share (according to the proportion of
(a) the amount of such selling Lender's required repayment to
the purchasing Lender
to
(b) the total amount so recovered from the purchasing Lender)
of any interest or other amount paid or payable by the purchasing Lender in
respect of the total amount so recovered. Each Borrower agrees that any Lender
so purchasing a participation from another Lender pursuant to this Section may,
to the fullest extent permitted by law, exercise all its rights of payment
(including pursuant to Section 5.9) with respect to such participation as fully
as if such Lender were the direct creditor of such Borrower in the
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amount of such participation. If under any applicable bankruptcy, insolvency or
other similar law, any Lender receives a secured claim in lieu of a setoff to
which this Section applies, such Lender shall, to the extent practicable,
exercise its rights in respect of such secured claim in a manner consistent
with the rights of the Lenders entitled under this Section to share in
the benefits of any recovery on such secured claim.
SECTION 5.9. Setoff. Each Lender shall, upon the occurrence of any
event or condition described in Section 9.1.6 or, with the consent of the
Required Lenders, upon the occurrence of any other Event of Default, have the
right to appropriate and apply to the payment of the Obligations owing to it
(whether or not then due) any and all balances, credits, deposits, accounts or
moneys of the applicable Borrower then or thereafter maintained with or
otherwise held by such Lender; provided, however, that any such appropriation
and application shall be subject to the provisions of Section 5.8. Each Lender
agrees promptly to notify the U.S. Borrower and the Administrative Agent after
any such setoff and application made by such Lender; provided, however, that the
failure to give such notice shall not affect the validity of such setoff and
application. The rights of each Lender under this Section are in addition to
other rights and remedies (including other rights of setoff under applicable law
or otherwise) which such Lender may have.
SECTION 5.10. Use of Proceeds. Each Borrower shall apply the proceeds
of each Credit Extension in accordance with the sixth recital.
SECTION 5.11. Currency Fluctuations, etc. (a) Not later than 1:00 p.m.,
New York City time, on each Calculation Date, the Fronting Bank shall (i)
determine the Applicable Exchange Rate as of such Calculation Date with respect
to each Qualified Foreign Currency for which there are at such time outstanding
Non-U.S. Letters of Credit and (ii) give notice thereof to the Administrative
Agent. The Applicable Exchange Rates so determined shall become effective on the
first Business Day immediately following the relevant Calculation Date (a "Reset
Date") and shall remain effective until the next succeeding Reset Date.
(b) Not later than 3:00 p.m., New York City time, on each Reset Date,
the Administrative Agent shall (i) determine the U.S. Dollar Equivalent of the
Non-U.S. Letters of Credit in each Qualified Foreign Currency then outstanding
(after giving effect to any Loans to be made or repaid on such date) and (ii)
notify the U.S. Borrower of the results of such determination.
SECTION 5.12. European Monetary Union. If, as a result of the
implementation of European Monetary Union ("EMU"), (a) any currency that is a
Qualified Foreign Currency ceases to be lawful currency of the nation issuing
the same and is replaced by a European common currency (the "Euro"), then any
amount payable hereunder in such replaced Qualified Foreign Currency by the
Fronting Bank in respect of a Disbursement shall instead be payable
in Euros and the amount so payable shall be determined by translating the amount
payable in such Qualified Foreign Currency to Euros at the exchange rate
recognized by the
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European Central Bank for the purpose of implementing EMU; and (b) any nation
issuing a currency that is a Qualified Foreign Currency also issues or
recognizes the Euro through the central bank or other comparable authority of
such nation, then so long as such nation issues or recognizes both the
Qualified Foreign Currency and the Euro as the national currency, any amounts
payable hereunder by the Fronting Bank in respect of a Disbursement in such
Qualified Foreign Currency shall be payable either in such Qualified Foreign
Currency or the Euro (determined in accordance with the method described
in the foregoing clause (a)), as may be requested by the applicable Letter of
Credit Beneficiary upon notice delivered to the Fronting Bank. Prior to the
applicability of clause (a) or (b) of the preceding sentence, each amount
payable hereunder in any Qualified Foreign Currency will continue to be payable
only in such Qualified Foreign Currency. Each of the Borrowers and the Fronting
Bank agrees, at the request of any such party at the time of, or at any time
following, the implementation of European Monetary Union, to enter into good
faith negotiations concerning an agreement to amend this Agreement in such
manner as any such party shall reasonably request in order to reflect the
implementation of European Monetary Union and to place the parties hereto in the
position they would have been in had European Monetary Union not been
implemented. Notwithstanding anything to the contrary in Section 11.1, in the
event that the Borrowers and the Fronting Bank are able to agree to an amendment
of this Agreement, which amendment solely addresses issues raised by European
Monetary Union, this Agreement, as of such amendment's effective date, shall be
deemed to be amended by such amendment without the requirement of any further
action hereunder by the Lenders or the Required Lenders, as the case may be.
ARTICLE VI
CONDITIONS PRECEDENT
SECTION 6.1. Initial Credit Extension. The amendment and restatement of
the Existing Credit Agreement on the terms set forth in this Agreement and the
obligations of the Lenders to make any Credit Extension and the Fronting Bank to
issue any Letters of Credit or Acceptances shall be subject to the delivery to
the Managing Agents of this Agreement duly executed and delivered by the
Required Lenders, each Agent, each Borrower and Group, and the prior or
concurrent satisfaction of each of the conditions precedent (other than the 100%
Effective Date Conditions Precedent) set forth below in this Section 6.1.
SECTION 6.1.1. Resolutions, etc. The Managing Agents shall have
received from each Borrower originally executed copies of a certificate, each
dated the date of the Effective Date, of its Secretary or Assistant Secretary as
to
(a) resolutions of its Board of Directors then in full force
and effect authorizing the execution, delivery and performance of this
Agreement, the Notes and each other Loan Document to be executed by it;
and
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(b) the incumbency and signatures of those of its officers
authorized to act with respect to this Agreement, the Notes and each
other Loan Document executed by it,
upon which certificate each Lender may conclusively rely until it shall have
received a further certificate of the Secretary of such Obligor canceling or
amending such prior certificate.
SECTION 6.1.2. Delivery of Notes. On the 100% Effective Date, each
Lender shall have received its Notes duly executed and delivered by each
Borrower.
SECTION 6.1.3. Affirmation and Consent to Guarantees. The Managing
Agents shall have received originally executed counterparts for each Lender of
an Affirmation and Consent, dated as of the date hereof, duly executed by an
Authorized Officer of Group and of each Domestic Subsidiary that is a party to
the Subsidiary Guaranty, in form and substance satisfactory to the
Administrative Agent.
SECTION 6.1.4. Supplement to Subsidiary Guaranty. The Managing Agents
shall have received originally executed counterparts for each Lender of a
Supplement to Subsidiary Guaranty, dated as of the date hereof, duly executed by
an Authorized Officer of each Domestic Subsidiary that is not already a party to
the Subsidiary Guaranty, if any.
SECTION 6.1.5. Certificates as to No Default, etc. No Default shall
have occurred and be continuing under the Existing Credit Agreement and no Event
of Default shall have occurred or would occur under the Existing Credit
Agreement or would result from the execution and delivery of, or the performance
by the Borrowers of their obligations under, this Agreement or the issuance of
any Letter of Credit or the creation of any Acceptance or the making of any
Loan, and the Managing Agents shall have received originally executed
certificates for each Lender dated the Effective Date from an Authorized Officer
of the U.S. Borrower certifying as to the above.
SECTION 6.1.6. No Material Adverse Change. Since January 2, 1999, there
shall have been no Material Adverse Change.
SECTION 6.1.7. Amendment of U.S. Credit Agreement. The Administrative
Agent shall have received an executed and effective amendment to the U.S. Credit
Agreement as required to permit this Agreement.
SECTION 6.1.8. Opinions of Counsel. The Managing Agents shall have
received opinions, dated the Effective Date and addressed to the Agents and all
Lenders, from (a) Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden, Arps"),
New York counsel to the Obligors, substantially in the form of Exhibit G hereto,
(b) Stanley P. Silverstein, General Counsel for the U.S. Borrower, substantially
in the form of Exhibit H hereto, (c) Garth Patterson, Barbados counsel to
Warnaco (HK), substantially in the form of Exhibit
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I hereto and (d) Loeff Claeys Verbeke, Dutch counsel to Warnaco B.V., Warnaco
Netherlands and Warnaco Holland, substantially in the form of Exhibit J hereto.
SECTION 6.1.9. Certificates as to No Default, etc. On the 100%
Effective Date, no Default shall have occurred and be continuing under this
Agreement and no Event of Default shall have occurred or would occur under this
Agreement or would result from the occurrence of the 100% Effective Date, and
the Managing Agents shall have received originally executed certificates for
each Lender dated the 100% Effective Date from an Authorized Officer of the U.S.
Borrower certifying as to the above.
SECTION 6.1.10. Opinions of Counsel. The Managing Agents shall have
received opinions, dated the 100% Effective Date and addressed to the Agents and
all Lenders, from (a) Skadden, Arps, Slate, Meagher & Flom LLP ("Skadden,
Arps"), New York counsel to the Obligors, substantially in the form of Exhibit G
hereto, (b) Stanley P. Silverstein, General Counsel for the U.S. Borrower,
substantially in the form of Exhibit H hereto, (c) Garth Patterson, Barbados
counsel to Warnaco (HK), substantially in the form of Exhibit I hereto and (d)
Loeff Claeys Verbeke, Dutch counsel to Warnaco B.V., Warnaco Netherlands and
Warnaco Holland, substantially in the form of Exhibit J hereto.
SECTION 6.2. All Credit Extensions. The obligation of each Lender or
the Fronting Bank to make any Credit Extension on any date other than a Funding
Date shall be subject to the satisfaction of each of the conditions precedent
set forth in this Section 6.2.
SECTION 6.2.1. Compliance with Warranties, No Default, etc. Both before
and after giving effect to any Credit Extension the following statements shall
be true and correct:
(a) no event or circumstances has occurred and is continuing,
or would result from the making of such Credit Extension, which
constitutes a Default, or which when considered by itself or together
with other past or then existing events or circumstances, constitutes
or would constitute a Material Adverse Change;
(b) no Event of Default or any condition, occurrence or event
which, after notice or lapse of time or both, would constitute an Event
of Default shall have occurred (unless otherwise waived by the Required
Lenders) in the performance of any affirmative or negative covenants
contained in Article VIII;
(c) none of the events described in Article IX shall have
occurred (unless, in the case of other than Section 9.1.6, otherwise
waived by the Required Lenders); and
(d) the representations and warranties set forth in Article
VII, Article III of the Subsidiary Guaranty and Article III of the
Group Guaranty shall, in each case, be true and correct with the same
effect as if then made (unless stated to relate solely to an earlier
date, in which case such representations and warranties shall have been
true and correct as of such earlier date).
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SECTION 6.2.2. Credit Request. To the extent that Loans are made in
accordance with clause (b) of Section 2.3, any Drawer requests that the Fronting
Bank create an Acceptance, or any Borrower requests that the Fronting Bank issue
a Letter of Credit other than by means of notification in accordance with the
terms of the Tradexpress Agreement, the Administrative Agent shall have been
presented with a draft by any Drawer or shall have received a Borrowing Request
or Issuance Request, as the case may be, for such Credit Extension, executed and
delivered (as applicable) by the applicable Borrower. Each of the delivery (or
deemed delivery pursuant to the terms of this Agreement) of a draft by any
Drawer, a Borrowing Request or an Issuance Request and the creation of the
Acceptance, the acceptance by any Borrower of the proceeds of the Borrowing, the
issuance of the Letter of Credit, or the making of a Loan upon a Disbursement or
the maturity of an unreimbursed Acceptance, as applicable, shall constitute a
representation and warranty by such Borrowers that on the date of such Credit
Extension (both immediately before and after giving effect to such Credit
Extension and the application of the proceeds thereof) or the creation of an
Acceptance or the issuance of the Letter of Credit, as applicable, the
statements made in Section 6.2.1 are in each case true and correct.
SECTION 6.2.3. Satisfactory Legal Form. All documents executed or
submitted pursuant hereto by or on behalf of Group or any of its Subsidiaries
shall be satisfactory in form and substance to the Managing Agents; the Managing
Agents shall have received all information, approvals, opinions, documents or
instruments as the Managing Agents may reasonably request.
ARTICLE VII
REPRESENTATIONS AND WARRANTIES
In order to induce the Fronting Bank, the Lenders and the Agents to
enter into this Agreement and to make Loans, create Acceptances and issue
Letters of Credit hereunder, each Borrower and Group represents and warrants
unto each Agent, each Lender and the Fronting Bank, as set forth in this Article
VII.
SECTION 7.1. Organization, etc. Group and each of its Subsidiaries is a
corporation, limited liability company or trust, as the case may be, duly
organized, validly existing and in good standing under the laws of the
jurisdiction of its incorporation or organization, is duly qualified to do
business and is in good standing as a foreign corporation, limited liability
company or trust, as applicable, in each jurisdiction where the nature of its
business requires such qualification, except where the failure to so qualify
would not have a Material Adverse Effect, and each Obligor has full power and
authority and holds all requisite governmental licenses, permits and other
approvals to enter into and perform its Obligations under this Agreement, the
Notes and each other Loan Document to which it is a party and to own and hold
under lease its property and to conduct its business substantially as currently
conducted by it. Set forth on Schedule 7.1 hereto is a complete and accurate
list
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of all Subsidiaries of Group and a designation as to whether or not such
Subsidiary is (a) a Domestic Subsidiary and/or (b) a Material Subsidiary.
SECTION 7.2. Due Authorization, Non-Contravention, etc. The execution,
delivery and performance (a) by the Borrowers and Group of this Agreement, the
Notes and each other Loan Document executed or to be executed by it, and (b) by
each other Obligor of each Loan Document executed and delivered by it, are, in
each case, within such Obligor's corporate (or other, as applicable) powers,
have been duly authorized by all necessary corporate (or other, as applicable)
action, and do not
(i) contravene such Obligor's Organic Documents;
(ii) contravene any contractual restriction, law or
governmental regulation or court decree or order binding on or
affecting such Obligor; or
(iii) result in, or require the creation or imposition of,
any Lien on any of such Obligor's properties.
No Obligor is in breach of any contractual restriction or in violation of any
law or governmental regulation or court decree or order binding on or affecting
such Obligor, the breach or violation of which is or would be reasonably likely
to have a Material Adverse Effect.
SECTION 7.3. Government Approval, Regulation, etc. No authorization or
approval or other action by, and no notice to or filing with, any governmental
authority or regulatory body or other Person is required for the due execution,
delivery or performance by any Borrower, Group or any other Obligor of this
Agreement, the Notes or any other Loan Document to which it is a party. Neither
Group nor any of its Subsidiaries is an "investment company" within the meaning
of the Investment Company Act of 1940, as amended, or a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company" or of a "subsidiary company" of a "holding company", within the meaning
of the Public Utility Holding Company Act of 1935, as amended.
SECTION 7.4. Validity, etc. This Agreement constitutes, and the Notes
and each other Loan Document executed by the Borrowers and each other Obligor
will, on the due execution and delivery thereof, constitute, the legal, valid
and binding obligations of such Borrower or such Obligor enforceable in
accordance with their respective terms, except as the enforceability thereof may
be limited by bankruptcy, insolvency, moratorium and other similar laws
affecting the enforcement of creditors rights generally and by general equity
principles.
SECTION 7.5. Financial Statements; No Material Adverse Change. (a) The
Consolidated balance sheets of Group and its Subsidiaries as at January 2, 1999,
and the
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related consolidated statements of operations, stockholders' equity and cash
flow of Group and its Subsidiaries for the Fiscal Year then ended, accompanied
by an opinion of PricewaterhouseCoopers LLP, independent public accountants, and
the Consolidated balance sheet of Group and its Subsidiaries as at July 3, 1999,
and the related Consolidated statements of operations, stockholders' equity and
cash flow of Group and its Subsidiaries for the three months then ended, duly
certified by the chief financial officer of Group, copies of which have been
furnished to each Lender, fairly present, subject, in the case of said balance
sheet as at July 3, 1999, and said statements of operations, stockholders'
equity and cash flow for the three months then ended, to year-end audit
adjustments, the Consolidated financial condition of Group and its Subsidiaries
as at such dates and the Consolidated results of the operations of Group and its
Subsidiaries for the periods ended on such dates, all in accordance with
generally accepted accounting principles applied on a consistent basis, and (b)
since January 2, 1999, there has been no Material Adverse Change.
SECTION 7.6. Litigation, etc. There is no action, suit, investigation,
litigation or proceeding affecting any Obligor or any of its Subsidiaries,
including any Environmental Action, pending or threatened before any court,
governmental agency or arbitrator that (a) purports to affect the legality,
validity or enforceability of this Agreement or any other Loan Document or (b)
is or would be reasonably likely to have a Material Adverse Effect.
SECTION 7.7. Regulations U and X. No Borrower is engaged in the
business of extending credit for the purpose of purchasing or carrying Margin
Stock, and no proceeds of any Loans will be used for a purpose which violates,
or would be inconsistent with, F.R.S. Board Regulation U or X. Terms for which
meanings are provided in F.R.S. Board Regulation U or X or any regulations
substituted therefor, as from time to time in effect, are used in this Section
with such meanings.
SECTION 7.8. Accuracy of Information. All factual information
heretofore or contemporaneously furnished by or on behalf of any Borrower or
Group in writing to any Agent or any Lender for purposes of or in connection
with this Agreement or any transaction contemplated hereby is, and all other
such factual information hereafter furnished by or on behalf of any Borrower to
any Agent or any Lender will be, true and accurate in every material respect on
the date as of which such information is dated or certified and as of the date
of execution and delivery of this Agreement by such Agent and such Lender, and
such information is not, or shall not be, as the case may be, incomplete by
omitting to state any material fact necessary to make such information not
misleading. The parties acknowledge and agree that nothing contained in this
Section shall constitute a representation or warranty by any Borrower or Group
as to the future financial performance or the results of operations of any
Borrower or Group; provided, however, that any projections delivered pursuant to
this Agreement have been (and will be) prepared on the basis of the assumptions
accompanying them, and such projections and assumptions, as of the date of
preparation thereof and as of the date hereof, are reasonable and represent such
Borrower's or Group's good faith estimate of its future financial performance.
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SECTION 7.9. Year 2000. For any date on or before December 31, 1999,
the Obligors have, and as soon as practicable after the Control Date, Authentic
Fitness will have (i) initiated a review and assessment of all areas within its
and each of its Subsidiaries' business and operations (including those affected
by suppliers, vendors and customers) that could be adversely affected by the
risk that computer applications used by such Person or any of its Subsidiaries
(or suppliers, vendors and customers) may be unable to recognize and perform
properly date-sensitive functions involving certain dates prior to and any date
after December 31, 1999 (the "Year 2000 Problem"), (ii) developed a plan and
timetable for addressing the Year 2000 problem on a timely basis and (iii) to
date, implemented that plan in accordance with such timetable. Based on the
foregoing, each such Person believes that all of its computer applications that
are material to its or any of its Subsidiaries' business and operations are
reasonably expected on a timely basis to be able to perform properly
date-sensitive functions for all dates before and after January 1, 2000, except
to the extent that a failure to do so could not reasonably be expected to have a
Material Adverse Effect.
ARTICLE VIII
COVENANTS
SECTION 8.1. Affirmative Covenants. The U.S. Borrower and Group agrees
with each Agent, each Lender and the Fronting Bank that, until all Commitments
have terminated and all Obligations have been paid and performed in full, the
U.S. Borrower and Group will perform the obligations set forth in this Section
8.1.
SECTION 8.1.1. Compliance with Laws, etc. Comply, and cause each of its
Subsidiaries to comply, in all material respects, with all applicable laws,
rules, regulations and orders, such compliance to include, without limitation,
compliance with ERISA and Environmental Laws, except where the failure so to
comply would not have a Material Adverse Effect.
SECTION 8.1.2. Payment of Taxes, etc. Pay and discharge, and cause each
of its Subsidiaries to pay and discharge, before the same shall become
delinquent, (a) all taxes, assessments and governmental charges or levies
imposed upon it or upon its property and (b) all lawful claims that, if unpaid,
would reasonably be likely to by law become a Lien upon its property; provided,
however, that neither Group nor any of its Subsidiaries shall be required to pay
or discharge any such tax, assessment, charge or claim that is being contested
in good faith and by proper proceedings and as to which appropriate reserves are
being maintained, unless and until any Lien resulting therefrom attaches to its
property and becomes enforceable against its other creditors so long as any such
amount, when taken together with any amount required to be paid as described in
clause (b) of the definition of "Permitted Liens", shall not exceed $10 million.
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SECTION 8.1.3. Maintenance of Insurance. Maintain, and cause each of
its Subsidiaries to maintain, insurance with responsible and reputable insurance
companies or associations in such amounts and covering such risks as is usually
carried by companies engaged in similar businesses and owning similar properties
in the same general areas in which such Borrower or such Subsidiary operates.
SECTION 8.1.4. Preservation of Corporate Existence, etc. Preserve and
maintain, and cause each of its Subsidiaries to preserve and maintain, its
corporate existence, rights (charter and statutory) and franchises; provided,
however, that Group and its Subsidiaries may consummate the Merger and any other
merger, consolidation or voluntary dissolution or liquidation permitted under
Section 8.2.2.
SECTION 8.1.5. Visitation Rights. At any reasonable time and from time
to time, permit any Agent or any of the Lender Parties or any agents or
representatives thereof, upon reasonable notice to the U.S. Borrower to examine
and make copies of and abstracts from the records and books of account of, and
visit the properties of, the U.S. Borrower and any of Group's Subsidiaries, and
to discuss the affairs, finances and accounts of the U.S. Borrower and any of
Group's Subsidiaries with any of such Person's officers or directors and with
such Person's independent certified public accountants.
SECTION 8.1.6. Keeping of Books. Keep, and cause each of its
Subsidiaries to keep, proper books of record and account, in which full and
correct entries shall be made of all financial transactions and the assets and
business of the U.S. Borrower and each such Subsidiary in accordance with
generally accepted accounting principles in effect from time to time.
SECTION 8.1.7. Maintenance of Properties, etc. Maintain and preserve,
and cause each of its Subsidiaries to maintain and preserve, all of its
properties that are used or useful in the conduct of its business in good
working order and condition, ordinary wear and tear excepted.
SECTION 8.1.8. Transactions with Affiliates. Conduct, and cause each of
its Subsidiaries to conduct, other than with respect to transactions among Group
and/or its wholly owned Subsidiaries, all transactions otherwise permitted under
the Loan Documents with any of their Affiliates on terms that are no less
favorable to Group or such Subsidiary than it would obtain in a comparable
arm's-length transaction with a Person not an Affiliate, provided, however, that
the foregoing restriction shall not apply to transactions pursuant to any
agreement referred to in Section 8.2.1(b) and provided, further, that no
Borrower shall engage in any transaction with any such Subsidiary that would
render such Subsidiary insolvent or cause a default under, or a breach of, any
material contract to which such Subsidiary is a party.
SECTION 8.1.9. [INTENTIONALLY DELETED].
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SECTION 8.1.10. Reporting Requirements. Furnish to the Lenders:
(a) as soon as available and in any event within 50 days after
the end of each of the first three quarters of each Fiscal Year,
Consolidated balance sheets of Group and its Subsidiaries as of the end
of such quarter and Consolidated statements of income and Consolidated
statements of cash flows of Group and its Subsidiaries for the period
commencing at the end of the previous Fiscal Year and ending with the
end of such quarter, duly certified (subject to year-end audit
adjustments) by the chief financial officer of the U.S. Borrower as
having been prepared in accordance with GAAP and a certificate of the
chief financial officer of Group as to compliance with the terms of
this Agreement and setting forth in reasonable detail the calculations
necessary to demonstrate compliance with Section 8.3, provided that in
the event of any change in GAAP used in the preparation of such
financial statements, the U.S. Borrower shall also provide, if
necessary for the determination of compliance with Section 8.3, a
statement of reconciliation conforming such financial statements to
GAAP;
(b) as soon as available and in any event within 95 days after
the end of each Fiscal Year of Group, a copy of the annual audit report
for such year for Group and its Subsidiaries, containing the
Consolidated balance sheet of Group and its Subsidiaries as of the end
of such Fiscal Year and Consolidated statements of income and cash
flows of the U.S. Borrower and its Subsidiaries for such Fiscal Year,
in each case accompanied by an opinion acceptable to the Required
Lenders by any Approved Accounting Firm or by other independent public
accountants acceptable to the Required Lenders, and a certificate of
the chief financial officer of Group as to compliance with the terms of
this Agreement setting forth in reasonable detail the calculations
necessary to demonstrate compliance with Section 8.3; provided that in
the event of any change in GAAP used in the preparation of such
financial statements, the U.S. Borrower shall also provide, if
necessary for the determination of compliance with Section 8.3, a
statement of reconciliation conforming such financial statements to
GAAP;
(c) as soon as possible and in any event within two Business
Days after the occurrence of each Default continuing on the date of
such statement, a statement of the chief financial officer of the U.S.
Borrower setting forth details of such Default and the action that the
U.S. Borrower has taken and proposes to take with respect thereto;
(d) promptly after the sending or filing thereof, copies of
all reports that the U.S. Borrower sends to any of its security holders
generally, and copies of all reports and registration statements that
Group or any Subsidiary files with the Securities and Exchange
Commission or any national securities exchange;
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(e) promptly after the commencement thereof, notice of all
actions and proceedings before any court, governmental agency or
arbitrator affecting any Borrower or any of its Subsidiaries of the
type described in Section 7.6;
(f) within five Business Days after receipt thereof by any
Obligor, copies of each notice from S&P or Moody's indicating any
change in the Debt Rating; and
(g) such other information respecting any Borrower or any of
its Subsidiaries as any Lender Party through the Managing Agents may
from time to time reasonably request.
SECTION 8.1.11. Covenant to Guarantee Obligations. At such time as any
new direct or indirect Domestic Subsidiary is formed or acquired (including
Authentic Fitness and its Subsidiaries as required by, and subject to, Section
8.1.12), cause such new Material Subsidiary that is a wholly owned Subsidiary to
(a) within 30 days thereafter or such later time as the U.S. Borrower and the
Administrative Agent shall agree (but in any event no later than 30 additional
days thereafter), duly execute and deliver to the Administrative Agent a
supplement to the Subsidiary Guaranty in form and substance reasonably
satisfactory to the Administrative Agent, provided, however, that the foregoing
shall not apply to (i) Excluded Subsidiaries (ii) joint ventures or (iii) any
Subsidiary organized solely for the purpose of entering into any agreements and
transactions referred to in Section 8.2.1(b) to the extent that such agreements
require that such Subsidiary not be a guarantor hereunder, and (b) within 30
days after the delivery of such guarantees or such later time as the U.S.
Borrower and the Administrative Agent shall agree (but in any event no later
than 30 additional days thereafter), deliver to the Administrative Agent a
signed copy of a favorable opinion, addressed to the Administrative Agent, of
counsel for the Obligors acceptable to the Administrative Agent as to the
documents contained in clause (a) above, as to such guarantees being legal,
valid and binding obligations of such Domestic Subsidiaries enforceable in
accordance with their terms and as to such other matters as the Administrative
Agent may reasonably request.
SECTION 8.1.12. Consummation of Merger. If there is a Tender Offer,
cause the Merger to be consummated in compliance with all applicable laws and
regulations as soon as practicable after consummation of the Tender Offer and
cause Authentic Fitness and its Subsidiaries to become Guarantors pursuant to
Section 8.1.11 as soon as practicable and, in any event, within 30 days after
consummation of the Merger.
SECTION 8.1.13. Authentic Fitness. As soon as practicable after
consummation of the Merger, cause the commitments under all Existing Authentic
Debt (other than Debt of Authentic Fitness and its Subsidiaries that become
Obligations under this Agreement) to be terminated and all such indebtedness to
be repaid in full.
SECTION 8.2. Negative Covenants. Each of the U.S. Borrower and Group
agrees with each Agent, each Lender and the Fronting Bank that, until all
Commitments have
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terminated and all Obligations have been paid and performed in full, neither the
U.S. Borrower nor Group will at any time take any actions set forth in this
Section 8.2.
SECTION 8.2.1. Liens, etc. Create or suffer to exist, or permit any of
its Subsidiaries to create, incur, assume or suffer to exist, any Lien on or
with respect to any of its properties of any character, whether now owned or
hereafter acquired, or assign, or permit any of its Subsidiaries to assign, any
right to receive income, other than:
(a) Permitted Liens,
(b) Liens on receivables of any kind (and in property securing
or otherwise supporting such receivables) in connection with agreements
for limited recourse sales or financings by the U.S. Borrower or any of
its Subsidiaries or by the Sub Borrower or any of its Subsidiaries for
cash of such receivables or interests therein, provided that (i) any
such agreement is of a type and on terms customary for comparable
transactions in the good faith judgment of the Board of Directors of
Group and (ii) such agreement does not create any interest in any asset
other than receivables (and property securing or otherwise supporting
such receivables), related general intangibles and proceeds of the
foregoing,
(c) other Liens securing Debt, including Liens incurred
pursuant to subsection (e) below, in an aggregate principal amount
outstanding at any time not to exceed 10% of Consolidated Tangible
Assets of Group and its Subsidiaries at such time, provided that Liens
securing Debt of Authentic Fitness Products Inc. under credit
facilities existing on the date that Authentic Fitness becomes a
Subsidiary of the U.S. Borrower are expressly permitted until the
consummation of the acquisition of 100% of the capital stock of
Authentic Fitness,
(d) Liens arising from covenants by the U.S. Borrower or its
Subsidiaries to grant security interests in the assets of Warnaco of
Canada Limited or its Subsidiaries (the "Canadian Subsidiaries") to
secure Debt of the Canadian Subsidiaries in the event that the
Lenders hereunder or lenders under the U.S. Credit Agreement,
the New Five Year Revolver or the New 364-Day Credit Agreement are
granted Liens by Group or its Subsidiaries in their respective assets
to secure the Obligations under the Loan Documents or the U.S. Credit
Agreement, the New Five Year Revolver or the New 364-Day Credit
Agreement, as the case may be, and
(e) Liens on Margin Stock.
SECTION 8.2.2. Mergers, etc. Merge into or consolidate with any Person
or permit any Person to merge into it, or permit any of its Subsidiaries (other
than Excluded Subsidiaries) to do so or to voluntarily liquidate, except that
(i) the Purchaser and Authentic Fitness may consummate the Merger, (ii) any
Subsidiary of Group may merge into or consolidate with any other Subsidiary of
Group, provided that if any such Subsidiary is a
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Domestic Subsidiary of Group, the Person formed thereby shall be a direct or
indirect wholly owned Domestic Subsidiary of Group, (iii) any Subsidiary of
Group may merge into or consolidate with any Person pursuant to an acquisition,
provided that, if any such Subsidiary is a Domestic Subsidiary of Group, the
Person formed thereby shall be a direct or indirect wholly owned Domestic
Subsidiary of Group, (iv) any Domestic Subsidiary of Group may merge into or
consolidate with Group, (v) the U.S. Borrower may merge into or consolidate with
any other Person so long as the U.S. Borrower is the surviving corporation and
(vi) any Subsidiary of Group may voluntarily liquidate and distribute its assets
to Group or any direct or indirect wholly owned Domestic Subsidiary of Group,
provided, in each case, that no Default shall have occurred and be continuing at
the time of such proposed transaction or would result therefrom.
SECTION 8.2.3. Debt. Create, incur, assume or suffer to exist, or
permit any of its Subsidiaries (other than Excluded Subsidiaries) to create,
incur, assume or suffer to exist, any Debt if after giving effect thereto the
U.S. Borrower shall fail to be in compliance with each of the covenants set
forth in Section 8.3.
SECTION 8.2.4. Sales, etc. of Assets. Sell, lease, transfer or
otherwise dispose of, or permit any of its Subsidiaries to sell, lease, transfer
or otherwise dispose of, any assets, or grant any option or other right to
purchase, lease or otherwise acquire any assets, except:
(a) sales of inventory in the ordinary course of its business;
(b) sales, leases, transfers or other disposals of assets, or
grants of any option or other right to purchase, lease or otherwise
acquire assets, following the Effective Date for fair value (valued at
the time of any such sale, lease, transfer or other disposal), in an
aggregate amount in each Fiscal Year not to exceed 20% per annum of the
Consolidated total assets of Group and its Subsidiaries as valued at
the end of the preceding Fiscal Year of the U.S. Borrower, and the fair
value of such assets shall have been determined in good faith by the
Board of Directors of Group;
(c) sales of assets on terms customary for comparable
transactions in the good faith judgment of the Board of Directors of
Group pursuant to agreements referred to in Section 8.2.1(b);
(d) transfers of assets between Group and its Subsidiaries;
(e) sales of assets listed on Schedule 8.2 hereto;
(f) sales of assets and properties of Group and its
Subsidiaries in connection with sale-leaseback transactions otherwise
permitted hereunder (including, without limitation, under Section
8.2.3);
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(g) the sale or discount of accounts (i) owing by Persons
incorporated, residing or having their principal place of business in
the United States in an aggregate amount not exceeding $10,000,000 in
face amount per calendar year or (ii) that are past due by more than 90
days, provided that the sale or discount of such accounts is in the
ordinary course of the Group's business and consistent with prudent
business practices;
(h) the licensing of trademarks and trade names by Group or
any of its Subsidiaries in the ordinary course of its business,
provided that such licensing takes place on an arm's-length basis;
(i) the rental by Group and its Subsidiaries, as lessors, in
the ordinary course of their respective businesses, on an arm's-length
basis, of real property and personal property, in each case under
leases (other than capitalized leases); and
(j) sales of Margin Stock for fair value as determined in good
faith by the Board of Directors of Group.
SECTION 8.2.5. Nature of Business. Make, or permit any of its
Subsidiaries to make, (a) except as otherwise permitted pursuant to subsection
(b) below, any change in the nature of its business as carried on at the date
hereof in a manner materially adverse to the Agents and the Lender Parties or
(b) any investments (except Investments in a net aggregate amount (after giving
effect to any dividends or other returns of capital) invested from the date
hereof not to exceed $100,000,000) other than in apparel manufacturing or
wholesaling businesses or apparel accessories manufacturing or wholesaling
businesses or in related retail businesses, provided that on an annual basis, at
least 51% of the revenue of Group and its Subsidiaries on a consolidated basis
is derived from apparel manufacturing or wholesaling businesses or apparel
accessories manufacturing or wholesaling businesses.
SECTION 8.2.6. Accounting Changes. Make or permit, or permit any of its
Subsidiaries to make or permit, any change in accounting policies (except as
required or permitted by the Financial Accounting Standards Board or GAAP),
reporting practices or fiscal year.
SECTION 8.2.7. Authentic Fitness. From and after the Control Date and
prior to the date that Authentic Fitness becomes a wholly-owned Subsidiary,
permit Authentic Fitness to (i) issue any securities, rights or options or (ii)
declare or make any dividends or distributions to the holders of Authentic
Fitness Stock, except, in each case, as contemplated by the terms of either or
both of the Tender Offer and the Merger and otherwise except to the extent any
such transactions are entered into and performed in the ordinary course of
Authentic Fitness's business as previously conducted and necessary for the
prudent operation of Authentic Fitness's business.
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SECTION 8.3. Financial Covenants. The U.S. Borrower and Group agrees
with each Agent, each Lender and the Fronting Bank that, until all Commitments
have terminated and all Obligations have been paid and performed in full, the
U.S. Borrower and Group will:
SECTION 8.3.1. Leverage Ratio. Maintain, at the end of each Fiscal
Quarter a ratio of (x) Indebtedness for Borrowed Money to (y) Consolidated
EBITDA of Group and its Subsidiaries for the preceding four Fiscal Quarters of
(i) 3.25 to 1.0 for each Fiscal Quarter ending prior to the consummation of the
Tender Offer and (ii) following the consummation of the Tender Offer, not more
than 3.75 to 1.0 for each Fiscal Quarter ending on or before September 30, 2000,
3.50 to 1.0 for each Fiscal Quarter ending on or about December 31, 2000 through
the Fiscal Quarter ending on or about September 30, 2001 and 3.25 to 1.0 for
each Fiscal Quarter thereafter.
SECTION 8.3.2. Coverage Ratio. Maintain, as of the end of each Fiscal
Quarter, a ratio of Consolidated EBITDA of Group and its Subsidiaries for the
four consecutive Fiscal Quarters then ended to Consolidated Interest Expense of
Group and its Subsidiaries for such period of not less than 3.00:1.00.
ARTICLE IX
EVENTS OF DEFAULT
SECTION 9.1. Listing of Events of Default. Each of the following events
or occurrences described in this Section 9.1 shall constitute an "Event of
Default".
SECTION 9.1.1. Non-Payment of Obligations. Any Borrower shall default
in the payment or prepayment when due of (a) any principal of or interest on any
Loan, (b) any Reimbursement Obligation, or (c) any fee or of any other
Obligation, and in each case such default in payment or prepayment shall
continue unremedied for more than three Business Days from the date such payment
or prepayment was due.
SECTION 9.1.2. Breach of Warranty. Any representation or warranty of
any Borrower or any other Obligor made or deemed to be made hereunder or in any
other Loan Document executed by it (including any certificates delivered
pursuant to Article VI) is or shall be incorrect when made or deemed made in any
material respect.
SECTION 9.1.3. Non-Performance of Certain Covenants and Obligations.
(a) The U.S. Borrower or Group shall default in the due performance and
observance of any of its obligations under Sections 8.1.4 or 8.1.11, 8.1.12,
8.2, 8.3 or (b) any Obligor shall fail to perform or observe any other term,
covenant or agreement contained in any Loan Document on its part to be performed
or observed if such failure shall remain unremedied for 30 days
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(i) after written notice thereof shall have been given to the U.S. Borrower by
any Agent or any Lender or (ii) after any officer of the U.S. Borrower obtains
knowledge thereof.
SECTION 9.1.4. Non-Performance of Other Covenants and Obligations. Any
Borrower or any other Obligor shall default in the due performance and
observance of any other agreement contained herein or in any other Loan Document
executed by it, and such default shall continue unremedied for a period of 30
days (a) after notice thereof shall have been given to the U.S. Borrower by any
Agent or any Lender or (b) after any officer of any Borrower obtains knowledge
thereof.
SECTION 9.1.5. Default Under Other Agreements. Any Obligor or any of
its Subsidiaries shall fail to pay any principal of or premium or interest on
any Debt under the U.S. Credit Agreement, the New 364-Day Credit Agreement, the
New Five Year Revolver or other Debt that is outstanding in a principal or
notional amount of at least $20,000,000 in the aggregate (but excluding Debt
outstanding hereunder) of such Obligor or such Subsidiary (as the case may be),
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 or
instrument relating to such Debt; or any other event shall occur or condition
shall exist under any agreement or instrument relating to any such Debt and
shall continue after the applicable grace period, if any, specified in such
agreement or instrument, if the effect of such event or condition is to
accelerate, or to permit the acceleration of, the maturity of such Debt; or any
such Debt shall be declared to be due and payable, or required to be prepaid or
redeemed (other than by a regularly scheduled required prepayment or redemption
or other than as a result of any event which provides cash to such Obligor in an
amount sufficient to satisfy such redemption or prepayment), purchased or
defeased, or an offer to prepay, redeem, purchase or defease such Debt shall be
required to be made, in each case prior to the stated maturity thereof.
SECTION 9.1.6. Bankruptcy, Insolvency, etc. Group, the U.S. Borrower or
any of their Material Subsidiaries (or any group of Subsidiaries which, in the
aggregate, would constitute a Material Subsidiary) 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 any of Group, the
U.S. Borrower or any of their Subsidiaries (or any group of Subsidiaries which,
in the aggregate, would constitute a Material Subsidiary) 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 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 30 days, or any of the actions
sought in such proceeding (including, without limitation, the entry of an order
for relief against, or the appointment of a
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receiver, trustee, custodian or other similar official for, it or for any
substantial part of its property) shall occur; or such Obligor or any of its
Subsidiaries shall take any corporate action to authorize any of the actions set
forth above in this Section 9.1.6.
SECTION 9.1.7. Judgments, etc. Any (a) judgment or order for the
payment of money in excess of $20,000,000 shall be rendered against any Obligor
or any of its Subsidiaries and either (i) enforcement proceedings shall have
been commenced by any creditor upon such judgment or order or (ii) there shall
be any period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect unless the payment of such judgment or order is covered by insurance and
such insurance coverage is not in dispute, or (b) non-monetary judgment or order
shall be rendered against any Obligor or any of its Subsidiaries that could be
reasonably expected to have a Material Adverse Effect, and there shall be any
period of 10 consecutive days during which a stay of enforcement of such
judgment or order, by reason of a pending appeal or otherwise, shall not be in
effect.
SECTION 9.1.8. Termination, etc., of Loan Documents. Any Loan Document
shall (except in accordance with its terms), in whole or in part, terminate,
cease to be effective or cease to be the legally valid, binding and enforceable
obligation of the Obligor that is a party thereto; or any Borrower (including
the U.S. Borrower with respect to its Guaranty set forth in Section 3.4) or any
other Obligor shall, directly or indirectly, contest in any manner such
effectiveness, validity, binding nature or enforceability (except as aforesaid).
SECTION 9.1.9. Change in Control. (a) Group shall at any time cease to
have legal and beneficial ownership of 100% of the capital stock of the U.S.
Borrower (except if such parties shall merge); or (b) any Person, or two or more
Persons acting in concert, shall have acquired beneficial ownership (within the
meaning of Rule 13d-3 of the Securities and Exchange Commission under the
Securities Exchange Act of 1934), directly or indirectly, of Voting Stock of
Group (or other securities convertible into such Voting Stock) representing 25%
or more of the combined voting power of all Voting Stock of Group (other than
Excluded Persons); or (c) any Person, or two or more Persons acting in concert
shall have acquired by contract or otherwise, or shall have entered into a
contract or arrangement that, upon consummation, will result in its or their
acquisition of, the power to exercise, directly or indirectly, a controlling
influence over the management or policies of Group, or control over Voting Stock
of Group (or other securities convertible into such securities) representing 25%
or more of combined voting power of all Voting Stock of Group (other than
Excluded Persons); or (d) Linda J. Wachner (or, in the case of her death or
disability, another officer or officers of comparable experience and ability
selected by the U.S. Borrower within 180 days thereafter after consultation with
the Administrative Agent) shall cease to be Chairman and Chief Executive Officer
of Group and the U.S. Borrower).
SECTION 9.1.10. ERISA. Any Obligor or any of its ERISA Affiliates shall
incur, or shall be reasonably likely to incur, liability in excess of
$20,000,000 in the aggregate as a result of one or more of the following: (i)
the occurrence of any ERISA Event; (ii) the
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partial or complete withdrawal of such Obligor or any of its ERISA Affiliates
from a Multiemployer Plan; or (iii) the reorganization or termination of a
Multiemployer Plan.
SECTION 9.2. Action Upon Bankruptcy. If any Event of Default described
in Section 9.1.6 shall occur, the Commitments (if not theretofore terminated)
shall automatically terminate and the outstanding principal amount of all
outstanding Loans and all other Obligations shall automatically be and become
immediately due and payable, without notice or demand.
SECTION 9.3. Action Upon Other Event of Default. If any Event of
Default (other than any Event of Default described in Section 9.1.6) shall occur
for any reason, whether voluntary or involuntary, and be continuing, the
Administrative Agent, upon the direction of the Required Lenders, shall by
notice to the U.S. Borrower (a) declare an amount equal to the sum of (i) the
aggregate face amount of all unmatured Acceptances and (ii) the maximum
aggregate amount that is or at any time thereafter may become available for
drawing under any outstanding Letters of Credit (whether or not any beneficiary
shall have presented, or shall be entitled at such time to present, the drafts
or other documents required to draw under such Letters of Credit) to be
immediately due and payable, the applicable Borrowers being obligated to cash
collateralize all such obligations immediately (in accordance with Section 4.7),
and/or (b) declare all or any portion of the outstanding principal amount of the
Loans and other Obligations in respect of the Loans or otherwise to be due and
payable and/or the Commitments (if not theretofore terminated) to be terminated,
whereupon the full unpaid amount of such Loans and other Obligations which shall
be so declared due and payable shall be and become immediately due and payable,
without further notice, demand or presentment, and/or, as the case may be, the
Commitments shall terminate.
ARTICLE X
THE AGENTS
SECTION 10.1. Actions. Each Lender hereby appoints Scotiabank as its
Administrative Agent and Societe Generale as its Documentation Agent under and
for purposes of this Agreement, the Notes and each other Loan Document. Each
Lender authorizes each Agent to act on behalf of such Lender under this
Agreement, the Notes and each other Loan Document and, in the absence of other
written instructions from the Required Lenders received from time to time by
such Agent (with respect to which the such Agent agrees that it will comply,
except as otherwise provided in this Section or as otherwise advised by
counsel), to exercise such powers hereunder and thereunder as are specifically
delegated to or required of such Agent by the terms hereof and thereof, together
with such powers as may be reasonably incidental thereto. Each Lender hereby
indemnifies (which indemnity shall survive any termination of this Agreement)
each Agent, pro rata according to such Lender's Percentage, from and against any
and all liabilities, obligations, losses, damages, claims, costs or expenses of
any kind or nature whatsoever which may at any time
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be imposed on, incurred by, or asserted against, such Agent in any way relating
to or arising out of this Agreement, the Notes and any other Loan Document,
including reasonable attorneys' fees, and as to which such Agent is not
reimbursed by the Borrowers; provided, however, that no Lender shall be liable
for the payment of any portion of such liabilities, obligations, losses,
damages, claims, costs or expenses which are determined by a court of competent
jurisdiction in a final proceeding to have resulted from such Agent's gross
negligence or wilful misconduct. Each Agent shall not be required to take any
action hereunder, under the Notes or under any other Loan Document, or to
prosecute or defend any suit in respect of this Agreement, the Notes or any
other Loan Document, unless it is indemnified hereunder to its satisfaction. If
any indemnity in favor of any Agent shall be or become, in such Agent's
determination, inadequate, such Agent may call for additional indemnification
from the Lenders and cease to do the acts indemnified against hereunder until
such additional indemnity is given.
SECTION 10.2. Copies, etc. Each Agent shall give prompt notice to each
Lender of each notice or request required or permitted to be given to such Agent
by the Borrowers pursuant to the terms of this Agreement (unless concurrently
delivered to the Lenders by a Borrower). Each Agent will distribute to each
Lender each document or instrument received for its account and copies of all
other communications received by such Agent from the Borrowers for distribution
to the Lenders by such Agent in accordance with the terms of this Agreement.
SECTION 10.3. Exculpation. Neither any Agent nor any of its affiliates,
directors, officers, employees or agents shall be liable to any Lender for any
action taken or omitted to be taken by it under this Agreement or any other Loan
Document, or in connection herewith or therewith, except for its own wilful
misconduct or gross negligence, nor responsible for any recitals or warranties
herein or therein, nor for the effectiveness, enforceability, validity or due
execution of this Agreement or any other Loan Document, nor for the creation,
perfection or priority of any Liens (if any) purported to be created by any of
the Loan Documents, or the validity, genuineness, enforceability, existence,
value or sufficiency of collateral security (if any), nor to make any inquiry
respecting the performance by any Borrower of its obligations hereunder or under
any other Loan Document. Any such inquiry which may be made by any Agent shall
not obligate it to make any further inquiry or to take any action. Each Agent
shall be entitled to rely upon advice of counsel concerning legal matters and
upon any notice, consent, certificate, statement or writing which such Agent
believes to be genuine and to have been presented by a proper Person.
SECTION 10.4. Successor. Each Agent may resign as such at any time upon
at least 30 days' prior notice to the U.S. Borrower and all Lenders. If such
Agent at any time shall resign, the Required Lenders may appoint another Lender
as a successor Agent which shall thereupon become an Agent in the capacity of
the resigning Agent hereunder. If no successor Agent shall have been so
appointed by the Required Lenders, and shall have accepted such appointment,
within 30 days after the retiring Agent's giving notice of resignation, then the
retiring Agent may, on behalf of the Lenders, appoint a successor
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Agent, which shall be one of the Lenders or a commercial banking institution
organized under the laws of the U.S. (or any State thereof) or a U.S. branch or
agency of a commercial banking institution, and having a combined capital and
surplus of at least $500,000,000. Upon the acceptance of any appointment as an
Agent hereunder by a successor Agent, such successor Agent shall be entitled to
receive from the retiring Agent such documents of transfer and assignment as
such successor Agent may reasonably request, and shall thereupon succeed to and
become vested with all rights, powers, privileges and duties of the retiring
Agent, and the retiring Agent shall be discharged from its duties and
obligations under this Agreement. After any retiring Agent's resignation
hereunder as an Agent, the provisions of
(a) this Article X shall inure to its benefit as to any
actions taken or omitted to be taken by it while it was an Agent under
this Agreement; and
(b) Section 11.3 and Section 11.4 shall continue to inure to
its benefit.
SECTION 10.5. Loans Made, Letters of Credit Issued or Acceptances
Created by Scotiabank and Loans Made by Societe Generale. Each of Scotiabank and
Societe Generale shall have the same rights and powers with respect to (x) the
Loans made by it or any of its affiliates, (y) the Notes held by it or any of
its affiliates, and (z) its participating interests in the Letters of Credit and
Acceptances as any other Lender and may exercise the same as if it were not an
Agent. Each of Scotiabank, Societe Generale and their respective affiliates may
accept deposits from, lend money to, and generally engage in any kind of
business with the U.S. Borrower or any Subsidiary or affiliate of the U.S.
Borrower as if Scotiabank or Societe Generale were not Agents hereunder.
SECTION 10.6. Credit Decisions. Each Lender acknowledges that it has,
independently of each Agent and each other Lender, and based on such Lender's
review of the financial information of the Borrowers, this Agreement, the other
Loan Documents (the terms and provisions of which being satisfactory to such
Lender) and such other documents, information and investigations as such Lender
has deemed appropriate, made its own credit decision to extend its Commitment.
Each Lender also acknowledges that it will, independently of each Agent and each
other Lender, and based on such other documents, information and investigations
as it shall deem appropriate at any time, continue to make its own credit
decisions as to exercising or not exercising from time to time any rights and
privileges available to it under this Agreement or any other Loan Document.
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ARTICLE XI
MISCELLANEOUS PROVISIONS
SECTION 11.1. Waivers, Amendments, etc. (a) The provisions of this
Agreement and of each other Loan Document may from time to time be amended,
modified or waived, if such amendment, modification or waiver is in writing and
consented to by the Borrowers and the Required Lenders; provided, however, that
no such amendment, modification or waiver which would:
(i) modify any requirement hereunder that any particular
action be taken by all the Lenders or by the Required Lenders shall be
effective unless consented to by each Lender;
(ii) (A) at all times prior to the occurrence of the 100%
Effective Date, modify this Section 11.1, change the definition of
"Required Lenders", increase the Commitment Amount or (except as
otherwise contemplated by this Agreement) the Percentage of any Lender,
reduce any fees described in Article III, release any guarantor under
the Subsidiary Guaranty, the Group Guaranty or this Agreement, or
extend any Commitment Termination Date shall be made without the
consent of each Lender and (B) at all times from and after the
occurrence of the 100% Effective Date, modify this Section 11.1, change
the definition of "Required Lenders", reduce any fees described in
Article III, release any guarantor under the Subsidiary Guaranty
(other than any guarantor which is not a Material Subsidiary),
the Group Guaranty or this Agreement, or extend any Commitment
Termination Date shall be made without the consent of each Lender;
(iii) at all times from and after the occurrence of the 100%
Effective Date, increase the Commitment Amount or (except as otherwise
contemplated by this Agreement) the Percentage of any Lender without
the consent of each Lender effected thereby;
(iv) extend the due date for, or reduce the amount of, (A) any
scheduled repayment or prepayment of principal of or interest on or
fees payable in respect of any Loan (or reduce the principal amount of
or rate of interest on or fees payable in respect of any Loan) shall be
made without the consent of the holder of that Note evidencing such
Loan, or (B) any Reimbursement Obligation shall be made without the
consent of the Lender to whom such Reimbursement Obligation is owed;
(v) affect adversely the interests, rights or obligations of
the Fronting Bank in its capacity as the Fronting Bank shall be made
without the consent of the Fronting Bank;
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(vi) affect adversely the interests, rights or obligations of
the Documentation Agent in its capacity as the Documentation Agent
shall be made without the consent of the Documentation Agent; or
(vii) affect adversely the interests, rights or obligations of
the Administrative Agent in its capacity as the Administrative Agent
shall be made without consent of the Administrative Agent.
(b) For purposes of clause (a) above, if any Lender which is
also a lender under the U.S. Credit Agreement consents to any
amendment, waiver, consent or other modification of any provision of
the U.S. Credit Agreement, such Lender shall automatically, and without
requiring any notice, approval, consent or other action, be deemed to
have consented to any comparable amendment, waiver, consent or other
modification of the corresponding provisions of this Agreement (with
such changes in interpretation as the context may require) unless such
Lender shall otherwise notify the Administrative Agent and the U.S.
Borrower within five days of the effectiveness of the U.S. Credit
Agreement amendment, waiver, consent or other modification.
No failure or delay on the part of any Agent, any Lender or the holder of any
Note in exercising any power or right under this Agreement or any other Loan
Document shall operate as a waiver thereof, nor shall any single or partial
exercise of any such power or right preclude any other or further exercise
thereof or the exercise of any other power or right. No notice to or demand on
any Borrower in any case shall entitle it to any notice or demand in similar or
other circumstances. No waiver or approval by any Agent or any Lender under this
Agreement or any other Loan Document shall, except as may be otherwise stated in
such waiver or approval, be applicable to subsequent transactions. No waiver or
approval hereunder shall require any similar or dissimilar waiver or approval
thereafter to be granted hereunder.
SECTION 11.2. Notices. All notices and other communications provided to
any party hereto under this Agreement or any other Loan Document shall be in
writing or by facsimile and addressed, delivered or transmitted to such party at
its address, or facsimile number set forth, in the case of any Borrower, Group
or any Agent, below its signature hereto or, in the case of any Lender, set
forth in Schedule II or in the Lender Assignment Agreement or at such other
address or facsimile number as may be designated by such party in a notice to
the other parties. Any notice, if mailed and properly addressed with postage
prepaid or if properly addressed and sent by pre-paid courier service, shall be
deemed given when received; any notice, if transmitted by facsimile, shall be
deemed given when transmitted.
SECTION 11.3. Payment of Costs and Expenses. The U.S. Borrower agrees
to pay on demand all reasonable expenses of the Agents (including the reasonable
fees and out-of- pocket expenses of counsel to the Agents and of local counsel,
if any, who may be retained by counsel to the Agents) in connection with
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(a) the negotiation, preparation, execution and delivery of
this Agreement and of each other Loan Document, including schedules and
exhibits, and any amendments, waivers, consents, supplements or other
modifications to this Agreement or any other Loan Document as may from
time to time hereafter be required, whether or not the transactions
contemplated hereby, the Tender Offer or the Merger are consummated,
and
(b) the preparation and review of the form of any document or
instrument relevant to this Agreement or any other Loan Document.
Each Borrower covenants to pay on demand all reasonable costs and expenses of
the Agents, the Fronting Bank and the Lenders incurred in the enforcement of any
Agent's, the Fronting Bank's or any Lender's rights under this Agreement and any
Loan Document (including the reasonable fees and expenses of counsel for such
Agent, the Fronting Bank and such Lender with respect thereto) and, further,
covenants that it will indemnify the Agents, the Fronting Bank and the Lenders
on demand against all loss or damage to such Persons arising out of the issuance
of or other action taken by such Persons in connection with any Letter of Credit
or Loan including the costs relating to any legal process instituted by any
party restraining or seeking to restrain the Fronting Bank from accepting or
paying any Acceptance, Letter of Credit or Draft. Each Borrower also agrees that
neither any Agent, the Fronting Bank nor any Lender shall have any liability to
it for any reason in respect of the creation of any Acceptance, the issuance of
any Letter of Credit or Loan other than on account of such Agent's, Fronting
Bank's or Lender's gross negligence or wilful misconduct. All payments to be
made to such Agent, the Fronting Bank and such Lender hereunder shall, subject
to Section 5.6, be made for value on the date due and free of any withholding
tax or levy, other than taxes imposed on the net income of such Agent, the
Fronting Bank or such Lender, and each Borrower covenants that such taxes or
levies, other than as excepted, shall be paid by such Borrower. The provisions
of this paragraph will survive payment in full hereunder.
SECTION 11.4. Indemnification. In consideration of the execution and
delivery of this Agreement by each Lender and the extension of the Commitments,
each Borrower hereby indemnifies, exonerates and holds each Agent, the Fronting
Bank and each Lender and each of their respective affiliates, officers,
directors, employees and agents (collectively, the "Indemnified Parties") free
and harmless from and against any and all actions, causes of action, suits,
losses, costs, liabilities and damages, and expenses incurred in connection
therewith (irrespective of whether any such Indemnified Party is a party to the
action for which indemnification hereunder is sought), including the reasonable
fees and expenses of counsel for such Agent, the Fronting Bank and such Lender
with respect thereto (collectively, the "Indemnified Liabilities"), incurred by
the Indemnified Parties or any of them as a result of, or arising out of, or
relating to
(a) any transaction financed or to be financed in whole or in
part, directly or indirectly, with the proceeds of any Loan or the use
of any Letter of Credit or Acceptance; or
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(b) the entering into and performance of this Agreement and
any other Loan Document by any of the Indemnified Parties (including
any action brought by or on behalf of any Borrower as the result of any
determination by the Required Lenders pursuant to Article VI not to
make any Credit Extension);
except for any such Indemnified Liabilities arising for the account of a
particular Indemnified Party by reason of the relevant Indemnified Party's gross
negligence or wilful misconduct.
SECTION 11.5. Survival. The obligations of each Borrower under Sections
5.3, 5.4, 5.5, 5.6, 11.3 and 11.4, and the obligations of the Lenders under
Section 10.1, shall in each case survive any termination of this Agreement, the
payment in full of all Obligations and the termination of all Commitments.
Furthermore, the parties acknowledge and agree that the obligations under
Sections 5.3, 5.4, 5.5, 5.6, 11.3 and 11.4 of the Existing Credit Agreement and
the obligations of the Lenders under Section 10.1 of the Existing Credit
Agreement are continuing obligations and have, notwithstanding the amendment and
restatement of the Existing Credit Agreement by the terms of this Agreement,
survived such amendment and restatement. The representations and warranties made
by the Borrowers in this Agreement and in each other Loan Document shall survive
the execution and delivery of this Agreement and each such other Loan Document.
SECTION 11.6. Severability. Any provision of this Agreement or any
other Loan Document which is prohibited or unenforceable in any jurisdiction
shall, as to such provision and such jurisdiction, be ineffective to the extent
of such prohibition or unenforceability without invalidating the remaining
provisions of this Agreement or such Loan Document or affecting the validity or
enforceability of such provision in any other jurisdiction.
SECTION 11.7. Headings. The various headings of this Agreement and of
each other Loan Document are inserted for convenience only and shall not affect
the meaning or interpretation of this Agreement or such other Loan Document or
any provisions hereof or thereof.
SECTION 11.8. Execution in Counterparts, Effectiveness, etc. This
Agreement may be executed by the parties hereto in several counterparts, each of
which shall be executed by each Borrower and each Agent and be deemed to be an
original and all of which shall constitute together but one and the same
agreement. This Agreement shall become effective when counterparts hereof
executed on behalf of each Borrower and the Required Lenders (or notice thereof
satisfactory to the Agents) shall have been received by the Agents and notice
thereof shall have been given by the Agents to the U.S. Borrower and each
Lender.
SECTION 11.9. Governing Law; Entire Agreement. THIS AGREEMENT, THE
NOTES AND EACH OTHER LOAN DOCUMENT SHALL EACH BE DEEMED TO BE A CONTRACT MADE
UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF NEW YORK. This
Agreement, the Notes and the other Loan Documents constitute the entire
understanding among the parties hereto with respect to the
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subject matter hereof and (subject to Section 11.5) supersede any prior
agreements, written or oral, with respect thereto.
SECTION 11.10. Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their respective
successors and assigns; provided, however, that:
(a) No Borrower may assign or transfer its rights or
obligations hereunder without the prior written consent of the Agents
and all Lenders; and
(b) the rights of sale, assignment and transfer of the
Lenders are subject to Section 11.11.
SECTION 11.11. Sale and Transfer of Loans and Notes; Participations in
Loans and Notes. Each Lender may assign, or sell participations in, its Loans
and Commitments to one or more other Persons in accordance with this Section
11.11.
SECTION 11.11.1. Assignments. Any Lender,
(a) with the written consent of the U.S. Borrower (which
consent shall not be unreasonably delayed or withheld), the Fronting
Bank and the Administrative Agent may at any time assign and delegate
to one or more commercial banks or other financial institutions; and
(b) with the consent of the Fronting Bank, and notice to the
U.S. Borrower and the Administrative Agent, but without the consent of
the U.S. Borrower or the Administrative Agent, may assign and delegate
to any other Lender or any Lender (as defined in the U.S. Credit
Agreement),
(each Person described in either of the foregoing clauses as being the Person to
whom such assignment and delegation is to be made, being hereinafter referred to
as an "Assignee Lender"), all or a fraction of such Lender's total Loans and
Commitments in a minimum amount of $10,000,000 of Loans and Commitments (other
than in the case of an assignment to any other Lender or any Affiliate of a
Lender or an assignment of the remaining Loans and Commitments of such assignor
Lender), that no Borrower shall be required to pay an amount under Section 5.6
that is greater than the amount which it would have been required to pay had no
assignment been made and provided, however, that, the Borrowers and the
Administrative Agent shall be entitled to continue to deal solely and directly
with such Lender in connection with the interests so assigned and delegated to
an Assignee Lender until
(c) written notice of such assignment and delegation, together
with payment instructions, addresses and related information with
respect to such Assignee Lender, shall have been given to the U.S.
Borrower (for the purposes hereof, also acting on
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behalf of the Foreign Borrowers and Authentic Fitness (HK)) and the
Administrative Agent by such Lender and such Assignee Lender,
(d) such Assignee Lender shall have executed and delivered to
the U.S. Borrower (for the purposes hereof, also acting on behalf of
the Foreign Borrowers and Authentic Fitness (HK)) and the
Administrative Agent a Lender Assignment Agreement, accepted by the
Administrative Agent, and
(e) the processing fees described below shall have been paid.
From and after the date that the Administrative Agent accepts such Lender
Assignment Agreement, (x) the Assignee Lender thereunder shall be deemed
automatically to have become a party hereto and to the extent that rights and
obligations hereunder have been assigned and delegated to such Assignee Lender
in connection with such Lender Assignment Agreement, shall have the rights and
obligations of a Lender hereunder and under the other Loan Documents, and (y)
the assignor Lender, to the extent that rights and obligations hereunder have
been assigned and delegated by it in connection with such Lender Assignment
Agreement, shall be released from its obligations hereunder and under the other
Loan Documents. Within five Business Days after its receipt of notice that the
Administrative Agent has received an executed Lender Assignment Agreement with
respect to the assignment of Loans, the Borrowers shall execute and deliver to
the Administrative Agent (for delivery to the relevant Assignee Lender) new
Notes evidencing such Assignee Lender's assigned Loans and Commitments and, if
the assignor Lender has Loans and Commitments hereunder, replacement Notes in
the principal amount of the Loans and Commitments retained by the assignor
Lender hereunder (such Notes to be in exchange for, but not in payment of, those
Notes then held by such assignor Lender). Each such Note shall be dated the date
of the predecessor Notes. The assignor Lender shall mark the predecessor Notes
"exchanged" and deliver them to the U.S. Borrower. Accrued interest on that part
of the predecessor Notes evidenced by the new Notes, and accrued fees, shall be
paid as provided in the Lender Assignment Agreement. Accrued interest on that
part of the predecessor Notes evidenced by the replacement Notes shall be paid
to the assignor Lender. Accrued interest and accrued fees shall be paid at the
same time or times provided in the predecessor Notes and in this Agreement. Such
assignor Lender or such Assignee Lender must also pay a processing fee to the
Administrative Agent upon delivery of any Lender Assignment Agreement in the
amount of $3,500. Any attempted assignment and delegation not made in accordance
with this Section 11.11.1 shall be null and void. Nothing in this Section shall
prevent or prohibit any Lender from pledging its rights (but not its obligations
to make Loans, to issue or participate in Letters of Credit and to create or
participate in Acceptances) under this Agreement and/or its Loans and/or Notes
hereunder to a Federal Reserve Bank in support of borrowing made by such Lender
from such Federal Reserve Bank.
SECTION 11.11.2. Participations. Any Lender may at any time sell to one
or more commercial banks or other Persons (each of such commercial banks and
other Persons being herein called a "Participant") participating interests (or a
sub-participating interest, in the
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case of a Lender's participating interest in a Letter of Credit or Acceptance)
in any of the Loans, Commitments, or other interests of such Lender hereunder;
provided, however, that
(a) no participation or sub-participation contemplated in this
Section 11.11.2 shall relieve such Lender from its Commitments or its
other obligations hereunder or under any other Loan Document,
(b) such Lender shall remain solely responsible for the
performance of its Commitments and such other obligations,
(c) the Borrowers and the Administrative Agent shall continue
to deal solely and directly with such Lender in connection with such
Lender's rights and obligations under this Agreement and each of the
other Loan Documents,
(d) no Participant, unless such Participant is an affiliate of
such Lender, or is itself a Lender, shall be entitled to require such
Lender to take or refrain from taking any action hereunder or under any
other Loan Document, except that such Lender may agree with any
Participant that such Lender will not, without such Participant's
consent, take any actions of the type described in clause (ii) (iii) or
(iv) of Section 11.1, and
(e) no Borrower shall be required to pay any amount under
Section 5.6 that is greater than the amount which it would have been
required to pay had no participating interest been sold.
SECTION 11.11.3. Fronting Bank Assignments. In the event that S&P,
Moody's or Thompson's BankWatch (or InsuranceWatch Ratings Service, in the case
of Lenders that are insurance companies (or Best's Insurance Reports, if such
insurance company is not rated by InsuranceWatch Ratings Service)) shall, after
the date that any Lender becomes a Lender, downgrade the long-term certificate
of deposit ratings of such Lender, and the resulting ratings shall be below
BBB-, Baa3 and B (or BB, in the case of Lender that is an insurance company (or
B, in the case of an insurance company not rated by InsuranceWatch Ratings
Service)), then each of the Fronting Bank and the U.S. Borrower shall have the
individual right, but not the obligation, upon notice to such Lender, to replace
(or, in the case of a request by the Fronting Bank, to request the U.S. Borrower
to use its reasonable efforts to replace) such Lender with an Assignee Lender
(in accordance with and subject to the restrictions contained in Section
11.11.1), and such affected Lender hereby agrees to transfer and assign without
recourse (in accordance with and subject to the restrictions contained in
Section 11.11.1) all of its interests, rights and obligations in respect of its
Commitment, Loans and other Obligations owing to it, together with the
obligations of such affected Lender hereunder, to such Assignee Lender;
provided, however, that (i) no such assignment shall conflict with any law, rule
and regulation or order of any governmental authority and (ii) such Assignee
Lender shall pay to such affected Lender in immediately available funds on the
date of such assignment the principal of and interest accrued to the date of
payment on
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the Loans made by such Lender hereunder and all other amounts accrued for such
Lender's account or owed to it hereunder.
SECTION 11.12. Other Transactions. Nothing contained herein shall
preclude any Agent, the Fronting Lender or any other Lender from engaging in any
transaction, in addition to those contemplated by this Agreement or any other
Loan Document, with the Borrowers or any of their affiliates in which such
Borrower or such affiliate is not restricted hereby from engaging with any other
Person.
SECTION 11.13. Forum Selection and Consent to Jurisdiction. ANY
LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN CONNECTION WITH,
THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY COURSE OF CONDUCT, COURSE OF
DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR ACTIONS OF THE AGENTS, THE
LENDERS, GROUP OR THE BORROWERS SHALL BE BROUGHT AND MAINTAINED EXCLUSIVELY IN
THE COURTS OF THE STATE OF NEW YORK OR IN THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK LOCATED IN NEW YORK COUNTY, NEW YORK. THE
PARTIES HERETO HEREBY EXPRESSLY AND IRREVOCABLY SUBMIT TO THE JURISDICTION OF
THE COURTS OF THE STATE OF NEW YORK AND OF THE UNITED STATES DISTRICT COURT FOR
THE SOUTHERN DISTRICT OF NEW YORK LOCATED IN NEW YORK COUNTY, NEW YORK FOR THE
PURPOSE OF ANY SUCH LITIGATION AS SET FORTH ABOVE AND IRREVOCABLY AGREE TO BE
BOUND BY ANY JUDGMENT RENDERED THEREBY IN CONNECTION WITH SUCH LITIGATION. EACH
FOREIGN BORROWER AND, FOLLOWING AUTHENTIC FITNESS (HK) BECOMING A BORROWER
HEREUNDER, AUTHENTIC FITNESS (HK) HEREBY IRREVOCABLY APPOINTS THE U.S. BORROWER
(IN SUCH CAPACITY, THE "PROCESS AGENT"), WITH AN OFFICE ON THE DATE HEREOF AT 90
PARK AVENUE, NEW YORK, NEW YORK 10016, UNITED STATES, AS ITS AGENT TO RECEIVE,
ON SUCH FOREIGN BORROWER'S BEHALF, OR, AS APPLICABLE, AUTHENTIC FITNESS (HK)'S
BEHALF AND ON BEHALF OF SUCH FOREIGN BORROWER'S OR, AS APPLICABLE, AUTHENTIC
FITNESS (HK)'S PROPERTY, SERVICE OF COPIES OF THE SUMMONS AND COMPLAINT AND ANY
OTHER PROCESS WHICH MAY BE SERVED IN ANY SUCH ACTION OR PROCEEDING. SUCH SERVICE
MAY BE MADE BY MAILING OR DELIVERING A COPY OF SUCH PROCESS TO SUCH FOREIGN
BORROWER OR, AS APPLICABLE, AUTHENTIC FITNESS (HK) IN CARE OF THE PROCESS AGENT
AT THE PROCESS AGENT'S ABOVE ADDRESS, AND SUCH FOREIGN BORROWER OR, AS
APPLICABLE, AUTHENTIC FITNESS (HK) HEREBY IRREVOCABLY AUTHORIZES AND DIRECTS THE
PROCESS AGENT TO ACCEPT SUCH SERVICE ON ITS BEHALF. AS AN ALTERNATIVE METHOD OF
SERVICE, EACH BORROWER FURTHER IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS BY
REGISTERED MAIL, POSTAGE PREPAID, OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF NEW YORK. EACH
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BORROWER HEREBY EXPRESSLY AND IRREVOCABLY WAIVES, TO THE FULLEST EXTENT
PERMITTED BY LAW, ANY OBJECTION WHICH IT MAY HAVE OR HEREAFTER MAY HAVE TO THE
LAYING OF VENUE OF ANY SUCH LITIGATION BROUGHT IN ANY SUCH COURT REFERRED TO
ABOVE AND ANY CLAIM THAT ANY SUCH LITIGATION HAS BEEN BROUGHT IN AN INCONVENIENT
FORUM. TO THE EXTENT THAT ANY BORROWER HAS OR HEREAFTER MAY ACQUIRE ANY IMMUNITY
FROM JURISDICTION OF ANY COURT OR FROM ANY LEGAL PROCESS (WHETHER THROUGH
SERVICE OR NOTICE, ATTACHMENT PRIOR TO JUDGMENT, ATTACHMENT IN AID OF EXECUTION
OR OTHERWISE) WITH RESPECT TO ITSELF OR ITS PROPERTY, SUCH BORROWER HEREBY
IRREVOCABLY WAIVES SUCH IMMUNITY IN RESPECT OF ITS OBLIGATIONS UNDER THIS
AGREEMENT AND THE OTHER LOAN DOCUMENTS.
SECTION 11.14. Waiver of Jury Trial. THE PARTIES HERETO HEREBY
KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE ANY RIGHTS THEY MAY HAVE TO A
TRIAL BY JURY IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF,
UNDER, OR IN CONNECTION WITH, THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, OR ANY
COURSE OF CONDUCT, COURSE OF DEALING, STATEMENTS (WHETHER ORAL OR WRITTEN) OR
ACTIONS OF THE AGENTS, THE LENDERS, THE FRONTING BANK, GROUP OR THE BORROWERS.
THE PARTIES HERETO ACKNOWLEDGE AND AGREE THAT THEY HAVE RECEIVED FULL AND
SUFFICIENT CONSIDERATION FOR THIS PROVISION (AND EACH OTHER PROVISION OF EACH
OTHER LOAN DOCUMENT TO WHICH IT IS A PARTY) AND GROUP AND EACH BORROWER
ACKNOWLEDGES THAT THIS PROVISION IS A MATERIAL INDUCEMENT FOR THE AGENTS, THE
FRONTING BANK AND THE LENDERS ENTERING INTO THIS AGREEMENT AND EACH SUCH OTHER
LOAN DOCUMENT.
SECTION 11.15. UCP; etc. (a) The Uniform Customs and Practice for
Documentary Credits as most recently published by the International Chamber of
Commerce (the "UCP") shall in all respects apply to each Letter of Credit issued
hereunder and shall be deemed for such purpose to be a part hereof as if fully
incorporated herein. In the event of any conflict between the UCP and the
governing law of the Agreement, the UCP shall prevail to the extent necessary to
remove the conflict.
(b) In the event of any issuance of a Letter of Credit for which any
Borrower may apply from time to time hereafter, or, of any extension of the
maturity or time for presentation of any Draft, or, of any renewal, extension or
increase in the amount of a Letter of Credit or any other modifications of its
terms, in each case with the consent or at the request of the U.S. Borrower, the
terms of the Agreement shall continue in force and apply to the Letter of Credit
so issued, or, to a Letter of Credit so renewed, extended, increased or
otherwise modified, or, to any, Draft, document or property covered thereby and
to any
-89-
<PAGE>
action taken by the Fronting Bank or its agents or correspondents in accordance
with such issuance, renewal, extension, increase or other modification.
SECTION 11.16. Usury Restraint. The provisions of this Agreement shall
be subject to any applicable law, regulation, order, rule or direction (a "Usury
Restraint") which prohibits or restricts the charging, receipt or retention of
interest or other amounts at the rates and amounts set forth herein (the "Stated
Rate") in excess (the "Excess") of the maximum rates or amount (the "Maximum
Rate") stipulated in the Usury Restraint. The provisions of this Agreement shall
not require the payment or permit the collection of interest in excess of the
Maximum Rate from time to time. If the Lenders comply (whether or not required
to do so at law) with such Usury Restraint then, to the extent permitted by law,
a subsequent reduction in the Stated Rate below the Maximum Rate shall be deemed
not to reduce the Stated Rate below the Maximum Rate until the total amount of
interest and other amounts earned and retained, measured by a dollar amount,
equals the amount of interest and other amounts which would have been earned and
retained hereunder, inclusive of the Excess, measured by a dollar amount, if the
Stated Rate had not been held at the Maximum Rate or any amount had not been
refunded to the applicable Borrower.
SECTION 11.17. Judgment Currency. The Obligations of the Borrowers,
Group and each other Obligor in respect of any sum due to any Lender, the
Fronting Bank or the Administrative Agent hereunder, under the Notes or under or
in respect of any other Loan Document shall, notwithstanding any judgment in a
currency (the "Judgment Currency") other than Dollars, be discharged only to the
extent that on the Business Day following receipt by such Lender, the Fronting
Bank or the Administrative Agent of any sum adjudged to be so due in the
Judgment Currency, such Lender, the Fronting Bank or the Administrative Agent,
in accordance with normal banking procedures, purchases Dollars with the
Judgment Currency. If the amount of Dollars so purchased is less than the sum
originally due to such Lender, the Fronting Bank or the Administrative Agent,
each Borrower and Group agrees as a separate obligation and notwithstanding any
such judgment, to indemnify each Lender, the Fronting Bank and the
Administrative Agent, as the case may be, against such loss.
SECTION 11.18. Future Wholly-Owned Domestic Subsidiaries Designated as
Warnaco Sub Borrowers. Upon no less than 30 days', and no more than 60 days',
written notice to the Administrative Agent, Group may from time to time
designate certain of its wholly-owned Domestic Subsidiaries to be Warnaco Sub
Borrowers hereunder and Schedule I shall be deemed revised to reflect such
designation; provided that, notwithstanding the foregoing, (x) for the purposes
of this Section only, Authentic Fitness (HK) shall be deemed to be organized
under the laws of the United States or any state thereof and (y) the notice
periods specified above shall be inapplicable for the designation of Authentic
Fitness Products and Authentic Fitness (HK) as "Warnaco Sub Borrowers",
provided, further, that,
(a) (i) at no time shall there be more than fifteen (15)
Borrowers under this Agreement and (ii) prior to becoming a Warnaco Sub
Borrower hereunder, each such
-90-
<PAGE>
designated wholly-owned Domestic Subsidiary shall have executed and
delivered (A) a supplement to the Subsidiary Guaranty and (B) a Joinder
Agreement. Upon compliance with this clause (a), each designated
Warnaco Sub Borrower shall become, for all purposes, a Borrower under
this Agreement, and shall have all the rights, powers and obligations
of a Borrower hereunder; and
(b) from time to time Group may, or if necessary to comply
with clause (a)(i) of this Section 11.18 shall, execute and deliver to
the Administrative Agent a Designation and Release Certificate which
shall designate one or more of the Sub Borrower, the Foreign Borrowers
or the Warnaco Sub Borrowers (each such designated Borrower, a
"Released Borrower") which, immediately prior to the date of such
Designation and Release Certificate, was a Borrower under this
Agreement and which shall, upon delivery of such Designation and
Release Certificate, no longer be a "Borrower" (or Sub Borrower,
Foreign Borrower or Warnaco Sub Borrower, as the case may be) for
purposes of this Agreement; and such Released Borrower shall (i) repay
in full the entire unpaid principal amount of its outstanding Loans, if
any, (ii) cash collateralize any and all Letters of Credit issued
and/or Acceptances created, as the case may be, in respect of which it
has a Reimbursement Obligation, (iii) pay in full any and all
reasonable costs and expenses (including attorneys' fees as well as
those costs and expenses set forth in Section 5.4) incurred in
connection with its release hereunder, (iv) pursuant to Section 11.5,
acknowledge and confirm that certain of the provisions of this
Agreement shall, notwithstanding the Released Borrower's release
hereunder, be continuing obligations and shall survive such release,
and (v) execute and deliver a certificate, in form and substance
satisfactory to the Administrative Agent, certifying that all of the
events set forth in clauses (b)(i) through (b)(iv) above shall have
occurred. Upon delivery of the certificate described in clause (b)(v)
above, such Released Borrower shall automatically be released from all
obligations of a Borrower hereunder (except such obligations which
survive pursuant to Section 11.5) without requiring any further action
by any party, including any written release by any of the Lender
Parties.
SECTION 11.19. Assumption of Certain Loans by U.S. Borrower. (a) The
U.S. Borrower may, from time to time, provide both the Administrative Agent and
the Fronting Bank with no less than five (5) Business Days' written notice that
it intends to assume those LIBO Rate Loans made by the Fronting Bank to Warnaco
(HK) or, following Authentic Fitness (HK) becoming a Borrower hereunder in
accordance with the terms of Section 11.18, Authentic Fitness (HK) and
identified in such notice (each such notice, an "Assumption Notice"), and upon
the date which is five (5) Business Days following the date of such Assumption
Notice (each such date, an "Assumption Date"), each Loan so identified shall be
deemed to be assumed in toto by the U.S. Borrower, without any further action by
the U.S. Borrower, the Fronting Bank or any other Person, and all obligations in
respect of each such Loan, from and after such Assumption Date, shall be deemed
to be the sole and direct obligation of the U.S. Borrower for all purposes of
this Agreement and Warnaco (HK) and/or, following Authentic Fitness (HK)
becoming a Borrower hereunder in accordance with
-91-
<PAGE>
the terms of Section 11.18, Authentic Fitness (HK), as applicable, shall,
concurrently with such assumption, be released of its obligations to repay each
such Loan for all purposes of this Agreement.
(b) In furtherance of the foregoing, on any Assumption Date, the U.S.
Borrower: (i) agrees to be bound by and perform each duty and obligation with
respect to the applicable Loan as if it were the original "Borrower" of such
Loan; (ii) accepts and assumes all liabilities related to any representation or
warranty made by, as applicable, Warnaco (HK) or following Authentic Fitness
(HK) becoming a Borrower hereunder in accordance with the terms of Section
11.18, Authentic Fitness (HK), in connection with the applicable Loan and
confirms and restates all such representations and warranties as of such
Assumption Date as if it were the original "Borrower" of such Loan; and (iii)
confirms and acknowledges that it is the "Borrower" referred to in this
Agreement with respect to the applicable Loan as if it had been the "Borrower"
thereof under this Agreement from the original making of such Loan.
SECTION 11.20. Release of non-Material Subsidiary Guarantors. Effective
upon the occurrence of the 100% Effective Date, the Lenders hereby consent to
the release of any guarantor party to the Subsidiary Guaranty on the date hereof
to the extent that any such guarantor is not a Material Subsidiary of Group and
authorize the Administrative Agent to execute and deliver any document,
instrument or agreement in order to effectuate such release.
-92-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers thereunto duly authorized as of the day
and year first above written.
WARNACO INC.
By: [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: VICE PRESIDENT AND TREASURER
Address: 90 Park Avenue
New York, New York 10016
Facsimile No.: 212-687-0480
Attention: Chief Financial Officer
General Counsel
WARNACO (HK) LTD.
By: [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: DIRECTOR
Address: 2A, Jing Hin Industrial
Bldg.
5 Wang Kee Street
Kowloon Bay, Kowloon
Hong Kong
Facsimile No.: 852-2755-2265
Attention: Director of Finance
S-1
<PAGE>
DESIGNER HOLDINGS, LTD.
By: [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: VICE PRESIDENT AND SECRETARY
Address: 90 Park Avenue
New York, New York 10016
Facsimile No.: 212-687-0480
Attention: Chief Financial Officer
General Counsel
WARNACO B.V.
By: [ILLEGIBLE SIGNATURE]
-------------------------------------
Title:
By:
-------------------------------------
Title: MANAGING DIRECTOR
Address: c/o Warnaco Inc.
90 Park Avenue
New York, New York 10016
Facsimile No.: 212-687-0480
Attention: Chief Financial Officer
General Counsel
S-2
<PAGE>
WARNACO NETHERLANDS B.V.
By: [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: MANAGING DIRECTOR
By:
-------------------------------------
Title:
Address: c/o Warnaco Inc.
90 Park Avenue
New York, New York 10016
Facsimile No.: 212-687-0480
Attention: Chief Financial Officer
General Counsel
WARNACO HOLLAND B.V.
By: [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: MANAGING DIRECTOR
By:
-------------------------------------
Title:
Address: c/o Warnaco Inc.
90 Park Avenue
New York, New York 10016
Facsimile No.: 212-687-0480
Attention: Chief Financial Officer
General Counsel
S-3
<PAGE>
THE WARNACO GROUP, INC.
By: [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: VICE PRESIDENT AND TREASURER
Address: 90 Park Avenue
New York, New York 10016
Facsimile No.: 212-687-0480
Attention: Chief Financial Officer
General Counsel
THE BANK OF NOVA SCOTIA, as
Administrative Agent
By:
-------------------------------------
Title:
Address: One Liberty Plaza
New York, New York 10006
Facsimile No.: 212-225-5090
Attention: John Hopmans
S-4
<PAGE>
THE WARNACO GROUP, INC.
By:
-------------------------------------
Title:
Address: 90 Park Avenue
New York, New York 10016
Facsimile No.: 212-687-0480
Attention: Chief Financial Officer
General Counsel
THE BANK OF NOVA SCOTIA, as
Administrative Agent
By: [ILLEGIBLE SIGNATURE]
-------------------------------------
Title:
Address: One Liberty Plaza
New York, New York 10006
Facsimile No.: 212-225-5090
Attention: John Hopmans
S-4
<PAGE>
SOCIETE GENERALE, as Documentation
Agent
By: ROBERT PETERSEN
-------------------------------------
Title: ROBERT PETERSEN
VICE PRESIDENT
Address: 1221 Avenue of the Americas
New York, New York 10020
Facsimile No.: 212-278-7430
Attention: Sedare Coradin
CITIBANK, N.A., as Syndication Agent
By:
-------------------------------------
Title: VP
Address: 399 Park Avenue
New York, New York 10043
Facsimile No.: 212-793-7585
Attention: Mark Merlino
S-5
<PAGE>
SOCIETE GENERALE, as Documentation
Agent
By:
-------------------------------------
Title: ROBERT PETERSEN
VICE PRESIDENT
Address: 1221 Avenue of the Americas
New York, New York 10020
Facsimile No.: 212-278-7430
Attention: Sedare Coradin
CITIBANK, N.A., as Syndication Agent
By: [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: VP
Address: 399 Park Avenue
New York, New York 10043
Facsimile No.: 212-793-7585
Attention: Mark Merlino
S-5
<PAGE>
LENDERS
THE BANK OF NOVA SCOTIA
By: [ILLEGIBLE SIGNATURE]
-------------------------------------
Title:
S-6
<PAGE>
LENDERS
CITIBANK, N.A.
By: MARC MERLINO
-------------------------------------
Title: MARC MERLINO -- VP
S-7
<PAGE>
LENDERS
THE BANK OF NEW YORK
By: [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: VP
S-8
<PAGE>
LENDERS
COMMERZBANK AG
NEW YORK
and Grand Cayman Branches
By: ROBERT DONOHUE
-------------------------------------
Name: ROBERT DONOHUE
Title: SENIOR VICE PRESIDENT
By: PETER DOYLE
-------------------------------------
Name: PETER DOYLE
Title: ASSISTANT VICE PRESIDENT
S-9
<PAGE>
LENDERS
THE DAI-ICHI KANGYO BANK, LIMITED
By: [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: Assistant Vice President
S-10
<PAGE>
LENDERS
FLEET BANK, N.A.
By: [ILLEGIBLE SIGNATURE]
-------------------------------------
Title: S.V.P.
S-11
<PAGE>
LENDERS
SOCIETE GENERALE
By: ROBERT PETERSEN
-------------------------------------
Title: ROBERT PETERSEN
VICE PRESIDENT
S-12
<PAGE>
LENDERS
BANK OF AMERICA, N.A.
By: DAVID H. DINKINS
-------------------------------------
Title: DAVID H. DINKINS
VICE PRESIDENT
S-13
<PAGE>
LENDERS
BANK OF TOKYO-MITSUBISHI TRUST
COMPANY
By: N. SAFFRA
--------------------------------------
N. SAFFRA
Title: VICE PRESIDENT
S-14
<PAGE>
LENDERS
BANKBOSTON, N.A.
By: [SIGNATURE ILLEGIBLE]
--------------------------------------
Title: DIRECTOR
S-15
<PAGE>
LENDERS
UNICREDIT ITALIANO
By: CHRISTOPHER J. ELDIN
--------------------------------------
CHRISTOPHER J. ELDIN
Title: FIRST VICE PRESIDENT &
DEPUTY MANAGER
By: GIANFRACO BISAGAL
--------------------------------------
GIANFRACO BISAGAL
Title: FIRST VICE PRESIDENT
S-16
<PAGE>
LENDERS
THE INDUSTRIAL BANK OF JAPAN
By: J. KENNETH BIEGEN
--------------------------------------
J. KENNETH BIEGEN
Title: SENIOR VICE PRESIDENT
S-17
<PAGE>
LENDERS
KBC BANK N.V.
By: ROBERT SNAUFFER ROBERT M. SURDAM, JR.
-------------------------------------------
ROBERT SNAUFFER ROBERT M. SURDAM, JR.
Title: VICE PRESIDENT VICE PRESIDENT
S-18
<PAGE>
LENDERS
HSBC BANK USA
By: [SIGNATURE ILLEGIBLE]
--------------------------------------
Title: VICE PRESIDENT
S-19
<PAGE>
LENDERS
MERITA BANK PLC - NEW YORK BRANCH
By: CLIFFORD ABRAMSKY
--------------------------------------
CLIFFORD ABRAMSKY
Title: VICE PRESIDENT
By: [SIGNATURE ILLEGIBLE]
--------------------------------------
[NAME ILLEGIBLE]
Title: VP
S-20
<PAGE>
LENDERS
MORGAN GUARANTY TRUST COMPANY
OF NEW YORK
By: DENNIS WILCZEK
--------------------------------------
DENNIS WILCZEK
Title: ASSOCIATE
S-21
<PAGE>
LENDERS
DEN DANSKE BANK
By: PETER L. HARGRAVES [SIGNATURE ILLEGIBLE]
----------------------------------------------------
PETER L. HARGRAVES [SIGNATURE ILLEGIBLE]
Title: VICE PRESIDENT VICE PRESIDENT
S-22
<PAGE>
LENDERS
REPUBLIC NATIONAL BANK
By: GARRY WEISS NISSIM HUSNI
---------------------------------------------------
GARRY WEISS NISSIM HUSNI
Title: FIRST VICE PRESIDENT VICE PRESIDENT
S-23
<PAGE>
LENDERS
STANDARD CHARTERED BANK
By: SHAFIQ UR. RAHMAN
--------------------------------------
SHAFIQ UR. RAHMAN
Title: SENIOR VICE PRESIDENT
STANDARD CHARTERED BANK
By: LESLIE SHAW BRIGHT
--------------------------------------
LESLIE SHAW BRIGHT
Title: VICE PRESIDENT
S-24
<PAGE>
LENDERS
SUN TRUST BANK
By: LAURA KAHN
--------------------------------------------
LAURA KAHN
Title: DIRECTOR, SENIOR RELATIONSHIP MANAGER
By:
-------------------------------------------
Title:
S-25
<PAGE>
LENDERS
WACHOVIA BANK, N.A.
By: [SIGNATURE ILLEGIBLE]
--------------------------------------
Title: SENIOR VICE PRESIDENT
S-26
<PAGE>
SCHEDULE I
WARNACO SUB BORROWERS
NAME
- ----
None.
<PAGE>
SCHEDULE II
PERCENTAGES AND ADMINISTRATIVE INFORMATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
REVOLVING LOAN
LENDER NAME COMMITMENT PERCENTAGES DOMESTIC OFFICE LIBOR OFFICE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Bank of America, N.A. 4.0000000000% 100 North Tryon Street 100 North Tryon Street
15th Floor 15th Floor
NC1-001-15-003 NC1-001-15-003
Charlotte, NC 28255 Charlotte, NC 28255
Facsimile No.: (704) 386-1270 Facsimile No.: (704) 386-1270
Attn: David Dinkins Attn: David Dinkins
- ----------------------------------------------------------------------------------------------------------------
Bank Leumi USA 3.0000000000% 579 Fifth Avenue 579 Fifth Avenue
New York, NY 10017 New York, NY 10017
Facsimile No.: (212) 407-4317 Facsimile No.: (212) 407-4317
Attention: Benjamin Huang Attention: Benjamin Huang
- ----------------------------------------------------------------------------------------------------------------
The Bank of New York 5.0000000000% One Wall Street One Wall Street
New York, NY 10286 New York, NY 10286
Facsimile No.: (212) 635-1480 Facsimile No.: (212) 635-1480
Attn: Eliza Adams Attn: Eliza Adams
- ----------------------------------------------------------------------------------------------------------------
The Bank of Nova Scotia 6.4888888900% One Liberty Plaza One Liberty Plaza
New York, NY 10006 New York, NY 10006
Facsimile No.: (212) 225-5090 Facsimile No.: (212) 225-5090
Attn: John Hopmans Attn: John Hopmans
- ----------------------------------------------------------------------------------------------------------------
Bank of Tokyo-Mitsubishi 4.0000000000% 1251 Avenue of the Americas 1251 Avenue of the Americas
Trust Company 12th Floor 12th Floor
New York, NY 10020-1104 New York, NY 10020-1104
Facsimile No.: (212) 782-4358 Facsimile No.: (212) 782-6441
Attn:: Jim Brown Attn: Joan Sanderman
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------
REVOLVING LOAN
LENDER NAME COMMITMENT PERCENTAGES DOMESTIC OFFICE LIBOR OFFICE
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
BankBoston, N.A. 3.0000000000% 100 Federal Street 100 Federal Street
Boston, MA 02110 Boston, MA 02110
Facsimile No.: (617) 434-0637 Facsimile No.: (617) 434-0637
Attn: Susan Santos Attn: Susan Santos
- ----------------------------------------------------------------------------------------------------------------
Citibank, N.A. 6.4888888900% 399 Park Avenue 399 Park Avenue
New York, NY 10043 New York, NY 10043
Facsimile No.: (212) 793-7585 Facsimile No.: (212) 793-7585
Attn: Mark Merlino Attn: Mark Merlino
- ----------------------------------------------------------------------------------------------------------------
Commerzbank AG, New York 6.6000000000% World Financial Center World Financial Center
Branch New York, NY 10281 New York, NY 10281
Facsimile No.: (212) 266-7235 Facsimile No.: (212) 266-7235
Attn: Bob Donohue Attn: Bob Donohue
- ----------------------------------------------------------------------------------------------------------------
The Dai-Ichi Kangyo Bank, 5.0000000000% One World Trade Center One World Trade Center
Limited New York, NY 10048 New York, NY 10048
Facsimile No.: (212) 912-1879 Facsimile No.: (212) 912-1879
Attn: Nick Fiore Attn: Nick Fiore
- ----------------------------------------------------------------------------------------------------------------
Den Danske Bank 6.0000000000% 280 Park Avenue 280 Park Avenue
New York, NY 10017 New York, NY 10017
Facsimile No.: (212) 370-9239 Facsimile No.: (212) 370-9239
Attn: Peter Hargraves Attn: Peter Hargraves
- ----------------------------------------------------------------------------------------------------------------
Fleet Bank, N.A. 3.6666666660% 1185 Avenue of the Americas 1185 Avenue of the Americas
2nd Floor 2nd Floor
New York, NY 10036 New York, NY 10036
Facsimile No.: (212) 819-4112 Facsimile No.: (212) 819-4108
Attn: Joseph Zautra Attn: Nancy Mejias
- ----------------------------------------------------------------------------------------------------------------
HSBC Bank USA 5.0000000000% One HSBC Center One HSBC Center
Buffalo, NY 14240 Buffalo, NY 14240
Facsimile No.: (716) 841-2067 Facsimile No.: (716) 841-2067
Attn: Patti M. Michalek Attn: Patti M. Michalek
- ----------------------------------------------------------------------------------------------------------------
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
REVOLVING LOAN
LENDER NAME COMMITMENT PERCENTAGES DOMESTIC OFFICE LIBOR OFFICE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
The Industrial Bank of Japan 3.0000000000% New York Branch New York Branch
1251 Avenue of the Americas 1251 Avenue of the Americas
New York, NY 10020 New York, NY 10020
Facsimile No.: (212) 282-4480 Facsimile No.: (212) 282-4480
Attn: Ken Biegen Attn: Atsushi Kawai
- --------------------------------------------------------------------------------------------------------------------
KBC Bank N.V. 5.0000000000% 125 West 55th Street 125 West 55th Street
New York, NY 10019 New York, NY 10019
Facsimile No.: (212) 541-0793 Facsimile No.: (212) 541-0793
Attn: Robert Surdam Attn: Robert Surdam
- --------------------------------------------------------------------------------------------------------------------
Merita Bank PLC - New York 1.6666666660% 437 Madison Avenue 437 Madison Avenue
Branch New York, NY 10022 New York, NY 10022
Facsimile No.: (212) 318-9318 Facsimile No.: (212) 318-9318
Attn: Cliff Abramsky Attn: Cliff Abramsky
- --------------------------------------------------------------------------------------------------------------------
Morgan Guaranty Trust 3.1000000000% 60 Wall Street Nassau Bahamas Office
Company of New York New York, NY 10260-0060 c/o J.P. Morgan Services, Inc.
Facsimile No.: (212) 648-5014 500 Stanton Christiana Road
Attn: Dennis Wilczek Newark, DE 19713-2107
Facsimile No.: 302-634-1852
Attn: Jeannie L. Mattson
- --------------------------------------------------------------------------------------------------------------------
Republic National Bank of New 3.0000000000% 452 Fifth Avenue 452 Fifth Avenue
York New York, NY 10018 New York, NY 10018
Facsimile No.: (212) 525-8370 Facsimile No.: (212) 525-8370
Attn: Garry Weiss Attn: Garry Weiss
- --------------------------------------------------------------------------------------------------------------------
Societe Generale 7.4888888880% 1221 Avenue of the Americas 1221 Avenue of the Americas
New York, NY 10020 New York, NY 10020
Facsimile No.: (212) 278-7997 Facsimile No.: (212) 278-7997
Attn: Bob Peterson Attn: Bob Peterson
- --------------------------------------------------------------------------------------------------------------------
Standard Chartered Bank 5.0000000000% 7 World Trade Center 7 World Trade Center
New York, NY 10048-2627 New York, NY 10048-2627
Facsimile No.: (212) 667-0193 Facsimile No.: (212) 667-0193
Attn: Shafiq Rahman Attn: Shafiq Rahman
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
iii
<PAGE>
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------------------------------
REVOLVING LOAN
LENDER NAME COMMITMENT PERCENTAGES DOMESTIC OFFICE LIBOR OFFICE
- --------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Sun Trust Bank 6.0000000000% 711 Fifth Avenue, 16th Floor 711 Fifth Avenue, 16th Floor
New York, NY 10022 New York, NY 10022
Facsimile No.: (212) 667-0193 Facsimile No.: (212) 667-0193
Attn: Laura Kahn Attn: Laura Kahn
- --------------------------------------------------------------------------------------------------------------------
Unicredit Italiano 2.5000000000% 375 Park Avenue 375 Park Avenue
New York, NY 10152 New York, NY 10152
Facsimile No.: (212) 546-9675 Facsimile No.: (212) 546-9675
Attn: Christopher Eldin Attn: Christopher Eldin
- --------------------------------------------------------------------------------------------------------------------
Wachovia Bank, N.A. 5.0000000000% 191 Peachtree Street 191 Peachtree Street
Atlanta, GA 30303 Atlanta, GA 30303
Facsimile No.: (404) 332-6898 Facsimile No.: (404) 332-6898
Attn: James Barwis Attn: James Barwis
- --------------------------------------------------------------------------------------------------------------------
</TABLE>
iv
<PAGE>
SCHEDULE 7.1
THE WARNACO GROUP INC. & SUBSIDIARIES
ENTITY LISTING
ALPHABETICAL BY ENTITY
<TABLE>
<CAPTION>
ENTITY
- ---------------------------------------------------------------------------
<S> <C>
184 Benton Street Inc.
A.B.S. Clothing Collection Inc.
Abbeville Manufacturing Co.
AEI Management Corporation
Blanche Inc.
Broadway Jeanswear Company Inc.
Broadway Jeanswear Holding Inc.
Broadway Jeanswear Sourcing Inc.
C.F. Klein France SNC a
Calvin Klein Jeanswear Company b
Centro Corte de Tella S.A. de C.V. a
CKJ Holdings Inc. b
CKJ Sourcing Inc.
Designer Holdings Ltd. b
Designer Holdings Overseas Ltd. a
Donatex-Warnaco S.A. a
Euralis S.A.S. a
GJM (HK) Manufacturing Ltd. a
GJM (Philippines) Manufacturing Inc. a
GJM Lanka Manufacturing (Private) Ltd. a
Gregory Street Inc. b
Hamlet Manufacturing S.A. a
Hamlet Shirt Company Ltd. a
Industrios del Valla, S.A. de C.V. (INVASA) a,c
Izka SC a
Jeanswear Holdings Inc. b
Juarmex S.A. de C.V. a
Kal Jay Manufacturing Company
Lejaby S.A.S. a
Leratex-Warnaco GeambH a
Leratex-Warnaco Ltd. a
Linda Vista de Texcale S.A. de C.V. a
Linda Vista de Veracruz S.A. de C.V. a
Linlex-Warnaco S.A. a
LMK Ltd. a
Mulson International BV a
MulaiKion B.V. a
Myrtle Avenue Inc. b
New Bedford Shippers Corp.
Olga de Villanueva S.A. a
Olguita de Mexico S.A. a
Outlet Holdings Inc.
Outlot Stores Inc. b
Panyu GJM Shatou Manufacturing Limited a
Penhaligon & Joavons Investments Ltd. a
Penhaligon's (1870) Inc.
Penhaligon's by Request, Inc.
Penhaligon's Ltd. a
Penhaligon's Pacific a
PMJ S.A. a
Private Pleasures Ltd. a
Rio Sportswear Inc.
STAR Warnaco International a,c
The Bra Company Limited a,d
Tibet Servisport Inc. a
Ventures Ltd.
Vista os Huantantia S.A. de C.V. a
</TABLE>
<PAGE>
THE WARNACO GROUP INC. & SUBSIDIARIES
ENTITY LISTING
ALPHABETICAL BY ENTITY
<TABLE>
<CAPTION>
ENTITY
- ---------------------------------------------------------------------------
<S> <C>
Vista de Puebla S.A. de C.V. a
Vista de Tella S.A. de C.V. a
WAC Internacional Distribution S.A. de C.V. a
Warnaco Ltd.
Warnaco (H.K.) Ltd. a
Warnaco (H.K.) Ltd. - Hong Kong Branch a
Warnaco (H.K.) Ltd. - Korea Liason Office a
Warnaco (H.K.) Ltd. - Pakistan Liason Office a
Warnaco (H.K.) Ltd. - Panyu Representative Office a
Warnaco B.V. a
Warnaco France SARL a
Warnaco Group Inc.
Warnaco Holland B.V. a
Warnaco Inc. b
Warnaco International Inc. b
Warnaco International LLC
Warnaco Intimo (Spain) S.A. a
Warnaco Japan K.K. a
Warnaco Lac One GmbH a
Warnaco Lac Two GmbH a
Warnaco Lac Two GmbH & Co. KG a
Warnaco Ltd. (U.K.) a
Warnaco Men's Sportswear Inc.
Warnaco Netherlands B.V. a
Warnaco of Canada Company a
Warnaco Operations Corporation b
Warnaco Sourcing Inc.
Warnaco South Africa (Proprietary) Limited a
Warnaco Srl a
Warnaco U.S. Inc. b
Warnaco Ventures Ltd.
Warner's (EIRE) Teoranta a
Warner's (U.K.) Ltd. a
Warner's Aiglon S.A. a
Warner's Company (Belgium) S.A. a
Warner's de Costa Rica Inc.
Warner's de Honduras S.A. a
Warner's de Mexico S.A. de C.V. a
</TABLE>
a Foreign Entity
b Domestic Entity with assets or EBITDA in excess of $15 miolion
c INVASA - 50% interest through Warnaco Inc.
d The Bra Company - 50% interest through Warner's UK Ltd.
e STAR/Warnaco International - 50% interest through Warnaco International LLC
<PAGE>
SCHEDULE 8.2
ASSETS HELD FOR SALE
1. Assets related to the C.F. Hathaway division
2. Knitwear division assets including Aguas Buenas, Puerto Rico
3. 80 Park Avenue, Apartment 15J, New York, NY 10016
4. Dothan, Alabama plant assets
5. Honduras Joint Venture - Invasa
6. 838,235 shares of common stock of Interworld Corporation
7. Certain other Internet-related investments
8. Investment in ARIS Industries
<PAGE>
EXHIBIT A
NOTE
$________ November __, 1999
FOR VALUE RECEIVED, the undersigned, [WARNACO INC., a Delaware
corporation (the "U.S. Borrower")] [DESIGNER HOLDINGS, LTD., a Delaware
corporation (the "Sub Borrower"] [WARNACO (HK) LTD., a company organized under
the laws of Barbados ("Warnaco (HK)")] [WARNACO B.V., a company organized under
the laws of The Netherlands ("Warnaco B.V.")] [WARNACO NETHERLANDS B.V., a
company organized under the laws of The Netherlands ("Warnaco Netherlands")]
[WARNACO HOLLAND B.V., a company organized under the laws of The Netherlands
("Warnaco Holland")], promises to pay to the order of [_____________] (the
"Lender") on the Stated Maturity Date (as defined in the Credit Agreement
referred to below) the principal sum of ___________ DOLLARS ($_________) or, if
less, the aggregate unpaid principal amount of all Loans shown on the schedule
attached hereto (and any continuation thereof) made by the Lender pursuant to
that certain Sixth Amended and Restated Credit Agreement, dated as of the date
hereof (as amended, supplemented amended and restated or otherwise modified from
time to time, the "Credit Agreement"), among Warnaco Inc., Designer Holdings,
Ltd., the wholly-owned Domestic Subsidiaries designated by Group (as hereinafter
defined) as Warnaco Sub Borrowers from time to time, Warnaco (HK) Ltd., Warnaco
B.V., Warnaco Netherlands B.V., Warnaco Holland B.V., The Warnaco Group, Inc.
("Group"), the various financial institutions as are or may become parties
thereto, Societe Generate, as Documentation Agent for the Lenders, Citibank,
N.A., as Syndication Agent for the Lenders, The Bank of Nova Scotia
("Scotiabank"), as Administrative Agent for the Lenders and Scotiabank and
Salomon Smith Barney, Inc. as the Arrangers.
[The U.S. Borrower] [The Sub Borrower] [Warnaco (HK)] [Warnaco B.V.]
[Warnaco Netherlands] [Warnaco Holland] also promises to pay interest on the
unpaid principal amount hereof from time to time outstanding from the date
hereof until maturity (whether by acceleration or otherwise) and, after
maturity, until paid, at the rates per annum, on the dates and in the manner
specified in the Credit Agreement.
Payments of both principal and interest are to be made in lawful money
of the United States of America in same day or immediately available funds to
the account designated by the Lender pursuant to the Credit Agreement.
This Note is one of the Notes referred to in, and evidences Debt
incurred under, the Credit Agreement, to which reference is made for a statement
of the terms and conditions on which [the U.S. Borrower] [the Sub Borrower]
[Warnaco (HK)] [Warnaco B.V.] [Warnaco
<PAGE>
Netherlands] [Warnaco Holland] is permitted and required to make prepayments and
repayments of principal of the Debt evidenced by this Note and on which such
Debt may be declared to be immediately due and payable in accordance with the
terms and provisions of the Credit Agreement. Unless otherwise defined, terms
used herein have the meanings provided in the Credit Agreement.
All parties hereto, whether as makers, endorsers, or otherwise,
severally waive presentment for payment, demand, protest and notice of dishonor.
THIS NOTE HAS BEEN DELIVERED IN NEW YORK, NEW YORK AND SHALL BE DEEMED
TO BE A CONTRACT MADE UNDER AND GOVERNED BY THE INTERNAL LAWS OF THE STATE OF
NEW YORK.
[WARNACO INC.]
[DESIGNER HOLDINGS, LTD.]
[WARNACO (HK) LTD.]
[WARNACO B.V.]
[WARNACO NETHERLANDS B.V.]
[WARNACO HOLLAND B.V.]
By___________________
Title:
-2-
<PAGE>
LOANS AND PRINCIPAL PAYMENTS
<TABLE>
<CAPTION>
Interest
Amount of Period Unpaid Principal Unapaid Principal Notation
Date Loan Made (If Applicable) Repaid Balance Total Made By
- ---- ----------- --------------- ----------- ----------- ----- --------
Base LIBO Base LIBO Base LIBO
Rate Rate Rate Rate Rate Rate
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
</TABLE>
<PAGE>
EXHIBIT B
ISSUANCE REQUEST
The Bank of Nova Scotia,
as Administrative Agent
One Liberty Plaza
New York, New York 10006
Attention: Ralph Davis
WARNACO INC./DESIGNER HOLDINGS, LTD./WARNACO (HK) LTD./
WARNACO B.V./ WARNACO NETHERLANDS B.V./ WARNACO HOLLAND B.V.
Gentlemen and Ladies:
This Issuance Request is delivered to you pursuant to Section 4.1.1 of
the Sixth Amended and Restated Credit Agreement, dated as of November 17, 1999
(as amended, supplemented amended and restated or otherwise modified from time
to time, the "Credit Agreement"), among Warnaco Inc., a Delaware corporation
(the "U.S. Borrower"), Designer Holdings, Ltd., a Delaware corporation (the "Sub
Borrower"), the wholly-owned Domestic Subsidiaries designated by Group (as
hereinafter defined) from time to time in accordance with Section 11.18 of the
Credit Agreement and set forth on Schedule I thereto (the "Warnaco
Sub-Borrowers"), Warnaco (HK) Ltd., a company organized under the laws of
Barbados ("Warnaco (HK)"), Warnaco B.V., a company organized under the laws of
The Netherlands ("Warnaco B.V."), Warnaco Netherlands B.V., a company organized
under the laws of The Netherlands ("Warnaco Netherlands"), Warnaco Holland B.V.,
a company organized under the laws of The Netherlands ("Warnaco Holland";
together with Warnaco (HK), Warnaco B.V. and Warnaco Netherlands, the "Foreign
Borrowers"), The Warnaco Group, Inc., a Delaware corporation ("Group"), the
various financial institutions as are or may become parties thereto
(collectively, the "Lenders"), Societe Generale, as documentation agent (the
"Documentation Agent") for the Lenders, Citibank, N.A., as syndication agent
(the "Syndication Agent") for the Lenders, The Bank of Nova Scotia
("Scotiabank"), as administrative agent (the "Administrative Agent") for the
Lenders and Scotiabank and Salomon Smith Barney, Inc. as co-lead arrangers and
co-book managers (the "Arrangers "). Unless otherwise defined herein or the
context otherwise requires, terms used herein have the meanings provided in the
Credit Agreement.
[The U.S. Borrower] [The Sub Borrower] [Warnaco (HK)] [Warnaco B.V.]
[Warnaco Netherlands] [Warnaco Holland] hereby requests that on__, 19__, (the
"Date of
<PAGE>
Issuance") The Bank of Nova Scotia (the "Fronting Bank") [issue a Documentary
Letter of Credit on ________________, 19__ in the initial Stated Amount of
$_____________ with a Stated Expiry Date (as defined in the Credit Agreement) of
__________________, 19 ] [extend the Stated Expiry Date (as defined under
Documentary Letter of Credit No.__,issued on __________________, 19__, in the
initial Stated Amount of $___) to a revised Stated Expiry Date (as defined in
the Credit Agreement) of __________________, 19__].
The beneficiary of the requested Letter of Credit will
be________________________, and such Letter of Credit will be in support
of_______________________________.
[The U.S. Borrower] [The Sub Borrower] [Warnaco (HK)] [Warnaco B.V.]
[Warnaco Netherlands] [Warnaco Holland] hereby acknowledges that, pursuant to
Section 6.2.2 of the Credit Agreement, each of the delivery of this Issuance
Request and the [issuance] [extension] of the Letter of Credit requested hereby
constitutes a representation and warranty by [the U.S. Borrower] [the Sub
Borrower] [Warnaco (HK)] [Warnaco B.V.] [Warnaco Netherlands] [Warnaco Holland]
that, on such date of [issuance] [extension] all statements set forth in Section
6.2.1 are true and correct in all material respects.
[The U.S. Borrower] [The Sub Borrower] [Warnaco (HK)] [Warnaco B.V.]
[Warnaco Netherlands] [Warnaco Holland] agrees that if, prior to the time of the
[issuance] [extension] of the Letter of Credit requested hereby, any matter
certified to herein by it will not be true and correct at such time as if then
made, it will immediately so notify the Administrative Agent. Except to the
extent, if any, that prior to the time of the issuance or extension requested
hereby the Administrative Agent and the Fronting Bank shall receive written
notice to the contrary from [the U.S. Borrower] [the Sub Borrower] [Warnaco
(HK)] [Warnaco B.V.] [Warnaco Netherlands] [Warnaco Holland], each matter
certified to herein shall be deemed to be certified at the date of such issuance
or extension.
IN WITNESS WHEREOF, the undersigned has caused this request to be
executed and delivered by its duly Authorized Officer this __ day of
_______________ 19__.
[WARNACO INC.]
[DESIGNER HOLDINGS, LTD.]
[WARNACO (HK) LTD.]
[WARNACO B.V.]
[WARNACO NETHERLANDS B.V.]
[WARNACO HOLLAND B.V.]
By________________________
Title:
-2-
<PAGE>
EXHIBIT C
BORROWING REQUEST
The Bank of Nova Scotia,
as Administrative Agent
One Liberty Plaza
New York, New York 10006
Attention: Ralph Davis
WARNACO INC./DESIGNER HOLDINGS, LTD./WARNACO (HK) LTD./
WARNACO B.V./ WARNACO NETHERLANDS B.V./ WARNACO HOLLAND B.V.
Gentlemen and Ladies:
This Borrowing Request is delivered to you pursuant to Section 2.3 of
the Sixth Amended and Restated Credit Agreement, dated as of November 17, 1999
(as amended, supplemented amended and restated or otherwise modified from time
to time, the "Credit Agreement"), among Warnaco Inc., a Delaware corporation
(the "U.S. Borrower"), Designer Holdings, Ltd., a Delaware corporation (the "Sub
Borrower"), the wholly-owned Domestic Subsidiaries designated by Group (as
hereinafter defined) from time to time in accordance with Section 11.18 of the
Credit Agreement and set forth on Schedule I thereto (the "Warnaco
Sub-Borrowers"), Warnaco (HK) Ltd., a company organized under the laws of
Barbados ("Warnaco (HK)"), Warnaco B.V., a company organized under the laws of
The Netherlands ("Warnaco B.V."), Warnaco Netherlands B.V., a company organized
under the laws of The Netherlands ("Warnaco Netherlands"), Warnaco Holland B.V.,
a company organized under the laws of The Netherlands ("Warnaco Holland";
together with Warnaco (HK), Warnaco B.V. and Warnaco Netherlands, the "Foreign
Borrowers"), The Warnaco Group, Inc., a Delaware corporation ("Group"), the
various financial institutions as are or may become parties thereto
(collectively, the "Lenders"), Societe Generale, as documentation agent (the
"Documentation Agent") for the Lenders, Citibank, N.A., as syndication agent
(the "Syndication Agent") for the Lenders, The Bank of Nova Scotia
("Scotiabank"), as administrative agent (the "Administrative Agent") for the
Lenders and Scotiabank and Salomon Smith Barney, Inc. as co-lead arrangers and
co-book managers (the "Arrangers"). Unless otherwise defined herein or the
context otherwise requires, terms used herein have the meanings provided in the
Credit Agreement.
[The U.S. Borrower] [The Sub Borrower] [Warnaco (HK)] [Warnaco B.V.]
[Warnaco Netherlands] [Warnaco Holland] hereby requests that a Loan be made in
the aggregate principal amount of $____________ on __________________, 19__ as a
[LIBO Rate Loan having an Interest Period of [one] [three] [six] month(s)] [Base
Rate Loan].
<PAGE>
[The U.S. Borrower] [The Sub Borrower] [Warnaco (HK)] [Warnaco B.V.]
[Warnaco Netherlands] [Warnaco Holland] hereby acknowledges that, pursuant to
Section 6.2.2 of the Credit Agreement, each of the delivery of this Borrowing
Request and the acceptance by [the U.S. Borrower] [the Sub Borrower] [Warnaco
(HK)] [Warnaco B.V.] [Warnaco Netherlands] [Warnaco Holland] of the proceeds of
the Loans requested hereby constitute a representation and warranty by [the U.S.
Borrower] [the Sub Borrower] [Warnaco (HK)] [Warnaco B.V.] [Warnaco Netherlands]
[Warnaco Holland] that, on the date of the making of such Loans, and before and
after giving effect thereto and to the application of the proceeds therefrom,
all statements set forth in Section 6.2.1 are true and correct in all material
respects.
[The U.S. Borrower] [The Sub Borrower] [Warnaco (HK)] [Warnaco B.V.]
[Warnaco Netherlands] [Warnaco Holland] agrees that if prior to the time of the
Borrowing requested hereby any matter certified to herein by it will not be true
and correct at such time as if then made, it will immediately so notify the
Administrative Agent. Except to the extent, if any, that prior to the time of
the Borrowing requested hereby the Administrative Agent shall receive written
notice to the contrary from [the U.S. Borrower] [the Sub Borrower] [Warnaco
(HK)] [Warnaco B.V.] [Warnaco Netherlands] [Warnaco Holland], each matter
certified to herein shall be deemed once again to be certified as true and
correct at the date of such Borrowing as if then made.
Please wire transfer the proceeds of the Borrowing to the accounts of
the following persons at the financial institutions indicated respectively:
Amount to be Transferred Person to be Paid
Name, Account No., Address, etc.
$____________ ___________________________
___________________________
___________________________
Attention:
$____________ ___________________________
___________________________
___________________________
Attention:
-2-
<PAGE>
[The U.S. Borrower] [The Sub Borrower] [Warnaco (HK)] [Warnaco B.V.]
[Warnaco Netherlands] [Warnaco Holland] has caused this Borrowing Request to be
executed and delivered, and the certification and warranties contained herein to
be made, by its duly Authorized Officer this ___ day of 19__.
[WARNACO INC.]
[DESIGNER HOLDINGS, LTD.]
[WARNACO (HK) LTD.]
[WARNACO B.V.]
[WARNACO NETHERLANDS Bay.]
[WARNACO HOLLAND B.V.]
By________________________
Title:
-3-
<PAGE>
EXHIBIT D
CONTINUATION/CONVERSION NOTICE
The Bank of Nova Scotia,
as Administrative Agent
One Liberty Plaza
New York, New York 10006
Attention: Ralph Davis
WARNACO INC./DESIGNER HOLDINGS, LTD./WARNACO (HK) LTD./
WARNACO B.V./WARNACO NETHERLANDS B.V./WARNACO HOLLAND B.V.
Gentlemen and Ladies:
This Continuation/Conversion Notice is delivered to you pursuant to
Section 2.4 of the Sixth Amended and Restated Credit Agreement, dated as of
November 17, 1999 (as amended, supplemented amended and restated or otherwise
modified from time to time, the "Credit Agreement"), among Warnaco Inc., a
Delaware corporation (the "U.S. Borrower"), Designer Holdings, Ltd., a Delaware
corporation (the "Sub Borrower"), the wholly-owned Domestic Subsidiaries
designated by Group (as hereinafter defined) from time to time in accordance
with Section 11.18 of the Credit Agreement and set forth on Schedule I thereto
(the "Warnaco Sub-Borrowers"), Warnaco (HK) Ltd., a company organized under the
laws of Barbados ("Warnaco (HK)"), Warnaco B.V., a company organized under the
laws of The Netherlands ("Warnaco B.V."), Warnaco Netherlands B.V., a company
organized under the laws of The Netherlands ("Warnaco Netherlands"), Warnaco
Holland B.V., a company organized under the laws of The Netherlands ("Warnaco
Holland"; together with Warnaco (HK), Warnaco B.V. and Warnaco Netherlands, the
"Foreign Borrowers"), The Warnaco Group, Inc., a Delaware corporation ("Group"),
the various financial institutions as are or may become parties thereto
(collectively, the "Lenders"), Soci6t6 Generale, as documentation agent (the
"Documentation Agent") for the Lenders, Citibank, N.A., as syndication agent
(the "Syndication Agent") for the Lenders, The Bank of Nova Scotia
("Scotiabank"), as administrative agent (the "Administrative Agent") for the
Lenders and Scotiabank and Salomon Smith Barney, Inc. as co-lead arrangers and
co-book managers (the "Arrangers"). Unless otherwise defined herein or the
context otherwise requires, terms used herein have the meanings provided in the
Credit Agreement.
[The U.S. Borrower] [The Sub Borrower] [Warnaco (HK)] [Warnaco B.V.]
[Warnaco Netherlands] [Warnaco Holland] hereby requests that on _______________,
19__,
<PAGE>
(1) $_______ of the presently outstanding principal amount of
the Loans originally made on ________________, 19__ to such Borrower,
(2) and all presently being maintained as [Base Rate Loans]
[LIBO Rate Loans],
(3) be [converted into] [continued as],
(4) [LIBO Rate Loans having an Interest Period of [one] [three]
[six] month(s)] [Base Rate Loans].
[The U.S. Borrower] [The Sub Borrower] [Warnaco (HK)] [Warnaco B.V.]
[Warnaco Netherlands] [Warnaco Holland] hereby:
(a) certifies and warrants that no Default has occurred and is
continuing; and
(b) agrees that if prior to the time of such continuation or
conversion any matter certified to herein by it will not be true and
correct at such time as if then made, it will immediately so notify the
Administrative Agent.
Except to the extent, if any, that prior to the time of the continuation or
conversion requested hereby the Administrative Agent shall receive written
notice to the contrary from [the U.S. Borrower] [the Sub Borrower] [Warnaco
(HK)] [Warnaco B.V.] [Warnaco Netherlands] [Warnaco Holland], each matter
certified to herein shall be deemed to be certified at the date of such
continuation or conversion as if then made.
[The U.S. Borrower] [The Sub Borrower] [Warnaco (HK)] [Warnaco B.V.]
[Warnaco Netherlands] [Warnaco Holland] has caused this Continuation/Conversion
Notice to be executed and delivered, and the certification and warranties
contained herein to be made, by its Authorized Officer this __ day of
_______________, 19__.
[WARNACO INC.]
[DESIGNER HOLDINGS, LTD.]
[WARNACO (HK) LTD.]
[WARNACO B.V.]
[WARNACO NETHERLANDS B.V.]
[WARNACO HOLLAND B.V.]
By________________________
Title:
-2-
<PAGE>
EXHIBIT E
LENDER ASSIGNMENT AGREEMENT
To: Warnaco Inc.
90 Park Avenue
New York, New York 10016
Attn: Chief Financial Officer
To: The Bank of Nova Scotia,
as Administrative Agent
One Liberty Plaza
New York, New York 10006
Attn: Claudio Chappell
WARNACO INC./DESIGNER HOLDINGS, LTD./WARNACO (HK) LTD./
WARNACO B.V./WARNACO NETHERLANDS B.V./WARNACO HOLLAND B.V.
Gentlemen and Ladies:
We refer to clause (d) of Section 11.11.1 of the Sixth Amended and
Restated Credit Agreement, dated as of November 17, 1999 (as amended,
supplemented amended and restated or otherwise modified from time to time, the
"Credit Agreement"), among Warnaco Inc., a Delaware corporation (the "U.S.
Borrower"), Designer Holdings, Ltd., a Delaware corporation (the "Sub
Borrower"), the wholly-owned Domestic Subsidiaries designated by Group (as
hereinafter defined) from time to time in accordance with Section 11.18 of the
Credit Agreement and set forth on Schedule I thereto (the "Warnaco
Sub-Borrowers"), Warnaco (HK) Ltd., a company organized under the laws of
Barbados ("Warnaco (HK)"), Warnaco B.V., a company organized under the laws of
The Netherlands ("Warnaco B.V."), Warnaco Netherlands B.V., a company organized
under the laws of The Netherlands ("Warnaco Netherlands"), Warnaco Holland B.V.,
a company organized under the laws of The Netherlands ("Warnaco Holland";
together with Warnaco (HK), Warnaco B.V. and Warnaco Netherlands, the "Foreign
Borrowers"), The Warnaco Group, Inc., a Delaware corporation ("Group"), the
various financial institutions as are or may become parties thereto
(collectively, the "Lenders"), Societe Generale, as documentation agent (the
"Documentation Agent") for the Lenders, Citibank, N.A., as syndication agent
(the "Syndication Agent") for the Lenders, The Bank of Nova Scotia
("Scotiabank"), as administrative agent (the "Administrative Agent") for the
Lenders and Scotiabank and Salomon Smith Barney, Inc. as co-lead arrangers and
co-book managers (the "Arrangers"). Unless otherwise defined herein
<PAGE>
or the context otherwise requires, terms used herein have the meanings provided
in the Credit Agreement.
This agreement is delivered to you pursuant to clause (d) of Section
11.11.1 of the Credit Agreement and also constitutes notice to each of you,
pursuant to clause (c) of Section 11.11.1 of the Credit Agreement, of the
assignment and delegation to ____________________ (the "Assignee") of ___% of
the Loans and Commitments of __________________ (the "Assignor") outstanding
under the Credit Agreement on the date hereof. After giving effect to the
foregoing assignment and delegation, the Assignor's and the Assignee's
Percentages for the purposes of the Credit Agreement are set forth opposite such
Person's name on the signature pages hereof.
[Add paragraph dealing with accrued interest and fees with respect to
Obligations assigned.]
The Assignee hereby acknowledges and confirms that it has received a
copy of the Credit Agreement and the exhibits related thereto, together with
copies of the documents which were required to be delivered under the Credit
Agreement as a condition to the making of the Credit Extensions thereunder. The
Assignee further confirms and agrees that in becoming a Lender and in making its
Commitments [and Loans] under the Credit Agreement, such actions have and will
be made without recourse to, or representation or warranty by any Agent.
Except as otherwise provided in the Credit Agreement, effective as of
the date of acceptance hereof by the Administrative Agent
(a) the Assignee
(i) shall be deemed automatically to have become a party
to the Credit Agreement, have all the rights and obligations of
a "Lender" under the Credit Agreement and the other Loan
Documents as if it were an original signatory thereto to the
extent specified in the second paragraph hereof; and
(ii) agrees to be bound by the terms and conditions set
forth in the Credit Agreement and the other Loan Documents as if
it were an original signatory thereto; and
(b) the Assignor shall be released from its obligations under
the Credit Agreement and the other Loan Documents to the extent
specified in the second paragraph hereof.
The Assignor and the Assignee hereby agree that the [Assignor]
[Assignee] will pay to the Administrative Agent the processing fee referred to
in Section 11.11.1 of the Credit Agreement upon the delivery hereof.
-2-
<PAGE>
The Assignee hereby advises each of you of the following administrative
details with respect to the assigned [Loans and] Commitments and requests the
Administrative Agent to acknowledge receipt of this document:
(A) Address for Notices:
Institution Name:
Attention:
Domestic Office:
_________________
_________________
_________________
Telephone:
Facsimile:
Telex (Answerback):
LIBOR Office:
_________________
_________________
_________________
Telephone:
Facsimile:
Telex (Answerback):
(B) Payment Instructions:
_________________
_________________
_________________
The Assignee agrees to furnish the tax forms required by Section 5.6 (if
so required) of the Credit Agreement no later than the date of acceptance hereof
by the Administrative Agent.
-3-
<PAGE>
This Agreement may be executed by the Assignor and Assignee in separate
counterparts, each of which when so executed and delivered shall be deemed to be
an original and all of which taken together shall constitute one and the same
agreement.
Adjusted Percentage [ASSIGNOR]
Loan Commitment
and Loans: ___% By:_________________________
Title:
Letters of Credit: ___%
Acceptances: ___%
Percentage [ASSIGNEE]
Loan Commitment
and Loans: ___% By:_________________________
Title:
Letters of Credit: ___%
Acceptances: ___%
Accepted and Acknowledged
this __ day of ______________, 19__
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By:____________________________
Title:
WARNACO INC.
By:____________________________
Title:
<PAGE>
EXHIBIT F-1
SECOND AMENDED AND RESTATED GUARANTY
SECOND AMENDED AND RESTATED GUARANTY (this "Guaranty"), dated as of July
31, 1998 (amending and restating the Amended and Restated Guaranty dated as of
August 12, 1997, the "Existing Guaranty"), made by THE WARNACO GROUP, INC., a
Delaware corporation (the "Guarantor"), in favor of the Lender Parties (as
defined below) and THE BANK OF NOVA SCOTIA, as administrative agent (the
"Administrative Agent") for the Lender Parties.
PRELIMINARY STATEMENT. Warnaco Inc., a Delaware corporation, Designer
Holdings, Ltd., a Delaware corporation, the wholly-owned Domestic Subsidiaries
designated from time to time, Warnaco (HK) Ltd., a company organized under the
laws of Barbados, Warnaco B.V., a company organized under the laws of The
Netherlands, Warnaco Netherlands B.V., a company organized under the laws of The
Netherlands, Warnaco Holland B.V. a company organized under the laws of The
Netherlands (together with each of the foregoing entities, the "Borrowers") and
the Guarantor have heretofore entered into a Fourth Amended and Restated Credit
Agreement, dated as of February 19, 1998 (as amended or otherwise modified prior
to the date hereof, the "Existing Credit Agreement"), with the Administrative
Agent, Citibank, N.A. ("Citibank"), as the Documentation Agent and the lenders
party thereto. Concurrently with the execution and delivery of this Guaranty,
the Existing Credit Agreement is being amended and restated in its entirety as
the Fifth Amended and Restated Credit Agreement, dated as of the date hereof (as
amended, modified or supplemented from time to time, the "Credit Agreement"),
among the Guarantor, the Borrowers, the Lenders party thereto (the "Lender
Parties"), Societe Generale as Documentation Agent, Citibank, as Syndication
Agent, and the Administrative Agent. The Guarantor has derived and will continue
to derive substantial direct and indirect benefit from the transactions
contemplated by the Credit Agreement. It is a condition precedent to the
effectiveness of the Credit Agreement and the maintaining and making of Credit
Extensions by the Lenders thereunder that the Guarantor, as the owner of 100% of
the outstanding shares of stock and other ownership interests of each Borrower,
shall have executed and delivered this Guaranty.
NOW THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, and in order to induce the Lenders to maintain and make
Credit Extensions (including the initial Credit Extensions) to each Borrower
pursuant to the Credit Agreement, the Guarantor agrees, for the benefit of each
Lender Party, as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Terms. The following terms (whether or not underscored)
when used in this Guaranty, including its preamble and recitals, shall have the
following meanings (such definitions to be equally applicable to the singular
and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Borrowers" is defined in the first recital.
"Credit Agreement" is defined in the first recital.
"Existing Credit Agreement" is defined in the first recital.
"Existing Guaranty" is defined in the preamble.
"Guarantor" is defined in the preamble.
"Guaranty" is defined in the preamble.
"Lender Parties" is defined in the first recital.
"U.C.C." means the Uniform Commercial Code as in effect in the State of New
York.
SECTION 1.2 Credit Agreement Definitions. Unless otherwise defined herein
or the context otherwise requires, terms used in this Guaranty, including its
preamble and recitals, have the meanings provided in the Credit Agreement.
SECTION 1.3 U.C.C. Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the U.C.C.
are used in this Guaranty, including its preamble and recitals, with such
meanings.
ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1 Guaranty. The Guarantor hereby absolutely, unconditionally and
irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment,
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declaration, acceleration, demand or otherwise, of all obligations of each
Borrower and each other obligor, whether for principal, interest, fees,
expenses or otherwise (including all such amounts which would become due
but for the operation of the automatic stay under Section 362 (a) of the
United States Bankruptcy Code, 11 U.S.C. 'SS'362(a), and the operation of
Sections 502 (b) and 506 (b) of the United States Bankruptcy Code, 11
U.S.C. 'SS'502 (b) and 'SS'506(b)), and
(b) indemnifies and holds harmless each Lender Party and each holder
of a Note for any and all costs and expenses (including reasonable
attorney's fees and expenses) incurred by such Lender Party or such holder,
as the case may be, in enforcing any rights under this Guaranty.
provided, however, that the Guarantor shall be liable under this Guaranty for
the maximum amount of such liability that can be hereby incurred without
rendering this Guaranty, as it relates to the Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer, and not
for any greater amount. This Guaranty constitutes a guaranty of payment when due
and not of collection, and the Guarantor specifically agrees that it shall not
be necessary or required that any Lender Party or any holder of any Note
exercise any right, assert any claim or demand or enforce any remedy whatsoever
against any Borrower or any other Obligor (or any other Person) before or as a
condition to the obligations of the Guarantor hereunder.
SECTION 2.2 Acceleration of Guaranty. The Guarantor agrees that, in the
event of the dissolution or insolvency of any Borrower or the dissolution (other
than to the extent permitted by the Credit Agreement) or insolvency of any other
Obligor or the Guarantor, or the inability or failure of any Borrower, any other
obligor or the Guarantor to pay debts as they become due, or an assignment by
any Borrower, any other Obligor or the Guarantor for the benefit of creditors,
or the commencement of any case or proceeding in respect of any Borrower, any
other Obligor or the Guarantor under any bankruptcy, insolvency or similar laws,
and with respect to any involuntary case or proceeding, such case or proceeding
remains undismissed for a period of 30 days, and if any such event shall occur
at a time when any of the obligations of each Borrower and each other obligor
may not then be due and payable, the Guarantor will pay to the Lenders forthwith
the full amount which would be payable hereunder by the Guarantor if all such
Obligations were then due and payable.
SECTION 2.3 Guaranty Absolute, etc. This Guaranty shall in all respects be
a continuing, absolute, unconditional and irrevocable guaranty of payment, and
shall remain in full force and effect until all Obligations of each Borrower and
each other
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Obligor have been paid in full, all obligations of the Guarantor hereunder shall
have been paid in full, all Letters of Credit have been terminated or expired,
all Acceptances shall have matured or expired and all Commitments shall have
terminated. The Guarantor guarantees that the Obligations of each Borrower and
each other Obligor and their respective Subsidiaries will be paid strictly in
accordance with the terms of the Credit Agreement and each other Loan Document
under which they arise, regardless of any law, regulation or order now or
hereafter in effect in any jurisdiction affecting any of such terms or the
rights of any Lender Party or any holder of any Note with respect thereto. The
liability of the Guarantor under this Guaranty shall be absolute, unconditional
and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note, any Letter of Credit, any Acceptance or any other Loan
Document;
(b) the failure of any Lender Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against any Borrower, any other obligor or any other Person
(including any other guarantor) under the provisions of the Credit
Agreement, any Note, any Letter of Credit, any Acceptance, any other
Loan Document or otherwise, or
(ii) to exercise any right or remedy against any other guarantor
of any obligations of any Borrower or any other Obligor;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations of any Borrower or any other
Obligor, or any other extension, compromise or renewal of any obligation of
any Borrower or any other obligor;
(d) any reduction, limitation, impairment or termination of the
obligations of any Borrower or any other Obligor for any reason, including
any claim of waiver, release, surrender, alteration or compromise, and
shall not be subject to (and the Guarantor hereby waives any right to or
claim of) any defense or setoff, counterclaim, recoupment or termination
whatsoever by reason of the invalidity, illegality, nongenuineness,
irregularity, compromise, unenforceability of, or any other event or
occurrence affecting, the Obligations of any Borrower, any other Obligor or
otherwise;
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(e) any amendment to, rescission, waiver, or other modification of, or
any consent to departure from, any of the terms of the Credit Agreement,
any Note, any Letter of Credit, any Acceptance, or any other Loan Document;
(f) any amendment to or waiver or release or addition of, or consent
to departure from, any other guaranty, held by any Lender Party or any
holder of any Note securing any of the Obligations of any Borrower or any
other obligor; or
(g) any other circumstance which might otherwise constitute a defense
available to, or a legal or equitable discharge of, any Borrower, any other
obligor, any surety or any guarantor.
SECTION 2.4 Reinstatement, etc. The Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must otherwise be restored by any Lender Party or any holder of any Note, upon
the insolvency, bankruptcy or reorganization of any Borrower, any other obligor
or otherwise, all as though such payment had not been made.
SECTION 2.5 Waiver, etc. The Guarantor hereby waives promptness, diligence,
notice of acceptance and any other notice with respect to any of the Obligations
of any Borrower or any other obligor and this Guaranty and any requirement that
the Administrative Agent, any other Lender Party or any holder of any Note
protect, secure, perfect or insure any security interest or Lien, or any
property subject thereto, or exhaust any right or take any action against any
Borrower, any other Obligor or any other Person (including any other guarantor)
or entity or any collateral securing the Obligations of any Borrower or any
other Obligor, as the case may be.
SECTION 2.6 Postponement of Subrogation, etc. The Guarantor will not
exercise any rights which it may acquire by way of rights of subrogation under
this Guaranty, by any payment made hereunder or otherwise, until the prior
payment, in full and in cash, of all obligations of each Borrower and each other
Obligor. Any amount paid to the Guarantor on account of any such subrogation
rights prior to the payment in full of all Obligations of each Borrower and each
other Obligor shall be held in trust for the benefit of the Lender Parties and
each holder of a Note and shall immediately be paid to the Administrative Agent
and credited and applied against the Obligations of each Borrower and each other
Obligor, whether matured or unmatured, in accordance with the terms of the
Credit Agreement; provided, however, that if
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(a) the Guarantor has made payment to the Lender Parties and each
holder of a Note of all or any part of the Obligations of any Borrower or
any other Obligor, and
(b) all Obligations of each Borrower and each other Obligor have been
paid in full, all Letters of Credit have been terminated or expired, each
Acceptance shall have matured or expired and all Commitments have been
permanently terminated,
each Lender Party and each holder of a Note agrees that, at the Guarantor's
request, the Administrative Agent, on behalf of the Lender Parties and the
holders of the Notes, will execute and deliver to the Guarantor appropriate
documents (without recourse and without representation or warranty) necessary to
evidence the transfer by subrogation to the Guarantor of an interest in the
Obligations of each Borrower and each other Obligor resulting from such payment
by the Guarantor. In furtherance of the foregoing, for so long as any
Obligations or Commitments remain outstanding, the Guarantor shall refrain from
taking any action or commencing any proceeding against any Borrower or any other
Obligor (or its successors or assigns, whether in connection with a bankruptcy
proceeding or otherwise) to recover any amounts in respect of payments made
under this Guaranty to any Lender Party or any holder of a Note.
SECTION 2.7 Successors, Transferees and Assigns; Transfers of Notes, etc.
This Guaranty shall:
(a) be binding upon the Guarantor, and its successors, transferees and
assigns; and
(b) inure to the benefit of and be enforceable by the Administrative
Agent and each other Lender Party.
Without limiting the generality of clause (b), any Lender may assign or
otherwise transfer (in whole or in part) any Note or Credit Extension held by it
to any other Person or entity, and such other Person or entity shall thereupon
become vested with all rights and benefits in respect thereof granted to such
Lender under any Loan Document (including this Guaranty) or otherwise, subject,
however, to the provisions of Section 11.11 and Article X of the Credit
Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties. The Guarantor hereby represents
and warrants unto each Lender Party as set forth in this Article III.
SECTION 3.1.1 Credit Agreement Representations and Warranties. As to all
matters contained in Article VII of the Credit Agreement, as in effect on the
date hereof, insofar as applicable to the Guarantor, the Guarantor's properties
or the Guarantor's obligations under the documents executed and delivered in
connection with the Credit Agreement, each such representation and warranty set
forth in such Section (insofar as so applicable) and all other terms of the
Credit Agreement, as in effect on the date hereof, to which reference is made
therein, together with all related definitions and ancillary provisions, are
hereby incorporated into this Guaranty by reference with respect to the
Guarantor as though specifically set forth in this Section 3.1.1.
SECTION 3.1.2 Authority. The Guarantor has full power and authority to
enter into and perform its obligations under this Guaranty.
SECTION 3.1.3 Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by the Guarantor of this Guaranty have been duly
authorized by all necessary corporate action (including but not limited to any
consent of stockholders required by law or its organizational documents), and do
not
(a) contravene the Guarantor's organizational documents;
(b) contravene any contractual restriction, law or governmental
regulation or court decree or order binding on or affecting the Guarantor;
or
(c) result in, or require the creation or imposition of, any lien,
security interest, encumbrance, pledge or hypothecation on any of the
Guarantor's properties.
SECTION 3.1.4 Validity, etc. This Guaranty constitutes the legal, valid and
binding obligations of the Guarantor enforceable in accordance with its terms,
subject to the effect of any applicable bankruptcy, insolvency, reorganization,
moratorium, liquidation or similar laws affecting creditors' rights generally
and general principles of equity.
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SECTION 3.1.5 Authorization, Approval, etc. No authorization, consent,
approval, or other action by, and no notice to, filing with, or license from,
any governmental authority, regulatory body or any other person is required for
due execution, delivery or performance by the Guarantor of this Guaranty.
ARTICLE IV
COVENANTS, ETC.
SECTION 4.1 Covenants. The Guarantor covenants and agrees that, so long as
any portion of the Obligations shall remain unpaid or any Lender shall have any
outstanding Commitment, the Guarantor will, unless the Required Lenders shall
otherwise consent in writing, perform the obligations set forth in this Section
4.1.
SECTION 4.1.1 Credit Agreement Covenants. The Guarantor will comply with
and be bound by all of the agreements, covenants and obligations contained in
Article VIII of the Credit Agreement. Each such agreement, covenant and
obligation contained in such Sections and all other terms of the Credit
Agreement and the documents executed in connection therewith to which reference
is made therein, together with all related definitions and ancillary provisions,
each as in effect on the date hereof, is hereby incorporated into this Guaranty
by reference as though specifically set forth in this Section 4.1.1, and each
such agreement, covenant and obligation shall, for purposes hereof, survive the
termination of the Credit Agreement.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1 Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including, without limitation, Article XI thereof.
SECTION 5.2 Binding on Successors, Transferees and Assigns; Assignment. In
addition to, and not in limitation of, Section 2.7, this Guaranty shall be
binding upon the Guarantor and its successors, transferees and assigns and shall
inure to the benefit of and be enforceable by each Lender Party and each holder
of a Note and their respective successors, transferees and assigns (to the full
extent provided pursuant to Section 2.7);
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provided, however, that the Guarantor may not assign any of its obligations
hereunder without the prior written consent of the Lenders.
SECTION 5.3 Amendments, etc. No amendment to or waiver of any provision of
this Guaranty, nor consent to any departure by the Guarantor herefrom, shall in
any event be effective unless the same shall be in writing and signed by the
Administrative Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 5.4 Notices. All notices and other communications provided to the
Guarantor under this Guaranty shall be in writing or by facsimile and addressed,
delivered or transmitted to the Guarantor at its address or facsimile number set
forth below its signature hereto or at such other address or facsimile number as
may be designated by the Guarantor in a notice to the other parties. Any notice,
if mailed and properly addressed with postage prepaid or if properly addressed
and sent by pre-paid courier service, shall be deemed given when received; any
notice, if transmitted by facsimile, shall be deemed given when transmitted.
SECTION 5.5 No Waiver; Remedies. In addition to, and not in limitation of,
Section 2.3 and Section 2.5, no failure on the part of any Lender Party or any
holder of a Note 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 remedies herein provided are cumulative and not
exclusive of any remedies provided by law.
SECTION 5.6 Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 5.7 Setoff. Each Lender Party shall, upon the occurrence of any
event or condition described in Section 9.1.6 of the Credit Agreement or, with
the consent of the Required Lenders, upon the occurrence of any other Event of
Default, have the right to appropriate and apply to the payment of the
obligations owing to it (whether or not then due) any and all balances, credits,
deposits, accounts or moneys of the Guarantor then or thereafter maintained with
or otherwise held by such Lender Party; provided, however, that any such
appropriation and application shall be subject to the provisions of Section 5.8
of the Credit Agreement. Each Lender Party agrees promptly to notify the
Guarantor and the Administrative Agent after any such setoff and application
made by such Lender Party; provided, however, that the failure to give such
notice shall not affect
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the validity of such setoff and application. The rights of each Lender Party
under this Section are in addition to other rights and remedies (including other
rights of setoff under applicable law or otherwise) which such Lender Party may
have.
SECTION 5.8 Severability. Wherever possible each provision of this Guaranty
shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 5.9 Governing Law. THIS GUARANTY SHALL BE GOVERNED BY AND CONSTRUED
IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. FOR PURPOSES OF
ANY ACTION OR PROCEEDING INVOLVING THIS GUARANTY, THE GUARANTOR HEREBY EXPRESSLY
SUBMITS TO THE JURISDICTION OF ALL FEDERAL AND STATE COURTS LOCATED IN THE STATE
OF NEW YORK AND CONSENTS THAT IT MAY BE SERVED WITH ANY PROCESS OR PAPER BY
REGISTERED MAIL OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE STATE OF NEW YORK.
SECTION 5.10 Waiver of Jury Trial. THE GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY. THE GUARANTOR ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE CREDIT
AGREEMENT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
THE WARNACO GROUP, INC.
By
------------------------------
Title:
Address: 90 Park Avenue
New York, New York 10016
Attention: Chief Financial Officer
Telecopy No.: (212) 687-0480
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EXHIBIT F-2
SECOND AMENDED AND RESTATED GUARANTY
SECOND AMENDED AND RESTATED GUARANTY (this "Guaranty"), dated as of July
31, 1998 (amending and restating the Amended and Restated Guaranty dated as of
August 12, 1997, the "Existing Guaranty"), made by certain of the Persons listed
on the signature pages hereof (each Person listed on the signature pages hereof,
a "Guarantor" and collectively, the "Guarantors"), in favor of the Lender
Parties (as defined below) and THE BANK OF NOVA SCOTIA, as administrative agent
(the "Administrative Agent") for the Lender Parties.
PRELIMINARY STATEMENT. Warnaco Inc., a Delaware corporation, Designer
Holdings, Ltd., a Delaware corporation, the wholly-owned Domestic Subsidiaries
designated from time to time, Warnaco (HK) Ltd., a company organized under the
laws of Barbados, Warnaco B.V., a company organized under the laws of The
Netherlands, Warnaco Netherlands B.V., a company organized under the laws of The
Netherlands, Warnaco Holland B.V., a company organized under the laws of The
Netherlands (together with each of the foregoing entities, the "Borrowers") and
the Warnaco Group, Inc., a Delaware corporation ("Group") have heretofore
entered into a Fourth Amended and Restated Credit Agreement, dated as of
February 19, 1998 (as amended or otherwise modified prior to the date hereof,
the "Existing Credit Agreement"), with the Administrative Agent, Citibank, N.A.
("Citibank"), as the Documentation Agent and the lenders party thereto.
Concurrently with the execution and delivery of this Guaranty, the Existing
Credit Agreement is being amended and restated in its entirety as the Fifth
Amended and Restated Credit Agreement, dated as of the date hereof (as amended,
modified or supplemented from time to time, the "Credit Agreement"), among
Group, the Borrowers, the Lenders party thereto (the "Lender Parties"), Societe
Generale, as Documentation Agent, Citibank, as Syndication Agent, and the
Administrative Agent. Each Guarantor has derived and will continue to derive
substantial direct and indirect benefits from the transactions contemplated by
the Credit Agreement. It is a condition precedent to the effectiveness of the
Credit Agreement and the maintaining and making of Credit Extensions by the
Lenders thereunder that each Guarantor shall have executed and delivered this
Guaranty.
NOW THEREFORE, for good and valuable consideration the receipt of which
is hereby acknowledged, and in order to induce the Lenders to maintain and make
Credit Extensions (including the initial Credit Extensions) to each Borrower
pursuant to the
<PAGE>
Credit Agreement, each Guarantor agrees, for the benefit of each Lender Party,
as follows:
ARTICLE I
DEFINITIONS
SECTION 1.1 Certain Terms. The following terms (whether or not
underscored) when used in this Guaranty, including its preamble and recitals,
shall have the following meanings (such definitions to be equally applicable to
the singular and plural forms thereof)
"Administrative Agent" is defined in the preamble.
"Borrowers" is defined in the first recital.
"Credit Agreement" is defined in the first recital.
"Existing Credit Agreement" is defined in the first recital.
"Existing Guaranty" is defined in the preamble.
"Group" is defined in the first recital.
"Guarantor" is defined in the preamble.
"Guaranty" is defined in the preamble.
"Lender Parties" is defined in the first recital.
"U.C.C." means the Uniform Commercial Code as in effect in the State of
New York.
SECTION 1.2 Credit Agreement Definitions. Unless otherwise defined
herein or the context otherwise requires, terms used in this Guaranty, including
its preamble and recitals, have the meanings provided in the Credit Agreement.
SECTION 1.3 U.C.C. Definitions. Unless otherwise defined herein or the
context otherwise requires, terms for which meanings are provided in the U.C.C.
are used in this Guaranty, including its preamble and recitals, with such
meanings.
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ARTICLE II
GUARANTY PROVISIONS
SECTION 2.1 Guarantv. Each Guarantor hereby jointly and severally,
absolutely, unconditionally and irrevocably
(a) guarantees the full and punctual payment when due, whether at
stated maturity, by required prepayment, declaration, acceleration,
demand or otherwise, of all Obligations of each Borrower and each other
Obligor, whether for principal, interest, fees, expenses or otherwise
(including all such amounts which would become due but for the operation
of the automatic stay under Section 362 (a) of the United States
Bankruptcy Code, 11 U.S.C. 'SS'362(a), and the operation of Sections
502 (b) and 506 (b) of the United States Bankruptcy Code, 11 U.S.C.
'SS'502 (b) and 'SS'506(b)), and
(b) indemnifies and holds harmless each Lender Party and each
holder of a Note for any and all costs and expenses (including
reasonable attorney's fees and expenses) incurred by such Lender Party
or such holder, as the case may be, in enforcing any rights under this
Guaranty.
provided, however, that each Guarantor shall be liable under this Guaranty for
the maximum amount of such liability that can be hereby incurred without
rendering this Guaranty, as it relates to such Guarantor, voidable under
applicable law relating to fraudulent conveyance or fraudulent transfer, and not
for any greater amount. This Guaranty constitutes a guaranty of payment when due
and not of collection, and each Guarantor specifically agrees that it shall not
be necessary or required that any Lender Party or any holder of any Note
exercise any right, assert any claim or demand or enforce any remedy whatsoever
against any Borrower or any other Obligor (or any other Person) before or as a
condition to the obligations of such Guarantor hereunder.
SECTION 2.2 Acceleration of Guaranty. Each Guarantor agrees that, in the
event of the dissolution or insolvency of any Borrower or the dissolution (other
than to the extent permitted by the Credit Agreement) or insolvency of any other
Obligor or such Guarantor, or the inability or failure of any Borrower, any
other Obligor or such Guarantor to pay debts as they become due, or an
assignment by any Borrower, any other Obligor or such Guarantor for the benefit
of creditors, or the commencement of any case or proceeding in respect of any
Borrower, any other Obligor or such Guarantor under any bankruptcy, insolvency
or similar laws, and with respect to any involuntary case or proceeding, such
case or proceeding remains undismissed for a period of 30 days, and if any such
event shall occur at a time when any of the obligations of any Borrower and each
other
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Obligor may not then be due and payable, such Guarantor will pay to the Lenders
forthwith the full amount which would be payable hereunder by such Guarantor if
all such Obligations were then due and payable.
SECTION 2.3 Guaranty Absolute, etc. This Guaranty shall in all respects
be a joint and several, continuing, absolute, unconditional and irrevocable
guaranty of payment, and shall remain in full force and effect until all
Obligations of each Borrower and each other Obligor have been paid in full, all
obligations of each Guarantor hereunder shall have been paid in full, all
Letters of Credit have been terminated or expired, all Acceptances shall have
matured or expired and all Commitments shall have terminated. Each Guarantor
guarantees that the Obligations of each Borrower and each other Obligor and
their respective Subsidiaries will be paid strictly in accordance with the terms
of the Credit Agreement and each other Loan Document under which they arise,
regardless of any law, regulation or order now or hereafter in effect in any
jurisdiction affecting any of such terms or the rights of any Lender Party or
any holder of any Note with respect thereto. The liability of each Guarantor
under this Guaranty shall be joint and several and shall be absolute,
unconditional and irrevocable irrespective of:
(a) any lack of validity, legality or enforceability of the Credit
Agreement, any Note, any Letter of Credit, any Acceptance or any other
Loan Document;
(b) the failure of any Lender Party or any holder of any Note
(i) to assert any claim or demand or to enforce any right or
remedy against any Borrower, any other Obligor or any other Person
(including any other guarantor) under the provisions of the Credit
Agreement, any Note, any Letter of Credit, any Acceptance, any
other Loan Document or otherwise, or
(ii) to exercise any right or remedy against any other
guarantor of any obligations of any Borrower or any other Obligor;
(c) any change in the time, manner or place of payment of, or in
any other term of, all or any of the Obligations of any Borrower or any
other Obligor, or any other extension, compromise or renewal of any
obligation of any Borrower or any other Obligor;
(d) any reduction, limitation, impairment or termination of the
obligations of any Borrower or any other Obligor for any reason,
including any claim of waiver,
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release,surrender, alteration or compromise, and shall not be subject to
(and such Guarantor hereby waives any right to or claim of) any defense
or setoff, counterclaim, recoupment or termination whatsoever by reason
of the invalidity, illegality, nongenuineness, irregularity, compromise,
unenforceability of, or any other event or occurrence affecting, the
Obligations of any Borrower, any other Obligor or otherwise;
(e) any amendment to, rescission, waiver, or other modification of,
or any consent to departure from, any of the terms of the Credit
Agreement, any Note, any Letter of Credit, any Acceptance or any other
Loan Document;
(f) any amendment to or waiver or release or addition of, or
consent to departure from, any other guaranty, held by any Lender Party
or any holder of any Note securing any of the Obligations of any
Borrower or any other Obligor; or
(g) any other circumstance which might otherwise constitute a
defense available to, or a legal or equitable discharge of, any
Borrower, any other Obligor, any surety or any guarantor.
SECTION 2.4 Reinstatement, etc. Each Guarantor agrees that this Guaranty
shall continue to be effective or be reinstated, as the case may be, if at any
time any payment (in whole or in part) of any of the Obligations is rescinded or
must otherwise be restored by any Lender Party or any holder of any Note, upon
the insolvency, bankruptcy or reorganization of any Borrower, any other Obligor
or otherwise, all as though such payment had not been made.
SECTION 2.5 Waiver, etc. Each Guarantor hereby waives promptness,
diligence, notice of acceptance and any other notice with respect to any of the
obligations of any Borrower or any other Obligor and this Guaranty and any
requirement that the Administrative Agent, any other Lender Party or any holder
of any Note protect, secure, perfect or insure any security interest or Lien, or
any property subject thereto, or exhaust any right or take any action against
any Borrower, any other Obligor or any other Person (including any other
guarantor) or entity or any collateral securing the Obligations of any Borrower
or any other Obligor, as the case may be.
SECTION 2.6 Postponement of Subrogation, etc. None of the Guarantors
will exercise any rights which it may acquire by way of rights of subrogation
under this Guaranty, by any payment made hereunder or otherwise, until the prior
payment, in full and in cash, of all Obligations of each Borrower and each other
Obligor. Any amount paid to any such Guarantor on account of any such
-5-
<PAGE>
subrogation rights prior to the payment in full of all Obligations of each
Borrower and each other obligor shall be held in trust for the benefit of the
Lender Parties and each holder of a Note and shall immediately be paid to the
Administrative Agent and credited and applied against the Obligations of each
Borrower and each other Obligor, whether matured or unmatured, in accordance
with the terms of the Credit Agreement; provided, however, that if
(a) a Guarantor has made payment to the Lender Parties and each
holder of a Note of all or any part of the Obligations of any Borrower
or any other Obligor, and
(b) all obligations of each Borrower and each other Obligor have
been paid in full, all Letters of Credit have been terminated or
expired, each Acceptance shall have matured or expired and all
Commitments have been permanently terminated,
each Lender Party and each holder of a Note agrees that, at such Guarantor's
request, the Administrative Agent, on behalf of the Lender Parties and the
holders of the Notes, will execute and deliver to such Guarantor appropriate
documents (without recourse and without representation or warranty) necessary to
evidence the transfer by subrogation to such Guarantor of an interest in the
obligations of each Borrower and each other obligor resulting from such payment
by such Guarantor. In furtherance of the foregoing, for so long as any
obligations or Commitments remain outstanding, each Guarantor shall refrain from
taking any action or commencing any proceeding against any Borrower or any other
obligor (or its successors or assigns, whether in connection with a bankruptcy
proceeding or otherwise) to recover any amounts in the respect of payments made
under this Guaranty to any Lender Party or any holder of a Note.
SECTION 2.7 Successors, Transferees and Assigns; Transfers of Notes,
etc. This Guaranty shall:
(a) be binding upon each Guarantor, and its successors, transferees
and assigns; and
(b) inure to the benefit of and be enforceable by the
Administrative Agent and each other Lender Party.
Without limiting the generality of clause (b), any Lender may assign or
otherwise transfer (in whole or in part) any Note or Credit Extension held by it
to any other Person or entity, and such other Person or entity shall thereupon
become vested with all rights and benefits in respect thereof granted to such
Lender under any Loan Document (including this Guaranty) or otherwise,
-6-
<PAGE>
subject, however, to the provisions of Section 11.11 and Article X of the Credit
Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES
SECTION 3.1 Representations and Warranties. Each Guarantor hereby
represents and warrants unto each Lender Party as set forth in this Article III.
SECTION 3.1.1 Credit Agreement Representations and Warranties. As to all
matters contained in Article VII of the Credit Agreement, as in effect on the
date hereof, insofar as applicable to each Guarantor, such Guarantor's
properties or such Guarantor's obligations under the documents executed and
delivered in connection with the Credit Agreement, each such representation and
warranty set forth in such Section (insofar as so applicable) and all other
terms of the Credit Agreement, as in effect on the date hereof, to which
reference is made therein, together with all related definitions and ancillary
provisions, are hereby incorporated into this Guaranty by reference with respect
to such Guarantor as though specifically set forth in this Section 3.1.1.
SECTION 3.1.2 Authority. Each Guarantor has full power and authority to
enter into and perform its obligations under this Guaranty.
SECTION 3.1.3 Due Authorization, Non-Contravention, etc. The execution,
delivery and performance by each Guarantor of this Guaranty have been duly
authorized by all necessary corporate action (including but not limited to any
consent of stockholders required by law or its organizational documents), and do
not
(a) contravene each Guarantor's organizational documents;
(b) contravene any contractual restriction, law or governmental
regulation or court decree or order binding on or affecting each
Guarantor; or
(c) result in, or require the creation or imposition of, any lien,
security interest, encumbrance, pledge or hypothecation on any of such
Guarantor's properties.
SECTION 3.1.4 Validity, etc. This Guaranty constitutes the legal, valid
and binding obligations of each Guarantor enforceable in accordance with its
terms, subject to the effect of any applicable bankruptcy, insolvency,
reorganization,
-7-
<PAGE>
moratorium, liquidation or similar laws affecting creditors' rights generally
and general principles of equity.
SECTION 3.1.5 Authorization, Approval, etc. No authorization, consent,
approval, or other action by, and no notice to, filing with, or license from,
any governmental authority, regulatory body or any other person is required for
due execution, delivery or performance by each Guarantor of this Guaranty.
ARTICLE IV
COVENANTS, ETC.
SECTION 4.1 Covenants. Each Guarantor covenants and agrees that, so long
as any portion of the obligations shall remain unpaid or any Lender shall have
any outstanding Commitment, such Guarantor will, unless the Required Lenders
shall otherwise consent in writing, perform the obligations set forth in this
Section 4.1.
SECTION 4.1.1 Credit Agreement Covenants. Each Guarantor will comply
with and be bound by all of the agreements, covenants and obligations contained
in Article VIII of the Credit Agreement. Each such agreement, covenant and
obligation contained in such Sections and all other terms of the Credit
Agreement and the documents executed in connection therewith to which reference
is made therein, together with all related definitions and ancillary provisions,
each as in effect on the date hereof, is hereby incorporated into this Guaranty
by reference as though specifically set forth in this Section 4.1.1, and each
such agreement, covenant and obligation shall, for purposes hereof, survive the
termination of the Credit Agreement.
ARTICLE V
MISCELLANEOUS PROVISIONS
SECTION 5.1 Loan Document. This Guaranty is a Loan Document executed
pursuant to the Credit Agreement and shall (unless otherwise expressly indicated
herein) be construed, administered and applied in accordance with the terms and
provisions thereof, including, without limitation, Article XI thereof.
SECTION 5.2 Binding on Successors, Transferees and Assigns; Assignment.
In addition to, and not in limitation of, Section 2.7, this Guaranty shall be
binding upon each Guarantor and its successors, transferees and assigns and
shall inure to
-8-
<PAGE>
the benefit of and be enforceable by each Lender Party and each holder of a Note
and their respective successors, transferees and assigns (to the full extent
provided pursuant to Section 2.7); provided, however, that such Guarantor may
not assign any of its obligations hereunder without the prior written consent of
the Lenders.
SECTION 5.3 Amendments, etc. No amendment to or waiver of any provision
of this Guaranty, nor consent to any departure by any Guarantor herefrom, shall
in any event be effective unless the same shall be in writing and signed by the
Administrative Agent, and then such waiver or consent shall be effective only in
the specific instance and for the specific purpose for which given.
SECTION 5.4 Notices. All notices and other communications provided to
any Guarantor under this Guaranty shall be in writing or by facsimile and
addressed, delivered or transmitted to such Guarantor at 90 Park Avenue, New
York, New York 10016, Telecopier No.: 212-687-0480, or at such other address or
facsimile number as may be designated by such Guarantor in a notice to the other
parties. Any notice, if mailed and properly addressed with postage prepaid or if
properly addressed and sent by pre-paid courier service, shall be deemed given
when received; any notice, if transmitted by facsimile, shall be deemed given
when transmitted.
SECTION 5.5 No Waiver; Remedies. In addition to, and not in limitation
of, Section 2.3 and Section 2.5, no failure on the part of any Lender Party or
any holder of a Note 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 remedies herein provided are cumulative
and not exclusive of any remedies provided by law.
SECTION 5.6 Captions. Section captions used in this Guaranty are for
convenience of reference only, and shall not affect the construction of this
Guaranty.
SECTION 5.7 Setoff. Each Lender Party shall, upon the occurrence of any
event or condition described in Section 9.1.6 of the Credit Agreement or, with
the consent of the Required Lenders, upon the occurrence of any other Event of
Default, have the right to appropriate and apply to the payment of the
Obligations owing to it (whether or not then due) any and all balances, credits,
deposits, accounts or moneys of any of the Guarantors then or thereafter
maintained with or otherwise held by such Lender Party; provided, however, that
any such appropriation and application shall be subject to the provisions of
Section 5.8 of the Credit Agreement. Each Lender Party agrees promptly to notify
such Guarantor and the Administrative Agent after any such setoff and
application made by such Lender Party; provided, however, that the failure to
give such notice shall not
-9-
<PAGE>
affect the validity of such setoff and application. The rights of each Lender
Party under this Section are in addition to other rights and remedies (including
other rights of setoff under applicable law or otherwise) which such Lender
Party may have.
SECTION 5.8 Severability. Wherever possible each provision of this
Guaranty shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Guaranty shall be prohibited by or
invalid under such law, such provision shall be ineffective to the extent of
such prohibition or invalidity, without invalidating the remainder of such
provision or the remaining provisions of this Guaranty.
SECTION 5.9 Governing Law. THIS GUARANTY SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF NEW YORK. FOR
PURPOSES OF ANY ACTION OR PROCEEDING INVOLVING THIS GUARANTY, EACH GUARANTOR
HEREBY EXPRESSLY SUBMITS TO THE JURISDICTION OF ALL FEDERAL AND STATE COURTS
LOCATED IN THE STATE OF NEW YORK AND CONSENTS THAT IT MAY BE SERVED WITH ANY
PROCESS OR PAPER BY REGISTERED MAIL OR BY PERSONAL SERVICE WITHIN OR WITHOUT THE
STATE OF NEW YORK.
SECTION 5.10 Waiver of Jury Trial. EACH GUARANTOR HEREBY KNOWINGLY,
VOLUNTARILY AND INTENTIONALLY WAIVES ANY RIGHTS IT MAY HAVE TO A TRIAL BY JURY
IN RESPECT OF ANY LITIGATION BASED HEREON, OR ARISING OUT OF, UNDER, OR IN
CONNECTION WITH, THIS GUARANTY. EACH GUARANTOR ACKNOWLEDGES AND AGREES THAT IT
HAS RECEIVED FULL AND SUFFICIENT CONSIDERATION FOR THIS PROVISION AND THAT THIS
PROVISION IS A MATERIAL INDUCEMENT FOR THE LENDERS ENTERING INTO THE CREDIT
AGREEMENT.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
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<PAGE>
IN WITNESS WHEREOF, each Guarantor has caused this Guaranty to be duly
executed and delivered by its officer thereunto duly authorized as of the date
first above written.
WARNACO INTERNATIONAL INC.
184 BENTON STREET INC.
WARMANA LIMITED
WARNACO MEN'S SPORTSWEAR INC.
C.F. HATHAWAY COMPANY
WARNACO SOURCING INC.
WARNER'S de COSTA RICA INC.
BLANCHE INC.
WARNACO INTERNATIONAL, L.L.C.
By Warnaco Inc., its Member
MYRTLE AVENUE, INC.
GREGORY STREET, INC.
ML INC.
DESIGNER HOLDINGS, LTD.
BROADWAY JEANSWEAR COMPANY, INC.
BROADWAY JEANSWEAR SOURCING, INC.
BROADWAY JEANSWEAR HOLDINGS, INC.
OUTLET STORES, INC.
OUTLET HOLDINGS, INC.
RIO SPORTSWEAR INC.
AEI MANAGEMENT CORP.
JEANSWEAR HOLDINGS, INC.
CALVIN KLEIN JEANSWEAR COMPANY
CKJ HOLDINGS INC.
KAIJAY ACQUISITION COMPANY
ABBEVILLE ACQUISITION COMPANY
NEW BEDFORD SHIPPERS CORP.
CKJ SOURCING INC.
By ________________________________________
Title:
-11-
<PAGE>
EXHIBIT K
JOINDER AGREEMENT
This JOINDER AGREEMENT (this "Joinder") dated as of _________________ __ ,
_____ , by ____________, a _____________ (the "Joining Party"), and delivered to
THE BANK OF NOVA SCOTIA ("Scotiabank"), as administrative agent (in such
capacity, the "Administrative Agent") for the Lenders, pursuant to the Sixth
Amended and Restated Credit Agreement, dated as of November 17, 1999 (as further
amended, supplemented, amended and restated or otherwise modified from time to
time, the "Credit Agreement"), among Warnaco Inc., a Delaware corporation, (the
"U.S. Borrower"), Designer Holdings, Ltd., a Delaware corporation, (the "Sub-
Borrower"), the wholly-owned Domestic Subsidiaries designated by Group (as
hereinafter defined) from time to time in accordance with Section 11.18 of the
Credit Agreement and set forth on Schedule I annexed thereto (the "Warnaco Sub
Borrowers"), Warnaco (HK) Ltd., a company organized under the laws of Barbados
"Warnaco (HK)"), Warnaco B.V. a company organized under the laws of The
Netherlands ("Warnaco BV"), Warnaco Netherlands B.V. a company organized under
the laws of The Netherlands ("Warnaco Netherlands"), Warnaco Holland B.V. a
company organized under the laws of The Netherlands ("Warnaco Holland"), The
Warnaco Group, Inc., a Delaware corporation ("Group"), the various financial
institutions as are or may become parties thereto (collectively, the "Lenders"),
Societe Generale, as documentation agent (in such capacity, the "Documentation
Agent") for the Lenders, Citibank, N.A., as syndication agent (in such capacity,
the "Syndication Agent") for the Lenders, the Administrative Agent and
Scotiabank and Salomon Smith Barney, Inc. as co-lead arrangers and co-book
managers (the "Arrangers").
WITNESSETH:
WHEREAS, the Joining Party is a wholly-owned Domestic Subsidiary of Group
and, prior to or contemporaneously with the execution of this Joinder has
executed a supplement to the Subsidiary Guaranty; and
WHEREAS, pursuant to Section 11.18 of the Credit Agreement, Group has
requested that the Joining Party become a Borrower under the Credit Agreement,
and the Joining Party is required, pursuant to clause (a)(ii) of Section 11.18
of the Credit Agreement, to execute and deliver this Joinder;
NOW, THEREFORE, the Joining Party hereby agrees as follows:
<PAGE>
ARTICLE I
DEFINITIONS
SECTION 1.1. Certain Definitions. The following terms (whether or not
underscored) when used in this Joinder shall have the following meanings (such
meanings to be equally applicable to the singular and plural forms thereof):
"Administrative Agent" is defined in the preamble.
"Credit Agreement" is defined in the preamble.
"Group" is defined in the preamble.
"Joinder" is defined in the preamble.
"Joinder Effective Date" is defined in Section 3.1.
"Joining Party" is defined in the preamble.
"Lenders" is defined in the preamble.
"Sub-Borrower" is defined in the preamble.
"U.S. Borrower" is defined in the preamble.
SECTION 1.2 Other Definitions. Terms for which meanings are provided in the
Credit Agreement are, unless otherwise defined herein or the context otherwise
requires, used in this Joinder with such meanings.
ARTICLE II
AGREEMENT
SECTION 2.1 Joining Party a Borrower. As of the Joinder Effective Date, the
Joining Party agrees that it will become a Borrower under the Credit Agreement
with respect to all Obligations hereafter incurred by it under the Loan
Documents, and will be bound by all terms, conditions and duties applicable to a
Borrower under the Credit Agreement and the other Loan Documents.
SECTION 2.2 Representations and Warranties. The Joining Party hereby
represents that each representation and warranty set forth in Article VII of the
Credit Agreement is true and correct as of the date hereof insofar as applicable
to such Joining Party (except to the extent such
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<PAGE>
representation or warranty expressly relates to an earlier date in which case
such representation and warranty shall be true and correct as of such earlier
date), and agrees to be bound by all covenants, agreements and obligations of a
Borrower pursuant to the Credit Agreement and all other Loan Documents to which
it is or may become a party.
ARTICLE III
CONDITIONS TO EFFECTIVENESS
SECTION 3.1 Joinder Effective Date. This Joinder shall be and become
effective on the date (the "Joinder Effective Date") when each of the conditions
set forth in this Article III shall have been fulfilled to the satisfaction of
the Administrative Agent.
SECTION 3.2 Resolutions, etc. The Managing Agents shall have received from
the Joining Party an originally executed copy of a certificate, dated the date
of the Joinder Effective Date, of its Secretary or Assistant Secretary as to
(a) resolutions of its Board of Directors then in full force and
effect authorizing the execution, delivery and performance of this Joinder,
the Notes and each other Loan Document to be executed by it (if any); and
(b) the incumbency and signatures of those of its officers authorized
to act with respect to this Joinder, the Notes and each other Loan Document
executed by it (if any),
upon which certificate each Lender may conclusively rely until it shall have
received a further certificate of the Secretary of the Joining Party canceling
or amending such prior certificate.
SECTION 3.3 Delivery of Notes. Each Lender shall have received its Notes
duly executed and delivered by the Joining Party.
SECTION 3.4 TradeExpress Agreement. If requested by the Administrative
Agent, the Administrative Agent shall have received a completed Warnaco Sub
Borrower Tradexpress Agreement, duly executed and delivered by the Joining
Party.
SECTION 3.5 Execution of Counterparts. The Administrative Agent shall have
received counterparts of this Joinder, duly executed and delivered on behalf of
the Joining Party.
SECTION 3.6 Certificate as to No Default, etc. The Managing Agents shall
have received from the U.S. Borrower originally executed certificates for each
Lender certifying as to the facts set forth in Section 6.1.5 of the Credit
Agreement as of the date hereof.
SECTION 3.7 Opinions of Counsel. The Managing Agents shall have received
opinions, dated the date hereof and addressed to the Managing Agents and all
Lenders, from
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<PAGE>
(a) Skadden, Arps, Slate, Meagher & Flom LLP, New York counsel to the
Obligors, substantially in the form of Exhibit G to the Credit Agreement,
and
(b) Stanley P. Silverstein, General Counsel for the U.S. Borrower,
substantially in the form of Exhibit H to the Credit Agreement.
SECTION 3.8 Fees and Expenses. The Administrative Agent shall have received
all fees and expenses due and payable pursuant to Section 4.2 (to the extent
then invoiced).
ARTICLE IV
MISCELLANEOUS
SECTION 4.1 Loan Document Pursuant to Credit Agreement. This Joinder is a
Loan Document executed pursuant to the Credit Agreement and shall be construed,
administered and applied in accordance with all of the terms and provisions of
the Credit Agreement. Any breach of any representation or warranty or covenant
or agreement contained in this Joinder shall be deemed to be an Event of Default
for all purposes of the Credit Agreement and the other Loan Documents.
SECTION 4.2 Fees and Expenses. The Joining Party shall pay all reasonable
out-of-pocket expenses incurred by the Administrative Agent in connection with
the preparation, negotiation, execution and delivery of this Joinder and the
documents and transactions contemplated hereby, including the reasonable fees
and disbursements of Mayer, Brown and Platt, as counsel for the Administrative
Agent.
SECTION 4.3 Headings. The various headings of this Joinder are inserted
for convenience only and shall not affect the meaning or interpretation of this
Joinder or any provisions hereof.
SECTION 4.4 Execution in Counterparts and by Facsimile. This Joinder may be
executed by the parties hereto in several counterparts and by facsimile, each of
which shall be deemed to be an original and all of which counterparts shall
constitute together but one and the same agreement.
SECTION 4.5 Cross-References. References in this Joinder to any Article or
Section are, unless otherwise specified or otherwise required by the context, to
such Article or Section of this Joinder.
SECTION 4.6 Successors and Assigns. This Joinder shall be binding upon and
inure to the benefit of the parties hereto and their respective successors and
assigns.
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<PAGE>
SECTION 4.7 GOVERNING LAW. THIS JOINDER SHALL BE DEEMED TO BE A CONTRACT
MADE UNDER AND GOVERNED BY THE LAWS OF THE STATE OF NEW YORK.
IN WITNESS WHEREOF, the Joining Party has caused this Joinder to be duly
executed as of the date first above written.
[NAME OF JOINING PARTY]
By:
-----------------------------
Name:
Title:
ACKNOWLEDGED AND ACCEPTED:
THE BANK OF NOVA SCOTIA,
as Administrative Agent
By:
-------------------------------
Name:
Title:
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<PAGE>
EXHIBIT L
DESIGNATION AND RELEASE
CERTIFICATE
The Bank of Nova Scotia,
as Administrative Agent
One Liberty Plaza
New York, New York 10006
Attention: ___________________
WARNACO INC./DESIGNER HOLDINGS, LTD./WARNACO (HK) LTD./
WARNACO B.V./WARNACO NETHERLANDS B.V./ WARNACO HOLLAND B.V.
Gentlemen and Ladies:
This Designation and Release Certificate (this "Certificate") is delivered
to you pursuant to clause (b) of Section 11.18 of the Sixth Amended and Restated
Credit Agreement, dated as of November 17, 1999 (as amended, supplemented
amended and restated or otherwise modified from time to time, the "Credit
Agreement"), among Warnaco Inc., a Delaware corporation (the "U.S. Borrower"),
Designer Holdings, Ltd., a Delaware corporation (the "Sub Borrower"), the
wholly-owned Domestic Subsidiaries designated by Group (as hereinafter defined)
from time to time in accordance with Section 11.18 of the Credit Agreement and
set forth on Schedule I thereto (the "Warnaco Sub-Borrowers"), Warnaco (HK)
Ltd., a company organized under the laws of Barbados ("Warnaco (HK)"), Warnaco
B.V., a company organized under the laws of The Netherlands ("Warnaco B.V."),
Warnaco Netherlands B.V., a company organized under the laws of The Netherlands
("Warnaco Netherlands"), Warnaco Holland B.V., a company organized under the
laws of The Netherlands ("Warnaco Holland"; together with Warnaco (HK), Warnaco
B.V. and Warnaco Netherlands, the "Foreign Borrowers"), The Warnaco Group, Inc.,
a Delaware corporation ("Group"), the various financial institutions as are or
may become parties thereto (collectively, the "Lenders"), Societe Generale, as
documentation agent (the "Documentation Agent") for the Lenders, Citibank, N.A.,
as syndication agent (the "Syndication Agent") for the Lenders, The Bank of Nova
Scotia ("Scotiabank"), as administrative agent (the "Administrative Agent") for
the Lenders and Scotiabank and Salomon Smith Barney, Inc. as co-lead arrangers
and co-book managers (the "Arrangers "). Unless otherwise defined herein or the
context otherwise requires, terms used herein have the meanings provided in the
Credit Agreement.
Group does hereby designate [name(s) of designated entity (or entities)],
[each of] which is currently [a/the] [Sub Borrower, Warnaco Sub Borrower or
Foreign Borrowers] under the terms of the Credit Agreement, as a Released
Borrower. Group represents and warrants that, as
<PAGE>
of the date hereof, all of the conditions listed in clause (b) of Section 11.18
of the Credit Agreement have been fulfilled in their entirety by [such/each
respective] Released Borrower. Upon delivery of this certificate and a
certificate of the Released Borrower in accordance with clause (b)(v) of Section
11.18 of the Credit Agreement, [each/the] Released Borrower shall be released of
all obligations as a Borrower under the Credit Agreement (except such
obligations which survive such release pursuant to Section 11.5 of the Credit
Agreement).
<PAGE>
IN WITNESS WHEREOF, Group has caused this Certificate to be executed this
____ day of __________________ , [_____].
THE WARNACO GROUP, INC.
By:
-----------------------------
Name:
Title:
<PAGE>
EXHIBIT 21
WARNACO GROUP INC. AND SUBSIDIARIES
Subsidiaries of the Registrant
Warnaco Group Inc. ("Warnaco"), a Delaware corporation, consolidates
all majority owned subsidiaries. The principal consolidated subsidiaries, all
of which are wholly owned by Warnaco or its wholly-owned subsidiaries, except
as indicated, are listed below. Included on the list are subsidiaries which
individually are not significant subsidiaries but primarily represent
subsidiaries in countries in which the Company has operations. The names of
Warnaco's other consolidated subsidiaries, which are primarily wholly owned by
Warnaco or its wholly-owned subsidiaries, are not listed because all such
subsidiaries, considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary.
<TABLE>
<CAPTION>
Incorporation
Company Country or State
- --------------------------------------------------------- ---------------------
<S> <C>
184 Benton Street Inc. Delaware
A.B.S. Clothing Collection Inc. Delaware
Abbeville Manufacturing Co. Delaware
AEI Management Corporation Delaware
Authentic Fitness Corporation Delaware
Authentic Fitness de Mexico, S.A. de C.V. Mexico
Authentic Fitness (H.K.) Ltd. Barbados
Authentic Fitness of Canada Inc. Canada
Authentic Fitness Online Inc. Nevada
Authentic Fitness Products Inc. Delaware
Authentic Fitness Retail Inc. Delaware
Blanche Inc. Delaware
Broadway Jeanswear Company Inc. Delaware
Broadway Jeanswear Holding Inc. Delaware
Broadway Jeanswear Sourcing Inc. Delaware
CCC Acquisition Corp. Delaware
CCC Acquisition Realty Corp. Delaware
CCC Cal. Corp. Delaware
CCC Ten Corp. Delaware
C.F. Hathaway Company Delaware
Calvin Klein France SnC France
Calvin Klein Jeanswear Company Delaware
Centro de Corte de Tetla S.A. de C.V. Mexico
CKJ Holdings Inc. Delaware
CKJ Sourcing Inc. Delaware
Designer Holdings Ltd. Delaware
Designer Holdings Overseas Ltd. Hong Kong
Donatex-Warnaco S.A. Belgium
Eratex-Warnaco Lac Two GmbH & Co. KG Germany
Euralis S.A.S. France
GJM (HK) Manufacturing Ltd. Hong Kong
GJM (Philippines) Manufacturing Inc. Philippines
GJM Lanka Manufacturing (Private) Ltd. Sri Lanka
Gregory Street Inc. Delaware
Hamlet Manufacturing S.A. Honduras
Hamlet Shirt Company Ltd. United Kingdom
Izka SC France
Jeanswear Holdings Inc. Delaware
Juarmex S.A. de C.V. Mexico
Kai Jay Manufacturing Company Delaware
Lejaby S.A.S. France
Lenitex-Warnaco GesmbH Austria
Leratex-Warnaco Ltd. United Kingdom
Linda Vista de Tlaxcala S.A. de C.V. Mexico
Linda Vista de Veracruz S.A. de C.V. Mexico
Lintex-Warnaco S.A. Switzerland
LMK Ltd. Isle of Jersey
Mullion International BVI British Virgin Islands
Mulmkion B.V. Netherlands
Myrtle Avenue Inc. Delaware
New Bedford Shippers Corp. Delaware
Olga de Villanueva S.A. Honduras
Olguita de Mexico S.A. Mexico
Outlet Holdings Inc. Delaware
Outlet Stores Inc. Delaware
Panyu GJM Shatou Manufacturing Limited China
Penhaligon & Jeavons Investment Ltd. United Kingdom
Penhaligon's by Request, Inc. Delaware
Penhaligon's Ltd. United Kingdom
Penhaligon's Pacific Ltd. Hong Kong
PMJ S.A. France
Private Pleasures Ltd. United Kingdom
Rio Sportswear Inc. Delaware
</TABLE>
<PAGE>
WARNACO GROUP INC. AND SUBSIDIARIES
Subsidiaries of the Registrant
Warnaco Group Inc. ("Warnaco"), a Delaware corporation, consolidates
all majority owned subsidiaries. The principal consolidated subsidiaries, all
of which are wholly owned by Warnaco or its wholly-owned subsidiaries, except
as indicated, are listed below. Included on the list are subsidiaries which
individually are not significant subsidiaries but primarily represent
subsidiaries in countries in which the Company has operations. The names of
Warnaco's other consolidated subsidiaries, which are primarily wholly owned by
Warnaco or its wholly-owned subsidiaries, are not listed because all such
subsidiaries, considered in the aggregate as a single subsidiary, would not
constitute a significant subsidiary.
<TABLE>
<CAPTION>
Incorporation
Company Country or State
- --------------------------------------------------------- -----------------------
<S> <C> >
Tilbes Servisport Inc. Canada
Ubertech Products Inc. Texas
Ventures Ltd. Delaware
Vista de Huamantla S.A. de C.V. Mexico
Vista de Puebla S.A. de C.V. Mexico
Vista de Yucatan S.A. de C.V. Mexico
WAC Internacional Distribucion S.A. de C.V. Mexico
Warmana Limited Delaware
Warnaco (H.K.) Ltd. Barbados
Warnaco B.V. Netherlands
Warnaco France SARL France
Warnaco Holland B.V. Netherlands
Warnaco Inc. Delaware
Warnaco International Inc. Delaware
Warnaco Intimo (Spain) S.A. Spain
Warnaco Japan K.K. Japan
Warnaco Lac One GmbH Germany
Warnaco Lac Two GmbH Germany
Warnaco Ltd. (U.K.) United Kingdom
Warnaco Men's Sportswear Inc. Delaware
Warnaco Netherlands B.V. Netherlands
Warnaco of Canada Company Canada
Warnaco Operations Corporation Delaware
Warnaco Sourcing Inc. Delaware
Warnaco South Africa (Proprietary) Limited South Africa
Warnaco SrL Italy
Warnaco U.S. Inc. Connecticut
Warnaco Ventures Ltd. Delaware
Warner's (EIRE) Teoranta Ireland
Warner's (U.K.) Ltd. United Kingdom
Warner's Aiglon S.A. France
Warner's Company (Belgium) S.A. Belgium
Warner's de Costa Rica Inc. Delaware
Warner's de Honduras S.A. Honduras
Warner's de Mexico S.A. de C.V. Mexico
</TABLE>
<PAGE>
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement
No. 333-41415 on Form S-3 and Registration Statement Nos. 333-51193, 33-60093,
33-60091, 33-59091, 33-58148 and 33-58146 on Form S-8 of The Warnaco Group,
Inc. of our report dated March 3, 2000, appearing in this Annual Report on
Form 10-K/A of The Warnaco Group, Inc. for the year ended January 1, 2000.
Deloitte & Touche LLP
New York, New York
March 31, 2000
<PAGE>
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-3 (No. 333-41415) and the Registration Statements on
Form S-8 (Nos. 333-51193, 33-60093, 33-60091, 33-59091, 33-58148 and 33-58146)
of The Warnaco Group, Inc. of our report dated March 2, 1999 relating to the
financial statements and financial statement schedule as of and for the two
fiscal years in the period ended January 2, 1999 which appears in this
Form 10-K/A.
PRICEWATERHOUSECOOPERS LLP
New York, New York
March 31, 2000
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE WARNACO GROUP, INC. FOR THE YEAR ENDED JANUARY 1,
2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<RESTATED>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JAN-01-2000
<PERIOD-START> JAN-03-1999
<PERIOD-END> JAN-01-2000
<CASH> 9,328
<SECURITIES> 72,921
<RECEIVABLES> 347,833
<ALLOWANCES> 32,872
<INVENTORY> 734,439
<CURRENT-ASSETS> 1,197,664
<PP&E> 479,298
<DEPRECIATION> 152,946
<TOTAL-ASSETS> 2,762,985
<CURRENT-LIABILITIES> 879,519
<BONDS> 1,187,951
0
0
<COMMON> 654
<OTHER-SE> 562,662
<TOTAL-LIABILITY-AND-EQUITY> 2,762,985
<SALES> 2,114,156
<TOTAL-REVENUES> 2,114,156
<CGS> 1,413,149
<TOTAL-COSTS> 1,884,257
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 206,098
<INTEREST-EXPENSE> 80,976
<INCOME-PRETAX> 148,923
<INCOME-TAX> 51,137
<INCOME-CONTINUING> 97,786
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 97,786
<EPS-BASIC> 1.75
<EPS-DILUTED> 1.72
</TABLE>
