Exhibit 99.1
THE BANK OF NOVA SCOTIA SALOMON SMITH BARNEY INC.
ONE LIBERTY PLAZA, 25TH FLOOR 390 GREENWICH STREET
NEW YORK, NY 10006 NEW YORK, NY 10013
CITIBANK, N.A.
399 PARK AVENUE
NEW YORK, NY 10043
MORGAN GUARANTY TRUST COMPANY COMMERZBANK A.G.
OF NEW YORK 2 WORLD FINANCIAL CENTER
60 WALL STREET NEW YORK, NY 10281
NEW YORK, NY 10260
SOCIETE GENERALE
1221 AVENUE OF THE AMERICAS
NEW YORK, NY 10020
July 19, 2000
Warnaco Inc.
90 Park Avenue
New York, NY 10016
Ladies and Gentlemen:
You have advised The Bank of Nova Scotia ("SCOTIABANK"), Salomon Smith
Barney Inc. ("SSBI"), Citibank, N.A. ("CITIBANK"), Morgan Guaranty Trust
Company of New York ("MORGAN"), Commerzbank A.G. ("COMMERZBANK") and
Societe Generale ("SG") that The Warnaco Group, Inc. ("GROUP") intends to
restructure the outstanding bank credit facilities of Group and its
subsidiaries through an intercreditor arrangement which will effectively
amend, modify, restate and, in certain cases, extend such facilities on
common terms (the "TRANSACTION"). Scotiabank, SSBI, Morgan, Commerzbank and
SG are sometimes referred to herein as the "ARRANGERS". Scotiabank,
Citibank, Morgan, Commerzbank and SG are sometimes referred to herein as
the "LEAD LENDERS". The Arrangers and Citibank are sometimes referred to
herein as the "MANAGERS".
In connection with the foregoing, each of the Lead Lenders is pleased to
advise you of its several commitment to participate in such Transaction to
the full extent of its and its affiliates total aggregate commitments,
loans and other extensions of credit under (including the undrawn portion
of any of) the Covered Facilities, as lenders and credit providers under
the Covered Facilities as of the date hereof, all upon and subject to the
terms and conditions set forth in this letter and in the summary of terms
attached as Annex I hereto (the "SUMMARY OF TERMS" and, together with this
letter agreement, the "COMMITMENT LETTER"). Scotiabank and SSBI are pleased
to advise you of their willingness to act as Lead Arrangers (the "LEAD
ARRANGERS") for the Transaction. Scotiabank and Citibank are pleased to
advise you of their willingness to act as Debt Coordinators (the "DEBT
COORDINATORS") for the Transaction. Scotiabank is pleased to advise you of
its willingness to act as the sole and exclusive administrative agent for
the Transaction (in such capacity, the "ADMINISTRATIVE AGENT"). All
capitalized terms used and not otherwise defined herein shall have the same
meanings as specified therefor in the Summary of Terms.
The commitment of the Lead Lenders hereunder and the undertaking of
Scotiabank, Citibank and SSBI to act in the capacities specified above are
subject to the satisfaction of each of the following conditions precedent
in a manner acceptable to the Arrangers: (a) the execution and delivery of
letter waivers by the respective requisite number of lenders and other
providers of credit under such of the existing facilities of Group and its
subsidiaries as is required to waive compliance with certain financial
covenants and to implement other undertakings during the period prior to
the effective date of the Transaction (the "EFFECTIVE DATE"); (b) the
participation in the Transaction by lenders and other providers of credit
to Group and its subsidiaries (collectively, the "LENDERS") representing an
aggregate percentage of the total indebtedness of Group and its
subsidiaries sufficient to provide sufficient liquidity for Group and its
subsidiaries to conduct operations in a manner consistent with current
practice and reasonably anticipated future requirements and (c) the
completion of a satisfactory confirmatory due diligence review of the
assets, liabilities (including contingent liabilities) and businesses of
Group and its subsidiaries; it being understood that such reviews and our
discussions with you are ongoing, but on the basis of such information and
due diligence investigation to date, the Managers have no reason to believe
that you will be unable to satisfy the closing conditions as specified in
the attached Summary of Terms on a timely basis.
You agree to actively assist the Arrangers in obtaining the support of the
Lenders for the Transaction. Such assistance shall include (a) your
providing and causing your advisors to provide the Arrangers and the
Lenders upon request with all information reasonably deemed necessary by
the Arrangers to complete the Transaction, (b) using your commercially
reasonable efforts to ensure that the efforts of the Arrangers benefit
materially from your existing lending relationships and (c) otherwise
assisting the Arrangers by making your officers and advisors available from
time to time to attend and make presentations regarding the business and
prospects of Group and its subsidiaries, as appropriate, at one or more
meetings of Lenders.
You hereby represent, warrant and covenant that (a) all written
information, other than Projections (as defined below), which has been or
is hereafter made available to the Arrangers or the Lenders by you or any
of your representatives (or on your or their behalf) or by Group or any of
its subsidiaries or representatives (or on their behalf) in connection with
any aspect of the Transaction (the "INFORMATION") is and will be complete
and correct in all material respects and does not and will not contain any
untrue statement of a material fact or omit to state a material fact
necessary to make the statements contained therein, taken as a whole, not
misleading and (b) all financial projections concerning Group and its
subsidiaries that have been or are hereafter made available to the
Arrangers by you or any of your representatives (or on your or their
behalf) or by Group or any of its subsidiaries or representatives (or on
their behalf) (the "PROJECTIONS") have been or will be prepared in good
faith based upon reasonable assumptions. You agree to furnish us with such
Information and Projections as we may reasonably request and to supplement
the Information and the Projections from time to time until the Effective
Date. In arranging this Transaction, the Arrangers are and will be using
and relying on the Information and the Projections (collectively, the
"PRE-COMMITMENT INFORMATION") without independent verification thereof.
By executing this Commitment Letter, you agree to reimburse each of the
Managers from time to time on demand for all reasonable out-of-pocket fees
and expenses (including, but not limited to, the reasonable fees,
disbursements and other charges of Shearman & Sterling, as counsel to the
Debt Coordinators and Lead Arrangers, and due diligence expenses) incurred
in connection with the Transaction and the preparation of the definitive
documentation therefor.
You agree to indemnify and hold harmless each of the Managers, each Lender
and each of their affiliates and their officers, directors, employees,
agents, advisors and other representatives (each an "INDEMNIFIED PARTY")
from and against (and will reimburse each Indemnified Party as the same are
incurred for) any and all claims, damages, losses, liabilities and expenses
(including, without limitation, the reasonable fees, disbursements and
other charges of counsel) 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 (including, without limitation, in connection with any
investigation, litigation or proceeding or preparation of a defense in
connection therewith) (a) any aspect of the Transaction or any similar
transaction and any of the other transactions contemplated thereby or (b)
the Facility Documents, except to the extent such claim, damage, loss,
liability or expense is found in a final, nonappealable judgment by a court
of competent jurisdiction to have resulted from such Indemnified Party's
gross negligence or willful misconduct. In the case of an investigation,
litigation or proceeding to which the indemnity in this paragraph applies,
such indemnity shall be effective whether or not such investigation,
litigation or proceeding is brought by you, your equityholders or creditors
or an Indemnified Party, whether or not an Indemnified Party is otherwise a
party thereto and whether or not any aspect of the Transaction is
consummated. You also agree that no Indemnified Party shall have any
liability (whether direct or indirect, in contract or tort or otherwise) to
you or your subsidiaries or affiliates or to your or their respective
equity holders or creditors arising out of, related to or in connection
with any aspect of the Transaction, except for direct, as opposed to
consequential, damages determined in a final nonappealable judgment by a
court of competent jurisdiction to have resulted from such Indemnified
Party's gross negligence or willful misconduct.
This Commitment Letter and the fee letters among you and the Arrangers, you
and the Lead Arrangers, and you and the Administrative Agent, in each case
of even date herewith (collectively, the "FEE LETTERS") and the contents
hereof and thereof are confidential and, except for the disclosure hereof
or thereof on a confidential basis to your accountants, attorneys and other
professional advisors retained in connection with the Transaction or as
otherwise required by law, may not be disclosed in whole or in part to any
person or entity without our prior written consent; provided, however, it
is understood and agreed that you may disclose this Commitment Letter
(including the Summary of Terms) but not the Fee Letters after your
acceptance of this Commitment Letter and the Fee Letters, in filings with
the Securities and Exchange Commission and other applicable regulatory
authorities and stock exchanges, and you may disclose the material terms of
this Commitment Letter (including the Summary of Terms) but not the Fee
Letters in a public press release.
The provisions of the immediately preceding three paragraphs shall remain
in full force and effect regardless of whether any definitive documentation
for the Transaction shall be executed and delivered and notwithstanding the
termination of this Commitment Letter.
In connection with the services and transactions contemplated hereby, you
agree that each of the Managers are permitted to access, use and share with
any of their agents, advisors (legal or otherwise) or representatives, to
the extent reasonably required in connection with the Transaction and
subject to undertakings of such recipients to maintain the confidentiality
of such information to the extent required hereby, any information
concerning you, Group or any of your or its respective affiliates that is
or may come into the possession of the Managers. Each Manager and their
affiliates will treat confidential information relating to you, Group and
your and its respective affiliates with the same degree of care as they
treat their own confidential information.
This Commitment Letter and the Fee Letters may be executed in counterparts
which, taken together, shall constitute an original. Delivery of an
executed counterpart of this Commitment Letter or either of the Fee Letters
by telecopier shall be effective as delivery of a manually executed
counterpart thereof.
This Commitment Letter and the Fee Letters shall be governed by, and
construed in accordance with, the laws of the State of New York. Each of
the Managers and you 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 Commitment Letter
(including, without limitation, the Summary of Terms), the Fee Letters, the
Transaction and the other transactions contemplated hereby and thereby or
the actions of any of the Managers in the negotiation, performance or
enforcement hereof. The commitments and undertakings of the Managers may be
terminated by us if you fail to perform your obligations under this
Commitment Letter or the Fee Letters on a timely basis after being notified
thereof.
This Commitment Letter, together with the Summary of Terms and the Fee
Letters, embodies the entire agreement and understanding among the
Managers, you, Group and your and its affiliates with respect to the
Transaction and supersedes all prior agreements and understandings relating
to the specific matters hereof. However, please note that the terms and
conditions of the commitment and undertaking of the Managers hereunder are
not limited to those set forth herein or in the Summary of Terms. Those
matters that are not covered or made clear herein or in the Summary of
Terms or the Fee Letters are subject to mutual agreement of the parties. No
party has been authorized by any Manager to make any oral or written
statements that are inconsistent with this Commitment Letter.
This Commitment Letter is not assignable by you and is intended to be
solely for the benefit of the parties hereto and the Indemnified Parties.
This Commitment Letter and all commitments and undertakings of the Managers
hereunder will expire at 6:00 a.m. (New York City time) on July 20, 2000
unless you execute this Commitment Letter and the Fee Letters and return
them to us prior to that time. Thereafter, all commitments and undertakings
of the Managers hereunder will expire on September 30, 2000, unless the
Effective Date occurs on or prior thereto.
[remainder of this page intentionally left blank]
We are pleased to have the opportunity to work with you on this important
transaction.
Very truly yours,
THE BANK OF NOVA SCOTIA
By /s/
-------------------------------
Title:
SALOMON SMITH BARNEY INC.
By /s/
-------------------------------
Title:
CITIBANK, N.A.
By /s/
-------------------------------
Title:
MORGAN GUARANTY TRUST
COMPANY OF NEW YORK
By /s/
-------------------------------
Title:
COMMERZBANK A.G.
By /s/
-------------------------------
Title:
SOCIETE GENERALE
By /s/
-------------------------------
Title:
ACCEPTED AND AGREED TO
as of July 19, 2000
WARNACO INC.
By /s/
----------------------------
Title:
ANNEX
AMENDMENT, MODIFICATION AND RESTATEMENT OF
WARNACO CREDIT FACILITIES
SUMMARY OF PRINCIPAL TERMS AND CONDITIONS OF
INTERCREDITOR AGREEMENT
This Summary of Principal Terms and Conditions outlines certain terms of
proposed amendments, modifications and restatements of each of the credit
facilities and derivative agreements listed on Annex I (the "EXISTING
FACILITIES"; certain terms defined in Annex I are used herein with the same
meaning) of The Warnaco Group, Inc. ("GROUP") and its subsidiaries to be
effected through an intercreditor agreement (the "INTERCREDITOR AGREEMENT")
and related agreements and documents (collectively, the "FACILITY
DOCUMENTS") to be entered into by the Lenders, Borrowers and Guarantors
described below, and having terms and conditions described below.
<TABLE>
<S> <C>
BORROWERS; TERMS OF THE The Borrowers (or, in the case of the derivative agreements
EXISTING FACILITIES: listed in items __ of Annex I (the "EXISTING DERIVATIVE
AGREEMENTS"), the obligors) under each of the Existing
Facilities will remain unchanged. Except as
contemplated by this Summary of Principal Terms and
Conditions, and certain other changes acceptable to the
Debt Coordinators and Group, the terms and provisions
of the Existing Facilities will remain unchanged and in
effect.
GUARANTORS: Group and all direct and indirect subsidiaries of
Group, other than (i) any foreign subsidiary that is or
is a subsidiary of a "controlled foreign corporation"
under Section 957 of the Internal Revenue Code (a
"CFC"), and (ii) Designer Finance Trust to the extent
the terms of Trust Originated Preferred Securities
issued by such trust preclude the issuance of a
guaranty by such trust (the "GUARANTORS"). The
Guarantors under the foreign credit facilities listed
in items __ of Annex I (the "FOREIGN FACILITIES") will
include such CFC subsidiaries of Group as shall be
agreed.
LENDERS: Each of the lenders under an Existing Facility, and
each senior lender under a credit facility that is
entered into after the Effective Date in compliance
with the Facility Documents (the "NEW FACILITIES"), in
each case that becomes (either directly or through the
action of an authorized agent or other representative
acting on its behalf) a party to the Intercreditor
Agreement as provided therein (collectively, the
"LENDERS").
LEAD ARRANGERS: The Bank of Nova Scotia ("SCOTIABANK") and Salomon
Smith Barney Inc. ("SSBI") (the "LEAD ARRANGERS").
CO-ARRANGERS: Morgan Guaranty Trust Company of New York ("MORGAN"),
Commerzbank A.G., New York Branch ("COMMERZ") and
Societe Generale ("SG") (and together with the Lead
Arrangers, the "ARRANGERS").
DEBT COORDINATORS: Scotiabank and Citibank, N.A. (the "DEBT
COORDINATORS").
ADMINISTRATIVE AGENT: Scotiabank.
COVERED FACILITIES: The credit facilities covered by the Facility Documents
(the "COVERED FACILITIES") shall consist of (i) the
Existing Facilities and (ii) the New Facilities.
EFFECTIVE DATE: The effective date of the amendment, modification,
extension and restatement of the Existing Facilities
pursuant to the Intercreditor Agreement is anticipated
to occur on or before September 30, 2000 (the
"EFFECTIVE DATE").
COMMITMENT
TERMINATION/MATURITY DATE: The commitment termination date or maturity date, as
applicable, of each of the Existing Facilities
identified in Annex I under the heading "Extending
Facilities" (the "EXTENDING FACILITIES") shall be
extended to August 12, 2002.
The commitment termination date or maturity date, as
applicable, of each of the other Existing Facilities
shall remain unchanged.
PURPOSE: Proceeds of amounts under the Existing Facilities will
be used solely as set forth in the Existing Facilities.
INTEREST, The margins over the applicable floating interest rates
COMMITMENT/FACILITY FEES, and the commitment/facility fees and bankers'
ETC.: acceptance and letter of credit fees provided for in
each of the Existing Facilities shall be as provided on
the pricing grid attached hereto as Annex II.
EXTENSION FEE FOR On the Effective Date, the Borrowers shall pay to the
EXTENDING FACILITIES: Administrative Agent, for the pro rata benefit of the
Lenders party to the Extending Facilities, an extension
fee of 0.75% of the outstanding commitments, and,
without duplication, loans outstanding, under each of
the Extending Facilities.
AMENDMENT FEE FOR On the Effective Date, the Borrowers shall pay to the
OTHER EXISTING FACILITIES: Administrative Agent, for the pro rata benefit of the
Lenders party to the Existing Facilities that are not
Extending Facilities who approve the amendment and
intercreditor facility, an amendment fee of 0.25% of
the outstanding principal balance of the term loans and
revolving credit commitments of such Lenders
outstanding under such Existing Facilities.
APPLICATION OF ALL Required to be pro rata across all of the Covered
OPTIONAL AND MANDATORY Facilities (with tax efficient mechanics to be
PREPAYMENTS AND COMMITMENT considered, and excluding prepayments of revolving
REDUCTIONS: facilities that do not also permanently reduce
commitments thereunder); provided that the prepayments
and commitment reductions which would otherwise be made
with respect to the Long-Term Facilities will instead
be allocated pro rata to each of the Lenders under the
Long-Term Facilities (i) based on their aggregate
credit extensions outstanding and commitments, if any,
under the Short-Term Facilities, with such prepayments
and commitment reductions specified in this proviso
applied to prepay credit extensions outstanding and
reduce commitments, if any, of such Lenders under the
Short-Term Facilities in the direct order of maturity
and (ii) if such Lenders have no (or no further) credit
extensions outstanding or remaining commitments under
the Short-Term Facilities, to such Lenders pro rata
under the Long-Term Facilities in the direct order of
maturity. As used in this paragraph, "LONG-TERM
FACILITIES" means those Covered Facilities with
scheduled amortization after August 12, 2002, and
"SHORT-TERM FACILITIES" means all other Covered
Facilities. Prepayments applicable to the Existing
Derivative Agreements shall be used to collateralize
the obligations thereunder and shall be applied on a
pro rata basis based on mark-to-market valuations at
the time of such prepayments. All prepayments and
reductions of the Covered Facilities shall, once
allocated among Covered Facilities as aforesaid, be
applied first to any term loans outstanding under each
such Facility and then to permanently reduce any
revolving loans (and corresponding commitments).
Notwithstanding the foregoing or anything to the
contrary contained herein, 100% of the net cash
proceeds of Designated Capital Markets Transactions (to
be defined as any debt or equity transaction other than
pari-passu secured debt) shall be applied first to the
permanent prepayment of the Bridge Facility.
MANDATORY PREPAYMENTS The Covered Facilities shall be permanently reduced
AND COMMITMENT REDUCTIONS: with (a) 100% of the net cash proceeds of all
non-ordinary-course asset sales or other dispositions
of property by Group and its subsidiaries (including
insurance and condemnation proceeds in excess of an
agreed amount), subject to limited exceptions to be
agreed, (b) 100% of Extraordinary Receipts (to be
defined and to exclude cash receipts in the ordinary
course of business and with other exceptions to be
agreed), (c) 100% of the net cash proceeds of issuances
of debt obligations of Group and its subsidiaries (with
exceptions to be agreed, and such debt to be issued on
terms as specified under "Covenants" below), and (d)
100% of the net cash proceeds of issuances of equity
and capital contributions of Group and its subsidiaries
until the Bridge Facility is permanently prepaid (it
being understood that this provision may be amended by
the unanimous vote of the Bridge Lenders, rather than a
vote of the Required Lenders), and thereafter with a
percentage of the net cash proceeds of issuances of
equity and capital contributions of Group and its
subsidiaries to be agreed, and subject to other limited
exceptions to be agreed.
COLLATERAL: The Covered Facilities will be secured by all of the
assets (real and personal, tangible and intangible, now
or hereafter existing, and including material
leaseholds, if any, to be agreed upon) of Group and
each of its direct and indirect domestic and non-CFC
foreign subsidiaries (whether existing or subsequently
acquired or organized); provided, however, that (i) the
Collateral in the case of any foreign subsidiary that
is a CFC, will be limited to a pledge of 66% of the
capital stock of each such first-tier foreign
subsidiary to the extent the pledge of any greater
percentage would result in adverse tax consequences to
Group and (ii) the granting and perfection of
Collateral not otherwise contractually prohibited will
be subject to cost efficiency determinations reasonably
made by the Debt Coordinators, taking into account,
among other things, adverse tax consequences and other
parameters as may be agreed by the Debt Coordinators.
The Collateral will be granted to and held by an
independent Collateral Trustee (the "COLLATERAL
TRUSTEE") acceptable to Group and the Debt Coordinators
for the benefit of the Lenders. The Collateral will be
automatically released, so long as no Default or Event
of Default shall have occurred or be existing under the
Facility Documents, if (a) the senior long-term
unsecured debt of Group is rated at least Baa2 by
Moody's and the corporate credit rating of Group is
rated at least BBB by S&P or (b) a fixed charge
coverage ratio and a leverage ratio to be determined
shall be maintained for two consecutive fiscal
quarters.
Notwithstanding the preceding paragraph, the
Securitization Facility will not be included as a
Covered Facility (except for purposes of the second
paragraph of the Commitment Letter), and therefore the
Collateral will not include the assets held with
respect to the Securitization Facility; it being
understood, however, that the securitization back-up
facility will be extended to August 12, 2002 either
directly or through evergreen or other
capital-efficient structures. Furthermore, the debt
associated with the Securitization Facility will be
effectively excluded from Total Debt for covenant
compliance purposes in a manner acceptable to Group and
the Debt Coordinators. The current securitization
structure will be modified in accordance with the
agreement in principle between Group and the Debt
Coordinators.
In addition, the Foreign Facilities will be secured by
the guarantees and assets of CFC subsidiaries of Group
that presently secure such Facilities, plus such
additional assets of CFC subsidiaries of Group as shall
be agreed upon in accordance with the standards
specified above. In this connection, if the maturity of
the Covered Facilities is accelerated, the Lenders
under the Foreign Facilities will be required to share
with the other Lenders pro rata any amount recovered by
the Lenders under the Foreign Facilities in respect of
such Foreign Facilities.
VOTING; OTHER ACTIONS 1. Amendments and modifications of the Intercreditor
BY LENDERS: Agreement and the other Facility Documents and actions
to be taken with respect to the Collateral shall
require the consent of Lenders (or their authorized
agents or other representatives) holding greater than
50% of the total outstanding principal amount plus
undrawn but available commitments and the outstanding
stated amount of all Letters of Credit under the
Covered Facilities (the "REQUIRED LENDERS"); provided
that, except as otherwise specified herein, a release
of all or substantially all Collateral shall require
the release of all Lenders. Furthermore, in addition to
the requisite approvals required under the Covered
Facilities, no amendments, modifications, waivers or
other changes under any of the Covered Facilities which
shorten maturity or increase the amount of any payment
of principal or shorten the date of any other payment,
or increase the rate of interest, or involve the
release or other actions taken with respect to the
Collateral, or create additional or more restrictive
covenants than those generally applicable to the
Covered Facilities, shall be effective unless approved
by the Required Lenders. Solely for purposes of voting,
obligations under Derivative Agreements shall not be
counted except for net obligations owing under the
Equity Derivatives.
2. Except for receipt of scheduled payments of
principal under certain Foreign Facilities to be
determined, and other scheduled payments of
interest, fees, and payment of costs and expenses
under the Existing Facilities, as modified
pursuant to the Facility Documents, any amounts
(other than in respect of Designated Capital
Markets Transactions, as specified under
"Mandatory Prepayments and Commitment Reductions"
above) received by any Lender will be shared pro
rata with the other Lenders.
3. From the Effective Date to August 12, 2002, no
Lender will act upon any default under its
respective Existing Facility(ies); the Facility
Documents will permit setoff, acceleration and
enforcement action only upon the instruction of
the Required Lenders.
CONDITIONS PRECEDENT The occurrence of the Effective Date will be subject to
TO THE the satisfaction of conditions customarily found in the
EFFECTIVE DATE: Debt Coordinators' loan documentation for secured
leveraged financings and other conditions deemed by the
Debt Coordinators to be appropriate to this specific
transaction and in any event including, without
limitation:
o The Intercreditor Agreement and the other Facility
Documents shall have been executed by all parties
thereto on terms satisfactory to the Debt Coordinators
and the Lenders, and where such execution is by an
agent or other representative, the Debt Coordinators
shall be satisfied that the appropriate percentage of
lenders under each Existing Facility shall have
authorized the execution of the Facility Documents.
o There shall have occurred no material adverse change in
(i) the business, condition (financial or otherwise),
operations, performance, properties or prospects of
Group and its subsidiaries, taken as a whole, since
January 1, 2000, (ii) the ability of the Borrowers or
the Guarantors to perform their respective obligations
under the Facility Documents or (iii) the ability of
the Administrative Agent, the Collateral Trustee and
the Lenders to enforce the Facility Documents (any of
the foregoing being a "MATERIAL ADVERSE CHANGE").
o There shall exist no action, suit, investigation,
litigation or proceeding pending or threatened in any
court or before any arbitrator or governmental
instrumentality that (i) could reasonably be expected
to result in a Material Adverse Change or (ii)
restrains, prevents or imposes or can reasonably be
expected to impose materially adverse conditions upon
the Covered Facilities or the transactions contemplated
thereby.
o All necessary governmental and third party consents and
approvals necessary in connection with the Covered
Facilities and the transactions contemplated thereby
shall have been obtained (without the imposition of any
conditions that are not reasonably acceptable to the
Lenders) and shall remain in effect, and all applicable
waiting periods shall have expired without in either
case any action being taken by any competent authority;
and no law or regulation shall be applicable in the
judgment of the Lenders that restrains, prevents or
imposes materially adverse conditions upon the Covered
Facilities or the transactions contemplated thereby.
o The Lenders shall have received and be satisfied with
valuation reports for all trademarks, copyrights,
patents, licenses and other general intangibles that
will constitute Collateral.
o The Lenders shall have been given such access to the
management, records, books of account, contracts, and
properties of Group and its subsidiaries and shall have
received such financial, business, legal and other
information regarding Group and its subsidiaries as
they shall have requested.
o Nothing contained in any public disclosure made by
Group or any of its subsidiaries after the date
hereof, or in any information disclosed to the
Arrangers or the Lenders by Group or any of its
subsidiaries after such date, shall lead any
Arranger or any Lender to determine that, and none
of the Arrangers or the Lenders shall have
otherwise become aware of any fact or condition
not disclosed to them prior to the date hereof
which shall lead any Arranger or Lender to
determine that the condition (financial or
otherwise), operations, performance, properties or
prospects of Group and its subsidiaries, taken as
a whole, are different in any material adverse
respect from that disclosed in writing to such
Arranger or Lender by or on behalf of Group prior
to such date, or derived by such Arranger or
Lender from the public filings of Group or any of
its subsidiaries prior to such date.
o The Collateral Trustee shall have a valid and
perfected first priority lien on and security
interest in the Collateral for the benefit of the
Lenders and the other secured parties; all
filings, recordations and searches necessary or
desirable in connection with such liens and
security interests shall have been duly made or
provided for; and all filing and recording fees
and taxes shall have been duly paid or provided
for.
o The Debt Coordinators shall be reasonably
satisfied with the amount, types and terms and
conditions of all insurance maintained by Group
and its subsidiaries, and the Collateral Trustee
shall have received endorsements naming the
Collateral Trustee, on behalf of the Lenders and
the other secured parties, as an additional
insured and loss payee under all insurance
policies to be maintained with respect to the
properties of Group and its subsidiaries forming
part of the Collateral (subject to the
availability of such endorsements in respect of
foreign assets).
o The Lenders shall have received satisfactory
opinions of counsel to the Borrowers and the
Guarantors (including foreign counsel and local
counsel as deemed appropriate by the Debt
Coordinators), addressing such matters as the
Lenders shall reasonably request, including,
without limitation, the enforceability of all the
Covered Facilities, compliance with all applicable
laws and regulations, the perfection of all
security interests purported to be granted in the
Collateral and no conflicts with agreements.
o The Debt Coordinators shall have received (i)
certified copies of all of the Existing Facilities
as in effect immediately prior to the Effective
Date and (ii) such corporate documents,
instruments and certificates as the Debt
Coordinators shall have requested.
o All fees and expenses (including reasonable fees
and expenses of counsel to the Debt Coordinators)
required to be paid to the Arrangers and the
Lenders on or before the Effective Date shall have
been paid.
REPRESENTATIONS AND All Lenders will have the benefit of representations
WARRANTIES: and warranties substantially similar to those found in
the Existing Facilities, applicable to the Facility
Documents and its Existing Facilities, as amended
thereby, as well as those customarily found in the Debt
Coordinators' loan documentation for secured leveraged
financings and other representations and warranties
deemed by the Debt Coordinators appropriate to the
specific transaction (which will be applicable to Group
and its subsidiaries). Borrowings will require a
bring-down of all representations and warranties,
including the following:
o There shall have occurred no material adverse
change in (i) the business, condition (financial
or otherwise), operations, performance, properties
or prospects of Group and its subsidiaries, taken
as a whole, from that which was, in each case on
and as of the Effective Date, either publicly
disclosed, or otherwise furnished in writing to
the Lenders, by or on behalf of Group, (ii) the
ability of the Borrowers or the Guarantors to
perform their respective obligations under the
Facility Documents or (iii) the ability of the
Administrative Agent, the Collateral Trustee and
the Lenders to enforce the Facility Documents.
COVENANTS: All Lenders will have the benefit of covenants
customarily found in the Debt Coordinators' loan
documentation for secured leveraged financings and
other affirmative covenants deemed by the Debt
Coordinators appropriate to the specific transaction
(which will be applicable to Group and its
subsidiaries, and based on GAAP as in effect on the
Effective Date), including, without limitation, the
following:
o New covenants will include restrictions on
investments, dividends and other restricted
payments (dividends will be permitted to be paid
at current levels so long as no Default has
occurred and in no case in excess of $5,000,000
per fiscal quarter; such amount to be adjusted for
exercises of options), formation of new
partnerships, joint ventures or subsidiaries,
amendments of charters or by-laws, debt
prepayments or redemptions, creating payment
restrictions on subsidiary dividends and payments
and capital expenditures.
o Additional covenants customarily found in the Debt
Coordinators' loan documentation for secured
leveraged financings and with exceptions that are
more narrow than those presently applicable in the
Existing Facilities will include the transactions
with affiliates covenant and restrictions on
incurrence of debt, liens, sale of assets, mergers
and change in nature of business.
o Total debt as of the end of fiscal year 2000 and
2001 will not exceed an amount to be determined,
with compliance to be certified in each case to
the Administrative Agent within 3 business days
after year-end.
o LIBOR-based trade debt in excess of $350,000,000
will be included as Total debt for purposes of
covenant compliance calculations.
o Customary covenants with respect to the
Collateral.
o A covenant not to automatically release Collateral
unless, in addition to the other conditions
specified for such release under "Collateral"
above, the Bridge Facility has been permanently
prepaid (unless the required lenders under the
Bridge Facility waive this additional repayment
requirement).
o A covenant, from and after the Effective Date, not
to amend or modify any Covered Facility in a
manner that is less advantageous from the point of
view of Group or any of its subsidiaries or any
Lender not a party to such Covered Facility than
the circumstances that existed prior to such
amendment or modification.
o All New Facilities will require approval of the
Debt Coordinators (other than Designated Capital
Market Transactions that are in compliance with
parameters to be agreed; provided that no New
Facility will in any event have any amortization
prior to August 12, 2002). Such approval will be
given by the Debt Coordinators, unless in their
reasonable judgment they determine that any such
Facility (i) could impair the value of or have an
adverse effect on the Existing Facilities or the
Covered Facilities or the rights or interests of
the Lenders thereunder or (ii) contains terms or
provisions (except for customary covenants
applicable to single asset financings) that are
materially more restrictive or onerous on Group or
any of the Borrowers than those contained in the
Existing Facilities or the Covered Facilities, in
which case in the foregoing clauses (i) or (ii)
any such Facility will be subject to the approval
of the Required Lenders. It is understood that no
fees will be required for approvals of New
Facilities by the Debt Coordinators or the
Required Lenders.
o Non-speculative hedges and derivatives will be
permitted on an unsecured basis and, if any Lender
is the counterparty, on a secured basis.
o All trade credit refinancings prior to the
Effective Date shall be treated in a manner
consistent with the treatment under the Trade
Credit Facility.
FINANCIAL COVENANTS: All Lenders will have the benefit of the following
financial covenants, which will be applicable to Group
and its subsidiaries on a consolidated basis,
calculated in accordance with GAAP as in effect on the
Effective Date, and tested, beginning with 4Q2000, at
the time the applicable 10K or 10Q, as the case may be,
is required to be delivered:
o Maintenance of maximum ratio of total debt to
EBITDA (with step-downs to be determined).
o Maintenance of a minimum ratio of EBITDA less
capital expenditures to the sum of (i) cash
interest expense, (ii) cash taxes paid, (iii)
principal amortization and (iv) dividends, to be
determined.
o Maintenance of a minimum net worth equal to: (i)
80% of net worth at the end of 2Q2000 after giving
effect to the 2Q2000 restructuring charge plus
(ii) 50% of an amount (but not less than zero)
equal to (a) aggregate cumulative net income
accrued on a cumulative basis since the Effective
Date less (b) the aggregate amount of cash
dividends paid by Group since the Effective Date.
For purposes of the financial covenants, EBITDA shall
include the gain resulting from the sale of Interworld,
but future gains and losses from material asset sales
and other non-recurring items (to be defined) will not
be included.
FINANCIAL AND OTHER All Lenders will have the benefit of financial and
REPORTING REQUIREMENTS: other reporting requirements substantially the same as
those set forth in the Existing Facilities, with the
following additional reporting requirements:
o Projections for the balance of the term of the
Covered Facilities and annual business plans, in
each case to be provided annually not more than 45
days after fiscal year end.
o Together with the delivery of quarterly financial
statements, a variance analysis of actual results
to budgeted results.
EVENTS OF DEFAULT: All Lenders will have the benefit of a cross payment
default to indebtedness under any Covered Facility of
not less than $5,000,000, a cross default to other
indebtedness of not less than $20,000,000, a judgment
default for the payment of money in excess of
$20,000,000, change of control (including change of
CEO) provisions to be determined and other customary
defaults.
INDEMNIFICATION: The Intercreditor Agreement will contain customary
indemnification provisions in favor of the Arrangers,
the Debt Coordinators, the Administrative Agent, the
Collateral Trustee and the Lenders.
COSTS AND EXPENSES: The Facility Documents shall contain customary cost and
expenses provisions covering (i) the reasonable costs
and expenses of the Administrative Agent, the Lead
Arrangers, the Collateral Trustee and the Debt
Coordinators (including all reasonable fees and
expenses of counsel to the Debt Coordinators and of
foreign counsel and local counsel to the Lenders) in
connection with the preparation, execution, delivery
and administration of the Facility Documents and
matters relating thereto and (ii) all reasonable costs
and expenses (including fees and expenses of counsel)
in connection with the enforcement of the Facility
Documents or the Covered Facilities.
ADMINISTRATION OF In coordination with the other Debt Coordinator, the
FACILITY DOCUMENTS: Administrative Agent will have responsibility for
administration of voting, notices and communications
with the Lenders and the Collateral Trustee under the
Facility Documents. The Administrative Agent will
maintain a register of all Lenders and no assignment
under any Covered Facility will be effective for
purposes of the Facility Documents unless the assignee
(i) agrees to be bound by the Facility Documents and
(ii) has its name recorded in such register. Other than
these functions and others reasonably incidental
thereto, the Administrative Agent shall have no
additional responsibilities.
MISCELLANEOUS: The Facility Documents will contain standard yield
protection provisions (including, without limitation,
provisions relating to compliance with risk-based
capital guidelines, increased costs, illegality and
payments free and clear of withholding taxes) and
waiver of jury trial substantially similar to those
applicable to the Existing Facilities, and customary
consent to New York jurisdiction, appointment of New
York agent for service of process and judgment currency
provisions.
WAIVERS: All defaults under the Covered Facilities identified
and existing at the Effective Date shall be waived; it
being understood that such waiver shall not preclude
the exercising of any rights with respect to any future
condition which arises under any Loan Document or
Covered Facility.
GOVERNING LAW: New York.
COUNSEL TO THE LEAD Shearman & Sterling.
ARRANGERS AND DEBT
COORDINATORS:
</TABLE>
ANNEX I
EXISTING FACILITIES
A. AMENDING FACILITIES
1. U.S. $600,000,000 Amended and Restated Credit Agreement, dated as of
November 17, 1999, among Warnaco Inc., as Borrower, The Warnaco Group,
Inc, the banks and other financial institutions from time to time
party thereto as Initial Lenders, Scotiabank and SSBI, as co-lead
arrangers and co-book managers, Citibank, N.A., as Syndication Agent,
Commerzbank AG (New York Branch), as Documentation Agent and
Scotiabank, as Administrative Agent, Competitive Bid Agent, Swing Line
Bank and Issuing Bank, as amended to the date hereof.
2. U.S.$450,000,000 Five-Year Credit Agreement, dated as of November 17,
1999, among Warnaco Inc., as Borrower, The Warnaco Group, Inc., the
banks and other financial institutions from time to time party thereto
as Initial Lenders, Scotiabank and SSBI, as co-lead arrangers and
co-book managers, Citibank, N.A., as Syndication Agent, Societe
Generale and Commerzbank AG, as Documentation Agents, Bank of America
N.A. and the Dai-Ichi Kangyo Bank, Ltd., as Co-Agents, and Scotiabank,
as Administrative Agent, Competitive Bid Agent and Swing Line Bank, as
amended to the date hereof.
3. FRF 480,000,000 Revolving Credit, Guarantee and Overdraft Agreement,
dated August 14, 1996, between the companies set forth in Schedule 1
thereto as Borrowers, the companies set forth in Schedule 2 as
Guarantors, Societe Generale, as Arranging Bank, Managing Agent,
Administrative Agent and Overdraft Bank and the banks and other
financial institutions from time to time party thereto as Lenders, as
amended by a Supplement Agreement dated April 17, 1998 and further
amended to the date hereof (the "FRENCH FRANC REVOLVING FACILITY").
4. U.S. $21,500,000 Loan Agreement between Warnaco Inc., as Borrower and
KBC Bank N.V. dated as of July 31, 1998 (the "KBC TERM FACILITY").
5. Interest rate protection agreements with Citibank, N.A., The Bank of
Nova Scotia and Morgan Guaranty Trust Company of New York (the "RATE
PROTECTION FACILITIES").
6. ISDA Master Agreements with Societe Generale relating to foreign
exchange.
B. EXTENDING FACILITIES
7. U.S. $600,000,000 364-Day Credit Agreement, dated as of November 17,
1999, among Warnaco Inc., as Borrower, The Warnaco Group, Inc., the
banks and other financial institutions from time to time party thereto
as Initial Lenders, Scotiabank and SSBI as co-lead arrangers and
co-book managers, Citibank, N.A., as Syndication Agent, Morgan
Guaranty Trust Company of New York, as Documentation Agent,
Scotiabank, as Administrative Agent, as amended to the date hereof
(the "BRIDGE FACILITY").
8. U.S.$500,000,000 Sixth Amended and Restated Credit Agreement, dated as
of November 17, 1999, among Warnaco Inc., as U.S. Borrower, Designer
Holdings, Ltd., as Sub Borrower, those wholly-owned domestic
subsidiaries designated therein as Warnaco Sub Borrowers, Warnaco (HK)
Ltd., Warnaco B.V., Warnaco Netherlands B.V. and Warnaco Holland B.V.,
as Foreign Borrowers, The Warnaco Group, Inc., as Guarantor, the banks
and other financial institutions from time to time party thereto as
Lenders, Societe Generale, as Documentation Agent, Citibank, N.A., as
Syndication Agent, Scotiabank, as Administrative Agent, and Scotiabank
and SSBI, as co-lead arrangers and co-book managers, as amended to the
date hereof (the "TRADE CREDIT FACILITY").
9. FRF $370,000,000 Credit Agreement, dated July 9, 1996, between Warnaco
Inc. and the Nominated Subsidiaries (as defined therein) as Borrowers,
The Warnaco Group, Inc., as Guarantor, Societe Generale, as Managing
and Administrative Agent, and the banks and other financial
institutions from time to time party thereto as Lenders. Deed of
Amendment, made November 4, 1996, to a FRF 370,000,000 Credit
Agreement for Warnaco Inc., as amended to the date hereof
(collectively, "FRENCH FRANC TERM FACILITY").
10. (pound)9,000,000 Facility Agreement, dated as of May 15, 1995, among
Warner's (United Kingdom) Limited, as Borrower, Scotiabank (U.K.)
Limited, as Security Agent, Citibank, N.A., as Administrative Agent,
Scotiabank (U.K.) Limited, as Overdraft Bank, Citibank, N.A. as
Issuing Bank, the financial institutions named in the First Schedule
as Banks, Warnaco Inc. and The Warnaco Group, Inc., as U.S.
Guarantors, and the Companies named in the Second Schedule as European
Guarantors (Warnaco GmbH, Warner's Aiglon S.A., Warner's (Eire)
Teoranta, Warner's Lenceria Femenina, S.A. and Warner's Belgium S.A.),
as amended to the date hereof.
11. Parallel Purchase Commitment, dated as of September 30, 1998, among
Warnaco Operations Corporation, as the Seller, certain commercial
lender institutions, as the Banks, Gregory Street, Inc., as initial
Servicer, and Scotiabank, as Arranger, as amended to the date hereof
(the "SECURITIZATION FACILITY").
12. Canadian Dollar 30,000,000 Amended and Restated Credit Agreement dated
as of September 24, 1996 between Warnaco of Canada Limited - Warnaco
du Canada Limitee, as Borrower, and The Bank of Nova Scotia, as Lender
(the "CANADIAN REVOLVING FACILITY").
13. U.S. $35,000,000 uncommited Short Term Line of Credit letter dated [ ],
2000 between Warnaco Inc. and The Dai-Ichi Kangyo Bank, Ltd.
14. U.S. $20,000,000 uncommitted Short Term Line of Credit letter dated
September 28, 1998 between Warnaco Inc. and The Industrial Bank of
Japan, Limited.
15. U.S. $91,700,000 uncommitted Letter of Credit Facility letter dated
August 4, 1999 between Citibank and Warnaco (HK) Ltd.
16. U.S. $75,000,000 uncommitted Letter of Credit Facility letter dated
January 10, 2000 between Bank of America, N.A. and Warnaco (HK) Ltd.
17. U.S. $27,000,000 uncommitted Letter of Credit Facility letter dated
December 29, 1999 between Standard Chartered Bank and Warnaco (HK)
Ltd.
18. U.S. $10,000,000 uncommitted Letter of Credit Facility letter dated
September 13, 1996 between The Bank of East Asia, Limited and Warnaco
(HK) Ltd.
19. U.S. $6,000,000 uncommitted Overdraft Facility letter dated August 24,
1999 between The Bank of Nova Scotia, Hong Kong Branch and Warnaco
(HK) Ltd.
20. GBP 1,600,000 Overdraft Facility letter dated March 27, 1998 between
National Westminster Bank PLC and Warnaco (United Kingdom) Limited.
21. 20,000,000 Austrian shillings Societe Generale Austria overdraft.
22. 35,000,000 Belgian francs Overdraft Facility letter dated December 2,
1998 among Warner's Company Belgium S.A., Donatex - Warnaco S.A. and
KBC Bank.
23. 4,000,000 Deutsche marks Societe Generale Germany overdraft.
24. 2,500,000,000 Italian Lire Credit Line letter dated July 9, 1998
between Warnaco S.r.l. Milano and Credito Italiano.
25. U.S. $6,000,000 short term Multi Purpose Credit arrangement letter
dated October 29, 1997 between Warnaco B.V. and Societe Generale.
26. FRF 7,500,000 Revolving Line of Credit Agreement dated October 31,
1996 between Warner's Lenceria Femenina, S.A., as Borrower, and
Societe Generale acting through its Madrid Branch, as Lender, as
amended by the Amendment Agreement dated July 31, 1998 between Warnaco
Intimo S.A., the Companies and Corporations referred to therein as
Guarantors and Societe Generale acting through its Madrid Branch.
27. FRF 7,500,000 Revolving Line Credit Agreement dated October 31, 1996
as amended by the Amendment Agreement dated July 31, 1998 between
Lintex-Warnaco S.A., as Borrower, the Companies and Corporations
referred to therein as Guarantors and Societe Generale Bank and Trust,
as Lender.
28. Equity Forward Purchase Agreement dated December 10, 1999 between
Scotia Capital (USA) Inc. and The Warnaco Group, Inc.
29. Equity Forward Purchase Agreement dated as of February 10, 2000
between Sun Trust Bank and The Warnaco Group, Inc.
ANNEX II
PRICING GRID
<TABLE>
<CAPTION>
REVOLVING
BA FEE, STANDBY FACILITES AND
LETTER OF CREDIT TRADE CREDIT
FEE, GUARANTEE DOCUMENTARY COMMITMENT FEE
SENIOR UNSECURED DEBT FEE & DRAWN LETTER OF ON UNUSED
TIER REAITNGS(A)(B) LOAN SPREAD(C) CREDIT FEE AMOUNT
---- --------------------- ---------------- ----------- --------------
<S> <C> <C> <C> <C>
I Greater than or equal to BBB+ or Baa1 1.25% 0.375% 0.25%
II Greater than or equal to BBB or Baa2 1.50% 0.45% 0.30%
III Greater than or equal to BBB- and Baa3 1.75% 0.525% 0.35%
IV BBB- or better and Ba1 2.00% 0.60% 0.40%
or Baa3 or better and
BB+
V Greater than or equal to BB+ and Ba1 2.50% 0.75% 0.50%
VI Greater than or equal to BB or Ba2 3.00% 1.00% 0.625%
VII Less than BB or Ba2 3.50% 1.25% 0.75%
</TABLE>
(a) In the event of a split rating where both ratings remain investment
grade, pricing associated with the higher rating applies. In the
event of a split rating, other than Tier IV, where either or both
ratings are below investment grade, pricing associated with the lower
rating applies.
(b) Tier I, II and III pricing will not be available for a six-month period.
(c) Drawn pricing will increase by (i) 0.50% across Tiers V, VI and VII
on the 12 month anniversary of the Effective Date, such increase to
be effective for the period during which Designated Capital Markets
Transactions yielding net cash proceeds of at least $300,000,000 have
not occurred and (ii) an additional 2.00% during the continuance of
an Event of Default. Each amount in this column will be 1.00% less in
the case of amounts bearing interest at the base or prime rate.
